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晨鸣B:2017年年度报告(英文版) 下载公告
公告日期:2018-03-28
I    Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the
truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no false representations,
misleading statements or material omissions contained in this Report, and are jointly and severally responsible for the liabilities of
the Company.
Chen Hongguo, head of the Company, Hu Jinbao, head in charge of accounting and Zhang Bo, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial
statements in the annual report.
All Directors were present in person at the Board meeting to consider and approve this Report except the following Director.
      Name of the Director             Capacity of the Director
    unable to attend                   unable to attend              Reason for failure to attend
     the meeting in person              the meeting in person              the meeting in person             Name of the proxy
             Pan Ailing                  Independent Director                  Health reasons                 Wang Fengrong
The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy and competition
in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factors likely to be faced
and the measures to be taken to address them as set out in the outlook on the future development of the Company in Discussion
and Analysis of Operations.
The proposed profit distribution plan of the Company was considered and passed by the Board:
The audited consolidated net profit attributable to shareholders of the Company for 2017 prepared in accordance with Accounting
Standards for Business Enterprises by the Company amounted to RMB3,769,325,450.93. When deducting the interest for
perpetual bonds of RMB153,140,000 for 2017 and the dividend for preference shares of RMB333,702,107.35, the distributable
profit realised for 2017 amounted to RMB3,282,483,343.58.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017 and the 774,526,678 simulated
ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the end of
2017, a cash dividend of RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders, a cash dividend of
RMB6 (tax inclusive) per ten simulated ordinary shares converted from the preference shares will be distributed to holders of
preference shares, and a capitalisation issue made out of the capital reserves of 5 shares for every ten shares held to ordinary
shareholders. A cash dividend of RMB of RMB1,161,843,280.20 will be distributed to ordinary shareholders and a variable cash
dividend of RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a cash dividend of RMB10.33
(tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference shares. No
bonus shares (tax inclusive) will be issued.
                                                                                                              2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.1 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:21
    I      Important Notice, Table of Contents and Definitions
    Table of Contents
    I       Important Notice, Table of Contents and Definitions ..............................................................................................                                    []
    II      Company Profile and Key Financial Indicators .......................................................................................................                                  []
    III     Chairman’s Report ..................................................................................................................................................                 []
    IV      Business Overview ..................................................................................................................................................                  []
    V       Discussion and Analysis of Operations ...................................................................................................................                             []
    VI      Directors’ Report .....................................................................................................................................................              []
    VII     Material Matters ......................................................................................................................................................               []
    VIII    Changes in Share Capital and Shareholders ..........................................................................................................                                  []
    IX      Preference Shares. ..................................................................................................................................................                 []
    X       Directors, Supervisors and Senior Management and Staff .....................................................................................                                          []
    XI      Corporate Governance ............................................................................................................................................                     []
    XII     Corporate Bonds .....................................................................................................................................................                 []
    XIII    Financial Report ......................................................................................................................................................               []
    XIV     Documents Available for Inspection........................................................................................................................                            []
2   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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I      Important Notice, Table of Contents and Definitions
Definitions
Item                                          means       Definition
Company, Group, Chenming                      means       Shandong Chenming Paper Holdings Limited and its subsidiaries
 Group or Chenming Paper
Parent Company or                             means       Shandong Chenming Paper Holdings Limited
  Shouguang Headquarters
Chenming Holdings                             means       Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange                       means       Shenzhen Stock Exchange
Stock Exchange                                means       The Stock Exchange of Hong Kong
CSRC                                          means       China Securities Regulatory Commission
Shandong CSRC                                 means       Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming                            means       Zhanjiang Chenming Pulp & Paper Co., Ltd.
Jiangxi Chenming                              means       Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming                                means       Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK)                                 means       Chenming (HK) Limited
Haiming Mining                                means       Haicheng Haiming Mining Company Limited
Jilin Chenming                                means       Jilin Chenming Paper Co., Ltd.
Shouguang Meilun                              means       Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company                        means       Shandong Chenming Paper Sales Company Limited
Finance Company                               means       Shandong Chenming Group Finance Co., Ltd.
Financial Leasing Company                     means       Shandong Chenming Financial Leasing Co., Ltd.
reporting period or the year                  means       The period from 1 January 2017 to 31 December 2017
the beginning of the year or                  means       1 January 2017
  the period
the end of the year or the period             means       31 December 2017
the prior year                                means       The period from 1 January 2016 to 31 December 2016
                                                                                                            2017 ANNUAL REPORT   3
       3704827-t01fnar (Shandong Chenming) p.3 (P98738) 27-03-2018 16:29
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    II Company Profile and Key Financial Indicators
    I.    Company profile
          Stock abbreviation                                                                Stock code
                                                                         B                  Stock code
                                                                           01               Stock code
                                                                           02               Stock code
                                                                           03               Stock code
          Stock exchanges on which the shares are listed             Shenzhen Stock Exchange
          Stock abbreviation                                                                Stock code
          Stock exchanges on which the shares are listed             The Stock Exchange of Hong Kong Limited
          Legal name in Chinese of the Company
          Legal short name in Chinese of the Company
          Legal name in English of the Company (if any)              SHANDONG CHENMING PAPER HOLDINGS LIMITED
          Legal short name in English of the Company (if any)        SCPH
          Legal representative of the Company                        Chen Hongguo
          Registered address                                         No. 595 Shengcheng Road, Shouguang City, Shandong Province
          Postal code of registered address
          Office address                                             No. 2199 Nongsheng East Road, Shouguang City, Shandong Province
          Postal code of office address
          Website of the Company                                     http://www.chenmingpaper.com
          Email address                                              chenmmingpaper@163.com
    II.   Contact persons and contact methods
                                  Secretary to the Board (Acting)        Securities Affairs Representative    Hong Kong Company Secretary
          Name                   Chen Hongguo                            Yuan Xikun                           Poon Shiu Cheong
          Correspondence address No. 2199 Nongsheng East Road,           No. 2199 Nongsheng East Road,        22nd Floor, World Wide House,
                                 Shouguang City, Shandong Province       Shouguang City, Shandong Province    Central, Hong Kong
          Telephone              (86)-0536-2158008                       (86)-0536-2158008                    (852)-2501 0088
          Facsimile              (86)-0536-2158977                       (86)-0536-2158977                    (852)-2501 0028
          Email address          chenmmingpaper@163.com                  chenmmingpaper@163.com               kentpoon_1009@yahoo.com.hk
    III. Information disclosure and places for inspection
          Designated media for information disclosure           China Securities Journal, Shanghai Securities News, Securities Times,
                                                                Securities Daily and Hong Kong Commercial Daily
          Designated websites for the publication of            Domestic: http://www.cninfo.com.cn; Overseas: http://www.hkex.com.hk
            the Annual Report as approved by CSRC
          Places for inspection of the Company’s               Securities investment department of the Company
            Annual Report
    IV. Change in registration
          Organisation registration code
          Change of principal activities since its listing      No
            (if any)
          Change of the controlling shareholder (if any)        No
4   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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II Company Profile and Key Financial Indicators
V.   Other relevant information
     CPAs engaged by the Company
     Name of CPAs                                                         Ruihua Certified Public Accountants (Special General Partnership)
     CPAs’ Office Address                                                4/F, Tower 2, No. 16 Xisihuanzhong Road, Haidian District, Beijing
     Name of the Signing Certified                                        Zhao Yanmei and Wang Zongpei
       Public Accountants
     Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
     √ Applicable                 Not applicable
                                                                                          Name of the
     Name of sponsor                      Sponsor’ office address                        representatives of sponsor                 Period under ongoing supervision
     CSC Financial Co., Ltd.              9/F, Block B and E, Kaiheng Center,             Song Shuangxi and                          1 January 2017 - 31 December 2017
                                          No. 2 Chaonei Avenue,                           Shen Xiqiang
                                          Dongcheng District, Beijing
     Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period
          Applicable           √ Not applicable
VI. Major accounting data and financial indicators
     Retrospective adjustment to or restatement of the accounting data for prior years by the Company
     √ Yes            No
     Reason for retrospective adjustment or restatement
     Correction of accounting errors
                                                                                                                   Increase/decrease
                                                                                                                       for the year as
                                                                                                                     compared to the
                                                                  2017                                     2016              prior year
                                                                                     Before                After                  After             Before                After
                                                                                 adjustment          adjustment            adjustment           adjustment          adjustment
     Revenue (RMB)                                    29,851,743,848.13    22,907,118,241.84   22,907,118,241.84              30.32%      20,241,906,131.81   20,241,906,131.81
     Net profit attributable to shareholders
       of the Company (RMB)                            3,769,325,450.93     2,063,986,822.25    1,998,578,788.75              88.60%       1,021,224,678.04    1,086,632,711.54
     Net profit after extraordinary gains or losses
       attributable to shareholders
       of the Company (RMB)                            3,425,779,016.95     1,611,533,699.22    1,546,125,665.72             121.57%         719,891,359.63      785,299,393.13
     Net cash flows from operating activities (RMB)       23,766,042.93     2,153,049,269.84    2,153,049,269.84             -98.90%      -9,721,363,524.30   -9,721,363,524.30
     Basic earnings per share (RMB per share)                      1.70                 0.99                0.95              78.95%                   0.50                0.53
     Diluted earnings per share (RMB per share)                    1.70                 0.99                0.95              78.95%                   0.50                0.53
     Rate of return on net assets on weighted
       average basis                                           15.80%                9.59%               9.23%                  6.57%               6.73%               7.17%
VI. Major accounting data and financial indicators
                                                                                                                                               2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.5 (P98738) 27-03-2018 16:29
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    II Company Profile and Key Financial Indicators
    VI. Major accounting data and financial indicators (Cont’d)
                                                                                                                Increase/decrease
                                                                                                                   as at the end of
                                                                                                                the year compared
                                                            As at the                              As at the           to the end of                                 As at the
                                                          end of 2017                            end of 2016          the prior year                               end of 2015
                                                                                  Before                After                  After             Before                   After
                                                                              adjustment         adjustment              adjustment          adjustment            adjustment
         Total assets (RMB)                        105,625,096,076.92   82,285,354,532.15   82,285,354,532.15              28.36%      77,961,699,547.59    77,961,154,948.14
         Net assets attributable to shareholders
           of the Company (RMB)                     27,778,529,074.90   22,218,808,367.43   22,218,808,367.43              25.02%      16,871,494,584.82    16,936,902,618.32
    1.   Reason for accounting policy change and correction of accounting errors:
         Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, proceeded to apply for the certification as a
         high and new technology enterprise in 2015. The Company received its high and new technology enterprise certificate and
         made a related announcement on 28 March 2016. The annual report of the Company was published on 30 March 2016.
         As the time of receipt of the certificate and the publication date were close, the Company continued to make a provision
         for the income tax expenses of Zhanjiang Chenming at an income tax rate of 25% for 2015. In May 2016, when Zhanjiang
         Chenming made the final settlement and payment of the income tax for 2015, the taxation authority agreed that the income
         tax for 2015 was calculated and paid at a tax rate of 15%, and returned the excessive tax amount of RMB65,952,632.95
         in August 2016. The excessive tax amount received by the Company was directly used to offset against the income tax
         expenses for 2016. As a result, the respective income tax amounts for 2015 and 2016 contained errors and the Company
         made a correction for prior years during the year. The deferred income tax assets as at 31 December 2015 deceased by
         RMB544,599.45 and the income tax expenses for 2015 decreased by RMB65,408,033.50 when the Company made a
         provision for the income tax expenses at an income tax rate of 15% for 2015 (The income tax expenses for the period also
         decreased by RMB65,952,632.95 and the deferred income tax expenses increased by RMB544,599.45).
    2.   Data specification of basic earnings per share, diluted earnings per share, weighted average return on
         equity:
         The net profit attributable to the shareholders of the listed company did not deduct any other equity instruments—perpetual
         debt can be deferred and accrued to the interest paid in subsequent periods and the impact of dividends on the preference
         shares of other equity instruments that have been released after being reviewed and approved. When calculating the
         financial indicators of earnings per share and weighted average return on net assets, the interest on perpetual bonds of
         RMB 153,140,000.00 and dividends on issuance of preference shares of RMB 333,702,107.35 are deducted during the
         reporting period. For details, please refer to section 13 and note 17.2 of this report.
    VII. Differences in accounting data under domestic and overseas accounting standards
         1.       Differences between the net profit and net assets disclosed in accordance with international
                  accounting standards and China accounting standards in the financial report
                      Applicable √ Not applicable
                  There was no difference between the net profit and net assets disclosed in accordance with international accounting
                  standards and China accounting standards in the financial report during the reporting period.
         2.       Differences between the net profit and net assets disclosed in accordance with overseas accounting
                  standards and China accounting standards in the financial report
                      Applicable √ Not applicable
                  There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
                  standards and China accounting standards in the financial report during the reporting period.
6   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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II Company Profile and Key Financial Indicators
VIII. Key Financial Indicators by Quarter
                                                                                                                                     Unit: RMB
                                                                        Q1                      Q2                   Q3                     Q4
    Revenue                                              6,274,273,821.63          7,474,961,185.61     8,179,965,762.07       7,922,543,078.82
    Net profit attributable to shareholders
      of the Company                                       702,517,923.91          1,042,996,914.32      966,000,240.51        1,057,810,372.19
    Net profit after extraordinary gains or losses
      attributable to shareholders of the Company           615,479,547.22         1,007,815,010.99       927,544,638.20         874,939,820.54
    Net cash flows from operating activities             -1,799,933,755.66        -2,313,008,012.73     2,499,802,074.06       1,636,905,737.26
    Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
    disclosed in the quarterly report or interim report
         Yes √ No
IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
    Rules
                                                                                                                               Unit: RMB’0,000
                                                                             For the year ended 31 December
                                                 2017                          2016                         2015            2014
                                                              Before           After         Before       After a
                                                          adjustment     adjustment     adjustment     djustment
    Revenue                                  2,985,174      2,290,711        2,290,711     2,024,191    2,024,191      1,910,168      2,038,889
    Profit before tax                          453,648        258,317          258,317       141,017      141,017         56,101         86,629
    Tax                                         77,752         56,056           62,597        43,224       36,683         10,770         17,594
    Profit for the current period
      attributable to shareholders
      of the listed company                   376,933        206,399           199,858       102,122      108,663          50,520       71,066
    Minority interests                         -1,036         -4,138            -4,138        -4,329       -4,329          -5,190       -2,030
    Basic earnings per share
      (RMB/share)                                  1.7           0.99             0.95          0.50         0.53            0.26          0.35
    Rate of return on net assets
      on weighted average basis (%)            15.80%          9.59%            9.23%         6.73%        7.17%           3.62%         5.11%
                                                                                                                               Unit: RMB’0,000
                                                                             For the year ended 31 December
                                                 2017                          2016                          2015           2014
                                                              Before           After         Before          After
                                                          adjustment     adjustment     adjustment     adjustment
    Total assets                            10,562,510      8,228,535        8,228,535     7,796,170    7,796,116      5,682,203      4,752,188
    Total liabilities                        7,535,092      5,972,050        5,972,050     6,070,277    6,063,736      4,247,396      3,288,353
    Minority interests                        249,565         34,605            34,605        38,743       38,743          43,073       59,847
    Equity attributable to shareholders
      of the listed company                  2,777,853      2,221,881         2,221,881    1,687,149    1,693,690      1,391,734      1,403,989
    Net current assets/(liabilities)          -783,090     -1,094,182        -1,094,182   -1,347,029   -1,340,488       -452,549       -106,347
    Total assets less current liabilities    4,837,646      3,557,671         3,557,671    2,932,756    2,939,242      2,872,637      2,823,321
                                                                                                                     2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.7 (P98738) 27-03-2018 16:29
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    II Company Profile and Key Financial Indicators
    X.   Items and amounts of extraordinary gains or losses
         √ Applicable          Not applicable
                                                                                                                                             Unit: RMB
         Item                                              Amount for 2017    Amount for 2016        Amount for 2015    Explanation
         Profit or loss from disposal of non-current
           assets (including write-off of provision
           for assets impairment)                            65,853,273.77       -1,536,454.18          18,317,909.85
         Government grants (except for the
           government grants closely related to
           the normal operation of the company
           and granted constantly at a fixed
           amount or quantity in accordance with
           a certain standard based on state
           policies) accounted for in profit or loss for
           the current period                               392,774,230.02      472,476,962.83         244,716,579.78
         Gain arising from investment costs for
           acquisition of subsidiaries, associates
           and joint ventures by the corporation
           being less than its share of fair value of
           identifiable net assets of the investees
           on acquisition                                   143,867,008.14
         Profit or loss from debt restructuring                  24,309.62          -90,997.90          32,089,863.80
         Gain or loss arising from contingent items
           unrelated to the ordinary course of
           business of the Company                         -325,259,082.28
         Except for effective hedging business
           conducted in the ordinary course of
           business of the Company, gain or
           loss arising from the change in fair
           value of financial assets held for trading
           and financial liabilities held for trading,
           as well as investment gains from disposal
           of financial assets held for trading and
           financial liabilities held for trading and
           available-for-sale financial assets               94,000,000.00
         Gain or loss on external entrusted loans            13,312,368.97       87,608,490.56          94,777,777.77
         Gain or loss from changes in fair value of
           consumable biological assets
           subsequently measured at fair value              -21,000,042.33      -20,084,425.90         -19,078,538.02
         Non-operating gains and losses other than
           the above items                                   33,659,216.99       10,022,635.89          10,274,311.04
         Less: Effect of income tax                          50,196,013.15       92,004,074.27          76,729,624.38
                Effect of minority interests (after tax)      3,488,835.77        3,939,014.00           3,034,961.43
         Total                                              343,546,433.98      452,453,123.03         301,333,318.41
8   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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II Company Profile and Key Financial Indicators
   Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
   Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary
   gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
   Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
    Applicable √ Not applicable
   No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
   Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its
   recurring gain or loss items during the reporting period.
                                                                                                     2017 ANNUAL REPORT
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   OUTPUT: 27-03-2018 16:29:23
     III Chairman’s Report
     Dear Shareholders,
     I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2017. On behalf
     of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to Chenming Paper.
     The supply-side reform continuously developed. The industrial structure was consistently adjusted. The environmental protection
     policies became more specific and stricter. Commercial and development opportunities arose for some enterprises and an
     industry reshuffle accelerated to deepen the industry concentration, and therefore the industry continued to prosper. On the
     one hand, the prices of paper products increased due to the increased costs of, among other things, wood pulp, waste paper
     and logistics. The leading enterprises maintained their cost advantage with their pulp inventories and their own pulp production
     capacity and improved their profitability. On the other hand, the financial leasing business became an integral part of the
     Company’s profit while enjoying good development momentum.
     In 2017, facing the complex macroeconomic conditions, as well as the pressure from the market, environmental protection and
     increasing costs, the Company, aiming at “developing into an enterprise with hundreds of billions in value and forging Chenming
     into a centennial brand”, committed itself to “team building, management enhancement, outstanding business performance and
     good results” to strive for progress and be innovative and practical, and comprehensively improved its quality and efficiency,
     management level, technology application, sense of happiness and brand image. It successfully completed all the work targets for
     the year and achieved very satisfactory results.
     I.    Results of Operations
           In 2017, the Company completed the production of machine-made paper of 5.10 million tonnes with sales of 4.96 million
           tonnes and achieved revenue of RMB29.852 billion, a year-on-year increase of 30.32%. The Company recorded operating
           costs of RMB19.729 billion, a year-on-year increase of 24.97%. Total profit and net profit attributable to equity holders of
           the Company were RMB4,536 million and RMB3,769 million respectively, up by 75.62% and 88.60% from the prior year.
           The Company’s total assets amounted to RMB105.625 billion. The financial segment experienced stable development
           across businesses with ever improving management systems and effective risk preventions.
     II.   Corporate Governance
           During the reporting period, the Company regulated its operation under the requirements of Companies Law, Securities
           Law, Code of Corporate Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock
           Exchange, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related
           provisions of the China Securities Regulatory Commission. The Company kept on improving and optimising its legal person
           governance structure and regulating its operation in practice. The Board considered the state of the Company’s corporate
           governance was substantially in compliance with the requirements and requests of the regulatory documents such as Code
           of Corporate Governance for Listed Companies.
           During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
           governance. It improved its corporate governance system in a timely manner and amended and improved the amended
           management systems including the Rules of Procedures for General Meetings, the Rules of Procedures for Board Meetings
           and the Articles of Association in accordance with the regulatory requirements.
           Strict enforcement of relevant internal control systems had promoted a regulated operation and healthy development of the
           Company, protecting the legitimate rights and interests of our investors. The overall state of corporate governance was in
           compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development strives
           forward, its state of regulated operation and internal control will continue to improve.
10   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                     3704827-t01fnar (Shandong Chenming) p.10 (P98738) 27-03-2018 16:29
                                                                                                                    OUTPUT: 27-03-2018 16:29:24
III Chairman’s Report
III. Dividend Distribution
    Consistent with our long-term goal of pursuing the maximisation of corporate values, the Company has always placed
    much emphasis on the benefits of and returns to our shareholders. The audited consolidated net profit attributable to
    shareholders of the Company for 2017 prepared in accordance with Accounting Standards for Business Enterprises by the
    Company amounted to RMB3,769,325,450.93. When deducting the interest for perpetual bonds of RMB153,140,000 and
    the dividend of preference shares of RMB333,702,107.35 for 2017, the distributable profit realised for 2017 amounted to
    RMB3,282,483,343.58. In accordance with the requirements of the Articles of Association and the Prospectus of Non-public
    Issuance of Preference Shares, the proposed profit distribution plan of the Company for 2017 is as follows:
    Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017 and the 774,526,678 simulated
    ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the
    end of 2017, a cash dividend of RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders; a cash
    dividend of RMB6 (tax inclusive) per ten simulated ordinary shares converted from the preference shares will be distributed
    to holders of preference shares; and a capitalisation issue will be made out of the capital reserves of 5 shares for every ten
    shares held to ordinary shareholders. A cash dividend of RMB1,161,843,280.20 will be distributed to ordinary shareholders
    and a variable cash dividend of RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a
    cash dividend of RMB10.33 (tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to
    holders of preference shares.
    As always, the Company will continue to stay focused on its long-term development and maximise returns for our
    shareholders by delivering better results.
IV. Future Development
    Benefiting from the continuous stable macroeconomic growth, the development of the paper making industry will maintain
    stable growth in the long run. In recently years, the central government has been introducing various industry policies
    such as production capacity reduction, the supply-side reform, ten rules regarding water pollution and ten rules regarding
    air pollution. Different measures such as setting higher emission standards and strictly restricting corporate size and
    structure put stricter restrictions on the enterprises in the paper making industry and force those enterprises with backward
    production capacity to actively exit the paper making market. With the continuous introduction of the supply-side reform,
    substitution of new production capacity for backward production capacity and other policies, the environmental protection
    policies have becoming stricter. The elimination of backward production capacity in the paper making industry has been
    progressing smoothly. New production capacity mainly comes from large enterprises. It is expected that the industry
    concentration ratio will further increase. The improvement in the supply in the industry has effectively boosted the dual
    growth in revenue and profitability of the enterprises in the paper making industry. The downstream demand in the paper
    making industry will continue to grow along with the domestic economic growth. The turning point in the supply and
    demand structure in the industry has gradually developed with a boom in the industry to be prolonged.
                                                                                                         2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.11 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:24
     III Chairman’s Report
          Since the implementation of the “Thirteenth Five Year Plan”, the accelerated urbanisation and industrialisation in China, the
          change in driver of economic growth, upgrade of traditional industries, development of emerging industries, and continuous
          infrastructure construction require substantial investment in fixed assets. China will become the largest leasing market in the
          world. According to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial
          Leasing Industry 2016-2021 issued by ASKCI Consulting Co. Ltd., the financial leasing industry will grow at a compound
          annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial leasing
          industry in China will amount to RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China
          are promising.
          Looking forward, the Company will adhere to the main theme of emphasising on environmental protection, low carbon,
          recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific
          development and quality and efficiency enhancement, it will comprehensively improve its quality and efficiency,
          management level, technology application, sense of happiness and brand image through the integration between its
          production and manufacture segment and financial services segment, incorporation of smart technology into its industrial
          activities, further reorganised methodology and restructuring so as to achieve taxable profit over RMB10 billion and strive to
          become one of the world-class companies with the highest growth rate during the “Thirteenth Five Year Plan” period.
     Chen Hongguo
     Chairman
     27 March 2018
12   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                     3704827-t01fnar (Shandong Chenming) p.12 (P98738) 27-03-2018 16:29
                                                                                                                    OUTPUT: 27-03-2018 16:29:24
IV Business Overview
I.   Principal operations of the Company during the Reporting Period
     Whether the Company needs to comply with the disclosure requirements of specific industries
     No
     (I)       Principal operations of the Company during the Reporting Period
               The Company is a large conglomerate principally engaged in paper making, finance, pulp and fibre and mining
               businesses while also involved in forestry, logistics, construction materials, and others. The Company is the first
               industrial and financing company in the paper making industry having a finance company and a financial leasing
               company and also the only listed company with A shares, B shares, H shares and preference shares in issue. The
               Company have maintained a leading position among its industry peers for 20 consecutive years in terms of its main
               indicators of corporate economic efficiency. The machine-made paper business and the financial leasing business are
               main sources of revenue and profit of the Company. During the reporting period, there was no significant change in
               the principal operations of the Company.
               1.       Machine-made paper business
                        The Company is a leading player in the paper making industry in China. It has established production bases
                        in Shandong, Guangdong, Hubei, Jiangxi and Jilin with annual pulp and paper production capacity of over
                        10,000,000 tonnes. Currently, it has the largest integrated forestry, pulp and paper project with the most
                        advanced technology in the world and dozens of pulp and paper production lines of international advanced
                        standards. The product mix of the Company has gradually diversified into eight major product series which
                        focus on high and middle end products, including high-end offset paper, coated paper, white paper board, light
                        weight coated paper, household paper, electrostatic copy paper, thermal paper and glassine paper.
                        The Company has scientific research institutions including the national enterprise technology centre, the
                        postdoctoral working station as well as state certified CNAS pulp and paper testing centre and has obtained
                        over 150 national patents including 12 patents for invention, with 7 products selected as national new products
                        and 35 products filling the gap in China. The Company has obtained 21 Science and Technology Progress
                        Awards above the provincial level and undertaken five national science and technology projects and 26
                        provincial technological innovation projects. The Company has obtained the ISO9001 quality certification,
                        ISO14001 environmental protection certification and FSC-COC certification, leading among its industry peers.
               2.       Financial leasing business
                        Since its establishment, the Financial Leasing Company, relying on strong capital strength of the Company and
                        leveraging its excellent business project design ability, strong ability in credit integration and outstanding risk
                        control capability while giving full play to the advantages of internationalisation and market-oriented operations,
                        has sustained rapid business development and has been seeking the organic combination between industrial
                        capital and financial capital. On the basis of serving the upper- and lower-stream of the paper making industry,
                        it actively provides financing and value-added service solutions to large state-owned enterprises, listed
                        companies, government financing platforms, quality private enterprises, new and high-tech enterprises, schools
                        and hospitals, thus greatly promoting the healthy and rapid development of the real economy. The financial
                        leasing business is mainly conducted on a leaseback basis. Recently, the financial leasing business has become
                        an integral part of profit of the Company with sound momentum for future growth.
                                                                                                                 2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.13 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:25
     IV Business Overview
     I.   Principal operations of the Company during the Reporting Period (Cont’d)
          (II)   General information of the industries where the Company operated in during the reporting period
                 1.   Paper making industry
                      The paper making industry is an important basic raw materials industry which is closely related to the national
                      economy and social development. Since 2017, China’s economy extended its development trend at stable
                      pace, and gradually showed steady growth with favourable momentum. The Thirteenth Five Year Plan imposed
                      much more stringent environmental protection requirements on the paper making industry. The successive
                      implementation of environmental protection inspections, licensing system for pollutant discharge and others
                      reflected that more stringent environmental protection measures will become a prolonged trend in the industry.
                      Different measures such as setting higher emission standards and strictly restricting corporate size and structure
                      put stricter restrictions on the enterprises in the paper making industry and forced those enterprises with
                      backward production capacity to actively exit the paper making market. The large leading enterprises having
                      comprehensive environmental facilities with significant economies of scale became the actual beneficiaries
                      under these environmental protection policies.
                      Policies such as production capacity reduction and the supply-side reform were continuously introduced.
                      The environmental protection policies continued to become stricter. The elimination of backward production
                      capacity in the paper making industry progressed smoothly. New production capacity mainly came from large
                      enterprises. The situation will bring about both commercial and development opportunities for some enterprises
                      while facilitating an industry reshuffle to deepen the industry concentration, and therefore the industry will
                      continue to prosper. The prices of paper products increase due to the increased costs of, among other things,
                      wood pulp, waste paper and logistics. The leading enterprises maintain their cost advantage with their pulp
                      inventories and their own pulp production capacity and improve their profitability with a boom in the industry to
                      be prolonged.
                      The Company is a leading player in the paper making industry of China and is ranked among the top ten paper
                      manufacturers in the world with an annual pulp and paper production capacity of over 10 million tonnes. The
                      Company have maintained a leading position among its industry peers for 20 consecutive years in terms of
                      its main indicators of corporate economic efficiency. Therefore, the Company enjoyed significant economies
                      of scale in the industry and was relatively favourably positioned for its future development. As the first listed
                      company with A shares, B shares, H shares and preference shares in issue in China, the Company had gained
                      access to the capital market, thus providing effective support for the future project investments of the Company.
                      The overall listing of the machine-made paper business of the Company also made the management of the
                      Company more regulated and the operations more transparent, thus laying a solid foundation for the sustainable
                      development of the Company.
14   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                     3704827-t01fnar (Shandong Chenming) p.14 (P98738) 27-03-2018 16:29
                                                                                                                    OUTPUT: 27-03-2018 16:29:25
IV Business Overview
I.    Principal operations of the Company during the Reporting Period (Cont’d)
      (II)      General information of the industries where the Company operated in during the reporting period
               (Cont’d)
                2.       Financial leasing industry
                         The Guiding Opinions on Accelerating the Development of Financial Leasing Industry and the Guiding Opinions
                         on Promoting the Sound Development of Financial Leasing Industry were issued by the State Council in 2015.
                         As the first national policy on promoting the financial leasing industry in China, the above opinions had paved
                         the way for the development of the financial leasing industry in the future.
                         Under the new normal of the economic development, the financial leasing industry in China entered its golden
                         years. According to the statistics of China Leasing Alliance and Tianjin Binhai Financial Leasing Research
                         Institute, there were about 9,090 enterprises engaging in financial leasing in China, representing a year-on-
                         year increase of approximately 1,954, as at the end of the 2017. The outstanding financial leasing contracts
                         amounted to RMB6.06 trillion, representing a year-on-year increase of approximately 13.70%. According to the
                         Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
                         Industry 2016-2021 issued by ASKCI Consulting Co., Ltd., the financial leasing industry will grow at a compound
                         annual growth rate of over 20% in the future and it is expected that the output of the industry will amount to
                         RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China are promising.
II.   Material Changes of Major Assets
      1.        Material Changes of Major Assets
                Major assets                            Description
                Equity                                  The Company principally had new equity investments in Ningbo Kaichen Huamei
                                                        and Weifang Sime Darby West Port during the reporting period.
                Investment property                     The Company disposed of its properties at Digital Building in Beijing and made
                                                        an investment in investment property at Pujiang International Financial Plaza in
                                                        Shanghai during the reporting period.
                Fixed assets                            The Company had the new fixed assets at Pujiang International Financial Plaza
                                                        in Shanghai for its own use during the reporting period.
                Construction in progress                Continued investment was made in the Shouguang Meilun chemical pulp
                                                        project, the 510,000 tonne high-end cultural paper project and the Huanggang
                                                        pulp and paper project, and investment was made in the newsprint paper-for-
                                                        cultural paper project during the reporting period.
      2.        Major Assets Overseas
                     Applicable √ Not applicable
                                                                                                               2017 ANNUAL REPORT
      3704827-t01fnar (Shandong Chenming) p.15 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:25
     IV Business Overview
     III. Analysis of Core Competitiveness
         Whether the Company needs to comply with the disclosure requirements of specific industries
         No
         The Company is a leading player in the paper making industry of China. After innovation and development for more than
         half a century, it has developed into a large conglomerate principally engaged in paper making, finance, pulp and fibre
         and mining businesses while also involved in forestry, logistics, construction materials, and others. It is also the only listed
         company with A shares, B shares and H shares and preference shares in issue in China and the first company in the paper
         making industry having a finance company and a financial leasing company integrated with its industrial activities in China.
         Compared with other enterprises in the industry, the Company has the following advantages:
         1.    Scale advantages
               After years of development, the Company, being a leading player in the paper making industry in China, has achieved
               annual pulp and paper production capacity of over 10 million tonnes and is capable to compete with international
               paper making enterprises in scale. The large-scale centralised production and operation model has provided
               the Company with obvious economic benefits. The Company also has strong market influence over raw material
               procurement, product pricing and industry policymaking.
         2.    Product advantages
               While the production scale of the Company is expanding rapidly, its product mix also continues to optimise. In recent
               years, the Company has built production lines for cultural paper such as high-end coated paper, high-end food
               packaging paper and high-end white paper board. The product mix of the Company has gradually diversified into
               eight major product series which focus on high and middle end products, including high-end offset paper, coated
               paper, white paper board, light weight coated paper, household paper, electrostatic copy paper, thermal paper and
               glassine paper. Thus, the Company has become the enterprise that offers the widest product range in China’s paper
               making industry. Diversification and gentrification of the product mix has not only greatly enhanced the Company’s
               ability to withstand market risks, but also enabled the Company to maintain a relatively high profitability.
         3.    Advantages in technical equipment
               Currently, the Company has the largest integrated forestry, pulp and paper project with the most advanced technology
               in the world and dozens of pulp and paper production lines of international advanced standards. The Company’s
               overall technical equipment has reached the advanced international level. The major production equipment has been
               imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of Finland, Voith of
               Germany and TBC of the United States.
               The technical equipment used by the Company generally reflects the characteristics of being technology-intensive
               and the integration of mechanical and electrical in the paper making industry nowadays. The degassing technology,
               wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet
               coating technology, multi-nip pressure balanced calender technology and the technical processes independently
               developed by the Company of the pulp systems have all reached the international advanced level.
16   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                     3704827-t01fnar (Shandong Chenming) p.16 (P98738) 27-03-2018 16:29
                                                                                                                    OUTPUT: 27-03-2018 16:29:25
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
    4.        Advantages in research and innovation and new product development
              The Company is a high and new-technology enterprise and gives full play to its strong research capability. Supported
              by the national enterprise technology centre and the post-doctoral working station, the Company has established
              a comprehensive intellectual property system and put more and more efforts in technical innovation and scientific
              research and development to develop new products with high technology contents and high added value as well
              as proprietary technologies. Meanwhile, the technology centre of the Company has actively engaged in technical
              cooperation with schools, research institutions and international advanced enterprises. The Company has obtained
              over 150 national patents including 12 patents for invention, with 7 products selected as national new products
              and 35 products filling the gap in China. The Company participated in the formulation of 4 national standards and
              was awarded honours including “China Patent Shandong Star Enterprise”, becoming the “green engine” of the
              transformation and upgrading in the paper making industry and leading the direction of the latest and most advanced
              technology in the paper making industry in China.
    5.        Funding advantages
              The paper making industry is a capital-intensive industry, and funding is one of the most important factors in the
              development of the industry. The Company has high profitability and credit status, and has maintained long-term
              stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing
              capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance
              structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained
              have been applied effectively with good market image, the Company has stronger abilities in direct financing in the
              capital market.
    6.        Team advantages
              The key management members and the core personnel of the Company remain stable. In the business development
              of Chenming Paper, an internal corporate culture developed by the stable core staff team favourable to the growth of
              the Company consolidates the management experience specific to the industry, thus resulting in a team advantage
              blended with management and culture. Meanwhile, the Company has attracted experienced professionals with
              financial, legal, financial management backgrounds through its advanced management philosophy and ample room
              for development. The high quality and professional team secures the sustainable development of the Company with a
              solid supply of talents.
    7.        Advantages in environmental governance capacity
              In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities including the
              alkali recovery system, middle water treatment system, white water recovery system and black liquor comprehensive
              utilisation system. The environmental emission indicators of the Company rank high among industry peers. Besides,
              the national policy of eliminating obsolete production capacity will facilitate the development of the paper making
              industry while the replenishment and replacement of advanced production capacity will bring new blood and
              momentum into the paper making industry, favouring industry concentration to establish a sound industry cycle.
                                                                                                            2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.17 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:25
     V Discussion and Analysis of Operations
     I.   Overview
          In 2017, facing the complex macroeconomic conditions, as well as the pressure from the market, environmental protection
          and increasing costs, the Company, aiming at “developing into an enterprise with hundreds of billions in value and forging
          Chenming into a centennial brand”, committed itself to “team building, management enhancement, outstanding business
          performance and good results” to strive for progress and be innovative and practical, and comprehensively improved its
          quality and efficiency, management level, technology application, sense of happiness and brand image. It successfully
          completed all the work targets for the year and achieved very impressive results.
          In 2017, the Company completed the production of machine-made paper of 5.10 million tonnes with sales of 4.96 million
          tonnes and achieved revenue of RMB29.852 billion, a year-on-year increase of 30.32%. The Company recorded operating
          costs of RMB19.729 billion, a year-on-year increase of 24.97%. Total profit and net profit attributable to equity holders of
          the Company were RMB4,536 million and RMB3,769 million respectively, up by 75.62% and 88.60% from the prior year.
          The Company’s total assets amounted to RMB105.625 billion. The financial segment experienced stable development
          across businesses with ever improving management systems and effective risk preventions.
          (I)    New breakthroughs in operation management
                 Facing the complex and ever-changing market conditions, the sales system persistently executed the decision
                 and planning made by the management of the Company in spite of challenges with a pioneering attitude, thus
                 opening up an unprecedented new era. By adopting measures such as strengthening business training, enhancing
                 appraisal methods and incentive measures, focusing on performance and caring for employees’ living, the sales team
                 significantly improved its capability with refreshed spirits. Under strengthened market operations and the regulated
                 market order, the marking strategies were useful and highly effective. The market construction was steadily enhanced
                 through strengthened management on accounts receivable and channel construction.
          (II)   New progress in production management
                 Benefiting from the strengthened basic management, the progress made in team building and improved operation
                 skills of employees, the production system was stable and under control and continued to perform well as a whole.
                 The machines were under stable and efficient operation during the year through strengthened management, control
                 and appraisal. The Company also conducted production capacity enhancement in its own pulp production, adjusted
                 product structure, focused on the development of products with high efficiency, optimised techniques and promoted
                 the application of new technologies and raw materials to improve efficiency.
18   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                    3704827-t01fnar (Shandong Chenming) p.18 (P98738) 27-03-2018 16:29
                                                                                                                   OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
I.   Overview (Cont’d)
     (III) Stable operation in the financial segment
               For the financial segment, the Company constructed a financial business system with a more reasonable structure
               through active business expansion and strict risk control. In order to strengthen the centralised management of its
               financial business, the Company set up the headquarters for the management of financial leasing and also established
               two financial leasing companies in Shanghai and Guangzhou, and two commercial factoring companies in Shandong
               and Guangzhou to further mitigate business risks and improve internal management and profitability. By issuing
               perpetual bonds of RMB3.0 billion and corporate bonds of RMB1.2 billion, the Company reduced its gearing ratio and
               improved its debt structure. The Company also stepped up efforts in cooperation between banks and enterprises by
               reaching a strategic cooperation with Qilu Bank and expanding the scope of cooperation with Industrial Bank, Postal
               Savings Bank and other banks, and obtained additional credit facilities of over RMB18.0 billion.
     (IV) Flourishing project construction in full swing
               The phase I of the magnesite mining project of Haiming Mining commenced operation in January 2018. The
               400,000-tonne chemical pulp project and 510,000 tonne high-end culture paper project of Shouguang Meilun and
               the 300,000 tonne wood pulp project of Huanggang Chenming progressed smoothly according to the schedule. After
               being put into production, these projects will play a very important role in enhancing the sustainable development and
               achieving the strategic objectives of the Company.
     (V)       Effective corporate management
               The Company fully implemented the adjustments in the organisational structure and the remuneration system as
               planned to further enhance the functional management as well as the effectiveness of remuneration as incentives. The
               Company promoted reform on management and system upgrade through the construction of process and information
               technology. The Company also further improved its management system to keep track of the basic management. By
               focusing on strengthening level management, formulating management measures and specifying management duties,
               the capabilities of discovering and solving problems at all levels were enhanced with stronger team execution. The
               Company motivated its team by enhancing remuneration and incentives and providing more positive incentives, thus
               significantly improving the enthusiasm and creativity of its management personnel.
                                                                                                            2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.19 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     II.   Analysis of principal operations
           1.   Overview
                Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.
           2.   Revenue and cost
                (1)   Components of revenue
                                                                                                                                               Unit: RMB
                                                                       2017                                     2016                                Increase/
                                                                 Amount           % of revenue            Amount       % of revenue                 decrease
                      Total revenue                     29,851,743,848.13               100%     22,907,118,241.84           100%                    30.32%
                      By industry
                      Machine-made paper                26,280,449,337.82              88.04%    19,536,639,601.47          85.29%                   34.52%
                      Financial leasing                  2,347,173,531.64               7.86%     2,339,925,682.07          10.21%                    0.31%
                      Electricity and steam                198,073,854.15               0.66%       338,702,429.21           1.48%                  -41.52%
                      Construction materials               255,747,205.45               0.86%       227,629,265.80           0.99%                   12.35%
                      Chemicals                            109,914,856.68               0.37%       129,003,963.48           0.56%                  -14.80%
                      Hotel                                 24,368,815.97               0.08%        26,677,286.19           0.12%                   -8.65%
                      Others                               636,016,246.42               2.13%       308,540,013.62           1.35%                  106.14%
                      By product
                      Duplex press paper                 6,368,897,144.23              21.34%     4,966,155,905.70          21.68%                   28.25%
                      Coated paper                       5,489,860,030.01              18.39%     4,428,162,301.09          19.33%                   23.98%
                      White paper board                  6,906,078,714.80              23.13%     2,815,701,912.71          12.29%                  145.27%
                      Electrostatic paper                2,371,439,780.86               7.94%     2,107,489,078.57           9.20%                   12.52%
                      Anti-sticking raw paper            1,207,953,706.05               4.05%     1,009,523,792.88           4.41%                   19.66%
                      Newsprint paper                      793,309,261.25               2.66%       996,218,028.98           4.35%                  -20.37%
                      Household paper                      689,570,026.52               2.31%       659,518,362.24           2.88%                    4.56%
                      Light weight coated paper            515,092,105.82               1.73%       463,577,121.66           2.02%                   11.11%
                      Writing paper                        275,304,569.70               0.92%       274,469,632.58           1.20%                    0.30%
                      Other machine-made paper           1,662,943,998.58               5.57%     1,815,823,465.06           7.93%                   -8.42%
                      Financial leasing                  2,347,173,531.64               7.86%     2,339,925,682.07          10.21%                    0.31%
                      Electricity and steam                198,073,854.15               0.66%       338,702,429.21           1.48%                  -41.52%
                      Construction materials               255,747,205.45               0.86%       227,629,265.80           0.99%                   12.35%
                      Chemicals                            109,914,856.68               0.37%       129,003,963.48           0.56%                  -14.80%
                      Hotel                                 24,368,815.97               0.08%        26,677,286.19           0.12%                   -8.65%
                      Others                               636,016,246.42               2.13%       308,540,013.62           1.35%                  106.14%
                      By geographical segment
                      Mainland China                    25,920,834,960.98              86.83%    19,628,612,055.93          85.69%                   32.06%
                      Other countries and regions        3,930,908,887.15              13.17%     3,278,506,185.91          14.31%                   19.90%
20   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                            3704827-t01fnar (Shandong Chenming) p.20 (P98738) 27-03-2018 16:29
                                                                                                                             OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II.   Analysis of principal operations (Cont’d)
      2.        Revenue and cost (Cont’d)
                (2)      Industries, products or regions accounting for over 10% of revenue or operating profit of the Company
                         √ Applicable             Not applicable
                         Whether the Company needs to comply with the disclosure requirements of specific industries
                         No
                                                                                                                                                                          Unit: RMB
                                                                                                                                           Increase/decrease       Increase/decrease of
                                                                                                               Increase/decrease of         of operating costs       gross profit margin
                                                                                                              revenue as compared         as compared to the         as compared to the
                                                                                                               to the corresponding     corresponding period       corresponding period
                                                          Revenue     Operating costs    Gross profit margin period of the prior year          of the prior year         of the prior year
                         By industry
                         Machine-made paper      26,280,449,337.82   18,620,269,325.34              29.15%                   34.52%                    25.03%                      5.38%
                         Financial leasing        2,376,560,324.10      282,366,339.02              88.12%                    1.57%                    28.67%                     -2.50%
                         By product
                         Duplex press paper       6,368,897,144.23    4,681,114,971.82              26.50%                   28.25%                    25.85%                      1.40%
                         Coated paper             5,489,860,030.01    3,806,504,813.36              30.66%                   23.98%                    15.77%                      4.91%
                         White paper board        6,906,078,714.80    4,769,506,903.63              30.94%                  145.27%                   124.22%                      6.49%
                         Electrostatic paper      2,371,439,780.86    1,503,657,404.54              36.59%                   12.52%                     8.70%                      2.23%
                         Anti-sticking
                           raw paper              1,207,953,706.05     795,913,212.90               34.11%                   19.66%                    11.05%                      5.10%
                         Financial leasing        2,376,560,324.10     282,366,339.02               88.12%                    1.57%                    28.67%                     -2.50%
                         By geographical segment
                         Mainland China          25,920,834,960.98   16,111,178,123.56              37.84%                   59.43%                    34.15%                    11.71%
                         Other countries
                           and regions            3,930,908,887.15    3,618,012,351.53               7.96%                   19.90%                    25.47%                     -4.09%
                         Under the circumstances that the statistics specification for the Company’s principal operations data
                         experienced adjustment in the reporting period, the principal operations data upon adjustment of the statistics
                         specification at the end of the reporting period in the latest year
                              Applicable        √ Not applicable
                                                                                                                                                    2017 ANNUAL REPORT
      3704827-t01fnar (Shandong Chenming) p.21 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     II.   Analysis of principal operations (Cont’d)
           2.   Revenue and cost (Cont’d)
                (3)   Whether revenue from sales in kind is higher than revenue from services
                      √ Yes     No
                                                                                                                                   Increase/
                      By industry              Item                 Unit                       2017              2016              decrease
                      Machine-made paper       Sales                ’0,000 tonnes               496               452                 9.73%
                                               Production output    ’0,000 tonnes               510               436                16.97%
                                               Inventories          ’0,000 tonnes                47                33                42.42%
                      Explanation on why the related data varied by more than 30%
                      √ Applicable     Not applicable
                      The inventories of machine-made paper increased by 42.42% year on year mainly due to the production
                      capacity increase after the operation of the Zhanjiang 600,000-tonne liquid packaging paper project.
                (4)   Performance of material sales contracts of the Company during the reporting period
                         Applicable   √ Not applicable
22   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                   3704827-t01fnar (Shandong Chenming) p.22 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II.   Analysis of principal operations (Cont’d)
      2.        Revenue and cost (Cont’d)
                (5)      Composition of operating costs
                         By industry
                                                                                                                                                               Unit: RMB
                                                                                        2017                                       2016                          Increase/
                         By industry            Item                              Amount     % of operating costs            Amount     % of operating costs     decrease
                         Machine-made paper Raw materials                11,321,010,554.29                60.80%     8,974,526,123.35                60.26%       26.15%
                                            Depreciation                    875,140,104.87                 4.70%       768,639,922.25                 5.16%       13.86%
                                            Labour costs                    259,402,371.05                 1.40%       186,978,418.54                 1.26%       38.73%
                                            Energy and power              2,041,148,096.91                11.00%     1,526,753,692.29                10.25%       33.69%
                                            Chemicals                     2,649,089,266.03                14.20%     2,014,239,925.46                13.52%       31.52%
                                            Other production costs        1,474,478,932.18                 7.90%     1,421,923,493.98                 9.55%        3.70%
                                            Subtotal                     18,620,269,325.34               100.00%    14,893,061,575.87               100.00%       25.03%
                         Power and steam        Raw materials              106,044,022.66                 80.20%      161,521,323.47                 75.37%       -34.35%
                                                Depreciation                 9,800,393.22                  7.40%       19,858,908.35                  9.27%       -50.65%
                                                Labour costs                 3,756,021.82                  2.80%        7,643,082.12                  3.57%       -50.86%
                                                Energy and power             2,850,799.43                  2.20%        2,769,566.68                  1.29%         2.93%
                                                Chemicals                      345,197.70                  0.30%          697,230.84                  0.33%       -50.49%
                                                Other production costs       9,400,888.63                  7.10%       21,811,402.07                 10.18%       -56.90%
                                                Subtotal                   132,197,323.45                100.00%      214,301,513.53                100.00%       -38.31%
                         Construction materials Raw materials              151,042,972.58                 72.70%      116,872,767.63                 67.09%        29.24%
                                                Depreciation                 7,247,023.47                  3.50%        4,589,639.45                  2.63%        57.90%
                                                Labour costs                14,112,147.05                  6.80%       11,218,728.30                  6.44%        25.79%
                                                Energy and power            23,009,884.02                 11.10%       22,500,486.99                 12.92%         2.26%
                                                Other production costs      12,319,837.64                  5.90%       19,011,859.48                 10.91%       -35.20%
                                                Subtotal                   207,731,864.76                100.00%      174,193,481.85                100.00%        19.25%
                                                                                                                                                  2017 ANNUAL REPORT         23
      3704827-t01fnar (Shandong Chenming) p.23 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     II.   Analysis of principal operations (Cont’d)
           2.   Revenue and cost (Cont’d)
                (6)   Change of scope of consolidation during the reporting period
                      √ Yes             No
                               Business combination not under common control
                                                                                                                                                                                Revenue of        Net profit of
                                                                                                                                                                             acquiree from      acquiree from
                                                                                        Equity            Equity                                                            the acquisition    the acquisition
                                                           Point of time of         acquisition       acquisition Equity             Acquisition   Basis for the         date to the end of date to the end of
                               Name of acquiree          equity acquisition   costs (RMB’0000)    proportion (%) acquisition mode   date          acquisition date       the period (RMB) the period (RMB)
                               Shanghai Hongtai Real         October 2017          159,064.67             45.00 Merger               2017.11.1     Date of substantive         485,784.40       -36,856,878.73
                                 Estate Co., Ltd.                                                               and acquisition                    control
                               Change in scope of consolidation due to other reasons
                               During the year, the scope of consolidation included 9 newly established subsidiaries, namely Shanghai
                               Chenming Industry Co., Ltd., Shanghai Chenming Financial Leasing Co., Ltd., Guangzhou Chenming
                               Financial Leasing Co., Ltd., Shandong Chenming Commercial Factoring Co., Ltd., Guangzhou Chenming
                               Commercial Factoring Co., Ltd., Qingdao Chenming Pulp and Paper Electronic Commodity Exchange
                               Co., Ltd., Xuchang Chenming Paper Co., Ltd., Chengdu Chenming Culture Communication Co., Ltd. and
                               Beijing Chenming Culture Communication Co., Ltd.
                               During the year, the scope of consolidation excluded 2 companies: a former subsidiary, namely
                               Shouguang Chenming Hongxin Packaging Co., Ltd was deregistered upon merger and acquisition by
                               another subsidiary Shouguang Hongxiang Printing and Packaging Co., Ltd, whereas Jilin Chenming
                               Machinery Manufacturing Co., Limited was transferred.
                (7)   Significant change in or adjustment of the businesses, products or services of the Company during the
                      reporting period
                         Applicable                √ Not applicable
24   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                  3704827-t01fnar (Shandong Chenming) p.24 (P98738) 27-03-2018 16:29
                                                                                                                                                                         OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II.   Analysis of principal operations (Cont’d)
      2.        Revenue and cost (Cont’d)
                (8)      Sales to major customers and major suppliers
                         Sales to major customers of the Company
                         Total sales to top 5 customers (RMB)                                                        1,948,080,321.71
                         Total sales to top 5 customers as a percentage of the total sales for the year                        6.53%
                         Sales to top 5 customers who are related parties
                           as a percentage of the total sales for the year                                                     0.00%
                         Information on top 5 customers of the Company
                                                                                                                     As a percentage
                                                                                                                     of the total sales
                         No.        Name of customer                                                  Sales (RMB)      for the year (%)
                         1          Customer A                                                     520,359,524.99              1.74%
                         2          Customer B                                                     397,167,618.02              1.33%
                         3          Customer C                                                     375,786,051.33              1.26%
                         4          Customer D                                                     342,484,499.61              1.15%
                         5          Customer E                                                     312,282,627.76              1.05%
                         Total      —                                                           1,948,080,321.71              6.53%
                         Other explanation of major customers
                              Applicable    √ Not applicable
                         Major suppliers of the Company
                         Total purchases from top 5 suppliers (RMB)                                                  4,905,829,110.64
                         Total purchases from top 5 suppliers as a percentage of the total purchases for the year             24.87%
                         Total purchases from top 5 suppliers who are related parties as a percentage
                           of the total purchases for the year                                                                 0.00%
                         Information on top 5 suppliers of the Company
                                                                                                                 As a percentage of
                                                                                                                 the total purchases
                         No.        Name of supplier                                             Purchases (RMB)      for the year (%)
                         1          Supplier A                                                   1,199,824,640.13              6.08%
                         2          Supplier B                                                   1,191,365,504.15              6.04%
                         3          Supplier C                                                   1,029,110,865.91              5.22%
                         4          Supplier D                                                     867,095,512.68              4.39%
                         5          Supplier E                                                     618,432,587.77              3.13%
                         Total      —                                                           4,905,829,110.64             24.86%
                         Other explanation of major suppliers
                              Applicable    √ Not applicable
                                                                                                                2017 ANNUAL REPORT        25
      3704827-t01fnar (Shandong Chenming) p.25 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     II.   Analysis of principal operations (Cont’d)
           3.   Expenses
                                                                                                                                    Unit: RMB
                                                                                  Increase/
                                                      2017                2016 decrease (%)        Reasons for material changes
                Selling and distribution   1,304,465,552.27   1,166,484,567.20         11.83%      Mainly due to the increase of
                  expenses                                                                         transportation expenses resulting
                                                                                                   from higher sales
                General and                1,909,369,899.86   1,441,458,586.06         32.46%      Mainly due to an increase in research
                  administrative                                                                   and development expenditure and
                  expenses                                                                         employee’s compensation
                Finance expenses           2,496,592,415.87   1,818,564,890.78         37.28%      Mainly due to an increase in interest
                                                                                                   expenses and exchange loss
                Loss on impairment          141,361,141.80     413,711,106.31         -65.83%      Mainly due to impairment of assets
                  of asset                                                                         incurred by Fuyu Chenming and
                                                                                                   Jiangxi Chenming during the
                                                                                                   corresponding period of the prior
                                                                                                   year
26   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                   3704827-t01fnar (Shandong Chenming) p.26 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II.   Analysis of principal operations (Cont’d)
      4.        Research and development expenditure
                √ Applicable        Not applicable
                The Company had been closely following the economic and market conditions in China and in the industry since
                2017. Driven by customers’ demand and targeting at enhancing economic benefits, the Company put more efforts
                into technical innovation, promoted the application of new technology and new raw materials such as enzymes
                for pulping and filler modification enhancers, and developed new products with high technology contents and
                high economic benefits, striving to conduct R&D on product differentiation and refining. Six R&D projects such as
                “technical development of light weight colour duplex press paper”, “technical development of low ink absorption
                one-side coated paper”, “technical development of copy raw paper for construction” and “technical development of
                oxidised starch for glassine paper”, were listed on the technological innovative project plans of Shandong Province
                for 2017. The Company was awarded the second tier prize of the Science and Technology Progress Awards of the
                Ministry of Education in 2017 for its “Key Technology and Application of Water Saving and Clean Production in Paper
                Making” under collaborative development with Nanjing Forestry University on production, learning and research in
                the water saving and clean production area in paper making. Meanwhile, the Company completed the development
                and upgrade of high value-added products such as micro coated paper, exquisite duplex press paper and white
                solid bleached board, thereby accelerating the adjustment in product structure and facilitating transformation and
                upgrading after industrial application.
                Research and development expenditure of the Company
                                                                                      2017             2016    Percentage change
                R&D headcount                                                         1,434            1,161              23.51%
                Ratio of R&D personnel                                              10.56%            8.94%                1.62%
                R&D expenditure (RMB)                                      1,017,306,281.19   735,689,011.01              38.28%
                R&D expenditure to revenue                                           3.41%            3.21%                0.20%
                Reasons for significant change in total R&D expenditure to revenue
                    Applicable      √ Not applicable
                                                                                                           2017 ANNUAL REPORT
      3704827-t01fnar (Shandong Chenming) p.27 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     II.   Analysis of principal operations (Cont’d)
           5.     Cash flows
                                                                                                                                         Unit: RMB
                                                                                                                                        Increase/
                                                                                                                                        decrease
                  Item                                                                 2017                     2016                          (%)
                  Subtotal of cash inflows from operating activities    25,185,850,961.77        23,640,327,789.01                         6.54%
                  Subtotal of cash outflows from operating activities   25,162,084,918.84        21,487,278,519.17                        17.10%
                  Net cash flows from operating activities                  23,766,042.93         2,153,049,269.84                       -98.90%
                  Subtotal of cash inflows from investing activities     1,018,367,966.90           660,100,177.22                        54.27%
                  Subtotal of cash outflows from investing activities    4,649,220,322.66         4,327,554,352.96                         7.43%
                  Net cash flows from investing activities              -3,630,852,355.76        -3,667,454,175.74                         1.00%
                  Subtotal of cash inflows from financing activities    66,918,619,679.44        59,667,079,610.56                        12.15%
                  Subtotal of cash outflows from financing activities   62,441,482,879.29        58,037,514,000.21                         7.59%
                  Net cash flows from financing activities               4,477,136,800.15         1,629,565,610.35                       174.74%
                  Net increase in cash and cash equivalents                824,547,328.84            91,753,551.86                       798.65%
                  Explanation on main effects of material changes
                  √ Applicable      Not applicable
                  (1)    Net cash flows from operating activities decreased by 98.90% as compared to the corresponding period of the
                         prior year mainly due to the external business growth of the financial leasing business.
                  (2)    Net cash flows from financing activities increased by 174.74% as compared to the corresponding period of the
                         prior year mainly due to the increase in borrowings during the year.
                  Explanation on main reasons leading to the material difference between net cash flows from operating activities during
                  the reporting period and net profit for the year
                  √ Applicable      Not applicable
                  The main reasons were the increase in amounts receivable of the Company settled through bills during the reporting
                  period and the external business growth of the financing leasing business.
     III. Analysis of non-principal operations
                Applicable   √ Not applicable
28   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                        3704827-t01fnar (Shandong Chenming) p.28 (P98738) 27-03-2018 16:29
                                                                                                                       OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IV. Assets and liabilities
    1.        Material changes of asset items
                                                                                                                                                                                                      Unit: RMB
                                                    As at the end of 2017                        As at the end of 2016
                                                                    As a percentage of                           As a percentage of
                                                      Amount               total assets            Amount               total assets   Percentage change   Description of major changes
              Monetary funds                 14,443,492,461.43                 13.67%     10,109,930,319.49                 12.29%                1.38%    Mainly due to the increase of the sales revenue
              Accounts receivable             3,665,865,577.03                  3.47%      3,974,065,104.15                  4.83%               -1.36%    —
              Inventories                     6,022,805,491.17                  5.70%      4,862,668,746.90                  5.91%               -0.21%    Mainly due to the increase of inventories of raw materials and
                                                                                                                                                           finished goods as the production capacity of the Company
                                                                                                                                                           increased
              Investment properties           4,809,535,109.82                  4.55%        14,258,675.83                   0.02%                4.53%    Mainly due to the inclusion of Shanghai Hongtai in the scope
                                                                                                                                                           of consolidation
              Long-term equity investments     391,868,827.45                   0.37%        67,251,992.88                   0.08%                0.29%    Mainly due to the new equity investments made in Kaichen
                                                                                                                                                           Huamei and Sime Darby West Port during the reporting period
              Fixed assets                   28,227,509,503.05                 26.72%     28,811,555,365.39                 35.01%               -8.29%    —
              Construction in progress        7,668,669,413.87                  7.26%      4,115,194,870.23                  5.00%                2.26%    Mainly due to the continued investment in the Meilun chemical
                                                                                                                                                           pulp project, the 510,000 tons of cultural paper project and the
                                                                                                                                                           Huanggang pulp and paper project
              Short-term borrowings          35,096,574,873.03                 33.23%     27,875,506,988.53                 33.88%               -0.65%    Mainly due to the increase of the short-term liquidity demand
                                                                                                                                                           from the expanded production scale
              Long-term borrowings            7,646,122,995.91                  7.24%      6,935,598,781.23                  8.43%               -1.19%    —
              Bills receivable                4,220,231,853.56                  4.00%      1,590,460,875.23                  1.93%                2.07%    Mainly due to the increase of the bills and letters of credit and
                                                                                                                                                           the increase of the bills pledged for loans
              Prepayments                     1,962,151,473.35                  1.86%      1,511,362,674.64                  1.84%                0.02%    Mainly due to the increase of the prepayments for raw
                                                                                                                                                           materials of the Company
              Other receivables                538,734,656.55                   0.51%      1,614,214,645.49                  1.96%               -1.45%    Mainly due to the recovery of the financial support granted
                                                                                                                                                           to Wuhan Chenming Wanxing Real Estate Co. Ltd by the
                                                                                                                                                           Company
              Non-current assets due          6,901,695,875.94                  6.53%      5,487,376,588.22                  6.67%               -0.14%    Mainly due to the increase of amounts receivable due within
               within one year                                                                                                                             one year of the long-term financing leasing business of the
                                                                                                                                                           Company
              Other current assets           11,568,757,330.26                 10.95%      6,616,744,831.28                  8.04%                2.91%    Mainly due to the increase of receivables under financial lease
                                                                                                                                                           due within one year of the Company
              Intangible assets               2,059,221,379.09                  1.95%      1,540,959,330.74                  1.87%                0.08%    Mainly due to the increase of the land use rights of Huanggang
                                                                                                                                                           Chenming and Haiming Mining
              Bills payable                   1,278,395,090.71                  1.21%       515,301,703.08                   0.63%                0.58%    Mainly due to the increase of the payment for goods settled by
                                                                                                                                                           bills by the Company
              Advance receipts                 243,182,891.22                   0.23%       377,135,566.33                   0.46%               -0.23%    Mainly due to the decrease of advance receipts received by
                                                                                                                                                           the Company
              Other receivables               1,426,629,545.41                  1.35%       948,919,195.81                   1.15%                0.20%    Mainly due to the increase of the deposits received by the
                                                                                                                                                           Company during the reporting period
              Non-current liabilities         3,625,430,347.40                  3.43%      6,237,021,557.17                  7.58%               -4.15%    Mainly due to the repayment of the matured corporate bonds
                due within one year                                                                                                                        of RMB3.8 billion
              Other current liabilities      10,797,248,631.76                 10.22%      6,602,863,069.45                  8.02%                2.20%    Mainly due to the increase of the short-term and ultra-short-
                                                                                                                                                           term commercial paper by the Company at the end of this year
              Long-term payables              5,550,881,435.64                  5.26%      3,951,368,854.00                  4.80%                0.46%    Mainly due to the proceeds from the financing leasing
                                                                                                                                                           business by the Company during the reporting period
                                                                                                                                                                         2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.29 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     IV. Assets and liabilities (Cont’d)
          2.   Assets and liabilities measured at fair value
               √ Applicable                 Not applicable
                                                                                                                                                                        Unit: RMB
                                                                            Profit or loss
                                                                         from change in          Cumulative       Impairment
                                                                        fair value during fair value change   provided during       Purchases     Disposal during
               Item                                  Opening balance           the period charged to equity        the period during the period        the period    Closing balance
               Financial assets
               1.financial assets measured at fair
                  value with changes carried
                  through profit or loss                                  94,000,000.00      94,000,000.00                                                          94,000,000.00
               Consumable biological assets          1,633,513,994.28    -21,000,042.33      99,474,798.31                       170,118,925.16    26,256,923.04 1,756,375,954.07
               Total                                 1,633,513,994.28     72,999,957.67     193,474,798.31              0.00     170,118,925.16    26,256,923.04 1,850,375,954.07
               Financial liabilities                            0.00                                                                                                                0.00
               Whether there were any material changes on the measurement attributes of major assets of the Company during the
               reporting period
                    Yes          √ No
          3.   Restriction on asset rights as at the end of the reporting period
                                                                                                                                                                        Unit: RMB
                                                       Carrying amount as
               Item                                  at the end of the year            Reasons for such restriction
               Monetary funds                            11,639,084,086.97             As deposits for bank acceptance bills, letters of credit and bank
                                                                                       borrowings, and deposit reserves
               Bills receivable                            2,108,159,820.71            As collateral for short-term borrowings, bills payable, letters of
                                                                                       guarantee and letters of credit
               Investment properties                      4,809,535,109.82             As collateral for bank borrowings
               Fixed assets                               5,663,286,231.38             As collateral for bank borrowings and long-term payables
               Intangible assets                            597,992,087.19             As collateral for bank borrowings and long-term payables
               Total                                     24,818,057,336.07
     V.   Investments
          1.   Overview
               √ Applicable                 Not applicable
                                                                                            Investments during
                                       Investments during the                      the corresponding period of
                                        reporting period (RMB)                                 prior year (RMB)                                                        Change
                                           10,071,391,422.52                                        4,603,144,781.24                                                  118.79%
30   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                           3704827-t01fnar (Shandong Chenming) p.30 (P98738) 27-03-2018 16:29
                                                                                                                                                      OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V.   Investments (Cont’d)
     2.        Material equity investments during the reporting period
               √ Applicable                                          Not applicable
                                                                                                                                                                                                                                                                                                  Unit: RMB
                                                                                                                                                                                                                   Progress as                      Profit or l ss   Lawsuit Date of
                                                                                  Form of             Investment                                                            Period of                              at the date of   Estimated   from i vestment      i i volved disclosure
               Name of i vestee                Principal activ t es               i vestment             amount Sharehold ng   Source of fund Partner(s)                    i vestment        Product type         balance sheet    return         for the period    or not     (if any)          Disclosure i dex (if any)
               Shanghai Chenming            Industria i vestment, commercia       Newly          1,000,000,000.00    100.00%   Self-owned      A whol y-owned subsid ary 15 September 2017    Enterprise i vestment Completed       —             -6,832,513.72     No          26 September     http://www.cninfo.com.cn
                 Industry Co., Ltd.         consultation and property             establ shed                                  funds                                     to                   etc.
                                            management                                                                                                                   14 September 2037
               Shanghai Chenming            Financia l asing and operating        Newly                      0.00    100.00%   Self-owned      A whol y-owned subsid ary 6 November 2017      Financia l asing     Not completed —                          0.00    No          26 September     http://www.cninfo.com.cn
                 Financia Leasing Co., Ltd. l asing                               establ shed                                  funds                                     to
                                                                                                                                                                         5 November 2047
               Shouguang Chenming Import Import and export of goods and           Capital         150,000,000.00     100.00%   Self-owned      A whol y-owned subsid ary 30 December 2011     Import and export    Completed        —              2,389,702.11     No          14 October 2017 http://www.cninfo.com.cn
                 and Export Trade Co., Ltd. technologies within the scope as      i crease                                     funds                                     to                   trade
                                            permitted by the State                                                                                                       30 December 2031
               Shandong Chenming            Business as permitted by the          Capital        1,000,000,000.00    100.00%   Self-owned      A whol y-owned subsid ary Long-term            Corporate financia   Completed        —           200,067,991.63      No          14 October 2017 http://www.cninfo.com.cn
                 Group Finance Co., Ltd. China Banking Regulatory                 i crease                                     funds                                                          business
                                            Commission pursuant to relevant
                                            l ws, admin strative regulations
                                            and other regulations
               Shanghai Hongtai Real        Real estate development               Acquis t on    1,590,646,717.76     45.00%   Self-owned      Guangdong Dejun Investment   31 January 1994   Real estate          Completed        —            -36,856,878.73     No          31 October 2017 http://www.cninfo.com.cn
                 Estate Co., Ltd.           and operation and property                                                         funds           Management Co., Ltd. and     to
                                            management                                                                                         Shanghai Xinhuangpu Real     30 January 2044
                                                                                                                                               Estate Co., Ltd.
               Guangzhou Chenming          Financia l asing                       Newly           465,779,506.00     100.00%   Self-owned      A whol y-owned subsid ary17 November 2017 Financia l asing Completed                 —                 98,465.85     No          16 November      http://www.cninfo.com.cn
                Financia Leasing Co., Ltd.                                        establ shed                                  funds                                    to
                                                                                                                                                                        16 November 2047
               Guangzhou Chenming              Commercia factoring                Newly            51,000,000.00      51.00%   Self-owned      Weifang Haiyue Corporate Long-term        Commercia factoring Completed              —                    404.34     No          16 November      http://www.cninfo.com.cn/
                 Commercia                                                        establ shed                                  funds           Management Co., Ltd.
                 Factoring Co., Ltd.
               Ningbo Kaichen Huamei           Private equity i vestment          Newly           200,000,000.00      40.00%   Self-owned      Zhuhai Kaichenxing          Long-term          Equity i vestment    Completed        —             -1,018,826.99     No          16 August 2017 http://www.cninfo.com.cn/
                 Equity Investment                                                establ shed                                  funds           Investment Advisory
                 Fund Partnership                                                                                                              Company (General
                 (Lim ted Partnership)                                                                                                         Partnership), Bei i g Taihe
                                                                                                                                               Orient Investment Co.,
                                                                                                                                               Ltd., Tibet Guangqi Venture
                                                                                                                                               Capital Management Co.,
                                                                                                                                               Ltd., Shenzhen Pengchong
                                                                                                                                               Investment Management Co.,
                                                                                                                                               Ltd., Wang Chengj ang, Yu
                                                                                                                                               Xiaoj e and Sui Xinpeng
               Weifang Sendamei West Port   Engaged i port construction,          Acquis t on     106,110,000.00      50.00%   Self-owned      Sendamei Overseas (Hong Long-term              Port                 Completed        —             -1,325,077.59     No          —               Not appl cable
                 Co. Ltd.                   management and operation                                                           funds           Kong) l m ted.
               Shandong Chenming            Relevant consultation services        Newly           150,000,000.00     100.00%   Self-owned      A whol y-owned subsid ary Long-term            Commercia factor     Completed        —               843,198.40      No                           Not appl cable
                 Commercia                  for domestic factoring, export        establ shed                                  funds
                 Factoring Co., Ltd.        factoring and commercia
                                            factoring; corporate management
                                            consultation; and asset valuation
                                            services
               Xuchang Chenmig Paper        Paper pulp, fin shed paper, paper     Newly            60,000,000.00      60.00%   Self-owned      A hold ng subsid ary         Long-term         Machine-made paper Completed          —            -17,007,455.36     No          Not appl cable   Not appl cable
                 Co. Ltd.                   products, packaging production,       establ shed                                  funds
                                            sales.
               Zhanj ang Chenming           Production and sales of               Capital        2,000,000,000.00    100.00%   Self-owned      A subsid ary                 Long-term         electrostatic paper, Completed        —          1,684,736,236.73     No          17 November      http://www.cninfo.com.cn/
                 Pulp & Paper Co. Ltd.      electrostatic paper, duplex press     i crease                                     funds                                                          duplex press paper,
                                            paper and white paper board; and                                                                                                                  white paper board,
                                            production and sales of pulp                                                                                                                      etc.
               Qingdao Chenming Nonghai Conducting spot transactions,             Capital        3,297,855,218.76    100.00%   Self-owned      A whol y-owned subsid ary Long-term            Financia l asing Completed            —           196,608,697.71      No          31 March 2016 http://www.cninfo.com.cn/
                 Financia Leasing Co., Ltd. trading of and electronic             i crease                                     funds
                                            commerce of pulp, fin shed paper
                                            products, paper-making auxi i ry
                                            materia s, etc., and onl ne sale of
                                            pulp, paper, paper product, etc.
               Total                           —                                 —            10,071,391,442.52         —   —              —                           —                —                   —               —          2,021,703,944.38     —          —               —
                                                                                                                                                                                                                                                               2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.31 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     V.   Investments (Cont’d)
          3.   Material non-equity investments during the reporting period
               √ Applicable                         Not applicable
                                                                                                                                                                                                                                                Unit: RMB
                                                                                                                                                                                Accumulated
                                                                Industry in                          Accumulated                                                                      realised
                                                                which the                           actual amount                                                                 return as of   Reasons for failure
                                                   Fixed assets investment         Investment       invested as of                                                                 the end of    in meeting scheduled Date of
                                      Form of      investment project       amount during the           the end of                                                              the reporting    progress and         disclosure
               Project name           investment   or not       operates      reporting period    reporting period   Source of fund    Progress   Estimated return                      period   estimated return     (if any)             Disclosure index (if any)
               Forestry paper           Self-       Yes         Pulp            802,532,697.23    2,482,982,255.45   Self-raised and    78.00%    The expected net profit                0.00    Not yet completed      2 August 2013      http://www.cninfo.com.cn/
                 integration project of constructed             production                                           borrowings                   of the forest base will
                 Huanggang Chenming                                                                                                               amount to RMB102 million
                                                                                                                                                  and the expected average
                                                                                                                                                  total profit per annum of
                                                                                                                                                  the industrial project will
                                                                                                                                                  amount to RMB350 million.
               510,000 tonne high-end Self-         Yes         Paper making    577,977,304.68     697,210,244.24    Self-raised and     1.44%    Upon the completion                    0.00    Not yet completed      18 February 2017 http://www.cninfo.com.cn/
                 cultural paper project constructed                                                                  borrowings                   of construction and
                 of Shouguang Meilun                                                                                                              commencement of
                                                                                                                                                  production of the project,
                                                                                                                                                  the expected profit will
                                                                                                                                                  amount to RMB308 million.
               400,000 tonne chemical Self-       Yes           Pulp           1,188,512,282.02   1,801,971,276.32   Self-raised and    43.84%    Upon the completion                    0.00    Not yet completed      21 March 2014      http://www.cninfo.com.cn/
                 pulp project of      constructed               production                                           borrowings                   of construction and
                 Shouguang Meilun                                                                                                                 commencement of
                                                                                                                                                  production of the project,
                                                                                                                                                  the expected total profit
                                                                                                                                                  will amount to RMB410
                                                                                                                                                  million.
               Magnesite project      Self-       Yes           Mining          289,216,242.71    1,047,440,597.94   Self-raised and    99.00%    The expected average total             0.00    Not yet transfer to fixed 25 October 2012 http://www.cninfo.com.cn/
                                      constructed                                                                    borrowings                   profit per annum RMB184                        assets as at the end of
                                                                                                                                                  million                                        the reporting period
               Newsprint paper to       Self-       Yes         Paper making    902,644,220.48     902,644,220.48    Self-raised and    30.00%    —                                     0.00    Not yet completed                         Not applicable
                 cultural paper machine constructed             and pulp                                             borrowings
                 and transformation                             production
                of the ancillary pulp
                 production lines
               Total                  —           —           —             3,760,882,747.12   6,932,248,594.43   —                      —   —                                     0.00    —                     —                 —
          4.   Financial asset investment
               (1)            Security investments
                                   Applicable              √ Not applicable
                              The Company did not have any security investments during the reporting period.
               (2)            Derivatives investments
                                   Applicable              √ Not applicable
                              The Company did not have any derivative investments during the reporting period.
32   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                                          3704827-t01fnar (Shandong Chenming) p.32 (P98738) 27-03-2018 16:29
                                                                                                                                                                                                                     OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V.   Investments (Cont’d)
     5.        Use of proceeds
               √ Applicable            Not applicable
               (1)      General use of proceeds
                        √ Applicable          Not applicable
                                                                                                                                                       Unit: RMB’0,000
                                                                          Total                       Total                Proportion
                                                                     amount of                   amount of         Total   of total                                Total
                                                                        utilised       Total      proceeds    amount of    amount of                               amount
                                                                      proceeds    amount of with change accumulated        accumulated   Total        Use and      of idle
                                          Fund-              Total   during the accumulated in use during      proceeds    proceeds      amount of    status of    proceeds
                                          raising       amount of       current      utilised the reporting with change    with change   unutilised   unutilised   for over
                        Year              method         proceeds        period    proceeds          period       in use   in use        proceeds     proceeds     2 years
                        2017              Public          119,820      119,820       119,820            0             0    0.00%         0            Not
                                          offering of                                                                                                 applicable
                                          corporate
                                          bonds
                        Description of the general use of proceeds
                        On 13 March 2017, the Company received the Approval (Zheng Jian Xu Ke [2017] No. 342) from the China
                        Securities Regulatory Commission for the public offering of corporate bonds of not more than RMB4.0 billion.
                        On 21 August 2017, the Company issued the first tranche of corporate bonds for 2017 to qualified investors,
                        with total proceeds raised of RMB1,200 million. After deducting the issuance expense paid of RMB1.80 million,
                        the net proceeds raised of RMB1,198.20 million were deposited to the designated account for the proceeds of
                        corporate bonds.
                                                                                                                                             2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.33 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     V.   Investments (Cont’d)
          5.   Use of proceeds (Cont’d)
               (2)   Commitment of proceeds
                     √ Applicable                  Not applicable
                                                                                                                                                                           Unit: RMB’0,000
                                              Change                                          Invested Accumulated Investment                              Return
                                              in project              Total       Total        amount      invested progress as                            realised       Expected
                     Committed                (including        committed investment        during the amount as at    at the end         Expect date      during the     return being Significant
                     investment project       partial           investment        after      reporting   the end of of the Period         of operation     reporting      achieved     change in
                     and excess proceeds      change)          of proceeds adjustment (1)       period the period (2)       (3)=(2)/(1)
                                                                                                                                          of the project   period         or not       project
                     Committed investment project
                     Swap of bank loans      No                   119,820         119,820     119,820         119,820        100.00%      22 August 2017 Not              Not           No
                                                                                                                                                         applicable       applicable
                     Subtotal of committed    —                  119,820         119,820     119,820         119,820               —    —             Not              —            —
                       investment project                                                                                                                applicable
                     Amount, use and          Not applicable
                       utilisation of
                       excess proceeds
                     Change in place of       Not applicable
                       implementation of
                       investment project
                       of proceeds
                     Adjustment on            Not applicable
                       implementation
                       method of investment
                       project of proceeds
                     Pre-investment and       Not applicable
                       swap of investment
                       project of proceeds
                     Temporary                Not applicable
                       replenishment of
                       liquidity by idle
                       proceeds
                     Balance and reason       Not applicable
                       for proceeds
                       arising from project
                       implementation
                     Use and direction of     Proceeds had been fully utilised.
                       unused proceeds
                     Use of proceeds and      None.
                     problems disclosed or
                     other issues
34   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                            3704827-t01fnar (Shandong Chenming) p.34 (P98738) 27-03-2018 16:29
                                                                                                                                                                  OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V.   Investments (Cont’d)
     5.        Use of proceeds (Cont’d)
               (3)                 Change in use of proceeds
                                      Applicable                         √ Not applicable
                                   The Company did not have any change in use of proceeds during the reporting period.
VI. Disposal of material assets and equity interest
     1.        Disposal of material assets
               √ Applicable                                 Not applicable
                                                                                                 Net profit
                                                                                           contribution to
                                                                                            the Company                            Ratio of net profit
                                                                                        from the beginning                           contribution to                                                                                                           Carried out on
                                                                                             of the period                             the Company                                                 Relationship with                                           schedule or not,
                                                                          Transaction            up to the                             of disposal of                              Related party   counterparty (ies) Relevant asset                           i not, the reasons
                                                                         consideration      disposal date Effect of disposal on the asset over total     Pricing basis of disposal transaction     (in case of related tit e ful y       Relevant debt ful y   and measures taken
               Counterparty(ies)     Asset disposed of   Disposal date     (RMB’0,000)       (RMB’0,000) Company (note 3)             net profit (%)   of asset                  or not          party transaction) transferred or not transferred or not    by the Company Disclosure date Disclosure i dex
               Jinrun Fangzhou       Property 2601- 2617, 24 February           8,200              5,832      The disposal of asset            1.55%     Determined by parties No                  Not appl cable    Yes                  Yes                  Not appl cable    1 March 2017 http://www.cninfo.com.cn
               Science               Block A, Cyber Tower, 2017                                               is beneficial for the                      involved through
                 and Technology      No. 2 Zhongguancun                                                       revitalisation of the                      negotiation after
               Co., Ltd.             South Street, Haidian                                                    Company’s assets,                         considering various
                                     District, Bei i g                                                        optimisation of                            factors, including the
                                                                                                              resources allocation and                   basic condit on of subject
                                                                                                              enhancement of fund                        project, transaction price
                                                                                                              utilisation efficiency.                    of nearby property and
                                                                                                              Relevant i come has been                   other factors.
                                                                                                              accounted for profit for the
                                                                                                              period, which can boost
                                                                                                              the profitabi i y for 2017.
     2.        Disposal of material equity interest
                       Applicable                        √ Not applicable
                                                                                                                                                                                                                                                               2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.35 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     VII. Analysis of major subsidiaries and investees
         √ Applicable                      Not applicable
         Major subsidiary and investees accounting for over 10% of the net profit of the Company
                                                                                                                                                                                           Unit: RMB
                                                Type of                                        Registered                                                                     Operating
         Name of company                        company      Principal activities                 capital         Total assets          Net assets          Revenue               profit        Net profit
         Zhanjiang Chenming                     Subsidiary   Production and sale of          5,550,000,000   19,637,972,265.93    7,674,094,388.74   9,314,971,712.72 1,980,723,132.50 1,684,736,236.73
           Pulp & Paper Co., Ltd.                            pulp, duplex press paper,
                                                             electrostatic paper
         Shandong Chenming                      Subsidiary   Paper product trading and       7,700,000,000   35,412,243,151.58   26,091,740,690.40   2,768,375,693.24 1,074,327,081.23     875,802,429.89
           Financial Leasing Co., Ltd.                       financial leasing
         Shouguang Meilun Paper Co., Ltd.       Subsidiary   Production and sale of coated   3,000,000,000    9,882,253,940.98    5,286,042,008.02   4,940,598,286.91    221,294,183.74    202,049,304.67
                                                             paper and household paper
         Jiangxi Chenming Paper Co., Ltd.       Subsidiary   Production and sale of light    2,038,116,000    5,081,399,764.50    2,390,668,674.54   3,323,823,190.88    338,019,850.01    293,490,046.91
                                                             weight paper and white paper
                                                             board
         Acquisition and disposal of subsidiaries during the reporting period
         √ Applicable                      Not applicable
                                                                            Methods to acquire and
                                                                            dispose of subsidiaries     Impact on overall production and
         Name of companies                                                  during the reporting period operation and results
         Shanghai Chenming Industry Co., Ltd.                               Newly established                            Net profit of – RMB6,832,513.72
         Shanghai Hongtai Real Estate Co., Ltd.                             Equity acquisition                           From the date of inclusion into the scope of
                                                                                                                         consolidation to the end of the reporting period, net
                                                                                                                         profit amounted to – RMB36,856,878.73
         Shanghai Chenming Financial                                        Newly established                            No effect on overall operation and results
           Leasing Co., Ltd.
         Guangzhou Chenming Financial                                       Newly established                            Net profit of RMB98,465.85
           Leasing Co., Ltd.
         Guangzhou Chenming                                                 Newly established                            Net profit attributable to the parent company was
           Commercial Factoring Co., Ltd.                                                                                RMB404.34
         Shandong Chenming                                                  Newly established                            Net profit of RMB843,198.40
           Commercial Factoring Co., Ltd.
         Chengdu Chenming                                                   Newly established                            No effect on overall and operation and results
           Culture Communication Co., Ltd.
         Beijing Chenming                                                   Newly established                            No effect on overall and operation and results
           Culture Communication Co., Ltd.
         Qingdao Chenming Pulp and                                          Newly established                            Net profit of RMB2,327,743.51
           Paper Electronic
           Commodity Exchange Co., Ltd.
         Xuchang Chenming Paper Co. Ltd.                                    Newly established                            Net profit RMB attributable to the parent company
                                                                                                                         of – RMB17,007,455.36
         Shouguang Chenming                                                 Consolidation by merger                      No effect on overall and operation and results
            Hongxin Packaging Co., Ltd.
         Jilin City Chenming Machinery                                      Equity transfer                              Effect on current net profit of RMB480,189.88
            Manufacturing Co., Ltd.
         Particulars of major subsidiaries and investees
         (1)   Zhanjiang Chenming’s major products, including high-end cultural paper and white paper board, had higher average
               selling prices, higher gross profit margin and stronger profitability.
         (2)       Financial Leasing Company made steady progress and delivered better profit.
         (3)       Benefiting from the higher prices of coated paper and living paper, Shouguang Meilun recorded better profit.
         (4)       Jiangxi Chenming’s major products, including high-end cultural paper, had higher selling price, higher gross profit and
                   stronger profitability.
36   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                   3704827-t01fnar (Shandong Chenming) p.36 (P98738) 27-03-2018 16:29
                                                                                                                                                                        OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
VIII. Structured entities controlled by the Company
          Applicable          √ Not applicable
IX. Outlook on the future development of the Company
    (I)       Competition overview and development trend of the industry
              Paper making industry
              The growth in production and consumption in the paper making industry is closely related to the domestic economic
              development. Benefiting from the continuous stable macroeconomic growth, the development of the paper making
              industry will maintain stable growth in the long run. In recently years, the central government has been introducing
              various industry policies such as production capacity reduction, the supply-side reform, ten rules regarding water
              pollution and ten rules regarding air pollution. Different measures such as setting higher emission standards and
              strictly restricting corporate size and structure put stricter restrictions on the enterprises in the paper making industry
              and force those enterprises with backward production capacity to actively exit the paper making market. With the
              continuous introduction of production capacity reduction, the supply-side reform and other policies, the environmental
              protection policies have becoming stricter. The elimination of backward production capacity in the paper making
              industry has been progressing smoothly. New production capacity mainly comes from large enterprises. It is expected
              that the industry concentration ratio will further increase. The improvement in the supply in the industry has effectively
              boosted the dual growth in revenue and profitability of the enterprises in the paper making industry. The downstream
              demand in the paper making industry will continue to grow along with the domestic economic growth. The turning
              point in the supply and demand structure in the industry has gradually developed with a boom in the industry to be
              prolonged.
              Financial leasing industry
              As the financial reforms advance further, the integration of industrial capital and financial capital gradually accelerate
              in China. The financial leasing industry as a favoured supplementary corporate financing channel and an effective tool
              to use assets at hand embraces continuously mounting market demand. Since the implementation of the “Thirteenth
              Five Year Plan”, the accelerated urbanisation and industrialisation in China, the change in drivers of economic growth,
              upgrade of traditional industries, development of emerging industries, and continuous infrastructure construction
              require substantial investment in fixed assets. China will become the largest leasing market in the world. According
              to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
              Industry 2016-2021 issued by ASKCI Consulting Co. Ltd, the financial leasing industry will grow at a compound
              annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial
              leasing industry in China will amount to RMB20.79 trillion by 2021.
              In view of the establishment and optimisation of trading rules, accounting standards, industry regulation and tax
              policies for the financial leasing industry, the financial leasing in China will present a development trend with stable
              growth in scale, in-depth expansion of scope of business, further enlarged agglomeration, improving professionalism,
              further strengthening risk prevention and control, and consolidating foundation for development in the future. The
              size of the financial leasing business in China will expand significantly. Financial leasing will become an important
              alternative of financing for enterprises, especially small and medium-sized enterprises. The business prospects of the
              financial leasing industry in China are promising.
                                                                                                               2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.37 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     IX. Outlook on the future development of the Company (Cont’d)
         (II)   Development strategy
                Looking forward, the Company will adhere to the principal of emphasising on environmental protection, low carbon,
                recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific
                development and quality and efficiency enhancement, it will comprehensively improve its quality and efficiency,
                management level, technology application, sense of happiness and brand image through the integration between
                its production and manufacture segment and financial services segment, incorporation of smart technology into
                its industrial activities, reorganised methodology and restructuring so as to expand and improve itself and strive to
                achieve taxable profit over RMB10 billion and strive to become one of the world-class companies with the highest
                growth rate during the “Thirteenth Five Year Plan” period.
                Transformation and upgrade strategy: The Company will comprehensively improve the industrial structure and
                regional layout; emphasise on the development of the five leading businesses, namely paper making, finance, fibre
                yarn, forestry and so on; and construct an efficient industrial system with synergies.
                Green development strategy: Remaining steadfast in the operation philosophy of “forestry-pulp-paper-fibre-yarn
                integration”; with technical progress, advanced equipment and strict and prudent management, the Company will
                promote clean production and recycling economy, become a low-energy consumption and environmentally-friendly
                enterprise. The Company seeks for development while protecting the environment and maintains higher environmental
                protection standards while seeking for scientific development, thus achieving a “win-win” situation in economic
                development and environmental protection.
                International operation strategy: The Company, based in China with a global reach, will follow the national strategy of
                the “Belt and Road” initiative, accelerate its pace of “going global”, reinforce global exchanges and communication
                and gradually expand its overseas market.
                Operational excellence strategy: By adhering to the management policy of “management enhancement, team building,
                outstanding business performance and good results”, the Company will constantly heighten its whole process
                management including production and operation, marketing, financial costs and project construction, effectively
                integrate its systems and resources, and strive to upgrade the Company’s management capacity and profitability.
                Strengthening the Company through talent strategy: By improving talent development, introduction, application and
                incentive mechanisms, and nurturing high-end, versatile, innovative and international talents, Chenming will become
                one of the world-class companies with the highest growth rate.
                Harmonious development strategy: By comprehensively enhancing enterprise culture building, caring for the
                employees, acting on its corporate social responsibilities, and elevating its integrated value-creating ability in terms of
                economy, society and environment, Chenming will create a positive corporate image for itself and strive to become a
                harmonious enterprise.
38   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                      3704827-t01fnar (Shandong Chenming) p.38 (P98738) 27-03-2018 16:29
                                                                                                                     OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
    (III) Operation plans for 2018
              In 2018, the main goal of the Company is adherence to the main theme of achieving growth amid stability, the general
              goal of “developing into an enterprise with hundreds of billions in value and forging Chenming into a centennial brand”
              and the guiding principal of work of “team building, management enhancement, outstanding business performance
              and good results”. The Company will fully carry forward its corporate style of “tackling problems once discovered”
              and strive to enhance management and efficiency while emphasising project construction and committing itself to,
              among other things, operating steadily, boosting growth, adjusting the structure, preventing risks and benefiting the
              employees, so as to take corporate development to a new level. The major measures are as follows:
              1.       Determined to upgrade corporate management
                       The guiding ideology of the Company’s management in 2018 is “solid foundation, new talents, guaranteed
                       implementation and strict evaluation”.
                       (1)        Enhance team building:       The Company will focus on staff training, training system building, hierarchical
                                  training material preparation and overall elevation of all employees’ comprehensive capabilities and
                                  management capacity of each level, ensuring qualified work.        The Company will further nurture young
                                  management personnel, revitalise the management, and introduce high-end talents to effectively support
                                  the Company’s development.       The Company will further improve its performance appraisal, widen the
                                  gap in distribution hierarchy and motivate the entire staff.
                       (2)        Solidify basic management:      The Company will apply a firmer grip on systematic and procedural
                                  early warning and feasibly elevate the scientific and standardised level. The Company will perform
                                  supervision and inspection on the implementation of policies and performance of functions of each
                                  department, provide assistance and rewards as appropriate and further promote the management
                                  capacity of the Company.
              2.       Determined to strengthen operations management and innovation
                       In 2018, with new projects going into production, the Company, facing tougher market conditions, will march on
                       with “confidence, courage, positiveness and initiative”.
                       (1)        Enhance basic management:           The Company will dedicate itself to the information technology
                                  development for the sales and full mechanical operation.  The Company will increase its efforts into
                                  market survey, and conduct comprehensive follow-up inspections and appraisal for basic management
                                  and business priorities on a monthly basis.
                       (2)        Focus on return management:       With confidence, the Company will increase the selling prices in a timely
                                  manner based on the actual market conditions and reap the returns on higher prices.         The Company
                                  will promote its returns through product structure adjustments and launch of products of higher returns.
                                      The Company will standardise channel management and deepen its cooperation with the major
                                  customers.     The Company will increase its investments in markets of close proximity to realise returns.
                       (3)        Determined to enhance risk management:       Collection of past due accounts, being a critical part of our
                                  marketing, must be personally handled by the management. The Company will tighten its assessment
                                  procedure and increase its efforts into preventing new past due accounts and past due collection.
                                  The Company will standardise its credit management by extending credit based on effective assets of
                                  customers and reduce the payment period and credit extended to customers in default.       The Company
                                  will continue to promote real estate mortgage with certain customers.      The Company will heighten
                                  prepayment operations.
                                                                                                                     2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.39 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     IX. Outlook on the future development of the Company (Cont’d)
         (III) Operation plans for 2018 (Cont’d)
              3.    Determined to enhance production management, innovation and efficiency
                    (1)   Enhance basic management:         The Company will comprehensively streamline the control procedure of
                          its subsidiaries and enhance supervision and appraisal.      The Company will add talents to the teams and
                          break through barriers currently suppressing its efficiency and elevate the management capacity.
                    (2)   Promote technological innovations:       The Company will recruit technicians of high calibre, advance
                          the industry-university-research cooperation, accelerate the introduction and integration of international
                          advanced technologies such as high-efficient production and water saving while upgrading its own
                          independent capability of research and development.          The Company will continue to optimise its
                          product structure and increase its returns by focusing on the development of new products such as pure
                          texture paper, super electro-static paper and food package board as well as increasing the production
                          of high-margin products.      The Company will introduce new technologies and new materials such as
                          dipropylene latex, mechanical pulp penetrant and surface enhancement to increase its returns.
                    (3)   Enhance safety and environmental protection:         The Company will implement safety standardisation
                          management and provide basic safety educational training to enhance awareness and capabilities
                          on safety protection of the employees, sparing no efforts in the prevention of major accidents.          The
                          Company will continue to invest in environmental protection with new projects such as membrane
                          treatment for reclaimed water recycling and comprehensive utilisation of solid waste, becoming a first-
                          rate company in the industry.      The Company will identify, rectify and assess potential hazards with zero
                          tolerance, ensuring rectification rate of 100%.
                    (4)   Step up in project management:      The Company will strengthen monthly inspections and appraisals and
                          delegate more power to the management to enhance project supplies and progress management, prevent
                          any issue from arising in project management and provide rewards in cases of timely or early completion.
                             The Company will build a production team with sound personnel allocation with proper training to
                          design mechanical production plans, striving for production that excels in efficiency, quantity and quality.
              4.    Determined to enhance financial management and achieve steady growth
                    (1)   Enhance risk management in the finance sector:  The Company will be professionally equipped, improve
                          and strictly implement its risk management system and realise mechanical control with information
                          technology system, preventing business risks.     The Company will standardise the finance leasing
                          business and reinforce the post-lease management for existing projects.
                    (2)   Strengthen financing management:       The Company will advance the issuance of privately placed bonds,
                          renewable corporate bonds, perpetual medium-term notes and private placement to improve its debt
                          structure and reduce the gearing ratio.   The Financial Leasing Company and the Finance Company will
                          together form a complete financing system and gradually achieve a virtuous financing circle.
40   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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                                                                                                                  OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
    (III) Operation plans for 2018 (Cont’d)
              5.       Determined to enhance supply chain building and increase business value
                       (1)        Enhance basic management: The Company, by virtue of information technology platforms such as
                                  process building, international tender network and contract management, will strengthen its control over
                                  suppliers and business processes, comprehensively enhancing the level of information management for
                                  procurement.
                       (2)        Focus on procurement efficiency: The Company will focus on and rely on the sources of procurement of
                                  bulk materials, optimise its supplier teams and procurement channels and strengthen market analysis to
                                  keep abreast of market conditions and reduce procurement costs.
                       (3)        Extend the scope of business:        The Company will conduct the financing business relating to the
                                  supply chain to ensure zero risk and improve efficiency.     The Company will extend the channels of
                                  raw materials to deepen the development of high-quality source customers and establish strategic
                                  cooperation relationship with quality suppliers. The Company will also set up a dedicated team to ensure
                                  the supply of raw materials for the production of new projects and the sustainable development of the
                                  Company.
                       (4)        Strengthen logistics construction:       The Company will introduce logistics professionals for the
                                  construction of a logistics information platform to establish an intelligent logistics system and facilitate
                                  the logistics construction of the Group.   The Company will promote the construction of the Shouguang
                                  Chenming International Logistics Centre project and the Qingdao Innovative Industrial Park project.
              6.       Caring for employees and sharing the results of development
                       Firstly, the Company will establish a scientific training system to provide a smooth promotion channel,
                       strengthen internal training, helping its employees grow quickly and provide them with more development
                       opportunities and a promotion platform. Secondly, the Company will redesign and change the work uniform
                       for employees to showcase the brand new spirits of the employees, which will greatly improve the image and
                       satisfaction of employees. Thirdly, the Company will continue to build more garden-like factories to create a
                       beautiful Chenming and a more pleasant working environment for the employees. Fourthly, the Company will
                       rationalise the salary increment mechanism to improve the staff’s income in real terms so as to make sure the
                       salary level of its staff is relatively higher than those of its local counterparts and industry peers.
                                                                                                                    2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.41 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     IX. Outlook on the future development of the Company (Cont’d)
         (IV) Future capital requirements, source of funds and plan for use
              The Company has established a conglomerate principally engaged in paper making, finance, pulp and fibre and
              mining businesses, etc.. With the further development of the existing principal businesses of the Company, the future
              capital requirements of the Company will be: (1) investment in the existing projects under construction and proposed
              new projects; (2) consistent investment in the existing production facilities because of technological transformation
              or production expansion; and (3) business expansion and general working capital requirements. As the demand for
              capital has been growing for the Company’s production and operation, there is a strong need to replenish the working
              capital to enhance the Company’s capability for sustainable operations.
              In order to meet the business development requirements of the Company and further extend and expand the industry
              chain, the Company will establish diversified financing channels and increase the proportion of direct financing
              through diversified financing channels such as private placement, corporate bonds, perpetual bonds, short-term
              commercial paper and cross-border financing so as to improve the debt structure of the Company and provide stable
              financial support for the operation and development of the Company.
              Diversified financing channels to meet the Company’s capital requirements: (1) The Company will use RMB3.7 billion
              from private placement to reduce the cost of paper making. The investment in the 400,000-tonne chemical pulp
              project through private placement will improve the self-sufficiency of pulp of the Company and the raw materials
              structure of the paper making segment, in the expectation of reducing the production costs of paper making and
              enhancing profitability of paper making business. At the same time, non-public issuance of shares will optimise the
              debt structure and reduce financial costs as well as the gearing ratio. (2) The Company will reduce the financing
              costs and optimise the capital structure by issuing corporate bonds, medium-term notes, short-term financing,
              super short-term financing, perpetual bonds and other means for financing so as to provide financial support for the
              Company’s long-term healthy development. (3) The Company will facilitate cross-border financing by making full
              use of the financing platform in Hong Kong market to increase its credit facilities. Besides, the Company will also
              mitigate exchange rate risk through multi-currency financing and improve the efficiency of use of capital to reduce
              financial costs. As at the end of 2017, the credit facilities utilised by the Company amounted to RMB47.7 billion and
              the banking credit facilities obtained by the Company amounted to RMB75.6 billion with an utilisation rate of 63.07%.
              (4) The Company will make use of the advantages of the Finance Company and the Financial Leasing Company in the
              financial industry to expand the financing channels for the Group, bring new momentum for business development.
42   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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                                                                                                                OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
    (V)       Risk factors likely to be faced and the measures to be taken
              1.       Risk on paper making industry
                       Policy risk
                       Paper making industry is a basic raw materials industry and its growth has been faster than the average
                       growth of the national economy in recent years. However, the paper making industry’s profitability is closely
                       correlated to the economic cycle, and the industry is therefore a cyclical industry fluctuating with the national
                       macroeconomic performance, which will further affect the profitability of the Company.
                       Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
                       will comprehensively improve its industrial structure and regional layout through the integration between its
                       production and manufacture segment and financial services segment, and incorporation of smart technology
                       into its industrial activities. The Company will emphasise on the development of leading businesses including
                       paper making, finance, pulp and fibre and mining so as to construct an efficient industrial system with synergies.
                       Market fluctuation risk
                       With the rapid growth of the national economy, economic globalisation and China’s accession to the WTO,
                       China’s paper making industry has been facing increasingly fierce competition. Leveraging the strength and
                       capital accumulated over the years, domestic enterprises have further expanded their size and improved their
                       technological levels and product quality. Well-known paper making enterprises overseas have also directly set
                       up production bases in China through sole proprietorship or joint ventures so as to participate in the domestic
                       market competition by virtue of their advantages in size and technology. Besides, tariff reduction on China after
                       accession to the WTO has also further intensified the impact on the international market.
                       Hence, the Company will strive to enhance the quality of paper products and achieve the target of establishing
                       a layout for high-end paper industry so as to increase the proportion of high-end paper. In recent years, the
                       Company has been expanding its business size and optimising its product mix and has set up a few production
                       lines for high-end paper. A diversified and high-end product mix enables the Company to spread market risk
                       and strengthen the resistance towards market volatility. Besides, as high-end products have better profit
                       margins, the Company can increase the proportion of high-end products through consistent improvement in
                       product mix, thereby enhancing its profitability and comprehensive competitiveness.
                                                                                                               2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.43 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     IX. Outlook on the future development of the Company (Cont’d)
         (V)   Risk factors likely to be faced and the measures to be taken (Cont’d)
               1.   Risk on paper making industry (Cont’d)
                    Risk of overcapacity and slowdown in demand
                    Overcapacity is a prominent problem in the paper making and paper product industry in China such that
                    there has been fierce competition among enterprises. Since 2013, affected by slowdown in macroeconomic
                    growth, the demand in paper making industry has been weak. At the same time, China has been encouraging
                    energy conservation and emission reduction. The obsolete production capacity will be phased out, and thus
                    the new projects will be on a large scale. By virtue of the economies of scale in the paper making industry,
                    the production capacity of individual paper making projects which are under construction or planning for
                    construction in China is large, which affects the demand and supply relationship in the whole paper making
                    industry.
                    Hence, the Company will make advancements in equipment and technological level, expand its product mix,
                    improve the grading of products and focus on the research and development of high-end products so as to
                    improve competitiveness.
                    Risk of price fluctuation of raw materials
                    The major raw materials used by the Company are wood pulp and waste paper. The market prices of wood pulp
                    and waste paper fluctuate significantly. The market price fluctuation of raw material has significantly affected the
                    production costs of the Company. In addition to intensified market competition resulting from surging capacity
                    in the industry in recent years, the increases in prices of a number of paper products were not in line with the
                    increases in prices of raw materials. The market price fluctuation of raw materials will have an impact on the
                    performance of the Company.
                    Hence, the Company will remain steadfast in the “forestry-pulp-paper integration” development path and focus
                    on the construction of the Zhanjiang Chenming pulp project, the Huanggang Chenming pulp project and the
                    Shouguang chemical pulp project, thereby eliminating the limitations of upstream resources on the Company’s
                    development and enhancing the Company’s sustainable development.
                    Risk of change in environmental protection policies
                    China has been raising the standards for environmental protection in recent years. More stringent environmental
                    protection policies have been implemented in the paper making industry with successive implementation
                    of environmental inspections and licensing system for pollutant discharge. A multi-pronged approach
                    has been adopted to promote industrial restructuring, and the paper making industry has entered into an
                    important transitional period of development. A higher emission standard is bound to increase the Company’s
                    environmental protection costs and a high entry standard may result in the slowdown of scale expansion.
                    The Company always strives to achieve harmonious development with energy conservation and emission
                    reduction. The Company will endeavour to develop the recycling economy through waste exchange and
                    recycling and strive to maximise its resource utilisation. Meanwhile, the Company will make greater efforts to
                    construct environment friendly projects and strive to achieve its waste emission target.
44   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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                                                                                                                  OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
    (V)       Risk factors likely to be faced and the measures to be taken (Cont’d)
              2.       Risk on financial leasing business
                       Policy risk
                       Recently, the financial leasing business is regulated by the commerce departments at different levels instead of
                       being directly regulated by the People ‘s Bank of China or China Banking Regulatory Commission. The financial
                       leasing industry in China is still at the exploration stage with incomplete laws and regulations. If there is any
                       material adjustment or change in national or local policies for the financial leasing industry, the Company’s
                       financial leasing business may be adversely affected, in turn harming the Company’s profitability.
                       In September 2015, the General Office of the State Council promulgated the Guiding Opinions on Accelerating
                       the Development of Financial Leasing Industry, which formulated comprehensive systematic planning on
                       accelerating the development of the financial leasing industry. The financial leasing industry embraced a rare
                       opportunity for leap-forward development. In February 2016, the General Office of People’s Government of
                       Shandong Province promulgated the Opinions of the General Office of People’s Government of Shandong
                       Province on Accelerating the Development of Financial Leasing Industry by Implementing Document Guo Ban
                       Fa [2015] No. 68, formulating specific measures to refine policy measures and ensure the measures being
                       carries out properly, which provided actual policy support for the development of the financial leasing industry
                       in Shandong Province.
                       Liquidity risk
                       In a market economy, the macroeconomic operation tends to be in cycles and the Company is inevitably
                       affected by those cycles. At the same time, there is fierce competition in the financial industry and the interest
                       margin is a main source of income for the financial leasing business. The market interest rate is affected by
                       the benchmark interest rate of the People’s Bank of China, the macroeconomic environment, market demand
                       and supply and other factors, bringing uncertainties to the fluctuation of the market interest rate, which in turn
                       causes uncertainties in revenue from the financial leasing business.
                       Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
                       will comprehensively improve its industrial structure and regional layout through the integration between its
                       production and manufacture segment and financial services segment, and incorporation of smart technology
                       into its industrial activities. The Company will emphasise on the development of leading businesses including
                       paper making, finance, pulp and fibre, real estate and mining so as to construct an efficient industrial system
                       with synergies.
                                                                                                               2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.45 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:26
     V Discussion and Analysis of Operations
     IX. Outlook on the future development of the Company (Cont’d)
          (V)   Risk factors likely to be faced and the measures to be taken (Cont’d)
                2.   Risk on financial leasing business (Cont’d)
                     Credit risk
                     The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
                     payment on time due to any reason and there are abuses on equipment or any other short-term behaviour.
                     Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provision
                     as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be
                     exposed to risk of bad debts.
                     The stringent risk management measures of Chenming Leasing provide comprehensive risk prevention
                     and management for the Company’s projects. Besides, the Company usually cooperates with state-owned
                     enterprises and local governments, so it has strong risk resistance and low risk of default. The Company does
                     not have any non-performing or overdue loans so far. Chenming Leasing will develop quality customers and
                     strengthen risk management so as to enhance risk resistance and maintain high quality services.
                     Operation risk
                     Recently, there is still a gap between the practitioners working in the financial leasing industry and those working
                     in traditional financial institutions such as banks in terms of their expertise and experience in financial profession
                     in China. There is also a large gap in terms of investment in infrastructure. If internal control procedures are
                     not implemented properly and involve operation risk as a result of operation errors, violations or non-standard
                     execution, the Company may suffer from loss.
                     Learning from the risk management experience of outstanding financial leasing companies at home and abroad,
                     the leasing company has formulated and optimised the internal management system of the leasing business
                     and established an effective system for risk assessment, risk control and risk tracking. The Company has
                     also exercised proper control on business risk by regulating the key business procedures including quotation,
                     guarantee review, contract signing, leased assets management and archives management.
     X.   Reception of research investigations, communications and interviews
            Applicable    √ Not applicable
          During the reporting period, there was no reception of research investigations, communications and interviews by the
          Company.
46   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2017.
I.    Principal activities
      Please refer to section IV “Business Overview”, and “I. Principal operations of the Company during the Reporting Period”
      and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
      activities of the Company.
II.   Results and profit distribution
      Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2017.
III. Dividends and Conversion of Shares
      After the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2017 (“final
      dividend”) of RMB6.00 in cash for every 10 Shares (tax inclusive) and a capitalisation issue made out of the capital revers
      for 5 shares for every ten shares (2016: dividend of RMB6.00 in cash for every 10 Shares (tax inclusive)) to the ordinary
      shareholders of the Company, subject to approval of shareholders at the forthcoming Annual General Meeting (“AGM”) of
      the Company held on 18 May 2018. Upon approval of shareholders of the Company at the AGM, the Company is expected
      to pay the final dividend on or by 17 July 2018 to shareholders whose names appear on the register of members of the
      Company on 18 May 2018.
      In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008,
      where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
      enterprise shareholders, it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.
      Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of final dividends as corporate income
      tax, distribute the final dividends to non-resident enterprise shareholders, i.e. any shareholders who hold the Company’s
      Shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, or other
      nominees, trustees, or holders of H Shares registered in the name of other organisations and groups.
      Due to changes in the PRC tax laws and regulations, according to the Announcement on the List of Fully and Partially
      Invalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation (
                                                          ) on 4 January 2011, individual Shareholders who hold the Company’s H
      Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
      income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer
      and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign
      Individuals (Guo Shui Fa [1993] No. 045) (                                                          (    )
                          (      [1993]045 )) issued by the State Administration of Taxation, whilst pursuant to the letter titled
      Tax Arrangements on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to
      the issuers on 4 July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax
      after the Repeal of Guo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) (
                              [1993]045                                                   (      [2011]348 )), it is confirmed that
      the overseas resident individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong
      Kong are entitled to the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the
      countries where they reside and the PRC or the tax arrangements between the PRC and Hong Kong or the Macau Special
      Administrative Region of the PRC. Therefore, the Company will withhold 10% of the dividend as individual income tax,
      unless it is otherwise specified in the relevant tax regulations and tax agreements, in which case the Company will withhold
      individual income tax of such dividends in accordance with the tax rates and according to the relevant procedures as
      specified by the relevant regulations.
                                                                                                            2017 ANNUAL REPORT
      3704827-t01fnar (Shandong Chenming) p.47 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:32
     VI Directors’ Report
     IV. Closure of register of members
          The register of members of the Company will be closed from 17 April 2018 (Tuesday) to 18 May 2018 (Friday), (both
          days inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
          vote at the annual general meeting to be held on 18 May 2017 (Friday), all share transfer documents accompanied by
          the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
          Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
          East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 16 April 2018 (Monday).
     V.   Five-year financial summary
          Please refer to “IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
          under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five
          financial years.
     VI. Donations
          During the year, the Company donated RMB1,950,000 (2016: RMB1,000,000) to non-profit making organisations.
     VII. Subsidiaries
          Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
          and “XX. Matters of significant of subsidiaries of the Company” under section VII “Material Matters” for the details of
          acquisition and disposal of subsidiaries by the Company during the year.
     VIII. Property, plant and equipment
          Please refer to “1. Consolidated Balance Sheet” under section XIII “Financial Report” for the details of changes in property,
          plant and equipment of the Group for the year ended 31 December 2017.
     IX. Share capital
          Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
          in share capital of the Company for the year ended 31 December 2017.
     X.   Pre-emptive rights
          In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
          shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.
     XI. Transfer into reserves
          The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
          December 2017, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
          surplus of the Company, amounted to RMB9,514,629,584.05 (2016: RMB7,393,989,520.67) as set out in “1. Consolidated
          Balance Sheet” under section XII “Financial Report”.
48   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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                                                                                                                     OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XII. Directors
    As at 31 December 2017, the Directors of the Company were:
    1.        Executive Directors
              Mr. Chen Hongguo
              Mr. Yin Tongyuan
              Mr. Geng Guanglin
              Mr. Li Feng
    2.        Non-executive Directors
              Ms. Zhang Hong
              Ms. Yang Guihua
    3.        Independent Non-executive Directors
              Ms. Liang Fu
              Ms. Wang Fengrong
              Mr. Huang Lei
              Ms. Pan Ailing
    According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been elected
    at the general meetings with a term of three years from May 2016 to May 2019. They may be re-elected for another term
    upon expiry of tenure.
XIII. Directors’ service contracts
    All Directors have entered into service contracts with the Company for a term from 18 May 2016 to 17 May 2019.
    None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
    contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
    payment of compensation other than statutory compensation.
XIV. Directors and Senior Management’s remuneration and the five highest paid individuals
    Details of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/and
    its subsidiaries are set out in part V of section X and part XII of section XII.
    In 2017, the Company had 23 Senior Management members in total, which included directors, supervisors and the Senior
    Management. The remuneration of the Senior Management falls within the following ranges:
    Range of remuneration (RMB)                                                                                       Number
    4.8 million to 5.2 million
    3.6 million to 4.0 million
    3.2 million to 3.6 million
    2.8 million to 3.2 million
    2.4 million to 2.8 million
    2.0 million to 2.4 million
    1.6 million to 2.0 million
    1.2 million to 1.6 million
    0.8 million to 1.2 million
    Below 0.8 million
                                                                                                       2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.49 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:32
     VI Directors’ Report
     XV. Independent Non-executive Directors
         The Company has received from each of the independent non-executive Directors a confirmation of independence for the
         year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
         be independent during the year.
     XVI. Securities interests held by Directors, Supervisors and Chief Executives
         As at 31 December 2017, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
         held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
         as follows:
                                                                                                                    Number of shares
                                                                                                                    (A shares) held as
                                                                                                                      at the end of the
                                                                                                                      reporting period
         Name                                                   Position                                                       (shares)
         Directors
         Chen Hongguo (Note 1)                                  Chairman                                                          6,696,296
         Yin Tongyuan                                           Executive Director and Vice Chairman                              2,423,640
         Li Feng                                                Executive Director                                                  471,818
         Geng Guanglin                                          Executive Director and General Manager                              437,433
         Yang Guihua                                            Non-executive Director                                                   —
         Zhang Hong                                             Non-executive Director                                                   —
         Huang Lei                                              Independent non-executive Director                                       —
         Liang Fu                                               Independent non-executive Director                                       —
         Wang Fengrong                                          Independent non-executive Director                                       —
         Pan Ailing                                             Independent non-executive Director                                       —
         Supervisors
         Li Dong                                                Supervisor                                                           100,000
         Sun Yinghua                                            Supervisor                                                                —
         Yang Hongqin                                           Supervisor                                                                —
         Zhang Xiaofeng                                         Supervisor                                                                —
50   SHANDONG CHENMING PAPER HOLDINGS LIMITED
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                                                                                                                 OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives (Cont’d)
    Associated corporations
                                                                                       Number of                                        Number of
                                                                                shares held at the                                   shares held at
                                                                                 beginning of the                                    the end of the
                                              Name of                            reporting period          Change during           reporting period
    Name                          Position    associated corporations                     (shares)          the period +/-                  (shares)
    Chen Hongguo                  Chairman    Shouguang Henglian                      231,000,000                          —           231,000,000
                                              Enterprise Investment
                                              Co. Ltd. (Note 2)
    Note 1: Save for the 6,696,296 A shares held personally, Chen Hongguo is deemed to be interested in the 429,348 A shares held by his spouse, Li
            Xueqin.
    Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd.,
            (hereinafter referred to as “Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo. As a result,
            the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by Shouguang
            Henglian is also deemed to be held by Chen Hongguo.
    Save as disclosed above, as at 31 December 2017, none of the Directors, Supervisors or chief executives of the Company
    had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
    corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
    352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the
    Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
    the Listing of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
    As at 31 December 2016, none of the Directors, Supervisors or chief executives or their respective spouses or children
    under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
    associated corporations.
XVII. Interests and short position of substantial shareholders in shares and underlying shares
    As at 31 December 2017, the following shareholders (other than the Directors, Supervisors or chief executives of the
    Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
    maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
                                                                                                             Approximate shareholding
                                                                                                                as a percentage of
                                                                    Number of shares held                    Total share             Class of
    Name                                                            (shares)                                  capital (%)          shares (%)
    Shouguang Chenming Holdings Co., Ltd.                           293,003,657 A shares (L)                         15.13                      26.32
    Shouguang Chenming Holdings Co., Ltd.                           137,122,226 B shares (L)                          7.08                      29.12
    Chenming Holdings (Hong Kong) Limited                           137,122,226 B shares (L)                          7.08                      29.12
    Shouguang Chenming Holdings Co., Ltd.                           102,276,000 H shares (L)                          5.28                      29.04
    Chenming Holdings (Hong Kong) Limited                           102,276,000 H shares (L)                          5.28                      29.04
    The National Social Security Fund Council                       31,638,500 H shares (L)                           1.63                       8.98
    (L) - Long position                      (S) - Short position             (P) - Lending pool
    Save as disclosed above, as at 31 December 2017, no other person had interests or short positions in the Company’s
    shares or underlying shares as recorded in the register maintained under section 336 of the SFO.
                                                                                                                           2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.51 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:32
     VI Directors’ Report
     XVIII. Relationship with employees, customers and suppliers
         Please refer to “VI. Personnel of the Company” under section X “Directors, Supervisors and Senior Management and
         Staff”,“2. (8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V
         “Discussion and Analysis of Operations” for details of the relationship between the Company and its employees, customers
         and suppliers.
     XIX. Directors’ interests in material contracts and indemnity provision
         None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
         interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
         period. The Company did not have any indemnity provision in favour of any Director.
     XX. Interests in competing business
         None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
         likely to compete with the businesses of the Company and any of its subsidiaries.
     XXI. Directors’ rights to purchase shares or debentures
         At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors
         to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
     XXII. Preference shares
         Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.
     XXIII. Management contracts
         No contracts concerning the management and administration of the whole or any substantial part of the business of the
         Company were entered into or existed in 2017.
     XXIV. Major risk factors
         Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
         of the Company” under section V “Discussion and Analysis of Operations” for details of major risk factors of the Company.
     XXV. Material matters
         Please refer to section VII “Material Matters” for details of material matters of the Company.
     XXVI. Future development
         Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
         plan for 2018” and “(IV) Future capital requirements, source of funds and plan for use” of “IX. Outlook on the future
         development of the Company” under section V “Discussion and Analysis of Operations” for details of future development of
         the Company.
     XXVII. Environment, social and governance report and social responsibility
         Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
         responsibility. Please refer to the environment, social and governance report as required by the Hong Kong Listing Rules,
         which will be issued separately by the Company before 27 June 2018.
52   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                       3704827-t01fnar (Shandong Chenming) p.52 (P98738) 27-03-2018 16:29
                                                                                                                      OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XXVIII. Purchase, sale and redemption of shares
    The Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting
    period.
XXIX. Sufficiency of public float
    During the reporting period, based on the information that is publicly available to the Company and within the knowledge of
    the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
    Listing Rules.
XXX. Review of the Audit Committee
    The audited consolidated financial statements of the Company for the year ended 31 December 2017 has been reviewed by
    the Audit Committee of the Company.
XXXI. Gearing ratio
    As at 31 December 2017, the Company’s gearing ratio (including minority interest) was 60.80%, representing a decrease
    of 1.61 percentage points from 62.41% for 2016, mainly due to the issuance of perpetual bonds of RMB3.0 billion as the
    Company sought to improve its capital and debt structure.
    The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
    year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXII. Going Concern Basis
    The Company is a leading player in the paper making industry in China. After innovation and development for more than
    half a century, it has developed into a large conglomerate principally engaged in paper making, finance, pulp and fibre
    and mining businesses while also involved in forestry, logistics, construction materials, and others. It is also the only listed
    company with A shares, B shares and H shares and preference shares in issue in China and the first company in the paper
    making industry having a finance company and a financial leasing company integrated with its industrial activities in China.
    The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi and Jilin, which deliver annual pulp and paper
    production capacity of over 10,000,000 tonnes.
    The Company has good sustainable profitability. In 2017, the Company achieved revenue of RMB29.852 billion, net
    profit attributable to shareholders of the Company of RMB3,769 million and net cash inflows from operating activities
    of RMB25.186 billion. Meanwhile, the Company always places emphasis on the interests of and return to shareholders,
    and has paid generous cash dividends for several years. With the improvement of the economic situation, the future
    performance of the Company is worth looking forward to.
    In addition, as at the end of December 2017, the Company obtained, from major financial institutions, comprehensive
    credit facilities of RMB75,600 million, of which the unutilised credit facilities amounted to RMB27.9 billion, which provided
    important support to the Company’s business development. As an A-share, B-share and H-share listed company,
    the Company has convenient financing channels. The Company has established financial leasing companies, finance
    companies and commercial factoring companies as the core of the financial segment. The rapid business development,
    improving management system and effective risk control provide new sources of profit growth for the Company, further
    increase the Group’s fund settlement, management, investment and financing ability, and reduce its financing cost while
    improving its debt structure.
    The auditors of the Company have prepared the 2017 annual financial report on a going concern basis, and have issued a
    standard unqualified audit opinion (see Financial Report section).
    Therefore, the Board believes the Company has the ability to continue as a going concern.
                                                                                                          2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.53 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:32
     VII Material Matters
     I.   Profit distribution for ordinary shares of the Company and conversion of capital reserves into
          share capital
          Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
          cash dividend during the reporting period
          √ Applicable   Not applicable
          The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
          dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
          resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
          of the small shareholders were fully protected as the related decision making process and mechanism were in place,
          the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
          opportunities to sufficiently voice their opinion and make requests.
          Implementation of the 2016 profit distribution plan for ordinary shareholders: Based on the number of the ordinary shares
          as at the dividend distribution registration date of 1,936,405,467 shares, a cash dividend of RMB6 (tax inclusive) was
          to be paid to all ordinary shareholders for every 10 shares held. The total cash dividend to be distributed amounted to
          RMB1,161,843,280.20 (tax inclusive). The dividend distribution was implemented and completed on 16 June 2017. For
          details, please refer to the announcement on payment of final dividend and withholding and payment of enterprise income
          tax for non-resident enterprise shareholders published on the Hong Kong Stock Exchange on 1 June 2017, and the
          announcement on the implementation of the 2016 profit distribution plan for A share and B share published on CNINFO on
          9 June 2017.
                                                       Particulars of Cash Dividend Policy
          Was it in compliance with the requirements of the Articles of Association
            and the resolutions of the general meeting?                                                                                        Yes
          Were the dividend distribution criteria and proportion well-defined and clear?                                                       Yes
          Were the related decision-making process and mechanism in place?                                                                     Yes
          Did independent Directors fulfil their duties and play their role?                                                                   Yes
          Were the minority shareholders given opportunities to sufficiently voice their opinion
            and make requests and were the legal interests of the minority shareholders fully protected?                                       Yes
          Were conditions and procedures legal and transparent in respect of
            cash dividend policy with adjustments and changes?                                                                                 Yes
          The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
          reserves into share capital (proposed) over the past three years (the reporting period inclusive)
          (1)   The 2017 profit distribution plan for ordinary shares
                Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017, a cash dividend of RMB6
                (tax inclusive) per ten shares and a transfer of five shares for every ten shares from capital reserve to ordinary
                shareholders, and RMB1,161,843,280.20, representing 30.82% of the consolidated net profit attributable to ordinary
                shareholders of the Company, will be distributed to ordinary shareholders.
54   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                      3704827-t01fnar (Shandong Chenming) p.54 (P98738) 27-03-2018 16:29
                                                                                                                     OUTPUT: 27-03-2018 16:29:33
VII Material Matters
I.   Profit distribution for ordinary shares of the Company and conversion of capital reserves into
     share capital (Cont’d)
     The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
     reserves into share capital (proposed) over the past three years (the reporting period inclusive) (Cont’d)
     (2)       The 2016 profit distribution plan for ordinary shares
               The 2016 profit distribution plan was considered and approved in the 2016 annual general meeting convened by the
               Company on 21 April 2017. Based on the number of the ordinary shares as at the dividend distribution registration
               date of 1,936,405,467 shares, a cash dividend of RMB6.00 (tax inclusive) was to be paid to all ordinary shareholders
               for every 10 shares held. The total cash dividend distributed during 2016 amounted to RMB1,161,843,280.20 (tax
               inclusive).
     (3)       The 2015 profit distribution plan
               The 2015 profit distribution plan was considered and approved in the 2015 annual general meeting convened by
               the Company on 18 May 2016. Based on the number of the shares as at the dividend distribution registration date
               of 1,936,405,467 shares, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10
               shares held. The total cash dividend distributed during 2015 amounted to RMB580,921,640.10 (tax inclusive).
               Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
                                                                                                                               Unit: RMB
                                                                                                          As a
                                                                                                 percentage
                                                                                   Net profit    of net profit
                                                                             attributable to     attributable
                                                                                    ordinary      to ordinary
                                                                           shareholders of      shareholders
                                                                           the Company in               of the    Amount
                                                                          the consolidated          Company        of cash Ratio of cash
                                                                                    financial           in the  dividends     dividends
                                                        Amount of               statements      consolidated distribution distribution
                                                   cash dividends           during the year          financial    through       through
               Year of distribution                  (tax inclusive)         of distribution      statements other means other means
               2017                               1,161,843,280.20        3,769,325,450.93           30.82%           0.00       0.00%
               2016                               1,161,843,280.20        1,998,578,788.75           58.13%           0.00       0.00%
               2015                                 580,921,640.10        1,086,632,711.54           53.46%           0.00       0.00%
               The Company made a profit and had positive retained profit available for ordinary shareholders of parent company
               during the reporting period without cash dividend for ordinary shares being proposed
                   Applicable √ Not applicable
                                                                                                                  2017 ANNUAL REPORT       55
     3704827-t01fnar (Shandong Chenming) p.55 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     II.   Proposals on profit distribution and conversion of capital reserves into share capital during
           this reporting period (including preference shares)
           √ Applicable   Not applicable
           Numbers of bonus share per 10 shares (share(s))
           Dividend distribution per 10 shares (RMB) (tax inclusive)                                 Cash dividend of RMB6 (tax
                                                                                                     inclusive) per 10 shares to ordinary
                                                                                                     shareholders and cash dividend of
                                                                                                     RMB6 (tax inclusive) per 10 simulated
                                                                                                     shares converted from preference
                                                                                                     shares into ordinary shares to holders
                                                                                                     of preference shares
           Conversion per 10 shares (share(s))                                                       Converted every 10 shares of the
                                                                                                     ordinary shareholders into 5 shares
                                                                                                     by using capital reserve
           Share base of the distribution proposal (shares)                                          1,936,405,467 ordinary shares
                                                                                                     and 774,526,678 simulated shares
                                                                                                     converted from preference shares
                                                                                                     on a conversion ratio of 1 preference
                                                                                                     share valued at RMB5.81; the share
                                                                                                     base of the distribution proposal was
                                                                                                     2,710,932,145 shares
           Total cash dividend (RMB) (tax inclusive)                                                                    1,626,559,287.08
           Distributable profits (RMB)                                                                                  8,866,614,844.39
           Percentage of cash dividend to total profits distribution                                                              62.69%
                                                                Cash dividend policy
           For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the
           percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
                               Particulars of profit distribution and conversion of capital reserves into share capital
           The audited consolidated net profit attributable to shareholders of the Company for 2017 prepared in accordance with
           Accounting Standards for Business Enterprises by the Company amounted to RMB3,769,325,450.93. When deducting the
           interest for perpetual bonds of RMB153,140,000 and dividend for preference shares of RMB333,702,107.35 for 2017, the
           distributable profit realised for 2017 amounted to RMB3,282,483,343.58. In accordance with the requirements of the Articles
           of Association and the Prospectus of Non-public Issuance of Preference Shares, the proposed profit distribution plan of the
           Company for 2017 is as follows:
           Based on the total ordinary share capital of 1,936,405,467 shares and the 774,526,678 simulated ordinary shares converted
           from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the end of 2017, a cash dividend of
           RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders; a cash dividend of RMB6 (tax inclusive) per
           ten simulated ordinary shares converted from the preference shares will be distributed to holders of preference shares; and
           a capitalisation issue will be made out of the capital reserves of 5 shares for every ten shares held to ordinary shareholders.
           A cash dividend of RMB1,161,843,280.20 will be distributed to ordinary shareholders and a variable cash dividend of
           RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a cash dividend of RMB10.33 (tax
           inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference shares.
56   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                       3704827-t01fnar (Shandong Chenming) p.56 (P98738) 27-03-2018 16:29
                                                                                                                      OUTPUT: 27-03-2018 16:29:33
VII Material Matters
III. Performance of undertakings
    1.       Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
             shareholders, related parties, bidders and the Company during the reporting period or prior periods
             but subsisting to the end of the reporting period
             √ Applicable               Not applicable
             Undertaking                 Party involved in   Type of           Details of undertaking                                          Undertaking date   Term                Particulars on the
                                         undertaking         undertaking                                                                                                              performance
             Undertaking on
               shareholding structure
               reformation
             Undertaking made in
               offering documents
               or shareholding
               alternation documents
             Undertaking made during
               asset reconstruction
             Undertaking made on         Shouguang           Non-competitive   (1) Shouguang Chenming Holdings Co., Ltd.                       22 May 2008        During the period   Implementing as
               initial public offering   Chenming Holdings   undertaking       (“Shouguang Chenming Holdings”) shall not engage,                                when Chenming       normal
               or refinancing            Co., Ltd.                             whether solely, jointly, or by representing itself or any                          Holdings was the
                                                                               other persons or companies, and shall not procure its                              major shareholder
                                                                               associates (as defined in The Listing Rules of Hong                                of the Company
                                                                               Kong Stock Exchange) to engage, in any business
                                                                               which competes with the business of the Company and
                                                                               its subsidiaries (“Chenming Group” or “we”) directly
                                                                               or indirectly, in any country and region which our
                                                                               business exists (or any part of the world if in any form of
                                                                               electronics business), or in any business that directly or
                                                                               indirectly competes with Chenming Group’s business
                                                                               which we operate from time to time (including but not
                                                                               limited to any business in the form of sole proprietorship,
                                                                               joint ventures or acquisitions, or holding interests directly
                                                                               or indirectly in such enterprises, or by any other means);
                                                                               (2) in the event that Shouguang Chenming Holdings is
                                                                               required by its business to, whether solely, jointly, or by
                                                                               representing itself or any other persons or companies,
                                                                               engage in business which directly or indirectly competes
                                                                               against the business of Chenming Group, or obtain
                                                                               any business opportunity which directly or indirectly
                                                                               competes against the business of Chenming Group, it
                                                                               shall endeavour to procure that Chenming Group shall
                                                                               have priority to obtain the right to operate such business
                                                                               or to obtain such business opportunity; (3) if Shouguang
                                                                               Chenming Holdings is in breach of the abovementioned
                                                                               undertakings, it shall indemnify the Company for any
                                                                               loss caused by such breach and the Company shall
                                                                               have the right to acquire all businesses of Shouguang
                                                                               Chenming Holdings, which directly or indirectly compete
                                                                               with the businesses of our Group, at market price or
                                                                               cost price (whichever price is lower); (4) Shouguang
                                                                               Chenming Holdings shall not make use of its position
                                                                               as the controlling shareholder (as defined in The Listing
                                                                               Rules of Hong Kong Stock Exchange) of our Group to
                                                                               jeopardise the legal interests of Chenming Group and
                                                                               its shareholders with other persons or companies or on
                                                                               their behalf.
                                                                                                                                                                   2017 ANNUAL REPORT
   3704827-t01fnar (Shandong Chenming) p.57 (P98738) 27-03-2018 16:29
   OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     III. Performance of undertakings (Cont’d)
         1.   Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
              shareholders, related parties, bidders and the Company during the reporting period or prior periods
              but subsisting to the end of the reporting period (Cont’d)
              Undertaking   Party involved in   Type of                Details of undertaking                                       Undertaking date   Term                   Particulars on the
                            undertaking         undertaking                                                                                                                   performance
                            Shouguang           Defective properties (1) According to the plan on defective properties of the       16 January 2008    During the period      Implementing as
                            Chenming Holdings                        Company, Shouguang Chenming Holdings Co., Ltd.                                    when Chenming          normal
                            Co., Ltd.                                (“Shouguang Chenming Holdings”) has guaranteed                                  Holdings was the
                                                                     and undertaken that: according to the application of                              major shareholder
                                                                     the Company, for defective property(ies) owned by the                             of the Company
                                                                     Company and its holding subsidiary company which
                                                                     situated in the administrative area of Shouguang city,
                                                                     Shouguang Chenming Holdings will purchase it (them)
                                                                     and have it(them) being transferred to itself pursuant
                                                                     to the law in accordance with the result of the related
                                                                     asset valuation if the Company decides to transfer and
                                                                     dispose of it(them) and there is no other transferee;
                                                                     (2) before the Company transfers and disposes of the
                                                                     defective properties pursuant to the law, if the Company
                                                                     suffers any economic losses due to the defects of the
                                                                     title (including but not limited to damages, penalties and
                                                                     relocation costs), Shouguang Chenming Holdings will
                                                                     bear such economic losses; (3) during the regulatory
                                                                     process taken to the defective properties of buildings
                                                                     and land of subsidiaries of the Company situated
                                                                     outside the local areas (outside the administrative area of
                                                                     Shouguang city), the economic losses such as penalties
                                                                     or relocation costs imposed by competent administrative
                                                                     authorities to be borne by the subsidiaries arising from
                                                                     defects of insufficient title documents shall be paid
                                                                     pursuant to the law by Shouguang Chenming Holdings
                                                                     after verification.
                            Shandong            Specific remedial      In view of the impacts on dilution of current returns        25 March 2016      9999-12-31             Implementing as
                            Chenming Paper      measures for           for ordinary shareholders under the preference shares                                                  normal
                            Holdings Limited    non-public issuance    issuance, and in order to implement the Notice of
                                                of preference shares   the General Office of the State Council on Further
                                                                       Strengthening Protection of the Lawful Rights of Small
                                                                       Investors in Capital Markets, protect the interests
                                                                       of ordinary shareholders and provide remedies for
                                                                       the possible dilution on current returns as a result
                                                                       of preference shares issuance, the Company has
                                                                       undertaken that it will implement various measures
                                                                       to ensure the effective utilisation of proceeds raised,
                                                                       which can prevent dilution on current returns effectively,
                                                                       thereby enhancing future returns.
58   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                      3704827-t01fnar (Shandong Chenming) p.58 (P98738) 27-03-2018 16:29
                                                                                                                                                              OUTPUT: 27-03-2018 16:29:33
VII Material Matters
III. Performance of undertakings (Cont’d)
     1.        Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
               shareholders, related parties, bidders and the Company during the reporting period or prior periods
               but subsisting to the end of the reporting period (Cont’d)
               Undertaking               Party involved in   Type of       Details of undertaking   Undertaking date   Term      Particulars on the
                                         undertaking         undertaking                                                         performance
               Equity incentive
                 undertakings
               Other undertakings
                 made to the
                 Company’s minority
                 shareholders
               Whether undertakings      Yes
                performed on time
               Specific reasons why      Not applicable
                 undertakings were not
                 performed on time
                 and next steps
     2.        Description on the Company’s assets and items in meeting original profit forecast and its explanation
               as there is profit forecast for assets and items of the Company and the reporting period is still within
               the profit forecast period
                    Applicable √ Not applicable
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
    for non-operating purposes
          Applicable √ Not applicable
     There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
     purposes during the reporting period.
V.   Opinions of the Board, the Supervisory Committee and independent Directors (if any)
     regarding the “modified auditor’s report” for the reporting period issued by the accountants
          Applicable √ Not applicable
VI. Reason for changes in accounting policies, accounting estimates and accounting methods
    as compared to the financial report for the prior year
     √ Applicable                Not applicable
                                                                                                                        2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.59 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
         (1)   Change in accounting policies
               Change of accounting policies due to the implementation of new Accounting Standard for Business Enterprises
               On 28 April 2017, the Ministry of Finance issued the Accounting Standard for Business Enterprises No. 42 - Non-
               current Assets Held-for-sale, Disposal Groups and Termination of Operations (Cai Kuai [2017] No. 13) which became
               effective on 28 May 2017 for implementation. On 10 May 2017, the Ministry of Finance issued the Accounting
               Standard for Business Enterprises No. 16 - Government Grants (Revised in 2017) (Cai Kuai [2017] No. 15) which
               became effective on 12 June 2017 for implementation.
               The Accounting Standard for Business Enterprises No. 42 - Non-current Assets, Disposal Groups for Sale and
               Termination of Operations defines the classification, measurement and disclosure of non-current assets or disposal
               groups for sale, and the disclosure of termination of operations. The financial statements have adjusted the disclosure
               of the annual financial statements in the comparable year and the notes thereof with respect to the termination of
               operations existed on the implementation date (28 May 2017) in accordance with the standard.
               Prior to the implementation of the Accounting Standard for Business Enterprises No. 16 - Government Grants (Revised
               in 2017), the Company included the government grants obtained in non-operating income or the government grants
               related to assets in deferred income, and the average amortization is included in the profit or loss for the current
               period. After the implementation of the Accounting Standard for Business Enterprises No. 16 - Government Grants
               (Revised in 2017), the government grants related to daily activities after 1 January 2017 is recognized in other income,
               if not, it is recognized in non-operating income or non-operating expenses.
60   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                    3704827-t01fnar (Shandong Chenming) p.60 (P98738) 27-03-2018 16:29
                                                                                                                   OUTPUT: 27-03-2018 16:29:33
VII Material Matters
   (2)       Change in accounting estimates
                                                                                                                                                      Unit: RMB
             Details, reason and time of application of                                          Procedure for
             change in accounting estimates                                                      approval             Items affected         Amount affected
             The debts arising from the financial leasing business 29                            Resolved and         Long-term              Decreased by
             of the Company’s subsidiary shall be provided for bad                              approved at the      receivables            RMB6,177,445.94
             debts from at 5% to 10% to by the following ways from                               19th extraordinary
             December 2017:                                                                      meeting of the
                                                                                                 eighth session of
                                                                                                 the Board on 29
                                                                                                 December 2017
                      Individual assessment of impairment
                      When assessing the probability of recovery of lease receivables                                 Loss on impairment     Increased by
                      from a customer, the ability and willingness to pay lease payments,                             of assets              RMB32,800,396.14
                      and the payment record of the customer, profitability of the lease
                      projects, and guarantees for leased assets will be analysed. If there
                      are evidences indicating that the customer is unable to repay and its
                      willingness to repay is not strong, and the principal and interest are
                      still not recoverable, or only a very small portion can be recovered,
                      after taking all possible measures or all necessary legal procedures,
                      the receivables are subject to individual impairment assessment, and
                      the difference between the present value of the future cash flows
                      expected to be derived from the receivables and the carrying amount
                      shall be accounted for as provision for bad debts and recognised in
                      profit or loss.
                      Collective assessment of impairment based on credit risk
                      characteristics
                      At the end of the period, each individual leasing contract is classified                        Non-current assets     Increased by
                      based on the amount past due and recovery, and the major basis for                              due within one year    RMB45,914,608.78
                      classification and provision for impairment are as follows:
                      Category            Basis for classification                Proportion
                                                                             of provision (%)
                      Normal              Not yet past due                              0.30
                      Overdue             180 days past due                             5.00
                                          181- 365 days past                           10.00
                                            due (inclusive)
                                          1-3 years past                               30.00
                                            due (inclusive)
                                          3- 5 years past                              50.00
                                            due (inclusive)
                                          Over 5 years past due                       100.00
                      No bad debt provision will be made for lease receivables from related                           Other current assets   Decreased by
                      parties unless there is objective evidence that the Company is unable                                                  RMB172,537,558.98
                      to recover the lease receivables from related parties.
                      If there is objective evidence that the lease receivables from related
                      parties are recovered and can be linked objectively to an event
                      occurring after the write-down, the impairment losses recognised will
                      be reversed and accounted for in profit or loss. The carrying amount
                      reversed shall not exceed the assumed amortised costs on the date
                      of reversal of the lease receivables had no impairment provision been
                      made.
                                                                                                                                       2017 ANNUAL REPORT         61
   3704827-t01fnar (Shandong Chenming) p.61 (P98738) 27-03-2018 16:29
   OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     VII. Reason for retrospective restatement to correct major accounting errors during the reporting
          period
            Applicable √ Not applicable
                                                                                                                                                 Unit: RMB
                                                                                                             The name of the
                                                                                                             report projects
                                                                                                             during the periods
                                                                                                             of comparison             Cumulative
         The contents of the correction of accounting errors.                      Procedure                 affected                  impacted number
         Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, Correction of financial     Income tax expense        Increased by
         applied for high-tech enterprise certification in 2015. The company received statement for 2016     (year 2016)               RMB65,408,033.50
         the high-tech enterprise certificate on 28 March 2016 and issued a public
         announcement. The company’s annual report was announced on 30                                      Initial undistributed     Decreased by
         March 2016, which is very close to the time that the company received the                           profit (1 January         RMB65,408,033.50
         certificate, thus in 2015, Zhanjiang Chenming was still withholding tax at a                        2016)
         25% income tax rate. In May 2016, when Zhanjiang Chenming settled the
         annual income tax for 2015, the tax authorities approved that the income
         tax may be paid at the rate of 15% for 2015. In addition, the tax authorities
         also refunded the overpaid taxes of RMB 65,952,632.95 in August 2016.
         The company directly offset the current income tax expense for 2016 after
         receiving it. As a result, there was an error in the amount of income tax
         for 2015 and 2016, but in this year, the company has made corrections to
         previous mistakes. In 2015, the company prepaid income tax at a rate of
         15%, which would reduce the deferred income tax assets of RMB 544,599.45
         as of 31 December 2015, and reduce the income tax expenses of RMB
         65,408,033.50 for the year of 2015 (among which, the current income tax
         expense was reduced by RMB 65,952,632.95, and the deferred income tax
         expense increased by RMB 544,599.45).
62   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                             3704827-t01fnar (Shandong Chenming) p.62 (P98738) 27-03-2018 16:29
                                                                                                                               OUTPUT: 27-03-2018 16:29:33
VII Material Matters
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
      financial report for the prior year
    √ Applicable            Not applicable
              Business combinations not under common control
                                                                                                                                       Revenue of     Net profit of
                                                                                                                                    acquiree from   acquiree from
                                                              Equity                                                               the acquisition the acquisition
                                          Point of time   acquisition        Equity        Equity                  Basis for the   date to the end date to the end
                                              of equity        costs acquisition       acquisition   Acquisition    acquisition      of the period   of the period
              Name of acquiree             acquisition    (RMB’0000) proportion (%)       mode            date            date              (RMB)           (RMB)
                                              2017.10     159,064.67         45.00     Merger and     2017.11.1        Date of         485,784.40   -36,856,878.73
              Shanghai Hongtai Real                                                    acquisition                  substantive
                Estate Co., Ltd.                                                                                        control
              Changes in scope of consolidation due to other reasons
              During the year, the scope of consolidation included 9 newly established subsidiaries, namely Shanghai Chenming
              Industry Co., Ltd., Shanghai Chenming Financial Leasing Co., Ltd., Guangzhou Chenming Financial Leasing Co.,
              Ltd., Shandong Chenming Commercial Factoring Co., Ltd., Guangzhou Chenming Commercial Factoring Co., Ltd.,
              Qingdao Chenming Pulp and Paper Electronic Commodity Exchange Co., Ltd., Xuchang Chenming Paper Co., Ltd.,
              Chengdu Chenming Culture Communication Co., Ltd. and Beijing Chenming Culture Communication Co., Ltd.
              During the year, the scope of consolidation excluded 2 companies: a former subsidiary, namely Shouguang Chenming
              Hongxin Packaging Co., Ltd was deregistered upon merger and acquisition by another subsidiary Shouguang
              Hongxiang Printing and Packaging Co., Ltd, whereas Jilin Chenming Machinery Manufacturing Co., Limited was
              transferred.
IX. Engagement or dismissal of accounting firms
    Current accounting firm engaged
    Name of the domestic accounting firm                                                                Ruihua Certified Public Accountants
                                                                                                        (Special General Partnership)
    Remuneration of the domestic accounting firm (RMB ‘0,000)
    Continued term of service of the domestic accounting firm
    Name of certified public accountants of the domestic accounting firm                                Zhao Yanmei and Wang Zongpei
    Whether to appoint another accounting firm during the period
    Continued term of service of certified public accountants of the
      domestic accounting firm
         Yes √ No
    Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
    √ Applicable            Not applicable
    1.        In 2017, the Company engaged Ruihua Certified Public Accountants as the internal control and auditing firm of the
              Company. The Company paid RMB600,000 as internal control and auditing fees during the period;
    2.        In 2017, the Company engaged King & Wood Mallesons (Qingdao) Law Firm as its regular legal advisor and paid
              RMB100,000 as legal advisory fees during the period;
    3.        Due to the working requirements for the non-public issuance of A shares, the Company engaged CSC Financial Co.,
              Ltd. as the sponsor for the non-public issuance. The term for ongoing supervisory will be expired on 31 December
              2017.
                                                                                                                                    2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.63 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     X.   Suspension in trading or delisting upon publication of annual report
            Applicable √ Not applicable
     XI. Matters related to bankruptcy and reorganisation
            Applicable √ Not applicable
          There was no matter related to bankruptcy and reorganisation during the reporting period.
64   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                   3704827-t01fnar (Shandong Chenming) p.64 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XII. Material litigation and arbitration
    √ Applicable               Not applicable
                                                                                                                                                          Judgment
                                                                                                                                                          execution of
    Basic information about    Amount          Will liability                                                 Judgment result of the litigation           the litigation
    litigation (arbitration)   (RMB’0,000)    be incurred      Progress of litigation (arbitration)          (arbitration) and its effect                (arbitration)    Disclosure date            Disclosure index
    Statutory demand and RMB167.86 million and Yes              1     The Court of First Instance in the 1.         The office address of the Company Not applicable       25 February 2017,          http://www.cninfo.com.cn,
    Winding-up Petition  the interest thereon,                        High Court of the HKSAR completed             in Hong Kong received the notice in                    17 July 2017, 20 October   announcement number: 2017-015,
                         USB3,548.9 thousand                          the hearing held from 21 February             relation to the injunction order with                  2017, 29 August 2017,      2017-067, 2017-069, 2017-070,
                         and the interest thereon,                    2017 to 23 February 2017.                     a case number of HCMP3060/2016                         12 September 2017,         2017-071, 2017-076, 2017-084,
                         HK$ 3303.9 thousand                                                                        to the legal representative of the                     20 October 2017            2017-128, 2017-103, 2017-106,
                         and the interest thereon               2.    The office address of the Company             Company from the Court of First                                                   2017-[]
                                                                      in Hong Kong received the notice in           Instance in the High Court of the
                                                                      relation to the injunction order with         HKSAR on 15 June 2017: (1) the
                                                                      a case number of HCMP3060/2016                amended originating summonses for
                                                                      to the legal representative of the            the injunction order be dismissed;
                                                                      Company from the Court of First               and (2) an order nisi be made on
                                                                      Instance in the High Court of the             the costs of the legal proceedings.
                                                                      HKSAR on 15 June 2017.                        The Company paid the costs to
                                                                                                                    the defendant (including the fees
                                                                3.    On 26 June 2017, there was an ex-
                                                                                                                    payable to two counsels). The
                                                                      parte hearing in chambers in the
                                                                                                                    costs shall be taxed if not agreed.
                                                                      High Court of the HKSAR in which
                                                                                                                    The High Court of the HKSAR
                                                                      the petitioner applied for an interim
                                                                                                                    anticipated the reasons for decision
                                                                      injunction order to prohibit the
                                                                                                                    of the case would be handed down
                                                                      Company from distribution of the
                                                                                                                    on 7 July 2017.
                                                                      2016 final dividend to the holders of
                                                                      H shares.                             2.      On 15 June 2017, the office address
                                                                                                                    of the Company in Hong Kong
                                                                4.    On 30 June 2017, the Hon Mr.
                                                                                                                    received a winding-up petition
                                                                      Justice Harris of the High Court of
                                                                                                                    dated 15 June 2017 filed by the
                                                                      the HKSAR discharged the interim
                                                                                                                    defendant to the High Court of the
                                                                      injunction order on the same date
                                                                                                                    HKSAR.
                                                                      after the hearing.
                                                                                                              3.    The decision was handed down by
                                                                5.    The decision was handed down by
                                                                                                                    the Hon Mr. Justice Harris of the
                                                                      the Hon Mr. Justice Harris of the
                                                                                                                    High Court of the HKSAR on 7 July
                                                                      High Court of the HKSAR on 7 July
                                                                                                                    2017.
                                                                      2017.
                                                                                                              4.    Having considered the reasons for
                                                                6.    The winding-up petition was
                                                                                                                    decision and the consequences
                                                                      scheduled to be heard before the
                                                                                                                    to the Company once the winding
                                                                      High Court of the HKSAR at 9:30
                                                                                                                    up petition is given, the Company
                                                                      a.m. on 23 August 2017.
                                                                                                                    applied for an appeal against
                                                                7.    The Company through its legal                 the decision to the High Court
                                                                      adviser applied to the Court of               of HKSAR on 12 July 2017. The
                                                                      HKSAR for the validation order                hearing was scheduled to be heard
                                                                      relating to the transfer of fully             before the Court of Appeal of the
                                                                      paid-up shares of the Company                 High Court of the HKSAR at 10:00
                                                                      on 19 July 2017 (case no.                     am on 11 May 2018.
                                                                      HCCW175/2017). The hearing of the
                                                                                                          5.        The High Court of HKSAR granted
                                                                      application of the validation order
                                                                                                                    the Validation Order to the
                                                                      was scheduled to be heard at 9:30
                                                                                                                    Company. Therefore, the transfer of
                                                                      a.m. on 19 October 2017.
                                                                                                                    fully paid-up shares of the Company
                                                                8.    The winding-up petition was heard             since the Winding Up Petition (i.e.
                                                                      by the Hon Mr. Justice Harris of              15 June 2017) would not be deemed
                                                                      the High Court of the HKSAR on 28             void because of the Winding Up
                                                                      August 2017.                                  Petition.
                                                                                                                                                                                             2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.65 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XII. Material litigation and arbitration (Cont’d)
                                                                                                                                                              Judgment
                                                                                                                                                              execution of
         Basic information about    Amount         Will liability                                                 Judgment result of the litigation           the litigation
         litigation (arbitration)   (RMB’0,000)   be incurred      Progress of litigation (arbitration)          (arbitration) and its effect                (arbitration)    Disclosure date        Disclosure index
                                                                    9.    On 5 July 2017, the Company 6.                The Court ordered an adjournment
                                                                          initiated legal proceedings for a             of the Winding-up Petition, on
                                                                          civil complaint against Arjowiggins           the Company’s undertaking that
                                                                          HKK2 Limited (“HKK2”) and related           it would procure a third party to
                                                                          parties (the “Civil Complaint”) at          pay into court the amount of the
                                                                          the Intermediate People’s Court              Statutory Demand plus interest
                                                                          of Weifang City in Shandong                   to 27 August 2018, totalling
                                                                          Province of the People’s Republic            approximately HK$389 million within
                                                                          of China (“Weifang Court”). The Civil       14 days. The costs of the Winding-
                                                                          Complaint was admitted to be heard            up Petition were kept.
                                                                          by Weifang Court on 8 July 2017.
                                                                                                                  7.    The Company had procured
                                                                          Justice Mimmie Chan of the Court              payment by a third party into the
                                                                          of First Instance of the High Court of        High Court of the HKSAR in the
                                                                          the HKSAR on 19 January 2018 in               sum of HK$389,112,432.44 (this
                                                                          chambers (open to public) ordered             sum being the Hong Kong dollar
                                                                          that the Company be restrained                equivalent of the amount set out in
                                                                          from further proceeding with the              the Statutory Demand and interest
                                                                          Civil Complaint that it had filed             thereon from 19 October 2016 to 27
                                                                          on 5 July 2017 against HKK2 and               August 2018).
                                                                          the related parties before Weifang
                                                                          Court.
                                                                          The Company withdrew the Civil
                                                                          Complaint from Weifang Court on
                                                                          22 February 2018.
     XIII. Punishment and rectification
              Applicable √ Not applicable
         There was no punishment and rectification of the Company during the reporting period.
     XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
              Applicable √ Not applicable
     XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
         incentive measure of the Company
              Applicable √ Not applicable
         There was no implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure
         of the Company during the reporting period.
66   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                                3704827-t01fnar (Shandong Chenming) p.66 (P98738) 27-03-2018 16:29
                                                                                                                                                                                                 OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVI. Significant related party transactions
    1.        Related party transactions associated with day-to-day operation
              √ Applicable                       Not applicable
                                                                                                                                                      Percentage
                                                                                             Subject    Pricing basis                     Amount of as the amount       Amount of                                    Market price
                                                                        Types of the    matter of the   of the related Price of        related party     of similar   transactions    Whether      Settlement of     of available
                                         Related party                  related party   related party   party          related party   transactions transactions         approved     exceeding    related party     similar        Disclosure
              Related party              relationship                   transactions    transactions    transactions transactions       (RMB’0,000)           (%)     (RMB’0,000)   approved cap transactions       transaction   date         Disclosure index
              Jiangxi Chenming Natural Pursuant to the requirement      Procurement     Natural gas, Market price       Market price     14,767.27          0.75%          35,000     No            Bank acceptance Not applicable 18 February http://www.cninfo.
              Gas Co., Ltd                    under Paragraph (2) of                    heavy oil etc.                                                                                              and telegraphic                2017        com.cn
                                              Article 10.1.6 of the                                                                                                                                 transfer
                                              Rules Governing the
                                              Listing of Stocks on
                                              Shenzhen Stock Exchange
              Total                                                                                     —              —               14,767.27              —         35,000      —             —              —            —           —
              Particulars on refund of bulk sale                                                        No
    2.        Related party transaction in connection with purchase or sale of assets or equity interest
                    Applicable √ Not applicable
              There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
              during the reporting period.
    3.        Related party transaction connected to joint external investment
                    Applicable √ Not applicable
              There was no related party transaction of the Company connected to joint external investment during the reporting
              period.
                                                                                                                                                                                                                   2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.67 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XVI. Significant related party transactions (Cont’d)
         4.   Related creditors’ rights and debts transactions
              √ Applicable                Not applicable
              Was there any non-operating related creditors’ rights and debts transaction?
              √ Yes          No
              Debts payable to any related party:
                                                                                                                                                      Amount             Amount
                                                                                                      Any appropriation                             increased          recovered
                                                                                                           of funds for           Opening           during the         during the                         Interest for the
                                              Relationship with                                          non-operating            balance       current period     current period                          current period
              Related party                   the Company                Reason                              purposes          (RMB’0,000)       (RMB’0,000)       (RMB’0,000)        Interest rate       (RMB’0,000)
              Shouguang Chenming              Controlling shareholder  Provision of financial support                 0 1,996,093,650.42 1,996,093,650.42                 0.00%                     0
                Holdings Company Limited                               to the Company from the
                                                                       controlling shareholder
              Shouguang Hengtai Enterprise A company controlled by Provision of financial support             4,037.27                  0                    0            4.35%               181.70%          4,218.97
                Investment Company Limited some directors and Senior from Hengtai Investment and
                                                 Management members of the Company on the same
                                                 the Company           proportion of shareholdings in
                                                                       Haiming Mining.
              Effect of related debts on the operating results and     The related debts are financial support to the Company and its subsidiaries from Chenming Holdings and Hengtai Investment to help ease the financial
                financial position of the Company                      pressure on the Company and its subsidiaries and promote the operation and production of the Company and its subsidiaries.
         5.   Other significant related party transactions
                   Applicable √ Not applicable
              There was no other significant related party transaction of the Company during the reporting period.
68   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                        3704827-t01fnar (Shandong Chenming) p.68 (P98738) 27-03-2018 16:29
                                                                                                                                                                                    OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVII. Material contracts and implementation
    1.        Custody, contracting and leasing
              (1)      Custody
                            Applicable √ Not applicable
                       There was no custody of the Company during the reporting period.
              (2)      Contracting
                            Applicable √ Not applicable
                       There was no contracting of the Company during the reporting period.
              (3)      Leasing
                            Applicable √ Not applicable
                       There was no leasing of the Company during the reporting period.
    2.        Significant guarantees
              √ Applicable               Not applicable
              (1)      Guarantees
                       During the reporting period, the Company provided guarantee to Weifang Sime Darby West Port Co., Ltd., a
                       joint venture and the guarantee amount incurred was RMB50.00 million. The Company provided guarantee
                       to subsidiaries and the guarantee amount incurred was RMB12,860.0440 million. The subsidiaries provided
                       guarantee to their subsidiaries and the guarantee amount incurred was RMB1,851.2499 million.
                       As at 31 December 2017, the balance of the external guarantee provided by the Company (including the
                       guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)
                       amounted to RMB18,452.7438 million, representing 66.43% of the equity attributable to shareholders of the
                       Company as at the end of 2017.
                       The Company did not provide any guarantee to external parties (excluding the guarantee provided to its
                       subsidiaries and investees and the guarantee provided to subsidiaries by subsidiaries) and did not provide any
                       guarantee against the rules and regulations.
                                                                                                                                                                                                                  Unit: RMB’0,000
                                                                                       External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)
                                                                                         Date of the related                                                                                                                      Guarantee
                                                                                         announcement                                                                                                                              to related
                                                                                         disclosing the             Amount of Guarantee date               Guarantee                                                  Fulfilled       parties
                       Name of obligee                                                   guarantee amount           guarantee (agreement date)             provided         Type of guarantee                 Term      or not         or not
                       Weifang Sime Darby West Port Co., Ltd.                             24 July 2017                 17,500                             5,000             General guarantee              10 years        No             No
                       Total external guarantees approved during the reporting period (A1)                             17,500 Total actual external guarantees during the reporting period (A2)                                        5,000
                       Total external guarantees approved at the end of the reporting period (A3)                      17,500 Balance of total actual guarantees at the end of the reporting period (A4)                               5,000
                                                                                                                                                                                                   2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.69 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XVII. Material contracts and implementation (Cont’d)
         2.   Significant guarantees (Cont’d)
              (1)   Guarantees (Cont’d)
                                                                                                       Guarantees between the Company and its subsidiaries
                                                                                    Date of the related                                                                                                                          Guarantee
                                                                                    announcement                                                                                                                                  to related
                                                                                    disclosing the             Amount of Guarantee date             Guarantee                                                                        parties
                    Name of obligee                                                 guarantee amount            guarantee (agreement date)          provided             Type of guarantee                 Term Fulfilled or not      or not
                    Zhanjiang Chenming Pulp & Paper Co., Ltd.                        30 March 2016                 150,000                                             General guarantee                 3 years           No              No
                    Zhanjiang Chenming Pulp & Paper Co., Ltd.                        17 February 2017              650,000                           342,060.64        General guarantee                 3 years           No              No
                    Shandong Chenming Financial Leasing Co., Ltd.                    26 March 2015                 500,000                           224,968.29        General guarantee                 7 years           No              No
                    Shandong Chenming Financial Leasing Co., Ltd.                    30 March 2016                 300,000                                             General guarantee                 7 years           No              No
                    Huanggang Chenming Arboriculture Development Co., Ltd.           17 February 2017                5,000                                             General guarantee                 3 years           No              No
                    Huanggang Chenming Pulp & Paper Co., Ltd.                        26 March 2015                 400,000                           116,161.34        General guarantee                 7 years           No              No
                    Huanggang Chenming Pulp & Paper Co., Ltd.                        30 March 2016                 550,000                                             General guarantee                 7 years           No              No
                    Jiangxi Chenming Paper Co., Ltd.                                 30 March 2016                 150,000                           91,467.48         General guarantee                 3 years           No              No
                    Jiangxi Chenming Paper Co., Ltd.                                 17 February 2017              200,000                                             General guarantee                 3 years           No              No
                    Shouguang Meilun Paper Co., Ltd.                                 16 December 2010              600,000                           50,000            General guarantee               10 years            No              No
                    Shouguang Meilun Paper Co., Ltd.                                 17 February 2017              100,000                                             General guarantee                 3 years           No              No
                    Shandong Chenming Paper Sales Company Limited                    30 March 2016                 200,000                                             General guarantee                 3 years           No              No
                    Shandong Chenming Paper Sales Company Limited                    17 February 2017              400,000                           342,479.49        General guarantee                 3 years           No              No
                    Chenming (HK) Limited                                            30 March 2016                 100,000                                             General guarantee                 3 years           No              No
                    Chenming (HK) Limited                                            17 February 2017              500,000                           470,012.15        General guarantee                 3 years           No              No
                    Shouguang Chenming Import and Export Trade Co., Ltd.             17 February 2017               50,000                           18,000            General guarantee                 3 years           No              No
                    Jilin Chenming Paper Co., Ltd.                                   17 February 2017              150,000                                             General guarantee                 3 years           No              No
                    Shandong Chenming Group Finance Co., Ltd.                        17 February 2017              500,000                                             General guarantee                 3 years           No              No
                    Zhanjiang Chenming Arboriculture Development Co., Ltd.           17 February 2017                5,000                                             General guarantee                 3 years           No              No
                    Nanchang Chenming Arboriculture Development Co., Ltd.            15 August 2017                 10,000                                             General guarantee                 3 years           No              No
                    Total amount of guarantee provided for subsidiaries approved during                          2,570,000 Total amount of guarantee provided for subsidiaries during the reporting period (B2)                   1,286,004.40
                       the reporting period (B1)
                    Total amount of guarantee provided for subsidiaries approved as at                           5,520,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting                    1,655,149.38
                       the end of the reporting period (B3)                                                                period (B4)
                                                                                                                 Guarantees between subsidiaries
                                                                                    Date of the related                                                                                                                             Guarantee
                                                                                    announcement                                                                                                                                     to related
                                                                                    disclosing the              Amount of Guarantee date                Guarantee                                                     Fulfilled         parties
                    Name of obligee                                                 guarantee amount            guarantee (agreement date)              provided         Type of guarantee                 Term         or not           or not
                    Chenming (HK) Limited                                            30 March 2016                 100,000                           99,620.41         General guarantee                 3 years           No             No
                    Chenming (HK) Limited                                            30 March 2016                 100,000                           85,504.58         General guarantee                 3 years           No             No
                    Chenming (HK) Limited                                            30 March 2016                 100,000                                             General guarantee                 3 years           No             No
                    Total amount of guarantee provided for subsidiaries approved during                                  0 Total amount of guarantee provided for subsidiaries during the reporting period (C2)                    185,124.99
                      the reporting period (C1)
                    Total amount of guarantee provided for subsidiaries approved as at                             300,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting                     185,124.99
                      the end of the reporting period (C3)                                                                 period (C4)
                                                                                           Total amount of guarantee provided (i.e. sum of the above three guarantee amount)
                    Total amount of guarantee approved during the reporting period (A1+B1+C1)                      2,587,500 Total amount of guarantee during the reporting period (A2+B2+C2)                                     1,476,129.39
                    Total amount of guarantee approved as at the end of the reporting period (A3+B3+C3)            5,837,500 Total balance of guarantee as at the end of the reporting period (A4+B4+C4)                          1,845,274.37
                    The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to                                                                                                                                            66.43%
                      the net assets of the Company
                    Of which:
                    Balance of guarantee provided for shareholders, beneficial controllers
                      and its related parties (D)
                    Balance of guarantee directly or indirectly provided for obligors                                                                                                                                             1,240,584.92
                      with gearing ratio over 70% (E)
                    Total amount of guarantee provided in excess of 50% of net assets (F)                                                                                                                                           604,689.45
                    Sum of the above three amount of guarantee (D+E+F)                                                                                                                                                            1,845,274.37
70   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                               3704827-t01fnar (Shandong Chenming) p.70 (P98738) 27-03-2018 16:29
                                                                                                                                                                                                    OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
    2.        Significant guarantees (Cont’d)
              (2)      External guarantees against the rules and regulations
                               Applicable √ Not applicable
                       There was no external guarantee provided by the Company which was against the rules and regulations during
                       the reporting period.
    3.        Entrusted cash and asset management
              (1)      Entrusted wealth management
                               Applicable √ Not applicable
                       The Company did not have any entrusted wealth management during the reporting period.
              (2)      Entrusted loans
                       √ Applicable               Not applicable
                       Entrusted loans during the reporting period
                       During the reporting period, the Company did not have other entrusted loans except for the entrusted loans
                       of RMB900 million recovered from Shouguang Jin Choi Public Assets Management Co., Ltd. according to the
                       agreement.
                       The specific circumstances of a high-risk entrusted loan with single significant amount or low security, poor
                       liquidity, and no principal protection.
                                                                                                                                                                                                          Unit: RMB’0,000
                                                                                                                                                                    Actual gains
                                                                                                                                                     Actual gains      or losses                                            Summary of
                                                                                                                                                        or losses     recovered                                             events and
                                                                                                                                       Expected        during the     during the   Impairment     Statutory   Any entrusted related
                                                Types of     Interest rate              Sources of   Commencement                         return        reporting      reporting   provision      procedure   loan plan     search
                       Borrower                 borrower         of loans Loan amount       funds    date              Expiry date        (if any)         period         period   (if any)       passed      in the future index (if any)
                       Shouguang Jin Choi       Local
                         Public Assets          government                                                                                                                                                                    http://www.
                         Management Co., Ltd.   platform                                Self-owned                     17 January                                 Recovered on                                                cninfo.com.
                                                company         10.00%         50,000   funds        18 January 2014   2017                               375.00 time              0              Yes         No              cn/
                       Shouguang Jin Choi       Local
                         Public Assets          government                                                                                                                                                                    http://www.
                         Management Co., Ltd.   platform                                Self-owned                                                                Recovered on                                                cninfo.com.
                                                company         10.00%         40,000   funds        18 April 2014     18 April 2017                    1,311.11 time              0              Yes         No              cn/
                       Total                                                   90,000           —   —                —                               1,686.11            —                    —          —              —
                       Unable to recover the principal of entrusted loans or other circumstances that may result in impairment
                               Applicable √ Not applicable
                                                                                                                                                                                                2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.71 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XVII. Material contracts and implementation (Cont’d)
         4.   Other material contracts
                 Applicable √ Not applicable
              The Company did not have any other material contract during the reporting period.
     XVIII. Fulfilment of Social Responsibility
         1.   Fulfilment of social responsibility (Cont’d)
              The state is the strongest support for the development of Chenming, while the society is the greatest origin for
              Chenming’s development and growth. During its development for more than half a century, Chenming has always
              adhered to its philosophy of “building the country through industry development and paying back to society”. It has
              voluntary performed its social responsibility, and cultivated the “tree of responsibility”, which has already achieved
              fruitful results.
              The Company has established its corporate governance structure in accordance with the requirements of the
              Companies Law, Securities Law, Articles of Association and other relevant laws and regulations and the actual
              situation of the Company. There is a clear separation of powers and responsibilities between the general meeting,
              the Board, the Supervisory Committee and the management which is accountable to the general manager. The
              management system under the structure is characterised by a mechanism of checks and balances of a legal person
              with separation of ownership and operation, separation of the decision-making, execution and supervisory powers,
              as well as the co-existence of the general meeting, the Board and the Supervisory Committee. Strict provisions on
              the rights, duties and responsibilities of the general meeting, the Board, the Supervisory Committee and general
              managers have been stipulated. The Company has placed great emphasis on fulfilment of social responsibility and
              goes beyond the concept of “profit as the only goal”. While creating value for shareholders during the process of
              production, operation and business development, the Company, in line with the development of the State and the
              society, has strived to reach a compromise between economic benefits and social benefits, short-term benefits and
              long-term benefits, as well as corporate development and social development, with the aim to achieve a healthy and
              harmonious development between the Company and its employees, the Company and the society, and the Company
              and the environment.
              Centring the corporate mission of “Creating Sharing Culture within Chenming and Achieving Win-Win Situation”, the
              core value of “Good Faith, Win-Win and Sharing”, the corporate spirit of “Learning, Surpass and Leading” as well
              as the human resources philosophy of “Providing Staff Trainings, Recruiting Talents, Allocating Human Resources
              Properly and Retaining Talents”, the Company has established its own corporate culture, which has become the spirit
              and driver for the sustainable and health development of the Company.
              The Company strives to the development path of new type industrialisation with high technology contents, low
              energy consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In
              addition, the Company endeavours to facilitate business development in line with ecological development, enhance
              its competitiveness in economic development and environmental protection, and establish its economic and
              ecological culture. It also seeks for development while protecting the environment and maintains higher environmental
              protection while seeking for scientific development, thus achieving “win-win” situation in economic development
              and environmental protection. The Company has strictly in compliance with relevant environmental protection
              policies, laws and regulations in China. It has mitigated the impact on environment through industrial optimisation
              and upgrade, reduced resources utilisation through innovative operation, and implemented strict management with
              the concept of environmental protection and safety operation being penetrated into every procedure in production
              and operation, thereby promoting the harmonious development between the people and the Company, as well as
              that of the Company and the environment. The Company is the first in the industry in China which passes ISO14001
              environmental management system certification. The Company has been named the environmental friendly enterprise,
              the recycling economy exemplary enterprise, the outstanding water efficiency unit and the outstanding unit in
              comprehensive utilisation of resources of Shandong province.
72   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                   3704827-t01fnar (Shandong Chenming) p.72 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility
    1.        Fulfilment of social responsibility (Cont’d)
              Leveraging its advanced production technology and manufacture equipment, extensive experience in waste treatment
              and various comprehensive treatment systems, the Company strives to implement horizontal and vertical control
              throughout its production processes, thus achieving low carbon emission through low energy consumption, as well
              as reduction of use of resources through recycling. The Company has passed the clean production assessment
              organised by United Nations Development Programme in May 1999. The Company focuses on its works in various
              aspects, including the establishment of eco-friendly energy consumption system, implementation of on-site 6S
              management, launch of environmental protection and hazard inspection works, wide application of new energy
              conservation and emission reduction technology, promotion of key energy conservation and emission reduction
              projects, enhancement of innovative technology, promotion of the industrialisation of comprehensive resources
              utilisation, implementation of scientific proposal on “multi-usage of water” based on the quality, quantity and working
              procedure, as well as strengthening of the awareness on energy saving and environmental protection of all staff and
              habit building. Hence, the Company has achieved whole process control and management over clean and efficient
              production.
              The Company has strictly implemented in-depth corporate governance. It has put great efforts and huge investments
              in promoting the management of “the three wastes” so as to facilitate energy conservation and emission reduction,
              aiming to become a low energy consumption and environment friendly enterprise. In respect of waste water
              treatment, the Company has established world-class waste water treatment system. It has over 10 waste water
              treatment facilities for various purposes, with the most advanced treatment technology in domestic and overseas
              market being adopted. Hence, the Company has realised the comprehensive integration and upgrade of waste water
              treatment facilities in plants, with different emission indicators better than relevant regulatory benchmark. In respect
              of solid waste treatment, the Company has discontinued the traditional landfilling treatment. It has enhanced its
              technology innovation, strengthened comprehensive resources utilisation, as well as expanded its industrial chain,
              thereby achieving recycling and harmless utilisation of solid wastes. In respect of waste gas treatment, the Company
              has introduced advanced international environmental protection equipment and technology for desulphurisation,
              denitrification and de-dusting, smelly gas treatment and closure of coal plants. It has adopted scientific waste gas
              treatment as to ensure our waste gas emission is in compliance with all relevant environmental protection standards
              and requirements in China.
              The Company strives to create a wealthy society. It has offered more job vacancies, thereby contributing more
              taxes to the government, and sharing the achievements of the Company with our staff and society. While caring our
              staff sincerely and building up a harmonious relationship with the staff, the Company also greatly supports different
              charity programmes. Over the past few years, the Company has donated tens of millions to Shouguang Education
              Fund, Shouguang Charity Federation, Weifang Venture Association, Shandong Red Cross and districts suffered from
              earthquake, which reflects the outstanding contribution of the Company to building a harmonious society in China.
              The Company has been honoured with the title of “Most Caring Donating Enterprise” by Weifang and Shouguang
              Municipal Committee and Municipal Government for serval times, while our chairman Mr. Chen Hongguo has been
              honoured with the title of “Most Caring Person”.
    2.        Fulfilment of social responsibility regarding targeted poverty relief
                  Applicable √ Not applicable
                                                                                                             2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.73 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XVIII. Fulfilment of Social Responsibility (Cont’d)
         3.   Environmental protection matters
              Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
              protection authority?
              Yes
                                          Name of major                                                                   Pollutant
                                          pollutants                     Number of                                        emission
              Name of company             and specific       Way of      emission Distribution of         Emission        standards                       Approved total    Excessive
              or subsidiary               pollutants         emission    outlets   emission outlets       concentration   implemented   Total emissions   emissions         emissions
              Shandong Chenming           COD                Organised   3          Within Chenming       200mg/L         300mg/L       4547t             7666.64t          No
                Paper Holdings Limited                       emission               Industrial Park
                                          Ammonia nitrogen   Organised   3          Within Chenming       2.90mg/L        45 mg/L       58.40t            766.66t           No
                                                             emission               Industrial Park
                                          Sulphur dioxide    Organised   2          Within Chenming       4.70mg/m3       35mg/m3       17.22t            247.16t           No
                                                             emission               Industrial Park
                                          Nitrogen oxide     Organised   2          Within Chenming       48.05mg/m3      100 mg/m3     163.10t           941.81t           No
                                                             emission               Industrial Park
                                          Smoke              Organised   2          Within Chenming       0.64 mg/m3      10 mg/m3      12.91t            70.62t            No
                                                             emission               Industrial Park
              Shouguang Meiun             Sulphur dioxide    Organised   2          Within Chenming       4.87mg/m3       35mg/m3       55.30t            348.10t           No
                Paper Co., Ltd.                              emission               Industrial Park
                                          Nitrogen oxide     Organised   2          Within Chenming       48.35mg/m3      100 mg/m3     464t              709.32t           No
                                                             emission               Industrial Park
                                          Smoke              Organised   2          Within Chenming       0.58mg/m3       5mg/m3        30.80t            73.62t            No
                                                             emission               Industrial Park
              Wuhan Chenming Hanyang      COD                Organised   1          East of the           33.97mg/l       80mg/L        40.47t            184.30t           No
               Paper Holdings Co., Ltd.                      emission               factory area
                                          Ammonia nitrogen   Organised   1          East of the           0.45mg/l        8 mg/L        0.53t             17.30t            No
                                                             emission               factory area
              Wuhan Chenming Qianneng Sulphur dioxide        Organised   2          Within Qianneng       13mg/m3         50mg/m3       32.95t            102.58t           No
               Electric Power Co., Ltd.                      emission               Electric Power
                                                                                    factory area
                                          Nitrogen oxide     Organised   2          Within Qianneng       25mg/m3         100 mg/m3     77.21t            205.16t           Nitrogen oxide
                                                             emission               Electric Power                                                                          emission
                                                                                    factory area                                                                            exceeded the
                                                                                                                                                                            standards in
                                                                                                                                                                            the first quarter
                                                                                                                                                                            of 2017 due
                                                                                                                                                                            to changes
                                                                                                                                                                            in emission
                                                                                                                                                                            standards.
                                          Smoke              Organised   2          Within Qianneng       15mg/m3         20mg/m3       14.47t            41.03t            No
                                                             emission               Electric Power
                                                                                    factory area
              Jiangxi Chenming Paper      COD                Organised   1          At the boundary       45mg/L          90mg/L        584.62t           1260t             No
                Co., Ltd.                                    emission               of factory area
                                          Ammonia nitrogen   Organised   1          At the boundary       1.5mg/L         8mg/L         48.78t            112t              No
                                                             emission               of factory area
                                          Sulphur dioxide    Organised   2          Within factory area   60mg/m3         200mg/m3      446.06t           806t              No
                                                             emission
                                          Nitrogen oxide     Organised   2          Within factory area   100mg/m3        200 mg/m3     715.35t           806t              No
                                                             emission
                                          Smoke              Organised   2          Within factory area   15mg/m3         30mg/m3       115.73t           135t              No
                                                             emission
74   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                         3704827-t01fnar (Shandong Chenming) p.74 (P98738) 27-03-2018 16:29
                                                                                                                                                          OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
    3.        Environmental protection matters (Cont’d)
                                         Name of major                                                                        Pollutant
                                         pollutants                     Number of                                             emission
              Name of company            and specific       Way of      emission Distribution of         Emission             standards                           Approved total   Excessive
              or subsidiary              pollutants         emission    outlets   emission outlets       concentration        implemented       Total emissions   emissions        emissions
              Jilin Chenming Paper       COD                Organised   1          At the boundary       61.70mg/L            90mg/L            315t              357t             No
                 Co., Ltd.                                  emission               of factory area
                                         Ammonia nitrogen   Organised   1          At the boundary       1.02mg/L             8mg/L             5.41t             34t              No
                                                            emission               of factory area
                                         Sulphur dioxide    Organised   1          Within factory area   34.30mg/m3           100mg/m3          53.28t            97t              No
                                                            emission
                                         Nitrogen oxide     Organised   1          Within factory area   54.90mg/m3           100mg/m3          73.16t            213t             No
                                                            emission
                                         Smoke              Organised   1          Within factory area   13.65mg/m3           30mg/m3           23.51t            51.66t           No
                                                            emission
              Zhanjiang Chenming         COD                Organised   1          Within Zhanjiang      63mg/L               90mg/L            1311.90t          1943t            No
                Pulp & Paper Co., Ltd.                      emission               Chenming
                                                                                   factory area
                                         Ammonia nitrogen   Organised   1          Within Zhanjiang      1.53mg/L             8mg/L             39t               43.90t           No
                                                            emission               Chenming
                                                                                   factory area
                                         Smoke              Organised   6          Within Zhanjiang      Lime kiln            Lime kiln 80mg/ 165.75t             196t             No
                                                            emission               Chenming              21.96mg/m3;          m3; Alkali
                                                                                   factory area          Alkali recovered     recovered
                                                                                                         18.60mg/m3;          30mg/m3; 1#—
                                                                                                         1#—3# circulating   3# circulating
                                                                                                         fluidised bed        fluidised bed
                                                                                                         boiler 5.83mg/       boiler30mg/m3;
                                                                                                         m3; 4# circulating   4# circulating
                                                                                                         fluidised bed        fluidised bed
                                                                                                         boiler2.63mg/m3      boiler10mg/m3
                                         Sulphur dioxide    Organised   6          Within Zhanjiang      Lime kiln            Lime kiln          160.65t          620t             No
                                                            emission               Chenming              1.67mg/m3;           400mg/m3;
                                                                                   factory area          Alkali recovered     Alkali recovered
                                                                                                         22.87mg/m3;          200mg/m3; 1#—
                                                                                                         1#—3# circulating   3# circulating
                                                                                                         fluidised bed        fluidised bed
                                                                                                         boiler 4.63mg/       boiler 100mg/
                                                                                                         m3; 4# circulating   m3; 4# circulating
                                                                                                         fluidised bed        fluidised bed
                                                                                                         boiler2.47mg/m3      boiler35mg/m3
                                         Nitrogen oxide     Organised   6          Within Zhanjiang      Lime kiln            Lime kiln          1588.60t         2169.70t         No
                                                            emission                Chenming             198.95mg/m3;         300mg/m3;
                                                                                    factory area         Alkali recovered     Alkali recovered
                                                                                                         192.10mg/m3;         200mg/m3; 1#—
                                                                                                         1#—3# circulating   3# circulating
                                                                                                         fluidised bed        fluidised bed
                                                                                                         boiler 6.90.mg/      boiler 100mg/
                                                                                                         m3; 4# circulating   m3; 4# circulating
                                                                                                         fluidised bed        fluidised bed
                                                                                                         boiler 4.25mg/m3     boiler 50mg/m3
                                                                                                                                                             2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.75 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XVIII. Fulfilment of Social Responsibility (Cont’d)
         3.   Environmental protection matters (Cont’d)
              Construction and operation of facilities for pollution prevention and control
              (1)   The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding
                    environmental protection of the central and local government. The construction of projects strictly executed
                    the evaluation system on impacts of project construction on environment. In order to ensure pollutants are
                    discharged strictly in accordance to requirements under laws and regulation and disposed properly, production
                    and operation strictly comply with the national Law on the Prevention and Control of Environmental Pollution,
                    Law on the Prevention and Control of Air Pollution, Ten Rules Regarding Water Pollution and Law on the
                    Prevention and Control of Environmental Pollution by Solid Waste.
              (2)   Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
                    facilities. The aerobic-anaerobic-in-depth treatment technology is the major technology for water treatment,
                    which can achieve standardised discharge of waste water. Moreover, subsidiaries are equipped with recycling
                    system for process effluent, and reuse treated waste water to the greatest extent in order to minimise pollution.
                    The Company has constructed a total of 8 water treatment plants, with daily treatment capacity of 350,000 m3.
                    A total of ten online water monitor facilities were installed in subsidiaries. Five online water monitor facilities are
                    directly managed by the environmental protection bureau, while the remaining five online water monitor facilities
                    are operated by entrusted enterprises qualified for running such facilities. In addition, governmental authority
                    will regularly visit the Company to conduct comparison of online monitor data every quarter. All data meets the
                    standards.
              (3)   All subsidiaries have their own power plants. Each self-owned plant has its own environmental protection
                    facilities for de-dusting, desulphurisation and denitrification. Denitrification is conducted through SNCR; while
                    desulphurisation is primarily conducted through gypsum desulphurisation (ammonia desulphurisation is adopted
                    in self-owned plant of Jiangxi Chenming).
              Environmental impact assessment of construction projects and other environmental protection administrative
              licensing
              The Company strictly complied with environmental laws and regulations all along to carry out environmental impact
              assessment of construction projects. The construction projects are all subject to environmental impact assessment.
              During the construction process, a reasonable environmental protection project construction plan is formulated and
              strictly implemented. The environmental protection facilities and the main project are designed, constructed and put
              into operation at the same time. At present, all construction projects put into production have obtained environmental
              impact assessment approval and acceptance approval.
              In 2017, the Company applied to the Environmental Protection Bureau in accordance with the Measures for the
              Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection. All subsidiaries completed
              the formalities for new discharge permits in June.
76   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                     3704827-t01fnar (Shandong Chenming) p.76 (P98738) 27-03-2018 16:29
                                                                                                                    OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
    3.        Environmental protection matters (Cont’d)
              Emergency plan for emergency environmental incidents
              The Company has strictly implemented emergency regulations for emergency environmental incidents, and
              formulated the “Emergency plan for emergency environmental incidents” according to the technical requirements in
              the “Technical Guidelines for Emergency Environmental Pollution Accidents”. The plan is reviewed by and filed with
              the Environmental Protection Bureau, and regular emergency training and emergency drills are conducted. Emergency
              measures in relation to dangerous chemicals are formulated in accordance with the environmental protection
              requirements. At the same time, necessary emergency supplies are provided with regularly inspections and updates.
              Environmental self-monitoring programme
              The Company has strictly complied with self-monitoring laws and regulations and conducted self-monitoring in
              accordance with environmental protection requirements to establish and perfect the corporate environmental
              management ledgers and materials. At present, self-monitoring is a combination of manual monitoring and automatic
              monitoring. At the same time, qualified units are engaged to conduct regular monitoring. Automatic monitoring
              projects include: Total wastewater discharge (COD, Ammonia nitrogen, flow rate); power plant, Alkali recovered
              furnace, and lime kiln exhaust emission (Sulphur dioxide, Nitrogen oxide, Smoke). Manually monitored items include:
              Daily monitoring of COD, Ammonia nitrogen, SS, chroma, pH, total phosphorus, and total nitrogen indicators. Sewage
              and other monitoring projects, unorganised exhaust emission, solid waste, and noise at the plant boundary, are
              monitored on a monthly or quarterly basis by qualified units engaged in accordance with the local environmental
              protection requirements in relation to each subsidiary.
              The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries
              are published on the national key pollution source information disclosure website and the provincial key pollution
              source information disclosure website.
              Other environmental information to be disclosed
              The relevant environmental protection information of the pollutant discharge permit information and the pollutant
              discharge permit requirements is announced on the national sewage discharge permit management information
              platform.
              Other environmental protection related information
              Other environmental protection related information is announced on the Company’s website.
                                                                                                           2017 ANNUAL REPORT        77
    3704827-t01fnar (Shandong Chenming) p.77 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XIX. Other matters of significance
         √ Applicable   Not applicable
         1.    Non-public issue of A shares
               At the 8th extraordinary meeting of the eighth session of the Board, relevant resolutions, including the Resolutions
               in Respect of the Extension of the Validity of the Resolutions in Respect of the Non-Public Issue of Shares of the
               Company were considered and approved. In view of the fact that the application for non-public issue of shares of the
               Company was still under review, it was proposed to extend the validity of the shareholders’ meeting resolutions in
               respect of the non-public issue of shares for a period of 12 months (i.e. 2 June 2018) to ensure the smooth progress
               of the non-public issue of shares and related matters. The Fourth Revision of Non-public Offering for 2016 was
               disclosed on 8 June 2017, and the Announcement on Adjustments to the Issue Price and Size for the Non-Public
               Issue of A Shares after Implementation of the 2016 Profit Distribution Plan was published on 26 July 2017.
               As of the disclosure date of the Report, the Company has not received the related approval of the CSRC. The
               Company will perform its obligations to disclose the related information on a timely basis based on the approval of the
               CSRC.
         2.    Issue of medium-term notes with an amount of RMB3,000 million.
               The public issue of the 2017 first tranche of medium-term notes in the national inter-bank bond market was launched
               by the Company on 11 July 2017. The amount of the issue was RMB1,000 million with a nominal value of RMB100
               each at the interest rate of 6.80%.
               The public issue of the 2017 second tranche of medium-term notes in the national inter-bank bond market was
               launched by the Company on 27 September 2017. The amount of the issue was RMB2,000 million with a nominal
               value of RMB100 each at the interest rate of 6.30%.
         3.    Establishment of Shanghai Chenming Industry Co., Ltd.
               In order to promote the diversified development of the Company, further expand its business scope, extend its
               market influence, enhance its overall strength and comprehensive competitiveness, and develop new sources of profit
               growth, the Company established a wholly-owned subsidiary in Shanghai named Shanghai Chenming Industry Co.,
               Ltd. with self-owned funds of RMB1,000 million.
               For details, please refer to the relevant announcement (announcement no.: 2017-113) of the Company published on
               CNINFO on 26 September 2017.
         4.    Capital increase in Chenming Finance Company
               In order to further improve the fund settlement, management and investment and financing standards, acquire more
               interbank funds and improve the profitability of Chenming Finance Company, the Company and Jiangxi Chenming
               Paper Co., Ltd. intended to increase the capital of Chenming Finance Company by RMB800 million and RMB200
               million with their own funds respectively. After the completion of the capital increase, the registered capital of
               Chenming Finance Company increased to RMB3,000 million from RMB2,000 million.
               For details, please refer to the relevant announcement (announcement no.: 2017-120) of the Company published on
               CNINFO on 14 October 2017.
78   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                   3704827-t01fnar (Shandong Chenming) p.78 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
    5.        Establishment of new financial leasing companies
              In order to promote the diversified development of the financial segment of the Group, further expand the business
              scope of the financial leasing business, enhance the overall strength and comprehensive competitiveness of the
              Company and create new sources of profit growth for the Company, the Company proposed to establish Shanghai
              Chenming Financial Leasing Co., Ltd. and Guangzhou Chenming Financial Leasing Co., Ltd in Shanghai and
              Guangzhou respectively.
              For details, please refer to the relevant announcements (announcement no.: 2017-114, 2017-143) of the Company
              published on CNINFO on 26 September 2017 and 16 November 2017.
    6.        Disposal of 30% equity interest in Xuchang Chenming
              In order to further integrate resources of the Company, optimise its asset structure and reduce its management risk,
              the Resolution on the disposal of 30% equity interest in Xuchang Chenming was considered and approved at the
              eighteenth extraordinary meeting of the eighth session of the Board of the Company, pursuant to which the Company
              proposed to dispose of 30% equity interest in its controlling subsidiary Xuchang Chenming Paper Co., Ltd. through
              public tender.
              For details, please refer to the relevant announcement (announcement no.: 2017-148) of the Company published on
              CNINFO on 28 November 2017.
    7.        Issue of super & short-term commercial paper approved for registration
              In order to further expand the finance channels of the Company, lower the finance expenses, improve the debt
              structure and enhance the benefits of the Company, the Resolution on the issue of super & short-term commercial
              paper was considered and approved at the 2016 Annual General Meeting of the Company held on 21 April 2017. The
              issue of super & short-term commercial paper of the Company was filed and approved by the National Association of
              Financial Market Institutional Investors and received the acceptance of registration notice (Zhong Shi Xie Zhu [2017]
              SCP242), by which the Company was approved to issue super & short-term commercial paper with registered amount
              of RMB 15 billion. The registered amount is valid for 2 years from the date of receipt of the notice and can be issued
              in phases within the valid registration period.
              For details, please refer to the relevant announcement (announcement no.: 2017-085) of the Company published on
              CNINFO on 5 August 2017.
                                                                                                           2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.79 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XIX. Other matters of significance (Cont’d)
         8.   Information disclosure index for 2017
              Announcement No. Subject matter                                                         Date of publication   Publication website and index
              2017-001          Announcement on Estimated Annual Results for 2016                     10 January 2017       http://www.cninfo.com.cn
              2017-002          Announcement on Result of the Issue of 2017 First Tranche of          10 January 2017       http://www.cninfo.com.cn
                                  Short-term Commercial Paper
              2017-003          Announcement on Result of the Issue of 2017 First Tranche of          12 January 2017       http://www.cninfo.com.cn
                                  Super & Short-term Commercial Paper
              2017-004          Indicative Announcement on Subsidiary Receiving Subsidy               19 January 2017       http://www.cninfo.com.cn
              2017-005          Supplementary Announcement Subsidiary Receiving Subsidy               20 January 2017       http://www.cninfo.com.cn
              2017-006          Announcement in respect of Resolutions of the Fourth Meeting          18 February 2017      http://www.cninfo.com.cn
                                  of the Eighth Session of the Board of Directors
              2017-007          Notice of 2016 Annual General Meeting                                 18 February 2017      http://www.cninfo.com.cn
              2017-008          2016 Annual Report Summary                                            18 February 2017      http://www.cninfo.com.cn
              2017-009          Announcement in respect of Resolutions of the Fifth Meeting of the    18 February 2017      http://www.cninfo.com.cn
                                  Eighth Session of the Supervisory Committee
              2017-010          Announcement on Provision of Guarantee for General Credit Lines       18 February 2017      http://www.cninfo.com.cn
                                  of Relevant Subsidiaries
              2017-011          Announcement on External Investment (I)                               18 February 2017      http://www.cninfo.com.cn
              2017-012          Announcement on Provision of Financial Support to Haiming             18 February 2017      http://www.cninfo.com.cn
                                  Mining and Related Party Transaction
              2017-013          Announcement on External Investment (II)                              18 February 2017      http://www.cninfo.com.cn
              2017-014          Announcement on Expected Ordinary Connected Transactions              18 February 2017      http://www.cninfo.com.cn
                                  in 2017
              2017-015          Indicative Announcement                                               25 February 2017      http://www.cninfo.com.cn
              2017-016          Announcement on Asset Disposal                                        1 March 2017          http://www.cninfo.com.cn
              2017-017          Announcement in respect of Resolutions of the Seventh Extraordinary   7 March 2017          http://www.cninfo.com.cn
                                  Meeting of the Eighth Session of the Board of Directors
              2017-018          Notice of 2016 Annual General Meeting                                 7 March 2017          http://www.cninfo.com.cn
              2017-019          Announcement in respect of Resolutions of the Fourth Extraordinary    7 March 2017          http://www.cninfo.com.cn
                                  Meeting of the Eighth Session of the Supervisory Committee
              2017-020          Announcement on the Cancellation of Proposal for the 2016 Annual      8 March 2017          http://www.cninfo.com.cn
                                  General Meeting
              2017-021          Supplemental Notice of 2016 Annual General Meeting                    8 March 2017          http://www.cninfo.com.cn
              2017-022          Announcement on the Distribution of Dividend for Preference Share     10 March 2017         http://www.cninfo.com.cn
              2017-023          Announcement on Result of the Issue of 2017 Second Tranche            10 March 2017         http://www.cninfo.com.cn
                                  of Super & Short-term Commercial Paper
              2017-024          Full Report of Changes in Equity                                      15 March 2017         http://www.cninfo.com.cn
              2017-025          Announcement on Result of the Issue of 2017 Third Tranche of          17 March 2017         http://www.cninfo.com.cn
                                  Super & Short-term Commercial Paper
              2017-026          Announcement on Entering into a Strategic Cooperation Agreement       21 March 2017         http://www.cninfo.com.cn
                                  with the People’s Government of Weidu District, Xuchang City
              2017-027          Announcement on Approval of Public Issuance of Corporate Bonds        24 March 2017         http://www.cninfo.com.cn
                                  by the China Securities Regulatory Commission
80   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                             3704827-t01fnar (Shandong Chenming) p.80 (P98738) 27-03-2018 16:29
                                                                                                                                    OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
    8.        Information disclosure index for 2017 (Cont’d)
              Announcement No.    Subject matter                                                          Date of publication   Publication website and index
              2017-028            Indicative Announcement on Subsidiary Receiving Subsidy                 31 March 2017         http://www.cninfo.com.cn
              2017-029            Second Supplementary Notice of the 2016 Annual General Meeting          6 April 2017          http://www.cninfo.com.cn
              2017-030            Announcement on Estimated Results for the First Quarter of 2017         11 April 2017         http://www.cninfo.com.cn
              2017-031            Announcement on Entering into a Strategic Cooperation Agreement         11 April 2017         http://www.cninfo.com.cn
                                    with Qilu Bank
              2017-032            Announcement in respect of Resolutions of the Eighth Extraordinary      13 April 2017         http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Board of Directors
              2017-033            Announcement in respect of Resolutions of the Fifth Extraordinary       13 April 2017         http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Supervisory Committee
              2017-034            Announcement in Relation to the Extension of the Validity               13 April 2017         http://www.cninfo.com.cn
                                    of the Resolutions in Respect of the Non-Public Issue of Shares
                                    of the Company and the Authorisation Granted to the Board to Deal
                                    with the Relevant Matters
              2017-035            Notice of 2017 First Extraordinary General Meeting                      13 April 2017         http://www.cninfo.com.cn
              2017-036            Notice of the 2017 First Domestic Listed Share Class Meeting and 2017   13 April 2017         http://www.cninfo.com.cn
                                    First Overseas Listed Share Class Meeting
              2017-037            Announcement on Result of the Issue of 2017 Second Tranche of           18 April 2017         http://www.cninfo.com.cn
                                    Short-term Commercial Paper
              2017-038            Indicative Announcement on 2016 Annual General Meeting                  19 April 2017         http://www.cninfo.com.cn
              2017-039            Announcement in respect of Resolutions of the Ninth Extraordinary       19 April 2017         http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Board of Directors
              2017-040            Announcement in respect of Resolutions of the Sixth Extraordinary       19 April 2017         http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Supervisory Committee
              2017-041            Announcement on Third Revision of Non-public Offering for 2016          19 April 2017         http://www.cninfo.com.cn
              2017-042            Announcement on Dilution of Current Returns and Remedial Measures       19 April 2017         http://www.cninfo.com.cn
                                    upon Non-public Offering (Third Revision)
              2017-043            Announcement on Resolutions of the 2016 Annual General Meeting          22 April 2017         http://www.cninfo.com.cn
              2017-044            Announcement on Result of the Issue of 2017 Fourth Tranche of           26 April 2017         http://www.cninfo.com.cn
                                    Super & Short-term Commercial Paper
              2017-045            Announcement in respect of Resolutions of the Fifth Meeting of the      28 April 2017         http://www.cninfo.com.cn
                                    Eighth Session of the Board of Directors
              2017-046            Announcement on Provision of Financial Support to Investee              28 April 2017         http://www.cninfo.com.cn
              2017-047            Announcement in respect of Resolutions of the Sixth Meeting of the      28 April 2017         http://www.cninfo.com.cn
                                    Eighth Session of the Supervisory Committee
              2017-048            2017 First Quarterly Report                                             28 April 2017         http://www.cninfo.com.cn
              2017-049            Indicative Announcement on Receipt of Subsidy                           28 April 2017         http://www.cninfo.com.cn
              2017-050            Announcement on the Total New Borrowings for the Year Exceeding 20%     9 May 2017            http://www.cninfo.com.cn
                                    of the Net Assets as at the End of the Previous Year
              2017-051            Announcement on Additional Resolutions Proposed at the 2017             16 May 2017           http://www.cninfo.com.cn
                                    First Extraordinary General Meeting
              2017-052            Supplementary Notice of 2017 First Extraordinary General Meeting        16 May 2017           http://www.cninfo.com.cn
                                                                                                                                      2017 ANNUAL REPORT        81
    3704827-t01fnar (Shandong Chenming) p.81 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XIX. Other matters of significance (Cont’d)
         8.   Information disclosure index for 2017 (Cont’d)
              Announcement No.   Subject matter                                                           Date of publication   Publication website and index
              2017-053           Second Supplementary Notice of the 2017 First Domestic Listed Share      16 May 2017           http://www.cninfo.com.cn
                                   Class Meeting and 2017 First Overseas Listed Share Class Meeting
              2017-054           Announcement on Pledge of Shares by Shareholders                         1 June 2017           http://www.cninfo.com.cn
              2017-055           Announcement on Resolution of the 2017 First Extraordinary               3 June 2017           http://www.cninfo.com.cn
                                   General Meeting
              2017-056           Poll Results Announcement of the 2017 First Domestic A Shareholders’    3 June 2017           http://www.cninfo.com.cn
                                   and B Shareholders’ Class Meeting and the 2017 First Overseas
                                   H Shareholders’ Class Meeting
              2017-057           Announcement on Release of Stock Pledge by Shareholders                  3 June 2017           http://www.cninfo.com.cn
              2017-058           Announcement on Pledge of Shares by Shareholders                         8 June 2017           http://www.cninfo.com.cn
              2017-059           Announcement in respect of Resolutions of the Tenth Extraordinary        8 June 2017           http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Board of Directors
              2017-060           Announcement in respect of Resolutions of the Seventh Extraordinary      8 June 2017           http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Supervisory Committee
              2017-061           Announcement on Entering into Conditional Share Purchase Agreement       8 June 2017           http://www.cninfo.com.cn
                                   and Connected Transactions under the Non-public Offering of A Share
                                   (Second Revision)
              2017-062           Announcement on Dilution of Current Returns and Remedial Measures        8 June 2017           http://www.cninfo.com.cn
                                   upon Non-public Offering (Fourth Revision)
              2017-063           Announcement on Adjustment to the Price Determination Date               8 June 2017           http://www.cninfo.com.cn
                                   for the Non-public Issue of A Shares
              2017-064           Notice of 2017 Second Extraordinary General Meeting                      8 June 2017           http://www.cninfo.com.cn
              2017-065           Notice of the 2017 Second Domestic Listed Share Class Meeting and        8 June 2017           http://www.cninfo.com.cn
                                   2017 Second Overseas Listed Share Class Meeting
              2017-066           Announcement on the Implementation of Dividend Distribution to Holders   9 June 2017           http://www.cninfo.com.cn
                                   of A Shares and B Shares for 2016
              2017-067           Indicative Announcement                                                  17 June 2017          http://www.cninfo.com.cn
              2017-068           Announcement on Resumption of Trading                                    17 June 2017          http://www.cninfo.com.cn
              2017-069           Indicative Announcement                                                  23 June 2017          http://www.cninfo.com.cn
              2017-070           Indicative Announcement                                                  30 June 2017          http://www.cninfo.com.cn
              2017-071           Indicative Announcement                                                  3 July 2017           http://www.cninfo.com.cn
              2017-072           Indicative Announcement of 2017 Second Extraordinary General Meeting,    8 July 2017           http://www.cninfo.com.cn
                                   2017 Second Class Meeting For Domestic Shareholders and 2017
                                   Second Class Meeting For Overseas Shareholders
              2017-073           Announcement on the Accumulated New Borrowing of the Current Year        8 July 2017           http://www.cninfo.com.cn
              2017-074           Announcement on Estimated Interim Results for 2017                       10 July 2017          http://www.cninfo.com.cn
              2017-075           Announcement on Result of the Issue of 2017 First Tranche of             15 July 2017          http://www.cninfo.com.cn
                                   Medium-term Notes
              2017-076           Indicative Announcement                                                  17 July 2017          http://www.cninfo.com.cn
              2017-077           Announcement in Respect of Resolutions of The Eleventh Extraordinary     25 July 2017          http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Board of Directors
              2017-078           Announcement on the Commencement of Financial Leasing Business           25 July 2017          http://www.cninfo.com.cn
              2017-079           Announcement on the Provision of Guarantee to Wholly-Owned               25 July 2017          http://www.cninfo.com.cn
                                   Subsidiary and Investee
82   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                 3704827-t01fnar (Shandong Chenming) p.82 (P98738) 27-03-2018 16:29
                                                                                                                                         OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
    8.        Information disclosure index for 2017 (Cont’d)
              Announcement No.    Subject matter                                                          Date of publication   Publication website and index
              2017-080            Notice of 2017 Third Extraordinary General Meeting                      25 July 2017          http://www.cninfo.com.cn
              2017-081            Announcement in Respect of Resolutions of 2017 Second Extraordinary     25 July 2017          http://www.cninfo.com.cn
                                    General Meeting, 2017 Second Class Meeting For Domestic
                                    Shareholders and 2017 Second Class Meeting For
                                    Overseas Shareholders
              2017-082            Announcement on Adjustments to the Issue Price and Size for the         26 July 2017          http://www.cninfo.com.cn
                                    Non-Public Issue of A Shares after Implementation of the 2016
                                    Profit Distribution Plan
              2017-083            Announcement on Release of Stock Pledge by Shareholders                 26 July 2017          http://www.cninfo.com.cn
              2017-084            Indicative Announcement                                                 31 July 2017          http://www.cninfo.com.cn
              2017-085            Announcement on Issue of Super & Short-term Commercial                  5 August 2017         http://www.cninfo.com.cn
                                    Paper Approved for Registration
              2017-086            Announcement in respect of Resolutions of the Twelfth Extraordinary     9 August 2017         http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Board of Directors
              2017-087            Announcement on the Distribution of Dividend for Second Tranche         9 August 2017         http://www.cninfo.com.cn
                                    of Preference Share
              2017-088            Announcement on Pledge of Shares by Shareholders                        9 August 2017         http://www.cninfo.com.cn
              2017-089            Announcement on Result of the Issue of 2017 Fifth Tranche of            12 August 2017        http://www.cninfo.com.cn
                                    Super & Short-term Commercial Paper
              2017-090            Announcement on 2017 Public Issue of Corporate Bonds to                 15 August 2017        http://www.cninfo.com.cn
                                    Qualified Investors (First Tranche)
              2017-091            Announcement in respect of Resolutions of the Sixth Meeting of the      16 August 2017        http://www.cninfo.com.cn
                                    Eighth Session of the Board of Directors
              2017-092            2017 Interim Report Summary                                             16 August 2017        http://www.cninfo.com.cn
              2017-093            Announcement on External Investment                                     16 August 2017        http://www.cninfo.com.cn
              2017-094            Announcement on the Provision of Guarantee to Wholly-Owned Subsidiary   16 August 2017        http://www.cninfo.com.cn
              2017-095            Announcement on Release of Stock Pledge by Shareholders                 16 August 2017        http://www.cninfo.com.cn
              2017-096            Announcement on the Implementation of the Distribution of Residual      16 August 2017        http://www.cninfo.com.cn
                                    Profits of 2016 to Preference Shareholders
              2017-097            Announcement on the Coupon Rate of 2017 Public Issue of Corporate       17 August 2017        http://www.cninfo.com.cn
                                    Bonds to Qualified Investors (First Tranche)
              2017-098            Announcement on the Participation in 2017 Online Collective Reception   19 August 2017        http://www.cninfo.com.cn
                                    Activity for Investors of Listed Companies in Shandong Jurisdiction
              2017-099            Announcement on the Result of 2017 Public Issue of Corporate Bonds      22 August 2017        http://www.cninfo.com.cn
                                    to Qualified Investors (First Tranche)
              2017-100            Supplementary Announcement of 2017 Third Extraordinary                  25 August 2017        http://www.cninfo.com.cn
                                    General Meeting
              2017-101            Supplementary Notice of 2017 Third Extraordinary General Meeting        25 August 2017        http://www.cninfo.com.cn
              2017-102            Indicative Announcement                                                 25 August 2017        http://www.cninfo.com.cn
              2017-103            Indicative Announcement                                                 29 August 2017        http://www.cninfo.com.cn
              2017-104            Announcement on Result of the Issue of 2017 Sixth Tranche of            9 September 2017      http://www.cninfo.com.cn
                                    Super & Short-term Commercial Paper
                                                                                                                                      2017 ANNUAL REPORT        83
    3704827-t01fnar (Shandong Chenming) p.83 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XIX. Other matters of significance (Cont’d)
         8.   Information disclosure index for 2017 (Cont’d)
              Announcement No.   Subject matter                                                           Date of publication   Publication website and index
              2017-105           Announcement on Release of Stock Pledge by Shareholders                  9 September 2017      http://www.cninfo.com.cn
              2017-106           Indicative Announcement                                                  12 September 2017     http://www.cninfo.com.cn
              2017-107           Announcement on the Distribution of Dividend for Third Tranche           13 September 2017     http://www.cninfo.com.cn
                                   of Preference Share
              2017-108           Poll Results Announcement of the 2017 Third Extraordinary                13 September 2017     http://www.cninfo.com.cn
                                   General Meeting
              2017-109           Announcement on Completion of Transfer of Shares Granted to Chairman     15 September 2017     http://www.cninfo.com.cn
              2017-110           Announcement On Result Of The Issue Of 2017 Seventh Tranche Of           22 September 2017     http://www.cninfo.com.cn
                                   Super & Short-Term Commercial Paper
              2017-111           Corrigendum to 2017 Interim Report                                       22 September 2017     http://www.cninfo.com.cn
              2017-112           Announcement in respect of Resolutions of the Thirteenth Extraordinary   26 September 2017     http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Board of Directors
              2017-113           Announcement on External Investment                                      26 September 2017     http://www.cninfo.com.cn
              2017-114           Announcement on External Investment                                      26 September 2017     http://www.cninfo.com.cn
              2017-115           Announcement on the Listing of 2017 Public Issue of Corporate Bonds      27 September 2017     http://www.cninfo.com.cn
                                   to Qualified Investors (First Tranche)
              2017-116           Announcement on Result of the Issue of 2017 Second Tranche of            30 September 2017     http://www.cninfo.com.cn
                                   Medium-term Notes
              2017-117           Announcement on Pledge of Shares by Shareholders                         30 September 2017     http://www.cninfo.com.cn
              2017-118           Announcement on Estimated Results for the First Three Quarters of 2017   11 October 2017       http://www.cninfo.com.cn
              2017-119           Announcement in respect of Resolutions of the Fourteenth Extraordinary   14 October 2017       http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Board of Directors
              2017-120           Announcement on External Investment                                      14 October 2017       http://www.cninfo.com.cn
              2017-121           Announcement on External Investment                                      14 October 2017       http://www.cninfo.com.cn
              2017-122           Announcement on Provision of Secured Borrowings to Xuchang Chenming      14 October 2017       http://www.cninfo.com.cn
              2017-123           Notice of 2017 Fourth Extraordinary General Meeting                      14 October 2017       http://www.cninfo.com.cn
              2017-124           Announcement on Result of the Issue of 2017 Eighth Tranche of            14 October 2017       http://www.cninfo.com.cn
                                   Super & Short-term Commercial Paper
              2017-125           Announcement in respect of Resolutions of the Fifteenth Extraordinary    20 October 2017       http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Board of Directors
              2017-126           Announcement on External Investment                                      20 October 2017       http://www.cninfo.com.cn
              2017-127           Announcement on Pledge of Shares by Shareholders                         20 October 2017       http://www.cninfo.com.cn
              2017-128           Indicative Announcement                                                  20 October 2017       http://www.cninfo.com.cn
              2017-129           Announcement on Result of the Issue of 2017 Ninth Tranche of             24 October 2017       http://www.cninfo.com.cn
                                   Super & Short-term Commercial Paper
              2017-130           2017 Third Quarterly Report                                              26 October 2017       http://www.cninfo.com.cn
              2017-131           Announcement on Result of the Issue of 2017 Tenth Tranche of             28 October 2017       http://www.cninfo.com.cn
                                   Super & Short-term Commercial Paper
              2017-132           Announcement on Resignation of Supervisor                                30 October 2017       http://www.cninfo.com.cn
              2017-133           Announcement in respect of Resolutions of the Sixteenth Extraordinary    31 October 2017       http://www.cninfo.com.cn
                                   Meeting of the Eighth Session of the Board of Directors
              2017-134           Announcement on the Transfer of 45% Equity Interest in Hongtai           31 October 2017       http://www.cninfo.com.cn
                                   Real Estate to the Company
84   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                 3704827-t01fnar (Shandong Chenming) p.84 (P98738) 27-03-2018 16:29
                                                                                                                                         OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
    8.        Information disclosure index for 2017 (Cont’d)
              Announcement No.    Subject matter                                                            Date of publication   Publication website and index
              2017-135            Announcement on the Provision of Guarantee to the Syndicated Loan         31 October 2017       http://www.cninfo.com.cn
                                    of Zhanjiang Chenming
              2017-136            Announcement on Pledge of Shares by Shareholders                          31 October 2017       http://www.cninfo.com.cn
              2017-137            Announcement on Release of Stock Pledge by Shareholders                   3 November 2017       http://www.cninfo.com.cn
              2017-138            Announcement on Increase in Shareholding by Senior Management             10 November 2017      http://www.cninfo.com.cn
              2017-139            Announcement on Resignation of General Manager                            10 November 2017      http://www.cninfo.com.cn
              2017-140            Announcement on Additional Resolutions Proposed at the 2017               11 November 2017      http://www.cninfo.com.cn
                                    Fourth Extraordinary General Meeting
              2017-141            Supplemental Notice of 2017 Fourth Extraordinary General Meeting          11 November 2017      http://www.cninfo.com.cn
              2017-142            Announcement in respect of Resolutions of the Seventeenth Extraordinary   16 November 2017      http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Board of Directors
              2017-143            Announcement on External Investment                                       16 November 2017      http://www.cninfo.com.cn
              2017-144            Announcement on External Investment                                       16 November 2017      http://www.cninfo.com.cn
              2017-145            Announcement on Result of the Issue of 2017 Eleventh Tranche of           18 November 2017      http://www.cninfo.com.cn
                                    Super & Short-term Commercial Paper
              2017-146            Announcement on Receipt of Government Subsidy                             25 November 2017      http://www.cninfo.com.cn
              2017-147            Announcement in respect of Resolutions of the Eighteenth Extraordinary    28 November 2017      http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Board of Directors
              2017-148            Announcement on the Disposal of 30% Equity Interest in                    28 November 2017      http://www.cninfo.com.cn
                                    Xuchang Chenming
              2017-149            Poll Results Announcement of the 2017 Fourth Extraordinary                1 December 2017       http://www.cninfo.com.cn
                                    General Meeting
              2017-150            Announcement on Release of Stock Pledge by Shareholders                   13 December 2017      http://www.cninfo.com.cn
              2017-151            Announcement on Pledge of Shares by Shareholders                          16 December 2017      http://www.cninfo.com.cn
              2017-152            Announcement on the Results of Redemption and Delisting of                20 December 2017      http://www.cninfo.com.cn
                                    “12 Chenming Bond”
              2017-153            Announcement on Result of the Issue of 2017 Twelfth Tranche of            21 December 2017      http://www.cninfo.com.cn
                                    Super & Short-term Commercial Paper
              2017-154            Announcement on Pledge of Shares by Shareholders                          23 December 2017      http://www.cninfo.com.cn
              2017-155            Announcement on Progress of Receipt of Government Subsidy                 28 December 2017      http://www.cninfo.com.cn
              2017-156            Announcement in respect of Resolutions of the Nineteenth Extraordinary    30 December 2017      http://www.cninfo.com.cn
                                    Meeting of the Eighth Session of the Board of Directors
              2017-157            Announcement on the Provision of Guarantee for the Issue of USD Bonds     30 December 2017      http://www.cninfo.com.cn
              2017-158            Announcement on External Investment(I)                                    30 December 2017      http://www.cninfo.com.cn
              2017-159            Announcement on External Investment (II)                                  30 December 2017      http://www.cninfo.com.cn
              2017-160            Announcement on the Commencement of Financial Leasing Business            30 December 2017      http://www.cninfo.com.cn
              2017-161            Announcement in respect of Changes in Accounting Policy and               30 December 2017      http://www.cninfo.com.cn
                                    Accounting Estimation
              2017-162            Notice of 2018 First Extraordinary General Meeting                        30 December 2017      http://www.cninfo.com.cn
              2017-163            Announcement on Release of Stock Pledge by Shareholders                   30 December 2017      http://www.cninfo.com.cn
              2017-164            Announcement on Receipt of Government Subsidy                             30 December 2017      http://www.cninfo.com.cn
              2017-165            Announcement on Resolution of the Eighth Extraordinary Meeting of the     30 December 2017      http://www.cninfo.com.cn
                                    Eighth Session of the Supervisory Committee
                                                                                                                                        2017 ANNUAL REPORT        85
    3704827-t01fnar (Shandong Chenming) p.85 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:33
     VII Material Matters
     XX. Matters of significant of subsidiaries of the Company
         √ Applicable   Not applicable
         1.    Construction of 510,000-tonne high-end cultural paper project of Shouguang Meilun
               In order to make full use of the existing pulping capacity and cost advantages of Zhanjiang Chenming Pulp & Paper
               Co., Ltd. and optimise the Company’s market layout, it was proposed to construct a new production line with an
               annual output of 510,000-tonne high-end cultural paper in the original product line with a capacity of 600,000-tonne
               coating linerboard.
               For details, please refer to the relevant announcement (announcement no.: 2017-013) of the Company published on
               CNINFO on 18 February 2017.
         2.    Transfer of 45% equity interest in Hongtai Real Estate to Shanghai Chenming Industry
               Shanghai Chenming Industry Co., Ltd. and Shanghai Hongkelong Investment Co., Ltd. entered into the Equity
               Acquisition Agreement. Based on the appraised value of the total shareholders’ equity of Shanghai Hongtai Real
               Estate Co., Ltd. of RMB 3,908,397 thousand, Shanghai Chenming proposed to acquire 45% equity interest in and
               the loan due from Hongtai Real Estate held by Hongkelong at a consideration of RMB1,714,356,217.76, in which the
               equity interest amounted to RMB 1,590,646,717.76 and loan amounted to RMB123,709,500.
               For details, please refer to the relevant announcement (announcement no.: 2017-134) of the Company published on
               CNINFO on 31 October 2017.
         3.    Construction of Differential Viscose Fibre and Ancillary Production Facilities Project of Huanggang
               Chenming
               In order to expand the industrial chain of the Company, facilitate the project construction of Huanggang Chenming,
               optimise the industrial deployment, cultivate new sources of profit growth and further enhance the competitiveness
               of the Company, Huanggang Chenming intended to establish a new production line with annual production capacity
               of 500,000 tonnes of differential viscose fibre and ancillary production facilities with annual production capacity of
               320,000 tonnes of caustic soda, 170,000 tonnes of hydrogen peroxide, 150,000 tonnes of chloroacetic acid, 240,000
               tonnes of epichlorohydrin, 260,000 tonnes of refined glycerine, 50,000 tonnes of carbon disulfide, 420,000 tonnes of
               sulfuric acid and 232,000 tonnes of calcium chloride, as well as the site construction of ancillary production facilities,
               and living quarters in Huanggang City, Hubei Province.
               For details, please refer to the relevant announcement (announcement no.: 2017-158) of the Company published on
               CNINFO on 30 December 2017.
         4.    Construction of Cogeneration Project in the Chemical Industrial Park of Huanggang Chenming
               In order to facilitate the project construction of Huanggang Chenming, satisfy the steam load of Huanggang
               Chenming’s viscose and ancillary chemicals project and provide stable steam supply to enterprises and public service
               units in the chemical industrial park with the construction of supporting facilities of high standards and high-quality
               landscape and environment, Huanggang Chenming intended to construct two 125MW high-temperature and high-
               pressure extraction back pressure steam generators and four 580t/h circulating fluidised bed boilers in Huanggang
               City, Hubei Province, as the source of heat supply for the industrial park with related supporting facilities.
               For details, please refer to the relevant announcement (announcement no.: 2017-159) of the Company published on
               CNINFO on 30 December 2017.
86   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                     3704827-t01fnar (Shandong Chenming) p.86 (P98738) 27-03-2018 16:29
                                                                                                                    OUTPUT: 27-03-2018 16:29:33
VIII Changes in Share Capital and Shareholders
I.   Changes in shares
     1.        Changes in shares
                                                                                                                                                                                  Unit: share
                                                         Opening balance                             Change during the reporting period (+/-)                            Closing balance
                                                                                                                        Shares
                                                                                                                     converted
                                                       Amount        Percentage      New issue   Bonus issue     from reserves                Others   Subtotal        Amount         Percentage
               I. Restricted shares                  7,787,180              0.40%           0              0                   0            147,921    147,921       7,935,101              0.41%
                    1. Shares held by other
                           domestic investors        7,787,180              0.40%           0              0                   0            147,921    147,921       7,935,101              0.41%
                        Including: shares held
                           by domestic
                           natural persons            7,787,180             0.40%           0              0                   0            147,921     147,921       7,935,101             0.41%
               II. Non-restricted shares          1,928,618,287            99.58%           0              0                   0           -147,921    -147,921   1,928,470,366            99.59%
                    1. RMB ordinary shares        1,105,591,276            57.07%           0              0                   0           -201,721    -201,721   1,105,389,555            57.08%
                    2. Domestic listed
                           foreign shares          470,823,511             24.32%           0              0                   0             53,800     53,800     470,877,311             24.32%
                    3. Overseas listed
                           foreign shares           352,203,500             18.19%          0              0                   0                  0          0      352,203,500             18.19%
               III. Total number of shares        1,936,405,467            100.00%          0              0                   0                  0          0    1,936,405,467            100.00%
               The reasons for such changes
               √ Applicable                     Not applicable
               Before the change, the number of restricted shares held by domestic natural persons decreased by 147,921 shares
               from 7,787,180 shares to 7,935,101 shares due to the fact that:
               According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and Senior
               Management of the Listed Companies of Shenzhen Stock Exchange, 196,327 RMB ordinary shares (A shares) without
               restriction granted to the Senior Management were put under restriction; 45,000 RMB ordinary shares (A shares)
               without restriction additionally acquired by the Senior Management and supervisors were put under restriction;
               and 46,200 domestic-listed foreign RMB shares (B shares) without restriction additionally acquired by the Senior
               Management were put under restriction during the reporting period;
               39,606 restricted RMB ordinary shares (A shares) held by the Senior Management who had resigned for more than
               half a year were released; 100,000 domestic-listed foreign RMB shares (B shares) held by the Senior Management
               who had resigned for more than half a year without restriction were released.
               Approval of changes in shareholding
                    Applicable √ Not applicable
                                                                                                                                                             2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.87 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:40
     VIII Changes in Share Capital and Shareholders
     I.   Changes in shares (Cont’d)
          1.   Changes in shares (Cont’d)
               Transfer of shares arising from changes in shareholding
               √ Applicable    Not applicable
               The Company issued the Announcement on Completion of Transfer of Shares Granted to Chairman (announcement
               no.: 2017-109) on 15 September 2017 in relation to the transfer of the 261,769 tradable A shares without restriction
               held by the former chairman of the Company, Mr. Chen Yongxing before his death to the current chairman, Mr. Chen
               Hongguo. The transfer was filed to China Securities Depository and Clearing Company Limited, Shenzhen Branch and
               the date of transfer was 11 September 2017.
               As at the disclosure date of this report, Mr. Chen Hongguo held 6,696,296 A shares of the Company, representing
               0.3458% of the total share capital of the Company.
               The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings per
               share and net assets per share attributable to shareholders of ordinary shares of the Company for the latest year and
               the latest period
                 Applicable √ Not applicable
               Other information considered necessary by the Company or required by the securities regulatory authorities to be
               disclosed
                 Applicable √ Not applicable
          2.   Changes in restricted shares
                 Applicable √ Not applicable
88   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                  3704827-t01fnar (Shandong Chenming) p.88 (P98738) 27-03-2018 16:29
                                                                                                                 OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
II.   Issuance and listing of securities
      1.        Issuance of securities (excluding preference shares) during the reporting period
                    Applicable √ Not applicable
      2.        Changes in the total number of shares and structure of shareholders and the structure of the assets
                and liabilities of the Company
                    Applicable √ Not applicable
      3.        Existing staff shares
                    Applicable √ Not applicable
III. Shareholders and beneficial controllers
      1.        Total number of shareholders and shareholdings
                                                                                                                                                                                  Unit: share
                Total number of            94,435, of which 74,291     Total number of            97,370, of which 78,263     Total number of          0   Total number of
                shareholders of ordinary   were holders of A shares,   shareholders of ordinary   were holders of A shares,   shareholders of              shareholders of
                shares as at the end       19,731 were holders of      shares as at the end of    18,735 were holders of      preference shares with       preference shares with
                of the reporting period    B shares and 413 were       the month prior to the     B shares and 372 were       restored voting right        restored voting right as
                                           holders of H shares         publication date of this   holders of H shares         as at the end of the         at the end of the month
                                                                       annual report                                          reporting period             prior to the disclosure
                                                                                                                                                           date of the annual report
                                                                                                                                                           2017 ANNUAL REPORT
      3704827-t01fnar (Shandong Chenming) p.89 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:40
     VIII Changes in Share Capital and Shareholders
     III. Shareholders and beneficial controllers (Cont’d)
         1.   Total number of shareholders and shareholdings (Cont’d)
                                                            Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
                                                                                                                                         Changes
                                                                                                                                      (increase or
                                                                                                                Number of                decrease)
                                                                                                             shares held at             during the        Number of          Number of
                                                                                             Percentage of   the end of the              reporting         restricted       non-restrict
              Name of shareholders                          Nature of shareholders            shareholding reporting period                 period       shares held        shares held           Share pledged or locked-up
                                                                                                                                                                                             Status of shares          Number
              SHOUGUANG CHENMING HOLDINGS                   State-owned legal person                15.13%        293,003,657                    0                  0       293,003,657             Pledged       171,599,100
                COMPANY LIMITED
              HKSCC NOMINEES LIMITED                        Overseas legal person                   12.85%        248,867,250           2,288,100                   0       248,867,250
              CHENMING HOLDINGS (HONG KONG) LIMITED         Overseas legal person                   12.54%        242,754,375          69,660,975                   0       242,754,375
              CENTRAL HUIJIN ASSET MANAGEMENT LTD.          Sate-owned legal person                  2.07%         40,137,900                   0                   0        40,137,900
              NATIONAL SOCIAL SECURITY FUND 403             Others                                   0.61%         11,853,596           7,111,563                   0        11,853,596
              VANGUARD EMERGING MARKETS                     Overseas legal person                    0.44%          8,608,238                   0                   0         8,608,238
                STOCK INDEX FUND
              JIAO Yanxi                                    Domestic nature person                   0.37%           7,111,563          7,111,563                  0          7,111,563
              CHEN Hongguo                                  Domestic nature person                   0.35%           6,696,296            261,769          5,022,222          1,674,074
              LSV EMERGING MARKETS EQUITY FUND, L.P.        Overseas legal person                    0.32%           6,102,800                  0                  0          6,102,800
              VANGUARD TOTAL INTERNATIONAL                  Overseas legal person                    0.31%           6,088,072            509,267                  0          6,088,072
                STOCK INDEX FUND
              Connected relationship or connected party     A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming
                relationship among the above shareholders   Holdings Company Limited, which is a state-owned legal person. Hence, they are persons acting in concert under Administration of Disclosure of Information on the
                                                            Change of Shareholdings in Listed Companies Procedures. Shareholder Chen Hongguo is the legal representative, chairman and general manager of Shouguang
                                                            Chenming Holdings Company Limited. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert and is also not
                                                            aware that any other shareholders of tradable shares are connected with each other.
90   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                         3704827-t01fnar (Shandong Chenming) p.90 (P98738) 27-03-2018 16:29
                                                                                                                                                                                           OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
    1.        Total number of shareholders and shareholdings (Cont’d)
                                   Shareholdings of the top ten shareholders of non-restricted shares
                                                                    Number of
                                                                 non-restricted
                                                                 shares held as
                                                              at the end of the
              Name of shareholders                             reporting period                 Class of shares
                                                                                 Class of shares                     Number
              SHOUGUANG CHENMING HOLDINGS                                293,003,657   RMB ordinary shares        293,003,657
               COMPANY LIMITED
              HKSCC NOMINEES LIMITED                                          Overseas listed
                                                                         248,867,250                         248,867,250
                                                                              foreign shares
              CHENMING HOLDINGS (HONG KONG) LIMITED            242,754,375 Domestic listed                   140,478,375
                                                                              foreign shares
                                                                              Overseas listed                102,276,000
                                                                              foreign shares
              CENTRAL HUIJIN ASSET MANAGEMENT LTD.               40,137,900 RMB ordinary shares                40,137,900
              NATIONAL SOCIAL SECURITY FUND 403                  11,853,596 RMB ordinary shares                11,853,596
              VANGUARD EMERGING MARKETS                           8,608,238 Domestic listed                     8,608,238
                STOCK INDEX FUND                                              foreign shares
              JIAO Yanxi                                          7,111,563 RMB ordinary shares                 7,111,563
              LSV EMERGING MARKETS EQUITY FUND, L.P.              6,102,800 Domestic listed                     6,102,800
                                                                              foreign shares
              VANGUARD TOTAL INTERNATIONAL                        6,088,072 Domestic listed                     6,088,072
                STOCK INDEX FUND                                              foreign shares
              JIN Xing                                            5,789,200 Domestic listed                     5,789,200
                                                                              foreign shares
              Connected relationship or connected       A shareholder, Chenming Holdings (Hong Kong) Limited, which
                party relationship among the top ten    is an overseas legal person, is a wholly-owned subsidiary
                shareholders of non-restricted shares,  of a shareholder, Shouguang Chenming Holdings Company
                and between the top ten shareholders of Limited, which is a state-owned legal person. Hence, they are
                non-restricted shares and the           persons acting in concert under Administration of Disclosure of
                top ten shareholders                    Information on the Change of Shareholdings in Listed Companies
                                                        Procedures. Save for the above, it is not aware that any other
                                                        shareholders of tradable shares are persons acting in concert and
                                                        is also not aware that any other shareholders of tradable shares
                                                        are connected with each other.
              Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
              shareholders and top 10 shareholders of non-restricted shares of the Company
                  Yes √ No
              The top 10 ordinary shareholders and top 10 shareholders of non-restricted ordinary shares of the Company did not
              enter into any agreed repurchase transaction during the reporting period.
                                                                                                         2017 ANNUAL REPORT       91
    3704827-t01fnar (Shandong Chenming) p.91 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:40
     VIII Changes in Share Capital and Shareholders
     III. Shareholders and beneficial controllers (Cont’d)
         2.   Controlling shareholders of the Company
              Nature of controlling shareholder: regional state-owned enterprise
              Type of controlling shareholder: legal person
                                               Legal
                                               representative/
              Name of controlling              Person in charge Date of
              shareholders                     of the unit      establishment         Enterprise code      Principal business
              Shouguang Chenming               Chen Hongguo       30 December              78348518-9   Investment in paper
                Holdings Company Limited                          2005                                  making, electricity,
                                                                                                        heat and arboriculture
                                                                                                        by its own capital.
              Shareholdings of controlling     Save for the Company, Shouguang Chenming Holdings Company Limited does not
                shareholders who have          have control over or hold any equity interest of other domestic or overseas listed
                control or hold shares in      companies.
                other domestic or overseas
                listed companies during
                the reporting period
              Change of controlling shareholders during the reporting period
                Applicable √ Not applicable
              There was no change of controlling shareholders of the Company during the reporting period.
         3.   Beneficial owner of the Company
              Nature of the beneficial owner: Regional state-owned assets administration authority
              Type of the beneficial owner: legal person
                                               Legal
                                               representative/
                                               Person in
                                               charge of          Date of
              Name of beneficial owner         the unit           establishment       Enterprise code     Principal business
              State-owned Assets               Fu Xingang         1 August 1991            F5108355-4  Responsible for the
                Supervision and                                                                        management and
                Administration Office of                                                               capital operation of the
                Shouguang City                                                                         state-owned assets of
                                                                                                       enterprises and business
                                                                                                       units in Shouguang city
              Shareholdings of beneficial owner who has           Save for the Company, State-owned Assets Supervision and
                control or holds shares in other domestic         Administration Office of Shouguang City does not have control
                or overseas listed companies during               over or hold any equity interest of other domestic or overseas
                the reporting period                              listed companies.
              Change of beneficial owner during the reporting period
                Applicable √ Not applicable
              There was no change of beneficial owner of the Company during the reporting period.
92   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                  3704827-t01fnar (Shandong Chenming) p.92 (P98738) 27-03-2018 16:29
                                                                                                                 OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
    3.        Beneficial owner of the Company (Cont’d)
              Chart illustrating the relationship between the Company and the beneficial owner
              Beneficial owner controlling the Company through trust or other asset management method
                  Applicable √ Not applicable
    4.        Other legal person shareholders interested in over 10% of the shares of the Company
                  Applicable √ Not applicable
    5.        Restrictions on decrease in shareholding by controlling shareholders, beneficial owner, reorganising
              party and other undertaking parties
                  Applicable √ Not applicable
                                                                                                   2017 ANNUAL REPORT   93
    3704827-t01fnar (Shandong Chenming) p.93 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:40
     IX Preference Shares
     √ Applicable          Not applicable
     I.    Issue and listing of preference shares during the past three years at the end of the reporting
           period
           √ Applicable             Not applicable
                                             Issue price                                                            With listing
                                                 (RMB/           Coupon         Issue size                          permission                        Information of               Information of
           Method       Issue date                share)            rate            (share) Listing date                 (share) Delisting date       use of proceeds              changes to proceeds
           Private      16 March 2016                 100         4.36%         22,500,000 8 April 2016             22,500,000 NA                     http://www.cninfo.com.cn Not applicable
           Private      16 August 2016                100         5.17%         10,000,000 12 September 2016        10,000,000 NA                     http://www.cninfo.com.cn Not applicable
           Private      21 September 2016             100         5.17%         12,500,000 24 October 2016          12,500,000 NA                     http://www.cninfo.com.cn Not applicable
     II.   Holders of preference shares and their shareholdings
                                                                                                                                                                                               Unit: share
           Total number of shareholders of                                                                 7 Total number of shareholders of
             preference shares as at the end of                                                                preference shares as at the end of
             the reporting period                                                                              the month prior to the publication
                                                                                                               date of this annual report
                                                      Holders holdings more than 5% of the preference shares of the Company or top ten holders of preference shares
                                                                                                                              Changes
                                                                                                                           (increase or
                                                                                                        Number of             decrease)
                                                                                                     shares held at          during the      Number of         Number of
                                                                                     Percentage of   the end of the           reporting       restricted      non-restrict
           Name of shareholders                        Nature of shareholders         shareholding reporting period              period     shares held       shares held         Share pledged or locked-up
                                                                                                                                                                             Status of shares          Number
           BEIJING YIBEN ZHONGXING                     Domestic non-state-                27.78%           12,500,000                0                0        12,500,000           Pledged        12,500,000
             INVESTMENT MANAGEMENT CO., LTD.           owned legal person
           BANK OF COMMUNICATIONS                      Others                             22.44%           10,100,000                0                0        10,100,000
             INTERNATIONAL TRUST CO., LTD. –
             HUILI NO.167 SINGLE CAPITAL TRUST
           BANK OF COMMUNICATIONS                      Others                             14.22%            6,400,000                0                0         6,400,000
             INTERNATIONAL TRUST CO., LTD. – HUILI
             NO.136 SINGLE CAPITAL TRUST
           QILU BANK CO., LTD. - QILU BANK QUANXIN     Others                             13.33%            6,000,000                0                0         6,000,000
             WEALTH MANAGEMENT PRODUCT SERIES
           HENGFENG BANK CO., LTD.                     Domestic non-state-                11.11%            5,000,000                0                0         5,000,000
                                                       owned legal person
           SHANGHAI STATE-OWNED                        State-owned legal person             6.67%           3,000,000                0                0         3,000,000
            ASSETS OPERATION CO., LTD.
           NCF - MINSHENG BANK - CHINA FORTUNE         Others                               4.44%           2,000,000                0                0         2,000,000
            INTERNATIONAL TRUST – CHINA
            FORTUNE TRUST MIN XIN NO. 11
            SINGLE CAPITAL TRUST
           Connected relationship or connected         The aforesaid holders of preference shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD.
            party relationship among the top ten       - HUILI NO.167 SINGLE CAPITAL TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO.,
            holders of preference shares, and          LTD. - HUILI NO.136 SINGLE CAPITAL TRUST”, are persons acting in concert. Save for the above, it is not aware
            between the top ten holders of             that the remaining holders of preference shares are persons acting in concert, and it is also not aware whether
            preference shares and the top ten          there is any connected relationship between the above holders of preference shares and top ten holders of
            holders of ordinary shares                 ordinary shares.
94   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                      3704827-t01fnar (Shandong Chenming) p.94 (P98738) 27-03-2018 16:29
                                                                                                                                                                             OUTPUT: 27-03-2018 16:29:42
IX Preference Shares
III. Profit distribution for preference shares
    √ Applicable                 Not applicable
    Profit distribution for preference shares during the reporting period
    √ Applicable                 Not applicable
                                                                                       Whether it is in
                                                                                       compliance with                                       Whether it
                                                                                       the conditions                       Whether          participates
                                                                       Distributed     and the relevant      Way of         it was an        in distribution
                                                   Dividend               amount       procedures of         dividend       accumulated      of remaining
    Date of Distribution                               Ratio        (tax inclusive)    distribution          payment        dividend         profit
    17 March 2017                                    4.36%         98,100,000.00       Yes                   Cash           No               Yes
    16 August 2017                                   5.17%         51,700,000.00       Yes                   Cash           No               Yes
    24 August 2017                                   5.30%        119,277,108.41       Yes                   Cash           No               Yes
    21 September 2017                                5.17%         64,625,000.00       Yes                   Cash           No               Yes
    Distribution for preference shares of the Company for the past three years
                                                                                                                                                Unit: RMB
                                                                                                                                         Explanation on
                                                                                                                                                 shortfall
                                                                                               Net profit                               accumulated to
                                                                                         attributable to          Percentage to                  the next
                                                                                      shareholders of              the net profit       accounting year
                                                                                       listed company             attributable to                   due to
                                                                                              under the         shareholders of               insufficient
                                                                                          consolidated          listed company              distributable
                                                                                                financial              under the       profits or portion
                                                                  Distributed               statements             consolidated        can be allocated
                                                                     amount                        for the              financial           to remaining
    Year of distribution                                       (tax inclusive)        distribution year              statements        profit distribution
    2017                                                   679,141,006.88             3,769,325,450.93                  18.02%        Chenming You 01,
                                                                                                                                       Chenming You 02
                                                                                                                                     and Chenming You
                                                                                                                                    03 participated in the
                                                                                                                                    proposal of remaining
                                                                                                                                    profit distribution for
                                                                                                                                    RMB464,716,006.88
                                                                                                                                                  in 2017.
    2016                                                   119,277,108.41             1,998,578,788.75                    5.97%       Chenming You 01
                                                                                                                                     participated in the
                                                                                                                                        remaining profit
                                                                                                                                         distribution for
                                                                                                                                    RMB119,277,108.41
                                                                                                                                                in 2016.
    2015                                                                0.00          1,086,632,711.54                    0.00%
    Any adjustment or change in profit distribution policy for preference shares
         Yes √ No
                                                                                                                                 2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.95 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:42
     IX Preference Shares
     III. Profit distribution for preference shares (Cont’d)
         Both earnings of the Company and retained profit of the parent company are positive during the reporting
         period but without profit distribution for preference shares
              Applicable √ Not applicable
         Explanation on other matters regarding distribution for preference shares
         √ Applicable      Not applicable
         Shareholders of preference shares participate in profit distribution in two portions, namely the fixed dividend distributed
         based on a fixed dividend rate and the distribution of retained earnings realised for the year.
         1.     Distribution of fixed dividend
                According to the Articles of Association, the Company shall distribute fixed dividends to holders of the preference
                shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
                reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
                the preference shares in accordance with the issuance plan under the framework and principles considered and
                approved in the general meeting in respect of the preference shares. The general meeting of the Company has the
                right to cancel part of or all of the current dividends on the preference shares. However, when the general meeting
                of the Company will consider the cancellation of part of or all of the current dividends on the preference shares, the
                Company shall inform the shareholders of preference shares at least 10 working days before the date of dividend
                payment in accordance with the requirements of the related authorities.
         2.     Participation in the distribution of retained earnings realised for the year.
                Holders of preference shares participate in the distribution of the retained earnings through receipt of cash which
                is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
                according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of preference shares can
                also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
                retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
                basis upon distribution of relevant fixed income to holders of financial instruments such as the preference shares
                which may be classified under equity. 50% of the retained earnings shall be distributed to holders of preference
                shares and ordinary shareholders. Holders of preference shares shall participate in the distribution of the retained
                earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained
                earnings by receiving cash dividends or dividends on ordinary shares.
96   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                      3704827-t01fnar (Shandong Chenming) p.96 (P98738) 27-03-2018 16:29
                                                                                                                     OUTPUT: 27-03-2018 16:29:42
IX Preference Shares
IV. Repurchase or conversion
          Applicable √ Not applicable
     There was no repurchase or conversion during the reporting period.
V.   Resumption of voting rights of preference shares
     1.        Resumption and exercise of voting rights
                   Applicable √ Not applicable
     2.        Shareholders and beneficial owner involved in resumption of voting rights of preference shares
                   Applicable √ Not applicable
VI. Accounting policy and reasons thereof
     √ Applicable                 Not applicable
     Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of
     Financial Instruments, Accounting Standard for Business Enterprises No. 37 - Presentation of Financial Instruments and
     Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
     preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
                                                                                                      2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.97 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:42
     X Directors, Supervisors and Senior Management and Staff
     I.   Changes in shareholding of Directors, Supervisors and Senior Management
                                                                                                                                                  Increase
                                                                                                                            Shares held     in the number           Decrease
                                                                                                                                as at the        of shares     in the number        Other changes      Shares held
                                                                                                                            beginning of       held during     of shares held         (increase or    as at the end
                                                                                         Start date         End date          the period        the period         during the            decrease)    of the period
          Name               Position                            Status      Sex   Age   of the term        of the term          (shares)           (shares)   period (shares)             (shares)         (shares)
          Chen Hongguo       Chairman                            In office   M     53    6 September 2001   18 May 2019       6,434,527                                                   261,769        6,696,296
          Yin Tongyuan       Vice Chairman                       In office   M     60    6 September 2001   18 May 2019       2,423,640                                                                  2,423,640
          Geng Guanglin      Director                            In office   M     44    27 May 2009        18 May 2019         437,433                                                                    437,433
                             General manager                     In office               15 November 2017   18 May 2019
          Li Feng            Director                            In office   M     45    19 April 2006      18 May 2019         471,818                                                                    471,818
          Zhang Hong         Director                            In office   F     53    12 April 2010      18 May 2019
          Yang Guihua        Director                            In office   F     52    9 May 2014         18 May 2019
          Pan Ailing         Independent Director                In office   F     53    15 May 2013        18 May 2019
          Wang Fengrong      Independent Director                In office   F     49    18 May 2016        18 May 2019
          Huang Lei          Independent Director                In office   M     61    18 May 2016        18 May 2019
          Liang Fu           Independent Director                In office   F     50    18 May 2016        18 May 2019
          Li Dong            Chairman of Supervisory Committee   In office   M     35    13 December 2016   18 May 2019                0           10,000                                                     10,000
          Sun Yinghua        Supervisor                          In office   F     49    18 May 2016        18 May 2019
          Yang Hongqin       Supervisor                          In office   F     50    30 April 2007      18 May 2019
          Zhang Xiaofeng     Supervisor                          In office   M     40    18 May 2016        18 May 2019
          Li Xueqin          Deputy general manager              In office   F     52    1 September 2004   18 May 2019         429,348                                                                    429,348
          Hu Changqing       Deputy general manager              In office   M     52    12 March 2010      18 May 2019           1,238                                                                      1,238
          Hu Jinbao          Financial controller                In office   M     51    16 November 2016   18 May 2019
          Li Zhenzhong       Deputy general manager              In office   M     44    20 March 2011      18 May 2019
          Yang Weiming       Deputy general manager              In office   M     43    18 May 2016        18 May 2019
          Zhang Qingzhi      Deputy general manager              In office   M     52    18 May 2016        18 May 2019
          Poon Shiu Cheong   Company secretary and               In office   M     48    28 May 2008        18 May 2019
                               qualified accountant
          Xiao Peng          Secretary to the Board              Resigned    M     35    16 November 2016 18 January 2018              0          111,600                                                  111,600
          Liu Jilu           Supervisor                          Resigned    M     51    18 May 2016      29 October 2017
          Total                                                                                                              10,198,004           121,600                   0             261,769       10,581,373
98   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                                                       3704827-t01fnar (Shandong Chenming) p.98 (P98738) 27-03-2018 16:29
                                                                                                                                                                                OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
II.   Changes of Directors, Supervisors and Senior Management of the Company
      √ Applicable                 Not applicable
      Name                              Position                 Type        Date              Reason
      Chen Hongguo                      General Manager          Dismissed   09 November 2017 Dismissed from the
                                                                                                general manager
                                                                                                due to work
                                                                                                arrangement
      Xiao Peng                         Secretary to the Board   Dismissed   18 January 2018  Dismissed from the
                                                                                                secretary to the
                                                                                                Board due to
                                                                                                personal
                                                                                                work change
      Liu Jilu                          Supervisor               Resigned    29 October 2017  Resigned from
                                                                                                Supervisory due to
                                                                                                his personal work
                                                                                             2017 ANNUAL REPORT      99
      3704827-t01fnar (Shandong Chenming) p.99 (P98738) 27-03-2018 16:29
      OUTPUT: 27-03-2018 16:29:43
      X Directors, Supervisors and Senior Management and Staff
      III. Employment
          Professional background, major working experiences and current duties at the Company of Directors, Supervisors and The
          Senior Management
          1.   Brief biographies of Directors
               (1)   Brief biographies of executive Directors
                     Mr. Chen Hongguo, with Chinese nationality but without the right of permanent residence abroad, joined the
                     Company in 1987, had held different positions including chief officer of manufacturing section, chief officer of
                     branch factory, the chairman of Wuhan Chenming Hanyang Paper Holdings Co., Ltd., deputy general manager,
                     director and general manager of the Company etc. He is currently the chairman of the Company and the
                     chairman cum general manager of Shouguang Chenming Holdings Company Limited. Mr. Chen Hongguo is the
                     spouse of Ms. Li Xueqin, a deputy general manager of the Company.
                     Mr. Yin Tongyuan, with Chinese nationality but without the right of permanent residence abroad, joined the Company
                     in 1982, had held different positions including the chief officer of manufacturing section, the chairman of Wuhan
                     Chenming Hanyang Paper Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd., the chairman of
                     Jiangxi Chenming Paper Co., Ltd., the director of Shouguang Chenming Holdings Co., Ltd. and the deputy general
                     manager of the Company. He is currently the Director and deputy general manager of the Company.
                     Mr. Geng Guanglin, with Chinese nationality but without the right of permanent residence abroad, joined the
                     Company in 1992, had held different positions including the chief officer of manufacturing section of the Company,
                     deputy general manager of Chibi Chenming Paper Co., Ltd., the chairman of Wuhan Chenming Hanyang Paper
                     Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd. and the chairman of Jiangxi Chenming Paper
                     Co., Ltd. He is currently a Director and the deputy general manager of the Company, and a director of Shouguang
                     Chenming Holdings Company Limited, and is in charge of the operation of Zhanjiang Chenming.
                     Mr. Li Feng, with Chinese nationality but without the right of permanent residence abroad, joined the Company
                     in 1992, had held different positions including the chief officer of manufacturing section and assistant to the
                     general manager of the Company, deputy general manager and chairman of Wuhan Chenming Hanyang Paper
                     Holdings Co., Ltd.. He is currently the executive Director and deputy general manager of the Company in charge
                     of the sales of cultural paper products. Mr. Li Feng is the brother of Ms. Li Xueqin, a deputy general manager of
                     the Company.
               (2)   Brief biographies of non-executive Directors
                     Ms. Yang Guihua, with Chinese nationality but without the right of permanent residence abroad, is a doctor of
                     engineering, an advisor to doctoral students and an candidate for the Ten Million Talents Project (
                                     ). Ms. Yang is a professor of Qilu University of Technology, a standing director of Shandong
                     Technical Association of Paper Industry, a committee member of Nano and Composite Materials Committee of
                     China Technical Association of Paper Industry (                                               ) and evaluation
                     experts in National Natural Science Foundation of China. She has served as a non-executive Director of the
                     Company since May 2014.
                     Ms. Zhang Hong, with Chinese nationality but without the right of permanent residence abroad, holds a doctoral
                     degree in Economics. She is currently a professor and advisor to doctoral students at Shandong University,
                     head of a multinational corporation research institute, a non-practising member of the Chinese Institute of
                     Certified Public Accountants, a director of China Association of International Trade, a director of Shandong
                     Province External Trade Association, an independent director of Shandong Gettop Acoustic Co., Ltd., an
                     independent director of Shandong Zhangqiu Blower Co., Ltd., an independent director of Shandong Delisi Food
                     Co., Ltd. and an independent director of Cisen Pharmaceutical Co., Ltd.. She has served as an non-executive
                     Director of the Company since April 2010.
100   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                  3704827-t01fnar (Shandong Chenming) p.100 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
    1.        Brief biographies of Directors (Cont’d)
              (3)      Brief biographies of independent non-executive Directors
                       Ms. Pan Ailing, with Chinese nationality but without the right of permanent residence abroad, is currently a
                       professor of the School of Management, and the chief of the Investment and Financing Research Centre (
                                  ) in Shandong University. She is also a director of the Accounting Institute, Shandong Province (
                                     ), a council member of Shandong Comparative Management Association, a visiting professor at
                       Soochow University in Taiwan, and a visiting scholar at University of Connecticut in the United States. She is
                       also an independent director of Sinotruck Jinan Truck Co., Ltd. (                                  ) and Inspir
                       Software Co., Ltd. She has served as an independent non-executive director of the Company since May 2013.
                       Ms. Wang Fengrong, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D.
                       in Economics and a visiting scholar at West Virginia University in the United States. She was previously a
                       lecturer at the Department of Finance of Shandong Economic University (                     ) and an associate
                       professor at the Economic Research Center of Shandong University (                             ). She currently
                       holds positions including professor and advisor to doctoral students at the Economic Research School of
                       Shandong University (                       ) and Shandong School of Development at Shandong University (
                                              ), evaluation experts in both National Social Science Fund and National Natural Science
                       Foundation of China, guest analyst regarding policy implementation of currency and credit matters for the Jinan
                       branch of the People’s Bank of China, as well as the executive director of Shandong Young Social Science
                       Workers Association (                                   ). She concurrently serves as an independent director
                       of Shandong Xinneng Taishan Power Generation Co., Ltd. (                                      ) and Shandong
                       Denghai Seeds Co., Ltd.
                       Mr. Huang Lei, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
                       Economics. He was the chief of the Department of Finance and the dean of School of Finance in Shandong
                       University of Finance (              ). He currently holds the positions including the dean of School of
                       Finance in Shandong University of Finance and Economics, the director of the professor committee and the
                       deputy director of the academic committee of Shandong University of Finance and Economics, a member
                       of the Guiding Committee on Education of Financial Majors (                                  ) of the Ministry of
                       Education, a deputy director of the Collaborative Innovation Centre for Financial Optimisation and Regional
                       Development in Shandong (                                           ), a director of the Taishan Capital Market
                       Research Center (                       ) of the Shandong University of Finance and Economics, a director of
                       the Shandong Capital Market Training Base (                            ) as well as an independent director of
                       Wanjia Asset Management Co., Ltd.
                       Ms. Liang Fu, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
                       management, a Young and Middle-aged Expert with Outstanding Contributions in Shandong Province (
                                                 ) and a visiting scholar at Tsinghua University. She concurrently holds the positions
                       including a professor and an advisor to doctoral students of the business school of Shandong University of
                       Finance and Economics, a visiting professor at Shandong Youth University of Political Science, an evaluation
                       expert in National Social Science Fund, a director of Talents Research Association of Shandong Higher
                       Education (                              ), a director of Shandong Economic Association (                     ),
                       an executive director of Shandong Management Association (                       ), an independent director of
                       Shandong Shengli Co., Ltd. and an external director of Shandong Steel Group Co., Limited.
                                                                                                               2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.101 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:43
      X Directors, Supervisors and Senior Management and Staff
      III. Employment (Cont’d)
          2.   Brief biographies of Supervisors
               Mr. Li Dong, with Chinese nationality but without the right of permanent residence abroad. After joining the Company
               in 2004, he had held different positions including the deputy chief of cost auditing section and the chief of general
               section under the financial department of the Company, the financial controller of Zhanjiang Chenming and the
               chief of financial department of the Group. He is currently the director and deputy general manager of Shouguang
               Chenming Holdings Company Limited and the chairman of the supervisory committee of the Company.
               Mr. Liu Jilu, with Chinese nationality but without the right of permanent residence abroad, graduated from the School
               of Economics and Management of China University of Geosciences with a master’s degree. He currently serves as an
               associate professor of the accounting specialty of Weifang Vocational College and has years of teaching and practical
               experience in financial accounting, financial management, audit and tax laws. He participated in the core training of
               the preparatory courses for the accountant and certified public accountant examinations and was invited to conduct
               seminars for the continuing education classes for the middle and high level accounting personnel in the Weifang City
               for many times. He resigned as a supervisor of the Company on 30 October 2017.
               Mr. Zhang Xiaofeng, with Chinese nationality but without the right of permanent residence abroad, graduated from the
               School of Management of Shandong University with a doctorate’s degree and his research direction was corporate
               strategies and corporate governance, traditional culture and modern management, etc. He currently serves as an
               associate professor of the Business Management Discipline and the deputy head of the Department of Business
               Management in the School of Management of Shandong University, offering management courses for undergraduate,
               MBA, EDP and EMBA students for a long time as well as providing training to large enterprises both inside and
               outside the province for hundreds of times. He concurrently holds positions including the committee member of
               the Professional Committee of Corporate Governance in the PRC (                                ), the part-time case
               researcher of China Europe International Business School and the secretary general of Shandong Young Social
               Science Workers Association (                                 ).
               Ms. Sun Yinghua, with Chinese nationality but without the right of permanent residence abroad, is an associate
               economist. She joined the Company in 1993, serving as price audit officer, audit director and other positions of the
               Company, and is currently an assistant to the general manager of the Company responsible for the audit department.
               Ms. Yang Hongqin, with Chinese nationality but without the right of permanent residence abroad, joined the Company
               in 1987, serving as the chief officer of quality control section and the chief of after sale services department of the
               Company and the manager of property management company, and is currently a Supervisor of the Company and
               assistant to general manager of Shandong Chenming Power Supply Holdings Co., Ltd.
102   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                 3704827-t01fnar (Shandong Chenming) p.102 (P98738) 27-03-2018 16:29
                                                                                                                 OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
    3.        Brief biographies of Senior Management
              Ms. Li Xueqin, with Chinese nationality but without the right of permanent residence abroad, is a deputy general
              manager of the Company. She joined the Company in 1987 and held the positions of the chief of audit department,
              deputy general manager, etc. Ms. Li has been a deputy general manager of the Company and a director of Shouguang
              Chenming Holdings Company Limited since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo, chairman
              of the Company.
              Mr. Hu Changqing, with Chinese nationality but without the right of permanent residence abroad, is a deputy general
              manager of the Company. He joined the Company in 1988 and had held positions as the chief of the technological
              reform department, chief officer of branch factory, deputy general manager and Director of the Company, etc. He is
              currently the director of Shouguang Chenming Holdings Company Limited, a deputy general manager of the Company
              in charge of the Huanggang Chenming Pulp and Paper project.
              Mr. Li Zhenzhong, with Chinese nationality but without the right of permanent residence abroad, joined the Company
              in 1995. He had served as principal representative of the Shanghai management region of a sales company, sales
              manager of light weight coated cultural paper products. He is currently a deputy general manager of the Company
              and marketing director of the Sales Company.
              Mr. Yang Weiming, with Chinese nationality but without the right of permanent residence abroad, joined the Company
              in 1998 and had held positions as the deputy manager, manager, general manager and principal representative of
              Chenming Sales Company, and the deputy manager, leader in charge, and general manager of a product company.
              He is currently a deputy general director of the Company in charge of overseas sales.
              Mr. Zhang Qingzhi, with Chinese nationality but without the right of permanent residence abroad, joined the Company
              in 1982 and had held positions as the chief officer of branch factory, head of the production department, assistant
              to the general manager and vice production director. He is currently a deputy general manager of the Company in
              charge of Shouguang Chenming.
              Mr. Hu Jinbao, with Chinese nationality but without the right of permanent residence abroad, a senior project manager
              in energy saving, joined the Company in 2016. He had held different positions including the director of the business
              department and the vice president of the Shouguang sub-branch of Bank of China in Weifang City of Shandong
              Province, the president of the Kuiwen sub-branch, the deputy director of the business department of the branch and
              the president of the Changyi sub-branch of Bank of China in Weifang City of Shandong Province. He is currently the
              financial controller of the Company.
              Mr. Xiao Peng, with Chinese nationality but without the right of permanent residence abroad, holds a bachelor degree
              in management. He had held different positions including the chief officer of the capital section, the chief officer of
              information disclosure section, head of securities investment department, and representative of securities affairs of
              the Company. He was the secretary to the Board of the Company during the reporting period. He resigned as the
              secretary to the Board of the Company on 18 January 2018.
              Mr. Poon Shiu Cheong is a Fellow Certified Public Accountant of Hong Kong Institute of Certified Public Accountants
              and CPA Australia. He obtained a master degree in Accounting from Central Queensland University and a master
              degree in Business Administration from Southern Cross University. He joined the Company in 2008, and is currently
              the qualified accountant and company secretary of the Company.
                                                                                                            2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.103 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:43
      X Directors, Supervisors and Senior Management and Staff
      III. Employment (Cont’d)
          3.   Brief biographies of Senior Management (Cont’d)
               Employment at the shareholder of the Company
               √ Applicable         Not applicable
                                                                                                                                                    Whether receiving
                                                                                                                                                    any remuneration
                                                                         Position at the                                                            or allowance from
                                        Name of shareholder              shareholder of                                                             the shareholder
               Name of employee         of the Company                   the Company            Start date of the term   End date of the term       of the Company
               Chen Hongguo             Shouguang Chenming Holdings   Chairman                22 September 2016       29 December 2020            No
                                          Company Limited
               Yin Tongyuan             Shouguang Chenming Holdings   Director                22 September 2016       29 December 2017            No
                                          Company Limited
               Geng Guanglin            Shouguang Chenming Holdings   Director                22 September 2016       29 December 2017            No
                                          Company Limited
               Li Xueqin                Shouguang Chenming Holdings   Director                22 September 2016       29 December 2020            No
                                          Company Limited
               Hu Changqing             Shouguang Chenming Holdings   Director                22 September 2016       29 December 2020            No
                                          Company Limited
               Li Dong                  Shouguang Chenming Holdings   Director                29 December 2017        29 December 2020            No
                                          Company Limited
               Explanation of the       Shouguang Chenming Holdings Company Limited held a general meeting on 29 December 2017 for re-election of new directors and
                 employment at the      supervisors.
                 shareholder of
                 the Company
104   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                              3704827-t01fnar (Shandong Chenming) p.104 (P98738) 27-03-2018 16:29
                                                                                                                                       OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
    3.        Brief biographies of Senior Management (Cont’d)
              Employment at other units
              √ Applicable         Not applicable
                                                                                                                                                          Whether receiving
                                                                                                                                                          any remuneration
                                                                           Position at the                                                                or allowance from
              Name of employee         Name of other units                 other units              Start date of the term     End date of the term       other units
              Zhang Hong               Sinoer Men’s Clothes Co., Ltd.        Independent director       05 September 2014            04 September 2017   Yes
                                       Shandong Gettop Acoustic               Independent director       16 September 2014            15 September 2017   Yes
                                         Co., Ltd.
                                       Shandong Zhangqiu Blower               Independent director       12 July 2015                 11 July 2018        Yes
                                         Co., Ltd.
                                       Shandong Delisi Food Co., Ltd.         Independent director       26 September 2017            25 September 2020   Yes
                                       Cisen Pharmaceutical Co., Ltd.         Independent director       28 November 2017             27 November 2020    Yes
              Pan Ailing               Sinotruck Jinan Truck Co., Ltd.        Independent director       28 April 2017                27 April 2020       Yes
                                       Inspir Software Co., Ltd.              Independent director       19 April 2017                18 April 2020       Yes
              Wang Fengrong            Shandong Xinneng Taishan               Independent director       23 May 2017                  22 May 2020         Yes
                                         Power Generation Co., Ltd.
                                       Shandong Denghai Seeds Co., Ltd. Independent director             12 May 2016                  11 May 2019         Yes
              Huang Lei                Wanjia Asset Management                Independent director       16 October 2015              16 October 2018     Yes
                                         Co., Ltd.
              Liang Fu                 Shandong Shengli Co., Ltd.             Independent director       15 May 2015                  15 May 2018         Yes
                                       Shandong Steel Group                   External director          13 September 2017            13 September 2020   Yes
                                         Co., Limited
              Explanation of the       On 2 February 2018, Shandong Gettop Acoustic Co., Ltd. issued the Announcement on Delay of Re-election for Board and Supervisory
                employment at the      Board. Prior to the completion of re-election for the Board of the Company, Zhang Hong would continue to carry out the obligations and
                other unit             duties of a director pursuant to the laws and regulations as well as the articles of association the company.
              Sanctions against current Directors, Supervisors and Senior Management of the Company and those who
              resigned during the reporting period by securities regulatory authorities in the past three years
                  Applicable √ Not applicable
                                                                                                                                           2017 ANNUAL REPORT
    3704827-t01fnar (Shandong Chenming) p.105 (P98738) 27-03-2018 16:29
    OUTPUT: 27-03-2018 16:29:43
      X Directors, Supervisors and Senior Management and Staff
      IV. Remuneration of Directors, Supervisors and Senior Management
          Decision process, basis for determining the remuneration and actual payment for the remuneration of
          Directors, Supervisors and the Senior Management
          (1)   Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual remuneration
                of each of the executive Directors and the Senior Management of the Company was in the band of RMB0.20 million to
                5.00 million and the specific amount for each of them was determined by the remuneration committee based on the
                main financial indicators and operation target completed by the Company, the scope of work and main responsibilities
                of the Directors and Senior Management of the Company, the target completion of the Directors and Senior
                Management as assessed by the duty and performance appraisal system, as well as business innovation capability
                and profit generation ability of the Directors and the Senior Management. During the reporting period, the Company
                will pay each of the independent non-executive Directors and non-executive Directors of the Company allowance of
                RMB120,000 (before tax). The travel expenses for attending board meetings and general meetings of the Company
                and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-
                executive Directors and non-executive Directors are reimbursed as expensed. The annual remuneration of Supervisors
                assuming specific managerial duties in the Company were determined by the general manager office of the Company
                based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external
                Supervisors who did not hold actual management positions in the Company. During the reporting period, the fixed
                remuneration of external Supervisors was RMB25,000 (before tax).
          (2)   Decision process for remuneration of Directors, Supervisors and Senior Management: In accordance with the relevant
                policies and regulations such as the Implementation Rules Of The Remuneration And Assessment Committee
                Under The Board, any remuneration plan for the Company’s executive Directors proposed by the remuneration and
                assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
                and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management
                officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
                directors, non-executive directors and external supervisors of the Company shall be agreed on by the Board and then
                submitted to the general meeting for consideration and approval prior to implementation.
          (3)   The remuneration and assessment committee, which was set up by the Board according to the resolution of the
                general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-
                independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and
                scheme of the non-independent Directors and Senior Management of the Company, and accountable to the Board.
106   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                  3704827-t01fnar (Shandong Chenming) p.106 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
    Decision process, basis for determining the remuneration and actual payment for the remuneration of
    Directors, Supervisors and the Senior Management (Cont’d)
                                                                                                          Unit: RMB’0,000
                                                                                                      Total       Received
                                                                                              remuneration    remuneration
                                                                                                 before tax    from related
                                                                                             received from        parties of
    Name                         Position                            Sex   Age   Status      the Company      the Company
    Chen Hongguo                 Chairman                            M      53   In office             499               No
    Yin Tongyuan                 Vice-chairman                       M      60   In office             298               No
    Geng Guanglin                Director, General Manager           M      44   In office          193.11               No
    Li Feng                      Director                            M      45   In office          242.22               No
    Zhang Hong                   Director                            F      53   In office              12               No
    Yang Guihua                  Director                            F      52   In office              12               No
    Pan Ailing                   Independent Director                F      53   In office              12               No
    Wang Fengrong                Independent Director                F      49   In office              12               No
    Huang Lei                    Independent Director                M      61   In office              12               No
    Liang Fu                     Independent Director                F      50   In office              12               No
    Li Dong                      Chairman of Supervisory Committee   M      35   In office           59.54               No
    Sun Yinghua                  Supervisor                          F      49   In office            51.4               No
    Yang Hongqin                 Supervisor                          F      50   In office           19.36               No
    Zhang Xiaofeng               Supervisor                          M      40   In office             2.5               No
    Li Xueqin                    Supervisor                          M      52   In office          211.68               No
    Hu Changqing                 Deputy general manager              F      52   In office             200               No
    Hu Jinbao                    Financial controller                M      51   In office          180.65               No
    Li Zhenzhong                 Deputy general manager              M      44   In office          175.13               No
    Yang Weiming                 Deputy general manager              M      43   In office           135.7               No
    Zhang Qingzhi                Deputy general manager              M      52   In office           61.79               No
    Poon Shiu Cheong             Company secretary and               M      48   In office           12.85               No
                                   qualified accountant
    Xiao Peng                    Secretary to the Board              M      35   Resigned            36.96               No
    Liu Jilu                     Supervisor                          M      51   Resigned             2.08               No
    Total                        —                                  —     —   —                2,453.97                —
    Directors, Supervisors and Senior Management of the Company granted share options as incentives during
    the reporting period
    Applicable √ Not applicable
                                                                                                  2017 ANNUAL REPORT
   3704827-t01fnar (Shandong Chenming) p.107 (P98738) 27-03-2018 16:29
   OUTPUT: 27-03-2018 16:29:43
      X Directors, Supervisors and Senior Management and Staff
      V.   Personnel of the Company
           1.   Number of staff, specialty composition and education level
                Number of staff at the Company (person)                                                                                  4,510
                Number of staff at major subsidiaries (person)                                                                           9,069
                Total number of staff (person)                                                                                          13,579
                Total number of staff receiving remuneration during the period (person)                                                 13,579
                Number of retired/resigned staff the parent comany and its principal subsidiaries
                  are required to compensate (person)
                                                               Specialty composition
                Category of specialty composition                                                          Number of people (person)
                Production staff                                                                                                          7,364
                Sales staff
                Technical staff                                                                                                           2,214
                Financial staff
                Administrative staff                                                                                                      1,746
                Other staff                                                                                                               1,507
                Total                                                                                                                   13,579
                                                                   Education level
                Category of education level                                                                Number of people (person)
                Postgraduate and above
                Undergraduate                                                                                                             1,293
                Post-secondary                                                                                                            3,039
                Technical secondary and below                                                                                             9,202
                Total                                                                                                                   13,579
108   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                  3704827-t01fnar (Shandong Chenming) p.108 (P98738) 27-03-2018 16:29
                                                                                                                  OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
V.   Personnel of the Company (Cont’d)
     2.        Remuneration policies
               The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject
               to the relevant laws and regulations, the Company adopts different standards of remuneration for different employees,
               which are determined based on their position, skill variety, performance etc. with reference to the remuneration level
               in the market, the average level of salary in the society and the corporate reference line set by the government. The
               Company provides various benefits to the employees, including social insurance, housing accumulation funds and
               various holidays etc. The Company regularly investigated into the remuneration level, realising a fair job place with
               incentives; and stipulated a differentiated analysis remuneration strategy to attract key personnel and enhanced the
               Company’s overall human resources competitiveness benefiting the Company’s development and human resources
               strategy.
     3.        Training programmes
               The Company attaches importance to personnel training, implements the corporate spirit of “learning, surpassing
               and leading” and establishes a learning organisation. In 2018, the Company will further enhance the cooperation with
               management consultancies and professional training institutions in order to build a scientific training system, prepare
               practical and efficient high-quality training materials and initiate targeted training programs by levels and by classes.
               All employees are given training on corporate culture. For the junior level staff, the training focuses on professional
               skills and business knowledge. For the middle level staff, the training focuses on team management and execution.
               For the senior management, training focuses on leadership. A staff team of high quality is made through training.
     4.        Labour outsourcing
                   Applicable √ Not applicable
                                                                                                              2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.109 (P98738) 27-03-2018 16:29
     OUTPUT: 27-03-2018 16:29:43
      XI Corporate Governance
      I.   Corporate governance in practice
           The Company operated in compliance with the requirement of Companies Law (                  ), Securities Law (        ),
           Code of Corporate Governance for Listed Companies (                              ), Rules Governing Listing of Stocks on
           Shenzhen Stock Exchange (                                    ), the Listing Rules of Hong Kong Stock Exchange and the
           related requirements as required by CSRC, and continued to improve and optimise its legal person governance structure
           during the reporting period. The Company also continuously improved its internal control system and proactively carried
           out management works in relation to investor relations during the reporting period, so as to further improve corporate
           governance standards and promote the Company’s standardised operations. As of the end of the reporting period, the
           actual practice of corporate governance complied with the requirements of the regulatory documents issued by the CSRC
           regarding the governance of listed companies.
           (I)    Shareholders and general meeting
                  The Company had established a corporate governance structure that ensured shareholders’ ability to fully exercise
                  their rights and enjoy equal status. Shareholders enjoyed their rights and undertook corresponding obligations in
                  accordance with the shares held by them. The convening and holding of general meeting of the Company were legal
                  and compliant, and on the premise of guaranteeing the legality and effectiveness of the general meeting, both on-site
                  voting and online voting were provided as channels to participate in such meetings. Where significant matters which
                  had an impact on the interests of minority investors were being considered, the votes by minority investors were
                  counted separately for the convenience of shareholders and for the sake of making public and timely disclosures. At
                  the same time, investors present at the general meeting could communicate with the management of the Company in
                  person, which effectively safeguard the rights and demands of investors to participate in the Company’s management.
                  We ensured that all investors could participate in corporate governance on an equal basis, which effectively safeguard
                  the legitimate interests of shareholders, especially those of minority shareholders.
           (II)   Controlling shareholder and the listed company
                  During the reporting period, the Company remained independent of its controlling shareholder, beneficial controllers
                  and related parties in terms of its business, assets, finance, personnel and organisations, and complied with the
                  relevant provisions of the China Securities Regulatory Commission on the independence of listed companies. The
                  controlling shareholders and beneficial controllers strictly regulated their behaviour, and exercised their rights and
                  performed their obligations in accordance with the laws. The Company had business independence and self-operation
                  capability.
           (III) Directors and the Board
                  The composition of the Board of the Company complied with the laws and regulations and the requirements of the
                  Articles of Association. Directors of the Company possessed the knowledge, skills, and qualities necessary to the
                  performance of their duties. All of them were able to earnestly, faithfully, and diligently perform their duties and powers
                  as stipulated in the Articles of Association. The convening and holding of Board meetings was in strict compliance
                  the Articles of Association and Rules of Procedure of Board Meetings and other relevant provisions. The four special
                  committees under the Board of the Company, namely the Strategic Committee, the Audit Committee, the Nomination
                  Committee and the Remuneration and Assessment Committee, performed their duties normally and provided
                  scientific and professional opinions for the decision-making of the Board.
110   SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                      3704827-t01fnar (Shandong Chenming) p.110 (P98738) 27-03-2018 16:29
                                                                                                                      OUTPUT: 27-03-2018 16:29:45
XI Corporate Governance
I.   Corporate governance in practice (Cont’d)
     (IV) Supervisors and the Supervisory Committee
               The Supervisory Committee strictly followed the requirement of relevant laws and regulations including the Companies
               Law, the Articles of Associations and the Rules of Procedure of the Supervisory Committee in fulfilling its duties. In
               the spirit of being accountable to the shareholders and the Company, the Supervisory Committee independently and
               effectively exercised its supervision and inspection functions. By attending Board meetings and conducting regular
               inspections on the legal compliance of the Company’s operations and finance, the Supervisory Committee supervised
               the decision-making procedures of the Board, resolutions and the legal compliance of the Company’s operations, so
               as to safeguard the legitimate interests of the Company and the shareholders.
     (V)       Information disclosure and management of investor relations
               In accordance with the requirements of the relevant rules, the Company strictly enforced the relevant information
               disclosure regulations and fully fulfilled its information disclosure obligations. The Company disclosed information in
               a timely and fair manner and ensured that the information disclosed was true, accurate and complete, and did not
               contain false information, misleading statements or major omissions. During the reporting period, the Company issued
               a total of more than 490 periodic reports, interim announcements, and related documents through the designated
               information disclosure media. The Company performed its information disclosure obligations in a timely manner with
               respect to the Company’s operations, related party transactions, external investment, external guarantees, and the
               implementation of annual profit distribution, so as to further safeguard the legitimate rights of investors.
               Under the premise of strictly fulfilling disclosure obligations, the Company attached importance to the management
               of investor relations. The Company made public our address, contact number, facsimile, e-mail and other information
               on its official website and CNINFO, in an attempt to facilitate investors’ communication with the company through
               the above channels. The Company also made full use of the investor hotline, Shenzhen Stock Exchange’s “EasyIR”
               platform, field investigation and research and other channels and methods to actively interact with investors and
               listen to what they had to say. We patiently answered questions from investors, and worked at enhancing investors’
               understanding and recognition of the Company. We passed investors’ reasonable opinions and suggestions to the
               management of the Company in a timely manner, building a bridge between investors and the Company.
     (VI) Management on registration of personnel with insider information
               The Company strictly complied with the provisions of the “Registration Management System of Personnel with Insider
               Information” and other relevant systems to strengthen the confidentiality of insider information and improved the
               registration and management of personnel with insider information. The Directors, Supervisors, Senior Management
               and other related personnel of the Company were able to strictly observe their confidentiality obligations throughout
               the preparation of periodic reports, temporary announcements and the planning of major events. With the
               development of the Company, the Company will continue to strictly abide by the requirements of relevant laws and
               regulations and continuously promote corporate governance to ensure that the Company operates in a standardised
               manner.
               Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
               CSRC in respect of actual governance of the Company
                   Yes √ No
               There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
               the CSRC in respect of the actual governance of the Company.
                                                                                                             2017 ANNUAL REPORT
     3704827-t01fnar (Shandong Chenming) p.111 (P98738) 27-03-2018 16:29
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      XI Corporate Governance
      II.   Particulars about the independence in terms of businesses, personnel, assets, organisations,
            and finance from the controlling shareholder
            The Company was completely separated from the controlling shareholder in terms of business, personnel, assets,
            organisations and finance. The Company had a comprehensive internal structure, independent and complete businesses as
            well as the capability of self-operation.
            1.   In terms of business: the Company had its own R&D, production, procurement and sales system, and was completely
                 independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiaries
                 were not competitors of the Company in the same industry.
            2.   In terms of personnel: the Company had an independent workforce, and had established independent departments
                 including the research and development department, production department, finance department, administration
                 department, procurement department and sales department. The Company had also established a comprehensive
                 management system with respect of labour, personnel and salary. Personnel of the Company were independent of
                 the controlling shareholder. The Company’s Chairman was elected at the general meeting, while the general manager,
  

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