Stock Code: 600977 Stock Name: China Film
China Film Co., Ltd.Action Plan of
“Improving Quality, IncreasingEfficiency and Emphasizing Returns
”in 2024
China Film Co., Ltd.Action Plan of
“Improving Quality, IncreasingEfficiency and Emphasizing Returns
”in 2024
To thoroughly implement the spirit of the 20th National Congress of theCommunist Party of China and the Central Financial Work Conference,practice the people-centered value orientation and development philosophy,and respond to the implementation of the Shanghai StockExchange's(hereinafter referred to as “SSE”) Public Initiative on the SpecialAction Of “Improving Quality, Increasing Efficiency And Emphasizing Returns”(hereinafter referred to as “Initiative”), China Film Co., Ltd. (hereinafter referredto as “the company” or “the CF”) formulates this action plan from six aspects,including production and operation, scientific and technological innovation,corporate governance, incentive and restraint, investor communication andshareholder returns, based on the company's development stage, industrycharacteristics and investors’ demands.
I. Deeply Cultivating the Film Industry and Improving the Quality ofOperation
1. Focusing On Film Creation and Production
We insist on taking creation as the core and closely follow therequirements of high-quality development to push forward film creation andproduction. At present, there are more than 90 projects in process ofdevelopment, including more than 50 original projects. Among them, thesecond part of the epic film The Volunteer, which panoramically shows thegreat course of the War to Resist US Aggression and Aid Korea, is scheduledto be released on the National Day this year. The tribute film, Until Find You,which celebrates the 25th anniversary of Macao’s return and shows theconnection of Macao and motherland, is scheduled to be released inDecember this year. The film version of The Journey of a Legendary
Landscape Painting, adapted from the classical dance-poetry drama, hasentered the post-production stage. The first part of the film The Legend of theCondor Heroes, adapted from the classic martial arts works of Jin Yong, isscheduled to be released this year.Since the launch of the “China Film Youth Talents Initiative”, 15 workshave been selected from more than 300 scripts to enter the creation stage.Among them the comedy film Keep Rolling will be released in the near future.
2. Optimizing the Asset Structure and Industrial Layout
In order to improve the situation of the long-term loss of heavy assetbusiness, we plan to start film production system reforms. By connecting twobusiness systems — film producing and production by China Film Studio—and promoting the integrated layout of talents, projects and managementelements, we transform the unique advantages of China Film Studio inindustrial clusters and professional teams into actual productivity. Thus we canbetter promote quality improvement, increase efficiency and service filmindustry.
In order to optimize the strategic layout, we acquired the equity of ChinaFilm Innovation Film Development Co., Ltd, and incorporated the rural film andcampus film business into our cinema industrial chain system to develop andopen up incremental market.
3. Taking Various Measures to Promote Lean Management
We will speed up the construction of treasury system, strengthen the leanmanagement of funds, promote the connection between capital budget andbusiness plan, and continuously improve the efficiency of fund utilization.
We will rationally allocate budgetary resources, ensure key points,emphasize efficiency, control costs, and improve the efficiency of resourceallocation.
We will continuously carry out special management of accountsreceivable, establish negative lists based on customer credit, solvency, risk
factors and other information, strengthen source control and processmonitoring and pre-warning, enhance the operating cash inflow and reduce therisk of bad debts.
II. Promoting Scientific and Technological Innovation andDeveloping New Quality Productive Forces
1. Promoting the Capacity Building of Sci-tech Innovation
In order to enhance the capacity of independent innovation and promotecommercialization of sci-tech achievements, we carried out internalrestructuring of the science and technology sector of the CF in 2023 and ChinaFilm Global (Beijing) Technology Co., Ltd，is the mainstay of the sector.
In 2024, we will further promote the integration of our science andtechnology business, further harmonize and rationalize the business structure,highlight the advantages of the main business, optimize the industrial layout,and ultimately realize the deep integration of innovation chain, industrial chainand talent chain.
2. Creating the Source of Original Technology
Guided by serving industrial upgrading, we boost the research anddevelopment of core technologies.
In 2023, our R&D investment exceeded 50million RMB, an increase of 8.5%over the same period last year and breakthroughs were made in the fields ofartificial intelligence frame insertion and high frame rate shooting. In 2024, wewill improve the R&D management system with high standards, furtherincrease R&D investment, and improve the output rate of technologicalinnovation.
We will implement Systematic Research, Development and Application ofKey Technology in the Whole Cinema Industrial Chain for High-Format Film,which is the National Key Research and Development Program of China, andstep up the R&D outputs and accumulations in the fields of key technologiessuch as High Frame Rate, Wide Color Gamut and High-Dynamic Range,
technologies related to high-format film production, and the field of LED displaytechnology for high-format film presentation.
3. Accelerating the Commercialization of Sci-Tech Achievements
In 2023, CFG Barco projectors commanded about 74% market share innew-product market and the number of CINITY new-build halls ranked numberone in China. The world's first CINITY LED screen, supporting 4K 120-framehigh-format projection, passed DCI certification and international standardBlu-ray testing and was installed in cinemas in Beijing, Nanchang and Jinanetc.In 2024, we will further harness our strengths in industrial base anddemand traction, develop a new generation of film equipment with controllableindependent intellectual property rights, and promote the industrialization andmarketization of high-format film technology.
4. Exploring Applications of Artificial Intelligence in Film Industry
We will proactively embrace transformation by establishing the specializedinstitution to carry out research on the application of artificial intelligence in filmindustry. We will start with the specific aspects of film creation and productionand find solutions to improve quality and efficiency of the company. Preliminaryresearches include AI dubbing, digital actors, AI script evaluation and otherworks in order to enrich film production tools.
Additionally, we will actively integrate into the global innovation networkand establish cooperative relations with domestic and foreign scientificinstitutions and leading sci-tech enterprises to promote open and independentinnovation.
III. Ensuring Standardized Operation and Enhancing GovernanceEffectiveness
1. Strengthening the Construction of the Board of Directors
The board of directors of CF conscientiously performs its functions and
responsibilities, and proactively plays the core role of “setting strategy, makingdecisions and preventing risks”.The board of directors has established four committees, namely, theStrategy (ESG) Committee, the Audit Committee, the Nomination Committee,and the Remuneration and Appraisal Committee. Independent directorsconstitute the majority in three committees and act as the conveners, providingargumentative support for the board of directors in making decisions on majormatters. Independent directors account for 50% of the board members, whichmakes decision-making more comprehensive and objective in strategicplanning, risk prevention and control, and governance.In 2024, we will further promote the construction of the board of directorsto ensure that governance decisions are scientific, effective, standardized andorderly, so as to lay a solid foundation for high-quality development of thecompany.
2. Improving the Governance System
We strongly emphasize the construction of governance system andimplement new policies and requirements into corporate governance at once.
As of the date of drafting this plan, we have actively responded to thereform spirit of the independent director rules. Based on the newlypromulgated and revised regulations and rules of the China SecuritiesRegulatory Commission and the SSE, we have revised the Articles ofAssociation as well as 10 governance policies in accordance with thecompany's actual situation, including the Rules of Procedure for the Board ofDirectors and the Working Rules for Independent Directors, and formulated theWorking Rules for Special Meetings of Independent Directors.
In 2024, we will implement the requirements of the governancemechanism set by authorities regarding independent directors and the returnsof shareholders, follow up the newly amended Company Law and subsequentchanges in a timely manner, and ensure the standardization, systematizationand effectiveness of our corporate governance system.
3. Safeguarding the Legitimate Rights and Interests of All
Shareholders
In strict compliance with the Articles of Association, we promote thegovernance entity to fulfill its responsibilities and protect the legitimate rightsand interests of shareholders.The board of directors promotes the construction of corporate governanceand creates value for all shareholders. The board of supervisors andindependent directors conscientiously perform their supervisory duties andeliminate the infringement of the rights and interests of the company andminority shareholders by taking advantage of the dominant position of themanagement.In 2024, on the basis of complying with the Articles of Association and therules and regulations, we will attach importance to listen to the opinions andsuggestions of shareholders, further carry out relevant work thoroughly andmeticulously, and provide convenience for minority shareholders to participatein governance decision-making and exercise their rights.
IV. Strengthening Incentives and Constraints and Unite DevelopmentEfforts
1. The Controlling Shareholder Holds the Company's Shares for a
Long Time
As the controlling shareholder of the company, China Film GroupCorporation (hereinafter referred to as “CFG”) has never reduced its sharessince CF listed on SSE in August 2016. When drafting this plan, we askedCFG about its shareholding intention and reduction plan. CFG expressed thatbased on the confidence in the CF's future development prospects and highrecognition of the CF's long-term value, as well as in order to safeguard therights and interests of investors and maintain the stability of the capital market,CFG will NOT reduce its shareholding in 2024 in any way and will hold sharesfor a long time, sharing risks and benefits with the company and small and
medium-sized shareholders.
2. Improving the Restraint and Incentive Mechanism
We strictly implement the Guideline on Performance Review for the Headsof State-Owned Enterprises and relative rules, and establish and improvesalary mechanism and asset management accountability in a scientific andreasonable way. The annual performance evaluation indicators of the directors,supervisors and senior managers of the CF include audited operating income,total profit, return on net assets, asset-liability ratio and other economicindicators of the company. The annual salary and performance bonus arelinked to the annual performance evaluation results, and the salary changesmatch the CF’s operating performance.In 2024, we will adhere to the unity of responsibilities, rights and interests,combine incentive and restraint mechanisms with corporate performance,implement restraint mechanisms for the management, and promote thelong-term stable development of the company.
3. Fulfilling the Responsibilities of the Capital Market
The directors, supervisors and senior managers of the CF pay closeattention to the company's market capitalization and market feedback, andkeep abreast of the market dynamics, reasons for fluctuation andshareholders' feedback through internal intraday reports, daily public opinionreports and monthly securities reports.
In 2024, we will further optimize the way of information collection andtransmission, follow up the policy changes and requirements of the regulatoryauthorities promptly, support the “key few” to participate in the learning andtraining organized by the regulatory authorities and associations, and providesupport to their effective performance and duties in legal basis so as toenhance their governance capabilities.
V. Improving the Communication Mechanism and Promoting Positive
Interaction
1. Ensuring the Regular Communication Mechanism
We have a specialized IR team, as a regular interface to communicatewith the capital market, to timely convey messages and answer questions toinvestors. In 2023, we were selected as the “Best Practice of InvestorRelations Management for Listed Companies".In 2024, we will continuously attach importance on IR work. We will plan toreceive no less than 20 investor surveys, organize or participate in no less than4 analyst strategy meetings, and ensure 100% response rate to IR hotline,email and SSE E-interactive.
2. Holding Regular Performance Briefing
We actively implement the Opinions on Further Improving the Quality ofListed Companies, to establish a good communication mechanism betweenthe board of directors and investors. We hold performance briefings afterannouncing periodic reports, and have been selected as the “Best Practice ofPerformance Briefings for Listed Companies” in the past two years.
In 2024, we plan to hold three performance briefings. Led by the chairmanor general manager and the board secretary, CFO, independent directors andrelevant directors and executives attend, we will communicate with investorsthrough live broadcasting, text and other online and offline ways.
3. Enriching the Communication and Dissemination Ways and
Enhancing Effects
We continuously improve the channels and forms of investorcommunication, and will proactively respond to investors' concerns anddemands on the basis of following information disclosure obligations, so as totruly and accurately convey our value.
In 2024, we further optimize works of information disclosure,communication with investors and publicity activities based on the investors’demands. We will make the information more effective and readable by
visualization methods such as videos, graphs and charts and provide investorswith abundant and convenient choices to understand the company viaplanning activities such as “CF Open Day” investor reception day and postinginvestor communication plans regularly.
VI. Focusing on Shareholder Returns and Sharing DevelopmentDividends
1. Formulating and Disclosing the Medium and Long-Term Return
Plan
We continuously improve the shareholder return mechanism. The boardof directors formulates the shareholder return plan in a three-year cycle andsubmits it to the shareholders' meeting for deliberation and approval in order toenhance the sustainability and predictability of shareholder return.
The latest return plan, Shareholder Return Plan in the Next Three Years(2023-2025), was disclosed on SSE website on April 26, 2023. This planspecifies that when distribution is feasible, the annual cash dividend shall notbe less than 10% of the distributable profit realized in that year, and the totalcash dividend in the last three years shall not be less than 30% of the averageannual distributable profit realized in the last three years.
2. Insisting on Distributing Stable and Reasonable Cash Dividends
We insist on rewarding investors with practical and effective measuresand sharing long-term development dividends with shareholders.
We have distributed 2.199 billion RMB since the CF listed on the SSE,accounting for 54.03%
of the net profit attributable to shareholders.
As of the drafting date of this plan, the board of directors has submittedthe profit distribution plan for 2023 to the shareholders' general meeting forconsideration, and proposed to distribute 0.71 RMB (including tax) per 10shares to all shareholders, with a dividend distribution rate of 50.41%.
In 2024, the board of directors will fully consider the characteristics of the
Cash dividend in 2018 calculated by net profit attributable to shareholders of the company beforenon-recurring gains and loss
industry of the company, the stage of development and strategic planning, aswell as the company's profitability and major capital arrangements for the nextyear to draw up a dividend plan, with a dividend payout rate
not lower than 41%as the first choice.
3. Listening to Shareholders’ Demands and Optimizing the Return
Mechanism
In response to the proposal of the Initiative that distributing dividendsmultiple times a year and pre-distributing dividends before the Spring Festivalin combination with the undistributed profits and the current businessperformance, the board of directors will investigate the needs of investors tounderstand the concentrated demands by publicly collecting opinions, studyand optimize the shareholder returns mechanism, and enhance investors'sense of gain.
The board of directors will continuously promote this action plan, regularlyevaluate the implementation of relevant measures, and promptly fulfill theinformation disclosure obligations.
This action plan is the judgment and working idea formed by the board ofdirectors based on the actual situation of the company at present. In the futureimplementation, it may be affected by factors such as macroeconomic,industry policies and market environment, and there is a degree of uncertainty.The business plans involved in the action plan are not fait accompli butforward-looking statements that do not constitute a substantial commitment bythe company and the board of directors to investors. Investors are advised topay attention to relevant risks.
The reference standard is a three-year average dividend rate of 41.5% from 2021 to 2023. Amongthem, the data for 2023 is calculated on the basis of the profit distribution plan that has been proposed bythe board of directors but has not yet been reviewed by the general meeting of shareholders as of thedate of this announcement.