晨鸣B:2023年半年度报告（英文版）

SHANDONG CHENMING PAPER HOLDINGS LIMITED Interim Report 2023

SHANDONG CHENMING PAPER HOLDINGS LIMITED

Interim Report 2023

August 2023I 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 interim report guarantee that there are no false representations

misleading statements or material omissions contained in the interim report and are jointly and severally responsible for the

liabilities of the Company.Chen Hongguo head of the Company Dong Lianming 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 report

in the interim report.All directors have attended the board meeting to review this report.The Company is exposed to various risk factors such as macro-economic fluctuation adjustment of state policy and

competition in the industry. Investors should be aware of investment risks. For further details please refer to the risk exposures

of the Company and the measures to be taken to address them as set out in Management Discussion and Analysis.The Company does not propose distribution of cash dividends or bonus shares and there will be no increase of share capital

from reserves.SHANDONG CHENMING PAPER HOLDINGS LIMITED 1

INTERIM REPORT 2023I Important Notice Table of Contents and Definitions

Table of Contents

I Important Notice Table of Contents and Definitions 1

II Company Profile and Key Financial Indicators 5

III Management Discussion and Analysis 9

IV Corporate Governance 24

V Environmental and Social Responsibility 27

VI Material Matters 36

VII Changes in Share Capital and Shareholders 60

VIII Preference Shares 67

IX Bonds 68

X Financial Report 71

2 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023I Important Notice Table of Contents and Definitions

Documents Available for Inspection

(I) The financial statements signed and sealed by the head of the Company the head in charge of accounting and the head of

the accounting department;

(II) the interim report signed by the legal representative;

(III) the original copies of all of the documents and announcements of the Company disclosed on the designated website as

approved by the China Securities Regulatory Commission during the reporting period;

(VI) the interim report disclosed on The Stock Exchange of Hong Kong Limited; and

(V) other relevant information.SHANDONG CHENMING PAPER HOLDINGS LIMITED 3

INTERIM REPORT 2023I Important Notice Table of Contents and Definitions

Definitions

Item Definition

Company Group Chenming Group means Shandong Chenming Paper Holdings Limited and its subsidiaries

or Chenming Paper

Parent Company or Shouguang means Shandong Chenming Paper Holdings Limited

Headquarters

Chenming Holdings means Chenming Holdings Company Limited

Shenzhen Stock Exchange means Shenzhen Stock Exchange

Stock Exchange means The Stock Exchange of Hong Kong Limited

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.Huanggang Chenming means Huanggang Chenming Pulp & Paper Co. Ltd.Chenming (HK) means Chenming (HK) Limited

Jilin Chenming means Jilin Chenming Paper Co. Ltd.Shouguang Meilun means Shouguang Meilun Paper Co. Ltd.Chenming Investment means Shandong Chenming Investment Limited

Chenming Leasing means Shandong Chenming Financial Leasing Co. Ltd. and its subsidiaries

Chenrong Fund means Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership

(Limited Partnership)

Corporate Bonds means 18 Chenming Bond 01

Perpetual Bonds means 17 Lu Chenming MTN001

reporting period means the period from 1 January 2023 to 30 June 2023

the beginning of the year or the means 1 January 2023

period

the end of the interim period or the means 30 June 2023

period

4 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023II Company Profile and Key Financial Indicators

I. Company profile

Stock abbreviation 晨鳴紙業 Stock code 000488

晨鳴 B 200488

Stock exchanges on which the shares are listed Shenzhen Stock Exchange

Stock abbreviation Chenming Paper Stock code 01812

Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited

Stock abbreviation before any changes (if any) None

Legal name in Chinese of the Company 山東晨鳴紙業集團有限公司

Legal short name in Chinese of the Company (if any) 晨鳴紙業

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

II. Contact persons and contact methods

Secretary to the Board Hong Kong Company Secretary

Name Yuan Xikun Chu Hon Leung

Correspondence No. 2199 Nongsheng East Road Shouguang City 22nd Floor World Wide House Central Hong Kong

Address Shandong Province

Telephone 0536-2158008 00852-21629600

Facsimile 0536-2158977 00852-25010028

Email address chenmmingpaper@163.com liamchu@li-partners.com

III. Other information

1. Contact methods of the Company

Whether the registered address office address postal code website email and others of the Company changed during

the reporting period

□ Applicable √ Not applicable

There was no change of the registered address office address postal code website email and others of the Company

during the reporting period. Please refer to the 2022 annual report for details.

2. Information disclosure and places for inspection

Whether the information disclosure and places for inspection changed during the reporting period

□ Applicable √ Not applicable

There was no change of the websites of the stock exchanges and the names and websites of the media where the

Company discloses its interim report and places for inspection of the Company’s interim report during the reporting

period. Please refer to the 2022 annual report for details.

3. Other relevant information

Whether other relevant information changed during the reporting period

□ Applicable √ Not applicable

SHANDONG CHENMING PAPER HOLDINGS LIMITED 5

INTERIM REPORT 2023II Company Profile and Key Financial Indicators

IV. Major accounting data and financial indicators

Retrospective adjustment to or restatement of the accounting data for prior years by the Company

□ Yes √ No

Increase/decrease

for the reporting

period as compared

The corresponding to the corresponding

period of period of

The reporting period the prior year the prior year

Revenue (RMB) 12564962781.31 16676428365.83 -24.65%

Net profit attributable to shareholders of the Company (RMB) -688080164.10 230141463.76 -398.98%

Net profit after extraordinary gains or losses attributable to

shareholders of the Company (RMB) -811839217.49 173407927.13 -568.17%

Net cash flows from operating activities (RMB) 1783087747.59 998264209.45 78.62%

Basic earnings per share (RMB per share) -0.250 0.064 -490.63%

Diluted earnings per share (RMB per share) -0.250 0.064 -490.63%

Decrease by 5.17

Rate of return on weighted average net assets -4.15% 1.02% percentage points

Increase/decrease as

at the end of the

reporting period as

As at the end of As at the end of compared to the

the reporting period the prior year end of the prior year

Total assets (RMB) 82652860756.58 84301017409.62 -1.96%

Net assets attributable to shareholders of the Company (RMB) 18287406923.90 19084565494.92 -4.18%

Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interest

payment deferred and accumulated to subsequent periods for Perpetual Bonds. When calculating financial indicators such as

earnings per share and rate of return on weighted average net assets the interest on Perpetual Bonds of RMB44481369.86

during the reporting period is deducted.

6 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023II Company Profile and Key Financial Indicators

V. 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.VI. Items and amounts of extraordinary gains or losses

√ Applicable □ Not applicable

Unit: RMB

Item Amount Explanation

Profit or loss from disposal of non-current assets (including write-off of provision

for asset impairment) 9118027.05

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 in compliance with national

policies and regulations) accounted for in profit or loss for the current period 108155697.19

Profit or loss from debt restructuring -145995.36

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 financial

liabilities held for trading and financial assets available for sale -25565577.25

Reversal of provision for impairment of receivables individually tested for

impairment 68586443.66

Profit or loss from changes in the fair value of consumable biological assets

subsequently measured at fair value 5749779.42

Other non-operating income and expenses other than the above items 443855.10

Less: Effect of income tax 39664063.42

Effect of minority interests (after tax) 2919113.00

Total 123759053.39

SHANDONG CHENMING PAPER HOLDINGS LIMITED 7

INTERIM REPORT 2023II Company Profile and Key Financial Indicators

Details of other gain or loss items falling within the definition of extraordinary gain or loss:

□ Applicable √ Not applicable

The Company did not have details of other gain or loss items falling within the definition of extraordinary gain or loss.Explanation on 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 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.

8 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

I. Principal activities of the Company during the Reporting Period

(I) Industry overview

According to the Guidelines for the Industry Classification of Listed Companies (2012 Revision) issued by the CSRC the

industry in which the Company operates is “C22 paper making and paper products industry”.The paper making industry is an important basic raw material industry closely related to the national economy and social

development with sustainable development characteristics. With strong industrial relevance and large market capacity

paper products are widely used in various fields such as cultural communication people’s life industry agriculture

and national defence involving forestry agriculture machinery manufacturing chemicals cogeneration environmental

protection and other industries and having an important pulling effect on the economic activities of upstream and

downstream sectors. As a typical midstream manufacturing industry the paper making industry is characterised

as “asset heavy” with “long industrial chain and diverse demand”. The upstream raw material price fluctuation will

directly affect the production and operation costs of companies and leading players have laid out their pulp and paper

integration strategies to seize the commanding heights in raw materials and grasp the market initiative. In recent years

with the implementation of policies such as “waste ban” and “dual control of energy intensity and total consumption”

environmental pressure and fierce market competition have resulted in a higher barrier to entry. Paper making

companies with economies of scale forest resources and capital and technological strength have gradually gained

a dominant position in the market and backward production capacity has been continuously phased out. According

to the survey data of China Paper Association the number of paper and paperboard production enterprises in China

decreased to about 2500 in 2022 from about 3500 in 2012 and the number of production enterprises with output

exceeding 1.00 million tonnes increased to 27 from 14 further raising the industry concentration ratio.In the first half of 2023 the paper making industry suffered from a weak global economic recovery great downward

pressure on the macroeconomy and insufficient end user consumption demand resulting from factors such as the

Russia-Ukraine conflict and the persistent high inflation pressure in Europe and the United States on the one hand. On

the other hand the paper making industry encountered a trough as pulp and paper production capacity continued to

increase the industry supply pressure remained high and the supply-demand imbalance suppressed the prices and

sales of machine-made paper. According to the data of the National Bureau of Statistics the total profit of industrial

enterprises above designated size in the paper making and paper products industry for the period from January to June

2023 was RMB12.04 billion down by 44.6% year on year. As the macroeconomic order returned to normal a series of

policies to expand domestic demand and boost consumption took effect and the downstream demand was going to

gradually pick up the profitability and prosperity of the paper making industry are expected to be restored.(II) Business overview

The Company has firmly adhered to the general keynote of green low-carbon recycling and sustainable development

focused on the pulp and paper making industry development vigorously implemented the innovation-driven strategy

persisted in the pulp and paper integration strategy and built three production bases with Shouguang in northern China

Huanggang in central China and Zhanjiang in southern China. At present the Company has established production

bases in Shandong Guangdong Hubei Jiangxi Jilin and other places with annual pulp and paper production capacity

of 11.00 million tonnes and is the first paper making enterprise in China to realise the capacity balance between pulp

production and paper making. During the reporting period the machine-made paper business was the major income

and profit source of the Company and there were no major changes in its principal activity and business model in terms

of procurement production marketing and R&D.In the first half of 2023 affected by the macroeconomic environment the downstream demand was weak which led to

a significant year-on-year decline in machine-made paper sales and prices. In particular the continuous decline in the

white cardboard prices had a great impact on the Company’s profit. Although the prices of raw and auxiliary materials

such as wood pulp wood chips and energy showed an obvious downward trend during the reporting period the costs

of machine-made paper were still higher than that of the corresponding period of the prior year and the profit margin

was squeezed due to the lagging effect of cost improvement. Next the Company will improve its operation quality and

efficiency by adjusting its pulp-paper structure advancing high value-added product development improving asset

utilisation rate and consolidating overseas market channels. Meanwhile with an improving macroeconomic environment

and gradually improving downstream demand the Company will effectively restore its profitability.SHANDONG CHENMING PAPER HOLDINGS LIMITED 9

INTERIM REPORT 2023III Management Discussion and Analysis

I. Principal activities of the Company during the Reporting Period (Cont’d)

(III) Products

As a leading enterprise in the domestic paper industry the Company attaches great importance to technology research

and development and brand benefits and has the largest and most advanced pulping and papermaking production

lines in the world with machine-made paper products covering more than 200 types in seven series including culture

paper coated paper white cardboard copy paper industrial paper special paper and household paper. The Company

owns “CHENMING CLOUDY MIRROR” “CHENMING CLOUDLY LION” “CHENMING SNOW SHARK” “CHENMINGEAGLE” “CHENMING GONGHAO” “XINGZHILIAN” and other famous brands. During the reporting period “CLOUDYMIRROR” 70g and 80g and “CLOUDY LEOPARD” electrostatic copy paper of the Company were successfully selected

into the 2023 “Made in Shandong * Qilu Quality Goods” and the brand reputation continued to improve.Major

production

Category Major brands and types companies Range of application

Culture paper series 1. “BIYUNTIAN” “CLOUDY MIRROR” “CLOUDY Shouguang Printing publications textbooks magazinesLEOPARD” and “YUNJIN” all-wood pulp offset Headquarters covers illustrations notebooks test papers

paper and electrostatic base paper Shouguang Meilun teaching materials reference books etc.

2. “CLOUDY LION” and “CLOUDY CRANE” original Zhanjiang Chenming

white offset paper Jiangxi Chenming

3. “CLOUDY PINE” and “GREEN PINE” light weight Jilin Chenming

paper

4. Blueprint paper colour offset paper pure texture

paper non-fluorescent offset paper PE offset

paper

5. Beige and high white book paper

6. Light weight coated paper

Coated paper series 1. “SNOW SHARK” and “EAGLE” one-sided coated Shouguang Double-sided coated paper is suitable for

paper Headquarters high quality printing such as high-grade

2. “SNOW SHARK” “EAGLE” and “RABBIT” double- Shouguang Meilun picture albums picture magazines and so

sided coated paper on promotional materials such as interior

3. “EAGLE” and “RABBIT” matte coated paper pages of high-end books wall calendars

posters and so on and suitable for suitable

for high-speed sheet printing and high-speed

rotary printing;

One-sided coated paper is suitable for

upscale tobacco package paper adhesive

sticker shopping bags slipcases envelopes

gift wrapping and so on and suitable for large

format printing and commercial printing.

10 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

I. Principal activities of the Company during the Reporting Period (Cont’d)

(II) Products (Cont’d)

Major

production

Category Major brands and types companies Range of application

White cardboard 1. White cardboard of “LIYA” series white cardboard Shouguang High-end gift boxes cosmetics boxes tags

series and ivory cardboard of “LIPIN” and “POPLAR” Headquarters shopping bags publicity pamphlets high-

series high bulk cardboard and ivory cardboard of Jiangxi Chenming end postcards; cigarette package printing

“LIZZY” and “BAIYU” series and super high bulk Zhanjiang Chenming of medium and high quality; milk package

cardboard of “LIYING” and “BAIYU” series beverage package disposable paper cups

2. Food package board of “LIYA” and “LIZZY” series milk tea cups and noodle bowls.

3. Coated cattle card and LIYA book card

4. Playcard paper board

5. Chenming cigarette cardboard

Copy paper series “GOLDEN MINGYANG” and “GOLDEN CHENMING” Shouguang Printing and copying business documents

copy paper “BOYA” and “BIYUNTIAN” copy paper Headquarters training materials and writing.“MINGYANG” “LUCKY CLOUDS” “BOYANG” and Shouguang Meilun

“SHANYIN” copy paper and “GONGHAO” and Zhanjiang Chenming

“TIANJIAN” copy paper

Industrial paper seriesHigh-grade yellow anti-sticking base paper ordinary Shouguang Anti-stick base paper is mainly used for

yellow/white anti-sticking base paper and PE paper Headquarters producing the paper base of stripping paper

Jiangxi Chenming or anti-sticking base paper;

Zhanjiang Chenming

Cast coated base paper is suitable for

producing adhesive paper or playcard

compound paper after coating.Special paper series Thermal paper and glassine paper Shouguang Art Paper High-grade adhesive backing paper for

electronics medicine food washing supplies

supermarket labels double-sided tapes etc.Household paper Toilet paper facial tissue pocket tissue napkin paper Shouguang Meilun Daily toilet supplies; used in restaurants and

series towels and “XINGZHILIAN” other catering industries and used in public

toilets in hotels guesthouses and office

buildings and also suitable for home and

other environment.SHANDONG CHENMING PAPER HOLDINGS LIMITED 11

INTERIM REPORT 2023III Management Discussion and Analysis

II. Analysis of liquidity financial resources and capital structure disclosed in accordance with the

listing rules of Hong Kong Stock Exchange

As at 30 June 2023 the Group’s current ratio was 62.61%. The quick ratio was 49.20%. The gearing ratio (i.e. total liabilities

divided by total assets) was 72.28%.There was no significant seasonal trend for capital requirements of the Group.The Group’s sources of capital primarily came from cash inflow generated from operating activities and borrowings from

financial institutions.As at 30 June 2023 the total bank borrowings of the Group were RMB41483 million (as at the end of the prior year: the total

bank borrowings and Corporate Bonds of the Group were RMB42288 million and RMB350 million respectively). As at 30

June 2023 the Group had monetary funds of RMB13756 million (as at the end of the prior year: RMB14000 million) in total (For

the breakdown of monetary funds please refer to X. VII. 1 Note on Monetary Funds in this report).To strengthen its financial management the Group established and optimised its strict internal control system on cash and

capital management. The liquidity and repayment ability of the Group were in a good condition. As at 30 June 2023 the Group

had 10364 employees. The total staff remuneration for the first half of 2023 amounted to RMB545.9545 million (The Group

had 10855 employees in 2022. The total staff remuneration for 2022 amounted to RMB1225.2395 million).There was no major investment project of the Company during the second half of 2023.The Company’s existing bank deposits were primarily used for production and operation construction projects and

investment in technology research and developments.For details of the assets with restricted ownership of the Group as at 30 June 2023 please refer to X. VII. 63. Details of assets

with restricted ownership or right to use in this report.III. Analysis of Core Competitiveness

After innovation and development for more than 60 years the Company has created a strong brand influence and cultivated

a solid comprehensive competitiveness. It promotes product upgrades enhances R&D strength and improves core

competitiveness by building a supply chain. The core competitiveness of the Company did not underwent major changes

during the reporting period. The details of the core competitiveness of the Company are as follows:

1. Advantages of pulp and paper integration

The Company has unwaveringly implemented a pulp and paper integration strategy. At present its major production

bases located in Shouguang Zhanjiang and Huanggang are equipped with chemical pulp production lines with total

production capacity of wood pulp reaching 4.30 million tonnes. It is the first modern large-scale paper making company

that basically realises wood pulp self-sufficiency in China. A complete supply chain not only creates cost advantage

for the Company but also safeguards the safety stability and quality of upstream raw materials and renders strong

support for the Company to maintain its long-term competitiveness.

12 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

III. Analysis of Core Competitiveness (Cont’d)

2. Scale advantages

The paper making industry is a typical capital-intensive and technology-intensive industry that follows the laws of

economies of scale. The Company is a leading player in the paper making industry in China. Its large-scale production

bases can be found in the major markets in Southern Central Northern and Northeast China with annual pulp and

paper production capacity reaching 11 million tonnes where reasonable production scale creates the marginal cost

advantage. Meanwhile by leveraging the scale advantages the Company has built an international logistics centre

and railway dedicated lines and docks and constructed a comprehensive logistics service platform covering container

shipping bonded warehousing transfer and storage at stations and terminals realising the improvement of logistics

efficiency and the stability of logistics costs.

3. Product advantages

The Company is an enterprise that offers the widest and the most complete product range in the paper making industry.The product series include culture paper white cardboard coated paper copy paper household paper thermal paper

etc. with each major product ranking among the best in terms of market share. The Company has attached great

importance to technology research and development. By introducing the most advanced pulping and paper making

technology and equipment in the world it persists in technological innovation and work process optimisation so as to

help improve product quality and structure upgrade continuously improve the brand value of Chenming and enhance

brand benefits.

4. Industry layout advantages

Closely centring on the pulp and paper integration strategy the Company has integrated resources and established

its production bases in the core target market to promote the coordinated development of all regions. Currently the

Company adopts the market-oriented approach and has production bases in Shandong Guangdong Hubei Jiangxi

Jilin and other places. With all products sold at close distances the Company substantially reduces transportation costs

while improving service efficiency achieving a “win-win” between the Company and its users.

5. Advantages in technical equipment

The Company highly values the introduction and upgrades of technical equipment actively push equipment and

technology upgrade forward and boasts the largest and most advanced pulping and paper making production line in the

world. The Company’s major production equipment has been imported from internationally renowned manufacturers

including Metso and Valmet of Finland Voith of Germany Andritz of Austria etc. and reached the advanced international

level thus ensuring production efficiency and product quality.

6. Advantages in research and innovation

The Company has scientific research institutions including the national enterprise technology centre the post-doctoral

working station the state certified CNAS pulp and paper testing centre. At the same time the Company actively carries

out in-depth industry-university-research cooperation with prestigious domestic universities and research institutes

continuously improves technical innovation capabilities and scientific research and development levels and develops

a series of new products with high technology contents and high added value as well as proprietary technologies.The Company and its subsidiaries Zhanjiang Chenming Shouguang Meilun Jiangxi Chenming Jilin Chenming and

Huanggang Chenming are high and new technology enterprises. As at the end of the reporting period the Company

had obtained over 400 national patents including 39 invention patents 7 national new products 16 scientific and

technological progress awards above the provincial level 5 national scientific and technological projects and 70

provincial technological innovation projects. The Company took the lead in obtaining the ISO9001 quality system

certification the ISO14001 environmental protection system certification and the FSC-COC international forest system

certification among domestic peers.SHANDONG CHENMING PAPER HOLDINGS LIMITED 13

INTERIM REPORT 2023III Management Discussion and Analysis

III. Analysis of Core Competitiveness (Cont’d)

7. Team management advantages

The Company possesses a complete and reasonable talent structure consisting of experienced personnel including

high-end talents specialising in production technology sales finance laws etc. In the course of business operations

the stable core team has developed a corporate culture that ties in with the Company’s development summarised

management experience with industry characteristics and formed a team advantage integrating management and

culture allowing it to accurately grasp the industry development trend. At the same time the Company has paid

attention to the construction of a talent reserve and cultivation mechanism. With advanced business concepts and

enormous development space the Company has attracted an array of high-calibre professionals and improved the level

of human capital construction providing solid guarantee for the Company’s long-term sustainable development.

8. Advantages in environmental governance capacity

The Company has actively upheld the concept of “lucid waters and lush mountains are invaluable assets” adhered to

the development idea of “placing green development and environmental protection as its priority” always regarded

environmental protection as the “life project” clung to the green development model of clean production and resource

recycling and earnestly shouldered the corporate responsibility of environmental protection. In recent years the

Company and its subsidiaries have invested more than RMB8 billion in total in environmental protection and have

constructed the pollution treatment facilities including the alkali recovery system reclaimed water treatment system

reclaimed water reuse system white water recovery system and black liquor comprehensive utilisation system. The

environmental protection indicators rank high in China and in the world. At present the Company adopts the world’s

most advanced “ultrafiltration membrane + reverse osmosis membrane” technology to complete the reclaimed water

recycling membrane treatment project which is the largest reclaimed water reuse project in the domestic paper industry.The reclaimed water recycle rate attains the industry-leading level. The reclaimed water quality meets drinking water

standards which can save hundreds of thousands cubic metres of fresh water every day. Meanwhile in response to the

“dual carbon” policy the Company actively introduces photovoltaic power generation and biomass power generation

continuously optimises the energy structure and improves the level of low-carbon production.

14 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

IV. Analysis of principal operations

Overview

Please see “I. Principal activities of the Company during the Reporting Period” for relevant information.Year-on-year changes in major financial information

Unit: RMB

Increase/

The corresponding decrease

The reporting period period of the prior year year on year Reason for the change

Revenue 12564962781.31 16676428365.83 -24.65% Mainly due to a year-on-year decrease of the

sales volumes and selling prices of machine-

made paper during the reporting period.Selling and distribution expenses 106666717.54 138055763.65 -22.74% Mainly due to a decrease in sales volume and

strict control of expenses by the Company at

the same time during the reporting period.Finance expenses 849526920.05 1021034604.66 -16.80% Mainly due to a year-on-year decrease of the

interest-bearing liability size and financing rates

during the reporting period.Investment income -42756726.88 -24138176.90 -77.13% Mainly due to a year-on-year increase of

discounted interest on bills included in

investment income during the reporting period.Gains on changes in fair value -19815797.83 -58813415.49 66.31% Mainly due to the change of the shares of China

Bohai Bank during the reporting period.Credit impairment loss -43081750.88 -25363341.17 69.86% Mainly due to a year-on-year increase of

provision for bad debts of accounts receivable

during the reporting period.Loss on impairment of assets -43314485.76 1936644.09 2336.57% Mainly due to a year-on-year increase of

provision for impairment of finished products

during the reporting period.Income tax expenses -211491182.14 1378726.69 -15439.60% Mainly due to a year-on-year decrease of the

total profit realised by the Company during the

reporting period.Net cash flows from operating 1783087747.59 998264209.45 78.62% Mainly due to a year-on-year decrease of cash

activities paid by the Company for purchasing goods and

accepting labour services during the reporting

period.Net cash flows from investing 46500863.35 -806624723.83 105.76% Mainly due to a year-on-year decrease of

activities project investments of the Company during the

reporting period.Net cash flows from financing -2088182807.81 -242119047.65 -762.46% Mainly due to the reduction of debts by the

activities Company during the reporting period.Significant change in structure or source of profit of the Company during the reporting period

□ Applicable √ Not applicable

There was no significant change in structure or source of profit of the Company during the reporting period.SHANDONG CHENMING PAPER HOLDINGS LIMITED 15

INTERIM REPORT 2023III Management Discussion and Analysis

IV. Analysis of principal operations (Cont’d)

Components of revenue

Unit: RMB

The corresponding period Increase/

The reporting period of the prior year decrease

Amount % of revenue Amount % of revenue year on year

Total revenue 12564962781.31 100% 16676428365.83 100% -24.65%

By industry

Machine-made paper 11300765054.86 89.94% 14440493130.31 86.59% -21.74%

Chemical pulp 240438232.65 1.91% 239810290.10 1.44% 0.26%

Power and steam 120561393.77 0.96% 195203273.89 1.17% -38.24%

Hotel and property rents 109744705.55 0.87% 104267757.09 0.63% 5.25%

Construction materials 106371211.95 0.85% 128912692.24 0.77% -17.49%

Processing of moulds 100217749.88 0.80% 147804749.38 0.89% -32.20%

Chemicals 60607594.98 0.48% 70973693.13 0.43% -14.61%

Others 526256837.67 4.19% 1348962779.69 8.09% -60.99%

By product

Duplex press paper 3668277002.07 29.19% 3784089225.00 22.69% -3.06%

White paper board 2540842151.66 20.22% 5228447295.27 31.35% -51.40%

Electrostatic paper 1910330360.89 15.20% 1913990734.51 11.48% -0.19%

Coated paper 1808743574.23 14.40% 2191460241.65 13.14% -17.46%

Anti-sticking raw paper 572047556.98 4.55% 512600898.29 3.07% 11.60%

Thermal paper 262227271.15 2.09% 280590566.03 1.68% -6.54%

Other machine-made paper 538297137.88 4.28% 529314169.56 3.17% 1.70%

Chemical pulp 240438232.65 1.91% 239810290.10 1.44% 0.26%

Power and steam 120561393.77 0.96% 195203273.89 1.17% -38.24%

Hotel and property rents 109744705.55 0.87% 104267757.09 0.63% 5.25%

Construction materials 106371211.95 0.85% 128912692.24 0.77% -17.49%

Processing of moulds 100217749.88 0.80% 147804749.38 0.89% -32.20%

Chemicals 60607594.98 0.48% 70973693.13 0.43% -14.61%

Others 526256837.67 4.19% 1348962779.69 8.09% -60.99%

By geographical segment

Mainland China 9191090980.52 73.15% 12792521541.65 76.71% -28.15%

Other countries and regions 3373871800.79 26.85% 3883906824.18 23.29% -13.13%

Industries products or regions accounting for over 10% of revenue or operating profit of the Company

√ Applicable □ Not applicable

16 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

IV. Analysis of principal operations (Cont’d)

Components of revenue (Cont’d)

Unit: RMB

Increase/ Increase/

Increase/ decrease of decrease of

decrease of operating gross profit

revenue as costs as margin as

compared to the compared to the compared to the

corresponding corresponding corresponding

Gross profit period of the period of period of

Revenue Operating costs margin prior year the prior year the prior year

By industry

Machine-made paper 11300765054.86 10388243784.40 8.07% -21.74% -14.73% -7.57%

By product

Duplex press paper 3668277002.07 3241144568.69 11.64% -3.06% -4.02% 0.88%

White paper board 2540842151.66 2617159371.91 -3.00% -51.40% -39.04% -20.88%

Electrostatic paper 1910330360.89 1628885600.03 14.73% -0.19% 4.21% -3.60%

Coated paper 1808743574.23 1623032059.93 10.27% -17.46% -9.38% -8.00%

By geographical segment

Mainland China 9191090980.52 8383226340.70 8.79% -28.15% -22.65% -6.49%

Other countries and regions 3373871800.79 3113505321.88 7.72% -13.13% -3.21% -9.45%

Under the circumstances that the statistics specification for the Company’s principal operations data experienced adjustment

in the reporting period the principal activity data upon adjustment of the statistics specification as at the end of the reporting

period in the latest year

□ Applicable √ Not applicable

Explanation on why the related data varied by more than 30%

√ Applicable □ Not applicable

The revenue from white paper board decreased by 51.40% as compared to the corresponding period of the prior year and

the cost decreased by 39.04% as compared to the corresponding period of the prior year. The main reason was that the sales

volume of white paper board decreased and the selling price decreased during the reporting period.SHANDONG CHENMING PAPER HOLDINGS LIMITED 17

INTERIM REPORT 2023III Management Discussion and Analysis

V. Analysis of non-principal operations

√ Applicable □ Not applicable

Unit: RMB

As a percentage

Amount of total profit Reason Is it sustainable?

Other income 108155697.19 -11.94% Receipt of government grants Including RMB82 million which is

related to daily business activities the annual amortisation amount of

government grants received in prior

periods which is sustainable.Gain or loss arising from the change -19815797.83 2.19% Fluctuations of fair values of the No

in fair value shares of China Bohai Bank as well

as forestry assets

Credit impairment loss -43081750.88 4.75% Bad debt provisions for receivables No

Loss on impairment of assets -43314485.76 4.78% Provisions for impairment of No

finished products

VI. Analysis of assets and liabilities

1. Material changes of asset items

Unit: RMB

As at the end of the reporting period As at the end of the prior year

As a As a

percentage of percentage of Percentage

Amount total assets Amount total assets change Description

Accounts receivable 2946153971.11 3.56% 3212260445.96 3.81% -0.25% Mainly due to a decrease of the

Company’s receivables from sales

customers as at the end of the reporting

period.Accounts receivable 614794433.04 0.74% 924960384.16 1.10% -0.36% Mainly due to a decrease of bills held

financing as at the end of the reporting period.Short-term borrowings 34946527126.28 42.28% 36385048295.02 43.16% -0.88% Mainly due to a decrease of short-

term borrowings as at the end of

the reporting period as a result of a

reduction of the liability size by the

Company during the reporting period.Bills payable 3530803793.61 4.27% 3128595835.04 3.71% 0.56% Mainly due to an increase of payment

for goods with bills by the Company

during the reporting period.Contract liabilities 1629061591.45 1.97% 1306029389.80 1.55% 0.42% Mainly due to an increase in advance

receipts from sales customers as at the

end of the reporting period.Non-current liabilities due 4152676912.29 5.02% 4673505241.86 5.54% -0.52% Mainly due to the repayment of

within one year Corporate Bonds and long-term

borrowings due within one year during

the reporting period.Long-term borrowings 4895546304.36 5.92% 3982236251.08 4.72% 1.20% Mainly due to the new long-term

operating property mortgage loans

during the reporting period.Long-term payables 2840065362.58 3.44% 3160771126.31 3.75% -0.31% Mainly due to the transfer of part of

equipment financing funds to non-

current liabilities due within one year

during the reporting period.

18 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

VI. Analysis of assets and liabilities (Cont’d)

2. Major assets overseas

□ Applicable √ Not applicable

3. Assets and liabilities measured at fair value

√ Applicable □ Not applicable

Unit: RMB

Profit or loss Cumulative fair Impairment

from change value change provided Purchases

in fair value charged to during the during the Disposal during Other

Item Opening balance during the period equity period period the period changes Closing balance

Financial assets

1. Held-for-trading financial assets

(excluding derivative financial

assets) 74708444.88 -24274574.29 -145250946.56 50433870.59

2. Other non-current financial assets 786750761.62 62860000.00 1376301.89 785374459.73

3. Consumable biological assets

measured at fair value 1496607818.84 5749779.42 35734776.07 11591593.63 21795664.43 1492153527.46

Total 2358067025.34 -18524794.87 -46656170.49 11591593.63 23171966.32 2327961857.78

Whether there were any material changes on the measurement attributes of major assets of the Company during the

reporting period

□ Yes √ No

4. Restriction on asset rights as at the end of the reporting period

Unit: RMB

Carrying amount as at

Item the end of the period Reasons for such restriction

Monetary funds 11912761370.57 As deposits for bank acceptance bills and letters of credit

security deposits for loans deposit reserves interest receivable

etc.Fixed assets 5380577035.38 As collateral for bank borrowings and long-term payables

Investment property 4754893839.15 As collateral for bank borrowings

Intangible assets 550003479.41 As collateral for bank borrowings and long-term payables

Accounts receivables 188497651.34 As collateral for borrowings

Total 22786733375.85

VII. Analysis of Investments

1. Overview

√ Applicable □ Not applicable

Investments during the

corresponding period of

Investments during the reporting period (RMB) the prior year (RMB) Change

5400000.0010000000.00-46.00%

SHANDONG CHENMING PAPER HOLDINGS LIMITED 19

INTERIM REPORT 2023III Management Discussion and Analysis

VII. Analysis of Investments (Cont’d)

2. Material equity investments during the reporting period

√ Applicable □ Not applicable

Unit: RMB

Progress as Profit or

at the date loss from Date of

Form of Investment Source Period of of balance Estimated investment Involvement disclosure Disclosure

Name of investee Principal activities investment amount Shareholding of fund Partner(s) investment Product type sheet return for the period in lawsuit (if any) index (if any)

Jiangxi Chenming Port Road transport Acquisition 5400000.00 100.00% Self-owned Subsidiary Long term Transportation Completed N/A 899011.43 No N/A N/A

Co. Ltd. cargo handling funds loading and

unloading services

Total －－ 5400000.00 －－－－－－ – 899011.43 －－－

3. Material non-equity investments during the reporting period

□ Applicable √ Not applicable

4. Financial asset investment

(1) Security investments

√ Applicable □ Not applicable

Unit: RMB

Profit or loss Accumulated

Accounting Book value at the from changes in changes in fair Purchased Sold amount Profit or loss Book value

Stock Abbreviation of Initial measurement beginning of the fair value in the value included amount in the in the during the at the end of the Classification Source

Type of security code stock name investment cost model reporting period current period in equity current period current period reporting period reporting period in accounts of fund

Domestic and foreign 09668 China Bohai Bank 195684817.15 Measured at fair value 74708444.88 -24274574.29 -145250946.56 0.00 0.00 -24274574.29 50433870.59 Held-for-trading Self-owned

shares financial assets funds

Total 195684817.15 － 74708444.88 -24274574.29 -145250946.56 0.00 0.00 -24274574.29 50433870.59 －－

Disclosure date of announcement in relation to the consideration and approval of securities 20 June 2020

investments by the Board

Disclosure date of announcement in relation to the consideration and approval of securities N/A

investments by the shareholders’ general meeting

(2) Derivatives investments

□ Applicable √ Not applicable

The Company did not have any derivative investments during the reporting period.

5. Use of proceeds

□ Applicable √ Not applicable

The Company did not use any proceeds during the reporting period.

20 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

VIII. Disposal of material assets and equity interest

1. Disposal of material assets

□ Applicable √ Not applicable

2. Disposal of material equity interest

□ Applicable √ Not applicable

IX. 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

Name of company company Principal activities Registered capital Total assets Net assets Revenue Operating profit Net profit

Zhanjiang Chenming Pulp & Paper Subsidiary Production and sale 6713808892.00 26445170266.51 8772254750.00 5372507782.65 -37455384.15 -40134946.90

Co. Ltd. of duplex press paper

electrostatic paper and

white paper board

Shouguang Meilun Paper Co. Ltd. Subsidiary Production and sale of 4801045519.00 17655736949.20 8516407225.73 4453614876.18 7590470.92 33639568.69

coated paper cultural

paper household paper

and chemical pulp

Huanggang Chenming Pulp & Subsidiary Production and sale of 3245000000.00 9911645261.14 3397703353.46 2111536459.36 -206502600.19 -160294517.80

Paper Co. Ltd. chemical pulp

Acquisition and disposal of subsidiaries during the reporting period

√ Applicable □ Not applicable

Methods to acquire and

dispose of subsidiaries Effect on overall production and

Name of company during the reporting period operation and results

Jiangxi Chenming Port Co. Ltd. Acquisition Net profit increased by RMB900000.Particulars of major subsidiaries and investees

1. During the reporting period the price of white paper board declined due to an increase in supply and insufficient

demand and profit margins of Zhanjiang Chenming were squeezed.

2. The demand for cultural paper and coated paper the major products of Shouguang Meilun was rigid and they are less

affected by the macroeconomic environment during the reporting period.

3. The price of chemical pulp the major product of Huanggang Chenming declined due to an increase in supply and

Huanggang Chenming’s profitability decreased year on year.The company enjoys the advantages of pulp and paper integration large scale comprehensive products reasonable

industrial layout and advanced technical equipment. With the gradual rise in the selling prices of machine-made paper and

the continuous optimisation of the cost side the company’s profitability will be effectively restored.SHANDONG CHENMING PAPER HOLDINGS LIMITED 21

INTERIM REPORT 2023III Management Discussion and Analysis

X. Structured entities controlled by the Company

□ Applicable √ Not applicable

XI. Risk factors of the Company and the measures to be taken

1. Macroeconomic policy risk

As a basic raw material industry the papermaking industry is supported by the national industrial policy. In recent years

in order to optimise the industrial structure improve the level of product technology save energy and reduce emissions

and eliminate backward production capacity the relevant competent authorities have issued a series of relevant policies

and regulations such as the Paper Industry Development Policy《 ( 造紙產業發展政策》). With the continuous development

of China’s economy the paper industry policy in the future may be also further adjusted. In addition fiscal and financial

policies bank interest rates and import and export policies may also be adjusted. The adjustment of the above

industrial policies and the related policies will affect the operation and development of the Company.In response to the aforesaid risks the Company will pay close attention to national industrial policies and focus on the

development of pulp and paper industry. Sticking to its innovation-driven strategy the Company will comprehensively

optimise industrial structure and regional layout and establish coordinated efficient industry system thus realising

steady growth in operating results. At the same time the Company will continue to strengthen lean management

broaden financing channels and control costs in order to improve its operating quality to cope with risks arising from

macroeconomic policy adjustments.

2. Environmental protection risk

Establishing a green paper industry is the strategic direction of industry development. In recent years environmental

protection requirements have become increasingly stringent. Relevant authorities have successively issued the White

Paper on Sustainable Development of Papermaking Industry in China the Guiding Opinions on Accelerating the

Establishment and Improvement of a Green Low-Carbon and Cyclical Economic System the Opinions on Accelerating

the High-Quality Development of the Manufacturing Services Industry the “14th Five-Year Plan” and Medium and Long-

term High-quality Development Outline of the Papermaking Industry and other policies which advocate cyclical low-

carbon green economy to achieve high-quality development. Such higher national environmental protection standards

will further increase the investment in pollution control by enterprises in the industry and increase the operating costs of

the Company in the short term.In response to the aforesaid risks the Company actively responds to the call of the national “double carbon” policy.The Company adheres to the development idea of “placing green development and environmental protection as itspriority” and conducts clean production. The Company widely adopts new technologies for energy saving and emission

reduction and strives to achieve its waste emission target. At present the Company adopts the world’s most advanced

“ultrafiltration membrane+reverse osmosis membrane” technology to complete the reclaimed water recycling membrane

treatment project. The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking

water standards which can save fresh water of 170000 cubic metres every day. At the same time the Company

actively explores the comprehensive utilisation of innovative resources and industrial recycling development models

and built three major circular economy ecological chains of “resources-products-renewable resources”.

22 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023III Management Discussion and Analysis

XI. Risk factors of the Company and the measures to be taken (Cont’d)

3. Risk of price fluctuation of raw materials

The major raw materials of the papermaking industry are wood pulp and wood chips. China’s wood resources are

relatively limited and the dependence on wood pulp and wood chips is high which makes the development of the

papermaking industry subject to fluctuations in the international price of wood pulp and wood chips. If the price of raw

materials fluctuates sharply it will bring uncertainty to the control of production costs of papermaking enterprises which

will affect the operating performance of enterprises.In response to the aforesaid risks the Company adheres to the strategic layout of the whole pulp and paper integrated

industry chain and has wood pulp production lines in Shouguang Zhanjiang Huanggang and other production bases

ensuring the stability of upstream raw materials. At the same time the Company has established a more comprehensive

supply chain management mechanism practiced source procurement closely followed the price trends of the raw

materials market and improved its market research and judgment ability in order to minimise the impact of fluctuations

in raw material prices on the Company.

4. Risk of intensifying market competition

Although the papermaking industry has accelerated the elimination of outdated production capacity after several rounds

of environmental protection policies the industry structure has been optimised with a further improved concentration.However there remains the phenomena of a large number of enterprises structural and staged overcapacity of some

products a large number of mid- and low-end products and product homogeneity. In the first half of 2023 affected

by the macroeconomic environment the market demand for machine-made paper weakened and market competition

further intensified.In response to the aforesaid risks the Company continues to promote technological innovation and transformation

and continuously improves its production equipment processing design and process levels in order to realise lean

production improve product quality and create brand benefits. At the same time based on the market conditions the

Company produces marketable products to meet the diverse needs striving to form a high-quality refined special

differentiated and personalised product structure increase the added value of products and improve the level of

corporate profitability.

5. Risk of the financial leasing business

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.To this end Chenming Leasing has comprehensive risk prevention and control measures for the financial leasing

business with strong risk resistance and low risk of default. At present the Company focuses on the development of

its principal activities i.e. pulp production and paper making and continues to reduce the size of the financial leasing

business. As at the end of the reporting period the balance of financial leases of Chenming Leasing decreased to

RMB5.501 billion. Some financial lease receivables of Chenming Leasing were overdue due to factors such as the

weak macroeconomic environment with the overdue principals amounting to RMB1781 million for which provisions

of RMB689 million were made and a provision coverage rate of 38.69%. Certain assets have been seized through

litigation. The Company had resorted to various collection measures such as control of the underlying assets litigation

for seizure recovery for guarantors and debt reconstruction with the overall risks under control.SHANDONG CHENMING PAPER HOLDINGS LIMITED 23

INTERIM REPORT 2023IV Corporate Governance

I. Annual general meeting and extraordinary general meeting convened during the reporting

period

1. General meetings during the reporting period

Attendance

rate of

Meeting Type of meeting investors Convening date Disclosure date Resolutions of meeting

2023 first extraordinary general Extraordinary general meeting 21.96% 27 February 2023 28 February 2023 http://www.cninfo.com.cn

meeting (announcement no.: 2023-010)

28 February 2023 http://www.hkex.com.hk

2023 first class meeting for holders Class general meeting 24.14% 27 February 2023 28 February 2023 http://www.cninfo.com.cn

of domestic-listed shares (announcement no.: 2023-010)

28 February 2023 http://www.hkex.com.hk

2023 first class meeting for holders Class general meeting 11.72% 27 February 2023 28 February 2023 http://www.cninfo.com.cn

of overseas-listed shares (announcement no.: 2023-010)

28 February 2023 http://www.hkex.com.hk

2023 second extraordinary general Extraordinary general meeting 20.53% 8 May 2023 9 May 2023 http://www.cninfo.com.cn

meeting (announcement no.: 2023-043)

8 May 2023 http://www.hkex.com.hk

2022 annual general meeting Annual general meeting 21.60% 12 May 2023 13 May 2023 http://www.cninfo.com.cn

(announcement no.: 2023-044)

12 May 2023 http://www.hkex.com.hk

2. Extraordinary general meeting requested by holders of preference shares with voting rights restored

□ Applicable √ Not applicable

II. Changes of Directors Supervisors and Senior Management of the Company

□ Applicable √ Not applicable

There was no change of Directors Supervisors and Senior Management of the Company during the reporting period. Please

see the 2022 annual report for details.III. Profit distribution and conversion of capital reserves into share capital during the reporting

period

□ Applicable √ Not applicable

The Company does not propose distribution of cash dividends and bonus shares and increase of share capital from reserves

for the interim period.IV. Implementation of the equity incentive plan employee shareholding plan or other employee

incentive measure of the Company

√ Applicable □ Not applicable

1. Equity incentive

1. On 30 March 2020 the Company convened the ninth extraordinary meeting of the ninth session of the Board at

which the Company considered and approved the Resolution in Relation to the 2020 Restricted Share Incentive

Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary and other resolutions. On the

same date the fourth extraordinary meeting of the ninth session of the Supervisory Committee of the Company

considered and approved the above resolutions and verified the list of proposed participants of the incentive

scheme. Independent Directors of the Company issued independent opinions on the incentive scheme.

24 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023IV Corporate Governance

IV. Implementation of the equity incentive plan employee shareholding plan or other employee

incentive measure of the Company (Cont’d)

1. Equity incentive (Cont’d)

2. On 3 April 2020 the Company announced the list of participants through the Company’s internal website for a

period from 3 April 2020 to 12 April 2020. During the period the Supervisory Committee of the Company and

relevant departments did not receive any objection against the proposed participants. The Supervisory Committee

verified the list of participants under the grant of the incentive scheme.

3. On 15 May 2020 the Company convened the 2020 second extraordinary general meeting the 2020 first class

meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed

shares at which the Company considered and approved the Resolution in Relation to the 2020 Restricted Share

Incentive Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary and other resolutions.On 16 May 2020 the Company disclosed the Self-Examination Report for the Trading of Shares of the Company

by Insiders and Participants of the 2020 Restricted A Share Incentive Scheme.

4. On 29 May 2020 the Company convened the tenth extraordinary meeting of ninth session of the Board and the

fifth extraordinary meeting of the ninth session of the Supervisory Committee at which the Company considered

and approved the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive

Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants

approving the issue of 79600000 restricted A shares to 111 participants at the price of RMB2.85 per share on 29

May 2020.

5. On 15 July 2020 the 79600000 restricted A shares granted to the participants were listed.

6. On 18 July 2022 the Company convened the second extraordinary meeting of the tenth session of the Board

and the first extraordinary meeting of the tenth session of the Supervisory Committee at which the Company

considered and approved the Resolution on the Fulfilment of the Unlocking Conditions of the Restricted Shares

Granted under the 2020 Restricted A Share Incentive Scheme during the First Unlocking Period and the Resolution

on the Adjustment to the Repurchase Price of the 2020 Restricted A Share Incentive Scheme and Repurchase

and Cancellation of Certain Restricted Shares. The independent Directors of the Company issued independent

opinions to agree with such resolutions.

96 participants fulfilled the unlocking conditions for the first unlocking period under the 2020 Restricted A Share

Incentive Scheme with 29948000 restricted shares being eligible for unlocking. 15 participants had resigned

had changed duty and had removed from office which failed to comply with the unlocking conditions. The

total number of restricted shares that have been granted to and held by the participants and have not yet been

unlocked is 4466000 representing 5.61% of the total number of restricted shares granted under the 2020

Restricted A Share Incentive Scheme.

7. On 27 July 2022 29948000 restricted A shares that were unlocked were listed for trading.

8. On 9 October 2022 Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong

Yan Zi (2022) No. 371C000576) in which they verified the change in the registered capital and paid-in capital (share

capital) of the Company as of 30 September 2022. Verification result: As of 30 September 2022 the registered

capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2979742200.00

and RMB2979742200.00 respectively.

9. On 18 October 2022 the Company completed the procedures for the repurchase and cancellation of 4466000

restricted A shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.SHANDONG CHENMING PAPER HOLDINGS LIMITED 25

INTERIM REPORT 2023IV Corporate Governance

IV. Implementation of the equity incentive plan employee shareholding plan or other employee

incentive measure of the Company (Cont’d)

2. Implementation of the employee shareholding plan

□ Applicable √ Not applicable

3. Other employee incentive measure

□ Applicable √ Not applicable

V. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of

Hong Kong Limited

(I) Compliance with the Code on Corporate Governance

The Company maintained high standards of corporate governance practices through various internal controls. The

Board reviews the corporate governance practices of the Company from time to time to enhance the corporate

governance standards of the Company. The Company had fully complied with all the principles and code provisions

of the Code on Corporate Governance as set out in Appendix 14 to the Hong Kong Listing Rules during the reporting

period.(II) Securities transactions by Directors

The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions

by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate

enquiries with all Directors of the Company the Company was not aware of any information that reasonably suggested

that the Directors had not complied with the requirements as stipulated in this code during the reporting period.

26 SHANDONG CHENMING PAPER HOLDINGS LIMITED

INTERIM REPORT 2023V Environmental and Social Responsibility

I. Major environmental protection matters

Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental protection

authority

√ Yes □ No

Environmental protection related policies and industry standards

1. The Company during its own production and operation process strictly abides by relevant environmental protection

laws and regulations as follows:

The Environmental Protection Law of the People’s Republic of China the Law on the Prevention and Control of Air

Pollution of the People’s Republic of China the Law on the Prevention and Control of Water Pollution of the People’s

Republic of China the Law on the Prevention and Control of Environmental Pollution by Solid Waste of the People’s

Republic of China the Law on Noise Pollution Prevention and Control of the People’s Republic of China Regulations on

the Administration of Pollutant Discharge Permit Regulations on Groundwater Management and the Measures for the

Emergency Administration of Environmental Contingencies.

2. The Company strictly implements national industry and local standards for pollutant discharge as follows:

Exhaust gas: Integrated Emission Standard of Air Pollutants (GB16297-1996) Emission Standard of Air Pollutants for

Thermal Power Plants (GB13223-2011) Emission Standard for Odor Pollutants (GB14554-93) Emission Standard of Air

Pollutants for Boilers (DB44/765-2019) Emission Standard of Air Pollutants for Thermal Power Plants (DB37/664-2019)

Regional and Integrated Emission Standard of Air Pollutants (DB37/2376-2019) and Emission Standard of Air Pollutants

for Building Materials Industry (DB37/2373-2018).Wastewater: Integrated Wastewater Discharge Standard (GB8978-1996) Wastewater Quality Standards for Discharge

to Municipal Sewers (GB/T31962-2015) Discharge Standard of Water Pollutants for the Pulp and Paper Industry

(GB3544-2008) and Discharge Limits of Water Pollutants (DB44/26-2001) and the wastewater influent standard of local

wastewater treatment plants.Noise: Emission Standard for Industrial Enterprises Noise at Boundary (GB 12348-2008).Environmental protection administrative licensing

Shandong Chenming Paper Holdings Limited: Issued on 2 March 2023 and valid up to 1 March 2028.Shouguang Meilun Paper Co. Ltd.: Issued on 2 March 2023 and valid up to 1 March 2028.Zhanjiang Chenming Pulp & Paper Co. Ltd.: Issued on 30 May 2022 and valid up to 29 May 2027.Jiangxi Chenming Paper Co. Ltd.: Issued on 11 June 2020 and valid up to 27 June 2025.Huanggang Chenming Pulp & Paper Co. Ltd.: Issued on 14 September 2021 and valid up to 13 September 2026.Jilin Chenming Paper Co. Ltd.: Issued on 10 December 2021 and valid up to 9 December 2026.SHANDONG CHENMING PAPER HOLDINGS LIMITED 27

INTERIM REPORT 2023V Environmental and Social Responsibility

I. Major environmental protection matters (Cont’d)

Industry emission standards and the status of pollutant emissions involved in production and operation

activities

行情