Contents
I. Important 2
II. Company Information 3
III. Summary of Financial and Operating Results 4
IV. Changes in Share Capital and Shareholders 8
V. Directors, Supervisors and Senior Management 13
VI. Directors’ Report 18
VII. Material Matters 31
VIII. Unaudited Financial Statements and Notes thereto Prepared in Accordance with Accounting
Standards for Business Enterprises 44
IX. Documents Available for Inspection 182
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1 SHANDONG CHENMING PAPER HOLDINGS LIMITED
I. Important Notice
The board (the “Board”) of directors of Shandong Chenming Paper Holdings Limited (the “Company”), its supervisory committee (the
“Supervisory Committee”), its directors (the “Directors”), its supervisors (the “Supervisors”) and its senior management (the “Senior
Management”) hereby warrant that there are no false representations, misleading statements or material omissions contained in
this report (the “Report”), and jointly and severally accept full responsibility for the truthfulness, accuracy and completeness of the
contents of the Report. The Report has been prepared in both Chinese and English. For any discrepancies, the Chinese version shall
prevail.
Chen Hongguo, the chairman of the Company (the “Chairman”), Wang Chunfang, the financial controller of the Company and Liu
Jun, head of the financial department, declare that they warrant the truthfulness and completeness of the financial statements in the
2012 interim report.
All Directors were present through means of communication in the thirteen meeting of the sixth session of the Board of the
Company at which this interim report was reviewed and approved.
The interim financial statements of the Company and its subsidiaries (the “Group”) for the six months ended 30 June 2012, which
was prepared in accordance with Accounting Standards for Business Enterprises, were unaudited.
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SHANDONG CHENMING PAPER HOLDINGS LIMITED 2
II. Company Overview
(I) Company information
A share B share H share
stock code 000488 stock code 200488 stock code 1812
A share stock B share stock H share stock
abbreviation 晨鸣纸业 abbreviation 晨鸣 B abbreviation Chenming Paper
Stock exchanges of listed shares Shenzhen Stock Exchange, The Stock Exchange of Hong Kong Limited
Legal name in Chinese
of the Company 山东晨鸣纸业集团股份有限公司
Legal short name in Chinese
of the Company 晨鸣纸业
Legal name in English
of the Company SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English
of the Company SCPH
Legal representative of the Company Chen Hongguo
Registered address No. 595 Shengcheng Road, Shouguang City, Shandong Province, People’s Republic of China
Postal code of registered address 262700
Office address No. 595 Shengcheng Road, Shouguang City, Shandong Province, People’s Republic of China
Postal code of office address 262700
International website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
(II) Contact person and contact method
12
Secretary to the Board Securities Affairs Representative Hong Kong Company Secretary INTERIM
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Name Hao Yun Fan Yingjie Poon Shiu Cheong
Correspondence Address No. 595 Shengcheng Road, No. 595 Shengcheng Road, 22nd Floor, World Wide House,
Shouguang City, Shandong Shouguang City, Shandong Central, Hong Kong
Province, PRC Province, PRC
Telephone 0536-2158011.0536-2156488 0536-2158011.0536-2156488 852-2501 0088
Facsimile 0536-2158640 0536-2158640 852-2501 0028
Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hk
(III) Information disclosure and places for inspection
Designated Newspapers for Information Disclosure China Securities Journal and Hong Kong Commercial Daily
Designated Websites for the Publication of the Interim Report
as approved by China Securities Regulatory Commission http://www.cninfo.com.cn and http://www.hkex.com.hk
Places for Inspection of the Company’s Interim Report Capital operation department of the Company
SHANDONG CHENMING PAPER HOLDINGS LIMITED 3
III. Summary of major accounting data and operation data
(I) Major accounting data and financial indicators
Retrospective adjustments to the financial statements of prior reporting periods
□ Yes √ No □ Not applicable
Major accounting data
Increase/decrease
for the reporting
period compared
The reporting period The same period to the same period
Major accounting data (January to June) of the prior year of the prior year (%)
Total revenue (RMB) 9,964,451,535.04 8,917,455,355.14 11.74%
Operating profit (RMB) -208,643,946.44 473,928,647.41 -144.02%
Total profit (RMB) 12,518,767.02 593,538,893.05 -97.89%
Net profit attributable to shareholders
of the Company (RMB) 94,244,962.85 483,549,691.40 -80.51%
Net profit after extraordinary gains or losses attributable
to shareholders of the Company (RMB) -103,989,811.77 382,038,739.41 -127.22%
Net cash flows from operating activities (RMB) 661,084,701.87 737,643,905.04 -10.38%
Increase/decrease
as at the end
12 of the reporting
INTERIM period compared
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As at the end of the As at the end to the end
reporting period of the prior year of the prior year (%)
Total assets (RMB) 46,856,345,791.89 45,630,828,967.03 2.69%
Equity attributable to shareholders of the Company (RMB) 13,313,408,004.75 13,528,622,319.91 -1.59%
Share capital (shares) 2,062,045,941.00 2,062,045,941.00 0%
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
III. Summary of major accounting data and operation data
(I) Major accounting data and financial indicators (Cont’d)
Major financial indicators
Increase/decrease
for the reporting
period compared
The reporting period The same period to the same period
Major financial indicators (January to June) of the prior year of the prior year
Basic earnings per share (RMB/share) 0.05 0.23 -78.26%
Diluted earnings per share (RMB/share) 0.05 0.23 -78.26%
Basic earnings per share after extraordinary gains
or losses (RMB/share) -0.05 0.19 -126.32%
Fully diluted return on net assets (%) 0.71% 3.61% -2.9%
Weighted average return on net assets (%) 0.7% 3.51% -2.81%
Fully diluted return on net assets after extraordinary
gains or losses (%) -0.78% 2.85% -3.63%
Weighted average return on net assets after
extraordinary gains or losses (%) -0.77% 2.78% -3.55%
Net cash flows per share from operating activities
(RMB/share)) 0.32 0.36 -11.11%
Increase/decrease
as at the end
of the reporting 12
INTERIM
period compared REPOR
As at the end of the As at the end to the end T
reporting period of the prior year of the prior year (%)
Net assets per share attributable to shareholders
of the Company (RMB/share) 6.46 6.56 -1.52%
Gearing ratio (%) 68.68% 67.15% 1.53%
(II) Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report
□ Applicable √ Not applicable
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
□ Applicable √ Not applicable
3. Breakdown of items with substantial differences
Nil
4. Explanation of differences in accounting data under domestic and overseas accounting standards
Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 5
III. Summary of major accounting data and operation data
(III) Items and amounts after extraordinary gains or losses
√ Applicable □ Not applicable
Item Amount (RMB) Explanation
Profit or loss from disposal of non-current assets 1,931,468.26
Tax rebate or tax concessions with ultra vires approval or without
official approval documents
Government grants accounted for in profit and loss account of the current 175,517,398.94
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)
Fees charged to profit or loss for the current period received
from non-financial institutions for utilisation of funds
Profit or loss arising from investment costs for acquisition
of subsidiaries, associates and joint-ventures by the corporation
being less than its share of fair value of identifiable net assets
of the investees on acquisition
Gain or loss on non-monetary assets swap
Gain or loss on assets invested or managed under entrustment
Impairment provisions for various assets due to force majeure such
as natural disasters
Net gains and losses from debt restructuring 10,000,000.00
12 Corporate restructuring fees such as expenses
INTERIM for severance payments for staff and consolidation fees
REPOR Profit or loss in excess of the fair value portion arising
T
from transactions with obvious unfair transaction prices
Net profit or loss arising from subsidiaries formed from business
combination under common control from the beginning
of the year to the combination date
Profit or loss arising from contingent items unrelated
to the normal course of business of the Company
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
Reversal of impairment provision on receivables tested
for impairment on individual basis
Gain or loss on externally entrusted loans
Gains or losses from changes in fair value of investment property
adopting fair value method for subsequent measurement
Effect on profit or loss for the current period from one-off
adjustments to profit or loss for the current period made pursuant
to taxation and accounting laws and regulations, etc.
Entrustment fees received from entrusted business
Non-operating gains and losses other than the above items 29,518,387.76
Other profit or loss items within the definition of non-recurrent profit 15,457,198.72
or loss
Effect of minority interests -992,841.11
Effect of income tax -33,196,837.95
Total 198,234,774.62
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
III. Summary of major accounting data and operation data
(III) Items and amounts after extraordinary gains or losses (Cont’d)
The Company’s explanation of “other profit or loss items within the definition of non-recurrent profit or loss” and defining
non-recurrent profit or loss items as recurrent profit or loss items based on the nature and characteristics of its own normal
business operations
Amount involved
Item (RMB) Explanation
Gains or losses from changes in fair value of biological assets adopting 15,457,198.72 The Company adopted fair value method
fair value method for subsequent measurements for subsequent measurement
of timber resources
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SHANDONG CHENMING PAPER HOLDINGS LIMITED 7
IV. Changes in share capital and shareholders
(I) Changes in share capital
1. Tabel illustrating changes in shares
√ Applicable □ Not applicable
Opening balance Change during the reporting period (Increase/decrease) Closing balance
Shares
transferred
Amounts Percentage New issue Bonus shares from reserve Others Sub-total Amounts Percentage
I. Restricted shares 302,211,557 14.66% -110,025 -110,025 302,101,532 14.65%
1. State-owned shares
2. State-owned legal person shares 293,003,657 14.21% 293,003,657 14.21%
3. Other domestic shares
of which: Domestic legal person shares
Domestic natural person shares
4. Foreign shares
of which: Overseas legal
person shares
Overseas natural person shares
5. Shares held by the Senior Management 9,207,900 0.45% -110,025 -110,025 9,097,875 0.44%
II. Non-restricted shares 1,759,834,384 85.34% 110,025 110,025 1,759,944,409 85.35%
1. RMB ordinary shares 811,066,899 39.33% 110,025 110,025 811,176,924 39.34%
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%
4. Others
III. Total number of shares 2,062,045,941 100% 2,062,045,941 100%
12 Approval of changes in shareholding (If applicable)
INTERIM
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Not applicable
Transfer of shares arising from changes in shareholding
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 (《深圳證券交易所上市公司董事、監事和高級
管理人員所持本公司股份管理業務操作指南》, all the shares held by a former Senior Management member were due for release
during the reporting period, the restricted RMB ordinary shares (A shares) changed to non-restricted shares and
amounted to 110,025 shares.
The effects of changes in shareholding on financial indicators such as earnings per share and net assets per share in the
latest period (if any): Nil
Other information considered necessary by the Company or required by the securities regulation authorities to be
ddisclosed: Nil
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV. Changes in share capital and shareholders
2. Changes in restricted shares
√ Applicable □ Not applicable
Restricted
Opening shares released Restricted Closing
balance of during shares increased balance of
Names of shareholders restricted shares the period during the period restricted shares Reason for restriction Date of release from restriction
Shouguang Chenming Holdings 293,003,657 0 0 293,003,657 Restriction under the Reform of
Company Limited Non-tradable shares 29 March 2010
Shares held by Senior 9,207,900 110,025 0 9,097,875 Lock-up of shares held by Released under the relevant
Management of the Company Senior Management of the requirements of Shenzhen
Company Stock Exchange
Total 302,211,557 110,025 0 302,101,532 — —
(II) Issuance and listing of securities
1. Issuance of securities in the last three years
√ Applicable □ Not applicable
Amount
Names of share and Issue price approved Termination date
its derivative Issue date (RMB/share) Amount issued Listing date for listed trading for transaction
Shares 12
Convertible corporate bonds, bonds with warrants and corporate bonds INTERIM
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Corporate bonds 6 July 2011 100.00 20,000,000.00 8 August 2011 20,000,000.00
Warrants
Explanation of issue of securities in the last three years
In July 2011, the Company issued a total of 20 million corporate bonds totalling RMB2.0 billion with a face value
of RMB100 each at an issue price of RMB100 and a coupon rate of 5.95%, raising a total of RMB2.0 billion. After
deducting RMB18 million of expenses, the net proceeds raised amounted to RMB1.982 billion. As of 31 December
2011, RMB1.982 billion of the funds raised were used, among which about RMB382 million for providing additional
liquidity and about RMB1.6 billion for repaying bank loans, mainly of which were loans from financial institutions.
2. Changes in the total number and structure of shares and the resulting changes in the structure of the
assets and liabilities of the Company
□ Applicable √ Not applicable
3. Existing staff shares
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 9
IV. Changes in share capital and shareholders
(III) Shareholders and actual controllers
1. Total number of shareholders at the end of the reporting period
The total number of shareholders at the end of the reporting period was 162,293.00.
2. Shareholdings of the top ten shareholders
Shareholdings of the top ten shareholders
Shares pledged or locked-up
Percentage of Total Number
shareholding number of of restricted Status
Name of shareholders Nature of shareholders (%) shares held shares held of shares Number
HKSCC Nominees Limited Overseas legal person 18.9% 389,710,500 0 0
Shouguang Chenming Holdings Company Limited State-owned legal person 14.21% 293,003,657 293,003,657 0
PLATINUM ASIA FUND Overseas legal person 2.11% 43,480,377 0 0
TAIFOOK SECURITIES COMPANY
LIMITED-ACCOUNT CLIENT Overseas legal person 2.09% 43,173,883 0 0
BILL & MELINDA GATES FOUNDATION TRUST Domestic non-state-owned 1.36% 28,121,967 0
legal person 0
China Life Insurance Company Limited Domestic non-state-owned 0.86% 17,819,798 0
– Dividend - Individual Dividend legal person
– 005L -FH002 Shenzhen 0
Caisse de dépt et placement du Québec Domestic non-state-owned 0.35% 7,308,567 0
legal person 0
Chen Hongguo Domestic natural person 0.31% 6,334,527 4,750,895 0
LSV EMERGING MARKETS EQUITY FUND, L.P. Overseas legal person 0.3% 6,102,800 0 0
12 VICTORIAN FUNDS MANAGEMENT
CORPORATION ATF VFM EMGMKTS TRT
Overseas legal person 0.3% 6,086,106 0
0
INTERIM Explanatory note to shareholders
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Shareholdings of the top ten shareholders of non-restricted shares
√ Applicable □ Not applicable
Class and number of shares
Number of
non-restricted
shares held as
at the end
Name of shareholders of the period Class Number
HKSCC Nominees Limited 389,710,500 H share 389,710,500
PLATINUM ASIA FUND 43,480,377 B share 43,480,377
TAIFOOK SECURITIES COMPANY
LIMITED-ACCOUNT CLIENT 43,173,883 B share 43,173,883
BILL & MELINDA GATES FOUNDATION TRUST 28,121,967 A share 28,121,967
China Life Insurance Company Limited
– Dividend - Individual Dividend
– 005L-FH002 Shenzhen 17,819,798 A share 17,819,798
Caisse de dépt et placement du Québec 7,308,567 A share 7,308,567
Chen Hongguo 6,334,527 A share 6,334,527
LSV EMERGING MARKETS EQUITY FUND, L.P. 6,102,800 B share 6,102,800
VICTORIAN FUNDS MANAGEMENT
CORPORATION ATF VFM EMGMKTS TRT 6,086,106 B share 6,086,106
GE Asset Management Incorporated
– GEAM China A Share Trust Fund 5,944,347 A share 5,944,347
Connected relationship or concert-party relationship among the above shareholders
Shouguang Chenming Holdings Company Limited, a state-owned legal person shareholder, is not connected with
any of the shareholders above. It is not a person acting in concert under Administration of Disclosure of Information
on the Change of Shareholdings in Listed Companies Procedures. It is not aware whether any other shareholders of
outstanding shares are persons acting in concert and is also not aware whether any other shareholders of outstanding
shares are connected with each other.
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV. Changes in share capital and shareholders
3 Controlling shareholders and beneficial controllers
(1) Change of controlling shareholders and beneficial controllers
□ Applicable √ Not applicable
(2) Profile of the controlling shareholder and beneficial controller
Whether there is any new beneficial controller
□ Yes √ No □ Not applicable
Name of beneficial controller State-owned Assets Supervision and Administration
Commission of Shouguang City
Type of beneficial controller Local State-owned Assets Supervision and Administration Commission
Explanation of the situation
The controlling shareholder of the Company, Shouguang Chenming Holdings Company Limited (hereinafter
referred to as “Chenming Holdings”), was established on 30 December 2005 with registered capital of
RMB1.685 billion. Its legal representative is Chen Hongguo and its scope of business is investment in paper-
making,electricity, steam and forestry projects. As at the end of the reporting period, it held 293,003,657
stateowned legal person shares, representing 14.21% of the total share capital of the Company.
State-owned Assets Supervision and Administration Commission of Shouguang City is the controlling shareholder
of Chenming Holdings, holding 59.73% equity interests in Chenming Holdings. Person in charge of the unit is
Zhang Yuhua. Scope of business is administration and supervision of state-owned assets, properties and titles
belonging to Shouguang City.
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(3) Chart illustrating the relationship between the Company and the beneficial controllers
State-owned Assets Supervision and Administration Commission of Shouguang City
↓ 59.73%
Shouguang Chenming Holdings Company Limited
↓ 14.21%
Shandong Chenming Paper Holdings Limited
(4) Beneficial controller controlling the Company through trust or other asset management method
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 11
IV. Changes in share capital and shareholders
4. The Company’s substantial shareholders’ and other persons’ interest in shares or debentures
As at 30 June 2012, the following shareholders (other than the directors, supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share
register maintained by the Company in accordance with Section 336 of the Securities and Futures Ordinance (“SFO”)
(Chapter 571 of the Laws of Hong Kong):
Approximate shareholding as a
percentage of (%)
Name Number of shares held Total share capital Class of shares
Shouguang Chenming Holdings
Company Limited 293,003,657 A shares (L) 14.21 26.32
The National Social Security Fund Council 35,570,000 H shares (L) 1.73 9.09
Zhong Hong (HK) Investment Limited 35,388,500 H shares (L) 1.72 9.04
FIL Limited 23,323,500 H shares (L) 1.13 5.96
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above, as at 30 June 2012, no other person had interests or short positions in the Company’s shares
or underlying shares as recorded in the register maintained under section 336 of the SFO.
5. Purchase, sale and redemption of shares
The Group did not purchase, sell or redeem any listed outstanding securities of the Company during the reporting
period.
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REPOR 6. Other legal person shareholders with more than 10% shareholdings
T □ Applicable √ Not applicable
(IV) Convertible bonds
□ Applicable √ Not applicable
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors, Supervisors and Senior Management
(I) Changes in shareholdings of the Directors, Supervisors and Senior Management
Specify
whether or
not he/she
received any
remuneration
Share from any
Increase in Decrease in Of which: options shareholder
Shares held the number the number Shares number of held of the
as at the of shares of shares held as at restricted as at the Company
beginning of held during held during the end of shares end of the Reason or any other
Start date End date the period the period the period the period held period for related
Name Position Sex Age of the term of the term (shares) (shares) (shares) (shares) (shares) (shares) change parties
Chen Hongguo Chairman and M 47 12 April 2010 12 April 2013 6,334,527 0 0 6,334,527 4,750,895 0 No
general manager
Yin Tongyuan Vice Chairman M 54 12 April 2010 12 April 2013 2,423,640 0 0 2,423,640 1,817,730 0 No
Li Feng Director, deputy general M 39 12 April 2010 12 April 2013 471,818 0 0 471,818 353,863 0 No
manager and deputy
marketing director
Geng Guanglin Director, deputy generalM 38 12 April 2010 12 April 2013 437,433 0 0 437,433 328,075 0 No
manager
Tan Daocheng Director M 45 12 April 2010 12 April 2013 185,700 0 0 185,700 139,275 0 No
Hou Huancai Director M 50 12 April 2010 12 April 2013 628,915 0 0 628,915 471,686 0 No
Zhou Shaohua Director M 50 12 April 2010 12 April 2013 123,007 0 0 123,007 92,255 0 No
Cui Youping Director M 48 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Wang Xiaoqun
Wang Fengrong
Director
Director F
M 56
43
12 April 2010
12 April 2010
12 April 2013
12 April 2013
0
0
0
0
0
0
0
0
0
0
0
0
No
No
12
INTERIM
Zhang Zhiyuan Independent Director M 49 12 April 2010 12 April 2013 0 0 0 0 0 0 No
REPOR
Wang Aiguo Independent Director M 48 12 April 2010 12 April 2013 0 0 0 0 0 0 No T
Zhang Hong Independent Director F 47 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Wang Yumei Independent Director F 49 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Wang Xiangfei Independent Director M 61 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Gao Junjie Supervisor M 41 12 April 2010 12 April 2013 39,606 0 0 39,606 29,704 0 No
Wang Ju Supervisor F 46 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Yang Hongqin Supervisor F 44 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Yin Qixiang Supervisor M 74 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Guo Guangyao Supervisor M 69 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Li Xueqin Deputy general manager F 46 12 April 2010 12 April 2013 429,348 0 0 429,348 322,011 0 No
Hao Yun Deputy general manager M 49 12 April 2010 12 April 2013 708,441 0 0 708,441 531,331 0 No
and secretary to the Board
Wang Shihong Deputy general manager M 48 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Zhang Yanjun Deputy general manager M 46 12 April 2010 12 April 2013 102,393 0 0 102,393 76,795 0 No
Hu Changqing Deputy general manager M 46 12 April 2010 12 April 2013 1,238 0 0 1,238 0 0 No
Zhang Chunlin Deputy general manager M 43 12 April 2010 12 April 2013 245,674 0 0 245,674 184,255 0 No
Chang Liting Deputy general manager M 58 30 March 2011 12 April 2013 0 0 0 0 0 0 No
Xia Jigang Deputy general manager M 36 30 March 2011 12 April 2013 0 0 0 0 0 0 No
Li Zhenzhong Deputy general manager M 38 30 March 2011 12 April 2013 0 0 0 0 0 0 No
Wang Chunfang Financial controller M 36 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Poon Shiu Cheong Company secretary M 42 12 April 2010 12 April 2013 0 0 0 0 0 0 No
Total -- -- -- -- -- 12,131,740 0 0 12,131,740 9,097,875 0 -- --
Directors, Supervisors and Senior Management granted share options as incentives during the reporting period
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 13
V Directors, Supervisors and Senior Management
(II) EQUITY INTERESTS HELD BY DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
FILED IN COMPLIANCE WITH SFO
As at 30 June 2012, the interests held by each of the Directors, Supervisors and Chief Executives of the Company and its
associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under
section 352 of the SFO, are set out as follows:
NNumber of shares
(A shares) held as at the
end of the reporting period
Name Position (shares)
Directors
Chen Hongguo (Note 1) Executive Director 6,334,527
Yin Tongyuan Executive Director 2,423,640
Li Feng Executive Director 471,818
Geng Guanglin Executive Director 437,433
Tan Daocheng Executive Director 185,700
Hou Huancai Executive Director 628,915
Zhou Shaohua Executive Director 123,007
Cui Youping Non-Executive Director 0
Wang Xiaoqun Non-Executive Director 0
Wang Fengrong Non-Executive Director 0
Wang Yumei Independent Non-Executive Director 0
12 Zhang Hong Independent Non-Executive Director 0
INTERIM Wang Aiguo Independent Non-Executive Director 0
REPOR
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Wang Xiangfei Independent Non-Executive Director 0
Zhang Zhiyuan Independent Non-Executive Director 0
Supervisors
Gao Junjie Supervisor representing the shareholders 39,606
Guo Guangyao Supervisor representing the shareholders 0
Yin Qixiang Supervisor representing the shareholders 0
Wang Ju Supervisor representing the employees 0
Yang Hongqin Supervisor representing the employees 0
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors, Supervisors and Senior Management
(II) EQUITY INTERESTS HELD BY DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
FILED IN COMPLIANCE WITH SFO (Cont’d)
Associated corporations
Number of Number of
shares held shares held
as at the beginning Change during as at the end
Name of associated of the reporting the reporting of the reporting
Name Position corporation period (shares) period (+/-) period (shares)
Chen Hongguo Chairman Shouguang Chenming 231,000,000 — 231,000,000
(Note 2) Holdings Company Limited
Note 1: Save as the 6,334,527 A Shares personally held, Chen Hongguo was also deemed to be interested in the 429,348 A Shares held by Li Xueqin,
his spouse.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively held 43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd.
(hereinafter referred to as “Shouguang Henglian”). As a result, Shouguang Henglian was deemed to be controlled by Chen Hongguo. As such,
the 231,000,000 shares in Chenming Holdings (approximately 13.71% of the total share capital of Chenming Holdings) held by Shouguang
Henglian was also deemed to be held by Chen Hongguo.
Save as disclosed above, as at 30 June 2012, none of the Directors, Supervisors or chief executives of the Company had
any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section 352
of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing the Listing INTERIM
12
of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”). REPOR
T
As at 30 June 2012, none of each of the Directors, Supervisors or chief executives or their respective spouses or children
under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
associated corporations.
(III) Employment
Employment at the shareholder of the Company
√ Applicable □ Not applicable
Whether
receiving any
remuneration or
Name of Position allowance from
shareholder at the shareholder shareholder of
Name of employee of the Company of the Company Start date of the term End date of the term the Company
Chen Hongguo Shouguang Chenming Chairman and 20 September 2010 20 September 2013 No
Holdings Company Limited General Manager
Yin Tongyuan Shouguang Chenming Director 20 September 2010 20 September 2013 No
Holdings Company Limited
Geng Guanglin Shouguang Chenming Director 20 September 2010 20 September 2013 No
Holdings Company Limited
Tan Daocheng Shouguang Chenming Director 20 September 2010 20 September 2013 No
Holdings Company Limited
Li Xueqin Shouguang Chenming Director 20 September 2010 20 September 2013 No
Holdings Company Limited
Gao Junjie Shouguang Chenming Supervisor 20 September 2010 20 September 2013 No
Holdings Company Limited
Explanation of the employment at the shareholder of the Company
SHANDONG CHENMING PAPER HOLDINGS LIMITED 15
V Directors, Supervisors and Senior Management
(III) Employment (Cont’d)
Employment at other units
√ Applicable □ Not applicable
Whether
receiving any
remuneration or
Name of the Position at the allowance from
Name of employee other unit other unit Start date of the term End date of the term the other unit
Zhang Hong Shandong Haihua Independent director 27April 2011 27 April 2014 Yes
Company Limited
Zhongtong Bus & Independent director 27 December 2010 27 December 2013 Yes
Holding Co., Ltd.
Shandong Xinneng Independent director 27 May 2011 27 May 2014 Yes
Taishan Power
Generation Co., Ltd.
Shandong Gettop Independent director 5 October 2011 5 October 2014 Yes
Acoustic Co., Ltd.
Zhang Zhiyuan Shandong Tyan Independent director 26 June 2008 26 June 2014 Yes
Home Co., Ltd.
12 Wang Aiguo Shandong Iron and
Steel Co., Ltd.
Independent director 10 April 2012 10 April 2015 Yes
INTERIM
REPOR China Corn Oil Independent director 23 November 2009 23 November 2012 Yes
T Company Limited
Hisense Kelon Independent director 20 January 2011 20 January 2014 Yes
Electrical Holdings
Co. Ltd.
Shangdong Zhanqiu Independent director 12 July 2012 12 July 2015 Yes
Blower Co., Ltd.
Wang Xiangfei China CITIC Bank Independent director 29 June 2009 29 June 2012 Yes
Corporation Limited
SEEC Media Independent director 21 June 2010 21 June 2013 Yes
Group Limited
Nan Nan Resources Executive director 19 March 2011 19 March 2014 Yes
Enterprise Limited
Shenzhen Rural supervisor 31 March 2012 31 March 2015 Yes
Commercial Bank
Explanation of All the above four persons were independent directors of the Company.
the employment
at the other unit
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors, Supervisors and Senior Management
(IV) Remuneration of Directors, Supervisors and Senior Management
Decision process for the remuneration The remuneration plans of the Directors, Supervisors and Senior Management
of Directors, Supervisors and Senior of the Company were assessed by the Remuneration Committee of the
Management Board based on the performance of their management responsibilities and
performance appraisal as well as the importance of the post, and considered
and approved by the Board.
Basis for determining the remuneration The remuneration of the Directors, Supervisors and Senior Management of
of Directors, Supervisors and Senior the Company were paid through monthly salary and annual incentive award
Management in accordance with the labour, personnel and salary management systems
formulated by the Company.
Actual payment for the remuneration Paid on a monthly basis
of Directors, Supervisors and Senior
Management
(V) Change of Directors, Supervisors and Senior Management of the Company
There was no change of Directors, Supervisors and Senior Management of the Company during the reporting period.
(VI) Personnel of the Company
Staff number 17,241.00
Number of ex-employees or retired employees for whom the
Company had obligations 10.00
Speciality composition
Speciality composition
Number in the speciality composition
12
INTERIM
Production staff 12,564.00 REPOR
T
Sales staff 1,020.00
Technical staff 2,211.00
Financial staff 225.00
Administrative staff 1,221.00
Education level
Type of education level Number (person)
Doctor 1.00
Master 22.00
Bachelor 1,145.00
Post-secondary 3,229.00
Senior secondary and below 12,844.00
Explanation of the personnel of the Company: The Company had obligations for 10 retired employees.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 17
VI. Directors’ report
(I) Management discussion and analysis
1. General overview during the reporting period
In the first half of 2012, the paper industry was affected by the macroeconomic environment due to the significant
slowdown of the national economic growth. Imbalance in supply and demand resulted from a slump in many industries
and the market demand was continuously weak with excess new production capacity of some paper products made
available. During the reporting period, the paper industry remained in the doldrums, and both the price of raw materials
and the price of products fell. Compared to the same period of last year, the profitability of the pricipal activities declined
during the reporting period, and the gross profit margin of paper products was lower than that of the same period of last
year.
2. Production and operation
During the reporting period, the Company achieved machine-made paper production of 2.04 million tonnes and sales
of 1.92 million tonnes, an increase of 22.42% and 22.41% over the same period of last year respectively. Revenue from
operations amounted to RMB9.965 billion, an increase of 11.74% over the same period of last year. Operating profit
was RMB-209 million, a decrease of 144.02% over the same period last year. Net profit attributable to shareholders was
RMB94 million, a decrease of 80.51% over the same period of last year. It was mainly due to a decline in the gross profit
margin during the reporting period over the same period of last year arising from the doldrums in the industry in the first
half of 2012.
Analysis of the Company’s assets and liabilities during the reporting period
Unit: RMB
12
Reason for
INTERIM
REPOR
Item 2012.6.30 2011.12.31 Change (%) the change
T
Prepayments 1,045,146,661.71 764,880,237.90 36.64% (1)
Other receivables 238,050,762.42 325,550,913.72 -26.88% (2)
Construction in progress 3,491,069,182.47 2,618,039,624.85 33.35% (3)
Construction materials 83,223,466.14 61,924,581.85 34.39% (3)
Deferred income tax assets 257,330,993.15 174,026,534.27 47.87% (4)
Bills payable 1,654,218,054.43 615,327,402.85 168.84% (5)
Advance receipts 351,160,489.96 231,428,013.45 51.74% (6)
Staff remuneration payable 196,886,749.84 147,063,891.65 33.88% (7)
Interest payable 172,073,207.37 106,854,702.74 61.03% (8)
Dividend payable 309,306,891.20 100.00% (9)
Non-current liabilities due within one year 1,785,251,433.52 1,203,616,858.22 48.32% (10)
Other non-current liabilities 3,542,607,521.90 2,444,093,897.14 44.95% (11)
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
2. Production and operation (Cont’d)
Explanation leading to the major changes:
(1) Prepayments increased by 36.64% as compared to the beginning of the year mainly due to an increase in the
advance payment for materials made by the Company.
(2) Other receivables decreased by 26.88% as compared to the beginning of the year mainly due to receipt of
proceeds from disposal of Chibi Chenming and Xianning Chenming in the year 2011 in accordance with the
provisions of the contracts during that reporting period.
(3) Construction in progress increased by 33.35% as compared to the beginning of the year, and construction
materials increased by 34.39% as compared to the beginning of the year mainly due to the investments in the
white coated linerboard project and the demolition and relocation of Jilin Chenming by the Company.
(4) Deferred income tax assets increased by 47.87% as compared to the beginning of the year mainly due to the
market downturn at the macroeconomic level and in the paper making industry level, some companies generated
deferred income tax, which could be used for offsetting for losses.
(5) Bills payable increased by 168.84% as compared to the beginning of the year mainly due to an increase in bank
acceptance bills issued by the Company for payment for goods during the reporting period.
(6) Advance receipts increased by 51.74% as compared to the beginning of the year mainly due to an increase in
advance receipts for goods resulting from an increase in market development efforts by the Company.
12
(7) Staff remuneration payables increased by 33.88% as compared to the beginning of the year mainly due to an
increase in unpaid staff remuneration. INTERIM
REPOR
T
(8) Interest payable increased by 61.03% as compared to the beginning of the year mainly due to the provision of
interest on medium-term notes and corporate bonds by the Company.
(9) The closing balance of dividend payable was RMB309,306,891.20 mainly due to the payment of unpaid dividend
declared by the Company.
(10) Non-current liabilities due within one year increased by 48.32% as compared to the beginning of the year mainly
due to an increase in long-term borrowings due within one year by the Company.
(11) Other non-current liabilities increased by 44.95% mainly due to the issue of medium-term notes of RMB1.1 billion
during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 19
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
2. Production and operation (Cont’d)
Analysis and explanation of the major changes in the profit and loss indicators during the reporting period as
compared to the same period last year
Unit: RMB
Reason for
Item 2012.6.30 2011.6.30 Change (%) the change
Revenue from operations 9,964,451,535.04 8,917,455,355.14 11.74% (1)
Operating costs 8,500,512,936.03 7,382,759,124.49 15.14% (2)
Selling and distribution expenses 535,959,288.53 438,518,128.62 22.22% (3)
General and administrative expenses 562,794,713.60 471,238,564.30 19.43% (4)
Finance expenses 541,285,654.45 153,592,178.50 252.42% (5)
Loss on impairment of assets 13,436,773.17 -21,425,466.16 162.71% (6)
Gain on change in fair value 15,457,198.72 3,715,429.62 316.03% (7)
Investment income -2,716,529.31 9,553,661.98 -128.43% (8)
Non-operating income 223,467,731.90 145,947,362.89 53.12% (9)
Non-operating expenses 2,305,018.44 26,337,117.25 -91.25% (10)
Total profit 12,518,767.02 593,538,893.05 -97.89% (11)
Income tax -12,866,933.23 96,723,898.32 -113.30% (11)
Net profit 25,385,700.25 496,814,994.73 -94.89% (11)
12 Net profit attributable to
INTERIM shareholders of the Company 94,244,962.85 483,549,691.40 -80.51% (11)
REPOR Minority interests -68,859,262.60 13,265,303.33 -619.09% (11)
T
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
2. Production and operation (Cont’d)
Analysis and explanation of the major changes in the profit and loss indicators during the reporting period as
compared to the same period last year (Cont’d)
Explanation leading to the major changes:
(1) Revenue from operations increased by 11.74% as compared to the same period of last year mainly due to an
increase in revenue caused by growth in sales resulting from an expansion in the scale of the Company.
(2) Operating costs increased by 15.14% as compared to the same period of last year mainly due to an increase in
revenue caused by growth in sales resulting from an expansion in the scale of the Company.
(3) Selling and distribution expenses increased by 22.22% as compared to the same period of last year mainly due to
an increase in transportation costs as a result of sales growth.
(4) General and administrative expenses increased by 19.43% as compared to the same period of last year mainly
due to an increase in technology research and development expenses resulting from an increase in investments in
research and development by the Company.
(5) Finance expenses increased by 252.42% as compared to the same period of last year mainly due to the
capitalised interest of the original loan being expensed during the reporting period upon completion of the
800,000-tonne coated paper project and the Zhanjiang pulp project of the Company.
(6) Loss on impairment of assets increased by 162.71% as compared to the same period of last year mainly due to
an increase in the bad debt provisions during the reporting period as compared to same period of last year as a 12
result of a change in the accounts receivable. INTERIM
REPOR
T
(7) Gain on change in fair value increased by 316.03% as compared to the same period of last year mainly due to a
change in the fair value of timber assets.
(8) Investment income decreased by 128.43% as compared to the same period of last year mainly due to the income
of RMB13.31 million arising from disposal of Heze Chenming Panels and Lindun Forestry in the prior period.
(9) Non-operating income increased by 53.12% as compared to the same period of last year mainly due to receipt of
more government grants during the reporting period as compared to the prior period.
(10) Non-operating expenses decreased by 91.25% as compared to the same period of last year mainly due to a debt
restructuring loss of RMB19.89 million on disposal of Heze Chenming Panels.
(11) Total profit, income tax, net profit, net profit attributable to shareholders of the Company, minority interests
decreased by 97.89%, 113.3%, 94.89%, 80.51% and 619.09% respectively as compared to the same period of
last year mainly due to: an decrease in, among other things, profit and income tax as affected by the lower gross
profit margin of paper products as compared to the prior period as a result of the market downturn at the national
and macroeconomic, and in the paper making industry level, and a greater decrease in minority shareholders
interests as compared to the prior period as a result of the loss of non-wholly-owned subsidiaries of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 21
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
2. Production and operation (Cont’d)
Cash flow generated from operating activities of the Company during the reporting period
Unit: RMB
Item 2012.6.30 2011.6.30 Change (%)
Net cash flow generated from operating activities 661,084,701.87 737,643,905.04 -10.38%
Net cash generated from investment activities -850,464,656.26 -2,602,316,539.31 67.32%
Net cash flow generated from financial activities 466,200,304.36 1,787,918,250.48 -73.92%
Explanation leading to the major changes:
(1) Net cash flow generated from operating activities decreased by 10.38% as compared to the same period of last
year mainly due to more outstanding bills being discounted and an increase in staff remuneration payment.
(2) Net cash flow generated from investment activities increased by 67.32% as compared to the same period of last
year mainly due to fewer project investments made during the reporting period upon completion of, among other
things, the 800,000-tonne coated paper project and the Zhanjiang pulp project of the Company.
(3) Net cash flow generated from financial activities decreased by 73.92% as compared to the same period of last
year mainly due to a decrease in the net flow of bank borrowings during the reporting period over the same period
of last year as a result of project investment.
12
INTERIM 3. The development trend of the industry and the outlook of the Company’s business
REPOR
T The industry to which the Company belongs is the paper making industry, which is a light industry. The paper making
industry is an important basic raw material industry which is closely related to the national economy and social
development. The paper making industry is characterised as being capital intensive and skill intensive as well as having
prominent economies of scale. Its growth rate is strongly and positively correlated to GDP. The government will continue
to implement the proactive fiscal policy and solid monetary policy so the national economy will enjoy steady and rapid
development. The development conditions of the paper making industry are gradually improved. Recently, the National
Development and Reform Commission, Ministry of Industry and Communication and State Forestry Administration have
jointly issued the Twelfth Five-Year Plan for the Development of the Paper Making Industry, which clearly states the
general direction of “controlling total volume, promoting concentration, optimising raw materials and reducing energy
consumption and emission”, from which the Company is expected to benefit in the long run.
In recent years, the Company is committed to the integrated development of forestry, pulp and paper with a longer
industry chain and a more comprehensive paper product mix. The Company carried out a series of capacity expansion
on paper products with better prospects. The Company’s direction of development is in line with the requirements of
the development plan of the paper making industry as a whole. Although the industry undergo short-term downturn
to a certain extent, the Company will have exponential growth in performance once the industry recovers, and the
Company’s future performance is still much anticipated.
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
4. The work of the Company will focus on the following areas in the second half of 2012:
Adhering to regulated operation, thereby continuing to enhance the standard of corporate governance and
promoting the healthy development of Company.
The Company strictly adheres to domestic and international regulatory listing requirements, regulates and perfects the
management and operation system of the Company, enhances the standard of regulated operation, avoids operation
risks in listing, implements the Basic Criteria for Internal Control, strengthens the internal control systems of the
Company and its subsidiaries, enhances the organisational management structure and internal control management
system of subsidiaries, regulates operating and management behaviour, strengthens the Company’s ability to withstand
risk; strengthens information disclosure, endeavours to perfect investor relations management and safeguards the
interests of shareholders and investors.
Intensifying capital operation to reduce the operating costs of the Company.
The Company fully takes advantage of its role as a listed company and sets up a finance company as soon as possible,
strengthening financial management, increasing efforts in centralised management of funds and managing the use
of funds by all subsidiaries and sales companies through a quota system. The company broadens financing sources
through methods such as issuance of corporate bonds and non-dedicated debt financing instruments to achieve direct
financing at a low cost.
Strengthening the management of production, sales and procurement. Strengthening production management.
First, the Company adjusts the product structure. The Company strengthens the development of new products,
adjusts the product structure as an important measure to respond to market changes, adheres to the two directions
of high end high value-added and low-end low cost to optimise the structure of product varieties and enhance market 12
competitiveness. The Company keeps a close watch of the market, steps up efforts in new product development and INTERIM REPOR
explores new market opportunities. Second, the Company strengthens brand building, improves quality management T
with the utmost efforts, improves product quality with a view to being on an equal footing with world-class enterprises,
creates renowned brand names, and enhances enterprise competitiveness and value-added products. Third, the
Company improves the level of equipment automation and information management to achieve a staff configuration
according to international advanced enterprise standards.
Strengthening sales. First, the Company forms and leads teams to strengthen the execution ability of the sales teams
and improve the ability to manage and control the market. Second, the Company changes the sales model, engages
large agents, increases the business with manufacturers, merchants and banks, uses social resources to strengthen
sales to make up for deficiencies of its own strength. Third, the Company strengthens the overseas market. Through
the introduction of talents, the Company speeds up the exploration of the international market and strives to export
800,000 tonnes in the year. Strengthening procurement management. The Company establishes import and export
trading companies, implements market-oriented operation and optimises resource allocation. The Company establishes
professional companies such as waste paper and coal companies to improve the waste paper recycling system, thereby
stabilising the supplies and reducing costs.
Further strengthening enterprise culture. Through creating a “learning, happy and strict management” corporate
culture as a goal, the Company enhances the standard of people oriented management. First, the departments perform
their departmental functions, and actively carry out the corporate culture work and creative activities, promote the
building of an enterprise culture, and make efforts to achieve a high degree of integration of corporate governance and
corporate culture. Second, the Company enriches the cultural life of its staff, provides comprehensive ancillary facilities
and venues for staff activities, regularly organises sports activities and a variety of cultural and leisure activities so that
employees can relax in their spare time, enhance their friendship and strengthen team cohesiveness.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 23
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
5. Future capital requirement, sources of funds and their planned use
The demand for capital of the Company is ever increasing as the Company continuously develops with a bigger
operating scale. As the largest paper making company in China and a listed company with three classes of shares,
namely A shares, B shares and H shares, the Company has a good reputation in the financial market and extensive
financing sources. The Company will adopt the following effective sources of funds based on its growth and future
development strategies:
(1) The Company will reinforce its sales in the market. It will increase its sales revenue and put greater efforts in the
recovery of receivables to speed up capital turnover, utilise capital potential and take full advantage of its own
funds;
(2) The Company will apply for the establishment of the Group’s finance company to enhance the centralised
management of the Group’s fund and improve the efficiency of capital use so as to further increase the Group’s
fund settlement, management, investment and financing ability, thereby reducing the financing costs. The
Company also enhances its financial internal control and management to increase the fund utilisation rate;
(3) The Company will endeavour to lower its finance expenses through financing like the issue of medium-term notes
and corporate bonds.
Whether the Company’s actual operation results were lower or higher than the publicly disclosed profit forecast for
the reporting period or business plan by more than 20%:
□Yes√No□Not Applicable
12
INTERIM Analysis of the operation and results of major subsidiaries and investees of the Company
REPOR
T 1. Zhanjiang Chenming Pulp and Paper Company Limited, a wholly-owned subsidiary of the Company with a
registered capital of RMB2,500,000,000, is principally engaged in business such as improvement of plant
fostering, forest conservation and soil improvement, and processing and sales of pulp. In the first half of 2012,
revenue from operations of RMB1,925,168,000 and a net profit of RMB175,668,400 were achieved.
2. Shandong Chenming Power Supply Holdings Co., Ltd.,a 86.71%-owned subsidiary of the Company with a
registered capital of RMB99,550,000, is principally engaged in in the production and supply of electricity and
steam. In the first half of 2012, revenue from operations of RMB244,693,600 and a net profit of RMB7,335,800
were achieved.
3. Wuhan Chenming Hanyang Paper Holdings Co., Ltd, a 50.93%-owned subsidiary of the Company with a
registered capital of RMB211,367,000, is principally engaged in the manufacture and sales of paper products,
and raw materials and machinery for manufacture of paper. In the first half of 2012, revenue from operations of
RMB874,494,700 and a net profit of RMB-63,780,900 were achieved.
4. Shouguang Meilun Paper Company Limited, a wholly-owned subsidiary of the Company with a registered capital
of RMB2,200,000,000, is principally engaged in the production and sales of machine-made paper and paperboard.
In the first half of 2012, revenue from operations of RMB1,117,391,900 and a net profit of RMB-45,153,200 were
achieved.
5. Jilin Chenming Paper Company Limited, a wholly-owned subsidiary of the Company with a registered capital
of RMB1,500,000,000, is principally engaged in the processing and sales of machine-made paper, paperboard,
paper product, paper pulp, machinery and equipment for manufacture of paper. In the first half of 2012, revenue
from operations of RMB440,428,600 and a net profit of RMB-61,596,200 were achieved.
6. Shouguang Chenming Art Paper Company Limited, a 75%-owned subsidiary of the Company with a registered
capital of US20,000,000, is principally engaged in production and sales of machine-made paper. In the first half of
2012, revenue from operations of RMB319,247,900 and a net profit of RMB-27,864,100 were achieved.
7. Shangdong Chenming Paper Sales Company Limited, a wholly-owned subsidiary of the Company with a
registered capital of RMB100,000,000, is principally engaged in the sales of machine-made paper, paperboard
and paper making raw materials. In the first half of 2012, revenue from operations of RMB7,610,670,700 and a net
profit of RMB-29,618,300 were achieved.
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI. Directors’ report
(I) Management discussion and analysis (Cont’d)
5. Future capital requirement, sources of funds and their planned use (Cont’d)
All risk factors which may adversely affect the achievement of the Company’s future development strategies and
business objectives
During the reporting period, the domestic market competition became more intense due to the downturn of the
macroeconomic environment with excess new production capacity in the industry made available. The Company’s new
projects had commenced operation successively but they were unable to make profit on a timely basis due to market
reasons. The company has higher leverage now. Fluctuation of the state deposit and lending interest rates will directly
cause fluctuation of interests undertaken by the Company so as to affect the Company’s profitability. Therefore, the
Company specifies following measures: First, the Company will further improve its international marketing network,
improve its organisation structure of its overseas companies, adjust its sales channels and further expand its overseas
market, especially for the coated paper products, high-end duplex press paper, electrostatic small paper and other
high-end products, devote great efforts to exports and fund collection, and relieve domestic market pressure. Second,
the Company will make full use of the financing platform of the Hong Kong market, seek the bonding point of Hong
Kong and domestic businesses, increase Hong Kong Chenming’s credit line and expand the business of Hong Kong
Chenming. Third, the Company will actively apply for the establishment of the Group’s finance company to enhance
the centralised management of the Group’s fund and improve the efficiency of capital use so as to further increase the
Group’s fund settlement, management, investment and financing ability, thereby reducing the financing cost.
(II) Principal acitivities of the Company and analysis of its operations
1. Principal activities by industry and by product
12
Unit: RMB INTERIM
REPOR
T
Year-on-year Year-on-year Year-on-year
increase/decrease increase/decrease increase/decrease
Revenue from Gross profit in revenue from in operating in gross profit
By industry or by product operations Operating costs margin (%) operations (%) costs (%) margin (%)
By industry
I. Machine-made paper 9,216,139,824.70 7,909,765,293.16 14.17% 12.58% 16.58% -2.95%
II. Electricity and steam 415,231,784.63 360,583,271.43 13.16% 0.14% -7.48% 7.15%
III. Construction materials 163,649,151.64 134,290,206.98 17.94% -15.95% -7.96% -7.12%
IV. Paper-making chemical products 40,108,732.97 31,277,925.63 22.02% 1.37% -2.68% 3.25%
V. Hotel 24,253,681.15 6,367,047.37 73.75% -4.49% 0.73% -1.36%
VI. Others 3,326,240.34 2,293,200.11 31.06% -55.35% -64.39% 17.51%
By product
Light weight coated paper 599,263,279.24 546,228,892.26 8.85% -8.79% -4.99% -3.65%
Duplex press paper 1,520,629,992.03 1,325,662,646.62 12.82% 37.8% 37.34% 0.29%
Writing paper 152,926,898.85 146,337,134.17 4.31% 5.6% 10.85% -4.53%
Coated paper 2,146,633,544.01 2,044,364,500.36 4.76% 4.2% 21.63% -13.66%
News press paper 878,669,387.09 671,377,990.27 23.59% 13.59% -0.21% 10.56%
Paperboard 293,356,674.72 283,499,896.76 3.36% 7.39% 10.58% -2.78%
White paper board 979,292,604.55 801,231,392.96 18.18% -19.69% -15.28% -4.27%
Other machine-made paper 2,645,367,444.21 2,091,062,839.76 20.95% 35.35% 34.31% 0.61%
Explanatory note to principal activities by industry and by product: Nil
Reason for the greater change of gross profit margin as compared to the same period of last year: In the first half of
2012, the gross profit margin during the reporting period was lower as compared to the same period of last year due to
the economic environment of the industry.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 25
VI. Directors’ report
(II) Principal acitivities of the Company and analysis of its operations (Cont’d)
2. Principal activities by geographical areas
Unit: RMB
Year-on-year
increase/decrease
Revenue in revenue from
Geographical areas from operations operations (%)
PRC 8,429,732,938.38 12.91%
Hong Kong 85,042,051.22 46.02%
United States 74,652,473.46 -51.33%
Japan 99,795,928.67 -0.37%
South East Asia 128,741,768.46 -13.8%
Middle East 203,094,484.24 -25.78%
Europe 129,403,908.38 -22.11%
South Africa 123,402,201.61 196.03%
Other countries and regions 588,843,661.01 28.24%
Explanatory note to principal activities by geographical areas: Nil
Explanatory note to the composition of principal activities: Nil
12 3. Explanation of material changes in principal activities and their structure
INTERIM
REPOR □ Applicable √ Not applicable
T
4. Explanation of material changes in profitability (gross profit margin) of principal activities as compared
year on year
√ Applicable □ Not applicable
The gross profit margin was lower as compared to the same period of last year mainly due to the lower selling price as
compared to the same period of last year as a result of the market downturn at the national and macroeconomic and in
the paper making industry level.
5. Analysis of reasons for material changes in profit structure as compared year on year
□ Applicable √ Not applicable
6. Business nature, major products or services and net profit of investees which contributed net profit of
more than 10%
□ Applicable √ Not applicable
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI. Directors’ report
(II) Principal acitivities of the Company and analysis of its operations (Cont’d)
7. Problems and difficulties experience in operation
The outlook for the second half of the year is characterised as challenging and complicated for the domestic and
international economic environment. The uncertainties in the economic development will become greater, thereby
exercising pressure on the continuous operations of the Company. However, the development of the Company is on
track with opportunities and challenges available. As a result, The Company will change its conceptions and innovate
as the operating environment and the market change, and pay its attention to the future. Firstly, the Company will
strategically and actively explore the sales of new products. Secondly, the Company will consolidate the foundation of
the healthy development of its traditional paper making business through delicate management and strategic union.
Thirdly, the Company will strengthen the regulated establishment of internal control and corporate governance to
enhance its regulated operation standards and mitigate its market risks and operating risks.
(III) Fair value measurement-related internal control system
√ Applicable □ Not applicable
Items related to fair value measurement
Unit: RMB
Profit or
loss from Cumulative fair Impairment
change in fair value change provided 12
Opening value during charged during Closing INTERIM
REPOR
Item balance the period to equity the period balance T
Financial assets
Of which: 1. Financial assets
measured at fair value
with any change in fair value
charged to profit or loss
for the period
Of which: derivative
financial assets
2. Available-for-sale
financial assets
Sub-total of financial assets
Financial liabilities
Investment property
Productive biological assets 959,061,500.85 15,457,198.72 142,614,672.01 1,053,117,556.55
Others
Total 959,061,500.85 15,457,198.72 142,614,672.01 1,053,117,556.55
Whether any significant difference arose in the valuation results while the fair value of same or similar items were determined
by valuation technique. If so, please give a description in detail.
□ Yes √ No □ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 27
VI. Directors’ report
(IV) Holdings of financial assets and financial liabilities in foreign currency
√ Applicable □ Not applicable
Unit: RMB
Profit or
loss from Cumulative fair Impairment
change in fair value change provided
Opening value during charged during Closing
Item balance the period to equity the period balance
Financial assets
Of which: 1. Financial assets
measured at fair value
with any change in fair value
charged to profit or loss
for the period
Of which: derivative
financial assets
2. Loans and receivables 1,140,174,770.86 703,703,394.05
3. Available-for-sale
financial assets
4. Held-to-maturity investments
12 Sub-total of financial assets 1,140,174,770.86 703,703,394.05
INTERIM
REPOR Financial liabilities 6,261,633,933.79 6,188,388,570.25
T
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI. Directors’ report
(V) Investments by the Company
1. Particulars of use of proceeds in general
□ Applicable √ Not applicable
2. Particulars of commited projects financed by the proceeds
□ Applicable √ Not applicable
3. Particulars of change in project financed by the proceeds
□ Applicable √ Not applicable
4. Highlights of the major investments not financed by the proceeds
√ Applicable □ Not applicable
Unit: RMB’ 0000
First disclosure by
Project name announcement Project amount Project progress Return of the project
The high-end white coated linerboard
project of annual production Trial production has
capacity of 600,000 tonnes 27 July 2009 260,000 100% commenced.
Total 260,000 - - 12
INTERIM
Explantion of the major investments not financed by the proceeds REPOR
The high-end white coated linerboard project of an annual production capacity of 600,000 tonnes in Shouguang City was considered and approved T
by the 2009 First Extraordinary General Meeting of the Company. The planned total investment amount for this project was approximately RMB2.6
billion. The construction of the project was to last for 18 months. Upon completion, the project will realise annual production capacity of 600,000
tonnes high-end white coated linerboard paper. Upon operation, the project will increase the percentage of high-end paper products and enhance the
comprehensive competitiveness of the Company.
(VI) Intended amendments to operating plans in the second half of the year by the Board
□ Applicable √ Not applicable
(VII) Estimate of the operating results for January to September 2012
Warning of cumulative net profit for the period between the beginning of the year to the end of the next reporting period being
projected to be at a loss or expected to have material changes as compared year on year and its explanation
□ Applicable √ Not applicable
(VIII)Opinions of the Board of Directors regarding the “modified auditor’s report” for the reporting
period issued by the accountants
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 29
VI. Directors’ report
(IX) Particulars provided by the Company’s Board of Directors regarding the changes and
handling of the matters involved in the “modified auditor’s report” for last year issued by the
accountants
□ Applicable √ Not applicable
(X) Representation of the results of the discussion of the reason for and effect of the accounting
policies, change in accounting estimates or corrections of significant accounting errors of the
Company by the Board
□ Applicable √ Not applicable
(XI) Formulation and implementation of the cash dividend policy of the Company
During the reporting period, the Company further defined its cash dividend policy based on the its actual operations in
accordance with the related requirements of China Securities Regulatory Commission, Shenzhen Stock Exchange and
Shandong branch of China Securities Regulatory Commission. The dividend decision mechanism and dividend supervision
and control mechanism were well defined. The corresponding amendments to the articles relating to profit distribution in the
Articles of Association were considered and approved by the Board, and the amendments to the articles relating to profit
distribution in the Articles of Association were also considered and approved by the most recently convened general meeting.
The 2011 Profit Distribution Plan as considered and approved by the 2011 general meeting was implemented and completed
on 18 July 2012. The Company implemented its profit distribution policy in strict compliance with the Articles of Association.
Its cash dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association
12 and the resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal
interests of the small shareholders were protected as the related decision making process and mechanism were in place,
INTERIM
REPOR the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
T opportunities to sufficiently voice their opinion and make requests.
(XII) Proposal on profit distribution or transfer of capital reserves into share capital
□ Applicable √ Not applicable
(XIII)Cumulative retained profit of the Company as at the end of 2011 was positive without cash
dividend being proposed
□ Applicable √ Not applicable
(XIV) Other disclosures
Nil
(XV) The Company’s debt profile, credit change and cash management for debt repayment in
the future years (this table is only applicable to the listed company which issued convertible
bonds)
□ Applicable √ Not applicable
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(I) Overview of corporate governance
1. Corporate Governance
The Company operated in compliance with the requirement of Companies Law (《公司法》, Securities Law 《證券法》,
Code of Corporate Governance for Listed Companies(《上市公司治理準則》, Rules Governing Listing of Stocks on
Shenzhen Stock Exchange(《深圳證券交易所股票上市規則》, Hong Kong Listing Rules and the related requirements as
required by China Securities Regulatory Commission. The Company further improved and optimised its legal person
governance structure during the reporting period. The Board considers there is no material deviation of the Company in
its corporate governance from the regulatory documentation requirements provided for listed companies in respect of
corporate governance.
The cash dividend distribution principle as set out in the Articles of Association, the conditions, form and percentage
of the distribution, the intervals of profit distribution, the decision making process of the profit distribution policy and
the adjustment to the profit distribution policy were optimized and supplemented based on the its actual operations in
accordance with the related requirements of Notice of Reproducing Notice regarding Further Implementation of Cash
Dividends Distribution of Listed Companies of CSRC (Lu Zheng Jian Fa [2012] No. 18)” issued by Shandong branch
of China Securities Regulatory Commission. The amendments had been submitted to the Board of the Company
considered and approved and would be implemented upon consideration and approval by the general meeting. The
Company strictly implemented its related system of internal control to facilitate its regulated operation and healthy
development, thereby protecting the legal interests of investors. The corporate governance of the Company was exactly
the same as what was required by the CSRC. The regulated operations and the internal control standards would grow
with the development of the Company.
The Company is committed to attaining good standard of corporate governance practices in order to enhance
shareholders’ value. Saved as disclosed below, none of the Directors is aware of any information that would reasonably 12
indicate that the Company is not, or was not for any part of the reporting period, in compliance with the Code on INTERIM
REPOR
Corporate Governance Practice/Corporate Governance Code, as set out in Appendix 14 of the Rules Governing the T
Listing of Securities on the Stock Exchange (“Hong Kong Listing Rules”).
The chairman and general manager of the Company is Mr. Chen Hongguo.
Mr. Chen Hongguo performs the roles of the chairman and the general manager for the overall management of the
Company. This constitutes a deviation from the principles and code provisions under Appendix 14 to Hong Kong
Listing Rules. However, the Directors of the Company believe that Mr. Chen Hongguo as the chairman and the general
manager will enable the Company to more effectively plan and implement the business strategies so that the Group
can effectively and rapidly seize business opportunities. As all major decisions will be made after consultation with
other members of the Board, the Company believes that the supervision of the Board and independent non-executive
directors will strike a sufficient balance of power and authority.
2. Performance of independent non-executive Directors
In the reporting period, each of the independent non-executive Directors continued to suggest constructive opinion
on the material matters relating to operations and management and internal control of the Company. They issued their
independent opinion on related matter pursuant to related requirements, thus raising the science and objectiveness of
Board decisions. Attendance of independent non-executive Directors at Board meetings during the reporting period is
as follows:
Number of Board Number of Number of
Name of independent meetings requiring attendance attendance Number of
non-executive Directors attendance in person by proxy absence
Zhang Zhiyuan 2 2 0 0
Wang Aiguo 2 2 0 0
Zhang Hong 2 2 0 0
Wang Yumei 2 2 0 0
Wang Xiangfei 2 2 0 0
Note: During the reporting period, independent non-executive Directors of the Company issued their independent opinions on the connected
transactions pursuant to the related laws and regulations. They raised no objection opinion on the proposals of Board meetings or other
issues.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 31
VII.Material Matters
(I) Overview of corporate governance (Cont’d)
3. Particulars about the separation of businesses, personnel, assets, organisations, and finance from the
controlling shareholder
1. In terms of business: The Company was completely independent from the controlling shareholder, and had its
independent and complete business operation capability.
2. In terms of personnel: The labour, personnel and salary management were completely separated from the
controlling shareholder.
3. In terms of assets: There was only shareholding relationship between the Company and Shouguang Chenming
Holdings Company Limited. The assets of the Company were completely separated from those of the controlling
shareholder.
4. In terms of organisation: The Company had a mature and independent organisation structure, which was
established according to the legal processes and the business practice of the Company. It was completely
separated from that of the controlling shareholder.
5. In terms of finance: The Company had its own accounting department, accounting system, financial management
system, and bank accounts. The controlling shareholder never interfered in the financial activities of the Company.
4. Assessment and incentive mechanism for the Senior Management in the reporting period
The Senior Management of the Company is assessed monthly and annually. Monthly assessments were conducted in
line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators, namely the
12 completion status of in each month and the evaluation on important performance indicators. It was carried out monthly
INTERIM by way of cross assessment and supervision among the related departments. The annual assessments were carried
REPOR
T out by the Remuneration and Assessment Committee with reference to the results of monthly assessments and overall
performances over the year, including the integrated quality of Senior Management and internal training of talents.
5. Securities transactions by Directors
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model
Code”) as set out in Appendix 10 of the Hong Kong Listing Rules as the code of conduct for Directors’ securities
transactions, and in response to the specific enquiries to all Directors by the Company, all Directors confirmed that they
had complied with the requirements as set out in the Model Code during the six month period ended 30 June 2012.
(II) The Company did not make any profit appropriation which was recommended previously for
distribution in the reporting period. No reserves were transferred to increase the share capital
and no new shares were issued.
√Applicable□Not applicable
The 2011 profit distribution plan was considered and approved by the 2011 annual general meeting of the Company on 29
May 2012. Based on 2,062,045,941 shares in the total share capital of the Company, a cash dividend of RMB1.50 was to
be paid to all shareholders for every 10 shares held (tax inclusive). RMB1.35 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. RMB1.35 for every 10 shares held
was actually paid to individual shareholders and non-residential enterprises holding B shares. Distribution of cash dividend
under such distribution amounted to RMB309 million (RMB309,306,891.15) (tax inclusive).
The 2011 equity distribution announcement was published by the Company on China Securities Journal and Hong Kong
Commercial Daily on 11 July 2012. For A Shares, the book closure date was 18 July 2012. For B Shares, the book closure
date was 23 July 2012. The ex-rights date was 19 July 2012.
(III) Material litigation and arbitration
□Applicable√Not applicable
The Company was not related to any material litigation and arbitration during the reporting period.
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(IV) Matter related to bankruptcy reorganisation
□Applicable√Not applicable
(V) The Company’s holding of equity interest in other listed companies and investments in
financial institutions
1. Securities investment
□Applicable√Not applicable
2. Holding of equity interest in other listed companies
□Applicable√Not applicable
3. Holding of equity interest in unlisted financial institutions
□Applicable√Not applicable
4. Trading of shares of other listed companies
□Applicable√Not applicable
(VI) Asset transactions
1. Acquisition of assets
□Applicable√Not applicable 12
INTERIM
REPOR
2. Disposal of assets T
□Applicable√Not applicable
3. Asset swap
□Applicable√Not applicable
4. Business combination
□Applicable√Not applicable
5. Progress of asset reorganisation or acquisition and disposal of assets since the publication of their
reports or announcements and their effect on the operating results and financial position during the
reporting period
□Applicable√Not applicable
(VII) Information on increase of shareholding proposed or implemented by the major shareholder of
the Company and the persons acting in concert during the reporting period
□Applicable√Not applicable
(VIII)Implementation of the equity incentive plan of the Company and its effect
□Applicable√Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 33
VII.Material Matters
(IX) Significant related party transactions
1. Related party transactions associated with day-to-day operation
√Applicable□Not applicable
Reason for
the relatively
greater
difference
Percentage as between
Subject Pricing Price of Amount of the amount transactions
Related Types of the matter of the basis of the related party related party of similar Settlement of Effect on price and
party related party related party related party transactions transactions transactions related party profit of Market price reference
Related party relationship transactions transactions transactions (RMB’ 0000) (RMB’ 0000) (%) transactions the Company (RMB’ 0000) market price
Machine-made Telegraphic
Anhui Shidai Resources Holdings Co. Ltd. Associate Sale paper Market price 0.5 2,437.11 0.24% Transfer 45.64 0.5 —
Total — — 2,437.11 0.24% — — — —
Description of return of bulk sales in details
Necessity and continuity of, and the reason for trade with related party instead
of other counterparties in the market, related party transactions
Effect of related party transactions on the independence of the listed company
How far did the Company rely on the related parties?
What about the related solution (if any)?
The actual performance of the estimated total amounts of day-to-day related party transactions
to be conducted in the period under review during the reporting period by type
Description of related party transactions
12 Related party transactions associated with day-to-day operation
INTERIM
REPOR
T
Sales of goods to and receipt Purchase of goods and receipt
Related party of services from related parties of services from related parties
Transaction Percentage as the Transaction Percentage as the
amount amount of similar amount amount of similar
(RMB’ 0000) transactions (%) (RMB’ 0000) transactions (%)
Anhui Shidai Resources
Holdings Co. Ltd. 2,437.11 0.24%
Total 2,437.11 0.24%
Of which, related party transactions of sales of goods or provision of services to the Company’s controlling shareholder
and its subsidiaries by the Company amounted to RMB0 during the reporting period.
2. Related party transactions associated with acquisition and disposal of assets
□Applicable√Not applicable
3. Significant related party transactions associated with joint investments
□Applicable√Not applicable
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(IX) Significant related party transactions (Cont’d)
4. Related creditors’ rights and liabilities transactions
√Applicable□Not applicable
Whether non-operating related creditors’ rights and liabilities transactions existed?
□Yes√No
Financing to related parties (RMB’ 0000) Financing to the Company by related parties (RMB’ 0000)
Amount Amount
Related party Opening during Closing Interest Interest Opening during Closing Interest Interest
Related party relationship balance the period Repayment balance income expenses balance the period Repayment balance income expenses
Non-operating
Sub-total
Operating
Shouguang Chenming Holdings Controlling
Company Limited shareholder 3,000 2,100 2,700 2,400
Sub-total 3,000 2,100 2,700 2,400
Total 3,000 2,100 2,700 2,400
The Company provided use of capital
to the controlling shareholder and its
subsidiaries during the reporting
period (RMB’ 0000)
Of which: Non-operating
amount (RMB’ 0000)
Balance of capital provided
12
INTERIM
by the Company to its controlling REPOR
shareholder and its subsidiaries T
(RMB’ 0000)
Of which: Non-operating balance
(RMB’ 0000)
Reason giving rise to related creditors’
rights and liabilities
Repayment of related creditors’ rights
and liabilities
Undertakings related to related creditors’
rights and liabilities
Effect of related creditors’ rights and
liabilities on the operating results and
financial position of the Company
Capital appropriation and repayment progress during the reporting period
□Applicable√Not applicable
As of the end of the reporting period, the Board had proposed a plan to fix the responsibilities for the unfinished
settlement of the non-operating capital appropriation of the Company.
□Applicable√Not applicable
5. Other significant related party transactions
Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 35
VII.Material Matters
(X) Material contracts and their performance
1. Custody, contracting and lease contributed profit over 10% (including 10%) of the total profit of the
Company for the reporting period
(1) Custody
□Applicable√Not applicable
(2) Contracting
□Applicable√Not applicable
(3) Leases
□Applicable√Not applicable
2. Guarantees
√Applicable□Not applicable
Unit: RMB’ 0000
External guarantees provided by the Company (excluding guarantees provided for subsidiaries)
Date of the Guarantee
related announcement to related
disclosing the Amount Guarantee Guarantee Type of Fulfilled parties
12
Name of obligor guarantee amount of guarantee date (agreement date) provided
guarantee Term or not or not
INTERIM
REPOR Total amount of external guarantee approved during Total amount of
T the reporting period (A1) external guarantee
provided during
the reporting
period (A2)
Total amount of external guarantee approved Total balance of
as at the end of the reporting period (A3) external guarantee
provided as at
the end of
the reporting
period (A4)
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(X) Material contracts and their performance (Cont’d)
2. Guarantees (Cont’d)
Guarantees provided by the Company for subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount Guarantee date Guarantee Type of Fulfilled parties
Name of obligor guarantee amount of guarantee (agreement date) provided guarantee Term or not or not
Zhanjiang Chenming Paper Pulp Co., Ltd. 27 July 2006 564,020 25 March 2008 354,872.85 Guarantee 15 No No
Zhanjiang Chenming Paper Pulp Co., Ltd. 30 March 2011 200,000 19 July 2011 0 Guarantee 1 Yes No
Zhanjiang Chenming Paper Pulp Co., Ltd. 28 March 2012 300,000 27 June 2012 53,336.5 Guarantee 1 No No
Jiangxi Chenming Paper Co., Ltd. 16 December 2009 45,000 10 December 2009 45,000 Guarantee 3 No No
Jiangxi Chenming Paper Co., Ltd. 17 March 2003 103,600 11 December 2003 0 Guarantee 10 Yes No
Huanggang Chenming Arboriculture Co., Ltd. 27 May 2009 10,000 2 June 2009 0 Guarantee 3 Yes No
Huanggang Chenming Arboriculture Co., Ltd. 25 February 2010 16,000 8 July 2010 2,000 Guarantee 3 No No
Huanggang Chenming Arboriculture Co., Ltd. 25 February 2010 16,000 29 April 2010 2,990 Guarantee 3 No No
Huanggang Chenming Arboriculture Co., Ltd. 30 March 2011 20,000 19 September 2011 3,000 Guarantee 3 No No
Huanggang Chenming Arboriculture Co., Ltd. 28 March 2012 20,000 27 June 2012 2,600 Guarantee No No
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 30 March 2011 30,000 0 Guarantee Yes No
Shouguang Meilun Paper Co., Ltd. 24 August 2010 79,473 10 September 2010 75,898.8 Guarantee 5 No No
Shouguang Meilun Paper Co., Ltd. 29 October 2010 600,000 14 January 2011 16,324.9 Guarantee 3 No No
Shouguang Meilun Paper Co., Ltd. 29 October 2010 600,000 26 March 2012 33,673.25 Guarantee 0.5 No No
Shouguang Chenming Art Paper Co., Ltd. 30 March 2011 10,000 0 Guarantee Yes No
Shouguang Chenming Art Paper Co., Ltd. 28 March 2012 10,000 0 Guarantee No No
Jilin Chenming Paper Co., Ltd. 30 March 2011 30,000 25 May 2011 0 Guarantee 1 Yes No
Jilin Chenming Paper Co., Ltd. 28 March 2012 100,000 0 Guarantee 1 No No
Shandong Chenming Paper Group Qihe Paperboard Co., Ltd.
Shandong Chenming Paper Group Qihe Paperboard Co., Ltd.
30 March 2011
28 March 2012
20,000
20,000
1 November 2011 0
0
Guarantee
Guarantee
1 No
No
No
No
12
INTERIM
Chenming (HK) Limited 29 October 2010 50,000 13 April 2011 50,000 Guarantee 3 No No REPOR
Chenming (HK) Limited 30 March 2011 329,300 0 Guarantee Yes No T
Chenming (HK) Limited 28 March 2012 500,000 0 Guarantee No No
Shandong Chenming Paper Sales Company Limited 29 October 2010 200,000 11August 2011 165,498.34 Guarantee 1 No No
Shandong Chenming Paper Sales Company Limited 27 October 2011 200,000 15 March 2012 144,950.75 Guarantee 1 No No
Yanbian Chenming Paper Co., Ltd. 29 November 2011 30,000 Guarantee No No
Shouguang Chenming Import and Export Trade Co., Ltd. 28 March 2012 200,000 Guarantee No No
Total amount of guarantee provided for subsidiaries approved 1,150,000 Total amount of guarantee 262,158.93
during the reporting period (B1) provided for subsidiaries during
the reporting period (B2)
Total amount of guarantee provided for subsidiaries approved 2,974,493 Total balance of guarantee 950,145.39
as at the end of the reporting period (B3) provided for subsidiaries as
at the end of the
reporting period (B4)
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) 1,150,000 Total amount of guarantee 262,158.93
provided during the
reporting period (A2+B2)
Total amount of guarantee approved as at the end of the reporting period (A3+B3) 2,974,493 Total balance of guarantee 950,145.39
provided as at the end of
the reporting period (A4+B4)
The percentage of total amount of guarantee provided (A4+B4) to the net assets of the Company 71.37%
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) 905,145.39
Total amount of guarantee provided in excess of 50% of net assets (E) 45,000.00
Sum of the above three amount of guarantee (C+D+E) 950,145.39
Explanation of possible joint obligation on outstanding guarantees provided Nil
Explanation of external guarantees in breach of the specified procedures Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 37
VII.Material Matters
(X) Material contracts and their performance (Cont’d)
3. Particulars of entrusted wealth management
□Applicable√Not applicable
4. Performance of material contracts in the ordinary course of business
Nil
5. Other material contracts
□Applicable√Not applicable
(XI) Particulars of corporate bond issue
√Applicable□Not applicable
The Company was approved to issue corporate bonds of total face value of not more than RMB2.0 billion to the public by
the document “Zheng Jian Xu Ke [2011] No. 1019” issued by China Securities Regulatory Commission on 27 June 2011. The
bonds are fixed interest corporate bonds with a tenor of 5 years. Their coupon rate is 5.95% and their interest is accrued per
annum using simple interest instead of compound interest. The value date was 6 July 2011. 6 July of each of the year 2012 to
2016 is the interest payment date for the previous interest-bearing year. The prinicpal and last interest payment will be paid
on these days. The Company disclosed “Announcement on 2012 Interest Payment of 2011 Corporate Bonds” on 30 July 2012
and completed the payment.
12 (XII) Performance of undertakings
INTERIM
REPOR
T 1. Undertakings made by the Company and shareholders interested in 5% or more of the shares of the
Company made in the reporting period or subsisting to the reporting period
□Applicable√Not applicable
2. The Company’s description of whether the performance of the assets or projects of the Company met
their original profit estimates and its reasoning when the reporting period was within the term of such
profit estimates
□Applicable√Not applicable
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(XIII) Other comprehensive income items
Unit: RMB
The reporting The prior
Item period period
1. Gains (losses) from available-for-sale financial assets
Less: Income tax effect from available-for-sale financial assets
Transfer to profit or loss of other comprehensive income
recognised previously in the current period, net
Sub-total
2. Share of the comprehensive income of the investees
accounted for using the equity method
Less: Income tax effect from share of the comprehensive
income of the investees accounted for using the equity method
Transfer to profit or loss of other comprehensive income
recognised previously in the current period, net
Sub-total
3. Gains or (losses) from cash flow hedging instruments
Less: Income tax effect from cash flow hedging instruments
Transfer to profit or loss of other comprehensive income
recognised previously in the current period, net
Adjustment on initial recognition of items transferred to hedged items
Sub-total 12
4. Translation difference of financial statements denominated in foreign currency -152,386.81 -277,876.30 INTERIM
REPOR
Less: Transfer to profit or loss on disposal of foreign T
operations in the period, net
Sub-total -152,386.81 -277,876.30
5. Others
Less: Income tax effect from others recognised in
other comprehensive income
Transfer to profit or loss of others recognised in other
comprehensive income previously in the current period, net
Sub-total
Total -152,386.81 -277,876.30
SHANDONG CHENMING PAPER HOLDINGS LIMITED 39
VII.Material Matters
(XIV) Registration report on reception of research investigations, communications and interviews
during the reporting period
Class of
Place Manner the parties Main topics of discussion
Date of reception of reception of reception accommodated Parties accommodated and information provided
09 January 2012 Shouguang, Shandong On-site research Institution Everbright Securities Production and operation of the Company
investigation
08 February 2012 Shouguang, Shandong On-site research Institution Galaxy AMC, Zheshang Production and operation of the Company
investigation Securities and Huatai Securities
30 March 2012 Shouguang, Shandong On-site research Institution Guotai Junan and Bosera Asset Production and operation of the Company
investigation Management
27 April 2012 Shouguang, Shandong On-site research Institution Atlantis Investment Management Production and operation of the Company
investigation (Hong Kong) Limited
15 May 2012 Shouguang, Shandong On-site research Institution Dongxing Securities Co., Ltd. Production and operation of the Company
investigation
18 May 2012 Shouguang, Shandong Conference Call Institution FIL Investment Management Production and operation of the Company
21 June 2012 Shouguang, Shandong On-site research Institution Daiwa Securities of Japan Production and operation of the Company
investigation
26 June 2012 Shouguang, Shandong Conference Call Institution Atlantis Investment Management Production and operation of the Company
(Hong Kong) Limited
28 June 2012 Shouguang, Shandong On-site research Institution Bank of America Merrill Lynch Production and operation of the Company
investigation and Prime Capital Management
12
INTERIM
REPOR
(XV) Engagement or dismissal of accounting firms
T
Whether the interim report is audited?
□Yes√No□Not applicable
Whether to appoint another accounting firm:
□Yes□No√Not applicable
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(XVI) The punishment and rectification of the listed company, its directors, its supervisors and its
senior management, and shareholders, beneficial controller and acquirer of the Company
□Applicable√Not applicable
(XVII)Explanation of other material matters
√Applicable□Not applicable
1. Qihe Chenming Panels Co., Ltd. (“Qihe Panels”) suspended its production since June 2008. As at the end of June
2012, its net assets amounted to RMB-7,248,484.56. It is held by Qihe Paperboard Co., Ltd. and Shandong Chenming
Panels Co., Ltd., controlling subsidiaries of the Company, as to 51% and 49% respectively. Qihe Paperboard Co., Ltd.
disposed of and transfered its 51% equity interest in Qihe Panels to Shandong Chenming Panels Co., Ltd. to adjust its
strategic positioning and to facilitate the corporate management. Upon completion of the transfer of the equity interests,
Qihe Paperboard Co., Ltd. will not hold any equity interest in Qihe Panels and Shandong Chenming Panels Co., Ltd. will
hold 100% equity interest in Qihe Panels. The transfer of the equity interest had no effect on the profit of the Company
for the two quarters.
2. Huanggang Chenming Arboriculture Co., Ltd. (“Huanggang Chenming”) is a wholly-owned subsidiary of the Company.
Taking the need for production and operation of Huanggang Chenming into account, the Company made contribution
to Huanggang Chenming with its own capital. The registered capital of Huanggang Chenming increased from RMB10.00
million to RMB70.00 million and the increased registered capital would be solely used for the establishment of the
production and operation of Huanggang Chenming and would improve its asset and liability structure, thereby laying a
solid foundation for further direct financing of Huanggang Chenming.
(XVIII) Significant change of the profitability, assets and credibility of the guarantor of the convertible
12
INTERIM
bonds of the Company REPOR
T
(This table is applicable for a listed company which has issued convertible bonds only)
□Applicable√Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 41
VII.Material Matters
(XIX) Index of Information Disclosure
Name and page number Websites of publication
Subject matter of the publication Date of announcement and their path
Indicative announcement in respect of receipt B027 of China Securities Journal 5 January 2012 http://www.cninfo.com.cn
of support and incentive funds A6 of Hong Kong Commercial Daily
Indicative announcement in respect of change 5 January 2012 http://www.cninfo.com.cn
in the shareholding structure of the
controlling shareholder
Announcement on resolutions of the 2012 B023 of China Securities Journal 17 January 2012 http://www.cninfo.com.cn
first extraordinary general meeting A2 of Hong Kong Commercial Daily
Legal opinion on the 2012 first extraordinary 17 January 2012 http://www.cninfo.com.cn
meeting attesting lawyer
Indicative announcement in respect of receipt B016 of China Securities Journal 3 March 2012 http://www.cninfo.com.cn
of support and incentive funds A9 of Hong Kong Commercial Daily
H share announcement 15 March 2012 http://www.cninfo.com.cn
Announcement in respect of resolutions of the B205 of China Securities Journal 29 March 2012 http://www.cninfo.com.cn
tenth meeting of the sixth session of the board A23 of Hong Kong Commercial Daily
of directors
2011 independent directors’ report 29 March 2012 http://www.cninfo.com.cn
2011 annual report summary 29 March 2012 http://www.cninfo.com.cn
2011 annual audit report 29 March 2012 http://www.cninfo.com.cn
Special audit report on the use of funds 29 March 2012 http://www.cninfo.com.cn
12 of listed companies by related parties
INTERIM of the Company
REPOR
T 2011 self assessment report on internal control 29 March 2012 http://www.cninfo.com.cn
2011 annual report 29 March 2012 http://www.cninfo.com.cn
Assurance annual report on the use and deposit 29 March 2012 http://www.cninfo.com.cn
of capitals raised by the company
Auditors’ report on internal control 29 March 2012 http://www.cninfo.com.cn
Announcement in respect of Resolutions B205 of China Securities Journal 29 March 2012 http://www.cninfo.com.cn
of the ninth meeting of the sixth session A23 of Hong Kong Commercial Daily
of the Supervisory Committee
Independent opinion of independent directors 29 March 2012 http://www.cninfo.com.cn
on the self assessment report on internal control
of the Company
Announcement in respect of provision B205 of China Securities Journal 29 March 2012 http://www.cninfo.com.cn
of financial support to controlling subsidiaries A23 of Hong Kong Commercial Daily
Notice of 2011 annual general meeting (updated) B023 of China Securities Journal 30 March 2012 http://www.cninfo.com.cn
A29 of Hong Kong Commercial Daily
Announcement in respect of provision of guarantee 30 March 2012 http://www.cninfo.com.cn
for the general banking facilities of
controlling subsidiaries (updated)
Shandong Chenming Paper Holdings Limited: B023 of China Securities Journal 30 March 2012 http://www.cninfo.com.cn
Correction announcement A29 of Hong Kong Commercial Daily
H share announcement 12 April 2012 http://www.cninfo.com.cn
Announcement on estimated results B003 of China Securities Journal 14 April 2012 http://www.cninfo.com.cn
for the first quarter of 2012 A16 of Hong Kong Commercial Daily
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII.Material Matters
(XIX) Index of Information Disclosure (Cont’d)
Name and page number Websites of publication
Subject matter of the publication Date of announcement and their path
Announcement on the resolutions of the B033 of China Securities Journal 26 April 2012 http://www.cninfo.com.cn
eleven meeting of the sixth session of the Board A9 of Hong Kong Commercial Daily
of Directors
2012 first quarter report B033 of China Securities Journal 26 April 2012 http://www.cninfo.com.cn
A9 of Hong Kong Commercial Daily
2012first quarter report 26 April 2012 http://www.cninfo.com.cn
Insider Registration System (April 2012) 26 April 2012 http://www.cninfo.com.cn
2011 management report on the securities 4 May 2012 http://www.cninfo.com.cn
of the Company in custody
Shandong Chenming Paper Holdings Limited: A37 of China Securities Journal 10 May 2012 http://www.cninfo.com.cn
Correction announcement A11 of Hong Kong Commercial Daily
Further notice of 2011 annual general meeting 10 May 2012 http://www.cninfo.com.cn
(updated)
Further notice of 2011 annual general meeting A36 of China Securities Journal 24 May 2012 http://www.cninfo.com.cn
A11 of Hong Kong Commercial Daily
Announcement in respect of closing and phasing out 26 May 2012 http://www.cninfo.com.cn
the backward production equipment
Announcement on Resolutions of the 2011 B019 of China Securities Journal 30 May 2012 http://www.cninfo.com.cn
Annual General Meeting A14 of Hong Kong Commercial Daily 12
Legal opinion on the 2011 annual general meeting 30 May 2012 http://www.cninfo.com.cn INTERIM
REPOR
by the attesting lawyer T
Indicative announcement on registration and 19 June 2012 http://www.cninfo.com.cn
approval of medium-term note issue
H share announcement 27 June 2012 http://www.cninfo.com.cn
Shandong Chenming Paper Holdings Limited: B025 of China Securities Journal 30 June 2012 http://www.cninfo.com.cn
Announcement on 2012 Interest Payment A25 of Hong Kong Commercial Daily
of 2011 Corporate Bonds
Indicative announcement in respect of the result 30 June 2012 http://www.cninfo.com.cn
of medium-term note issue
SHANDONG CHENMING PAPER HOLDINGS LIMITED 43
VIII. Financial Report
(I) Auditors’ opinions
Whether the interim report is audited or not?
□ Yes √ No □ Not applicable
(II) Financial statements
Consolidated financial statements need to be prepared:
√ Yes □ No □ Not applicable
Unless otherwise stated, the unit in the financial statements of the financial report is: RMB
The unit in the notes to the financial statements is: RMB
1. Consolidate balance sheet
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB
Item Note Closing balance Opening balance
CURRENT ASSETS:
Monetary funds 3,577,575,965.34 3,529,938,211.47
12 Balances with clearing companies
INTERIM Loans to banks and other financial institutions
REPOR
T Held-for-trading financial assets 0.00 0.00
Bills receivable 2,300,338,786.78 2,444,508,997.74
Accounts receivable 3,416,046,386.88 2,886,437,754.69
Prepayments 1,045,146,661.71 764,880,237.90
Premium receivable
Receivables from reinsurers
Reinsurance contract reserves receivable
Interest receivable
Dividend receivable
Other receivables 238,050,762.42 325,550,913.72
Financial assets purchased under agreements to resell
Inventory 5,431,835,346.37 5,586,472,121.37
Non-current assets due within one year
Other current assets 1,825,128,528.24 1,698,362,261.63
Total current assets 17,834,122,437.74 17,236,150,498.52
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
1. Consolidate balance sheet (Cont’d)
Item Note Closing balance Opening balance
NON-CURRENT ASSETS:
Entrusted loans and advances to customers
Available-for-sale financial assets
Held-to-maturity investments
Long-term receivables
Long-term equity investments 94,717,476.18 77,434,005.49
Investment properties 22,080,828.01 22,949,956.03
Fixed assets 21,753,715,858.92 22,740,904,031.02
Construction in progress 3,491,069,182.47 2,618,039,624.85
Construction materials 83,223,466.14 61,924,581.85
Disposal of fixed assets 547,643,828.15 0.00
Productive biological assets 1,053,117,556.55 959,061,500.85
Oil and gas assets
Intangible assets 1,497,565,370.87 1,517,137,201.36
Development expenditure
Goodwill 20,283,787.17 20,283,787.17
Long-term prepaid expenses 191,475,006.54 192,917,245.62
Deferred income tax assets 257,330,993.15 174,026,534.27
Other non-current assets 10,000,000.00 10,000,000.00 12
INTERIM
Total non-current assets 29,022,223,354.15 28,394,678,468.51 REPORT
TOTAL ASSETS 46,856,345,791.89 45,630,828,967.03
CURRENT LIABILITIES:
Short-term borrowings 11,624,585,358.08 12,086,984,606.69
Borrowings from the central bank
Customer bank deposits and due to banks
and other financial institutions
Placements from banks and other financial institutions
Held-for-trading financial liabilities
Bills payable 1,654,218,054.43 615,327,402.85
Accounts payable 3,669,255,907.28 4,685,585,997.60
Advance receipts 351,160,489.96 231,428,013.45
Assets sold under agreements to repurchase
Handling charges and commission payable
Staff remuneration payables 196,886,749.84 147,063,891.65
Taxes payable 63,459,793.15 68,240,005.91
Interest payable 172,073,207.37 106,854,702.74
Dividend payable 309,306,891.20
Other payables 870,620,863.94 763,621,538.95
Due to reinsurers
Insurance contract reserves
Customer brokerage deposits
Securities underwriting brokerage deposits
Non-current liabilities due within one year 1,785,251,433.52 1,203,616,858.22
Other current liabilities 11,943,381.96 10,227,001.60
Total current liabilities 20,708,762,130.73 19,918,950,019.66
SHANDONG CHENMING PAPER HOLDINGS LIMITED 45
VIII. Financial Report
(II) Financial statements (Cont’d)
1. Consolidate balance sheet (Cont’d)
Item Note Closing balance Opening balance
NON-CURRENT LIABILITIES:
Long-term borrowings 4,800,684,896.98 5,143,067,496.05
Bonds payable 2,479,860,934.30 2,476,942,694.79
Long-term payables
Special payables 650,074,924.05 660,000,000.00
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 3,542,607,521.90 2,444,093,897.14
Total non-current liabilities 11,473,228,277.23 10,724,104,087.98
TOTAL LIABILITIES 32,181,990,407.96 30,643,054,107.64
OWNERS’ INTEREST (OR SHAREHOLDERS’ INTEREST):
Paid-up capital (or share capital) 2,062,045,941.00 2,062,045,941.00
Capital reserves 6,098,264,836.00 6,098,264,836.00
Less: Treasury shares
Special reserves
Surplus reserves 1,132,116,106.40 1,132,116,106.40
12 General risk provisions
INTERIM Retained profit 4,022,722,068.19 4,237,783,996.54
REPOR
T Foreign currency translation differences -1,740,946.84 -1,588,560.03
Total equity attributable to shareholders of the Company 13,313,408,004.75 13,528,622,319.91
Minority Shareholders’ interests 1,360,947,379.18 1,459,152,539.48
Total owners’ interest (or Shareholders’ interest) 14,674,355,383.93 14,987,774,859.39
TOTAL LIABILITIES AND OWNERS’ INTEREST
(OR SHAREHOLDERS’ INTEREST) 46,856,345,791.89 45,630,828,967.03
Legal Representative: Chen Hongguo Financial controller: Wang Chunfang Head of the financial department: Liu Jun
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
2. Balance sheet of the Company
Unit: RMB
Item Note Closing balance Opening balance
CURRENT ASSETS:
Monetary funds 1,762,696,493.00 1,747,384,563.57
Held-for-trading financial assets
Bills receivable 1,511,259,019.35 1,432,408,267.82
Accounts receivable 546,208,077.45 1,743,034,281.97
Prepayments 1,466,547,462.67 664,693,619.26
Interest receivable
Dividend receivable 10,487,270.13
Other receivables 8,070,165,092.64 6,928,079,845.18
Inventory 1,326,792,835.07 1,173,839,484.91
Non-current assets due within one year 200,000,000.00 50,000,000.00
Other current assets 86,300,706.02 15,216,230.82
Total current assets 14,980,456,956.33 13,754,656,293.53
NON-CURRENT ASSETS:
Available-for-sale financial assets
Held-to-maturity investments 300,000,000.00 500,000,000.00 12
Long-term receivables INTERIM
Long-term equity investments 8,835,293,283.52 8,748,703,461.63 REPOR
T
Investment properties 22,080,828.01 22,949,956.03
Fixed assets 5,167,336,101.19 5,264,187,852.03
Construction in progress 401,841,093.49 422,232,622.40
Construction materials 2,627,319.91 3,589,906.68
Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 318,210,213.09 322,623,412.83
Development expenditure
Goodwill
Long-term prepaid expenses
Deferred income tax assets 41,271,213.90 41,388,325.93
Other non-current assets 10,000,000.00 10,000,000.00
Total non-current assets 15,098,660,053.11 15,335,675,537.53
TOTAL ASSETS 30,079,117,009.44 29,090,331,831.06
SHANDONG CHENMING PAPER HOLDINGS LIMITED 47
VIII. Financial Report
(II) Financial statements (Cont’d)
2. Balance sheet of the Company (Cont’d)
Item Note Closing balance Opening balance
CURRENT LIABILITIES:
Short-term borrowings 6,096,366,224.70 8,080,716,020.88
Held-for-trading financial liabilities
Bills payable 1,506,586,112.66 346,418,281.23
Accounts payable 1,059,169,091.98 1,698,958,458.63
Advance receipts 1,001,660,468.78 119,723,590.83
Staff remuneration payables 105,350,758.91 79,433,205.74
Taxes payable 6,079,255.16 21,270,847.19
Interest payable 168,915,277.78 103,910,194.44
Dividend payable 309,306,891.20
Other payables 198,473,547.86 211,491,763.93
Non-current liabilities due within one year 775,938,740.00 543,009,000.00
Other current liabilities 1,813,538.40 1,345,288.40
Total current liabilities 11,229,659,907.43 11,206,276,651.27
NON-CURRENT LIABILITIES:
Long-term borrowings 659,813,195.94 648,055,935.94
Bonds payable 1,985,081,805.64 1,983,425,123.62
12 Long-term payables
INTERIM Special payables
REPOR
T Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 3,400,467,117.98 2,314,615,977.46
Total non-current liabilities 6,045,362,119.56 4,946,097,037.02
TOTAL LIABILITIES 17,275,022,026.99 16,152,373,688.29
OWNERS’ INTEREST (OR SHAREHOLDERS’ INTEREST):
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 1,119,926,524.49 1,119,926,524.49
General risk provisions
Retained profit 3,437,906,528.19 3,571,769,688.51
Foreign currency translation differences
Total owners’ interest (or Shareholders’ interest) 12,804,094,982.45 12,937,958,142.77
TOTAL LIABILITIES AND OWNERS’ INTEREST
(OR SHAREHOLDERS’ INTEREST) 30,079,117,009.44 29,090,331,831.06
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
3. Consolidated Income Statement
Unit: RMB
Amounts for Amounts for
Item Note the reporting period the prior period
I. Total revenue 9,964,451,535.04 8,917,455,355.14
Including: Revenue 9,964,451,535.04 8,917,455,355.14
Interest income
Earned premium
Handling charges and commission income
II. Total operating costs 10,185,836,150.89 8,456,795,799.33
Including: Operating costs 8,500,512,936.03 7,382,759,124.49
Interest expenses
Handling charges and commission expenses
Surrenders
Net claims paid
Net change in insurance contract reserves
Policyholder dividend expenses
Expenses for reinsurance accepted
Business taxes and surcharges 31,846,785.11 32,113,269.58
Selling and distribution expenses 535,959,288.53 438,518,128.62
General and administrative expenses 562,794,713.60 471,238,564.30 12
INTERIM
Finance expenses 541,285,654.45 153,592,178.50 REPOR
Loss on impairment of assets 13,436,773.17 -21,425,466.16 T
Plus: Gain on change in fair value (“-” denotes loss) 15,457,198.72 3,715,429.62
Investment income (“-” denotes loss) -2,716,529.31 9,553,661.98
Including: Investment income from
associates and joint ventures -2,716,529.31 -3,755,501.39
Foreign exchange gains (“-” denotes loss)
III. Operating profit (“-” denotes loss) -208,643,946.44 473,928,647.41
Plus: Non-operating income 223,467,731.90 145,947,362.89
Less: Non-operating expenses 2,305,018.44 26,337,117.25
Including: Loss on disposal of non-current assets 909,346.99 923,387.79
IV. Total profit (“-” denotes total loss) 12,518,767.02 593,538,893.05
Less: Income tax expenses -12,866,933.23 96,723,898.32
SHANDONG CHENMING PAPER HOLDINGS LIMITED 49
VIII. Financial Report
(II) Financial statements (Cont’d)
3. Consolidated Income Statement (Cont’d)
Amounts for Amounts for
Item Note the reporting period the prior period
V. Net profit (“-” denotes net loss) 25,385,700.25 496,814,994.73
Including: Net profit achieved by the acquiree
before business combination
Net profit attributable to shareholders of the Company 94,244,962.85 483,549,691.40
Minority interests -68,859,262.60 13,265,303.33
VI. Earnings per share: — —
(I) Basic earnings per share 0.05 0.23
(II) Diluted earnings per share 0.05 0.23
VII. Other comprehensive income -152,386.81 -277,876.30
VIII. Total comprehensive income 25,233,313.44 496,537,118.43
Total comprehensive income attributable to
shareholders of the Company 94,092,576.04 483,271,815.10
Total comprehensive income attributable to minority interests -68,859,262.60 13,265,303.33
For the business combination under common control during the current period, the net profit achieved by the acquiree
12
before business combination was RMB0.00.
INTERIM Legal Representative: Chen Hongguo Financial controller: Wang Chunfang Head of the financial department: Liu Jun
REPOR
T
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
4. Income statement of the Company
Unit: RMB
Amounts for Amounts for
Item Note the reporting period the prior period
I. Revenue 4,087,223,643.12 4,110,859,712.15
Less: Operating costs 3,448,243,509.14 3,325,675,097.46
Business taxes and surcharges 16,665,654.21 13,912,091.01
Selling and distribution expenses 125,030,947.56 135,529,408.44
General and administrative expenses 264,784,924.40 211,532,488.08
Finance expenses 244,992,432.75 125,413,016.82
Loss on impairment of assets -7,044,869.23 -38,465,504.04
Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 42,792,407.91 140,407,977.15
Including: Investment income from associates and
joint ventures -2,716,529.31 -3,755,501.39
II. Operating profit (“-” denotes loss) 37,343,452.20 477,671,091.53
Plus: Non-operating income 152,611,810.82 100,848,267.10
Less: Non-operating expenses 151,132.48 22,727,730.47
Including: Loss on disposal of non-current assets 126,486.38 443,271.23
III. Total profit (“-” denotes total loss) 189,804,130.54 555,791,628.16
Less: Income tax expenses 14,360,399.66 58,452,362.47 12
INTERIM
IV. Net profit (“-” denotes net loss) 175,443,730.88 497,339,265.69 REPOR
V. Earnings per share: — — T
(I) Basic earnings per share 0.09 0.24
(II) Diluted earnings per share
VI. Other comprehensive income
VII. Total comprehensive income 175,443,730.88 497,339,265.69
SHANDONG CHENMING PAPER HOLDINGS LIMITED 51
VIII. Financial Report
(II) Financial statements (Cont’d)
5. Consolidated cash flow statement
Unit: RMB
Amounts for Amounts for
Item the reporting period the prior period
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 8,768,879,634.98 7,854,858,051.86
Net increase in customer bank deposits and due to banks
and other financial institutions
Net increase in borrowings from the central bank
Net increase in placements from other financial institutions
Cash received from premiums under original insurance contracts
Net cash received from reinsurance business
Net increase in deposits from policyholders
Net increase from disposal of held-for-trading financial assets
Cash received from interest, handling charges and commissions
Net increase in placements from banks and other financial institutions
Net capital increase of repurchase business
Tax rebates received 4,195,458.50 15,888,429.59
Cash received relating to other operating activities 282,265,076.77 895,946,310.86
Subtotal of cash inflows from operating activities 9,055,340,170.25 8,766,692,792.31
12 Cash paid for goods and services 6,789,505,489.23 5,917,115,598.43
INTERIM
REPOR
Net increase in loans and advances to customers
T Net increase in deposits with the central bank and
other financial institutions
Cash paid for claims under original insurance contracts
Cash paid for interest, handling charges and commission
Cash paid for policyholder dividend
Cash paid to and for employees 477,021,702.85 426,234,308.06
Payments of taxes and surcharges 677,026,381.95 846,940,819.17
Cash paid relating to other operating activities 450,701,894.35 838,758,161.61
Subtotal of cash outflows from operating activities 8,394,255,468.38 8,029,048,887.27
Net cash flows from operating activities 661,084,701.87 737,643,905.04
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 278,250.65 21,052,642.46
Net cash received from disposal of subsidiaries and other business units 3,467,152.31
Cash received relating to other investing activities 23,142,607.18 5,834,492.06
Subtotal of cash inflows from investing activities 23,420,857.83 30,354,286.83
Cash paid for purchase of fixed assets, intangible assets and
other long-term assets 853,885,514.09 2,632,670,826.14
Cash paid on investments 20,000,000.00
Net increase in pledged loans
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities
Subtotal of cash outflows from investing activities 873,885,514.09 2,632,670,826.14
Net cash flows from investing activities -850,464,656.26 -2,602,316,539.31
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
5. Consolidated cash flow statement (Cont’d)
Amounts for Amounts for
Item the reporting period the 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 10,931,730,380.78 7,669,027,263.45
Cash received from bond issue
Cash received relating to other financing activities 1,308,110,040.62 491,750,000.00
Subtotal of cash inflows from financing activities 12,239,840,421.40 8,160,777,263.45
Cash repayments of amounts borrowed 11,154,877,653.16 3,811,506,924.57
Cash paid for dividend and profit distribution or interest payment 618,762,463.88 780,814,563.65
Including: dividend and profit paid to minority interests by subsidiaries 11,577,192.00
Cash paid relating to other financing activities 1,780,537,524.75
Subtotal of cash outflows from financing activities 11,773,640,117.04 6,372,859,012.97
Net cash flows from financing activities 466,200,304.36 1,787,918,250.48
IV. Effect of foreign exchange rate changes on cash and cash equivalents -4,572,555.48 -13,615,852.06
V. Net increase in cash and cash equivalents 272,247,794.49 -90,370,235.85
Plus: Balance of cash and cash equivalents as at
the beginning of the period 2,317,048,619.53 1,855,235,979.80 12
INTERIM
VI. Balance of cash and cash equivalents as at the end of the period 2,589,296,414.02 1,764,865,743.95 REPOR
T
SHANDONG CHENMING PAPER HOLDINGS LIMITED 53
VIII. Financial Report
(II) Financial statements (Cont’d)
6. Cash flow statement of the Company
Unit: RMB
Amounts for Amounts for
Item the reporting period the prior period
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 4,945,717,360.44 3,651,680,690.25
Tax rebates received
Cash received relating to other operating activities 149,176,538.97 127,620,327.96
Subtotal of cash inflows from operating activities 5,094,893,899.41 3,779,301,018.21
Cash paid for goods and services 2,646,840,470.86 1,804,333,442.64
Cash paid to and for employees 187,446,352.99 152,867,010.05
Payments of taxes and surcharges 327,460,414.34 391,818,527.42
Cash paid relating to other operating activities 932,284,647.01 -452,537,261.41
Subtotal of cash outflows from operating activities 4,094,031,885.20 1,896,481,718.70
Net cash flows from operating activities 1,000,862,014.21 1,882,819,299.51
II. Cash flows from investing activities:
Cash received from investments 50,000,000.00 240,022,705.39
Cash received from investment income 35,021,667.09 176,215,492.04
Net cash received from disposal of fixed assets,
12 intangible assets and other long-term assets
Net cash received from disposal of subsidiaries and other business units
49,702.28 59,083.56
INTERIM
REPOR Cash received relating to other investing activities
T
Subtotal of cash inflows from investing activities 85,071,369.37 416,297,280.99
Cash paid for purchase of fixed assets, intangible assets and
other long-term assets 58,643,789.68 276,561,700.64
Cash paid on investments 69,465,450.00 1,719,533,425.00
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities
Subtotal of cash outflows from investing activities 128,109,239.68 1,996,095,125.64
Net cash flows from investing activities -43,037,870.31 -1,579,797,844.65
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
6. Cash flow statement of the Company (Cont’d)
Amounts for Amounts for
Item the reporting period the prior period
III. Cash flows from financing activities:
Cash received from capital contribution
Cash received from borrowings 5,960,484,091.71 4,197,471,624.39
Cash received from bond issue
Cash received relating to other financing activities 1,083,500,000.00
Subtotal of cash inflows from financing activities 7,043,984,091.71 4,197,471,624.39
Cash repayments of amounts borrowed 7,700,146,887.89 2,188,125,261.03
Cash paid for dividend and profit distribution or interest payment 285,015,256.06 652,004,766.37
Cash paid relating to other financing activities 490,664,036.03 1,708,401,563.04
Subtotal of cash outflows from financing activities 8,475,826,179.98 4,548,531,590.44
Net cash flows from financing activities -1,431,842,088.27 -351,059,966.05
IV. Effect of foreign exchange rate changes on cash and cash equivalents -1,334,162.23 -1,249,163.22
V. Net increase in cash and cash equivalents -475,352,106.60 -49,287,674.41
Plus: Balance of cash and cash equivalents as at
the beginning of the period 1,290,039,078.57 662,209,607.29
VI. Balance of cash and cash equivalents as at the end of the period 814,686,971.97 612,921,932.88
12
INTERIM
REPOR
T
SHANDONG CHENMING PAPER HOLDINGS LIMITED 55
VIII. Financial Report
(II) Financial statements (Cont’d)
7. Consolidated statement of changes in owners’ equity
Amounts for the reporting period
Unit: RMB
Amounts for the reporting period
Equity attributable to shareholders of the Company
Paid-up capital Less: treasury General risk Total
Item (or share capital) Capital reserves 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 6,098,264,836 1,132,116,106.4 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39
Plus: accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941 6,098,264,836 1,132,116,106.4 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39
III. Changes in the period (“-” denotes decrease) -215,061,928.35 -152,386.81 -98,205,160.3 -313,419,475.46 (I)
Net profit 94,244,962.85 -68,859,262.6 25,385,700.25 (II)
Other comprehensive income -152,386.81 -152,386.81
Sub-total of (I) and (II) above 94,244,962.85 -152,386.81 -68,859,262.6 25,233,313.44
(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 -309,306,891.2 -29,345,897.7 -338,652,788.9
12 1. Transfer to surplus reserves
2. Transfer to general risk provision
INTERIM 3. Distribution to owners (shareholders) -309,306,891.2 -29,345,897.7 -338,652,788.9
REPOR
T 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
IV. Balance as at the end of the period 2,062,045,941 6,098,264,836 1,132,116,106.4 4,022,722,068.19 -1,740,946.84 1,360,947,379.18 14,674,355,383.93
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
7. Consolidated statement of changes in owners’ equity
Amounts for the prior year
Unit: RMB
Amounts for the prior year
Equity attributable to shareholders of the Company
Paid-up capital Less: treasury General risk Total
Item (or share capital) Capital reserves shares Special reserves Surplus reserves provisions Retained profit Others Minority interests owners’ equity
I. Balance as at the beginning of the prior year 2,062,045,941 6,093,493,004.71 1,046,510,680.99 4,333,731,947.96 4,219.88 1,724,413,211.96 15,260,199,006.5
Plus: Retrospective adjustments arising
from business combination under common control
Plus: accounting policy changes
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941 6,093,493,004.71 1,046,510,680.99 4,333,731,947.96 4,219.88 1,724,413,211.96 15,260,199,006.5
III. Changes in the period (“-” denotes decrease) 4,771,831.29 85,605,425.41 -95,947,951.42 -1,592,779.91 -265,260,672.48 -272,424,147.11 (I)
Net profit 608,271,256.29 -19,544,473.47 588,726,782.82 (II)
Other comprehensive income -1,592,779.91 -1,592,779.91
Sub-total of (I) and (II) 608,271,256.29 -1,592,779.91 -19,544,473.47 587,134,002.91
(III) Capital paid in and reduced by owners 4,771,831.29 -216,438,980.57 -211,667,149.28
1. Capital paid in by owners 5,000,000 5,000,000
2. Amounts of share-based payments
recognised in owners’ equity
3. Others 4,771,831.29 -221,438,980.57 -216,667,149.28 12
(IV) Profit distribution 85,605,425.41 -704,219,207.71 -29,277,218.44 -647,891,000.74 INTERIM
1. Transfer to surplus reserves 85,605,425.41 -85,605,425.41 REPOR
2. Transfer to general risk provision T
3. Distribution to owners (shareholders) -618,613,782.3 -29,277,218.44 -647,891,000.74
4, Others
(V) Transfer with 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) Other
IV. Balance as at the end of the period 2,062,045,941 6,098,264,836 1,132,116,106.4 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39
SHANDONG CHENMING PAPER HOLDINGS LIMITED 57
VIII. Financial Report
(II) Financial statements (Cont’d)
8. Statement of changes in owners’ equity of the Company
Amounts for the reporting period
Unit: RMB
Amounts for the reporting period
Paid-up capital Less: treasury Special Surplus General risk Total
Item (or share capital) Capital reserves shares reserves 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 1,119,926,524.49 3,571,769,688.51 12,937,958,142.77
Plus: accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,571,769,688.51 12,937,958,142.77
III. Changes in the period (“-” denotes decrease) -133,863,160.32 -133,863,160.32 (I)
Net profit 175,443,730.88 175,443,730.88 (II)
Other comprehensive income
Sub-total of (I) and (II) above 175,443,730.88 175,443,730.88
(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 -309,306,891.20 -309,306,891.20
1. Transfer to surplus reserves
12 2. Transfer to general risk provision
3. Distribution to owners (shareholders) -309,306,891.20 -309,306,891.20
INTERIM 4. Others
REPOR
T (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
IV. Balance as at the end of the period 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,437,906,528.19 12,804,094,982.45
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(II) Financial statements (Cont’d)
8. Statement of changes in owners’ equity of the Company
Amounts for the prior year
Unit: RMB
Amounts for the reporting period
Paid-up capital Less: treasury Special Surplus General risk Total
Item (or share capital) Capital reserves shares reserves reserves provisions Retained profit owners’ equity
I. Balance as at the beginning 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
Plus: accounting policy changes
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,034,321,099.08 3,419,934,642.10 12,700,517,670.95
III. Changes in the period (“-” denotes decrease) 85,605,425.41 151,835,046.41 237,440,471.82 (I)
Net profit 856,054,254.12 856,054,254.12 (II)
Other comprehensive income
Sub-total of (I) and (II) 856,054,254.12 856,054,254.12
(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 85,605,425.41 -704,219,207.71 -618,613,782.30
1. Transfer to surplus reserves 85,605,425.41 -85,605,425.41
2. Transfer to general risk provision
3. Distribution to owners (shareholders) -618,613,782.30 -618,613,782.30
12
4, Others INTERIM
REPOR
(V) Transfer with owners’ equity T
1. Transfer from capital reserves to capital
(or share capital)
2. Transfer from surplus reserves to capital
(or share capital)
3. Transfer from surplus reserves to
make up for losses
4. Others
(VI) Special reserves
1. Appropriated in the period
2. Used in the period
(VII) Other
IV. Balance as at the end of the period 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,571,769,688.51 12,937,958,142.77
SHANDONG CHENMING PAPER HOLDINGS LIMITED 59
VIII. Financial Report
III. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”), whose predecessor was Shandong
Shouguang Paper Mill Corporation, was 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 Social Security Fund Council (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 of 31 December 2011, the cumulatively issued total share capital of the Company was 2,062,045,941 shares. Please see
Note VII. 47 for details.
The business scope of the Company and its subsidiaries (hereinafter referred as the (“Group”) covers: processing and sale
12 of paper products (including machine made paper and paper board), paper making raw materials and machinery; generation
INTERIM
REPOR and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing,
T 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 for publication by the Board on 21 August 2012.
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period
1. 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 and consumable biological assets, the financial statements are prepared under
the historical cost convention. In the event that depreciation of assets occurs, a provision for impairment is made
accordingly in accordance with the relevant regulations.
2. 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 for the six months period ended 30 June 2012 and relevant information such
as the operating results and cash flows of the Company and the Group of the first six months of 2012. 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 12
Requirements for Financial Reports” revised by the China Securities Regulatory Commission in 2010 and the notes INTERIM
REPOR
thereto. T
3. 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.
4. Reporting currency
The Company and its domestic subsidiaries recognise RMB as their reporting currency according to the primary
economic environment in which they operate. The reporting currency of the Company and its domestic subsidiaries is
Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar as their reporting currency according to
the primary economic environment in which these subsidiaries operate. The Group prepares its financial statements in
RMB.
Reporting currency for overseas subsidiaries: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 61
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
5. Accounting treatment of business combination under common control and not under common control
(1) Business combination under common control
A business combination involving enterprises under common control is a business combination in which all of the
combining enterprises are ultimately controlled by the same party or parties before and after the combination,
and that control is not transitory. The party that, on the combination date, obtains control of another enterprise
participating in the combination is the absorbing party, while that other enterprise participating in the combination
is a party being absorbed. The combination date is the date on which one combining enterprise effectively obtains
control of the other combining enterprises.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination
date as recorded by the party being merged. The difference between the carrying amount of the net assets
obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value of
shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve (share
capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to
profit or loss in the period in which they are incurred.
(2) Business combination not under common control
12 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
INTERIM
REPOR combination. For a business combination not involving enterprises under common control, the party that, on the
T acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that
other enterprise participating in the combination is the acquiree. The acquisition date is the date on which the
acquirer effectively obtains control of the acquiree.
For business combination involving entities not under common control, the cost of a business combination is the
aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity
instruments issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire plus agency
fee such as audit, legal service and evaluation consultation and other management fees charged to the profit
or loss for the period when incurred. As equity or bond securities are issued by the acquirer as consideration,
any attributable transaction cost is included their initial costs. Involved contingent consideration charged to the
combination cost according to its fair value on the acquisition date, the combined goodwill be will be adjusted
if new or addition evidence existed about the condition in the acquisition date within twelve months after the
acquisition date, which is required to adjust the contingent consideration.
The combination cost incurred by the acquirer and the identifiable net assets acquired from the combination
are measured at their fair values. Where the cost of a business combination exceeds 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.
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
6. Basis for preparation of consolidated financial statements
(1) Basis for preparation of consolidated financial statements
(1) Principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is determined on the basis of control.
The term “control” means that the Company has the power to decide 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
flow statements; for disposal of subsidiaries during the reporting period, no adjustment shall be made to
the opening balance of the consolidated balance sheet. For those subsidiaries acquired through business
combination not under common control, the operating results and cash flows after the acquisition date have
been properly included in the consolidated income statements and consolidated cash flow statements. No
adjustments shall be made to the opening balance of the consolidated balance sheet and the comparative
consolidated financial statements amount. For those subsidiaries acquired through business combination 12
INTERIM
under common control, the operating results and cash flows from the beginning of the consolidation period REPOR
to the consolidation date are also presented in the consolidated income statement and the consolidated T
cash flow statements. The comparative amounts presented in the consolidated financial statements are also
adjusted accordingly.
The financial statements of the subsidiaries are adjusted in accordance with the accounting policies and
accounting period of the Company in the preparation of the consolidated financial statements, where the
accounting policies and the accounting periods are inconsistent between the Company and the subsidiaries.
For acquisition of subsidiaries arising from merger of entities not under same control, the financial
statements of the subsidiaries will be adjusted according to the fair value of the identifiable net assets.
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.
If the Company losses control over a subsidiary due to partial disposal of equity investment or other
reasons, the remaining equity is measured at fair value on the date when the control lost. The difference
between the sum of consideration received for disposal of equity interest and the fair value of remaining
equity interest less the net assets attributable to the Company calculated continuously since the purchase
date based on shareholding percentage before disposal are recognised in gains on investment in the
period when the control lost. Other comprehensive income related to equity investment in the subsidiary
is transferred to gains on investment at the time control lost. The remaining equity interest is measured
subsequently according to the related requirements of “Accounting Standards for Business Enterprises No.
2 – Long-term Equity Investment” or “Accounting Standards for Business Enterprises No. 22 – Recognition
and measurement of Financial Instruments”. Please see Note IV. 10 “Long-term equity investments” for
details or Note IV. 7 “Financial Instruments”.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 63
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
6. Basis for preparation of consolidated financial statements (Cont’d)
(2) Relevant accounting treatment of disclosure of acquisition and disposal of or disposal and acquisition of
equity of the same subsidiary in two consecutive accounting years
Not applicable
7. Standards for recognising cash and cash equivalents
Cash and cash equivalents of the Company include cash on hand, deposits readily available for payment purpose and
short-term (normally fall due within three months from the date of acquisition) and highly liquid investments held the
Company which are readily convertible into known amounts of cash and which are subject to insignificant risk of value
change.
8. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
(1) Basis for translation of foreign currency transactions
The foreign currency transactions of the Company, when initially recognised, are translated into functional
currency at the prevailing spot exchange rate on the date of exchange while the Company’s foreign currency
12 exchange operations and transactions in connection with foreign currency exchange shall be translated into
functional currency at the exchange rate actually adopted.
INTERIM
REPOR
T (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; ② and except for other carrying amounts of the amortisation costs, the
differences arising from changes of the foreign currency items available for sale.
The foreign currency non-monetary items measured at historical cost shall still be measured by the
functional currency translated at the spot exchange rate on the date of the transaction. Foreign currency
non-monetary items measured at fair value are translated at the spot exchange rate on the date of
determination of the fair value. The difference between the amounts of reporting currency before and after
the translation will be treated as changes in fair value (including changes in foreign exchange rates) and
recognised in profit or loss for the period or recognised as other consolidated income and included in the
capital reserves.
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
8. Foreign currency operations and translation of statements denominated in foreign currency (Cont’d)
(2) Basis for translation of foreign currency financial statements
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 average 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.
12
Cash flow dominated in foreign currency or from foreign subsidiaries shall be translated at the spot exchange rate INTERIM
when it incurs. Effects arising from changes of exchange rate of cash shall be presented separately in the cash REPOR
T
flow statements.
The opening balance and the prior year’s figures are presented according to the translated amounts of the prior
year.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 65
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
9. Financial instruments
(1) Classification of financial instruments
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, loans and receivables and available for-sale financial assets
when they are initially recognised.
Financial liabilities are classified at fair value at initial recognition and changes are carried through profit and loss
as financial liabilities and other financial liabilities for the current period.
(2) Basis of recognition and method of measurement of financial assets
Financial assets are initially recognised at fair value. For financial assets measured at fair value and whose
changes are carried through profit or loss, relevant transaction costs are directly recognised in profit or loss for the
period. For financial assets classified as other categories, relevant transaction costs are included in the amount
initially recognised.
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.
12 Financial assets may be classified as financial assets held for trading if one of the following conditions is
INTERIM
REPOR met: A. the financial assets is acquired or incurred principally for the purpose of selling it in the near term; B.
T
the financial assets is part of a portfolio of identified financial instruments that are managed together and for
which there is objective evidence of a recent pattern of short-term profit-taking; or C. the financial assets is
a derivative, excluding the derivatives designated as effective hedging instruments, the derivatives classified
as financial guarantee contract, and the derivatives linked to an equity instrument investment which has no
quoted price in an active market nor a reliably measured fair value and are required to be settled through
that equity instrument.
A financial asset may be designated as at fair value through profit or loss upon initial recognition only
when one of the following conditions is satisfied: A. Such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise result from measuring assets or recognising
the gains or losses on them on different bases; or B. The financial asset forms part of a group of financial
assets or a group of financial assets and financial liabilities, which is managed and its performance is
evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment
strategy, and information about the grouping is reported to key management personnel on that basis.
A financial asset at fair value through profit or loss is subsequently measured at fair value. Any gains or
losses arising from changes in the fair value and any dividend or interest income earned on the financial
asset are recognised in profit or loss in the current period.
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
9. Financial instruments (Cont’d)
(2) Basis of recognition and method of measurement of financial assets (Cont’d)
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.
12
③ Loans and receivables INTERIM
REPOR
T
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 and entrusted loans are classified as loans and receivables by the Group.
Loans and receivables are measured subsequently at the amortised cost by using the effective interest rate
method. Gains or losses incurred at the time of derecognition, impairment or amortization are charged to
profit or loss in the current period.
④ Available-for-sale financial assets
They include non-derivative financial assets that are designated in this category on initial recognition, and
the financial assets other than the financial assets at fair value through profit and loss, loans and receivables
and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change
in fair value are recognised as other comprehensive income and charged to capital reserves, except for
impairment loss and exchange differences arising from foreign monetary financial assets and amortised cost
which are accounted for through profit or loss for the current period. The financial assets will be transferred
out of the financial assets on derecognition and accounted for through profit or loss for the current period.
Interests received from available-for-sale financial assets held and the cash dividends declared by the
investee are recognised as investment income.
Financial liabilities are initially recognised at fair value. For financial liabilities measured at fair value and
whose changes are carried through profit or loss, relevant transaction costs are directly recognised in profit
or loss for the period. For financial liabilities classified as other categories, relevant transaction costs are
included in the amount initially recognised.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 67
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
9. Financial instruments (Cont’d)
(2) Basis of recognition and method of measurement of financial assets (Cont’d)
① Financial liabilities measured at fair value and whose changes are carried through profit or loss for the
period
The criteria for a financial liability to be classified as held for trading and designated as at financial
liabilities at fair value through profit or loss are the same as those for a financial asset to be classified
as held for trading and designated as at financial assets at fair value through profit or loss.
Financial liabilities at fair value through profit or loss for the period are subsequently measured at fair
value. The gain or loss arising from changes in fair value and dividends and interest income related to
such financial liabilities are included into the current profit or loss.
② Other financial liabilities
Derivative financial liabilities which are linked to equity instruments that are not quoted in an active
market and the fair value of which cannot be measured reliably measured, and which shall be settled
by delivery of equity instruments are subsequently measured at cost. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method. Gains or losses arising
from derecognition or amortisation is recognised in profit or loss for the current period.
12
③ Financial Guarantee Contracts
INTERIM
REPOR Financial guarantee contracts other than those designated as financial liabilities at fair value through
T
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”.
(3) Recognition and measurement of transfers of financial asset
Financial asset that satisfied any of the following criteria shall be derecognised: ① the contract right to recover
the cash flows of the financial asset has terminated; ② the financial asset, along with substantially all the risk and
return arising from the ownership of the financial asset, has been transferred to the transferee; and ③ the financial
asset has been transferred to the transferee, and the transferor has given up the control on such financial asset,
though it does not assign maintain substantially all the risk and return arising from the ownership of the financial
asset.
When the entity does not either assign or maintain substantially all the risk and return arising from the ownership
of the financial asset and does not give up the control on such financial asset, to the extent of its continuous
involvement in the financial asset, the entity recognises 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.
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
9. Financial instruments (Cont’d)
(4) 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.
(5) 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 12
INTERIM
discounting method and option pricing models. REPOR
T
(6) Impairment provision for financial assets (excluding accounts receivables)
Not applicabe
(7) For unmatured held-to-maturity investments reclassified as available-for-sale financial assets, please state the
intention for holding and the basis for change in capability
Not applicabe
10. Basis for recognition and measurement of bad debt provision for accounts receivables
The Group carries out an overall inspection on the carrying amount of accounts receivable on the balance sheet date.
Where there arises any of the following objective evidences indicating that accounts receivable have been impaired, an
impairment provision will be made: ① a serious financial difficulty occurs to the debtor; ② the debtor breaches any of
the contractual stipulations (such as he fails to pay or delays the payment of interests or the principal); ③ the debtor will
probably go bankrupt or carry out other financial reorganisations; ④ other objective evidences show that the accounts
receivable are impaired.
(1) Bad debt provision for a single significant item of accounts receivable
Basis of determination or criterion of Accounts receivable of more than RMB1 million is recognised as
amount for single significant items individually significant accounts receivable by the Group.
Method for making bad debt provision For accounts receivable that is individually significant, the Group
individually for single significant items 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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 69
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
10. Basis for recognition and measurement of bad debt provision for accounts receivables (Cont’d)
(2) Accounts receivable making bad debt provision by portfolio
Method for making bad debt
Name of portfolio provision by portfolio Basis for determining the portfolio
No-risk portfolio Other methods Accounts receivable which are individually significant or
have certain specific risk features and are determined by
the management to be not impaired as at the balance
sheet date upon subject to impairment tests separately.
General-risk portfolio Aging analysis Accounts receivable for which bad debts are provided
under credit risk portfolio as they are not qualified to
be subject to impairment tests separately (individually
significant or have certain specific risk features) and
are classified into some portfolios based on the credit
risk features such as age and the percentage of bad
debt provision of each portfolio is determined against
the common risk features of each portfolio by the
management.
12 Use of aging analysis for making bad debt provision in the portfolio:
INTERIM
REPOR
T √ Applicable □ Not applicable
Ratio of Ratio of
accounts other accounts
receivable receivable
Age provision (%) provision (%)
Within 1 year (including 1 year) 5% 5%
1-2 years 10% 10%
2-3 years 20% 20%
Over 3 years 100% 100%
3-4 years 100% 100%
4-5 years 100% 100%
Over 5 years 100% 100%
Use of percentage of amount outstanding for making bad debt provision in the portfolio:
□ Applicable √ Not applicable
Use of other methods for making bad debt provision in the portfolio:
□ Applicable √ Not applicable
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
10. Basis for recognition and measurement of bad debt provision for accounts receivables (Cont’d)
(3) Accounts receivable insignificant but making bad debt provisions individually
Reasons for making bad debt provisions individually
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: 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.
Method for making bad debt provisions:
Bad debt provisions are made based on the difference between the present value of the future cash flow and the
book value in determining the impairment loss.
11. Inventory
(1) Classification of inventories
Inventories mainly include raw materials, work in progress and finished products, etc.
(2) Pricing of inventory dispatched
12
INTERIM
□ First-in-first-out √ Weighted average □ Determined individually □ Others REPOR
T
(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) Inventory taking system
□ Continuous inventory system √ Periodic inventory system □ Others
The inventory taking system is continuous inventory system/periodic inventory system.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 71
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
11. Inventory (Cont’d)
(5) Amortisation of low-value consumables and packaging materials
Low-value consumables
Amortisation method : Lump-sum
Packaging materials
Amortisation method : Lump-sum
12. 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 business combination cost is the aggregate of assets paid, liabilities incurred or undertook and fair value of
equity securities issued by the acquirer. Agent fees incurred by the acquirer for the acquisition such as audit,
legal service, and valuation and consultation fees, and other related administration expenses are charged to
profit or loss in the current period at the time such expenses incurred. Transaction cost incurred for issuing
12 equity securities or debt securities, which are used as consideration for the combination, are included in the initial
recognition amount of the equity securities or debt securities.
INTERIM
REPOR
T 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 are accounted for using equity method. Long-term equity investment without control or joint control
or significant influence with a fair value which can be reliably measured is accounted for as available-for-sale
financial assets.
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.
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
12. Long-term equity investments (Cont’d)
(2) Method for subsequent measurement and profit or loss recognition (Cont’d)
② Long-term equity investments accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds
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 12
of investees, the carrying amount of long-term equity investments is accordingly adjusted and recognised INTERIM
as other consolidated income and included in the capital reserves. REPOR
T
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.
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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 73
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
12. Long-term equity investments (Cont’d)
(2) Method for subsequent measurement and profit or loss recognition (Cont’d)
④ Disposal of long-term equity investments
In these consolidated financial statements, where the parent company disposes of a portion of the 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.
12
INTERIM (3) Recognition of having joint control or significant influence over the investee
REPOR
T 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.
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
13. 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.
18 “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
INTERIM
REPOR
14. Fixed assets T
(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) 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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 75
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
14. Fixed assets (Cont’d)
(3) Method for depreciation of different fixed assets
A fixed asset shall be initially measured at cost and the effect of any expected costs of abandoning the asset at
the end of its use. Depreciation is provided over its estimated useful life from the next month after it has been
brought to its working condition for its intended use using the straight-line method. The useful life, estimated
residual value and annual depreciation rate of each category of a fixed asset are as follows:
Useful lives of Estimated Annual
depreciation residual depreciation
Category (year) value(%) rate(%)
Buildings and structures 20-40 5-10 2.25-4.75
Machinery equipment 8-20 5-10 4.5-11.88
Electronic equipment 5 5-10 18.00-19.00
Transportation equipment 5-8 5-10 11.25-19.00
Other equipment
Fixed assets under finance lease: — — —
Of which:
Buildings and structures 20-40 5-10 2.25-4.75
12 Machinery equipment
Electronic equipment
8-20
5
5-10
5-10
4.5-11.88
18.00-19.00
INTERIM
REPOR Transportation equipment 5-8 5-10 11.25-19.00
T
Other equipment
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
(4) Impairment test methods and provision for impairment methods on fixed assets
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of fixed assets.
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.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of
the restorable value.
(5) Explanation on other matters 12
INTERIM
REPOR
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is T
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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 77
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
15. Construction in progress
(1) Types of construction in progress
Construction is progress means project expenses for uncompleted addition, alteration, expansion or technological
improvement, equipment upgrading and major overhaul of the fixed assets of the enterprise.
(2) Criteria and time for transferring construction in progress to fixed assets
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.
(3) Impairment test method and impairment provision method for construction in progress
For construction in progress, the Group will judge if there is any indication of impairment as at the balance sheet
date. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for
impairment test.
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
12 recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the
INTERIM future cash flows expected to be derived from the asset. An asset’s fair value is the price in a sale agreement in
REPOR
T 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.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of
the restorable value.
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
16. Borrowing costs
(1) Principles for recognising capitalisation of borrowing costs
Borrowing costs incurred by the Company that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised and included in the costs of the relevant assets when all the
following conditions are satisfied:
① when expenditures for the asset have been incurred;
② when borrowing costs have been incurred;
③ activities relating to the acquisition, construction or production of the asset that are necessary to prepare
the asset for its intended use have commenced,.
Other differences in borrowing interest, discounts or premiums and exchange rate will be carried through profit
and loss in the period in which they are incurred.
(2) Period for capitalisation of borrowing costs
For borrowing costs incurred that are directly attributable to the acquisition, construction or production of a
qualifying asset, capitalisation will begin when expenditures for the asset have been incurred, borrowing costs
have been incurred, and 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; capitalisation will stop when the
12
acquisition, construction or production of the qualifying asset have reached the expected status of the intended INTERIM
use or sale. REPOR
T
(3) Period for suspension of capitalisation
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.
(4) Calculation of the amount of capitalisation of borrowing costs
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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 79
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
17. 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.
18. Petroleum assets
Not applicable
12
INTERIM
REPOR
T
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
19. Intangible assets
(1) Measurement of intangible assets
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
12
INTERIM
policies accordingly REPOR
T
(2) Estimated useful life of intangible assets with a finite useful life
Item Estimated useful life Basis
Land use right 50 Statutory right of use
Computer software 5-10 years Estimated period of gains
(3) Basis for deciding an intangible asset as having an indefinite useful life
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 81
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
19. Intangible assets (Cont’d)
(4) Impairment provision for intangible assets
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of intangible
assets with a finite useful life. If there is any evidence indicating that an asset may be impaired, recoverable
amount shall be estimated for impairment test. 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
12 determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest
INTERIM
REPOR
group of assets capable of generating cash flows independently.
T
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of
the restorable value.
(5) Specific criteria for classifying internal research and development projects of the Company into the research
phase and development phase
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.
(6) Accounting for internal research and development project 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.
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
19. Intangible assets (Cont’d)
(5) Specific criteria for classifying internal research and development projects of the Company into the research
phase and development phase (Cont’d)
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.
Research and development expenditure incurred which cannot be differentiated as expended during the research
phase or develppment phase are recognised through profit and loss.
12
INTERIM
20. Long-term prepaid expenses REPOR
T
Long-term prepaid expenses are expenditures and other expenses which have incurred but that shall be amortised over
the current period and subsequent periods of more than one year. Long-term prepaid expenses are amortised over the
estimated benefit period using the straight-line method.
21. Asset transfer with repurchase conditions
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 83
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
22. Accrued liabilities
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as accrued liabilities:
(1) The obligation is a current obligation borne by the Group; (2) it is likely that an outflow of economic benefits will be
resulted from the performance of the obligation; and (3) the amount of the obligation can be reliably measured.
At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses required
for the performance of existing obligations, after taking into account relevant risks, uncertainties, time value of money
and other factors pertinent to the contingencies.
If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party, the
compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation amount
recognised shall not be more than the carrying amount of accrued liabilities.
(1) Criteria for recognition of 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.
12
(2) Method for measuring accrued liabilities
INTERIM At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses
REPOR
T required for the performance of existing obligations, after taking into account relevant risks, uncertainties, time
value of money and other factors pertinent to the contingencies.
If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party,
the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation
amount recognised shall not be more than the carrying amount of accrued liabilities.
23. Share-based payments and equity instruments
Not applicable
24. Repurchase of the Company’s shares
Not applicable
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
25. Revenue
(1) The specific criteria for recognition of 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) Basis for recognition of revenue from the use right of assigned assets
Revenue is recognised on accrual basis according to the related contracts or agreements.
(3) Basis and method for determination of completion schedule when revenue from the rendering of services and
construction contracts is recognised based on the percentage-of-completion method
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;
economic benefits will flow into the enterprise;
② it is probable that the
③ the completion schedule of the transaction can be reliably
12
INTERIM
ascertained; and ④ transaction costs incurred and to be incurred can be reliably measured. REPOR
T
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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 85
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
26. Government grant
(1) Types
Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at
no consideration, excluding capital considerations from the government as an owner of the Group. Government
grants are classified into government grants related to assets and government grants related to income.
(2) Accounting treatment
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.
12 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
INTERIM
REPOR in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognised
T immediately in profit or loss for the current period.
27. Deferred income tax assets and deferred income tax liabilities
(1) Basis for recognition of deferred income tax assets
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.
(2) Basis for recognition of deferred income tax liabilities
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.
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
28. Lease
(1) Accounting treatment of operating lease
(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.
(2) Accounting treatment of 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. All other leases are classified 12
as operating leases. INTERIM
REPOR
T
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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 87
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
29. Assets held for sale
(1) Criteria for recognition of 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.
(2) Accounting treatment for assets held for sale
The non-current assets held for sale are not depreciated nor amortised 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
as set 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
12 at the date on which no future sale is decided.
INTERIM
REPOR
T 30. Business of asset securitisation
Not applicable
31. Hedge accounting
Not applicable
32. Changes in Significant Accounting Policies and Estimates
Any changes in significant accounting policies and accounting estimates during the reporting period
□ Yes √ No □ Not applicable
(1) Changes in accounting policies
Any changes in significant accounting policies during the reporting period
□ Yes √ No □ Not applicable
(2) Changes in accounting estimates
Any changes in significant accounting estimates during the reporting period
□ Yes √ No □ Not applicable
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
IV. Significant accounting policies, accounting estimates and amendments to differences in the
previous period (Cont’d)
33. Corrections on accounting errors in prior periods
Any prior accounting errors identified during the reporting period
□ Yes √ No □ Not applicable
(1) Retrospective restatement
Any prior accounting errors based on retrospective restatement identified during the reporting period
□ Yes √ No □ Not applicable
(2) Prospective application
Any prior accounting errors based on prospective application identified during the reporting period
□ Yes √ No □ Not applicable
34. Other significant accounting policies, accounting estimates and preparation method of financial
statements
Not applicable
12
INTERIM
REPOR
T
SHANDONG CHENMING PAPER HOLDINGS LIMITED 89
VIII. Financial Report
(v) Taxation
1. Main Tax Types and Tax Rates of the Company
Tax type Basis of taxation Tax rate
Value added tax Sales and procurement volume 10%, 13%, 17%
Excise tax
Business tax Revenue 3%, 5%
Urban maintenance and construction tax Amount of value added tax 5-7%
and business tax paid
Enterprise income tax Taxable income tax rate 15%, 25%
Educational surcharges Amount of value added tax and 3%
business tax paid
Local educational surcharges Amount of value added tax 2%
and business tax paid
2. Tax Incentives and Approvals
Enterprise Income Tax
Pursuant to the ”Revenue Bill 2008” passed by The Legislative Council of the Hong Kong Special Administrative Region
on 26 June 2008, Chenming (HK) Limited, a subsidiary of 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
12 tax rate of 25%.
INTERIM
REPOR
T Value-added Tax (“VAT”) incentives
Pursuant to Cai Shui [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of
Resources” issued by the State Administration of Taxation”, enterprises engaged in utilisation of raw materials
containing not less than 30% of coal gangue, stone coal, coal ash, bottom ash of coal boiler (excluding blast furnace
water quenching residue) in the production of building material products shall be exempted from VAT. Wuhan Chenjian
New-style Wall Materials Co., Ltd., a subsidiary of the Company, utilises raw materials containing above 30% of
coal ash in its production. It is thus qualified as an enterprise engaged in the utilisation of waste in production and is
exempted from VAT in 2012.
Pursuant to Cai Shui Zi [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of
Resources issued by the Ministry of Finance and the State Administration of Taxation” and the relevant requirements of
Cai Shui [2001] Document No. 72, Shandong Chenming Panels Co., Ltd. ( –|Q° ), Qihe
Chenming Panels Co., Ltd., Juancheng Chenming Panels Co., Ltd and Heze Chenming Panels Co., Ltd., all being
subsidiaries of the Company and produce products that applied integrated use of resources, are subject to an
immediate VAT refund policy.
3. Other explanation
Nil
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
、、
VIII. Financial Report
(VI) Business Combination and Consolidated Financial Statements
General description on business combination and consolidated financial statements: Nil
1. Subsidiaries
(1) Subsidiaries acquired through establishment or investment
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
SHANDONG CHENMING PAPER HOLDINGS LIMITED
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Wuhan Chenming Controlling Wuhan, Manufacture 211,367,000.00 RMB Manufacture and sales 202,824,716.34 — 50.93% 50.93% Yes 281,413,136.59 — —
Hanyang Paper subsidiary China of paper of paper products,
Holdings Co., Ltd. the materials of
manufacture of paper
and machinery
Shandong Chenming Wholly-owned Qihe, Manufacture 376,200,000.00 RMB Manufacture, processing 376,200,000.00 — 100% 100% Yes — —
Paper Group Qihe subsidiary China of paper and sales of paperboard
Paperboard and packaging paper Co.,
Ltd.
Shandong Chenming Controlling Shouguang, Electricity 99,553,100.00 RMB Manufacture and supply of 157,810,117.43 — 86.71% 86.71% Yes 17,047,011.91 — —
Power Supply subsidiary China electricity and steam
Holdings Co., Ltd.
Yanbian Chenming Controlling Yanji, Manufacture 81,633,000.00 RMB Mucilage glue fiber pulp, 96,725,533.01 — 100% 100% Yes — —
Paper Co., Ltd. subsidiary China of paper pulp and machine-made
paper
INTERIM
REPOR
12
91
INTERIM
REPOR
12
92
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Jiangxi Chenming Controlling Nanchang, Manufacture 172,000,000.00 US$ Production and processing, 69,754,840.64 — 51% 51% Yes 878,364,733.72 — —
Paper Co., Ltd. subsidiary China of paper etc. of machine-made
paper, paperboard,
paper panel, paper
products and
paper-making raw materials
Shouguang Chenming Controlling Shouguang, Manufacture 10,590,000.00 RMB Development, nurture of fast 7,199,000.00 — 68% 68% Yes -974,078.89 — —
Tianyuan Arboriculture subsidiary China growth poplar, forest,
Co., Ltd. vegetable and fruit
Hailaer Chenming Controlling Hailaer, Manufacture 16,000,000.00 RMB Sales and processing; sales 12,000,000.00 — 75% 75% Yes 26,686,334.95 — —
Paper Co., Ltd. subsidiary China of paper of machine- made paper
and pulp paper
Wuhan Chenming Controlling Wuhan, Electricity 88,235,000.00 RMB Generation and sales 45,000,000.00 — 51% 51% Yes 39,951,150.41 — —
Qianneng Electric subsidiary China of electricity and steam
Power Co., Ltd.
Wuhan Chenjian Controlling Wuhan, Wall materials 10,000,000.00 RMB Production, operation and 5,100,000.00 — 51% 51% Yes 15,827,169.46 — —
New-style Wall subsidiary China of paper sales of aerated fly ash
Materials Co., ltd. concrete blocks
Shandong Chenming Controlling Shouguang, Electricity 11,800,000.00 US$ Generation and sales of 49,820,000.00 — 51% 51% Yes 63,553,495.11 — —
Xinli Power subsidiary China electricity and steam
Co., Ltd.
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Shouguang Chenming Wholly-owned Shouguang, Production and 7,000,000.00 RMB Utilisation of ash in the 7,000,000.00 — 100% 100% Yes — —
Cement Co., Ltd. subsidiary China sales of cement production of cement
and sales of cement
SHANDONG CHENMING PAPER HOLDINGS LIMITED
Shandong Chenming Wholly-owned Shouguang, Production and 30,000,000.00 RMB Decorative board of the 30,000,000.00 — 100% 100% Yes — —
Panels Co., Ltd. subsidiary China sales of panels layer of laminated
board, wooden products,
laminated board and
fortified wooden floorboard
Shouguang Chenming Wholly-owned Shouguang, Production and 500,000.00 RMB Production, processing and 500,000.00 — 100% 100% Yes — —
Floor Board Co., Ltd. subsidiary China sales of floor sales of fortified wooden
board floorboard and
impregnated paper
Qihe Chenming Wholly-owned Qihe, Production and 40,820,000.00 RMB Production, processing 40,820,000.00 — 100% 100% Yes — —
Panels Co., Ltd. subsidiary China sales of panels and sales of high-density
(medium-density)
fiberboard, decorative
panel, melamine
impregnated paper
and composite floor
INTERIM
REPOR
12
93
INTERIM
REPOR
12
94
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Yangjiang Chenming Wholly-owned Yangjiang, Manufacture 1,000,000.00 RMB Plantation and development 1,000,000.00 — 100% 100% Yes — —
Arboriculture subsidiary China of forest, and technology
Co., Ltd. consultation of forestry
Zhanjiang Chenming Wholly-owned Zhanjiang, Manufacture 1,000,000.00 RMB Plantation of forest, 1,000,000.00 — 100% 100% Yes — —
Arboriculture Co., Ltd. subsidiary China nutrition and sales of
seedling, processing and
sales of timber and
processing and sales
of by-products of timber
Jilin Chenming Wholly-owned Jilin City, Manufacture 1,500,000,000.00 RMB Processing and sales of 1,501,350,000.00 — 100% 100% Yes — —
Paper Co., Ltd. subsidiary China of paper machine-made paper,
paperboard, paper product,
paper pulp, machinery and
equipment of manufacture
of paper
Juancheng Wholly-owned Juancheng, Production and 15,000,000.00 RMB Production and sales of 15,000,000.00 — 100% 100% Yes — —
Chenming Panels subsidiary China sales of panels particle board, decorative
Co., Ltd. particle board and
melamine impregnated
paper
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Shandong Grand Controlling Shouguang, Beverage 13,910,000.00 US$ Restaurant and 80,500,000.00 — 70% 70% Yes -8,864,142.76 — —
View Hotel Co., Ltd. subsidiary China beverage services
SHANDONG CHENMING PAPER HOLDINGS LIMITED
Zhanjiang Chenming Wholly-owned Zhanjiang, Arboriculture 2,500,000,000.00 RMB Improvement of 2,500,000,000.00 — 100% 100% Yes — —
Paper Pulp Co., Ltd. subsidiary China plant fodtering,
true planting and soil,
research of forestry,
manufacture,
production, processing
and sales of paper
pulp etc.
Chenming (HK) Wholly-owned Hong Kong, Trade of 100,000.00 US$ Export and import trade 783,310.00 — 100% 100% Yes — —
Limited subsidiary China paper of paper products
and market research
Shouguang Chenming Wholly-owned Shouguang, Transportation 10,000,000.00 RMB Transportation of goods 10,000,000.00 — 100% 100% Yes — —
Modern Logistic subsidiary China
Co., Ltd.
Shouguang Chenming Controlling Shouguang, Manufacture 20,000,000.00 US$ Production and sales 113,616,063.80 — 75% 75% Yes 42,929,339.21 — —
Art Paper Co., Ltd. subsidiary China of paper of machine-made paper
Qihe Chenming Wholly-owned Qihe, Purchase and 500,000.00 RMB Purchase and sales of 500,000.00 — 100% 100% Yes — —
Waste Collection subsidiary China sales of waste wastes and old materials
Co., Ltd. and old material
INTERIM
REPOR
12
95
INTERIM
REPOR
12
96
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Jilin Chenming Wholly-owned Jilin, Purchase and 1,000,000.00 RMB Purchase and sales of 1,000,000.00 — 100% 100% Yes — —
Waste Collection subsidiary China sales of waste wastes and old materials
Co., Ltd. and old mateial
Jilin Chenming Wholly-owned Jilin, Processing of 600,000.00 RMB Processing of machinery, 600,000.00 — 100% 100% Yes — —
Machinery subsidiary China machinery manufacture, installation
Manufacturing and repair of
Co., Ltd. the equipment
of machinery
Nanchang Chenming Wholly-owned Nanchang, Arboriculture 10,000,000.00 RMB Processing and sales 10,000,000.00 — 100% 100% Yes — —
Arboriculture subsidiary China of wooden finished
Co., Ltd. products, semi- finished
products and
by-products of timber
Fuyu Chenming Wholly-owned Fuyu, Manufacture 208,000,000.00 RMB Production and sales 208,000,000.00 — 100% 100% Yes — —
Paper Co., Ltd. subsidiary China of paper of machine-made paper
and paperboard
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d))
Unit: RMB
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Huanggang Chenming Wholly-owned Huanggang, Arboriculture 70,000,000.00 RMB Plantation, processing 70,000,000.00 — 100% 100% Yes — —
Arboriculture Co., Ltd. subsidiary China and sales of forests
SHANDONG CHENMING PAPER HOLDINGS LIMITED
Huanggang Chenming Wholly-owned Huanggang, Arboriculture 20,000,000.00 RMB Operation and acquisition 20,000,000.00 — 100% 100% Yes — —
Paper Co., Ltd. subsidiary China of forest; establishment
of paper pulp projects
Shouguang Meilun Wholly-owned Shouguang, Manufacture 2,200,000,000.00 RMB Production and sales of 2,200,000,000.00 — 100% 100% Yes — —
Paper Co. Ltd. subsidiary China of paper machine-made paper
and paperboard
Shouguang Shun Wholly-owned Shouguang, Customs 1,500,000.00 RMB Business agency of 1,500,000.00 — 100% 100% Yes — —
Da Customs subsidiary China declaration, professional customs
Declaration Co,Ltd. inspection declaration and
declaration inspection declaration
INTERIM
REPOR
12
97
INTERIM
REPOR
12
98
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to the minority
shareholders
to the minority
shareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Wuhan Chenming Wholly-owned Wuhan, Real estate 20,000,000.00 RMB Development of real estate 20,000,000.00 — 100% 100% Yes — —
Wan Xing subsidiary China and sales of
Real Estate Co., Ltd. commodity house
Shandong Chenming Wholly-owned Shouguang, Sales of paper 100,000,000.00 RMB Sales of machine-made 100,000,000.00 100% 100% Yes — —
Paper Sales subsidiary China paper, paperboard and
Company Limited paper making raw
materials
Shanghai Runchen Controlling Shanghai, Equity investment 305,000,000.00 RMB Equity investment, 300,000,000.00 98.36% 98.36% Yes 5,013,229.47
Equity Investment subsidiary China investment management,
Fund Co., Ltd. investment consulting
Shouguang Chenming Wholly-owned Shouguang, Transportation 10,000,000.00 RMB Land transport, 10,000,000.00 100% 100% Yes
Industrial Logistics subsidiary China storage of goods
Co., Ltd.
Shouguang Chenming Wholly-owned Shouguang, Machinery 2,000,000.00 RMB Processing and repair of 2,000,000.00 100% 100% Yes
Papermaking Machine subsidiary China manufacturing paper making
Co., Ltd. machines
Shouguang Chenming Wholly-owned Shouguang, Import and 10,000,000.00 RMB Import and export of 10,000,000.00 100% 100% Yes
Import and Export subsidiary China export trade goods and technology
Trade Co., Ltd.
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
shareholders of
the subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Shouguang Chenming Wholly-owned Shouguang, Property 1,000,000.00 RMB Property investment 1,000,000.00 100% 100% Yes
Jiatai Property subsidiary China investment
Management Co., Ltd.
SHANDONG CHENMING PAPER HOLDINGS LIMITED
Shouguang Chenming Wholly-owned Shouguang, Packaging 1,000,000.00 RMB Sales of paper 1,000,000.00 100% 100% Yes
Hongxin Packaging subsidiary China packaging
Co., Ltd.
Shouguang Hengfeng Wholly-owned Shouguang, Storage of 500,000.00 RMB Storage and leasing, 500,000.00 100% 100% Yes
Storage Co., Ltd. subsidiary Shandong, goods, leasing storage service
China
Chenming International Wholly-owned Los Angeles, Import 3,000,000.00 US$ Import and export, 19,861,955.00 100% 100% Yes
Co., Ltd. subsidiary United States and export, technology research
technology and development
research and
development
Japan
Chenming Paper Joint venture Tokyo, Japan Trade of paper 1,500,000.00 US$ Trade of paper 9,306,351.20 100% 100% Yes
Company Limited subsidiary
Wuhan Xingzhilian
Paper Company Limited Wholly-owned Wuhan, China Manufacture 20,000,000.00 RMB Manufacture of paper 20,000,000.00 100% 100% Yes
subsidiary of paper
INTERIM
REPOR
12
99
INTERIM
REPOR
12
100
VI. Business Combination and Consolidated Financial Statements (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment
(1) Subsidiaries acquired through establishment or investment
Further explanation of subsidiaries acquired through establishment or investment: Nil Unit: RMB
(2) Subsidiaries acquired through business combination under common control Setting off
of the loss
Not applicable attributable
to the minority
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
shareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Shouguang City Wholly-owned Shouguang, Purchase and 1,000,000.00 RMB Purchase and sales of 1,000,000.00 100% 100% Yes — — —
Run Sheng Wasted subsidiary Shandong sales of waste and obsolete
SHANDONG CHENMING PAPER HOLDINGS LIMITED
Paper Recycle waste and materials
Co., Ltd. old materials
Wuxie Song Ling Wholly-owned Wuxi City Manufacture 5,010,000.00 RMB Sales, cutting and 0.00 100% 100% Yes — — —
Paper Co., Ltd. subsidiary of paper processing of paper
Shouguang Hongyi Wholly-owned Shouguang, Packaging 1,550,000.00 RMB Processing and sales of 1,700,000.00 100% 100% Yes — — —
Decorative Packaging subsidiary Shandong packaging Products,
Co., Ltd. indoor and outdoor
decorations
Shouguang Wei Yuan Wholly-owned Shouguang, Transportation 3,930,000.00 RMB Transportation of goods, 4,000,000.00 100% 100% Yes — — —
Logistics Company subsidiary Shandong maintenance of vehicles,
Limited storage and loading of
goods, international
freight agency service
INTERIM
REPOR
12
101
INTERIM
REPOR
12
102
VI. Business Combination and Consolidated Financial Statements (Cont’d)
SHANDONG CHENMING PAPER HOLDINGS LIMITED
1. Subsidiaries (Cont’d)
(3) subsidiaries acquired not through business combination under common control
(3) subsidiaries acquired not through business combination under common control (Cont’d)
Unit: RMB
Setting off
of the loss
attributable
to attributable
toshareholders
of the
subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
Balance of Set off the the minority
other projects profit or loss shareholders’
Actual that of the minority portion of
investment constitutes interests from the opening
as at net investment the equity of balance of
Full name Subsidiary Place of Business Registered the end of in the Shareholding Voting rights Whether Minority the minority owners’ equity
of subsidiary type Incorporation Nature capital Currency Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Shouguang Xinyuan Wholly-owned Shouguang, Coal 3,000,000.00 RMB Retail of coal, gasoline, 2,000,000.00 100% 100% Yes — — —
Coal Co., Ltd. subsidiary Shandong construction materials
and plumbing parts
Shouguang Liben Shouguang, Paper making 74,070,000.00 RMB Carbon copy paper 15,850,354.00 100% 100% Yes
Paper Making China
Co., Ltd.
Further explanation of subsidiaries acquired not through business combination under common control: Nil
VIII. Financial Report
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
2. Special purpose vehicles or operating entities whose control resulting from, among other things,
entrusting to operate or lease
□ Applicable √ Not applicable
Further explanation of Special purpose vehicles or operating entities whose control resulting from, among other things,
entrusting to operate or lease: Nil
3. Explanation of change in scope of consolidation
√ Applicable □ Not applicable
Reason for change in scope of consolidated financial statements:
The Company invested and established a wholly-owned subsidiary, Japan Chenming Paper Company Limited in Tokyo,
Japan on 18 January 2012. On 8 February 2012, Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a controlling
subsidiary of the Company, invested and established a wholly-owned subsidiary, Wuhan Xingzhilian Company
Limited. The Company is able to exercise control over the two companies since their establishment date and they are
consolidated upon their date of establishment.
4. Entities newly included in the scope of consolidation during the reporting period and entities not
included in the scope of consolidation during the reporting period
Subsidiaries, special purpose vehicles and operating entities whose control resulting from, among other things,
entrusting to operate or lease newly included in the scope of consolidation during the reporting period 12
INTERIM
Unit: RMB REPOR
T
Net assets at Net profit
Name the end of period for the period
Japan Chenming Paper Company Limited 3,746,230.52 -5,338,173.72
Wuhan Xingzhilian Company Limited 19,994,281.68 -5,718.32
Subsidiaries, special purpose vehicles and operating entities whose control resulting from, among other things,
entrusting to operate or lease not included in the scope of consolidation during the reporting period: Nil
5. Business combination under common control during the reporting period
Not applicable
6. Business combination not under common control during the reporting period
Not applicable
7. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period
Not applicable
8. Reverse takeover during the reporting period
Not applicable
9. Merger during the reporting period
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 103
VIII. Financial Report
(VI) Business Combination and Consolidated Financial Statements (Cont’d)
10. Exchange rate of translating major financial statement items of overseas operating entities
The exchange rate of translating Chenming (HK) Limited, Chenming International Co., Ltd., and Japan Chenming Paper
Company Limited, the overseas subsidiaries of the Company, into the reporting currency of the consolidated financial
statements is as follows: all asset and liability items in the balance sheet were translated using the spot exchange rate
(i.e. RMB6.3249: USD1) prevailing at the balance sheet date; All the owner’s equity items were translated using the spot
exchange rate on the date the corresponding transactions occurred, except the “retained profit” item. The income and
expense items in the income statement were translated using the average exchange rate on the date the corresponding
transactions occurred. The cash flows of overseas subsidiaries were translated using the spot exchange rate on the date
the cash flows ocurred. The effect of exchange rate change on cash is separately presented in the cash flow statement
as reconciliation item.
(VII) Notes to major items of the Consolidated Financial Statements
1. Monetary funds
Unit:RMB
Closing balance Opening balance
Foreign Foreign
currency Exchange Amount in currency Exchange Amount in
Item amounts Rate RMB amounts Rate RMB
Cash: — — 1,612,295.60 — — 1,908,702.31
12 RMB
USD
—
30,000.00
—
6.3249
1,265,128.60
189,747.00
—
30,000.00
—
6.3009
1,556,425.31
189,027.00
INTERIM EUR 20,000.00 7.871 157,420.00 20,000.00 8.1625 163,250.00
REPOR
T Cash in Bank: — — 2,587,684,118.42 — — 2,315,139,917.22
RMB — — 2,290,767,563.09 — — 1,830,469,433.66
USD 46,373,103.24 6.3249 293,305,240.70 76,809,550.06 6.3009 483,969,293.97
EUR 82,772.88 7.871 651,505.34 82,977.09 8.1625 677,300.50
JPY 34,912,325.00 0.07967 2,781,464.93 29,467.24 0.8107 23,889.09
HKD 218,768.38 0.81522 178,344.36
Other monetary funds: — — 988,279,551.32 — — 1,212,889,591.94
RMB — — 987,499,409.21 — — 1,212,112,028.70
USD 123,329.79 6.3249 780,048.59 123,389.73 6.3009 777,466.35
EUR 11.88 7.871 93.52 11.87 8.1625 96.89
Total — — 3,577,575,965.34 — — 3,529,938,211.47
Amounts subject to limitations, deposited overseas and liable to recovery risk due to security, pledge or immobilisation
should be individually stated:
(1) On 30 June 2012, the ownership of other monetary funds of RMB136,100,000.00 (31 December 2011:
RMB402,100,000.00) of the Group was restricted, of which certificates of time deposits of RMB136,100,000.00
were the pledge for the bank loans of USD20,000,000.00 from J.P. Morgan for a term of two years.
(2) Other monetary funds of RMB398,554,173.38 (31 December 2011: RMB263,942,118.89) were the guarantee
deposit for the application for bank acceptance with the banks by the Group;
(3) Other monetary funds of RMB453,625,377.94 (31 December 2011: RMB546,847,473.05) were the guarantee
deposit for the application for letter of credit with the banks by the Group.
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(VII) Notes to major items of the Consolidated Financial Statements (Cont’d)
2. Held-for-trading financial assets
Not applicable
3. Bills receivable
(1) Classification of bills receivable
Unit:RMB
Closing Opening
Category balance balance
Bank acceptance 2,300,338,786.78 2,444,508,997.74
Commercial acceptance
Total 2,300,338,786.78 2,444,508,997.74
(2) Bills receivable pledged at the end of the period
Nil
Note: As at 30 June 2012, notes with a carrying value of RMB1,999,243,719.86 (31 December 2011: RMB1,729,809,660.95) was
discounted for short-term borrowings. The Company did not cease to recognise discounted bills.
(3) Bills converted into accounts receivable due to default on the part of the drawer and outstanding notes 12
INTERIM
endorsed to other parties by the Company at the end of the period REPOR
T
Nil
Overview of outstanding notes endorsed to other parties by the Company
Unit:RMB
Unit of issue Date of issue Date of expiry Amount Note
Foreign Language Teaching and Research Press Co., Ltd. 30 May 2012 30 November 2012 9,677,999.85
Samson Paper (Shenzhen) Co., Ltd. 29 May 2012 29 November 2012 9,200,000.00
Anhui Shidai Resources Holdings Co., Ltd. 28 May 2012 28 November 2012 6,000,000.00
Shanghai Zesheng Composite Material Co., Ltd. 31 May 2012 30 November 2012 6,000,000.00
Guangxi Guilin Xinxin Chain of Agricultural Products Co., Ltd. 17 February 2012 17 August 2012 5,600,000.00
Total 36,477,999.85
Note: Nil
Explanation of discounted or pledged commercial acceptance: Nil
4. Dividend receivable
Not applicable
5. Interest receivable
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 105
VIII. Financial Report
(Cont’d)
6. Accounts receivable
(1) Disclosure of accounts receivable according to classification
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amount Percentage (%) Amount Percentage (%) Amount Percentage (%) Amount Percentage (%)
Accounts receivable which are
individually significant and
individually provided for bad debt 51,145,706.12 1.39% 51,145,706.12 100% 56,089,509.86 1.79% 56,089,509.86 100%
Accounts receivable collectively provided for bad debt
No-risk portfolio 469,063,226.74 12.78% 241,485,698.41 7.72%
General-risk portfolio 3,150,254,255.95 85.83% 203,271,095.81 6.45% 2,831,411,794.16 90.49% 186,459,737.88 6.59%
Sub-total 3,619,317,482.69 98.61% 203,271,095.81 5.62% 3,072,897,492.57 98.21% 186,459,737.88 6.07%
Accounts receivable which are not
individually significant but
individually provided for bad debt
Total 3,670,463,188.81 — 254,416,801.93 — 3,128,987,002.43 — 242,549,247.74 —
Explanatory note to the categories of accounts receivable:
Accounts receivable of more than RMB1 million are recognised as accounts receivable individually significant.
12 A no-risk portfolio is the accounts receivable which are individually significant or have certain specific risk
INTERIM features and are determined by the management to be not impaired as at the balance sheet date upon subject to
REPOR
T impairment tests separately. A general-risk portfolio is the accounts receivable for which bad debts are provided
under credit risk portfolio as they are not qualified to be subject to impairment tests separately (individually
significant or have certain specific risk features) and are classified into some portfolios based on the credit
risk features such as age and the percentage of bad debt provision of each portfolio is determined against the
common risk features of each portfolio by the management. Accounts receivable of less than RMB1 million but
individually provided for bad debt are recognised as accounts receivable not individually significant but individually
provided for bad debt.
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
6. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable according to classification (Cont’d)
Accounts receivable individually significant and individually provided for bad debt as at end of the period
□ Applicable □ Not applicable
Unit: RMB
Bad debt Percentage
Accounts receivable Book balance provision of provision Reason
Payment for goods 51,145,706.12 51,145,706.12 100% Most of which were payment for
goods aged over 3 years and
unlikely to be recovered
Total 51,145,706.12 51,145,706.12 —
In respect of portfolio, the measurement of bad debt provision for portfolio is based on the aging method:
□ Applicable □ Not applicable
Unit: RMB
Closing balance Opening balance 12
Book balance Bad debt Book balance Bad debt INTERIM
Aging Amount Percentage (%) provision Amount Percentage (%) provision REPOR
T
Within 1 year
Of which:
Within 1 year 3,075,138,786.68 97.62% 153,756,939.36 2,769,702,335.26 97.82% 138,485,116.77
Sub-total of
within 1 year 3,075,138,786.68 97.62% 153,756,939.36 2,769,702,335.26 97.82% 138,485,116.77
1 to 2 years 24,188,101.69 0.77% 2,418,810.17 10,895,154.72 0.38% 1,089,515.48
2 to 3 years 4,790,026.63 0.15% 958,005.33 4,911,498.20 0.18% 982,299.65
Over 3 years 46,137,340.95 1.46% 46,137,340.95 45,902,805.98 1.62% 45,902,805.98
3 to 4 years
4 to 5 years
Over 5 years
Total 3,150,254,255.95 203,271,095.80 2,831,411,794.16 186,459,737.88
In respect of portfolio, the measurement of bad debt provision for portfolio is based on the percentage of total
accounts receivable method:
□ Applicable √□ Not applicable
In respect of portfolio, the measurement of bad debt provision for portfolio is based on other methods:
□ Applicable √□ Not applicable
Accounts receivable not individually significant but individually provided for bad debt as at the end of the period:
□ Applicable √□ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 107
VIII. Financial Report
(Cont’d)
6. Accounts receivable (Cont’d)
(2) Reversal or recovery of accounts recrivable during the reporting period
Unit: RMB
Cumulative bad
Particulars of Reason for Original basis debt provisions Reversed or
accounts reversal or for bad debt prior to reversal recovered
receivable recovery provisions or recovery amounts
Payment for goods Collection of Overdue for 4,943,803.74 4,943,803.74
payment for goods 2 years and
the least estimated
possibility of
recovery
Total — — 4,943,803.74 —
Accounts receivable individually significant or not individually significant but tested for impairment individually and
provided for bad debt as at end of the period:
Nil
12
INTERIM (3) Accounts receivable actually written-off during the reporting period
REPOR
T
Not Applicable
(4) Outstanding amount within the accounts receivable due from shareholders holding 5% or more
(including 5%) in the voting shares of the Company during the reporting period
□ Applicable √□ Not applicable
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
6. Accounts receivable (Cont’d)
(5) Top five accounts receivable are as follows:
Unit: RMB
As a percentage of
the total balance
Relationship with of accounts
Entity name the Company Amount Term receivable (%)
Hebei WenTong Trading Non-related party 86,777,500.00 Within 1 year 2.36%
Co., Ltd.
Dongguan Huafa Paper Non-related party 37,870,607.81 Within 1 year 1.03%
Co., Ltd.
Dandong Wuxing Chemical Non-related party 33,708,328.43 Within 1 year 0.92%
Fibre and Textile
(Group) Co., Ltd.
Shanxi Printing Materials Non-related party 27,313,790.90 Within 1 year 0.75%
Company
Hefei Wuzhou Paper Co., Ltd. Non-related party 26,017,514.94 Within 1 year 0.71%
Total — 211,687,742.08 5.77%
12
INTERIM
REPOR
(6) Overview of accounts receivable of the related parties T
As a percentage of
the total balance
Relationship with of accounts
Entity name the Company Amount receivable (%)
Anhui Shidai Resources Holdings Co., Ltd. Associate 10,189,479.28 0.28%
Jiangxi Jiangbao Media Colour Printing Associate 647,390.00 0.02%
Co. Ltd.
Total — 10,836,869.28 0.3%
(7) Derecognition of accounts receivable
Not applicable
(8) Accounts receivable as the underlying of securitisation and the amount of the assets and liabilities involved
and derived continuously presented
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 109
VIII. Financial Report
(Cont’d)
7. Other receivables
(1) Disclosure of other receivables by classification
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Percentage Percentage Percentage Percentage
Category Amount (%) Amount (%) Amount (%) Amount (%)
Other receivables which are
individually significant and
individually provided for
bad debt 9,402,148.72 3.08% 9,402,148.72 100% 9,330,331.45 2.38% 9,330,331.45 100%
Other receivables collectively provided for bad debt
No-risk portfolio 135,127,761.41 44.28% 252,019,690.65 64.41%
General-risk portfolio 146,219,785.27 47.92% 43,296,784.26 29.61% 114,387,017.39 29.23% 40,855,794.32 35.72%
Sub-total 281,347,546.68 92.2% 43,296,784.26 15.39% 366,406,708.04 93.64% 40,855,794.32 11.15%
Other receivables which are
not individually significant but
12 individually provided for
bad debt 14,401,628.46 4.72% 14,401,628.46 100% 15,554,009.74 3.98% 15,554,009.74 100%
INTERIM
REPOR
T Total 305,151,323.86 — 67,100,561.44 — 391,291,049.23 — 65,740,135.51 —
Explanatory note to the categories of other receivables:
Other receivables of more than RMB1 million are recognised as other receivables individually significant. A no-
risk portfolio is the other receivables which are individually significant or have certain specific risk features and
are determined by the management to be not impaired as at the balance sheet date upon subject to impairment
tests separately. A general-risk portfolio is the other receivables for which bad debts are provided under credit
risk portfolio as they are not qualified to be subject to impairment tests separately (individually significant or have
certain specific risk features) and are classified into some portfolios based on the credit risk features such as age
and the percentage of bad debt provision of each portfolio is determined against the common risk features of
each portfolio by the management. Other receivables of less than RMB1 million but individually provided for bad
debt are recognised as other receivables not individually significant but individually provided for bad debt.
Other receivables individually significant and individually provided for bad debt as at end of the period
□ Applicable □ Not applicable
Unit: RMB
Bad debt Percentage of
Other receivables Book balance provisions provision Reason
Amounts with customers 9,402,148.72 9,402,148.72 100% Most of which
were amounts
aged over
five years
Total 9,402,148.72 9,402,148.72 —
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the aging method:
□ Applicable □ Not applicable
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
7. Other receivables (Cont’d)
(1) Disclosure of other receivables by classification (Cont’d)
Unit: RMB
Closing balance Opening balance
Book balance Bad debt Book balance Bad debt
Aging Amount Percentage (%) provision Amount Percentage (%) provision
Within 1 year Of which:
Within 1 year 88,447,364.71 60.49% 4,422,368.24 63,395,635.64 55.42% 3,169,781.77
Sub-total of within 1 year 88,447,364.71 60.49% 4,422,368.24 63,395,635.64 55.42% 3,169,781.77
1 to 2 years 5,342,872.33 3.65% 534,287.23 3,856,994.93 3.37% 385,699.49
2 to 3 years 17,611,774.30 12.05% 3,522,354.86 12,292,592.20 10.75% 2,458,518.44
Over 3 years 34,817,773.93 23.81% 34,817,773.93 34,841,794.62 30.46% 34,841,794.62
3 to 4 years
4 to 5 years
Over 5 years
Total 146,219,785.27 — 43,296,784.26 114,387,017.39 — 40,855,794.32
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the percentage of 12
INTERIM
total accounts receivable method: REPOR
T
□ Applicable √□ Not applicable
In respect of portfolio, the measurement of bad debt provision for other receivables is based on other methods:
□ Applicable √□ Not applicable
Other receivables not individually significant but individually provided for bad debt as at end of the period:
□ Applicable □ Not applicable
Unit: RMB
Percentage
Other Book Bad debt of provision
receivables balance provision (%) Reason
Amounts with customers 14,401,628.46 14,401,628.46 100% Most of which were
amounts aged
over 2 years
Total 14,401,628.46 14,401,628.46 100%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 111
VIII. Financial Report
(Cont’d)
7. Other receivables (Cont’d)
(2) Reversal or recovery of other receivables during the reporting period
Unit: RMB
Cumulative bad
Particulars of Reason for Original basis debt provisions Reversed or
other reversal or for debt prior to reversal recovered
receivables recovery provision or recovery amounts
Prepayments for goods Receipt of payments Prepayment overdue 1,080,564.01 1,080,564.01
for goods, for 2 years and the
receipt of goods least estimated
possibility of recovery
Total — — 1,080,564.01 —
Other receivables individually significant or not individually significant but tested for impairment individually and
provided for bad debt as at end of the period: Nil
(3) Other receivables actually written-off during the reporting period
12
INTERIM Unit: RMB
REPOR
T
Whether related
Nature of other Time of Written-off Reason for to related party
Entity name receivable written-off amount written-off transactions
Amounts with customers Deposits, etc. 1 May 2012 234,423.07 Unable to No
recover
Total — — 234,423.07 — —
Explanation of written-off of other receivables: the cumulative written-off other receivables amounted to
RMB234,423.07 and no significant other receivables were actually written off.
(4) Outstanding amount within the other receivables due from shareholders holding 5% or more (including 5%) in
the voting shares of the Company during the reporting period
□ Applicable √□ Not applicable
(5) Explanation of the significant other receivables
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
Not applicable
(Cont’d)
7. Other receivables (Cont’d)
(6) Top five other receivables are as follows:
Unit:RMB
As a percentage of
the total balance
Relationship with of other
Entity name the Company Amount Term receivable (%)
Zhanjiang Customs Non-related party 52,490,685.69 Within 1 year 17.2%
District, People’s
Republic of China
Communications and Non-related party 7,318,243.00 Within 1 year 2.4%
transportation Bureau
of Shouguang City
Weifang Customs duty Non-related party 6,533,380.87 Within 1 year 2.14%
People’s Court of Non-related party 6,904,693.90 Within 1 year 2.26%
Shouguang City
Shandong Zhenglong
International Trade
Non-related party 3,628,589.70 Within 1 year 1.19%
12
INTERIM
Co., Ltd. REPORT
Total 76,875,593.16 — 25.19%
(7) Overview of other receivables of the related parties
Unit: RMB
As a percentage of
Relationship with the total balance of
Entity name the Company Amount other receivables (%)
Arjo Wiggins Chenming Specialty Paper
Co., Ltd. Associate 1,290,901.12 0.42%
Total — 1,290,901.12 0.42%
(8) Derecognition of other receivables
Not applicable
(9) Other receivable as the underlying of securitisation and the amount of the assets and liabilities involved and
derived continuously presented
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 113
VIII. Financial Report
(Cont’d)
8. Prepayments
1) Prepayments stated according to aging
Unit: RMB
Closing balance Opening balance
Aging Amount Percentage (%) Amount Percentage (%)
Within 1 year 836,824,876.99 80.07% 582,653,900.45 76.18%
1 to 2 years 208,321,784.72 19.93% 182,226,337.45 23.82%
2 to 3 years
Over 3 years
Total 1,045,146,661.71 — 764,880,237.90 —
Explanatory note to the aging of prepayments:
The significant prepayments of aging over 1 year mainly are the prepaid amounts of purchasing for which the
Group does not require the delivery of goods due to the operating plan and arrangement of the Group.
12
INTERIM
REPOR
T
114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
8. (cont’d)
(2) Top 5 prepayments are set out as follows
Unit: RMB
Relationship Reason for
Entity name with the Group Amount Time outstanding
Shouguang Cailun Shenxing Non-related party 252,133,185.45 31 May 2012 Prepaid the good
Fine Chemical Co., Ltd. payments according
to the agreed contract
Forestry deposits of each village Non-related party 88,589,560.20 24 December 2010 Prepaid forestry
of Huanggang Shi Xia Qu deposits according to
the agreed contract
Tianyuan Construction Group Non-related party 32,373,000.00 31 December 2011 Prepaid the good
Co., Ltd. payments according
to the agreed contract
EFAT GROUP LTD Non-related party 23,485,050.58 29 April 2012 Prepaid the good
payments according
to the agreed contract
Dalin Nge Logistics Co., Ltd. Non-related party 22,026,439.64 13 December 2011 Prepaid the good
payments according
to the agreed contract
12
INTERIM
REPORT
Total — 418,607,235.87 — —
Description of major entities related to prepayments: Nil
(3) Outstanding amount within the prepayments due from shareholders holding 5% or more (including 5%) in the
shares of the Company in the reporting period
□Applicable√Not applicable
(4) Description of prepayments
Nil
9. Inventory
(1) Inventory by classification:
Unit: RMB
Closing balance Opening balance
Item Book balance Impairment Provision Carrying amount Book balance Impairment Provision Carrying amount
Raw materials 3,073,872,351.99 552,446.69 3,073,319,905.30 2,892,631,003.19 21,071,145.40 2,871,559,857.79
Work-in-process products 84,755,864.75 84,755,864.75 105,925,380.16 105,925,380.16
Goods in stock 2,273,793,581.59 34,005.27 2,273,759,576.32 2,644,574,241.70 35,587,358.28 2,608,986,883.42
Working capital
construction materials
Consumable biological assets
Total 5,432,421,798.33 586,451.96 5,431,835,346.37 5,643,130,625.05 56,658,503.68 5,586,472,121.37
SHANDONG CHENMING PAPER HOLDINGS LIMITED 115
VIII. Financial Report
(Cont’d)
9. Inventory (cont’d)
(2) Inventory impairment provision
Unit: RMB
Decrease during the period
Opening Provision Closing
Inventory type book balance during the period Reversals Write-offs book balance
Raw materials 21,071,145.40 20,518,698.71 552,446.69
Work-in-process products
Goods in stock 35,587,358.28 35,553,353.01 34,005.27
Working capital construction materials
Consumable biological assets
Total 56,658,503.68 56,072,051.72 586,451.96
(3) Inventory impairment provision
Percentage of the
reversal and
12
write-off during
INTERIM Reason of reversal and the period
REPOR
T write-off of inventory to the closing
Basis for inventory impairment provision balance of
Item impairment provision during the period such inventory
Raw materials Disposal
Goods in stock The realisable net value of the Disposal
finished goods lower than the
cost of the inventory due to
the decrease of the market
price
Work-in-process
products
Working capital
construction materials
Consumable
biological assets
Description of inventory:
Nil
116 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
10. Other current assets
Unit: RMB
Item Closing balance Opening balance
Non-credited VAT proceeds 1,726,258,999.04 1,661,162,690.83
Prepaid enterprise income tax 98,869,529.20 37,199,570.80
Total 1,825,128,528.24 1,698,362,261.63
Description of other current assets: Nil
11. Held-for-trading financial liabilities
Not applicable
12. Held-to-maturity investments
Not applicable
13. Long-term receivables 12
INTERIM
REPOR
T
Not applicable
14. Investments in joint ventures and investments in associates
Unit: RMB
Voting right
Equity interest in the Total assets Total liabilities Total net assets
Enterprise Registration Legal Business Registered held by the investee by the as at the end as at the end as at the end Total revenue Net profit
Name of investee type place representative nature capital Currency Company (%) Company (%) of the period of the period of the period for the period for the period
I. Joint venture
II. Associate
Arjo Wiggins Chenming Sino-foreign
Specialty Paper Equity Joint Manufacture
Co., Ltd. venture Shandong, China Tong Chong of paper 267,368,330.00 RMB 30% 30% 295,563,422.50 240,585,403.60 54,978,018.90 -9,639,651.68
Qingzhou Chenming
Denaturation Limited
Amylum Co., Ltd. company Shandong, China Fang Shiming Starch 3,000,000.00 RMB 30% 30%
Jiangxi Jiangbao
Media Colour Limited
Printing Co. Ltd. company Jiangxi, China Ou Yang Printing 23,140,000.00 RMB 21.16% 21.16% 39,213,919.58 17,403,066.27 21,810,853.31 7,002,232.61 828,762.73
Shandong Hongqiao
Venture Capital Limited Venture
Co., Ltd. company Shandong, China Tan Shouqing capital 250,000,000.00 RMB 20% 20% 250,000,000.00 250,000,000.00
Description of significant differences in significant accounting policies and accounting estimates of joint ventures and
associates with the accounting policies and accounting estimates of the Company: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 117
118
INTERIM
REPOR
12
VIII. Financial Report
SHANDONG CHENMING PAPER HOLDINGS LIMITED
(Cont’d)
15. Long-term equity investments
(1) Details of long-term equity investments
Unit: RMB
Explanation of
the inconsistent
Voting right in of equity
Equity i n t e r e s t the investee interest and Impairment
Accounting Initial Opening Closing h e l d b y t h e by the voting right Impairment provision during Cash dividend
Name of investee method investment balance Change balance Company (%) Company (%) in the investee provision the period for the period
Arjo Wiggins
Chenming Specialty
Paper Co., Ltd. Equity method 80,100,000.00 19,385,301.17 -2,891,895.50 16,493,405.67 30% 30%
Qingzhou Chenming
Denaturation
Amylum Co., Ltd. Equity method 900,000.00 900,000.00 900,000.00 30% 30% 900,000.00
Jiangxi Jiangbao
Media Colour
Printing Co. Ltd. Equity method 6,000,000.00 4,788,278.79 175,366.19 4,963,644.98 21.16% 21.16%
Shandong Paper
Making & Printing
Enterprises
Corporation Cost method 200,000.00 200,000.00 200,000.00 2% 2% 200,000.00
Zhejiang Province
Guangyu Media
Printing Company
Limited Cost method 2,000,000.00 2,000,000.00 2,000,000.00 9.96% 9.96%
Jinan Shangyou
Commercial
Company Limited Cost method 350,000.00 350,000.00 350,000.00 5% 5% 350,000.00
Shouguang Mihe
Water Company
Limited Cost method 20,000,000.00 20,000,000.00 20,000,000.00 19.46% 19.46%
Shanghai Forest &
Paper E-Commerce
Co., Ltd. Cost method 1,400,000.00 1,400,000.00 1,400,000.00 14% 14% 1,139,574.47
Anhui Shidai
Resources Holdings
Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 10% 10%
Shandong Hongqiao
Venture Capital
Co., Ltd. Equity method 50,000,000.00 30,000,000.00 20,000,000.00 50,000,000.00 20% 20%
Total — 161,950,000.00 80,023,579.96 17,283,470.69 97,307,050.65 — — — 2,589,574.47
(2) Limitations on the ability to transfer capital to the investee
Not applicable
VIII. Financial Report
(Cont’d)
16. Investment properties
(1) Investment properties measured at cost
√Applicable□Not applicable
Unit: RMB
Increase during Decrease during
Item Opening book balance the period the period Closing book balance
I. Total original carrying amount 38,291,395.70 38,291,395.70
1. Buildings 38,291,395.70 38,291,395.70
2. Land use rights
II. Accumulated depreciation
and accumulated amortisation
in total 15,341,439.67 869,128.02 16,210,567.69
1. Buildings 15,341,439.67 869,128.02 16,210,567.69
2. Land use rights
III. Net book value of
Investment properties in total 22,949,956.03 22,080,828.01
1. Buildings 22,949,956.03 22,080,828.01
2. Land use rights
IV. Accumulated impairment
12
INTERIM
provision for Investment REPOR
T
properties in total
1. Buildings
2. Land use rights
V. Book value of
Investment properties in total 22,949,956.03 22,080,828.01
1. Buildings 22,949,956.03 22,080,828.01
2. Land use rights
Unit: RMB
During the period
Depreciation and amortisation during the period 869,128.02
Impairment provision for investment properties during the period
(2) Investment properties measured at fair value
□Applicable√Not applicable
Description of change in measurement model of investment properties and investment properties without good
title during the reporting period. Explanation of the reason for investment properties without good title and the
expected time for establishing good title:
Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 119
VIII. Financial Report
(Cont’d)
17. Fixed assets
(1) Overview of fixed assets
Unit: RMB
Deductions during
Item Opening book balance Additions during the period the period Closing book balance
I. Total original carrying amount: 31,201,018,906.91 367,960,483.14 830,749,363.43 30,738,230,026.62
Of which: Buildings 5,032,859,983.26 132,592,358.06 125,334,743.44 5,040,117,597.88
Machinery and equipment 25,330,303,624.43 219,470,526.42 698,094,071.24 24,851,680,079.61
Vehicles 223,585,996.49 11,286,700.21 5,159,056.56 229,713,640.14
Electronic equipment and others 614,269,302.73 4,610,898.45 2,161,492.19 616,718,708.99
Additions during Accrued during Deductions during
Opening book balance the period the period the period Closing book balance
II. Total accumulated depreciation: 8,443,871,036.17 795,252,254.26 270,852,962.45 8,968,270,327.98
Of which: Buildings 859,052,452.86 79,617,164.54 15,982,506.39 922,687,111.01
Machinery and equipment 7,142,181,254.41 679,750,607.47 249,770,419.83 7,572,161,442.05
Vehicles 86,365,989.64 11,022,586.83 1,483,949.20 95,904,627.27
Electronic equipment and others 356,271,339.26 24,861,895.42 3,616,087.03 377,517,147.65
Opening book Closing book
balance — balance
III. Net carrying amount of fixed assets 22,757,147,870.74 — 21,769,959,698.64
Of which: Buildings
Machinery and equipment
4,173,807,530.40
18,188,122,370.02
—
—
4,117,430,486.87
17,279,518,637.56
12 Vehicles
Electronic equipment and others
137,220,006.85
257,997,963.47
—
—
133,809,012.87
239,201,561.34
INTERIM
REPOR IV. Total impairment provision 16,243,839.72 — 16,243,839.72
T Of which: Buildings —
Machinery and equipment 16,243,839.72 — 16,243,839.72
Vehicles —
Electronic equipment and others —
V. Total book value of fixed assets 22,740,904,031.02 — 21,753,715,858.92
Of which: Buildings 4,173,807,530.40 — 4,117,430,486.87
Machinery and equipment 18,171,878,530.30 — 17,263,274,797.84
Vehicles 137,220,006.85 — 133,809,012.87
Electronic equipment and others 257,997,963.47 — 239,201,561.34
Depreciation for the period amounted to RMB 795,252,254.26. RMB317,948,694.97 was transferred from
construction in progress to the original value of fixed assets for the period.
(2) Temporary unused fixed assets
Unit: RMB
Original Accumulated Impairment
Item carrying value depreciation provision Carrying amount Note
Buildings 380,472,848.97 62,219,636.66 318,253,212.31
Machinery and equipment 1,131,422,414.93 311,180,361.68 2,140,834.48 818,101,218.77
vehicles 14,614,382.16 7,853,175.91 6,761,206.25
Office equipment 3,409,611.37 2,670,489.15 739,122.22
Total 1,529,919,257.43 383,923,663.40 2,140,834.48 1,143,854,759.55
120 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
17. Fixed assets (cont’d)
(3) Fixed assets leased through finance lease
□Applicable√Not Applicable
(4) Fixed assets let out through operating lease
□Applicable√Not Applicable
(5) Fixed asset held for sale as at the end of the period
Not Applicable
(6) Fixed assets without property right certificates
Reason for not yet obtaining Estimated time for obtaining
Item property right certificates property right certificates
Shandong Chenming Paper
Holdings Limited Being applied 31 December 2012
Jilin Chenming Paper Co., Ltd. Being applied 31 December 2012
Zhanjiang Chenming Paper Pulp
Co., Ltd. Being applied 31 December 2012 12
Jiangxi Chenming Paper Co., Ltd. Being applied 31 December 2012 INTERIM
REPOR
Shandong Grand View Hotel Co., Ltd. Being applied 31 December 2012 T
Shouguang Meilun Paper Co., Ltd. Being applied 31 December 2012
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. Being applied 31 December 2012
Description of fixed assets:
As at 31 December 2012, the ownership of buildings and structures and equipment of the carrying amount of
approximately RMB7,427,968,090.88 (the original value of RMB8,002,366,490.98) (31 December 2011: carrying
amount of RMB7,601,941,606.98) and intangible assets - land cooperation rights of the carrying amount of
RMB403,252,046.32 (31 December 2011: RMB407,560,348.35) was restricted as collateral for long-term
borrowings of RMB3,343,379,701.04 (31 December 2011: RMB3,099,817,990.11) and long-term borrowings due
within one year of RMB40,149,693.52 (31 December 2011: RMB539,993,458.22).
SHANDONG CHENMING PAPER HOLDINGS LIMITED 121
VIII. Financial Report
(Cont’d)
18. Construction in progress
(1) Construction in progress
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provisions Carrying amount Book balance provisions Carrying amount
The high-end coated paper project
of annual production capacity
of 800,000 tonnes 169,500,365.37 169,500,365.37 114,294,573.34 114,294,573.34
The household paper project
of annual production capacity
of 98,000 tonnes 48,596,426.19 48,596,426.19 45,812,895.20 45,812,895.20
Huanggang forestry pulp
integration project (Huanggang) 114,980,684.15 114,980,684.15 54,100,442.98 54,100,442.98
4400 paper machine
technological improvement (Qihe) 11,034,053.90 11,034,053.90
Desulphurisation of 130 tonnes
and 75 tonnes boiler (Qianneng) 10,812,188.35 10,812,188.35
Second plant paper
machine improvement (Jilin) 39,901.88 39,901.88 45,216,980.09 45,216,980.09
Technological improvements
to white cardboard project, etc. 34,387,542.85 34,387,542.85 125,241,798.08 125,241,798.08
12 Reclamation of recyclable
water (electricity and steam) 22,594,394.67 22,594,394.67 21,984,737.22 21,984,737.22
INTERIM Mihe River view wetland
REPOR
T (Grand View Hotel) 101,918,191.99 101,918,191.99 69,314,704.82 69,314,704.82
600,000 tonnes white
coated linerboard project (Meilun) 2,084,826,006.30 2,084,826,006.30 1,557,621,431.73 1,557,621,431.73
Power plant phase III
further expansion (the Company) 365,668,995.70 365,668,995.70 206,777,982.80 206,777,982.80
60,000 tonnes sewage
advanced treatment (the Company) 47,901,473.19 47,901,473.19
New plant (Jilin) 227,076,145.46 227,076,145.46 54,738,533.66 54,738,533.66
Zhanjiang Chenming 700,000
tonne pulp equipment upgrade 97,735,554.98 97,735,554.98 43,862,858.73 43,862,858.73
Other projects of construction
in progress 212,710,919.03 212,710,919.03 220,359,024.66 220,359,024.66
3,491,069,182.47 3,491,069,182.47 2,618,039,624.85 2,618,039,624.85
122 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
18. Construction in progress (cont’d)
(2) Change in material construction in progress projects
Unit: RMB
Capitalisation rate
Accumulated Of which: capitalised of the interest
Additions Transfer to Investment to Construction capitalisedinterest interest amount amount during the
Project name Budgeted amounts Opening balance during the period fixed assets Other deductions budgeted costs (%) progress amount during the period period (%) Source of fund Closing balance
The high-end coated paper
project of annual production
capacity of 800,000 tonnes 35.00 114,294,573.34 55,205,792.03 89.46% 100% 184,775,491.95 Capital and borrowing 169,500,365.37
The household paper project of
annual production capacity
of 98,000 tonnes 5.00 45,812,895.20 2,783,530.99 84.01% 100% 13,000,000.00 Capital and borrowing 48,596,426.19
Huanggang forestry pulp
integration project (Huanggang) 0.50 54,100,442.98 60,880,241.17 12% To be completed Self-raised 114,980,684.15
4400 film coated base paper
improvement 11,034,053.90 104.46% Completed Self-raised 11,034,053.90
Desulphurisation of 130 tonnes
and 75 tonnes boiler (Qianneng) 0.15 10,812,188.35 10,812,188.35 88% 90% Self-raised
Second plant paper machine
improvement (Jilin) 0.50 45,216,980.09 45,177,078.21 Suspended Self-raised 39,901.88
Technological improvements
to white cardboard project, etc. 125,241,798.08 26,155,204.73 117,009,459.96 95% Self-raised 34,387,542.85
Reclamation of recyclable water
(electricity and steam) 0.23 21,984,737.22 609,657.45 89.65% To be completed 2,923,387.81 893,472.82 3.12% Capital and borrowing 22,594,394.67
Mihe River view wetland
SHANDONG CHENMING PAPER HOLDINGS LIMITED
(Grand View Hotel) 0.60 69,314,704.82 32,603,487.17 100% 7,472,817.46 2,244,994.11 6.56% Self-raised 101,918,191.99
600,000 tonnes white coated
linerboard project (Meilun) 26.00 1,557,621,431.73 527,204,574.57 84.62% 90% 162,963,283.90 104,701,362.43 4.82% Capital and borrowing 2,084,826,006.30
Power plant phase III further
expansion (the Company) 5.80 206,777,982.80 158,891,012.90 62% 90% Self-raised 365,668,995.70
60,000 tonnes sewage
advanced treatment (the Company) 0.50 47,901,473.19 11,001,987.23 58,903,460.42 100% Completed Self-raised
New plant (Jilin) 13.794 54,738,533.66 172,337,611.80 15% 30% 2,777,981.47 2,777,981.47 4.55% Self-raised 227,076,145.46
Zhanjiang Chenming 700,000
tonne pulp equipment upgrade 2.70 43,862,858.73 53,872,696.25 36% 30% 835,942.91 835,942.91 Capital and borrowing 97,735,554.98
Other projects of construction
in progress 0.90 220,359,024.66 126,005,192.45 131,223,586.24 2,429,711.84 2,620,508.31 236,062.40 Capital and borrowing 212,710,919.03
Total 2,618,039,624.85 1,238,585,042.64 317,948,694.97 47,606,790.05 — — 377,369,413.81 111,689,816.14 — — 3,491,069,182.47
Explanation on change in material construction in progress projects: Nil
INTERIM
REPOR
12
123
VIII. Financial Report
(Cont’d)
18. Construction in progress (cont’d)
(3) Impairment provision for construction in progress
Not applicable
(4) Construction progress of material construction in progress
Construction
Projects progress Notes
Huanggang forestry pulp integration 12% Construction progress was estimated on the basis
project (Huanggang) of investment to budgeted costs
600,000 tonnes white coated 90% Construction progress was estimated on the basis
linerboard project (Meilun) of investment to budgeted costs
Power plant phase III further 90% Construction progress was estimated on the basis
expansion (the Company) of investment to budgeted costs
New plant (Jilin) 30% Construction progress was estimated on the basis
of investment to budgeted costs
(5) Explanation on construction in progress
Nil
12
19. Project materials
INTERIM
REPOR
T Unit: RMB
Additions during Deduction during
Item Opening balance the period the period Closing balance
Special materials 43,961,331.91 33,116,217.61 12,146,292.77 64,931,256.75
Special equipment 17,963,249.94 5,942,017.05 5,613,057.60 18,292,209.39
Total 61,924,581.85 39,058,234.66 17,759,350.37 83,223,466.14
Explanation on project materials: Nil
20. Clearance of fixed assets
Unit: RMB
Opening Closing carr
Item carrying amount ing amount Reasons for transference to clearance
Demolition, relocation and scrapping
Clearance of fixed assets 0.00 547,643,828.15 of fixed assets
Total 0.00 547,643,828.15 —
Explanation on progress of clearance of fixed assets for fixed assets transferred to clearance for one year or above
since transference: Nil
124 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
21. Consumable biological assets
(1) Measured at cost
□ Applicable√ Not applicable
(2) Measured at fair value
□ Applicable□ Not applicable
Unit: RMB
Opening Additions during Deduction during Closing
Item carrying amount the period the period carrying amount
I. Plantation
II Livestock rearing
and breeding
III. Forestry
Timber 959,061,500.85 94,277,357.69 221,301.99 1,053,117,556.55
IV. Aquaculture
Total 959,061,500.85 94,277,357.69 221,301.99 1,053,117,556.55
Explanation on consumable biological assets 12
INTERIM
(1) Consumable biological assets are measured at fair value, the fair value of timber increased by REPOR
T
RMB3,074,569.12 due to acquisition, increased by RMB75,745,589.85 due to breeding, decreased by
RMB221,301.99 due to disposal, and increased by RMB15,457,198.72 due to change of fair value.
(2) As of 30 June 2012, there was no significant difference between the fair value and cost of the timbers
planted during the year or unable to form any level of stocking in the consumable biological assets so
their carrying amount was taken as their fair value. The timbers forming a level of stocking were measured
at fair value and their fair value was determined based on the valuation of Jones Lang LaSalle Sallmanns
Limited. The consumable biological assets measured at carrying amount as their fair value amounted to
RMB87,874,884.88,and the consumable biological assets measured at assessed value as their fair value
amounted to RMB 965,242,671.67.
22. Oil and gas assets
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 125
VIII. Financial Report
(Cont’d)
23. Intangible assets
(1) Intangible assets
Unit: RMB
Opening Additions Deduction Closing book
Item book balance during the period during the period balance
I. Total original
carrying amount 1,690,347,916.95 217,350.00 36,096.36 1,690,529,170.59
Land use rights 1,672,649,254.38 36,096.36 1,672,613,158.02
Software 17,698,662.57 217,350.00 17,916,012.57
II. Total accumulated
amortisation 173,210,715.59 19,753,084.13 192,963,799.72
Land use rights 162,800,378.78 18,741,982.91 181,542,361.69
Software 10,410,336.81 1,011,101.22 11,421,438.03
III. Total net carrying
amount of intangible asset 1,517,137,201.36 1,497,565,370.87
Land use rights 1,509,848,875.60 1,491,070,796.33
Software 7,288,325.76 6,494,574.54
IV. Total impairment provision
Land use rights
12 Software
INTERIM
REPOR Total carrying amount
T
of intangible asset 1,517,137,201.36 1,497,565,370.87
Land use rights 1,509,848,875.60 1,491,070,796.33
Software 7,288,325.76 6,494,574.54
The amortisation amount was RMB 19,753,084.13 during the current period.
(2) Expenditure of the Company’s development projects
Not applicable
(3) Intangible assets without property right certificates
Not applicable
126 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
24. Goodwill
Unit: RMB
Impairment
Additions during Deduction during provisions at the
Name of investee units or item generating goodwill Opening balance the period the period Closing balance end of the period
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57
Total 20,283,787.17 20,283,787.17
Explanation on impairment test method and impairment provision on goodwill:
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.
12
The goodwill of the Company arose from the business combination not under common control during the prior years
INTERIM
On the balance sheet date, management of the Company assesses the recoverable amount of cash-generating REPOR
T
unit which results goodwill, in order to determine whether to make provision for impairment loss accordingly. The
recoverable amount of cash-generating unit is determined based on the estimated cash flow in financial budget of five
years in the future by management, using the steady annual growth rate in the industry of 5% (2011: 5%) expected by
the market, and time value of currency was estimated using the discount rate of 8.32% (2011: 8.32%). Management of
the Company expects no provision for impairment loss is necessary to be made for goodwill during the reporting period.
25. Long-term prepaid expenses
Unit: RMB
Additions for the Amortisation for Other Reasons for other
Item Opening balance current period the current period deductions Closing balance deductions
Expenses on improvement of leased assets 20,916,986.51 2,732,472.51 18,184,514.00
Woodland expenses 169,752,657.81 11,869,448.78 3,761,836.80 6,794,136.53 171,066,133.26 Lease terminated
Others 2,247,601.30 23,242.02 2,224,359.28
Total 192,917,245.62 11,869,448.78 6,517,551.33 6,794,136.53 191,475,006.54 —
Explanation on long-term prepaid expenses: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 127
VIII. Financial Report
(Cont’d)
26. Deferred income tax assets and deferred income tax liabilities
(1) Deferred income tax assets and deferred income tax liabilities not stated as the net amount after offsetting
√Applicable□Not applicable
Recognised deferred income tax assets and deferred income tax liabilities
Unit: RMB
Item Closing balance Opening balance
Deferred income tax assets
Provision for impairment of assets 72,873,949.47 71,751,853.16
Setup fee
Deductible losses 127,734,897.34 49,859,143.71
Elimination of unrealised profit arising from intra-group 18,513,240.50 15,739,516.99
Unpaid payables 18,424,110.48 16,443,903.23
Deferred income 19,784,795.36 20,232,117.18
Sub-total 257,330,993.15 174,026,534.27
Deferred income tax liabilities:
Valuation of financial instruments held for
trading and derivative financial instruments
Fair value change of financial instruments
12 recognised at capital reserve
INTERIM
REPOR Sub-total
T
Breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary differences 186,914,634.00 139,486,221.34
Deductible loss 618,849,997.52 548,006,631.56
Total 805,764,631.52 687,492,852.90
128 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
26. Deferred income tax assets and deferred income tax liabilities (cont’d)
(1) Deferred income tax assets and deferred income tax liabilities not stated as the net amount after offsetting
(cont’d)
Deductible loss of unrecognised deferred income tax will expire by the following periods
Unit: RMB
Year Closing balance Opening balance Note
2012 14,585,476.04 14,585,476.04
2013 72,648,810.53 72,648,810.53
2014 69,020,481.95 69,020,481.95
2015 129,791,262.25 129,791,262.25
2016 261,960,600.79 261,960,600.79
2017 70,843,365.96
Total 618,849,997.52 548,006,631.56 —
Breakdown of tax payable differences and deductible differences
Unit: RMB
Amount of temporary differences 12
Item Beginning of period End of period INTERIM
REPOR
T
Tax payable differences
Sub-total
Deductible differences
Provision for impairment of assets 311,476,917.48 314,787,643.19
Elimination of unrealised profit arising from intra-group 74,052,962.01 63,204,734.93
Unpaid payables 110,701,938.66 101,004,317.87
Deferred income 88,254,256.13 91,467,775.41
Deductible losses 510,939,589.32 199,436,574.84
Sub-total 1,095,425,663.60 769,901,046.24
(2) Deferred income tax assets and deferred income tax liabilities stated as the net amount after offsetting
□Applicable√Not applicable
Explanation on deferred income tax assets and deferred income tax liabilities: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 129
VIII. Financial Report
(Cont’d)
27. Breakdown of provision for impairment of assets
Unit: RMB
Deduction during the period
Opening balance Additions during Closing balance
Item of carrying amount the period Reversals Write-offs of carrying amount
I. Provisions for bad debts 308,289,383.25 19,461,140.92 6,024,367.75 208,793.05 321,517,363.37
II. Provisions for inventory impairment 56,658,503.68 56,072,051.72 586,451.96
III. Provisions for available-for-sale financial assets impairment
IV. Provisions for held-to-maturity investment impairment
V. Provisions for long-term equity investment impairment 2,589,574.47 2,589,574.47
VI. Provisions for real estate investment impairment
VII. Provisions for fixed assets impairment 16,243,839.72 16,243,839.72
VIII. Provisions for construction materials impairment
IX. Provisions for construction in progress impairment
X. Provisions for consumable biological assets impairment
Of which: Provisions for mature consumable
biological assets impairment
XI. Provisions for oil and gas assets impairment
XII. Provisions for intangible assets impairment
XIII. Provisions for goodwill impairment
XIV. Others
Total 383,781,301.12 19,461,140.92 6,024,367.75 56,280,844.77 340,937,229.52
12
INTERIM Explanation on breakdown of provision for impairment of assets: Nil
REPOR
T
28. Other non-current assets
Unit: RMB
Item Closing balance Opening balance
Investments 10,000,000.00 10,000,000.00
Total 10,000,000.00 10,000,000.00
Explanation on other non-current assets
As of 27 December 2011, the Company invested RMB10.00 million in Weifeng Xinya Capital Investment Co., Ltd.
which had not changed its shareholder registration with Adminstration for Industry and Commerce as of 30 June 2012.
130 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
29. Short-term borrowings
(1) Types of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 176,133,062.41
Secured borrowings
Guarantee loans 4,037,837,298.18 2,223,510,136.38
Credit loans 5,587,504,340.04 7,957,531,746.95
Discounted loans 1,999,243,719.86 1,729,809,660.95
Total 11,624,585,358.08 12,086,984,606.69
Explanation on types of short-term borrowings:
① Guarantee loans are the loans obtained by the subsidiaries of the Company from financial institutions when
the Company acts as their guarantee;
② Discounted borrowings were discounted with bank acceptance and accounted for as short-term borrowings
by the Group.
(2) Outstanding short-term borrowings 12
INTERIM
Not applicable REPOR
T
30. Financial liabilities held-for-trading
Not applicable
31. Bills payable
Unit: RMB
Type Closing balance Opening balance
Commercial acceptance — —
Bank acceptance 1,654,218,054.43 615,327,402.85
Total 1,654,218,054.43 615,327,402.85
Amount to be due in the next accounting period amounted to RMB1,654,218,054.43.
Explanation on bills payable: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 131
VIII. Financial Report
(Cont’d)
32. Accounts payable
(1) Accounts payable
Unit: RMB
Item Closing balance Opening balance
Within 1 year 3,416,686,728.73 4,420,184,816.30
1 to 2 years 131,098,073.97 117,265,142.92
2 to 3 years 40,319,036.98 67,792,980.94
Over 3 years 81,152,067.60 80,343,057.44
Total 3,669,255,907.28 4,685,585,997.60
(2) Amount of trade payables due to shareholders holding over 5% (5% inclusive) of the Company’s shares during
the reporting period
□Applicable√Not applicable
Explanation on significant trade payables aged over one year
Repaid after
Reason of the reporting
12 Name of creditors Amount outstanding loans period or not
INTERIM China Western Power Industrial Co., Ltd. 12,148,106.56 Temporary outstanding No
REPOR
T Anhui Hualing Cable Group Co., Ltd. 5,935,402.68 Temporary outstanding No
Baosheng Science and Technology
Innovation Co., Ltd. 5,648,215.92 Temporary outstanding No
Artemis Forestry Co., Ltd 5,578,226.15 Temporary outstanding No
SGI Thailand 4,812,771.64 Temporary outstanding No
Total 34,122,722.95
33. Advance receipts
(1) Advance receipts
Unit: RMB
Item Closing balance Opening balance
Within 1 year 342,820,898.32 211,879,347.81
1 to 2 years 8,339,591.64 19,548,665.64
Total 351,160,489.96 231,428,013.45
132 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
33. Advance receipts (Cont’d)
(2) Any amount of advance receipts advanced from shareholders holding 5% or more (including 5%) in the voting
shares of the Company during the reporting period
□ Applicable √ Not applicable
Explanation of the significant advance receipts aged over one year
Name of creditors Amount Reasons of not being carried forward
Shouguang Longyuan Paper
Coating Co., Ltd. 3,630,000.00 No delivery requirement from the counterparty
Yong Yi Adhesive (Zhongshan) Co. Ltd. 1,384,668.41 No delivery requirement from the counterparty
Total 5,014,668.41
34. Staff remuneration payables
Unit: RMB
Opening book Increase during Decrease during Closing book
Item balance the period the period balance
I. Salaries, bonuses, allowance and
subsidies 89,914,662.03 376,240,193.08 348,600,208.45 117,554,646.66
12
INTERIM
II. Staff welfare 433,903.26 27,206,465.62 26,797,662.73 842,706.15 REPOR
T
III. Social insurance premium 12,495,889.17 94,587,110.32 85,354,062.83 21,728,936.66
Of which: 1. Medical insurance
premium 8,683,901.99 20,753,592.67 19,888,519.36 9,548,975.30
2. Pension insurance
premium 2,249,723.97 63,149,849.81 55,438,810.79 9,960,762.99
3. Unemployment
insurancepremium 154,033.86 6,070,073.21 5,455,182.04 768,925.03
4. Work-related injury
insurance premium 27,545.09 2,663,900.89 2,716,403.03 -24,957.05
5. Maternity insurance
premium 1,380,684.26 1,949,693.74 1,855,147.61 1,475,230.39
IV. Housing provident funds 7,489,616.55 30,537,434.98 25,973,863.75 12,053,187.78
V. Lay off welfare
VI. Others 18,804,595.54 18,804,595.54
VII. Union operation costs and
employee education costs 17,925,225.10 13,341,193.99 5,363,742.04 25,902,677.05
Total 147,063,891.65 541,912,397.99 492,089,539.80 196,886,749.84
Amount of default payment within staff remuneration payables amounted to RMB0.
Union operation costs and employee education costs amounted to RMB 25,902,677.05, non-monetary welfare
amounted to RMB0 and compensation arising from termination of service amounted to RMB0.
Arrangement of the expected payment schedule and the payment of staff remuneration payables: Nil.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 133
VIII. Financial Report
(Cont’d)
35. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 562,356.21 8,847,121.90
Excise tax
Business tax 1,347,330.90 6,510,523.22
Enterprise income tax 45,695,572.23 21,030,687.55
Individual income tax 757,566.70 5,201,988.58
Urban maintenance and construction tax 764,613.84 2,669,994.50
Land use tax 5,692,929.42 14,021,262.09
Property tax 5,326,045.41 5,382,575.62
Educational surcharges and others 1,209,544.89 2,775,009.93
Stamp duty 2,103,833.55 1,800,842.52
Total 63,459,793.15 68,240,005.91
36. Interest payable
Unit: RMB
12
Item Closing balance Opening balance
INTERIM Interest on long-term borrowings with interest payment by instalment
REPOR
T and principal repayment when due
Interest on corporate bonds 121,827,374.04 62,113,952.74
Interest payable on short-term borrowings
Interest on medium-term notes 50,245,833.33 44,740,750.00
Total 172,073,207.37 106,854,702.74
Description of interest payable: Nil
37. Dividend payable
Unit: RMB
Item Closing balance Opening balance Reason for failure to pay for over a year
2011 dividend 309,306,891.20
Total 309,306,891.20 —
Description of dividend payable: Nil
134 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
38. Other payables
(1) Other payables
Unit: RMB
Item Closing balance Opening balance
Within 1 year 541,021,191.98 525,381,372.20
1 to 2 years 259,083,597.84 176,020,931.91
2 to 3 years 12,613,204.11 20,604,081.20
Over 3 years 57,902,870.01 41,615,153.64
Total 870,620,863.94 763,621,538.95
(2) Any amount of other payables payable to shareholders holding 5% or more (including 5%) in the voting shares
of the Company during the reporting period
√ Applicable □ Not applicable
Unit: RMB
Entity name Closing balance Opening balance
Shouguang Chenming Holdings Company Limited 24,000,000.00 30,000,000.00
12
INTERIM
REPOR
Total 24,000,000.00 30,000,000.00 T
(3) Explanation of the significant other payables aged over one year
Repaid after the
Reason for balance sheet
Name of creditors Amount outstanding date or not
State-owned Shouguang Qingshuipo Farm 8,800,000.00 Temporary outstanding No
Huanghe Paperboard Factory 3,454,087.82 Temporary outstanding No
Guangxi Construction Engineering Group
No. 1 Installation Co., Ltd. 1,500,000.00 Temporary outstanding No
Samsung Inc., Korea 1,065,775.96 Temporary outstanding No
Asia Paper Markets (SIP) Co., Ltd. 903,341.21 Temporary outstanding No
Total 15,723,204.99
SHANDONG CHENMING PAPER HOLDINGS LIMITED 135
VIII. Financial Report
(Cont’d)
38. Other payables (Cont’d)
(4) Explanation of the significant other payables
Name of creditor Closing balance Opening balance
Zhanjiang Finance Bureau 212,000,000.00 Deposit
Qihe County Lianxinyuan Panels Co., Ltd. 82,000,000.00 Prepayments
Shouguang Chenming Holdings Company Limited 24,000,000.00 Transaction with customers
Prepayment of post surcharge 28,543,771.39 Port surcharge
Prepayment of transportation fee 14,664,551.43 Transportation fee
State-owned Shouguang Qingshuipo Farm 8,800,000.00 Transaction with customers
Total 370,008,322.82
39. Estimated liabilities
Not applicable
40. Non-current liabilities due with one year
(1) Non-current liabilities due with one year
Unit: RMB
12
INTERIM Item Closing balance Opening balance
REPOR
T
Long-term borrowings due within one year 1,785,251,433.52 1,203,616,858.22
Bond payable due within one year
Long-term payables due within one year
Total 1,785,251,433.52 1,203,616,858.22
(2) Long-term borrowings due within one year
Long-term borrowings due within one year
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 31,624,500.00
Secured borrowings 40,149,693.52 539,993,458.22
Guarantee borrowings 968,963,000.00 19,800,000.00
Credit borrowings 744,514,240.00 643,823,400.00
Total 1,785,251,433.52 1,203,616,858.22
Rollover of overdue borrowings within long-term borrowing due within a year amounted to RMB0.
136 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
40. Non-current liabilities due with one year (Cont’d)
(2) Long-term borrowings due within one year (Cont’d)
Top five long-term borrowings due within one year
Unit: RMB
Closing balance Opening balance
Functional Functional
Borrowing units Starting date Termination date Currency Rate (%) Foreign currency currency Foreign currency currency
The Export-Import Bank of
China Nanchang branch 10 December 2009 9 December 2012 CNY 4.06% 450,000,000.00
The Export-Import Bank of
China Qingdao branch 28 September 2009 27 September 2012 CNY 3.97% 280,000,000.00
Sumitomo Mitsui Banking
Corporation (China) Limited 10 September 2009 9 September 2012 USD 3.6% 40,000,000.00 252,996,000.00
The Export-Import Bank of
China Qingdao branch 28 June 2010 27 June 2013 USD 3.95% 36,000,000.00 227,696,400.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 USD 2.96% 30,000,000.00 189,747,000.00
Sumitomo Mitsui Banking
Corporation (China) Limited 10 September 2009 9 September 2012 USD 3.6% 16,000,000.00 100,814,400.00
The Export-Import Bank of
China Nanchang branch 10 December 2009 9 December 2012 CNY 4.06% 450,000,000.00
The Export-Import Bank of
China Qingdao branch 28 September 2009 27 September 2012 CNY 3.51% 280,000,000.00 12
China Construction Bank INTERIM
REPOR
Corporation Shouguang T
sub-branch 17 June 2009 15 June 2012 CNY 5.76% 170,000,000.00
Hong Kong and Shanghai
Banking Corporation
Limited 15 September 2010 14 September 2012 USD 3.55% 10,000,000.00 63,009,000.00
Total — — — — — 1,400,439,400.00 — 1,063,823,400.00
Overdue borrowings within long-term borrowings due with one year: Nil
Description of long-term borrowings due with one year: Nil
(3) Bond payable due within one year
Not applicable
(4) Long-term payables due within one year
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 137
VIII. Financial Report
(Cont’d)
41. Other current liabilities
Unit: RMB
Closing book Opening book
Item balance balance
Deferred income 11,943,381.96 10,227,001.60
Total 11,943,381.96 10,227,001.60
Description of other current liabilities: Other current liabilities as at the end of the year were deferred income to be
amortised within one year
42. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 126,498,000.00 126,018,000.00
Secured borrowings 100,772,894.56 120,891,118.33
12 Guarantee borrowings 4,999,211,500.00 5,034,728,300.00
INTERIM Credit borrowings 1,359,453,935.94 1,065,046,935.94
REPOR Less: long-term borrowings due within one year -1,785,251,433.52 -1,203,616,858.22
T
Total 4,800,684,896.98 5,143,067,496.05
Explanatory note to long-term borrowings:
1. Guarantee borrowings were the borrowings obtained by the subsidiaries of the Company from
financial institutions when the Company acted as their guarantee, among which the borrowings of
RMB3,282,756,500.00 were also secured by real estate and machinery and equipment as collateral;
2. Pledged borrowings included pledged bank deposits borrowings of the Company amounting to
RMB126,498,000.00, of which certificates of time deposits of RMB136,100,000.00 were the pledge for the
bank loans of US$20,000,000.00 from J.P. Morgan for a term from 19 July 2011 to 18 July 2013.
3. Long-term borrowings due within one year amounted to RMB1,785,251,433.52. Long-term borrowings due
over one year but within two years amounted to RMB996,210,295.94. Long-term borrowings due over two
years but within five years amounted to RMB521,718,101.04. Long-term borrowings due over five years
amounted to RMB3,282,756,500.00.
138 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
42. Long-term borrowings (Cont’d)
(2) Top five long-term borrowings
Unit: RMB
Closing balance Opening balance
Interest Functional Functional
Borrowing units Starting date Expiry date Currency Rate (%) Foreign currency currency Foreign currency currency
China Development Bank
Guangdong branch 2008/03/25 2023/03/24 USD 2.96% 335,000,000.00 2,118,841,500.00
China Development Bank
Guangdong branch 2009/03/25 2023/03/24 CNY 4.86% 1,163,915,000.00
Sumitomo Mitsui Banking
Corporation (China) Limited 2009/09/10 2013/09/09 USD 3.6% 80,000,000.00 505,992,000.00
Sumitomo Mitsui Banking
Corporation (China) Limited 2012/03/21 2015/03/20 USD 2.4% 50,000,000.00 316,245,000.00
Bank of China Limited
houguang sub-branch 2012/05/25 2015/05/24 USD 6.18% 23,400,000.00 148,002,660.00
China Development Bank
Guangdong branch 2008/03/25 2023/03/24 USD 2.96% 380,000,000.00 2,394,342,000.00
China Development Bank
Guangdong branch 2009/03/25 2023/03/24 CNY 4.86% 1,124,578,300.00
Sumitomo Mitsui Banking
Corporation (China) Limited 2009/09/10 2013/09/10 USD 3.6% 104,000,000.00 655,293,600.00
J.P. Morgan Chase
The Export-Import Bank of
2011/06/27 2013/06/27 CNY 2.37% 20,000,000.00 126,018,000.00
12
China Qingdao branch 2010/06/28 2013/06/27 USD 3.95% 36,000,000.00 226,832,400.00 INTERIM
REPOR
T
Total -- -- -- -- — 4,252,996,160.00 — 4,527,064,300.00
Explanation of long-term borrowings, such as long-term borrowings arising from obtaining extension of overdue
borrowings, the terms, principal, interest and expected repayment arrangements for the extension should be
stated: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 139
VIII. Financial Report
(Cont’d)
43. Bonds payable
Unit: RMB
Interest payable Interest payable
Issued at the beginning Interest accrued Interest paid at the end
Bond name Face value Issue date Term amount of the period during the period during the period of the period Closing balance
11 Chenming debt 2,000,000,000.00 2011/07/16 5 years 1,982,000,000.00 59,169,444.44 59,500,000.01 118,669,444.45 1,985,081,805.64
11 Chenming Hong Kong debt 500,000,000.00 2011/04/13 5 years 491,750,000.00 2,944,508.30 6,842,361.13 6,628,939.84 3,157,929.59 494,779,128.66
Sub-total 2,500,000,000.00 2,473,750,000.00 62,113,952.74 66,342,361.14 6,628,939.84 121,827,374.04 2,479,860,934.30
Explanation on bonds payable, including the terms and period for conversion of the Company’s convertible
bonds: Nil
44. Long-term accounts payable
(1) Top five long-term accounts payable
Not applicable
(2) Breakdown of finance lease payables in long-term accounts payables
12 Not applicable
INTERIM
REPOR
T Explanation on long-term accounts payables: Nil
45. Special accounts payable
Unit: RMB
Opening Increase during Decrease during Closing
Item balance the period the period balance Note
Relocation of Jilin Chenming
due to environmental
reason 660,000,000.00 9,925,075.95 650,074,924.05
Total 660,000,000.00 9,925,075.95 650,074,924.05 —
Note on special accounts payable:
Jilin Chenming Paper Co., Ltd. and Jilin Paper Manufacturing Co., Ltd. were required to relocate their plants according
to the environmental requirements and Jilin urban construction planning. A parcel of land of 1304.8 mu being occupied
by them was collected by China Development Jilin Investment Co., Ltd. on behalf of People’s Government of Jilin City.
China Development Jilin Investment Co., Ltd. shall make a payment amounting to RMB2,200,000,000 to Jilin Chenming
Paper Co., Ltd. as land compensation fees, loss on relocation of all the fixed assets ancillary to the land, relocation
fees and staff relocation fees. As stipulated in the agreement, China Development Jilin Investment Co., Ltd. was to pay
Jilin Chenming Paper Co., Ltd. 30% of the compensation, i.e. RMB660,000,000, within 10 days from the date of the
agreement. In September 2011, Jilin Chenming Paper Co., Ltd. obtained compensation of RMB660,000,000, which
was accounted for as special accounts payable. The loss arising from the relocation was RMB9,925,075.95, which was
transferred from special accounts payable to non-operation revenue.
140 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
46. Other Non-current liabilities
Unit: RMB
Closing balance of Opening balance of
Item carrying amount carrying amount
Deferred income 163,114,552.26 151,733,337.22
Medium-term notes 3,379,492,969.64 2,292,360,559.92
Including: due within one year 2,300,000,000.00 1,200,000,000.00
due within 1 - 2 years 1,100,000,000.00
due within 2 – 5 years 1,100,000,000.00
Unamortised issue expenses -20,507,030.36 -7,639,440.08
Total 3,542,607,521.90 2,444,093,897.14
Explanation on other non-current liabilities, including asset-related and revenue-related Government grants received
during the reporting period and their closing balances:
The breakdown of the above deferred income is as follows:
Item Closing balance Opening balance
Government grants in respect of assets 12
Special subsidy funds for environmental protection 45,854,071.42 43,981,654.62 INTERIM
Project fund for National technological support scheme 2,687,775.00 2,770,125.00 REPOR
T
Special subsidy fund for Songhuajiang environmental protection project 31,670,346.66 29,354,246.60
Modification of alkaline recycling system 4,930,416.53 5,070,416.57
Atmospheric pollution prevention and treatment subsidy fund 800,000.00 800,000.00
Sewage treatment and water conservation reconfiguration project 28,063,779.25 22,562,488.46
Financial grants for technological modification project 8,569,248.12 2,771,015.05
Zhejiang pulp project and construction project of eucalyptus forest 51,477,664.62 53,633,800.00
Others 1,004,632.62 1,016,592.52
Less: deferred income to be amortised within 1 year 11,943,381.96 10,227,001.60
Total 163,114,552.26 151,733,337.22
Note: Deferred income of RMB 23,142,607.18was received in the current period. Deferred income recognised through profit or loss was RMB
10,045,011.78.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 141
VIII. Financial Report
(Cont’d)
47. Share capital
Unit: RMB
Change during the period (Increase/decrease
Shares transferred
Opening balance New issue Bonus shares from reserve Others Sub-total Closing balance
Total number of shares 2,062,045,941.00 2,062,045,941.00
Explanation on changes in share capital: the name of the auditors carrying out the capital review and the number of
the capital review report should be disclosed for increase or decrease in share capital during the reporting period; for
joint stock companies operating for less than three years, only the net assets had to be stated for those years before
establishment; capital review at the establishment of the company should be stated when a limited liability company
wholly changed into a joint stock company.
A capital review report named as Zhong Rui Yue Hua Yan Zi [2008] No. 2189 was published for the certification of the
review.
48. Treasury shares
Not applicable
12 49. Special reserve
INTERIM
REPOR Not applicable
T
50. Capital reserves
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Capital premium
(share premium) 5,391,471,967.47 5,391,471,967.47
Other capital reserves 702,011,834.45 702,011,834.45
Acquisition of minority
interests 4,781,034.08 4,781,034.08
Total 6,098,264,836.00 6,098,264,836.00
Explanation on capital reserves: Nil
142 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
51. Surplus reserve
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Statutory surplus reserve 1,132,116,106.40 1,132,116,106.40
Discretionary surplus reserve
Reserve fund
Enterprise development fund
Others
Total 1,132,116,106.40 1,132,116,106.40
Explanation on surplus reserve, the relevant resolutions should be stated when using the surplus reserve for increasing
share capital, making up shortfall and paying dividends:
Pursuant to the Companies Law and the Articles of Association, the Group transferred 10% of the net profit to the
statutory surplus reserves. There was no need to transfer if the accumulated amount of the statutory reserves exceeded
50% of the Company’s registered capital.
52. General risk provision
Not applicable
12
INTERIM
REPOR
T
SHANDONG CHENMING PAPER HOLDINGS LIMITED 143
VIII. Financial Report
(Cont’d)
53. Retained profit
Unit: RMB
Proportion
of appropriation
Item Amounts or allocation
Retained profit of prior year before adjustment 4,237,783,996.54 —
Adjustment of the aggregate retained profit as at the beginning of the year
(increase after adjustment +, decrease after adjustment -) —
Retained profit as at the beginning of the year after adjustment 4,237,783,996.54 —
Plus : Net profit of the current year attributable to
shareholders of the Company 94,244,962.85 —
Less : Withdrawn statutory surplus reserves
Transfer to discretionary surplus Reserve
Transfer to general risk provision
Ordinary dividend payable 309,306,891.20
Ordinary dividend converted to share capital
Retained profit as at the end of the period 4,022,722,068.19 —
Adjustments to the retained profit breakdown as at the beginning of the year:
12 1.
The effect of the retrospective adjustments arising from Accounting Standards for Business Enterprises and their
INTERIM
REPOR new related requirements on the retained profit as at the beginning of the year amounted to RMB0.00.
T
2. The effect of changes in accounting policies on the retained profit as at the beginning of the year amounted to
RMB0.00.
3. The effect of corrections of significant accounting errors on the retained profit as at the beginning of the year
amounted to RMB0.00.
4. The effect of the change of the scope of combination under common control on the retained profit as at the
beginning of the year amounted to RMB0.00.
5. The effect of other adjustments on the retained profit as at the beginning of the year amounted to RMB0.00.
For the retain profit of a company which had its initial public offering, if the accumulated profit before its new issue has
been approved by the general meeting to be shared by the old and new shareholders, the company should clearly make
a related statement; if the accumulated profit before its new issue has been approved by the general meeting to be
distributed among the old shareholders before its new issue, the company should clearly disclose the dividend payable
which is corresponding to the audited profit attributable to the old shareholders: Nil
144 SHANDONG CHENMING PAPER HOLDINGS LIMITED
1st Proof 11/08/2012
VIII. Financial Report
(Cont’d)
54. Revenue and operating costs
(1) Revenue and operating costs
Unit: RMB
Amounts during Amounts during
the reporting the prior
Item period period
Revenue from principal activities 9,862,709,415.43 8,867,913,416.05
Revenue from other activities 101,742,119.61 49,541,939.09
Operating costs 8,500,512,936.03 7,382,759,124.49
(2) Principal activities (by industry)
√ Applicable □ Not applicable
Unit: RMB
Amounts during Amounts during
the reporting period the prior period
Industry name Revenue Operating costs Revenue Operating costs
I. Machine-made paper 9,216,139,824.70 7,909,765,293.16 8,186,161,306.83 6,784,659,561.49
12
INTERIM
II. Electricity and steam 415,231,784.63 360,583,271.43 414,633,495.26 389,718,244.42 REPOR
III. Building materials 163,649,151.64 134,290,206.98 194,707,888.55 145,906,730.77 T
IV. Paper chemicals 40,108,732.97 31,277,925.63 39,567,408.70 32,139,830.20
V. Hotel 24,253,681.15 6,367,047.37 25,394,309.98 6,320,942.59
VI. Others 3,326,240.34 2,293,200.11 7,449,006.73 6,439,641.14
Total 9,862,709,415.43 8,444,576,944.68 8,867,913,416.05 7,365,184,950.61
SHANDONG CHENMING PAPER HOLDINGS LIMITED 145
VIII. Financial Report
(Cont’d)
54. Revenue and operating costs (Cont’d)
(3) Principal activities (by product)
√ Applicable □ Not applicable
Unit: RMB
Amounts during Amounts during
the reporting period the prior period
Product name Revenue Operating costs Revenue Operating costs
Light weight coated paper 599,263,279.24 546,228,892.26 657,033,033.83 574,932,181.53
Duplex press paper 1,520,629,992.03 1,325,662,646.62 1,103,544,255.25 965,222,375.87
Writing paper 152,926,898.85 146,337,134.17 144,823,190.92 132,016,212.06
Coated paper 2,146,633,544.01 2,044,364,500.36 2,060,127,936.87 1,680,746,018.02
News press paper 878,669,387.09 671,377,990.27 773,572,610.55 672,761,966.99
Paperboard 293,356,674.72 283,499,896.76 273,165,462.20 256,384,451.47
White paper board 979,292,604.55 801,231,392.96 1,219,419,198.60 945,705,748.07
Other machine-made paper 2,645,367,444.21 2,091,062,839.76 1,954,475,618.61 1,556,890,607.48
Electricity and steam 415,231,784.63 360,583,271.43 414,633,495.26 389,718,244.42
Construction materials 163,649,151.64 134,290,206.98 194,707,888.55 145,906,730.77
Paper-making
12 chemical products
Hotel
40,108,732.97
24,253,681.15
31,277,925.63
6,367,047.37
39,567,408.70
25,394,309.98
32,139,830.20
6,320,942.59
INTERIM
REPOR Others 3,326,240.34 2,293,200.11 7,449,006.73 6,439,641.14
T
Total 9,862,709,415.43 8,444,576,944.68 8,867,913,416.05 7,365,184,950.61
(4) Principal activities (by geographical areas)
√ Applicable □ Not applicable
Unit: RMB
Amounts during Amounts during
the reporting period the prior period
Geographical area name Revenue Operating costs Revenue Operating costs
PRC 8,429,732,938.38 7,047,508,278.17 7,466,152,102.15 6,038,757,296.77
Hong Kong 85,042,051.22 82,802,641.61 58,239,166.05 55,846,279.75
United States 74,652,473.46 70,989,361.06 153,370,094.99 149,004,934.47
Japan 99,795,928.67 97,186,265.13 100,167,928.68 95,567,635.37
South East Asia 128,741,768.46 125,361,950.58 149,359,989.66 138,524,656.07
Middle East 203,094,484.24 201,948,291.67 273,648,100.79 258,498,802.65
Europe 129,403,908.38 124,403,235.71 166,133,876.02 155,927,193.15
South Africa 123,402,201.61 120,069,947.66 41,686,106.64 35,893,611.81
Other countries and regions 588,843,661.01 574,306,973.09 459,156,051.07 437,164,540.57
Total 9,862,709,415.43 8,444,576,944.68 8,867,913,416.05 7,365,184,950.61
146 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
54. Revenue and operating costs (Cont’d)
(5) Revenue from top 5 customers of the Company
Unit: RMB
Percentage of the
Revenue for total revenue of
Name of customer principle activities the Company (%)
Shanghai Yaoji Playing Card Co., Ltd. 132,085,952.84 1.33%
Sun Hing Paper Company Ltd. 77,670,124.99 0.78%
Dongguan Huafa Paper Co., Ltd. 75,275,680.22 0.76%
Hebei Wentong Trading Co., Ltd. 74,168,803.43 0.74%
Qidong Yaoji Playing Card Industrial Co., Ltd. 73,132,957.60 0.73%
Total 432,333,519.08 4.34%
Description of revenue: Nil
55. Contracted project income
□ Applicable □ Not applicable
Description of contracted project: Nil
12
INTERIM
REPOR
T
56. Business taxes and surcharges
Unit: RMB
Amounts during Amounts during Calculation
Item the period the prior period standard
Excise tax
3% or 5%
Business tax 7,548,025.90 4,331,266.10 of revenue
5-7% of the value
added tax and
Urban maintenance and business tax
construction tax 13,391,191.15 14,663,063.47 payment
3% of the value
added tax and
Educational surcharges 9,323,433.40 13,086,702.39 business tax payment
Resource tax
Others 1,584,134.66 32,237.62
Total 31,846,785.11 32,113,269.58 —
Description of Business taxes and surcharges: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 147
VIII. Financial Report
(Cont’d)
57. Gain on change in fair value
Unit: RMB
Amounts during Amounts during
Source of gain on change in fair value the period the prior period
Held-for-trading financial assets
Of which: gain on change in fair value arising from derivative
financial instruments
Held-for-trading financial liabilities
Investment properties measured at fair value
Others
Biological assets measured at fair value 15,457,198.72 3,715,429.62
Total 15,457,198.72 3,715,429.62
Description of gain on change in fair value: Nil
58. Investment income
(1) Breakdown of investment income
12
Unit: RMB
INTERIM
REPOR Amounts during Amounts during
T
Item the period the prior period
Income from long-term equity investments accounted for
using the cost method
Income from long-term equity investments accounted for
using the equity method -2,716,529.31 -3,755,501.39
Investment gain on disposal of long-term equity investments 13,309,163.37
Investment income from holding held-for-trading financial assets
Investment income from held-to-maturity investments
making investment returns
Investment income from holding available-for-sale financial assets, etc.
Investment gain on disposal of held-for-trading financial assets
Investment income from held-to-maturity investments
Investment income from available-for-sale financial assets, etc.
Others
Total -2,716,529.31 9,553,661.98
(2) Income from long-term equity investments accounted for using the cost method
Not applicable
148 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
58. Investment income (Cont’d)
(3) Income from long-term equity investments accounted for using the equity method
Unit: RMB
Amounts during Amounts during
Investee the period the prior period Reason for change
Arjo Wiggins Chenming Specialty Paper The investee incurred
Co., Ltd -2,891,895.50 -2,960,733.52 losses during the period
Jiangxi Jiangbao Media Colour Printing The investee incurred
Co. Ltd. 175,366.19 -51,825.23 losses during the period
The investee incurred
Shouguang Liben Paper Making Co., Ltd. -742,942.64 losses during the period
Total -2,716,529.31 -3,755,501.39 —
Description of investment income: If there are no significant restrictions on remittance of investment income back
to the Company, please make a related statement; it there is no such significant restriction, please also make a
related statement: Nil
59. Loss on impairment of assets
12
Unit: RMB INTERIM
REPOR
T
Amounts during Amounts during
Item the period the prior period
I. Loss on bad debts 13,436,773.17 -17,554,955.74
II. Loss on inventory impairment -3,870,510.42
III. Loss on available-for-sale financial asset impairment
IV. Loss on held-to-maturity investments impairment
V. Loss on long-term equity investments impairment
VI. Loss on investment property impairment
VII. Loss on fixed asset impairment
VIII. Loss on construction materials impairment
IV. Loss on construction in progress impairment
X. Loss on productive biological asset impairment
XI. Loss on oil and gas asset impairment
XII. Loss on intangible asset impairment
XIII. Loss on goodwill impairment
XIV. Others
Total 13,436,773.17 -21,425,466.16
SHANDONG CHENMING PAPER HOLDINGS LIMITED 149
VIII. Financial Report
(Cont’d)
60. Non-operating income
(1) Non-operating income
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Total gain on disposal of non-current assets 2,840,815.25 1,811,245.53
Of which: Gain on disposal of fixed assets 2,840,815.25 1,811,245.53
Gain on disposal of intangible assets
Gain on debt reconstructuring 10,000,000.00 16,400.00
Gain on non-monetary asset swap
Receipt of donations
Government grants 179,712,857.44 136,607,867.13
Relocation compensation 9,925,075.95
Others 20,988,983.26 7,511,850.23
Total 223,467,731.90 145,947,362.89
(2) Breakdown of government grants
12
Unit: RMB
INTERIM Amounts during Amounts during
REPOR
T Item the period the prior period f ÷
Amortised deferred
income amounted to
RMB10,045,011.78 and
income-related expansion
grants amounted to
Expansion grants 175,517,398.94 125,301,439.93 RMB165,472,387.16.
Value-added tax refund 4,195,458.50 11,306,427.20
Total 179,712,857.44 136,607,867.13 —
Description of non-operating income: Nil
150 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
61. Non-operating expenses
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Total loss on disposal of non-current assets 909,346.99 923,387.79
Of which: Loss on disposal of fixed assets 909,346.99 923,387.79
Loss on disposal of intangible assets
Loss on debt reconstructuring 19,886,372.60
Loss on non-monetary asset swap 239,349.34 340,898.19
Donations 500,000.00
Others 656,322.11 5,186,458.67
Total 2,305,018.44 26,337,117.25
Description of non-operating expenses: Loss for debt restructuring represented waiver of the debts of Heze Chenming
Panels Co., Ltd. by the Company.
12
INTERIM
REPOR
T
SHANDONG CHENMING PAPER HOLDINGS LIMITED 151
VIII. Financial Report
(Cont’d)
62. Income tax expenses
Unit: RMB
Amounts during the Amounts during the
Item reporting period prior period
Current income tax calculated according to tax laws and relevant rules 70,437,525.65 87,178,859.01
Adjustment to deferred income tax -83,304,458.88 9,545,039.31
Total -12,866,933.23 96,723,898.32
63 Calculation of basic 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:
Amounts for the Amounts for the
Item reporting period prior period
12 Net profit for the period attributable to ordinary shareholders 94,244,962.85 483,549,691.40
INTERIM Of which: net profit attributable to continued operations 94,244,962.85 483,549,691.40
REPOR net profit attributable to discontinued operations
T
Net profit after deducting extraordinary gains and losses
attributable to ordinary shareholders of the Company -103,989,811.77 382,038,739.41
Of which: net profit attributable to continued operations -103,989,811.77 382,038,739.41
net profit attributable to discontinued operations
2. For the purpose of calculating earnings per share, the denominator is the weighted average of outstanding
ordinary shares. The calculation is as follows:
Amounts for the Amounts for the
Item reporting period prior period
Number of outstanding ordinary shares as
at the beginning of the period 2,062,045,941.00 2,062,045,941.00
Plus: number of weighted ordinary shares issued during the period
Less: number of weighted ordinary shares
repurchased during the period
Number of outstanding ordinary shares as at the end of the period 2,062,045,941.00 2,062,045,941.00
152 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
64. Other comprehensive income
Unit: RMB
Amounts Amounts during
Item during the year the prior year
1. Amount of profit (loss) arising from available-for-sale financial assets
Less: income tax impact of available-for-sale financial assets
Net amount recognised in other comprehensive income
in the prior period and transferred to profit or loss in the current period
Sub-total
2. Share of other comprehensive income of investees based
on equity method accounting
Less: income tax impact of share of other comprehensive income
of investees based on equity method accounting
Net amount recognised in other comprehensive income
in the prior period and transferred to profit or loss in the current period
Sub-total
3. Amount of profit (loss) arising from cash flow hedging instruments 12
Less: income tax impact of cash flow hedging instruments INTERIM
Net amount recognised in other comprehensive income in the prior REPOR
T
period and transferred to profit or loss in the current period
Adjustment to the initial recognition amount of items transferred
as hedging items
Sub-total
4. Translation difference of financial statements denominated
in foreign currency -152,386.81 -277,876.30
Less: net amount of disposal of overseas operations transferred
to profit or loss during the period
Sub-total -152,386.81 -277,876.30
5. Others
Less: income tax effect arising from other items charged to
other comprehensive income net amount of other items
previously charged to other comprehensive income and transferred
to profit or loss during the current year
Sub-total
Total -152,386.81 -277,876.30
Explanation on other comprehensive income: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 153
VIII. Financial Report
(Cont’d)
65. Notes to the cash flow statements
(1) Cash received relating to other operating activities
Unit: RMB
Item Amounts
Finance support fund 165,472,387.16
Interest income 79,124,229.96
Income on default penalty and fine 2,117,127.00
Bank balances and other income 35,551,332.65
Total 282,265,076.77
Explanation on cash received relating to other operating activities: Nil
(2) Cash paid relating to other operating activities
Unit: RMB
Item Amounts
12 Transportation expense
174,679,243.26
INTERIM
REPOR Hospitality expense 19,908,907.64
T Rental expense 2,676,795.45
Travel expense 6,174,545.95
Office expense 4,215,080.77
Waste disposal expense 20,054,348.58
Insurance premium 12,795,038.91
Repair expense 4,266,319.56
Advertising expense 15,521,458.15
Intermediary service expense 1,393,614.11
Financial institutions charge 14,797,625.10
Others 174,218,916.87
Total 450,701,894.35
Explanation on cash paid relating to other operating activities: Nil
154 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
65. Notes to the cash flow statements (Cont’d)
(3) Cash received relating to other investing activities
Unit: RMB
Item Amounts
Special subsidy funds received 23,142,607.18
Total 23,142,607.18
Explanation on cash received relating to other investing activities: Nil
(4) Cash paid relating to other investing activities
Not applicable
(5) Cash received relating to other financing activities
Unit: RMB
Item Amounts 12
INTERIM
Decrease in restricted bank deposits during the period 224,610,040.62 REPOR
T
Medium-term notes 1,083,500,000.00
Total 1,308,110,040.62
Explanation on cash received relating to other financing activities: Nil
(6) Cash paid relating to other financing activities
Not applicable
Explanation on cash paid relating to other financing activities: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 155
VIII. Financial Report
(Cont’d)
66. Supplementary information on cash flow statements
(1) Supplementary information on cash flow statements
Unit: RMB
Amounts Amounts during
Supplementary information during the period the prior period
1. Reconciliation of net profit as cash flows from operating activities: — —
Net profit 25,385,700.25 496,814,994.73
Add: Provision for impairment of assets 13,436,773.17 -21,425,466.16
Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of productive biological assets 796,121,382.28 582,233,501.25
Amortisation of intangible assets 19,753,084.13 17,102,238.25
Long-term prepaid expenses 6,517,551.36 11,777,968.45
Loss on disposal of fixed assets, intangible assets and
other long-term assets (“-” denotes gain) -1,931,468.26 -887,857.74
Loss on retired fixed assets (“-” denotes gain)
Loss on change in fair value (“-” denotes gain) -15,457,198.72
Finance expenses (“-” denotes gain) 579,386,304.38 194,556,465.57
Investment loss (“-” denotes gain) 2,716,529.31 -9,553,661.98
12 Decrease in deferred income tax assets(“-” denotes increase)
Increase in deferred income tax liabilities (“-” denotes decrease)
-83,304,458.88 -10,885,320.97
-1,340,281.66
INTERIM
REPOR Decrease in inventory (“-” denotes increase) 132,109,969.74 -611,684,865.07
T
Decrease in operating receivables(“-” denotes increase) -515,991,848.48 -692,903,938.89
Increase in operating payables(“-” denotes decrease) -297,657,618.41 783,840,129.26
Others
Net cash flows from operating activities 661,084,701.87 737,643,905.04
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 0.00
3 Net change in cash and cash equivalents: — —
Cash balance at the end of the period 2,589,296,414.02 1,764,865,743.95
Less: cash balance at the beginning of the period 2,317,048,619.53 1,855,235,979.80
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 272,247,794.49 -90,370,235.85
156 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(Cont’d)
66. Supplementary information on cash flow statements (Cont’d)
(2) Relevant information with respect to acquisition or disposal of subsidiaries and other operating units during
the reporting period
Unit: RMB
Amounts Amounts during
Supplementary information during the period the prior period
I. Relevant information with respect to acquisition of subsidiaries
and other operating units: — —
1. Consideration for acquisition of subsidiaries and
other operating units
2. Cash and cash equivalents paid on acquisition of subsidiaries
and other operating units
Less: cash and cash equivalents held by subsidiaries
and other operating units
3. Net cash paid on acquisition of subsidiaries and
other operating units
4. Net assets of subsidiaries acquired 0.00 0.00
Of which: Current assets
Non-current assets
Current liabilities
12
INTERIM
Non-current liabilities REPOR
T
II. Relevant information with respect to disposal of subsidiaries
and other operating units: — —
1. Consideration from disposal of subsidiaries and
other operating units 4,500,002.00
2. Cash and cash equivalents received from disposal
of subsidiaries and other operating units
Less: cash and cash equivalents held by subsidiaries
and other operating units 1,032,849.69
3. Net cash received from disposal of subsidiaries and
other operating units 3,467,152.31
4. Net assets of subsidiaries disposed of 0.00 -13,193,990.22
Of which: Current assets 32,692,729.92
Non-current assets 88,161,672.30
Current liabilities 134,048,392.44
Non-current liabilities
SHANDONG CHENMING PAPER HOLDINGS LIMITED 157
VIII. Financial Report
(Cont’d)
66. Supplementary information on cash flow statements (Cont’d)
(3) Cash and cash equivalents composition
Unit: RMB
Item Closing amount Opening amount
I. Cash 2,589,296,414.02 2,317,048,619.53
Of which: Treasury cash 1,612,295.60 1,908,702.31
Bank deposit that can be used for payment at any time 2,587,684,118.42 2,315,139,917.22
Other monetary funds that can be used for payment at any time
Deposit at central bank deposit that can be used for payment
Amount due from banks
Amount due to banks
II. Cash equivalents
Of which: Bond investment with maturity within 3 months
III. Balance of cash and cash equivalent at end of period 2,589,296,414.02 2,317,048,619.53
Explanation on supplementary information of cash flow statements: Nil
67. Notes to statement of changes in owners’ equity
12
Please state the name and the amount of adjustment of the “others” item for which the balance at the end of the prior
INTERIM
REPOR year had been adjusted and retrospective adjustment arising from the combination of enterprises under common
T
control: Nil
(VIII) Accounting for asset securitisation business
1. Explanation of the major transaction arrangements, accounting and bankruptcy remoteness provisions
for asset securitisation business
Not applicable
2. Main situation of special projects in which the Company does not have control but has to bear its risks
in reality
Not applicable
158 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(IX) Related parties and related party transactions
1. Parent company of the Company
Unit: RMB
Shareholding of the Voting right of the
Name of parent Place of Legal parent company on parent company on Ultimate controlling
company Relationship Company type incorporation representative Business nature Registered capital Currency the Company (%) the Company (%) party of the Company Organisation code
Shouguang Chenming Controlling Limited liability Shouguang Chen Investment in 1,685,425,500.00 RMB 14.21% 14.21% Shouguang 78348518-9
Holdings Co., Ltd. shareholder company City Hongguo manufacture of Chenming
paper,electricity, Holdings Co., Ltd.
steam,
arboriculture
Explanation on the parent company of the Company: Nil
12
INTERIM
REPOR
T
SHANDONG CHENMING PAPER HOLDINGS LIMITED 159
VIII. Financial Report
(IX) Related parties and related party transactions (Cont’d)
2. Subsidiaries
Unit: RMB
Legal
Ful name of subsidiary Subsidiary type Company type Place of i corporation representative Business nature Registered capital Currency Shareholding (%) Voting right (%) Organisation code
Wuhan Chenming Hanyang Paper Hold ngs Co., Ltd. Control i g subsid ary Join stock company Wuhan, China Li Weishan Manufacture of paper 211,367,000.00 50.93% 50.93% 27189235-4
Shandong Chenming Paper Group Qihe Paperboard Co., Ltd. Control i g subsid ary Lim ted l abi i y company Qihe, China Tan Daocheng Manufacture of paper 376,200,000.00 100% 100% 72074277-4
Shandong Chenming Power Supply Hold ngs Co., Ltd. Control i g subsid ary Join stock company Shouguang, China Sun Hongj Electric ty 99,553,100.00 86.71% 86.71% 70620711-8
Yanbian Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Yanj , China Wang Yingjun Manufacture of paper 81,633,000.00 100% 100% 72958840-0
Jiangxi Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Nanchang, China Jia Shaojun Manufacture of paper 172,000,000.00 USD 51% 51% 74426460-7
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Li Dej ang Arboriculture 10,590,000.00 68% 68% 73925671-7
Hai aer Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Hai aer, China Gao Ziwei Manufacture of paper 16,000,000.00 75% 75% 70130836-6
Wuhan Chenming Qianneng Electric Power Co., Ltd. Control i g subsid ary Lim ted l abi i y company Wuhan, China Hu Jianguo Electric ty 88,235,000.00 51% 51% 72579372-2
Wuhan Chenj an New-style Wal Materia s Co., Ltd. Control i g subsid ary Lim ted l abi i y company Wuhan, China Lu Xuefeng Wal materia s 10,000,000.00 51% 51% 74475404-0
Shandong Chenming Xin i Power Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Sun Hongj Electric ty 11,800,000.00 USD 51% 51% 72073121-5
Shouguang Chenming Cement Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Sun Hongj Production and sales of cement 7,000,000.00 100% 100% 73720178-X
Shandong Chenming Panels Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, Shandong, China Liu Shusen Production and sales of panels 30,000,000.00 100% 100% 73816170-8
Shouguang Chenming Floor Board Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Liu Shusen Production and sales of floor boards 500,000.00 100% 100% 76366212-5
Qihe Chenming Panels Co., Ltd. Control i g subsid ary Lim ted l abi i y company Qihe, China Liu Shusen Production and sales of panels 40,820,000.00 100% 100% 76001404-2
Yangj ang Chenming Arboriculture Co., Ltd. Control i g subsid ary Lim ted l abi i y company Yangj ang, China Li Zengxiang Arboriculture 1,000,000.00 100% 100% 78487434-6
Zhanj ang Chenming Arboriculture Co., Ltd. company Control i g subsid ary Lim ted l abi i y company Zhanj ang, China Li Zengxiang Arboriculture 1,000,000.00 100% 100% 78298807-5
Ji i Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Ji i , China Zhang Chunl n Manufacture of paper 1,500,000,000.00 100% 100% 78298556-0
Juancheng Chenming Panels Co., Ltd. Control i g subsid ary Lim ted l abi i y company Juancheng, China Liu Shusen Production and sales of panels 15,000,000.00 100% 100% 77872435-X
12 Shandong Grand View Hotel Co., Ltd.
Zhanj ang Chenming Paper Pulp Co., Ltd.
Control i g subsid ary
Control i g subsid ary
Lim ted l abi i y company
Lim ted l abi i y company
Shouguang, China
Zhanj ang, China
Xia Guangchun
Geng Guangl n
Catering
Arboriculture
13,910,000.00
2,500,000,000.00
USD 70%
100%
70%
100%
97529857-8
77527884-1
INTERIM Chenming (HK) Lim ted Control i g subsid ary Lim ted l abi i y company Hong Kong, China Li Feng Trade of paper 100,000.00 USD 100% 100% 3734927300011080
REPOR
Shouguang Chenming Modern Logistic Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Transportation 10,000,000.00 100% 100% 66015223-7
T
Shouguang Chenming Art Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Yin Tongyuan Manufacture of paper 20,000,000.00 USD 75% 75% 79867677-0
Qihe Chenming Waste Col ection Co., Ltd. Control i g subsid ary Lim ted l abi i y company Qihe, China Wang Xinglong Purchase and sales of waste and old 500,000.00 100% 100% 75825591-2
materia s
Ji i Chenming Waste Col ection Co., Ltd. Control i g subsid ary Lim ted l abi i y company Ji i , China Zhang Bangj Purchase and sales of waste and old 1,000,000.00 100% 100% 77872731-5
materia s
Ji i Chenming Machinery Manufacturing Co., Ltd. Control i g subsid ary Lim ted l abi i y company Ji i , China Zhang Chunl n Processing of machinery 600,000.00 100% 100% 66012410-5
Nanchang Chenming Arboriculture Co., Ltd. Control i g subsid ary Lim ted l abi i y company Nanchang, China Hou Huancai Arboriculture 10,000,000.00 100% 100% 66204306-9
Fuyu Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Fuyu, China Liu Chunshan Manufacture of paper 208,000,000.00 100% 100% 66389298-6
Huanggang Chenming Arboriculture Co., Ltd. Control i g subsid ary Lim ted l abi i y company Huanggang, China Wang Zaiguo Arboriculture 70,000,000.00 100% 100% 67036898-X
Huanggang Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Huanggang, Xiao Xiang Arboriculture 20,000,000.00 100% 100% 67976586-9
Shouguang Mei un Paper Co. Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Manufacture of paper 2,200,000,000.00 100% 100% 69064934-0
Shouguang Shun Da Customs Declaration Co, Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Customs declaration, i spection declaration 1,500,000.00 100% 100% 69689781-2
Wuhan Chenming Wan Xing Real Estate Co., Ltd. Control i g subsid ary Lim ted l abi i y company Wuhan, China Li Weishan Real estate 20,000,000.00 100% 100% 69534385-0
Shandong Chenming Paper Sales Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Sales of paper 100,000,000.00 100% 100% 55222631-5
Shanghai Runchen Equity Investment Fund Co., Ltd. Control i g subsid ary Lim ted l abi i y company Shanghai, China Li Yunnan Equity i vestment 305,000,000.00 98.36% 98.36% 58867347-5
Shouguang Chenming Industria Logistics Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Transportation 10,000,000.00 100% 100% 58877448-7
Shouguang Chenming Papermaking Machine Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Machinery manufacturing 2,000,000.00 100% 100% 58877452-4
Shouguang Chenming Import and Export Trade Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Import and export trade 10,000,000.00 100% 100% 58877445-2
Shouguang Chenming Jiatai Property Management Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Property management 1,000,000.00 100% 100% 58877454-0
Shouguang Chenming Hongxin Packaging Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Packaging 1,000,000.00 100% 100% 58877451-6
Shouguang Hengfeng Storage Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, Shandong, China Zhang Jianguo Storage of goods, l asing 500,000.00 100% 100% 58609781-4
Chenming International Co., Ltd Control i g subsid ary Lim ted l abi i y company Los Angeles, USA Xia Guangchun Import and export, technology research and 3,000,000.00 USD 100% 100%
development
Japan Chenming Paper Co., Ltd. Control i g subsid ary Lim ted l abi i y company Tokyo, Japan Feng Tao Paper i dustry, trading 1,500,000.00 USD 100% 100% 0100-01-144599
Wuhan Xingzhih an Paper Co., Ltd Control i g subsid ary Lim ted l abi i y company Wuhan, China Li Weishan Manufacture of paper 20,000,000.00 100% 100% 58798587-2
Shouguang City Run Sheng Wasted Paper Recycle Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Chen Hongguo Purchase and sales of waste and old 1,000,000.00 100% 100% 77316557-9
materia s
Wuxie Song Ling Paper Co., Ltd Control i g subsid ary Lim ted l abi i y company Wuxi, China Liu Chunshan Manufacture of paper 5,010,000.00 100% 100% 76243145-6
Shouguang Hongyi Decorative Packaging Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Ding Buxun Packaging 1,550,000.00 100% 100% 78077560-7
Shouguang Wei Yuan Logistics Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Hao Lim n Transportation 3,930,000.00 100% 100% 78079463-X
Shouguang Xinyuan Coal Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Hao Lim n Coal 3,000,000.00 100% 100% 86570424-2
Shouguang Liben Paper Making Co., Ltd Control i g subsid ary Lim ted l abi i y company Shouguang, China Gao Junj e Manufacture of paper 74,070,000.00 100% 100% 61358854-8
160 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(IX) Related parties and related party transactions (Cont’d)
3. Information on the joint ventures and associates of the Company
Unit: RMB
Voting right of
the Company Total assets Total liabilities Total net assets Total operating
Place of Legal Business Shareholding of in the at the end at the end at the end revenue Net profit Organisation
Name of investee Company type incorporation representative nature Registered capital Currency the Company (%) investee (%) of the period of the period of the period in the period in the period Relationship code
I. Joint venture — — — — — — — — — — — — — — —
II. Associate — — — — — — — — — — — — — — —
Arjo Wiggins Chenming Sino-foreign joint Shandong, China Tong Chong Manufacture 267,368,330.00 RMB 30% 30% 295,563,422.50 240,585,403.60 54,978,018.90 -9,639,651.68 Associate 78233868-9
Specialty Paper venture of paper
Co., Ltd.
Qingzhou Chenming Limited company Shandong, China Fang Shiming Deep 3,000,000.00 RMB 30% 30% Associate 16937769-8
Denaturation Amylum processing of
Co., Ltd. starch
Jiangxi Jiangbao Limited company Jiangxi, China Ou Yang Printing 23,140,000.00 RMB 21.16% 21.16% 39,213,919.58 17,403,066.27 21,810,853.31 7,002,232.61 828,762.73 Associate 79479506-X
Media Colour
Printing Co. Ltd.
Shandong Hongqiao Limited company Shandong, China Tan Shouqing Venture 250,000,000.00 RMB 20% 20% 250,000,000.00 250,000,000.00 Associate 58875429-1
Venture Capital Co., investment
Ltd.
SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM
REPOR
12
161
VIII. Financial Report
(IX) Related parties and related party transactions (Cont’d)
4. Other related parties of the Company
Name of other related party Relationship with the Company Organisation No.
Shandong Paper Making & Printing Enterprises Investee
Corporation
Zhejiang Province Guangyu Media Printing Investee
Company Limited
Jinan Shangyou Commercial Company Limited Investee
Shouguang Mihe Water Company Limited Investee
Shanghai Forest & Paper E-Commerce Co., Ltd Investee
Anhui Shidai Resources Cost method Holdings Co., Ltd. Investee
5. Related party transactions
(1) Related party transactions involving sales of goods and provision of services
Not applicable
Table on sales of goods and provision of services
Unit: RMB
12 Amounts during the period Amounts during the prior period
INTERIM
REPOR
Pricing principle of As a percentage As a percentage
T
Details of related party transactions of similar of similar
related party and decision making transaction transaction
Related party transactions process Amount amounts (%) Amount amounts (%)
Anhui Shidai Sales of Market price Authorised 24,371,109.40 0.29% 51,931.63
Resources paper by the Board
Holdings Co. Ltd.
Jiangxi Jiangbao Sales of Market price Authorised 3,757,178.95 0.04%
Media Colour paper by the Board
Printing Co. Ltd.
(2) Related party custody/outsourcing
Not applicable
(3) Related party leasing
Not applicable
162 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(IX) Related parties and related party transactions (Cont’d)
5. Related party transactions (cont’d)
(4) Guarantees provided for related parties
Unit: RMB
Whether
performance of
Amounts under Starting date of Expiry date of guarantee is
Guarantor Party being guaranteed guarantee guarantee guarantee completed
The Company Nanchang Chenming Arboriculture Co., Ltd. 9,600,000.00 2010.08.19 2013.08.18 No
The Company Nanchang Chenming Arboriculture Co., Ltd. 6,000,000.00 2012.03.20 2015.03.19 No
The Company Nanchang Chenming Arboriculture Co., Ltd. 20,000,000.00 2010.05.26 2015.05.25 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. 29,900,000.00 2010.04.29 2013.04.28 No
The Company Huanggang Chenming Arboriculture Co., Ltd. 20,000,000.00 2010.07.08 2012.07.07 No
The Company Huanggang Chenming Arboriculture Co., Ltd. 30,000,000.00 2011.09.19 2014.09.18 No
The Company Huanggang Chenming Arboriculture Co., Ltd. 26,000,000.00 2012.06.27 2015.06.26 No
The Company Shouguang Meilun Paper Co., Ltd. 187,500,000.00 2012.03.26 2012.09.25 No
The Company Shouguang Meilun Paper Co., Ltd. 63,249,000.00 2011.01.26 2012.12.25 No
The Company Shouguang Meilun Paper Co., Ltd. 118,308,760.00 2012.06.21 2012.12.20 No
The Company Shouguang Meilun Paper Co., Ltd. 30,923,701.08 2011.10.28 2012.08.27 No
The Company Shouguang Meilun Paper Co., Ltd. 505,992,000.00 2011.04.19 2014.03.18 No 12
The Company Shouguang Meilun Paper Co., Ltd. 100,000,000.00 2011.01.14 2014.01.13 No INTERIM
REPOR
The Company Shouguang Meilun Paper Co., Ltd. 252,996,000.00 2010.09.10 2013.03.09 No T
The Company Zhanjiang Chenming Paper & Pulp Co., Ltd. 274,739,861.48 2012.05.24 2013.05.23 No
The Company Zhanjiang Chenming Paper & Pulp Co., Ltd. 258,625,133.25 2012.06.27 2013.06.26 No
The Company Zhanjiang Chenming Paper & Pulp Co., Ltd. 3,548,723,500.00 2008.03.25 2023.03.24 No
The Company Shandong Chenming Paper Sales Company Limited 1,015,000,000.00 2011.11.17 2012.11.16 No
The Company Shandong Chenming Paper Sales Company Limited 899,871,783.65 2012.02.17 2012.08.16 No
The Company Shandong Chenming Paper Sales Company Limited 390,000,000.00 2012.04.19 2012.10.18 No
The Company Shandong Chenming Paper Sales Company Limited 799,619,058.72 2012.03.31 2012.09.30 No
The Company Chenming (HK) Limited 500,000,000.00 2011.04.13 2014.04.12 No
Total 9,537,048,798.18
Explanation for guarantees provided for related parties: The Company provided guarantee for the issuance of
bonds amounting to RMB0.5 billion by Chenming (HK) Limited.
(5) Related party funds borrowing
Not applicable
(6) Related party asset transfer and debt restructuring
Not applicable
(7) Other related party transactions
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 163
VIII. Financial Report
(IX) Related parties and related party transactions (Cont’d)
6. Related party accounts receivables and accounts payables (cont’d)
Accounts receivables of the Company due from the related party
Unit: RMB
Item Related party Closing party Opening balance
Anhui Shidai Resources Holdings Co. Ltd. Trade receivable 10,189,479.28 819,534.42
Jiangxi Jiangbao Media Colour Printing Co. Ltd. Trade receivable 647,390.00 847,390.00
Arjo Wiggins Chenming Specialty Paper Co., Ltd. Other receivable 1,290,901.12 1,290,901.12
Accounts payables of the Company due to the related party
Unit: RMB
Item Related party Closing party Opening balance
Shouguang Chenming Holdings Co., Ltd. Other payables 24,000,000.00 30,000,000.00
12
INTERIM
REPOR
T
164 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(X) Share-based payments
1. General information on share-based payments
Not applicable
2. Share-based payments settled by equity
Not applicable
3. Share-based payments settled by cash
Not applicable
4. Share-based payments for services
Not applicable
5. Amendments to and termination of share-based payments settled by
Not applicable
(XI) Contingency
1. Contingent liabilities arising from pending causes or arbitration and their financial effects
Nil
12
INTERIM
2. Contingent liabilities arising from providing debt guarantees for other units and their financial effects REPOR
T
Nil
Other contingent liabilities and their financial effects: Nil
SHANDONG CHENMING PAPER HOLDINGS LIMITED 165
VIII. Financial Report
(XII) Commitments
1. Significant commitments
(1) Capital commitments
Item Closing balance Opening balance
Contracted but not yet recognised in the financial statements
– Commitments in relation to acquisition and construction
of long-term assets 1,452,064,583.33 3,367,499,794.06
Total 1,452,064,583.33 3,367,499,794.06
(2) Opeating lease commitments
As at the balance sheet date, the Company entered into irrevocable operating lease contracts with non-group
companies as follows:
Item Closing balance Opening balance
Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 34,803,533.79 39,043,673.69
The second year after balance sheet date 15,498,329.33 20,588,005.02
The third year after balance sheet date 15,476,956.33 15,599,245.62
In the years thereafter 577,753,213.26 666,563,916.25
12
INTERIM Total 643,532,032.71 741,794,840.58
REPOR
T
2. Performance of commitments for the prior period
As of 30 June 2012, no significant commitments had to be disclosed by the Company.
(XIII) Events after the balance sheet date
1. Important events after the balance sheet date
Not applicable
2. Profit distribution after the balance sheet date
Not applicable
3. Other events after the balance sheet date
No events after the balance sheet date have to be disclosed.
166 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XIV) Other important matter
1. Non-monetary asset swap
Not applicable
2. Debt reconstructuring
Not applicable
3. Business combination
Not applicable
4. Lease
Investment properties leased through operating lease
Minimum lease
Remaining term of lease payments
Within 1 years (including 1 year) 2,835,754.80
Over 1 year but within 2 years (including 2 year) 1,614,010.80
Over 2 years but within 3 years (including 3 year) 309,352.07
Total 4,759,117.67
12
INTERIM
REPOR
5. Financial instruments outstanding and convertible to shares as at the end of the period T
Not applicable
6. Major terms of the annuity plan and its significant change
Not applicable
7. Other material matter need to be disclosed
Biological assets measured at fair value
Profit or loss Accumulated Provision for
from change change in fair impairment
Opening in fair value value charged during
Item balance for the period to equity the period Closing balance
Consumable biological assets 959,061,500.85 15,457,198.72 142,614,672.01 1,053,117,556.55
Sub-total 959,061,500.85 15,457,198.72 142,614,672.01 1,053,117,556.55
SHANDONG CHENMING PAPER HOLDINGS LIMITED 167
VIII. Financial Report
(XV) Notes to major financial statement items of the Company
1. Accounts receivable
(1) Accounts receivable
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amount Percentage (%) Amount Percentage (%) Amount Percentage (%) Amount Percentage (%)
Accounts receivable which are individually
significant and individually provided
for bad debt 51,145,706.12 8.27% 51,145,706.12 100% 56,089,509.86 3.08% 56,089,509.86 100%
Accounts receivable collectively provided
for bad debt
No-risk portfolio 537,410,151.80 86.89% 1,730,082,770.43 95.07%
General-risk portfolio 29,950,075.79 4.84% 21,152,150.14 70.63 33,541,440.60 1.85% 20,589,929.06 61.39%
Sub-total 567,360,227.59 91.73% 21,152,150.14 3.73% 1,763,624,211.03 96.92% 39,666,946.35 1.17%
Accounts receivable which are not
individually significant but
individually provided for bad debt
Total 618,505,933.71 — 72,297,856.26 — 1,819,713,720.89 — 117,715,865.10 —
12
Explanatory note to the categories of accounts receivable:
INTERIM
REPOR Accounts receivable of more than RMB1 million are recognised as accounts receivable individually significant.
T
A no-risk portfolio is the accounts receivable which are individually significant or have certain specific risk
features and are determined by the management to be not impaired as at the balance sheet date upon subject to
impairment tests separately. A general-risk portfolio is the accounts receivable for which bad debts are provided
under credit risk portfolio as they are not qualified to be subject to impairment tests separately (individually
significant or have certain specific risk features) and are classified into some portfolios based on the credit
risk features such as age and the percentage of bad debt provision of each portfolio is determined against the
common risk features of each portfolio by the management.
Accounts receivable individually significant and individually provided for bad debt as at end of the period
√ Applicable □ Not applicable
Unit: RMB
Accounts Percentage of
receivable Book balance Bad debt provision provision Reason
Payment for 51,145,706.12 51,145,706.12 100% Most of which were payment for
goods goods aged over 2 years and
unlikely to be recovered
Total 51,145,706.12 51,145,706.12 — —
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the aging
method:
√ Applicable □ Not applicable
168 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
1. Accounts receivable (Cont’d)
(1) Accounts receivable (Cont’d)
Unit: RMB
Closing balance Opening balance
Book balance Book balance
Aging Amount Percentage (%) Bad debt provision Amount Percentage (%) Bad debt provision
Within 1 year
Of which: — — — — — —
Within 1 year 4,779,196.51 15.96% 238,959.83 7,038,534.93 20.98% 351,926.75
Sub-total of within 1 year 4,779,196.51 15.96% 238,959.83 7,038,534.93 20.98% 351,926.75
1 to 2 years 1,580,179.22 5.28% 158,017.92 3,726,896.05 11.11% 372,689.61
2 to 3 years 3,544,409.59 11.83% 708,881.92 3,638,371.15 10.85% 727,674.23
Over 3 years 20,046,290.47 66.93% 20,046,290.47 19,137,638.47 57.06% 19,137,638.47
3 to 4 years
4 to 5 years
Over 5 years
Total 29,950,075.79 — 21,152,150.14 33,541,440.60 — 20,589,929.06
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the percentage
of total accounts receivable method:
□ Applicable √ Not applicable 12
INTERIM
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on other methods: REPOR
T
□ Applicable √ Not applicable
Accounts receivable not individually significant but individually provided for bad debt as at end of the period:
□ Applicable √ Not applicable
(2) Reversal or recovery of accounts receivable during the reporting period
Not applicable
(3) Accounts receivable actually written-off during the reporting period
Not applicable
(4) Outstanding amount within the accounts receivable due from shareholders holding 5% or more (including 5%)
in the voting shares of the Company during the reporting period
□ Applicable √ Not applicable
(5) Explanation of the significant other receivables
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 169
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
1. Accounts receivable (Cont’d)
(6) Top five other receivables are as follows:
Unit: RMB
As a percentage of
Relationship the total accounts
Entity name with the Company Amount Term receivable (%)
Shouguang Meilun Paper Co., Ltd. Related party within the 230,899,127.75 Within 1 year 37.33%
scope of consolidation
Shouguang Chenming Art Paper Related party within the 195,622,369.89 Within 1 year 31.63%
Co., Ltd. scope of consolidation
Wuhan Chenming Hanyang Paper Related party within the 47,827,570.22 Within 1 year 7.73%
Holdings Co., Ltd. scope of consolidation
Foshan Shunde Xingchen Paper Non-related party 26,845,065.23 3 to 4 years 4.34%
Co., Ltd.
Shouguang Liben Paper Making Related party within the 26,128,063.36 Within 1 year 4.22%
Co., Ltd. scope of consolidation
Total — 527,322,196.45 — 85.25%
12
INTERIM (7) Information on accounts receivable of the related parties
REPOR
T
Unit: RMB
As a percentage of
Relationship the total accounts
Entity name with the Company Amount receivable (%)
Shouguang Liben Paper Making Co., Ltd. Subsidiary of the Company 26,128,063.36 4.22%
Shouguang Chenming Art Paper Co., Ltd. Subsidiary of the Company 195,622,369.89 31.63%
Wuhan Chenming Hanyang Subsidiary of the Company 47,827,570.22 7.73%
Paper Holdings Co., Ltd.
Yanbian Chenming Paper Co., Ltd. Subsidiary of the Company 4,207,722.89 0.68%
Jilin Chenming Paper Co., Ltd. Subsidiary of the Company 4,670,204.58 0.76%
Zhanjiang Chenming Paper Pulp Co., Ltd. Subsidiary of the Company 16,636.36 0.003%
Shouguang Meilun Paper Co., Ltd. Subsidiary of the Company 230,899,127.75 37.33%
Shandong Chenming Panels Co., Ltd. Subsidiary of the Company 20,327,569.14 3.29%
Shandong Grand View Hotel Co., Ltd. Subsidiary of the Company 2,291,524.66 0.37%
Total — 537,410,151.80 86.89%
(8) Transferred amount of accounts receivable not qualified to be derecognised amounted to RMB0.00.
(9) Accounts receivable as the underlying assets of securitisation and the related transaction arrangement in brief:
Nil
170 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
2. Other receivables
(1) Other receivables
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amount Percentage (%) Amount Percentage (%) Amount Percentage (%) Amount Percentage (%)
Other receivables which are individually significant
and individually provided for bad debt 9,402,148.72 0.12% 9,402,148.72 100% 9,330,331.45 0.14% 9,330,331.45 100%
Other receivables collectively provided for bad debt
No-risk portfolio 8,031,313,439.72 99.01% 6,894,133,462.44 98.88%
General-risk portfolio 56,796,589.19 0.7% 17,944,936.27 31.6% 53,445,787.71 0.77% 19,499,404.97 36.48%
Sub-total 8,088,110,028.91 99.71% 17,944,936.27 0.22% 6,947,579,250.15 99.64% 19,499,404.97 0.28%
Other receivables which are not individually
significant but individually provided for bad debt 14,401,628.46 0.17% 14,401,628.46 100% 15,554,009.74 0.22% 15,554,009.74 100%
Total 8,111,913,806.09 — 41,748,713.45 — 6,972,463,591.34 — 44,383,746.16 —
Explanatory note to the categories of other receivables:
Other receivables of more than RMB1 million are recognised as other receivables individually significant. A no- 12
risk portfolio is the other receivables which are individually significant or have certain specific risk features and INTERIM
are determined by the management to be not impaired as at the balance sheet date upon subject to impairment REPOR T
tests separately. A general-risk portfolio is the other receivables for which bad debts are provided under credit
risk portfolio as they are not qualified to be subject to impairment tests separately (individually significant or have
certain specific risk features) and are classified into some portfolios based on the credit risk features such as age
and the percentage of bad debt provision of each portfolio is determined against the common risk features of
each portfolio by the management.
Other receivables individually significant and individually provided for bad debt as at end of the period:
√ Applicable □ Not applicable
Unit: RMB
Other Percentage of
receivables Book balance Bad debt provision provision Reason
Amounts with 9,402,148.72 9,402,148.72 100% Aged amounts are unlikely to
customers be recovered based on past
experience.
Total 9,402,148.72 9,402,148.72 — —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 171
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
2. Other receivables (Cont’d)
(1) Other receivables (Cont’d)
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the aging method:
√ Applicable □ Not applicable
Unit: RMB
Closing balance Opening balance
Book balance Book balance
Aging Amount Percentage (%) Bad debt provision Amount Percentage (%) Bad debt provision
Within 1 year
Of which: — — — — — —
Within 1 year 25,783,365.05 45.4% 1,289,168.25 28,392,081.38 53.12% 1,419,604.07
Sub-total of within 1 year 25,783,365.05 45.4% 1,289,168.25 28,392,081.38 53.12% 1,419,604.07
1 to 2 years 4,351,700.78 7.66% 435,170.08 3,011,095.47 5.64% 301,109.55
2 to 3 years 13,051,156.77 22.98% 2,610,231.35 5,329,899.38 9.97% 1,065,979.87
Over 3 years 13,610,366.59 23.96% 13,610,366.59 16,712,711.48 31.27% 16,712,711.48
3 to 4 years
4 to 5 years
Over 5 years
Total 56,796,589.19 — 17,944,936.27 53,445,787.71 — 19,499,404.97
12
INTERIM In respect of portfolio, the measurement of bad debt provision for other receivables is based on the percentage of
REPOR
T total accounts receivable method:
□ Applicable √ Not applicable
In respect of portfolio, the measurement of bad debt provision for other receivables is based on other methods:
□ Applicable √ Not applicable
Other receivables not individually significant but individually provided for bad debt as at end of the period:
□ Applicable √ Not applicable
(2) Reversal or recovery of other receivables during the reporting period
Other receivables individually significant or not individually significant but tested for impairment individually and
provided for bad debt as at end of the period:
Accounts Percentage
receivable Book balance Bad debt provision of provision Reason
Amounts with 14,401,628.46 14,401,628.46 100% Aged amounts are unlikely to
customers be recovered based on past
experience.
Total 14,401,628.46 14,401,628.46 — —
Other receivables not individually significant but having greater risks according to their credit risk profile: Nil
(3) Other receivables actually written-off during the reporting period
Not applicable
172 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
2. Other receivables (Cont’d)
(4) Outstanding amount within the other receivables due from shareholders holding 5% or more (including 5%) in
the voting shares of the Company during the reporting period
□ Applicable √ Not applicable
(5) Explanation of the significant other receivables
No.
(6) Top five other receivables are as follows:
Unit: RMB
As
a percentage
of the
Relationship total other
Entity name with the Company Amount Term receivables (%)
Shouguang Meilun Paper Co., Ltd. Related party within the 3,487,611,197.94 With 1year 42.99%
scope of consolidation
Zhanjiang Chenming Paper Pulp Related party within the 1,977,446,414.53 With 1year 24.38%
Co., Ltd. scope of consolidation 12
Shouguang Chenming Art Paper Related party within the 535,859,685.38 With 1year 6.61% INTERIM
REPOR
Co., Ltd. scope of consolidation T
Wuhan Chenming Hanyang Paper Related party within the 524,996,035.35 With 1year 6.47%
Holdings Co., Ltd. scope of consolidation
Jilin Chenming Paper Co., Ltd. Related party within the 475,573,852.62 With 1year 5.86%
scope of consolidation
Total — 7,001,487,185.82 — 86.31%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 173
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
2. Other receivables (Cont’d)
(7) Overview of other receivables of the related parties
Unit: RMB
As a percentage
Relationship of the total other
Entity name with the Company Amount receivables (%)
Shouguang Meilun Paper Co., Ltd. Related party within the 3,487,611,197.94 42.99%
scope of consolidation
Zhanjiang Chenming Paper & Pulp Related party within the 1,977,446,414.53 24.38%
Co., Ltd. scope of consolidation
Shouguang Chenming Art Paper Co., Ltd. Related party within the 535,859,685.38 6.61%
scope of consolidation
Wuhan Chenming Hanyang Paper Related party within the 524,996,035.35 6.47%
Co., Ltd. scope of consolidation
Jilin Chenming Paper Co., Ltd. Related party within the 475,573,852.62 5.86%
scope of consolidation
Shandong Grand View Hotel Co., Ltd. Related party within the 349,964,953.47 4.31%
scope of consolidation
Shandong Chenming Paper Group Related party within the 74,078,613.63 0.91%
Qihe Paperboard Co., Ltd. scope of consolidation
Fuyu Chenming Paper Co., Ltd. Related party within the 164,886,098.95 2.03%
12 scope of consolidation
INTERIM Shandong Chenming Selling Co., Ltd. Related party within the 15,947,828.88 0.2%
REPOR
T scope of consolidation
Wuhan Chenming Qianneng Related party within the 59,280,983.07 0.73%
Electric Power Co., Ltd. scope of consolidation
Juancheng Chenming Panels Co., Ltd. Related party within the 50,601,853.43 0.62%
scope of consolidation
Huanggang Chenming Paper Pulp Related party within the 101,145,430.3 1.25%
Co., Ltd. scope of consolidation
Huanggang Chenming Arboriculture Related party within the 87,750,754.85 1.08%
Co., Ltd. scope of consolidation
Yanbian Chenming Paper Co., Ltd. Related party within the 311,582.66 0.0038%
scope of consolidation
Zhanjiang Chenming Arboriculture Co., Ltd.Related party within the 116,854,118.81 1.44%
scope of consolidation
Yangjiang Chenming Arboriculture Related party within the 3,020,900 0.04%
Co., Ltd. scope of consolidation
Wuhan Chenming Wan Xing Real Estate Related party within the 1,142,777.77 0.01%
Co., Ltd. scope of consolidation
Shouguang Liben Paper Making Co., Ltd. Related party within the 4,691,333.45 0.06%
scope of consolidation
Hailaer Chenming Paper Co., Ltd. Related party within the 136,204.63 0.0017%
scope of consolidation
Arjo Wiggins Chenming Specialty Paper Associate 1,290,901.12 0.02%
Co., Ltd.
Chenming International Co., Ltd. Related party within the 12,820
scope of consolidation
Total — 8,032,604,340.84 99.02%
(8) Transferred amount of other receivables not qualified to be derecognised amounted to RMB0.00.
(9) Other receivables as the underlying assets of securitisation and the related transaction arrangement in brief:
Nil
174 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
3. Long-term equity investments
Unit: RMB
Explanation of the
inconsistent of
Equity interest in the Voting right in the equity interest
Accounting investee held by the investee by the and voting right Impairment provision Cash dividend
Investee method Initial investment Opening Balance Change Closing balance Company (%) Company (%) in the investee Impairment provision during the period for the period
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. Cost method 202,824,716.34 202,824,716.34 202,824,716.34 50.93% 50.93%
Shandong Chenming Paper Group Qihe Paperboard
Co., Ltd. Cost method 376,200,000 376,200,000 376,200,000 100% 100%
Shandong Chenming Power Supply Holdings Co., Ltd. Cost method 157,810,117.43 157,810,117.43 157,810,117.43 86.71% 86.71% 28,487,270.13
Yanbian Chenming Paper Co., Ltd. Cost method 96,725,533.01 96,725,533.01 96,725,533.01 100% 100%
Hailaer Chenming Paper Co., Ltd. Cost method 12,000,000 12,000,000 12,000,000 75% 75%
Jiangxi Chenming Paper Co., Ltd. Cost method 697,548,406.4 697,548,406.4 697,548,406.4 51% 51%
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. Cost method 7,199,000 7,199,000 7,199,000 68% 68%
Jilin Chenming Paper Co., Ltd. Cost method 1,501,350,000 1,501,350,000 1,501,350,000 100% 100%
Juancheng Chenming Panels Co., Ltd. Cost method 15,000,000 15,000,000 15,000,000 100% 100%
Shandong Grand View Hotel Co., Ltd. Cost method 80,500,000 80,500,000 80,500,000 70% 70%
Zhanjiang Chenming Paper Pulp Co., Ltd. Cost method 2,500,000,000 2,500,000,000 2,500,000,000 100% 100%
Chenming (HK) Limited Cost method 783,310 783,310 783,310 100% 100%
Shouguang Chenming Modern Logistic Co., Ltd. Cost method 10,000,000 10,000,000 10,000,000 100% 100%
Shouguang Chenming Art Paper Co., Ltd. Cost method 113,616,063.8 113,616,063.8 113,616,063.8 75% 75%
Fuyu Chenming Paper Co., Ltd. Cost method 208,000,000 208,000,000 208,000,000 100% 100%
Huanggang Chenming Paper Co., Ltd. Cost method 20,000,000 20,000,000 20,000,000 100% 100%
Huanggang Chenming Arboriculture Co., Ltd. Cost method 70,000,000 10,000,000 60,000,000 70,000,000 100% 100%
Shouguang Meilun Paper Co. Ltd. Cost method 2,200,000,000 2,200,000,000 2,200,000,000 100% 100%
Shouguang Shun Da Customs Declaration Co, Ltd. Cost method 1,500,000 1,500,000 1,500,000 100% 100%
Shandong Chenming Paper Sales Company Limited Cost method 100,000,000 100,000,000 100,000,000 100% 100%
SHANDONG CHENMING PAPER HOLDINGS LIMITED
Shouguang Liben Paper Making Co., Ltd. Cost method 15,850,354.16 15,850,354.16 15,850,354.16 100% 100%
Arjo Wiggins Chenming Specialty Paper Co., Ltd. Equity method 80,100,000 19,385,301.17 -2,891,895.5 16,493,405.67 30% 30%
Qingzhou Chenming Denaturation Amylum Co., Ltd. Equity method 900,000 900,000 900,000 30% 30% 900,000
Jiangxi Jiangbao Media Colour Printing Co. Ltd. Equity method 6,000,000 4,788,278.79 175,366.19 4,963,644.98 21.16% 21.16%
Shandong Paper Making & Printing Enterprises Corporation Cost method 200,000 200,000 200,000 2% 2% 200,000
Zhejiang Province Guangyu Media Printing Company Limited Cost method 2,000,000 2,000,000 2,000,000 9.96% 9.96%
Jinan Shangyou Commercial Company Limited Cost method 350,000 350,000 350,000 5% 5% 350,000
Shouguang Mihe Water Company Limited Cost method 20,000,000 20,000,000 20,000,000 19.46% 19.46%
Shanghai Forest & Paper E-Commerce Co., Ltd. Cost method 1,400,000 1,400,000 1,400,000 14% 14% 1,139,574.47
Anhui Shidai Resources Holdings Co., Ltd. Cost method 1,000,000 1,000,000 1,000,000 10% 10%
Shanghai Runchen Equity Investment Fund Co., Ltd. Cost method 300,000,000 300,000,000 300,000,000 98.36% 98.36%
Shouguang Chenming Industrial Logistics Co., Ltd. Cost method 10,000,000 10,000,000 10,000,000 100% 100%
Shouguang Chenming Papermaking Machine Co., Ltd. Cost method 2,000,000 2,000,000 2,000,000 100% 100%
Shouguang Chenming Import and Export Trade Co., Ltd. Cost method 10,000,000 10,000,000 10,000,000 100% 100%
Shouguang Chenming Jiatai Property Management Co., Ltd. Cost method 1,000,000 1,000,000 1,000,000 100% 100%
Shouguang Chenming Hongxin Packaging Co., Ltd. Cost method 1,000,000 1,000,000 1,000,000 100% 100%
Shouguang Hengfeng Storage Co., Ltd. Cost method 500,000 500,000 500,000 100% 100%
Chenming International Co., Ltd. Cost method 19,861,955 19,861,955 19,861,955 100% 100%
Japan Chenming Paper Company Limited Cost method 9,306,351.2 9,306,351.2 9,306,351.2 100% 100%
Shandong Hongqiao Venture Capital Co., Ltd. Equity method 50,000,000 30,000,000 20,000,000 50,000,000 20% 20%
Total 8,902,525,807.34 8,751,293,036.10 86,589,821.89 8,837,882,857.99 - - - 2,589,574.47 28,487,270.13
Description of long-term equity investments: Nil
175
INTERIM
REPOR
12
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
4. Revenue and operating costs
(1) Revenue and operating costs
Unit: RMB
Amounts during Amounts during the
Item the period prior period
Revenue from principal activities 3,703,428,614.56 3,957,321,998.90
Revenue from other activities 383,795,028.56 153,537,713.25
Operating costs 3,448,243,509.14 3,325,675,097.46
Total
(2) Principal activities (by industry)
√ Applicable □ Not applicable
Unit: RMB
Amounts during the period Amounts during the prior period
Industry name Revenue Operating costs Revenue Operating costs
12 Machine-made paper
Electricity and steam
3,114,476,781.75
588,951,832.81
2,574,426,997.64
498,093,999
3,536,530,874.3
420,791,124.6
2,793,416,747.88
404,038,018.71
INTERIM
REPOR
T Total 3,703,428,614.56 3,072,520,996.64 3,957,321,998.90 3,197,454,766.59
(3) Principal activities (by product)
√ Applicable □ Not applicable
Unit: RMB
Amounts during the period Amounts during the prior period
Product name Revenue Operating costs Revenue Operating costs
Light weight coated paper 48,662,606.09 40,091,730.46 57,683,656.17 47,415,070.79
Duplex press paper 235,566,674.59 184,544,726.15 207,765,624.79 161,260,149.34
Writing paper 20,947,059.71 18,244,231.13 22,193,570.72 20,812,236.27
Coated paper 720,179,569.18 668,282,035.42 1,018,197,952.79 774,217,874.23
News press paper 704,748,171.31 532,979,502.38 738,051,948.64 667,559,883.43
White paper board 794,054,103 651,137,851.95 960,844,780.88 695,112,456.08
Other machine-made
paper 590,318,597.87 479,146,920.15 531,793,340.31 427,039,077.74
Electricity and steam 588,951,832.81 498,093,999 420,791,124.6 404,038,018.71
Total 3,703,428,614.56 3,072,520,996.64 3,957,321,998.90 3,197,454,766.59
176 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
4. Revenue and operating costs
(4) Principal activities (by geographical areas) (Cont’d)
√ Applicable □ Not applicable
Unit: RMB
Amounts during the period Amounts during the prior period
Geographical
area name Revenue Operating costs Revenue Operating costs
PRC 3,454,822,431.78 2,850,493,502.72 3,589,566,978.66 2,910,180,255.76
Hong Kong 248,606,182.78 222,027,493.92 367,755,020.24 287,274,510.83
Total 3,703,428,614.56 3,072,520,996.64 3,957,321,998.90 3,197,454,766.59
(5) Revenue from top 5 customers of the Company
Unit: RMB
Percentage of the
total revenue of the
Name of customer Total revenue Company (%)
12
Shandong Chenming Paper Sales Company Limited 2,787,798,366.57 68.21% INTERIM
Shouguang Meilun Paper Co., Ltd. 463,878,750 11.35% REPOR
T
Shandong Electric Power Group Corp. Weifang Power
Supply Company 309,874,699.32 7.58%
Chenming (HK) Limited 248,606,182.78 6.08%
Shouguang Chenming Art Paper Co., Ltd. 130,294,530.8 3.19%
Total 3,940,452,529.47 96.41%
Description of revenue: Mainly derived from sales of machine-made paper and steam as well as sales of materials
to subsidiaries
SHANDONG CHENMING PAPER HOLDINGS LIMITED 177
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
5. Investment income
(1) Breakdown of investment income
Unit: RMB
Amounts during the Amounts during
Item period the prior period
Income from long-term equity investments accounted for using
the cost method 28,487,270.13 86,000,000.00
Income from long-term equity investments accounted for using
the equity method -2,716,529.31 -3,755,501.39
Investment gain on disposal of long-term equity investments
Investment income from holding held-for-trading financial assets
Investment income from held-to-maturity investments making
investment returns
Investment income from holding available-for-sale financial
assets, etc.
Investment gain on disposal of held-for-trading financial assets
Investment income from held-to-maturity investments
Investment income from available-for-sale financial assets, etc.
Others 17,021,667.09 58,163,478.54
12
INTERIM Total 42,792,407.91 140,407,977.15
REPOR
T
(2) Income from long-term equity investments accounted for using the cost method
Unit: RMB
Amounts during Amounts during
Investee the period the prior period Reason for change
Shandong Chenming Power
Supply Holdings Co., Ltd. 28,487,270.13
Shandong Chenming Paper
Group Qihe Paperboard
Co., Ltd. 86,000,000
Total 28,487,270.13 86,000,000.00 —
(3) Income from long-term equity investments accounted for using the equity method
Unit: RMB
Amounts during Amounts during
Investee the period the prior period Reason for change
Arjo Wiggins Chenming The investee incurred losses during
Specialty Paper Co., Ltd -2,891,895.5 -2,891,895.5 the period
Jiangxi Jiangbao Media Colour The investee incurred losses during
Printing Co. Ltd. 175,366.19 -51,825.23 the period
Shouguang Liben Paper Making The investee incurred losses during
Co., Ltd. -742,942.64 the period
Total -2,716,529.31 -3,755,501.39 —
Description of investment income: Nil
178 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XV) Notes to major financial statement items of the Company (Cont’d)
6. Supplementary information on cash flow statement
Unit: RMB
Amounts during Amounts during
Supplementary information the period the prior period
1. Reconciliation of net profit as cash flows from operating activities: — —
Net profit 175,443,730.88 497,339,265.69
Add: Provision for impairment of assets -7,044,869.23 -38,465,504.04
Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of productive biological assets 306,244,526.12 291,792,105.16
Amortisation of intangible assets 4,630,549.74 4,461,395.06
Long-term prepaid expenses
Loss on disposal of fixed assets, intangible assets and other
long-term assets (“-” denotes gain) -2,008,319.17 -946,304.12
Loss on retired fixed assets (“-” denotes gain)
Loss on change in fair value (“-” denotes gain)
Finance expenses (“-” denotes gain) 423,895,393.90 223,147,887.79
Investment loss (“-” denotes gain) -42,792,407.91 -140,407,977.15
Decrease in deferred income tax assets (“-” denotes increase) 117,112.03 -12,151,529.94
Increase in deferred income tax liabilities (“-” denotes decrease)
Decrease in inventory (“-” denotes increase) -152,953,350.16 -261,634,804.79 12
Decrease in operating receivables (“-” denotes increase) -890,031,497.71 389,129,283.28 INTERIM
Increase in operating payables (“-” denotes decrease) 1,185,361,145.72 930,555,482.57 REPOR
T
Others
Net cash flows from operating activities 1,000,862,014.21 1,882,819,299.51
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 814,686,971.97 612,921,932.88
Less: cash balance at the beginning of the period 1,290,039,078.57 662,209,607.29
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 -475,352,106.60 -49,287,674.41
7. Assets and liabilities at assessed value under reverse takeover
Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 179
VIII. Financial Report
(XVI) Supplementary information
1. Return on net assets and earnings per share
Unit: RMB
Weighted average Earnings per share
return on net assets Basic earnings Diluted earnings
Profit during the reporting period (%) per share per share
Net profit attributable to holders of ordinary shares
of the Company 0.7% 0.05 0.05
Net profit attributable to holders of ordinary shares
of the Company, after deducting extraordinary
gains and losses -0.77% -0.05 -0.05
2. Explanation of irregular movements in major accounting statement items of the Company
1) Balance sheet items:
(1) The closing balance of prepayments of RMB1,045,146,661.71 increased by 36.64% as compared with the
opening balance mainly due to an increase in the advance payment for materials made by the Company;
(2) The closing balance of other receivables of RMB238,050,762.42 decreased by 26.88% as compared with
the opening balance mainly due to receipt of proceeds from disposal of Chibi Chenming and Xianning
Chenming in 2011 in accordance with the provisions of the contracts during the reporting period;
12 (3)
The closing balance of long-term equity investments of RMB94,717,476.18 increased by 22.32% as
INTERIM
REPOR compared with the opening balance mainly due to the increased investments in an associate, Shandong
T Hongqiao Venture Capital Co., Ltd., by the Company;
(4) The closing balance of construction in progress of RMB3,491,069,182.47 increased by 33.35% as compared
with the opening balance, and the closing balance of construction materials of RMB83,223,466.14 increased
by 34.39% as compared with the opening balance mainly due to the investments in the white coated
linerboard project and the demolition and relocation of Jilin Chenming by the Company;
(5) The closing balance of deferred income tax assets of RMB257,330,993.15 increased by 47.87% as
compared with the opening balance mainly due to deferred income tax assets generated by some
companies as affected by the market downturn at the macroeconomic level and in the paper making
industry, which could be used for offsetting for losses;
(6) The closing balance of bills payable of RMB1,654,218,054.43 increased by 168.84% as compared with the
opening balance mainly due to an increase in bank acceptance bills issued by the Company for payment for
goods during the reporting period;
(7) The closing balance of advance receipts of RMB351,160,489.96 increased by 51.74% as compared with
the opening balance mainly due to an increase in advance receipts for goods resulting from an increase in
market development efforts by the Company;
(8) The closing balance of staff remuneration payables of RMB196,886,749.84 increased by 33.88% as
compared with the opening balance mainly due to an increase in unpaid staff remuneration;
(9) The closing balance of interest payable of RMB172,073,207.37 increased by 61.03% as compared with the
opening balance mainly due to the provision of interest on medium-term notes and corporate bonds by the
Company;
(10) The closing balance of dividend payable was RMB309,306,891.20 mainly due to the payment of unpaid
dividend declared by the Company;
(11) The closing balance of non-current liabilities due within one year of RMB1,785,251,433.52 increased by
48.32% as compared with the opening balance mainly due to an increase in long-term borrowings due
within one year by the Company;
(12) The closing balance of other non-current liabilities of RMB3,542,607,521.90 increased by 44.95% mainly
due to the issue of medium-term notes of RMB1.1 billion during the reporting period.
180 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII. Financial Report
(XVI) Supplementary information (Cont’d)
2. Explanation of irregular movements in major accounting statement items of the Company (Cont’d)
(2)
(1) Revenue from operations of RMB9,964,451,535.04 increased by 11.74% as compared to the same period
last year mainly due to an increase in revenue caused by sales growth resulting from an expansion in the
scale of the Company;
(2) Operating costs of RMB8,500,512,936.03 increased by 15.14% as compared to the same period last year
mainly due to an increase in revenue caused by sales growth resulting from an expansion in the scale of the
Company;
(3) Selling and distribution expenses of RMB535,959,288.53 increased by 22.22% as compared to the same
period last year mainly due to an increase in transportation costs as a result of sales growth;
(4) General and administrative expenses of RMB562,794,713.60 increased by 19.43% as compared to the
same period last year mainly due to an increase in technology research and development expenses resulting
from an increase in investments in research and development by the Company;
(5) Finance expenses of RMB541,285,654.45 increased by 252.42% as compared to the same period last year
mainly due to the capitalised interest of the original loan being expensed during the reporting period upon
completion of the 800,000-tonne coated paper project and the Zhanjiang pulp project of the Company;
12
(6) Loss on impairment of assets of RMB13,436,773.17 increased by 162.71% as compared to the same period INTERIM
last year mainly due to an increase in the bad debt provisions during the reporting period as compared to REPOR
T
same period last year as a result of a change in the accounts receivable;
(7) Gain on change in fair value of RMB15,457,198.72 increased by 316.03% as compared to the same period
last year mainly due to a change in the fair value of timber assets;
(8) Investment income of RMB-2,716,529.31 decreased by 128.43% as compared to the same period last year
mainly due to the income of RMB13.31 million arising from disposal of Heze Chenming Panels and Lindun
Forestry in the prior period;
(9) Non-operating income of RMB223,467,731.90 increased by 53.12% as compared to the same period last
year mainly due to receipt of more government grants during the reporting period as compared to the prior
period;
(10) Non-operating expenses of RMB2,305,018.44 decreased by 91.25% as compared to the same period last
year mainly due to a debt restructuring loss of RMB19.89 million on disposal of Heze Chenming Panels;
(11) Total profit, income tax, net profit, net profit attributable to shareholders of the Company, and minority
interests of RMB12,518,767.02, RMB-12,866,933.23, RMB25,385,700.25, RMB94,244,962.85 and RMB-
68,859,262.60 respectively decreased by 97.89%, 113.3%, 94.89%, 80.51% and 619.09% respectively as
compared to the same period last year mainly due to: an decrease in, among other things, profit and income
tax as affected by the lower gross profit margin of paper products as compared to the prior period as a
result of the market downturn at the national and macroeconomic level and in the paper making industry,
and a greater decrease in minority interests as compared to the prior period as a result of the loss of non-
wholly-owned subsidiaries of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 181
Documents Available for Inspection
I. The financial statements signed and sealed by the legal representative, financial controller and head of the financial department of the
Company;
II. The interim report signed by the legal representative;
III. The original copies of all of the documents and announcements of the Company disclosed in the designated newspaper as approved by
China Securities Regulatory Commission during the reporting period;
IV. The interim report disclosed on the Stock Exchange of Hong Kong Limited; V.
Other related information.
Chairman: Chen Hongguo
Approved by the Board for submission: 21 August 2012
12
INTERIM REPORT
182