Stock code: 000488 200488 Stock abbreviation: Chenming Paper Chenming B Announcement No.:2021-032

2020 Annual Report Summary of

Shandong Chenming Paper Holdings Limited

I. IMPORTANT NOTICE

This annual report summary is extracted from the text of the annual report. For the full understanding of the operating results

financial position and plan for further development investors should carefully read the text of the annual report published on the

media as designated by the CSRC.

All directors have attended the board meeting to review this annual report in person.

Notice of non-standard auditor’s opinion

□ Applicable √ Not applicable

A proposed profit distribution plan on ordinary shares or a proposed plan on conversion of capital reserves into share capital for

the reporting period was considered and passed by the Board

√ Applicable □ Not applicable

Whether there is an increase of share capital from reserves

□ Yes √ No

The proposed profit distribution plan on ordinary shares of the Company was considered and passed by the Board: based on the

total ordinary share capital of 2984208200 shares as at the end of 2020 a cash dividend of RMB1.85 (tax inclusive) per 10 shares

will be distributed to all shareholders. No bonus shares will be issued and there is no increase of share capital from reserves. A cash

dividend of RMB552078517.00will be distributed to ordinary shareholders. If the total share capital of the Company changes before

the date of the equity registration for the implementation of the equity distribution it is proposed to maintain the same total

distribution and adjust the distribution ratio per share accordingly.

A proposed profit distribution plan on preference shares for the reporting period was considered and approved by the Board

√ Applicable □ Not applicable

In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference

Shares based on the simulated ordinary shares converted from the second and third tranches of the Preference Shares using a

conversion ratio of 1 share valued at RMB3.82 as at the end of 2020 of 589005236 shares a cash dividend of RMB1.85 (tax

inclusive) per 10 simulated ordinary shares converted from the Preference Shares will be distributed to holders of the second and

third tranches of the Preference Shares. A variable cash dividend of RMB108965968.66 will be distributed to holders of the second

and third tranches of the Preference Shares. In other words a cash dividend of RMB4.84 (tax inclusive) per Preference Share with a

nominal value of RMB100 each will be distributed to holders of the second and third tranches of the Preference Shares. If the total

share capital of the Company changes before the date of the equity registration for the implementation of the equity distribution it is

proposed to maintain the same total distribution and adjust the distribution ratio per share accordingly.Profit distribution for preference shares during the reporting period

Date of Distribution

Dividend

Ratio

Distributed

amount (RMB)

(tax inclusive)

Whether it is in

compliance with

the conditions and

the relevant

procedures of

distribution

Way of dividend

payment

Whether it was an

accumulated

dividend

Whether it

participates in

distribution of

remaining profit

17 March 2020 4.36% 98100000.00 Yes Cash No Yes

17 August 2020 5.17% 51700000.00 Yes Cash No Yes

18 August 2020 3.837246% 172676073.42 Yes Cash No Yes

21 September 2020 5.17% 64625000.00 Yes Cash No Yes

II. BASIC INFORMATION ABOUT THE COMPANY

1. Company profile

Stock abbreviation晨鸣纸业

Stock code

000488

晨鸣B 200488

晨鸣优01 140003

晨鸣优02 140004

晨鸣优03 140005

Stock exchange on which the shares

are listed

Shenzhen Stock Exchange

Stock abbreviation CHENMING PAPER Stock code 01812

Stock exchange on which the shares

are listed

The Stock Exchange of Hong Kong Limited

Contact persons and contact

methods

Secretary to the Board Hong Kong Company Secretary

Name Yuan Xikun Chu Hon Leung

Correspondence address

No. 2199 East Nongsheng Road Shouguang City

Shandong Province

22nd Floor World Wide House Central

Hong Kong

Telephone (86)-0536-2158008 +852-21629600

Facsimile (86)-0536-2158977 +852-25010028

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

2 Overview of principle activities or products during the reporting period

(I) Principal activities of the Company during the reporting period

The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic development in

finance forestry logistics and construction materials. Its key indicators in respect of business and economic efficiency have been in a

leading position in the industry in China for over 20 consecutive years. The Company has been on the Fortune 500 China list for 11

years. The Company focuses on its principal activities i.e. pulp production and paper making. The machine-made paper business is

the major source of revenue and profit of the Company. During the reporting period there was no significant change in the principal

activities of the Company.

1. Business overview

The Company has committed itself to implementing a pulp and paper integration strategy. It takes the lead in laying out the

entire industrial chain with 6 production bases in Shandong Guangdong Hubei Jiangxi Jilin and other places with an annual pulp

and paper production capacity of more than 11 million tonnes. It is the only large-scale pulp and paper integrated company in China

that achieves a balance between pulp and paper production. The Company implements an innovation-driven strategy and has

introduced world-leading pulp production and paper making technology and equipment. Its product series include high-end offset

paper white paper board coated paper light weight coated paper household paper electrostatic copy paper and thermal paper with

each major product ranking among the highest in terms of market share in China.The Company focuses on product and technology research and development has scientific research institutions including the

national enterprise technology centre the post-doctoral working station the state certified CNAS pulp and paper testing centre

Shandong Pulp and Paper Making Laboratory as well as the Guangdong Pulp and Paper Production Technology Research Center and

has obtained 303 national patents including 25 patents for invention with 7 products selected as national new products. The Company

has obtained 15 science and technology progress awards above the provincial level and undertaken five national science and technology

projects and 63 provincial technological innovation projects. The Company has pioneered to obtain the ISO9001 quality certification

ISO14001 environmental protection certification and FSC-COC certification among its industry peers.

2. Major products

Culture paper

Major brands: BIYUNTIAN CLOUDY MIRROR and CLOUDY LEOPARD all-wood

pulp offset paper; “CLOUDY LION” and “CLOUDY CRANE” offset paper; and

“CEDAR” and “GREEN PINE” light weight paper.

Range of application: Printing publications textbooks magazines covers illustrations

notebooks test papers teaching materials reference books etc.

Coated paper

Major brands: “SNOW SHARK” and “EAGLE” one-sided coated paper; “SNOW

SHARK” “EAGLE” “RABBIT” and “SNOW SWALLOW” doublesided coated paperand “EAGLE” “RABBIT” and “SNOW SWALLOW” matte coated paper.Range of application: High quality printing such as high-grade picture albums picture

magazines and so on. Promotional materials such as interior pages of high-end books wall

calendars posters and so on. Upscale tobacco package paper adhesive sticker shopping

bags slipcases envelopes gift wrapping and so on.White cardboard

Major brands: White cardboard and ivory cardboard of ZITAN series and POPLAR

series super high bulk cardboard Chenming cigarette cardboard fluid inclusion cardboard

and base paper for mugs.Range of application: High-end gift boxes cosmetics boxes tags shopping bags publicity

pamphlets high-end postcards; cigarette package printing of medium and high quality; milk

package beverage package disposable paper cups milk tea cups and noodle bowls.

(II) The situation of the industry where the Company operated and its position in the industry during the reporting

period

The paper making industry is one of the basic industries of the national economy. The paper making industry has the typical

characteristics of large-scale industrial production such as continuous and efficient operation and significant economies of scale.The paper making industry is also vitally interrelated with people’s daily life. Not only is the paper making industry the provider of

basic goods and materials but it also makes a lot of important materials related to packaging construction chemical industry

electronics energy transportation national security and other fields. The paper making industry plays an irreplaceable role in the

national economy. Affected by the supply-side reform the development of paper making industry has evolved from an extensive

form to an intensive form. The increase in the societal demands the publishing of environmental protection policies the continuous

advances in technology and the changes in the supply of resources have resulted in an accelerating reduction of the production

capacity of low-end products the increasing concentration ratio of the industry and an improving industrial pattern.

Affected by the outbreak of COVID-19 in 2020 the ever-changing pattern of trade and other factors the global economy

slumped and the external environment became complicated and difficult. In the face of difficulties the control and prevention of

COVID-19 and every aspect of economic and societal development were carried out efficiently on a national level. All

decision-making and deployment were implemented with a determined attitude. The resumption of work and production were

progressing steadily. The overall national economy was looking up and the prices of paper products and the upstream pulp rose

steadily. The implementation of the ban on plastics the ban on importing waste and other policies brought a new scope for

development to the paper making industry. Safety stability and economic efficiency became a new issue in the industry. The major

development trend of the paper making industry consisted of the further expansion of the industrial chain of paper making and the

integration of pulp and paper.

As a leading player in the paper making industry of China the Company has implemented the strategy of innovative operation

quickened its pace in growth driver replacement and led the way in full industry chain operation and has emerged as the only paper

making enterprise in China to achieve capacity balance between pulp production and paper making. Currently the Company has the

annual pulp and paper production capacity of over 11 million tonnes tops the industry in its paper product variety and ranks among

the best in China in terms of the market share of its major products. In 2020 the Company was once again listed in Top 500

Enterprises in China with the highest rank among paper making enterprises which demonstrated the strength in the Company’s

development as it continued to lead the growth of the industry.

3. Major accounting data and financial indicators

(1) Major accounting data and financial indicators for the latest three years

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

Light weight coated paper

Major brands: Jinzhou high-grade light weight coated paper and refined light weight

coated paper

Range of application: Printing advertisements high-end publications magazine inner

pages and picture albums; suitable for highspeed sheetfed press or high-speed rotary speed

press.Industrial paper

Major brands: High-grade yellow antisticking base paper ordinary yellow/white

anti-sticking base paper bill base paper cast coated base paper PE paper stripping base

paper and white kraft paper

Range of application: Anti-stick base paper is mainly used for producing the paper base

of stripping paper or anti-sticking base paper. Cast coated base paper is suitable for

producing adhesive paper or playcard compound paper after coating.

Electrostatic copy paper

Major brands: GOLDEN MINGYANG and GOLDEN CHENMING copy paper

BOYA and BIYUNTIAN copy paper MINGYANG LUCKY CLOUDS BOYANG

and SHANYIN copy paper and GONGHAO and TIANJIAN copy paper

Range of application: Printing and copying business documents training materials and

writing.Household paper

Major brands: Toilet paper facial tissue pocket tissue napkin paper towels

“XINGZHILIAN” “FOREST LOVE” and “BEIYING”

Range of application: Daily toilet supplies; used in restaurants and other catering industries

and used in public toilets in hotels guesthouses and office buildings and also suitable for

home and other environment.

□ Yes √ No

Unit: RMB

2020 2019

Increase/decrease

for the year as

compared to the

prior year

2018

Revenue 30736517996.90 30395434073.35 1.12% 28875756163.56

Net profit attributable to shareholders of the

Company

1712029078.52 1656566584.88 3.35% 2509828858.47

Net profit after extraordinary gains or losses

attributable to shareholders of the Company

1119103808.75 702329086.29 59.34% 1953699849.75

Net cash flows from operating activities 11259802676.28 12232707222.94 -7.95% 14099701887.04

Basic earnings per share (RMB per share) 0.36 0.33 9.09% 0.51

Diluted earnings per share (RMB per share) 0.36 0.33 9.09% 0.51

Rate of return on weighted average net assets 5.84% 5.57%

Increased by 0.27

percentage point

8.51%

As at the end of

2020

As at the end of

2019

Increase/decrease

as at the end of the

year compared to

the end of the prior

year

As at the end of 2018

Total assets 91575457828.62 97958909935.15 -6.52% 105318734827.82

Net assets attributable to shareholders of the

Company

24276968789.00 25169743863.75 -3.55% 25048731454.79

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 under other equity instruments and the effect of the dividends

on Preference Shares under other equity instruments that have been considered and approved for distribution. When calculating

financial indicators such as earnings per share and rate of return on weighted average net assets the interest on Perpetual Bonds of

RMB171776438.36 the dividends on Preference Shares of RMB387101073.42 declared to be distributed and the cash dividends

of RMB116679908.80 attributable to the shareholders of restricted shares expected to be unlocked in the future among the

dividends distributed during the reporting period are deducted.

(2) Key financial indicators by quarter

Unit: RMB

First quarter Second quarter Third quarter Fourth quarter

Revenue 6085376805.28 7514428960.58 8473304915.35 8663407315.69

Net profit attributable to shareholders of the Company 202790856.25 313535847.23 560227575.14 635474799.90

Net profit after extraordinary gains or losses

attributable to shareholders of the Company

143993251.71 -76111135.48 463336879.91 587884812.61

Net cash flows from operating activities 655581522.20 1671452262.48 4941816336.88 3990952554.72

Whether the above financial indicators or their aggregated amounts have any material difference with the respective financial

indicators as disclosed in the quarterly report or interim report by the Company

□ Yes √ No

4. Share capital and shareholders

(1) Table of the number of ordinary shareholders and holders of preference shares with restored voting right and

the shareholdings of Top 10 shareholders

Unit: share

Total number

of ordinary

shareholders as

at the end of

the reporting

period

119948 of

which 98300

were holders of

A shares

21290 were

holders of B

shares and 358

were holders of

H shares

Total number

of ordinary

shareholders

as at the end

of the month

prior to the

publication

date of this

annual report

113916 of which

94363 were

holders of A

shares 19210

were holders of B

shares and 343

were holders of H

shares

Total number of

holders of

preference

shares with

restored voting

right as at the

end of the

reporting period

0

Total number of

holders of

preference shares

with restored voting

right as at the end of

the month prior to

the disclosure date

of the annual report

0

Shareholdings of top 10 shareholders

Name of shareholders Nature of shareholders

Percenta

ge of

sharehol

ding

Number of

shares held

Number

of

restricte

d shares

held

Share pledged or

locked-up

Status of

shares

Number

CHENMING HOLDINGS COMPANY

LIMITED

State-owned legal

person

15.32% 457322919 Pledged 238470000

HKSCC NOMINEES LIMITED Overseas legal person 12.51% 373359125

CHENMING HOLDINGS (HONG KONG)

LIMITED

Overseas legal person 12.20% 364131563

CENTRAL HUIJIN ASSET MANAGEMENT

LTD.

State-owned legal

person

2.02% 60206850

HONG KONG SECURITIES CLEARING

COMPANY LIMITED

Overseas legal person 1.14% 34168330

Chen Hongguo Domestic nature person 1.04% 31080044

283100

33

NATIONAL SOCIAL SECURITY FUND 418 Others 0.63% 18840000

NINGBO ASIA PAPER TUBE CARTON CO.

LTD.

Domestic

non-state-owned legal

person

0.62% 18400000

VANGUARD TOTAL INTERNATIONAL

STOCK INDEX FUND

Overseas legal person 0.50% 14771945

VANGUARD EMERGING MARKETS STOCK

INDEX FUND

Overseas legal person 0.44% 13121946

Related party relationship or acting in concert

among the above shareholders

A shareholder Chenming Holdings (Hong Kong) Limited which is an overseas

legal person and a wholly-owned subsidiary of a shareholder Shouguang

Chenming Holdings Company Limited a state-owned legal person is a person

acting in concert under the Measures for the Administration of Disclosure of

Shareholder Equity Changes of Listed Companies. A shareholder Chen

Hongguo is the legal representative chairman and general manager of Chenming

Holdings Company Limited. Save for the above it is not aware that any other

shareholders of tradable shares mentioned above are persons acting in concert. It

is also not aware that any other shareholders of tradable shares mentioned above

are related to each other.Securities margin trading of shareholders if any

Chenming Holdings Company Limited held 457322919 RMB ordinary shares

of which 379522919 shares were held through ordinary account and 77800000

shares were held through credit guarantee security account.Ningbo Asia Paper Tube Carton Co. Ltd. held 18400000 RMB ordinary shares

of which 0 share was held through ordinary account and 18400000 shares were

held through credit guarantee security account.

(2) Table of the total number of holders of preference shares of the Company and the shareholdings of Top 10

holders of preference shares

√ Applicable □ Not applicable

Unit: share

Total number of holders of preference

shares as at the end of the reporting

period

8

Total number of holders of preference shares

as at the end of the month prior to the

publication date of this annual report

8

Shareholdings of top 10 holders of preference shares

Name of shareholders

Nature of

shareholders

Percentage

of

shareholding

Number of

shares held

Number of

preference

shares held

Share pledged or

locked-up

Status of

shares

Number

BEIJING YIBEN ZHONGXING

INVESTMENT MANAGEMENT CO. LTD.

Domestic

non-state-owned

legal person

27.78% 12500000 12500000 Pledged 12500000

BANK OF COMMUNICATIONS

INTERNATIONAL TRUST CO. LTD. –

HUILI NO.167 SINGLE CAPITAL TRUST

Others 22.44% 10100000 10100000

BANK OF COMMUNICATIONS

INTERNATIONAL TRUST CO. LTD. –

HUILI NO.136 SINGLE CAPITAL TRUST

Others 14.22% 6400000 6400000

QILU BANK CO. LTD. - QILU BANK

QUANXIN WEALTH MANAGEMENT

PRODUCT SERIES

Others 13.33% 6000000 6000000

SHANGHAI SHIJIE BUSINESS

CONSULTING CO. LTD.

Domestic

non-state-owned

legal person

9.20% 4140100 4140100

HENGFENG BANK CO. LTD.

Domestic

non-state-owned

legal person

8.89% 4000000 4000000

LEAD CAPITAL MANAGEMENT CO. LTD.

– LEAD CAPITAL – LI DE YING NO. 2

ASSET MANAGEMENT PLAN

Others 2.62% 1179900 1179900

LEAD CAPITAL MANAGEMENT CO.

LTD.- LEAD CAPITAL – LI DE YING NO. 1

ASSET MANAGEMENT PLAN

Others 1.51% 680000 680000

Description of related party relationship or

acting in concert among the above shareholdersThe above holders of Preference Shares “BANK OF COMMUNICATIONS

INTERNATIONAL TRUST CO. LTD. – HUILI NO.167 SINGLE CAPITALTRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST

CO. LTD. – HUILI NO.136 SINGLE CAPITAL TRUST” and “LEAD

CAPITAL MANAGEMENT CO. LTD.－LEAD CAPITAL－LI DE YING NO.1

ASSET MANAGEMENT PLAN” and “LEAD CAPITAL MANAGEMENT CO.

LTD. － LEAD CAPITAL－ LI DE YING NO.2 ASSET MANAGEMENT

PLAN” are persons acting in concert. Save for the above it is not aware that

whether the remaining holders of Preference Shares are persons acting in concert.It is also not aware that the top ten holders of Preference Shares and the above

ordinary shareholders are related to each other.

(3) A block diagram disclosure of the ownership and control relationship between the Company and its

controller

State-owned Assets Supervision and

Administration Bureau of Shouguang City

Shandong Shouguang Jinxin Investment

Holdings Limited

Chenming Holdings Company Limited

Shandong Chenming Paper Holdings

Limited

Chenming Holdings (Hong

Kong) Limited

100%

45.21%

100%

12.20%

15.32%

5. Corporate bonds

Are there any corporate bonds offered to the public by the Company and listed on stock exchanges which do not become due as at the

date of approval of this annual report or overdue but not fully settled?

Yes

(1) Basic information on corporate bonds

Name of bond

Bond

abbreviation

Bond

code

Issue date Maturity date

Outstanding amount

of the bonds

(RMB’0000)

Interest

rate

The First Tranche of Corporate Bonds

of Shandong Chenming Paper

Holdings Limited Publicly Issued to

Qualified Investors in 2017

17 Chenming

Bond 01

112570 17 August 2017 21 August 2022 9000 7.28%

The First Tranche of Corporate Bonds

of Shandong Chenming Paper

Holdings Limited Publicly Issued to

Qualified Investors in 2018

18 Chenming

Bond 01

112641 29 March 2018 2 April 2023 35000 7.60%

(2) Updated rating and change of rating of corporate bondsOn May 26 2020 China Chengxin International Credit Rating Co. Ltd. (China Chengxin International) issued the “Follow-upRating Report” (2020) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2017”. The

credit rating of the company’s “17 Chenming Bond 01” is AA+ and the main credit rating of the company is AA+ and the rating

outlook is stable. For details please refer to the company’s announcement dated 28 May 2020 on Juchao Information Network.

On 26 May 2020 China Chengxin International issued the “Follow-up Rating Report” (2020) with Respect to the First Tranche

of Corporate Bonds Publicly Issued to Qualified Investors in 2018” which assessed the Company’s “18 Chenming Bond 01” creditrating as AA+. The main credit rating of the Company is AA+ and the rating outlook is stable. For details please refer to the

announcement of the Company dated 28 May 2020 on Juchao Information Network.

On 3 July 2020 China Chengxin International issued the “Announcement on Putting Shandong Chenming Paper Group Co.Ltd. Main Body and Related Debt Credit Ratings on the Watch List for Possible Downgrades” and decided to set the company’s

AA+ main credit rating and the AA+ credit ratings of “17 Chenming Bond 01” and “18 Chenming Bond 01” are included on the

watch list for possible downgrade. For details please refer to the announcement of the Company dated 9 July 2020 on Juchao

Information Network.

On 30 December 2020 China Chengxin International issued the “Announcement on Removing the Credit Rating of Shandong

Chenming Paper Group Co. Ltd. and Related Debts from the Watch List of Possible Downgrades and Adjusting the Rating Outlookto Negative” and decided to maintain it The company’s subject credit rating is AA+ and the credit ratings of “17 Chenming Bond

01” and “18 Chenming Bond 01” are maintained at AA+. The credit ratings of the above entities and related debts are removed fromthe watch list for possible downgrade and the rating outlook is adjusted to negative. For details please refer to the announcement of

the Company dated 31 December 2020 on Juchao Information Network.

(3) Major accounting data and financial indicators of the Company over the past two years as at the end of the

reporting period

Unit: RMB’0000

Item 2020 2019 Year-on-year increase/decrease in percentage

Gearing ratio 71.83% 73.11% -1.28%

Proportion of EBITDA to total debts 12.22% 11.32% 0.90%

Interest coverage ratio 1.96 1.70 15.29%

III. DISCUSSION AND ANALYSIS OF OPERATIONS

1. Overview of operations during the reporting period

In 2020 the unexpected COVID-19 epidemic posed unprecedented shock to the global economy and increased the downward

pressure of the economy. Under the leadership of the Central Committee of the Communist Party of China China adhered to the

general principle of seeking progress while maintaining stability carried out epidemic prevention and control and promoted

economic development in a coordinated manner. With the continuous implementation of the “six stability” and “six guarantees”

tasks domestic economy embraced steady resuscitation and China became the only country among the world’s major economies

that achieved positive growth. As one of the important basic raw material industries in China the output and total profit of the paper

making and paper product industry exhibited a trend of “turning a negative into a positive accelerating quarter by quarter”. Reeled

from the epidemic in the first quarter during this reporting period the paper making industry was confronted with problems such as

insufficient raw materials delays in production resumption and return to work difficulties in logistics and delivery decline in foreign

trade and insufficient market demand. According to the National Bureau of Statistics the output of machine-made paper and paper

board in China decreased by 12.4% year on year the total profit of industrial enterprises above designated size in the paper making

and paper product industry fell by 5.5% year on year. Since entering the second quarter with the gradual strengthening of epidemic

prevention and control achievements enterprises resumed work and production in an orderly manner. Thanks to the combined effects

of favourable policies such as the “ban on importing waste” and a stricter ban on plastics market demand gradually picked up which

stimulated a price rise of pulp and machine-made paper and improved prosperity of the paper making industry. The major indicators

changed from negative to positive and recorded growth against the overall downtrend. According to the data from the National

Bureau of Statistics from January to December 2020 the national output of machine-made paper and paper board was 127006300

tonnes a record high since the founding of the People’s Republic of China.The Company seized opportunities during crisis and sought stability in changes. During the reporting period the Company as a

leading player in the paper making industry in China took strict control over the epidemic during the critical period of epidemic

prevention and control carried out production resumption and return to work in an orderly manner and stabilised production and

product quality. As the prevention and control of the epidemic bore fruits market demand increased with a higher pulp price. The

Company’s major types of paper saw a price rise. The advantages of the pulp and paper integration became more apparent with

further enhanced profitability and successful fulfilment of various mission goals.

In 2020 the Company produced 5.77 million tonnes machine-made paper with sales of 5.61 million tonnes representing a

year-on-year increase of 15.17% and 6.86% respectively. The Company recorded revenue of RMB30737 million representing a

year-on-year increase of 1.12%. Total profit and net profit attributable to equity holders of the Company amounted to RMB2172

million and RMB1712 million respectively representing a year-on-year increase of 6.04% and 3.35%. Total asset of the Company

amounted to RMB97959 million. The operation and management results were mainly reflected in the following aspects:

(i) Achieving objectives of production capacity and efficiency strategic optimisation and upgrading

In recent years the Company continued to focus on the development of the principal business of pulping and paper making. It

successively invested in the 500000-tonne cultural paper renovation project of Shouguang headquarters the 510000-tonne high-end

cultural paper project of Shouguang Meilun the 1 million-tonne chemical pulp project of Shouguang Meilun and 600000-tonne of

chemical wood pulp project of Huanggang Chenming. The Company’s pulp and paper production capacity reached more than 11

million tonnes becoming the only pulping and paper making enterprise in China with a balanced pulp and paper production capacity.

During the reporting period as the pulp price continued to rise the Company’s advantages of low costs became prominent. New

projects achieved the objectives of production capacity and efficiency and recorded year-on-year growth of total profit.(ii) Satisfying performance brought by innovative sales

In 2020 the COVID-19 epidemic brought a severe impact on sales work. In face of challenges all sales personnel actively

strengthened marketing and promotion assessed the current situation seized the opportunity generated by improved market

sentiment and continued to increase prices so as to achieve increases in both production and sales. The sales volume of

machine-made paper was 5.61 million tonnes representing an increase of 360000 tonnes over last year. Firstly we strengthened

channel development and customer management. As a result the number of contracted customers increased significantly and the

market construction has been steadily improved. Secondly we gave full play to the advantages of the production base layout and

increased sales at close distances. Thirdly we improved credit management increased prepayments and strictly control business

risks. Fourthly we insisted on structural adjustments actively developed new products increased sales of products with greater profit

margin and strengthened competitive advantages.(iii) Significant effects of supply chain management

During the reporting period the management of the supply chain management centre was improved. The centre strove for

favourable policies and the direct procurement from sources was taken to a higher level. The highlights of our unparalleled results

are as follows: 1. the amount of funds used was lowered by improving plan management regulating and sharing materials and sellingon consignment. 2. National policies were researched on and strived for. The Company was approved as “The Experimental Unit forthe Regulatory Reform of the Processing Trade of Enterprise Groups”. The Company and relevant import and export trade

companies were approved to enjoy the tax payment guarantee policies provided by the Finance Company of Chenming leading to a

lower cost of customs clearance and quicker clearance than ever before. 3. The management of suppliers was further improved. We

explored new sources vigorously. Its cooperation with customers the stability of the supply of raw materials and the quality of raw

materials were taken to a higher level.(iv) Improving financial management and capital structure

During the reporting period even though being confronted with harsh economic conditions the Company improved its financial

management steadily. Various measures were adopted to optimise our debt and capital structure leading to a better financial

conditions. 1. By enhancing capital management lowering the balance of bonds and reducing our debt and lease in a sustained way

the Company withdrew capital with a net value of RMB3600 billion. Risks were under effective control and financial security was

ensured. 2. Promoting setting up a financial information system and a capital management platform realising a comprehensive

improvement of the overall arrangement standardisation and financial management of the Group’s financial business. 3. The policies

benefiting enterprises the scientific tax planning improved analysis on the trend of exchange rates and other measures resulted in a

lower cost of funds and a better financial position.(v) Improving production management and exploring our potentials for a higher efficiency

During the reporting period our production system adhered to the guiding principles and goals of the Company. Our production

management was enhanced. Our production was sped up for a high production volume. We also explored our potentials for a higher

efficiency. The Company produce 5.77 million tonne machine-made paper in 2020 representing a year-on-year increase of 0.76

million tonnes. 1. We carried out standard practice vigorously to ensure that our paper making machines can operate in best

conditions aiming to increase production and efficiency. 2. Upholding the operation philosophy of “pulp and paper integration”.

Maximising the production of self-produced pulp by increasing the production of paper making machines. 3. Producing products

with high added value by adjusting product mix. Optimising the proportion of pulp to other materials to lower production costs. Our

volume of production is determined on sales and our production is arranged scientifically. We manage our inventory vigorously.Measures in relation to saving water and reducing pollutants discharges were adopted. The purpose of all of these actions is to

explore our potentials and increase efficiency.(vi) Strict corporate management producing initial success

In 2020 the Company’s management centre improved its basic management to conform to a series of requirements and a

certain amount of effect was produced. The details are as follows:

1. Improving and streamlining our institutions and enhancing our implementation. The Group’s overall management institutions

were streamlined to make them simple and easy to use. We have developed 160 new procedures and the number of existing

procedures is over 1200. Certain parts of these procedures are monitored by a mechanically controlled early warning system leading

to a higher operational efficiency. We obeyed our rules and regulations in a stricter manner. Problems were solved immediately once

they were discovered. Weekly examinations and appraisals were conducted on essential works improving the quality of our works

effectively.

2. Improving our incentive mechanism and strengthening our team building. Our check-up system was organised

comprehensively and our medium-term and long-term incentive mechanism was improved. The 2020 Restricted A Shares Incentive

Plan was implemented thus members of our team were motivated effectively. Everyone’s enthusiasm was aroused by taking up a

job through competition among cadres appraising through democratic discussion choosing excellent employees and other activities.We improved the quality of our training and trained our own talents by building an online learning platform and an operational

classroom and conducting training with special topic.

2. Significant change in the principal activities during the reporting period

□ Yes √ No

3. Products accounting for over 10% of revenue or operating profit of the Company

√ Applicable □ Not applicable

Unit: RMB

Product name Revenue Operating costs

Gross profit

margin

Increase/decreas

e of revenue as

compared to the

corresponding

period of the

prior year

Increase/decreas

e of operating

profit as

compared to the

corresponding

period of the

prior year

Increase/decreas

e of gross profit

margin as

compared to the

corresponding

period of the

prior year

White paper board 7900414595.22 2135920806.88 27.04% 14.35% 148.10% 14.57%

Duplex press paper 6880399009.21 1222137129.77 17.76% -10.98% -28.91% -4.48%

Coated paper 4134523188.76 880888276.54 21.31% 9.39% -2.59% -2.62%

Electrostatic paper 4052403877.82 855939083.41 21.12% 23.92% 0.29% -4.98%

Anti-sticking raw paper 1118932774.91 250184646.81 22.36% -9.66% -28.55% -5.91%

Financial leasing 935121026.20 807500930.78 86.35% -48.49% -52.37% -7.04%

4. Whether any seasonal or cyclical characteristic of operations gives rise to concern

□ Yes √ No

5. Description of significant change in revenue operating costs and total net profit attributable to ordinary

shareholders of the Company during the reporting period as compared to the prior reporting period

□ Applicable √ Not applicable

6. To be delisted

□ Applicable √ Not applicable

7. Events relating to financial reporting

(1) Description of changes in accounting policies accounting estimates and accounting methods as compared to

the financial report for the prior year

√ Applicable □ Not applicable

The Company has been implementing the Accounting Standard for Business Enterprises No. 13 promulgated by the Ministry of

Finance since 1 January 2020 for which the prospective application method is applied.

(2) Reason for retrospective restatement to correct major accounting errors during the reporting period

□ Applicable √ Not applicable

No retrospective restatement was made to correct major accounting errors during the reporting period.

(3) Reason for changes in scope of the consolidated financial statements as compared to the financial report for

the prior year

√ Applicable □ Not applicable

During the reporting period the scope of consolidation had 8 newly established subsidiaries namely Chenming (Overseas) Co.

Ltd. Chenming (Singapore) Co. Ltd. Qingdao Chenming Import and Export Trade Co. Ltd. Hainan Chenming Technology Co.Ltd. Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership (Limited Partnership) Hubei Huanggang

Chenming Equity Investment Fund Management Co. Ltd. Shandong Dingkun Asset Management Partnership (Limited Partnership)

and Huanggang Chenming Paper Technology Co. Ltd. During the reporting period a subsidiary was acquired not within the

definition of business namely Shanghai Herui Investment Co. Ltd. and a subsidiary Kunshan Tuoan Plastic Products Co. Ltd. was

acquired by the Group.

During the reporting period 3 companies were reduced from the scope of consolidation. A subsidiary Shandong Chenming

Paper Group (Fuyu) Sales Co. Ltd. was absorbed into the Group. The Company disposed of 100% equity interest in Qingdao

Chenming International Logistics Co. Ltd. and 100% equity interest in Shouguang Chenming Industrial Logistics Co. Ltd. Such

companies were excluded from the scope of consolidation.The Board of Shandong Chenming Paper Holdings Limited

25 March 2021