晨鸣纸业(000488)晨鸣Ｂ2003年年度报告摘要（英文版）

SHANDONG CHENMING PAPER HOLDINGS LIMITED Annual Report 2003 (Summary) §1 Important Declaration： 1.1 The Board of Directors and the directors of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. This is the summary abstracted from the complete version of Annual Report 2003, for details please refer to the complete version. 1.2 No Director(s) declares disagreement on the truthfulness, accuracy and completeness. 1.3 All of the directors presented the Board meeting. 1.4 Tianjian CPA Co., Ltd. issued the Auditors’ Report with no reserved comments and explanatory statements. 1.5 The Chairman of the Board – Mr. Chen Hongguo, Chief Accounting Supervisor – Mr. Yu Shiyong, Administrator of the Accounting Department – Mr. Liu Junwu hereby declare: the truthfulness and completeness of the report are guaranteed. § 2 Company Profile 2.1 Basic Information Stock Name Chenming Paper , Chenming B Stock Code 000488、200488 Stock Exchange Shenzhen Stock Exchange Registered No. 595 Shencheng Rd., Shouguang City, Shandong Province location and office No. 595 Shencheng Rd., Shouguang City, Shandong Province address P. C. 262700 Web address http://www.chenmingpaper.com Email cmzqb@public.wfptt.sd.cn 1 2.2 Liaisons Secretary of the Board Representative of Stock Affairs Name Hao Yun Wang Wei Stock Affair Department Stock Affair Department Address No. 595 Shencheng Rd., Shouguang City, No. 595 Shencheng Rd., Shouguang City, Shandong Province Shandong Province Tel 0536－5280011 0536－5280011 Fax 0536－5228900 0536－5228900 Email haoyun@public.wfptt.sd.cn cmzqb@public.wfptt.sd.cn §3 Financial Highlights 3.1 Major accounting data (in RMB) Change of current 2003 (Current 2002 (Prev. year) year than prev. 2001 year) year Major business 5,819,073,195.58 4,454,775,147.87 30.63% 2,405,533,667.40 revenue Gross profit 847,587,681.32 621,209,082.67 36.44% 248,088,023.53 Net profit 628,111,635.21 363,767,078.67 72.67% 141,999,714.53 Net profit deducted non-recurring 588,117,031.53 322,928,634.82 82.12% 112,496,272.92 gain/loss Change of end of End of 2003 (end End of 2002 (End End of 2001 current year than of current year) of prev. year) end of prev. year Gross Assets 10,230,861,065.03 8,689,918,637.96 17.73% 7,392,134,448.98 Shareholders’ equity ( minority 4,375,920,134.78 3,543,330,736.52 23.50% 3,176,669,565.23 shareholders’ equity not included) Net cash flow per share generated by 616,688,666.62 1,034,441,447.45 -40.38% 145,497,415.40 business operation 2 3.2 Major accounting indices Change of 2003 (Current 2002 (Prev. current year 2001 year) year) than prev. year Earnings per share 0.70 0.73 -4.07% 0.28 Earnings per share * 0.70 -- -- -- Net earnings / capital ratio 14.35% 10.27% 39.73% 4.47% Net earnings per share ratio based on deducting of 13.44% 9.11% 47.53% 3.54% non-recurring gain/loss Net Cash flow generated by 0.69 2.07 -66.88% 0.29 business operation Change of end End of 2003 End of 2002 of current year End of 2001 (end of current (End of prev. than end of year) year) prev. year Net asset per share 4.87 7.10 -31.39% 6.37 Net asset per share adjusted 4.80 4.63 3.77% 6.31 3.3 Discrepancy of domestic and international accounting standards √ Applicable □Non - Applicable Domestic Accounting Standard International Accounting Standard Net profit 62,811.16 65,306.18 The accounting statements were audited by both of the domestic and overseas CPA upon China Accounting Standard and International Accounting Standard respectively. The result of net profit of the domestic auditing (consolidated) is RMB628,111,600, while the result of net profit of the overseas auditing (consolidated) is RMB653,061,800 which is RMB24,950,200 higher than that of the domestic auditing. This was caused by: In accordance with the International Accounting Standard, (1) Adjustment of booking value of re-evaluation of trademarks and relative amortizing, which increased the profit by RMB1,450,000; (2) Adjustment of booking value of re-evaluation of fixed assets and relative Particulars depreciations, which increased the profit by RMB1,749,300; about the (3) Balance of bad debt provisions of previous years, which increased the profit discrepancy by RMB13,862,500; (4) Adjustment of booking value of credit balance of equity investment and relative amortizings, which decreased the profit by RMB3,753,600; (5) Transferring of the governmental financed fixed asset construction from capital reserves into deferred incomes, which increased the profit by RMB17,560,600; (6) Transferring of the other governmental allowances from capital reserves into other business incomes, which increased the profit by RMB10,975,000; (7) Balance of clearing of enterprise income tax for year 2002, which decreased the profit by RMB16,893,600. 3 §4. Change of Share Capital and Shareholders 4.1 Change of shares (in shares) Before Changed currently After Issue of new from public Transferred Allotting Subtotal reserves Others Bonus shares (I) Non-current shares 1、Promoter’s shares 161,144,754 32,228,951 96,686,852 128,915,803 290,060,557 Including: State-owned shares 156,608,584 31,321,717 93,965,150 125,286,867 281,895,451 Domestic legal 4,536,170 907,234 2,721,702 3,628,936 8,165,106 person shares Overseas legal person holding shares Others 2、Legal person shares invited 3、Employees’ 54,112,420 10,822,484 32,467,452 -97,402,356 -54,112,420 shares 4、Preference shares or others Total of non-current 215,257,174 43,051,435 129,154,304 -97,402,356 74,803,383 290,060,557 shares (II) Current shares 1、RMB common 77,000,000 15,400,000 46,200,000 97,402,356 159,002,356 236,002,356 shares listed domestically 2、Foreign capital 206,480,550 41,296,110 123,888,330 165,184,440 371,664,990 shares listed domestically 3、Foreign capital shares listed abroad 4、Others Total of current 283,480,550 56,696,110 170,088,330 97,402,356 324,186,796 607,667,346 shares (III) Total shares 498,737,724 99,747,545 299,242,634 398,990,179 897,727,903 4 4.2 Top 10 shareholders Total number of shareholders at the end of report term: 49,558 The top 10 shareholders Changed Share Shares held at Share Mortgaged Rank Shareholders’ name during portion the end of term categories or frozen the year % SHOUGUANG 281,895,451 31.40 State-owned None 1 STATE-OWNED ASSET +125,286,867 shares ADMINISTRATION (promoter) Fenghe Value Security Investment 20,790,200 2.31 Unknown 2 +10,386,600 A shares Foundation 3 M insheng Securities Co., Ltd. 10,634,768 Unknown 1.18 A shares Unknown KWONG WAH INVESTMENT 9,415,562 1.05 Unknown 4 +3,225,562 B shares (SHOUGUANG) LIMITED BERMUDA TRUST(FAR 7,935,124 Unknown 0.88 Unknown 5 EAST)LTD-VALUE PARTNERS B shares A FD BTFE-BOBL/MANULIFE 7,621,831 Unknown 0.85 Unknown 6 B shares GLOBAL FUND-CHINA VALUE BTFE-VALUE PARTNERS 6,511,834 Unknown 0.73 Unknown 7 INTELLIGHT FD-CHINA B SHS B shares FD Shanghai Hong Kong Wanguo 5,690,639 Unknown 0.63 Unknown 8 B shares Securities NIKKOCITI TB S/A RE:JF 4,999,871 Unknown 0.56 Unknown 9 B shares CHINA MOTHER FD(716000) 10 Hao Yunfeng 4,455,837 +1,962,372 0.50 A shares Unknown Particulars about the related relationship or collaborated activity: It is not to the knowledge of the Company. 3. Particulars about the top-10 holders of current shares in shares Number of current shares Categories (A, B, H or Shareholders’ full name held at the end of term others) Fenghe Value Security Investment Foundation 20,790,200 A shares Minsheng Securities Co., Ltd. 10,634,768 A shares KWONG WAH INVESTMENT (SHOUGUANG) LIMITED 9,415,562 B shares BERMUDA TRUST(FAR EAST)LTD-VALUE PARTNERS A 7,935,124 B shares FD BTFE-BOBL/MANULIFE GLOBAL FUND-CHINA VALUE 7,621,831 B shares BTFE-VALUE PARTNERS INTELLIGHT FD-CHINA B SHS 6,511,834 B shares FD Shanghai Hong Kong Wanguo Securities 5,690,639 B shares NIKKOCITI TB S/A RE:JF CHINA MOTHER FD(716000) 4,999,871 B shares Hao Yunfeng 4,455,837 A shares Taihe Securities Investment Foundation 4,120,358 A shares Fenghe Value Security Investment Foundation and Taihe Securities Investment Foundation are both Particulars about the relations among the top-10 current share under the administrating of Jiashi Foundations holders. Management Co., Ltd. Relations among the other 8 shareholders are not to the knowledge of the company. 4.3 Controlling shareholders and practical controllers 4.3.1 Change of controlling shareholders and practic al controllers. □Applicable √Non - Applicable 5 4.3.2 Particulars about controlling shareholders and practical controllers The controlling shareholder of the Company is Shouguang State-owned Asset Administration. Its legal representative is Mr. Mao Derong, and its business range is managing and administrating of national owned assets and their accounting and asset representation. It takes 281,895,451 shares at the end of the term, which increased by 125,286,867 shares. No shares were mortgaged or frozen. No altering of controlling shareholder was occurred during the report term. §5 Particulars About the Directors, Supervisors, Senior Managements, and Employees 5.1 Change of share holding Shares held Shares at held at the Change Names Position Sex Age Job Term the end beginning (share) of term of term (Share) (Share) Chen Hongguo Chairman Male 39 2001.9-2004.9 29,106 52,391 +23,285 Yin Tongyuan Vice Chairman, GM Male 46 2001.9-2004.9 33,471 60,248 +26,777 Li Mingren Director Male 44 2001.9-2004.9 0 0 0 Hu Wenhe Director Male 58 2001.9-2004.9 5,821 10,478 +4,657 Guo Xiucheng Director, Vice GM Male 38 2001.9-2004.9 0 0 0 Wang Zhijun Director Male 43 2001.9-2004.9 13,097 23,575 +10,478 Xia Youliang Director Male 40 2001.9-2004.9 8,731 15,716 +6,985 Hu Changqing Director, Vice GM Male 38 2001.9-2004.9 11,642 20,955 +9,313 Dong Jianwen Director, Vice GM Male 41 2003.4-2004.9 2,569 4,624 +2,055 Zhou Shaohua Director Male 42 2003.4-2004.9 0 0 0 Zhao Jinghua Independent Director Male 42 2002.4-2004.9 0 0 0 Liu Xueyan Independent Director Male 65 2002.4-2004.9 0 0 0 Diao Yuntao Independent Director Male 39 2003.4-2004.9 0 0 0 Wang Zhihua Independent Director Male 45 2003.4-2004.9 0 0 0 Zhou Chengjuan Independent Director Female 40 2003.4-2004.9 0 0 0 Hao Yun Secretary of the Board Male 41 2001.9-2004.9 17,463 31,433 +13,970 Sun Qiang Chairman of the Male 34 2001.9-2004.9 +13,970 Supervisory 17,463 31,433 Committee Zhen Liyong Vice Chairman of the Male 38 2001.9-2004.9 +9,314 Supervisory 11,642 20,956 Committee Gao Junjie Supervisor Male 33 2001.9-2004.9 11,642 20,955 +9,313 Sun Dianming Supervisor Male 33 2003.4-2004.9 0 0 0 Wang Zaiguo Supervisor Male 38 2003.4-2004.9 2,910 5,238 +2,328 Li Xueqin Vice GM Female 41 2003.3-2004.9 2,910 5,238 +2,328 Fang Lijun Vice GM Male 34 2001.9-2004.9 8,731 15,716 +6,985 Zhang Yanjun Vice GM Male 38 2001.9-2004.9 11,642 20,955 +9,313 Hou Huancai Vice GM Male 42 2001.9-2004.9 17,463 31,433 +13,970 Wang Fuzeng Vice GM Male 43 2001.9-2004.9 11,642 20,955 +9,313 M eng Feng Vice GM Male 32 2002.4-2004.9 0 0 0 Yu Shiyong CFO Male 41 2003.1-2004.9 0 0 0 Shao Xuejun Chief Engineer Male 38 2002.4-2004.9 5,821 10,478 +4,657 6 5.2 Particulars about directors and supervisors take job position in any of the shareholders. □Applicable √Non - Applicable 5.3 Annual payroll of the directors, supervisors and senior management (RMB10 thousand) Total of annual payroll 928.00 Total of the highest 3 directors 388.00 Total of the highest 3 338.00 management Allowance for the 40 /people/year independent directors Others for independent The transportation and accommodation expenses of independent directors directors to attend the board meeting or Shareholders’ General Meeting, as well as the reasonable expenses will be covered by the Company in accordance the relative rules of The Article of Association of the company. Names of the directors and Nil supervisors who don’t take salaries or allowances from the Company Range of payment Number of people 100－150 4 50－100 3 20－50 5 5－20 12 §6. Report of the Board of Directors 6.1 Analyzing of overall business status for the report term In the year 2003, the Company has being in a steady growing situation. The production scale and economical efficiency increased significantly. The Company has been the top player of the industry in the country for successively 9 years. The Company kept under the scheme of development, undertook multiple measures to enforce the overall controlling. Projects of 300K ton art paper, 150K ton press paper, 180K ton A-class paper board were put into operation and realized good economical efficiency. For the year 2004, the Company will stress on the construction of new projects to ensure the company developing continuously. The 300K ton coated white board project of Shandong Shouguang Chenming, the 200K ton low-ration coated paper project, 187K ton bleaching chemical hot milling machinery pulp technical reforming project, and “substitution of imported large-scale paper project” of Shanghai Chenming Paper Machinery Co., Ltd. will be guaranteed to be on schedule. 7 6.2 Distribution of major business on categories of business or products (in RMB 10 thousand) Change of Change of Change of major major Major Gross profit Major Gross profit business business cost Categories business ratio over business cost ratio (%) revenue over over revenue previous previous previous year (％) year (％) year (％) Machine 551,913.66 392,608.13 28.86 25.41 24.68 3.52 make paper Man-made 20,556.00 16,930.89 17.64 1,482.11 1,306.70 149.36 board Electricity and heating 3,791.00 2,860.08 24.56 1.01 2.46 -3.90 power Maintenance of 4,381.31 3,665.53 16.34 specialized equipments Other 1,265.35 1,246.02 1.53 257.12 454.01 -95.83 Incl. Related 0.00 0.00 -- 0.00 0.00 0.00 transactions Light coating 144,796.91 104,458.45 27.86 195.30 178.79 18.12 paper Double 61,246.56 50,445.68 17.64 76.16 82.10 -13.22 plastic paper Ordinary 98,482.78 65,993.13 32.99 -15.77 -21.36 16.85 paper Art paper 62,068.25 43,041.84 30.65 26.96 28.27 -2.26 Press paper 50,127.43 34,963.90 30.25 -3.80 -3.22 -1.36 Paperboard 57,236.95 40,380.39 29.45 2.28 -7.51 -33.94 Incl. Related 0.00 0.00 -- 0.00 0.00 0.00 transactions Price policy of related No transactions Statement of necessity and durative on related No transactions 6.3 Major business distribution in territories: (in RMB 10 thousand) Territory Business income Change over previous year (%) Shandong 384,642.90 51.69 Hubei 159,963.70 -0.03 North-east China 32,919.39 535.10 Others 4,381.31 0.00 6.4 Top 5 vendors and buyers (in RMB 10 thousand) The purchases of the company Portion of the total 42,788.84 8.79% from the top 5 vendors purchase The sales of the company to the 34,293.82 Portion of the total sales 5.89% top 5 buyers 8 6.5 Operation of the shareholding companies (applicable for the company which the investment earnings takes more than 10% or over.) □Applicable √Non - Applicable 6.6 Causations of significant changes occurred on the major business and its structure. □Applicable √Non - Applicable 6.7 Causations of significant changes occurred on the profitability of major business comparing with the previous year □Applicable √Non - Applicable 6.8 Causations of significant change of the operation result and profit structure comparing with the previous year √Applicable □Non – Applicable 1. The projects of 300k ton art paper of the head quarter, 150k ton press paper project of Wuhan Chenming, 180k ton A-class paper board have been put into operation. That caused the output, sales volume and profit increased significantly. 2. Approved by Shandong Provincial Finance Bureau, RMB91.92 million has been deducted from the income tax due to purchasing of domestic made equipments. 6.9 Influence on the business operation of the company from the changing of business environment, macro policies, laws and regulations √Applicable □Non – Applicable On July 1st , 2003, The Ministry of Commerce issued the 28th announcement of year 2003 to undertake final investigation on the anti-dumping processes against the press paper products origin in Canada, Korea, and US. The final investigation will be terminated before June 30th , 2004. On August 6th , 2003, the Ministry of Commerce issued the 35th announcement of year 2003. It announced the final arbitrating that 4% - 71% of anti-dumping duties would be charged against the art paper products originated in Korea and Japan for 5 years. As the major manufacturer of art paper and press paper, the above anti-dumping process investigation and final arbitrating brings the Company a very good opportunity for developing. 6.10 Fulfilling of profitability forecasting □Applicable √Non – Applicable 6.11 Fulfilling of the business target □Applicable √Non – Applicable 6. 12 Utilizing of raised fund (in RMB 10 thousand) □Applicable √Non – Applicable Particulars about changing of utilization □Applicable √Non – Applicable 9 6.13 Particulars about projects invested by non-raised fund Name of projects Investment Progress Profitability (in RMB 10 thousand) 300K ton coated white 87,000.00 11% Under construction paperboard project 200K ton low-ration 136,000.00 18% coated paper project of Under construction Jiangxi Chenming Paper Co., Ltd. 150T/D 9,500.00 101% chemical-mechanical Trial operation in Dec. pulp system and its 2003 accessory systems Total 232,500.00 -- -- 6.14 Statement of the Board of Directors on the “non-comments” of the public accountant □Applicable √Non – Applicable 6.15 Plan of the Board for the coming new year □Applicable √Non – Applicable Profitability prediction for the coming new year □Applicable √Non – Applicable 6.16 Profit distribution or capitalization of capital public reserves for the current term 1. According to the auditing result of Tianjian CPA, the company realized net profit of 628,111,635.21 in year 2003. According to the rules of the Article of Association, 10% of it is about to be drawn as statutory reserves amounted to RMB58,501,720.77; another 10% is about to be drawn as statutory public welfareamounted to RMB58,501,720.77; thus the profit distributable realized in year 2003 is RMB511,108,193.67, plus the profit distributable at the beginning of year amounted to RMB733,859,623.77, and deduct of the amount distributed for the distribution plan of year 2002 amounted to RMB124,684,431.20, the distributable profit for current term is RMB1,120,283,386.24. 2. Profit distribution plan of the year 2003 Basing on the total capital share of 897,727,903 shares, and the distributable profit for current term of RMB1,120,283,386.24, RMB1.00 of cash dividend will be distributed to each 10 shares (tax included) for all of the shareholders of the Company. Totally RMB89,772,790.30 will be distributed. The retained profit of RMB1,030,510,595.94 will be kept over to the coming years. 10 §7. Significant Events 7.1 Assets acquisition □Applicable √Non – Applicable 7.2 Assets placing □Applicable √Non – Applicable 7.3 Significant guarantees □Applicable √Non – Applicable 7.4 Related credits and debts □Applicable √Non – Applicable 7.5 Consigned financing □Applicable √Non – Applicable 7.6 Fulfilling of commitment event □Applicable √Non – Applicable 7.7 Significant lawsuit and arbitration □Applicable √Non – Applicable 7.8 Particulars about the independent directors In the report term, 5 of the independent directors that engaged by the company were doing their jobs responsibly. They presented the board meetings and exercised their judgments independently on the decision-making processes of personnel changing, related transactions, devalue provisions, salaries of directors and senior managements, motivating policies, chairman motivation foundation, correcting of accounting errors, and outgoing guarantees. Thus protecting the legal benefit of the whole company and middle-small shareholders as well. §8 Report of the Supervisory Committee For the report term, with the legal benefits of the Company and the shareholders at the first consideration, the Supervisory Committee of the Company was taking their responsibilities seriously on the inspection of the board meetings, accounting processes, and the legality of the operations of the directors and managements. The independent opinions of the Supervisory Committee: 1. The decision-making procedures of the company are valid. The internal controlling system is mature and properly operated. No behaviors that violate the laws or the Article of Association or harming the benefit of the company were found. 2. The committee undertook inspections on the financial status of the company. The committee takes for the auditors’ reports issued by both of Tianjian Certified Public Accountants and PriceWaterHouseCoopers as reflecting the financial status and business results of the company frankly, objectively, and justly. 3. The company issued new A shares in November 2000 and invested into the project of 153 thousand ton / year art paper production line, which was according with that described in the Stock Inviting Prospectus. The entire fund raised from the share issuing has been put into investment. The production line has been completed and put into production in August 2002 and achieved good profitability. 4. Property acquisitions occurred during the report term was on reasonable price and neither harmed the interests of the shareholders nor causing losing of company assets. 5. Related transactions occurred during the report term was on a fair and reasonable base, harmed no benefit of the company. 11 §9 Financial Report 9.1 Auditor’s comments TO THE SHAREHOLDERS OF SHANDONG CHENMING PAPER HOLDINGS LIMITED (incorporated as a joint stock limited company in the People’s Republic of China) We have audited the accompanying consolidated balance sheet of Shandong Chenming Paper Holdings Limited (the “Company”) and its subsidiaries (the “Group”) as of 31 December 2003 and the related consolidated income and cash flow statements for the year then ended. These consolidated financial statements set out on pages 2 to 35 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly in all material respects the consolidated financial position of the Group as of 31 December 2003 and the consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 14 March 2004 12 9.2 Financial Statements CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 2003 2002 RMB’000 RMB’000 Sales 5,797,836 4,439,260 Cost of sales (4,152,181) (3,179,052) 1,645,655 1,260,208 Gross profit Other operating income 70,129 32,424 Distribution costs (345,354) (250,782) Administrative expenses (327,895) (327,342) Profit on sale of trading investments - 41,949 1,042,535 756,457 Operating profit Finance costs, net (150,616) (130,335) Gain on disposal of equity interest in a 4,769 - subsidiary Share of results before tax of an associate (572) 1,589 896,116 627,711 Profit before tax Income tax expense (171,008) (145,147) 725,108 482,564 Profit after tax Minority interests (72,047) (95,401) 653,061 387,163 Net profit RMB0.73 RMB0.43 Earnings per share – basic 13 CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2003 2003 2002 ASSETS RMB’000 RMB’000 Non-current assets Property, plant and equipment 5,420,021 5,107,072 Leasehold land 173,066 157,134 Construction in progress 706,392 285,348 Investments in associates 19,107 42,911 Available-for-sale investments 6,592 6,592 Prepayments 18,000 - 6,343,178 5,599,057 Current assets Inventories 1,045,831 527,595 Receivables and prepayments 1,785,596 1,692,459 Pledged bank deposits - 106,900 Cash and cash equivalents 1,052,935 743,344 3,884,362 3,070,298 Total assets 10,227,540 8,669,355 EQUITY AND LIABILITIES Capital and reserves Share capital 897,728 498,738 Capital reserves 1,571,580 1,853,261 Statutory common reserve fund 205,098 148,285 Statutory public welfare fund 184,995 128,299 Discretionary common reserve fund 117 - Retained earnings 1,155,393 758,204 4,014,911 3,386,787 Minority interests 866,042 762,797 Non-current liabilities Borrowings 687,386 1,368,772 Deferred income 414,181 181,358 1,101,567 1,550,130 Current liabilities Trade and other payables 1,209,697 1,229,040 Borrowings 2,963,757 1,689,318 Current tax liabilities 71,438 51,283 Dividend payable 128 - 4,245,020 2,969,641 Total liabilities 5,346,587 4,519,771 Total equity and liabilities 10,227,540 8,669,355 14 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Notes 2003 2002 RMB’000 RMB’000 Cash flows from operating activities Cash generated from operations 27 705,410 857,411 Interest paid (166,926) (187,402) Tax paid (150,853) (86,135) Net cash from operating activities 387,631 583,874 Cash flows from investing activities Purchase of property, plant and equipment (205,814) (247,407) Payment for leasehold land (20,919) (7,447) Payment for construction costs, excluding interest capitalised (915,821) (1,455,796) Proceeds from disposal of property, plant and equipment 1,235 8,611 Receipt of loan receivable - 150,000 Proceeds from sale of trading investments 10,300 314,000 Acquisition of subsidiaries 22,500 - Proceeds from disposal of equity interest in a subsidiary 9 10,140 - Investment in an associate - (22,500) Purchase of available-for-sale investments - (2,000) Interest received 16,652 27,243 Dividend received 732 - Government grants received 22 252,000 5,410 Government subsidies received 4 51,602 18,864 Net cash used in investing activities (777,393) (1,211,022) Cash flows from financing activities Increase in borrowings 593,053 303,830 Dividends paid to group shareholders (24,809) - Dividends paid to minority shareholders by subsidiaries (32,595) (63,868) Capital contribution from minority shareholders 56,804 20,613 Bank deposits withdrawn/(pledged) 106,900 (23,801) Net cash from financing activities 699,353 236,774 Net increase/(decrease) in cash and cash equivalents 309,591 (390,374) Cash and cash equivalents at beginning of year 743,344 1,133,718 Cash and cash equivalents at end of year 1,052,935 743,344 15 9.3 Particulars about changing of accounting policies, accounting estimating and calculating method of the current term comparing with the previous annual report. 1. The accounting policies been changed, the details are as: ① The cash dividend carried in the profit distribution plan, which was produced between the date of the annual Balance Sheet and the date when the financial statements were approved, was booked as “dividend payable”as the adjustment of post-term event, but now it is not subject to the accounting treatment according to current accounting standard. It is only presented in the notes of the financial statements of the report term. This alteration of accounting policy has been adopted backward to the adjustment of initial retains and relative initial figures. The “previous term” figures carried in the Income Statement are adjusted. The impacts are accumulated to RMB24,936,886.20. The “dividend payable”at the end of 2002 was decreased by RMB23,625,762.00, and “tax payable”was decreased by RMB1,311,124.20 due to the alteration of accounting policy. Whereas the “initial retained profit” of year 2003 was increased by RMB24,936,886.20, including the “profit not distributed” increased by RMB24,936,886.20. ② In accordance with the document issued by the Ministry of Finance titled “Q&As of implementing ‘Enterprise Accounting Standard’and relative accounting regulations”, since March 17, 2003, the credit balance of share equity occurred hereinafter will be booked directly into capital reserves but not been amortised into gain/loss account upon not less than 10 years. For those credit balance of share equity occurred before March 17, 2003, no adjustment will be made and will adopt original accounting policy till it was completely amortized. This alteration of accounting policy conducts no impact on the Financial Statements of year 2003. 2. No changing of accounting estimating been made. 3. The calculating method has not been changed 9.4 Particulars about the changing of consolidation range of the current term comparing with the previous annual report. Shanghai Chenming Paper Machine Co., Ltd. and Beijing Tianbao Jialin Real-estate Co., Ltd. are added into the consolidating range as controlling subsidiaries of the Company. The Board of Directors of Shandong Chenming Paper Holdings Ltd. March 16, 2003 16