SHANDONG CHENMING PAPER HOLDINGS LIMITED Annual Report 2024 March 2025I Important Notice Table of Contents and Definitions The board of directors (the “Board”) the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”) supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the truthfulness accuracy and completeness of the contents of the annual report guarantee that there are no false representations misleading statements or material omissions contained in this annual report and are jointly and severally responsible for the liabilities of the Company.Hu Changqing 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 annual report.All Directors have attended the board meeting to review this report.Grant Thornton (Special General Partnership) has issued the 2024 annual audit report with a qualified opinion for the Company. The Board and the Supervisory Committee of the Company have provided detailed explanations regarding the relevant matters. Investors are advised to carefully read these explanations.Reminder of material deficiencies in internal control ? Applicable □ Not applicable Grant Thornton (Special General Partnership) has issued an adverse opinion in the auditor’s report on internal control for 2024 for the Company. Please refer to XII to XIV of section VI Corporate Governance for details.Forward-looking statements such as future plans contained in this annual report do not represent earnings forecasts of the Company nor constitute substantive commitments to investors by the Company. Investors and relevant persons shall maintain a sufficient risk awareness hereto and understand the differences among plans forecasts and commitments.The Company is exposed to various risk factors such as macro-economic fluctuation state policies and regulations and competition in the industry. Investor should be aware of investment risks. For further details please refer to the risk factors likely to be faced and the measures to be taken to address them as set out in the outlook on the future development of the Company in section VI 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. 2024 ANNUAL REPORT 1I 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 III Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 IV Management Discussion and Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 V Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 VI Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 VII Environmental and Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 VIII Material Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 IX Changes in Share Capital and Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 X Preference Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 XI Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 XII Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 2 SHANDONG CHENMING PAPER HOLDINGS LIMITEDI Important Notice Table of Contents and Definitions Documents Available for Inspection I. The financial statements signed and sealed by the legal representative the head in charge of accounting and the head of the accounting department of the Company; II. The original copy of the auditor’s report which is sealed by the accounting firm and signed and sealed by the certified public accountants; III. The original copies of the documents and announcements of the Company disclosed in the designated newspaper and on the website as approved by the CSRC during the reporting period; IV. The annual report disclosed on the website of The Stock Exchange of Hong Kong Limited; V. Other related information. 2024 ANNUAL REPORT 3I Important Notice Table of Contents and Definitions Definitions Item Definition Company Group Chenming Group Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries Paper or Chenming Paper Company Parent Company or Shouguang Headquarters means Shandong Chenming Paper Holdings Limited 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.Shanghai Chenming means Shanghai Chenming Industry 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.Shouguang Art Paper means Shouguang Chenming Art Paper Co. Ltd.Finance Company means Shandong Chenming Group Finance Co. Ltd. 4 SHANDONG CHENMING PAPER HOLDINGS LIMITEDI Important Notice Table of Contents and Definitions Item Definition 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) Jiangxi Port means Jiangxi Chenming Port Co. Ltd.Yujing Hotel means Shandong Yujing Grand Hotel Co. Ltd.Guangyuan Real Property means Shouguang Chenming Guangyuan Real Property Company Limited the reporting period or the year means The period from 1 January 2024 to 31 December 2024 the beginning of the year or the period means 1 January 2024 the end of the year or the period means 31 December 2024 the prior year means The period from 1 January 2023 to 31 December 2023 2024 ANNUAL REPORT 5II Company Profile and Key Financial Indicators I. Company profile Stock abbreviation ST 晨鳴 Stock code 000488 ST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 Name in Chinese of the Company 山東晨鳴紙業集團股份有限公司 Short name in Chinese of the Company 晨鳴紙業 Name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED Short name in English of the Company (if any) SCPH Legal representative of the Company Hu Changqing Registered address No. 595 Shengcheng Road Shouguang City Shandong Province Postal code of registered address 262700 Changes of the registered address of the Company Nil Office address No.2199 Nongsheng East Road Shouguang City Shandong Province Postal code of office address 262705 Website of the Company http://www.chenmingpaper.com Email address chenmmingpaper@163.com II. Contact persons and contact methods Secretary to the Board Securities affairs representatives Hong Kong Company Secretary Name Yuan Xikun Zhang Chuangyong Chen Lin Chu Hon Leung Email address chenmmingpaper@163.com friend537@163.com ZQCL0536@163.com liamchu@li-partners.com Correspondence No. 2199 Nongsheng East Road No. 2199 Nongsheng East Road Shouguang City Shandong 22nd Floor World Wide House address Shouguang City Shandong Province Central Hong Kong Province Telephone 0536-2158008 0536-2158008 00852-21629600 Facsimile 0536-2158977 0536-2158977 00852-25010028 III. Information disclosure and places for inspection Websites of the stock exchanges where the Company Domestic: http://www.szse.cn; overseas: http://www.hkex.com.hk discloses its annual report Names and websites of the media where the Company China Securities Journal Shanghai Securities News Securities discloses its annual report Times Securities Daily Hong Kong Commercial Daily and CNINFO (http://www.cinifo.com.cn) Places for inspection of the Company’s annual report Securities investment department of the Company IV. Change in registration Organisation registration code 913700006135889860 Change of principal activities since its listing (if any) Nil Change of the controlling shareholder (if any) Nil 6 SHANDONG CHENMING PAPER HOLDINGS LIMITEDII Company Profile and Key Financial Indicators V. Other relevant information CPAs engaged by the Company Name of CPAs Grant Thornton (Special General Partnership) CPAs’ Office Address Floor 11 Building No. 4 HuaChuang GuanLi Center 219 Shunhai Road Lixia District Jinan Name of the Signing Certified Public Accountants Jiang Tao and Guo Dongmei Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period □ Applicable √ Not applicable Financial advisors engaged by the Company to continuously perform its supervisory function during the reporting period □ Applicable √ Not applicable VI. Major accounting data and financial indicators Retrospective adjustment to or restatement of the accounting data for prior years by the Company □ Yes √ No Increase/decrease for the year as compared to the 2024 2023 prior year 2022 Revenue (RMB) 22729474852.76 26608570228.20 -14.58% 32004367320.91 Net profit attributable to shareholders of the Company (RMB) -7410784491.65 -1281289649.82 -478.38% 189290120.82 Net profit after extraordinary gains or losses attributable to shareholders of the Company (RMB) -7202385457.32 -1942120184.70 -270.85% -361459377.16 Net cash flows from operating activities (RMB) 2623191664.60 4389949308.82 -40.25% 3449824242.37 Basic earnings per share (RMB per share) -2.53 -0.45 -462.22% 0.03 Diluted earnings per share (RMB per share) -2.53 -0.45 -462.22% 0.03 Decreased by 49.60 Rate of return on weighted average net assets -57.25% -7.65% percentage points 0.55% Increase/decrease as at the end of the year compared to the end of the As at the end of 2024 As at the end of 2023 prior year As at the end of 2022 Total assets (RMB) 63509295142.08 79487052953.58 -20.10% 84301017409.62 Net assets attributable to shareholders of the Company (RMB) 9156104358.91 16692175196.53 -45.15% 19084565494.92 2024 ANNUAL REPORT 7II Company Profile and Key Financial Indicators The lower of the Company’s net profit before or after extraordinary gains or losses in the last three accounting years is negative and the audit report for the last year shows that the Company’s ability to continue as a going concern is uncertain √ Yes □ No The lower of net profit before or after extraordinary gains or losses is negative √ Yes □ No Item 2024 2023 Remark Revenue (RMB) 22729474852.76 26608570228.20 Revenue from sales of Deduction to revenue (RMB) 159980820.39 986216965.96 materials of Revenue after deduction (RMB) 22569494032.37 25622353262.24 RMB105595945.36 and other revenue of RMB54384875.03.VII. Differences in accounting data under domestic and overseas accounting standards 1. Differences between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report □ Applicable √ Not applicable There was no difference between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report during the reporting period. 2. Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report □ Applicable √ Not applicable There was no difference between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report during the reporting period. 8 SHANDONG CHENMING PAPER HOLDINGS LIMITEDII Company Profile and Key Financial Indicators VIII. Key Financial Indicators by Quarter Unit: RMB Q1 Q2 Q3 Q4 Revenue 6761777174.00 7122954345.04 5940014289.43 2904729044.29 Net profit attributable to shareholders of the Company 58196200.97 -29549995.55 -738744725.34 -6700685971.73 Net profit after extraordinary gains or losses attributable to shareholders of the Company -226480578.98 -44384464.53 -804074160.18 -6127446253.63 Net cash flows from operating activities 473092608.52 1519406784.55 391884014.73 238808256.80 Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as disclosed in the quarterly report or interim report □ Yes √ No IX. Five-year financial summary under paragraph 19 of appendix D2 of the Hong Kong Listing Rules Unit: RMB’0000 For the year ended 31 December 20242023202220212020 Revenue 2272947 2660857 3200437 3301981 3073652 Profit before tax -785319 -170970 18227 230618 217227 Tax -6017 -38306 -13509 21650 26606 Profit for the current period attributable to shareholders of the Company -741078 -128129 18929 206551 171203 Minority interests -38223 -4535 12807 2417 19418 Basic earnings per share (RMB/share) -2.53 -0.45 0.03 0.56 0.36 Rate of return on weighted average net assets (%) -57.25% -7.65% 0.55% 9.56% 5.84% Unit: RMB’0000 For the year ended 31 December 20242023202220212020 Total assets 6350930 7948705 8430102 8286966 9157546 Total liabilities 5067352 5838920 6057276 6029463 6577519 Minority interests 367967 440568 464369 345705 152329 Equity attributable to shareholders of the Company 915610 1669218 1908457 1911799 2427697 Net current assets (liabilities) -2795136 -2121186 -1917930 -1766446 -1516398 Total assets less current liabilities 1966696 2970931 3240227 3233471 4052922 2024 ANNUAL REPORT 9II Company Profile and Key Financial Indicators X. Items and amounts of extraordinary gains or losses □ Applicable □ Not applicable Unit: RMB Item Amount for 2024 Amount for 2023 Amount for 2022 Description Profit or loss from disposal of non-current assets (including write-off of provision for assets impairment) 35240228.34 431805592.54 161509859.17 Government grants (except for the government grants closely related to the normal operation of the Company granted in accordance with an established standard and having an ongoing effect on the Company’s profit or loss in compliance with national policies and regulations) accounted for in profit or loss for the current period 64412067.13 117211489.25 314934315.62 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 and financial liabilities held by a non-financial company as well as gain or loss arising from disposal of its financial assets and financial liabilities -181379218.46 58579398.48 -35178162.53 Reversal of provision for impairment of receivables individually tested for impairment 99483459.63 275585463.86 Profit or loss from debt restructuring 3519918.36 55297346.06 967464.91 Profit or loss from changes in the fair value of consumable biological assets subsequently measured at fair value -153411759.17 6775808.38 9924233.72 Other non-operating income and expenses other than the above items -15275886.14 -11642079.10 -37391130.09 Less: Effect of income tax -18173051.07 89176973.22 137333913.66 Effect of minority interests (after tax) -20322564.54 7503507.14 2268633.02 Total -208399034.33 660830534.88 550749497.98 – Details of other gain or loss items that fall within the definition of extraordinary gain or loss: □ Applicable √ Not applicable The Company did not have details of other gain or loss items that fall 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 Item Amount involved (RMB) Reason Other income 56090636.54 Government grants related to assets and closely related to the normal operation of the Company as extraordinary gain or loss due to the inclusion of their subsequent amortisation in other income and their ongoing effect on the Company’s profit or loss 10 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIII Chairman’s Report Dear shareholders and investors First of all on behalf of the Company I would like to express my sincere gratitude to the shareholders and investors for their attention to and support for the development of the Group.Over the past year the Company has faced severe challenges. During reporting period the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry.The prices of the Company’s major paper products in particular the price of white cardboard have declined significantly under the influence of the supply-demand contradiction leading to reduced profitability of the Company and incurring losses. At the same time as some financial institutions downsized the loan scale the Company faced temporary liquidity shortages and thus the Company and some of its subsidiaries encountered instances of debt defaults. In response some creditors have filed lawsuits against these debts in the court and simultaneously applied for property preservation and the court has made a ruling to freeze some of the bank accounts of the Company and its subsidiaries.In 2024 due to factors such as production restrictions and shutdowns for maintenance the Company produced 4.27 million tonnes of machine-made paper and sold 4.47 million tonnes of machine-made paper achieving revenue of RMB22729 million and a net profit attributable to the parent company of RMB-7411 million representing a significant decline as compared to the previous year. To reduce losses the Company has implemented production restrictions and shutdowns at some of its production bases since November along with maintenance of machinery and equipment. However due to the fact that the shutdown and maintenance has exceeded three months and the Company failed to resume large-scale production and operations the Company’s A shares and B shares have been subject to other risk warnings by the Shenzhen Stock Exchange.To turn the tables we have taken the following measures: Firstly the Company made every effort to promote the resumption of operation and production. The Company established production resumption plans conducted comprehensive overhauls across all production systems improved automated detection and control functions and enhanced equipment integrity and operational efficiency. Striving to achieve the resumption of operation and production within the shortest possible time the Company also strengthened its communication and coordination with suppliers to foster stable long-term cooperative relationships between them. As of the date of this report some production lines at Huanggang Chenming Jiangxi Chenming and Shouguang Chenming have gradually resumed production and operations.Secondly the Company made every effort to speed up the granting of a new syndicated credit facility. On 18 December 2024 provincial debt committees had been set up. It is agreed that they shall maintain the stability of existing credit facilities. They will renew expiring loans wherever possible without loan cancellations or delays and will provide support such as extended loan terms reduced interest rates and extended interest settlement cycles in order to alleviate the operational burden on the Company. The relevant matters are still subject to the respective consideration and approval procedures of the financial institutions. As of the date of this report most banks and leasing companies have completed decisions on renewals interest rate reductions and extensions of interest settlement cycles and have begun implementing these measures. The Company actively communicated and coordinated with all banks in the syndicate to speed up internal approvals and push for the granting of a new syndicated credit facility of RMB2.31 billion as soon as possible to inject funds for the resumption of operation and production of the Company.Thirdly the Company made every effort to revitalise and dispose of its existing assets. The Company strengthened the disposal of assets in its non-principal business established an asset management center adjusted and optimised internal management divided asset disposal management areas by region and assigned responsibilities to individuals to improve the efficiency of asset disposal. The Company also stepped up efforts to recover outstanding debts and pursued debtors with realisable assets with priority given to negotiation means. For accounts receivable that are difficult to recover the Company resorted to judicial channels to resolve the issues and striving to improve its liquidity. 2024 ANNUAL REPORT 11III Chairman’s Report Fourthly the Company made every effort to introduce strategic investments. A task force for the introduction of strategic investors has been set up. Dedicated personnel are responsible for engaging and negotiating with interested strategic investors and use flexible cooperation methods to effectively integrate resources. At the same time the Company insisted on the approach of combining “going out” and “bringing in” took the initiative to cooperate with competent enterprises and acquired the necessary working capital for the resumption of production through a variety of channels so as to support the Company in achieving normal production and operation as soon as possible.Difficulties and hardships polish us like jade. We have the confidence determination and capability to resolve all issues currently affecting our production and operations. By achieving the highest management standards the lowest production costs the best product offerings and the most competitive product prices we will enhance our profitability and achieve new growth.Finally I would like to extend our heartfelt gratitude once again to all shareholders investors and all sectors of the community for their attention to and support for the development of the Company.Hu Changqing Chairman 31 March 2025 12 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis I. Industry situation of the Company during the reporting period As a basic raw material industry closely related to economic and social development the paper industry experienced a complex and volatile development process against the backdrop of fluctuating raw material prices increased supply of paper products slow growth in sales and short-term supply and demand tensions in 2024.On the raw material side the raw materials for the paper industry primarily include wood pulp among others. In 2024 the prices of softwood pulp and hardwood pulp were affected by both unexpected international supply disruptions and the release of new domestic production capacity showing a mixed trend of upward and downward movements.For softwood pulp due to labour strikes and maintenance at pulp mills in major international suppliers of softwood pulp such as Finland Chile and Canada in the first half of the year its supply tightened which pushed up its price. However with the release of new domestic pulp production capacities supply pressure increased and overseas demand weakened and thus the price fell again. As of 31 December 2024 the average market price of softwood pulp in Shandong was RMB6400 per tonne representing an increase of 9.4% from the beginning of the year.For hardwood pulp its price trend was different from that of softwood pulp which demonstrated an overall decline. As of 31 December 2024 the average market price of hardwood pulp in Shandong was RMB4610 per tonne representing a decrease of 8.53% from the beginning of the year.On the supply side the paper industry saw a continuous increase in the supply of paper products driven by new production capacity in 2024. From January to December 2024 the national production of machine-made paper and paper board reached 158.469 million tonnes representing a year-on-year increase of 8.6%. According to statistics as of the end of October 2024 the number of papermaking enterprises nationwide reached 7999 representing an increase of 331 from the end of 2023. As an important component of the paper industry the paper and paperboard manufacturing sector saw cumulative year-on-year growth of 20.6% in its fixed asset investment demonstrating strong momentum of investment growth.On the demand side despite the continuous increase in supply in the paper industry the growth in sales of paper products remained slow due to the global economic slowdown and sluggish domestic consumer demand. Product prices struggled to rise with overall price levels lower than the same period in the previous year.For the price of culture paper the price of culture paper experienced a fluctuation process of rising first and then falling in 2024. At the beginning of the year the price of culture paper rose due to market demand and adjustments in supply-side production capacity. However as end-user demand weakened and the orders for finished paper decreased the prices of bulk paper continued to decline leading to a drop in the price of culture paper. In particular starting from May both the price and profit fell to historically low levels. Although the price of culture paper recovered in late November due to short-term supply contractions and the concentrated delivery of tender orders the current prices of duplex press paper and coated paper remain at relatively low levels.For the price of white cardboard the white cardboard sector also faced significant challenges in 2024. Affected by the substantial release of new supply in the previous period and the relatively slow recovery of end-user demand the price of white cardboard remained in a downward trend with a profitability level near the lowest point in history. Although the state subsidy for new home appliances had been gradually extended to small kitchen appliances in certain regions which provided some boost to industry demand the overall sector still faced considerable competitive pressure.The paper industry needs to pay close attention to policy changes and the recovery of market demand strengthen technological innovation and digital transformation and enhance its core competitiveness and market adaptability in order to achieve sustainable development. 2024 ANNUAL REPORT 13IV Management Discussion and Analysis II. Principal activities of the Company during the reporting period 1. Business overview of the Company The Company is a large modern conglomerate principally engaged in pulp production and paper making and committed itself to implementing a pulp and paper integration strategy. The Company has production bases in Shandong Guangdong Hubei Jiangxi Jilin and other places for the production of 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. It is the enterprise with the largest variety of products and the most complete products in the domestic paper industry. It is also the first domestic paper making enterprise that achieves a balance between pulp production and paper making capacity in general. During the reporting period the machine-made paper business was the major source of revenue and profit of the Company with no significant changes in the principal activity.In recent years the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. As a result the prices of the Company’s major products continued to decline during the reporting period with a year-on-year decrease in gross profit. In addition some of the Company’s production bases had successively been in shutdown and maintenance in the fourth quarter leading to unsatisfactory capacity utilisation and a year-on-year decline in production and sales volumes.The Company made impairment provisions for certain assets and also increased the provision ratio for bad debts related to underperforming financial leasing customers out of prudence which collectively contributed to a decline in profitability. In 2024 the net profit attributable to shareholders of the Company recorded a loss of RMB7411 million. 2. Major products of the Company and their application The Company attaches great importance to technology research and development and brand benefits. Focusing on key areas of green papermaking technology the Company continuously strengthens the construction of research platforms and other hardware facilities and has a number of domestically leading innovative R&D platforms including a national enterprise technology centre a post-doctoral working station a collaborative innovation centre for cleaner production and refinery of light industry bio-based products the Shandong Pulp and Paper Making Engineering Lab in order to promote standardised production optimise and adjust its product structure and facilitate high-quality development of its principal business. During the reporting period the Company successfully passed the audit ofChina Environmental United Certification Center and was awarded the certificate of “China Environmental Labelling(Type I) Product Certification”. Projects such as the “development of green wet processing technology for cornstarch” were included in the 2024 Shandong Provincial Technological Innovation Project Campaign. 14 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis II. Principal activities of the Company during the reporting period (Continued) 2. Major products of the Company and their application (Continued) Major brands of machine-made paper products and their applications are set out below: Category Major brands and types Major manufacturing companies Range of application Culture paper series 1. “BIYUNTIAN” “CLOUDY MIRROR” “CLOUDY LEOPARD” Shouguang Headquarters Printing publications textbooks magazines covers illustrations and “YUNJIN” all-wood pulp offset paper and electrostatic Shouguang Meilun notebooks test papers teaching materials reference books base paper Zhanjiang Chenming etc. 2. “CLOUDY LION” and “CLOUDY CRANE” original white Jiangxi Chenming offset paper Jilin Chenming 3. “CLOUDY PINE” and “GREEN PINE” light weight 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 paper Shouguang Headquarters Double-sided coated paper is suitable for high quality printing 2. “SNOW SHARK” “EAGLE” and “RABBIT” double-sided Shouguang Meilun such as high-grade picture albums picture magazines and so coated paper on promotional materials such as interior pages of high-end 3. “EAGLE” and “RABBIT” matte coated paper 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.White cardboard series 1. White cardboard of “LIYA” series white cardboard and Shouguang Headquarters High-end gift boxes cosmetics boxes tags shopping bags ivory cardboard of “LIPIN” and “POPLAR” series high bulk Jiangxi Chenming publicity pamphlets high-end postcards; cigarette package cardboard and ivory cardboard of “LIZZY” and “BAIYU” Zhanjiang Chenming printing of medium and high quality; milk package beverage series and super high bulk cardboard of “LIYING” and package disposable paper cups milk tea cups and noodle “BAIYU” series bowls. 2. Food package board of “LIYA” and “LIZZY” series 3. Coated cattle card and LIYA book card 4. Playcard paper board 5. Chenming cigarette cardboard Copy paper series “GOLDEN MINGYANG” and “GOLDEN CHENMING” copy paper Shouguang Headquarters Printing and copying business documents training materials and “BOYA” and “BIYUNTIAN” copy paper “MINGYANG” Shouguang Meilun writing.“LUCKY CLOUDS” “BOYANG” and “SHANYIN” copy Zhanjiang Chenming paper and “GONGHAO” and “TIANJIAN” copy paper Industrial paper series High-grade yellow anti-sticking base paper ordinary yellow/ Shouguang Headquarters Anti-stick base paper is mainly used for producing the paper base white anti-sticking base paper and PE paper Jiangxi Chenming of stripping paper 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 series Toilet paper facial tissue pocket tissue napkin paper towels Shouguang Meilun Daily toilet supplies; used in restaurants and other catering and “XINGZHILIAN” industries and used in public toilets in hotels guesthouses and office buildings and also suitable for home and other environment. 2024 ANNUAL REPORT 15IV Management Discussion and Analysis II. Principal activities of the Company during the reporting period (Continued) 3. Operation model (1) Purchase model The Company has established a supply chain management centre which adopts a supply chain managementmodel of “centralised procurement by the Group source as the first priority hierarchical separation andone-vote veto”. Through continuous improvement of the procurement information system the Company has fully realised online bidding and effectively developed high-quality suppliers improving the fairness and impartiality of procurement. Based on the needs of production bases the Group integrates the resources of related parties and implements centralised procurement. The Company seeks sources and high-quality suppliers through industry exhibitions on-site inspections and competitive factory research to strengthen procurement at source and reduce procurement costs; and introduces a supplier competition mechanism by establishing a three-level joint review mechanism for suppliers and implementing a system of eliminating substandard suppliers so as to improve supply quality. (2) Production model The Company has committed itself to implementing a pulp and paper integration strategy. Adhering to the concept of “placing green development and environmental protection as its priority” the Company has actively promoted clean production and vigorously carried out energy conservation and emission reduction aiming to be a resource-saving and environmentally friendly model enterprise. It is innovating an integrated use of resources and a circular industrial development mode and an “ecological chain” featuring resources products and recycled resources has been established. As for production process the Company takes planned management as the focus and implements a hierarchical planned management model for the Group the Company factories and workshops. Its production volume is determined based on the sales its production is arranged scientifically and its inventories are under strict control. The Group has set up a production scheduling centre to monitor the operation of the production lines of each subsidiary around the clock on a real-time basis so as to ensure normal production. It has actively built and promoted the MES management system and realised the timely information transfer between the management and the production control unit through bridging the gap between the ERP and DCS systems. Starting from the fourth quarter of the reporting period the Company’s production bases in Shouguang Zhanjiang Jiangxi and Jilin had successively been in shutdown and maintenance resulting in unsatisfactory capacity utilisation of the Company during the reporting period and a year-on-year decline in production and sales volumes. (3) Marketing model The Company has always adhered to the marketing concept of “Good faith Win-Win and Sharing” while wholeheartedly serving its customers. The Company has a relatively mature sales network and has set up specialised sales companies responsible for the development of domestic and overseas markets product sales and formulation of sales policies. The sales companies’ management systems are divided into product lines product companies management areas and branches to achieve matrix management. The sales companies are divided into culture paper series coated paper series electrostatic paper series special paper series and household paper series according to product line. Each product company has its administrative district. A regional general manager is responsible for his/her administrative district under which branch companies are set up. The chief representatives of the branch companies have full authority to deal with branch business. 16 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis II. Principal activities of the Company during the reporting period (Continued) 3. Operation model (Continued) (3) Marketing model (Continued) The Company has implemented a three-level scheduling mechanism. Branch companies administrative districts and sales companies schedule task indicators daily to ensure the effective implementation of the plans.It sticks to a “four-level visit mechanism” to gain deep market insights and meet customer needs. Meanwhile by leveraging its comprehensive information systems the Company has realised It-based management. It has also established and improved the complaint handling system and customer satisfaction system to enhance the Company’s marketing management level. (4) R&D model The Company is market-oriented and innovation is it driving force. It highly values technological R&D and has formed a variety of R&D modes such as independent R&D technology introduction and industry university research cooperation. At present the Company has a number of domestically leading innovative R&D platforms including a national enterprise technology centre a post-doctoral working station a collaborative innovation centre for cleaner production and refinery of light industry bio-based products and Shandong Pulp and Paper Making Engineering Lab which continuously enhance its independent innovation capabilities. Meanwhile on the basis of introducing internationally advanced pulp and paper production lines and advanced technologies the Company has made technological improvements optimised product processes and improved product quality forming distinctive core technologies. The Company also works hard on carrying out academic research with colleges and universities and R&D institutions such as Qilu University of Technology and Shandong Paper Industry Research and Design Institute introducing digesting and absorbing scientific research and innovation achievements optimising product mix and improving the competitiveness of its products in the market.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 creating competitive advantages in an industry chain featured with pulp and paper integration. 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. 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. 2. Scale advantages The paper 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 industry in China. Its large-scale production bases can be found in the major markets in Southern Central Northern and Northeast China 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. 2024 ANNUAL REPORT 17IV Management Discussion and Analysis III. Analysis of core competitiveness (Continued) 3. Product advantages The Company is an enterprise that offers the widest and the most complete product range in the paper industry in China. 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 a national enterprise technology centre a post-doctoral working station a collaborative innovation centre for cleaner production and refinery of light industry bio-based products and Shandong Pulp and Paper Making Engineering Lab. 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 470 national patents including 42 invention patent authorisation 7 national new products 16 scientific and technological progress awards above the provincial level 5 national scientific and technological projects and 75 Shandong 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. 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. 18 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis III. Analysis of core competitiveness (Continued) 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 for 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 paperindustry. The reclaimed water recycle rate attains the industry-leading level. Meanwhile in response to the “dualcarbon” 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.IV. Analysis of principal operations 1. Overview In recent years the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Company’s major paper products in particular the price of white cardboard have declined significantly under the influence of the supply-demand contradiction. The profit level of the Company has been decreasing and has even turned from profits into losses. In 2024 the prices of the Company’s major products continued to be low with a year-on-year decline in gross profit. Starting from the fourth quarter the Company’s production bases in Shouguang Zhanjiang Jiangxi and Jilin had successively been in shutdown and maintenance resulting in unsatisfactory capacity utilisation of the Company and a year-on-year decline in production and sales volumes. At the same time the Company made impairment provisions for certain assets resulting in increased operating losses. The Company will accelerate the progress of maintenance for technical renovation focus on its main responsibilities and principal business and make every effort to promote the resumption of normal production and achieve sustainable and sound operation. During the reporting period the Company completed machine-made paper production of 4.27 million tonnes and sales volume of 4.47 million tonnes and realised revenue of RMB22729 million and net profit attributable to shareholders of the Company of RMB-7411 million. Next the Company will continue to implement the pulp and paper integration strategy adjust and optimise internal management strengthen cost management optimise product structure consolidate and expand sales market promote corporate reform and innovation and strive to improve corporate management and operation quality. At the same time as the pressure of new production capacity in the paper industry has eased off the industry is expected to alleviate the imbalance between supply and demand. Along with an orderly rebound in the prices of major paper products the Company’s profitability will be further restored. 2024 ANNUAL REPORT 19IV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 2. Revenue and cost (1) Components of revenue Unit: RMB 20242023 Amount % of revenue Amount % of revenue Increase/decrease Total revenue 22729474852.76 100% 26608570228.20 100% -14.58% By industry Machine-made paper 20179848508.57 88.79% 23892883773.10 89.79% -15.54% Chemical pulp 1519262130.75 6.68% 551886319.48 2.07% 175.29% Electricity and steam 216763239.54 0.95% 223450300.54 0.84% -2.99% Hotel and property rentals 193494961.95 0.85% 212364573.64 0.80% -8.89% Construction materials 127783427.12 0.56% 222788884.78 0.84% -42.64% Chemicals 88627247.45 0.39% 128495469.03 0.48% -31.03% Others 403695337.38 1.78% 1376700907.63 5.18% -70.68% By product Duplex press paper 6117888314.70 26.92% 7702426452.75 28.95% -20.57% White cardboard 4553056974.25 20.03% 5477558929.56 20.59% -16.88% Coated paper 3758928113.95 16.54% 3925663395.23 14.75% -4.25% Electrostatic paper 3547162310.53 15.61% 4005559008.36 15.05% -11.44% Anti-sticking raw paper 909489122.98 4.00% 1127626969.18 4.24% -19.34% Thermal paper 432929902.58 1.90% 553666757.69 2.08% -21.81% Other machine-made paper 860393769.58 3.79% 1100382260.33 4.14% -21.81% Chemical pulp 1519262130.75 6.68% 551886319.48 2.07% 175.29% Electricity and steam 216763239.54 0.95% 223450300.54 0.84% -2.99% Hotel and property rentals 193494961.95 0.85% 212364573.64 0.80% -8.89% Construction materials 127783427.12 0.56% 222788884.78 0.84% -42.64% Chemicals 88627247.45 0.39% 128495469.03 0.48% -31.03% Others 403695337.38 1.78% 1376700907.63 5.18% -70.68% By geographical segment Mainland China 18082061604.77 79.55% 20082348032.36 75.47% -9.96% Other countries and regions 4647413247.99 20.45% 6526222195.84 24.53% -28.79% By sales model Distribution 16965016680.69 74.64% 18126061624.64 68.12% -6.41% Direct sales 5764458172.07 25.36% 8482508603.56 31.88% -32.04% 20 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 2. Revenue and cost (Continued) (2) Industries products regions and sales model accounting for over 10% of revenue or operating profit of the Company √ Applicable □ Not applicable Unit: RMB Increase/ Increase/ Increase/ decrease of decrease of decrease of operating gross profit revenue as costs as margin as compared compared compared to the to the to the corresponding corresponding corresponding Gross period of the period of the period of Revenue Operating costs profit margin prior year prior year the prior year By industry Machine-made paper 20179848508.57 19870513391.35 1.53% -15.54% -9.84% -6.23% By product Duplex press paper 6117888314.70 5767014322.77 5.74% -20.57% -16.77% -4.30% White cardboard 4553056974.25 5140713897.07 -12.91% -16.88% -9.38% -9.34% Coated paper 3758928113.95 3263366438.24 13.18% -4.25% -3.73% -0.47% Electrostatic paper 3547162310.53 3146628608.35 11.29% -11.44% -7.74% -3.57% By geographical segment Mainland China 18082061604.77 17512725170.98 3.15% -9.96% -4.42% -5.61% Other countries and regions 4647413247.99 4632103497.45 0.33% -28.79% -24.35% -5.85% By sales model Distribution 16965016680.69 16675644976.42 1.71% -6.41% -0.64% -5.70% Direct sales 5764458172.07 5469183692.01 5.12% -32.04% -28.63% -4.55% 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 2024 ANNUAL REPORT 21IV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 2. Revenue and cost (Continued) (3) Whether revenue from sales in kind is higher than revenue from services √ Yes □ No Increase/ By industry Item Unit 2024 2023 decrease Machine-made paper Sales ’0000 tonnes 447 474 -5.70% Production ’0000 tonnes 427 478 -10.67% Inventories ’0000 tonnes 16 36 -55.56% Explanation on why the related data varied by more than 30% √ Applicable □ Not applicable Inventories decreased by 55.56% as compared to the corresponding period of the prior year mainly due to the temporary shutdown for maintenance of certain production bases of the Company which resulted in lower production and sales year on year and a significant decline in inventories. (4) Performance of material sales contracts and material procurement contracts of the Company during the reporting period □ Applicable √ Not applicable 22 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 2. Revenue and cost (Continued) (5) Composition of operating costs By industry Unit: RMB 20242023 % of % of operating operating Increase/ By industry Item Amount costs Amount costs decrease Machine-made paper Raw materials 11828109710.98 59.53% 12570191697.45 57.04% -5.90% Chemicals 2583423761.59 13.00% 2971091082.48 13.48% -13.05% Energy and power 2386038849.39 12.01% 3035894899.73 13.78% -21.41% Depreciation 960184014.41 4.83% 974858417.49 4.42% -1.51% Freight 686460621.13 3.55% 879576446.70 3.99% -21.96% Labour costs 291717645.90 1.47% 273486536.00 1.24% 6.67% Other production costs 1134578787.95 5.61% 1333740009.76 6.05% -14.93% Subtotal 19870513391.35 100.00% 22038839089.61 100.00% -9.84% Chemical pulp Raw materials 958370750.86 69.94% 326385778.01 59.41% 193.63% Chemicals 241722332.15 17.64% 77144557.36 14.04% 213.34% Accumulated depreciation 52876991.99 3.86% 25312257.02 4.61% 108.90% Energy and power 38763133.20 2.83% 78827192.35 14.35% -50.83% Labour costs 9468190.03 0.69% 7101094.24 1.29% 33.33% Other production costs 68993613.36 5.04% 34630638.99 6.30% 99.23% Subtotal 1370195011.59 100.00% 549401517.97 100.00% 149.40% Electricity and steam Raw materials 157175024.00 60.54% 161991982.35 76.38% -2.97% Depreciation 34156605.23 13.16% 16818943.23 7.93% 103.08% Labour costs 15489066.88 5.97% 7859289.01 3.71% 97.08% Energy and power 4724477.71 1.82% 4983704.94 2.35% -5.20% Chemicals 2636036.76 1.02% 387301.28 0.18% 580.62% Other production costs 45419675.79 17.49% 20048349.41 9.45% 126.55% Subtotal 259600886.37 100.00% 212089570.22 100.00% 22.40% Construction materials Raw materials 95782541.60 70.44% 161288633.91 74.50% -40.61% Energy and power 13470743.69 9.91% 20858840.97 9.64% -35.42% Labour costs 6940173.79 5.10% 7205420.78 3.33% -3.68% Depreciation 6917316.31 5.09% 5941206.01 2.74% 16.43% Freight 4181321.70 3.07% 5718100.50 2.64% -26.88% Other production costs 8690233.12 6.39% 15469301.87 7.15% -43.82% Subtotal 135982330.21 100.00% 216481504.04 100.00% -37.19% 2024 ANNUAL REPORT 23IV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 2. Revenue and cost (Continued) (6) Change of scope of consolidation during the reporting period √ Yes □ No During the year 2 subsidiaries were newly established namely Shandong Chenming Industrial Trading Co.Ltd. and Hubei Chenming Technology Industrial Co. Ltd. 2 subsidiaries were deregistered namely Chenming International Co. Ltd. and Guangzhou Chenming Commercial Factoring Co. Ltd. 1 subsidiary was disposed of namely Kunshan Tuoan Plastic Products Co. Ltd. (7) Significant change in or adjustment of the businesses products or services of the Company during the reporting period □ Applicable √ Not applicable (8) Sales to major customers and major suppliers Sales to major customers of the Company Total sales to top 5 customers (RMB) 6640449070.92 Total sales to top 5 customers as a percentage of the total sales for the year 29.22% Sales to top 5 customers who are related parties as a percentage of the total sales for the year 0.00% Information on top 5 customers of the Company As a percentage of the No. Name of customer Sales (RMB) total sales for the year (%) 1 Customer A 2064673781.53 9.08% 2 Customer B 1756822697.40 7.73% 3 Customer C 1435062542.98 6.31% 4 Customer D 750788017.87 3.30% 5 Customer E 633102031.14 2.80% Total – 6640449070.92 29.22% Other explanation of the major customers □ Applicable √ Not applicable 24 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 2. Revenue and cost (Continued) (8) Sales to major customers and major suppliers (Continued) Major suppliers of the Company Total purchases from top 5 suppliers (RMB) 5545576735.77 Total purchases from top 5 suppliers as a percentage of the total purchases for the year 25.04% Total purchases from top 5 suppliers who are related parties as a percentage of the total purchases for the year 0.00% Information on top 5 suppliers of the Company As a percentage of the total No. Name of supplier Purchases (RMB) purchases for the year (%) 1 Supplier A 2397232744.21 10.83% 2 Supplier B 930208840.68 4.20% 3 Supplier C 822725545.62 3.72% 4 Supplier D 756893525.57 3.42% 5 Supplier E 638516079.69 2.87% Total – 5545576735.77 25.04% Other explanation of the major suppliers □ Applicable √ Not applicable Income from trading business accounted for more than 10% of revenue during the reporting period □ Yes √ No □ Not applicable 3. Expenses Unit: RMB Increase/ 2024 2023 decrease Reasons for material changes Selling and distribution expenses 241171109.12 230999637.43 4.40% General and administrative expenses 751168974.00 690319782.01 8.81% Legal costs litigation expenses and depreciation expenses increased year on year during the reporting period.Finance expenses 1967982467.34 2009666708.14 -2.07% 2024 ANNUAL REPORT 25IV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 4. Research and development expenditure √ Applicable □ Not applicable Objectives to be Expected impact on the future Name of major R&D project Project purpose Project progress achieved development of the Company Research on deep delignification Saving raw materials Trial production To become Improving product quality lowering technology for broadleaf wood sulphate stage domestically leading production costs and improving pulping the Company’s economic benefits.Research on the strengthening effect Enhancing product Pilot testing stage To become Improving product quality lowering of amphoteric dry strength agent on functionality or improving domestically leading production costs and improving electrostatic copy paper performance the Company’s economic benefits.Development of green wet processing Reducing energy Small testing stage To become Improving product quality lowering technology for corn starch consumption or domestically leading production costs and improving improving energy the Company’s economic efficiency benefits.Development of technology for high-end Enhancing product Pilot testing stage To become Improving customer satisfaction with kitchen paper functionality or improving domestically leading products and increasing market performance share.Development of key grinding technology Enhancing product Pilot testing stage To become Improving customer satisfaction with for thermal paper colour developing functionality or improving domestically leading products and increasing market process performance share.Development of technology for coated Enhancing product Pilot testing stage To become Improving customer satisfaction with cattle card functionality or improving domestically leading products and increasing market performance share. 26 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 4. Research and development expenditure (Continued) R&D personnel of the Company Percentage 2024 2023 of change R&D headcount 1310 1502 -12.78% Ratio of R&D personnel 13.65% 14.16% -0.51% Academic background of R&D personnel Bachelor’s degree 143 154 -7.14% Master’s degree 3 3 0.00% Age composition of R&D personnel Under 30 230 319 -27.90% 30~40 years old 824 853 -3.40% R&D expenditure of the Company Percentage 2024 2023 of change R&D expenditure (RMB) 1080331754.42 1164419698.13 -7.22% R&D expenditure to revenue 4.75% 4.38% 0.37% Amount of R&D expenditure capitalised (RMB) 0.00 0.00 0.00 Capitalised R&D expenditure to R&D expenditure 0.00% 0.00% 0.00% Reasons for and effects of significant changes in the composition of the Company’s R&D personnel □ Applicable √ Not applicable Reasons for significant change in total R&D expenditure to revenue □ Applicable √ Not applicable Reasons for and reasonableness of the significant change of the capitalisation rate of R&D expenditure □ Applicable √ Not applicable 2024 ANNUAL REPORT 27IV Management Discussion and Analysis IV. Analysis of principal operations (Continued) 5. Cash flows Unit: RMB Increase/ Item 2024 2023 decrease Subtotal of cash inflows from operating activities 23774221275.09 29165118764.19 -18.48% Subtotal of cash outflows from operating activities 21151029610.49 24775169455.37 -14.63% Net cash flows from operating activities 2623191664.60 4389949308.82 -40.25% Subtotal of cash inflows from investing activities 535245822.29 377601853.11 41.75% Subtotal of cash outflows from investing activities 69444183.34 319310876.89 -78.25% Net cash flows from investing activities 465801638.95 58290976.22 699.10% Subtotal of cash inflows from financing activities 34062925816.76 35277274955.07 -3.44% Subtotal of cash outflows from financing activities 37787846793.19 41061017053.99 -7.97% Net cash flows from financing activities -3724920976.43 -5783742098.92 35.60% Net increase in cash and cash equivalents -612290496.30 -1395226406.90 56.12% Explanation on main effects of material changes in relevant data year on year √ Applicable □ Not applicable (1) Net cash flows from operating activities decreased by 40.25% as compared to the corresponding period of the prior year mainly due to the decrease in sales revenue as a result of the decrease in sales volume during the reporting period. (2) Net cash flows from investing activities increased by 699.10% as compared to the corresponding period of the prior year mainly due to the receipt of proceeds from the disposal of equity in a subsidiary during the reporting period. (3) Net cash flows from financing activities increased by 35.60% as compared to the corresponding period of the prior year mainly due to the year-on-year decrease in debts due for repayment during the reporting period.Explanation on reasons leading to the material difference between net cash flows from operating activities during the reporting period and net profit for the year √ Applicable □ Not applicable Net profit decreased significantly mainly due to credit impairment losses and loss on impairment of assets during the year. At the same time receipts from sales of the Company during the year were higher than raw material costs and various expenses leading to a material difference between the cash flow from operating activities and the net profit during the year. 28 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis V. Analysis of non-principal operations √ Applicable □ Not applicable Unit: RMB As a percentage Amount of total profit Reason Sustainable or not Other income 295803414.30 -3.77% Receipt of government grants Including RMB105 million the annual related to daily business activities amortisation amount of government grants received in prior periods and sustainable in nature.Investment income -766913269.23 9.77% Recognition of external investment income and dividends as well as income from equity disposal and derecognition of financial assets during the reporting period Gain or loss arising from the -192216967.50 2.45% Fluctuations of fair values of the change in fair value shares of China Bohai Bank as well as forestry assets and other non-current financial assets Credit impairment loss -3198089208.46 40.72% Bad debt provisions for receivables Loss on impairment of assets -332755406.25 4.24% Bad debt provisions for non-current assets VI. Analysis of assets and liabilities 1. Material changes of asset items Unit: RMB As at the end of 2024 As at the beginning of 2024 As a percentage As a percentage Percentage Amount of total assets Amount of total assets change Description Monetary funds 5909879812.18 9.31% 12124832831.30 15.25% -5.94% Mainly due to a decrease in guarantee deposits as at the end of the reporting period.Accounts 1384290313.70 2.18% 2528507059.83 3.18% -1.00% Mainly due to a decrease in receivables from receivables customers as at the end of the reporting period.Other receivables 1084651870.94 1.71% 2224904557.88 2.80% -1.09% Mainly due to a decrease in payments with external entities as at the end of the reporting period.Inventories 2835388802.15 4.46% 4958178000.36 6.24% -1.78% Mainly due to a decrease in inventories and raw materials as at the end of the reporting period. 2024 ANNUAL REPORT 29IV Management Discussion and Analysis VI. Analysis of assets and liabilities (Continued) 1. Material changes of asset items (Continued) As at the end of 2024 As at the beginning of 2024 As a percentage As a percentage Percentage Amount of total assets Amount of total assets change Description Non-current assets 2840365519.48 4.47% 4161725935.75 5.24% -0.77% Mainly due to a decrease in long-term due within one receivables due within one year as at the year end of the reporting period.Other current 559911202.83 0.88% 1068826944.78 1.34% -0.46% Mainly due to a decrease in one-year finance assets lease and factoring receivables as at the end of the reporting period.Construction in 593838603.87 0.94% 859617965.16 1.08% -0.14% Mainly due to the transfer of some construction progress in progress into fixed assets during the reporting period.Short-term 26780358809.11 42.17% 33475479021.62 42.11% 0.06% Mainly due to a reduction in short-term debts as borrowings at the end of the reporting period.Bills payable 1423918112.99 2.24% 4618986463.95 5.81% -3.57% Mainly due to the overdue bills being reclassified to accounts payable other payables and short-term borrowings as at the end of the reporting period.Accounts payable 7708967406.47 12.14% 3902620870.20 4.91% 7.23% Mainly due to an increase in payables to suppliers and some overdue commercial bills being reclassified to accounts payable as at the end of the reporting period.Contract liabilities 274829824.35 0.43% 1443680155.62 1.82% -1.39% Mainly due to a decrease in advance payments from customers as at the end of the reporting period.Non-current 1577936964.14 2.48% 3631937677.82 4.57% -2.09% Mainly due to in the overdue equipment lease liabilities due payments being reclassified to other current within one year liabilities as at the end of the reporting period.Other current 2680562600.58 4.22% 100000000.00 0.13% 4.09% Mainly due to the overdue equipment lease liabilities payments being reclassified to other current liabilities as at the end of the reporting period.Long-term 774965008.29 1.22% 2541095217.66 3.20% -1.98% Mainly due to the overdue equipment lease payables payments being reclassified to other current liabilities as at the end of the reporting period.A higher proportion of overseas assets □ Applicable √ Not applicable 30 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis VI. Analysis of assets and liabilities (Continued) 2. Assets and liabilities measured at fair value √ Applicable □ Not applicable Unit: RMB Profit or loss Cumulative from change fair value Impairment Amount Amount in fair value change provided acquired disposed during the charged to during the during the of during Item Opening balance period equity period period the period Other changes Closing balance Financial assets 1. Held-for-trading financial assets (excluding derivative financial assets) 46294291.71 -9757917.81 -159474419.34 722951.80 37259325.70 2. Other non-current financial assets 781561040.57 -29047290.52 30221725.86 1483295.37 751030454.68 3. Consumable biological assets measured at fair value 1483978089.61 -153411759.17 -116650954.14 23849675.16 98036231.75 1256379773.85 Total 2311833421.89 -192216967.50 -245903647.62 2044669554.23 Whether there were any material changes on the measurement attributes of major assets of the Company during the reporting period □ Yes √ No 3. Restriction on asset rights as at the end of the reporting period Unit: RMB As at the end of the period As at the beginning of the period Type of Type of Item Book balance Book value restriction Restriction Book balance Book value restriction Restriction Fixed assets 34375256421.29 20001586415.43 Charged As collateral for bank borrowings 9411111670.62 6303095864.20 Charged As collateral for bank borrowings and long-term payables and long-term payables Investment properties 6742657317.44 5433525500.09 Charged As collateral for bank borrowings 5941741699.60 5004776921.76 Charged As collateral for bank borrowings Monetary funds 5728747806.12 5728747806.12 Pledged As deposits for bank acceptance 11360599088.69 11360599088.69 Pledged As deposits for bank acceptance frozen bills letter of credit loans frozen bills letter of credit letter deposit reserves or frozen of guarantee loans deposit accounts and interest reserves and interest receivable frozen by receivable etc.litigation etc.Intangible assets 1789243785.12 1312981381.52 Charged As collateral for bank borrowings 865105844.99 665784045.39 Charged As collateral for bank borrowings and long-term payables and long-term payables Long-term equity investments 1549103158.31 1549103158.31 Frozen Frozen due to being sued for arrears Accounts receivable 207017962.56 206147426.74 Pledged As collateral for borrowings 403349324.55 398710807.32 Pledged As collateral for borrowings Inventories 120195864.99 103566055.40 Seized by Seized due to being sued for court arrears Accounts receivable financing 90551168.01 90551168.01 Pledged As collateral for obtaining letters of credit Total 50512222315.83 34335657743.61 28072458796.46 23823517895.37 2024 ANNUAL REPORT 31IV Management Discussion and Analysis VII. Analysis of investments 1. Overview √ Applicable □ Not applicable Investments during the corresponding period of Investments during the reporting period (RMB) prior year (RMB) Change 83000000.00582400000.00-85.75% 2. Material equity investments acquired during the reporting period √ Applicable □ Not applicable Unit: RMB Profit or Progress as loss from Date of Form of Investment Source of Period of at the date of Estimated investment for Involvement disclosure Disclosure Name of investee Principal activities investment amount Shareholding fund Partner(s) Investment Product type balance sheet return the period in lawsuit if any Index if any Shouguang Chenming Sale of paper Capital 33000000.00 100% Self-owned Subsidiary Long-term Trading Completed N/A -333840339.76 No N/A N/A Import and Export products and increase funds Trade Co. Ltd. paper production materials Hubei Chenming Sale of pulp and Newly 50000000.00 100% Self-owned Subsidiary Long-term Trading Completed N/A -1004888.55 No N/A N/A Technology paper products established funds Industrial Co. Ltd.Total – – 83000000.00 – – – – – – -334845228.31 – – – 32 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis VII. Analysis of investments (Continued) 3. Material non-equity investments during the reporting period □ Applicable √ Not applicable Construction in progress which had not yet been completed and transferred with a contract amount of more than RMB200 million as at the end of the reporting period.□ Yes □ No √ Not applicable 4. Financial asset investment (1) Security investments √ Applicable □ Not applicable Unit: RMB Book value Book value at Profit or loss Accumulated Amount Amount as at the Accounting the beginning from changes in changes in fair acquired disposed of Profit or loss end of the Abbreviation of Initial investment measurement of the reporting fair value for value included during the during the during the reporting Source of Type of security Stock code stock name cost model period the period in equity period period reporting period period Accounting item fund Domestic and 09668 China Bohai Bank 195684817.15 Measured at 46294291.71 -9757917.81 -159474419.34 0.00 0.00 -9034966.01 37259325.70 Held-for-trading Self-owned foreign shares fair value financial funds assets Total 195684817.15 – 46294291.71 -9757917.81 -159474419.34 0.00 0.00 -9034966.01 37259325.70 – – Disclosure date of announcement in relation to the 20 June 2020 consideration and approval of securities investments by the Board Disclosure date of announcement in relation to the N/A consideration and approval of securities investments by the shareholders’ general meeting (if any) (2) Derivative 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. 2024 ANNUAL REPORT 33IV Management Discussion and Analysis VIII. Disposal of material assets and equity interest 1. Disposal of material assets □ Applicable √ Not applicable During the reporting period the Company did not dispose of material assets. 2. Disposal of material equity interest √ Applicable □ Not applicable Net profit contribution Net profit to the contribution Company to the Carried out from the Company on schedule beginning of on equity Pricing Relevant or not if not the period disposal as a basis of Related Relationship equity title the reasons Transaction up to the Effect of percentage disposal party with fully and measures Equity interest Disposal consideration disposal date disposal on of total net of equity transaction counterparty transferred taken by the Disclosure Disclosure Counterparty(ies) disposed of date (RMB’0000) (RMB’0000) the Company profit interest or not (ies) or not Company date index Kunshan Dupen Kunshan Tuoan 29 February 14373.00 -265.33 The disposal of equity -0.41% Assessed No N/A Yes Yes N/A N/A Electronics Technology Plastic 2024 interest in the value Co. Ltd. Products subsidiary Tuoan Co. Ltd. Plastic did not affect the normal operation of the Company and the disposal of equity interest replenished the liquidity.IX. Analysis of major subsidiaries and investees √ Applicable □ Not applicable Major subsidiaries and investees accounting for over 10% of the net profit of the Company Unit: RMB Name of company Type of company Principal activities Registered capital Total assets Net assets Revenue Operating profit Net profit Zhanjiang Chenming Subsidiary Production and sale of duplex 6913572423.00 20415875711.29 7729762990.17 10918531151.42 -1020127316.73 -883547814.00 Pulp & Paper Co. press paper electrostatic Ltd. paper and white cardboard etc.Shouguang Meilun Subsidiary Production and sale of coated 4801045519.00 19742523135.68 7729274592.89 8141538879.98 -686216151.05 -570290773.09 Paper Co. Ltd. paper culture paper household paper and chemical pulp Huanggang Chenming Subsidiary Production and sale of 3350000000.00 6730024366.07 3277797889.73 5029253116.25 -37310457.87 -22607049.12 Pulp & Paper Co. chemical pulp Ltd. 34 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis IX. Analysis of major subsidiaries and investees (Continued) Acquisition and disposal of subsidiaries during the reporting period √ Applicable □ Not applicable Methods to acquire and dispose of subsidiaries during the Impact on overall production and Name of company reporting period operation and results Shandong Chenming Industrial Trading Co. Ltd. Establishment Net profit decreased by RMB938200 Hubei Chenming Technology Industrial Co. Ltd. Establishment Net profit decreased by RMB1004900 Guangzhou Chenming Commercial Factoring Co. Ltd. Deregistration Net profit decreased by RMB5300 Chenming International Co. Ltd. Deregistration Net profit decreased by RMB14000000 Kunshan Tuoan Plastic Products Co. Ltd. Disposal Net profit increased by RMB32000000 Particulars of major subsidiaries and investees 1. During the reporting period Zhanjiang Chenming and Meilun Paper’s production bases were temporarily shut down for maintenance which adversely affected the Company’s operation scale. At the same time the selling prices of Zhanjiang Chenming’s white cardboard and Meilun Paper’s electrostatic paper fell significantly resulting in a decrease in profitability year on year. 2. During the reporting period the production and sales of chemical pulp the main product of Huanggang Chenming increased significantly while the gross profit of the product increased resulting in an increase in profitability year on year.The Company is accelerating its maintenance and technological transformation progress focusing on its main business accelerating the adjustment and optimisation of its internal management promoting corporate reform and innovation and pushing forward the resumption of production in accordance with the market circumstances.X. Structured entities controlled by the Company □ Applicable √ Not applicable XI. Outlook on the future development of the Company (I) Overview and trend of the industry The paper industry is an important basic raw material industry in China characterised by intensive capital and technology as well as significant economies of scale. Its upstream connects to pulp production and other sectors while its downstream links to cultural consumer and other sectors. The entire industrial chain is closely interconnected collectively facilitating the development of the paper industry.With the continuous development of the industry efficiency boosted by technological advancements prevalent green and environmentally friendly practices acceleration of industrial restructuring and rapid progress of international development have become defining features of the industry. 2024 ANNUAL REPORT 35IV Management Discussion and Analysis XI. Outlook on the future development of the Company (Continued) (I) Overview and trend of the industry (Continued) During the reporting period affected by factors such as increased supply and sluggish demand growth paper product prices were hit to a certain extent. Coupled with a decline in sales volumes the profitability of enterprises was seriously constrained. Institutions predict that in 2025 production capacity will continue to expand in the industry and thus production will increase. At the same time demand may see marginal improvements by virtue of policy stimulus which may boost sales volumes. A relatively ample supply structure will likely keep overall prices under pressure. In the future the paper industry will place greater emphasis on industrial restructuring optimising resource allocation and improving industrial concentration. These efforts will enhance the competitiveness and sustainability of the entire industry. The advantages of leading paper enterprises will become more pronounced potentially accelerating the pace of industry consolidation.(II) Development strategy of the Company Transformation and upgrading strategy: The Group will comprehensively optimise the industrial structure and regional layout focus on developing the pulp and paper industries and build a coordinated and efficient industrial system; Green development strategy: The Group will adhere to the operating philosophy of “pulp and paper integration” rely on technological progress advanced equipment and stringent management to ensure clean production and develop a circular economy. The Group will establish itself as a benchmark for resource-efficient and environmentally friendly enterprises pursue development while protecting the environment improve environmental standards through scientific progress and achieve both economic and environmental benefits; Internationalisation strategy: The Group will take root in China expand into the world rely on China’s “Belt and Road” initiative accelerate the “going out” pace deepen international exchanges and cooperation and gradually expand into overseas markets;Operational excellence strategy: With the management policy of “Construct a learning atmosphere and standardiseeverything resolutely implement to seek practical results” the Group will continuously strengthen the whole process management of production and operation marketing financial costs and project construction effectively integrate system resources and continuously improve corporate management standards and profitability; Talent strengthening strategy: The Group will refine mechanisms for talent cultivation recruitment utilisation and motivation and actively foster a high-calibre versatile innovative and internationally competitive talent pool to support the Company to become a world-class enterprise with the greatest growth momentum; Harmonious development strategy: The Group will comprehensively strengthen corporate culture development wholeheartedly care for employees actively fulfil corporate social responsibilities enhance the ability to create comprehensive economic social and environmental values build a positive corporate image and strive to build a harmonious enterprise. 36 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis XI. Outlook on the future development of the Company (Continued) (III) Operation plans for 2025 In recent years the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Company’s major paper products in particular the price white cardboard have declined sharply affecting the Company’s profitability.Although the domestic economy continues to face challenges such as insufficient demand the long-term positive trend of China’s economy remains unchanged as a series of policies aimed at improving livelihoods and stimulating consumption continue to take effect and new policies are effectively implemented. The contradiction between supply and demand in the paper industry is expected to ease and industry sentiment is likely to improve. 2025 marks the final year of the “14th Five-Year Plan”. In the coming year the Company will remain confident and act with determination and focus on its principal responsibilities and operations. It will adjust and optimise internal management facilitate corporate reform and innovation and make every effort to secure working capital. The Company will ensure orderly production across its production bases improve production efficiency control production costs seize market opportunities expand sales channels and achieve sustained and stable operations. 1. Strengthen production management to ensure stable production The Company’s major production bases have successively been in shutdown and maintenance in the fourth quarter affecting capacity utilisation and efficiency of the Company. As a result prioritising the resumption of work and production at these bases has become the Company’s top priority at the beginning of the coming year. In addition the Company will continue to strengthen production management by implementing 6S on-site management practices enhancing equipment upgrades and maintenance and improving equipment reliability and operational efficiency to ensure stable production. The Company will strictly control the quality of raw materials and spare parts promote technological upgrades and R&D actively adjust the product mix and optimise production processes so as to improve product quality. At the same time it will adjust its incentive mechanisms to motivate frontline employees thereby boosting production efficiency. Adhering to the principle that safety and environmental protection are the lifelines of an enterprise the Company will thoroughly investigate and address potential hazards to ensure production safety. 2. Strengthen capital management to mitigate debt risks In recent years the contradiction between supply and demand in the paper industry have led to declining prices of the Company’s major products which undermined the Company’s profitability. Coupled with the situation where some financial institutions downsized the loan scale the Company faced temporary liquidity shortages and instances of debt defaults in 2024. In 2025 with the support from governments at all levels and financial institutions the Company will take multiple measures to mitigate debt risks and will continue to strengthen its communication with creditors to negotiate solutions such as extension of loan terms and adjustment of repayment plans. At present financial institutions have established provincial debt committees which initially agreed not to reduce delay or cancel loans while offering interest rate reductions and extensions. The Company will actively cooperate with the internal approval processes of financial institutions and will promote equity financing and introduce strategic investors. At the same time the Company will continue to reduce the size of its financial leasing business and strengthen the disposal of non-core assets to increase cash inflows and enhance liquidity. 2024 ANNUAL REPORT 37IV Management Discussion and Analysis XI. Outlook on the future development of the Company (Continued) (III) Operation plans for 2025 (Continued) 3. Strengthen procurement management to ensure stable supply In 2025 the Company will further refine its procurement management regulations optimise the procurement management structure and performance evaluation mechanisms and enhance internal collaboration within the procurement team to comprehensively improve procurement efficiency. It will streamline procurement processes innovate procurement models and align procurement planning with production schedules to ensure supply chain stability while reducing capital occupancy. The Company will expand sourcing channels for raw materials strengthen supplier management and improve communication and coordination with suppliers. It will maintain long-term partnerships with high-quality suppliers optimise collaboration methods and ensure the quality of raw materials while reducing procurement costs. 4. Strengthen sales management to enhance corporate efficiency In 2025 the Company will continuously optimise and innovate its sales models based on operational conditions actively expand sales channels seize market opportunities and adjust sales strategies promptly to respond to market changes. It will strengthen communication and collaboration between the sales and production teams identify issues in products and services through market research and customer feedback and develop product solutions based on market and customer needs. By aligning with the production department the Company will develop and produce high-quality products that meet market demand creating brand value. It will also optimise its sales management structure enhance professional training and adjust incentive schemes to improve team capabilities and boost sales performance.(IV) Future capital requirements and source of funds Future capital requirements of the Company will mainly focus on: the continuous investment in existing production facilities due to technology upgrade or production expansion; and capital requirement for business expansion and daily operation. The special paper project with annual production capacity of 180000 tonnes of Zhanjiang Chenming planned and constructed by the Company will be partly funded by self-owned funds of the Company as well as government guide funds policy support funds and syndicated loans.While focusing on the development of its principal activities of pulp production and paper making improving its business performance and increasing its operating cash flow the Company will expand its financing channels and optimise financing structure through well planned long and short-term bank loans introduction of third-party strategic investors equipment financing and other means thus providing stable financial support for the operation and development of the Company.(V) Risk factors likely to be faced and measures to be taken 1. Macroeconomic and policy risk The paper industry is a basic raw materials industry thus is being supported by national industry policies.Over the years relevant competent departments issued a series of relevant policies and regulations including the Policy on the Development of the Paper Industry aiming to improve industry structure enhance product technology standard energy saving and emission reduction as well as eliminate outdated production capacity.With the continuous economic development in China the policies on the paper industry may further adjust in the future. In addition the fiscal and financial policies bank interest rate import and export policy and other policies may be adjusted in the future. All the above industrial policies and related policy adjustments will have an impact on the Company’s operation and development. 38 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis XI. Outlook on the future development of the Company (Continued) (V) Risk factors likely to be faced and measures to be taken (Continued) 1. Macroeconomic and policy risk (Continued) In response to the above risks the Company will pay close attention to the national industrial policy and focus on its principal activities of pulp production and paper making. The Company will strive to its innovation-driven strategy comprehensively optimise the industrial structure and regional layout and establish a coordinated and efficient industry system to respond to the risks arising from industrial policy adjustments. At the same time the Company will continuously improve its lean management broaden financing channels control costs and optimise its capital structure thus improving its operating quality to cope with the risks arising from adjustments of other macroeconomic policies such as fiscal and financial policies. 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 the Paper 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 Paper Industry and other policies which advocate cyclical low-carbon green economy to achieve high-quality development of the industry. Such higher national environmental protection standards 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 implements the national “double carbon” policy. TheCompany adheres to the development idea of “placing green development and environmental protection as itspriority”. The Company widely adopts new technologies for energy saving and emission reduction conducts clean production 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. At the same time the Company actively explores the comprehensive utilisation of innovative resources and industrial recycling development models and built a circular economy ecological chain of “resources-products-renewable resources”. 3. Risk of price fluctuation of raw materials The major raw materials of the paper 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 paper 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 business 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. 2024 ANNUAL REPORT 39IV Management Discussion and Analysis XI. Outlook on the future development of the Company (Continued) (V) Risk factors likely to be faced and measures to be taken (Continued) 4. Risk of intensifying market competition Although the paper 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.During the reporting period affected by factors such as supply shocks and weak demand the prices of machine-made paper especially white cardboard declined year on year and market competition further intensified.In response to the aforesaid risks the Company continues to promote technological innovation 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. Capital risk The paper industry is capital-intensive. In recent years the industry has seen concentrated capacity expansion insufficient downstream demand and prominent supply-demand imbalances. The prices of major paper products especially white cardboard have continued to decline leading to reduced profitability for paper enterprises. For enterprises with high debt levels scenarios such as loan delays by financial institutions or withdrawals of strategic investors during industry downturns may result in temporary liquidity shortages leading to debt defaults account freezes litigations and other issues that could impact business operations.To address these risks the Company focuses on its principal responsibilities and operations and strengthens the disposal of assets in its non-principal business to increase cash inflows. It actively communicates and coordinates with financial institutions to renew expiring loans wherever possible without loan cancellations or delays and provide support such as extended loan terms reduced interest rates and extended interest settlement cycles in order to alleviate the operational burden on the Company. Additionally the Company accelerates internal management adjustments and optimisations facilitates corporate reform and innovation and leverages its basic strengths in order to achieve sustained and stable operations. 6. 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.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. During the reporting period some financial leasing customers experienced operational difficulties leading to unexpected situations such as litigations and seizures. The Company increased the provision ratio for bad debts related to these financial leasing customers out of prudence. As at the end of the reporting period the balance of financial leases of Chenming Leasing decreased to RMB4467 million with the overall risks under control. 40 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIV Management Discussion and Analysis XII. Reception of research investigations communications and interviews during the reporting period √ Applicable □ Not applicable Major discussion points and information Index of the basic Date of reception Site of reception Way of reception Type of recipient Recipient provided particulars of the survey 7 April 2024 Panorama * Interactive Others Individuals and Investors participating in The Company’s financial For details please refer to Platform for Investors institutions the 2023 annual results position and operating the Investor Relations Relationship briefing of the Company results in 2023 future Activity Record Sheet online prospects etc. on CNINFO (www.cninfo.com.cn) XIII. Development and implementation of a market capitalisation management system and a valuation enhancement plan Whether the Company has developed a market capitalisation management system □ Yes √ No Whether the Company has disclosed a valuation enhancement plan □ Yes √ No XIV. Implementation of the “Quality and Return Enhancement” action plan Whether the Company has disclosed its “Quality and Return Enhancement” action plan □ Yes √ No 2024 ANNUAL REPORT 41V Directors’ Report The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements of the Company and the Group for the year ended 31 December 2024.I. Principal activities Please refer to “II. Principal operations of the Company during the Reporting Period” and “IV. Analysis of principaloperations” under section IV “Management Discussion and Analysis” for details of principal activities of the Company.II. Results and profit distribution Please refer to section XII “Financial Report” for the results of the Group for the year ended 31 December 2024.III. Dividends In recent years the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Company’s major products continued to decline during the reporting period with a year-on-year decrease in gross profit. Some financial leasing customers experienced operational difficulties leading to unexpected situations such as litigations and seizures. The Company increased the provision ratio for bad debts related to these financial leasing customers out of prudence.Meanwhile the Company’s major production bases had successively been in shutdown and maintenance in the fourth quarter leading to unsatisfactory capacity utilisation and a year-on-year decline in production and sales volumes. The Company made impairment provisions for certain assets which resulted in a loss. The net profit attributable to shareholders of the Company for 2024 amounted to RMB-7411 million. Based on the operations in 2024 and taking into account the Company’s development plan for 2025 the Board proposed not to pay cash dividend issue bonus shares and increase share capital from reserves in 2025 to satisfy the capital needs for day-to-day production and operation and enhance the risk resistance of the Company thereby realising the sustainable steady and healthy development of the pulp production and paper making the principal activities of the Company and better safeguarding the interests of all shareholders in the long run subject to approval of shareholders at the forthcoming annual general meeting of the Company to be held on 15 May 2025 (the “AGM”).IV. Closure of register of members The register of members of the Company will be closed from Monday 12 May 2025 to Thursday 15 May 2025 (both days inclusive) during which no transfer of shares of the Company will be registered. In order to be eligible to attend and vote at the annual general meeting to be held on Thursday 15 May 2025 all share transfer documents accompanied by the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office Computershare Hong Kong Investor Services Limited at shops 1712-1716 17th Floor Hopewell Centre 183 Queen’s Road East Wan Chai Hong Kong for registration not later than 4:30 p.m. on Friday 9 May 2025. 42 SHANDONG CHENMING PAPER HOLDINGS LIMITEDV Directors’ Report V. Five-year financial summary Please refer to “IX. Five-year financial summary under paragraph 19 of appendix D2 of the Hong Kong Listing Rules” under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five financial years.VI. Donations During the year the Company donated RMB300000.00 (2023: RMB505280.00) to non-profit making organisations.VII. Subsidiaries Please refer to “IX. Analysis of major subsidiaries and investees” under section IV “Management Discussion and Analysis” and “XVII. Matters of significant of subsidiaries of the Company” under section VIII “Material Matters” for the details of acquisition and disposal of subsidiaries by the Company during the year.VIII. Property plant and equipment Please refer to “II. Financial Statements 1. Consolidated Balance Sheet” under section XII “Financial Report” for the details of changes in property plant and equipment of the Group for the year ended 31 December 2024.IX. Share capital Please refer to “I. Changes in shares” under section IX “Changes in Share Capital and Shareholders” for details of changes in share capital of the Company for the year ended 31 December 2024.X. Pre-emptive rights In accordance with the Articles of Association and the PRC laws there are no rules requiring the Company to grant existing shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.XI. Transfer into reserves The Company’s contributed surplus is distributable to shareholders in accordance with the Company Law. As at 31 December 2024 the Company’s reserves available for cash distribution and/or distribution in specie including contributedsurplus of the Company amounted to RMB1086188080.67 (2023: 8492988611.52) as set out in “II. Financial Statements 1. Consolidated Balance Sheet” under section XII “Financial Report”. 2024 ANNUAL REPORT 43V Directors’ Report XII. Directors As at 31 December 2024 the Directors of the Company were: 1. Executive Directors Mr. Hu Changqing Mr. Li Xingchun Mr. Li Feng Mr. Li Weixian 2. Non-executive Directors Mr. Han Tingde Mr. Li Chuanxuan 3. Independent Non-executive Directors Ms. Yin Meiqun Mr. Yang Biao Mr. Sun Jianfei Mr. Li Zhihui According to the Articles of Association all Directors including non-executive Directors have been elected at the general meetings with a term of three years from June 2022 to June 2025. They may be re-elected for another term upon expiry of tenure. The term of office of independent non-executive Directors is the same as that of other Directors. They may be re-elected for consecutive terms but the consecutive terms shall not be more than six years.XIII. Directors’ and Supervisors’ service contracts All Directors and Supervisors have entered into service contracts with the Company for a term from 15 June 2022 to 15 June 2025.None of the Directors and Supervisors who have offered themselves for re-election at the forthcoming general meeting have entered into any service contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without payment of compensation other than statutory compensation. 44 SHANDONG CHENMING PAPER HOLDINGS LIMITEDV Directors’ Report IV. Directors and Senior Management’s remuneration and the five highest paid individuals Details of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/and its subsidiaries are set out in “V. Directors Supervisors and Senior Management” in section VI “Corporate Governance” and “XIV. Related parties and related party transactions” in section XII “Financial Report”.In 2024 the Company had 23 Senior Management members in total which included Directors Supervisors and the Senior Management. The remuneration of the Senior Management falls within the following ranges: Range of remuneration (RMB) Person 3.6 million to 4.0 million 3.2 million to 3.6 million 2.8 million to 3.2 million 2.4 million to 2.8 million 2.0 million to 2.4 million 2 1.6 million to 2.0 million 2 1.2 million to 1.6 million 0.8 million to 1.2 million 4 Below 0.8 million 15 XV. Independent non-executive Directors The Company has received from each of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to be independent. 2024 ANNUAL REPORT 45V Directors’ Report XVI. Securities interests held by Directors Supervisors and chief executives As at 31 December 2024 the interests and short positions held by each of the Directors Supervisors and chief executives of the Company in the shares underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) (the “SFO”)) as recorded in the register required to be kept under section 352 of the SFO are set out as follows: The Company Number of shares (A shares) held as at the end of As a percentage the reporting of the total shares Name Position period (shares) of the Company Directors Hu Changqing Chairman 792857 0.03% Li Xingchun Executive Director and vice chairman 2000000 0.07% Li Weixian Executive Director and general manager 362100 0.01% Li Feng Executive Director and deputy general manager 1356027 0.05% Han Tingde Non-executive Director – – Li Chuanxuan Non-executive Director – – Sun Jianfei Independent non-executive Director – – Yin Meiqun Independent non-executive Director – – Yang Biao Independent non-executive Director – – Li Zhihui Independent non-executive Director – – Supervisors Li Kang Chairman of the Supervisory Committee 149300 0.01% Pan Ailing Supervisor – – Zhang Hong Supervisor – – Sang Ailing Supervisor – – Qiu Lanju Supervisor – – As at 31 December 2024 none of the Directors Supervisors or chief executives of the Company had any interests or short positions in the shares underlying shares or debentures of the Company or any of its associated corporations which were required to be filed in the register of the Company required to be maintained pursuant to section 352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix C3 to the Rules Governing the Listing of Securities on Hong Kong Stock Exchange.As at 31 December 2024 none of the Directors Supervisors or chief executives or their respective spouses or children under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its associated corporations. 46 SHANDONG CHENMING PAPER HOLDINGS LIMITEDV Directors’ Report XVII. Interests and short position of substantial shareholders in shares and underlying shares As at 31 December 2024 the following shareholders (other than the Directors Supervisors or chief executives of the Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register maintained by the Company in accordance with Section 336 of the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) (the “SFO”): Approximate shareholding as a percentage of Number of shares Total share Class of Name held (shares) capital (%) shares (%) Chenming Holdings Co. Ltd. 455781319 A shares (L) 15.50 26.70 Chenming Holdings (Hong Kong) Limited 210717563 B shares (L) 7.16 29.83 Chenming Holdings (Hong Kong) Limited 153414000 H shares (L) 5.22 29.04 (L) – Long position (S) – Short position (P) – Lending pool Save as disclosed above as at 31 December 2024 no other person had interests or short positions in the Company’s shares or underlying shares as recorded in the register maintained under section 336 of the SFO.XVIII. Relationship with employees customers and suppliers Please refer to “IX. Personnel of the Company” under section VI “Corporate Governance” and “2. (8) Sales to majorcustomers and major suppliers” of “IV. Analysis of principal operations” under section IV “Management Discussion andAnalysis” for details of the relationship between the Company and its employees customers and suppliers.XIX. Directors’ interests in material contracts and indemnity provision None of the Company or any of its subsidiaries entered into any material contracts in which Directors or Supervisors had significant interests (either directly or indirectly) that subsisted at the end of the financial year or at any time during the reporting period. The Company did not have any indemnity provision in favour of any Director and Supervisor.XX. Interests in competing business None of the Directors or controlling shareholders of the Company was interested in any business which competes or is likely to compete with the businesses of the Company and any of its subsidiaries. 2024 ANNUAL REPORT 47V Directors’ Report XXI. Directors’ rights to purchase shares or debentures As considered and approved at 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 of the Company held on 15 May 2020 the Company implemented the 2020 Restricted A Share Incentive Scheme. As considered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session of the Supervisory Committee of the Company held on 29 May 2020 an aggregate of 79.6 million restricted A shares were granted to 111 participants. In particular Mr. Hu Changqing Mr. Li Xingchun Mr. Li Weixian and Mr. Li Feng all being Directors were granted 5 million shares 5 million shares 2 million shares and 3 million shares respectively. In view of the fact that the results for 2022 of the Company failed to pass the performance appraisal targets at company level set for the second Unlocking Period as set out in the 2020 Restricted A Share Incentive Scheme (Draft) and the results for 2023 of the Company failed to pass the performance appraisal targets at company level set for the third Unlocking Period as set out in the 2020 Restricted A Share Incentive Scheme (Draft) the Board of the Company repurchased and cancelled the Restricted Shares that had been granted to Participants but not yet unlocked for the second and third Unlocking Periods under the authorisation. In particular 3 million Restricted Shares of Director Hu Changqing 3 million Restricted Shares of Director Li Xingchun 1.20 million Restricted Shares of Director Li Weixian and 1.80 million Restricted Shares of Director Li Feng were repurchased and cancelled.Save for the above neither was the Company nor any of its subsidiaries a party to any arrangements to enable any Director to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.XXII. Management contracts No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed in 2024.XXIII. Major risk factors Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “XI. Outlook on the future developmentof the Company” under section IV “Management Discussion and Analysis” for details of major risk factors of the Company.XXIV. Material matters Please refer to section VIII “Material Matters” for details of material matters of the Company.XXV. Future development Please refer to (I) Overview and trends of the industry (II) Development strategy of the Company (III) Operating plan for 2025 and (IV) Future capital requirements and source of funds of “XI. Outlook on the future development of the Company” under section IV “Management Discussion and Analysis” for details of future development of the Company.XXVI. Environment social and governance report and social responsibility Please refer to section VII “Environmental and Social Responsibility” for details of fulfilment of social responsibility. The Company will publish the environment social and governance report as required by the Hong Kong Listing Rules on the website of CNINFO and the website of the Hong Kong Stock Exchange on the same date as the 2024 annual report. 48 SHANDONG CHENMING PAPER HOLDINGS LIMITEDV Directors’ Report XXVII. Purchase sale and redemption of shares 1. Repurchase and cancellation of some restricted shares granted under the 2020 Restricted A Share Incentive Scheme On 31 July 2024 the Company convened the fifteenth extraordinary meeting of the tenth session of the Board and the sixth extraordinary meeting of the tenth session of the Supervisory Committee at which the Resolution on the Failure Fulfilment of the Unlocking Conditions for the Third Unlocking Period under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares was considered and approved. The results for 2023 of the Company failed to pass the performance appraisal targets at company level set for the third unlocking period as set out in the 2020 Restricted A Share Incentive Scheme (Draft) and the Assessment Management Measures for the 2020 Restricted A Share Incentive Scheme. According to the authorisation granted at 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 of the Company the Board of the Company repurchased and cancelled 22257000 restricted A shares which had been granted to 93 participants but not yet unlocked at a repurchase price of RMB2.5184172 per share (excluding the bank loan interest rate for the same term). The total amount for the funds required for the repurchase amounted to RMB67.0597 million when the bank loan interest rate for the same term was included.The Company made the repurchase payment of RMB67.0597 million to 93 participants on 1 November 2024. On 15 November 2024 Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421) in which they verified the change in the registered capital and paid-in capital (share capital) of the Company as of 6 November 2024. Verification result: As of 6 November 2024 the registered capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2934556200.00 and RMB2934556200.00 respectively.As at the end of the reporting period the Company completed the procedures for the repurchase and cancellation of the 15357000 restricted A shares held by 91 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. The procedures for the share repurchase transfer and cancellation of the 6900000 restricted A shares held by the remaining 2 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze.Save for the above the Company and any of its subsidiaries did not purchase sell or redeem any listed securities of the Company during the reporting period.XXVIII. Sufficiency of public float During the reporting period based on the information that is publicly available to the Company and within the knowledge of the Directors the Company maintained a sufficient prescribed amount of public float as required under the Hong Kong Listing Rules.XXIX. Review of the Audit Committee The audited consolidated financial statements of the Company for the year ended 31 December 2024 have been reviewed by the Audit Committee of the Company. 2024 ANNUAL REPORT 49V Directors’ Report XXX. Gearing ratio As at 31 December 2024 the Company’s gearing ratio (including minority interest) was 59.83% representing a decrease of 1.87 percentage points from 61.70% for 2023. The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one year borrowings due after one year short-term commercial paper and medium and long-term notes and others).XXXI. Going concern basis In compiling the accounts for the year ended 31 December 2024 the Directors have chosen and thoroughly applied the appropriate accounting policies with due and reasonable judgement and estimates having been made and prepared the accounts on a going concern basis. The auditor has issued a qualified audit report on the Company’s 2024 annual financial report which is prepared on a going concern basis. Please refer to “I. Auditors’ Report” and “IV. Basis of Preparation of theFinancial Statements” in section XII “Financial Report” for details.XXXII. Connected Transaction 1. Disposal of equity interest in Yujing Hotel and entering into the Equity and Debt Transfer Agreement with Guangyuan Real Property On 22 March 2024 the Company convened the fourteenth extraordinary meeting of the tenth session of the Board at which the Resolution on the Equity Transfer of Yujing Hotel and a Connected Transaction and the Equity and Debt Transfer Agreement entered into by the Company Yujing Hotel a non-wholly owned subsidiary of the Company and Guangyuan Real Estate a connected person of the Company on 22 March 2024 were considered and approved.Pursuant to them the Company disposed of its 90.05% equity interest in Yujing Hotel and the debts owed by Yujing Hotel to the Company amounting to RMB193.5072 million for a total consideration of RMB356.5 million. Guangyuan Real Property shall pay in cash of (i) RMB178.25 million within five working days after the entering into of the Equity and Debt Transfer Agreement; and (ii) the remaining RMB178.25 million by 31 December 2024 to the Company respectively. The consideration of the Disposal was determined on normal commercial terms after arm’s length negotiations between the Company and Guangyuan Real Property and with reference to the assessed market value of all shareholders’ equity of Yujing Hotel on the Valuation Benchmark Date (31 December 2023) of RMB180.7176 million (the corresponding assessed value of the 90.05% equity interest was RMB162.7362 million) based on the valuation by Tinho International an independent asset valuer using the asset-based approach and the carrying amount of the target debts as the basis for pricing. Upon completion of the disposal the Company would cease to have any interest in Yujing Hotel and Yujing Hotel would cease to be a subsidiary of the Company. 50 SHANDONG CHENMING PAPER HOLDINGS LIMITEDV Directors’ Report XXXII. Connected Transaction (Continued) 1. Disposal of equity interest in Yujing Hotel and entering into the Equity and Debt Transfer Agreement with Guangyuan Real Property (Continued) As Guangyuan Real Estate failed to perform the payment obligation of the second transfer payment in accordance with the Equity and Debt Transfer Agreement which constituted a breach of contract the Company Yujing Hotel and Guangyuan Real Estate a connected person of the Company terminated the Equity and Debt Transfer Agreement on 14 March 2025 to terminate the equity transfer of Yujing Hotel and the connected transaction. Guangyuan Real Estate will co-operate with the Company in completing the relevant procedures for the registration of the change of equity interest in Yujing Hotel. Royal View Hotel will remain a subsidiary of the Company and its financial results will be consolidated in the consolidated financial statements of the Company.For details please refer to the announcement disclosed by the Company on CNINFO on 23 March 2024 and 15 March 2025 (announcement number: 2024-008) and the relevant announcements disclosed by the Company on the website of Hong Kong Stock Exchange on 24 March 2024 2 May 2024 and 14 March 2025.Save as disclosed above the Group did not enter into other connected transaction required under the Listing Rules of the Stock Exchange during the reporting period. The related party transactions entered into by the Group during the year ended 31 December 2024 are set out in Note XIV to the financial statements. Save as disclosed above the related party transactions did not constitute connected transactions or continuing connected transactions (as defined in the Listing Rules of the Stock Exchange) of the Group.XXXIII. Major investment acquisition and disposal During the year ended 31 December 2024 save for the matter mentioned in “XXXII. Connected Transaction” in this section “Directors’ Report” there were no other major investments acquisitions and disposals.XXXIV. Tax relief The Company is not aware of any tax relief available to shareholders as a result of holding securities of the Company. 2024 ANNUAL REPORT 51VI Corporate Governance I. Corporate governance During the reporting period the Company continued to improve its legal person governance structure establish a sound mechanism to regulate its operation and improve the quality of information disclosure in strict compliance with the requirements of the laws and regulations such as the Company Law 《( 公司法》) the Securities Law 《( 證券法》) the Code of Corporate Governance for Listed Companies 《( 上市公司治理準則》) the Rules Governing Listing of Stocks on Shenzhen Stock Exchange 《( 深圳證券交易所股票上市規則》) and the Listing Rules of Hong Kong Stock Exchange and the rules and regulatory documents of the CSRC thereby further enhancing the standardised operation level of the Company. Its corporate governance complied with the requirements of the regulatory documents issued by the CSRC the Shenzhen Stock Exchange and the Stock Exchange regarding the governance of listed companies.(i) Shareholders and general meeting The Company convened and held shareholder meetings in strict compliance with the requirements of the Rules Governing Shareholders’ General Meetings of Listed Companies the Articles of Association and the Rules of Procedure of the General Meeting of Shareholders. During the reporting period the Board of the Company convened and held 1 annual general meeting and 3 extraordinary general meeting and both on-site voting and online voting were provided as channels to participate in each general meeting to safeguard the rights of all shareholders to participate in and make decisions on important matters of the Company. The Company also conducted separate vote counting of the votes on the resolutions of minority shareholders and disclosed them in a timely and public manner to enable minority shareholders to enjoy equal status with other shareholders and effectively safeguard the interests of minority shareholders.(ii) Controlling shareholder and the Company During the reporting period the Company remained independent of its controlling shareholder beneficial controllers and related parties in terms of its business assets finance personnel and organisations and the Board the Supervisory Committee and internal departments of the Company operated independently which complied with the relevant provisions of the CSRC on the independence of listed companies. The controlling shareholder and beneficial controllers strictly regulated their behaviour and exercised their rights and performed their obligations in accordance with the laws and there was no appropriation of capital and assets of the Company by the controlling shareholder beneficial controllers and their related parties.(iii) Directors and the Board There are four special committees namely the Strategic and Sustainable Development Committee the Audit Committee the Nomination Committee and the Remuneration and Assessment Committee under the Board of the Company. The Board of the Company has a total of 10 Directors of which 4 are independent Directors who are professionals with professional knowledge in finance law management etc. During the reporting period the Board of the Company held a total of 10 meetings. The Board convened Board meetings in strict compliance with the Articles of Association and the Rules of Procedure of Board Meetings and other relevant regulations. Each Director attended meetings of the Board and the special committees under the Board on time and faithfully and diligently perform their duties actively participated in operational and management decisions and safeguarded the interests of shareholders.Meanwhile he or she actively participated in special training organised by the regulatory authorities and study the relevant laws and regulations so as to effectively improve the level of performance of their duties. 52 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance I. Corporate governance (Continued) (iv) Supervisors and the Supervisory Committee The Supervisory Committee of the Company has a total of 5 Supervisors including 3 shareholder representative Supervisors and 2 employee representative Supervisors. During the reporting period the Supervisory Committee of the Company held a total of 7 meetings. The Supervisory Committee strictly followed the requirement of relevant laws and regulations including the Company Law the Articles of Associations and the Rules of Procedure of the Supervisory Committee in fulfilling its duties. In the spirit of being accountable to the shareholders and the Company the Supervisory Committee independently and effectively exercised its supervision and inspection functions to supervise the Company’s operation and management decision-making procedures financial position and the duty of care and diligence of the Company’s Directors and Senior Management so as to safeguard the legitimate interests of the Company and the shareholders.(v) Operation of the independent director system During the reporting period the independent Directors of the Company were accountable to the minority shareholders and performed their duties independently and impartially by actively attending Board meetings and general meetings and understanding the Company’s production operations and financial position and the implementation of the Board resolutions in strict compliance with the requirements of the relevant laws and regulations such as the Articles of Association the Administrative Rules for Independent Directors the Guidelines of Self-Regulatory Regulations for Listed Companies on the Shenzhen Stock Exchange No. 1 – Standardised Operation of the Companies Listed on the Main Board and at the same time reviewed the Company’s related party transactions and submitted them to the Board for consideration after approval by the majority.(vi) Information disclosure and prevention and control of inside information The Company earnestly fulfils its information disclosure obligation effectively strengthens the confidentiality of inside information and improve the registration and management of personnel with inside information to improve the quality of information disclosure in accordance with the relevant requirements of the Articles of Association the Rules Governing the Listing of Stocks on Shenzhen Stock Exchange and the Listing Rules of Hong Kong Stock Exchange.During the reporting period there was no case where the Directors Supervisors Senior Management and other related personnel of the Company used inside information to buy and/or sell the shares of the Company during the reporting period and the Company issued periodic reports interim announcements and related documents through the information disclosure media designated by the CSRC and the website of the Hong Kong Stock Exchange to ensure that information disclosure was true accurate complete timely and fair.Any material non-compliance of the laws administrative regulations and the regulatory documents on the governance of listed companies issued by the CSRC in respect of actual governance of the Company □ Yes □ No There was no material non-compliance of the laws administrative regulations and the regulatory documents on the governance of listed companies issued by the CSRC in respect of the actual governance of the Company. 2024 ANNUAL REPORT 53VI Corporate Governance II. Particulars about the independence in terms of assets personnel finance organisations and business from the controlling shareholder and beneficial controllers The Company was completely separated from the controlling shareholder in terms of business personnel assets organisations and finance. The Company had a comprehensive internal structure independent and complete businesses as well as the capability of self-operation. 1. In terms of business: the Company had its own R&D production procurement and sales system and was completely independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiaries were not competitors of the Company in the same industry. 2. In terms of personnel: the Company had an independent workforce and had established independent departments including the research and development department production department administration department finance department procurement department and sales department. The Company had also established a comprehensive management system with respect to labour personnel and salary. Personnel of the Company were independent of the controlling shareholder. The Company’s Chairman was elected at the general meeting while the general manager deputy general manager secretary to the Board chief financial officer and other Senior Management members all worked at and received remuneration from the Company. They did not receive remuneration from related companies of the controlling shareholder nor did they serve at any position therein other than a director or supervisor. The appointment of the Company’s Directors Supervisors and Senior Management was conducted through legal procedures and in strict compliance with the relevant requirements of Company Law and the Articles of Association.None of the controlling shareholders interfered with the Company’s Board or the appointment and dismissal decisions at general meetings. 3. In terms of assets: the title relationship between the Company and the controlling shareholder was clear and the Company’s funds assets and other resources were not illegally occupied or dominated by the controlling shareholder.The Company’s assets were complete and possessed production equipment auxiliary production equipment patents and other assets that were in line with its production and operation scope. The Company had complete control and dominance over all assets. 4. In terms of organisations: the Board Supervisory Committee management and other internal organisations of the Company operated independently. Each functional department was completely separated from the controlling shareholder in terms of authority personnel etc. There was no subordinate relationship between the controlling shareholder and its functional departments and the Company and its functional departments. The Company’s independence in terms of its production operation and management was not affected by the controlling shareholder. 5. In terms of finance: the Company had its own finance department accounting and auditing system and financial management system and was able to make independent financial decisions with a standardised financial accounting system and financial management system for subsidiaries. None of the controlling shareholders interfered with the Company’s finance and accounting activities. The Company had a separate account in a commercial bank and there was no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled its tax obligations independently in accordance with the law. 54 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance III. Competition in the industry □ Applicable □ Not Applicable IV. Annual general meeting and extraordinary general meeting convened during the reporting period 1. General meetings during the reporting period Attendance rate Meeting Type of meeting of investors Convening date Disclosure date Resolutions of meeting 2023 annual general meeting Annual general meeting 19.50% 14 May 2024 15 May 2024 http://www.cninfo.com.cn (announcement no.:2024-033) 14 May 2024 http://www.hkex.com.hk 2024 first extraordinary general Extraordinary general 19.09% 23 September 2024 24 September 2024 http://www.cninfo.com.cn meeting meeting (announcement no.:2024-058) 23 September 2024 http://www.hkex.com.hk 2024 second extraordinary Extraordinary general 18.81% 16 October 2024 17 October 2024 http://www.cninfo.com.cn general meeting meeting (announcement no.:2024-062) 16 October 2024 http://www.hkex.com.hk 2024 third extraordinary general meeting Extraordinary general 18.85% 28 November 2024 29 November 2024 http://www.cninfo.com.cn meeting (announcement no.:2024-076) 28 November 2024 http://www.hkex.com.hk 2. Extraordinary general meeting requested by holders of the preference shares with voting right restored □ Applicable □ Not Applicable 2024 ANNUAL REPORT 55VI Corporate Governance V. Directors Supervisors and Senior Management 1. General information Decrease Increase in in the Shareholding the number number at the of shares of shares Shareholding Date of the beginning of held during held during Other at the end Status of beginning of Date of the the period the period the period changes of the period Reason for Name Position Office Gender Age the term end of the term (shares) (shares) (shares) (shares) (shares) changes Hu Changqing Chairman In office M 59 8 November 2024 15 June 2025 2292857 0 0 1500000 792857 Repurchase and cancellation of restricted shares Vice chairman Resigned 23 June 2018 8 November 2024 Li Xingchun Vice chairman In office M 59 11 June 2019 15 June 2025 3500000 0 0 1500000 2000000 Repurchase and cancellation of restricted shares Li Weixian Director In office M 43 15 June 2022 15 June 2025 962100 0 0 600000 362100 Repurchase and cancellation of restricted shares General manager 8 October 2023 15 June 2025 Li Feng Director In office M 51 19 June 2020 15 June 2025 2256027 0 0 900000 1356027 Repurchase and cancellation of restricted shares Deputy general 15 June 2022 15 June 2025 manager Han Tingde Director In office M 56 11 June 2019 15 June 2025 0 0 0 0 0 N/A Li Chuanxuan Director In office M 47 11 June 2019 15 June 2025 0 0 0 0 0 N/A Li Zhihui Independent directorIn office M 66 15 June 2022 15 June 2025 0 0 0 0 0 N/A Sun Jianfei Independent directorIn office M 52 11 June 2019 15 June 2025 0 0 0 0 0 N/A Yin Meiqun Independent directorIn office F 54 11 June 2019 15 June 2025 0 0 0 0 0 N/A Yang Biao Independent directorIn office M 45 11 June 2019 15 June 2025 0 0 0 0 0 N/A Li Kang Supervisor In office F 43 27 July 2020 15 June 2025 149300 0 0 0 149300 N/A Chairman of 15 June 2022 15 June 2025 the Supervisory Committee Pan Ailing Supervisor In office F 60 11 June 2019 15 June 2025 0 0 0 0 0 N/A Zhang Hong Supervisor In office F 60 11 June 2019 15 June 2025 0 0 0 0 0 N/A Qiu Lanju Supervisor In office F 51 11 June 2019 15 June 2025 0 0 0 0 0 N/A Sang Ailing Supervisor In office F 46 18 April 2021 15 June 2025 0 0 0 0 0 N/A Li Zhenzhong Deputy general In office M 51 20 March 2011 15 June 2025 1346400 0 0 600000 746400 Repurchase and manager cancellation of restricted shares 56 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 1. General information (Continued) Decrease Increase in in the Shareholding the number number at the of shares of shares Shareholding Date of the beginning of held during held during Other at the end Status of beginning of Date of the the period the period the period changes of the period Reason for Name Position Office Gender Age the term end of the term (shares) (shares) (shares) (shares) (shares) changes Li Mingtang Deputy general In office M 57 15 June 2022 15 June 2025 450000 0 0 300000 150000 Repurchase and manager cancellation of restricted shares Ge Guangming Deputy general In office M 54 15 June 2022 15 June 2025 0 0 0 0 0 N/A manager Dong Lianming Financial controller In office M 50 12 October 2018 15 June 2025 519600 0 0 300000 219600 Repurchase and cancellation of restricted shares Yuan Xikun Secretary to the In office M 39 16 May 2018 15 June 2025 179700 0 0 90000 89700 Repurchase and Board cancellation of restricted shares Chu Hon Leung Company secretary In office M 42 11 June 2019 15 June 2025 0 0 0 0 0 N/A (Hong Kong) Chen Hongguo Chairman Resigned M 60 6 September 2001 7 November 2024 25080044 0 0 6000000 19080044 Repurchase of Li Xueqin Deputy general Resigned F 59 18 March 2003 7 November 2024 2961322 0 0 900000 2061322 restricted manager shares but the share transfer and cancellation procedures not completed because the shares were frozen.Total – – – – – – 39697350 0 0 12690000.00 27007350.00 – Other explanations: The number of shares in ‘Other changes (shares)’ in this table represents the restricted shares granted to participants but failing to fulfil the unlocking conditions for the third unlocking period under the 2020 Restricted A Share Incentive Scheme and repurchased and cancelled by the Company. On 1 November 2024 the Company made restricted share repurchase payments to all participants. On 15 November 2024 Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421). However the procedures for the share repurchase transfer and cancellation of the 6000000 restricted shares held by Mr. Chen Hongguo and 900000 restricted A shares held by Ms. Li Xueqin with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as the shares were subject to judicial freeze. 2024 ANNUAL REPORT 57VI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 1. General information (Continued) During the reporting period did any Director and Supervisor resign and was any member of the Senior Management dismissed during their term of office √ Yes □ No Mr. Chen Hongguo resigned as a Director and Chairman of the Company and a member of the Strategic and Sustainable Development Committee and the Nomination Committee under the Board on 7 November 2024 due to personal reasons. Ms. Li Xueqin resigned as a deputy general manager of the Company on 7 November 2024 due to retirement.Changes of Directors Supervisors and Senior Management of the Company √ Applicable □ Not Applicable Name Position Type Date Reason Hu Changqing Chairman Elected 8 October 2024 Work arrangements. Hu Changqing was elected as the chairman of the Company after the consideration at the nineteenth extraordinary meeting of the tenth session of Vice chairman Resigned 8 October 2024 the Board.Chen Hongguo Chairman Resigned 7 October 2024 Personal reasons Li Xueqin Deputy general Dismissed 7 October 2024 retirement manager 58 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment Professional background major working experiences and current duties at the Company of Directors Supervisors and the Senior Management 1. Brief biographies of Directors (1) Brief biographies of executive Directors Mr. Hu Changqing is a member of the Communist Party of the PRC. He holds a bachelor’s degree and is a senior engineer. He joined the Company in 1987. He had held various positions in the Company such as chief of the technological reform department chief officer of branch factory deputy general manager and vice chairman. He is currently a director of Chenming Holdings Company Limited the controlling shareholder of the Company and the chairman of the Company.Mr. Li Xingchun holds a doctorate from School of Engineering Management and Engineering at Nanjing University and is a visiting professor of Shanghai Finance University. He has successively worked in Ctrip.com Fuyou Securities Co. Ltd. (富友證券有限責任公司) and Western Development Holdings Co.Ltd. accumulating more than 30 years of experience in industry securities trust and other fields. He is currently the chairman of Zhejiang Kingland Pipeline and Technologies Co. Ltd. a vice chairman of Shanghai New Huangpu Industrial Group Co. Ltd. the chairman of Kunpeng Asset Management Co.Ltd. a director of Western Leadbank Fund Management Co. Ltd. an independent director of Huadian International Power Co. Ltd. and a vice chairman of the Company.Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as the deputy manager of a sales company of the Company manager of a sales company general manager of Jiangsu district of a sales company chairman of a household paper company product general manager deputy marketing director and marketing director of a sales company a deputy general manager of the Group and chairman of the financial division of a group. He is currently a director of Chenming Holdings and an executive Director and the general manager of the Company.Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the Company in 1992 and had held different positions including the chief officer of manufacturing section and assistant to the general manager of the Company chairman marketing director deputy general manager and general manager of Wuhan Chenming. He is currently an executive Director and deputy general manager of the Company. 2024 ANNUAL REPORT 59VI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment (Continued) 1. Brief biographies of Directors (Continued) (2) Brief biographies of non-executive Directors Mr. Han Tingde graduated with a bachelor’s degree. He was a deputy general manager and the general manager of operational department of Liaocheng and Linyi offices of Shandong Securities Co. Ltd. the general manager of operational department of Zibo and Jinan offices of Tiantong Securities Co. Ltd.the general manager of each of the customer service department the brokerage headquarters and the legal affairs department as well as a deputy general manager of the retail headquarters of Qilu Securities Company Limited etc. He is currently a non-executive Director of the Company.Mr. Li Chuanxuan holds a doctorate in law. He is a professor at Fudan University Shanghai. He has been a lecturer an associate professor and a professor in the Law School of Fudan University since 2008. From 2012 to 2013 he was a visiting scholar of the Law School of Columbia University in the United States focusing on the research on green finance rule of law ESG rule of law and “dual carbon” rule of law for a long time. He is currently the secretary general of the Environmental and Resources Protection Law Society of Shanghai Law Society (上海市法學會環境和資源保護法研究會) the director of the Chinese Society of Environmental and Resources Law (中國法學會環境資源法學研究會) and an appraisal expert of environmental damage forensics in China. He has been selected into the Shanghai Leading Talent Program of Eastern Talent Plan the Shanghai Pujiang Talent Program and the Shanghai Youth Legal Talent Pool. He has been in charge of over 10 national and provincial scientific research projects. Moreover he has participated in the drafting of several laws and regulations of different legislatures including the Standing Committee of the National People’s Congress the Ministry of Ecology and Environment and Shanghai National People’s Congress. He concurrently serves as an independent director of Jiangsu Guanlian New Material Technology Co. Ltd. and an independent director of Shanghai Liangxin Electrical Co. Ltd. and is currently a non-executive Director of the Company. (3) Brief biographies of independent non-executive Directors Mr. Li Zhihui holds a doctorate degree in economics and is a professor and advisor to doctoral students.He currently serves as the head of the Institute of Finance the School of Economics Nankai University a director of the China Society for Finance and Banking a director of the China International Finance Society a member of the China Financial Publishing House’s teaching material editorial committee and a visiting professor at Tianjin Foreign Studies University. He also serves as a director of Northern International Trust Co. Ltd. a director of Henan Anyang Shangdu Rural Commercial Bank Co. Ltd. an independent director of Henan Yiyang Rural Commercial Bank Co. Ltd. and an external supervisor of Dezhou Bank Co. Ltd. He is currently an independent Director of the Company. 60 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment (Continued) 1. Brief biographies of Directors (Continued) (3) Brief biographies of independent non-executive Directors (Continued) Mr. Sun Jianfei holds a doctorate in finance and is a professor. He was a lecturer at University of Nevada Reno and concurrently served as the consultant of hedge funds such as EP. From August 2010 to February 2017 he was an assistant professor at Antai College of Economics & Management Shanghai Jiao Tong University. He was selected in the National Academic Leadership Talent Programme in Accounting (Standby List) (全國學術類會計領軍(後備)人才項目) organised by the Ministry of Finance as well as the Shanghai Pujiang Talent Programme. From February 2017 to August 2020 he was a professor at the Institute for Social and Economic Research of Nanjing Audit University and a part-time professor at Antai College of Economics & Management and Advanced Institute of Finance Shanghai Jiao Tong University. He is currently an Associate professor of Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University. He is currently an independent Director of the Company.Mr. Yang Biao holds a doctorate in law and is currently a professor and advisor to doctoral students. He is current a professor of the School of Law of Sun Yat-sen University. He has concurrently served as an independent director of Guangdong Tianhe Agricultural Resources Co. Ltd. an independent director of Qiaoyi Logistics Co. Ltd. and a supervisor of Guangzhou Chuanwen Education Consulting Co. Ltd. He is currently an independent Director of the Company.Ms. Yin Meiqun holds a doctorate in accounting and is a professor an advisor to doctoral students and a certified public accountant in China. She paid academic visits to Sweden Finland Denmark and the Iowa State University in the United States. She is currently a professor of China University of Political Science and Law. She has also served as a managing director of China Business Accounting Institute and a council member of the Accounting Society of China. She has concurrently served as an independent director of China Best Group Holding Limited. She is currently an independent Director of the Company. 2024 ANNUAL REPORT 61VI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment (Continued) 2. Brief biographies of Supervisors Ms. Li Kang is a member of the Communist Party of the PRC. She holds a bachelor’s degree. She joined the Company in 2001. She has successively served as the section chief of the management section and deputy minister and minister of the purchasing department and assistant to the general manager and a deputy financial controller of the Company. She is currently the chairman of the Supervisory Committee of the Company.Ms. Pan Ailing is a Ph.D. in Economics and holds a post-doctoral degree in Financial Management. She is currently a level-2 professor of the School of Management an advisor to doctoral students and the chief of the Investment and Financing Research Centre (投融資研究中心) in Shandong University and a non-practising member of CICPA (Chinese Institute of Certified Public Accountants). She is also a council member of Shandong Comparative Management Association a visiting scholar at University of Connecticut in the United States and a state-level candidate for the New Century Ten Million Talents Project (新世紀“百千萬人才工程”).She is a specialist entitled to the State Council Special Allowance (國務院政府特貼專家) and a special expert of the Taishan Scholar. She is the chief expert of the Major Tender Projects of National Social and Science Fund (國 家社科基金重大招標課題首席專家). She has finished various research projects at national and provincial level.She is also an independent director of Shandong Sunway Chemical Group Co. Ltd. Qingdao Rural Commercial Bank Co. Ltd. and Shandong Linglong Tire Co. Ltd. She is currently a Supervisor of the Company.Ms. Zhang Hong holds a doctoral degree in Economics and is currently a professor and advisor to doctoral students at Shandong University a non-practising member of the Chinese Institute of Certified Public Accountants a director of China Association of International Trade and the managing director of the Shandong Society of World Economics. She has concurrently served as an independent director of Hua Xia Bank Co.Limited an independent director of Shandong Hi-speed Road & Bridge Group Co. Ltd. an independent director of Vosges Group Co. Ltd. and an independent director of Sinotruck Jinan Truck Co. Ltd. She is currently a Supervisor of the Company.Ms. Qiu Lanju graduated with a diploma. She joined the Company in 1995 and served as the deputy chief of the price audit section of the Company’s inspection department the chief of the implementation section of the procurement department the chief of the general management section of the procurement department and the director of the procurement department. She is currently an employee representative Supervisor of the Company.Ms. Sang Ailing is a member of the Communist Party of the PRC and holds a bachelor’s degree. She joined the Company in 2000 and served as the chief of the personnel management section of the marketing department of a sales company a deputy director and director of the marketing department of a sales company a deputy director of the marketing department of the Company etc. She is currently the director of human resources of the Group and an employee representative Supervisor of the Company. 62 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment (Continued) 3. Brief biographies of Senior Management Mr. Li Weixian graduated with a postgraduate degree. He joined the Company in 2002 and served as a deputy manager of a sales company of the Company manager of a sales company general manager of Jiangsu district of a sales company chairman of a household paper company product general manager deputy marketing director and marketing director of a sales company the general manager of the Group and chairman of the financial division of a group. He is currently a director of Chenming Holdings and an executive Director and the general manager of the Company.Mr. Li Feng is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the Company in 1992 and had held different positions including the chief officer of manufacturing section and assistant to the general manager of the Company chairman marketing director deputy general manager and general manager of Wuhan Chenming. He is currently an executive Director and deputy general manager of the Company.Mr. Li Zhenzhong is a member of the Communist Party of the PRC. He holds a bachelor’s degree. He joined the Company in 1995 and had served as principal representative of the Shanghai management region of a sales company sales manager of light weight coated culture paper products general manager of culture paper products of a sales company. He is currently a deputy general manager of the Company.Mr. Li Mingtang is a member of the Communist Party of the PRC. He joined the Company in 2002 and had served as principal representative of the Jiangsu management region and Jinan branch of a sales company assistant to general manager and general manager of a culture paper products company and deputy general manager of a coated linerboard products company. He is currently a deputy general manager of the Company.Mr. Ge Guangming is a member of the Communist Party of the PRC. He joined the Company in 1995 and had served as a deputy general project manager of the Company deputy general manager of Jilin Chenming assistant to general manager of the Company and deputy general manager responsible for the Zhanjiang Chenming project and the Huanggang Chenming Pulp & Paper project. He is currently a deputy general manager of the Company. 2024 ANNUAL REPORT 63VI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment (Continued) 3. Brief biographies of Senior Management (Continued) Mr. Dong Lianming is a member of the Communist Party of the PRC and an accountant. He holds a bachelor’s degree. He joined the Company in 1997 and had held positions as the chief of accounting and auditing section under the financial department of the Company the deputy chief and chief of the financial department chief accountant of Jiangxi Chenming chief accountant of Shandong Chenming Panels and financial controller and deputy general manager of Zhanjiang Chenming. He is currently the financial controller of the Company.Mr. Yuan Xikun is a member of the Communist Party of the PRC. He holds a bachelor’s degree in management.He joined the Company in 2010 and had held positions as the accountant for consolidated financial statements in the financial department of the Group the manager of the information disclosure section the security affairs representative and a deputy chief of the securities investment department. He is currently the secretary to the Board of the Company.Mr. Chu Hon Leung is a lawyer. He obtained a bachelor’s degree in business from Macquarie University Sydney Australia and a postgraduate diploma in law from The College of Law London England. He graduated from the City University of Hong Kong and obtained a diploma in Hong Kong law. He had been a lawyer in local and international law firms in Hong Kong and served and an internal consultant for leading Chinese asset management companies. He has been a practicing lawyer in Hong Kong since 2009 and currently works for Li & Partners.Employment at the shareholder of the Company √ Applicable □ Not applicable Receipt of any remuneration or allowance from Position at the Date of the the shareholder Name of shareholder shareholder beginning of Date of the end of the Company Name of employee of the Company of the Company the term of the term or not Hu Changqing Chenming Holdings Director 22 September 2016 19 November 2027 No Company Limited Li Weixian Chenming Holdings Director 19 November 2024 19 November 2027 No Company Limited Explanation of the employment Nil at the shareholder of the Company 64 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 2. Employment (Continued) 3. Brief biographies of Senior Management (Continued) Employment at other units √ Applicable □ Not applicable Receipt of any remuneration or Name of Date of the allowance from employee Name of other unit(s) Position at other unit(s) beginning of the term Date of the end of the term other units or not Li Chuanxuan Shanghai Liangxin Electrical Co. Ltd. Independent director 17 May 2023 10 September 2027 Yes Yang Biao Guangdong Tianhe Agricultural Resources Co. Ltd. Independent director 17 May 2018 Newly elected independent director Yes Yang Biao Qiaoyi Logistics Co. Ltd. Independent director 31 March 2021 3 July 2024 Yes Yang Biao Dongguan Rural Commercial Bank Co. Ltd. External supervisor 1 October 2019 30 May 2024 Yes Sun Jianfei Suzhou Thvow Technology Co. Ltd. Independent director 8 May 2020 20 May 2024 Yes Sun Jianfei Cubic Digital Technology Co. Ltd. Independent director 18 May 2021 20 May 2024 Yes Sun Jianfei Central China Land Media Co. Ltd. Independent director 19 May 2023 24 February 2025 Yes Yin Meiqun China Testing & Certification International Independent director 19 May 2024 1 February 2027 Yes Group Co. Ltd.Yin Meiqun China Best Group Holding Limited Independent director 1 December 2021 30 November 2027 Yes Li Xingchun Huadian International Power Co. Ltd. Independent director 30 June 2020 30 May 2026 Yes Li Xingchun Shanghai New Huangpu Industrial Group Co. Ltd. Vice chairman 9 August 2022 8 August 2025 No Li Xingchun Zhejiang Kingland Pipeline and Technologies Co. Ltd. Chairman 11 May 2023 28 December 2025 No Pan Ailing Shinva Medical Instrument Co. Ltd. Independent director 27 July 2020 24 July 2026 Yes Pan Ailing Qingdao Rural Commercial Bank Co. Ltd. Independent director 12 October 2022 18 June 2027 Yes Pan Ailing Shandong Linglong Tire Co. Ltd. Independent director 6 July 2022 5 July 2025 Yes Zhang Hong Cisen Pharmaceutical Co. Ltd. Independent director 8 December 2020 28 February 2024 Yes Zhang Hong Shandong Hi-speed Road & Bridge Group Co. Ltd. Independent director 23 April 2019 22 April 2025 Yes Zhang Hong Vosges Group Co. Ltd. Independent director 15 July 2019 10 May 2026 Yes Zhang Hong Sinotruck Jinan Truck Co. Ltd. Independent director 28 April 2020 11 May 2026 Yes Zhang Hong Hua Xia Bank Co. Limited External supervisor 31 March 2022 11 December 2027 Yes Sanctions against current Directors Supervisors and Senior Management of the Company and those who resigned during the reporting period by securities regulatory authorities in the past three years □ Applicable √ Not applicable 2024 ANNUAL REPORT 65VI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 3. Remuneration of Directors Supervisors and Senior Management Decision process basis for determining the remuneration and actual payment for the remuneration of Directors Supervisors and the Senior Management (1) Determination basis for remuneration of Directors Supervisors and the Senior Management: The annual remuneration of each of the executive Directors and the Senior Management of the Company was in the band of RMB0.20 million to RMB5.00 million and the specific amount for each of them was determined by the remuneration committee based on the main financial indicators and operation target completed by the Company the scope of work and main responsibilities of the Directors and Senior Management of the Company the target completion of the Directors and Senior Management as assessed by the duty and performance appraisal system as well as business innovation capability and profit generation ability of the Directors and the Senior Management. The annual remuneration of Supervisors assuming specific managerial duties in the Company were determined by the general manager office of the Company based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external Supervisors who did not hold actual management positions in the Company. As approved at the 2022 first extraordinary general meeting of the Company the Company paid each of the independent non-executive Directors and non-executive Directors of the Company allowance of RMB200000 (before tax). The remuneration of external Supervisors amounted to RMB100000 (before tax). The travel expenses for attending board meetings supervisory meetings and general meetings of the Company and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-executive Directors non-executive Directors and external supervisors are reimbursed as expensed. (2) Decision process for remuneration of Directors Supervisors and Senior Management: In accordance with the relevant policies and regulations such as the Implementation Rules of the Remuneration and Assessment Committee under the Board any remuneration plan for the Company’s executive Directors proposed by the remuneration and assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive Directors non-executive Directors and external Supervisors of the Company shall be agreed on by the Board and then submitted to the general meeting for consideration and approval prior to implementation. (3) The remuneration and assessment committee which was set up by the Board according to the resolution of the general meeting is mainly responsible to formulate the standards of carry out appraisal in respect of the non-independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and scheme of the non-independent Directors and Senior Management of the Company and accountable to the Board. 66 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance V. Directors Supervisors and Senior Management (Continued) 3. Remuneration of Directors Supervisors and Senior Management (Continued) Remuneration of Directors Supervisors and Senior Management of the Company during the reporting period Unit: RMB’0000 Receipt of Total remuneration remuneration from related before tax parties of the received from Company Name Position Gender Age Status the Company or not Hu Changqing Chairman M 59 In office 174.00 No Li Xingchun Vice chairman M 59 In office 201.00 Yes Li Weixian Director and general manager M 43 In office 167.06 No Li Feng Director and deputy general manager M 51 In office 93.54 No Han Tingde Director M 56 In office 20.00 No Li Chuanxuan Director M 47 In office 20.00 No Li Zhihui Independent Director M 66 In office 20.00 No Sun Jianfei Independent Director M 52 In office 20.00 No Yin Meiqun Independent Director F 54 In office 20.00 No Yang Biao Independent Director M 45 In office 20.00 No Li Kang Chairman of the Supervisory Committee F 43 In office 56.24 No Pan Ailing Supervisor F 60 In office 10.00 No Zhang Hong Supervisor F 60 In office 10.00 No Qiu Lanju Supervisor F 51 In office 54.81 No Sang Ailing Supervisor F 46 In office 23.64 No Li Zhenzhong Deputy general manager M 51 In office 114.98 No Li Mingtang Deputy general manager M 57 In office 71.45 No Ge Guangming Deputy general manager M 54 In office 111.42 No Dong Lianming Financial controller M 50 In office 67.24 No Yuan Xikun Secretary to the Board M 39 In office 47.01 No Chu Hon Leung Company secretary (Hong Kong) M 42 In office 0.00 No Chen Hongguo Chairman M 60 Resigned 207.47 No Li Xueqin Deputy general manager F 59 Resigned 92.29 No Total – – – – 1622.15 – Note: The total pre-tax remuneration received by Directors Supervisors and the Senior Management from the Company is the remuneration during their tenure.Other explanation □ Applicable √ Not applicable 2024 ANNUAL REPORT 67VI Corporate Governance VI. Performance of Directors during the reporting period 1. Board meetings during the reporting period Meeting Convening date Disclosure date Resolutions of meeting The fourteenth extraordinary meeting 22 March 2024 23 March 2024 http://www.cninfo.com.cn of the tenth session of the Board (announcement no.:2024-007) 24 March 2024 http://www.hkex.com.hk The eighth meeting of the tenth 28 March 2024 29 March 2024 http://www.cninfo.com.cn session of the Board (announcement no.:2024-009) 28 March 2024 http://www.hkex.com.hk The ninth meeting of the tenth 15 April 2024 N/A The Company’s 2024 First Quarterly session of the Board Report was considered and approved. It was exempted from disclosure by resolution announcement.The fifteenth extraordinary meeting 31 July 2024 1 August 2024 http://www.cninfo.com.cn of the tenth session of the Board (announcement no.:2024-039) 31 July 2024 http://www.hkex.com.hk The tenth meeting of the tenth session 14 August 2024 15 August 2024 http://www.cninfo.com.cn of the Board (announcement no.:2024-045) 14 August 2024 http://www.hkex.com.hk The sixteenth extraordinary meeting 6 September 2024 7 September 2024 http://www.cninfo.com.cn of the tenth session of the Board (announcement no.:2024-052) 6 September 2024 http://www.hkex.com.hk The seventeenth extraordinary meeting 19 September 2024 20 September 2024 http://www.cninfo.com.cn of the tenth session of the Board (announcement no.:2024-055) 19 September 2024 http://www.hkex.com.hk The eighteenth extraordinary meeting 29 September 2024 30 September 2024 http://www.cninfo.com.cn of the tenth session of the Board (announcement no.:2024-059) 30 September 2024 http://www.hkex.com.hk The eleventh meeting of the tenth 30 October 2024 31 October 2024 http://www.cninfo.com.cn session of the Board (announcement no.:2024-063) 30 October 2024 http://www.hkex.com.hk The nineteenth extraordinary meeting 8 November 2024 9 November 2024 http://www.cninfo.com.cn of the tenth session of the Board (announcement no.:2024-070) 8 November 2024 http://www.hkex.com.hk 68 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance VI. Performance of Directors during the reporting period (Continued) 2. Attendance of Directors at Board meetings and general meetings Attendance of Directors at Board meetings and general meetings Number of attendance required for Attendance Attendance Absent from Board meetings at Board at Board Attendance at Absence Board meetings Attendance during the meetings in meetings by Board meetings from Board twice in a row at general Name of Directors reporting period person communication by proxy meetings (in person) meetings Hu Changqing 10 0 10 0 0 No 4 Li Xingchun 10 0 10 0 0 No 4 Li Feng 10 0 10 0 0 No 4 Li Weixian 10 0 10 0 0 No 4 Han Tingde 10 0 10 0 0 No 4 Li Chuanxuan 10 0 10 0 0 No 4 Li Zhihui 10 0 10 0 0 No 4 Sun Jianfei 10 0 10 0 0 No 4 Yin Meiqun 10 0 10 0 0 No 4 Yang Biao 10 0 10 0 0 No 4 Explanation for absent from Board meetings twice in a row (in person) During the reporting period none of the Directors was absent from Board meetings twice in a row (in person). 3. Objections from Directors on related issues of the Company Were there any objections on related issues of the Company from Directors □ Yes √ No There was no objection on related issues of the Company from Directors during the reporting period. 2024 ANNUAL REPORT 69VI Corporate Governance VI. Performance of Directors during the reporting period (Continued) 4. Other details about the performance of duties by Directors Were there any suggestions from Directors adopted by the Company √ Yes □ No Explanation on the adoption or non-adoption of suggestions related to the Company from the Directors During the reporting period being accountable to the investors the Directors of the Company devoted to their duties diligently in strict compliance with the requirements of the laws and regulations regulatory documents and the systems of the Company such as the Company Law 《( 公司法》) the Securities Law 《( 證券法》) the Rules Governing Listing of Stocks on Shenzhen Stock Exchange 《( 深圳證券交易所股票上市規則》) the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Articles of Association. They actively attended Board meetings meetings of special committees under the Board and general meetings at which they carefully considered various resolutions and prudently made scientific decisions. They proactively understood the production and operations of the Company through WeChat communication telephone communication on-site visits and other means attached great importance to some overdue debts of the Company the temporary outage maintenance and the resumption of operation and production at the production bases and the corporate governance of the Company and gave advice on the Company’s operation and development from a professional perspective. The members of the Audit Committee had fully communicated with Grant Thornton (Special General Partnership) the auditor of the Company on the timetable key concerns and audit scope of the audit of internal control and financial reporting for 2024 so as to effectively safeguard the legitimate rights and interests of the Company and all shareholders. 70 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance VII. Special committees under the Board during the reporting period Number of Name of the meeting Important opinion Details of committee Member convened Convening date Details of the meeting and advice Other duties performed objection Audit Committee Yin Meiqun 4 28 March 2024 Consideration of the 2023 Consent to submission to the Assessment of the performance Nil Li Zhihui and Annual Report Full Text and Board for consideration of Grant Thornton (Special Sun Jianfei Summary of the Company General Partnership) for 2023 the 2023 Self-assessment communication with it on the audit Report on Internal Control of the internal control and financial of the Company the 2023 reporting for 2023 to confirm the Financial Final Accounts key audit matters and matters of Report of the Company the key concern; paying attention to the Report on the Assessment provision for impairment of assets in of the Accounting the second half of 2023 and review Firm’s Performance of the full text of the 2023 annual for 2023 and the Audit report; and at the same time Committee’s Performance review of the independence of the of Supervisory auditor and its audit fees consent Responsibilities the to re-appointing Grant Thornton Resolution on Re- (Special General Partnership) as appointment of Auditor for the Company’s auditor for 2024 2024 and the Resolution and reporting to the Board on the on Provision for Impairment Audit Committee’s performance of of Assets in the Second its supervisory responsibilities for Half of 2023 2023. 15 April 2024 Consideration of the 2024 Consent to submission to the Review of the 2024 First Quarterly Nil First Quarterly Report of Board for consideration Report of the Company.the Company 14 August 2024 Consideration of the 2024 Consent to submission to the Paying attention to the Company’s Nil Interim Report Full Text Board for consideration financial transactions with related and Summary of the parties in the first half of 2024 and Company review of the 2024 Interim Financial Report of the Company. 30 October 2024 Consideration of the 2024 Consent to submission to the Review of the 2024 Third Quarterly Nil Third Quarterly Report Board for consideration Report of the Company and of the Company and the consideration of the provision Resolution on Provision for for impairment of assets such as Impairment of Assets in the account receivables and inventories First Nine Months of 2024 for the first three quarters.Nomination Before adjustment: 1 28 March 2024 Consideration of the Consent to submission to the Appointment of Mr. Zhang Chuanyong Nil Committee Li Zhihui Chen Resolution of Appointment Board for consideration and Ms. Chen Lin as securities Hongguo and of Securities Affairs affairs representatives of the Yin Meiqun Representatives Company to assist the secretary After adjustment: to the Board to perform the related Li Zhihui duties.Hu Changqing and Yin Meiqun 2024 ANNUAL REPORT 71VI Corporate Governance VII. Special committees under the Board during the reporting period (Continued) Number of Name of the meeting Important opinion Details of committee Member convened Convening date Details of the meeting and advice Other duties performed objection Remunerationand Yang Biao 2 28 March 2024 Consideration of the Consent to submission to the Review of the performance assessment Nil Assessment Li Xingchun and Resolution on 2023 Board for consideration on executive Directors and senior Committee Sun Jianfei Remuneration Distribution management and Supervisors of the Directors who assume specific management Supervisors and Senior positions in the Company and Management determination of the remuneration of Directors Supervisors and the Senior Management based on the operations of the Company in 2023. 31 July 2024 Consideration of the Consent to submission to the Review of the reason for the failure Nil Resolution on the Failure Board for consideration fulfilment of the unlocking Fulfilment of the Unlocking conditions for the third unlocking Conditions for the Third period under the 2020 Restricted Unlocking Period under A Share Incentive Scheme the the 2020 Restricted A number of shares repurchased and Share Incentive Scheme cancelled the repurchase price and and Repurchase and basis and the list of participants.Cancellation of Certain Restricted Shares Strategic and Before adjustment: 2 28 March 2024 Consideration of the 2023 Consent to submission to the Review of the 2023 Environmental Nil Sustainable Chen Hongguo Environmental Social Board for consideration Social and Governance Report of Development Hu Changqing and and Governance Report the Company paying attention Committee Yang Biao of the Company and the to the performance of social After adjustment: Resolution on Reduction responsibilities of the Company Hu Changqing of Registered Capital of and consent to the reduction of Li Weixian and Wholly-owned Subsidiary registered capital of RMB3000 Yang Biao million of the Financial Leasing Company to reduce the capital utilisation of non-principal activities. 19 September 2024 Consideration of the Consent to submission to the Consent to increase the capital of Nil Resolution on Capital Board for consideration Jilin Chenming a wholly-owned Increase of Jilin Chenming subsidiary by RMB1500 million with the Company’s own funds to meet the needs of the operation and development of the subsidiary.Other explanation: Mr. Chen Hongguo resigned as a Director and Chairman of the Company and a member of the Strategic and Sustainable Development Committee and the Nomination Committee under the Board due to personal reasons. The Company convened the nineteenth extraordinary meeting of the tenth session of the Board on 8 November 2024 to adjust the composition of the members of the Strategic and Sustainable Development Committee and the Nomination Committee under the tenth session of the Board. 72 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance VIII. Performance of duties by the Supervisory Committee Were there any risks of the Company identified by the Supervisory Committee when performing its duties during the reporting period □ Yes √ No None of those issues under the supervision was objected by the Supervisory Committee during the reporting period.IX. Personnel of the Company 1. Number of staff specialty composition and education level Number of staff at the Company (person) as at the end of the reporting period 2041 Number of staff at major subsidiaries (person) as at the end of the reporting period 6847 Total number of staff (person) as at the end of the reporting period 9594 Total number of staff receiving remuneration during the period (person) 9594 Number of retired/resigned staff the Company and its major subsidiaries are required to compensate (person) 0 Specialty composition Number of people Category of specialty composition (person) Production staff 6444 Sales staff 423 Technical staff 354 Financial staff 132 Administrative staff 1153 Other staff 1088 Total 9594 Education level Number of people Category of education level (person) Postgraduate and above 24 Undergraduate 793 Post-secondary 2161 Technical secondary and below 6616 Total 9594 2024 ANNUAL REPORT 73VI Corporate Governance IX. Personnel of the Company (Continued) 2. Remuneration policies The remuneration of the employees of the Company includes their salaries bonuses and other fringe benefits. Subject to the relevant laws and regulations the Company adopts different standards of remuneration for different employees which are determined based on their position skill variety performance etc. with reference to the remuneration level in the labour market the average level of salary in the society and the corporate reference line set by the government.The Company provides various benefits to the employees including social insurance housing allowance and paid leaves etc. 3. Training programmes The Company has established comprehensive staff promotion and incentive mechanisms to enhance the enthusiasm and creativity of employees. The Company focuses on the cooperation with quality training institutions to introduce quality training programmes especially focusing on improving the capability of middle-level and senior management in respect of learning management and action. The Company deep dives into front-line of production to understand the true needs of employees for trainings improve the operational skills of employees and enhance our core competitiveness. 4. Labour outsourcing □ Applicable √ Not applicable X. Profit distribution of the Company and conversion of capital reserves into share capital Formulation implementation or adjustment of profit distribution policy especially the cash dividend during the reporting period □ Applicable √ Not applicable The Company was profitable during the reporting period and the Parent Company’s profit available for distribution to shareholders was positive but no cash dividend distribution plan was proposed □ Applicable √ Not applicable 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 or bonus shares for the year and there will be no increase of share capital from reserves. 74 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company √ Applicable □ Not applicable 1. Equity incentives (1) Overview of the 2020 Restricted A Share Incentive Scheme * Purpose of the Share Incentive Scheme In order to further improve the corporate governance structure of the Company promote the establishment and improvement of long-term incentive and restraint mechanisms fully mobilise the enthusiasm responsibility and mission of the directors core technology and business key personnel and bond the interests of Shareholders the Company and individual operators together effectively making all parties to attend to the long-term development of the Company and work together for it; at the same time in order to further promote the long-term behaviour of decision-makers and operators promote the sustainable and steady development of the Company and maximise the value of the Company and shareholders the 2020 Restricted A Share Incentive Scheme was formulated on the premise of fully protecting the interests of Shareholders and on the principle of income equivalent to contribution and in compliance with the relevant requirements under the laws and regulations such as the Company Law and the Securities Law regulatory documents and the Articles of Association combined with the existing management systems of the Company including the remuneration mechanism and performance appraisal system.* Participants under the Share Incentive Scheme The number of the participants under the 2020 Restricted A Share Incentive Scheme shall be 111 specifically including: (i) Directors senior management members of the Company (ii) key technical (business) employees of the Company and (iii) the persons who in the opinion of the Board are qualified. The participants under the 2020 Restricted A Share Incentive Scheme exclude independent non-executive Directors Supervisors and Shareholders individually or in aggregate holding 5% or more of the shares of the Company or the de facto controllers and their spouses parents or children. Among the above participants a director or senior management member must have been elected at a general meeting or engaged by the Board. All participants should be engaged employed or hired by the Company or any of the branch or subsidiary of the Company at the time of granting under the Share Incentive Scheme and during the appraisal period.All of the participants under the Incentive Scheme shall not participate in an incentive scheme of any other listed company concurrently and any of the participants who has participated in an incentive scheme of any other listed company shall not participate in the Incentive Scheme. No other persons who are not Directors nor employees of the Company are qualified as participants. 2024 ANNUAL REPORT 75VI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (1) Overview of the 2020 Restricted A Share Incentive Scheme (Continued) * Number of shares granted and the grant price The Company issued and granted 79.6 million restricted A shares to 111 participants on 29 May 2020 under the 2020 Restricted A Share Incentive Scheme (Draft) of the Company. This grant shall be one-off in nature without reserved portion. During the reporting period the total shares to be issued under the Scheme represented approximately 0% of the shares in issue (excluding the treasury shares) as at the end of 2024. The grant price of the restricted shares shall be RMB2.85 per share. A participant may purchase the restricted shares of the Company issued by the Company to the Participants at RMB2.85 per share.* Basis of determination of the grant price The grant price of the restricted shares granted by the Company via means of issuing additional shares under the Incentive Scheme shall be determined according to principle of fair market price and shall be the higher of the followings: (i) 60% of the closing price of the shares of the Company on the last trading day before the date of the announcement of the Incentive Scheme; (ii) 60% of the average closing prices of the shares of the Company on the last 30 trading days before the date of the announcement of the Incentive Scheme; (iii) 60% of the average trading prices (the total transaction value for the last trading days divided by the total transaction volume for the last trading days) of the shares of the Company on the last trading day before the date of the announcement of the Incentive Scheme; (iv) 60% of the average trading price (the total transaction value for the last 20 trading days divided by the total transaction volume for the last 20 trading days) of the shares of the Company on the last 20 trading days before the date of the announcement of the Incentive Scheme; or (v) the nominal value of the shares of Company being RMB1 per share.Based on the above pricing principles the grant price of the restricted shares to be granted under the Incentive Scheme shall be RMB2.85 per share.The restricted shares granted to the participants shall be funded by themselves. The Company shall undertake not to provide loans loan guarantee and any other form of financial assistances to the participants for the acquisition of the restricted shares under the Incentive Scheme. 76 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (1) Overview of the 2020 Restricted A Share Incentive Scheme (Continued) * Validity period and lock-up periods of the Share Incentive Scheme The validity period of the Incentive Scheme shall commence on the date on which the registration of the grant of the restricted shares is completed and end on the date on which all the restricted shares granted to the participants are unlocked or repurchased and cancelled which shall not exceed 60 months. On 14 July 2020 the Company completed the registration of the restricted shares granted under the Scheme with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. As of 31 December 2024 the Scheme remained valid for not more than 7 months. The lock-up periods of the restricted shares granted under the Incentive Scheme shall be 24 months 36 months and 48 months from the date of registration of the restricted shares under the grant.The share awards granted under the Scheme do not have a vesting period. After 24 months from the date of completion of the registration of the grant of restricted shares granted under the Scheme if the unlocking conditions of the restricted shares are satisfied the participants will unlock in three phases within the next 36 months. Upon expiry of each lock-up period the Company shall proceed with the unlocking for the participants who satisfy the unlocking conditions and the restricted shares held by participants who do not satisfy the unlocking conditions shall be repurchased and cancelled by the Company. The table below sets out the unlocking period and unlocking schedule for the restricted shares under each grant: Percentage of the restricted shares to be unlocked of total number of the restricted Unlocking period Description of the unlocking period shares granted First unlocking Commencing from the first trading day after expiry of the 24-month period 40% period from the date on which the registration of the grant of the restricted shares is completed and ending on the last trading day of the 36-month period from the date on which the registration of the grant of the restricted shares is completed Second unlocking Commencing from the first trading day after expiry of the 36-month period 30% period from the date on which the registration of the grant of the restricted shares is completed and ending on the last trading day of the 48-month period from the date on which the registration of the grant of the restricted Shares is completed Third unlocking Commencing from the first trading day after expiry of the 48-month period 30% period from the date on which the registration of the grant of the restricted shares is completed and ending on the last trading day of the 60-month period from the date on which the registration of the grant of the restricted shares is completed 2024 ANNUAL REPORT 77VI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (1) Overview of the 2020 Restricted A Share Incentive Scheme (Continued) * Validity period and lock-up periods of the Share Incentive Scheme (Continued) Note: The completion date of registration of the grant of the restricted A shares is 14 July 2020.The participants correspond to the restricted shares that cannot be unlocked during the unlocking period and cannot be deferred to the future years to unlock the restricted shares. These restricted shares shall be repurchased and cancelled by the Company. The repurchase price is the price granted for the restricted shares plus the bank loan interest rate for the same period.* The maximum number of the shares to be granted to a participant The total number of shares to be issued and granted under the Incentive Scheme during the validity period shall not exceed 10% of the total issued share capital of the Company and the total number of the restricted shares to be granted under the Incentive Scheme during the validity period to the participant shall not exceed 1% of the total issued share capital of the Company.* The period for the exercise of the share options by a participant under the scheme Not applicable * The amount if any payable on application for or acceptance of an award and the period within which payment or notification of payment is to be made or the loan on application for an award is to be repaid No payment is to be made on acceptance of an award. (2) Relevant procedures performed under the 2020 Restricted A Share Incentive Scheme * 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.* 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.* 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. 78 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (2) Relevant procedures performed under the 2020 Restricted A Share Incentive Scheme (Continued) * 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.* On 15 July 2020 the 79600000 restricted A shares granted to the participants were listed.* 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 been removed from office which failed to comply with the unlocking conditions. The total number of restricted shares granted to and held by the participants and not yet been unlocked was 4466000 with a repurchase price of RMB2.5184172 per share (excluding the bank loan interest rate for the same term). On 27 July 2022 29948000 restricted A shares that were unlocked were listed for trading.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.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.* On 17 July 2023 the Company convened the ninth extraordinary meeting of the tenth session of the Board and the fifth extraordinary meeting of the tenth session of the Supervisory Committee at which the Resolution on the Failure Fulfilment of the Unlocking Conditions for the Second Unlocking Period under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares was considered and approved. The independent Directors of the Company issued independent opinions to agree with such resolutions. The results for 2022 of the Company failed to pass the performance appraisal targets at company level set for the second unlocking period. Meanwhile 5 participants lost their incentive qualification due to their resignation. The Board of the Company repurchased and cancelled 22929000 restricted A shares which had been granted to participants but not yet unlocked for the second unlocking period at a repurchase price of RMB2.5184172 per share (excluding the bank loan interest rate for the same term). 2024 ANNUAL REPORT 79VI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (2) Relevant procedures performed under the 2020 Restricted A Share Incentive Scheme (Continued) On 10 November 2023 Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2023) No. 371C000518) in which they verified the change in the registered capital and paid-in capital (share capital) of the Company as of 18 October 2023. Verification result: As of 18 October 2023 the registered capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2956813200.00 and RMB2956813200.00 respectively.On 20 November 2023 the Company completed the procedures for the repurchase and cancellation of 22929000 restricted A shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.* On 31 July 2024the Company convened the first special meeting of independent Directors of the tenth session of the Board the fifteenth extraordinary meeting of the tenth session of the Board and the sixth extraordinary meeting of the tenth session of the Supervisory Committee at which the Resolution on the Failure Fulfilment of the Unlocking Conditions for the Third Unlocking Period under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Restricted Shares was considered and approved. The results for 2023 of the Company failed to pass the performance appraisal targets at company level set for the third unlocking period. The Board of the Company repurchased and cancelled 22257000 restricted A shares that had been granted to 93 participants but not yet unlocked at a repurchase price of RMB2.5184172 per share (excluding the bank loan interest rate for the same term).On 15 November 2024 Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421) in which they verified the change in the registered capital and paid-in capital (share capital) of the Company as of 6 November 2024. Verification result: As of 6 November 2024 the registered capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2934556200.00 and RMB2934556200.00 respectively.On 18 December 2024 the Company completed the procedures for the repurchase and cancellation of the 15357000 restricted A shares held by 91 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. As at the end of the reporting period the procedures for the share repurchase transfer and cancellation of the 6900000 restricted A shares held by the remaining 2 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze. (3) Implementation of the equity incentive plan during the reporting period As at the beginning and the end of the reporting period the number of awards to be granted under authority of the Scheme was 0. During the reporting period the Company did not grant any awards and accordingly the number of shares that may be issued in respect of awards granted under all schemes during the reporting period divided by the weighted average number of shares of the relevant class in issue (excluding treasury shares) for the reporting period is not applicable.Equity incentives granted to Directors and the Senior Management of the Company 80 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (3) Implementation of the equity incentive plan during the reporting period (Continued) √ Applicable □ Not applicable Unit: share Number Number Exercise Number of Number of share of newly price of restricted of newly Number Number of options granted Number Number the shares Number Market price shares Number of granted of shares Number restricted held share of shares of shares exercised of share at the end held unlocked restricted Grant repurchased of shares shares at the options exercisable exercised during the options of the at the shares shares price of and lapsed held beginning during the during the during the reporting held at the reporting beginning during the during the restricted cancelled Repurchase during at the Grant Lock-up of the reporting reporting reporting period end of the period of the current reporting shares during the price the end of Name Position date period period period period period (RMB/share) period (RMB/share) period period period (RMB/share) period (RMB/share) period the period Hu Changqing Chairman 29 May 14 July 0 0 0 0 0 0 3.05 1500000 0 0 2.85 1500000 2.5184172 0 0 20202020 –14 July 2024 Li Xingchun Vice 29 May 0 0 0 0 0 0 3.05 1500000 0 0 2.85 1500000 2.5184172 0 0 chairman 2020 Li Weixian Director 29 May 0 0 0 0 0 0 3.05 600000 0 0 2.85 600000 2.5184172 0 0 and 2020 general manager Li Feng Director 29 May 0 0 0 0 0 0 3.05 900000 0 0 2.85 900000 2.5184172 0 0 and 2020 deputy general manager Li Zhenzhong deputy 29 May 0 0 0 0 0 0 3.05 600000 0 0 2.85 600000 2.5184172 0 0 general 2020 manager Li Mingtang deputy 29 May 0 0 0 0 0 0 3.05 300000 0 0 2.85 300000 2.5184172 0 0 general 2020 manager Dong Lianming Financial 29 May 0 0 0 0 0 0 3.05 300000 0 0 2.85 300000 2.5184172 0 0 controller 2020 Yuan Xikun Secretary 29 May 0 0 0 0 0 0 3.05 90000 0 0 2.85 90000 2.5184172 0 0 to the 2020 Board Other – 29 May 0 0 0 0 0 0 3.05 16467000 0 0 2.85 9567000 2.5184172 0 6900000 employees 2020 Total – 0 0 0 0 – 0 – 22257000 0 0 – 15357000 – 0 6900000 Five Individuals with the 29 May 14 July 0 0 0 0 0 0 3.05 8580000 0 0 2.85 1680000 2.5184172 0 6900000 highest total remuneration 2020 2020 other than Directors (total) – 14 July 2024 Remarks (if any) The results for 2023 of the Company failed to pass the performance appraisal targets at company level set for the third unlocking period. The Company shall repurchase and cancel 22257000 restricted A shares held by 93 participants but not yet unlocked at a repurchase price of RMB2.5184172 per share (excluding the bank loan interest rate for the same term) under the 2020 Restricted A Share Incentive Scheme (Draft) of the Company. On 1 November 2024 the Company made restricted share repurchase payments to 93 participants.On 18 December 2024 the Company completed the procedures for the repurchase transfer and cancellation of the 15357000 restricted A shares held by 91 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. As at the end of the reporting period the procedures for the share transfer and cancellation of the 6900000 restricted A shares held by the remaining 2 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze. 2024 ANNUAL REPORT 81VI Corporate Governance XI. Implementation of the equity incentive plan employee shareholding plan or other employee incentive measures of the Company (Continued) 1. Equity incentives (Continued) (3) Implementation of the equity incentive plan during the reporting period (Continued) Assessment and incentive mechanism for the Senior Management The Senior Management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted in line with the direction of the annual major tasks and were focused on appraisals of two fixed indicators namely the completion status of each month and the evaluation on important performance indicators.It was carried out monthly by way of cross assessment and supervision among the related departments. The annual assessments were carried out by the Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances during the year including the integrated quality of Senior Management and internal training of talents. 2. Implementation of employee shareholding plans □ Applicable √ Not applicable 3. Other employee incentive measures □ Applicable √ Not applicable XII. Construction and implementation of internal control system during the reporting period 1. Construction and implementation of internal control system During the reporting period in accordance with the Basic Internal Control Norms for Enterprises and its supporting guidelines taking internal and external environment internal organisation and management requirements into account the Company updated and improved its internal control system in a timely manner comprehensively reviewed and revised the daily work and business flows and internal control systems of each department and business segment of the Company supplemented and revised the relevant content of the Internal Control Management Manual and established a scientifically designed concise and applicable internal control system with effective operation.The internal control of the Company was able to cover the main aspects of the Company’s operation and management. The units businesses and events included in the evaluation scope and high-risk areas covered the main aspects of the Company’s operation and management and there were no major omissions. The design of the internal control system of the Company was sound and reasonable. The implementation of internal controls was effective.Through the operation analysis and evaluation of the internal control system the Company effectively prevented operation and management risks and promoted the realisation of internal control objectives. 82 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XII. Construction and implementation of internal control system during the reporting period (Continued) 2. Particulars of material deficiencies in internal control detected during the reporting period √ Yes □ No Potential effect of Corrective Specific deficiency measures Person Time of occurrence description on financial implemented Rectification responsible Effect of of deficiency of deficiency reporting or to be implemented time for rectification rectification 2024 Inadequa te r i s k The Company lacked effective The Company is preparing to November 2024 The management 1. The Company has establ ished assessment or risk and robust countermeasures set up a special rectification of the Company provincia l debt commit tees wi th awareness of the when risks emerged leading t e a m t o s t r e n g t h e n t h e f i nanc ia l c red i to rs . The re i s no management to l iqu id i ty d i f f icu l t ies for training of the management cancellation or delays of existing loans.Chenming Paper in 2024. This on risk assessment and risk Interest rates and fees shall be reduced resulted in overdue payments management and to introduce to alleviate the burden on the Company.for borrowings from financial a professional risk management Up to now a consensus is reached for institution and payments to consultancy organisation to loans. It is expected to reduce finance supplier the freezing of multiple assist in the improvement of costs by approximately RMB600 million bank accounts and multiple the Company’s risk assessment every year.l i t iga t ions and a rb i t ra t ion system and the formulation 2. Government support is sought. The cases due to debt defaults. o f de ta i l ed r i sk r esponse registered capital of RMB1 billion for for Bes ides some product ion plans in the future. At the the establishment to Weifang Xingchen l ines suspended operat ion same time the Company has Trading Co. Ltd. to be funded by and product ion expos ing strengthened communication governments at city and county levels the Company to signif icant and coordination with financial has received with the syndicated loan operational and financial risks. inst i tut ions and suppl iers of RMB2.31 billion is currently under and actively sought solutions review for approval by provincial offices to ease its liquidity pressure or head offices of various banks. At and gradually address issues present China Construction Bank the such as the freezing of bank lead bank has completed its approval accounts and litigation and process.arbitrat ion cases so as to 3. As of the date of th is report reduce the impact on the H uanggang p roduc t i on base i s effectiveness of the internal operating as normal. Some production control of financial reporting. l ines of J iangxi product ion base Currently the rectification work and Shouguang product ion base is being carried out in an orderly have resumed p roduc t ion w i th manner. design capacity is reached. Other production bases are conducting outage maintenance on schedule and gradually resume production. 4. The Company has accelerated its asset disposal. Subsequent to the reporting period the Company received payment for asset disposal of RMB16 million and settlement for leased items of RMB65 million. 2024 ANNUAL REPORT 83VI Corporate Governance XIII. The Company’s management and control of subsidiaries during the reporting period In accordance with relevant requirements of the Company Law the Rules Governing Listing of Stocks on Shenzhen Stock Exchange the Basic Internal Control Norms for Enterprises and other laws and regulations and the Articles of Association based on the actual situation of the Company the Company had formulated a comprehensive internal system. It had timely amended and optimised its internal system based on the stricter management requirements and changes in internal control condition. The complete set of internal control system and information management procedures of the Company also applied to subsidiaries so as to ensure the operation and development of subsidiaries were in line with and contributing to the development strategies and overall plans of the Company.XIV. Assessment report on internal control or auditor’s report on internal control 1. Assessment report on internal controls Date of disclosure of assessment report on internal controls 1 April 2025 Index of assessment report on internal controls disclosure http://www.cninfo.com.cn Percentage of total assets included in assessment to total assets in consolidated financial statements of the Company 98.5% Percentage of revenue included in assessment to revenue in consolidated financial statements of the Company 99.9% 84 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XIV. Assessment report on internal control or auditor’s report on internal control (Continued) 1. Assessment report on internal controls (Continued) Basis for identifying deficiencies Non-financial Type Financial reporting reporting Qualitative criteria * Indicators of material deficiencies * Indicators of material in the internal control of financial deficiencies in the internal control reporting include: ineffective of non-financial reporting include: control environment; material loss major failure as a result of the to and adverse impact on the decision making process; lack Company as a result of misconduct of control system or occurrence by Directors Supervisors and of systematic failure in principal Senior Management; material activities and lack of effective misstatement of non-exceptional compensation control; high incidents; ineffectiveness in turnover rate of mid to senior level supervision of internal control of management and senior technical the Company by the Board or staff; failure to address the findings its delegated authorities and the of internal control assessment in internal audit department. particular material deficiencies; and * Indicators of major deficiencies other factors which impose material in internal control of financial adverse impact on the Company.reporting include: failure in * Indicators of major deficiencies selecting and applying accounting in internal control of non-financial policies in accordance with reporting include: general failure generally accepted accounting as a result of the decision-making principles; failure to establish process; deficiencies in major procedures and control measures business procedure or system; high to prevent corrupt practices; failure turnover rate of key staff; failure to establish corresponding control to address the findings of internal mechanism for the accounting of control assessment in particular unusual or special transactions major deficiencies; and other or failure to implement or set up factors which impose great adverse the corresponding compensation impact to the Company.control; failure to reasonably ensure * Indicators of general deficiencies the truthfulness and accuracy in internal control of non-financial in the preparation of financial reporting include: low efficiency statement as a result of one or of decision-making process; more deficiencies in the control of deficiencies in general business financial reporting as of the end of procedure or system; high turnover the period. rate of employees; and failure to * General deficiencies: other rectify general deficiencies.deficiencies in internal control that do not constitute material or major deficiencies. 2024 ANNUAL REPORT 85VI Corporate Governance XIV. Assessment report on internal control or auditor’s report on internal control (Continued) 1. Assessment report on internal controls (Continued) Basis for identifying deficiencies Non-financial Type Financial reporting reporting Quantitative criteria General deficiencies: deviation of General deficiencies: quantitative less than or equal to 0.1% from criterion (financial loss) less than the target of accounting error/the RMB5000000; major deficiencies: total revenue; Major deficiencies: quantitative criterion (financial deviation of 0.1% – 0.5% from loss) between RMB5000000 the target of accounting error/the and RMB20000000; material total revenue; material deficiencies: deficiencies: over RMB20000000.deviation greater than 0.5%.Number of material deficiencies in financial reporting 1 Number of material deficiencies in non-financial reporting 0 Number of major deficiencies in financial reporting 0 Number of major deficiencies in non-financial reporting 0 2. Auditor’s report on internal control √ Applicable □ Not applicable Auditor’s opinion contained in the auditor’s report on internal control We are of the opinion that due to the existence of the above material deficiencies and their impacts on the achievement of internal control goals Chenming Paper had in all material aspects failed to maintain effective internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31 December 2024.Disclosure of auditor’s report on internal control Disclosed Date of disclosure of auditor’s report on internal control 1 April 2025 Index of auditor’s report on internal control disclosure http://www.cninfo.com.cn Type of opinion in auditor’s report on internal control Standard and Adverse opinion unqualified opinion Material deficiencies in non-financial reporting No Any non-standard opinions set out in the auditor’s report on internal control issued by accountants □ Yes □ No Explanation of the non-standard opinions set out in the auditor’s report on internal control issued by accountants Material deficiency refers to a deficiency or a combination of deficiencies in internal control that may result in material misstatement in financial statements which cannot be timely avoided or discovered and rectified. 86 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XIV. Assessment report on internal control or auditor’s report on internal control (Continued) 2. Auditor’s report on internal control (Continued) The management of Chenming Paper did not have sufficient risk assessment or risk awareness. The Company lacked effective and robust countermeasures when risks emerged leading to liquidity difficulties for Chenming Paper in 2024.This resulted in overdue payments for borrowings from financial institution and payments to supplier the freezing of multiple bank accounts and multiple litigations and arbitration cases due to debt defaults. Besides some production lines suspended operation and production exposing the Company to significant operational and financial risks.Inadequate risk assessment and response of the management of Chenming Paper indicates that there are deficiencies in risk assessment or control environment of the Company.Effective internal control can provide a reasonable assurance for the truthfulness and completeness of financial statements and relevant information. Chenming Paper has lost this internal control function due to the above material deficiencies.The management of Chenming Paper has identified the above material deficiencies and included such deficiencies in the internal control assessment report of the Company. The above deficiencies have been fairly reflected in all material aspects. During the audit of 2024 financial statements of Chenming Paper we have considered the impacts of the above deficiencies on the nature time arrangement and scope of audit procedures.Auditor’s report on internal control issued by accountants was in line with Directors’ opinions contained in self-assessment report □ Yes □ No 2024 ANNUAL REPORT 87VI Corporate Governance XV. Rectification of problems found in self-inspection under the special initiative on corporate governance of the listed company Not applicable XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (i) Compliance with the Corporate Governance Code The Company maintained high standards of corporate governance through various internal controls. The Board reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance standards of the Company.Save for the details set out in III. Board and XVII. Communications with shareholders in this section the Company had fully complied with all the principles and code provisions of the Corporate Governance Code as set out in Appendix C1 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 C3 to the Hong Kong Listing Rules. Having made adequate enquiries with all Directors and Supervisors of the Company the Company was not aware of any information that reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this code during the reporting period.(iii) Board The members of the Board of the Company are elected at the general meeting and held accountable to the general meeting and shall exercise the following functions and powers: (1) to be responsible for convening the general meeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3) to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annual financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for material acquisition and repurchase of the Company’s ordinary shares; (8) to draft plans for the merger division or dissolution or the change of formation of the Company; (9) to decide on external investment acquisition and disposal of assets pledge of assets matter in relation to external guarantee entrusted wealth management connected transactions etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of the Company’s internal management organisation; (11) to employ or dismiss the manager or secretary to the Board of the Company; to employ or dismiss the Senior Management such as the deputy general manager(s) and personnel in charge of financial affairs as proposed by the general manager; and to decide on their remuneration and rewards and punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for amending the Articles of Association; (14) to administrate matter related to information disclosure of the Company; (15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercise the functions and powers as conferred upon by the Articles of Association or the general meeting. 88 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (iii) Board (Continued) As regards its corporate governance functions the Board is responsible for: (1) formulating reviewing and making recommendations on the Company’s corporate governance policies and practices; (2) reviewing and monitoring the training and continuous professional development of the Directors and Senior Management of the Company; (3) reviewing and monitoring the Company’s policies and practices on compliance with legal and regulatory requirements; (4) formulating reviewing and monitoring the code of conduct and compliance manual applicable to employees and Directors of the Company; and (5) reviewing the Company’s compliance with the Corporate Governance Code and disclosure in the Corporate Governance Report. During the reporting period the Board had performed the above duties.The Board comprised four executive Directors: Hu Changqing (Chairman) Li Xingchun Li Weixian and Li Feng; two non-executive Directors: Han Tingde and Li Chuanxuan; and four independent non-executive Directors: Li Zhihui Sun Jianfei Yin Meiqun and Yang Biao. Please refer to part V of this section for their brief biographies.The management of the Company regularly report to the Board on the Company’s operations and material matters based on the Company’s business situation. The Board of the Company is responsible for leading and monitoring the Company and is wholly responsible for the administration and supervision of the Company’s businesses to facilitate its success. The Executive Director or the Senior Management is authorised to be responsible for the various divisions and functions and management of the processing. Directors of the Company shall act objectively and make decisions in the interests of the Company. The management and the Senior Management of the Company held regular meetings with the Board to discuss the ordinary business operations and performance of the Company and carried out the relevant decisions of the Board. The management and the Senior Management of the Company have to get prior approval from among others the Board before they make any decision or enter into any commitment on behalf of the Company. The Company will arrange independent legal advice upon the request from the Directors or any committees of the Board if the Board or any committees of the Board consider it necessary to seek for independent professional advice.Pursuant to Code C.1.8 of the code provisions the Company should arrange appropriate insurance cover in respect of legal action against its Directors. During the reporting period the Company arranged director liability insurance for Directors to safeguard the rights and interests of Directors to perform their duties in compliance. 2024 ANNUAL REPORT 89VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (iii) Board (Continued) During the reporting period the Board held 10 meetings 4 of which were regular meetings and 6 were extraordinary meetings. None of the Directors were absent from any Board meetings.Attendance at the relevant meetings (attendance required/attendance) Remuneration Strategic and and Sustainable Audit Nomination Assessment Development Board Committee Committee Committee Committee General Name Position meetings meetings meetings meetings meetings meetings I. Executive Directors Hu Changqing Chairman 10/10 N/A N/A N/A 2/2 4/4 Li Xingchun Vice chairman 10/10 N/A N/A 2/2 N/A 4/4 Li Weixian Executive Director 10/10 N/A N/A N/A N/A 4/4 Li Feng Executive Director 10/10 N/A N/A N/A N/A 4/4 II. Non-executive Directors Li Chuanxuan Director 10/10 N/A N/A N/A N/A 4/4 Han Tingde Director 10/10 N/A N/A N/A N/A 4/4 III. Independent non-executive Directors Li Zhihui Independent Director 10/10 4/4 1/1 N/A N/A 4/4 Sun Jianfei Independent Director 10/10 4/4 N/A 2/2 N/A 4/4 Yin Meiqun Independent Director 10/10 4/4 1/1 N/A N/A 4/4 Yang Biao Independent Director 10/10 N/A N/A 2/2 2/2 4/4 Mr. Chen Hongguo resigned as a Director and Chairman of the Company and a member of the Strategic and Sustainable Development Committee and the Nomination Committee under the Board on 7 November 2024 due to personal reasons.Save for those disclosed in the brief profile of Directors of the Company in this Report none of the members of the Board had any financial business family relations or material connections with each other.According to Article 186 of the Articles of Association Board meetings shall be notified to all the Directors and Supervisors in writing ten (10) days in prior and there was no objection from any director to a shorter notice period.Therefore the Board held 4 regular meetings during the year each by giving a 10-day notice in advance to ensure that all Directors could participate in discussions of matters in the agenda and could make timely and prompt decisions on transactions that are material to the Group’s business. Reasonable prior notification was given for the other meetings of the Board to ensure all Directors could take time to attend. The Board will use its best endeavours to comply with the requirements of the code provisions.All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governing the Board and all applicable regulations and rules were complied with. 90 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (iii) Board (Continued) Directors’ training and professional development All newly appointed Directors are provided with necessary orientation information with an aim to ensure that they will have a better understanding of operations and business of the Company as well as relevant laws and regulations and obligations under the Listing Rules.During the reporting period the Company provided all Directors with the latest regulatory policies and interpretation materials issued by the regulatory authorities on the capital market such as: the answers of Wu Qing the secretary of the Party Committee and the chairman of the CSRC to reporters’ questions at the economic theme press conference of the second session of the 14th National People’s Congress and the detailed interpretation of the implementation of the new “National Nine Articles”. All Directors read and studied the CSRC’s opinions on strengthening the regulation of listed companies the State Council’s opinions on strengthening regulation and preventing risks to promote the high-quality development of the capital market and the CSRC’s opinions on the strict implementation of the delisting system. In addition all Directors of the Company participated in the special training session on annual reports of listed companies in Shandong Province organised by the Shandong CSRC online on 15 March 2024 thus further enhancing their professional capabilities in annual report preparation and disclosure. Mr. Li Chuanxuan a non-executive Director attended the 2024 first training course for directors supervisors and senior management of the Shandong CSRC on 22 August 2024 to gain a deeper understanding of the latest regulatory requirements. Mr. Hu Changqing the chairman participated in the 2024 second training course for directors supervisors and senior management of the Shandong CSRC on 10 December 2024 thus further enhancing his ability to perform his duties. At the same time the briefing paper in respect of amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of the Company was distributed by the Company to all Directors and Supervisors the above of which were to ensure all Directors and Supervisors to comply with relevant laws and sound corporate governance practice and enhance their awareness of sound corporate governance practice.(iv) Chairman and general manager Mr. Chen Hongguo resigned as the Chairman of the Company on 7 November 2024 due to personal reasons. To ensure the proper functioning of the Board the Company convened the nineteenth extraordinary meeting of the tenth session of the Board on 8 November 2024 to elect Mr. Hu Changqing as the Chairman of the Company. Mr. Li Weixian is the general manager of the Company. Please refer to part V of this section for his brief biographies.According to the Articles of Association the chairman shall exercise the following powers: (1) presiding over general meetings and convening and presiding over Board meetings; (2) supervising and inspecting the implementation of the resolutions of the Board; (3) signing the shares the securities and bonds issued by the Company; (4) signing important documents of the Board and other documents which are required to be signed by legal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidates for general manager for the Board; (7) exercising the special right to operate the Company in accordance with the laws and acting for the benefits of the Company in the event of emergency situation as a result of act of God or natural disaster and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powers authorised by the Board.The general manager of the Company exercises the duties of a chief executive officer. The general manager shall exercise the following powers: (1) in charge of the operation and management of the Company and organising the implementation of the resolutions of the Board; (2) organising the implementation of the Company’s annual business plans and investment plans; (3) drafting plans for the establishment of the internal organisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulating specific rules and regulations for the Company; (6) proposing the appointment or dismissal of the deputy general manager and chief financial officer; (7) appointing or dismissing management personnel other than those required to be appointed or dismissed by the Board; (8) proposing the wages welfare rewards and penalties of staff and to decide the appointment or dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting of the Board; and (10) exercising other powers conferred by the Articles of Association and the Board. 2024 ANNUAL REPORT 91VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (v) Independent non-executive Directors There are four independent non-executive Directors in the Board which is in compliance with the minimum requirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Yin Meiqun and Sun Jianfei the independent non-executive Directors of the Company have appropriate accounting or related financial management expertise which is compliance with the requirement of Rule 3.10 of the Hong Kong Listing Rules. Please refer to part V of this section for their brief biographies. The Company has received from each of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to be independent during the year.(vi) Terms of Directors According to the Articles of Association all Directors including non-executive Directors have been elected at the general meetings with a term of three years from June 2022 to June 2025. They may be re-elected for another term upon expiry of tenure. The term of office of independent non-executive Directors is the same as that of other Directors. They may be re-elected for consecutive terms but the consecutive terms shall not be more than six years.(vii) Directors’ responsibility for the financial statements The Directors acknowledged their responsibility to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company. The Directors believed that the Company had adopted and applied consistently appropriate accounting policies in preparing the financial statements in compliance with all related accounting standards.(viii) Board committees Pursuant to the Corporate Governance Code the Board has established four committees namely Audit Committee Remuneration and Assessment Committee Strategy and Sustainable Development Committee and Nomination Committee for overseeing particular aspects of the Company’s affairs. Each Board Committee has its own defined written terms of reference. The written terms of reference of each Board Committee are published on websites of stock exchange and the Company.Save for requirements of the Corporate Governance Code the Company also set up Strategy and Sustainable Development Committee for overseeing and studying long-term strategic development plan of the Company and making recommendations.(ix) Audit Committee The Audit Committee of the Company comprises three members including Yin Meiqun (as the chairman) Li Zhihui and Sun Jianfei all of whom are independent non-executive Directors. The primary duties of the Audit Committee are serving as a communication media between internal and external audit and the related review and supervision. Yin Meiqun and Sun Jianfei have appropriate professional qualifications or appropriate accounting or related financial management expertise which is in compliance with the requirement of the Hong Kong Listing Rules. 92 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (ix) Audit Committee (Continued) The main functions of the Audit Committee of the Company are: (1) to supervise and evaluate the work of external audit and propose the engagement or replacement of the external audit institution: * to be primarily responsible for making recommendations to the Board on the appointment reappointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor and any questions of its resignation or dismissal; * to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process in accordance with applicable standards. The Committee should discuss with the auditor the nature and scope of the audit and reporting obligations before the audit commences; and * to develop and implement a policy on engaging an external auditor (including any entity that is under common control ownership or management with the audit firm or any entity that a reasonable and informed third party knowing all relevant information would reasonably conclude to be part of the audit firm nationally or internationally) to supply non-audit services. The Audit Committee should report to the Board identifying and making recommendations on any matters where action or improvement is needed; (2) to supervise and evaluate the work of internal audit and to be responsible for the coordination between internal and external audits and to ensure that the internal audit function has adequate resources to operate its duties and appropriate standing within the Company and to review and monitor its effectiveness; (3) to review the Company’s financial information and its disclosures: * to monitor the integrity of the Company’s financial statements and annual reports and accounts half-year reports and quarterly reports if prepared for publication and to review significant financial reporting judgements contained in them. In reviewing these reports before submission to the Board the Committee should focus particularly on: (i) any changes in accounting policies and practices; (ii) major judgmental areas; (iii) significant adjustments resulting from audit; (iv) the going concern assumptions and any qualifications; (v) compliance with accounting standards; and (vi) compliance with the Listing Rules and legal requirements in relation to financial reporting; * regarding the above matters the Audit Committee should liaise with the Board and the senior management and the Committee must meet at least twice a year with the external auditor to consider any significant or unusual items that are or may need to be reflected in the reports and accounts and it should give due consideration to any matters that have been raised by the Company’s staff responsible for the accounting and financial reporting function compliance officer or the external auditor; (4) to supervise and evaluate the Company’s financial reporting system risk management and internal control systems: * to review the Company’s financial control and review the Company’s risk management and internal control systems; * to discuss the risk management and internal control systems with the management to ensure that the management has performed its duty to have the effective systems. This discussion should include the adequacy of resources staff qualifications and experience training programmes and budget of the issuer’s accounting and financial reporting function; * to consider major investigation findings on risk management and internal control matters as delegated by the Board or on its own initiative and management’s response to these findings; * to review the Group’s financial and accounting policies and practices; * to review the external auditor’s management letter any material queries raised by the auditor to the management about accounting records financial accounts or systems of control and management’s response; * to ensure that the Board will provide a timely response to the issues raised in the external auditor’s management letter; * to report to the board on the matters in this article; and * to consider other topics as defined by the Board; (5) to review arrangements employees of the Company can use in confidence to raise concerns about possible improprieties in financial reporting internal control or other matters. The Audit Committee should ensure that proper arrangements are in place for fair and independent investigation of these matters and for appropriate follow-up action; (6) to act as the key representative body for overseeing the Company’s relations with the external auditor; and (7) to deal with other matters as authorized by the Board and other matters involved in the relevant laws and regulations as well as the regulations of the Hong Kong Stock Exchange and Shenzhen Stock Exchange. 2024 ANNUAL REPORT 93VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (ix) Audit Committee (Continued) The Audit Committee discussed with the management of the Company the accounting standards and practices adopted by the Group and discussed and reviewed this report including the review of the financial statements of the Group for the year ended 31 December 2024 prepared in accordance with China Accounting Standards for Business Enterprises.The Audit Committee has strictly reviewed the qualified audit report issued by the accounting firm as well as the management’s position on the qualified opinion and the corresponding measures taken by the Group to address the qualified opinion. For the reasons stated above the Audit Committee has concurred with the management’s position.In addition the Audit Committee has requested the management to take all necessary actions to eliminate the uncertainties about the qualified opinion related to going concern in order to address the going concern issue as soon as possible. The Audit Committee has also discussed the financial position of the Group and the measures taken and to be taken by the Group with Grant Thornton (Special General Partnership) and has taken into account Grant Thornton (Special General Partnership)’s rationale and understood their consideration in arriving at their opinion.Particulars of the meetings held by the Audit Committee during the reporting period are detailed in part VII of this section.Risk Management and Internal Control The Board is responsible for the risk management and internal control systems and reviewing their effectiveness.Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatement or loss.The Audit Committee (on behalf of the Board) oversees management in the design implementation and monitoring of the risk management and internal control systems and the Audit Committee reviews the adequacy and effectiveness of the risk management and internal control systems at least once a year. The management has provided confirmation to the Audit Committee (and the Board) on the adequacy and effectiveness of these systems for the year ended 31 December 2024. The Audit Committee (as well as the Board) was satisfied with the adequacy and effectiveness of the related systems.In respect of internal control system procedures have been designed for safeguarding assets against unauthorised use or disposition ensuring the maintenance of proper accounting records for the provision of reliable financial information for internal use or for publication and ensuring compliance of applicable laws rules and regulations.(x) Remuneration and Assessment Committee The Remuneration and Assessment Committee of the Company comprises three members including Yang Biao (as the chairman) Li Xingchun and Sun Jianfei. Two of them including the chairman are independent non-executive Directors which is in compliance with Code on Corporate Governance Practices. The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal of the Directors and managers and conducting the appraisal and studying and formulating the remuneration policy and package of the Directors and the Senior Management of the Company. The Remuneration and Assessment Committee is accountable to the Board. 94 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (x) Remuneration and Assessment Committee (Continued) The Remuneration and Assessment Committee of the Board of the Company is responsible for formulating standards for appraising Directors and senior management of the Company formulate and review the policies for and proposals on the remuneration of Directors and senior management and make recommendations to the Board for the following matters: (1) Remuneration of Directors and senior management including non-monetary income pension and compensation etc.; (2) Formulation or changes of incentive option schemes and employee option schemes grant of entitlements to scheme participants and fulfilment of exercise conditions; (3) Arrangement of option schemes at subsidiaries proposed to be spin-off for Directors and senior management; (4) To make recommendations to the Board on the policy and structure for all Directors’ and senior management’s remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy; (5) To review and approve the management’s remuneration proposals with reference to the Board’s corporate goals and objectives; (6) To make recommendations to the Board on the remuneration of non-executive Directors; (7) To consider salaries paid by comparable companies time commitment and responsibilities and employment conditions elsewhere in the Group; (8) To review compensation payable to executive Directors and senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive; (9) To review compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate; (10) To ensure that no Director or any of their associates is involved in deciding that Director’s own remuneration; (11) To review and/or approve matters relating to share schemes under Chapter 17 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange; and (12) Other matters required by the laws regulations CSRC the Articles of Association and the Listing Rules and authorized by the Board.Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period are detailed in part VII of this section.(xi) Nomination Committee Mr. Chen Hongguo resigned as a member of the Nomination Committee of the Company on 7 November 2024 due to personal reasons. The Company convened the nineteenth extraordinary meeting of the tenth session of the Board on 8 November 2024 to elect Mr. Hu Changqing as a member of the Nomination Committee of the tenth session of the Board of the Company. The Nomination Committee of the Company comprises three members including Li Zhihui (as the chairman) Hu Changqing and Yin Meiqun. Two of them including the chairman are independent non-executive Directors which is in compliance with the Corporate Governance Code. The Nomination Committee is primarily responsible for selecting candidates for directors and the management of the Company determining the selection criteria and procedure and making recommendations. 2024 ANNUAL REPORT 95VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xi) Nomination Committee (Continued) The primary duties of the Nomination Committee of the Company: (1) to submit proposals to the Board regarding its scale and constitution according to the Company’s business activities assets scale and shareholding structure; (2) to study the standards and procedures for selecting Directors and senior management and submit proposals to the Board; (3) to select qualified candidates for the Directors and senior management; (4) to examine and make recommendations on the candidates for the Directors and senior management; (5) to make recommendations on the nomination appointment and dismissal of Directors to the Board with regard to the skills knowledge experience background gender and other qualities required for the Directors to perform their duties under the Board as well as to strike a balance on the Board diversity in order to improve its efficiency and ensure the benefits to be derived from the Board diversity; (6) to make recommendations on the appointment and dismissal of the senior management to the Board; (7) to review and amend the Board diversity policy on a regular basis and make relevant disclosure in the corporate governance report in the annual report; (8) to review the structure size and composition (including the skills knowledge and experience) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company’s corporate strategy; (9) to identify individuals suitably qualified to become Board members and make recommendations to the Board; (10) to assess the independence of independent non-executive Directors; (11) to make recommendations to the Board on the appointment or reappointment of Directors and succession planning for Directors in particular the chairman and the chief executive; and (12) other matters required by the laws regulations the CSRC the Listing Rules and the Articles of Association and authorized by the Board.Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VII of this section.(xii) Strategy and Sustainable Development Committee Mr. Chen Hongguo resigned as a member of the Strategy and Sustainable Development Committee of the Company on 7 November 2024 due to personal reasons. The Company convened the nineteenth extraordinary meeting of the tenth session of the Board on 8 November 2024 to elect Mr. Li Weixian as a member and Mr. Hu Changqing as the chairman of the Strategy and Sustainable Development Committee of the tenth session of the Board of the Company.The Strategy and Sustainable Development Committee of the Company comprised three members including Hu Changqing (as the chairman) Li Weixian and Yang Biao. The Strategy and Sustainable Development Committee is primarily responsible for studying the long-term strategic development major investments sustainable development and ESG works of the Company and making recommendations. 96 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xii) Strategy and Sustainable Development Committee (Continued) The primary duties of the Strategy and Sustainable Development Committee are (1) conducting research and submitting proposals regarding the long term development strategic plan; (2) conducting research and submitting proposals regarding the financing plans for major investments which require approval from the Board as stipulated in the Articles of Association; (3) conducting research and submitting proposals regarding major capital operations and assets operation projects which require approval from the Board as stipulated in the Articles of Association; (4) supervising the Company and its subsidiaries to operate in compliance with the national and local directions policies laws and regulations in respect of sustainable development; (5) making recommendation to the Board in respect of material matters on sustainable development and ESG of the Company; (6) guiding sustainable development and ESG works studying ESG-related planning objectives systems and material matters of the Company reviewing ESG-related reports and providing consultation recommendations to the Board; (7) conducting supervision and inspection on the execution of ESG works and providing guidance and opinions in due course; (8) conducting research and submitting proposals regarding other material matters that may affect the development of the Company; (9) carrying out examination on the implementation of the above matters; (10) dealing with other matters as delegated by the Board.Particulars of the meetings held by the Strategy and Sustainable Development Committee during the reporting period are detailed in part VII of this section.(xiii) Auditor On 11 May 2022 the Company convened the 2021 annual general meeting and considered and approved the Resolution in relation to the Appointment of the Auditor for 2022 and continued to engage Grant Thornton (Special General Partnership) as the domestic auditor of the Company for 2022 and be responsible for domestic auditing of the Company for 2022.On 12 May 2023 the Company convened the 2022 annual general meeting and considered and approved the Resolution in relation to the Appointment of the Auditor for 2023 and continued to engage Grant Thornton (Special General Partnership) as the domestic auditor of the Company for 2023 and be responsible for domestic auditing of the Company for 2023.On 14 May 2024 the Company convened the 2023 annual general meeting and considered and approved the Resolution in relation to the Appointment of the Auditor for 2024 and continued to engage Grant Thornton (Special General Partnership) as the domestic auditor of the Company for 2024 and be responsible for domestic auditing of the Company for 2024.(xiv) Remuneration for the Auditor The financial statements for 2024 prepared in accordance with Accounting Standards for Business Enterprises by the Group were audited by Grant Thornton (Special General Partnership). In 2024 the Company paid the auditor a total of RMB2.8 million (tax inclusive; tax exclusive amount: RMB2.6415 million) in respect of financial statements audit for 2023 and a total of RMB1.1 million (tax inclusive; tax exclusive amount: RMB1.0377 million) in respect of audit services in relation to internal control for 2023.Grant Thornton (Special General Partnership) has stated their reporting responsibilities on the financial statements of the Group in XII. Financial Report of this annual report. 2024 ANNUAL REPORT 97VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xiv) Remuneration for the Auditor (Continued) In addition to the aforesaid annual financial report and internal control audit fees paid to Grant Thornton (Special General Partnership) totalling RMB3.6792 million (tax exclusive) other tax-exclusive audit expenses incurred due to the audit of R&D expenses and the audit of income tax settlement and payment totalled RMB1.8278 million.(xv) Supervisors and Supervisory Committee The Supervisory Committee comprises three shareholder representatives and two employee representatives. The shareholder representative Supervisors shall be elected and removed at a general meeting and the employee representative Supervisors shall be elected and removed democratically by the employees of the Company. During the reporting period the Supervisory Committee of the Company convened 5 meetings and all Supervisors attended Supervisory Committee meetings convened during the year and carefully reviewed the 2023 Annual Report 2024 First Quarterly Report 2024 Interim Report and 2024 Third Quarterly Report and issued special opinions. The Supervisory Committee is accountable to the shareholders. It monitors the financial position of the Company and the performance of the Directors managers and Senior Management of the Company as to whether they are in accordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company and the shareholders.(xvi) Company Secretary During the year the company secretary confirmed that he has received relevant professional training for not less than 15 hours in accordance with Rule 3.29 of the Listing Rules. (xvii) Communications with Shareholders The Company considers effective communication with Shareholders is essential to enable them to have a clear assessment of the Group’s performance as well as accountability of the Board. Principal means of communication with Shareholders of the Company are as follows: Information disclosure on the Company’s website The Company endeavours to disclose all material information about the Group to all interested parties as widely and timely as possible. The Company maintains its website at www.chenmingpaper.com where important information about the Group’s activities and corporate matters such as annual reports and interim reports to Shareholders announcements business development and operations corporate governance practices and other information are available for review by Shareholders and other stakeholders.When announcements are made through the Stock Exchange the same information will be made available on the Company’s website. 98 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xvii) Communications with Shareholders (Continued) General meetings The Company’s annual general meeting provides a useful platform for direct communication between the Board and Shareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Save for the annual general meeting held on 14 May 2024 by the Company three extraordinary general meeting were convened in 2024. The attendance record of Directors at each general meeting is set out below: Name Directors attending general meetings in person 2023 annual general meeting Hu Changqing Li Chuanxuan Li Weixian Li Feng Han Tingde Li Chuanxuan Li Zhihui Sun Jianfei Yin Meiqun Yang Biao 2024 first extraordinary general meeting Hu Changqing Li Chuanxuan Li Weixian Li Feng Han Tingde Li Chuanxuan Li Zhihui Sun Jianfei Yin Meiqun Yang Biao 2024 second extraordinary general meeting Hu Changqing Li Chuanxuan Li Weixian Li Feng Han Tingde Li Chuanxuan Li Zhihui Sun Jianfei Yin Meiqun Yang Biao 2024 third extraordinary general meeting Hu Changqing Li Chuanxuan Li Weixian Li Feng Han Tingde Li Chuanxuan Li Zhihui Sun Jianfei Yin Meiqun Yang Biao The Company’s external auditor also attended the Annual General Meeting and scrutinised voting.Code provision F.2.2 – This code provision requires the chairman to invite the chairmen of the audit remuneration and nomination committees to attend the annual general meeting.Mr. Chen Hongguo the then chairman of the Company and a then member of the Nomination Committee was absent from the annual general meeting due to business commitments.Code provision C.1.6 – This code provision requires independent non-executive directors and other non-executive directors as equal board members should give the board of the directors and any committees on which they serve the benefit of their skills expertise and varied backgrounds and qualifications through regular attendance and active participation. They should also attend general meetings and develop a balanced understanding of the views of shareholders.During the year all independent non-executive Directors and other non-executive Directors of the Company attended the general meetings without absence.Voting by poll Resolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conduct of the poll are explained to the shareholders at the commencement of each general meeting and questions from shareholders regarding the voting procedures are answered. The poll results are posted on the websites of the Stock Exchange and the Company respectively on the same day. 2024 ANNUAL REPORT 99VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xvii) Communications with Shareholders (Continued) Shareholders’ right 1. Procedures for convening an extraordinary general meeting by Shareholder Pursuant to Article 93 of the Articles of Association Shareholder(s) alone or in aggregate holding 10% or more of the Company’s voting shares shall be entitled to request the Board to convene extraordinary general meetings provided that such request shall be made in writing. The Board shall in accordance with provisions of the laws administrative regulations and the Articles of Association furnish a written reply stating its agreement or disagreement to the convening of an extraordinary general meeting within ten days after receiving such proposal of the same.In the event that the Board agrees to convene an extraordinary general meeting the notice of general meeting shall be issued within five days after the passing of the relevant resolution of the Board. Any changes in the original request made in the notice shall require prior approval of Shareholders concerned.In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish any reply within ten days after receiving such proposal Shareholder(s) alone or in aggregate holding 10% or more of the Company’s voting shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary general meeting provided that such proposal shall be made in writing.In the event that the Supervisory Committee agrees to convene an extraordinary general meeting the notice of general meeting shall be issued within five days after receiving such request. Any changes in the original request made in the notice shall require prior approval of Shareholders concerned.Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shall be deemed as failure of the Supervisory Committee to convene and preside over a general meeting and Shareholder(s) alone or in aggregate holding 10% or more of the Company’s voting shares for ninety consecutive days or more shall be entitled to convene and preside over the meeting on a unilateral basis.Pursuant to Article 94 of the Articles of Association if Shareholders determine to convene a general meeting on their own they shall give a written notice to the Board and file the same with the stock exchange for records. The shareholding percentage of shareholders who convened shall not be lower than 10% prior to the announcement of resolutions of the general meeting.Shareholders who convened shall submit relevant certifications to the stock exchange upon the issuance of the notice of general meeting and the announcement of resolutions of the general meeting.Pursuant to Article 95 of the Articles of Association the Board and its secretary shall cooperate with respect to matters relating to general meetings convened by Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholding register.Pursuant to Article 96 of the Articles of Association if a general meeting is convened by shareholders on their own all necessary expenses incurred shall be borne by the Company. 100 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xvii) Communications with Shareholders (Continued) Shareholders’ right (Continued) 2. Procedures for sending shareholders’ enquiries to the Board Shareholders may at any time send their enquiries and concerns to the Board of the Company in writing through the Company Secretary/Secretary to the Board whose contact details are as follows: Secretary to the Board Hong Kong Company Secretary Name Yuan Xikun Chu Hon Leung Address No. 2199 East Nongsheng Road 22/F Universal Building Central Shouguang City Shandong Province Hong Kong Telephone 0536-2158008 00852-21629600 Facsimile 0536-2158977 00852-25010028 Email chenmmingpaper@163.com liamchu@li-partners.com The Company Secretary and the secretary to the Board shall forward shareholders’ enquiries and concerns to the Board and/or relevant Board Committees of the Company where appropriate to answer shareholders’ questions. 3. Procedures for putting forward proposals of Shareholders at general meetings Pursuant to Article 101 of the Articles of Association shareholder(s) individually or jointly holding over 3% of the total shares of the Company shall have the right to propose motions to the Company.Shareholder(s) individually or jointly holding over 3% of the total shares of the Company shall have the right to propose new motions to the convener ten working days before the convening of the general meeting. The convener shall issue a supplementary notice with regard to motions that fall within the functions and powers of the general meetings within two (2) working days of receiving such proposals and announce the content of the extraordinary motions.Save for provided above the convener shall not amend proposals stated in the notice of general meeting or add new proposals therein following the notice of general meeting has been issued.No voting or resolution shall be effected or adopted at the general meeting for proposals that have not been stated in the notice of general meeting or that do not comply with provisions of the Articles of Association.Extraordinary general meeting shall not resolve issues that are not contained in the notice. 2024 ANNUAL REPORT 101VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xvii) Communications with Shareholders (Continued) Relationships with investors The Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond to their questions. Investors are received and visited at appropriate times to explain the Group’s business. In addition questions received from the general public and individual shareholders are answered promptly. In all cases great care is taken to ensure that no price-sensitive information is disclosed selectively.The Board has reviewed the interaction with Shareholders during the reporting period and is satisfied with the implementation of the shareholder communications policy of the Company and its effectiveness.(xviii) Internal Control For details of internal control of the Company please refer to XII. Internal control system development and implementation during the reporting period and XIV. Self-assessment report on internal control or auditor’s report on internal control of this section.(xix) Articles of Association On 14 May 2024 and 31 July 2024 the Company amended the new Articles of Association. Amendments were primarily made to among others the repealed provisions related to the Special Provisions of the State Council Concerning the Floatation and Listing Abroad of Stocks by Limited Stock Companies (State Council Order No. 160) the Mandatory Provisions for the Articles of Association of Companies Listed Overseas and the Circular RegardingComments on the Amendments to Articles of Association of Companies Listed in Hong Kong (“Zheng Jian Hai Han[1995] No. 1”) the qualifications and duties of independent directors in relation to the independent director reform and the share capital structure after the repurchase and cancellation of certain restricted shares and changes in the registered capital. The Memorandum of Association and the amended version of the new Articles of Association of the Company are available on websites of the Company and Stock Exchange.(xx) Board Diversity The Company has implemented a Board diversity policy. The implementation rules for the Nomination Committee was amended on 28 March 2024. The Nomination Committee shall regularly review the Board diversity policy to improve Board efficiency and ensure interest thereof.The Board diversity policy is summarised as follows: The Company recognises and embraces the benefits of having a diverse Board and sees diversity at Board level as an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use of differences in the talents skills regional and industry experience backgrounds genders and other qualities of the members of the Board. These differences will be considered in determining the optimum composition of the Board and when possible should be balanced appropriately. All appointments of the members of the Board are made on merit and in the context of the talents skills and experience of the Board as a whole. 102 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xx) Board Diversity (Continued) The Nomination Committee of the Company reviews and assesses the composition of the Board and makes recommendations to the Board on appointment of new directors of the Company. The Nomination Committee also oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing the composition of the Board the Nomination Committee will consider the benefits of all aspects of diversity including without limitation those described above in order to maintain an appropriate range and balance of talents skills experience and backgrounds on the Board. In recommending candidates for appointment to the Board the Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board. As at the date of the report the Board is composed of 9 male Directors and 1 female Director. The Nomination Committee and the Board will seize the opportunity to gradually increase the proportion of female Directors in the Board when they select and recommend a suitable Director candidate.The composition of the Board of the Company is basically diversified. For details please refer to (iii) Board of this section.(xxi) Employee diversity The Company always adheres to the principles of fairness and impartiality in recruitment resolutely eliminates any form of discrimination based on race gender religious belief etc. and is committed to building a diverse and inclusive talent team. The Company takes “cultivating talents retaining talents and making good use of talents” as its core concept and through the formulation and implementation of a series of policies such as the Measures for the Implementation of the Seniority Allowance and Title Allowance and the Regulations on the Management of Employees’ Early Retirement it effectively pays attention to the well-being of employees and continuously improves their sense of belonging and happiness; At the same time the Company has established a clear career development path for employees and provided abundant training resources and career development support to help them achieve personal growth and self-worth. We always adhere to the principle of gender equality in terms of salary system training opportunities and career prospects ensuring that all employees enjoy fair development opportunities and treatment promoting gender equality in the workplace through practical actions and creating a harmonious and inclusive working environment.As at 31 December 2024 the total number of employees in the Company was 9594 of which 2226 are female employees accounting for 23.20% of the total. Due to the fact that the Company operates in the paper and paper products industry in the manufacturing industry the production process requires high physical strength from frontline technical staff and the nature of the work involves a shift system. Therefore in the actual recruitment process male candidates are the main ones. This phenomenon is mainly due to industry characteristics and job demands rather than restricting women from applying for frontline technical positions. The Company always adheres to the principles of fairness and impartiality in recruitment and equal employment opportunities are offered regardless of gender. 2024 ANNUAL REPORT 103VI Corporate Governance XVI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of Hong Kong Limited (Continued) (xxii) Dividend policy In recent years the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Company’s major products continued to decline during the reporting period with a year-on-year decrease in gross profit. Some financial leasing customers experienced operational difficulties leading to unexpected situations such as litigations and seizures. The Company increased the provision ratio for bad debts related to these financial leasing customers out of prudence.Meanwhile the Company’s major production bases had successively been in shutdown and maintenance in the fourth quarter leading to unsatisfactory capacity utilisation and a year-on-year decline in production and sales volumes.The Company made impairment provisions for certain assets which resulted in a loss. The net profit attributable to shareholders of the Company for 2024 amounted to RMB-7411 million. Based on the operations in 2024 and taking into account the Company’s development plan for 2025 the Board proposed not to pay cash dividend issue bonus shares and increase share capital from reserves in 2025 to satisfy the capital needs for day-to-day production and operation and enhance the risk resistance of the Company thereby realising the sustainable steady and healthy development of the pulp production and paper making the principal activities of the Company and better safeguarding the interests of all shareholders in the long run. 104 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVII 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 bides 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 Measures for the Administration of Pollutant Discharge Permits 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) Emission Standard of Air Pollutants for Building Materials Industry (DB37/2373-2018) Emission standards of pollutants for inorganic chemical industry (GB31573-2015) and Standard for pollution control on hazardous waste incineration (GB18484-2020).Wastewater: Integrated Wastewater Discharge Standard (GB8978-1996) Wastewater Quality Standards for Discharge to Municipal Sewers (GB/T 31962-2015) 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 (GB12348-2008).Environmental protection administrative licensing The dates of issue and validity of pollutant discharge permits are as follows: 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.Shouguang Chenming Art Paper Co. Ltd.: Issued on 24 June 2021 and valid up to 23 June 2026.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 24 June 2024 and valid up to 23 June 2029.Huanggang Chenming Pulp & Paper Co. Ltd.: Issued on 12 June 2024 and valid up to 11 June 2029.Jilin Chenming Paper Co. Ltd.: Issued on 10 December 2021 and valid up to 9 December 2026. 2024 ANNUAL REPORT 105VII Environmental and Social Responsibility I. Major environmental protection matters (Continued) Industry emission standards and the status of pollutant emissions involved in production and operation activities Category of Name of major major pollutants pollutants Number of Approved Name of company and specific and specific Way of emission Distribution of emission Pollutant emission total Excessive or subsidiary pollutants pollutants SO2 emission outlets outlets Emission concentration standards implemented Total emissions emissions emissions Shandong Chenming Exhaust gas SO 3 32 Organised 2 Chenming Industrial Park Power plant no. 1: 11.7mg/m 35mg/m Power plant no. 1: 21.88t 160.32t/year No Paper Holdings emission Power plant no. 2: 11.8mg/m3 Power plant no. 2: 24.18t Limited NOx Organised 2 Chenming Industrial Park Power plant no. 1: 40.6mg/m 3 50mg/m3 Power plant no. 1: 75.32t 233.91t/year No emission Power plant no. 2: 38.0mg/m3 Power plant no. 2: 75.18t Particulates Organised 2 Chenming Industrial Park Power plant no. 1: 0.643mg/m3 5mg/m3 Power plant no. 1: 1.195t 23.39t/year No emission Power plant no. 2: 0.562mg/m3 Power plant no. 2: 1.198t Wastewater COD Indirect emission 2 Chenming Industrial Park Sewage outlet no. 1: 148mg/L 300mg/L Sewage outlet no. 1: 1297.4t 6510.74t/year No Sewage outlet no. 2: 203mg/L Sewage outlet no. 2: 2253.4t Ammonia Indirect emission 2 Chenming Industrial Park Sewage outlet no. 1: 3.69mg/L 30mg/L Sewage outlet no. 1: 33.765t 650.7t/year No nitrogen Sewage outlet no. 2: 0.967mg/L Sewage outlet no. 2: 10.453t Total nitrogen Indirect emission 2 Chenming Industrial Park Sewage outlet no. 1: 16.5 mg/L 70mg/L Sewage outlet no. 1: 147.56t 1519.1t/year No Sewage outlet no. 2: 17.1 mg/L Sewage outlet no. 2: 190.9t Shouguang Meilun Exhaust gas SO2 Organised 4 Chenming Industrial Park Power plant no. 1: 18.0mg/m 3 35mg/m3 Power plant no. 1: 16.29t 342.89t/year No Paper Co. Ltd. emission Power plant no. 2: 14.4mg/m3 (self-owned power plant) Power plant no. 2: 15.04t Alkali recovery: 8.23mg/m3 50mg/m3 Alkali recovery: 91.09t Lime kiln: 3.01mg/m3 (chemical pulp mill) Lime kiln: 3.09t NOx Organised 4 Chenming Industrial Park Power plant no. 1: 37.7mg/m 3 50mg/m3 Power plant no. 1: 32.99t 1202.75t/year No emission Power plant no. 2: 35.9mg/m3 (self-owned power plant) Power plant no. 2: 36.49t Alkali recovery: 81.0mg/m3 100mg/m3 Alkali recovery: 752.63t Lime kiln: 12.5mg/m3 (chemical pulp mill) Lime kiln: 14.8t Particulates Organised 4 Chenming Industrial Park Power plant no. 1: 0.336mg/m3 5mg/m3 Power plant no. 1: 0.292t 121.979t/year No emission Power plant no. 2: 0.484mg/m3 (self-owned power plant) Power plant no. 2: 0.543t Alkali recovery: 1.61mg/m3 10mg/m3 Alkali recovery: 16.415t Lime kiln: 1.15mg/m3 (chemical pulp mill) Lime kiln: 1.08t Jiangxi Chenming Exhaust gas SO2 Organised 1 Thermal power plant 240T/h furnace: 15.52mg/m 3 200mg/m3 29.098t 806t/year No Paper Co. Ltd. emission NOx Organised 1 Thermal power plant 240T/h furnace: 37.09mg/m 3 200mg/m3 69.525t 806t/year No emission Particulates Organised 1 Thermal power plant 240T/h furnace: 2.79mg/m3 30mg/m3 5.24t 135t/year No emission Wastewater COD Direct emission 1 Total wastewater discharge 36.26mg/L 90mg/L 212.3t 1260t/year No Ammonia Direct emission 1 Total wastewater discharge 1.36mg/L 8mg/L 7.96t 112t/year No nitrogen Total nitrogen Direct emission 1 Total wastewater discharge 2.543mg/L 12mg/L 13.4t / No Jilin Chenming Exhaust gas SO2 Organised 3 (2 in use 1 Within factory area 6.12mg/m 3 100mg/m3 4.32t 97t/year No Paper Co. Ltd. emission spare) NOx Organised 3 (2 in use 1 Within factory area 35.04mg/m 3 100mg/m3 19.24t 213t/year No emission spare) Particulates Organised 3 (2 in use 1 Within factory area 8.54mg/m3 30mg/m3 5.19t 51.66t/year No emission spare) Wastewater COD Indirect emission 1 Total wastewater discharge 124.84mg/L 120mg/L 525.43t 6000t/year No Ammonia Indirect emission 1 Total wastewater discharge 1.36mg/L 45mg/L 5.94t 500t/year No nitrogen Total nitrogen Indirect emission 1 Total wastewater discharge 10.97mg/L 50mg/L 27.48t / No 106 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVII Environmental and Social Responsibility I. Major environmental protection matters (Continued) Industry emission standards and the status of pollutant emissions involved in production and operation activities (Continued) Category of Name of major major pollutants pollutants Number of Approved Name of company and specific and specific Way of emission Distribution of emission Pollutant emission total Excessive or subsidiary pollutants pollutants SO2 emission outlets outlets Emission concentration standards implemented Total emissions emissions emissions Zhanjiang Chenming Exhaust gas SO2 Organised 6 Within factory area Power plant no. 1: 2.6mg/m 3 Power plant: 35mg/m3 111t 620t/year No Pulp & Paper emission Power plant no. 2: 2.4mg/m3 Lime kiln: 200mg/m3 Co. Ltd. Power plant no. 3: 2.2mg/m3 Alkali furnace: 200mg/m3 Power plant no. 4: 0.7mg/m3 Lime kiln: 21.0mg/m3 Alkali furnace: 16.9mg/m3 NOx Organised 6 Within factory area Power plant no. 1: 19.0mg/m 3 Power plant: 50mg/m3 361t 1800t/year No emission Power plant no. 2: 20.4mg/m3 Lime kiln: 200mg/m3 Power plant no. 3: 15.3mg/m3 Alkali furnace: 200mg/m3 Power plant no. 4: 7.8mg/m3 Lime kiln: 109.5mg/m3 Alkali furnace: 83.7mg/m3 Particulates Organised 6 Within factory area Power plant no. 1: 2.7mg/m3 Power plant: 10mg/m3 45t 195.06t/year No emission Power plant no. 2: 2.6mg/m3 Lime kiln: 30mg/m3 Power plant no. 3: 2.1mg/m3 Alkali furnace: 30mg/m3 Power plant no. 4: 0.6mg/m3 Lime kiln: 13.3mg/m3 Alkali furnace: 9.4mg/m3 Wastewater COD Direct emission 1 Wastewater discharge 33.41mg/L 90mg/L 919t 1943t/year No Ammonia Direct emission 1 Wastewater discharge 0.94mg/L 8mg/L 25t 43.9t/year No nitrogen Total nitrogen Direct emission 1 Wastewater discharge 2.32mg/L 12mg/L 59t 320.4t/year No Huanggang Exhaust gas SO2 Organised 1 Lime kiln chimney 39.9mg/m 3 80mg/m3 20.02t 142.872t/year No Chenming Pulp & emission Paper Co. Ltd. SO2 Organised 1 Alkali furnace chimney 27.3mg/m 3 200mg/m3 97.09t 328.417t/year No emission NOX Organised 1 Lime kiln chimney 84.78mg/m 3 180mg/m3 55.1t 181.887t/year No emission NOX Organised 1 Alkali furnace chimney 133.79 mg/m 3 200mg/m3 548.74t 950.829t/year No emission Particulates Organised 1 Lime kiln chimney 56.25 mg/m3 200mg/m3 16.5t 45.311t/year No emission Particulates Organised 1 Alkali furnace chimney 25.25mg/m3 30mg/m3 58.71t 83.759t/year No emission Wastewater COD Indirect emission 1 Total wastewater discharge 25.08 mg/L 150mg/L 233.24t 398.911t/year No Ammonia Indirect emission 1 Total wastewater discharge 0.79 mg/L 14mg/L 7.57t 39.891t/year No nitrogen Total nitrogen Indirect emission 1 Total wastewater discharge 3.75mg/L 29mg/L 34.68t / No 2024 ANNUAL REPORT 107VII Environmental and Social Responsibility I. Major environmental protection matters (Continued) Treatment of pollutants 1. Shandong Chenming Paper Holdings Limited Its own power plant uses the exhaust gas treatment process of limestone-gypsum desulfurization + SNCR selective non-catalytic reduction denitration + electric and bag composite dust removal + wet type electric dust removal.In 2024 the environmental protection exhaust gas treatment facilities operated well and were overhauled in time according to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard and the exhaust gas was discharged up to the standard after treatment.Its sewage treatment plant uses the traditional activated sludge wastewater treatment process + membrane treatment and recycle process and the wastewater which is treated up to the standard is partially discharged into the sewage treatment plants of Shouguang Zhongye Water Co. Ltd. and CCCC (Shouguang) Investment Co. Ltd. and partially reused in production lines. In 2024 the wastewater treatment facilities operated well and were overhauled in time according to the overhaul plan. The daily average wastewater indicator did not exceed the standard and the wastewater was discharged up to the standard after treatment. 2. Shouguang Meilun Paper Co. Ltd. Its own power plant uses the exhaust gas treatment process of limestone-gypsum desulfurization + SNCR selective non-catalytic reduction denitration + electric and bag composite dust removal + wet type electric dust removal. The chemical pulp alkali recovery furnace uses the exhaust gas treatment process of PSCR denitration + electrostatic dust removal + wet electrostatic dust removal and the chemical pulp lime kiln uses the exhaust gas treatment process of ozone denitration + electrostatic dust removal + wet type electric dust removal. In 2024 the environmental protection exhaust gas treatment facilities operated well and were overhauled in time according to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard and the exhaust gas was discharged up to the standard after treatment. 3. Jiangxi Chenming Paper Co. Ltd. Its own power plant uses the exhaust gas treatment process of ammonia desulfurization + SNCR catalytic reduction denitrification+ electric and bag composite dust removal + 90-metre desulfurization and denitrification tower. The aerobic section of the sewage treatment plant is equipped with a negative pressure exhaust device to recover and treat the exhaust gas from anaerobic and aerobic sections and uses the process of alkali spraying + biofiltration + water washing. In 2024 the environmental protection exhaust gas treatment facilities operated well and were overhauled in time according to the overhaul plan. The daily average exhaust gas indicator did not exceed the standard and the exhaust gas was discharged up to the standard after treatment.Industrial wastewater is collected by a catchment well with large particles removed by grids and fibres in the wastewater recovered by inclined mesh and then flow into the settling tank for preliminary settling and cooling in free-flowing. When the water temperature reaches 38°C the water is pumped into a high-concentration primary settling tank and a low-concentration primary settling tank. After the pre-acidification treatment organic matter which can be easily decomposed from the polymer decomposed through a hydrolysis acidification tank. In the biochemical process the biogas produced is recovered for power generation and the biochemical water enters into the anaerobic section and gets into aeration and other aerobic systems with cooled low-concentration water. A stable COD value is achieved through the aerobic system. In order to better treat the water the aerobic water enters into the in-depth treatment system and is treated up to the standard through the processes such as Fenton treatment settling tank treatment inclined plate settling and flocculation settling. In the process of wastewater treatment the suspended matter in the water body is removed from the sludge produced which is treated by the processes such as plate and frame filtering and belt machine desliming which meets the requirements of Table II of GB3544. A reclaimed water recycling device is in place to recycle some water which meets the requirements. 108 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVII Environmental and Social Responsibility I. Major environmental protection matters (Continued) Treatment of pollutants(Continued) 4. Jilin Chenming Paper Co. Ltd. Its own power plant uses low-temperature combustion staged combustion and SCR denitrification outside the furnace and uses bag filter for flue gas dust removal and uses wet desulfurization process of limestone inside the furnace + limestone-gypsum outside the furnace and the discharge is up to the standard.The sewage station uses the treatment process of anaerobic (IC reactor) + aerobic (jet aeration) + in-depth treatment (Fenton advanced oxidation) with wastewater being discharged to local wastewater treatment plant and the discharge is up to the standard. 5. Zhanjiang Chenming Pulp and Paper Co. Ltd. The thermal power plant of Zhanjiang Chenming Pulp and Paper Co. Ltd. has three circulating fluidised bed boilers of 280t/h and one circulating fluidised bed boiler of 400t/h. In particular the three boilers of 280t/h are equipped with SNGR denitrification and external wet (cement-plaster) desulphurisation system. The boiler of 400t/h is equipped with SNCR+SCR in combination denitrification external wet desulphurisation and wet electrostatic dust removal system.The company has constructed wastewater treatment station in two phases. Among which the capacity of phase Iwastewater treatment station is 86000 m3/d (applies “primary settling tower + conditioning tower + selective aerationtank + Fenton oxidation tank + clarifier” treatment) while that of phase II wastewater treatment station is 30000 m3/d (applies “first-class sedimentation pre-treatment + second-class biological treatment + third-class Fenton oxidationdeep treatment”). 6. Huanggang Chenming Pulp & Paper Co. Ltd. The alkali furnace uses polymer denitration outside the furnace + electrostatic dust removal and alkaline melt from the process able to absorb sulphur dioxide and the discharge is up to the standard. The lime kiln uses limestone to fix sulphur and five electrostatic precipitators to remove dust and the discharge is up to the standard.The sewage treatment uses physical settling + aerobic biochemical treatment + Fenton in-depth treatment process and the discharge is up to the standard.Environmental self-monitoring programme The Company has strictly complied with self-monitoring laws and regulations and conducted self-monitoring in accordance with the environmental protection requirements to establish and perfect the corporate environmental management ledgers and materials. At present self-monitoring is a combination of manual monitoring and automatic monitoring. At the same time qualified units are engaged to conduct regular monitoring. Automatically monitored items include: total wastewater discharge (COD ammonia nitrogen flow rate total phosphorus total nitrogen and pH); power plant alkali recovery boilers and lime kiln exhaust emissions (sulphur dioxide nitrogen oxide and particulates). Manually monitored items include: daily monitoring of COD ammonia nitrogen SS chroma pH total phosphorus and total nitrogen indicators. Sewage and other monitoring items unorganised exhaust emission solid waste and noise at the plant boundary are monitored on a monthly or quarterly basis by qualified units engaged in accordance with the local environmental protection requirements in relation to each subsidiary.The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries are published on the national key pollution source information disclosure website and the provincial key pollution source information disclosure websites. 2024 ANNUAL REPORT 109VII Environmental and Social Responsibility I. Major environmental protection matters (Continued) Emergency plan for emergency environmental incidents The Company has strictly implemented emergency regulations for emergency environmental incidents and formulatedvarious emergency plans for emergency environmental incidents according to the technical requirements in the “TechnicalGuidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the Environmental Protection Bureau and regular emergency training and emergency drills are conducted. Emergency measures in relation to dangerous chemicals are formulated in accordance with the environmental protection requirements. At the same time necessary emergency supplies are provided with regular inspections and updates.Investment in environmental governance and protection and payment of environmental protection tax The Company has always adhered to the concept of “green development ecological Chenming” and clung to the development model of “clean production” and resource recycling. A green ecology is incorporated in the whole process of production and operation. The Company has invested more than RMB8 billion in total to construct 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. During the reporting period the Company paid environmental protection tax according to law. The Company’s environmental protection tax mainly results from atmospheric pollutants. According to the Environmental Protection Tax Law of People’s Republic of China and its implementation rules the pollutants shall be calculated according to the automatic monitoring data of pollutants if automatic pollutant monitoring equipment which complies with national provisions and monitoring standards is installed and used. Taxable atmospheric pollutants are determined according to the pollution equivalent quantity converted from the amount of pollutant discharge. The taxable atmospheric pollutants discharged from each outlet or where there is no outlet are to be ranked in decreasing order of pollution equivalent quantity and environmental taxes are to be levied on the top three pollutants. In 2024 the Company paid environmental protection tax amounting to RMB13.2229 million.Measures taken to reduce its carbon emissions during the reporting period and their effectiveness √ Applicable □ Not applicable 1. The Group strengthened energy management and compared and analysed the consumption of coal and electricity etc. on a daily basis with strict control. 2. The Group implemented the conversion of old and new energy sources eliminated high energy-consuming equipment replaced high-efficiency inverter and energy-saving motors and reduced energy consumption. 3. According to the zero position of the air cover of the paper machine dryer the Group reduced the frequency of the fan appropriately to improve the drying efficiency by raising the zero position and save electricity consumption. 4. For moisture content of screening unit and squeezing unit of paper machine the Group reduced out of the press moisture and the amount of steam used of drying unit by adjusting the lip plate flow rate retention rate and line pressure and other measures. 5. The Group strengthened daily energy-saving management by developing a system for temperature of air conditioning and switching on and off of various power supplies with tracking and inspection. 6. The Group vigorously developed clean energy and energy recycling projects to reduce carbon emissions. 7. The Group carried out energy saving and emission reduction at different factories so that the amount of clean water was under strict control the amount of water produced by membrane treatment was increased and the amount of wastewater recycled was increased. 110 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVII Environmental and Social Responsibility I. Major environmental protection matters (Continued) Administrative penalties for environmental problems during the reporting period Impact on the production Name of company or and operation of the Corrective measures subsidiary Reasons for penalty Violations Penalty results listed company of the company Jiangxi Chenming Violation of the requirement of The general industrial solid waste and An administrative Jiangxi Chenming The general industrial paragraph 1 of Article 37 of sludge treating entity commissioned penalty of had completed the solid waste and the Law on the Prevention by Jiangxi Chenming did not RMB800000 rectification and paid sludge treating and Control of Environmental have the eligibility and technical was imposed on the penalty on time. entity was promptly Pollution by Solid Waste of capabilities for treatment. It was Jiangxi Chenming There was no material replaced. An entity the People’s Republic of alleged that Jiangxi Chenming failed by Nanchang adverse impact on the with qualificationsChina “Where an entity that to fulfil its verification obligation Ecological listed company. and technicalproduces industrial solid wastes in breach of the requirement to Environment strengths for treating commissions another person commission another person to Bureau. general industrial to transport utilise or treat the transport utilise or treat the solid waste and industrial solid wastes it shall industrial solid wastes. sludge was selected verify the eligibility and technical for cooperation.capabilities of the commissioned Specialised personnel party sign a written contract as were regularly legally required and stipulate assigned to verify the the requirements for pollution treatment on site.prevention and control in thecontract”.Other environmental information to be disclosed The relevant environmental protection information of the pollutant discharge permit information and the pollutant discharge permit requirements is announced on the national sewage discharge permit management information platform.Other environmental protection related information Other environmental protection related information is announced on the Company’s website.II. Social responsibility Adhering to the corporate mission of “creating values and contributing to the society” the Company stayed true to original aspiration and strived to its missions proactively assumed its social responsibilities and paid attention to the creation of social value while pursuing economic benefits. For details please refer to the 2024 Environmental Social and Governance Report of Shandong Chenming Paper Holdings Limited published by the Company on CNINFO on 1 April 2025.III. Consolidate and expand the achievements of poverty alleviation and rural revitalisation Not applicable 2024 ANNUAL REPORT 111VIII Material Matters I. Performance of undertakings 1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers shareholders related parties bidders and the Company during the reporting period or prior periods but subsisting to the end of the reporting period √ Applicable □ Not applicable Party involved in Type of Undertaking Particulars on Undertaking undertaking undertaking Details of undertaking date Term the performance Undertaking made Chenming Holdings Non-competitive (1) Chenming Holdings Co. Ltd. (“Chenming Holdings”) shall not engage 22 May 2008 During the period Implementing as on initial public Company Limited undertaking whether solely jointly or by representing itself or any other persons when Chenming normal offering or or companies and shall not procure its associates (as defined in The Holdings was the refinancing Listing Rules of Hong Kong Stock Exchange) to engage in any business major shareholder which competes with the business of the Company and its subsidiaries of the Company (“Chenming Group” or “we”) directly or indirectly in any country and region which our business exists (or any part of the world if in any form of electronics business) or in any business that directly or indirectly competes with Chenming Group’s business which we operate from time to time (including but not limited to any business in the form of sole proprietorship joint ventures or acquisitions or holding interests directly or indirectly in such enterprises or by any other means); (2) in the event that Chenming Holdings is required by its business to whether solely jointly or by representing itself or any other persons or companies engage in business which directly or indirectly competes against the business of Chenming Group or obtain any business opportunity which directly or indirectly competes against the business of Chenming Group it shall endeavour to procure that Chenming Group shall have priority to obtain the right to operate such business or to obtain such business opportunity; (3) if Chenming Holdings is in breach of the abovementioned undertakings it shall indemnify the Company for any loss caused by such breach and the Company shall have the right to acquire all businesses of Chenming Holdings which directly or indirectly compete with the businesses of our Group at market price or cost price (whichever price is lower); (4) Chenming Holdings shall not make use of its position as the controlling shareholder (as defined in The Listing Rules of Hong Kong Stock Exchange) of our Group to jeopardise the legal interests of Chenming Group and its shareholders with other persons or companies or on their behalf. 112 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters I. Performance of undertakings (Continued) 1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers shareholders related parties bidders and the Company during the reporting period or prior periods but subsisting to the end of the reporting period (Continued) Party involved in Type of Undertaking Particulars on Undertaking undertaking undertaking Details of undertaking date Term the performance Chenming Holdings Defective (1) According to the plan on defective properties of the Company 16 January During the period Implementing as Company Limited properties Chenming Holdings Co. Ltd. (“Chenming Holdings”) has guaranteed and 2008 when Chenming normal undertaken that: according to the application of the Company for defective Holdings was the property(ies) owned by the Company and its holding subsidiary company major shareholder which situated in the administrative area of Shouguang city Chenming of the Company Holdings will purchase it (them) and have it (them) being transferred to itself pursuant to the law in accordance with the result of the related asset valuation if the Company decides to transfer and dispose of it (them) and there is no other transferee; (2) before the Company transfers and disposes of the defective properties pursuant to the law if the Company suffers any economic losses due to the defects of the title (including but not limited to damages penalties and relocation costs) Chenming Holdings will bear such economic losses; (3) during the regulatory process taken to the defective properties of buildings and land of subsidiaries of the Company situated outside the local areas (outside the administrative area of Shouguang city) the economic losses such as penalties or relocation costs imposed by competent administrative authorities to be borne by the subsidiaries arising from defects of insufficient title documents shall be paid pursuant to the law by Chenming Holdings after verification.Whether undertakings performed on time Yes If the undertakings are not performed within specified period N/A details of the specific reasons for the incomplete performance and the next steps should be provided 2. Description on the Company’s assets and items in meeting original profit forecast and its explanation as there is profit forecast for assets and items of the Company and the reporting period is still within the profit forecast period □ Applicable √ Not applicable 2024 ANNUAL REPORT 113VIII Material Matters II. Appropriation of funds of the Company by the controlling shareholder and other related parties for non-operating purposes □ Applicable √ Not applicable There was no appropriation of funds of the Company by the controlling shareholder and other related parties for non-operating purposes during the reporting period.III. External guarantees against the rules and regulations □ Applicable √ Not applicable There was no external guarantee provided by the Company which was against the rules and regulations during the reporting period.IV. Opinions of the Board regarding the “modified auditor’s report” for the latest period □ Applicable √ Not applicable V. Opinions of the Board the Supervisory Committee and independent directors (if any) regarding the “modified auditor’s report” for the reporting period issued by the accountants □ Applicable □ Not applicable (I) Opinions of the Board regarding the “modified auditor’s report” for the reporting period issued by the accountants The Board of the Company is of the view that the auditor’s report with qualified opinion issued by the accountants has objectively and fairly reflected the financial position and operating results of the Company in 2024. The operating and financial difficulties faced by the Company are caused by the combined effects of various factors including changes in industry and market condition large preliminary debts tight liquidity and others. Attaching great importance to such matters the Board will urge the management to further arrange and optimise relevant responsive plans diligently facilitate specific measures in eliminating relevant matters and their impacts and timely perform its obligations on information disclosure based on the progress of relevant matters so as to actively protect the legitimate rights of the Company and all shareholders.The management of the Company has taken plans and measures to improve the Company’s ability to continue as a going concern and its operations. The relevant plans and measures are set out in IV. Basis of Preparation of the Financial Statements of section XII Financial Report.(II) Opinions of the Supervisory Committee regarding the “modified auditor’s report” for the reporting period issued by the accountants 1. Grant Thornton (Special General Partnership) has issued the auditor’s report with qualified opinion for the 2024 financial statements of the Company. We respect the professional judgments made by the auditor. The Supervisory Committee of the Company has no disagreement on auditor’s opinions. 2. The Supervisory Committee agrees with the Opinions of the Board regarding the “modified auditor’s report” for the reporting period issued by the accountants. It will continue to urge the Board and the management of the Company to implement effective measures in solving matters regarding the qualified opinion eliminate the negative impacts of such matters on the Company and timely perform its obligations on information disclosure so as to protect the legitimate rights of the Company and all shareholders. 114 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters VI. Changes in accounting policies accounting estimates or correction of major accounting errors as compared to the financial report for the prior year √ Applicable □ Not applicable (1) Changes in significant accounting policies * Interpretation No. 17 of Accounting Standards for Business Enterprises In November 2023 the Ministry of Finance issued the Interpretation No. 17 of Accounting Standards for Business Enterprises (Cai Kuai [2023] No. 21) (the “Interpretation No. 17”).Classification of current and non-current liabilities According to the Interpretation No. 17 for a liability arising from an entity’s loan arrangement an entity’s right to defer settlement of the liability to more than one year after the balance sheet date may be subject to the entity complying with conditions specified in that loan arrangement (hereinafter referred to as the “covenants”). If the entity is required to comply with a covenant on or before the balance sheet date even if compliance with the covenant is assessed only after the balance sheet date (for example a covenant based on the entity’s financial position on the balance sheet date but assessed for compliance only after the balance sheet date) such a covenant affects whether that right exists on the balance sheet date and in turn affects the classification of the liability as current or non-current on the balance sheet date. If an entity is required to comply with a covenant after the balance sheet date (for example a covenant based on the entity’s financial position six months after the balance sheet date) such a covenant does not affect whether that right exists on the balance sheet date and is not related to the classification of the liability as current or non-current on the balance sheet date.In circumstances where a term of a liability result in its settlement by the transfer of the entity’s own equity instruments at the option of the counterparty if the entity classifies the option as an equity instrument in accordance with the requirements under the standards recognising it separately as an equity component of a compound financial instrument such a term does not affect the classification of the liability as current or non-current.The Company has adopted the Interpretation No. 17 since 1 January 2024 and the adoption of which does not have significant impact on the financial position and operating results of the Company in a comparable period. (2) Changes in significant accounting estimates There was no changes in significant accounting estimates of the Company during the year.VII. 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 year 2 subsidiaries were newly established namely Shandong Chenming Industrial Trading Co. Ltd. and Hubei Chenming Technology Industrial Co. Ltd.; and 2 subsidiaries were deregistered namely Chenming International Co. Ltd.and Guangzhou Chenming Commercial Factoring Co. Ltd. 1 subsidiary was disposed of namely Kunshan Tuoan Plastic Products Co. Ltd. 2024 ANNUAL REPORT 115VIII Material Matters VIII. Engagement or dismissal of accounting firms Current accounting firm engaged Name of the domestic accounting firm Grant Thornton (Special General Partnership) Remuneration of the domestic accounting firm (RMB’0000) 390 Continued term of service of the domestic accounting firm 6 Name of certified public accountants of the domestic accounting firm Jiang Tao and Guo Dongmei Continued term of service of certified public accountants of the domestic accounting firm 2 Whether to appoint another accounting firm during the period □ Yes √ No Particulars on recruitment of accounting firms financial consultants or sponsors for internal control and auditing purposes √ Applicable □ Not applicable During the year the Company engaged Grant Thornton (Special General Partnership) as the auditor for internal control of the Company for 2024. The Company paid RMB1.10 million as internal control audit fees for prior year during the reporting period.IX. Prospects of withdrawal from listing subsequent to the publication of the annual report □ Applicable √ Not applicable X. Matters related to bankruptcy and reorganisation □ Applicable √ Not applicable There was no matter related to bankruptcy and reorganisation during the reporting period. 116 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XI. Material litigation and arbitration √ Applicable □ Not applicable General information Whether on the litigation provisions are Enforcement of Date of (arbitration) Amount involved made Progress Trial results and impact judgment disclosure Disclosure index Statutory demand and HK$389112432.44 No On 10 August 2023 the Hong Kong On 23 April 2024 the Company N/A 26 April 2024 http://www.cninfo.com.cn winding-up petition Court of First Instance handed down received the judgment made 25 April 2024 (Announcement no.its judgment on the application by the Hong Kong Court of 2024-031) made by the Company for the Appeal ruling to dismiss the http://www.hkex.com.hk dismissal or adjournment of the appeal made by HKK2.winding-up petition and ruled that the winding-up petition was stayed.On 31 October 2023 Arjowiggins HKK2 Limited (“HKK2”) appealed against the judgment of the Hong Kong Court of First Instance on staying the winding-up petition. On 21 March 2024 The Hong Kong Court of Appeal heard the appeal made by HKK2.Summary of matters not RMB566.8613 million No Judgment was made. For resolved litigations the court The amount N/A N/A subject to disclosure ordered relevant defendant involved in the as material litigation and guarantor to settle resolved and (arbitration) in which outstanding loans to the executed cases Chenming Leasing is Company in line with the was RMB87.66 the plaintiff request of the Company and million and would not have any significant other cases are impact on the operations in the progress and financial position of the of execution.Company.Summary of matters not RMB1.30 million No Judgment was made. The case was closed having Enforcement of N/A N/A subject to disclosure no significant impact on the judgment as material litigation the operations and financial was executed.(arbitration) in which position of the Company.Chenming Leasing is the defendant Summary of matters not RMB469.8267 million No The amount involved in ongoing cases The cases had no significant The amount N/A N/A subject to disclosure was RMB63.5872 million; the impact on the operations involved in as material litigation amount involved in resolved cases and financial position of the the resolved (arbitration) in which was RMB406.2395 million. Company. and executed the Company and cases was other subsidiaries of RMB6.4931 the Company are the million and plaintiff other cases are in the progress of execution. 2024 ANNUAL REPORT 117VIII Material Matters XI. Material litigation and arbitration (Continued) General information Whether on the litigation provisions are Enforcement of Date of (arbitration) Amount involved made Progress Trial results and impact judgment disclosure Disclosure index Summary of matters not RMB700.5489 million Provision of The amount involved in ongoing cases The cases had no significant All the resolved N/A N/A subject to disclosure RMB5.9350 was RMB667.8953 million; the impact on the operations cases were as material litigation million amount involved in resolved cases and financial position of the executed.(arbitration) in which was RMB32.6536 million. Company.the Company and other subsidiaries of the Company are the defendant XII. Punishment and rectification √ Applicable □ Not applicable Type of inspection Date of Name Type Reason and punishment Conclusion (if any) disclosure Disclosure index Zhanjiang Chenming Subsidiary On 29 June 2023 a mechanical injury accident occurred in General administrative On 19 August 2024 Emergency N/A N/A Papermaking Plant No. 1 of Zhanjiang Chenming causing punishment Management Bureau of Mazhang the death of an employee. On the ground that Zhanjiang District of Zhanjiang issued the Chenming’s failure in establishing and implementing the Decision for Administrative Penalty double prevention mechanism on safety risk classification (Zhan Ma Emergency Penalty management and potential hazard inspection and [2024] No. 16) and imposed penalty management supervising and inspecting safety production of RMB400000 on Zhanjiang works of unit eliminating potential hazard of safety Chenming. Zhanjiang Chenming production incident in a timely manner and arranging rectified its current safety production and initiating hazard source identification and evaluation; management and the identified Zhanjiang Chenming’s unreasonable labour allocation potential safety hazards and paid in production workshop; and Zhanjiang Chenming had the aforementioned penalty.insufficient safety investments and lack of maintenance and management of equipment safety facilities as well as in view of other failures Emergency Management Bureau of Mazhang District of Zhanjiang ruled out that Zhanjiang Chenming had violated relevant regulations under the Production Safety Law of the People’s Republic of China.Rectification √ Applicable □ Not applicable 118 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XII. Punishment and rectification (Continued) Focusing on the problems discovered in the incident and learning from the lesson of the incident Zhanjiang Chenming has strictly implemented safety production accountability measures in order to prevent the re-occurrence of similar incident in the future. Specific measures are as follow: 1. Comprehensively implement safety accountability system at different levels formulate detailed list of safety production responsibility expand the coverage of the list of safety production responsibility from major person-in-charge to employees at all levels enhance on-site safety production management diligently implement on-site production protection measures and position safety production management system and strengthen risk identification and control. 2. Further promote the concept of safety development implement in-person deployment and supervision by major person-in-charge deepen frontline supervision and inspection and duly focus on safety works in details. 3. Further enhance safety trainings conduct in-depth safety production training and programme strictly implement the 3-level programme for new employees prohibit employees from taking part in operations without passing safety trainings conduct trainings on rules and systems procedures for safety operation at different positions and other key aspects and continuously improve the safety awareness and safety operation level of employees. 4. Thoroughly inspect and rectify potential safety hazards focus on the inspection on the occurrence of the “threeviolations” in respect of command operation and labour discipline and seriously handle any violations regarding potential hazards identified during inspection in accordance with the systems.XIII. Credibility of the Company its controlling shareholders and beneficial controllers □ Applicable √ Not applicable XIV. Significant related party transactions 1. Related party transactions associated with day-to-day operation √ Applicable □ Not applicable Percentage Pricing basis of Related Amount of as the Amount of Whether Market price Relationship Types of the Subject matter of the related party related party amount of transactions exceeding Settlement of of available with the related party the related party party transaction transactions similar approved approved related party similar Disclosure Related party Company transactions transactions transaction price (RMB’0000) transactions (RMB’0000) cap transactions transaction date Disclosure index Weifang Port Wood Chip Joint venture Labour services Port miscellaneous Market price Market price 8620.39 11.52% 11000.00 No Bank acceptance N/A 29 March http://www.cninfo.com.cn Wharf Co. Ltd. fees and telegraphic 2024 transfer Total – – 8620.39 – 11000.00 – – – – – Particulars on refund of bulk sale Nil Estimated total amount for day-to-day related party transactions to be conducted during Nil the period (by types of transactions) and their actual implementing during the reporting period (if any) Reasons for large differences between transaction price and market reference price (if N/A applicable) 2024 ANNUAL REPORT 119VIII Material Matters XIV. Significant related party transactions (Continued) 2. Related party transaction in connection with purchase or sale of assets or equity interest □ Applicable √ Not applicable There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest during the reporting period. 3. Related party transaction connected to joint external investment □ Applicable √ Not applicable There was no related party transaction of the Company connected to joint external investment during the reporting period. 4. Related creditors’ rights and debts transactions √ Applicable □ Not applicable Was there any non-operating related creditors’ rights and debts transaction √ Yes □ No Creditor’s rights receivable from any related party Amount Amount Was there any increased recovered Interest for Relationship non-operating Opening during the during the the current Closing with the capital balance current period current period period balance Related party Company Reason occupation (RMB’0000) (RMB’0000) (RMB’0000) Interest rate (RMB’0000) (RMB’0000) Shouguang Meite Joint venture Financial support No 1042.72 6.00% 63.61 1106.33 Environmental Technology Co. Ltd.Weifang Port Wood Chip Joint venture Financial support No 7555.47 3500.00 3500.00 6.00% 384.3 7939.77 Wharf Co. Ltd.Wuhan Chenming Hanyang Associate Financial support No 22725.27 4.75% 1084.07 23809.34 Paper Holdings Co. Ltd.Effect of related creditors’ rights on the The above creditors’ rights did not affect the ordinary operation of the Company. Moreover they catered to the needs for development of existing operating results and financial position businesses of the above entities as well as lowered the finance costs.of the Company 120 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XIV. Significant related party transactions (Continued) 4. Related creditors’ rights and debts transactions (Continued) Debts payable to any related party Amount increased Amount repaid Interest for Opening during the during the the current Closing Relationship balance current period current period period balance Related party with the Company Reason (RMB’0000) (RMB’0000) (RMB’0000) Interest rate (RMB’0000) (RMB’0000) Chenming Holdings Controlling Financial support 13561.29 29251.00 39356.72 Market interest rate 394.43 3850.00 Company Limited shareholder Guangdong Nanyue Associate Borrowing 206906.00 85789.00 206906.00 Market interest rate 882.91 85789.00 Bank Co. Ltd.Effect of related debts on the operating results Financial support was provided by Chenming Holdings without requiring any pledge or guarantee which was a testament to its support and and financial position of the Company confidence in the future development of the Company and helped the Company promote project construction and satisfy its needs for working capital. 5. Deals with related financial companies □ Applicable √ Not applicable There were no deposits loans credits or other financial services between the Company its related financial companies and the related parties. 6. Deals between financial companies controlled by the company and related parties □ Applicable √ Not applicable There were no deposits loans credits or other financial services between the financial companies controlled by the Company and the related parties. 7. Other significant related party transactions □ Applicable √ Not applicable There was no other significant related party transaction of the Company during the reporting period.XIV. Significant related party transactions 1. Custody contracting and leasing (1) Custody □ Applicable √ Not applicable There was no custody of the Company during the reporting period. 2024 ANNUAL REPORT 121VIII Material Matters XIV. Significant related party transactions (Continued) 1. Custody contracting and leasing (Continued) (2) Contracting √ Applicable □ Not applicable Contracting description In April 2023 Jiangxi Chenming a subsidiary acquired equity interest in Jiangxi Port which was included in the scope of consolidation. The principal activities of Jiangxi Port is goods loading and transportation at wharf.In order to revitalise Jiangxi Port and enhance economic benefits to the Company Jiangxi Chenming has contracted the businesses of Jiangxi Port to Jiangxi Yirong Investment Co. Ltd. for 5 years and receives fixed contracting fees of RMB4.00 million per year on quarterly basis.A project which generates profit or loss for the Company representing more than 10% of the Company’s total profit during the reporting period □ Applicable √ Not applicable The Company did not have any contracting project that brought profit or loss to the Company amounting to more than 10% of the total profit of the Company during the reporting period. (3) Leasing √ Applicable □ Not applicable Leasing description: As a lessee The Company has simplified the treatment of short-term leases and leases of low-value assets by not recognising right-of-use assets and lease liabilities. The charges to expense for short-term leases low-value assets and variable lease payments not included in the measurement of lease liabilities during the current period are as follows: Unit: RMB Item 2024 Low-value leases 7529440.55 Total 7529440.55 122 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XIV. Significant related party transactions (Continued) 1. Custody contracting and leasing (Continued) (3) Leasing (Continued) Leasing description: (Continued) As a lessor Where an operating lease is formed: According to paragraph 58 of the new lease standard the lessor shall disclose in the notes the following information related to operating leases: * Lease income and make separate disclosure of income related to variable lease payments not included in lease receipts; Unit: RMB Item 2024 Lease income 173983222.36 * The amount of undiscounted lease receipts to be received in each of the five consecutive fiscal years after the balance sheet date and the total amount of undiscounted lease receipts to be received in the remaining years.Unit: RMB Year 2024.12.31 Within 1 year after the balance sheet date 152207821.18 1 to 2 years after the balance sheet date 159924290.10 2 to 3 years after the balance sheet date 157974084.34 3 to 4 years after the balance sheet date 160776701.99 4 to 5 years after the balance sheet date 158478080.32 More than 5 years after the balance sheet date 155500794.16 Total 944861772.09 Items that bring profit or loss of more than 10% of the total profit of the Company during the reporting period □ Applicable √ Not applicable The Company did not have any leasing project that brought profit or loss to the Company amounting to more than 10% of the total profit of the Company during the reporting period. 2024 ANNUAL REPORT 123VIII Material Matters XIV. Significant related party transactions (Continued) 2. Significant guarantees √ Applicable □ Not applicable (1) Guarantees During the reporting period the Company provided guarantee to subsidiaries and the guarantee amount incurred was RMB11890.382 million. As at 31 December 2024 the balance of the external guarantee provided by the Company (including the guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries) amounted to RMB19777.8493 million representing 216.01% of the equity attributable to shareholders of the Company in 2024.Unit: RMB’0000 External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries) Date of the related Guarantee announcement to related disclosing the Amount of Guarantee Counter-guarantee Fulfilled parties Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee Collateral (if any) (if any) Term or not or not Weifang Port Wood Chip 24 July 2017 17500.00 20 December 2017 7840.00 General guarantee Credit guarantee Nil 10 years No Yes Wharf Co. Ltd.Zhanjiang Runbao Trading 28 March 2024 16000.00 25 April 2024 16000.00 Pledge 34.64% equity Equity transfer payment 2 years No No Co. Ltd. interest in Wuhan of RMB160 million Chenming Zhanjiang Dingjin Trading 7 December 2022 13558.19 7 December 2022 13558.19 Mortgage Properties Remaining equity 3 years No No Co. Ltd. transfer payment of RMB136 million Shanghai Shuilan Trading 7 December 2022 45700.00 7 December 2022 45000.00 Pledge 100% equity 80% equity interest in 3 years No No Co. Ltd. interest in Taixing Port held by Shanghai Shanghai Huahao Chongmin Total external guarantees approved during the 16000.00 Total actual external guarantees during the reporting period (A2) 16000.00 reporting period (A1) Total external guarantees approved at the end 92758.19 Balance of total actual guarantees at the end of the reporting period (A4) 82398.19 of the reporting period (A3) 124 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XIV. Significant related party transactions (Continued) 2. Significant guarantees (Continued) (1) Guarantees (Continued) Guarantees between subsidiaries Date of the related Guarantee announcement to related disclosing the Amount of Guarantee Collateral Counter-guarantee Fulfilled parties Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee (if any) (if any) Term or not or not Zhanjiang Chenming Pulp & 30 March 2016 27500.00 14 March 2016 27500.00 Joint and several Nil Nil 12 years No No Paper Co. Ltd. liability guarantee Zhanjiang Chenming Pulp & 27 October 2017 94000.00 26 March 2018 94000.00 Joint and several Nil Nil 11 years No No Paper Co. Ltd. liability guarantee Zhanjiang Chenming Pulp & 30 March 2022 24154.03 17 June 2022 24154.03 Joint and several Nil Nil 3 years No No Paper Co. Ltd. liability guarantee Zhanjiang Chenming Pulp & 30 March 2023 111507.23 2 June 2023 111507.23 Joint and several Nil Nil 3 years No No Paper Co. Ltd. liability guarantee Zhanjiang Chenming Pulp & 28 March 2024 1070000.00 29 April 2024 327117.44 Joint and several Nil Nil 1 year No No Paper Co. Ltd. liability guarantee Shouguang Meilun Paper 28 March 2020 39942.33 9 September 2021 39942.33 Joint and several Nil Nil 5 years No No Co. Ltd. liability guarantee Shouguang Meilun Paper 30 March 2022 42223.86 24 May 2022 42223.86 Joint and several Nil Nil 3 years No No Co. Ltd. liability guarantee Shouguang Meilun Paper 30 March 2023 87817.12 9 June 2023 87817.12 Joint and several Nil Nil 1 year No No Co. Ltd. liability guarantee Shouguang Meilun Paper 28 March 2024 500000.00 27 May 2024 161782.35 Joint and several Nil Nil 1 year No No Co. Ltd. liability guarantee Jiangxi Chenming Paper 27 March 2018 10697.57 28 February 2022 10697.57 Joint and several Nil Nil 5 years No No Co. Ltd. liability guarantee Jiangxi Chenming Paper 30 March 2022 7441.67 1 April 2023 7441.67 Joint and several Nil Nil 3 years No No Co. Ltd. liability guarantee Jiangxi Chenming Paper 30 March 2023 15533.49 8 September 2023 15533.49 Joint and several Nil Nil 3 years No No Co. Ltd. liability guarantee Jiangxi Chenming Paper 28 March 2024 430000.00 31 May 2024 162459.97 Joint and several Nil Nil 1 year No No Co. Ltd. liability guarantee Huanggang Chenming Pulp 30 March 2016 76364.00 16 December 2019 76364.00 Joint and several Nil Nil 12 years No No & Paper Co. Ltd. liability guarantee Huanggang Chenming Pulp 30 March 2022 22274.86 20 May 2022 22274.86 Joint and several Nil Nil 3 years No No & Paper Co. Ltd. liability guarantee Huanggang Chenming Pulp 30 March 2023 35466.97 12 July 2023 35466.97 Joint and several Nil Nil 2 years No No & Paper Co. Ltd. liability guarantee Huanggang Chenming Pulp 28 March 2024 350000.00 20 May 2024 37499.50 Joint and several Nil Nil 1 year No No & Paper Co. Ltd. liability guarantee Huanggang Chenming 28 March 2024 470000.00 – Joint and several Nil Nil 1 year No No Paper Technology Co. liability guarantee Ltd.Huanggang Chenming 8 November 2024 -160000.00 – Joint and several Nil Nil 1 year No No Paper Technology Co. liability guarantee Ltd. 2024 ANNUAL REPORT 125VIII Material Matters XIV. Significant related party transactions (Continued) 2. Significant guarantees (Continued) (1) Guarantees (Continued) Guarantees between subsidiaries Date of the related Guarantee announcement to related disclosing the Amount of Guarantee Collateral Counter-guarantee Fulfilled parties Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee (if any) (if any) Term or not or not Chenming (HK) Limited 28 March 2024 200000.00 17 June 2024 25362.07 Joint and several Nil Nil 1 year No No liability guarantee Zhanjiang Chenming 28 March 2024 30000.00 29 March 2024 4416.00 Joint and several Nil Nil 1 year No No Arboriculture liability guarantee Development Co. Ltd.Jilin Chenming Paper Co. 30 March 2023 18422.60 15 December 2023 18422.60 Joint and several Nil Nil 2 years No No Ltd. liability guarantee Jilin Chenming Paper Co. 28 March 2024 130000.00 19 June 2024 37249.81 Joint and several Nil Nil 1 year No No Ltd. liability guarantee Shouguang Chenming Art 28 March 2024 20000.00 – Joint and several Nil Nil 1 year No No Paper Co. Ltd. liability guarantee Chenming (Singapore) Co. 28 March 2024 50000.00 – Joint and several Nil Nil 1 year No No Ltd. liability guarantee Shandong Chenming Paper 30 March 2023 19000.00 14 August 2023 19000.00 Joint and several Nil Nil 1 year No No Sales Co. Ltd. liability guarantee Shandong Chenming Paper 28 March 2024 350000.00 23 May 2024 154282.19 Joint and several Nil Nil 1 year No No Sales Co. Ltd. liability guarantee Shandong Chenming Paper 8 November 2024 160000.00 – Joint and several Nil Nil 1 year No No Sales Co. Ltd. liability guarantee Shanghai Hongtai Property 19 April 2023 250000.00 9 June 2023 200454.55 Joint and several Nil Nil 10 years No No Management Co. Ltd. liability guarantee Shanghai Chenming Pulp & 30 March 2022 925.00 13 February 2023 925.00 Joint and several Nil Nil 3 years No No Paper Sales Co. Ltd. liability guarantee Shanghai Chenming Pulp & 30 March 2023 441.19 21 November 2023 441.19 Joint and several Nil Nil 1 year No No Paper Sales Co. Ltd. liability guarantee Shanghai Chenming Pulp & 28 March 2024 100000.00 4 June 2024 60170.04 Joint and several Nil Nil 1 year No No Paper Sales Co. Ltd. liability guarantee Shanghai Chenming Pulp & 19 June 2024 -10000.00 – Joint and several Nil Nil 1 year No No Paper Sales Co. Ltd. liability guarantee Shanghai Heruiming 19 June 2024 10000.00 27 June 2024 7998.00 Joint and several Nil Nil 1 year No No Property Management liability guarantee Co. Ltd.Jilin Chenming Pulp & Fiber 30 March 2023 2000.00 13 November 2023 2000.00 Joint and several Nil Nil 1 year No No Trading Co. Ltd. liability guarantee Jilin Chenming Pulp & Fiber 28 March 2024 30000.00 24 September 2024 2000.00 Joint and several Nil Nil 1 year No No Trading Co. Ltd. liability guarantee Shouguang Chenming 28 March 2024 100000.00 25 August 2024 41999.30 Joint and several Nil Nil 1 year No No Import and Export Trade liability guarantee Co. Ltd. 126 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XIV. Significant related party transactions (Continued) 2. Significant guarantees (Continued) (1) Guarantees (Continued) Guarantees between subsidiaries Date of the related Guarantee announcement to related disclosing the Amount of Guarantee Collateral Counter-guarantee Fulfilled parties Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee (if any) (if any) Term or not or not Hainan Chenming 30 March 2023 5000.00 2 February 2024 5000.00 Joint and several No No 1 year No No Technology Co. Ltd. liability guarantee Hainan Chenming 28 March 2024 120000.00 10 April 2024 29400.00 Joint and several Nil Nil 1 year No No Technology Co. Ltd. liability guarantee Chenming (Overseas) Co. 28 March 2024 30000.00 Joint and several Nil Nil 1 year No No Ltd. liability guarantee Nanchang Chenming 28 March 2024 10000.00 Joint and several Nil Nil 1 year No No Arboriculture liability guarantee Development Co. Ltd.Shouguang Chenming 30 March 2023 5000.00 997.97 Joint and several Nil Nil 1 year No No Papermaking Machine liability guarantee Co. Ltd.Shouguang Chenming 28 March 2024 5000.00 Joint and several Nil Nil 1 year No No Papermaking Machine liability guarantee Co. Ltd.Shouguang Hongxiang 30 March 2023 5000.00 985.66 Joint and several Nil Nil 1 year No No Printing and Packaging liability guarantee Co. Ltd.Shouguang Hongxiang 28 March 2024 5000.00 Joint and several Nil Nil 1 year No No Printing and Packaging liability guarantee Co. Ltd.Shouguang Hongyi 28 March 2024 5000.00 Joint and several Nil Nil 1 year No No Decorative Packaging liability guarantee Co. Ltd.Shouguang Chenming 28 March 2024 5000.00 Joint and several Nil Nil 1 year No No Modern Logistic Co. liability guarantee Ltd.Foshan Chenming Import 28 March 2024 50000.00 29 September 2024 500.00 Joint and several Nil Nil 1 year No No and Export Trade Co. liability guarantee Ltd.Shanghai Hongtai Property 28 March 2024 10000.00 Joint and several Nil Nil Nil No No Management Co. Ltd. liability guarantee Total amount of guarantee provided for 4070000.00 Total amount of guarantee provided for subsidiaries during the reporting period (B2) 1189038.20 subsidiaries approved during the reporting period (B1) Total amount of guarantee provided for 4970711.90 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4) 1895386.74 subsidiaries approved as at the end of the reporting period (B3) 2024 ANNUAL REPORT 127VIII Material Matters XIV. Significant related party transactions (Continued) 2. Significant guarantees (Continued) (1) Guarantees (Continued) Guarantees between subsidiaries Date of the related Guarantee announcement to related disclosing the Amount of Guarantee Collateral Counter-guarantee Fulfilled parties Name of obligee guarantee amount guarantee Guarantee date provided Type of guarantee (if any) (if any) Term or not or not Shouguang Meilun Paper 28 March 2024 60000.00 Joint and several Nil Nil 1 year No No Co. Ltd. liability guarantee Huanggang Chenming Pulp 28 March 2024 20000.00 Joint and several Nil Nil 1 year No No & Paper Co. Ltd. liability guarantee Shouguang Meilun Paper 28 March 2024 20000.00 Joint and several Nil Nil 1 year No No Co. Ltd. liability guarantee Zhanjiang Chenming Pulp & 28 March 2024 30000.00 Joint and several Nil Nil 1 year No No Paper Co. Ltd. liability guarantee Shanghai Chenming Pulp & 30 September 2024 70000.00 Joint and several Nil Nil 5 years No No Paper Sales Co. Ltd. liability guarantee Total amount of guarantee provided for 200000.00 Total amount of guarantee provided for subsidiaries during the reporting period (C2) – subsidiaries approved during the reporting period (C1) Total amount of guarantee provided for 200000.00 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4) – subsidiaries approved as at the end of the reporting period (C3) Total amount of guarantee provided (i.e. sum of the above three guarantee amount) Total amount of guarantee approved during the 4286000.00 Total amount of guarantee during the reporting period (A2+B2+C2) 1205038.20 reporting period (A1+B1+C1) Total amount of guarantee approved as at the 5263470.09 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 1977784.93 end of the reporting period (A3+B3+C3) The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to the net assets 216.01% of the Company Of which: Balance of guarantee provided for shareholders beneficial controllers and its related parties (D) – Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 767286.58 Total amount of guarantee provided in excess of 50% of net assets (F) 1519979.71 Sum of the above three amount of guarantee (D+E+F) 2287266.29 For the unexpired guarantee contract the guarantee liability has occurred during the reporting period or there is evidence showing that it is possible to bear joint Nil liability for repayment (if any) Providing external guarantees in violation of prescribed procedures (if any) Nil 128 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XIV. Significant related party transactions (Continued) 3. Entrusted cash and asset management (1) Entrusted wealth management □ Applicable √ Not applicable The Company did not have any entrusted wealth management during the reporting period. (2) Entrusted loans □ Applicable √ Not applicable The Company did not have any entrusted loans during the reporting period. 4. Other material contracts □ Applicable √ Not applicable The Company did not have any other material contracts during the reporting period.XVI. Other matters of significance √ Applicable □ Not applicable 1. Overdue of some of the debts freezing of some of the bank accounts and shutdown of production bases In recent years the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Company’s major paper products in particular the price of white cardboard have declined significantly under the influence of the supply-demand contradiction. Subsequently the profit level of the Company has been continuously decreasing and has even turned from profits into losses; coupled with the situation where some financial institutions have downsized the loan scale the Company and some of its subsidiaries have during certain phases faced issues of failing to repay some debts as scheduled. In response some creditors have filed lawsuits against these debts in the court and simultaneously applied for property preservation and the court has made a ruling to freeze some of the bank accounts of the Company and its subsidiaries. Since November certain production lines in Shouguang base and Zhanjiang base Jiangxi base and Jilin bases were shut down for maintenance. As at the end of the reporting period the Company and its subsidiaries had a cumulative of 210 bank accounts frozen. The cumulative frozen amount of the frozen bank accounts amounted to RMB44.1583 million (excluding deposits).For details please refer to the relevant announcements disclosed by the Company on CNINFO on 20 November 2024 and 21 December 2024 (announcement number: 2024-073 and 2024-079) and the announcements disclosed by the Company on the website of Hong Kong Stock Exchange on 19 November 2024 and 20 December 2024. 2024 ANNUAL REPORT 129VIII Material Matters XVI. Other matters of significance (Continued) 2. Information disclosure index for 2024 Annual Report Announcement no. Subject matter Date of publication Publication website and index 2024-001 Announcement on Pledge and Continued Pledge of Shares of 19 January 2024 http://www.cninfo.com.cn Shareholder 2024-002 Announcement on Pledge of Shares of Shareholder 26 January 2024 http://www.cninfo.com.cn 2024-003 2023 Annual Results Forecast 31 January 2024 http://www.cninfo.com.cn 2024-004 Announcement on Pledge of Shares of Shareholder 8 February 2024 http://www.cninfo.com.cn 2024-005 Announcement on Adjustment to Amount of Guarantee Between 22 February 2024 http://www.cninfo.com.cn Subsidiaries 2024-006 Announcement on Release of Pledge of Shares of Shareholder 13 March 2024 http://www.cninfo.com.cn 2024-007 Announcement on Resolution of the Fourteenth Extraordinary 23 March 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Board of Directors 2024-008 Announcement on Equity Transfer of Subsidiary and Related 23 March 2024 http://www.cninfo.com.cn Party Transaction 2024-009 Announcement on Resolutions of the Eighth Meeting of the Ten 29 March 2024 http://www.cninfo.com.cn Session of the Board of Directors 2024-010 Announcement on Resolutions of the Eighth Meeting of the Ten 29 March 2024 http://www.cninfo.com.cn Session of the Supervisory Committee 2024-011 Notice of 2023 Annual General Meeting 29 March 2024 http://www.cninfo.com.cn 2024-012 Special Statement on Securities Investment in 2023 29 March 2024 http://www.cninfo.com.cn 2024-013 Announcement on Re-appointment of Auditor for 2024 29 March 2024 http://www.cninfo.com.cn 2024-014 Announcement on Development of Equipment Financing 29 March 2024 http://www.cninfo.com.cn Business 2024-015 Announcement on Carrying out Factoring Business of Accounts 29 March 2024 http://www.cninfo.com.cn Receivable 2024-016 Announcement on Expected Provision of Guarantees to 29 March 2024 http://www.cninfo.com.cn Subsidiaries for 2024 2024-017 Announcement on Proposed Non-distribution of Profit for 2023 29 March 2024 http://www.cninfo.com.cn 2024-018 Announcement on Amendment to Related Governance Systems 29 March 2024 http://www.cninfo.com.cn of the Company 2024-019 Announcement on Receipt of Financial Support and Related 29 March 2024 http://www.cninfo.com.cn Party Transaction 2024-020 Announcement on Estimated Day-to-day Related Party 29 March 2024 http://www.cninfo.com.cn Transactions for 2024 2024-021 Announcement on Appointment of Securities Affairs 29 March 2024 http://www.cninfo.com.cn Representatives 2024-022 Announcement on Provision of External Guarantee 29 March 2024 http://www.cninfo.com.cn 2024-023 Announcement on Proposed Issue of Corporate Bonds 29 March 2024 http://www.cninfo.com.cn Overseas and Provision of Guarantee 2024-024 2023 Annual Report Summary 29 March 2024 http://www.cninfo.com.cn 2024-025 Announcement on Reduction of Registered Capital of Wholly- 29 March 2024 http://www.cninfo.com.cn owned Subsidiary 2024-026 Announcement on the 2023 Annual Online Performance Briefing 29 March 2024 http://www.cninfo.com.cn 130 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XVI. Other matters of significance (Continued) 2. Information disclosure index for 2024 Annual Report (Continued) Announcement no. Subject matter Date of publication Publication website and index 2024-027 2024 First Quarterly Results Forecast 9 April 2024 http://www.cninfo.com.cn 2024-028 Announcement on Pledge of Shares of Shareholder 13 April 2024 http://www.cninfo.com.cn 2024-029 2024 First Quarterly Report 16 April 2024 http://www.cninfo.com.cn 2024-030 Announcement on Release of Pledge of Shares of Shareholder 20 April 2024 http://www.cninfo.com.cn 2024-031 Announcement on Progress of Litigation 26 April 2024 http://www.cninfo.com.cn 2024-032 Announcement on Pledge of Shares of Shareholder 15 May 2024 http://www.cninfo.com.cn 2024-033 Results of the 2023 Annual General Meeting 15 May 2024 http://www.cninfo.com.cn 2024-034 Announcement on Adjustment to Amount of Guarantee Between 20 June 2024 http://www.cninfo.com.cn Subsidiaries 2024-035 2024 Interim Results Forecast 13 July 2024 http://www.cninfo.com.cn 2024-036 Announcement on Pledge and Continued Pledge of Shares held 16 July 2024 http://www.cninfo.com.cn by Shareholders and Partial Release of Pledge of Shares 2024-037 Announcement on Pledge of Shares of Shareholder 24 July 2024 http://www.cninfo.com.cn 2024-038 Announcement on Partial Release of Pledge of Shares and 30 July 2024 http://www.cninfo.com.cn Continued Pledge of Shares held by Shareholders 2024-039 Announcement on Resolutions of the Fifteenth Extraordinary 1 August 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Board of Directors 2024-040 Announcement on Resolutions of the Sixth Extraordinary 1 August 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Supervisory Committee 2024-041 Announcement on Failing to Fulfil the Unlocking Conditions 1 August 2024 http://www.cninfo.com.cn for the Third Unlocking Period Under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Restricted Shares 2024-042 Review Opinions on the Unlocking Conditions for the Third 1 August 2024 http://www.cninfo.com.cn Unlocking Period Under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Restricted Shares of the Supervisory Committee 2024-043 Announcement on Repurchase and Cancellation of Restricted A 1 August 2024 http://www.cninfo.com.cn Shares and Notice to Creditors 2024-044 2024 Interim Report Summary 15 August 2024 http://www.cninfo.com.cn 2024-045 Announcement on Resolutions of the Tenth Meeting of the 15 August 2024 http://www.cninfo.com.cn Tenth Session of the Board of Directors 2024-046 Announcement on Resolutions of the Tenth Meeting of the 15 August 2024 http://www.cninfo.com.cn Tenth Session of the Supervisory Committee 2024-047 Announcement on Dissolution of Shandong Chenming Group 15 August 2024 http://www.cninfo.com.cn Finance Co. Ltd. 2024-048 Announcement on Pledge of Shares of Shareholder 21 August 2024 http://www.cninfo.com.cn 2024-049 Announcement on Continued Pledge of Shares of Shareholder 27 August 2024 http://www.cninfo.com.cn 2024-050 Announcement on Progress of Provision of Guarantee to a 31 August 2024 http://www.cninfo.com.cn Subsidiary 2024-051 Announcement on Pledge of Shares of Shareholder 5 September 2024 http://www.cninfo.com.cn 2024-052 Announcement on Resolutions of the Sixteenth Extraordinary 7 September 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Board of Directors 2024-053 Notice of the 2024 First Extraordinary General Meeting 7 September 2024 http://www.cninfo.com.cn 2024 ANNUAL REPORT 131VIII Material Matters XVI. Other matters of significance (Continued) 2. Information disclosure index for 2024 Annual Report (Continued) Announcement no. Subject matter Date of publication Publication website and index 2024-054 Announcement on Pledge of Shares held by Shareholders and 12 September 2024 http://www.cninfo.com.cn Partial Release of Pledge of Shares 2024-055 Announcement on Resolutions of the Seventeenth Extraordinary 20 September 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Board of Directors 2024-056 Announcement on External Investment 20 September 2024 http://www.cninfo.com.cn 2024-057 Announcement on Release of Pledge of Shares by Shareholders 20 September 2024 http://www.cninfo.com.cn 2024-058 Announcement on Resolution of the 2024 First Extraordinary 24 September 2024 http://www.cninfo.com.cn General Meeting 2024-059 Announcement on Resolutions of the Eighteenth Extraordinary 30 September 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Board of Directors 2024-060 Announcement on Provision of Guarantee in Favour of a 30 September 2024 http://www.cninfo.com.cn Subsidiary 2024-061 Notice of the 2024 Second Extraordinary General Meeting 30 September 2024 http://www.cninfo.com.cn 2024-062 Announcement on Resolution of the 2024 Second Extraordinary 17 October 2024 http://www.cninfo.com.cn General Meeting 2024-063 Announcement on Resolutions of the Eleventh Meeting of the 31 October 2024 http://www.cninfo.com.cn Ten Session of the Board of Directors 2024-064 Announcement on Resolutions of the Eleventh Meeting of the 31 October 2024 http://www.cninfo.com.cn Ten Session of the Supervisory Committee 2024-065 2024 Third Quarterly Report 31 October 2024 http://www.cninfo.com.cn 2024-066 Announcement on Provision of Financial Assistance to Investee 31 October 2024 http://www.cninfo.com.cn by a Subsidiary 2024-067 Announcement on Provision of Financial Assistance to an 31 October 2024 http://www.cninfo.com.cn Invested Company and a Related Party Transaction 2024-068 Notice of the 2024 Third Extraordinary General Meeting 31 October 2024 http://www.cninfo.com.cn 2024-069 Announcement on Adjustment to Amount of Guarantee Between 9 November 2024 http://www.cninfo.com.cn Subsidiaries 2024-070 Announcement on Resolutions of the Nineteenth Extraordinary 9 November 2024 http://www.cninfo.com.cn Meeting of the Tenth Session of the Board of Directors 2024-071 Announcement on Changes in Chairman and Composition of 9 November 2024 http://www.cninfo.com.cn Board Committees 2024-072 Announcement on Retirement of Deputy General Manager 9 November 2024 http://www.cninfo.com.cn 2024-073 Announcement on Overdue of Some of the Company’s Debts 20 November 2024 http://www.cninfo.com.cn and Freezing of Some of Its Bank Accounts 2024-074 Announcement on Unusual Price Movement of Shares of the 25 November 2024 http://www.cninfo.com.cn Company 2024-075 Announcement on Pledge of Shares of Shareholder 28 November 2024 http://www.cninfo.com.cn 2024-076 Announcement on Resolution of the 2024 Third Extraordinary 29 November 2024 http://www.cninfo.com.cn General Meeting 2024-077 Announcement on Partial Release of Pledge of Shares and Re- 3 December 2024 http://www.cninfo.com.cn Pledge of Shares of Shareholders 2024-078 Announcement on Completion of Repurchase and Cancellation 20 December 2024 http://www.cninfo.com.cn of Certain Restricted Shares 2024-079 Announcement on the Progress in Temporary Shutdown and 21 December 2024 http://www.cninfo.com.cn Maintenance of Certain Production Bases 132 SHANDONG CHENMING PAPER HOLDINGS LIMITEDVIII Material Matters XVII. Matters of significant of subsidiaries of the Company √ Applicable □ Not applicable 1. Business status of Chenming Leasing 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. Some financial leasing customers experienced operational difficulties leading to unexpected situations such as litigations and seizures. The Company increased the provision ratio for bad debts related to these financial leasing customers out of prudence. As at the end of the reporting period the balance of financial leases of Chenming Leasing decreased to RMB4.467 billion. Among which receivables of RMB1.432 billion (principals of RMB1.219 billion) were overdue for which provisions of RMB668 million were made with a provision coverage rate of 46.65%. Certain assets were subject to seizure through litigation. The Company has resorted to among other things control of the underlying assets litigation for seizure recovery for guarantors and debt reconstruction with the overall risks under control. 2. Dissolution of Chenming Finance On 14 August 2024 the Resolution on Dissolution of Shandong Chenming Group Finance Co. Ltd. was considered and approved at the tenth meeting of the tenth session of the Board convened by the Company pursuant to which the Board of the Company agreed to authorise the management of the Company to deal with the matters relating to the dissolution of Chenming Finance. The dissolution of Chenming Finance is subject to the approval of the National Financial Regulatory Administration.For details please refer to the relevant announcement disclosed by the Company published on CNINFO on 15 August 2024 (announcement no.: 2024-047) and the relevant announcement disclosed on the website of Hong Kong Stock Exchange on 14 August 2024. 2024 ANNUAL REPORT 133IX Changes in Share Capital and Shareholders I. Changes in shares 1. Changes in shares Unit: share Opening balance Change during the reporting period (+/-) Closing balance Shares converted Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage I. Restricted shares 36578587 1.24% -5637433 -5637433 30941154 1.05% 1. Shares held by other domestic investors 36578587 1.24% -5637433 -5637433 30941154 1.05% Including: Shares held by domestic natural persons 36578587 1.24% -5637433 -5637433 30941154 1.05% II. Non-restricted shares 2920234613 98.76% -9719567 -9719567 2910515046 98.95% 1. RMB ordinary shares 1685544097 57.00% -9719567 -9719567 1675824530 56.97% 2. Domestic listed foreign shares 706385266 23.89% 706385266 24.01% 3. Overseas listed foreign shares 528305250 17.87% 528305250 17.96% III. Total number of shares 2956813200 100.00% -15357000 -15357000 2941456200 100.00% The reasons for such changes √ Applicable □ Not applicable * The Shenzhen Branch of China Securities Depository and Clearing Corporation Limited recalculated the statutory quota of transferable shares for the Directors Supervisors and Senior Management of the Company this year at 25% on the first trading day of this year based on the shares of the Company registered under the names of its Directors Supervisors and Senior Management on the last trading day of the previous year. The resignation of Directors and Senior Management of the Company resulted in a reduction in the locked-up shares of Senior Management. Hence restricted shares increased by 9719567 RMB ordinary shares in aggregate while non-restricted shares decreased by 9719567 RMB ordinary shares in aggregate; * Pursuant to the 2020 Restricted A Share Incentive Scheme (Draft) 15357000 restricted A shares that had been granted to participants but not yet unlocked were repurchased and cancelled resulting in a reduction of 15357000 shares in both restricted shares and total number of shares. Approval of changes in shareholding √ Applicable □ Not applicable On 31 July 2024 the Company convened the first special meeting of independent Directors of the tenth session of the Board fifteenth extraordinary meeting of the tenth session of the Board and the sixth extraordinary meeting of the tenth session of the Supervisory Committee at which the Resolution on the Failure Fulfilment of the Unlocking Conditions for the Third Unlocking Period under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Restricted Shares was considered and approved. The results for 2023 of the Company failed to pass the performance appraisal targets at company level set for the third unlocking period. The Board of the Company repurchased and cancelled the 22257000 restricted A shares granted to 93 participants but not yet unlocked. 134 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIX Changes in Share Capital and Shareholders I. Changes in shares (Continued) 1. Changes in shares (Continued) Approval of changes in shareholding (Continued) On 15 November 2024 Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421) in which they verified the change in registered capital and paid-in capital (share capital) of the Company as of 6 November 2024. Verification result: As of 6 November 2024 the registered capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2934556200.00 and RMB2934556200.00 respectively.On 18 December 2024 the Company completed the procedures for the repurchase and cancellation of the 15357000 restricted A shares held by 91 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. As at the end of the reporting period the procedures for the share repurchase transfer and cancellation of the 6900000 restricted A shares held by the remaining 2 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze.Transfer of shares arising from changes in shareholding √ Applicable □ Not applicable Pursuant to the 2020 Restricted A Share Incentive Scheme (Draft) the Company shall repurchase and cancel 22257000 restricted A shares granted to 93 participants but not yet unlocked. The Company made the repurchase payments to 93 participants on 1 November 2024 and Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421) on 15 November 2024 in which they verified the change in the registered capital and paid-in capital (share capital) of the Company as of 6 November 2024. Verification result: As of 6 November 2024 the registered capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2934556200.00 and RMB2934556200.00 respectively.As at the end of the reporting period the Company completed the procedures for the repurchase and cancellation of the 15357000 restricted A shares held by 91 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. The procedures for the share repurchase transfer and cancellation of the 6900000 restricted A shares held by the remaining 2 participants with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze.The effects of changes in shareholding on financial indicators such as basic earnings per share diluted earnings per share and net assets per share attributable to ordinary shareholders of the Company for the latest year and the latest period □ Applicable √ Not applicable Other information considered necessary by the Company or required by the securities regulatory authorities to be disclosed □ Applicable √ Not applicable 2024 ANNUAL REPORT 135IX Changes in Share Capital and Shareholders I. Changes in shares (Continued) 2. Changes in restricted shares √ Applicable □ Not applicable Unit: share Restricted shares at the Restricted Restricted Restricted beginning of shares increased shares released shares at the Name of shareholder the period during the period during the period end of the period Reason for restriction Date of release from restriction Hu Changqing 1532143 187500 1500000 219643 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 1500000 restricted shares under the incentive scheme.Li Xingchun 2250000 375000 1500000 1125000 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 1500000 restricted shares under the incentive scheme.Li Weixian 603600 117975 600000 121575 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 600000 restricted shares under the incentive scheme.Li Feng 1579520 112500 900000 792020 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 900000 restricted shares under the incentive scheme.Li Kang 111975 0 0 111975 Locked-up shares of Directors In accordance with relevant Supervisors and Senior Management requirements for shares held by Directors Supervisors and Senior Management Li Zhenzhong 859800 150000 600000 409800 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 600000 restricted shares under the incentive scheme.Li Mingtang 300000 37500 300000 37500 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 300000 restricted shares under the incentive scheme.Dong Lianming 300000 37500 300000 37500 Locked-up shares of Directors On 18 December 2024 the Company Supervisors and Senior Management completed the repurchase and cancellation of 300000 restricted shares under the incentive scheme.Yuan Xikun 168525 0 123750 44775 Locked-up shares of Directors On 2 January 2024 33750 lock-up Supervisors and Senior Management shares held by Senior Management were released. On 18 December 2024 the Company completed the repurchase and cancellation of 90000 restricted shares under the incentive scheme. 136 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIX Changes in Share Capital and Shareholders I. Changes in shares (Continued) 2. Changes in restricted shares (Continued) Restricted shares at the Restricted Restricted Restricted beginning of shares increased shares released shares at the Name of shareholder the period during the period during the period end of the period Reason for restriction Date of release from restriction Chen Hongguo 11310033 7770011 0 19080044 Locked-up shares of Directors In accordance with relevant Supervisors and Senior Management requirements for shares held by Directors Supervisors and Senior Management 6000000 0 0 6000000 Restricted shares of the participants of The Company made payment for the the Share Incentive Scheme repurchase of 6000000 restricted shares under the Share Incentive Scheme on 1 November 2024. As at the end of the reporting period the share repurchase transfer and cancellation of such shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze.Li Xueqin 1095991 965331 0 2061322 Locked-up shares of Directors In accordance with relevant Supervisors and Senior Management requirements for shares held by Directors Supervisors and Senior Management 900000 0 0 900000 Restricted shares of the participants of The Company made payment for the the Share Incentive Scheme repurchase of 900000 restricted shares under the Share Incentive Scheme on 1 November 2024. As at the end of the reporting period the share repurchase transfer and cancellation of such shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze.Other 83 participants 9567000 0 9567000 0 Restricted shares of the participants of 18 December 2024 under the 2020 the Share Incentive Scheme Restricted A Share Incentive Scheme other than the aforementioned directors and senior management Total 36578587 9753317 15390750 30941154 – – Note: The “Restricted shares increased during the period” in the table refers to the lock-up shares of Directors Supervisors and Senior Management newly issued during the reporting period. 2024 ANNUAL REPORT 137IX Changes in Share Capital and Shareholders II. Issuance and listing of securities 1. Issuance of securities (excluding preference shares) during the reporting period □ Applicable √ Not applicable 2. Changes in the total number of shares and structure of shareholders and the structure of the assets and liabilities of the Company √ Applicable □ Not applicable Pursuant to the 2020 Restricted A Share Incentive Scheme (Draft) the Company shall repurchase and cancel the 22257000 restricted A shares granted to participants but not yet unlocked. The Company made payment to all participants for the repurchase on 1 November 2024 and Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421) on 15 November 2024 in which they verified the change in the registered capital and paid-in capital (share capital) of the Company as of 6 November 2024. Verification result: As of 6 November 2024 the registered capital and paid-in capital (share capital) of the Company upon the change amounted to RMB2934556200.00 and RMB2934556200.00 respectively.On 18 December 2024 the Company completed the procedures for the repurchase and cancellation of 15357000 restricted A shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. As at the end of the reporting period the procedures for the share repurchase transfer and cancellation of the remaining 6900000 restricted A shares with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited were not completed as they were subject to judicial freeze.As at the end of the reporting period the total number of shares of the Company changed to 2941456200 shares from 2956813200 shares and there was no change in controlling shareholder of the Company.Explanation on changes in asset and liability structure of the Company: As at the end of December 2024 the total assets of the Company amounted to RMB63.509 billion which decreased by 20.10% as compared to the beginning of the period and the total liabilities of the Company amounted to RMB50.674 billion which decreased by 13.21% as compared to the beginning of the period. 3. Existing staff shares □ Applicable √ Not applicable III. Shareholders and beneficial controllers 1. Total number of shareholders and shareholdings Unit: share Total number of 138685 of which Total number of 133575 of which Total number of 0 Total number of holders 0 ordinary 118804 were ordinary 114573 were holders of of preference shares shareholders as holders of A shares shareholders as at holders of A shares preference shares with restored voting at the end of the 19560 were holders the end of the 18684 were holders with restored voting right as at the end of reporting period of B shares and month prior to the of B shares and right as at the end the month prior to the 321 were holders publication date of 318 were holders of the reporting disclosure date of the of H shares this annual report of H shares period annual report 138 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIX Changes in Share Capital and Shareholders III. Shareholders and beneficial controllers (Continued) 1. Total number of shareholders and shareholdings (Continued) Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders (excluding the shares lent under refinancing business) Changes Number of (increase or shares held decrease) Percentage at the end of during the Number of Number of Nature of of the reporting reporting restricted non-restricted Share pledged marked Name of shareholder shareholder shareholding period period shares held shares held or locked-up Status of shares Number CHENMING HOLDINGS COMPANY LIMITED State-owned legal 15.50% 455781319 -1541600 0 455781319 Pledged and 326322919 person locked-up HKSCC NOMINEES LIMITED Overseas legal 12.69% 373366025 -95250 0 373366025 person CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal 12.38% 364131563 0 0 364131563 (Note 1) person CHINA MERCHANTS SECURITIES (HK) CO. LIMITED Overseas legal 0.65% 19157832 -1814426 0 19157832 person Chen Hongguo Domestic natural 0.65% 19080044 -6000000 19080044 0 Locked-up 19080044 person VANGUARD TOTAL INTERNATIONAL STOCK Overseas legal 0.50% 14771945 0 0 14771945 INDEX FUND person Jin Xing Domestic natural 0.48% 14037796 14037796 0 14037796 person HONG KONG SECURITIES CLEARING COMPANY Overseas legal 0.43% 12682163 1430383 0 12682163 LIMITED person China Merchants Bank Co. Ltd. - China Southern Other 0.39% 11337534 9684334 0 11337534 CSI 1000 ETF Fund VANGUARD EMERGING MARKETS STOCK Overseas legal 0.38% 11271946 -3580200 0 11271946 INDEX FUND person Strategic investors or general legal persons who Nil become the top ten shareholders due to the placement of new shares Related party relationship or acting in concert A shareholder Chenming Holdings (Hong Kong) Limited which is an overseas legal person is a wholly-owned subsidiary of a shareholder among the above shareholders Chenming Holdings Company Limited which is a state-owned legal person. Save for the above it is not aware that any other shareholders of tradable shares are persons acting in concert. It is also not aware that any other shareholders of tradable shares are related to each other.Explanation of the aforementioned shareholders’ Nil entrusted/entrusted voting rights and waiver of voting rights Special explanation for designated repurchase During the reporting period pursuant to the 2020 Restricted A Share Incentive Scheme (Draft) the Company made payments for the accounts among the top ten shareholders repurchase of restricted shares not yet unlocked for the third unlocking period under the 2020 Restricted A Share Incentive Scheme. In the process of completing the procedures for the share transfer and cancellation the 6000000 restricted shares held by Chen Hongguo were judicially frozen. Hence the procedures for the transfer and cancellation of such restricted shares were not yet completed with the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.The 19080044 shares held by Chen Hongguo being a domestic natural person excludes the 6000000 restricted shares under the share incentive scheme. 2024 ANNUAL REPORT 139IX Changes in Share Capital and Shareholders III. Shareholders and beneficial controllers (Continued) 1. Total number of shareholders and shareholdings (Continued) Shareholdings of the top ten non-restricted shareholders Number of non-restricted shares held as at the end Name of shareholder of the reporting period Class of shares Class of shares Number CHENMING HOLDINGS COMPANY LIMITED 455781319 RMB ordinary shares 455781319 HKSCC NOMINEES LIMITED 373366025 Overseas listed foreign shares 373366025 CHENMING HOLDINGS (HONG KONG) LIMITED (Note 1) 364131563 Domestic listed foreign shares 210717563 Overseas listed foreign shares 153414000 China Merchants Securities (HK) Co. Limited 19157832 Domestic listed foreign shares 19157832 VANGUARD TOTAL INTERNATIONAL STOCK INDEX 14771945 Domestic listed foreign shares 14771945 FUND Jin Xing 14037796 Domestic listed foreign shares 14037796 HONG KONG SECURITIES CLEARING COMPANY 12682163 RMB ordinary shares 12682163 LIMITED China Merchants Bank Co. Ltd. - China Southern CSI 11337534 RMB ordinary shares 11337534 1000 ETF Fund VANGUARD EMERGING MARKETS STOCK INDEX FUND 11271946 Domestic listed foreign shares 11271946 Xu Hekun 6789900 Domestic listed foreign shares 6789900 Related party relationship or acting in concert among the A shareholder Chenming Holdings (Hong Kong) Limited which is an overseas legal person is a wholly- top ten shareholders of non-restricted shares and owned subsidiary of a shareholder Chenming Holdings Company Limited which is a state-owned legal between the top ten shareholders of non-restricted person. Save for the above it is not aware that any other shareholders of tradable shares are persons acting shares and the top ten shareholders in concert. It is also not aware that any other shareholders of tradable shares are related to each other.Securities margin trading of top ten ordinary Chenming Holdings Company Limited held 455781319 RMB ordinary shares of which 326322919 shares Shareholders were held through ordinary account and 129458400 shares were held through credit guarantee security account Note 1: In order to meet its own capital needs Chenming Holdings (Hong Kong) Limited conducted share financing business with overseas institutions entrusting 210717563 B shares and 153414000 H shares of the Company held by it to the custody brokerage designated by overseas institutions. The aforesaid shares were subject to the risk of not to be recovered which may lead to a reduction in the Company’s shareholding but does not affect Chenming Holdings’ position as the largest shareholder and does not affect the Company’s control. For details please refer to the announcement disclosed by the Company on CNINFO on 18 July 2023 (announcement no.: 2023-058) and the insider information disclosed by the Company on the website of Hong Kong Stock Exchange on 18 July 2023. 140 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIX Changes in Share Capital and Shareholders III. Shareholders and beneficial controllers (Continued) 1. Total number of shareholders and shareholdings (Continued) Share lending by shareholders interested in more than 5% top 10 shareholders and top 10 shareholders of non- restricted shares under refinancing business √ Applicable □ Not applicable Unit: share Share lending by shareholders interested in more than 5% top 10 shareholders and top 10 shareholders of non-restricted shares under refinancing business Number of shares lent Number of shares lent Shareholding under out but not yet returned Shareholding under out but not yet returned ordinary account and under refinancing ordinary account and under refinancing credit account as at the arrangement as at the credit account as arrangement as at the beginning of the period beginning of the period at the end of the period end of the period Percentage Percentage Percentage Percentage to total share to total share to total share Total to total share Name of shareholder (full name) Total amount capital Total amount capital Total amount capital amount capital China Merchants Bank Co. Ltd. - China Southern CSI 1000 ETF Fund 1653200 0.06% 354300 0.01% 11337534 0.39% 0.00 0.00% Changes of top 10 shareholders and top 10 shareholders of non-restricted shares due to lending/returning of shares under refinancing business as compared to prior period □ Applicable √ Not applicable Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company □ Yes √ No The top 10 ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company did not enter into any agreed repurchase transaction during the reporting period. 2024 ANNUAL REPORT 141IX Changes in Share Capital and Shareholders III. Shareholders and beneficial controllers (Continued) 2. Controlling shareholders of the Company Nature of controlling shareholder: regional state-owned enterprise Type of controlling shareholder: legal person Legal representative/ Name of controlling Person in charge shareholders of the unit Date of establishment Enterprise code Principal business CHENMING HOLDINGS Wang Dongxing 30 December 2005 91370783783485189Q Investment in paper COMPANY LIMITED making electricity heat and arboriculture by its own capital.Shareholdings of controlling shareholders who have Save for the Company Chenming Holdings Company Limited is indirectly control or hold shares in other domestic or interested in 10.16% equity interest in Zhejiang Kingland Pipeline and overseas listed companies during the reporting Technologies Co. Ltd.period Note: The legal representative of Chenming Holdings Company Limited has been changed to Wang Dongxing. The registration procedures have not yet been completed.Change of controlling shareholders during the reporting period □ Applicable √ Not applicable There was no change in the controlling shareholders of the Company during the reporting period. 3. Beneficial controller of the Company and persons acting in concert Nature of the beneficial controller: regional state-owned assets administration authority Type of the beneficial controller: legal person Legal representative/ Person in charge Date of Name of beneficial controller of the unit establishment Enterprise code Principal business State-owned Assets Supervision and N/A 1 August 1991 N/A Responsible for the management Administration Bureau of Shouguang and capital operation of the state- City owned assets of enterprises and business units in Shouguang city.Shareholdings of beneficial controller Save for the Company State-owned Assets Supervision and Administration Office of Shouguang City is who has control or holds shares in also the beneficial controller of Shandong Molong Petroleum Machinery Co. Ltd. and Zhejiang Kingland other domestic or overseas listed Pipeline and Technologies Co. Ltd.companies during the reporting period 142 SHANDONG CHENMING PAPER HOLDINGS LIMITEDIX Changes in Share Capital and Shareholders III. Shareholders and beneficial controllers (Continued) 3. Beneficial controller of the Company and persons acting in concert (Continued) Change of beneficial controller during the reporting period □ Applicable √ Not applicable There was no change in the beneficial owner of the Company during the reporting period.Chart illustrating the relationship between the Company and the beneficial controller State-owned Assets Supervision and Administration Commission of Shouguang City 100% Shouguang Jinxu Industry Development Group Co. Ltd. 100% Shandong Shouguang Jinxin Investment Development Holdings Group Co. Ltd. 45.21% Chenming Holdings Company Limited 100% Chenming Holdings 15.50% (Hong Kong) Limited 12.38% Shandong Chenming Paper Holdings Limited Beneficial controller controlling the Company through trust or other asset management method □ Applicable √ Not applicable 2024 ANNUAL REPORT 143IX Changes in Share Capital and Shareholders III. Shareholders and beneficial controllers (Continued) 4. The number of shares pledged by the controlling shareholder or the largest shareholder of the Company and persons acting in concert with it reaches 80% of the number of shares held by them in aggregate □ Applicable √ Not applicable 5. Other legal person shareholders interested in over 10% of the shares of the Company □ Applicable √ Not applicable 6. Restrictions on decrease in shareholding by controlling shareholders beneficial controller reorganising party and other undertaking parties □ Applicable √ Not applicable IV. The implementation of share repurchase during the reporting period Progress of share repurchase □ Applicable √ Not applicable Progress of decrease in the holding of repurchased shares by way of bidding □ Applicable √ Not applicable 144 SHANDONG CHENMING PAPER HOLDINGS LIMITEDX Preference Shares □ Applicable √ Not applicable The Company had no preference shares during the reporting period. 2024 ANNUAL REPORT 145XI Bonds □ Applicable √ Not applicable 146 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report I. Auditors’ Report Type of auditor’s opinion Qualified opinion The date of the audit report signed 31 March 2025 Name of the auditor Grant Thornton (Special General Partnership) Reference number of the auditor’s report Zhi Tong Shen Zi (2025) No. 371A006392 Name of certified public accountants Jiang Tao and Guo Dongmei Text of the auditor’s report To all shareholders of Shandong Chenming Paper Holdings Limited: I. Qualified opinion We have audited the financial statements of Shandong Chenming Paper Holdings Limited (“Chenming Paper”) which comprise the consolidated and the Company’s balance sheets as at 31 December 2024 the consolidated and the Company’s profit and loss statements the consolidated and the Company’s cash flow statements and the consolidated and the Company’s statements of changes in shareholders’ equity for 2024 and notes to the relevant financial statements.In our opinion except for the effects of the matters as described in “Basis for qualified opinion” the accompanying financial statements are prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects and give a true and fair view of the consolidated and the Company’s financial position of Chenming Paper as at 31 December 2024 and of its consolidated and the Company’s operating results and cash flows for 2024.II. Basis for qualified opinion Ability to continue as a going concern As described in note II to the financial statements Chenming Paper continuously recorded losses. Chenming Paper’s net loss after extraordinary gains or losses attributable to shareholders of the Company for 2024 amounted to RMB- 7202 million and its gearing ratio increased to 79.79% and current ratio was 0.36 as of 31 December 2024. During the reporting period Chenming Paper had liquidity difficulties which resulted in overdue payments for borrowings from financial institutions and payments to suppliers the freezing of multiple bank accounts some of its assets subject to seizure and multiple litigations and arbitration cases due to debt defaults. Besides some production lines suspended operation and production exposing it to significant operational and financial risks.The above matters or circumstances indicate that there may be material uncertainties about Chenming Paper’s going concern basis. The notes to the financial statements of Chenming Paper have disclosed that the major matters that may cast significant doubt on the ability to continue as a going concern and some countermeasures.However there are material uncertainties in the progress of debt mitigation and resumption of work and production and the management of Chenming Paper (the “management”) has failed to adequately disclose effective measures to eliminate the above material uncertainties about the ability to continue as a going concern. In connection to the accumulated balance of deferred income tax asset of RMB1790.6390 million as at the end of 2024 as recognised by the management on the basis of normal operation to be maintained in the future we cannot obtain sufficient audit evidence to determine whether such recognition fulfilled the recognition conditions as stipulated under the Accounting Standards for Business Enterprises or not.We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute of Certified Public Accountants. Our responsibilities under those standards are further described in the responsibilities of certified public accountants for the audit of the financial statements section of the auditor’s report. We are independent of Chenming Paper in accordance with the ethical codes of Chinese certified public accountants and we have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 2024 ANNUAL REPORT 147XII Financial Report III. Key audit matters Key audit matters are those matters that in our professional judgment were of most significance in our audit of the financial statements for the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon we do not provide a separate opinion on these matters.Except for the matters as described in “Basis for qualified opinion” we determine that the following matters are key audit matters that need to be communicated in the audit report.(i) Impairment testing of financial lease receivables factoring receivables and debt transfer receivables For detailed disclosures of relevant information please see note III. 11 and note V. 47910 and 11.As at 31 December 2024 the carrying amount of the financial lease receivables factoring receivables and debt transfer receivables amounted to RMB8898.5057 million in aggregate and impairment provision of RMB4600.6797 million was made with carrying amount of RMB4297.8260 million.We have identified the impairment testing of financial lease receivables factoring receivables and debt transfer receivables due to the significance of the financial lease receivables factoring receivables and debt transfer receivables and fact that the impairment testing involves significant accounting estimates and judgments made by the management of Chenming Paper. 2. Application for auditing (1) we have identified the accounting policies of Chenming Paper for financial lease receivables factoring receivables and debt transfer receivables and evaluated their rationality; (2) we have acquired the impairment testing list of Chenming Paper to determine whether the generated cash flows estimated by the Company are reasonable or not; (3) we have reviewed the pledge and guarantee for receivables to determine whether impairment provision is sufficient or not; (4) we have sought external confirmations for the customers of financial lease receivables factoring receivables and debt transfer receivables; and (5) we have selected certain major clients to conduct interview or visit to understand and determine the repayment capability of the client.(ii) Impairment testing of machinery and equipment For detailed disclosures of relevant information please see note III. 16 and 23 and note V. 15 and 58 of the financial statements. 148 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report 1. Details As at 31 December 2024 the original carrying amount of the machinery and equipment of Chenming Paper amounted to RMB43724.3252 million and impairment provision of fixed assets of RMB192.6910 million was made. In 2024 some production lines of Chenming Paper suspended operation and production due to liquidity difficulties and impairment losses may be incurred on machinery and equipment related to machine-made paper due to prolonged inactivity.We have identified the impairment testing of machinery and equipment as a key audit matter due to the significance of the carrying amount of the machinery and equipment and the fact that the impairment testing involves significant accounting estimates and judgments made by the management of Chenming Paper (the “management”). 2. Application for auditing (1) we have identified evaluated and tested the effectiveness of the design and operation of internal controls related to impairment of fixed assets of Chenming Paper; (2) we have evaluated whether the accounting policies and accounting estimates of Chenming Paper for impairment of fixed assets comply with the Accounting Standards for Business Enterprises and industry practices;(3) we have supervised the fixed assets and monitored the status of the machinery and equipment; and (4) we have identified Chenming Paper’s plans of resumption of work and production and obtained a copy of the calculation table of impairment of machinery and equipment so as to assess the reasonableness of the significant estimates made by the management in determining the net realisable value while taking into account the reasonable useful life and capacity of the equipment estimated selling prices gross profit margins of the products and performed recalculations.(iii) Recognition of revenue from machine-made paper For detailed disclosures of relevant information please see note III. 27 and note V. 48 of the financial statements. 2024 ANNUAL REPORT 149XII Financial Report 1. Details For the year 2024 Chenming Paper achieved operating revenue of RMB22729474900 of which RMB21699110600 was from machine-made paper and pulp accounting for 95.47% of the operating revenue. For domestic machine-made paper sales business Chenming Paper recognised the revenue after the goods were delivered and signed by the customer for confirmation; for foreign machine-made paper sales business Chenming Paper recognised the revenue after the goods were loaded on board and declared.As revenue is one of the key performance indicators of Chenming Paper and the revenue from the sales of machine-made paper accounts for a relatively huge proportion of the total revenue due to its enormous sales volume there may be potential misstatement in relation to whether revenue recognition is accounted for in the appropriate period of the financial statements which has a significant impact on the financial statements. Therefore we have identified recognition of revenue from sales of machine-made paper as a key audit matter. 2. Application for auditing (1) We have identified evaluated and tested the effectiveness of the design and operation of key internal controls related to machine-made paper sales business of Chenming Paper; (2) we have conducted sampling inspections on sales contracts identified contract terms and conditions related to the transfer of control of the goods assessed whether the timing of recognition of sales revenue from Chenming Paper meets the requirements of the Accounting Standards for Business Enterprises; (3) we have analysed revenue and gross profit by taking into account product types and identified whether the abnormal fluctuations in the amount of revenue are reasonable in the current period; (4) we have inspected the occurrence of on-the-spot recognition of sales at the end of the inspection period and inspected goods returns after the inspection period to determine the accuracy of revenue recognition during the period; (5) we have collected samples from sales revenue recorded around the balance sheet date for cut-off tests; verified delivery orders and other supporting documents to assess whether sales revenue is recorded in the appropriate accounting period; and (6) we have sought external confirmations for clients with larger sales during the period. IV. Other information The management of Chenming Paper is responsible for other information. Other information includes the information covered in the 2024 annual report of Chenming Paper but does not include the financial statements and our audit report.Our audit opinions published in the financial statements do not cover other information and we do not publish any form of assurance conclusion on other information. 150 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report In conjunction with our audit of the financial statements our responsibility is to read other information during which we consider whether there is significant inconsistency or other material misstatement of other information with the financial statements or what we have learned during the audit.Based on the work we have performed if we determine that there is a material misstatement of other information we should report that fact. As described in the “Basis for qualified opinion” paragraph above we are unable to obtain sufficient appropriate audit evidence regarding the feasibility of the improvement measures to eliminate the material uncertainty of the going concern of Chenming Paper. Accordingly we are unable to determine whether other information relating to these matters is materially misstated.V. Responsibilities of the management and those charged with governance for the financial statements The management of Chenming Paper is responsible for the preparation of financial statements in accordance with the requirements of the Accounting Standards for Business Enterprises to enable them to achieve fair reflection and to achieve the design implementation and maintenance of necessary internal controls so that the financial statements are free of material misstatements due to fraud or errors.In the preparation of the financial statements the management is responsible for assessing the continuing operations capabilities of Chenming Paper disclosing issues related to going concern (if applicable) and applying the going concern assumption unless the management plans to liquidate Chenming Paper terminate operations or have no other realistic options.The management is responsible for supervising the financial reporting process of Chenming Paper.VI. Auditor’s responsibilities for the audit of the financial statements Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from material misstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance is a high level of assurance but it does not guarantee that an audit performed in accordance with auditing standards can always discover a major misstatement when it exists. Misstatements may be caused by fraud or errors and are generally considered to be material if it is reasonably expected that misstatements individually or in aggregate may affect the economic decision made by users of financial statements based on the financial statements.In the process of conducting audit work in accordance with auditing standards we use professional judgment and maintain professional suspicion. At the same time we also perform the following tasks: (1) To identify and assess risks of material misstatement of financial statements due to fraud or errors design and implement audit procedures to address these risks and obtain adequate and appropriate audit evidence together perform as a basis for issuing audit opinions. Since fraud may involve collusion falsification intentional omission misrepresentation or override of internal controls the risk of failing to detect a material misstatement due to fraud is higher than the risk of failing to detect a material misstatement due to an error. (2) To understand audit-related internal controls to design appropriate audit procedures. (3) To evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of accounting estimates and related disclosures. 2024 ANNUAL REPORT 151XII Financial Report (4) To conclude on the appropriateness of management’s use of the continuing operation assumption. At the same time according to the audit evidence obtained it may lead to conclusions as to whether there are significant uncertainties in matters or circumstances that have significant doubts about the ability of Chenming Paper to continue its operations. If we conclude that there are significant uncertainties the auditing standards require us to request the users of the report to pay attention to the relevant disclosures in the financial statements in the audit report; if the disclosure is not sufficient we should publish modified audit report. Our conclusions are based on the information available as of the date of the audit report. However future events or conditions may cause Chenming Paper to cease to continue as a going concern. (5) Evaluate the overall presentation structure and content of the financial statements and evaluate whether the financial statements fairly reflect the relevant transactions and matters. (6) To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities in Chenming Paper to express opinions on the financial statements. We are responsible for guiding supervising and executing group audits and take full responsibility for the audit opinion.We communicate with the management on planned audit scope time arrangements and major audit findings including communication of the internal control deficiencies that we identified during the audit.We also provide statements to the management on compliance with ethical requirements related to independence and communicate with the management on all relationships and other matters that may reasonably be considered to affect our independence as well as related preventive measures (if applicable).From the matters we communicated with the management we determine which matters are most important for the audit of the financial statements for the current period and thus constitute the key audit matters. We describe these matters in our audit report unless laws and regulations prohibit the public disclosure of these matters or in rare cases if it is reasonably expected that the negative consequences of disclosing something in the audit report will outweigh the benefits to the public interest we determine that the matter should not be reported in the audit report.Grant Thornton Chinese Certified Public Accountant (Special General Partnership) Jiang Tao (Project Partner) Chinese Certified Public Accountant Guo Dongmei Beijing China 31 March 2025 152 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report II. Financial Statements The unit in the notes to the financial statements is: RMB 1. Consolidated Balance Sheet Prepared by: Shandong Chenming Paper Holdings Limited 31 December 2024 Unit: RMB Item Closing balance Opening balance CURRENT ASSETS: Monetary funds 5909879812.18 12124832831.30 Financial assets held for trading 37259325.70 46294291.71 Bills receivable 506605701.74 411600000.00 Accounts receivable 1384290313.70 2528507059.83 Accounts receivable financing 100730797.32 215884249.97 Prepayments 631893495.14 825135156.21 Other receivables 1084651870.94 2224904557.88 Including: Interest receivable – Dividend receivable 22659149.81 – Inventories 2835388802.15 4958178000.36 Including: Data resources – – Non-current assets due within one year 2840365519.48 4161725935.75 Other current assets 559911202.83 1068826944.78 Total current assets 15890976841.18 28565889027.79 2024 ANNUAL REPORT 153XII Financial Report Item Closing balance Opening balance NON-CURRENT ASSETS: Long-term receivables 280291802.55 339293533.35 Long-term equity investments 3971035411.54 4685199385.73 Other non-current financial assets 751030454.68 781561040.57 Investment property 5743235268.46 6049242696.36 Fixed assets 31855069324.04 33186248169.56 Construction in progress 593838603.87 859617965.16 Bearer biological assets 9352071.80 17684687.36 Right-of-use assets 266024312.87 167815311.50 Intangible assets 1652267783.57 2002360891.85 Including: Data resources – – Goodwill – 35220543.80 Long-term prepaid expenses 289677546.87 39979161.49 Deferred income tax assets 1790639019.23 1689857881.49 Other non-current assets 415856701.42 1067082657.57 Total non-current assets 47618318300.90 50921163925.79 Total assets 63509295142.08 79487052953.58 154 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report Item Closing balance Opening balance CURRENT LIABILITIES: Short-term borrowings 26780358809.11 33475479021.62 Bills payable 1423918112.99 4618986463.95 Accounts payable 7708967406.47 3902620870.20 Receipts in advance 54538940.24 16242921.65 Contract liabilities 274829824.35 1443680155.62 Employee benefits payable 251387660.00 74337158.44 Taxes payable 193424339.67 99709707.56 Other payables 2896409953.94 2414752127.19 Including: Interest payable 63042283.31 – Dividend payable 123000000.00 – Non-current liabilities due within one year 1577936964.14 3631937677.82 Other current liabilities 2680562600.58 100000000.00 Total current liabilities 43842334611.49 49777746104.05 2024 ANNUAL REPORT 155XII Financial Report Item Closing balance Opening balance NON-CURRENT LIABILITIES: Long-term borrowings 4763662194.24 4681014489.64 Lease liabilities 37092473.06 41987022.85 Long-term payables 774965008.29 2541095217.66 Provisions 5935000.00 – Deferred income 1240939485.52 1337864114.70 Deferred income tax liabilities 8595744.33 9490159.05 Total non-current liabilities 6831189905.44 8611451003.90 Total liabilities 50673524516.93 58389197107.95 156 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report Item Closing balance Opening balance OWNERS’ EQUITY: Share capital 2934556200.00 2956813200.00 Capital reserves 5207678622.75 5328790899.61 Less: Treasury shares – 63432450.00 Other comprehensive income -913708670.15 -864881489.08 Special reserves 26800491.53 23322829.57 Surplus reserves 1212009109.97 1212009109.97 General risk provisions 80950584.11 79370294.91 Retained profit 607818020.70 8020182801.55 Total equity attributable to owners of the Company 9156104358.91 16692175196.53 Minority interest 3679666266.24 4405680649.10 Total owners’ equity 12835770625.15 21097855845.63 Total liabilities and owners’ equity 63509295142.08 79487052953.58 Legal Representative: Financial controller: Head of the financial department: Hu Changqing Dong Lianming Zhang Bo 2. Balance sheet of the Company Unit: RMB Item Closing balance Opening balance CURRENT ASSETS: Monetary funds 1599326584.12 4421608897.40 Bills receivable 275500130.56 3024868267.23 Accounts receivable 240787940.24 28216771.01 Prepayments 1221574612.38 476746114.74 Other receivables 8459731199.92 9237241240.86 Including: Interest receivable – – Dividend receivable – – Inventories 279754637.58 554028121.69 Including: Data resources – – Non-current assets due within one year – 3428684.19 Other current assets 38776511.95 62834527.02 Total current assets 12115451616.75 17808972624.14 2024 ANNUAL REPORT 157XII Financial Report Item Closing balance Opening balance NON-CURRENT ASSETS: Long-term receivables – 12485720.05 Long-term equity investments 18587172933.97 18298999830.51 Other non-current financial assets 101028728.82 122462024.19 Fixed assets 3286823373.00 3415454701.17 Construction in progress 6526025.52 38707761.30 Right-of-use assets 103125000.00 Intangible assets 462060836.20 476297197.96 Including: Data resources – – Deferred income tax assets 587532690.79 571194789.79 Other non-current assets 12030680.01 12692260.70 Total non-current assets 23146300268.31 22948294285.67 Total assets 35261751885.06 40757266909.81 158 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report Item Closing balance Opening balance CURRENT LIABILITIES: Short-term borrowings 8760304513.03 13172491176.11 Bills payable 4776895581.73 6699118643.16 Accounts payable 1494669551.89 1817323321.03 Contract liabilities 1795549425.10 1454807158.83 Employee benefits payable 83931485.87 38778024.93 Taxes payable 40921701.99 9022105.28 Other payables 3679222270.99 1412965873.90 Including: Interest payable 22581097.56 – Dividend payable – – Non-current liabilities due within one year 1329838949.85 734311029.42 Other current liabilities 59111611.53 – Total current liabilities 22020445091.98 25338817332.66 2024 ANNUAL REPORT 159XII Financial Report Item Closing balance Opening balance NON-CURRENT LIABILITIES: Long-term borrowings 1548277044.45 1795000000.00 Long-term payables 8106807.57 1281983636.99 Provisions 5935000.00 – Deferred income 34010344.36 31530836.20 Total non-current liabilities 1596329196.38 3108514473.19 Total liabilities 23616774288.36 28447331805.85 160 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report Item Closing balance Opening balance OWNERS’ EQUITY: Share capital 2934556200.00 2956813200.00 Capital reserves 5032163419.19 5073338869.19 Less: Treasury shares – 63432450.00 Special reserves 7405266.87 4612641.99 Surplus reserves 1199819528.06 1199819528.06 Retained profit 2471033182.58 3138783314.72 Total owners’ equity 11644977596.70 12309935103.96 Total liabilities and owners’ equity 35261751885.06 40757266909.81 2024 ANNUAL REPORT 161XII Financial Report 3. Consolidated Income Statement Unit: RMB Item 2024 2023 I. Total revenue 22729474852.76 26608570228.20 Including: Revenue 22729474852.76 26608570228.20 II. Total operating costs 26411444253.77 28768694490.76 Including: Revenue 22144828668.43 24445486299.93 Taxes and surcharges 225961280.46 227802365.12 Sales and distribution expenses 241171109.12 230999637.43 General and administrative expenses 751168974.00 690319782.01 Research and development expense 1080331754.42 1164419698.13 Finance expenses 1967982467.34 2009666708.14 Including: Interest expenses 1869661335.22 1908394881.89 Interest income 182479117.53 201101017.34 Add: Other income 295803414.30 337324331.43 Investment income (“-” denotes loss) -766913269.23 505067035.78 Including: Investment income from associates and joint ventures -689387136.28 128934922.00 Gains on derecognition of financial assets measured at amortised cost -101812317.04 -99744741.95 Gain on change in fair value (“-” denotes loss) -192216967.50 -25555304.50 Credit impairment loss (“-” denotes loss) -3198089208.46 -319956249.39 Loss on impairment of assets (“-” denotes loss) -332755406.25 -45007299.22 Gain on disposal of assets (“-” denotes loss) 55406263.64 14607428.91 III. Operating profit (“-” denotes loss) -7820734574.51 -1693644319.55 Add: Non-operating income 5147637.71 2998769.41 Less: Non-operating expenses 37604177.94 19058851.67 IV. Total profit (“-” denotes total loss) -7853191114.74 -1709704401.81 Less: Income tax expenses -60171697.45 -383061983.95 162 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report Item 2024 2023 V. Net profit (“-” denotes net loss) -7793019417.29 -1326642417.86 (i) Classification according to the continuity of operation 1. Net profit from continuing operations (“-” denotes net loss) -7793019417.29 -1326642417.86 2. Net profit from discontinued operations (“-” denotes net loss) – – (ii) Classification according to ownership 1. Net profit attributable to shareholders of the Company -7410784491.65 -1281289649.82 2. Profit or loss of minority interest -382234925.64 -45352768.04 VI. Net other comprehensive income after tax -48827181.07 -42940794.51 Net other comprehensive income after tax attributable to owners of the Company -48827181.07 -42940794.51 (i) Other comprehensive income that cannot be reclassified to profit and loss – – (ii) Other comprehensive income that will be reclassified to profit and loss -48827181.07 -42940794.51 1. Other comprehensive income that may be reclassified to profit and loss under the equity method 6370472.83 -1224007.02 2. Exchange differences arising from translation of financial statements denominated in foreign currencies -55197653.90 -41716787.49 Other comprehensive income net of tax attributable to minority interest – – VII. Total comprehensive income -7841846598.36 -1369583212.37 Total comprehensive income attributable to shareholders of the Company -7459611672.72 -1324230444.33 Total comprehensive income attributable to minority interest -382234925.64 -45352768.04 VIII. Earnings per share (i) Basic earnings per share -2.53 -0.45 (ii) Diluted earnings per share -2.53 -0.45 Legal Representative: Financial controller: Head of the financial department: Hu Changqing Dong Lianming Zhang Bo 2024 ANNUAL REPORT 163XII Financial Report 4. Income statement of the Company Unit: RMB Item 2024 2023 I. Revenue 7475506782.76 7579414619.45 Less: Operating costs 7120576791.83 7176479930.73 Taxes and surcharges 47521328.42 37636362.13 Sales and distribution expenses 7981255.43 8462782.60 General and administrative expenses 231719632.20 140689667.12 Research and development expense 225257814.55 252057763.89 Finance expenses 444721496.25 274265017.24 Including: Interest expenses 553965331.86 469512534.61 Interest income 258695456.58 410504372.73 Add: Other income 42778699.89 59642240.78 Investment income (“-” denotes loss) -102226395.52 357646522.46 Including: Investment income from associates and joint ventures -132754796.54 99693847.76 Gains on derecognition of financial assets measured at amortised cost (“-” denotes loss) -17770062.57 -47421175.71 Gain on change in fair value (“-” denotes loss) -19950000.00 310000.00 Credit impairment loss (“-” denotes loss) -2353308.15 -8773992.60 Loss on impairment of assets (“-” denotes loss) -7210153.16 -16979924.08 Gain on disposal of assets (“-” denotes loss) 28004223.70 -21301396.27 II. Operating profit (“-” denotes loss) -663228469.16 60366546.03 Add: Non-operating income 1258032.61 541593.38 Less: Non-operating expenses 22117596.59 7382596.72 III. Total profit (“-” denotes total loss) -684088033.14 53525542.69 Less: Income tax expenses -16337901.00 -53023500.87 IV. Net profit (“-” denotes net loss) -667750132.14 106549043.56 (i) Net profit from continuing operations (“-” denotes net loss) -667750132.14 106549043.56 (ii) Net profit from discontinued operations (“-” denotes net loss) – – V. Total comprehensive income -667750132.14 106549043.56 164 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report 5. Consolidated cash flow statement Unit: RMB Item 2024 2023 I. Cash flows from operating activities: Cash received from sales of goods and rendering of services 23237707950.05 27966458590.37 Tax rebates received 11658499.79 167475052.87 Cash received relating to other operating activities 524854825.25 1031185120.95 Subtotal of cash inflows from operating activities 23774221275.09 29165118764.19 Cash paid for goods and services 18151509011.53 20996101741.25 Cash paid to and for employees 1144326678.52 1355503347.12 Payments of taxes and surcharges 429650083.60 866089499.58 Cash paid relating to other operating activities 1425543836.84 1557474867.42 Subtotal of cash outflows from operating activities 21151029610.49 24775169455.37 Net cash flows from operating activities 2623191664.60 4389949308.82 II. Cash flows from investing activities: Cash received from investments 7305395.37 1598737.43 Cash received from investment income 3574134.20 66558010.99 Net cash received from disposal of fixed assets intangible assets and other long-term assets 20427346.14 210115150.25 Net cash received from disposal of subsidiaries and other business units 503938946.58 99329954.44 Cash received relating to other financing activities – – Subtotal of cash inflows from investing activities 535245822.29 377601853.11 Cash paid for purchase of fixed assets intangible assets and other long-term assets 69444183.34 314376125.86 Net cash paid for acquisition of subsidiaries and other business units – 4934751.03 Cash paid relating to other financing activities – – Subtotal of cash outflows from investing activities 69444183.34 319310876.89 Net cash flows from investing activities 465801638.95 58290976.22 2024 ANNUAL REPORT 165XII Financial Report Item 2024 2023 III. Cash flows from financing activities: Cash received from investments – 300000000.00 Including: Cash received from subsidiaries from minority investments – 300000000.00 Cash received from borrowings 27224432497.83 32279984571.38 Cash received relating to other financing activities 6838493318.93 2697290383.69 Subtotal of cash inflows from financing activities 34062925816.76 35277274955.07 Cash repayments of amounts borrowed 33203238743.18 34204285275.28 Cash paid for dividend and profit distribution or interest payment 1921902301.87 2244930422.38 Including: Dividend and profit paid by subsidiaries to minority shareholders – 254313617.44 Cash paid relating to other financing activities 2662705748.14 4611801356.33 Subtotal of cash outflows from financing activities 37787846793.19 41061017053.99 Net cash flows from financing activities -3724920976.43 -5783742098.92 IV. Effect of foreign exchange rate changes on cash and cash equivalents 23637176.58 -59724593.02 V. Net increase in cash and cash equivalents -612290496.30 -1395226406.90 Add: Balance of cash and cash equivalents as at the beginning of the period 764233742.61 2159460149.51 VI. Balance of cash and cash equivalents as at the end of the period 151943246.31 764233742.61 166 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report 6. Cash flow statement of the Company Unit: RMB Item 2024 2023 I. Cash flows from operating activities: Cash received from sales of goods and rendering of services 8469958914.03 8501405410.34 Tax rebates received – 10186261.55 Cash received relating to other operating activities 225099137.16 455821934.12 Subtotal of cash inflows from operating activities 8695058051.19 8967413606.01 Cash paid for goods and services 7516008175.22 7495797116.97 Cash paid to and for employees 292646483.16 337462560.61 Payments of taxes and surcharges 37515271.04 53252740.71 Cash paid relating to other operating activities 314026900.98 474578098.99 Subtotal of cash outflows from operating activities 8160196830.40 8361090517.28 Net cash flows from operating activities 534861220.79 606323088.73 II. Cash flows from investing activities: Cash received from investments 387305395.37 147471372.61 Cash received from investment income 143198463.59 112467060.62 Net cash received from disposal of fixed assets intangible assets and other long-term assets 19188807.14 40668050.26 Net cash received from disposal of subsidiaries and other business units – – Cash received relating to other investing activities – – Subtotal of cash inflows from investing activities 549692666.10 300606483.49 Cash paid for purchase of fixed assets intangible assets and other long-term assets 8324093.92 20519612.30 Cash paid relating to other investing activities – – Subtotal of cash outflows from investing activities 8324093.92 20519612.30 Net cash flows from investing activities 541368572.18 280086871.19 2024 ANNUAL REPORT 167XII Financial Report Item 2024 2023 III. Cash flows from financing activities: Cash received from investments – – Cash received from borrowings 14145974981.53 19258041006.64 Cash received relating to other financing activities 2488411858.25 1590113157.73 Subtotal of cash inflows from financing activities 16634386839.78 20848154164.37 Cash repayments of amounts borrowed 17030448289.24 19259308611.34 Cash paid for dividend and profit distribution or interest payment 407710636.83 471489436.79 Cash paid relating to other financing activities 622627667.95 1880449249.46 Subtotal of cash outflows from financing activities 18060786594.02 21611247297.59 Net cash flows from financing activities -1426399754.24 -763093133.22 IV. Effect of foreign exchange rate changes on cash and cash equivalents -348158.85 -6501936.29 V. Net increase in cash and cash equivalents -350518120.12 116814890.41 Add: Balance of cash and cash equivalents as at the beginning of the period 350786839.40 233971948.99 VI. Balance of cash and cash equivalents as at the end of the period 268719.28 350786839.40 168 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report 2024 ANNUAL REPORT 169 7. Consolidated statement of changes in owners’ equity Amount for the period Unit: RMB 2024 Equity attributable to owners of the Company Other equity instruments Less: Other Preference Perpetual Capital Treasury comprehensive Special Surplus General risk Total owners’ Item Share capital shares Bonds Others reserves shares income reserves reserves provisions Retained profit Subtotal Minority interest equity I. Balance as at the end of the prior year 2956813200.00 – – – 5328790899.61 63432450.00 -864881489.08 23322829.57 1212009109.97 79370294.91 8020182801.55 16692175196.53 4405680649.10 21097855845.63 II. Balance as at the beginning of the year 2956813200.00 – – – 5328790899.61 63432450.00 -864881489.08 23322829.57 1212009109.97 79370294.91 8020182801.55 16692175196.53 4405680649.10 21097855845.63 III. Changes in the period (“-” denotes decrease) -22257000.00 – – – -121112276.86 -63432450.00 -48827181.07 3477661.96 – 1580289.20 -7412364780.85 -7536070837.62 -726014382.86 -8262085220.48 (i) Total comprehensive income – – – – – – -48827181.07 – – – -7410784491.65 -7459611672.72 -382234925.64 -7841846598.36 (ii) Capital paid in and reduced by owners -22257000.00 – – – -121112276.86 -63432450.00 – – – – – -79936826.86 -290042380.45 -369979207.31 1. Ordinary shares paid by owners – -290042380.45 -290042380.45 2. Amount of share-based payments recognised in owners’ equity -22257000.00 -41175450.00 -63432450.00 – – 3. Others -79936826.86 -79936826.86 -79936826.86 (iii) Profit distribution – – – – – – – – – 1580289.20 -1580289.20 – -123000000.00 -123000000.00 1. Transfer of general risk reserves 1580289.20 -1580289.20 – – 2. Distribution to owners (or shareholders) – -123000000.00 -123000000.00 (iv) Transfer within owners’ equity – – – – – – – – – – – – 69262923.23 69262923.23 1. Others – 69262923.23 69262923.23 (v) Special reserves – – – – – – – 3477661.96 – – – 3477661.96 – 3477661.96 1. Withdrew in the period 19870503.88 19870503.88 19870503.88 2. Used in the period -16392841.92 -16392841.92 -16392841.92 IV. Balance as at the end of the period 2934556200.00 – – – 5207678622.75 – -913708670.15 26800491.53 1212009109.97 80950584.11 607818020.70 9156104358.91 3679666266.24 12835770625.15XII Financial Report 170 SHANDONG CHENMING PAPER HOLDINGS LIMITED Amount for the prior period Unit: RMB 2023 Equity attributable to owners of the company Other equity instruments Less: Other Preference Perpetual Capital Treasury comprehensive Special Surplus General risk Total owners’ Item Share capital shares Bonds Others reserves shares income reserves reserves provisions Retained profit Others Subtotal Minority interest equity I. Balance as at the end of the prior year 2979742200.00 – 996000000.00 – 5361200522.29 128780100.00 -821940694.57 15791710.95 1212009109.97 79900268.71 9390642477.57 – 19084565494.92 4643688325.69 23728253820.61 Others – – – – – – – – – – – – – – – II. Balance as at the beginning of the year 2979742200.00 – 996000000.00 – 5361200522.29 128780100.00 -821940694.57 15791710.95 1212009109.97 79900268.71 9390642477.57 – 19084565494.92 4643688325.69 23728253820.61 III. Changes in the period (“-” denotes decrease) -22929000.00 – -996000000.00 – -32409622.68 -65347650.00 -42940794.51 7531118.62 – -529973.80 -1370459676.02 – -2392390298.39 -238007676.59 -2630397974.98 (i) Total comprehensive income – – – – – – -42940794.51 – – – -1281289649.82 -1324230444.33 -45352768.04 -1369583212.37 (ii) Capital paid in and reduced by owners -22929000.00 – -996000000.00 – -32409622.68 -65347650.00 – – – – – – -985990972.68 51682676.42 -934308296.26 1. Ordinary shares paid by owners – – – – – – – – – – – – – 51682676.42 51682676.42 2. Capital paid by holders of other equity instruments – – -996000000.00 -4000000.00 – – – – – – – -1000000000.00 – -1000000000.00 3. Amount of share-based payments recognised in owners’ equity -22929000.00 – – – -69886171.92 -65347650.00 – – – – – – -27467521.92 – -27467521.92 4. Others – – – – 41476549.24 – – – – – – – 41476549.24 – 41476549.24 (iii) Profit distribution – – – – – – – – – -529973.80 -89170026.20 – -89700000.00 -254313617.44 -344013617.44 1. Transfer of general risk reserves – – – – – – – – – -529973.80 529973.80 – – – – 2. Distribution to owners (or shareholders) – – – – – – – – – – -89700000.00 -89700000.00 -254313617.44 -344013617.44 (iv) Transfer within owners’ equity – – – – – – – – – – – – – 9976032.47 9976032.47 1. Others – － – – – – – – – – – – – 9976032.47 9976032.47 (v) Special reserves – – – – – – – 7531118.62 – – – – 7531118.62 – 7531118.62 1. Withdrew in the period – – – – – – – 31146275.32 – – – 31146275.32 – 31146275.32 2. Used in the period – – – – – – – -23615156.70 – – – – -23615156.70 – -23615156.70 IV. Balance as at the end of the period 2956813200.00 – – – 5328790899.61 63432450.00 -864881489.08 23322829.57 1212009109.97 79370294.91 8020182801.55 16692175196.53 4405680649.10 21097855845.63XII Financial Report 2024 ANNUAL REPORT 171 8. Statement of changes in owners’ equity of the Company Amount for the period Unit: RMB 2024 Other equity instruments Less: Other Preference Perpetual Capital Treasury comprehensive Special Surplus Retained Item Share capital shares Bonds Others reserves shares income reserves reserves profit Total owners’ equity I. Balance as at the end of the prior year 2956813200.00 – – – 5073338869.19 63432450.00 – 4612641.99 1199819528.06 3138783314.72 12309935103.96 II. Balance as at the beginning of the year 2956813200.00 – – – 5073338869.19 63432450.00 – 4612641.99 1199819528.06 3138783314.72 12309935103.96 III. Changes in the period (“-” denotes decrease) -22257000.00 – – – -41175450.00 -63432450.00 – 2792624.88 – -667750132.14 -664957507.26 (i) Total comprehensive income – – – – – – – – – -667750132.14 -667750132.14 (ii) Capital paid in and reduced by owners -22257000.00 – – – -41175450.00 -63432450.00 – – – – – 1. Amount of share-based payments recognised in owners’ equity -22257000.00 – – – -41175450.00 -63432450.00 – – – – – (iii) Profit distribution – – – – – – – – – – – (iv) Transfer within owners’ equity – – – – – – – – – – – (v) Special reserves – – – – – – – 2792624.88 – – 2792624.88 1. Withdrew in the period – – – – – – – 2792624.88 – – 2792624.88 2. Used in the period – – – – – – – – – – – (vi) Others – – – – – – – – – – – IV. Balance as at the end of the period 2934556200. 00 – – – 5032163419.1 9 – – 7405266.8 7 1199819528.0 6 2471033182.5 8 11644977596.7 0XII Financial Report 172 SHANDONG CHENMING PAPER HOLDINGS LIMITED Amount for the prior period Unit: RMB 2023 Other equity instruments Less: Other Preference Perpetual Capital Treasury comprehensive Special Surplus Retained Total owners’ Item Share capital shares Bonds Others reserves shares income reserves reserves profit Others equity I. Balance as at the end of the prior year 2979742200.00 – 996000000.00 – 5147225041.11 128780100.00 – 2066138.15 1199819528.06 3121934271.16 – 13318007078.48 II. Balance as at the beginning of the year 2979742200.00 – 996000000.00 – 5147225041.11 128780100.00 – 2066138.15 1199819528.06 3121934271.16 – 13318007078.48 III. Changes in the period (“-” denotes decrease) -22929000.00 – -996000000.00 – -73886171.92 -65347650.00 – 2546503.84 – 16849043.56 – -1008071974.52 (i) T o t a l c o m p r e h e n s i v e income – – – – – – – – – 106549043.56 – 106549043.56 (ii) Capital paid in and reduced by owners -22929000.00 – -996000000.00 – -73886171.92 -65347650.00 – – – – – -1027467521.92 1. Capital paid by holders of other equity instruments – – -996000000.00 – -4000000.00 – – – – – – -1000000000.00 2. Amount of share-based payments recognised in owners’ equity -22929000.00 – – – -69886171.92 -65347650.00 – – – – – -27467521.92 (iii) Profit distribution – – – – – – – – – -89700000.00 – -89700000.00 1. Transfer to surplus reserves – – – – – – – – – – – – 2. Distribution to owners (or shareholders) – – – – – – – – – -89700000.00 – -89700000.00 (iv) Special reserves – – – – – – – 2546503.84 – – – 2546503.84 1. Withdrew in the period – – – – – – – 2569804.81 – – – 2569804.81 2. Used in the period – – – – – – – -23300.97 – – – -23300.97 IV. Balance as at the end of the period 2956813200.00 – – – 5073338869.19 63432450.00 – 4612641.99 1199819528.06 3138783314.72 – 12309935103.96XII Financial Report III. General Information of the Company 1. Company overview The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company” a joint-stock company incorporated in Shouguang City Shandong Province) was Shandong Shouguang Paper Mill Corporation which was changed as a joint stock company with limited liability through offering to specific investors in May 1993. In December 1996 with approval by Lu Gai Zi [1996] No. 270 issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committee of the State Council the Company was changed as a joint stock company with limited liability established by share offer. The Company’s headquarters is located at No. 2199 Nongsheng East Road Shouguang City Shandong Province.In May 1997 with approval by Zheng Wei Fa [1997] No. 26 issued by the Securities Committee of the State Council the Company issued 115000000 domestic listed foreign shares (B shares) under public offering which were listed and traded on Shenzhen Stock Exchange from 26 May 1997.In September 2000 with approval by Zheng Jian Gong Si Zi [2000] No. 151 issued by the China Securities Regulatory Commission the Company issued additional 70000000 RMB ordinary shares (A shares) which were listed and traded on Shenzhen Stock Exchange from 20 November 2000.In June 2008 with approval by the Stock Exchange of Hong Kong Limited the Company issued 355700000 H shares. At the same time 35570000 H shares were allocated to the National Council for Social Security Fund by our relevant state-owned shareholder and converted into overseas listed foreign shares (H shares) for the purpose of reducing the number of state-owned shares. The additionally issued H shares were listed and traded on Hong Kong Stock Exchange on 18 June 2008.As at 31 December 2024 the total share capital of the Company was 2934556200 shares. For details please refer to Note VII. 40.Principal business activities: the Company is principally engaged in among other things processing and sale of paper products (including machine-made paper and paper board) paper making raw materials machinery and chemicals; generation and sale of electric power and thermal power; forestry saplings growing processing and sale of timber and construction materials; manufacturing processing and sale of wood products; and hotel service and equipment financial and operating leasing investment properties and property service etc.The financial statements and notes thereto were approved at the twelfth meeting of the tenth session of the board of directors of the Company (the “Board”) on 31 March 2025. 2. Scope of consolidation Subsidiaries of the Company included in the scope of consolidation in 2024 totalled 76. For details please refer to Note X “Interest in other entities”. The scope of consolidation of the Company during the year had two morecompanies included and three companies less compared to the prior year. For details please refer to Note IX “Changein scope of consolidation”. 2024 ANNUAL REPORT 173XII Financial Report IV. Basis of Preparation of the Financial Statements 1. Basis of preparation These financial statements are prepared in accordance with the accounting standards for business enterprises the application guidelines thereof interpretations and other related rules (collectively referred to as “ASBEs”) promulgated by the Ministry of Finance. In addition the Company also discloses relevant financial information in accordance withthe “Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 – GeneralProvisions on Financial Reports” (revised in 2023) of the CSRC.The financial statements are presented on a going concern. 2. Going concern The Company’s net profit after extraordinary gains or losses attributable to shareholders of the Company for 2022 2023 and 2024 amounted to RMB-361 million RMB-1942 million and RMB-7202 million respectively which remained negative for three consecutive years. As of 31 December 2024 the Company’s gearing ratio was 79.79%.The current ratio was 36.25%. The Company had liquidity difficulties. As of 31 December 2024 the Company’s bank borrowings financial leasing borrowings and acceptance bills that need to be repaid due to overdue amounted to RMB4599.7821 million the restricted monetary funds amounted to RMB5728.7478 million and certain outstanding operating payables were also overdue. A number of litigation and arbitration cases arose from overdue debts.Some of the Company’s assets were subject to seizure or freeze and some production lines were shut down or suspended production. The Company was exposed to greater operational and financial risks. The above matters or circumstances both indicate that there may be material uncertainties about the Company’s going concern basis.In view of the above the Board of the Company has conducted sufficient and detailed assessments after carefully considering its liquidity operations and sources of financing in the future. The Company will take following actions to improve its ability to continue as a going concern and its operations aiming to address the qualified opinion in the next financial year including: (1) Resumption of operation and production. The government task force in collaboration with the Company has formulated a comprehensive work plan from eight aspects including full resumption of operation and production introduction of strategic investments grant of syndicated loan and asset disposal. Adhering to the principle of “one policy for one enterprise one policy for one region” the Company will actively engage with local governments to finalise specific cooperation details in pursuit of the full resumption of operation and production at its major production bases. In accordance with the established production resumption plans for each base the Company will conduct comprehensive overhauls across all production systems improve automated detection and control functions and enhance equipment integrity and operational efficiency. Striving to achieve the resumption of operation and production within the shortest possible time the Company will also strengthen its communication and coordination with suppliers to foster stable long-term cooperative relationships between them. 174 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report IV. Basis of Preparation of the Financial Statements (Continued) 2. Going concern (Continued) (2) Debt restructuring. As of 31 December 2024 the Company and financial creditors had established provincial debt committees and reached a consensus that: firstly they shall refrain from instituting unauthorised proceedings for seizure and overdue loans shall be first settled by negotiation instead of litigation for seizure or credit rating downgrade or classification; secondly they shall maintain the stability of existing credit facilities.Financial institutions inside and outside of the provinces shall adjust the credit facilities to liquidity loans renew expiring loans wherever possible without loan cancellations or delays provide extended loan terms for non- renewable loans and adjust repayment schedules for medium to long term loans; thirdly interest rates and fees shall be reduced to alleviate the burden on the Company. Loan rates shall be reduced to below 2% new loan rates shall be reduced to below 3% and loan rates shall be re-adjusted in accordance with the recovery of the Company after three years; fourthly interest settlement cycles shall be extended. In principle the interest shall be settled semi-annually within three years and the settlement cycle shall be adjusted in accordance with the operations of the Company after three years. (3) Asset disposal. The Company will make every effort to revitalise and dispose of its existing assets. The Company will strengthen the disposal of assets in its non-principal business establish an asset management center adjust and optimise internal management divide asset disposal management areas by region and assign responsibilities to individuals to improve the efficiency of asset disposal. The Company will also step up efforts to recover outstanding debts and pursue debtors with realisable assets through negotiation or legal means. For accounts receivable that are difficult to recover the Company will resort to judicial channels to resolve the issues and striving to improve its liquidity. (4) Government support. The Company has applied to local governments for support including but not limited to policy and financial support to assist the Company in overcoming difficulties. Currently governments have established task forces to assist the Company in coordinating financial institutions to establish provincial debt committees to provide financing support to the Company for the renewal of loans and other purposes. State- owned enterprises at city and county levels have funded the establishment of Weifang Xingchen Trading Co. Ltd. with raised funds amounting to RMB3.31 billion for the resumption of production. In particular the registered capital of RMB1.0 billion has been received and the syndicated loan of RMB2.31 billion is currently under review for approval by head offices of various banks. At present certain banks have completed their approval process. (5) Introduction of strategic investments. A task force for the introduction of strategic investors has been set up at the municipal level to form a multi-level and multi-field collaborative working mechanism. Dedicated personnel will be responsible for engaging and negotiating with interested strategic investors to effectively integrate resources and enhance decision-making efficiency. At the same time the Company will insist on the approach of combining “going out” and “bringing in” take the initiative to cooperate with competent enterprises and acquire the necessary working capital for the resumption of production through a variety of channels so as to support the Company in achieving normal production and operation as soon as possible.By implementing the above measures the Company believes that it is appropriate to prepare the financial statements for the reporting period on a going concern basis. 2024 ANNUAL REPORT 175XII Financial Report IV. Basis of Preparation of the Financial Statements (Continued) 2. Going concern (Continued) The Company’s financial statements have been prepared on an accrual basis. Except for certain financial instruments the financial statements are prepared under the historical cost convention. In the event that impairment of assets occurs a provision for impairment is made accordingly in accordance with the relevant regulations.V. Significant Accounting Policies and Accounting Estimates Specific accounting policies and accounting estimates are indicated as follows: The Company and its subsidiaries are engaged in the business of machine-made paper electricity and heat building materials paper chemicals hotel management etc. The Company and its subsidiaries have formulated a number of specific accounting policies and accounting estimates for transactions and matters such as revenue recognition determination of performance progress and R&D expenses based on their actual production and operation characteristics in accordance with the requirements of the relevant ASBEs. For details please refer to the descriptions under Note V.30 “Revenue”. For anexplanation of the critical accounting judgments and estimates made by the management please refer to Note 39 “Criticalaccounting judgments and estimates”. 1. Statement of compliance with the Accounting Standards for Business Enterprises These financial statements have been prepared in conformity with the ASBEs which truly and fully reflect the financial position of the consolidated entity and the Company as at 31 December 2024 and relevant information such as the operating results and cash flows of the consolidated entity and the Company for 2024. 2. Accounting period The accounting period of the Company is from 1 January to 31 December of each calendar year. 176 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 3. Operating cycle The operating cycle of the Company lasts for 12 months. 4. Functional currency The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or “US$”) Japanese yen (“JPY”) Euro (“EUR”) and South Korean Won (“KRW”) as their respective functional currency according to the general economic environment in which these subsidiaries operate. The Company prepares the financial statements in RMB. 5. Determination method and selection basis of importance standards Item Importance standards Significant accounts receivable with single Overdue accounts receivable and the amount of a single provision for bad debt reserves receivable exceeds 0.5% of total assets Write-off of significant accounts receivable during The amount of a single write-off exceeds 0.5% of net assets the period Significant prepayments aged more than one year Aged more than one year and the single amount exceeds 0.5% of total assets Significant receipts in advance aged more than Aged more than one year and the single amount exceeds 0.5% one year of total assets Significant other payables aged more than one Aged more than one year and the single amount exceeds 0.5% year of total assets Significant accounts payable aged more than one Aged more than one year and the single amount exceeds 0.5% year of total assets Bad debt provisions with significant amounts Individually identified or classified into the third stage the reversed or recovered during the current period amount transferred or recovered exceeds 0.5% of total assets Significant construction in progress Projects with budgets exceeding 0.5% of total assets Significant non-wholly owned subsidiaries The total assets of the subsidiary exceed 10% of the Company on a consolidated basis and the revenue or pre-tax profit exceeds 10% Significant investment activities Investment amount exceeds 0.5% of total assets Significant joint ventures and associates The joint venture or associate operates normally with an accounting amount exceeding 0.5% of total assets S ignificant debt restructuring T he restructuring amount exceeds 0.5% of total assets 6. Accounting treatment of business combinations under common control and not under common control (1) Business combination under common control For the business combination involving entities under common control the assets and liabilities of the party being merged that are obtained in the business combination by the absorbing party shall be measured at the carrying amounts as recorded by the ultimate controlling party in the consolidated financial statements at the combination date. The difference between the carrying amount of the consideration paid for the combination and the carrying amount of the net assets obtained in the combination is charged to the capital reserve. If the capital reserve is not sufficient to absorb the difference any excess shall be adjusted against retained earnings. 2024 ANNUAL REPORT 177XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 6. Accounting treatment of business combinations under common control and not under common control (Continued) (1) Business combination under common control (Continued) Business combinations involving entities under common control and achieved in stages The assets and liabilities of the party being merged that are obtained at the combination by the absorbing party shall be measured at the carrying value as recorded by the ultimate controlling party in the consolidated financial statements at combination date. The difference between the sum of the carrying value from original shareholding portion and the new investment cost incurred at combination date and the carrying value of net assets obtained at combination date shall be adjusted to capital reserve (share premium/capital premium) if the balance of capital reserve is not sufficient to absorb the differences any excess is adjusted to retained earnings. The long-term investment prior to the absorbing party obtaining the control of the party being merged the recognised profit or loss comprehensive income and other change of owners’ equity at the closer date of the acquisition date and combination date under common control shall separately offset the opening balance of retained earnings and profit or loss during comparative statements. (2) Business combination not under common control For business combinations involving entities not under common control the cost for each combination is measured at the aggregate fair value at acquisition date of assets given liabilities incurred or assumed and equity securities issued by the acquirer in exchange for control of the acquiree. At acquisition date the acquired assets liabilities or contingent liabilities of acquiree are measured at their fair value.Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets the difference is recognised as goodwill and subsequently measured on the basis of its cost minus accumulative impairment provision; Where the cost of combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets the difference is recognised in profit or loss for the current period after reassessment.Business combinations involving entities not under common control and achieved in stages The combination cost is the sum of consideration paid at acquisition date and fair value of the acquiree’s equity investment held prior to acquisition date. The cost of equity of the acquiree held prior to acquisition date shall be remeasured at the fair value at acquisition date and the difference between the fair value and carrying amount shall be recognised as investment income or loss for the current period. Other comprehensive income and changes of other owners’ equity related with acquiree’s equity held prior to acquisition date shall be transferred to investment profit or loss for current period at acquisition date except for the other comprehensive income incurred by the changes of net assets or net liabilities due to the remeasurement of defined benefit plans and the other comprehensive income related to investments in non-trading equity instruments that were previously designated as at fair value through other comprehensive income. (3) Transaction fees attribution during business combination The audit legal valuation advisory and other intermediary fees and other relevant administrative expenses arising from business combinations are recognised in profit or loss when incurred. Transaction costs of equity or debt securities issued as the considerations of business combination are included in the initial recognition amounts. 178 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 7. Judgment criteria for control and preparation of consolidated financial statements (1) Judgment criteria for control The scope of consolidation of the consolidated financial statements is determined on the basis of control. The term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of those returns. The Company will reassess when changes in relevant facts and circumstances result in changes in the relevant elements involved in the definition of control.When judging whether to include a structured entity into the scope of consolidation the Company comprehensively considers all facts and circumstances including assessing the purpose and design of the structured entity identifying the types of variable returns and assessing whether to control the structured entity on the basis of whether it bears part or all of the return variability by participating in its related activities. (2) Basis for preparation of the consolidated financial statements The consolidated financial statements are prepared by the Company based on the financial statements of the Company and its subsidiaries and other relevant information. In preparing the consolidated financial statements the accounting policies and accounting periods of the Company and its subsidiaries shall be consistent and intra-company significant transactions and balances are eliminated.A subsidiary and its business acquired through a business combination involving entities under common control during the reporting period shall be included in the scope of the consolidation of the Company from the date of being controlled by the ultimate controlling party and its operating results and cash flows from the date of being controlled by the ultimate controlling party are included in the consolidated income statement and the consolidated cash flow statement respectively.For a subsidiary and its business acquired through a business combination involving entities not under common control during the reporting period its income expenses and profits are included in the consolidated income statement and cash flows are included in the consolidated cash flow statement from the acquisition date to the end of the reporting period.The shareholders’ equity of the subsidiaries that is not attributable to the Company is presented under shareholders’ equity in the consolidated balance sheet as minority interest. The portion of net profit or loss of subsidiaries for the period attributable to minority interest is presented in the consolidated income statement under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the subsidiary the excess amount shall be allocated against minority interest. (3) Acquisition of non-controlling interests in subsidiaries The difference between the long-term equity investments costs acquired by the acquisition of non-controlling interests and the share of the net assets from subsidiaries from the date of acquisition or the date of combination based on the new shareholding ratio as well as the difference between the proceeds from the partial disposal of the equity investment without losing control over its subsidiary and the disposal of the long-term equity investment corresponding to the share of the net assets of the subsidiaries from the date of acquisition or the date of combination is adjusted to the capital reserve. If the capital reserve is not sufficient any excess is adjusted to retained earnings. 2024 ANNUAL REPORT 179XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 7. Judgment criteria for control and preparation of consolidated financial statements (Continued) (4) Accounting treatment for loss of control over subsidiaries For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons the remaining equity is measured at fair value on the date when the control is lost. The difference arising from the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest over the sum of the share of the carrying amount of net assets of the former subsidiary calculated continuously from the purchase date based on the shareholding percentage before disposal and the goodwill is recognised as investment income in the period when the control is lost.Other comprehensive income related to equity investment in the former subsidiary shall be accounted for on the same basis as the former subsidiary’s direct disposal of relevant assets or liabilities when the control is lost.Other changes in owners’ equity related to the former subsidiary that are accounted for using the equity method shall be transferred to current profit or loss at the time when the control is lost. 8. Classification of joint arrangements and accounting treatment for joint operations A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of the Company comprise joint operations and joint ventures. (1) Joint operations Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets and obligations of this arrangement.The Company recognises the following items in relation to its interest in a joint operation and accounts for them in accordance with the relevant ASBEs: A. the assets held solely by it and assets held jointly according to its share; B. the liabilities assumed solely by it and liabilities assumed jointly according to its share; C. the revenue from sale of output from joint operations; D. the revenue from sale of output from joint operations according to its share; E. the fees solely incurred by it and fees incurred from joint operations according to its share. (2) Joint ventures Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this arrangement.The Company accounts for its investments in joint ventures in accordance with the requirements relating to accounting treatment using equity method for long-term equity investments. 180 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 9. Standards for recognising cash and cash equivalents Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short- term and highly liquid investments held by the Company which are readily convertible into known amount of cash and which are subject to insignificant risk of value change. 10. Foreign currency operations and translation of statements denominated in foreign currency (1) Foreign currency operations The foreign currency operations of the Company are translated into the functional currency at the prevailing spot exchange rate on the date of exchange.On the balance sheet date foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date will be recognised in profit or loss for the period. The foreign currency non-monetary items measured at historical cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange rate on the date of determination of the fair value. The difference between the amounts of the functional currency before and after the translation will be recognised in profit or loss or other comprehensive income for the period based on the nature of the non-monetary items. (2) Translation of financial statements denominated in foreign currency When translating the financial statements denominated in foreign currency of overseas subsidiaries assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which such items arose.Income and expenses items in the income statement are translated at the prevailing spot exchange rate on the transaction date.All items in the cash flow statements shall be translated at the prevailing spot exchange rate on the date that the cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presented separately as the “effect of foreign exchange rate changes on cash and cash equivalents” item in the cash flow statements.The differences arising from translation of financial statements shall be included in the “other comprehensiveincome” item in owners’ equity in the balance sheet.On disposal of foreign operations and loss of control exchange differences arising from the translation of financial statements denominated in foreign currencies related to the disposed foreign operations which has been included in shareholders’ equity in the balance sheet shall be transferred to profit or loss in whole or in proportionate share in the period in which the disposal took place. 2024 ANNUAL REPORT 181XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. (1) Recognition and derecognition of financial instruments Financial asset or financial liability will be recognised when the Company became one of the parties under a financial instrument contract.Financial asset that satisfied any of the following criteria shall be derecognised: * the contract right to receive the cash flows of the financial asset has terminated; * the financial asset has been transferred and meets the derecognition criteria for the transfer of financial asset as described below.A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or in part. If an agreement is entered between the Company (debtor) and a creditor to replace the existing financial liabilities with new financial liabilities and the contractual terms of the new financial liabilities are substantially different from those of the existing financial liabilities the existing financial liabilities shall be derecognised and the new financial liabilities shall be recognised.Conventionally traded financial assets shall be recognised and derecognised at the trading date. (2) Classification and measurement of financial assets The Company classifies the financial assets according to the business model for managing the financial assets and characteristics of the contractual cash flows as follows: financial assets measured at amortised cost financial assets measured at fair value through other comprehensive income and financial assets measured at fair value through profit or loss.Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair value through profit or loss relevant transaction costs are directly recognised in profit or loss for the current period. For other categories of financial assets relevant transaction costs are included in the amount initially recognised. Accounts receivable arising from sales of goods or rendering services without significant financing component are initially recognised based on the transaction price expected to be entitled by the Company.Financial assets measured at amortised cost A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at fair value through profit or loss: The Company’s business model for managing such financial assets is to collect contractual cash flows; The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely payments of principal and interest on the principal amount outstanding.Subsequent to initial recognition such financial assets are measured at amortised cost using the effective interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a hedging relationship shall be recognised in profit or loss for the current period when the financial asset is derecognised amortised using the effective interest method or with impairment recognised. 182 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (2) Classification and measurement of financial assets (Continued) Financial assets measured at fair value through other comprehensive income A financial asset is classified as measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated at fair value through profit or loss: The Company’s business model for managing such financial assets is achieved both by collecting collect contractual cash flows and selling such financial assets; The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely payments of principal and interest on the principal amount outstanding.Subsequent to initial recognition such financial assets are subsequently measured at fair value. Interest calculated using the effective interest method impairment losses or gains and foreign exchange gains and losses are recognised in profit or loss for the current period and other gains or losses are recognised in other comprehensive income. On derecognition the cumulative gain or loss previously recognised in other comprehensive income is reclassified from other comprehensive income to profit or loss.Financial assets measured at fair value through profit or loss The Company classifies the financial assets other than those measured at amortised cost and measured at fair value through other comprehensive income as financial assets measured at fair value through profit or loss.Upon initial recognition the Company irrevocably designates certain financial assets that are required to be measured at amortised cost or at fair value through other comprehensive income as financial assets measured at fair value through profit or loss in order to eliminate or significantly reduce accounting mismatch.Upon initial recognition such financial assets are measured at fair value. Except for those held for hedging purposes gains or losses (including interests and dividend income) arising from such financial assets are recognised in the profit or loss for the current period.The business model for managing financial assets refers to how the Company manages its financial assets in order to generate cash flows. That is the Company’s business model determines whether cash flows will result from collecting contractual cash flows selling financial assets or both. The Company determines the business model for managing financial assets on the basis of objective facts and specific business objectives for managing financial assets determined by key management personnel. 2024 ANNUAL REPORT 183XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (2) Classification and measurement of financial assets (Continued) Financial assets measured at fair value through profit or loss (Continued) The Company assesses the characteristics of the contractual cash flows of financial assets to determine whether the contractual cash flows generated by the relevant financial assets on a specific date are solely payments of principal and interest on the principal amount outstanding. The principal refers to the fair value of the financial assets at the initial recognition. Interest includes consideration for the time value of money for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks costs and profits. In addition the Company evaluates the contractual terms that may result in a change in the time distribution or amount of contractual cash flows from a financial asset to determine whether it meets the requirements of the above contractual cash flow characteristics.All affected financial assets are reclassified on the first day of the first reporting period following the change in the business model where the Company changes its business model for managing financial assets; otherwise financial assets shall not be reclassified after initial recognition. (3) Classification and measurement of financial liabilities At initial recognition financial liabilities of the Company are classified as financial liabilities measured at fair value through profit or loss and financial liabilities measured at amortised cost. For financial liabilities not classified as measured at fair value through profit or loss relevant transaction costs are included in the amount initially recognised.Financial liabilities measured at fair value through profit or loss Financial liabilities measured at fair value through profit or loss comprise held-for-trading financial liabilities and financial liabilities designated at fair value through profit or loss upon initial recognition. Such financial liabilities are subsequently measured at fair value and the gains or losses from the change in fair value and the dividend or interest expenses related to the financial liabilities are included in the profit or loss of the current period.Financial liabilities measured at amortised cost Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method and the gains or losses arising from derecognition or amortisation are recognised in profit or loss for the current period. 184 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (3) Classification and measurement of financial liabilities (Continued) Classification between financial liabilities and equity instruments A financial liability is a liability if: * it has a contractual obligation to pay in cash or other financial assets to other parties.* it has a contractual obligation to exchange financial assets or financial liabilities under potential adverse condition with other parties.* it is a non-derivative instrument contract which will or may be settled with the entity’s own equity instruments and the entity will deliver a variable number of its own equity instruments according to such contract.* it is a derivative instrument contract which will or may be settled with the entity’s own equity instruments except for a derivative instrument contract that exchanges a fixed amount of cash or other financial asset with a fixed number of its own equity instruments.Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.If the Company cannot unconditionally avoid the performance of a contractual obligation by paying cash or delivering other financial assets the contractual obligation meets the definition of financial liabilities.Where a financial instrument must or may be settled with the Company’s own equity instruments the Company’s own equity instruments used to settle such instrument should be considered as to whether it is as a substitute for cash or other financial assets or for the purpose of enabling the holder of the instrument to be entitled to the remaining interest in the assets of the issuer after deducting all of its liabilities. For the former it is a financial liability of the Company; for the latter it is the Company’s own equity instruments. (4) Fair value of financial instruments The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 12. 2024 ANNUAL REPORT 185XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (5) Impairment of financial assets The Company makes provision for impairment based on expected credit losses (ECLs) on the following items: Financial assets measured at amortised cost; Receivables and investment in debt instruments measured at fair value through other comprehensive income; Contract assets as defined in the Accounting Standards for Business Enterprises No. 14 – Revenue; Lease receivables; Financial guarantee contracts (except those measured at fair value through profit or loss or formed by continuing involvement of transferred financial assets or the transfer does not qualify for derecognition).Measurement of ECLs ECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Credit losses refer to the difference between all contractual cash flows receivable according to the contract and discounted according to the original effective interest rate and all cash flows expected to be received i.e. the present value of all cash shortages.The Company takes into account reasonable and well-founded information such as past events current conditions and forecasts of future economic conditions and calculates the probability-weighted amount of the present value of the difference between the cash flows receivable from the contract and the cash flows expected to be received weighted by the risk of default.The Company measures ECLs of financial instruments at different stages. If the credit risk of the financial instrument did not increase significantly upon initial recognition it is at the first stage and the Company makes provision for impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrument increased significantly upon initial recognition but has not yet incurred credit impairment it is at the second stage and the Company makes provision for impairment based on the lifetime ECLs of the instrument; if the financial instrument incurred credit impairment upon initial recognition it is at the third stage and the Company makes provision for impairment based on the lifetime ECLs of the instrument.For financial instruments with low credit risk on the balance sheet date the Company assumes that the credit risk did not increase significantly upon initial recognition and makes provision for impairment based on the ECLs within the next 12 months.Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financial instrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrument within 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) after the balance sheet date and is a portion of lifetime ECLs. 186 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (5) Impairment of financial assets (Continued) Measurement of ECLs (Continued) The maximum period to be considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk including renewal options.For the financial instruments at the first and second stages and with low credit risks the Company calculates the interest income based on the book balance and the effective interest rate before deducting the impairment provisions. For financial instruments at the third stage interest income is calculated based on the amortised cost after deducting impairment provisions made from the book balance and the effective interest rate.For receivables such as bills receivable accounts receivable accounts receivable financing and other receivables if the credit risk characteristics of a customer are significantly different from other customers in the portfolio or the credit risk characteristics of such customer change significantly the Company will make a separate provision for bad debts for such receivables. In addition to the receivables for which bad debt provisions are made individually the Company divides the receivables into portfolios based on credit risk characteristics and calculates bad debt provisions on a combined basis.Bills receivable and accounts receivable For bills receivable accounts receivable and contract assets regardless of whether there is a significant financing component the Company always makes provision for impairment at an amount equal to lifetime ECLs.When the Company is unable to assess the information of ECLs for an individual financial asset or contract assets at a reasonable cost it classifies bills receivable accounts receivable and contract assets into portfolios based on the credit risk characteristics and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows: A. Bills receivable Bills receivable portfolio 1: Bank acceptance bills Bills receivable portfolio 2: Commercial acceptance bills B. Accounts receivable Accounts receivable portfolio 1: Due from related party customers Accounts receivable portfolio 2: Due from non-related party customers Accounts receivable portfolio 3: Factoring receivables 2024 ANNUAL REPORT 187XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (5) Impairment of financial assets (Continued) Bills receivable and accounts receivable (Continued) For bills receivable classified as a portfolio the Company refers to the historical credit loss experience combined with the current situation and the forecast of future economic conditions to calculate the ECLs based on default risk exposure and lifetime ECL rate.For accounts receivable classified as a portfolio the Company refers to the historical credit loss experience combined with the current situation and the forecast of future economic conditions to prepare a comparison table of the ageing of accounts receivable and the lifetime ECL rate to calculate the ECLs. The aging of accounts receivable is calculated from the date of recognition.Other receivables The Company classifies other receivables into portfolios based on credit risk characteristics and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows: Other receivables portfolio 1: Amount due from government authorities Other receivables portfolio 1: Amount due from related parties Other receivables portfolio 3: Other receivables For other receivables classified as a portfolio the Company calculates the ECLs based on default risk exposure and the ECL rate over the next 12 months or the entire lifetime. For other receivables grouped by aging the aging is calculated from the date of recognition.Long-term receivables The Company’s long-term receivables include finance lease receivables and deposits receivable. 188 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (5) Impairment of financial assets (Continued) Long-term receivables (Continued) The Company classifies the finance lease receivables and deposits receivable into portfolios based on the credit risk characteristics and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows: A. Finance lease receivables Finance lease receivables portfolio 1: Receivables not past due Finance lease receivables portfolio 2: Overdue receivables B. Other long-term receivables Other long-term receivables portfolio 1: Deposits receivable Other long-term receivables portfolio 2: Other receivables For accounts receivable financing and deposits receivable the Company refers to the historical credit loss experience combined with the current situation and the forecast of future economic conditions and calculates the ECLs based on default risk exposure and lifetime ECL rate.Except for those of finance lease receivables and deposits receivable the ECLs of other receivables and long- term receivables classified as a portfolio are measured based on default risk exposure and ECL rate over the next 12 months or the entire lifetime.Debt investments and other debt investments For debt investments and other debt investments the Company measures the ECLs based on the nature of the investment the types of counterparty and risk exposure and default risk exposure and ECL rate within the next 12 months or the entire lifetime. 2024 ANNUAL REPORT 189XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (5) Impairment of financial assets (Continued) Assessment of significant increase in credit risk In assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition the Company compares the risk of default of the financial instrument at the balance sheet date with that at the date of initial recognition to determine the relative change in risk of default within the expected lifetime of the financial instrument.In determining whether the credit risk has increased significantly upon initial recognition the Company considers reasonable and well-founded information including forward-looking information which can be obtained without unnecessary extra costs or efforts. Information considered by the Company includes: The debtor’s failure to make payments of principal and interest on their contractually due dates; An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any); An actual or expected significant deterioration in the operating results of the debtor; Existing or expected changes in the technological market economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Company.Depending on the nature of the financial instruments the Company assesses whether there has been a significant increase in credit risk on either an individual basis or a collective basis. When the assessment is performed on a collective basis the financial instruments are grouped based on their common credit risk characteristics such as past due information and credit risk ratings.The Company determines that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.Credit-impaired financial assets At balance sheet date the Company assesses whether financial assets measured at amortised cost and debt investments measured at fair value through other comprehensive income are credit-impaired. A financial asset is credit-impaired when one or more events that have an adverse effect on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable events: Significant financial difficulty of the issuer or debtor; A breach of contract by the debtor such as a default or delinquency in interest or principal payments; 190 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (5) Impairment of financial assets (Continued) Credit-impaired financial assets (Continued) For economic or contractual reasons relating to the debtor’s financial difficulty the Company having granted to the debtor a concession that would not otherwise consider; It becoming probable that the debtor will enter bankruptcy or other financial reorganisation; The disappearance of an active market for that financial asset because of financial difficulties of the issuer or debtor.Presentation of provisions for ECLs ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk upon initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss for the current period. For financial assets measured at amortised cost the provisions of impairment is deducted from the carrying amount of the financial assets presented in the balance sheet; for debt investments at fair value through other comprehensive income the Company makes provisions of impairment in other comprehensive income without reducing the carrying amount of the financial asset.Write-offs The book balance of a financial asset is directly written off to the extent that there is no realistic prospect of recovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutes derecognition of such financial asset. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.If a write-off of financial assets is subsequently recovered the recovery is credited to profit or loss in the period in which the recovery occurs. 2024 ANNUAL REPORT 191XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 11. Financial instruments (Continued) (6) Transfer of financial assets Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than the issuer of such financial assets (the transferee).If the Company transfers substantially all the risks and rewards of ownership of the financial asset to the transferee the financial asset shall be derecognised. If the Company retains substantially all the risks and rewards of ownership of a financial asset the financial asset shall not be derecognised.If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset it accounts for the transaction as follows: if the Company does not retain control it derecognises the financial asset and recognises any resulting assets or liabilities; if the control over the financial asset is not waived the relevant financial asset is recognised according to the extent of its continuing involvement in the transferred financial asset and the relevant liability is recognised accordingly. (7) Offset of financial assets and financial liabilities If the Company owns the legitimate rights of offsetting the recognised financial assets and financial liabilities which are enforceable currently and the Company plans to realise the financial assets or to clear off the financial liabilities on a net amount basis or simultaneously the net amount of financial assets and financial liabilities shall be presented in the balance sheet upon offsetting. Otherwise financial assets and financial liabilities are presented separately in the balance sheet without offsetting. 12. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.The Company measures the relevant asset and liability at fair value based on the presumption that the orderly transaction to sell the asset or transfer the liability takes place either in the principal market for the relevant asset or liability or in the absence of a principal market in the most advantageous market for relevant the asset or liability. The principal or the most advantageous market must be a trading market accessible by the Company at the measurement date. The Company adopts the presumption that market participants would use when pricing the asset or liability in their best economic interest.If there exists an active market for a financial asset or financial liability the Company uses the quotation on the active market as its fair value. If the market for a financial instrument is inactive the Company uses valuation technique to recognise its fair value.Fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its best use or by selling it to another market participant that would use the asset in its best use.The Company adopts valuation techniques that are appropriate in the current circumstance and for which sufficient data and other information are available prioritises the use of relevant observable inputs and uses unobservable inputs only under the circumstances where such relevant observable inputs cannot be obtained or practicably obtained. 192 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 12. Fair value measurement (Continued) Assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole.Level 1: based on quoted prices (unadjusted) in active markets for identical assets or liabilities obtainable at the measurement date. Level 2: observable inputs for the relevant asset or liability either directly or indirectly except for Level 1 input. Level 3: unobservable inputs for the relevant assets or liability.At each balance sheet date the Company reassesses assets and liabilities measured at fair value that are recognised in the financial statements on a recurring basis to determine whether transfers have occurred between fair value measurement hierarchy levels. 13. Inventories (1) Classification of inventories Inventories of the Company mainly include raw materials work in progress goods in stock development products and consumable biological assets etc. (2) Pricing of inventories dispatched Inventories of the Company are measured at their actual cost when obtained. Cost of raw materials goods in stock and others will be calculated with weighted average method when being dispatched.Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumable biological assets without a stock are stated at historical cost at initial recognition and subsequently measured at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current period. The cost of self-planting self-cultivating consumable biological assets is the necessary expenses directly attributable to such assets prior to canopy closure including borrowing costs eligible for capitalisation.Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or loss for the current period.The cost of consumable biological assets shall at the time of harvest or disposal be carried forward at carrying amount using the stock volume proportion method. (3) Recognition of and provision for inventory impairment At the balance sheet date inventories are measured at the lower of cost and net realisable value. If the net realisable value is below the cost of inventories a provision for inventory impairment is made.Net realisable value refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion estimated sales expenses and taxes and levies. The realisable value of inventories shall be determined on the basis of definite evidence purpose of holding the inventories and effect of after-balance- sheet-date events.The Company usually makes provisions for inventory impairment on the basis of individual inventory items; however for inventories with large quantities and lower unit prices these inventories are accrued impairment according to inventory categories. 2024 ANNUAL REPORT 193XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 13. Inventories (Continued) (4) Inventory stock taking system The Company implements permanent inventory system as its inventory stock taking system. (5) Amortisation of low-value consumables and packaging materials The low-value consumables of the Company are amortised when issued for use.Packaging materials for turnover are amortised when issued for use. 14. Long-term equity investments Long-term equity investments include the equity investments in subsidiaries joint ventures and associates. Associates of the Company are those investees that the Company imposes significant influence over. (1) Determination of initial investment cost Long-term equity investments acquired through business combinations: for a long-term equity investment acquired through a business combination involving enterprises under common control the investment cost shall be the absorbing party’s share of the carrying amount of the owners’ equity under the consolidated financial statements of the ultimate controlling party on the date of combination.For a long-term equity investment acquired through a business combination involving enterprises not under common control the investment cost of the long-term equity investment shall be the cost of combination. (2) Subsequent measurement and method for profit or loss recognition Investments in subsidiaries shall be accounted for using the cost method. Except for the investments which meet the conditions of holding for sale investments in associates and joint ventures shall be accounted for using the equity method.For a long-term equity investment accounted for using the cost method the cash dividends or profits declared by the investees for distribution shall be recognised as investment gains and included in profit or loss for the current period except the case of receiving the actual consideration paid for the investment or the declared but not yet distributed cash dividends or profits which is included in the consideration. 194 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 14. Long-term equity investments (Continued) (2) Subsequent measurement and method for profit or loss recognition (Continued) For a long-term equity investment accounted for using the equity method where the initial investment cost exceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date no adjustment shall be made to the investment cost of the long-term equity investment. Where the initial investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date adjustment shall be made to the carrying amount of the long-term equity investment and the difference shall be charged to profit or loss for the current period.Under the equity method investment gain and other comprehensive income shall be recognised based on the Company’s share of the net profits or losses and other comprehensive income made by the investee respectively. Meanwhile the carrying amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividend distributed by the investee. In respect of the other movement of net profit or loss other comprehensive income and profit distribution of investee the carrying amount of long-term equity investment shall be adjusted and included in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s net profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of acquisition after making appropriate adjustments thereto according to the accounting policies and accounting periods of the Company.For additional equity investment made in order to obtain significant influence or common control over investee without resulted in control the initial investment cost under the equity method shall be the aggregate of fair value of previously held equity investment and additional investment cost on the date of transfer. For investments in non-trading equity instruments that were previously classified as at fair value through other comprehensive income the cumulative fair value changes associated with them that were previously included in other comprehensive income are transferred to retained earnings upon the change to the equity method of accounting.In the event of loss of common control or significant influence over investee due to partial disposal of equity investment the remaining equity interest after disposal shall be accounted for according to the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The difference between its fair value and carrying amount shall be included in profit or loss for the current period. In respect of other comprehensive income recognised under previous equity investment using equity method it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when equity method was ceased to be used. Movement of other owners’ equity related to the previous equity investment shall be transferred to profit or loss for the current period. 2024 ANNUAL REPORT 195XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 14. Long-term equity investments (Continued) (2) Subsequent measurement and method for profit or loss recognition (Continued) In the event of loss of control over investee due to partial disposal of equity investment the remaining equity interest which can apply common control or impose significant influence over the investee after disposal shall be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using equity method since it is obtained and adjustment was made accordingly. For the remaining equity interest which cannot apply common control or impose significant influence over the investee after disposal it shall be accounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The difference between its fair value and carrying amount as at the date of losing control shall be included in profit or loss for the current period.If the shareholding ratio of the Company is reduced due to the capital increase of other investors and as a result the Company loses the control of but still can apply common control or impose significant influence over the investee the net asset increase due to the capital increase of the investee attributable to the Company shall be recognised according to the new shareholding ratio and the difference with the original carrying amount of the long-term equity investment corresponding to the shareholding ratio reduction part that should be carried forward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according to the new shareholding ratio as if equity method is used for accounting when acquiring the investment.In respect of the transactions between the Company and its associates and joint ventures the share of unrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Company. Investment gain or loss shall be recognised accordingly. However any unrealised loss arising from internal transactions between the Company and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets. (3) Basis for determining the common control and significant influence on the investee Common control is the contractually agreed sharing of control over an arrangement which relevant activities of such arrangement must be decided by unanimously agreement from parties who share control. When determining if there is any common control it should first be identified if the arrangement is controlled by all the participants or the group consisting of the participants and then determined if the decision on the arranged activity can be made only with the unanimous consent of the participants sharing the control. If all the participants or a group of participants can only decide the relevant activities of certain arrangement through concerted action it can be considered that all the participants or a group of participants share common control on the arrangement. If there are two or more participant groups that can collectively control certain arrangement it does not constitute common control. When determining if there is any common control the relevant protection rights will not be taken into account.Significant influence is the power of the investor to participate in the financial and operating policy decisions of an investee but to fail to control or joint control the formulation of such policies together with other parties.When determining if there is any significant influence on the investee the influence of the voting shares of the investee held by the investor directly and indirectly and the potential voting rights held by the investor and other parties which are exercisable in the current period and converted to the equity of the investee including the warrants stock options and convertible bonds that are issued by the investee and can be converted in the current period shall be taken into account. 196 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 14. Long-term equity investments (Continued) (3) Basis for determining the common control and significant influence on the investee (Continued) When the Company holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the voting shares of the investee it is generally considered to have significant influence on the investee unless there is concrete evidence to prove that it cannot participate in the production and operation decision-making of the investee and cannot pose significant influence in this situation. When the Company owns less than 20% of the voting shares of the investee it is generally considered that it has not significantly influenced on the investee unless there is concrete evidence to prove that it can participate in the production and operation decision- making of the investee and can impose significant influence in this situation. (4) Impairment test method and impairment provision For the method for making impairment provision for the investment in subsidiaries associates and joint ventures please refer to Note V. 23. 15. Investment property Investment property refers to real estate held to earn rentals or for capital appreciation or both. The investment property of the Company includes leased land use rights land use rights held for sale after appreciation and leased buildings.The investment property of the Company is measured initially at cost upon acquisition and subject to depreciation or amortisation in the relevant periods according to the relevant provisions on fixed assets or intangible assets.For the method for making impairment provision for the investment property adopted cost method for subsequent measurement please refer to Note V. 23.When an investment property is sold transferred retired or damaged the amount of proceeds on disposal of the property net of the carrying amount and related tax and surcharges is recognised in profit or loss for the current period. 16. Fixed assets (1) Conditions for recognition of fixed assets Fixed assets represent the tangible assets held by the Company using in the production of goods rendering of services and for operation and administrative purposes with useful life over one year.Fixed assets are recognised when it is probable that the related economic benefits will flow to the Company and the costs can be reliably measured.The Company’s fixed assets are initially measured at the actual cost at the time of acquisition.Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Company and the related cost can be reliably measured.The cost of routine repairs of fixed assets that do not qualify as capitalised subsequent expenditure is charged to current profit or loss or included in the cost of the related assets in accordance with the beneficiary object when incurred. The carrying amount of the replaced part is derecognised. 2024 ANNUAL REPORT 197XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 16. Fixed assets (Continued) (2) Depreciation method of fixed assets The Company adopts the straight-line method for depreciation. Provision for depreciation will be started when the fixed asset reaches its expected usable state and stopped when the fixed asset is derecognised or classified as a non-current asset held for sale. Without regard to the depreciation provision the Company determines the annual depreciation rate by category estimated useful lives and estimated residual value of the fixed assets as below: Year of Estimated residual Annual depreciation Category depreciation (year) value (%) rate (%) Housing and building structure 20-40 5-10 2.25-4.75 Machinery and equipment 8-20 5-10 4.50-11.88 Transportation equipment 5-8 5-10 11.25-19.00 Electronic equipment and others 5 5-10 18.00-19.00 Where for the fixed assets for which impairment provision is made to determine the depreciation rate the accumulated amount of the fixed asset impairment provision that has been made shall be deducted. (3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 23. (4) The Company will review the useful lives estimated net residual value and depreciation method of the fixed assets at the end of each year.When there is any difference between the useful lives estimate and the originally estimated value the useful lives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual value estimate and the originally estimated value the estimated net residual value shall be adjusted. (5) Disposal of fixed assets A fixed asset is derecognised on disposal or when it is expected that there shall be no economic benefit arising from using or after disposal. Where the fixed assets are sold transferred retired or damaged the income received after disposal after deducting the carrying amount and related taxes are recognised in profit or loss for the current period. 198 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 17. Construction in progress Construction in progress of the Company is recognised based on the actual construction cost including all necessary expenditures incurred for construction projects capitalised borrowing costs for the construction in progress before it has reached the working condition for its intended use and other related expenses during the construction period.A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended use. For technological transformation or new machine-made paper projects the projects will be put into trial operation for a period of time (usually three months) upon completion of construction. After the internal acceptance is completed during the trial operation period the construction in progress will be transferred to fixed assets.The method for impairment provision of construction in progress is set out in Note V. 23. 18. Materials for project The materials for project of the Group refer to various materials prepared for construction in progress including construction materials equipment not yet installed and tools for production.The purchased materials for project are measured at cost and the planning materials for project are transferred to construction in progress. After the completion of the project the remaining materials for project are transferred to inventory.The method for impairment provision of materials for project is set out in Note V. 23.The closing balance of materials for project is presented as “construction in progress” item in the balance sheet. 19. Borrowing costs (1) Recognition principle for the capitalisation of the borrowing costs The borrowing costs incurred by the Company directly attributable to the acquisition construction or production of a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will be recognised as expenses when incurred according to the incurred amount and included in the profit or loss for the current period. When the borrowing costs meet all the following conditions capitalisation shall be started: * The capital expenditure has been incurred which includes the expenditure incurred by paying cash transferring non-cash assets or undertaking interest-bearing liabilities for acquiring constructing or producing the qualifying assets; * the borrowing costs have been incurred; and * the acquisition construction or production activity necessary for the asset to be ready for its intended use or sale has been started. 2024 ANNUAL REPORT 199XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 19. Borrowing costs (Continued) (2) Capitalisation period of borrowing costs When a qualifying asset acquired constructed or produced by the Company is ready for its intended use or sale the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifying asset is ready for its intended use or sale shall be recognised as expenses when incurred according to the incurred amount and included in the profit or loss for the current period.Capitalisation of borrowing costs shall be suspended during periods in which the acquisition construction or production of a qualifying asset is interrupted abnormally when the interruption is for a continuous period of more than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruption period. (3) Calculation methods for capitalisation rate and capitalised amount of the borrowing costs Where funds are borrowed for a specific purpose the amount of interest to be capitalised shall be the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used into banks or any investment income on the temporary investment of those funds. Where funds are borrowed for general purpose the Company shall determine the amount of interest to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings.The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.During the capitalisation period exchange differences on a specific purpose borrowing denominated in foreign currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in foreign currency shall be included in profit or loss for the current period. 20. Bearer biological assets (1) Standards for recognising bearer biological assets Bearer biological assets refer to biological assets held for the purpose of producing agricultural products providing labour services or renting. The Company’s bearer biological assets are mainly tea trees. Bearer biological assets are initially measured at cost. The cost of a planted or propagated bearer biological asset includes the expenses directly attributable to the asset and necessarily incurred before the asset is ready for its intended production and operation including the borrowing costs that are eligible for capitalisation.The management protection and feeding costs of a biological asset subsequent to crown closure or after the asset is ready for its intended production and operation are expensed and recognised in profit or loss as incurred. According to experience the tea trees grown by the Company generally take 7 years to reach the crown closure stage.Depreciation of bearer biological assets is calculated using the straight-line method over the estimated useful life of each biological asset less its residual value as follows: Type of bearer biological Estimated residual Annual depreciation assets Useful life (year) value (%) rate (%) Tea tree 20 5.00 200 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 20. Bearer biological assets (Continued) (1) Standards for recognising bearer biological assets (Continued) The Company reviews the useful life and estimated net residual value of a bearer biological asset and the depreciation method applied at least at each financial year-end. A change in the useful life or estimated net residual value of a fixed asset or the depreciation method used shall be accounted for as a change in accounting estimate.The difference between the disposal income of the sale loss death or damage of a bearer biological asset net of its carrying amount and related taxes is recognised in profit or loss for the current period. (2) Treatment of impairment of bearer biological assets The method for impairment provision of bearer biological assets is set out in Note V. 23. 21. Intangible assets The intangible assets of the Company include land use rights software patents and certificates of third party right.The intangible asset is initially measured at cost and its useful life is determined upon acquisition. If the useful life is finite the intangible asset will be amortised over the estimated useful life using the amortisation method that can reflect the estimated realisation of the economic benefits related to the asset starting from the time when it is available for use. If it is unable to reliably determine the estimated realisation straight-line method shall be adopted for amortisation. The intangible assets with uncertain useful life will not be amortised.The amortisation methods for the intangible assets with finite useful life are as follows: The basis for Method of Category Useful life determining useful life amortisation Remark Land use rights 50-70 Years of certificate Straight-line method Software 5-10 Estimated years for Straight-line method software replacement Patents 5-20 Useful life of purchase Straight-line method Certificates of third party right 3 Useful life of purchase Straight-line method The Company reviews the useful life and amortisation method of the intangible assets with finite useful life at the end of each year. If it is different from the previous estimates the original estimates will be adjusted and will be treated as a change in accounting estimate.If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic benefit to the company the carrying amount of the intangible asset will be entirely transferred into the profit or loss for the current period.The impairment method for the intangible assets is set out in Note V. 23. 2024 ANNUAL REPORT 201XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 22. R&D expenses The R&D expenses of the Company are expenses directly related to the R&D activities of the Company including the wages R&D staff direct investment costs depreciation expenses and long-term prepaid expenses design expenses equipment testing expenses amortisation expenses of intangible assets and outsourced R&D expenses and other expenses. Among them the wages of R&D staff are included in R&D expenses based on working hours of related projects. Equipment production lines and sites shared between R&D activities and other production and operation activities are included in R&D expenses according to the proportion of working hours and the proportion of area.The Company divides the expenses on internal R&D projects into expenses in the research phase and expenses in the development phase. All R&D expenses of the Company are included in the current profits and losses when incurred. 23. Asset impairment Impairment of long-term equity investments in subsidiaries associates and joint ventures asset impairment on investment property fixed assets construction in progress bearer biological assets measured at cost right-of- use assets intangible assets goodwill and others (excluding inventories deferred tax assets and financial assets) subsequently measured at cost is determined as follows: The Company determines if there is any indication of asset impairment as at the balance sheet date. If there is any evidence indicating that an asset may be impaired recoverable amount shall be estimated for impairment test.Goodwill arising from business combinations intangible assets with an indefinite useful life and intangible assets not ready for intended use will be tested for impairment annually regardless of whether there is any indication of impairment.The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. The Company estimates the recoverable amount of an individual asset. If it is not possible to estimate the recoverable amount of the individual asset the Company shall determine the recoverable amount of the asset group to which the asset belongs. The determination of an asset group is based on whether major cash inflows generated by the asset group are independent of the cash inflows from other assets or asset groups.When the recoverable amount of an asset or an asset group is less than its carrying amount the carrying amount is reduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision is made accordingly.For the purpose of impairment test of goodwill the carrying amount of goodwill acquired in a business combination is allocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocate to the related asset groups it is allocated to the combination of related asset groups. The related asset groups or combination of asset groups are those which can benefit from the synergies of the business combination and are not larger than the reportable segments identified by the Company.In the impairment test if there is any indication that an asset group or a combination of asset groups related to goodwill may be impaired the Company first tests the asset group or set of asset groups excluding goodwill for impairment calculates the recoverable amount and recognises the corresponding impairment loss. An impairment test is then carried out on the asset group or combination of asset groups containing goodwill by comparing its carrying amount with its recoverable amount. If the recoverable amount is lower than the carrying amount an impairment loss is recognised for goodwill.An impairment loss recognised shall not be reversed in a subsequent period. 202 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 24. Long-term prepaid expenses The long-term prepaid expenses incurred by the Company shall be recognised based on the actual cost and evenly amortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequent accounting periods its value after amortisation shall be entirely included in the profit or loss for the current period. 25. Contract liabilities A contract liability represents the Company’s obligation to transfer goods to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If the customer has already paid the contract consideration before the Company transfers goods to the customer or the Company has obtained the unconditional collection right the Company will recognise such amount received or receivable as contract liabilities at earlier of the actual payment by the customer or the amount payable becoming due. Contract assets and contract liabilities under the same contract are presented on a net basis and contract assets and contract liabilities under different contracts are not offset. 26. Employee benefits (1) Scope of employee benefits Employee benefits are all forms of considerations or compensation given by an entity in exchange for services rendered by employees or for the termination of employment. Employee benefits include short-term staff remuneration post-employment benefits termination benefits and other long-term employee benefits.Employee benefits include benefits provided to employees’ spouses children other dependants survivors of the deceased employees or other beneficiaries.Employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable” in the balance sheet respectively according to liquidity. (2) Short-term staff remuneration Employee wages or salaries actually incurred bonuses and social insurance contributions such as medical insurance work injury insurance maternity insurance and housing fund contributed at the applicable benchmarks and rates are recognised as a liability as the employees provide services with a corresponding charge to profit or loss or included in the cost of assets where appropriate. 2024 ANNUAL REPORT 203XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 26. Employee benefits (Continued) (3) Post-employment benefits Post-employment benefit plans include defined contribution plans and defined benefit plans. A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate fund and the Company has no further obligations for payment. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.Defined contribution plans Defined contribution plans include basic pension insurance unemployment insurance and enterprise annuity plan (if any).During the accounting period in which an employee provides service the amount payable calculated according to the defined contribution plan is recognised as a liability and included in the profit or loss for the current period or the cost of relevant assets. (4) Termination benefits When the Company provides termination benefits to employees employee benefits liabilities arising from termination benefits are recognised in profit or loss for the current period at the earlier of the following dates: when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labour relationship plans and employee redundant proposals; the Company recognises cost and expenses related to payment of compensation for dismissal and restructuring.For the early retirement plans economic compensations before the actual retirement date were classified as termination benefits. During the period from the date of cease of render of services to the actual retirement date relevant wages and contribution to social insurance for the employees proposed to be paid are recognised in profit or loss on a one-off basis. Economic compensation after the official retirement date such as normal pension is accounted for as post-employment benefits. 204 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 26. Employee benefits (Continued) (5) Other long-term benefits Other long-term employee benefits provided by the Group to employees that meet the conditions for defined contribution plans are accounted for in accordance with the relevant provisions relating to defined contribution plans as stated above. If the conditions for defined benefit plans are met the benefits shall accounted for inaccordance with the relevant provisions relating to defined benefit plans but the “changes arising from theremeasurement of net liabilities or net assets of defined benefit plans” in the relevant employee benefits shall be included in the current profit and loss or the relevant costs of assets. 27. Provisions Obligations pertinent to the contingencies which satisfy the following conditions are recognised by the Company as provisions: (1) the obligation is a current obligation borne by the Company; (2) it is likely that an outflow of economic benefits from the Company will be resulted from the performance of the obligation; (3) the amount of the obligation can be reliably measured. The provisions shall be initially measured based on the best estimate for the expenditure required for the performance of the current obligation after taking into account relevant risks uncertainties time value of money and other factors pertinent to the contingencies. If the time value of money has significant influence the best estimates shall be determined after discounting the relevant future cash outflow. The Company reviews the carrying amount of the provisions on the balance sheet date and adjust the carrying amount to reflect the current best estimates.If all or some expenses incurred for settlement of recognised provisions are expected to be borne by the third party the compensation amount shall on a recoverable basis be recognised as asset separately and compensation amount recognised shall not be more than the carrying amount of provisions. 28. Share-based payments and equity instruments (1) Category of share-based payment The Company’s share-based payment is either equity-settled or cash-settled. (2) Determination of fair value of equity instruments For the existence of an active market for options and other equity instruments granted by the Company the fair value is determined at the quoted price in the active market. For options and other equity instruments with no active market option pricing model shall be used to estimate the fair value of the equity instruments. The following factors shall be taken into account using option pricing models: A. the exercise price of the option; B.the validity period of the option; C. the current market price of the share; D. the expected volatility of the share price; E. predicted dividend of the share; and F. risk-free rate of the option within the validity period. 2024 ANNUAL REPORT 205XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 28. Share-based payments and equity instruments (Continued) (3) Recognition of vesting of equity instruments based on the best estimate On each balance sheet date within the vesting period the estimated number of equity instruments expected to vest is revised based on the best estimate made by the Company according to the latest available subsequent information as to changes in the number of employees with exercisable rights. On the vesting date the final estimated number of equity instruments expected to vest should equal the actual number of equity instruments expected to vest. (4) Accounting treatment of implementation modification and termination of share-based payment Equity-settled share-based payment shall be measured at the fair value of the equity instruments granted to employees. For those may immediately vest after the grant the fair value of equity instrument at the grant date shall be included in the relevant costs or expenses and the capital reserve shall be increased accordingly.If the right may not be exercised until the vesting period comes to an end or until the specified performance conditions are met on each balance sheet date within the vesting period the services obtained in the current period shall based on the best estimate of the number of vested equity instruments be included in the relevant costs or expenses and the capital reserve at the fair value of the equity instrument at the grant date. After the vesting period relevant costs or expenses and total shareholders’ equity which have been recognised will not be adjusted.Cash-settled share-based payment shall be measured in accordance with the fair value of liability calculated and recognised based on the shares or other equity instruments undertaken by the Company. For those may immediately vest after the grant the fair value of the liability undertaken by the Company shall on the date of the grant be included in the relevant costs or expenses and the liabilities shall be increased accordingly. If the right may not be exercised until the vesting period comes to an end or until the specified performance conditions are met on each balance sheet date within the vesting period the services obtained in the current period shall based on the best estimate of the information about the exercisable right be included in the relevant costs or expenses and the corresponding liabilities at the fair value of the liability undertaken by the Company. For each of the balance sheet date and settlement date before the settlement of the relevant liabilities fair value of the liabilities shall be remeasured and the changes will be included in the profit or loss for the current period.When there are changes in Company’s share-based payment plans if the modification increases the fair value of the equity instruments granted corresponding recognition of service increase in accordance with the increase in the fair value of the equity instruments; if the modification increases the number of equity instruments granted the increase in fair value of the equity instruments is recognised as a corresponding increase in service achieved. An increase in the fair value of equity instruments refers to the difference between the fair values of the modified date. If the modification reduces the total fair value of shares paid or not conductive to the use of other employees share-based payment plans to modify the terms and conditions of service it will continue to be accounted for in the accounting treatment as if the change had not occurred unless the Company cancelled some or all of the equity instruments granted.During the vesting period if the cancelled equity instruments (except for failure to meet the conditions of the non-market vesting conditions) granted by the Company to cancel the equity instruments granted amount treated as accelerated vesting of the remaining period should be recognised immediately in profit or loss while recognising capital reserves. If employees or other parties can choose to meet non-vesting conditions but they are not met in the vesting period the Company will treat them as cancelled equity instruments granted. (5) Restricted shares If the Company grants the restricted shares to incentive participants under an equity incentive plan the incentive participants shall subscribe for the shares first. If the unlocking conditions stipulated in the equity incentive plan cannot be fulfilled subsequently the Company repurchase the shares at the predetermined price. If the registration and other capital increase procedures for the restricted shares issued to employees are completed in accordance with relevant regulations the Company recognises share capital and capital reserve (or capital premium) based on the subscription money received from the employees on the grant date; and recognises treasury shares and other payables for repurchase obligation. 206 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 29. Other financial instruments such as preference shares and Perpetual Bonds (1) Classification of financial liabilities and equity instruments Financial instruments issued by the Company are classified into financial assets financial liabilities or equity instruments on the basis of the substance of the contractual arrangements and the economic nature not only its legal form together with the definition of financial asset financial liability and equity instruments on initial recognition. (2) Accounting treatment of other financial instruments such as preference shares and Perpetual Bonds Financial instruments issued by the Company are initially recognised and measured in accordance with the financial instrument standards; thereafter interest or dividends are accrued on each balance sheet date and accounted for in accordance with relevant specific ASBEs i.e. to determine the accounting treatment for interest expenditure or dividend distribution of the instrument based on the classification of the financial instrument issued. For financial instruments classified as equity instruments their interest expenses or dividend distributions are treated as profit distribution of the Company and their repurchases and cancellations are treated as changes in equity; for financial instruments classified as financial liabilities their interest expenses or dividend distribution are in principle accounted for with reference to borrowing costs and the gains or losses arising from their repurchases or redemption are included in the profit or loss for the current period.For the transaction costs such as fees and commissions incurred by the Company for issuing financial instruments if such financial instruments are classified as debt instruments and measured at amortised cost they are included in the initial measured amount of the instruments issued; if such financial instruments are classified as equity instruments they are deducted from equity. 30. Revenue (1) General principles The Company recognises revenue when it satisfies a performance obligation in the contract i.e. when the customer obtains control of the relevant goods or services.Where a contract has two or more performance obligations the Company allocates the transaction price to each performance obligation based on the percentage of respective unit price of goods or services guaranteed by each performance obligation and recognises as revenue based on the transaction price that is allocated to each performance obligation.If one of the following conditions is fulfilled the Company performs its performance obligation within a certain period; otherwise it performs its performance obligation at a point of time: * when the customer simultaneously receives and consumes the benefits provided by the Company when the Company performs its obligations under the contract; * when the customer is able to control the goods in progress in the course of performance by the Company under the contract; * when the goods produced by the Company under the contract are irreplaceable and the Company has the right to payment for performance completed to date during the whole contract term. 2024 ANNUAL REPORT 207XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 30. Revenue (Continued) (1) General principles (Continued) For performance obligations performed within a certain period the Company recognises revenue by measuring the progress towards complete of that performance obligation within that certain period. When the progress of performance cannot be reasonably determined if the costs incurred by the Company are expected to be compensated the revenue shall be recognised at the amount of costs incurred until the progress of performance can be reasonably determined.For performance obligation performed at a point of time the Company recognises revenue at the point of time at which the customer obtains control of relevant goods or services. To determine whether a customer has obtained control of goods or services the Company considers the following indications: * The Company has the current right to receive payment for the goods which is when the customer has the current payment obligations for the goods.* The Company has transferred the legal title of the goods to the customer which is when the client possesses the legal title of the goods.* The Company has transferred the physical possession of goods to the customer which is when the customer obtains physical possession of the goods.* The Company has transferred all of the substantial risks and rewards of ownership of the goods to the customer which is when the customer obtain all of the substantial risks and rewards of ownership of the goods to the customer.* The customer has accepted the goods or services.* Other information indicates that the customer has obtained control of the goods. (2) Specific methods The Company’s revenue mainly comes from the following types of business: sales of goods provision of hotel and property services and provision of financial leasing and factoring services.Sales of goods The Company produces and sells machine-made paper and raw materials electricity and steam construction materials papermaking chemicals plastic automobile accessories moulds and other products.In terms of domestic sales revenue is recognised at a point in time when the control over the goods is transferred after the Company has delivered the goods (other than electricity and steam) sold to the location as specified in the contract and the customer has accepted the goods.In terms of overseas sales revenue is recognised on the day when the goods (other than electricity and steam) sold are loaded on board and declared. 208 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 30. Revenue (Continued) (2) Specific methods (Continued) Sales of goods (Continued) The sales of electricity and steam by the Company are performance obligations performed within a certain period. For sales of electricity the Company recognises revenue from sales of electricity based on the quantity of electricity delivered to customers every month at a price agreed in the contract. For sales of steam the Company recognises revenue from sales of steam based on the amount of steam delivered to customers every month at a price agreed in the contract.The credit periods granted by the Company to customers in various industries are consistent with the practices of various industries therefore there is no significant financing component.The Company provides product quality assurance for the sales of products and recognises corresponding provisions. The Company does not provide any additional services or additional quality assurance so the product quality assurance does not constitute a separate fulfilment obligation.The Company’s cooperation model with distributors is outright sales and the recognition of sales revenue under the distribution model is consistent with the direct sales model.Certain contracts between the Company and its customers contain arrangements on sales rebates which will give rise to variable consideration. Where a contract contains variable consideration the Company determines the best estimates on the variable consideration based on expected values or the most probable amount provided that transaction prices including variable consideration shall not exceed the cumulative amount of recognised revenue upon the removal of relevant uncertainties in connection with which a significant reversal is highly unlikely.For sales of machine-made paper with sales return clauses the revenue recognised is subject to the cumulative amount of recognised revenue in connection with which a significant reversal is highly unlikely. The Company recognises the liabilities according to the expected amount of refund and recognises the carrying amount of the goods returned at the time of transfer deducting the estimated cost of recovering the goods as an asset (including the loss of the value of the returned goods).Provision of hotel and property services The Company provides hotel and property services to external parties. Since the customers obtain and consume the economic benefits brought by the Company’s performance of the contract while the Company performs the contract the Company recognises revenue according to the progress of the contract performance.Since the performance progress occurs evenly the Company recognises revenue by amortising on a straight- line basis over the service period. Since the performance progress occurs evenly the Company recognises revenue by amortising on a straight-line basis over the service period.Provision of financial leasing and factoring services The Company recognises revenue from external financial leasing and factoring services according to the effective interest rate.For assets that have not experienced credit impairment the Company determines its interest income based on the amount of the book balance of the financial asset (i.e. without considering the impact of impairment) multiplied by the effective interest rate. 2024 ANNUAL REPORT 209XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 30. Revenue (Continued) (2) Specific methods (Continued) Provision of financial leasing and factoring services (Continued) There are two cases for financial assets with credit impairment: For financial assets that are not credit-impaired when purchased or originated but are credit-impaired in subsequent periods the Company shall in the subsequent periods when impairment occurs determine its income based on the amount of the amortised cost of the financial asset (i.e. the book balance minus the accrued impairment) multiplied by the effective interest rate (the effective interest rate determined at the time of initial recognition which does not change due to the occurrence of impairment).For financial assets that are credit-impaired when purchased or originated the Company shall upon initial recognition determines its income based on the amount of the amortised cost of the financial asset multiplied by the credit-adjusted effective interest rate (i.e. the interest rate at which the projected future cash flows after impairment are discounted to the amortised cost at the time of purchase or origination). 31. Contract costs Contract costs are either the incremental costs of obtaining a contract with a customer or the costs to fulfil a contract with a customer.Incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained e.g. sales commission. The Company recognises the incremental costs of obtaining a contract with a customer as an asset if it expects to recover those costs. Other costs of obtaining a contract other than incremental costs that are expected to be recovered are recognised in profit or loss in the period in which they are incurred.If the costs to fulfil a contract with a customer are not within the scope of inventories or other ASBEs the Company recognises an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria: * the costs relate directly to an existing contract or to a specifically identifiable anticipated contract including direct labour direct materials allocations of overheads (or similar costs) costs that are explicitly chargeable to the customer and other costs that are incurred only because the Company entered into the contract; * the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; * the costs are expected to be recovered. 210 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 31. Contract costs (Continued) Assets recognised for the incremental costs of obtaining a contract and assets recognised for the costs to fulfil a contract (the “assets related to contract costs”) are amortised on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate and recognised in profit or loss for the current period. If the amortisation period does not exceed one year it shall be recognised in profit or loss for the current period.The Company recognises an impairment loss in profit or loss to the extent that the carrying amount of an asset related to contract costs exceeds: * remaining amount of consideration that the Company expects to receive in exchange for the goods or services to which the asset relates; * the cost estimated to be happened for the transfer of related goods or services. 32. Government grants A government grant is recognised when the grant will be received and that the Company will comply with the conditions attaching to the grant.If a government grant is in the form of a monetary asset it is measured at the amount received or receivable. If a government grant is in the form of non-monetary asset it is measured at fair value; if the fair value cannot be obtained in a reliable way it is measured at the nominal amount of RMB1.Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset formation are classified as government grants related to assets while the remaining government grants are classified as government grants related to revenue.Regarding the government grant not clearly defined in the official documents and can form long-term assets the part of government grant which can be referred to the value of the assets is classified as government grant related to assets and the remaining part is government grant related to revenue. For the government grant that is difficult to distinguish the entire government grant is classified as government grant related to revenue. 2024 ANNUAL REPORT 211XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 32. Government grants (Continued) A government grant related to an asset shall be recognised as deferred income and evenly amortised to profit or loss over the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue if the grant is a compensation for related costs expenses or losses incurred the grant shall be recognised in profit or loss for the current period or used to offset related costs; if the grant is a compensation for related costs expenses or losses to be incurred in subsequent periods the grant shall be recognised as deferred income and recognised in profit or loss over the periods in which the related costs expenses or losses are recognised or used to offset related costs. A government grant measured at nominal amount is directly included in profit or loss for the current period. The Company adopts a consistent approach to the same or similar government grants.A government grant related to daily activities is recognised in other gains or used to offset related costs relying on the essence of economic business; otherwise recognised in non-operating income or used to offset non-operating expenses.For the repayment of a government grant already recognised if the carrying amount of relevant assets was written off at initial recognition the carrying amount of the assets shall be adjusted; if there is any related deferred income the repayment shall be offset against the carrying amount of the deferred income and any excess shall be recognised in profit or loss for the current period; otherwise the repayment shall be recognised immediately in profit or loss for the current period. 33. Deferred income tax assets/deferred income tax liabilities Income tax comprises current income tax expense and deferred income tax expense which are included in profit or loss for the current period as income tax expenses except for deferred tax related to transactions or events that are directly recognised in owners’ equity which are recognised in owners’ equity and deferred tax arising from a business combination which is adjusted against the carrying amount of goodwill.Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base at the balance sheet date of the Company shall be recognised as deferred income tax using the balance sheet liability method.All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in the following transactions: (1) The initial recognition of goodwill and the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when the transaction occurs (other than a single transaction that the initially recognised assets and liabilities result in an equal amount of taxable temporary differences and deductible temporary differences); (2) The taxable temporary differences associated with investments in subsidiaries associates and joint ventures and the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 212 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 33. Deferred income tax assets/deferred income tax liabilities (Continued) The Company recognises a deferred income tax asset for the carry forward of deductible temporary differences deductible losses and tax credits to subsequent periods to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences deductible losses and tax credits can be utilised except for those incurred in the following transactions: (1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when the transaction occurs (other than a single transaction that the initially recognised assets and liabilities result in an equal amount of taxable temporary differences and deductible temporary differences); (2) The deductible temporary differences associated with investments in subsidiaries associates and joint ventures the corresponding deferred income tax asset is recognised when both of the following conditions are satisfied: it is probable that the temporary difference will reverse in the foreseeable future and it is probable that taxable profits will be available in the future against which the temporary difference can be utilised.At the balance sheet date deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their tax effect is reflected accordingly.At the balance sheet date the Company reviews the carrying amount of a deferred income tax asset. If it is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be utilised the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.At the balance sheet date deferred income tax assets and deferred income tax liabilities are presented as the net amount after offsetting when the following conditions are met at the same time: (1) The tax payer within the Company has the legal right to settle current income tax assets and current income tax liabilities on a net basis; (2) Deferred income tax assets and deferred income tax liabilities are related to income taxes levied by the same tax collection and administration authority on the same taxpayer within the Company. 34. Leases (1) Identification of leases On the beginning date of the contract the Company (as a lessee or lessor) assesses whether the customer in the contract has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use and has the right to direct the use of the identified asset throughout the period of use. If a contract conveys the right to control the use of an identified asset and multiple identified assets for a period of time in exchange for consideration the Company identifies such contract is or contains a lease. (2) The Company as lessee On the beginning date of the lease the Company recognises right-of-use assets and lease liabilities for all leases except for short-term lease and low-value asset lease with simplified approach.The accounting policy for right-of-use assets is set out in Note V. 35. 2024 ANNUAL REPORT 213XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 34. Leases (Continued) (2) The Company as lessee (Continued) The lease liability is initially measured at the present value of the lease payments that are not paid at the beginning date of the lease using the interest rate implicit in the lease. Where the interest rate implicit in the lease cannot be determined the incremental borrowing rate is used as the discount rate. Lease payments include fixed payments and in-substance fixed payments less any lease incentives receivable; variable lease payments that are based on an index or a rate; the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; payments for terminating the lease if the lease term reflects the lessee exercising that option of terminating; and amounts expected to be payable by the lessee under residual value guarantees. Subsequently the interest expense on the lease liability for each period during the lease term is calculated using a constant periodic rate of interest and is recognised in profit or loss for the current period.Variable lease payments not included in the measurement of lease liabilities are recognised in profit or loss for the period in which they actually arise.Short-term lease Short-term leases refer to leases with a lease term of less than 12 months from the commencement date except for those with a purchase option.Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on a straight-line basis over the lease term.For short-term leases the Company chooses to adopt the above simplified approach for the following types of assets that meet the conditions of short-term lease according to the classification of leased assets.Low-value equipment Transportation vehicles Low-value asset lease A low-value asset lease is a lease that the value of a single leased asset is below RMB40000 when it is a new asset.Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term and either included in the cost of the related asset or charged to profit or loss for the current period.For a low-value asset lease the Company chooses the above simplified approach based on the specific circumstances of each lease. 214 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 34. Leases (Continued) (2) The Company as lessee (Continued) Lease modification The Company accounts for a lease modification as a separate lease when the modification occurs and the following conditions are met: * the lease modification expands the scope of lease by adding the right to use one or more of the leased assets; and * the increase in consideration is equivalent to the separate price for the expanded scope of lease adjusted for that contractual situation.Where a lease modification is not accounted for as a separate lease at the effective date of the lease modification the Company reallocates the consideration of the modified contract redetermines the lease term and remeasures the lease liability based on the present value of the lease payments after the modification and the revised discount rate.If a lease modification results in a reduction in the scope of the lease or a shortening of the lease term the Company reduces the carrying amount of the right-of-use asset accordingly and includes in the profit or loss for the period the gain or loss associated with the partial or complete termination of the lease.Where other lease modifications result in a remeasurement of the lease liability the Company adjusts the carrying amount of the right-of-use asset accordingly. (3) The Company as lessor When the Company is a lessor a lease is classified as a finance lease whenever the terms of the lease transfer substantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases are classified as operating leases.Finance leases Under finance leases the Company accounts for finance lease receivables at the beginning of the lease term at the net lease investment which is the sum of the unsecured residual value and the present value of the lease receipts outstanding at the commencement date of the lease discounted at the interest rate implicit in the lease. The Company as lessor calculates and recognises interest income for each period of the lease term based on a fixed periodic interest rate. Variable lease payments acquired by the Company as lessor that are not included in the net measurement of lease investments are included in profit or loss for the period when they are actually incurred.Derecognition and impairment of finance lease receivables are accounted for in accordance with the requirements under the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments and the Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets. 2024 ANNUAL REPORT 215XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 34. Leases (Continued) (3) The Company as lessor (Continued) Operating lease Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on a straight-line basis over the lease term. Lease payments under operating leases are recognised in profit or loss on a straight-line basis over the lease term. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease term on the same basis as rental income and recognised in profit or loss for the current period. The variable lease payments obtained in relation to operating leases that are not included in the lease payments are recognised in profit or loss in the period in which they actually incurred.Lease modification The Company accounts for a modification in an operating lease as a new lease from the effective date of the modification and the amount of lease receipts received in advance or receivable in respect of the lease prior to the modification is treated as a receipt under the new lease.The Company accounts for a modification in a finance lease as a separate lease when the change occurs and the following conditions are met: * the modification expands the scope of lease by adding the right to use one or more of the leased assets; and * the increase in consideration is equivalent to the separate price for the expanded scope of lease adjusted for that contractual situation.Where a finance lease is modified and not accounted for as a separate lease the Company accounts for the modified lease in the following circumstances: * If the modification takes effect on the lease commencement date the lease will be classified as an operating lease the Company will account for it as a new lease from the effective date of the lease modification and use the net lease investment before the effective date of the lease modification; * If the modification takes effect on the lease commencement date the lease will be classified as a finance lease and the Company will conduct accounting treatment in accordance with the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments on modifying or renegotiating contracts. (4) Sublease When the Company is an intermediate lessor the sublease is classified with reference to the right-of-use assets arising from the head lease. If the head lease is a short-term lease for which the Company adopts a simplified approach then the Company classifies the sublease as an operating lease. 216 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 34. Leases (Continued) (5) Sale and leaseback The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and leaseback transaction is a sale in accordance with the requirements of the Accounting Standard for Business Enterprises No. 14 – Revenue.Where asset transfer under the sale and leaseback transactions is a sale the lessee shall measure the right- of-use assets created by the sale and leaseback based on the portion of carrying amount of the original assets related to right of use obtained upon leaseback and only recognise relevant profit or loss for the right transferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicable ASBEs and account for the lease of assets in accordance with this standard.Where asset transfer under the sale and leaseback transactions is not a sale the lessee shall continue to recognise the transferred assets while recognising a financial liability equal to the transfer income and account for such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial asset equal to the transfer income and account for such asset according to the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments. 35. Right-of-use assets (1) Conditions for recognition of right-of-use assets Right-of-use assets are defined as the right of underlying assets in the lease term for the Company as a lessee.Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes the amount of the initial measurement of lease liability; lease payments made at or before the inception of the lease less any lease incentives enjoyed; initial direct costs incurred by the Company as lessee; costs to be incurred in dismantling and removing the underlying assets restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease incurred by the Company as lessee. As a lessee the Company recognises and measures the costs of dismantling and restoration in accordance with the Accounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently the lease liability is adjusted for any remeasurement of the lease liability. (2) Depreciation method of right-of-use assets The Company uses the straight-line method for depreciation. Where the Company as a lessee is reasonably certain to obtain ownership of the leased asset at the end of the lease term such asset is depreciated over the remaining useful life of the leased asset. Where ownership of the lease assets during the lease term cannot be reasonably determined right-of-use assets are depreciated over the lease term or the remainder of useful lives of the lease assets whichever is shorter. (3) For the methods of impairment test and impairment provision of right-of-use assets please refer to Note V. 23. 2024 ANNUAL REPORT 217XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 36. Production safety expenses and maintenance costs According to relevant provisions the Company makes provisions for production safety expenses based on the revenue of the power plant in the previous year and the prescribed percentages. The specific provisions are as follows: * if the revenue of the previous year did not exceed RMB10 million provisions would be made at 3%; * if the revenue of the previous year exceeded RMB10 million but did not exceed RMB100 million provisions would be made at 1.5%; * if the revenue of the previous year exceeded RMB100 million but did not exceed RMB1000 million provisions would be made at 1%; * if the revenue of the previous year exceeded RMB1000 million but did not exceed RMB5000 million provisions would be made at 0.8%; * if the revenue of the previous year exceeded RMB5000 million but did not exceed RMB10000 million provisions would be made at 0.6%; * if the revenue of the previous year exceeded RMB10000 million provisions would be made at 0.2%.Provisions for production safety expenses are included in the cost of related products or profit or loss of the current period and included in “special reserves” correspondingly.When the provisions for production safety expenses and maintenance costs are utilised within the prescribed scope if such production safety expenses are applied and related to revenue expenditures specific reserve is directly offset.When fixed assets are incurred they are included in the “construction in progress” item and transferred to fixed assets when the status of the assets is ready for intended use. They are then offset against specific reserve based on the amount included in fixed assets while corresponding amount is recognised in accumulated depreciation. Such fixed assets are no longer depreciated in subsequent periods. 37. Repurchase of shares Prior to cancellation or transfer of shares repurchased the Company recognises all expenditures arising from share repurchase as cost of treasury shares in the treasury share account. Considerations and transaction fee incurred from the repurchase of shares shall lead to the elimination of owners’ equity and does not recognise profit or loss when shares of the Company are repurchased transferred or cancelled.The difference between the actual amount received and the carrying amount of the treasury shares are recognised as capital reserve when the treasury shares are transferred if the capital reserve is not sufficient to be offset the excess amount shall be recognised to offset surplus reserve and retained profit. When the treasury shares are cancelled the capital shall be eliminated according to the number of shares and par value of cancelled shares the difference between the actual amount received and the carrying amount of the treasury shares are recognised as capital reserve if the capital reserve is not sufficient to be offset the excess amount shall be recognised to offset surplus reserve and retained profit. 38. Debt restructuring (1) The Company as the debtor The debt is derecognised when the current obligation of the debt is discharged. Specifically when the uncertainty about the execution process and results of the debt restructuring agreement is eliminated the gains and losses related to the debt restructuring are recognised.If debt restructuring is carried out by repaying debts with assets the Company shall derecognise the relevant assets and the debts paid off when they meet the conditions for derecognition and the difference between the book value of the debts paid off and the book value of the transferred assets shall be included in the current profit and loss.If the debt is converted into equity instruments for debt restructuring the Company shall derecognise the debts paid off when they meet the conditions for derecognition. When the Company initially recognises an equity instrument it is measured based on the fair value of the equity instrument. If the fair value of the equity instrument cannot be measured reliably it is measured based on the fair value of the debt paid off. The difference between the book value of the debts paid off and the recognised amount of the equity instrument shall be included in the current profit and loss. 218 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 38. Debt restructuring (Continued) (1) The Company as the debtor (Continued) When a debt restructuring involves the modification of other terms of a debt the Company shall recognise and measure the restructured debts in accordance with the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments and the Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments.When a debt is settled by multiple assets or combination of various methods in a debt restructuring the Company shall recognise and measure the equity instruments and restructured debts in accordance with the aforementioned methods and the difference between the book value of the debts paid off and the sum of the book value of the transferred assets and the recognised amount of the equity instruments and restructured debts shall be included in the current profit and loss. (2) The Company as the creditor The debt receivable are derecognised when the contractual rights to receive the cash flows under the debt receivable expire. Specifically when the uncertainty about the execution process and results of the debt restructuring agreement is eliminated the gains and losses related to the debt restructuring are recognised.If debt restructuring is carried out by repaying debts with assets the Company shall initially recognise assets other than the transferred financial assets at cost. In particular the cost of inventories includes the fair value of the debt receivable and any directly attributable expenditure including taxes transportation costs handling costs insurance and other costs for bringing the assets to the current position and condition; the cost of investment in associates or joint ventures includes the fair value of the debt receivable and any directly attributable expenditure including taxes; the cost of investment property includes the fair value of the debt receivable and any directly attributable expenditure including taxes; the cost of fixed assets includes the fair value of the debt receivable and any directly attributable expenditure including taxes transportation costs handling costs installation costs professional service fees and other costs for bringing the assets to the status for intended use; the cost of intangible assets includes the fair value of the debt receivable and any directly attributable expenditure including taxes for bringing the assets to the status for intended use. The difference between the fair value and the book value of the debt receivable is included in the current profit and loss.When the debt restructuring causes the Company to convert the debt receivable to an equity investment of joint ventures or associates the Company shall measure the equity investment based on the sum of the fair value of debt receivable and any directly attributable taxes and other costs of the investment. The difference between the fair value and the book value of the debt receivable is included in the current profit and loss.When a debt restructuring involves the modification of other terms of a debt the Company recognises and measures the restructured debt receivable in accordance with the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments.When a debt is settled by multiple assets or combination of various methods in a debt restructuring the Company first recognises and measures the financial assets received and restructured debt receivable in accordance with the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments and then allocates the net value which is the fair value of the debt receivable deducted by the recognised amount of financial assets received and restructured debt receivable to the costs of non- financial assets received based on their relative fair value. The difference between the fair value and the book value of the debt receivable is included in the current profit and loss. 2024 ANNUAL REPORT 219XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 39. Critical accounting judgments and estimates The Company gives continuous assessment on among other things the reasonable expectations of future events and the critical accounting estimates and key assumptions adopted according to its historical experience and other factors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks of the carrying amount of assets and liabilities for the next financial year are listed as follows: Deferred income tax assets Deferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred income tax assets that can be recognised based upon the likely timing and level of future taxable profits together with future tax planning strategies.Classification of financial assets Significant judgements involved in determining the classification of financial assets include the analysis of business models and contractual cash flow characteristics.Factors considered by the Company in determining the business model for a group of financial assets include how the asset’s performance is evaluated and reported to key management personnel how risks are assessed and managed and how the relevant management personnel are compensated.When the Company assesses whether the contractual cash flows of the financial assets are consistent with basic lending arrangements the main judgements are described as below: whether the principal amount may change over the life of the financial asset (for example if there are repayments of principal); whether the interest includes only consideration for the time value of money credit risk other basic lending risks and a profit margin and cost. For example whether the amount repaid in advance reflects only the outstanding principal and interest thereon as well as reasonable compensation paid for early termination of the contract.Measurement of the ECLs of accounts receivable The Company calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accounts receivable and determines the ECL rate based on default probability and default loss rate. When determining the ECL rate the Company adjusts its historical data by referring to information such as historical credit loss experience as well as current situation and forward-looking information. When considering the forward-looking information indicators used by the Company include the risk of economic downturn external market environment technology environment and changes in customers. The assumptions relating to the ECL calculation are monitored and reviewed by the Company on a regularly basis. 220 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 39. Critical accounting judgments and estimates (Continued) Measurement of past due credit losses on finance lease receivables The Company calculates the ECLs of financial lease receivables using the exposure to default risk and ECL rate of financial lease receivables and determines the ECL rate based on default probability and default loss rate.When determining the ECL rate the Company takes into account the current status and repayment ability of the counterparty while considering the value of collateral guarantees and other credit enhancement measures related to the lease receivables.Deferred income tax assets Deferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred income tax assets that can be recognised based upon the likely timing and level of future taxable profits together with future tax planning strategies.Impairment of goodwill The Company assesses the impairment of goodwill at least annually which requires estimates of the use value of asset groups allocated with goodwill. When estimating the use value the Company is required to estimate the future cash flows from such asset groups while selecting the appropriate discount rate to calculate the present value of future cash flows.Impairment of inventories On the balance sheet date the Company determines the net realisable value of its inventories based on the estimated selling prices of the inventories less costs estimated to be incurred upon completion estimated selling expenses and related taxes. The realisable value of inventories shall be determined on the basis of definite evidence purpose of holding the inventories and effect of after-balance-sheet-date events. If the net realisable value is below the cost of inventories a provision for inventory impairment is made.Impairment of fixed assets and long-term equity investments The Company assesses the impairment of fixed assets and long-term equity investments at least annually. When any event or change in circumstances indicates that the carrying amount may not be recoverable the carrying amount of such project is reviewed for impairment. If the carrying amount of an asset exceeds its recoverable amount impairment loss is recognised for the difference. The recoverable amount is determined as the higher of the asset’s fair value less costs of disposal and the present value of the asset’s estimated future cash flows. A number of assumptions are made in estimating the recoverable amount of assets including future cash flows and discount rates relating to non-current assets. If future events differ from these assumptions the recoverable amount shall be revised which may have an impact on the operations or financial position of the Company. 2024 ANNUAL REPORT 221XII Financial Report V. Significant Accounting Policies and Accounting Estimates (Continued) 40. Changes in significant accounting policies and accounting estimates (1) Changes in significant accounting policies * Interpretation No. 17 of the Accounting Standards for Business Enterprises In November 2023 the Ministry of Finance issued the Interpretation No. 17 of Accounting Standards for Business Enterprises (Cai Kuai [2023] No. 21) (the “Interpretation No. 17”).Classification of current and non-current liabilities According to the Interpretation No. 17 for a liability arising from an entity’s loan arrangement an entity’s right to defer settlement of the liability to more than one year after the balance sheet date may be subject to the entity complying with conditions specified in that loan arrangement (hereinafter referred to as the “covenants”). If the entity is required to comply with a covenant on or before the balance sheet date even if compliance with the covenant is assessed only after the balance sheet date (for example a covenant based on the entity’s financial position on the balance sheet date but assessed for compliance only after the balance sheet date) such a covenant affects whether that right exists on the balance sheet date and in turn affects the classification of the liability as current or non-current on the balance sheet date. If an entity is required to comply with a covenant after the balance sheet date (for example a covenant based on the entity’s financial position six months after the balance sheet date) such a covenant does not affect whether that right exists on the balance sheet date and is not related to the classification of the liability as current or non-current on the balance sheet date.In circumstances where a term of a liability result in its settlement by the transfer of the entity’s own equity instruments at the option of the counterparty if the entity classifies the option as an equity instrument in accordance with the requirements under the standards recognising it separately as an equity component of a compound financial instrument such a term does not affect the classification of the liability as current or non-current.The Company has adopted the Interpretation No. 17 since 1 January 2024 and the adoption of which does not have significant impact on the financial position and operating results of the Company in a comparable period. (2) Changes in significant accounting estimates The Company did not have any change in significant accounting estimates during the year. 222 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VI. Taxation 1. Main tax types and tax rates Tax type Tax base Tax rate (%) Value added tax VAT payable (VAT payable is calculated by multiplying 13/9/6 taxable sales amount by the applicable tax rate less current deductible input VAT) Property tax Rental income and property price 1.2/12 Urban maintenance and construction tax Actual turnover tax paid 7 E nterprise income tax Taxable income 25 Disclosure of taxable entities subject to different EIT tax rates Name of taxable entity EIT tax rate (%) Shandong Chenming Paper Holdings Limited 15 Shouguang Meilun Paper Co. Ltd. 15 Jilin Chenming Paper Co. Ltd. 15 Jiangxi Chenming Paper Co. Ltd. 15 Zhanjiang Chenming Pulp & Paper Co. Ltd. 15 Huanggang Chenming Pulp & Paper Co. Ltd. 15 Shouguang Xinyuan Coal Co. Ltd. 20 Shouguang Chenming Papermaking Machine Co. Ltd. 20 Shouguang Wei Yuan Logistics Company Limited 20 Zhanjiang Chenming Arboriculture Development Co. Ltd. Exempt from EIT Nanchang Chenming Arboriculture Development Co. Ltd Exempt from EIT Chenming Arboriculture Co. Ltd. Exempt from EIT Y angjiang Chenming Arboriculture Development Co. Ltd. Exempt from EIT 2. Tax incentives (1) Enterprise income tax On 7 December 2024 the Company received a high and new technology enterprise certificate with a certification number of GR202437001530. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies the Company is subject to a corporate income tax rate of 15% of taxable income and is entitled to the preferential treatment from 2024 to 2026.Shouguang Meilun Paper Co. Ltd. a subsidiary of the Company received a high and new technology enterprise certificate with a certification number of GR202437000114 on 7 December 2024. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Shouguang Meilun is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the preferential treatment from 2024 to 2026.Jilin Chenming Paper Co. Ltd. a subsidiary of the Company received a high and new technology enterprise certificate with a certification number of GR202222000414 on 29 November 2022. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Jilin Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the preferential treatment from 2022 to 2024. 2024 ANNUAL REPORT 223XII Financial Report VI. Taxation (Continued) 2. Tax incentives (Continued) (1) Enterprise income tax (Continued) Jiangxi Chenming Paper Co. Ltd. a subsidiary of the Company received a high and new technology enterprise certificate with a certification number of GR202236000018 on 4 November 2022. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Jiangxi Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the preferential treatment from 2022 to 2024.Zhanjiang Chenming Pulp & Paper Co. Ltd. a subsidiary of the Company received a high and new technology enterprise certificate with a certification number of GR202444002840 on 19 November 2024. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Zhanjiang Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the preferential treatment from 2024 to 2026.Huanggang Chenming Pulp & Paper Co. Ltd. a subsidiary of the Company received a high and new technology enterprise certificate with a certification number of GR202342003128 on 5 December 2023. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies Huanggang Chenming is subject to an enterprise income tax rate of 15% of taxable income and is entitled to the preferential treatment from 2023 to 2025.Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Tax and Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax Zhanjiang Chenming Arboriculture Development Co. Ltd. Yangjiang Chenming Arboriculture Development Co. Ltd. Nanchang Chenming Arboriculture Development Co. Ltd. and Chenming Arboriculture Co. Ltd. which are the subsidiaries of the Company have completed the filings for EIT reduction for exemption from EIT.Shouguang Xinyuan Coal Co. Ltd. Shouguang Chenming Papermaking Machine Co. Ltd. and Shouguang Wei Yuan Logistics Company Limited which are subsidiaries of the Company are small and micro enterprises.Pursuant to the Announcement of the Ministry of Finance and the State Administration of Taxation on Further Implementation of Preferential Income Tax Policies for Small and Micro Enterprises (Cai Shui [2022] No. 13) and the Announcement of the Ministry of Finance and the State Administration of Taxation on the Implementation of Preferential Income Tax Policies for Small and Micro Enterprises and Individual Industrial and Commercial Business (Cai Shui [2023] No. 6) the annual taxable income of a small low-profit enterprise that is less than RMB3 million shall be included in its taxable income at a reduced rate of 25% with the applicable enterprise income tax rate of 20%. (2) Value-added Tax (“VAT”) Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax Zhanjiang Chenming Arboriculture Development Co. Ltd. Yangjiang Chenming Arboriculture Development Co. Ltd.Nanchang Chenming Arboriculture Development Co. Ltd. and Chenming Arboriculture Co. Ltd. which are subsidiaries of the Company are exempt from VAT and have completed the filings for VAT reduction for exemption from VAT. 224 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements 1. Monetary funds Unit: RMB Item Closing balance Opening balance Treasury cash 1363319.76 3674805.36 Bank deposit 150579926.55 760558937.25 Other monetary funds 5728747806.12 11321241125.05 Deposits with Finance Company 29188759.75 39357963.64 Total 5909879812.18 12124832831.30 Including: Total deposits in overseas banks 90613912.87 261470228.68 Other explanations: * Other monetary funds of RMB4199123725.42 were the guarantee deposit for the application for acceptance bills by the Company; * Other monetary funds of RMB1454708192.10 were the guarantee deposit for the application for letter of credit with the banks by the Company; * Other monetary funds of RMB16224110.34 were the guarantee deposit for the application for loans with the banks by the Company; * Other monetary funds of RMB12972408.07 were the Company’s statutory reserve deposits with the People’s Bank of China; * Other monetary funds of RMB45719370.19 were restricted or locked-up due to reasons such as litigations or being unused for a long time resulting in restriction on the use of that account’s balance. 2. Financial assets held for trading Unit: RMB Item Closing balance Opening balance Financial assets measured at fair value through profit or loss 37259325.70 46294291.71 Including: Investment in equity instruments 37259325.70 46294291.71 T otal 37259325.70 46294291.71 Explanation: Financial assets held for trading were shares of China Bohai Bank subscribed by the Company. 2024 ANNUAL REPORT 225XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 3. Bills receivable (1) Bills receivable by category Unit: RMB Item Closing balance Opening balance Bank acceptance bills Commercial acceptance bills 506605701.74 411600000.00 Total 506605701.74 411600000.00 (2) Bills receivable endorsed or discounted by the Company but not yet due as at the balance sheet date Unit: RMB Amount Amount not yet derecognised derecognised as at the end of as at the end of Item the period the period Bank acceptance bills Commercial acceptance bills 223000.00 Total 223000.00 4. Accounts receivable (1) Disclosure by ageing Unit: RMB Ageing Closing book balance Opening book balance Within 1 year (including 1 year) 929046115.66 1561046809.05 1 to 2 years 274913099.67 385112389.04 2 to 3 years 352196765.13 722669952.03 Over 3 years 1112205999.57 408747914.19 Subtotal 2668361980.03 3077577064.31 Less: Bad debt provision 1284071666.33 549070004.48 T otal 1384290313.70 2528507059.83 The basis used by the ageing analysis of the accounts receivable of the Company: the ageing of accounts receivable is the length of time of the Company’s outstanding accounts receivable based on invoice date. The closing balance is recognised one by one from the end of the period onwards until the amounts add up to the balance. It is also broken up by intervals of within 1 year 1-2 years 2-3 years and over 3 years. 226 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 4. Accounts receivable (Continued) (2) Disclosure by bad debt provision method Unit: RMB Closing balance Opening balance Book balance Bad debts provision Book balance Bad debts provision Provision Provision Percentage percentage Carrying Percentage percentage Carrying Category Amount (%) Amount (%) amount Amount (%) Amount (%) amount Accounts receivable assessed individually for bad debt provision 252399157.18 9.46 244457449.18 96.85 7941708.00 201074254.68 6.53 193132546.68 96.05 7941708.00 Accounts receivable assessed collectively for bad debt provision 2415962822.85 90.54 1039614217.15 43.03 1376348605.70 2876502809.63 93.47 355937457.80 12.37 2520565351.83 Including: Due from related parties 1945551.12 0.07 13618.86 0.70 1931932.26 2359.03 23.18 0.98 2335.85 Due from non-related parties 1153594000.22 43.23 126192125.69 10.94 1027401874.53 1545540409.94 50.22 81008019.20 5.24 1464532390.74 Factoring receivables 1260423271.51 47.24 913408472.60 72.47 347014798.91 1330960040.66 43.25 274929415.42 20.66 1056030625.24 Total 2668361980.03 100 1284071666.33 48.12 1384290313.70 3077577064.31 100 549070004.48 17.84 2528507059.83 Items assessed individually for bad debt provision: Unit: RMB Closing balance Bad debts Provision Name Book balance provision percentage (%) Provision reason Customer 1 26697528.70 26697528.70 100 Long outstanding Customer 2 17600000.00 9658292.00 54.88 Long outstanding Customer 3 14813369.27 14813369.27 100 Long outstanding Customer 4 14453432.93 14453432.93 100 Long outstanding Customer 5 13396601.22 13396601.22 100 Long outstanding Customer 6 10954285.12 10954285.12 100 Long outstanding Customer 7 10624137.64 10624137.64 100 Long outstanding Customer 8 10614691.35 10614691.35 100 Long outstanding Customer 9 10250525.02 10250525.02 100 Long outstanding 46 companies including Customer 10 122994585.93 122994585.93 100 Long outstanding Total 252399157.18 244457449.18 96.85 2024 ANNUAL REPORT 227XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 4. Accounts receivable (Continued) (2) Disclosure by bad debt provision method (Continued) Unit: RMB Opening balance Bad debts Provision Name Book balance provision percentage (%) Provision reason Customer 1 45493811.40 45493811.40 100 Long outstanding Customer 2 26697528.70 26697528.70 100 Long outstanding Customer 3 17600000.00 9658292.00 54.88 Long outstanding Customer 4 14813369.27 14813369.27 100 Long outstanding Customer 5 14753432.93 14753432.93 100 Long outstanding Customer 6 13396601.22 13396601.22 100 Long outstanding 49 companies including Customer 7 68319511.16 68319511.16 100 Long outstanding T otal 201074254.68 193132546.68 96.05 Explanation: Although Wuhan Tianrui Paper Co. Ltd. has not repaid the loan for a long time it has not fully provided for bad debts because the company has paid a deposit when the transaction occurred and part of such deposit may offset part of the losses.Items assessed collectively for bad debt provision: Due from related party customers Unit: RMB Closing balance Name Book balance Bad debts provision Provision percentage (%) Within 1 year 1945551.12 13618.86 0.70 T otal 1945551.12 13618.86 0.70 228 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 4. Accounts receivable (Continued) (2) Disclosure by bad debt provision method (Continued) Items assessed collectively for bad debt provision: Due from non-related party customers Unit: RMB Closing balance Name Book balance Bad debts provision Provision percentage (%) Within 1 year 919473167.28 16744310.74 1.82 1 to 2 years 172551830.25 52058552.58 30.17 2 to 3 years 1766895.77 893773.39 50.58 Over 3 years 59802106.92 56495488.98 94.47 Total 1153594000.22 126192125.69 10.94 Items assessed collectively for bad debt provision: Factoring receivables Unit: RMB Closing balance Name Book balance Bad debts provision Provision percentage (%) Within 1 year 7627397.26 3813698.63 50.00 1 to 2 years 102361269.42 51777234.71 50.58 2 to 3 years 350429869.36 280343895.48 80.00 Over 3 years 800004735.47 577473643.78 72.18 Total 1260423271.51 913408472.60 72.47 If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs: □ Applicable √ Not applicable 2024 ANNUAL REPORT 229XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 4. Accounts receivable (Continued) (3) Provision recovery or reversal of bad debt provision for the period Bad debt provision for the period: Unit: RMB Changes in the period C ategory Opening balance Provision Recovery or reversal Written-off Others Closing balance Bad debts provision 549070004.48 740113750.02 1414900.45 0.00 -3697187.72 1284071666.33 Total 549070004.48 740113750.02 1414900.45 0.00 -3697187.72 1284071666.33 Explanation: “Others” includes a decrease in bad debts of RMB3537412.30 from disposal of subsidiaries and a decrease in bad debts of RMB159775.42 due to changes in exchange rates. (4) Actual write-off of accounts receivable for the period Unit: RMB Item Write-off amount A ctual write-off of accounts receivable 0.00 230 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 4. Accounts receivable (Continued) (5) Top five accounts receivable and contract assets based on closing balance of debtors The total amount of top five accounts receivable and contract assets based on closing balance of debtors for the period amounted to RMB1057672738.56 in total accounting for 39.64% of the total closing balance of accounts receivable and contract assets. The closing balance of the corresponding bad debt provision amounted to RMB751208046.24 in total.Unit: RMB As a percentage of the closing balance Closing balance of Closing balance of of the total accounts bad debt provision of Name of entity accounts receivable receivable (%) accounts receivable Customer 1 481810233.33 18.06 385448186.65 Customer 2 222656666.64 8.34 178125333.31 Customer 3 123297505.26 4.62 36107859.62 Customer 4 121908333.33 4.57 97526666.66 Customer 5 108000000.00 4.05 54000000.00 Total 1057672738.56 39.64 751208046.24 5. Accounts receivable financing (1) Accounts receivable financing by category Unit: RMB Item Closing balance Opening balance Bills receivable 100730797.32 215884249.97 Total 100730797.32 215884249.97 Explanation: All the accounts receivable financing of the Company were bank acceptance bills. Since the terms of the bank acceptance bills did not exceed one year and both parties to the endorsement of the bills agreed to offset equal amounts of accounts receivable and payable based on the face value of the bills fair value equalled amortised cost.Certain subsidiaries of the Company discount and endorse part of the bank acceptance bills based on their daily capital management needs. Therefore the bank acceptance bills of the subsidiaries are classified as financial assets measured at fair value through other comprehensive income.The Company has no bank acceptance bill assessed individually for impairment provision. At the end of the period the Company believed that there is no significant credit risk in the bank acceptance bills held and no major losses will be incurred due to default of banks. 2024 ANNUAL REPORT 231XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 5. Accounts receivable financing (Continued) (2) Accounts receivable financing endorsed or discounted but not yet due as at the balance sheet date Unit: RMB Amount Amount derecognised not yet derecognised as at the end of as at the end of Item the period the period Bank acceptance bills 5008422470.60 T otal 5008422470.6 0 Explanation: The credit risk and deferred payment risk of bank acceptance bills used for discounting were very small and the interest rate risk related to the bills had been transferred to the banks. It was determined that the major risks and rewards of the ownership of the bills had been transferred so these bills were derecognised. 6. Other receivables Unit: RMB Item Closing balance Opening balance Other receivables 1061992721.13 2224904557.88 Dividend receivable 22659149.81 Total 1084651870.94 2224904557.88 (1) Dividends receivable 1) Classification of dividends receivable Unit: RMB Item (or investee) Closing balance Opening balance Weifang Chenchuang Equity Investment Fund Partnership (Limited Partnership) 22659149.81 Subtotal 22659149.81 Less: Bad debt provision T otal 22659149.81 232 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 6. Other receivables (Continued) (2) Other receivables 1) Classification of other receivables by nature Unit: RMB Nature Closing book balance Opening book balance Open credit 2522792110.64 2691372170.61 Reserve and borrowings 16114760.18 27444170.92 Guarantee deposit and deposit 14874445.09 12578821.54 Others 7975085.22 3445072.68 Subtotal 2561756401.13 2734840235.75 Less: Bad debt provision 1499763680.00 509935677.87 T otal 1061992721.13 2224904557.88 2) Disclosure by ageing Unit: RMB Ageing Closing book balance Opening book balance Within 1 year (including 1 year) 680590285.93 1052737595.00 1 to 2 years 409320986.47 291207253.53 2 to 3 years 198957834.50 204348508.24 Over 3 years 1272887294.23 1186546878.98 Subtotal 2561756401.13 2734840235.75 Less: Bad debt provision 1499763680.00 509935677.87 T otal 1061992721.13 2224904557.88 The basis used by the ageing analysis: the ageing of other receivables is the length of time of the Company’s outstanding other receivables based on invoice date. The closing balance is recognised one by one from the end of the period onwards until the amounts add up to the balance. It is also broken up by intervals of within 1 year 1-2 years 2-3 years and over 3 years. 2024 ANNUAL REPORT 233XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 6. Other receivables (Continued) (2) Other receivables (Continued) 3) Particulars of bad debt provisionWhen one or more of the following circumstances occurs it is considered as “a significant increase incredit risk upon initial recognition” and shall be assigned to stage 2: the payment has been overdue for more than 30 days but not more than 90 days; the debtor encountered an adverse event that affected its solvency; significant adverse changes in the value of collateral or the quality of guarantees or credit enhancements provided by third parties.When one or more of the following circumstances occurs it is considered as “credit impairment hasoccurred” and shall be assigned to stage 3: the payment has been overdue for more than 90 days; the debtor encountered major financial difficulties or was likely to go bankrupt or undergo other financial restructuring; other situations that violate contractual agreements and indicate that there is objective evidence of impairment of financial assets.Closing bad debt provision at stage 1: Expected credit losses Category Book balance within 12 months (%) Bad debts provision Carrying amount Reason Items assessed collectively for bad debt provision 474324711.81 11.91 56487807.03 417836904.78 Amount due from government agencies 8929150.60 8.25 736883.39 8192267.21 Amount due from related parties 328692310.16 9.51 31260068.90 297432241.26 Other receivables 136703251.05 17.92 24490854.74 112212396.31 Total 474324711.81 11.91 56487807.03 417836904.78 As at the end of the period the Group did not have interest receivables dividends receivables and other receivables in phase 2.Closing bad debt provision at stage 3 Category Book balance Lifetime ECL rate (%) Bad debts provision Carrying amount Reason Items assessed individually for bad debt provision 2087431689.32 69.14 1443275872.97 644155816.35 T otal 2087431689.32 69.14 1443275872.97 644155816.35 234 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 6. Other receivables (Continued) (2) Other receivables (Continued) 3) Particulars of bad debt provision (Continued) Items assessed individually for bad debt provision: Lifetime ECL Category Book balance rate (%) Bad debts provision Carrying amount Reason Customer 1 472854783.56 70.25 332202672.36 140652111.20 Uncertain recovery to a certain extent Customer 2 453002316.85 40.00 181200926.74 271801390.11 Uncertain recovery to a certain extent Customer 3 390000000.00 100.00 390000000.00 0.00 Uncertain recovery to a certain extent Customer 4 143940305.63 55.00 79167168.10 64773137.53 Uncertain recovery to a certain extent 136 customers including customer 5 627634283.28 73.40 460705105.77 166929177.51 Uncertain recovery to a certain extent Total 2087431689.32 69.14 1443275872.97 644155816.35 Bad debt provision based on the general model of ECLs: Unit: RMB Stage 1 Stage 2 Stage 3 ECLs for the Lifetime ECLs Lifetime ECLs Bad debts provision next 12 months (not credit-impaired) (credit-impaired) Total Balance as at 1 January 2024 87540266.28 422395411.59 509935677.87 Balance as at 1 January 2024 for the period – Transferred to stage 2 – Transferred to stage 3 – Reversed to stage 2 – Reversed to stage 1 Provision for the period 13979730.50 1022206731.89 1036186462.39 Reversal for the period 43619026.39 1326270.51 44945296.90 Transfer for the period Write-off for the period Other changes -1413163.36 -1413163.36 Balance as at 31 December 2024 56487807.03 1443275872.97 1499763680.00 Explanation: “Others Changes” includes a decrease in bad debts of RMB19000.00 from disposal of subsidiaries and a decrease in bad debts of RMB1394163.36 due to changes in exchange rates. 2024 ANNUAL REPORT 235XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 6. Other receivables (Continued) (2) Other receivables (Continued) 3) Particulars of bad debt provision (Continued) Changes in carrying book balances with significant changes in loss provision for the period □ Applicable √ Not applicable 4) Provision recovery or reversal of bad debt provision for the period Bad debt provision for the period: Unit: RMB Changes in the period Opening Recovery or Transfer or Closing Category balance Provision reversal write-off Others balance Bad debts provision 509935677.87 990203590.69 44945296.90 -1413163.36 1453780808.30 Total 509935677.87 990203590.69 44945296.90 -1413163.36 1453780808.30 Explanation: “Others Changes” includes a decrease in bad debts of RMB19000.00 from disposal of subsidiaries and a decrease in bad debts of RMB1394163.36 due to changes in exchange rates. 5) Top five other receivables according to closing balance of debtors The total amount of the Company’s top five other receivables based on closing balance of debtors for the period was RMB1697890764.48 which accounted for 66.28% of the closing balance of the total other receivables. The closing balance of corresponding bad debt provision amounted to RMB996094469.96.Unit: RMB As a percentage of the closing Closing balance balance of total of bad debt Name of entity Nature Closing balance Ageing other receivables provision Customer 1 Consideration for 472854783.56 4 to 5 years 18.46 332202672.36 debt transfer Customer 2 Consideration for 453002316.85 Over 5 years 17.68 181200926.74 debt transfer Customer 3 Consideration for 390000000.00 1 to 2 years 15.22 390000000.00 debt transfer Customer 4 Open credit 238093358.44 1 to 2 years 9.29 13523702.76 Customer 5 Financial support 143940305.63 3 to 4 years 5.62 79167168.10 T otal 1697890764.48 66.28 996094469.96 236 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 7. Prepayments (1) Prepayments by ageing Unit: RMB Closing balance Opening balance Ageing Amount Percentage (%) Amount Percentage (%) Within 1 year 592705315.78 93.80 790687918.61 95.83 1 to 2 years 39188179.36 6.20 34447237.60 4.17 T otal 631893495.14 100 825135156.21 100 (2) Top five prepayments based on closing balance of prepaid parties The total amount of top five prepayments based on closing balance of prepaid parties for the period amounted to RMB228850872.41 accounting for 36.22% of the closing balance of the total prepayments.Unit: RMB As a percentage of the closing Closing balance balance of the total Name of entity of prepayments prepayments (%) Customer 1 55668669.56 8.81 Customer 2 52889218.97 8.37 Customer 3 52234915.42 8.27 Customer 4 39241698.45 6.21 Customer 5 28816370.01 4.56 T otal 228850872.41 36.22 2024 ANNUAL REPORT 237XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 8. Inventories Whether the Company needs to comply with the disclosure requirements for real estate industries No (1) Categories of inventories Unit: RMB Closing balance Opening balance Impairment Impairment provision for provision for inventories inventories or performance or performance Item Book balance costs Carrying amount Book balance costs Carrying amount Raw materials 1225049193.59 15709012.21 1209340181.38 1977478797.85 18030837.14 1959447960.71 Work-in-process products 121749898.40 121749898.40 102415558.33 102415558.33 Goods in stock 269949625.20 22030676.68 247918948.52 1413366440.57 1030048.86 1412336391.71 Consumable biological assets 1256379773.85 1256379773.85 1483978089.61 1483978089.61 T otal 2873128491.04 37739688.89 2835388802.15 4977238886.36 19060886.00 4958178000.36 Note: Consumable biological assets are forestry assets. (2) Impairment provision for inventories and performance costs Unit: RMB Increase during the period Decrease during the period Item Opening balance Provision Others Reversal or transfer Others Closing balance Raw materials 18030837.14 2321824.93 15709012.21 Goods in stock 1030048.86 22030676.68 1030048.86 22030676.68 Total 19060886.00 22030676.68 3351873.79 37739688.89 Impairment provision for inventories and performance costs (continued) Reason for reversal or written-off of impairment Basis for recognition of net realisable value/ provision for inventories/performance costs during Item residual consideration with future cost the period Raw materials The cost of raw materials is higher than Written-off of impairment provision for inventories their net realisable value due to sales of impaired spare parts during the period Goods in stock The cost of goods in stock is higher than Written-off of impairment provision for inventories their net realisable value due to sales of impaired goods in stock during the period 238 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 9. Non-current assets due within one year Unit: RMB Item Closing balance Opening balance Long-term receivables due within one year 2840365519.48 4161725935.75 Total 2840365519.48 4161725935.75 Explanations: * Long-term receivables due within one year amounting to RMB2816898675.87 (amount for the prior year: RMB4054545080.32) were financial lease receivables; * Long-term receivables due within one year amounting to RMB23098378.89 (amount for the prior year: RMB107180855.43) were deposits receivable; * Long-term receivables due within one year amounting to RMB368464.72 (amount for the prior year: RMB0.00) were sublease receivables.Significant receivables assessed individually for bad debt provision in financial lease receivables Unit: RMB Lifetime ECL Bad debts Carrying Category Book balance rate (%) provision amount Reason Customer 1 1554672582.20 17.50 272067701.89 1282604880.31 Uncertain recovery to a certain extent Customer 2 958754877.25 80.00 767003901.80 191750975.45 Uncertain recovery to a certain extent Customer 3 485296142.90 46.00 223236225.74 262059917.16 Uncertain recovery to a certain extent Customer 4 397228355.05 5.00 19861417.75 377366937.30 Uncertain recovery to a certain extent Customer 5 328844439.00 80.00 263075551.20 65768887.80 Uncertain recovery to a certain extent Total 3724796396.40 41.49 1545244798.38 2179551598.02 10. Other current assets Unit: RMB Item Closing balance Opening balance Input tax amount to be deducted 135623629.69 119271427.68 Prepaid tax 7659808.66 47645192.37 Receivables under financial lease due within one year 182672726.43 400411532.31 Factoring receivables due within one year 74820340.44 261871191.52 Prepaid expenses 144335745.61 201963827.62 Other payments 14798952.00 37663773.28 Total 559911202.83 1068826944.78 2024 ANNUAL REPORT 239XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 11. Long-term receivables (1) Particulars of long-term receivables Unit: RMB Closing balance Opening balance Bad debts Carrying Bad debts Carrying Discount Item Book balance provision amount Book balance provision amount rate range Finance lease payments 5247340922.67 2041452234.56 3205888688.11 5329611463.14 1070429664.01 4259181799.13 4%-12% Less: Unrealised financing income 121865194.82 121865194.82 66941274.36 66941274.36 Deposit for finance lease 247738958.47 247738958.47 329246696.64 329246696.64 Less: Unrealised financing income 25782566.94 25782566.94 20467752.31 20467752.31 Sublease receivable for woodland 18790408.36 899519.98 17890888.38 Less: Unrealised financing income 6803007.48 6803007.48 Subtotal 5359419520.26 2042351754.54 3317067765.72 5571449133.11 1070429664.01 4501019469.10 Less: Long-term receivables due within one year 4867758553.13 2027393033.65 2840365519.48 5229345488.65 1067619552.90 4161725935.75 Less: Classified as other current liabilities 196410443.69 196410443.69 T otal 295250523.44 14958720.89 280291802.55 342103644.46 2810111.11 339293533.35 (2) Disclosure by bad debt provision method Unit: RMB Closing balance Opening balance Book balance Bad debts provision Book balance Bad debts provision Provision Provision Percentage percentage Carrying Percentage percentage Carrying Category Amount % Amount % amount Amount % Amount % amount Items assessed collectively for bad debt provision 295250523.44 100.00 14958720.89 5.07 280291802.55 342103644.46 100.00 2810111.11 0.82 339293533.35 Including: Receivables not past due 281184018.32 95.24 14059200.91 5.00 267124817.41 140505555.56 41.07 2810111.11 2.00 137695444.45 Sublease receivable for woodland 11618936.16 3.93 899519.98 7.74 10719416.18 Deposits receivable 2447568.96 0.83 2447568.96 201598088.90 58.93 201598088.90 Total 295250523.44 100.00 14958720.89 5.07 280291802.55 342103644.46 100.00 2810111.11 0.82 339293533.35 240 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 11. Long-term receivables (Continued) (2) Disclosure by bad debt provision method (Continued) Items assessed collectively for bad debt provision: Receivables not past due Unit: RMB Closing balance Balance as at the end of the prior year Long-term Bad debts ECL rate Long-term Bad debts ECL rate receivables provision (%) receivables provision (%) Within 1 year 1 to 2 years 85192921.52 4259646.06 5.00 140505555.56 2810111.11 2.00 2 to 3 years 85192921.54 4259646.08 5.00 Over 3 years 110798175.26 5539908.77 5.00 Total 281184018.32 14059200.91 5.00 140505555.56 2810111.11 2.00 Collectively assessed item: Sublease receivable for woodland Unit: RMB Closing balance Balance as at the end of the prior year Long-term Bad debts ECL rate Long-term Bad debts ECL rate receivables provision (%) receivables provision (%) 1 to 2 years 381729.44 9237.43 2.42 2 to 3 years 395471.70 16179.23 4.09 Over 3 years 10841735.02 874103.32 8.06 Total 11618936.16 899519.98 7.74 2024 ANNUAL REPORT 241XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 11. Long-term receivables (Continued) (2) Disclosure by bad debt provision method (Continued) Collectively assessed item: Deposits receivable Unit: RMB Closing balance Balance as at the end of the prior year Long-term Bad debts ECL rate Long-term Bad debts ECL rate receivables provision (%) receivables provision (%) Within 1 year 1 to 2 years 2204172.55 136426669.75 2 to 3 years 243396.41 38434359.53 Over 3 years 26737059.62 Total 2447568.9 6 201598088.90 (3) Provision recovery or reversal of bad debt provision for the period Unit: RMB Changes in the period Non-current assets Recovery or Transfer or classified as due Category Opening balance Provision reversal write-off within one year Closing balance Bad debts provision 2810111.11 25438884.77 13290274.99 14958720.89 T otal 2810111.11 25438884.77 13290274.99 14958720.89 242 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 12. Long-term equity investments Unit: RMB Change for the period Investment Distribution Opening gain or loss Adjustment Other of cash Closing balance of recognised of other change in dividend balance of Opening balance impairment Additional Withdrawn under equity comprehensive equity or profit Impairment Closing balance impairment Investee (carrying amount) provision contribution contribution method income interest declared provision Others (carrying amount) provision I. Joint ventures Shouguang Chenming Huisen New-style Construction Materials Co. Ltd. 7400283.59 1468652.13 500000.00 8368935.72 Weifang Port Wood Chip Terminal Co.Ltd. 79142080.56 8174934.95 87317015.51 Shouguang Meite Environmental Technology Co. Ltd. 19066523.79 -1106308.52 17960215.27 Shouguang Jintou Industrial Investment Partnership (Limited Partnership) 2344570247.55 -565479070.99 1779091176.56 Weifang Xingxing United Chemical Co.Ltd. 91874385.12 13078890.78 78795494.34 13078890.78 Subtotal 2542053520.61 556941792.43 500000.00 13078890.78 1971532837.40 13078890.78 II. Associates Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited Partnership) 27263804.36 -96122.05 27167682.31 Ningbo Kaichen Huamei Equity Investment Fund Partnership (Limited Partnership) 278128830.13 -142574010.13 135554820.00 Nanchang Tianchen Port Co. Ltd. 58147506.39 2595113.17 3747087.61 56995531.95 Goldtrust Futures Co. Ltd. 187786626.28 10674121.86 4010000.00 194450748.14 4010000.00 Xuchang Chenming Paper Co. Ltd. 5994545.96 5994545.96 Chenming (Qingdao) Asset Management Co. Ltd. 8377144.65 7822100.00 271748.56 826793.21 Wuhan Chenming Hanyang Paper Holdings Co. Ltd. 251918902.31 -22064313.95 229854588.36 Guangdong Nanyue Bank Co. Ltd. 1331523051.00 18748118.69 6370472.83 -1989232.35 1354652410.17 Subtotal 2143145865.12 5994545.96 7822100.00 –132445343.85 6370472.83 -1989232.35 3747087.61 4010000.00 1999502574.14 10004545.96 Total 4685199385.73 5994545.96 7822100.00 –689387136.28 6370472.83 -1989232.35 4247087.61 17088890.78 3971035411.54 23083436.74 Explanation: * The Company estimates the fair value of an investee on the balance sheet date by conducting profit forecasts on the investee or hiring an appraisal organisation to conduct appraisals. Disposal expenses which mainly taking the corporate income tax on equity transfer are used to estimate the recoverable amount of the related investment. 10-year treasury rate is selected as the risk- free rate and the average market yield is calculated and determined based on the Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange Composite Index over the past 14 years.* The Company’s equity investments in Goldtrust Futures Co. Ltd. and Guangdong Nanyue Bank Co. Ltd. have been frozen due to overdue debts and other reasons. 2024 ANNUAL REPORT 243XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 12. Long-term equity investments (Continued) Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses √ Applicable □ Not applicable Unit: RMB Basis of Determination of fair determination Carrying Recoverable value and disposal Key of key Item amount amount Impairment expenses parameter parameter Weifang Xingxing United Chemical Co. Ltd. 91874385.12 78795494.34 13078890.78 Contracts or agreements Goldtrust Futures Co. Ltd. 198460748.14 194450748.14 4010000.00 Contracts or agreements Total 290335133.26 273246242.48 17088890.78 Determination of present value of recoverable amount based on expected cash flows □ Applicable √ Not applicable 13. Other non-current financial assets Unit: RMB Item Closing balance Opening balance Investment in debt instruments 650001725.86 659099016.38 Investment in equity instruments 101028728.82 122462024.19 T otal 751030454.68 781561040.57 244 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 14. Investment property (1) Investment property under the cost method √ Applicable □ Not applicable Unit: RMB Housing and Item building structure Total I. Original carrying amount 1. Opening balance 7142921213.87 7142921213.87 2. Increase during the period 3. Decrease during the period 8857835.38 8857835.38 (1) Disposal 8857835.38 8857835.38 4. Closing balance 7134063378.49 7134063378.49 II. Accumulated depreciation and accumulated amortisation 1. Opening balance 1093678517.51 1093678517.51 2. Increase during the period 196503060.50 196503060.50 (1) Provision or amortisation 196503060.50 196503060.50 3. Decrease during the period 1581458.07 1581458.07 (1) Disposal 1581458.07 1581458.07 4. Closing balance 1288600119.94 1288600119.94 III. Impairment provision 1. Opening balance 2. Increase during the period 102227990.09 102227990.09 (1) Provision 102227990.09 102227990.09 3. Decrease during the period 4. Closing balance 102227990.09 102227990.09 IV. Carrying amount 1. Closing carrying amount 5743235268.46 5743235268.46 2. Opening carrying amount 6049242696.3 6 6049242696.3 6 Note: Investment properties under the Company primarily include: * Pujiang International Finance Plaza located at No. 1098 Dongdaming Road Hongkou District Shanghai is a long-term held office property of Shanghai Hongtai Real Estate Co. Ltd. a subsidiary of the Company and leasehold land mainly used for external rental or office purposes; * Jinan Chenming Finance Building (濟南晨鳴金融大廈) located in No. 7 Zone Hanyu Financial Business Center No. 7000 Jingshi Road Jinan Innovation Zone is a long-term held office property of Shandong Chenming Investment Limited a subsidiary of the Company and leasehold land mainly used for external rental or office purposes; * Fatum Apartment (法朵公寓) located at No. 463 Anbo Road No. 22 Lane 467 Anbo Road Yangpu District Shanghai is a long-term held office property of Shanghai Heruiming Property Management Co. Ltd. a subsidiary of the Company and leasehold land mainly used for external rental purposes; * Guangzhou Zhengjia Plaza (廣州正佳廣場) located at Room 3901-3926 No. 372 Huanshi East Road Yuexiu District Guangzhou is a long-term held office property of Guangzhou Chenming Property Management Co. Ltd. a subsidiary of the Company and leasehold land mainly used for external rental purposes; * Shenzhen Zhuoyue Baozhong Times Square (深圳卓越寶中時代廣場) located at Room 3201-3210 Building C Zhuoyue Baozhong Times Square (Phase 2) Xin’an Sub-district Bao’an District Shenzhen is a long-term held office property of Guangzhou Chenming Property Management Co. Ltd. a subsidiary of the Company and leasehold land mainly used for external rental purposes.* Shanghai Xizang South Road shop located at No. 518-528 Xizang South Road Shanghai is a long-term store held by Wuhan Junheng Property Management Co. Ltd. a subsidiary and leasehold land mainly for external rental purposes. 2024 ANNUAL REPORT 245XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 14. Investment property (Continued) (1) Investment property under the cost method (Continued) Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses √ Applicable □ Not applicable Unit: RMB Determination of fair Recoverable value and disposal Basis of determination Item Carrying amount amount Impairment expenses Key parameter of key parameter Pujiang International 3929078563.30 3870804012.06 58274551.2 Assessment Fair value – disposal expenses. Sales and Determined based on Finance Plaza distribution expenses at 1% of fair value market surveys.taxes and surcharges at 1.11% Shenzhen Zhuoyue Baozhong 155511029.33 130660000.00 24851029.33 Assessment Fair value – disposal expenses. Sales and Determined based on Times Square distribution expenses at 1% of fair value market surveys.(深圳卓越寶中時代廣場) taxes and surcharges at 1.11% Guangzhou Yuexiu Zhengjia 68875409.52 49773000.00 19102409.52 Assessment Fair value – disposal expenses. Sales and Determined based on Oriental International Plaza distribution expenses at 1% of fair value market surveys.(廣州越秀正佳東方國際廣場) taxes and surcharges at 1.11% Total 4153465002.15 4051237012.06 102227990.09 Determination of present value of recoverable amount based on expected cash flows □ Applicable √ Not applicable (2) Investment property under the fair value method □ Applicable √ Not applicable (3) Particulars of investment property without obtaining property right certificates The Company has no investment property without obtaining property right certificates. 15. Fixed assets Unit: RMB Item Closing balance Opening balance Fixed assets 31855069324.04 33186248169.56 Total 31855069324.04 33186248169.56 246 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 15. Fixed assets (Continued) (1) Particulars of fixed assets Unit: RMB Electronic Housing and Machinery and Transportation equipment Item building structure equipment equipment and others Total I. Original carrying amount: 1. Opening balance 11722953106.41 43133736594.15 294812326.00 398874518.61 55550376545.17 2. Increase during the period 185190958.99 805013161.41 2438389.50 3629309.18 996271819.08 (1) Acquisition 90115733.97 108152608.87 2438389.50 3629309.18 204336041.52 (2) Transferred from construction in progress 16118099.31 436860552.54 452978651.85 (3) Debt restructuring 78957125.71 260000000.00 338957125.71 3. Decrease during the period 87596205.70 214424554.21 28880416.48 21916943.17 352818119.56 (1) Disposal or retirement 87596205.70 214424554.21 28880416.48 21916943.17 352818119.56 4. Closing balance 11820547859.70 43724325201.35 268370299.02 380586884.62 56193830244.69 II. Accumulated depreciation 1. Opening balance 2624265582.21 19050501794.09 222005103.33 263312432.67 22160084912.30 2. Increase during the period 304582020.17 1782635041.99 16227822.00 9144414.71 2112589298.87 (1) Provision 304582020.17 1782635041.99 16227822.00 9144414.71 2112589298.87 3. Decrease during the period 28516633.86 129026043.17 24019376.64 17798386.42 199360440.09 (1) Disposal or retirement 28516633.86 129026043.17 24019376.64 17798386.42 199360440.09 (2) Other decreases 4. Closing balance 2900330968.52 20704110792.91 214213548.69 254658460.96 24073313771.08 III. Impairment provision 1. Opening balance 27808852.79 168785487.47 13889.13 7435233.92 204043463.31 2. Increase during the period 37498185.92 31528912.00 69027097.92 (1) Provision 37498185.92 31528912.00 69027097.92 3. Decrease during the period 7623411.66 7623411.66 (1) Disposal or retirement 7623411.66 7623411.66 4. Closing balance 65307038.71 192690987.81 13889.13 7435233.92 265447149.57 IV. Carrying amount 1. Closing carrying amount 8854909852.47 22827523420.63 54142861.20 118493189.74 31855069324.04 2. Opening carrying amount 9070878671.41 23914449312.59 72793333.54 128126852.02 33186248169.56 2024 ANNUAL REPORT 247XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 15. Fixed assets (Continued) (2) Particulars of temporarily idle fixed assets Unit: RMB Original carrying Accumulated Impairment Carrying Item amount depreciation provision amount Remark Housing and building structure 72464084.41 26914458.81 3093008.64 42456616.96 Machinery and equipment 1146244589.87 594604349.18 179338924.05 372301316.64 Electronic equipment 303999.85 273600.10 7187.27 23212.48 Total 1219012674.13 621792408.09 182439119.96 414781146.08 (3) Particulars of fixed assets without obtaining property right certificates Unit: RMB Carrying Reason for not yet obtaining Item amount property right certificates Housing and building structure (Chongmin Culture Development (Shanghai) Co. Ltd.) 1172180611.42 Under application Housing and building structure (Zhanjiang Chenming Pulp & Paper Co. Ltd.) 958010770.92 Under application Housing and building structure (Shouguang Meilun Paper Co. Ltd.) 467847134.79 Under application Housing and building structure (Jilin Chenming Paper Co. Ltd.) 427523333.72 Under application Housing and building structure (Jiangxi Chenming Paper Co. Ltd.) 189228867.38 Under application Housing and building structure (Shandong Chenming Paper Holdings Limited) 135600113.40 Under application Housing and building structure (Huanggang Chenming Pulp & Paper Co. Ltd.) 8403482.71 Under application T otal 3358794314.34 248 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 15. Fixed assets (Continued) (4) Impairment test on fixed assets √ Applicable □ Not applicable Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses √ Applicable □ Not applicable Unit: RMB Determination of Recoverable fair value and Basis of determination Item Carrying amount amount Impairment disposal expenses Key parameter of key parameter Pujiang International 1028250904.29 1012760200.79 15490703.50 Assessment Fair value – disposal expenses. Sales and Determined based on Finance Plaza distribution expenses at 1% of fair value market surveys.taxes and surcharges at 1.11% Chenming Cultural Square 1172180611.42 1150173129.00 22007482.42 Average transaction Average office price is RMB35000/square prices of nearby meter; average commercial commercial real real estate price is RMB50000/square estate meter; average car parking space is RMB260000/space Machinery and equipment 260000000.00 228471088.00 31528912.00 Assessment Fair value – disposal expenses. Determined based on Disposal expenses include sales and market surveys.distribution expenses (0.5%) dismantling expenses (2.5%) relevant taxes (1.59%) and other direct expenses incurred to bring the asset to a marketable condition.Total 2460431515.71 2391404417.79 69027097.92 Determination of present value of recoverable amount based on expected cash flows □ Applicable √ Not applicable 16. Construction in progress Unit: RMB Item Closing balance Opening balance Construction in progress 586611718.04 852139418.48 Materials for project 7226885.83 7478546.68 T otal 593838603.87 859617965.16 2024 ANNUAL REPORT 249XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 16. Construction in progress (Continued) (1) Particulars of construction in progress Unit: RMB Closing balance Opening balance Impairment Impairment Item Book balance provision Carrying amount Book balance provision Carrying amount Relocation of Wuhan 4800 papermaking machine project (Zhanjiang Chenming) 549063751.76 86712411.44 462351340.32 533417722.83 533417722.83 Technological transformation project 129380245.56 11645893.36 117734352.20 130674807.30 662764.60 130012042.70 Forestry-pulp-paper project (Huanggang Pulp & Paper) 156604031.76 156604031.76 300000 tonnes softwood pulp project (Shandong Chenming) 12703321.77 6177296.25 6526025.52 8941631.08 8941631.08 Others 23648105.73 23648105.73 44302661.87 21138671.76 23163990.11 Total 714795424.82 128183706.78 586611718.04 873940854.84 21801436.36 852139418.48 250 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 16. Construction in progress (Continued) (2) Changes in material construction in progress projects for the period Unit: RMB Capitalisation Including: rate of the Transfer to Other Capitalised interest Increase fixed asset deductions Accumulated Accumulated interest amount Opening during the during the during the Closing investment to Construction capitalised amount during during the Project name Budget balance period period period balance budget (%) progress (%) interest the period period Source of fund Relocation of Wuhan 4800 papermaking Self-owned machine project funds and (Zhanjiang Chenming) 800000000.00 533417722.83 15646028.93 549063751.76 68.63 71.00 borrowings 300000 tonnes Self-owned softwood pulp project funds and (Shandong Chenming) 1488980000.00 8941631.08 3761690.69 12703321.77 0.85 0.70 borrowings Total 2288980000.00 542359353.91 19407719.62 561767073.53 － － (3) Impairment provision for construction in progress for the period Unit: RMB Opening Increase during Decrease during Reason for Item balance the period the period Closing balance provision 300000 tonnes softwood pulp project (Shandong Chenming) 6177296.25 6177296.25 Closed deodorisation at wastewater treatment plant (Shandong Chenming) 5061399.69 5061399.69 Relocation of Wuhan 4800 papermaking machine project (Zhanjiang Chenming) 86712411.44 86712411.44 Automation upgrade for water treatment (Jilin Chenming) 662764.60 662764.60 Differentiated viscose fibre and spinning and chemical project (Huanggang Pulp & Paper) 12609724.89 12609724.89 Others 3467547.18 13492562.73 16960109.91 T otal 21801436.36 106382270.42 128183706.78 － Explanation: The Company conducted impairment tests on important construction projects. Impairment was made for ancillary construction costs incurred in the early stage of the suspended projects. 2024 ANNUAL REPORT 251XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 16. Construction in progress (Continued) (4) Impairment provision for construction in progress √ Applicable □ Not applicable Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses √ Applicable □ Not applicable Unit: RMB Determination of Basis of Carrying Recoverable fair value and Key determination of Item amount amount Impairment disposal expenses parameter key parameter Relocation of Wuhan 4800 549063751.76 462351340.32 86712411.44 papermaking machine project 300000 tonnes softwood 12703321.77 6526025.52 6177296.25 pulp project T44 mechanical pulp 10983128.76 10983128.76 brightness improvement transformation project 200000 tonnes/year 905660.38 905660.38 methane chloride project 350000 tonnes/year hydrogen 566037.74 566037.74 peroxide (27.5%) engineering 80000 tonnes/year thionyl 1037735.85 1037735.85 chloride (including 60000 tonnes/year polyaluminium chloride) project T otal 575259636.26 468877365.84 106382270.42 Explanation: In 2024 certain production bases of the Company were temporarily shut down for maintenance and certain construction projects were suspended. At the end of the year the Company took a stocktaking and impairment was primarily made for ancillary construction costs incurred in the early stage of the suspended projects.Determination of present value of recoverable amount based on expected cash flows □ Applicable √ Not applicable (5) Materials for project Unit: RMB Closing balance Opening balance Book Impairment Carrying Book Impairment Carrying Item balance provision amount balance provision amount Special materials 7226885.83 7226885.83 7478546.68 7478546.68 T otal 7226885.83 7226885.83 7478546.68 7478546.68 252 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 17. Bearer biological assets (1) Bearer biological assets under the cost method √ Applicable □ Not applicable Unit: RMB Item Tea tree Total I. Original carrying amount: 1. Opening balance 17684687.36 17684687.36 2. Increase during the period 1019456.24 1019456.24 (1) Cultivation 1019456.24 1019456.24 3. Decrease during the period 4. Closing balance 18704143.60 18704143.60 II. Accumulated depreciation 1. Opening balance 2. Increase during the period 3. Decrease during the period 4. Closing balance III. Impairment provision 1. Opening balance 2. Increase during the period 9352071.80 9352071.80 (1) Provision 9352071.80 9352071.80 3. Decrease during the period 4. Closing balance 9352071.80 9352071.80 IV. Carrying amount 1. Closing carrying amount 9352071.80 9352071.80 2. Opening carrying amount 17684687.36 17684687.36 (2) Impairment test on bearer biological assets under the cost method √ Applicable □ Not applicable Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses √ Applicable □ Not applicable 2024 ANNUAL REPORT 253XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 17. Bearer biological assets (Continued) (2) Impairment test on bearer biological assets under the cost method (Continued) Unit: RMB Basis of determination Carrying Recoverable Determination of fair value and Key of key Item amount amount Impairment disposal expenses parameter parameter Tea tree 18704143.60 9352071.80 9352071.80 See explanation for details T otal 18704143.60 9352071.80 9352071.80 Explanation: According to the stocktaking the Company estimated that tea tress corresponding to 50% of the area were withered or had poor growth due to management and maintenance and therefore a 50% impairment was provided.Determination of present value of recoverable amount based on expected cash flows □ Applicable √ Not applicable (3) Bearer biological assets measured at fair value □ Applicable √ Not applicable 254 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 18. Right-of-use assets (1) Particulars of right-of-use assets Unit: RMB Housing and building Item Land use rights structure Total I. Original carrying amount 1. Opening balance 198089207.01 5521837.26 203611044.27 2. Increase during the period 15065365.55 105000000.00 120065365.55 (1) Leased 105000000.00 105000000.00 (2) Adjustment of lease liabilities 15065365.55 15065365.55 3. Decrease during the period 20281761.75 24770.64 20306532.39 (1) Sublease as financial lease 5763444.28 5763444.28 (2) Transfer or held for sale 14270611.07 14270611.07 (3) Other decreases 247706.40 24770.64 272477.04 4. Closing balance 192872810.81 110497066.62 303369877.43 II. Accumulated depreciation 1. Opening balance 34470758.27 1324974.50 35795732.77 2. Increase during the period 7258461.26 1899929.90 9158391.16 (1) Provision 7258461.26 1899929.90 9158391.16 3. Decrease during the period 7608559.37 7608559.37 (1) Sublease as financial lease 1352587.09 1352587.09 (2) Transfer or held for sale 6255972.28 6255972.28 4. Closing balance 34120660.16 3224904.40 37345564.56 III. Impairment provision 1. Opening balance 2. Increase during the period 3. Decrease during the period 4. Closing balance IV. Carrying amount 1. Closing carrying amount 158752150.65 107272162.22 266024312.87 2. Opening carrying amount 163618448.74 4196862.76 167815311.50 Explanation: The reason for other decreases is that the original recognised amount of right-of-use assets was tax included and as the invoices for leasing have been received the input tax amount offset the original carrying amount of the right-of-use assets. (2) Impairment test on right-of-use assets □ Applicable √ Not applicable 2024 ANNUAL REPORT 255XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 19. Intangible assets (1) Particulars of intangible assets Unit: RMB Certificates of third Item Land use rights Software Patents party right Total I. Original carrying amount 1. Opening balance 2525157831.82 23309148.71 27493613.05 15908674.87 2591869268.45 2. Increase during the period 20708694.00 20708694.00 (1) Increase due to debt restructuring 20708694.00 20708694.00 3. Decrease during the period 350101394.77 344645.70 350446040.47 (1) Disposal 43294094.77 344645.70 43638740.47 (2) Other decrease 306807300.00 306807300.00 4. Closing balance 2195765131.05 22964503.01 27493613.05 15908674.87 2262131921.98 II. Accumulated amortisation 1. Opening balance 549448621.95 22999984.34 1151095.44 15908674.87 589508376.60 2. Increase during the period 52576156.98 505587.99 522553.77 53604298.74 (1) Provision 52576156.98 505587.99 522553.77 53604298.74 3. Decrease during the period 32407129.83 841407.10 33248536.93 (1) Disposal 13832242.59 841407.10 14673649.69 (2) Other decrease 18574887.24 18574887.24 4. Closing balance 569617649.10 22664165.23 1673649.21 15908674.87 609864138.41 III. Impairment provision 1. Opening balance 2. Increase during the period 3. Decrease during the period 4. Closing balance IV. Carrying amount 1. Closing carrying amount 1626147481.95 300337.78 25819963.84 1652267783.57 2. Opening carrying amount 1975709209.87 309164.37 26342517.61 2002360891.85 As at the end of the period the intangible assets from internal R&D of the Company accounted for 0% of the balance of intangible assets. 1) For details of restricted ownership please refer to note VII. 24. (2) Information and resources recognised as intangible assets □ Applicable √ Not applicable 256 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 19. Intangible assets (Continued) (3) Right-of-use assets without proper title certificates Unit: RMB Reason for not yet obtaining property Item Carrying amount right certificates Shouguang Kunhe Trading Co. Ltd. 71821374.49 Under application Shandong Chenming Paper Holdings Limited 1325945.32 Under application Zhanjiang Chenming Pulp & Paper Co. Ltd. 56507180.99 Under application Total 129654500.80 (4) Impairment test on intangible assets □ Applicable √ Not applicable 2024 ANNUAL REPORT 257XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 20. Goodwill (1) Original carrying amount of goodwill Unit: RMB Increase during Decrease during the period the period Arising from Name of investee or event Opening business generating goodwill balance combinations Disposal Closing balance Jilin Chenming Paper Co. Ltd. 14314160.60 14314160.60 Kunshan Tuoan Plastic Products Co. Ltd. 26946905.38 26946905.38 Jiangxi Chenming Port Co. Ltd. 8273638.42 8273638.42 T otal 49534704.40 26946905.38 22587799.02 (2) Provision for impairment of goodwill Unit: RMB Increase during Decrease during Name of investee or event Opening the period the period generating goodwill balance Provision Disposal Closing balance Jilin Chenming Paper Co. Ltd. 14314160.60 14314160.60 Jiangxi Chenming Port Co. Ltd. 8273638.42 8273638.42 T otal 14314160.60 8273638.42 22587799.02 Explanation: The Company conducted profit forecast on Jiangxi Chenming Port Co. Ltd. in general. The recoverable amount was determined based on the present value of the estimated future cash flows. Future cash flows were determined based on the financial budget for 2025 to 2029 with weighted average asset cost of 4.09%. Other key assumptions used in estimating future cash flows included the estimated sales and gross profit based on the performance of such asset group in the past and the expectation to market development by the management. Upon assessment the management is of the view that impairment occurred as a result of the acquisition of Jiangxi Chenming Port Co. Ltd. 258 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 20. Goodwill (Continued) (3) Relevant information on goodwill for asset group or combination of asset groups Whether it Composition and basis of asset group or Operating segment is consistent Name combination of asset groups and basis with prior year Jiangxi Chenming The company as a whole is regarded as an asset group or Other segment Yes Port Co. Ltd. combination of asset groups. (4) Specific determination of recoverable amount Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses □ Applicable √ Not applicable Determination of present value of recoverable amount based on expected cash flows √ Applicable □ Not applicable 2024 ANNUAL REPORT 259XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 20. Goodwill (Continued) (4) Specific determination of recoverable amount (Continued) Unit: RMB Basis of determination of key Term of Key parameter Key parameter parameter Carrying Recoverable forecast for forecast for stabilisation for stabilisation Item amount amount Impairment period period period period Jiangxi Chenming -2870430.59 -30547385.05 8273638.42 5 Discount rate of Growth rate of Port Co. Ltd. 4.09% zero T otal -2870430.5 9 -30547385.05 8 273638.42 (5) Fulfilment of performance undertaking and corresponding impairment of goodwill Goodwill was formed when a performance undertaking existed and the reporting period or the previous period fell within the performance undertaking period.□ Applicable √ Not applicable 21. Long-term prepaid expenses Unit: RMB Opening Increase during Amortisation Other Closing Item balance the period during the period deductions balance Bank financial advisory fees 262430000.00 13121499.99 249308500.01 Woodland expenses 5952099.77 3584440.65 1409772.51 8126767.91 Others 34027061.72 975934.44 2760717.21 32242278.95 T otal 39979161.49 266990375.09 17291989.71 289677546.87 260 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 22. Deferred income tax assets/deferred income tax liabilities (1) Deferred income tax assets before offsetting Unit: RMB Closing balance Opening balance Deductible Deferred Deductible Deferred temporary income temporary income Item difference tax assets difference tax assets Provision for impairment of assets 722577808.85 148433553.46 2170702373.93 509035457.40 Unrealised profit arising from intra-group transactions 7605345.40 1901336.35 Outstanding payables 257788652.79 56051325.73 121528026.20 18553482.43 Deferred income 134649677.05 20197451.55 144721508.43 21708225.98 Deductible loss 9715020431.43 1565956688.49 7008265437.96 1138659379.33 T otal 10830036570.12 1790639019.23 9452822691.92 1689857881.49 (2) Deferred income tax liabilities before offsetting Unit: RMB Closing balance Opening balance Taxable Deferred Taxable Deferred temporary income tax temporary income tax Item differences liabilities differences liabilities Asset valuation increment from business combinations involving entities not under common control 33371073.97 5005661.10 37960636.20 9490159.05 Unrealised profit arising from intra- group transactions 14360332.90 3590083.23 T otal 47731406.87 8595744.33 37960636.20 9490159.05 (3) Deferred income tax assets or liabilities presented as net amount after offsetting Unit: RMB Offset of deferred Offset of deferred Closing balance of income tax assets Opening balance of income tax assets deferred income tax and liabilities at the deferred income tax and liabilities at the assets or liabilities beginning of the assets or liabilities Item end of the period after offsetting period after offsetting Deferred income tax assets 1797939019.23 1689857881.49 Deferred income tax liabilities 8595744.33 9490159.05 2024 ANNUAL REPORT 261XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 22. Deferred income tax assets/deferred income tax liabilities (Continued) (4) The breakdown of unrecognised deferred income tax assets Unit: RMB Item Closing balance Opening balance Deductible temporary difference 5404679879.65 53265395.05 Deductible loss 2074025508.84 721381744.55 Total 7478705388.49 774647139.60 (5) Expiry of deductible loss of unrecognised deferred income tax assets falls in the years as follows Unit: RMB Year Closing balance Opening balance Remark 2024—158265081.51 2025208245408.21226672646.51 2026590291155.7661481717.71 2027110332902.3077967748.73 2028425783078.02196994550.09 2029739372964.55— T otal 2074025508.84 721381744.55 23. Other non-current assets Unit: RMB Closing balance Opening balance Book Impairment Carrying Book Impairment Carrying Item balance provision amount balance provision amount Payments for engineering and equipment 125012037.98 125012037.98 1055195141.00 1055195141.00 Others 290844663.44 290844663.44 11887516.57 11887516.57 Total 415856701.42 415856701.4 2 1067082657.57 1067082657.57 262 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 24. Assets with restricted ownerships or right to use Unit: RMB End of the period Beginning of the period Type of Type of Item Book balance Carrying amount restriction Restriction Book balance Carrying amount restriction Restriction Fixed assets 34375256421.29 20001586415.43 Charged As collateral for bank 9411111670.62 6303095864.20 Charged As collateral for bank borrowings and long-term borrowings and long-term payables (Note VII. 15) payables (Note VII. 15) Investment 6742657317.44 5433525500.09 Charged As collateral for bank 5941741699.60 5004776921.76 Charged As collateral for bank property borrowings (Note VII. 14) borrowings (Note VII. 14) Monetary 5728747806.12 5728747806.12 Pledged As deposits for acceptance 11360599088.69 11360599088.69 Pledged As deposits for bank funds and bills and letters of credit and locked- acceptance bills and locked-up security deposits for up letters of credit deposits loans deposit for letter of guarantee reserves or account security deposits for locked-up interest loans deposit reserves receivable freezing by interest receivable etc.litigation etc. (Note VII. 1) (Note VII. 1) Intangible 1789243785.12 1312981381.52 Charged As collateral for bank 865105844.99 665784045.39 Charged As collateral for bank assets borrowings and long-term borrowings and long-term payables (Note VII. 19) payables (Note VII. 19) Long-term 1549103158.31 1549103158.31 Freezing Freeze for non-payment equity (Note VII. 12) investments Accounts 207017962.56 206147426.74 Pledged As pledge for borrowings 403349324.55 398710807.32 Pledged As pledge for borrowings receivable (Note VII. 4) (Note VII. 4) Inventories 120195864.99 103566055.40 Court Seizure due to non-payment seizure (Note VII. 8) Accounts 90551168.01 90551168.01 Pledged As pledge for obtaining receivable letters of credit financing (Note VII. 5) Total 50512222315.83 34335657743.61 28072458796.46 23823517895.37 Other explanations: As at 31 December 2024 housing building structure and equipment with the book value of RMB20001586415.43 (31 December 2023: book value of RMB6303095864.20) investment properties with the book value of RMB5433525500.09 (31 December 2023: book value of RMB5004776921.76) and intangible assets with the book value of RMB1312981381.52 (31 December 2023: book value of RMB665784045.39) were pledged as collateral for long-term borrowings of RMB3669467809.18 (31 December 2023: RMB4262800469.08) short-term borrowings of RMB1375200404.98 (31 December 2023: RMB85000000.00) and long-term payables of RMB3600767587.75 (31 December 2023: RMB4345793513.95). 2024 ANNUAL REPORT 263XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 25. Short-term borrowings (1) Classification of short-term borrowings Unit: RMB Item Closing balance Opening balance Discounted borrowings 8292279333.33 12270872000.00 Credit borrowings 8179010348.64 9908287425.27 Guaranteed borrowings 8087802486.06 9785629371.41 Mortgage borrowings 1375200404.98 85000000.00 Pledged borrowings 846066236.10 1425690224.94 T otal 26780358809.11 33475479021.62 Explanation of the classification of short-term borrowings: * For classification and amount of mortgage borrowings and mortgage assets please see 1. Monetary funds and 24. Assets with restricted ownerships or right to use in Note VII.* For classification and amount of pledged borrowings and mortgage assets please see 1. Monetary funds and 24. Assets with restricted ownerships or right to use in Note VII.* Short-term borrowings included accrued interest of RMB28011462.42.* Mortgage borrowings of RMB1340000000.00 were also guaranteed by related parties. 264 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 25. Short-term borrowings (Continued) (2) Overdue borrowings At the end of the period the overdue debts of the Company totalled RMB2146408352.63 of which overdue short-term borrowings amounted to RMB469368352.63 and in accordance with Interpretation No. 17 of Accounting Standards for Business Enterprises the liabilities transferred to short-term borrowings totalled RMB1677040000.00 including overdue bank acceptance bills of RMB672040000.00 overdue long- term borrowings of RMB760000000.00 and non-current liabilities due within one year – bank loans of RMB245000000.00.Major overdue borrowings Unit: RMB Overdue interest Borrower Closing balance Borrowing rate Overdue time rate Guangdong Branch of China Development Bank 940000000.00 4.90% 20 December 2024 18% Zhanjiang Branch of Bank of China Limited 65000000.00 5.50% 16 December 2024 18% Total 1005000000.00 － － － 26. Bills payable Unit: RMB Category Closing balance Opening balance Commercial acceptance bills 1213818112.99 3604737193.92 Bank acceptance bills 210100000.00 1014249270.03 Total 1423918112.99 4618986463.95 Explanation: Total outstanding bills payable due as at the end of the period amounted to RMB3488013610.78 which was classified and presented as accounts payable other payables and short-term borrowings. 2024 ANNUAL REPORT 265XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 27. Accounts payable (1) Particulars of accounts payable Unit: RMB Item Closing balance Opening balance Payment for goods 7272978630.96 3329807929.61 Payment for engineering 217322928.02 222541200.98 Payment for equipment 117822089.47 107663951.56 Service fees 2163435.99 3460163.15 Others 98680322.03 239147624.90 Total 7708967406.47 3902620870.20 (2) Disclosure by ageing Unit: RMB Reason for outstanding Item Closing balance or not transfer Within 1 year (including 1 year) 7335083941.43 As agreed in the contract 1 to 2 years 106143394.23 As agreed in the contract 2 to 3 years 59054724.68 As agreed in the contract Over 3 years 208685346.13 As agreed in the contract Total 7708967406.47 The basis used by the ageing analysis of the accounts payable of the Company: the ageing of accounts payable is the length of time of the Company’s outstanding accounts payable based on invoice date. The closing balance is recognised one by one from the end of the period onwards until the amounts add up to the balance.It is also broken up by intervals of within 1 year 1-2 years 2-3 years and over 3 years. 266 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 28. Other payables Unit: RMB Item Closing balance Opening balance Other payables 2710367670.63 2414752127.19 Dividend payable 123000000.00 Interest payable 63042283.31 Total 2896409953.94 2414752127.19 (1) Interest payable Unit: RMB Item Closing balance Opening balance Interest on overdue borrowings 49289730.81 Interest on overdue appropriation of funds 8842575.24 Interest on overdue bills 2397040.00 Interest on overdue finance lease payments 2512937.26 T otal 63042283.31 2024 ANNUAL REPORT 267XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 28. Other payables (Continued) (2) Dividend payable Unit: RMB Item Closing balance Opening balance Weifang Chenchuang Equity Investment Fund Partnership (Limited Partnership) 54000000.00 Jianxin Financial Asset Investment Co. Ltd. 42000000.00 Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) 27000000.00 Total 123000000.00 (3) Other payables 1) Other payables by nature Unit: RMB Item Closing balance Opening balance Open credit 2194650156.21 1090141993.83 Accrued expenses 282776392.24 381781932.14 Guarantee deposit deposit and warranty 182034513.50 785572067.82 The obligation to repurchase shares under the share incentive scheme 63764745.74 Others 50906608.68 93491387.66 Total 2710367670.63 2414752127.19 268 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 29. Receipts in advance (1) Particulars of receipts in advance Unit: RMB Item Closing balance Opening balance Prepaid rents and property fees 54538940.24 16242921.65 T otal 54538940.24 16242921.65 30. Contract liabilities Unit: RMB Item Closing balance Opening balance Payment for goods in advance 274829824.35 1443680155.62 Total 274829824.35 1443680155.62 31. Staff remuneration payables (1) Particulars of staff remuneration payables Unit: RMB Increase Decrease Opening during the during the Item balance period period Closing balance I. Short-term remuneration 73907233.82 1115270025.78 939413563.31 249763696.29 II. Retirement benefit plan-defined contribution scheme 429924.62 203383411.91 202189372.82 1623963.71 III. Termination benefits 2723742.39 2723742.39 Total 74337158.44 1321377180.08 1144326678.52 251387660.00 2024 ANNUAL REPORT 269XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 31. Staff remuneration payables (Continued) (2) Particulars of short-term remuneration Unit: RMB Increase Decrease Opening during the during the Closing Item balance period period balance 1. Salaries bonuses allowance and subsidies 54425637.71 902478029.92 730326586.08 226577081.55 2. Staff welfare 44825885.55 44825885.55 3. Social insurance premium 1399223.32 92517903.30 93360611.91 556514.71 Of which: Medical insurance premium 494472.68 82002818.75 81987906.18 509385.25 Work-related injury insurance premium 15635.74 8898721.30 8903837.95 10519.09 Maternity insurance premium 889114.90 1616363.25 2468867.78 36610.37 4. Housing provident funds 6932114.30 65262274.21 61060892.04 11133496.47 5. Union funds and workers’ education 7813758.78 8869633.29 6331051.46 10352340.61 6. Other short-term remuneration 3336499.71 1316299.51 3508536.27 1144262.95 T otal 73907233.82 1115270025.78 939413563.31 249763696.29 (3) Defined contribution plan Unit: RMB Increase Decrease Opening during the during the Closing Item balance period period balance 1. Basic pension insurance premiums 415282.27 195084561.53 194235970.48 1263873.32 2. Unemployment insurance premiums 14642.35 8298850.38 7953402.34 360090.39 Total 429924.62 203383411.91 202189372.82 1623963.71 270 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 32. Tax payables Unit: RMB Item Closing balance Opening balance Value added tax 86589345.15 40076417.59 Property tax 44930390.41 15486094.67 Land use tax 19563508.13 11149858.80 Stamp duty 11784134.43 10875401.17 Enterprise income tax 6750896.17 6720397.49 Resource tax 5839230.84 3000000.00 Urban maintenance and construction tax 5779995.16 2396420.76 Educational surcharges and others 4599189.85 2062463.52 Environmental protection tax 3282700.03 3698248.00 Individual income tax 2280921.30 2184712.31 Land appreciation tax 2024028.20 2059693.25 Total 193424339.67 99709707.56 33. Non-current liabilities due within one year Unit: RMB Item Closing balance Opening balance Long-term borrowings due within one year 1207756283.94 1273902656.06 Long-term payables due within one year 367723693.41 2354342454.51 Lease liabilities due within one year 2456986.79 3692567.25 T otal 1577936964.14 3631937677.82 2024 ANNUAL REPORT 271XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 34. Other non-current liabilities Unit: RMB Item Closing balance Opening balance Overdue finance leasing borrowings 2680562600.58 S hort-term financial leasing borrowings 100000000.00 T otal 2680562600.58 100000000.00 35. Long-term borrowings (1) Types of long-term borrowings Unit: RMB Item Closing balance Opening balance Mortgage borrowings 3669467809.18 4262800469.08 Credit borrowings 1221043391.30 834545402.88 Guaranteed borrowings 1080907277.70 857571273.74 Subtotal 5971418478.18 5954917145.70 Less: Long-term borrowings due within one year 1207756283.94 1273902656.06 Total 4763662194.24 4681014489.64 Explanation of the types of long-term borrowings: * For classification and amount of mortgage assets of mortgage borrowings please see 1. Monetary funds and 24. Assets with restricted ownerships or right to use in Note VII.* In accordance with Interpretation No. 17 of Accounting Standards for Business Enterprises the Company reclassified long-term borrowings that were past due and non-current liabilities that were previously reported as due within one year. The loan agreement stipulates that in the event of a loan overdue the creditor shall require the borrower to immediately repay the full amount of the loan. Since the above debts had triggered the default clause in the contract and no extension agreement had been reached with the creditors on the balance sheet date based on the characteristics of liquidity risk and the immediacy ofrepayment obligations the Company adjusted the full amount of the book balance to the “short-termborrowings” account.* Mortgage borrowings of RMB3160106586.05 were also guaranteed by related parties.* Long-term payables included accrued interest of RMB1777044.45. 272 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 36. Lease liabilities Unit: RMB Item Closing balance Opening balance Lease payments payable 52866869.42 64264374.68 Less: Unrecognised financing expenses 13317409.57 18584784.58 Subtotal 39549459.85 45679590.10 Less: Lease liabilities due within one year 2456986.79 3692567.25 Total 37092473.06 41987022.85 37. Long-term payables Unit: RMB Item Closing balance Opening balance Long-term payables 774965008.29 2541095217.66 T otal 774965008.29 2541095217.66 Explanation: In accordance with Interpretation No. 17 of Accounting Standards for Business Enterprises the Company reclassified long-term payables that were past due and non-current liabilities that were previously reported as due within one year. The loan agreement stipulates that in the event of a loan overdue the creditor shall require the borrower to immediately repay the full amount of the loan. Since the above debts had triggered the default clause in the contract and no extension agreement had been reached with the creditors on the balance sheet date based on the characteristics of liquidity risk and the immediacy of repayment obligations the Company adjusted the full amount of the book balance to the “other current liabilities” account. 2024 ANNUAL REPORT 273XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 37. Long-term payables (Continued) (1) By nature Unit: RMB Item Closing balance Opening balance Financial leasing borrowings 3600767587.75 4345793513.95 China Development Bank Special Fund 275000000.00 343750000.00 Contributions by other partners 137894158.22 199894158.22 Retention for the financial leasing operations 6000000.00 6000000.00 Subtotal 4019661745.97 4895437672.17 Less: Other current liabilities 2876973044.27 Less: Long-term payables due within one year 367723693.41 2354342454.51 T otal 774965008.29 2541095217.66 Other explanation: Contributions by other partners refer to the contributions made by other partners to Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) and Weifang Chendu Equity Investment Partnership (Limited Partnership) and such contributions are reclassified as financial liabilities on a consolidation basis. 38. Provisions Unit: RMB Item Closing balance Opening balance Reason Pending litigations 5935000.00 Estimated compensation for losses Total 5935000.00 Other explanation: The Company was involved in a number of legal proceedings and a total of RMB5935000.00 was provided as provisions based on the potential compensation for losses. 274 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 39. Deferred income Unit: RMB Increase during Decrease during Item Opening balance the period the period Closing balance Reason Government grants 1337864114.70 7770000.00 104694629.18 1240939485.52 Financial provision T otal 1337864114.70 7770000.00 104694629.18 1240939485.52 － Items in respect of government grants Unit: RMB Include in New grants non-operating Include in cAhmaroguendt Opening during the income for other income against Asset-related/ Liability item balance period the period for the period cost expenses Other changes Closing balance income-related Funding for environmental protection 524694035.24 4500000.00 50778082.72 478415952.52 Income-related Huanggang forestry-pulp-paper project 445968305.25 25026217.80 420942087.45 Asset-related Infrastructure and environmental protection engineering 196803377.25 11517589.45 185285787.80 Asset-related Financial subsidies for technological transformation project 95106015.68 3270000.00 8958104.96 89417910.72 Asset-related Zhanjiang forestry-pulp-paper project 42617331.35 4094632.92 38522698.43 Asset-related Project fund for National Key Technology Research and Development Program 793725.00 164700.00 629025.00 Asset-related Others 31881324.93 4155301.33 27726023.60 Asset-related T otal 1 337864114.70 7770000.00 104694629.18 1 240939485.52 2024 ANNUAL REPORT 275XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 40. Share capital Unit: RMB Increase/decrease during the year (+/-) Repurchase Shares of restricted converted Opening balance shares Bonus issue from reserves Others Subtotal Closing balance T otal number of shares 2956813200.00 -22257000.00 -22257000.00 2934556200.00 Explanation: On 31 July 2024 the Company convened the fifteenth extraordinary meeting of the tenth session of the Board and the sixth extraordinary meeting of the tenth session of the Supervisory Committee at which the Resolution on the Failure Fulfilment of the Unlocking Conditions for the Third Unlocking Period under the 2020 Restricted A Share Incentive Scheme and Repurchase and Cancellation of Certain Restricted Shares was considered and approved. Grant Thornton (Special General Partnership) issued a Capital Verification Report (Zhi Tong Yan Zi (2024) No. 371C000421) for the repurchase of restricted shares during the period. Upon the completion of share repurchase the total number of shares of the Company changed from 2956813200 to 2934556200. 41. Capital reserves Unit: RMB Increase during Decrease during Item Opening balance the period the period Closing balance Share incentive 4599770312.40 121112276.86 4478658035.54 Other capital reserves 729020587.21 729020587.21 Total 5328790899.61 121112276.86 5207678622.75 Other explanations including changes (increase or decrease) during the period and reasons for such changes: * The Company acquired partial equity interest in Shouguang Meilun Paper Co. Ltd. a subsidiary from minority shareholders resulting in a decrease in capital reserves of RMB9957619.55; * the Company contributed capital to Shandong Yujing Grand Hotel Co. Ltd. resulting in a decrease in capital reserves of RMB67989974.96; * the change of capital reserves of Guangdong Nanyue Bank Co. Ltd. an associate of the Company resulted in a decrease in capital reserves of RMB1989232.35; * the repurchase of the restricted shares not to be unlocked in the current period reduced capital reserves by RMB41175450.00. 276 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 42. Treasury shares Unit: RMB Increase during Decrease during Item Opening balance the period the period Closing balance Share incentive 63432450.00 63432450.00 T otal 63432450.00 63432450.00 Explanation: Due to failure in fulfilling the unlocking conditions the Company repurchased certain restricted shares with a reduction of RMB63432450.00 in treasury shares. 43. Other comprehensive income Other comprehensive income attributable to the Company in the balance sheet is as follows: Unit: RMB Amount during the period Less: Transferred from other comprehensive Attributable to income in the parent prior periods to Opening company retained earnings Closing Item balance after tax during the period balance I. Other comprehensive income that cannot be reclassified to profit or loss in subsequent periods II. Other comprehensive income that will be reclassified to profit and loss in subsequent periods -864881489.08 -48827181.07 -913708670.15 1. Other comprehensive income that may be reclassified to profit and loss under the equity method -11140109.71 6370472.83 -4769636.88 2. Translation differences of financial statements denominated in foreign currency -853741379.37 -55197653.90 -908939033.27 T otal other comprehensive income -864881489.08 -48827181.07 -913708670.15 2024 ANNUAL REPORT 277XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 43. Other comprehensive income (Continued) Other comprehensive income attributable to the parent company in the income statement: Unit: RMB Amount during the period Less: Transferred from other comprehensive income in prior Less: Attributable Incurred before periods to profit to minority Attributable to income tax for or loss during Less: Income shareholders parent company I tem the period the period tax expenses after tax after tax I. Other comprehensive income that cannot be reclassified to profit or loss in subsequent periods II. Other comprehensive income that will be reclassified to profit and loss in subsequent periods -48827181.07 -48827181.07 1. Other comprehensive income that may be reclassified to profit and loss under the equity method 6370472.83 6370472.83 2. Translation differences of financial statements denominated in foreign currency -55197653.90 -55197653.90 T otal other comprehensive income -48827181.07 -48827181.07 44. Special reserves Unit: RMB Increase during Decrease during Item Opening balance the period the period Closing balance Production safety expenses 23322829.57 19870503.88 16392841.92 26800491.53 Total 23322829.57 19870503.88 16392841.92 26800491.53 45. Surplus reserves Unit: RMB Increase during Decrease during Item Opening balance the period the period Closing balance Statutory surplus reserves 1212009109.97 1212009109.97 Total 1212009109.97 1212009109.97 278 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 46. General risk provisions Increase during Decrease during Item Opening balance the period the period Closing balance General risk provisions 79370294.91 1580289.20 80950584.11 T otal 79370294.91 1580289.20 80950584.11 Explanation: The general risk provisions are accrued by the Company’s subsidiaries Shandong Chenming Group Finance Co. Ltd. and Shandong Chenming Commercial Factoring Co. Ltd. based on 1% of the balance of the receivables. Accordingly the balance of the general risk provisions was adjusted based on the balance of the receivables. 47. Retained profit Unit: RMB Item The period The prior period Retained profit as at the end of the prior year before adjustment 8020182801.55 9390642477.57 Adjustment to opening balance of retained earnings (increase + decrease -) Opening balance of retained profit after adjustment 8020182801.55 9390642477.57 Add: Net profit for the period attributable to shareholders of the parent company -7410784491.65 -1281289649.82 Less: Transfer of general risk provisions 1580289.20 -529973.80 Perpetual Bonds interest payable 89700000.00 R etained profit as at the end of the period 607818020.70 8020182801.55 2024 ANNUAL REPORT 279XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 48. Revenue and operating costs Unit: RMB Amount during the period Amount during the prior period Item Revenue Costs Revenue Costs Principal activities 22602034544.86 22085665323.51 26368633225.48 24241469338.15 Other activities 127440307.90 59163344.92 239937002.72 204016961.78 Total 22729474852.76 22144828668.43 26608570228.20 24445486299.93 Whether the lower of the audited net profit before or after deducting extraordinary gains or losses is a negative number √ Yes □ No Unit: RMB Item Current year Specific deductions Prior year Specific deductions Revenue 22729474852.76 26608570228.20 Total deductions from revenue 159980820.39 Revenue from sales of materials of 986216965.96 Revenue from sales of materials of RMB105595945.36 and other RMB900376053.88 and other revenue of RMB54384875.03. revenue of RMB85840912.08.Proportion of total deductions from revenue to 0.70% 3.71% revenue I. Revenue from operations not related to principal operations 1. Revenue from operations other than normal 159980820.39 Revenue from sales of materials of 986216965.96 Revenue from sales of materials of operation such as revenue realised from RMB105595945.36 and other RMB900376053.88 and other leasing fixed assets intangible assets revenue of RMB54384875.03. revenue of RMB85840912.08 packaging materials sales of materials exchanges for non-monetary assets with materials engaging in entrusted management business and revenue included in revenue from principal operations but generated from operations other than normal operation of the Company.Subtotal of revenue from operations not related 159980820.39 Revenue from sales of materials of 986216965.96 Revenue from sales of materials of to principal operations RMB105595945.36and other RMB900376053.88 and other revenue of RMB54384875.03 revenue of RMB85840912.08.II. Income without commercial substance III. Other income not related to the principal operations or without commercial substance Revenue after deductions 22569494032.37 Revenue from sales of materials of 25622353262.24 Revenue from sales of materials of RMB105595945.36 and other RMB900376053.88 and other revenue of RMB54384875.03. revenue of RMB85840912.08. 280 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 48. Revenue and operating costs (Continued) Breakdown of revenue and operating costs: Unit: RMB Machine-made paper Financial services Hotel and property rentals Others Total Category of contract Revenue Operating costs Revenue Operating costs Revenue Operating costs Revenue Operating costs Revenue Operating costs Type of business 22121097000.91 21633558055.36 194122370.30 754872.50 195920780.92 213936663.38 218334700.63 296579077.19 22729474852.76 22144828668.43 Including: Machine-made paper 20179848508.57 19870513391.35 20179848508.57 19870513391.35 Chemical pulp 1519262130.75 1370195011.59 1519262130.75 1370195011.59 Electricity and steam 216763239.54 259600886.37 216763239.54 259600886.37 Construction materials 127783427.12 135982330.21 127783427.12 135982330.21 Hotel and property rentals 193494961.95 213050117.25 193494961.95 213050117.25 Paper chemicals 88627247.45 76919302.04 88627247.45 76919302.04 Others 116595874.60 56329464.01 194122370.30 754872.50 2425818.97 886546.13 90551273.51 160596746.98 403695337.38 218567629.62 By geographical area 22121097000.91 21633558055.36 194122370.30 754872.50 195920780.92 213936663.38 218334700.63 296579077.19 22729474852.76 22144828668.43 Including: Mainland China 17473683752.92 17001454557.91 194122370.30 754872.50 195920780.92 213936663.38 218334700.63 296579077.19 18082061604.77 17512725170.98 Other countries and regions 4647413247.99 4632103497.45 4647413247.99 4632103497.45 By the timing of delivery 22121097000.91 21633558055.36 194122370.30 754872.50 195920780.92 213936663.38 218334700.63 296579077.19 22729474852.76 22144828668.43 Including: Goods (at a point in time) 21894912696.29 21371499091.00 1036801.87 886546.13 218334700.63 296579077.19 22114284198.79 21668964714.32 Services (within a certain period) 226184304.62 262058964.36 194122370.30 754872.50 194883979.05 213050117.25 615190653.97 475863954.11 By sales channel 22121097000.91 21633558055.36 194122370.30 754872.50 195920780.92 213936663.38 218334700.63 296579077.19 22729474852.76 22144828668.43 Including: Distribution 16965016680.69 16675644976.42 16965016680.69 16675644976.42 Direct sales 5156080320.22 4957913078.94 194122370.30 754872.50 195920780.92 213936663.38 218334700.63 296579077.19 5764458172.07 5469183692.01 2024 ANNUAL REPORT 281XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 48. Revenue and operating costs (Continued) Breakdown of revenue from principal activities * By industry Unit: RMB Amount for the year Amount for the prior year Name of industry Revenue Costs Revenue Costs Machine-made paper 20179848508.57 19870513391.35 23892883773.10 22038839089.61 Chemical pulp 1519262130.75 1370195011.59 551886319.48 549401517.97 Electricity and steam 216763239.54 259600886.37 223450300.54 212089570.22 Hotel and property rentals 193494961.95 213050117.25 212364573.64 202364469.60 Construction materials 127783427.12 135982330.21 222788884.78 216481504.04 Paper chemicals 88627247.45 76919302.04 128495469.03 118581502.40 Others 276255029.48 159404284.70 1136763904.91 903711684.31 T otal 22602034544.86 22085665323.51 26368633225.48 24241469338.15 * Machine-made paper by main product type Unit: RMB Amount for the year Amount for the prior year Name of industry Revenue Costs Revenue Costs Duplex press paper 6117888314.70 5767014322.77 7702426452.75 6929011543.24 White paper board 4553056974.25 5140713897.07 5477558929.56 5673086405.12 Coated paper 3758928113.95 3263366438.24 3925663395.23 3389639629.49 Electrostatic paper 3547162310.53 3146628608.35 4005559008.36 3410527141.51 Anti-sticking raw paper 909489122.98 772483237.25 1127626969.18 947141370.39 Thermal paper 432929902.58 422071788.54 553666757.69 484068025.05 Others 860393769.58 814075382.06 1100382260.33 1032967683.96 Shutdown loss 544159717.07 172397290.85 T otal 20179848508.57 19870513391.35 23892883773.10 22038839089.61 282 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 48. Revenue and operating costs (Continued) * Machine-made paper by geographical segment Unit: RMB Amount for the year Amount for the prior year Name of industry Revenue Costs Revenue Costs Mainland China 15532435260.58 15238409893.90 17366661577.26 15915850731.09 Other countries and regions 4647413247.99 4632103497.45 6526222195.84 6122988358.52 Total 20179848508.57 19870513391.35 23892883773.10 22038839089.61 * Revenue from top 5 customers Unit: RMB Percentage of the Total revenue from total revenue in the Period top 5 customers same period (%) 20246640449070.9229.22% 20235966203769.1422.42% Information related to performance obligations: Company’s Nature of goods Whether the commitments Time for fulfilment of that the Company person is the expected to Types of quality assurance performance Significant terms of undertakes to primary person be refunded to offered by the Company and Item obligations payment transfer in charge customers related obligations Machine-made Domestic sales on the Domestic sales tend Produces easily Yes None Guaranteed quality assurance paper day of delivery to the to be provided on distinguishable should there be objections to customer; foreign an invoice basis; product quality within 7 days sales on the day of foreign sales tend of arrival the products can customs clearance to be prepaid. be returned and exchanged.Other explanations: The Company’s performance obligations for sales of machine-made paper are generally less than one year and the Company takes advance payments or provides credit terms depending on the customer. When the Company is the primary responsible party for a sale it generally obtains the unconditional right to receive payment when control of the merchandise is transferred to the customer either at the time of shipment or upon delivery to the destination specified by the customer.Information related to the transaction price allocated to residual performance obligations: As at the end of the reporting period the amount of revenue with signed contracts but unfulfilled or uncompleted performance obligation was RMB274829824.35 in which RMB274829824.35 was expected to be recognised in 2025. 2024 ANNUAL REPORT 283XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 49. Taxes and surcharges Unit: RMB Amount during Amount during Item the period the prior period Property tax 85290265.89 88246740.83 Stamp duty 46117978.93 42431971.88 Land use tax 41247568.81 34743967.04 Urban maintenance and construction tax 13956911.51 18839445.01 Resource tax 12908476.74 13725384.40 Environmental tax 12876424.84 13009450.64 Educational surcharges 6220575.30 8522314.82 Local education surcharges 4147050.24 5859476.27 Water conservation funds 901231.53 848092.68 Others 2294796.67 1575521.55 Total 225961280.46 227802365.12 Note: For details of the calculation basis of various taxes and surcharges please refer to Note VI Taxes. 50. General and administrative expenses Unit: RMB Amount during Amount during Item the period the prior period Wages and surcharges 246167228.89 229206077.91 Depreciation expenses 128779641.74 91759528.87 Business hospitality expenses 90745828.51 94404109.34 Amortisation of intangible assets and long-term expenses 51506321.75 48832351.39 Legal costs 47505377.69 20252237.24 Welfare expenses 45660222.08 58663557.66 Litigation expenses 23259822.70 1692917.44 Intermediary service expenses 22648125.77 21621384.60 Repair cost and consumption of materials 15827440.75 23468894.14 Insurance premium 14953971.53 16758186.64 Travel expenses 11382389.61 15150365.49 Office expenses 3249506.16 3871812.80 Termination benefits expenses 2591967.39 2091062.84 Others 46891129.43 62547295.65 Total 751168974.00 690319782.01 284 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 51. Sales and distribution expenses Unit: RMB Amount during Amount during Item the period the prior period Wages and surcharges 132918538.10 109381728.48 Business hospitality expenses 47459555.70 51126929.37 Travel expenses 28721204.65 28631831.59 Rental expenses 6921416.15 7343527.12 Depreciation expenses 4742847.33 4677235.58 Selling commissions 4618204.21 6940887.40 Office expenses 2117947.35 4241864.88 Others 13671395.63 18655633.01 Total 241171109.12 230999637.43 52. Research and development expense Unit: RMB Amount during Amount during Item the period the prior period Consumption of materials 725049519.67 781407604.78 Utilities 130904560.17 155276067.70 Wages and surcharges 123022797.35 129508833.28 Depreciation expenses 64184587.23 56914306.41 Insurance premium 25909846.14 26981737.42 Welfare expenses 4556030.19 3362929.39 Housing provident funds 4151966.75 4435343.17 Union funds 1271458.04 1323605.61 Other expenses 1280988.88 5209270.37 Total 1080331754.42 1164419698.13 2024 ANNUAL REPORT 285XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 53. Finance expenses Unit: RMB Amount during Amount during Item the period the prior period Interest expenses 1869661335.22 1908394881.89 Less: Capitalised interest amount Interest income 182479117.53 201101017.34 Foreign exchange gains and losses -50235759.26 -25018964.43 Less: Capitalisation of foreign exchange gains and losses Bank charges and others 331036008.91 327391808.02 Total 1967982467.341 2009666708.14 54. Other income Unit: RMB Amount during Amount during Source of other income the period the prior period Government grants – amortised deferred income included in profit or loss 104694629.18 133096353.76 Government grants – directly included in profit or loss 15808074.49 36809925.69 Additional deduction of VAT 174580943.06 154495020.82 Refund of handling fees for withholding and payment of individual income tax 513801.11 2522709.33 Gain on debt restructuring 205966.46 10400321.83 Total 295803414.30 337324331.43 Note: For more information on government grants please refer to Note XI. Government grants. 55. Gain on change in fair value Unit: RMB Amount during Amount during Source of gain on change in fair value the period the prior period Financial assets held for trading -9757917.81 -28740129.26 Other non-current financial assets -29047290.52 -3590983.62 Gain on change in fair value of consumable biological assets measured at fair value -153411759.17 6775808.38 Total -192216967.50 -25555304.50 286 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 56. Investment income Unit: RMB Amount during Amount during Item the period the prior period Dividend on financial assets held for trading and other noncurrent financial assets 23957613.40 39529607.69 Investment gain on debt restructuring 3313951.90 44897024.23 Investment gain on disposal of long-term equity investments -2985381.21 391450223.81 Investment gain on derecognition of financial assets -101812317.04 -99744741.95 Income from long-term equity investments accounted for using the equity method -689387136.28 128934922.00 Total -766913269.23 505067035.78 57. Credit impairment loss Unit: RMB Amount during Amount during Item the period the prior period Bad debt loss of accounts receivable -738698849.57 -96453353.50 Bad debt loss of other receivables -991241165.49 -47363307.69 Bad debt loss of financial lease payments -1468149193.40 -176139588.20 Total -3198089208.46 -319956249.39 58. Loss on impairment of assets Unit: RMB Amount during Amount during Item the period the prior period Impairment losses on goodwill -8273638.42 Impairment losses on bearer biological assets -9352071.80 Impairment losses on long-term equity investments -17088890.78 Inventory impairment losses -20403446.82 -44344534.62 Impairment losses on fixed assets -69027097.92 Impairment losses on investment properties -102227990.09 Impairment losses on construction in progress -106382270.42 -662764.60 Total -332755406.25 -45007299.22 2024 ANNUAL REPORT 287XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 59. Asset disposal income Unit: RMB Amount during Amount during Item the period the prior period Sublease (“-” denotes loss) 27779307.50 3780766.85 Gain on disposal of fixed assets (“-” denotes loss) 27626956.14 11090813.00 Gain on disposal of intangible assets (“-” denotes loss) -264150.94 Total 55406263.64 14607428.91 60. Non-operating income Unit: RMB Included in non-recurring Amount during Amount during profit or loss Item the period the prior period in the period Fines compensation income 3064805.35 1965328.23 3064805.35 Gain on damage and retirement of non-current assets 836632.57 450007.54 836632.57 Exempted debts 766729.62 222676.32 766729.62 Government grants 72000.00 Others 479470.17 288757.32 479470.17 Total 5147637.71 2998769.41 5147637.71 288 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 61. Non-operating expenses Unit: RMB Included in non-recurring Amount during Amount during profit or loss Item the period the prior period in the period Loss on damage and retirement of non-current assets 18017286.66 4940010.70 18017286.66 Utilisation cancellation and trading of carbon emission quota 10143868.80 13613560.97 10143868.80 Litigation compensation 8683133.63 8683133.63 Donation 300000.00 505280.00 300000.00 Others 459888.85 459888.85 Total 37604177.94 19058851.67 37604177.94 62. Income tax expenses (1) Particulars of income tax expenses Unit: RMB Amount during Amount during Item the period the prior period Current income tax calculated according to tax law and related regulations 29520796.36 26624910.52 Deferred income tax expenses -89692493.81 -409686894.47 Total -60171697.45 -383061983.95 2024 ANNUAL REPORT 289XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 62. Income tax expenses (Continued) (2) The reconciliation between accounting profit and income tax expenses Unit: RMB Amount during Item the period Total profit -7853191114.74 Income tax expenses calculated at statutory (or applicable) tax rates -1177978667.21 Effect of different tax rates applicable to certain subsidiaries -289098723.65 Adjustments to income tax for prior periods 53667789.92 Profit and loss of joint ventures and associates accounted for using the equity method 127351544.10 Income not subject to tax (listed with “-”) -3815166.49 Non-deductible costs expenses and losses 16175703.25 The impact of tax rate changes on the opening deferred income tax balance Tax effect of utilisation of unrecognised deductible losses and deductible temporary differences in the previous year (listed with “-”) -22376863.40 Tax effect of utilisation of unrecognised deductible losses and deductible temporary differences 1340443501.17 Tax effect of R&D fee deduction (listed with“-”) -101346229.46 The pre-tax deduction of the interest on Perpetual Bonds accounted as equity Tax incentives such as 10% deduction for income from particle board -3194585.68 Deferred income taxes that have not been recognised as deductible losses and deductible temporary differences in previous years are reversed in the current period.Income tax expense -60171697.45 63. Items on statements of cash flow (1) Cash relating to operating activities Cash received relating to other operating activities Unit: RMB Amount during Amount during Item the period the prior period Net proceedings from the financial leasing business 260647420.02 615990074.21 Finance expenses – Interest income 145479117.53 192639004.29 Open credit and other income 93824314.21 185197937.53 Government grants 24021791.25 36369756.40 Default penalty and fine 882182.24 988348.52 Total 524854825.25 1031185120.95 290 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 63. Items on statements of cash flow (Continued) (1) Cash relating to operating activities (Continued) Cash paid relating to other operating activities Unit: RMB Amount during Amount during Item the period the prior period Transportation expenses 658951178.78 827892596.27 Financial institutions charge 251788057.09 231394529.58 Net investment in factoring business 127400000.00 Business hospitality expenses 120249429.77 126982128.56 Intermediary service expenses 57572669.84 42941628.90 Travel expenses 39774276.92 44024694.22 Cargo handling charges 22750943.01 16197187.56 Waste disposal expenses 19349998.12 15654882.06 Leasing expenses 13784498.82 13911319.46 Repair expenses 11283362.12 23853382.84 Office expenses 10013183.60 8375443.12 Insurance premium 9735854.15 16063115.65 Others 82890384.62 190183959.20 Total 1425543836.84 1557474867.42 (2) Cash relating to investing activities Significant cash received relating to investing activities Unit: RMB Amount during Amount during Item the period the prior period Net cash received from disposal of subsidiaries 503938946.58 99329954.44 Demolition or relocation compensation received 138000000.00 Disposal of properties or property assets 61500000.00 Total 503938946.58 298829954.44 2024 ANNUAL REPORT 291XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 63. Items on statements of cash flow (Continued) (2) Cash relating to investing activities (Continued) Significant cash paid relating to investing activities Unit: RMB Amount during Amount during Item the period the prior period Expenses on construction projects land and fixed assets 314376125.86 Net cash paid for acquisition of subsidiaries 4934751.03 Total 319310876.89 (3) Cash relating to financing activities Cash received relating to other financing activities Unit: RMB Amount during Amount during Item the period the prior period Net recovery of guarantee deposit 5592493318.93 434899520.51 Equipment leaseback 1246000000.00 2116532500.00 Current accounts 135100000.00 Deposit for finance lease 10758363.18 Total 6838493318.93 2697290383.69 292 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 63. Items on statements of cash flow (Continued) (3) Cash relating to financing activities (Continued) Cash paid relating to other financing activities Unit: RMB Amount during Amount during Item the period the prior period Repayment of equipment leaseback 2134347896.07 2761859486.35 Acquisition of non-controlling interests 300000000.00 200000000.00 China Development Bank equity 68750000.00 68750000.00 Current accounts 68200000.00 Share repurchase under the share incentive scheme 67391949.19 66228770.38 Security deposit for financial leasing 22550000.00 68250000.00 Lease payable 1465902.88 7013099.60 Repayment of Perpetual Bonds 1000000000.00 Repayment of bonds 350000000.00 Repayment of Perpetual Bonds interest 89700000.00 Total 2662705748.14 4611801356.33 Changes in liabilities arising from financing activities ? Applicable □ Not applicable Unit: RMB Increase during the period Decrease during the period Item Opening balance Cash changes Non-cash changes Cash changes Non-cash changes Closing balance Short-term borrowings 33475479021.62 23806795311.77 1382346360.93 31884261885.21 26780358809.11 Long-term borrowings 5954917145.70 2360645554.68 108429947.45 1437574169.65 1015000000.00 5971418478.18 Long-term payables 4895437672.17 1246000000.00 143321969.87 2265097896.07 4019661745.97 Other payables (financing) 282524750.00 1056991631.38 267610000.00 1071906381.38 Lease liabilities 45679590.10 5267375.01 1465902.88 9931602.38 39549459.85 Total 44654038179.59 28470432497.83 1639365653.26 35856009853.81 1024931602.38 37882894874.49 2024 ANNUAL REPORT 293XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 64. Supplementary information on cash flow statement (1) Supplementary information on cash flow statement Unit: RMB Amount for Amount for Supplementary information the period the prior period 1. Reconciliation of net profit as cash flows from operating activities: Net profit -7793019417.29 -1326642417.86 Add: Provision for impairment 3530844614.71 364963548.61 Depreciation of fixed assets depreciation of investment properties and depreciation of bearer biological assets 2309092359.37 2258072937.60 Depreciation of right-of-use assets 9158391.16 7674988.32 Amortisation of intangible assets 53604298.74 53903852.31 Amortisation of long-term prepaid expenses 17291989.71 4580218.92 Loss on disposal of fixed assets intangible assets and other long-term assets (“-” denotes gain) -55406263.64 -14607428.91 Loss on retirement of fixed assets (“-” denotes gain) 17180654.09 4490003.16 Loss on changes in fair value (“-” denotes gain) 192216967.50 25555304.50 Finance expenses (“-” denotes gain) 1869661335.22 1908394881.89 Investment loss (“-” denotes gain) 766913269.23 -505067035.78 Decrease in deferred income tax assets (“-” denotes increase) -100781137.74 -354157315.89 Increase in deferred income tax liabilities (“-” denotes decrease) -894414.72 1308894.76 Decrease in inventories (“-” denotes increase) 1876512079.56 741332805.87 Decrease in operating receivables (“-” denotes increase) 795688330.88 348500778.63 Increase in operating payables (“-” denotes decrease -864871392.18 871645292.69 Others Net cash flows from operating activities 2623191664.60 4389949308.82 2. Major investing and financing activities not involving cash settlements: Capital converted from debts Convertible corporate bonds due within one year Fixed assets under finance leases Addition of right-of-use assets 103125000.00 3. Net change in cash and cash equivalents: Closing balance of cash 151943246.31 764233742.61 Less: Opening balance of cash 764233742.61 2159460149.51 Add: Closing balance of cash equivalents Less: Opening balance of cash equivalents Net increase in cash and cash equivalents -612290496.30 -1395226406.90 294 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 64. Supplementary information on cash flow statement (Continued) (2) Net Cash from Disposal of Subsidiaries Received in Current Period Unit: RMB Amount Cash or cash equivalents received in the current period from disposal of subsidiaries during the period 143730000.00 Of which: Kunshan Tuoan Plastic Products Co. Ltd. 143730000.00 Less: Cash and cash equivalents held by the subsidiary on the date of loss of control 20091053.42 Of which: Kunshan Tuoan Plastic Products Co. Ltd. 20091053.42 Add: Cash or cash equivalents received in the current period from disposal of subsidiaries during previous periods 380300000.00 Of which: Wuhan Chenming Hanyang Paper Holdings Co. Ltd. 380000000.00 Zhanjiang Chenming New-style Wall Materials Co. Ltd. 300000.00 Net cash received from disposal of subsidiaries 503938946.58 (3) Cash and cash equivalents composition Unit: RMB Item Closing balance Opening balance I. Cash 151943246.31 764233742.61 Of which: Treasury cash 1363319.76 3674805.36 Bank deposit that can be used for payment at any time 150579926.55 760558937.25 III. Balance of cash and cash equivalent at the end of the period 151943246.31 764233742.61 Of which: Restricted cash and cash equivalents used by the Company or subsidiaries within the Group (4) Monetary funds other than cash and cash equivalents Unit: RMB Reasons why it is not Item Amount for the period Amount for the prior period cash and cash equivalents Other monetary funds 5728747806.12 11321241125.05 See Note VII.1 for details Interest accrued on deposits 29188759.75 39357963.64 See Note VII.1 for details Total 5757936565.87 11360599088.69 2024 ANNUAL REPORT 295XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 65. Notes to items of statements of changes in owners’ equity Nil 66. Foreign currency items (1) Foreign currency items Unit: RMB Closing foreign Closing balance Item currency balance Exchange rate in RMB Monetary funds Of which: USD 54052617.90 7.1884 388551838.51 EUR 1094935.39 7.5257 8240155.26 HKD 1554765.99 0.9260 1439713.31 GBP 1777.90 9.0765 16137.11 SGD 3985.09 5.3214 21206.26 JPY 1197.00 0.0462 55.30 Accounts receivables Of which: USD 3390727.72 7.1884 24373907.14 EUR 100814.49 7.5257 758699.61 JPY 146734998.00 0.0462 6779156.91 Other receivables Of which: USD 1043513.63 7.1884 7501193.38 EUR 191821.66 7.5257 1443592.27 Accounts payable Of which: USD 92261475.49 7.1884 663212390.41 EUR 1048028.29 7.5257 7887146.50 Other payables Of which: USD 533977.32 7.1884 3838442.57 EUR 9519.99 7.5257 71644.59 Long-term borrowings Of which: EUR 4042908.00 7.5257 30425712.74 296 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 66. Foreign currency items (Continued) (2) Explanation on overseas operating entities (including major overseas operating entities) which shall disclose their overseas principal places of business functional currency and basis. Reasons shall be disclosed if there is any change in the functional currency.? Applicable □ Not applicable Principal place Place of incorporation No. Name of subsidiary of business Functional currency Functional currency 1 Chenming GmbH Hamburg Germany Hamburg Germany EUR 2 Chenming Paper Korea Co. Ltd. Seoul Korea Seoul Korea KRW 3 Chenming Paper Japan Co. Ltd. Tokyo Japan Tokyo Japan JPY 4 Chenming Paper United States Co. Ltd. Los Angeles USA USA Los Angeles USA USD 5 Chenming (Overseas) Limited Hong Kong China Hong Kong China USD 6 Chenming (Singapore) Limited Singapore Singapore USD 7 Chenming (HK) Limited Hong Kong China Hong Kong China USD 67. Leases (1) The Company as a lessee Unit: RMB Amount during tem the period Short-term lease expenses 7529440.55 (2) The Company as a lessor Operating lease as a lessor ? Applicable □ Not applicable Lease income Unit: RMB Amount during Item the period Lease income 173983222.36 2024 ANNUAL REPORT 297XII Financial Report VII. Notes to items of the consolidated financial statements (Continued) 67. Leases (Continued) (2) The Company as a lessor (Continued) The Company as a lessor □ Applicable ? Not applicable Undiscounted lease payments for each of the next five years ? Applicable □ Not applicable Unit: RMB Annual undiscounted lease payments Item Closing balance Opening balance The first year 152207821.18 179905002.33 The second year 159924290.10 168651189.37 The third year 157974084.34 167585064.63 The fourth year 160776701.99 162996827.55 The fifth year 158478080.32 159887562.91 Five years later 155500794.16 165396559.34 Total 944861772.09 1004422206.13 VIII. R&D Expenses Unit: RMB Amount during Amount during Item the period the prior period Consumption of materials 725049519.67 781407604.78 Utilities 130904560.17 155276067.70 Wages and surcharges 123022797.35 129508833.28 Depreciation expenses 64184587.23 56914306.41 Insurance premium 25909846.14 26981737.42 Welfare expenses 4556030.19 3362929.39 Housing provident funds 4151966.75 4435343.17 Union funds 1271458.04 1323605.61 Other expenses 1280988.88 5209270.37 Total 1080331754.42 1164419698.13 Including: R&D expenses included in profit or loss 1080331754.42 1164419698.13 298 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report IX. Change in Scope of Consolidation 1. Disposal of a subsidiary Any transaction or event that results in the loss of control of any subsidiary during the period ? Yes □ No Unit: RMB Determination and key Difference assumption between Carrying of fair value Relevant consideration amount Fair value of remaining other and share of remaining of remaining shareholding comprehensive of net assets shareholding shareholding as of the income of of relevant as of the date as of the date date of loss former The basis subsidiary Remaining of loss of of loss of Gain or of control subsidiary Disposal Disposal Disposal for as per shareholding control as per control as per loss in as per transferred consideration percentage method at Date of determining consolidated as of the date consolidated consolidated fair value of consolidated to profit or at the date of at the date of the date of loss of c the date of financial of loss of financial financial remaining financial loss or retained Name of subsidiary loss of control loss of control loss of control ontrol loss of control statements control statements statements shareholding statements profit Kunshan Tuoan February 29 Plastic Products Co. Ltd. 143730000.00 100.00 Transfer 2024 Loss of control 12619604.72 0.00 0.00 0.00 N/A N/A N/A Any transaction or event that results in the loss of control of any subsidiary during the period □ Applicable ? Not applicable 2. Change in scope of consolidation due to other reasons During the year 2 subsidiaries were newly established namely Shandong Chenming Industrial Trading Co. Ltd. and Hubei Chenming Technology Industrial Co. Ltd. 2 subsidiaries were deregistered namely Chenming International Co.Ltd. and Guangzhou Chenming Commercial Factoring Co. Ltd. 2024 ANNUAL REPORT 299XII Financial Report X. Interest in Other Entities 1. Interest in subsidiaries (1) Constitution of the Group Unit: RMB’0000 Principle Issued Issued Register place Place of Nature of Type of legal Shareholding debt share Name of subsidiary capital of business incorporation business person Direct Indirect Acquisition securities capital Shouguang Meilun Paper Co. 480104.55 Shouguang Shouguang Paper making For-profit 68.28 Establishment 0 0 Ltd. corporation Shouguang Meichen Energy 100.00 Shouguang Shouguang Electricity For-profit 100 Establishment 0 0 Technology Co. Ltd. corporation Shandong Chenming Industrial 1000 Weifang Weifang Paper making For-profit 100 Establishment 0 0 Trading Co. Ltd. corporation Shouguang Chenming Art 2000.00(USD) Shouguang Shouguang Paper making For-profit 75 Establishment 0 0 Paper Co. Ltd. corporation Shandong Chenming 10000.00 Shouguang Shouguang Sales of paper For-profit 100 Establishment 0 0 Paper Sales Co. Ltd. product corporation Shanghai Chenming Pulp & 10000.00 Shanghai Shanghai Sales of paper For-profit 100 Establishment 0 0 Paper Sales Co. Ltd. product corporation Shandong Chenming 10000.00 Shouguang Shouguang Sales of paper For-profit 100 Establishment 0 0 Paper Sales Co. Ltd. product corporation Shouguang Chenming Import 70000.00 Shouguang Shouguang Trading For-profit 35.71 64.29 Establishment 0 0 and Export Trade Co. Ltd. corporation Jiangxi Chenming Supply Chain 200.00 Jiangxi Jiangxi Trading For-profit 70 Establishment 0 0 Management Co. Ltd. corporation Zhanjiang Chenming 691357.24 Zhanjiang Zhanjiang Paper making For-profit 80.28 Establishment 0 0 Pulp & Paper Co. Ltd. corporation Zhanjiang Chenming 130000.00 Zhanjiang Zhanjiang Arboriculture For-profit 100 Establishment 0 0 Arboriculture corporation Development Co. Ltd.Yangjiang Chenming 22000.00 Yangjiang Yangjiang Arboriculture For-profit 100 Establishment 0 0 Arboriculture corporation Development Co. Ltd.Guangdong Huirui 25800.00 Zhanjiang Zhanjiang Investment For-profit 100 Establishment 0 0 Investment Co. Ltd. corporation Hubei Changjiang Chenming 200100.00 Huanggang Huanggang Fund For-profit 59.97 Establishment 0 0 Huanggang Equity corporation Investment Fund Partnership (Limited Partnership) Hainan Chenming Technology 20000.00 Haikou Haikou Wholesale and For-profit 100 Establishment 0 0 retail corporation Foshan Chenming Import 20000.00 Foshan Foshan Trading For-profit 100 Establishment 0 0 and Export Trade Co. Ltd. corporation Shanghai Herui Investment Co. 30150.00 Shanghai Shanghai Business For-profit 100 Merger and 0 0 Ltd. services corporation acquisition Zhanjiang Chenming Technology 10000.00 Zhanjiang Zhanjiang Paper making For-profit 100 Establishment 0 0 Development Co. Ltd. corporation Zhanjiang Meilun Pulp & 10000.00 Zhanjiang Zhanjiang Paper making For-profit 100 Establishment 0 0 Paper Co. Ltd. corporation 300 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report X. Interest in Other Entities (Continued) 1. Interest in subsidiaries (Continued) (1) Constitution of the Group (Continued) Principle Issued Issued Register place Place of Nature of Type of legal Shareholding debt share Name of subsidiary capital of business incorporation business person Direct Indirect Acquisition securities capital Guangdong Chenming 1000.00 Guangdong Guangdong Panels For-profit 100 Establishment 0 0 Panels Co. Ltd. corporation Jiangxi Chenming 1000.00 Jiangxi Jiangxi Tea business For-profit 100 Establishment 0 0 Tea Co. Ltd. corporation Jiangxi Chenming 32673.32(USD) Nanchang Nanchang Paper making For-profit 100 Establishment 0 0 Paper Co. Ltd. corporation Jiangxi Chenming 500.00 Nanchang Nanchang Logistics For-profit 100 Establishment 0 0 Logistics Co. Ltd. corporation Nanchang Shengheng 10000.00 Nanchang Nanchang Trading For-profit 100 Establishment 0 0 Trading Co. Ltd. corporation Nanchang Kunheng 1000.00 Nanchang Nanchang Trading For-profit 100 Establishment 0 0 Trading Co. Ltd. corporation Nanchang Chenming 1000.00 Nanchang Nanchang Arboriculture For-profit 100 Establishment 0 0 Arboriculture corporation Development Co. Ltd.Jiangxi Chenming 1507.00 Jiangxi Jiangxi Cargo For-profit 100 Merger and 0 0 Port Co. Ltd. transportation corporation acquisition Shandong Dingkun Asset 100100.00 Shouguang Shouguang Business For-profit 100 Establishment 0 0 Management Partnership services corporation (Limited Partnership) Shouguang Kunhe 1000.00 Shouguang Shouguang Trading For-profit 100 Establishment 0 0 Trading Co. Ltd. corporation Jilin Chenming 300000.00 Jilin Jilin Paper making For-profit 100 Acquisition 0 0 0 Paper Co. Ltd. corporation Fuyu Chenming 30800.00 Fuyu Fuyu Paper making For-profit 100 Establishment 0 0 Paper Co. Ltd. corporation Jilin Chenming New Wall 1000.00 Jilin Jilin Wall materials For-profit 100 Establishment 0 0 Materials Co. Ltd. corporation Jilin Chenming 1000.00 Jilin Jilin Logistics For-profit 100 Establishment 0 0 Logistics Co. Ltd. corporation Jilin Chenming Pulp and 5000.00 Huanggang Huanggang Trading For-profit 100 Establishment 0 0 Paper Trading Co. Ltd. corporation Huanggang Chenming 335000.00 Huanggang Huanggang Pulp production For-profit 70.15 29.85 Establishment 0 0 Pulp & Paper Co. Ltd. corporation Huanggang Chenming 100000.00 Huanggang Huanggang Paper making For-profit 100 Establishment 0 0 Pulp & Fiber Trading Co. Ltd. corporation Huanggang Chenming 5000.00 Huanggang Huanggang Port services For-profit 100 Establishment 0 0 Port Service Co. Ltd. corporation Hubei Huanggang Chenming 300.00 Huanggang Huanggang Capital market For-profit 60 Establishment 0 0 Equity Investment services corporation 2024 ANNUAL REPORT 301XII Financial Report X. Interest in Other Entities (Continued) 1. Interest in subsidiaries (Continued) (1) Constitution of the Group (Continued) Principle Issued Issued Register place Place of Nature of Type of legal Shareholding debt share Name of subsidiary capital of business incorporation business person Direct Indirect Acquisition securities capital Hubei Chenming Technology 5000.00 Huanggang Huanggang Paper product For-profit 100 Establishment 0 0 Industrial Co. Ltd. trading corporation Shandong Chenming Group 500000.00 Jinan Jinan Finance For-profit 80 20 Establishment 0 0 Finance Co. Ltd. corporation Shandong Chenming Financial 587200.00 Jinan Jinan Finance leases For-profit 100 Establishment 0 0 Leasing Co. Ltd. corporation Chenming (HK) Limited 9990.00(USD) Hong Kong Hong Kong Paper product For-profit 100 Establishment 0 0 trading corporation Qingdao Chenming Nonghai 500000.00 Qingdao Qingdao Finance leases For-profit 100 Establishment 0 0 Financial Leasing Co. Ltd corporation Shanghai Chenming Financial 100000.00 Shanghai Shanghai Finance leases For-profit 100 Establishment 0 0 Leasing Co. Ltd. corporation Wuhan Junheng Property 39600.00 Wuhan Wuhan Property For-profit 100 Merger and 0 0 Management Co. Ltd. corporation acquisition Guangzhou Chenming Property 100000.00 Guangzhou Guangzhou Property For-profit 100 Establishment 0 0 Management Co. Ltd. corporation Shandong Chenming 20000.00 Jinan Jinan Investment For-profit 100 Establishment 0 0 Investment Limited corporation Shanxi Fuyin Industrial 36000.00 Taiyuan Taiyuan Wholesale For-profit 100 Acquisition 0 0 Trading Co. Ltd. and retail corporation Chongmin Culture Development 20000.00 Shanghai Shanghai For-profit For-profit 100 Acquisition 0 0 (Shanghai) Co. Ltd. corporation corporation Jinan Chenming Paper 10000.00 Jinan Jinan Investment For-profit 100 Establishment 0 0 Sales Co. Ltd. management/ corporation Paper product trading Shandong Chenming Commercial 20000.00 Jinan Jinan Business For-profit 100 Establishment 0 0 Factoring Co. Ltd. factoring corporation Chenming GmbH 65.00 (USD) Germany Germany Paper product For-profit 100 Establishment 0 0 trading corporation Chenming Paper Japan Co. Ltd 150.00 (USD) Japan Japan Paper product For-profit 100 Establishment 0 0 trading corporation Chenming Paper United 100.00 the United the United Paper product For-profit 100 Establishment 0 0 States Co. Ltd. (USD) States States trading corporation Chenming Paper Korea Co. Ltd. 100.00 Korea Korea Paper product For-profit 100 Establishment 0 0 (USD) trading corporation Chenming (Overseas) Limited 2000.00 (USD) Hong Kong Hong Kong Paper product For-profit 100 Establishment 0 0 trading corporation Chenming (Singapore) Limited 2000.00 (USD) Singapore Singapore Paper product For-profit 100 Establishment 0 0 trading corporation 302 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report X. Interest in Other Entities (Continued) 1. Interest in subsidiaries (Continued) (1) Constitution of the Group (Continued) Principle Issued Issued Register place Place of Nature of Type of legal Shareholding debt share Name of subsidiary capital of business incorporation business person Direct Indirect Acquisition securities capital Meilun (BVI) Limited 5.00 (USD) Cayman Cayman Commerce For-profit 100 Establishment 0 0 corporation Shanghai Chenming 370000.00 Shanghai Shanghai Property For-profit 100 Establishment 0 0 Industry Co. Ltd. investment and corporation management Shanghai Chenyin Trading Co. 41000.00 Shanghai Shanghai Trading For-profit 51 Establishment 0 0 Ltd. corporation Shanghai Hongtai Real 60391.77 Shanghai Shanghai Real estate For-profit 100 Merger and 0 0 Estate Co. Ltd. corporation acquisition Shanghai Hongtai Property 200.00 Shanghai Shanghai Property For-profit 100 Merger and 0 0 Management Co. Ltd. corporation acquisition Shouguang Chenming 200.00 Shouguang Shouguang Machinery For-profit 100 Establishment 0 0 Papermaking manufacturing corporation Machine Co. Ltd.Shouguang Hongxiang Printing 80.00 Shouguang Shouguang Printing and For-profit 100 Acquisition 0 0 and packaging corporation Packaging Co. Ltd.Shouguang Chenming Modern 1000.00 Shouguang Shouguang Transportation For-profit 100 Establishment 0 0 Logistic Co. Ltd. corporation Shouguang Hongyi Decorative 200.00 Shouguang Shouguang Packaging For-profit 100 Merger and 0 0 Packaging Co. Ltd. corporation acquisition Shouguang Xinyuan Coal Co. 300.00 Shouguang Shouguang Coal For-profit 100 Merger and 0 0 Ltd. corporation acquisition Shouguang Wei Yuan Logistics 393.00 Shouguang Shouguang Logistics For-profit 100 Merger and 0 0 Company Limited corporation acquisition Shouguang City Run Sheng 2380.00 Shouguang Shouguang Purchase and For-profit 100 Merger and 0 0 Wasted Paper Recycle Co. sale of waste corporation acquisition Ltd.Huanggang Chenming 7000.00 Huanggang Huanggang Arboriculture For-profit 100 Establishment 0 0 Arboriculture corporation Development Co. Ltd.Chenming Arboriculture Co. Ltd. 10000.00 Wuhan Wuhan Arboriculture For-profit 100 Establishment 0 0 corporation Hailaer Chenming Paper Co. Ltd. 1600.00 Hailaer Hailaer Paper making For-profit 75 Establishment 0 0 corporation Weifang Chenming Growth 100000.00 Weifang Weifang Fund For-profit 79 Establishment 0 0 Driver Replacement corporation Weifang Chendu Equity 32000.00 Shouguang Shouguang Capital market For-profit 79.69 Establishment 0 0 Investment services corporation Partnership (Limited Partnership) Nanjing Chenming Culture 500.00 Nanjing Nanjing Marketing For-profit 100 Establishment 0 0 Communication Co. Ltd corporation Shandong Yujing Grand 4192.48(USD) Shouguang Shouguang Catering For-profit 90.05 Establishment 0 0 Hotel Co. Ltd. corporation 2024 ANNUAL REPORT 303XII Financial Report X. Interest in Other Entities (Continued) (2) Major non-wholly owned subsidiaries Unit: RMB Dividend to Gain or loss attributable minority interest to minority interest declared during Closing balance Name of subsidiary Minority interest during the period the period of minority interest Shouguang Meilun Paper Co. Ltd. 31.72 -179691337.36 123000000.00 1610257206.10 Zhanjiang Chenming Pulp & Paper Co. Ltd. 19.72 -176278564.86 1404432439.55 (3) Key financial information of major non-wholly owned subsidiaries Unit: RMB Closing balance Opening balance Current Non-current Total Current Non-current Total Current Non-current Total Current Non-current Total Name of subsidiary assets assets assets liabilities liabilities liabilities assets assets assets liabilities liabilities liabilities Shouguang Meilun Paper Co. Ltd. 10198457312.12 9544065823.56 19742523135.68 12006315839.27 7392419.69 12013708258.96 5534633307.08 10096140872.04 15630774179.12 6282312497.46 888031988.48 7170344485.94 Zhanjiang Chenming Pulp & Paper Co. Ltd. 8429523936.97 11986351774.32 20415875711.29 11877878416.94 473681057.41 12351559474.35 12562782806.69 13116686959.25 25679469765.94 14866141937.07 1876669919.47 16742811856.54 Unit: RMB Amount during the period Amount during the prior period Total Cash flows Total Cash flows comprehensive from operating comprehensive from operating Name of subsidiary Revenue Net profit income activities Revenue Net profit income activities Shouguang Meilun Paper Co. Ltd. 8141538879.98 -570290773.09 -570290773.09 498166092.88 9084559413.98 153008366.72 153008366.72 1528677090.76 Zhanjiang Chenming Pulp & Paper Co. Ltd. 10918531151.42 -883547814.00 -877177341.17 349194411.81 11000808231.98 -541888245.61 -543112252.63 1332553432.65 304 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report X. Interest in Other Entities (Continued) 2. Transaction changing shareholding in but not causing to loss of control over subsidiaries (1) Changing in shareholding in subsidiaries The Company previously held 64.87% equity interest in Shouguang Meilun Paper Co. Ltd. In 2024 the Company and Dongxing Securities Investment Co. Ltd. and SWSC Innovation Investment Co. Ltd. entered into an equity transfer agreement in relation to the transfer of an aggregate of 3.41% equity interest in Shouguang Meilun Paper Co. Ltd to the Company. The equity transfer transaction did not result in the loss of control over Shouguang Meilun Paper Co. Ltd. by the Company. As at 30 June 2024 the equity transfer agreement was completed and the total transaction consideration paid was RMB300 million. The transaction resulted in a decrease in minority interest by RMB290.0424 million and a decrease in capital reserves by RMB9957600. (2) Effect of the transactions on minority interest and equity attributable to the owners of the parent company Unit: RMB Shouguang Meilun Item Paper Co. Ltd.Cost of acquisition 300000000.00 – Cash 300000000.00 Total cost of acquisition/disposal consideration 300000000.00 Less: Share of net assets of the subsidiary calculated based on the proportion of equity interest acquired/disposed of 290042380.45 Difference 9957619.55 Of which: Capital reserve adjustment 9957619.55 3. Interest in joint arrangements or associates (1) Major joint ventures and associates Accounting method for investment in Principle place Place of Nature of Shareholding joint ventures or Name of joint venture and associate of business incorporation business Direct (%) Indirect (%) associates I. Joint venture Shouguang Jintou Industrial Investment Partnership (Limited Partnership Shouguang Shouguang Investment 49.57 Equity method II. Associate Guangdong Nanyue Bank Co. Ltd. Guangdong Guangdong Bank 4.46 Equity method The Company holds 4.46% equity interest in Guangdong Nanyue Bank Co. Ltd. but is the second largest shareholder and is able to exercise significant influence over Guangdong Nanyue Bank Co. Ltd. by appointing one director to the board of directors (out of a total of nine directors on the board of directors). 2024 ANNUAL REPORT 305XII Financial Report X. Interest in Other Entities (Continued) 3. Interest in joint arrangements or associates (Continued) (2) Key financial information of major joint ventures Unit: RMB Closing balance/ Opening balance/ Amount during Amount during the period the prior period Shouguang Shouguang Jintou Industrial Jintou Industrial Investment Investment Partnership Partnership (Limited Partnership) (Limited Partnership) Current assets 1469875783.97 1775433885.35 Of which: Cash and cash equivalents 11415277.31 1047090.41 Non-current assets 594445221.29 408884578.74 Total assets 2064321005.26 2184318464.09 Current liabilities 257355454.66 104387199.50 Non-current liabilities 22702318.57 5805542.05 Total liabilities 280057773.23 110192741.55 Net assets 1784263232.03 2074125722.54 Of which: Minority interest 5172055.47 Equity interest attributable to shareholders of the parent company 1779091176.56 2074125722.54 Share of net assets based on shareholding 881884821.67 1028131675.91 Adjustments Of which: Others 897206354.89 1316438571.64 Impairment provision Carrying amount of equity investment in joint ventures 1779091176.56 2344570247.55 Revenue 503795502.75 857541982.94 Finance expenses 1790006.41 765662.12 Income tax expenses Net profit -565479070.99 -15428414.12 Total comprehensive income -565479070.99 -15428414.12 Dividends received from joint ventures during the year 306 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report X. Interest in Other Entities (Continued) 3. Interest in joint arrangements or associates (Continued) (3) Key financial information of major associates Unit: RMB Closing balance/ Opening balance/ Amount during Amount during the period the prior period Guangdong Nanyue Guangdong Nanyue Bank Co. Ltd. Bank Co. Ltd.Current assets 195708622711.11 194828415917.54 Non-current assets 132561137018.86 111581185310.11 Total assets 328269759729.97 306409601227.65 Current liabilities 273238389155.39 250233916389.30 Non-current liabilities 24657998149.20 26252549634.28 Total liabilities 297896387304.59 276486466023.58 Net assets 30373372425.38 29923135204.07 Of which: Minority interest 68358275.97 Equity interest attributable to shareholders of the parent company 30373372425.38 29854776928.10 Share of net assets based on shareholding 1354652410.17 1331523051.00 Adjustments Of which: Goodwill Others Carrying amount of equity investment in associates 1354652410.17 1331523051.00 Fair value of equity investment with a quoted price in the open market Revenue 2784608144.97 2739283882.64 Net profit 420235807.79 416331873.52 Other comprehensive income 142835713.60 -9346709.52 Total comprehensive income 563071521.39 406985164.00 Dividends received from associates during the year 2024 ANNUAL REPORT 307XII Financial Report X. Interest in Other Entities (Continued) 3. Interest in joint arrangements or associates (Continued) (4) Summary financial information of non-major joint ventures and associates Unit: RMB Closing balance/ Opening balance/ Amount during Amount during the period the prior period Joint ventures: Total carrying amount of investment 192441660.84 197483273.06 Total amount of the following items based on shareholding Net profit 8537278.56 16545813.91 Other comprehensive income Total comprehensive income 8537278.56 16545813.91 Associates: Total carrying amount of investment 644850163.97 811622814.12 Total amount of the following items based on shareholding Net profit -151193462.54 102840690.39 Other comprehensive income Total comprehensive income -151193462.54 102840690.39 308 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XI. Government grants 1. Government grants recognised at the end of the reporting period at the amount receivable □ Applicable ? Not applicable Reasons for not receiving the estimated amount of government grants at the estimated time □ Applicable ? Not applicable 2. Liabilities in respect of government grants ? Applicable □ Not applicable Unit: RMB Include in non-operating Include in New grants income for the other income Other changes Asset-related/ Subsidy item Accounting item Opening balance during the period period for the period for the period Closing balance income-related Funding for environmental Deferred income 524694035.24 4500000.00 50778082.72 478415952.52 Asset-related protection Huanggang pulp-forestry-paper Deferred income 445968305.25 25026217.80 420942087.45 Asset-related project Infrastructure and environmental Deferred income 196803377.25 11517589.45 185285787.80 Asset-related protection engineering Financial subsidies for technical Deferred income 95106015.68 3270000.00 8958104.96 89417910.72 Asset-related transformation project Zhanjiang forestry-pulp-paper Deferred income 42617331.35 4094632.92 38522698.43 Asset-related project Project fund for National Key Deferred income 793725.00 164700.00 629025.00 Asset-related Technology Research and Development Program Others Deferred income 31881324.93 4155301.33 27726023.60 Asset-related Total 1337864114.70 7770000.00 104694629.18 1240939485.52 2024 ANNUAL REPORT 309XII Financial Report XI. Government grants (Continued) 3. Government grants included in profit or loss for the period: ? Applicable □ Not applicable Unit: RMB Accounting Amount during Amount during Subsidy item item the period the prior period Funding for environmental protection Other gains 50778082.72 51761248.56 Huanggang pulp-forestry-paper project Other gains 25026217.80 25026217.80 Sewage treatment and water conservation transformation project Other gains 11517589.45 11517589.44 Financial subsidies for technological transformation project Other gains 8958104.96 39699264.96 Special fund for the development of modern commerce and trade Other gains 4946000.00 Zhanjiang forestry-pulp-paper project Other gains 4094632.92 4094632.92 Employment stabilisation subsidy Other gains 3388129.28 1143782.30 Government awards Other gains 3153800.00 13580000.00 Special subsidy for foreign trade Other gains 2660000.00 11140000.00 Afforestation subsidy Other gains 1032091.00 4487983.85 Project Funding for National Key Technology Other gains 164700.00 164700.00 Industrial development subsidy Other gains 117967.00 Immediate VAT refund Other gains 3186241.18 Enterprise reform and development subsidies Other gains 904184.00 Social security subsidy Other gains 46689.71 R&D subsidy Other gains 4000.00 Others Other gains 4665388.54 3221744.73 Total 120502703.67 169978279.45 XII. Risk relating to financial instruments Main financial instruments of the Group include monetary funds bills receivable accounts receivable accounts receivable financing other receivables non-current assets due within one year other current assets financial assets held for trading other non-current financial assets long-term receivables bills payable accounts payable other payables short-term borrowings financial liabilities held for trading non-current liabilities due within one year long-term borrowings lease liabilities and long-term payables. Details of financial instruments refer to related notes. The risks associated with these financial instruments and the risk management policies adopted by the Company to mitigate these risks are described below. The management of the Company manages and monitors these exposures to ensure that the above risks are controlled in a limited extent. 1. Risk management goals and policies Risks associated with the financial instrument of the Company mainly include credit risk liquidity risk market risk (including exchange rate risk interest rate risk and commodity price risk). 310 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XII. Risk relating to financial instruments (Continued) 1. Risk management goals and policies (Continued) The Company aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverse effects on the Company’s financial performance from financial risk. Based on such objectives the Company’s risk management policies are established to identify and analyse the risks faced by the Company to set appropriate risk limits and devise corresponding internal control procedures and to monitor risks faced by the Company. Such risk management policies and internal control systems are reviewed regularly to adapt to changes in market conditions and the Company’s activities. The internal audit department of the Company undertakes both regular and ad-hoc reviews of risk management controls and procedures.The board of directors is responsible to plan and establish the Company’s risk management structure make risk management policies and related guidelines and supervise the implementation of risk management. The Company has already made risk management risks to identify and analyse risks that the Company face. These policies mentioned specific risks covering market credit risk and liquidity risk etc. The Company regularly assesses market environment and the operation of the Company changes to determine if to make alteration to risk management policy and systems. The Company’s risk management is implemented by Risk Management Committee according to the approval of the board of directors. The Risk Management Committee works closely with other business department of the Company to identify evaluating and avoiding certain risks. The Company’s internal audit department will audit the risk management control and procedures regularly and report the result to audit committee of the Company.The Company spreads risks through diverse investment and business lines and through making risk management policy to reduce risks of single industry specific area and counterpart. (1) Credit risk Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty resulting in financial losses to the Company.The Company manages credit risk based category. Credit risks mainly arose from bank deposit bills receivable accounts receivable other receivables and long-term receivables etc.The Company’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listed banks. The Company anticipated that the bank deposit does not have significant credit risk.For accounts receivables other receivables and long-term receivables the Company set related policies to control exposure of credit risks. The Company evaluates client’s credit quality and set related credit period based on the client’s financial status credit records and other factors such as current market situation etc. The Company keeps monitor the client’s credit record and for client with deteriorate credit records the Company will ensure the credit risk is under control in whole by means of written notice of payment collection shorten or cancel credit period.The Company’s debtor spread over different industry and area. The Company continued to assess the credit evaluation to receivables and purchase credit guarantee insurance if necessary.The biggest credit risk exposure of the Company is the carrying amount of each financial asset in the balance sheet. The Company did not provide financial guarantee which resulted in credit risks.The amount of top 5 accounts receivable of the Company accounted for 39.64% (2023: 36.65%) of the Company’s total accounts receivables. The amount of top 5 other receivable of the Company accounted for 66.28% (2023: 70.32%) of the Company’s total other receivables. 2024 ANNUAL REPORT 311XII Financial Report XII. Risk relating to financial instruments (Continued) 1. Risk management goals and policies (Continued) (2) Liquidity risk Liquidity risk refers to the risks that the Company will not be able to meet its obligations associated with its financial liabilities that are settled by delivering cash or other financial assets.To manage the liquidity risk the Company monitors and maintains a level of cash and cash equivalents to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. The management of the Company monitors the usage of bank borrowings and ensures compliance with the borrowing agreements.In the meantime we obtain commitments from major financial institutions to provide sufficient standby funds to meet short-term and long-term funding needs.Operating cash of the Company was generated from capital and bank and other borrowings. As at 31 December 2024 the Company’s unused bank loan credit was RMB11176.9188 million (has been completely frozen and cannot be used) (31 December 2023: RMB44131.5478 million). The closing balance of financial assets of the Company due within one year amounted to RMB17548.7745 million while the closing balance of financial liabilities due within one year amounted to RMB43191.8401 million. The financial assets due within one year was less than that of financial liabilities.As at the end of the period the financial assets financial liabilities and off balance sheet guarantee held by the Company are analysed by their maturity date as below at their remaining undiscounted contractual cash flows (in RMB’0000): Closing balance Item Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total Financial assets Monetary funds 588069.11 588069.11 Financial assets held for trading 3725.93 3725.93 Bills receivable 50660.57 50660.57 Accounts receivable 266836.20 266836.20 Accounts receivable financing 10073.08 10073.08 Other receivables 256175.64 256175.64 Long-term receivables 11281.94 22341.95 1432.04 35055.93 Other non-current financial assets 75103.05 75103.05 Other current assets 88236.02 88236.02 Non-current assets due within one year 491100.90 491100.90 Total financial assets 1754877.45 11281.94 22341.95 76535.09 1865036.43 Financial liabilities: Short-term borrowings 2675234.73 2675234.73 Bills payable 142391.81 142391.81 Accounts payable 770896.74 770896.74 Other payables 283336.77 283336.77 Non-current liabilities due within one year 160954.54 160954.54 Other current liabilities 286369.42 286369.42 Long-term borrowings 165672.85 109483.19 201032.48 476188.52 Lease liabilities 286.71 1011.20 3615.65 4913.56 Long-term payables 46996.82 34565.33 81562.15 Total financial liabilities and contingent liabilities 4319184.01 212956.38 145059.72 204648.13 4881848.24 312 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XII. Risk relating to financial instruments (Continued) 1. Risk management goals and policies (Continued) (2) Liquidity risk (Continued) As at the end of the prior year the financial assets financial liabilities and off-balance sheet guarantee held by the Company are analysed by their maturity date as below at their remaining undiscounted contractual cash flows (in RMB’0000): Closing balance of the prior year Item Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total Financial assets: Monetary funds 1208547.49 1208547.49 Financial assets held for trading 4629.43 4629.43 Bills receivable 41160.00 41160.00 Accounts receivables 307757.71 307757.71 Accounts receivable financing 21588.42 21588.42 Other receivables 273484.02 273484.02 Long-term receivables 29478.61 6700.00 36178.61 Other non-current financial assets 78156.10 78156.10 Other current assets 69994.65 69994.65 Non-current assets due within one year 529707.20 529707.20 Total financial assets 2456868.92 29478.61 6700.00 78156.10 2571203.63 Financial liabilities Short-term borrowings 3344774.24 3344774.24 Bills payable 461898.65 461898.65 Accounts payable 390262.09 390262.09 Other payables 241475.21 241475.21 Non-current liabilities due within one year 374650.69 374650.69 Other current liabilities 10000.00 10000.00 Long-term borrowings 84962.58 115780.76 267358.11 468101.45 Lease liabilities 453.22 354.01 5249.95 6057.18 Long-term payables 149201.63 112355.62 261557.25 Total financial liabilities and contingent liabilities 4823060.88 234617.43 228490.39 272608.06 5558776.76 The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from the carrying amount of the line items of the balance sheet.Maximum guarantee amount for signed guarantee contracts does not represent the amount to be paid 2024 ANNUAL REPORT 313XII Financial Report XII. Risk relating to financial instruments (Continued) 1. Risk management goals and policies (Continued) (3) Market risk Market risk includes interest rate risk and currency risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated due to the changes in market price.Interest rate risk Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated due to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument and unrecognised financial instrument (e.g. loan commitments).The Company’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowing and bonds payable. Financial liabilities issued at floating rate expose the Company to cash flow interest rate risk. Financial liabilities issued at fixed rate expose the Company to fair value interest rate risk. The Company determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market conditions and to maintain an appropriate combination of financial instruments at fixed rate and floating rate through regular reviews and monitors.The Company continuously monitors the interest rate position of the Company. The Company did not enter into any interest rate hedging arrangements. But the management is responsible to monitor the risks of interest rate and consider to hedge significant interest risk if necessary. Increase in interest rates will increase the cost of new borrowing and the interest expenses with respect to the Company’s outstanding floating rate interest-bearing borrowings and therefore could have a material adverse effect on the Company’s financial result. The management will make adjustments with reference to the latest market conditions. These adjustments may include enter into interest swap agreement to mitigate its exposure to the interest rate risk.Interest bearing financial instrument held by the Company are as follows (in RMB’0000): Amount for Item Amount for the period the prior period Financial instrument with fixed interest rate Financial liabilities Of which: Short-term borrowings 2675234.73 3344774.24 Long-term borrowings 476188.52 468101.45 Long-term borrowings due within one year 120435.06 127390.27 Total 3271858.31 3940265.96 Financial instrument with float interest rate Financial assets Of which: Monetary funds 587932.77 1208180.01 Total 587932.77 1208180.01 314 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XII. Risk relating to financial instruments (Continued) 1. Risk management goals and policies (Continued) (3) Market risk (Continued) Interest rate risk (Continued) The financial instruments held by the Company at the reporting date expose the Company to fair value interest rate risk. This sensitivity analysis as above has been determined assuming that the change in interest rates had occurred at the reporting date and arisen from the recalculation of the above financial instrument issued at new interest rates. The non-derivative tools issued at floating interest rate held by the Company at the reporting date expose the Company to cash flow interest rate risk. The effect to the net profit and shareholder’s equity illustrated in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interest expenses or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.Exchange rate risk Exchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuated due to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured.The principal business of the Company is situated within the PRC and is denominated in RMB. However foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currency transactions as recognised by the Company (assets and liabilities in foreign currencies and foreign currency transactions are mainly denominated in US dollar Euro Hong Kong dollar and Japanese yen).The following table details the financial assets and liabilities held by the Company which denominated in foreign currencies and amounted to RMB as at 31 December 2024 are as follows (in RMB’0000): Liabilities denominated in Assets denominated in foreign currency foreign currency Closing balance Closing balance Item Closing balance of the prior year Closing balance of the prior year USD 66705.08 60628.27 42042.69 45596.22 EUR 3838.45 1460.24 1044.24 4305.63 HKD 143.97 204.24 JPY 677.92 736.8 SGD 2.12 GBP 1.61 1.33 Total 70543.53 62088.51 43912.55 50844.22 The Group continuously monitors the size of the Group’s foreign currency transactions and foreign currency assets and liabilities to minimise the foreign exchange risks it faces and for this reason the Group may aim to avoid foreign exchange risk by signing forward foreign exchange contracts or currency swap contracts. 2024 ANNUAL REPORT 315XII Financial Report XII. Risk relating to financial instruments (Continued) 1. Risk management goals and policies (Continued) (3) Market risk (Continued) Exchange rate risk (Continued) With other variables unchanged the after-tax effect of the possible reasonable changes in the exchange rate of foreign currency to RMB on the current profit and loss of the Company is as follows (in RMB’0000): Increase (decrease) in after-tax profits Amount for the period Amount for the prior period Increase in exchange rate of USD 5% -1233.12 5% -751.60 Decrease in exchange rate of USD -5% 1233.12 -5% 751.60 Increase in exchange rate of Euro 5% -139.71 5% 142.27 Decrease in exchange rate of Euro -5% 139.71 -5% -142.27 Other price risks Other price risks refer to the risk of fluctuations caused by changes in market prices other than exchange rate risks and interest rate risks whether arising from factors related to a single financial instrument or its issuer or from factors related to all similar financial instruments traded on the market. Other price risks can stem from changes in commodity prices stock market indexes equity instrument prices and other risk variables.Listed equity instrument investments held by the Company classified as financial assets held for trading other non-current financial assets and other equity instrument investments are measured at fair value on the balance sheet date. Therefore the Company is subject to the risk of changes in the securities market.The Company monitors closely the impact of price changes on the price risk of the Company’s investment in equity securities. The Company has not taken any measures to avoid other price risks. However the management is responsible for monitoring other price risks and will consider holding multiple equity securities portfolios to reduce the price risk of equity securities investment when necessary.With other variables unchanged the after-tax effect of the change of -19.52% (prior year: -38.03%) in equity securities investment prices on the Company’s current profit and loss and other comprehensive income is as follows (unit: RMB’0000): Increase (decrease) in Increase (decrease) in after-tax profits other comprehensive income Balance for Balance for Balance for Balance for Item the period the prior period the period the prior period Due to the rise in the price of equity securities investment Due to the decline in the price of equity securities investment -903.50 -2841.42 316 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XII. Risk relating to financial instruments (Continued) 2. Capital management The objective of the Company’s capital risk management is to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.In order to maintain or adjust the capital structure the Company may adjust its financing methods adjust the number of dividends paid to shareholders return capital to shareholders issue new shares or disposes assets to reduce its liabilities.The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by total capital. As at 31 December 2024 the Company’s gearing ratio is 79.79% (31 December 2023: 73.46%). 3. Financial assets (1) By transfer method ? Applicable □ Not applicable Unit: RMB Nature of financial Amount of financial Confirmation Basis for Transfer Method assets transferred assets transferred of derecognition derecognition Endorsement or discounting Bills receivable 223000.00 Not derecognised Where the Company retains almost all the risks and rewards including the risk of default associated with it Endorsement or discounting Accounts receivable 5008422470.60 Derecognised Where the Company financing transferred substantially all of the risks and rewards Total 5008645470.60 (2) Financial assets derecognised due to transfer ? Applicable □ Not applicable Unit: RMB Amount of financial Gains or losses associated Item Method of financial assets transfer assets derecognised with derecognition Accounts receivable financing Endorsement or discounting 5008422470.60 976279.14 Total 5008422470.60 976279.14 2024 ANNUAL REPORT 317XII Financial Report XIII. Fair value disclosure 1. Fair value of assets and liabilities measured at fair value as at the end of the period Based on the inputs of the lowest level that are of great significance to the measurement as a whole in the fair value measurement the fair value can be categorised as: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2: Observable inputs other than the quoted market price of assets or liabilities in Level 1 either directly (the prices) or indirectly (derived from prices).Level 3: Any input that is not based on observable market data (unobservable inputs) is used for assets or liabilities (1) Items and amounts measured at fair value As at the end of the period assets and liabilities measured at fair value are listed as follows based on the three hierarchies as set out above: Unit: RMB Fair value at the end of the period Fair value measurements Fair value measurements Fair value measurements Item categorised into Level 1 categorised into Level 2 categorised into Level 3 Total I. Measurement of fair value on an ongoing basis (i) Financial assets held for trading 37259325.70 37259325.70 1. Equity instrument investments 37259325.70 37259325.70 (ii) Accounts receivable financing 100730797.32 100730797.32 (iii) Other non-current financial assets 751030454.68 751030454.68 (iv) Biological assets 1256379773.85 1256379773.85 1. Consumable biological assets 1256379773.85 1256379773.85 Total assets measured at fair value on an ongoing basis 37259325.70 2108141025.85 2145400351.55 II. Non-continuous measurement of fair value For financial assets that are traded in an active market the Company determines the fair value based on the quoted price in the active market. For other non-current financial assets that are not traded in an active market the fair value at the end of the period is determined by evaluating the investment in Shandong Hongqiao Venture Capital Co. Ltd.; for the investment in Weifang Chenchuang Equity Investment Fund Partnership (Limited Partnership) and Jiaohui Chenming Zhuli (Suzhou) Emerging Industry Development Fund Partnership (Limited Partnership) The Company determines the fair value at the end of the period by calculating the average price-earnings ratio price-to-book ratio and price-to-sales ratio of listed companies in the same industry; the fair value of the investment in Shanghai Hengzhan Venture Capital Center (Limited Partnership) and Lide Technology Co. Ltd. is based on historical cost. 318 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIII. Fair value disclosure (Continued) 1. Fair value of assets and liabilities measured at fair value as at the end of the period (Continued) (2) Quantitative information about significant unobservable inputs used in the Level 3 fair value measurement that are significant Fair value as at the Valuation Item end of the period techniques Unobservable inputs Range Equity instrument investments: Shandong Hongqiao Venture Capital Co. Ltd. 58220000.00 Cost method Weifang Chenchuang Equity Investment Fund 406763465.62 See explanation for details Partnership (Limited Partnership) Jiaohui Chenming Zhuli (Suzhou) Emerging 243238260.24 See explanation for details Industry Development Fund Partnership (Limited Partnership) Consumable biological assets: Forestry 1256379773.85 Roll back method of Unit price per tonne of Eucalyptus wood RMB515 market price Unit price per tonne of wet pine RMB525 Unit price per tonne of fir wood RMB560 Explanation: The Company has no active trading market for Weifang Chenchuang Equity Investment Fund Partnership (Limited Partnership) and Jiaohui Chenming Zhuli (Suzhou) Emerging Industry Development Fund Partnership (Limited Partnership). The Company determines the fair value at the end of the period by calculating the average price-earnings ratio price-to-book ratio and price-to-sales ratio of listed companies in the same industry. (3) Reconciliation of fair value measurements categorised within Level 3 of the fair value hierarchy Total profit or loss for the period Opening Transfer to Transfer from Transferred to Transferred to other Item (current amount) balance third level third level profit and loss comprehensive income Closing balance Accounts receivable financing 215884249.97 115153452.65 100730797.32 Other non-current financial assets 781561040.57 1483295.37 -29047290.52 751030454.68 biological assets: 1483978089.61 74186556.59 -153411759.17 1256379773.85 Consumable biological assets 1483978089.61 74186556.59 -153411759.17 1256379773.85 Total 2481423380.15 190823304.61 -182459049.69 2108141025.85 XIV. Related parties and related party transactions 1. Parent company of the Company Place of Shareholding of Voting right of the incorporation the parent company parent company Name of parent company Business Business nature Registered capital in the Company in the Company Chenming Holdings Co. Ltd. Shouguang Investment in manufacture 1238787700 27.87% 27.87% of paper electricity steam and arboriculture 2024 ANNUAL REPORT 319XII Financial Report XIV. Related parties and related party transactions (Continued) 1. Parent company of the Company (Continued) Description of the parent company of the Company: The ultimate controller of the Company is Shouguang State-owned Assets Supervision and Administration Office. 2. Subsidiaries of the Company For details of the Company’s subsidiaries please refer to Note X. 1. 3. Joint ventures and associates of the Company For details of material joint ventures and associates of the Company please refer to Note X. 3.Balance of related party transaction between the Company and its joint ventures or associates during the period or prior periods are as follows: Name of joint ventures or associates Relation Weifang Port Wood Chip Terminal Co. Ltd. A joint venture of the Company Shouguang Meite Environmental Technology Co. Ltd. A joint venture of the Company Weifang Xingxing United Chemical Co. Ltd. A joint venture of the Company Shouguang Chenming Huisen New-style Construction A joint venture of the Company Materials Co. Ltd.Wuhan Chenming Qianneng Electric Power Co. Ltd. A subsidiary of an associate of the Company Wuhan Chenming Hanyang Paper Holdings Co. Ltd An associate of the Company Chenming (Qingdao) Asset Management Co. Ltd. An associate of the Company Guangdong Nanyue Bank Co. Ltd. An associate of the Company Xuchang Chenming Paper Co. Ltd. An associate of the Company 4. Other related parties Name of other related parties Relation Shouguang Huixin Construction Materials Co. Ltd. A subsidiary of a company invested by the Directors and Senior Management of the Company Lide Technology Co. Ltd. A subsidiary of a company invested by the Directors and Senior Management of the Company Shouguang Chenming Guangyuan Real Property A subsidiary of a company invested by the Directors and Senior Management of the Company Hu Changqing Li Xingchun Li Weixian Li Feng Han Tingde Key management personnel of the Company Li Chuanxuan Li Zhihui Sun Jianfei Yin Meiqun Yang Biao Li Kang Pan Ailing Zhang Hong Qiu Lanju Sang Ailing Li Zhenzhong Li Mingtang Ge Guangming Dong Lianming Yuan Xikun Zhu Hanliang Chen Hongguo and Li Xueqin 320 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (1) Purchase and sales of goods and rendering and receiving services Table on purchase of goods/receiving of services Unit: RMB Whether the Details of related Amount during Transaction transaction facility Amount during Related party party transaction the period facility approved is exceeded the prior period Weifang Port Wood Chip Terminal Co. Ltd. Port miscellaneous 86203912.59 110000000.00 No 78803278.24 expenses Shouguang Meite Environmental Purchase of 22683726.74 N/A N/A 79998572.97 Technology Co. Ltd. chemical materials Table on sales of goods/providing of services Unit: RMB Related party Details of related party transaction Amount during the period Amount during the prior period Shouguang Chenming Huisen New-style Construction Sales of electricity and steam 13910563.45 16738082.47 Materials Co. Ltd.Shouguang Huixin Construction Materials Co. Ltd. Sales of cement coal oil etc. 238057.97 141035.23 Shouguang Meite Environmental Technology Co. Ltd. Sales of electricity and water 2922144.29 8446713.09 (2) Related party leasing The Company as lessor: Unit: RMB Lease income recognised Lease income recognised Name of lessee Type of leased asset for the current period for the previous period Shouguang Chenming Huisen New-style Construction Materials Co. Ltd. Land 233944.95 222477.07 Shouguang Huixin Construction Materials Co. Ltd. Land 123853.21 123853.21 Shouguang Meite Environmental Technology Co. Ltd. Housing 1467889.91 1467889.91 Chenming (Qingdao) Asset Management Co. Ltd. Housing 667610.46 789102.99 Lide Technology Co. Ltd. Housing 1918497.41 1898020.91 2024 ANNUAL REPORT 321XII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee The Company as guarantor Unit: RMB Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Weifang Port Wood Chip Terminal Co. Ltd. 78400000.00 December 20 2017 December 20 2027 No Chenming (HK) Limited 19847274.98 July 26 2024 November 27 2024 No Chenming (HK) Limited 16115273.43 August 16 2024 November 18 2024 No Chenming (HK) Limited 21281944.00 August 23 2024 November 22 2024 No Chenming (HK) Limited 13316268.34 September 05 2024 February 28 2025 No Chenming (HK) Limited 18788303.91 September 14 2024 December 20 2024 No Chenming (HK) Limited 8322140.90 September 30 2024 December 11 2024 No Chenming (HK) Limited 9754153.58 October 01 2024 March 28 2025 No Chenming (HK) Limited 16023277.62 October 17 2024 February 09 2025 No Chenming (HK) Limited 19603059.42 October 21 2024 February 14 2025 No Chenming (HK) Limited 20759723.14 October 30 2024 February 22 2025 No Chenming (HK) Limited 16169531.51 October 31 2024 February 24 2025 No Chenming (HK) Limited 16466280.98 December 02 2024 March 03 2025 No Chenming (HK) Limited 17251967.49 December 11 2024 March 11 2025 No Chenming (HK) Limited 5000000.00 December 15 2024 January 15 2025 No Chenming (HK) Limited 5000000.00 December 15 2024 January 27 2025 No Chenming (HK) Limited 17456804.00 December 15 2024 February 07 2025 No Chenming (HK) Limited 3134501.82 December 23 2024 March 24 2025 No Chenming (HK) Limited 9330232.59 December 30 2024 June 30 2025 No Hainan Chenming Technology Co. Ltd. 30000000.00 February 02 2024 January 29 2025 No Hainan Chenming Technology Co. Ltd. 20000000.00 February 05 2024 January 31 2025 No Hainan Chenming Technology Co. Ltd. 39600000.00 May 21 2024 November 21 2024 No Hainan Chenming Technology Co. Ltd. 8400000.00 July 02 2024 January 02 2025 No Hainan Chenming Technology Co. Ltd. 126000000.00 September 29 2024 March 29 2025 No Hainan Chenming Technology Co. Ltd. 50500000.00 November 27 2024 November 26 2025 No Hainan Chenming Technology Co. Ltd. 19500000.00 November 28 2024 November 27 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 563640000.00 December 16 2019 December 15 2031 No Huanggang Chenming Pulp & Paper Co. Ltd. 200000000.00 September 30 2020 December 15 2031 No Huanggang Chenming Pulp & Paper Co. Ltd. 100000000.00 May 20 2022 May 27 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 11060000.00 October 13 2022 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 38993016.93 November 30 2022 November 30 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 17510595.47 January 12 2023 January 12 2026 No Huanggang Chenming Pulp & Paper Co. Ltd. 4299000.00 February 09 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 886000.00 February 28 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 50000000.00 March 09 2023 March 09 2026 No Huanggang Chenming Pulp & Paper Co. Ltd. 25219402.86 April 22 2023 April 10 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 4407000.00 April 25 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 19107717.37 May 10 2023 May 10 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 2586696.60 May 23 2023 September 28 2027 No 322 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee (Continued) Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Huanggang Chenming Pulp & Paper Co. Ltd. 16414514.00 May 29 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 2950000.00 June 09 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 10970000.00 June 27 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 100365399.49 July 06 2023 July 15 2026 No Huanggang Chenming Pulp & Paper Co. Ltd. 6727100.00 August 29 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 4220000.00 September 20 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 10465335.60 October 13 2023 September 28 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 67000000.00 November 23 2023 November 23 2024 No Huanggang Chenming Pulp & Paper Co. Ltd. 78236501.55 January 30 2024 February 05 2027 No Huanggang Chenming Pulp & Paper Co. Ltd. 20000000.00 April 28 2024 April 27 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 90000000.00 May 20 2024 May 19 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 10000000.00 June 25 2024 December 22 2024 No Huanggang Chenming Pulp & Paper Co. Ltd. 30000000.00 July 19 2024 July 18 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 30000000.00 July 19 2024 January 15 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 30000000.00 August 01 2024 July 29 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 10000000.00 August 01 2024 January 27 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 14000000.00 August 01 2024 July 29 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 45000000.00 August 14 2024 August 13 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 14250600.00 August 23 2024 February 19 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 15749400.00 September 10 2024 February 18 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 15995000.00 September 14 2024 September 12 2025 No Huanggang Chenming Pulp & Paper Co. Ltd. 50000000.00 October 18 2024 October 18 2025 No Jilin Chenming Pulp and Paper Trading Co. Ltd. 10000000.00 November 13 2023 November 13 2024 No Jilin Chenming Pulp and Paper Trading Co. Ltd. 10000000.00 November 24 2023 November 22 2024 No Jilin Chenming Pulp and Paper Trading Co. Ltd. 10000000.00 September 24 2024 September 24 2025 No Jilin Chenming Paper Co. Ltd. 184225999.23 December 15 2023 December 15 2025 No Jilin Chenming Paper Co. Ltd. 16000000.00 June 19 2024 June 17 2025 No Jilin Chenming Paper Co. Ltd. 60000000.00 July 18 2024 January 17 2025 No Jilin Chenming Paper Co. Ltd. 120000000.00 July 19 2024 January 18 2025 No Jilin Chenming Paper Co. Ltd. 35000000.00 July 24 2024 January 21 2025 No Jilin Chenming Paper Co. Ltd. 15000000.00 September 10 2024 March 10 2025 No Jilin Chenming Paper Co. Ltd. 91498111.11 September 29 2024 September 28 2026 No Jilin Chenming Paper Co. Ltd. 35000000.00 October 15 2024 April 15 2025 No Jiangxi Chenming Logistics Co. Ltd. 4600000.00 April 29 2024 April 29 2025 No Jiangxi Chenming Paper Co. Ltd. 106975661.00 February 28 2022 February 28 2027 No Jiangxi Chenming Paper Co. Ltd. 7971781.19 April 01 2022 April 01 2025 No Jiangxi Chenming Paper Co. Ltd. 52835042.81 May 23 2022 May 15 2025 No Jiangxi Chenming Paper Co. Ltd. 8609827.27 August 18 2022 February 18 2025 No Jiangxi Chenming Paper Co. Ltd. 5000000.00 October 11 2022 October 11 2025 No Jiangxi Chenming Paper Co. Ltd. 30000000.00 September 08 2023 August 22 2026 No 2024 ANNUAL REPORT 323XII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee (Continued) Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Jiangxi Chenming Paper Co. Ltd. 40000000.00 November 14 2023 November 14 2024 No Jiangxi Chenming Paper Co. Ltd. 15334938.09 December 04 2023 June 03 2025 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 March 08 2024 March 07 2025 No Jiangxi Chenming Paper Co. Ltd. 50000000.00 March 13 2024 March 08 2025 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 March 25 2024 March 25 2025 No Jiangxi Chenming Paper Co. Ltd. 70000000.00 April 25 2024 April 24 2025 No Jiangxi Chenming Paper Co. Ltd. 39999702.50 April 30 2024 October 29 2024 No Jiangxi Chenming Paper Co. Ltd. 5000000.00 May 31 2024 May 26 2025 No Jiangxi Chenming Paper Co. Ltd. 200000000.00 May 31 2024 November 29 2025 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 June 07 2024 June 03 2025 No Jiangxi Chenming Paper Co. Ltd. 30000000.00 June 11 2024 June 09 2025 No Jiangxi Chenming Paper Co. Ltd. 250000000.00 June 13 2024 December 12 2025 No Jiangxi Chenming Paper Co. Ltd. 30000000.00 June 17 2024 June 13 2025 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 June 18 2024 June 16 2025 No Jiangxi Chenming Paper Co. Ltd. 17000000.00 June 20 2024 June 15 2025 No Jiangxi Chenming Paper Co. Ltd. 16000000.00 June 21 2024 June 17 2025 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 June 24 2024 June 20 2025 No Jiangxi Chenming Paper Co. Ltd. 200000000.00 July 02 2024 July 01 2025 No Jiangxi Chenming Paper Co. Ltd. 50000000.00 July 02 2024 December 31 2025 No Jiangxi Chenming Paper Co. Ltd. 100000000.00 July 05 2024 July 01 2025 No Jiangxi Chenming Paper Co. Ltd. 193450000.00 August 23 2024 February 18 2025 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 August 30 2024 August 26 2025 No Jiangxi Chenming Paper Co. Ltd. 70000000.00 September 13 2024 March 13 2025 No Jiangxi Chenming Paper Co. Ltd. 80000000.00 September 14 2024 March 14 2025 No Jiangxi Chenming Paper Co. Ltd. 1300000.00 September 29 2024 September 24 2025 No Jiangxi Chenming Paper Co. Ltd. 57600000.00 September 29 2024 March 29 2026 No Jiangxi Chenming Paper Co. Ltd. 29700000.00 October 17 2024 October 17 2027 No Jiangxi Chenming Paper Co. Ltd. 10000000.00 October 31 2024 October 27 2025 No Jiangxi Chenming Paper Co. Ltd. 4950000.00 November 12 2024 May 12 2025 No Jiangxi Chenming Paper Co. Ltd. 4950000.00 November 13 2024 May 13 2025 No Jiangxi Chenming Paper Co. Ltd. 9900000.00 November 14 2024 May 14 2025 No Jiangxi Chenming Paper Co. Ltd. 19800000.00 November 15 2024 May 15 2025 No Jiangxi Chenming Paper Co. Ltd. 20000000.00 December 13 2024 November 30 2025 No Jiangxi Chenming Paper Co. Ltd. 20000000.00 December 16 2024 November 30 2025 No Jiangxi Chenming Paper Co. Ltd. 20000000.00 December 18 2024 November 30 2025 No Jiangxi Chenming Paper Co. Ltd. 3500000.00 December 19 2024 November 30 2025 No Jiangxi Chenming Paper Co. Ltd. 6500000.00 December 25 2024 November 30 2025 No Jiangxi Chenming Paper Co. Ltd. 9900000.00 December 26 2024 June 26 2025 No Jiangxi Chenming Paper Co. Ltd. 10450000.00 December 27 2024 June 27 2025 No Shandong Chenming Paper Sales Co. Ltd. 40000000.00 November 28 2023 November 28 2024 No Shandong Chenming Paper Sales Co. Ltd. 150000000.00 February 08 2024 February 12 2025 No Shandong Chenming Paper Sales Co. Ltd. 258402137.74 April 01 2024 April 02 2025 No 324 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee (Continued) Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Shandong Chenming Paper Sales Co. Ltd. 101549733.69 April 03 2024 April 07 2025 No Shandong Chenming Paper Sales Co. Ltd. 203370000.00 August 14 2024 August 15 2025 No Shandong Chenming Paper Sales Co. Ltd. 50000000.00 August 22 2024 November 20 2024 No Shandong Chenming Paper Sales Co. Ltd. 120000000.00 September 04 2024 March 03 2025 No Shandong Chenming Paper Sales Co. Ltd. 280000000.00 September 05 2024 March 04 2025 No Shandong Chenming Paper Sales Co. Ltd. 43000000.00 September 05 2024 December 04 2024 No Shandong Chenming Paper Sales Co. Ltd. 100000000.00 September 09 2024 September 10 2025 No Shandong Chenming Paper Sales Co. Ltd. 32680000.00 September 19 2024 September 19 2025 No Shandong Chenming Paper Sales Co. Ltd. 50000000.00 September 24 2024 September 23 2025 No Shandong Chenming Paper Sales Co. Ltd. 25000000.00 September 26 2024 March 26 2025 No Shandong Chenming Paper Sales Co. Ltd. 50000000.00 September 27 2024 March 27 2025 No Shandong Chenming Paper Sales Co. Ltd. 50000000.00 September 29 2024 March 29 2025 No Shandong Chenming Paper Sales Co. Ltd. 25000000.00 September 30 2024 March 30 2025 No Shandong Chenming Paper Sales Co. Ltd. 153820000.00 October 09 2024 October 10 2025 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 9250000.00 February 13 2023 February 12 2026 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 4411888.83 November 21 2023 November 20 2024 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 5600000.00 June 04 2024 May 30 2025 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 9000000.00 June 06 2024 November 20 2024 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 6300000.00 June 14 2024 June 09 2025 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 5600000.00 June 20 2024 May 28 2025 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 20000000.00 June 21 2024 June 18 2025 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 35200404.98 August 23 2024 November 21 2024 No Shanghai Chenming Pulp & Paper Sales Co. Ltd. 520000000.00 October 18 2024 September 24 2029 No Shanghai Heruiming Property Management Co. Ltd. 59980000.00 May 23 2024 November 08 2024 No Shanghai Heruiming Property Management Co. Ltd. 20000000.00 June 27 2024 January 06 2025 No Shanghai Hongtai Real Estate Co. Ltd. 2004545455.00 June 09 2023 March 20 2038 No Shouguang Chenming Import and Export Trade Co. Ltd. 31179628.93 August 25 2024 November 25 2024 No Shouguang Chenming Import and Export Trade Co. Ltd. 72595822.02 August 26 2024 November 25 2024 No Shouguang Chenming Import and Export Trade Co. Ltd. 31892669.52 September 24 2024 December 25 2024 No Shouguang Chenming Import and Export Trade Co. Ltd. 90959280.79 September 26 2024 December 25 2024 No Shouguang Chenming Import and Export Trade Co. Ltd. 28842694.68 October 27 2024 January 25 2025 No Shouguang Chenming Import and Export Trade Co. Ltd. 44522892.05 October 28 2024 January 25 2025 No Shouguang Chenming Import and Export Trade Co. Ltd. 90000000.00 December 16 2024 December 15 2025 No Shouguang Chenming Import and Export Trade Co. Ltd. 30000000.00 December 27 2024 June 27 2025 No Shouguang Chenming Papermaking Machine Co. Ltd. 9979722.22 November 14 2023 November 14 2024 No Shouguang Hongxiang Printing and Packaging Co. Ltd. 9856554.16 November 15 2023 November 14 2024 No Shouguang Meilun Paper Co. Ltd. 236000000.00 September 09 2021 August 20 2026 No Shouguang Meilun Paper Co. Ltd. 13265425.74 December 14 2021 December 14 2025 No Shouguang Meilun Paper Co. Ltd. 2999174.16 December 20 2021 December 20 2024 No Shouguang Meilun Paper Co. Ltd. 147158650.41 March 14 2022 March 14 2027 No Shouguang Meilun Paper Co. Ltd. 8861179.27 May 24 2022 May 25 2025 No Shouguang Meilun Paper Co. Ltd. 13845230.30 June 06 2022 June 05 2025 No 2024 ANNUAL REPORT 325XII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee (Continued) Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Shouguang Meilun Paper Co. Ltd. 21399530.65 June 28 2022 June 28 2025 No Shouguang Meilun Paper Co. Ltd. 30000000.00 August 25 2022 August 25 2025 No Shouguang Meilun Paper Co. Ltd. 21466666.64 September 30 2022 September 29 2025 No Shouguang Meilun Paper Co. Ltd. 109591059.28 November 25 2022 January 15 2028 No Shouguang Meilun Paper Co. Ltd. 195000000.00 December 27 2022 December 26 2027 No Shouguang Meilun Paper Co. Ltd. 5074948.25 December 29 2022 December 29 2024 No Shouguang Meilun Paper Co. Ltd. 12000000.00 January 18 2023 January 18 2026 No Shouguang Meilun Paper Co. Ltd. 5000000.00 March 29 2023 March 29 2025 No Shouguang Meilun Paper Co. Ltd. 106670000.00 June 09 2023 May 20 2027 No Shouguang Meilun Paper Co. Ltd. 34420409.16 August 30 2023 August 30 2026 No Shouguang Meilun Paper Co. Ltd. 17178745.04 October 08 2023 April 15 2025 No Shouguang Meilun Paper Co. Ltd. 71649000.00 October 23 2023 October 23 2024 No Shouguang Meilun Paper Co. Ltd. 42974114.02 October 25 2023 October 25 2026 No Shouguang Meilun Paper Co. Ltd. 15000000.00 January 03 2024 December 27 2024 No Shouguang Meilun Paper Co. Ltd. 500000000.00 January 18 2024 January 18 2027 No Shouguang Meilun Paper Co. Ltd. 41278885.85 January 29 2024 January 28 2027 No Shouguang Meilun Paper Co. Ltd. 44000000.00 February 27 2024 February 26 2025 No Shouguang Meilun Paper Co. Ltd. 5000000.00 March 07 2024 March 07 2025 No Shouguang Meilun Paper Co. Ltd. 22446656.28 April 12 2024 April 12 2025 No Shouguang Meilun Paper Co. Ltd. 46166000.00 May 24 2024 May 24 2027 No Shouguang Meilun Paper Co. Ltd. 56044826.08 May 27 2024 May 28 2025 No Shouguang Meilun Paper Co. Ltd. 69241000.00 May 28 2024 May 28 2027 No Shouguang Meilun Paper Co. Ltd. 45727471.68 May 31 2024 June 03 2025 No Shouguang Meilun Paper Co. Ltd. 98114605.57 June 04 2024 June 05 2025 No Shouguang Meilun Paper Co. Ltd. 178130000.00 June 26 2024 June 25 2025 No Shouguang Meilun Paper Co. Ltd. 50000000.00 June 28 2024 June 27 2025 No Shouguang Meilun Paper Co. Ltd. 20000000.00 June 28 2024 June 24 2025 No Shouguang Meilun Paper Co. Ltd. 10000000.00 June 28 2024 June 26 2025 No Shouguang Meilun Paper Co. Ltd. 10000000.00 June 28 2024 June 26 2025 No Shouguang Meilun Paper Co. Ltd. 27000000.00 June 28 2024 June 28 2027 No Shouguang Meilun Paper Co. Ltd. 70000000.00 July 01 2024 January 01 2025 No Shouguang Meilun Paper Co. Ltd. 51392466.44 July 05 2024 January 05 2026 No Shouguang Meilun Paper Co. Ltd. 94028794.20 July 10 2024 January 07 2025 No Shouguang Meilun Paper Co. Ltd. 9500000.00 July 11 2024 July 11 2026 No Shouguang Meilun Paper Co. Ltd. 30000000.00 July 23 2024 July 23 2025 No Shouguang Meilun Paper Co. Ltd. 91760000.00 July 25 2024 July 25 2025 No Shouguang Meilun Paper Co. Ltd. 25120755.08 August 06 2024 February 05 2025 No Shouguang Meilun Paper Co. Ltd. 60000000.00 August 06 2024 February 06 2025 No Shouguang Meilun Paper Co. Ltd. 20000000.00 August 27 2024 February 27 2025 No Shouguang Meilun Paper Co. Ltd. 15900000.00 December 05 2024 December 05 2025 No Shouguang Meilun Paper Co. Ltd. 43000000.00 December 09 2024 December 08 2025 No 326 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee (Continued) Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Shouguang Meilun Paper Co. Ltd. 10000000.00 December 09 2024 December 09 2025 No Shouguang Meilun Paper Co. Ltd. 10000000.00 December 09 2024 December 09 2025 No Shouguang Meilun Paper Co. Ltd. 62000000.00 December 09 2024 June 09 2025 No Shouguang Meilun Paper Co. Ltd. 199500000.00 December 12 2024 November 12 2025 No Shouguang Meilun Paper Co. Ltd. 133253598.00 December 13 2024 December 12 2025 No Shouguang Meilun Paper Co. Ltd. 49497280.00 December 16 2024 December 15 2025 No Shouguang Meilun Paper Co. Ltd. 10000000.00 December 27 2024 December 26 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100000000.00 March 14 2016 March 13 2028 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 175000000.00 August 18 2016 March 13 2028 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 940000000.00 March 26 2018 March 25 2029 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 130000000.00 June 17 2022 June 16 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 60540260.41 June 29 2022 June 29 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 51000000.00 March 31 2023 March 30 2026 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 90000000.00 June 02 2023 June 02 2026 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 60900191.21 June 20 2023 June 20 2026 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 200000000.00 July 12 2023 July 12 2026 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 164172110.17 November 08 2023 November 08 2028 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 85500000.00 November 29 2023 November 21 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100000000.00 December 09 2023 December 08 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100000000.00 January 03 2024 January 02 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 205000000.00 March 20 2024 March 20 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 38000000.00 March 21 2024 March 20 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 10500000.00 March 26 2024 March 26 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 31000000.00 March 28 2024 March 27 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 30000000.00 March 29 2024 March 27 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100000000.00 April 29 2024 October 29 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 25000000.00 May 16 2024 May 15 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 75770782.44 May 23 2024 November 26 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 60000000.00 May 27 2024 May 26 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 45000000.00 May 29 2024 May 28 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 63000000.00 May 31 2024 May 29 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 40000000.00 June 06 2024 June 05 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 38372000.00 June 06 2024 June 03 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 47784000.00 June 06 2024 June 03 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 48000000.00 June 26 2024 June 25 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 58940000.00 June 27 2024 December 27 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 70000000.00 June 27 2024 December 27 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 62000000.00 June 28 2024 June 26 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 26620000.00 June 28 2024 December 28 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 25000000.00 June 28 2024 December 28 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 69440000.00 June 28 2024 December 28 2024 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 70500000.00 July 01 2024 January 03 2025 No 2024 ANNUAL REPORT 327XII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (3) Related party guarantee (Continued) Commencement Expiry date of Whether performance of Party being guaranteed Amount under guarantee date of guarantee guarantee guarantee is completed Zhanjiang Chenming Pulp & Paper Co. Ltd. 30000000.00 July 02 2024 January 02 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 67000000.00 July 09 2024 January 03 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 85000000.00 July 11 2024 January 11 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 200000000.00 July 12 2024 July 11 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 65000000.00 July 15 2024 January 10 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 29000000.00 July 18 2024 July 17 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100000000.00 July 23 2024 July 22 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 67000000.00 July 24 2024 July 22 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 41408350.00 July 24 2024 July 22 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100399224.00 August 06 2024 August 05 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 60000000.00 August 07 2024 August 06 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 59000000.00 August 08 2024 August 07 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 67000000.00 August 14 2024 August 13 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 65000000.00 August 14 2024 February 14 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50000000.00 September 12 2024 January 12 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50000000.00 September 13 2024 September 13 2027 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50000000.00 September 20 2024 January 17 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100000000.00 September 25 2024 September 24 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 78000000.00 October 10 2024 October 10 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 62000000.00 October 11 2024 April 10 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 110000000.00 October 15 2024 October 14 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 60000000.00 October 15 2024 April 14 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 5000000.00 October 17 2024 January 16 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50290000.00 October 17 2024 April 17 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 98700000.00 November 11 2024 May 09 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 167500000.00 November 11 2024 November 10 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50290000.00 November 12 2024 May 10 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 6000000.00 November 13 2024 May 12 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 100200000.00 November 14 2024 November 13 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 59460000.00 November 20 2024 November 19 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50000000.00 November 27 2024 May 26 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 47500000.00 December 18 2024 June 17 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 65000000.00 December 19 2024 June 18 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 50000.00 December 26 2024 June 26 2025 No Zhanjiang Chenming Pulp & Paper Co. Ltd. 49950000.00 December 30 2024 June 30 2025 No Foshan Chenming Import and Export Trade Co. Ltd. 5000000.00 September 29 2024 March 28 2025 No Hainan Chenming Technology 50000000.00 April 10 2024 April 07 2025 No Zhanjiang Chenming Arboriculture Development Co. Ltd. 44160000.00 March 29 2024 March 27 2026 No Huanggang Chenming Port Service Co. Ltd. 6000000.00 December 27 2023 December 20 2025 No Jilin Chenming Pulp and Paper Trading Co. Ltd. 10000000.00 September 26 2024 September 26 2025 No Total 19032267355.72 328 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (4) Related party lending and borrowing Unit: RMB Related party Borrowing amount Commencement date Expiry date Description Borrowing Chenming Holdings Co. Ltd. 292510000.00 April 11 2024 31 December 2024 Controlling shareholder Guangdong Nanyue Bank Co. Ltd. 857890000.00 March 26 2024 31 December 2024 Associate Lending Weifang Port Wood Chip 35000000.00 June 28 2024 June 27 2025 Joint venture Terminal Co. Ltd. (5) Remuneration of key management staff The Company has 23 key management staff for the period and 23 for the prior period. The remuneration payment is as follows: Unit: RMB’0000 Amount during Amount during Item the period the prior period Remuneration of key management staff 1622.15 2361.67 * Distribution band of remuneration of key management staff Amount during Amount during the Band of annual remuneration the year (RMB’0000) prior year (RMB’0000) Total 1622.15 2361.67 Of which: (number of staff in each band of amount) RMB4.00-4.80 million 1 RMB3.20-3.60 million RMB2.80-3.20 million RMB2.40-2.80 million 1 RMB2.00-2.40 million RMB1.60-2.00 million 2 2 RMB1.20-1.60 million 2 1 RMB0.80-1.20 million 4 RMB4.00-4.80 million 4 2 RMB3.20-3.60 million 15 12 2024 ANNUAL REPORT 329XII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (5) Remuneration of key management staff (Continued) * Breakdown of remuneration of key management staff Amount during the year (RMB’0000) Social welfare contribution Salaries Of which: allowances Social Pension Housing Total Key management staff Fees Bonuses and benefits insurance insurance fund (RMB’0000) Yin Meiqun 20.00 20.00 Yang Biao 20.00 20.00 Sun Jianfei 20.00 20.00 Li Zhihui 20.00 20.00 Subtotal of independent non-executive Director 80.00 80.00 Li Chuanxuan 20.00 20.00 Han Tingde 20.00 20.00 Subtotal of non-executive Directors 40.00 40.00 Chen Hongguo 199.17 6.78 4.32 1.52 207.47 Hu Changqin 159.60 11.31 7.05 3.09 174.00 Li Xingchun 201.00 201.00 Li Feng 150.46 11.31 7.05 5.29 167.06 Li Weixian 84.64 7.24 4.60 1.66 93.54 Subtotal of executive Directors 794.87 36.64 23.02 11.56 843.07 Li Kang 48.05 6.67 4.25 1.52 56.24 Pan Ailing 10.00 10.00 Zhang Hong 10.00 10.00 Qiu Lanju 46.25 6.84 4.24 1.72 54.81 Sang Ailing 19.16 3.63 2.25 0.85 23.64 Total of Supervisors 133.46 17.14 10.74 4.09 154.69 Subtotal of other Senior Management 452.72 41.67 26.17 10.00 504.39 Total 1501.05 95.45 59.93 25.65 1622.15 330 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (5) Remuneration of key management staff (Continued) * Breakdown of remuneration of key management staff (Continued) Amount during the year (RMB’0000) Social welfare contribution Salaries Of which: allowances Social Pension Housing Total Key management staff Fees Bonuses and benefits insurance insurance fund (RMB’0000) Yin Meiqun 20.00 20.00 Yang Biao 20.00 20.00 Sun Jianfei 20.00 20.00 Li Zhihui 20.00 20.00 Subtotal of independent non-executive Director 80.00 80.00 Li Chuanxuan 20.00 20.00 Han Tingde 20.00 20.00 Subtotal of non-executive Directors 40.00 40.00 Chen Hongguo 308.90 6.93 4.42 1.59 317.42 Hu Changqin 188.78 9.93 6.04 2.54 201.25 Li Xingchun 420.00 420.00 Li Feng 135.86 6.93 4.42 1.59 144.38 Li Weixian 216.56 11.32 6.79 5.08 232.96 Subtotal of executive Directors 1270.10 35.11 21.67 10.80 1316.01 Li Kang 75.78 6.93 4.42 1.59 84.30 Pan Ailing 10.00 10.00 Zhang Hong 10.00 10.00 Qiu Lanju 66.95 6.46 4.07 1.62 75.03 Sang Ailing 17.60 3.64 2.27 0.85 22.09 Total of Supervisors 180.33 17.03 10.76 4.06 201.42 Subtotal of other Senior Management 674.44 40.17 25.47 9.63 724.24 Total 2244.87 92.31 57.90 24.49 2361.67 Note: Social welfare contribution includes basic pension insurance medical insurance work-related injury insurance maternity insurance and unemployment insurance. 2024 ANNUAL REPORT 331XII Financial Report XIV. Related parties and related party transactions (Continued) 5. Related party transactions (Continued) (5) Remuneration of key management staff (Continued) * The 5 highest paid individuals of the Company during the year included 4 directors of the Company and 1 other senior management personnel. The remuneration range of 1 senior management personnel was RMB0.80 million to RMB1.20 million with salaries allowances and benefits amounting to RMB1.0608 million and an annual salary of RMB1.1498 million social insurance of RMB72400 (including pension insurance of RMB46000) and housing provident fund of RMB16600.A. Remuneration of the five highest paid individuals Amounts during Amounts during Item the period the prior year Salaries allowances and benefits 816.31 1295.83 Housing provident fund 11.56 10.83 Social welfare contribution 36.64 34.64 Of which: Pension insurance 23.02 21.32 Total 864.51 1341.30 B. Distribution band of remuneration of the five highest paid individuals Number of Number of individuals individuals Band of annual remuneration during the year during the prior year RMB4.00-4.80 million 1 RMB3.20-3.60 million RMB2.80-3.20 million 1 RMB2.40-2.80 million RMB2.00-2.40 million 2 2 RMB1.60-2.00 million 2 1 RMB1.20-1.60 million RMB0.80-1.20 million 1 * For the financial year ended 31 December 2024 no other bonuses which are discretionary or are based on the Company’s the Company’s or any member of the Company’s performance were paid to or receivable by the 5 highest paid individuals and no other emoluments were paid by the Company to the Directors of the Company and the 5 highest paid individuals as an inducement to join or upon joining the Company or as compensation for loss of office. None of the Directors waived any emoluments during the year. 332 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Related parties and related party transactions (Continued) 6. Related party accounts receivable and accounts payable (1) Accounts receivable Unit: RMB Closing balance Opening balance Bad debt Bad debt Item Related party Book balance provision Book balance provision Accounts receivable Shouguang Chenming Huisen New-style 903414.15 6323.90 Construction Materials Co. Ltd.Accounts receivable Lide Technology Co. Ltd. 171451.91 1200.16 Accounts receivable Chenming (Qingdao) Asset 2359.03 23.18 Management Co. Ltd.Accounts receivable Shouguang Chenming Guangyuan 870685.06 6094.80 Property Management Co. Ltd.Other receivables Wuhan Chenming Hanyang Paper 238093358.44 13523702.76 227252701.60 Holdings Co. Ltd Other receivables Shouguang Meite Environmental 11179201.88 5603487.91 10427200.00 2102653.38 Technology Co. Ltd.Other receivables Weifang Port Wood Chip 79397749.84 12131778.23 75554749.84 8991998.46 Terminal Co. Ltd.Other receivables Shouguang Chenming Guangyuan 22000.00 1100.00 Real Property (2) Accounts payable Unit: RMB Closing book Opening book Item Related party balance balance Accounts payable Wuhan Chenming Qianneng Electric Power Co. Ltd. 4869.10 72483.77 Accounts payable Wuhan Chenming Hanyang Paper Holdings Co. Ltd 13921249.12 14334304.63 Accounts payable Weifang Xingxing United Chemical Co. Ltd. 26905494.34 26905494.34 Accounts payable Weifang Port Wood Chip Terminal Co. Ltd. 22610306.71 6932747.45 Accounts payable Shouguang Meite Environmental Technology Co. Ltd. 15292739.96 12973303.12 Accounts payable Shouguang Huixin Construction Materials Co. Ltd. 42929.24 Other payables Wuhan Chenming Hanyang Paper Holdings Co. Ltd 5194879.89 305000000.00 Other payables Lide Technology Co. Ltd. 559897.05 559897.05 Other payables Chenming (Qingdao) Asset Management Co. Ltd. 115583.42 Other payables Chenming Holdings Co. Ltd. 38500000.00 135612917.24 Other payables Weifang Xingxing United Chemical Co. Ltd. 16860000.00 16860000.00 O ther payables Shouguang Chenming Guangyuan Real Property 197714644.82 2024 ANNUAL REPORT 333XII Financial Report XIV. Related parties and related party transactions (Continued) 6. Related party accounts receivable and accounts payable (Continued) (3) Deposits with related parties Unit: RMB Item Related party Closing balance Opening balance Bank deposit Guangdong Nanyue Bank Co. Ltd. 1891614.39 7189314.62 O ther monetary funds G uangdong Nanyue Bank Co. Ltd. 87600000.00 1311200000.00 (4) Loans from related parties Unit: RMB Item Related party Closing balance Opening balance S hort-term borrowings G uangdong Nanyue Bank Co. Ltd. 857890000.00 2069060000.00 334 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XV. Share-based Payment 1. General information of share-based payment □ Applicable √ Not applicable 2. Equity-settled share-based payment □ Applicable √ Not applicable 3. Cash-settled share-based payment □ Applicable √ Not applicable 4. Share-based payment expense for the period □ Applicable √ Not applicable 2024 ANNUAL REPORT 335XII Financial Report XVI. Undertaking and contingency 1. Significant commitments (1) Capital commitments Unit: RMB Capital commitments contracted for but not yet Balance as at the necessary to be recognised on the balance sheet Closing balance end of the prior year Commitments in relation to acquisition and construction of long-term assets 298488760.20 288776312.58 (2) Other commitments As at 31 December 2024 the Company has no other commitments that should be disclosed. 2. Contingency (1) Contingent liabilities arising from pending litigation and arbitration and their financial impacts Unit: RMB Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status Guangdong Nanyue Bank Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff Intermediate People’s 452700000.00 Under first Haitang Sub-branch Co. Ltd. and Shandong Chenming for default on repayment of Court of Zhanjiang City instance trial Paper Holdings Limited borrowings Weifang Huiyu Ecological Agriculture Shandong Chenming Paper Litigation filed by the plaintiff Kuiwen District People’s 10046850.00 litigation hold Technology Co. Ltd. Holdings Limited for the non-payment of overdue Court of Weifang City payment for goods Guodu Venture Capital Co. Ltd. Shandong Chenming Paper Litigation filed by the plaintiff for People’s Court of 63706000.00 Under first Holdings Limited the non-payment of equity Dongcheng District instance trial transfer payment Beijing Anhui Tongkang Industrial Shouguang Meilun Litigation filed by the plaintiff for People’s Court of 30224000.00 Under first Development Co. Ltd. Paper Co. Ltd. the non-payment of commercial Shouguang City instance trial paper upon maturity Hangzhou Changbao Agricultural Shandong Chenming Paper Litigation filed by the plaintiff Fuyang District People’s 15200000.00 Pending first Technology Co. Ltd. Holdings Limited for default on repayment of Court of Hangzhou City instance trial borrowings Beijing Ge En Mei Medical Shandong Chenming Paper Litigation filed by the plaintiff People’s Court of 46155000.00 Under first Technology Co. Ltd. Sales Co. Ltd. for default on repayment of Dongcheng District instance trial borrowings Beijing Zhangzhou Yuncheng Shandong Chenming Paper Litigation filed by the plaintiff Longwen District People’s 300427000.00 Second instance Trading Co. Ltd. Holdings Limited and for the non-payment of overdue Court of Zhangzhou City appeal against Shouguang Chenming Import payment for goods the first instance and Export Trade Co. Ltd. ruling 336 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XVI. Undertaking and contingency (Continued) 2. Contingency (Continued) (1) Contingent liabilities arising from pending litigation and arbitration and their financial impacts (Continued) Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status Industrial Bank Co. Ltd. Jilin Chenming Paper Co. Ltd. Litigation filed by the plaintiff Changyi District People’s 35050000.00 Second instance Jilin Branch and Shandong Chenming Paper for the non-payment of Court of Jilin City appeal against Holdings Limited advance payments the first instance ruling Xinjiang Baoxin Hengyuan Shandong Chenming Paper Litigation filed by the plaintiff People’s Court of Sanping 149724000.00 Second instance Logistics Co. Ltd. Holdings Limited for the non-payment of overdue Reclamation Area the appeal against payment for goods Xinjiang Production and the first instance Construction Corps ruling Ganzhou Gongfa Financial Jiangxi Chenming Paper Co. Ltd. Litigation filed by the plaintiff for People’s Court of Ganzhou 30010000.00 Pending first Leasing Co. Ltd. and Shandong Chenming Paper the non-payment of rent overdue Economic & Technological instance trial Holdings Limited and Shandong under financial leasing Development Zone Chenming Paper Sales Co. Ltd.Haicheng Senguang Real Shandong Chenming Paper Litigation filed by the plaintiff Haicheng City 21000000.00 Pending first Estate Co. Ltd. Holdings Limited and Shandong for default on repayment of People’s Court instance trial Chenming Paper Sales Co. Ltd. borrowings Jilin Ruihong Environmental Shandong Chenming Paper Litigation filed by the plaintiff for Changyi District People’s 10372800.00 Pending first Protection Technology Holdings Limited the non-payment of commercial Court of Jilin City instance trial Development Co. Ltd. paper upon maturity CIMC Eco Material Shandong Chenming Paper Litigation filed by the plaintiff for Shouguang City 12004700.00 Pending first Supply Co. Ltd. Holdings Limited and Shouguang the non-payment of commercial People’s Court instance trial Meilun Paper Co. Ltd. paper upon maturity Xiamen Haitou Supply Chain Shandong Chenming Paper Holdings Litigation filed by the plaintiff Intermediate People’s 204286000.00 Pending first Operation Co. Ltd. Limited and Shouguang Chenming for the non-payment of overdue Court of Xiamen city instance trial Import and Export Trade Co. Ltd. payment for goods Fujian Province Chengdu Si Di Ou Trading Co. Ltd. Shandong Chenming Paper Litigation filed by the plaintiff Wuhou District People’s 13448000.00 Pending first Holdings Limited for default on repayment of Court of Chengdu City instance trial borrowings 2024 ANNUAL REPORT 337XII Financial Report XVI. Undertaking and contingency (Continued) 2. Contingency (Continued) (1) Contingent liabilities arising from pending litigation and arbitration and their financial impacts (Continued) Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status Quzhou Qujiang Qingqu Industry Shandong Chenming Paper Litigation filed by the plaintiff Qujiang District People’s 101181400.00 Pending first Development Co. Ltd. Holdings Limited for the non-payment of overdue Court of Quzhou City instance trial payment for goods Jinan Yuxiao Group Co. Ltd. Shandong Chenming Paper Litigation filed by the plaintiff Shizhong District People’s 50000000.00 Pending first Holdings Limited for default on repayment of Court of Jinan City instance trial borrowings Shenzhen Financial Leasing Huanggang Chenming Pulp & Paper Litigation filed by the plaintiff for Guangling District People’s 91958600.00 Pending first (Group) Co. Ltd. Co. Ltd. and Shandong Chenming the non-payment of rent overdue Court of Yangzhou City instance trial Paper Holdings Limited under financial leasing Bank of Taian Co. Ltd. Taixi Branch Shandong Chenming Paper Litigation filed by the plaintiff for Daiyue District People’s 150000000.00 Pending first Holdings Limited the non-payment of advance Court of Tai’an City instance trial payments of the letter of credit.Fuzhou Agribusiness Supply Jilin Chenming Pulp and Paper Litigation filed by the plaintiff Huangzhou District 17891000.00 Pending first Chain Co. Ltd. Trading Co. Ltd. and Huanggang for the non-payment of overdue People’s Court instance trial Chenming Pulp & Paper Co. Ltd. payment for goods Great Wall Guoxing Financing Huanggang Chenming Pulp & Paper Litigation filed by the plaintiff for Wuchang District People’s 68225500.00 Second instance Leasing Co. Ltd. Co. Ltd. and Shandong Chenming the non-payment of rent overdue Court of Wuhan City appeal against Paper Holdings Limited under financial leasing the first instance ruling HNAC Grant Environmental Protection Shandong Chenming Paper Litigation filed by the plaintiff Intermediate People’s 103529000.00 Appeal filed by Technology (Beijing) Co. Ltd. Holdings Limited for the non-payment of overdue Court of Weifang City the plaintiff after payment for engineering the first instance ruling and dismissal at the second instance Village Committee of Beikoubu Village Shandong Chenming Paper Litigation filed by the plaintiff Qingzhou City 11879000.00 Pending first Heguan Town Qingzhou City Holdings Limited and Shouguang for land infringement People’s Court instance ruling Meilun Paper Co. Ltd. 338 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XVI. Undertaking and contingency (Continued) 2. Contingency (Continued) (1) Contingent liabilities arising from pending litigation and arbitration and their financial impacts (Continued) Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status Qingdao Metro Financial Shouguang Meilun Paper Litigation filed by the plaintiff for Shibei District People’s 34257000.00 Second instance Leasing Co. Ltd. Co. Ltd. and Guangdong the non-payment of rent overdue Court of Qingdao City appeal against Chenming Panels Co. Ltd. under financial leasing the first instance ruling HNAC Grant Environmental Protection Zhanjiang Chenming Litigation filed by the plaintiff Mazhang District People’s 22338000.00 Appeal filed by the Technology (Beijing) Co. Ltd. Pulp & Paper Co. Ltd. for the non-payment of overdue Court of Zhanjiang City plaintiff after the payment for engineering first instance ruling and dismissal at the second instance Luchuan County Yizhong Building Zhanjiang Chenming Litigation filed by the plaintiff Luchuan County 15670000.00 Pending first Materials Co. Ltd. Pulp & Paper Co. Ltd. for the non-payment of People’s Court instance ruling overdue payment for goods and commercial paper upon maturity Sichuan Changhong Minsheng Jilin Chenming Paper Co. Ltd. Litigation filed by the plaintiff for People’s Court of 12179200.00 Pending first Logistics Co. Ltd. the non-payment of freight Shouguang City instance trial Shanghai Greenland Construction Chongmin Culture Development Litigation filed by the plaintiff Minhang District People’s 39998000.00 Pending first (Group) Co. Ltd. (Shanghai) Co. Ltd. for the non-payment of overdue Court of Shanghai instance ruling payment for engineering Municipality Shanghai Yingmeng Century Business Shanghai Hongtai Real Estate Litigation filed by the plaintiff in Hongkou District People’s 93887000.00 Pending first Management Co. Ltd. Co. Ltd. relation to lease rental dispute Court of Shanghai instance ruling Municipality Sichuan Nanchong Port Co. Ltd. Shandong Chenming Litigation filed by the plaintiff People’s Court of 84770000.00 Second instance Paper Sales Co. Ltd. for the non-payment of overdue Shouguang City appeal against payment for goods the first instance ruling Minsheng Bank Weigongcun Shandong Chenming Litigation filed by the plaintiff for Beijing Financial Court 200005000.00 Pending first Sub-branch Paper Sales Co. Ltd. the non-payment of advance instance ruling payments of the letter of credit.Total 2492123050.00 2024 ANNUAL REPORT 339XII Financial Report XVI. Undertaking and contingency (Continued) 2. Contingency (Continued) (2) Equity interest subject to freeze The Company’s equity investments in subsidiaries being pledged as a result of overdue debts or financial guarantees are as follows: Equity interest in entity pledged Pledgee Chongmin Culture Development (Shanghai) Co. Ltd. Shanxi Fuyin Industrial Trading Co. Ltd.Shanghai Heruiming Property Management Co. Ltd. Wuchan Zhongda Asset Management (Zhejiang) Co. Ltd.Shanghai Chenming Industry Co. Ltd. Shouguang Huinong New Rural Construction Investment Development Co. Ltd.Shanghai Chenming Industry Co. Ltd. Shouguang Jin Choi Public Assets Management Co.Ltd.Shanghai Chenming Industry Co. Ltd. Shouguang Jinchen Trading Co. Ltd.Huanggang Chenming Port Service Co. Ltd. Hubei Port Commercial Factoring Co. Ltd.As at 31 December 2024 the Company had no other contingencies that should be disclosed. 340 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XVII. Post-balance sheet event 1. Notes to Other Post-balance Sheet Event (1) Description of significant non-adjustments to post-balance sheet event Unit: RMB Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status CIMC Yongfa (Tianjin) Financial Leasing Shouguang Meilun Paper Co. Ltd. Litigation filed by the plaintiff Nanshan District People’s 11228700.00 Pending first Co. Ltd. and Shandong Chenming Paper for the non-payment of rent Court of Shenzhen City instance trial Holdings Limited overdue under financial leasing Guangdong Province CIMC Yongfa (Tianjin) Financial Leasing Shandong Chenming Paper Litigation filed by the plaintiff Nanshan District People’s 73038000.00 Pending first Co. Ltd. Holdings Limited for the non-payment of rent Court of Shenzhen City instance trial overdue under financial leasing Guangdong Province Xiamen Hengfeng Financial Leasing Shouguang Meilun Paper Co. Ltd. Litigation filed by the plaintiff Huli District People’s Court 37108000.00 Pending first Co. Ltd. and Shandong Chenming Paper for the non-payment of rent of Xiamen City instance Holdings Limited overdue under financial leasing ruling Hubei International Trade Group Co. Shouguang Chenming Import and Litigation filed by the plaintiff for Intermediate People’s Court 131806900.00 Pending first Ltd. Export Trade Co. Ltd. the non-payment of overdue of Wuhan City instance trial payment for goods The Korea Development Bank Qingdao Shouguang Meilun Paper Co. Ltd. Litigation filed by the plaintiff Intermediate People’s Court 72016700.00 Pending first Branch and Shandong Chenming Paper for default on repayment of of Qingdao City instance ruling Holdings Limited borrowings Bank of China Limited Zhanjiang Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff Intermediate People’s Court 201289000.00 Pending first Branch Co. Ltd. and Shandong Chenming for default on repayment of of Zhanjiang City instance Paper Holdings Limited borrowings and non-payment of ruling advance payments Shanghai Electric Financial Leasing Shouguang Meilun Paper Co. Ltd. Litigation filed by the plaintiff Pudong New Area People’s 51212600.00 Pending first Co. Ltd. and Shandong Chenming Paper for the non-payment of rent Court of Shanghai instance Holdings Limited overdue under financial leasing Municipality ruling Shandong Port Microfinance Co. Ltd. Shouguang Chenming Import Litigation filed by the plaintiff Shibei District People’s 75206300.00 Pending first and Export Trade Co. Ltd. and for default on repayment of Court of Qingdao City instance Shandong Chenming Paper borrowings ruling Holdings Limited Hubei Port Commercial Factoring Co. Huanggang Chenming Pulp & Fiber Litigation filed by the plaintiff for Jianghan District People’s District Pending first Ltd. Trading Co. Ltd. the non-payment of outstanding Court of Wuhan City 80000000.00 instance trial commercial factorings Bank of Tianjin Co. Ltd. Jinan Branch Shandong Chenming Investment Litigation filed by the plaintiff Shizhong District People’s 232984000.00 Pending first Limited for default on repayment of Court of Jinan City instance ruling borrowings 2024 ANNUAL REPORT 341XII Financial Report XVII. Post-balance sheet event (Continued) 1. Notes to Other Post-balance Sheet Event (Continued) (1) Description of significant non-adjustments to post-balance sheet event (Continued) Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status Wanjiang Financial Leasing Co. Ltd. Huanggang Chenming Pulp & Fiber Litigation filed by the plaintiff Jiujiang District People’s 20188400.00 Pending first Trading Co. Ltd. and Shandong for the non-payment of rent Court of Wuhu City Anhui instance trial Chenming Paper Holdings Limited overdue under financial leasing Province Export-Import Bank of China Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff for Intermediate People’s Court 100000000.00 Pending first Guangdong Branch Co. Ltd. and Shandong Chenming default on repayment of of Guangzhou City instance trial Paper Holdings Limited borrowings Industrial Bank Co. Ltd. Zhanjiang Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff for Intermediate People’s Court 269880000.00 Pending first Branch Co. Ltd. and Shandong Chenming default on repayment of of Zhanjiang City instance ruling Paper Holdings Limited borrowings China Guangfa Bank Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff Intermediate People’s 104572800.00 Pending first Zhanjiang Branch Co. Ltd. and Shandong Chenming for the non-payment of advance Court of Zhanjiang City instance ruling Paper Holdings Limited payments China Guangfa Bank Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff Intermediate People’s Court 447500000.00 Pending first Zhanjiang Branch Co. Ltd. and Shandong Chenming for default on repayment of of Zhanjiang City instance ruling Paper Holdings Limited borrowings Ligen Financial Leasing Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff Tianhe District People’s 65289000.00 Pending first Co. Ltd. Shandong Chenming for the non-payment of rent Court of Guangzhou City instance trial Paper Holdings Limited and overdue under financial leasing Guangzhou Chenming Property Management Co. Ltd.Guangdong Nanyue Bank Co. Ltd. Shandong Chenming Paper Holdings Litigation filed by the plaintiff Intermediate People’s Court 317590000.00 Pending first Haitang Sub-branch Limited and Shouguang Chenming for default on repayment of of Zhanjiang City instance trial Import and Export Trade Co. Ltd. borrowings Zhanjiang Leilin Industrial Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff for Mazhang District People’s 60804000.00 Pending first Co. Ltd. default on repayment of overdue Court of Zhanjiang City instance trial payment for goods 342 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XVII. Post-balance sheet event (Continued) 1. Notes to Other Post-balance Sheet Event (Continued) (1) Description of significant non-adjustments to post-balance sheet event (Continued) Amount of the Plaintiff Defendant Cause of action Trial to be heard subject matter Case status Bank of Communications Co. Ltd. Jilin Shandong Chenming Paper Holdings Litigation filed by the plaintiff Changyi District People’s 50000000.00 Pend ing f i r s t Branch Limited and Jilin Chenming Paper for default on repayment of Court of Jilin City i n s t a n c e Co. Ltd. borrowings ruling Hangzhou Chengtou Industrial Co. Ltd. Shandong Chenming Paper Holdings Litigation filed by the plaintiff for S h a n g c h e n g D i s t r i c t 48887500.00 Pend ing f i r s t Limited and Zhanjiang Chenming default on repayment of overdue P e o p l e ’ s C o u r t o f instance trial Pulp & Paper Co. Ltd. payment for goods Hangzhou City Qingdao Guosheng Financing Leasing Shandong Chenming Paper Holdings Litigation filed by the plaintiff Shibei Distr ict People’s 29217800.00 Pend ing f i r s t Co. Ltd. Limited and Shouguang Meilun for the non-payment of rent Court of Qingdao City instance trial Paper Co. Ltd. overdue under financial leasing Zhuhai Zhengfang Trading Co. Ltd. Shandong Chenming Paper Holdings Litigation filed by the plaintiff for Xiangzhou District People’s 15192800.00 Pending first Limited and Zhanjiang Chenming default on repayment of overdue Court of Zhuhai City instance trial Pulp & Paper Co. Ltd. payment for goods Shanghai Banghui Commercial Shandong Chenming Paper Holdings Litigation filed by the plaintiff Daxing District People’s 13677100.00 Pending first Factoring Co. Ltd. Limited for default on repayment of Court of Beijing City instance borrowings ruling Shanghai Banghui Commercial Shandong Chenming Paper Holdings Litigation filed by the plaintiff Daxing District People’s 12984300.00 Pending first Factoring Co. Ltd. Limited for default on repayment of Court of Beijing City instance borrowings ruling Zhonglin Group Leizhou Forestry Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff for Mazhang District People’s 12845000.00 Pending first Bureau Co. Ltd. Co. Ltd. default on repayment of overdue Court of Zhanjiang City instance trial payment for goods Shanghai Banghui Commercial Shandong Chenming Paper Holdings Litigation filed by the plaintiff Daxing District People’s 12749500.00 Pending first Factoring Co. Ltd. Limited for default on repayment of Court of Beijing City instance borrowings ruling Shanghai Banghui Commercial Shandong Chenming Paper Holdings Litigation filed by the plaintiff Daxing District People’s 12525000.00 Pending first Factoring Co. Ltd. Limited for default on repayment of Court of Beijing City instance borrowings ruling Qinshi New Energy (Zhanjiang) Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff for Mazhang District People’s 11510000.00 Pending first Co. Ltd. default on repayment of overdue Court of Zhanjiang City instance trial payment for goods Zhejiang Zheyin Financial Leasing Co. Shandong Chenming Paper Holdings Litigation filed by the plaintiff Gongshu District People’s 53625000.00 Pending first Ltd. Limited and Shouguang Meilun for the non-payment of rent Court of Hangzhou City instance trial Paper Co. Ltd. overdue under financial leasing Zhejiang Zheyin Financial Leasing Co. Shandong Chenming Paper Holdings Litigation filed by the plaintiff Gongshu District People’s 15078000.00 Pending first Ltd. Limited and Shouguang Meilun for the non-payment of rent Court of Hangzhou City instance trial Paper Co. Ltd. overdue under financial leasing Shanghai Banghui Commercial Shandong Chenming Paper Holdings Litigation filed by the plaintiff Daxing District People’s 12672000.00 Pending first Factoring Co. Ltd. Limited for default on repayment of Court of Beijing City instance borrowings ruling Shenzhen Jinjia Group Co. Ltd. Zhanjiang Chenming Pulp & Paper Litigation filed by the plaintiff for Mazhang District People’s 59318000.00 Pending first Co. Ltd. default on repayment of overdue Court of Zhanjiang City instance payment for goods ruling Total 2711996400.00 2024 ANNUAL REPORT 343XII Financial Report XVIII. Other Material Matters 1. Transfer and Disposal of Significant Assets In order to further optimise the asset structure revitalise inefficient assets improve asset utilisation efficiency expedite capital recovery increase cash inflow focus on the main business of pulping and paper making and enhance the Company’s profitability the Company externally transferred its 100% equity interest in Kunshan Tuoan Plastic Products Co. Ltd. for RMB143.73 million during the period resulting in an investment gain of RMB12.6196 million. 2. Segment information (1) Basis for determination and accounting policies According to the Company’s internal organisational structure management requirements and internal reporting system the Company’s operating business is divided into 4 reporting segments. These report segments are determined based on the financial information required by the company’s daily internal management. The management of the Group regularly evaluates the operating results of these reporting segments to determine the allocation of resources to them and evaluate their performance.The Company’s reporting segments include: (1) Machine paper segment which is responsible for production and sales of machine paper; (2) Financial services segment which provides financial services; (3) Hotels and property rentals segment which is responsible for hotel services and property rental; (4) Other segments which is responsible for the above segments otherwise. The transfer prices of the transfer transactions between the Company’s segments are based on market prices.Segment report information is disclosed in accordance with the accounting policies and measurement standards adopted by each segment when reporting to management. These accounting policies and measurement basis are consistent with the accounting policies and measurement basis used in preparing the financial statements. 344 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XVIII. Other Material Matters (Continued) 2. Segment information (Continued) (2) Financial Information of Reporting Segment Unit: RMB Machine-made Financial Hotels and Current period or end of the current period paper services property rentals Others Offset Total Revenue 22631951988.07 294265189.14 218472144.22 875895266.62 1291109735.29 22729474852.76 Of which: Revenue from external transactions 22121097000.91 194122370.30 195920780.92 218334700.63 22729474852.76 Revenue from inter-segment transactions 510854987.16 100142818.84 22551363.30 657560565.99 1291109735.29 Of which: Revenue from principal activities 22342338732.50 294265189.14 216040917.16 516279443.44 766889737.38 22602034544.86 Operating costs 22142564244.40 129290999.94 220948362.81 954139643.19 1302114581.91 22144828668.43 Of which: Costs of principal activities 21817408428.61 129290999.94 220061816.68 604455575.82 685551497.54 22085665323.51 Operating expenses 211301293.09 19786226.71 3500573.46 -6583015.86 241171109.12 Of which: Wages 125648321.41 6041820.39 1228396.30 132918538.10 Depreciation expenses 1065408.58 3675184.06 2254.69 4742847.33 Office expenses 2104193.40 13620.13 133.82 2117947.35 Travel expenses 28246818.27 3097.06 471289.32 28721204.65 Selling commissions 71407.60 4546796.61 4618204.21 Rental expenses 6821793.52 99622.63 6921416.15 Hospitality expenses 40762381.84 29770.00 84388.00 -6583015.86 47459555.70 Others 6580968.47 5475938.46 1614488.70 13671395.63 Operating profit/(loss) -3938128030.75 -2518087175.80 -961022745.28 -367642543.68 35854079.00 -7820734574.51 Total assets 70105850088.46 12533349415.32 8425823090.03 7499755004.88 35055482456.61 63509295142.08 Total liabilities 52435567469.59 3878708512.86 5238836562.08 2351979014.66 13231567042.26 50673524516.93 Total cost of construction in progress incurred for the current period 296435087.14 249532.12 296684619.26 Fixed assets purchased 146444059.24 903834.50 55906328.10 1081819.68 204336041.52 Intangible assets purchased 2024 ANNUAL REPORT 345XII Financial Report XVIII. Other Material Matters (Continued) 2. Segment information (Continued) (2) Financial Information of Reporting Segment (Continued) Machine-made Financial Hotels and Prior period or end of the prior period paper services property rentals Others Offset Total Revenue 26058035388.40 301292707.38 254837443.63 1219004554.91 1224599866.12 26608570228.20 Of which: Revenue from external transactions 25702327302.60 164338689.66 219640822.73 522263413.21 26608570228.20 Revenue from inter-segment transactions 355708085.80 136954017.72 35196620.90 696741141.70 1224599866.12 Of which: Revenue from principal activities 25788767491.17 301198367.76 243565800.51 849762727.46 814661161.42 26368633225.48 Operating costs 24386288002.52 204302382.76 130727028.36 1168316010.65 1444147124.36 24445486299.93 Of which: Costs of principal activities 23814132560.42 204302382.76 122251073.59 794535943.46 693752622.08 24241469338.15 Operating expenses 200500812.07 145808.06 23056705.85 7298824.54 2513.09 230999637.43 Of which: Wages 96356812.71 72901.73 8678304.12 2861300.98 107969319.54 Depreciation expenses 1512250.48 3152288.23 12696.87 4677235.58 Office expenses 2423476.31 312114.69 2058.20 2737649.20 Travel expenses 27622492.10 12886.33 401223.13 595230.03 28631831.59 Selling commissions 806731.10 5681138.21 6487869.31 Rental expenses 7258810.13 84716.99 7343527.12 Hospitality expenses 49883644.70 60020.00 8206.24 1046790.23 50998661.17 Warehouse expenses 411253.96 411253.96 Others 14636594.54 4823431.23 2284777.28 2513.09 21742289.96 Operating profit/(loss) -1160171360.20 -136565046.01 -155575612.67 -77629857.27 163702443.40 -1693644319.55 Total assets 86100280962.71 22071239021.47 9506827255.33 8256043256.86 46447337542.79 79487052953.58 Total liabilities 64520459199.32 4546731289.22 4386780705.48 2745589649.10 17810363735.17 58389197107.95 Total cost of construction in progress incurred for the current period 475949831.35 2547924.54 478497755.89 Fixed assets purchased 295923899.03 273136.94 2265531.65 5638663.73 292823903.89 Intangible assets purchased 148906631.36 1278301.89 150184933.25 346 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XVIII. Other Material Matters (Continued) 3. Others (1) Chenming Holdings (Hong Kong) Limited (hereinafter referred to as “Hong Kong Chenming Holdings”)a wholly- owned subsidiary of Chenming Holdings Company Limited (hereinafter referred to as “Chenming Holdings”) In the case of the equity financing business dispute between Hong Kong Chenming Holdings and three overseas institutions (hereinafter referred to as “Lenders”) over the Company’s 210.72 million B shares (representing 7.16% of the total share capital of the Company) and 153.41 million H shares (representing 5.22% of the total share capital of the Company) Hong Kong Chenming Holdings has appointed counsel to take litigation and arbitration measures in the courts of the relevant jurisdictions.On 28 June 2024 Hong Kong Chenming Holdings filed a complaint with the New York Court of the United States. On 29 October 2024 the New York Court of the United States held a pre-trial conference and ordered that the plaintiffs and the defendant must complete two rounds of cross-examinations before 28 February 2025.On 22 November 2024 Hong Kong Chenming Holdings filed an amended complaint with the US court; and on 15 February 2025 it filed a reply to the defendant’s defence pending further instructions from the court on subsequent procedures.As of the date of this announcement Chenming Holdings’ production and operations are normal and it is actively safeguarding its legitimate rights and interests via legal means There is a risk that the shares involved may not be returned which may result in a decrease in the percentage of shareholding of Chenming Holdings in the Company but will have no impact on the status of Chenming Holdings as the largest shareholder and will have no impact on the control of the Company. (2) On 14 June 2022 the Hong Kong Court of Final Appeal handed down its judgment in the case of H-share liquidation filed by ArjowigginsHKK2Limited (“HKK2 Company”) in relation to the Company’s Joint Venture dispute and the Company has paid the relevant amount of compensation.On 25 October 2022 the Company instructed its legal adviser in Hong Kong to apply to the Court of First Instance to seek the dismissal or adjournment of the winding-up petition filed by HKK2 against the Company On 25 July 2023 the Court of First Instance held a hearing on the said application.On 10 August 2023 the Company received a judgment from the judge of the Court of First Instance Mr. Justice Harris which ruled that the winding-up petition be stayed given that the Company’s arbitration petition filed in the Hong Kong International Arbitration Centre in June 2022 against the Joint Venture Contracts formed the basis of the Company’s cross claim against HKK2 in the winding-up proceedings. The relevant arbitration hearing was heard at the Hong Kong International Arbitration Centre in May 2024 and the verdict is pending. 2024 ANNUAL REPORT 347XII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements 1. Accounts receivable (1) Disclosure by ageing Unit: RMB Ageing Closing balance Opening balance Within 1 year 240828735.48 18345187.32 1 to 2 years 11500000.00 2 to 3 years 1500000.00 Over 3 years 3002821.17 3002821.17 Subtotal 245331556.65 32848008.49 Less: bad debt provision 4543616.41 4631237.48 Total 240787940.24 28216771.01 (2) Disclosure by bad debt provision method Unit: RMB Closing balance Opening balance Book balance Bad debts provision Book balance Bad debts provision Provision Provision percentage Carrying Percentage Category Amount Percentage (%) Amount (%) amount Amount Percentage (%) Amount (%) Carrying amount Assessed individually for bad debt provision Assessed collectively for bad debt provision 245331556.65 100.00 4543616.41 1.85 240787940.24 32848008.49 100.00 4631237.48 14.10 28216771.01 Including: Due from related party 225768022.18 92.03 5370.25 225762651.93 10453076.75 31.82 10453076.75 Due from non-related party 19563534.47 7.97 4538246.16 23.20 15025288.31 22394931.74 68.18 4631237.48 20.68 17763694.26 Total 245331556.65 100.00 4543616.41 1.85 240787940.24 32848008.49 100.00 4631237.48 14.10 28216771.01 348 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 1. Accounts receivable (Continued) (2) Disclosure by bad debt provision method (Continued) Items assessed collectively for bad debt provision: Due from related party customers Unit: RMB Closing balance Bad debts Provision Name Book balance provision percentage (%) Within 1 year 225768022.18 5370.25 Total 225768022.18 5370.25 Items assessed collectively for provision: Receivables from non-related party Unit: RMB Closing balance Bad debts Provision Name Book balance provision percentage (%) Within 1 year 15060713.30 35424.99 0.24 1 to 2 years 2 to 3 years 1500000.00 1500000.00 100.00 Over 3 years 3002821.17 3002821.17 100.00 Total 19563534.47 4538246.16 23.20 If the bad debt provision of accounts receivable is made in accordance with the general model of ECLs: □ Applicable √ Not applicable 2024 ANNUAL REPORT 349XII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 1. Accounts receivable (Continued) (3) Provision recovery or reversal of bad debt provision for the period Bad debt provision for the period: Unit: RMB Changes in the period Closing Opening Recovery or Provision Category balance Provision reversal Write-off Others balance Bad debt provision 4631237.48 87621.07 4543616.41 T otal 4631237.48 87621.07 4543616.41 (4) Top five accounts receivable and contract assets based on closing balance of debtors The total amount of top five accounts receivable and contract assets based on closing balance of debtors for the period amounted to RMB245062281.41 in total accounting for 99.88% of the total closing balance of accounts receivable and contract assets. The closing balance of the corresponding bad debt provision amounted to RMB4462071.86 in total.Unit: RMB Percentage to total Closing balance of Closing balance of closing balance of bad debt provision of Name of entity accounts receivable accounts receivable (%) accounts receivable Customer 1 235000843.97 95.79% Customer 2 4422600.00 1.80% 4422600.00 Customer 3 2607456.33 1.06% 18252.19 Customer 4 2264202.90 0.92% 15849.42 Customer 5 767178.21 0.31% 5370.25 T otal 245062281.41 99.88% 4462071.86 2. Other receivables Unit: RMB Item Closing balance Opening balance Interest receivable Dividend receivable Other receivables 8459731199.92 9237241240.86 Total 8459731199.92 9237241240.86 350 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 2. Other receivables (Continued) (1) Other receivables 1) Classification of other receivables by nature Unit: RMB Balance as at the end of Item Closing balance the prior year Open credit 8539141510.67 9304134372.16 Guarantee deposit and deposit 820000.00 740000.00 Reserve and borrowings 13009976.80 22523648.60 Others 1150970.20 1793548.63 Sub-total 8554122457.67 9329191569.39 Bad debt provision 94391257.75 91950328.53 T otal 8459731199.92 9237241240.86 2) Disclosure by ageing Unit: RMB Balance as at the Ageing Closing book balance end of the prior year Within 1 year 8439577689.53 9165796778.41 1 to 2 years 8767733.14 76289024.67 2 to 3 years 41423849.01 7386768.10 Over 3 years 64353185.99 79718998.21 Subtotal 8554122457.67 9329191569.39 Bad debts provision 94391257.75 91950328.53 T otal 8459731199.92 9237241240.86 3) Particulars of bad debt provision Closing bad debt provision at stage 1: Unit: RMB Lifetime ECL Bad debts Category Book balance rate (%) provision Carrying amount Bad debt provision assessed collectively 8485410554.07 0.32 26930069.45 8458480484.62 Amount due from government agencies 5408443.96 5.91 319526.28 5088917.68 Amount due from related parties 8462533948.96 0.30 25662066.54 8436871882.42 Other receivables 17468161.15 5.43 948476.63 16519684.52 Total 8485410554.07 0.32 26930069.45 8458480484.62 2024 ANNUAL REPORT 351XII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 2. Other receivables (Continued) (1) Other receivables (Continued) 3) Particulars of bad debt provision (Continued) As at the end of the period the Group did not have interest receivables dividends receivables and other receivables in phase 2 As at the end of the period closing bad debt provision at stage 3: Unit: RMB Lifetime ECL Bad debts Category Book balance rate (%) provision Carrying amount Bad debt provision assessed individually 68711903.60 98.18 67461188.30 1250715.30 Total 68711903.60 98.18 67461188.30 1250715.30 Bad debt provision assessed individually: Unit: RMB Lifetime ECL Bad debt Category Book balance rate (%) provision Carrying amount Reason Customer 1 2844459.53 100.00 2844459.53 Uncertain recovery to a certain extent Customer 2 1290901.12 100.00 1290901.12 Uncertain recovery to a certain extent Customer 3 760073.40 100.00 760073.40 Uncertain recovery to a certain extent 25 customers including 63816469.55 98.04 62565754.25 1250715.30 Uncertain customer 4 recovery to a certain extent Total 68711903.60 98.18 67461188.30 1250715.30 352 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 2. Other receivables (Continued) (1) Other receivables (Continued) 4) Provision recovery or reversal of bad debt provision for the period Unit: RMB Stage 1 Stage 2 Stage 3 ECLs for the Lifetime ECLs Lifetime ECLs Bad debts provision next 12 months (not credit-impaired) (credit-impaired) Total Opening balance 41856357.86 50093970.67 91950328.53 Opening balance in the current period – Transferred to stage 2 – Transferred to stage 3 – Reversed to stage 2 – Reversed to stage 1 Provision for the period 17367217.63 17367217.63 Reversal for the period 14926288.41 14926288.41 Transfer for the period Write-off for the period Other changes C losing balance 26930069.45 67461188.30 94391257.75 2024 ANNUAL REPORT 353XII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 2. Other receivables (Continued) (1) Other receivables (Continued) 5) Top five accounts receivable based on closing balance of debtors The total amount of top five other receivables based on closing balance of debtors for the period amounted to RMB6407070531.27 in total accounting for 74.90% of the total closing balance of other receivables. The closing balance of the corresponding bad debt provision amounted to RMB0.00 in total.Unit: RMB Percentage to total Other receivables closing balance of other Closing balance of Name of entity Nature closing balance Ageing receivables (%) bad debt provision Customer 1 Open credit 2442033001.14 Within 1 year 28.55 Customer 2 Open credit 1347116068.96 Within 1 year 15.75 Customer 3 Open credit 1255354827.07 Within 1 year 14.68 Customer 4 Open credit 809609195.89 Within 1 year 9.46 Customer 5 Open credit 552957438.21 Within 1 year 6.46 Total 6407070531.27 74.90 3. Long-term equity investments Unit: RMB Closing balance Opening balance Impairment Impairment Impairment Item Book balance provision Book balance provision Book balance provision Investment in subsidiaries 18327937687.22 18327937687.22 17898687687.22 17898687687.22 Investment in joint ventures 95685951.23 95685951.23 86542364.15 86542364.15 Investment in associates 169543841.48 5994545.96 163549295.52 319764325.10 5994545.96 313769779.14 T otal 18593167479.93 5994545.96 18587172933.97 18304994376.47 5994545.96 18298999830.51 354 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 3. Long-term equity investments (Continued) (1) Investment in subsidiaries Unit: RMB Opening Change for the period Closing balance of balance of Opening balance impairment Additional Withdrawn Impairment Closing balance impairment Investee (book value) provision contribution contribution provision Others (book value) provision Chenming Paper Korea Co. Ltd. 6143400.00 6143400.00 Chenming GmbH 4083235.00 4083235.00 Hailaer Chenming Paper Co. Ltd. 12000000.00 12000000.00 Huanggang Chenming Pulp & Paper Co. Ltd. 2350000000.00 2350000000.00 Huanggang Chenming Arboriculture Development Co. Ltd 70000000.00 70000000.00 Jinan Chenming Paper Sales Co. Ltd. 100000000.00 100000000.00 Shandong Yujing Grand Hotel Co. Ltd. 280500000.00 280500000.00 Zhanjiang Chenming Pulp & Paper Co. Ltd. 5206250000.00 68750000.00 5275000000.00 Shouguang Chenming Modern Logistic Co. Ltd. 10000000.00 10000000.00 Shouguang Chenming Art Paper Co. Ltd. 113616063.80 113616063.80 Shouguang Meilun Paper Co. Ltd. 4649441979.31 300000000.00 4949441979.31 Shandong Chenming Paper Sales Co. Ltd. 1500000.00 1500000.00 Shouguang Chenming Import and Export Trade Co. Ltd. 250000000.00 250000000.00 Shouguang Chenming Papermaking Machine Co. Ltd. 2000000.00 2000000.00 Shouguang Hongxiang Printing and Packaging Co. Ltd. 3730000.00 3730000.00 Shandong Chenming Group Finance Co. Ltd. 4000000000.00 4000000000.00 Chenming Arboriculture Co. Ltd. 45000000.00 45000000.00 Chenming Paper United States Co. Ltd. 6407800.00 6407800.00 Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) 559722323.96 559722323.96 Weifang Chendu Equity Investment Partnership (Limited Partnership) 228292885.15 62000000.00 290292885.15 Subtotal 17898687687.22 430750000.00 1500000.00 18327937687.22 2024 ANNUAL REPORT 355XII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 3. Long-term equity investments (Continued) (2) Investment in associates and joint ventures Unit: RMB Change for the period Investment Distribution Opening gain or loss Adjustment Other of cash Closing Opening balance of recognised of other change dividend or Closing balance of balance impairment Additional Withdrawn under equity comprehensive in equity profit Impairment balance impairment Investee (book value) provision contribution contribution metho d income interest declared provision Others (book value) provision I. Associates Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited Partnership) 27263804.36 -96122.05 27167682.31 Ningbo Kaichen Huamei Equity Investment Fund Partnership (Limited Partnership) 278128830.13 -142574010.13 135554820.00 Chenming (Qingdao) Asset Management Co. Ltd. 8377144.65 7822100.00 271748.56 826793.21 Xuchang Chenming Paper Co. Ltd. 5994545.96 5994545.96 Subtotal 313769779.14 5994545.96 7822100.00 -142398383.62 163549295.52 5994545.96 II. Joint ventures Shouguang Chenming Huisen New-style Construction Materials Co. Ltd. 7400283.59 1468652.13 500000.00 8368935.72 Weifang Port Wood hip Wharf Co. Ltd. 79142080.56 8174934.95 87317015.51 Subtotal 86542364.15 9643587.08 500000.00 95685951.23 T otal 400312143.29 5994545.96 78221 00.00 –132754796 .54 500 000.00 259235246.75 5994545.96 Determination of net amount of recoverable amount measured at fair value after deducting disposal expenses □ Applicable √ Not applicable Determination of present value of recoverable amount based on expected cash flows □Applicable √ Not applicable 356 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 4. Revenue and operating costs Unit: RMB Amount for the period Amount for the prior period Item Revenue Operating costs Revenue Operating costs Principal activities 4647274143.27 4671882008.18 5560666894.03 5556483312.72 Other activities 2828232639.49 2448694783.65 2018747725.42 1619996618.01 Total 7475506782.76 7120576791.83 7579414619.45 7176479930.73 Breakdown information of operating revenues and operating costs: Unit: RMB Machine-made paper Others Total Category of contract Operating Revenue Operating Costs Operating Revenue Operating Costs Operating Revenue Operating Costs Type of business 7120045573.77 7037629000.64 355461208.99 82947791.19 7475506782.76 7120576791.83 Including: Machine-made paper 4647274143.27 4671882008.18 4647274143.27 4671882008.18 Others 2472771430.50 2365746992.46 355461208.99 82947791.19 2828232639.49 2448694783.65 By geographical area 7120045573.77 7037629000.64 355461208.99 82947791.19 7475506782.76 7120576791.83 Including: Mainland China 6334195700.16 6134340692.53 355461208.99 82947791.19 6689656909.15 6217288483.72 Other countries and regions 785849873.61 903288308.11 785849873.61 903288308.11 By the timing of delivery 7120045573.77 7037629000.64 355461208.99 82947791.19 7475506782.76 7120576791.83 Including: Goods (at a point in time) 6935617089.28 6873201959.62 100949449.84 73027745.58 7036566539.12 6946229705.20 Services (within a certain period) 184428484.49 164427041.02 254511759.15 9920045.61 438940243.64 174347086.63 By sales channels 7120045573.77 7037629000.64 355461208.99 82947791.19 7475506782.76 7120576791.83 Including: Distribution 4646159244.37 4670752317.89 4646159244.37 4670752317.89 Direct sales 2473886329.40 2366876682.75 355461208.99 82947791.19 2829347538.39 2449824473.94 2024 ANNUAL REPORT 357XII Financial Report XIV. Major Item Notes of the Parent Company’s Financial Statements (Continued) 4. Revenue and operating costs (Continued) Information related to performance obligations: Company’s Whether the commitments Nature of goods that the person is the expected to Types of quality assurance Time for fulfilment of Company undertakes primary person be refunded offered by the Company and Item performance obligations Significant terms of payment to transfer in charge to customers related obligations Machine-made Domestic sales on the day of Domestic sales tend to be Produces easily distinguishable Yes No Guaranteed quality assurance paper delivery to the customer; provided on an invoice basis; should there be objections to foreign sales on the day of foreign sales tend to be product quality within 7 days customs clearance prepaid. of arrival the products can be returned and exchanged.Other explanations: The Company’s performance obligations for sales of machine-made paper are generally less than one year and the Company takes advance payments or provides credit terms depending on the customer. When the Company is the primary responsible party for a sale it generally obtains the unconditional right to receive payment when control of the merchandise is transferred to the customer either at the time of shipment or upon delivery to the destination specified by the customer.Information related to the transaction price allocated to residual performance obligations: At the end of the reporting period the amount of revenue with signed contracts but unfulfilled or uncompleted performance obligation was RMB1795549425.10 in which RMB1795549425.10 was expected to be recognised in 2025. 5. Investment income Unit: RMB Amount for Amount for Item the period the prior period Income from long-term equity investments accounted for using the cost method 47000000.00 88000000.00 Income from long-term equity investments accounted for using the equity method -132754796.54 99693847.76 Investment gain on disposal of long-term equity investments 215506789.79 Investment gain on derecognition of financial assets -17770062.57 -47421175.71 Investment gain on holding other non-current financial assets 1298463.59 1867060.62 Total -102226395.52 357646522.46 358 SHANDONG CHENMING PAPER HOLDINGS LIMITEDXII Financial Report XX. Supplementary information 1. Breakdown of extraordinary gains or losses for the current period √ Applicable □ Not applicable Unit: RMB Item Amount Remark Profit or loss from disposal of non-current assets (including write-off of provision for assets impairment) 35240228.34 Government grants (except for the government grants closely related to the normal operation of the Company granted in accordance with an established standard and having an ongoing effect on the Company’s profit or loss in compliance with national policies and regulations) accounted for in profit or loss for the current period 64412067.13 Except for effective hedging activities conducted in the ordinary course of business of the Company gain or loss arising from the change in fair value of financial assets and financial liabilities held by a non-financial company as well as gain or loss arising from disposal of its financial assets and financial liabilities -181379218.46 Profit or loss from debt restructuring 3519918.36 Profit or loss from changes in the fair value of consumable biological assets subsequently measured at fair value -153411759.17 Other non-operating income and expenses other than the above items -15275886.14 Total extraordinary gains or losses -246894649.94 Less: Effect of income tax of extraordinary gains or losses -18173051.07 Net extraordinary gains or losses -228721598.87 Less: Net effect of extraordinary gains or losses attributable to minority interest (after tax) -20322564.54 Extraordinary gains or losses attributable to ordinary shareholders of the Company -208399034.33 Details of other gain or loss items that fall within the definition of extraordinary gain or loss: □ Applicable √ Not applicable The Company did not have details of other gain or loss items that fall 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 2024 ANNUAL REPORT 359XII Financial Report XX. Supplementary information (Continued) 1. Breakdown of extraordinary gains or losses for the current period (Continued) Item Amount involved Reasons Other income 56090636.54 Government grants related to assets that are closely related to the Company’s normal operations are subsequently amortised to other income which has a continuing effect on the Company’s profit or loss and is therefore accounted for as recurring profit or loss. 2. Return on net assets and earnings per share Rate of return on net Earnings per share assets on weighted Basic Diluted Profit for the reporting period average basis (RMB per share) (RMB per share) Net profit attributable to ordinary shareholders of the Company -57.25 -2.53 -2.53 Net profit after extraordinary gains or losses attributable to ordinary shareholders of the Company -55.64 -2.45 -2.45 3. Accounting data difference under accounting standard at home and abroad (1) Differences of net profit and net assets disclosed in financial reports prepared under IAS and Chinese accounting standards □ Applicable √ Not applicable (2) Differences of net profit and net assets disclosed in financial reports prepared under oversea and Chinese accounting standards □ Applicable √ Not applicable (3) Reasons for the differences in figures under domestic and foreign accounting standards. The name of the foreign audit institution shall be indicated if the data audited by the foreign audit institution has been regulated differently.□ Applicable √ Not applicable The Board of Shandong Chenming Paper Holdings Limited 31 May 2025 360 SHANDONG CHENMING PAPER HOLDINGS LIMITED