MITED
SHANNGDONG CHEENMINNG PAPPER HOOLDINGGS LIM
THE 2016 A AL REPPORT
Febbruary 2017
I Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the
truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no false representations,
misleading statements or material omissions contained in this Report, and are jointly and severally responsible for the liabilities of
the Company.
Chen Hongguo, head of the Company, Hu Jinbao, 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 annual report.
All Directors were present in person at the Board meeting to consider and approve this Report.
The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy and competition
in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factors likely to be faced
and the measures to be taken to address them as set out in the outlook on the future development of the Company in Discussion
and Analysis of Operations.
The proposed profit distribution plan of the Company was considered and passed by the Board:
The audited consolidated net profit attributable to shareholders of the Company for 2016 prepared in accordance with Accounting
Standards for Business Enterprises by the Company amounted to RMB2,063,986,822.25. When deducting the interest for
perpetual bonds of RMB153,140,000 for 2016, the distributable profit realised for 2016 amounted to RMB1,910,846,822.25.
In accordance with the Prospectus of Non-public Issuance of Preference Shares, shareholders of preference shares may jointly
participate in the distribution of the 50% retained earnings realised for the year of issuance with ordinary shareholders. The basis
for the distribution is calculated as follows: (the number of months for the period from the next month after the month of issuance
to the end of the reporting period/12) the retained earnings realised for the year 50%, and the basis for the distribution is
9/12 19.11 50%=RMB717 million.
Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2016 and the 387,263,339 simulated shares
converted from the preference shares as at the end of 2016 on a conversion ratio of 1 share valued at RMB5.81, a cash dividend
of RMB6 (tax inclusive) per ten shares or RMB1,161,843,280.20 will be distributed to ordinary shareholders, and a cash dividend
of RMB3.08 (tax inclusive) per ten shares or a variable cash dividend of RMB119,277,108.41 will be distributed to holders of
preference shares. No bonus shares (tax inclusive) will be issued and the share capital will not increase with the funds transferred
from the reserves.
2016 ANNUAL REPORT
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I Important Notice, Table of Contents and Definitions
Table of contents
I Important Notice, Table of Contents and Definitions ...............................................................................................
II Company Profile and Key Financial Indicators ........................................................................................................
III Chairman’s Report ...................................................................................................................................................
IV Business Overview ...................................................................................................................................................
V Discussion and Analysis of Operations ....................................................................................................................
VI Directors’ Report ...................................................................................................................................................... 46
VII Material Matters ....................................................................................................................................................... 53
VIII Changes in Share Capital and Shareholders ...........................................................................................................
IX Preference Shares ....................................................................................................................................................
X. Directors, Supervisors and Senior Management and Staff......................................................................................
XI Corporate Governance.............................................................................................................................................
XII Corporate Bonds......................................................................................................................................................
XIII Financial Report ....................................................................................................................................................... 129
XIV Documents Available for Inspection ........................................................................................................................
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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I Important Notice, Table of Contents and Definitions
Definitions
Item Definition
Company, Group, Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries
Group or Chenming Paper
Parent Company or means Shandong Chenming Paper Holdings Limited
Shouguang Headquarters
Chenming Holdings means Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co., Ltd.
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Haiming Mining means Haicheng Haiming Mining Company Limited
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Financial Leasing Company means Shandong Chenming Financial Leasing Co., Ltd.
reporting period or the year means The period from 1 January 2016 to 31 December 2016
the beginning of the year or means 1 January 2016
the period
the end of the year or means 31 December 2016
the period
the prior year means The period from 1 January 2015 to 31 December 2015
2016 ANNUAL REPORT 3
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II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation , B Stock code 000488, 200488
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Chenming Paper Stock code
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Legal name in Chinese of the Company
Legal short name in Chinese of the Company
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
Registered address No. 595 Shengcheng Road, Shouguang City, Shandong Province
Postal code of registered address
Office address No. 2199 Nongsheng East Road, Shouguang City, Shandong Province
Postal code of office address
Website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the Board Securities Affairs Representative Hong Kong Company Secretary
Name Xiao Peng Yuan Xikun Poon Shiu Cheong
Correspondence Address No. 2199 Nongsheng East Road, No. 2199 Nongsheng East Road, 22nd Floor, World Wide House, Central,
Shouguang City, Shandong Province Shouguang City, 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
III. Information disclosure and places for inspection
Designated media for information disclosure China Securities Journal, Shanghai Securities News, Securities Times,
Securities Daily and Hong Kong Commercial Daily
Designated websites for the publication of Domestic: http://www.cninfo.com.cn; Overseas: http://www.hkex.com.hk
the Annual Report as approved by CSRC
Places for inspection of the Company’s Securities investment department of the Company
Annual Report
IV. Change in registration
Uniform social credit code
Change of principal activities since its listing
(if any) No
Change of the controlling shareholder (if any) No
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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II Company Profile and Key Financial Indicators
V. Other relevant information
CPAs engaged by the Company
Name of CPAs Ruihua Certified Public Accountants (Special General Partnership)
CPAs’ Office Address 4/F, Tower 2, No. 16 Xisihuanzhong Road, Haidian District, Beijing
Name of the Signing Certified Zhao Yanmei and Wang Zongpei
Public Accountants
Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
√ Applicable Not applicable
Name of the
Name of sponsor Sponsor’ office address representatives of sponsor Period under ongoing supervision
Zhongtai Securities Securities Tower, No. 86 Jingqi Road, Qian Wei and Zeng Liping 16 March 2016 – 22 November 2016
Company Limited Jinan, Shandong Province
CSC Financial 9/F, Block B and E, Kaiheng Song Shuangxi and 23 November 2016 –
Co., Ltd. Center, No. 2 Chaonei Avenue, Shen Xiqiang 31 December 2017
Dongcheng District, Beijing
Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period
Applicable √ Not applicable
2016 ANNUAL REPORT
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II Company Profile and Key Financial Indicators
VI. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company due to change of
accounting policies and correction of accounting errors
Yes √ No
Increase/decrease
for the year as
compared to
2016 2015 the prior year (%)
Revenue (RMB) 22,907,118,241.84 20,241,906,131.81 13.17% 19,101,677,077.69
Net profit attributable to shareholders
of the Company (RMB) 2,063,986,822.25 1,021,224,678.04 102.11% 505,204,384.73
Net profit after extraordinary gains or
losses attributable to shareholders
of the Company (RMB) 1,611,533,699.22 719,891,359.63 123.86% 130,445,644.83
Net cash flows from operating
activities (RMB) 2,153,049,269.84 -9,721,363,524.30 122.15% 985,399,735.85
Basic earnings per share
(RMB per share) 0.99 0.50 98.00% 0.26
Diluted earnings per share
(RMB per share) 0.99 0.50 98.00% 0.26
Rate of return on net assets on
weighted average basis 9.59% 6.73% 2.86% 3.62%
Increase/decrease
as at the end
of the year
compared
As at the As at the to the end of As at the
end of 2016 end of 2015 the prior year (%) end of 2014
Total assets (RMB) 82,285,354,532.14 77,961,699,547.59 5.55% 56,822,026,545.21
Net assets attributable to shareholders
of the Company (RMB) 22,218,808,367.43 16,871,494,584.82 31.69% 13,917,343,301.15
Explanation: Net profit attributable to shareholders of the Company does not exclude the effect of interest payment deferred
and accumulated to subsequent periods for perpetual bonds under other equity instruments. When calculating financial
indicators such as earnings per share and rate of return on net assets on weighted average basis, the interest for perpetual
bonds from 1 January 2016 to 31 December 2016 of RMB153,140,000.00 is deducted. For details, please refer to Note XVII.
2 of section XIII of this report.
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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II Company Profile and Key Financial Indicators
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.
VIII. Key Financial Indicators by Quarter
Unit: RMB
1Q 2Q 3Q 4Q
Revenue 4,951,931,256.74 5,654,427,476.28 5,965,699,811.33 6,335,059,697.49
Net profit attributable to shareholders
of the Company 402,131,344.77 537,033,525.83 614,998,648.94 509,823,302.71
Net profit after extraordinary gains or losses
attributable to shareholders of the Company 292,898,560.63 448,912,523.19 522,725,460.32 346,997,155.08
Net cash flows from operating activities -3,936,890,898.29 1,239,381,045.25 -422,581,643.26 5,273,140,766.14
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
disclosed in the quarterly report or interim report
Yes √ No
2016 ANNUAL REPORT 7
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II Company Profile and Key Financial Indicators
IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
Rules
Unit: RMB’0,000
For the year ended 31 December
2016 2015 2014 2013
Revenue 2,290,711 2,024,191 1,910,168 2,038,889 1,976,168
Profit before tax 258,317 141,017 56,101 86,629 -1,614
Tax 56,056 43,224 10,770 17,594 -6,283
Profit for the current period attributable to
shareholders of the listed company 206,399 102,122 50,520 71,066 22,103
Minority interests -4,138 -4,329 -5,190 -2,030 -17,435
Basic earnings per share (RMB/share) 0.99 0.50 0.26 0.35 0.11
Rate of return on net assets on weighted
average basis (%) 9.59% 6.73% 3.62% 5.11% 1.63%
Unit: RMB’0,000
For the year ended 31 December
2016 2015 2014 2013
Total assets 8,228,535 7,796,170 5,682,203 4,752,188 4,772,542
Total liabilities 5,972,050 6,070,277 4,247,396 3,288,353 3,338,000
Minority interests 34,605 38,743 43,073 59,847 58,592
Equity attributable to shareholders of the
listed company 2,221,881 1,687,149 1,391,734 1,403,989 1,375,950
Net current assets/(liabilities) -1,094,182 -1,347,029 -452,549 -106,347 24,638
Total assets less current liabilities 3,557,671 2,932,756 2,872,637 2,823,321 2,775,419
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable Not applicable
Unit: RMB
Item Amount for 2016 Amount for 2015 Amount for 2014 Explanation
Profit or loss from disposal of non-current
assets (including write-off of provision
for assets impairment) -1,536,454.18 18,317,909.85 65,276,190.37
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 472,476,962.83 244,716,579.78 260,000,612.10
Profit or loss from debt restructuring -90,997.90 32,089,863.80 1,725,797.17
Gain or loss on external entrusted loans 87,608,490.56 94,777,777.77 82,833,581.81
Non-operating gains and losses other
than the above items 10,022,635.89 10,274,311.04 49,781,358.66
Gain or loss from changes in fair value of
consumable biological assets
subsequently measured at fair value -20,084,425.90 -19,078,538.02 6,856,815.32
Less: Effect of income tax 92,004,074.27 76,729,624.38 81,221,136.75
Effect of minority interests (after tax) 3,939,014.00 3,034,961.43 10,494,478.78
Total 452,453,123.03 301,333,318.41 374,758,739.90 —
Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its
recurring gain or loss items during the reporting period.
2016 ANNUAL REPORT 9
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III Chairman’s Report
Dear Shareholders,
I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2016. On behalf
of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to Chenming Paper.
In 2016, China’s economy grew at a slow yet stable pace with favourable momentum. The supply-side reform achieved
initial results. Against the backdrop of the stable macroeconomic operation, the paper making industry where the Company
operated was affected by factors including the supply-side structural reform, national environmental governance, elimination of
overcapacity and increase in market demand, favouring the accelerated price increases in the paper making industry. In particular,
in the second half year, there was a general increase in prices in the paper making industry in China due to the increased cost
of, among other things, wood pulp, waste paper, logistics and coal, showing signs of recovery in the industry with a boom to be
prolonged. On the other hand, with support from the documents in relation to the promotion of the leasing business issued by the
State Council, the leasing industry continued to grow in defiance of an overall swoon with increasing downward pressure on the
economic development.
In 2016, the Company aimed for “developing into an enterprise with hundreds of billions in value” by adhering to the main theme
of “achieving growth amid stability” and committed itself to “team building, management enhancement, outstanding business
performance and good results”. The Company stuck to its diversification strategy, accelerated transformation and upgrading, and
developed an industrial system that centred on pulp production, paper making and finance to achieve synergy among forestry
and mining so as to boost the management quality, core competitiveness and profitability. The past year was the best year for
the Company’s development so far. The overall strength of the Company significantly increased while the Company enhanced its
position in the industry, delivering excellent performance.
I. Results of Operations
In 2016, the Company completed the production of machine-made paper of 4.36 million tonnes with sales of 4.52 million
tonnes and achieved revenue of RMB22.907 billion, a year-on-year increase of 13.17%. The Company recorded operating
costs of RMB15.787 billion, a year-on-year increase of 6.93%. Total profit and net profit attributable to equity holders of the
Company were RMB2,583 million and RMB2,064 million respectively, up by 83.18% and 102.11% from the prior year. The
Company’s total assets amounted to RMB82.285 billion. The financial segment experienced stable development across
businesses with ever improving management systems and effective risk preventions.
II. Corporate Governance
During the reporting period, the Company regulated its operation under the requirements of Companies Law, Securities
Law, Code of Corporate Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock
Exchange, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related
provisions of the China Securities Regulatory Commission. The Company kept on improving and optimising its legal person
governance structure and regulating its operation in practice. The Board considered the state of the Company’s corporate
governance was substantially in compliance with the requirements and requests of the regulatory documents such as Code
of Corporate Governance for Listed Companies.
During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
governance. It improved corporate governance system in a timely manner and formulated and optimised management
systems including the Administrative Measures of Proceeds, the amended the Implementing Rules for Audit Committee
under the Board and amended Articles of Association in accordance with the regulatory requirements.
Strict enforcement of relevant internal control systems had promoted a regulated operation and healthy development of the
Company, protecting the legitimate rights and interests of our investors. The overall state of corporate governance was in
compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development strives
forward, its state of regulated operation and internal control will continue to improve.
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III Chairman’s Report
III. Dividend Distribution
Consistent with our long-term goal of pursuing the maximisation of corporate values, the Company has always placed much
emphasis on the benefits of and returns to our shareholders. The audited consolidated net profit attributable to shareholders
of the Company for 2016 prepared in accordance with Accounting Standards for Business Enterprises by the Company
amounted to RMB2,063,986,822.25. When deducting the interest for perpetual bonds of RMB153,140,000 for 2016, the
distributable profit realised for 2016 amounted to RMB1,910,846,822.25. In accordance with the requirements of the Articles
of Association and the Prospectus of Non-public Issuance of Preference Shares, the proposed profit distribution plan of the
Company for 2016 is as follows:
In accordance with the Prospectus of Non-public Issuance of Preference Shares, shareholders of preference shares
may jointly participate in the distribution of the 50% retained earnings realised for the year of issuance with ordinary
shareholders. The basis for the distribution is calculated as follows: (the number of months for the period from the next
month after the month of issuance to the end of the reporting period/12) the retained earnings realised for the year
50%, and the basis for the distribution is 9/12 19.11 50%=RMB717 million.
Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2016 and the 387,263,339 simulated
shares converted from the preference shares as at the end of 2016 on a conversion ratio of 1 share valued at RMB5.81, a
cash dividend of RMB6 (tax inclusive) per ten shares or RMB1,161,843,280.20 will be distributed to ordinary shareholders,
and a cash dividend of RMB3.08 (tax inclusive) per ten shares or a variable cash dividend of RMB119,277,108.41 will be
distributed to holders of preference shares. The retained earnings after the profit distribution will be carried forward for
distribution in subsequent years.
As always, the Company will continue to stay focused on its long-term development and maximise returns for our
shareholders by delivering better results.
IV. Future Development
In the light of the easing downward pressure on the national economy, improving income levels for residents and the
stabilising economy as a whole, the disparity between China and developed countries will become smaller. According to
the per capita consumption of paper products in developed countries, it is expected the per capita consumption of paper
and paper board will continue to increase in China. Besides, under the current market conditions, elimination of obsolete
production capacity in the paper making industry and increasingly stringent environmental protection policies are forcing
some small and medium-sized enterprises out of the market, thus favouring industry concentration and standardised
industry competition to establish a sound industry cycle. There are obvious signs for industry recovery with a boom to be
prolonged.
Since the implementation of the “Thirteenth Five Year Plan”, the accelerated urbanisation and industrialisation in China, the
change in driver of economic growth, upgrade of traditional industries, development of emerging industries, and continuous
infrastructure construction require substantial investment in fixed assets. China will become the largest leasing market in the
world. According to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial
Leasing Industry 2016-2021 issued by ASKCI Consulting Co. Ltd., the financial leasing industry will grow at a compound
annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial leasing
industry in China will amount to RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China
are promising.
Looking forward, the Company will adhere to the main theme of emphasising on environmental protection, low carbon,
recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific
development and quality and efficiency enhancement, it will comprehensively improve its quality and efficiency,
management level, technology application, sense of happiness and brand image through the integration between its
production and manufacture segment and financial services segment, incorporation of smart technology into its industrial
activities, further reorganised methodology and restructuring so as to achieve taxable profit over RMB10 billion and develop
into an integrated diversified enterprise with hundreds of billions in value during the “Thirteenth Five Year Plan” period.
Chen Hongguo
Chairman
17 February 2017
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:46:55
IV Business Overview
I. Principal operations of the Company during the Reporting Period
Whether the Company needs to comply with the disclosure requirements of specific industries
No
(I) Principal operations of the Company during the Reporting Period
The Company is a large and integrated modern conglomerate principally engaged in pulp production, paper making,
finance and forestry businesses while also involved in mining, energy, logistics, construction materials, hotel operation
and others. It is also the only listed company with A shares, B shares, H shares and preference shares in issue and
the first company in the paper making industry having a finance company and a financial leasing company integrated
with its industrial activities in China. The machine-made paper business and the financial leasing business are main
sources of revenue and profit of the Company. In 2016, the Company completed the production of machine-made
paper of 4.36 million tonnes with sales of 4.52 million tonnes. During the reporting period, there was no significant
change in the principal operations of the Company.
1. Machine-made paper business
The Company is a leading player in the paper making industry in China. It has established production bases
in Shandong, Guangdong, Hubei, Jiangxi and Jilin with annual pulp and paper production capacity of
over 8,500,000 tonnes. It has the largest pulp paper production base in the world and dozens of pulp and
paper production lines of international advanced standards. The product mix of the Company has gradually
diversified into five major paper types, namely printing paper, packaging paper, office paper, industrial paper
and household paper, as well as the nine major product series which focus on high and middle end products,
including high-end cultural paper, coated paper, white paper board, newsprint paper, light weight coated paper,
copy paper, industrial paper, special paper and household paper.
The Company has scientific research institutions including the national enterprise technology centre, the post-
doctoral working station as well as state certified CNAS pulp and paper testing centre and has obtained over
150 national patents including 9 patents for invention, with 7 products selected as national new products and
29 products filling the gap in China. The Company has obtained 21 Science and Technology Progress Awards
above the provincial level and undertaken five national science and technology projects and 26 provincial
technological innovation projects. The brand “Chenming” is recognised as a well-known brand name in China.
2. Financial leasing business
Since the establishment of the Financial Leasing Company, it, relying on strong capital strength and talent
advantages of the Company while giving full play to the advantages of internationalisation and market-
oriented operation mechanisms, has been actively seeking the organic combination between industrial capital
and financial capital. Externally, it provides financing and value-added service solutions to large state-owned
enterprises, listed companies, government financing platforms, quality private enterprises, new and high-tech
enterprises, schools and hospitals. Internally, it adapts to the trend of diversification of demands in the financial
market and the development of integrated financial services within the Company to provide services for the
upstream and downstream sectors of the industry chain of the paper making industry. The leasing business
of the Financial Leasing Company is mainly conducted on a leaseback basis. Recently, the Financial Leasing
Company has become a new source of profit growth of the Company with sound momentum for future growth.
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:46:58
IV Business Overview
I. Principal operations of the Company during the Reporting Period (Cont’d)
(II) General information of the industries where the Company operated in during the reporting period
1. Paper making industry
The growth of the paper making industry tends to be closely correlated to the macroeconomic growth. While
there are adjustments of economic growth in China, the growth of the paper making industry is also subject
to pressure for adjustments. However, in the light of the easing downward pressure on the national economy,
improving income levels of residents and the stabilising economy as a whole, it is expected the per capita
consumption of paper and paper board will continue to increase. Besides, under the current market conditions,
as the enterprises step up efforts to eliminate obsolete production capacity and restructure their businesses, it
is expected the competition in the paper making industry will be further standardised.
In 2016, China’s economy grew at a slow yet stable pace with favourable momentum. The supply-side reform
achieved initial results. There were more drivers for economic growth. Against the backdrop of the stable
macroeconomic operation, the paper making industry where the Company operated was affected by factors
including the supply-side structural reform, national environmental protection governance, elimination of
overcapacity and increase in market demand, favouring the accelerated price increases in the paper making
industry. In particular, in the second half year, there was a general increase in prices in the paper making
industry in China due to the increased cost of, among other things, wood pulp, waste paper, logistics and coal.
In the medium to long run, as the supply-side reform in China further advances, the elimination of much more
obsolete production capacity in the paper making industry will accelerate, and the elimination of the production
capacity of small and medium-sized enterprises will also accelerate due to the strengthened environmental
governance, thus favouring industry concentration. There are obvious signs for industry recovery with a boom
to be prolonged.
The Company enjoyed obvious economies of scale in the paper making industry. The output and sales revenue
of the Company had been ranking high in the industry for many years, and its comprehensive economic benefits
had ranked first among the peers in the industry in China for many years in a row. Its comprehensive strength
had ranked among the top ten paper manufacturers in the world. Therefore, the Company enjoyed significant
economies of scale in the industry and was relatively favourably positioned for its future development. In
addition, as the first listed company with A shares, B shares, H shares and preference shares in issue in China,
the Company had gained access to the capital market, thus providing effective support for the future project
investments of the Company. The overall listing of the machine-made paper business of the Company also
made the management of the Company more regulated and the operations more transparent, thus laying a solid
foundation for the sustainable development of the Company.
2. Financial leasing industry
The Guiding Opinions on Accelerating the Development of Financial Leasing Industry and the Guiding Opinions
on Promoting the Sound Development of Financial Leasing Industry were issued by the State Council in 2015.
As the first national policy on promoting the financial leasing industry in China, the above opinions had paved
the way for the development of the financial leasing industry in the future.
Under the new normal of the economic development, the financial leasing industry in China entered its golden
years. According to the estimate of the China Leasing Alliance, there were over 7,000 headquarters enterprises
engaging in financial leasing in China, representing a year-on-year increase of approximately 2,500, as at the
end of the year. The outstanding financial leasing contracts amounted to RMB5.33 trillion, representing a year-
on-year increase of 20%. According to the Research Report on Business Prospects Survey of and Investment
Strategies in the China Financial Leasing Industry 2016-2021 issued by ASKCI Consulting Co., Ltd., the financial
leasing industry will grow at a compound annual growth rate of over 20% in the future and it is expected that
the output of the industry will amount to RMB20.79 trillion by 2021. The business prospects of the financial
leasing industry in China are promising.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:46:58
IV Business Overview
II. Material Changes of Major Assets
1. Material Changes of Major Assets
Major assets Description
Equity The Company made equity investments in Guangdong Dejun Investment Co.,
Ltd. during the reporting period.
Fixed Assets The Company reclassified the high-end packaging paper project of Jiangxi
Chenming and 600,000-tonne liquid packaging paper project of Zhanjiang
Chenming during the reporting period.
Construction in progress The Company reclassified the high-end packaging paper project of Jiangxi
Chenming and 600,000-tonne liquid packaging paper project of Zhanjiang
Chenming during the reporting period.
2. Major Assets Overseas
Applicable √ Not applicable
III. Analysis of Core Competitiveness
Whether the Company needs to comply with the disclosure requirements of specific industries
No
The Company is a leading player in the paper making industry of China. After entrepreneurship and innovation for more than
half a century, it has developed into a large and integrated modern conglomerate principally engaged in pulp production,
paper making, finance and forestry businesses while also involved in mining, energy, logistics, construction materials, hotel
operation and others. It is also the only listed company with A shares, B shares, H shares and preference shares in issue
in China and the first company in the paper making industry having a finance company and a financial leasing company
integrated with its industrial activities in China. Compared with other enterprises in the industry, the Company has the
following advantages:
1. Scale advantages
After years of development, the Company, being a leading player in the paper making industry in China, has achieved
annual pulp and paper production capacity of over 8.50 million tonnes and is capable to compete with international
paper making enterprises in scale. The large-scale centralised production and operation model has provided
the Company with obvious economic benefits. The Company also has strong market influence over raw material
procurement, product pricing and industry policymaking.
2. Product advantages
While the production scale of the Company is expanding rapidly, its product mix also continues to optimise. In recent
years, the Company has built production lines for cultural paper such as high-end coated paper, high-end food
packaging paper and high-end white paper board. The product mix of the Company has gradually diversified into five
major paper types, namely printing paper, packaging paper, office paper, industrial paper and household paper, as
well as the nine major product series which focus on high and middle end products, including high-end cultural paper,
coated paper, white paper board, newsprint paper, light weight coated paper, copy paper, industrial paper, specialty
paper and household paper. Thus, the Company has become the enterprise that offers the widest product range in
China’s paper making industry. Diversification and gentrification of the product mix has not only greatly enhanced the
Company’s ability to withstand market risks, but also enabled the Company to maintain a relatively high profitability
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:46:58
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
3. Advantages in technical equipment
The Company’s overall technical equipment has reached the advanced international level. The major production
equipment has been imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso
of Finland, Voith of Germany and TBC of the United States. The equipment such as advanced dilution headboxes,
top wire formers, unirun dryers, on-machine film coaters, non-contact hot air drying and two-sided soft and dense
calender machines in the world is equipped with advanced technologies including online paper disease monitoring
system, caliper control system and intelligent quality control system.
The technical equipment used by the Company generally reflects the characteristics of being technology-intensive
and the integration of mechanical and electrical in the paper making industry nowadays. The degassing technology,
wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet
coating technology, multi-nip pressure balanced calender technology and the technical processes independently
developed by the Company of the pulp systems have all reached the international advanced level.
4. Advantages in research and innovation and new product development
The Company is a high and new-technology enterprise and gives full play to its strong research capability. Supported
by the national enterprise technology centre and the post-doctoral working station, the Company has established
a comprehensive intellectual property system and put more and more efforts in technical innovation and scientific
research and development to develop new products with high technology contents and high added value as well
as proprietary technologies. Meanwhile, the technology centre of the Company has actively engaged in technical
cooperation with schools, research institutions and international advanced enterprises. The Company has obtained
over 150 national patents including 9 patents for invention, with 7 products selected as national new products and
29 products filling the gap in China. The Company has obtained 21 Science and Technology Progress Awards above
the provincial level and undertaken five national science and technology projects and 26 provincial technological
innovation projects. The brand “Chenming” is recognised as a well-known brand name in China.
5. Funding advantages
The paper making industry is a capital-intensive industry, and funding is one of the most important factors in the
development of the industry. The Company has high profitability and credit status, and has maintained long-term
stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing
capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance
structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained
have been applied effectively with good market image, the Company has stronger abilities in direct financing in the
capital market.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:46:58
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
6. Team advantages
The key management members and the core personnel of the Company remain stable. In the business development
of Chenming Paper, an internal corporate culture developed by the stable core staff team favourable to the growth of
the Company consolidates the management experience specific to the industry, thus resulting in a team advantage
blended with management and culture. Meanwhile, the Company has attracted experienced professionals with
financial, legal, financial management backgrounds through its advanced management philosophy and ample room
for development. The high quality and professional team secures the sustainable development of the Company with a
solid supply of talents.
7. Advantages in environmental governance capacity
In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities including the
alkali recovery system, middle water treatment system, white water recovery system and black liquor comprehensive
utilisation system. The environmental emission indicators of the Company rank high among industry peers. Besides,
the national policy of eliminating obsolete production capacity will facilitate the development of the paper making
industry while the replenishment and replacement of advanced production capacity will bring new blood and
momentum into the paper making industry, favouring industry concentration to establish a sound industry cycle.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:46:58
V Discussion and Analysis of Operations
I. Overview
In 2016, the Company aimed for “developing into an enterprise with hundreds of billions in value” by adhering to the main
theme of “achieving growth amid stability” and committed itself to “team building, management enhancement, outstanding
business performance and good results”. The Company stuck to its diversification strategy, accelerated transformation
and upgrading, and developed an industrial system that centred on pulp production, paper making and finance to achieve
synergy among forestry and mining so as to boost the management quality, core competitiveness and profitability.
The past year was the best year for the Company’s development so far. The overall strength of Company significantly
increased while the Company enhanced its position in the industry, delivering excellent performance. In 2016, the Company
completed the production of machine-made paper of 4.36 million tonnes with sales of 4.52 million tonnes and achieved
revenue of RMB22.907 billion, a year-on-year increase of 13.17%. The Company recorded operating costs of RMB15.787
billion, a year-on-year increase of 6.93%. Total profit and net profit attributable to equity holders of the Company were
RMB2,583 million and RMB2,064 million respectively, up by 83.18% and 102.11% from the prior year. The Company’s total
assets amounted to RMB82.285 billion. The financial segment experienced stable development across businesses with ever
improving management systems and effective risk preventions.
(I) New era in corporate management
The Company introduced a professional management consulting company to make changes focusing on the three
aspects, namely, organisation management and structural optimisation, remuneration system and performance
appraisal. The Company placed emphasis on “strengthening the headquarters and consolidating secondary
companies” and adjusted the organisation structure of the Group. The Company also achieved synergy among three
segments, namely manufacturing, finance and supply chain trading, to expand and develop into a diversified group
integrating production, financing and trading.
(II) New performance in marketing
The Company attached great importance to its employees. Human resources were actively introduced at all levels.
The appraisal methodology was optimised to reward the diligent. The market-based sales work assignment toolkit
was established and the product lines were segmented. A company was set up for electrostatic paper products and
the development of major customers was strengthened. Management of receivables was strengthened and default in
delivery was controlled strictly. Delivery and reduction in inventories were implemented.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(III) New progress in production and operation
Primary management was steadily enhanced and production and operation continued to be highly effective in
strict compliance with the standard parameters and subject to the sheet break and review of operation efficiency.
The Company watched the markets closely to adjust its product mix by developing high value added products
such as glassine paper, wine label paper, super high-bulk white paper board and high weight duplex press paper.
The Company gained efficiency through optimisation of the pulp structure, substitution of domestically produced
chemicals for overseas ones, and promotion of the application of new technologies such as filler enhancers and novel
retention agents.
(IV) New development in the financial segment
The Company successfully issued preference shares of RMB4.5 billion as the first Shandong-based listed company
and the first company in the industry to issue preference shares. The Company secured the special funds of RMB700
million from the National Development and Reform Commission and China Development Bank at a return rate of 1.2%
per annum to reduce its finance expenses, which was a precedent in the paper making industry. The invoicing system
of the Finance Company was approved to be online to increase the business of the rediscounting channel of People’s
Bank of China. The Finance Company developed all lines of business.
(V) New momentum gained from corporate development
Progress of new projects accelerated: Zhanjiang Chenming’s liquid packaging paper project commenced operation
smoothly in October 2016. Haiming Mining’s magnesite mining project entered the peak time of shaft construction
and equipment installation. Huanggang Chenming’s forestry pulp integration project commenced the construction of
pulp manufacturing facilities, piers and staff quarters. Shouguang Chenming’s chemical pulp project made progress
on schedule. The above projects played a very important role in reinforcing the subsequent corporate development
and facilitating the fulfilment of corporate strategic objectives.
(VI) New benefits from procurement
Procurement to reduce costs with benefits at source paid off. The Company cooperated with quality and major
suppliers to reduce overall procurement costs. The measures such as overseas financing, adjusted and centralised
payment procedures and boosted sales volume of trading increased benefits by reducing the capital appropriated
for inventories. The electronic commodity exchange for pulp and paper was approved as a trading platform for the
integrated pulp and paper supply chain system, which became a new source of profit growth.
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations
1. Overview
Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2016 2015 Increase/decrease
Amount % of revenue Amount % of revenue (%)
Total revenue 22,907,118,241.84 100% 20,241,906,131.81 100% 13.17%
By industry
Machine-made paper 19,536,639,601.47 85.29% 18,072,997,652.53 89.29% 8.10%
Financial leasing 2,339,925,682.07 10.21% 1,084,860,187.11 5.36% 115.69%
Electricity and steam 338,702,429.21 1.48% 437,772,691.42 2.16% -22.63%
Construction materials 227,629,265.80 0.99% 223,266,272.44 1.10% 1.95%
Chemicals 129,003,963.48 0.56% 124,008,406.45 0.61% 4.03%
Hotel 26,677,286.19 0.12% 27,136,077.49 0.13% -1.69%
Others 308,540,013.62 1.35% 271,864,844.37 1.34% 13.49%
By product
Duplex press paper 4,966,155,905.70 21.68% 4,460,441,279.15 22.04% 11.34%
Coated paper 4,428,162,301.09 19.33% 4,365,890,220.92 21.57% 1.43%
White paper board 2,815,701,912.71 12.29% 1,915,153,293.25 9.46% 47.02%
Electrostatic paper 2,107,489,078.57 9.20% 1,580,897,670.32 7.81% 33.31%
Anti-sticking raw paper 1,009,523,792.88 4.41% 897,236,148.18 4.43% 12.51%
Newsprint paper 996,218,028.98 4.35% 970,297,912.12 4.79% 2.67%
Household paper 659,518,362.24 2.88% 670,406,337.06 3.31% -1.62%
Light weight paper 463,577,121.66 2.02% 612,237,436.63 3.02% -24.28%
Writing paper 274,469,632.58 1.20% 289,489,121.26 1.43% -5.19%
Other machine-made paper 1,815,823,465.06 7.93% 2,310,948,233.64 11.42% -21.43%
Financial leasing 2,339,925,682.07 10.21% 1,084,860,187.11 5.36% 115.69%
Electricity and steam 338,702,429.21 1.48% 437,772,691.42 2.16% -22.63%
Construction materials 227,629,265.80 0.99% 223,266,272.44 1.10% 1.95%
Chemicals 129,003,963.48 0.56% 124,008,406.45 0.61% 4.03%
Hotel 26,677,286.19 0.12% 27,136,077.49 0.13% -1.69%
Others 308,540,013.62 1.35% 271,864,844.37 1.34% 13.49%
By geographical segment
Mainland China 19,628,612,055.93 85.69% 16,431,182,080.91 81.17% 19.46%
Other countries and regions 3,278,506,185.91 14.31% 3,810,724,050.90 18.83% -13.97%
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.19 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(2) Industries, products or regions accounting for over 10% of revenue or operating profit of the Company
√ Applicable Not applicable
Whether the Company needs to comply with the disclosure requirements of specific industries
No
Unit: RMB
Increase/decrease Increase/decrease of
Increase/decrease of of operating costs gross profit margin
revenue as compared as compared to the as compared to the
to the corresponding corresponding period corresponding period
Revenue Operating costs Gross profit margin period of the prior year of the prior year of the prior year
By industry
Machine-made paper 19,536,639,601.47 14,893,061,575.87 23.77% 8.10% 6.87% 0.87%
Financial leasing 2,339,925,682.07 219,444,595.95 90.62% 115.69% 71.75% 2.40%
By product
Duplex press paper 4,966,155,905.70 3,719,642,641.60 25.10% 11.34% 10.71% 0.43%
Coated paper 4,428,162,301.09 3,287,988,564.78 25.75% 1.43% 0.91% 0.38%
White paper board 2,815,701,912.71 2,127,180,790.00 24.45% 47.02% 45.33% 0.88%
Financial leasing 2,339,925,682.07 219,444,595.95 90.62% 115.69% 71.75% 2.40%
By geographical segment
Mainland China 16,258,133,415.56 12,009,467,873.60 26.13% 13.99% 7.21% 4.68%
Other countries
and regions 3,278,506,185.91 2,883,593,702.27 12.05% -13.97% 5.50% -16.23%
Under the circumstances that the statistics specification for the Company’s principal operations data
experienced adjustment in the reporting period, the principal operations data upon adjustment of the statistics
specification at the end of the reporting period in the latest year
√ Applicable Not applicable
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes No
Increase/
decrease
By industry Item Unit 2016 2015 (%)
Machine-made paper Sales ’0,000 tonnes 452 415 8.92%
Production output ’0,000 tonnes 436 418 4.31%
Inventories ’0,000 tonnes 33 49 -32.65%
Explanation on why the related data varied by more than 30%
√ Applicable Not applicable
The inventories of machine-made paper decreased by 32.65% as compared to the corresponding period of the
prior year mainly due to the increase in sales as a result of market recovery and increase in price.
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(4) Performance of material sales contracts of the Company during the reporting period
Applicable √ Not applicable
(5) Composition of operating costs
By industry
Unit: RMB
2016 2015 Increase/decrease
By industry Item Amount % of operating costs Amount % of operating costs (%)
Machine-made paper Raw materials 8,974,526,123.35 60.26% 8,201,192,813.92 58.85% 9.43%
Depreciation 768,639,922.25 5.16% 717,089,611.94 5.15% 7.19%
Labour costs 186,978,418.54 1.26% 155,963,303.02 1.12% 19.89%
Energy and power 1,526,753,692.29 10.25% 1,431,585,168.47 10.27% 6.65%
Chemicals 2,014,239,925.46 13.52% 2,239,539,323.75 16.07% -10.06%
Other production costs 1,421,923,493.98 9.55% 1,189,915,009.44 8.54% 19.50%
Subtotal 14,893,061,575.87 100.00% 13,935,285,230.54 100.00% 6.87%
Power and steam Raw materials 161,521,323.47 75.37% 212,564,419.12 76.48% -24.01%
Depreciation 19,858,908.35 9.27% 26,248,475.37 9.44% -24.34%
Labour costs 7,643,082.12 3.57% 9,007,758.17 3.24% -15.15%
Energy and power 2,769,566.68 1.29% 6,764,518.93 2.43% -59.06%
Chemicals 697,230.84 0.33% 3,670,407.74 1.32% -81.00%
Other production costs 21,811,402.07 10.18% 19,675,742.40 7.08% 10.85%
Subtotal 214,301,513.53 100.00% 277,931,321.73 100.00% -22.89%
Construction materials Raw materials 116,872,767.63 67.09% 130,797,042.19 74.04% -10.65%
Depreciation 4,589,639.45 2.63% 4,696,431.30 2.66% -2.27%
Labour costs 11,218,728.30 6.44% 7,362,629.26 4.17% 52.37%
Energy and power 22,500,486.99 12.92% 21,178,593.05 11.99% 6.24%
Other production costs 19,011,859.48 10.91% 12,628,034.78 7.15% 50.55%
Subtotal 174,193,481.85 100.00% 176,662,730.59 100.00% -1.40%
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(6) Change of scope of consolidation during the reporting period
√ Yes No
1. Newly established subsidiaries
Registered
Time of capita
Name incorporation Scope of business (RMB’0,000) Shareholding
Qingdao Chenming Nonghai 2016.07 Financial leasing, operating leasing, 500,000.00 100%
Financial Leasing Co., Ltd. purchase of assets for leasing, etc.
Jilin Chenming Logistics 2016.08 Road transportation of general 500.00 100%
Co., Ltd. cargo; transportation for
containers; road transportation
agency; consultation on cargo
transportation; warehousing,
loading and unloading
services, etc.
Jiangxi Chenming Logistics 2016.09 Road transportation of general 500.00 100%
Co., Ltd. cargo; transportation for
containers; road transportation
agency; consultation on cargo
transportation; warehousing,
loading and unloading
services, etc.
2. Disposal of subsidiaries
Difference
between
consideration
and share of
net assets
of relevant
subsidiary
Consideration as per
of disposal Shareholding Nature of consolidated
of equity of disposal disposal financial
interest of equity of equity Time of loss statements
Name (RMB’0,000) interest (%) interest of control Basis for time (RMB)
Shouguang Chenming 100.00 100.00 Transfer 2016.12 Equity transfer 1203.18
Jiatai Property agreement and
Management Co., Ltd. consideration
received
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period
Applicable √ Not applicable
(8) Sales to major customers and major suppliers
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 1,366,256,966.82
Total sales to top 5 customers as a percentage of the total sales for the year 5.96%
Sales to top 5 customers who are related parties as a percentage of the total
sales for the year 1.06%
Information on top 5 customers of the Company
As a percentage
of the total sales
No. Name of customer Sales (RMB) for the year (%)
1 XIAMEN ITG GROUP CORP., LTD 334,802,947.45 1.46%
2 SHANGHAI YAOJI PLAYING CARD CO., LTD. 309,184,951.64 1.35%
3 DELI GROUP CO., LTD. 263,198,484.86 1.15%
4 ANHUI TIME SOURCE CORPORATION 242,616,643.35 1.06%
5 VITAL SOLUTIONS PTE LTD 216,453,939.52 0.94%
Total 1,366,256,966.82 5.96%
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 3,174,029,707.71
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 20.11%
Total purchases from top 5 suppliers who are related parties as a percentage
of the total purchases for the year 0.00%
Information on top 5 suppliers of the Company
As a percentage of
the total purchases
No. Name of supplier Purchases (RMB) for the year (%)
1 GUANGDONG LEPENG TRADING CO., LTD 789,805,758.56 5.00%
2 ITOCHU HONGKONG LTD 787,631,291.55 4.99%
3 ZHANJIANG MINGLI TRADING CO., LTD 768,404,800.30 4.87%
4 JIANGXI COAL SALES CO., LTD. 416,884,759.82 2.64%
5 SHANDONG HEXIN CHEMICAL GROUP CO., LTD. 411,303,097.47 2.61%
Total 3,174,029,707.70 20.11%
2016 ANNUAL REPORT 23
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
3. Expenses
Unit: RMB
Increase/
2016 2015 decrease (%) Reasons for material changes
Selling and distribution 1,166,484,567.20 1,190,961,739.99 -2.06% Mainly due to strengthened
expenses management and strict expense
control.
General and 1,441,458,586.06 1,384,652,496.82 4.10% Mainly due to increase in research
administrative and development expenditure.
expenses
Finance expenses 1,818,564,890.78 1,669,400,051.76 8.94% Mainly due to increase in interest
expenses.
Taxes and surcharges 251,439,236.50 133,046,735.23 88.99% Mainly due to the reclassification
of taxes originally included in
administrative expenses.
Loss on impairment of 413,711,106.31 60,968,344.72 578.57% Mainly due to the provision of
assets impairment for the idle fixed assets
of Fuyu Chenming and Jiangxi
Chenming.
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
4. Research and development expenditure
√ Applicable Not applicable
The Company had been watching closely the changes in economic situation and market development in China since
2016. Driven by customers’ demand and targeting at enhancing economic benefits, the Company strived to conduct
R&D on product differentiation and refining. The Company also promoted structural adjustments in products and
eliminated obsolete production capacity while developing new products with high technology contents and high
economic benefits. For example, six projects such as “technical development of special cardboard for pharmaceutical
packaging”, “technical development of special raw paper for babies”, “technical development of high-bulk matte
coated paper” and “technical development of high-end wet curtain raw paper, were listed into the technological
innovative project plans of Shandong Province for 2016. Meanwhile, the Company completed the development of high
value-added products such as high-end glassine paper, wine label paper, super high-bulk white paper board, high
weight duplex press paper or their upgrades, thereby making significant improvement in product quality, enhancing
market competitiveness and raising economic benefits.
Research and development expenditure
2016 2015 Percentage change
R&D headcount 1,161 1,108 4.78%
Ratio of R&D personnel 8.94% 9.32% -0.38%
R&D expenditure (RMB) 735,689,011.01 649,368,119.76 13.29%
R&D expenditure to revenue 3.21% 3.21%
Capitalised R&D expenditure (RMB) 0.00 0.00
Capitalised R&D expenditure to R&D expenditure 0.00% 0.00%
Reasons for significant change in total R&D expenditure to revenue
Applicable √ Not applicable
Reasons and basis for significant change in R&D capitalisation ratio
Applicable √ Not applicable
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
5. Cash flows
Unit: RMB
Increase/
decrease
Item 2016 2015 (%)
Subtotal of cash inflows from operating activities 23,640,327,789.01 20,059,101,045.18 17.85%
Subtotal of cash outflows from operating activities 21,487,278,519.17 29,780,464,569.48 -27.85%
Net cash flows from operating activities 2,153,049,269.84 -9,721,363,524.30 122.15%
Subtotal of cash inflows from investing activities 660,100,177.22 641,826,148.96 2.85%
Subtotal of cash outflows from investing activities 4,327,554,352.96 4,102,411,633.83 5.49%
Net cash flows from investing activities -3,667,454,175.74 -3,460,585,484.87 -5.98%
Subtotal of cash inflows from financing activities 59,667,079,610.56 42,750,073,812.63 39.57%
Subtotal of cash outflows from financing activities 58,037,514,000.21 28,686,399,578.97 102.32%
Net cash flows from financing activities 1,629,565,610.35 14,063,674,233.66 -88.41%
Net increase in cash and cash equivalents 91,753,551.86 912,010,632.46 -89.94%
Explanation on main effects of material changes
√ Applicable Not applicable
(1) Net cash flows from operating activities increased by 122.15% as compared to the corresponding period of the
prior year mainly due to the increased sales of machine-made paper with higher revenue, and the decreased
external investment of the financial leasing business.
(2) Net cash flows from financing activities decreased by 88.41% as compared to the corresponding period of the
prior year mainly due to the increase in repayment for the corporate bonds, privately placed bonds and short-
term commercial paper due.
Explanation on main reasons leading to the material difference between net cash flows from operating activities during
the reporting period and net profit for the year
Applicable √ Not applicable
III. Analysis of non-principal operations
Applicable √ Not applicable
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IV. Assets and liabilities
1. Material changes of asset items
Unit: RMB
As at the end of 2016 As at the end of 2015
As a percentage of As a percentage of
Amount total assets Amount total assets Percentage change Description of major changes
Monetary funds 10,109,930,319.49 12.29% 8,984,326,016.01 11.52% 0.77% Mainly due to the increase of the sales revenue.
Accounts receivable 3,974,065,104.15 4.83% 3,951,287,979.32 5.07% -0.24% –
Inventories 4,862,668,746.90 5.91% 5,210,917,891.42 6.68% -0.77% –
Investment property 14,258,675.83 0.02% 15,996,931.87 0.02% 0.00% –
Long-term equity investments 67,251,992.88 0.08% 70,492,256.38 0.09% -0.01% –
Fixed assets 28,811,555,365.39 35.01% 24,169,725,529.18 31.00% 4.01% Mainly due to the reclassification of the high-end packaging
paper project of Jiangxi Chenming and 600,000-tonne liquid
packaging paper project in Zhanjiang.
Construction in progress 4,115,194,870.23 5.00% 5,829,619,258.48 7.48% -2.48% Mainly due to the reclassification of the high-end packaging
paper project of Jiangxi Chenming and 600,000-tonne liquid
packaging paper project in Zhanjiang.
Short-term borrowings 27,875,506,988.53 33.88% 24,755,535,672.86 31.75% 2.13% Mainly due to the greater demand for short-term working
capital as a result of the increase of the production scale of
the Company.
Long-term borrowings 6,935,598,781.23 8.43% 5,169,381,063.83 6.63% 1.80% Mainly due to the increase of long-term borrowings as a result
of the increased investment in the projects of the Company.
Available-for-sale 1,945,000,000.00 2.36% 109,000,000.00 0.14% 2.22% Mainly due to the additional investment of RMB1.85 billion in
financial assets Guangdong Dejun Investment Co., Ltd.
Accounts payable 3,724,266,382.06 4.53% 2,942,337,386.57 3.77% 0.76% Mainly due to the increase in the amounts payable for projects.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IV. Assets and liabilities (Cont’d)
2. Assets and liabilities measured at fair value
√ Applicable Not applicable
Unit: RMB
Profit or loss
from change in Cumulative Impairment
fair value during fair value change provided during Purchases Disposal during
Item Opening balance the period charged to equity the period during the period the period Closing balance
Financial assets
Consumable biological assets 1,509,964,711.87 -20,084,425.90 120,474,840.64 229,064,141.88 85,430,433.57 1,633,513,994.28
Total 1,509,964,711.87 -20,084,425.90 120,474,840.64 229,064,141.88 85,430,433.57 1,633,513,994.28
Financial liabilities 0.00 0.00
Whether there were any material changes on the measurement attributes of major assets of the Company during the
reporting period
Yes √ No
3. Restriction on asset rights as at the end of the reporting period
Carrying amount as
Item at the end of the year Reasons for such restriction
Monetary funds 8,130,069,273.87 As deposits for bank acceptance bills, letters of credit and bank
borrowings, and deposit reserves
Bills receivable 637,871,869.25 As collateral for short-term borrowings, bills payable, letters of
guarantee and letters of credit
Fixed assets 4,597,554,400.35 As collateral for bank borrowings and long-term payables
Intangible assets 432,328,638.94 As collateral for bank borrowings and long-term payables
Total 13,797,824,182.41
V. Analysis of Investments
1. Overview
√ Applicable Not applicable
Investments during the reporting Investments during the corresponding
period (RMB) period of prior year (RMB) Change
4,603,144,781.24 4,664,143,400.00 -1.31%
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
V. Analysis of Investments (Cont’d)
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Progress as Profit or l ss from Lawsuit i
Form of Period of at the date of Estimated i vestment for the i volved Date of
Name of i vestees Principal activ t es i vestment Investment amount Sharehold ng Source of fund Partner(s) i vestment Product type balance sheet return reporting period or not disclosure (if any) Disclosure i dex (if any)
Qingdao Chenming Nonghai Financia l asing Newly 1,392,144,781.24 100.00% Self-owned funds Not appl cable 22 July 2016 - 21 Financial leasing Completed Not appl cable 11,405,095.03 No 31 March 2016 http://www.cninfo.com.cn/
Financia Leasing Co., Ltd. business (excluding establ shed July 2046 business
financia l asing) and
operating l asing
business, etc.
Shandong Chenming Group Business as Capital 1,000,000,000.00 100.00% Self-owned funds Not appl cable Long term Corporate Completed Not appl cable 104,001,738.03 No 14 September 2016 http://www.cninfo.com.cn/
Finance Co., Ltd. permitted by the i crease financia business
China Banking
Regulatory Commission
pursuant to relevant
l ws, admin strative
regulations and
other regulations.
Guangdong Dejun Investment House l asing; sales Capital 1,850,000,000.00 50.00% Self-owned funds Shanghai Zhongneng Long term Project Completed Not appl cable 0.00 No 28 December 2016 http://www.cninfo.com.cn/
Co., Ltd. of: chemical materia s i crease Enterprise Development i vestment
(excluding dangerous (Group) Co., Ltd.
chemicals), metal i
materia s, bui d ng
materia s, paper-making
materia s and paper,
cement, steel and mineral
products (excluding
tungsten, tin and stib um),
electronic appl ances and
components, mechanical
equipment, electronic
products, hardware
products, l bour i surance
products, agricultural by-
products; and export
and i port of goods and
technology.
Shanghai Hengzheng Venture Investment management, Newly 6,000,000.00 11.43% Self-owned Shanghai Hengying 24 February Investment Completed Not appl cable 0.00 No 19 December 2016 http://www.cninfo.com.cn/
Capital Investment Center venture capital i vestment, establ shed funds Cisheng Asset 2016 management
(Lim ted Partnership) i dustria i vestment, asset Management Co., Ltd.; Li – 23 February
management, i vestment Yuan, Wu Sis , etc. 2036
consultation and
commercia i formation
consultation.
Shandong Chenming Paper Sale of machine-made Capital 350,000,000.00 100.00% Self-owned Not appl cable 17 March 2010 Paper product Completed Not appl cable 5,703,360.87 No Not appl cable Not appl cable
Sales Company Lim ted paper, paperboard, paper- i crease funds to 10 March trading
making materia s and
accessories and paper
machinery.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
V. Analysis of Investments (Cont’d)
2. Material equity investments during the reporting period (Cont’d)
Progress as Profit or l ss from Lawsuit i
Form of Investment Period of at the date of Estimated i vestment for the i volved Date of
Name of i vestees Principal activ t es i vestment amount Sharehold ng Source of fund Partner(s) i vestment Product type balance sheet return reporting period or not disclosure (if any) Disclosure i dex (if any)
Jiangxi Chenming Logistics Road transportation Newly 100.00% Self-owned Not appl cable Long term Logistics Capital Not appl cable -41,544.31 No Not appl cable Not appl cable
Co., Ltd. of general cargo; establ shed funds contribution to
transportation for be made
containers; road
transportation agency;
consultation on
cargo transportation;
warehousing, l ading and
unloading services, etc.
Ji i Chenming Logistics Road transportation Newly 5,000,000.00 100.00% Self-owned Not appl cable Long term Logistics Completed Not appl cable 60,579.45 No Not appl cable Not appl cable
Co., Ltd. of general cargo; establ shed funds
transportation for
containers; road
transportation agency;
consultation on
cargo transportation;
warehousing, l ading and
unloading services, etc.
Total 4,603,144,781.24 Not appl cable 121,129,229.07
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
V. Analysis of Investments (Cont’d)
3. Material non-equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Accumulated
realised Reasons
Industry in Accumulated return for failure
which the Investment actual amount as of the in meeting
Fixed assets investment amount during invested as of end of the scheduled Date of
Form of investment project the reporting the end of Estimated reporting progress and disclosure
Project name investment or not operates period reporting period Source of fund Progress return period estimated return (if any) Disclosure index (if any)
Forestry paper Self- Yes Pulp 1,486,551,177.12 2,147,036,838.90 Self-raised and 41.57% The expected net profit 0 Not yet completed 2 August 2013 http://www.cninfo.com.cn/
integration project constructed production borrowings of the forest base will
of Huanggang amount to RMB102
Chenming million and the expected
average total profit per
annum of the industrial
project will amount to
RMB350 million.
600,000 tonne liquid Self- Yes Paper making 1,959,980,125.78 4,549,537,022.09 Self-raised and 100.00% The expected profit 0 Asset 19 December http://www.cninfo.com.cn/
packaging paper constructed borrowings realised for the year reclassification 2015
will amount to RMB340 during the
million. reporting
period without
profit contribution
Magnesite mining Self- Yes Mining 216,089,605.96 758,224,355.23 Self-raised and 99.00% The expected average 0 Not yet completed 25 October http://www.cninfo.com.cn/
constructed borrowings total profit per annum
RMB184 million
Integrated terminal Self- Yes Terminal 62,908,602.53 62,908,602.53 Self-raised and 17.92% To ensure the normal 0 Not yet completed 19 December http://www.cninfo.com.cn/
project of H constructed borrowings production and
uanggang Chenming operation of Huanggang
Chenming and reduce
the transportation costs
of the Company.
Total — — — 3,725,529,511.39 7,517,706,818.75 — — — — — — —
4. Financial asset investment
(1) Security investments
Applicable √ Not applicable
The Company did not have any security investments during the reporting period.
(2) Derivatives investments
Applicable √ Not applicable
The Company did not have any derivative investments during the reporting period.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
V. Analysis of Investments (Cont’d)
5. Use of proceeds
√ Applicable Not applicable
(1) General use of proceeds
√ Applicable Not applicable
Unit: RMB’0,000
Total
Total amount of Total Proportion
amount proceeds amount of of total Total
of utilised Total with change accumulated amount of amount
proceeds amount of in use proceeds accumulated Total Use and of idle
Fund- Total during the accumulated during the with proceeds amount of status of proceeds
raising amount of current utilised reporting change with change unutilised unutilised for over 2
Year method proceeds period proceeds period in use in use proceeds proceeds years
2016 Non-public 450,000 447,750 447,750 0 0 0.00% 0 Not
issuance of applicable
preference
shares
Total — 450,000 447,750 447,750 0 0 0.00% 0 —
Description of the general use of proceeds
On 17 September 2015, the Company received the Approval of the Non-Public Issuance of Preference Shares
of Shandong Chenming Paper Holdings Limited (Zheng Jian Xu Ke [2015] No. 2130) from the China Securities
Regulatory Commission.
(1) On 17 March 2016, the gross proceeds from the non-public issuance of preference shares amounted to
RMB2,250 million and the proceeds from the same net of paid issuance expenses of RMB11.25 million
amounted to RMB2,238.75 million, which was deposited to the designated account for the proceeds of
such issuance. At the tenth extraordinary meeting of the seventh session of the Board held on 24 March
2016, the Resolution on Replacement of Self-raised Funds Invested in Advance to Projects Financed by
Proceeds with Proceeds from Issue of Preference Shares approving the replacement of self-raised funds
invested in advance to projects financed by proceeds with RMB2,238.75 million from the proceeds of
initial non-public issue of preference shares was passed.
(2) On 17 August 2016, the gross proceeds from the non-public issuance of preference shares amounted
to RMB1,000 million and the proceeds from the same net of paid issuance expenses of RMB5 million
amounted to RMB995 million, which was deposited to the designated account for the proceeds of such
issuance.
(3) On 22 September 2016, the gross proceeds from the non-public issuance of preference shares amounted
to RMB1,250 million and the proceeds from the same net of paid issuance expenses of RMB6.25 million
amounted to RMB1,243.75 million, which was deposited to the designated account for the proceeds of
such issuance. At the third extraordinary meeting of the eighth session of the Board held on 23 September
2016, the Resolution on Replacement of Self-raised Funds Invested in Advance to Projects Financed by
Proceeds with Proceeds from Issue of the Third Tranche of Preference Shares approving the replacement
of self-raised funds invested in advance to projects financed by proceeds with RMB761.25 million from
the proceeds of initial non-public issue of the third tranche of preference shares was passed.
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
V. Analysis of Investments (Cont’d)
5. Use of proceeds (Cont’d)
(2) Commitment of proceeds
√ Applicable Not applicable
Unit: RMB’0,000
Investment
Change Total Invested Accumulated progress as Return Expected
Committed in project Total investment amount invested at the end Expect realised return
investment project (including committed after during the amount as of the date of during the being Significant
and excess partial investment adjustment reporting at the end of Period operation of reporting achieved change
proceeds change) of proceeds (1) period the period (2) (3)=(2)/(1) the project period or not in project
Committed
investment project
Repayment of bank No 300,000 300,000 300,000 300,000 100.00% 23 September Not Yes No
borrowings 2016 applicable
Replenishment No 150,000 147,750 147,750 147,750 100.00% 23 September Not Yes No
of liquidity 2016 applicable
Total of committed — 450,000 447,750 447,750 447,750 — — Not — —
investment project applicable
Condition and reason Not
for not achieving applicable
planned progress
or expected return
(by special item)
Description Not
of significant change applicable
in feasibility
of project
Amount, use and Not
utilisation of excess applicable
proceeds
Change in place of Not
implementation of applicable
investment project
of proceeds
Adjustment on Not
implementation applicable
method of
investment project
of proceeds
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
V. Analysis of Investments (Cont’d)
5. Use of proceeds (Cont’d)
(2) Commitment of proceeds (Cont’d)
Investment
Change Total Invested Accumulated progress as Return Expected
Committed in project Total investment amount invested at the end Expect realised return
investment project (including committed after during the amount as of the date of during the being Significant
and excess partial investment adjustment reporting at the end of Period operation of reporting achieved change
proceeds change) of proceeds (1) period the period (2) (3)=(2)/(1) the project period or not in project
Pre-investment Applicable
and swap of
investment project
of proceeds
(1) At the tenth extraordinary meeting of the seventh session of the Board held on 24 March 2016, the Resolution on Replacement of Self-
raised Funds Invested in Advance to Projects Financed by Proceeds with Proceeds from Issue of Preference Shares approving the
replacement of self-raised funds invested in advance to projects financed by proceeds with RMB2,238.75 million from the proceeds of
initial non-public issue of preference shares was passed. Please refer to the relevant announcement dated 25 March 2016 published on
www.cninfo.com.cn.
(2) At the third extraordinary meeting of the eighth session of the Board held on 23 September 2016, the Resolution on Replacement of Self-
raised Funds Invested in Advance to Projects Financed by Proceeds with Proceeds from Issue of the Third Tranche of Preference Shares
approving the replacement of self-raised funds invested in advance to projects financed by proceeds with RMB761.25 million from the
proceeds of initial non-public issue of the third tranche of preference shares was passed. Please refer to the relevant announcement
dated 24 September 2016 published on www.cninfo.com.cn.
Temporary Not
replenishment applicable
of liquidity by idle
proceeds
Balance and reason Not
for proceeds applicable
arising from project
implementation
Use and direction Not
of unused proceeds applicable
Use of proceeds Not
and problems applicable
disclosed or other
issues
(3) Change in use of proceeds
Applicable √ Not applicable
The Company did not have any change in use of proceeds during the reporting period.
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
VI. Disposal of material assets and equity interest
1. Disposal of material assets
Applicable √ Not applicable
The Company did not have any disposal of material assets during the reporting period.
2. Disposal of material equity interest
√ Applicable Not applicable
Net profit Ratio of the
contribution to net profit
the Company contribution to Carried out
from the the Company Relevant on schedule
beginning of of disposal Pricing equity or not, if not,
the period of equity basis of Related interest the reasons
Equity Transaction up to the Effect of interest over disposal of party Relationship fully and measures
interest Disposal consideration disposal date disposal on total net equity transaction with transferred taken by the Disclosure Disclosure
Counterparty(ies) disposed of date (RMB’0,000) (RMB’0,000) the Company profit (%) interest or not counterparty(ies) or not Company date index
Shouguang 100% equity 30 December 100 -0.04 No effect 0 Transfer No Not applicable Yes Not applicable Not Not
Yucheng Trading interest in 2016 based on net applicable applicable
Co.,Ltd. Shouguang assets
Chenming
Jiatai Property
Management
Co., Ltd.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees
√ Applicable Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMB
Operating
Name of company Type of company Principal activities Registered capital Total assets Net assets Revenue profit Net profit
Zhanjiang Chenming Pulp & Subsidiary Production and sale 3,550,000,000.00 19,547,470,205.55 4,059,577,379.49 4,962,723,381.93 555,568,627.61 567,190,267.33
Paper Co., Ltd. of pulp, duplex press
paper, Electrostatic
paper
Shandong Chenming Financial Subsidiary Paper product trading 5,872,000,000.00 26,077,801,815.27 7,493,294,936.26 2,558,763,185.27 998,037,881.50 918,516,201.38
Leasing Co., Ltd. and financial leasing
Shouguang Meilun Paper Co., Ltd. Subsidiary Production and sale 3,000,000,000.00 10,061,260,332.41 4,591,070,219.26 5,194,516,832.03 465,089,491.56 353,189,186.48
of coated paper and
household paper
Fuyu Chenming Paper Co., Ltd. Subsidiary Production and sale of 208,000,000.00 178,742,720.05 -217,437,397.40 26,917,408.94 -217,554,999.67 -216,371,879.34
flat sheet
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Methods to acquire and
dispose of subsidiaries during Impact on overall production and
Name of companies the reporting period operation and results
Shouguang Chenming Jiatai Equity transfer No effect on overall production
Property Management Co., Ltd. and operation and results.
Jilin Chenming Logistics Co., Ltd. New establishment Net profit for 2016 was RMB60,600.
Jiangxi Chenming Logistics Co., Ltd. New establishment Net profit for 2016 was -RMB41,500.
Qingdao Chenming Nonghai New establishment Net profit for 2016 was RMB11.4051 million.
Financial Leasing Co., Ltd.
Particulars of major subsidiaries and investees
(1) Zhanjiang Chenming’s major products, including high-end duplex press paper and electrostatic paper, had lower
costs, high gross profit margin and better returns.
(2) Financial Leasing Company made steady progress and delivered better profit.
(3) With the higher gross profit margin from its major product, coated paper, and the gains from sale of electricity,
Shouguang Meilun recorded better profit.
(4) Fuyu Chenming suspended its production and made impairment provision for its fixed assets and construction in
progress.
36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
VIII. Structured entities controlled by the Company
Applicable √ Not applicable
IX. Outlook on the future development of the Company
(I) Competition overview and development trend of the industry
Paper making industry
The growth of the paper making industry tends to be closely correlated to the macroeconomic growth. While there
are adjustments of economic growth in China, the growth of paper making industry is also subject to pressure for
adjustments. However, in the light of the easing downward pressure on the national economy, improving income
levels of residents and the stabilising economy as a whole, it is expected the per capita consumption of paper
and paper board will continue to increase. Besides, under the current market conditions, elimination of obsolete
production capacity in the paper making industry and increasingly stringent environmental protection policies are
forcing some small and medium-sized enterprises out of the market, thus favouring industry concentration and
standardised industry competition to establish a sound industry cycle. There are obvious signs for industry recovery
with a boom to be prolonged.
Financial leasing industry
As the financial reforms advance further, the integration of industrial capital and financial capital gradually accelerate
in China. The financial leasing industry as a favoured supplementary corporate financing channel and an effective tool
to use assets at hand embraces continuously mounting market demand. Since the implementation of the “Thirteenth
Five Year Plan”, the accelerated urbanisation and industrialisation in China, the change in driver of economic growth,
upgrade of traditional industries, development of emerging industries, and continuous infrastructure construction
require substantial investment in fixed assets. China will become the largest leasing market in the world. According
to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
Industry 2016-2021 issued by ASKCI Consulting Co. LTD, the financial leasing industry will grow at a compound
annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial
leasing industry in China will amount to RMB20.79 trillion by 2021.
In view of the establishment and optimisation of trading rules, accounting standards, industry regulation and tax
policies for the financial leasing industry, the financial leasing in China has been evolving into modern leasing at high
speed. In the future, the size of the financial leasin24g business in China will expand significantly. Financial leasing
will become an important alternative of financing for enterprises, especially small and medium-sized enterprises. The
business prospects of the financial leasing industry in China are promising.
(II) Development strategy
Looking forward, Chenming Group will adhere to the principal of emphasising on environmental protection, low
carbon, recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of
scientific development and quality and efficiency enhancement, it will comprehensively improve its quality and
efficiency, management level, technology application, sense of happiness and brand image through the integration
between its production and manufacture segment and financial services segment, incorporation of smart technology
into its industrial activities, reorganised methodology and restructuring so as to expand and improve itself and strive
to achieve taxable profit over RMB10 billion and develop into an integrated diversified enterprise with hundreds of
billions in value during the “Thirteenth Five Year Plan” period.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2017
In the year 2017, the main goal of the Company is adherence to the main theme of achieving growth amid stability
and the guiding principal of work of “team building, management enhancement, outstanding business performance
and good results”. A new management philosophy will be firmly established and consistently practised. The Company
will commit itself to, among other things, operating steadily, boosting growth, adjusting the structure, preventing risks
and benefiting the employees. The major measures are as follows:
1. Determined to upgrade corporate management
The Company will enhance its corporate management level with the help of external experts. The Company
commits itself to performing its tasks up to standard and on schedule in strict compliance with the plans
as formulated by the management consulting companies and the information technology companies. The
Company will work together with external experts to learn their advanced philosophies and methods.
The Company will focus on team building to enhance its comprehensive management capability. The
hierarchical management will improve to make the management at each hierarchy level function and to
establish cadres with designated duties and full of energy. Staff teams will excel themselves during skill training.
Hierarchical training will be given in terms of, among other things, ideology, morals, business skills, theory and
knowledge.
2. Determined to strengthen market-oriented operations in terms of operations management
The Company will strengthen its market-oriented operations. It will increase the selling prices in a timely manner
based on the actual market conditions, and increase its revenue through the measures such adjustment to
the product structure, investment in products of higher returns, investment in markets of close proximity and
turning inefficient entities around. The Company will control the appropriation of funds through the measures
such as increase in prepayments, sales on contract with customers, and bartering, thus enhancing the quality of
operations.
The Company will commit itself to working together with the management consulting companies and the
information technology companies. The Company will enhance its sales management level by well defining
job duties based on the sales structure, formulating standard procedures, and paying attention to key points
through full mechanical operation.
The Company will make every effort to recover the amount past due with a view to the collection of all past due
accounts. The Company will improve the quality of collateral security to prevent risks.
38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2017 (Cont’d)
3. Determined to promote innovation with higher efficiency in terms of production management
The Company will focus on the improvement of management level for production and operation while ensuring
stable operation and put more efforts into efficiency utilisation, research and development innovation as well
as environmental protection and safety. The Company will motivate the employees through appraisals at levels
and attach great importance to training programmes for staff at entry level. The Company will cooperate with
information technology companies to facilitate early warning and examination through mechanical operation
during production. The Company will introduce high-end technicians to improve the research and development
capabilities of the teams. The Company will encourage technology innovation and apply for 20 national patents.
The Company will adjust the product mix and focus on the research and development as well as marketing
of unbleached household paper, anti-counterfeiting white paper board, cigarette card board and other high
value-added products. The Company will introduce new types of raw materials and promote the application of
technologies including paper surface enhancement. The Company will be strict with product quality and work
on increases in prices and benefits in sales. The Company will implement safety standardisation management
and pay attention to environmental protection in accordance with national standards and requirements. The
Company will set up and closely monitor the safety factors for internal control indicators so as to ensure
standardised emission.
4. Determined to maintain quality and be on track in terms of project management
The Company will make sure the phase I of Haiming mining project to commence production on schedule. The
Company will also pay close attention to Huanggang Chenming’s integrated forestry, pulp and paper project,
Shouguang Chenming’s chemical pulp project and other projects under construction to ensure such projects
will proceed on schedule.
5. Determined to achieve stable growth in terms of financial capital management
The Company will regard risk management as the most important task for financial capital management.
Leveraging professional teams, the Company will optimise its business risk management system and set
up a customer classification evaluation system. Financing and project investment will be under centralised
management of the Group so as to prevent business risk.
The Company will proceed with capital financing to reduce its gearing ratio and optimise the structure of assets
and liabilities. The Company will also proceed with direct financing for the medium to long term so as to prevent
liquidity risk.
The Company will enhance the incentive and appraisal mechanism for middle and senior management for the
financial segment. The Company will strengthen the ideological education and comprehensive capabilities
training for cadres to enhance team cohesion. By virtue of additional investment through the leasing company
and expansion in the scale of cooperation with the industry peers through the Finance Company, the Company
will engage in new businesses including industry chain finance to increase benefits.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2017 (Cont’d)
6. Determined to grow revenue from trading in terms of supply chain management
Cooperating with management consulting companies and professional information technology companies,
the Company will strive to the establishment of information platform and international tender network so as
to enhance the level of information management for procurement. The Company will place great emphasis
on bulk procurement of raw materials and establish strategic cooperation relationship with quality customers
while putting more efforts into market analysis and improving analysis and judgement capabilities for market
conditions so as to reduce procurement costs. The Company will give full play to the electronic merchandise
exchange centre for pulp and paper products and establish a supply chain system integrating warehousing
and logistics for pulp and paper products in China. The Company will expand sales channels in the market to
improve trading volume. The Company will closely follow the coordination and payment process and further
utilise acceptance payment to facilitate the cooperation with electronic commercial draft business.
7. Determined to consolidate resources in terms of logistics management
The Company will rationalise its organisation structure and introduce logistics professionals to facilitate the
greater reforms of the logistics of the Group. The Company will ensure the timely completion of phase I of the
Shouguang Chenming international logistics centre project and the main building of the Qingdao innovative
industry park project. The Company will facilitate the establishment of logistics information platform so as to
accomplish the integration between business flow, material flow and information flow. The information platform
will integrate logistics resources to build an intelligent logistics system. The Company will utilise the function
of supervision stations, bonded warehouses and other existing facilities to customise comprehensive logistics
service programs for different corporate customers.
8. Caring for employees with more and more employee benefits
The Company will rationalise the salary increment mechanism to improve staff’s income in real terms so as to
make sure the salary level of its staff is relatively higher than those of its local counterparts and industry peers.
Making reference to renowned enterprises, the Company will improve the living standards of staff quarters
through further improvement in basic facilities and amenities. The Company will commence physical training
and testing for staff to improve their physical quality. Focusing on green landscaping, the Company will build
more garden-like factory areas so as to create a more pleasant working environment for employees.
(IV) Future capital requirements, source of funds and plan for use
The Company has established business segments for its core business, namely, pulp production, paper making,
finance and forestry. With the further development of the existing principal businesses of the Company, the future
capital requirements of the Company will be: (1) investment in the existing projects under construction and proposed
new projects; (2) consistent investment in the existing production facilities because of technological transformation
or production expansion; and (3) business expansion and general working capital requirements. As the demand for
capital has been growing for the Company’s production and operation, there is a strong need to replenish the working
capital to enhance the Company’s capability for sustainable operations.
In order to meet the business development requirements of the Company and further extend and expand the industry
chain, the Company will establish diversified financing channels and increase the proportion of direct financing
through diversified financing channels such as private placement, preference shares, corporate bonds and cross-
border financing so as to improve the debt structure of the Company and provide stable financial support for the
operation and development of the Company.
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(IV) Future capital requirements, source of funds and plan for use (Cont’d)
The Company will use RMB3.7 billion from private placement to reduce the cost of paper making. The investment
in the 400,000-tonne chemical pulp project through private placement will improve the self-sufficiency of pulp of the
Company and the raw materials structure of the paper making segment, in the expectation of reducing the production
costs of paper making and enhancing profitability of paper making business. At the same time, non-public issuance of
shares will optimise the debt structure and reduce financial costs as well as the gearing ratio.
Diversified financing channels to meet the Company’s capital requirements: (1) The Company will reduce the financing
costs and optimise the capital structure by issuing corporate bonds, medium-term notes, short-term financing,
super short-term financing, perpetual bonds and other means for financing so as to provide financial support for the
Company’s long-term healthy development. (2) The Company will facilitate cross-border financing by making full use
of the financing platform in Hong Kong market to increase its credit line. Besides, the Company will also mitigate
exchange rate risk through multi-currency financing and improve the efficiency of use of capital to reduce financial
costs. As at the end of 2016, the credit lines utilised by the Company amounted to RMB36.7 billion and the credit
lines obtained by the Company amounted to RMB68.4 billion with a utilisation rate of 53.65%. (3) The Company will
make use of the advantages of the Finance Company and the Financial Leasing Company in the financial industry to
expand the financing channels for the Group, bring new momentum for business development.
(V) Risk factors likely to be faced and the measures to be taken
1. Risk on paper making industry
Policy risk
Paper making industry is a basic raw materials industry and its growth has been faster than the average
growth of the national economy in recent years. However, the paper making industry’s profitability is closely
correlated to the economic cycle, and the industry is therefore a cyclical industry fluctuating with the national
macroeconomic performance, which will further affect the profitability of the Company.
Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
will comprehensively improve its industrial structure and regional layout through the integration between its
production and manufacture segment and financial services segment, and incorporation of smart technology
into its industrial activities. The Company will emphasise on the development of leading businesses including
paper making, finance and forestry so as to construct an efficient industrial system with synergies.
Market fluctuation risk
With the rapid growth of the national economy, economic globalisation and China’s accession to the WTO,
China’s paper making industry has been facing increasingly fierce competition. Leveraging the strength and
capital accumulated over the years, domestic enterprises have further expanded their sizes and improved their
technological levels and product quality. Well-known paper making enterprises overseas have also directly set
up production bases in China through sole proprietorship or joint ventures so as to participate in the domestic
market competition by virtue of their advantages in size and technology. Besides, tariff reduction on China after
accession to the WTO has also further intensified the impact on the international market.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
1. Risk on paper making industry (Cont’d)
Hence, the Company will strive to enhance the quality of paper products and achieve the target of establishing
a layout for high-end paper industry so as to increase the proportion of high-end paper. In recent years, the
Company has been expanding its business size and optimising its product mix and has set up a few production
lines for high-end paper. A diversified and high-end product mix enables the Company to spread market risk
and strengthen the resistance towards market volatility. Besides, as high-end products have better profit
margins, the Company can increase the proportion of high-end products through consistent improvement in
product mix, thereby enhancing its profitability and comprehensive competitiveness.
Risk of overcapacity and slowdown in demand
Overcapacity is a prominent problem in the paper making and paper product industry in China such that
there has been fierce competition among enterprises. Since 2013, affected by slowdown in macroeconomic
growth, the demand in paper making industry has been weak. At the same time, China has been encouraging
energy conservation and emission reduction. The obsolete production capacity will be phased out, and thus
the new projects will be on a large scale. By virtue of the economies of scale in the paper making industry,
the production capacity of individual paper making projects which are under construction or planning for
construction in China is large, which affects the demand and supply relationship in the whole paper making
industry.
Hence, the Company will make advancements in equipment and technological level, expand its product mix,
improve the grading of products and focus on the research and development of high-end products so as to
improve competitiveness.
Risk of price fluctuation of raw materials
The major raw materials used by the Company are wood pulp and waste paper. The market prices of wood pulp
and waste paper fluctuate significantly. The market price fluctuation of raw material has significantly affected the
production costs of the Company. In addition to intensified market competition resulting from surging capacity
in the industry in recent years, the increases in prices of a number of paper products were not in line with the
increases in prices of raw materials. The market price fluctuation of raw materials will have an impact on the
performance of the Company.
Hence, the Company will remain steadfast in the “forestry-pulp-paper integration” development path and focus
on the construction of the Zhanjiang Chenming pulp project, the Huanggang Chenming pulp project and the
Shouguang chemical pulp project, thereby eliminating the limitations of upstream resources on the Company’s
development and enhancing the Company’s sustainable development.
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
1. Risk on paper making industry (Cont’d)
Risk of change in environmental protection policies
China has been raising the standards for environmental protection in recent years. The new Environmental
Protection Law took effect on 1 January 2015. More stringent environmental protection policies have been
implemented in the paper making industry. A multi-pronged approach has been adopted to promote industrial
restructuring, and the paper making industry has entered into an important transitional period of development. A
higher emission standard is bound to increase the Company’s environmental protection costs and a high entry
standard may result in the slowdown of scale expansion.
The Company always strives to achieve harmonious development with energy conservation and emission
reduction. The Company will endeavour to develop the recycling economy through waste exchange and
recycling and strive to maximise its resource utilisation. Meanwhile, the Company will make greater efforts to
construct environment friendly projects and strive to achieve its waste emission target.
2. Risk on financial leasing business
Policy risk
Recently, the financial leasing business is regulated by the commerce departments at different levels instead of
being directly regulated by the People ‘s Bank of China or China Banking Regulatory Commission. The financial
leasing industry in China is still at the exploration stage with incomplete laws and regulations. If there is any
material adjustment or change in national or local policies for the financial leasing industry, the Company’s
financial leasing business may be adversely affected, in turn harming the Company’s profitability.
In September 2015, the General Office of the State Council promulgated the Guiding Opinions on Accelerating
the Development of Financial Leasing Industry, which formulated comprehensive systematic planning on
accelerating the development of the financial leasing industry. The financial leasing industry embraced a rare
opportunity for leap-forward development. In February 2016, the General Office of People’s Government of
Shandong Province promulgated the Opinions of the General Office of People’s Government of Shandong
Province on Accelerating the Development of Financial Leasing Industry by Implementing Document Guo Ban
Fa [2015] No. 68, formulating specific measures to refine policy measures and ensure the measures being
carries out properly, which provided actual policy support for the development of the financial leasing industry
in Shandong Province.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:01
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
2. Risk on financial leasing business (Cont’d)
Liquidity risk
In a market economy, the macroeconomic operation tends to be in cycles and the Company is inevitably
affected by those cycles. At the same time, there is fierce competition in the financial industry and the interest
margin is a main source of income for the financial leasing business. The market interest rate is affected by
the benchmark interest rate of the People’s Bank of China, the macroeconomic environment, market demand
and supply and other factors, bringing uncertainties to the fluctuation of the market interest rate, which in turn
causes uncertainties in revenue from the financial leasing business.
Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
will comprehensively improve its industrial structure and regional layout through the integration between its
production and manufacture segment and financial services segment, and incorporation of smart technology
into its industrial activities. The Company will emphasise on the development of leading businesses including
paper making, finance and forestry so as to construct an efficient industrial system with synergies.
Credit risk
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
payment on time due to any reason and there are abuses on equipment or any other short-term behaviour.
Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provision
as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be
exposed to risk of bad debts.
The stringent risk management measures of Chenming Leasing provide comprehensive risk prevention
and management for the Company’s projects. Besides, the Company usually cooperates with state-owned
enterprises and local governments, so it has strong risk resistance and low risk of default. The Company does
not have any non-performing or overdue loans so far. Chenming Leasing will develop quality customers and
strengthen risk management so as to enhance risk resistance and maintain high quality services.
Operation risk
Recently, there is still a gap between the practitioners working in the financial leasing industry and those working
in traditional financial institutions such as banks in terms of their expertise and experience in financial profession
in China. There is also a large gap in terms of investment in infrastructure. If internal control procedures are
not implemented properly and involve operation risk as a result of operation errors, violations or non-standard
execution, the Company may suffer from loss.
Learning from the risk management experience of outstanding financial leasing companies at home and abroad,
the leasing company has formulated and optimised the internal management system of the leasing business
and established an effective system for risk assessment, risk control and risk tracking. The Company has
also exercised proper control on business risk by regulating the key business procedures including quotation,
guarantee review, contract signing, leased assets management and archives management.
44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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V Discussion and Analysis of Operations
X. Reception of research investigations, communications and interviews
1. Registration report on reception of research investigations, communications and interviews during the
reporting period
√ Applicable Not applicable
Class of parties
Date of reception Manner of reception accommodated Index of particulars of research investigations
5 May 2016 On-site research Institution Details are disclosed in the investor relationship
investigation event record on CNINFO on 8 May 2016
19 May 2016 On-site research Institution Details are disclosed in the investor relationship
investigation event record on CNINFO on 22 May 2016
27 June 2016 On-site research Institution Details are disclosed in the investor relationship
investigation event record on CNINFO on 28 June 2016
Number of receptions
Number of institutions received
Number of individuals received
Number of other entities received
Disclosure, leakage or divulgence of
undisclosedsignificant information No
2016 ANNUAL REPORT
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VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2016.
I. Principal activities
Please refer to section IV “Business Overview”, and “I. Principal operations of the Company during the Reporting Period”
and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
activities of the Company.
II. Results and profit distribution
Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2016.
III. Dividends
After the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2016 (“final
dividend”) of RMB6.00 in cash for every 10 Shares (tax inclusive) (2015: dividend of RMB3.00 in cash for every 10 Shares
(tax inclusive)) to the ordinary shareholders of the Company, subject to approval of shareholders at the forthcoming Annual
General Meeting (“AGM”) of the Company held on 21 April 2017. Upon approval of shareholders of the Company at the
AGM, the Company is expected to pay the final dividend on or by 20 June 2017 to shareholders whose names appear on
the register of members of the Company on 28 April 2017.
In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008,
where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
enterprise shareholders, it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.
Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of final dividends as corporate income
tax, distribute the final dividends to non-resident enterprise shareholders, i.e. any shareholders who hold the Company’s
Shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, or other
nominees, trustees, or holders of H Shares registered in the name of other organisations and groups.
Due to changes in the PRC tax laws and regulations, according to the Announcement on the List of Fully and Partially
Invalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation (
) on 4 January 2011, individual Shareholders who hold the Company’s H
Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer
and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign
Individuals (Guo Shui Fa [1993] No. 045) ( ( )
( [1993]045 )) issued by the State Administration of Taxation, whilst pursuant to the letter titled
Tax Arrangements on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to
the issuers on 4 July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax
after the Repeal of Guo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) (
[1993]045 ( [2011]348 )), it is confirmed that
the overseas resident individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong
Kong are entitled to the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the
countries where they reside and the PRC or the tax arrangements between the PRC and Hong Kong or the Macau Special
Administrative Region of the PRC. Therefore, the Company will withhold 10% of the dividend as individual income tax,
unless it is otherwise specified in the relevant tax regulations and tax agreements, in which case the Company will withhold
individual income tax of such dividends in accordance with the tax rates and according to the relevant procedures as
specified by the relevant regulations.
46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VI Directors’ Report
IV. Closure of register of members
The register of members of the Company will be closed from 20 March 2017 (Monday) to 21 April 2017 (Friday), (both
days inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
vote at the annual general meeting to be held on 21 April 2017 (Friday), all share transfer documents accompanied by
the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 17 March 2017 (Friday).
V. Five-year financial summary
Please refer to “IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five
financial years.
VI. Donations
During the year, the Company donated RMB1,000,000 (2015: RMB600,000) to non-profit making organisations.
VII. Subsidiaries
Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
and “XX. Matters of significant of subsidiaries of the Company” under section VII “Material Matters” for the details of
acquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to “1. Consolidated Balance Sheet” under section XIII “Financial Report” for the details of changes in property,
plant and equipment of the Group for the year ended 31 December 2016.
IX. Share capital
Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2016.
X. Pre-emptive rights
In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.
XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
December 2016, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB7,393,989,520.67 (2015: RMB6,002,557,599.09) as set out in “1. Consolidated
Balance Sheet” under section XII “Financial Report”.
2016 ANNUAL REPORT
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VI Directors’ Report
XII. Directors
As at 31 December 2016, the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Yin Tongyuan
Mr. Li Feng
Mr. Geng Guanglin
2. Non-executive Directors
Ms. Zhang Hong
Ms. Yang Guihua
3. Independent Non-executive Directors
Ms. Liang Fu
Ms. Wang Fengrong
Mr. Huang Lei
Ms. Pan Ailing
According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been elected
at the general meetings with a term of three years from May 2016 to May 2019. They may be re-elected for another term
upon expiry of tenure.
XIII. Directors’ service contracts
All Directors have entered into service contracts with the Company for a term from 18 May 2016 to 17 May 2019.
None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
payment of compensation other than statutory compensation.
XIV. Directors and senior management’s remuneration and the five highest paid individuals
Details of Directors and senior management’s remuneration and those of the five highest paid individuals in the Company
and its subsidiaries are set out in part V of section X and part XII of section XII.
In 2016, the Company has 33 senior management in total, which include directors, supervisors and senior management.
The remuneration of senior management falls within the following ranges:
Range of remuneration (RMB) Number
4.8 million to 5.2 million
3.6 million to 4.0 million
3.2 million to 3.6 million
2.8 million to 3.2 million
2.4 million to 2.8 million
2.0 million to 2.4 million
1.2 million to 1.6 million
0.8 million to 1.2 million
Below 0.8 million
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VI Directors’ Report
XV. Independent Non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for the
year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
be independent during the year.
XVI. Securities interests held by Directors, Supervisors and Chief Executives
As at 31 December 2016, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
as follows:
Number of shares
(A shares) held
as at the end of
the reporting period
Name Position (shares)
Directors
Chen Hongguo (Note 1) Chairman and General Manager 6,434,527
Yin Tongyuan Executive Director and Vice Chairman 2,423,640
Li Feng Executive Director 471,818
Geng Guanglin Executive Director 437,433
Yang Guihua Non-executive Director —
Zhang Hong Non-executive Director —
Huang Lei Independent non-executive Director —
Liang Fu Independent non-executive Director —
Wang Fengrong Independent non-executive Director —
Pan Ailing Independent non-executive Director —
Supervisors
Li Dong Supervisor —
Sun Yinghua Supervisor —
Yang Hongqin Supervisor —
Liu Jilu Supervisor —
Zhang Xiaofeng Supervisor —
2016 ANNUAL REPORT 49
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VI Directors’ Report
Associated corporations
Number of Number of
shares held at shares held at
the beginning of the end of
Name of the reporting Change during the reporting
Name Position associated corporations period (shares) the period +/- period (shares)
Chen Hongguo Chairman Shouguang Henglian 231,000,000 — 231,000,000
Enterprise Investment
Co. Ltd. (Note 2)
Note 1: Save for the 6,434,527 A shares held personally, Chen Hongguo is deemed to be interested in the 429,348 A shares held by his spouse, Li
Xueqin.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd.,
(hereinafter referred to as “Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo. As a
result, the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by
Shouguang Henglian is also deemed to be held by Chen Hongguo.
Save as disclosed above, as at 31 December 2016, none of the Directors, Supervisors or chief executives of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
the Listing of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 31 December 2016, none of the Directors, Supervisors or chief executives or their respective spouses or children
under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
associated corporations.
XVII. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2016, the following shareholders (other than the Directors, Supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Approximate shareholding
as a percentage of
Number of shares held Total share Class of
Name (shares) capital (%) shares (%)
Shouguang Chenming Holdings Co., Ltd. 293,003,657 A shares (L) 15.13 26.32
Shouguang Chenming Holdings Co., Ltd. 73,207,900 B shares (L) 3.78 15.55
Chenming Holdings (Hong Kong) Limited 73,207,900 B shares (L) 3.78 15.55
Shouguang Chenming Holdings Co., Ltd. 99,885,500 H shares (L) 5.16 28.36
Chenming Holdings (Hong Kong) Limited 99,885,500 H shares (L) 5.16 28.36
The National Social Security Fund Council 35,570,000 H shares (L) 1.84 10.10
(L) - Long position (S) - Short position (P) - Lending pool
Save as disclosed above, as at 31 December 2016, 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.
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:09
VI Directors’ Report
XVIII. Relationship with employees, customers and suppliers
Please refer to “VI. Personnel of the Company” under section X “Directors, Supervisors and Senior Management and Staff”,
“2. (8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V “Discussion
and Analysis of Operations” for details of the relationship between the Company and its employees, customers and
suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
period. The Company did not have any indemnity provision in favour of any Director.
XX. Interests in competing business
None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
likely to compete with the businesses of the Company and any of its subsidiaries.
XXI. Directors’ rights to purchase shares or debentures
At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors
to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
XXII. Preference shares
Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.
XXIII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed in 2016.
XXIV. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
of the Company” under section V “Discussion and Analysis of Operations” for details of major risk factors of the Company.
XXV. Material matters
Please refer to section VII “Material Matters” for details of material matters of the Company.
XXVI. Future development
Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
plan for 2017” and “(IV) Future capital requirements, source of funds and plan for use” of “IX. Outlook on the future
development of the Company” under section V “Discussion and Analysis of Operations” for details of future development of
the Company.
XXVII. Environment, social and governance report and social responsibility
Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
responsibility. Please refer to the environment, social and governance report as required by the Hong Kong Listing Rules,
which will be issued separately by the Company before 17 May 2017.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:09
VI Directors’ Report
XXVIII. Purchase, sale and redemption of shares
The Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting
period.
XXIX. Sufficiency of public float
During the reporting period, based on the information that is publicly available to the Company and within the knowledge of
the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
Listing Rules.
XXX. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2016 has been reviewed by
the Audit Committee of the Company.
XXXI. Gearing ratio
As at 31 December 2016, the Company’s gearing ratio (including minority interest) was 62.41%, representing a decrease
of 2.65 percentage points from 65.06% for 2015, mainly due to the issuance of preference shares of RMB4.5 billion as the
Company sought to improve its capital and debt structure.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXII. Going Concern Basis
The Company is a leading player in the paper making industry in China. After entrepreneurship and innovation for more than
half a century, it has developed into a large and integrated modern conglomerate principally engaged in pulp production,
paper making, finance and forestry businesses while also involved in mining, energy, logistics, construction materials, hotel
operation and others. It is the only Chinese company with A shares, B shares, H shares and preference shares in issue, and
the first company in the paper making industry to integrate finance and industry and own a finance company and a financial
leasing company. The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi and Jilin, which deliver annual
pulp and paper production capacity of over 8,500,000 tonnes.
The Company has good sustainable profitability. In 2016, the Company achieved revenue of RMB22.907 billion, net profit
attributable to shareholders of the Company of RMB2,064 million and net cash flows from operating activities of RMB2,153
million. Meanwhile, the Company always places emphasis on the interests of and return to shareholders, and has paid
generous cash dividends for several years. With the improvement of the economic situation, the future performance of the
Company is worth looking forward to.
In addition, as of the end of December 2016, the Company obtained a comprehensive credit line of RMB68.4 billion from
major financial institutions, of which unused credit line amounted to RMB31.7 billion, which provided important support to
the Company’s business development. As an A-share, B-share and H-share listed company, the Company has convenient
financing channels. The Company established Shandong Chenming Financial Leasing Co., Ltd., Shandong Chenming
Investment Limited and Shandong Chenming Group Finance Co., Ltd. as the core of the financial segment. The rapid
business development, improving management system and effective risk control provide new sources of profit growth for
the Company, further increase the Group’s fund settlement, management, investment and financing ability, and reduce its
financing cost while improving its debt structure.
The auditors of the Company have prepared the 2016 annual financial report on a going concern basis, and have issued a
standard unqualified audit opinion (see Financial Report section).
Therefore, the Board believes the Company has the ability to continue as a going concern.
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:09
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital
Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
cash dividend during the reporting period
√ Applicable Not applicable
On 2 June 2016, the Resolution on Amendments to the Articles of Association of Shandong Chenming Paper Holdings
Limited was considered and passed at the 2016 second extraordinary general meeting of the company, which amended
the practice of profit distribution in the Articles of Association based on the actual operating conditions and the non-public
issuance of shares of the Company.
The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
of the small shareholders were fully protected as the related decision making process and mechanism were in place,
the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
opportunities to sufficiently voice their opinion and make requests.
Implementation of the 2015 profit distribution plan: Based on the number of the shares as at the dividend distribution
registration date of 1,936,405,467 shares, a cash dividend of RMB3 (tax inclusive) was to be paid to all shareholders
for every 10 shares held. The total cash dividend to be distributed amounted to RMB580,921,640.10 (tax inclusive). The
dividend distribution was implemented and completed on 15 July 2016. For details, please refer to the announcement on
payment of final dividend and withholding and payment of enterprise income tax for non-resident enterprise shareholders
published on the Hong Kong Stock Exchange on 4 July 2016, and the announcement on the implementation of the 2015
profit distribution plan for A share and B share published on CNINFO on 7 July 2016.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association
and the resolutions of the general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion
and make requests and were the legal interests of the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect of
cash dividend policy with adjustments and changes? Yes
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
reserves into share capital (proposed) over the past three years (the reporting period inclusive)
(1) The 2016 profit distribution plan
Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2016, a cash dividend of RMB6 (tax
inclusive) per ten shares or RMB1,161,843,280.20, representing 56.29% of the consolidated net profit attributable to
ordinary shareholders of the Company, will be distributed to ordinary shareholders.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
reserves into share capital (proposed) over the past three years (the reporting period inclusive) (Cont’d)
(2) The 2015 profit distribution plan
The 2015 profit distribution plan was considered and approved in the 2015 annual general meeting convened by
the Company on 18 May 2016. Based on the number of the shares as at the dividend distribution registration date
of 1,936,405,467 shares, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10
shares held. The total cash dividend distributed during 2015 amounted to RMB580,921,640.10 (tax inclusive).
(3) The 2014 profit distribution plan
The 2014 profit distribution plan was considered and approved in the 2014 annual general meeting convened by
the Company on 15 May 2015. Based on the number of the shares as at the dividend distribution registration date
of 1,936,405,467 shares, a cash dividend of RMB1.40 (tax inclusive) was to be paid to all shareholders for every 10
shares held. The total cash dividend distributed amounted to RMB271,096,765.38 (tax inclusive).
Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
Unit: RMB
As a
percentage
Net profit of net profit
attributable to attributable
owners of to owners
the Company in of the Amount Ratio of
the consolidated Company of cash cash
financial in the dividends dividends
Amount of statements consolidated distribution distribution
cash dividends during the year financial through through
Year of distribution (tax inclusive) of distribution statements other means other means
2016 1,161,843,280.20 2,063,986,822.25 56.29% 0.00 0.00%
2015 580,921,640.10 959,717,938.31 60.53% 0.00 0.00%
2014 271,096,765.38 505,204,384.73 53.66% 0.00 0.00%
The Company made a profit and had positive retained profit available for ordinary shareholders of parent company
during the reporting period without cash dividend for ordinary shares being proposed
Applicable √ Not applicable
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
II. Proposals on profit distribution and conversion of capital reserves into share capital during
this reporting period (Including preference shares)
√ Applicable Not applicable
Numbers of bonus share per 10 shares (share(s))
Dividend distribution per 10 shares (RMB) (tax inclusive) Dividend of RMB6.00 (tax inclusive)
per 10 ordinary shares and RMB3.08
(tax inclusive) for per 10 preference
shares
Conversion per 10 shares (share(s))
Share base of the distribution proposal (shares) 1,936,405,467 ordinary shares
and 387,263,339 simulated shares
converted from preference shares on
a conversion ratio of 1 share valued
at RMB5.81
Total cash dividend (RMB) (tax inclusive) 1,281,120,388.61
Distributable profits (RMB) 6,684,468,041.59
Percentage of cash dividend to total profits distribution 100. 00%
Cash dividend policy
For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the
percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
Particulars of profit distribution and conversion of capital reserves into share capital
The audited consolidated net profit attributable to shareholders of the Company for 2016 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB2,063,986,822.25. When deducting
the interest for perpetual bonds of RMB153,140,000 for 2016, the distributable profit realised for 2016 amounted to
RMB1,910,846,822.25. In accordance with the requirements of the Articles of Association and the Prospectus of Non-public
Issuance of Preference Shares, the proposed profit distribution plan of the Company for 2016 is as follows:
In accordance with the Prospectus of Non-public Issuance of Preference Shares, shareholders of preference shares
may jointly participate in the distribution of the 50% retained earnings realised for the year of issuance with ordinary
shareholders. The basis for the distribution is calculated as follows: (the number of months for the period from the next
month after the month of issuance to the end of the reporting period/12) the retained earnings realised for the year
50%, and the basis for the distribution is 9/12 19.11 50%=RMB717 million.
Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2016 and the 387,263,339 simulated
shares converted from the preference shares as at the end of 2016 on a conversion ratio of 1 share valued at RMB5.81, a
cash dividend of RMB6 (tax inclusive) per ten shares or RMB1,161,843,280.20 will be distributed to ordinary shareholders,
and a cash dividend of RMB3.08 (tax inclusive) per ten shares or a variable cash dividend of RMB119,277,108.41 will be
distributed to holders of preference shares.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
III. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period
√ Applicable Not applicable
Undertaking Party involved Type of undertaking Details of undertaking Undertaking date Term Particulars on
in undertaking the performance
Undertaking on
shareholding structure
reformation
Undertaking made in
offering documents
or shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on Shouguang Non-competitive (1) Shouguang Chenming Holdings Co., Ltd. 22 May 2008 During the period Implementing as
initial public offering Chenming Holdings undertaking (“Shouguang Chenming Holdings”) shall not engage, w h e n C h e n m i n g normal
or refinancing Co., Ltd. whether solely, jointly, or by representing itself or any Holdings was the
other persons or companies, and shall not procure its major shareholder of
associates (as defined in The Listing Rules of Hong the Company
Kong Stock Exchange) to engage, in any business
which competes with the business of the Company and
its subsidiaries (“Chenming Group” or “we”) directly
or indirectly, in any country and region which our
business exists (or any part of the world if in any form of
electronics business), or in any business that directly or
indirectly competes with Chenming Group’s business
which we operate from time to time (including but not
limited to any business in the form of sole proprietorship,
joint ventures or acquisitions, or holding interests directly
or indirectly in such enterprises, or by any other means);
(2) in the event that Shouguang Chenming Holdings is
required by its business to, whether solely, jointly, or by
representing itself or any other persons or companies,
engage in business which directly or indirectly competes
against the business of Chenming Group, or obtain
any business opportunity which directly or indirectly
competes against the business of Chenming Group, it
shall endeavour to procure that Chenming Group shall
have priority to obtain the right to operate such business
or to obtain such business opportunity; (3) if Shouguang
Chenming Holdings is in breach of the abovementioned
undertakings, it shall indemnify the Company for any
loss caused by such breach and the Company shall
have the right to acquire all businesses of Shouguang
Chenming Holdings, which directly or indirectly compete
with the businesses of our Group, at market price or
cost price (whichever price is lower); (4) Shouguang
Chenming Holdings shall not make use of its position
as the controlling shareholder (as defined in The Listing
Rules of Hong Kong Stock Exchange) of our Group to
jeopardise the legal interests of Chenming Group and
its shareholders with other persons or companies or on
their behalf.
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
III. Performance of undertakings (Cont’d)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Cont’d)
Undertaking Party involved Type of undertaking Details of undertaking Undertaking date Term Particulars on
in undertaking the performance
Shouguang Defective properties (1) According to the plan on defective properties of the 16 January 2008 During the period Implementing as
Chenming Holdings Company, Shouguang Chenming Holdings Co., Ltd. w h e n C h e n m i n g normal
Co., Ltd. (“Shouguang Chenming Holdings”) has guaranteed Holdings was the
and undertaken that: according to the application of major shareholder of
the Company, for defective property(ies) owned by the the Company
Company and its holding subsidiary company which
situated in the administrative area of Shouguang city,
Shouguang Chenming Holdings will purchase it (them)
and have it(them) being transferred to itself pursuant
to the law in accordance with the result of the related
asset valuation if the Company decides to transfer and
dispose of it(them) and there is no other transferee;
(2) before the Company transfers and disposes of the
defective properties pursuant to the law, if the Company
suffers any economic losses due to the defects of the
title (including but not limited to damages, penalties and
relocation costs), Shouguang Chenming Holdings will
bear such economic losses; (3) during the regulatory
process taken to the defective properties of buildings
and land of subsidiaries of the Company situated
outside the local areas (outside the administrative area of
Shouguang city), the economic losses such as penalties
or relocation costs imposed by competent administrative
authorities to be borne by the subsidiaries arising from
defects of insufficient title documents shall be paid
pursuant to the law by Shouguang Chenming Holdings
after verification.
Shandong Specific remedial In view of the impacts on dilution of current returns 25 March 2016 9999-12-31 Implementing as
Chenming Paper measures for for ordinary shareholders under the preference shares normal
Holdings Limited non-public issuance issuance, and in order to implement the Notice of
of preference shares the General Office of the State Council on Further
Strengthening Protection of the Lawful Rights of Small
Investors in Capital Markets, protect the interests
of ordinary shareholders and provide remedies for
the possible dilution on current returns as a result
of preference shares issuance, the Company has
undertaken that it will implement various measures
to ensure the effective utilisation of proceeds raised,
which can prevent dilution on current returns effectively,
thereby enhancing future returns.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
III. Performance of undertakings (Cont’d)
2. Description on the Company’s assets and items in meeting original profit forecast and its explanation
as there is profit forecast for assets and items of the Company and the reporting period is still within
the profit forecast period
Applicable √ Not applicable
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.
V. Opinions of the Board, the Supervisory Committee and independent Directors (if any)
regarding the “modified auditor’s report” for the reporting period issued by the accountants
Applicable √ Not applicable
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
VI. Reason for changes in accounting policies, accounting estimates and accounting methods
as compared to the financial report for the prior year
√ Applicable Not applicable
1. There was no change in accounting policies and accounting methods of the Company during the reporting period.
2. There was a change in accounting estimates of the Financial Leasing Company under the Company during the
reporting period. The debts arising from the financial leasing business of the Financial Leasing Company were
provided for bad debts at 5% to 10% since 1 November 2016.
VII. Reason for retrospective restatement to correct major accounting errors during the reporting
period
Applicable √ Not applicable
No retrospective restatement was made to correct major accounting errors during the reporting period.
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable Not applicable
1. Establishment of new subsidiaries
Registered
Date of capital Percentage
Name of the company establishment Operating scope (RMB’0,000) of shareholding
Qingdao Chenming Nonghai July 2016 Finance leasing, operational leasing, purchase of assets for leasing, 500,000.00 100%
Finance Leasing Co., Ltd. etc.
Jilin Chenming Logistics Co., Ltd. August 2016 Road transportation of general cargo; transportation for containers; 500.00 100%
road transportation agency; consultation on cargo transportation;
warehousing, loading and unloading services, etc.
Jiangxi Chenming Logistics Co., Ltd. September 2016 Road transportation of general cargo; transportation for containers; 500.00 100%
road transportation agency; consultation on cargo transportation;
warehousing, loading and unloading services, etc.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year (Cont’d)
2. Disposal of subsidiary
Difference
between
disposal
consideration
and net assets
of the subject
subsidiary
attributable
to the Company
under
Consideration consolidated
for equity Percentage Date on which Basis of determination of financial
disposal of equity control over date on which control statements
Name of subsidiary (RMB’0,000) disposed (%) Way of disposal subsidiary is lost over subsidiary is lost (RMB)
Shouguang Chenming Jiatai 100.00 100.00 Transfer December 2016 Equity transfer agreement and 1,203.18
Property Management Co., Ltd. transfer consideration
received
IX. Engagement or dismissal of accounting firms
Current accounting firm engaged
Name of the domestic accounting firm Ruihua Certified Public Accountants
(Special General Partnership)
Remuneration of the domestic accounting firm (RMB ‘0,000)
Continued term of service of the domestic accounting firm
Name of certified public accountants of the domestic accounting firm Zhao Yanmei and Wang Zongpei
Whether to appoint another accounting firm during the period
Yes √ No
Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
√ Applicable Not applicable
1. In 2016, the Company engaged Ruihua Certified Public Accountants as the internal control and auditing firm of the
Company. The Company paid RMB600,000 as internal control and auditing fees during the period;
2. In 2016, the Company engaged King & Wood Mallesons (Qingdao) Law Firm as its regular legal advisor and paid
RMB100,000 as legal advisory fees during the period;
3. During the year, due to non-public issuance of preference shares, the Company engaged Zhongtai Securities Co., Ltd.
as the sponsor of the Company. The Company paid RMB2.00 million as sponsorship fees during the period. During
the reporting period, due to the working requirements for the non-public issuance of A shares, the Company engaged
CSC Financial Co., Ltd. as the sponsor for the non-public issuance. Hence, the unfinished ongoing supervisory of
Zhongtai Securities on the non-public issuance of the Company will be succeeded by CSC Financial. The term for
ongoing supervisory will be expired on 31 December 2017.
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
X. Suspension in trading or delisting upon publication of annual report
Applicable √ Not applicable
XI. Matters related to bankruptcy and reorganisation
Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
XII. Material litigation and arbitration
√ Applicable Not applicable
Judgment
execution of
Basic information about Amount Will liability Judgment result of the litigation the litigation
litigation (arbitration) (RMB’0,000) be incurred Progress of litigation (arbitration) (arbitration) and its effect (arbitration) Disclosure date Disclosure index
Statutory demand RMB167,860,000 and No 1. On 18 October 2016, a “statutory 1. The injunction order issued Not applicable 26 October 2016, http://www.cninfo.com.cn,
the interest thereon, demand” from a claimed creditor on 7 November 2016 will 9 November2016 and announcement number:
USD3,548,900 and was delivered to the Hong Kong continue to be effective until 22 November 2016 2016-140, 2016-144 and 2016-151.
the interest thereon and registered address of the Company; further order made by the
HKD3,303,900 and court.
the interest thereon 2. On 7 November 2016, the Company
engaged solicitor to apply to 2. The inter-parties hearing
the Court of First Instance in the regarding the injunction
High Court of Hong Kong Special order will be continued at the
Administrative Region and has Court of First Instance in the
obtained an injunction order High Court of Hong Kong
“against applicant to petition for Special Administrative Region
winding-up against the Company; on 21 February 2017 and
22 February 2017, with 23
3. On 11 November 2016, the Court of February 2017 reserved.
First Instance in the High Court of
Hong Kong Special Administrative 3. The production and operation
Region has made the following of the Company remain
orders: (1) The injunction order normal, with increase in
issued on 7 November 2016 will production and sale volume.
continue to be effective until further In view of the amount involved
order made by the court; (2) the in this incident and the current
inter-parties hearing regarding the financial condition of the
injunction order will be continued Company, the Board of the
at the Court of First Instance in Company is not expecting any
the High Court of Hong Kong significant adverse effect on
Special Administrative Region on the ordinary production and
21 February 2017 and 22 February operation of the Company.
2017, with 23 February 2017
reserved.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIII. Punishment and rectification
√ Applicable Not applicable
Name Type Reason Type of punishment Conclusion (if any) Disclosure date Disclosure index
Jiangxi Chenming Paper Enterprise Administrative penalty imposed by Ordinary administrative penalty From April to September 2016, the Not applicable Not applicable
Co., Ltd. environment authority due to over- imposed by environment authority unstable operation of environmental
discharge of waste gas and waste protection facilities of Jiangxi
water Chenming resulted in fluctuation
in waste water and waste gas
indicators. The Environmental
Protection Bureau imposed six
administrative penalties on Jiangxi
Chenming. The penalties were
paid on-time, and the aforesaid
punishment was concluded. Jiangxi
Chenming conducted rectification in
accordance with the requirements
under the Notice on Rectification
within a Prescribed Timeframe,
and the rectification achieved good
results. The six administrative
penalties above were ordinary
administrative penalty and did not
constitute any material breach of
laws and regulations.
Explanation on rectification
√ Applicable Not applicable
After the aforesaid environmental protection punishment had been imposed, Jiangxi Chenming has proactively implemented
rectification. As of 31 December 2016, Jiangxi Chenming had fully paid the penalties. Specific rectify measures imposed by
Jiangxi Chenming are as follow:
1. In respect of over-discharge of waste water, specific rectify measures imposed by Jiangxi Chenming are as follows:
(1) Establish an environment management team under the supervision of senior management, which will be
responsible for discovering and solving issues about process effluent produced during ordinary production, and
supervising the ordinary production and operation.
(2) Adjust the water discharge indicator for workshops. Filtration equipment will be installed at gutters of workshops
in order to reduce impurity in waste water.
(3) Cooling water and condensate in workshops will be fully reused; For paper-making workshops, 90% of the
white water will be reused; Invest RMB3.50 million for the installation of new sand filtration system, which
can reuse approximately 6,000 m3 process effluent per day; Improve the fibre retention rate to over 95% in
systems as to reduce loss in fibres. Through reducing loss at source, the volume of waste water discharged will
be reduced, thus mitigating the load for process effluent treatment. By implementing aforesaid measures, the
waste water discharge of Jiangxi Chenming can meet with the discharge limitation.
2. In respect of over-discharge of smelly gas, Jiangxi Chenming will invest RMB3.80 million for the installation of new
odour elimination system for process effluent. Such system has put into operation. The process effluent workshops
of Jiangxi Chenming have been operating steadily. Functional departments have enhanced their supervision over the
operation of process effluent workshop, and focused on supervision over various technical indicators, thus meeting
with the discharge indicators.
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable √ Not applicable
XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measure of the Company
Applicable √ Not applicable
There was no implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure
of the Company during the reporting period.
XVI. Significant related party transactions and connected transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Percentage
Types of Subject matter Amount of as the amount Amount of Market price A connected transaction Disclosed under the
the related of the Pric ng basis Price of related party of sim l r transactions Whether of avai able under Chapter 14A of requirements of the
Related party party related party of the related related party transactions transactions approved exceeding Settlement of related sim l r the Hong Kong Listing Hong Kong Listing Rules
Related party relationship transactions transactions party transactions transactions (RMB’0,000) (%) (RMB’0,000) approved cap party transactions transaction Disclosure date Disclosure i dex Rules or not or not
Jiangxi Chenming Senior management Procurement Natural gas and Market price Market price 16,943.69 1.07% 36,000 No Bank acceptance and Not appl cable 31 March http://www.cninfo.com.cn Yes Yes. Please see the related
Natural Gas of the Company heavy oi etc. telegraphic transfer 2016 announcement dated
Co., Ltd. served as i s director 30 March 2016
Particulars on refund of bulk sale Ni
Estimated total amount for day-to-day related party transactions to be conducted during the period (by types of transactions) and their actual i plementing during the reporting period (if any) Not appl cable
Reason for the difference between transaction price and market reference price (if appl cable) Not appl cable
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable √ Not applicable
There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
during the reporting period.
3. Related party transaction in connection with joint external investment
Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVI. Significant related party transactions (Cont’d)
4. Related creditors’ rights and debts transactions
√ Applicable Not applicable
Whether non-operating related creditors’ rights and debts transactions existed
Yes √ No
There was no non-operating related creditors’ rights and debts transaction of the Company during the reporting
period.
5. Other significant related party transactions
Applicable √ Not applicable
There was no other related party transaction of the Company during the reporting period.
6. Connected transactions
During the year, the connected transaction entered into by the Company was in strict compliance with the related
requirements of Chapter 14A of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong
Limited (the “Listing Rules”). The details of the related connected transaction are as follows:
Entering into a conditional new share subscription agreement with the controlling shareholder
On 17 May 2016, the Company entered into a conditional new share subscription agreement with Chenming Holdings,
pursuant to which Chenming Holdings subscribed shares in the non-public issue based on its 20.35% (including
20.35%) equity interest in the Company as at 31 March 2016. The specific number of the subscribed shares was
determined by the final number of the shares issued in the non-public issue multiplied by 20.35%. As at the date of
this report, Chenming Holdings is the controlling shareholder of the Company which holds 24.07% equity interest in
the Company. Under Chapter 14A of the Listing Rules, Chenming Holdings is a connected person of the Company.
For the details of entering into the new share subscription agreement, please refer to 1. Non-public issue of A shares
under XIX. Other matters of significance of this section, and the announcement of the Company dated 17 May 2016.
7. Continuing connected transactions
During the year, the continuing connected transactions entered into by the Company were in strict compliance
with the related requirements of Chapter 14A of the Listing Rules and approved by the independent shareholders if
necessary. The details of the related continuing connected transactions are as follows:
Entering into a purchase and sale agreement with Jiangxi Chenming Natural Gas Co., Ltd. (the “Purchase and Sale
Agreement”)
On 30 March 2016, the Company and Jiangxi Chenming Natural Gas Co., Ltd. (“Jiangxi Chenming Natural Gas”)
entered into the Purchase and Sale Agreement in relation to the procurement. The term of the Purchase and Sale
Agreement is one year commencing on 30 March 2016 and expiring on 29 March 2017. As at the effective date of
the Purchase and Sale Agreement, Mr. Chen Hongguo, being an executive Director, held 60.36% equity interest in
Shouguang Hengtai Enterprise Investment Company Limited (“Hengtai Enterprise”), and Mr. Yin Tongyuan, Mr. Li
Feng, Mr. Geng Guanglin, Mr. Hou Huancai and Mr. Zhou Shaohua, all being executive Directors, and Mr. Gao Junjie,
being a Supervisor, held in aggregate 37.28% equity interest in Hengtai Enterprise, which in turn held 51% equity
interest in Jiangxi Chenming Natural Gas. Accordingly, Jiangxi Chenming Natural Gas was deemed to be an associate
of the above connected persons. Pursuant to Chapter 14A of the Listing Rules, the procurement under the Purchase
and Sale Agreement constituted continuing connected transactions of the Company. For the details of the Purchase
and Sale Agreement, please refer to XVI. Significant related party transactions under this section, (1) Related party
transactions in connection with purchase and sales of goods and rendering and receiving services under 5. Related
party transactions of XII. Related parties and related party transactions under section XIII Financial Report, and the
announcement of the Company dated 30 March 2016.
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVI. Significant related party transactions (Cont’d)
The independent non-executive Directors of the Company had reviewed the above continuing connected transactions
and confirmed that the transactions had been entered into:
(1) in the ordinary and usual course of business of the Group;
(2) on normal commercial terms or better (as defined in the Listing Rules); and
(3) according to the agreement governing them on terms that were fair and reasonable and in the interests of the
shareholders of the Company as a whole.
The Company had engaged Ruihua Certified Public Accountants (Special General Partnership), the auditors of the
Company, to conduct an annual review of the above continuing connected transactions in accordance with Rule
14A.56 of the Listing Rules. Ruihua Certified Public Accountants (Special General Partnership) had undertaken a
limited assurance engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised),
Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and with reference to
Practice Note 740, Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules issued
by Hong Kong Institute of Certified Public Accountants, and provided a letter separately to the Board, confirming that
the above continuing connected transactions:
(1) were approved by the Board;
(2) were, in all material respects, executed in accordance with the pricing policies of the relevant agreement
governing the transactions;
(3) were, in all material respects, conducted in accordance with the terms of the relevant agreement governing the
transactions; and
(4) had not exceeded the annual cap as disclosed in the related announcement.
XVII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable √ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees
√ Applicable Not applicable
(1) Guarantees
During the reporting period, the Company did not provide any guarantee to external parties (excluding those
provided to its subsidiaries) and did not provide any guarantees against the rules and regulations.
During the reporting period, the Company provided guarantee to their subsidiaries with respect to application of
bank loans. The guarantee amount incurred was RMB12,007.0451 million. As at 31 December 2016, the balance
of the guarantee provided by the Company amounted to RMB13,170.7253 million, representing 59.28% of the
equity attributable to shareholders of the Company as at the end of 2016.
Unit: RMB’0,000
External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)
Date of the related
announcement Guarantee to
disclosing the Amount of Guarantee date related parties
Name of obligee guarantee amount guarantee (agreement date) Guarantee provided Type of guarantee Term Fulfilled or not or not
Total external guarantees approved during the reporting period (A1) 0 Total actual external guarantees during the reporting period (A2)
Total external guarantees approved at the end of the reporting period (A3) 0 Balance of total actual guarantees at the end of the reporting period (A4)
Guarantees between the Company and its subsidiaries
Date of the related
announcement Guarantee to
disclosing the Amount of Guarantee date Guarantee Type of Fulfilled related parties
Name of obligee guarantee amount guarantee (agreement date) provided guarantee Term or not or not
Zhanjiang Chenming Pulp & Paper Co., Ltd. 27 October 2014 650,000 29 June 2015 253,602.82 General guarantee 3 years No No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30 March 2016 150,000 General guarantee 3 years No No
Shandong Chenming Financial Leasing Co., Ltd. 26 March 2015 500,000 28 November 2014 258,586.54 General guarantee 7 years No No
Shandong Chenming Financial Leasing Co., Ltd. 30 March 2016 300,000 General guarantee 7 years No No
Huanggang Chenming Arboriculture Co., Ltd. 27 October 2014 10,000 General guarantee 3 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 26 March 2015 400,000 17 August 2015 83,607.05 General guarantee 7 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 30 March 2016 550,000 General guarantee 7 years No No
Jiangxi Chenming Paper Co., Ltd. 27 October 2014 200,000 29 January 2014 82,423.66 General guarantee 3 years No No
Jiangxi Chenming Paper Co., Ltd. 30 March 2016 150,000 General guarantee 3 years No No
Shouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 14 November 2016 34,383.49 General guarantee 10 years No No
Shandong Chenming Paper Sales Company Limited 27 October 2014 400,000 7 July 2016 227,671.05 General guarantee 3 years No No
Shandong Chenming Paper Sales Company Limited 30 March 2016 200,000 General guarantee 3 years No No
Chenming (HK) Limited 27 October 2014 500,000 22 January 2016 372,797.91 General guarantee 3 years No No
Chenming (HK) Limited 30 March 2016 100,000 General guarantee 3 years No No
Shouguang Chenming Import and Export Trade Co., Ltd. 27 October 2014 200,000 General guarantee 3 years No No
Jilin Chenming Paper Co., Ltd. 27 October 2014 150,000 20 July 2016 4,000 General guarantee 3 years No No
Shandong Chenming Group Finance Co., Ltd. 29 December 2014 400,000 General guarantee 3 years No No
Total amount of guarantee provided for subsidiaries approved during the reporting period (B1) 2,050,000 Total amount of guarantee provided for subsidiaries during 1,200,704.51
the reporting period (B2)
Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (B3) 5,460,000 Total balance of guarantee provided for subsidiaries as at 1,317,072.53
the end of the reporting period (B4)
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between subsidiaries
Date of the related
announcement Guarantee to
disclosing the Amount of Guarantee date Guarantee Fulfilled related parties
Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term or not or not
Total amount of guarantee provided for subsidiaries approved during the reporting period (C1) 0 Total amount of guarantee provided for subsidiaries
during the reporting period (C2)
Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (C3) 0 Total balance of guarantee provided for subsidiaries
s at the end of the reporting period (C4)
Total amount of guarantee provided (i.e. sum of the above three guarantee amount)
Total amount of guarantee approved during the reporting period (A1+B1+C1) 2,050,000 Total amount of guarantee during the reporting period (A2+B2+C2) 1,200,704.51
Total amount of guarantee approved as at the end of the reporting period (A3+B3+C3) 5,460,000 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 1,317,072.53
The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to the net assets of the Company 59.28%
Of which:
Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D)
Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 1,232,228.49
Total amount of guarantee provided in excess of 50% of net assets (F) 188,829.57
Sum of the above three amount of guarantee (D+E+F) 1,317,072.53
(2) External guarantees against the rules and regulations
Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during
the reporting period.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
3. Entrusted cash and asset management
(1) Entrusted wealth management
Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
√ Applicable Not applicable
Unit: RMB’0,000
Actual Actual gains
principal or losses Gains or losses
Related party recovered Impairment during the recovered during
transaction Interest rate during provision Expected reporting the reporting
Borrower or not of loans Loan amount Commencement date Expiry date the period (if any) return period period
Shouguang Jin
Choi Public Assets
Management Co., Ltd. No 10.00% 50,000 18 January 2014 17 January 2017 0 0 15,000 4,867.14 Recovered on time
Shouguang Jin
Choi Public Assets
Management Co., Ltd. No 10.00% 40,000 18 April 2014 18 April 2017 0 0 12,000 3,893.71 Recovered on time
Source of entrusted loans Self-owned funds
Accumulated principal and return overdue but not yet recover
Dispute (if applicable) None
Disclosure date of approval of entrusted loans in board meeting (if any) 18 January 2014
Disclosure date of approval of entrusted loans at a general meeting (if any)
Any entrusted loan plan in the future? Not applicable
4. Other material contracts
Applicable √ Not applicable
The Company did not have any other material contract during the reporting period.
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVIII. Fulfilment of Social Responsibility
1. Fulfilment of social responsibility regarding specialised poverty relief
Applicable √ Not applicable
2. Fulfilment of other social responsibility
The state is the strongest support for the development of Chenming, while the society is the greatest origin for
Chenming’s development and growth. During its development for more than half a century, Chenming has always
adhered to its philosophy of “building the country through industry development and paying back to society”. It has
voluntary performed its social responsibility, and cultivated the “tree of responsibility”, which has already achieved
fruitful results.
The Company has established its corporate governance structure in accordance with the requirements of the
Companies Law, Securities Law, Articles of Association and other relevant laws and regulations and the actual
situation of the Company. There is a clear separation of powers and responsibilities between the general meeting,
the Board, the Supervisory Committee and the management which is accountable to the general manager. The
management system under the structure is characterised by a mechanism of checks and balances of a legal person
with separation of ownership and operation, separation of the decision-making, execution and supervisory powers,
as well as the co-existence of the general meeting, the Board and the Supervisory Committee. Strict provisions on
the rights, duties and responsibilities of the general meeting, the Board, the Supervisory Committee and general
managers have been stipulated. The Company has placed great emphasis on fulfilment of social responsibility and
goes beyond the concept of “profit as the only goal”. While creating value for shareholders during the process of
production, operation and business development, the Company, in line with the development of the State and the
society, has strived to reach a compromise between economic benefits and social benefits, short-term benefits and
long-term benefits, as well as corporate development and social development, with the aim to achieve a healthy and
harmonious development between the Company and its employees, the Company and the society, and the Company
and the environment.
Centring the corporate mission of “Creating Sharing Culture within Chenming and Achieving Win-Win Situation”, the
core value of “Good Faith, Win-Win and Sharing”, the corporate spirit of “Learning, Surpass and Leading” as well
as the human resources philosophy of “Providing Staff Trainings, Recruiting Talents, Allocating Human Resources
Properly and Retaining Talents”, the Company has established its own corporate culture, which has become the spirit
and driver for the sustainable and health development of the Company.
The Company strives to the development path of new type industrialisation with high technology contents, low
energy consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In
addition, the Company endeavours to facilitate business development in line with ecological development, enhance
its competitiveness in economic development and environmental protection, and establish its economic and
ecological culture. It also seeks for development while protecting the environment and maintains higher environmental
protection while seeking for scientific development, thus achieving “win-win” situation in economic development
and environmental protection. The Company has strictly in compliance with relevant environmental protection
policies, laws and regulations in China. It has mitigated the impact on environment through industrial optimisation
and upgrade, reduced resources utilisation through innovative operation, and implemented strict management with
the concept of environmental protection and safety operation being penetrated into every procedure in production
and operation, thereby promoting the harmonious development between the people and the Company, as well as
that of the Company and the environment. The Company is the first in the industry in China which passes ISO14001
environmental management system certification. The Company has been named the environmental friendly enterprise,
the recycling economy exemplary enterprise, the outstanding water efficiency unit and the outstanding unit in
comprehensive utilisation of resources of Shandong province.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
2. Fulfilment of other social responsibility (Cont’d)
Leveraging its advanced production technology and manufacture equipment, extensive experience in waste treatment
and various comprehensive treatment systems, the Company strives to implement horizontal and vertical control
throughout its production processes, thus achieving low carbon emission through low energy consumption, as well
as reduction of use of resources through recycling. The Company has passed the clean production assessment
organised by United Nations Development Programme in May 1999. The Company focuses on its works in various
aspects, including the establishment of eco-friendly energy consumption system, implementation of on-site 6S
management, launch of environmental protection and hazard inspection works, wide application of new energy
conservation and emission reduction technology, promotion of key energy conservation and emission reduction
projects, enhancement of innovative technology, promotion of the industrialisation of comprehensive resources
utilisation, implementation of scientific proposal on “multi-usage of water” based on the quality, quantity and working
procedure, as well as strengthening of the awareness on energy saving and environmental protection of all staff and
habit building. Hence, the Company has achieved whole process control and management over clean and efficient
production.
The Company has strictly implemented in-depth corporate governance. It has put great efforts and huge investments
in promoting the management of “the three wastes” so as to facilitate energy conservation and emission reduction,
aiming to become a low energy consumption and environment friendly enterprise. In respect of waste water
treatment, the Company has established world-class waste water treatment system. It has over 10 waste water
treatment facilities for various purposes, with the most advanced treatment technology in domestic and overseas
market being adopted. Hence, the Company has realised the comprehensive integration and upgrade of waste water
treatment facilities in plants, with different emission indicators better than relevant regulatory benchmark. In respect
of solid waste treatment, the Company has discontinued the traditional landfilling treatment. It has enhanced its
technology innovation, strengthened comprehensive resources utilisation, as well as expanded its industrial chain,
thereby achieving recycling and harmless utilisation of solid wastes. In respect of waste gas treatment, the Company
has introduced advanced international environmental protection equipment and technology for desulphurisation,
denitrification and de-dusting, smelly gas treatment and closure of coal plants. It has adopted scientific waste gas
treatment as to ensure our waste gas emission is in compliance with all relevant environmental protection standards
and requirements in China.
The Company strives to create a wealthy society. It has offered more job vacancies, thereby contributing more
taxes to the government, and sharing the achievements of the Company with our staff and society. While caring our
staff sincerely and building up a harmonious relationship with the staff, the Company also greatly supports different
charity programmes. Over the past few years, the Company has donated tens of millions to Shouguang Education
Fund, Shouguang Charity Federation, Weifang Venture Association, Shandong Red Cross and districts suffered from
earthquake, which reflects the outstanding contribution of the Company to building a harmonious society in China.
The Company has been honoured with the title of “Most Caring Donating Enterprise” by Weifang and Shouguang
Municipal Committee and Municipal Government for serval times, while our chairman Mr. Chen Hongguo has been
honoured with the title of “Most Caring Person”.
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
2. Fulfilment of other social responsibility (Cont’d)
Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
protection authority?
√ Yes No Not applicable
(1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding
environmental protection of the central and local government. The construction of projects strictly executed
the evaluation system on impacts of project construction on environment. In order to ensure pollutants are
discharged strictly in accordance to requirements under laws and regulation and disposed properly, production
and operation strictly comply with the national Law on the Prevention and Control of Environmental Pollution,
Law on the Prevention and Control of Air Pollution, Ten Rules Regarding Water Pollution and Law on the
Prevention and Control of Environmental Pollution by Solid Waste.
(2) Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
facilities. The aerobic-anaerobic-in-depth treatment technology is the major technology for water treatment,
which can achieve standardised discharge of waste water. Moreover, subsidiaries are equipped with recycling
system for process effluent, and reuse treated waste water to the greatest extent in order to minimise pollution.
Chenming Paper has constructed a total of 8 water treatment plants, with daily treatment capacity of 350,000
m3. Major national monitor indicators included indicators on COD, SS, ammonia nitrogen and PH value etc. The
emission standards are: <90mg/l for COD, <30mg/l for SS, <8mg/l for ammonia nitrogen and PH value ranges
from 6-9. In 2016, the average emission standards are: 68mg/l for COD, 19mg/l for SS, 2mg/l for ammonia
nitrogen and PH value of 7.1. Total pollutant emission in 2016 was 2,674 tonnes for COD and 128.97 tonnes
for ammonia nitrogen. A total of seven online water monitor facilities were installed in subsidiaries (one of
which was shared by two water treatment plants in Zhanjiang). Four online water monitor facilities are directly
managed by the environmental protection bureau, while the remaining three online water monitor facilities are
operated by entrusted enterprises qualified for running such facilities. In addition, governmental authority will
regularly visit the Company to conduct comparison of online monitor data every quarter. All data meets the
standards.
(3) Subsidiaries of Chenming Paper have its own power plants. Each self-owned plant has its own environmental
protection facilities for de-dusting, desulphurisation and denitrification. Denitrification is conducted
through SNCR, while desulphurisation is primarily conducted through gypsum desulphurisation (ammonia
desulphurisation is adopted in self-owned plant of Jiangxi Chenming).
Shouguang Chenming power plant II: 12mg/l for smoke (standard: 20mg/l), 8mg/l for sulphur dioxide (standard:
100mg/l) and 50mg/l for nitrogen oxide (standard: 200mg/l);
Shouguang Chenming power plant III: 11mg/l for smoke (standard: 20mg/l), 9mg/l for sulphur dioxide (standard:
35mg/l) and 53mg/l for nitrogen oxide (standard: 100mg/l);
Jilin Chenming, Zhanjiang Chenming 1#2#: 13mg/l for smoke (standard: 30mg/l), 12mg/l for sulphur dioxide
(standard: 100mg/l) and 35mg/l for nitrogen oxide (standard: 100mg/l);
Jiangxi Chenming: 12mg/l for smoke (standard: 30mg/l), 50mg/l for sulphur dioxide (standard: 200mg/l) and
110mg/l for nitrogen oxide (standard: 200mg/l);
Total pollutant emission in 2016: 900.25 tonnes per year for smoke, 1,583.11 tonnes per year for sulphur dioxide
and 3,776.02 tonnes per year for nitrogen oxide. A total of ten online water monitor facilities were installed in
subsidiaries. Five online water monitor facilities are directly managed by the environmental protection bureau,
while the remaining five online water monitor facilities are operated by entrusted enterprises qualified for running
such facilities. In addition, governmental authority will regularly visit the Company to conduct comparison of
online monitor data every quarter. All data meet the standards.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
2. Fulfilment of other social responsibility (Cont’d)
Will social responsibility report be published?
Yes √ No
XIX. Other matters of significance
√ Applicable Not applicable
1. Non-public issue of A shares
At the 4th extraordinary meeting of the eighth session of the Board, relevant resolutions, including the Resolution
on the Adjustments to the Use of Proceeds, Proceeds Amount, Issue Price and Issue Volume for the Non-Public
Issue of A Shares, were considered and approved. In view of the recent fluctuation in the security market and the
actual conditions of the Company, based on the authorisation granted to the Board at the general meeting, the
Company intended to cancel the utilisation of proceeds of RMB1,500 million for the repayment of bank loans. The
proceeds to be raised from the issue will be adjusted from not more than RMB5,200 million (inclusive) to not more
than RMB3,700 million (inclusive). It is proposed that the proceeds, net of issue expenses, will be fully utilised for the
annual production capacity of 400,000-tonne bleached sulphate pine chemical pulp project. The Announcement on
Supplemental Reply to the Notice of Feedback on Administrative Approval Application for the Non-public Issuance
and the Supplemental Reply to the Notice of Feedback on Administrative Approval Application for the Non-public
Issuance were published on 27 September 2016.
As of the disclosure date of the Report, the Company has not received the related approval of the CSRC. The
Company will perform its obligations to disclose the related information on a timely basis based on the approval of the
CSRC.
2. Completion of non-public issuance of 45.00 million preference shares with proceeds raised of RMB4.5
billion
On 17 September 2015, as approved by the Approval from the China Securities Regulatory Commission (Zheng Jian
Xu Ke [2015] No. 2130), not more than 45,000,000 preference shares shall be issued. Among which: the Company
issued 22,500,000 preference shares on 17 March 2016. The actual proceeds raised from the non-public issuance,
net of issue expenses, amounted to RMB2,238.75 million; The Company issued 10,000,000 preference shares on 17
August 2016. The actual proceeds raised from the non-public issuance, net of issue expenses, amounted to RMB995
million; The Company issued 12,500,000 preference shares on 22 September 2016. The actual proceeds raised from
the non-public issuance, net of issue expenses, amounted to RMB1,243.75 million.
3. Obtaining high and new tech enterprise qualifications by the Company and its subsidiaries
The Company received a high and new technology enterprise certificate jointly issued by the Shandong Provincial
Office of SAT, Shandong Local Taxation Bureau, the Shandong Province Finance Bureau and the Department of
Science & Technology of Shandong Province certifying the Company as a high and new technology enterprise with a
certification number of GR201537000611 valid for three years.
Shouguang Meilun, a wholly-owned subsidiary, received a high and new technology enterprise certificate jointly
issued by the Shandong Provincial Office of SAT, Shandong Local Taxation Bureau, the Shandong Province Finance
Bureau and the Department of Science & Technology of Shandong Province certifying Shouguang Meilun as a high
and new technology enterprise with a certification number of GR201537000228 valid for three years.
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
3. Obtaining high and new tech enterprise qualifications by the Company and its subsidiaries (Cont’d)
Zhanjiang Chenming, a controlling subsidiary of the Company, received a high and new technology enterprise
certificate jointly issued by the Guangdong Provincial Office of SAT, Guangdong Local Taxation Bureau, the
Guangdong Province Finance Bureau and the Department of Science & Technology of Guangdong Province
certifying Zhanjiang Chenming as a high and new technology enterprise of Guangdong with a certification number of
GR201544000146 valid for three years.
Jilin Chenming, a wholly-owned subsidiary, received a high and new technology enterprise certificate jointly issued by
the Jilin Provincial Office of SAT, Jilin Local Taxation Bureau, the Jilin Province Finance Bureau and the Department of
Science & Technology of Jilin Province certifying the Jilin Chenming as a high and new technology enterprise of Jilin
with a certification number of GR201622000039 valid for three years.
Pursuant to relevant requirements, the Company, Shouguang Meilun, Zhanjiang Chenming and Jilin Chenming are
eligible for relevant national preferential treatment enjoyable by high and new tech enterprises for three years and
subject to a corporate income tax rate of 15%.
4. Capital increase of Guangdong Dejun Investment Co., Ltd.
In order to promote the diversified development of Shandong Chenming Paper Holdings Limited, further expand
the business scope, enhance overall strength and comprehensive competitiveness, and foster new sources of profit
growth, Chenming Paper, together with Shanghai Zhongneng Enterprise Development (Group) Co., Ltd. (“Shanghai
Zhongneng”), intended to increase the capital of Guangdong Dejun Investment Co., Ltd. (“Guangdong Dejun”).
According to the evaluation report, as agreed by both parties and based on the net assets of Guangdong Dejun of
RMB1,000 million, Shanghai Zhongneng shall contribute RMB850 million, of which RMB425 million and RMB425
million shall be contributed to registered capital and capital reserve, respectively. Chenming Paper shall contribute
RMB1,850 million, of which RMB925 million and RMB925 million shall be contributed to register capital and capital
reserve, respectively. Upon completion of capital increase, the registered capital of Guangdong Dejun will increase to
RMB1,850 million. The contribution made by Shanghai Zhongneng and Chenming Paper shall represent 50% of the
registered capital of Guangdong Dejun, i.e. RMB925 million.
For details, please refer to relevant announcement (announcement no.: 2016-162) of the Company published on
CNINFO on 29 December 2016.
5. Capital injection to Zhanjiang Chenming
Zhanjiang Chenming is applying for syndicated loan for its projects. Banks have requested Zhanjiang Chenming to
increase its registered capital in order to reduce its gearing ratio. To ensure smooth commencement of projects of
Zhanjiang Chenming, the Company intended to increase the registered capital of Zhanjiang Chenming by RMB2.0
billion. Contribution will be gradually made based on the progress of syndicated loan investment. Prior to the capital
injection, the Company contributed RMB3.0 billion, representing 84.51% of the shareholding of Zhanjiang Chenming.
China Development Bank Development Fund Co., Ltd. contributed RMB550 million, representing 15.49% of the
shareholding of Zhanjiang Chenming. Since China Development Bank Development Fund Co., Ltd. will not participate
in the daily operation and management of Zhanjiang Chenming, it will not make corresponding capital contribution
based on its shareholding. Upon completion of the capital injection, the registered capital of Zhanjiang Chenming will
increase to RMB5.55 billion from RMB3.55 billion. Capital contribution made by the Company will be amounted to
RMB5.0 billion, representing 90.09% of the shareholding of Zhanjiang Chenming. Capital contribution made by China
Development Bank Development Fund Co., Ltd. will be amounted to RMB550 million, representing 9.91% of the
shareholding of Zhanjiang Chenming.
For details, please refer to relevant announcement (announcement no.: 2016-148) of the Company published on
CNINFO on 18 November 2016.
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.73 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
6. Capital injection to Finance Company
After operated for more than two years, Shandong Chenming Group Finance Co., Ltd. had its indicators fulfilling the
regulatory requirements of regulatory authorities. In order to further improve the fund settlement, management and
investment and financing standards, optimise resources utilisation, maximise profits, reduce financing costs and
enhance comprehensive strength, the Company and Jiangxi Chenming Paper Co., Ltd. intended to increase the
capital of Chenming Finance Company by RMB0.8 billion and RMB0.2 billion with their own funds respectively. Upon
the completion of the capital increase, the registered capital of Chenming Finance Company will be increased to
RMB2.0 billion from RMB1.0 billion.
For details, please refer to relevant announcement (announcement no.: 2016-115) of the Company published on
CNINFO on 14 September 2016.
7. Establishment of Qingdao Chenming Nonghai Finance Leasing Co., Ltd.
In order to strengthen overall strength and comprehensive competitiveness, further expand the scope of finance
leasing business, promote diversified development, increase investment in financial sector, and foster new sources of
profit growth, the Company intended to establish a new finance leasing company in Qingdao. For details, please refer
to relevant announcement (announcement no.: 2016-033) of the Company published on CNINFO on 31 March 2016.
8. Investment in Leader Life Insurance Co., Ltd.
In order to promote diversified development, further optimise the operating structure, expand and enrich business
scope, facilitate the strategic plan in financial field, enhance overall strength and comprehensive competitiveness, and
foster new sources of profit growth, the Company intended to jointly establish Leader Life Insurance Co., Ltd. (tentative
name, subject to company name under commercial registration) with Leader Technology Co., Ltd., Shanjin Jinkong
Capital Management Co., Ltd., Septwolves Group Holding Co., Ltd., Jiangxi Zhongyi Mining Group Co., Ltd., Shanxi
Xinlongyuen Coal Development Co., Ltd., Tibet Yifeng Investment Management Co., Ltd. and Haineng Industrial
Group Co., Ltd.
For details, please refer to relevant announcement (announcement no.: 2016-136) of the Company published on
CNINFO on 26 October 2016.
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.74 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016
Announcement No. Subject matter Date of publication Publication website and index
2016-001 Announcement on Pledge of Shares by Shareholders 5 January 2016 http://www.cninfo.com.cn
2016-002 Announcement on Progress of increase in shareholding of 5 January 2016 http://www.cninfo.com.cn
the Company by Controlling Shareholder
2016-003 Announcement on Progress of Undertaking by 9 January 2016 http://www.cninfo.com.cn
the Controlling Shareholder of the Company
2016-004 Announcement on Pledge of Shares by Shareholders 13 January 2016 http://www.cninfo.com.cn
2016-005 Announcement on Progress of increase in shareholding of 13 January 2016 http://www.cninfo.com.cn
the Company by Controlling Shareholder
2016-006 Full Report of Changes in Equity 15 January 2016 http://www.cninfo.com.cn
2016-007 Second Supplementary Notice of the 2016 First 15 January 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
2016-008 Supplementary Announcement on Full Report of Changes in Equity 19 January 2016 http://www.cninfo.com.cn
2016-009 Announcement on Result of the Issue of 2016 First Tranche of 20 January 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-010 Announcement on Progress of Registered Capital Decrease 23 January 2016 http://www.cninfo.com.cn
by Controlling Shareholder
2016-011 Announcement on Estimated Annual Results for 2015 26 January 2016 http://www.cninfo.com.cn
2016-012 Indicative Announcement of 2016 First Extraordinary General Meeting 29 January 2016 http://www.cninfo.com.cn
2016-013 Indicative Announcement on Subsidiary Receiving Subsidy 29 January 2016 http://www.cninfo.com.cn
2016-014 Announcement on Resolutions of the 2016 First 4 February 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
2016-015 Announcement on Result of the Issue of 2016 Second 12 March 2016 http://www.cninfo.com.cn
Tranche of Super & Short-term Commercial Paper
2016-016 Announcement on Pledge of Shares by Shareholders 12 March 2016 http://www.cninfo.com.cn
2016-017 Announcement on Result of the Issue of 2016 Third Tranche of 15 March 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-018 Announcement in Respect of Resolutions of the Ninth 16 March 2016 http://www.cninfo.com.cn
Extraordinary Meeting of the Seventh Session of
the Board of Directors
2016-019 Announcement on Investment of China Development Bank 16 March 2016 http://www.cninfo.com.cn
Development Fund Co., Ltd. in Subsidiary Zhanjiang Chenming
2016-020 Indicative announcement on refund of value-added tax received 19 March 2016 http://www.cninfo.com.cn
by a subsidiary
2016-021 Announcement on Undertakings and Performance under 25 March 2016 http://www.cninfo.com.cn
Non-public Issue of Preference Shares
2016-022 Announcement on Resolution of the 10th Extraordinary Meeting 25 March 2016 http://www.cninfo.com.cn
of the Seventh Session of the Board of Directors
2016-023 Announcement on Replacement of Self-raised Funds 25 March 2016 http://www.cninfo.com.cn
Invested in Advance to Projects with Proceeds
from Issue of Preference Shares
2016-024 Announcement on Resolution of the First Extraordinary Meeting 25 March 2016 http://www.cninfo.com.cn
of the Seventh Session of the Supervisory Committee
2016-025 Announcement on Entering into Proceeds Supervision Agreement 29 March 2016 http://www.cninfo.com.cn
2016 ANNUAL REPORT 75
3700278-t01fnar (Shandong Chenming) p.75 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2016-026 Announcement on Subsidiaries Obtaining High and 29 March 2016 http://www.cninfo.com.cn
New Tech Enterprise Qualifications
2016-027 Indicative Announcement on Medium-term Notes Issue Registered 29 March 2016 http://www.cninfo.com.cn
2016-028 Announcement in respect of Resolutions of the 13th Meeting of 31 March 2016 http://www.cninfo.com.cn
the Seventh Session of the Board of Directors
2016-029 Announcement on Resolution of the 13th Meeting of 31 March 2016 http://www.cninfo.com.cn
the Seventh Session of the Supervisory Committee
2016-030 2015 Annual Report Summary 31 March 2016 http://www.cninfo.com.cn
2016-031 Notice of 2015 Annual General Meeting 31 March 2016 http://www.cninfo.com.cn
2016-032 Announcement on Provision of Guarantee for 31 March 2016 http://www.cninfo.com.cn
Comprehensive Credit Line of Relevant Subsidiaries
2016-033 Announcement in relation to External Investment 31 March 2016 http://www.cninfo.com.cn
2016-034 Announcement on Expected Ordinary Connected 31 March 2016 http://www.cninfo.com.cn
Transactions in 2016
2016-035 Announcement on Entering into a Strategic Cooperation Agreement 1 April 2016 http://www.cninfo.com.cn
with Postal Savings Bank of China (Shandong Branch)
2016-036 Announcement on the Company and Subsidiaries Obtaining High 2 April 2016 http://www.cninfo.com.cn
and New Tech Enterprise Qualifications
2016-037 Transfer Announcement on Non-public Issue of Preference Shares 7 April 2016 http://www.cninfo.com.cn
2016-038 Announcement on Estimated Results for the First Quarter of 2016 7 April 2016 http://www.cninfo.com.cn
2016-039 Announcement on Suspension of Trading in Relation to Major Event 12 April 2016 http://www.cninfo.com.cn
2016-040 Announcement on Synchronised Information Disclosure on 12 April 2016 http://www.cninfo.com.cn
Two Stock Exchanges
2016-041 Announcement in respect of Resolutions of the 11th Extraordinary 16 April 2016 http://www.cninfo.com.cn
Meeting of the Seventh Session of the Board of Directors
2016-042 Announcement on Resolution of the Second Extraordinary Meeting 16 April 2016 http://www.cninfo.com.cn
of the Seventh Session of the Supervisory Committee
2016-043 Announcement on Dilution of Current Returns and 16 April 2016 http://www.cninfo.com.cn
Remedial Measures upon Non-public Offering
2016-044 Notice of 2016 Second Extraordinary General Meeting 16 April 2016 http://www.cninfo.com.cn
2016-045 Notice of the 2016 First Domestic Listed Share Class Meeting 16 April 2016 http://www.cninfo.com.cn
and 2016 First Overseas Listed Share Class Meeting
2016-046 Announcement on Resumption of Trading 16 April 2016 http://www.cninfo.com.cn
2016-047 Announcement on Capital Increase of Chenming Leasing 16 April 2016 http://www.cninfo.com.cn
2016-048 Indicative Announcement for H Shares 19 April 2016 http://www.cninfo.com.cn
2016-049 Supplemental Notice of 2016 Second Extraordinary General Meeting 20 April 2016 http://www.cninfo.com.cn
2016-050 Supplementary Notice of the 2016 First Domestic Listed Share 20 April 2016 http://www.cninfo.com.cn
Class Meeting and 2016 First Overseas Listed Share
2016-051 Announcement on Result of the Issue of 2016 Fifth Tranche of 20 April 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-052 Announcement on Result of the Issue of 2016 Sixth Tranche of 23 April 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-053 Indicative Announcement on Media Coverage 26 April 2016 http://www.cninfo.com.cn
2016-054 2016 First Quarterly Report 28 April 2016 http://www.cninfo.com.cn
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.76 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2016-055 Announcement on Total New Borrowings for 2015 and 2016 28 April 2016 http://www.cninfo.com.cn
2016-056 Announcement in respect of Resolutions of the 12th Extraordinary 29 April 2016 http://www.cninfo.com.cn
Meeting of the Seventh Session of the Board of Directors
2016-057 Announcement on Revision on the Date of 29 April 2016 http://www.cninfo.com.cn
2015 Annual General Meeting
2016-058 Notice of 2015 Annual General Meeting 29 April 2016 http://www.cninfo.com.cn
2016-059 Announcement on Revision on the Date of 2016 Second 29 April 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
2016-060 Announcement on Revision on the Date of 2016 First Domestic 29 April 2016 http://www.cninfo.com.cn
Listed Share Class Meeting and 2016 First Overseas Listed Share
2016-061 Notice of 2016 Second Extraordinary General Meeting 29 April 2016 http://www.cninfo.com.cn
2016-062 Notice of 2016 First Domestic Listed Share Class Meeting and 29 April 2016 http://www.cninfo.com.cn
2016 First Overseas Listed Share
2016-063 Announcement in respect of Resolutions of the 15th Meeting 30 April 2016 http://www.cninfo.com.cn
of the Seventh Session of the Board of Directors
2016-064 Announcement on Resolution of the 15th Meeting of 30 April 2016 http://www.cninfo.com.cn
the Seventh Session of the Supervisory Committee
2016-065 Announcement on Additional Resolutions Proposed at 30 April 2016 http://www.cninfo.com.cn
the 2015 General Meeting
2016-066 Supplemental Notice of 2015 General Meeting 30 April 2016 http://www.cninfo.com.cn
2016-067 Notice of Investor Reception Day 4 May 2016 http://www.cninfo.com.cn
2016-068 Announcement on Result of the Issue of 2016 Seven Tranche of 8 May 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-069 Indicative Announcement on 2015 General Meeting 13 May 2016 http://www.cninfo.com.cn
2016-070 Announcement in respect of Resolutions of the 13th Meeting of 18 May 2016 http://www.cninfo.com.cn
the Seventh Session of the Board of Directors
2016-071 Announcement on Resolution of the Third Extraordinary Meeting 18 May 2016 http://www.cninfo.com.cn
of the Seventh Session of the Supervisory Committee
2016-072 Announcement on Additional Resolutions Proposed at 18 May 2016 http://www.cninfo.com.cn
the 2016 Second Extraordinary General Meeting
2016-073 Announcement on Additional Resolutions Proposed at 18 May 2016 http://www.cninfo.com.cn
2016 First Domestic Listed Share Class Meeting and
2016 First Overseas Listed Share
2016-074 Supplementary Notice of 2016 Second Extraordinary General Meeting 18 May 2016 http://www.cninfo.com.cn
2016-075 Supplementary Notice of 2016 First Domestic Listed Share 18 May 2016 http://www.cninfo.com.cn
Class Meeting and 2016 First Overseas Listed Share
2016-076 Announcement on Dilution of Current Returns and 18 May 2016 http://www.cninfo.com.cn
Remedial Measures upon Non-public Offering (Revision)
2016-077 Announcement on Entering into Conditional Share Purchase 18 May 2016 http://www.cninfo.com.cn
Agreement and Connected Transactions under
the Non-public Offering of A Shares (Revision)
2016-078 Announcement on Revision of Non-public Offering for 2016 18 May 2016 http://www.cninfo.com.cn
2016-079 Announcement on Resolutions of the 2015 General Meeting 19 May 2016 http://www.cninfo.com.cn
2016-080 Announcement in respect of Resolutions of the 1st Meeting of 19 May 2016 http://www.cninfo.com.cn
the Eighth Session of the Board of Directors
2016 ANNUAL REPORT 77
3700278-t01fnar (Shandong Chenming) p.77 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2016-081 Announcement on Resolutions of the 1st Meeting of 19 May 2016 http://www.cninfo.com.cn
the Eighth Session of the Supervisory Committee
2016-082 Indicative Announcement on 2016 Second 26 May 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
2016-083 Indicative Announcement on 2016 First Domestic Listed Share Class 26 May 2016 http://www.cninfo.com.cn
Meeting and 2016 First Overseas Listed Share
2016-084 Announcement on Resolutions of 2016 Second 3 June 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
2016-085 Poll Results Announcement of the 2016 First Domestic 3 June 2016 http://www.cninfo.com.cn
A Shareholders’ and B Shareholders’ Class Meeting and
the 2016 First Overseas H Shareholders’ Class Meeting
2016-086 Announcement on Pledge of Shares by Shareholders 7 June 2016 http://www.cninfo.com.cn
2016-087 Notice of Investor Reception Day 14 June 2016 http://www.cninfo.com.cn
2016-088 Announcement on Resignation of Senior Management 15 June 2016 http://www.cninfo.com.cn
2016-089 Announcement on receipt of CSRC Notice of Acceptance of 21 June 2016 http://www.cninfo.com.cn
Application for Administrative Approval
2016-090 Announcement on Result of the Issue of 2016 Eighth Tranche of 25 June 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-091 Announcement on Redemption, Dividend Payment and Delisting of 30 June 2016 http://www.cninfo.com.cn
“11 Chenming Bond” for 2016
2016-092 Announcement on the Implementation of Dividend Distribution to 7 July 2016 http://www.cninfo.com.cn
Holders of A Shares and B Shares for 2015
2016-093 Announcement on Estimated Results for the Half Year of 2016 11 July 2016 http://www.cninfo.com.cn
2016-094 Announcement on Result of the Issue of 2016 Ninth Tranche of 11 July 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-095 Announcement on Entering into a Strategic Cooperation Agreement 16 July 2016 http://www.cninfo.com.cn
with Ping An Bank
2016-096 Announcement on Reply to the Notice of Feedback on 28 July 2016 http://www.cninfo.com.cn
Project Administrative Approval from CSRC
2016-097 Announcement on Neither Punishment nor Regulatory Measures 28 July 2016 http://www.cninfo.com.cn
Being Imposed by Security Regulator and Stock Exchange in
Last Five Years
2016-098 Indicative Announcement on Receipt of the Fund of Tax Rebate 5 August 2016 http://www.cninfo.com.cn
by Subsidiary
2016-099 Indicative Announcement on Subsidiary Receiving Subsidy 5 August 2016 http://www.cninfo.com.cn
2016-100 Announcement on Result of the Issue of 2016 Tenth Tranche of 15 August 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-101 Announcement in respect of Resolution of the 1st Extraordinary 18 August 2016 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2016-102 Announcement on Investment of China Development Bank 18 August 2016 http://www.cninfo.com.cn
Development Fund Co., Ltd. in Subsidiary Zhanjiang Chenming
2016-103 Announcement on Pledge of Shares by Shareholders 20 August 2016 http://www.cninfo.com.cn
2016-104 Indicative Announcement on Receipt of Subsidy 20 August 2016 http://www.cninfo.com.cn
2016-105 Indicative Announcement on Receipt of Subsidy 23 August 2016 http://www.cninfo.com.cn
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.78 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2016-106 Announcement in respect of Resolution of the 2nd Meeting of 25 August 2016 http://www.cninfo.com.cn
the Eighth Session of the Board of Directors
2016-107 Announcement in respect of Guarantee for Issuance of 25 August 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper by Zhanjiang Chenming
2016-108 Notice of 2016 Third Extraordinary General Meeting 25 August 2016 http://www.cninfo.com.cn
2016-109 2016 Interim Report Summary 25 August 2016 http://www.cninfo.com.cn
2016-110 Announcement on Undertakings and Performance under 25 August 2016 http://www.cninfo.com.cn
Non-public Issue of Preference Shares
2016-111 Indicative Announcement on Subsidiary Receiving Subsidy 3 September 2016 http://www.cninfo.com.cn
2016-112 Transfer Announcement on Non-public Issue of Preference Shares 9 September 2016 http://www.cninfo.com.cn
2016-113 Announcement in respect of Resolutions of the Second 14 September 2016 http://www.cninfo.com.cn
Extraordinary Meeting of the Eighth Session of
the Board of Directors
2016-114 Announcement on Commencement of Asset Securitisation 14 September 2016 http://www.cninfo.com.cn
Operation by Sales Company
2016-115 Announcement on External Investment 14 September 2016 http://www.cninfo.com.cn
2016-116 Announcement on Additional Resolutions Proposed at 14 September 2016 http://www.cninfo.com.cn
the 2016 Third Extraordinary General Meeting
2016-117 Announcement on Resolution of the 2nd Extraordinary Meeting of 14 September 2016 http://www.cninfo.com.cn
the Eighth Session of the Board of Directors
2016-118 Announcement on Resolution of the 3rd Extraordinary Meeting of 24 September 2016 http://www.cninfo.com.cn
the Eighth Session of the Board of Directors
2016-119 Announcement on Reimbursement of the Self-raised Funds Used in 24 September 2016 http://www.cninfo.com.cn
the Project Financed by Proceeds with the Proceeds from
the Third Tranche of Preference Shares
2016-120 Announcement on Resolution of the 1st Extraordinary Meeting of 24 September 2016 http://www.cninfo.com.cn
the Eighth Session of the Supervisory Committee
2016-121 Supplemental Notice of 2016 Third Extraordinary General Meeting 24 September 2016 http://www.cninfo.com.cn
2016-122 Announcement in respect of Resolutions of the Fourth 27 September 2016 http://www.cninfo.com.cn
Extraordinary Meeting of the Eighth Session of
the Board of Directors
2016-123 Announcement on Resolution of the 2nd Extraordinary Meeting of 27 September 2016 http://www.cninfo.com.cn
the Eighth Session of the Supervisory Committee
2016-124 Announcement on Adjustments to the Use of Proceeds, 27 September 2016 http://www.cninfo.com.cn
Proceeds Amount, Issue Price and Issue Volume for
the Non-Public Issue of A Shares
2016-125 Announcement on Second Revision of Non-public Offering for 2016 27 September 2016 http://www.cninfo.com.cn
2016-126 Announcement on Dilution of Current Returns and 27 September 2016 http://www.cninfo.com.cn
Remedial Measures upon Non-public Offering (Second Revision)
2016-127 Announcement on Supplemental Reply to the Notice of Feedback on 27 September 2016 http://www.cninfo.com.cn
Administrative Approval Application for the Non-public Issuance
2016-128 Indicative Announcement of 2016 Third Extraordinary 30 September 2016 http://www.cninfo.com.cn
General Meeting
2016-129 Announcement on Undertakings and Performance under 30 September 2016 http://www.cninfo.com.cn
Non-public Issue of Preference Shares
2016 ANNUAL REPORT 79
3700278-t01fnar (Shandong Chenming) p.79 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2016-130 Announcement on Resolution of the 2016 Third 12 October 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
2016-131 Announcement on Estimated Results for the First 12 October 2016 http://www.cninfo.com.cn
Three Quarters of 2016
2016-132 Announcement on Result of the Issue of 2016 Eleventh Tranche of 20 October 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-133 Transfer Announcement on Non-public Issue of Preference Shares 21 October 2016 http://www.cninfo.com.cn
2016-134 Announcement in respect of Resolutions of the Third Meeting of 26 October 2016 http://www.cninfo.com.cn
the Eighth Session of the Board of Directors
2016-135 2016 Third Quarterly Report 26 October 2016 http://www.cninfo.com.cn
2016-136 Announcement on External Investment (I) 26 October 2016 http://www.cninfo.com.cn
2016-137 Notice of 2016 Fourth Extraordinary General Meeting 26 October 2016 http://www.cninfo.com.cn
2016-138 Announcement on External Investment (II) 26 October 2016 http://www.cninfo.com.cn
2016-139 Announcement on Resolution of the 3rd Meeting of 26 October 2016 http://www.cninfo.com.cn
the Eighth Session of the Supervisory Committee
2016-140 Indicative Announcement 26 October 2016 http://www.cninfo.com.cn
2016-141 Announcement on Pledge of Shares by Shareholders 4 November 2016 http://www.cninfo.com.cn
2016-142 Announcement on Pass Away of Chairman of 8 November 2016 http://www.cninfo.com.cn
the Supervisory Committee Mr. Gao Junjie
2016-143 Announcement on Result of the Issue of 2016 Twelfth Tranche of 8 November 2016 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2016-144 Indicative Announcement 9 November 2016 http://www.cninfo.com.cn
2016-145 Announcement in respect of Resolutions of the Fourth Meeting of 17 November 2016 http://www.cninfo.com.cn
the Eighth Session of the Board of Directors
2016-146 Announcement on External Investment 17 November 2016 http://www.cninfo.com.cn
2016-147 Announcement on Provision of Guarantee to Sales Company for 17 November 2016 http://www.cninfo.com.cn
Commencement of Asset Securitisation Operation
2016-148 Supplementary Announcement on External Investment 18 November 2016 http://www.cninfo.com.cn
2016-149 Indicative Announcement on Subsidiary Receiving 18 November 2016 http://www.cninfo.com.cn
Government Subsidy
2016-150 Corrigendum for 2016 Interim Report 18 November 2016 http://www.cninfo.com.cn
2016-151 Indicative Announcement 22 November 2016 http://www.cninfo.com.cn
2016-152 Announcement on Resolution of the 3rd Extraordinary Meeting of 23 November 2016 http://www.cninfo.com.cn
the Eighth Session of the Supervisory Committee
2016-153 Announcement on Additional Resolutions Proposed at 26 November 2016 http://www.cninfo.com.cn
the 2016 Fourth Extraordinary General Meeting
2016-154 Supplemental Notice of 2016 Fourth Extraordinary General Meeting 26 November 2016 http://www.cninfo.com.cn
2016-155 Announcement on Changes in Sponsor and Sponsor Representative 26 November 2016 http://www.cninfo.com.cn
for Continuous Supervisory
2016-156 Indicative Announcement of 2016 Fourth Extraordinary 9 December 2016 http://www.cninfo.com.cn
General Meeting
2016-157 Indicative Announcement on Subsidiary Receiving Subsidy 13 December 2016 http://www.cninfo.com.cn
2016-158 Poll Results Announcement of the 2016 Fourth 14 December 2016 http://www.cninfo.com.cn
Extraordinary General Meeting
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.80 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XIX. Other matters of significance (Cont’d)
9. Information disclosure index for 2016 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2016-159 Announcement on Resolution of the 4th Meeting of 14 December 2016 http://www.cninfo.com.cn
the Eighth Session of the Supervisory Committee
2016-160 Announcement on 2016 Dividend Payment in Respect of 19 December 2016 http://www.cninfo.com.cn
“12 Chenming Bond”
2016-161 Announcement in respect of Resolutions of the Sixth 29 December 2016 http://www.cninfo.com.cn
Extraordinary Meeting of the Eighth Session of
the Board of Directors
2016-162 Announcement on External Investment 29 December 2016 http://www.cninfo.com.cn
2016-163 Indicative Announcement on Subsidiary Receiving Subsidy 29 December 2016 http://www.cninfo.com.cn
2016-164 Announcement on Release of Stock Pledge by Shareholders 30 December 2016 http://www.cninfo.com.cn
2016-165 Announcement on Pledge of Shares by Shareholders 30 December 2016 http://www.cninfo.com.cn
XX. Matters of significant of subsidiaries of the Company
√ Applicable Not applicable
1. Commencement of Asset Securitisation Operation by Sales Company
In order to revitalise idle assets, facilitate capital transfer and broaden financing channels, the Sales Company
intended to implement the asset securitisation project for cash flow receivables. The “asset-backed security project
for cash flow receivables from sales” will be established through financial institution, and financing activities will be
conducted by issuing asset-backed securities pursuant to the Project.
Under the Project, it is intended to issue asset-backed securities of not more than RMB2.1 billion (inclusive) by
tranches, with terms of not more than 5 years. The asset-backed securities to be issued are classified as prioritised
asset-backed securities and subordinated asset-backed securities. Relevant components of prioritised asset-backed
securities and subordinated asset-backed securities, such as scale and terms, might be adjusted as required by
regulators or based on the market demand.
The interest rate of prioritised asset-backed securities will be determined based on the prevailing market interest rate
at the time of issuance through book-building procedure. Dividends for prioritised asset-backed securities will be
payable at a fixed rate. Subordinated asset-backed securities will not provide fixed-term return with zero coupon rate.
Upon the establishment of the Project, asset-backed securities will be listed and traded on stock exchange.
For details, please refer to relevant announcement (announcement no.: 2016-114) of the Company published on
CNINFO on 14 September 2016.
2016 ANNUAL REPORT 81
3700278-t01fnar (Shandong Chenming) p.81 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VII Material Matters
XX. Matters of significant of subsidiaries of the Company (Cont’d)
2. Investment by China Development Bank Development Fund Co., Ltd. (“CDBD Fund”) in the subsidiary
Zhanjiang Chenming
CDBD Fund will contribute RMB550 million for the capital increase of Zhanjiang Chenming as an investment in its
600,000-tonne liquid packaging cardboard project. Upon the completion of capital increase, CDBD Fund will hold
9.91% equity interests in Zhanjiang Chenming. Investment made by CDBD Fund shall have a term of 12 years at a
return rate of not more than 1.2% per annum. The Company and its subsidiaries will pledge its land and property
as the guarantee. Such equity interest will be recovered by the Company in accordance to the agreed payback
mechanism upon the expiry of the construction phase of the project.
For details, please refer to relevant announcements (announcement no.: 2016-019, 2016-102 and 2016-148) of the
Company published on CNINFO on 16 March 2016, 18 August 2016 and 18 November 2016.
3. Issuance of super & short-term commercial paper by Zhanjiang Chenming
In order to further expand the financing channels, lower finance costs and increase the efficiency of the Company,
Zhanjiang Chenming intended to, subject to registration with the National Association of Financial Market Institutional
Investors, issue super & short-term commercial paper (the “SS Paper”) of not more than RMB3.5 billion (inclusive).
The SS Paper will be guaranteed by Shandong Chenming Paper Holdings Limited.
For details, please refer to relevant announcement (announcement no.: 2016-106) of the Company published on
CNINFO on 25 August 2016.
4. Joint establishment of Huanggang Chenming Port Co., Ltd. by Huanggang Chenming
In order to promote diversified development, further expand business scope, enhance overall strength and
competitiveness, and foster new sources of profit growth while meeting the transportation and loading requirements
for raw materials and finished goods of Huanggang Chenming, it proposed that Huanggang Chenming P&P and
Huanggang Urban Investment and Asset Management Co., Ltd. will jointly establish Huanggang Chenming Port Co.,
Ltd. (tentative name, subject to company name under commercial registration).
For details, please refer to relevant announcement (announcement no.: 2016-138) of the Company published on
CNINFO on 26 October 2016.
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.82 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:12
VIII Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: share
Opening balance Change during the reporting period (+/-) Closing balance
Shares
converted
Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage
I. Restricted shares 8,241,219 0.42% 0 0 0 -454,039 -454,039 7,787,180 0.40%
1. Shares held by other
domestic investors 8,241,219 0.42% 0 0 0 -454,039 -454,039 7,787,180 0.40%
Shares held by domestic
natural persons 8,241,219 0.42% 0 0 0 -454,039 -454,039 7,787,180 0.40%
II. Non-restricted shares 1,928,164,248 99.58% 0 0 0 454,039 454,039 1,928,618,287 99.60%
1. RMB ordinary shares 1,105,037,237 57.07% 0 0 0 554,039 554,039 1,105,591,276 57.10%
2. Domestic listed foreign
shares 470,923,511 24.32% 0 0 0 -100,000 -100,000 470,823,511 24.31%
3. Overseas listed foreign
shares 352,203,500 18.19% 0 0 0 0 0 352,203,500 18.19%
III. Total number of shares 1,936,405,467 100.00% 0 0 0 0 0 1,936,405,467 100.00%
The reasons for such changes
√ Applicable Not applicable
Before the change, the number of restricted shares held by domestic natural persons increased by 454,039 from
8,241,219 to 7,787,180, due to the fact that:
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, 25% of RMB ordinary shares (A shares), i.e. 9,902
shares, without restriction held by senior management were put under restriction for half a year since the resignation
thereof during the reporting period;
100% of domestic-listed foreign shares (B shares), i.e. 100,000 shares, without restriction held by senior management
were put under restriction for half a year since the resignation thereof;
563,941 restricted RMB ordinary shares (A shares) held by senior management who have been resigned for more than
half a year were released.
Approval of changes in shareholding
Applicable √ Not applicable
Transfer of shares arising from changes in shareholding
Applicable √ Not applicable
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.83 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:21
VIII Changes in Share Capital and Shareholders
I. Changes in shares (Cont’d)
1. Changes in shares (Cont’d)
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings
per share and net assets per share attributable to shareholders of ordinary shares of the Company for the latest
year and the latest period
Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be
disclosed
Applicable √ Not applicable
2. Changes in restricted shares
Applicable √ Not applicable
II. Issuance and listing of securities
1. Issuance of securities (excluding preference shares) during the reporting period
Applicable √ Not applicable
2. Changes in the total number of shares and structure of shareholders and the structure of the assets
and liabilities of the Company
Applicable √ Not applicable
3. Existing staff shares
Applicable √ Not applicable
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of 106,915, of which Total number of 95,521, of which Total number of 0 Total number of
shareholders of ordinary 84,582 were holders of shareholders of 73,559 were holders of shareholders of shareholders of
shares as at the end of A shares, 21,862 were ordinary shares as A shares, 21,497 were preference shares with preference shares with
the reporting period holders of B shares and at the end of the month holders of B shares and restored voting right restored voting right as
471 were holders prior to the publication 465 were holders as at the end of the at the end of the month
of H shares date of this of H shares reporting period (if any) prior to the disclosure
annual report (please refer to note 8) date of the annual
report (if any)
(please refer to note 8)
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.84 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:21
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Changes
Number of (increase or
shares held decrease)
at the end of during the Number of Number of
Percentage of the reporting reporting restricted non-restrict
Name of shareholders Nature of shareholders shareholding period period shares held shares held Share pledged or locked-up
Status of shares Number
SHOUGUANG CHENMING HOLDINGS
COMPANY LIMITED State-owned legal person 15.13% 293,003,657 0 0 293,003,657 Pledged 201,562,000
HKSCC NOMINEES LIMITED Overseas legal person 12.97% 251,155,350 -40,855,550 0 251,155,350
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 8.94% 173,093,400 101,310,220 0 173,093,400
CENTRAL HUIJIN ASSET MANAGEMENT LTD. Domestic non-state-owned
legal person 2.07% 40,137,900 0 0 40,137,900
ANBANG ASSET MANAGEMENT - CHINA
MERCHANTS BANK - ANBANG ASSET
MANAGEMENT - CHINA MERCHANTS
BANK - ANBANG ASSET MANAGEMENT -
WIN-WIN NO. 3 COLLECTIVE ASSET
MANAGEMENT PRODUCT Others 1.52% 29,403,560 29,403,560 0 29,403,560
HUATAI SECURITIES CO., LTD. Domestic non-state-owned
legal person 0.71% 13,839,967 -3,854,801 0 13,839,967
BBH A/C VANGUARD EMERGING MARKETS
STOCK INDEX FUND Overseas legal person 0.44% 8,608,238 0 0 8,608,238
JIN Xing Domestic nature person 0.40% 7,761,763 -233,237 0 7,761,763
CHEN Hongguo Domestic nature person 0.33% 6,434,527 0 0 6,434,527
LSV EMERGING MARKETS EQUITY FUND, L.P. Overseas legal person 0.32% 6,102,800 0 0 6,102,800
Connected relationship or connected party A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming
relationship among the above shareholders Holdings Company Limited, which is a state-owned legal person. Hence, they are persons acting in concert under Administration of Disclosure of Information on the
Change of Shareholdings in Listed Companies Procedures. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in
concert and is also not aware that any other shareholders of tradable shares are connected with each other.
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.85 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:21
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Number of
non-restricted
shares held as
at the end of the
Name of shareholders reporting period Class of shares
Class of shares Number
SHOUGUANG CHENMING HOLDINGS 293,003,657 RMB ordinary shares 293,003,657
COMPANY LIMITED
HKSCC NOMINEES LIMITED 251,155,350 Overseas listed 251,155,350
foreign shares
CHENMING HOLDINGS 173,093,400 Domestic listed 73,207,900
(HONG KONG) LIMITED foreign shares
Overseas listed 99,885,500
foreign shares
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 40,137,900 RMB ordinary shares 40,137,900
ANBANG ASSET MANAGEMENT - CHINA 29,403,560 RMB ordinary shares 29,403,560
MERCHANTS BANK - ANBANG ASSET
MANAGEMENT - CHINA MERCHANTS
BANK - ANBANG ASSET MANAGEMENT
- WIN-WIN NO. 3 COLLECTIVE ASSET
MANAGEMENT PRODUCT
HUATAI SECURITIES CO., LTD. 13,839,967 RMB ordinary shares 13,839,967
BBH A/C VANGUARD EMERGING MARKETS 8,608,238 Domestic listed 8,608,238
STOCK INDEX FUND foreign shares
JIN Xing 7,761,763 Domestic listed 7,761,763
foreign shares
CHEN Hongguo 6,434,527 RMB ordinary shares 6,434,527
LSV EMERGING MARKETS EQUITY FUND, L.P. 6,102,800 Domestic listed 6,102,800
foreign shares
Connected relationship or connected party A shareholder, Chenming Holdings (Hong Kong) Limited, which
relationship among the top ten shareholders is an overseas legal person, is a wholly-owned subsidiary
of non-restricted shares, and between of a shareholder, Shouguang Chenming Holdings Company
the top ten shareholders of Limited, which is a state-owned legal person. Hence, they are
non-restricted shares and the top persons acting in concert under Administration of Disclosure of
ten shareholders Information on the Change of Shareholdings in Listed Companies
Procedures. Save for the above, it is not aware that any other
shareholders of tradable shares are persons acting in concert and
is also not aware that any other shareholders of tradable shares
are connected with each other.
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
shareholders and top 10 shareholders of non-restricted shares of the Company
Yes √ No
The top 10 ordinary shareholders and top 10 shareholders of non-restricted ordinary shares of the Company did not
enter into any agreed repurchase transaction during the reporting period.
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.86 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:21
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Legal
representative/
Name of controlling Person in charge Date of
shareholders of the unit establishment Enterprise code Principal business
Shouguang Chenming Holdings Chen Hongguo 30 December 2005 78348518-9 Investment in paper
Company Limited making, electricity,
heat and arboriculture.
Shareholdings of controlling Save for the Company, Shouguang Chenming Holdings Company Limited does not have
shareholders who have control over or hold any equity interest of other domestic or overseas listed companies.
control or hold shares in
other domestic or overseas
listed companies during
the reporting period
Change of controlling shareholders during the reporting period
Applicable √ Not applicable
There was no change of controlling shareholders of the Company during the reporting period.
3. Beneficial owner of the Company
Nature of the beneficial owner: Regional state-owned assets administration authority
Type of the beneficial owner: legal person
Legal
representative/
Person in
charge of Date of
Name of beneficial owner the unit establishment Enterprise code Principal business
State-owned Assets Fu Xingang 1 August 1991 F5108355-4Responsible for the
Supervision and management and
Administration Office capital operation of the
of Shouguang City state-owned assets of
enterprises and business
units in Shouguang city
Shareholdings of beneficial Save for the Company, State-owned Assets Supervision and Administration Office
owner who has control or of Shouguang City does not have control over or hold any equity interest of other
holds shares in other domestic or overseas listed companies.
domestic or overseas
listed companies during
the reporting period
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.87 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:21
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial owner of the Company (Cont’d)
Change of beneficial owner during the reporting period
Applicable √ Not applicable
There was no change of beneficial owner of the Company during the reporting period.
Chart illustrating the relationship between the Company and the beneficial owner
Beneficial owner controlling the Company through trust or other asset management method
Applicable √ Not applicable
4. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable √ Not applicable
5. Restrictions on decrease in shareholding by controlling shareholders, beneficial owner, reorganising
party and other undertaking parties
Applicable √ Not applicable
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.88 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:21
IX Preference Shares
√ Applicable Not applicable
I. Issue and listing of preference shares during the past three years at the end of the reporting
period
√ Applicable Not applicable
With listing
Issue price Coupon Issue size permission Information of Information of
Method Issue date (RMB/share) rate (share) Listing date (share) Delisting date use of proceeds changes to proceeds
Private 6 March 2016 100 4.36% 22,500,000 8 April 2016 22,500,000 http://www.cninfo.com.cn http://www.cninfo.com.cn
Private 16 August 2016 100 5.17% 10,000,000 12 September 2016 10,000,000 http://www.cninfo.com.cn http://www.cninfo.com.cn
Private 21 September 2016 100 5.17% 12,500,000 24 October 2016 12,500,000 http://www.cninfo.com.cn http://www.cninfo.com.cn
II. Holders of preference shares and their shareholdings
Unit: share
Total number of shareholders of preference 7 Total number of shareholders of preference
shares as at the end of the reporting period shares as at the end of the month prior
to the publication date of this annual report
More than 5% shareholdings of the preference shares of the Company or top ten holders of preference shares
Changes
Number of (increase or
shares held decrease)
at the end of during the Number of Number of
Percentage of the reporting reporting restricted non-restrict
Name of shareholders Nature of shareholders shareholding period period shares held shares held Share pledged or locked-up
Status of shares Number
BEIJING YIBEN ZHONGXING INVESTMENT Domestic non-state-owned 27.78% 12,500,000 12,500,000 0 12,500,000 Pledged 12,500,000
MANAGEMENT CO., LTD. legal person
BANK OF COMMUNICATIONS Others 22.44% 10,100,000 10,100,000 0 10,100,000
INTERNATIONAL TRUST CO., LTD. - HUILI
NO.167 SINGLE CAPITAL TRUST
BANK OF COMMUNICATIONS Others 14.22% 6,400,000 6,400,000 0 6,400,000
INTERNATIONAL TRUST CO., LTD. - HUILI
NO.136 SINGLE CAPITAL TRUST
QILU BANK CO., LTD. - QILU BANK QUANXIN Others 13.33% 6,000,000 6,000,000 0 6,000,000
WEALTH MANAGEMENT PRODUCT SERIES
HENGFENG BANK CO., LTD. Domestic non-state-owned 11.11% 5,000,000 5,000,000 0 5,000,000
legal person
SHANGHAI STATE-OWNED ASSETS State-owned legal person 6.67% 3,000,000 3,000,000 0 3,000,000
OPERATION CO., LTD.
NCF - MINSHENG BANK - CHINA FORTUNE Others 4.44% 2,000,000 2,000,000 0 2,000,000
INTERNATIONAL TRUST – CHINA
FORTUNE TRUST MIN XIN NO. 11
SINGLE CAPITAL TRUST
Connected relationship or connected party The aforesaid holders of preference shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. - HUILI NO.167 SINGLE CAPITAL TRUST”
relationship among the top ten holders of and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. - HUILI NO.136 SINGLE CAPITAL TRUST”, are persons acting in concert. Save for
preference shares, and between the top ten the above, it is not aware that the remaining holders of preference shares are persons acting in concert, and it is also not aware whether there is any connected
holders of preference shares and the top ten relationship between the above holders of preference shares and top ten holders of ordinary shares.
holders of ordinary shares
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.89 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:25
IX Preference Shares
III. Profit distribution for preference shares
√ Applicable Not applicable
Profit distribution for preference shares during the reporting period
√ Applicable Not applicable
2016 proposed profit distribution plan for preference shares
The audited consolidated net profit attributable to shareholders of the Company for 2016 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB2,063,986,822.25. When deducting
the interest for perpetual bonds of RMB153,140,000 for 2016, the distributable profit realised for 2016 amounted to
RMB1,910,846,822.25. In accordance with the requirements of the Articles of Association and the Prospectus of Non-public
Issuance of Preference Shares, the proposed profit distribution plan for preference shares of the Company for 2016 is as
follows:
In accordance with the Prospectus of Non-public Issuance of Preference Shares, shareholders of preference shares
may jointly participate in the distribution of the 50% retained earnings realised for the year of issuance with ordinary
shareholders. The basis for the distribution is calculated as follows: (the number of months for the period from the next
month after the month of issuance to the end of the reporting period/12) the retained earnings realised for the year
50%, and the basis for the distribution is 9/12 19.11 50%=RMB717 million.
Based on the 387,263,339 simulated shares converted from the preference shares as at the end of 2016 on a conversion
ratio of 1 share valued at RMB5.81, a cash dividend of RMB3.08 (tax inclusive) per ten shares or a variable cash dividend
amounting to RMB119,277,108.41 will be distributed to holders of preference shares.
Distribution for preference shares of the Company for the past three years
Unit: RMB
Explanation on
shortfall
Net profit Percentage accumulated to the
attributable to to the net profit next accounting
owners of the attributable to year due to
Company owners of the insufficient
under the Company distributable profits
consolidated under the or portion can
financial statements consolidated be allocated to
Distributed amount for the distribution financial remaining profit
Year of distribution (tax inclusive) year statements distribution
2016 119,277,108.41 2,063,986,822.25 5.78% Nil
Any adjustment or change in profit distribution policy for preference shares
Yes √ No
Both earnings of the Company and retained profit of the parent company are positive during the reporting
period but without profit distribution for preference shares
Applicable √ Not applicable
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.90 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:25
IX Preference Shares
III. Profit distribution for preference shares (Cont’d)
Explanation on other matters regarding distribution for preference shares
√ Applicable Not applicable
Shareholders of preference shares participate in profit distribution in two portions, namely the fixed dividend distributed
based on a fixed dividend rate and the distribution of retained earnings realised for the year.
1. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the preference
shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
the preference shares in accordance with the issuance plan under the framework and principles considered and
approved in the general meeting in respect of the preference shares. The general meeting of the Company has the
right to cancel part of or all of the current dividends on the preference shares. However, when the general meeting
of the Company will consider the cancellation of part of or all of the current dividends on the preference shares, the
Company shall inform the shareholders of preference shares at least 10 working days before the date of dividend
payment in accordance with the requirements of the related authorities.
2. Participation in the distribution of retained earnings realised for the year.
Holders of preference shares participate in the distribution of the retained earnings through receipt of cash which
is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of preference shares can
also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
basis upon distribution of relevant fixed income to holders of financial instruments such as the preference shares
which may be classified under equity. 50% of the retained earnings shall be distributed to holders of preference
shares and ordinary shareholders. Holders of preference shares shall participate in the distribution of the retained
earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained
earnings by receiving cash dividends or dividends on ordinary shares.
IV. Repurchase or conversion
Applicable √ Not applicable
There was no repurchase or conversion during the reporting period.
V. Resumption of voting rights of preference shares
1. Resumption and exercise of voting rights
Applicable √ Not applicable
2. Shareholders and beneficial owner involved in resumption of voting rights of preference shares
Applicable √ Not applicable
VI. Accounting policy and reasons thereof
√ Applicable Not applicable
Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of
Financial Instruments, Accounting Standard for Business Enterprises No. 37 - Presentation of Financial Instruments and
Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
2016 ANNUAL REPORT
3700278-t01fnar (Shandong Chenming) p.91 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:25
X. Directors, Supervisors and Senior Management and Staff
I. Changes in shareholding of Directors, Supervisors and Senior Management
Shares held Increase in the Decrease in the Other changes
as at the number of shares number of shares (increase or Shares held as
Start date End date of beginning of the held during the held during the decrease) at the end of the
Name Position Status Sex Age of the term the term period (shares) period (shares) period (shares) (shares) period (shares)
Chen Hongguo Chairman and general manager In office M 52 6 September 2001 18 May 2019 6,434,527 6,434,527
Yin Tongyuan Vice Chairman In office M 59 6 September 2001 18 May 2019 2,423,640 2,423,640
Li Feng Director In office M 44 19 April 2006 18 May 2019 471,818 471,818
Geng Guanglin Director and deputy general manager In office M 43 27 May 2009 18 May 2019 437,433 437,433
Zhang Hong Director In office F 52 12 April 2010 18 May 2019
Yang Guihua Director In office F 51 9 May 2014 18 May 2019
Pan Ailing Independent Director In office F 52 15 May 2013 18 May 2019
Wang Fengrong Independent Director In office F 48 18 May 2016 18 May 2019
Huang Lei Independent Director In office M 60 18 May 2016 18 May 2019
Liang Fu Independent Director In office M 49 18 May 2016 18 May 2019
Li Dong Chairman of Supervisory Committee In office M 34 13 December 2016 18 May 2019
Yang Hongqin Supervisor In office F 49 30 April 2007 18 May 2019
Sun Yinghua Supervisor In office F 48 18 May 2016 18 May 2019
Liu Jilu Supervisor In office M 50 18 May 2016 18 May 2019
Zhang Xiaofeng Supervisor In office M 39 18 May 2016 18 May 2019
Li Xueqin Deputy general manager In office F 51 1 September 2004 18 May 2019 429,348 429,348
Hu Changqing Deputy general manager In office M 51 12 April 2010 18 May 2019 1,238 1,238
Hu Jinbao Financial controller In office M 50 16 November 2016 18 May 2019
Xiao Peng Secretary to the Board In office M 34 16 November 2016 18 May 2019
Yang Weiming Deputy general manager In office M 42 18 May 2016 18 May 2019
Li Zhenzhong Deputy general manager In office M 43 30 March 2011 18 May 2019
Zhang Qingzhi Deputy general manager In office M 51 18 May 2016 18 May 2019
Poon Shiu Cheong Company secretary and In office M 47 28 May 2008 18 May 2019
qualified accountant
Hou Huancai Director Resigned M 55 1 September 2004 18 May 2016 628,915 Note 1
Zhou Shaohua Director and deputy general manager Resigned M 55 1 September 2004 18 May 2016 123,007 Note 2
Wang Xiaoqun Director Resigned M 61 12 April 2010 18 May 2016
Wang Chunfang Director, deputy general manager Resigned M 41 8 April 2009 14 June 2016 130,000 130,000
and secretary to the Board
Zhang Zhiyuan Independent Director Resigned M 54 12 April 2010 18 May 2016
Wang Aiguo Independent Director Resigned M 53 12 April 2010 18 May 2016
Gao Junjie Chairman of Supervisory Committee Resigned M 46 6 September 2001 4 November 2016 39,606 39,606
Wang Ju Supervisor Resigned M 51 11 May 2006 18 May 2016
Yin Qixiang Supervisor Resigned M 79 12 April 2010 18 May 2016
Guo Guangyao Supervisor Resigned M 74 27 May 2009 18 May 2016
Total — — — — — — 11,119,532 0 0 0 10,367,610
Notes 1 and 2: Hou Huancai and Zhou Shaohua resigned during the reporting period and their resignation was effective for half a year. As at the end
of the reporting period, their shareholding after their resignation was unknown.
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3700278-t01fnar (Shandong Chenming) p.92 (CHIPC07) 17-02-2017 16:38
OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
II. Changes of Directors, Supervisors and Senior Management of the Company
Name Position Type Date Reason
Hou Huancai Director Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Zhou Shaohua Director Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Wang Xiaoqun Director Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Zhang Zhiyuan Independent Director Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Wang Aiguo Independent Director Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Wang Ju Supervisor Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Yin Qixiang Supervisor Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Guo Guangyao Supervisor Resigned on expiry of 18 May 2016 Resigned on expiry
term of office of term of office
Wang Chunfang Director Resigned 14 June 2016 Resigned due to
personal reasons
Wang Chunfang Secretary to the Board Dismissed 14 June 2016 Resigned due to
and deputy general personal reasons
manager
Gao Junjie Chairman of Supervisory Resigned 14 November 2016 Passed away due
Committee to illness
2016 ANNUAL REPORT 93
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
III. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisors and
Senior Management
1. Brief biographies of Directors
(1) Brief biographies of executive Directors
Mr. Chen Hongguo, with Chinese nationality but without the right of permanent residence abroad, joined the
Company in 1987, had held different positions including chief officer of manufacturing section, chief officer
of branch factory, deputy general manager, Director of the Company and the chairman of Wuhan Chenming
Hanyang Paper Holdings Co., Ltd., etc. He is currently the Chairman and general manager of the Company and
the chairman of Shouguang Chenming Holdings Company Limited. Mr. Chen Hongguo is the spouse of Ms. Li
Xueqin, a deputy general manager of the Company.
Mr. Yin Tongyuan, with Chinese nationality but without the right of permanent residence abroad, joined the
Company in 1982, had held different positions including the chief officer of manufacturing section, director of
technology department, deputy factory chief, standing deputy factory chief and general manager. He is currently
the vice-chairman of the Company and a director of Shouguang Chenming Holdings Company Limited.
Mr. Li Feng, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1992, had held different positions including the chief officer of manufacturing section and assistant to
the general manager of the Company, deputy general manager of Shandong Chenming Paper Group Qihe
Paperboard Co., Ltd., deputy general manager and chairman of Wuhan Chenming Hanyang Paper Holdings
Co., Ltd., and a director of Chenming Holdings Co., Ltd. He is currently the executive Director of the Company
in charge of the sales of cultural paper products. Mr. Li Feng is the brother of Ms. Li Xueqin, a deputy general
manager of the Company.
Mr. Geng Guanglin, with Chinese nationality but without the right of permanent residence abroad, joined
the Company in 1992, had held different positions including the chief officer of manufacturing section of the
Company, deputy general manager of Chibi Chenming Paper Co., Ltd., the chairman of Wuhan Chenming
Hanyang Paper Holdings Co., Ltd. the chairman of Jilin Chenming Paper Co., Ltd. and the chairman of Jiangxi
Chenming Paper Co., Ltd. He is currently a Director and the deputy general manager of the Company, and a
director of Shouguang Chenming Holdings Company Limited in charge of the operation of Zhanjiang Chenming.
(2) Brief biographies of non-executive Directors
Ms. Yang Guihua, with Chinese nationality but without the right of permanent residence abroad, holds a
doctoral degree. She served as a technician with Jinan Advanced Tissue Paper Factory ( ), a
teacher at Light Chemistry and Environmental Engineering College, Qilu University of Technology. Ms. Yang is a
professor of Qilu University of Technology and a standing director of Shandong Technical Association of Paper
Industry. She has served as a non-executive Director of the Company since May 2014.
Ms. Zhang Hong, with Chinese nationality but without the right of permanent residence abroad, holds a doctoral
degree in Economics. She is currently a professor and advisor to doctoral students at Shandong University,
head of a multinational corporation research institute, non-practising member of the Chinese Institute of
Certified Public Accountants, director of China Association of International Trade, director of Shandong
Province External Trade Association and independent director of Shandong Gettop Acoustic Co., Ltd. She has
served as an independent non-executive Director of the Company since April 2010.
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(3) Brief biographies of independent non-executive Directors
Ms. Pan Ailing, with Chinese nationality but without the right of permanent residence abroad, is currently a
professor of the School of Management, and the chief of the Investment and Financing Research Centre (
) in Shandong University. She is also a director of the Accounting Institute, Shandong Province (
), a council member of Shandong Comparative Management Association, a visiting professor at
Soochow University in Taiwan, and a visiting scholar at University of Connecticut in the United States. She is
also an independent director of Sinotruck Jinan Truck Co., Ltd. ( ) and Inspir
Software Co., Ltd. She has served as an independent non-executive director of the Company since May 2013.
Ms. Wang Fengrong, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D.
in Economics and a visiting scholar at West Virginia University in the United States. She was previously a
lecturer at the Department of Finance of Shandong Economic University ( ) and an associate
professor at the Economic Research Center of Shandong University ( ). She currently
holds positions including professor and advisor to doctoral students at the Economic Research School of
Shandong University ( ) and Shandong School of Development at Shandong University (
), evaluation experts in both National Social Science Fund and National Natural Science
Foundation of China, as well as guest analyst regarding policy implementation of currency and credit matters
for the Jinan branch of the People’s Bank of China. She has finished various research projects at national and
provincial level and published more than 60 academic papers on CSSCI academic journals. Her research was
included in the National Achievements Library of Philosophy and Social Sciences. She concurrently serves as
an independent director of Shandong Xinneng Taishan Power Generation Co., Ltd. (
) and Shandong Denghai Seeds Co., Ltd.
Mr. Huang Lei, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
Economics. He was the chief of the Department of Finance and the dean of School of Finance in Shandong
University of Finance ( ). He currently holds positions including the dean of School of Finance
in Shandong University of Finance and Economics, the director of the professor committee and the deputy
director of the academic committee of Shandong University of Finance and Economics, a member of the
Guiding Committee on Education of Financial Majors ( ) of the Ministry of
Education, a deputy director of the Collaborative Innovation Centre for Financial Optimisation and Regional
Development in Shandong ( ), a director of the Taishan Capital Market
Research Center ( ) of the Shandong University of Finance and Economics, a director of
the Shandong Capital Market Training Fund ( ) as well as an independent director of
Shandong Hi-Speed Road and Bridge Co., Ltd. and Wanjia Asset Management Co., Ltd.
Ms. Liang Fu, with Chinese nationality but without the right of permanent residence abroad, is an advisor to
doctoral students and a Young and Middle-aged Expert with Outstanding Contributions in Shandong Province
( ). She served as a deputy professor, a professor and an advisor to master’s
students of the business school of Shandong University of Finance, a professor, an advisor to master’s students
and an advisor to doctoral students of the business school of Shandong University of Finance and Economics
and a company president and experienced in start-up, development, mergers and acquisitions and listing.
She published three academic papers on CSSCI, a major academic journal in the PRC. She had one case
included in the China Management Case-sharing Center and was in charge of two provincial level topics. She
currently holds positions including an evaluation expert in National Social Science Fund, a support specialist
in the decision-making of the information industry in the PRC, a director of Shandong Economic Association
( ), an executive director of Shandong Management Association ( ) as well as an
independent director of Shandong Shengli Co., Ltd.2. Brief biographies of Supervisors
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
2. Brief biographies of Supervisors
Mr. Li Dong, with Chinese nationality but without the right of permanent residence abroad, graduated from
Shandong University of Science and Technology with a diploma in auditing. After joining the Company in 2004,
he had held different positions including the deputy chief of cost auditing section and the chief of general
section under the financial department of the Company, the financial controller of Zhanjiang Chenming and the
chief of financial department of the Group. He is currently the Chairman of Supervisory Committee.
Mr. Liu Jilu, with Chinese nationality but without the right of permanent residence abroad, graduated from the
School of Economics and Management of China University of Geosciences with a master’s degree. He currently
serves as an associate professor of the accounting specialty of Weifang Vocational College and has years
of teaching and practical experience in financial accounting, financial management, audit and tax laws. He
participated in the core training of the preparatory courses for the accountant and certified public accountant
examinations and was invited to conduct seminars for the continuing education classes for the middle and high
level accounting personnel in the Weifang City for many times.
Mr. Zhang Xiaofeng, with Chinese nationality but without the right of permanent residence abroad, graduated
from the School of Management of Shandong University with a doctorate’s degree and his research direction
was corporate system and corporate governance, corporate strategies and human resources, etc. He currently
serves as an associate professor of the Business Management Discipline in the School of Management of
Shandong University, offering management courses for undergraduate, MBA, EDP and EMBA students for a
long time as well as providing training to large enterprises both inside and outside the province for hundreds
of times. He concurrently holds positions including the committee member of the Professional Committee of
Corporate Governance in the PRC ( ), the part-time case researcher of China Europe
International Business School and the deputy secretary general of Shandong Young Social Science Workers
Association ( ).
Ms. Sun Yinghua, with Chinese nationality but without the right of permanent residence abroad, graduated from
the vocational Shandong Communist Party School ( ) specialising in Economics and Management
and is an associate economist. She joined the Company in 1993, serving as price audit officer, audit director
and other positions, and is currently an assistant to the general manager of the Company responsible for the
audit department.
Ms. Yang Hongqin, with Chinese nationality but without the right of permanent residence abroad, joined the
Company in 1987, serving as the deputy chief and chief officer of quality control section and the chief of after
sale services department of the Company and the manager of property management company, and is currently
a Supervisor of the Company and assistant to general manager of Shandong Chenming Power Supply Holdings.
Co., Ltd.
96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management
Ms. Li Xueqin, with Chinese nationality but without the right of permanent residence abroad, is the deputy general
manager of the Company. She joined the Company in 1987 and held the positions of the chief of audit department
and deputy general manager, etc. Ms. Li has been a deputy general manager of the Company and a director of
Shouguang Chenming Holdings Company Limited since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen
Hongguo, chairman of the Company.
Mr. Hu Changqing, with Chinese nationality but without the right of permanent residence abroad, is the deputy general
manager of the Company. He joined the Company in 1988 and had held positions as the chief of the technological
reform department, chief officer of branch factory, deputy general manager and Director of the Company, etc. He is
currently the deputy general manager of the Company in charge of the Huanggang Chenming Pulp and Paper project.
Mr. Yang Weiming, with Chinese nationality but without the right of permanent residence abroad, is the deputy
general manager of the Company. He joined the Company in 1998 and had held positions as the deputy manager,
manager, general manager and principal representative of Chenming Sales Company, and the deputy manager, leader
in charge, and general manager of a product company. He is currently the vice marketing director of a sales company.
Mr. Li Zhenzhong, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1995. He had served as principal representative of the Shanghai management region of a sales company, sales
manager of cultural paper products. He is currently deputy general manager of the Company and in charge of the
sales of coated paper products of the Company.
Mr. Zhang Qingzhi, with Chinese nationality but without the right of permanent residence abroad, is the deputy
general manager of the Company. He joined the Company in 1982 and had held positions as the chief officer of
branch factory, head of the production department, assistant to the general manager and vice production director. He
is currently the production director of the Company.
Mr. Hu Jinbao, with Chinese nationality but without the right of permanent residence abroad, graduated from China
Central Radio and TV University with a bachelor’s degree. He is senior project manager in energy saving. He joined
the Company in 2016. He had held different positions including the head of the savings counter unit, the head of the
credit card section and the director of the business department of the Shouguang sub-branch of Bank of China in
Weifang City of Shandong Province, the deputy general manager of the Shouguang sub-branch, the general manager
of the Kuiwen sub-branch, the deputy director of the business department of the sub-branch and the general manager
of the Changyi sub-branch of Bank of China in Weifang City of Shandong Province. He is currently the financial
controller of the Company.
Mr. Xiao Peng, with Chinese nationality but without the right of permanent residence abroad, holds a bachelor degree
in management. He had held different positions including the chief officer of the capital section, the chief officer of
information disclosure section, head of securities and investment management department, and representative of
securities affairs of the Company. He is currently the secretary to the Board of the Company.
Mr. Poon Shiu Cheong is a Fellow Certified Public Accountant of Hong Kong Institute of Certified Public Accountants
and CPA Australia. He obtained a master degree in Accounting from Central Queensland University and a master
degree in Business Administration from Southern Cross University. He joined the Company in 2008, and is currently
the qualified accountant and company secretary of the Company.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Employment at the shareholder of the Company
√ Applicable Not applicable
Whether receiving
any remuneration
Position at the or allowance from
Name of shareholder shareholder of the shareholder
Name of employee of the Company the Company Start date of the term End date of the term of the Company
Chen Hongguo Shouguang Chenming Holdings Chairman 22 September 2016 21 September 2019 No
Company Limited
Yin Tongyuan Shouguang Chenming Holdings Director 22 September 2016 21 September 2019 No
Company Limited
Geng Guanglin Shouguang Chenming Holdings Director 22 September 2016 21 September 2019 No
Company Limited
Li Xueqin Shouguang Chenming Holdings Director 22 September 2016 21 September 2019 No
Company Limited
Explanation of the employment at the shareholder Nil
of the Company
Employment at other units
√ Applicable Not applicable
Whether receiving
any remuneration
Position at the or allowance from
Name of employee Name of other unit other unit Start date of the term End date of the term other unit
Zhang Hong Sinoer Men’s Clothes Co., Ltd. Independent director 5 September 2014 4 September 2017 Yes
Zhang Hong Shandong Gettop Acoustic Co., Ltd. Independent director 16 September 2014 15 September 2017 Yes
Zhang Hong Shandong Zhangqiu Blower Co., Ltd.Independent director 12 July 2015 11 July 2018 Yes
Pan Ailing Sinotruck Jinan Truck Co., Ltd. Independent director 6 May 2014 5 May 2017 Yes
Pan Ailing Inspir Software Co., Ltd. Independent director 14 March 2014 13 March 2017 Yes
Wang Fengrong Shandong Xinneng Taishan Independent director 23 May 2014 22 May 2017 Yes
Power Generation Co., Ltd.
Wang Fengrong Shandong Denghai Seeds Co., Ltd. Independent director 12 May 2016 11 May 2019 Yes
Huang Lei Shandong Hi-Speed Road Independent director 15 July 2013 15 July 2016 Yes
and Bridge Co., Ltd.
Huang Lei Wanjia Asset Management Co., Ltd. Independent director 16 October 2015 16 October 2018 Yes
Liang Fu Shandong Shengli Co., Ltd. Independent director 15 May 2015 15 May 2018 Yes
Explanation of the employment at the other unit Nil
Sanctions against current Directors, Supervisors and Senior Management of the Company and those who resigned
during the reporting period by securities regulatory authorities in the past three years
Applicable √ Not applicable
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of
Directors, Supervisors and Senior Management
(1) Determination basis for remuneration of Directors, Supervisors and Senior Management: The annual remuneration of
each of the executive Directors and senior management of the Company was in the band of RMB0.20 million to 5.00
million and the specific amount for each of them was determined by the remuneration committee based on the main
financial indicators and operation target completed by the Company, the scope of work and main responsibilities of
the Directors and senior management of the Company, the target completion of the Directors and senior management
as assessed by the duty and performance appraisal system, as well as business innovation capability and profit
generation ability of the Directors and senior management. During the reporting period, the Company will pay
each of the independent non-executive Directors and non-executive Directors of the Company annual allowance
of RMB50,000. The travel expenses for attending board meetings and general meetings of the Company and fees
reasonably incurred in the performance of their duties under the Articles of Association by independent non-executive
Directors and non-executive Directors are reimbursed as expensed. The annual remuneration of Supervisors
assuming specific managerial duties in the Company were determined by the general manager office of the Company
based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external
Supervisors who did not hold actual management positions in the Company. During the reporting period, the fixed
annual remuneration of external Supervisors was RMB25,000 each year.
(2) Decision process for remuneration of Directors, Supervisors and Senior Management: In accordance with the relevant
policies and regulations such as the Implementation Rules Of The Remuneration And Assessment Committee
Under The Board, any remuneration plan for the Company’s executive Directors proposed by the remuneration and
assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
and approval prior to implementation. Any proposal of remuneration distribution plan for senior management officers
of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
directors, non-executive directors and external supervisors of the Company shall be agreed on by the Board and then
submitted to the general meeting for consideration and approval prior to implementation.
(3) The remuneration and assessment committee, which was set up by the Board according to the resolution of the
general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-
independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and
scheme of the non-independent Directors and Senior Management of the Company, and accountable to the Board.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
Decision process, basis for determining the remuneration and actual payment for the remuneration of
Directors, Supervisors and Senior Management (Cont’d)
Remuneration of Directors, Supervisors and Senior Management during the reporting period
Unit: RMB’0,000
Total Received
remuneration remuneration
before tax from related
received from parties of the
Name Position Sex Age Status the Company Company
Chen Hongguo Chairman and general manager M 52 In office 498 No
Yin Tongyuan Vice-chairman M 59 In office 298 No
Li Feng Director M 44 In office 133.74 No
Geng Guanglin Director and deputy general manager M 43 In office 138.11 No
Zhang Hong Director F 52 In office 5 No
Yang Guihua Director F 51 In office 5 No
Pan Ailing Independent Director F 52 In office 5 No
Wang Fengrong Independent Director F 48 In office 2.92 No
Huang Lei Independent Director M 60 In office 2.92 No
Liang Fu Independent Director F 49 In office 2.92 No
Li Dong Chairman of Supervisory Committee M 34 In office 27.81 No
Yang Hongqin Supervisor F 49 In office 19.19 No
Sun Yinghua Supervisor F 48 In office 49.77 No
Liu Jilu Supervisor M 50 In office 1.46 No
Zhang Xiaofeng Supervisor M 39 In office 1.46 No
Li Xueqin Deputy general manager F 51 In office 234.55 No
Hu Changqing Deputy general manager M 51 In office 114.75 No
Hu Jinbao Financial controller M 50 In office 66.83 No
Xiao Peng Secretary to the Board M 34 In office 22.37 No
Yang Weiming Deputy general manager M 42 In office 77.79 No
Li Zhenzhong Deputy general manager M 43 In office 128.27 No
Zhang Qingzhi Deputy general manager M 51 In office 90.34 No
Poon Shiu Cheong Company secretary and M 47 In office 13.52 No
qualified accountant
Hou Huancai Director M 55 Resigned 24.56 No
Zhou Shaohua Director and deputy general manager M 55 Resigned 59.83 No
Wang Xiaoqun Director M 61 Resigned 5 No
Wang Chunfang Director, deputy general manager and M 41 Resigned 62.35 No
secretary to the Board
Zhang Zhiyuan Independent Director M 54 Resigned 5 No
Wang Aiguo Independent Director M 53 Resigned 5 No
Gao Junjie Chairman of Supervisory Committee M 46 Resigned 59.77 No
Wang Ju Supervisor F 51 Resigned 1.01 No
Yin Qixiang Supervisor M 79 Resigned 2.5 No
Guo Guangyao Supervisor M 74 Resigned 2.5 No
Total — — — — 2,167.24 —
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
Decision process, basis for determining the remuneration and actual payment for the remuneration of
Directors, Supervisors and Senior Management (Cont’d)
Directors, Supervisors and Senior Management of the Company granted share options as incentives during the reporting
period
Applicable √ Not applicable
V. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) 4,418
Number of staff at major subsidiaries (person) 8,568
Total number of staff (person) 12,986
Total number of staff receiving remuneration during the period (person) 12,986
Number of ex-employees or retired employees for which the Company
and the major subsidiaries have obligations (person)
Specialty composition
Category of specialty composition Number of people (person)
Production staff 7,151
Sales staff
Technical staff 2,054
Financial staff
Administrative staff 1,469
Other staff 1,412
Total 12,986
Education level
Category of education level Number of people (person)
Postgraduate and above
Undergraduate 1,214
Post-secondary 2,875
Technical secondary and below 8,858
Total 12,986
2016 ANNUAL REPORT 101
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OUTPUT: 17-02-2017 16:47:27
X. Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company (Cont’d)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject
to the relevant laws and regulations of the PRC, the Company adopts different standards of remuneration for different
employees, which are determined based on their performance, experience, position, etc. Details of the remuneration
of employees of the Group in 2016 are set out in Note 26 to the financial statements prepared in accordance with
Accounting Standards for Business Enterprises.
Meanwhile, employees of the Group in the PRC participate in state-managed retirement benefit schemes operated
by local governments. The Group is required to contribute a specified percentage of the employees’ payroll costs to
the retirement benefit scheme to fund the benefits. Details of the employee pension benefits provided by the Group
are set out in Note 26 of the financial statements prepared in accordance with Accounting Standards for Business
Enterprises.
3. Training programmes
The Company attaches importance to personnel training, implements the corporate spirit of “learning, surpassing
and leading”, and establishes a learning organisation. In 2017, the Company will strengthen the cooperation with
management consulting companies and professional training organisations, and utilise the internal resources and
exert the management autonomy at different levels to initiate targeted training programmes by levels and by classes.
The Company will classify the staff members under the Senior Management level, the middle level and the junior level
with respective training materials, and initiate dynamic corporate culture and company development training sessions
for all staff members. The training for the Senior Management emphasises leadership, the training for the middle-level
staff emphasises team management and execution, while the training for junior staff emphasises business skills and
theory and knowledge.
4. Labour outsourcing
Applicable √ Not applicable
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:27
XI Corporate Governance
I. Corporate governance in practice
(I) Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law ( ), Securities Law (
), Code of Corporate Governance for Listed Companies ( ), Rules Governing Listing of
Stocks on Shenzhen Stock Exchange ( ), Hong Kong Listing Rules and the related
requirements as required by China Securities Regulatory Commission. The Company further improved and optimised
its legal person governance structure during the reporting period. Save for the details set out in subsection (IX) (I) of
this section, the Board considers there is no material deviation of the Company in its corporate governance from the
regulatory documentation requirements provided for listed companies in respect of corporate governance.
The Company has established a more complete corporate governance structure which is comprised of the general
meeting, the Board, the Supervisory Committee, and the managers. The Board of the Company is comprised of
ten Directors, four of which are independent Directors. The Supervisory Committee of the Company is comprised
of five supervisors, two of which are staff representative supervisors. The General Meeting is the highest organ of
authority of the Company. The Board performs the duties in accordance with the resolution of the general meetings.
The Supervisory Committee performs supervision duties towards the Board, Directors and the Senior Management.
The managers specifically perform the daily operation of the Company according to the resolution of the Board.
Meanwhile, the Company has established and optimised the general meeting, the Board, Supervisory Committee and
independent Directors system and rules of procedures.
1. The organisation structure of the Company is sound and clear, and has established and optimised the general
meeting, the Board, the Supervisory Committee and the independent Directors system and rules of procedures
according to law. The duties of the general meeting, the Board, Supervisory Committee and managers are
well-defined., the check and balance mechanism works efficiently, the decision-making process and rules of
procedures are democratic and transparent, and the internal supervision and feedback system is sound and
effective. Their operations accord with the laws and regulations, regulatory documents and the regulations of
the Articles of Association.
2. The Company has established and optimised the working system of independent Directors, and their terms of
reference accord with the requirements of relevant laws and regulations and regulatory documents. Independent
Directors have necessary knowledge base to perform their duties, and are capable to perform the duties of
independent Directors during the Board’s decision making. All independent Directors diligently and faithfully
perform the responsibility and obligations as independent Directors in practical manner.
3. The Company has established an internal control institution with more complete system according to the
relevant requirements of Pronouncement on Enhancement of the Quality of Listed Companies, Code of
Corporate Governance of Listed Companies, Guidelines for the Articles of Association of Listed Companies,
Guidelines for Internal Control of Listed Companies, Basic Norms for Enterprise Internal Controls and the
supplementary guides and other documents. The institution has been efficiently implemented during execution.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
(II) Corporate governance activities
During the reporting period, the Board strived to regulate the operation of the Company by improving corporate
governance based on relevant special activities carried out in 2015. Pursuant to the requirements of the CSRC, the
Shenzhen Stock Exchange, Hong Kong Exchanges and Clearing Limited and the Shandong Securities Regulatory
Bureau, it made the following efforts to continuously improve the corporate governance level:
1. On 2 June 2016, the Resolution on Amendments to the Articles of Association of Shandong Chenming Paper
Holdings Limited was considered and passed at the 2016 second extraordinary general meeting of the
Company, which amended the practice of profit distribution in the Articles of Association based on the actual
operation conditions and the non-public issuance of shares of the Company. On 17 March 2016, 17 August
2016 and 22 September 2016, the Company was approved to respectively issue 22,500,000, 10,000,000 and
12,500,000 preference shares. The Company amended the issuing scale and conditions of the preference
shares in the Articles of Association according to the issuing status of the preference shares.
2. According to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as
amended and effective 1 January 2016), the Board amended the Implementing Rules of the Audit Committee.
3. Pursuant to the relevant laws and regulations and regulations of regulatory documents such as the Guidelines
for the Supervision and Administration on Listed Companies No. 2 - Supervision and Administration
Requirements for Listed Companies on the Management and Use of Raised Funds and Guidelines of the
Shenzhen Stock Exchange for the Standard Operation of Listed Companies on the Small and Medium-sized
Enterprise Board (2015 Revision), the Company’s proposed to reformulate the Administrative Measures of
Proceeds of Shandong Chenming Paper Holdings Limited in order to further regulate the use and management
of the proceeds of the Company and ensure the use and management of the proceeds of the Company
conforming to the requirements of relevant laws and regulations. The proposal was considered and approved
by the 2016 second extraordinary general meeting and was executed.
The Company strictly implemented its related system of internal control to facilitate its regulated operation and
healthy development, thereby protecting the legal interests of investors. The corporate governance of the Company
was exactly the same as what was required by the CSRC. The regulated operations and the internal control standards
would grow with the development of the Company.
Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
CSRC in respect of actual governance of the Company
Yes √ No
There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
the CSRC in respect of the actual governance of the Company.
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
II. Particulars about the independence in terms of businesses, personnel, assets, organisations,
and finance from the controlling shareholder
In terms of business: The Company was completely independent from the controlling shareholder, and had business
independence and self-operation capability.
In terms of personnel: The labour, personnel and salary management were completely separated from the controlling
shareholder.
In terms of assets: There was only shareholding relationship between the Company and Shouguang Chenming Holdings
Company Limited. The assets of the Company were completely separated from that of the controlling shareholder.
In terms of organisation: The Company had a mature and independent organisation structure, which was established
according to the legal processes and the business practice of the Company. It was completely separated from that of the
controlling shareholder.
In terms of finance: The Company had its own accounting department, accounting system, financial management system,
and bank accounts. The controlling shareholder did not interfere in the financial activities of the Company.
All in all, the Company is totally separate in businesses, personnel, assets, organisations, and finance from the controlling
shareholder, and had its business independence and self-operation capability.
III. Competition in the industry
Applicable √ Not applicable
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period
1. General meetings during the reporting period
Attendance
rate of
Meeting Type of meeting investors Convening date Disclosure date Disclosure index
2016 first extraordinary Extraordinary
general meeting general meeting 0.06% 3 February 2016 4 February 2016 http://www.cninfo.com.cn
Annual general
2015 annual general meeting meeting 0.08% 18 May 2016 19 May 2016 http://www.cninfo.com.cn
2016 second Extraordinary
extraordinary meeting general meeting 0.10% 2 June 2016 3 June 2016 http://www.cninfo.com.cn
2016 first domestic listed Extraordinary
share class meeting general meeting 0.10% 2 June 2016 3 June 2016 http://www.cninfo.com.cn
2016 first overseas listed Extraordinary
share class meeting general meeting 0.20% 2 June 2016 3 June 2016 http://www.cninfo.com.cn
2016 third extraordinary Extraordinary
meeting general meeting 0.10% 11 October 2016 12 October 2016 http://www.cninfo.com.cn
2016 fourth Extraordinary
extraordinary meeting general meeting 0.08% 13 December 2016 14 December 2016 http://www.cninfo.com.cn
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
IV. Annual general meeting and extraordinary general meeting convened during the reporting
period (Cont’d)
2. Extraordinary general meeting requested by holders of the preference shares with voting rights
restored
Applicable √ Not applicable
V. Performance of Independent Directors during the reporting period
1. Attendance of independent Directors at Board meetings and general meetings
Attendance of Independent Directors at board meetings
Number of
attendance
required
for Board
meetings
Name of during Absent twice
independent the reporting Attendance Attendance by Attendance in a row
Directors period in person communication by proxy Absence (in person)
Pan Ailing 17 2 15 0 0 No
Wang Fengrong 9 1 8 0 0 No
Huang Lei 9 1 8 0 0 No
Liang Fu 9 1 8 0 0 No
Zhang Zhiyuan 8 1 7 0 0 No
Wang Aiguo 8 1 7 0 0 No
Zhang Hong 8 1 7 0 0 No
Number of the general meetings attended by independent Directors
Explanation on absence from the Board meeting twice in a row:
None of the independent Directors was absent from the Board meeting twice in a row.
2. Objections from independent Directors on related issues of the Company
Were there any objections on related issues of the Company from the independent Directors?
Yes √ No
There was no objection on related issues of the Company from the independent Directors during the reporting period.
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
V. Performance of Independent Directors during the reporting period (Cont’d)
3. Other details about the performance of duties by the independent Directors
Were there any suggestions from the independent Directors adopted by the Company?
√ Yes No
Explanation on the adoption or non-adoption with related suggestions from the independent Directors
During the reporting period, the independent Directors of the Company focused on the operation of the Company
and performed their duties strictly in accordance with relevant laws and regulations and the Articles of Association.
They provided a lot of valuable professional recommendations on optimising the Company’s system and decision on
daily operation. They also issued independent and fair opinion on matters arising during the reporting period which
requested opinions from independent Directors. This helped optimising the supervisory system of the Company, as
well as protecting the legal rights of the Company and all shareholders.
Publication date Subject matter Opinion
24 March 2016 Independent opinions on replacement of self-raised funds invested in Agreement
advance to projects with proceeds from issue of preference shares
30 March 2016 Independent opinions on internal control self-assessment report, external Agreement
guarantees, determination of remuneration of directors and senior
management for 2015, use of proceeds by related parties and related
party transactions, provision of guarantee for comprehensive credit line
of wholly-owned subsidiaries and related party transactions
15 April 2016 Independent opinions on the non-public issue of A shares, the Dividend Agreement
Distribution Plan for Shareholders of Shandong Chenming Paper
Holdings Limited in the Coming Three Years (2016-2018) and the related
party transactions and entering into of conditional share subscription
agreement with specific parties; prior approval opinions on the relevant
matters of the non-public issue
29 April 2016 Independent opinions on the appointment and re-appointment of Agreement
Directors
17 May 2016 Independent opinions on the non-public issue of A shares and the related Agreement
party transactions and entering into of conditional share subscription
agreement with specific parties; prior approval opinions on the relevant
matters of the non-public issue
18 May 2016 Independent opinions on the appointment of senior management Agreement
24 August 2016 Independent opinions on the guarantee for issuance of short term Agreement
commercial paper by Zhanjiang Chenming, utilisation of funds by
controlling shareholders and other related parties and external
guarantees
23 September 2016 Independent opinions on replacement of self-raised funds invested in Agreement
advance to projects with proceeds from issue of the third tranche of
preference shares
26 September 2016 Independent opinions on the non-public issue of A shares; prior approval Agreement
opinions on the matters in relation to the non-public issue of A shares of
the Company
25 October 2016 Independent opinions on the appointment of accounting firm Agreement
16 November 2016 Independent opinions on the appointment of the company secretary and Agreement
chief financial officer and provision of guarantees for the commencement
of asset securitisation business of Sales Company
2016 ANNUAL REPORT 107
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
VI. Performance of duties by special committees under the Board
(I) Audit committee
1. The following major tasks were completed in 2016:
(1) it conducted pre-audit communication with external auditing institution engaged by the Company in
respect of the 2015 financial report auditing, reviewed the 2015 auditing report and financial report and
submitted such reports to the Board of the Company;
(2) it reviewed the first quarter report of the Company as of 31 March 2016, which was submitted to the
Board for approval.
(3) it reviewed the interim financial statements for the six months ended 30 June 2016, which were submitted
to the Board for approval.
(4) it reviewed the third quarter report of the Company as of 30 September 2016, which was submitted to the
Board for approval.
2. Auditing work conducted on the 2016 financial report of the Company is as follows:
(1) it reviewed the 2016 auditing plan and the related information of the Company with the auditing certified
public accountants and the finance department of the Company prior to the on-site audit and negotiated
and determined the schedule of an audit of the 2016 financial statements of the Company with Ruihua
Certified Public Accountants;
(2) it reviewed the draft of financial statements of the Company prior to an annual on-site audit performed by
the auditing certified public accountants and issued its approval to audit;
(3) it kept in close contact with the auditors upon the annual on-site audit and issued a letter to the auditors
to urge the submission of the auditors’ report on schedule;
(4) it reviewed the financial statements of the Company again upon the issue of draft opinion on the annual
audit by the auditing certified public accountants, and considered the financial statements of the
Company true, accurate and complete to reflect the overall position of the Company;
(5) at the first meeting of the audit committee in 2017, the auditors’ report on the annual audit issued by the
certified public accountants was approved and then was submitted to the Board;
(6) it reviewed the report on internal audit and internal control of the Company for the year ended 31
December 2016.
(II) Remuneration and assessment committee
The remuneration and assessment committee of the Company were primarily responsible for formulating the
remuneration and assessment for the Directors and the Senior Management of the Company and formulating and
examining the remuneration package of the Directors and the Senior Management of the Company, and accountable
to the Board. During the reporting period, the remuneration and assessment committee formulated the 2015
remuneration package of the Directors and the Senior Management of the Company, which then was submitted to the
Board for approval, based on the production and operation conditions of 2015 and assessment of the Directors and
the Senior Management of the Company.
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
VI. Performance of duties by special committees under the Board (Cont’d)
(III) Strategic committee
During the reporting period, the strategic committee held two meetings. The first meeting in 2016 considered the
proposed resolutions in relation to the capital increase of Chenming Financial Leasing Company Limited, which was
submitted to the eleventh extraordinary meeting of the seventh session of the Board of the Company for consideration
and approval. The second meeting in 2016 considered the proposed resolutions in relation to the capital increase of
the Finance Company, which were submitted to the second extraordinary meeting of the eighth session of the Board
of the Company for consideration and approval.
Concerned about the authorisation on project development and financing from the Board, the strategic committee
keeps constant communication with the management, and is fully aware of each issue within the scope of such
authorisation.
(IV) Nomination committee
During the reporting period, the nomination committee held two meetings. The first meeting in 2016 considered
and approved the proposed resolutions in relation to the election of directors as part of the change of the session
of the Board, which was submitted to the fifteenth meeting of the seventh session of the Board of the Company for
consideration and approval;
VII. Performance of duties by the Supervisory Committee
During the reporting period, the Supervisory Committee held seven regular meetings and six extraordinary meetings.
The first extraordinary meeting of the seventh session of the Supervisory Committee considered and approved the
proposed resolutions in relation to the reimbursement of the self-raised funds used in the project financed by proceeds with
the proceeds from the preference shares;
The second extraordinary meeting of the seventh session of the Supervisory Committee considered and approved twelve
proposed resolutions respectively in relation to the fulfilment of conditions in respect of the non-public issue of A shares of
the Company, the proposal on the non-public issue of A shares of the Company and the proposal on the non-public issue
of A shares of the Company;
The thirteenth meeting of the seventh session of the Supervisory Committee considered and approved six proposed
resolutions respectively in relation to the 2015 supervisors’ report of the Company, the full text and summary of the 2015
annual report of the Company and the 2015 financial statements of the Company;
The fourteenth meeting of the seventh session of the Supervisory Committee considered and approved the proposed
resolution in relation to approving the full text and body text of the 2016 first quarterly report of the Company;
The fifteen meeting of the seventh session of the Supervisory Committee considered and approved the election of
supervisors as part of the change of the session of the Supervisory Committee;
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
VII. Performance of duties by the Supervisory Committee (Cont’d)
The third extraordinary meeting of the seventh session of the Supervisory Committee considered and approved eight
proposed resolutions respectively in relation to the fulfilment of conditions in respect of the non-public issue of A shares of
the Company, the proposal on the non-public issue of A shares of the Company and the proposal on the non-public issue
of A shares of the Company;
The first meeting of the eighth session of the Supervisory Committee considered and approved the proposed resolution in
relation to election of the chairman of the Supervisory Committee of the Company;
The second meeting of the eighth session of the Supervisory Committee considered and approved the proposed resolution
in relation to approving the full text and summary of the 2016 interim report of the Company;
The first extraordinary meeting of the eighth session of the Supervisory Committee considered and approved the proposed
resolution in relation to the reimbursement of the self-raised funds used in the project financed by proceeds with the
proceeds from the preference shares;
The second extraordinary meeting of the eighth session of the Supervisory Committee considered and approved four
proposed resolutions in relation to the adjustments to the use of proceeds, proceeds amount, issue price and issue volume
for the non-public issue of A shares, the second amendment of the proposal on the non-public issue of A shares of the
Company and the second amendment of feasibility analysis report on the use of proceeds of the non-public issue of shares
of the Company;
The third meeting of the eighth session of the Supervisory Committee considered and approved the proposed resolution in
relation to approving the full text and body text of the 2016 third quarterly report of the Company.
The third extraordinary meeting of the eighth session of the Supervisory Committee considered and approved the proposed
resolution in relation to the appointment of the shareholder representative supervisor;
The fourth meeting of the eighth session of the Supervisory Committee considered and approved the proposed resolution in
relation to election of the chairman of the Supervisory Committee of the Company;
Were there any risks of the Company identified by Supervisory Committee when performing its duties during the reporting
period?
Yes √ No
None of those issues under the supervision was objected by Supervisory Committee during the reporting period.
VIII. Assessment and incentive mechanism for the Senior Management
The Senior Management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted
in line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators, namely the
completion status of each month and the evaluation on important performance indicators. It was carried out monthly by
way of cross assessment and supervision among the related departments. The annual assessments were carried out by the
Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances
during the year, including the integrated quality of Senior Management and internal training of talents.
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
IX. Internal Control
1. Particulars of material deficiencies in internal control detected during the reporting period
Yes √ No
2. Self-assessment Report on Internal Control
Date of Disclosure of Assessment Report on Internal Controls 17 February 2017
Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cn
Percentage of Total Assets Included in Assessment to
Total Assets in Consolidated Financial Statements of the Company 99.20%
Percentage of Revenue Included in Assessment to Revenue in
Consolidated Financial Statements of the Company 99.50%
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Qualitative criteria (1) Indicators of material deficiencies in the Indicators of material deficiencies in the
internal control of financial reporting include: internal control of non-financial reporting
ineffective control environment, material loss include: major failure as a result of the decision
to and adverse impact on the Company as a making process; lack of control system or
result of misconduct by Directors, Supervisors occurrence of systematic failure in principal
and senior management; material misstatement activities and lack of effective compensation
of non-exceptional incidents; ineffectiveness in control, high turnover rate of mid to senior level
supervision of internal control of the Company management and senior technical staff; failure
by the Board, or its delegated authorities, and to address the findings of internal control
the internal audit department. (2) Indicators of assessment, in particular material deficiencies;
major deficiencies in internal control of financial and other factors which impose material
reporting include: failure in selecting and adverse impact on the Company. Indicators
applying accounting policies in accordance of major deficiencies in internal control of
with generally accepted accounting principles; nonfinancial reporting include: general failure
failure to establish procedures and control as a result of the decision-making process;
measures to prevent corrupt practices; deficiencies in major business procedure or
failure to establish corresponding control system; high turnover rate of key staff; failure
mechanism for the accounting of unusual or to address the findings of internal control
special transactions or failure to implement assessment, in particular major deficiencies;
or set up the corresponding compensation and other factors which impose great adverse
control; failure to reasonably ensure the impact to the Company. Indicators of general
truthfulness and accuracy in the preparation of deficiencies in internal control of non-financial
financial statement, as a result of one or more reporting include: low efficiency of decision
deficiencies in the control of financial reporting making process; deficiencies in general
as of the end of the period. (3) General business procedure or system; high turnover
deficiencies: other deficiencies in internal rate of employees; and failure to rectify general
control that do not constitute material or major deficiencies.
deficiencies.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
IX. Internal Control (Cont’d)
2. Self-assessment Report on Internal Control (Cont’d)
Basis for identifying deficiencies
Type Financial reporting Non-financial reporting
Quantitative criteria General deficiencies: deviation of less than or General deficiencies: quantitative criterion
equal to 0.1% from the target of accounting (financial loss) less than RMB5,000,000;
error/the total revenue; Major deficiencies: major deficiencies: quantitative criterion
deviation of 0.1% - 0.5% from the target of (financial loss) between RMB5,000,000
accounting error/the total revenue; material and RMB20,000,000; material deficiencies:
deficiencies: deviation greater than 0.5% from quantitative criterion (financial loss) over
the target of accounting error/the total revenue RMB20,000,000.
in consolidated statements.
Number of material deficiencies in financial reporting: (number)
Number of material deficiencies in non-financial reporting: (number)
Number of major deficiencies in financial reporting: (number)
Number of major deficiencies in non-financial reporting: (number)
X. Auditors’ report on internal control
√ Applicable Not applicable
Auditors’ opinion contained in the Auditors’ report on internal control
We are of the opinion that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effective
internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31
December 2016.
Disclosure of Auditors’ Report on Internal Control Disclosed
Date of Disclosure of Auditors’ report on internal control 17 February 2017
Index of Auditors’ Report on Internal Control Disclosure http://www.cninfo.com.cn
Type of Opinion in Auditors’ Report on Internal Control Standard and unqualified opinion
Material deficiencies in non-financial reporting No
Any opinions of non-standardisation set out in the Auditors’ Report on Internal Control issued by accountants
Yes √ No
Auditors’ Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment
Report
√ Yes No
112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited
(I) Compliance with the Code on Corporate Governance
The Company maintained high standards of corporate governance through various internal controls. The Board
reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance
standards of the Company.
Save for the details set out in (III) “Board”, (IV) “Chairman and general manager” and (XVII) “Communications with
shareholders”, the Company had fully complied with all the principles and code provisions of the Code on “Corporate
Governance” as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting period.
(II) Securities transactions by Directors
The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions
by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate
enquiries with all Directors and Supervisors of the Company, the Company was not aware of any information that
reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this
code during the reporting period.
(III) Board
The members of the Board of the Company are elected at the general meeting and held accountable to the general
meeting, and shall exercise the following functions and powers: (1) to be responsible for convening the general
meeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)
to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annual
financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan
making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the
Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for material
acquisition and repurchase of the Company’s own shares; (8) to draft plans for the merger, division or dissolution or
the change of formation of the Company; (9) to decide on external investment, acquisition and disposal of assets,
pledge of assets, matter in relation to external guarantee, entrusted wealth management, connected transactions,
etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of the Company’s
internal management organisation; (11) to employ or dismiss the manager or secretary to the Board of the Company;
to employ or dismiss the Senior Management, such as the deputy general manager(s) and personnel in charge
of financial affairs, as proposed by the general manager; and to decide on their remuneration and rewards and
punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for
amending the Articles of Association; (14) to administrate matter related to information disclosure of the Company;
(15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the
Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercise
the functions and powers as conferred upon by the Articles of Association or the general meeting.
The Board comprised four executive Directors: Chen Hongguo (Chairman), Yin Tongyuan, Li Feng, Geng Guanglin;
two non-executive Directors: Yang Guihua, Zhang Hong; and four independent non-executive Directors: Pan Ailing,
Wang Fengrong, Huang Lei and Liang Fu. Please refer to section X of this Annual Report for their brief biographies.
2016 ANNUAL REPORT
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OUTPUT: 17-02-2017 16:47:32
XI Corporate Governance
XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
Hong Kong Limited (Cont’d)
(III) Board (Cont’d)
The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration
and supervision of company businesses to facilitate its success. The Executive Director or the senior management is
authorised to be responsible for the various divisions and functions and management of the processing. Directors of
the Company shall act objectively and make decisions in the interests of the Company. The management and senior
management of the Company held regular meetings with the Board to discuss the ordinary business operations
and performance of the Company, and carried out the relevant decisions of the Board. The Company will arrange
independent legal advice upon the request from the Directors or any committees of the Board, if the Board or any
committees of the Board consider it necessary to seek for independent professional advice.
Pursuant to Code A.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respect
of legal action against its Directors. During the reporting period, the Company did not make such arrangement as no
consensus was reached with the existing insurer. The Company, however, is in negotiations with another insurer for
such arrangement for 2017.
During the reporting period, the Board held 17 meetings, 6 of which were regular meetings and 11 were extraordinary
meetings. All Directors of the Company attended 17 Board meetings.
Attendance at the relevant meetings (attention required/attended)
Remuneration
and
Audit Nomination assessment Strategic
Board committee committee committee committee General
Name Position meetings meetings meetings meetings meetings meetings
I. Executive Directors
Chen Hongguo Chairman and 17/17 N/A 1/1 1/1 0/0 6/3
General Manager
Yin Tongyuan Vice Chairman 17/17 N/A N/A N/A 0/0 6/6
Li Feng Director 17/17 N/A N/A N/A N/A 6/0
Geng Guanglin Director and Deputy 17/17 N/A N/A N/A N/A 6/5
General Manager
Hou Huancai (resigned) Director 8/8 N/A N/A N/A N/A 2/0
Zhou Shaohua (resigned) Director and Deputy 8/8 N/A N/A N/A N/A 2/0
General Manager
Wang Chunfang (resigned) Director, Deputy General 1/1 N/A N/A N/A N/A 2/2
Manager and Secretary
to the Board
II. Non-executive Directors
Yang Guihua Director 17/17 5/5 N/A N/A N/A 6/0
Wang Xiaoqun (resigned) Director 8/8 N/A N/A N/A N/A 2/0
Zhang Hong Director 9/9 N/A N/A 0/0 0/0 4/0
III. Independent non-executive Directors
Huang Lei Independent Director 9/9 N/A N/A 0/0 0/0 4/0
Wang Fengrong Independent Director 9/9 2/2 0/0 N/A
