晨鸣纸业(000488)晨鸣Ｂ2004年年度报告摘要（英文版）

Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Stock ID: Chenming Paper; Chenming B Stock Code: 000488 200488 Bond ID: Chenming Bond Bond Code: 125488 Announcement No. 2005-003 SHANDONG CHENMING PAPER HOLDINGS LIMITED Annual Report 2004 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 text is abstracted from the complete Annual Report, for details please read the complete version of the Annual Report. 1.2 Directors not present the Board meeting Name of the Director Reason for absent Dong Jianwen On business travel Zhou Shaohua On business travel 1.3 Tianjian CPA Co., Ltd. and Deloitte Touche Tohmatsu CPA Ltd. issued standard auditing report without qualified opinion. 1.4 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 Company Profile Stock ID Chenming Paper , Chenming B Stock Code 000488、200488 Stock Exchange Shenzhen Stock Exchange Registered address No. 595 Shencheng Rd., Shouguang City, Shandong Province and office address Post Code 262700 Website: www.chenmingpaper.com Email. cmzqb@chenming.com.cn 2.2 Contacts Secretary of the Board Representative of Stock Affairs Name Hao Yun Wang Wei No. 595 Shencheng Rd., Shouguang City, No. 595 Shencheng Rd., Shouguang City, Address Shandong Province Shandong Province Tel. 0536－2158011、2156488 0536－2158011、2156488 Fax. 0536－2158640 0536－2158640 Email. cmzqb@chenming.com.cn zqbwangwei@tom.com 1 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. §3 Summary of Accounting Data and Financial Indices 3.1 Major accounting data In RMB Yuan 2003 2002 Change 2004 Adjusted Not adjusted (%) Adjusted Not adjusted Major business 7,064,613,089.05 5,819,073,195.58 5,819,073,195.58 21.40%4,454,775,147.87 4,454,775,147.87 turnover Gross profit 847,436,670.72 847,587,681.32 847,587,681.32 -0.02% 621,209,082.67 621,209,082.67 Net profit 503,721,298.14 627,141,183.07 628,111,635.21 -19.68% 363,767,078.67 380,660,696.72 Net profit deducted 453,120,230.74 587,146,579.39 588,117,031.53 -22.95% 321,903,711.29 338,797,329.34 non-recurring gain/loss Net Cash flow generated by 406,238,392.59 616,688,666.62 616,688,666.62 -34.13%1,034,441,447.45 1,034,441,447.45 business operation End of 2003 Changed End of 2002 End of 2004 Adjusted Not adjusted (％) Adjusted Not adjusted Gross Assets 15,850,290,151.74 10,230,861,065.03 10,230,861,065.03 54.93%8,689,918,637.96 8,689,918,637.96 Shareholders’ Equity (Exclude Minority 4,839,068,873.63 4,371,048,361.78 4,375,920,134.78 10.71%3,543,330,736.52 3,535,287,468.37 Shareholders’ Equity) 3.2 Major financial indices In RMB Yuan Increase/decrease from the 2004 2003 2002 previous year (%) Earnings per share 0.56 0.69 -20% 0.73 Earnings per share (less non-recurring 0.50 - - - gain/loss) Net earnings / capital ratio 10.41% 14.35% -3.94% 10.27% Net profit/asset ratio on net profit less 9.36% 13.43% -4.08% 9.58% non-recurring gain/loss Net Cash flow per share generated by 0.45 0.69 -34.78% 2.07 business operation End of End of End of Increase/decrease (%) 2004 2003 2002 Net asset per share 5.39 4.87 10.68% 7.10 Net asset per share, adjusted 5.33 4.80 11.04% 4.63 Note: In case of the capital shares has been changed during the period from the end of the report term to the date when this report is released, the new capital share will be adopted to calculate the earnings per share. Non-recurring gain and loss items 2 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. √ Applicable □ Not applicable In RMB Yuan Non-recurring gain and Amount loss items Non-business income 2,606,552.08 Non-business expenditure -6,367,697.08 Tax returned and 52,591,578.72 allowance income Short-term inventory impairment provision 126,426.87 written back Bad debt provisions 1,020,017.44 written back Gain/loss from entrusted 760,000.00 investment Income from disposal of -135,810.63 share equity Total 50,601,067.40 3.3 Discrepancy between the domestic and international accounting standard √ Applicable □ Not applicable In RMB Yuan Domestic Accounting Standard Overseas accounting standard: Net profit 503,721,298.14 478,990,000.00 The net profit provided by domestic CPA (consolidate) is RMB503,721,000, where the net profit provided by overseas CPA (consolidated) is RMB478,990,000 which is less than that of provided by the domestic CPA by RMB24,731,000. This is maily because according to the international accounting standard: ① Relative amortizing adjustment and trademark re-evaluation increased the net profit by RMB1.45 million. ② The government special fund regarding purchasing of fixed assets is re-classified from capital reserves into differed income, which increased the profit by RMB1.749 million. ③ The loss from foreign currency loans exchanging, which decreased the profit by RMB31.231 million. ④ Adjustment of credit of equity investment and relative amortizing, which decreased the Statement about the profit by RMB4.486 million. diversity ⑤ The government special fund regarding purchasing of properties, plants and equipment is re-classified from capital reserves into differed income, which increased the profit by RMB20.174 million. ⑥ Interests of transferable bond prediction, decreased the profit by RMB3.349 million ⑦ The opening expenses written into gain/loss, decreased the profit by RMB5.145 million. ⑧ The income from debt re-organizing transferred from capital reserves to other business income, increased the profit by RMB0.978 million. ⑨ The diversity of enterprise income tax clearance, decreased the profit by RMB4.871 million. 3 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. §4 Movement of Capital Share and the Shareholders 4.1 Movement of capital share In Shares Before the changeChanged this term (+,-)After the changed Sub-total I. None negotiable shares 1. Promoters’ shares 290,060,557 290,060,557 Including:State-owned shares 281,895,451 281,895,451 Domestic legal person shares 8,165,106 8,165,106 Overseas legal person shares Others 2. Legal person shares raised 3. Employees’ shares 4. Preference shares or other Total of non-negotiable shares 290,060,557 290,060,557 II. Negotiable shares 1. Common shares in RMB 236,002,356 236,002,356 2. Shares listed domestic in foreign currency 371,664,990 371,664,990 3. Shares listed overseas in foreign currency 4. Others Total of negotiable shares 607,667,346 607,667,346 III. Total of capital shares 897,727,903 897,727,903 Shares allotted from foundations, employees’ shares traded on site, shares allotted to strategic investors, and shares allotted to common legal persons shall be presented their amount. □Applicable √ Not applicable 4.2 Top 10 shareholders and negotiable-shares holders. Total shareholders at the 39,411 end of the report period Top Ten Shareholders Shares held at Full name of Changed in Proportion Pledged or Property of the end of report Class of share shareholder the term % frozen shareholder term Shandong Shouguang State-owned Asset 0 281,895,451 31.40% Non-negotiable 0 State-owned Administration NIKKOCITI TB S/A RE:JF CHINA 5,000,000 9,999,871 1.11% Negotiable 0 Foreign shares MOTHER FD(716000) KWONG WAH INVESTMENT 0 9,415,562 1.05% Negotiable 0 Foreign shares (SHOUGUANG) LIMITED CHINA INTL MARINE 8,651,685 8,651,685 0.96% Negotiable 0 Foreign shares CONTAINERS (HONG KONG)LTD Fenghe Value -12,355,831 8,434,369 0.94% Negotiable 0 Others Security Investment 4 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Foundation China Industrial & Commercial Bank – Boshi Selective 8,195,055 8,195,055 0.91% Negotiable 0 Others Securities Investment Found Taihe Security Investment 3,225,562 6,999,500 0.78% Negotiable 0 Others Foundation China Commercial and Industrial Bank – Pufeng Securities 6,701,988 6,701,988 0.75% Negotiable 0 Others Investment Foundation Bank of China – Jiashi Service Industries Securities 6,701,549 6,701,549 0.75% Negotiable 0 Others Investment Foundation China Merchant Bank Co., Ltd. – Zhongxin Classic Formula 6,585,175 6,585,175 0.73% Negotiable 0 Others Securities Investment Foundation Top Ten Shareholders of Negotiable Shares Negotiable shares held at the Full name of shareholder Category of share (A,B,H or others) end of report term NIKKOCITI TB S/A RE:JF CHINA 9,999,871 B shares MOTHER FD(716000) KWONG WAH INVESTMENT 9,415,562 B shares (SHOUGUANG) LIMITED CHINA INTL MARINE CONTAINERS 8,651,685 B shares (HONG KONG)LTD Fenghe Value Security Investment 8,434,369 A shares Foundation China Industrial & Commercial Bank – Boshi Selective Securities Investment 8,195,055 A shares Found Taihe Security Investment Foundation 6,999,500 A shares China Commercial and Industrial Bank – 6,701,988 A shares Pufeng Securities Investment Foundation Bank of China – Jiashi Service Industries 6,701,549 A shares Securities Investment Foundation China Merchant Bank Co., Ltd. – Zhongxin Classic Formula Securities 6,585,175 A shares Investment Foundation China Commercial and Industrial Bank – 5,424,671A shares Jintai Securities Investment Foundation Fenghe Value Security Investment Foundation, Taihe Security Investment Foundation and Bank of China – Jiashi Service Industries Notes to relationship or “action in Securities Investment Foundation are under the same manager – concert” among the top ten shareholders. Jiashi Foundation Management Co., Ltd. It is unknown whether there is relationship among them are “Action in Concert”. 5 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. 4.3 Controlling shareholder and practical controllers 4.3.1 Movement of controlling shareholder and practical controller □Applicable √ Not applicable 4.3.2 Introduction of the controlling shareholder and practical controller 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. No shares were mortgaged or frozen. No altering of controlling shareholder was occurred during the report term. 4.3.3 Controlling relationship chart Shouguang State-owned Asset Administrative Bureau ↓ 31.40％ Shandong Chenming Paper Holdings Co., Ltd. 6 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. §5 Particulars About the Directors, Supervisors, Senior Managements, and Employees 5.1 Particulars About the Changing of Shareholding Status of Directors, Supervisors, Senior Managements Shares held at the Shares held at the Cause of Name Position SexAge Job Term beginning of term end of term change Chen Sept. 1 2004 – Chairman M 40 52,391 549,794 Hongguo Sept. 1 2007 Yin Sept. 1 2004 – General Manager M 47 60,248 309,188 Tongyuan Sept. 1 2007 Guo Sept. 1 2004 – Director M 39 0 99,500 Xiucheng Sept. 1 2007 Dong Sept. 1 2004 – Director M 42 4,624 104,124 Jianwen Sept. 1 2007 Zhou Sept. 1 2004 – Director M 43 0 66,300 Shaohua Sept. 1 2007 Sept. 1 2004 – Wu Bingyu Director M 35 0 66,300 Sept. 1 2007 Sept. 1 2004 – Hou Huancai Director M 43 31,433 97,733 Sept. 1 2007 Sept. 1 2004 – Hu Wenhe Director M 59 10,478 76,778 Sept. 1 2007 Hu Sept. 1 2004 – Director M 39 20,955 70,655 Changqing Sept. 1 2007 Liu Sept. 1 2004 – Director M 35 0 66,300 Chengzhen Sept. 1 2007 Independent Sept. 1 2004 – Zhao Jinghua M 43 0 0 Director Sept. 1 2007 Independent Sept. 1 2004 – Liu Xueyan M 66 0 0 Director Sept. 1 2007 Independent Sept. 1 2004 – Diao Yuntao M 40 0 0 Director Sept. 1 2007 Independent Sept. 1 2004 – Wang Zhihua M 46 0 0 Director Sept. 1 2007 Zhou Independent Sept. 1 2004 – F 41 0 0 Chengjuan Director Sept. 1 2007 Zheng Sept. 1 2004 – Supervisor M 39 20,956 20,956 Liyong Sept. 1 2007 Sun Sept. 1 2004 – Supervisor M 34 0 0 Dianming Sept. 1 2007 Sept. 1 2004 – Ren Guang’ai Supervisor M 37 0 0 Sept. 1 2007 Sept. 1 2004 – Gao Junjie Supervisor M 34 20,955 20,955 Sept. 1 2007 Liu Sept. 1 2004 – Supervisor M 33 0 0 Wenzheng Sept. 1 2007 Wang Vice General Sept. 1 2004 – M 31 0 0 Baoliang Manager Sept. 1 2007 Huang Vice General Sept. 1 2004 – M 40 0 0 Bendong Manager Sept. 1 2007 Vice General Sept. 1 2004 – Ren Wei M 43 0 0 Manager Sept. 1 2007 Gen GuanglinVice General M 31 Sept. 1 2004 – 0 49,700 7 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Manager Sept. 1 2007 Vice General Sept. 1 2004 – Fang Lijun M 35 15,716 48,916 Manager Sept. 1 2007 Vice General Sept. 1 2004 – Li Xueqin F 42 5,238 38,438 Manager Sept. 1 2007 Vice General Sept. 1 2004 – Hao Yun M 42 31,433 81,133 Manager Sept. 1 2007 Vice General Sept. 1 2004 – Wang Zaiguo M 39 5,238 5,238 Manager Sept. 1 2007 Sept. 1 2004 – Yu Shiyong CFO M 42 0 0 Sept. 1 2007 Note: Changing of shareholding status of directors and senior managements was caused by the share award implemented for year 2002. 5.2 Directors and supervisors taking positions in the shareholding parties □Applicable √ Not applicable 5.3 Annual rewards of directors, supervisors and senior managmenet In RMB 10 thousand Yuan Total of annual reward 900 Top 3 directors 370 Top 3 managements 180 Independent Director 4.00 10K / people. year Other expenses of Independent Directors: Directors and supervisors not taking rewards from the Company Reward distribution Number of people 100－150 3 50－100 4 20－50 8 5－20 9 §6. Report of the Board of Directors 6.1 Overall business situation in the report term For the year of 2004, the competition of the industry was severe all over the world. The Company was doing its best to develop its potential and enhance its management, to overcome negative effect brought by high rising of prices of energy and raw materials. The output and sales income increased successively during the year and enforced the Company’s leading position in the whole industry of the country for the past 10 years. Issuing of RMB2 billion transferable bonds was a strong support to 8 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. the Company’s construction projects. The 300KT coated white board project was completed in early 2005 and put into test operation; The 250KT hot mill pulp project was in test operation; Jiangxi Chenming was established together with SAPPI LIMITED from South Africa, Xin Maolin Co. from Korea, and international financing companies, which will introduce advanced management system to the Company and opened an international financing channel. The 200KT low-ration coated paper and accessory projects was in testing stage. All of the above will bring new growth point to the Company in the year of 2005. 6.2 Distribution of business on industries and products In RMB 10 thousand Yuan _ Distribution on industries Major business cost Gross profit Increase/decrease On industry or Major business Major business Gross profit increased/decrease ration of major business product turnover cost ratio % d over increased/decr turnover (%) corresponding eased term Paper 661,115.52 506,299.73 23.42% 20.52% 29.62% -5.44% production Power and 5,238.01 4,614.52 11.90% 38.17% 61.34% -12.65% heating Other construction 27,028.83 19,605.21 27.47% 31.49% 15.80% 9.83% business Other specialized 4,415.19 2,594.99 41.23% 0.77% -29.21% 24.88% machinery Chemical 6,813.61 4,315.70 36.66% 102.69% 114.21% -3.4% products Other 1,850.15 1,530.71 17.27% 46.22% 22.85% 15.74% Including: related transactions Distribution on products Lightweight 56,207.47 42,279.26 24.78% -1.80% 4.70% -4.67% coated paper Duplex press 97,095.57 73,804.79 23.99% -1.41% 11.83% -9.00% paper Writing paper 41,511.26 32,270.85 22.26% -17.19% -7.70% -7.99% Art paper 181,155.27 131,805.04 27.24% 25.11% 26.18% -0.62% News press 69,726.26 49,352.73 29.22% 12.34% 14.66% -1.43% paper Paperboard 75,878.67 63,992.29 15.66% 23.89% 26.85% -1.98% Including: related 0.00 0.00 0.00% transactions Starch is applied for preparation of paper surface sizing and coating. The Company purchase starch Pricing Policy as well as other production raw materials via public bidding; The pricing basis is the product and Basis quality and quotation of tendering suppliers; there is no difference between the trading price and the fair market price. 9 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. The reason the Company has chosen the related parties in the transaction is based on its Transaction comparative superiority in price and quality and well as convenient supply due to its nearer Purpose and location. This related transaction has been carried out in a fair way and has done nothing harmful to the Impact the listed company’s interest and has not impacted the Company’s financial position and the upon the operation results of the report year as well as in future. This related transaction has not affected Listed the independence of the listed company and the Company has not become dependent on the related Company party. As the Company’s products are developing to high-grade products, the application of the related party’s product is turning smaller and such related transaction is progressively decreasing. Including: The company has sold products or services to the controlling shareholder or its subsidiaries (related transactions) amounted to RMB0.00. 6.3 Major business distribution on geographic areas In RMB 10 thousand Yuan Regions Major business turnover Increase/decrease of major business turnover (%) East 292,779.09 58.48% North 135,350.99 9.11% South 94,686.57 -3.38% Mid-south 77,048.40 20.57% North-east 49,967.43 122.82% South-west 23,397.01 23.83% North-west 13,421.58 213.32% Overseas 19,810.25 -44.39% 6.4 Purchasing resources and clients In RMB 10 thousand Yuan takes the whole Top 5 vendors 54,492.30 10.11% purchasing Takes the whole Top 5 clients 47,897.85 6.78% sales 6.5 Operation of shareholding subsidiaries □Applicable √ Not applicable 6.6 Causations of significant changes occurred on the major business and its structure. √ Applicable □ Not applicable The major business turnover has increased significantly over the corresponding term, mainly due to the enlarging of business scale and production volume. 6.7 Causations of significant change of major business profitability √ Applicable □ Not applicable The gross profit decreased due to increasing of raw material prices and costs. 6.8 Causations of significant change on business performance and profit structure 10 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. □Applicable √ Not applicable Causations of significant change on overall financial status √ Applicable □ Not applicable (1) Increasing of total asset was caused by increasing of loans raised for new projects, issuing of bonds and increasing of net profit. (2) Increasing of shareholders’ equity was caused by increasing of net profit in the report term. (3) Decreasing of net profit was due to the decreasing of tax reimbursement and increasing of raw materials prices, which caused the increasing of costs and decreasing of gross profit. (4) Increasing of cash and cash equivalent was due to the collecting of sales income and the part of the fund raised from bond issuing in 2004 has not been utilized yet, and the increasing of current capital due from the investment of Jiangxi Chenming Paper Co., Ltd. 6.9 Significant changes in business environment, national policies and regulations impacting the financial situation and business performance in the past, present or future. √ Applicable □ Not applicable The significant increasing of raw materials and energy prices has impacted the business operation of the Company at certain level. 6.10 Profitability prediction □Applicable √ Not applicable 6.11 Fulfilling of business plan □Applicable √ Not applicable 6.12 Utilizing of fund raised √ Applicable □ Not applicable In RMB 10 thousand Yuan Total of fund raised and 175,465.00 Total of fund raised 195,622.00 utilized Accumulated fund used 175,465.00 Schedule and Planned Changed Practical Income Fulfilling of Committed projects income expectation investment or not investment generated prediction fulfilled or not 300KT coated white board 83,760.00 No 83,760.00 Yes Yes Pollution treatment and 17,300.00 No 7,800.00 Yes Yes recycling engineering IT and logistics management 17,800.00 No 1,361.00 Yes Yes project 200KT low-ration coated paper project 51,699.00 No 51,699.00 Yes Yes 150T/D chemical-mechanical pulp 8,708.00 No 8,708.00 3,820.00 Yes Yes 11 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. system and accessories Supplementary of working 25,000.00 No 22,137.00 Yes Yes capital Total 204,267.00 - 175,465.00 3,820.00 - - Statement for overdue (in detailed projects) Statement for reason of changing and procedure (in detailed projects) Changing of projects □Applicable √ Not applicable 6.13 Utilizing of non-raised fund √ Applicable □ Not applicable In RMB 10 thousand Yuan Projects Amount of the project progress Profitability Test operation in the 1st Annually profit after tax of 25KT BCTMP 520,000.00 quarter of 2005 RMB100 million Total 520,000.00 - - 6.14 Statement on the “None-standard” opinion issued by the CPA □Applicable √ Not applicable 6.15 Business plan of the Board for the coming year √ Applicable □ Not applicable For the year 2005, the Company will keep focusing on the market construction and emphasis on self-development and creativity. Investment will be enlarged on construction of net projects and marketplace as well as technical development. International development will also be the main strategic direction in viewing of create an international enterprise with global competition. Major works and measurements: 1. Enforce the market developing of new products with target of building up international reputation. Further enhance the construction of marketing force and network. Keep balance of production and sales volume of new products. 2. Building a network of production bases and purchasing process. Establish wood supplying base by means of joint venture, to establish a integrated wood, pulp and paper production chain. 3. Enforce employee training programme to increase employee skill and backup the speedy development of the enterprise. 4. Speed up international co-operation process, improve capital operation, perform multi-layer and full range international cooperation, seek for more powerful partners.Explore for new projects in viewing of international market to ensure the consistence of delelopment. 12 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Prediction of profitability □Applicable √ Not applicable 6.16 Current profit distribution plan or capitalization of public reserves plan √ Applicable □ Not applicable 1. As audited by Tianjian Public Accountant Co., Ltd., the net profit realized in year 2004 was RMB503,721,298.14. According to the regulations of the Article of Association, 10% of it will be drawn as legal reserves amounted to RMB48,121,062.87, 10% of it will be drawn as legal public welfare amounted to RMB48,121,062.87, the distributable profit for year 2004 was RMB407,479,172.40. Plus the retained profit at the beginning of year amounted to RMB1,116,385,967.84 and minus the amount distributed for year 2003, the distributable profit for year 2004 is RMB1,434,092,349.94. 2. Profit distribution preplan for year 2004 On the basis of total capital share of 897,727,903 at the end of year 2004, and the distributable profit of RMB407,479,172.40, 2 bonus shares and RMB1.00 of cash dividend will be dilivered to each 10 shares (tax included). The total profit distributed is amounted to RMB269,318,370.90, the retained profit of RMB138,160,801.50 will be carried over to the next year. By the meantime, basing on the total capital share of 897,727,903 shares at the end of year 2004, 3 new shares will be increased over each 10 shares by the capital reserves. The company is making profit in the report term but not yet have any dividend plan. □ Applicable √ Not applicable §7 Significant Events 7.1 Acquisition □Applicable √ Not applicable 7.2 Selling of property □Applicable √ Not applicable 7.3 Significant guarantee √ Applicable □ Not applicable In RMB 10 thousand Yuan External guarantee (controlled subsidiaries not included) Guarantee Amount Type of Completed or Related party or Date of contract Term provided to guaranteed guarantee not not Total of guarantee occurred in the report term Total of the balance at the end of report term. Guarantee provided to controlled subsidiaries 13 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Total of guarantee provided to controlling 153,075.00 shareholder in the report term Total of balance of guarantee provided to controlling shareholder at the end of report 181,252.00 term The total of guarantee provided (including controlled subsidiaries) Total of guarantee 181,252.00 Proportion of the total guarantee in the net 37.46% asset of the Company Guarantee for violation of regulations Amount provided to controlling shareholder and other related parties holding less than 0 50% of the equity Guarantee provided to parties with 0 liability/asset ratio over 70% The total amount of guarantee has proceeded No 50% of the net asset? Total of illegal guarantee 0 7.4 Significant Related Transactions 7.4.1 Related sales and purchasing □Applicable √ Not applicable 7.4.2 Credit and debt interchange □Applicable √ Not applicable 7.5 Financing proxy □Applicable √ Not applicable 7.6 Fulfilling of consent issues □Applicable √ Not applicable 7.7 Significant lawsuit √ Applicable □ Not applicable The Company was involved in a lawsuit event regarding payment for engineering projects. After the completion of the workshop, the contractor sued to the court that the Company didn’t make the payment. The court issued judgment of executing in advance to the Company according to the request of the contractor. The bank saving of the Company amounted to RMB7.804 million was frozen and executed the Company by RMB10 million in advance. Ended December 31st 2004, the court didn’t make any formal judgment yet. The Company is preparing for responding the lawsuit. Because of the uncertainty of the result, the Company has predicted relative liabilities in accordance with the lawsuit, and adjusted the cost and gain/loss account of the relative project. 14 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. This event will not make any impact on the normal operation and production of the whole company and shall bring no loss to the Company. 7.8 Independent directors’ execution of duties Presenting the Board meetings Name of Presented Presented by Independent Times of Board Meeting Absent Notes personally proxy Director Zhao Jinghua 5 5 0 0 Liu Xueyan 5 5 0 0 Diao Yuntao 5 5 0 0 Wang Zhihua 5 5 0 0 Zhou Chengjuan 5 5 0 0 Objection opinion raised by the independent directors on the business of the Company □Applicable √ Not applicable §8 Report of the Supervisory Committee √ Applicable □ Not applicable In the report term, the Supervisory Committee was exercising its duty with respecting of the shareholders’ benefit. The committee presented the Board meetings and performed inspection on the legality of the financial activities and performing of duties of the directors, managers and other senior managements. Independent statements issued by 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 Deloitte Touche Tohmatsu CPA Ltd.as reflecting the financial status and business results of the company frankly, objectively, and justly. 3. The company issued RMB2 billion of transferable bonds, which was according with that described in the Stock Inviting Prospectus. No investment has been made to projects other than that of set by the prospectus. 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. 15 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. §9 Financial Report 9.1 Auditing Statement Standard auditing statement without qualified opinion 9.2 Financial Statements 16 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. 9.2.1 Balance Sheet Domestic Statement In RMB yuan Items At the end of term Initial Consolidated Parent company Consolidated Parent company Current asset: Monetary fund 1,594,144,437.40 682,941,544.18 1,052,934,646.55 588,673,478.84 Short-term investment Notes receivable 355,254,470.07 166,232,472.92 293,722,210.41 181,947,688.53 Dividend receivable 11,227,650.00 46,395,000.00 Interest receivable Account receivable 1,056,177,704.68 624,949,466.40 1,077,618,235.48 702,640,685.18 Other account receivable 175,756,572.67 1,108,691,959.32 179,194,256.84 546,432,357.98 Advance account 419,984,595.68 215,698,274.11 209,612,788.44 50,273,641.51 Allowance receivable 2,966,853.74 2,966,853.74 Inventories 1,611,938,179.51 838,016,858.01 1,045,831,132.30 481,201,290.13 Expense to be amortized 6,234,788.66 4,625,912.81 5,726,026.03 2,580,167.48 Long-term credit invest expire in 1 year Other current asset Total of current asset 5,219,490,748.67 3,652,384,137.75 3,867,606,149.792,603,111,163.39 Long-term investment: Long-term share equity investment 708,455.83 2,158,705,956.05 -4,189,128.791,601,641,354.12 Long-term credit investment 142,210.00 142,210.00 142,210.00 142,210.00 Total of long-term investment 850,665.83 2,158,848,166.05 -4,046,918.791,601,783,564.12 Consolidated price difference Fixed asset: Original value of fixed assets 7,550,120,019.50 3,954,910,751.73 6,680,742,547.193,539,643,564.07 Less: Accumulated depreciation 1,719,052,422.41 1,025,360,173.47 1,174,775,363.78 707,235,011.19 Net fixed assets 5,831,067,597.09 2,929,550,578.26 5,505,967,183.412,832,408,552.88 Less: Fixed asset impairment provision Net fixed asset 5,831,067,597.09 2,929,550,578.26 5,505,967,183.412,832,408,552.88 Engineering material 257,407,289.02 19,053,145.74 Construction in progress 4,404,456,425.97 1,612,980,714.69 699,888,380.24 314,836,502.80 Fixed asset disposal 0 Total of fixed assets 10,492,931,312.08 4,542,531,292.95 6,224,908,709.393,147,245,055.68 Intangible and others: Intangible assets 95,236,085.95 65,953,265.84 107,666,623.72 76,976,087.93 Long-term expenses to be amortized 41,781,339.21 34,726,500.92 Other long-term assets Total of intangible and other assets 137,017,425.16 65,953,265.84 142,393,124.64 76,976,087.93 Deferred tax: Deferred tax debit Total of assets 15,850,290,151.7410,419,716,862.5910,230,861,065.037,429,115,871.12 Current liabilities Short-term loans 3,298,879,364.75 2,013,188,367.75 2,256,704,089.401,391,654,089.40 Notes payable 9,095,109.60 68,896,419.85 40,217,241.40 Account payable 1,339,044,758.25 372,387,501.44 569,213,296.28 321,612,125.83 Account received in advance 225,569,740.76 281,990,318.14 234,405,483.72 264,793,499.37 Prepaid wages 2,429,755.61 4,664,926.58 Welfare payable 21,569,411.60 2,427,321.17 19,845,779.49 4,069,959.21 Dividend payable 775,471.21 775,471.21 128,211.95 128,211.95 17 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Tax payable 98,462,736.64 18,033,010.12 71,469,879.74 (3,713,246.07) Other accounts to be delivered 584,802.30 26,440.47 1,554,475.14 29,336.11 Other account payable 271,315,156.35 128,369,185.09 327,463,088.52 144,467,140.83 Reserved expenses 10,540,646.33 7,901,073.79 5,230,379.32 4,952,401.32 Expected liabilities Long-term liability expire in 1 year 305,329,500.00 174,829,500.00 685,500,000.00 480,000,000.00 Other current liability Total of current liability 5,583,596,453.40 2,999,928,189.18 4,245,076,029.992,648,210,759.35 Long-term liabilities Long-term borrowings 1,648,405,988.04 458,627,535.94 692,881,557.94 408,792,035.94 Bond payable 2,009,627,777.77 2,009,627,777.77 Long-term payable Special payable 6,080,000.00 Other long-term liability Total of long-term liability 3,664,113,765.81 2,468,255,313.71 692,881,557.94 408,792,035.94 Deferred tax: Deferred tax credit Total of liability 9,247,710,219.21 5,468,183,502.89 4,937,957,587.933,057,002,795.29 Minor shareholders’ equity 1,763,511,058.90 921,855,115.32 Owner’s equity (or shareholders’ equity) Capital received or capital share 897,727,903.00 897,727,903.00 897,727,903.00 897,727,903.00 Less: returned investment Practical capital (or share capital), 897,727,903.00 897,727,903.00 897,727,903.00 897,727,903.00 net Capital reserves 1,986,920,344.63 2,201,151,085.34 1,932,848,340.622,013,168,639.88 Surplus reserves 520,328,276.06 508,138,694.15 424,086,150.32 411,896,568.41 Incl. Statutory public welfare 234,443,278.75 232,924,350.69 186,322,215.88 184,803,287.82 Un-distributed profit 1,434,092,349.94 1,344,515,677.21 1,116,385,967.841,049,319,964.54 Incl. Cash dividend 89,772,790.30 89,772,790.30 89,772,790.30 89,772,790.30 Investment loss not recognized Different of foreign currency translation Total of Owner’s equity (or 4,839,068,873.63 4,951,533,359.70 4,371,048,361.784,372,113,075.83 shareholders’ equity) Total of liabilities and owner’s equity 15,850,290,151.7410,419,716,862.5910,230,861,065.037,429,115,871.12 (or shareholders’ equity) 18 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. 9.2.2 Income Statement Domestic Statement In RMB yuan Current term Same period last year Items Consolidated Parent company Consolidated Parent company I. Major business turnover 7,064,613,089.053,895,516,626.935,819,073,195.58 3,485,175,218.42 Less: Major business cost 5,389,608,600.753,096,298,329.114,173,106,528.76 2,681,119,603.55 Major business tax and surtax 21,730,971.27 467,817.35 21,237,480.00 711,266.59 II. Major business profit 1,653,273,517.03 798,750,480.471,624,729,186.82 803,344,348.28 Plus: other business profit 23,402,883.40 11,445,919.51 4,504,158.75 84,924.33 Less: Business expenses 396,042,235.97 143,695,809.28 345,353,865.19 87,782,337.77 Administrative expense 336,263,238.52 156,896,469.46 343,207,498.89 140,551,590.19 Financial expenses 195,735,144.48 129,235,788.56 157,215,898.42 82,435,818.93 III. Business profit 748,635,781.46 380,368,332.68 783,456,083.07 492,659,525.72 Plus: Investment income 6,864,868.23 189,309,478.76 18,625,979.97 139,150,301.47 Allowance income 100,905,936.59 19,929,107.00 45,124,535.32 Non-business income 5,992,907.12 1,042,298.96 7,520,059.86 3,204,696.50 Less: Non-business expenses 14,962,822.68 2,003,159.42 7,138,976.90 4,198,087.71 IV. Total profit 847,436,670.72 588,646,057.98 847,587,681.32 630,816,435.98 Less: Income tax 206,403,742.22 107,435,429.27 142,126,495.73 46,769,680.44 Minor shareholders’ equity 137,311,630.36 78,320,002.52 Investment loss occurred this term but not recognized V. Net profit 503,721,298.14 481,210,628.71 627,141,183.07 584,046,755.54 Plus: Retained profit at the beginning of 1,116,385,967.841,049,319,964.54 730,738,567.09 706,766,991.32 term Other transferred in VI. Distributable profit 1,620,107,265.981,530,530,593.251,357,879,750.16 1,290,813,746.86 Less: Statutory surplus reserves 48,121,062.87 48,121,062.87 58,404,675.56 58,404,675.56 Drawing of statutory public welfare 48,121,062.87 48,121,062.87 58,404,675.56 58,404,675.56 Employee award and welfare fund Reserves Enterprise development fund Profit returned to investment VII. Distributable profit 1,523,865,140.241,434,288,467.511,241,070,399.04 1,174,004,395.74 Less: Preference share dividend payable Optional surplus reserves Common share dividend payable 89,772,790.30 89,772,790.30 24,936,886.20 24,936,886.20 Common share dividend transferred to 99,747,545.00 99,747,545.00 capital (or share capital) VIII. Undistributed profit 1,434,092,349.941,344,515,677.211,116,385,967.84 1,049,319,964.54 Income statement (Supplementary information) 1. Income from disposal of departments or invested entities 2. Loss from nature force 3. Increase (or loss) in gross profit due to changing of accounting policies 4. Increase (or loss) in gross profit due to changing of accounting estimations 5. Loss from debt reorganization 6. Others 19 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. 9.2.3 Cash Flow Statements In RMB Yuan Under domestic accounting standard Current term Items Consolidated Parent company I. Net cash flow from business operation Cash received from sales or providing of 8,039,164,100.04 4,465,384,779.42 services Tax returned 12,493,953.38 Other cash inflow related to operation 127,645,112.36 136,659,314.50 Subtotal of cash inflow 8,179,303,165.78 4,602,044,093.92 Cash paid for purchasing of merchandise and 6,206,293,098.75 3,886,593,497.55 services Cash paid to staffs or paid for staffs 357,280,367.80 162,735,040.33 Taxes paid 667,533,356.27 258,638,229.73 Other cash paid related to operation 541,957,950.37 380,699,611.38 Subtotal of cash outflow 7,773,064,773.19 4,688,666,378.99 Net Cash flow generated by business 406,238,392.59 -86,622,285.07 operation II. Cash flow generated by investing Cash received from returning of investment 52,456.45 Cash received as investment profit 2,265,375.42 47,404,346.40 Net cash received from disposal of fixed assets, intangible assets and other long-term 2,691,310.00 1,600,000.00 assets Other cash received related to investment Subtotal of cash inflow 5,009,141.87 49,004,346.40 Cash paid to acquire fixed assets, intangible 3,950,459,576.65 1,488,174,049.45 assets and other long-term assets Cash paid for investment 516,990,000.00 Other cash paid related to investment Subtotal of cash outflow 3,950,459,576.65 2,005,164,049.45 Net cash flow generated by investment -3,945,450,434.78 -1,956,159,703.05 III. Cash flow generated by financing Proceeds from investments 707,798,400.00 Cash received from loans 8,527,980,553.92 6,093,289,556.92 Other cash received related to financing 89,995,200.00 Subtotal of cash inflow 9,325,774,153.92 6,093,289,556.92 Cash paid for recovering of debt 4,955,420,174.54 3,771,870,174.54 Cash paid for dividend, profit or interest 292,437,582.34 192,745,347.80 Other cash paid related to financing 5,575,052.36 Subtotal of cash outflow 5,253,432,809.24 3,964,615,522.34 Net cash flow generated by financing 4,072,341,344.68 2,128,674,034.58 IV. Influence of exchange rate movement 276,713.24 572,243.76 V. Net increase of cash and cash equivalents 533,406,015.73 86,464,290.22 20 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. Supplementary information 1. Cash flow in adjusting the net profit for operating activities Net profit 503721298.14 481,210,628.71 Add: Provisions allocated for assets devaluation -559,035.58 22,476,840.32 Depreciation of fixed assets 558,142,362.42 321,919,023.79 Amortization of intangible assets 4,400,010.60 1,552,460.06 Amortization of long-term expenses to be 6,922,564.80 apportioned Decrease (less: increase) of expenses to be -508,762.63 -2,045,745.33 apportioned Increase (less: decrease) of accrued expenses 3,875,511.45 -1,026,603.69 Losses (less: gains) on disposal of fixed, intangible 1,405,434.89 1,108,398.16 and other long-term assets Losses in shortage and rejection of fixed assets 10,226,410.41 Financial expenses 190,842,717.68 122,028,650.01 Losses in investment (less: gains) -6,864,868.23 -189,309,478.76 Deferred taxes – loan (Less: debts) Decrease of inventories (Less: increase) -603,150,723.95 -394,082,468.00 Decrease of receivables in operation (less: increase) -243,723,185.99 -323,303,808.41 Increase of payables in operation (less: decrease) -155,802,971.78 -127,150,181.93 Others Minority shareholders’ gains of current term 137,311,630.36 Net cash flows from operating activities 406,238,392.59 -86,622,285.07 2. Investment and fund raising activities without cash incomings / outgoings involved Liabilities converted into capital Convertible company bond due within a year Financing for hiring the fixed assets 3. Particulars about net increase of cash and cash equivalents Balance of cash at end of period 1,586,340,662.28 675,137,769.06 Less: balance of cash at beginning of period 1,052,934,646.55 588,673,478.84 Add: balance of cash equivalents at end of period Less: balance of cash equivalents at beginning of period Net increase of cash and cash equivalent 533,406,015.73 86,464,290.22 21 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. 9.2.4 Asset impairment provisions Year 2004 in RMB Balance at the beginning Carried back this Balance at end of Items of term Increased this term term term I. Total of bad debt provisions 137,191,365.59 684,205.24 1,020,017.44 136,855,553.39 114,036,125.91 1,020,017.44 113,016,108.47 Incl. Account receivable - 23,155,239.68 684,205.24 Other account receivable - 23,839,444.92 II. Total of short-term invest impairment provisions - - - - Incl. Stocks - - - - Bonds - - - - III. Total of inventory 223,223.38 impairment provisions - 223,223.38 - 223,223.38 Incl. Finished products in stock - 223,223.38 - Raw materials - - - - Others - - - - IV. Total of long-term invests 1,200,000.00 devalue reserves - - 1,200,000.00 Incl. Long-term invests on share 1,200,000.00 equity - - 1,200,000.00 Long-term credit investment - - - - V. Total of fixed assets impairment provision - - - - Incl. Buildings - - - - Equipment & machinery - - VI. Total of intangible asset impairment provision - - - - Incl. Patent - - - - Trademark - - - - VII. Construction in progress impairment provision - - -- VIII. Entrusted loan impairment provision - - -- 9.3 Statement on the changing of accounting policies, accounting estimations and method of calculating comparing with the latest term □Applicable √ Not applicable 22 Annual Report 2004 Summary, Shandong Chenming Paper Holdings Co., Ltd. 9.4 Correcting of significant accounting error □Applicable √ Not applicable 9.5 Changing of consolidation range comparing with the latest term √ Applicable □ Not applicable 1. Qihe Chenming Board Co., Ltd. Shandong Chenming Board Co., Ltd. and Shandong Ruipu Bio-chemical Co., Ltd., the subsidiary companies indirectly controlled by us, signed the contract of joint venture on March 19th, 2004. Qihe Chenming Board Co., Ltd. was set up, and the Business License of Enterprise Legal Person was obtained on March 31st, 2004. The registered capital is 40 million RMB. 20 million is fund by Shandong Chenming Board Co., Ltd., with the holding ratio of 50%, and Shandong Ruipu Bio-chemical Co., Ltd. contributed 20 million, with the holding ratio of 50%. On November. 1st, 2004, Shandong Ruipu Bio-chemical Co., Ltd. transferred its 50% controlling interest on Qihe Chenming Board Co., Ltd. to Shandong Chenming Group Qihe Board Co., Ltd. at original price of 20 million. At the same time, Shandong Chenming Group Qihe Board Co., Ltd. put additional investments of 820 thousand on Qihe Chenming Board Co., Ltd.. After the change, the registered capital of Qihe Chenming Board Co., Ltd. is 40.82 million, with a share holding of 51% for Shandong Chenming Group Qihe Board Co., Ltd., and Shandong Chenming Board Co., Ltd. 49%.) 2. Hezhe Chenming Board Co., Ltd. Shandong Chenming Power Plant Co., Ltd., our share-controlled subsidiary company, and Shandong Chenming Board Co., Ltd. our indirectly share-controlled subsidiary company, joint invested and set up the Hezhe Chenming Board Co., Ltd., with a registered capital of 30 million. Shandong Chenming Board Co., Ltd. contributed 10.2 million with a share holding of 34%, and Shandong Chenming Power Plant Co., Ltd. 9.9 million, 33%; Dingtao County Economic & Investment Co., Ltd. million, 33%. SHANDONG CHENMING PAPER HOLDINGS LIMITED March, 2005 23