Company Limited China National Materials Materials Bring a Prosperous Life Annual Report 2016 2 0 1 6 A n n u a l R e China National Materials p o China National Materials Company Limited r t Company Limited CONTENTS CORPORATE INFORMATION 2 CORPORATE PROFILE 4 CORPORATE STRUCTURE 5 FINANCIAL SUMMARY 6 BUSINESS SUMMARY 7 CHAIRMAN’S STATEMENT 8 MANAGEMENT DISCUSSION AND ANALYSIS 10 BIOGRAPHY OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT 23 DIRECTORS’ REPORT 30 SUPERVISORY COMMITTEE’S REPORT 45 CORPORATE GOVERNANCE REPORT 46 AUDITOR’S REPORT 59 CONSOLIDATED BALANCE SHEET 63 BALANCE SHEET OF THE COMPANY 66 CONSOLIDATED INCOME STATEMENT 68 INCOME STATEMENT OF THE COMPANY 70 CONSOLIDATED STATEMENT OF CASH FLOWS 71 STATEMENT OF CASH FLOWS OF THE COMPANY 72 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 73 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY OF THE COMPANY 75 NOTES TO THE FINANCIAL STATEMENTS 77 DEFINITIONS 198 CHINA NATIONAL MATERIALS COMPANY LIMITED ANNUAL REPORT 2016 1 CORPORATE INFORMATION As at 31 December 2016 DIRECTORS REMUNERATION COMMITTEE 6 Executive Directors WANG Zhulin (Chairman) LIU Zhijiang (Chairman) LEUNG Chong Shun PENG Jianxin (President) LU Zhengfei 7 Non-executive Directors1 NOMINATION COMMITTEE LI Xinhua (Vice-chairman) LIU Zhijiang (Chairman) LI Jianlun LEUNG Chong Shun SHEN Yungang LU Zhengfei WANG Fengting SECRETARY OF THE BOARD Independent Non-executive Directors2 GU Chao LEUNG Chong Shun LU Zhengfei JOINT COMPANY SECRETARIES WANG Zhulin GU Chao SUPERVISORS 3 YU Leung Fai (HKICPA, AICPA and CPAA) XU Weibing (Chairman) AUTHORISED REPRESENTATIVES ZHANG Hai GUO Yanming LIU Zhijiang WANG Yingcai YU Leung Fai (HKICPA, AICPA and CPAA) QU Xiaoli REGISTERED OFFICE AND PLACE OF BUSINESS 4 STRATEGY COMMITTEE 8th Floor, Tower 2 LIU Zhijiang (Chairman) Guohai Plaza, 17 Fuxing Road LI Xinhua Haidian District PENG Jianxin Beijing 100036, the PRC AUDIT COMMITTEE 5 PLACE OF BUSINESS IN HONG KONG LU Zhengfei (Chairman) 7th Floor, Hong Kong Trade Centre LI Xinhua 161-167 Des Voeux Road Central WANG Zhulin Hong Kong 1 On 29 July 2016, Mr. SHEN Yungang and Mr. WANG Fengting were appointed as non-executive Directors, and Mr. YU Shiliang, Mr. YU Guobo and Mr. TANG Baoqi ceased to be non-executive Directors. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 2 On 29 July 2016, Mr. WANG Zhulin was appointed as an independent non-executive Director, and Mr. WANG Shimin and Mr. ZHOU Zude ceased to be independent non-executive Directors. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 3 On 29 March 2016, Mr. ZHANG Renjie resigned as a Supervisor due to change of work allocation. For details, please refer to the announcement of the Company published on 29 March 2016 on the websites of the Hong Kong Stock Exchange and the Company. On 24 May 2016, Mr. WANG Fengting was appointed as a Supervisor. For details, please refer to the announcement of the Company published on 24 May 2016 on the websites of the Hong Kong Stock Exchange and the Company. On 29 July 2016, Mr. WANG Fengting and Mr. WANG Jianguo ceased to be Supervisors, and Mr. ZHANG Hai and Mr. GUO Yanming were appointed as Supervisors. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 4 On 29 July 2016, Mr. LIU Zhijiang was appointed as the chairman of the Strategy Committee, and Mr. LI Xinhua and Mr. PENG Jianxin were appointed as members of the Strategy Committee. Mr. YU Shiliang, Mr. LI Jianlun, Mr. YU Guobo and Mr. ZHOU Zude ceased to be members of the Strategy Committee. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 5 On 29 July 2016, Mr. LU Zhengfei was appointed as the chairman of the Audit Committee, and Mr. LI Xinhua and Mr. WANG Zhulin were appointed as members of the Audit Committee. Mr. WANG Shimin and Mr. YU Shiliang ceased to be members of the Audit Committee. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 6 On 29 July 2016, Mr. WANG Zhulin was appointed as the chairman of the Remuneration Committee, and Mr. LEUNG Chong Shun and Mr. LU Zhengfei were appointed as members of the Remuneration Committee. Mr. WANG Shimin ceased to be a member of the Remuneration Committee. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 7 On 29 July 2016, Mr. LIU Zhijiang was appointed as the chairman of the Nomination Committee, and Mr. LEUNG Chong Shun and Mr. LU Zhengfei were appointed as members of the Nomination Committee. Mr. WANG Shimin and Mr. ZHOU Zude ceased to be members of the Nomination Committee. For details, please refer to the announcement of the Company published on 29 July 2016 on the websites of the Hong Kong Stock Exchange and the Company. 2 CHINA NATIONAL MATERIALS COMPANY LIMITED ANNUAL REPORT 2016 CORPORATE INFORMATION As at 31 December 2016 LEGAL ADVISORS DLA Piper (as to Hong Kong law) Jia Yuan Law Firm (as to PRC law) AUDITOR8 ShineWing Certified Public Accountants LLP HONG KONG H SHARE REGISTRAR AND TRANSFER OFFICE Computershare Hong Kong Investor Services Limited 17M Floor, Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong STOCK CODE 01893 COMPANY WEBSITE http://www.sinoma-ltd.cn INVESTOR CONTACT Tel: (8610)6813 9628 Fax: (8610)6813 9688 E-mail: [email protected] 8 The annual general meeting of the Company for the year 2015 approved to cease to re-appoint SHINEWING (HK) CPA Limited as the international auditor of the Company, and approved to re-appoint ShineWing Certified Public Accountants LLP as the auditor of the Company for the year 2016. For details, please refer to the announcements of the Company published on 29 March 2016 and 24 May 2016 as well as the circular of the Company published on 6 April 2016 on the websites of the Hong Kong Stock Exchange and the Company. CHINA NATIONAL MATERIALS COMPANY LIMITED ANNUAL REPORT 2016 3 CORPORATE PROFILE China National Materials Company Limited is a joint stock company approved by the State-owned Assets Supervision and Administration Commission of the State Council and established jointly by China National Materials Group Corporation Ltd. and other promoters. The Company was incorporated on 31 July 2007 and was listed on the Main Board of the Hong Kong Stock Exchange on 20 December 2007. The Company is mainly engaged in cement equipment and engineering services, cement and high-tech materials businesses. The Company possesses series of core technologies such as glass fiber, composite materials, synthetic crystals, advanced ceramics and new dry process cement technology, with pioneering research and development capabilities, strong implementation capability for commercialisation of innovative technologies, successful mergers and acquisitions experience and unique business model. The Company is the largest provider of cement equipment and engineering services globally and is a leading producer of non-metal materials in the PRC. The Company is the only enterprise in the non-metal materials industry in the PRC with a business model that integrates research and development, industrial design, equipment manufacturing, engineering and construction services and production. The Company is committed to maintaining sustainable development for the long term and continuously creates value for all our stakeholders including Shareholders, customers, employees and the society. The Company upholds our positioning as an innovative, international and value-added enterprise. We strive to become the leading provider of technology, core equipment and engineering and system integration services in the global cement engineering industry and to become a prominent developer and provider of non-metal materials and related products globally. 4 CHINA NATIONAL MATERIALS COMPANY LIMITED ANNUAL REPORT 2016 CORPORATE STRUCTURE As at 31 December 2016 Sinoma 41.84% 39.70% Sinoma International3 Group Cement Equipment and 100% Engineering Services Sinoma Mining 8.96% Cinda 35.49% Tianshan Cement4 100% Taishan 8.67% Sinoma Cement Investment Cement 47.56% Ningxia Building Materials 51% 3.66% Qilianshan Holdings Well Kent1 China National Materials Company Limited Tianshan 1.80% Group2 60.24% Sinoma Science & Technology 99.46% Sinoma Advanced 1.75% Materials BBMG High-tech Materials 50.01% Sinoma Jinjing 51% Xiamen Standard Zibo 0.72% Sand Hi-Tech Holders 32.60% 100% Sinoma (Hong Kong) of H Shares Notes: 1. Well Kent is a wholly-owned subsidiary of Cinda. On 20 February 2017, China Securities Depository and Clearing Corporation Limited issued the Confirmation Letter for Securities Transfer and Registration 《( 過戶登記確認書》) in respect of the transfer by Well Kent of 130,793,218 unlisted foreign shares of the Company held by it to Forchn International Co., Limited (“Forchn International”). 2. Sinoma Group holds 50.95% equity interest in Tianshan Group. 3. On 29 May 2015, Sinoma International resolved to issue no more than 64,516,129 subscription shares for raising proceeds of no more than RMB1,000,000,000 in aggregate by way of non-public offer. For details, please refer to the announcements of the Company published on 29 May 2015 and 25 November 2015 on the websites of the Hong Kong Stock Exchange and the Company respectively. As Sinoma International failed to complete the above-mentioned issue within the valid period of the written approval from CSRC, the approval made by CSRC in respect of the above-mentioned issue expired and terminated automatically.