I Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the truthfulness,
accuracy and completeness of the contents of the 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, Wang Chunfang, head in charge of accounting and Dong Lianming, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial statements
in the interim report.
13
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 1
I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions 1
II Company Profile 4
III Summary of Accounting Data and Financial Indicators 6
IV Chairman’s Statement 8
V Directors’ Report 11
VI Material Matters 25
VII Changes in Share Capital and Shareholders 41
VIII Directors, Supervisors, and Senior Management 45
IX Financial Report 49
X Documents Available for Inspection 162
13
INTERIM
REPORT
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Shouguang Henglian means Shouguang Henglian Enterprise Investment Co., Ltd.
Shouguang Hengtai means Shouguang Hengtai Enterprise Investment Company Limited
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Guangdong Huirui means Guangdong Huirui Investment Co., Ltd. 13
INTERIM
Haiming Mining means Haicheng Haiming Mining Company Limited REPORT
BeiHai Group means Liaoning BeiHai Industries Group Co., Ltd.
Zhanjiang Chenming means Zhanjiang Chenming Paper Pulp Co., Ltd.
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Yanbian Chenming means Yanbian Chenming Paper Co., Ltd.
GF Securities means GF Securities Co., Ltd
Hailaer Chenming means Hailaer Chenming Paper Co., Ltd.
RSM China means RSM China Certified Public Accountants (Special General Partnership)
Ruihua means Ruihua Certified Public Accountants (Special General Partnership)
Chenming Germany means Chenming GmbH
Jilin Waste means Jilin Chenming Waste Collection Co., Ltd.
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Chenming Power means Shandong Chenming Power Supply Holdings Co., Ltd.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 3
II Company Profile
I. Company profile
A share stock abbreviation 晨鳴紙業 Stock Code 000488
B share stock abbreviation 晨鳴B Stock Code 200488
H share stock abbreviation Chenming Paper Stock Code 1812
Stock exchanges on which the shares are listed Shenzhen Stock Exchange and The Stock Exchange of Hong Kong
Legal name in Chinese of the Company 山東晨鳴紙業集團股份有限公司
Legal short name in Chinese of the Company (if any) 晨鳴紙業
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
II. Contact persons and contact methods
Securities Affairs Hong Kong
Secretary to the Board Representative Company Secretary
Name Wang Chunfang Fan Yingjie Poon Shiu Cheong
Correspondence No. 2199 East Nongsheng No. 2199 Nongsheng East 22nd Floor, World Wide
Address Road, Shouguang City, Road, Shouguang City, House, Central,
Shandong Province Shandong Province Hong Kong
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
13
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 is no change in the registered address, office address, postal code, website and email of the Company during the
reporting period. Please refer to 2012 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
Designated newspapers for information disclosure China Securitas Journal, Shanghai Securities News,
Securities Times, Securities Daily and
Hong Kong Commercial Daily
Designated websites for the publication of the Interim Domestic: http://www.cninfo.com.cn;
Report as approved by CSRC Overseas: http://www.hkex.com.hk
Places for inspection of the Company’s Interim Report Capital operation department of the Company
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
II Company Profile
3. Change in registration
Whether registration information changed during the reporting period.
□ Applicable √ Not applicable
There is no change in the registration information such as registration date, registered address, legal person business
license registration number, taxation registration number and organisation code of the Company during the reporting
period. Please refer to 2012 Annual Report for details.
4. Other relevant information
Whether other relevant information changed during the reporting period.
□ Applicable √ Not applicable
13
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 5
III Summary of AccountingData and FinancialIndicators
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
Increase/decrease
for the reporting
period compared to
The Corresponding the corresponding
reporting period of period of
period the prior year the prior year (%)
Revenue (RMB) 10,027,901,358.43 9,964,451,535.04 0.64%
Net profit attributable to shareholders of 333,409,511.73 94,244,962.85 253.77%
the Company (RMB)
Net profit after extraordinary gains or losses attributable 134,539,548.74 -103,989,811.77 229.38%
to shareholders of the Company (RMB)
Net cash flows from operating activities (RMB) 906,935,242.95 661,084,701.87 37.19%
Basic earnings per share (RMB per share) 0.16 0.05 220.00%
Diluted earnings per share (RMB per share) 0.16 0.05 220.00%
Rate of return on net assets on weighted average basis (%) 2.40 0.70 1.70%
Increase/decrease
13 as at the end of
INTERIM As at the As at the the reporting period
REPORT
end of the end of the compared to the end
reporting period prior year of the prior year (%)
Total assets (RMB) 47,511,262,149.79 47,725,421,927.39 -0.45%
Net assets attributable to shareholders of 13,685,701,295.53 13,759,496,179.85 -0.54%
the Company (RMB)
Net assets per share attributable to shareholders of 6.93 6.67 3.90%
the Company (RMB/Share)
Gearing ratio 69.94% 69.94% 0%
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
Unit: RMB
Net profit attributable to shareholders Net assets attributable to shareholders
of the Company of the Company
Amounts for
the reporting Amounts for
period the prior period Closing balance Opening balance
Under China accounting standards 333,409,511.73 94,244,962.85 13,685,701,295.53 13,759,496,179.85
Items and amounts adjusted under international accounting standards
Under international 333,409,511.73 94,244,962.85 13,685,701,295.53 13,759,496,179.85
accounting standards
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
III Summary of Accounting Data and Financial Indicators
III. Items and amounts of extraordinary gains or losses
Unit: RMB
Item Amounts Explanation
Profit or loss from disposal of non-current assets
(including write-off of provision for assets impairment) -28,456,570.02
Government grants (except for the government grants
closely related to the normal operation of the company
and granted constantly at a fixed amount or quantity
in accordance with a certain standard based on state
policies) accounted for in profit or loss for the current period 112,054,796.04
Profit or loss from debt restructuring 39,984.11 Non-
operating gains and losses other than the above items 206,618,857.32 Changes in
fair value of consumable biological assets 9,229,042.51
Less: Effect of income tax 28,181,423.03
Effect of minority interests (after tax) 72,434,723.94
Total 198,869,962.99 －
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.
13
□ Applicable √ Not applicable INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 7
IV Chairman’s Statement
Dear shareholders,
It is my pleasure to present the financial report as of 30 June 2013 to all shareholders and express my gratitude, for all shareholders’
concern and support to Chenming Paper on behalf of the board of directors.
During the reporting period, a higher concentration ratio was secured due to the slowdown in the growth of the supply of the paper
making industry and the elimination of outdated production capacity, which was conducive to a proactive increase in price proposed
by enterprises. Meanwhile, the continuation of the appreciation of RMB and the increased downward pressure on raw material
prices relieved the pressure on the operating costs of enterprises. The profitability of the Company turned around as compared to
the corresponding period of the prior year.
The reporting period saw the normal operation of the Company’s projects such as Zhanjiang Chenming’s pulp project, 800,000
tonne coated paper project and 600,000 tonne white coated linerboard project. The Company, accordingly, achieved steady growth
in production capacity on the basis of 2012. In order to expand its industry chain and increase its sustainable profitability, the
Company had invested in magnesite mining and Zhanjiang waterfront regulation works and they were carried out as scheduled.
During the reporting period, to enrich the types of products of the Company and to enhance the comprehensive competitiveness
and the gross margin of the products in the market, the Company invested in Wuhan Chenming household paper project and
Jiangxi Chenming high-end packaging paper project. Upon completion of the projects, the Company will further leverage its scale
advantages, and thus further enhance the market competitiveness of the Company.
I. Operating Results
During the reporting period, the Company completed machine-made paper production of 2,020,000 tonnes, representing an
increase of 100,000 tonnes or 5.21% as compared with 1,920,000 tonnes in the corresponding period of the prior year. The
Company’s revenue amounted to RMB10,028 million, up by RMB63 million as compared to the corresponding period of prior
13 year or up by 0.64%. The operating costs were RMB8,251 million, down by RMB249 million or 2.93% from the corresponding
INTERIM period of prior year. The operating profit and net profit attributable to equity holders of the Company were RMB97.3169 million
REPORT
and RMB333.4095 million respectively, up by 146.64% and 253.77% respectively.
II. Corporate Governance
During the reporting period, the Company regulated its operation under the requirements of Companies Law, Securities Law,
Code of Corporate Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock Exchange,
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related provisions of CSRC.
It kept on improving and optimising its legal person governance structure and regulating its operation in practice. The Board
considered the state of the Company’s corporate governance was substantially in compliance with the requirements and
requests of the regulatory documentation such as Code of Corporate Governance for Listed Companies.
During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
governance. It improved corporate governance practice in a timely manner and formulated and optimised management
systems including the amended version of Articles of Association, Investor Relationship Management system, Implementation
Rules for the Remuneration and Assessment Committee of the Board of Directors, Implementation Rules for the Nomination
Committee of the Board of Directors, Implementation Rules for the Strategic Committee of the Board of Directors, and
Implementation Rules for the Audit Committee of the Board of Directors in accordance with the regulatory requirements.
III. Dividend Distribution
The Group has always placed much emphasis on shareholders’ benefits and returns. The profit distribution plan for 2012 is
as follows: the registered capital of the Company as at 31 December 2012 totalled 2,062,045,941 shares. After deducting
the treasury shares of 86,573,974 shares to be cancelled under the repurchase of B shares of the Company, the share
capital entitled to this distribution amounted to 1,975,471,967 shares. Based on the 1,975,471,967 shares and a cash
dividend of RMB0.60 (tax inclusive) was to be paid to all shareholders for every 10 shares held, a total cash dividend of
RMB118,528,318.02 (tax inclusive) was distributed, which represented 53.62% of the net profit attributable to shareholders of
the Company as set out in the 2012 consolidated financial statements prepared in accordance with Accounting Standards for
Business Enterprises. After the profit distribution, the undistributed profit would be rolled over for distribution in subsequent
years. As always, the Company will continue to stay focused on its long-term development and maximise returns for
shareholders by delivering better results.
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Chairman’s Statement
IV. Future Development
The industry to which the Company belongs is the paper making industry, which is a light industry. The business sentiments
of the industry are highly related to the macroeconomic growth. The overall profitability of the paper making industry hovered
around at a low level from the beginning of the year. However, a higher concentration ratio was obtained due to the slowdown
in the growth of the supply of the paper making industry and the elimination of outdated production capacity. In the long
run, the development conditions of the paper making industry gradually improve. The National Development and Reform
Commission, Ministry of Industry and Communication and State Forestry Administration have jointly issued the Twelfth Five-
Year Plan for the Development of the Paper Making Industry, which clearly states the general direction of “controlling total
volume, promoting concentration, optimising raw materials and reducing energy consumption and emission”, from which the
Company is expected to benefit in the long run.
In recent years, the Company is committed to the integrated development of forestry, pulp and paper with a longer industry
chain and more comprehensive paper types. During the reporting period, the Company carried out a series of 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 Company has expanded its industry chain with a
more rationalised industry positioning, which further strengthens the Company’s competitiveness and development potential.
As the economy and industry gradually recover, it is expected that the result of the Company will record stable growth. The
Company’s future performance is what the market can look forward to.
In the second half of 2013, the Company will deal with the following major areas based on the strategic objectives formulated
by the Company:
(1) Adhere to strategy guidelines and make a blueprint for development plan. We shall focus on project establishment,
promote technology upgrading and make more efforts to conduct technology research. We optimise the combination of
production, learning, research and utilisation in both channel and system. Meanwhile, we will comply with environmental 13
protection policies, apply new technology and skills, promote the recycle economy, enhance comprehensive utilisation INTERIM
REPORT
of resources and improve energy saving and emission reduction.
(2) Strengthen innovation management and enhance working efficiency. We will introduce advanced management mode,
optimise purchase management and put the mode of “purchase on demand” on trial. A finance company is established
to intensify the centralised management of the Group’s fund and enhance financial management. We make full use
of the financing platform of the Hong Kong market in order to increase its credit line and expand its business scope,
thereby lowering our financial costs and improve our profitability. Quality is the essence of a corporation. Adhering to the
object of improving quality and increasing economic benefits, the Company will strive to realise “all staff, whole process
and the entire corporation” quality management to strengthened quality management. We optimise flow of internal
control, bring risk-prevention management system into perfection, intensify and promote the transformation of internal
audit into management audit and risk audit, perfect corporate legal risk-prevention mechanism and strengthen process
oversights and management and control over significant risks so as to enhance the internal control construction.
(3) Adjust product portfolio and explore new markets. The Company will enhance product quality management,
increase the development on high value-added products, produce popular products as well as increase the market
competitiveness of products. It also endeavours to produce low-end products at low cost in order to meet client’s
needs, leverage on its low-cost edge and increase the efficiency. The Company will put more efforts in direct marketing
and expand its overseas sales channels. The Company will target on major direct clients. Meanwhile, the Company
will explore cooperation opportunities with strong major distributors, and increase the overseas market exposure
of products via their sales channels. The Company will expand the marketing channels for its brand. The Company
will organise promotion activities such as new products presentation. Hence, the recognition of Chenming brand will
increase, which will fully enhance the brand image and influence of the Company.
(4) Strengthen team-building and improve staff quality. Human resources are the “major essential” for corporate
development. The Company will develop an innovative staff development programme and focus on its recruitment and
training works. It aims to maintain a fair staff system and will enhance its staff training on a people-oriented basis. The
Company will enhance the technical standard of various position, aiming to develop as a learning and knowledgeable
enterprise. A good working and living environment will be established, which strengthens staff’s loyalty and unity to the
Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 9
IV Chairman’s Statement
IV. Future Development (Cont’d)
(5) Build up Chenming corporate culture and promote culture promotion and implementation. The Company adheres
to the establishment of corporate culture. It strives to “achieve a high degree of integration of corporate governance
and corporate culture” as well as ensures proper internal cooperation with all works conducted orderly. The Company
will strengthen the establishment of culture system, its promotion and implementation, aiming to make all staff have a
deeper understanding on Chenming corporate culture. In addition, this can promote incorporation of culture into thought
and management and make corporate culture as a direction of all works, which can improve the quality and execution
ability of staff. Hence, a brand new Chenming corporate culture is established.
Chen Hongguo
Chairman
21 August 2013
13
INTERIM
REPORT
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
I. Overview
During the reporting period, the previous round of intensive expansion in the paper making industry was basically completed.
Papermaking enterprises were unlikely to expand in the near future due to the sentiment in the industry. In addition, some
the small and medium-sized enterprises left the market as a result of elimination of outdated production capacity and stricter
environmental protection policy. This partly lowered the pressure of the new production capacity on the supply in the industry.
A higher concentration ratio was secured due to the slowdown in the growth of the supply of the paper making industry
and the elimination of outdated production capacity, which was conducive to a proactive increase in price proposed by
enterprises. Meanwhile, the continuation of the appreciation of RMB and the increased downward pressure on raw material
prices relieved the pressure on the operating costs of enterprises. As compared to the corresponding period of prior year, the
profitability of our major operations improved during the reporting period. The profit margin of our paper products was higher
as compared to the corresponding period of prior year.
During the reporting period, the Company strived to establish itself as an international leading papermaking enterprise which
operated in an environmental friendly and sustainable manner. We focused on our development and were driven by innovative
ideas. We invested in the household paper project of Wuhan Chenming and magnesite mining project, entered into contract
for the waterfront regulation works BT project in Zhanjiang City and were engaged in Wuhan Chenming cultural paper
machine upgrade project, which accelerated the structural adjustment of the Company and facilitated the transformation and
upgrade of the Company. We put more efforts to conduct technology research, optimised the combination of production,
learning, research and utilisation in both channel and system, and achieved better results in surface enhancement technology
and finished paper ash content technology. Meanwhile, we complied with environmental protection policies, applied new
technology and skills, promoted the recycle economy, enhanced comprehensive utilisation of resources and improved energy
saving and emission reduction.
During the reporting period, the Company enhanced innovative management. We managed our staff through our system and
operated in accordance with the standard. We fully utilised the capital market to improve the standard of capital settlement,
13
INTERIM
management, investment and financing of the Group. We enhanced our financial management and lowered the financial costs. REPORT
We optimised our procurement management and implemented the “purchase on demand” mode. We optimised our internal
control procedure, improved our risk prevention system and strengthened procedure supervision and controlled major risk.
The Company developed an innovative staff development programme. Based on the demand for development, the Company
put greater efforts on recruiting talents who possessed advance and new technology knowledge, and management talents.
The Company endeavoured to develop a high quality team with the same philosophy as the Company and adaptable to the
strategic development.
During the reporting period, the Company accelerated the adjustment in product structure, enhanced product quality
management, increased the development on high valued-added products, put more efforts in direct sale and expanded
overseas sale channels. We convened meeting with contracted distributors during the first half of 2013, which enhanced the
recognition of Chenming brand, the brand image and influence of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 11
V Directors’ Report
II. Analysis of principal operations
1. Production and operation
During the reporting period, the Company’s revenue amounted to RMB10,027.9014 million, up by RMB63.4498 million
or 0.64% from the corresponding period of the prior year. The operating costs were RMB8,251.3498 million, down
by RMB249.1631 million or 2.93% from the corresponding period of the prior year. Operating profit and net profit
attributable to equity holders of the Company were RMB97.3169 million and RMB333.4095 million respectively, up by
146.64% and 253.77% respectively. During the reporting period, the expenses for the period were RMB1,659.3318
million, up by RMB19.2922 million or 1.18% from the corresponding period of the prior year. Investments in research
and development amounted to RMB154.0344 million, up by RMB6.2727 million or 4.25% from the corresponding
period of the prior year. Net cash flows were RMB-744.8025 million, down by 1,017.0503 million or 373.58% from the
corresponding period of the prior year.
Analysis of asset and liability of the Company during the reporting period
Unit: RMB
Increase/
Item 2013.6.30 2012.12.31 decrease (%) Reason for the change
Prepayments 2,020,732,736.41 1,636,233,924.64 23.50% Zhanjiang Meilun Paper Pulp Co.,
Ltd., a subsidiary of the Company,
made new prepayments on plant
and equipment of RMB194 million
13 and the Company’s prepayments
INTERIM on materials increased.
REPORT Long-term equity 87,902,951.07 356,796,777.78 -75.36% The Company transferred the
investments equity interest in its subsidiary,
Shanghai Runchen Equity
Investment Fund Co., Ltd.
Construction in 2,757,926,003.96 5,017,604,821.59 -45.04% The 600,000 tonnes white coated
progress linerboard project of Shouguang
Meilun was reclassified as fixed
assets in January 2013.
Construction 205,573,437.90 75,054,992.09 173.90% The materials for plant relocation
materials of Jilin Chenming increased.
Bills payable 933,239,044.69 1,285,627,762.07 -27.41% Bank acceptance bills issued
by the Company for payment
for goods decreased during the
reporting period.
Advance receipts 424,229,542.28 347,835,800.87 21.96% Greater efforts were made by the
Company on customer exploration
with an increase in advance
receipts.
Staff 119,074,985.07 177,847,769.71 -33.05% Outstanding staff remuneration
remuneration payment by the Company decreased.
payables
Interest payable 246,955,329.53 133,046,123.31 85.62% The Company made a withdrawal
for the interest incurred from
medium-term notes and corporate
bonds.
Dividend payable 118,528,318.02 100.00% The Company made a withdrawal
for dividend payable to ordinary
shares for 2012.
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
II. Analysis of principal operations (Cont’d)
1. Production and operation (Cont’d)
Analysis of asset and liability of the Company during the reporting period (Cont’d)
Increase/
Item 2013.6.30 2012.12.31 decrease (%) Reason for the change
Other payables 337,264,869.67 435,772,288.98 -22.61% Security deposit and accrued
expenses received by the
Company decreased during the
reporting period, and disposal of
subsidiaries resulted in a change
in the scope of consolidation.
Treasury shares 265,363,183.60 100.00% Upon the repurchase of B
shares by the Company, the
repurchased shares were
reclassified as treasury shares.
Changes in major financial information
Unit: RMB
During the
corresponding
During the period of Increase/
reporting period the prior year decrease (%) Reason for the change 13
INTERIM
Revenue 10,027,901,358.43 9,964,451,535.04 0.64% REPORT
Operating costs 8,251,349,814.35 8,500,512,936.03 -2.93% Decline in raw material prices.
Selling and 570,398,742.45 535,959,288.53 6.43%
distribution
expenses
Administrative 602,523,953.98 562,794,713.60 7.06%
expenses
Finance 486,409,117.79 541,285,654.45 -10.14% RMB appreciation and increase
expenses in foreign exchange gains.
Income tax 82,871,206.26 -12,866,933.23 744.06% Increase in the provision for
expenses income tax expenses on
Company’s profit based on tax
laws and regulations after the
market recovery.
Investments in 154,034,416.74 147,761,690.01 4.25%
research and
development
Net cash flows 906,935,242.95 661,084,701.87 37.19% The Company put greater efforts
from operating on recovering receivables.
activities Cash received from goods
selling increased. In addition,
the Company increased the
percentage of payments for good
by bills.
Net cash flows -885,800,802.95 -850,464,656.26 4.15%
from investing
activities
Net cash flows -772,501,665.99 466,200,304.36 -265.7% Repurchase of B share and
from financing repayment of medium-term notes
activities resulted in significant increase in
cash outflow.
Net increase in -744,802,455.71 272,247,794.49 -373.58% Primarily affected by net cash
cash and cash flow from financing activities.
equivalents
SHANDONG CHENMING PAPER HOLDINGS LIMITED 13
V Directors’ Report
II. Analysis of principal operations (Cont’d)
1. Production and operation (Cont’d)
Changes in major financial information (Cont’d)
Significant change in constitution or source of profit of the Company during the reporting period.
□ Applicable √ Not Applicable
There is no significant change in constitution or source of profit of the Company during the reporting period.
Disclosure of future development and planning continued during the reporting period in public documents such as
IPO prospectus, offering prospectus and asset reconstruction report.
□ Applicable √ Not Applicable
There is no disclosure of future development and planning continued 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.
During the reporting period, the Company actively processed various works based on our plan formulated earlier this
year and achieved some progress. For details, please refer to “I. Overview” of this section.
13
INTERIM
REPORT
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
II. Analysis of principal operations (Cont’d)
2. Analysis of liquidity, financial resources and capital structure
Indicators of the capital structure and liquidity of the Company
Increase/decrease
as at the end of the
reporting period
As at the end of As at the end of compared to the end
Major indicators the reporting period the prior year of the prior year (%)
Gearing ratio 69.94% 69.94% 0%
Current ratio 94.05% 95.29% -1.24%
Quick ratio 73.32% 73.22% 0.10%
Accounts receivable turnover ratio 372.52% 348.97% 23.55%
(including bills receivable)
Accounts receivable turnover ratio 611.90% 614.87% -2.97%
Inventory turnover ratio 374.82% 314.45% 60.37%
Note: Gearing ratio = Total liabilities/Total assets*100%
Accounts receivable turnover ratio = turnover/weighted average accounts receivable and net bills*100%
Inventory turnover ratio = cost of sales of the products/weighted average net inventory*100%
There was no significant seasonal trend for capital requirements of the Group.
The Group’s sources of capital primarily came from cash generated from operating activities, borrowings from financial
13
INTERIM
institutions, issuance of corporate bonds and medium-term notes in the capital market, as well as privately placed REPORT
bonds in the interbank market.
As of 30 June 2013, the total bank borrowings, corporate loans, medium-term notes and privately placed bonds of the
Group were RMB18,022 million, RMB6,262 million and RMB2,574 million (As at the end of the prior year: the total bank
borrowings, corporate loans, medium-term notes and privately placed bonds of the Group were RMB18,177 million,
RMB6,259 million and RMB2,184 million, respectively). As of 30 June 2013, the Group had monetary funds of RMB3,785
million (As at the end of the prior year: RMB4,456 million) in total (For the breakdown of monetary funds, please refer to
“Section X. 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 2013, the Group had 13,026 employees. The total staff remuneration for the first half of 2013 amounted to
RMB306.1748 million (as at the end of the prior year, the Group had 15,775 employees. The total staff remuneration for
2012 amounted to RMB744.1945million). For details of the staff, please refer to “Section VIII. Part V” in this report.
Major investment projects of the Company during the second half of 2013 will include the household paper project of
Wuhan Chenming, relocation of Jilin Chenming due to environmental protection reason, the high-end coated white
linerboard project of Jiangxi Chenming, magnesite mining and the waterfront regulation works of Guangdong Huirui.
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 2013, please refer to “Section IX. VII. 11. Details of
restricted fixed assets” in this report.
As at 30 June 2013, no contingent event was required to be disclosed by the Group.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 15
V Directors’ Report
II. Analysis of principal operations (Cont’d)
3. Development trend in the industry and corporate outlook
The industry to which the Company belongs is the paper making industry, which is a light industry. The sentiment
within the industry is closely related to the macroeconomic growth rate. Since the beginning of 2013, the growth
rate of the downstream demand of the domestic paper making industry was still at a low level. The weak domestic
demand persisted with the overall profitability in the paper making industry hovered around at a low level. However, the
development conditions for the paper making industry gradually improved in the long run. The National Development
and Reform Commission, Ministry of Industry and Communication and State Forestry Administration jointly issued the
Twelfth Five-Year Plan for the Development of the Paper Making Industry, which clearly states the general direction of
“controlling total volume, promoting concentration, optimising raw materials and reducing energy consumption and
emission”, from which the Company is expected to benefit in the long run.
In recent years, the Company is committed to the integrated development of forestry, pulp and paper with a longer
industry chain and more comprehensive paper types. During the reporting period, the Company 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 Company has expanded its
industry chain with a more rationalised industry positioning, which further strengthens the Company’s competitiveness
and development potential. As the economy and industry gradually recover, it is expected that the result of the
Company will record stable growth. The Company’s future performance is what the market can look forward to.
4. During the second half of 2013, the Company will primarily engage in the following works which are in
line with our strategic objectives:
13 (1) Adhere to strategy guidelines and make a blueprint for development plan. We focus on project establishment
INTERIM and enhance technology upgrade. For technology upgrade projects, we will make verification and pick up the
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pace to ensure high quality and good results. We will make more efforts to conduct technology research and
optimise the combination of production, learning, research and utilisation in both channel and system. Meanwhile,
we will comply with environmental protection policies, apply new technology and skills, promote the recycle
economy, enhance comprehensive utilisation of resources and improve energy saving and emission reduction.
(2) Strengthen innovation management and enhance working efficiency. We will introduce advanced management
mode. We will optimise purchase management and put the “purchase on demand” mode on trial. A finance
company is established to intensify the centralised management of the Group’s fund and enhance our financial
management. We make full use of the financing platform of the Hong Kong market in order to expand our
business scope, lower our financial costs and improve our profitability. Quality is the essence of a corporation.
Adhering to the object of improving quality and increasing economic benefits, the Company will strive to realise
“all staff, whole process and the entire corporation” quality management and strengthen our quality management.
We optimise flow of internal control, and bring risk-prevention management system into perfection, intensify and
promote the transformation of internal audit into management audit and risk audit, and perfect corporate legal
risk-prevention mechanism, and strengthen process oversights and management and control over significant
risks, aiming to enhance the internal control construction.
(3) Adjust product portfolio and explore new markets. The Company will enhance product quality management,
increase the development on high value-added products, produce popular products as well as increase the
market competitiveness of products. The Company endeavours to produce products at low cost in order to meet
client’s needs, leverage on its low cost edge and increase the efficiency. The Company will put more efforts
in direct marketing and expand its overseas sales channels. The Company will target on major direct clients.
Meanwhile, the Company will explore cooperation opportunities with strong major distributors, and increase the
overseas market exposure of products via their sales channels. The Company will expand the marketing channels
for its brand and organise promotion activities. Hence, the recognition of Chenming brand will increase, which will
fully enhance the brand image and influence of the Company.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
II. Analysis of principal operations (Cont’d)
4. During the second half of 2013, the Company will primarily engage in the following works which are in
line with our strategic objectives: (Cont’d)
(4) Strengthen team-building and improve staff quality. Human resources are the “major essential” for corporate
development. The Company will develop an innovative staff development programme. The Company will focus
on its recruitment and training works. It aims to maintain a fair staff system. The Company will enhance its staff
training and conduct a people-oriented way. The Company will also enhance the technical standard of various
position, aiming to develop as a learning and knowledgeable enterprise. The Company will establish a good
working and living environment, which strengthen staff’s loyalty and unity to the Company.
(5) Build up Chenming corporate culture and promote culture promotion and implementation. The Company
adheres to the establishment of corporate culture. It strives to “achieve a high degree of integration of corporate
governance and corporate culture” as well as ensures proper internal cooperation with all works conducted
orderly. The Company will strengthen the establishment of culture system, its promotion and implementation,
aiming to make all staff have a deeper understanding on Chenming corporate culture. This can promote
incorporation of culture into thought and management and make corporate culture as a direction of all works,
which can improve the quality and execution ability of staff. Hence, a brand new Chenming corporate culture is
established.
5. Capital requirements, source of funds and plan for usage
The Company’s new projects had commenced operation successively but they were unable to make profit on a timely
basis due to market reasons. At present, the Company has higher leverage. Fluctuation of the state deposit and lending
interest rates will directly cause fluctuation of interests undertaken by the Company so as to affect the Company’s 13
profitability. Therefore, the Company specifies the following measures: First, the Company will further improve its INTERIM
REPORT
international marketing network, improve its organisation structure of its overseas companies, adjust its sales channels
and step up effort to expand its overseas market, especially for the coated paper products, high-end duplex press
paper, electrostatic small paper and other high-end products, devote great efforts to exports and fund collection, and
relieve domestic market pressure. Secondly, the Company will make full use of the financing platform of the Hong Kong
market, seek the matching point of Hong Kong and domestic businesses, increase Hong Kong Chenming’s credit line
and expand the business of Hong Kong Chenming. Thirdly, the Company will actively establish the Group’s finance
company to enhance the centralised management of the Group’s fund and improve the efficiency of capital use so as
to further increase the Group’s fund settlement, management, investment and financing ability, thereby reducing its
financing cost.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 17
V Directors’ Report
II. Analysis of principal operations (Cont’d)
6. Potential risks
As a basic raw materials industry of the national economy, the papermaking 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
papermaking 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 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.
Industry risk. China’s papermaking industry has been facing increasingly fierce competition. Domestic papermaking
enterprises have launched new projects, introduced advanced equipment, expanded production capacity and promoted
sales. International renowned papermaking enterprises also participated directly in the domestic market competition by
leveraging on their advantages in scale and technology. The fierce competition in the domestic papermaking industry
will certainly affect the Company’s future operating results.
Policy risk. From the point of view of China’s policy, China will change the mode of growth through optimising the
layout of the papermaking industry and the raw material structure and product structure, in order to promote a modern
papermaking industry based on recycling by integrating the forestry and papermaking industry, which will have an
13 impact on the operating results of the Company.
INTERIM Environmental risk. The papermaking industry is a polluting industry. With the rising awareness of environment
REPORT
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 papermaking
industry has entered into an important transition period of development. The higher emission standard is bound to
increase the Company’s environmental protection cost and will result in the slowing down of scale expansion.
Interest rate risk. In recent years, greater fluctuations of the Renminbi benchmark lending rate level have an impact on
the Company’s cost of debt financing. 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 financial
expenses, thus affecting its operating results.
Exchange rate risk. As an import and export enterprise, the exchange rate of Renminbi against other currencies in future
will affect the Company’s operating results. The foreign currency transactions of the Company are mainly denominated
in US$. The operations of raw material imports, product exports and US$ borrowings of the Company will face the risk
of exchange rate changes.
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
III. Components of principal operations
Unit: RMB
Increase/decrease Increase/decrease Increase/decrease
of revenue as of operating costs of gross profit margin
compared to the as compared to the as compared to the
corresponding corresponding corresponding
Gross profit period of period of period of
Revenue Operating costs margin (%) the prior year (%) the prior year (%) the prior year (%)
By industry
Machine-made paper 8,848,173,025.18 7,326,007,309.03 17.20% -3.99% -7.38% 3.03%
Electricity and steam 803,178,978.83 667,582,441.74 16.88% 93.43% 85.14% 3.72%
Construction materials 109,279,405.02 91,159,060.57 16.58% -33.22% -32.12% -1.36%
Hotel 19,689,151.28 4,853,289.68 75.35% -18.82% -23.77% 1.60%
Others 48,754,432.33 39,934,984.09 18.09% 1,365.75% 1,641.45% -12.97%
By products
Light weight coated paper 501,851,702.17 426,670,112.16 14.98% -16.26% -21.89% 6.13%
Duplex press paper 1,371,028,527.11 1,134,137,789.43 17.28% -9.84% -14.45% 4.46%
Writing paper 185,288,743.85 161,211,366.92 12.99% 21.16% 10.16% 8.69%
Coated paper 2,160,140,193.34 1,877,854,601.69 13.07% 0.63% -8.14% 8.30%
News press paper 774,970,941.13 569,464,168.35 26.52% -11.8% -15.18% 2.93%
Paperboard 75,457,462.04 70,449,307.72 6.64% -74.28% -75.15% 3.28%
White paper board 1,101,886,281.24 875,218,954.34 20.57% 12.52% 9.23% 2.39%
Other machine-made paper 2,677,549,174.30 2,211,001,008.42 17.42% 1.22% 5.74% -3.53%
Electricity and steam 803,178,978.83 667,582,441.74 16.88% 93.43% 85.14% 3.72%
Construction materials
Hotel
109,279,405.02
19,689,151.28
91,159,060.57
4,853,289.68
16.58%
75.35%
-33.22%
-18.82%
-32.12%
-23.77%
-1.36%
1.6%
13
Others 48,754,432.33 39,934,984.09 18.09% 1,365.75% 1,641.45% -12.97% INTERIM
REPORT
By geographical segment
Mainland China 8,269,892,081.97 6,674,839,221.55 19.29% -1.9% -5.29% 2.89%
Hong Kong 325,828,258.19 231,375,805.11 28.99% 283.14% 179.43% 26.36%
U.S. 176,059,601.45 175,946,606.21 0.06% 135.84% 147.85% -4.84%
Japan 86,957,710.96 91,020,040.44 -4.67% -12.86% -6.34% -7.29%
Southeast Asia 188,351,001.08 185,553,307.61 1.49% 46.3% 48.01% -1.14%
Middle East 249,421,527.92 244,493,213.57 1.98% 22.81% 21.07% 1.41%
Europe 128,149,696.15 128,477,031.97 -0.26% -0.97% 3.27% -4.12%
South Africa 111,537,253.23 111,419,524.87 0.11% -9.61% -7.2% -2.59%
Other countries and regions 292,877,861.69 286,412,333.78 2.21% -50.26% -50.13% -0.26%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 19
V Directors’ Report
IV. Analysis of Core Competitiveness
(1) Scale advantages. After years of development, the Company has achieved annual paper production capacity of
over 6,000,000 tonnes and is capable to compete with international papermaking enterprises in scale. Large-scale
centralised production has provided the Company with obvious economic benefits, which are reflected not only in the
manufacturing costs of products, but also in its strong market influence in raw material procurement, product pricing
and industry policymaking.
(2) Product advantages. While the production scale of the Company expanded rapidly, its product mix also continued to
optimize. 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 achieved higher technological content
of products and added values as well as a higher gross profit margin. Diversification and gentrification of the product
mix has not only greatly enhanced the Company’s ability to withstand market risks, but also enabled the Company to
maintain a relatively high profitability.
(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. Its equipment
of advanced international level. The technical equipment used by the Company generally reflects the characteristics of
being technology-intensive and the integration of mechanical and electrical in the papermaking 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 the international advanced level.
(4) Research and innovation advantages. Leveraging its research strengths and relied on state-level enterprise technical
centres and post-doctoral research stations, the Company has established a comprehensive intellectual property rights
13 system, and has continuously enlarged its technological innovation capacity and research and development efforts to
INTERIM actively develop new products and proprietary technology with high technology content and added values. Meanwhile,
REPORT
Chenming Paper Technology Centre is actively engaged in technological cooperation with universities, research units
and international advanced enterprises. The above have helped the Company establish a research and development
network leveraging both the domestic and international advanced papermaking research bases, and guaranteed
Chenming’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,
and the Company’s energy consumption per ton of paper was also controlled at a relatively low level; secondly, the
Company has established a 150 tonnes/day mechanical pulp production line and a BCTMP pulp production line with
annual production of 250,000 tonnes, and has also increased the raw materials supply by launching the construction of
the 700,000 tonnes of wood pulp project in Zhanjiang; thirdly, the Company has reduced costs through the construction
of the captive power plant to ensure energy supply.
(6) Funding advantages. The Company has high profitability and credit status, and has maintained long-term stable
cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing capacity.
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 maximization of shareholders’ wealth. It has
conducted several financing activities in domestic and foreign stock markets. The funds obtained have been applied
effectively and has helped the Company create good market image, which has provided the Company with stronger
abilities in direct financing in the stock capital market.
(7) Advantages in environmental regulation capacity: Over the years, the Company has firmly established “environmental
protection first, scale expansion second” as the concept of development. The Company has ensured the enhancement
of economic and environmental benefits simultaneously by giving equal importance to environmental protection
and production. In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities
including the alkali recovery system, middle water treatment system, white water recovery system, red liquor
comprehensive utilization system and the sewage treatment plants, which guaranteed that the environment protection
facilities can meet the demand of the rapid expansion of the Company.
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
V. Analysis of investments
1. External equity investments
(1) External investments
External investments
Investments during
Investments during the the corresponding
reporting period (RMB) period of prior year (RMB) Change (%)
184,206,250.00 89,306,351.20 106.26%
Investees
The Company’s
share of interest in
Names of the companies Principal activities investees (%)
Haicheng Haiming Mining Processing and sales of magnesite and talc 60%
Company Limited
Zhanjiang Meilun Paper Pulp Plant fostering, forest conservation, soil improvement, 100%
Co., Ltd. forestry research, construction of raw material
bases; implementation, management and operation
of pulp mill construction; manufacture, production,
processing and sales of pulp and related products
Zhanjiang Chenming New-style Production and sales of new-style wall materials, and 100% 13
Wall Materials Co., Ltd. comprehensive utilisation of coal ash INTERIM
REPORT
Chenming GmbH Trading of machine-made paper 100%
2. Use of proceeds
(1) The general use of proceeds
Unit: RMB’0,000
Total proceeds 380,000
Total investment of proceeds during the reporting period 177,040
Total cumulative investment of proceeds 377,340
Total proceeds of changed use during the reporting period 0
Total cumulative proceeds of changed use during the reporting period 0
Ratio of total cumulative proceeds of changed use (%) 0%
Description of the general use of proceeds
On 26 December 2012, the Company issued a total of 38.00 million corporate bonds totalling RMB3,800 million
with a face value of RMB100 each at an issue price of RMB100 per bond. The coupon rate was 5.65% and the
proceeds amounted to RMB3,800 million. After deducting expenses of RMB27 million, the net proceeds available
for use amounted to RMB3,773 million. During the reporting period, RMB1,770 million of the proceeds were used,
of which approximately RMB273 million was used to replenishing the liquidity and approximately RMB1,497
million was used to repay bank borrowings and refinance short-term bank borrowings. As at 30 June 2013,
RMB3,773 million of the proceeds were cumulatively used, of which approximately RMB273 million was used to
replenishing the liquidity and approximately RMB3,500 million was used to repay bank borrowings, most of which
were used to refinance short-term bank borrowings.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 21
V Directors’ Report
V. Analysis of investments (Cont’d)
3. Analysis of major subsidiaries and investees
Information on major subsidiaries and investees
Unit: RMB’0,000
Type of Principal products Revenue from
Name of companies companies Industry or services Registered capital Total assets Net assets operations Operating profit Net profit
Zhanjiang Chenming Subsidiary Pulp Pulp, coated paper RMB3,000 million 1,152,372.89 362,652.81 208,848.26 28,445.39 22,617.37
Paper Pulp Co., Ltd.
Shandong Chenming Paper Subsidiary Trading of Sales of paper RMB100.00 million 724,726.87 11,067.66 740,481.26 9,516.49 6,896.86
Sales Company Limited paper products
products
Jiangxi Chenming Paper Subsidiary Papermaking Coated paper US$172.00 million 319,668.66 173,995.98 87,901.63 2,528.02 2,914.37
Co., Ltd.
Shandong Chenming Power Subsidiary Electricity Generation and sales RMB99.5531 million 46,162.53 28,625.78 25,514.78 2,644.17 2,507.25
Supply Holdings Co., Ltd. and steam of electricity
and steam
Wuhan Chenming Hanyang Subsidiary Papermaking Writing paper and RMB211.3670 million 241,545.46 47,221.12 46,492.56 -18,875.78 -3,401.54
Paper Holdings Co., Ltd. news press paper
Shouguang Meilun Paper Subsidiary Papermaking Coated paper and RMB2,200.00 million 913,975.87 169,619.97 183,254.61 -28,785.24 -21,361.38
Co., Ltd. household paper
Particulars of major subsidiaries and investees:
(1) Zhanjiang Chenming and Jiangxi Chenming were benefited from the overall upturn in the market with better cost
13 control and soaring gross profit margin as compared to the corresponding period of prior year. Chenming Sales
INTERIM Company began to make profit gradually through strict cost control amid the overall upturn of the paper product
REPORT
market. Chenming Power Supply continued to maintain its profitability due to the low costs of major raw materials.
(2) Wuhan Chenming Plant I suspended its production due to elimination of outdated production capacity. Its
products suffered market downturn with a lower gross profit margin. Shouguang Meilun launched new coated
paper and white coated linerboard projects with their market to be exploited.
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Directors’ Report
V. Analysis of investments (Cont’d)
4. Highlights of major investments not financed by the proceeds
Unit: RMB’0,000
Accumulated
actual
investments
Investment made as of
Total made during the end of
planned the reporting the reporting Progression Revenue from
Name of project investment period period of projects projects
600,000 tonnes white 260,000 8,964.90 257,827.22 100% Assets were reclassified
coated linerboard during the reporting period
project and no contribution was
made to revenue in the
short run.
Relocation of Jilin 230,000 17,417.27 150,411.72 65.4% Not completed.
Chenming
First-stage household 48,900 23,265.58 27,976.61 57.21% Not completed.
paper project of
Wuhan Chenming
Magnesite mining 50,000 10,045.07 29,656.97 59.31% Not completed.
13
Total 588,900 59,692.82 465,872.52 － － INTERIM
REPORT
VI. Estimate of the operating results from January to September 2013
Warning of cumulative net profit for the period between the beginning of the year to the end of the next reporting period
being projected to be at a loss or expected to have material changes as compared to the corresponding period of prior
year and its explanation.
□ Applicable √ Not applicable
VII. Opinions of the Board of Directors and the Supervisory Committee regarding the “modified
auditor’s report” for the reporting period issued by the accountants
The interim financial statements of the Company for 2013 were unaudited by the accountants.
VIII. Particulars provided by the Board of Directors regarding the “modified auditor’s report” for
last year
The financial statements of the Company for 2012 were audited by RSM China CPA (currently is renamed as Ruihua CPA), for
which RSM China CPA (currently is renamed as Ruihua CPA) issued a standard unqualified audit report.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 23
V Directors’ Report
IX. 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 2012 profit distribution plan was considered and approved by the 2012 annual general meeting of the Company on
15 May 2013. There were 2,062,045,941 shares in the total share capital of the Company as at 31 December 2012. After
deduction of treasury shares of 86,537,974 shares to be cancelled under the repurchase of B shares of the Company, the total
share capital entitled to this distribution amounted to 1,975,471,967 shares which were entitled to this distribution. Based on
the 1,975,471,967 shares and a cash dividend of RMB0.60 (tax inclusive) to be paid to shareholders for every 10 shares held,
a total cash dividend of RMB118,528,318.02 (tax inclusive) was distributed.
The 2012 equity distribution announcement was published by the Company on China Securities Journal, Shanghai Securities
News, Securities Daily, Securities Times, Hong Kong Commercial Daily and CNINFO on 3 July 2013. For A Shares, the book
closure date was 9 July 2013. For B Shares, the book closure date was 12 July 2013. The ex-rights date was 10 July 2013.
X. Proposals on profit distribution and conversion of capital reserves into share capital during
this reporting period
There was no proposal on profit distribution and conversion of capital reserves into share capital during this reporting period.
13
INTERIM
REPORT
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
I Overview of corporate governance
(I) Corporate Governance
The Company operated in compliance with the requirement of Companies Law (《公司法》), Securities Law 《( 證 券
法》), Code of Corporate Governance for Listed Companies (《上市公司治理準則》), Rules Governing Listing of
Stocks on Shenzhen Stock Exchange (《深圳證券交易所股票上市規則》), Hong Kong Listing Rules and the related
requirements as required by China Securities Regulatory Commission. The Company further improved and optimised
its legal person governance structure in practice during the reporting period. The Board considers there is no material
deviation of the Company in its corporate governance from the regulatory documentation requirements provided for
listed companies in respect of corporate governance.
(II) Corporate Governance Activities
During the reporting period, on the basis of the consolidation of corporate governance works by listed companies in
2012, the Board strived to regulate the operation of the Company by improving corporate governance. In accordance
of the requirements of China Securities Regulatory Commission, Shenzhen Stock Exchange and Shandong branch
of China Securities Regulatory Commission. The Company carried out the following activities to continue to improve
corporate governance:
1. In order to improve the efficiency of decision-making of the Board, the Company reduced the members of the
Board and at the same time revised the Articles of Association after taking into consideration of the expiration of
terms of some directors and the change of the session of the Board.
2. In order to carry out the spirit of the Notice regarding Implementation of Investor Protection in 2013 (Zheng Jian
Ban Fa [2013] No. 21) by CSRC and the Notice regarding Further Implementation of Investor Protection of Listed
Companies (Lu Zheng Jian Gong Si Zi [2013] No. 33) issued by Shandong branch of China Securities Regulatory
13
INTERIM
Commission, conscientiously protect investors, especially the legal rights of public investors, the Company REPORT
formulated and implemented Investor Relations Management System in accordance with the Work Guidance for
Relations between Listed Companies and Investors and requirement of above Notices.
3. In accordance with The Rules Governing the Listing of Securities of the Stock Exchange of Hong Kong Limited,
combining the change of the session of the Board and the situation of Articles of Association, the Company
revised Implementation Rules of the Remuneration and Assessment Committee, Implementation Rules of the
Nomination Committee, Implementation Rules of the Strategic Committee and Implementation Rules of the Audit
Committee, further confirmed the responsibilities and work process of the Board and all professional committees
and improved corporate governance.
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 CSRC. The regulated operations and the internal control standards would grow with
the development of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 25
VI Material Matters
I. Overview of corporate governance (Cont’d)
(III) 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 Rules Governing the Listing of
Securities on the Stock Exchange (“Hong Kong Listing Rules”).
1. The chairman and general manager of the Company is Mr. Chen Hongguo. Mr. Chen Hongguo performs the roles
of the chairman and the general manager for the overall management of the Company. This constitutes a deviation
from the principles and code provisions of A2 - Directors and Chief Executive Office in Corporate Governance
Code and Corporate Governance Report under Appendix 14 to Hong Kong Listing Rules. However, the Directors
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. Communication with shareholders
During the reporting period, the Company held the annual general meeting on 15 May 2013.
In accordance with E1.2 of Corporate Governance Code and Corporate Governance Report under Appendix 14 to
Hong Kong Listing Rules, Chairman of the Board shall attend the annual general meeting and invite the chairmen
13 of the audit, remuneration, nomination and any other committees (as appropriate) to attend. In their absence, he
INTERIM should invite another member of the committee or failing this his duly appointed delegate, to attend.
REPORT
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 also attended the annual
general meeting as a scrutineer.
(VI) 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. In response to the specific enquiries to all Directors and Supervisors by the Company, all Directors and
Supervisors confirmed that they had complied with the requirements as set out in the Model Code during the six month
period ended 30 June 2013.
(V) 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 Mr. Cui Youping. 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 six months ended 30 June 2013
prepared in accordance with the accounting standards.
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
II. Material litigation and arbitration
□ Applicable √ Not applicable
The Company was not related to any material litigation and arbitration during the reporting period.
III. Media criticism
√ Applicable □ Not applicable
Description on media criticism Disclosure Date Disclosure index
Clarification on media criticism regarding the Company relating 26 February 2013 http://www.cninfo.com.cn
to matters such as “alleged discharge of waste water, delay Announcement No.: 2013-016
in reclassifying construction in progress as fixed assets and
reliance on government grants”
IV. Matter related to bankruptcy and reorganisation
In order to facilitate production upgrade and comply with the national energy saving and emission reduction requirements,
subject to the concept of “Notice on the action plan regarding eliminating outdated production capacity in 2012” (Nei Zheng
Fa [2012] No. 28) issued by the People’s government of Inner Mongolia Autonomous Region, the Company decided to close
down Hailaer Chenming by the end of May 2012 and wind it up in accordance with PRC laws and regulations. For further 13
details, please refer to the Company’s “Announcement in respect of closing and eliminating outdated production capacity” INTERIM
REPORT
posted on the website of CNINFO on 26 May 2012. As at the end of the reporting period, Hailaer Chenming was in the
process of liquidation in accordance with the requirements of the PRC and relevant production lines and equipment are being
removed.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 27
VI Material Matters
V. Asset transactions
1. Acquisition of assets
Ratio of the
net profit Relationship
contribution with the
to the party(ies)
Company involved
of the (Applicable
Transaction asset(s) Connected to Disclosure
Counterparty(ies) or consideration Effect on operating of Effect on profit and loss over total transaction connected Date
ultimate controller(s) Asset(s) acquired (RMB’0,000) Progress (Note 2) the Company (Note 3) of the Company (Note 4) net profit (%) or not transaction) (Note 5) Disclosure index
Yanbian Shixian Bailu 6350mm paper 20,400 Asset title and liability Able to further leverage the No effect on the financial No 16 May 2013 http://www.cninfo.com.cn
Papermaking machine were transferred. advantage of the existing position and operating
Co., Ltd. equipment of the Company results during the reporting
and at the same time period.
able to save the costs of
acquisition.
13
INTERIM
REPORT
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
V. Asset transactions (Cont’d)
2. Disposal of assets
Net profit
contribution
to the Ratio of the
Company net profit
from the contribution Relationship
beginning of to the with
the period Company of counterparty
up to the disposal of Pricing (ies) Relevant Relevant
Transaction disposal assets over basis of Connected (applicable to asset title liability
consideration date Effect on the Company total net asset transaction connected transferred transferred Disclosure 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 index
Yanbian Shixian 49% equity interest 15 May 2013 5,400 -192.53 Net profit increased by 1.62% Based on the No Yes Yes 16 May 2013 http://www.
Bailu Papermaking in Yanbian Chenming RMB5.43 million due to asset appraised price cninfo.com.cn
Co., Ltd. Paper Co., Ltd. disposal, in line with the of an appraisal
development agency
strategy of high-end
products, capable of
improving economic
efficiency and having no
adverse effect on the financial
position and operating results
of the Company.
Yanbian State-owned 51% equity interest 15 May 2013 5,600 -200.39 Net profit increased by 1.7% Based on the
Assets Investment in Yanbian Chenming RMB5.65 million due to asset appraised price
No Yes Yes 16 May 2013 http://www.
cninfo.com.cn 13
Management Paper Co., Ltd. disposal, in line with the of an appraisal INTERIM
Co., Ltd. development agency REPORT
strategy of high-end
products, capable of
improving economic
efficiency and having no
adverse effect on the financial
position and operating results
of the Company.
Hubei Zhongjian 51% equity interest 2 M a r c h 510 -28.21 Net profit decreased by -0.9% Based on the No Yes Yes Not Not
Haohua Environment in Wuhan Chenjian 2013 RMB3.00 million due to asset appraised price applicatble applicatble
Protection Co., Ltd. N e w - s t y l e W a l l disposal, no adverse effect of an appraisal
Materials Co., ltd. on the financial position agency
and operating results of the
Company.
Shanghai Ruibao 98.36% equity 26 April 2013 30,091.6 56.46 Net profit remaing unchanged 0% Based on the No Yes Yes 27 April 2013 http://www.
Environmental. interest in Shanghai due to asset disposal, audited net cninfo.com.cn
Technology Runchen Equity conducive to protect the assets as at 31
Co., Ltd.) Investment Fund Co., interests of the Company March 2013
Ltd. and shareholders, reducing
investment risk, improving
capital utilisation efficiency and
having no adverse effect on the
financial position and operating
results of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 29
VI Material Matters
VI. Implementation of the equity incentive plan of the Company and its effect
Not applicable.
VII. Significant connected party transactions
1. Connected party transactions associated with day-to-day operation
Subject matter Pricing basis Amount of Percentage as
Types of the of the of the Price of connected the amount Settlement of Market price
Connected connected connected connected connected party of similar connected of available
party party party party party transactions transactions party similar Disclosure Disclosure
Connected party relationship transactions transactions transactions transactions (RMB’0000) (%) transactions transaction date index
Anhui Time Source Corporation Associate Sale Machine-made Market price Market price 8.68 Bank Not applicable Not applicable
paper and acceptance
wauthorisation and telegraphic
from the Board transfer
Total — — 8.68 — — — — —
Description of return of bulk sales in details Nil
The actual performance of the estimated total amounts of Nil
day-to-day connected party transactions to be conducted
in the period under review during the reporting period by
type (if any)
13 The difference between the transaction price and the market Nil
INTERIM reference price (if applicable)
REPORT
2. Connected creditors’ rights and debts transactions
Whether non-operating connected creditors’ rights and debts transactions existed?
□ Yes √ No
Whethe Amount
r the incurred
Type of non- Opening during Closing
Connected party creditor’s rights capital being balance period balance
Connected party relationship and debts Reason used or not (RMB ’0,000) (RMB ’0,000) (RMB ’0,000)
Anhui Time Source Corporation Associate Creditors’ rights due In the ordinary No 1,573.91 -1,573.91 0
from a connected course of business
party
Jiangxi Jiangbao Media Colour Associate Creditors’ rights due In the ordinary No 2.16 -2.16 0
Printing Co. Ltd. from a connected course of business
party
Effect of connected creditors’ rights and There is no effect on the operating results and financial position of the Company.
liabilities on the operating results and
financial position of the Company
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
VII. Significant connected party transactions (Cont’d)
3. Other significant connected party transactions
On 6 February 2013, the Company convened the 8th extraordinary meeting of the sixth session of the Board, in which
“Resolution on capital increase in Haiming Mining and introduction of the shareholder” was passed. The current
registered capital of Haiming Chenming was relatively limited and did not commence any revenue generating operation.
Having considered operational risks and capital requirements for future projects of Haiming Chenming, the Company
decided to increase the capital of Haiming Chenming to RMB240 million upon discussion with shareholders, which
benefited the Company and shareholders as a whole and shareholders could share all risks and work together. The
Company, Liaoning BeiHai Industries Group Co., Ltd. and Shouguang Hengtai Enterprise Investment Company Limited
made capital contributions in the amounts of RMB74.00 million, RMB42.00 million and RMB24.00 million respectively to
the registered capital of Haiming Chenming. Upon completion of the capital increase, the registered capital of Haiming
Mining increased to RMB240 million, which was owned as to 60%, 30% and 10% by the Company, BeiHai Industries
and Hengtai Enterprise respectively. As the Chairman and some of the directors, supervisors and senior management
of the Company had equity interest in Hengtai Enterprise, the capital contributions by Hengtai Enterprise to Haiming
Mining constituted a connected transaction. The capital increase and introduction of new shareholders of Haiming
Mining was completed on 13 March 2013. The registered capital of Haiming Mining changed to RMB240 million.
Relevant information regarding the tentative announcement disclosure website for significant connected party
transactions
Disclosure date
of the tentative Name of the tentative
Name of tentative announcement announcement announcement disclosure website
13
Announcement in respect of capital increase in INTERIM
Haiming Mining and connected transaction 7 February 2013 http://www.cninfo.com.cn REPORT
VIII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
During the reporting period, no assets of other companies was in the custody of the Company or vice versa.
Projects contributed profit or loss over 10% of the total profit of the Company during the reporting period.
□ Applicable √ Not applicable
(2) Contracting
During the reporting period, the Company did not contract other companies’ assets or vice versa.
Projects contributed profit or loss over 10% of the total profit of the Company during the reporting period.
□ Applicable √ Not applicable
(3) Leasing
During the reporting period, the Company did not lease other companies’ assets or vice versa.
Projects contributed profit or loss over 10% of the total profit of the Company during the reporting period.
□ Applicable √ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 31
VI Material Matters
VIII. Material contracts and implementation (Cont’d)
2. Guarantees
During the reporting period, the Company did not provide any guarantee to external parties (excluding the guarantees
provided to its subsidiaries) and did not provide any guarantees against the rules and regulations.
Unit: RMB’0,000
Guarantees provided by the Company for subsidiaries
Date of the related Guarantee
announcement Guarantee to related
disclosing the Amount of date (agreement Guarantee Fulfilled parties
Name of obligor guarantee amount guarantee date) provided Type of guarantee Term or not or not
Zhanjiang Chenming Paper Pulp 28 March 2012 300,000 24 May 2012 56,178.7 General guarantee 3 years No No
Co., Ltd.
Jiangxi Chenming Paper Co., Ltd. 21 December 2012 20,000 21 December 2012 10,000 General guarantee 3 years No No
Jiangxi Chenming Paper Co., Ltd. 27 March 2013 200,000 0 General guarantee 3 years No No
Huanggang Chenming Arboriculture 25 February 2010 16,000 20 April 2010 0 General guarantee 3 years Yes No
Co., Ltd.
Huanggang Chenming Arboriculture 25 February 2010 16,000 8 July 2010 2,970 General guarantee 3 years No No
Co., Ltd.
13 Huanggang Chenming Arboriculture 30 March 2011 20,000 19 September 2011 3,000 General guarantee 3 years No No
INTERIM
REPORT Co., Ltd.
Huanggang Chenming Arboriculture 28 March 2012 20,000 27 June 2012 2,600 General guarantee 3 years No No
Co., Ltd.
Shouguang Meilun Paper Co., Ltd. 24 August 2010 79,473 10 September 2010 49,429.6 General guarantee 5 years No No
Shouguang Meilun Paper Co., Ltd. 29 October 2010 600,000 14 January 2011 0 General guarantee 3 years No No
Shouguang Chenming Art Paper 28 March 2012 10,000 0 General guarantee 3 years No No
Co., Ltd.
Jilin Chenming Paper Co., Ltd. 28 March 2012 100,000 0 General guarantee 3 years No No
Jilin Chenming Paper Co., Ltd. 27 March 2013 50,000 0 General guarantee 3 years No No
Chenming (HK) Limited 29 October 2010 50,000 13 April 2011 50,000 General guarantee 3 years No No
Shandong Chenming Paper Sales 27 October 2011 400,000 15 March 2012 212,501.31 General guarantee 3 years No No
Company Limited
Shouguang Chenming Import and 28 March 2012 200,000 0 General guarantee 3 years No No
Export Trade Co., Ltd.
Zhanjiang Meilun Paper Co., Ltd. 27 March 2013 50,000 0 General guarantee 3 years No No
Yanbian Chenming Paper Co., Ltd. 27 March 2013 50,000 0 General guarantee 3 years Yes No
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
VIII. Material contracts and implementation (Cont’d)
2. Guarantees (Cont’d)
Unit: RMB’0,000
Guarantees provided by the Company for subsidiaries
Date of the related Guarantee
announcement Guarantee to related
disclosing the Amount of date (agreement Guarantee Fulfilled parties
Name of obligor guarantee amount guarantee date) provided Type of guarantee Term or not or not
Total amount of guarantee provided for subsidiaries 350,000 Total amount of guarantee provided for subsidiaries during the reporting period 189,867.56
approved during the reporting period (B1) (B2)
Total amount of guarantee provided for subsidiaries 2,115,473 Total balance of guarantee provided for subsidiaries as at the end of the 386,679.61
approved as at the end of the reporting period (B3) reporting period (B4)
Total amount of guarantee provided by the Company (the sum of the above two main categories)
Total amount of guarantee approved during the reporting 350,000 Total amount of guarantee provided during the reporting period (A2+B2) 189,867.56
period (A1+B1)
Total amount of guarantee approved as at the end of the 2,115,473 Total balance of guarantee provided as at the end of the reporting 386,679.61
reporting period (A3+B3) period (A4+B4)
The percentage of total amount of guarantee provided (A4+B4) to the net assets of the Company (%) 28.25% 13
Of which: INTERIM
REPORT
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) 320,500.91
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) 320,500.91
Explanation of possible joint obligation on outstanding guarantees provided (if any) Nil
Explanation of external guarantees in breach of the specified procedures (if any) Nil
During the reporting period, the Company did not have any compound guarantee.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 33
VI Material Matters
VIII. Material contracts and implementation (Cont’d)
3. Other material contracts
Book value Appraised
of subject value of the
Name of the asset of the subject asset Name of Connected Progress as
company Name of party contract of the contract appraisal Transaction party Connected at the end of
entering into involved in the Date of (RMB’0,000) (RMB’0,000) agency Appraisal price transaction party the reporting
contract contract contract (if any) (if any) (if any) date (if any) Pricing basis (RMB’0,000) or not relationship period
Guangdong Zhanjiang City 6 February 2013 Not applicable Not applicable No Not applicable The construction
Huirui Construction project related to
Investment Project the contract was
Co., Ltd. Administration being examined
Bureau and approved. The
construction had
not commenced as
at the end of the
reporting period.
IX. Undertakings made by the Company and shareholders interested in 5% or more of the shares
of the Company made during the reporting period or before the reporting period but subsisting
to the reporting period
Particulars
13 Party involved Undertaking on the
INTERIM Undertaking in undertaking Details of undertaking date Term performance
REPORT
Undertaking on shareholding
structure reformation
Undertaking made in offering
documents or shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on initial public Shouguang (1) According to the plan on defective properties of the Company, Shouguang Chenming 16 January During the Strictly
offering or refinancing Chenming Holdings Company Limited has guaranteed and undertaken that: according to the 2008 issuance of implemented
Holdings Co., Ltd, application of the Company, for defective property(ies) owned by the Company and its H shares,
the controlling holding company which situated in the administrative area of Shouguang city, Shouguang no specific
shareholder of the Chenming Holdings will purchase it(them) and have it(them) being transferred to itself term
Company 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 defects cause the Company to incur any economic losses (including but not limited
to damages, penalties and relocation costs), Shouguang Chenming Holdings will bear such
economic losses; (3) during the corrective activities taken to the defective properties of
buildings and land of subsidiaries of the Company situated outside the local areas (including
the administrative area of Shouguang city), the economic losses such as penalties or
relocation costs implemented by competent administrative authorities and borne by the
subsidiaries arising from defects of insufficient title documents shall be paid pursuant to the
law by Shouguang Chenming Holdings after verification.
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
IX. Undertakings made by the Company and shareholders interested in 5% or more of the shares
of the Company made during the reporting period or before the reporting period 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 solely, jointly, or by 22 May 2008 During the Strictly
Chenming representing itself or any other persons or companies, and shall not procure its associates issuance of implemented
Holdings Co., Ltd, (as defined in The Listing Rules of Hong Kong Stock Exchange) to engage, in any business H shares,
the controlling which competes with the business of the Company and its subsidiaries (“Chenming Group” no specific
shareholder of the or “we”) directly or indirectly, in any country and region which our business exists (or any term
Company part of the world if in any form of electronics business), or in any business that directly or
indirectly competes with Chenming Group’s business which we operate from time to time
(including but not limited to any business in the form of sole proprietorship, joint ventures
or acquisitions, or holding interests directly or indirectly in such enterprises, or by any other
means); (2) in the event that Shouguang Chenming Holdings is required by its business to,
whether solely, jointly, or by representing itself or any other persons or companies, engage
in business which directly or indirectly competes against Chenming Group’s business, or
obtain any business opportunity which directly or indirectly competes against Chenming
Group’s business, 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 13
indemnify us for any loss caused by such breach and the Company shall have the right INTERIM
REPORT
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 performed Yes
timely?
Specific reasons for non- Not applicable
performance and further
plans (if any)
SHANDONG CHENMING PAPER HOLDINGS LIMITED 35
VI Material Matters
X. Engagement or dismissal of accounting firms
Has the interim financial report already been audited yet?
□ Yes √ No
The proposal for the engagement of the auditors for the year 2013 has been considered and approved on the 2012 Annual
General Meeting held on 15 May, 2013. It was resolved to re-appoint RSM China CPA (Special General Partnership) as the
auditors for the financial audit of the Company for 2013. The Company received a letter on the Change of RSM China CPA
(Special General Partnership) into Ruihua CPA (Special General Partnership) from RSM in July 2013, which set out that RSM
had merged with Crowe Horwath CPA and it was named as Ruihua CPA (Special General Partnership) after the merger. After
the establishment of Ruihua, the staff and the business of RSM are transferred to Ruihua and RSM provides its service to its
clients under the name of Ruihua. All the contracts previously entered into by RSM with the Company remain valid and Ruihua
will succeed to and perform the corresponding duties, rights and obligations. The proposal for the change of the auditors was
considered and approved at the 2013 First Extraordinary General Meeting on 21 August 2013, pursuant to which the Company
appointed Ruihua CPA (Special General Partnership) as the auditors of the Company for 2013. For more details, please refer
to the related announcements disclosed by the Company on 2 Aug 2013 and 22 Aug 2013.
XI. Punishment and rectification
The Company did not receive punishment during the reporting period.
Particulars on rectification
□ Applicable √ Not applicable
13 XII. Explanation of other material matters
INTERIM
REPORT
1. Jilin Chenming Waste Collection Co., Ltd. was established in 2005 with registered capital of RMB1.00 million. Jilin
Waste had been inactive for many years. With a view to saving relevant expenses, the Board of Jilin Chenming agreed
to cancel the registration of Jilin Waste. Assets and liabilities of Jilin Waste were consolidated into Jilin Chenming for
audit on 30 May 2013, while the relevant registration cancellation procedures were being processed.
2. Wuhan Xingzhilian Paper Company Limited was a wholly-owned subsidiary with registered capital of RMB20.00
million established by Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a controlling subsidiary of the Company,
in February 2012 for investment in a household paper project. According to the Company’s strategic plans and needs
of production and operation, the household paper project was assigned to Wuhan Chenming for investment and
development, so as to reduce relevant expenses. It was resolved at the fourteenth meeting of the fifth session of the
Board of Wuhan Chenming that the registration of Wuhan Xingzhilian Paper Company Limited was approved to be
cancelled. The relevant registration cancellation procedures were completed on 18 March 2013.
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
XII. Explanation of other material matters (Cont’d)
3. Information disclosure index for the first half of 2013
Websites of publication
Subject matter Date of publication and their path
Third Announcement on Repurchase of B Shares and 11 January 2013 http://www.cninfo.com.cn
Reduction of Registered Capital
Announcement on Notice of 2013 First Bondholder 11 January 2013 http://www.cninfo.com.cn
Meeting of “11 Chenming Bond”
Indicative Announcement on Agreed Repurchase Type 23 January 2013 http://www.cninfo.com.cn
Securities Trading by a Shareholder
Announcement on Failure to Convene 2013 First 29 January 2013 http://www.cninfo.com.cn
Bondholder Meeting of “11 Chenming Bond”
Announcement on Estimated Annual Results for 2012 31 January 2013 http://www.cninfo.com.cn
Indicative Announcement on Receipt of Subsidies 31 January 2013 http://www.cninfo.com.cn
2012 Corporate Bonds Listing Announcement 1 February 2013 http://www.cninfo.com.cn
Notice of Seventh Extraordinary Meeting of the Sixth 1 February 2013 http://www.cninfo.com.cn
Session of the Board
Joint Venture Established with Tianma Specialty 1 February 2013 http://www.cninfo.com.cn 13
Chemicals INTERIM
REPORT
Indicative Announcement on Contracts Signed by 7 February 2013 http://www.cninfo.com.cn
Guangdong Huirui
Zhanjiang Huirui Investment Co., Ltd. Renamed as 7 February 2013 http://www.cninfo.com.cn
Guangdong Huirui Investment Co., Ltd.
Announcement on Resolutions of the Eighth 6 February 2013 http://www.cninfo.com.cn
Extraordinary Meeting of the Sixth Session
of the Board
Shareholding Structure of Haiming Mining Changed to 7 February 2013 http://www.cninfo.com.cn
Be Owned as to 60%, 30% and 10% by the Company,
BeiHai Industries and Hengtai Enterprise
Wuhan Chenming Commenced Construction of 7 February 2013 http://www.cninfo.com.cn
Household Paper Project of 136,000 Tonnes Annual
Production Capacity; and 4800 Paper Machine
production line of Wuhan Plant 2 Was Upgraded
Guangdong Huirui Invested in Regulation Works Project 7 February 2013 http://www.cninfo.com.cn
Clarification Announcement of Media Coverage on the 26 February 2013 http://www.cninfo.com.cn
Company relating to matters such as Alleged
Discharge of Waste Water, Delay in Reclassifying
Construction in Progress as Fixed Assets and Reliance
on Government Grants
Indicative Announcement on Progress of Repurchase of 28 February 2013 http://www.cninfo.com.cn
Part of B Shares
Announcement on Implementation of Repurchase of 8 March 2013 http://www.cninfo.com.cn
Part of B Shares
SHANDONG CHENMING PAPER HOLDINGS LIMITED 37
VI Material Matters
XII. Explanation of other material matters (Cont’d)
3. Information disclosure index for the first half of 2013 (Cont’d)
Websites of publication
Subject matter Date of publication and their path
Announcement on Resolutions of the Sixteenth meeting 27 March 2013 http://www.cninfo.com.cn
of the Sixth session of the Board
Announcement on Resolutions of the Thirteenth Meeting 27 March 2013 http://www.cninfo.com.cn
of the Sixth Session of the Supervisory Committee
Notice of 2012 Annual General Meeting 28 March 2013 http://www.cninfo.com.cn
Announcement in respect of Provision of Guarantee for 28 March 2013 http://www.cninfo.com.cn
the General Banking Facilities of Controlling
Subsidiaries
Announcement in respect of Provision of Financial 28 March 2013 http://www.cninfo.com.cn
Support to Several Controlling Subsidiaries
2012 Annual Report summary 28 March 2013 http://www.cninfo.com.cn
Announcement on Entitlement of High-tech Enterprises 3 April 2013 http://www.cninfo.com.cn
Indicative Announcement on Refunds upon Receipt of 3 April 2013 http://www.cninfo.com.cn
13 Tax Revenue
INTERIM Indicative Announcement on Progress of Repurchase of 3 April 2013 http://www.cninfo.com.cn
REPORT
Part of B shares
Announcement on Estimated Results for the First 3 April 2013 http://www.cninfo.com.cn
Quarter of 2013
Indicative Announcement on Progress of Repurchase of 12 April 2013 http://www.cninfo.com.cn
Part of B shares
Additional Resolution on “Guangdong Huirui Authorised 26 April 2013 http://www.cninfo.com.cn
to Invested in Regulation Works Project”
Indicative Announcement on Notice of 2012 Annual 26 April 2013 http://www.cninfo.com.cn
General Meeting
Announcement on Issue of Dedicated Private Debt 26 April 2013 http://www.cninfo.com.cn
Financing Instruments
Announcement on Resolutions of Seventeenth meeting 26 April 2013 http://www.cninfo.com.cn
of the Sixth session of the Board
Announcement on Disposal of Equity Interest in 27 April 2013 http://www.cninfo.com.cn
Shanghai Runchun
2013 First Quarter Report 27 April 2013 http://www.cninfo.com.cn
Indicative Announcement on Disposal of Equity Interest 3 May 2013 http://www.cninfo.com.cn
and Acquisition of Assets with Shixian Paper
Indicative Announcement on Progress of Repurchase of 4 May 2013 http://www.cninfo.com.cn
Part of B shares
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Material Matters
XII. Explanation of other material matters (Cont’d)
3. Information disclosure index for the first half of 2013 (Cont’d)
Websites of publication
Subject matter Date of publication and their path
Letter of Intent on Disposal of Equity Interest and 7 May 2013 http://www.cninfo.com.cn
Acquisition of Assets with Shixian Paper
Indicative Announcement on Progress of Repurchase of 15 May 2013 http://www.cninfo.com.cn
Part of B shares
Announcement on the Ninth Extraordinary Meeting of 15 May 2013 http://www.cninfo.com.cn
the Sixth session of the Board
Announcement on Disposal of Equity Interest in Yanbian 15 May 2013 http://www.cninfo.com.cn
Chenming and Acquisition of Assets
Announcement on Resolutions of 2012 Annual General 15 May 2013 http://www.cninfo.com.cn
Meeting
Announcement on Resolutions of the First Meeting of 16 May 2013 http://www.cninfo.com.cn
the Seventh Session of the Board 13
Announcement on Resolutions of the First Meeting of 16 May 2013 http://www.cninfo.com.cn INTERIM
REPORT
the Seventh Session of the Supervisory Committee
Indicative Announcement on Progress of Repurchase of 24 May 2013 http://www.cninfo.com.cn
Part of B shares
Indicative Announcement on Receipt of Incentive Fund 25 May 2013 http://www.cninfo.com.cn
Indicative Announcement 28 May 2013 http://www.cninfo.com.cn
Indicative Announcement on Progress of Repurchase of 6 June 2013 http://www.cninfo.com.cn
Part of B shares (I)
Indicative Announcement on Progress of Repurchase of 6 June 2013 http://www.cninfo.com.cn
Part of B shares (II)
Announcement on Resolutions of the First Extraordinary 27 June 2013 http://www.cninfo.com.cn
Meeting of the Seventh Session of the Board
Capital increase in Jiangxi Chenming 28 June 2013 http://www.cninfo.com.cn
Jiangxi Chenming Invested in high-end Packaging Paper 28 June 2013 http://www.cninfo.com.cn
Project
Notice of the 2013 Third Extraordinary General Meeting 28 June 2013 http://www.cninfo.com.cn
Notice of 2013 First Domestic Listed Share Class 28 June 2013 http://www.cninfo.com.cn
Meeting and 2013 First Overseas Listed Share Class
Meeting
Indicative Announcement on Receipt of Incentive Fund 28 June 2013 http://www.cninfo.com.cn
Announcement on 2013 Dividend Payment in respect of 28 June 2013 http://www.cninfo.com.cn
“11 Chenming Bond”
SHANDONG CHENMING PAPER HOLDINGS LIMITED 39
VI Material Matters
XIII. Purchase, sale and redemption of shares
1. Particulars of Repurchase of B shares by the Company
On 12 December 2012, the Company convened the Third Extraordinary General Meeting, Domestic listed share (A
shares and B shares) class meeting and overseas listed share (H shares) class meeting, on which resolutions in respect
of repurchase of B shares by the Company were approved, respectively. On 26 February 2013, such repurchase of
B shares by the Company had obtained the approval of the Shenzhen Stock Exchange and the Company had issued
announcements such as Repurchase Report which marked the commencement of repurchase. As of the end of this
reporting period, the Company cumulatively repurchased 86,573,974 B shares, representing 4.1985% of the Company’s
total share capital. The highest repurchase price was HK$4.00 per share, while the lowest price was HK$3.38 per share.
The total amount paid amounted to HK$330,911,185.31 (stamp duty and commission inclusive).
2. Apart from the above repurchase of B shares by the Company, the Company did not purchase, sell or redeem any listed
outstanding securities of the Company during the reporting period.
13
INTERIM
REPORT
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Changes in Share Capital and Shareholders
I. Changes in shares
Opening balance Change during the reporting period (Increase/decrease) Closing balance
Shares
Percentage converted Percentage
Amounts (%) New issue Bonus shares from reserve Others Sub-total Amounts (%)
I. Restricted shares 9,336,404 0.45% -882,092 -882,092 8,454,312 0.41%
1. Shares held by the Senior 9,336,404 0.45% -882,092 -882,092 8,454,312 0.41%
Management
II. Non-restricted shares 2,052,709,537 99.55% 882,092 882,092 2,053,591,629 99.59%
1. RMB ordinary shares 1,103,942,052 53.54% 882,092 882,092 1,104,824,144 53.58%
2. Domestic listed foreign shares 557,497,485 27.04% 0 0 557,497,485 27.04%
3. Overseas listed foreign shares 391,270,000 18.97% 0 0 391,270,000 18.97%
III. Total number of shares 2,062,045,941 100% 0 0 2,062,045,941 100%
The reasons for such changes.
√ Applicable □ Not Applicable
During the reporting period, the restricted shares held by the Senior Management changed by 882,092 shares from 9,336,404
shares to 8,454,312 shares. The reasons for such changes were as follows: according to the Practice Guidance for the
Company’s shares held by the directors, supervisors and senior management of the listed companies of Shenzhen Stock
Exchange (《深圳證券交易所上市公司董事、監事和高級管理人員所持本公司股份管理業務操作指南》), during the reporting
period, 25% of the non-restricted RMB ordinary shares (A shares) held by former Senior Management of the Company
13
INTERIM
leaving office for less than six months changed to restricted shares, i.e. 72,023 shares; during the reporting period, the sales REPORT
restriction on the shares held by former Directors and Senior Management of the Company leaving office for more than six
months expired and was released. Therefore, the nature of the 954,115 shares, used to be held by the Senior Management,
was changed from restricted shares held by the senior management to non-restricted RMB ordinary shares (A shares).
Approval of changes in shareholding.
□ Applicable √ Not Applicable
Transfer of shares arising from changes in shareholding.
□ Applicable √ Not Applicable
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings per
share and net assets per share attribute to shareholders of original shares of the Company in the latest year and the latest
period.
□ Applicable √ Not Applicable
Other information considered necessary by the Company or required by the securities regulation 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
SHANDONG CHENMING PAPER HOLDINGS LIMITED 41
VII Changes in Share Capital and Shareholders
II. Total number of shareholders and shareholding
Unit: share
Total number of shareholders at the end of the reporting period Total number of shareholders was 145,394, of which 116,069 were holders of A shares,
28,748 holders of B shares and 577 holders of H shares.
Shareholding of top ten shareholders
Share pledged or locked-up
Number of Changes
shares held (increase or
Percentage at as the end decrease)
of of the during the Number of Number of
Nature of shareholding reporting reporting restricted non-restricted Status
Names of shareholders shareholders (%) period period shares held shares held of shares Number
HKSCC NOMINEES LIMITED Overseas legal person 18.90% 389,775,500 26,500 0 389,775,500 0
SHOUGUANG CHENMING HOLDINGS State-owned legal person 10.01% 206,403,657 -86,600,000 0 206,403,657 0
COMPANY LIMITED
Agreed repurchase earmarked account Domestic non-state- 4.20% 86,600,000 86,600,000 0 86,600,000 0
at GF SECURITIES CO., LTD. owned legal person
PLATINUM ASIA FUND Overseas legal person 1.57% 32,341,052 -11,139,325 0 32,341,052 0
BILL & MELINDA GATES Overseas legal person 1.34% 27,724,435 1,092,800 0 27,724,435 0
13 FOUNDATION TRUST
BBH A/C VANGUARD EMERGING Overseas legal person 0.58% 12,036,985 10,180,285 0 12,036,985 0
INTERIM
REPORT MARKETS STOCK INDEX FUND
GE ASSET MANAGEMENT FUNDS Overseas legal person 0.52% 10,806,649 7,664,454 0 10,806,649 0
PLC — GEAM CHINA A
SHARE FUND
BANK OF COMMUNICATIONS - Domestic non-state- 0.48% 10,000,000 -3,421,199 0 10,000,000 0
HUAAN BAOLI ALLOCATION FUND owned legal person
Jin Xing Domestic natural person 0.38% 7,910,700 -106,500 0 7,910,700 0
Chen Hongguo Domestic natural person 0.31% 6,334,527 0 4,750,895 1,583,632 0
Connected relationship or connect-party relationship among the Shouguang Chenming Holdings Company Limited, a state-owned legal person shareholder, is not
above shareholders connected with any of the shareholders in the above. It is not a person acting in concert under
Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies
Procedures. Save for the above, it is not aware of any other shareholders of tradable shares are persons
acting in concert and is also not aware of any other shareholders of tradable shares are connected with
each others.
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VII Changes in Share Capital and Shareholders
II. Total number of shareholders and shareholding (Cont’d)
Shareholding of top ten shareholders of non-restricted shares
Class of shares
Number of
non-restricted
shares held as at
the end of the
Name of shareholders reporting period Class of shares Number
HKSCC NOMINEES LIMITED 389,775,500 Overseas listed foreign shares 389,775,500
SHOUGUANG CHENMING HOLDINGS 206,403,657 RMB ordinary shares 206,403,657
COMPANY LIMITED
Agreed repurchase earmarked account at 86,600,000 RMB ordinary shares 86,600,000
GF SECURITIES CO., LTD.
PLATINUM ASIA FUND 32,341,052 Domestic listed foreign shares 32,341,052
BILL & MELINDA GATES FOUNDATION TRUST 27,724,435 RMB ordinary shares 27,724,435
BBH A/C VANGUARD EMERGING MARKETS 12,036,985 Overseas listed foreign shares 12,036,985
STOCK INDEX FUND
GE ASSET MANAGEMENT FUNDS PLC — 10,806,649 RMB ordinary shares 10,806,649
GEAM CHINA A SHARE FUND
BANK OF COMMUNICATIONS - HUAAN BAOLI 10,000,000 RMB ordinary shares 10,000,000
ALLOCATION FUND
Jin Xing 7,910,700 RMB ordinary shares 2,127,100
Domestic listed foreign shares 5,783,600 13
UBS AG 6,110,505 RMB ordinary shares 6,110,505 INTERIM
REPORT
Connected relationship or connect-party Shouguang Chenming Holdings Company Limited, a state-owned legal
relationship among each of the top ten person shareholder, is not connected with any of the shareholders in
shareholders of non-restricted shares, and the above. It is not a person acting in concert under Administration of
between the top ten shareholders of non- Disclosure of Information on the Change of Shareholdings in Listed
restricted shares and the top ten shareholders Companies Procedures. Save for the above, it is not aware of any other
shareholders of tradable shares are persons acting in concert and is also
not aware of any other shareholders of tradable shares are connected with
each others.
Whether shareholders of the Company make the agreed repurchase transactions during the reporting period.
√ Yes □ No
Unit: share
Initially agreed Share repurchase during As at the end of
repurchase trades the reporting period the reporting period
Percentage of
Beneficial shareholders Securities company Percentage Percentage Number of shareholding
participated in the trade participated in the trade Number (%) Number (%) shareholding (%)
Shouguang Chenming Holdings GF Securities Co., Ltd. 86,600,000 4.20% 0 0 86,600,000 4.20%
Company Limited
On 21 January 2013, Shouguang Chenming Holdings Company Limited, the controlling shareholder of the Company,
disposed of 86,600,000 shares, representing 4.20% of the total share capital of the Company through agreed repurchase type
securities trading. GF Securities Co., Ltd. is the securities company participated in the trade. The repurchase period is 1 year.
During the reporting period, no repurchase trade has been processed by Chenming Holdings. As at the end of the reporting
period, GF Securities Co., Ltd. held, through the agreed repurchase earmarked account, 86,600,000 shares of the Company,
representing 4.20% of the total share capital of the Company.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 43
VII Changes in Share Capital and Shareholders
III. Change of controlling shareholders or beneficial owners
Change of controlling shareholders during the reporting period.
□ Applicable √ Not Applicable
Change of beneficial owners during the reporting period.
□ Applicable √ Not Applicable
IV. The Company’s shareholders’ and other persons’ interest in shares or debentures
As at 30 June 2013, the following shareholders (other than the directors, supervisors or chief executives of the Company) had
interests or short positions in the Company’s shares and underlying shares as shown in the share register maintained by the
Company in accordance with Section 336 of the Securities and Futures Ordinance (“SFO”) (Chapter 571 of the Laws of Hong
Kong):
Approximate shareholding as
a percentage of (%)
Name Number of shareholding Total share capital Class of shares
Shouguang Chenming Holdings 206,403,657 A shares (L) 10.01 18.54
Company Limited
The National Social Security Fund Council 35,270,000 H shares (L) 1.71 9.01
Agreed repurchase earmarked account 86,600,000 A shares (L) 4.20 7.78
at GF SECURITIES CO., LTD.
13 PLATINUM ASIA FUND 32,341,052 B shares (L) 1.57 5.80
INTERIM
REPORT (L) – Long position (S) – Short position (P) – Lending pool
Save as disclosed in the above, as at 30 June 2013, 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.
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Directors, Supervisors and Senior Management
I. Changes in shareholding of Directors, Supervisors and Senior Management
√ Applicable □ Not Applicable
Increase in the Decrease in the Share held Restricted shares Restricted shares
Share held as at number of shares number of shares as at the granted at the Restricted shares granted at the
the beginning of held during the held during the end of the beginning of granted during end of the
Name Position Status the period (shares) period shares) period (shares) period (shares) the period (shares) the period (shares) period (shares)
Chen Hongguo Chairman and general manager In office 6,334,527 0 0 6,334,527 0 0 0
Yin Tongyuan Vice Chairman In office 2,423,640 0 0 2,423,640 0 0 0
Li Feng Director, deputy general manager In office 471,818 0 0 471,818 0 0 0
Geng Guanlin Director, deputy general manager In office 437,433 0 0 437,433 0 0 0
Tan Daocheng Director Resigned 185,700 0 0 185,700 0 0 0
Hou Huancai Director In office 628,915 0 0 628,915 0 0 0
Zhou Shaohua Director, deputy general manager In office 123,007 0 0 123,007 0 0 0
Cui Youping Director In office 0 0 0 0 0 0 0
Wang Xiaoqun Director In office 0 0 0 0 0 0 0
Wang Fengrong Director Resigned 0 0 0 0 0 0 0
Zhang Zhiyuan Independent Director In office 0 0 0 0 0 0 0
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
Wang Yumei Independent Director Resigned 0 0 0 0 0 0 0
Wang Xiangfei Independent Director Resigned 0 0 0 0 0 0 0
Pan Ailing Independent Director In office 0 0 0 0 0 0 0
Gao Junjie Chairman of Supervisory Committee In office 39,606 0 0 39,606 0 0 0
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
Guo Guangyao
Supervisor
Supervisor
In office
In office
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
Li Xueqin Deputy general manager In office 429,348 0 0 429,348 0 0 0 INTERIM
REPORT
Wang Chunfang Financial Controller, secretary In office 30,000 70,000 0 100,000 0 0 0
to the Board
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
Zhang Yanjun Deputy general manager Resigned 102,393 0 0 102,393 0 0 0
Xia Jigang Deputy general manager Resigned 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 — — 11,207,625 70,000 0 11,277,625 0 0 0
SHANDONG CHENMING PAPER HOLDINGS LIMITED 45
VIII Directors, Supervisors and Senior Management
II. Changes of Directors, Supervisors and Senior Management
Name Position Type Date Reason
Chen Hongguo Chairman and general manager Elected 16 May 2013 Change of the session
Yin Tongyuan Vice Chairman Elected 16 May 2013 Change of the session
Li Feng Director Elected 16 May 2013 Change of the session
Geng Guanlin Director Elected 16 May 2013 Change of the session
Zhou Shaohua Director Elected 16 May 2013 Change of the session
Hou Huancai Director Elected 16 May 2013 Change of the session
Wang Aiguo Independent Director Elected 16 May 2013 Change of the session
Zhang Zhiyuan Independent Director Elected 16 May 2013 Change of the session
Zhang Hong Independent Director Elected 16 May 2013 Change of the session
Cui Youping Director Elected 16 May 2013 Change of the session
Pan Ailing Independent Director Elected 16 May 2013 Change of the session
Wang Xiaogun Director Elected 16 May 2013 Change of the session
Gao Junjie Chairman of Supervisory Committee Elected 16 May 2013 Change of the session
Yang Hongqin Supervisor Elected 16 May 2013 Change of the session
Wang Ju Supervisor Elected 16 May 2013 Change of the session
Guo Guangyao Supervisor Elected 16 May 2013 Change of the session
Yin Qixiang Supervisor Elected 16 May 2013 Change of the session
Li Xueqin Deputy general manager Appointed 16 May 2013 Appointment
Li Feng Deputy general manager Appointed 16 May 2013 Appointment
Geng Guanlin Deputy general manager Appointed 16 May 2013 Appointment
Zhou Shaohua Deputy general manager Appointed 16 May 2013 Appointment
Wang Chunfang Financial Controller, secretary to the Board Appointed 16 May 2013 Appointment
Hu Changqing Deputy general manager Appointed 16 May 2013 Appointment
Shao Zhenzhong Deputy general manager Appointed 16 May 2013 Appointment
13 Li Zhenzhong
Chang Liting
Deputy general manager
Deputy general manager
Appointed
Appointed
16 May 2013
16 May 2013
Appointment
Appointment
INTERIM
REPORT Poon Shiu Cheong Company secretary and qualified accountant Appointed 16 May 2013 Appointment
Tan Daocheng Director Expiration of tenure 15 May 2013 Expiration of tenure
Wang Yumei Independent Director Expiration of tenure 15 May 2013 Expiration of tenure
Wang Fengrong Director Expiration of tenure 15 May 2013 Expiration of tenure
Zhang Yanjun Deputy general manager Expiration of tenure 16 May 2013 Expiration of tenure
Xia Jigang Deputy general manager Expiration of tenure 16 May 2013 Expiration of tenure
Wang Xiangfei Independent Director Expiration of tenure 15 May 2013 Expiration of tenure
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Directors, Supervisors and Senior Management
III. Changes in the information of Directors and Supervisors
Under Rule 13.51(B) of the Listing Rules, changes in the information of Directors and Supervisors since the date of annual
report of the year ended 31 December 2012 are set out below:
Name of Director Details of the changes
Tan Daocheng No longer an executive director since 15 May 2013 due to expiration of tenure
Wang Yumei No longer an independent non-executive director since 15 May 2013 due to expiration of tenure
Wang Fengrong No longer a non-executive director since 15 May 2013 due to expiration of tenure
Wang Xiangfei No longer an independent non-executive director since 15 May 2013 due to expiration of tenure
Pan Ailing Being appointed as an independent non-executive director since 16 May 2013
IV. Remuneration of the Directors, Supervisors and Senior Management of the Company
1. Decision process for the remuneration of Directors, Supervisors and Senior Management
The remuneration plans of the Directors, Supervisors and Senior Management of the Company were assessed by the
Remuneration Committee of the Board based on the performance of their management responsibilities and performance
appraisal as well as the importance of the post, and considered and approved by the Board.
2. Basis for determining the remuneration of Directors, Supervisors and Senior Management
The remuneration of the Directors, Supervisors and Senior Management of the Company were paid through monthly
salary and annual incentive award in accordance with the labour, personnel and salary management systems formulated
by the Company.
13
INTERIM
3. Actual payment for the remuneration of Directors, Supervisors and Senior Management REPORT
The remuneration of the Directors, Supervisors and Senior Management of the Company were paid on a monthly basis.
V. Personnel of the Company
Staff number 13,026
Number of ex-employees or retired employees for whom the Company had obligations 14
Speciality composition
Number of
speciality
Type of speciality composition composition
Production staff 7,423
Sales staff 965
Technical staff 1,867
Financial staff 202
Administrative staff 1,172
Other staff 1,397
Education level
Type of education level Number (person)
Master or above 29
Bachelor 1,157
Post-secondary 2,832
Secondary and below 9,008
SHANDONG CHENMING PAPER HOLDINGS LIMITED 47
VIII Directors, Supervisors and Senior Management
VI. EQUITY INTERESTS HELD BY DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
FILED IN COMPLIANCE WITH SFO
As at 30 June 2013, 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:
Number of shares
(A shares) held
as at the end of
the reporting
Name Position period (shares)
Chen Hongguo (Note 1) Chairman and Executive Director 6,334,527
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
shares held Number of
13 as at the shares held
INTERIM Name of beginning of Change during as at the end
REPORT
associated the reporting the reporting of the reporting
Name Position corporation period (shares) period (+/-) period (shares)
Chen Hongguo (Note 2) Chairman Shouguang Chenming 231,000,000 231,000,000
Holdings Company
Limited
Note 1: Save as the 6,334,527 A Shares personally held, Chen Hongguo was also deemed to be interested in the 429,348 A Shares held by Li Xueqin,
his spouse.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively held 43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd.
(hereinafter referred to as “Shouguang Henglian”). As a result, Shouguang Henglian was deemed to be controlled by Chen Hongguo. As such,
the 231,000,000 shares in Chenming Holdings (approximately 13.71% of the total share capital of Chenming Holdings) held by Shouguang
Henglian was also deemed to be held by Chen Hongguo.
Save as disclosed in the above, as at 30 June 2013, none of the Directors, Supervisors or chief executives of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section 352
of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing the Listing
of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 30 June 2013, 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.
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
I. Auditors’ Report
Has the interim financial report already been audited yet?
□ Yes √ No
The interim financial report has not been audited yet.
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 3,784,625,075.07 4,456,217,362.86
Balances with clearing companies
Loans to banks and other financial institutions
Held-for-trading financial assets
Bills receivable 2,026,920,903.56 1,852,478,364.46
Accounts receivable
Prepayments
3,479,489,889.32
2,020,732,736.41
3,602,955,051.18
1,636,233,924.64
13
INTERIM
Premium receivable REPORT
Receivables from reinsurers
Reinsurance contract reserves receivable
Interest receivable
Dividend receivable
Other receivables 1,442,941,265.70 1,284,655,342.63
Financial assets purchased under agreements to resell
Inventories 4,090,593,802.98 4,412,548,700.68
Non-current assets due within one year
Other current assets 1,716,259,432.97 1,803,256,307.61
Total current assets 18,561,563,106.01 19,048,345,054.06
SHANDONG CHENMING PAPER HOLDINGS LIMITED 49
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
Held-to-maturity investments
Long-term receivables
Long-term equity investments 87,902,951.07 356,796,777.78
Investment properties 20,342,571.97 21,211,699.99
Fixed assets 22,181,177,678.73 19,751,339,991.06
Construction in progress 2,757,926,003.96 5,017,604,821.59
Construction materials 205,573,437.90 75,054,992.09
Disposal of fixed assets 309,306,361.03 287,309,818.03
Consumable biological assets 1,251,776,376.25 1,169,269,054.15
Oil and gas assets
Intangible assets 1,487,441,631.52 1,416,497,159.22
Development expenditure
Goodwill 20,283,787.17 20,283,787.17
Long-term prepaid expenses 200,004,375.47 184,770,685.65
Deferred income tax assets 427,963,868.71 376,938,086.60
13 Other non-current assets
INTERIM Total non-current assets 28,949,699,043.78 28,677,076,873.33
REPORT
Total assets 47,511,262,149.79 47,725,421,927.39
CURRENT LIABILITIES:
Short-term borrowings 13,365,215,062.60 12,876,398,495.16
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 933,239,044.69 1,285,627,762.07
Accounts payable 2,962,663,447.39 3,239,781,724.81
Advance receipts 424,229,542.28 347,835,800.87
Assets sold under agreements to repurchase
Handling charges and commission payable
Staff remuneration payables 119,074,985.07 177,847,769.71
Taxes payable 88,882,227.52 106,816,413.87
Interest payable 246,955,329.53 133,046,123.31
Dividend payable 118,528,318.02
Other payables 337,264,869.67 435,772,288.98
Due to reinsurers
Insurance contract reserves
Customer brokerage deposits
Securities underwriting brokerage deposits
Non-current liabilities due within one year 1,122,233,139.26 1,368,108,800.00
Other current liabilities 18,005,728.56 17,659,498.56
Total current liabilities 19,736,291,694.59 19,988,894,677.34
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements (Cont’d)
1. Consolidated Balance Sheet (Cont’d)
Item Closing balance Opening balance
NON-CURRENT LIABILITIES:
Long-term borrowings 3,535,153,218.64 3,933,167,835.94
Bonds payable 6,261,678,456.72 6,256,263,237.00
Long-term payables
Special payables 733,851,240.79 641,526,872.70
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 2,962,017,952.50 2,560,151,371.36
Total non-current liabilities 13,492,700,868.65 13,391,109,317.00
TOTAL LIABILITIES 33,228,992,563.24 33,380,003,994.34
OWNERS’ EQUITY (OR SHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 2,062,045,941.00 2,062,045,941.00
Capital reserves 6,383,471,238.54 6,414,892,999.53
Less: Treasury shares 265,363,183.60
Special reserves
Surplus reserves 1,132,116,106.40 1,132,116,106.40 13
General risk provisions INTERIM
Retained profit 4,364,393,121.59 4,149,511,927.88 REPORT
Foreign currency translation differences 9,038,071.60 929,205.04
Total equity attributable to equity holders of the company 13,685,701,295.53 13,759,496,179.85
Minority shareholders interests 596,568,291.02 585,921,753.20
Total owners’ equity (or shareholders’ equity) 14,282,269,586.55 14,345,417,933.05
TOTAL LIABILITIES AND OWNERS’ EQUITY
(OR SHAREHOLDERS’ EQUITY) 47,511,262,149.79 47,725,421,927.39
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 51
IX Financial Report
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 2,379,448,927.80 3,057,756,467.02
Held-for-trading financial assets
Bills receivable 1,811,587,848.26 2,592,967,374.30
Accounts receivable 2,780,039,014.14 342,497,381.57
Prepayments 1,070,998,960.33 646,962,478.93
Interest receivable
Dividend receivable 692,535,466.11 512,215,933.76
Other receivables 9,462,455,307.41 9,232,778,999.32
Inventories 1,026,318,878.22 937,107,565.73
Non-current assets due within one year 500,000,000.00
Other current assets 136,459,973.38 62,260,013.84
Total current assets 19,359,844,375.65 17,884,546,214.47
NON-CURRENT ASSETS:
13 Available-for-sale financial assets
INTERIM Held-to-maturity investments
REPORT
Long-term receivables
Long-term equity investments 8,672,786,106.24 8,991,578,553.83
Long-term equity investments 20,342,571.97 21,211,699.99
Fixed assets 5,335,487,462.32 5,006,474,783.75
Construction in progress 80,557,305.10 513,157,612.96
Construction materials 1,908,519.07 2,536,053.61
Disposal of fixed assets
Productive biological assets
Oil and gas assets
Intangible assets 312,931,312.35 313,572,418.35
Development expenditure
Goodwill
Long-term prepaid expenses
Deferred income tax assets 15,348,912.53 21,517,455.45
Other non-current assets
Total non-current assets 14,439,362,189.58 14,870,048,577.94
TOTAL ASSETS 33,799,206,565.23 32,754,594,792.41
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
II. Financial Statements (Cont’d)
2. Balance sheet of the Company (Cont’d)
Item Closing balance Closing balance
CURRENT LIABILITIES:
Short-term borrowings 8,669,987,185.21 7,847,558,953.68
Held-for-trading financial liabilities
Bills payable 350,062,044.69 643,432,387.04
Accounts payable 1,115,421,346.15 1,044,590,466.45
Advance receipts 297,323,937.83 417,522,231.17
Staff remuneration payables 56,451,710.19 101,268,730.42
Taxes payable 21,040,290.06 25,109,370.51
Interest payable 243,805,361.17 129,893,611.11
Dividend payable 118,528,318.02
Other payables 222,392,701.94 255,596,331.72
Non-current liabilities due within one year 316,254,500.00 514,843,000.00
Other current liabilities 2,328,791.64 2,328,791.64
Total current liabilities 11,413,596,186.90 10,982,143,873.74
NON-CURRENT LIABILITIES:
Long-term borrowings 459,627,035.94 352,112,035.94
Bonds payable 5,764,309,594.33 5,760,200,575.93
Long-term payables 13
Special payables INTERIM
REPORT
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities 2,603,270,572.86 2,214,846,544.38
Total non-current liabilities 8,827,207,203.13 8,327,159,156.25
Total liabilities 20,240,803,390.03 19,309,303,029.99
OWNERS’ EQUITY (OR SHAREHOLDERS’ EQUITY):
Paid-up capital (or share capital) 2,062,045,941.00 2,062,045,941.00
Capital reserves 6,184,215,988.77 6,184,215,988.77
Less: Treasury shares 265,363,183.60
Special reserves
Surplus reserves 1,119,926,524.49 1,119,926,524.49
General risk provisions
Retained profit 4,457,577,904.54 4,079,103,308.16
Foreign currency translation differences
Total owners’ equity (or shareholders’ equity) 13,558,403,175.20 13,445,291,762.42
TOTAL LIABILITIES AND OWNERS’ EQUITY
(OR SHAREHOLDERS’ EQUITY) 33,799,206,565.23 32,754,594,792.41
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 53
IX Financial Report
II. Financial Statements (Cont’d)
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 10,027,901,358.43 9,964,451,535.04
Including: Revenue 10,027,901,358.43 9,964,451,535.04
Interest income
Earned premium
Handling charges and commission income
II. Total operating costs 9,944,996,711.69 10,185,836,150.89
Including: Operating 8,251,349,814.35 8,500,512,936.03
Interest expenses
Handling charges and commission expenses
Surrenders
Net claims paid
Net change in insurance contract reserves
Policyholder dividend expenses
Expenses for reinsurance accepted
13 Business taxes and surcharges 38,967,507.99 31,846,785.11
INTERIM Sales and distribution expenses 570,398,742.45 535,959,288.53
REPORT General and administrative expenses 602,523,953.98 562,794,713.60
Finance expenses 486,409,117.79 541,285,654.45
Loss on impairment of assets -4,652,424.87 13,436,773.17
Plus: Gain on change in fair value (“-” denotes loss) 9,229,042.51 15,457,198.72
Investment income (“-” denotes loss) 5,183,185.10 -2,716,529.31
Including: Investment income from associates and joint ventures 421,036.92 -2,716,529.31
Foreign exchange gains (“-” denotes loss)
III. Operating profit (“-” denotes loss) 97,316,874.35 -208,643,946.44
Plus: Non-operating income 336,305,361.16 223,467,731.90
Less: Non-operating expenses 39,540,627.38 2,305,018.44
Including: Loss on disposal of non-current assets 35,870,782.59 909,346.99
IV. Total profit (“-” denotes total loss) 394,081,608.13 12,518,767.02
Less: Income tax expenses 82,871,206.26 -12,866,933.23
V. Net profit (“-” denotes net loss) 311,210,401.87 25,385,700.25
Including: Net profit achieved by the acquisition
before business merger
Net profit attributable to shareholders of the Company 333,409,511.73 94,244,962.85
Minority shareholders interests -22,199,109.86 -68,859,262.60
VI. Earnings per share: — —
(I) Basic earnings per share 0.16 0.05
(II) Diluted earnings per share 0.16 0.05
VII. Other comprehensive income 8,108,866.56 -152,386.81
VIII. Total comprehensive income 319,319,268.43 25,233,313.44
Total comprehensive income attributable to shareholders of
the Company 341,518,378.29 94,092,576.04
Total comprehensive income attributable to minority shareholders interests -22,199,109.86 -68,859,262.60
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
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 4,917,032,522.93 4,087,223,643.12
Less: Operating costs 3,976,552,277.16 3,448,243,509.14
Business taxes and surcharges 21,443,084.31 16,665,654.21
Selling and distribution expenses 151,177,561.24 125,030,947.56
General and administrative expenses 290,395,877.15 264,784,924.40
Finance expenses 254,845,387.49 244,992,432.75
Loss on impairment of assets 3,701,835.30 -7,044,869.23
Plus: Gain on change in fair value (“-” denotes loss)
Investment income (“-” denotes loss) 255,712,842.31 42,792,407.91
Including: Investment income from associates and joint ventures 421,036.92 -2,716,529.31
II. Operating profit (“-” denotes loss) 474,629,342.59 37,343,452.20
Plus: Non-operating income 94,094,442.54 152,611,810.82
Less: Non-operating expenses 28,964,163.57 151,132.48
Including: Loss on disposal of non-current assets 28,464,163.57 126,486.38
III. Total profit (“-” denotes total loss) 539,759,621.56 189,804,130.54 13
Less: Income tax expenses 42,756,707.16 14,360,399.66 INTERIM
IV. et profit (“-” denotes net loss) 497,002,914.40 175,443,730.88 REPORT
V. Earnings per share: — —
(I) Basic earnings per share
(II) Diluted earnings per share
VI. Other comprehensive income
VII. Total comprehensive income 497,002,914.40 175,443,730.88
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 55
IX Financial Report
II. Financial Statements (Cont’d)
5. Consolidated cash flow statement
Prepared by: Shandong Chenming Paper Holdings Limited
Unit: RMB
Amounts Amounts for
Item for the reporting the prior period
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 11,385,469,688.38 8,768,879,634.98
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 6,507,666.33 4,195,458.50
Cash received relating to other operating activities 293,722,261.11 282,265,076.77
13
INTERIM Subtotal of cash inflows from operating activities 11,685,699,615.82 9,055,340,170.25
REPORT
Cash paid for goods and services 9,008,158,586.79 6,789,505,489.23
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 410,741,602.10 477,021,702.85
Payments of taxes and surcharges 541,777,262.88 677,026,381.95
Cash paid relating to other operating activities 818,086,921.10 450,701,894.35
Subtotal of cash outflows from operating activities 10,778,764,372.87 8,394,255,468.38
Net cash flows from operating activities 906,935,242.95 661,084,701.87
56 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. ash 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 20,828,975.62 278,250.65
Net cash received from disposal of subsidiaries and other business units 407,898,445.53
Cash received relating to other investing activities 175,961,341.00 23,142,607.18
Subtotal of cash inflows from investing activities 604,688,762.15 23,420,857.83
Cash paid for purchase of fixed assets, intangible
assets and other long-term assets 1,490,489,565.10 853,885,514.09
Cash paid on investments 20,000,000.00
Net increase in pledged loans
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities
Subtotal of cash outflows from investing activities 1,490,489,565.10 873,885,514.09
13
Net cash flows from investing activities -885,800,802.95 -850,464,656.26 INTERIM
REPORT
III. ash 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 12,061,537,576.13 10,931,730,380.78
Cash received from bond issue
Cash received relating to other financing activities 1,486,500,000.00 1,308,110,040.62
Subtotal of cash inflows from financing activities 13,614,037,576.13 12,239,840,421.40
Cash repayments of amounts borrowed 12,216,611,286.73 11,154,877,653.16
Cash paid for dividend and profit distribution or interest payment 731,354,603.87 618,762,463.88
Including: dividend and profit paid to minority interests by subsidiaries 15,687,493.50 11,577,192.00
Cash paid relating to other financing activities 1,438,573,351.52
Subtotal of cash outflows from financing activities 14,386,539,242.12 11,773,640,117.04
Net cash flows from financing activities -772,501,665.99 466,200,304.36
IV. Effect of foreign exchange rate changes on cash and cash equivalents 6,564,770.28 -4,572,555.48
V. Net increase in cash and cash equivalents -744,802,455.71 272,247,794.49
Plus: Balance of cash and cash equivalents as
at the beginning of the period 2,343,550,185.45 2,317,048,619.53
VI. Balance of cash and cash equivalents as at the end of the period 1,598,747,729.74 2,589,296,414.02
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 57
IX Financial Report
II. Financial Statements (Cont’d)
6. Cash flow 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. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 3,976,388,687.84 4,945,717,360.44
Tax rebates received
Cash received relating to other operating activities 343,215,249.54 149,176,538.97
Subtotal of cash inflows from operating activities 4,319,603,937.38 5,094,893,899.41
Cash paid for goods and services 5,033,798,986.49 2,646,840,470.86
Cash paid to and for employees 165,474,579.19 187,446,352.99
Payments of taxes and surcharges 291,241,251.17 327,460,414.34
Cash paid relating to other operating activities 1,071,544,485.43 932,284,647.01
Subtotal of cash outflows from operating activities 6,562,059,302.28 4,094,031,885.20
Net cash outflows from operating activities -2,242,455,364.90 1,000,862,014.21
13 II. Cash flows from investing activities:
INTERIM
REPORT Cash received from investments 896,725,533.01 50,000,000.00
Cash received from investment income 77,706,684.89 35,021,667.09
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 88,184.24 49,702.28
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 974,613,902.14 85,071,369.37
Cash paid for purchase of fixed assets,
intangible assets and other long-term assets 31,454,612.99 58,643,789.68
Cash paid on investments 74,206,250.00 69,465,450.00
Net cash paid for acquisition of subsidiaries and other business units
Cash paid relating to other investing activities
Subtotal of cash outflows from investing activities 105,660,862.99 128,109,239.68
Net cash flows from investing activities 868,953,039.15 -43,037,870.31
58 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 7,783,390,709.33 5,960,484,091.71
Cash received from bond issue
Cash received relating to other financing activities 1,486,500,000.00 1,083,500,000.00
Subtotal of cash inflows from financing activities 9,269,890,709.33 7,043,984,091.71
Cash repayments of amounts borrowed 7,018,797,223.94 7,700,146,887.89
Cash paid for dividend and profit distribution or interest payment 189,202,456.98 285,015,256.06
Cash paid relating to other financing activities 2,134,404,556.34 490,664,036.03
Subtotal of cash outflows from financing activities 9,342,404,237.26 8,475,826,179.98
Net cash flows from financing activities -72,513,527.93 -1,431,842,088.27
IV. Effect of foreign exchange rate changes on cash and cash equivalents -1,333,058.28 -1,334,162.23
V. Net increase in cash and cash equivalents -1,447,348,911.96 -475,352,106.60
Plus: Balance of cash and cash equivalents 13
as at the beginning of the period 1,786,622,854.08 1,290,039,078.57 INTERIM
REPORT
VI. Balance of cash and cash equivalents as at the end of the period 339,273,942.12 814,686,971.97
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 59
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 Less: Special Surplus General Minority Total
Item (or share capital) Capital reserves treasury shares reserves reserves risk provisions Retained profit Others interests owners’ 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: accounting policy change
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 income -31,421,760.99 8,108,866.56 -23,312,894.43
13
Sub-total of (I) and (II) above -31,421,760.99 333,409,511.73 8,108,866.56 -22,199,109.86 287,897,507.44
INTERIM (III) Capital paid in and
REPORT 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) Others
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
60 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 Less: General Minority Total
Item (or share capital) Capital reserves treasury shares Special reserves Surplus reserves risk provisions Retained profit Others interests owners’ equity
I. Balance as at the beginning
of the prior year 2,062,045,941.00 6,098,264,836.00 1,132,116,106.40 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39
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 6,098,264,836.00 1,132,116,106.40 4,237,783,996.54 -1,588,560.03 1,459,152,539.48 14,987,774,859.39
III. Changes in the period
(“-” denotes decrease) -215,061,928.35 -152,386.81 -98,205,160.30 -313,419,475.46
(I) Net profit 94,244,962.85 -68,859,262.60 25,385,700.25
(II) Other comprehensive income -152,386.81 -152,386.81
13
Sub-total of (I) and (II) 94,244,962.85 -152,386.81 -68,859,262.60 25,233,313.44 INTERIM
REPORT
(III) Capital paid in and
reduced by owners
1. Capital paid in by owners
2. Amounts of share-based
payments recognised in
owners’ equity
3. Others
(IV) Profit distribution -309,306,891.20 -29,345,897.70 -338,652,788.90
1. Transfer to
surplus reserves
2. Transfer to general
risk provision
3. Distribution to owners
(shareholders) -309,306,891.20 -29,345,897.70 -338,652,788.90
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) Other
IV. Balance as at the end of the period 2,062,045,941.00 6,098,264,836.00 1,132,116,106.40 4,022,722,068.19 -1,740,946.84 1,360,947,379.18 14,674,355,383.93
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 61
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 Less: General Total
Item (or share capital) Capital reserves treasury shares Special reserves Surplus reserves risk provisions Retained profit owners’ equity
I. Balance as at the end of the prior year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 4,079,103,308.16 13,445,291,762.42
Plus: accounting policy change
Corrections of prior period errors
Others
II. Balance as at the beginning of the year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 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) above 497,002,914.40 497,002,914.40
(III) Capital paid in and
reduced by owners
1. Capital paid in by owners
13 2. Amounts of share-based payments
INTERIM recognised in owners’ equity
REPORT 3. Others
(IV) Profit distribution 265,363,183.60 -118,528,318.02 -383,891,501.62
1. Transfer to surplus reserves
2. Transfer to general risk provision
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) Others
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
62 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 prior year
Unit: RMB
Amounts for the prior year
Paid-up capital Less: General Total
Item (or share capital) Capital reserves treasury shares Special reserves Surplus reserves risk provisions Retained profit owners’ equity
I. Balance as at the beginning of the prior year 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,571,769,688.51 12,937,958,142.77
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 3,571,769,688.51 12,937,958,142.77
III. Changes in the period
(“-” denotes decrease) -133,863,160.32 -133,863,160.32
(I) Net profit 175,443,730.88 175,443,730.88
(II) Other comprehensive income
Sub-total of (I) and (II) 175,443,730.88 175,443,730.88
(III) Capital paid in and reduced by owners
1.Capital paid in by owners
2. Amounts of share-based payments
recognised in owners’ equity
3. Others
(IV) Profit distribution -309,306,891.20 -309,306,891.20
13
INTERIM
1. Transfer to surplus reserves REPORT
2. Transfer to general risk provision
3. Distribution to owners (shareholders) -309,306,891.20 -309,306,891.20
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) Other
IV. Balance as at the end of the period 2,062,045,941.00 6,184,215,988.77 1,119,926,524.49 3,437,906,528.19 12,804,094,982.45
Legal Representative: Financial controller: Head of the financial department:
Chen Hongguo Wang Chunfang Dong Lianming
SHANDONG CHENMING PAPER HOLDINGS LIMITED 63
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.
13 In December 1996, with approval by the Letter on Recommending Shandong Shouguang Papermaking Group Incorporated
INTERIM Company to Issue B Shares (Lu Zheng Zi [1996] No. 270) verified and issued by the People’s Government of Shandong
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.
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.
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
III. General Information of the Company (Cont’d)
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
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
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
13
INTERIM
Paper Group Incorporated Company (Shang Zi Pi [2005] No. 1364) verified and issued by the Ministry of Commerce of the REPORT
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.
The Registration No. of the Business License for Enterprise Legal Person was 370000400001170.
As of 31 December 2012, the cumulatively issued total share capital of the Company was 2,062,045,941 shares. Please see
Note VII. 36 for details.
The business scope of the Company and its subsidiaries (hereinafter referred to as the (“Group”) covers: processing and sale
of paper products (including machine made paper and paper board), paper making raw materials and machinery; generation
and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing,
processing and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 65
IX Financial Report
III. General Information of the Company (Cont’d)
Shouguang Chenming Holdings Co., Ltd is the parent company of the Group.
Shouguang Chenming Holdings Co., Ltd (hereinafter referred to as “Shouguang Chenming Holdings”) was established on 30
December 2005 by State-owned Assets Supervision and Administration Commission of Shouguang City which contributed
its state-owned shares to set up the Company. The China Securities Regulatory Commission finally approved the change
in the holder of state-owned Shares of Chenming Paper and the change in nature of its equity interests arising from the
establishment of Shouguang Chenming Holdings on 14 August 2006 (Guo Zi Chan Quan [2005] No. 1539). Since then, the
largest shareholder of the Company was changed from State-owned Assets Supervision and Administration Commission of
Shouguang City to Shouguang Chenming Holdings.
IV. Significant accounting policies, accounting estimates and differences in the previous period
1. Basis of Preparation of the Financial Statements
The Company’s financial statements have been prepared based on the going concern basis. The financial statements
have been prepared based on actual transactions and events, in accordance with the accounting standards for
business enterprises promulgated by the Ministry of Finance of PRC in 15 February 2006 and 38 specific accounting
standards, the subsequently promulgated application guidelines of the Accounting Standards for Business Enterprises,
interpretations and other related rules of the Accounting Standards for Business Enterprises (hereinafter referred to
as “ASBEs”), and the disclosure requirements of the “Regulation on the Preparation of Information Disclosures of
Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2010) of China
Securities Regulatory Commission.
13 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
INTERIM
REPORT the historical cost convention. In the event that depreciation of assets occurs, a provision for impairment is made
accordingly in accordance with the relevant regulations.
2. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial
positions of the Company and the Group for the six months ended 30 June 2013 and relevant information such as the
operating results and cash flows of the Company and the Group of the first six months of 2013. 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
Accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to
reporting periods that are shorter than a full fiscal year. The fiscal year of the Company is from 1 January to 31
December of each calendar year.
4. Reporting currency
The Company and its domestic subsidiaries recognise RMB as their reporting currency according to the primary
economic environment in which they operate. The reporting currency of the Company and its domestic subsidiaries is
Renminbi (“RMB”). Overseas subsidiaries of the Company, namely Chenming (HK) Co., Ltd., Chenming Paper Japan
Co., Ltd. and Chenming GmbH, recognise U.S. dollar, Japanese Yen and Euro as their respective reporting currency
according to the primary economic environment in which these subsidiaries operate. The Group prepares its financial
statements in RMB.
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
(1) Business combination under common control
A business combination involving enterprises under common control is a business combination in which all of the
combining enterprises are ultimately controlled by the same party or parties before and after the combination,
and that control is not transitory. The party that, on the combination date, obtains control of another enterprise
participating in the combination is the absorbing party, while that other enterprise participating in the combination
is a party being absorbed. The combination date is the date on which one combining enterprise effectively obtains
control of the other combining enterprises.
Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination
date as recorded by the party being merged. The difference between the carrying amount of the net assets
obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value
of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve
(share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained
earnings.
Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to
profit or loss in the period in which they are incurred.
(2) Business combination not under common control
A business combination not involving enterprises under common control is a business combination in which
all of the combining enterprises are not ultimately controlled by the same party or parties before and after the 13
combination. For a business combination not involving enterprises under common control, the party that, on the INTERIM
REPORT
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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 67
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
6. Basis for preparation of consolidated financial statements
(1) Basis for preparation of consolidated financial statements
① Principle of determining the scope of consolidated financial statements
The scope of consolidation of the consolidated financial statements is determined on the basis of control.
The term “control” means that the Company has the power to decide an investee’s financial and operating
policy. The scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is a
business or entity controlled by the Company.
② Basis for preparation of the consolidated financial statements
Subsidiaries are consolidated from the date on which the Group obtains net assets and the effective control of
decision-making of production and operation and are deconsolidated from the date that such control ceases. For
disposal of subsidiaries, the operating results and cash flows of such subsidiaries before the date of disposal are
properly included into the consolidated income statement and consolidated cash flow statements; for disposal of
subsidiaries during the reporting period, no adjustment shall be made to the opening balance of the consolidated
balance sheet. For those subsidiaries acquired through business combination not under common control, the
operating results and cash flows after the acquisition date have been properly included in the consolidated
income statements and consolidated cash flow statements. No adjustments shall be made to the opening
balance of the consolidated balance sheet and the comparative consolidated financial statements amount. For
those subsidiaries acquired through business combination under common control, the operating results and
13 cash flows from the beginning of the consolidation period to the consolidation date are also presented in the
consolidated income statement and the consolidated cash flow statements. The comparative amounts presented
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.
If the Company loses control over a subsidiary due to partial disposal of equity investment or other reasons, the
remaining equity is measured at fair value on the date when the control is lost. The difference between the sum of
consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets
attributable to the Company calculated continuously since the purchase date based on shareholding percentage
before disposal are recognised in gains on investment in the period when the control is lost. Other comprehensive
income related to equity investment in the subsidiary is transferred to gains on investment at the time the control is
lost. The remaining equity interest is measured subsequently according to the related requirements of “Accounting
Standards for Business Enterprises No. 2 – Long-term Equity Investments” or “Accounting Standards for Business
Enterprises No. 22 – Recognition and measurement of Financial Instruments”. For details, please see Note IV. 10
“Long-term equity investments” or Note IV. 7 “Financial Instruments”.
(2) Accounting treatment for acquiring then disposing of (or vice versa) the equity interest of same subsidiary for
two successive accounting years
Not applicable.
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
7. Standards for recognising cash and cash equivalents
Cash and cash equivalents of the Company include cash on hand, deposits readily available for payment purpose and short-
term (normally fall due within three months from the date of acquisition) and highly liquid investments held the Company
which are readily convertible into known amounts of cash and which are subject to insignificant risk of value change.
8. Foreign currency operations and translation of statements denominated in foreign currency
(1) Foreign currency operations
① Basis for translation of foreign currency transactions
The foreign currency transactions of the Company, when initially recognised, are translated into functional
currency at the prevailing spot exchange rate on the date of exchange while the Company’s foreign currency
exchange operations and transactions in connection with foreign currency exchange shall be translated into
functional currency at the exchange rate actually adopted.
② Basis for translation of foreign currency monetary items and foreign currency non-monetary items
On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange
rate (generally, a spot exchange rate is the middle price quoted by the People’s Bank of China on the
day of transaction) on the balance sheet date. All differences are included in the consolidated income
statement, except for: ①the differences arising from foreign currency borrowings related to the acquisition
or construction of fixed assets which are qualified for capitalisation; ② except for other carrying amounts of
the amortisation costs, the differences arising from changes of the foreign currency items available for sale. 13
INTERIM
The foreign currency non-monetary items measured at historical cost shall still be measured by the functional REPORT
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.
(2) Basis for translation of foreign currency financial statements
Exchange differences arising from change in exchange rate where the preparation of consolidated financial
statements relates to overseas operation and foreign currency monetary items materially constitute net investment
in overseas operation shall be recorded into “translation reserve” in the shareholders’ equity: disposal of overseas
operation shall be included into profits and losses on disposal in the current period.
The financial statements denominated in foreign currency of a foreign operation are translated to RMB in comply with
the following requirement: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing
at the balance sheet date; owner’s equity items except for “retained profit” are translated at the spot exchange rates
at the dates on which such items arose; income and expenses items in the income statement are translated at the
average spot exchange rate at the date of transaction. The retained profit brought forward are reported at the prior year’s
closing balance; the retained profit as at the end of the year are presented after translated the profit appropriation items;
differences between the aggregate of asset and liability items and owners’ equity items are recognised as “translation
differences arising on the translation of financial statements denominated in foreign currencies” in other consolidated
income, and presented separately as under owners’ equity items in the balance sheet. On disposal of foreign operations
and loss of control, exchange differences arising from the translation of financial statements denominated in foreign
currencies related to the disposed foreign operation which has been included in owners’ equity in the balance sheet,
shall be transferred to profit or loss in whole or in proportionate share in the period in which the disposal took place.
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 period’s figures are presented according to the translated amounts of the prior period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 69
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
9. Financial instruments
(1) Classification of financial instruments
Conventionally traded financial assets shall be recognised and derecognised at the trading date. Financial assets
are divided into financial assets at fair value through profit or loss, held-to-maturity investments, loans and
receivables and available for-sale financial assets when they are initially recognised.
Financial liabilities are classified into financial liabilities at fair value and changes are carried through profit and loss
for the current period and other financial liabilities at initial recognition.
(2) Basis of recognition and method of measurement of financial instrument
Financial assets are initially recognised at fair value. For financial assets measured at fair value and whose changes
are carried through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period. For
financial assets classified as other categories, relevant transaction costs are included in the amount initially recognised.
① Financial assets carried at fair value through profit or loss for the current period
They include financial assets held for trading and financial assets designated as at fair value through profit
or loss for the current period.
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
13 financial assets is part of a portfolio of identified financial instruments that are managed together and for which
INTERIM there is objective evidence of a recent pattern of short-term profit-taking; or C. the financial assets is a derivative,
REPORT excluding the derivatives designated as effective hedging instruments, the derivatives classified as financial
guarantee contract, and the derivatives linked to an equity instrument investment which has no quoted price in
an active market nor a reliably measured fair value and are required to be settled through that equity instrument.
A financial asset may be designated as at fair value through profit or loss upon initial recognition only when one
of the following conditions is satisfied: A. Such designation eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise result from measuring assets or recognising the gains or
losses on them on different bases; or B. The financial asset forms part of a group of financial assets or a group of
financial assets and financial liabilities, which is managed and its performance is evaluated on a fair value basis,
in accordance with the Group’s, documented risk management or investment strategy, and information about the
grouping is reported to key management personnel on that basis.
A financial asset at fair value through profit or loss is subsequently measured at fair value. Any gains or
losses arising from changes in the fair value and any dividend or interest income earned on the financial
asset are recognised in profit or loss in the current period.
② Held-to-maturity investments
They are non-derivative financial assets with fixed maturity dates and fixed or determinable payments that
the Group has positive intent and ability to hold to maturity.
Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. Gain
or loss on derecognition, impairment or amortisation is recognised through profit or loss for the current period.
The effective interest method is a method of calculating the amortised cost of a financial asset and of
allocating interest income or expense over each period based on the effective interest of a financial asset or
a financial liability (including a group of financial assets or financial liabilities). The effective interest is the rate
that discounts future cash flows from the financial asset or financial liability over its expected life or (where
appropriate) a shorter period to the carrying amount of the financial asset or financial liability.
In calculating the effective interest rate, the Group will estimate the future cash flows (excluding future
credit losses) by taking into account all contract terms relating to the financial assets or financial liabilities
whilst considering various fees, transaction costs and discounts or premiums which are part of the effective
interest rate paid or received between the parties to the financial assets or financial liabilities contracts.
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
9. Financial instruments (Cont’d)
(2) Basis of recognition and method of measurement of financial instrument (Cont’d)
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, other receivables and entrusted loans are classified as loans and receivables by the Group.
Loans and receivables are measured subsequently at the amortised cost by using the effective interest rate
method. Gains or losses incurred at the time of derecognition, impairment or amortisation are charged to
profit or loss in the current period.
④ Available-for-sale financial assets
They include non-derivative financial assets that are designated in this category on initial recognition, and
the financial assets other than the financial assets at fair value through profit and loss, loans and receivables
and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change
in fair value are recognised as other comprehensive income and charged to capital reserves, except for
impairment loss and exchange differences arising from foreign monetary financial assets and amortised cost
which are accounted for through profit or loss for the current period. The financial assets will be transferred
out of the financial assets on derecognition and accounted for through profit or loss for the current period. 13
INTERIM
Interests received from available-for-sale financial assets held and the cash dividends declared by the REPORT
investee are recognised as investment income.
Financial liabilities are initially recognised at fair value. For financial liabilities measured at fair value and whose changes
are carried through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period. For
financial liabilities classified as other categories, relevant transaction costs are included in the amount initially recognised.
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
Financial guarantee contracts other than those designated as financial liabilities at fair value through
profit or loss is 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”.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 71
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
9. 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
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
13 period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition
INTERIM and the aforementioned carrying amount.
REPORT
(4) Derecognition of financial liabilities
Financial liabilities are derecognised in full or in part only when the present obligation is discharged in full or in
part. An agreement is entered between the Group (debtor) and a creditor to replace the original financial liabilities
with new financial liabilities with substantially different terms, derecognise the original financial liabilities as well as
recognise the new financial liabilities.
When financial liabilities is derecognised in full or in part, the difference between the carrying amount of the
financial liabilities derecognised and the consideration paid (including transferred non-cash assets or new financial
liability) is recognised in profit or loss for the current period.
(5) Method of determination of the fair value for financial assets and financial liabilities
The fair value refers to the amount, at which both willing parties to a fair transaction who are familiar with the
condition exchange their assets or clear off their debts under fair conditions. Financial instruments exist in an
active market. Fair value is determined based on the quoted price in such market. An active market refers to where
pricing is easily and regularly obtained from exchanges, brokers, industrial organisations and price fixing service
organisations, representing the actual price of a market transaction that takes place in a fair deal. While financial
instruments do not exist in an active market, the fair value is determined using valuation techniques. Valuation
technologies include reference to be familiar with situation and prices reached in recent market transactions
entered into by both willing parties, reference to present fair values of similar other financial instruments, cash flow
discounting method and option pricing models.
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
9. Financial instruments (Cont’d)
(6) Impairment tests and provision of financial assets (excluding amount receivables)
In addition to financial assets at fair value through profit or loss for the current period, the Group reviews the book
value of other financial assets at each balance sheet date and provide for impairment where there is objective
evidence that financial assets are impaired.
For a financial asset that is individually significant, the Group assesses the asset individually for impairment.
For a financial asset that is not individually significant, the Group assess the asset individually for impairment or
include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them
for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed
financial asset, whether the financial asset is individually significant or not, the financial asset is included in a
group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Financial
assets for which an impairment loss is individually recognised are not included in the collective assessment for
impairment.
① Impairment 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
shall be reversed to the extent that the carrying value of the financial assets upon reversal will not exceed
13
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 is more than 20%. “Non-temporary decline” refers to the fair value
decreased continuously for more than 12 months.
When the available-for-sale financial assets impair, the accumulated loss originally included in the capital
reserve arising from the decrease in fair value was transferred out from the capital reserve and included in
the profit or loss for the period. The accumulated loss that transferred out from the capital reserve is the
balance of the acquired initial cost of asset, after deduction of the principal recovered, amortised amounts,
current fair value and the impairment loss originally included in the profit or loss.
After recognition of the impairment loss, if there is objective evidence showing recovery in value of such
financial assets impaired and which is related to any event occurring after such recognition in subsequent
periods, the impairment loss originally recognised shall be reversed. The impairment loss reversal of the
available-for-sale equity instrument will be recognised as other consolidated income, and the impairment
loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period.
When an equity investment that is not quoted in an active market and the fair value of which cannot be
measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that
shall be settled by delivery of that equity instrument, then it will not be reversed.
(7) Reclassification of outstanding held-to-maturity investments as available-for-sale financial assets as a basis to
show the intention or ability to make changes
Not applicable.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 73
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
10. Basis for recognition and measurement of bad debt provision for accounts receivables
The Group carries out an overall inspection on the carrying amount of accounts receivable on the balance sheet date.
Where there arises any of the following objective evidences indicating that accounts receivable have been impaired, an
impairment provision will be made: ① a serious financial difficulty occurs to the debtor; ② the debtor breaches any of
the contractual stipulations (such as he fails to pay or delays the payment of interests or the principal); ③ the debtor will
probably go bankrupt or carry out other financial reorganisations; ④ other objective evidences show that the accounts
receivable are impaired.
(1) Bad debt provision for a an individually significant item of accounts receivable
Basis of determination or criterion of amount Accounts receivable of more than RMB1 million is recognised as
for individually significant items individually significant accounts receivable by the Group.
Method for making bad debt provision For accounts receivable that is individually significant, the Group
individually for 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.
13
INTERIM (2) Accounts receivable making bad debt provision by portfolio
REPORT
Method for making bad
Name of portfolio debt provision by portfolio Basis for determining the portfolio
No-risk portfolio 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.
Use of ageing analysis for making bad debt provision in the portfolio:
√ Applicable □ Not applicable
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
10. Basis for recognition and measurement of bad debt provision for accounts receivables (Cont’d)
(2) Accounts receivable making bad debt provision by portfolio (Cont’d)
Ratio of Ratio of
accounts other accounts
receivable receivable
Age provision (%) provision (%)
Within 1 year (including 1 year) 5% 5%
1-2 years 10% 10%
2-3 years 20% 20%
Over 3 years 100% 100%
3-4 years 100% 100%
4-5 years 100% 100%
Over 5 years 100% 100%
Use of percentage of amount outstanding for making bad debt provision in the portfolio:
□ Applicable √ Not applicable
Use of other methods for making bad debt provision in the portfolio:
□Applicable √ Not applicable
(3) Accounts receivable insignificant but making bad debt provisions individually 13
INTERIM
REPORT
Reasons for making bad debt The Group conducts individual impairment tests for the single
provisions individually item with insignificant account receivables but with following
features. If there is objective evidence indicating that the accounts
receivable is impaired, then impairment loss will be recognised
and bad debts will be provided according to the difference when
the present value of future cash flow is fewer than its carrying
amounts: accounts receivable with dispute against counterparties
or involved in litigation or arbitration; there is obvious objective of
the accounts receivable indicated that the debtor is likely to fail to
comply with the repayment obligation, etc.
Method for making bad debt provisions Bad debt provisions are made based on the difference between
the present value of the future cash flow and the book value in
determining the impairment loss.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 75
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IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
11. Inventories
(1) Classification of inventories
Inventories mainly include raw materials, work in progress and finished products, etc.
(2) Pricing of inventories upon delivery
Pricing method: First-in first-out method
(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
13 impairment shall be transferred back and incorporated into the profit or loss for the current period.
INTERIM
REPORT (4) The inventory taking system
Taking system: permanent inventory system
(5) Amortisation of low-value consumables and packaging materials
Low-value consumables
Amortisation method: lump-sum
Packaging materials
Amortisation method: lump-sum
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
12. 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.
(2) Subsequent measurement and profit or loss recognition 13
INTERIM
Cost method is used to account for a long-term equity investment where the investor does not have joint control REPORT
or significant influence over the investee, and the investment is not quoted in an active market and its fair value
cannot be reliably measured. Long-term equity investments with joint control or significant influence on the
investee are accounted for using equity method. Long-term equity investment without control or joint control
or significant influence with a fair value which can be reliably measured is accounted for as available-for-sale
financial assets.
In addition, long-term equity investments with control on the investee are accounted for using cost method and
record in the Company’s financial statements.
① Long-term equity investments accounted for using the cost method
Under the cost method, a long-term equity investment is measured at its initial investment cost. Except
receiving the actual consideration paid for the investment or the declared but not yet distributed cash
dividends or profits which is included in the consideration, investment gains for the period is recognised as
the cash dividends or profits declared by the investee.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 77
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
12. Long-term equity investments (Cont’d)
(2) Subsequent measurement and profit or loss recognition (Cont’d)
② Long-term equity investments accounted for using the equity method
Under the equity method, where the initial investment cost of a long-term equity investment exceeds
the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, no
adjustment shall be made to the initial investment cost. Where the initial investment cost is less than the
investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, the
difference shall be charged to profit or loss for the current period, and the cost of the long term equity
investment shall be adjusted accordingly.
Under the equity method, investment gain or loss represents the Group’s share of the net profits or losses
made by the investee for the current period. The Group shall recognize 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
13 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.
INTERIM
REPORT
The Group’s share of net losses of the investee shall be recognised to the extent that the carrying amount
of the long-term equity investment together with any long-term interests that in substance form part of
the investor’s net investment in the investee are reduced to zero. If the Group has to assume additional
obligations, the estimated obligation assumed shall be provided for and charged to the profit or loss as
investment loss for the period. Where the investee is making profits in subsequent periods, the Group shall
resume recognising its share of profits after setting off against the share of unrecognised losses. If there is
debit variation in relation to the long-term equity investments in associates and joint venture held prior to
first adoption of the Accounting Standards for Business Enterprises by the Group on 1 January 2007, the
amounts amortised over the original residual term using the straight-line method is included in the profit or
loss for the period.
③ Acquisition of minority interests
Upon the preparation of the consolidated financial statements, since acquisition of minority interests
increased of long-term equity investment which was compared to fair value of identifiable net assets
recognised which are measured based on the continuous measurement since the acquisition date (or
combination date) of subsidiaries attributable to the Group calculated according to the proportion of newly
acquired shares, the difference of which recognised as adjusted capital surplus, capital surplus insufficient
to set off impairment and adjusted retained earnings.
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
12. Long-term equity investments (Cont’d)
(2) Subsequent measurement and profit or loss recognition (Cont’d)
④ Disposal of long-term equity investments
In these consolidated financial statements, where the parent company disposes of a portion of the long-
term equity investments in a subsidiary without a change in control, the difference between disposal cost
and disposal of long-term equity investments relative to the net assets of the subsidiary is charged to the
owners’ equity. Where the parent company disposes of a portion of the long-term equity investments in a
subsidiary resulting in the loss of control over that subsidiary, the relevant accounting policy set out in Note
IV. 4. (2) “Basis for preparation of the consolidated financial statements” shall apply.
On disposal of a long-term equity investment otherwise, the difference between the carrying amount of
the investment and the actual consideration paid is recognised through profit or loss in the current period.
Where the equity method is adopted, other comprehensive income attributable to the long term equity
investments previously included in shareholders’ equity shall be transferred to through profit or loss in
the current period on a pro-rata basis. The remaining equity shall be recognised as the long-term equity
investments or other relevant financial assets based on the carrying amount and subsequently measured
in accordance with the accounting policies of the foresaid long-term equity investments or financial assets.
The retrospective adjustment shall be made in accordance with the relevant provisions if the remaining
equity is accounted for using the equity method instead of the cost method.
(3) Recognition of having joint control or significant influence over the investee
13
The term “control” means that the Group has the power to decide an enterprise’s financial and operating policy, INTERIM
REPORT
pursuant to which, the Group can get the power to obtain benefits from its operating activities. Joint control
is the contractually agreed sharing of control over an economic activity, which only exists when relevant and
important financial affairs and management decisions related to such economic activity require sharing of control
by investors who unanimously agree upon. Significant influence is the power to participate in the financial and
operating policy decisions of an enterprise, but to fail to control or joint control the formulation of such policies
together with other parties. In determining whether there is control or significance influence over the investee,
potential voting right factors (such as the convertible corporate bonds for the period and the exercisable stock
warrants for the period of the investee and other invested units held) were taken into account.
(4) Impairment test method and impairment provision
The Group assesses at each balance sheet date whether there is any indication that any long-term equity
investments may be impaired. If there is any evidence indicating that an asset may be impaired, recoverable
amount shall be estimated for the individual asset. If the recoverable amount of an asset is less than its carrying
amount, the reduction is recognised as an impairment loss and charged to profit or loss for the current period. A
provision for impairment loss of the asset is recognised accordingly.
An impairment loss recognised on long-term equity investments shall not be reversed in a subsequent period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 79
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
13. Investment Property
Investment property refer to real estate held to earn rentals or for capital appreciation, or both including the land use
right that have been leased out; the land use right that held and will be transferred after appreciation; and the building
that have been leased out.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be
included in cost of investment property only when the economic benefits associated with the asset will likely flow to the
Group and its cost can be measured reliably. All other expenditures on investment property shall be included in profit or
loss for the current period when incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortised
using the same policy as that for buildings and land use rights.
The method for impaired test of investment property and measurement of impairment provision are detailed in Note IV.
18. “Impairment of non-current non-monetary financial asset”.
In the event that an owner-occupied property or inventories is converted to an investment property (or vice versa), upon
the conversion, the property shall be stated at the carrying amount prior to the conversion.
If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be
obtained from the disposal, the recognition of it as an investment property shall be terminated. When an investment
property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying
amount and related tax and surcharges is recognised in profit or loss for the current period.
13
INTERIM 14. Fixed assets
REPORT
(1) Conditions for recognition of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes; and have a useful life of more than one accounting year.
(2) Recognition basis and measurement method of fixed assets under finance lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. Title may or may not eventually be transferred. The fixed asset leased by the
finance lease is used the policy consistent with that of proprietary fixed assets for provision of depreciated leased
asset. If it can be reasonably determined that the ownership of the leased asset can be obtained upon expiration
of the lease term, the leased asset shall be depreciated over its useful life. If it cannot be reasonably determined
that the ownership of the leased asset can be obtained at the expiration of the lease term, the leased asset shall
be depreciated over the shorter of the lease term or its useful life.
(3) Method for depreciation of different fixed assets
Useful lives Estimated Annual
of depreciation residual depreciation
Category (Year) value (%) rate (%)
Buildings and structures 20-40 5-10 2.25-4.75
Machinery and equipment 8-20 5-10 4.5-11.88
Electronic equipment 5 5-10 18.00-19.00
Transportation equipment 5-8 5-10 11.25-19.00
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
14. Fixed assets (Cont’d)
(4) Impairment testing methods and provision for impairment methods on fixed assets
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of fixed
assets. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated
for impairment test.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount,
the impairment provision will be made according to the difference and recognised as an impairment loss. The
recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the
future cash flows expected to be derived from the asset. An asset’s fair value is the price in a sale agreement in
an arm’s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value
shall be determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair
value shall be based on the best available information. Costs of disposal are expenses attributable to disposal
of the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to
prepare the asset for its intended sale. The present value of the future cash flows expected to be derived from
the asset over the course of continued use and final disposal is determined as the amount discounted using
an appropriately selected discount rate. Provisions for assets impairment shall be made and recognised for the
individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall
determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest
group of assets capable of generating cash flows independently.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of
the restorable value.
13
INTERIM
REPORT
(5) Explanation on other matters
Subsequent expenditures incurred for a fixed asset shall be included in the cost of the fixed asset, only if it is
probable that economic benefits associated with the asset will flow to the Company and the relevant cost can be
measured reliably; meanwhile the carrying amount of the replaced part shall be derecognised. Other subsequent
expenditures shall be charged to profit or loss when incurred.
When a fixed asset is sold, transferred, retired or damaged, the Group shall recognise the amount of any proceeds
on disposal of the asset net of the carrying amount and related taxes in profit or loss for the current period.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method
applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixed
asset or the depreciation method used shall be accounted for as a change in accounting estimate.
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IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
15. Construction in progress
(1) Types of the construction in progress
Construction is progress refers to expenditures incurred for outstanding construction projects such as new
construction, renovation and expansion of the Company’s fixed assets or technology and equipment upgrade and
large-scale renovation works.
(2) Criteria and time for transferring construction in progress to fixed assets
Construction in progress is recognised based on the actual construction cost, including all expenditures incurred
for construction projects, capitalised borrowing costs for the construction in progress before it has reached the
working condition for its intended use, and other related expenses during the construction period. A construction
in progress is transferred to fixed assets when it has reached the working condition for its intended use.
(3) Impairment testing methods and provision for impairment methods on construction in progress
The Group will judge if there is any indication of impairment as at the balance sheet date in respect of construction
in progress. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be
estimated for impairment test.
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount,
the impairment provision will be made according to the difference and recognised as an impairment loss. The
recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the
13 future cash flows expected to be derived from the asset. An asset’s fair value is the price in a sale agreement in
INTERIM an arm’s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value
REPORT
shall be determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair
value shall be based on the best available information. Costs of disposal are expenses attributable to disposal
of the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to
prepare the asset for its intended sale. The present value of the future cash flows expected to be derived from
the asset over the course of continued use and final disposal is determined as the amount discounted using
an appropriately selected discount rate. Provisions for assets impairment shall be made and recognised for the
individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall
determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest
group of assets capable of generating cash flows independently.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of
the restorable value.
16. Borrowing costs
(1) Principles for recognising capitalisation of borrowing costs
Borrowing costs incurred by the Company that are directly attributable to acquisition or production of a
capitalisation qualifying asset shall be capitalised as part of the cost of that asset upon the following condition is
satisfied:
① expenditures for the asset have incurred;
② borrowing costs have incurred;
③ activities relating to the acquisition or production of the asset that are necessary to prepare the asset for its
intended use or sale have commenced.
Other borrowing interest, discount or premium and foreign exchange difference shall be recognised as expense in
the period in which they are incurred.
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
16. Borrowing costs (Cont’d)
(2) Period for capitalisation of borrowing costs
For borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying
asset, when expenditures for the asset and borrowing costs are being incurred, activities relating to the
acquisition, construction or production of the asset that are necessary to prepare the asset for its intended
use or sale have commenced, such borrowing costs shall be capitalised as part of the cost of that asset; and
capitalisation shall discontinue when the qualifying asset is ready for its intended use or sale.
(3) Period for suspension of capitalisation
Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or
production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more
than 3 months, until the acquisition, construction or production of the qualifying asset is resumed.
(4) Calculation of the amount of capitalisation of borrowing costs
Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual
interest expense incurred on that borrowing for the period less any bank interest earned from depositing the
borrowed funds before being used into banks or any investment income on the temporary investment of those
funds. Where funds are borrowed for general purpose, the Group shall determine the amount of interest to
be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess
amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings.
The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose
13
INTERIM
borrowings. REPORT
17. Biological assets
Consumable biological assets refer to biological assets held for sale or to be harvested as agricultural produce in the
future, which include growing commercial forests. Consumable biological assets are stated at cost at initial recognition.
The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable to
such assets prior to canopy closure, including borrowing costs eligible for capitalisation. Subsequent expenses incurred
after canopy closure shall be included in profit or loss for the current period.
The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying value
using the rotation age method.
All the consumable biological assets of the Company are subsequently measured at fair value as they are quoted in
an active market where the Company can obtain a quoted market price and other information of the same or similar
consumable biological assets and thus their fair values can be reliably estimated. Changes in fair values shall be
recognised as profit or loss in the current period.
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IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
18. Intangible assets
(1) Measurement of intangible assets
An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be
recognised as cost of the intangible asset only if it is probable that economic benefits associated with the asset
will flow to the Group and the cost of the asset can be measured reliably. Other expenditures on an item asset
shall be charged to profit or loss when incurred.
Land use right acquired shall normally be recognised as an intangible asset. Self-constructed buildings (e.g.
plants), related land use right and the buildings shall be separately accounted for as an intangible asset and fixed
asset. For buildings and structures purchased, the purchase consideration shall be allocated among the land
use right and the buildings on a reasonable basis. In case there is difficulty in making a reasonable allocation, the
consideration shall be recognised in full as fixed assets.
An intangible asset with 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, the Company shall estimate the useful life of that asset and apply the accounting
13 policies accordingly.
INTERIM
REPORT
(2) Estimated useful life of intangible assets with a finite useful life
Item Expected useful life Basis
Land use rights 50 Legal use rights
Computer software 5-10 Expected revenue term
(3) Judgement basis on intangible assets with an indefinite useful life
Not applicable.
(4) Impairment provision for intangible assets
For intangible assets with a finite useful life, 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. Intangible assets with an indefinite useful life
and intangible assets not in working conditions will be tested for impairment annually, regardless of whether there
is any indication of impairment.
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
18. Intangible assets (Cont’d)
(4) Impairment provision for intangible assets (Cont’d)
If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount,
the impairment provision will be made according to the difference and recognised as an impairment loss. The
recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the
future cash flows expected to be derived from the asset. An asset’s fair value is the price in a sale agreement in
an arm’s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value
shall be determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair
value shall be based on the best available information. Costs of disposal are expenses attributable to disposal
of the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to
prepare the asset for its intended sale. The present value of the future cash flows expected to be derived from
the asset over the course of continued use and final disposal is determined as the amount discounted using
an appropriately selected discount rate. Provisions for assets impairment shall be made and recognised for the
individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall
determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest
group of assets capable of generating cash flows independently.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of
the restorable value.
(5) Specific standard on classifying the research phase and development phase of internal research and
development activities of the Company 13
INTERIM
Expenditure on internal research and development activities of the Group is categorised into expenditure arising REPORT
from the research phase and expenditure arising from the development phase.
Expenditure arising from the research phase is recognised as profit or loss in the current period.
Expenditure arising from the development phase that satisfies 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 ability to use or sell the intangible asset;
⑤ the expenditure attributable to the development phase of the intangible asset can be measured reliably.
(1) Calculation of expenditure on internal research and development activities
Expenditure arising from the research phase is recognised as profit or loss in the current period.
Expenditure arising from the development phase that satisfies condition (5) 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.
If the expenditure arising from the research phase and the development phase cannot be distinguished separately,
all development expenditure incurred are accounted for in the profit or loss for the current period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 85
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
19. 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.
20. Accrued liabilities
(1) Criteria for recognition of accrued liabilities
Obligations pertinent to the contingencies which satisfy the following conditions are recognised as accrued
liabilities: (1) The obligation is a current obligation borne by the Group; (2) it is likely that an outflow of economic
benefits will be resulted from the performance of the obligation; and (3) the amount of the obligation can be
reliably measured.
(2) Method for measuring accrued liabilities
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
13 amount recognised shall not be more than the carrying amount of accrued liabilities.
INTERIM
REPORT 21. Repurchase of the Company’s shares
Share repurchase consideration paid and transaction costs to reduce the owner’s equity, repurchase, transfer or
cancellation of the Company’s shares, the gains or losses are not recognised.
The difference between the amount actually received and the carrying amount of the treasury shares is credited to the
capital reserve for the transfer of treasury shares. When insufficient to dilute, capital reserve will be offset against the
surplus reserve and retained profits. Treasury shares are cancelled at par value and by the number of shares cancelled
to reduce the share capital. The difference between the book balance and the nominal value of the treasury shares shall
be offset against the capital reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve
and retained profits.
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
22. Revenue
(1) The specific criteria for recognition of revenue from sales of goods
Revenue is recognised when the Company has transferred to the buyer the significant risks and rewards of
ownership of the goods, retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold, will receive the economic benefits associated with the
transaction, and can reliably measure the relevant amount of revenue and costs.
(2) Basis for recognition of revenue from the use right of assigned assets
Revenue is recognised on an accrual basis under the relevant contracts or agreements.
(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 13
recognise the revenue from the rendering of services based on the cost of rendering services already incurred and INTERIM
REPORT
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.
(4) Basis and method for determination of completion schedule when revenue from the rendering of services and
construction contracts is recognised based on the percentage-of-completion method
When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the
balance sheet date, recognise the revenue from the rendering of services employing the percentage-of-completion
method. The completion schedule of transaction concerning the rendering of services shall be ascertained
according to the proportion of service costs incurred to the estimated total costs.
Where the outcome of a construction contracts can be reliably estimated, it shall, on the balance sheet date,
recognise contract revenue and contacts expenses using the percentage of completion method. The completion
schedule of a contract shall be ascertained according to the portion of accumulative actual contract costs incurred
to the estimated total contract costs or the completed contract work to the estimated total contracts work or the
actually measured completion schedule.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 87
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
23. Government grant
(1) Types
Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at
no consideration, excluding capital considerations from the government as an owner of the Group. Government
grants are classified into government grants related to assets and government grants related to income.
(2) Accounting treatment
If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount
received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be
measured at fair value. If fair value is not reliably determinable, the item shall be measured at a nominal amount
and recognised immediately in profit or loss for the current period.
A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit
or loss over the useful life of the asset. For a government grant related to income, if the grant is a compensation
for related expenses or losses to be incurred in subsequent periods, the grant shall be recognised as deferred
income, and recognised in profit or loss over the periods in which the related costs are recognised; if the grant is a
compensation for related expenses or losses already incurred, the grant shall be recognised immediately in profit
or loss for the current period.
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
13 in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognised
INTERIM immediately in profit or loss for the current period.
REPORT
24. Deferred income tax assets and deferred income tax liabilities
(1) Basis for recognition of deferred income tax assets
Deferred income tax assets are not recognised for deductible temporary differences related to the initial
recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting
profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Group recognizes the
corresponding deferred income tax asset for deductible temporary differences associated with investments in
subsidiaries, associates and joint ventures to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be utilised, except when both of the following conditions
are satisfied: it is not probable that the temporary difference will reverse in the foreseeable future; and it is not
probable that taxable profits will be available in the future, against which the temporary difference can be utilised.
The Company recognises a deferred income tax asset for the carry forward of deductible losses and tax credits to
subsequent periods, to the extent that it is probable that future taxable profits will be available against which the
deductible losses and tax credits can be utilised.
(2) Basis for recognition of deferred income tax liabilities
Deferred income tax liabilities are not recognised for taxable temporary differences related to: the initial
recognition of goodwill; and the initial recognition of an asset or liability in a transaction which is neither a business
combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the transaction. In
addition, the Group recognises the corresponding deferred income tax liability for taxable temporary differences
associated with investments in subsidiaries, associates and joint ventures, except when both of the following
conditions are satisfied: the Group able to control the timing of the reversal of the temporary difference; and it is
probable that the temporary difference will not reverse in the foreseeable future.
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
25. Operating lease and finance lease
(1) Accounting treatment of operating lease
① Operating lease business with the Group recorded as lessee
Lease payment for operating lease is recognised as related asset cost or profits and losses for the current
period using the straight-line method over the lease term. The initial direct cost is directly accounted in profit
or loss for the current period. Contingent rent is recognised as profit or loss for the current period upon
occurrence.
② Operating lease business with the Group recorded as lessor
Rental income is recognised in profit or loss for the current period using the straight-line method over the
lease term. The initial direct cost where the amount is larger is capitalised when incurred, and accounted for
as profit or loss for the current period on the same basis as recognition of rental income over the entire lease
period; the initial direct cost where the amount is fewer is included in the profit or loss for the period when
incurred. Contingent rental is accounted for as profit or loss for the period in which it is incurred.
(2) Accounting treatment of finance lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. Title may or may not eventually be transferred. All other leases are classified
as operating leases.
13
The Group as a lessee under a finance lease INTERIM
REPORT
On the lease beginning date, a lessee shall recognise the lower of the fair value of the leased asset on the lease
beginning date and the present value of the minimum lease payments as the recorded value, and recognise the
minimum lease payments as the recorded value of long-term accounts payable, and the difference between such
amounts shall be determined as unrecognised finance charge. The initial direct costs directly attributable to the
leased item incurred during the process of lease negotiation and execution of the leasing agreement shall be
accounted for as the value of the leased asset. The balance of the minimum lease payments after deducting the
unrecognised financing charge shall be separately presented as long-term liabilities and long-term liabilities due
within one year.
The unrecognised financing charge shall be accounted for during the lease period using the effective interest
method and recognised as financing charge for the period. Contingent rent payments are recognised in the profit
and loss for the period when actually incurred.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 89
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
26. Assets held for sale
(1) Criteria for recognition of assets held for sale
If the Group has made a resolution in respect of disposal of a non-current asset and signed an irrevocable transfer
agreement with the transferee, and such transfer is likely to be completed within one year, this non-current asset
shall be accounted for as non-current assets held for sale.
(2) Accounting treatment for assets held for sale
The non-current assets held for sale are not depreciated nor amortised and calculated at the lower of carrying
amount and net amount of the fair value less disposal cost. Non-current assets held for sale include individual
asset and disposal group. If the group of disposal is a set of asset groups and goodwill received from business
combination is allocated to such asset groups in accordance with the “Accounting Standards for Business
Enterprises No.8 “Assets Impairment” or such disposal group is an operation in the asset groups, it shall include
the goodwill in business combination.
If an asset or disposal group is classified as held for sale, but fails to meet recognition requirements for noncurrent
assets held for sale, it shall no longer be classified as assets held for sale and calculated at the lower of the
following two amounts: (1) the carrying amount of such asset or disposal group before being classified as assets
held for sale subsequent to the adjustment to the originally recognised depreciation, amortisation or impairment
under the condition that they are not classified as assets held for sale; and (2) the recoverable amount at the date
on which no future sale is decided.
13 27. Changes in Significant Accounting Policies and Estimates
INTERIM
REPORT
Any changes in significant accounting policies and accounting estimates during the reporting period.
□ Yes √ No
There is no changes in significant accounting policies and accounting estimates during the reporting period.
(1) Changes in accounting policies
Any changes in significant accounting policies during the reporting period.
□ Yes √ No
(2) Changes in accounting estimates
Any changes in significant accounting estimates during the reporting period.
□ Yes √ No
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
28. Corrections on accounting errors in prior periods
Any prior accounting errors identified during the reporting period.
□ Yes √ No
There is no significant prior accounting errors identified during the reporting period.
(1) Retrospective restatement
Any prior accounting errors based on retrospective restatement identified during the reporting period.
□ Yes √ No
(2) Prospective application
Any prior accounting errors based on prospective application identified during the reporting period.
□ Yes √ No
29. Other significant accounting policies, accounting estimates and preparation method of financial
statements
Critical accounting judgments and estimate
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
13
INTERIM
and assumptions are made based on the historical experiences of the Group’s management and taking into account REPORT
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.
(2) Allowance for inventories
Under the accounting policies of inventories and by measuring at the lower of cost and net realisable value, the
Group makes allowance for inventories which have costs higher than net realisable value or become obsolete and
slow-moving. Write-down of inventories to their net realisable values is based on the saleability of the evaluated
inventory and their net realisable values. Given the management’s 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.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 91
IX Financial Report
IV. Significant accounting policies, accounting estimates and differences in the previous period (Cont’d)
29. Other significant accounting policies, accounting estimates and preparation method of financial
statements (Cont’d)
Critical accounting judgments and estimate (Cont’d)
(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.
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
13 attributable to such assets disposal.
INTERIM
REPORT 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
The Group shall provide depreciation and amortisation for investment properties, fixed assets and intangible
assets over their useful lives and after taking into account of their residual value, using straight-line method. The
Group shall regularly review the useful lives to determine the amount depreciated and amortised to be accounted
for in each reporting period. The useful life is determined by the Group according to its previous experience on the
similar assets and estimated technical innovation. If there is any material change in the previously made estimate,
the depreciation and amortisation will be adjusted over the future period.
(6) Deferred income tax assets
It is probable that all unused tax loss will be recognised as the deferred income tax assets to the extent there will
be sufficient taxable profits against which the deducible loss is available. This requires the Group’s management
to apply numerous 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.
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX. Financial Report
V. Taxation
1. Main Tax Types and Tax Rates of the Company
Tax type Basis of taxation Tax rate
Value added tax Sales of goods 13% and 17%
Business tax Rent income 3% and 5%
Urban maintenance and construction tax Value-added tax and business tax payables 7%
Enterprise income tax Taxable income 15% and 25%
Educational surcharges Value-added tax and business tax payables 3%
Local educational surcharges Value-added tax and business tax payables 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% Hailaer Chenming 25% Chenming GmbH －
Holdings Limited Paper Co., Ltd.
Wuhan Chenming Hanyang 25% Huanggang Chenming 25% Zhanjiang Chenjian New-style 25%
Paper Holdings Co., Ltd. Paper Co., Ltd. Wall Materials Co., ltd.
Haicheng Haiming Mining 25% Huanggang Chenming Tax exempt Zhanjiang Meilun Paper 25%
Company Limited Arboriculture Co., Ltd. Pulp Co., Ltd.
Shandong Chenming Power 25% Shouguang Chenming 25% Zhanjiang Huirui Investment 25%
Supply Holdings Co., Ltd.
Chenming International Co., Ltd.
Industrial Logistics Co., Ltd.
－ Shouguang Shun Da Customs
Co., Ltd.
25% Yangjiang Chenming Tax exempt
13
INTERIM
Declaration Co, Ltd. Arboriculture Co., Ltd. REPORT
Shouguang Meilun Paper Co. Ltd. 25% Shandong Chenming Paper 25% Zhanjiang Chenming Tax exempt
Sales Company Limited Arboriculture Co., Ltd.
Shouguang Chenming 25% Fuyu Chenming Paper Co., Ltd. 25% Nanchang Chenming Tax exempt
Tianyuan Arboriculture Co., Ltd. Arboriculture Co., Ltd.
Chenming (HK) Limited 17% Shouguang Chenming Hongxin 25% Shandong Chenming 25%
Packaging Co., Ltd. Xinli Power Co., Ltd.
Jilin Chenming Paper Co., Ltd. 25% Shouguang Chenming 25% Shouguang Chenming 25%
Papermaking Machine Co., Ltd. Cement Co., Ltd.
Shouguang Hengfeng Storage Co., Ltd. 25% Shouguang Chenming Import 25% Shandong Chenming 25%
and Export Trade Co., Ltd. Panels Co., Ltd.
Shandong Grand View Hotel Co., Ltd. 25% Shouguang Chenming Jiatai 25% Shouguang Hongyi Decorative 25%
Property Management Co., Ltd. Packaging Co., Ltd.
Shouguang Chenming Modern 25% Zhanjiang Chenming 25% Shouguang Wei Yuan Logistics 25%
Logistic Co., Ltd. Paper Pulp Co., Ltd. Company Limited
Shouguang Chenming Art 25% Japan Chenming － Shouguang City Run Sheng 25%
Paper Co., Ltd. Paper Company Limited Wasted Paper Recycle Co., Ltd.
Jilin Chenming Machinery 25% Wuhan Chenming Qianneng 25% Shouguang Chenming Floor 25%
Manufacturing Co., Ltd. Electric Power Co., Ltd. Board Co., Ltd.
Jiangxi Chenming Paper Co., Ltd. 15% Wuhan Chenming Wan Xing 25% Shouguang Xinyuan 25%
Real Estate Co., Ltd. Coal Co., Ltd.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 93
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 or new technology enterprise which needs
the major support of the state as approved by State Taxation Administration of Shouguang, Shandong. An enterprise
income tax rate of 15% is applicable to the Company since 2012.
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 or 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 the Company since 2013.
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 the Company, namely, Zhenjiang
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
on 26 June 2008, Chenming (HK) Limited, a subsidiary of the Company, has been subject to a corporate income tax rate
13 of 16.5% commencing 2008, and the applicable tax rate for 2013 was 16.5%.
INTERIM
REPORT Except for the above preferential policies, the Company and its remaining subsidiaries are subject to enterprise income
tax rate of 25%.
Value-added Tax (“VAT”) incentives
Pursuant to 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 Cai Shui Zi [1995] No. 44 “Circular on VAT Exemption for Certain Products Applying Integrated Use of
Resources issued by the Ministry of Finance and the State Administration of Taxation” and the relevant requirements of
Cai Shui [2001] Document No. 72, Shandong Chenming Panels Co., Ltd. (山東晨鳴板材有限責任公司), being a subsidiary
of the Company and produce products that applied integrated use of resources, are subject to an immediate VAT refund
policy.
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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
Balance of the Company
of other Minority exceeds
projects that interest used the minority
substantially to offsetshareholders’
Actual forms net the profit orportion of the
investment as investment Share Voting loss ofopening balance
Place of Registered at the end of in the holding rights Whether Minority the minority of owners’ equity
Full name of subsidiary Subsidiary type Incorporation Business Nature capital Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Wuhan Chenming Hanyang Controlling Wuhan, China Manufacture 211,360,000.00 Manufacture and sales of 202,824,716.34 50.93% 50.93% Yes 212,564,273.65
Paper Holdings Co., Ltd. subsidiary of paper paper products, the materials
of manufacture of paper
Haicheng Haiming Controlling Haicheng, Mining
and machinery
240,000,000.00 Processing and sales of 144,000,000.00 60% 60% Yes 96,000,000.00
13
Mining Company Limited subsidiary China magnetite and talc INTERIM
Shandong Chenming Power Controlling Shouguang, Electricity 99,550,000.00 Manufacture and supply of 157,810,117.43 86.71% 86.71% Yes 19,779,983.50 REPORT
Supply Holdings Co., Ltd. subsidiary China electricity and steam
Jiangxi Chenming Paper Wholly-owned Nanchang, Manufacture of US$172,000,000 Production and etc. of 697,548,406.40 51% 100% Yes
Co., Ltd. subsidiary China paper machine-made paper,
paperboard, paper panel,
paper products and
paper-making raw
materials processing
Shouguang Chenming Controlling Shouguang, Arboriculture 10,590,000.00 Development, nurture of 7,199,000.00 68% 68% Yes -974,078.88
Tianyuan Arboriculture subsidiary China fast growth poplar, forest,
Co., Ltd. vegetable and fruit
Hailaer Chenming Paper Controlling Hailaer, China Manufacture of 16,000,000.00 Sales and processing; sales of 12,000,000.00 75% 75% Yes 16,412,722.66
Co., Ltd. subsidiary paper machine- made paper and
pulp paper
Japan Chenming Paper Wholly-owned Tokyo, Japan Trade of paper US$1,500,000 Trade of paper and 9,306,351.20 100% 100% Yes
Company Limited subsidiary raw materials
Jilin Chenming Paper Co., Ltd. Wholly-owned Jilin City, Manufacture of 1,500,000,000.00 Processing and sales of 1,501,350,000.00 100% 100% Yes
subsidiary China paper machine-made paper,
paperboard, paper product,
paper pulp
Shandong Grand View Controlling Shouguang, Restaurant and US$13,910,000 Restaurant and beverage 80,500,000.00 70% 70% Yes -15,526,551.66
Hotel Co., Ltd. subsidiary China beverage services
Zhanjiang Chenming Wholly-owned Zhanjiang, Manufacture of 3,000,000,000.00 Processing and sales of 3,000,000,000.00 100% 100% Yes
Paper Pulp Co., Ltd. subsidiary China paper pulp paper pulp
Chenming (HK) Limited Wholly-owned Hong Kong, Trade of paper US$100,000 Export and import trade of 783,310.00 100% 100% Yes
subsidiary China paper products and
market research
Shouguang Chenming Wholly-owned Shouguang, Transportation 10,000,000.00 Transportation of goods 10,000,000.00 100% 100% Yes
Modern Logistic Co., Ltd. subsidiary China
Shouguang Chenming Art Controlling Shouguang, Manufacture of US$20,000,000 Production and sales of 113,616,063.80 75% 75% Yes 35,539,258.73
Paper Co., Ltd. subsidiary China paper machine-made paper
Fuyu Chenming Paper Co., Ltd. Wholly-owned Fuyu, China Manufacture of 208,000,000.00 Production and sales of 208,000,000.00 100% 100% Yes
subsidiary paper machine-made paper and
paperboard
Huanggang Chenming Wholly-owned Huanggang, Arboriculture 70,000,000.00 Plantation, processing and 70,000,000.00 100% 100% Yes
Arboriculture Co., Ltd. subsidiary China sales of forests
SHANDONG CHENMING PAPER HOLDINGS LIMITED 95
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)
Setting off of the
loss attributable
to the minority
shareholders of
the subsidiaries
in the current
period from the
owner’s equity
Balance of the Company
of other Minority exceeds
projects that interest used the minority
substantially to offsetshareholders’
Actual forms net the profit orportion of the
investment as investment Share Voting loss ofopening balance
Place of Registered at the end of in the holding rights Whether Minority the minority of owners’ equity
Full name of subsidiary Subsidiary type Incorporation Business Nature capital Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Huanggang Chenming Wholly-owned Huanggang, Arboriculture, 20,000,000.00 Operation and acquisition of 20,000,000.00 100% 100% Yes
Paper Co., Ltd. subsidiary China establishment of forest; establishment of
paper pulp project paper pulp projects
Shouguang Meilun Paper Wholly-owned Shouguang, Manufacture of 2,200,000,000.00 Production and sales of 2,200,000,000.00 100% 100% Yes
Co. Ltd. subsidiary China paper machine-made paper and
13 Shouguang Shun Da Wholly-owned Shouguang, Customs
paperboard
1,500,000.00 Business agency of 1,500,000.00 100% 100% Yes
INTERIM Customs Declaration Co, Ltd. subsidiary China declaration, professional customs
REPORT
inspection declaration and
declaration inspection declaration
Shandong Chenming Paper Wholly-owned Shouguang, Sales of paper 100,000,000.00 Sales of machine-made 100,000,000.00 100% 100% Yes
Sales Company Limited subsidiary China paper, paperboard and
paper making raw materials
Shouguang Chenming Wholly-owned Shouguang, Transportation 10,000,000.00 Land transport, storage of 10,000,000.00 100% 100% Yes
Industrial Logistics Co., Ltd. subsidiary China goods
Shouguang Chenming Wholly-owned Shouguang, Machinery 2,000,000.00 Processing and repair of 2,000,000.00 100% 100% Yes
Papermaking Machine subsidiary China manufacturing paper making machines
Co., Ltd.
Shouguang Chenming Import Wholly-owned Shouguang, Import and 10,000,000.00 Import and export of goods 10,000,000.00 100% 100% Yes
and Export Trade Co., Ltd. subsidiary China export trade and technology
Shouguang Chenming Jiatai Wholly-owned Shouguang, Property 1,000,000.00 Property management 1,000,000.00 100% 100% Yes
Property Management subsidiary China management
Co., Ltd.
Shouguang Chenming Wholly-owned Shouguang, Packaging 1,000,000.00 Sales of paper packaging 1,000,000.00 100% 100% Yes
Hongxin Packaging Co., Ltd. subsidiary China
Shouguang Hengfeng Wholly-owned Shouguang, Storage of goods, 500,000.00 Storage and leasing, 500,000.00 100% 100% Yes
Storage Co., Ltd. subsidiary China leasing storage service
Chenming International Co., Ltd. Wholly-owned L.A., U.S. Import and US$3,000,000 Import and export, technology 19,861,955.00 100% 100% Yes
subsidiary export, technology research and development
research and
development
Wuhan Chenming Controlling Wuhan, China Electricity 88,240,000.00 Generation and sales of 45,000,000.00 51% 51% Yes 39,025,404.63
Qianneng Electric subsidiary electricity and steam
Power Co., Ltd.
Wuhan Chenming Wan Wholly-owned Wuhan, China Real estate 20,000,000.00 Development of real estate 20,000,000.00 100% 100% Yes
Xing Real Estate Co., Ltd. subsidiary and sales of commodity house
Shandong Chenming Controlling Shouguang, Electricity US$11,800,000 Generation and sales of 49,820,000.00 51% 51% Yes 67,984,226.87
Xinli Power Co., Ltd. subsidiary China electricity and steam
Shouguang Chenming Wholly-owned Shouguang, Production and 7,000,000.00 Utilisation of ash in the 7,000,000.00 100% 100% Yes
Cement Co., Ltd. subsidiary China sales of cement production of cement and
sales of cement
96 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)
Setting off of the
loss attributable
to the minority
shareholders of
the subsidiaries
in the current
period from the
owner’s equity
Balance of the Company
of other Minority exceeds
projects that interest used the minority
substantially to offsetshareholders’
Actual forms net the profit orportion of the
investment as investment Share Voting loss ofopening balance
Place of Registered at the end of in the holding rights Whether Minority the minority of owners’ equity
Full name of subsidiary Subsidiary type Incorporation Business Nature capital Business activity the period subsidiary (%) (%) consolidated interests interests of the subsidiary
Shandong Chenming Wholly-owned Shouguang, Production and 30,000,000.00 Decorative board of the layer 30,000,000.00 100% 100% Yes
Panels Co., Ltd. subsidiary China sales of panels of laminated board, wooden
products, laminated board and
fortified wooden floorboard
Shouguang Chenming Wholly-owned Shouguang, Production and 500,000.00 Production, processing and 500,000.00 100% 100% Yes
Floor Board Co., Ltd. subsidiary China sales of floor
board
sales of fortified wooden
floorboard and impregnated
13
paper INTERIM
REPORT
Yangjiang Chenming Wholly-owned Yangjiang, Arboriculture 1,000,000.00 Plantation and development 1,000,000.00 100% 100% Yes
Arboriculture Co., Ltd. subsidiary China of forest, and technology
consultation of forestry
Zhanjiang Chenming Wholly-owned Zhanjiang, Arboriculture 1,000,000.00 Plantation of forest, nutrition 1,000,000.00 100% 100% Yes
Arboriculture Co., Ltd. subsidiary China and sales of seedling,
processing and sales of
timber and processing and
sales of by-products of timber
Jilin Chenming Machinery Wholly-owned Jilin, China Processing of 600,000.00 Processing of machinery, 600,000.00 100% 100% Yes
Manufacturing Co., Ltd. subsidiary machinery manufacture, installation and
repair of the equipment of
machinery
Nanchang Chenming Wholly-owned Nanchang, Arboriculture 10,000,000.00 Processing and sales of wooden 10,000,000.00 100% 100% Yes
Arboriculture Co., Ltd. subsidiary China finished products, semi- finished
products and by-products of
timber
Zhanjiang Meilun Paper Wholly-owned Zhanjiang, Manufacture of 100,000,000.00 Manufacturing, production, 100,000,000.00 100% 100% Yes
Pulp Co., Ltd. subsidiary China paper pulp processing and sales of
paper pulp and
relevant products
Zhanjiang Chenming Wholly-owned Zhanjiang, Wall materials 10,000,000.00 Manufacturing and sales of 10,000,000.00 100% 100% Yes
New-style Wall Materials subsidiary China new-style wall materials of
Co., ltd. paper, consolidated
utilisation of aerated fly ash
Chenming GmbH Wholly-owned Hamburg, Trade 250,000 Trade of machine-made paper 206,250.00 100% 100% Yes
subsidiary Germany
SHANDONG CHENMING PAPER HOLDINGS LIMITED 97
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 the minority
of other shareholders’
projects that Minority interest portion of the
substantially used to offset opening
Actual forms net the profit or balance of
investment as investment Share Voting loss of owners’ equity
Subsidiary Place of Business Registered at the end of in the holding rights Whether Minority the minority of the
Full name of subsidiary type Incorporation Nature capital Business activity the period subsidiary (%) (%) consolidated interests interests subsidiary
13 Wuxi Songling Paper Co., Ltd. Wholly-owned Wuxi, China
subsidiary
Papermaking 5,010,000.00 Sales, cutting and
processing of paper
5,010,000.00 100% 100% Yes
INTERIM Shouguang Runsheng Waste Wholly-owned Shouguang, Purchase and 1,000,000.00 Purchase and sales of 1,000,000.00 100% 100% Yes
REPORT Paper Recycle Co., Ltd. subsidiary China sales of waste waste and obsolete materials
and obsolete
materials
Shouguang Hongyi Decorative Wholly-owned Shouguang, Packaging 1,550,000.00 Processing and sales of 1,700,000.00 100% 100% Yes
Packaging Co., Ltd. subsidiary China packaging products, indoor
and outdoor decorations
Shouguang Wei Yuan Wholly-owned Shouguang, Transportation 3,930,000.00 Transportation of goods, 4,000,000.00 100% 100% Yes
Logistics Company Limited subsidiary China maintenance of vehicles,
storage and loading of
goods, international freight
agency services
Shouguang Xinyuan Wholly-owned Shouguang, Coal 3,000,000.00 Retail of coal, gasoline, 2,000,000.00 100% 100% Yes
Coal Co., Ltd. subsidiary China construction materials and
plumbing parts
Zhanjiang Huirui Investment Controlling Zhanjiang, Investment 258,000,000.00 Investment in marine 131,560,000.00 51% 51% Yes 125,765,277.99
Co., Ltd. subsidiary China engineering projects
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX. Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
2. Explanation on changes in the scope of consolidation
Explanation on changes in the scope of consolidated statements
√ Applicable □ Not applicable
(1) During the year (period), three more companies were consolidated as compared to the prior year due to the
reasons as follows:
During the reporting period, the Company established three companies through investments, namely Chenming
GmbH, Zhanjiang Meilun Paper Pulp Co., Ltd. and Zhanjiang Chenming New-style Wall Materials Co., Ltd.,
respectively;
In order to push forward with the Company’s sales of paper products, further expand the Company’s products’
share in the European market, and establish a broader and more comprehensive marketing network, the Company
decided to set up a sales company in Germany. On 7 January 2013, the Company obtained “Overseas Investment
certificate” approved by the Ministry of Commerce, which ratified our establishment of Chenming GmbH with its
registered capital of EUR25,000. The Company may make more investments timely based on the operations of
the new company. It was included in the scope of consolidation since March 2013.
In order to make full use of ancillary facilities of public works, realise diversification of the product mix of the
Company, and further lower the costs and increase the Company’s capability to resist risks, the fifth extraordinary
meeting of the six session of the Board of Directors approved “Resolution in relation to establishment of Zhanjiang
Meilun Paper Pulp Co., Ltd.”, with its registered capital amounting to RMB100.00 million and the company was
included in the scope of consolidation since January 2013.
13
In order to strengthen comprehensive utilisation of resources and actively respond to national policy for resource INTERIM
utilisation, we decided to, based on local needs, set up Zhanjiang Chenming New-style Wall Materials Co., Ltd., REPORT
which was invested by Zhanjaing Chenming, a wholly-owned subsidiary of our Company, with its registered
capital amounting to RMB10.00 million. The company was included in the scope of consolidation since March
2013.
(2) During the year (period), five companies were deconsolidated as compared to the prior year due to the reasons as
follows:
The Company lost its control over Yanbian Chenming Paper Co., Ltd., Wuhan Chenjian New-style Wall Materials
Co., Ltd. and Shanghai Runchen Equity Investment Fund Co., Ltd. due to disposal of equity interest during
the period. Therefore, the above three companies ceased to be included in the scope of consolidation. The
registration of Wuhan Xingzhilian Paper Company Limited and Jilin Chenming Waste Collection Co., Ltd. was
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 26 April 2013, the seventeenth meeting of the six session of the Board of Directors of the Company passed
“Resolution in relation to disposal of equity interests in Shanghai Runchen. On the same day, the Company entered
into an equity transfer agreement with Shanghai Ruibao Environmental Technology Co., Ltd. (hereinafter referred
to as Shanghai Runchen) to transfer 98.36% equity interest in Shanghai Runchen Equity Investment Fund Co., Ltd.
at a consideration of RMB300.9160 million. The Company lost its control over Shanghai Runchen and Shanghai
Runchen ceased to be included in the scope of consolidation effective from 26 April 2013.
On 15 May 2013, the Company entered into an equity transfer agreement with Yanbian Shixian Bailu Paper
Co., Ltd and Yanbian State-owned Assets Management Co., Ltd. to transfer its 49% and 51% equity interest in
Yanbian Chenming Paper Co., Ltd. (hereinafter referred to as Yanbian Chenming), respectively, at a consideration
of RMB54.00 million and RMB56.00 million. The Company lost its control over Yanbian Chenming and Yanbian
Chenming ceased to be included in the scope of consolidation effective from 15 May 2013.
On 31 January 2013, Wuhan Chenming Hanyang Paper Holdings Co., Ltd., a subsidiary of the Company, entered
into an equity transfer agreement with Hubei Zhongjian Haohua Environment Protection Co., Ltd. to transfer its
51% equity interest in Wuhan Chenjian New-style Wall Materials Co., Ltd. (hereinafter referred to as Chenjian
Company) at a consideration of RMB5.10 million. The Company lost its control over Chenjian Company and
Chenjian Company ceased to be included in the scope of consolidation.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 99
IX. Financial Report
VI. Business Combination and Consolidated Financial Statements (Cont’d)
3. 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
Chenming GmbH -6,817,223.74 -7,049,334.35
Zhanjiang Meilun Paper Pulp Co., Ltd. 99,918,870.83 -81,129.17
Zhanjiang Chenming New-style Wall Materials Co., Ltd. 9,994,039.76 -5,960.24
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 as the beginning of
13 Name
at the date of
disposal
the year to the
date of disposal
INTERIM
REPORT
Yanbian Chenming Paper Co., Ltd. 128,385,259.16 -3,929,284.60
Wuhan Chenjian New-style Wall Materials Co., Ltd. 30,245,726.25 -1,086,132.46
Wuhan Xingzhilian Paper Company Limited 18,654,752.92 -2,715.42
Shanghai Runchen Equity Investment Fund Co., Ltd. 305,931,289.86 573,994.12
Jilin Chenming Waste Collection Co., Ltd. 1,271,992.74 24,876.07
4. Subsidiaries eliminated due to disposal of controlling equity interest during the reporting period
Name of subsidiary Date of disposal Method to recognise profit or loss
Yanbian Chenming Paper Co., Ltd. 15 May 2013 The balance of disposal consideration and the value
that is shown in the consolidated financial statements
as the net asset as at the date of disposal of such
subsidiary in respect of equity interest disposal is
recognised as profit or loss from disposal.
Wuhan Chenjian New-style
Wall Materials Co., Ltd. 31 January 2013 Ditto
Shanghai Runchen Equity
Investment Fund Co., Ltd. 26 April 2013 Ditto
5. Exchange rate of translating major financial statement items of overseas operating entities
Chenming (HK) Limited, Chenming International Co., Ltd., Japan Chenming Paper Company Limited and Chenming
GmbH, the overseas subsidiaries of the Company, are translated into the reporting currency of the consolidated financial
statements at the exchange rate as follows: all asset and liability items in the balance sheet were translated using the
spot exchange rate prevailing at the balance sheet date. All the owner’s equity items were translated using the spot
exchange rate on the date the corresponding transactions occurred, except the “retained profit” item. The income and
expense items in the income statement were translated using the average exchange rate on the date the corresponding
transactions occurred. The cash flows of overseas subsidiaries were translated using the spot exchange rate on the date
the cash flows occurred. The effect of exchange rate change on cash is separately presented in the cash flow statement
as reconciliation items.
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements
1. Monetary funds
Unit: RMB
Closing balance Opening balance
Amount in Amount in
Item foreign currency Exchange rate Amount in RMB foreign currency Exchange rate Amount in RMB
Cash: － － 1,905,225.31 － － 1,398,324.17
RMB － － 1,279,501.57 － － 937,182.22
USD 49,900.00 6.1787 308,317.13 46,900.00 6.2855 294,789.95
EUR 38,000.00 8.0536 306,036.80 20,000.00 8.3176 166,352.00
JPY 181,606.00 0.062607 11,369.81
Cash deposited in banks: － － 1,596,842,504.43 － － 2,342,151,861.28
RMB － － 1,005,801,442.54 － － 2,187,734,778.74
USD 91,735,539.01 6.1787 566,806,374.88 23,459,592.25 6.2855 147,455,267.10
EUR 1,360,671.91 8.0536 10,958,307.29 61,101.44 8.3176 508,217.34
HKD 229,524.04 0.79655 182,827.37 218,778.49 0.81085 177,396.54
JPY 209,138,792.00 0.062607 13,093,552.35 85,917,693.00 0.073049 6,276,201.56
Other monetary funds: － － 2,185,877,345.33 － － 2,112,667,177.41
RMB － － 2,185,114,941.21 － － 1,953,372,355.46
USD 123,392.32 6.1787 762,404.12 25,343,206.29 6.2855 159,294,723.14
EUR 11.88 8.3176 98.81 13
INTERIM
Total － － 3,784,625,075.07 － － 4,456,217,362.86 REPORT
Amounts subject to limitations, deposited overseas and exposed to recovery risk due to security, pledge or
immobilisation should be separately stated:
① Other monetary funds of RMB862,078,959.81 (31 December 2012: RMB987,167,187.90) were the guarantee
deposit for the application for bank acceptance with the banks by the Group;
② Other monetary funds of RMB624,193,752.79 (31 December 2012: RMB595,207,540.73) were the guarantee
deposit for the application for letter of credit with the banks by the Group.
③ Other monetary funds of RMB597,600,000.00 (31 December 2012: RMB394,200,000.00) were the guarantee
deposit for the application for guarantees with the banks by the Group.
④ the ownership of other monetary funds amounted to RMB102,004,632.73 (31 December 2012:
RMB136,092,448.78) of the Group was restricted, of which certificates of time deposits of RMB102,004,632.73
were the pledge for the bank loans of US$15,000,000.00 from J.P. Morgan for a term of two years.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 101
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
2. Bills receivable
(1) Classification of bills receivable
Unit: RMB
Category Closing balance Opening balance
Bank acceptance 1,963,488,430.13 1,852,478,364.46
Commercial acceptance 63,432,473.43
Total 2,026,920,903.56 1,852,478,364.46
(2) Bills reclassified into accounts receivable due to default on the part of the drawer and outstanding notes
endorsed to other parties by the Company at the end of the period
There is no bills reclassified into accounts receivable due to default on the part of the drawer during the reporting
period.
Outstanding notes endorsed to other parties by the Company
Unit: RMB
Issuing Company Issuing date Maturity date Amount Remark
13
INTERIM
FUJIAN CHENHE TRADE 19 February 2013 19 August 2013 10,000,000.00 Derecognised
REPORT CO., LTD.
WUXI YIFA PAPER CO., LTD. 31 May 2013 30 November 2013 9,000,000.00
SAMSON PAPER 30 May 2013 30 November 2013 8,446,585.69
(SHENZHEN) COMPANY
LIMITED
BEIJING NEW BUILDING 10 April 2013 10 July 2013 8,001,500.00 Derecognised
MATERIAL (GROUP)
CO., LTD.
TIANJIN QIRUN INVESTMENT 24 May 2013 23 November 2013 7,548,000.00
CO., LTD.
Total － － 42,996,085.69 －
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
3. 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
are provided for bad debts
on individual basis 48,605,549.72 1.3% 48,605,549.72 100% 48,696,549.72 1.26% 48,696,549.72 100%
Accounts receivable that are provided for bad debts on portfolio basis
Risk-free portfolio 513,023,073.75 13.78% 358,778,459.12 9.27%
General portfolio 3,161,916,964.71 84.92% 195,450,149.14 6.18% 3,461,286,305.68 89.47% 217,109,713.62 6.27%
Sub-total for portfolio 3,674,940,038.46 98.7% 195,450,149.14 5.23% 3,820,064,764.80 98.74% 217,109,713.62 5.68%
Accounts receivable that are
individually insignificant but
are provided for bad debts
on individual basis 25,640.70 25,640.70 100% 86,850.13 86,850.13 100%
Total 3,723,571,228.88 － 244,081,339.56 － 3,868,848,164.65 － 265,893,113.47 －
Accounts receivable individually significant and individually provided for bad debt as at end of the period 13
INTERIM
√ Applicable □ Not applicable REPORT
Unit: RMB
Accounts Book balance Provision for Percentage Reason
receivable bad debts of provision
Loans 48,605,549.72 48,605,549.72 100% Most of which were
payment for goods aged
over 3 years and unlikely to
be recovered
Total 48,605,549.72 48,605,549.72 － －
In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on the ageing
method.
√ Applicable □ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 103
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)
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 3,052,256,941.62 96.53% 152,612,847.09 3,350,375,732.48 96.8% 167,518,786.62
Sub-total of within 1 year 3,052,256,941.62 96.53% 152,612,847.09 3,350,375,732.48 96.8% 167,518,786.62
1 to 2 years 69,220,814.48 2.19% 6,922,081.45 65,152,312.73 1.88% 6,515,231.27
2 to 3 years 5,654,985.01 0.18% 1,130,997.00 3,353,205.93 0.1% 670,641.19
Over 3 years 34,784,223.60 1.1% 34,784,223.60 42,405,054.54 1.22% 42,405,054.54
Total 3,161,916,964.71 － 195,450,149.14 3,461,286,305.68 － 217,109,713.62
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
13
INTERIM In respect of portfolio, the measurement of bad debt provision for accounts receivable is based on other methods.
REPORT
□ Applicable √ Not applicable
Accounts receivable not individually significant but individually provided for bad debt as at the end of the period.
√ Applicable □ Not applicable
Unit: RMB
Accounts Book balance Provision for Percentage Reason
receivable bad debt of provision
(%)
Loans 25,640.70 25,640.70 100% Most of which were
payment for goods aged
over 3 years and unlikely to
be recovered
Total 25,640.70 25,640.70 － －
104 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)
(2) Reversal or recovery of accounts receivable during the reporting period
Unit: RMB
Cumulative bad
Particulars debt provision Amount of
of accounts Reason for Original basis for prior to reversal reversal or
receivable reversal or recovery bad debt provision or recovery recovery
Loans Collection of payment for Overdue for over 3 26,468,300.18 26,468,300.18
goods years and estimated the
possibility to recover is
least
Total － － 26,468,300.18 －
Accounts receivable individually significant or not individually significant but tested for impairment individually and
provided for bad debt as at end of the period
Unit: RMB
Percentage
Accounts of provision 13
receivable Book balance Provision bad debt (%) Reason INTERIM
REPORT
Loans 48,631,190.42 48,631,190.42 100% Most of which were
payment for goods aged
over 3 years and unlikely to
be recovered
Total 48,631,190.42 48,631,190.42 － －
(3) Particulars of top five accounts receivable
Unit: RMB
As a percentage
of the total
Relation with of accounts
Name of entity the Company Amount Term receivable (%)
BEIJING ZHONGBANLIAN Non-related party 70,386,844.77 Within 1 year 1.86%
PRINTING MATERIALS
CO., LTD.
SHANXI PRINTING Non-related party 40,052,952.98 Within 1 year 1.06%
MATERIALS COMPANY
JIANGSU XINHUABAI Non-related party 28,109,243.64 Within 1 year 0.74%
PRINTING CO., LTD.
YUNNAN PRINTING Non-related party 27,878,691.18 Within 1 year 0.74%
MATERIALS COMPANY
CHANGJIANG (HUBEI) Non-related party 26,252,972.70 Within 1 year 0.69%
PUBLISH & PRINT
MATERIALS CO., LTD.
Total － 192,680,705.27 － 5.09%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 105
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
4. Other receivables
(1) Disclosure of other 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 (%)
Other receivable that are individually
significant and are provided for
bad debts on individual basis 8,918,424.06 0.59% 8,918,424.06 100% 8,918,424.06 0.66% 8,918,424.06 100%
Other receivable that are provided for bad debts on portfolio basis
Risk-free portfolio 1,388,523,375.23 92.1% 1,213,593,786.15 89.91%
General portfolio 96,464,341.15 6.4% 42,046,450.68 43.59% 113,580,888.39 8.41% 42,519,331.91 37.44%
Sub-total for portfolio 1,484,987,716.38 98.5% 42,046,450.68 2.83% 1,327,174,674.54 98.32% 42,519,331.91 3.2%
Other receivable that are individually
insignificant but are provided
for bad debts on individual basis 13,717,509.43 0.91% 13,717,509.43 100% 13,771,354.38 1.02% 13,771,354.38 100%
Total 1,507,623,649.87 － 64,682,384.17 － 1,349,864,452.98 － 65,209,110.35 －
13 Description of the classification of other receivables
INTERIM Among risk-free portfolio, it mainly comprised of
REPORT
① RMB242 million of equity transfer of the Company due from Henan Jianghe Paper Co., Ltd., RMB588
million of debts of the Company due from Shandong Chenming Paper Group Qihe Paperboard Co., Ltd.
Date of payment of such account receivables was determined pursuant to the equity transfer agreement
and the contract on assignment of debt. In addition, such contracts allowed us to supervise and inspect
on-site operations of Qihe Paperboard. Currently, the Company assigned sent a group to carry out on-site
supervision and inspection on a monthly basis, and, as such, there were no risks.
② RMB155 million of Zhanjiang Finance Bureau was due to Zhanjiang Chenming Paper Pulp Co., Ltd. of which
RMB40.00 million was the performance guarantee deposits in relation to BT Project and would be refunded
within 10 days following completion of construction and inspection of the project according to the contract.
There were no risks. For the remaining amounts, namely construction reserve, it would be used to pay third
parties or progress payments according to the contract.
③ RMB108 million of Development Area branch of Bureau of Land Resources of Wuhan was due to Wuhan
Chenming Hanyang Paper Holdings Co., Ltd. Such amount was the premium for land acquisition and would
be refunded after the completion of the auction process or acted as land premium. There were no risks.
106 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 receivable according to classification (Cont’d)
Other receivables individually significant and individually provided for bad debt as at end of the period.
√ Applicable □ Not applicable
Unit: RMB
Percentage
Other Amount of of provision
receivables Book balance bad debt (%) Reason
Loans 8,918,424.06 8,918,424.06 100% Most of which were
payment for goods aged
over 3 years and unlikely to
be recovered
Total 8,918,424.06 8,918,424.06 － －
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the ageing
method
√ Applicable □ Not applicable 13
Unit: RMB INTERIM
REPORT
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 33,592,788.12 34.83% 1,679,639.43 52,096,861.35 45.87% 2,604,843.05
Sub-total of within 1 year 33,592,788.12 34.83% 1,679,639.43 52,096,861.35 45.87% 2,604,843.05
1 to 2 years 9,851,467.35 10.21% 985,146.74 13,434,171.09 11.83% 1,343,417.10
2 to 3 years 17,048,026.47 17.67% 3,409,605.30 11,848,480.25 10.43% 2,369,696.05
Over 3 years 35,972,059.21 37.29% 35,972,059.21 36,201,375.70 31.87% 36,201,375.70
Total 96,464,341.15 － 42,046,450.68 113,580,888.39 － 42,519,331.90
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the percentage of
total accounts receivable method.
□ Applicable √ Not applicable
In respect of portfolio, the measurement of bad debt provision for other receivables is based on other methods.
□ Applicable √ Not applicable
Other receivables not individually significant but individually provided for bad debt as at the end of the period.
√ Applicable □ Not applicable
SHANDONG CHENMING PAPER HOLDINGS LIMITED 107
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
4. Other receivables (Cont’d)
(1) Disclosure of other receivable according to classification (Cont’d)
Unit: RMB
Particulars
of other Provision for
receivables Book balance bad debts Provision rate (%) Reason for provision
Amounts with 13,717,509.43 13,717,509.43 100% Most of which were
customers payment for goods aged
over 3 years and unlikely to
be recovered
Total 13,717,509.43 13,717,509.43 － －
(2) Reversal or recovery of other receivables during the reporting period
Unit: RMB
Cumulative
bad debt
13 Particulars of Reason for Original basis
provision prior
to reversal
Amount of
reversal or
INTERIM
REPORT the receivables reversal or recovery for bad debt provision or recovery recovery
Amounts with Collection of Amounts with Overdue for over 3 1,130,758.26 1,130,758.26
customers customers years and estimated the
possibility to recover is
least
Total － － 1,130,758.26 －
Other receivables individually significant or not individually significant but tested for impairment individually and
provided for bad debt as at end of the period: Nil
Unit: RMB
Particulars
of Amount Amount of
receivables Book balance bad debt Provision rate (%) Reason
Loans 22,635,933.49 22,635,933.49 100% Most of which were
payment for goods aged
over 3 years and unlikely to
be recovered
Total 22,635,933.49 22,635,933.49 － －
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)
(3) Nature and particulars of the significant other receivables
Unit: RMB
Nature and As a percentage
particulars of of the total of other
Name of entity Amount amount receivables (%)
Shandong Chenming Paper Group 587,675,845.54 Transaction with 38.98%
Qihe Paperboard Co., Ltd. customers
Henan Jianghe Paper Co., Ltd. 242,253,083.33 Equity transfer 16.07%
Zhanjiang Finance Bureau 154,465,863.35 Construction reserve 10.25%
Development Area branch of Bureau 108,000,000.00 Land premium 7.16%
of Land Resources of Wuhan
People’s court in Shouguang 9,215,835.75 Litigation fee 0.61%
Total 1,101,610,627.97 － 73.07%
(4) Particulars of top five other receivables
Unit: RMB
As a percentage 13
INTERIM
of the total REPORT
Relation with of other
Name of entity the Company Amount Term receivable (%)
Shandong Chenming Non-related party 587,675,845.54 Within 1 year 38.98%
Paper Group Qihe
Paperboard Co., Ltd.
Henan Jianghe Paper Non-related party 242,253,083.33 Within 1 year 16.07%
Co., Ltd.
Zhanjiang Finance Non-related party 154,465,863.35 Within 1 year 10.25%
Bureau
Development Area Non-related party 108,000,000.00 2-3 years 7.16%
Branch of Bureau
of Land Resources
of Wuhan
People’s Court Non-related party 9,215,835.75 Within 3 years 0.61%
in Shouguang
Total － 1,101,610,627.97 － 73.07%
SHANDONG CHENMING PAPER HOLDINGS LIMITED 109
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
5. Prepayments
(1) Prepayments stated according to ageing
Unit: RMB
Closing bala nce Opening balance
Ageing Amount Ratio (%) Amount Ratio (%)
Within 1 year 1,791,974,042.49 88.68% 1,458,377,404.07 89.13%
1-2 years 124,910,387.31 6.18% 177,856,520.57 10.87%
2-3 years 18,892,975.98 0.93%
Over 3 years 84,955,330.63 4.21%
`
Total 2,020,732,736.41 － 1,636,233,924.64 －
`
(2) Particulars of top five prepayments
Unit: RMB
Relation with Reasons
Name of entity the Company Amount Term for unsettlement
JIANGSU XINHAI PORT Non-related party 880,000,000.00 Within 1 year Prepayments for
13 ENGINEERING CO., LTD construction fee
INTERIM according to the
REPORT
agreed contract
YANBIAN SHIXIAN BAILU Non-related party 163,200,000.00 Within 1 year Prepayments for
PAPER CO., LTD the equipment
according to the
agreed contracts
SHOUGUANG CAILUN Non-related party 108,061,470.46 Within 1 year Prepayments
SHENXING FINE for chemicals
CHEMICAL CO., LTD. according to the
agreed contract
Each village of Non-related party 90,666,108.60 Within 1 year, 1-2 Prepayments for
Huanggang City years, 2-3 years and forestry deposits
over 3 years according to the
agreed contract
ANHUI YIQING SUPPLY & Non-related party 67,789,609.04 Within 1 year Prepayments
MARKETING COMPANY for the goods
PUDONG COMPANY according to the
agreed contracts
Total － 1,309,717,188.10 － －
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
6. Inventories
(1) Categories of inventories
Unit: RMB
Closing balance Opening balance
Impairment Impairment
Item Book balance provision Book value Book balance provision Book value
Raw materials 2,170,242,284.06 2,170,242,284.06 1,961,862,887.18 1,961,862,887.18
Work-in-process products 86,872,999.27 86,872,999.27 179,769,195.77 179,769,195.77
Goods in stock 1,833,478,519.65 1,833,478,519.65 2,285,369,746.18 14,453,128.45 2,270,916,617.73
Total 4,090,593,802.98 4,090,593,802.98 4,427,001,829.13 14,453,128.45 4,412,548,700.68
(2) Impairment provision for inventories
Unit: RMB
Decrease during the period
Opening Provision during Closing
Type of inventories book balance the period Reversal Write-off book balance
Goods in stock 14,453,128.45 14,453,128.45
Total 14,453,128.45 14,453,128.45
13
INTERIM
REPORT
7. Other current assets
Unit: RMB
Item Closing balance Opening balance
Prepaid enterprise income tax 116,719,130.49 103,139,626.04
Non-credited VAT proceeds 1,599,540,302.48 1,700,116,681.57
Total 1,716,259,432.97 1,803,256,307.61
SHANDONG CHENMING PAPER HOLDINGS LIMITED 111
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
8. Investments in joint ventures and associates
Unit: RMB
Voting right in Total revenue
Equity interest the investee by Total assets Total liabilities Total net assets from operations
held by the the Company as at the end as at the end as at the end during the Net profit
Name of investee Company (%) (%) of the period of the period of the period period for the period
I. Joint venture
II. Associate
Jiangxi Jiangbao 21.16% 21.16% 47,337,401.62 25,397,299.82 21,940,101.80 8,835,204.95 -709,591.59
Media Colour
Printing Co., Ltd.
Qingzhou 30% 30%
Chenming
Denaturation
Amylum Co., Ltd.
Description of significant differences in significant accounting policies and accounting estimates of joint ventures and
associates with the accounting policies and accounting estimates of the Company: Nil
Qingzhou Chenming Denaturation Amylum Co., Ltd. made impairment provision in full over the prior years due to its
13 underperformance.
INTERIM
REPORT 9. Long-term investments in equity
(1) The breakdown of long-term investment in equity
Unit: RMB
Explanation of
the inconsistency
of shareholding Impairment
Accounting Cost of Opening Closing Shareholding in Voting right in and voting right Impairment provision for Cash dividend
Name of investee method investment balance Changes balance the investee (%) the investee (%) in the investee provision the period for the period
Qingzhou Chenming Denaturation Equity method 900,000.00 900,000.00 900,000.00 30% 30% 900,000.00
Amylum Co., Ltd.
Jiangxi Jiangbao Media Equity method 6,000,000.00 4,792,675.12 -150,149.58 4,642,525.54 21.16% 21.16%
Colour Printing Co. Ltd.
Shanghai Anzhou New Energy Co., Ltd. Equity method 250,000,000.00 268,743,677.13 -268,743,677.13 49% 49%
Shandong Paper Making & Cost method 200,000.00 200,000.00 200,000.00 2% 2% 200,000.00
Printing Enterprises Corporation
Jinan Shangyou Commercial Cost method 350,000.00 350,000.00 350,000.00 5% 5% 350,000.00
Company Limited
Zhejiang Province Guangyu Media Cost method 2,000,000.00 2,000,000.00 2,000,000.00 9.96% 9.96%
Printing Company Limited
Shouguang Mihe Water Cost method 20,000,000.00 20,000,000.00 20,000,000.00 19.46% 19.46%
Company Limited
Shanghai Forest & Paper Cost method 1,400,000.00 1,400,000.00 1,400,000.00 14% 14% 1,139,574.47
E-Commerce Co., Ltd.
Anhui Time Source Corporation Cost method 1,000,000.00 1,000,000.00 1,000,000.00 10% 10%
Weifang Xinye Capital Investment Cost method 10,000,000.00 10,000,000.00 10,000,000.00 3.76% 3.76%
Co., Ltd.
Shandong Hongqiao Venture Cost method 50,000,000.00 50,000,000.00 50,000,000.00 16.67% 16.67%
Capital Co., Ltd.
Total － 341,850,000.00 359,386,352.25 -268,893,826.71 90,492,525.54 － － － 2,589,574.47
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
10. Investment properties
(1) Investment properties measured at cost
Unit: RMB
Opening Increase for Decrease for Closing
Item book balance the period the period book balance
I. Total original 38,291,395.70 38,291,395.70
carrying amount
1.Buildings 38,291,395.70 38,291,395.70
II. Accumulated depreciation 17,079,695.71 869,128.02 17,948,823.73
and accumulated
amortisation in total
1.Buildings 17,079,695.71 869,128.02 17,948,823.73
III. Net book value of 21,211,699.99 -869,128.02 20,342,571.97
Investment properties
in total
1.Buildings 21,211,699.99 -869,128.02 20,342,571.97
IV. Book value of Investment 21,211,699.99 -869,128.02 20,342,571.97
properties in total
1.Buildings 21,211,699.99 -869,128.02 20,342,571.97
13
Unit: RMB INTERIM
REPORT
For the period
Depreciation and amortisation for the period 869,128.02
Impairment provision for investment properties for the period 0.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 113
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
11. Fixed assets
(1) Particulars of fixed assets
Unit: RMB
Decrease for
Item Opening book balance Increase for the period the period Closing book balance
I. Total original carrying amount: 28,412,923,014.84 3,361,144,731.24 478,743,873.21 31,295,323,872.87
Of which: Building 4,539,770,091.32 429,796,556.14 128,620,019.46 4,840,946,628.00
Machinery and equipment 23,039,134,217.46 2,892,667,559.49 324,489,158.35 25,607,312,618.60
Vehicle 216,843,313.45 31,076,083.31 13,867,558.15 234,051,838.61
Electronic equipment and others 617,175,392.61 7,604,532.30 11,767,137.25 613,012,787.66
Decrease for
Opening book balance Increase for the period Provision for the period the period Closing book balance
II. Accumulated depreciation and accumulated
amortisation in total: 8,648,567,024.93 658,939,168.16 221,375,997.80 9,086,130,195.29
Of which: Buildings 827,808,803.62 63,734,070.18 58,694,772.62 832,848,101.18
Machinery and equipment 7,354,849,826.06 563,388,709.23 144,869,185.18 7,773,369,350.11
Vehicles 88,283,565.63 9,964,003.85 8,177,113.44 90,070,456.04
13 Electronic equipment and others 377,624,829.62 21,852,384.90 9,634,926.56 389,842,287.96
INTERIM
REPORT Opening book balance Closing book balance
III. Net carrying amount of fixed assets 19,764,355,989.91 － 22,209,193,677.58
Of which: Buildings 3,711,961,287.70 － 4,008,098,526.82
Machinery and equipment 15,684,284,391.40 － 17,833,943,268.49
Vehicles 128,559,747.82 － 143,981,382.57
Electronic equipment and others 239,550,562.99 － 223,170,499.70
IV. Total impairment provision 13,015,998.85 － 28,015,998.85
Machinery and equipment 13,015,998.85 － 28,015,998.85
Electronic equipment and others －
V. Total carrying amount of fixed assets 19,751,339,991.06 － 22,181,177,678.73
Of which: Buildings 3,711,961,287.70 － 4,008,098,526.82
Machinery and equipment 15,671,268,392.55 － 17,805,927,269.64
Vehicles 128,559,747.82 － 143,981,382.57
Electronic equipment and others 239,550,562.99 － 223,170,499.70
Depreciation for the current period amounted to RMB658,939,168.16. RMB3,207,126,057.78 was reclassified
from construction in progress into the original value of fixed assets for the current period.
Details of restricted fixed assets
As at 30 June 2013, the ownership of buildings and equipment of the carrying amount of RMB6,228,487,308.97
(the original value of RMB6,682,978,708.86) (31 December 2012: carrying amount of RMB6,351,131,719.77
and original value of RMB6,654,874,429.83) and intangible assets - land use rights of the carrying amount
of RMB327,109,666.28 (31 December 2012: RMB330,717,493.46) was restricted as collateral for long-term
borrowings of RMB2,943,826,182.70 (31 December 2012: RMB3,098,403,800.00) and long-term borrowings due
within one year of RMB271,882,639.26 (31 December 2012: RMB290,625,800.00).
114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
11. Fixed assets (Cont’d)
(2) Particulars of temporarily unused fixed assets
Unit: RMB
Original Accumulated Provision for Net carrying
Item carrying amount depreciation impairment amount Note
Buildings 27,606,867.26 8,267,820.55 19,339,046.71
Machinery and equipment 123,940,382.16 61,368,810.78 62,571,571.38
vehicles 760,779.40 511,765.76 249,013.64
Electronic equipment and others 26,564,079.01 14,629,021.58 11,935,057.43
(3) Particulars of fixed assets without obtaining property right certificates
Reason for not yet Estimated year for
Item obtaining property right obtaining property right
Shouguang Meilun Paper Co., Ltd. Processing 2013
Shandong Chenming Paper Processing 2013
Holdings Limited
Fuyu Chenming Paper Co., Ltd. Processing 2013
Zhanjiang Chenming Paper Pulp Processing 2013 13
Co., Ltd. INTERIM
REPORT
12. Construction in progress
(1) Particulars of construction in progress
Unit: RMB
Closing balance Closing balance
Impairment Impairment
Item Book balance provisions Carrying amount Book balance provisions Carrying amount
Huanggang forestry pulp 125,631,425.36 125,631,425.36 120,872,039.53 120,872,039.53
integration project
Relocation of Jilin 1,504,117,238.65 1,504,117,238.65 1,358,160,725.92 1,358,160,725.92
Technological improvements to 32,208,656.89 32,208,656.89 18,231,971.17 18,231,971.17
white paper board project, etc.
600,000 tonnes white coated 2,488,623,232.74 2,488,623,232.74
linerboard project (Meilun)
Power plant phase III further 483,981,213.99 483,981,213.99
expansion (the Company)
Zhanjiang Chenming 700,000 tonnes 158,505,408.62 158,505,408.62 116,258,400.00 116,258,400.00
pulp equipment upgrade
Magnesite mining 296,569,677.95 296,569,677.95 196,118,936.12 196,118,936.12
Household paper project phase 279,766,141.02 279,766,141.02 47,110,293.82 47,110,293.82
one (Wuhan)
Technological improvements to 40,340,958.04 40,340,958.04 37,306,505.60 37,306,505.60
speciality paper project (Wuhan)
Meilun papermaking additive project 133,450,371.93 133,450,371.93 50,464,830.16 50,464,830.16
Other construction in 187,336,125.50 187,336,125.50 100,476,672.54 100,476,672.54
progress projects
Total 2,757,926,003.96 2,757,926,003.96 5,017,604,821.59 5,017,604,821.59
SHANDONG CHENMING PAPER HOLDINGS LIMITED 115
INTERIM
116
REPORT
13
SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
12. Construction in progress (Cont’d)
(2) Changes in material construction in progress projects
Unit: RMB
Capitalisation
rate of the
Investment Accumulated Of which: capitalised interest
Budget Increase for Reclassified to to budget Construction capitalised interest amount for amount for Source
Name of project (100 million) Opening balance the period fixed assets Other deductions (%) progress interest amount the period the period (%) of funds Closing balance
Huanggang forestry pulp 120,872,039.53 4,759,385.83 To be completed Self-raised 125,631,425.36
integration project
Relocation of Jilin 23.00 1,358,160,725.92 174,172,698.96 28,216,186.23 65.4% To be completed 13,742,821.56 8,242,821.57 6.2% Self-raised 1,504,117,238.65
and borrowings
Technological improvements to 2.00 18,231,971.17 27,581,931.05 13,605,245.33 16.1% To be completed Self-raised 32,208,656.89
white paper board project, etc.
600,000 tonnes white coated 26.00 2,488,623,232.74 89,648,981.23 2,578,272,213.97 completed Capital and
linerboard project (Meilun) borrowings
Power plant phase III further 5.80 483,981,213.99 71,071,928.66 555,053,142.65 completed Self-raised
expansion (the Company)
Zhanjiang Chenming 700,000 tonnes 2.30 116,258,400.00 42,247,008.62 68.92% To be completed 5,686,007.02 2,127,581.94 6% Capital and 158,505,408.62
pulp equipment upgrade borrowings
Magnesite mining 5.00 196,118,936.12 100,450,741.83 59.31% To be completed Self-raised 296,569,677.95
Household paper project 4.89 47,110,293.82 232,655,847.20 57.21% To be completed 4,464,588.10 4,464,588.10 6.36% Capital and 279,766,141.02
phase one (Wuhan) borrowings
Technological improvements to 2.50 37,306,505.60 3,034,452.44 16.14% To be completed 1,516,410.56 1,516,410.56 6.06% Capital and 40,340,958.04
speciality paper project (Wuhan) borrowings
Meilun papermaking additive project 3.50 50,464,830.16 82,985,541.77 38.13% To be completed 2,113,219.11 2,113,219.11 6.55% Capital and 133,450,371.93
borrowings
Other construction in progress projects 100,476,672.54 182,352,814.90 60,195,455.83 35,297,906.11 597,685.46 597,685.46 Self-raised 187,336,125.50
and borrowings
Total 74.99 5,017,604,821.59 1,010,961,332.49 3,207,126,057.78 63,514,092.34 － － 28,120,731.81 19,062,306.74 － － 2,757,926,003.96
Deduction in construction in progress of the relocation of Jilin Chenming: some assets were written off due to the relocation.
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
12. Construction in progress (Cont’d)
(3) Construction progress of material construction in progress
Construction
Projects progress Note
Relocation of Jilin 65.40% Construction progress was estimated on the basis
of the percentage of investment to budget
Technological improvements to white 16.10% Construction progress was estimated on the basis
paper board project, etc. of the percentage of investment to budget
Zhanjiang Chenming 700,000 tonnes pulp 68.92% Construction progress was estimated on the basis
equipment upgrade of the percentage of investment to budget
Magnesite mining 59.31% Construction progress was estimated on the basis
of the percentage of investment to budget
Household paper project phase one 57.21% Construction progress was estimated on the basis
(Wuhan) of the percentage of investment to budget
Technological improvements to speciality 16.14% Construction progress was estimated on the basis
paper project (Wuhan) of the percentage of investment to budget
Meilun papermaking additive project 38.13% Construction progress was estimated on the basis
of the percentage of investment to budget
13. Materials for projects
Unit: RMB
13
INTERIM
REPORT
Increase for Decrease for
Item Opening balance the period the period Closing balance
Special materials 38,672,668.55 174,591,997.36 26,829,447.44 186,435,218.47
Special equipment 36,382,323.54 34,331,451.02 51,575,555.13 19,138,219.43
Total 75,054,992.09 208,923,448.38 78,405,002.57 205,573,437.90
14. Disposal of fixed assets
Unit: RMB
Opening Closing
Item carrying amount carrying amount Reasons for disposal of
Disposal of fixed assets arising 287,015,185.63 308,744,678.63 Relocation and retirement of fixed
from the relocation of assets
Jilin Chenming Paper Co., Ltd.
Fuyu Chenming Paper Co., Ltd. 294,632.40 561,682.40
Total 287,309,818.03 309,306,361.03 －
SHANDONG CHENMING PAPER HOLDINGS LIMITED 117
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
15. Consumable biological assets
(1) Measured at fair value
Unit: RMB
Opening Increase for Decrease for Closing
Item carrying amount the period the period carrying amount
Consumable biological assets 1,169,269,054.15 87,692,588.35 5,185,266.25 1,251,776,376.25
Total 1,169,269,054.15 87,692,588.35 5,185,266.25 1,251,776,376.25
Explanation on consumable biological assets
(1) Consumable biological assets are measure at fair value. The fair value of timber increased by
RMB3,924,877.41 due to acquisition, increased by RMB74,538,668.43 due to breeding, decreased by
RMB5,185,266.25 due to disposal, and increased by RMB9,229,042,51 due to change of fair value.
(2) As of 30 June 2013, there was no significant difference between the fair value and cost of the timber planted
during the year or unable to form any level of stocking in the consumable biological assets so its carrying
amount was taken as its fair value. The timber forming a level of stocking was measured at fair value and
its fair value was determined based on the valuation of China Faith Appraisers Co., Ltd. The consumable
biological assets measured at carrying amount as their fair value amounted to RMB163,526,887.20
13 and the consumable biological assets measured at assessed value as their fair value amounted to
INTERIM RMB1,088,249,489.05.
REPORT
16. Intangible assets
(1) Particulars of intangible assets
Unit: RMB
Opening Increase for Decrease for Closing
Item book balance the period the period book balance
I. Total original 1,607,671,950.95 124,282,537.40 40,901,250.89 1,691,053,237.46
carrying amount
Land use rights 1,590,505,598.38 123,344,613.44 40,901,250.89 1,672,948,960.93
Software 17,166,352.57 937,923.96 18,104,276.53
II. Total accumulated 191,174,791.73 14,807,626.85 2,370,812.64 203,611,605.94
amortisation
Land use rights 179,397,382.19 13,838,700.94 2,370,812.64 190,303,637.13
Software 11,777,409.54 968,925.91 13,307,968.81
III. Total net carrying amount 1,416,497,159.22 109,474,910.55 38,530,438.25 1,487,441,631.52
of intangible asset
Land use rights 1,411,108,216.19 109,505,912.50 38,530,438.25 1,482,645,323.80
Software 5,388,943.03 -31,001.95 4,796,307.72
Land use rights
Software
Total carrying amount 1,416,497,159.22 109,474,910.55 38,530,438.25 1,487,441,631.52
of intangible asset
Land use rights 1,411,108,216.19 109,505,912.50 38,530,438.25 1,482,645,323.80
Software 5,388,943.03 -31,001.95 4,796,307.72
The amortisation amount was RMB14,807,626.85 during the period.
118 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
17. Goodwill
Unit: RMB
Impairment
provisions
Name of investee or tem Opening Increase for Decrease for Closing at the end
generating goodwill balance the period the period balance of the period
Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60
Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57
Total 20,283,787.17 20,283,787.17
Explanation on impairment test method and impairment provision on goodwill.
For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements
shall be allocated to the asset groups or group of assets benefiting from synergy of business combination. If the
recoverable amount is less than the carrying amount, the Group shall recognise an impairment loss. The amount of
impairment loss shall first reduce the carrying amount of any goodwill allocated to the asset group or set of asset
groups, and then reduce the carrying amount of other assets (other than goodwill) within the asset group or set of asset
groups, pro rata on the basis of the carrying amount of each asset.
An impairment loss recognised on the aforesaid assets shall not be reversed in a subsequent period in respect of the
restorable value. 13
INTERIM
The goodwill of the Company arose from the business combination not under common control during the prior years. REPORT
On the balance sheet date, management of the Company assesses 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 is determined based on the estimated cash flow in financial budget of five
years in the future by management, using the steady annual growth rate in the industry of 5% (2012: 5%) expected by
the market, and time value of currency was estimated using the discount rate of 8.32% (2012: 8.32%). Management of
the Company expects no provision for impairment loss is necessary to be made for goodwill during the reporting period.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 119
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
18. Long-term prepaid expens es
Unit: RMB
Increase Amortisation Reasons for
Item Opening balance for the period for the period Other deductions Closing balance other deductions
Disposal of Yanbian
Expenses on improvement of leased assets 12,108,612.65 10,384,425.05 1,724,187.60 during the period
Woodland expenses 170,460,955.74 1,500,737.60 3,303,130.70 168,658,562.64
Other 2,201,117.26 27,443,749.99 23,242.02 29,621,625.23
Total 184,770,685.65 28,944,487.59 3,326,372.72 10,384,425.05 200,004,375.47 －
19. Deferred income tax assets and deferred income tax liabilities
(1) Deferred income tax assets and deferred income tax liabilities not stated as the net amount after offsetting
Recognised deferred income tax assets and deferred income tax liabilities
Unit: RMB
Item Closing balance Opening balance
Deferred income tax assets:
13 Provision for impairment of assets 69,610,826.50 76,283,989.46
INTERIM Deductible losses 317,264,221.25 244,104,208.24
REPORT Elimination of unrealised profit arising from intra-group 15,583,569.74 20,805,987.85
Unpaid payables 9,026,201.63 17,531,699.23
Deferred income 16,479,049.59 18,212,201.82
Sub-total 427,963,868.71 376,938,086.60
Deferred income tax liabilities:
Breakdown of unrecognised deferred income tax assets
Unit: RMB
Item Closing balance Opening balance
Deductible temporary differences 9,983,254.86 118,431,196.57
Deductible loss 396,383,253.04 329,374,556.35
Total 406,366,507.90 447,805,752.92
120 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
19. Deferred income tax assets and deferred income tax liabilities (Cont’d)
Deductible loss of unrecognised deferred income tax assets will expire by the following periods.
Unit: RMB
Year Closing balance Opening balance Remark
2013 74,170.94 74,170.94
2014 38,442,223.21 38,442,223.21
2015 67,208,911.93 67,208,911.93
2016 70,887,235.48 70,887,235.48
2017 152,762,014.79 152,762,014.79
2018 67,008,696.69
Total 396,383,253.04 329,374,556.35 －
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
13
Tax payable differences INTERIM
REPORT
Deductible differences
Provision for impairment of assets 298,780,468.87 322,820,452.56
Preliminary expenses
Deductible losses 1,277,501,916.10 976,416,833.00
Elimination of unrealised profit arising from intra-group 62,334,278.96 83,223,951.42
Unpaid payables 45,327,821.96 95,609,060.53
Deferred income 80,174,931.73 86,010,898.97
Sub-total 1,764,119,417.62 1,564,081,196.48
SHANDONG CHENMING PAPER HOLDINGS LIMITED 121
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
19. Deferred income tax assets and deferred income tax liabilities (Cont’d)
(2) Deferred income tax assets and deferred income tax liabilities stated as the net amount after offsetting
Constituent items of deferred income tax assets and liabilities after offsetting
Unit: RMB
Deferred income Deductible and
Deferred income Deductible and tax assets or taxable temporary
tax assets or taxable temporary liabilities after differences after
liabilities after differences after offsetting as at offsetting as at
offsetting as at offsetting as the beginning the beginning
the end of the at the end of the of the reporting of the reporting
Item reporting period reporting period period period
Deferred income tax assets 427,963,868.71 376,938,086.60
20. Breakdown of provision for impairment of assets
Unit: RMB
Decrease for the period
Opening balance Increase for Closing balance
13 Item of carrying amount the period Reversal Write-off of carrying amount
INTERIM
REPORT I. Provisions for bad debts 331,102,223.82 7,946,633.57 27,599,058.44 2,686,075.22 308,763,723.73
II. Provisions for inventory impairment 14,453,128.45 14,453,128.45
V. Provisions for long-term equity 2,589,574.47 2,589,574.47
investment impairment
VII. Provisions for fixed assets impairment 13,015,998.85 15,000,000.00 28,015,998.85
Total 361,160,925.59 22,946,633.57 27,599,058.44 17,139,203.67 339,369,297.05
Explanation on provision for impairment of assets: in the write-off of the deduction of provision for impairment of assets,
bad debt provision of RMB930,989.33 was deducted resulting from the disposal of Wuhan Chenjian New-style Wall
Materials Co., Ltd. during the period.
122 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
21. Short-term borrowings
(1) Types of short-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 179,182,300.00
Guarantee borrowings 2,786,800,195.61 3,893,489,091.48
Credit borrowings 7,393,570,548.12 5,925,909,403.68
Discounted borrowings 3,005,662,018.87 3,057,000,000.00
Total 13,365,215,062.60 12,876,398,495.16
Description of types of short-term borrowings
① Guarantee borrowings are the loans obtained by the subsidiaries of the Company from financial institutions
when the Company acts as their guarantee;
② Discounted borrowings were discounted with bank acceptance and accounted for as short-term borrowings
by the Group.
22. Bills payable
Unit: RMB
13
INTERIM
REPORT
Type Closing balance Opening balance
Commercial acceptance 477,720,000.00
Bank acceptance 455,519,044.69 1,285,627,762.07
Total 933,239,044.69 1,285,627,762.07
Amount to be due in the next accounting period amounted to RMB933,239,044.69
23. Accounts payable
(1) Particulars of accounts payable
Unit: RMB
Item Closing balance Opening balance
Within 1 year 2,641,403,781.25 2,937,983,262.67
1-2 years 194,742,863.12 158,572,722.64
2-3 years 53,418,963.91 49,693,420.80
Over 3 years 73,097,839.11 93,532,318.70
Total 2,962,663,447.39 3,239,781,724.81
SHANDONG CHENMING PAPER HOLDINGS LIMITED 123
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
23. Accounts payable (Cont’d)
(2) Explanation on significant trade payables aged over 1 year
Reason of Repaid after
Name of unit Amount being outstanding the reporting date
Artemis Forestry Co., Ltd 21,879,231.84 Temporary No
outstanding
America Chung Nam, Inc. 13,874,111.82 Temporary No
outstanding
Shandong Nge Logistics Co., Ltd. 12,787,406.09 Temporary No
outstanding
MODERN WOOD INVESTMENT LTD 9,165,994.97 Temporary No
outstanding
Henan Kaifeng High Pressure Valve Co., Ltd. 6,246,968.30 Temporary No
outstanding
Total 63,953,713.02 － －
24. Advance receipts
(1) Particulars of advance receipts
13
INTERIM
Unit: RMB
REPORT
Item Closing balance Opening balance
Within 1 year 416,131,364.76 340,139,089.13
1-2 years 8,098,177.52 7,696,711.74
Total 424,229,542.28 347,835,800.87
(2) Explanation on significant advance receipts aged over one year
Reason for
not being
Name of unit Amount carried forward
Shandong Kailong Paper Science and Technology Co., Ltd 1,082,000.00 No delivery
requirement from
the counterparty
Total 1,082,000.00
124 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
25. Staff remuneration payables
Unit: RMB
Opening Increase for Decrease for Closing
Item book balance the period the period book balance
I. Salaries, bonuses, allowance
and subsidies 113,061,559.95 306,174,750.12 368,182,183.98 51,054,126.09
II. Staff welfare 16,485,322.27 16,485,322.27
III. Social insurance premium 12,309,783.97 79,101,165.78 74,546,684.69 16,864,265.06
Of which: 1. Medical
insurance premium 7,814,322.06 17,441,700.98 16,995,155.00 8,260,868.04
2. Pension insurance
premium 3,130,098.40 53,423,932.88 50,446,111.74 6,107,919.54
3. Unemployment
insurance premium 35,238.75 4,539,779.39 3,350,056.49 1,224,961.65
4. Work-related injury
insurance premium 63,922.14 2,014,121.55 1,963,581.83 114,461.86
5. Maternity insurance
premium 1,266,202.62 1,681,630.98 1,791,779.63 1,156,053.97
IV. Housing provident funds 10,020,193.56 27,476,033.96 29,423,015.11 8,073,212.41
V. Lay off welfare 3,083.97 21,919.31 12,928.13 12,075.15
VI. Others 18,804,595.54 328,846.40 336,066.44 18,797,375.50 13
VII. ion operation costs and INTERIM
REPORT
employee education costs 23,648,552.72 6,162,247.08 5,536,868.94 24,273,930.86
Total 177,847,769.71 435,750,284.92 494,523,069.56 119,074,985.07
Amount of default payment within staff remuneration payables amounted to RMB0.00.
Union operation costs and employee education costs amounted to RMB24,273,930.86, non-monetary welfare amounted
to RMB0.00 and compensation arising from termination of service amounted to RMB12,075.15.
26. Taxes payable
Unit: RMB
Item Closing balance Opening balance
Value added tax 6,070,319.82 39,231,100.57
Business tax 2,425,786.60 962,094.33
Enterprise income tax 51,838,806.21 42,565,684.15
Individual income tax 8,597,864.40 170,709.08
Urban maintenance and construction tax 3,487,867.18 2,792,836.34
Land use tax 3,554,528.92 8,114,849.29
Property tax 8,020,850.54 8,224,888.15
Educational surcharges and others 3,557,207.77 2,678,529.97
Stamp duty 1,328,996.08 2,075,721.99
Total 88,882,227.52 106,816,413.87
SHANDONG CHENMING PAPER HOLDINGS LIMITED 125
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
27. Interest payable
Unit: RMB
Item Closing balance Opening balance
Interest on corporate bonds 229,830,246.21 65,900,289.97
Interest on medium-term notes 17,125,083.32 67,145,833.34
Total 246,955,329.53 133,046,123.31
28. Dividend payable
Unit: RMB
Reason for
failure to pay
Name of unit Closing balance Opening balance for over a year
2012 dividend 118,528,318.02
Total 118,528,318.02 －
13 Description of dividend payable: please refer to V Directors’ Report XI of this report for details.
INTERIM
REPORT
29. Other payables
(1) Particulars of other payables
Unit: RMB
Item Closing balance Opening balance
Within 1 year 200,437,201.41 310,080,861.84
1-2 years 57,317,701.29 58,740,745.82
2-3 years 27,705,444.95 16,748,468.93
Over 3 years 51,804,522.02 50,202,212.39
Total 337,264,869.67 435,772,288.98
126 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
29. Other payables (Cont’d)
(2) Explanation on significant other payables aged over 1 year
Reason of Repaid after
Name of unit Amount being outstanding the reporting date
China Development Bank Guangdong branch 6,609,391.81 Temporary No
outstanding
Hangzhou Huadong Steel Structure 1,195,000.00 Temporary No
Manufactory Co., Ltd. outstanding
Asia Paper Markets (SIP) Co., Ltd. 867,050.87 Temporary No
outstanding
Shouguang Construction Co., Ltd, 840,600.00 Temporary No
Chenming Branch outstanding
Far East Cable Co., Ltd. 685,000.00 Temporary No
outstanding
Total 10,197,042.68 － －
(3) Explanation of the significant other payables
Repaid after
Name of unit Amount Nature or details the reporting date 13
INTERIM
China Development Bank Guangdong branch 6,609,391.81 Prepaid interest No REPORT
Hangzhou Huadong Steel Structure 1,195,000.00 Amounts with No
Manufactory Co., Ltd. customers
Asia Paper Markets (SIP) Co., Ltd. 867,050.87 Amounts with No
customers
Shouguang Construction Co., Ltd, 840,600.00 Amounts with No
Chenming Branch customers
Far East Cable Co., Ltd. 685,000.00 Amounts with No
customers
Total 10,197,042.68 － －
SHANDONG CHENMING PAPER HOLDINGS LIMITED 127
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
30. 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 1,122,233,139.26 1,368,108,800.00
Total 1,122,233,139.26 1,368,108,800.00
(2) Long-term borrowings due within one year
Long-term borrowings due within one year
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 125,710,000.00
Secured borrowings 271,882,639.26 290,625,800.00
Guarantee borrowings 534,096,000.00 562,640,000.00
Credit borrowings 316,254,500.00 389,133,000.00
13 Total 1,122,233,139.26 1,368,108,800.00
INTERIM
REPORT
Rollover of overdue borrowings within long-term borrowing due within a year amounted to RMB0.00.
Top five long-term borrowings due within one year
Unit: RMB
Opening balance Closing balance
Date of Amount in Amount in
Borrowed by commencement Date of termination Currency Rate (%) foreign currency Functional currency foreign currency Functional currency
Sumitomo Mitsui Banking 10 September 2010 10 September 2013 USD 3.36% 48,000,000.00 296,577,600.00
Corporation (China) Limited
China Development Bank 25 March 2008 20 November 2013 RMB 5.9% 179,202,139.26
Guangdong branch
Sumitomo Mitsui Banking 19 April 2011 11 March 2014 USD 2.98% 24,000,000.00 148,288,800.00
Corporation (China) Limited
The Export-Import Bank of 13 April 2011 RMB 4.51% 100,000,000.00
China Qingdao branch
J.P. Morgan 19 July 2011 19 July 2013 USD 2.32% 15,000,000.00 92,680,500.00
Sumitomo Mitsui Banking 10 September 2010 10 September 2013 USD 3.36% 64,000,000.00 402,272,000.00
Corporation (China) Limited
The Export-Import Bank of 28 June 2010 27 June 2013 USD 3.76% 36,000,000.00 226,278,000.00
China Qingdao branch
China Development Bank 25 March 2008 24 March 2013 USD 3.15% 30,000,000.00 188,565,000.00
Guangdong branch
China Development Bank 25 March 2008 24 March 2013 RMB 5.9% 102,060,800.00
Guangdong branch
Agricultural Bank of China 26 January 2011 28 December 2013 RMB 4.7% 100,000,000.00
Shouguang sub-branch
Total － － － － － 816,749,039.26 － 1,019,175,800.00
Overdue borrowings within long-term borrowings due within one year: Nil.
128 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
31. Other current liabilities
Unit: RMB
Closing Opening
Item book balance book balance
Deferred income to be amortised within one year 18,005,728.56 17,659,498.56
Total 18,005,728.56 17,659,498.56
Explanatory note to other current liabilities: the content should be asset-related government grant
32. Long-term borrowings
(1) Type of Long-term borrowings
Unit: RMB
Item Closing balance Opening balance
Pledged borrowings 125,710,000.00
Secured borrowings 3,215,708,821.96 3,389,029,600.00
Guarantee borrowings 615,796,000.00 895,292,000.00
Credit borrowings
Less: long-term borrowings due within one year
825,881,535.94
1,122,233,139.26
891,245,035.94
1,368,108,800.00
13
INTERIM
REPORT
Total 3,535,153,218.64 3,933,167,835.94
(2) Top five long-term borrowings
Unit: RMB
Closing balance Opening balance
Date of Amount in Amount in
Borrowed by commencement Date of termination Currency Rate (%) foreign currency Functional currency foreign currency Functional currency
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 USD 3.15% 320,000,000.00 1,977,184,000.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 RMB 5.9% 966,642,182.70
Sumitomo Mitsui Banking
Corporation (China) Limited 21 March 2012 30 November 2014 USD 2.31% 30,000,000.00 185,361,000.00
The Export-Import Bank of
China Qingdao branch 20 June 2013 20 June 2015 USD 3.91% 20,000,000.00 123,574,000.00
Bank of Communications
Shouguang sub-branch 22 February 2013 21 February 2016 RMB 6.15% 100,000,000.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 USD 3.15% 320,000,000.00 2,011,360,000.00
China Development Bank
Guangdong branch 25 March 2008 24 March 2023 RMB 5.9% 1,087,043,800.00
Sumitomo Mitsui Banking
Corporation (China) Limited 11 April 2011 11 March 2014 USD 2.98% 40,000,000.00 251,420,000.00
Mitsui syndicated loans 11 April 2011 11 March 2014 USD 2.98% 39,909,633.28 250,852,000.00
The Export-Import Bank of
China Qingdao branch 13 April 2011 12 April 2014 RMB 5.51% 100,000,000.00
Total － － － － － 3,352,761,182.70 － 3,700,675,800.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 129
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
33. Bonds payable
Unit: RMB
Interest payable Interest payable
at the beginning Interest accrued Interest paid at the end
Bond name Nominal value Issue date Term Issued amount of the period during the period during the period of the period Closing balance
11 Chenming debt 2,000,000,000.00 06 July 2011 5years 1,982,000,000.00 59,169,444.44 59,500,000.01 118,669,444.45 1,970,493,148.96
11 Chenming
Hong Kong debt 500,000,000.00 13 April 2011 5 years 491,750,000.00 2,944,508.30 6,834,399.90 6,628,939.84 3,149,968.36 497,368,862.39
12 Chenming debt 3,800,000,000.00 26 December 5 years 3,773,400,000.00 3,578,333.33 104,432,500.07 108,010,833.40 3,793,816,445.37
2012
Total 6,300,000,000.00 6,247,150,000.00 65,692,286.07 170,766,899.98 6,628,939.84 229,830,246.21 6,261,678,456.72
34. Special accounts payable
Unit: RMB
Increase for Decrease for
Item Opening balance the period the period Closing balance Note
Relocation of Jilin Chenming due 641,526,872.70 150,000,000.00 57,675,631.91 733,851,240.79
to environmental protection reason
13
INTERIM Total 641,526,872.70 150,000,000.00 57,675,631.91 733,851,240.79 －
REPORT
Note on special accounts payable: During the reporting period, pursuant to the relocation compensation agreement
entered into with China Development Jilin Co., Ltd., the Company received relocation compensation of RMB150 million.
During the reporting period, the Company utilised the relocation compensation to offset loss on disposal of fixed asset
and suspension of production of RMB6,682,941.54 and RMB50,992,690.37, respectively.
35. Other Non-current liabilities
Unit: RMB
Closing balance Opening balance
Item of carrying amount of carrying amount
Deferred income 388,252,921.40 375,881,264.56
Medium-term notes and privately placed bonds 2,573,765,031.10 2,184,270,106.80
of which: due within 1 year 1,100,000,000.00
due within 1 to 2 years
due within 2 to 5 years 2,600,000,000.00 1,100,000,000.00
unamortised issue expenses -26,234,968.90 -15,729,893.20
Total 2,962,017,952.50 2,560,151,371.36
Explanation on other non-current liabilities, including asset-related and revenue-related Government grants received
during the reporting period and their closing balances
130 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
35. Other Non-current liabilities (Cont’d)
Among which, 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 73,385,034.98 63,922,883.01
Project fund for National technological support scheme 7,523,075.00 7,605,425.00
Special subsidy fund for Songhuajiang environmental protection project 27,275,829.84 27,790,829.88
Modification of alkaline recycling system 4,883,749.85 4,883,749.85
Atmospheric pollution prevention and treatment subsidy fund
Sewage treatment and water conservation reconfiguration project 12,404,360.57 12,899,569.87
Financial grants for technological modification project 1,972,781.97 1,972,781.97
Project on integrated development of pulp and paper in Zhejiang 277,833,104.95 273,472,850.82
Others 980,712.80 992,672.72
Less: deferred income to be amortised within 1 year 18,005,728.56 17,659,498.56
Total 388,252,921.40 375,881,264.56
Note: Deferred income of RMB25,867,841.00 was received during the period. Deferred income recognised through profit or loss was
RMB8,603,382.74.
36. Share capital 13
INTERIM
Unit: RMB REPORT
Change during the period (Increase/decrease)
Shares converted
Opening balance New issue Bonus shares from reserve Others Sub-total Closing balance
Total number of 2,062,045,941.00 0.00 0.00 0.00 0.00 0.00 2,062,045,941.00
shares
37. Treasury shares
Explanation on treasury shares
Increase during Decrease during
Item Opening balance the period the period Closing balance
Repurchase part of B shares 265,363,183.60 265,363,183.60
of the Company
Total 265,363,183.60 265,363,183.60
SHANDONG CHENMING PAPER HOLDINGS LIMITED 131
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
37. Treasury shares (Cont’d)
Explanation on treasury shares:
At the 2012 third extraordinary general meeting of the Company, the resolution in respect of the repurchase of part of
the domestic listed foreign shares (B shares) of the Company was reviewed and approved. During the 12 months from
the date of passing of the resolution on the repurchase at a general meeting, the Company proposes to repurchase
not more than 150 million domestic listed foreign shares (B shares). The number of the shares to be repurchased
will be determined by the number of the shares actually repurchased upon expiry of the repurchase period subject
to repurchase at the repurchase price equal to or below HK$4 per share based on the change of the market price of
the domestic listed foreign shares (B shares) during the period of the implementation of the repurchase proposal with
reference to the operations of the Company and its funding position. From 7 March 2013 to 30 June 2013, 86,573,974
B shares have been cumulatively repurchased by the Company, which represented 4.1985% of the total share capital
of the Company. Ceiling price was HK$4.00 per share while floor price was HK$3.38 per share. A total amount of HK$
330,911,185.31 was paid (including stamp duty and commissions).
38. Capital reserves
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Capital premium (share premium) 5,713,148,731.33 5,713,148,731.33
13 Other capital reserves 701,744,268.20 31,421,760.99 670,322,507.21
INTERIM
REPORT
Total 6,414,892,999.53 31,421,760.99 6,383,471,238.54
Explanation on capital reserves: capital reserves decreased during the period due to the transfer of the equity interest in
Yanbian Chenming.
39. Surplus reserve
Unit: RMB
Increase during Decrease during
Item Opening balance the period the period Closing balance
Statutory surplus reserve 1,132,116,106.40 1,132,116,106.40
Total 1,132,116,106.40 1,132,116,106.40
132 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
40. Retained profit
Unit: RMB
Proportion of
appropriation
Item Amounts or allocation
Retained profit as at the end of the prior year before adjustment 4,149,511,927.88 －
Retained profit as at the beginning of the year after adjustment 4,149,511,927.88 －
Plus : Net profit for year attributable to shareholders 333,409,511.73 －
of the parent company
Ordinary dividend payable 118,528,318.02
Retained profit as at the end of the period 4,364,393,121.59 －
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. 13
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.
41. 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 9,829,074,992.64 9,862,709,415.43
Revenue from other activities 198,826,365.79 101,742,119.61
Operating costs 8,251,349,814.35 8,500,512,936.03
SHANDONG CHENMING PAPER HOLDINGS LIMITED 133
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
41. Revenue and operating costs (Cont’d)
(2) Principal activities (by industry)
Unit: RMB
Amounts during the period Amounts during the prior period
Industry name Operating revenue Operating costs Operating revenue Operating costs
I. Machine-made paper 8,848,173,025.18 7,326,007,309.03 9,216,139,824.70 7,909,765,293.16
II. Electricity and steam 803,178,978.83 667,582,441.74 415,231,784.63 360,583,271.43
III. Construction materials 109,279,405.02 91,159,060.57 163,649,151.64 134,290,206.98
IV. Paper chemicals 40,108,732.97 31,277,925.63
V. Hotel 19,689,151.28 4,853,289.68 24,253,681.15 6,367,047.37
VI. Hotels 48,754,432.33 39,934,984.09 3,326,240.34 2,293,200.11
Total 9,829,074,992.64 8,129,537,085.11 9,862,709,415.43 8,444,576,944.68
(3) Principal activities (by product)
Unit: RMB
Amounts during the period Amounts during the prior period
13 Product name Operating revenue Operating costs Operating revenue Operating costs
INTERIM
REPORT Light weight coated paper 501,851,702.17 426,670,112.16 599,263,279.24 546,228,892.26
Duplex press paper 1,371,028,527.11 1,134,137,789.43 1,520,629,992.03 1,325,662,646.62
Writing paper 185,288,743.85 161,211,366.92 152,926,898.85 146,337,134.17
Coated paper 2,160,140,193.34 1,877,854,601.69 2,146,633,544.01 2,044,364,500.36
News press paper 774,970,941.13 569,464,168.35 878,669,387.09 671,377,990.27
Paperboard 75,457,462.04 70,449,307.72 293,356,674.72 283,499,896.76
White paper board 1,101,886,281.24 875,218,954.34 979,292,604.55 801,231,392.96
Other machine-made paper 2,677,549,174.30 2,211,001,008.42 2,645,367,444.21 2,091,062,839.76
Electricity and steam 803,178,978.83 667,582,441.74 415,231,784.63 360,583,271.43
Building materials 109,279,405.02 91,159,060.57 163,649,151.64 134,290,206.98
Paper chemicals 40,108,732.97 31,277,925.63
Hotel 19,689,151.28 4,853,289.68 24,253,681.15 6,367,047.37
Others 48,754,432.33 39,934,984.09 3,326,240.34 2,293,200.11
Total 9,829,074,992.64 8,129,537,085.11 9,862,709,415.43 8,444,576,944.68
134 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
41. Revenue and operating costs (Cont’d)
(4) Principal activities (by geographical areas)
Unit: RMB
Amounts during the period Amounts during the prior period
Region Operating revenue Operating costs Operating revenue Operating costs
Mainland China 8,269,892,081.97 6,674,839,221.55 8,429,732,938.38 7,047,508,278.17
Hong Kong 325,828,258.19 231,375,805.11 85,042,051.22 82,802,641.61
U.S. 176,059,601.45 175,946,606.21 74,652,473.46 70,989,361.06
Japan 86,957,710.96 91,020,040.44 99,795,928.67 97,186,265.13
Southeast Asia 188,351,001.08 185,553,307.61 128,741,768.46 125,361,950.58
Middle East 249,421,527.92 244,493,213.57 203,094,484.24 201,948,291.67
Europe 128,149,696.15 128,477,031.97 129,403,908.38 124,403,235.71
South Africa 111,537,253.23 111,419,524.87 123,402,201.61 120,069,947.66
Other countries and regions 292,877,861.69 286,412,333.78 588,843,661.01 574,306,973.09
Total 9,829,074,992.64 8,129,537,085.11 9,862,709,415.43 8,444,576,944.68
(5) Revenue from top 5 customers of the Company
Unit: RMB 13
INTERIM
Percentage of the REPORT
Revenue from total revenue of
Name of customer principle activities the Company (%)
INTERNATIONAL FOREST PRODUCTS 115,264,196.18 1.15%
VITAL SOLUTIONS PTE LTD 93,452,376.88 0.93%
BEIJING ZHONGBANLIAN PRINTING MATERIALS CO., LTD. 81,197,667.74 0.81%
SHANGHAI YAOJI PLAYING CARD CO., LTD. 85,516,453.69 0.85%
BEIJING MUCUN PAPER CO., LTD. 75,050,797.59 0.75%
Total 450,481,492.08 4.49%
42. Business taxes and surcharges
Unit: RMB
Amounts during Amounts during Calculation
Item the period the prior period standard
Business tax 5,832,299.61 7,548,025.90 3% or 5% of
the income
Urban maintenance and construction tax 18,277,248.56 13,391,191.15 5-7% of the value
added tax and
business tax paid
Educational surcharges 12,894,018.95 9,323,433.40 3% of the value
added tax and
business tax paid
Others 1,963,940.87 1,584,134.66
Total 38,967,507.99 31,846,785.11 －
SHANDONG CHENMING PAPER HOLDINGS LIMITED 135
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
43. Selling and distribution expenses
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Wages and surcharges 67,659,759.74 57,464,171.45
Depreciation expense 10,612,838.57 11,079,947.27
Warehouse expense 5,252,715.19 4,028,052.09
Utilities expense 3,115,321.98 3,582,776.04
Sales commission and consignment commission charge 3,071,018.21
Transportation expense 387,964,117.84 364,668,776.81
Cargo handling charges 12,327,966.67 11,971,838.24
Travel expense 19,279,665.75 15,655,400.80
Hospitality expense on business purpose 30,603,367.66 32,425,464.00
Office expense 2,999,329.34 3,001,146.71
Rental expense 3,553,679.69
Others 27,029,980.02 29,010,696.91
Total 570,398,742.45 535,959,288.53
13 44. General and administrative expenses
INTERIM Unit: RMB
REPORT
Amounts during Amounts during
Item the period the prior period
Wages and surcharges 116,586,345.12 121,892,556.35
Insurance premium for staff 18,660,014.18 21,768,254.37
Depreciation expense 29,118,564.28 29,162,968.44
Waste disposal expense 17,851,951.10 20,054,348.58
Hospitality expense on business purpose 11,306,119.68 12,925,818.51
Amortization of intangible assets 15,077,529.50 16,338,125.24
Technological development expense 154,034,416.74 147,761,690.01
Tax 32,176,223.99 43,460,228.32
Production interruption loss 118,765,772.80 43,459,259.99
Insurance premium 10,985,773.65 10,618,890.71
Others 77,961,242.94 95,352,573.08
Total 602,523,953.98 562,794,713.60
136 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
45. Finance expenses
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Interest expenses 729,787,021.37 722,193,327.18
Less: interest income 183,899,985.11 79,124,229.96
Less: capitalised interest amount 19,062,306.74 142,807,022.80
Foreign exchange gains and losses -72,465,754.66 18,877,469.88
Capitalised foreign exchange gains and losses amount
Others 32,050,142.93 22,146,110.15
Total 486,409,117.79 541,285,654.45
46. 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 9,229,042.51 15,457,198.72
13
Total 9,229,042.51 15,457,198.72 INTERIM
REPORT
47. 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 421,036.92 -2,716,529.31
using the equity method
Investment gain on disposal of long-term equity investments 5,176,688.18
Others -414,540.00
Total 5,183,185.10 -2,716,529.31
SHANDONG CHENMING PAPER HOLDINGS LIMITED 137
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
47. Investment income (Cont’d)
(2) Income from long-term equity investments accounted for using the equity method
Unit: RMB
Amounts during Amounts during
Investee the period the prior period Reason for change
ARJO WIGGINS CHENMING -2,891,895.50 Provision for impairment has been
SPECIALTY PAPER fully provided to investee.
CO., LTD.
JIANGXI JIANGBAO MEDIA -150,149.58 175,366.19 Change in revenue of investee
COLOUR PRINTING
CO., LTD.
SHANGHAI BANGTAI 571,186.50 Change in revenue of investee
NEW ENERGY
TECHNOLOGY CO., LTD.
Total 421,036.92 -2,716,529.31 －
48. Loss on impairment of assets
13 Unit: RMB
INTERIM Amounts during Amounts during
REPORT
Item the period the prior period
I. Loss on bad debts -19,652,424.87 13,436,773.17
II. Loss on fixed asset impairment 15,000,000.00
Total -4,652,424.87 13,436,773.17
49. 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 7,414,212.57 2,840,815.25
Of which: Gain on disposal of fixed assets 7,414,212.57 2,840,815.25 7,414,212.57
Gain on debt reconstructuring 39,984.11 10,000,000.00 39,984.11
Government grants 118,562,462.37 179,712,857.44 112,054,796.04
Compensation for demolition 199,583,037.58 9,925,075.95 199,583,037.58
Other 10,705,664.53 20,988,983.26 10,705,664.53
Total 336,305,361.16 223,467,731.90
138 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
49. Non-operating income (Cont’d)
(2) Breakdown of government grants
Unit: RMB
Amounts during Amounts during
Item the period the prior period Note
Expansion grants 112,054,796.04 175,517,398.94 Amortised deferred
income amounted to
RMB2,232,500.04
and income-
related expansion
grants amounted
to RMB
109,822,296.00.
Value-added tax refund 6,507,666.33 4,195,458.50
Total 118,562,462.37 179,712,857.44 －
50. Non-operating expenses
Unit: RMB 13
Amounts included INTERIM
REPORT
in current
Amounts during Amounts during extraordinary
Item the period the prior period gains and losses
Total loss on disposal of non-current assets 35,870,782.59 909,346.99
Of which: Loss on disposal of fixed assets 35,870,782.59 909,346.99
Losses from exchange of non-monetary assets 239,349.34
Donation 500,000.00
Other 3,669,844.79 656,322.11
Total 39,540,627.38 2,305,018.44
51. 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 151,457,198.79 70,437,525.65
Adjustment to deferred income tax -68,585,992.53 -83,304,458.88
Total 82,871,206.26 -12,866,933.23
SHANDONG CHENMING PAPER HOLDINGS LIMITED 139
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
52. Calculation of basic earnings per share and diluted earnings per share
(1) Net profit for the period attributable to ordinary shareholders for the purpose of calculating earnings per share
are as follows:
Amounts during Amounts during
Item the period the prior period
Net profit for the period attributable to ordinary shareholders 333,409,511.73 94,244,962.85
Of which: net profit attributable to continuing operations 333,409,511.73 94,244,962.85
Net profit attributable to discontinued operations
Net profit after deducting extraordinary gains and losses 134,539,548.74 -103,989,811.77
attributable to ordinary shareholders of the Company
Of which: net profit attributable to continuing operations 134,539,548.74 -103,989,811.77
Net profit attributable to discontinued operations
(2) For the purpose of calculating earnings per share, the denominator is the weighted average of outstanding
ordinary shares. The calculation is as follows:
Amounts during Amounts during
Item the period the prior period
Number of outstanding ordinary shares as at the beginning 2,062,045,941.00 2,062,045,941.00
13 of the year
INTERIM Add: number of weighted ordinary shares issued during the year
REPORT
Less: number of weighted ordinary shares 17,687,393.00
repurchased during the year
Number of outstanding ordinary shares as at the end of the year 2,044,358,548.00 2,062,045,941.00
53. Other comprehensive income
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Translation difference of financial statements denominated 8,108,866.56 -152,386.81
in foreign currency
Sub-total 8,108,866.56 -152,386.81
Total 8,108,866.56 -152,386.81
140 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
54. Notes to the cash flow statements
(1) Cash received relating to other operating activities
Unit: RMB
Item Amounts
Expansion grants 183,899,965.11
Interest income 109,822,296.00
Total 293,722,261.11
(2) Cash paid relating to other operating activities
Unit: RMB
Item Amounts
Expense and bank balances 818,086,921.10
Total 818,086,921.10
(3) Cash received relating to other investing activities
13
Unit: RMB INTERIM
REPORT
Item Amounts
Compensation for demolition in Jilin 150,000,000.00
Special subsidy funds 25,961,341.00
Total 175,961,341.00
(4) Cash received relating to other financing activities
Unit: RMB
Item Amounts
13 Chenming privately placed bonds 1,486,500,000.00
Total 1,486,500,000.00
(5) Cash paid relating to other financing activities
Unit: RMB
Item Amounts
Increase in restricted bank deposits 73,210,167.92
Repayment of the principal of medium-term notes 1,100,000,000.00
Repurchase B shares 265,363,183.60
Total 1,438,573,351.52
SHANDONG CHENMING PAPER HOLDINGS LIMITED 141
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
55. 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 311,210,401.87 25,385,700.25
Add: Provision for impairment of assets -4,652,424.87 13,436,773.17
Depreciation of fixed assets, consumption of oil and gas 659,808,296.18 796,121,382.28
assets, depreciation of productive biological assets
Amortization of intangible assets 14,807,626.85 19,753,084.13
Amortization of long-term prepaid expenses 3,326,372.72 6,517,551.36
Loss on disposal of fixed assets, intangible assets and other -54,880.45 -1,931,468.26
long-term assets (“-” denotes gain)
Loss on change in fair value (“-” denotes gain)
Loss of changes in fair value (“-” denotes gain) -9,229,042.51 -15,457,198.72
Finance expenses (“-” denotes gain) 703,169,573.91 579,386,304.38
Investment loss (“-” denotes gain) -5,183,185.10 2,716,529.31
13 Decrease in deferred income tax assets(“-” denotes increase) 51,025,782.11 -83,304,458.88
INTERIM Increase in deferred income tax liabilities (“-” denotes decrease)
REPORT Decrease in inventories (“-” denotes increase) 321,954,897.70 132,109,969.74
Decrease in operating receivables(“-” denotes increase) -571,423,611.99 -515,991,848.48
Increase in operating payables(“-” denotes decrease) -485,317,241.37 -297,657,618.41
Others -82,507,322.10
Net cash flows from operating activities 906,935,242.95 661,084,701.87
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 1,598,747,729.74 2,589,296,414.02
Less: cash balance at the beginning of the period 2,343,550,185.45 2,317,048,619.53
Net increase in cash and cash equivalents -744,802,455.71 272,247,794.49
142 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VII. Notes to major items of the Consolidated Financial Statements (Cont’d)
55. 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 416,016,016.71
other operating units
2. Cash and cash equivalents received from disposal of 416,016,016.71
subsidiaries and other operating units
Less: cash and cash equivalents held by subsidiaries and 8,117,571.18
other operating units
3. Net cash received from disposal of subsidiaries and 407,898,445.53
other operating units
4. Net assets of subsidiaries disposed of 463,727,948.34
Current assets 410,280,305.40 13
Non-current assets 463,265,373.67 INTERIM
Current liabilities 405,624,159.31 REPORT
Non-current liabilities 4,193,571.42
(3) Cash and cash equivalents composition
Unit: RMB
Item Closing balance Opening balance
I. Cash 1,598,747,729.74 2,343,550,185.45
Of which: Treasury cash 1,905,225.31 1,398,324.17
Bank deposit that can be used for payment at any time 1,596,842,504.43 2,342,151,861.28
III. Balance of cash and cash equivalent at end of period 1,598,747,729.74 2,343,550,185.45
SHANDONG CHENMING PAPER HOLDINGS LIMITED 143
IX Financial Report
VIII. Related parties and related party transactions
1. Parent company of the Company
Currency
Shareholding Voting right
of the parent of the parent
company on company on Ultimate
Place of Legal Registered the Company the Company controlling party Organization
Name of parent company Relationship Company type incorporation representative Business nature capital (%) (%) of the Company code
Shouguang Chenming Controlling Limited liability Shouguang Chen Hongguo Investment in 1,685.4200 million 10.01% 10.01% Shouguang 78348518-9
Holdings Co., Ltd. shareholder company City manufacture of Chenming
paper, electricity, Holdings Co., Ltd.
steam,
arboriculture
2. Subsidiaries of the Company
Details please refer to Note (VI).1.Subsidiaries
3. Information on the joint ventures and associates of the Group
Details please refer to Note (VII).9. Long-term equity investments.
13
INTERIM
REPORT
144 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
VIII. Related parties and related party transactions (Cont’d)
4. Related party transactions
(1) Related party transactions involving sales of goods and provision of services
Table on sales of goods and provision of services
Unit: RMB
Amounts during the period Amounts during the prior period
Pricing principle of
related party As a percentage As a percentage
transactions of of
Details of related and decision similar similar
Related party party transactions process Amount amounts (%) Amount amounts (%)
Anhui Time Source Sales of paper Market price 86,823.93 24,371,109.40 0.29%
Corporation Authorised by the Board
(2) Guarantees provided for related parties
Unit: RMB
Whether
performance of
Amounts Starting date of Expiry date of guarantee
Guarantor Party being guaranteed under guarantee guarantee guarantee is completed 13
INTERIM
The Company Jiangxi Chenming Paper Co., Ltd 100,000,000.00 21 December 2012 20 December 2015 No
REPORT
The Company Huanggang Chenming Arboriculture C o., Ltd. 29,700,000.00 8 July 2010 7 July 2013 No
The Company Huanggang Chenming Arboriculture C o., Ltd. 30,000,000.00 19 September 2011 18 September 2014 No
The Company Huanggang Chenming Arboriculture C o., Ltd. 26,000,000.00 27 June 2012 26 June 2015 No
The Company Shouguang Meilun Paper Co., Ltd. 494,296,000.00 10 September 2010 9 September 2015 No
The Company Zhanjiang Chenming Paper & Pulp , Ltd. 561,787,000.00 24 May 2012 23 May 2015 No
Co. The CompanyShandong Chenming Paper Sales 2,125,013,195.61 15 March 2012 14 March 2015 No
Company Limited
The Company Chenming (HK) Limited 500,000,000.00 13 April 2011 12 April 2014 No
Total 3,866,796,195.61
(3) Other related party transactions
Details please refer to VII.5. Other significant related party transactions in Section VI.
5. Related party accounts receivables and accounts payables
Accounts receivables of the listed company due from the related part
Unit: RMB
At the end of period At the beginning of the period
Bad debt Bad debt
Item Related party Book balance provision Book balance provision
Anhui Time Source Corporation Accounts receivable -69.40 0.00 15,739,073.73 0.00
Jiangxi Jiangbao Media Colour Accounts receivable 0.00 0.00 21,627.00 0.00
Printing Co., Ltd.
Arjo Wiggins Chenming Other receivables 1,290,901.12 1,290,901.12 1,290,901.12 0.00
Specialty Paper Co., Ltd.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 145
IX Financial Report
IX. Contingency
As of 30 June 2012, no significant contingent event had to be disclosed by the Group.
X. Commitments
1. Significant commitments
(1) Capital commitment
Unit: RMB
Item Closing balance Opening balance
Contracted but not yet recognised in the financial statements
– Commitments in relation to acquisition and construction of 1,457,417,859.84 3,492,740,126.70
long-term assets
Total 1,457,417,859.84 3,492,740,126.70
(2) Operating lease commitments
As at the balance sheet date, the Group entered into irrevocable operating lease contracts with non-group
companies as follows:
Unit: RMB
13 Item Closing balance Opening balance
INTERIM
REPORT
Minimum lease payments under irrevocable operating leases:
The first year after balance sheet date 32,869,266.95 25,750,281.07
The second year after balance sheet date 14,061,923.90 14,197,441.54
The third year after balance sheet date 13,816,414.54 13,894,570.34
In the years thereafter 572,127,952.10 592,968,638.49
Total 632,875,557.49 646,810,931.44
2. Performance of commitments for the prior period
As of 30 June 2013, no significant commitments had to be disclosed by the Company.
XI. Events occurring after balance sheet date
1. Description of significant events after balance sheet date
Not applicable.
2. Profit distribution after balance sheet date
Not applicable.
3. Other events after balance sheet date
No event after balance sheet date had to be to be disclosed.
146 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
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 for value charged impairment
Item Opening balance the period to equity during the period Closing balance
Financial assets
Consumable biological assets 1,169,269,054.15 9,229,042.51 150,788,202.99 1,251,776,376.25
Total 1,169,269,054.15 9,229,042.51 150,788,202.99 1,251,776,376.25
Financial liabilities 0.00 0.00 0.00 0.00
13
INTERIM
REPORT
SHANDONG CHENMING PAPER HOLDINGS LIMITED 147
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 Amount Percentage (%) Amount Percentage (%) Amount Percentage (%) Amount Percentage (%)
Accounts receivable collectively
provided for bad debt
No-risk portfolio 2,772,651,402.81 99.56% 335,827,030.39 96.73%
General-risk portfolio 12,242,348.10 0.44% 4,854,736.77 39.66% 11,346,123.83 3.27% 4,675,772.65 41.21%
Portfolio sub-total 2,784,893,750.91 100% 4,854,736.77 0.17% 347,173,154.22 100% 4,675,772.65 1.35%
Total 2,784,893,750.91 － 4,854,736.77 － 347,173,154.22 － 4,675,772.65 －
Accounts receivable individually significant and individually provided for bad debt as at 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
13 Unit: RMB
INTERIM
REPORT
Closing balance Opening balance
Book balance Book balance
Bad debt Bad debt
Ageing Amount Percentage (%) provision Amount Percentage (%) provision
Within 1 year
Of which:
Within 1 year 5,234,588.64 42.76% 261,729.43 7,021,422.29 61.88% 351,071.11
Sub-total of Within 1 year 5,234,588.64 42.76% 261,729.43 7,021,422.29 61.88% 351,071.11
1 to 2 years 2,683,057.92 21.91% 268,305.80
Over 3 years 4,324,701.54 35.33% 4,324,701.54 4,324,701.54 38.12% 4,324,701.54
Total 12,242,348.10 － 4,854,736.77 11,346,123.83 － 4,675,772.65
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 not individually significant but individually provided for bad debt as at end of the period.
□ Applicable √ Not applicable
148 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)
(2) Top five other receivables are as follows:
Unit: RMB
As
a percentage
of the total
accounts
Entity name Relationship with the Company Amount Term receivable (%)
Shandong Chenming Paper Related party within the 1,631,000,639.55 Within 1 year 58.57%
Sales Co., Ltd scope of consolidation
Shouguang Meilun Paper Co., Ltd. Related party within the 1,063,318,703.90 Within 1 year 38.18%
scope of consolidation
Wuhan Chenming Hanyang Related party within the 60,198,684.52 Within 1 year 2.16%
Paper Holdings Co., Ltd. scope of consolidation
Fuyu Chenming Paper Co., Ltd. Related party within the 8,850,089.49 Within 1 year 0.32%
scope of consolidation
Shouguang Cailun Beihai Mud unrelated parties 7,873,351.43 Within 1 year, 0.28%
Filling Co., Ltd. 1 to 2 years
Total － 2,771,241,468.89 － 99.51%
13
INTERIM
(3) Information on accounts receivable of the related parties REPORT
Unit: RMB
As a percentage of
Relationship with the total accounts
Entity name the Company Amount receivable (%)
Shandong Chenming Paper Sales Co., Ltd Related party within thhe scope 1,631,000,639.55 58.57%
of consolidation
Shouguang Meilun Paper Co., Ltd. Related party within the scope 1,063,318,703.90 38.18%
of consolidation
Wuhan Chenming Hanyang Related party within the scope 60,198,684.52 2.16%
Paper Holdings Co., Ltd. of consolidation
Fuyu Chenming Paper Co., Ltd. Related party within the scope 8,850,089.49 0.32%
of consolidation
Shandong Chenming Panels Co., Ltd. Related party within the scope 4,224,803.34 0.15%
of consolidation
Shandong Grand View Hotel Co., Ltd. Related party within the scope 5,058,482.01 0.18%
of consolidation
Total － 2,772,651,402.81 99.56%
(4) Transferred amount of other receivables not qualified to be derecognised amounted to RMB0.00.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 149
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 Amount Percentage (%) Amount Percentage (%) Amount Percentage (%) Amount Percentage (%)
Other receivables which 8,918,424.06 0.09% 8,918,424.06 100% 8,918,424.06 0.1% 8,918,424.06 100%
are individually significant and
individually provided for bad debt
Other receivables collectively
provided for bad debt
No-risk portfolio 9,424,695,370.21 99.13% 9,181,123,808.55 99%
General-risk portfolio 59,897,989.61 0.63% 22,138,052.41 36.96% 70,216,527.05 0.76% 18,561,336.28 26.43%
Portfolio sub-total 9,484,593,359.82 99.76% 22,138,052.41 0.23% 9,251,340,335.60 99.76% 18,561,336.28 0.2%
Other receivables which are 13,717,509.43 0.15% 13,717,509.43 100% 13,771,354.38 0.14% 13,771,354.38 100%
not individually significant but
individually provided for bad debt
Total 9,507,229,293.31 － 44,773,985.90 － 9,274,030,114.04 － 41,251,114.72 －
Other receivables individually significant and individually provided for bad debt as at end of the period.
13 √ Applicable □ Not applicable
INTERIM
REPORT Unit: RMB
Amount of Percentage
Other receivables Book balance bad debt of provision (%) Reason
Loans 8,918,424.06 8,918,424.06 100% Mainly are loans aged over
three years and are unlikely
to be recovered
Total 8,918,424.06 8,918,424.06 － －
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the ageing
method.
√ Applicable □ Not applicable
150 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)
(1) Other receivables (Cont’d)
Unit: RMB
Closing balance Opening balance
Book balance Book balance
Bad debt Bad debt
Ageing Amount Percentage (%) provision Amount Percentage (%) provision
Within 1 year
Of which:
Within 1 year 20,630,663.14 34.44% 1,031,533.16 35,120,692.33 50.02% 1,756,034.63
Sub-total of within 1 year 20,630,663.14 34.44% 1,031,533.16 35,120,692.33 50.02% 1,756,034.63
1 to 2 years 6,862,602.09 11.46% 686,260.21 11,321,624.73 16.12% 1,132,162.48
2 to 3 years 14,980,581.67 25.01% 2,996,116.33 10,126,338.52 14.42% 2,025,267.70
Over 3 years 17,424,142.71 29.09% 17,424,142.71 13,647,871.47 19.44% 13,647,871.47
Total 59,897,989.61 － 22,138,052.41 70,216,527.05 － 18,561,336.28
In respect of portfolio, the measurement of bad debt provision for other receivables is based on the percentage of
total accounts receivable method.
□ Applicable √ Not applicable
In respect of portfolio, the measurement of bad debt provision for other receivables is based on other methods.
□ Applicable √ Not applicable
13
INTERIM
REPORT
Other receivables not individually significant but individually provided for bad debt as at end of the period.
√ Applicable □ Not applicable
Unit: RMB
Bad debt Percentage of
Other receivables Book balance provision provision (%) Reason for provision
Amounts with 13,717,509.43 13,717,509.43 100% Over three years and are unlikely
customers to be recovered
Total 13,717,509.43 13,717,509.43 － －
SHANDONG CHENMING PAPER HOLDINGS LIMITED 151
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
2. Other receivables (Cont’d)
(2) Explanation of the significant other receivables
As a percentage of
the total other
Entity name Amount Nature or details receivable (%)
Shouguang Meilun Paper Co., Ltd. 4,800,126,130.20 Amounts with customers 50.49
Zhanjiang Chenming Paper Pulp Co., Ltd. 1,014,497,849.49 Amounts with customers 10.67
Jilin Chenming Paper Co., Ltd. 664,575,920.60 Amounts with customers 6.99
Shouguang Chenming Paper Group Qihe
Paperboard Co., Ltd. 587,675,845.54 Amounts with customers 6.18
Shouguang Chenming Art Paper 581,562,982.94 Amounts with customers 6.12
Co., Ltd.
Total 7,648,438,728.77 － 80.45
(3) Top five other receivables are as follows
Unit: RMB
As a percentage
of the total other
13 Entity name Relationship with the Company Amount Term receivable (%)
Shouguang Meilun Paper Co., Ltd. Related party within the 4,800,126,130.20 Within 1 year 50.49
scope of consolidation
Zhanjiang Chenming Paper Related party within the 1,014,497,849.49 Within 1 year 10.67
Pulp Co., Ltd. scope of consolidation
Jilin Chenming Paper Co., Ltd. Related party within the 664,575,920.60 Within 1 year 6.99
scope of consolidation
Shouguang Chenming Paper Group Non-related party 587,675,845.54 Within 1 year 6.18
Qihe Paperboaed Co., Ltd.
Shouguang Chenming Art Related party within the 581,562,982.94 Within 1 year 6.12
Paper Co., Ltd. scope of consolidation
Total － 7,648,438,728.77 － 80.45
152 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)
(4) Overview of other receivables of the related parties
Unit: RMB
As a percentage
of the total other
Entity name Relationship with the Company Amount receivable (%)
Shouguang Meilun Paper Co., Ltd. Related party within 4,800,126,130.20 50.73%
the scope of consolidation
Zhanjiang Chenming Paper Related party within the 1,014,497,849.49 10.72%
Pulp Co., Ltd. scope of consolidation
Jilin Chenming Paper Co., Ltd. Related party within the 664,575,920.60 7.02%
scope of consolidation
Shouguang Chenming Art Related party within the 581,562,982.94 6.15%
Paper Co., Ltd. scope of consolidation
Wuhan Chenming Hanyang Paper Related party within the 556,048,864.00 5.88%
Holdings Co., Ltd. scope of consolidation
Shandong Grand View Hotel Co., Ltd. Related party within the 355,350,993.70 3.76%
scope of consolidation
Jiangxi Chenming Paper Co., Ltd. Related party within the 210,090,730.81 2.22%
scope of consolidation 13
Fuyu Chenming Paper Co., Ltd. Related party within the 188,512,575.67 1.99% INTERIM
scope of consolidation REPORT
Zhanjiang Chenming Arboriculture Related party within the 153,166,808.30 1.62%
Co., Ltd. scope of consolidation
Shandong Chenming Paper Related party within the 134,927,068.48 1.43%
Sales Co., Ltd scope of consolidation
Huanggang Chenming Arboriculture Related party within the 112,066,344.19 1.18%
Co., Ltd. scope of consolidation
Huanggang Chenming Paper Co., Ltd. Related party within the 111,474,860.75 1.18%
scope of consolidation
Wuhan Chenming Qianneng Electric Related party within the 62,641,498.37 0.66%
Power Co., Ltd. scope of consolidation
Haicheng Haiming Mining Co., Ltd. Related party within the 42,496,633.33 0.45%
scope of consolidation
Yangjiang Chenming Arboriculture Related party within the 3,011,000.00 0.03%
Co., Ltd. scope of consolidation
Shouguang Chenming Related party within the 2,427,092.83 0.03%
Tianyuan Arboriculture Co., Ltd. cope of consolidation
Wuhan Chenming Wan Xing Real Related party within the 1,142,777.77 0.01%
Estate Co., Ltd. scope of consolidation
Hailaer Chenming Paper Co., Ltd. Related party within the 197,660.63 0%
scope of consolidation
Chenming International Co., Ltd Related party within the 12,820.00 0%
scope of consolidation
Shandong Chenming Xinli Power Related party within the 200.00 0%
Co., Ltd. scope of consolidation
Total － 8,994,330,812.06 95.06%
(5) Transferred amount of other receivables not qualified to be derecognised amounted to RMB0.00
SHANDONG CHENMING PAPER HOLDINGS LIMITED 153
INTERIM
154
REPORT
13
LIMITED
SHANDONG CHENMING PAPER HOLDINGS
I
XIII. Notes to major financial statement items of the parent company (Cont’d)
3. Long-term equity investments
Financial Report
Unit: RMB
Explanation of the
Equity interest in Voting right in the inconsistent of equity Impairment
the investee held by investee by the interest and voting Impairment provision during Cash dividend
Investee Accounting method Investment cost Opening Balance Change Closing balance the Company (%) Company (%) right 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 86.71% 86.71% 30,213,771.35
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% 75%
Yanbian Chenming Paper Co., Ltd. Cost method 96,725,533.01 96,725,533.01 -96,725,533.01
Shouguang Chenming Tianyuan Arboriculture Co., Ltd. Cost method 7,199,000.00 7,199,000.00 7,199,000.00 68% 68%
Jiangxi Chenming Paper Co., Ltd. Cost method 697,548,406.40 697,548,406.40 697,548,406.40 51% 100%
Shandong Paper Making & Printing Enterprises Corporation Cost method 200,000.00 200,000.00 200,000.00 2% 2% 200,000.00
Jinan Shangyou Commercial Co., Ltd. Cost method 350,000.00 350,000.00 350,000.00 5% 5% 350,000.00
Zhejiang Province Guangyu Media Printing Co., Ltd. Cost method 2,000,000.00 2,000,000.00 2,000,000.00 9.96% 9.96%
Qingzhou Chenming Denaturation Amylum Co., Ltd. Equity method 900,000.00 900,000.00 900,000.00 30% 30% 900,000.00
Shandong Grand View Hotel Co., Ltd. Cost method 80,500,000.00 80,500,000.00 80,500,000.00 70% 70%
Jilin Chenming Paper Co., Ltd. Cost method 1,501,350,000.00 1,501,350,000.00 1,501,350,000.00 100% 100%
Arjo Wiggins Chenming Specialty Paper Co., Ltd. Equity method 80,100,000.00
Zhanjiang Chenming Paper Pulp Co., Ltd. Cost method 3,000,000,000.00 3,000,000,000.00 3,000,000,000.00 100% 100% 180,000,000.00
Chenming (HK) Limited Cost method 783,310.00 783,310.00 783,310.00 100% 100%
Shouguang Chenming Modern Logistic Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100% 100%
Fuyu Chenming Paper Co., Ltd. Cost method 208,000,000.00 208,000,000.00 208,000,000.00 100% 100%
Shouguang Chenming Art Paper Co., Ltd. Cost method 113,616,063.80 113,616,063.80 113,616,063.80 75% 75%
Shouguang Mihe Water Co., Ltd. Cost method 20,000,000.00 20,000,000.00 20,000,000.00 19.46% 19.46%
Shanghai Forest & Paper E-Commerce Co., Ltd. Cost method 1,400,000.00 1,400,000.00 1,400,000.00 14% 14% 1,139,574.47
Huanggang Chenming Arboriculture Co., Ltd. Cost method 70,000,000.00 70,000,000.00 70,000,000.00 100% 100%
Huanggang Chenming Paper Pulp Co., Ltd. Cost method 20,000,000.00 20,000,000.00 20,000,000.00 100% 100%
Jiangxi Jiangbao Media Colour Printing Co. Ltd. Equity method 6,000,000.00 4,792,675.12 -150,149.58 4,642,525.54 21.16% 21.16%
Shouguang Meilun Paper Co., Ltd. Cost method 2,200,000,000.00 2,200,000,000.00 2,200,000,000.00 100% 100%
Chenming International Co., Ltd. Cost method 19,861,955.00 19,861,955.00 19,861,955.00 100% 100%
Shouguang Shun Da Customs Declaration Co, Ltd. Cost method 1,500,000.00 1,500,000.00 1,500,000.00 100% 100%
Anhui Shidai Resources Holdings Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 10% 10%
Shandong Chenming Paper Sales Co., Ltd. Cost method 100,000,000.00 100,000,000.00 100,000,000.00 100% 100%
Shouguang Hengfeng Storage Co., Ltd. Cost method 500,000.00 500,000.00 500,000.00 100% 100%
Shouguang Chenming Import and Export Trade Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100% 100%
Shouguang Chenming Papermaking Machine Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100% 100%
Shouguang Chenming Papermaking Machine Co., Ltd. Cost method 2,000,000.00 2,000,000.00 2,000,000.00 100% 100%
Shouguang Chenming Industrial Logistics Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 100% 100%
Shouguang Chenming Hongxin Packaging Co., Ltd. Cost method 1,000,000.00 1,000,000.00 1,000,000.00 100% 100%
Shandong Hongqiao Venture Capital Co., Ltd. Cost method 50,000,000.00 50,000,000.00 50,000,000.00 16.67% 16.67%
Shanghai Runchen Equity Investment Fund Co., Ltd. Cost method 300,000,000.00 300,000,000.00 -300,000,000.00 19,313,686.50
Japan Chenming Paper Co., Ltd. Cost method 9,306,351.20 9,306,351.20 9,306,351.20 100% 100%
Weifang Xinye Capital Investment Co., Ltd. Cost method 10,000,000.00 10,000,000.00 10,000,000.00 3.76% 3.76%
Haicheng Haiming Mining Co., Ltd. Cost method 70,000,000.00 70,000,000.00 74,000,000.00 144,000,000.00 60% 60%
Chenming GmbH Cost method 4,083,235.00 4,083,235.00 100% 100%
Total － 9,075,475,453.18 8,994,168,128.30 -318,792,447.59 8,675,375,680.71 － － － 2,589,574.47 229,527,457.85
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
4. Revenue and operating costs
(1) Revenue
Unit: RMB
Amounts during Amounts during
Item the period the prior period
Revenue from principal activities 4,329,750,335.77 3,703,428,614.56
Revenue from other activities 587,282,187.16 383,795,028.56
Total 4,917,032,522.93 4,087,223,643.12
Operating costs 3,976,552,277.16 3,448,243,509.14
(2) Principal activities (by industry)
Unit: RMB
Amounts during the period Amounts during the prior period
Industry name Revenue Operating costs Revenue Operating costs
Machine-made paper 3,144,305,160.63 2,467,851,375.93 3,114,476,781.75 2,574,426,997.64
Electricity and steam supply 1,185,445,175.14 947,682,863.91 588,951,832.81 498,093,999.00 13
INTERIM
Total 4,329,750,335.77 3,415,534,239.84 3,703,428,614.56 3,072,520,996.64 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 42,567,195.18 32,695,986.33 48,662,606.09 40,091,730.46
Duplex press paper 307,034,036.77 239,323,219.24 235,566,674.59 184,544,726.15
Writing paper 28,685,162.06 23,678,690.73 20,947,059.71 18,244,231.13
Coated paper 710,385,033.97 532,334,754.44 720,179,569.18 668,282,035.42
News press paper 709,752,411.59 541,945,417.17 704,748,171.31 532,979,502.38
White paper board 779,851,217.12 632,739,824.47 794,054,103.00 651,137,851.95
Other machine-made paper 566,030,103.94 465,133,483.55 590,318,597.87 479,146,920.15
Electricity and steam supply 1,185,445,175.14 947,682,863.91 588,951,832.81 498,093,999.00
Total 4,329,750,335.77 3,415,534,239.84 3,703,428,614.56 3,072,520,996.64
SHANDONG CHENMING PAPER HOLDINGS LIMITED 155
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
4. Revenue and operating costs (Cont’d)
(4) Principal activities (by geographical areas)
Unit: RMB
Amounts during the period Amounts during the prior period
Geographical area Revenue Operating costs Revenue Operating costs
Mainland China 4,124,261,209.19 3,242,787,868.07 3,454,822,431.78 2,850,493,502.72
Hong Kong 205,489,126.58 172,746,371.77 248,606,182.78 222,027,493.92
Total 4,329,750,335.77 3,415,534,239.84 3,703,428,614.56 3,072,520,996.64
(5) Revenue from top 5 customers of the Company
Unit: RMB
Percentage of
the total
revenue of
Name of customer Total revenue the Company (%)
Shandong Chenming Paper Sales Company Limited 2,846,255,627.72 57.89%
13 Chenming (HK) Limited 205,489,126.58 4.18%
INTERIM Shouguang Meilun Paper Co., Ltd. 82,696,070.01 1.68%
REPORT
Shouguang Chenming Art Paper Co., Ltd. 9,226,878.63 0.19%
Shouguang Chenming Import and Export Trade Co., Ltd. 726,689.14 0.01%
Total 3,144,394,392.08 63.95%
5. 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 229,527,457.85 28,487,270.13
for using the cost method
Income from long-term equity investments accounted -150,149.58 -2,716,529.31
for using the equity method
Investment gain on disposal of long-term equity investments 14,190,483.70
Others 12,145,050.34 17,021,667.09
Total 255,712,842.31 42,792,407.91
156 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
5. 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
Zhanjiang Chenming Paper 180,000,000.00
Pulp Co., Ltd.
Shanghai Runchen Equity 19,313,686.50
Investment Fund Co., Ltd.
Shandong Chenming Power 30,213,771.35 28,487,270.13
Supply Holdings Co., Ltd.
Total 229,527,457.85 28,487,270.13 －
(3) Income from long-term equity investments accounted for using the equity method
Unit: RMB
Amounts during Amounts during
Investee the period the prior period Reason for change
13
Arjo Wiggins Chenming -2,891,895.50 INTERIM
REPORT
Specialty Paper Co., Ltd.
Jiangxi Jiangbao Media -150,149.58 175,366.19
Colour Printing Co., Ltd.
Total -150,149.58 -2,716,529.31 －
SHANDONG CHENMING PAPER HOLDINGS LIMITED 157
IX Financial Report
XIII. Notes to major financial statement items of the parent company (Cont’d)
6. Supplementary information on cash flow statement
Unit: RMB
Amounts during Amounts during
Supplementary information the period the prior period
1. Reconciliation of net profit as cash flows from operating activities: － －
Net profit 497,002,914.40 175,443,730.88
Plus: Provision for impairment of assets 3,701,835.30 -7,044,869.23
Depreciation of fixed assets, consumption of oil and 168,610,612.74 306,244,526.12
gas assets, depreciation of productive biological assets
Amortisation of intangible assets 4,668,034.28 4,630,549.74
Loss on assets written-off (“-” denotes gain) 25,327,282.02 -2,008,319.17
Finance expenses (“-” denotes gain) 531,515,104.30 423,895,393.90
Investment loss (“-” denotes gain) -255,712,842.31 -42,792,407.91
Decrease in deferred income tax assets (“-” denotes increase) 6,168,542.92 117,112.03
Decrease in inventory (“-” denotes increase) -89,211,312.49 -152,953,350.16
Decrease in operating receivables (“-” denotes increase) -2,628,076,731.12 -890,031,497.71
Increase in operating payables (“-” denotes decrease) -506,448,804.94 1,185,361,145.72
Net cash flows from operating activities -2,242,455,364.90 1,000,862,014.21
2. Major investing and financing activities not involving cash settlements: － －
13 3. Net change in cash and cash equivalents: － －
INTERIM
Cash balance at the end of the period 339,273,942.12 814,686,971.97
REPORT Less: cash balance at the beginning of the period 1,786,622,854.08 1,290,039,078.57
Net increase in cash and cash equivalents -1,447,348,911.96 -475,352,106.60
158 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIV. Supplementary information
1. Breakdown of extraordinary gains and losses for the current period
Unit: RMB
Item Amount Description
Profit or loss from disposal of non-current assets -28,456,570.02
(included offset amount of provision
for assets impairment)
Government grants included in profit and loss for 112,054,796.04
the period (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 39,984.11
Non-operating gains and losses other than the above items 206,618,857.32
Changes in fair value of consumable biological assets 9,229,042.51
Less: Effect of income tax 28,181,423.03
Effect of minority interests (after tax) 72,434,723.94
Total 198,869,962.99 －
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
13
INTERIM
extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies REPORT
Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
□ Applicable √ Not applicable
2. Return on net assets and earnings per share
Unit: RMB
Earnings per share
Weighted average
return on net Basic earnings Diluted earnings
Profit during the reporting period assets (%) per share per share
Net profit attributable to holders of ordinary 2.40% 0.16 0.16
shares of the Company
Net profit attributable to holders of ordinary shares 0.97% 0.07 0.07
of the Company, after deducting
extraordinary gains and losses
SHANDONG CHENMING PAPER HOLDINGS LIMITED 159
IX Financial Report
XIV. Supplementary information (Cont’d)
3. Explanation of irregular movements in major accounting statement items of the Company
Items in balance sheet:
(1) The closing balance of prepayments as at 30 June 2013 was RMB2,020,732,736.41, up by 23.50% as compared
with the opening balance mainly due to the new prepayment for plant and equipment of the Company’s
subsidiary, Zhanjiang Meilun Pulp Paper Co., Ltd., of RMB194 million and increase in Company’s prepayment for
raw materials.
(2) The closing balance of long-term equity investments as at 30 June 2013 was RMB87,902,951.07, down by
75.36% as compared with the opening balance mainly due to the transfer of equity interests in Shanghai Runchen
Equity Investment Fund Co., Ltd. by the Company.
(3) The closing balance of construction in progress as at 30 June 2013 was RMB2,757,926,003.96, down by 45.04%
as compared with the opening balance mainly due to the 600,000 tonnes white coated linerboard project of
Shouguang Meilun transferred to fixed assets in January 2013.
(4) The closing balance of construction materials as at 30 June 2013 was RMB205,573,437.90, up by 173.90% as
compared with the opening balance mainly due to an increase in materials for relocation of Jilin Chenming.
(5) The closing balance of bills payables as at 30 June 2013 was RMB933,239,044.69, down by 27.41% as compared
with the opening balance mainly due to a decrease in bank acceptance bills issued by the Company for payment
for goods during the reporting period.
(6) The closing balance of advance receipts as at 30 June 2013 was RMB424,229,542.28, up by 21.96% as
13 compared with the opening balance mainly due to the greater efforts made by the Company on customer
INTERIM
REPORT
exploration and an increase in advance receipts.
(7) The closing balance of staff remuneration payables as at 30 June 2013 was RMB119,074,985.07, down by
33.05% as compared with the opening balance mainly due to a decrease in outstanding staff remuneration of the
Company.
(8) The closing balance of interest payables as at 30 June 2013 was RMB246,955,329.53, up by 85.62% as
compared with the opening balance mainly due to the medium-term notes and corporate loans interest withdrew
by the Company.
(9) The closing balance of other payables as at 30 June 2013 was RMB337,264,869.67, down by 22.61% as
compared with the opening balance mainly due to a decrease in deposits and advances received by the Company
during the reporting period and a change in the scope of consolidation arising from disposal of subsidiaries.
(10) The closing balance of treasury shares as at 30 June 2013 was RMB265,363,183.60, up by 100% as compared
with the opening balance mainly due to the repurchased shares during B share repurchase by the Company being
transferred to treasury shares.
160 SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report
XIV. Supplementary information (Cont’d)
3. Explanation of irregular movements in major accounting statement items of the Company (Cont’d)
Items in income statement:
(1) Revenue during the reporting period was RMB10,027,901,358.43, up by 0.64% from the corresponding period of
the prior year mainly due to an increase in sales resulting from market recovery.
(2) Operating costs during the reporting period was RMB8,251,349,814.35, down by 2.93% from the corresponding
period of the prior year mainly due to a decrease in raw materials price.
(3) Finance expenses during the reporting period was RMB486,409,117.79, down by 10.14% from the corresponding
period of the prior year mainly due to an increase in exchange gains as a result of RMB appreciation.
(4) Loss on impairment of assets during the reporting period was RMB-4,652,424.87, down by 134.62% from the
corresponding period of the prior year mainly due to a decrease in bad debt provisions as a result of change in
account receivables items.
(5) Changes in fair value during the reporting period was RMB9,229,042.51, down by 40.29% from the corresponding
period of the prior year mainly due to the changes in fair value of forestry assets.
(6) Investment income during the reporting period was RMB5,183,185.10, up by 290.80% from the corresponding
period of the prior year mainly due to the investment income of RMB5.1767 million arising from disposal of
subsidiaries.
(7) Non-operating income during the reporting period was RMB336,305,361.16, up by 50.49% from the
corresponding period of the prior year mainly due to compensation for the suspension of Wuhan Plant I and 13
transfer of government subsidies. INTERIM
REPORT
(8) Non-operating expenses during the reporting period were RMB39,540,627.38, up by 1,615.41% from the
corresponding period of the prior year mainly due to the loss on disposal of accumulated and idle non-current
assets.
(9) Income tax expenses during the reporting period was RMB82,871,206.26, up by 744.06% from the corresponding
period of the prior year mainly due to an increase in income tax expenses provision according to tax law as a
result of increase in revenue under the recovering market.
(10) Gross profit, net profits, net profits attributable to owners of parent company and gains and losses attributable
to minority shareholders during the reporting period were RMB394,081,608.13, RMB311,210,401.87,
RMB333,409,511.73 and RMB-22,199,109.86 respectively, up by 3,047.93%, 1,125.93%, 253.77% and 67.76%
from the corresponding period of the prior year mainly due to an increase in profit margin of paper products,
profits and income tax as a result of the recovering paper industry, as well as a decrease in losses of non-wholly
owned subsidiaries of the Company resulting in decrease in gains and losses attributable to minority shareholders.
SHANDONG CHENMING PAPER HOLDINGS LIMITED 161
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 website 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
21 August 2013
13
INTERIM
REPORT
162 SHANDONG CHENMING PAPER HOLDINGS LIMITED
