SHANGDONG CHENMING PAPER HOLDINGS LIMITED
SEMI-ANNUAL REPORT 2014
August 2014
SHANDONG CHENMING PAPER HOLDINGS LIMITED 1
I Important Notice, Table of Contents and Definitions
The board (the “Board”) of directors (the “Directors”), the supervisory committee (the “Supervisory Committee”), the Directors,
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the truthfulness,
accuracy and completeness of the contents of the interim report (the “Report”), guarantee that there are no false representations,
misleading statements or material omissions contained in this Report, and are jointly and severally responsible for the liabilities of
the Company.
All Directors were present at the Board meeting to consider and approve this Report.
The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capital from
reserves.
Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Liu Jun, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial statements
in the interim report.
14
INTERIM
REPORT
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions 2
II Company Profile 5
III Summary of Accounting Data and Financial Indicators 6
IV Directors’ Report 8
V Material Matters 25
VI Changes in Share Capital and Shareholders 37
VII Preference Shares 43
VIII Directors, Supervisors and Senior Management 44
IX Financial Report 47
X Documents Available for Inspection 174
14
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 3
I Important Notice, Table of Contents and Definitions
Definitions
Item means Definition
Company or Chenming Paper means Shandong Chenming Paper Holdings Limited
Group means Shandong Chenming Paper Holdings Limited and its subsidiaries
Chenming Holdings means Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Shouguang Henglian means Shouguang Henglian Enterprise Investment Co. Ltd.
Shouguang Hengtai means Shouguang Hengtai Enterprise Investment Company Limited
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co., Ltd. 14
INTERIM
Jilin Chenming means Jilin Chenming Paper Co., Ltd. REPORT
Chenming GmbH means Chenming GmbH
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Guangdong Huirui means Guangdong Huirui Investment Co., Ltd.
Xinli Power means Shandong Chenming Xinli Power Co., Ltd.
Haicheng Haiming means Haicheng Haiming Mining Company Limited
Cheming Power means Shandong Chenming Power Supply Holdings Co., Ltd.
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile
I. Company profile
Stock abbreviation 晨鳴紙業 Stock Code 000488
Stock abbreviation 晨鳴 B Stock Code 200488
Stock exchange on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Stock Code 01812
Stock exchange on which the shares are listed The Stock Exchange of Hong Kong
Chinese name of the Company 山東晨鳴紙業集團股份有限公司
Chinese short name of the Company 晨鳴紙業
English name of the Company SHANDONG CHENMING PAPER HOLDINGS LIMITED
English short name of the Company SCPH
Legal representative of the Company Chen Hongguo
II. Contact persons and contact methods
Securities Affairs Hong Kong
Secretary to the Board Representative Company Secretary
Name Wang Chunfang Xiao Peng Poon Shiu Cheong
Correspondence No. 2199 East Nongsheng Road, No. 2199 East Nongsheng Road, 22nd Floor, World Wide House,
address Shouguang City, Shouguang City, Central, Hong Kong
Shandong Province Shandong Province
Telephone (86)-0536-2158008 (86)-0536-2158008 (852)-2501 0088
Facsimile (86)-0536-2158977 (86)-0536-2158977 (852)-2501 0028
Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hk
14
INTERIM III. Other information
REPORT
1. Contact methods of the Company
Whether the registered address, office address, postal code, website, email of the Company changed during the
reporting period
□ Applicable √ Not applicable
There was no change of the registered address, office address, postal code, website and email of the Company during
the reporting period. Please refer to 2013 Annual Report for details.
2. Information disclosure and places for inspection
Whether the information disclosure and places for inspection changed during the reporting period
□ Applicable √ Not applicable
There was no change of the newspapers designated by the Company for information disclosure, designated websites
for the publication of the Interim Report as approved by CSRC and places for inspection of the Company’s Interim
Report during the reporting period. Please refer to 2013 Annual Report for details.
3. Change of registration information
Whether the registration information changed during the reporting period
√ Applicable □ Not applicable
Legal Person Taxation
Date of Address of Business License Registration Organisation
Registration Registration Registration Number Number Code
Registration at the 2 January 2014 Shandong Administration 370000400001170 370783613588986 61358898-6
beginning of the for Industry & Commerce
reporting period
Registration at the 28 May 2014 Shandong Administration 370000400001170 370783613588986 61358898-6
of thed reporting period for Industry & Commerce
SHANDONG CHENMING PAPER HOLDINGS LIMITED 5
III Summary of Accounting Data and Financial Indicators
I. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company due to change of
accounting policies and correction of accounting errors
√ Yes □ No
In accordance with the requirements of “Notice on the issuance of ‘Accounting Standard for Business Enterprises No. 2 –
Long-term equity investments’” (Cai Kuai [2014] No. 14) and “Notice on the issuance of ‘Accounting Standard for Business
Enterprises No. 41 – Disclosure of interests in other entities’” (Cai Kuai [2014] No. 16), entities listed overseas are encouraged
to early adopt the above two accounting standards issued or amended in 2014. As a listed company in the PRC and Hong
Kong, the Company implemented the above two accounting standards in preparation of the financial statements for the first
half of 2014 and made retrospective adjustments to the data as at the end of 2013. The retrospective adjustments affected
available-for-sale financial assets and long-term equity investments in the balance sheet but had no effect on the income
statement. Please see section IX. IV. 31 “Changes in significant accounting policies and estimates” as set out in this Report
for the details of the affected amounts.
Increase/decrease
for the reporting
period compared
to the
corresponding
The reporting The corresponding period period of the
period of the prior year prior year (%)
Before adjustment After adjustment After adjustment
14
Revenue (RMB) 9,082,020,579.01 10,027,901,358.43 10,027,901,358.43 -9.43% INTERIM
Net profit attributable to shareholders REPORT
of the Company (RMB) 242,461,095.02 333,409,511.73 333,409,511.73 -27.28%
Net profit after extraordinary gains or losses
attributable to shareholders of the
Company (RMB) 57,813,473.27 134,539,548.74 134,539,548.74 -57.03%
Net cash flows from operating
activities (RMB) 1,285,696,261.13 906,935,242.95 906,935,242.95 41.76%
Basic earnings per share (RMB per share) 0.12 0.16 0.16 -25.00%
Diluted earnings per share (RMB per share) 0.12 0.16 0.16 -25.00%
Rate of return on net assets on weighted
average basis 1.72% 2.40% 2.40% -0.68%
Increase/decrease
as at the end
of the reporting
As at the end period compared
of the reporting to the end of the
period As at the end of the prior year prior year (%)
Before adjustment After adjustment After adjustment
Total assets (RMB) 50,465,774,693.92 47,521,883,569.18 47,521,883,569.18 6.19%
Net assets attributable to shareholders
of the Company (RMB) 13,635,437,678.10 14,039,888,226.11 14,039,888,226.11 -2.88%
Share capital (shares) Note 1 1,936,405,467 1,975,471,967 1,975,471,967 -1.98%
Note 1: The Company repurchased and cancelled 39,066,500 H shares during the reporting period and, therefore, the total number of the shares of
the Company was reduced by 39,066,500 shares.
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
III Summary of Accounting Data and Financial Indicators
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
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and
China accounting standards in the financial report
□ Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.
III. Items and amounts of extraordinary gains or losses
√ Applicable □ Not applicable
Unit: RMB
Item Amount Note
Profit or loss from disposal of non-current assets
14 (including write-off of provision for assets impairment) 73,764,935.36
INTERIM
Government grants (except for the government grants
REPORT closely related to the normal operation of the Company
and granted constantly at a fixed amount or quantity
in accordance with a certain standard based
on state policies) accounted for in profit or
loss for the current period 100,763,109.28
Gain or loss from debt restructuring 623,626.67
Gain or loss from change in fair value of consumable
biological assets 967,670.22
Non-operating gains and losses other than the above items 64,271,540.63
Less: Effect of income tax 44,085,625.09
Effect of minority interests (after tax) 11,657,635.32
Total 184,647,621.75 —
Notes for the Company‘s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
□ Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its
recurring gain or loss items during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 7
IV Directors’ Report
I. Overview
2014 marked an important year of reform and innovation for paper making industry. The paper making industry in China has
been entering into a new stage of transformation and upgrade in 2014. Some paper types are in a phase of overcapacity due
to slowdown in economic growth and weakness in market demand, thus resulting in fierce competition in the paper making
industry. In the first half of 2014, the domestic pulp and paper market was sluggish due to the macro environment. The overall
market development was weak.
On one hand, some small and medium-sized enterprises left the market as a result of elimination of outdated production
capacity and stricter environmental protection policy. This lowered the pressure of the new production capacity on the supply
in the industry to a certain extent, which was conductive to a proactive increase in price proposed by enterprises. Meanwhile,
the continued low level of raw material prices relieved the pressure on the operating costs of enterprises. On the other hand,
the slow recovery of market demand prevented the price from rising. Enterprises therefore underwent more production and
operation difficulties.
During the reporting period, the Company’s revenue amounted to RMB9,082.0206 million, down by 9.43 % from the
corresponding period of the prior year. The net profit attributable to shareholders of the Company was RMB242.4611 million,
down by 27.28% from the corresponding period of the prior year.
During the reporting period, the Company specified the working principles of “team building, strict management, outstanding
business performance, achieving good results” for the year and strengthened their implementation and putting them into
practice. It sorted out the existing management system, enhanced team building, strengthened strict management, improved
incentive schemes and further mobilised the enthusiasm of the cadres and staff. The Company increased investment in high-
efficiency areas by optimising product structure and increase. It improved performance appraisal systems to fully arouse the
enthusiasm of sales staff. It reduced inventories to proactively respond to the market through measures including market
research and timely developed marketing strategies. The Company also stepped up efforts to promote new products, the 14
result of innovation and research and development and established professional sales teams for high value-added products INTERIM
REPORT
including the “Forest Love” household paper, thermal paper and glassine paper to increase the revenue of the Company.
During the reporting period, Jilin Chenming’s environmental protection relocation project, Wuhan Chenming’s household
paper project and Shouguang Meilun’s paper additives project commenced operation and were reclassified as fixed
assets, which played an important role in the Company’s restructuring, cost reduction and efficiency enhancement. Jiangxi
Chenming’s 350,000 tonne high-end packaging paper project, Zhanjiang Chenming’s 180,000 tonne paper cup sheets
and 190,000 tonne culture paper projects, Huanggang Chenming’s integrated forestry, pulp and paper project, Shouguang
City’s 400,000 tonne chemical pulp project, Haicheng Haiming’s magnesite mining project, Guangdong Huirui’s waterfront
comprehensive regulation works, and Wuhan Wan Xing’s real estate , and other projects in the pipeline commenced orderly
in accordance with our plans, which accelerated the transformation, upgrade and restructuring of the Company, thus further
enhancing the Company’s overall competitiveness.
During the reporting period, a finance company was approved to commence operation. Meanwhile, the financial leasing
company also commenced operation. Therefore, the Company became the first enterprise in the paper making industry to
own a finance company and a financial leasing company. The operation of the finance company enables the temporarily idle
capital within the Group to be under the central management of the finance company for the operation in the interbank lending
market and provision of various financial services, thus realising the transformation of capital management from a ‘custody
mode’ to an ‘operation mode’ to effectively enhance the efficiency of the use of capital and achieve capital appreciation, and
pave the way for new diversification in the development of the Company.
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
II. Analysis of principal operations
During the reporting period, the Company’s revenue amounted to RMB9,082.0206 million, down by 9.43% from the
corresponding period of the prior year. The operating costs were RMB7,378.9986 million, down by 10.57% from the
corresponding period of the prior year. Operating profit and net profit attributable to equity holders of the Company
were RMB22.0533 million and RMB242.4611 million respectively, down by 77.34% and 27.28% respectively from the
corresponding period of the prior year. During the reporting period, the expenses for the period were RMB1,651.3395 million,
down by 0.48% from the corresponding period of the prior year. Investment in research and development amounted to
RMB186.0690 million, up by 20.80% from the corresponding period of the prior year. Net cash flows from operating activities
were RMB1,285.6963 million, up by 41.76% from the corresponding period of the prior year.
Year on year changes in major financial information
Unit: RMB
During the
corresponding
During the period of the Increase/ Reason for
reporting period prior year decrease (%) the change
Revenue 9,082,020,579.01 10,027,901,358.43 -9.43% —
Operating costs 7,378,998,628.31 8,251,349,814.35 -10.57% —
Selling and distribution expenses 524,593,811.50 570,398,742.45 -8.03% —
Administrative expenses 500,133,881.63 602,523,953.98 -16.99% —
—
14
Finance expenses 626,611,788.47 486,409,117.79 28.82%
Income tax expenses 34,033,045.12 82,871,206.26 -58.93% (1)
INTERIM Investments in research and development 186,069,011.16 154,034,416.74 20.80% —
REPORT
Net cash flows from operating activities 1,285,696,261.13 906,935,242.95 41.76% (2)
Net cash flows from investing activities -1,797,453,118.70 -885,800,802.95 -102.92% (3)
Net cash flows from financing activities 709,490,179.43 -772,501,665.99 191.84% (4)
Net increase in cash and cash equivalents 184,819,902.18 -744,802,455.71 124.81% (5)
Explanation on major changes:
(1) The profitability of the Company decreased as compared to the corresponding period of the prior year due to the factors
such as market and exchange rate changes.
(2) The Company increased the proportion of payment for goods by bills.
(3) The Company made new external entrusted loans.
(4) The borrowings for the period increased due to the projects.
(5) The change was primarily due to changes in cash flow from operating activities, investing activities and financing
activities.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 9
IV Directors’ Report
II. Analysis of principal operations (Cont’d)
Significant change in structure or source of profit of the Company during the reporting period
□ Applicable √ Not Applicable
There was no significant change in structure or source of profit of the Company during the reporting period.
Disclosure of future development and continued planning during the reporting period in public documents
such as IPO prospectus, offering prospectus and asset reconstruction report
□ Applicable √ Not Applicable
There was no disclosure of future development and continued planning during the reporting period in public documents such
as IPO prospectus, offering prospectus and asset reconstruction report.
Progress of operating plans disclosed in corporate review during the reporting period
For details, please refer to “I. Overview” of this section.
III. Analysis of liquidity, financial resources and capital structure in accordance with generally
accepted accounting principles in Hong Kong
As of 30 June 2014, the Group’s current ratio was 80.50%. The quick ratio was 62.00%. The gearing ratio was 72.05%. The
accounts receivable turnover ratio was 375.09% (Accounts receivable turnover ratio = turnover/weighted average accounts
receivable and net bills*100%). The inventory turnover ratio was 350.26% (Inventory turnover ratio = cost of sales of the
products/weighted average net inventory*100%). 14
INTERIM
There was no significant seasonal trend for capital requirements of the Group. REPORT
The Group’s sources of capital primarily came from cash generated from operating activities, borrowings from financial
institutions, open issuance of corporate bonds in the capital market, as well as issuance of privately placed bonds, medium-
term notes and short-term commercial paper in the interbank market.
As of 30 June 2014, the total bank borrowings, corporate loans, medium-term notes and privately placed bonds of the Group
were RMB16,789 million, RMB5,773 million, RMB2,581 million and RMB3,964 million (As at the end of the prior year: the total
bank borrowings, corporate loans, medium-term notes and privately placed bonds, and short-term commercial paper of the
Group were RMB18,185 million, RMB6,267 million, RMB2,577 million and RMB3,853 million, respectively). As of 30 June
2014, the Group had monetary funds of RMB3,357 million (As at the end of the prior year: RMB2,548 million) in total (For the
breakdown of monetary funds, please refer to “Section IX. VII.1 Note on monetary funds” in this report).
To strengthen our financial management, the Group implemented strict internal control system on cash and capital
management. The liquidity and repayment ability of the Group were in a good condition. As at 30 June 2014, the Group had
12,761 employees. The total staff remuneration for the first half of 2014 amounted to RMB336.0257 million (as at the end of
the prior year, the Group had 12,954 employees. The total staff remuneration for 2013 amounted to RMB665.6397 million).
Major investment projects of the Company during the second half of 2014 will include Jiangxi Chenming’s 350,000 tonne
high-end packaging paper project, Zhanjiang Chenming’s 180,000 tonne paper cup sheets and 190,000 tonne culture paper
projects, Huanggang Chenming’s integrated forestry, pulp and paper project, Shouguang City’s 400,000 tonne chemical
pulp project, Haicheng Haiming’s magnesite mining project, Guangdong Huirui’s waterfront comprehensive regulation works
project, Wuhan Wan Xing’s real estate development project and other projects.
Our existing bank deposits were primarily used for production and operation, construction projects and investment in
technology research and development.
For details of the restricted assets of the Group as of 30 June 2014, please refer to “Section IX. VII. 12. Details of restricted
fixed assets” in this report.
As at 30 June 2014, no contingent event was required to be disclosed by the Group.
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
IV. Components of principal operations
Unit: RMB
Increase/decrease
Increase/decrease Increase/decrease of gross profit
of revenue as of operating costs margin as
compared to the as compared to the compared to the
corresponding corresponding corresponding
period of the period of the period of the
Revenue Operating costs Gross profit margin prior year prior year prior year
By industry
Machine-made paper 8,545,843,565.79 7,004,509,499.62 18.04% -3.42% -4.39% 0.83%
Electricity and heat 198,681,459.85 144,716,153.44 27.16% -75.26% -78.32% 10.28%
Chemical products 42,387,862.87 27,967,694.33 34.02% — — —
Construction materials 94,627,856.04 76,921,331.07 18.71% -13.41% -15.62% 2.13%
Hotel 14,901,686.03 3,398,372.51 77.19% -24.32% -29.98% 1.84%
Others 65,178,932.67 63,565,414.91 2.48% 33.69% 59.17% -15.61%
By products
Light weight coated paper 348,081,994.57 316,335,859.11 9.12% -30.64% -25.86% -5.86%
Duplex press paper 1,441,112,796.55 1,134,551,552.38 21.27% 5.11% 0.04% 3.99%
Writing paper 82,378,061.06 62,326,659.34 24.34% -55.54% -61.34% 11.35%
White paper board 940,339,733.70 758,413,648.95 19.35% -14.66% -13.35% -1.22%
Container paperboard 375,085,910.27 356,635,077.75 4.92% — — —
14 Coated white paperboard
Coated white linerboard
294,879,370.13
200,359,591.57
284,598,760.23
193,325,571.97
3.49%
3.51%
—
165.53%
—
174.42%
—
-3.13%
INTERIM Paperboard 2,185,259,143.15 1,820,063,708.25 16.71% 1.16% -3.08% 3.64%
REPORT News press paper 519,433,041.74 385,119,601.80 25.86% -32.97% -32.37% -0.66%
Electrostatic paper 840,427,787.43 638,909,675.65 23.98% -2.42% -6.03% 2.92%
Household paper 253,924,521.39 230,635,298.13 9.17% — — —
Other machine-made paper 1,064,561,614.23 823,594,086.06 22.64% -41.39% -46.21% 6.93%
Electricity and steam 198,681,459.85 144,716,153.44 27.16% -75.26% -78.32% 10.28%
Chemical products 42,387,862.87 27,967,694.33 34.02% — — —
Construction materials 94,627,856.04 76,921,331.07 18.71% -13.41% -15.62% 2.13%
Hotel 14,901,686.03 3,398,372.51 77.19% -24.32% -29.98% 1.84%
Others 65,178,932.67 63,565,414.91 2.48% 33.69% 59.17% -15.61%
By geographical segment
Mainland China 7,170,230,465.09 5,592,480,772.13 22.00% -13.30% -16.22% 2.72%
Other countries and regions 1,791,390,898.16 1,728,597,693.75 3.51% 14.89% 18.83% -3.20%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 11
IV Directors’ Report
V. Analysis of asset and liability
Unit: RMB
Reason for
Item 30 June 2014 31 December 2013 Increase/decrease the change
Monetary funds 3,357,075,224.97 2,547,729,794.24 31.77% (1)
Construction in progress 3,383,652,916.06 5,266,031,817.60 -35.75% (2)
Construction materials 23,245,677.92 63,968,067.62 -63.66% (3)
Other non-current assets 900,000,000.00 0 100.00% (4)
Interest payable 246,392,305.53 153,189,860.42 60.84% (5)
Dividend payable 580,921,640.10 0 100.00% (6)
Long-term payable 128,000,000.00 60,000,000.00 113.33% (7)
Explanation on major changes:
(1) The establishment of Shandong Chenming Group Finance Co., Ltd. was approved. Its registered capital was RMB1
billion. Registration has not been made with the industrial and commercial administration as at the end of the reporting
period.
(2) Jilin Chenming’s environmental protection relocation project, Wuhan Chenming’s household paper project and
Shouguang Meilun’s paper additives project were reclassified as fixed assets.
(3) Jilin Chenming’s environmental protection relocation project was reclassified as fixed assets.
(4) The Company made new external entrusted loans due after one year. 14
INTERIM
(5) The interest of “11 Chenming Bond”, “12 Chenming Bond” and 2012 medium-term notes was payable by the Company. REPORT
(6) Dividend on ordinary shares for 2013 was payable by the Company.
(7) During the period, the Management Committee of Nanchang Economic and Technological Development Zone provided
borrowings of RMB68.00 million for the phase II project of Jiangxi Chenming.
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
VI. Analysis of Core Competitiveness
The Company is a large enterprise primarily engaged in forestry, pulping and paper-making operations. It is also the only listed
company with three types of listed shares (i.e. A shares, B shares and H shares) in China. Compared with other enterprises in
the industry, the Company has the following advantages:
(1) Scale advantages: As China’s largest state-owned paper making enterprise, after years of development, the Company
has achieved annual pulp and paper production capacity of 8.00 million tonnes and is capable to compete with
international paper making enterprises in scale. Large-scale centralised production has provided the Company with
obvious economic benefits, which are reflected not only in the manufacturing costs of products, but also in its strong
market influence in raw material procurement, product pricing and industry policy making.
(2) Product advantages: While the production scale of the Company expands rapidly, its product mix also continues to
optimise. In recent years, the Company has built the production lines for high-end coated paper, high-end light weight
coated paper, high-end white paper board and high-end duplex press paper, and has achieved higher technological
content of products and added values as well as a higher gross profit margin. The product mix of the Company has
changed from one that focused mainly on ordinary offset paper to a wide product range including electrostatic paper,
duplex press paper, light weight coated paper, news press paper, coated paper, white paper board and household
paper, and thus the Company has become the enterprise that offers the widest and the most complete product range
in China’s paper making industry. Proportion of the Company’s high-end products will further increase in the future.
Diversification and gentrification of the product mix have not only greatly enhanced the Company’s ability to withstand
market risks, but also enabled the Company to maintain a relatively high profitability.
(3) Advantages in technical equipment: The Company’s overall technical equipment has reached the advanced international
level. The main production equipment has been imported from internationally renowned manufacturers, including
14 Metso and Ahlstrom of Finland, Fuyite of Germany, Andritz of Austria and ABB of the United States. The technical
INTERIM equipment used by the Company generally reflects the characteristics of being technology-intensive and the integration
REPORT
of mechanical and electrical in the paper making industry nowadays. The degassing technology, wet end chemical
technology, intelligent sheet lateral control technology, coating preparation technology, free-jet coating technology,
multi-nip pressure balanced burnishing technology and independent developed processes of the slurry system have all
reached or surpassed the international advanced level.
(4) Research and innovation advantages: Leveraging its research strengths and relying on state-level enterprise technical
centres and post-doctoral research stations, the Company has established a comprehensive intellectual property rights
system, and has continuously enlarged its technological innovation capacity and research and development efforts to
actively develop new products and proprietary technology with high technology content and added values. Meanwhile,
Chenming Paper Technology Centre is actively engaged in technological cooperation with higher education institutions,
research units and international advanced enterprises, which has helped the Company to establishing a research and
development network leveraging both the domestic and international advanced paper making research bases, and
guaranteed the Company’s leading position in industry research in China.
(5) Comprehensive cost advantages: The Company has a relative advantage in comprehensive cost, which is mainly
reflected in: first, the Company has optimised the operation of the production lines through stringent management,
which has substantially reduced the waste of resources in evaporating, emitting, dripping or leaking, and the Company’s
energy consumption per tonne of paper is also controlled at a relatively low level; secondly, striving for the integrated
development of forestry, pulp and paper, the Company has built up forest land of approximately 2.00 million mu and
established several advanced pulp production lines, thus increasing the supply for major raw materials; thirdly, the
Company has reduced costs through the construction of the captive power plant to ensure energy supply.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 13
IV Directors’ Report
VI. Analysis of Core Competitiveness (Cont’d)
(6) Funding advantages: The paper making industry is a capital-intensive industry, and funding is one of the most important
factors which affect the development of the industry. The Company has high profitability and credit status, and has
maintained long-term stable cooperative relations with the banks, which provide the Company with an unobstructed
financing capacity. In recent years, the Company has made full use of indirect financing channels to accelerate its
development. While the Company has increased borrowings, it has maintained higher returns on net assets, improved
its earnings ratio, and leveraged the advantage of financial leverage. All these are in line with the goal of maximisation
of shareholders’ wealth. Since its listing, the Company has maintained good operating results and a sound corporate
governance structure. It has conducted several financing activities in domestic and foreign stock markets. The funds
obtained have been applied effectively, which has provided the Company with stronger abilities in direct financing in the
stock market. The establishment of finance company and financial leasing company has diversified the development of
the Company.
(7) Advantages in environmental regulation capacity: Over the years, the Company has firmly established “environmental
protection first upon scale expansion” as the concept of development. The Company has ensured the enhancement
of economic and environmental benefits simultaneously by giving equal importance to environmental protection
and production. In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities
including the alkali recovery system, middle water treatment system, white water recovery system, black liquor
comprehensive utilisation system, desulfurisation and denitrification system and the sewage treatment plants, which
guarantee that the environmental protection facilities can meet the demand of the rapid expansion of the Company.
VII. Outlook on the future development of the Company
1. Competition overview and development trend of the industry
14
The industry to which the Company belongs is the paper making industry, which is a light industry. The paper making INTERIM
REPORT
industry is an important basic raw materials industry which is closely related to the national economy and social
development. The paper making industry features capital and skills intensive characteristics with prominent economy of
scale. Its growth rate is strongly and positively correlated to that of GDP. In respect of the industry, since 2013, some
paper types are in a phase of overcapacity due to slowdown in economic growth and weak market demand, resulting
in fierce competition in the paper making industry. The outlook of the domestic paper and pulp market is not promising
due to the macro environment. The overall market development is weak with sluggish market condition. However,
the development conditions for the paper making industry are gradually improving in the long run. The National
Development and Reform Commission, Ministry of Industry and Communication and State Forestry Administration 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”. Elimination of outdated production capacity and the stricter environmental protection
policy will force some small and medium-sized enterprises to leave the industry, thereby lowering the pressure of the
new production capacity on the supply in the industry to a certain extent, which is conducive to a proactive increase in
price proposed by enterprises. Meanwhile, the continued low level of raw material prices relieved the pressure on the
operating costs of enterprises. The Company is expected to benefit in the long run.
In recent years, the Company is committed to the integrated development of forestry, pulp and paper with a longer
industry chain and more comprehensive paper types. The Company has carried out capacity expansion on paper types
with better prospects. The Company’s direction of development is in line with the requirements of the development plan
of the entire paper making industry. Meanwhile, the operation of the finance company and the financial leasing company
signifies that the Company has officially stepped into the financial sector. Moreover, the Company has engaged in
various operations such as waterfront regulation, magnesite mining, and real estate development, thereby expanding its
industry chain with a more rationalised industry positioning, which further strengthen the Company’s competitiveness
and development potential. As the industry gradually recovers with the economic turnaround, the results of the
Company will make great strides.
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
VII. Outlook on the future development of the Company (Cont’d)
2. Development strategy of the Company
(1) The Company will adjust its product structure and focus on developing the production of high-end paper
product. Several projects of the Company have commenced operation upon completion. They are the high-end
low weight coated paper project of production capacity of 800,000 tonnes, the high-end culture paper project
of production capacity of 450,000 tonnes, the high-end white coated linerboard project of production capacity
of 600,000 tonnes, Wuhan Chenming’s high-end household paper project and Jilin Chenming’s environmental
protection relocation project. The Company has also invested in and constructed the high-end packaging paper
project of production capacity of 350,000 tonnes, the high-end cultural paper project of production capacity of
190,000 tonnes and the paper cup project of production capacity of 180,000 tonnes. The Company will take these
opportunities to further upgrade its products for a higher end market and strive to become one of the leading
companies in the global paper making industry within a period of time.
(2) The Company will eliminate the bottlenecks in raw materials encountered during the development of the Company
and strengthen the Company’s product cost control. The Company will focus on the construction of Zhanjiang
pulp project and ancillary raw material bases, as well as the construction of Huanggang Chenming pulp project
and ancillary raw material bases. The Company will establish the “forestry-pulp-paper integration” chain industry
and construct the chemical pulp project of production capacity of 400,000 tonnes in Shouguang City, thereby
eliminating the limitations of upstream resources on the Company and enhancing Company’s sustainable
development.
(3) The Company will pay all its attention to its environmental protection works, aiming to achieve harmonious
development with energy consumption and emission reduction. Upon implementation of the new national
14 environmental protection standards and the greater emphasis on environment regulation, the Company will
INTERIM endeavour to develop the recycle economy. The Company will strive to maximise its resource utilisation.
REPORT
Meanwhile, the Company will make greater efforts to construct environment friendly projects and strive to achieve
its waste emission target.
(4) The Company will enhance staff training and technology innovation. On one hand, the Company adheres to
internal training as well as external recruitment in order to enhance the overall quality of the team. On the other
hand, it strives to develop its own technology, strengthen its own innovation ability and step up investments in its
research and development.
(5) Enhance corporate management and improve operational quality: to implement the management concept of
“to manage people with system and to work up to the standard”, and improve all systems and processes to
enhance implementation capability; to continuously improve equipment automation and information technology
management, and implement post setting and staffing according to advanced international standards; to further
strengthen the reform of the remuneration system, improve the performance appraisal system, establish different
promotion channels and ranks; and to strengthen the management awareness of the management staff and
improve their ability to identify and solve problems.
(6) Develop domestic and international markets and expand development potential: firstly, to implement a proactive
and rational marketing strategy, timely adjust product structure according to market changes, further expand the
Company’s market share domestically and internationally through innovative sales and marketing and services;
secondly, to strengthen sales and marketing management with the help of management advisory body, take
the lead in implementing a new management mode within the sales system, adjust the product management
structure, strengthen the management of market segmentation, increase training efforts and build up a quality
sales force; thirdly, to optimise the international marketing network, strengthen overseas sales force and expand
export volumes; and fourthly, to commence e-commerce business, accelerate the construction of virtual terminal
market, carry out customer-facing e-commerce business and expand sales channels through on-line marketing.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 15
IV Directors’ Report
VII. Outlook on the future development of the Company (Cont’d)
3. Operating plan for the second half of 2014
(1) Corporate Management: firstly, the Company will firmly establish and strictly implement the working principles of
“team building, strict management, outstanding business performance, achieving good results”; and secondly,
the Company will adopt four measures in corporate management, as follows: ① revise the existing management
system by making it simple, effective, and easy to implement in order to create the basic conditions for strict
management; ② enhance team building by employment of qualified employees and dismissal of unqualified
employees; ③ strengthen strict and careful management, with special emphasis on “strict” and “careful”; and ④
improve incentive schemes by innovative incentives and adoption of appointment through competition to further
mobilise the enthusiasm of the cadres and staff.
(2) Operation and management: the Company will increase efficiency by optimising product structure and increase
investment in high-efficiency areas. It will make reference to advanced corporate marketing incentives, improve
performance appraisal systems to fully arouse the enthusiasm of sales staff. It will implement system optimisation
and strictly control risk. The Company aims to reduce inventories and capital appropriations to proactively
respond to the market through measures including market research and timely developed marketing strategies.
The Company will also enhance new product promotion and establish professional sales teams for high value-
added products to increase the revenue of the Company.
(3) Production management: firstly, the Company places great emphasis on the operation of production upgrade
projects and new production projects. It focuses on the management of its 800,000 tonne coated paper project,
600,000 tonne bleached kraft liner board project, Jilin Chenming’s environmental protection relocation project,
Meilun’s paper additives projects and Wuhan’s specialty paper upgrade and household paper projects to
accelerate growth in efficiency. Secondly, it will speed up product restructuring and new product development, 14
strengthen new product development, enrich product structure, improve the ability to respond to the market, INTERIM
REPORT
and increase sales of new products and high value-added products. Thirdly, special emphasis will be placed
on technology development and application to improve the Company’s core competitiveness. Research on the
use of fibre reinforced and filler modification technology as well as new alternative adhesives technology will be
conducted to reduce costs and increase efficiency. Fourthly, it will implement strict equipment management to
eliminate serious accidents involving equipment. Fifthly, the Company will continue to implement post setting and
staffing and reduce labour costs through post consolidation and improvement in automation.
(4) Project management: firstly, the Company will revise and improve its original project management system to
make the system fully reflect the principle for project construction of “careful planning, casting quality products,
striving for progress and effectiveness verification”. Secondly, the Company will enhance the professional skills of
project personnel by encouraging them to learn outside the Company and engage them to learn in the Company.
Thirdly, it will adopt strict requirements from the pre-feasibility studies to process control, and from construction
company tenders to selection of equipment suppliers to ensure the overall quality of the project. Fourthly, it
will specific clear project details and quality objectives, highlight project staff’s accountability and implement
a strict reward and punishment system. The Company will focus on implementing the following tasks: ① for
projects under construction including Jiangxi Chenming’s 350,000 tonne high-end packaging paper, Zhanjiang
Chenming’s 180,000 tonne paper cup sheets and 190,000 tonne culture paper projects, the Company will ensure
comprehensive control and assessment, as well as strict quality and cost control to ensure timely commencement
of production; ② planned and approved projects including Huanggang Chenming’s integrated forestry, pulp and
paper project and Shouguang City’s 400,000 tonne chemical pulp project will undergo repeated verification and
optimisation to ensure that these projects will become world-class quality products.
(5) Other aspects: firstly, the Company will make full use of offshore funds and reduce finance costs through the
finance company and financial leasing company. Secondly, it will reduce finance costs by increasing use of
offshore funds, expanding financing channels and improving capital use efficiency. Thirdly, it aims to achieve
economic efficiency by increasing trade volume through import and export companies, developing new customer
sources, establishing strategic partnerships and controlling quality supplies. Fourthly, it will reduce inventories and
improve contract compliance rate to reduce capital appropriations and financing costs.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
VII. Outlook on the future development of the Company (Cont’d)
4. Capital requirements, source of funds and plan for usage
The future capital requirement of the Company mainly arises from the normal production and operation and Zhanjiang
Chenming’s 180,000 tonne paper cup sheets and 190,000 tonne culture paper projects, Jiangxi Chenming’s 350,000
tonne high-end packaging paper project, Huanggang Chenming’s integrated forestry, pulp and paper project,
Shouguang City’s 400,000 tonne chemical pulp project, Haicheng Haiming’s magnesite mining project, Guangdong
Huirui’s waterfront comprehensive regulation works project, Wuhan Wan Xing’s real estate development project and
other projects in the pipeline. The Company employs the following measures to satisfy it capital requirement:
Firstly, the Company will further improve its marketing network, optimise its marketing organisation structure and
increase its sales channels by developing new customer sources and establishing strategic partnerships with quality
customers. It will also strengthen its management of capital appropriations to reduce capital appropriations and speed
up the turnover of the funds.
Secondly, the Company will leverage the overseas financing platform by increasing its overseas financing at lower costs
and make good use of overseas funds.
Thirdly, the Company will enhance the centralised management of the Group’s fund and improve the efficiency of capital
use through the finance company and financial leasing company so as to further increase the Group’s fund settlement,
management, investment and financing ability, thus reducing its financing cost.
Fourthly, the Company will establish strategic partnership with major financial institutions to leverage the regional
advantages of various subsidiaries, and proactively obtain direct financing from the interbank market and capital market
14
to secure the capital requirement for project construction and production and operation.
INTERIM 5. Risk factors likely to be faced and the measures to be taken
REPORT
As a basic raw materials industry of the national economy, the paper making industry’s overall efficiency has a
strong correlation with the national macroeconomic performance, and is therefore a cyclical industry. The national
macroeconomic performance will have a greater impact on the market demand for paper products, which will
further affect the product price and cost of raw materials, and will ultimately affect the operating results of the paper
making enterprises, including the Company. There still exist some uncertainties and complexities in China’s future
macroeconomic trends. Thus, the Company still faces the risk of earnings level being affected by macroeconomic
fluctuations.
Operational risk. The major raw materials used by the Company are wood pulp and waste paper. The Company’s
products mainly comprised high-end paper products, and wood pulp and waste paper have accounted for a higher
proportion of the production cost. The relatively high market price fluctuations of wood pulp and waste paper have
affected the production cost of the Company’s machine-made paper products, and thus have an impact on the
performance of the Company.
Hence, the Company will focus on the construction of Zhanjiang Chenming’s pulp project and ancillary raw material
bases, as well as the construction of Huanggang Chenming pulp project and ancillary raw material bases. The Company
will establish the “forestry-pulp-paper integration” chain industry and construct the chemical pulp project of production
capacity of 400,000 tonnes in Shouguang City, thereby eliminating the limitations of upper-stream resources on the
Company and enhancing Company’s sustainable development.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 17
IV Directors’ Report
VII. Outlook on the future development of the Company (Cont’d)
5. Risk factors likely to be faced and the measures to be taken (Cont’d)
Industrial risk. Some paper types are in a phase of overcapacity due to slowdown in economic growth and weak market
demand, thus resulting in fierce competition in the paper making industry. The excess capacity is to be absorbed in the
market.
Hence, the Company, under the guiding philosophy of “transformation and upgrade”, will work on new product
development so as to diversify its product portfolio and enhance its ability to cope with market changes. It will also
focus on the development of high-end paper products, thereby enhancing its core competitiveness. The Company will
step up efforts to export its products and get rid of the bottleneck in exports to explore its overseas market. Meanwhile,
the Company will actively expand into new industries to diversify its business.
Policy risk. On 30 December 2011, the National Development and Reform Commission, the Ministry of Industry and the
State Forestry Administration jointly issued the “12th Five-Year Plan” of the paper making industry, which has stipulated
the guiding ideology, basic principles, development objectives, major tasks, key projects, policy initiatives and planning
implementation for the industry development during the 12th Five-Year period. At present, the industry has entered into
an important transitional period, and the mode which supported the rapid development of the paper making industry in
the past has currently faced the dual pressures of resources and environment. From the point of view of China’s policy,
China will change the mode of growth through optimising the layout of the paper making industry and the raw material
structure and product structure, in order to promote a modern paper making industry based on recycling by integrating
the forestry and paper making industry, which will have an impact on the operating results of the Company.
Elimination of outdated production capacity and stricter environmental protection policy has facilitated a higher
concentration ratio in the industry. The concentration benefits of the leading enterprises in the industry gradually
emerge. The Company is expected to benefit for years in the long run.
14
INTERIM
REPORT
Environmental protection risk. The paper making industry is a pollution industry. With the rising awareness of
environmental protection in the society and the industry, more stringent environmental protection policies of the industry
have been implemented. A multi-pronged approach has been adopted to promote industrial restructuring, and the
paper making industry has entered into an important transitional period of development. The higher emission standard is
bound to increase the Company’s environmental protection cost and may result in the slowing down of scale expansion,
thus affecting its production and operation.
The Company always strive to achieve harmonious development with energy consumption and emission reduction. The
Company will endeavour to develop the recycle economy. The Company will strive to maximise its resource utilisation.
Meanwhile, the Company will make greater efforts to construct environmental friendly projects and strive to achieve its
waste emission target.
Interest rate risk. In recent years, greater fluctuations of the Renminbi benchmark lending rate level have an impact on
the Company’s finance costs. The People’s Bank of China may continue to adjust the level of the benchmark interest
rate according to the macroeconomic trends, which may cause greater volatility in the Company’s finance expenses,
thus affecting its operating results.
The Company will continue to monitor the rate level of the Group. It will leverage the overseas financing platform by
increasing its overseas financing at lower costs. The Company will enhance the centralised management of the Group’s
fund and improve the efficiency of capital use through the finance company and financial leasing company. The Group
will proactively obtain direct financing from the interbank market and capital market to reduce its finance costs.
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
VII. Outlook on the future development of the Company (Cont’d)
5. Risk factors likely to be faced and the measures to be taken (Cont’d)
Exchange rate risk. The value of Renminbi is affected by the domestic and international economic and political
environment, and the supply and demand for Renminbi. As an import and export enterprise, the exchange rate
of Renminbi against other currencies in future will affect the Company’s operating results. The foreign currency
transactions of the Company are mainly denominated in US dollar. The operations of raw material imports, product
exports and US$ borrowings of the Company will face the risk of exchange rate changes.
The Company will set up a professional team responsible for monitoring the Group’s foreign currency transactions
and scale of assets and liabilities denominated in foreign currency, aiming to minimise the exchange rate risk by multi-
currency financing, and forwards which lock in the exchange rate.
14
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 19
IV Directors’ Report
VIII. Analysis of investments
1、 External equity investments
(1) External investments
√ Applicable □ Not applicable
External investments
Investments during
Investments during the the corresponding period
reporting period (RMB) of prior year (RMB) Change (%)
1,609,917,592.00 184,206,250.00 773.98%
Investees
The Company’s
share of interest
Names of the companies Principal activities in investees (%)
Shandong Chenming Financial leasing business, operating leasing business, 100.00%
Financial Leasing Co., Ltd. domestic and overseas leased assets acquisition,
disposal and maintenance of leased assets, and
consultation on leasing transactions.
Shouguang Meilun Production and sale of coated paper, paperboard, 100.00%
Paper Co., Ltd. paper product, paper making raw materials and paper 14
making machines; sale of fibre feeds, wheat germ INTERIM
and protein powder; operation of export and import of REPORT
goods and technologies within the scope approved by
the State.
Shandong Chenming Investment in sectors which the Chinese government 100.00%
Investment Limited encouraged and allowed foreign investment in
accordance with the laws; maintaining foreign exchange
balance between investees under the approval
and supervision of foreign exchange management
department; assisting investees in getting loans and
provide guarantee; providing consulting services for
investors, and providing consulting services such
as market information related to investment and
investment policies for related party companies;
contracting business outsourcing for foreign companies
and related party companies of its parent company.
Huanggang Chenming Construction of raw material bases and wood 100.00%
Pulp & Paper Co., Ltd. procurement; manufacture, production, processing of
paper pulp and related products, project construction
and related import and export business.
Chenming (HK) Limited Export and import trade of paper products and market 100.00%
research.
Shouguang Chenming Huisen Manufacture and sale of desulphurised gypsum, 50.00%
New-style Construction construction gypsum powder, gypsum board, gypsum
Materials Co., Ltd. block and light gauge steel frame.
Jiangxi Chenming Port Co., Ltd. Engaged in handling and transportation of goods and 40.00%
storage operation.
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
VIII. Analysis of investments (Cont’d)
1、 External equity investments (Cont’d)
(2) Shareholding in financial companies
□ Applicable √ Not applicable
The Company did not have any shareholding in financial companies during the reporting period.
(3) Security investments
□ Applicable √ Not applicable
The Company did not have any security investments during the reporting period.
2. Entrusted wealth management, derivative investments and entrusted loans
(1) Entrusted wealth management
□ Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Derivatives investments
□ Applicable √ Not applicable
14 The Company did not have any derivative investments during the reporting period.
INTERIM
REPORT (3) Entrusted loans
√ Applicable □ Not applicable
Unit: RMB’0,000
Interest rate
Borrower Related parties Loan amount of loans Guarantor or Collateral Use of proceeds by borrowers
Shouguang Jin Choi No 100,000 10.00% S h o u g u a n g I n f r a s t r u c t u r e F u n d Construction, i nvestment and
Public Assets Management Centre shall pledge 20% of operation of rural infrastructure.
Management Co., Ltd. the equity interest of the Shouguang Jin
Choi Public Assets Management Co., Ltd.
held by it
Total － 100,000 － － －
Disclosure date of approval of entrusted loans in board meeting 18 January 2014
3. Use of proceeds
(1) The general use of proceeds
□ Applicable √ Not applicable
(2) The commitment of proceeds
□ Applicable √ Not applicable
(3) Changes in use of proceeds
□ Applicable √ Not applicable
The Company did not have any change in use of proceeds during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 21
IV Directors’ Report
VIII. Analysis of investments (Cont’d)
4. Analysis of major subsidiaries and investees
√ Applicable □ Not applicable
Information on major subsidiaries and investees
Unit: RMB’0,000
Type of Principal products Registered Revenue from
Name of companies companies Industry or services capital Total assets Net assets operations Operating profit Net profit
Zhanjiang Chenming Pulp & Subsidiary Paper making Pulp, duplex press and RMB3,000 million 1,210,439.00 380,685.46 193,251.77 15,976.39 16,854.19
Paper Co., Ltd. electrostatic paper
Shandong Chenming Paper Subsidiary Trading of Sales of paper products RMB100 million 750,116.40 16,701.88 689,857.68 6,034.50 4,312.70
Sales Company Limited paper products
Chenming (HK) Limited Subsidiary Trading of Sales of paper products, US$29.9 million 472,752.47 30,339.40 356,678.79 4,300.81 4,081.32
paper products import of raw materials
and processing
Jiangxi Chenming Paper Subsidiary Paper making Duplex press paper and US$272 million 385,422.82 203,793.00 72,838.26 -2,232.94 4,969.50
Co., Ltd. coated paper
Shouguang Meilun Paper Subsidiary Paper making Coated paper, white RMB3,000 million 1,036,991.59 211,674.94 233,475.51 -13,173.34 -9,667.65
Co., Ltd. coated linerboard and
household paper
Wuhan Chenming Hanyang Subsidiary Paper making Writing paper, news RMB211.3670 million 304,939.22 37,203.75 38,810.70 -8,818.13 -4,271.94
Paper Holdings Co., Ltd. presspaper and
household paper
5. Highlights of major investments not financed by the proceeds
14
INTERIM
√ Applicable □ Not applicable REPORT
Unit: RMB’0,000
Accumulated
actual
investment
Investment made as of
made during the end of Revenue
Total planned the reporting the reporting Progression from
Name of project investment period period of projects projects
350,000 tonne high-end 183,000 24,117.77 36,380.31 20.00% Not
packaging paper project of completed
Jiangxi Chenming
180,000 tonne paper cup project 132,300 19,610.77 50,986.83 39.00% Not
completed
190,000 tonne high-end 309,700 12,872.59 41,368.49 13.00% Not
cultural paper project completed
Forestry paper integration project 348,510 18,412.14 31,491.68 9.00% Not
of Huanggang Chenming completed
Total 973,510 75,013.27 160,227.31 － －
Index of temporary
announcement disclose
in designated website http://www.cninfo.com.cn/
Progression of projects is estimated base on the proportion of accumulated investment over proposed total investment.
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report
IX. Estimate of the operating results from January to September 2014
Warning of cumulative net profit for the period from the beginning of the year to the end of the next reporting period being
projected to be at a loss or expected to have material changes as compared to the corresponding period of prior year and its
explanation
□ Applicable √ Not applicable
X. Opinions of the Board and the Supervisory Committee regarding the “modified auditor’s
report” for the reporting period issued by the accountants
□ Applicable √ Not applicable
XI. Opinions of the Board regarding the “modified auditor’s report” for the prior year
□ Applicable √ Not applicable
XII. Particulars of profit distribution by the Company during the reporting period
Implementation and adjustment of profit distribution proposals, especially the cash dividend proposal and proposal on
conversion of capital reserves into share capital during the reporting period
√ Applicable □ Not applicable
The 2013 profit distribution plan was considered and approved in the 2013 annual general meeting convened by the Company
14
on 9 May 2014. Based on the number of the shares as at the dividend distribution registration date of 1,936,405,467 shares, a
cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10 shares held. The total cash dividend
INTERIM to be distributed amounted to RMB580,921,640.10 (tax inclusive). The dividend distribution was implemented and completed
REPORT
on 8 July 2014. For details, please refer to the announcement on payment of final dividend and withholding and payment
of enterprise income tax for non-resident enterprise shareholders published on the Hong Kong Stock Exchange on 27 June
2014, and the announcement on the implementation of the 2013 profit distribution plan for A share and B share published on
http://www.cninfo.com.cn on 28 June 2014.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association and the Yes
resolutions of the general meeting?
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion Yes
and make requests and were the legal interests of the minority shareholders
fully protected?
Were conditions and procedures legal and transparent in respect of Not applicable
cash dividend policy with adjustments and changes?
XIII. Proposals on profit distribution and conversion of capital reserves into share capital during
this reporting period
□ Applicable √ Not applicable
The Company does not intend to distribute cash dividend and bonus share, and conduct conversion of capital reserves into
share capital for the interim period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 23
IV Directors’ Report
XIV. Registration report on reception of research investigations, communications and interviews
during the reporting period
√ Applicable □ Not applicable
Place Manner Class of parties Main topics of discussion and
Date of reception of reception of reception accommodated Parties accommodated information provided
11 February 2014 The Company’s On-site research Institution E Fund Management Co., Ltd. Recent production and operation of the Company
conference room investigation and development of the industry
27 March 2014 The Company’s Conference call Institution First Beijing Investment Limited Recent production and operation of the Company
conference room and development of the industry
28 March 2014 The Company’s On-site research Institution Taikang Asset Management Co., Ltd. Recent production and operation of the Company
conference room investigation and development of the industry
23 May 2014 The Company’s On-site research Institution ICBC Credit Suisse Asset Management Recent production and operation of the Company
conference room investigation (International) Company Limited and development of the industry
14
INTERIM
REPORT
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
I. Overview of corporate governance
1. Corporate Governance
The Company operated in compliance with the requirement of Companies Law, Securities Law, Code of Corporate
Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock Exchange, Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “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 in practice during the reporting period. The Board considered the state of the
Company’s corporate governance was substantially in compliance with the requirements and requests of the regulatory
documents such as Code of Corporate Governance for Listed Companies.
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
enhance with the development of the Company.
2. Corporate Governance Code
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
indicate that the Company is not, or was not for any part of the reporting period, in compliance with the Corporate
Governance Code and Corporate Governance Report, as set out in Appendix 14 of the Hong Kong Listing Rules.
(1) The chairman and general manager of the Company is Mr. Chen Hongguo. Mr. Chen Hongguo performs the roles
14
of the chairman and the general manager for the overall management of the Company. This constitutes a deviation
from the principles and code provisions of A2 - Directors and Chief Executive Office in Corporate Governance
INTERIM Code and Corporate Governance Report under Appendix 14 to Hong Kong Listing Rules. However, the Directors
REPORT
of the Company believe that Mr. Chen Hongguo acting 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) Pursuant to Rule 3.21 of the Hong Kong Listing Rules, every listed issuer must establish an audit committee
comprising its non-executive directors only. As Mr. Cui Youping ceased to be a non-executive director and a
member of the audit committee of the Company after the conclusion of the annual general meeting, the number
of the members of the audit committee was below a minimum of three members under the Rule 3.21 of the Hong
Kong Listing Rules. However, the Board was unable to convene a meeting from the conclusion of the annual
general meeting on 9 May 2014 to 30 June 2014 to appoint a member of the audit committee in order to satisfy
the requirement of Rule 3.21 of the Hong Kong Listing Rules. Nonetheless, the Board held a Board meeting on 27
August 2014 to appoint Ms. Yang Guihua a non-executive director as a member of the audit committee to fill the
vacancy.
(3) Communication with shareholders
During the reporting period, the Company held the annual general meeting on 9 May 2014.
Mr. Chen Hongguo, the chairman of the Board and the strategic committee, Ms. Zhang Hong, chairman of the audit
committee, Mr. Wang Aiguo, the chairman of the remuneration and assessment committee and Mr. Zhang Zhiyuan, the
chairman of the nomination committee, were absent from the annual general meeting due to business commitments.
The Company’s external auditor attended the annual general meeting as a scrutineer.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 25
V Material Matters
I. Overview of corporate governance (Cont’d)
3. Securities transactions by Directors and Supervisors
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. The Company had made specific enquiry of all Directors and Supervisors and all Directors and Supervisors
confirmed that they had complied with the requirements as set out in the Model Code for the six months ended 30
June 2014.
4. Audit Committee
The audit committee of the Company now comprises two independent non-executive Directors and one non-executive
Director. The members of the audit committee are Ms. Zhang Hong, Mr. Wang Aiguo and Ms. Yang Guihua. The
audit committee reviewed the accounting standards and practices adopted by the Group with the management of
the Company and discussed and reviewed the interim results and interim report for t h e six months ended 30 June
2014 prepared in accordance with the accounting standards.
II. Material litigation and arbitration
□ Applicable √ Not applicable
The Company was not involved in any material litigation and arbitration during the reporting period.
III. Questioning from the Media
□ Applicable √ Not applicable 14
INTERIM
There was no questioning from the media during the reporting period. REPORT
IV. Matter related to bankruptcy and reorganisation
□ Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
V. Asset transactions
1. Acquisition of assets
□ Applicable √ Not applicable
There was no acquisition of assets during the reporting period.
2. Disposal of assets
√ Applicable □ Not applicable
Net profit
contribution
to the Ratio of the
Company net profit
from the contribution
beginning of to the Relationship
the period Company of with
up to the disposal of Pricing Related counterparty(ies) Relevant Relevant
Transaction disposal assets over basis of party (applicable to asset title liability
consideration date Effect on the Company total net asset transaction related party transferred transferred Disclosure
Counterparty(ies) Asset disposed of Disposal Date (RMB’0,000) (RMB’0,000) of disposal (note 3) profit (%) disposal or not transaction) or not or not date Disclosure index
Guangdong Dejun 51% equity interest 4 March 2014 7,619.4 435.83 Increases cash flow and -3.51% Arrived at after valuation No Not applicable Yes Yes 5 March 2014 http://www.cninfo.com.cn
Investment in Xinli Power held by allows the Company and based on the quoted
Co., Ltd Chenming Power centralise resources for price on an equity
14
developing high-end exchange
niche products.
INTERIM
REPORT
3. Business merger
□ Applicable √ Not applicable
There was no business merger during the reporting period.
VI. Implementation of the equity incentive plan of the Company and its effect
□ Applicable √ Not applicable
There was no implementation of the equity incentive plan of the Company during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 27
V Material Matters
VII. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable □ Not applicable
Subject matter Pricing basis Amount of Percentage
Types of the of the of the Price of related party as the amount Settlement of Market price
Related related related party related party related party transactions of similar related of available
party party transactions transactions transactions (RMB’0000) transactions party similar
Related party relationship transactions (%) transactions transaction Disclosure date Disclosure index
Anhui Time Source Corporation Associate Sale Machine-made Market price Market price 14,823.71 2.15% Bank Not applicable Not applicable Not applicable
paper acceptance
and telegraphic
transfer
Total — — 14,823.71 — — — — —
Description of return of bulk sales in details Nil
2. Related party transaction connected to purchase or sale of assets
□ Applicable √ Not applicable
There was no related party transaction of the Company connected to purchase or sale of assets during the reporting
period.
14
INTERIM
3. Related party transaction connected to joint external investment REPORT
□ Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
4. Related creditors’ rights and debts transactions
√ Applicable □ Not applicable
Whether non-operating related creditors’ rights and debts transactions existed?
□ Yes √ No
There was no non-operating related creditors’ rights and debts transaction of the Company during the reporting period.
5. Other significant related party transactions
□ Applicable √ Not applicable
There was no significant related party transaction of the Company during the reporting period.
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
VIII. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
□ Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.
IX. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
□ Applicable √ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
□ Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
14 (3) Leasing
INTERIM
REPORT □ Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
2. Guarantees
√ Applicable □ Not applicable
During the reporting period, the Company did not provide any guarantee to external parties (excluding those provided to
its subsidiaries) and did not provide any guarantees against the rules and regulations.
During the reporting period, the Company provided guarantee to its subsidiaries with respect to application of bank
loans. The guarantee amount incurred was RMB123.8336 million. As at 30 June 2014, the balance of the guarantee
provided by the Company to its subsidiaries amounted to RMB2,722.6503 million, representing 19.97% of the equity
attributable to shareholders of the Company as at 30 June 2014.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 29
V Material Matters
IX. Material contracts and implementation (Cont’d)
2. Guarantees (Cont’d)
Unit: RMB’0,000
External guarantees provided by the Company (excluding guarantees provided for subsidiaries)
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee date Guarantee Type of Fulfilled parties
Name of obligor guarantee amount guarantee (agreement date) provided guarantee Term or not or not
Total amount of external guarantee approved during Total amount of external guarantee provided during
the reporting period (A1) 0 the reporting period (A2) 0
Total amount of external guarantee approved as at the end Total balance of external guarantee provided as at the end
of the reporting period (A3) 0 of the reporting period (A4) 0
Guarantees provided by the Company for subsidiaries
Date of the related
announcement
Guarantee
disclosing the Amount of Guarantee date Guarantee Type of
Fulfilled to Related
Name of obligor guarantee amount guarantee (agreement date) provided guarantee Term or not parties or not
Zhanjiang Chenming Pulp & Paper Co., Ltd. 28 March 2012 300,000 24 May 2012 142,130.10 General guarantee 3 years No No
Jiangxi Chenming Paper Co., Ltd. 21 December 2012 20,000 29 May 2014 7,461.12 General guarantee 3 years No No 14
— — General guarantee INTERIM
Jiangxi Chenming Paper Co., Ltd. 27 March 2013 200,000 3 years No No REPORT
Huanggang Chenming Arboriculture Co., Ltd. 30 March 2011 20,000 19 September 2011 2,960 General guarantee 3 years No No
Huanggang Chenming Arboriculture Co., Ltd. 28 March 2012 20,000 27 June 2012 2,600 General guarantee 3 years No No
Shouguang Meilun Paper Co., Ltd. 24 August 2010 79,473 10 September 2010 — General guarantee 5 years Yes No
Shouguang Meilun Paper Co., Ltd. 29 October 2010 600,000 7 March 2014 4,922.24 General guarantee 10 years No No
Shouguang Chenming Art Paper Co., Ltd. 28 March 2012 10,000 — — General guarantee 3 years No No
Jilin Chenming Paper Co., Ltd. 28 March 2012 100,000 — — General guarantee 3 years No No
Jilin Chenming Paper Co., Ltd. 27 March 2013 50,000 — — General guarantee 3 years No No
Chenming (HK) Limited 29 October 2010 50,000 13 April 2011 — General guarantee 3 years Yes No
Chenming (HK) Limited 28 March 2012 500,000 — — General guarantee 3 years No No
Shandong Chenming Paper Sales
Company Limited 27 October 2011 400,000 7 June 2013 108,191.57 General guarantee 3 years No No
Shouguang Chenming Import and
Export Trade Co., Ltd. 28 March 2012 200,000 — — General guarantee 3 years No No
Zhanjiang Meilun Paper Co., Ltd. 27 March 2013 50,000 — — General guarantee 3 years No No
Guangdong Huirui Investment Co., Ltd. 16 November 2013 4,000 28 November 2013 4,000.00 General guarantee 2 years No No
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
IX. Material contracts and implementation (Cont’d)
2. Guarantees (Cont’d)
Unit: RMB’0,000
Total amount of guarantee provided for subsidiaries approved during 0 Total amount of guarantee provided for subsidiaries during the reporting period (B2) 12,383.36
the reporting period (B1)
Total amount of guarantee provided for subsidiaries approved 2,603,473 Total balance of guarantee provided for subsidiaries as at the end of the reporting 272,265.03
as at the end of the reporting period (B3) period (B4)
Total amount of guarantee approved during the reporting 0 Total amount of guarantee provided during the reporting period (A2+B2) 12,383.36
period (A1+B1)
Total amount of guarantee approved as at the end of the 2,603,473 Total balance of guarantee provided as at the end of the reporting period (A4+B4) 272,265.03
reporting period (A3+B3)
The percentage of total amount of guarantee provided (A4+B4) to the net assets of the Company 19.97%
Of which:
Amount of guarantee provided for shareholders, beneficial controllers and its related parties (C) 0
Amount of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (D) 122,673.81
Total amount of guarantee provided in excess of 50% of net assets (E) 0
Sum of the above three amount of guarantee (C+D+E) 122,673.81
3. Other material contracts
√ Applicable □ Not applicable
14
INTERIM Book value Appraised
REPORT of subject value of the
asset of the subject asset Name of Related Progress as
Name of party Date of contract of the contract appraisal Transaction party Related at the end of
Name of the company involved in the the contract (RMB’0,000) (RMB ’0,000) institute Appraisal price transaction party the reporting
entering into contract contract entered into (if any) (if any) (if any) date (if any) Pricing basis (RMB’0,000) or not relationship period
Shandong Chenming Jinan Hi-Tech 9 May 2014 Not applicable Not applicable Not applicable Not applicable Market price 36,000 No Not applicable In progress
Paper Holdings Holding Group
Limited Co., Ltd
4. Other material transactions
□ Applicable √ Not applicable
There was no other material transaction of the Company during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 31
V Material Matters
X. Undertakings made by the Company and shareholders interested in 5% or more of the shares
of the Company made in the reporting period or prior periods but subsisting to the reporting
period
√ Applicable □ Not applicable
Particulars
Party involved Undertaking on the
Undertaking in undertaking Details of undertaking date Term performance
Undertaking on shareholding
structure reformation
Undertaking made in offering
documents or shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on initial Shouguang (1) According to the plan on defective properties of the 16 January 2008 During the Strictly
public offering or refinancing Chenming Company, Shouguang Chenming Holdings has guaranteed period when implemented
Holdings Co., Ltd, and undertaken that: according to the application of the Chenming
the controlling Company, for defective property(ies) owned by the Company Holdings
14
shareholder of the and its holding subsidiary company which situated in the was the major
Company administrative area of Shouguang city, Shouguang Chenming shareholder
Holdings will purchase it(them) and have it(them) being of the Company INTERIM
REPORT
transferred to itself pursuant to the law in accordance with the
result of the related asset valuation if the Company decides
to transfer and dispose of it(them) and there is no other
transferee; (2) before the Company transfers and disposes of
the defective properties pursuant to the law, if the Company
suffers any economic losses due to the defects of the title
(including but not limited to damages, penalties and relocation
costs), Shouguang Chenming Holdings will bear such
economic losses; (3) during the regulatory process taken to
the defective properties of buildings and land of subsidiaries
of the Company situated outside the local areas (outside the
administrative area of Shouguang city), the economic losses
such as penalties or relocation costs imposed by competent
administrative authorities to be borne by the subsidiaries
arising from defects of insufficient title documents shall be
paid pursuant to the law by Shouguang Chenming Holdings
after verification.
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
X. Undertakings made by the Company and shareholders interested in 5% or more of the shares
of the Company made in the reporting period or prior periods but subsisting to the reporting
period (Cont’d)
Particulars
Party involved Undertaking on the
Undertaking in undertaking Details of undertaking date Term performance
Shouguang (1) Shouguang Chenming Holdings shall not engage, whether 22 May 2008 During the Strictly
Chenming solely, jointly, or by representing itself or any other persons or period when implemented
Holdings Co., Ltd, companies, and shall not procure its associates (as defined Chenming
the controlling in The Listing Rules of Hong Kong Stock Exchange) to Holdings was
shareholder of the engage, in any business which competes with the business the major
Company of the Company and its subsidiaries (“Chenming Group” or shareholder
“we”) directly or indirectly, in any country and region which of the Company
our business exists (or any part of the world if in any form
of electronics business), or in any business that directly or
indirectly competes with Chenming Group’s business which
we operate from time to time (including but not limited to any
business in the form of sole proprietorship, joint ventures
or acquisitions, or holding interests directly or indirectly in
such enterprises, or by any other means); (2) in the event that
Shouguang Chenming Holdings is required by its business to,
14 whether solely, jointly, or by representing itself or any other
INTERIM persons or companies, engage in business which directly
REPORT
or indirectly competes against the business of Chenming
Group, or obtain any business opportunity which directly or
indirectly competes against the business of Chenming Group,
it shall endeavour to procure that Chenming Group shall have
priority to obtain the right to operate such business or to
obtain such business opportunity; (3) if Shouguang Chenming
Holdings is in breach of the abovementioned undertakings,
it shall indemnify the Company for any loss caused by such
breach and the Company shall have the right to acquire all
businesses of Shouguang Chenming Holdings, which directly
or indirectly compete with the businesses of our Group,
at market price or cost price (whichever price is lower); (4)
Shouguang Chenming Holdings shall not make use of its
position as the controlling shareholder (as defined in The
Listing Rules of Hong Kong Stock Exchange) of our Group
to jeopardise the legal interests of Chenming Group and its
shareholders with other persons or companies or on their
behalf.
Other undertakings made to
minority shareholders
of the Company
Does the undertaking Yes
performed timely?
SHANDONG CHENMING PAPER HOLDINGS LIMITED 33
V Material Matters
XI. Engagement or dismissal of accounting firms
Has the interim financial report been audited?
□ Yes √ No
XII. Punishment and rectification
□ Applicable √ Not applicable
There was no punishment and rectification of the Company during the reporting period.
XIII. Risk of delisting due to non-compliance
□ Applicable √ Not applicable
The Company was not exposed to the risk of delisting due to non-compliance during the reporting period.
XIV. Purchase, sale and redemption of shares
1. Particulars of Repurchase of H shares by the Company
On 21 August 2013, the Company convened the 2013 First extraordinary shareholders’ meeting, Class Meeting for
Holders of Domestic Listed Shares (A shares and B shares) and Class Meeting for Holders of Overseas Listed Shares
(H shares), at each of which proposals concerning the repurchase of H shares of the Company were approved. On
10 October 2013, Shandong Province Commerce Department issued a Preliminary Reply to Capital Reduction by
Shandong Chenming Paper Holdings Limited (Lu Shang Wu Wai Zi Zi [2013] No. 705), which intended to agree that 14
the Company repurchased not more than 39.127 million issued overseas listed foreign shares (H share). The number of INTERIM
REPORT
repurchased shares will be determined by the actual amount of shares repurchased and the registered capital should be
reduced accordingly.
On 1 November 2013, the reply from Shouguang City Branch of the State Administration of Foreign Exchange
consented to the foreign exchange purchase quota in respect of the H shares repurchased by the Company.
The Company has commenced repurchase of its H shares since 11 December 2013. As of the end of the term of such
repurchase on 9 May 2014, the Company repurchased 39,066,500 shares, representing 1.9776% of the Company’s
total share capital. The highest repurchase price was HK$3.60 per share, while the lowest price was HK$3.17 per share.
The total amount paid amounted to HK$133,556,245.00 (before stamp duty and commission).
On 15 May 2014, the Company has cancelled the repurchased 39,066,500 overseas listed foreign shares (H shares).
2. Apart from the above repurchase of H shares by the Company, the Company did not purchase, sell or
redeem any listed outstanding securities of the Company during the reporting period.
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters
XV. Other matters of significance
√ Applicable □ Not applicable
1. During the reporting period, in order to save the related expenses, the Company deregistered two subsidiaries which
had not engaged in any business activity for years, namely Shouguang Chenming Tianyuan Arboriculture Co., Ltd. and
Shouguang Hengfeng Storage Co., Ltd. Their assets and liabilities were consolidated into the financial statements of
the parent Company.
2. The Company received the Approval from Shandong CBRC of the Operation of Shandong Chenming Group Finance
Co., Ltd. (Lu Yin Jian Zhun [2014] No. 233) issued by China Banking Regulatory Commission Shandong office on 30
June 2014. Please refer to the related announcement (Announcement No.: 2014-034) disclosed by the Company on 1
July 2014.
3. Information disclosure index for the first half of 2014
Announcement Date of
No. Subject matter publication Publication website
2014-001 Announcement on Amendment to Articles of 4 January 2014 http://www.cninfo.com.cn
Association
2014-002 Announcement on Resolutions of the 18 January 2014 http://www.cninfo.com.cn
Fourth Extraordinary Meeting of the
Seventh Session of the Board
2014-003 Announcement on External Investment 18 January 2014 http://www.cninfo.com.cn
14 2014-004 Announcement on change of Securities Affairs 18 January 2014 http://www.cninfo.com.cn
INTERIM Representative
REPORT 2014-005 Announcement on External Investment 18 January 2014 http://www.cninfo.com.cn
2014-006 Discloseable Transaction - Entrusted Loan 18 January 2014 http://www.cninfo.com.cn
Arrangement
2014-007 Announcement on Estimated Annual Results 21 January 2014 http://www.cninfo.com.cn
for 2013
2014-008 Announcement on Repurchase of Shares 21 January 2014 http://www.cninfo.com.cn
by a Shareholder through Agreed Repurchase
Type Securities Trading
2014-009 Indicative Announcement on Receipt of Subsidies 23 January 2014 http://www.cninfo.com.cn
2014-010 Indicative Announcement on Receipt of 29 January 2014 http://www.cninfo.com.cn
Special Subsidies by Subsidiaries
2014-011 Announcement on the Performance of 13 February 2014 http://www.cninfo.com.cn
Undertakings by the Company and
Relevant Entities
2014-012 Announcement on disposal of equity interest 5 March 2014 http://www.cninfo.com.cn
in Xinli Power
2014-013 Announcement on Resolutions of the 21 March 2014 http://www.cninfo.com.cn
Fourth Meeting of the Seventh Session
of the Board of Directors
2014-014 Notice of 2013 Annual General Meeting 21 March 2014 http://www.cninfo.com.cn
2014-015 Announcement of Annual Results for the 21 March 2014 http://www.cninfo.com.cn
Year Ended 31 December 2013
2014-016 Announcement on financial assistance 21 March 2014 http://www.cninfo.com.cn
to controlling subsidiaries
2014-017 Announcement on External Investment 21 March 2014 http://www.cninfo.com.cn
2014-018 Announcement on External Investment 21 March 2014 http://www.cninfo.com.cn
2014-019 Announcement on Resolutions of the 21 March 2014 http://www.cninfo.com.cn
Fifth Meeting of the Seventh Session
of the Supervisory Committee
SHANDONG CHENMING PAPER HOLDINGS LIMITED 35
V Material Matters
XV. Other matters of significance (Cont’d)
Announcement Date of
No. Subject matter publication Publication website
2014-020 Indicative Announcement on Increase 25 March 2014 http://www.cninfo.com.cn
of Shareholding in the Company
by Senior Management
2014-021 Indicative Announcement on Receipt of 1 April 2014 http://www.cninfo.com.cn
Subsidies by Subsidiary
2014-022 Announcement on Resignation of Director 16 April 2014 http://www.cninfo.com.cn
2014-023 Announcement on Additional Resolution 23 April 2014 http://www.cninfo.com.cn
of 2013 Annual General Meeting
2014-024 Supplemental Notice of 2013 Annual General 23 April 2014 http://www.cninfo.com.cn
Meeting
2014-025 2014 First Quarterly Report 30 April 2014 http://www.cninfo.com.cn
2014-026 Results of the 2013 Annual General Meeting 10 May 2014 http://www.cninfo.com.cn
2014-027 Announcement on Completion of Repurchase 10 May 2014 http://www.cninfo.com.cn
of Part of H Shares
2014-028 Indicative Announcement in respect of Change 10 May 2014 http://www.cninfo.com.cn
in Shareholdings of Controlling Shareholder
2014-029 Discloseable Transaction: Entrusted Construction 10 May 2014 http://www.cninfo.com.cn
Agreement
2014-030 Announcement on Participation in 2014 Collective 13 May 2014 http://www.cninfo.com.cn 14
Online Reception Day for Investors of Shandong INTERIM
REPORT
Listed Companies
2014-031 Announcement on Amendment to Articles 30 May 2014 http://www.cninfo.com.cn
of Association
2014-032 Announcement on the Implementation of 28 June 2014 http://www.cninfo.com.cn
Equity Distribution to Holders of A Shares and
B Shares for 2013
2014-033 Announcement on 2013 Dividend Payment 28 June 2014 http://www.cninfo.com.cn
in respect of “11 Chenming Bond”
2014-034 Announcement on Approval from Shandong CBRC 1 July 2014 http://www.cninfo.com.cn
of the Operation of the Finance Company
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders
I. Changes in shares
Unit: Share
Opening balance Change during the reporting period (+/-) Closing balance
Shares
New Bonus converted
Amounts Percentage issue issue from reserve Others Sub-total Amounts Percentage
I. Restricted shares 8,166,219 0.41% 0 0 0 75,000 75,000 8,241,219 0.42%
1. Shares held by other domestic investors 8,166,219 0.41% 75,000 75,000 8,241,219 0.42%
Shares held by domestic natural persons 8,166,219 0.41% 75,000 75,000 8,241,219 0.42%
II. Non-restricted shares 1,967,305,748 99.59% 0 0 0 -39,141,500 -39,141,500 1,928,164,248 99.58%
1. RMB ordinary shares 1,105,112,237 55.94% -75,000 -75,000 1,105,037,237 57.07%
2. Domestic listed foreign shares 470,923,511 23.84% 0 470,923,511 24.32%
3. Overseas listed foreign shares 391,270,000 19.81% -39,066,500 -39,066,500 352,203,500 18.19%
III. Total number of shares 1,975,471,967 100.00% 0 0 0 -39,066,500 -39,066,500 1,936,405,467 100.00%
The reasons for such changes
√ Applicable □ Not applicable
1. After the changes, the restricted shares held by domestic natural person changed by 75,000 shares from 8,166,219
shares to 8,241,219 shares. The reason for such change is as follows: during the reporting period, the senior
management increased their shareholding in the Company, of which 75,000 shares were changed to restricted shares
held by domestic natural persons from non-restricted RMB ordinary shares in nature according to the Practice Guidance
for the Company’s shares held by the directors, supervisors and senior management of the listed companies of
14
Shenzhen Stock Exchange.
INTERIM
REPORT 2. After the changes, overseas listed foreign shares changed by 39,066,500 shares from 391,270,000 shares to
352,203,500 shares. The reason for such change is as follows: during the reporting period, the Company repurchased
some overseas listed foreign shares (H shares). As of 9 May 2014, the Company had repurchased H shares amounting
to 39,066,500 shares. Cancellation of repurchased shares was completed at Computershare Hong Kong Investor
Services Limited on 14 May 2014.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 37
VI Changes in Share Capital and Shareholders
I. Changes in shares (Cont’d)
Approval of changes in shareholding
√ Applicable □ Not applicable
On 27 June 2013, the First Extraordinary Meeting of the Seventh Session of the Board approved the proposal concerning
granting a general mandate to the Board for repurchase of part of H shares of the Company.
On 21 August 2013, the Company convened the 2013 First extraordinary general meeting, Class Meeting for Holders of
Domestic Listed Shares (A shares and B shares) and Class Meeting for Holders of Overseas Listed Shares (H shares), at each
of which proposals concerning the repurchase of H shares of the Company were approved.
On 10 October 2013, Shandong Province Commerce Department issued a Preliminary Reply to Capital Reduction by
Shandong Chenming Paper Holdings Limited (Lu Shang Wu Wai Zi Zi [2013] No. 705), which intended to agree that the
Company repurchased not more than 39.127 million issued overseas listed foreign shares (H shares). The number of
repurchased shares will be determined by the actual amount of shares repurchased and the registered capital should be
reduced accordingly.
On 1 November 2013, the reply from Shouguang City Branch of the State Administration of Foreign Exchange consented to
the foreign exchange purchase quota in respect of the H shares repurchased by the Company.
On 14 May 2014, the cancellation of the repurchased 39,066,000 H shares was completed at Computershare Hong Kong
Investor Services Limited.
On 27 May 2014, the Company received the “Reply on Capital Reduction of Shandong Chenming Paper Holdings Limited” (Lu
Shang Wu Wai Zi Zi [2014] 158) from the Department of Commerce of Shandong Province and the Certificate of Approval for
Foreign Investment Enterprise upon the reduction of share capital, which both agreed that the Company reduced its registered 14
capital from RMB1,975,471,967 to RMB1,936,405,467. INTERIM
REPORT
On 28 May 2014, the Company conducted filing procedures in capital reduction with Shandong Province Industry and
Commerce Bureau and obtained its business license after capital reduction, with the registered capital of RMB1,936,405,467.
Transfer of shares arising from changes in shareholding
□ Applicable √ Not applicable
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings per share and
net assets per share attributable to shareholders of ordinary shares of the Company for the latest year and the latest period
□ Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be disclosed
□ Applicable √ Not applicable
Changes in the total number of shares and structure of shareholders and the structure of the assets and liabilities of the
Company
√ Applicable □ Not applicable
(1) During the reporting period, the Company repurchased some overseas listed foreign shares (H shares). As of 9 May
2014, the Company had repurchased H shares amounting to 39,066,500 shares. Cancellation of repurchased shares
was completed at Computershare Hong Kong Investor Services Limited on 14 May 2014. The total number of shares of
the Company decreased to 1,936,405,467 shares from 1,975,471,967 shares upon the cancellation of the repurchased
H shares.
(2) During the reporting period, the shareholding ratio of Shouguang Chenming Holdings Limited, the controlling
shareholder of the Company increased to 15.13% from 14.83% due to the partial repurchase and cancellation of H
shares. There were other minor effects on the shareholder structure. For the change in shareholder structure, please
refer to the first part “Changes in shares” in this chapter.
(3) During the reporting period, the share capital of the Company reduced by RMB39,066,500; the capital reserve
decreased by RMB66,614,983.35 and the gearing ratio increased to 72.05% from 71.90% due to the partial repurchase
and cancellation of H shares.
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders
II. Total number of shareholders and shareholdings
Unite: Share
Total number of shareholders of ordinary shares as at 132,524, of which 103,446 were holders of A shares, 28,523 holders Total number of shareholders of preference shares with restored voting right 0
the end of the reporting period of B shares and 555 holders of H shares. as at the end of the reporting period
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top ten shareholders
Share pledged or locked-up
Changes
Number of (increase or
shares held decrease)
at the end during Number of Number of
Nature of Percentage of of the reporting the reporting Restricted non-restrict Status of
Name of shareholders shareholders shareholding period period shares held shares held shares Number
HKSCC NOMINEES LIMITED Overseas legal person 18.11% 350,691,500 -39,125,000 0 350,691,500
0
SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED State-owned legal 15.13% 293,003,657 86,600,000 0
person 293,003,657 0
ZHONGRONG INTERNATIONAL TRUST CO., LTD. - HAITONG UMBRELLA Others 1.74% 33,696,131 -2,177,687 0
BAO NO. 1 SECURITIES INVESTMENT ASSEMBLED FUNDS TRUST 33,696,131 0
PLATINUM ASIA FUND Overseas legal person 1.67% 32,341,052 0 0 32,341,052 0
CAITONG FUND - EVERBRIGHT BANK - CAITONG FUND - YUAN Others 1.43% 27,706,556 -1,350,000 0
MEINO. 2 ASSETS MANAGEMENT PROGRAMME 27,706,556 0
CAITONG FUND - EVERBRIGHT BANK - YUAN MEI NO. 1 ASSETS Others 1.40% 27,198,049 -1,750,000 0
MANAGEMENT PROGRAMME 27,198,049 0
YUNNAN INTERNATIONAL TRUST CO., LTD. - YUNNAN TRUST Others 0.70% 13,547,397 -422,200 0
GROWTH 2013 - NO. 2 ASSEMBLED FUNDS TRUST PROGRAMME 13,547,397 0
14 BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND
BILL & MELINDA GATES FOUNDATION TRUST
Overseas legal person
Overseas legal person
0.62%
0.52%
12,036,985
10,033,077 -12,724,314
0 0
0
12,036,985
10,033,077
0
0
INTERIM
JIN Xing Domestic nature person 0.42% 8,109,300 21,000 0 8,109,300 0
REPORT
Connected relationship or connected party relationship among Shouguang Chenming Holdings Company Limited, a state-owned legal person shareholder, is not connected with any of the shareholders above. They are
the above shareholders not persons acting in concert under Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies Procedures. Both
Caitong Fund - Everbright Bank - Caitong Fund - Yuan Mei No. 2 Assets Management Programme and Caitong Fund - Everbright Bank - Yuan Mei No. 1
Assets Management Programme are funds managed by Caitong Fund Management Co., Ltd. Save for the above, it is not aware that any other shareholders
of tradable shares are persons acting in concert and is also not aware that any other shareholders of tradable shares are connected with each others.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 39
VI Changes in Share Capital and Shareholders
II. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Number of
non-restricted
shares held
as at the end
of the reporting
Name of shareholders period Class of shares
Class of shares Number
HKSCC NOMINEES LIMITED 350,691,500 Overseas listed 350,691,500
foreign shares
SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED 293,003,657 RMB ordinary shares 293,003,657
ZHONGRONG INTERNATIONAL TRUST CO., LTD. - HAITONG 33,696,131 RMB ordinary shares 33,696,131
UMBRELLA BAO NO. 1 SECURITIES INVESTMENT
ASSEMBLED FUNDS TRUST
PLATINUM ASIA FUND 32,341,052 Domestic listed 32,341,052
foreign shares
CAITONG FUND - EVERBRIGHT BANK - CAITONG FUND - YUAN 27,706,556 RMB ordinary shares 27,706,556
MEINO. 2 ASSETS MANAGEMENT PROGRAMME
CAITONG FUND - EVERBRIGHT BANK - YUAN MEI 27,198,049 RMB ordinary shares 27,198,049
NO. 1 ASSETS MANAGEMENT PROGRAMME
YUNNAN INTERNATIONAL TRUST CO., LTD. - YUNNAN
TRUST GROWTH 2013 - NO. 2 ASSEMBLED FUNDS
13,547,397 RMB ordinary shares 13,547,397 14
INTERIM
TRUST PROGRAMME REPORT
BBH A/C VANGUARD EMERGING MARKETS 12,036,985 Domestic listed 12,036,985
STOCK INDEX FUND foreign shares
BILL & MELINDA GATES FOUNDATION TRUST 10,033,077 RMB ordinary shares 10,033,077
JIN Xing 8,109,300 RMB ordinary shares 2,087,000
Domestic listed 6,022,300
foreign shares
Connected relationship or connected party Shouguang Chenming Holdings Company Limited, a state-owned legal
relationship among the top ten shareholders of person shareholder, is not connected with any of the shareholders above.
non-restricted shares, and between the top ten They are not persons acting in concert under Administration of Disclosure
shareholders of non-restricted shares and the of Information on the Change of Shareholdings in Listed Companies
top ten shareholders Procedures. Both Caitong Fund - Everbright Bank - Caitong Fund - Yuan
Mei No. 2 Assets Management Programme and Caitong Fund - Everbright
Bank - Yuan Mei No. 1 Assets Management Programme are funds
managed by Caitong Fund Management Co., Ltd. Save for the above, it
is not aware that any other shareholders of tradable shares are persons
acting in concert and is also not aware that any other shareholders of
tradable shares are connected with each others.
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders
Whether an agreed repurchase transaction was entered into during the reporting period by shareholders of the Company
√ Applicable □ Not applicable
On 20 January 2014, Shouguang Chenming Holdings Company Limited, a shareholder interested in more than 5% of the
shares of the Company, repurchased the disposed 86,600,000 shares of the Company through agreed repurchase type
securities trading. The shareholding of the shareholder before and after the trading is as follows:
Unite: Share
Before the repurchase After the repurchase
As a percentage As a percentage
Number of of the total Number of of the total
shares of the share capital shares of the share capital
Name of shareholder Company held of the Company Company held of the Company
Shouguang Chenming Holdings
Company Limited 206,403,657 14.83% 293,003,657 15.13%
III. Change of controlling shareholders or beneficial controllers
Change of controlling shareholders during the reporting period
□ Applicable √ Not applicable
14 There was no change of controlling shareholders of the Company during the reporting period.
INTERIM
REPORT
Change of beneficial controllers during the reporting period
□ Applicable √ Not applicable
There was no change of beneficial controllers of the Company during the reporting period.
IV. Plan on increase of shareholding proposed or implemented by shareholders of the Company
and their persons acting in concert during the reporting period
√ Applicable □ Not applicable
Unite: Share
Number of Percentage of Number of Percentage of Date of initial
shares under shares under shares related shares related disclosure of Date of disclosure
the plan on the plan on to actual to actual the plan on of completion of
Name of shareholder/ increase of increase of increase in increase in increase of the plan on increase
Name of person acting in concert shareholding shareholding shareholding shareholding shareholding of shareholding
Chen Hongguo — — 100,000 0.005% — 25 March 2014
SHANDONG CHENMING PAPER HOLDINGS LIMITED 41
VI Changes in Share Capital and Shareholders
V. The Company’s shareholders’ and other persons’ interest in shares or debentures
As at 30 June 2014, the following persons (other than directors, supervisors or chief executives of the Company) had interests
or short positions in the Company’s shares and underlying shares as recorded in the share register maintained 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
Number of Total share Class of
Name shares held capital shares
SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED 293,003,657 15.13% 26.32%
A shares (L)
THE NATIONAL SOCIAL SECURITY FUND COUNCIL 35,270,000 1.82% 10.01%
H shares (L)
(L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed above, as at 30 June 2014, 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.
14
INTERIM
REPORT
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Directors, Supervisors and Senior Management
I. Issue and listing of preference shares during the reporting period
□ Applicable √ Not applicable
II. Number of shareholders of preference shares of the Company and their shareholding
□ Applicable √ Not applicable
III. Repurchase or conversion of preference shares
1. Repurchase of preference shares
□ Applicable √ Not applicable
2. Conversion of preference shares
□ Applicable √ Not applicable
IV. Restoration and exercise of voting rights of preference shares
□ Applicable √ Not applicable
V. Accounting policies adopted for preference shares and their reason
□ Applicable √ Not applicable
14
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 43
VII Preference Shares
I. Changes in shareholding of Directors, Supervisors and Senior Management
√ Applicable □ Not applicable
Increase in Decrease in Restricted Restricted
Share held as the number the number Share held as shares granted Restricted shares granted
at the beginning of shares of shares at the end at the beginning shares granted at the end
of the period held during the held during the of the period of the period during the of the period
Name Position Status (shares) period shares) period (shares) (shares) (shares) period (shares) (shares)
Chen Hongguo Chairman and In office 6,334,527 100,000 0 6,434,527 0 0 0
general manager
Yin Tongyuan Vice Chairman In office 2,423,640 0 0 2,423,640 0 0 0
Li Feng Director, deputy In office 471,818 0 0 471,818 0 0 0
general manager
Geng Guanglin Director, deputy In office 437,433 0 0 437,433 0 0 0
general manager
Hou Huancai Director In office 628,915 0 0 628,915 0 0 0
Zhou Shaohua Director, deputy In office 123,007 0 0 123,007 0 0 0
general manager
Cui Youping Director Resigned 0 0 0 0 0 0 0
Wang Xiaoqun Director In office 0 0 0 0 0 0 0 14
INTERIM
Zhang Zhiyuan Independent Director In office 0 0 0 0 0 0 0 REPORT
Wang Aiguo Independent Director In office 0 0 0 0 0 0 0
Zhang Hong Independent Director In office 0 0 0 0 0 0 0
Pan Ailing Independent Director In office 0 0 0 0 0 0 0
Yang Guihua Director In office 0 0 0 0 0 0 0
Gao Junjie Chairman of In office 39,606 0 0 39,606 0 0 0
Supervisory Committee
Wang Ju Supervisor In office 0 0 0 0 0 0 0
Yang Hongqin Supervisor In office 0 0 0 0 0 0 0
Yin Qixiang Supervisor In office 0 0 0 0 0 0 0
Guo Guangyao Supervisor In office 0 0 0 0 0 0 0
Li Xueqin Deputy general manager In office 429,348 0 0 429,348 0 0 0
Wang Chunfang Secretary to the Board, In office 130,000 0 0 130,000 0 0 0
deputy general manager
Hu Changqing Deputy general manager In office 1,238 0 0 1,238 0 0 0
Shao Zhenzhong Deputy general manager In office 0 0 0 0 0 0 0
Chang Liting Deputy general manager In office 0 0 0 0 0 0 0
Li Zhenzhong Deputy general manager In office 0 0 0 0 0 0 0
Poon Shiu Cheong Company secretary and In office 0 0 0 0 0 0 0
qualified accountant
Total -- -- 11,019,532 100,000 0 11,119,532 0 0 0
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Directors, Supervisors and Senior Management
II. Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable □ Not applicable
Name Position Type Date Reason
Cui Youping Director Resigned 9 May 2014 Personal reason
Yang Guihua Director Elected 9 May 2014 Election at the general meeting
III. Changes in the information of Directors and Supervisors
Under Rule 13.51(B) of the Hong Kong Listing Rules, changes in the information of Directors and Supervisors since the date of
the annual report for the year ended 31 December 2013 are set out below:
Name of Director Details of the changes
Cui Youping Resigned as an non-executive director since 9 May 2014
Yang Guihua Appointed as an non-executive director since 9 May 2014
IV. Equity interests held by Directors, Supervisors and Senior Management filed in compliance
with SFO of Hong Kong
As at 30 June 2014, the interests held by each of the Directors, Supervisors and Chief Executives of the Company in 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:
14
Number of shares
INTERIM (A shares) held as
REPORT at the end of
the reporting
Name Position period (shares)
Chen Hongguo (Note 1) Chairman and Executive Director 6,863,875
Yin Tongyuan Executive Director 2,423,640
Li Feng Executive Director 471,818
Geng Guanglin Executive Director 437,433
Hou Huancai Executive Director 628,915
Zhou Shaohua Executive Director 123,007
Gao Junjie Chairman of Supervisory Committee 39,606
Associated corporations
Number of Number of
shares held as shares held as
at the beginning Change during the at the end of
Name of of the reporting reporting period (+/- the reporting
Name Position associated corporation period (shares) ) period (shares)
Chen Hongguo (Note 2) Chairman Shouguang Chenming 231,000,000 231,000,000
Holdings Company
Limited
Note 1: Save as the 6,434,527 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. As a result,
Shouguang Henglian was deemed to be controlled by Chen Hongguo. As such, the 231,000,000 shares of Chenming Holdings (approximately 13.71%
of the total share capital of Chenming Holdings) held by Shouguang Henglian were also deemed to be held by Chen Hongguo.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 45
VIII Directors, Supervisors and Senior Management
Save as disclosed in the above, as at 30 June 2014, 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 Hong Kong Listing Rules.
As at 30 June 2014, 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.
14
INTERIM
REPORT
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
I. Auditors’ Report
Is the interim report audited?
□ Yes √ No
The interim financial report is not audited.
II. Financial Statements
The unit in the financial statements of the financial report is: RMB
1. Consolidated Balance Sheet
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB
Item Closing balance Opening balance
CURRENT ASSETS:
Monetary funds 3,357,075,224.97 2,547,729,794.24
Balances with clearing companies
Loans to banks and other financial institutions
Held-for-trading financial assets
Bills receivable 2,248,149,475.62 2,870,443,681.49
14 Accounts receivable
Prepayments
3,174,703,520.27
1,810,805,884.03
3,102,643,083.54
1,589,021,331.24
INTERIM
REPORT Premium receivable
Receivables from reinsurers
Reinsurance contract reserves receivable
Interest receivable
Dividend receivable
Other receivables 1,387,721,807.90 1,331,900,749.84
Financial assets purchased under agreements to resell
Inventories 4,119,044,954.18 3,725,809,877.25
Non-current assets due within one year
Other current assets 1,827,429,366.35 1,740,520,586.37
Total current assets 17,924,930,233.32 16,908,069,103.97
SHANDONG CHENMING PAPER HOLDINGS LIMITED 47
IX Financial Report
II. Financial Statements (Cont’d)
1. Consolidated Balance Sheet (Cont’d)
Item Closing balance Opening balance
NON-CURRENT ASSETS:
Entrusted loans and advances to customers Available-for-
sale financial assets 83,000,000.00 83,260,425.53
Held-to-maturity investments
Long-term receivables
Long-term equity investments 39,354,618.33 32,216,789.33
Investment properties 18,604,315.93 19,473,443.95
Fixed assets 24,021,575,836.80 21,181,647,488.39
Construction in progress 3,383,652,916.06 5,266,031,817.60
Construction materials 23,245,677.92 63,968,067.62
Disposal of fixed assets 644,202,059.61 588,181,647.53
Consumable biological assets
1,347,416,044.33
1,317,141,123.77
Oil and gas assets
Intangible assets 1,329,187,864.48 1,365,418,002.26
Development expenditure
Goodwill 20,283,787.17 20,283,787.17
Long-term prepaid expenses 167,031,194.08 168,538,483.68
Deferred income tax assets 563,290,145.89 507,653,388.38
Other non-current assets 900,000,000.00 14
INTERIM
Total non-current assets 32,540,844,460.60 30,613,814,465.21 REPORT
Total assets 50,465,774,693.92 47,521,883,569.18
CURRENT LIABILITIES:
Short-term borrowings 11,866,009,950.56 9,818,885,237.85
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 228,716,908.05 290,403,790.59
Accounts payable 3,317,507,726.31 2,695,169,927.14
Advance receipts 327,099,380.94 442,432,261.58
Assets sold under agreements to repurchase
Handling charges and commission payable
Staff remuneration payables 121,611,538.00 130,271,812.18
Taxes payable 119,113,869.82 130,192,936.87
Interest payable 246,392,305.53 153,189,860.42
Dividend payable 580,921,640.10
Other payables 526,234,433.28 486,836,595.89
Due to reinsurers
Insurance contract reserves
Customer brokerage deposits
Securities underwriting brokerage deposits
Non-current liabilities due within one year 941,964,400.00 1,287,804,452.66
Other current liabilities 3,990,678,171.80 3,878,735,536.52
Total current liabilities 22,266,250,324.39 19,313,922,411.70
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
1. Consolidated Balance Sheet (Cont’d)
Item Closing balance Opening balance
NON-CURRENT LIABILITIES:
Long-term borrowings 3,981,294,707.90 3,723,865,807.90
Bonds payable 5,772,774,960.37 5,768,418,612.73
Long-term payables 128,000,000.00 60,000,000.00
Special payables 1,148,088,048.84 971,805,561.39
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 3,066,066,119.63 3,045,517,642.57
Total non-current liabilities 14,096,223,836.74 13,569,607,624.59
TOTAL LIABILITIES 36,362,474,161.13 32,883,530,036.29
OWNERS’ EQUITY (OR SHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 1,936,405,467.00 1,975,471,967.00
Capital reserves 6,149,082,212.53 6,204,682,028.94
Less: Treasury shares 30,954,891.40
Special reserves
Surplus reserves 1,132,116,106.40 1,132,116,106.40
14 General risk provisions
INTERIM Retained profit 4,403,178,396.50 4,741,638,941.58
REPORT
Foreign currency translation differences 14,655,495.67 16,934,073.59
Total equity attributable to equity holders of the company 13,635,437,678.10 14,039,888,226.11
Minority interest 467,862,854.69 598,465,306.78
Total owners’ equity (or shareholders’ equity) 14,103,300,532.79 14,638,353,532.89
TOTAL LIABILITIES AND OWNERS’ EQUITY
(OR SHAREHOLDERS’ EQUITY) 50,465,774,693.92 47,521,883,569.18
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 49
IX Financial Report
II.II. Financial Statements (Cont’d)
2. Balance sheet of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB
Item Closing balance Closing balance
CURRENT ASSETS:
Monetary funds 1,086,201,307.14 1,454,242,620.40
Held-for-trading financial assets
Bills receivable 1,300,364,016.64 945,832,396.01
Accounts receivable 5,450,527,043.46 3,814,654,532.05
Prepayments 1,005,413,047.89 762,470,888.60
Interest receivable
Dividend receivable 191,300,102.21
Other receivables 9,554,870,161.49 11,051,622,177.96
Inventories 906,109,088.93 857,030,449.25
Non-current assets due within one year 200,000,000.00
Other current assets 204,109,572.39 103,214,843.26
Total current assets 19,507,594,237.94 19,380,368,009.74
NON-CURRENT ASSETS:
Available-for-sale financial assets 83,000,000.00 83,260,425.53 14
INTERIM
Held-to-maturity investments REPORT
Long-term receivables
Long-term equity investments 9,876,593,518.04 8,780,477,577.92
Investment properties 18,604,315.93 19,473,443.95
Fixed assets 4,953,737,214.74 5,170,770,619.87
Construction in progress 246,779,691.91 127,095,105.63
Construction materials 1,667,197.06 1,813,442.43
Disposal of fixed assets
Consumable biological assets
Oil and gas assets
Intangible assets 303,136,827.02 308,163,298.83
Development expenditure
Goodwill
Long-term prepaid expenses
Deferred income tax assets 18,419,215.15 17,082,162.53
Other non-current assets 900,000,000.00
Total non-current assets 16,401,937,979.85 14,508,136,076.69
TOTAL ASSETS 35,909,532,217.79 33,888,504,086.43
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
2. Balance sheet of the Company (Cont’d)
Item Closing balance Closing balance
CURRENT LIABILITIES:
Short-term borrowings 5,631,922,590.85 5,119,632,573.69
Held-for-trading financial liabilities
Bills payable 500,000.00
Accounts payable 764,934,206.23 891,996,724.44
Advance receipts 102,727,990.92 185,524,508.71
Staff remuneration payables 71,748,172.04 62,091,273.25
Taxes payable 10,078,433.85 8,949,746.01
Interest payable 246,392,305.53 150,047,305.56
Dividend payable 580,921,640.10
Other payables 1,113,168,948.87 431,217,791.18
Non-current liabilities due within one year 357,640,000.00 343,876,000.00
Other current liabilities 3,967,039,467.96 3,856,239,467.95
Total current liabilities 12,846,573,756.35 11,050,075,390.79
NON-CURRENT LIABILITIES:
Long-term borrowings 1,192,916,035.94 594,568,035.94
14
Bonds payable 5,772,774,960.37 5,768,418,612.73
Long-term payables
INTERIM
REPORT
Special payables
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 2,608,807,612.57 2,607,180,511.28
Total non-current liabilities 9,574,498,608.88 8,970,167,159.95
Total liabilities 22,421,072,365.23 20,020,242,550.74
OWNERS’ EQUITY (OR SHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 1,936,405,467.00 1,975,471,967.00
Capital reserves 5,938,811,795.82 6,005,426,779.17
Less: Treasury shares 30,954,891.40
Special reserves
Surplus reserves 1,119,926,524.49 1,119,926,524.49
General risk provisions
Retained profit 4,493,316,065.25 4,798,391,156.43
Foreign currency translation differences
Total owners’ equity (or shareholders’ equity) 13,488,459,852.56 13,868,261,535.69
TOTAL LIABILITIES AND OWNERS’ EQUITY
(OR SHAREHOLDERS’ EQUITY) 35,909,532,217.79 33,888,504,086.43
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 51
IX Financial Report
3. Consolidated Income Statement
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB
Amounts for Amounts for
Item the reporting period the prior period
I. Total revenue 9,082,020,579.01 10,027,901,358.43
Including: Revenue 9,082,020,579.01 10,027,901,358.43
Interest income
Earned premium
Handling charges and commission income
II. Total operating costs 9,082,153,213.06 9,944,996,711.69
Including: Operating costs 7,378,998,628.31 8,251,349,814.35
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 35,500,467.78 38,967,507.99 14
Sales and distribution expenses 524,593,811.50 570,398,742.45 INTERIM
General and administrative expenses 500,133,881.63 602,523,953.98 REPORT
Finance expenses 626,611,788.47 486,409,117.79
Loss on impairment of assets 16,314,635.37 -4,652,424.87
Plus: Gain on change in fair value (“-” denotes loss) 967,670.22 9,229,042.51
Investment income (“-” denotes loss) 21,218,247.82 5,183,185.10
Including: Investment income from associates and joint ventures -1,890,171.00 421,036.92
Foreign exchange gains (“-” denotes loss)
III. Operating profit (“-” denotes loss) 22,053,283.99 97,316,874.35
Plus: Non-operating income 253,711,372.78 336,305,361.16
Less: Non-operating expenses 14,028,105.87 39,540,627.38
Including: Loss on disposal of non-current assets 8,764,674.26 35,870,782.59
IV. Total profit (“-” denotes total loss) 261,736,550.90 394,081,608.13
Less: Income tax expenses 34,033,045.12 82,871,206.26
V. Net profit (“-” denotes net loss) 227,703,505.78 311,210,401.87
Including: Net profit achieved by the acquiree before business combination
Net profit attributable to shareholders of the Company 242,461,095.02 333,409,511.73
-14,757,589.24 -22,199,109.86
Minority interest
VI. Earnings per share: — —
(I) Basic earnings per share 0.12 0.16
(II) Diluted earnings per share 0.12 0.16
VII. Other comprehensive income -2,305,777.92 8,108,866.56
VIII. Total comprehensive income 225,397,727.86 319,319,268.43
Total comprehensive income attributable to shareholders of the Company 240,164,021.10 341,518,378.29
Total comprehensive income attributable to minority interest -14,766,293.24 -22,199,109.86
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II.II. Financial Statements (Cont’d)
4. Income statement of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB
Amounts for Amounts for
Item the reporting period the prior period
I. Revenue 3,996,792,004.38 4,917,032,522.93
Less: Operating costs 3,157,273,029.32 3,976,552,277.16
Business taxes and surcharges 16,249,023.49 21,443,084.31
Selling and distribution expenses 141,537,803.94 151,177,561.24
General and administrative expenses 263,404,356.79 290,395,877.15
Finance expenses 419,085,682.08 254,845,387.49
Loss on impairment of assets 531,463.30 3,701,835.30
Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 228,032,037.93 255,712,842.31
Including: Investment income from associates and joint ventures -74,651.88 421,036.92
II. Operating profit (“-” denotes loss) 226,742,683.39 474,629,342.59
Plus: Non-operating income 52,625,942.79 94,094,442.54
Less: Non-operating expenses 2,636,144.44 28,964,163.57
Including: Loss on disposal of non-current assets 207,851.60 28,464,163.57
14 III. Total profit (“-” denotes total loss) 276,732,481.74 539,759,621.56
INTERIM Less: Income tax expenses 885,932.82 42,756,707.16
REPORT IV. Net profit (“-” denotes net loss) 275,846,548.92 497,002,914.40
V. Earnings per share: — —
(I) Basic earnings per share
(II) Diluted earnings per share
VI. Other comprehensive income
VII. Total comprehensive income 275,846,548.92 497,002,914.40
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 53
IX Financial Report
5. Consolidated cash flow statement
Prepared by: Shandong Chenming Paper Holdings Limited
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 9,887,593,678.02 11,385,469,688.38
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 509,758.13 6,507,666.33
Cash received relating to other operating activities 236,297,041.43 293,722,261.11 14
INTERIM
Subtotal of cash inflows from operating activities 10,124,400,477.58 11,685,699,615.82 REPORT
Cash paid for goods and services 7,297,677,811.16 9,008,158,586.79
Net increase in loans and advances to customers
Net increase in deposits with the central bank and other financial
institutions
Cash paid for claims under original insurance contracts
Cash paid for interest, handling charges and commission
Cash paid for policyholder dividend
Cash paid to and for employees 438,554,968.19 410,741,602.10
Payments of taxes and surcharges 453,797,498.68 541,777,262.88
Cash paid relating to other operating activities 648,673,938.42 818,086,921.10
Subtotal of cash outflows from operating activities 8,838,704,216.45 10,778,764,372.87
Net cash flows from operating activities 1,285,696,261.13 906,935,242.95
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX 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
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 114,959,960.80 20,828,975.62
Net cash received from disposal of subsidiaries and other business
units 75,035,211.41 407,898,445.53
Cash received relating to other investing activities 230,000,000.00 175,961,341.00
Subtotal of cash inflows from investing activities 419,995,172.21 604,688,762.15
Cash paid for purchase of fixed assets, intangible assets and other
long-term assets 1,214,448,290.91 1,490,489,565.10
Cash paid on investments 3,000,000.00
Net increase in pledged loans
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities 1,000,000,000.00
14 Subtotal of cash outflows from investing activities 2,217,448,290.91 1,490,489,565.10
INTERIM
REPORT Net cash flows from investing activities -1,797,453,118.70 -885,800,802.95
III. Cash flows from financing activities:
Cash received from capital contribution 66,000,000.00
Including: cash received from minority interest contribution to
subsidiaries 66,000,000.00
Cash received from borrowings 10,114,432,956.75 12,061,537,576.13
Cash received from bond issue
Cash received relating to other financing activities 68,000,000.00 1,486,500,000.00
Subtotal of cash inflows from financing activities 10,182,432,956.75 13,614,037,576.13
Cash repayments of amounts borrowed 8,173,866,573.80 12,216,611,286.73
Cash paid for dividend and profit distribution or interest payment 653,495,183.98 731,354,603.87
Including: dividend and profit paid to minority interest by subsidiaries 2,091,495.75 15,687,493.50
Cash paid relating to other financing activities 645,581,019.54 1,438,573,351.52
Subtotal of cash outflows from financing activities 9,472,942,777.32 14,386,539,242.12
Net cash flows from financing activities 709,490,179.43 -772,501,665.99
IV. Effect of foreign exchange rate changes on cash and cash equivalents -12,913,419.68 6,564,770.28
V. Net increase in cash and cash equivalents 184,819,902.18 -744,802,455.71
Plus: Balance of cash and cash equivalents as at the beginning of the
period 726,532,928.96 2,343,550,185.45
VI. Balance of cash and cash equivalents as at the end of the period 911,352,831.14 1,598,747,729.74
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 55
IX Financial Report
II. Financial Statements (Cont’d)
6. Cash flow statement of the Company (Cont’d)
Prepared by: Shandong Chenming Paper Holdings Limited
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 3,549,147,836.05 3,976,388,687.84
Tax rebates received
Cash received relating to other operating activities 82,491,417.97 343,215,249.54
Subtotal of cash inflows from operating activities 3,631,639,254.02 4,319,603,937.38
Cash paid for goods and services 1,533,483,679.27 5,033,798,986.49
Cash paid to and for employees 217,060,276.98 165,474,579.19
Payments of taxes and surcharges 182,972,526.03 291,241,251.17
Cash paid relating to other operating activities 127,363,732.10 1,071,544,485.43
Subtotal of cash outflows from operating activities 2,060,880,214.38 6,562,059,302.28
Net cash outflows from operating activities 1,570,759,039.64 -2,242,455,364.90
II. Cash flows from investing activities:
14
INTERIM
Cash received from investments 800,000,000.00 896,725,533.01 REPORT
Cash received from investment income 13,613,768.88 77,706,684.89
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets 17,069.00 88,184.24
Net cash received from disposal of subsidiaries and other business
units
Cash received relating to other investing activities 93,500.00
Subtotal of cash inflows from investing activities 813,630,837.88 974,613,902.14
Cash paid for purchase of fixed assets, intangible assets and other
long-term assets 80,853,295.53 31,454,612.99
Cash paid on investments 1,703,929,592.00 74,206,250.00
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities 1,000,000,000.00
Subtotal of cash outflows from investing activities 2,784,782,887.53 105,660,862.99
Net cash flows from investing activities -1,971,152,049.65 868,953,039.15
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX 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 5,861,716,631.35 7,783,390,709.33
Cash received from bond issue
Cash received relating to other financing activities 1,486,500,000.00
Subtotal of cash inflows from financing activities 5,861,716,631.35 9,269,890,709.33
Cash repayments of amounts borrowed 4,734,961,076.26 7,018,797,223.94
Cash paid for dividend and profit distribution or interest payment 288,024,703.93 189,202,456.98
Cash paid relating to other financing activities 379,346,431.66 2,134,404,556.34
Subtotal of cash outflows from financing activities 5,402,332,211.85 9,342,404,237.26
Net cash flows from financing activities 459,384,419.50 -72,513,527.93
IV. Effect of foreign exchange rate changes on cash and cash equivalents -6,379,154.41 -1,333,058.28
V. Net increase in cash and cash equivalents 52,612,255.08 -1,447,348,911.96
14
Plus: Balance of cash and cash equivalents as at the beginning of the
period 64,392,029.09
1,786,622,854.08
INTERIM
REPORT
VI. Balance of cash and cash equivalents as at the end of the period 117,004,284.17 339,273,942.12
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 57
IX Financial Report
II. Financial Statements (Cont’d)
7. Consolidated statement of changes in owners’ equity
Prepared by: Shandong Chenming Paper Holdings Limited
Amounts for the reporting period
Unit: RMB
Amounts for the reporting period
Equity attributable to shareholders of the Company
Paid-up capital Capital Less: Special Surplus General risk Retained Minority Total owners’
Item (or share capital) reserves treasury shares reserves reserves provisions profit Others interest equity
I. Balance as at the end of
the prior year 1,975,471,967.00 6,204,682,028.94 30,954,891.40 1,132,116,106.40 4,741,638,941.58 16,934,073.59 598,465,306.78 14,638,353,532.89
Plus: accounting policy
change
Corrections of prior
period errors
Others
II. Balance as at the beginning
of the year 1,975,471,967.00 6,204,682,028.94 30,954,891.40 1,132,116,106.40 4,741,638,941.58 16,934,073.59 598,465,306.78 14,638,353,532.89
III. Changes in the period
(“-” denotes decrease) -39,066,500.00 -55,599,816.41 -30,954,891.40 -338,460,545.08 -2,278,577.92 -130,602,452.09 -535,053,000.10
(I) Net profit 242,461,095.02 -14,757,589.24 227,703,505.78
(II) Other comprehensive
income -27,200.00 -2,278,577.92 -2,305,777.92
14
Sub-total of (I) and (II) above -27,200.00 242,461,095.02 -2,278,577.92 -14,757,589.24 225,397,727.86
(III) Capital paid in and INTERIM
reduced by owners -39,066,500.00 -55,572,616.41 -30,954,891.40 -61,913,669.40 -125,597,894.41 REPORT
1. Capital paid in by
owners -39,066,500.00 -55,572,616.41 -30,954,891.40 -61,913,669.40 -125,597,894.41
2. Amounts of share-based
payments recognized
in owners’ equity
3 Others
(IV)Profit distribution -580,921,640.10 -53,931,193.45 -634,852,833.55
1. Transfer to surplus
reserves
2. Transfer to general risk
provision
3. Distribution to owners
(shareholders) -580,921,640.10 -53,931,193.45 -634,852,833.55
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 1,936,405,467.00 6,149,082,212.53 1,132,116,106.40 4,403,178,396.50 14,655,495.67 467,862,854.69 14,103,300,532.79
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements (Cont’d)
7. Consolidated statement of changes in owners’ equity (Cont’d)
Amounts for the prior year
Unit: RMB
Amounts for the prior year
Equity attributable to shareholders of the Company
Paid-up capital Capital Less: Special Surplus General risk Retained Minority Total owners’
Item (or share capital) reserves treasury shares reserves reserves provisions profit Others interest equity
I. Balance as at the end of the
prior year 2,062,045,941.00 6,414,892,999.53 1,132,116,106.40 4,149,511,927.88 929,205.04 585,921,753.20 14,345,417,933.05
Plus: Retrospective
adjustments arising from
business combination
under common control
Plus: accounting policy
changes
Corrections of prior
period errors
Others
II. Balance as at the beginning of
the year 2,062,045,941.00 6,414,892,999.53 1,132,116,106.40 4,149,511,927.88 929,205.04 585,921,753.20 14,345,417,933.05
III. Changes in the period (“-”
denotes decrease) -31,421,760.99 265,363,183.60 214,881,193.71 8,108,866.56 10,646,537.82 -63,148,346.50
(I) Net profit 333,409,511.73 -22,199,109.86 311,210,401.87
(II) Other comprehensive
14
income -31,421,760.99 8,108,866.56 -23,312,894.43
Sub-total of (I) and (II) -31,421,760.99 333,409,511.73 8,108,866.56 -22,199,109.86 287,897,507.44
INTERIM
REPORT
(III) Capital paid in and reduced
by owners 48,533,141.18 48,533,141.18
1. Capital paid in by
owners 56,100,000.00 56,100,000.00
2. Amounts of share-based
payments recognised in
owners’ equity
3. Others -7,566,858.82 -7,566,858.82
(IV)Profit distribution 265,363,183.60 -118,528,318.02 -15,687,493.50 -399,578,995.12
1. Transfer to surplus
reserves
2. Transfer to general risk
provision
3. Distribution to owners
(shareholders) -118,528,318.02 -15,687,493.50 -134,215,811.52
4, Others 265,363,183.60 -265,363,183.60
(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) Other
IV. Balance as at the end of the
period 2,062,045,941.00 6,383,471,238.54 265,363,183.60 1,132,116,106.40 4,364,393,121.59 9,038,071.60 596,568,291.02 14,282,269,586.55
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 59
IX Financial Report
II. Financial Statements (Cont’d)
8. Statement of changes in owners’ equity of the Company
Prepared by: Shandong Chenming Paper Holdings Limited
Amounts for the reporting period
Unit: RMB
Amounts for the reporting period
Paid-up capital Capital Less: Special Surplus General risk Retained Total owners’
Item (or share capital) reserves treasury shares reserves reserves provisions profit equity
I. Balance as at the end of the prior year 1,975,471,967.00 6,005,426,779.17 30,954,891.40 1,119,926,524.49 4,798,391,156.43 13,868,261,535.69
Plus: accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 1,975,471,967.00 6,005,426,779.17 30,954,891.40 1,119,926,524.49 4,798,391,156.43 13,868,261,535.69
III. Changes in the period (“-” denotes decrease) -39,066,500.00 -66,614,983.35 -30,954,891.40 -305,075,091.18 -379,801,683.13
(I) Net profit 275,846,548.92 275,846,548.92
(II) Other comprehensive income
Sub-total of (I) and (II) above 275,846,548.92 275,846,548.92
(III) Capital paid in and reduced by owners -39,066,500.00 -66,614,983.35 -30,954,891.40 -74,726,591.95
1. Capital paid in by owners -39,066,500.00 -66,614,983.35 -30,954,891.40 -74,726,591.95
2. Amounts of share-based payments recognised
14
in owners’ equity
3. Others
(IV) Profit distribution -580,921,640.10 -580,921,640.10 INTERIM
1. Transfer to surplus reserves REPORT
2. Transfer to general risk provision
3. Distribution to owners (shareholders) -580,921,640.10 -580,921,640.10
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 1,936,405,467.00 5,938,811,795.82 1,119,926,524.49 4,493,316,065.25 13,488,459,852.56
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements (Cont’d)
8. Statement of changes in owners’ equity of the Company (Cont’d)
Amounts for the reporting period
Unit: RMB
Amounts for the reporting period
Paid-up capital Capital Less: Special Surplus General risk Retained Total owners’
Item (or share capital) reserves treasury shares reserves reserves provisions profit 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 4,079,103,308.16 13,445,291,762.42
Plus: accounting policy changes
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 4,079,103,308.16 13,445,291,762.42
III. Changes in the period (“-” denotes decrease) 265,363,183.60 378,474,596.38 113,111,412.78
(I) Net profit 497,002,914.40 497,002,914.40
(II) Other comprehensive income
Sub-total of (I) and (II) 497,002,914.40 497,002,914.40
(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
14 (IV) Profit distribution
1. Transfer to surplus reserves
265,363,183.60 -118,528,318.02 -383,891,501.62
INTERIM
2. Transfer to general risk provision
REPORT
3. Distribution to owners (shareholders) -118,528,318.02 -118,528,318.02
4. Others 265,363,183.60 -265,363,183.60
(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) Other
IV. Balance as at the end of the period 2,062,045,941.00 6,184,215,988.77 265,363,183.60 1,119,926,524.49 4,457,577,904.54 13,558,403,175.20
Legal Representative: Chen Hongguo Financial controller: Dong Lianming Head of the financial department: Liu Jun
SHANDONG CHENMING PAPER HOLDINGS LIMITED 61
IX Financial Report
III. General Information of the Company
Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”), whose predecessor was Shandong
Shouguang Paper Mill Corporation, was reformed as Shandong Shouguang Paper Making, Printing and Packaging Group
Company Limited through “offering to specific investors” in May 1993, with registered capital of RMB66,647,400 and total
share capital of 66,647,400 shares. Its shareholding structure is as follows: 46,497,400 sponsor’s state-owned shares
accounting for 69.76% of total share capital, 1,558,500 domestic legal person shares accounting for 2.34% of total share
capital and 18,591,500 staff shares, accounting for 27.90% of total share capital.
On 21 August 1993, replied by the Reply on Changing Shandong Shouguang Papermaking, Printing and Packaging (Group)
Incorporated Company as Shandong Shouguang Papermaking (Group) Incorporated Company (Shou Gai Fa [1993] No.
23) verified and issued by the Shandong Shouguang Office for Restructuring Economic System, Shandong Shouguang
Papermaking, Printing and Packaging (Group) Incorporated Company was changed as Shandong Shouguang Papermaking
(Group) Incorporated Company, with the relevant industrial and commercial alteration registration procedures completed on
8 October 1993. On 4 December 1996, according to the Letter on Agreeing to Determine Shandong Shouguang Papermaking
Group Incorporated Company (Lu Ti Gai Han Zi [1996] No. 123) verified and issued by the Shandong Commission for
Restructuring Economic System and the Shandong Incorporated Company Approval Certificate (Lu Zheng Gu Zi [1996] No.
98) verified and issued by the People’s Government of Shandong Province, it was agreed to change Shandong Shouguang
Papermaking Group Incorporated Company as Shandong Chenming Paper Holdings Limited (present name of the Company).
On 27 October 1996, at the third general meeting of the Company, the Company passed the profit distribution plan to deliver 3.5
bonus shares per 10 shares for the year of 1995, and the proposal of converting such above shares into state-owned shares
as well. After such bonus share issue and conversion into capital, the Company’s share capital was changed from 66,647,400
shares into 99,840,990 shares.
In December 1996, with approval by the Letter on Recommending Shandong Shouguang Papermaking Group Incorporated 14
Company to Issue B Shares (Lu Zheng Zi [1996] No. 270) verified and issued by the People’s Government of Shandong INTERIM
REPORT
Province and Zheng Wei [1996] No. 59 of the Securities Committee of the State Council, the Company was changed as the
incorporated company established by share offer.
On 4 February 1997, the Company held the fourth general meeting, which passed the proposal that the Company absorbed
and merged Shouguang Yongli Paper Co., Ltd. and the profit distribution plan to deliver 4 bonus shares per 10 shares for
1996. After bonus shares distribution, the Company’s share capital was changed from 99,840,990 shares into 158,855,665
shares.
On 30 April 1997, according to approval by the Letter on Recommending Shandong Shouguang Papermaking Group
Incorporated Company to Issue B Shares (Lu Zheng Zi [1996] No. 270) verified and issued by the People’s Government of
Shandong Province, the Reply on Shandong Chenming Paper Co., Ltd. to Issue Foreign Shares Listed in China (Zheng Wei
Fa [1997] No. 26) verified and issued by the Securities Committee of the State Council, and Shen Zheng Fa [1997] No. 188
of the Shenzhen Stock Exchange, the Company issued 115,000,000 domestic listed foreign shares (B shares), which were
listed on Shenzhen Stock Exchange on 26 May 1997. After issuance, the Company’s total share capital was increased from
158,855,665 shares to 273,855,665 shares. The Company was changed as the foreign-invested incorporated company by the
Reply on Changing Shandong Chenming Paper Group Incorporated Company as the Foreign-invested Incorporated Company
([1997] Wai Jing Mao Zi Er Han Zi No. 415) verified and issued by the original Ministry of Foreign Trade and Economic
Cooperation.
On 22 November 1997, the Company held the extraordinary general meeting in 1997 and passed the Proposal of Converting
Capital Reserve into Share Capital by discussion, to convert capital reserve into share capital of 109,542,266 shares at
the ratio of 10:4 according to the Company’s share capital of 273,855,665 shares on 30 June 1997. Upon conversion, the
Company’s total share capital was changed to 383,397,931 shares.
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
III. General Information of the Company (Cont’d)
With approval by the Notice about Approving Application of Shandong Chenming Paper Group Incorporated Company to
Issue Shares (Zheng Jian Gong Si Zi [2000] No. 151) verified and issued by the China Securities Regulatory Commission on
30 September 2000 and the Notice of Listing (Sheng Zheng Shang [2000] No. 151) verified and issued by the Shenzhen Stock
Exchange on 15 November 2000, the Company issued 70 million RMB ordinary shares (A shares), which were listed and
traded on Shenzhen Stock Exchange on 20 November 2000. After issuance, the Company’s total share capital was increased
from 383,397,931 shares to 453,397,931 shares.
In May 2001, with approval by the Notice on Approving Non-listed Foreign Shares of Shandong Chenming Paper Group
Incorporated Company for Circulation (Zheng Jian Gong Si Zi [2001] No. 44) verified and issued by the China Securities
Regulatory Commission on 19 April 2001, 26,709,591 original non-tradable foreign legal person shares held by Guanghua
Company were converted into B shares and listed on Shenzhen Stock Exchange. Listed tradable B shares of the Company
were increased to 187,709,591 shares.
On 28 June 2001, the Company held 2000 general meeting and passed the year 2000 profit distribution plan by discussion. It
presented 1 bonus share per 10 shares to all shareholders based on the total share capital of 453,397,931 shares at the end
of 2000, to increase 45,339,793 shares in total. After the bonus shares distribution, the Company’s total share capital was
increased to 498,737,724 shares.
In May 2003, the Company implemented the 2002 profit distribution to present 2 bonus shares per 10 shares, and converted
into 6 share capitals per 10 capital reserves to increase 398,990,179 shares in total. After the bonus shares distribution and
conversion, the Company’s total share capital was increased from 498,737,724 shares to 897,727,903 shares.
On 15 September 2004, with approval by the Notice on Approving Shandong Chenming Paper Group Incorporated Company
14 to Publicly Issue Convertible Bonds ([2004] No. 147) verified and issued by the China Securities Regulatory Commission, the
Company publicly issued 20 million convertible bonds with face value of RMB100, total issuance of RMB2 billion and term of
INTERIM
REPORT five years, and listed and traded on Shenzhen Stock Exchange on 30 September 2004. The conversion period lasted from 15
March 2005 to 15 September 2009. The bond was called Chenming Convertible Bond as its short name, with the convertible
bond code of 125488.
On 29 April 2005, the Company held 2004 general meeting and passed the 2004 profit distribution plan by discussion. It
converted into 3 share capitals per 10 capital reserves based on the total share capital of 897,727,903 shares at the end of
2004. The Company’s change of share capital was replied by the Reply on Agreeing Capital Increase of Shandong Chenming
Paper Group Incorporated Company (Shang Zi Pi [2005] No. 1364) verified and issued by the Ministry of Commerce of the
People’s Republic of China. According to the above resolution and reply, the Company implemented the distribution plan to
deliver 2 bonus shares per 10 shares to all shareholders and converting into 3 capital shares per 10 capital reserves based on
the total share capital of 897,728,913 shares on 19 May 2005, the date of record (as of 19 May 2005, the Company converted
into share capital of 1,010 shares from convertible bonds). After the bonus shares distribution and conversion, the Company’s
total share capital was increased to 1,346,593,369 shares.
On 6 April 2007, the Company’s 21st meeting of the fourth session of the board of directors discussed to pass the Proposal
on Exercising Redemption Right for Convertible Bonds under Redemptive Condition but Not Converted. It decided that the
Company could redeem the Chenming convertible bonds which were not converted before the date of redemption according
to procedures agreed in the Prospectuses and 105% of face value (including the current interests) after actually meeting
relevant redemptive condition of the Prospectuses of convertible bonds. On 14 May 2007, the Company converted the
Chenming Convertible Bonds and total shares were increased to 1,706,345,941 shares.
Replied by Zheng Jian Xu Ke [2008] No. 290 document of the Reply on Approving Shandong Chenming Paper Group
Incorporated Company to Issue Foreign Shares by the China Securities Regulatory Commission, and with reply by the Stock
Exchange of Hong Kong Ltd. (hereinafter referred to as the Stock Exchange of Hong Kong), the Company was approved
to publicly issue the overseas listed foreign shares (H shares). The Company publicly offered 355,700,000 H shares all over
the world and listed for trading on the main board of Stock Exchange of Hong Kong on 18 June 2008. The share was called
Chenming Paper as its short name with the stock code of HK1812. After offering, the Company’s total shares were increased
to 2,062,045,941 shares.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 63
IX Financial Report
III. General Information of the Company (Cont’d)
Pursuant to resolutions of the 2012 Third Extraordinary General Meeting, resolutions of the 2012 First Class Meeting for
Holders of Domestic Listed Share (A shares and B shares), resolutions of the 2012 First Class Meeting for Holders of Overseas
Listed Share (H shares) and the Articles of Association (as amended), the Company applied for the reduction of share capital
of RMB86,573,974, including a decrease of 86,573,974 domestic listed foreign shares (B shares) at RMB1 per share. From 7
March 2013 to 11 December 2013, the Company repurchased 86,573,974 domestic listed foreign shares (B shares), and the
repurchased shares were cancelled on 24 December 2013. The share capital of the Company was RMB1,975,471,967 upon
such change.
Pursuant to resolutions of the 2013 First Extraordinary General Meeting, resolutions of the 2013 First Class Meeting for
Holders of Domestic Listed Share (A shares and B shares), resolutions of the 2013 First Class Meeting for Holders of Overseas
Listed Share (H shares) and the Articles of Association (as amended), the Company applied for the reduction of share capital
of RMB39,066,500, including a decrease of 39,066,500 overseas listed foreign shares (H shares) at RMB1 per share. From
11 December 2013 to 9 May 2014, the Company repurchased 39,066,500 overseas listed foreign shares (H shares), and the
repurchased shares were cancelled on 14 May 2014. The share capital of the Company was RMB1,936,405,467 upon such
change.
The Registration No. of the Business License for Enterprise Legal Person is 370000400001170.
The Company has a long business period. In the opinion of the Board of the Company, the Company is capable of operating
subsidiaries of a limited business period as a going concern upon expiry of their business period.
As of 30 June 2014, the cumulatively issued total share capital of the Company was 1,936,405,467 shares. Please see Note
VII. . 38 for details.
The business scope of the Company and its subsidiaries (hereinafter referred to as the (“Group”) covers: processing and sale 14
of paper products (including machine made paper and paper board), paper making raw materials and machinery; generation INTERIM
REPORT
and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing,
processing and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards.
Shouguang Chenming Holdings Co., Ltd is the parent company of the Group.
Shouguang Chenming Holdings Co., Ltd (hereinafter referred to as “Shouguang Chenming Holdings”) was established on 30
December 2005 by State-owned Assets Supervision and Administration Commission of Shouguang City which contributed
its state-owned shares to set up the Company. The China Securities Regulatory Commission finally approved the change
in the holder of state-owned Shares of Chenming Paper and the change in nature of its equity interests arising from the
establishment of Shouguang Chenming Holdings on 14 August 2006 (Guo Zi Chan Quan [2005] No. 1539). Since then, the
largest shareholder of the Company was changed from State-owned Assets Supervision and Administration Commission
of Shouguang City (currently renamed as State-owned Assets Supervision and Administration Office of Shouguang City) to
Shouguang Chenming Holdings.
The Company’s financial statements were approved for publication by the Board on 27 August 2014.
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
1. Basis of Preparation of the Financial Statements
The Group’s financial statements are prepared on a going concern basis and based on actual transactions and events,
in accordance with the accounting standards for business enterprises promulgated by the Ministry of Finance of PRC on
15 February 2006 and 41 specific accounting standards as promulgated and amended on and after the same date, the
application guidelines of the Accounting Standards for Business Enterprises, interpretations and other related rules of
the Accounting Standards for Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements
of the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General
Requirements for Financial Reports” (revised in 2010) of China Securities Regulatory Commission.
In accordance with the requirements of “Notice on the issuance of ‘Accounting Standard for Business Enterprises
No. 2 – Long-term equity investments’” (Cai Kuai [2014] No. 14) and “Notice on the issuance of ‘Accounting Standard
for Business Enterprises No. 41 – Disclosure of interests in other entities’” (Cai Kuai [2014] No. 16), entities listed
overseas are encouraged to early adopt the above two accounting standards issued or amended in 2014. The Company
implemented the above two accounting standards in preparation of the financial statements for the first half of 2014 as
a listed company in the PRC and Hong Kong. For the details of changes in accounting policies arising from the adoption
the new accounting standards, please refer to Note IV. 31 “Changes in Significant Accounting Policies and Estimates”.
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. Non-current assets held for sale are stated at the lower of fair value less estimated costs,
and the original carrying value when it was qualified as held for sale. In the event that depreciation of assets occurs, a
provision for impairment is made accordingly in accordance with the relevant regulations.
14
INTERIM 2. Statement of Compliance with the Accounting Standards for Business Enterprises
REPORT
The financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial
positions of the Company and the Group as at 30 June 2014 and relevant information such as the operating results
and cash flows of the Company and the Group for the first half of 2014. In addition, the financial statements of the
Company also comply with, in all material respects, the disclosure requirements of the “Regulation on the Preparation
of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports”
revised by the China Securities Regulatory Commission in 2010 and the notes thereto.
3. Accounting period
The accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to
reporting periods that are shorter than a full accounting year. The accounting year of the Company is from 1 January to
31 December of each calendar year.
4. Reporting currency
The Company and its domestic subsidiaries recognise RMB as their reporting currency according to the primary
economic environment in which they operate. The reporting currency of the Company and its domestic subsidiaries is
Renminbi (“RMB”). Overseas subsidiaries of the Company, namely Chenming (HK) Co., Ltd., Chenming International
Co., Ltd., Chenming Paper Japan Co., Ltd. and Chenming GmbH recognise U.S. dollar (“USD” or “US$”), Japanese yen
(“JPY”) and Euro (“EUR”) as their respective reporting currency according to the general economic environment in which
these subsidiaries operate. The Group prepares its financial statements in RMB.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 65
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
1. Accounting treatment of business combination under common control and not under common control
(1) Business combination under common control
A business combination involving enterprises under common control is a business combination in which all of the
combining enterprises are ultimately controlled by the same party or parties before and after the combination,
and that control is not transitory. The party that, on the combination date, obtains control of another enterprise
participating in the combination is the absorbing party, while that other enterprise participating in the combination
is a party being absorbed. The combination date is the date on which one combining enterprise effectively obtains
control of the other combining enterprises.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination
date as recorded by the party being merged. The difference between the carrying amount of the net assets
obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value
of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve
(share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained
earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to
profit or loss in the period in which they are incurred.
(2) Business combination not under common control
A business combination not involving enterprises under common control is a business combination in which 14
all of the combining enterprises are not ultimately controlled by the same party or parties before and after the INTERIM
REPORT
combination. For a business combination not involving enterprises under common control, the party that, on the
acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that
other enterprise participating in the combination is the acquiree. The acquisition date is the date on which the
acquirer effectively obtains control of the acquiree.
For business combination involving entities not under common control, the cost of a business combination is the
aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity
instruments issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire plus agency
fee such as audit, legal service and evaluation consultation and other management fees charged to the profit
or loss for the period when incurred. As equity or bond securities are issued by the acquirer as consideration,
any attributable transaction cost is included their initial costs. Involved contingent consideration charged to the
combination cost according to its fair value on the acquisition date, the combined goodwill be will be adjusted
if new or addition evidence existed about the condition in the acquisition date within twelve months after the
acquisition date, which is required to adjust the contingent consideration.
The combination cost incurred by the acquirer and the identifiable net assets acquired from the combination
are measured at their fair values. Where the cost of a business combination exceeds 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.
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
5. Accounting treatment of business combination under common control and not under common control
(Cont’d)
(2) Business combination not under common control (Cont’d)
For a business combination not under common control completed in phases through several transactions,
the several transactions will be judged whether they constitute “basket transactions” in accordance with
the judgement criteria on “basket transactions” as set out in the Notice of the Ministry of Finance on Issuing
Interpretation No. 5 of the Accounting Standards for Business Enterprises (Cai Kuai [2012] No. 19) (see Note IV.
6 (2)). If they constitute “basket transactions”, they are accounted for with reference to the descriptions as set
out in the previous paragraphs of this section and Note IV. 13 “Long-term equity investments”, and if they do
not constitute “basket transactions”, they are accounted for in separate financial statements and consolidated
financial reports:
In separate financial statements, the initial equity investment cost is the aggregate of the carrying amount of the
equity investment in the acquiree held prior to the acquisition date and the investment cost newly added as at the
acquisition date. Any other comprehensive income attributable to the equity interest in the acquiree prior to the
acquisition date is transferred to investment income at disposal of the investment.
In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is re-
measured at fair value as at the acquisition date, and the difference between the fair value and the carrying
amount is recognised as investment income for the current period. Any other comprehensive income attributable
14 to the equity interest in the acquiree held prior to the acquisition date is transferred to investment income in the
INTERIM period of the acquisition date.
REPORT
6. Specific accounting policies regarding disposal of equity interests in phases until the loss of control
(1) Judgement principles for “basket transactions”
Usually, several transactions related to the disposal of equity investment in a subsidiary are accounted for as
basket transactions when the terms, conditions and economic effects of these several transactions meet the
following one or more conditions: ① these transactions are entered into at the same time or after considering their
effects on each other; ② these transactions as a whole can reach a complete business result; ③the occurrence
of a transaction depends on at least the occurrence of another transaction; and ④ a transaction is not economical
when separately accounted for but is economical when considered with other transactions.
(2) Accounting methods of “basket transactions”
When several transactions related to the disposal of equity investment in a subsidiary until the loss of control
over the subsidiary constitute basket transactions, all of them are accounted for as a transaction on disposal of a
subsidiary with loss of control. However, each different between the consideration of disposal and the net assets
of a subsidiary attributable to the investment being disposed of prior to the loss of control shall be recognised as
other comprehensive income in the consolidated financial statements and transferred to profit or loss at the time
when the control is lost.
(3) Accounting methods of “non-basket transactions”
If they do not constitute basket transactions, each of them is separately accounted for in accordance with
applicable principles of “disposal of a portion of the long-term equity investment in a subsidiary without loss of
control” (see Note IV. 13 (2)) and “the loss of control over a subsidiary due to disposal of a portion of the equity
investment or other reasons” (see the preceding paragraph for details).
SHANDONG CHENMING PAPER HOLDINGS LIMITED 67
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
7. Preparation of consolidated financial statements
(1) Basis for principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is determined on the basis of control. The
term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns
from its involvement with the investee and the ability to use its power over the investee to affect the amount of
those returns. The scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an
entity controlled by the Company.
(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
14
acquired through business combination under common control, the operating results and cash flows from the
beginning of the consolidation period to the consolidation date are also presented in the consolidated income
statement and the consolidated cash flow statements. The opening balance and comparative amounts presented INTERIM
REPORT
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 shareholders’ 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.
For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons,
the remaining equity is measured at fair value on the date when the control is lost. The difference arising from the
sum of consideration received for disposal of equity interest and the fair value of remaining equity interest over
the share of net assets of the former subsidiary calculated continuously since the purchase date based on the
shareholding percentage before disposal are recognised as investment income in the period when the control
is lost. Other comprehensive income related to equity investment in the subsidiary is transferred to investment
income at the time when the control is lost. The remaining equity interests are measured subsequently according
to “Accounting Standard for Business Enterprises No. 2 – Long-term Equity Investments” or “Accounting Standard
for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments”. See Note IV. 13 “Long-
term equity investments” or Note IV. 10 “Financial instruments” for details.
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
8. Standards for recognising cash and cash equivalents
Cash and cash equivalents of the Company include cash on hand, deposits readily available for payment purpose and
short-term (normally fall due within three months from the date of acquisition) and highly liquid investments held the
Company which are readily convertible into known amounts of cash and which are subject to insignificant risk of value
change.
9. Foreign currency operations and translation of statements denominated in foreign currency
(1) Basis for translation of foreign currency transactions
The foreign currency transactions of the Company, when initially recognised, are translated into functional
currency at the prevailing spot exchange rate on the date of exchange, i.e. the middle price of RMB exchange rate
published by the People’s Bank of China on that date in general and the same hereinafter, while the Company’s
foreign currency exchange operations and transactions in connection with foreign currency exchange shall be
translated into functional currency at the exchange rate actually adopted.
(2) Basis for translation of foreign currency 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
14 operation shall be included into profits and losses on disposal in the current period.
INTERIM The financial statements denominated in foreign currency of a foreign operation are translated to RMB in comply
REPORT
with the following requirement: assets and liabilities on the balance sheet are translated at the spot exchange rate
prevailing at the balance sheet date; owner’s equity items except for “retained profit” are translated at the spot
exchange rates at the dates on which such items arose; income and expenses items in the income statement are
translated at the spot exchange rate at the date of transaction. The retained profit brought forward are reported
at the prior year’s closing balance; the retained profit as at the end of the year are presented after translated the
profit appropriation items; differences between the aggregate of asset and liability items and owners’ equity items
are recognised as “translation differences arising on the translation of financial statements denominated in foreign
currencies” in other consolidated income, and presented separately as under owners’ equity items in the balance
sheet. On disposal of foreign operations and loss of control, exchange differences arising from the translation of
financial statements denominated in foreign currencies related to the disposed foreign operation which has been
included in owners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in proportionate
share in the period in which the disposal took place.
Cash flow dominated in foreign currency or from foreign subsidiaries shall be translated at the spot exchange rate
when it incurs. Effects arising from changes of exchange rate of cash shall be presented separately in the cash
flow statements.
The opening balance and the prior year’s figures are presented according to the translated amounts of the prior
year.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 69
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
9. Foreign currency operations and translation of statements denominated in foreign currency (Cont’d)
(3) 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: the differences
arising from foreign currency borrowings related to the acquisition or construction of fixed assets which are
qualified for capitalisation; and except for other carrying amounts of the amortisation costs, the differences arising
from changes of the foreign currency items available for sale.
The foreign currency non-monetary items measured at historical cost shall still be measured by the functional
currency translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary
items measured at fair value are translated at the spot exchange rate on the date of determination of the fair
value. The difference between the amounts of reporting currency before and after the translation will be treated as
changes in fair value (including changes in foreign exchange rates) and recognised in profit or loss for the period
or recognised as other consolidated income and included in the capital reserves.
10. Financial instruments
(1) Classification of financial instruments
Conventionally traded financial assets shall be recognised and derecognised at the trading date. Financial assets
14
shall be classified into the following four categories for initial recognition: the financial assets at fair value through
profit or loss, hold-to-maturity financial assets, loans and the account receivables, and financial assets available
for sale. INTERIM
REPORT
Financial liabilities are classified at initial recognition: at fair value and changes are carried through profit and loss
as financial liabilities and other financial liabilities.
(2) Basis of recognition and measurement of financial instruments
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.
①Financial assets carried at fair value through profit or loss for the current period
They include financial assets held for trading and financial assets designated as at fair value through profit
or loss for the current period.
Financial assets may be classified as financial assets held for trading if one of the following conditions is
met: A. the financial assets is acquired or incurred principally for the purpose of selling it in the near term; B.
the financial assets is part of a portfolio of identified financial instruments that are managed together and for
which there is objective evidence of a recent pattern of short-term profit-taking; or C. the financial assets is
a derivative, excluding the derivatives designated as effective hedging instruments, the derivatives classified
as financial guarantee contract, and the derivatives linked to an equity instrument investment which has no
quoted price in an active market nor a reliably measured fair value and are required to be settled through
that equity instrument.
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
10. Financial instruments (Cont’d)
(2) Basis of recognition and measurement of financial instruments (Cont’d)
① Financial assets carried at fair value through profit or loss for the current period (Cont’d)
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.
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.
14 Held-to-maturity investments are subsequently measured at amortised cost using the effective interest
INTERIM method. Gain or loss on derecognition, impairment or amortisation is recognised through profit or loss for
REPORT
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.
③ Loans and receivables
They are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Financial assets, including bills receivable, accounts receivable, interest receivable, dividends
receivable and other receivables are classified as loans and receivables by the Group.
Loans and receivables are measured subsequently at the amortised cost by using the effective interest rate
method. Gains or losses incurred at the time of derecognition, impairment or amortisation are charged to
profit or loss in the current period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 71
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
10. Financial instruments (Cont’d)
(2) Basis of recognition and measurement of financial instruments (Cont’d)
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.
Except for long-term equity investments unable to exercise common control or significant influence over the
investees, and not quoted in an active market so that their fair value cannot be reliably measured, which are
accounted for under the cost method, 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.
14
For financial liabilities measured at fair value and whose changes are carried through profit or loss, relevant INTERIM
transaction costs are directly recognised in profit or loss for the period. For financial liabilities classified as REPORT
other categories, relevant transaction costs are included in the amount initially recognised.
① Financial liabilities measured at fair value and whose changes are carried through profit or loss for the
period
The criteria for a financial liability to be classified as held for trading and designated as at financial
liabilities at fair value through profit or loss are the same as those for a financial asset to be classified
as held for trading and designated as at financial assets at fair value through profit or loss.
Financial liabilities at fair value through profit or loss for the period are subsequently measured at fair
value. The gain or loss arising from changes in fair value and dividends and interest income related to
such financial liabilities are included into the current profit or loss.
② Other financial liabilities
Derivative financial liabilities which are linked to equity instruments that are not quoted in an active
market and the fair value of which cannot be measured reliably measured, and which shall be settled
by delivery of equity instruments are subsequently measured at cost. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method. Gains or losses arising
from derecognition or amortisation is recognised in profit or loss for the current period.
③ Financial Guarantee Contracts and loan commitments
Financial guarantee contracts other than those designated as financial liabilities at fair value through
profit or loss, or loan commitments other than those designated as financial liabilities at fair value
through profit or loss with interest rate lower than market level, are initially recognised at fair value, and
shall be subsequently measured at the higher of the following: the amount determined in accordance
with Accounting Standard for Business Enterprises No. 13 “Contingencies” and the amount initially
recognised less cumulative amortisation recognised in accordance with the principles set out in
Accounting Standard for Business Enterprises No. 14 “Revenue”.
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
10. Financial instruments (Cont’d)
(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
14 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
INTERIM period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition
REPORT
and the aforementioned carrying amount.
(4) Conditions of 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) Determination of fair values for financial assets and financial liabilities
The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a
liability in an orderly transaction between market participants on the date of measurement. Financial instruments
exist in an active market. Fair value is determined based on the quoted price in such market. An active market
refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organisations and
price fixing service organisations, representing the actual price of a market transaction that takes place in a fair
deal. While financial instruments do not exist in an active market, the fair value is determined using valuation
techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent
market transactions entered into by both willing parties, reference to present fair values of similar other financial
instruments, cash flow discounting method and option pricing models.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 73
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
10. Financial instruments (Cont’d)
(6) Impairment test method and impairment provision for financial assets (excluding accounts receivable)
In addition to financial assets at fair value through profit or loss for the current period, the Group reviews the book
value of other financial assets at each balance sheet date and provide for impairment where there is objective
evidence that financial assets are impaired.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For a
financial asset that is not individually significant, the Group assess the asset individually for impairment or include
the asset in a group of financial assets with similar credit risk characteristics and collectively assess them for
impairment. If it is determined that no objective evidence of impairment exists for an individually assessed financial
asset, whether the asset is individually significant or not, the financial asset is included in a group of financial
assets with similar credit risk characteristics and collectively assessed for impairment. Financial assets for which
an impairment loss is individually recognised are not included in the collective assessment for impairment.
①Impairment of held-to-maturity investments and loans and receivables
The carrying amount of financial assets measured as costs or amortised costs are subsequently reduced
to the present value discounted from its projected future cash flow. The reduced amount is recognised as
impairment loss and recorded as profit or loss for the period. After recognition of the impairment loss from
financial assets, if there is objective evidence showing recovery in value of such financial assets impaired
and which is related to any event occurring after such recognition, the impairment loss originally recognised 14
shall be reversed to the extent that the carrying value of the financial assets upon reversal will not exceed INTERIM
the amortised cost as at the reversal date assuming there is no provision for impairment. REPORT
② Impairment of available-for-sale financial assets
In the event that decline in fair value of the available-for-sale equity instrument is regarded as “severe
decline” or “non-temporary decline” on the basis of comprehensive related factors, it indicates that there
is impairment loss of the available-for-sale equity instrument. In particular, “severe decline” refers to
accumulative decline in fair value of more than 20%. “Non-temporary decline” refers to continuous decline
in fair value for more than 12 months. The period of continuous decline is determined on the basis of the
accumulative decline in fair value of more than 10%.
When the available-for-sale financial assets impair, the accumulated loss originally included in the capital
reserve arising from the decrease in fair value was transferred out from the capital reserve and included in
the profit or loss for the period. The ac cumulated loss that transferred out from the capital reserve is the
balance of the acquired initial cost of asset, after deduction of the principal recovered, amortised amounts,
current fair value and the impairment loss originally included in the profit or loss.
After recognition of the impairment loss, if there is objective evidence showing recovery in value of such
financial assets impaired and which is related to any event occurring after such recognition in subsequent
periods, the impairment loss originally recognised shall be reversed. The impairment loss reversal of the
available-for-sale equity instrument will be recognised as other consolidated income, and the impairment
loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period.
When an equity investment that is not quoted in an active market and the fair value of which cannot be
measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that
shall be settled by delivery of that equity instrument, then it will not be reversed.
Recognition standards for impairment of various available-for-sale financial assets
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
10. Financial instruments (Cont’d)
(7) Offset of financial assets and financial liabilities
If the Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which
are enforceable currently, and the Group plans to realise the financial assets or to clear off the financial liabilities
by net amount method, the amount of the offsetting financial assets and financial liabilities shall be reported in the
balance sheep. Otherwise, financial assets and financial liabilities are presented separately in the balance sheet
without offsetting.
(8) Equity instruments
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities. For equity instruments, the price received during the issue shall be added to shareholder’s equity
after reducing the transaction fees.
Various distributions (excluding dividends) made by the Group to holders of equity instruments reduces owners’
equity. The Group does not recognise the movement in fair value of equity instruments.
11 Basis for recognition and measurement of bad debt provision for accounts receivable
Accounts receivable include, among other things, trade receivables and other accounts receivable.
14 The Group carries out an overall inspection on the carrying amount of accounts receivable on the balance sheet date.
INTERIM Where there arises any of the following objective evidences indicating that accounts receivable have been impaired, an
REPORT impairment provision will be made: ① a serious financial difficulty occurs to the debtor; ② the debtor breaches any of
the contractual stipulations (such as he fails to pay or delays the payment of interests or the principal); ③ the debtor will
probably go bankrupt or carry out other financial reorganisations; ④ other objective evidences show that the accounts
receivable are impaired.
(1) Bad debt provision for individually significant accounts receivable
Basis of determination or criterion of Accounts receivable of more than RMB1.00 million is recognised
amount for individually significant items as individually significant accounts receivable by the Group.
Method for making bad debt provision For accounts receivable that is individually significant, the Group
individually for individually 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 75
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
11 Basis for recognition and measurement of bad debt provision for accounts receivable (Cont’d)
(2) Accounts receivable provided for bad debt by portfolio
Method for making bad debt provision
Name of portfolio by portfolio Basis for determining the portfolio
Risk-free portfolio No bad debt provision Accounts receivable which are individually
significant or have certain specific risk features
and are determined by the management to be
not impaired as at the balance sheet date upon
subject to impairment tests separately.
General-risk portfolio Ageing analysis Accounts receivable for which bad debts are
provided under credit risk portfolio as they
are not qualified to be subject to impairment
tests separately (individually significant or have
certain specific risk features) and are classified
into some portfolios based on the credit risk
features such as age and the percentage of bad
debt provision of each portfolio is determined
against the common risk features of each
portfolio by the management. 14
INTERIM
Use of ageing analysis for making bad debt provision in the portfolio: REPORT
√ Applicable □ Not applicable
Ratio of other
Ratio of accounts accounts
Ageing receivable provision receivable provision
Within 1 year (including 1 year) 5.00% 5.00%
1-2 years 10.00% 10.00%
2-3 years 20.00% 20.00%
Over 3 years 100.00% 100.00%
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
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
11 Basis for recognition and measurement of bad debt provision for accounts receivable (Cont’d)
(3) Accounts receivable individually insignificant but provided for bad debt separately
Reasons for making bad debt provisions Accounts receivable which are individually insignificant but have
separately the following features are subject to impairment tests separately
by the Group. If there is objective evidence indicating that the
accounts receivable are impaired, then impairment loss will be
recognised and bad debts will be provided according to the
difference when the present value of future cash flow is lower
than its carrying amounts: amounts due from connected parties;
accounts receivable with dispute against counterparties or involved
in litigation or arbitration; there is obvious objective of the accounts
receivable indicated that the debtor is likely to fail to comply with
the repayment obligation, etc.
Provision for bad debts Impairment loss will be recognised and bad debts will be provided
according to the difference when the present value of future cash
flow is lower than its carrying amounts
(4) Reversal of provision for bad debts
14 If there are evidences indicating that the value of the account receivable is recovered and that recovery is
connected to the event subsequent to the recognition of the loss, the impairment loss previously recognised will
INTERIM
REPORT be revered and recorded into profit or loss for the period. However, the carrying amount so reversed shall not
exceed the amortised cost of the account receivable on the date of reversal on the assumption that no impairment
loss has been made.
12. Inventories
(1) Classification of inventories
Inventories mainly include raw materials, work in progress, goods in stock and development products etc.
(2) Pricing of inventories dispatched
Pricing method: weighted average method
Inventories are measured at their actual cost when obtained. Cost of an inventory consists of purchase costs,
processing costs and other costs. When used and dispatched, inventories will be calculated with weighted
average method.
The inventories of land development companies under the Company are initially measured at cost. The inventories
primarily consist of land development products. The costs of developing products include preconstruction costs,
expenditures for essential ancillary facilities, expenses on construction and installation, borrowing costs incurred
before the completion of the subject project and other related expenses during the course of the development.
Once the inventories are delivered, the actual costs will be determined using specific measurement methods.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 77
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
12. Inventories (Cont’d)
(3) Recognition of net realisable value of inventory and provision for inventory impairment
Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred
upon completion, estimated sales expenses and 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.
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.
(4) The inventory stock taking system
Stock taking system: permanent inventory system
(5) Amortisation of low-value consumables and packaging materials
14
Low-value consumables INTERIM
Amortisation method: lump-sum REPORT
Packaging materials
Amortisation method: lump-sum
13. Long-term equity investments
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises under common
control, the initial investment cost of the long-term equity investment shall be the 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
equity securities or debt securities, which are used as consideration for the combination, are included in the initial
recognition amount of the equity securities or debt securities.
The long-term equity investment acquired through means other than a business combination shall be initially
measured at its cost. Such cost is depended upon the acquired means of long-term equity investments, which
is recognised based on the purchase cost actually paid by the Group in cash, the fair value of equity securities
issued by the Group, the agreed value of investment contract or agreement, the fair value or original carrying
amounts of the non-monetary asset exchange transaction which the asset will be transferred out of the Group,
and the fair value of long-term equity investment itself. The costs, taxes and other necessary expenses that are
directly attributable to the acquisition of the long-term equity investments are also included in the investment cost.
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and profit or loss recognition
Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence
on the investee are accounted for using equity method. Long-term equity investment without control or joint
control or significant influence with a fair value which can be reliably measured is accounted for as available-for-
sale financial assets or financial assets measured at fair value with any change in fair value charged to profit or
loss.
In addition, long-term equity investments with control on the investee are accounted for using cost method and
record in 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.
14
INTERIMREPORT
② Long-term equity investments accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the investor’s interest in
the fair value of the investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment
cost. Where the initial investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets
at the acquisition date, the difference shall be charged to profit or loss for the current period, and the cost of the long term
equity investment shall be adjusted accordingly.
Under the equity method, investment gain or loss represents the Group’s share of the net profits or losses made by the investee for
the current period. The Group shall recognise its share of the investee’s net profits or losses based on the fair values of the
investee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto in
conformity with the accounting policies and accounting periods of the Group. The unrealised gain or loss from internal transactions
entered into between the Group and its associated enterprises and joint ventures is set off according to the shareholding attributable
to the Group and accounted for as investment income and loss based such basis. However, the unrealised gain or loss from internal
transactions entered into between the Group and its investee is not set up if belonging to impairment loss from assets transferred
according to regulations such as “Accounting Standards for Business Enterprises No. 8 “Assets impairment”. In respect of the other
consolidated income of investees, the carrying amount of long-term equity investments is accordingly adjusted and recognised as
other consolidated income and included in the capital reserves.
The Group’s share of net losses of the investee shall be recognised to the extent that the carrying amount of the long-term equity
investment together with any long-term interests that in substance form part of the investor’s net investment in the investee are
reduced to zero. If the Group has to assume additional obligations, the estimated obligation assumed shall be provided for and
charged to the profit or loss as investment loss for the period. Where the investee is making profits in subsequent periods, the
Group shall resume recognising its share of profits after setting off against the share of unrecognised losses.
If there is debit variation in relation to the long-term equity investments in associates and joint venture held prior to first adoption of
the Accounting Standards for Business Enterprises by the Group on 1 January 2007, the amounts amortised over the original
residual term using the straight-line method is included in the profit or loss for the period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 79
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
13. Long-term equity investments (Cont’d)
(2) Subsequent measurement and profit or loss recognition (Cont’d)
③ Acquisition of minority interests
Upon the preparation of the consolidated financial statements, since acquisition of minority interests
increased of long-term equity investment which was compared to fair value of identifiable net assets
recognised which are measured based on the continuous measurement since the acquisition date (or
combination date) of subsidiaries attributable to the Group calculated according to the proportion of newly
acquired shares, the difference of which recognised as adjusted capital surplus, capital surplus insufficient
to set off impairment and adjusted retained earnings.
④ Disposal of long-term equity investments
In these consolidated financial statements, for disposal of a portion of the long-term equity investments in
a subsidiary without loss of control, the difference between disposal cost and disposal of long-term equity
investments relative to the net assets of the subsidiary is charged to the owners’ equity. If disposal of a
portion of the long-term equity investments in a subsidiary by the parent company results in a change in
control, it shall be accounted for in accordance with the relevant accounting policies as described in Note
IV. 7. (2) “Preparation Method of the Consolidated Financial Statements”.
On disposal of a long-term equity investment otherwise, the difference between the carrying amount of 14
the investment and the actual consideration paid is recognised through profit or loss in the current period. INTERIM
Where the equity method is adopted, other comprehensive income attributable to the long term equity REPORT
investments previously included in shareholders’ equity shall be transferred to through profit or loss in
the current period on a pro-rata basis. The remaining equity shall be recognised as the long-term equity
investments or other relevant financial assets based on the carrying amount and subsequently measured
in accordance with the accounting policies of the foresaid long-term equity investments or financial assets.
The retrospective adjustment shall be made in accordance with the relevant provisions if the remaining
equity is accounted for using the equity method instead of the cost method.
(3) Recognition of having joint control or significant influence over the investee
The term “control” refers to the fact that the Company has power over the investee and is entitled to variable
returns from its involvement with the investee and the ability to use its power over the investee to affect the
amount of those returns. 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.
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
14. Joint arrangements
A joint arrangement refers to an arrangement of two or more parties have joint control. In accordance with the
Company’s rights and obligation ns under a joint arrangement, the Company classifies joint arrangements into: joint
ventures and joint operations. Joint operations refer to a joint arrangement during which the Company is entitled
to relevant assets and obligations of this arrangement. Joint ventures refer to a joint arrangement during which the
Company only is entitled to net assets of this arrangement.
The Company treats investments in joint ventures by using the equity method of accounting in accordance with
accounting policies as set out in Note IV.13.(2) ② “long-term equity investment by using equity method of accounting”.
The Company shall, as a joint venture, recognise the assets held and obligations assumed solely by the Company, and
recognise assets held and obligations assumed jointly by the Company in appropriation to the share of the Company;
recognise revenue from disposal of the share of joint operations of the Company; recognise fees solely occurred by
Company and recognise fees from joint operations in appropriation to the share of the Company.
When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets dose not constitute
a business, the same below) from joint operations, the Company shall only recognise the part of profit or lost from
this transaction attributable to other parties of joint operations before these assets are sold to the third party. If
the occurrence of these assets meet the impairment loss of asset as set our in “Accounting Standard for Business
Enterprises No. 8 – Asset Impairment”, the Company shall recognise the full amount of this loss in relation to the
Company invests in or sells assets to joint operations; the Company recognise the loss according to the Company’s
14 share of commitment in relation to the Company purchase assets from joint operations.
INTERIM
REPORT 15. 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.
22 “Impairment of non-current non-monetary financial asset”.
In the event that an owner-occupied property or inventories is converted to an investment property (or vice versa), upon
the conversion, the property shall be stated at the carrying amount prior to the conversion.
In the event that an investment property is converted to an owner-occupied property, such property shall become fixed
assets or intangible assets since the date of its conversion. In the event that an owner-occupied property is converted
to real estate held to earn rentals or for capital appreciation, such fixed assets or intangible assets shall become an
investment property since the date of its conversion. Investment property is measured at cost during its conversion.
Upon the conversion, the property shall be stated at the carrying amount prior to the conversion.
If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be
obtained from the disposal, the recognition of it as an investment property shall be terminated. When an investment
property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying
amount and related tax and surcharges is recognised in profit or loss for the current period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 81
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
16. Fixed assets
(1) Conditions for recognition of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes; and have a useful life of more than one accounting year.
(2) Method for depreciation of different fixed assets
A fixed asset shall be initially measured at cost and the effect of any expected costs of abandoning the asset at
the end of its use. Depreciation is provided over its estimated useful life from the next month after it has been
brought to its working condition for its intended use using the straight-line method. Estimated net residual value
of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the asset, after
deducting the estimated costs of disposal, if the asset were already of the stage and in the condition expected at
the end of its useful life.
The useful life, estimated residual value and annual depreciation rate of each category of a fixed asset are as
follows:
Useful lives of Estimated Annual
Category depreciation (Year) residual value depreciation rate
Housing and building structure 20-40 5%-10.00% 2.25%-4.75%
Machinery and equipment 8-20 5%-10.00% 4.5%-11.88% 14
Electronic equipment 5 5%-10.00% 18.00%-19.00% INTERIM
REPORT
Transportation equipment 5-8 5%-10.00% 11.25%-19.00%
(3) Impairment testing methods and provision for impairment methods on fixed assets
The method for impaired test of fixed asset and measurement of impairment provision are detailed in Note IV. 22
“Impairment of non-current non-monetary financial asset”.
(4) Explanation on other matters
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is
probable that economic benefits associated with the asset will flow to Chenming Paper and the relevant cost
can be measured reliably; meanwhile the carrying amount of the replaced part shall be derecognised. Other
subsequent expenditures shall be charged to profit or loss when incurred.
When a fixed asset is sold, transferred, retired or damaged, the Group shall recognise the amount of any proceeds
on disposal of the asset net of the carrying amount and related taxes in profit or loss for the current period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method
applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixed
asset or the depreciation method used shall be accounted for as a change in accounting estimate.
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
17. Construction in progress
(1) Types of construction in progress
Construction in progress is recognised based on the actual construction cost, including all expenditures incurred
for construction projects, capitalised borrowing costs for the construction in progress before it has reached the
working condition for its intended use, and other related expenses during the construction period.
(2) Criteria and time for the reclassification of construction in process to fixed assets
A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended
use.
(3) Impairment test method and impairment provision for construction in progress
The method for impaired test of construction in progress and measurement of impairment provision are detailed in
Note IV. 22 “Impairment of non-current non-monetary financial asset”.
18. Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums related to borrowings, ancillary costs incurred in
connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. For
14
borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, when
expenditures for the asset and borrowing costs are being incurred, activities relating to the acquisition, construction
INTERIM or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced, such
REPORT
borrowing costs shall be capitalised as part of the cost of that asset; and capitalisation shall discontinue when the
qualifying asset is ready for its intended use or sale. Other borrowing costs shall be recognised as expense in the period
in which they are incurred.
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual interest
expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds
before being used into banks or any investment income on the temporary investment of those funds. Where funds are
borrowed for general purpose, the Group shall determine the amount of interest to be capitalised on such borrowings by
applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset
over and above the amounts of specific-purpose borrowings. The capitalisation rate shall be the weighted average of
the interest rates applicable to the general-purpose borrowings.
During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign currency
shall be capitalised. Exchange differences related to general-purpose borrowings denominated in foreign currency shall
be included in profit or loss for the current period.
Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily take a substantial
period of time for acquisition, construction or production to get ready for their intended use or sale.
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or production
of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months,
until the acquisition, construction or production of the qualifying asset is resumed.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 83
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
19. Consumable biological assets
Consumable biological assets refer to biological assets held for sale or to be harvested as agricultural produce in the
future, which include growing commercial forests. Consumable biological assets are stated at cost at initial recognition,
subsequently measured at fair value. Changes in fair values shall be recognised as profit or loss in the current period.
The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable
to such assets prior to complete planting, 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.
20. Intangible assets
(1) Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the Group.
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be
recognised as cost of the intangible asset only if it is probable that economic benefits associated with the asset will flow
to the Group and the cost of the asset can be measured reliably. Other expenditures on an item asset shall be charged
to profit or loss when incurred.
Land use right acquired shall normally be recognised as an intangible asset. Self-constructed buildings (e.g. plants), 14
related land use right and the buildings shall be separately accounted for as an intangible asset and fixed asset. For INTERIM
buildings and structures purchased, the purchase consideration shall be allocated among the land use right and the REPORT
buildings on a reasonable basis. In case there is difficulty in making a reasonable allocation, the consideration shall be
recognised in full as fixed assets.
An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and any accumulated
impairment loss provision and amortised using the straight-line method over its useful life when the asset is available for
use. Intangible assets with indefinite life are not amortised.
The Group shall review the useful life of intangible asset with a finite useful life and the amortisation method applied
at least at each financial year-end. A change in the useful life or amortisation method used shall be accounted for as a
change in accounting estimate. For an intangible asset with an indefinite useful life, the Group shall review the useful life
of the asset in each accounting period. If there is evidence indicating that the useful life of that intangible asset is finite,
Chenming Paper shall estimate the useful life of that asset and apply the accounting policies accordingly.
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
20. Intangible assets (Cont’d)
(2) Research and development expenditure (Cont’d)
Research and development expenditure of the Group was divided into expenses incurred during the research
phase and expenses incurred during the development phase.
Expenses incurred during the research phase are recognised as profit or loss in the current period.
Expenses incurred during the development phase that satisfy the following conditions are recognised as intangible
assets, while those that do not satisfy the following conditions are accounted for in the profit or loss for the current
period:
① it is technically feasible that the intangible asset can be used or sold upon completion;
② there is intention to complete the intangible asset for use or sale;
③ the intangible asset can produce economic benefits, including there is evidence that the products produced
using the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is
for internal use, there is evidence that there exists usage for the intangible asset;
④ there is sufficient support in terms of technology, financial resources and other resources in order to
complete the development of the intangible asset, and there is capability to use or sell the intangible asset;
14 ⑤ the expenses attributable to the development phase of the intangible asset can be measured reliably.
INTERIM If the expenses incurred during the research phase and the development phase cannot be distinguished
REPORT
separately, all development expenses incurred are accounted for in the profit or loss for the current period.
(3) Method for impairment test of intangible asset and measurement of impairment provision
The method for impaired test of intangible asset and measurement of impairment provision are detailed in Note IV.
22 “Impairment of non-current non-financial assets”.
21. Long-term prepaid expenses
Long-term prepaid expenses are expenditures and other expenses which have incurred but that shall be amortised over
the current period and subsequent periods of more than one year. Long-term prepaid expenses are amortised over the
estimated benefit period using the straight-line method.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 85
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
22. Impairment of non-current non-financial assets
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of non-current non-
financial assets such as fixed assets, construction in progress, intangible assets with a finite useful life, investment
properties measured at cost, and long-term equity investments in subsidiaries, joint controlled entities and associates.
If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment
test. Goodwill, intangible assets with an indefinite useful life and intangible assets beyond working conditions will be
tested for impairment annually, regardless of whether there is any indication of impairment.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the
impairment provision will be made according to the difference and recognised as an impairment loss. The recoverable
amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash
flows expected to be derived from the asset. 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.
14
For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements INTERIM
REPORT
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.
23. 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.
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
24. Repurchase of Chenming Paper’s shares
Share repurchase consideration paid and transaction costs to reduce the owner’s equity, repurchase, transfer or
cancellation of Chenming Paper’s shares, the gains or losses are not recognised.
Treasury shares are cancelled at par value and by the number of shares cancelled to reduce the share capital. The
difference between the book balance and the nominal value of the treasury shares shall be offset against the capital
reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve and retained profits.
25. Revenue
(1) Revenue from sales of goods
Revenue is recognised when Chenming Paper has transferred to the buyer the significant risks and rewards of
ownership of the goods, retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold, will receive the economic benefits associated with the
transaction, and can reliably measure the relevant amount of revenue and costs. Confirmation time for sales
revenue: In terms of domestic sales, confirmation will be made on the day when goods are delivered to the clients.
While in terms of overseas sales, confirmation will be made on the day when goods are loaded on board and
declared.
(2) Revenue from the rendering of services
14 When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the
INTERIM balance sheet date, recognise the revenue from the rendering of services employing the percentage-of-completion
REPORT
method. The completion schedule of transaction concerning the rendering of services shall be ascertained
according to the proportion of service costs incurred to the estimated total costs.
The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall
concurrently satisfy: ① The relevant amount of revenue can be reliably measured; ② it is probable that the
economic benefits will flow into the enterprise; ③ the completion schedule of the transaction can be reliably
ascertained; and ④ transaction costs incurred and to be incurred can be reliably measured.
When the outcome of a transaction involving the rendering of services cannot be reliably estimated, it shall
recognise the revenue from the rendering of services based on the cost of rendering services already incurred and
expected to be compensated, and the cost of rendering services incurred shall be recognised as an expense for
the current period. If the cost of rendering services is expected not to be compensated, it shall be recognised as
an expense.
When a contract or agreement signed by the Group includes sales of goods and rendering of services, if sales
of goods and rendering of services can be differentiated and separately measured, they will be recognised
respectively. If sales of goods and rendering of services cannot be differentiated or cannot be separately
measured, they will be recognised as sales of goods in full.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 87
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
25. Revenue (Cont’d)
(3) Basis for recognition of revenue from the rendering of services
When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the
balance sheet date, recognise the revenue from the rendering of services employing the percentage-of-completion
method. The completion schedule of transaction concerning the rendering of services shall be ascertained
according to the proportion of service costs incurred to the estimated total costs.
The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall
concurrently satisfy: ① The relevant amount of revenue can be reliably measured; ② it is probable that the
economic benefits will flow into the enterprise; ③ the completion schedule of the transaction can be reliably
ascertained; and ④ transaction costs incurred and to be incurred can be reliably measured.
When the outcome of a transaction involving the rendering of services cannot be reliably estimated, it shall
recognise the revenue from the rendering of services based on the cost of rendering services already incurred and
expected to be compensated, and the cost of rendering services incurred shall be recognised as an expense for
the current period. If the cost of rendering services is expected not to be compensated, it shall be recognised as
an expense.
When a contract or agreement signed by the Group includes sales of goods and rendering of services, if sales
of goods and rendering of services can be differentiated and separately measured, they will be recognised
respectively. If sales of goods and rendering of services cannot be differentiated or cannot be separately
measured, they will be recognised as sales of goods in full. 14
INTERIM
REPORT
(4) Revenue from rendering of services
Revenue from rendering of services is recognised as income on the accrual basis in accordance with the
underlying contracts or agreements.
(5) Interest income
Interest income is calculated based on the time during which the Group’s monetary fund, and the effective interest
rates.
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and 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.
Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset
formation are classified as related to assets. Other government grants are classified as related to revenue. If
related government documents do not specify the objective of the grants, the grants are classified as related to
assets or income as follows: ① In case a project for which the grants are granted is specified in such documents,
the grants are classified as related to assets and income based on the budgeted ratio of the expenditure on asset
formation and the expenditure recorded as expenses, where such ratio should be reviewed and, if necessary,
changed on each balance sheet date; and ② in case of general description without specifying any project in such
documents, the grants are classified as related to income.
(2) Accounting policy
If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount
received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be
measured at fair value. If fair value is not reliably determinable, the item shall be measured at a nominal amount
14
and recognised immediately in profit or loss for the current period. Government grants are generally recognised
when received and measured at the amount actually received, but are measured at the amount likely to be
INTERIM received when there is conclusive evidence at the end of the accounting period that the Company will meet
REPORT
related requirements of such grants and will be able to receive the grants. The government grants so measured
should also satisfy the following conditions: ① the amount of the grants be confirmed with competent authorities
in written form or reasonably deduced from related requirements under financial fund management measures
officially released without material uncertainties; ② the grants be given based on financial support projects and
fund management policies officially published and voluntarily disclosed by local financial authorities in accordance
with the requirements under disclosure of government information, where such policies should be open to any
company satisfying conditions required and not specifically for certain companies; and ③ the date of payment
be specified in related documents and the payment thereof be covered by corresponding budget to ensure such
grants will be paid on time as specified.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit
or loss over the useful life of the asset. For a government grant related to income, if the grant is a compensation
for related expenses or losses to be incurred in subsequent periods, the grant shall be recognised as deferred
income, and recognised in profit or loss over the periods in which the related costs are recognised; if the grant is a
compensation for related expenses or losses already incurred, the grant shall be recognised immediately in profit
or loss for the current period.
For the repayment of a government grant already recognised, if there is any related deferred income, the
repayment shall be off set against the carrying amount of the deferred income, and any excess shall be recognised
in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognised
immediately in profit or loss for the current period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 89
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
27. Deferred income tax assets/deferred income tax liabilities
(1) Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods shall be
measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. Taxable
profits, which are the basis for calculating the current income tax expense, are determined after adjusting the
accounting profits before tax for the year in accordance with relevant requirements of tax laws.
(2) Deferred income tax assets and deferred income tax liabilities
Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax
base, and the difference between the tax base and the carrying amount of those items that are not recognised
as assets or liabilities but have a tax base that can be determined according to tax laws, shall be recognised as
deferred income tax assets and deferred income tax liabilities using the balance sheet liability method.
Deferred income tax liabilities are not recognised for taxable temporary differences related to: the initial
recognition of goodwill; and the initial recognition of an asset or liability in a transaction which is neither a business
combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the transaction. In
addition, the Group recognises the corresponding deferred income tax liability for taxable temporary differences
associated with investments in subsidiaries, associates and joint ventures, except when both of the following
conditions are satisfied: the Group able to control the timing of the reversal of the temporary difference; and it is
probable that the temporary difference will not reverse in the foreseeable future. 14
Deferred income tax assets are not recognised for deductible temporary differences related to the initial INTERIM
REPORT
recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting
profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Group recognises the
corresponding deferred income tax asset for deductible temporary differences associated with investments in
subsidiaries, associates and joint ventures to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be utilised, except when both of the following conditions
are satisfied: it is not probable that the temporary difference will reverse in the foreseeable future; and it is not
probable that taxable profits will be available in the future, against which the temporary difference can be utilised.
Chenming Paper recognises a deferred income tax asset for the carry forward of deductible losses and tax credits
to subsequent periods, to the extent that it is probable that future taxable profits will be available against which
the deductible losses and tax credits can be utilised.
At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax
rates that are expected to apply to the period when the asset is realised or the liability is settled, according to the
requirements of tax laws.
At the balance sheet date, Chenming Paper shall review the carrying amount of a deferred income tax asset. If it
is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred
income tax asset to be utilised, the carrying amount of the deferred income tax asset shall be reduced. Any such
reduction in amount shall be reversed when it becomes probable that sufficient taxable profits will be available.
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
27. Deferred income tax assets/deferred income tax liabilities (Cont’d)
(3) Income tax expense
Income tax expense comprises current income tax expense and deferred income tax expense.
Current income tax expense (current income tax income) and deferred income tax expense (deferred income tax
income) are included in profit or loss for the current period, except for: recognised as other comprehensive income
or current income tax and deferred income tax related to transactions or events that are directly recognised in
other comprehensive income or owners’ equity, which are recognised directly in owners’ equity, and deferred
income tax arising from a business combination, which is adjusted against the carrying amount of goodwill.
(4) Offset of income tax
After granted the legal rights of net settlement and with the intention to use net settlement or obtain assets, repay
debt, the Group, at the same time, records the net amount after offsetting its current income tax assets and
current income tax liabilities.
The Group was granted the legal rights of net settlement of current income tax assets and current income tax
liabilities. Deferred income tax assets and deferred income tax liabilities are related to income tax to be paid by the
same entity liable to pay tax to the same tax collection and management authority or related to different entities
liable to pay tax, but the relevant entity liable to pay tax is intended to apply net settlement of current income tax
14 assets and liabilities or, at the same time, obtain assets, repay debt whenever every deferred income tax assets
and liabilities with importance would be reversed in the future, the Group records the net amount after offsetting
INTERIM its current income tax assets and current income tax liabilities.
REPORT
28. Other comprehensive income
Any profit or loss not recognised in profit or loss for the current period in accordance with other accounting policies is
stated as other comprehensive income. Under related accounting policies, other comprehensive income is classified
into:
(1) Those not to be reclassified into profit or loss in subsequent periods, which mainly includes changes arising from
re-measuring net assets or net liabilities of defined benefit plan, share of investee’s other comprehensive income
not to be reclassified into profit or loss in subsequent periods using the equity method;
(2) Those to be reclassified into profit or loss after meeting certain criteria in subsequent periods, which mainly
includes share of investee’s other comprehensive income to be reclassified into profit or loss after meeting certain
criteria in subsequent periods, profit or loss arising from change of fair value of available-for-sale financial assets,
profit or loss arising from reclassifying held-to-maturity investment into available-for-sale financial assets, the
effectively hedged portion in profit or loss generated from cash flow hedging instruments, translation difference of
foreign currencies in financial statements.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 91
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
29. Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. All other leases are
classified as operating leases.
(1) Operating lease business with the Group recorded as lessee
Lease payment for operating lease is recognised as related asset cost or profits and losses for the current period
using the straight-line method over the lease term. The initial direct cost is directly accounted in profit or loss for
the current period. Contingent rent is recognised as profit or loss for the current period upon occurrence.
(2) Operating lease business with the Group recorded as lessor
Rental income is recognised in profit or loss for the current period using the straight-line method over the lease
term. The initial direct cost where the amount is larger is capitalised when incurred, and accounted for as profit or
loss for the current period on the same basis as recognition of rental income over the entire lease period; the initial
direct cost where the amount is fewer is included in the profit or loss for the period when incurred. Contingent
rental is accounted for as profit or loss for the period in which it is incurred.
30. Employee benefits
In the accounting period in which an employee has rendered service to the Group, the Group recognises the employee
benefits payable as a liability.
14
INTERIM
REPORT
Expenditures paid by the Group for the social security system set up by the government, such as basic pension
insurance, medical insurance, housing funds and others, are recognised in the costs of related assets or the current
profit or loss.
When the Group terminates the employment relationship with employees before the end of the employment contracts
or provides compensation as an offer to encourage employees to accept voluntary redundancy, the Company shall
recognise employee compensation liabilities arising from compensation for staff dismissal and account for profit or loss
at the current period, when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation
of labour relationship plans and employee redundant proposals; the Company recognise cost and expenses related to
payment of compensation for dismissal and restructuring, whichever is earlier.
The early retirement plan shall be accounted for in accordance with the accounting principles for compensation for
termination of employment. The salaries or wages and the social contributions to be paid for the employees who retire
before schedule from the date on which the employees stop rendering services to the Group to the scheduled retirement
date, shall be recognised (as compensation for termination of employment) in the current profit or loss if the recognition
principles for provisions are satisfied.
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
31. Changes in Significant Accounting Policies and Estimates
(1) Changes in Accounting Policies
Any changes in significant accounting policies during the reporting period
√ Yes □ No
During the reporting period, in accordance with the requirements of “Notice on the issuance of ‘Accounting
Standard for Business Enterprises No. 2 – Long-term equity investments’” (Cai Kuai [2014] No. 14) and “Notice
on the issuance of ‘Accounting Standard for Business Enterprises No. 41 – Disclosure of interests in other
entities’” (Cai Kuai [2014] No. 16), entities listed overseas are encouraged to early adopt the above two accounting
standards issued or amended in 2014. The Company implemented the above two accounting standards in
preparation of the financial statements for the first half of 2014 as a listed company in the PRC and Hong Kong,
and made adjustments in accordance with the requirements therein.
Unit: RMB
Effect on the Effect on the
Details and reason of changes in Items set out in relevant amounts as at amounts as at
accounting policies statements affected 31 December 2013 30 June 2014
14 In accordance with “ Accounting
Standard for Business Enterprises No.
Long-term equity
investments
83,260,425.53 83,000,000.00
INTERIM
REPORT 2 – Long-term equity investments”,
for any long-term equity investment
unable to exercise common control
or significant influence over the
investee, and not quoted in an active
market so that its fair value cannot be
reliably measured, it is reported as an
available-for-sale financial asset instead
of a long-term equity investment by the
Company.
In accordance with “ Accounting Available-for-sale 83,260,425.53 83,000,000.00
Standard for Business Enterprises No. financial assets
2 – Long-term equity investments”,
for any long-term equity investment
unable to exercise common control
or significant influence over the
investee, and not quoted in an active
market so that its fair value cannot be
reliably measured, it is reported as an
available-for-sale financial asset instead
of a long-term equity investment by the
Company.
(2) Changes in Accounting Estimates
Any changes in significant accounting estimates during the reporting period
□ Yes √ No
SHANDONG CHENMING PAPER HOLDINGS LIMITED 93
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
32. Critical accounting judgments and estimates
The Group needs to make judgments, estimates and assumptions as to the carrying amount of statement items which
cannot be accurately calculated during the application of the Group’s accounting policies. Such judgments, estimates
and assumptions are made based on the historical experiences of the Group’s management and taking into account
other relevant factors, which may affect the reported amount of revenue, expenses, assets and liabilities and disclosure
of contingent liabilities at the balance sheet date. However, the outcome from such estimate uncertainties may cause
critical adjustment to the carrying amount of assets or liabilities which may be affected in the future.
The Group regularly reviews the aforesaid judgments, estimates and assumptions on the basis of continued operation. A
revision to accounting estimates is recognised in the period in which the estimate is revised if it only affects that period.
A revision is recognised in the period of the revision and future periods if it affects both current and future periods.
At the balance sheet date, the critical areas where Group needs to make judgments, estimates and assumptions as to
the items amount of financial statements are set out below:
(1) Provision for bad debts
The Group adopts the allowance method to account for bad debt loss under the accounting policies of accounts
receivable. Impairment of accounts receivable is based on the recoverability of assessed accounts receivable.
Given the management’s judgment and estimate required for impairment of accounts receivable, the difference
between the actual outcome and original estimate will affect the carrying amount of accounts receivable and
provision and reversal of bad debts of accounts receivable during the estimate revision period. 14
INTERIM
(2) Allowance for inventories REPORT
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value, the
Group makes allowance for inventories which have costs higher than net realisable value or become obsolete and
slow-moving. Write-down of inventories to their net realisable values is based on the saleability of the evaluated
inventory and their net realisable values. Given the management’s judgments and estimates required for inventory
impairment on the basis of definite evidence, purpose of holding the inventories and other factors, the difference
between the actual outcome and original estimate will affect the carrying amount of inventories and provision and
reversal of bad debts of inventories allowance during the estimate revision period.
(3) Subsequent measurement of biological assets
The Group has appointed an independent professional valuer to value the fair value of the biological assets.
When the valuer determines the fair value, the valuation method used by the valuer includes some assumptions.
Directors have judged that the valuation method reflects the prevailing market conditions.
(4) Provision for impairment of non-financial non-current assets
At the balance sheet date, the Group makes its judgment as to whether there is any evidence indicating potential
impairment of non-current assets other than financial assets. Intangible assets with indefinite useful life shall be
tested for impairment when there is any indication of impairment in addition to the annual impairment testing.
Other non-current assets other than financial assets shall be tested for impairment if there is any evidence
indicating that their carrying amount cannot be recovered. When the carrying amount of an asset or asset groups
is higher than the recoverable amount, being the higher of its fair value less costs of disposal and the present
value of the future cash flows expected to be derived from the asset, it indicates impairment.
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period
(Cont’d)
32. Critical accounting judgments and estimates (Cont’d)
(4) Provision for impairment of non-financial non-current assets (Cont’d)
The net amount of the fair value less costs of disposal is determined by making reference to the price in a sale
agreement in an arm’s length transaction or the observable market price less the incremental costs directly
attributable to such assets disposal.
In projecting the present value of the future cash flows, critical judgments shall be made to the output, selling
price and relevant operating costs of such assets (or asset groups) and the discount rate applied in calculating
the discount. In estimating the recoverable amount, the Group may adopt all relevant materials including the
projections as to the output, selling price and relevant operating costs based on reasonable and supportive
assumptions.
The test shall be performed at least once a year as to whether there is any impairment. This requires an estimate
for the present value of the future cash flows of the asset groups or sets of asset groups to which goodwill is
allocated. In estimating the present value of the future cash flows, the Group needs to estimate the cash flows
generated from the future asset groups or sets of asset groups. Meanwhile, the present value of future cash flows
is determined using an appropriately selected discount rate.
(5) Depreciation and amortisation
14 The Group shall provide depreciation and amortisation for investment properties, fixed assets and intangible
assets over their useful lives and after taking into account of their residual value, using straight-line method. The
INTERIM Group shall regularly review the useful lives to determine the amount depreciated and amortised to be accounted
REPORT
for in each reporting period. The useful life is determined by the Group according to its previous experience on the
similar assets and estimated technical innovation. If there is any material change in the previously made estimate,
the depreciation and amortisation will be adjusted over the future period.
(6) Deferred income tax assets
It is probable that all unused tax loss will be recognised as the deferred income tax assets to the extent there will
be sufficient taxable profits against which the deducible loss is available. This requires the Group’s management
to apply numerous judgments to estimate the time and amount generated from the future taxable profits so as to
determine the amount of deferred income tax assets with reference to the tax planning strategy.
(7) Income tax
There are some uncertainties in tax treatment and calculation for some transactions of the Group during its
ordinary course of business. The approval from the tax authority is required for pre-tax expending of some items.
Any difference between the final recognition outcome of such tax matters and the initially estimated amount will
exert an effect on the current income tax and deferred income tax during their final recognition period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 95
IX Financial Report
V. Taxation
1. Main Tax Types and Tax Rates of Chenming Paper
Tax type Basis of taxation Tax rate
Value added tax 17% for general and 13% for sales of gas and water. 13% and 17%
Value-added tax is computed on the difference after
deduction of input value-added tax
Business tax Taxable revenue 3% - 5%
Urban maintenance and construction tax Actual payment of turnover tax 7%
Enterprise income tax Taxable income 25% for taxable
income, 15% for
high-tech enterprises
and 20% for
small-size enterprises.
Educational surcharges Actual payment of turnover tax 3%
Local educational surcharges Actual payment of turnover tax 2%
Rate of income tax for subsidiaries and branch factories
Rate of Rate of Rate of
Subsidiary income tax Subsidiary income tax Subsidiary income tax
Shandong Chenming Paper 15% Huanggang Chenming Pulp 25% Wuhan Chenming Qianneng 25%
Holdings Limited &Paper Co., Ltd. Electric Power Co., Limited 14
Wuhan Chenming Hanyang 25% Huanggang Chenming Tax free Jilin Chenming Machinery 25% INTERIM
Paper Holdings Co., Ltd. Arboriculture Co., Ltd. Manufacturing Co., Limited REPORT
Shandong Chenming Power Supply 25% Shouguang Shun Da Customs 25% Shouguang Chenming 25%
Holdings Co., Ltd. Declaration Co, Ltd. Cement Co., Limited
Hailaer Chenming Paper Co., Ltd. 25% Chenming International Co., Ltd. — Shandong Chenming 25%
Panels Co., Limited
Haicheng Haiming Mining 25% Shouguang Chenming Hongxin 25% Shouguang Chenming Floor 25%
Company Limited Packaging Co., Ltd. Board Co., Limited
Jiangxi Chenming Paper Co., Ltd. 15% Shouguang Chenming 25% Nanchang Chenming Tax free
Papermaking Machine Co., Ltd. Arboriculture Co., Ltd.
Shandong Chenming Financial 25% Shouguang Chenming Import 25% Shouguang Hongyi Decorative 25%
Leasing Co., Ltd. and Export Trade Co., Ltd. Packaging Co., Ltd.
Shandong Grand View Hotel Co., Ltd. 25% Shouguang Chenming Industrial 25% Shouguang Xinyuan 25%
Logistics Co., Ltd. Coal Co., Ltd.
Shouguang Chenming Art Paper Co., Ltd. 25% Shouguang Chenming Jiatai 25% Shouguang City Run Sheng 25%
Property Management Co., Ltd. Wasted Paper Recycle
Co., Ltd.
Jilin Chenming Paper Co., Ltd. 25% Shandong Chenming 25% Shouguang Wei Yuan Logistics 25%
Investment Co., Ltd. Company Limited
Zhanjiang Chenming Pulp & 25% Japan Chenming Paper — Wuxi Song Ling Paper 25%
Paper Co., Ltd. Company Limited Co., Limited
Shouguang Meilun Paper Co. Ltd. 25% Chenming GmbH — Guangdong Huirui 25%
Investment Co., Ltd.
Shandong Chenming Paper Sales 25% Zhanjiang Chenming New-style 25% Shouguang Hongxiang Printing 25%
Company Limited Wall Materials Co., Ltd. and Packaging Co., Ltd.
Chenming (HK) Limited 16.5% Zhanjiang Chenming Tax free Shandong Chenming Paper 25%
Arboriculture Co., Ltd. Group (Fuyu) Sales Co., Ltd.
Shouguang Chenming Modern 25% Yangjiang Chenming Tax free
Logistic Co., Ltd. Arboriculture Co., Ltd.
Fuyu Chenming Paper Co., Ltd. 25% Zhanjiang Meilun Pulp & 25%
Paper Co., Ltd.
96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
V. Taxation (Cont’d)
2. Tax Incentives and Approvals
Enterprise Income Tax:
Pursuant to the requirements of Law of the People’s Republic of China on Enterprise Income Tax (《中華人民共和國企
業所得稅法》) dated 16 March 2007, the Company is recognised as a high and new technology enterprise which needs
the major support of the state as approved by State Taxation Administration of Shouguang, Shandong. An enterprise
income tax rate of 15% is applicable to the Company from 1 January 2012 to 31 December 2014.
Pursuant to the requirements of Law of the People’s Republic of China on Enterprise Income Tax (《中華人民共和國
企業所得稅法》) dated 16 March 2007, Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, is recognised
as a high and new technology enterprise which needs the major support of the state as approved by State Taxation
Administration of Nanchang Economic and Technological Development Zone, Jiangxi. An enterprise income tax rate
of 15% is applicable to Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, from 1 January 2012 to 31
December 2015.
Pursuant to the requirements of Rule 27 of Law of the People’s Republic of China on Enterprise Income Tax (《中華人民
共和國企業所得稅法》) and Rule 86 of Regulations for the Implementation of Law of the People’s Republic of China on
Enterprise Income Tax (《中華人民共和國企業所得稅法實施條例》), subsidiaries of Chenming Paper, namely, Zhanjiang
Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co., Ltd., Nanchang Chenming Arboriculture Co.,
Ltd. and Huanggang Chenming Arboriculture Co., Ltd., are engaged in arboriculture cultivating and thus exempt from
corporate income tax.
Pursuant to the ”Revenue Bill 2008” passed by The Legislative Council of the Hong Kong Special Administrative Region
14 on 26 June 2008, Chenming (HK) Limited, a subsidiary of Chenming Paper, has been subject to a corporate income tax
rate of 16.5% commencing 2008, and the applicable tax rate for 2013 was 16.5%.
INTERIM
REPORT
Except for the above preferential policies, Chenming Paper and its remaining subsidiaries are subject to enterprise
income tax rate of 25%.
Value-added Tax (“VAT”) incentives:
Pursuant to Cai Shui [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of
Resources” issued by the State Administration of Taxation”, enterprises engaged in utilisation of raw materials
containing not less than 30% of coal gangue, stone coal, coal ash, bottom ash of coal boiler (excluding blast furnace
water quenching residue) in the production of building material products shall be exempted from VAT. Zhanjiang
Chenming New-style Wall Materials Co., Ltd., a subsidiary of the Company, utilises raw materials containing above 30%
of coal ash in its production. It is thus qualified as an enterprise engaged in the utilisation of waste in production and is
exempted from VAT in 2013.
Pursuant to the related requirements of the “Notice of the Ministry of Finance and the State Administration of Taxation
on Adjusting and Improving the Value-added Tax Policies for Products and Labour Services that Comprehensively
Utilize Resources” (No. Cai Shui [2011] No. 115) as issued by the Ministry of Finance and the State Administration of
Taxation, Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, produces products that apply integrated
use of resources and is subject to an immediate VAT refund policy.
3. Others
Income from transportation business was previously subject to business tax at 3%. Pursuant to requirements including
Notice in relation to Pilot Tax Collection Policy in the Transportation Industry and Certain Modern Service Industries
Issued by the Ministry of Finance and the State Administration of Taxation (Cai Shui [2013] No. 37), income of certain
subsidiaries of the Company, namely Shouguang Chenming Modern Logistic Co., Ltd. and Shouguang Wei Yuan
Logistics Company Limited, were subject to value-added tax at 11% from 1 August 2013.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 97
IX Financial Report
VI. Business Combination and Consolidated Financial Statements
1. Subsidiaries
(1) Subsidiaries acquired through establishment or investment
Unit: RMB
Setting off of
the loss
attributable to
the minority
shareholders of
the subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
the minority
Balance of shareholders’
other projects Minority portion of the
that interest used opening
Actual substantially to offset the balance
investment as forms net profit or loss of owners’
Place of Business Registered at the end of investment in Voting Whether Minority of the minority equity of
Full name of subsidiary Subsidiary type incorporation Nature capital Business activity the period the subsidiary Shareholding rights consolidated interest interest the subsidiary
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd.
Controlling
subsidiary
Wuhan, China Manufacture
of paper
211,370,000 Manufacture and sales of
paper products, the materials
202,820,000.00 50.93% 50.93% Yes 182,558,816.01
14
of manufacture of paper INTERIM
and machinery REPORT
Shandong Chenming Power Supply Wholly-owned Shouguang, Electricity 86,325,061.00 Manufacture and supply of 157,810,000.00 100.00% 100.00% Yes 0.00
Holdings Co., Ltd. subsidiary China electricity and heat
Hailaer Chenming Paper Co., Ltd. Controlling Hailaer, China Manufacture 16,000,000 Sales and processing; sales 12,000,000.00 75.00% 75.00% Yes 15,187,862.68
subsidiary of paper of machine- made paper
and pulp paper
Haicheng Haiming Mining Controlling Haicheng, China Mining 240,000,000 Processing and sales of 144,000,000.00 60.00% 60.00% Yes 96,000,000.00
Company Limited subsidiary magnesite and talc
Jiangxi Chenming Paper Co., Ltd. Wholly-owned Nanchang, Manufacture US$272 million Production and processing 1,206,590,000.00 100.00% 100.00% Yes 0.00
subsidiary China of paper of machine-made paper,
paperboard, paper panel,
paper products and paper-
making raw materials, etc.
Shandong Grand View Hotel Co., Ltd. Controlling Shouguang, Restaurant US$13.9057 Restaurant and beverage 80,500,000.00 70.00% 70.00% Yes -20,859,665.03
subsidiary China and beverage million services
Shouguang Chenming Art Paper Co., Ltd. Controlling Shouguang, Manufacture US$20 million Production and sales of 113,620,000.00 75.00% 75.00% Yes 32,506,942.58
subsidiary China of paper machine-made paper and others
Jilin Chenming Paper Co., Ltd. Wholly-owned Jilin City, China Manufacture 1,500,000,000 Processing and sales of machine- 1,501,350,000.00 100.00% 100.00% Yes 0.00
subsidiary of paper made paper, paperboard, paper
product, paper pulp
Zhanjiang Chenming Pulp & Paper Co., Ltd.Wholly-owned Zhanjiang, China Manufacture 3,000,000,000 Processing and sales of 3,000,000,000.00 100.00% 100.00% Yes 0.00
subsidiary of paper paper pulp
Shouguang Meilun Paper Co. Ltd. Wholly-owned Shouguang, Manufacture 3,000,000,000 Production and sales of machine- 3,000,000,000.00 100.00% 100.00% Yes 0.00
subsidiary China of paper made paper and paperboard
Shandong Chenming Paper Sales Wholly-owned Shouguang, Sales of paper 100,000,000 Sales of machine-made paper, 100,000,000.00 100.00% 100.00% Yes 0.00
Company Limited subsidiary China paperboard and paper making
raw materials
Chenming (HK) Limited Wholly-owned Hong Kong, Trade of paper US$29.90 Export and import trade of paper 183,470,000.00 100.00% 100.00% Yes 0.00
subsidiary China million products and market research
Shouguang Chenming Modern Wholly-owned Shouguang, Transportation 10,000,000 Transportation of goods 10,000,000.00 100.00% 100.00% Yes 0.00
Logistic Co., Ltd. subsidiary China
Fuyu Chenming Paper Co., Ltd. Wholly-owned Fuyu, China Manufacture 208,000,000 Production and sales of machine- 208,000,000.00 100.00% 100.00% Yes 0.00
subsidiary of paper made paper and paperboard
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off of
the loss
attributable to
the minority
shareholders of
the subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
the minority
Balance of shareholders’
other projects Minority portion of the
that interest used opening
Actual substantially to offset the balance
investment as forms net profit or loss of owners’
Place of Business Registered at the end of investment in Voting Whether Minority of the minority equity of
Full name of subsidiary Subsidiary type incorporation Nature capital Business activity the period the subsidiary Shareholding rights consolidated interest interest the subsidiary
14 Huanggang Chenming Pulp &
Paper Co., Ltd.
Wholly-owned Huanggang,
subsidiary China
Paper pulp 200,000,000 Operation and acquisition of
forest; establishment of paper
200,000,000.00 100.00% 100.00% Yes 0.00
INTERIM pulp projects
REPORT Huanggang Chenming Arboriculture Wholly-owned Huanggang, Arboriculture 70,000,000 Plantation, processing and 70,000,000.00 100.00% 100.00% Yes 0.00
Co., Ltd. subsidiary China sales of forests
Shouguang Shun Da Customs Wholly-owned Shouguang, Customs 1,500,000 Business agency of professional 1,500,000.00 100.00% 100.00% Yes 0.00
Declaration Co., Ltd. subsidiary China declaration, customs declaration and
inspection inspection declaration
declaration
Chenming International Co., Ltd. Wholly-owned Los Angeles, Import and export, US$3 million Import and export, technology US$3.00 million 100.00% 100.00% Yes 0.00
subsidiary U.S. technology research and development
research and
development
Shouguang Chenming Hongxin Wholly-owned Shouguang, Packaging 1,000,000 Sales of paper packaging 1,000,000.00 100.00% 100.00% Yes 0.00
Packaging Co., Ltd. subsidiary China
Shouguang Chenming Papermaking Wholly-owned Shouguang, Machinery 2,000,000 Processing and repair of paper 2,000,000.00 100.00% 100.00% Yes 0.00
Machine Co., Ltd. subsidiary China manufacturing making machines
Shouguang Chenming Import and Wholly-owned Shouguang, Import and 10,000,000 Import and export of goods 10,000,000.00 100.00% 100.00% Yes 0.00
Export Trade Co., Ltd. subsidiary China export trade and technology
Shouguang Chenming Industrial Wholly-owned Shouguang, Transportation 10,000,000 Land transport, storage of goods 10,000,000.00 100.00% 100.00% Yes 0.00
Logistics Co., Ltd. subsidiary China
Shouguang Chenming Jiatai Wholly-owned Shouguang, Property 1,000,000 Property management 1,000,000.00 100.00% 100.00% Yes 0.00
Property Management Co., Ltd. subsidiary China management
Japan Chenming Paper Company Limited Wholly-owned Tokyo, Japan Trade of paper US$1.50 million Trade of paper products and US$1.50 million 100.00% 100.00% Yes 0.00
subsidiary products raw materials
Chenming GmbH Wholly-owned Hamburg, Trade of machine- EUR25,000 Trade of machine-made paper EUR25,000 100.00% 100.00% Yes 0.00
subsidiary Germany made paper
Shandong Chenming Paper Group Wholly-owned Fuyu, China Sales of paper 1,000,000 Sales of machine-made paper, 1,000,000.00 100.00% 100.00% Yes 0.00
(Fuyu) Sales Co., Ltd. subsidiary paper board, paper-making
materials and accessories and
paper machinery
Zhanjiang Chenming Arboriculture Wholly-owned Zhanjiang, Arboriculture 1,000,000 Plantation of forest, nutrition and 1,000,000.00 100.00% 100.00% Yes 0.00
Co., Ltd. subsidiary China sales of seedling, processing and
sales of timber and processing
and sales of by-products of timber
Yangjiang Chenming Arboriculture Wholly-owned Yangjiang, Arboriculture 1,000,000 Plantation and development 1,000,000.00 100.00% 100.00% Yes 0.00
Co., Ltd. subsidiary China of forest, and technology
consultation of forestry
SHANDONG CHENMING PAPER HOLDINGS LIMITED 99
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
(1) Subsidiaries acquired through establishment or investment (Cont’d)
Unit: RMB
Setting off of
the loss
attributable to
the minority
shareholders of
the subsidiaries
in the current
period from the
owner’s equity
of the Company
exceeds
the minority
Balance of shareholders’
other projects Minority portion of the
that interest used opening
Actual substantially to offset the balance
investment as forms net profit or loss of owners’
Place of Business Registered at the end of investment in Voting Whether Minority of the minority equity of
Full name of subsidiary Subsidiary type incorporation Nature capital Business activity the period the subsidiary Shareholding rights consolidated interest interest the subsidiary
Zhanjiang Meilun Pulp & Paper Co., Ltd . Wholly-owned Zhanjiang,
subsidiary China
Paper pulp 100,000,000 Manufacture, production,
processing and sales of paper
100,000,000.00 100.00% 100.00% Yes 0.00
14
pulp and related products INTERIM
Zhanjiang Chenming New-style Wall Wholly-owned Zhanjiang, Wall materials 10,000,000 Production and sales of wall 10,000,000.00 100.00% 100.00% Yes 0.00 REPORT
Materials Co., Ltd. subsidiary China materials, and sales and mixed
use of coal ash
Wuhan Chenming Qianneng Electric Controlling Wuhan, China Electricity 88,240,000 Generation and sales of 45,000,000.00 51.00% 51.00% Yes 38,720,431.68
Power Co., Ltd. subsidiary electricity and heat
Jilin Chenming Machinery Wholly-owned Jilin, China Processing 600,000 Processing of machinery, 600,000.00 100.00% 100.00% Yes 0.00
Manufacturing Co., Ltd. subsidiary of machinery manufacture, installation
and repair of the equipment
of machinery
Shouguang Chenming Cement Co., Ltd. Wholly-owned Shouguang, Sales of cement 7,000,000 Utilisation of ash in the production 7,000,000.00 100.00% 100.00% Yes 0.00
subsidiary China of cement and sales of cement
Shandong Chenming Panels Co., Ltd. Wholly-owned Shouguang, Sales of panels 30,000,000 Decorative board of the layer 30,000,000.00 100.00% 100.00% Yes 0.00
subsidiary China of laminated board, wooden
products, laminated board and
fortified wooden floorboard
Shouguang Chenming Floor Board Co.,Wholly-owned Shouguang, Sales of floor 500,000 Production, processing and sales 500,000.00 100.00% 100.00% Yes 0.00
Ltd. subsidiary China board of fortified wooden floorboard and
impregnated paper
Nanchang Chenming Arboriculture Co.,Wholly-owned Nanchang, Arboriculture 10,000,000 Processing and sales of wooden 10,000,000.00 100.00% 100.00% Yes 0.00
Ltd. subsidiary China finished products, semi- finished
products and by-products
of timber
Shandong Chenming Financial Wholly-owned Jinan, China Financial leasing 300,000,000 Financial leasing 300,000,000.00 100.00% 100.00% Yes 0.00
Leasing Co., Ltd. subsidiary
Shandong Chenming Investment Co., Ltd. Wholly-owned Jinan, China Investment 200,000,000 Investment 200,000,000.00 100.00% 100.00% Yes 0.00
subsidiary
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
1. Subsidiaries (Cont’d)
(2) Subsidiaries acquired through business combination not under common control
Unit: RMB
Setting off 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 the minority
other projects shareholders’
that Minority portion of the
substantially interest used opening
Actual forms net to offset the balance
investment as investment profit or loss of owners’
Subsidiary Place of Registered at the end of in the Voting Whether Minority of the minority equity of
Full name of subsidiary type incorporation Business Nature capital Business activity the period subsidiary Shareholding rights consolidated interest interest the subsidiary
14 Shouguang Hongyi Decorative
Packaging Co., Ltd.
Wholly-owned Shouguang, Packaging
subsidiary China
1,550,000 Processing and sales of
packaging products, indoor
1,550,000.00 100.00% 100.00% Yes 0.00
INTERIM and outdoor decorations
REPORT Shouguang Xinyuan Coal Co., Ltd. Wholly-owned Shouguang, Coal 3,000,000 Retail of coal, gasoline, 3,000,000.00 100.00% 100.00% Yes 0.00
subsidiary China construction materials
and plumbing parts
Shouguang Runsheng Waste Wholly-owned Shouguang, Purchase and 1,000,000 Purchase and sales of waste and 1,000,000.00 100.00% 100.00% Yes 0.00
Paper Recycle Co., Ltd. subsidiary China sales of waste and obsolete materials
obsolete materials
Shouguang Wei Yuan Logistics Wholly-owned Shouguang, Transportation 3,930,000 Transportation of goods, 3,930,000.00 100.00% 100.00% Yes 0.00
Company Limited subsidiary China maintenance of vehicles, storage
and loading of goods, international
freight agency services
Wuxi Songling Paper Co., Ltd. Wholly-owned Wuxi, China Papermaking 5,010,000 Sales, cutting and processing 5,010,000.00 100.00% 100.00% Yes 0.00
subsidiary of paper
Guangdong Huirui Investment Co., Ltd. Controlling Zhanjiang, China Investment 258,000,000 Investment in marine 131,580,000.00 51.00% 51.00% Yes 123,830,219.92
subsidiary engineering projects
Shouguang Hongxiang Printing Wholly-owned Shouguang, Printing of 800,000 Processing and sales of 2,730,000.00 100.00% 100.00% Yes 0.00
and Packaging Co., Ltd. subsidiary China packaging packaging products and indoors
materials and outdoors decoration
SHANDONG CHENMING PAPER HOLDINGS LIMITED 101
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
2. Special purpose vehicles or operating entities whose control resulting from, among other things,
entrusting to operate or lease
Chenming Paper has no special purpose vehicles or operating entities whose control resulting from, among other things,
entrusting to operate or lease.
3. Explanation on changes in the scope of consolidation
Explanation on changes in the scope of consolidation
√ Applicable □ Not applicable
During the year (period), two more companies were consolidated as compared to the prior year due to the reasons as
follows:
During the reporting period, the Company established two companies through investments, namely Shandong
Chenming Financial Leasing Co., Ltd. and Shandong Chenming Investment Co., Ltd., respectively.
In order to promote diversified development of the Company, further expand its business scope, enhance its overall
strength and comprehensive competitiveness, develop new sources of profit growth, the Company convened the fourth
extraordinary meeting of the seventh session of the Board on 17 January 2014, at which the Resolution on Establishing
a Financial Leasing Company was considered and approved. On 21 February 2014, the Company invested RMB300.00
million, through Chenming (HK) Limited, a wholly-owned subsidiary of the Company, to establish Shandong Chenming
Financial Leasing Co., Ltd., which was consolidated into the financial statements of the Company since February 2014.
In order to promote diversified development of the Company, further expand its business scope, enhance its overall
14
INTERIM
strength and comprehensive competitiveness, develop new sources of profit growth, the Company convened the fourth REPORT
meeting of the seventh session of the Board on 20 March 2014, at which the Resolution on Establishing Shandong
Chenming Investment Co., Ltd. was considered and approved. On 26 March 2014, the Company invested RMB200.00
million, through Chenming (HK) Limited, a wholly-owned subsidiary of the Company, to establish Shandong Chenming
Investment Co., Ltd., which was consolidated into the financial statements of the Company since March 2014.
During the year (period), three companies were deconsolidated as compared to the prior year due to the reasons as
follows:
The Company lost its control over Shandong Chenming Xinli Power Co., Ltd. due to disposal of equity interest during
the period. Therefore, the above company ceased to be included in the scope of consolidation. The registration of
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. and Shouguang Hengfeng Storage Co., Ltd. were cancelled
according to actual needs of operations during the period. Therefore, the above two companies ceased to be included
in the scope of consolidation.
On 15 November 2013, the Company convened the third extraordinary meeting of the seventh session of the Board and
approved the Resolution on Disposal of Equity Interest in Xinli Power”. On 4 March 2014, the Company entered into
an equity interest contract with Guangdong Dejun Investment Co., Ltd. to transfer its 51% equity interest in Shandong
Chenming Xinli Power Co., Ltd. at a consideration of RMB76.1940 million. The Company lost its control over Xinli Power,
which ceased to be included in the scope of consolidation with effect from 4 March 2014.
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. and Shouguang Hengfeng Storage Co., Ltd. had not engaged
in any business activity for years. The Company cancelled their registration to save the related expenses. The related
assets and liabilities were consolidated into the financial statements of the Company. The above two companies ceased
to be included in the scope of consolidation with effect from May 2014.
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
4. Entities newly included in the scope of consolidation during the reporting period and entities ceasing to
be included in the scope of consolidation during the reporting period
Subsidiaries, special purpose vehicles and operating entities whose control resulting from, among other things,
entrusting to operating or leasing newly included in the scope of consolidation for the period
Unit: RMB
Net assets
at the end of Net profit
Name the period for the period
Shandong Chenming Financial Leasing Co., Ltd. 304,219,067.83 4,219,067.83
Shandong Chenming Investment Co., Ltd. 199,989,036.71 -10,963.29
Subsidiaries, special purpose vehicles and operating entities whose control resulting from, among other things,
entrusting to operating or leasing not included in the scope of consolidation for the period
Unit: RMB
Net profit for
the period from
Net assets the beginning of
as at the date the year to the
14
Name of disposal date of disposal
INTERIM Shandong Chenming Xinli Power Co., Ltd. 166,099,869.20 8,545,730.38
REPORT
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. 17,359.30 0.00
Shouguang Hengfeng Storage Co., Ltd. 456,537.70 -8,888.79
(1) Shandong Chenming Xinli Power Co., Ltd. ceased to be included in the scope of consolidation as the Company
lost the control over it due to disposal of its equity interest (contribution rights) (Note VI. 3).
(2) The registration of Shouguang Chenming Tianyuan Arboriculture Co., Ltd. and Shouguang Hengfeng Storage Co.,
Ltd. was cancelled during the period and they ceased to be included in the scope of consolidation (Note VI. 3).
5. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period
Name of the subsidiary Date of disposal Recognition method of gain or loss
Shandong Chenming Xinli 4 March 2014 The excess of the disposal consideration over the
Power Co., Ltd. share of the net assets of the subsidiary attributable
to the equity interest disposed of as at the disposal
date accounted for in the consolidated financial
statements of the Company is recognised as gain or
loss on disposal.
On 4 March 2014, the Company transferred its 51% equity interest in Shandong Chenming Xinli Power Co., Ltd. to
Guangdong Dejun Investment Co., Ltd. The date of disposal was the date when the Company actually no longer had
control over the net assets and financial and operating decisions of Shandong Chenming Xinli Power Co., Ltd.
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
5. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period (Cont’d)
① Disposal price and the cash flows are set out as follows:
Item Amount
Disposal price 76,194,000.00
Cash and cash equivalents received from disposal 76,194,000.00
Less: cash and cash equivalents held by Xinli Power 1,158,788.59
Net cash received from disposal 75,035,211.41
② Net assets of disposal of Xinli Power are set as follows:
Net assets as Net assets
at the date as at the end of
Item of disposal the prior year
Current assets 73,281,626.81 50,934,910.85
Non-current assets 137,643,679.50 140,521,337.12
Current liabilities 44,825,437.11 33,902,109.15
Non-current liabilities — —
Total net assets 166,099,869.20 157,554,138.82 14
INTERIM
REPORT
③ Gain or loss on disposal is calculated as follows:
Item Amount
Disposal price 76,194,000.00
Less: net assets attributable to Xinli Power as at the date of disposal 84,710,933.29
Plus: other comprehensive income in relation to Xinli Power transferred
to gain or loss on disposal for the period
Investment gains arising from disposal -8,516,933.29
④ Revenue, expenses and profit of Xinli Power from the beginning of the year of disposal to the date of disposal are
set out as follows:
Item Amount
Revenue 41,547,370.18
Less: costs and expenses 30,165,750.48
Total profit 11,381,619.70
Less: income tax expenses 2,835,889.32
Net profit 8,545,730.38
Whether there was disposal of investment in a subsidiary through several transactions resulting in loss of control
during the reporting period
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 103
IX Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
6. Exchange rate of translating major financial statement items of overseas operating entities
Item Assets and liabilities items
30 June 2014 1 January 2014
Chenming (HK) Limited USD1=RMB6.1528 USD1=RMB6.0969
Japan Chenming Paper Company Limited JPY100=RMB6.0815 JPY100= RMB5.7771
Chenming GmbH EUR1=RMB8.3946 EUR1= RMB8.4189
Item Revenue, expense and cash flow items
For the first half of 2014 For the year 2013
Chenming (HK) Limited USD1=RMB6.1451 USD1= RMB6.1811
Japan Chenming Paper Company Limited JPY100=RMB6.0204 JPY100= RMB6.2623
Chenming GmbH EUR1=RMB8.4058 EUR1= RMB8.1517
VII. Notes to major items of the Consolidated Financial Statements
1. Monetary funds
Unit: RMB
Item Closing balance Opening balance
14 Amount in
foreign currency Exchange rate Amount in RMB
Amount in
foreign currency Exchange rate Amount in RMB
INTERIM
REPORT
Cash: — — 2,153,991.53 — — 1,333,503.27
RMB — — 1,478,658.11 — — 879,154.77
–USD 60,000.00 6.1528 369,168.00 40,000.00 6.0969 243,876.00
–EUR 27,000.00 8.3946 226,654.20 25,000.00 8.4189 210,472.50
–JPY 2,240.00 0.060815 136.22
–HKD 100,000.00 0.7938 79,375.00
Deposits with banks: — — 909,198,839.61 — — 725,199,425.69
RMB — — 706,632,042.59 — — 612,023,754.51
–USD 23,136,866.08 6.1528 143,144,220.66 11,698,274.37 6.0969 71,323,209.01
–EUR 1,255,091.73 8.3946 22,192,556.38 1,548,593.85 8.4189 13,037,456.78
–JPY 612,119,017.00 0.060815 37,226,018.02 498,558,670.00 0.057771 28,802,232.92
–HKD 5,041.83 0.7938 4,001.96 16,245.21 0.78623 12,772.47
Other monetary funds: — — 2,445,722,393.83 — — 1,821,196,865.28
RMB — — 2,426,170,469.40 — — 1,788,148,011.28
–USD 3,176,056.79 6.1528 19,541,642.22 5,420,599.65 6.0969 33,048,854.00
–EUR 1,224.86 8.3946 10,282.21
Total — — 3,357,075,224.97 — — 2,547,729,794.24
① Other monetary funds of RMB231,596,639.29 (31 December 2013: RMB249,333,637.64) were the guarantee
deposit for the application for bank acceptance with the banks by the Group.
② Other monetary funds of RMB461,763,365.42 (31 December 2013: RMB1,380,738,601.00) were the guarantee
deposit for the application for letter of credit with the banks by the Group.
③ Other monetary funds of RMB752,362,389.12 (31 December 2013: RMB140,836,352.11) were the guarantee
deposit for the application for guarantees with the banks by the Group.
④ Other monetary funds of RMB1,000,000,000.00 were the investment in the registered capital of Shandong
Chenming Financial Leasing Co., Ltd. As at the end of the reporting period, Shandong Chenming Financial
Leasing Co., Ltd. was not established.
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
1. Bills receivable
(1) Classification of bills receivable
Unit: RMB
Category Closing balance Opening balance
Bank acceptance 2,234,716,744.41 2,827,024,280.10
Commercial acceptances 13,432,731.21 43,419,401.39
Total 2,248,149,475.62 2,870,443,681.49
(2) Outstanding notes endorsed to other parties by the Company at the end of the period
Unit: RMB
Issuing entity Issuing date Maturity date Amount Remark
YIWU HONGNA PAPER
CO. LTD. 31 March 2014 28 September 2014 2,000,000.00
TANGSHAN MINCHEN
TRADING CO. LTD. 24 April 2014 24 October 2014 1,500,000.00
FUQING LEAVES
AGRICULTURAL 14
DEVELOPMENT CO., LTD. 26 January 2014 26 July 2014 1,500,000.00 INTERIM
REPORT
SHENZHEN DONNELLEY
PRINTING CO., LTD. 19 May 2014 21 August 2014 1,442,470.20
SAMSON PAPER
(SHANGHAI)
COMPANY LIMITED 20 January 2014 20 July 2014 1,242,059.00
Total — — 7,684,529.20 —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 105
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
2. Accounts receivable
(1) Disclosure of accounts receivable according to classification
Unit: RMB
Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Category Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Accounts receivable that are
individually significant and
provided for bad debts separately 48,535,549.72 1.42% 48,535,549.72 100.00% 48,605,549.72 1.46% 48,605,549.72 100.00%
Accounts receivable that are provided for bad debts on portfolio basis
Risk-free portfolio 364,437,072.32 10.69% 457,124,812.49 13.73%
General portfolio 2,997,855,973.92 87.89% 187,589,525.97 6.26% 2,823,789,275.45 84.81% 178,271,004.40 6.31%
Sub-total for portfolio 3,362,293,046.24 98.58% 187,589,525.97 5.58% 3,280,914,087.94 98.54% 178,271,004.40 5.43%
Total 3,410,828,595.96 — 236,125,075.69 — 3,329,519,637.66 — 226,876,554.12 —
Presentation of accounts receivable according to ageing analysis
Unit: RMB
14 Closing balance Opening balance
INTERIM Item Amount Ratio Amount Ratio
REPORT
Within 1 year 3,238,736,233.95 94.95% 3,172,267,013.90 95.28%
1-2 years 57,140,092.15 1.68% 50,136,238.22 1.50%
2-3 years 34,334,137.13 1.01% 26,223,349.82 0.79%
Over 3 years 80,618,132.73 2.36% 80,893,035.72 2.43%
Total 3,410,828,595.96 100.00% 3,329,519,637.66 100.00%
Accounts receivable that are individually significant and are provided for bad debts separately at the end of the
period
√ Applicable □ Not applicable
Unit: RMB
Particulars
of accounts Provision for Reason for
receivable Book balance bad debts Provision ratio bad debt provision
Payment for 48,535,549.72 48,535,549.72 100.00% Most of them are payment
goods for goods overdue for over
three years and are unlikely
to be recovered
Total 48,535,549.72 48,535,549.72 — —
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(1) Disclosure of accounts receivable according to classification (Cont’d)
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable □ Not applicable
Unit: RMB
Closing balance Opening balance
Book balance Provision for Book balance Provision for
Ageing Amount Ratio bad debts Amount Ratio bad debts
Within 1 year
Of which: — — — — — —
Within 1 year 2,874,217,506.67 95.88% 142,909,775.34 2,715,360,837.57 96.16% 135,768,041.85
Sub-total within 1 year 2,874,217,506.67 95.88% 142,909,775.34 2,715,360,837.57 96.16% 135,768,041.85
1-2 years 57,140,092.15 1.91% 5,714,009.21 50,127,138.22 1.78% 5,012,713.82
2-3 years 34,415,792.09 1.15% 6,883,158.41 26,013,813.66 0.92% 5,202,762.73
Over 3 years 32,082,583.01 1.07% 32,082,583.01 32,287,486.00 1.14% 32,287,486.00
Total 2,997,855,973.92 — 187,589,525.97 2,823,789,275.45 — 178,271,004.40
Accounts receivable using percentage of balance for making bad debt provision in the portfolio: 14
INTERIM
□ Applicable √ Not applicable REPORT
Accounts receivables using other methods for making bad debt provision in the portfolio:
□ Applicable √ Not applicable
Accounts receivable that are individually insignificant but are provided for bad debts separately as at the end of
the period
□ Applicable √ Not applicable
(2) Reversal or recovery of accounts receivable during the reporting period
Unit: RMB
Cumulative bad
Particulars debt provision Amount of
of accounts Reason for reversal Original basis for prior to reversal reversal or
receivable or recovery bad debt provision or recovery recovery
Payment of goods Collection of Overdue for over 18,932,595.33 18,932,595.33
payment of goods three years and unlikely
to be recovered
Total — — 18,932,595.33 —
(3) There was no accounts receivable from any company in which the Company held 5% (5% inclusive) or more
voting rights during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 107
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
3. Accounts receivable (Cont’d)
(4) Particulars of top five accounts receivable
Unit: RMB
As a percentage
of the total of
Relationship accounts
Name of entity with the Company Amount Term receivable
SHANGHAI YAOJI PLAYING
CARD CO., LTD. Non-related party 66,745,929.97 Within 1 year 1.96%
ARSGIA TEJARAT SHEKOUH Non-related party 38,822,063.37 Within 1 year 1.14%
SHANGHAI CHANGYI
ADHESIVE PRODUCTS
CO., LTD. Non-related party 34,739,822.41 Within 1 year 1.02%
CHANGJIANG (HUBEI)
PUBLISH PRINT
MATERIALS CO., LTD. Non-related party 31,438,946.94 Within 1 year 0.92%
SHENZHEN CENTURY
HONGBO TRADING
CO., LTD. Non-related party 29,798,619.00 Within 1 year 0.87%
14 Total — 201,545,381.69 — 5.91%
INTERIM
REPORT
(5) Particulars of accounts receivable of the related parties
Particulars of related party accounts receivable and accounts payable in Note VIII. 5.
4. Other receivables
(1) Disclosure of other receivables according to classification
Unit: RMB
Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Category Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Other receivables that are
individually significant and are
provided for bad debts separately 9,402,148.72 0.64% 9,402,148.72 100.00% 8,918,424.06 0.64% 8,918,424.06 100.00%
Other receivables that are provided for bad debts on portfolio basis
Risk-free portfolio 1,280,335,707.85 87.82% 1,251,663,625.86 89.22%
General portfolio 155,208,086.94 10.65% 47,821,986.89 30.81% 128,661,773.06 9.17% 48,424,649.08 37.64%
Sub-total for portfolio 1,435,543,794.79 98.46% 47,821,986.89 3.33% 1,380,325,398.92 98.39% 48,424,649.08 3.51%
Other receivables that are
individually insignificant
but are provided
for bad debts separately 13,033,288.78 0.89% 13,033,288.78 100.00% 13,717,509.43 0.97% 13,717,509.43 100.00%
Total 1,457,979,232.29 — 70,257,424.39 — 1,402,961,332.41 — 71,060,582.57 —
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
4. Other receivables (Cont’d)
(1) Disclosure of other receivables according to classification (Cont’d)
The presentation of other receivables according to ageing analysis is as follows
Unit: RMB
Closing balance Opening balance
Item Amount Ratio Amount Ratio
Within 1 year 811,045,422.43 55.63% 1,200,466,405.38 85.57%
1-2 years 475,294,947.82 32.60% 100,811,139.72 7.18%
2-3 years 111,535,001.35 7.65% 41,370,171.48 2.95%
Over 3 years 60,103,860.69 4.12% 60,313,615.83 4.30%
Total 1,457,979,232.29 100.00% 1,402,962,332.41 100.00%
Other receivables that are individually significant and are provided for bad debts separately at the end of the
period
√ Applicable □ Not applicable
Unit: RMB
Particulars 14
of other Provision for INTERIM
REPORT
receivables Book balance bad debts Provision ratio Reason for provision
Open credit 9,402,148.72 9,402,148.72 100.00% Most of them are open
credit for over three years
and are unlikely to
be recovered
Total 9,402,148.72 9,402,148.72 — —
Use of ageing analysis for making bad debt provision in the portfolio
√ Applicable □ Not applicable
Unit: RMB
Closing balance Opening balance
Book balance Provision for Book balance Provision for
Ageing Amount Ratio bad debts Amount Ratio bad debts
Within 1 year
Of which:
Within 1 year 84,518,376.98 54.45% 4,225,918.85 44,912,660.62 34.91% 2,245,633.03
Sub-total within 1 year 84,518,376.98 54.45% 4,225,918.85 44,912,660.62 34.91% 2,245,633.03
1-2 years 14,821,413.23 9.55% 1,482,141.32 6,967,923.12 5.42% 696,792.31
2-3 years 18,194,337.51 11.72% 4,439,967.51 39,123,706.98 30.41% 7,824,741.40
Over 3 years 37,673,959.22 24.27% 37,673,959.22 37,657,482.34 29.26% 37,657,482.34
Total 155,208,086.94 — 47,821,986.90 128,661,773.06 — 48,424,649.08
SHANDONG CHENMING PAPER HOLDINGS LIMITED 109
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
4. Other receivables (Cont’d)
(1) Disclosure of other receivables according to classification (Cont’d)
Other receivables using percentage of balance for making bad debt provision in the portfolio
□ Applicable √ Not applicable
Other receivables using other methods for making bad debt provision in the portfolio
□ Applicable √ Not applicable
Other receivables that are individually insignificant but are provided for bad debts separately as at the end of the
period
√ Applicable □ Not applicable
Unit: RMB
Particulars
of other Provision for Reason for bad
receivables Book balance bad debts Provision ratio debts provision
Open credit 13,033,288.78 13,033,288.78 100.00% Most of them are open
credit for over three years
14
and are unlikely to
be recovered
INTERIM
REPORT Total 13,033,288.78 13,033,288.78 — —
(2) Reversal or recovery of other receivables during the reporting period
Unit: RMB
Cumulative bad
debt provision Amount of
Particulars of Reason for reversal Original basis for prior to reversal reversal or
other receivables or recovery bad debt provision or recovery recovery
Open credit Collection of open credit Overdue for over 2,334,907.71 2,334,907.71
three years and unlikely
to be recovered
Total — — 2,334,907.71 —
(3) No outstanding amount within other receivables due from shareholders holding 5% or more (including 5%) in
the voting shares of the Company during the reporting period
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
4. Other receivables (Cont’d)
(4) Particulars of top five other receivables
Unit: RMB
As a percentage
Relationship of the total of
Name of entity with the Company Amount Term other receivables
WUHAN CHENMING Related party 579,535,749.56 Within 1 year, 39.75%
WAN XING REAL 1-2 years
ESTATE CO., LTD.
SHANDONG JIANGHE Non-related party 530,094,699.70 1-2 years 36.36%
PAPER CO. LTD.
ZHANJIANG Non-related party 102,587,813.35 Within 1 year 7.04%
FINANCE BUREAU
JIANGSU XINHAI PORT Non-related party 38,546,912.03 Within 1 year 2.64%
ENGINEERING CO., LTD.
VALTRA INC. of Finland Non-related party 12,198,802.77 2 to 3 years 0.84%
Total — 1,262,963,977.41 — 86.63%
(5) Particulars of other receivables of the related parties 14
INTERIM
See Note VIII. 5 Related party accounts receivable and accounts payable REPORT
5. Prepayments
(1) Prepayments stated according to ageing
Unit: RMB
Closing balance Opening balance
Ageing Amount Ratio Amount Ratio
Within 1 year 856,779,423.98 47.31% 647,808,677.28 40.77%
1-2 years 954,026,460.05 52.69% 941,212,653.96 59.23%
— —
Total 1,810,805,884.03 1,589,021,331.24
SHANDONG CHENMING PAPER HOLDINGS LIMITED 111
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
5. Prepayments (Cont’d)
(2) Particulars of top five prepayments
Unit: RMB
Relationship Reason for
Name of entity with the Company Amount Term being unsettled
JIANGSU XINHAI PORT Non-related party 880,000,000.00 Within 1 year, Prepayments for
ENGINEERING CO., LTD. 1-2 years construction fee
according to the
agreed contract
JINAN HI-TECH HOLDING Non-related party 162,000,000.00 Within 1 year Prepayments for
GROUP CO., LTD goods according
to the agreed
contract
EACH VILLAGE OF Non-related party 87,932,010.00 Within 1 year, Prepayments for
HUANGGANG CITY 1-2 years forestry deposits
according to the
agreed contract
MANZHOULI JINFA Non-related party 34,911,638.46 Within 1 year Prepayments for
TRADING CO., LIMITED goods according
14 to the agreed
INTERIM
contract
REPORT ZHANJIANG XINCHEN Non-related party 21,272,184.01 Within 1 year Prepayments for
TRADING CO., LTD. goods according
to the agreed
contract
Total — 1,186,115,832.47 — —
(3) No outstanding amount within prepayments due from shareholders holding 5% or more (including 5%) in the
voting shares of the Company during the reporting period
6. Inventories
(1) Categories of inventories
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value
2,102,799,924.39
Raw materials 1,823,665,041.74 1,823,665,041.74 2,102,799,924.39
Work-in-process products 57,094,308.42 57,094,308.42 55,128,694.09 55,128,694.09
Goods in stock 2,094,560,250.02 0.00 2,094,560,250.02 1,516,242,717.77 36,472,052.20 1,479,770,665.57
Products under development 143,725,354.00 143,725,354.00 88,110,593.20 88,110,593.20
3,725,809,877.25
Total 4,119,044,954.18 0.00 4,119,044,954.18 3,762,281,929.45 36,472,052.20
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
6. Inventories (Cont’d)
(2) Impairment provision for inventories
Unit: RMB
Opening Provision during Decrease during the period Closing book
Type of inventories book balance the period Reversal Write-off balance
Goods in stock 36,472,052.20 36,472,052.20 0.00
Total 36,472,052.20 36,472,052.20 0.00
7. Other current assets
Unit: RMB
Item Closing balance Opening balance
Prepaid enterprise income tax 112,435,915.46 74,006,369.37
Non-credited VAT proceeds 1,614,993,450.89 1,666,514,217.00
Entrusted loans due within one year 100,000,000.00
Total 1,827,429,366.35 1,740,520,586.37
14
INTERIM
8. Available-for-sale assets REPORT
(1) Particulars of available-for-sale assets
Impairment
Investee Investment cost Book balance provision Book value
QINGZHOU CHENMING 900,000.00 900,000.00 900,000.00
DENATURATION AMYLUM
CO., LTD.
SHANDONG PAPER 200,000.00 200,000.00 200,000.00
MAKING & PRINTING
ENTERPRISES
CORPORATION
JINAN SHANGYOU 350,000.00 350,000.00 350,000.00
COMMERCIAL COMPANY
LIMITED
ZHEJIANG PROVINCE 2,000,000.00 2,000,000.00 2,000,000.00
GUANGYU MEDIA
PRINTING COMPANY
LIMITED
SHOUGUANG MIHE WATER 20,000,000.00 20,000,000.00 20,000,000.00
COMPANY LIMITED
ANHUI TIME SOURCE 1,000,000.00 1,000,000.00 1,000,000.00
CORPORATION
WEIFANG XINYE CAPITAL 10,000,000.00 10,000,000.00 10,000,000.00
INVESTMENT CO., LTD.
SHANDONG HONGQIAO 50,000,000.00 50,000,000.00 50,000,000.00
VENTURE CAPITAL
CO., LTD.
Total 84,450,000.00 84,450,000.00 1,450,000.00 83,000,000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 113
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
8. Available-for-sale assets (Cont’d)
(2) Changes in impairment of available-for-sale assets during the reporting period
Unit: RMB
Type of available- Available-for-sale Available-for-sale
for-sale assets equity instruments debt instruments Others Total
Provision made at the 2,589,574.47 2,589,574.47
beginning of the period
Decrease for the year 1,139,574.47 1,139,574.47
Provision made at the end 1,450,000.00 1,450,000.00
of the period
9. Investments in joint ventures and associates
Unit: RMB
Total revenue
Equity interest Voting right in Total assets Total liabilities Total net assets from operations
held by the investee by as at the end as at the end as at the end during Net profit for
Name of investee the Company the Company of the period of the period of the period the period the period
14 I. Joint venture
Shouguang 50.00% 50.00% 6,000,000.00 6,000,000.00
INTERIM
REPORT Chenming
Huisen New
Building
Materials
Co., Ltd.
II. Associate
Wuhan Chenming 40.00% 40.00% 696,493,866.09 632,353,647.49 64,140,218.60 -4,538,797.85
Wan Xing Real
Estate Co., Ltd.
Jiangxi Chenming 40.00% 40.00% 15,070,000.00 15,070,000.00
Port Co., Ltd.
Jiangxi Jiangbao 21.16% 21.16% 47,976,517.68 25,902,443.50 22,074,074.18 9,686,805.54 -287,688.62
Media Colour
Printing Co., Ltd.
114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
10. Long-term equity investments
(1) Particulars of long-term equity investments
Unit: RMB
Explanation of
the inconsistency
of shareholding Impairment
Accounting Shareholding in Voting right in and voting right Impairment Provision Cash dividend
Name of investee method Cost of investment Opening balance Changes Closing balance the investee the investee in the investee provision for the period for the period
Shouguang Chenming Huisen Equity method 3,000,000.00
3,000,000.00 3,000,000.00 50.00% 50.00%
New Building Materials Co., Ltd.
Jiangxi Chenming Port Co., Ltd. Equity method 6,028,000.00 6,028,000.00 6,028,000.00 40.00% 40.00%
Wuhan Chenming Wan Xing Equity method 40,000,000.00 27,471,606.58 -1,815,519.12 25,656,087.46 40.00% 40.00%
Real Estate Co., Ltd.
Arjo Wiggins Chenming Specialty Equity method 80,100,000.00 30.00% 30.00%
Paper Co., Ltd
Jiangxi Jiangbao Media Colour Equity method 6,000,000.00 4,745,182.75 -74,651.88 4,670,530.87 21.16% 21.16%
Printing Co. Ltd.
Total — 135,128,000.00 32,216,789.33 7,137,829.00 39,354,618.33 — — —
(2) Classification of long-term equity investments
Increase during Decrease during
14
Item Opening balance the period the period Closing balance INTERIM
REPORT
Investment in joint ventures 3,000,000.00 3,000,000.00
Investment in associates 32,216,789.33 6,028,000.00 1,890,171.00 36,354,618.33
Total 32,216,789.33 9,028,000.00 1,890,171.00 39,354,618.33
SHANDONG CHENMING PAPER HOLDINGS LIMITED 115
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
11. Investment properties
(1) Particulars of investment properties
Increase during Decrease during
Item Opening balance the period the period Closing balance
Investment properties
subsequently measured
at cost 19,473,443.95 869,128.02 18,604,315.93
Less: Impairment provision
Total 19,473,443.95 869,128.02 18,604,315.93
(2) Investment properties measured at cost
Unit: RMB
Opening Increase during Decrease during Closing
Item book balance the period the period book balance
I. Total original
carrying amount 38,291,395.70 38,291,395.70
14 1.Housing and
building structure 38,291,395.70 38,291,395.70
INTERIM
REPORT II. Accumulated depreciation
and accumulated
amortisation in total 18,817,951.75 869,128.02 19,687,079.77
1.Housing and
Building Structure 18,817,951.75 869,128.02 19,687,079.77
III. Net book value of
investment properties
in total 19,473,443.95 -869,128.02 18,604,315.93
1.Housing and
Building Structure 19,473,443.95 -869,128.02 18,604,315.93
V. Book value of investment
properties in total 19,473,443.95 -869,128.02 18,604,315.93
1.Housing and
building structure 19,473,443.95 -869,128.02 18,604,315.93
Unit: RMB
For the period
Depreciation and amortisation for the period 869,128.02
Impairment provision for investment properties for the period 0.00
116 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
12. Fixed assets
(1) Particulars of fixed assets
Unit: RMB
Opening Increase during Decrease during
Item book balance the period the period Closing book balance
I. Total original carrying amount: 30,295,936,553.76 3,758,173,930.21 410,647,517.67 33,643,462,966.30
Of which: housing and building structure 4,634,480,230.40 890,016,897.64 55,886,845.66 5,468,610,282.38
Machinery and equipment 25,039,733,811.26 2,792,615,684.64 223,074,840.38 27,609,274,655.52
Vehicles 197,490,484.57 70,180,589.55 8,731,461.19 258,939,612.93
Electronic equipment and other 424,232,027.53 5,360,758.38 122,954,370.44 306,638,415.47
Opening Increase for Provision for Decrease for Closing balance
— book balance the period the period the period for the period
II. Accumulated depreciation and
accumulated amortisation in total: 9,088,069,065.37 690,604,514.36 183,006,450.23 9,595,667,129.50
Of which: housing and building structure 800,492,196.08 81,148,787.15 26,337,887.20 855,303,096.03
Machinery and equipment 7,953,122,683.86 585,553,576.23 115,830,971.78 8,422,845,288.31
Vehicles 95,130,974.48 13,241,015.58 3,947,148.77 104,424,841.29
Electronic equipment and other 239,323,210.95 10,661,135.39 36,890,442.48 213,093,903.86
Opening 14
— book balance — 本期 Closing balance INTERIM
REPORT
III. Net carrying amount of fixed assets 21,207,867,488.39 — 24,047,795,836.80
Of which: housing and building structure 3,833,988,034.32 — 4,613,307,186.35
Machinery and equipment 17,086,611,127.40 — 19,186,429,367.21
Vehicles 102,359,510.09 — 154,514,771.64
Electronic equipment and other 184,908,816.58 — 93,544,511.61
IV. Total impairment provision 26,220,000.00 — 26,220,000.00
Machinery and equipment 26,220,000.00 — 26,220,000.00
Electronic equipment and other —
—
V. Total carrying amount of fixed assets 21,181,647,488.39 24,021,575,836.80
Of which: housing and building structure 3,833,988,034.32 — 4,613,307,186.35
Machinery and equipment 17,060,391,127.40 — 19,160,209,367.21
Vehicles 102,359,510.09 — 154,514,771.64
Electronic equipment and other 184,908,816.58 — 93,544,511.61
Depreciation for the current period amounted to RMB690,604,514.36. RMB3,560,280,912.58 was reclassified
from construction in progress into the original value of fixed assets for the current period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 117
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
12. Fixed assets (Cont’d)
(2) Particulars of restricted fixed assets
As at 30 June 2014, the ownership of housing and building structure and equipment of the carrying amount of
approximately RMB5,955,369,579.14 (the original value of RMB6,712,642,767.98) (31 December 2013: carrying
amount of RMB6,096,739,906.27 and original value of RMB6,696,658,597.87) was restricted as collateral for long-
term borrowings of RMB2,665,050,671.96 (31 December 2013: RMB2,784,334,971.96) (Note VII. 33) and long-
term borrowings due within one year of RMB270,990,800.00 (31 December 2013: RMB269,313,900.00) (Note VII.
31).
(3) Particulars of Temporarily unused fixed assets
Unit: RMB
Original carrying Accumulated Provision for Net carrying
Item amount depreciation impairment amount Remark
Housing and building structure 17,543,318.35 1,653,748.98 15,889,569.37
Machinery and equipment 59,287,663.47 2,338,196.86 56,949,466.61
Total 76,830,981.82 3,991,945.84 72,839,035.98
14 (4) Particulars of fixed assets without obtaining property right certificates
INTERIM
REPORT
Reason for not yet obtaining Year for obtaining property right
Item property right certificates certificates based on estimation
Shandong Chenming Paper
Holdings Limited Processing 2014
Shouguang Meilun Paper Co., Ltd. Processing 2014
Wuhan Chenming Hanyang Paper
Holdings Co., Ltd. Processing 2014
Jiangxi Chenming Paper Co., Ltd. Processing 2014
Zhanjiang Chenming Pulp & Paper
Co., Ltd. Processing 2014
Jilin Chenming Paper Co., Ltd. Processing 2014
Fuyu Chenming Paper Co., Ltd. Processing 2014
118 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
13. Construction in progress
(1) Particulars of construction in progress
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value
Railway project (parent company) 95,804,010.99 95,804,010.99 67,825,111.06 67,825,111.06
Technology upgrade for white paper 149,021,394.73 149,021,394.73 57,275,709.38 57,275,709.38
board projects (parent company)
Zhanjiang Chenming 700,000 tonne 368,884,207.61 368,884,207.61 267,839,895.73 267,839,895.73
pulp equipment upgrade
(Zhanjiang Chenming)
180,000 tonne paper cup raw paper 509,868,298.57 509,868,298.57 313,760,579.02 313,760,579.02
project (Zhanjiang Chenming)
190,000 tonne high-end cultural 413,684,922.56 413,684,922.56 284,958,974.38 284,958,974.38
paper project
(Zhanjiang Chenming)
Biomass vaporisation upgrade 44,073,025.46 44,073,025.46 1,073,025.46 1,073,025.46
project (Zhanjiang Chenming)
7,800 tonne paper machine press 11,088,354.20 11,088,354.20 62,598,886.06 62,598,886.06
section rebuild (Jiangxi Chenming)
Desulphurisation and denitrification 63,238,399.34 63,238,399.34 27,249,910.87 27,249,910.87
project of power plant
(Jiangxi Chenming) 14
Packaging paper for food project 363,803,088.39 363,803,088.39 122,625,351.96 122,625,351.96 INTERIM
(Jiangxi Chenming) REPORT
BTMP mechanical pulp production 30,714,727.61 30,714,727.61
line upgrade for production
expansion (Jiangxi Chenming)
New production line of household 445,390,478.03 445,390,478.03
paper machine upgrade in Wuhan
second factory (Wuhan Chenming)
Technological upgrade for specialty 268,766,579.19 268,766,579.19 185,261,723.30 185,261,723.30
paper project (Wuhan Chenming)
Relocation of Jilin (Jilin Chenming) 2,218,570,285.48 2,218,570,285.48
Magnesite mining 422,798,059.11 422,798,059.11 463,059,536.30 463,059,536.30
(Haicheng Haiming)
Meilun paper making additive project 339,261,614.70 339,261,614.70
(Shouguang Meilun)
Thermal paper upgrade project 228,293,634.55 228,293,634.55 208,582,395.43 208,582,395.43
(Shouguang Art Paper)
Forestry pulp integration project 314,916,775.73 314,916,775.73 130,795,345.46 130,795,345.46
(Huanggang Chenming)
Others 98,697,438.02 98,697,438.02 69,902,994.98 69,902,994.98
Total 3,383,652,916.06 3,383,652,916.06 5,266,031,817.60 5,266,031,817.60
SHANDONG CHENMING PAPER HOLDINGS LIMITED 119
INTERIM
REPORT
14
120
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
13. Construction in progress (Cont’d)
(2) Changes in material construction in progress projects
Unit: RMB
Of which: Capitalisation
Budget (in capitalised rate of the
RMB100 Increase during Transfer to Investment Construction Accumulated interest amount interest amount
Item name million) Opening balance the period fixed asset Other deductions to budget progress capitalised interest for the period for the period Source of fund Closing balance
Railway project (parent company) 2.40 67,825,111.06 27,978,899.93
40% 40% 3,446,622.09 2,170,152.49 6.00% Capital and 95,804,010.99
borrowings
Technology upgrade for white paper board 2.00 57,275,709.38 95,485,948.59 3,740,263.24 75% 75% 1,242,500.00 1,242,500.00 6.00% Capital and 149,021,394.73
projects (parent company) borrowings
Zhanjiang Chenming 700,000 tonne pulp 3.70 267,839,895.73 101,044,311.88 100% 100% 14,858,113.13 4,918,964.39 6.00% Capital and 368,884,207.61
equipment upgrade (Zhanjiang Chenming) borrowings
180,000 tonne paper cup raw paper project 13.22 313,760,579.02 196,107,719.55 39% 39% 32,884,182.19 16,488,909.54 6.00% Capital and 509,868,298.57
(Zhanjiang Chenming) borrowings Self-
190,000 tonne high-end cultural paper project 30.97 284,958,974.38 128,725,948.18 13% 13% 0.00 raised 413,684,922.56
(Zhanjiang Chenming)
Biomass vaporisation upgrade project 2.00 1,073,025.46 43,000,000.00 22% 22% 534,047.82 534,047.82 6.00% Capital and 44,073,025.46
(Zhanjiang Chenming) borrowings
7,800 tonne paper machine press section rebuild 0.76 62,598,886.06 4,363,099.94 55,873,631.80 85% 85% 1,681,490.55 1,290,517.10 6.00% Capital and 11,088,354.20
(Jiangxi Chenming) borrowings
Desulphurisation and denitrification project 0.82 27,249,910.87 35,988,488.47 77% 77% 1,260,639.91 1,260,639.91 6.00% Capital and 63,238,399.34
of power plant (Jiangxi Chenming) borrowings
Packaging paper for food project 18.30 122,625,351.96 241,177,736.43 20% 20% 2,977,505.56 2,212,491.38 6.00% Capital and 363,803,088.39
(Jiangxi Chenming) borrowings
BTMP mechanical pulp production line upgrade 0.97 30,714,727.61 32% 32% 556,008.44 556,008.44 6.00% Capital and 30,714,727.61
for production expansion (Jiangxi Chenming) borrowings
New production line of household paper 4.50 445,390,478.03 35,229,962.47 480,620,440.50 100% 100% 24,167,540.06 4,689,732.39 6.00% Capital and
machine upgrade in Wuhan second factory borrowings
(Wuhan Chenming)
Technological upgrade for specialty paper 2.48 185,261,723.30 83,504,855.89 100% 100% 15,302,273.74 11,697,362.60 6.00% Capital and 268,766,579.19
project (Wuhan Chenming) borrowings
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
13. Construction in progress (Cont’d)
(2) Changes in material construction in progress projects (Cont’d)
Of which: Capitalisation
Budget (in capitalised rate of the
RMB100 Increase during Transfer to Investment Construction Accumulated interest amount interest amount
Item name million) Opening balance the period fixed asset Other deductions to budget progress capitalised interest for the period for the period Source of fund Closing balance
Relocation of Jilin (Jilin Chenming) 23.00 2,218,570,285.48 342,276,552.53 2,560,846,838.01 100% 100% 5,499,999.99
6.00% Capital and
borrowings
Magnesite mining (Haicheng Haiming) 5.00 463,059,536.30 18,163,955.31 12,408,366.49 46,017,066.01 93% 93% 0.00 6.00% Self-raised 422,798,059.11
Meilun paper making additive project 5.50 339,261,614.70 84,678,225.22 423,939,839.92 100% 100% 10,363,647.51 2,660,067.59 6.00% Capital and 0.00
(Shouguang Meilun) borrowings
Thermal paper upgrade project 2.00 208,582,395.43 19,711,239.12 100% 100% 2,696,934.81 1,555,097.36 6.00% Capital and 228,293,634.55
(Shouguang Art Paper) borrowings Self-
Forestry pulp integration project 34.85 130,795,345.46 184,121,430.27 9% 9% 0.00 raised 314,916,775.73
(Huanggang Chenming)
Others 69,902,994.98 51,645,975.66 22,851,532.62 2,740,510.94 110,631.00 6.00% Capital and 98,697,438.02
borrowings
Total 152.47 5,266,031,817.60 1,723,919,077.05 3,560,280,912.58 46,017,066.01 — — 120,212,016.74 51,387,122.01 — — 3,383,652,916.06
Other deductions in construction in progress of Haicheng Haiming were due to the return of government prepayments for demolition.
SHANDONG CHENMING PAPER HOLDINGS LIMITED
INTERIM
REPORT
14
121
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
13. Construction in progress (Cont’d)
(3) Construction progress of material construction in progress
Construction
Item progress Remark
Railway project (parent company) 40% Construction progress was estimated on
the basis of the percentage of investment
to budget
Technology upgrade for white paper board projects 75% Construction progress was estimated on
(parent company) the basis of the percentage of investment
to budget
Zhanjiang Chenming 700,000 tonne pulp equipment 100% Construction progress was estimated on
upgrade (Zhanjiang Chenming) the basis of the percentage of investment
to budget
180,000 tonne paper cup raw paper project 39% Construction progress was estimated on
(Zhanjiang Chenming) the basis of the percentage of investment
to budget
190,000 tonne high-end cultural paper project 13% Construction progress was estimated on
(Zhanjiang Chenming) the basis of the percentage of investment
to budget
14
Biomass vaporisation upgrade project 22% Construction progress was estimated on
(Zhanjiang Chenming) the basis of the percentage of investment
INTERIM to budget
REPORT
7,800 tonne paper machine press section rebuild 85% Construction progress was estimated on
(Jiangxi Chenming) the basis of the percentage of investment
to budget
Desulphurisation and denitrification project 77% Construction progress was estimated on
of power plant (Jiangxi Chenming) the basis of the percentage of investment
to budget
Packaging paper for food project 20% Construction progress was estimated on
(Jiangxi Chenming) the basis of the percentage of investment
to budget
BTMP mechanical pulp production line upgrade 32% Construction progress was estimated on
for production expansion (Jiangxi Chenming) the basis of the percentage of investment
to budget
122 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
13. Construction in progress (Cont’d)
(3) Construction progress of material construction in progress (Cont’d)
Construction
Item progress Remark
New production line of household paper machine 100% Construction progress was estimated on
upgrade in Wuhan second factory the basis of the percentage of investment
(Wuhan Chenming) to budget
Technological upgrade for specialty paper project 100% Construction progress was estimated on
(Wuhan Chenming) the basis of the percentage of investment
to budget
Relocation of Jilin (Jilin Chenming) 100% Construction progress was estimated on
the basis of the percentage of investment
to budget
Magnesite mining (Haicheng Haiming) 93% Construction progress was estimated on
the basis of the percentage of investment
to budget
Meilun paper making additive project 100% Construction progress was estimated on
(Shouguang Meilun) the basis of the percentage of investment
to budget
14
Thermal paper upgrade project 100% Construction progress was estimated on
(Shouguang Art Paper) the basis of the percentage of investment
to budget INTERIM
REPORT
Forestry pulp integration project (Huanggang 9% Construction progress was estimated on
Chenming) the basis of the percentage of investment
to budget
14. Materials for project
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Special materials 35,814,649.31 74,324,074.97 86,982,796.63 23,155,927.65
Special equipment 28,153,418.31 2,569,651.64 30,633,319.68 89,750.27
Total 63,968,067.62 76,893,726.61 117,616,116.31 23,245,677.92
SHANDONG CHENMING PAPER HOLDINGS LIMITED 123
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
15. Disposal of fixed assets
Unit: RMB
Opening Closing
Item carrying amount carrying amount Reasons for transferring to disposal
Environmental protection 242,538,418.36 299,097,057.42 Relocation
relocation of Jilin Chenming
Relocation of Wuhan Chenming 345,643,229.17 345,105,002.19 Relocation
Total 588,181,647.53 644,202,059.61 —
16. Consumable biological assets
Unit: RMB
Opening Increase for Decrease for Closing
Item carrying amount the period the period carrying amount
Forestry
Timber 1,317,141,123.77 77,772,747.71 47,497,827.15 1,347,416,044.33
14
Total 1,317,141,123.77 77,772,747.71 47,497,827.15 1,347,416,044.33
INTERIM
REPORT (1) Consumable biological assets are measured at fair value. The fair value of timber increased by RMB3,868,554.70
due to acquisition, increased by RMB72,936,522.79 due to breeding, decreased by RMB47,497,827.15 due to
disposal, and increased by RMB967,670.22 due to change in fair value.
(2) As of 30 June 2014 there was no significant difference between the fair value and cost of the timbers planted
during the year or unable to form any level of stocking in the consumable biological assets so their carrying
amount was taken as their fair value. The timbers forming a level of stocking were measured at fair value and
their fair value was determined based on the valuation of Golden Standard & Headmen Appraisal and Advisory
Co., Ltd. The consumable biological assets measured at carrying amount as their fair value amounted to
RMB153,509,225.51 and the consumable biological assets measured at assessed value as their fair value
amounted to RMB1,193,906,818.82.
124 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
17. Intangible assets
Particulars of intangible assets
Unit: RMB
Opening Increase for Decrease for Closing
Item book balance the period the period book balance
I. Total original carrying
amount 1,564,887,522.28 17,868,006.43 43,126,878.46 1,539,628,650.25
Land use rights 1,546,569,094.81 17,867,656.43 43,096,348.46 1,521,340,402.78
Software 18,318,427.47 350.00 30,530.00 18,288,247.47
II. Total accumulated
amortisation 199,469,520.02 27,243,687.93 16,272,422.18 210,440,785.77
Land use rights 185,694,876.64 25,628,274.25 16,242,242.18 195,080,908.71
Software 13,774,643.38 1,615,413.68 30,180.00 15,359,877.06
III. Total net carrying amount
of intangible assets 1,365,418,002.26 -9,375,681.50 26,854,456.28 1,329,187,864.48
Land use rights 1,360,874,218.17 -7,760,617.82 26,854,106.28 1,326,259,494.07
Software 4,543,784.09 -1,615,063.68 350.00 2,928,370.41
Land use rights
IV. Total impairment provision
Software 14
Total carrying amount of INTERIM
intangible assets 1,365,418,002.26 -9,375,681.50 26,854,456.28 1,329,187,864.48 REPORT
Land use rights 1,360,874,218.17 -7,760,617.82 26,854,106.28 1,326,259,494.07
Software 4,543,784.09 -1,615,063.68 350.00 2,928,370.41
The amortisation amount was RMB27,243,687.93 during the period.
① The original value of the decreased intangible assets due to disposal of subsidiaries amounted to
RMB25,375,288.95 during the year. The cumulative amortisation of the decreased intangible assets due to
disposal of subsidiaries amounted to RMB16,126,867.74.
② On 30 June 2014, the ownership of intangible assets of carrying amount of RMB319,894,011.92 (31 December
2013: RMB323,501,839.10) was restricted, of which land use rights and fixed assets of carrying amount
of RMB323,501,839.10 were the pledge for long-term borrowings of RMB2,665,050,671.96 (31 December
2013: RMB2,784,334,971.96) (For details, see Note VII. 33) and long-term borrowings due within one year of
RMB270,990,800.00 (31 December 2013: RMB269,313,900.00) (For details, see Note VII. 31). The amortisation of
such land use rights for the current period amounted to RMB3,607,827.18 (31 December 2013: RMB7,215,654.36).
③ The state-owned land use rights obtained by the Group in China were in compliance with PRC laws with a term of
grant of 40-50 years upon receipt.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 125
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
18. Goodwill
Unit: RMB
Impairment
provisions at
Opening book Increase for Decrease for Closing book the end of
Name of investee or item generating goodwill balance the period the period balance the period
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57
Total 20,283,787.17 20,283,787.17
The goodwill of the Company arose from the business combined not under common control during the prior year.
On the balance sheet date, the management of the Company assessed the recoverable amount of cash-generating
unit which results goodwill, in order to determine whether to make provision for impairment loss accordingly. The
recoverable amount of cash-generating unit was determined based on the estimated cash flow in the financial budget
for the next five years by the management, using the steady annual growth rate of the industry of 5% (2013: 5%) as
expected by the market, and the time value of currency was estimated using the discount rate of 8.32% (2013: 8.32%).
The management of the Company expected that no provision for impairment loss was necessary to be made for
goodwill during the reporting period.
14 For methods to test impairment on goodwill, see Note IV. 22.
INTERIM
REPORT
19. Long-term prepaid expenses
Unit: RMB
Opening Increase for Amortisation Other Closing Reasons for
Item balance the period for the period deductions balance other deductions
Woodland expenses 166,383,850.46 1,281,211.98 2,765,259.56 164,899,802.88
Rentals fee for docks 2,154,633.22 23,242.02 2,131,391.20
—
Total 168,538,483.68 1,281,211.98 2,788,501.58 167,031,194.08
126 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
20. Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets and deferred income tax liabilities not stated as the net amount after offsetting
Recognised deferred income tax assets and deferred income tax liabilities
Unit: RMB
Item Closing balance Opening balance
c
Deferred income tax assets:
Deferred income tax assets: 70,537,035.58 76,545,138.40
Provision for impairment of assets 446,404,949.21 391,818,687.83
Deductible loss 22,230,065.73 14,392,382.14
Elimination of unrealised profit arising from intra-group 10,536,818.90 10,652,244.21
Unpaid payables 13,581,276.47 14,244,935.80
c
Sub-total 563,290,145.89 507,653,388.38
c
Deferred income tax liabilities:
The breakdown of unrecognised deferred income tax assets
14
Unit: RMB
Item Closing balance Opening balance INTERIM
REPORT
Deductible temporary differences 1,761,855.60 2,095,852.19
Deductible loss 407,498,352.59 420,230,273.61
Total 409,260,208.19 422,326,125.80
Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as follows
Unit: RMB
Year Closing balance Opening balance Remark
2014 60,626,308.87
2015 37,886,444.37 37,886,444.37
2016 64,240,356.54 64,240,356.54
2017 116,631,374.76 116,631,374.76
2018 140,845,789.07 140,845,789.07
2019 47,894,387.85
Total 407,498,352.59 420,230,273.61 —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 127
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
20. 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)
The breakdown of tax payable differences and deductible differences
Unit: RMB
Amount of temporary differences
The end of The beginning of
Item the period the period
Tax payable differences
Deductible differences
Provision for impairment of assets 304,625,649.61 328,446,526.51
Elimination of unrealised profit arising from intra-group 88,920,262.92 57,569,528.58
Unpaid payables 57,416,699.62 53,895,396.66
Deferred income 67,176,763.36 70,461,516.47
Deductible losses 1,785,619,796.84 1,567,274,751.26
Sub-total 2,303,759,172.35 2,077,647,719.48
14 21. Particulars of provision for impairment of assets
INTERIM Unit: RMB
REPORT
Decrease for the period
Increase for
Item Opening balance the period Reversal Write-off Others Closing balance
I. Provisions for bad debts 297,937,136.69 37,582,138.41 21,267,503.03 366,030.50 7,503,241.48 306,382,500.09
II. Provisions for inventory
impairment 36,472,052.20 36,472,052.20 0.00
III. Provisions for
impairment of
available-for-sale
financial assets 2,589,574.47 1,139,574.47 1,450,000.00
IV. Provisions for
impairment of
fixed assets 26,220,000.00 26,220,000.00
Total 363,218,763.36 37,582,138.41 21,267,503.03 37,977,657.17 7,503,241.48 334,052,500.09
Other deductions in provisions for impairment of assets were due to disposal of Shandong Chenming Xinli Power Co.,
Ltd. and Shouguang Chenming Tianyuan Arboriculture Co., Ltd.
128 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
22. Short-term borrowings
Classification of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
398,617,193.53
Pledged borrowings 280,707,019.89
Guarantee loans 4,534,855,612.98 3,999,962,588.92
Credit loans 6,330,447,317.69 5,420,305,455.40
Discounted loans 720,000,000.00
9,818,885,237.85
Total 11,866,009,950.56
① Guarantee loans were the loans obtained by subsidiaries of the Company from financial institutions when the
Company acted as their guarantor.
② The Company had no short-term borrowings due and outstanding.
23. Bills payable
Unit: RMB
Category Closing balance Opening balance
14
Bank acceptance bills 228,716,908.05 290,403,790.59 INTERIM
REPORT
Total 228,716,908.05 290,403,790.59
Amount to be due in the next accounting period amounted to RMB228,716,908.05.
24. Accounts payable
(1) Particulars of accounts payable
Unit: RMB
Item Closing balance Opening balance
2,251,158,621.76
Within 1 year 2,941,094,036.07
1-2 years 199,785,442.15 240,434,222.13
2-3 years 80,880,278.33 120,073,847.85
Over 3 years 95,747,969.76 83,503,235.40
2,695,169,927.14
Total 3,317,507,726.31
(2) During the reporting period, the accounts payable were not due to any shareholders or related parties holding
over 5% (5% inclusive) voting rights of the Company’s shares
SHANDONG CHENMING PAPER HOLDINGS LIMITED 129
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
24. Accounts payable (Cont’d)
(3) Explanation on significant trade payable for over 1 year
Reason for Repaid after the
Name of creditors Amount being outstanding reporting date
ANDRITZ (CHINA) CO., LTD. 20,114,963.00 Temporarily No
outstanding
SHANDONG NGE LOGISTICS CO., LTD. 9,706,231.34 Temporarily No
outstanding
VOITH INTERNATIONAL TRADE 4,747,703.87 Temporarily No
(SHANGHAI) CO., LTD. outstanding 4,377,011.99
SHANDONG SWAN WATER Temporarily No
ENGINEERING CO., LTD. outstanding
Total 38,945,910.20
25. Advance receipts
(1) Particulars of advance receipts
Unit: RMB
14 Item Closing balance Opening balance
INTERIM
REPORT
Within 1 year 315,615,720.79 425,728,033.93
1-2 years 11,483,660.15 16,704,227.65
Total 327,099,380.94 442,432,261.58
(2) During the reporting period, advance receipts were not due to any shareholders or related parties holding over
5% (5% inclusive) voting rights of the Company’s shares.
(3) Explanation on significant advance receipts for over one year
Reason for not
being carried
Name of creditors Amount forward
TIANJIN XINYI PACKING PRODUCT CO., LTD. 3,324,016.55 No delivery
requirement from
the counterparty
YONG YI ADHESIVE (ZHONGSHAN) CO. LTD. 1,384,668.41 No delivery
requirement from
the counterparty
ZHANJIANG CHEMICAL SERVICE COMPANY 919,024.80 No delivery
requirement from
the counterparty
No delivery
requirement from
DAZHOU TONGCHUAN JINYIN CO., LTD. 728,161.34 the counterparty
Total 6,355,871.10
130 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
26. Staff remuneration payables
Unit: RMB
Opening book Increase for Decrease for Closing book
Item balance the period the period balance
I. Salaries, bonuses, allowance
and subsidies 73,707,512.94 336,025,725.49 345,730,639.51 64,002,598.92
II. Staff welfare 11,052,130.05 11,052,130.05 0.00
III. Social insurance
premium 9,821,268.75 76,734,212.06 76,991,932.74 9,563,548.07
Of which: 1. Medical insurance
premium 7,294,373.22 18,335,068.13 18,219,675.93 7,409,765.43
2. Pension insurance
premium 1,375,018.33 50,549,391.42 50,958,979.19 965,430.56
3. Unemployment
insurance premium 186,679.75 3,482,483.16 3,541,800.95 127,361.96
4. Work-related injury
insurance premium 1,589.18 2,628,546.46 2,554,030.27 76,105.37
5. Maternity insurance
premium 963,608.27 1,738,722.89 1,717,446.41 984,884.75
14
IV. Housing provident funds 5,206,430.44 26,517,949.89 27,818,536.55 3,905,843.78
V. Lay off welfare 22,719,929.36 9,868,876.86 7,445,839.23 25,142,966.99
VI. Non-monetary welfare INTERIM
REPORT
VII. Lay off welfare 12,075.15 12,075.15
VIII. Cash-settled share-based
payment
IX. Others 18,804,595.54 229,235.90 49,326.35 18,984,505.09
Total 130,271,812.18 460,428,130.25 469,088,404.43 121,611,538.00
The delayed payment in respect of staff remuneration payables amounted to RMB0.00.
Union operation costs and employee education costs amounted to RMB7,445,839.23, non-monetary welfare amounted
to RMB0.00 and compensation arising from termination of service amounted to RMB0.00.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 131
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
27. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 20,532,603.43 6,620,418.81
Business tax 1,132,381.06 596,310.07
Enterprise income tax 74,491,436.79 104,402,645.76
Individual income tax 512,409.39 1,780,803.13
Urban maintenance and construction tax 3,454,870.35 1,713,580.49
Land use tax 5,961,895.73 5,495,793.45
Property tax 7,074,400.32 7,824,057.43
Educational surcharges and others 3,175,613.44 446,510.66
Stamp duty 2,778,259.31 1,312,817.07
Total 119,113,869.82 130,192,936.87
28. Interest payable
Unit: RMB
Item Closing balance Opening balance
14
Interest on corporate bonds
229,267,222.25 65,559,777.08
INTERIM
REPORT Interest on medium-term notes 450,083.28 27,455,083.34
Interest on privately placed bonds 16,675,000.00 60,175,000.00
Total 246,392,305.53 153,189,860.42
29. Dividend payable
Unit: RMB
Reason for failure
to pay for
Name of entity Closing balance Opening balance over a year
Dividend for 2013 580,921,640.10
—
Total 580,921,640.10
30. Other payables
(1) Particulars of other payables
Unit: RMB
Item Closing balance Opening balance
Within 1 year 389,933,521.83 419,910,089.94
1-2 years 84,995,822.48 23,967,481.29
2-3 years 11,932,189.97 16,877,980.44
Over 3 years 39,372,899.00 26,081,044.22
Total 526,234,433.28 486,836,595.89
132 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
30. Other payables (Cont’d)
(2) During the reporting period, other payables were not due to any shareholders or related parties holding over 5%
(5% inclusive) voting rights of the Company’s shares.
During the reporting period, no other payables were due to any shareholders or related parties holding over 5% (5%
inclusive) voting rights of the Company’s shares;
For details of amounts due to related parties in other payables, see Note VIII. 5 Related party accounts receivable
and accounts payable.
(3) Explanation on significant other payables for over 1 year
Reason of being Repaid after the
Name of creditors Amount outstanding reporting date
State-owned SHOUGUANG 8,800,000.00 Temporarily No
QINGSHUIPO FARM outstanding 3,500,000.00
CHINA RAILWAY NO. 10 Temporarily No
ENGINEERING GROUP CO., LTD. outstanding 2,400,000.00
GUANGXI CONSTRUCTION ENGINEERING Temporarily No
GROUP NO. 4 CONSTRUCTION outstanding
ENGINEERING CO., LTD.
KEDA (ANHUI) INDUSTRIAL CO., LTD. 2,400,000.00 Temporarily
outstanding
No
14
INTERIM
E.C.H. WILL GMBH 1,991,596.06 Temporarily No REPORT
outstanding
Total 19,091,596.06
(4) Particulars of the significant other payables
Name of creditors Closing balance Nature or details
LIAONING BEIHAI INDUSTRIES GROUP CO., LTD. 33,070,700.00 Shareholder’ loan
to subsidiaries
SHOUGUANG HENGTAI ENTERPRISE 19,831,479.17 Shareholder’ loan
INVESTMENT COMPANY LIMITED to subsidiaries
State-owned SHOUGUANG QINGSHUIPO FARM 8,800,000.00 Open credit
CHINA RAILWAY NO. 10 ENGINEERING GROUP CO., LTD. 3,500,000.00 security deposit
Total 65,202,179.17
SHANDONG CHENMING PAPER HOLDINGS LIMITED 133
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
31. Non-current liabilities due within one year
(1) Particulars of non-current liabilities due within one year
Unit: RMB
Item Closing balance Opening balance
Long-term borrowings due within one year 941,964,400.00 789,115,500.00
Payable bonds due within one year 498,688,952.66
Total 941,964,400.00 1,287,804,452.66
(2) Long-term borrowings due within one year
Long-term borrowings due within one year
Unit: RMB
Item Closing balance Opening balance
Secured borrowings 270,990,800.00 269,313,900.00
Guarantee borrowings 263,333,600.00 175,925,600.00
Credit borrowings 407,640,000.00 343,876,000.00
14
Total 941,964,400.00 789,115,500.00
INTERIM
REPORT
Rollover of overdue borrowings in long-term borrowings due within a year amounted to RMB0.00.
134 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
31. Non-current liabilities due within 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
Date of Amounts in Functional Amounts in Functional
Borrowed by commencement Date of termination Currency Rate (%) foreign currency currency foreign currency currency
The Export-Import Bank of
China Guangdong branch 3 July 2013 2 July 2015 RMB 5.40% 160,000,000.00
China Development Bank
Guangdong branch 3 November 2010 24 March 2023 RMB 5.90% 86,406,900.00
The Export-Import Bank of
China Qingdao branch 20 June 2013 20 June 2015 USD 3.91% 20,000,000.00 123,056,000.00
Sumitomo Mitsui Banking
Corporation (China) Limited 21 Match 2012 30 November 2014 USD 2.31% 30,000,000.00 184,584,000.00
China Development Bank
Guangdong branch 17 March 2010 24 March 2023 USD 3.15% 30,000,000.00 184,584,000.00
The Export-Import Bank of
China Qingdao branch 13 April 2011 12 April 2014 RMB 5.50% 100,000,000.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 RMB 5.90% 86,406,900.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 USD 3.15%
30,000,000.00 182,907,000.00 14
Sumitomo Mitsui Banking INTERIM
Corporation (China) Limited 21 March 2012 30 November 2014 USD 2.31% 40,000,000.00 243,876,000.00 REPORT
Mitsui syndicated loan 11 April 2011 11 March 2014 USD 2.98% 24,000,000.00 146,325,600.00
Total — — — — — 738,630,900.00 — 759,515,500.00
32. Other current liabilities
Unit: RMB
Closing book Opening book
Item balance balance
Deferred income to be amortised within one year 26,989,282.88 25,246,647.62
Short-term commercial paper 3,963,688,888.92 3,853,488,888.90
Total 3,990,678,171.80 3,878,735,536.52
SHANDONG CHENMING PAPER HOLDINGS LIMITED 135
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
32. Other current liabilities (Cont’d)
The breakdown of the above deferred income is as follows:
Item Closing balance Opening balance
Government grants in respect of assets
Special subsidy funds for environmental protection 5,158,730.00 1,693,753.30
Project fund for National technological support scheme 1,092,453.30 164,700.00
Special subsidy fund for Songhuajiang environmental protection project 1,030,000.08 1,030,000.08
Sewage treatment and water conservation reconfiguration project 990,418.60 990,418.60
Financial grants for technological modification project 7,260,000.00 7,260,000.00
Zhanjiang integrated forestry, pulp and paper project 11,305,973.76 13,956,068.49
Others 151,707.14 151,707.15
Total 26,989,282.88 25,246,647.62
33. Long-term borrowings
(1) Types of long-term borrowings
Unit: RMB
14 Item Closing balance Opening balance
INTERIM Secured borrowings 2,936,041,471.96 3,053,648,871.96
REPORT
Guarantee borrowings 386,661,600.00 470,888,400.00
Credit borrowings 1,600,556,035.94 988,444,035.94
Less: long-term borrowings due within one year (see Note VII. 31) 941,964,400.00 789,115,500.00
Total 3,981,294,707.90 3,723,865,807.90
For the category and amounts of secured assets under secured borrowings, please see Note VII. 12 and Note VII.
17.
136 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
33. Long-term borrowings (Cont’d)
(2) Top five long-term borrowings
Unit: RMB
Closing balance Opening balance
Date of Amounts in Functional Amounts in Functional
Borrowed by commencement Date of termination Currency Rate (%) foreign currency currency foreign currency currency
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 USD 3.15% 275,000,000.00 1,692,020,000.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 RMB 5.90% 973,030,671.96
Bank of Communications,
Shouguang Branch 26 March 2014 27 December 2015 RMB 6.15% 200,000,000.00
Bank of Communications,
Shouguang Branch 31 July 2013 30 July 2016 RMB 6.15% 200,000,000.00
The Export-Import Bank of
China Qingdao branch 14 May 2014 14 May 2016 RMB 6.15% 100,000,000.00
Bank of Communications,
Weifang Shouguang Branch 31 July 2013 30 July 2016 RMB 5.51% 200,000,000.00
The Export-Import Bank of
China Qingdao branch 8 July 2013 8 July 2015 USD 2.31% 20,000,000.00 121,938,000.00
China Development Bank
Guangdong branch 25 March 2008 24 February 2023 RMB 5.90% 1,016,233,971.96
China Development Bank
Guangdong branch 25 March 2008 24 February 2023 USD 3.15% 290,000,000.00 1,768,101,000.00 14
The Export-Import INTERIM
Bank of China 1 July 2013 1 July 2015 RMB 5.68% 160,000,000.00 REPORT
Total — — — — — 3,165,050,671.96 — 3,266,272,971.96
34. Bonds payable
Unit: RMB
Opening Interest accrued Interest paid Closing
Bond name Nominal value Issue date Term of bond Issued amount interest payable for the period for the period interest payable Closing balance
11 Chenming debt 2,000,000,000.00 6 July 2011 5 years 1,982,000,000.00 58,838,888.89 107,350,000.02
166,188,888.91 1,992,051,730.24
12 Chenming debt 3,800,000,000.00 26 December 2012 5 years 3,773,400,000.00 3,578,333.33 59,500,000.01 63,078,333.34 3,780,723,230.13
Total
5,755,400,000.00 62,417,222.22 166,850,000.03
229,267,222.25 5,772,774,960.37
SHANDONG CHENMING PAPER HOLDINGS LIMITED 137
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
35. Long-term payables
Classification of long-term payables
Borrowing
Entity Term conditions Closing balance Opening balance
Nanchang Economic and December 2013 – — 128,000,000.00 60,000,000.00
Technological January 2019
Development
Zone Investment
Holdings Limited
Total 128,000,000.00 60,000,000.00
36. Special accounts payable
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance Note
Environmental protection relocation of Jilin Chenming 971,805,561.39 100,000,000.00 23,717,512.55 1,048,088,048.84
14 Huanggang Chenming integrated forestry, pulp and paper
project 100,000,000.00 100,000,000.00
INTERIM
REPORT
Total 971,805,561.39 200,000,000.00 23,717,512.55 1,148,088,048.84 —
During the reporting period, a special government grant of RMB100,000,000,000.00 for Huanggang Chenming
integrated forestry, pulp and paper project was received from the Finance Bureau of Huanggang City; pursuant to
the relocation compensation agreement entered into with China Development Jilin Co., Ltd., the Company received
relocation compensation of RMB100,000,000.00. The Company utilised the relocation compensation to offset loss on
disposal of fixed assets of RMB12,467,512.55 and amortisation of RMB11,250,000.00.
37. Other Non-current liabilities
Unit: RMB
Item Closing balance Opening balance
Deferred income 485,100,150.79 468,354,064.53
Medium-term notes 1,089,665,449.15 1,088,060,197.75
Privately placed bonds 1,491,300,519.69 1,489,103,380.29
Of which: due within 1 year —
Due within 1-2 years 1,500,000,000.00
Due within 2-5 years 1,100,000,000.00 2,600,000,000.00
Unamortised issuance costs -19,034,031.16 -22,836,421.96
Total 3,066,066,119.63 3,045,517,642.57
138 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
37. Other Non-current liabilities (Cont’d)
Explanation on other non-current liabilities
Among which, the breakdown of deferred income is as follows:
Amounts included in
non-operating
New grants income during
Liabilities item Opening balance for the period the period Other changes Closing balance
Government grants in respect of assets
Special subsidy funds for environmental protection 67,038,714.68 30,000,000.00 2,454,100.00 94,584,614.68
Project fund for National technological support scheme 7,440,725.00 446,226.65 6,994,498.35
Special subsidy fund for Songhuajiang
environmental protection project 26,913,079.80 515,000.04 26,398,079.76
Modification of alkaline recycling system 4,883,749.85 4,883,749.85
Sewage treatment and water conservation
reconfiguration project 11,909,151.27 495,209.30 11,413,941.97
Financial grants for technological modification project 100,544,210.53 1,709,463.54 98,834,746.99
Zhanjiang integrated forestry, pulp and paper project 273,646,753.33 5,815,425.38 267,831,327.95
Others 1,224,327.69 75,853.57 1,148,474.12
Deferred income to be amortised within 1 year 25,246,647.62 25,246,647.62
Total 468,354,064.53 30,000,000.00 11,511,278.48 — 468,354,064.53
14
INTERIM
REPORT
Note: Deferred income of RMB30,000,000.00 was received during the period. Deferred income amortisation recognised through profit or loss
was RMB11,511,278.48.
38. Share capital
Item Opening balance Change during the year (+/-) Closing balance
Shares
converted
Amount % New issue Bonus shares from reserve Others Sub-total Amount %
I. Restricted shares
Shares held by the Senior Management 8,166,219 0.41% 75,000 75,000 8,241,219 0.42%
Total restricted shares 8,166,219 0.41% 75,000 75,000 8,241,219 0.42%
II. Non-restricted shares
1.RMB ordinary shares (A shares) 1,105,112,237 55.94% -75,000 -75,000 1,105,037,237 57.07%
2.Domestic listed foreign shares (B shares) 470,923,511 23.84% 0 470,923,511 24.32%
3.Overseas listed foreign shares (H shares) 391,270,000 19.81% -39,066,500 -39,066,500 352,203,500 18.19%
Total non-restricted shares 1,967,305,748 99.59% -39,141,500 -39,141,500 1,928,164,248 99.58%
III. Total number of shares 1,975,471,967 100.00% -39,066,500 -39,066,500 1,936,405,467 100.00%
Note: For the reason of changes (Increase/decrease) during the period, please refer to VII. Changes in Share Capital and Shareholders.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 139
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
39. Treasury shares
Increase during Decrease during
Item Opening balance the period the period Closing balance
Repurchase of H shares
of the Company 30,954,891.40 74,726,591.95 105,681,483.35
Total 30,954,891.40 74,726,591.95 105,681,483.35
40. Capital reserves
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Capital premium (share premium) 5,534,359,521.73 11,042,366.94 66,614,983.35 5,478,786,905.32
Other capital reserves 670,322,507.21 27,200.00 670,295,307.21
Total 6,204,682,028.94 11,042,366.94 66,642,183.35 6,149,082,212.53
14 41.
Surplus reserve
INTERIM Unit: RMB
REPORT
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
Total 1,132,116,106.40 1,132,116,106.40
Pursuant to the Companies Law and the Articles of Association, the Company transferred 10% of the net profit to
the statutory surplus reserves. There was no need to transfer if the accumulated amounts of the statutory reserves
exceeded 50% of the Company’s registered capital.
The Company can transfer the discretionary surplus reserve upon the transfer of statutory surplus reserve. Once
approved, the discretionary surplus reserve can be used to offset loss for prior years or increase the share capital.
140 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
42. Retained profit
Unit: RMB
Proportion of
appropriation
Item Amounts or allocation
Retained profit as at the end of the prior year before adjustment 4,741,638,941.58 —
Retained profit as at the beginning of the year after adjustment 4,741,638,941.58 —
Plus : Net profit for year attributable to shareholders of the parent company 242,379,341.87 —
Ordinary dividend payable 580,921,640.10
Retained profit as at the end of the period 4,403,178,396.50 —
Adjustments to the retained profit breakdown as at the beginning of the year:
(1) The effect of the retrospective adjustments arising from Accounting Standards for Business Enterprises and their
new related requirements on the retained profit as at the beginning of the year amounted to RMB0.00.
(2) The effect of changes in accounting policies on the retained profit as at the beginning of the year amounted to
RMB0.00.
(3) The effect of corrections of significant accounting errors on the retained profit as at the beginning of the year
amounted to RMB0.00. 14
INTERIM
(4) The effect of the change of the scope of combination under common control on the retained profit as at the REPORT
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.
43. Revenue and operating costs
(1) Revenue and operating costs
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Revenue from principal activities 8,961,621,363.25 9,829,074,992.64
Revenue from other activities 120,399,215.76 198,826,365.79
Operating costs 7,378,998,628.31 8,251,349,814.35
SHANDONG CHENMING PAPER HOLDINGS LIMITED 141
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
43. Revenue and operating costs (Cont’d)
(2) Principal activities (by industries)
Unit: RMB
Amounts during the period Amounts during the prior period
Industry name Revenue Operating costs Revenue Operating costs
I. Machine-made paper 8,545,843,565.79 7,004,509,499.62 8,848,173,025.18 7,326,007,309.03
II. Electricity and steam 198,681,459.85 144,716,153.44 803,178,978.83 667,582,441.74
III. Construction materials 94,627,856.04 76,921,331.07 109,279,405.02 91,159,060.57
IV. Paper chemicals 42,387,862.87 27,967,694.33
V. Hotel 14,901,686.03 3,398,372.51 19,689,151.28 4,853,289.68
VI. Others 65,178,932.67 63,565,414.91 48,754,432.33 39,934,984.09
Total 8,961,621,363.25 7,321,078,465.88 9,829,074,992.64 8,129,537,085.11
(3) Principal activities (by product)
Unit: RMB
Amounts during the period Amounts during the prior period
14 Product name Revenue Operating costs Revenue Operating costs
INTERIM
REPORT Light weight coated paper 348,081,994.57 316,335,859.11 501,851,702.17 426,670,112.16
Duplex press paper 1,441,112,796.55 1,134,551,552.38 1,371,028,527.11 1,134,137,789.43
Writing paper 82,378,061.06 62,326,659.34 185,288,743.85 161,211,366.92
Coated paper 2,185,259,143.15 1,820,063,708.25 2,160,140,193.34 1,877,854,601.69
News press paper 519,433,041.74 385,119,601.80 774,970,941.13 569,464,168.35
Paperboard 375,085,910.27 356,635,077.75 75,457,462.04 70,449,307.72
White paper board 940,339,733.70 758,413,648.95 1,101,886,281.24 875,218,954.34
Other machine-made paper 2,654,152,884.75 2,171,063,392.04 2,677,549,174.30 2,211,001,008.42
Electricity and steam 198,681,459.85 144,716,153.44 803,178,978.83 667,582,441.74
Building materials 94,627,856.04 76,921,331.07 109,279,405.02 91,159,060.57
Paper chemicals 42,387,862.87 27,967,694.33
Hotel 14,901,686.03 3,398,372.51 19,689,151.28 4,853,289.68
Others 65,178,932.67 63,565,414.91 48,754,432.33 39,934,984.09
Total 8,961,621,363.25 7,321,078,465.88 9,829,074,992.64 8,129,537,085.11
(4) Principal activities (by geographical areas)
Unit: RMB
Amounts during the period Amounts during the prior period
Region Revenue Operating costs Revenue Operating costs
Mainland China 7,170,230,465.09 5,592,480,772.13 8,269,892,081.97 6,674,839,221.55
Other countries and regions 1,791,390,898.16 1,728,597,693.75 1,559,182,910.67 1,454,697,863.56
Total 8,961,621,363.25 7,321,078,465.88 9,829,074,992.64 8,129,537,085.11
142 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
43. Revenue and operating costs (Cont’d)
(5) Revenue from top 5 customers of the Company
Unit: RMB
Percentage of the
Revenue from total revenue of
Name of customer principle activities the Company (%)
INTERNATIONAL FOREST PRODUCTS CORPORATIN 200,456,360.93 2.21%
SHANGHAI YAOJI PLAYING CARD CO., LTD. 186,682,243.78 2.06%
ANHUI TIME SOURCE CORPORATION 148,237,093.34 1.63%
GUANGZHOU QIRUN PAPER CO., LTD. 86,480,863.05 0.95%
SUN HING PAPER COMPANY LIMTIED 77,284,658.57 0.85%
Total 699,141,219.67 7.70%
44. Business taxes and surcharges
Unit: RMB
Amounts during Amounts during
Item the period the prior period Calculation standard 14
INTERIM
Business tax 7,697,521.89 5,832,299.61 Business tax calculated at 3%-5% of REPORT
taxable revenue
Urban maintenance and 15,024,834.72 18,277,248.56 Calculated at 7% of actual payment of
construction tax turnover tax
Educational surcharges 10,916,129.06 12,894,018.95 Calculated at 2%-3% of actual
payment of turnover tax
Water engineering funds 1,762,616.71 1,903,790.37
Others 99,365.40 60,150.50
Total 35,500,467.78 38,967,507.99 —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 143
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
45. Selling and distribution expenses
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Wages and surcharges 57,340,886.65 67,659,759.74
Depreciation expenses 6,550,079.09 10,612,838.57
Office expenses 2,862,634.37 2,999,329.34
Utilities expenses 2,966,516.84 3,115,321.98
Transportation expenses 362,833,373.61 387,964,117.84
Cargo handling charges 10,095,500.94 12,327,966.67
Travel expenses 18,572,630.54 19,279,665.75
Business hospitality expenses 26,772,603.81 30,603,367.66
Warehouse expenses 2,282,782.55 5,252,715.19
Rental expenses 3,481,975.81 3,553,679.69
Others 30,834,827.29 27,029,980.02
Total 524,593,811.50 570,398,742.45
46. General and administrative expenses
14
Unit: RMB
INTERIM
REPORT
Amounts during Amounts during
Item the period the prior period
Wages and surcharges 106,906,249.56 116,586,345.12
Labour insurance premium 14,862,809.78 18,660,014.18
Insurance premium 8,827,642.09 10,985,773.65
Depreciation expenses 26,501,576.92 29,118,564.28
Waste disposal expenses 12,254,789.79 17,851,951.10
Hospitality expenses 9,912,486.52 11,306,119.68
Amortisation of intangible assets 16,447,714.13 15,077,529.50
Technological development expenses 186,069,011.06 154,034,416.74
Tax 45,082,265.72 32,176,223.99
Production interruption loss 12,826,530.73 118,765,772.80
Others 60,442,805.33 77,961,242.94
Total 500,133,881.63 602,523,953.98
144 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
47. Finance expenses
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Interest expenses 738,288,648.90 760,230,067.01
Less: interest income 110,234,151.75 183,899,985.11
Less: capitalised interest amount 108,362,453.17 49,505,352.38
Foreign exchange gains and losses 67,827,125.18 -72,465,754.66
Less: capitalised foreign exchange gains and losses amount
Others 39,092,619.31 32,050,142.93
Total 626,611,788.47 486,409,117.79
48. 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
Biological assets measured at fair value 967,670.22 9,229,042.51
14
Total 967,670.22 9,229,042.51 INTERIM
REPORT
49. Investment income
(1) Breakdown of investment income
Unit: RMB
Amounts during Amounts during
Source of gain on change in fair value the period the prior period
Income from long-term equity investments accounted for
using the equity method -1,890,171.00 421,036.92
Investment gain on disposal of long-term equity investments -8,613,803.41 5,176,688.18
Others 31,722,222.23 -414,540.00
Total 21,218,247.82 5,183,185.10
SHANDONG CHENMING PAPER HOLDINGS LIMITED 145
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
49. Investment income (Cont’d)
(2) Income from long-term equity investments accounted for using the equity method
Unit: RMB
Amounts Amounts
during the during the
Investee period prior period Reason for change
Jiangxi Jiangbao Media Colour Printing Co. Ltd. -74,651.88 -150,149.58 Change in revenue of
the investee
Shanghai Anzhou New Energy Co., Ltd. 571,186.50 Change in revenue of
the investee
Wuhan Chenming Wan Xing
Real Estate Co., Ltd. -1,815,519.12 Change in revenue of
the investee
Total -1,890,171.00 421,036.92 —
50. Loss on impairment of assets
Unit: RMB
14
Amounts during Amounts during
INTERIM Item the period the prior period
REPORT
I. Loss on bad debts 16,314,635.37 -19,652,424.87
II. Loss on fixed asset impairment 15,000,000.00
Total 16,314,635.37 -4,652,424.87
51. Non-operating income
(1) Non-operating income
Unit: RMB
Amounts included
in current
Amounts during Amounts during extraordinary
Item the period the prior period gains and losses
Total gain on disposal of non-current assets 82,529,609.62 7,414,212.57 82,529,609.62
Of which: Gain on disposal of fixed assets 2,063,679.26 7,414,212.57 2,063,679.26
Gain on intangible assets 80,465,930.36 80,465,930.36
Gain on debt restructuring 3,061,355.81 39,984.11 3,061,355.81
Government grants 101,272,867.41 118,562,462.37 100,763,109.28
Income from Wuhan relocation 35,817,460.19 146,956,203.92 35,817,460.19
Special payables for Jilin 23,895,319.77 52,626,833.66 23,895,319.77
Business combination not under
common control
Others 7,134,759.98 10,705,664.53 7,134,759.98
Total 253,711,372.78 336,305,361.16 253,201,614.65
146 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
51. Non-operating income (Cont’d)
(2) Government grants included in the current gains and losses
Unit: RMB
Amounts during Amounts during
Grants item the period the prior period
Expansion grants 100,763,109.28 112,054,796.04
Value-added tax refund 509,758.13 6,507,666.33
Total 101,272,867.41 118,562,462.37
52. Non-operating expenses
Unit: RMB
Amounts included
in current
Amounts during Amounts during extraordinary
Item the period the prior period gains and losses
Total loss on disposal of non-current assets 8,764,674.26 35,870,782.59 8,764,674.26
Of which: loss on disposal of fixed assets 8,764,674.26 35,870,782.59 8,764,674.26 14
Loss on debt restructuring 2,437,729.14 2,437,729.14 INTERIM
REPORT
Others 2,825,702.47 3,669,844.79 2,825,702.47
Total 14,028,105.87 39,540,627.38 14,028,105.87
53. Income tax expenses
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Current income tax calculated according to tax laws and relevant rules 89,458,831.33 151,457,198.79
Adjustment to deferred income tax -55,425,786.21 -68,585,992.53
Total 34,033,045.12 82,871,206.26
SHANDONG CHENMING PAPER HOLDINGS LIMITED 147
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
54. Calculation of basic earnings per share and diluted earnings per share
The basic earnings per share is computed by dividing the net profit for the period attributable to ordinary shareholders
of the Company by the number of weighted average ordinary shares in issue. The number of newly issued ordinary
shares is confirmed starting from the day of consideration receivables (generally the offering date of stock) according to
the specific terms in the offering agreement.
The numerator of the diluted earnings per share is the net profit for the period attributable to ordinary shareholders of
the Company, which is confirmed after adjusting the following factors: (1) interests of diluted potential ordinary shares
recognised as expenses for the period; (2) gains or expenses arising from the transfer of diluted potential ordinary
shares; and (3) effect of income tax due to the above adjustment.
The denominator of diluted earnings per share is the sum of the followings: (1) weighted average number of ordinary
shares in issue of the parent company in the basic earnings per share; and (2) average weighted number of the
increased ordinary shares during the transfer of the estimated diluted potential ordinary shares to ordinary shares.
For the purpose of calculating the average weighted number of the increased ordinary shares during the transfer of the
estimated diluted potential ordinary shares to ordinary shares in issue, diluted potential ordinary shares issued during
the prior period were assumed to be transferred as at the beginning of the current period while diluted potential ordinary
shares issued in the current period were assumed to be transferred on offering date.
(1) Basic earnings per share and diluted earnings per share over the periods
14
Profit for the reporting period Amounts during the period Amounts during the prior period
Basic earnings Diluted earnings Basic earnings Diluted earnings
INTERIM per share per share per share per share
REPORT
Net profit attributable to ordinary
shareholders of the Company 0.12 0.12 0.16 0.16
Net profit after extraordinary gains
and losses attributable to ordinary
shareholders of the Company 0.03 0.03 0.07 0.07
(2) Calculation of earnings per share and diluted earnings per share
① Net profit for the period attributable to ordinary shareholders for the purpose of calculating basic earnings
per share are as follows:
Amounts during Amounts during
Item the period the prior period
Net profit for the period attributable to ordinary shareholders 242,379,341.87 333,409,511.73
Of which: net profit attributable to continuing operations 242,379,341.87 333,409,511.73
net profit attributable to discontinued operations
Net profit after extraordinary gains and losses attributable
to ordinary shareholders of the Company 57,813,473.27 134,539,548.74
Of which: net profit attributable to continuing operations 57,813,473.27 134,539,548.74
net profit attributable to discontinued operations
148 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
54. Calculation of basic earnings per share and diluted earnings per share (Cont’d)
(2) Calculation of earnings per share and diluted earnings per share (Cont’d)
② For the purpose of calculating earnings per share, the denominator is the weighted average of outstanding
ordinary shares. The calculation is as follows:
Amounts during Amounts during
Item the period the prior period
Number of outstanding ordinary shares as at the
beginning of the period 1,963,987,467.00 2,062,045,941.00
Add: number of weighted ordinary shares
missued during the period
Less: number of weighted ordinary shares
repurchased during the period 27,582,000.00 17,687,393.00
Number of outstanding ordinary shares as at the
end of the period 1,936,405,467.00 2,044,358,548.00
55. Other comprehensive income
Unit: RMB
Amounts during Amounts during 14
Item the period the prior period INTERIM
REPORT
Translation difference of financial statements denominated in
foreign currency -2,278,577.92 8,108,866.56
Sub-total -2,278,577.92 8,108,866.56
Reclassification to net profit or loss of others charged to
mother comprehensive income during the prior period -27,200.00
Sub-total -27,200.00
Total -2,305,777.92 8,108,866.56
56. Notes to the cash flow statements
(1) Cash received relating to other operating activities
Unit: RMB
Item Amounts
Finance support fund 88,938,673.30
Interest income 110,234,151.75
Open credit, and income from default penalty and fine 37,124,216.38
Total 236,297,041.43
SHANDONG CHENMING PAPER HOLDINGS LIMITED 149
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
56. Notes to the cash flow statements (Cont’d)
(2) Cash paid relating to other operating activities
Unit: RMB
Item Amounts
Expense and open credit 648,673,938.42
Total 648,673,938.42
(3) Cash received relating to other investing activities
Unit: RMB
Item Amounts
Compensation for demolition in Jilin 100,000,000.00
Government grants 30,000,000.00
Special subsidy funds 100,000,000.00
Total 230,000,000.00
14
INTERIM (4) Cash paid relating to other investing activities
REPORT
Unit: RMB
Item Amounts
Entrusted loans to external entities 1,000,000,000.00
Total 1,000,000,000.00
(5) Cash received relating to other financing activities
Unit: RMB
Item Amounts
Interest-free loan received by Jiangxi Chenming from the government 68,000,000.00
Total 68,000,000.00
(6) Cash paid relating to other financing activities
Unit: RMB
Item Amounts
Acquisition of personal equity interest by Chenming Power 21,055,491.00
Increase in restricted bank deposits 624,525,528.54
Total 645,581,019.54
150 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
57. Supplementary information on cash flow statements
(1) Supplementary information on cash flow statement
Unit: RMB
Amounts during Amounts during
Supplementary information the period the prior period
1.Reconciliation of net profit as cash flows from
operating activities: — —
Net profit 227,703,505.78 311,210,401.87
Plus: Provision for impairment of assets 16,314,635.37 -4,652,424.87
Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of productive biological assets 690,604,514.36 659,808,296.18
Amortisation of intangible assets 27,243,687.93 14,807,626.85
Amortisation of long-term prepaid expenses 2,788,501.58 3,326,372.72
Loss on disposal of fixed assets, intangible assets and
other long-term assets (“-” denotes gain) -73,764,935.36 -54,880.45
Loss on changes in fair value (“-” denotes gain) -967,670.22 -9,229,042.51
Finance expenses (“-” denotes gain) 738,288,648.90 703,169,573.91
Investment loss (“-” denotes gain) -21,218,247.82 -5,183,185.10
Decrease in deferred income tax assets (“-” denotes increase) -55,636,757.52 -51,025,782.11
Decrease in inventories (“-” denotes increase) -393,235,076.93 321,954,897.70 14
Decrease in consumable biological assets(“-” denotes increase) -29,307,250.34 -82,507,322.10, INTERIM
Decrease in operating receivables (“-” denotes increase) -27,817,205.10 -571,423,611.99 REPORT
Increase in operating payables (“-” denotes decrease) 184,699,910.50 -383,265,677.15
Net cash flows from operating activities 1,285,696,261.13 906,935,242.95
2.Major investing and financing activities not
involving cash settlements: — —
3.Net change in cash and cash equivalents: — —
Cash balance at the end of the period 911,352,831.14 1,598,747,729.74
Less: cash balance at the beginning of the period 726,532,928.96 2,343,550,185.45
Net increase in cash and cash equivalents 184,819,902.18 -744,802,455.71
SHANDONG CHENMING PAPER HOLDINGS LIMITED 151
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
57. Supplementary information on cash flow statements (Cont’d)
(2) Relevant information with respect to acquisition or disposal of subsidiaries and other operating
units during the reporting period
Unit: RMB
Amounts during Amounts during
Supplementary information the period the prior period
I. Relevant information with respect to acquisition of
subsidiaries and other operating units — —
II. Relevant information with respect to disposal of
subsidiaries and other operating units: — —
1.Consideration from disposal of subsidiaries and
other operating units 76,194,000.00 416,016,016.71
2.Cash and cash equivalents received from disposal of
subsidiaries and other operating units 76,194,000.00 416,016,016.71
Less: cash and cash equivalents held by subsidiaries and
other operating units 1,158,788.59 8,117,571.18
3.Net cash received from disposal of subsidiaries and
other operating units 75,035,211.41 407,898,445.53
14 4.Net assets of subsidiaries disposed of
Current assets
166,099,869.20
73,281,626.81
463,727,948.34
410,280,305.40
INTERIM
REPORT Non-current assets 137,643,679.50 463,265,373.67
Current liabilities 44,825,437.11 405,624,159.31
Non-current liabilities 4,193,571.42
(3) Cash and cash equivalents composition
Unit: RMB
Amounts during Amounts during
Item the period the prior period
I. Cash 911,352,831.14 726,532,928.96
Of which: Treasury cash 2,153,991.53 1,333,503.27
Bank deposit that can be used for payment at any time 909,198,839.61 725,199,425.69
III. Balance of cash and cash equivalent at end of period 911,352,831.14 726,532,928.96
152 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VIII. Related parties and related party transactions
1. Parent company of the Company
Shareholding of Voting right of Ultimate
Registered the parent the parent company controlling
Place of Legal capital company on on the Company party of Organisation
Name of parent company Relationship Company type incorporation representative Business nature (RMB0,000) the Company (%) (%) the Company code
Shouguang Chenming Holdings Co., Ltd. Controlling Limited liability Shouguang City Chen Hongguo Investment in manufacture of 168,542.00 15.13% 15.13% State-owned 78348518-9
shareholder company paper, electricity, steam and Assets Supervision
arboriculture and Administration
Office of
Shouguang City,
2. Information on subsidiaries, joint ventures and associates of the Company
For details please refer to Note VI. 1. Subsidiaries and Note VII. 8, 9 and 10.
3. Information on other related parties of the Company
Name of other related parties Relationship with the Company Organisation code
Shouguang Hengtai Enterprise Investment A company invested by the senior management 56251690-6
Company Limited of the Company
4. Related party transactions
(1) Table on sales of goods and provision of services 14
INTERIM
Unit: RMB REPORT
Amounts during the period Amounts during the prior period
Pricing principle of related As a percentage of As a percentage of
Details of related party transactions and similar transaction similar transaction
Related party party transactions decision making process Amounts amounts (%) Amounts amounts (%)
Anhui Time Sales of paper Market price 148,237,093.34 2.15% 86,823.93 0
Source Corporation
SHANDONG CHENMING PAPER HOLDINGS LIMITED 153
IX Financial Report
VIII. Related parties and related party transactions (Cont’d)
4. Related party transactions (Cont’d)
(2) Guarantees provided for related parties
Unit: RMB
Whether
performance of
Amounts Starting date Expiry date guarantee is
Guarantor Party being guaranteed under guarantee of guarantee of guarantee completed
The Company Huanggang Chenming Arboriculture Co., Ltd. 29,600,000.00 19 September 2011 18 September 2014 No
The Company Huanggang Chenming Arboriculture Co., Ltd. 26,000,000.00 27 June 2012 26 June 2015 No
The Company Shouguang Meilun Paper Co., Ltd. 49,222,400.00 7 March 2014 4 July 2014 No
The Company Shandong Chenming Paper Sales 599,833,143.79 15 May 2014 9 December 2014 No
Company Limited
The Company Shandong Chenming Paper Sales 482,082,540.84 20 May 2014 5 June 2015 No
Company Limited
The Company Shandong Chenming Paper Sales 74,611,200.00 28 May 2014 28 May 2015 No
Company Limited
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 73,833,600.00 13 November 2013 13 November 2015 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 61,528,000.00 16 June 2014 15 June 2016 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 160,000,000.00 3 July 2013 3 July 2015 No
14 The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 14 January 2014 11 July 2014 No
INTERIM The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 23 July 2013 22 July 2014 No
REPORT The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 12 August 2013 11 August 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 28,000,000.00 26 March 2014 25 August 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 4 September 2013 3 September 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 5 September 2013 4 September 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 15 November 2013 14 November 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 11 September 2013 10 September 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,000,000.00 27 September 2013 26 September 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 12 November 2013 27 October 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 7,088,025.60 18 April 2014 18 July 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 8,828,577.29 27 March 2014 27 August 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 15,790,545.92 06 March 2014 02 September 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 15,530,010.00 28 March 2014 27 August 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,702,250.00 14 February 2014 13 August 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 16 May 2014 8 November 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 25 November 2013 24 November 2014 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 13 February 2014 23 January 2015 No
The Company Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 6 June 2014 5 June 2015 No
Zhanjiang Chenming Guangdong Huirui Investment Co., Ltd. 40,000,000.00 28 November 2013 27 November 2015 No
Pulp & Paper
Co., Ltd.
154 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VIII. Related parties and related party transactions (Cont’d)
4. Related party transactions (Cont’d)
(3) Joint investment of the Company and related parties
Contribution by
Shouguang Hengtai Contribution by
Contribution by Enterprise Investment non-related
Name of investee the Company Company Limited shareholder Registered capital Business nature
Haicheng Haiming Mining RMB144.00 million RMB24.00 million RMB72.00 million RMB240.00 million Processing and sales
Company Limited of magnetite and talc
As at 30 June 2014, the total assets, total liabilities and net assets of Haicheng Haiming Mining amounted to
RMB448,642,174.81, RMB208,642,174.81 and RMB240,000,000.00, respectively.
5. Related party accounts receivable and accounts payable
Accounts receivable of the Company due from related parties
Unit: RMB
At the end of the period At the beginning of the period
Bad debt Bad debt
Item Related party Book balance provision Book balance provision
Accounts receivable Anhui Time Source Corporation 46,222,705.19 2,311,135.26 16,580,021.04 829,001.05 14
Other receivables Wuhan Chenming Wan Xing Real Estate Co., Ltd. 579,535,749.56 551,964,609.01 INTERIM
REPORT
Other receivables Arjo Wiggins Chenming Specialty Paper Co., Ltd. 1,290,901.12 1,290,901.12 1,290,901.12 1,290,901.12
Accounts payables of the Company due to related parties
Unit: RMB
At the end of At the beginning
Item Related parties the period of the period
Other payables Shouguang Hengtai Enterprise Investment 19,831,479.17 18,668,679.17
Company Limited
SHANDONG CHENMING PAPER HOLDINGS LIMITED 155
IX Financial Report
IX. Contingency
As of 30 June 2014, no significant contingent event had to be disclosed by the Group.
X. Commitments
1. Significant commitments
(1) Capital commitment
Unit: RMB
At the end of At the beginning
Item the period of the period
Contracted but not yet recognised in the financial statements
– Commitments in relation to acquisition and construction of
long-term assets 2,041,754,503.01 2,437,963,978.39
– Huirui BT Project 3,519,192,334.81 3,637,017,103.35
– Commitments in relation to external investments 6,028,000.00
Total 5,560,946,837.82 6,081,009,081.74
(2) Operating lease commitments
14 As at the balance sheet date, the Company entered into irrevocable operating lease contracts with external
companies as follows:
INTERIM
REPORT
Unit: RMB
At the end of At the beginning
Item the period of the period
Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 17,470,362.41 21,250,728.73
The second year after balance sheet date 13,814,410.50 13,786,011.70
The third year after balance sheet date 13,764,830.38 13,814,410.50
In the years thereafter 567,591,252.97 572,915,704.51
Total 612,640,856.26 621,766,855.44
2. Performance of commitments for the prior period
As of 30 June 2014, no significant commitments had to be disclosed by the Group.
156 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XI. Post-balance sheet date events
It is not necessary for the Company to separately explain post-balance sheet date events.
XII. Other material matters
1. Assets and liabilities measured at fair value
Unit: RMB
Profit or loss Accumulated
from change change in fair Provision for
in fair value value charged impairment
Item Opening balance for the period to equity during the period Closing balance
Financial assets
Consumable biological assets 1,317,141,123.77 967,670.22 1,347,416,044.33
Aggregate amount 1,317,141,123.77 967,670.22 1,347,416,044.33
Financial liabilities 0.00 0.00
14
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 157
IX Financial Report
XIII. Notes to major financial statement items of the parent company
1. Accounts receivable
(1) Accounts receivable
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amounts Percentage (%) Amounts Percentage (%) Amounts Percentage (%) Amounts Percentage (%)
Accounts receivable collectively
provided for bad debt
Risk-free portfolio 5,447,921,676.55 99.87% 3,810,425,562.91 99.77%
General-risk portfolio 6,997,192.93 0.13% 4,391,826.02 62.77% 8,776,614.79 0.23% 4,547,645.65 51.82%
Portfolio sub-total 5,454,918,869.48 100.00% 4,391,826.02 0.08% 3,819,202,177.70 100.00% 4,547,645.65 0.12%
Total 5,454,918,869.48 — 4,391,826.02 — 3,819,202,177.70 — 4,547,645.65 —
Accounts receivable stated according to ageing
Unit: RMB
Closing balance Opening balance
Item Amounts Percentage (%) Amounts Percentage (%)
14
Within 1 year 5,450,664,167.94 99.92% 3,814,870,507.13 99.89%
1 to 2 years 6,969.03
INTERIM 2 to 3 years
REPORT
Over 3 years 4,254,701.54 0.08% 4,324,701.54 0.11%
Total 5,454,918,869.48 100.00% 3,819,202,177.70 100.00%
Accounts receivable individually significant and separately provided for bad debt as at the end of the period
□ Applicable √ Not applicable
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the ageing
method
√ Applicable □ Not applicable
Unit: RMB
Closing balance Opening balance
Book balance Bad debt Book balance Bad debt
Ageing Amounts Percentage (%) provision Amounts Percentage (%) provision
Within 1 year
Of which: — — — — — —
Within 1 year 2,742,491.39 39.19% 137,124.57 4,444,944.22 50.65% 222,247.21
Sub-total of within 1 year 2,742,491.39 39.19% 137,124.57 4,444,944.22 50.65% 222,247.21
1 to 2 years 6,969.03 0.08% 696.90
Over 3 years 4,254,701.54 60.81% 4,254,701.54 4,324,701.54 49.27% 4,324,701.54
Total 6,997,192.93 — 4,391,826.11 8,776,614.79 — 4,547,645.65
158 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
1. Accounts receivable (Cont’d)
(1) Accounts receivable (Cont’d)
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the percentage
of total accounts receivable method.
□ Applicable √ Not applicable
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on other methods.
□ Applicable √ Not applicable
Accounts receivable individually significant and separately provided for bad debt as at the end of the period.
□ Applicable √ Not applicable
(2) No reversal or recovery of accounts receivable during the reporting period
(3) No accounts receivable actually written-off during the reporting period.
(4) No outstanding amount in the accounts receivable due from shareholders holding 5% or more (including 5%
inclusive) in the voting shares of the Company during the reporting period.
(5) Top five other receivables are as follows
14
Unit: RMB INTERIM
REPORT
As a
percentage
of the total
Relationship with accounts
Entity name the Company Amounts Term receivable (%)
Shandong Chenming Paper Related party within the
Sales Co., Ltd. scope of consolidation 2,833,886,880.70 Within 1 year 51.95%
Shouguang Meilun Paper Co., Ltd. Related party within the
scope of consolidation 2,373,421,837.41 Within 1 year 43.51%
Shandong Chenming Paper Group Related party within the
(Fuyu) Sales Co., Ltd. scope of consolidation 133,539,985.25 Within 1 year 2.45%
Shouguang Chenming Art Paper Related party within the
Co., Ltd. scope of consolidation 98,327,124.90 Within 1 year 1.80%
Fuyu Chenming Paper Co., Ltd. Related party within the
scope of consolidation 7,902,340.49 Within 1 year 0.14%
Total — 5,447,078,168.75 — 99.85%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 159
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
1. Accounts receivable (Cont’d)
(6) Information on accounts receivable due from related parties
Unit: RMB
As a
percentage of the
Relationship with total Accounts
Entity name the Company Amounts receivable (%)
Shandong Chenming Paper Sales Related party within the
Co., Ltd. scope of consolidation 2,833,886,880.70 51.95%
Shouguang Meilun Paper Co., Ltd. Related party within the
scope of consolidation 2,373,421,837.41 43.51%
Shandong Chenming Paper Group Related party within the
(Fuyu) Sales Co., Ltd. scope of consolidation 133,539,985.25 2.45%
Shouguang Chenming Art Paper Co., Related party within the
Ltd. scope of consolidation 98,327,124.90 1.80%
Fuyu Chenming Paper Co., Ltd. Related party within the
scope of consolidation 7,902,340.49 0.14%
Shandong Grand View Hotel Co., Ltd. Related party within the
14
scope of consolidation 206,496.00 0.00%
INTERIM Total — 5,447,284,664.75 99.85%
REPORT
(7) Transferred amount of other receivables not qualified to be derecognised amounted to RMB0.00.
160 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables
(1) Other receivables
Unit: RMB
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Category Amounts Percentage (%) Amounts Percentage (%) Amounts Percentage (%) Amounts Percentage (%)
Other receivables which are
individually significant and are
separately provided for bad debt 9,402,148.72 0.10% 9,402,148.72 100.00% 8,918,424.06 0.08% 8,918,424.06 100.00%
Other receivables collectively
provided for bad debt
Risk-free portfolio 9,502,343,162.60 98.91% 10,991,002,770.81 99.00%
General-risk portfolio 81,884,835.37 0.85% 29,357,836.48 35.85% 89,083,928.68 0.80% 28,464,521.53 31.95%
Portfolio sub-total 9,584,227,997.97 99.76% 29,357,836.48 35.85% 11,080,086,699.49 99.80% 28,464,521.53 0.26%
Other receivables which are not
individually significant but are
separately provided for bad debt 13,027,752.75 0.14% 13,027,752.75 100.00% 13,717,509.43 0.12% 13,717,509.43 100.00%
Total 9,606,657,899.44 — 51,787,737.95 — 11,102,722,632.98 — 51,100,455.02 —
Other receivable stated according to ageing
Unit: RMB 14
INTERIM
Closing balance Opening balance REPORT
Item Amounts Percentage (%) Amounts Percentage (%)
Within 1 year 9,538,245,477.79 99.29% 10,479,494,850.60 94.39%
1 to 2 years 5,617,373.70 0.06% 542,640,693.82 4.89%
2 to 3 years 17,027,573.62 0.17% 38,955,846.94 0.35%
Over 3 years 45,767,474.33 0.48% 41,631,241.62 0.37%
Total 9,606,657,899.44 100.00% 11,102,722,632.98 100.00%
Other receivables individually significant and separately provided for bad debt as at the end of the period
√ Applicable □ Not applicable
Unit: RMB
Amounts of Percentage
Other receivables Book balance bad debts of provision (%) Reason
Open credit 9,402,148.72 9,402,148.72 100.00% Most of which were open credit
for over 3 years and unlikely to be
recovered
Total 9,402,148.72 9,402,148.72 — —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 161
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(1) Other receivables (Cont’d)
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the ageing
method
√ Applicable □ Not applicable
Unit: RMB
Closing balance Opening balance
Book balance Bad debt Book balance Bad debt
Ageing Amounts Percentage (%) provision Amounts Percentage (%) provision
Within 1 year
Of which: — — — — — —
Within 1 year 30,744,399.99 37.55% 1,537,220.01 26,419,111.28 29.66% 1,320,955.56
Sub-total of within 1 year 30,744,399.99 37.55% 1,537,220.01 26,419,111.28 29.66% 1,320,955.56
1 to 2 years 10,775,288.90 13.16% 1,077,528.89 5,856,440.10 6.57% 585,644.01
2 to 3 years 17,027,573.62 20.79% 3,405,514.72 37,813,069.17 42.45% 7,562,613.83
Over 3 years 23,337,572.86 28.50% 23,337,572.86 18,995,308.13 21.32% 18,995,308.13
Total 81,884,835.37 — 29,357,836.48 89,083,928.68 — 28,464,521.53
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the percentage of
14 amounts outstanding
INTERIM
REPORT □ 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 individually significant and separately provided for bad debt as at the end of the period.
√ Applicable □ Not applicable
Unit: RMB
Bad debt Percentage
Other receivables Book balance provision of provision (%) Reason
Open credit 13,027,752.75 13,027,752.75 100.00% Most of which were open credit
for over 3 years and unlikely to be
recovered
Total 13,027,752.75 13,027,752.75 — —
(2) No reversal or recovery of other receivables during the year.
(3) No other receivables actually written-off during the reporting period.
(4) Outstanding amount in other receivables due from shareholders holding 5% or more (5% inclusive) in the
voting shares of the Company during the reporting period.
162 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(5) Top five other receivables are as follows
Unit: RMB
As a
percentage of
Relationship with the total other
Entity name the Company Amounts Term receivables (%)
Shouguang Meilun Paper Co., Ltd. Related party within the scope
of consolidation 4,573,513,860.38 Within 1 year 47.61%
Shandong Chenming Paper Sales Related party within the scope
Co., Ltd. of consolidation 844,444,205.25 Within 1 year 8.79%
Jilin Chenming Paper Co., Ltd. Related party within the scope
of consolidation 671,024,556.13 Within 1 year 6.98%
Shandong Jianghe Paper Co., Ltd. Non-related party 530,094,699.70 Within 1 year 5.52%
Shouguang Chenming Art Paper Related party within the scope
Co., Ltd. of consolidation 496,108,943.20 Within 1 year 5.16%
Total — 7,115,186,264.66 — 74.06%
(6) Overview of other receivables due from related parties 14
INTERIM
Unit: RMB REPORT
As a
percentage of the
Relationship with total other
Entity name the Company Amounts receivable (%)
Shouguang Meilun Paper Co., Ltd. Related party within
the scope of consolidation 4,573,513,860.38 47.61%
Shandong Chenming Paper Sales Co.,Related party within
Ltd. the scope of consolidation 844,444,205.25 8.79%
Jilin Chenming Paper Co., Ltd. Related party within
the scope of consolidation 671,024,556.13 6.98%
Shouguang Chenming Art Paper Related party within
Co., Ltd. the scope of consolidation 496,108,943.20 5.16%
Wuhan Chenming Hanyang Paper Related party within
Holdings Co., Ltd. the scope of consolidation 331,553,846.38 3.45%
Shandong Grand View Hotel Co., Ltd. Related party within
the scope of consolidation 294,064,505.28 3.06%
Fuyu Chenming Paper Co., Ltd. Related party within
the scope of consolidation 203,203,881.29 2.12%
Zhanjiang Chenming Arboriculture Related party within
Co., Ltd. the scope of consolidation 187,202,046.79 1.95%
Huanggang Chenming Arboriculture Related party within
Co., Ltd the scope of consolidation 171,586,139.55 1.79%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 163
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(6) Overview of other receivables due from related parties (Cont’d)
As a
percentage of the
Relationship with total other
Entity name the Company Amounts receivable (%)
Haicheng Haiming Mining Co., Ltd. Related party within
the scope of consolidation 155,713,633.33 1.62%
Zhanjiang Chenming Pulp & Paper Related party within
Co., Ltd. the scope of consolidation 141,124,891.86 1.47%
Wuhan Chenming Qianneng Electric Related party within
Power Co., Ltd. Related the scope of consolidation 66,057,391.57 0.69%
Huanggang Chenming Pulp & Related party within
Paper Co., Ltd. the scope of consolidation 22,732,473.19 0.24%
Shouguang Chenming Industrial Related party within
Logistics Co., Ltd. the scope of consolidation 4,781,473.07 0.05%
Yangjiang Chenming Arboriculture Related party within
Co., Ltd. the scope of consolidation 3,000,000.00 0.03%
Shouguang Chenming Industrial Related party within
14
Logistics Co., Ltd. the scope of consolidation 1,011,663.18 0.01%
Related party within
INTERIM Hailaer Chenming Paper Co., Ltd. the scope of consolidation 199,101.63 0.00%
REPORT
Shandong Chenming Panels Related party within
Co., Ltd. the scope of consolidation 68,025.29 0.00%
Related party within
Chenming International Co., Ltd. the scope of consolidation 12,820.00 0.00%
Shouguang Chenming Hongxin Related party within
Packaging Co., Ltd. the scope of consolidation 1,842.30 0.00%
Arjo Wiggins Chenming Specialty Related party out of
Paper Co., Ltd. the scope of consolidation 1,290,901.12 0.01%
Wuhan Chenming Wan Xing Related party out of
Real Estate Co., Ltd. the scope of consolidation 1,142,777.77 0.01%
Total — 8,169,838,978.56 85.04%
(7) Transferred amount of other receivables not qualified to be derecognised amounted to RMB0.00.
164 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
3. Available-for-sale financial assets
(1) Changes of available-for-sale financial assets
Amounts at Amounts at
the beginning Increase during Decrease during the end
Item of the period the period the period of the period
Other equity investments 85,850,000.00 1,400,000.00 84,450,000.00
Less: Impairment provision
for available-for-sale
financial assets 2,589,574.47 1,139,574.47 1,450,000.00
Total 83,260,425.53 260,425.53 83,000,000.00
(2) Details of available-for-sale financial assets
Accounting Investment Opening Closing Impairment Closing
Investee method cost Balance balance amounts amounts, net
Qingzhou Chenming Denaturation
Amylum Co., Ltd. Cost method 900,000.00 900,000.00 900,000.00 -900,000.00
Shandong Paper Making & Printing
Enterprises Corporation Cost method 200,000.00 200,000.00 200,000.00 -200,000.00
14
Jinan Shangyou Commercial INTERIM
REPORT
Co., Ltd. Cost method 350,000.00 350,000.00 350,000.00 -350,000.00
Zhejiang Province Guangyu Media
Printing Co., Ltd. Cost method 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00
Shouguang Mihe Water Co., Ltd. Cost method 20,000,000.00 20,000,000.00 20,000,000.00 20,000,000.00
Shanghai Forest & Paper
E-Commerce Co., Ltd. Cost method 1,400,000.00 1,400,000.00
Anhui Shidai Resources Holdings
Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00
Weifang Xinye Capital Investment
Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00
Shandong Hongqiao Venture
Capital Co., Ltd. Cost method 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00
Total 85,850,000.00 85,850,000.00 84,450,000.00 -1,450,000.00 83,000,000.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 165
INTERIM
REPORT
14
166
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
4. Long-term equity investments
Unit: RMB
Explanation of the
Equity interest Voting right inconsistent of
in the investee in the equity interest Impairment
Accounting Investment Opening Closing held by the investee by the and voting right Impairment provision during Cash dividend
Investee method cost Balance Change balance Company (%) Company (%) in the investee provision the period for the period
Shandong Chenming Power Supply Holdings Co., Ltd. Cost method 157,810,117.43 157,810,117.43
157,810,117.43 100.00% 100.00%
Wuhan Chenming Hanyang Paper Holdings Co., Ltd. Cost method 202,824,716.34 202,824,716.34 202,824,716.34 50.93% 50.93%
Hailaer Chenming Paper Co., Ltd. Cost method 12,000,000.00 12,000,000.00 12,000,000.00 75.00% 75.00%
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. Cost method 7,199,000.00 7,199,000.00 -7,199,000.00
Jiangxi Chenming Paper Co., Ltd. Cost method 822,867,646.40 822,867,646.40 822,867,646.40 100.00% 100.00%
Shandong Grand View Hotel Co., Ltd. Cost method 80,500,000.00 80,500,000.00 80,500,000.00 70.00% 70.00%
Jilin Chenming Paper Co., Ltd. Cost method 1,501,350,000.00 1,501,350,000.00 1,501,350,000.00 100.00% 100.00%
Zhanjiang Chenming Pulp & Paper Co., Ltd. Cost method 3,000,000,000.00 3,000,000,000.00 3,000,000,000.00 100.00% 100.00% 100,000,000.00
Chenming (HK) Limited Cost method 183,472,902.00 62,583,310.00 120,889,592.00 183,472,902.00 100.00% 100.00%
Shouguang Chenming Modern Logistic Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100.00% 100.00%
Fuyu Chenming Paper Co., Ltd. Cost method 208,000,000.00 208,000,000.00 208,000,000.00 100.00% 100.00%
Shouguang Chenming Art Paper Co., Ltd. Cost method 113,616,063.80 113,616,063.80 113,616,063.80 75.00% 75.00%
Huanggang Chenming Arboriculture Co., Ltd. Cost method 70,000,000.00 70,000,000.00 70,000,000.00 100.00% 100.00%
Huanggang Chenming Pulp & Paper Co., Ltd. Cost method 200,000,000.00 20,000,000.00 180,000,000.00 200,000,000.00 100.00% 100.00%
Shouguang Meilun Paper Co., Ltd. Cost method 3,000,000,000.00 2,200,000,000.00 800,000,000.00 3,000,000,000.00 100.00% 100.00%
Chenming International Co., Ltd. Cost method 19,861,955.00 19,861,955.00 19,861,955.00 100.00% 100.00%
Shouguang Shun Da Customs Declaration Co, Ltd. Cost method 1,500,000.00 1,500,000.00 1,500,000.00 100.00% 100.00%
Shandong Chenming Paper Sales Co., Ltd. Cost method 100,000,000.00 100,000,000.00 100,000,000.00 100.00% 100.00% 100,000,000.00
Shouguang Hengfeng Storage Co., Ltd. Cost method 500,000.00 500,000.00 -500,000.00
Shouguang Chenming Import and Export Trade Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100.00% 100.00%
Shouguang Chenming Jiatai Property Management Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100.00% 100.00%
Shouguang Chenming Papermaking Machine Co., Ltd. Cost method 2,000,000.00 2,000,000.00 2,000,000.00 100.00% 100.00%
Shouguang Chenming Industrial Logistics Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100.00% 100.00%
Shouguang Chenming Hongxin Packaging Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100.00% 100.00%
Japan Chenming Paper Co., Ltd. Cost method 9,306,351.20 9,306,351.20 9,306,351.20 100.00% 100.00%
Haicheng Haiming Mining Co., Ltd. Cost method 144,000,000.00 144,000,000.00 144,000,000.00 60.00% 60.00%
Chenming GmbH Cost method 4,083,235.00 4,083,235.00 4,083,235.00 100.00% 100.00%
Shouguang Hongxiang Printing and Packaging Co., Ltd. Cost method 2,730,000.00 2,730,000.00 2,730,000.00 100.00% 100.00%
Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100.00% 100.00%
Shouguang Chenming Huisen New-style
Construction Materials Co., Ltd. Cost method 3,000,000.00 3,000,000.00 3,000,000.00 50.00% 50.00%
Arjo Wiggins Chenming Specialty Paper Co., Ltd. Equity method 80,100,000.00 30.00% 30.00%
Jiangxi Jiangbao Media Colour Printing Co. Ltd. Equity method 6,000,000.00 4,745,182.75 -74,651.88 4,670,530.87 21.16% 21.16%
Total — 9,965,721,987.17 8,780,477,577.92 1,096,115,940.12 9,876,593,518.04 — — — 200,000,000.00
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
5. Revenue and operating costs
(1) Revenue
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Revenue from principal activities 3,488,961,465.88 4,329,750,335.77
Revenue from other activities 507,830,538.50 587,282,187.16
Total 3,996,792,004.38 4,917,032,522.93
Operating costs 3,157,273,029.32 3,976,552,277.16
(2) Principal activities (by industries)
Unit: RMB
Amounts during the period Amounts during the prior period
Industry name Revenue Operating costs Revenue Operating costs
Machine-made paper 2,931,751,670.76 2,300,909,667.23 3,144,305,160.63 2,467,851,375.93
Electricity and steam 557,209,795.12 376,256,922.78 1,185,445,175.14 947,682,863.91 14
INTERIM
Total 3,488,961,465.88 2,677,166,590.01 4,329,750,335.77 3,415,534,239.84 REPORT
(3) Principal activities (by product)
Unit: RMB
Amounts during the period Amounts during the prior period
Product name Revenue Operating costs Revenue Operating costs
Light weight coated paper 28,588,773.05 19,975,143.06 42,567,195.18 32,695,986.33
Duplex press paper 317,395,227.67 225,512,679.96 307,034,036.77 239,323,219.24
Writing paper 82,325,335.75 62,789,027.43 28,685,162.06 23,678,690.73
Coated paper 766,731,773.60 564,880,378.39 710,385,033.97 532,334,754.44
News press paper 519,417,229.77 385,076,471.84 709,752,411.59 541,945,417.17
White paper board 940,339,733.70 758,413,648.95 779,851,217.12 632,739,824.47
Other machine-made paper 276,953,597.22 284,262,317.60 566,030,103.94 465,133,483.55
Electricity and steam 557,209,795.12 376,256,922.78 1,185,445,175.14 947,682,863.91
Total 3,488,961,465.88 2,677,166,590.01 4,329,750,335.77 3,415,534,239.84
SHANDONG CHENMING PAPER HOLDINGS LIMITED 167
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
5. Revenue and operating costs (Cont’d)
(4) Principal activities (by geographical areas)
Unit: RMB
Amounts during the period Amounts during the prior period
Region Revenue Operating costs Revenue Operating costs
Mainland China 3,279,258,404.74 2,512,407,235.92 4,124,261,209.19 3,242,787,868.07
Other countries and regions 209,703,061.14 164,759,354.09 205,489,126.58 172,746,371.77
Total 3,488,961,465.88 2,677,166,590.01 4,329,750,335.77 3,415,534,239.84
(5) Revenue from top 5 customers of the Company
Unit: RMB
Percentage
of the total
revenue of the
Name of customer Total revenue Company (%)
14
Shandong Chenming Paper Sales Company Limited 2,399,916,447.94 60.05%
Chenming (HK) Limited 209,001,834.03 5.23%
INTERIM Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. 157,401,745.26 3.94%
REPORT
Shouguang Meilun Paper Co., Ltd. 138,719,864.63 3.47%
Shouguang Chenming Art Paper Co., Ltd. 26,010,551.79 0.65%
Total 2,931,050,443.65 73.34%
6. Investment income
(1) Breakdown of investment income
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Income from long-term equity investments accounted for
using the cost method 200,000,000.00 229,527,457.85
Income from long-term equity investments accounted for
using the equity method -74,651.88 -150,149.58
Investment gain on disposal of long-term equity investments -7,366,532.42 14,190,483.70
Others 35,473,222.23 12,145,050.34
Total 228,032,037.93 255,712,842.31
168 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
6. Investment income (Cont’d)
(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. 30,213,771.35
Zhanjiang Chenming Pulp &
Paper Co., Ltd. 100,000,000.00 180,000,000.00
Shandong Chenming Paper
Sales Company Limited 100,000,000.00
Shanghai Runchen Equity
Investment Fund Co., Ltd. 19,313,686.50
Total 200,000,000.00 229,527,457.85 —
(3) Income from long-term equity investments accounted for using the equity method
Unit: RMB
Amounts during Amounts during 14
Investee the period the prior period Reason for change INTERIM
REPORT
Jiangxi Jiangbao Media
Colour Printing Co., Ltd. -74,651.88 -150,149.58
Total -74,651.88 -150,149.58 —
SHANDONG CHENMING PAPER HOLDINGS LIMITED 169
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
7. Supplementary information on cash flow statement
Unit: RMB
Amounts during Amounts during
Supplementary information the period Amounts the prior period
1. Reconciliation of net profit as cash flows from operating activities — —
Net profit 275,846,548.92 497,002,914.40
Plus: Provision for impairment of assets 531,463.30 3,701,835.30
Depreciation of fixed assets, consumption of oil and gas assets,
depreciation of productive biological assets 228,138,182.04 168,610,612.74
Amortisation of intangible assets 5,026,471.81 4,668,034.28
Loss on disposal of fixed assets, intangible assets and other
long-term assets (“-” denotes gain) -1,341,798.35 25,327,282.02
Finance expenses (“-” denotes gain) 571,281,292.53 531,515,104.30
Investment loss (“-” denotes gain) -228,231,103.16 -255,712,842.31
Decrease in deferred income tax assets (“-” denotes increase) 5,026,471.81 6,168,542.92
Decrease in inventory (“-” denotes increase) -49,078,639.68 -89,211,312.49
Decrease in operating receivables (“-” denotes increase) 251,241,419.58 -2,628,076,731.12
Increase in operating payables (“-” denotes decrease) 512,318,730.84 -506,448,804.94
Net cash flows from operating activities 1,570,759,039.64 -2,242,455,364.90
— —
14
2. Major investing and financing activities not involving cash settlements:
3. Net change in cash and cash equivalents: — —
INTERIM Cash balance at the end of the period 117,004,284.17 339,273,942.12
REPORT
Less: cash balance at the beginning of the period 64,392,029.09 1,786,622,854.08
Net increase in cash and cash equivalents 52,612,255.08 -1,447,348,911.96
170 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIV. Supplementary information
1. Breakdown of extraordinary gains and losses for the current period
Unit: RMB
Amounts during Amounts during
Item the period Amounts the prior period
Profit or loss from disposal of non-current assets 73,764,935.36 -28,456,570.02
(included offset amount of provision for assets impairment)
Government grants included in profit and loss for the current period 100,763,109.28 112,054,796.04
(except for government grants closely related to the ordinary course
of business of the Company that were given under at a fixed standard
amount or quantity as stipulated by the State)
Gains and losses from debt restructuring 623,626.67 39,984.11
Gains or losses from changes in fair value of consumable productive 967,670.22 9,229,042.51
assets adopting fair value method for follow-up measurements
Non-operating gains and losses other than the above items 64,271,540.63 206,618,857.32
Less: Effect of income tax 44,085,625.09 28,181,423.03
Effect of minority interest (after tax) 11,657,635.32 72,434,723.94
Total 184,647,621.75 198,869,962.99
14
Government grants accounted for in profit and loss for the current period are recurring gain or loss items. Explanation
on each disclosure should be made.
INTERIM
□ Applicable √ Not applicable REPORT
2. Difference in accounting data under domestic and overseas accounting standards
(1) Differences between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report
Unit: RMB
Net profit attributable to Net assets attributable to
shareholders of the Company shareholders of the Company
Amounts during Amounts during Amounts during Amounts during
the period the prior period the period the prior period
Under China 242,461,095.02 333,409,511.73 13,635,437,678.10 14,039,888,226.11
accounting standards
Items and amounts adjusted
under international
accounting standards
SHANDONG CHENMING PAPER HOLDINGS LIMITED 171
IX Financial Report
XIV. Supplementary information (Cont’d)
2. Difference in accounting data under domestic and overseas accounting standards (Cont’d)
(2) Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
Unit: RMB
Net profit attributable to Net assets attributable to
shareholders of the Company shareholders of the Company
Amounts during Amounts during Amounts during Amounts during
the period the prior period the period the prior period
Under China 242,461,095.02 333,409,511.73 13,635,437,678.10 14,039,888,226.11
accounting standards
Items and amounts adjusted
under overseas
accounting standards
3. Return on net assets and earnings per share
Unit: RMB
Weighted average Earnings per share
return on net Basic earnings Diluted earnings
14
Profit during the reporting period assets (%) per share per share
INTERIM
REPORT Net profit attributable to holders of 1.72% 0.12 0.12
ordinary shares of the Company
Net profit after extraordinary gains and 0.41% 0.03 0.03
losses attributable to holders of ordinary
shares of the Company
4. Explanation on irregular movements in major accounting statement items of the Company
Items in balance sheet:
(1) The closing balance of monetary funds as at 30 June 2014 was RMB3,357,075,224.97, up by 31.77% as
compared with the opening balance mainly due to the approval of the establishment of Shandong Chenming
Group Finance Co., Ltd. with registered capital of RMB1,000 million by the Company. The company was not
registered with the industrial and commercial administration as at the end of the reporting period.
(2) The closing balance of bills receivable as at 30 June 2014 was RMB2,248,149,475.62, down by 21.68% as
compared with the opening balance mainly due to the increase in payment by bills.
(3) The closing balance of long-term equity investments as at 30 June 2014 was RMB39,354,618.33, up by 22.16%
as compared with the opening balance mainly due to the establishment of a new joint venture Shouguang
Chenming Huisen New-style Construction Materials Co., Ltd. by the Company, and the establishment of an
associate, Jiangxi Chenming Port Co., Ltd. by Jiangxi Chenming, a subsidiary of the Company.
(4) The closing balance of construction in progress as at 30 June 2014 was RMB3,383,652,916.06, down by 35.75%
as compared with the opening balance mainly due to the reclassification of Jilin Chenming’s environmental
protection relocation project, Wuhan Chenming’s household paper project and Shouguang Chenming’s paper
additives project as fixed assets.
(5) The closing balance of construction materials as at 30 June 2014 was RMB23,245,677.92, down by 63.66% as
compared with the opening balance mainly due to the reclassification of Jilin Chenming’s environment protection
relocation project as fixed assets.
172 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIV. Supplementary information (Cont’d)
4. Explanation on irregular movements in major accounting statement items of the Company (Cont’d)
Items in balance sheet: (Cont’d)
(6) The closing balance of short-term loans as at 30 June 2014 was RMB11,866,009,950.56, up by 20.85% as
compared with the opening balance mainly due to the greater demand for liquidity resulting from the increase in
investments in construction in progress for the period, and expansion in production capacity and operating scale.
(7) The closing balance of bills payable as at 30 June 2014 was RMB228,716,908.05, down by 21.24% as compared
with the opening balance mainly due to the decrease in bank acceptance bills issued by the Company.
(8) The closing balance of accounts payable as at 30 June 2014 was RMB3,317,507,726.31, up by 23.09% as
compared with the opening balance mainly due to the increase in raw material procurement.
(9) The closing balance of interests payable as at 30 June 2014 was RMB246,392,305.53, up by 60.84% as
compared with the opening balance mainly due to the interest on corporate bonds and medium-term notes
payable by the Company.
(10) The closing balance of non-current liabilities due within one year as at 30 June 2014 was RMB941,964,400.00,
down by 26.86% as compared with the opening balance mainly due to the payment of Chenming Hong Kong’s
debts of RMB500 million due for repayment.
(11) The closing balance of long-term payables as at 30 June 2014 was RMB128,000,000.00, up by 113.33%
as compared with the opening balance mainly due to the borrowings of RMB68.00 million provided by the
Management Committee of Nanchang Economic and Technological Development Zone for the phase II project of
Jiangxi Chenming during the period. 14
INTERIM
(12) The closing balance of minority interest as at 30 June 2014 was RMB467,862,,854.69, down by 21.82% as REPORT
compared with the opening balance mainly due to the disposal of a subsidiary, Shandong Chenming Xinli Power
Co., Ltd. by Chenming Power Supply.
Items in income statement :
(1) Revenue for the period was RMB9,082,020,579.01, down by 9.43% from the corresponding period of the prior
year mainly due to the decline in machine-made paper price and the decrease of external sales of electricity.
(2) Operating costs for the period were RMB7,378,998,628.31, down by 10.57% from the corresponding period of
the prior year mainly due to the decline in raw material price and the decrease of external sales of electricity.
(3) Finance expenses for the period were RMB626,611,788.47, up by 28.82% from the corresponding period of the
prior year mainly due to the depreciation of RMB and the increase in foreign exchange loss.
(4) Loss on impairment of assets for the period was RMB16,314,635.37, up by 450.67% from the corresponding
period of the prior year mainly due to the increase in accounts receivable and provision for bad debts.
(5) Investment income for the period was RMB21,218,247.82, up by 309.37% from the corresponding period of the
prior year mainly due to receipt of the interest on new entrusted loans made by the Company.
(6) Non-operating income for the period was RMB253,711,372.78, down by 24.56% from the corresponding period
of the prior year mainly due to the decrease in compensation for suspension of production of Wuhan Chenming.
(7) Non-operating expense for the period was RMB14,028,105.87, down by 64.52% from the corresponding period of
the prior year mainly due to loss on disposal of non-current assets during the prior period.
(8) Income tax expenses for the period was RMB34,033,045.12, down by 58.93% from the corresponding period
of the prior year mainly due to the year on year decrease of the profitability of the Company as affected by the
factors such as market and exchange rate changes.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 173
X Documents Available for Inspection
I. The financial statements signed and sealed by the legal representative, financial representative and head of the financial
department of the Company;
II. The 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.
Shandong Chenming Paper Holdings Limited
27 August 2014
14
INTERIM
REPORT
174 SHANDONG CHENMING PAPER HOLDINGS LIMITED