Contents
I. Company Information 2
II. Summary of Financial and Operating Results 3
III. Changes in Share Capital and Shareholders 5
IV. Directors, Supervisors and Senior Management 8
V. Directors’ Report 10
VI. Material Matters 20
VII. Unaudited Financial Statements and Notes thereto
Prepared in Accordance with Accounting
Standards for Business Enterprises 29
VIII. Documents Available for Inspection 141
1
I. Company Information
1. Legal Chinese name of the Company: 山东晨鸣纸业集团股份有限公司
Legal English name of the Company: SHANDONG CHENMING PAPER HOLDINGS LIMITED
Abbreviation of the English name: SCPH
2. Legal Representative of the Company: Chen Hongguo
3. Secretary to the Board of the Company: Hao Yun
Company Secretary (Hong Kong): Poon Shiu Cheong
Securities Affairs Representatives: Fan Yingjie
Correspondence Address: No. 595 Shengcheng Road, Shouguang City,
Shandong Province, People’s Republic of China
Telephone: (86)-0536-2158011, (86)-0536-2156488
Facsimile: (86)-0536-2158640
Email address: chenmmingpaper@163.com
4. Registered Address and Office No. 595 Shengcheng Road, Shouguang City,
Address of the Company: Shandong Province, People’s Republic of China
Postal Code: 262700
International Website of the Company: http://www.chenmingpaper.com
5. Designated Local Newspapers for China Securities Journal and Hong Kong
Information Disclosure: Commercial Daily
Designated Website for http://www.cninfo.com.cn
Publication of Interim Report: http://www.hkex.com.hk
Places for Inspection of
the Company’s Interim Report: Capital operation department of the Company
6. Stock Information: A shares
Shenzhen Stock Exchange
Stock Abbreviation: 晨鸣纸业
Stock Code: 000488
B shares
Shenzhen Stock Exchange
Stock Abbreviation: 晨鸣B
Stock Code: 200488
H shares
The Stock Exchange of Hong Kong Limited
Stock Abbreviation: Chenming Paper
Stock Code: 1812
7. Other Relevant Information:
Date of Change in Registration of
the Company: 27 September 2008
Registered Address: No. 595 Shengcheng Road, Shouguang City,
Shandong Province
Legal Person Business License
Registration Number: 370000400001170
Taxation Registration Number: 370783613588986
2
II. Summary of Financial and Operating Results
I. MAJOR FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH
ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES
Unit: RMB
Increase / decrease
as at the end of
the reporting
period compared
As at the end of As at the end with the end of
Items the reporting period of the prior year the prior year (%)
Total assets 39,537,159,503.43 35,077,132,129.98 12.71%
Equity attributable to equity
holders of the Company 13,400,443,827.34 13,535,785,794.54 -1.00%
Net assets per share (RMB/share) 6.50 6.56 -0.91%
Increase/decrease
for the
reporting period
The compared with
corresponding the corresponding
The reporting period period of period of the
(January to June) the prior year prior year (%)
Operating profit 473,928,647.41 777,353,073.97 -39.03%
Total profit 593,538,893.05 838,558,409.76 -29.22%
Net profit attributable to
equity holders of the Company 483,549,691.40 607,868,970.24 -20.45%
Net profits after extraordinary gains
or losses attributable to the
equity holders of the Company 382,038,739.41 571,504,710.16 -33.15%
Basic earnings per share (RMB) 0.23 0.29 -20.69%
Diluted earnings per share (RMB) N/A N/A N/A
Weighted average return on net assets 3.51% 4.57% decreased by 1.06
percentage points
Net cash flows from operating activities 737,643,905.04 1,189,723,076.40 -38.00%
Net cash flows per share from operating activities (RMB) 0.36 0.58 -37.93%
3
I. MAJOR FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH
ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (continued)
NOTE: EXTRAORDINARY GAINS OR LOSSES ITEMS
Unit: RMB
Extraordinary gains or losses items Amount
Net gains or losses from
disposal of non-current assets 887,857.74
Government grants received 125,301,439.93
Net gains or losses attributable to debt restructuring -19,869,972.60
Gains or losses arising from disposal of subsidiaries 13,309,163.37
Gains or losses on change in fair value of consumable biological assets 3,715,429.62
Non-operating net gains or
losses other than the above 1,984,493.37
Effect of extraordinary gains or
losses on minority shareholders -9,721,125.93
Effect of extraordinary gains or losses on income tax -14,096,333.51
Total 101,510,951.99
4
III. Changes in Share Capital and Shareholders
I. CHANGES IN SHARE CAPITAL AT THE END OF THE REPORTING PERIOD
(Unit: shares)
Increase/decrease (+/-) resulting
Opening balance from changes in the reporting period Closing balance
Increase in Release of
Number lock-up restricted Number
of shares Percentage shares Shares Sub-total of shares Percentage
I. Restricted shares 303,011,972 14.69% 52,300 -643,515 -591,215 302,420,757 14.67%
1. State-owned legal
person shares 293,003,657 14.21% — — — 293,003,657 14.21%
2. Shares held by Senior
Management 10,008,315 0.48% 52,300 -643,515 -591,215 9,417,100 0.46%
II. Non-restricted shares 1,759,033,969 85.31% -52,300 643,515 591,215 1,759,625,184 85.33%
1. Renminbi ordinary shares 810,266,484 39.30% -52,300 643,515 591,215 810,857,699 39.32%
2. Domestic listed
foreign shares 557,497,485 27.04% — — — 557,497,485 27.04%
3. Overseas listed
foreign shares 391,270,000 18.97% — — — 391,270,000 18.97%
III. Total number of shares 2,062,045,941 100.00% — — — 2,062,045,941 100.00%
Note: During the reporting period, the restricted shares held by Senior Management changed by -591,215 shares from 10,008,315 shares to 9,417,100 shares. The
reasons for such change were as follows:
(1) According to the Practice Guidance for the Management of the Company’s shares held by the directors, supervisors and senior
management of the listed companies of Shenzhen Stock Exchange（《深圳证券交易所上市公司董事、监事和高级管理人员所持本
公司股份管理业务操作指南》） the shares held by the existing Directors, Supervisors and Senior Management would be unlocked up
on the basis of the percentage of 25% of the shares held as at the beginning of each year. During the reporting period, 25% of the
restricted RMB ordinary shares (A shares) held by four Senior Management members of the Company changed to non-restricted shares
and amounted to 643,515 shares.
(2) During the reporting period, 25% of the non-restricted RMB ordinary shares (A shares) held by a former Senior Management member
changed to restricted shares and amounted to 52,300 shares;
As a result, the restricted shares held by Senior Management decreased by a total of 591,215 shares as compared to the end of the prior
year.
5
II. SHAREHOLDERS’ PROFILE AS AT THE END OF THE REPORTING PERIOD
1. The top ten shareholders and the top ten shareholders of non-restricted shares
Total number of shareholders The total number of shareholders was 165,386, of which 134,960 were holders of A shares,
29,805 were holders of B shares and 621 were holders of H shares
Shareholdings of the top ten shareholders
Total Number of Number of
number of restricted shares
Name of Nature of Percentage of shares held shares held pledged or
shareholders shareholders shareholding (shares) (shares) locked-up
HKSCC NOMINEES LIMITED Overseas 18.89% 389,532,500 0 Unknown
non-state-owned
legal person
(foreign shareholder)
SHOUGUANG CHENMING HOLDINGS State-owned legal person 14.21% 293,003,657 293,003,657 0
COMPANY LIMITED
PLATINUM ASIA FUND Overseas legal person 2.11% 43,480,377 0 Unknown
BBH BOS S/A FIDELITY Overseas legal person 1.45% 29,800,890 0 Unknown
FD-CHINA FOCUS FD
BILL & MELINDA GATES Domestic 1.17% 24,036,202 0 Unknown
FOUNDATION TRUST non-state-owned
legal person
HTHK-MANULIFE CHINA VALUE FUND Overseas legal person 1.11% 22,892,182 0 Unknown
MANULIFE GLOBAL FUND Overseas legal person 0.99% 20,324,321 0 Unknown
Bank of Communications – Bosera Domestic 0.97% 20,000,000 0 Unknown
Emerging Growth Stock Securities non-state-owned
Investment Fund legal person
China Life Insurance Company Limited Domestic 0.91% 18,819,737 0 Unknown
- Dividend - Individual Dividend non-state-owned
°@- 005L - FH002 Shenzhen legal person
DRAGON BILLION CHINA Overseas 0.67% 13,853,877 0 Unknown
MASTER FUND legal person
6
II. SHAREHOLDERS’ PROFILE AS AT THE END OF THE REPORTING PERIOD (continued)
1. The top ten shareholders and the top ten shareholders of non-restricted shares (continued)
Shareholding of the top ten shareholders of non-restricted shares
Number of
non-restricted
Name of shares held Classes
shareholders (shares) of shares
HKSCC NOMINEES LIMITED 389,532,500 H shares
PLATINUM ASIA FUND 43,480,377 B shares
BBH BOS S/A FIDELITY FD-CHINA FOCUS FD 29,800,890 B shares
BILL & MELINDA GATES FOUNDATION TRUST 24,036,202 A shares
HTHK-MANULIFE CHINA VALUE FUND 22,892,182 B shares
MANULIFE GLOBAL FUND 20,324,321 B shares
Bank of Communications – Bosera Emerging Growth 20,000,000 A shares
Stock Securities Investment Fund
China Life Insurance Company Limited - Dividend - Individual 18,819,737 A shares
Dividend - 005L - FH002 Shenzhen
DRAGON BILLION CHINA MASTER FUND 13,853,877 B shares
VALUE PARTNERS CLASSIC FUND 8,143,633 B shares
Connected relationship or Among the top ten shareholders of the Company, Shouguang Chenming
concert-party relationship Holdings Company Limited, a state-owned legal person shareholder,
among the above is not connected with any of the other shareholders. Save for the above,
shareholders the Company is not aware of any other shareholders of outstanding shares as aforesaid
are connected with each other.
2. Changes in the Company’s controlling shareholders and beneficial controllers during the reporting period
The Company’s controlling shareholders and beneficial controllers remained unchanged during the reporting period.
7
IV. Directors, Supervisors and Senior Management
I. Changes in shareholdings of the Directors, Supervisors and Senior Management
Shares Increase of Decrease of Shares Share options
held as at the shares held shares held held as at held as
beginning during the during the the end of the Restricted at the end of Reasons
Name Position of the year current period current period period (shares) shares held the period for change
Chen Hongguo Chairman 6,334,527 0 0 6,334,527 4,750,895 0 —
Yin Tongyuan Vice-chairman 2,423,640 0 0 2,423,640 1,817,730 0 —
Li Feng Director, standing deputy general 471,818 0 0 471,818 353,863 0 —
manager and sales controller
Geng Guanglin Director amd deputy 437,433 0 0 437,433 328,075 0 —
general manager
Tan Daocheng Director 185,700 0 0 185,700 139,275 0 —
Hou Huancai Director 628,915 0 0 628,915 471,686 0 —
Zhou Shaohua Director 123,007 0 0 123,007 92,255 0 —
Cui Youping Director 0 0 0 0 0 0 —
Wang Xiaoqun Director 0 0 0 0 0 0 —
Wang Fengrong Director 0 0 0 0 0 0 —
Zhang Zhiyuan Director 0 0 0 0 0 0 —
Wang Aiguo Director 0 0 0 0 0 0 —
Zhang Hong Director 0 0 0 0 0 0 —
Wang Yumei Director 0 0 0 0 0 0 —
Wang Xiangfei Director 0 0 0 0 0 0 —
Gao Junjie Supervisor 39,606 0 0 39,606 29,704 0 —
Wang Ju Supervisor 0 0 0 0 0 0 —
Yang Hongqin Supervisor 0 0 0 0 0 0 —
Yin Qixiang Supervisor 0 0 0 0 0 0 —
Guo Guangyao Supervisor 0 0 0 0 0 0 —
Wang Baoliang Deputy general manager 209,200 0 0 209,200 209,200 0 Shares held by
former Senior
Management
locked up in
accordance with
the relevant
requirements
upon leaving
office
Li Xueqin Deputy general manager 429,348 0 0 429,348 322,011 0 —
Hao Yun Deputy general manager, secretary 708,441 0 0 708,441 531,331 0 —
to the Board
Wang Zaiguo Deputy general manager 146,700 0 36,675 110,025 110,025 0 Restrictions on
Shares held
by Senior
Management
lifted
Wang Shihong Deputy general manager 0 0 0 0 0 0 —
Zhao Liqun Deputy general manager 0 0 0 0 0 0 —
Zhang Yanjun Deputy general manage 102,393 0 0 102,393 76,795 0 —
Hu Changqing Deputy general manager 1,238 0 0 1,238 0 0 —
Zhang Chunlin Deputy general manager 245,674 0 0 245,674 184,255 0 —
Chang Liting Deputy general manager 0 0 0 0 0 0 —
Xia Jigang Deputy general manager 0 0 0 0 0 0 —
Li Zhenzhong Deputy general manager 0 0 0 0 0 0 —
Wang Chunfang Financial controller 0 0 0 0 0 0 —
8
II. CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
1. On 30 March 2011, after the consideration of the fifth meeting of the sixth session of the Board, Mr. Wang Baoliang no longer was a
deputy general manager of the Company due to job change. The Board appointed Mr. Chang Liting, Mr. Xia Jigang and Mr. Li
Zhenzhong as deputy general managers of the Company due to job requirements.
For specific details, please refer to the relevant announcements published in China Securities Journal, Hong Kong Commercial Daily
and on the website of CNINF (http://www.cninfo.com.cn) on 31 March 2011, and the website of the Hong Kong Stock Exchange
(www.hkex.com.hk) on 30 March 2011.
9
V. Directors’ Report
I. Discussion and analysis under Accounting Standards for Business Enterprises:
The following financial data are extracted from the unaudited financial statements prepared by the Company in accordance with Accounting
Standards for Business Enterprises. The following discussion and analysis shall be read in conjunction with the financial statements of the
Company set out in this report and the notes thereto.
1. Operations of the Company during the reporting period
In the first half of 2011, the paper making industry saw shrinking demand due to the macro economic conditionsand lower prices due to
the new production capacity in operation. During the reporting period, the raw materialprice and the product costs became higher due
to lower economic growth and China’s prudent monetary policy.During the reporting period, the profitability of the principal activities
of the Company became weaker as comparedto the corresponding period of the prior year with lower gross profit margin of paper
products as compared to thecorresponding period of the prior year.
During the reporting period, the Company completed machine-made paper production of 1.6628 million tonneswith sales volume of
1.5654 million tonnes, representing a growth of -1.24% and 0.99% as compared to the correspondingperiod of the prior year. Revenue
from operations amounted to RMB8.917 billion, up 9.06% from the correspondingperiod of the prior year. Operating profit amounted
to RMB474 million, down 39.03% from the correspondingperiod of the prior year. Net profit attributable to equity holders of the
Company were RMB484 million, down20.45% from the corresponding period of the prior year mainly due to an decrease in the gross
profit margin duringthe period as compared to the corresponding period of the prior year resulting from a rise in raw material price.
Unit: RMB
Increase
compared
to the
corresponding
January to January to period of the
Item June 2011 June 2010 prior year (%)
Revenue from operations 8,917,455,355.14 8,176,641,676.99 9.06%
Operating profit 473,928,647.41 777,353,073.97 -39.03%
Net profit attributable to equity holders of
the Company 483,549,691.40 607,868,970.24 -20.45%
The Company operates in the paper making industry, which is a light industry, and its principal activities are the production and sale of
machine-made paper and paperboard, paper making raw materials and machinery; and generation and sale of electricity and steam.
During the reporting period, machine-made paper realised revenue from principal activities of RMB8,186 million, accounting for
91.80% of the total revenue from operations of the Company.
10
I. Discussion and analysis under Accounting Standards for Business Enterprises: (Cont’d)
2. Revenue from operations by industry and by product
Unit: RMB’0000
Revenue from operations by industry
Increase/
Increase/ decrease in
decrease in Increase/ gross profit
revenue from decrease in margin
operations cost of sale compared
compared compared to the
to the to the corresponding
corresponding corresponding period of
Revenue period of period of the prior year
from Gross profit the prior year the prior year (percentage
By industry or by product operations Cost of sales margin (%) (%) (%) points)
Machine-made paper 818,616.13 678,465.96 17.12% 5.59% 11.68% -4.52%
Electricity and steam 41,463.35 38,971.82 6.01% 135.77% 172.48% -12.66%
Construction materials 19,470.79 14,590.67 25.06% 11.98% 1.18% 8.00%
Chemical products 3,956.74 3,213.98 18.77% 21.94% 50.46% -15.40%
Others 8,238.53 3,033.48 63.18% 96.45% 134.21% -5.94%
Total 891,745.54 738,275.91 17.21% 9.06% 15.42% -4.56%
Principal activities by product
Light weight coated paper 65,703.30 57,493.22 12.50% -4.31% 0.18% -3.92%
Duplex press paper 110,354.43 96,522.24 12.53% 13.19% 22.04% -6.34%
Writing paper 14,482.32 13,201.62 8.84% -49.21% -44.38% -7.92%
Copperplate paper 206,012.79 168,074.60 18.42% -1.09% 7.26% -6.35%
News press paper 77,357.26 67,276.20 13.03% 6.19% 6.70% -0.42%
Paperboard 27,316.55 25,638.45 6.14% -33.18% -28.62% -6.01%
White paper board 121,941.92 94,570.57 22.45% 15.69% 26.64% -6.70%
11
I. Discussion and analysis under Accounting Standards for Business Enterprises: (Cont’d)
3. Breakdown of revenue from operations by geographical segment
Unit: RMB’0000
Increase/
decrease
in revenue from
operations
compared
to the
corresponding
Revenue from period of
Geographical segment operations the prior year (%)
PRC 751,569.40 5.30%
United States 15,337.01 251.46%
Hong Kong 5,823.92 -42.94%
Japan 10,016.79 -10.90%
South Africa 4,168.61 -5.36%
Other overseas areas 104,829.80 42.28%
Total 891,745.54 9.06%
12
I. Discussion and analysis under Accounting Standards for Business Enterprises: (Cont’d)
4. Problems emerged in operations and measures to resolve them
During the reporting period, the domestic market competition became greater with lower product prices due tonew production capacity
of the industry in operation. The market demand did not boom due to lower economicgrowth and the reduced expected future demand.
The profit margin of the Company reduced due to the rise in theraw material price and the fall in product prices.
The above changes made things difficult for the management to make decision for product sale strategy, purchasing strategy and
inventory management of the Company. The corresponding measures adopted by the Company included:
(1) Timely adjusting its product mix and actively developing the new products with marketability in response tothe change in market
demand and seeking to keep the inventory level low;
(2) Formulating market development strategies, implementing more reasonable sales and pricing strategies andthinking out the
market planning, thus creating greater benefits for the Company;
(3) Taking full advantage of the own low pulp production cost of the Company by effectively controlling the productioncost with
flexible corresponding measures in response to the change in pulp market price;
(4) Strengthening the management of distributors and consolidating the distributor management system to improvethe service of the
distributors; and organising a major training program for the sales staff and giving the staffof the operations incentives to rapid
enhance the capabilities of the sales staff;
(5) Implementing a product differentiation positioning strategy on new project in operation to ensure the productsto rapidly gain market
share upon operation..
13
II. Investments during the reporting period
1. Use of proceeds
The Company raised no funds and utilised no proceeds from prior periods during the reporting period.
2. Highlights of the major investments not financed by the proceeds during the reporting period
As at the end of the reporting period, the Company and its controlling subsidiaries made cumulative investment of RMB11,191 million
mainly for the following five projects:
(1) The high-end low weight coated paper project of annual production capacity of 800,000 tonnes
The high-end low weight coated paper project of annual production capacity of 800,000 tonnes in ShouguangCity was considered
and approved by the 2009 First Extraordinary General Meeting of the Company. Theplanned total investment amount for this
project was approximately RMB5.2 billion. The construction of theproject was to last for 18 months. Upon completion, the
project will realise annual production capacity of800,000 tonnes high-end low weight coated paper. Upon operation, the project
will, to some extent, increasethe percentage of high-end paper products and enhance the comprehensive competitiveness of the
Company.
The project provided a new source of benefit growth upon the successful trial production in June 2011. Cumulativeinvestment of
RMB2,890 million was made as of the end of the reporting period.
(2) The high-end culture paper project of annual production capacity of 450,000 tonnes
The high-end culture paper project of annual production capacity of 450,000 tonnes in Zhanjiang, Guangdong was considered
and approved by the 2008 Annual General Meeting of the Company. The planned total investment amount for this project was
approximately RMB1.668 billion. The construction of the project was to last for 18 months. Upon completion, the project will
realise annual production capacity of 450,000 tonnes high-end culture paper and annual profit of approximately RMB189 million.
Upon operation, the project will, to some extent, increase the percentage of high-end paper products and enhance the
comprehensive competitiveness of the Company.
Currently, the civil works of the project were about 95% completed and equipment installation of the project was about 90%
completed. Cumulative investment of RMB1,687 million was made as of the end of the reporting period. It was expected that the
project may commence operation by August 2011.
(3) The high-end white coated linerboard project of annual production capacity of 600,000 tonnes
The high-end white coated linerboard project of an annual production capacity of 600,000 tonnes in ShouguangCity was
considered and approved by the 2009 First Extraordinary General Meeting of the Company. Theplanned total investment amount
for this project was approximately RMB2.6 billion. The construction of theproject was to last for 18 months. Upon completion,
the project will realise annual production capacity of600,000 tonnes high-end white coated linerboard paper. Upon operation, the
project will increase the percentageof high-end paper products and enhance the comprehensive competitiveness of the Company.
Currently, the civil works of the project were about 70% completed and its masonry structure was 90% completed. Cumulative
investment of RMB582 million was made as of the end of the reporting period.
14
II. Investments during the reporting period
2. Highlights of the major investments not financed by the proceeds during the reporting period (Cont’d)
(4) Research and development centre project
The construction project of a research and development centre was approved by the Thirteenth Meeting of the Fifth Session of
the Board. The project’s planned investment amounted to approximately RMB120 million and it was to be completed in 17
months. Upon completion, the centre will be mainly used for development of new projects and includes technical research
institutes, technical laboratories, product testing rooms, workstations for post-doctoral technicians, offices, etc.
Currently, the project was completed and commenced operation in June 2011. Cumulative investment of RMB160 million was
made as of the end of the reporting period.
(5) The bleached sulfate pulp project of annual production capacity of 700,000 tonnes
The construction of the bleached sulfate pulp project of annual production capacity of 700,000 tonnes was considered and
approved by the Board of the Company. The planned total investment amount for this project was approximately RMB9.4 billion.
The construction of the project was to last for three year.
Currently, the civil works of the project were about 95% completed and equipment installation of the project was about 90%
completed. Cumulative investment of RMB5,876 million was made as of the end of the reporting period. It was expected that the
project may commence operation by August 2011.
15
III. 1. Analysis of the assets and liabilities of the Company
Unit: RMB
As at As at
30 June 31 December
Reasons for
Items 2011 2010 Change change
(%)
Inventory 3,666,551,486.97 3,047,078,215.01 20.33% (1)
Other current assets 1,342,459,344.12 658,572,125.34 103.84% (2)
Construction in progress 10,261,432,888.00 7,871,512,563.84 30.36% (3)
Construction materials 203,451,709.86 116,481,086.12 74.67% (4)
Short-term borrowings 5,906,247,149.54 3,594,157,220.47 64.33% (5)
Bills payable 1,324,707,285.74 218,757,186.75 505.56% (6)
Advance receipts 250,933,984.66 410,243,554.75 -38.83% (7)
Other payables 981,268,512.05 582,052,511.43 68.59% (8)
Other current liabilities 1,909,713,509.43 3,412,493,915.88 -44.04% (9)
Long-term borrowings 6,467,134,801.11 4,725,628,719.05 36.85% (10)
Deferred income tax liabilities 1,340,281.66 -100.00% (11)
Explanation on the main reasons leading to the changes:
(1) Inventory increased by 20.33% as compared to the beginning of the year mainly due to the higher raw material costs and
goods-in-stock costs resulting from the rise in raw material price.
(2) Other current assets increased by 103.84% as compared to the beginning of the year mainly due to a significant increase in the
input tax of non-credited value added tax resulting from an increase in the Group’s construction in progress and a significant
increase in the input tax of the equipment procurement.
(3) Construction in progress increased by 30.36% as compared to the beginning of the year mainly due to the investments in the
copperplate paper project of production capacity of 800,000 tonnes, the Zhanjiang pulp project of production capacity of 700,000
tonnes and the white coated linerboard project of production capacity of 600,000 tonnes made by the Group.
(4) Construction materials increased by 74.67% as compared to the beginning of the year mainly due to investments in construction
projects made by the Company.
(5) Short-term borrowings increased by 64.33% as compared to the beginning of the year mainly due to an increase in short-term
borrowings upon expiry of short-term debentures of RMB1.5 billion of the Company.
(6) Bill payable increased by 505.56% as compared to the beginning of the year mainly due to increased bill payments for loans with
reasonable use of financing channels by the Company.
(7) Advance receipts decreased by 38.83% as compared to the beginning of the year mainly due to an increase in goods delivery with
less advances on sales during the period.
(8) Other payables increased by 68.59% as compared to the beginning of the year mainly due to an increase in bank balances with
the holding company resulting from some project funds raised through the holding company by the Company.
16
III. 1. Analysis of the assets and liabilities of the Company (Cont’d)
(9) Other current liabilities decreased by 44.04% as compared to the beginning of the year mainly due to expiry of short-term
debentures of RMB1.8 billion of the Company during the period.
(10) Long-term borrowings increased by 36.85% as compared to the beginning of the year mainly due to the increase in some
long-term borrowings resulting from investments in construction projects.
(11) Deferred income tax liabilities decreased by 100% as compared to the beginning of the year mainly due to disposal of
subsidiaries during the year with deferred income tax liabilities incurred on acquisition of subsidiaries during prior years
reversed.
17
III. 2. Analysis and explanation on major year-on-year changes in profit and loss indicators during the
reporting period
Unit: RMB
For the For the
six months six months
ended ended
30 June 30 June Reason§r for
Items 2011 2010 Change change
(%)
Business taxes and surcharges 32,113,269.58 10,397,727.74 208.85% (1)
Finance expenses 153,592,178.50 125,739,655.86 22.15% (2)
Loss on impairment of assets -21,425,466.16 20,796,487.26 -203.02% (3)
Gain on change in fair value 3,715,429.62 8,358,094.03 -55.55% (4)
Investment income 9,553,661.98 4,324,494.78 120.92% (5)
Non-operating income 145,947,362.89 67,413,802.58 116.49% (6)
Non-operating expenses 26,337,117.25 6,208,466.79 324.21% (7)
Total profit 589,823,463.43 838,558,409.76 -29.66% (8)
Income tax expenses 96,723,898.32 142,479,322.30 -32.11% (8)
Net profit attributable to equity holders
of the Company 483,549,691.40 607,868,970.24 -20.45% (8)
Minority interests 13,265,303.33 88,210,117.22 -84.96% (8)
Explanation on the main reasons leading to the changes:
(1) Business taxes and surcharges increased by 208.85% as compared to the corresponding period of the prior year mainly due to the
payment of the urban maintenance and construction tax and education surcharges by foreign-invested enterprises since December
2010.
(2) Finance expenses increased by 22.15% as compared to the corresponding period of the prior year mainly due to an increase in
interest expenses as compared to the corresponding period of the prior year resulting from interest rate changes and an increase of
loans.
(3) Loss on impairment of assets decreased by 203.02% as compared to the corresponding period of the prior year mainly because
the Company made greater efforts to clear open account receivables outstanding for a long period and eliminated bad debt
provisions during the period.
(4) Gain on change in fair value decreased by 55.55% as compared to the corresponding period of the prior year mainly due to
change in fair value of timber assets.
(5) Investment income increased by 120.92% as compared to the corresponding period of the prior year mainly due to investment
income on disposal of Heze Chenming Panels Co., Ltd. and Shandong Lin Dun Wood Industry Co., Ltd. during the period.
(6) Non-operating income increased by 116.49% as compared to the corresponding period of the prior year mainly due to an increase
of government grants received during the period.
(7) Non-operating expenses increased by 324.21% as compared to the corresponding period of the prior year mainly due to an
increase in the losses from debt restructuring incurred by the Company during the period.
(8) Total profit, income tax expenses, net profit attributable to equity holders of the Company and minority interests decreased as
compared to the corresponding period of the prior year mainly due to an decrease in the gross profit margin as compared to the
corresponding period of the prior year resulting from a rise in raw material price.
18
III. 3. Cash flows from operating activities of the Company during the reporting period
Unit: RMB
For the six For the six
Items months ended months ended
30 June 2011 30 June 2010 Change (%)
Net cash flows from operating activities 737,643,905.04 1,189,723,076.40 -38.00%
Net cash flows from investment activities -2,602,316,539.31 -1,502,481,365.60 -73.20%
Net cash flows from financing activities 1,787,918,250.48 -170,160,445.16 1150.72%
Explanation on the main reasons leading to the changes:
(1) Cash flows from operating activities decreased as compared to the corresponding period of the prior year mainly due to a
significant increase in discounted outstanding bills during the period as compared to the corresponding period of the prior year.
(2) net cash flows from investment activities decreased as compared to the corresponding period of the prior year mainly due to the
increased investments in the copperplate paper project of production capacity of 800,000 tonnes, the high-end white coated
linerboard project of production capacity of 600,000 tonnes and the Zhanjiang pulp project of the Company during the period.
(3) Net cash flow from financing activities increased as compared to the corresponding period of the prior year mainly due to project
investments and an increase in bank borrowings during the period.
IV. FOCUS OF WORK DURING THE SECOND HALF OF 2011
In the second half of the year, the Company will continue to stick to the tasks set at the beginning of the year. While paying attention to
economic benefits, new project construction and utilisation of new production capacity, the Company will reinforce its market development,
strengthen its self-innovation capability, save energy consumption and reduce emission by:
(1) Exploring the domestic and overseas market to facilitate future development: the Company will implement proactive and reasonable
marketing strategies and optimise its international marketing network by employing diversified currency settlement and various
operating models; well prepare for new projects to be in operation; actively make sales planning and expand its sales channels;
(2) Accelerating the construction of raw material bases on the basis of the forestry bases in Zhanjiang, Huizhou and Huanggang as the
planned objective;
(3) Strengthening the management of distributors, enhancing the capabilities of the sales staff and strengthening brand promotion;
(4) Strengthening internal control and system establishment and improving corporate governance with a view to enhancing its management
strength and operation quality;
(5) Standardising the operation of its technological innovation system, optimising its innovation incentive mechanism, speeding up the
research and development of the key technologies and firmly establishing its quality and brands;
(6) Continuously taking resources saving and environmental protection as strategic objectives in the course of corporate development with
a view to strengthening energy saving and emission reduction for the purpose of sustainable development.
19
VI. Material Matters
I. PERSEONNEL INFORMATION
1. Change of personnel
Please refer to “IV. Directors, Supervisors and Senior Management”.
2. Personnel of the Company
As at 30 June 2011, the Group had 17,985 employees in aggregate, including 10,238 production staff, 866 sales staff, 2,499 technical
staff, 285 financial staff, 1,398 administrative staff and 2,699 other staff. The remuneration of the employees of the Company includes
their salaries, bonuses and other fringe benefits. The Company determines different rates of remuneration for different employees based
on their performance, qualifications, duties and other factors in compliance with the relevant PRC laws and regulations.
II. CORPORATE GOVERNANCE STRUCTURE DURING THE REPORTING PERIOD
1. The Company’s corporate governance is generally in compliance with the relevant requirements of China
Securities Regulatory Commission (CSRC)
Strictly in compliance with the requirements of the relevant laws and regulations of Companies Law ( 公司法》), Securities Law ( 证
券法》), Code of Corporate Governance for Listed Companies ( 上市公司治理准则》), Rules Governing Listing on Shenzhen Stock
Exchange (《深圳证券交易所股票上市规则》) and the Articles of Association, the Company continued to optimise its legal person
governance structure, and established an modern enterprise policy to regulate the operations of the Company.
The state of governance of the Company is currently in compliance with the requirements under the relevant documents of CSRC.
2. Audit committee
The Audit Committee of the Company had discussed with the management the accounting standards and practices adopted by the
Company, and had also discussed and reviewed this report, including the financial statements of the Company as at 30 June 2011
prepared in accordance with Accounting Standards for Business Enterprises.
20
III. 2010 PROFIT DISTRIBUTION PLAN AND 2011 INTERIM PROFIT DISTRIBUTION PLAN
1. The 2010 profit distribution plan of the Company was considered and approved by the 2010 Annual General Meeting. Based on
2,062,045,941 shares in the total share capital of the Company, cash bonus of RMB 3.0 was to be paid to all shareholders for every 10
shares held (tax included, RMB2.70 for every 10 shares held was actually paid to individual shareholders, investment funds and
Qualified Foreign Institutional Investors holding A shares after tax deduction; and in respect of other A share shareholders, no income
tax was deducted for tax payment. RMB2.70 for every 10 shares held was actually paid to individual shareholders and non-residential
enterprises holding B shares). Distribution of cash bonuses under such distribution amounted to RMB619 million
(RMB618,613,782.30) (tax included).
For A Shares, the book closure date was 20 June 2011. For B Shares, the book closure date was 23 June 2011. The ex-rights date was
21 June 2011.
2. The 2011 interim profit distribution plan: no profit distribution was proposed to be implemented for the interim period of 2011 and no
share capital increase by way of transfer from capital reserves would be carried out.
IV. MATERIAL ACQUISITION AND DISPOSAL OF ASSETS, ABSORPTIONS AND MERGERS OF
THE COMPANY DURING THE REPORTING PERIOD
The Company had no material acquisition and disposal of assets, absorptions and mergers during the reporting period.
V. MATERIAL LITIGATION AND ARBITRATION
The Company was not subject to any material litigation or arbitration during the reporting period.
VI. UNDERTAKINGS BY HOLDERS OF NON-TRADABLE SHARES DERIVED FROM THE
REFORM OF CONVERSION
1. Undertakings made during the reform of conversion and performance of such undertakings
It was undertaken that shares held by Shouguang Chenming Holdings Co., Ltd., the controlling shareholder of the Company, shall not
be listed and traded within 48 months from the date of implementation of the reform of conversion. During the reporting period,
Shouguang Chenming Holdings Co., Ltd. had strictly adhered to such undertakings. The undertakings of the controlling shareholder
expired on 29 March 2010. The undertakings of the holders of non-tradable shares were fully fulfilled. The relevant procedure for the
release from sales restriction will be processed upon confirmation from the controlling shareholder regarding such release from sales
restriction.
2. During the reporting period, no shareholders holding 5% (including 5%) or above shares in the Company had made any additional
undertakings on shares subject to trading moratorium.
VII. . SIGNIFICANT CONTRACTS AND THEIR PERFORMANCE
The Company had not entered into any significant contracts during the reporting period.
21
VIII. External guarantees
During the reporting period, the Company provided no guarantee to external parties (excluding the guarantees provided to its controlling
subsidiaries) and did not provide any guarantees against the rules and regulations.
As at 30 June 2011, the balance of guarantee the Company provided to its controlling subsidiaries amounted to RMB6,165.9418 million
representing 46.01% of the net assets attributable to equity holders of the Company.
Unit: RMB’0000
External guarantees provided by the Company (excluding guarantees provided for subsidiaries)
Date and number
of the related
announcement Guarantee Guarantee
disclosing the Amount of date Guarantee Type of Fulfilled to related
Name of obligor guarantee amount guarantee (agreement date) provided guarantee Term or not? parties or not
Total amount of external guarantee 0.00 Total amount of external guarantee provided 0.00
approved during the reporting period (A1) during the reporting period (A2)
Total amount of external guarantee approved 0.00 Total balance of external guarantee provided 0.00
as at the end of the reporting period (A3) as at the end of the reporting period (A4)
Guarantees provided by the Company for subsidiaries
Date and number
of the related
announcement Guarantee Guarantee
disclosing the Amount of date Guarantee Type of Term Fulfilled to related
Name of obligor guarantee amount guarantee (agreement date) provided guarantee (year) or not? parties or not
Zhanjiang Chenming 2006-07-27(2006-042) 564,020.00 25 March 2008 351,956.48 Credit 15 No No
Paper Pulp Co., Ltd.
Zhanjiang Chenming 2011-03-31(2011-005) 200,000.00 — 0.00 Credit 1 The contract No
Paper Pulp Co., Ltd. had not been
signed
Jiangxi Chenming Paper 2009-12-16(2009-034) 45,000.00 10 December 2009 45,000.00 Credit 3 No No
Co., Ltd.
Jiangxi Chenming 2003-03-17(2003-002) 103,600.00 11 December 2003 5,000.00 Credit 3 No No
Paper Co., Ltd.
Huanggang Chenming 2011-03-31(2011-005) 20,000.00 — 0.00 Credit 1 The contract No
Arboriculture Co., Ltd. had not been
signed
Huanggang Chenming 2010-02-25(2010-003) 16,000.00 20 April 2010 2,000.00 Credit 3 No No
Arboriculture Co., Ltd.
Huanggang Chenming 2010-02-25(2010-003) 16,000.00 8 July 2010 3,000.00 Credit 3 No No
Arboriculture Co., Ltd.
Huanggang Chenming 2009-05-27(2009-012) 10,000.00 2 June 2009 5,000.00 Credit 3 No No
Arboriculture Co., Ltd.
Wuhan Chenming 2011-03-31(2011-005) 30,000.00 — 0.00 Credit 1 The contract No
Hanyang Paper had not been
Holdings Co., Ltd. signed
Shouguang Meilun 2010-08-25(2010-027) 79,473.00 10 September 2010 77,659.20 Credit 5 No No
Paper Co., Ltd.
Shouguang Meilun 2010-10-29(2010-034) 600,000.00 14 January 2011 26,471.60 Credit 3 No No
Paper Co., Ltd.
Shouguang Chenming 2011-03-31(2011-005) 10,000.00 — 0.00 Credit 1 The contract No
Art Paper Co., Ltd. had not been
signed
22
VIII. External guarantees (continued)
Unit: RMB’0000
Guarantees provided by the Company for subsidiaries
Date and number
of the related
announcement Guarantee Guarantee
disclosing the Amount of date Guarantee Type of Term Fulfilled to related
Name of obligor guarantee amount guarantee (agreement date) provided guarantee (year) or not? parties or not
Jilin Chenming Paper 2011-03-31(2011-005) 30,000.00 25 May 2011 0.00 Credit 1 No No
Co., Ltd.
Shandong Chenming 2011-03-31(2011-005) 20,000.00 — 0.00 Credit 1 The contract No
Paper Group Qihe had not been
Paperboard Co., Ltd. signed
Shandong Chenming 2010-02-25(2010-003) 20,000.00 16 September 2010 0.00 Credit 1 No No
Paper Group Qihe
Paperboard Co., Ltd.
Chenming (HK) Limited 2011-03-31(2011-005) 329,300.00 — 0.00 Credit 1 The contract No
had not been
signed
Chenming (HK) Limited 2010-10-29(2010-034) 50,000.00 13 April 2011 50,000.00 Credit 3 No No
Xianning Chenming 2011-03-31(2011-005) 10,000.00 — 0.00 Credit 1 Contract has No
Arboriculture Co., Ltd. not been
signed
Shandong Chenming 2010-10-29(2010-034) 200,000.00 25 February 2011 50,506.90 Credit 0.5 No No
Paper Sales Company
Limited
Total amount of guarantee provided for subsidiaries approved during the reporting period (B1) 649,300.00
Total amount of guarantee provided for subsidiaries during the reporting period (B2) 230,221.70
Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (B3) 2,337,393.00
Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4) 616,594.18
Total amount of guarantee provided by the Company (the sum of the above two main categories)
Total amount of guarantee approved during the reporting period (A1+B1) 649,300.00
Total amount of guarantee provided during the reporting period (A2+B2) 230,221.70
Total amount of guarantee approved as at the end of the reporting period (A3+B3) 2,337,393.00
Total balance of guarantee provided as at the end of the reporting period (A4+B4) 616,594.18
Total amount of guarantee provided (A4+B4) as a percentage of the net assets of the Company 46.01%
Of which:
Amount of guarantee provided for shareholders, beneficial controllers and its related parties (C) 0.00
Amount of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (D) 214,637.70
Total amount of guarantee provided in excess of 50% of net assets (E) 0.00
Sum of the above three amount of guarantee (C+D+E) 214,637.70
Explanation on possible joint obligation on outstanding guarantees provided Nil
23
IX. OTHER MATERIAL MATTERS AND EXPLANATION AND ANALYSIS ON THEIR IMPACTS
AND SOLUTIONS
1. During the reporting period, the Company did not invest in any securities, and the Company did not hold any equity interests in other
listed companies, unlisted financial institutions or prospective listed companies.
2. During the reporting period, except for provision of entrusted loans to controlling subsidiaries of the Company (for details, please refer
to the financial statements and Note 8 thereto prepared in accordance with Accounting Standards for Business Enterprises), the
Company did not appoint any person to manage the Company’s funds during the reporting period or in the preceding reporting period
which had been carried over to this reporting period. Also, there was no significant custody, subcontracting or lease of the assets
between the Company and other companies during the reporting period or in the preceding reporting period which had been carried
over to this reporting period.
3. Independent opinion from Independent Directors of the Company concerning utilisation of funds by related parties and external
guarantees.
After inspection, there was no utilisation of funds of the Company by controlling shareholders and other related parties during the
reporting period, except for connected transactions between the Company and its controlling subsidiaries and the investees of the
Company (for details, please refer to the financial statements and Note 8 thereto prepared in accordance with Accounting Standards
for Business Enterprises). The connected transactions were true and accurate to represent the ordinary connected transactions of the
Company, which complied with the principle of fair and reasonable, and related requirements of the Companies Law and the Articles
of Association. The prices of the transactions were true and fair and do not impair the interests of the Company and other shareholders,
especially the interest of minority shareholders, and non-related shareholders.
Upon inspection, except for the guarantees provided to controlling subsidiaries during the reporting period (for details, please refer to
the financial statements and Note 8 thereto prepared in accordance with Accounting Standards for Business Enterprises), the Company
had provided RMB0 of external guarantee for the period of and accrued up to 30 June 2011. The Company strictly followed the
relevant requirements of Notice on Regulation of External Guarantee Provided by Listed Companies (Zheng Jian Fa [2005] No.120)
《关于规范上市公司对外担保行为的通知》（证监发）[2005]120号, and the Articles of Association to earnestly perform its
information disclosure obligations in respect of external guarantees and honestly provided information concerning all external
guarantee matters to the public accountant. During the reporting period, the Company provided guarantee for controlling subsidiaries
for the ordinary production and operation and reasonable utilisation of the funds of the Company. The decision procedures were legal
and without prejudice to the interests of the Company and the shareholders of the Company (especially minority shareholders).
24
X. Reception of research investigations, communications and interviews during the reporting period
Main topics of
Date of Place of Manner of Parties discussion and
reception reception reception accommodated information provided
7 January Zhanjiang, On-site Qilu Securities Matters including recent
2011 Guangdong research development of the industry and
investigation development trend in the future,
production and operation of the
Company, as well as strategic
development
12 January Shouguang, On-site China International Capital
2011 Shandong research Corporation Limited, PICC Asset
investigation Management Company Limited,
尚心投资管理有限公司
12 January Shouguang, On-site Polaris International
2011 Shandong research Securities Investment
investigation Trust Co., Ltd.
27 January Shouguang, On-site First Shanghai Securities Limited
2011 Shandong research of Hong Kong
investigation
17 February Shouguang, On-site Sinolink Securities Co., Ltd.
2011 Shandong research and E Fund Management Co., Ltd.
investigation
24 February Shouguang, On-site Huatai Securities, Guodu Securities,
2011 Shandong research Chongyang Investment, Fortune
investigation Securities, Capital Synergy Invest
Management Co., Ltd.
4 May 2011 Shouguang, On-site Guotai Junan Securities, China Asset
Shandong research Management Co., Ltd., Union Life
investigation Insurance Co., Ltd.
5 May 2011 Shouguang, On-site Huatai United Securities,
Shandong research HuaAn Fund Management Co., Ltd.
investigation
9 May 2011 Shouguang, On-site 英国保诚基金
Shandong research
investigation
10 May 2011 Shouguang, On-site Fubon Financial of Taiwan
Shandong research
investigation
11 May 2011 Shouguang, On-site Tebon Securities Co., Ltd.
Shandong research of Shanghai
investigation
20 May 2011 Shouguang, On-site Everbright Securities,
Shandong research First-trust Fund Management Co., Ltd.
investigation
30 June 2011 Shouguang, On-site Zeal Asset Management Limited
Shandong research
investigation
25
XI. Index of Information Disclosure in the First Half of 2011
Date of
announcement Subject matter Media for publication
25 January 2011 Announcement on the Results Express for 2010 B009 of China Securities Journal,
D5 of Securities Times,
A18 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
19 March 2011 Indicative announcement in respect of B012 of China Securities Journal,
receiving incentive funds from the government A15 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
19 March 2011 Announcement in respect of H shares http://www.cninfo.com.cn
31 March 2011 2010 annual report B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Self assessment report on internal control B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 2010 social responsibility report B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Special audit report on the use of funds of listed B139 of China Securities Journal,
companies by related parties of the Company A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Announcement on the resolutions of B139 of China Securities Journal,
the fifth meeting of the sixth session of A14 of Hong Kong Commercial Daily
the Supervisory Committee http://www.cninfo.com.cn
31 March 2011 Notice of 2010 Annual General Meeting B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Announcement on the resolutions of B139 of China Securities Journal,
the fifth meeting of the sixth session of A14 of Hong Kong Commercial Daily
the Board of Directors http://www.cninfo.com.cn
31 March 2011 2010 auditors’ report B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 2010 annual report summary B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
26
XI. Index of information disclosure in the first half of 2011 (continued)
Date of
announcement Subject matter Media for publication
31 March 2011 Code of conduct for major shareholders and B139 of China Securities Journal,
beneficial controller and information A14 of Hong Kong Commercial Daily
enquiry system (March 2011) http://www.cninfo.com.cn
31 March 2011 Internal control on derivatives investments B139 of China Securities Journal,
and information disclosure system A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Announcement on lock-up of LIBOR on B139 of China Securities Journal,
Zhanjiang Chenming US dollar loans A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Announcement on handling settlement of B139 of China Securities Journal,
forward foreign exchange + NDF A14 of Hong Kong Commercial Daily
portfolio operations http://www.cninfo.com.cn
31 March 2011 Announcement in respect of provision of guarantee B139 of China Securities Journal,
for the general banking facilities being applied by A14 of Hong Kong Commercial Daily
controlling subsidiaries http://www.cninfo.com.cn
31 March 2011 Special report on internal control B139 of China Securities Journal,
A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Assurance annual report on the use and deposit of B139 of China Securities Journal,
capitals raised by the company A14 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
31 March 2011 Independent opinion of independent directors on B139 of China Securities Journal,
the self assessment report on internal control of A14 of Hong Kong Commercial Daily
the Company http://www.cninfo.com.cn
31 March 2011 Independent directors’ report for 2010 B012 of China Securities Journal,
A9 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
14 April 2011 Announcement in respect of H shares http://www.cninfo.com.cn
15 April 2011 Indicative announcement on issuing notes of A11 of China Securities Journal,
RMB500 million by a wholly-owned subsidiary A32 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
15 April 2011 Announcement in respect of H shares A11 of China Securities Journal,
A32 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
27
XI. Index of information disclosure in the first half of 2011 (continued)
Date of
announcement Subject matter Media for publication
28 April 2011 Independent opinion of independent directors on B117 of China Securities Journal,
reappointment of the accounting firm A26 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
28 April 2011 Notice in respect of the increased resolutions at B117 of China Securities Journal,
the 2010 Annual General Meeting A26 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
28 April 2011 Announcement on the resolutions of B117 of China Securities Journal,
the sixth meeting of the sixth session of A26 of Hong Kong Commercial Daily
the Board of Directors http://www.cninfo.com.cn
28 April 2011 The full text of 2011 first quarterly report B117 of China Securities Journal,
A26 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
28 April 2011 The main text of 2011 first quarterly report B117 of China Securities Journal,
A26 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
28 April 2011 Announcement in respect of H shares B117 of China Securities Journal,
A26 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
19 May 2011 Legal opinion as witnessed by lawyers on B24 of China Securities Journal,
the 2010 Annual General Meeting B8 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
19 May 2011 Announcement on the resolution of B24 of China Securities Journal,
2010 Annual General Meeting B8 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
14 June 2011 Announcement of dividend payment for 2010 B018 of China Securities Journal,
A5 of Hong Kong Commercial Daily
http://www.cninfo.com.cn
16 June 2011 Announcement on approval by http://www.cninfo.com.cn
the Issuance Audit Committee of
China Securities Regulatory Commission of
the application for issue of corporate bonds
30 June 2011 Announcement on approval by http://www.cninfo.com.cn
China Securities Regulatory Commission of
issue of corporate bonds
Note: A total of 35 announcements were issued by the Company in the first half year of 2011.
28
VII. Unaudited Financial Statements and Notes thereto Prepared in
Accordance with Accounting Standards for Business Enterprises
Consolidated Balance Sheet
As at 30 June 2011
Prepared by: Shandong Chenming Paper Holdings LimitedUnit: RMB
Items Notes Closing Balance Opening balance
CURRENT ASSETS:
Monetary funds VII.1 2,092,372,229.62 1,951,854,940.72
Held-for-trading financial assets
Bills receivable VII.2 2,907,199,130.35 2,762,389,909.89
Accounts receivable VII.3 2,470,687,488.76 2,122,578,824.27
Prepayments VII.5 990,222,160.27 924,354,545.55
Interest receivable
Dividend receivable
Other receivables VII.4 120,648,508.43 117,634,380.52
Inventory VII.6 3,666,551,486.97 3,047,078,215.01
Current assets due within one year VII.7 5,471,558.96
Other current assets VII.8 1,342,459,344.12 658,572,125.34
Total current assets 13,595,611,907.48 11,584,462,941.30
NON-CURRENT ASSETS:
Available-for-sale financial assets
Held-to-maturity investments
Long-term receivables
Long-term equity investments VII.9 63,446,430.50 67,201,931.89
Investment properties VII.10 23,819,084.05 24,688,212.07
Fixed assets VII.11 12,755,665,301.97 12,882,358,381.56
Construction in progress VII.12 10,261,432,888.00 7,871,512,563.84
Construction materials VII.13 203,451,709.86 116,481,086.12
Disposal of fixed assets
Consumable biological assets VII.14 854,627,460.54 726,742,568.44
Oil and gas assets
Intangible assets VII.15 1,418,157,494.90 1,459,453,227.94
Development expenditure
Goodwill VII.16 20,283,787.17 20,283,787.17
Long-term prepaid expenses VII.17 182,267,638.76 176,436,950.42
Deferred income tax assets VII.18 158,395,800.20 147,510,479.23
Other non-current assets
Total non-current assets 25,941,547,595.95 23,492,669,188.68
TOTAL ASSETS 39,537,159,503.43 35,077,132,129.98
29
Items Notes Closing Balance Opening balance
CURRENT LIABILITIES:
Short-term borrowings VII.21 5,906,247,149.54 3,594,157,220.47
Held-for-trading financial liabilities
Bills payable VII.22 1,324,707,285.74 218,757,186.75
Accounts payable VII.23 3,021,214,487.89 2,708,064,676.44
Advance receipts VII.24 250,933,984.66 410,243,554.75
Staff remuneration payables VII.25 136,242,342.77 169,426,660.41
Taxes payable VII.26 121,533,605.16 134,029,387.82
Interest payable
Dividend payable VII.27 106,831,703.46
Other payables VII.28 981,268,512.05 582,052,511.43
Non-current liabilities due within one year VII.29 1,270,588,281.77 1,432,841,463.15
Other current liabilities VII.30 1,909,713,509.43 3,412,493,915.88
Total current liabilities 15,029,280,862.47 12,662,066,577.10
NON-CURRENT LIABILITIES:
Long-term borrowings VII.31 6,467,134,801.11 4,725,628,719.05
Bonds payable VII.32 490,204,131.56
Long-term payables
Special accounts payable
Estimated liabilities
Deferred income tax liabilities VII.18 1,340,281.66
Other non-current liabilities VII.30 2,432,132,832.15 2,427,897,545.67
Total non-current liabilities 9,389,471,764.82 7,154,866,546.38
TOTAL LIABILITIES 24,418,752,627.29 19,816,933,123.48
OWNERS’ EQUITY (OR SHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) VII.33 2,062,045,941.00 2,062,045,941.00
Capital reserves VII.34 6,093,493,004.71 6,093,493,004.71
Less: Treasury shares
Special reserves
Surplus reserves VII.35 1,046,510,680.99 1,046,510,680.99
General risk provisions
Retained profit VII.36 4,198,667,857.06 4,333,731,947.96
Foreign currency translation differences -273,656.42 4,219.88
Total equity attributable to equity holders of the company 13,400,443,827.34 13,535,785,794.54
Minority interests 1,717,963,048.80 1,724,413,211.96
Total owners’ equity 15,118,406,876.14 15,260,199,006.50
TOTAL LIABILITIES AND OWNERS’ EQUITY 39,537,159,503.43 35,077,132,129.98
30
Consolidated Income Statement
January to June 2011
Prepared by: Shandong Chenming Paper Holdings LimitedUnit: RMB
Amounts for the Amounts for the
Items Notes current period prior period
I. Total operating revenue 8,917,455,355.14 8,176,641,676.99
Including: Operating revenue VII.37 8,917,455,355.14 8,176,641,676.99
II. Total operating costs 8,456,795,799.33 7,411,971,191.83
Including: Operating costs VII.37 7,382,759,124.49 6,396,400,180.14
Business taxes and surcharges VII.38 32,113,269.58 10,397,727.74
Selling and distribution expenses VII.39 438,518,128.62 441,501,879.97
General and administrative expenses VII.40 471,238,564.30 417,135,260.86
Finance expenses VII.41 153,592,178.50 125,739,655.86
Loss on impairment of assets VII.44 -21,425,466.16 20,796,487.26
Add: Gain on change in fair value (“-” denotes loss) VII.42 3,715,429.62 8,358,094.03
Investment income (“-” denotes loss) VII.43 9,553,661.98 4,324,494.78
Including: Investment income from associates
and joint ventures -3,755,501.39 4,324,494.78
III. Operating profit (“-” denotes loss) 473,928,647.41 777,353,073.97
Add: Non-operating income VII.45 145,947,362.89 67,413,802.58
Less: Non-operating expenses VII.46 26,337,117.25 6,208,466.79
Including: Loss on disposal of non-current assets 923,387.79 3,130,585.22
IV. Total profit (“-” denotes total loss) 593,538,893.05 838,558,409.76
Less: Income tax expenses VII.47 96,723,898.32 142,479,322.30
V. Net profit (“-” denotes net loss) 496,814,994.73 696,079,087.46
Net profit attributable to equity holders of the Company 483,549,691.40 607,868,970.24
Minority interests 13,265,303.33 88,210,117.22
VI. Earnings per share:
(I) Basic earnings per share VII.48 0.23 0.29
(II) Diluted earnings per share VII.48
VII. Other comprehensive income VII.49 -277,876.30 -124,067.32
VIII. Total comprehensive income 496,537,118.43 695,955,020.14
Total comprehensive income attributable to
equity holders of the Company 483,271,815.10 607,744,902.92
Total comprehensive income attributable to minority interests 13,265,303.33 88,210,117.22
31
Consolidated Cash Flows Statements
January to June 2011
Prepared by: Shandong Chenming Paper Holdings LimitedUnit: RMB
Amounts for the Amounts for the
Items Notes current period prior period
I. Cash flows from operating activities:
Cash received from sales of goods
and rendering of services 7,854,858,051.86 8,396,743,627.10
Tax rebates received 15,888,429.59 9,564,967.88
Cash received relating to other operating activities VII.50 895,946,310.86 149,110,831.59
Subtotal of cash inflows from operating activities 8,766,692,792.31 8,555,419,426.57
Cash paid for goods and services 5,917,115,598.43 5,928,577,889.61
Cash paid to and for employees 426,234,308.06 398,614,872.25
Payments of taxes and surcharges 846,940,819.17 704,611,703.50
Cash paid relating to other operating activities VII.50 838,758,161.61 333,891,884.81
Subtotal of cash outflows from operating activities 8,029,048,887.27 7,365,696,350.17
Net cash flows from operating activities 737,643,905.04 1,189,723,076.40
II. Cash flows from investing activities:
Cash received from investments
Cash received from investment income
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 21,052,642.46 20,129,176.66
Net cash received from disposal of
subsidiaries and other business units 3,467,152.31
Cash received relating to other investing activities VII.50 5,834,492.06
Subtotal of cash inflows from investing activities 30,354,286.83 20,129,176.66
Cash paid for purchase of fixed assets,
intangible assets and other long-term assets 2,632,670,826.14 1,521,600,542.26
Cash paid on investments 1,010,000.00
Net cash paid for acquisition of
subsidiaries and other business units
Cash paid relating to other investing activities VII.50
Subtotal of cash outflows from investing activities 2,632,670,826.14 1,522,610,542.26
Net cash flows from investing activities -2,602,316,539.31 -1,502,481,365.60
32
Amounts for the Amounts for the
Items Notes current period prior period
III. Cash flows from financing activities:
Cash received from capital contribution
Including: Cash received from minority
interest contribution to subsidiaries
Cash received from borrowings 7,669,027,263.45 2,475,825,316.09
Cash received from bond issue
Cash received relating to other financing activities 491,750,000.00 2,899,268,303.74
Subtotal of cash inflows from financing activities 8,160,777,263.45 5,375,093,619.83
Cash repayments of amounts borrowed 3,811,506,924.57 4,713,400,265.77
Cash paid for dividend and profit
distribution or interest payment 780,814,563.65 831,853,799.22
Cash paid relating to other financing activities 1,780,537,524.75
Subtotal of cash outflows from financing activities 6,372,859,012.97 5,545,254,064.99
Net cash flows from financing activities 1,787,918,250.48 -170,160,445.16
IV. Effect of foreign exchange rate
changes on cash and cash equivalents -13,615,852.06 -11,859,439.78
V. Net increase in cash and cash equivalents VII.51 -90,370,235.85 -494,778,174.14
Add: Balance of cash and cash equivalents
as at the beginning of the period VII.51 1,855,235,979.80 2,367,334,202.50
VI. Balance of cash and cash equivalents
as at the end of the period VII.51 1,764,865,743.95 1,872,556,028.36
33
Consolidated Statement of Changes in Owners’ Equity
January to June 2011
Prepared by:
Shandong Chenming
Paper Holdings Limited
Unit: RMB
Amounts for the current period Amounts for the prior year
Equity attributable to equity holders of the Company Equity attributable to equity holders of the Company
Paid-up capital Less: General risk Total Paid-up capital Less: General risk Total
Items (or share capital) Capital reserves Treasury Shares Special reserves Surplus reserves provisions Retained profit Others Minority interests owners’ equity (or share capital) Capital reserves Treasury Shares Special reserves Surplus reserves provisions Retained profit Others Minority interests owners’ equity
I. Balance as at the
end of the prior year 2,062,045,941.00 6,093,493,004.71 1,046,510,680.99 4,333,731,947.96 4,219.88 1,724,413,211.96 15,260,199,006.50 2,062,045,941.00 6,093,483,801.92 906,929,047.49 3,928,586,297.55 859,233.72 1,745,156,500.47 14,737,060,822.15
Add: Accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,093,493,004.71 1,046,510,680.99 4,333,731,947.96 4,219.88 1,724,413,211.96 15,260,199,006.50 2,062,045,941.00 6,093,483,801.92 906,929,047.49 3,928,586,297.55 859,233.72 1,745,156,500.47 14,737,060,822.15
III. Changes in the year
(“-” denotes decrease) -135,064,090.90 -277,876.30 -6,450,163.16 -141,792,130.36 9,202.79 139,581,633.50 405,145,650.41 -855,013.84 -20,743,288.51 523,138,184.35
(I) Net profit 483,549,691.40 13,265,303.33 496,814,994.73 1,163,341,066.21 138,317,052.86 1,301,658,119.07
(II) Other comprehensive income -277,876.30 -277,876.30 -855,013.84 -855,013.84
Sub-total of (I) and (II) above 483,549,691.40 -277,876.30 13,265,303.33 496,537,118.43 1,163,341,066.21 -855,013.84 138,317,052.86 1,300,803,105.23
(III) Capital paid in and reduced by owners 4,270,551.95 4,270,551.95 9,202.79 -19,202.79 -10,000.00
1. Capital paid in by owners
2. Amounts of share-based payments
recognised in owners’ equity
3. Others 4,270,551.95 4,270,551.95 9,202.79 -19,202.79 -10,000.00
(IV) Profit distribution -618,613,782.30 -23,986,018.44 -642,599,800.74 139,581,633.50 -758,195,415.80 -159,041,138.58 -777,654,920.88
1. Transfer to surplus reserves 139,581,633.50 -139,581,633.50
2. Transfer to general risk provision
3. Distribution to owners (shareholders) -618,613,782.30 -23,986,018.44 -642,599,800.74 -618,613,782.30 -159,041,138.58 -777,654,920.88
4. Others
(V) Transfer within owners’ equity
1. Transfer from capital reserves to capital (or share capital)
2. Transfer from surplus reserves to capital (or share capital)
3. Transfer from surplus reserves to make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Others
1. Others
IV. Balance as at the end
of the period 2,062,045,941.00 6,093,493,004.71 1,046,510,680.99 4,198,667,857.06 -273,656.42 1,717,963,048.80 15,118,406,876.14 2,062,045,941.00 6,093,493,004.71 1,046,510,680.99 4,333,731,947.96 4,219.88 1,724,413,211.96 15,260,199,006.50
34
Balance Sheet
As at 30 June 2011
Prepared by: Shandong Chenming Paper Holdings LimitedUnit: RMB
Items Notes Closing Balance Opening balance
CURRENT ASSETS:
Monetary funds 813,573,061.88 704,109,173.25
Held-for-trading financial assets
Bills receivable 1,522,839,996.01 1,527,349,378.06
Accounts receivable XIII.1 1,222,422,596.56 1,621,939,553.18
Prepayments 891,174,260.22 919,638,465.71
Interest receivable
Dividend receivable 25,500,000.00
Other receivables XIII.2 4,818,831,211.21 4,773,074,610.91
Inventory 1,060,082,416.36 798,447,611.57
Non-current assets due within one year 1,504,190,971.94 1,799,625,759.18
Other current assets 56,722,886.43
Total current assets 11,889,837,400.61 12,169,684,551.86
NON-CURRENT ASSETS:
Available-for-sale financial assets
Entrusted loans 500,000,000.00 500,000,000.00
Long-term receivables
Long-term equity investments XIII.3 7,673,994,193.38 5,957,887,739.77
Investment properties 23,819,084.05 24,688,212.07
Fixed assets 4,881,835,825.32 5,162,505,904.23
Construction in progress 873,449,445.99 377,881,973.00
Construction materials 19,564,335.23 18,789,838.50
Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 325,814,026.25 329,934,823.01
Development expenditure
Goodwill
Long-term prepaid expenses
Deferred income tax assets 48,153,700.80 60,305,230.74
Other non-current assets
Total non-current assets 14,346,630,611.02 12,431,993,721.32
TOTAL ASSETS 26,236,468,011.63 24,601,678,273.18
35
Items Notes Closing Balance Opening balance
CURRENT LIABILITIES:
Short-term loans 3,938,230,655.64 2,177,183,475.78
Held-for-trading financial liabilities
Bills payable 1,228,453,083.63 124,145,654.66
Accounts payable 1,087,586,803.03 995,425,830.59
Advance receipt 277,247,264.77 284,808,123.90
Staff remuneration payables 86,134,229.11 106,040,498.15
Taxes payable 13,457,947.58 36,899,207.08
Interest payable
Dividend payable 106,831,703.46
Other payables 247,273,946.64 248,170,250.32
Non-current liabilities due within one year 1,153,012,000.00 1,360,951,000.00
Other current liabilities 1,899,376,705.05 3,405,958,538.39
Total current liabilities 10,037,604,338.91 8,739,582,578.87
NON-CURRENT LIABILITIES:
Long-term borrowings 1,307,817,635.94 852,222,735.94
Bonds payable
Long-term payables
Special accounts payable
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 2,311,802,882.44 2,309,355,287.42
Total non-current liabilities 3,619,620,518.38 3,161,578,023.36
TOTAL LIABILITIES 13,657,224,857.29 11,901,160,602.23
OWNERS’ EQUITY (OR SHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 2,062,045,941.00 2,062,045,941.00
Capital reserves 6,184,215,988.77 6,184,215,988.77
Less: Treasury shares
Special reserves
Surplus reserves 1,034,321,099.08 1,034,321,099.08
General risk provisions
Retained profit 3,298,660,125.49 3,419,934,642.10
Total owners’ equity (shareholders’ equity) 12,579,243,154.34 12,700,517,670.95
TOTAL LIABILITIES AND OWNERS’ EQUITY
(SHAREHOLDERS’ EQUITY) 26,236,468,011.63 24,601,678,273.18
36
Income Statement
January to June 2011
Prepared by: Shandong Chenming Paper Holdings LimitedUnit: RMB
Amounts for the Amounts for the
Items Notes current period prior period
I. Operating revenue XIII.4 4,110,859,712.15 7,103,442,044.05
Less: Cost of operations XIII.4 3,325,675,097.46 6,017,146,134.97
Business tax and surcharges 13,912,091.01 1,746,468.34
Selling and distribution expenses 135,529,408.44 229,508,020.80
General and administrative expenses 211,532,488.08 210,426,747.56
Finance expenses 125,413,016.82 111,970,947.81
Loss on impairment of assets -38,465,504.04 34,949,608.75
Add: Gain on change in fair value (“-” denotes loss) 3,870,000.00
Investment income (“-” denotes loss) XIII.5 140,407,977.15 249,697,380.90
Including: Investment income from
associates and joint ventures -3,755,501.39 4,324,494.78
II. Operating profit (“-” denotes loss) 477,671,091.53 751,261,496.72
Add: Non-operating income 100,848,267.10 32,258,682.65
Less: Non-operating expenses 22,727,730.47 3,993,753.67
Including: Loss on disposal of non-current assets 443,271.23 1,904,148.67
III. Total profit (“-” denotes total loss) 555,791,628.16 779,526,425.70
Less: Income tax expenses 58,452,362.47 96,332,012.49
IV. Net profit (“-” denotes net loss) 497,339,265.69 683,194,413.21
V. Other comprehensive income
VI. Total comprehensive income 497,339,265.69 683,194,413.21
37
Cash Flows Statements
January to June 2011
Prepared by: Shandong Chenming Paper Holdings LimitedUnit: RMB
Amounts for the Amounts for the
Items Notes current period prior period
I. Cash flows from operating activities:
Cash received from sales of goods and
rendering of services 3,651,680,690.25 6,528,632,656.16
Tax rebates received
Cash received relating to other operating activities 127,620,327.96 46,562,110.75
Subtotal of cash inflows from operating activities 3,779,301,018.21 6,575,194,766.91
Cash paid for goods and services 1,804,333,442.64 4,554,172,766.62
Cash paid to and for employees 152,867,010.05 130,147,836.04
Payments of taxes and surcharges 391,818,527.42 446,152,782.46
Cash paid relating to other operating activities -452,537,261.41 1,480,177,671.73
Subtotal of cash outflows from operating activities 1,896,481,718.70 6,610,651,056.85
Net cash flows from operating activities 1,882,819,299.51 -35,456,289.94
II. Cash flows from investing activities:
Cash received from investments 240,022,705.39 296,000,000.00
Cash received from investment income 176,215,492.04 182,607,069.44
Disposal of fixed assets,
intangible assets and other long-term assets 59,083.56 18,977,755.80
Cash received relating to other investing activities
Subtotal of cash inflows from investing activities 416,297,280.99 497,584,825.24
Cash paid for purchase of fixed assets,
intangible assets and other long-term assets 276,561,700.64 30,295,440.54
Cash paid on investments 1,719,533,425.00 535,000,000.00
Cash paid relating to other investing activities
Subtotal of cash outflows from investing activities 1,996,095,125.64 565,295,440.54
Net cash flows from investing activities -1,579,797,844.65 -67,710,615.30
38
Amounts for the Amounts for the
Items Notes current period prior period
III. Cash flows from financing activities:
Cash received from capital contribution
Cash received from borrowings 4,197,471,624.39 1,447,618,522.84
Cash received from bond issue
Cash received relating to other financing activities 2,875,273,211.00
Subtotal of cash inflows from financing activities 4,197,471,624.39 4,322,891,733.84
Cash repayments of amounts borrowed 2,188,125,261.03 4,068,972,362.27
Cash paid for dividend and profit distribution
or interest payment 652,004,766.37 696,143,228.07
Cash paid relating to other financing activities 1,708,401,563.04
Subtotal of cash outflows from financing activities 4,548,531,590.44 4,765,115,590.34
Net cash flows from financing activities -351,059,966.05 -442,223,856.50
IV. Effect of foreign exchange rate changes
on cash and cash equivalents -1,249,163.22 -10,495,000.04
V. Net increase in cash and cash equivalents -49,287,674.41 -555,885,761.78
Add: Balance of cash and cash equivalents
as at the beginning of the period 662,209,607.29 1,586,045,998.83
VI. Cash and cash equivalents as at the end of the period 612,921,932.88 1,030,160,237.05
39
Statement of Changes in Owners’ Equity
January to June 2011
Prepared by:
Shandong Chenming
Paper Holdings Limited
Unit: RMB
Amounts for the current period Amounts for the prior year
Paid-up capital Less: General risk Total Paid-up capital Less: General risk Total
Items (or share capital) Capital reserves Treasury Shares Special reserves Surplus reserves provisions Retained profit owners’ equity (or share capital) Capital reserves Treasury Shares Special reserves Surplus reserves provisions Retained profit owners’ equity
I. Balance as at the end of the prior year 2,062,045,941.00 6,184,215,988.77 1,034,321,099.08 3,419,934,642.10 12,700,517,670.95 2,062,045,941.00 6,184,215,988.77 894,739,465.58 2,782,313,722.90 11,923,315,118.25
Add: Accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,034,321,099.08 3,419,934,642.10 12,700,517,670.95 2,062,045,941.00 6,184,215,988.77 894,739,465.58 2,782,313,722.90 11,923,315,118.25
III. Changes in the year (“-” denotes decrease) -121,274,516.61 -121,274,516.61 139,581,633.50 637,620,919.20 777,202,552.70
(I) Net profit 497,339,265.69 497,339,265.69 1,395,816,335.00 1,395,816,335.00
(II) Other comprehensive income
Sub-total of (I) and (II) above 497,339,265.69 497,339,265.69 1,395,816,335.00 1,395,816,335.00
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments
recognised in owners’ equity
3. Others
(IV) Profit distribution -618,613,782.30 -618,613,782.30 139,581,633.50 -758,195,415.80 -618,613,782.30
1. Transfer to surplus reserves 139,581,633.50 -139,581,633.50
2. Transfer to general risk provision
3. Distribution to owners (shareholders) -618,613,782.30 -618,613,782.30 -618,613,782.30 -618,613,782.30
4. Others
(V) Transfer within owners’ equity
1. Transfer from capital reserves to capital (or share capital)
2. Transfer from surplus reserves to capital (or share capital)
3. Transfer from surplus reserves to make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Others
1. Others
IV. Balance as at the end of the period 2,062,045,941.00 6,184,215,988.77 1,034,321,099.08 3,298,660,125.49 12,579,243,154.34 2,062,045,941.00 6,184,215,988.77 1,034,321,099.08 3,419,934,642.10 12,700,517,670.95
40
Notes to the financial statements from January to June 2011
(All amounts in RMB unless otherwise specified)
I. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”), whose predecessor was Shandong Shouguang
Paper Mill Corporation, was reorganised to become a joint stock limited company by way of private placement in May 1993. In December
1996, with the approval issued by the Shandong Provincial Government (Lu Gai Zi [1996] Document No. 270) and by the Securities
Committee of the State Council (Zheng Wei [1996] Document No.59), the Company was reorganised to become a joint stock limited
company by way of public subscription.
In May 1997, with the approval issued by the Securities Committee of the State Council ( [1997] Document No. 26), the Company issued
115 million B Shares in connection with its international offering. B-shares from this issuance were listed on Shenzhen Stock Exchange since
26 May 1997.
In September 2000, with the approval issued by China Securities Regulatory Committee (hereinafter referred to as the “CSRC”) (Zheng Jian
Gong Si Zi [2000] Document No. 151), the Company issued 70 million A Shares. A-shares from this issuance were listed on Shenzhen Stock
Exchange on 20 November 2000.
In June 2008, with the approval issued by the Stock Exchange of Hong Kong Limited (hereinafter referred to as the “Stock Exchange”), the
Company issued 355,700,000 H shares. Meanwhile, the relevant state shareholders of the Company performed the reduction of state-owned
shares, by way of transferring to the National Council for Social Security Fund (the “NSSF Council”) such number of shares held by it,
representing 35,570,000 shares, which were to be converted into overseas listed foreign shares (H shares). H-shares under the new issue were
listed on the Hong Kong Stock Exchange on 18 June 2008.
As at 31 December 2010, the Company has a total of 2,062,045,941 shares.
The business scope of the Company and its subsidiaries (hereinafter referred as the (“Group”) covers: processing and sale of paper products
(including machine made paper and paper board), paper making raw materials and machinery; generation and sale of electric power and
thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing and sale of wood products; and
manufacturing and sale of laminated boards and fortified wooden floorboards.
Shouguang Chenming Holdings Co., Ltd is the parent company of the Group.
Shouguang Chenming Holdings Co., Ltd (hereinafter referred to as “Shouguang Chenming Holdings”) was established on 30 December
2005 by State-owned Assets Supervision and Administration Commission of Shouguang City which contributed its state-owned shares to set
up the Company. The China Securities Regulatory Commission finally approved the change in the holder of state-owned Shares of
Chenming Paper and the change in nature of its equity interests arising from the establishment of Shouguang Chenming Holdings on 14
August 2006 (Guo Zi Chan Quan [2005] No. 1539) . Since then, the largest shareholder of the Company was changed from State-owned
Assets Supervision and Administration Commission of Shouguang City to Shouguang Chenming Holdings
The Company’s financial statements were approved by the Board on 25 August 2011.
II. Basis of Preparation of the Financial Statements
The Company’s financial statements have been prepared based on the going concern assumption. The financial statements have been
prepared based on actual transactions and events, in accordance with the accounting standards for business enterprises promulgated by the
Ministry of Finance of PRC in 15 February 2006 and 38 specific accounting standards, the subsequently promulgated application guidelines
of the Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards for Business
Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on the Preparation of Information
Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2010) of China Securities
Regulatory Commission.
The Group’s financial statements have been prepared on an accrual basis in accordance with the ASBEs. Except for certain financial
instruments which are measured at fair value, 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.
III. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial positions of the
Company and the Group as at 30 June 2011and relevant information such as the operating results and cash flows of the Company and the
Group of 2011. In addition, the financial statements of the Company also comply with, in all material respects, the disclosure requirements of
the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for
Financial Reports” revised by the China Securities Regulatory Commission in 2010 and the notes thereto.
41
IV. Significant Accounting Policies and Estimates
1. Accounting period
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 fiscal year. The fiscal year of the Company is from 1 January to 31 December of each calendar year.
2. 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 as their reporting currency according to the primary economic environment in which
these subsidiaries operate. The Group prepares its financial statements in RMB.
3. Accounting treatment of business combination
A business combination refers to the transaction or event to combine two or more separate entities into a single reporting entity.
Business combination is classified into business combination under common control and business combination not under common
control.
(1) Business combination under common control
A business combination involving enterprises under common control is a business combination in which all of the combining
enterprises are ultimately controlled by the same party or parties before and after the combination, and that control is not
transitory. The party that, on the combination date, obtains control of another enterprise participating in the combination is the
absorbing party, while that other enterprise participating in the combination is a party being absorbed. The combination date is
the date on which one combining enterprise effectively obtains control of the other combining enterprises.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination date as recorded
by the party being merged. The difference between the carrying amount of the net assets obtained and the carrying amount of the
consideration paid for the combination (or the aggregate nominal value of shares issued as consideration) is charged to the capital
reserve (share capital premium). If the capital reserve (share capital premium) is not sufficient to absorb the difference, any
excess shall be adjusted against retained earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to profit or loss in
the period in which they are incurred.
42
IV. Significant Accounting Policies and Estimates (Cont’d)
3. Accounting treatment of business combination (Cont’d)
(2) Business combination not under common control
A business combination not involving enterprises under common control is a business combination in which all of the combining
enterprises are not ultimately controlled by the same party or parties before and after the combination. For a business
combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another
enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the
acquiree. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
For business combination involving entities not under common control, the cost of a business combination is the aggregate of the
fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the
acquirer to be paid by the acquirer, in exchange for control of the acquire plus agency fee such as audit, legal service and
evaluation consultation and other management fees charged to the profit or loss for the period when incurred. As equity or bond
securities are issued by the acquirer as consideration, any attributable transaction cost is included their initial costs. Adjustments
for cost of combination which are likely to occur and can be measured reliably will be recognised as contingent consideration.
Subsequent adjustments will impact on the goodwill. Involved or contingent consideration charged to the combination cost
according to its fair value in the acquisition date, the combined goodwill be will be adjusted if new or addition evidence existed
about the condition in the acquisition date within twelve months after the acquisition date, which is required to adjust the
contingent consideration. When the business combination is achieved in stages through a number of exchange transactions, the
Group re-measures its previously held equity interest in the acquiree on the acquisition date, and the difference between the fair
value and the net book value is recognised as investment income for the period in the consolidated financial statements of the
Group, in the meanwhile, the other comprehensive income related to the equity interest of acquiree held before the acquisition
date is transferred to investment income for the period. The cost of combination is the sum of the fair value of the equity interest
of the acquiree as at the acquisition date which held before the acquisition date and the fair value of the equity interest of the
acquiree as at the acquisition date which additional acquired in the acquisition date.
The combination cost incurred by the acquirer and the identifiable net assets acquired from the combination are measured at their
fair values. Where the cost of a business combination exceeds 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.
The acquiree’s deductible temporary difference acquired by the acquirer, which is still not yet recognised as it does not satisfy the
recognition conditions of the deferred income tax assets on the acquisition date. If new or addition information proves that the
relevant circumstances have already existed on the acquisition date within twelve months after the acquisition date, which
estimates that the economic benefits incurred from the deductible temporary difference at the acquisition date of acquirer can be
realised, then the relevant deferred income tax assets will be recognised, and the goodwill will be reduced at the same time, if the
goodwill is not sufficient be absorbed, any excess shall be recognised as the profit or loss for the period. Except as disclosed
above, the deferred income tax assets related to the business combination are charged in the profit or loss for the period.
43
IV. Significant Accounting Policies and Estimates (Cont’d)
4. Basis for preparation of consolidated financial statements
(1) Principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is setermined on the basis of control. The term “control”
means that the Company has the power to secide an investee’s financial and operating policy. The scope of consolidation
includes the Company and all of its subsidiaries. A subsidiary is a business or entity controlled by the Company.
(2) Basis for preparation of the consolidated financial statements
Subsidiaries are consolidated from the date on which the Group obtains net assets and the effective control of decision making of
production and operation and are deconsolidated from the date that such control ceases. For disposal of subsidiaries, the operating
results and cash flows of such subsidiaries before the date of disposal are properly included into the consolidated income
statement and consolidated cash flows 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 flows 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
flows 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 subsidiaries acquired from business combination not under
common control, the financial statements of the subisidiaries will be adjusted according to the fair value of the identifiable net
assets.
All intra-group significant balances, transactions and unrealised profit are eliminated in the consolidated financial statements.
The shareholder s’ equity and the portion of the profit or loss for the period that is not attributable to the Company are presented
separately under shareholders’ equity and net profit in the consolidated financial statements. The portion of net profit or loss of
subsidiaries for the period attributable to minority interests is presented in the consolidated income statement under the” net
profit” line item as “minority interests”. When the amount of loss attributable to the minority shareholders of a subsidiary
exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the subsidiary, the excess amount shall be
allocated against minority interests.
5. 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.
44
IV. Significant Accounting Policies and Estimates (Cont’d)
6. 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 fuctional currency at the
prevailing spot exchange rate on the date of exchange (usually refers to the middle rate of the exchange rate for the day as quoted
by the People’s Bank of China, the same below) while the Company’s foreign currency exchange operations and transactions in
connection with foreign currency exchange shall be translated into functional currency at the exchange rate actually adopted.
(2) Basis for translation of foreign currency monetary items and foreign currency non-monetary items
On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date.
All differences are included in the consolidated income statement, except for: (1) the differences arising from foreign currency
borrowings related to the acquisition or construction of fixed assets which are qualified for capitalisation; and (2) except for other
carrying amounts of the amortisation costs, the differences arising from changes of the foreign currency items available for sale.
The foreign currency non-monetary items measured at historical cost shall still be measured by the functional currency translated
at the spot exchange rate on the date of the transaction. Foreign currency non-monetary items measured at fair value are
translated at the spot exchange rate on the date of determination of the fair value. The difference between the amounts of
reporting currency before and after the translation will be treated as changes in fair value (including changes in foreign exchange
rates) and recognised in profit or loss for the period or recognised as other consolidated income and included in the capital
reserves.
(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
overseas operation and foreign currency monetary items materially constitute net investment in overseas operation shall be
recorded into “translation reserve” in the shareholders’ equity: disposal of overseas operation 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 comply with the
following requirement: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance
sheet date; owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which such
items arose; income and expenses items in the income statement are translated at the 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 consolidated income, and presented separately as under owners’ equity items in the balance sheet. On
disposal of foreign operations and loss of control, exchange differences arising from the translation of financial statements
denominated in foreign currencies related to the disposed foreign operation which has been included 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 flows 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 flows statements.
The opening balance and the prior year’s figures are presented according to the translated amounts of the prior year.
45
IV. Significant Accounting Policies and Estimates (Cont’d)
7. Financial instruments
(I) Method of determination of the fair value for financial assets and financial liabilities
The fair value refers to the amount, at which both willing parties to a fair transaction who are familiar with the condition
exchange their assets or clear off their debts under fair conditions. Financial instruments exist in an active market. Fair value is
determined based on the quoted price in such market. An active market refers to where pricing is easily and regularly obtained
from exchanges, brokers, industrial organisations and price-fixing service organisations, representing the actual price of a market
transaction that takes place in a fair deal. While financial instruments do not exist in an active market, the fair value is determined
using valuation techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent
market transactions entered into by both willing parties, reference to present fair values of similar other financial instruments,
cash flow discounting method and option pricing models.
(2) Classification, recognition and measurement of the financial assets
By way of buying and selling the financial assets in a regular way, recognition and derecognition are carried out according to the
accounts on the transaction day. Financial assets are divided into financial assets at fair value through profit or loss,
held-to-maturity investments, accounts receivable and available for-sale financial assets when they are initially recognised.
Financial assets and financial liabilities are initially recognised at fair value. For financial assets and financial liabilities classified
as fair value through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period. For financial
assets classified as other categories, relevant transaction costs are included in the amount initially recognised.
① Financial assets carried at fair value through profit or loss for the current period
They include financial assets held for trading and financial assets designated as at fair value through profit or loss for the
current period. The Group’s financial assets at fair value through profit or loss for the current period are all financial assets
held for trading.
Financial assets may be classified as financial assets held for trading if one of the following conditions is met: (1) the
financial assets is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; (2) the
financial assets is part of a portfolio of identified financial instruments that are managed together and for which there is
objective evidence of a recent pattern of short-term profit-taking; or (3) the financial assets is a derivative, excluding the
derivatives designated as effective hedging instruments, the derivatives classified as financial guarantee contract, and the
derivatives linked to an equity instrument investment which has no quoted price in an active market nor a reliably measured
fair value and are required to be settled through that equity instrument.
Financial assets held for trading are subsequently measured at fair value. The gain or loss arising from changes in fair value
and dividends and interest income related to such financial assets are charged to profit or loss for the current period.
② Held-to-maturity investments
They are non-derivative financial assets with fixed maturity dates and fixed or determinable payments that the Group has
positive intent and ability to hold to maturity.
Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. Gain or loss
on derecognition, impairment or amortisation is recognised through profit or loss for the current period.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest
income or expense over each period based on the effective interest of a financial asset or a financial liability (including a
group of financial assets or financial liabilities). The effective interest is the rate that discounts future cash flows from the
financial asset or financial liability over its expected life or (where appropriate) a shorter period to the carrying amount of
the financial asset or financial liability.
In calculating the effective interest rate, the Group will estimate the future cash flows (excluding future credit losses) by
taking into account all contract terms relating to the financial assets or financial liabilities whilst considering various fees,
transaction costs and discounts or premiums which are part of the effective interest rate paid or received between the parties
to the financial assets or financial liabilities contracts.
46
IV. Significant Accounting Policies and Estimates (Cont’d)
7. Financial instruments (Cont’d)
(2) Classification, recognition and measurement of the financial assets (Cont’d)
③ Accounts receivable
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 accounts receivable by the Group.
The receivables that are formed in sale of goods or rendering of services to external parties, and the receivables, except for
the debt instruments quoted in an active market, due to the Company from other entities, including accounts receivable,
bills receivable, other receivables, long-term receivables, etc., are initially recognised at the consideration of the contract or
agreement to be received from the buyers. Accounts receivable that are of a financing nature are initially recognised at their
present value. Upon recovery or disposal of accounts receivable, the difference between the consideration obtained and the
carrying amount is charged to profit or loss for the period.
④ Available-for-sale financial assets
They include non-derivative financial assets that are designated in this category on initial recognition, and the financial
assets other than the financial assets at fair value through profit and loss, loans and receivables and held-to-maturity
investments.
Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change in fair value are
recognised as other comprehensive income and charged to capital reserves, except for impairment loss and exchange
differences arising from foreign monetary financial assets and amortised cost which are accounted for through profit or loss
for the current period. The financial assets will be transferred out of the financial assets on derecognition and accounted for
through profit or loss for the current period.
Interests received from available-for-sale financial assets held and the cash dividends declared by the investee are
recognised as investment income.
(3) Impairment of financial assets
In addition to financial assets at fair value through profit or loss for the current period, the Group reviews the book value of other
financial assets at each balance sheet date and provide for impairment where there is objective evidence that financial assets are
impaired.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For a financial asset
that is not individually significant, the Group assess the asset individually for impairment or include the asset in a group of
financial assets with similar credit risk characteristics and collectively assess them for impairment. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether the financial asset is individually
significant or not, the financial asset is included in a group of financial assets with similar credit risk characteristics and
collectively assessed for impairment. Financial assets for which an impairment loss is individually recognised are not included in
the collective assessment for impairment.
① Held-to-maturity investments of loans and accounts receivable
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.
47
IV. Significant Accounting Policies and Estimates (Cont’d)
7. Financial instruments (Cont’d)
(3) Impairment of financial assets (Cont’d)
② Impairment of available-for-sale financial assets
When the available-for-sale financial assets impair, the accumulated loss originally included in the capital reserve arising
from the decrease in fair value was transferred out from the capital reserve and included in the profit or loss for the period.
The accumulated loss that transferred out from the capital reserve is the balance of the acquired initial cost of asset, after
deduction of the principal recovered, amortised amounts, current fair value and the impairment loss originally included in
the profit or loss.
After recognition of the impairment loss, if there is objective evidence showing recovery in value of such financial assets
impaired and which is related to any event occurring after such recognition in subsequent periods, the impairment loss
originally recognised shall be reversed. The impairment loss reversal of the available-for-sale equity instrument will be
recognised as other consolidated income, and the impairment loss reversal of the available-for-sale debt instrument will be
included in the profit or loss for the period.
When an equity investment that is not quoted in an active market and the fair value of which cannot be measured reliably,
or the impairment loss of a derivative financial asset linked to the equity instrument that shall be settled by delivery of that
equity instrument, then it will not be reversed.
(4) Recognition and measurement of transfers of financial asset
Financial asset that satisfied any of the following criteria shall be derecognised: ¨ the contract right to recover 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 enitity does not either assign or maintain substantially all the risk and return arising from the ownership of the financial
asset and does not give up the control on such financial asset, to the extent of its continuous involvement in the financial asset,
the entity recognises it as a related financial asset and recognises the relevant liability accordingly. The extent of the continuous
involvement is the extent to which the entity exposes to changes in the value of such financial assets.
On derecognition of a financial asset, the difference between the following amounts is recognised in profit or loss for the current
period: the carrying amount and the sum of the consideration received and any accumulated gain or loss that had been recognised
directly in equity.
If a part of the financial assets qualifies for derecognition, the carrying amount of the financial asset is allocated between the part
that continues to be recognised and the part that qualifies for derecognition, based on the fair values of the respective parts. The
difference between the following amounts is recognised in profit or loss for the period: the sum of the consideration received and
the carrying amount of the part that qualifies for derecognition and the aforementioned carrying amount.
48
IV. Significant Accounting Policies and Estimates (Cont’d)
7. Financial instruments (Cont’d)
(5) Classification and measurement of financial liabilities
At initial recognition, financial liabilities are classified either as “financial liabilities at fair value through profit or loss” or “other
financial liabilities”. Financial liabilities are initially recognised at fair value. For financial liabilities classified as fair value
through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period. For financial liabilities
classified as other categories, relevant transaction costs are included in the amount initially recognised.
① Financial liabilities at fair value through profit or loss for the period
The criteria for a financial liability to be classified as held for trading and designated as at financial liabilities at fair value
through profit or loss are the same as those for a financial asset to be classified as held for trading and designated as at
financial assets at fair value through profit or loss.
Financial liabilities at fair value through profit or loss for the period are subsequently measured at fair value. The gain or
loss arising from changes in fair value and dividends and interest income related to such financial liabilities are included
into the current profit or loss.
② Other financial liabilities
Derivative financial liabilities which are linked to equity instruments that are not quoted in an active market and the fair
value of which cannot be measured reliably measured, and which shall be settled by delivery of equity instruments are
subsequently measured at cost. Other financial liabilities are subsequently measured at amortised cost using the effective
interest method. Gains or losses arising from derecognition or amortisation is recognised in profit or loss for the current
period.
③ Financial Guarantee Contracts
Financial guarantee contracts other than those designated as financial liabilities at fair value through profit or loss are
initially recognised at fair value, and shall be subsequently measured at the higher of the following: the amount determined
in accordance with Accounting Standard for Business Enterprises No. 13 “Contingencies” and the amount initially
recognised less cumulative amortisation recognised in accordance with the principles set out in Accounting Standard for
Business Enterprises No. 14 “Revenue”.
(6) Derecognition of financial liabilities
Financial liabilities are derecognised in full or in part only when the present obligation is discharged in full or in part. An
agreement is entered between the Group (debtor) and a creditor to replace the original financial liabilities with new financial
liabilities with substantially different terms, derecognise the original financial liabilities as well as recognise the new financial
liabilities.
When financial liabilities is derecognised in full or in part, the difference between the carrying amount of the financial liabilities
derecognised and the consideration paid (including transferred non-cash assets or new financial liability) is recognised in profit or
loss for the current period.
(7) Derivative Instruments
Derivative instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently measured at fair value. Any gains or losses arising from changes in fair value of derivatives are taken directly to
profit or loss for the period, except for derivative instruments that are designated as hedging instruments and which are highly
effective in hedging, gains or losses arising from changes in their fair value are taken to the profit or loss for the period in
accordance with the hedge accounting requirement based on the nature of hedging relationships.
49
IV. Significant Accounting Policies and Estimates (Cont’d)
7. Financial instruments (Cont’d)
(8) Offset of Financial Assets and Financial Liabilities
If the Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which are enforceable
currently, and the Group plans to realise the financial assets or to clear off the financial liabilities by net amount method, the
amount of the offsetting financial assets and financial liabilities shall be reported in the balance sheep. Otherwise, financial assets
and financial liabilities are presented separately in the balance sheet without offsetting.
(9) 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 transaction fees arising from the issue of equity instruments by one party in the business combination shall be reduced in the
premium income. If the transaction fees overweight the premium income, it shall be reduced in the retained revenue. For
remaining equity instruments, the price received during the issue shall be added to shareholder’s equity after reducing the
transaction fees.
The distribution (excluding the dividends) to the equity instrument holders by the Group shall reduce the shareholder’s equity.
The Group shall not recognise the changes of the equity instruments’ fair value.
8. Accounts receivable
Accounts receivable includes accounts receivable and other accounts receivable, etc.
(1) Recognition of bad debt provision
The Group carries out an overall inspection on the carrying amount of accounts receivable on the balance sheet date. Where there
arises any of the following objective evidences indicating that accounts receivable have been impaired, an impairment provision
will be made: ¨ 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.
(2) Measurement of bad debt provision
① Basis for recognition and measurement of bad debt provision for single item with significant accounts receivable, which is
impaired individually for bad debt
Accounts receivable of more than RMB1 million is recognised as individually significant accounts receivable by the Group.
For accounts receivable that is individually significant, the Group 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.
50
IV. Significant Accounting Policies and Estimates (Cont’d)
8. Accounts receivable (Cont’d)
(2) Measurement of bad debt provision (Cont’d)
② Basis for recognition and measurement of bad debt provision for receivable by credit risk features
A. Basis for determining portfolio of credit risk features
In respect of accounts receivable that are individually insignificant and those that are significant but are not impaired
upon individual testing, the Group classifies financial assets based on the similarity and relevancy of credit risk
features. These credit risks usually reflect debtors’ ability to settle all amounts that fall due based on the contracted
terms of the assets, and are relevant to the estimated future cash flows of the inspected assets.
Basis for determining different portfolios:
Items Basis for determining portfolio
Account receivable for fewer than Shorter age, fewer risk
2 years age (including 2 years)
Account receivable for over 2 years age Longer age, greater risk
B. Measurement of determining bad debt provision based on credit risk feature portfolio
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 features (debtors’ ability to settle
outstanding amounts based on contracted terms), taking into account historical experience and the prevailing
economic situations as well as losses that are expected to have been incurred in the group of accounts receivable.
Basis for bad debt provision of different portfolio:
Items Basis of provision
Account receivable for fewer than 2 years age Analysis by age
Account receivable for over 2 years age Analysis by age
In respect of portfolio, the measurement of bad debt provision for portfolio is based on analysis by age
Ratio of Ratio of
accounts other accounts
receivable receivable
Age provision (%) provision (%)
Within 1 year (including 1 year, the same below) 5 5
1-2 years 10 10
2-3 years 20 20
Over 3 years 100 100
51
IV. Significant Accounting Policies and Estimates (Cont’d)
8. Accounts receivable (Cont’d)
(2) Measurement of bad debt provision (Cont’d)
③ Insignificant accounts receivable but impaired individually for bad debt
The Group conducts impairment tests for the single item with insignificant account receivables but with following features.
if there is objective evidence indicating that the accounts receivable is impaired, then impairment loss will be recognised
and provision for bad debts according to the difference when the present value of future cash flow is fewer than its carrying
amounts: amounts due from associates; accounts receivable with dispute against counterparties or involved in litigation or
arbitration; there is obvious objective of the accounts receivable indicated that the debtor is likely to fail to comply with the
repayment obligation, etc.
(3) Reversal of provision
If there are evidences indicating that the value of the account receivable is recovered and that recovery is connected to the event
subsequent to the recognition of the loss, the impairment loss previously recognised will be revered and recorded into profit or
loss for the period. However, the carrying amount so reversed shall not exceed the amortised cost of the account receivable on the
date of reversal on the assumption that no impairment loss has been made.
9. Inventory
(1) Classification of inventories
Inventories mainly include raw materials, work in progress and finished products, etc.
(2) Pricing of inventory 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 based on the planned cost first, and deviations in cost will
be apportioned by month end, so that the planned cost will be adjusted to become the actual cost.
(3) Recognition of net realisable value of inventory and provision for inventory impairment
At the balance sheet date, inventories are calculated at the lower of cost and net realisable value. Provision for inventory
impairment is made when the net realisable value is lower than the cost. Provisions for impairment of inventory shall be made
according to the amount by which the cost of a single item exceeds its net realisable value.
After making the provision for inventory impairment, in case the factors causing inventory impairment no longer exists, and the
net realisable value of an inventory is higher than its book-value, the original provision for inventory impairment shall be
transferred back and incorporated into the profit or loss for the current period.
Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion,
estimated sales expenses and other amounts after tax and levies in daily operation. The realisable value of inventories shall be
determined on the basis of definite evidence, purpose of holding the inventories and effect of after-balance-sheet-date events.
(4) The inventory taking system shall use permanent inventory system/periodic inventory system.
(5) Amortisation of low-value consumables and packaging materials
Low-value consumables are amortised by lump-sum when taken for use. Also, packaging materials are amortised by lump-sum
when taken for use.
52
IV. Significant Accounting Policies and Estimates (Cont’d)
10. Long-term equity investments
(1) Determination of initial 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 of the party being absorbed at the date of combination. For a long-term equity investment acquired through
business combination not involving enterprises under common control, the initial investment cost of the long-term equity
investment acquired shall be the each direct related expenses of acquirer arising from business combination.
The long-term equity investment acquired through means other than a business combination shall be initially measured at its cost.
Such cost is depended upon the acquired means of long-term equity investments, which is recognised based on the purchase cost
actually paid by the Group in cash, the fair value of equity securities issued by the Group, the agreed value of investment contract
or agreement, the fair value or original carrying amounts of the non-monetary asset exchange transaction which the asset will be
transferred out of the Group, and the fair value of long-term equity investment itself. The costs, taxes and other necessary
expenses that are directly attributable to the acquisition of the long-term equity investments are also included in the investment
cost.
(2) Method for subsequent measurement and profit or loss recognition
Cost method is used to account for a long-term equity investment where the investor does not have joint control or significant
influence over the investee, and the investment is not quoted in an active market and its fair value cannot be reliably measured.
Long-term equity investments with joint control or significant influence on the investee is accounted for using equity method.
Long-term equity investment without control or joint control or significant influence with a fair value which can be reliably
measured is accounted for as available-for-sale financial assets.
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.
① Long-term equity investments accounted for using the cost method
Under the cost method, a long-term equity investment is measured at its initial investment cost. Except receiving the actual
consideration paid for the investment or the declared but not yet distributed cash dividends or profits which is included in
the consideration, investment gains for the period is recognised as the cash dividends or profits declared by the investee.
② Long-term equity investments accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds 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 or loss represents the Group’s share of the net profits or losses made by the
investee for the current period. The Group 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 conformity with the accounting policies and accounting periods of the Group. The unrealised gain or
loss from internal transactions entered into between the Group and its associated enterprises and joint ventures is set off
according to the shareholding attributable to the Group and accounted for as investment income and loss based such basis.
However, the unrealised gain or loss from internal transactions entered into between the Group and its investee is not set up
if belonging to impairment loss from assets transferred according to regulations such as “Accounting Standards for
Business Enterprises No. 8 “Assets impairment”. In respect of the other consolidated income of investees, the carrying
amount of long-term equity investments is accordingly adjusted and recognised as other consolidated income and included
in the capital reserves.
The Group’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 Group has to assume additional obligations, the estimated obligation assumed shall be
provided for and charged to the profit or loss as investment loss for the period. Where the investee is making profits in
subsequent periods, the Group shall resume recognising its share of profits after setting off against the share of
unrecognised losses.
If there is debit variation in relation to the long-term equity investments in associates and joint venture held prior to first
adoption of the Accounting Standards for Business Enterprises by the Group on 1 January 2007, the amounts amortised
over the original residual term using the straight-line method is included in the profit or loss for the period.
53
IV. Significant Accounting Policies and Estimates (Cont’d)
10. Long-term equity investments (Cont’d)
(2) Method for subsequent measurement and profit or loss recognition (Cont’d)
③ Acquisition of minority interests
Upon the preparation of the consolidated financial statements, since acquisition of minority interests increased of long-term
equity investment which was compared to fair value of identifiable net assets recognised which are measured based on the
continuous measurement since the acquisition date (or combination date) of subsidiaries attributable to the Group calculated
according to the proportion of newly acquired shares, the difference of which recognised as adjusted capital surplus, capital
surplus insufficient to set off impairment and adjusted retained earnings.
④ Disposal of long-term equity investments
In these consolidated financial statements, where the parent company disposes of a portion of the long-term equity
investments in a subsidiary without a change in control, the difference between disposal cost and disposal of long-term
equity investments relative to the net assets of the subsidiary is charged to the owners’ equity. If disposal of a portion of the
long-term equity investments in a subsidiary by the parent company results in a change in control, it shall be treated in
accordance with the relevant accounting policies as described in Note IV. 4. (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. Where the equity method is adopted,
other comprehensive income attributable to the long-term equity investments previously included in shareholders’ equity
shall be transferred to through profit or loss in the current period on a pro-rata basis. The remaining equity shall be
recognised as the long-term equity investments or other relevant financial assets based on the carrying amount and
subsequently measured in accordance with the accounting policies of the foresaid long-term equity investments or financial
assets. The retrospective adjustment shall be made in accordance with the relevant provisions if the remaining equity is
accounted for using the equity method instead of the cost method.
(3) Recognition of having joint control or significant influence over the investee
The term “control” means that the Group has the power to decide an enterprise’s financial and operating policy, pursuant to
which, the Group can get the power to obtain benefits from its operating activities. Joint control is the contractually agreed
sharing of control over an economic activity, which only exists when relevant and important financial affairs and management
decisions related to such economic activity require sharing of control by investors who unanimously agree upon. Significant
influence is the power to participate in the financial and operating policy decisions of an enterprise, but to fail to control or joint
control the formulation of such policies together with other parties. In determining whether there is control or significance
influence over the investee, potential voting right factors (such as the convertible corporate bonds for the period and the
exercisable stock warrants for the period of the investee and other invested units held) were taken into account.
(4) Impairment test method and impairment provision
The Group assesses at each balance sheet date whether there is any indication that any long-term equity investments may be
impaired. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for the
individual asset. If the recoverable amount of an asset is less than its carrying amount, the reduction is recognised as an
impairment loss and charged to profit or loss for the current period. A provision for impairment loss of the asset is recognised
accordingly.
An impairment loss recognised on long-term equity investments shall not be reversed in a subsequent period.
54
IV. Significant Accounting Policies and Estimates (Cont’d)
11. Investment Property
Investment property refer to real estate held to earn rentals or for capital appreciation, or both including the land use right that have
been leased out; the land use right that held and will be transferred after appreciation; and the building that have been leased out.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost of
investment property only when the economic benefits associated with the asset will likely flow to the Group and its cost can be
measured reliably. All other expenditures on investment property shall be included in profit or loss for the current period when
incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortised using the same
policy as that for buildings and land use rights.
The method for impaired test of investment property and measurement of impairment provision are detailed in Note IV. 17
“Impairment of non-current non-monetary financial asset”.
In the event that an owner-occupied property or inventories is converted to an investment property (or vice versa), upon the conversion,
the property shall be stated at the carrying amount prior to the conversion.
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.
12. Fixed assets
(1) Conditions for recognition of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes; and have a useful life of more than one accounting year.
(2) Method for depreciation of different fixed assets
Fixed assets shall be initially measured at cost and the effect of any expected costs of abandoning the asset at the end of its use.
Depreciation is provided over their estimated useful lives from the month after they have reached the working condition for their
intended use using the straight-line method/units-of-production method. The useful life, estimated residual value and annual
depreciation rate of each category of fixed assets are as follows:
Annual
Useful lives of Estimated depreciation
Category depreciation residual value rate
Buildings and structures 20-40 5-10 2.25-4.75
Machinery and equipment 8-20 5-10 4.5-11.88
Transportation equipment 5-8 5-10 11.25-19.00
Electronic equipment and others 5 5-10 18.00-19.00
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the
asset, after deducting the estimated costs of disposal, if the asset were already of the stage and in the condition expected at the
end of its useful life.
(3) Impairment testing methods and provision for impairment methods on fixed assets
The method for impaired test of fixed asset and measurement of impairment provision are detailed in Note IV. 18 “Impairment of
non-current non-monetary financial asset”.
55
IV. Significant Accounting Policies and Estimates (Cont’d)
12. Fixed assets (Cont’d)
(4) Recognition basis and measurement method of fixed assets under finance lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. Title may or may not eventually be transferred. The fixed asset leased by the finance lease is used the
policy consistent with that of proprietary fixed assets for provision of depreciated leased asset. If it can be reasonably determined
that the ownership of the leased asset can be obtained upon expiration of the lease term, the leased asset shall be depreciated over
its useful life. If it cannot be reasonably determined that the ownership of the leased asset can be obtained at the expiration of the
lease term, the leased asset shall be depreciated over the shorter of the lease term or its useful life.
(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 the Company and the relevant cost can be measured reliably; meanwhile
the carrying amount of the replaced part shall be derecognised. Other subsequent expenditures shall be charged to profit or loss
when incurred.
When a fixed asset is sold, transferred, retired or damaged, the Group shall recognise the amount of any proceeds on disposal of
the asset net of the carrying amount and related taxes in profit or loss for the current period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least at
each financial year-end. A change in the useful life or estimated net residual value of a fixed asset or the depreciation method
used shall be accounted for as a change in accounting estimate.
13. Construction in progress
Construction in progress is recognised based on the actual construction cost, including all expenditures incurred for construction
projects, capitalised borrowing costs for the construction in progress before it has reached the working condition for its intended use,
and other related expenses during the construction period. A construction in progress is transferred to fixed assets when it has reached
the working condition for its intended use.
The method for impaired test of construction in progress and measurement of impairment provision are detailed in Note IV. 18
“Impairment of non-current non-monetary financial asset”.
14. Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums related to borrowings, ancillary costs incurred in connection
with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. For borrowing costs that are
directly attributable to the acquisition, construction or production of a qualifying asset, when expenditures for the asset and borrowing
costs are being incurred, activities relating to the acquisition, construction or production of the asset that are necessary to prepare the
asset for its intended use or sale have commenced, such borrowing costs shall be capitalised as part of the cost of that asset; and
capitalisation shall discontinue when the qualifying asset is ready for its intended use or sale. Other borrowing costs shall be recognised
as expense in the period in which they are incurred.
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual interest expense incurred
on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used into banks or any
investment income on the temporary investment of those funds. Where funds are borrowed for general purpose, the Group shall
determine the amount of interest to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the
excess amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings. The capitalisation
rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalisation period, exchange differences related to the principal and interest on a specific purpose borrowing
denominated in foreign currency shall be capitalised as part of the cost of the qualifying asset. Exchange differences related to
general-purpose borrowings denominated in foreign currency shall be included in profit or loss for the current period.
Qualifying assets are assets (fixed assets, investment property, inventories, etc) that necessarily take a substantial period of time for
acquisition, construction or production to get ready for their intended use or sale.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a qualifying
asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months, until the acquisition,
construction or production of the qualifying asset is resumed.
56
IV. Significant Accounting Policies and Estimates (Cont’d)
15. Biological assets
Consumable biological assets refer to biological assets held for sale or to be harvested as agricultural produce in the future, which
include growing commercial forests. Consumable biological assets are stated at cost at initial recognition. The cost of self-planting,
self-cultivating consumable biological assets is the necessary expenses directly attributable to such assets prior to canopy closure,
including borrowing costs eligible for capitalisation. Subsequent expenses incurred after canopy closure shall be included in profit or
loss for the current period.
The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying value using the rotation
age method.
All the consumable biological assets of the Company are subsequently measured at fair value as they are quoted in an active market
where the Company can obtain a quoted market price and other information of the same or similar consumable biological assets and
thus their fair values can be reliably estimated. Changes in fair values shall be recognised as profit or loss in the current period.
16. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the Group.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be recognised as
cost of the intangible asset only if it is probable that economic benefits associated with the asset will flow to the Group and the
cost of the asset can be measured reliably. Other expenditures on an item asset shall be charged to profit or loss when incurred.
Land use right acquired shall normally be recognised as an intangible asset. Self-constructed buildings (e.g. plants), related land
use right and the buildings shall be separately accounted for as an intangible asset and fixed asset. For buildings and structures
purchased, the purchase consideration shall be allocated among the land use right and the buildings on a reasonable basis. In case
there is difficulty in making a reasonable allocation, the consideration shall be recognised in full as fixed assets.
An intangible asset with an infinite 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//units of production method over its useful life when the
asset is available for use. Intangible assets with indefinite life are not amortised.
The Group shall review the useful life of intangible asset with an infinite useful life and the amortisation method applied at least
at each financial year-end. A change in the useful life or amortisation method used shall be accounted for as a change in
accounting estimate. For an intangible asset with an indefinite useful life, the Group shall review the useful life of the asset in
each accounting period. If there is evidence indicating that the useful life of that intangible asset is finite, the Company shall
estimate the useful life of that asset and apply the accounting policies accordingly.
57
IV. Significant Accounting Policies and Estimates (Cont’d)
16. Intangible assets (Cont’d)
(2) Research and development expenditure
Expenditure on internal research and development activities of the Group is categorised into expenditure arising from the
research phase and expenditure arising from the development phase.
Expenditure arising from the research phase is recognised as profit or loss in the current period.
Expenses incurred during the development stage that satisfy the following conditions are recognised as intangible assets, while
those that do not satisfy the following conditions are accounted for in the profit or loss for the current period:
① it is technically feasible that the intangible asset can be used or sold upon completion;
② there is intention to complete the intangible asset for use or sale;
③ the intangible asset can produce economic benefits, including there is evidence that the products produced using the
intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use, there is
evidence that there exists usage for the intangible asset;
④ there is sufficient support in terms of technology, financial resources and other resources in order to complete the
development of the intangible asset, and there is capability to use or sell the intangible asset;
⑤ the expenses attributable to the development stage of the intangible asset can be measured reliably.
If the expenses incurred during the research stage and the development stage cannot be distinguished separately, all development
expenses incurred are accounted for in the profit or loss for the current period.
(3) Intangible assets impairment test method and their impairment provision
The method for impaired test of intangible assets and measurement of impairment provision are detailed in Note IV. 18
“Impairment of non-current non-monetary financial asset”.
17. Long-term deferred expenses
Long-term deferred 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 deferred expenses are reasonably amortised over the estimated benefit
period, using the straight-line method or other systems.
58
IV. Significant Accounting Policies and Estimates (Cont’d)
18. Non-current non-financial assets impairment
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of non-current non-financial assets
such as fixed assets, construction in progress, intangible assets with an infinite useful life, investment properties measured at cost, and
long-term equity investments in subsidiaries, joint controlled entities and associates. If there is any evidence indicating that an asset
may be impaired, recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with an indefinite useful life
and intangible assets beyond working conditions will be tested for impairment annually, regardless of whether there is any indication of
impairment.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the impairment provision
will be made according to the difference and recognised as an impairment loss. The recoverable amount of an asset is the higher of its
fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. 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 Group shall determine the
recoverable amount of the asset group to which the asset belongs. The asset group is the smallest group of assets capable of generating
cash flows independently.
For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements shall be
allocated to the asset groups or group of assets benefiting from synergy of business combination. If the recoverable amount is less than
the carrying amount, the Group shall recognise an impairment loss. The amount of impairment loss shall first reduce the carrying
amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of other assets (other
than goodwill) within the asset group or set of asset groups, pro rata on the basis of the carrying amount of each asset.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of the restorable value.
19. Accrued liabilities
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as accrued liabilities: (1) The
obligation is a current obligation borne by the Group; (2) it is likely that an outflow of economic benefits will be resulted from the
performance of the obligation; and (3) the amount of the obligation can be reliably measured.
At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses required for the
performance of existing obligations, after taking into account relevant risks, uncertainties, time value of money and other factors
pertinent to the contingencies.
If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party, the compensation
amount shall, on a recoverable basis, be recognised as asset separately, and compensation amount recognised shall not be more than the
carrying amount of accrued liabilities.
59
IV. Significant Accounting Policies and Estimates (Cont’d)
20. Revenue
(1) Revenue from sales of goods
Revenue is recognised when the Company 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.
(2) Revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the balance sheet
date, recognise the revenue from the rendering of services employing the percentage-of-completion method. The completion
schedule of transaction concerning the rendering of services shall be ascertained according to the proportion of service costs
incurred to the estimated total costs.
The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall concurrently satisfy: (1)
The relevant amount of revenue can be reliably measured; (2) it is probable that the economic benefits will flow into the
enterprise; (3) the completion schedule of the transaction can be reliably ascertained; and (4) transaction costs incurred and to be
incurred can be reliably measured.
When the outcome of a transaction involving the rendering of services cannot be reliably estimated, it shall recognise the revenue
from the rendering of services based on the cost of rendering services already incurred and expected to be compensated, and the
cost of rendering services incurred shall be recognised as an expense for the current period. If the cost of rendering services is
expected not to be compensated, it shall be recognised as an expense.
When a contract or agreement signed by the Group includes sales of goods and rendering of services, if sales of goods and
rendering of services can be differentiated and separately measured, they will be recognised respectively. If sales of goods and
rendering of services cannot be differentiated or cannot be separately measured, they will be recognised as sales of goods in full.
(3) Royalty revenue
Revenue is recognised on an accrual basis under the relevant contracts or agreements.
(4) Interest income
Interest income is measured based on the length of time for which the Group’s cash is used by others and the effective interest
rate.
21. Government grant
Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at no consideration,
excluding capital considerations from the government as an owner of the Group. Government grants are classified into government
grants related to assets and government grants related to income.
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.
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.
60
IV. Significant Accounting Policies and Estimates (Cont’d)
22. Deferred income tax assets / deferred income tax liabilities
(1) Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods shall be measured at the
amount expected to be paid (or recovered) according to the requirements of tax laws. Taxable profits, which are the basis for
calculating the current income tax expense, are determined after adjusting the accounting profits before tax for the year in
accordance with relevant requirements of tax laws.
(2) Deferred income tax assets and deferred income tax liabilities
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base, and the
difference between the tax base and the carrying amount of those items that are not recognised as assets or liabilities but have a
tax base that can be determined according to tax laws, shall be recognised as deferred income tax assets and deferred income tax
liabilities using the balance sheet liability method.
Deferred income tax liabilities are not recognised for taxable temporary differences related to: the initial recognition of goodwill;
and the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting
profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Group recognises the corresponding
deferred income tax liability for taxable temporary differences associated with investments in subsidiaries, associates and joint
ventures, except when both of the following conditions are satisfied: the Group able to control the timing of the reversal of the
temporary difference; and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are not recognised for deductible temporary differences related to the initial recognition of an asset or
liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible loss)
at the time of the transaction. In addition, the Group recognises the corresponding deferred income tax asset for deductible
temporary differences associated with investments in subsidiaries, associates and joint ventures to the extent that it is probable
that taxable profits will be available against which the deductible temporary differences can be utilised, except when both of the
following conditions are satisfied: it is not probable that the temporary difference will reverse in the foreseeable future; and it is
not probable that taxable profits will be available in the future, against which the temporary difference can be utilised.
The Company 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, the Company 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.
61
IV. Significant Accounting Policies and Estimates (Cont’d)
22. 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 Group,
at the same time, records the net amount after offsetting its current income tax assets and current income tax liabilities.
The Group was granted the legal rights of net settlement of current income tax assets and current income tax liabilities. Deferred
income tax assets and deferred income tax liabilities are related to income tax to be paid by the same entity liable to pay tax to the
same tax collection and management authority or related to different entities liable to pay tax, but the relevant entity liable to pay
tax is intended to apply net settlement of current income tax assets and liabilities or, at the same time, obtain assets, repay debt
whenever every deferred income tax assets and liabilities with importance would be reversed in the future, the Group records the
net amount after offsetting its current income tax assets and current income tax liabilities.
23. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee. Title may or may not eventually be transferred. All other leases are classified as operating leases.
(1) Operating lease business with the Group recorded as lessee
Lease payment for operating lease is recognised as related asset cost or profits and losses for the current period using the
straight-line method over the lease term. The initial direct cost is directly accounted in profit or loss for the current period.
Contingent rent is recognised as profit or loss for the current period upon occurrence.
(2) Operating lease business with the Group recorded as lessor
Rental income is recognised in profit or loss for the current period using the straight-line method over the lease term. The initial
direct cost where the amount is larger is capitalised when incurred, and accounted for as profit or loss for the current period on
the same basis as recognition of rental income over the entire lease period; the initial direct cost where the amount is fewer is
included in the profit or loss for the period when incurred. Contingent rental is accounted for as profit or loss for the period in
which it is incurred.
(3) The Group as a lessee under a finance lease
On the lease beginning date, a lessee shall recognise the lower of the fair value of the leased asset on the lease beginning date and
the present value of the minimum lease payments as the recorded value, and recognise the minimum lease payments as the
recorded value of long-term accounts payable, and the difference between such amounts shall be determined as unrecognised
finance charge. The initial direct costs directly attributable to the leased item incurred during the process of lease negotiation and
execution of the leasing agreement shall be accounted for as the value of the leased asset. The balance of the minimum lease
payments after deducting the unrecognised financing charge shall be separately presented as long-term liabilities and long-term
liabilities due within one year.
The unrecognised financing charge shall be accounted for during the lease period using the effective interest method and
recognised as financing charge for the period. Contingent rent payments are recognised in the profit and loss for the period when
actually incurred.
62
IV. Significant Accounting Policies and Estimates (Cont’d)
24. Assets held for sale
If the Group has made a resolution in respect of disposal of a non-current asset and signed an irrevocable transfer agreement with the
transferee, and such transfer is likely to be completed within one year, this non-current asset shall be accounted for as non-current
assets held for sale without any depreciation or amortisation provided and calculated at the lower of carrying amount and net amount of
the fair value less disposal cost. Non-current assets held for sale include individual asset and disposal group. If the group of disposal is
a set of asset groups and goodwill received from business combination is allocated to such asset groups in accordance with the
"Accounting Standards for Business Enterprises No.8 "Assets Impairment" or such disposal group is an operation in the asset groups, it
shall include the goodwill in business combination.
If an asset or disposal group is classified as held for sale, but fails to meet recognition requirements for non-current assets held for sale,
it shall no longer be classified as assets held for sale and calculated at the lower of the following two amounts: (i) the carrying amount
of such asset or disposal group before being classified as assets held for sale subsequent to the adjustment to the originally recognised
depreciation, amortisation or impairment under the condition that they are not classified as assets held for sale; and (2) the recoverable
amount at the date on which no future sale is decided.
25. Employee Benefits
In the accounting period in which an employee has rendered services, the Group shall recognise the employee benefits payable as a
liability.
The Group participates in social security systems operated by the government. Payments of social security contributions for employees,
such as premiums or contributions on pensions, medical insurance, payments of housing funds and other social welfare contributions
shall be included in the cost of related assets or profit or loss for the period in which they are incurred.
When the Group terminates the employment relationship with employees before the expiry of the employment contracts or provides
compensation as an offer to encourage employees to accept voluntary redundancy, if the Group has a formal plan for termination of
employment relationship or has made an offer for voluntary redundancy, which will be implemented immediately, and the Group
cannot unilaterally withdraw from the termination plan or the redundancy offer, a compensation liability arising from the termination of
employment relationship with employees should be charged to the profit or loss for the current period.
An internal retirement plan is accounted for using the same principles as described above. Salaries and social insurance contributions to
be paid to the internally retired employees by the Group during the period from the date when the employee ceases to provide services
to the normal retirement date are recognised in profit or loss for the period when the recognition criteria for provisions are met
(termination benefits).
26. Changes in Significant Accounting Policies and Estimates
(1) Changes in accounting policies
Nil.
(2) Changes in accounting estimates
Nil.
27. Corrections on accounting errors in prior periods
Nil.
63
IV. Significant Accounting Policies and Estimates (Cont’d)
28. Critical accounting judgements and estimates
The Group needs to make judgements, estimates and assumptions as to the carrying amount of statement items which cannot be
accurately calculated during the application of the Group’s accounting policies. Such judgements, estimates and assumptions are made
based on the historical experiences of the Group’s management and taking into account other relevant factors, which may affect the
reported amount of revenue, expenses, assets and liabilities and disclosure of contingent liabilities at the balance sheet date. However,
the outcome from such estimate uncertainties may cause critical adjustment to the carrying amount of assets or liabilities which may be
affected in the future.
The Group regularly reviews the aforesaid judgements, estimates and assumptions on the basis of continued operation. A revision to
accounting estimates is recognised in the period in which the estimate is revised if it only affects that period. A revision is recognised
in the period of the revision and future periods if it affects both current and future periods.
At the balance sheet date, the critical areas where Group needs to make judgements, estimates and assumptions as to the items amount
of financial statements are set out below:
(1) Provision for bad debts
The Group adopts the allowance method to account for bad debt loss under the accounting policies of accounts receivable.
Impairment of accounts receivable is based on the recoverability of assessed accounts receivable. Given the management’s
judgement and estimate required for impairment of accounts receivable, the difference between the actual outcome and original
estimate will affect the carrying amount of accounts receivable and provision and reversal of bad debts of accounts receivable
during the estimate revision period.
(2) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value, the Group makes
allowance for inventories which have costs higher than net realisable value or become obsolete and slow-moving. Write-down of
inventories to their net realisable values is based on the saleability of the evaluated inventory and their net realisable values.
Given the management’s judgements and estimates required for inventory impairment on the basis of definite evidence, purpose
of holding the inventories and other factors, the difference between the actual outcome and original estimate will affect the
carrying amount of inventories and provision and reversal of bad debts of inventories allowance during the estimate revision
period.
(3) Subsequent measurement of biological assets
The Group has appointed an independent professional valuer to value the fair value of the biological assets. When the valuer
determines the fair value, the valuation method used by the valuer includes some assumptions. Directors have judged that the
valuation method reflects the prevailing market conditions.
64
IV. Significant Accounting Policies and Estimates (Cont’d)
28. Critical accounting judgements and estimates (Cont’d)
(4) Provision for impairment of non-financial non-current assets
At the balance sheet date, the Group makes its judgement 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 judgements shall be made to the output, selling price and relevant
operating costs of such assets (or asset groups) and the discount rate applied in calculating the discount. In estimating the
recoverable amount, the Group may adopt all relevant materials including the projections as to the output, selling price and
relevant operating costs based on reasonable and supportive assumptions.
The test shall be performed at least once a year as to whether there is any impairment. This requires an estimate for the present
value of the future cash flows of the asset groups or sets of asset groups to which goodwill is allocated. In estimating the present
value of the future cash flows, the Group needs to estimate the cash flows generated from the future asset groups or sets of asset
groups. Meanwhile, the present value of future cash flows is determined using an appropriately selected discount rate.
(5) Depreciation and amortisation
The Group shall provide depreciation and amortisation for investment properties, fixed assets and intangible assets over their
useful lives and after taking into account of their residual value, using straight-line method. The Group shall regularly review the
useful lives to determine the amount depreciated and amortised to be accounted for in each reporting period. The useful life is
determined by the Group according to its previous experience on the similar assets and estimated technical innovation. If there is
any material change in the previously made estimate, the depreciation and amortisation will be adjusted over the future period.
(6) Deferred income tax assets
It is probable that all unused tax loss will be recognised as the deferred income tax assets to the extent there will be sufficient
taxable profits against which the deducible loss is available. This requires the Group’s management to apply numerous
judgements to estimate the time and amount generated from the future taxable profits so as to determine the amount of deferred
income tax assets with reference to the tax planning strategy.
(7) Income tax
There are some uncertainties in tax treatment and calculation for some transactions of the Group during its ordinary course of
business. The approval from the tax authority is required for pre-tax expending of some items. Any difference between the final
recognition outcome of such tax matters and the initially estimated amount will exert an effect on the current income tax and
deferred income tax during their final recognition period.
65
V. Taxation
1. Main Tax Types and Tax Rates
Tax type Basis of taxing Tax Rate
Value: added tax
Of which: Product sold in the domestic market Sales volume 17%
Paper core sales, printing Sales volume 17%
Purchase of barley grass, pampas grass Procurement volume 13%
Purchase of steam power for production use Procurement volume 13%
Purchase of electric power for production use Procurement volume 17%
Purchase of sodium silicate, paperboard for Procurement volume 17%
production use
Purchase of waste paper in the PRC Procurement volume 10%
Coal Procurement volume 17%
Business tax
Of which: Repair services Revenue from repair 5%
Entrusted loans Interests income 5%
Transportation services Revenue from transportation 3%
Urban maintenance and construction tax Amount of value added tax 5-7%
and business tax paid
Education surtax Amount of value added tax and 3%
business tax paid
Enterprise income tax Taxable income 15%, 25%
2. Tax Incentives and Approvals
Enterprise Income Tax
Pursuant to the requirements of Law of the People’s Republic of China on Enterprise Income Tax （《中华人民共和国企业所得税
法》）dated 16 March 2007, the Company is recognised as a high or new technology enterprise which needs the major support of the
state as approved by State Taxation Administration of Shouguang, Shandong. An enterprise income tax rate of 15% is applicable to the
Company since 1 January 2009 for three years. The sales branches of the Company were still subject to an enterprise income tax rate of
25%.
Shandong Chenming Xinli Power Co., Ltd. （山东晨鸣新力热电有限公司） a subsidiary of the Company, was established in 2001 as
a Sino-foreign joint venture and engaged in the business of electric power and thermal power generation. Pursuant to Rule No. 73 of
“Detailed Rules on the Implementation of the Income Tax Law of The People’s Republic of China for Enterprises with Foreign
Investment and Foreign Enterprises” （《中华人民共和国外商投资企业和外国企业所得税法实施细则》）and rules under the State
Council’s Circular on Expanding Application Scope of Income Tax Preferential Treatment on Enterprises with Foreign Investment
Engaged in Energy or Traffic Infrastructure Projects（《国务院关于扩大外商投资企业从事能源交通基础设施项目税收优惠规定
使用范围的通知》）(Guo Fa [1999] No. 13), and Guo Shui Han [2002] Document No. 1032 “Written Reply on issues regarding the
application of preferential enterprise income tax rate to Shandong Chenming Xinli Power Co., Ltd.” from the State Council（《国家税
务总局关于山东晨鸣新力热电有限公司适用企业所得税率问题的批覆》） Shandong Chenming Xinli Power Co., Ltd. is subject to
income tax rate of 15%. Pursuant to Guo Fa [2007] Document No. 39 “Circular on Transitional Preferential Enterprise Income Tax
Policy” issued by the State Council（《国务院关于实施企业所得税过渡优惠政策的通知》） the subsidiary was subject to the income
tax rate of 24% in 2011.
Wuhan Chenming Hanyang Paper Holdings Co., Ltd.（武汉晨鸣汉阳纸业股份有限公司） a subsidiary of the Company, was
transformed into an EFI in April 2005. Pursuant to the Income Tax Law of The People’s Republic of China for Enterprises with
Foreign Investment and Foreign Enterprises and its implementation rules, and as approved by State Taxation Administration of
Economic and Technological Development Zone of Wuhan City, the income tax for 2007 was reduced in half. Pursuant to Guo Fa
[2007] Document No. 39 “Circular on Transitional Preferential Enterprise Income Tax Policy” issued by the State Council（《国务院
关于实施企业所得税过渡优惠政策的通知》）, the subsidiary was subject to the income tax rate of 24% in 2011.
66
V. Taxation (Cont’d)
2. Tax Incentives and Approvals (Cont’d)
Enterprise Income Tax (Cont’d)
Jiangxi Chenming Paper Co., Ltd.（江西晨鸣纸业有限责任公司）a subsidiary of the Company, was transformed into an EFI in 2004.
It engaged in production with a period of operation of more than 10 years as a foreign-investment enterprise. 2009 was the third year
since it started to make profits. Pursuant to Guo Fa [2007] Document No. 39 “Circular on Transitional Preferential Enterprise Income
Tax Policy” issued by the State Council（《国务院关于实施企业所得税过渡优惠政策的通知》）, the subsidiary was subject to the
income tax of 12.5% in 2011.
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 the Company, has been subject to a corporate income tax rate of 16.5% commencing
2008, and the applicable tax rate for 2011 was 16.5%.
Except for the above preferential policies, the Company and its remaining subsidiaries are subject to enterprise income tax rate of 25%.
Value-added Tax (“VAT”) incentives
Pursuant to the requirements of the “Provisional Regulations on Value-added Tax of the People’s Republic of China” （《中华人民共
和国增值税暂行条例》）and “Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax of the
People’s Republic of China” （《中华人民共和国增值税暂行条例实施细则》）, with effect from 1 January 2009, general payers of
VAT may have the input amount incurred from acquiring (including acceptance of donation and investment in kind) or manufacturing
(including rebuilding, expansion of building and installation) fixed assets deducted from the output amount upon the proof of the
VAT-specific invoice, special bill of payment of import VAT obtained from the customs and freight settlement voucher.
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（《国家税务总局对部分资源综合利用产品免征增值税的通知》）, 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. Wuhan Chenjian
New-style Wall Materials Co., Ltd.（武汉晨建新型墙体材料有限公司）, 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 2011.
Pursuant to Cai Shui Zi [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of Resources issued
by the Ministry of Finance and the State Administration of Taxation”（《财政部、国家税务总局关于对部分资源综合利用产品免征
增值税问题的通知》）and the relevant requirements of Cai Shui [2001] Document No. 72, Shandong Chenming Panels Co., Ltd. （山
东晨鸣板材有限责任公司） Qihe Chenming Panels Co., Ltd. （齐河晨鸣板材有限公司） Juancheng Chenming Panels Co., Ltd（鄄
城晨鸣板材有限公司）and Heze Chenming Panels Co., Ltd.,（河泽晨鸣板材有限责任公司）all being subsidiaries of the Company
and produce products that applied integrated use of resources, are subject to an immediate VAT refund policy.
67
VI. Business Combination and Consolidated Financial Statements
1. Overview of Subsidiaries
(1) Subsidiaries acquired through establishment or investment
Unit: RMB ’0000
Setting off of the loss
attributable to
Balance of Set off the the minority
other projects profit or loss shareholders of the subsidiaries
that of the minority in the current period from the
The actual constitutes interests from owner’s equity of the Company
investment net investment the equity of exceeds the minority shareholders’
Full name Subsidiary Place of Business Registered Legal Organisation at the end in the Shareholding Voting rights Whether Minority the minority portion of the opening balance
of subsidiary type Incorporation Nature capital Business activity representative code of period subsidiary (%) (%) consolidated interests interests of owners’ equity of the subsidiary
Wuhan Chenming Sino-foreign Wuhan City Manufacture 21,136 Manufacture and sales of paper Tan Daocheng 27189235-4 20,283 — 50.93 50.93 Yes 42,847.53 — —
Hanyang Paper joint venture of paper products,the materials of
Holdings Co., Ltd. manufacture of paper
and machinery
Shandong Chenming Limited Qihe, Manufacture 37,620 Manufacture, processing Hou Huancai 72074277-4 37,620 — 100 100 Yes — —
Paper Group Qihe liability Shandong of paper and sales of paperboard
Paperboard company and packaging paper
Co., Ltd.
Shandong Chenming Limited liability Shouguang, Electricity 9,955 Manufacture and supply of 孫洪吉 70620711-8 15,781 — 86.71 86.71 Yes 10,916.39 — —
Power Supply stock company Shandong electricity and steam
Holdings Co., Ltd.
Yanbian Chenming Limited liability Yanji, Manufacture 8,163.30 Mucilage glue fiber pulp, pulp 桑景高 72958840-0 4,009 — 76.73 76.73 Yes 4,667.94 — —
Paper Co., Ltd. company Jilin of paper and machine-made paper
Jiangxi Chenming Sino-foreign Nanchang city Manufacture USD172.00 Production and processing, etc. Geng Guanglin 74426460-7 69,755 — 51 51 Yes 83,277.28 — —
Paper Co., Ltd. joint venture of paper million of machine-made paper,
paperboard, paper panel,
paper products and
paper-making raw materials
Shouguang Chenming Limited liability Shouguang, Arboriculture 1,059 Development, nurture of fast 德江 73925671-7 720 — 68 68 Yes -80.26 — —
Tianyuan Arboriculture company Shandong growth poplar, forest,
Co., Ltd. vegetable and fruit
Hailaer Chenming Limited liability Hailaer City Manufacture 1,600 Sales and processing; sales 高子偉 70130836-6 1,200 — 75 75 Yes 3,201.80 — —
Paper Co., Ltd. company of paper of machine- made paper
and pulp paper
Chibi Chenming Limited liability Chibi, Hubei Manufacture 17,742 Production, processing and sales 陳建明 42203935-3 2,627 — 51 51 Yes 20,448.55 — —
Paper Co., Ltd. company of paper of pulp and paper products;
land transport
Wuhan Chenming Limited liability Wuhan City Electricity 8,824 Generation and sales 胡建國 72579372-2 4,500 — 51 51 Yes 8,081.09 — —
Qianneng Electric company of electricity and steam
Power Co., Ltd.
68
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Overview of Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB ’0000
Setting off of the loss
attributable to
Balance of Set off the the minority
other projects profit or loss shareholders of the subsidiaries
that of the minority in the current period from the
The actual constitutes interests from owner’s equity of the Company
investment net investment the equity of exceeds the minority shareholders’
Full name Subsidiary Place of Business Registered Legal Organisation at the end in the Shareholding Voting rights Whether Minority the minority portion of the opening balance
of subsidiary type Incorporation Nature capital Business activity representative code of period subsidiary (%) (%) consolidated interests interests of owners’ equity of the subsidiary
Wuhan Chenjian Limited liability Wuhan City Wall materials 1,000 Production, operation and 學峰 74475404-0 510 — 51 51 Yes 2,744.12 — —
New-style Wall company sales of aerated fly ash
Materials Co., ltd. concrete blocks
Shandong Chenming Sino-foreign Shouguang, Electricity USD11.80 Generation and sales of 孫洪吉 72073121-5 4,982 — 51 51 Yes 9,000.93 — —
Xinli Power joint venture Shandong million electricity and steam
Co., Ltd.
Shouguang Chenming Limited liability Shouguang, Production and 700 Utilisation of ash in the 孫洪吉 73720178-X 700 — 100 100 Yes 288.36 — —
Cement Co., Ltd. company Shandong sales of cement production of cement and
sales of cement
Shandong Chenming Limited liability Shouguang, Production and 3,000 Decorative 樹森 73816170-8 3,000 — 100 100 Yes 1,692.07 — —
Panels Co., Ltd. company Shandong sales of panels board of the layer of laminated
board, wooden products,
laminated board and fortified wooden
floorboard
Shouguang Chenming Limited liability Shouguang, Production and 50 Production, processing and sales of 樹森 76366212-5 50 — 100 100 Yes 111.55 — —
Floor Board Co., Ltd. company Shandong sales of floor board fortified wooden floorboard and
impregnated paper
Qihe Chenming Limited liability Qihe, Production and 4,082 Production, processing and sales 樹森 76001404-2 4,082 — 100 100 Yes — —
Panels Co., Ltd. company Shandong sales of panels of high-density (medium-density)
fiberboard, decorative panel,
melamine impregnated paper
and composite floor
Yangjiang Chenming Limited liability Yangjiang, Arboriculture 100 Plantation and development Yin Tongyuan 78487434-6 100 — 100 100 Yes — —
Arboriculture company Guangdong of forest, and technology
Co., Ltd. consultation of forestry
Zhanjiang Chenming Limited liability Zhanjiang, Arboriculture 100 Plantation of forest, nutrition Wang Zaiguo 78298807-5 100 — 100 100 Yes — —
Arboriculture Co., Ltd. company Guandong and sales of seedling,
processing and sales of
timber and processing and sales
of by-products of timber
69
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Overview of Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB ’0000
Setting off of the loss
attributable to
Balance of Set off the the minority
other projects profit or loss shareholders of the subsidiaries
that of the minority in the current period from the
The actual constitutes interests from owner’s equity of the Company
investment net investment the equity of exceeds the minority shareholders’
Full name Subsidiary Place of Business Registered Legal Organisation at the end in the Shareholding Voting rights Whether Minority the minority portion of the opening balance
of subsidiary type Incorporation Nature capital Business activity representative code of period subsidiary (%) (%) consolidated interests interests of owners’ equity of the subsidiary
Jilin Chenming Limited liability Jilin City, Manufacture of 150,000 Processing and sales of Zhang Chunlin 78298556-0 150,135 — 100 100 Yes — — —
Paper Co., Ltd. company Jilin paper machine-made paper,
paperboard, paper product,
paper pulp, machinery and
equipment of manufacture of paper
Juancheng Limited liability Juancheng, Production and 1,500 Production and sales of 樹森 77872435-X 1,500 — 100 100 Yes — — —
Chenming Panels company Shandong sales of panels particle board, decorative
Co., Ltd. particle board and melamine
impregnated paper
Shandong Grand Sino-foreign Shouguang, Beverage USD13.91 Restaurant and beverage services Xia Guangchun 97529857-8 8,050 — 70 70 Yes 325.39 — —
View Hotel Co., Ltd. joint venture Shandong million
Zhanjiang Chenming Limited liability Zhanjiang, Arboriculture 250,000 Improvement of plant fodtering, Yin Tongyuan 77527884-1 80,000 — 100 100 Yes — —
Paper Pulp Co., Ltd. company Guangdong true planting and soil, research
of forestry, manufacture,
production, processing
and sales of paper pulp etc.
Chenming (HK) Limited liability Hong Kong, Trade of USD0.10 Export and import trade of paper Li Feng 3734927300011080 78 — 100 100 Yes — —
Limited company China paper million products and market research
Shouguang Chenming Limited liability Shouguang, Transportation 1,000 Transportation of goods Chen Hongguo 66015223-7 1,000 — 100 100 Yes — —
Modern Logistic company Shandong
Co., Ltd.
Shouguang Chenming Sino-foreign Shouguang, Manufacture USD20.00 Production and sales of Yin Tongyuan 79867677-0 11,362 — 75 75 Yes 5,355.60 — —
Art Paper Co., Ltd. joint venture Shandong of paper million machine-made paper
Qihe Chenming Limited liability Qihe, Purchase and 50 Purchase and sales of 汪興 75825591-2 50 — 100 100 Yes — —
Waste Collection company Shandong sales of waste wastes and old materials
Co., Ltd. and old material
70
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Overview of Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB ’0000
Setting off of the loss
attributable to
Balance of Set off the the minority
other projects profit or loss shareholders of the subsidiaries
that of the minority in the current period from the
The actual constitutes interests from owner’s equity of the Company
investment net investment the equity of exceeds the minority shareholders’
Full name Subsidiary Place of Business Registered Legal Organisation at the end in the Shareholding Voting rights Whether Minority the minority portion of the opening balance
of subsidiary type Incorporation Nature capital Business activity representative code of period subsidiary (%) (%) consolidated interests interests of owners’ equity of the subsidiary
Jilin Chenming Limited liability Jilin Purchase and 100 Purchase and sales of wastes 張邦吉 77872731-5 100 — 100 100 Yes — —
Waste Collection company sales of waste and old materials
Co., Ltd. and old mateial
Jilin Chenming Limited liability Jilin Processing of 60 Processing of machinery, Zhang Chunlin 66012410-5 60 — 100 100 Yes — —
Machinery company machinery manufacture, installation and
Manufacturing repair of the equipment
Co., Ltd. of machinery
Nanchang Chenming Limited liability Nanchang, Arboriculture 1,000 Processing and sales of wooden Geng Guanglin 66204306-9 1,000 — 100 100 Yes 693.25 — —
Arboriculture company Jiangxi finished products,
Co., Ltd. semi- finished products and
by-products of timber
Fuyu Chenming Limited liability Fuyu County, Manufacture of 20,800 Production and sales of 春山 66389298-6 20,800 — 100 100 Yes — —
Paper Co., Ltd. company Qiqihar City paper machine-made paper
and paperboard
Huanggang Chenming Limited liability Huanggang Arboriculture 1,000 Plantation, processing and Wang Zaiguo 67036898-X 1,000 — 100 100 Yes — —
Arboriculture Co., Ltd. company City, Hubei sales of forests
Huanggang Chenming Limited liability Huanggang City, Arboriculture 2,000 Operation and acquisition 肖翔 67976586-9 2,000 — 100 100 Yes — —
Paper Co., Ltd. company Hubei of forest; establishment
of paper pulp projects
Xianning Chenming Limited liability Xianning, Arboriculture 1,000 Plantation, processing and Wang Zaiguo 67975036-8 1,000 — 100 100 Yes — —
Arboriculture Co., Ltd. company Hubei sales of forests
Shouguang Meilun Limited liability Shouguang, Manufacture of 150,000 Production and sales of Yin Tongyuan 69064934-0 150,000 — 100 100 Yes — —
Paper Co. Ltd. company Shandong paper machine-made paper
and paperboard
Shouguang Shun Limited liability Shouguang, Customs 150 Business agency of professional Chen Hongguo 69689781-2 150 — 100 100 Yes — —
Da Customs company Shandong declaration, customs declaration and
Declaration Co, inspection inspection declaration
Ltd. declaration
Wuhan Chenming Limited liability Wuhan, Real estate 2,000 Development of real estate and Tan Daocheng 69534385-0 2,000 — 100 100 Yes 924.37 — —
Wan Xing company Hubei sales of commodity house
Real Estate Co., Ltd.
Shandong Chenming Limited liability Shouguang, Sales of paper 10,000 Sales of machine-made paper, Chen Hongguo 55222631-5 10,000 100 100 Yes — —
Paper Sales company Shandong paperboard and paper
Company Limited making raw materials
71
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Overview of Subsidiaries (Cont’d)
(2) Subsidiaries acquired from business combination not under common control
Unit: RMB ’0000
Setting off of the loss
attributable to
Balance of Set off the the minority
other projects profit or loss shareholders of the subsidiaries
that of the minority in the current period from the
The actual constitutes interests from owner’s equity of the Company
investment net investment the equity of exceeds the minority shareholders’
Full name Subsidiary Place of Business Registered Legal Organisation at the end in the Shareholding Voting rights Whether Minority the minority portion of the opening balance
of subsidiary type Incorporation Nature capital Business activity representative code of period subsidiary (%) (%) consolidated interests interests of owners’ equity of the subsidiary
Shouguang City Limited liability Shouguang, Purchase and sales of 100 Purchase and sales of waste and Chen Honguo 77316557-9 100 100 100 Yes — — —
Run Sheng Wasted company Shandong waste and old materials obsolete materials
Paper Recycle
Co., Ltd.
Wuxie Song Ling Limited liability Wuxi City Manufacture 501 Sales, cutting and processing Liu Chunshan 76243145-6 — 100 100 Yes — — —
Paper Co., Ltd. company of paper of paper
Shouguang Hongyi Limited liability Shouguang, Packaging 155 Processing and sales of packaging Ding Buxun 78077560-7 170 100 100 Yes — — —
Decorative Packaging company Shandong Products, indoor and
Co., Ltd. outdoor decorations
Shouguang Wei Yuan Limited liability Shouguang, Transportation 393 Transportation of goods, Hao Limin 78079463-X 400 100 100 Yes — — —
Logistics Company company Shandong maintenance of vehicles,
Limited storage and loading of goods,
international freight agency service
Shouguang Xinyuan Limited liability Shouguang, Coal 300 Retail of coal, gasoline, construction Hao Limin 86570424-2 200 100 100 Yes — — —
Coal Co., Ltd. company Shandong materials and plumbing parts
72
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Overview of Subsidiaries (Cont’d)
(2) Subsidiaries acquired from business combination not under common control (Cont’d)
Subsidiaries disposed during the reporting period:
Heze Chenming Panels Co., Ltd.
The equity transfer of Heze Chenming Panels Co., Ltd. was completed on 1 April 2011. For details of specific equity transfer and
the operating results from the beginning of the year to the date of equity transfer of the company, please see Note VII.52.
Shandong Lin Dun Wood Industry Co., Ltd.
The equity transfer of Shandong Lin Dun Wood Industry Co., Ltd. was completed on 1 April 2011. For details of specific equity
transfer and the operating results from the beginning of the year to the date of equity transfer of the company, please see Note
VII.52.
(3) The exchange rate of translation of the major statement items of the overseas operating entities
The reporting currency of the consolidated financial statements of exchange rate of translation translated from Chenming (HK)
Limited, an overseas controlling subsidiary of the Company, is as follows: all asset and liability items of the balance sheet was
translated according to the spot exchange rate (i.e. translated according to RMB6.6227: USD1) prevailing at the reporting date;
all the owner’s equity items were translated according to the spot exchange rate when occurrence, except the “retained profit”
item. The income and expense items in the income statement shall be translated at the approximate exchange rate of the spot
exchange rate of the transaction date.
73
VII. Notes to the Consolidated Financial Statements
Unless specified otherwise, the notes to the consolidated financial statements, the “opening balance” and “closing balance” refer to the
balances as at 31 December 2011 and 30 June 2011 respectively, and the “prior period” and “current period” refer to the period from January
to June 2010 and the period from January to June 2011 respectively.
1. Monetary funds
Closing balance Opening balance
Foreign Foreign
currency Exchange Amount in Exchange Amount in currency
Items amounts Rate RMB Rate RMB amounts
Treasury cash:
– RMB — — 1,325,420.30 — — 1,100,197.18
– USD 30,000.00 6.4716 194,148.00 20,000.00 6.6227 132,454.00
Cash in Bank:
– RMB — — 1,075,269,034.76 — — 1,546,974,335.41
– USD 105,675,339.81 6.4716 683,888,529.86 45,958,441.92 6.6227 304,368,975.24
– HKD 147,138.32 0.8316 122,363.17 759,304.73 0.8509 646,115.18
– EURO 434,372.50 9.3612 4,066,247.86 228,683.68 8.8065 2,013,902.79
Other monetary funds:
– RMB — — 326,708,251.04 — — 95,802,510.63
– USD 123,327.09 6.4716 798,123.60 123,264.82 6.6227 816,345.94
– EURO 11.86 9.3612 111.03 11.85 8.8065 104.35
Total 2,092,372,229.62 1,951,854,940.72
Note: As at 30 June 2011, the Group’s restricted monetary funds was RMB327,506,485.67 (31 December 2010: RMB96,618,960.62), which contained certificate
of the Group’s fixed deposit of RMB22,640,933.48 secured for 6-month bank borrowings of USD3,104,700.00;
2. Bills receivable
(1) Classification of bills receivable
Closing Opening
Category balance balance
Bank acceptance 2,907,199,130.35 2,762,389,909.89
Commercial acceptance — —
Total 2,907,199,130.35 2,762,389,909.89
Note: (1) As at 30 June 2011, notes with a carrying value of RMB1,975,688,923.44(31 December 2010: RMB1,583,925,454.80) was discounted for
short-term borrowings. The Group did not cease to recognise discounted bills.
74
VII. Notes to the Consolidated Financial Statements (Cont’d)
1. Monetary funds (Cont’d)
(2) Overview of outstanding notes endorsed to other parties at the end of the period (Top 5 amounts)
Whether
Unit of issue Date of issue Date of expiry Amount de-recognised Remarks
Customer I 2011-5-24 2011-11-24 12,141,000.00 Yes
Customer II 2011-3-6 2011-9-6 12,000,000.00 Yes
Customer III 2011-4-28 2011-10-28 8,500,000.00 Yes
Customer IV 2011-04-07 2011-10-07 7,000,000.00 No
Customer V 2011-4-29 2011-10-27 6,489,415.80 Yes
Total 46,130,415.80
3. Accounts receivable
(1) The breakdown of accounts receivable according to classification is as follows
Closing balance
Book balance Bad debt provision
Category Amount Ratio (%) Amount Ratio (%)
Single item with significant
accounts receivable
provided as single bad debt 2,453,014,160.61 90.53 197,611,888.88 8.06
Accounts receivable provided
as bad debt by category
Accounts receivable aged
within two years
(including two years) 204,011,464.11 7.53 10,375,630.09 5.09
Accounts receivable aged
over two years 37,272,172.88 1.37 30,864,632.36 82.81
Sub-total 241,283,636.99 8.90 41,240,262.45 17.09
Single item without significant
accounts receivable yet
provided as single bad debt 15,401,059.97 0.57 159,217.48 1.03
Total 2,709,698,857.57 100.00 239,011,368.81 8.82
75
VII. Notes to the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(1) The breakdown of accounts receivable according to classification is as follows (Cont’d)
Opening balance
Book balance Bad debt provision
Category Amount Ratio (%) Amount Ratio (%)
Single item with significant
accounts receivable
provided as single bad debt 2,059,893,496.83 87.36 192,995,370.65 9.37
Accounts receivable provided
as bad debt by category
Accounts receivable aged
within two years
(including two years) 255,673,024.22 10.84 13,138,786.03 5.14
Accounts receivable aged
over two years 32,119,826.36 1.36 29,221,227.50 90.98
Sub-total 287,792,850.58 12.20 42,360,013.53 14.72
Single item without significant
accounts receivable yet
provided as single bad debt 10,247,861.04 0.44
Total 2,357,934,208.45 100.00 235,355,384.18 9.98
(2) Accounts receivable stated according to aging
Closing balance Bad debt
Items Amount Ratio (%) Amount Ratio (%)
Within 1 year 2,559,620,795.96 94.45 112,605,374.91 47.12
1 to 2 years 67,074,449.73 2.48 49,643,439.17 20.77
2 to 3 years 7,801,321.43 0.29 1,560,264.28 0.65
Over 3 years 75,202,290.45 2.78 75,202,290.45 31.46
Total 2,709,698,857.57 100.00 239,011,368.81 100.00
Closing balance Bad debt
Items Amount Ratio (%) Amount Ratio (%)
Within 1 year 2,223,077,582.95 94.28 120,249,426.99 51.09
1 to 2 years 28,201,927.17 1.20 12,316,780.20 5.23
2 to 3 years 59,631,780.81 2.53 55,766,259.47 23.70
Over 3 years 47,022,917.52 1.99 47,022,917.52 19.98
Total 2,357,934,208.45 100.00 235,355,384.18 100.00
76
VII. Notes to the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(3) Overview of bad debt provision
(1) Single item with significant accounts receivable provided as single bad debt
Percentage of
Accounts receivable Carrying amount Bad debt provision provision(%) Reasons
Good payments 2,453,014,160.61 197,611,888.88 8.06 Provision
according to aging
Total 2,453,014,160.61 197,611,888.88 8.06
(2) Single item without significant accounts receivable yet provided as single bad debt
Percentage of
Accounts receivable Book balance provision(%) Bad debt provision Reasons for provision
Good payments 15,401,059.97 1.03 159,217.48 Some of good
payments mainly settled
by letter of credit
were unrecoverable
upon individual
recognition.
Total 15,401,059.97 1.03 159,217.48
77
VII. Notes to the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(4) Actual write-off of significant accounts receivable (RMB1 million) during the reporting period
Whether
Nature of arising from
Name accounts Amount of Reasons for connected
receivable write-off write-off transaction
隆信印刷厂(Longxin Good payments 22,647.24 Smaller amount aged No
Printing Company) over 5 year, recovery cost
could not be covered by
proceedings or field recovery
武汉科文文化纸品 Good payments 22,165.00 Smaller amount aged No
有限公司(Wuhan over 5 year, recovery cost
Kewen Culture could not be covered by
Paper Co., Ltd.) proceedings or field recovery
无锡市张泾复印纸厂 Good payments 11,171.20 Smaller amount aged No
(Wuxi Zhangjing over 5 year, recovery cost
Copy Paper could not be covered by
Company) proceedings or field recovery
武汉南方复印纸制造 Good payments 71,793.29 Business license revoked, No
有限公司(Wuhan amount aged over 5 years
Nanfang Copy
Paper Manufacturing
Co., Ltd.)
Total 127,776.73
(5) There is no outstanding amount within the accounts receivable due from shareholders holding 5% or more (including 5%) in the
shares of the Company during the reporting period.
(6) Top 5 accounts receivable are as follows
Percentage of
the total
balance of
Relationship accounts
Name with the Group Amount Aging receivable (%)
東五興化纖紡
織（集團） 有限公司 Non-related party 72,236,412.66 Within 1 year 2.67
佛山市順德區星
紙業有限公司 Non-related party 47,706,660.23 4 to 5 years 1.76
湖知音印務有限公司 Non-related party 36,370,966.95 Within 1 year 1.34
廣州兆峰紙業有限公司 Non-related party 31,901,446.14 Within 1 year 1.18
武漢晚報社 Non-related party 29,467,439.12 Within 1 year 1.09
Total 217,682,925.10 8.03
(7) Overview of accounts receivable of the related parties
Please refer to Note 9 5. Amounts receivable and payable of the related parties.
78
VII. Notes to the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(8) Accounts receivable denominated in foreign currency stated in original currency and exchange rate are as follows
Closing balance Opening balance
Amount in Translated Amount in
Translated
Item foreign currency Exchange rate into RMB foreign currency Exchange rate into RMB
USD 34,696,450.84 6.4716 224,541,551.23 49,294,334.22 6.6227 326,461,587.20
4. Other receivables
(1) The breakdown of other receivables according to classification is as follows
Category Book balance Bad debt provisions
Amount Ratio (%) Amount Ratio (%)
Single item with significant other
receivables provided as single
bad debt 118,757,952.92 62.58 31,591,075.95 26.60
Other receivables provided
as bad debt by category
Other receivables aged within
two years (including two years) 16,058,519.46 8.46 1,238,483.11 7.71
Other receivables aged over
two years 47,325,770.16 24.94 36,076,534.23 76.23
Sub-total 63,384,289.62 33.4 37,315,017.34 58.87
Single item without significant
other receivables yet provided
as single bad debt 7,626,627.79 4.02 214,268.61 2.81
Total 189,768,870.33 100.00 69,120,361.90 36.42
Category Book balance Bad debt provisions
Amount Ratio (%) Amount Ratio (%)
Single item with significant other
receivables provided as single
bad debt 154,360,691.65 69.39 61,922,131.27 40.12
Other receivables provided
as bad debt by category
Other receivables aged within
two years (including two years) 10,888,111.35 4.89 1,800,736.15 16.54
Other receivables aged over
two years 31,710,164.35 14.25 18,690,064.13 58.94
Sub-total 42,598,275.70 19.15 20,490,800.28 48.10
Single item without significant
other receivables yet provided
as single bad debt 25,495,433.35 11.46 22,407,088.63 87.89
Total 222,454,400.70 100.00 104,820,020.18 47.12
79
VII. Notes to the Consolidated Financial Statements (Cont’d)
4. Other receivables (Cont’d)
(2) Other receivables stated according to aging
Closing balance Bad debt provisions
Items Amount Ratio (%) Amount Ratio (%)
Within 1 year 99,550,825.57 52.46 25,688,640.13 37.17
1 to 2 years 7,479,247.49 3.94 730,743.12 1.06
2 to 3 years 49,474,573.02 26.07 9,436,754.40 13.65
Over 3 years 33,264,224.25 17.53 33,264,224.25 48.12
Total 189,768,870.33 100.00 69,120,361.90 100.00
Opening balance Bad debt provisions
Items Amount Ratio (%) Amount Ratio (%)
Within 1 year 151,664,283.27 68.19 65,207,184.95 62.21
1 to 2 years 17,605,155.37 7.91 696,954.52 0.67
2 to 3 years 17,427,665.73 7.83 3,158,584.38 3.01
Over 3 years 35,757,296.33 16.07 35,757,296.33 34.11
Total 222,454,400.70 100.00 104,820,020.18 100.00
(3) Bad debt provisions
(1) Single item with significant other receivables provided as single bad debt
Bad debt Percentage
Other receivables Carrying amount provision of provision Reason
Current accounts 118,757,952.92 23,769,394.62 20.01 Mainly amounts aged
over two years
Total 118,757,952.92 23,769,394.62 20.01
(2) Single item without significant other receivables yet provided as single bad debt
Percentage
Other Book of provision Bad debt
receivables balance (%) provision Reasons for provision
Transfer from 7,626,627.79 2.81 214,268.62 Estimated to be
prepayments unrecoverable due to
of over 2 years the passage of a
prolonged time
Total 7,626,627.79 2.81 214,268.62
80
VII. Notes to the Consolidated Financial Statements (Cont’d)
4. Other receivables (Cont’d)
(4) Actual write-off of accounts receivable during the reporting period
Whether
arising from
Nature of Amount of Reasons for connected
Name amounts receivable write-off write-off transactions
赤壁市市造纸总厂 Borrowings 11,712,750.00 Business license revoked in No
(Chibi City Paper December 2007 No for over 3 years
Making Plant)
赤壁市市造纸总厂 Advanced 650,957.38 Business license revoked in No
(Chibi City Paper electricity cost December 2007 No for over 3 years
Making Plant)
赤壁市市造纸总厂 Paper cost 780,819.50 Business license revoked in No
(Chibi City Paper December 2007 No for over 3 years
Making Plant)
赤壁市市造纸总厂 Material cost 245,399.19 Business license revoked in No
(Chibi City Paper December 2007 No for over 3 years
Making Plant)
Total 13,389,926.07
(5) There is no outstanding amount within the other receivables due from shareholders holding 5% or more (including 5%) in the
shares of the Company during the reporting period.
(6) Top 5 other receivables are as follows
Percentage of
the total
Relationship with balance of other
Name the Group Amount Aging receivables %)
瑞典傑維公司 Non-related party 22,909,924.97 2 to 3 years 12.07
濰坊海關 Non-related party 21,518,713.21 Within 1 year 11.34
壽光市人民法院 Non-related party 9,401,784.78 Within 1 year, 4.95
1 to 2 years,
2 to 3 years
南昌晨建新型牆體
材有限責任公司 Non-related party 3,721,142.77 Within 1 year 1.96
芬奧斯公司 Non-related party 2,820,742.72 Within 1 year 1.49
Total 60,372,308.45 31.81
(7) Overview of other receivables of the related parties
Please refer to Note 9 5. Amounts receivable and payable of the related parties.
81
VII. Notes to the Consolidated Financial Statements (Cont’d)
5. Prepayments
(1) Prepayments stated according to aging
Closing balance Opening balance
Aging Amount Ratio (%) Amount Ratio (%)
Within 1 year 781,452,691.92 78.92 618,529,456.56 66.91
1 to 2 years 208,769,468.35 21.08 305,825,088.99 33.09
Total 990,222,160.27 100 924,354,545.55 100
(2) Top 5 prepayments are set out as follows
Relationship Year of
Name with the Group Amount prepayment Reason of outstanding
壽光蔡申興精細
化工有限公司 Non-related party 219,141,462.90 Within 1 year Prepaid the good
payments according
to the agreed contract
黃岡市轄區各村 Non-related party 85,057,088.41 1 to 2 years Prepaid the good
payments according
to the agreed contract
壽光德聖造紙業
化工有限公司 Non-related party 34,623,960.69 Within 1 year, Prepaid the good
1 to 2 years payments according
to the agreed contract
南昌柏宇實業
有限公司 Non-related party 14,348,554.54 Within 1 year Prepaid the good
payments according
to the agreed contract
佛山電德茨技術
有限公司 Non-related party 13,465,198.95 Within 1 year, Prepaid the good
1 to 2 years payments according
to the agreed contract
Total 366,636,265.49
(3) There is no outstanding amount within the prepayments due from shareholders holding 5% or more (including 5%) in the shares
of the Company in the reporting period.
(4) Other advances denominated in foreign currency stated in original currency and exchange rate are as follows
Closing balance Opening balance
Amount in Translated Amount in Translated
Items foreign currency Exchange rate into RMB foreign currency Exchange rate into RMB
USD 53,422,582.87 6.4716 345,729,587.31 58,981,185.01 6.6227 390,614,694.00
EURO 4,826,375.61 9.3612 45,180,667.34 4,878,217.69 8.8065 42,960,024.10
82
VII. Notes to the Consolidated Financial Statements (Cont’d)
6. Inventory
(1) Inventory categories:
Closing balance
Book Allowance for
Items balance inventories Carrying amount
Raw materials 1,968,844,573.06 552,446.69 1,968,292,126.37
Goods-in stock 172,965,283.84 172,965,283.84
Goods delivered 5,953,280.96 5,953,280.96
Work-in-progress 1,519,374,801.07 34,005.27 1,519,340,795.80
Total 3,667,137,938.93 586,451.96 3,666,551,486.97
Opening balance
Book Allowance for
Items balance inventories Carrying amount
Raw materials 1,834,652,151.48 3,092,298.90 1,831,559,852.58
Goods-in stock 118,807,317.30 118,807,317.30
Work-in-progress 1,101,441,158.39 4,730,113.26 1,096,711,045.13
Total 3,054,900,627.17 7,822,412.16 3,047,078,215.01
(2) Changes in allowance for inventories
Provision for Decrease for
Opening the current the current period
Items balance period Reversals Write-offs Closing balance
Raw materials 3,092,298.90 2,539,852.21 552,446.69
Work-in-progress
Goods-in stock 4,730,113.26 3,870,510.42 825,597.57 34,005.27
Total 7,822,412.16 3,870,510.42 3,365,449.78 586,451.96
(3) Allowance for inventories and reason for reversal
Percentage of
the reversal and
Reason of reversal write-off in the
and write-off of current period to
Basis of allowance allowance for inventories the closing balance
Items for inventories for the current period of such inventory
Goods-in-stock Provided impairment was reversed 0.25%
resulting from an improvement in the
market price of a portion of the goods
83
VII. Notes to the Consolidated Financial Statements (Cont’d)
7. Non-current assets due within one year
Items Closing balance Opening balance Note
Other non-current 5,471,558.96 Entrusted loan to Lin
assets due within one year Dun Wood Industry by
(including entrusted loans) Shouguang Panels
Total 5,471,558.96
8. Other current assets
Items Closing balance Opening balance
Non-credited VAT proceeds 1,310,744,482.91 652,018,306.99
Prepaid enterprise income tax 31,714,861.21 6,553,818.35
Total 1,342,459,344.12 658,572,125.34
9. Long-term equity investments
(1) Classification of Long-term equity investments
Increase Decrease
for the for the Closing
Items Opening balance current period current period balance
Investments in associates 44,170,084.12 -3,755,501.39 40,414,582.73
Other equity investments 24,950,000.00 24,950,000.00
Less: Provision for impairment of
long equity investments 1,918,152.23 1,918,152.23
Total 67,201,931.89 -3,755,501.39 63,446,430.50
84
VII. Notes to the Consolidated Financial Statements (Cont’d)
9. Long-term equity investments (Cont’d)
(2) The details of long-term equity investments
Accounting Initial Opening Additions
Closing
Name of investee entity method investment balance /deduction balance
Shouguang Liben Paper Equity method 19,550,000.00 16,680,630.29 -742,942.64 15,937,687.65
Making Co., Ltd.
Arjo Wiggins Chenming Equity method 80,100,000.00 21,651,499.85 -2,960,733.52 18,690,766,33
Specialty Paper Co., Ltd.
Qingzhou Chenming Equity method 900,000.00 900,000.00 900,000.00
Denaturation Amylum Co., Ltd
Jiangxi Jiangbao Equity method 6,000,000.00 4,937,953.98 -51,825.23 4,886,128.75
Media Colour Printing Co. Ltd.
Shandong Paper Making & Printing Cost method 200,000.00 200,000.00 200,000.00
Enterprises Corporation
Zhejiang Province Guangyu Cost method 2,000,000.00 2,000,000.00 2,000,000.00
Media Printing Company Limited
Jinan Shangyou Commercial Cost method 350,000.00 350,000.00 350,000.00
Company Limited
Shouguang Mihe Water Cost method 20,000,000.00 20,000,000.00 20,000,000.00
Company Limited
Shanghai Forest & Paper Cost method 1,400,000.00 1,400,000.00 1,400,000.00
E-Commerce Co., Ltd
安徽時代物資股份有限公司 Cost method 1,000,000.00 1,000,000.00 1,000,000.00
Total 69,120,084.12 -3,755,501.39 65,364,582.73
85
VII. Notes to the Consolidated Financial Statements (Cont’d)
9. Long-term equity investments (Cont’d)
(2) The details of long-term equity investments (Cont’d)
Explanation
of the
inconsistent
of shareholding Write off
Percentage of Percentage of percentage provision of Cash
shareholding voting right and voting impairment bonuses for
in the investee in the investee right in the Impairment for the the current
Name of investee entity entity (%) entity (%) investee entity provision current period period
Shouguang Liben Paper
Making Co., Ltd. 26.40 26.40
Arjo Wiggins Chenming
Specialty Paper Co., Ltd. 30.00 30.00
Qingzhou Chenming
Denaturation Amylum Co., Ltd 30.00 30.00 900,000.00
Jiangxi Jiangbao
Media Colour Printing Co. Ltd. 21.16 21.16
Shandong Paper Making & Printing
Enterprises Corporation 2.00 2.00 200,000.00
Zhejiang Province Guangyu
Media Printing Company Limited 9.96 9.96
Jinan Shangyou Commercial
Company Limited 5.00 5.00 350,000.00
Shouguang Mihe Water
Company Limited 19.46 19.46
Shanghai Forest & Paper
E-Commerce Co., Ltd 14.00 14.00 468,152.23
安徽时代物资股份有限公司 10.00 10.00
Total 1,918,152.23
86
VII. Notes to the Consolidated Financial Statements (Cont’d)
9. Long-term equity investments (Cont’d)
(3) Investments in associates
Overview of associates
Percentage Percentage
of the of the
shareholding voting right in
of the the investee
Legal Registered investee entity entity
Name of investee entity Enterprise type Registration place Representative Business nature capital (%) (%)
Shouguang Liben Paper Sino-foreign Shandong Cang Tiantai Manufacture 74,070,000 26.4 26.4
Making Co., Ltd. joint venture of paper
Arjo Wiggins Chenming Sino-foreign Shandong Tong Chong Manufacture 267,368,330 30 30
Specialty Paper Co., Ltd. joint venture of paper
Qingzhou Chenming Limited liability Shandong Fang Shiming Deep 3,000,000 30 30
Denaturation Amylum company processing
Co., Ltd. of starch
Jiangxi Jiangbao Media Limited liability Jiangxi Ou Yang Printing 23,140,000 21.15 21.15
Colour Printing Co. Ltd. company
Total Total Total net Operating Net profit
assets at liabilities at asset value revenue for for the
the end the end for the current the current current
Name of investee entity of period of period period period period Relationship Organisation No.
Shouguang Liben Paper 77,298,390.63 16,928,361.68 60,370,028.95 41,865,988.01 -2,814,176.68 Associated 61358854-8
Making Co., Ltd. corporation
Arjo Wiggins Chenming 336,094,728.15 273,792,173.70 62,302,554.45 6,424,125.51 -9,869,111.72 Associated 78233868-9
Specialty Paper Co., Ltd. corporation
Jiangxi Jiangbao Media 39,210,770.67 16,108,507.07 23,302,263.60 5,915,745.81 -245,036.56 Associated 79479506-X
Colour Printing Co. Ltd. corporation
Qingzhou Chenming Its operation was poor and it was fully provided for impairment in prior years Associated 16937769-8
Denaturation Amylum corporation
Co., Ltd.
(4) Details of impairment provision on long-term equity investments
Increase for the Decrease for
Items Opening balance current period the current period Closing balance
Qingzhou Chenming
Denaturation Amylum Co., Ltd. 900,000.00 900,000.00
Shandong Paper Making & Printing
Enterprises Corporation 200,000.00 200,000.00
Jinan Shangyou Commercial Company Limited 350,000.00 350,000.00
Shanghai Forest & Paper E-Commerce Co., Ltd 468,152.23 468,152.23
Total 1,918,152.23 1,918,152.23
87
VII. Notes to the Consolidated Financial Statements (Cont’d)
10. Investment Properties
(1) The details of investment properties
Opening Increase for the Decrease for the Closing
Items balance current period current period balance
Investment property
adopting cost
method for subsequent
measurement 24,688,212.07 869,128.02 23,819,084.05
Less: Provision for
impairment of long
investment property — — —
Total 24,688,212.07 869,128.02 23,819,084.05
(2) Investment properties measured at cost
Opening Increase for the Decrease for the Closing
Items balance current period current period balance
I. Total original value 38,291,395.70 38,291,395.70
Buildings 38,291,395.70 38,291,395.70
II. Accumulated
depreciation and
accumulated
amortisation
in total 13,603,183.63 869,128.02 14,472,311.65
Buildings 13,603,183.63 869,128.02 14,472,311.65
III. Impairment provision
in total
Buildings
IV. Total carrying
amount 24,688,212.07 23,819,084.05
Buildings 24,688,212.07 23,819,084.05
Note: Depreciation for the current period amounted to RMB869,128.02.
88
VII. Notes to the Consolidated Financial Statements (Cont’d)
11. Fixed Assets
(1) Overview of fixed assets
Additions Deductions
for the for the
Items Opening balance current period current period Closing balance
I. Total original carrying amount: 20,401,326,599.38 530,904,774.89 193,049,724.52 20,739,181,649.75
Of which: Buildings 3,489,121,797.39 79,098,767.43 44,893,123.26 3,523,327,441.56
Machinery and
equipment 16,187,336,880.50 425,417,289.81 140,002,614.46 16,472,751,555.85
Electronic equipment
and others 550,925,327.25 4,515,637.51 4,378,478.24 551,062,486.52
Vehicles 173,942,594.24 21,873,080.14 3,775,508.56 192,040,165.82
II. Accumulated depreciation Provision for the current period
Total accumulated
depreciation: 7,490,186,114.37 582,233,501.25 105,147,107.55 7,967,272,508.06
Of which: Buildings 776,138,764.87 58,871,262.67 13,448,077.90 821,561,949.64
Machinery and
equipment 6,325,073,882.19 493,934,160.50 85,182,892.93 6,733,825,149.76
Electronic equipment
and others 309,393,625.93 21,745,475.36 3,235,804.99 327,903,296.29
Vehicles 79,579,841.38 7,682,602.72 3,280,331.73 83,982,112.37
III.Net carrying amount 12,911,140,485.01 12,771,909,141.69
Of which: Buildings 2,712,983,032.52 2,701,765,491.92
Machinery and
equipment 9,862,262,998.31 9,738,926,406.09
Electronic equipment
and others 241,531,701.32 223,159,190.23
Vehicles 94,362,752.86 108,058,053.45
IV. Total impairment provision 28,782,103.45 12,538,263.73 16,243,839.72
Of which: Buildings
Machinery and 28,782,103.45 12,538,263.73 16,243,839.72
equipment
Electronic equipment
and others
Vehicles
V. Net carrying amount 12,882,358,381.56 12,755,665,301.97
Of which: Buildings 2,712,983,032.52 2,701,765,491.92
Machinery and
equipment 9,833,480,894.86 9,722,682,566.37
Electronic equipment
and others 241,531,701.32 223,159,190.23
Vehicles 94,362,752.86 108,058,053.45
Note: (1) Depreciation for the current period amounted to RMB 582,233,501.25. RMB 454,255,600.90 was transferred from construction in progress to
the original value of fixed assets for the current period.
(2) The reduction of impairment provision for fixed assets of the Company during the period was mainly because Heze Chenming Panels Co., Ltd.
was not accounted for on a consolidated basis during the period.
(2) Details of restricted fixed assets
As at 30 June 2011, the titles of buildings and equipment with a carrying value of approximately RMB992,121,278.50 in an
original value of RMB1,352,124,400.00 (31 December 2010: carrying amount of RMB1,022,544,077.50, original value of
RMB1,352,124,400.00) and land use rights within intangible assets with a carrying value of RMB70,607,865.32 (31 December
2010: RMB71,448,435.14) was restricted as the collaterals for a long-term borrowings of RMB103,160,365.17 (31 December
2010: RMB127,175,683.11) and long-term borrowings due within 1 year of RMB48,600,447.57 (31 December 2010:
RMB71,890,463.15).
89
VII. Notes to the Consolidated Financial Statements (Cont’d)
11. Fixed Assets (Cont’d)
(3) Temporary unused fixed assets
Original Accumulated Impairment Carrying
Items carrying value depreciation provision value Remarks
Buildings 670,752.14 88,459.71 582,292.43 Suspension
Machinery and equipment 12,380,330.34 3,515,703.40 8,864,626.94 Suspension,
Improvement
Electrical machinery and others 724,269.87 469,239.76 255,030.11 Suspension
Total 13,775,352.35 4,073,402.87 9,701,949.48
(4) Fixed assets without property right certificates
Reasons for Estimated time
not yet obtaining for obtaining
property right property right
Items certificates certificates Carrying amount
Wuhan project Self construction Being applied 41,834,301.65
Jilin project Self construction in plant Being applied 192,114,764.50
Meilun Houshold Paper Application after completion End of 2012 56,648,547.24
manufacturing plant of all Meilun items
property right certificate
Property right cerificate (Yanbian) Assets being acquired 2011 33,240,500.00
Pulp sheet manufacturing plant Not yet decided 2012 17,105,609.19
(Jiangxi)
Total 340,943,722.58
90
VII. Notes to the Consolidated Financial Statements (Cont’d)
12 Construction in progress
(1) The general information of constructions in progress
Closing balance Opening balance
Book Impairment Carrying Book Impairment Carrying
Items balance provision amount balance provision amount
The high-end coated paper project
of annual production capacity
of 800,000 tonnes (Meilun Paper) 2,726,053,918.22 2,726,053,918.22 2,277,312,260.67 2,277,312,260.67
The household paper project
of annual production capacity
of 98,000 tonnes (Meilun Paper) 76,630,987.95 76,630,987.95 407,103,435.25 407,103,435.25
Huanggang forestry pulp integration
project (Huanggang) 31,387,537.56 31,387,537.56 30,383,565.19 30,383,565.19
4400 paper machine technological
improvement (Qihe) 70,603,563.75 70,603,563.75 61,850,381.70 61,850,381.70
Pulping production plant oxygen
delignification improvement (Qihe) 11,857,058.25 11,857,058.25 11,613,569.78 11,613,569.78
Desulphurisation of 130 tonnes and
75 tonnes boiler (Qianneng) 10,003,778.11 10,003,778.11 10,513,384.07 10,513,384.07
Intermediate water advance
treatment (Jilin) 34,579,408.12 34,579,408.12 34,341,668.12 34,341,668.12
Second plant paper machine
improvement (Jilin) 28,382,917.43 28,382,917.43 45,216,980.09 45,216,980.09
Power plant phase III expansion and
improvement (the Company) 174,529,800.00 174,529,800.00 234,299,205.48 234,299,205.48
Data improvement of construction
in progress (the Company) 93,492,271.05 93,492,271.05 42,830,017.64 42,830,017.64
Reclamation of recyclable water
(electricity and steam) 23,763,672.41 23,763,672.41 20,129,045.13 20,129,045.13
700,000 tonnes paper pulp and
450,000 tonnes cultural paper 5,410,217,506.45 5,410,217,506.45 4,092,344,011.00 4,092,344,011.00
Mihe River view wetland
(Grand View Hotel) 69,931,335.34 69,931,335.34 33,615,119.48 33,615,119.48
600,000 tonnes white linerboard
(Meilun Paper) 582,119,206.02 582,119,206.02 247,563,122.64 247,563,122.64
Other projects of
construction in progress 917,879,927.34 917,879,927.34 322,396,797.60 322,396,797.60
Total 10,261,432,888.00 10,261,432,888.00 7,871,512,563.84 7,871,512,563.84
91
VII. Notes to the Consolidated Financial Statements (Cont’d)
12 Construction in progress (Cont’d)
(2) Change in material constructions in progress projects
Additions for Transfer to fixed
(RMB in Opening the current assest for the Other Closing
Project name 100 million) balance period current period deductions balance
The high-end coated paper project
of an annual production capacity
of 800,000 tonnes (Meilun Paper) 52 2,277,312,260.67 448,741,657.55 2,726,053,918.22
98,000-tonne household paper project
(Meilun Paper) 5 407,103,435.25 43,777,050.22 374,249,497.52 76,630,987.95
Huanggang forestry pulp integration
project (Huanggang) 0.5 30,383,565.19 1,003,972.37 31,387,537.56
4400 paper machine technological
improvement (Qihe) 0.32 61,850,381.70 8,753,182.05 70,603,563.75
Pulping production plant oxygen
delignification improvement (Qihe) 11,613,569.78 243,488.47 11,857,058.25
Desulphurisation of 130 tonnes and
75 tonnes boilers (Qianneng) 0.15 10,513,384.07 509,605.96 10,003,778.11
Intermediate water advance
treatment (Jilin) 34,341,668.12 237,740.00 34,579,408.12
Second plant paper machine
improvement (Jilin) 45,216,980.09 16,834,062.66 28,382,917.43
Power plant phase III expansion and
improvement (the Company) 4.5 234,299,205.48 96,713,184.95 331,012,390.43
Data improvement of construction
in progress (the Company) 42,830,017.64 52,968,589.54 2,306,336.13 93,492,271.05
Reclamation of recyclable water
(electricity and steam) 0.389 20,129,045.13 3,634,627.28 23,763,672.41
700,000 tonnes paper pulp and
450,000 tonnes cultural paper 94 4,092,344,011.00 1,317,873,495.45 5,410,217,506.45
Mihe River view wetland
(Grand View Hotel) 0.6 33,615,119.48 40,809,195.86 4,492,980.00 69,931,335.34
600,000 tonnes of white linerboard
(Meilun Paper) 26 247,563,122.64 334,556,083.38 582,119,206.02
Other projects of construction
in progress 322,396,797.60 521,733,715.36 75,513,123.38 7,220,052.67 761,397,336.91
Total 7,871,512,563.84 2,871,045,982.48 454,255,600.90 26,870,057.42 10,261,432,888.00
92
VII. Notes to the Consolidated Financial Statements (Cont’d)
12 Construction in progress (Cont’d)
(3) Impairment provision of constructions in progress
Of which:
Accumulated capitalised
capitalised interest Investment to
interest amount for the budgeted Construction
Sources
Project name amount current period costs (%) progress of Fund
Electric power project (Fuyu) 1,081,896.44 812,920.93 95% Entrusted loan
Pulp dissolving project (Fuyu) 173,886.39 159,233.07 86.51% Completed Entrusted loan
Oxidation pond wetland
project (Fuyu) 25,355.95 25,355.95 90% Entrusted loan
Meilun project 181,596,108.63 94,566,627.10 External
borrowings and
entrusted loan
Recycable water project (Xinli Power) 947,124.77 626,592.14 61.09% 99% External
borrowings and
entrusted loan
1 million mu pulp raw materials 19,677,555.02 4,778,900.36 62.78% 63% External
base construction project borrowings and
(Huanggang) entrusted loan
Zhanjiang 700,000 tonnes paper 61,830,741.77 43,513,302.40 57.56% 55% External
pulp and 450,000 tonnes borrowings and
cultural paper entrusted loan
Total 265,332,668.97 144,482,931.95
For the six months ended 30 June 2011, no carrying amounts were higher than the recoverable amounts for constructions in
progress of the Company.
13. Project materials
Additions for Deduction for
Opening the current the current Closing
Items balance period period balance
Special equipment 93,745,274.76 532,582,821.07 441,535,248.33 184,792,847.50
Special materials 22,735,811.36 25,127,116.05 29,204,065.05 18,658,862.36
Total 116,481,086.12 557,709,937.12 470,739,313.38 203,451,709.86
14. Consumable biological assets
Measured at fair value
Additions for Deduction for
Opening the current the current Closing
Items balance period period balance
Timber 726,742,568.44 258,882,113.15 130,997,221.05 854,627,460.54
Total 726,742,568.44 258,882,113.15 130,997,221.05 854,627,460.54
Consumable biological assets are measured at fair value. The fair value of timber increased by RMB16,691,448.62 due to acquisition,
increased by RMB220,211,509.78 due to breeding, increased by RMB6,243,559.94 due to amortisation of land use rights, increased by
RMB8,341,286.19 due to capitalisation of external borrowing interests, increased by RMB3,678,879.00 due to capitalisation of internal
borrowing interests, increased by RMB3,715,429.62 due to change of fair value, and decreased by RMB130,997,221.05 due to
disposal.
93
VII. Notes to the Consolidated Financial Statements (Cont’d)
15. Intangible assets
(1) The details of intangible assets
Opening Additions for Deductions for Closing
book the current the current book
Items balance period period balance
I. Total original 1,599,493,963.68 381,958.30 27,222,227.35 1,572,653,694.63
carrying amount:
Land use rights 1,584,208,340.63 27,192,047.35 1,557,016,293.28
Software 15,285,623.05 381,958.30 30,180.00 15,637,401.35
II. Total accumulated 140,040,735.74 17,102,238.25 2,646,774.26 154,496,199.73
amortisation
Land use rights 131,276,521.30 16,303,168.37 2,616,594.26 144,963,095.41
Software 8,764,214.44 799,069.88 30,180.00 9,533,104.32
III. Total impairment
provision
Land use rights
Software
IV. Total carrying amount 1,459,453,227.94 1,418,157,494.90
Land use rights 1,452,931,819.33 1,412,053,197.87
Software 6,521,408.61 6,104,297.03
Notes: ① The amortisation amount was RMB17,102,238.25 during the current period.
② Intangible assets -for the pledge of land use rights, please see Note VII. 11. (2).
③ As at 30 June 2011, the carrying amount of land use right of land use right certificates not yet obtained was RMB157,210,933.62.
16. Goodwill
Additions Deductions Impairment
Name of investee for the for the provision
units or matters Opening current current Closing at the end
generating goodwill balance period period balance of the period
Jilin Chenming Paper Co., Ltd. 14,314,160.60 — — 14,314,160.60 —
Shandong Chenming decorating
materials Panels Co., Ltd. 5,969,626.57 — — 5,969,626.57 —
Total 20,283,787.17 — — 20,283,787.17 —
17. Long-term prepaid expenses
Additions Amortisation
for the for the Reasons
Opening current current Other Closing for other
Items balance period period deductions balance deductions
Transforming expense
on leased assets 20,634,556.14 2,324,200.00 1,902,443.37 21,056,312.77
Woodland expenses 152,748,747.82 15,284,456.79 6,821,878.62 161,211,325.99
Others 3,053,646.46 3,053,646.46
Total 176,436,950.42 17,608,656.79 11,777,968.45 72,369,454.82 182,267,638.76
94
VII. Notes to the Consolidated Financial Statements (Cont’d)
18. Deferred income tax assets / deferred income tax liabilities
(1) Recognised deferred income tax assets and deferred income tax liabilities
(1) Recoghised deferred income tax assets
Items Closing balance Opening balance
Deductible Deductible
Deferred temporary Deferred temporary
income differences and income differences and
tax assets deductible loss tax assets deductible loss
Provision for impairment
of assets 71,424,560.02 316,272,181.02 74,965,397.98 338,243,809.22
Elimination of unrealised
profit arising from
intra-group 26,143,279.51 104,573,118.04 15,789,316.34 63,157,265.36
Prepaid salaries of senior
management 9,923,617.46 60,629,489.93 14,321,072.45 91,406,128.57
Unpaid payables 11,347,991.41 59,421,960.97 11,347,991.44 59,934,063.55
Deferred income 21,100,723.01 94,593,081.35 21,067,365.45 96,948,558.78
Preliminary expenses
Decrease in fair value of
consumable biological
assets
Deductible losses 18,455,628.79 75,305,188.56 10,019,335.57 40,077,342.27
Changes in fair value
Total 158,395,800.20 710,795,019.87 147,510,479.23 689,767,167.75
(2) Recognised deferred income tax liabilities
Items Closing balance Opening balance
Deferred Taxable Deferred Taxable
income temporary income temporary
tax liabilities differences tax liabilities differences
Business combination
not under common control 1,340,281.66 5,361,126.68
Change in fair value of
biological assets
1,340,281.66 5,361,126.68
95
VII. Notes to the Consolidated Financial Statements (Cont’d)
19. Provision for impairment of assets
Provision Decrease for the
Opening for the current period Closing
Items balance current period Reversals Write-offs balance
I. Provisions for bad debts 340,175,404.36 38,083,680.89 55,638,636.63 14,488,717.91 308,131,730.71
II. Provisions for inventory impairment 7,822,412.16 3,870,510.42 3,365,449.78 586,451.96
III. Impairment provisions for long-term
equity investments 1,918,152.23 1,918,152.23
IV. Impairment provisions for fixed assets 28,782,103.45 12,538,263.73 16,243,839.72
Total 378,698,072.20 38,083,680.89 59,509,147.05 30,392,431.42 326,880,174.62
20 Assets with limited ownership or use rights
Closing Reasons
Items balance of limitations
Sub-total of assets used for
providing guarantees: 1,062,729,143.82
Machinery and equipment (Jiangxi) 992,121,278.50 As collaterals for bank borrowings
Land use rights (Jiangxi) 70,607,865.32 As collaterals for bank borrowings
Other monetary funds 327,506,485.67 Deposits
Total 1,390,235,629.49
96
VII. Notes to the Consolidated Financial Statements (Cont’d)
21. Short-term borrowings
Items Closing balance Opening balance
Secured borrowings 196,537,177.75 20,561,496.69
Guarantee loans 569,785,000.00 187,493,632.08
Credit loans 3,164,236,048.35 1,802,176,636.90
Discounted bills 1,975,688,923.44 1,583,925,454.80
Total 5,906,247,149.54 3,594,157,220.47
Note: (1) For the category and amount of secured assets under secured borrowings, please see Note VII.1;
(2) Guarantee loans are the loans obtained by the subsidiaries of the Company from financial institutions when the Company acts as their guarantee;
(3) Discounted loans are the loans obtained from financial institutions with pledged bank acceptance.
22. Bills payable
Type Closing balance Opening balance
Bank acceptance 1,324,707,285.74 213,607,186.75
Commercial acceptance 5,150,000.00
Total 1,324,707,285.74 218,757,186.75
23. Accounts payable
(1) Breakdown of accounts payable:
Items Closing balance Opening balance
Within 1 year 2,798,179,591.22 2,516,618,611.43
1-2 years 102,431,702.37 71,824,074.09
2-3 years 55,884,237.14 64,607,259.87
Over 3 years 64,718,957.16 55,014,731.05
Total 3,021,214,487.89 2,708,064,676.44
(2) During the reporting period, the accounts payable was not due to any shareholders holding over 5% (5% inclusive) of the
Company’s shares.
97
VII. Notes to the Consolidated Financial Statements (Cont’d)
23. Accounts payable (Cont’d)
(3) Explanation on the significant trade payables (above RMB1,000,000) aged over one year
Repay after
Reason of the reporting
Name of creditors Amount outstanding loans period or not
Customer I 64,753,658.89 Temporary outstanding No
Customer II 42,190,421.30 Temporary outstanding No
Customer III 37,387,286.09 Temporary outstanding No
Customer IV 35,773,489.73 Temporary outstanding No
Customer V 34,504,792.92 Temporary outstanding No
Total 214,609,648.93
(4) Accounts receivable at the end of the reporting period comprised the following balances in foreign currencies:
Closing balance Opening balance
Foreign Foreign
Items Foreign currency exchange rates RMB Foreign currency exchange rates RMB
USD 406,374,284.40 6.4716 2,629,891,818.91 99,658,689.98 6.6227 660,009,606.14
EURO 2,857,928.02 9.3612 26,753,635.78 7,753.51 8.8065 68,281.29
GBP 28,943.33 10.3986 300,970.11
Total 409,261,155.75 2,656,946,424.80 660,077,887.43
24. Advance receipts
(1) Breakdown of advance receipts
Items Closing balance Opening balance
Within 1 year 240,832,302.29 400,171,708.36
1-2 years 10,101,682.37 10,071,846.39
Total 250,933,984.66 410,243,554.75
(2) As at 30 June 2011, the advance receipts were not received from any shareholders holding over 5% (5% inclusive) of the
Company’s shares.
98
VII. Notes to the Consolidated Financial Statements (Cont’d)
24. Advance receipts (Cont’d)
(3) Explanation on the significant advance receipts (above RMB1 million) aged over one year
Name of creditors Amount Reasons of not being carried forward
Customer I 2,582,510.00 No delivery requirement from the counterparty
Total 2,582,510.00
25. Staff remuneration payables
Opening Increase for Decrease for
Closing
Items balance the period the period balance
I. Salaries, bonuses, allowance and
subsidies 106,164,937.66 314,909,013.27 352,509,330.60 68,564,620.33
II. Staff welfare 692,139.40 27,440,074.15 27,839,338.37 292,875.18
III. Social insurance premiums 15,521,936.46 70,583,931.54 65,315,074.03 20,790,793.97
Of which:
1. Medical insurance premium 10,127,697.04 11,557,472.21 11,014,035.66 10,671,133.59
2. Pension insurance premium 3,409,664.85 52,907,336.11 47,570,494.01 8,746,506.95
3. Unemployment
insurance premium 157,215.80 4,004,662.00 4,486,467.63 -324,589.83
4. Work-related injury
insurance premium 48,528.38 1,472,433.7 1,422,408.91 98,553.17
5. Maternity insurance premium 1,778,830.39 642,027.52 821,667.82 1,599,190.09
IV. Housing provident funds 6,160,147.64 24,458,583.52 24,176,384.57 6,442,346.59
V. Union operation costs and
employee education costs 22,024,200.53 5,602,558.03 6,566,371.12 21,060,387.44
VI Non-monetary welfare 143,197.20 143,197.20
VII Lay off welfare
VIII Cash-settled share-based payment
IX Others 18,863,298.72 689,775.41 461,754.87 19,091,319.26
Total 169,426,660.41 443,827,133.12 477,011,450.76 136,242,342.77
26. Taxes payables
Items Closing balance Opening balance
Enterprise income tax 60,097,990.60 63,216,459.39
Value added tax 27,145,159.08 22,409,317.62
Business tax 4,341,025.94 4,809,383.74
Land use tax 9,445,567.81 13,840,227.24
Property tax 3,641,681.93 5,578,174.83
Urban maintenance and construction tax 4,472,701.30 5,088,049.71
Educational surcharges and others 4,778,809.17 6,402,114.55
Individual income tax 5,879,901.81 10,532,914.69
Stamp duty 1,730,767.52 2,152,746.05
Total 121,533,605.16 134,029,387.82
99
VII. Notes to the Consolidated Financial Statements (Cont’d)
27. Dividend payable
Name Closing balance Opening balance
Legel person shares 106,831,703.46
Total 106,831,703.46
28. Other payables
(1) Breakdown of other payables
Items Closing balance Opening balance
Within 1 year 860,591,192.28 467,607,969.48
1-2 years 33,674,750.64 38,962,690.39
2-3 years 15,184,255.76 51,434,377.75
Over 3 years 71,818,313.37 24,047,473.81
Total 981,268,512.05 582,052,511.43
(2) The other payables during of the reporting period were not due to any shareholders who holding over 5% (5% inclusive) of the
Company’s shares.
(3) Explanation on the significant other payables (above RMB1 million) aged over one year
Reason of Repay after the
Name of creditors Amount outstanding loans reporting period or not
Customer I 11,475,826.89 Temporary outstanding No
Customer II 8,800,000.00 Temporary outstanding No
Customer III 3,454,087.82 Temporary outstanding No
Customer IV 3,400,000.00 Temporary outstanding No
Customer V 2,760,000.00 Temporary outstanding No
Total 29,889,914.71
(4) Explanation on the significant other payables (the top five)
Name of creditors Outstanding balance Nature or details
Customer I 315,719,000.00 Temporary outstanding
Customer II 200,000,000.00 Temporary outstanding
Customer III 17,325,900.00 Temporary outstanding
Customer IV 10,000,000.00 Temporary outstanding
Customer V 10,000,000.00 Temporary outstanding
Total 553,044,900.00
100
VII. Notes to the Consolidated Financial Statements (Cont’d)
29. Non-current liabilities due within one year
(1) Breakdown of long-term liabilities due within one year
Items Closing balance Opening balance
Long-term liabilities due within one year (Note VII.31) 1,270,588,281.77 1,432,841,463.15
Total 1,270,588,281.77 1,432,841,463.15
(1) Breakdown of long-term borrowings due within one year
Items Closing balance Opening balance
Secured borrowings 48,600,447.57 71,890,463.15
Guarantee loans 70,000,000.00
Credit loans 1,151,987,834.20 1,360,951,000.00
Total 1,270,588,281.77 1,432,841,463.15
(2) Top five long-term borrowings due within one year
Closing balance
Borrowing units Starting date Expiry date Interest rate(%) Currency Foreign currency Functional currency
Bank I 20081223 20111222 5.49 RMB 400,000,000.00
Bank II 20091020 20111019 1.42 USD 30,000,000.00 194,148,000.00
Bank III 20090617 20120615 4.86 RMB 170,000,000.00
Bank IV 20091109 20111108 1.46 USD 25,000,000.00 161,790,000.00
Bank V 20081223 20111122 5.49 RMB 100,000,000.00
Total 1,025,938,000.00
Opening balance
Borrowing units Starting date Expiry date Interest rate(%) Currency Foreign currency Functional currency
Bank I 20081223 20111222 4.86 RMB 400,000,000.00
Bank II 20091020 20111019 1.4178 USD 30,000,000.00 198,681,000.00
Bank III 20091228 20111228 1.6943 USD 30,000,000.00 198,681,000.00
Bank IV 20090520 20110509 1.3291 USD 25,000,000.00 165,567,500.00
Bank V 20091106 20111105 1.4629 USD 25,000,000.00 165,567,500.00
Total 1,128,497,000.00
101
VII. Notes to the Consolidated Financial Statements (Cont’d)
30. Other current liabilities/other non-current liabilities
(1) Other current liabilities
Items Closing balance Opening balance
Deferred income 8,532,613.51 7,609,415.89
Medium-term debentures interests 54,628,395.90 46,115,333.31
Short-term debentures payable 1,846,552,500.02 3,358,769,166.68
Total 1,909,713,509.43 3,412,493,915.88
(2) Other non-current liabilities
Items Closing balance Opening balance
Deferred income 143,210,886.45 142,414,214.19
Medium-term debentures 2,288,921,945.70 2,285,483,331.48
Total 2,432,132,832.15 2,427,897,545.67
Of which,
(1) the breakdown of deferred income is as follows:
Items Closing balance Opening balance
Funds for three projects in connection with technology
allocated by the local financial authority — —
Special subsidy funds for environmental protection 50,685,186.10 49,868,423.92
Project fund for National technological support scheme 4,533,975.00 4,660,575.00
Special subsidy fund for Songhuajiang
environmental protection project 24,508,333.11 23,060,833.12
Modification of alkaline recycling system 5,866,666.61 5,350,416.65
Atmospheric pollution prevention
and treatment subsidy fund 500,001.00 993,785.71
Sewage treatment and water
conservation reconfiguration project 21,526,071.35 21,892,797.56
Financial grants for technological modification project 2,008,928.67 2,164,285.79
Zhejiang pulp project and construction
project of eucalyptus forest 40,992,000.00 40,992,000.00
Others 1,122,338.12 1,040,512.33
Total 151,743,499.96 150,023,630.08
Deferred income of RMB4,751,612.49 was received in the current period. Deferred income recognised through profit or loss was
RMB3,031,742.61 for the current period.
(2) Principal payments of short-term debentures were RMB1,800,000,000.00. Accrued interest was RMB46,552,500.02.
(3) Principal payments of medium-term notes were RMB 2,300,000,000.00. Interest due within one year was
RMB51,478,916.63. Handling charges not fully amortised under the effective interest method were RMB11,078,054.30.
(4) Interest due within one year of bonds payable was RMB3,149,479.28.
102
VII. Notes to the Consolidated Financial Statements (Cont’d)
31. Long-term borrowings
(1) Types of long-term borrowings
(1) Types of long-term borrowings
Items Closing balance Opening balance
Secured borrowings 151,760,812.74 199,066,146.26
Guarantee loans 5,126,156,800.00 3,746,230,300.00
Credit loans 2,459,805,470.14 2,213,173,735.94
Less: Long-term borrowings due
within one year (Note VII.31) 1,270,588,281.77 1,432,841,463.15
Total 6,467,134,801.11 4,725,628,719.05
Note: For the category and amount of secured assets under secured borrowings, please see Note VII.11 and VII.15. Guarantee loans were granted
by financial institutions to subsidiaries of the Company and were guaranteed by the Company.
(2) Top five long-term borwings
Closing balance
Borrowing units Starting date Expiry date Interest rate(%) Currency Foreign currency Functional currency
Bank I 20080325 20230324 1.49 USD 378,000,000.00 2,446,264,800.00
Bank II 20080325 20230324 6.12 RMB 1,073,300,000.00
Bank III 20100910 20130910 Floating USD 80,000,000.00 517,728,000.00
Bank IV 20091210 20121210 4.86 RMB 450,000,000.00 450,000,000.00
Bank V 20090928 20120927 4.29 RMB 280,000,000.00
Total 4,767,292,800.00
Opening balance
Borrowing units Starting date Expiry date Interest rate(%) Currency Foreign currency Functional currency
Bank I 20080325 20230324 2.96 USD 309,000,000.00 2,046,414,300.00
Bank II 20090325 20230324 4.86 RMB 540,000,000.00
Bank III 20090910 20130910 3.6 USD 80,000,000.00 529,816,000.00
Bank IV 20091210 20121210 4.06 RMB 450,000,000.00
Bank V 20081213 20111222 4.86 RMB 400,000,000.00
Total 3,966,230,300.00
103
VII. Notes to the Consolidated Financial Statements (Cont’d)
32. Bonds payable
Items Closing balance Opening balance
RMB debentures 490,204,131.56
Total 490,204,131.56
Note: On 13 April 2011, Chenming (HK) Limited, a subsidiary of the Company, issued RMB debentures of RMB500,000,000.00, with an annual interest rate of
2.95%. The debentures interests will be paid on a half-yearly basis.
33. Share capital
Closing
Opening balance Change for the period (Increase/decrease) balance
Shares
transfer
Bonus from
Items Amounts Percentage New issue shares reserve Others Sub-total Amounts Percentage
I. Restricted shares
1. State-owned legal person shares 293,003,657 14.21 293,003,657 14.21
2. Other domestic shares 10,008,315 0. 48 -591,215 -591,215 9,417,100 0.46
Total number of restricted shares 303,011,972 14.69 -591,215 -591,215 302,420,757 14.67
II. Non-restricted shares
1. RMB ordinary shares 810,266,484 39.3 591,215 591,215 810,857,699 39.32
2. Domestic listed foreign shares 557,497,485 27.04 557,497,485 27.04
3. Overseas listed foreign shares 391,270,000 18.97 391,270,000 18.97
Total number of non-restricted shares 1,759,033,969 85.31 1,759,033,969 85.33
III. Total shares 2,062,045,941 100 2,062,045,941 100
34. Capital reserves
Increase Decrease
Opening for the for the Closing
Items balance current period current period balance
Capital premium 5,391,471,967.47 5,391,471,967.47
Of which: Capital contribution
from investors 3,373,256,665.49 3,373,256,665.49
Exercise of conversion
rights in convertible bonds
of the Company 2,018,215,301.98 2,018,215,301.98
Acquisition of minority interests 9,202.79 9,202.79
Other capital reserves 702,011,834.45 702,011,834.45
Of which: transfer from capital
reserves under the
original system 702,011,834.45 702,011,834.45
Total 6,093,493,004.71 6,093,493,004.71
104
VII. Notes to the Consolidated Financial Statements (Cont’d)
35. Surplus reserve
Increase Decrease
Opening for the for the Closing
Items balance current period current period balance
Statutory surplus reserves 1,046,510,680.99 1,046,510,680.99
Total 1,046,510,680.99 1,046,510,680.99
36. Retained profit
(1) Information on the change of retained profit
Proportion of
Amounts in the Amounts in appropriation
Items current period prior period or allocation
Retained profit of prior period before adjustment 4,333,731,947.96 3,928,586,297.55
Adjustment of the aggregate retained profit
as at the beginning of the period
(increase after adjustment +,
decrease after adjustment -)
Retained profit as at the beginning
of the period after adjustment 4,333,731,947.96 3,928,586,297.55
Add : Net profit of the current period
attributable to equity holders
of the Company 483,549,691.40 1,163,341,066.21
Less : Withdrawn statutory surplus reserves 139,581,633.50 10% of new profit
of the Company
Ordinary shares dividend payable 618,613,782.30 618,613,782.30
Retained profit as at the end of the period 4,198,667,857.06 4,333,731,947.96
(2) Information on the breakdown of profit distribution
According to the profit distribution plan for 2010 approved by 2010 Annual General Meeting of the Company on 18 May 2011,
the Company declared cash dividends of RMB0.3 per share to all shareholders, totalling RMB618,613,782.30, which was
calculated based on the 2,062,045,941 shares in issue.
37. Operating revenue and operating costs
(1) Operating revenue and operating costs
Incurred Incurred
during the during the
Items current period prior period
Operating revenue from principal operations 8,867,913,416.05 8,163,269,791.82
Other operating revenue 49,541,939.09 13,371,885.17
Total operating revenue 8,917,455,355.14 8,176,641,676.99
Operating costs from principal operations 7,365,184,950.61 6,394,221,973.32
Other operating costs 17,574,173.88 2,178,206.82
Total operating costs 7,382,759,124.49 6,396,400,180.14
105
VII. Notes to the Consolidated Financial Statements (Cont’d)
37. Operating revenue and operating costs (Cont’d)
(2) Principal operation (by products)
Incurred during the Incurred during the
current period prior period
Operating Operating Operating Operating
Product name revenue costs revenue costs
I. Machine-made paper 8,186,161,306.83 6,784,659,561.49 7,752,518,632.68 6,074,850,432.89
II. Electricity and steam 414,633,495.26 389,718,244.42 175,867,123.49 143,026,054.52
III. Building materials 194,707,888.55 145,906,730.77 173,871,552.11 144,211,194.63
IV. Paper chemicals 39,567,408.70 32,139,830.20 32,447,409.89 21,360,557.82
V. Hotel 25,394,309.98 6,320,942.59 22,229,234.27 5,763,863.47
VI. Others 7,449,006.73 6,439,641.14 6,335,839.38 5,009,869.99
Total 8,867,913,416.05 7,365,184,950.61 8,163,269,791.82 6,394,221,973.32
(3) Principal operations - Machine-made paper (by geographical segment)
Incurred Incurred
during the
during the
Regions current period prior period
PRC 6,784,399,992.93 6,713,574,816.48
Hong Kong 58,239,166.05 102,064,685.86
United States 153,370,094.99 43,637,929.18
Japan 100,167,928.68 112,421,707.48
South Africa 41,686,106.64 44,048,245.23
Other overseas countries and regions 1,048,298,017.54 736,771,248.46
Total 8,186,161,306.83 7,752,518,632.69
(4) The following table sets forth operating revenue from top 5 customers
Incurred Percentageof
during the total operating
revenue for the
Name of entity current period current period (%)
ROCKGOLD CO., LTD 122,335,874.23 1.37
VITAL SOLUTIONS PTE CO,. LTD. 115,098,896.41 1.29
東五興化纖紡織（集團）有限公司 94,772,507.69 1.06
上海姚記撲克股份有限公司 92,233,611.90 1.03
廣州兆峰紙業有限公司 73,120,762.18 0.82
Total 497,561,652.41 5.58
106
VII. Notes to the Consolidated Financial Statements (Cont’d)
38. Business taxes and surcharges
Incurred Incurred
during the during the
Items current period prior period
Business taxes 4,331,266.10 4,517,393.04
Urban maintenances and construction tax 14,663,063.47 3,660,038.84
Educational surcharges 13,086,702.39 2,204,920.45
Others 32,237.62 15,375.41
Total 32,113,269.58 10,397,727.74
Note: For the calculation standard of business taxes and surcharges, please see Note V. Taxation.
39. Selling expenses
Incurred Incurred
during the during the
Items current period prior period
Wages 46,963,579.38 44,336,931.80
Depreciation expense 10,995,357.54 12,258,477.61
Material consumption expense 3,277,988.65 2,273,230.10
Office expense 2,769,186.04 2,145,929.14
Sales commission and selling expense 2,924,595.53 2,630,621.20
Transportation expense 290,211,082.20 328,348,610.17
Cargo handling charges 10,470,370.22 9,389,399.75
Rental expense 2,176,097.46 1,241,681.46
Hospitality expense 22,707,225.63 21,157,775.21
Others 46,022,645.97 17,719,223.53
Total 438,518,128.62 441,501,879.97
40. General and administrative expenses
Incurred Incurred
during the during the
Items current period prior period
Wages and surcharges 116,786,729.59 118,475,329.02
Labour insurance expense 14,751,090.91 15,088,679.56
Depreciation expense 22,440,343.75 20,286,702.29
Waste disposal expense 18,171,053.44 16,627,402.05
Hospitality expense 8,825,749.41 11,565,898.54
Amortisation of intangible assets 16,250,849.39 13,515,053.87
Technological development expense 97,977,233.41 92,980,039.10
Tax 44,155,146.13 36,085,014.19
Production interruption loss 35,343,596.09 14,095,936.32
Insurance premium 11,384,767.70 9,032,909.68
Others 85,152,004.48 69,382,296.24
Total 471,238,564.30 417,135,260.86
107
VII. Notes to the Consolidated Financial Statements (Cont’d)
41. Finance expenses
Incurred Incurred
during the during the
Items current period prior period
Interest expenses 194,556,465.57 139,639,767.05
Less: interest income 12,589,181.23 16,988,867.25
Foreign exchange gains and losses -50,005,047.99 -8,150,089.22
Others 21,629,942.15 11,238,845.28
Total 153,592,178.50 125,739,655.86
42. Gain on changes in fair value
Incurred Incurred
during the during the
Source of gain on changes in fair value current period prior period
Gain on changes in fair value generated from
derivative financial Instruments — -3,130,000.00
Biological assets measured at fair value 3,715,429.62 11,488,094.03
Total 3,715,429.62 8,358,094.03
108
VII. Notes to the Consolidated Financial Statements (Cont’d)
43. Investment income
(1) Breakdown of investment income
Incurred Incurred
during the
during the
Items current period prior period
Gain from long-term equity investments accounted
for using the equity method -3,755,501.39 4,324,494.78
Investment gain on disposal of long-term equity investments 13,309,163.37 —
Total 9,553,661.98 4,324,494.78
(2) Gain on long-term equity investments of the Company accounted for using equity method
Incurred Incurred
Name of during the during the Reason of addition
investee entity current period prior period or deduction
Arjo Wiggins Chenming -2,960,733.52 5,016,072.32 Investment loss due to
Specialty Paper Co., Ltd the company’s loss
Jiangxi Jiangbao Media -51,825.23 -138,891.88 Investment loss due to
Colour Printing Co. Ltd. the company’s loss
Shouguang Liben Paper -742,942.64 -552,685.66 Investment loss due to
Making Co., Ltd. the company’s loss
Total -3,755,501.39 4,324,494.78
44. Loss on impairment of assets
Incurred Incurred
during the during the
Items current period prior period
Loss on bad debts -17,554,955.74 23,823,361.70
Loss on allowance for inventories -3,870,510.42 -3,026,874.44
Loss on impairment of fixed assets — —
Total -21,425,466.16 20,796,487.26
109
VII. Notes to the Consolidated Financial Statements (Cont’d)
45. Non-operating income
Amount of
extraordinary
Incurred Incurred gains and losses
during the during the recorded for the
Items current period prior period current period
Total income on disposal of non-current assets 1,811,245.53 1,699,483.26 —
Of which: Income on disposal of fixed assets 1,811,245.53 1,699,483.26 —
Income from debt reconstructing 16,400.00 — —
Government grants (For details,
please see the following table: breakdown
of government grants) 136,607,867.13 58,914,598.71 —
Others 7,511,850.23 6,799,720.61 —
Total 145,947,362.89 67,413,802.58 —
Of which, breakdown of government grants:
Incurred Incurred
during the during the
Items current period prior period Explanation
Expansion grants 125,301,439.93 9,564,967.88
Value-added tax refund 11,306,427.20 49,349,630.83
Total 136,607,867.13 58,914,598.71
46. Non-operating expenses
Amount of
extraordinary
Incurred Incurred gains and losses
during the during the recorded for the
Items current period prior period current period
Total loss on disposal of non-current assets 923,387.79 3,130,585.22 —
Of which: Loss on disposal of fixed assets 923,387.79 3,130,585.22 —
Donation expenses — 402,000.00 —
Penalty Expenses 340,898.19 — —
Loss on debt restructuring 19,886,372.60 545,247.24 —
Others 5,186,458.67 2,130,634.33 —
Total 26,337,117.25 6,208,466.79 —
47. Income tax expenses
Incurred Incurred
during the during the
Items current period prior period
Current income tax calculated according to
tax laws and relevant rules 87,178,859.01 139,896,713.79
Adjustment on deferred income tax 9,545,039.31 2,582,608.51
Total 96,723,898.32 142,479,322.30
110
VII. Notes to the Consolidated Financial Statements (Cont’d)
48. Basic earnings per share and diluted earnings per share
The basic earnings per share is computed by dividing the net profit for the period attributable to ordinary shareholders of the Company
by the number of weighted average ordinary shares in issue. The number of newly issued ordinary shares is confirmed starting from the
day of consideration receivables (generally the offering date of stock) according to the specific terms in the offering agreement.
The numerator of the diluted earnings per share is the net profit for the period attributable to ordinary shareholders of the Company,
which is confirmed after adjusting the following factors: (1) interests of diluted potential ordinary shares recognised as expenses for the
period; (2) gains or expenses arising from the transfer of diluted potential ordinary shares; and (3) effect of income tax due to the above
adjustment.
The denominator of diluted earnings per share is the sum of the followings: (1) weighted average number of ordinary shares in issue of
the parent company in the basic earnings per share; and (2) average weighted number of the increased ordinary shares during the
transfer of the estimated diluted potential ordinary shares to ordinary shares.
For the purpose of calculating the average weighted number of the increased ordinary shares during the transfer of the estimated diluted
potential ordinary shares to ordinary shares in issue, diluted potential ordinary shares issued during the prior period were assumed to be
transferred as at the beginning of the current period while diluted potential ordinary shares issued in the current period were assumed to
be transferred on offering date.
(1) Basic earnings per share and diluted earnings per share over the periods
Profit for the reporting period Current period Prior period
Basic Diluted Basic Diluted
earnings earnings earnings earnings
per share per share per share per share
Net profit attributable to
ordinary shareholders 0.23 N/A 0.29 N/A
Net profit after deducting
extraordinary gains and losses
attributable to ordinary
shareholders of the Company 0.19 N/A 0.28 N/A
(2) Calculation of earnings per share and diluted earnings per share
During the reporting period, the Company did not have any potential diluted ordinary shares. Therefore, diluted earnings per
share are equal to basic earnings per share.
(1) Net profit for the period attributable to ordinary shareholders for the purpose of calculating earnings per share are as
follows:
RMB
Incurred Incurred
during the during the
Items current period prior period
Net profit for the period attributable
to ordinary shareholders 479,834,261.78 607,868,970.24
Of which: net profit attributable to continued operations 479,834,261.78 607,868,970.24
net profit attributable to discontinued operations — —
Net profit after deducting extraordinary
gains and losses attributable to
ordinary shareholders of the Company 382,038,739.41 577,372,863.48
Of which: net profit attributable to continued operations 382,038,739.41 577,372,863.48
net profit attributable to discontinued operations — —
111
VII. Notes to the Consolidated Financial Statements (Cont’d)
48. Basic earnings per share and diluted earnings per share (Cont’d)
(2) For the purpose of calculating earnings per share, the denominator is the weighted average of outstanding ordinary shares.
The calculation is as follows:
RMB
Incurred Incurred
during the during the
Items current period prior period
Number of outstanding ordinary
as at the beginning of the period 2,062,045,941.00 2,062,045,941.00
Add: number of weighted ordinary shares
issued during the period — —
Less: number of weighted ordinary shares
repurchased during the period — —
Number of outstanding ordinary
as at the end of the period 2,062,045,941.00 2,062,045,941.00
49. Other comprehensive income
Incurred Incurred
during the during the
Items current period prior period
Translation difference of financial statements
denominated in foreign currency -277,876.30 -124,067.32
Total -277,876.30 -124,067.32
50. Notes to the cash flows statements items
(1) Cash received relating to other operating activities
Incurred Incurred
during the during the
Items current period prior period
Finance support fund 196,851,782.17 49,349,630.83
Interest income 8,517,649.67 14,026,021.32
Income on default penalty and fine 29,628,772.64 81,528.20
Bank balances and other income 660,948,106.38 85,653,651.24
Total 895,946,310.86 149,110,831.59
112
VII. Notes to the Consolidated Financial Statements (Cont’d)
50. Notes to the cash flows statements items (Cont’d)
(2) Cash paid relating to other operating activities
Amounts Amounts
during the during the
Items current period prior period
Transportation expense 210,474,448.81 183,707,949.28
Hospitality expense 17,454,701.58 8,210,460.56
Rental expense 3,571,210.44 9,408,605.94
Travel expense 9,386,730.84 11,831,101.89
Office expense 3,790,836.21 6,470,004.66
Waste disposal expense 10,565,700.55 16,627,402.05
Insurance premium 16,392,119.67 8,946,959.52
Water and electricity expense 1,140,160.86 2,929,069.19
Repair expense 5,562,621.08 6,990,804.88
Advertising expense 4,277,996.55 19,200.00
Intermediary service expense 2,580,063.32 1,960,431.35
Quality compensation — 81,670.90
Financial institutions charge 10,870,212.86 11,055,221.89
Others 542,691,358.84 65,653,002.70
Total 838,758,161.61 333,891,884.81
(3) Cash received relating to other investing activities
Incurred Incurred
during the during the
Items current period prior period
Special subsidy funds received 5,834,492.06 —
Total 5,834,492.06 —
(4) Cash received relating to other financing activities
Amounts Amounts
during the during the
Items current period prior period
Debentures deposits — 315,168,303.74
Short-term debentures — 1,494,000,000.00
Medium-term notes — 1,090,100,000.00
RMB debentures 491,750,000.00 —
Total 491,750,000.00 2,899,268,303.74
113
VII. Notes to the Consolidated Financial Statements (Cont’d)
50. Notes to the cash flows statements items (Cont’d)
(5) Cash paid relating to other financing activities
Incurred Incurred
during the during the
Items current period prior period
Increase in restricted bank deposits during the period 230,887,524.75 —
Payments of bank balances — —
Cash paid in repaying bonds 1,549,650,000.00 —
Total 1,780,537,524.75 —
51. Supplementary information on cash flows statements
(1) Information on reconciliation of net profit to cash flows from operating activities
Amounts Amounts
during the during the
Items current period prior period
1. Reconciliation of net profit as cash flows from
operating activities:
Net profit 479,834,261.78 696,079,087.46
Add: Provision for impairment of assets -21,425,466.16 20,796,487.26
Depreciation of fixed assets, consumption of oil
and gas assets, depreciation of productive
biological assets 582,233,501.25 580,110,471.43
Amortisation of intangible assets 17,102,238.25 26,799,157.06
Long-term prepaid expenses 11,777,968.45 5,976,761.70
Loss on disposal of fixed assets, intangible assets
and other long-term assets (“-” denotes gain) -887,857.74 1,431,101.96
Loss on retired fixed assets (“-” denotes gain) —
Loss on change in fair value (“-” denotes gain) — 3,130,000.00
Finance expenses (“-” denotes gain) 194,556,465.57 136,676,921.12
Investment loss (“-” denotes gain) -9,553,661.98 -4,324,494.78
Decrease in deferred income tax assets
(“-” denotes increase) -10,885,320.97 -274,009.46
Increase in deferred income tax
liabilities (“-” denotes decrease) -1,340,281.66 2,856,617.97
Decrease in inventory (“-” denotes increase) -611,684,865.07 -910,959,441.89
Decrease in Consumable biological assets
(“+” denotes increase) — -84,916,715.22
Decrease in operating receivables
(“-” denotes increase) -692,903,938.89 306,166,511.18
Increase in operating payables
(“-” denotes decrease) 800,820,862.21 410,174,620.61
Others — —
Net cash flows from operating activities 737,643,905.04 1,189,723,076.40
114
VII. Notes to the Consolidated Financial Statements (Cont’d)
51. Supplementary information on cash flows statements (Cont’d)
(1) Information on reconciliation of net profit to cash flows from operating activities (Cont’d)
Amounts Amounts
during the during the
Items current period prior period
2. Major investing and financing activities not
involving cash settlements:
Capital converted from debts — —
Convertible bonds of the Company due within one year — —
Finance leases of fixed assets — —
3. Net change in cash and cash equivalents:
Cash balance at the end of the period 1,764,865,743.95 1,872,556,028.36
Less: cash balance at the beginning of the period 1,855,235,979.80 2,367,334,202.50
Add: balance of cash equivalents
at the end of the period — —
Less: balance of cash equivalents
at the beginning of the period — —
Net increase in cash and cash equivalents -90,370,235.85 -494,778,174.14
(2) The compositions of cash and cash equivalents
Items Closing balance Opening balance
I. Cash 1,764,865,743.95 1,855,235,979.80
Of which : Treasury cash 1,519,568.30 1,232,651.18
Bank deposits repayble on demand 1,763,346,175.65 1,854,003,328.62
Other monetary funds repayable on demand — —
II. Cash equivalents
Of which : bond investments due within 3 months — —
III. Balance of cash and cash equivalents at the end of period 1,764,865,743.95 1,855,235,979.80
115
VII. Notes to the Consolidated Financial Statements (Cont’d)
52. Disposal of Subsidiaries
(1) Heze Chenming Panels Co., Ltd.
Both Shandong Chenming Panels Co., Ltd. and Shandong Chenming Power Supply Holdings Co., Ltd., subsidiaries of the
Company, signed equity transfer contracts with 济 宁 阳 光 木 业 有 限 公 司 (Jining Yangguang Wood Industry Co.,
Ltd.)respectively to transfer 34% and 33% equity interest of Heze Chenming Panels Co., Ltd. to 济宁阳光木业有限公司
(Jining Yangguang Wood Industry Co., Ltd.) at a respective transfer consideration of RMB1.
The financial results as at the date of disposal and as at the end of 2010 of the disposed subsidiary:
31 March 2011 31 December 2010
Current assets 9,777,550.66 11,172,012.69
Fixed assets 51,953,624.92 54,706,485.01
Other assets 14,651,097.12 14,733,871.68
Total assets 76,382,272.70 80,612,369.38
Current liabilities 113,367,117.64 113,541,908.37
Long-term liabilities
Total liabilities 113,367,117.64 113,541,908.37
Minority interests -12,204,998.83 -10,866,747.87
Group’s share of net assets -24,779,846.11 -22,062,791.12
Gain on disposal of subsidiaries 24,779,848.11
Total 2.00
Consideration for disposal of subsidiaries
Cash 2.00
Total 2.00
Net cash flow derived from disposal of subsidiaries
Consideration settled in cash 2.00
Less: Bank deposits and cash of disposed subsidiaries 5,338.30
-5,336.30
Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, signed an equity transfer contract with济宁阳光木业有限公
司 (Jining Yangguang Wood Industry Co., Ltd.) to transfer 67% equity interest of Shandong Lin Dun Wood Industry Co., Ltd. to
济宁阳光木业有限公司 (Jining Yangguang Wood Industry Co., Ltd.) at a transfer consideration of RMB4,500,000.
116
VII. Notes to the Consolidated Financial Statements (Cont’d)
52. Disposal of Subsidiaries (Cont’d)
(1) Heze Chenming Panels Co., Ltd. (Cont’d)
The financial results as at the date of disposal and as at the end of 2010 of the disposed subsidiary:
31 March 2011 31 December 2010
Current assets 22,915,179.26 28,752,909.38
Fixed assets 15,880,381.92 16,801,494.97
Other assets 5,722,556.52 1,780,000.21
Total assets 44,518,117.70 47,334,404.56
Current liabilities 20,681,274.80 27,697,586.94
Long-term liabilities
Total liabilities 20,681,274.80 27,697,586.94
Minority interests 7,866,158.16 6,480,149.81
Group’s share of net assets 15,970,684.74 13,156,667.81
Gain on disposal of subsidiaries -11,470,684.74
Total 4,500,000.00
Consideration for disposal of subsidiaries
Cash 4,500,000.00
Total
Net cash flow derived from disposal of subsidiaries
Consideration settled in cash 4,500,000.00
Less: Bank deposits and cash of disposed subsidiaries 1,027,511.39
3,472,488.61
117
VIII. Related party relations and transactions
1. The information on the parent company of the Company:
Name of the Type of Place of Legal Type of
parent company Relationship corporation registration representative business
Shouguang Chenming The largest Limited Shouguang Chen Investments in
Holdings Co., Ltd shareholder liability City Hongguo papermaking,
company power and steam,
forestry projects
Voting
The parent rights of
company’s the largest
Name of the Registered shareholder in shareholder in Ultimate controller Organisation
parent company capital the Company(%) the Company (%) of the Company code
Shouguang Chenming RMB168,542 14.21 14.21 State-owned Assets 78348518-9
Holdings Co., Ltd Supervision and
Administration
Commission
of Shouguang City
2. The subsidiaries of the Company
Refer to Note VI.1 for further information.
3. Information on the joint ventures and associates of the Company
For the information on the joint ventures and associates of the Company, please refer to Note VII.9 (3). For the investments in other
related parties of the Group, please refer to Note VII.9 (2).
4. Information on related party transactions
(1) Related party transactions involving sales of goods and provision of services
Pricing principle As a As a
of related party percentage percentage
Details of transactions During the of similar During the of similar
related party and decision current period transaction prior period transaction
Related party transactions making process Amount amounts (%) Amount amounts (%)
安徽时代物资
股份有限公司 Sales Market price 51,931.63
(Anhui Shidai
Resources Holdings
Co., Ltd.)
Shouguang Liben Paper Sales Market price 3,757,178.95 0.04% 4,178,835.08 0.05%
Making Co., Ltd.
118
VIII. Related party relations and transactions (Cont’d)
4. Information on related party transactions (Cont’d)
(2) Guarantees provided for related parties
Starting Expiry Performance
Party being Amounts under date of date of of guarantee
Guarantor guaranteed guarantee guarantee guarantee is completed
The Company Jiangxi Chenming
Paper Co., Ltd. 50,000,000.00 2009.4.22 2012.4.21 No
The Company Jiangxi Chenming
Paper Co., Ltd. 450,000,000.00 2009.12.10 2012.12.10 No
The Company Huanggang Chenming
Arboriculture Co., Ltd. 50,000,000.00 2009.6.3 2012.6.2 No
The Company Huanggang Chenming
Arboriculture Co., Ltd. 20,000,000.00 2010.4.29 2013.4.28 No
The Company Huanggang Chenning
Arboriculture Co., Ltd. 30,000,000.00 2010.7.8 2013.7.7 No
The Company Shouguang Meilun
Paper Co. Ltd. 100,000,000.00 2011.01.14 2014.1.13 No
The Company Shouguang Meilun
Paper Co. Ltd. 100,000,000.00 2011.4.29 2017.8.23 No
The Company Shouguang Meilun
Paper Co. Ltd. 103,545,600.00 2010.9.10 2012.9.10 No
The Company Shouguang Meilun
Paper Co. Ltd. 103,545,600.00 2010.9.10 2013.3.10 No
The Company Shouguang Meilun
Paper Co. Ltd. 310,636,800.00 2010.9.10 2013.9.10 No
The Company Shouguang Meilun
Paper Co. Ltd. 51,772,800.00 2011.4.19 2013.4.19 No
The Company Shouguang Meilun
Paper Co. Ltd. 51,772,800.00 2011.4.19 2013.10.19 No
The Company Shouguang Meilun
Paper Co. Ltd. 155,318,400.00 2011.4.19 2014.3.19 No
The Company Shouguang Meilun
Paper Co. Ltd. 64,716,000.00 2011.1.14 2014.1.13 No
119
VIII. Related party relations and transactions (Cont’d)
4. Information on related party transactions (Cont’d)
(2) Guarantees provided for related parties (Cont’d)
Starting Expiry Performance
Party being Amounts under date of date of of guarantee
Guarantor guaranteed guarantee guarantee guarantee is completed
The Company Zhanjiang Chenming
Paper Pulp Co., Ltd. 3,519,564,800.00 2008.03.25 2023.03.24 No
The Company Shandong Chenming
Paper Sales
Company Limited 375,000,000.00 2011.3.3 2011.9.2 No
The Company Shandong Chenming
Paper Sales
Company Limited 130,069,000.00 2011.4.20 2011.7.19 No
The Company Chenming (HK) Limited 500,000,000.00 2011.4.13 2014.4.12 No
Notes: The Company provided guarantee for the issuance of notes of RMB500 millon notes by Chenming (HK) Limited.
(3) Entrusted loan to subsidiaries of the Company
Unit: RMB’0000
Amount of
entrusted loan
Related party incurred Starting date Expiry date Explanation
Jiangxi Chenming Paper Co., Ltd. 30,000.00 2007.05.24 2017.05.25 Entrusted loan
Shouguang Chenming Art Paper Co.,Ltd 59,740.00 2010.12.03 2011.12.02 Entrusted loan
Shandong Chenming Qihe
Paperboard Co., Ltd. 8,950.35 2010.12.03 2011.12.02 Entrusted loan
Huanggang Chenming
Arboriculture Co., Ltd. 8,000.00 2010.01.06 2012.01.05 Entrusted loan
Fuyu Chenming Paper Co., Ltd. 9,911.76 2009.12.16 2011.12.15 Entrusted loan
Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 37,987.02 2009.12.03 2011.12.02 Entrusted loan
Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 12,679.97 2009.12.14 2011.12.13 Entrusted loan
Wuhan Chenming Hanyang
Paper Holdings Co., Ltd. 10,000.00 2010.08.03 2011.08.02 Entrusted loan
Jiangxi Chenming Paper Co., Ltd. 20,000.00 2010.04.19 2013.04.18 Entrusted loan
Shandong Chenming Panels Co., Ltd. 2,570.00 2010.12.03 2011.12.01 Entrusted loan
Qihe Chenming Panels Co., Ltd. 580.00 2010.12.03 2011.12.02 Entrusted loan
120
VIII. Related party relations and transactions (Cont’d)
5. Receivables and payables of related parties
(1) Receivables and prepayments of related parties
Unit: RMB’0000
Closing balance Opening balance
Book Bad debt Book Bad debt
Name of items balance provision balance provision
Accounts receivable:
安徽时代物资股份有限公司
(Anhui Shidai Resources
Holdings Co., Ltd.) 287.53 14.38 1,079.13 53.96
Jiangxi Jiangbao Media
Colour Printing Co. Ltd. 56.67 2.83
Total 287.53 14.38 1,135.80 56.79
Other receivables:
Arjo Wiggins Chenming
Specialty Paper Co., Ltd. 129.09 16.65 129.09 16.65
Shouguang Liben
Paper Co., Ltd. 80.39 4.02
Total 209.48 20.67 129.09 16.65
Other payables:
Shouguang Chenming
Holdings Co., Ltd. 31,571.90
Total 31,571.90
There were no prepayments of related parties during the reporting period.
(2) Payables and advances of related parties
There were no payables and advances of related parties during the reporting period.
IX. Contingent items
As at 30 June 2011, it was not necessary for the Group to disclose significant contingent items.
121
X. COMMITMENTS
1. Significant Commitments
(1) Capital commitments
RMB
Items Closing balance Opening balance
Contracted but not yet recognised in the financial statements
– commitments in relation to acquisition
and construction of long-term assets 3,326,360,846.51 4,634,896,079.74
Total 3,326,360,846.51 4,634,896,079.74
(2) Operating lease commitments
As at the balance sheet date, the Group entered into irrevocable operating lease contracts with non-group companies as follows:
RMB
Name of items Closing balance Opening balance
Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 42,440,892.55 60,189,073.16
The second year after balance sheet date 24,343,208.27 28,385,986.80
The third year after balance sheet date 23,717,696.51 28,492,058.29
In the years thereafter 849,157,737.05 938,172,599.89
Total 939,659,534.38 1,055,239,718.14
2. Performance of commitments for the prior period
As at 30 June 2011, significant commitments had been performed by the Group.
XI Events after the balance sheet date
As at the date of approval of the issue of these financial statements, it was not necessary for the Group to disclose significant events after the
balance sheet date.
XII. Other important explanations
Biological assets measured at fair value
Accumulated
Profit or loss change of
from change fair value Provision of
Opening in fair value accounted impairment Closing
Items balance for the period for equity for the period balance
Consumable
biological assets 726,724,974.94 89,954,847.97 850,912,030.92
Total 726,724,974.94 89,954,847.97 850,912,030.92
122
XIII. Notes of the major financial statements’ items of the company
1. Accounts receivable
Unless specified otherwise, in the notes to the financial statements, the “opening balance” and “closing balance” refer to the balances
as at 31 December 2010 and 30 June 2011 respectively and the “current period” and “prior period” refer to the period from January to
June 2010 and the period from January to June 2011 respectively.
(1) Accounts receivable stated according to breakdown
Closing balance
Book balance Bad debt provision
Breakdown Amount Ratio (%) Amount Ratio (%)
Single item with significant
accounts receivable and
bad debt provision 1,298,999,760.36 98.28 88,730,129.58 6.83
Accounts receivable with
bad debt provision
by group
Accounts receivable aged
within 2 years 9,612,296.22 0.73 625,600.08 6.51
Accounts receivable aged
more than 2 years 12,697,371.38 0.96 9,919,299.10 78.12
Group sub-total 22,309,667.60 1.69 10,544,899.18 47.26
Single item without
significant accounts
receivable but with
bad debt provision 388,197.36 0.03
Total 1,321,697,625.32 100 99,275,028.76 7.51
Opening balance
Book balance Bad debt provision
Breakdown Amount Ratio (%) Amount Ratio (%)
Single item with significant
accounts receivable and
bad debt provision 1,652,798,337.63 95.01 104,159,492.68 6.30
Accounts receivable with
bad debt provision
by group
Accounts receivable aged
within 2 years 75,752,870.19 4.35 4,256,709.90 5.62
Accounts receivable aged
more than 2 years 10,746,015.20 0.62 9,299,662.52 86.54
Group sub-total 86,498,885.39 4.97 13,556,372.42 15.67
Single item without
significant accounts
receivable but with
bad debt provision 358,195.26 0.02 — —
Total 1,739,655,418.28 100 117,715,865.10 6.77
123
XIII. Notes of the major financial statements’ items of the company (Cont’d)
1. Accounts receivable (Cont’d)
(2) Accounts receivable stated according to aging
Closing balance Opening balance
Items Amount Ratio (%) Amount Ratio (%)
Within 1 year 1,217,190,261.82 92.09 1,644,505,095.40 94.53
1 to 2 years 53,563,689.52 4.05 21,571,510.58 1.24
2 to 3 years 3,472,590.35 0.26 57,067,573.19 3.28
Over 3 years 47,471,083.63 3.6 16,511,239.11 0.95
Total 1,321,697,625.32 100 1,739,655,418.28 100
(3) Information on the provision of bad debts
Information on the provision of bad debts of single items with significant accounts receivable and bad debt provision
Details of Carrying Bad debt Percentage of
accounts receivable amount provision provision (%) Reason
Types of paper 1,298,999,760.36 88,730,129.58 6.83 aging analysis
Total 1,298,999,760.36 88,730,129.58
(4) During the current reporting period, there were no accounts receivable from shareholder units holding 5% (including 5%) or more
shares with voting power in the Company.
(5) Top 5 accounts receivable are set out as follows
As a percentage
of the
total balance
Relationship of accounts
Entities with the Company Amount Aging receivable (%)
Shandong Chenming Related party within 686,366,200.57 Within 1 year 51.93
Paper Sales the scope of consolidation
Company Limited
Shouguang Chenming Related party within 332,793,445.14 Within 1 year, 2 to 3 years 25.18
Art Paper Co., Ltd. the scope of consolidation
Shouguang Meilun Related party within 112,146,707.32 Within 1 year, years 1 to 2 8.48
Paper Co., Ltd. the scope of consolidation
Shandong Chenming Related party within 15,802,299.88 Within 1 year, 2 to 3 years 1.20
Paper Group Qihe the scope of consolidation
Paperboard Co., Ltd.
Shandong Chenming Related party within 8,833,544.41 Within 1 year 0.67
Panels Co., Ltd. the scope of consolidation
Total 1,155,942,197.32 87.46
124
XIII. Notes of the major financial statements’ items of the company (Cont’d)
1. Accounts receivable (Cont’d)
(6) Information on accounts receivable of the related parties
Percentage of
Relationship with the total accounts
Name of units the Company Amounts receivable (%)
Shandong Chenming Subsidiary of the Company 686,366,200.57 51.93
Paper Sales Company
Limited
Shouguang Chenming Subsidiary of the Company 332,793,445.14 25.18
Art Paper Co., Ltd.
Shouguang Meilun Paper Subsidiary of the Company 112,146,707.32 8.49
Co., Ltd.
Shandong Chenming Subsidiary of the Company 15,802,299.88 1.20
Paper Group Qihe
Paperboard Co., Ltd.
Shandong Chenming Subsidiary of the Company 8,833,544.41 0.67
Panels Co., Ltd.
Fuyu Chenming Subsidiary of the Company 3,106,093.83 0.24
Paper Co., Ltd.
Jilin Chenming Subsidiary of the Company 653,983.20 0.05
Paper Co., Ltd.
Wuhan Chenming Subsidiary of the Company 468,000.00 0.04
Hanyang Paper
Holdings Co., Ltd.
Shandong Grand Subsidiary of the Company 237,537.66 0.02
View Hotel Co., Ltd.
Yanbian Chenming Subsidiary of the Company 52,974.40
Paper Co., Ltd.
Total 1,160,460,786.41 87.80
125
XIII. Notes of the major financial statements’ items of the company (Cont’d)
2. Other receivables
(1) Other receivables stated according to breakdown
Closing balance
Book balance Bad debt provision
Breakdown Amount Ratio (%) Amount Ratio (%)
Single item with
significant other
receivables and bad
debt provision 4,837,525,417.29 99.33 20,279,010.31 0.42
Other receivables with bad
debt provision by group
Other receivables aged
within 2 years 3,640,080.31 0.07 2,528,591.68 69.47
Other receivables aged
more than 2 years 28,654,249.98 0.59 28,649,864.38 99.98
Group sub-total 32,294,330.29 0.66 31,178,456.06 96.54
Single item without
significant other
receivables but with
bad debt provision 468,930.00 0.01
Total 4,870,288,677.58 100 51,457,466.37 1.06
Opening balance
Book balance Bad debt provision
Amount Ratio (%) Amount Ratio (%)
Single item with
significant other
receivables and bad
debt provision 4,803,742,856.08 99.16 39,885,247.29 0.83
Other receivables with bad
debt provision by group
Other receivables aged
within 2 years 2,758,118.53 0.06 172,244.01 6.24
Other receivables aged
more than 2 years 15,143,251.74 0.31 8,972,454.14 59.25
Group sub-total 17,901,370.27 0.37 9,144,698.15 51.08
Single item without
significant other
receivables but with
bad debt provision 22,867,418.63 0.47 22,407,088.63 97.99
Total 4,844,511,644.98 100 71,437,034.07 1.47
126
XIII. Notes of the major financial statements’ items of the company (Cont’d)
2. Other receivables (Cont’d)
(2) Other receivables stated according to aging
Closing balance Bad debt balance
Items Amounts Ratio (%) Amounts Ratio (%)
Within 1 year 4,468,740,271.44 91.76 24,969,296.18 48.52
1 to 2 years 266,583,103.52 5.47 674,011.18 1.31
2 to 3 years 122,913,483.50 2.52 13,762,339.89 26.75
Over 3 years 12,051,819.12 0.25 12,051,819.12 23.42
Total 4,870,288,677.58 100.00 51,457,466.37 100.00
Opening balance Bad debt balance
Items Amounts Ratio (%) Amounts Ratio (%)
Within 1 year 4,140,927,115.96 85.48 61,887,118.78 86.63
1 to 2 years 688,441,277.28 14.21 577,461.14 0.81
2 to 3 years 7,713,497.00 0.16 1,542,699.40 2.16
Over 3 years 7,429,754.74 0.15 7,429,754.74 10.4
Total 4,844,511,644.98 100.00 71,437,034.06 100.00
(3) Information on the provision of bad debts
Information on the provision of bad debts of single items with significant other receivables and bad debt provision
Details of Carrying Bad debt As Percentage
other receivables amount provision of provision (%) Reason
Bank balances 4,837,525,417.29 20,279,010.31 0.42 No bad debt was
provided for the
accounts
receivable from
related parties
upon
consolidation
and other
accounts
receivable were
provided for under
aging analysis on
individual basis.
Total 4,837,525,417.29 20,279,010.31 0.42
(4) During the current reporting Period, there were no other receivables from shareholder units holding 5% (including 5%) or more
shares with voting power in the Company.
127
XIII. Notes of the major financial statements’ items of the company (Cont’d)
2. Other receivables (Cont’d)
(5) Top 5 other receivables are set out as follows
As a percentage
of the
total balance
Relationship of accounts
Name with the Company Amount Aging receivable (%)
Shouguang Meilun Related party within 1,769,493,677.98 Within 1 year 36.33
Paper Co., Ltd. the scope of consolidation
Zhanjiang Chenming Related party within 1,000,889,258.36 Within 1 year, 1 to 2 years 20.55
Paper Pulp Co., Ltd. the scope of consolidation
Jilin Chenming Related party within 851,039,688.41 Within 1 year 17.47
Paper Co., Ltd. the scope of consolidation
Shandong Grand Related party within 319,483,356.08 Within 1 year, 6.56
View Hotel Co., Ltd. the scope of consolidation 1-2 years, 2 to 3 years
Wuhan Chenming Hanyang Related party within 181,996,316.11 Within 1 year 3.74
Paper Holdings Co., Ltd. the scope of consolidation
Total 4,122,902,296.94 84.65
(6) Information on other receivables of the related parties
As a percentage of
Relationship the total balance of
Name of units with the Company Amounts other receivables (%)
Zhanjiang Chenming Related party within
Paper Pulp Co., Ltd. the scope of consolidation 1,000,889,258.36 20.55
Shouguang Meilun Related party within
Paper Co. Ltd. the scope of consolidation 1,769,493,677.98 36.33
Jilin Chenming Related party within
Paper Co., Ltd. the scope of consolidation 851,039,688.41 17.47
Shandong Grand Related party within
View Hotel Co., Ltd. the scope of consolidation 319,483,356.08 6.56
Juancheng Chenming Related party within
Panels Co., Ltd. the scope of consolidation 47,884,267.36 0.98
Wuhan Chenming Related party within
Hanyang Paper the scope of consolidation
Holdings Co., Ltd. 181,996,316.11 3.74
Chibi Chenming Related party within
Paper Co., Ltd. the scope of consolidation 31,247,768.14 0.64
Heze Chenming Related party within
Panels Co., Ltd. the scope of consolidation 28,800,000.00 0.59
128
XIII. Notes of the major financial statements’ items of the company (Cont’d)
2. Other receivables (Cont’d)
(6) Information on other receivables of the related parties (Cont’d)
As a percentage of
Relationship the total balance of
Name of units with the Company Amounts other receivables (%)
Xianning Chenming Related party within
Arboriculture Co., Ltd. the scope of consolidation 42,594,530.00 0.87
Fuyu Chenming Paper Related party within
Co., Ltd. the scope of consolidation 36,075,791.42 0.74
Yanbian Chenming Related party within
Paper Co. Ltd. the scope of consolidation 122,845,817.74 2.52
Shandong Chenming Related party within
Paper Sales Co., Ltd. the scope of consolidation 34,814,634.35 0.71
Zhanjiang Chenming Related party within
Forestry Development the scope of consolidation 49,965,630.00 1.03
Co., Ltd.
Shouguang Chenming Related party within
Art Paper Co., Ltd. the scope of consolidation 54,284,554.43 1.11
Wuhan Chenming Related party within
Qianneng Electric the scope of consolidation
Power Co., Ltd. 55,624,690.00 1.14
Huanggang Chenming Related party within
Paper Pulp Co., Ltd. the scope of consolidation 17,824,200.00 0.37
Zhanjiang Chenming Related party within
Forestry Development the scope of consolidation
Co., Ltd. 7,108,221.00 0.15
Yangjiang Chenming Related party within
Arboriculture Co., Ltd. the scope of consolidation 3,000,000.00 0.06
Shouguang Chenming Related party within
Tianyuan Arboriculture the scope of consolidation
Co., Ltd. 2,492,142.92 0.05
Huanggang Chenming Related party within
Arboriculture Co., Ltd. the scope of consolidation 413,009.02 0.01
Shangdong Chenming Related party within
Paper Holdings Limited the scope of consolidation
Hong Kong branch 383,049.79 0.01
129
XIII. Notes of the major financial statements’ items of the company (Cont’d)
2. Other receivables (Cont’d)
(6) Information on other receivables of the related parties (Cont’d)
As a percentage of
Relationship the total balance of
Name of units with the Company Amounts other receivables (%)
Hailaer Chenming Related party within
Paper Co., Ltd. the scope of consolidation 87,209.88
Qihe Chenming Related party within
Salels Co., Ltd. the scope of consolidation 14,624.00
Chenming International Related party within
Co., Ltd. the scope of consolidation 12,820.00
Shandong Chenming Related party within
Paper Group Qihe the scope of consolidation 86,902,201.32 1.78
Paperboard Co., Ltd.
Total 4,745,277,458.31 97.43
3. Long-term equity investments
(1) Types of long term equity investments
Increase during Decrease during
Items Opening balance the current period the current period Closing balance
Investment in
subsidiaries 5,890,685,807.88 1,719,861,955.00 7,610,547,762.88
Investment in
associate enterprises 44,170,084.12 -3,755,501.39 40,414,582.73
Other equity investments 24,950,000.00 24,950,000.00
Less: impairment provision
for long term
equity investments 1,918,152.23 1,918,152.23
Total 5,957,887,739.77 1,716,106,453.61 7,673,994,193.38
130
XIII. Notes of the major financial statements’ items of the company (Cont’d)
3. Long-term equity investments (Cont’d)
(2) Breakdown of long-term equity investments
Accounting Initial Opening Additions Closing
Name of investee entity method investment balance /Deduction balance
Wuhan Chenming Hanyang Cost method 202,824,716.34 202,824,716.34 202,824,716.34
Paper Holdings Co., Ltd.
Shandong Chenming Cost method 376,200,000.00 376,200,000.00 376,200,000.00
Paper Group Qihe
Paperboard Co., Ltd.
Shandong Chenming Power Cost method 157,810,117.43 157,810,117.43 157,810,117.43
Supply Holdings Co., Ltd.
Chibi Chenming Paper Cost method 26,270,460.90 26,270,460.90 26,270,460.90
Co., Ltd.
Yanbian Chenming Cost method 40,083,733.01 40,083,733.01 40,083,733.01
Paper Co., Ltd.
Hailaer Chenming Cost method 12,000,000.00 12,000,000.00 12,000,000.00
Paper Co., Ltd.
Jiangxi Chenming Cost method 697,548,406.40 697,548,406.40 697,548,406.40
Paper Co., Ltd.
Shouguang Chenming Cost method 7,199,000.00 7,199,000.00 7,199,000.00
Tianyuan
Arboriculture Co., Ltd.
Jilin Chenming Cost method 1,501,350,000.00 1,501,350,000.00 1,501,350,000.00
Paper Co., Ltd.
Juancheng Chenming Cost method 15,000,000.00 15,000,000.00 15,000,000.00
Panels Co., Ltd.
Shandong Grand View Cost method 80,500,000.00 80,500,000.00 80,500,000.00
Hotel Co., Ltd.
Zhanjiang Chenming Cost method 2,500,000,000.00 800,000,000.00 1,700,000,000.00 2,500,000,000.00
Paper Pulp Co., Ltd.
Chenming (HK) Limited Cost method 783,310.00 783,310.00 783,310.00
Shouguang Chenming Cost method 10,000,000.00 10,000,000.00 10,000,000.00
Modern Logistic Co., Ltd.
Shouguang Chenming Cost method 113,616,063.80 113,616,063.80 113,616,063.80
Art Paper Co., Ltd.
Fuyu Chenming Cost method 208,000,000.00 208,000,000.00 208,000,000.00
Paper Co., Ltd.
Xianning Chenming Cost method 10,000,000.00 10,000,000.00 10,000,000.00
Arboriculture
Co., Ltd.
Huanggang Chenming Cost method 20,000,000.00 20,000,000.00 20,000,000.00
Paper Co., Ltd.
Huanggang Chenming Cost method 10,000,000.00 10,000,000.00 10,000,000.00
Arboriculture Co., Ltd.
131
XIII. Notes of the major financial statements’ items of the company (Cont’d)
3. Long-term equity investments (Cont’d)
(2) Breakdown of long-term equity investments (Cont’d)
Accounting Initial Opening Additions Closing
Name of investee entity method investment balance /Deduction balance
Shouguang Meilun Cost method 1,500,000,000.00 1,500,000,000.00 1,500,000,000.00
Paper Co. Ltd.
Shouguang Shun Da Cost method 1,500,000.00 1,500,000.00 1,500,000.00
Customs
Declaration Co, Ltd.
Shandong Chenming Cost method 100,000,000.00 100,000,000.00 100,000,000.00
Paper Sales
Company Limited
Shouguang Liben Paper Equity method 19,550,000.00 16,680,630.29 -742,942.64 15,937,687.65
Making Co., Ltd.
Arjo Wiggins Chenming Equity method 80,100,000.00 21,651,499.85 -2,960,733.52 18,690,766,33
Specialty Paper Co., Ltd.
Qingzhou Chenming Equity method 900,000.00 900,000.00 900,000.00
Denaturation Amylum
Co., Ltd.
Jiangxi Jiangbao Equity method 6,000,000.00 4,937,953.98 -51,825.23 4,886,128.75
Media Colour
Printing Co. Ltd.
美国晨鸣 Cost method 19,861,955.00 19,861,955.00 19,861,955.00
(Chenming USA)
Shandong Paper Making & Cost method 200,000.00 200,000.00 200,000.00
Printing Enterprises
Corporation
Zhejiang Province Guangyu Cost method 2,000,000.00 2,000,000.00 2,000,000.00
Media Printing Company
Limited
Jinan Shangyou Commercial Cost method 350,000.00 350,000.00 350,000.00
Company Limited
Shouguang Mihe Water Cost method 20,000,000.00 20,000,000.00 20,000,000.00
Company Limited
Shanghai Forest & Paper Cost method 1,400,000.00 1,400,000.00 1,400,000.00
E-Commerce Co., Ltd
安徽时代物资股份有限公司 Cost method 1,000,000.00 1,000,000.00 1,000,000.00
(Anhui Shidai Resources
Holdings Co., Ltd.)
Total 5,959,805,892.00 1,716,106,453.61 7,675,912,345.61
132
XIII. Notes of the major financial statements’ items of the company (Cont’d)
3. Long-term equity investments (Cont’d)
(2) Breakdown of long-term equity investments (Cont’d)
Explanation
of the
inconsistent of
Percentage shareholding
Percentage of the percentage Provision of
of shareholding voting right in and voting impairment
in investee the investee right in the Impairment for the
Name of investee entity entity (%) entity (%) investee entity provision current period Cash bonus
Wuhan Chenming Hanyang 50.93 50.93
Paper Holdings Co., Ltd.
Shandong Chenming 100 100 86,000,000.00
Paper Group Qihe
Paperboard Co., Ltd.
Shandong Chenming Power 86.71 86.71
Supply Holdings Co., Ltd.
Chibi Chenming Paper 51 51
Co., Ltd.
Yanbian Chenming 76.75 76.75
Paper Co., Ltd.
Hailaer Chenming 75 75
Paper Co., Ltd.
Jiangxi Chenming 51 51
Paper Co., Ltd.
Shouguang Chenming 68 68
Tianyuan
Arboriculture Co., Ltd.
Jilin Chenming 100 100
Paper Co., Ltd.
Juancheng Chenming 100 100
Panels Co., Ltd.
Shandong Grand View 70 70
Hotel Co., Ltd.
Zhanjiang Chenming 100 100
Paper Pulp Co., Ltd.
Chenming (HK) Limited 100 100
Shouguang Chenming 100 100
Modern Logistic Co., Ltd.
Shouguang Chenming 75 75
Art Paper Co., Ltd.
Fuyu Chenming 100 100
Paper Co., Ltd.
Xianning Chenming 100 100
Arboriculture
Co., Ltd.
Huanggang Chenming 100 100
Paper Co., Ltd.
Huanggang Chenming 100 100
Arboriculture Co., Ltd.
133
XIII. Notes of the major financial statements’ items of the company (Cont’d)
3. Long-term equity investments (Cont’d)
(2) Breakdown of long-term equity investments (Cont’d)
Explanation
of the
inconsistent of
Percentage shareholding
Percentage of the percentage Provision of
of shareholding voting right in and voting impairment
in investee the investee right in the Impairment for the
Name of investee entity entity (%) entity (%) investee entity provision current period Cash bonus
Shouguang Meilun 100 100
Paper Co. Ltd.
Shouguang Shun Da 100 100
Customs
Declaration Co, Ltd.
Shandong Chenming 100 100
Paper Sales
Company Limited
Shouguang Liben Paper 26.40 26.40
Making Co., Ltd.
Arjo Wiggins Chenming 30 30
Specialty Paper Co., Ltd.
Qingzhou Chenming 30 30 900,000.00
Denaturation Amylum
Co., Ltd.
Jiangxi Jiangbao 21.16 21.16
Media Colour
Printing Co. Ltd.
Shandong Paper Making & 2.00 2.00 200,000.00
Printing Enterprises
Corporation
Zhejiang Province Guangyu 9.96 9.96
Media Printing Company
Limited
Jinan Shangyou Commercial 5.00 5.00 350,000.00
Company Limited
Shouguang Mihe Water 19.46 19.46
Company Limited
Shanghai Forest & Paper 14.00 14.00 468,152.23
E-Commerce Co., Ltd
安徽时代物资股份有限公司 10.00 10.00
(Anhui Shidai Resources
Holdings Co., Ltd.)
Total 1,918,152.23 86,000,000.00
134
XIII. Notes of the major financial statements’ items of the company (Cont’d)
3. Long-term equity investments (Cont’d)
(3) Breakdown of impairment provision of long term equity investments
Increase during Decrease during
Items Opening balance the current period the current period Closing balance
Qingzhou Chenming 900,000.00 900,000.00
Denaturation Amylum
Co., Ltd.
Shandong Paper Making & 200,000.00 200,000.00
Printing Enterprises
Corporation
Jinan Shangyou Commercial 350,000.00 350,000.00
Company Limited
Shanghai Forest & 468,152.23 468,152.23
Paper E-Commerce Co., Ltd
Total 1,918,152.23 1,918,152.23
4. Operating Revenue and Operating Costs
(1) Operating revenue and operating costs
Incurred during Incurred during
the current period the prior period
Operating revenue from principal operations 3,957,321,998.90 7,000,408,065.19
Revenue from other operations 153,537,713.25 103,033,978.86
Total operating revenue 4,110,859,712.15 7,103,442,044.55
Operating costs from principal operations 3,197,454,766.59 5,922,822,786.51
Costs of other operations 128,220,330.87 94,323,348.46
Total operating costs 3,325,675,097.46 6,017,146,134.97
(2) Principal operations (by industry)
Incurred during Incurred during
the current period the prior period
Products Operating revenue Operating costs Operating revenue Operating costs
Machine-made paper 3,536,530,874.30 2,793,416,747.88 6,835,350,658.16 5,791,160,743.06
Electricity and steam supply 420,791,124.60 404,038,018.71 165,057,407.03 131,662,043.45
Total 3,957,321,998.90 3,197,454,766.59 7,000,408,065.19 5,922,822,786.51
135
XIII. Notes of the major financial statements’ items of the company (Cont’d)
5. Investment Income
(1) Breakdown of investment income
Incurred during Incurred during
Name of investee entity the current period the prior period
Gain from long-term equity investments accounted
for using the cost method 86,000,000.00 190,257,576.86
Gain from long-term equity investments
accounted for using the equity method -3,755,501.39 4,324,494.78
Investment gain on disposal of long-term equity investments
Interest income from entrusted loans 58,163,478.54 55,115,309.26
Total 140,407,977.15 249,697,380.90
Note: There are no significant restrictions on remittance of investment gains back to the Company.
(2) Gains on long-term equity investment accounted for using cost method
Incurred during Incurred during
Name of investee entity the current period the prior period
Shandong Chenming Power
Supply Holdings Co., Ltd. 86,000,000.00
Wuhan Chenming Hanyang Paper Holdings Co., Ltd 81,488,000.00
Yanbian Chenming Paper Co., Ltd 108,769,576.86
Jiangxi Chenming Paper Co., Ltd.
Chenming (HK) Limited
Weifang Venture Capital Co., Ltd.
Chibi Chenming Paper Co., Ltd.
Total 86,000,000.00 190,257,576.86
(3) Gain from long-term equity investments accounted for using the cost method
Incurred during the Incurred during the
Name of investee entity current period prior period Reasons for change
Arjo Wiggins Chenming Specialty -2,960,733.52 5,016,072.32 Investee’s loss for the
Paper Co., Ltd. current period
Jiangxi Jiangbao Media Colour -51,825.23 -138,891.88 Investee’s loss for the
Printing Co. Ltd. current period
Shouguang Liben -742,942.64 -552,685.66 Investee’s loss for the
Paper Making Co., Ltd. current period
Total -3,755,501.39 4,324,494.78
136
XIII. Notes of the major financial statements’ items of the company (Cont’d)
6. Supplementary information on cash flow statements
Amounts Amounts
for the for the
Supplementary Information current period prior period
1. Reconciliation of net profits as cash
flows from operating activities:
Net profit 497,339,265.69 683,194,413.21
Add: Provision for impairment of assets 34,949,608.74
Depreciation of fixed assets, depreciation
of oil and gas assets, depreciation
of productive biological-assets 291,792,105.16 295,079,159.66
Amortisation of intangible assets 4,461,395.06 4,531,494.62
Long-term prepaid expenses
Loss from disposal of fixed assets, intangible assets
and other long-term assets (gain is shown as “-”)
Loss from retired fixed assets (gain is shown as “-”) — —
Loss from change in fair
value (gain is shown as “-”) 1,806,497.52
Financial expenses (gain is shown as “-”) -3,870,000.00
Investment losses (gain is shown as “-”) 125,413,016.82 113,757,817.65
Decrease in deferred income
tax assets (increase is shown as “-”) -140,407,977.15 -249,697,380.90
Increase in deferred income tax
debt (decrease is shown as “-”) -9,662,511.67 -3,347,759.23
Decrease in stock (gain is shown as “-”) -261,634,804.79 -501,388,042.11
Decrease in operating receivables
(increase is shown as “-”) 389,129,283.28 -393,745,054.78
Increase in operating payables
(decrease is shown as “-”) 986,389,527.11 -16,727,044.32
Others
Net cash flows from operating activities 1,882,819,299.51 -35,456,289.94
2. Major investments and financing
activities not involving cash settlements:
Capital converted from debts
Convertible bonds of the Company due within one year
Finance leases of fixed assets
3. Net change in cash and cash equivalents:
Cash balance at the end of the period 612,921,932.88 1,030,160,237.05
Less: cash balance at the beginning of the period 662,209,607.29 1,586,045,998.83
Add: cash equivalents as at the end of the period
Less: cash equivalents as at the beginning of the period
Net increase in cash and cash equivalents -49,287,674.41 -555,885,761.78
137
XIV. SUPPLEMENTARY INFORMATION
1. Breakdown of extraordinary gains and losses
Unit: RMB
Amounts in the
Items current period
Profit or loss from disposal of non-current assets 887,857.74
Government grants accounted for in profit and loss account of the
current period (except for government grants closely related to the
corporate business that were given under at a fixed standard amount
or quantity as stipulated by the State) 125,301,439.93
Profit or loss arising from investment costs for acquisition of subsidiary,
associated corporation and joint-venture by the corporation being less
than its share of fair value of identifiable net assets of the invested
entity on acquisition -19,869,972.60
Net gains and losses from debt restructuring
Except for effective hedging business conducted over the course of
ordinary operation of the Company, profit or loss arising from fair
value change in financial assets held for trading and financial liabilities
held for trading, as well as investment gains from disposal of
financial assets held for trading and financial liabilities held for
trading and available-for-sale financial assets
Gains or losses from disposal of subsidiaries 13,309,163.37
Gains or losses from changes in fair value of biological assets adopting
fair value method for follow-up measurements 3,715,429.62
Non-operating gains and losses other than the above items 1,984,493.37
Sub-total 125,328,411.43
Effect of income tax 14,096,333.51
Effect of minority interests (after tax) 9,721,125.93
Total 101,510,951.99
Note: In respect the figures of extraordinary gains and losses, “+” refer to gains or incomes, “-” refer to losses or expenditures.
The Group’s recognition of non-recurring items is in accordance with the regulations of “No.1 Interpretation - Non-recurring profit or
loss on Disclosure of Companies with Public Offering of Securities” (CSRC [2008] No. 43).
138
XIV. SUPPLEMENTARY INFORMATION (Cont’d)
2. Return on net assets and earnings per share
Earnings per share
Profit during the Weighted average (RMB/share)
reporting period return on assets Basic Diluted
Net profit attributable to holders of ordinary shares
of the Company 3.51% 0.23
Net profit attributable to holders of ordinary shares of
the Company, after deducting extraordinary
gains and losses 2.78% 0.19
Note: (1) Weighted average return on assets = Net profit attributable to holders of ordinary shares in the current period/(Equity attributable to holders of
ordinary shares at the beginning of period + Net profit attributable to holders of ordinary shares in the current period/2 – Cash dividend in the
current period*(12- Dividend months)/12).
(2) See Note VII. 47 for the calculation of basic earnings per share and diluted earnings per share.
4. Explanation or irregular movements and the reasons in major items of the consolidated financial statements of
the Group
(1) Balance sheet items:
(1) The closing balance of other current assets as at 30 June 2011 amounting to RMB1,342,459,344.12 increased by 103.84%
as compared with the opening balance mainly due to a significant increase in the input tax of non-credited value added tax
resulting from an increase in the Group’s construction in progress and a significant increase in the input tax of the
equipment procurement;
(2) The closing balance of construction in progress as at 30 June 2011 amounting to RMB10,261,432,888.00 increased by
30.36% as compared with the opening balance mainly due to the investments in the Group’s major investment projects: the
800,000-tonne copperplate paper project and the 700,000-tonne pulp production line project of Shouguang Meilun Paper
Co., Ltd. and Zhanjiang Chenming Paper Pulp Co., Ltd.;
(3) The closing balance of construction materials as at 30 June 2011 amounting to RMB203,451,709.86 increased by 74.67%
as compared with the opening balance mainly due to the increase in the investments in construction projects made by the
Company;
(4) The closing balance of short-term borrowings as at 30 June 2011 amounting to RMB5,906,247,149.54 increased by 64.33%
as compared with the opening balance mainly due to an increase in short-term borrowings upon expiry of short-term
debentures of RMB1.5 billion of the Company during the period;
(5) The closing balance of bills payable as at 30 June 2011 amounting to RMB1,324,707,285.74 increased by 505.56% as
compared with the opening balance mainly due to the increased bill payments for loans with reasonable use of financing
channels by the Company;
(6) The closing balance of advance receipts as at 30 June 2011 amounting to RMB250,933,984.66 decreased by 38.83% as
compared with the opening balance mainly due to an increase in goods delivery with less advances on sales during the
period;
(7) The closing balance of other payables as at 30 June 2011 amounting to RMB981,268,512.05 increased by 68.59% as
compared with the opening balance mainly due to an increase in bank balances with the holding company resulting from
some project funds raised through the holding company by the Company;
(8) The closing balance of deferred income tax liabilities as at 30 June 2011 amounting to nil decreased by 100% as compared
with the opening balance mainly due to the disposal of subsidiaries during the year with deferred income tax liabilities
incurred on acquisition of subsidiaries during prior years reversed;
(9) The closing balance of long-term borrowings as at 30 June 2011 amounting to RMB6,467,134,801.11 increased by 36.85%
as compared with the opening balance mainly due to the increase in some long-term borrowings resulting from investments
in construction projects;
139
XIV. SUPPLEMENTARY INFORMATION (Cont’d)
4. Explanation or irregular movements and the reasons in major items of the consolidated financial statements of
the Group (Cont’d)
(2) Income statement items:
(1) Operating cost incurred during January to June 2011 amounting to RMB7,382,759,124.49 increased by 15.42% as
compared to the corresponding period of the prior year mainly due to an increase in raw material price and labour costs in
the year;
(2) Business taxes and surcharges incurred during January to June 2011 amounting to RMB32,113,269.58 increased by
208.85% as compared to the corresponding period of the prior year mainly due to the payment of the urban maintenance
and construction tax and education surcharges by foreign-invested enterprises since December 2010;
(3) General and administrative expenses incurred during January to June 2011 amounting to RMB471,238,563.30 increased by
12.97% as compared to the corresponding period of the prior year mainly due to the increased production interruption loss
resulting from the suspended production lines of certain subsidiaries for improvement;
(4) Finance expenses incurred during January to June 2011 amounting to RMB153,592,178.50 increased by 22.15% as
compared to the corresponding period of the prior year mainly due to an increase in interest expenses as compared to the
corresponding period of the prior year resulting from interest rate changes and an increase of loans;
(5) Loss on impairment of assets during January to June 2011 amounting to -RMB21,425,466.16 decreased by 203.02% as
compared to the corresponding period of the prior year mainly because the Company made greater efforts to clear open
account receivables outstanding for a long period and eliminated bad debt provisions during the period;
(6) Gain on change in fair value incurred during January to June 2011 amounting to RMB3,715,429.62 decreased by 55.55% as
compared to the corresponding period of the prior year mainly due to the change in fair value of timber assets;
(7) Investment income incurred during January to June 2011 amounting to RMB9,553,661.98 increased by 120.92% as
compared to the corresponding period of the prior year mainly due to the investment income on disposal of Heze Chenming
Panels Co., Ltd. and Shandong Lin Dun Wood Industry Co., Ltd. during the period;
(8) Non-operating income incurred during January to June 2011 amounting to RMB145,947,362.89 increased by 116.49% as
compared to the corresponding period of the prior year mainly due to an increase of government grants received during the
period;
(9) Non-operating expense incurred during January to June 2011 amounting to RMB26,337,117.25 increased by 324.21% as
compared to the corresponding period of the prior year mainly due to an increase in the losses from debt restructuring
incurred by the Company during the period.
140
VIII. Documents Available for Inspection
I. Accounting statements signed and stamped with seal by the legal representative, financial controller and responsible personnel of the finance
department;
II. copy of the Interim Report signed by the legal representative;
III. originals of corporate documents publicly disclosed in newspapers designated by CSRC during the reporting period and original copies of the
relevant announcements;
IV. copy of the Interim Report filed with the Stock Exchange of Hong Kong Limited; and
V. other relevant information.
141
