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个股公告正文

晨 鸣B:2015年半年度报告(英文版)

日期:2015-08-28附件下载

I    Important Notice, Table of Contents and Definitions


The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the truthfulness,
accuracy and completeness of the contents of the interim report (the “Report”), guarantee that there are no false representations,
misleading statements or material omissions contained in this Report, and are jointly and severally responsible for the liabilities of
the Company.

All Directors were present in person at the Board meeting to consider and approve this Report.

The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capital from
reserves.

Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting and Liang Tingkun, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial statements
in the interim report.

The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy, intensified
competition in the industry, as well as change in exchange rate. 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 as set out in the outlook on the future development of
the Company in the Directors’ Report.




                                                                                                                                           15
                                                                                                                                           INTERIM
                                                                                                                                            REPORT




                                                                              SHANDONG CHENMING PAPER HOLDINGS LIMITED                        1
          I      Important Notice, Table of Contents and Definitions


          Table of contents
          I      Important Notice, Table of Contents and Definitions    3

          II     Company Profile                                         4

          III    Summary of Accounting Data and Financial Indicators    5

          IV     Directors’ Report                                     7

          V      Material Matters                                       23

          VI     Changes in Share Capital and Shareholders              34

          VII    Preference Shares                                      38

          VIII   Directors, Supervisors and Senior Management           39

          IX     Financial Report                                       41

          X      Documents Available for Inspection                    144




15
INTERIM
 REPORT




  2       SHANDONG CHENMING PAPER HOLDINGS LIMITED
I      Important Notice, Table of Contents and Definitions


Definitions
Item                              means   Definition

Company or Chenming Paper         means   Shandong Chenming Paper Holdings Limited

Group                             means   Shandong Chenming Paper Holdings Limited and its subsidiaries

Chenming Holdings                 means   Shouguang Chenming Holdings Company Limited

Shenzhen Stock Exchange           means   Shenzhen Stock Exchange

Stock Exchange                    means   The Stock Exchange of Hong Kong Limited

CSRC                              means   China Securities Regulatory Commission

Shandong CSRC                     means   Shandong branch of China Securities Regulatory Commission

Zhanjiang Chenming                means   Zhanjiang Chenming Pulp & Paper Co., Ltd.

Jiangxi Chenming                  means   Jiangxi Chenming Paper Co., Ltd.

Wuhan Chenming                    means   Wuhan Chenming Hanyang Paper Holdings Co., Ltd.

Chenming (HK)                     means   Chenming (HK) Limited

Jilin Chenming                    means   Jilin Chenming Paper Co., Ltd.

Shouguang Meilun                  means   Shouguang Meilun Paper Co., Ltd.                                        15
                                                                                                                  INTERIM
Chenming Sales Company            means   Shandong Chenming Paper Sales Company Limited                            REPORT

Finance Company                   means   Shandong Chenming Group Finance Co., Ltd.

Financial Leasing Company         means   Shandong Chenming Financial Leasing Co., Ltd.

Investment Company                means   Shandong Chenming Investment Limited

New Third Board Investment Fund   means   Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited
                                          Partnership)

reporting period                  means   The period from 1 January 2015 to 30 June 2015




                                                                  SHANDONG CHENMING PAPER HOLDINGS LIMITED           3
          II Company Profile


          I.    Company profile
                Stock abbreviation                                                          Stock Code           000488
                Stock abbreviation                                            B             Stock Code           200488
                Stock abbreviation                                       Chenming Paper     Stock Code           1812
                Stock exchanges on which the shares are listed           Shenzhen Stock Exchange and The Stock Exchange of Hong Kong
                                                                         Limited
                Legal name in Chinese of the Company
                Legal short name in Chinese of the Company (if any)
                Legal name in English of the Company (if any)            SHANDONG CHENMING PAPER HOLDINGS LIMITED
                Legal short name in English of the Company (if any)      SCPH
                Legal representative of the Company                      Chen Hongguo

          II.   Contact persons and contact methods
                                                                      Securities Affairs
                                    Secretary to the Board            Representative                    Hong Kong Company Secretary

                Name                Wang Chunfang                     Xiao Peng                         Poon Shiu Cheong
                Correspondence      No. 2199 East Nongsheng Road,     No. 2199 East Nongsheng Road,     22nd Floor, World Wide House,
                  Address           Shouguang City,                   Shouguang City,                   Central, Hong Kong
                                    Shandong Province                 Shandong Province
                Telephone           (86)-0536-2158008                 (86)-0536-2158008                 (852)-2501 0088
                Facsimile           (86)-0536-2158977                 (86)-0536-2158977                 (852)-2501 0028
                Email address       chenmmingpaper@163.com            chenmmingpaper@163.com            kentpoon_1009@yahoo.com.hk
15
INTERIM   III. Other information
 REPORT
                1.   Contact methods of the Company
                     Whether the registered address, office address, postal code, website, email of the Company changed during the
                     reporting period

                          Applicable   √ Not applicable

                     There was no change of the registered address, office address, postal code, website and email of the Company during
                     the reporting period. Please refer to 2014 Annual Report for details.

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

                          Applicable   √ Not applicable

                     There was no change of the newspapers designated by the Company for information disclosure, designated websites
                     for the publication of the Interim Report as approved by CSRC and places for inspection of the Company’s Interim
                     Report during the reporting period. Please refer to 2014 Annual Report for details.

                3.   Change of registration information
                     Whether the registration information changed during the reporting period

                          Applicable   √ Not applicable

                     There was no change of the registration information of the Company, such as date and address of registration, legal
                     person business license registration number, taxation registration number and organisation code, during the reporting
                     period. Please refer to 2014 Annual Report for details.




  4       SHANDONG CHENMING PAPER HOLDINGS LIMITED
III Summary of Accounting Data and Financial Indicators


I.   Major accounting data and financial indicators
     Retrospective adjustment to or restatement of the accounting data for prior years by the Company due to change of
     accounting policies and correction of accounting errors

         Yes    √ No

                                                                                                                Increase/decrease
                                                                                                                  for the reporting
                                                                                                                          period as
                                                                                                                  compared to the
                                                                                         The corresponding          corresponding
                                                                       The reporting              period of               period of
                                                                              period          the prior year         the prior year

     Revenue (RMB)                                                  9,718,697,677.76       9,082,020,579.01                  7.01%
     Net profit attributable to shareholders
       of the Company (RMB)                                          276,388,070.51         242,461,095.02                 13.99%
     Net profit after extraordinary gains or losses attributable
       to shareholders of the Company (RMB)                           174,462,219.94          57,813,473.27                201.77%
     Net cash flows from operating activities (RMB)                -2,222,755,634.73       1,285,696,261.13               -272.88%
     Basic earnings per share (RMB per share)                                   0.14                   0.12                  16.67%
     Diluted earnings per share (RMB per share)                                 0.14                   0.12                  16.67%
     Rate of return on net assets on weighted average basis                   1.97%                  1.72%                    0.25%
                                                                                                                Increase/decrease
                                                                                                                       as at the end   15
                                                                                                                    of the reporting   INTERIM
                                                                                                                                        REPORT
                                                                        As at the end                          period as compared
                                                                                of the      As at the end of              to the end
                                                                     reporting period         the prior year       of the prior year

     Total assets (RMB)                                            63,749,809,197.37     56,822,026,545.21                 12.19%
     Net assets attributable to shareholders
       of the Company (RMB)                                        13,938,653,299.56     13,917,343,301.15                   0.15%




                                                                            SHANDONG CHENMING PAPER HOLDINGS LIMITED                      5
          III Summary of Accounting Data and Financial Indicators


          II.   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.


          III. Items and amounts of extraordinary gains or losses
                √   Applicable        Not applicable

                                                                                                                                  Unit: RMB

                Item                                                                               Amount    Explanation


15              Profit or loss from disposal of non-current assets
                Government grants (except for the government grants
                                                                                              4,358,929.60

INTERIM
 REPORT           closely related to the normal operation of the company
                  and granted constantly at a fixed amount or quantity in
                  accordance with a certain standard based on state policies)
                  accounted for in profit or loss for the current period                    58,824,671.63
                Profit or loss from debt restructuring                                          23,308.47
                Profit or loss arising from external entrusted loans                        48,777,777.77
                Gain or loss from changes in fair value of consumable
                  biological assets subsequently measured at fair value                     -2,177,906.88
                Non-operating gains and losses other than the above items                    8,552,098.95
                Less: Effect of income tax                                                  16,531,107.30
                        Effect of minority interests                                           -98,078.33
                Total                                                                      101,925,850.57

                Notes for the Company‘s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
                Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary
                gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
                Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items

                       Applicable   √ Not applicable

                No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
                Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its
                recurring gain or loss items during the reporting period.




  6       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


I.   Overview
     In the first half of 2015, there had been downward pressure in China’s macro-economy with a slowdown in growth rate.
     However, there was steady progress in new directions amid the sluggishness and the overall economy was maintained
     at a stable upward trend. The paper making industry remained in the stage of eliminating outdated production capacity
     and adjusting the product mix, and prices of paper products hovered at a low level facing the imbalanced supply and
     demand during the first half of the year. However, the supply and demand fundamentals was improving with prices of raw
     materials stabilising, which, in addition to the more stringent environmental protection policies and moderating outdated
     capacity elimination and new capacity, will likely bring a turnaround to the performance of the industry on the back of further
     concentration and new growth points resulting from business transformation in the long run.

     In 2015, the Company has been actively adjusting to the “new normal” economic development by accelerating transformation
     and upgrade and enhancing operation quality. During the reporting period, the Company consistently implemented the
     working principles of “Team Building, Strict Management, Outstanding Business Performance, Achieving Good Results” with
     focus on basic and team building and reorganising systems to enhance execution. It elevated its human resources structure
     and thus its teams through work report and performance assessment. It also strengthened risk control and overseas sales
     management and reduced outstanding receivables to enhance management over key operations areas.

     During the reporting period, the Company implemented good progress control over projects. Jiangxi Chenming’s 350,000
     tonne high end packaging paper project would come into trial operation. These projects coming in stream speeded up the
     Company’s restructuring and transformation. Shouguang Chenming railroad extension formally opened, enabling further
     reduction of procurement costs by allowing upstream bulk procurement. Zhanjiang Chenming’s Biomass vaporisation project,
     which significantly lowered production costs as well as pollutant emission through the advanced circulating fluidised bed
     boiler technology, was completed. Those projects under construction, namely Huanggang Chenming’s integrated forestry,
     pulp and paper project, Shouguang’s 400,000 tonne chemical pulp project, Haicheng Haiming’s magnesite mining project,
     Guangdong Huirui’s Haidong New District Waterfront comprehensive regulation works and property development project
                                                                                                                                          15
                                                                                                                                          INTERIM
     of Wan Xing Real Estate in Wuhan, are steadily carried out according to plan and have made substantial progress, further              REPORT
     enhancing the overall competitiveness of the Company.

     During the reporting period, the Company also diversified into the financial segment. By virtue of strong capital support of
     the Group, the Financial Leasing Company made good use of the international and market-oriented edge inherent in a listed
     company and spread its coverage nationwide. It not only achieved higher financing efficiency in internal services, but also had
     higher profitability in external business and brought a new source of profit growth to the Company. After a capital increase,
     it is expected that the Financial Leasing Company’s performance is definitely worth looking forward to. For the management
     of the Finance Company, with the approval for operation of the new business, the Finance Company will make progress in
     external equity investments and quoted securities investments, thus providing new impetus for our growth in earnings.

     Based on the above, as the industry is bottoming out with elimination of outdated production capacity and improvement
     in supply and demand fundamentals, it is expected that the Company will turn around with the industrial recovery. While
     strengthening its principal businesses, the Company proactively strives to diversify by positioning itself in the financial sector
     with initial success. The financial segment will become a major driving force for the future results of the Company and further
     boost the profitability of the Company.




                                                                             SHANDONG CHENMING PAPER HOLDINGS LIMITED                        7
          IV Directors’ Report


          II.   Analysis of principal operations
                Year on year changes in major financial information

                                                                                                                                     Unit: RMB

                                                                             During the
                                                                         corresponding
                                                      During the              period of     Increase/
                                                reporting period          the prior year    decrease     Reason for the change

                Revenue                        9,718,697,677.76        9,082,020,579.01        7.01%     Sales of paper products increased
                                                                                                         and the Financial Leasing Company
                                                                                                         newly established external business
                Operating costs                7,370,384,661.31        7,378,998,628.31       -0.12%
                Selling and distribution         551,073,823.71          524,593,811.50        5.05%
                  expenses
                Administrative                   654,253,969.26          500,133,881.63       30.82%     Increase in research and development
                   expenses                                                                              expenditure due to greater investment
                                                                                                         in research and development made
                                                                                                         by the Company.
                Finance expenses                 745,472,279.11          626,611,788.47       18.97%     Increase in interest expenses.
                Income tax expenses              173,411,302.61           34,033,045.12      409.54%     A year-on-year increase in profitability
                                                                                                         of the Company.
                Investments in research          278,819,214.56          186,069,011.06       49.85%     The Company made greater investment
15                and development                                                                        in research and development so as to
INTERIM                                                                                                  increase its competitiveness.
 REPORT
                Net cash flows from           -2,222,755,634.73        1,285,696,261.13     -272.88%     The Financial Leasing Company came
                  operating activities                                                                   into operation with growth in business
                                                                                                         volume.
                Net cash flows from           -1,201,478,950.29       -1,797,453,118.70       33.16%     Commencement of external entrusted
                  investing activities                                                                   loan operation by the Company in the
                                                                                                         prior year.
                Net cash flows from            3,152,446,052.60          709,490,179.43      344.33%     Issue of RMB3.6 billion short-term
                   financing activities                                                                  commercial paper.
                Net increase in cash            -250,918,819.93          184,819,902.18     -235.76%
                  and cash equivalents


                Significant change in structure or source of profit of the Company during the reporting period
                    Applicable √        Not Applicable

                There was no significant change in structure or source of profit of the Company during the reporting period.

                Disclosure of future development and continued planning during the reporting period in public documents
                such as IPO prospectus, offering documents and asset reconstruction report
                    Applicable √        Not Applicable

                There was no disclosure of future development and continued planning during the reporting period in public documents such
                as IPO prospectus, offering documents and asset reconstruction report.

                Progress of operating plans disclosed in corporate review during the reporting period
                For details, please refer to “I. Overview” of this section.




  8       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


III. Analysis of liquidity, financial resources and capital structure disclosed in accordance with the
     listing rules of the Hong Kong Stock Exchange
    As at 30 June 2015, the Group’s current ratio was 74.38%. The quick ratio was 58.35%. The gearing ratio was 77.50%. The
    accounts receivable turnover ratio was 331.17% (Accounts receivable turnover ratio = turnover/weighted average accounts
    receivable and net bills*100%). The inventory turnover ratio was 353.70% (Inventory turnover ratio = cost of sales of the
    products/weighted average net inventory*100%).

    There was no significant seasonal trend for capital requirements of the Group.

    The Group’s sources of capital primarily came from cash generated from operating activities, borrowings from financial
    institutions, open issuance of corporate bonds in the capital market, as well as issuance of privately placed bonds, medium-
    term notes and short-term commercial paper in the interbank market.

    As at 30 June 2015, the total bank borrowings, corporate bonds, medium-term notes and privately placed bonds of the Group
    were RMB28,051 million, RMB5,782 million, RMB2,589 million and RMB3,632 million (As at the end of the prior year: the total
    bank borrowings, corporate bonds, and medium-term notes and privately placed bonds of the Group were RMB25,949 million,
    RMB5,777 million and RMB2,585 million, respectively). As at 30 June 2015, the Group had monetary funds of RMB6,993
    million (As at the end of the prior year: RMB5,476 million) in total (For the breakdown of monetary funds, please refer to “Section
    IX. VII.1 Note on Monetary Funds” in this report).

    To strengthen our financial management, the Group established and optimised its strict internal control system on cash and
    capital management. The liquidity and repayment ability of the Group were in a good condition. As at 30 June 2015, the Group
    had 12,571 employees. The total staff remuneration for the first half of 2015 amounted to RMB316.4808 million (as at the end
    of the prior year, the Group had 12,833 employees. The total staff remuneration for 2014 amounted to RMB625.2310 million).

    Major investment projects of the Company during the second half of 2015 will include Jiangxi Chenming’s 350,000 tonne high-
                                                                                                                                           15
                                                                                                                                           INTERIM
    end packaging paper project, Huanggang Chenming’s integrated forestry, pulp and paper project, Shouguang City’s 400,000               REPORT
    tonne chemical pulp project, Haicheng Haiming’s magnesite mining project, Guangdong Huirui’s waterfront comprehensive
    regulation works project, Wuhan Wan Xing’s real estate development project and other projects.

    Our existing bank deposits were primarily used for production and operation, construction projects and investment in
    technology research and developments.

    For details of the assets with restricted ownership of the Group as at 30 June 2015, please refer to “Section IX. VII. 55. Details
    of assets with restricted ownership or right of use” in this report.

    As at 30 June 2015, no contingent event was required to be disclosed by the Group.




                                                                             SHANDONG CHENMING PAPER HOLDINGS LIMITED                         9
          IV Directors’ Report


          IV. Components of principal operations
                                                                                                                                                        Unit: RMB

                                                                                                                                                  Increase/decrease
                                                                                                     Increase/decrease     Increase/decrease           of gross profit
                                                                                                          of revenue as     of operating costs             margin as
                                                                                                       compared to the         as compared to       compared to the
                                                                                                         corresponding     the corresponding          corresponding
                                                                                                           period of the          period of the         period of the
                                                   Revenue     Operating costs Gross profit margin            prior year             prior year             prior year

              By industry

              Machine-made paper            8,868,460,907.69   6,966,238,393.81           21.45%                3.78%                 -0.55%                  3.41%
              Electricity and steam           180,357,434.35     123,066,649.13           31.77%               -9.22%                -14.96%                  4.60%
              Construction materials           49,824,616.83      37,848,419.37           24.04%               17.54%                 35.33%                 -9.98%
              Chemical products               102,073,407.08      83,247,439.35           18.44%                7.87%                  8.22%                 -0.27%
              Hotel                            13,576,184.58       3,305,692.10           75.65%               -8.89%                 -2.73%                 -1.54%
              Others                          323,945,609.51      40,854,357.51           87.39%              397.01%                -35.73%                 84.91%

              By products

              Light weight coated paper       326,115,470.96     279,821,845.40           14.20%               -6.31%                -11.54%                  5.08%
              Duplex press paper            2,180,961,187.95   1,657,673,349.40           23.99%               51.34%                 46.11%                  2.72%
              Writing paper                   107,445,824.99      86,557,656.08           19.44%               30.43%                 38.88%                 -4.90%
              Coated paper                  2,096,633,394.41   1,599,511,246.83           23.71%               -4.06%                -12.12%                  7.00%
              News press paper                478,061,938.68     373,295,620.43           21.91%               -7.96%                 -3.07%                 -3.94%

15            Paperboard
              White paper board
                                              134,207,618.47
                                              874,197,258.30
                                                                 133,491,068.66
                                                                 680,079,684.48
                                                                                           0.53%
                                                                                          22.21%
                                                                                                              -64.22%
                                                                                                               -7.03%
                                                                                                                                     -62.57%
                                                                                                                                     -10.33%
                                                                                                                                                             -4.39%
                                                                                                                                                              2.86%
INTERIM       Electrostatic paper             730,621,568.87     500,585,318.42           31.49%              -13.07%                -21.65%                  7.51%
 REPORT       Household paper                 325,165,670.13     276,075,027.57           15.10%               28.06%                 19.70%                  5.93%
              Other machine-made paper      1,615,050,974.95   1,379,147,576.53           14.61%                3.54%                  5.96%                 -1.95%
              Electricity and steam           180,357,434.35     123,066,649.13           31.77%               -9.22%                -14.96%                  4.60%
              Construction materials           49,824,616.83      37,848,419.37           24.04%               17.54%                 35.33%                 -9.98%
              Chemical products               102,073,407.08      83,247,439.35           18.44%                7.87%                  8.22%                 -0.27%
              Hotel                            13,576,184.58       3,305,692.10           75.65%               -8.89%                 -2.73%                 -1.54%
              Others                          323,945,609.51      40,854,357.51           87.39%              397.01%                -35.73%                 84.91%

              By geographical segment

              Mainland China                7,791,146,285.63   5,690,144,127.24           26.97%                 8.66%                  1.75%                  4.96%
              Other countries and regions   1,747,091,874.41   1,564,416,824.03           10.46%                -2.47%                 -9.50%                  6.95%




 10       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


V.   Analysis of asset and liability
                                                                                                                            Unit: RMB

                                                                                                            Increase/    Reason for
     Item                                                 30 June 2015     31 December 2014                 decrease     the change

     Other receivables                                2,480,908,390.56       1,776,467,886.07                39.65%           (1)
     Available-for-sale financial assets                409,000,000.00          73,000,000.00               460.27%           (2)
     Long-term payables                               5,035,760,955.94       1,420,598,667.99               254.48%           (3)
     Long-term equity investments                        83,942,816.67          36,087,848.12               132.61%           (4)
     Bills payable                                    2,495,752,255.20       1,598,110,792.85                56.17%           (5)
     Interest payable                                   246,392,305.46         150,047,305.50                64.21%           (6)
     Other payables                                   1,145,101,448.59         783,790,884.61                46.10%           (7)


     Explanation on major changes:

     (1)    Mainly due to leaseback arrangements and other activities within one year were classified under other receivables by
            the Financial Leasing Company.

     (2)    Mainly due to new equity investments made by the Company into Shanghai Leadbank Asset Management Co., Ltd. and
            Shanghai Zhongneng Enterprise Development (Group) Co., Ltd. during the current period.

     (3)    Mainly due to the Financial Leasing Company commencing new business.

     (4)    Mainly due to a new equity investment made by the Company into Zhuhai Dechen New Third Board Equity Investment
            Fund Company (Limited Partnership) during the current period.                                                                 15
                                                                                                                                          INTERIM
     (5)    Mainly due to stepping up efforts to settle external payment by bills by the Company.                                          REPORT

     (6)    Mainly due to the interests on corporate bonds not due for payment.

     (7)    Mainly due to the Financial Leasing Company commencing operation and receiving deposits.


VI. Analysis of Core Competitiveness
     The Company is a large enterprise primarily engaged in forestry, pulping and paper-making operations with diversified
     operations. It is also the only listed company with three types of listed shares (i.e. A shares, B shares and H shares) in China.
     Compared with other enterprises in the industry, the Company has the following advantages:

     1.     Scale advantages
            After years of development, the Company has achieved annual pulp and paper production capacity of 8.00 million
            tonnes and is capable to compete with international paper making enterprises in scale. Large-scale centralised
            production has provided the Company with obvious economic benefits, which are reflected not only in the
            manufacturing costs of products, but also in its strong market influence in raw material procurement, product pricing
            and industry policymaking.

     2.     Product advantages
            While the production scale of the Company was expanding rapidly, its product mix also continued to optimise. In
            recent years, the Company has built production lines for cultural paper such as high-end coated paper, high-end light
            weight coated paper and high-end white paper board, and achieved higher technological content of products and
            added values as well as a higher gross profit margin. The product mix of the Company gradually diversified into five
            major paper types, namely printing paper, packaging paper, office paper, industrial paper and household paper, as well
            as the nine major product series which focused on high and middle end products, including high-end coated paper,
            white paper board, coated linerboard, news press paper, light weight coated paper, duplex press paper, light weight
            paper, electrostatic paper and household paper. Thus, the Company has become the enterprise that offers the widest
            product range in China’s paper making industry. Diversification and gentrification of the product mix has not only greatly
            enhanced the Company’s ability to withstand market risks, but also enabled the Company to maintain a relatively high
            profitability.


                                                                              SHANDONG CHENMING PAPER HOLDINGS LIMITED                      11
          IV Directors’ Report


          VI. Analysis of Core Competitiveness
              3.   Advantages in technical equipment
                   The Company’s overall technical equipment has reached the advanced international level. The main production
                   equipment have been imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of
                   Finland, Voith of Germany and TBC of the United States. In particular, Shouguang Meilun’s production lines for high-
                   end white coated linerboard project of production capacity of 600,000 tonnes and high-end low weight coated paper
                   project of production capacity of 800,000 tonnes, as well as Zhanjiang Chenming’s production line for high-end cultural
                   paper project of production capacity of 650,000 tonnes were leading production lines with greatest production capacity,
                   widest length of paper produced and highest equipment standard among similar production line worldwide. In addition,
                   various technical indicators of products had reached the international leading level.

              4.   Research and innovation and new product development advantages
                   Leveraging its research strengths and relied on state-level enterprise technical centres and post-doctoral research
                   stations, the Company has established a comprehensive intellectual property rights system, and has continuously
                   enlarged its technological innovation capacity and research and development efforts to actively develop new products
                   and proprietary technology with high technology content and added values. The Company has undertook 7 national
                   new product trial production projects, 2 national torch programs, 3 national scientific research projects and 28
                   provincial innovative projects. In addition, the Company won 9 provincial or above technology advanced awards. Our
                   major product, high-end coated paper, won the First Class Prize for advanced technology in Shandong Province. The
                   Company has been granted 157 national patents, of which 12 were invention patents. Our “Chenming” trademark has
                   been recognised as a well-known trademark in China.

15            5.   Funding advantages
INTERIM
 REPORT
                   The paper making industry is a capital-intensive industry, and funding is one of the most important factors influencing
                   the development of the industry. The Company has high profitability and credit status, and has maintained long-term
                   stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing
                   capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance
                   structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained
                   have been applied effectively with good market image, the Company has stronger abilities in direct financing in the
                   capital market.

              6.   Advantages in environmental regulation capacity
                   Over the years, the Company has firmly established “environmental protection first, scale expansion second” as
                   the concept of development. The Company has ensured the enhancement of economic and environmental benefits
                   simultaneously by giving equal importance to environmental protection and production. In recent years, the Company
                   and its subsidiaries have constructed the pollution treatment facilities including the alkali recovery system, middle
                   water treatment system, white water recovery system and black liquor comprehensive utilisation system, as well as the
                   sewage treatment plants, which guarantee that the environmental protection facilities can meet the demand of the rapid
                   expansion of the Company. The environmental emission indicators of the Company are in the top rank among industry
                   peers.

              7.   Advantages in diversified development
                   The Company has established a financial segment, which comprises of the Financial Leasing Company, the Finance
                   Company, the Investment Company and the New Third Board Investment Fund. Currently, both the Financial Leasing
                   Company and the Finance Company have generated profits. Those companies have huge potential for development. In
                   addition, profitability of the financial industry is higher than that of the traditional papermaking industry, thus providing
                   new sources of profit growth for the Company. Apart from entering into the financial industry, the Company has
                   also entered into the fields of energy exploration and waterfront regulation works. It proactively facilitates diversified
                   development, thereby further enhancing its competiveness and strength.




 12       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


VII. Analysis of Investments
    1.   External equity investments
         (1)   External investments

               √   Applicable      Not applicable

                                                               External investments
                                                                       Investments during
                             Investments during the              the corresponding period
                              reporting period (RMB)                     of prior year (RMB)                           Change

                                  2,134,143,400.00                            1,609,917,592.00                          24.56%


                                                                     Investees
                                                                                                               The Company’s
                                                                                                               share of interest
               Names of the companies                  Principal activities                                        in investees

               Shandong Chenming Financial             Financial leasing business, operating leasing                  100.00%
                 Leasing Co., Ltd.                     business, domestic and overseas leased assets
                                                       acquisition, disposal of residual value and
                                                       maintenance of leased assets, and consultation on
                                                       leasing transactions.
               Shanghai Leadbank Asset                 Financial consultation, corporate management                         3%     15
                 Management Co., Ltd.                  consultation, marketing planning, and convention                            INTERIM
                                                       services etc.                                                                REPORT
               Jinan Chenming Investment               Investment with self-owned assets, investment                  100.00%
                 Management Co., Ltd.                  management, investment consultation, corporate
                                                       management consultation, commercial information
                                                       consultation, and financial consultation etc.
               Zhuhai Dechen New Third                 Equity investment in unlisted enterprises, equity                33.33%
                 Board Equity Investment Fund          investment, and listing consultation for enterprises.
                 Company (Limited Partnership)
               Shanghai Zhongneng Enterprise           Industrial investment, construction works,                       30.00%
                 Development (Group) Co., Ltd.         commercial consultation, and sales of electricity,
                                                       power station equipment sets, automated devices,
                                                       electromechanical equipment, engineering
                                                       equipment, environmentally friendly equipment and
                                                       construction materials.
               Chenming Paper Korea Co., Ltd.          Trading of paper products.                                     100.00%




                                                                               SHANDONG CHENMING PAPER HOLDINGS LIMITED              13
          IV Directors’ Report


          VII. Analysis of Investments (Cont’d)
              1.   External equity investments (Cont’d)
                   (2)   Shareholding in financial companies

                         √      Applicable                 Not applicable

                                                                           Initial                     Shareholding as Number of shares            Shareholding     Carrying amount     Gain or loss for
                                                                     investment    Initial number of   at the beginning held as at the end       as at the end of    as at the end of     the reporting
                         Name of company           Type                   (RMB) shares held (share)        of the period of the period (share)         the period   the period (RMB)      period (RMB)        Accounting treatment   Source of shares

                         Shandong Chenming Group   Other        1,000,000,000.00                              100.00%                                  100.00%      1,030,619,728.00     23,906,081.64        Long-term              Capital contribution
                           Finance Co., Ltd.                                                                                                                                                                  equity investment



                   (3)   Security investments

                                  Applicable √ Not applicable

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

                   (4)   Equity interest in other listed companies

                                  Applicable √ Not applicable

                         The Company did not have any equity interest in other listed companies during the reporting period.

15            2.   Entrusted wealth management, derivative investments and entrusted loans
INTERIM
 REPORT            (1)   Entrusted wealth management

                                  Applicable √ Not applicable

                         The Company did not have any entrusted wealth management during the reporting period.

                   (2)   Derivatives investments

                                  Applicable √ Not applicable

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

                   (3)   Entrusted loans

                         √      Applicable                 Not applicable

                                                                                                                                                                                                                           Unit: RMB’0,000

                                                                                                                   Interest rate
                         Borrower                          Related parties            Loan amount                      of loans              Guarantor or Collateral                                       Use of proceeds by borrowers

                         Shouguang Jin Cai                                No                    90,000                    10.00%             S h o u g u a n g I n f r a s t r u c t u r e F u n d Construction, investment and
                           Public Assets                                                                                                     Management Centre shall pledge 20% of o p e r a t i o n o f u r b a n a n d r u r a l
                           Management Co., Ltd.                                                                                              the equity interest of the Shouguang Jin infrastructure.
                                                                                                                                             Cai Public Assets Management Co., Ltd.
                                                                                                                                             held by it.

                         Total                                                                  90,000

                         Disclosure date of approval of entrusted loans in board meeting                      18 January 2014




 14       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


VII. Analysis of Investments (Cont’d)
    3.   Utilisation of proceeds raised
                 Applicable √ Not applicable

         The Company did not utilise any proceed raised during the reporting period.

    4.   Analysis of major subsidiaries and investees
         √    Applicable                  Not applicable

         Information on major subsidiaries and investees

                                                                                                                                                                                Unit: RMB’0,000

                                     Type of                               Principal products                 Registered                                 Revenue from
         Name of companies           companies           Industry          or services                           capital     Total assets   Net assets     operations   Operating profit   Net profit

         Zhanjiang Chenming Pulp &   Limited liability   Paper making      Pulp, duplex press        RMB3,000.00 million     1,397,524.45   330,539.13     210,191.28         29,433.95    21,812.59
           Paper Co., Ltd.           company                               and electrostatic paper
         Shandong Chenming Group     Limited liability   Financial         Financial services          RMB100.00 million      243,696.49    103,061.97       5,206.13          3,182.61     2,390.61
           Finance Co., Ltd.          company            industry
         Chenming (HK) Limited       Limited liability   Trading of paper Sales of paper products,      US$29.90 million     1,417,635.19    57,684.56     294,976.74         22,324.97    16,787.97
                                     company             products         import of raw materials
                                                                          and processing
         Shouguang Meilun            Limited liability   Paper making     Coated paper, white        RMB3,000.00 million     1,345,687.38   400,801.71     243,453.57         30,904.70    23,388.59
           Paper Co., Ltd.           company                              coated linerboard and

         Wuhan Chenming Hanyang      Limited liability   Paper making
                                                                          household paper
                                                                          Writing paper, news        RMB211.3670 million      331,210.90     31,786.87      50,460.19         -4,090.26    -3,114.35
                                                                                                                                                                                                        15
          Paper Holdings Co., Ltd.   company                              press paper and                                                                                                               INTERIM
                                                                                                                                                                                                         REPORT
                                                                          household paper

         Particulars of major subsidiaries and investees:

         (1)        Zhanjiang Chenming’s major products, including commercial pulp and high-end duplex press paper, had lower
                    costs, high gross profit margin and better returns. Due to the fluctuation in foreign exchange rate, Chenming (HK)
                    recorded decrease in profit as compared to the corresponding period of the prior year. However, its subsidiary,
                    Shandong Chenming Financial Leasing Co., Ltd., had good profitability. With the higher gross profit margin from
                    coated paper and the gains from sale of electricity, the profitability of Meilun Paper had gradually improved.

         (2)        the Finance Company was primarily engaged in provision of financial services for internal entities of the Group,
                    and maintained profit while lowering the overall financial costs of the Group.

         (3)        The major product of Wuhan Chenming, writing paper, had relatively low gross profit. The profitability of new
                    specialty paper and household paper had lower profitability as their market was in the development stage.




                                                                                                                           SHANDONG CHENMING PAPER HOLDINGS LIMITED                                       15
          IV Directors’ Report


          VII. Analysis of Investments (Cont’d)
              5.    Highlights of major investments not financed by the proceeds
                    √   Applicable                    Not applicable

                                                                                                                                                                        Unit: RMB’0,000

                                                                                               Accumulated
                                                                                                      actual
                                                                              Investment         investment
                                                                            made during      made as of the
                                                            Total planned   the reporting         end of the   Progression    Revenue            Date of
                    Name of project                           investment           period   reporting period    of projects   from projects      disclosure (if any)   Disclosure index (if any)

                    350,000 tonne high-end packaging             124,800       18,934.70         110,899.91           89%     Not completed      28 June 2013          http://www.cninfo.com.cn/
                       paper project of Jiangxi Chenming
                    190,000 tonne high-end                       309,700       71,603.73         166,618.07           54%     Trial production   30 September 2013     http://www.cninfo.com.cn/
                       cultural paper project
                    Integrated forestry and paper project        348,510          259.96          32,214.94            9%     Not completed      2 August 2013         http://www.cninfo.com.cn/
                       of Huanggang Chenming



          VIII. Estimate of the operating results from January to September 2015
              Warning of cumulative net profit for the period between the beginning of the year to the end of the next reporting period being
              projected to be at a loss or expected to have material changes as compared to the corresponding period of prior year and its
              explanation
15                 Applicable √ Not applicable
INTERIM
 REPORT




 16       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


IX. Outlook on the future development of the Company
    (I)   Competition overview and development trend of the industry
          The Company is engaged in the paper making industry, which is a light industry. The business sentiments of the industry
          are highly related to the macroeconomic growth. In recent years, on the one hand, with the impact of macroeconomic
          slowdown, demand was continuously weak in the paper making industry. On the other hand, new production capacity of
          the paper making industry had been released together over the past few years, resulting in the transitional overcapacity
          of some paper types. Due to fierce competition, product prices continued to decline, narrowing profit margins of
          papermaking enterprises.

          In the long run, the development conditions of the paper making industry are gradually improving. Currently, with
          basically stable production capacity, excess capacity has become the primary problem to be resolved in the industry.
          As 2015 is the last year of the “Twelfth Five-Year” Plan, elimination of outdated production capacity and increasingly
          stringent environmental policies are forcing some small and medium-sized enterprises out of the market. To some
          extent, this eases the pressure of new capacity on the supply of the industry, which is conducive for enterprises to
          initiate a price rise. For major paper making enterprises, fully utilising advantages of capital, technology and scale to
          achieve a change in the growth pattern may help them gain new market share. Meanwhile, with the impact of a weak
          demand, raw material prices have been hovering at a low level, easing the pressure of operating costs on paper making
          enterprises. Eliminating outdated production capacity will remove obstacles for the industry’s development, while
          replenishment of and substitution of advanced production capacity will bring fresh blood and drive to the industry,
          conductive to a higher concentration ratio to creating a favourable industry lifecycle.

          Faced with increasingly fierce competition in the industry, the Company gains competitive edge by leveraging on our
          strong corporate strength to improve equipment and technologies, enrich product mix, upgrade product quality, and
          focus on research and development of high-end products. The adjustment of product mix has injected new driving              15
          force for our corporate restructuring and development, while continuous management refinement has opened up our             INTERIM
                                                                                                                                       REPORT
          growth bottleneck, releasing vigour to the Company. Our diversified development brings new sources of profit growth
          to the Company, accelerating the process of the Company to becoming a world-class paper making enterprise. As the
          industry is bottoming out with elimination of outdated production capacity and improvement in supply and demand
          fundamentals, and the benefits from the Company’s integrated forestry, pulp and paper project begin to be realised, it
          is expected that the Company will turn around with the industrial recovery. While strengthening its principal businesses,
          the Company strives to diversify by positioning itself in the financial sector. Initial success has been achieved, which
          will become a major driving force for the future results of the Company. As the economic situation improves and the
          industry is gradually recovering, the Company’s performance will have a steady growth.




                                                                           SHANDONG CHENMING PAPER HOLDINGS LIMITED                     17
          IV Directors’ Report


          IX. Outlook on the future development of the Company (Cont’d)
              (II)   Development strategy of the Company
                     Adhering to our development philosophy of “creating innovative ideas, maintaining our leading position and becoming
                     an international enterprise”, the Company strives to become a leading international paper maker which focuses on
                     environmental protection and sustainable development. The Company accelerates our transformation and upgrade
                     process, and implements our new round of strategic planning. Hence, a development trend focusing on principal
                     operations as well as diversification, and environmental protection and standardised management takes shape. We
                     also promote detailed management. Being market-oriented, the Company has been optimising our product mix with
                     an increasing proportion of high value-added and high-end products. The Company strives to become a world-class
                     paper making enterprise with rapid growth based on the philosophy of “High-end Positioning, Production of First-class
                     Products”.

              (III) Operating plan for the second half of 2015
                     In 2015, the Company will proactively adapt to the “new normal” of economic development, accelerate transformation
                     and upgrade process, as well as enhance operation efficiency. During the second half of the year, the Company
                     will consistently implement our working direction of “Team Building, Strict Management, Outstanding Business
                     Performance, Achieving Good Results”. To achieve our operating goals, the Company will pay special attention to the
                     following aspects:

                     1.   Basic management and team building. The Company will ensure comprehensive optimisation and implementation
                          on the system establishment and improvement. We will step up efforts in system inspection and appraisal in
                          order to strengthen policy implementation. In addition, the Company will optimise our human resources allocation
15                        mechanism through various means such as management work reporting, management assessment, and training
INTERIM                   and examination, thus making our team building move on to a new stage.
 REPORT
                     2.   Operating focus and procurement efficiency. The Company will focus on solving major issues on, among other
                          things, efficiency management, risk control, capital utilisation and foreign operations management, aiming to
                          achieve great improvement. Leveraging the commencement of operation of the railroad of Shouguang Chenming,
                          the Company will also enhance the procurement at source of materials in bulk in order to lower procurement
                          costs. With sufficient capital reserved, the Company aims to lower procurement price through advance payment
                          and other means, thereby maximising our return. We will increase trade volume through import and export
                          companies, and establish strategic partnerships with quality customers, thus securing quality supplies. In addition,
                          the Company will enhance logistics management and optimise operating mode, thereby optimising logistics
                          efficiency.

                     3.   Production management. The Company will strengthen our system optimisation and execution: In respect of trial
                          operation of new systems, the Company will conduct verification and make conclusion. We will identify areas
                          for further improvement under the system and make rectification as soon as possible, and strictly implement
                          such rectification. The Company will also standardise equipment operating parameters: With reference to the
                          operation of similar advanced equipment in local and overseas markets, the Company will conduct comparison
                          and adjustment in order to ensure the best operation of the equipment. The Company will accelerate adjustment
                          on product portfolio: In order to complete the development of new products such as high-bulk white paper
                          board, food paper and liquid packaging paper, the Company will introduce offshore high quality technical talents.
                          In accordance with the human resources allocation standard in leading local enterprises, the Company will
                          continue to work on position establishment and appointment through position consolidation, automation and
                          other measures. The Company will highly focus on our environmental protection, safety and fire prevention works.
                          We will learn from the past experience of overseas leading enterprises or our peers, aiming to reach the highest
                          standard in the industry.




 18       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


IX. Outlook on the future development of the Company (Cont’d)
    (III) Operating plan for the second half of 2015 (Cont’d)
         4.   Project progress. For projects under construction such as Jiangxi Chenming’s 350,000 tonnes high-end packaging
              paper, the Company will have control at key points to ensure timely commencement of operation. For Huanggang
              Chenming’s integrated forestry, pulp and paper project, the Company will improve its preparation works and
              it is going to commence construction during the year. The Company will also proactively facilitate Shouguang
              Chenming’s 400,000 tonnes chemical pulp project, aiming to achieve substantive progress in a short period of
              time.

         5.   Financial benefits. The Financial Leasing Company will strictly control its risk exposures, aiming to achieve growth
              amid stability. The Finance Company will strengthen its management to provide impetus for our results growth.
              The Company will expand our financing channels through various means including issue of preference shares,
              thus lowering the finance expenses and improve our liabilities structure.

    (IV) Future capital requirements, source of funds and plan for use
         With the extension of the Company’s industry chain and expansion of business scale, some of the new projects are
         unable to make profit contribution in a timely manner due to market reasons, and therefore the Company has greater
         demand for working capital. To this end, the Company has identified the following measures:

         Firstly, the Company will raise fund through non-public offering of preference shares. This will help the Company meet
         our financing needs together with our business development. Issue of preference shares which may be accounted for in
         equity will also help reduce the Company’s gearing ratio, improving the Company’s capital structure and enhancing the
         Company’s risk aversion capability.
                                                                                                                                     15
         Secondly, the Company will establish diversified financing channels. Various financing methods, such as increasing          INTERIM
                                                                                                                                      REPORT
         direct financing and issuing super and short term commercial paper and perpetual notes, will be used to reduce the
         Company’s finance expenses, improve the Company’s liabilities structure and ensure funding for the Company’s
         sustainable and healthy development.

         Thirdly, the Company will make progress in cross-border financing. Leveraging the financing platform of the Hong Kong
         market, the Company will make effort to increase the credit line of Hong Kong Chenming, avert exchange rate risks
         through multi-currency financing and improve the efficiency of capital use so as to reduce finance expenses.

         Fourthly, the Company will capitalise on the financial advantages of our Finance Company and the Financial Leasing
         Company to expand the Group’s financing channels. They will grow amid stability and provide new impetus for the
         Company’s earnings growth, opening up new sources of profit growth for the Company.

         Fifthly, the Company will further improve our international and domestic sales and marketing network, expand our export
         sales and increase our investment in products of high profit so as to increase economic benefits. The Company will take
         strict control measures to reduce inventories and improve contract compliance rate in order to reduce use of funds,
         further reducing the finance expenses. The Company will strengthen our management in household paper products,
         making it the Company’s new source of profit growth as soon as possible.




                                                                         SHANDONG CHENMING PAPER HOLDINGS LIMITED                      19
          IV Directors’ Report


          IX. Outlook on the future development of the Company (Cont’d)
              (V)   Risk factors likely to be faced and the measures to be taken
                    Industry risk

                    As a basic raw materials industry of the national economy, the paper making industry’s overall efficiency has a strong
                    correlation with economic cycles, and is therefore a cyclical industry fluctuating with the national macroeconomic
                    performance, which will further affect the profitability of paper making enterprises. With the rapid growth of the national
                    economy, economic globalisation and China’s accession to the WTO, China’s paper making industry has been facing
                    increasingly fierce competition, and overcapacity and lower demand will have certain impact on the operating results of
                    the Company in the future.

                    In light of the above, the Company will enhance the level of its equipment and technology, enrich its product portfolio,
                    raise its product quality and put emphasis on developing high-end products to increase its competitiveness.

                    Policy risk

                    At present, the industry has entered into an important transitional period, and the mode which supported the rapid
                    development of the paper making industry in the past has currently faced the dual pressures of resources and
                    environment. From the point of view of China’s policy, China will change the mode of growth through optimizing the
                    layout of the paper making industry and the raw material structure and product structure, in order to promote a modern
                    paper making industry based on recycling by integrating the forestry and paper making industry, and adjust the industry
                    through entry requirements, environmental standards and energy saving. The development of the Company will be
                    affected by the direction of such policies.
15                  Elimination of outdated production capacity and stricter environment protection policy has forced some of the SMEs
INTERIM             exited the industry. Hence, the Company is expected to record long-term revenue.
 REPORT

                    Operational risk

                    The major raw materials used by the Company are wood pulp and waste paper. The Company’s products are mainly
                    comprised of high-end paper, and as the State encourages the increase of the proportion of wood pulp used by the
                    industry, wood pulp, thus, has accounted for a higher proportion of the production cost. The market price fluctuations
                    of raw material have significantly affected the production cost of the Company. In addition to intensified market
                    competition resulting from surging capacity in the industry in recent years, the market price fluctuation of raw materials
                    will have an impact on the performance of the Company.

                    Hence, the Company will remain steadfast in the “forestry-pulp-paper integration” development path and focus on the
                    construction of Zhanjiang Chenming pulp project, Huanggang Chenming pulp project and Shouguang chemical pulp
                    project, thereby eliminating the limitations of upper-stream resources on the Company’s development and enhancing
                    Company’s sustainable development.

                    Environmental protection risk

                    The new Environmental Protection Law took effect on 1 January 2015. More stringent environmental protection policies
                    of the industry have been implemented. A multi-pronged approach has been adopted to promote industrial restructuring,
                    and the paper making industry has entered into an important transitional period of development. The higher emission
                    standard is bound to increase the Company’s environmental protection cost and high entry standards may result in the
                    slowing down of scale expansion, thus affecting its production and operation.

                    The Company always strives to achieve harmonious development with energy consumption and emission reduction. The
                    Company will endeavour to develop the recycle economy through waste exchange and recycling and strive to maximise
                    its resource utilisation. Meanwhile, the Company will make greater efforts to construct environmental friendly projects
                    and strive to achieve its waste emission target.




 20       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IV Directors’ Report


IX. Outlook on the future development of the Company (Cont’d)
     (V)    Risk factors likely to be faced and the measures to be taken (Cont’d)
            Exchange rate risk

            The value of Renminbi is affected by the domestic and international economic and political environment, and the supply
            and demand for Renminbi. As an import and export enterprise, the exchange rate of Renminbi against other currencies
            in future will affect the Company’s operating results. The foreign currency transactions of the Company are mainly
            denominated in US dollar. The operations of raw material imports, product exports and US dollar borrowings of the
            Company will face the risk of exchange rate changes.

            The Company lowers the proportion of imported goods procurement denominated in foreign currency. The Company
            uses more domestic raw materials and spare parts in its production, and increases its Renminbi settlement while
            decreasing its foreign exchange settlement. Meanwhile, the Company expands its overseas sales, increases repatriation
            on exports and repays its domestic US dollar loans in order to mitigate its exchange rate risk exposure.


X.   Opinions of the Board of Directors and the Supervisory Committee regarding the “modified
     auditor’s report” for the reporting period issued by the accountants
           Applicable      √ Not applicable


XI. Opinions of the Board regarding the “modified auditor’s report” for the prior year
           Applicable √     Not applicable


XII. Particulars of profit distribution by the Company during the reporting period
                                                                                                                                       15
                                                                                                                                       INTERIM
                                                                                                                                        REPORT
     Implementation and adjustment of profit distribution proposals, especially the cash dividend proposal and proposal on
     conversion of capital reserves into share capital during the reporting period

     √ Applicable           Not applicable

     The 2014 profit distribution plan was considered and approved in the 2014 annual general meeting convened by the Company
     on 15 May 2015. Based on the number of the shares as at the dividend distribution registration date of 1,936,405,467 shares,
     a cash dividend of RMB1.40 (tax inclusive) was to be paid to all shareholders for every 10 shares held. The total cash dividend
     to be distributed amounted to RMB271,096,765.38 (tax inclusive). The dividend distribution was implemented and completed
     on 14 July 2015. For details, please refer to the announcement on payment of final dividend and withholding and payment
     of enterprise income tax for non-resident enterprise shareholders published on the Hong Kong Stock Exchange on 23 June
     2015, and the announcement on the implementation of the 2014 profit distribution plan for A share and B share published on
     http://www.cninfo.com.cn on 4 July 2015.

                                                   Particulars of Cash Dividend Policy

     Was it in compliance with the requirements of the Articles of
       Association and the resolutions of the general meeting?                              Yes
     Were the dividend distribution criteria and proportion well-defined and clear?         Yes
     Were the related decision making process and mechanism in place?                       Yes
     Did independent Directors fulfil their duties and play their role?                     Yes
     Were the minority shareholders given opportunities to sufficiently voice
       their opinion and make requests and were the legal interests
       of the minority shareholders fully protected?                                        Yes
     Were conditions and procedures legal and transparent in respect of
       cash dividend policy with adjustments and changes?                                   Yes




                                                                            SHANDONG CHENMING PAPER HOLDINGS LIMITED                     21
          IV Directors’ Report


          XIII. Proposals on profit distribution and conversion of capital reserves into share capital during
                this reporting period
                    Applicable        √ Not applicable

              The Company does not intend to distribute cash dividend and bonus share, and conduct conversion of capital reserves into
              share capital for the interim period.


          XIV. Registration report on reception of research investigations, communications and interviews
               during the reporting period
              √ Applicable               Not applicable

                                                                         Class of parties                                                  Main topics of discussion
              Date of reception   Place ofreception   Manner ofreception accommodated       Parties accommodated                           and information provided

              13 January 2015     The Company’s      On-site research    Institution       Guotai Junan Securities Co. Ltd.               Recent production and operation of
                                  conference room     investigation                                                                        the Company and development of the
                                                                                                                                           industry

              13 January 2015     The Company’s      On-site research    Institution       27 fund companies including Shenyin Wanguo, BOC Recent production and operation of
                                  conference room     investigation                         Schroder Fund, HuaAn Funds, GTJA Allianz Funds, the Company and development of the
                                                                                            Fullgoal Fund, Zhong Ou AMC, Lion Fund, CPIC, industry
                                                                                            Harfor Fund, Caitong Securities, Franklin Templeton
                                                                                            Sealand Fund, Baoying Fund, Caitong Fund, First-
                                                                                            Trust Fund, Tongben Investment, Oriental Capital,
                                                                                            Minsheng Royal Fund, HFT Investment, China Life

15                                                                                          Asset Management, Yongjin Asset Management,
                                                                                            CICC, ICBCCS, CITIC PE, China AMC, Minsen
INTERIM                                                                                     Investment etc
 REPORT
              28 January 2015     The Company’s      On-site research    Institution       Brilliance Asset Management Limited            Recent production and operation of
                                  conference room     investigation                                                                        the Company and development of the
                                                                                                                                           industry




 22       SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters


I.   Overview of corporate governance
     1.   Corporate Governance in practice
          The Company operated in compliance with the requirement of Companies Law, Securities Law, Code of Corporate
          Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock Exchange, Rules Governing
          the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the related requirements
          as required by the CSRC. The Company further improved and optimised its legal person governance structure in
          practice during the reporting period. The Board considered the state of the Company’s corporate governance was
          substantially in compliance with the requirements and requests of the regulatory documents such as Code of Corporate
          Governance for Listed Companies.

     2.   Corporate governance activities
          During the reporting period, the Board strived to regulate the operation of the Company by improving corporate
          governance based on relevant special activities carried out in 2014. Pursuant to the requirements of the CSRC, the
          Shenzhen Stock Exchange and the Shandong Securities Regulatory Bureau, it made the following efforts to continuously
          improve the corporate governance level:

          According to relevant provisions of the Company Law of the People’s Republic of China, the State Council Guidance
          Opinion on the launch of the preference shares pilot scheme and the Experimental Administrative Measures on
          Preference Shares, and based on the non-public issue of preference shares by the Company, the Board amended its
          Articles of Association.

          The Company strictly implemented its related system of internal control to facilitate its regulated operation and healthy
          development, thereby protecting the legal interests of investors. The corporate governance of the Company was exactly
          the same as what was required by the CSRC. The regulated operations and the internal control standards would
                                                                                                                                      15
                                                                                                                                      INTERIM
          enhance with the development of the Company.                                                                                 REPORT


     3.   Corporate Governance Code
          The Company is committed to attaining good standard of corporate governance practices in order to enhance
          shareholders’ value. Saved as disclosed below, none of the Directors is aware of any information that would reasonably
          indicate that the Company is not, or was not for any part of the reporting period, in compliance with the Corporate
          Governance Code and Corporate Governance Report, as set out in Appendix 14 of the Listing Rules.

          (1)   The chairman and general manager of the Company is Mr. Chen Hongguo. Mr. Chen Hongguo performs the
                roles of the chairman and the general manager for the overall management of the Company. This constitutes
                a deviation from the principles and code provisions of A2 - Directors and Chief Executive Office in Corporate
                Governance Code and Corporate Governance Report under Appendix 14 to Listing Rules. However, the Directors
                of the Company believe that Mr. Chen Hongguo acting as the chairman and the general manager will enable the
                Company to more effectively plan and implement the business strategies so that the Group can effectively and
                rapidly seize business opportunities. As all major decisions will be made after consultation with other members of
                the Board, the Company believes that the supervision of the Board and independent non-executive Directors will
                strike a sufficient balance of power and authority.




                                                                           SHANDONG CHENMING PAPER HOLDINGS LIMITED                     23
          V Material Matters


          I.   Overview of corporate governance (Cont’d)
               3.   Corporate Governance Code (Cont’d)
                    (2)   Communication with shareholders

                          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 15 May 2015 by the Company, an extraordinary general meeting
                          was convened during the reporting period. Pursuant to section E1.2 of Appendix 14 to the Corporate Governance
                          Code and Corporate Governance Report, the chairman of the board should attend the annual general meeting. He
                          should also invite the chairmen of the audit, remuneration, nomination and any other committees (as appropriate)
                          to attend. In their absence, he should invite another member of the committee or failing this his duly appointed
                          delegate, to attend.

                          The attendance record of Directors at each general meeting is set out below:

                          Name                                            Attendance of general meetings

                          Annual General Meeting for 2014                 Chen Hongguo, Yin Tongyuan, Wang Xiaoqun,
                                                                            Wang Aiguo and Yang Guihua
                          First extraordinary general meeting for 2015    Yin Tongyuan and Wang Xiaoqun

                          Ms. Zhang Hong, the chairman of the audit committee, and Mr. Zhang Zhiyuan, the chairman of the nomination
                          committee, were absent from the annual general meeting due to business commitments. The Company’s external
                          auditor also attended the annual general meeting as the scrutineer.
15
INTERIM        4.   Securities transactions by Directors and Supervisors
 REPORT
                    The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model
                    Code”) as set out in Appendix 10 of the Listing Rules as the code of conduct for Directors’ securities transactions. The
                    Company had made specific enquiry of all Directors and Supervisors and all Directors and Supervisors confirmed that
                    they had complied with the requirements as set out in the Model Code for the six months ended 30 June 2015.

               5.   Audit Committee
                    The audit committee of the Company now comprises two independent non-executive Directors and one non-executive
                    Director. The members of the audit committee are Ms. Zhang Hong, Mr. Wang Aiguo and Ms. Yang Guihua. The audit
                    committee reviewed the accounting standards and practices adopted by the Group with the management of the
                    Company and discussed and reviewed the interim results and interim report for the six months ended 30 June 2015
                    prepared in accordance with the accounting standards.




 24       SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters


II.   Litigation
      Material litigation and arbitration

           Applicable √ Not applicable

      The Company was not involved in any material litigation and arbitration during the reporting period.

      Other litigations

           Applicable √    Not applicable


III. Questioning from the Media
           Applicable √    Not applicable

      There was no questioning from the media during the reporting period.


IV. Matter related to bankruptcy and reorganisation
           Applicable √    Not applicable

      There was no matter related to bankruptcy and reorganisation during the reporting period.


V.    Asset transactions
      1.    Acquisition of assets                                                                                        15
                 Applicable √ Not applicable                                                                            INTERIM
                                                                                                                          REPORT
            There was no acquisition of assets during the reporting period.

      2.    Disposal of assets
                 Applicable √ Not applicable

            There was no disposal of assets during the reporting period.

      3.    Business combination
                 Applicable √ Not applicable

            There was no business combination during the reporting period.


VI. Implementation of the equity incentive plan of the Company and its effect
           Applicable √    Not applicable

      There was no implementation of the equity incentive plan of the Company during the reporting period.




                                                                              SHANDONG CHENMING PAPER HOLDINGS LIMITED     25
          V Material Matters


          VII. Significant related party transactions
              1.              Related party transactions associated with day-to-day operation
                              √   Applicable                         Not applicable

                                                                                                                                                     Percentage
                                                                                Subject                                                                   as the
                                                                                matter of           Pricing basis                      Amount of         amount        Amount of
                                                                Types of the    the related         of the          Price of        related party      of similar   transactions       Whether                         Market price of
                                        Related                 related party   party               related party   related party   transactions    transactions        approved     exceeding Settlement of related   available similar
              Related party             party relationship      transactions    transactions        transactions    transactions      (RMB’0000)             (%)     (RMB’0000) approved cap party transactions       transaction      Disclosure date Disclosure index

              Anhui Time                  Associate               Sale          Machine-made paper Market price     Market price      20,036.56          2.73% Not applicable Not applicable Bank acceptance and       Not applicable   Not applicable   Not applicable
                Source Corporation                                                                                                                                                            telegraphic transfer
              Jiangxi Jiangbao Media      Associate               Sale          Machine-made paper Market price     Market price           12.31         0.00% Not applicable Not applicable Bank acceptance and       Not applicable   Not applicable   Not applicable
                Colour Printing Co., Ltd.                                                                                                                                                      telegraphic transfer
              Jiangxi Chenming            Under indirect control Procurement    Energy such as      Market price    Market price        7,538.98         1.02%        32,000             No Bank acceptance and        Not applicable   27 March 2015    http://www.cninfo.com.cn
                Natural Gas Co., Ltd.       of directors,                         natural gas                                                                                                  telegraphic transfer
                                            supervisors or senior                 and heavy oil
                                            management of
                                            the Company

              2.              Related party transaction connected to purchase or sale of assets
                                    Applicable √ Not applicable

                              There was no related party transaction of the Company connected to purchase or sale of assets during the reporting

15                            period.

INTERIM
 REPORT       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

                              Whether non-operating related creditors’ rights and debts transactions existed

                                    Yes √ No

                              There was no non-operating related creditors’ rights and debts transaction of the Company during the reporting period.

              5.              Other related party transactions
                                    Applicable √ Not applicable

                              There was no other related party transaction of the Company during the reporting period.




 26       SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters


VIII. Appropriation of funds of the Company by the controlling shareholder and its related parties
      for non-operating purposes
         Applicable √ Not applicable

    There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
    purposes during the reporting period.


IX. Material contracts and implementation
    1.    Custody, contracting and leasing
          (1)   Custody
                    Applicable √   Not applicable

                There was no custody of the Company during the reporting period.

          (2)   Contracting
                   Applicable √    Not applicable

                There was no contracting of the Company during the reporting period.

          (3)   Leasing
                    Applicable √   Not applicable

                There was no leasing of the Company during the reporting period.
                                                                                                                                    15
    2.    Guarantees                                                                                                                INTERIM
                                                                                                                                     REPORT
          √ Applicable       Not applicable

          During the reporting period, the Company did not provide any guarantee to external parties (excluding those provided to
          its subsidiaries) and did not provide any guarantees against the rules and regulations.

          During the reporting period, the Company provided guarantee to its subsidiaries with respect to application of bank
          loans. The guarantee amount incurred was RMB7,047.1989 million. As at 30 June 2015, the balance of the guarantee
          provided by the Company to its subsidiaries amounted to RMB9,745.1122 million, representing 69.91% of the equity
          attributable to owners of the parent company as at 30 June 2015.




                                                                         SHANDONG CHENMING PAPER HOLDINGS LIMITED                     27
          V Material Matters


          IX. Material contracts and implementation (Cont’d)
              2.   Guarantees (Cont’d)
                                                                                                                                                                Unit: RMB’0,000

                                                      External guarantees provided by the Company (excluding guarantees provided for subsidiaries)
                                                        Date of
                                                        the related                                                                                                          Guarantee
                                                        announcement                                                                                                         to related
                                                        disclosing the              Amount    Guarantee date           Guarantee     Type of                    Fulfilled    parties
                   Name of obligee                      guarantee amount       of guarantee   (agreement date)          provided     guarantee     Term         or not       or not
                   Total amount of external guarantee approved during the                 0    Total amount of external guarantee provided during the                               0
                   reporting period (A1)                                                       reporting period (A2)
                   Total amount of external guarantee approved as at the end              0    Total balance of external guarantee provided as at the end of                        0
                   of the reporting period (A3)                                                the reporting period (A4)
                                                                           Guarantees between the Company and its subsidiaries
                                                        Date of
                                                        the related                                                                                                          Guarantee
                                                        announcement                                                                                                         to related
                                                        disclosing the              Amount    Guarantee date           Guarantee     Type of                    Fulfilled    parties
                   Name of obligee                      guarantee amount       of guarantee   (agreement date)          provided     guarantee     Term         or not       or not

                   Zhanjiang Chenming                   28 March 2012               270,000   13 November 2013          13,449.92   General         3 years     No           No
                     Pulp & Paper Co., Ltd.                                                                                         guarantee
15                 Zhanjiang Chenming                   27 October 2014             650,000   27 October 2014            157,120.90 General         3 years     No           No
INTERIM              Pulp & Paper Co., Ltd.                                                                                         guarantee
 REPORT            Jiangxi Chenming Paper Co., Ltd.     27 October 2014             200,000   06 January 2015             36,577.65 General         3 years     No           No
                                                                                                                                    guarantee
                   Huanggang Chenming                   27 October 2014              10,000   18 December 2014                3,500 General         3 years     No           No
                      Arboriculture Co., Ltd.                                                                                       guarantee
                   Jilin Chenming Paper Co., Ltd.       27 October 2014             150,000   16 April 2015                         General         3 years     No           No
                                                                                                                                    guarantee
                   Chenming (HK) Limited                28 March 2012               500,000   21 August 2014              98,514.55 General         3 years     No           No
                                                                                                                                    guarantee
                   Chenming (HK) Limited                27 October 2014             500,000   01 December 2014           306,188.10 General         3 years     No           No
                                                                                                                                    guarantee
                   Shandong Chenming Paper              27 October 2014             400,000   09 January 2015            258,132.22 General         3 years     No           No
                     Sales Company Limited                                                                                          guarantee
                   Shouguang Chenming Import            27 October 2014             200,000                                         General         3 years     No           No
                     and Export Trade Co., Ltd.                                                                                     guarantee
                   Shandong Chenming                    26 March 2015               500,000   22 May 2015                 45,821.25 General         7 years     No           No
                     Financial Leasing Co., Ltd.                                                                                    guarantee
                   Haicheng Haiming Mining              27 August 2014               60,000                                         General         3 years     No           No
                     Company Limited                                                                                                guarantee
                   Shandong Chenming Group              29 December 2014            400,000                                         General         3 years     No           No
                     Finance Co., Ltd.                                                                                              guarantee
                   Shouguang Meilun Paper Co., Ltd.     16 December 2010            600,000   13 April 2015               51,206.63 General         10 years    No           No
                                                                                                                                    guarantee
                   Huanggang Chenming                    26 March 2015              400,000                                         General         7 years     No           No
                     Pulp & Paper Co., Ltd                                                                                          guarantee
                   Total amount of guarantee provided for subsidiaries              900,000    Total amount of guarantee provided for subsidiaries during the               704,719.89
                   approved during the reporting period (B1)                                   reporting period (B2)
                   Total amount of guarantee provided for subsidiaries            4,070,000    Total balance of guarantee provided for subsidiaries as at the               970,511.22
                   approved as at the end of the reporting period (B3)                         end of the reporting period (B4)




 28       SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters


IX. Material contracts and implementation (Cont’d)
    2.   Guarantees (Cont’d)

                                                                                 Guarantees provided by subsidiaries for subsidiaries
                                                        Date of
                                                        the related                                                                                                                                       Guarantee
                                                        announcement                                                                                                                                      to related
                                                        disclosing the                    Amount         Guarantee date                   Guarantee        Type of                       Fulfilled        parties
         Name of obligee                                guarantee amount             of guarantee        (agreement date)                  provided        guarantee       Term          or not           or not
         Guangdong Huirui Investment           16 November 2013                                4,000     28 November 2013                       4,000
                                                                                                                                                General         2 years   No                              No
           Co., Ltd.                                                                                                                            guarantee
         Total amount of guarantee provided for subsidiaries                                        0      Total amount of guarantee provided for subsidiaries during the                                          0
         approved during the reporting period (C1)                                                         reporting period (C2)
         Total amount of guarantee provided for subsidiaries                                   4,000       Total balance of guarantee provided for subsidiaries as at the                                      4,000
         approved as at the end of the reporting period (C3)                                               end of the reporting period (C4)
                                                    Total amount of guarantee provided by the Company (the sum of the above three main categories)
         Total amount of guarantee approved during the reporting              900,000 Total amount of guarantee provided during the reporting period                                                  704,719.89
         period (A1+B1+C1)                                                                 (A2+B2+C2)
         Total amount of guarantee approved as at the end of the            4,074,000 Total balance of guarantee provided as at the end of the                                                        974,511.22
         reporting period (A3+B3+C3)                                                       reporting period (A4+B4+C4)
         The percentage of total amount of guarantee provided (A4+B4+C4) to the net assets of the Company                                                                                                  69.91%
         Of which:
         Amount of guarantee provided for shareholders, beneficial controllers and its related parties (D)
                                                                                                                                                                                                                          15
                                                                                                                                                                                                                0
         Amount of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E)                                                                                              888,112.32
         Total amount of guarantee provided in excess of 50% of net assets (F)                                                                                                                         277,578.56         INTERIM
                                                                                                                                                                                                                           REPORT
         Sum of the above three amount of guarantee (D+E+F)                                                                                                                                          1,165,690.88

         (1)        External guarantees against the rules and regulations
                        Applicable √ Not applicable

                    There was no external guarantee provided by the Company which was against the rules and regulations during the
                    reporting period.

    3.   Other material contracts
         √    Applicable                    Not applicable

                                                                                                          Appraised
                                                                                            Book value      value of
                                                                                             of subject the subject                                                                                       Progress
                                                                                               asset of asset of the        Name of                                                Related                as at
                                   Name of party                                   Date of the contract    contract        appraisal                               Transaction       party     Related    the end of
         Name of the company       involved in                                the contract       (if any)     (if any)      institute Appraisal                          price transaction        party   the reporting
         entering into contract    the contract         Subject matter        entered into (RMB’0,000) (RMB ’0,000)         (if any) date (if any) Pricing basis (RMB’0,000)     or not relationship   period

         Shandong Chenming Paper Jinan Hi-Tech Holding Construction project   9 May 2014 Not applicable Not applicable Not applicable Not applicable Market price      36,000         No Not applicable In progress
           Holdings Limited        Group Co., Ltd       of A7-2 plot of
                                                        the Han Yu Jin Gu

    4.   Other material transactions
                 Applicable √ Not applicable

         There was no other material transaction of the Company during the reporting period.




                                                                                                                          SHANDONG CHENMING PAPER HOLDINGS LIMITED                                                          29
          V Material Matters


          X.   Undertakings made by the Company and shareholders interested in 5% or more of the shares
               of the Company made during the reporting period or prior periods but subsisting to the
               reporting period
               √ Applicable                      Not applicable

                                                     Party involved                                                                                                                       Particulars on
               Undertaking                           in undertaking         Details of undertaking                                                    Undertaking date Term               the performance

               Undertaking on shareholding
                 structure reformation

               Undertaking made in offering
                documents or shareholding
                 alternation documents

               Undertaking made during
                 asset reconstruction

               Undertaking made on initial           Shouguang Chenming     (1) Shouguang Chenming Holdings Co., Ltd. (“Shouguang                        22 May 2008 During the period Strictly implemented
                 public offering or refinancing        Holdings Co., Ltd.   Chenming Holdings”) shall not engage, whether solely, jointly,                             when Chenming
                                                                            or by representing itself or any other persons or companies, and                            Holdings was the
                                                                            shall not procure its associates (as defined in The Listing Rules                           major shareholder
                                                                            of Hong Kong Stock Exchange) to engage, in any business which                               of the Company
                                                                            competes with the business of the Company and its subsidiaries
15                                                                          (“Chenming Group” or “we”) directly or indirectly, in any country
INTERIM
                                                                            and region which our business exists (or any part of the world if in
 REPORT                                                                     any form of electronics business), or in any business that directly
                                                                            or indirectly competes with Chenming Group’s business which we
                                                                            operate from time to time (including but not limited to any business
                                                                            in the form of sole proprietorship, joint ventures or acquisitions, or
                                                                            holding interests directly or indirectly in such enterprises, or by any
                                                                            other means); (2) in the event that Shouguang Chenming Holdings
                                                                            is required by its business to, whether solely, jointly, or by
                                                                            representing itself or any other persons or companies, engage in
                                                                            business which directly or indirectly competes against the business
                                                                            of Chenming Group, or obtain any business opportunity which
                                                                            directly or indirectly competes against the business of Chenming
                                                                            Group, it shall endeavour to procure that Chenming Group shall
                                                                            have priority to obtain the right to operate such business or to
                                                                            obtain such business opportunity; (3) if Shouguang Chenming
                                                                            Holdings is in breach of the abovementioned undertakings, it
                                                                            shall indemnify the Company for any loss caused by such breach
                                                                            and the Company shall have the right to acquire all businesses
                                                                            of Shouguang Chenming Holdings, which directly or indirectly
                                                                            compete with the businesses of our Group, at market price or cost
                                                                            price (whichever price is lower); (4) Shouguang Chenming Holdings
                                                                            shall not make use of its position as the controlling shareholder (as
                                                                            defined in The Listing Rules of Hong Kong Stock Exchange) of our
                                                                            Group to jeopardise the legal interests of Chenming Group and its
                                                                            shareholders with other persons or companies or on their behalf.




 30       SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters


X.   Undertakings made by the Company and shareholders interested in 5% or more of the shares
     of the Company made during the reporting period or prior periods but subsisting to the
     reporting period (Cont’d)

                                           Party involved                                                                                                             Particulars on
     Undertaking                           in undertaking         Details of undertaking                                        Undertaking date Term                 the performance

                                           Shouguang Chenming     (1) According to the plan on defective properties of the Company, 16 January 2008 During the period Strictly implemented
                                             Holdings Co., Ltd.   Shouguang Chenming Holdings Co., Ltd. (“Shouguang Chenming                         when Chenming
                                                                  Holdings”) has guaranteed and undertaken that: according to the                    Holdings was the
                                                                  application of the Company, for defective property(ies) owned                       major shareholder
                                                                  by the Company and its holding subsidiary company which                             of the Company
                                                                  situated in the administrative area of Shouguang city, Shouguang
                                                                  Chenming Holdings will purchase it(them) and have it(them) being
                                                                  transferred to itself pursuant to the law in accordance with the
                                                                  result of the related asset valuation if the Company decides to
                                                                  transfer and dispose of it(them) and there is no other transferee;
                                                                  (2) before the Company transfers and disposes of the defective
                                                                  properties pursuant to the law, if the Company suffers any
                                                                  economic losses due to the defects of the title (including but not
                                                                  limited to damages, penalties and relocation costs), Shouguang
                                                                  Chenming Holdings will bear such economic losses; (3) during the
                                                                  regulatory process taken to the defective properties of buildings
                                                                  and land of subsidiaries of the Company situated outside the local                                                         15
                                                                  areas (outside the administrative area of Shouguang city), the                                                             INTERIM
                                                                                                                                                                                              REPORT
                                                                  economic losses such as penalties or relocation costs imposed
                                                                  by competent administrative authorities to be borne by the
                                                                  subsidiaries arising from defects of insufficient title documents
                                                                  shall be paid pursuant to the law by Shouguang Chenming
                                                                  Holdings after verification.

     Other undertakings made to minority
       shareholders of the Company

     Does the undertaking                  Yes
       performed timely?

XI. Engagement or dismissal of accounting firms
     Has the interim financial report been audited?

           Yes √        No

     The interim financial report is unaudited.


XII. Punishment and rectification
           Applicable √ Not applicable

     There was no punishment and rectification of the Company during the reporting period.


XIII. Risk of delisting due to non-compliance
           Applicable √ Not applicable

     The Company was not exposed to the risk of delisting due to non-compliance during the reporting period.




                                                                                                            SHANDONG CHENMING PAPER HOLDINGS LIMITED                                           31
          V Material Matters


          XIV. Purchase, sale and redemption of shares
              The Company did not purchase, sell or redeem any listed outstanding securities of the Company during the reporting period.


          XV. Other matters of significance
              √ Applicable       Not applicable

              1.   Approval of Registration on Medium-term Notes and Super & Short-term Commercial Papers
                   Under the Notice of Acceptance of Registration (Zhong Shi Zhu Xie [2015] No. MTN141) issued by the National
                   Association of Financial Market Institutional Investors, the issue of medium-term notes by the Company has been
                   approved and registered with an amount of RMB2.6 billion, which shall be valid for a period of two years from the date
                   of such notice. The issue may be made in tranches during the validity period.

                   Under the Notice of Acceptance of Registration (Zhong Shi Zhu Xie [2015] No. SCP104) issued by the National
                   Association of Financial Market Institutional Investors, the issue of super & short-term commercial papers by the
                   Company has been approved and registered with an amount of RMB13.8 billion, which shall be valid for a period of two
                   years from the date of such notice. The issue may be made in tranches during the validity period.

              2.   Capital injection to Shandong Chenming Financial Leasing Co., Ltd.
                   In order to facilitate the Financial Leasing Company to engage in project financing and leasing business, and increase
                   the Company’s overall strength, comprehensive competitiveness and profit, Chenming (HK) intended to increase the
                   capital of the Financial Leasing Company by RMB5.0 billion by instalments with its own funds. After the completion
15                 of the capital increase, the registered capital of the Financial Leasing Company will change to RMB9.072 billion from
                   RMB4.072 billion. As at the end of the reporting period, the registered capital of the Financial Leasing Company
INTERIM
 REPORT            amounted to RMB5.872 billion.

              3.   Information disclosure index for the first half of 2015

                   Announcement                                                          Date of             Publication website
                   No.               Subject matter                                      publication         and index

                   2015-001          Announcement on Additional Resolutions Proposed     29 January 2015     http://www.cninfo.com.cn
                                       at the 2015 First Extraordinary General Meeting
                   2015-002          Supplemental Notice of 2015 First Extraordinary     29 January 2015     http://www.cninfo.com.cn
                                       General Meeting
                   2015-003          Second supplementary notice of the 2015 First       29 January 2015     http://www.cninfo.com.cn
                                       Domestic Listed Share Class Meeting and 2015
                                       First Overseas Listed Share Class Meeting
                   2015-004          Announcement on Resolutions of the 2015             14 February 2015    http://www.cninfo.com.cn
                                       First Extraordinary General Meeting
                   2015-005          Announcement on Resolutions of the 2015             14 February 2015    http://www.cninfo.com.cn
                                       First Class Meeting for Holders of Domestic
                                       Listed Shares (A shares and B shares) and
                                       Resolutions of the 2015 First Class Meeting for
                                       Holders of Overseas Listed Shares (H shares)
                   2015-006          Announcement on Receipt of CSRC Notice of           03 March 2015       http://www.cninfo.com.cn
                                       Acceptance of Application for
                                       Administrative Approval
                   2015-007          Results of the Eighth Extraordinary Meeting of      27 March 2015       http://www.cninfo.com.cn
                                       the Seventh Session of the Board




 32       SHANDONG CHENMING PAPER HOLDINGS LIMITED
V Material Matters


XIV. Other matters of significance (Cont’d) (Cont’d)
     3.   Information disclosure index for the first half of 2015 (Cont’d)

          Announcement                                                           Date of         Publication website
          No.             Subject matter                                         publication     and index

          2015-008        Announcement of Annual Results for the Year            27 March 2015   http://www.cninfo.com.cn
                            Ended 31 December 2014
          2015-009        Announcement on Investment in a Subsidiary             27 March 2015   http://www.cninfo.com.cn
          2015-010        Announcement on Provision of Guarantee for             27 March 2015   http://www.cninfo.com.cn
                            Comprehensive Credit Line of
                            Wholly-Owned Subsidiaries
          2015-011        Announcement on Expected Ordinary Connected            27 March 2015   http://www.cninfo.com.cn
                            Transactions in 2015
          2015-012        Notice of 2014 Annual General Meeting                  27 March 2015   http://www.cninfo.com.cn
          2015-013        Results of the Ninth Extraordinary Meeting of the      27 March 2015   http://www.cninfo.com.cn
                            Seventh Session of the Supervisory Committee
          2015-014        Announcement in relation to External Investment        02 April 2015   http://www.cninfo.com.cn
          2015-015        Announcement in relation to External Investment        02 April 2015   http://www.cninfo.com.cn
          2015-016        Shandong Chenming Paper Holdings Limited:              24 April 2015   http://www.cninfo.com.cn
                            Announcement on Result of the Issue of 2015
                            First Tranche of Short-term Commercial Paper
          2015-017        Results of the Ninth Extraordinary Meeting of          28 April 2015   http://www.cninfo.com.cn
                            the Seventh Session of the Board                                                                15
          2015-018        2015 First Quarter Report                              28 April 2015   http://www.cninfo.com.cn   INTERIM
                                                                                                                             REPORT
          2015-019        Announcement on Equity Transfer at Nil Consideration   28 April 2015   http://www.cninfo.com.cn
                          between Wholly-owned Subsidiaries
          2015-020        Announcement in Respect of Resignation                 28 April 2015   http://www.cninfo.com.cn
                            of Senior Management
          2015-021        Result of the Issue of 2015 Second Tranche of          28 April 2015   http://www.cninfo.com.cn
                            Short-term Commercial Paper
          2015-022        Supplementary notice of 2014 Annual General            29 April 2015   http://www.cninfo.com.cn
                          Meeting
          2015-023        Warning on reduction of shareholding by shareholders   08 May 2015     http://www.cninfo.com.cn
          2015-024        Results of the 2014 Annual General Meeting             16 May 2015     http://www.cninfo.com.cn
          2015-025        Results of the Sixth Extraordinary Meeting of          06 June 2015    http://www.cninfo.com.cn
                            the Seventh Session of the Board
          2015-026        Amendments to the Proposed Issue of Non-Public         06 June 2015    http://www.cninfo.com.cn
                          Preference Shares
          2015-027        Notice of 2015 Second Extraordinary General Meeting    06 June 2015    http://www.cninfo.com.cn
          2015-028        Announcement in Respect of Reply on Application        09 June 2015    http://www.cninfo.com.cn
                            for Non-Public Issue of Preference Shares
          2015-029        Announcement in Respect of Supplementary               09 June 2015    http://www.cninfo.com.cn
                            Disclosure Required under the Reply from CSRC
                            on Application for Non-Public Issue
                            of Preference Shares
          2015-030        Announcement on Approval of Registration on            20 June 2015    http://www.cninfo.com.cn
                            Medium-term Notes and Super & Short-term
                            Commercial Papers
          2015-031        Announcement on 2015 Dividend Payment in               30 June 2015    http://www.cninfo.com.cn
                            respect of “11 Chenming Bond”




                                                                         SHANDONG CHENMING PAPER HOLDINGS LIMITED             33
          VI Changes in Share Capital and Shareholders


          I.   Changes in shares
                                                                                                                                                                           Unit: Share

                                                                   Opening balance                     Change during the reporting period (+/-)                    Closing balance
                                                                                                                         Shares
                                                                                                                      converted
                                                                Amounts     Percentage   New issue   Bonus issue from reserve            Others   Sub-total     Amounts      Percentage

               I. Restricted shares                             8,241,219        0.42%          0              0              0              0           0     8,241,219         0.42%
                  Shares held by other domestic investors       8,241,219        0.42%          0              0              0              0           0     8,241,219         0.42%
                  Shares held by domestic natural persons       8,241,219        0.42%          0              0              0              0           0     8,241,219         0.42%
               II. Non-restricted shares                    1,928,164,248       99.58%          0              0              0              0           0 1,928,164,248        99.58%
               1. RMB ordinary shares                       1,105,037,237       57.07%          0              0              0              0           0 1,105,037,237        57.07%
               2. Domestic listed foreign shares              470,923,511       24.32%          0              0              0              0           0 470,923,511          24.32%
               3. Overseas listed foreign shares              352,203,500       18.19%          0              0              0              0           0 352,203,500          18.19%
               III. Total number of shares                  1,936,405,467      100.00%          0              0              0              0           0 1,936,405,467       100.00%


               The reasons for such changes
                      Applicable √ Not applicable

               Approval of changes in shareholding
                      Applicable √ Not applicable

               Transfer of shares arising from changes in shareholding
15                    Applicable √ Not applicable
INTERIM
 REPORT        The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted
               earnings per share and net assets per share attributable to shareholders of ordinary shares of the Company
               for the latest year and the latest period
                      Applicable √ Not applicable

               Other information considered necessary by the Company or required by the securities regulatory authorities
               to be disclosed
                      Applicable √ Not applicable

               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




 34       SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders


II.   Total number of shareholders and shareholdings
                                                                                                                                                                                                                        Unit: share

      Total number of shareholders of ordinary shares as at      110,656, of which 82,801 were holders of A shares, 27,342 holders        Total number of shareholders of preference shares with restored voting right as at            0
      the end of the reporting period                            of B shares and 513 holders of H shares.                                 the end of the reporting period (if any)

                                            Shareholdings of shareholders of ordinary shares interested in more than 5% of the shares of the Company or top ten shareholders of ordinary shares
                                                                                                                                                                                                             Share pledged or locked-up
                                                                                                                                  Number of           Changes
                                                                                                                                 shares held      (increase or            Number of          Number of
                                                                                                                                at the end of        decrease)             restricted    non-restricted
                                                                                 Nature of                  Percentage of       the reporting       during the              ordinary    ordinary shares         Status of
      Name of shareholders                                                       shareholders                shareholding              period reporting period           shares held               held           shares          Number

      HKSCC NOMINEES LIMITED                                                     Overseas legal person            18.11%         350,705,450               70,950                   0       350,705,450                                 0
      SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED                                State-owned legal                15.13%         293,003,657                    0                   0
                                                                                 person                                                                                                     293,003,657          Pledged       146,500,000
      INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED –                         Others                             1.19%            23,000,010        23,000,010                   0
        DONG FANG HONG CHINA ADVANTAGE FLEXIBLE ALLOCATION
        HYBRID SECURITIES INVESTMENT FUND                                                                                                                                                    23,000,010                                 0
      AGRICULTURAL BANK OF CHINA LIMITED – BAOYING TRANSITIONAL                 Others                             1.08%            20,846,115        20,846,115                   0
        MOMENTUM FLEXIBLE ALLOCATION HYBRID SECURITIE
         INVESTMENT FUND                                                                                                                                                                     20,846,115                                 0
      CHINA CONSTRUCTION BANK CORPORATION – ZHONG OU NEW BLUE                   Others                             0.89%            17,261,756        17,261,756                   0
        CHIP FLEXBLE ALLOCATION HYBRID SECURITIES INVESTMENT FUND                                                                                                                            17,261,756                                 0
      INDUSTRIAL BANK CO., LTD. – ZHONG OU NEW TREND EQUITY                     Others                             0.79%            15,369,990        15,369,990                   0
        SECURITIES INVESTMENT FUND (LOF)                                                                                                                                                      15,369,990                                 0
      RONGTONG NEW BLUE CHIP SECURITIES INVESTMENT FUND
      VALUE PARTNERS CLASSIC FUND
                                                                                 Others
                                                                                 Overseas legal person
                                                                                                                     0.72%
                                                                                                                     0.70%
                                                                                                                                    14,000,000
                                                                                                                                    13,643,695
                                                                                                                                                         5,999,988
                                                                                                                                                       13,643,695
                                                                                                                                                                                    0
                                                                                                                                                                                    0
                                                                                                                                                                                              14,000,000
                                                                                                                                                                                              13,643,695
                                                                                                                                                                                                                                         0
                                                                                                                                                                                                                                         0      15
      JIN Xing                                                                   Domestic nature person              0.47%           9,018,200             161,800                  0          9,018,200                                 0      INTERIM
      BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND                         Overseas legal person               0.44%           8,608,238          -3,338,747                  0          8,608,238                                 0       REPORT
      Connected relationship or connected party relationship                     Shouguang Chenming Holdings Company Limited, a state-owned legal person shareholder, is not connected with any of the shareholders above. They are
        among the above shareholders                                             not persons acting in concert under Administration of Disclosure of Information on the Change of Shareholdings in Listed Companies Procedures. Save for
                                                                                 the above, it is not aware that any other shareholders of tradable shares are persons acting in concert and is also not aware that any other shareholders of
                                                                                 tradable shares are connected with each others.




                                                                                                                                      SHANDONG CHENMING PAPER HOLDINGS LIMITED                                                                    35
          VI Changes in Share Capital and Shareholders


          II.   Total number of shareholders and shareholdings
                                  Shareholdings of the top ten shareholders of ordinary shares of non-restricted shares

                                                                                       Number of
                                                                                   non-restricted
                                                                                   shares held as
                                                                                     at the end of
                                                                                    the reporting
                Name of shareholders                                                        period              Class of shares
                                                                                                         Class of shares           Number

                HKSCC NOMINEES LIMITED                                               350,705,450     Overseas listed          350,705,450
                                                                                                      foreign shares
                SHOUGUANG CHENMING HOLDINGS COMPANY LIMITED                          293,003,657 RMB ordinary shares          293,003,657
                INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED                       23,000,010 RMB ordinary shares           23,000,010
                  – DONG FANG HONG CHINA ADVANTAGE FLEXIBLE
                  ALLOCATION HYBRID SECURITIES INVESTMENT FUND
                AGRICULTURAL BANK OF CHINA LIMITED – BAOYING                          20,846,115 RMB ordinary shares           20,846,115
                  TRANSITIONAL MOMENTUM FLEXIBLE ALLOCATION
                  HYBRID SECURITIES INVESTMENT FUND
                CHINA CONSTRUCTION BANK CORPORATION – ZHONG OU                        17,261,756 RMB ordinary shares           17,261,756
                  NEW BLUE CHIP FLEXBLE ALLOCATION HYBRID
                  SECURITIES INVESTMENT FUND
15              INDUSTRIAL BANK CO., LTD. – ZHONG OU NEW TREND
                  EQUITY SECURITIES INVESTMENT FUND (LOF)
                                                                                       15,369,990 RMB ordinary shares           15,369,990
INTERIM
 REPORT         RONGTONG NEW BLUE CHIP SECURITIES INVESTMENT FUND                      14,000,000 RMB ordinary shares           14,000,000
                VALUE PARTNERS CLASSIC FUND                                            13,643,695     Domestic listed           13,643,695
                                                                                                       foreign shares

                JIN Xing                                                                9,018,200 RMB ordinary shares             1,555,600

                                                                                                         Domestic listed          7,462,600
                                                                                                          foreign shares
                BBH A/C VANGUARD EMERGING MARKETS STOCK                                 8,608,238        Domestic listed          8,608,238
                 INDEX FUND                                                                               foreign shares

                Connected relationship or connected party         Shouguang Chenming Holdings Company Limited, a state-owned legal
                relationship among the top ten shareholders of    person shareholder, is not connected with any of the shareholders above.
                ordinary shares of non-restricted shares, and     They are not persons acting in concert under Administration of Disclosure
                between the top ten shareholders of ordinary      of Information on the Change of Shareholdings in Listed Companies
                shares of non-restricted shares and the top ten   Procedures. Save for the above, it is not aware that any other shareholders
                shareholders of ordinary shares                   of tradable shares are persons acting in concert and is also not aware that
                                                                  any other shareholders of tradable shares are connected with each others.

                Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 shareholders of ordinary
                shares and top 10 shareholders of non-restricted shares of the Company

                    Yes √ No

                The top 10 shareholders of ordinary shares and top 10 shareholders of non-restricted shares of the Company did not enter
                any agreed repurchase transaction during the reporting period.




 36       SHANDONG CHENMING PAPER HOLDINGS LIMITED
VI Changes in Share Capital and Shareholders


III. Change of controlling shareholders or beneficial controllers
     The Change of controlling shareholders during the reporting period
         Applicable √ Not applicable

     There was no change of controlling shareholders of the Company during the reporting period.

     Change of beneficial owner during the reporting period
         Applicable √ Not applicable

     There was no change of beneficial owner of the Company during the reporting period.


IV. Plan on increase of shareholding proposed or implemented by shareholders of the Company
    and their persons acting in concert during the reporting period
         Applicable √ Not applicable

     As far as the Company is aware, there was no plan on increase of shareholding proposed or implemented by shareholders of
     the Company and their persons acting in concert during the reporting period.


V.   The Company’s shareholders’ and other persons’ interest in shares or debentures
     As at 30 June 2015, the following shareholders (other than the Directors, Supervisors or chief executives of the Company) had
     interests or short positions in the Company’s shares and underlying shares as shown in the share register maintained by the
     Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
                                                                                                                                     15
                                                                                                                                     INTERIM
                                                                                                                                      REPORT
                                                                                              Approximate shareholding
                                                                                                 as a percentage of
                                                                         Number of
                                                                        shares held     Total share capital     Class of shares
     Name                                                                   (shares)                   (%)                  (%)

     SHOUGUANG CHENMING HOLDINGS CO., LTD                               293,003,657                 15.13                 26.32
                                                                         A shares (L)
     THE NATIONAL SOCIAL SECURITY FUND                                   35,270,000                   1.82                10.01
                                                                         H shares (L)
     Deutsche Bank Aktiengesellschaft                                    21,796,000                   1.13                  6.19
                                                                         H shares (L)
                                                                            480,000                   0.02                  0.14
                                                                         H shares (S)
                                                                          8,248,500                   0.43                  2.34
                                                                         H shares (P)

     (L) – Long position   (S) – Short position (P) – Lending pool

     Save as disclosed above, as at 30 June 2015, 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.




                                                                           SHANDONG CHENMING PAPER HOLDINGS LIMITED                    37
          VII. Preference Shares


          On 29 December 2014, the resolution on the proposal on non-public offer of preference shares and related resolutions were
          considered and approved at the fifth extraordinary general meeting of the seventh session of the Board of the Company.

          On 11 February 2015, the Company received the Reply on Issues Regarding the Non-public Offer of Preference Shares by
          Shandong Chenming Paper Holdings Limited (Lu Quo Zi Chan Quan Zi [2015] No. 4) issued by Stated-owned Assets Supervision
          and Administration Commission of Shandong Province, which agreed the non-public offer of not more than 45.00 million preference
          shares by the Company.

          On 13 February 2015, the Company convened the 2015 First Extraordinary General Meeting, the 2015 First Class Meeting for
          Holders of Domestic Listed Shares (A shares and B shares) and the 2015 First Class Meeting for Holders of Overseas Listed Shares
          (H shares), at which the resolution on the non-public offer of preference share proposal and related resolutions were considered and
          approved respectively.

          On 2 March 2015, the Company received CSRC Notice of acceptance of application for administrative approval (No. 150373) from
          China Securities Regulatory Commission (hereinafter referred to as “CSRC”). Having examined the information submitted by the
          Company in support of its application for administrative approval for Confirmation of Issue of Preference Shares by Listed Company,
          CSRC was of the opinion that the information in support of application was complete and complied with legal requirements, and
          decided to accept the said application for administrative approval.

          On 15 May 2015, the Company and its sponsor for the non-public issue of the preference shares received Reply on Application for
          Non-Public Issue of Preference Shares by Shandong Chenming Paper Holdings Limited (CSRC Notice of Reply on Administrative
          Approval-requiring Projects (No. 150373) (the “Reply”) from CSRC. Explanation and analysis had been made by the Company on
          relevant issues in accordance therewith.

          On 5 June 2015, the Company convened the sixth meeting of the seventh Board, at which the resolution on the amendments to the

15        non-public offer of preference share proposal and disclosed the proposal as amended on the same date.

INTERIM   On 9 June 2015, the Company published the Announcement in Respect of Reply on Application for Non-Public Issue of Preference
 REPORT
          Shares and the Announcement in Respect of Supplementary Disclosure Required under the Reply from CSRC on Application for
          Issue of Non-Public Preference Shares. Materials for the supplementary disclosure required were sent to the CSRC within two
          business days.

          On 21 August 2015, the application for non-public issue of preference shares of the Company was reviewed and approved by the
          Public Offering Review Committee of the CSRC.




 38       SHANDONG CHENMING PAPER HOLDINGS LIMITED
VIII Directors, Supervisors and Senior Management


I.    Changes in shareholdings of Directors, Supervisors and Senior Management
      There was no change in shareholdings of Directors, Supervisors and senior management of the Company during the reporting
      period. Please see the annual report for 2014 for details.


II.   Changes of Directors, Supervisors and Senior Management of the Company
      Name                        Position                         Type                        Date                      Reason

      Shao Zhenzhong              Deputy general manager           Resignation              27 April 2015                For personal reasons.
      Chang Liting                Deputy general manager           Expiry of term of office 27 April 2015                Retirement.



III. Equity interests held by Directors, Supervisors and Senior Management filed in compliance
     with SFO of Hong Kong
      As at 30 June 2015, the interests held by each of the Directors, Supervisors and Chief Executives of the Company in the
      Company and its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be
      kept under section 352 of the SFO, are set out as follows:

                                                                                                                                Number of shares
                                                                                                                                (A shares) held as
                                                                                                                                  at the end of the
                                                                                                                                  reporting period
      Name                                                                        Position                                                 (shares)
                                                                                                                                                           15
      Chen Hongguo (Note 1)                                                       Chairman and Executive Director                         6,863,875        INTERIM
      Yin Tongyuan                                                                Executive Director                                      2,423,640         REPORT
      Li Feng                                                                     Executive Director                                        471,818
      Geng Guanglin                                                               Executive Director                                        437,433
      Hou Huancai                                                                 Executive Director                                        628,915
      Zhou Shaohua                                                                Executive Director                                        123,007
      Gao Junjie                                                                  Chairman of Supervisory Committee                          39,606

      Associated corporations
                                                                                        Number of
                                                                                       shares held                                      Number of
                                                                                          as at the                Change           shares held as
                                                                                      beginning of               during the       at the end of the
                                                Name of                              the reporting                reporting               reporting
      Name                         Position     associated corporation              period (shares)              period (+/-)       period (shares)

      Chen Hongguo (Note 2) Chairman            Shouguang Chenming                     231,000,000                                     231,000,000
                                                Holdings Company
                                                Limited
      Note 1:   Save as the 6,434,527 A Shares personally held, Chen Hongguo was also deemed to be interested in the 429,348 A Shares held by Li Xueqin,
                his spouse.

      Note 2:   Chen Hongguo and his spouse, Li Xueqin, collectively held 43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd. As
                a result, Shouguang Henglian was deemed to be controlled by Chen Hongguo. As such, the 231,000,000 shares of Chenming Holdings
                (approximately 13.71% of the total share capital of Chenming Holdings) held by Shouguang Henglian were also deemed to be held by Chen
                Hongguo.




                                                                                       SHANDONG CHENMING PAPER HOLDINGS LIMITED                              39
          VIII Directors, Supervisors and Senior Management


          Save as disclosed in the above, as at 30 June 2015, 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 as contained
          in Appendix 10 to the Listing Rules.

          As at 30 June 2015, none of each 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.




15
INTERIM
 REPORT




 40       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


I.    Auditors’ Report
      Is the interim report audited

           Yes     √ No

      The interim financial report is unaudited.


II.   Financial Statements
      The unit in the financial statements of the financial report is: RMB

      1.    Consolidated Balance Sheet
            Prepared by: Shandong Chenming Paper Holdings Limited

            30 June 2015

                                                                                                                   Unit: RMB

            Item                                                                        Closing balance     Opening balance

            CURRENT ASSETS:
             Monetary funds                                                             6,992,524,403.46    5,475,658,186.10
             Bills receivable                                                           3,235,015,656.47    3,047,541,556.15
             Accounts receivable                                                        3,950,725,119.36    3,489,409,369.20   15
             Prepayments                                                                1,586,665,921.49    1,838,017,454.90   INTERIM
             Other receivables                                                          2,480,908,390.56    1,776,467,886.07    REPORT
             Inventories                                                                5,251,609,376.93    5,420,740,468.60
             Non-current assets due within one year                                       625,936,558.28      865,738,333.65
             Other current assets                                                       1,515,951,658.64    1,656,602,232.09

            Total current assets                                                       25,639,337,085.19   23,570,175,486.76

            NON-CURRENT ASSETS:
             Available-for-sale financial assets                                          409,000,000.00       73,000,000.00
             Long-term receivables                                                      5,035,760,955.94    1,420,598,667.99
             Long-term equity investments                                                  83,942,816.67       36,087,848.12
             Investment property                                                           16,866,059.89       17,735,187.91
             Fixed assets                                                              24,698,413,796.75   24,744,731,705.04
             Construction in progress                                                   4,345,421,714.36    3,709,270,828.53
             Construction materials                                                        16,661,915.35       22,955,982.38
             Intangible assets                                                          1,478,885,698.10    1,319,104,425.04
             Goodwill                                                                      20,283,787.17       20,283,787.17
             Long-term prepaid expenses                                                   170,188,608.23      173,690,747.83
             Deferred income tax assets                                                   640,922,517.72      620,267,636.44
             Other non-current assets                                                   1,194,124,242.00    1,094,124,242.00

            Total non-current assets                                                   38,110,472,112.18   33,251,851,058.45

            Total assets                                                               63,749,809,197.37   56,822,026,545.21




                                                                             SHANDONG CHENMING PAPER HOLDINGS LIMITED            41
          IX Financial Report


          II.   Financial Statements (Cont’d)
                1.   Consolidated Balance Sheet (Cont’d)
                     Item                                                                                Closing balance       Opening balance

                     CURRENT LIABILITIES:
                      Short-term borrowings                                                            22,353,701,292.50      20,470,296,592.92
                      Bills payable                                                                     2,495,752,255.20       1,598,110,792.85
                      Accounts payable                                                                  2,911,506,069.22       3,408,366,113.93
                      Advance receipts                                                                    286,878,004.93         270,056,726.88
                      Staff remuneration payables                                                         180,874,418.61         153,926,042.30
                      Taxes payable                                                                       187,093,051.84         161,100,088.94
                      Interest payable                                                                    246,392,305.46         150,047,305.50
                      Dividend payable                                                                    271,096,765.38
                      Other payables                                                                    1,145,101,448.59          783,790,884.61
                      Non-current liabilities due within one year                                       1,229,998,100.00        1,099,968,900.00
                      Other current liabilities                                                         3,632,120,000.00

                     Total current liabilities                                                         34,940,513,711.73      28,095,663,447.93

                     NON-CURRENT LIABILITIES:
                      Long-term borrowings                                                               4,467,061,483.45       4,378,290,245.19
                      Bonds payable                                                                      5,781,747,447.67       5,777,131,308.01
                      Special payables                                                                     161,983,516.66         161,983,516.66
15                    Deferred income                                                                    1,463,023,929.34       1,476,121,434.78
INTERIM               Other non-current liabilities                                                      2,588,775,681.58       2,584,768,359.64
 REPORT

                     Total non-current liabilities                                                     14,462,592,058.70      14,378,294,864.28

                     TOTAL LIABILITIES                                                                 49,403,105,770.43      42,473,958,312.21

                     OWNERS’ EQUITY:
                      Share capital                                                                      1,936,405,467.00       1,936,405,467.00
                      Capital reserves                                                                   6,149,138,276.81       6,149,136,873.41
                      Other comprehensive income                                                            49,780,458.01          33,763,168.13
                      Surplus reserves                                                                   1,132,116,106.40       1,132,116,106.40
                      Retained profit                                                                    4,671,212,991.34       4,665,921,686.21

                     Total equity attributable to equity holders of the company                        13,938,653,299.56      13,917,343,301.15
                       Minority interest                                                                  408,050,127.38         430,724,931.85
                     Total owners’ equity                                                             14,346,703,426.94      14,348,068,233.00

                     TOTAL LIABILITIES AND OWNERS’ EQUITY                                             63,749,809,197.37      56,822,026,545.21


                     Legal Representative: Chen Hongguo      Financial controller: Dong Lianming   Head of the financial department: Liang Tingkun




 42       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


II.   Financial Statements (Cont’d)
      2.   Balance sheet of the Company

                                                                                                Unit: RMB

           Item                                                      Closing balance     Opening balance

           CURRENT ASSETS:
            Monetary funds                                           3,267,417,680.15    2,345,637,944.73
            Bills receivable                                         1,328,129,615.72    3,516,397,335.06
            Accounts receivable                                      2,771,397,234.19    3,503,819,172.94
            Prepayments                                              1,882,683,149.20    1,734,892,571.69
            Other receivables                                       10,917,955,044.33    9,312,981,273.16
            Inventories                                                846,562,208.45      824,854,551.21
            Non-current assets due within one year                                         300,000,000.00
            Other current assets                                       68,209,049.61       114,216,338.90

           Total current assets                                     21,082,353,981.65   21,652,799,187.69

           NON-CURRENT ASSETS:
            Available-for-sale financial assets                        373,000,000.00       73,000,000.00
            Long-term equity investments                            12,526,731,131.61   12,370,935,132.02
            Investment property                                         16,866,059.89       17,735,187.91

                                                                                                            15
            Fixed assets                                             3,498,268,158.05    3,350,685,307.94
            Construction in progress                                    82,672,707.11      323,543,539.92
            Construction materials                                       1,541,694.94        1,564,277.42   INTERIM
                                                                                                             REPORT
            Intangible assets                                          313,017,487.23      246,581,452.71
            Deferred income tax assets                                 115,013,108.94       41,033,875.05
            Other non-current assets                                   900,000,000.00      900,000,000.00

           Total non-current assets                                 17,827,110,347.77   17,325,078,772.97

           TOTAL ASSETS                                             38,909,464,329.42   38,977,877,960.66

           CURRENT LIABILITIES:
            Short-term borrowings                                    5,646,708,970.65    9,143,654,360.01
            Bills payable                                            2,098,817,187.81      680,548,319.01
            Accounts payable                                           622,982,789.95      693,506,846.35
            Advance receipts                                             1,408,055.14        1,724,744.50
            Staff remuneration payables                                 95,030,839.83       75,683,362.25
            Taxes payable                                               31,008,200.55       30,908,886.06
            Interest payable                                           246,392,305.46      150,047,305.50
            Dividend payable                                           271,096,765.38
            Other payables                                           2,586,008,948.24    4,141,133,979.84
            Non-current liabilities due within one year                866,816,000.00      494,760,000.00
            Other current liabilities                                3,632,120,000.00

           Total current liabilities                                16,098,390,063.01   15,411,967,803.52




                                                          SHANDONG CHENMING PAPER HOLDINGS LIMITED            43
          IX Financial Report


          II.   Financial Statements (Cont’d)
                2.   Balance sheet of the Company (Cont’d)

                     Item                                                                             Closing balance       Opening balance

                     NON-CURRENT LIABILITIES:
                      Long-term borrowings                                                              350,692,035.94         867,832,035.94
                      Bonds payable                                                                   5,781,747,447.67       5,777,131,308.01
                      Deferred income                                                                    63,085,753.49          44,507,433.25
                      Other non-current liabilities                                                   2,588,775,681.58       2,584,768,359.64

                     Total non-current liabilities                                                    8,784,300,918.68       9,274,239,136.84

                     Total liabilities                                                              24,882,690,981.69      24,686,206,940.36

                     OWNERS’ EQUITY:
                      Share capital                                                                   1,936,405,467.00       1,936,405,467.00
                      Capital reserves                                                                5,938,840,660.10       5,938,839,256.70
                      Surplus reserves                                                                1,119,926,524.49       1,119,926,524.49
                      Retained profit                                                                 5,031,600,696.14       5,296,499,772.11

                     Total owners’ equity                                                          14,026,773,347.73      14,291,671,020.30

                     TOTAL LIABILITIES AND OWNERS’ EQUITY                                          38,909,464,329.42      38,977,877,960.66
15
INTERIM              Legal Representative: Chen Hongguo   Financial controller: Dong Lianming   Head of the financial department: Liang Tingkun
 REPORT




 44       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


II.   Financial Statements (Cont’d)
      3.   Consolidated Income Statement

                                                                                                                               Unit: RMB

                                                                                                  Amounts for             Amounts for
           Item                                                                            the reporting period        the prior period

           I.     Total revenue                                                                9,718,697,677.76       9,082,020,579.01
                  Including: Revenue                                                           9,718,697,677.76       9,082,020,579.01
           II.    Total operating costs                                                        9,407,786,957.20       9,082,153,213.06
                  Including: Operating costs                                                   7,370,384,661.31       7,378,998,628.31
                               Business taxes and surcharges                                      51,233,976.66          35,500,467.78
                               Sales expenses                                                    551,073,823.71         524,593,811.50
                               Administrative expenses                                           654,253,969.26         500,133,881.63
                               Finance expenses                                                  745,472,279.11         626,611,788.47
                               Loss on impairment of assets                                       35,368,247.15          16,314,635.37
                  Plus:        Gain on change in fair value (“-” denotes loss)                  -2,177,906.88             967,670.22
                               Investment income (“-” denotes loss)                             46,632,746.32          21,218,247.82
                               Including: Investment income from associates
                                  and joint ventures                                              -2,145,031.45          -1,890,171.00
           III.   Operating profit (“-” denotes loss)                                          355,365,560.00          22,053,283.99
                  Plus: Non-operating income                                                      75,090,038.49         253,711,372.78
                          Including: Gain on disposal of non-current assets                        7,042,678.94          82,529,609.62      15
                  Less: Non-operating expenses                                                     3,331,029.84          14,028,105.87      INTERIM
                          Including: Loss on disposal of non-current assets                        2,683,749.34           8,764,674.26       REPORT
           IV.    Total profit (“-” denotes total loss)                                        427,124,568.65         261,736,550.90
                  Less: Income tax expenses                                                      173,411,302.61          34,033,045.12
           V.     Net profit (“-” denotes net loss)                                            253,713,266.04         227,703,505.78
                  Net profit attributable to owners of the Company                               276,388,070.51         242,461,095.02
                  Minority interest                                                              -22,674,804.47         -14,757,589.24
           VI.    Other comprehensive income after tax, net                                       16,017,289.88          -2,305,777.92
                  Other comprehensive income after tax attributable to
                      owners of the Company, net                                                  16,017,289.88          -2,305,777.92
                  (II) Other comprehensive income that will not be reclassified to
                         profit and loss in subsequent periods                                    16,017,289.88          -2,305,777.92
                           Translation difference of financial statements
                             denominated in foreign currency                                      16,017,289.88          -2,305,777.92
           VII.   Total comprehensive income                                                     269,730,555.92         225,397,727.86

           Total comprehensive income attributable to owners of the Company                      292,405,360.39         240,155,317.10

           Total comprehensive income attributable to minority interest                          -22,674,804.47         -14,757,589.24

           VIII. Earnings per share:
                 (I) Basic earnings per share                                                               0.14                   0.12
                 (II) Diluted earnings per share                                                            0.14                   0.12

           Legal Representative: Chen Hongguo       Financial controller: Dong Lianming   Head of the financial department: Liang Tingkun




                                                                               SHANDONG CHENMING PAPER HOLDINGS LIMITED                       45
          IX Financial Report



          II.   Financial Statements (Cont’d)
                4.   Income statement of the Company

                                                                                                                                        Unit: RMB

                                                                                                            Amounts for            Amounts for
                     Item                                                                            the reporting period       the prior period

                     I.     Revenue                                                                     3,168,439,943.39       3,996,792,004.38
                            Less: Operating costs                                                       2,599,359,718.51       3,157,273,029.32
                                   Business taxes and surcharges                                           13,228,944.39          16,249,023.49
                                   Selling expenses                                                       132,390,470.24         141,537,803.94
                                   Administrative expenses                                                247,053,467.37         263,404,356.79
                                   Finance expenses                                                       655,455,057.16         419,085,682.08
                                   Loss on impairment of assets                                               613,708.24             531,463.30
                                   Investment income (“-” denotes loss)                                 409,332,599.58         228,032,037.93
                                   Including: Investment income from associates and joint ventures           -347,400.41             -74,651.88
                     II.    Operating profit (“-” denotes loss)                                         -70,328,822.94         226,742,683.39
                            Plus: Non-operating income                                                      4,623,094.90          52,625,942.79
                                   Including: Gain on disposal of non-current assets                        2,762,502.62           1,152,350.23
                            Less: Non-operating expenses                                                    2,075,816.44           2,636,144.44
                                   Including: Loss on disposal of non-current assets                        1,922,928.98             207,851.60
15                   III.   Total profit (“-” denotes total loss)                                       -67,781,544.48         276,732,481.74
INTERIM
                            Less: Income tax expenses                                                     -73,979,233.89             885,932.82
 REPORT              IV.    Net profit (“-” denotes net loss)                                             6,197,689.41         275,846,548.92
                     V.     Other comprehensive income after tax, net

                     VI. Total comprehensive income                                                         6,197,689.41         275,846,548.92


                     Legal Representative: Chen Hongguo      Financial controller: Dong Lianming   Head of the financial department: Liang Tingkun




 46       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


II.   Financial Statements (Cont’d)
      5.   Consolidated cash flow statement

                                                                                                                      Unit: RMB

                                                                                             Amounts for          Amounts for
           Item                                                                       the reporting period     the prior period

           I.   Cash flows from operating activities:
                Cash received from sales of goods and rendering of services              9,898,058,035.83     9,887,593,678.02
                Tax rebates received                                                                                509,758.13
                Cash received relating to other operating activities                      571,126,879.30        236,297,041.43

           Subtotal of cash inflows from operating activities                          10,469,184,915.13     10,124,400,477.58

                Cash paid for goods and services                                         7,576,299,500.64     7,174,237,200.77
                Cash paid to and for employees                                             440,902,131.38       438,554,968.19
                Payments of taxes                                                          479,492,280.63       453,797,498.68
                Cash paid relating to other operating activities                         4,195,246,637.21       772,114,548.81

                Subtotal of cash outflows from operating activities                    12,691,940,549.86      8,838,704,216.45

           Net cash flows from operating activities                                     -2,222,755,634.73     1,285,696,261.13

           II. Cash flows from investing activities:
               Cash received from investments                                             100,000,000.00
                                                                                                                                  15
                                                                                                                                  INTERIM
               Net cash received from disposal of fixed assets,                                                                    REPORT
                 intangible assets and other long-term assets                                  111,852.36      114,959,960.80
               Net cash received from disposal of subsidiaries
                 and other business units                                                                       75,035,211.41
               Cash received relating to other investing activities                         31,438,021.33      230,000,000.00

           Subtotal of cash inflows from investing activities                             131,549,873.69       419,995,172.21

                Cash paid for purchase of fixed assets, intangible assets
                  and other long-term assets                                              947,028,823.98      1,214,448,290.91
                Cash paid on investments                                                  386,000,000.00          3,000,000.00
                Cash paid relating to other investing activities                                              1,000,000,000.00

           Subtotal of cash outflows from investing activities                           1,333,028,823.98     2,217,448,290.91

           Net cash flows from investing activities                                     -1,201,478,950.29    -1,797,453,118.70




                                                                              SHANDONG CHENMING PAPER HOLDINGS LIMITED              47
          IX Financial Report


          II.   Financial Statements (Cont’d)
                5.   Consolidated cash flow statement (Cont’d)
                                                                                                           Amounts for             Amounts for
                     Item                                                                           the reporting period        the prior period

                     III. Cash flows from financing activities:
                          Cash received from borrowings                                               17,281,871,535.62      10,114,432,956.75
                          Cash received from bond issue                                                3,585,600,000.00
                          Cash received relating to other financing activities                                                    68,000,000.00

                     Subtotal of cash inflows from financing activities                               20,867,471,535.62      10,182,432,956.75

                        Cash repayments of amounts borrowed                                           15,175,740,399.14        8,173,866,573.80
                        Cash paid for dividend and profit distribution or interest payment               771,500,046.59          653,495,183.98
                        Including: dividend and profit paid to minority interest by subsidiaries                                   2,091,495.75
                        Cash paid relating to other financing activities                                1,767,785,037.29         645,581,019.54

                     Subtotal of cash outflows from financing activities                              17,715,025,483.02        9,472,942,777.32

                     Net cash flows from financing activities                                           3,152,446,052.60         709,490,179.43

                     IV. Effect of foreign exchange rate changes on
                           cash and cash equivalents                                                       20,869,712.49         -12,913,419.68

15                   V. Net increase in cash and cash equivalents
                         Plus: Balance of cash and cash equivalents
                                                                                                         -250,918,819.93         184,819,902.18

INTERIM
 REPORT                        as at the beginning of the period                                          976,096,861.30         726,532,928.96

                     VI. Balance of cash and cash equivalents as at the end of the period                 725,178,041.37         911,352,831.14


                     Legal Representative: Chen Hongguo      Financial controller: Dong Lianming   Head of the financial department: Liang Tingkun




 48       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


II.   Financial Statements (Cont’d)
      6.   Cash flow statement of the Company

                                                                                                                      Unit: RMB

                                                                                             Amounts for          Amounts for
           Item                                                                       the reporting period     the prior period

           I.   Cash flows from operating activities:
                Cash received from sales of goods and rendering of services              3,565,908,328.69    3,549,147,836.05
                Cash received relating to other operating activities                        81,122,254.98       82,491,417.97

                Subtotal of cash inflows from operating activities                       3,647,030,583.67    3,631,639,254.02

                Cash paid for goods and services                                         1,806,037,967.56    1,533,483,679.27
                Cash paid to and for employees                                             190,552,619.28      217,060,276.98
                Payments of taxes                                                           61,089,661.71      182,972,526.03
                Cash paid relating to other operating activities                            73,119,210.01      127,363,732.10

           Subtotal of cash outflows from operating activities                           2,130,799,458.56    2,060,880,214.38

           Net cash flows from operating activities                                      1,516,231,125.11    1,570,759,039.64

           II. Cash flows from investing activities:
               Cash received from investments
               Cash received from investment income
                                                                                          300,000,000.00
                                                                                              903,625.62
                                                                                                               800,000,000.00
                                                                                                                13,613,768.88
                                                                                                                                  15
                                                                                                                                  INTERIM
               Net cash received from disposal of fixed assets,                                                                    REPORT
                 intangible assets and other long-term assets                                      140.00            17,069.00
               Cash received relating to other investing activities                         21,611,333.23

           Subtotal of cash inflows from investing activities                             322,515,098.85       813,630,837.88

                Cash paid for purchase of fixed assets,
                  intangible assets and other long-term assets                             50,797,899.17        80,853,295.53
                Cash paid on investments                                                  459,143,400.00     1,703,929,592.00
                Cash paid relating to other investing activities                                             1,000,000,000.00

           Subtotal of cash outflows from investing activities                            509,941,299.17     2,784,782,887.53

           Net cash flows from investing activities                                       -187,426,200.32    -1,971,152,049.65




                                                                              SHANDONG CHENMING PAPER HOLDINGS LIMITED              49
          IX Financial Report


          II.   Financial Statements (Cont’d)
                6.   Cash flow statement of the Company (Cont’d)

                                                                                                           Amounts for             Amounts for
                     Item                                                                           the reporting period        the prior period

                     III. Cash flows from financing activities:
                          Cash received from borrowings                                                 5,161,426,356.80       5,861,716,631.35
                          Cash received from bond issue                                                 3,585,600,000.00

                     Subtotal of cash inflows from financing activities                                 8,747,026,356.80       5,861,716,631.35

                        Cash repayments of amounts borrowed                                             8,803,455,745.75       4,734,961,076.26
                        Cash paid for dividend and profit distribution or interest payment                370,381,029.51         288,024,703.93
                        Cash paid relating to other financing activities                                  883,402,412.60         379,346,431.66

                     Subtotal of cash outflows from financing activities                              10,057,239,187.86        5,402,332,211.85

                     Net cash flows from financing activities                                          -1,310,212,831.06         459,384,419.50

                     IV. Effect of foreign exchange rate changes on
                           cash and cash equivalents                                                       19,785,229.09          -6,379,154.41
                     V. Net increase in cash and cash equivalents                                          38,377,322.82          52,612,255.08
                         Plus: Balance of cash and cash equivalents
15                             as at the beginning of the period                                           40,590,357.33          64,392,029.09
INTERIM
 REPORT              VI. Balance of cash and cash equivalents as at the end of the period                  78,967,680.15         117,004,284.17


                     Legal Representative: Chen Hongguo      Financial controller: Dong Lianming   Head of the financial department: Liang Tingkun




 50       SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                           II.   Financial Statements (Cont’d)
                                                 7.   Consolidated statement of changes in owners’ equity
                                                      Amounts for the reporting period

                                                                                                                                                                                                                                                                                                                                                              Unit: RMB

                                                      Item                                                                                                                                                                          For the reporting period
                                                                                                                                                                                                  Equity attributable to owners of the Company
                                                                                                                                                      Other equity instruments
                                                                                                                                                                                                                                                Other
                                                                                                                                                                                                                           Less:        comprehensive                                                       General                                                        Total
                                                                                                                                                                                                                                                                                                                                                                                   IX Financial Report




                                                                                                                  Share capital   Preference shares      Perpetual bonds         Others   Capital reserves       treasury shares              income           Special reserves   Surplus reserves   risk provisions    Retained profit   Minority interest      owners’ equity

                                                      I. Balance as at the end of the prior period             1,936,405,467.00                                                           6,149,136,873.41                               33,763,168.13                            1,132,116,106.40                     4,665,921,686.21    430,724,931.85     14,348,068,233.00
                                                      II. Balance as at the beginning of the period            1,936,405,467.00                                                           6,149,136,873.41                               33,763,168.13                            1,132,116,106.40                     4,665,921,686.21    430,724,931.85     14,348,068,233.00
                                                      III. Changes in the period (“-” denotes decrease)                                                                                         1,403.40                               16,017,289.88                                                                     5,291,305.13    -22,674,804.47         -1,364,806.06
                                                           (I) Total comprehensive income                                                                                                                                                16,017,289.88                                                                   276,388,070.51    -22,674,804.47        269,730,555.92
                                                           (II) Capital paid in and reduced by owners                                                                                             1,403.40                                                                                                                                                             1,403.40
                                                                 1. Ordinary shares paid by shareholders                                                                                          1,403.40                                                                                                                                                             1,403.40
                                                           (III) Profit distribution                                                                                                                                                                                                                                   -271,096,765.38                          -271,096,765.38
                                                                 1. Transfer to surplus reserves
                                                                    Transfer to general risk provision
                                                                 3. Distribution to owners (or shareholders)                                                                                                                                                                                                           -271,096,765.38                          -271,096,765.38

                                                      IV. Balance as at the end of the period                  1,936,405,467.00                                                           6,149,138,276.81                               49,780,458.01                            1,132,116,106.40                     4,671,212,991.34    408,050,127.38     14,346,703,426.94




SHANDONG CHENMING PAPER HOLDINGS LIMITED
51
                                                                                                                                                                                                                            15
                                                                                                                                                                                                                   REPORT
                                                                                                                                                                                                                  INTERIM
52
                                                                                                                                                                                                                            15
                                                                                                                                                                                                                   REPORT
                                                                                                                                                                                                                  INTERIM
                                           II.   Financial Statements (Cont’d)
                                                 7.   Consolidated statement of changes in owners’ equity (Cont’d)
                                                      Amounts for the prior period

                                                                                                                                                                                                                                                                                                                                                            Unit: RMB

                                                      Item                                                                                                                                                                            For the prior period
                                                                                                                                                                                                  Equity attributable to owners of the Company
                                                                                                                                                      Other equity instruments
                                                                                                                                                                                                                                                Other
                                                                                                                                                                                                                           Less:        comprehensive                                                     General                                                        Total
                                                                                                                                                                                                                                                                                                                                                                                 IX Financial Report




                                                                                                                  Share capital   Preference shares      Perpetual bonds         Others   Capital reserves       treasury shares              income         Special reserves   Surplus reserves   risk provisions    Retained profit   Minority interest      owners’ equity

                                                      I. Balance as at the end of the prior period             1,975,471,967.00                                                           6,204,682,028.94         30,954,891.40          16,934,073.59      1,132,116,106.40                                        4,741,638,941.58    598,465,306.78     14,638,353,532.89
                                                      II. Balance as at the beginning of the period            1,975,471,967.00                                                           6,204,682,028.94         30,954,891.40          16,934,073.59      1,132,116,106.40                                        4,741,638,941.58    598,465,306.78     14,638,353,532.89
                                                      III. Changes in the period (“-” denotes decrease)        -39,066,500.00                                                             -55,599,816.41        -30,954,891.40          -2,278,577.92                                                               -338,460,545.08   -130,602,452.09       -535,053,000.10
                                                           (I) Total comprehensive income                                                                                                                                                 -2,278,577.92                                                                242,461,095.02    -14,757,589.24        225,424,927.86
                                                           (II) Capital paid in and reduced by owners            -39,066,500.00                                                             -55,599,816.41        -30,954,891.40                                                                                                         -61,913,669.40       -125,625,094.41
                                                                 1. Ordinary shares paid by shareholders         -39,066,500.00                                                             -55,572,616.41        -30,954,891.40                                                                                                         -61,913,669.40       -125,597,894.41




SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                 4. Others                                                                                                                      -27,200.00                                                                                                                                                         -27,200.00
                                                           (III) Profit distribution                                                                                                                                                                                                                                 -580,921,640.10     -53,931,193.45       -634,852,833.55
                                                                 1. Transfer to surplus reserves
                                                                    Transfer to general risk provision
                                                                 3. Distribution to owners (or shareholders)                                                                                                                                                                                                         -580,921,640.10     -53,931,193.45       -634,852,833.55
                                                                 4. Others

                                                      IV. Balance as at the end of the period                  1,936,405,467.00                                                           6,149,082,212.53                                14,655,495.67      1,132,116,106.40                                        4,403,178,396.50    467,862,854.69     14,103,300,532.79



                                                      Legal Representative: Chen Hongguo                                                              Financial controller: Dong Lianming                                                                          Head of the financial department: Liang Tingkun
                                           II.   Financial Statements (Cont’d)
                                                 8.   Statement of changes in owners’ equity of the Company
                                                      Amounts for the reporting period

                                                                                                                                                                                                                                                                                                                 Unit: RMB

                                                      Item                                                                                                                                                   For the reporting period
                                                                                                                                                      Other equity instruments
                                                                                                                                                                                                                                                Other
                                                                                                                                                                                                                             Less:      comprehensive                                                                         Total
                                                                                                                                                                                                                                                                                                                                      IX Financial Report




                                                                                                                  Share capital   Preference shares        Perpetual bonds       Others   Capital reserves         treasury shares            income    Special reserves   Surplus reserves    Retained profit      owners’ equity

                                                      I. Balance as at the end of the prior period             1,936,405,467.00                                                           5,938,839,256.70                                                                 1,119,926,524.49   5,296,499,772.11   14,291,671,020.30
                                                      II. Balance as at the beginning of the period            1,936,405,467.00                                                           5,938,839,256.70                                                                 1,119,926,524.49   5,296,499,772.11   14,291,671,020.30
                                                      III. Changes in the period (“-” denotes decrease)                                                                                         1,403.40                                                                                     -264,899,075.97     -264,897,672.57
                                                           (I) Total comprehensive income                                                                                                                                                                                                         6,197,689.41        6,197,689.41
                                                           (II) Capital paid in and reduced by owners                                                                                             1,403.40                                                                                                                1,403.40
                                                                 1. Ordinary shares paid by shareholders                                                                                          1,403.40                                                                                                                1,403.40
                                                           (III) Profit distribution                                                                                                                                                                                                          -271,096,765.38      -271,096,765.38
                                                                 1. Transfer to surplus reserves
                                                                 2. Distribution to owners (or shareholders)                                                                                                                                                                                  -271,096,765.38      -271,096,765.38
                                                                 3. Others

                                                      IV. Balance as at the end of the period                  1,936,405,467.00                                                           5,938,840,660.10                                                                 1,119,926,524.49   5,031,600,696.14   14,026,773,347.73




SHANDONG CHENMING PAPER HOLDINGS LIMITED
53
                                                                                                                                                                                                             15
                                                                                                                                                                                                   REPORT
                                                                                                                                                                                                  INTERIM
54
                                                                                                                                                                                                             15
                                                                                                                                                                                                   REPORT
                                                                                                                                                                                                  INTERIM
                                           II.   Financial Statements (Cont’d)
                                                 8.   Statement of changes in owners’ equity of the Company (Cont’d)
                                                      Amounts for the prior period

                                                                                                                                                                                                                                                                                                             Unit: RMB

                                                      Item                                                                                                                                                   For the prior period
                                                                                                                                                      Other equity instruments
                                                                                                                                                                                                                                            Other
                                                                                                                                                                                                                          Less:     comprehensive                                                                         Total
                                                                                                                  Share capital   Preference shares        Perpetual bonds       Others   Capital reserves      treasury shares           income    Special reserves   Surplus reserves    Retained profit      owners’ equity
                                                                                                                                                                                                                                                                                                                                  IX Financial Report




                                                      I. Balance as at the end of the prior period             1,975,471,967.00                                                           6,005,426,779.17        30,954,891.40                                        1,119,926,524.49   4,798,391,156.43   13,868,261,535.69
                                                      II. Balance as at the beginning of the period            1,975,471,967.00                                                           6,005,426,779.17        30,954,891.40                                        1,119,926,524.49   4,798,391,156.43   13,868,261,535.69
                                                      III. Changes in the period (“-” denotes decrease)        -39,066,500.00                                                             -66,614,983.35       -30,954,891.40                                                            -305,075,091.18     -379,801,683.13
                                                           (I) Total comprehensive income                        -39,066,500.00                                                             -66,614,983.35       -30,954,891.40                                                             275,846,548.92      201,119,956.97
                                                           (II) Capital paid in and reduced by owners
                                                                 1. Ordinary shares paid by shareholders
                                                                 2. Capital paid by holders of




SHANDONG CHENMING PAPER HOLDINGS LIMITED
                                                                       other equity instruments
                                                                 3. Amounts of share-based payments
                                                                       recognised in owners’ equity
                                                                 4. Others
                                                           (III) Profit distribution                                                                                                                                                                                                      -580,921,640.10      -580,921,640.10
                                                                 1. Transfer to surplus reserves
                                                                 2. Distribution to owners (or shareholders)                                                                                                                                                                              -580,921,640.10      -580,921,640.10
                                                                 3. Others

                                                      IV. Balance as at the end of the period                  1,936,405,467.00                                                           5,938,811,795.82                                                             1,119,926,524.49   4,493,316,065.25   13,488,459,852.56


                                                      Legal Representative: Chen Hongguo                                                         Financial controller: Dong Lianming                                                   Head of the financial department: Liang Tingkun
IX Financial Report


III. General Information of the Company
    Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was incorporated in May 1993 in
    Shouguang City, Shandong Province, with its headquarters at No. 2199 Nongsheng Road East, Shouguang City, Shandong
    Province.

    Its predecessor, Shandong Shouguang Paper Mill Corporation, was reformed as Shandong Shouguang Paper Making,
    Printing and Packaging Group Company Limited through “offering to specific investors” in May 1993, with registered capital
    of RMB66,647,400 and total share capital of 66,647,400 shares. Its shareholding structure is as follows: 46,497,400 sponsor’s
    state-owned shares accounting for 69.76% of total share capital, 1,558,500 domestic legal person shares accounting for 2.34%
    of total share capital and 18,591,500 staff shares, accounting for 27.90% of total share capital.

    On 21 August 1993, replied by the Reply on Changing Shandong Shouguang Papermaking, Printing and Packaging (Group)
    Incorporated Company as Shandong Shouguang Papermaking (Group) Incorporated Company (Shou Gai Fa [1993] No.
    23) verified and issued by the Shandong Shouguang Office for Restructuring Economic System, Shandong Shouguang
    Papermaking, Printing and Packaging (Group) Incorporated Company was changed as Shandong Shouguang Papermaking
    (Group) Incorporated Company, with the relevant industrial and commercial alteration registration procedures completed on
    8 October 1993. On 4 December 1996, according to the Letter on Agreeing to Determine Shandong Shouguang Papermaking
    Group Incorporated Company (Lu Ti Gai Han Zi [1996] No. 123) verified and issued by the Shandong Commission for
    Restructuring Economic System and the Shandong Incorporated Company Approval Certificate (Lu Zheng Gu Zi [1996] No.
    98) verified and issued by the People’s Government of Shandong Province, it was agreed to change Shandong Shouguang
    Papermaking Group Incorporated Company as Shandong Chenming Paper Holdings Limited (present name of the Company).

    On 27 October 1996, at the third general meeting of the Company, the Company passed the profit distribution plan to deliver 3.5
    bonus shares per 10 shares for the year of 1995, and the proposal of converting such above shares into state-owned shares
    as well. After such bonus share issue and conversion into capital, the Company’s share capital was changed from 66,647,400       15
    shares into 99,840,990 shares.                                                                                                    INTERIM
                                                                                                                                       REPORT
    In December 1996, with approval by the Letter on Recommending Shandong Shouguang Papermaking Group Incorporated
    Company to Issue B Shares (Lu Zheng Zi [1996] No. 270) verified and 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 the
    incorporated company established by share offer.

    On 4 February 1997, the Company held the fourth general meeting, which passed the proposal that the Company absorbed
    and merged Shouguang Yongli Paper Co., Ltd. and the profit distribution plan to deliver 4 bonus shares per 10 shares for
    1996. After bonus shares distribution, the Company’s share capital was changed from 99,840,990 shares into 158,855,665
    shares.

    On 30 April 1997, according to approval by the Letter on Recommending Shandong Shouguang Papermaking Group
    Incorporated Company to Issue B Shares (Lu Zheng Zi [1996] No. 270) verified and issued by the People’s Government of
    Shandong Province, the Reply on Shandong Chenming Paper Co., Ltd. to Issue Foreign Shares Listed in China (Zheng Wei
    Fa [1997] No. 26) verified and issued by the Securities Committee of the State Council, and Shen Zheng Fa [1997] No. 188
    of the Shenzhen Stock Exchange, the Company issued 115,000,000 domestic listed foreign shares (B shares), which were
    listed on Shenzhen Stock Exchange on 26 May 1997. After issuance, the Company’s total share capital was increased from
    158,855,665 shares to 273,855,665 shares. The Company was changed as the foreign-invested incorporated company by the
    Reply on Changing Shandong Chenming Paper Group Incorporated Company as the Foreign-invested Incorporated Company
    ([1997] Wai Jing Mao Zi Er Han Zi No. 415) verified and issued by the original Ministry of Foreign Trade and Economic
    Cooperation.

    On 22 November 1997, the Company held the extraordinary general meeting in 1997 and passed the Proposal of Converting
    Capital Reserve into Share Capital by discussion, to convert capital reserve into share capital of 109,542,266 shares at
    the ratio of 10:4 according to the Company’s share capital of 273,855,665 shares on 30 June 1997. Upon conversion, the
    Company’s total share capital was changed to 383,397,931 shares.




                                                                           SHANDONG CHENMING PAPER HOLDINGS LIMITED                     55
          IX Financial Report


          III. General Information of the Company (Cont’d)
              With approval by the Notice about Approving Application of Shandong Chenming Paper Group Incorporated Company to
              Issue Shares (Zheng Jian Gong Si Zi [2000] No. 151) verified and issued by the China Securities Regulatory Commission on
              30 September 2000 and the Notice of Listing (Sheng Zheng Shang [2000] No. 151) verified and issued by the Shenzhen Stock
              Exchange on 15 November 2000, the Company issued 70 million RMB ordinary shares (A shares), which were listed and
              traded on Shenzhen Stock Exchange on 20 November 2000. After issuance, the Company’s total share capital was increased
              from 383,397,931 shares to 453,397,931 shares.

              In May 2001, with approval by the Notice on Approving Non-listed Foreign Shares of Shandong Chenming Paper Group
              Incorporated Company for Circulation (Zheng Jian Gong Si Zi [2001] No. 44) verified and issued by the China Securities
              Regulatory Commission on 19 April 2001, 26,709,591 original non-tradable foreign legal person shares held by Guanghua
              Company were converted into B shares and listed on Shenzhen Stock Exchange. Listed tradable B shares of the Company
              were increased to 187,709,591 shares.

              On 28 June 2001, the Company held 2000 general meeting and passed the year 2000 profit distribution plan by discussion. It
              presented 1 bonus share per 10 shares to all shareholders based on the total share capital of 453,397,931 shares at the end
              of 2000, to increase 45,339,793 shares in total. After the bonus shares distribution, the Company’s total share capital was
              increased to 498,737,724 shares.

              In May 2003, the Company implemented the 2002 profit distribution to present 2 bonus shares per 10 shares, and converted
              into 6 share capitals per 10 capital reserves to increase 398,990,179 shares in total. After the bonus shares distribution and
              conversion, the Company’s total share capital was increased from 498,737,724 shares to 897,727,903 shares.

              On 15 September 2004, with approval by the Notice on Approving Shandong Chenming Paper Group Incorporated Company
15            to Publicly Issue Convertible Bonds ([2004] No. 147) verified and issued by the China Securities Regulatory Commission, the
              Company publicly issued 20 million convertible bonds with face value of RMB100, total issuance of RMB2 billion and term of
INTERIM
 REPORT       five years, and listed and traded on Shenzhen Stock Exchange on 30 September 2004. The conversion period lasted from 15
              March 2005 to 15 September 2009. The bond was called Chenming Convertible Bond as its short name, with the convertible
              bond code of 125488.

              On 29 April 2005, the Company held 2004 general meeting and passed the 2004 profit distribution plan by discussion. It
              converted into 3 share capitals per 10 capital reserves based on the total share capital of 897,727,903 shares at the end of
              2004. The Company’s change of share capital was replied by the Reply on Agreeing Capital Increase of Shandong Chenming
              Paper Group Incorporated Company (Shang Zi Pi [2005] No. 1364) verified and issued by the Ministry of Commerce of the
              People’s Republic of China. According to the above resolution and reply, the Company implemented the distribution plan to
              deliver 2 bonus shares per 10 shares to all shareholders and converting into 3 capital shares per 10 capital reserves based on
              the total share capital of 897,728,913 shares on 19 May 2005, the date of record (as of 19 May 2005, the Company converted
              into share capital of 1,010 shares from convertible bonds). After the bonus shares distribution and conversion, the Company’s
              total share capital was increased to 1,346,593,369 shares.

              On 6 April 2007, the Company’s 21st meeting of the fourth session of the board of directors discussed to pass the Proposal
              on Exercising Redemption Right for Convertible Bonds under Redemptive Condition but Not Converted. It decided that the
              Company could redeem the Chenming convertible bonds which were not converted before the date of redemption according
              to procedures agreed in the Prospectuses and 105% of face value (including the current interests) after actually meeting
              relevant redemptive condition of the Prospectuses of convertible bonds. On 14 May 2007, the Company converted the
              Chenming Convertible Bonds and total shares were increased to 1,706,345,941 shares.

              Replied by Zheng Jian Xu Ke [2008] No. 290 document of the Reply on Approving Shandong Chenming Paper Group
              Incorporated Company to Issue Foreign Shares by the China Securities Regulatory Commission, and with reply by the Stock
              Exchange of Hong Kong Ltd. (hereinafter referred to as the Stock Exchange of Hong Kong), the Company was approved
              to publicly issue the overseas listed foreign shares (H shares). The Company publicly offered 355,700,000 H shares all over
              the world and listed for trading on the main board of Stock Exchange of Hong Kong on 18 June 2008. The share was called
              Chenming Paper as its short name with the stock code of HK1812. After offering, the Company’s total shares were increased
              to 2,062,045,941 shares.




 56       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


III. General Information of the Company (Cont’d)
    Pursuant to resolutions of the 2012 Third Extraordinary General Meeting, resolutions of the 2012 First Class Meeting for
    Holders of Domestic Listed Share (A shares and B shares), resolutions of the 2012 First Class Meeting for Holders of Overseas
    Listed Share (H shares) and the Articles of Association (as amended), the Company applied for the reduction of share capital
    of RMB86,573,974, including a decrease of 86,573,974 domestic listed foreign shares (B shares) at RMB1 per share. From 7
    March 2013 to 11 December 2013, the Company repurchased 86,573,974 domestic listed foreign shares (B shares), and the
    repurchased shares were cancelled on 24 December 2013. The share capital of the Company was RMB1,975,471,967 upon
    such change.

    Pursuant to resolutions of the 2013 First Extraordinary General Meeting, resolutions of the 2013 First Class Meeting for
    Holders of Domestic Listed Share (A shares and B shares), resolutions of the 2013 First Class Meeting for Holders of Overseas
    Listed Share (H shares) and the Articles of Association (as amended), the Company applied for the reduction of share capital
    of RMB39,066,500, including a decrease of 39,066,500 overseas listed foreign shares (H shares) at RMB1 per share. From
    11 December 2013 to 9 May 2014, the Company repurchased 39,066,500 overseas listed foreign shares (H shares), and the
    repurchased shares were cancelled on 14 May 2014. The share capital of the Company was RMB1,936,405,467 upon such
    change.

    The Registration No. of the Business License for Enterprise Legal Person is 370000400001170.

    The Company has a long business period. In the opinion of the Board of the Company, the Company is capable of operating
    subsidiaries of a limited business period as a going concern upon expiry of their business period.

    The financial statements were considered and approved by the board of directors of the Company on 27 August 2015.

    The Company and its subsidiaries (hereinafter referred to as the (“Group”) are principally engaged in processing and sale of
    paper products (including machine made paper and paper board), paper making raw materials and machinery; generation              15
    and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing,          INTERIM
                                                                                                                                      REPORT
    processing and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards,
    equipment financial and operating leasing, etc.

    Subsidiaries of the Company included in the scope of consolidation for the first half of 2015 totalled 51. For details, please
    refer to this Note IX “Equity in other entities”. The scope of consolidation of the Company during the year had 2 additional
    companies included compared to the prior year. For details, please refer to this Note VIII “Changes in the scope of
    consolidation”.


IV. Basis of Preparation of the Financial Statements
    1.   Basis of preparation
         The Group’s financial statements are prepared on a going concern basis and based on actual transactions and events,
         in accordance with the accounting standards for business enterprises promulgated by the Ministry of Finance of
         PRC ((Order of Ministry of Finance No. 33 Issue and Order of Ministry of Finance No. 76 Amendment) and 41 specific
         accounting standards as promulgated and amended on and after February 15 2006, the application guidelines of the
         Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards for
         Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on the
         Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial
         Reports” (revised in 2014) of China Securities Regulatory Commission.

         The Group’s financial statements have been prepared on an accrual basis in accordance with the ASBEs. Except
         for certain financial instruments and consumable biological assets, the financial statements are prepared under
         the historical cost convention. In the event that depreciation of assets occurs, a provision for impairment is made
         accordingly in accordance with the relevant regulations.

    2.   Going concern
         No facts or circumstances comprise a material uncertainty about the Company’s going concern basis within 12 months
         since the end of the reporting period.




                                                                          SHANDONG CHENMING PAPER HOLDINGS LIMITED                     57
          IX Financial Report


          V.   Significant Accounting Policies and Accounting Estimates
               1.   Statement of Compliance with the Accounting Standards for Business Enterprises
                    The financial statements have been prepared by the Company in conformity with the ASBEs, which truly and fully
                    reflect the financial position of the consolidated entity and the Company as at 30 June 2015 and relevant information
                    such as the operating results and cash flows of the consolidated entity and the Company for the first half of 2015. In
                    addition, the financial statements of the Company also comply with, in all material respects, the disclosure requirements
                    of the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General
                    Requirements for Financial Reports” revised by the China Securities Regulatory Commission in 2014 and the notes
                    thereto.

               2.   Accounting period
                    The accounting periods of the Group are divided into annual periods and interim periods. Interim periods refer to
                    reporting periods that are shorter than a full accounting year. The accounting year of the Group is from 1 January to 31
                    December of each calendar year.

               3.   Operating cycle
                    Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Group until their
                    realisation in cash or cash equivalents. The operating cycle of the Group lasts for 12 months, and acts as an indicator
                    for classification of liquidity of assets and liabilities.

                    Our subsidiaries, including Zhanjiang Chenming Arboriculture Co., Ltd., Yangjiang Chenming Arboriculture Co., Ltd.,

15                  Nanchang Chenming Arboriculture Co., Ltd., Huanggang Chenming Arboriculture Co., Ltd. and Chenming Arboriculture
                    Co., Ltd., were engaged in arboriculture cultivating, plantation and sale. Their ordinary operating cycle lasts for over 1
INTERIM
 REPORT             year.

               4.   Reporting currency
                    The Company and its domestic subsidiaries recognise RMB as their reporting currency according to the primary
                    economic environment in which they operate. The reporting 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”)
                    and Euro (“EUR”) as their respective reporting currency according to the general economic environment in which these
                    subsidiaries operate. The Company prepares its financial statements in RMB.




 58       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
     5.   Accounting treatment(s) of business combination under common control and not under common control
          Business combinations refer to the transactions or events in which two or more separate enterprises merged as a single
          reporting entity. Business combinations are divided into business combination under common control and not under
          common control.

          (1)   Business combination under common control

                A business combination involving enterprises under common control is a business combination in which all of the
                combining enterprises are ultimately controlled by the same party or parties before and after the combination,
                and that control is not transitory. The party that, on the combination date, obtains control of another enterprise
                participating in the combination is the absorbing party, while that other enterprise participating in the combination
                is a party being absorbed. The combination date is the date on which one combining enterprise effectively obtains
                control of the other combining enterprises.

                Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination
                date as recorded by the party being merged. The difference between the carrying amount of the net assets
                obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value
                of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve
                (share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained
                earnings.

                Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to
                profit or loss in the period in which they are incurred.
                                                                                                                                               15
                                                                                                                                               INTERIM
          (2)   Business combination not under common control                                                                                   REPORT

                A business combination not involving enterprises under common control is a business combination in which
                all of the combining enterprises are not ultimately controlled by the same party or parties before and after the
                combination. For a business combination not involving enterprises under common control, the party that, on the
                acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that
                other enterprise participating in the combination is the acquiree. The acquisition date is the date on which the
                acquirer effectively obtains control of the acquiree.

                For business combination involving entities not under common control, the cost of a business combination is
                the aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and
                equity instruments issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire plus
                agency fee such as audit, legal service and evaluation consultation and other management fees charged to the
                profit or loss for the period when incurred. As equity or debt securities are issued by the acquirer as consideration,
                any attributable transaction cost is included their initial costs. Involved contingent consideration charged to the
                combination cost according to its fair value on the acquisition date, the combined goodwill be will be adjusted
                if new or addition evidence existed about the condition in the acquisition date within twelve months after the
                acquisition date, which is required to adjust the contingent consideration. The combination cost incurred by the
                acquirer and the identifiable net assets acquired from the combination are measured at their fair values. Where the
                cost of a business combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net
                assets on the acquisition date, the difference is recognised as goodwill. Where the cost of a business combination
                is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirer shall first
                reassess the measurement of the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
                and the measurement of the cost of combination. If after such reassessment the cost of combination is still less
                than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is charged to
                profit or loss for the period.




                                                                               SHANDONG CHENMING PAPER HOLDINGS LIMITED                          59
          IX Financial Report


          V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
               5.   Accounting treatment(s) of business combination under common control and not under common control
                    (Cont’d)
                    (2)   Business combination not under common control (Cont’d)

                          In relation to the deductible temporary difference acquired from the acquiree, which was not recognised as
                          deferred tax assets due to non-fulfilment of the recognition criteria at the date of the acquisition, if new or
                          further information that is obtained within 12 months after the acquisition date indicates that related conditions
                          at the acquisition date already existed, and that the implementation of the economic benefits brought by the
                          deductible temporary difference of the acquiree can be expected, the relevant deferred tax assets shall be
                          recognised and goodwill shall be deducted. When the amount of goodwill is less than the deferred tax assets that
                          shall be recognised, the difference shall be recognised in the profit or loss of the period. Except for the above
                          circumstances, deferred tax assets in relation to business combination are recognised in the profit or loss of the
                          period.

                          For a business combination not under common control is finished by a stage-up approach with several
                          transactions, these several transactions will be judged whether they belong to “transactions in a basket” in
                          accordance with the judgement standards on “transactions in a basket” as set out in the Notice of the Ministry of
                          Finance on Issuing Accounting Standards for Business Enterprises Interpretation No. 5 (Cai Kuai [2012] No. 19)
                          and “Accounting Standard for Business Enterprises No. 33 – Consolidated Financial Statements”(see Note V. 6 (2)).
                          If they belong to “transactions in a basket”, they are accounted for with reference to the descriptions as set out in
                          the previous paragraphs of this section and Note V. 13 “Long-term equity investments”, and if they do not belong
                          to “transactions in a basket”, they are accounted for in separate financial statements and consolidated financial
15                        reports:
INTERIM
 REPORT                   In separate financial statements, the initial equity investment cost is the aggregate of the carrying amount of the
                          equity investment in the acquiree held prior to the acquisition date and the investment cost newly added as at the
                          acquisition date. In respect of any other comprehensive income attributable to the equity interest in the acquiree
                          prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment
                          as direct disposal of relevant asset or liability by the acquiree at the time of disposal (i.e. to be transferred to
                          investment income for the period, except for the changes arising from re-measuring net assets or net liabilities of
                          defined benefit plan using the equity method attributable to the acquiree).

                          In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is
                          remeasured at fair value as at the acquisition date, and the difference between the fair value and the carrying
                          amount is recognised as investment income for the current period. In respect of any other comprehensive income
                          attributable to the equity interest in the acquiree held prior to the acquisition date, other comprehensive income
                          is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree
                          (i.e. to be transferred to investment income at the acquisition date, except for the changes arising from re-
                          measuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree)
                          is transferred to investment income in the period of the acquisition date.




 60       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
     6.   Preparation of consolidated financial statements
          (1)   Basis for principle of determining the scope of consolidated financial statements

                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 scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an
                entity controlled by the Company.

                The Company will conduct reassessment in the event there are changes in actual condition and situation causing
                changes in relevant elements involved in the definition of control above.

          (2)   Basis for preparation of the consolidated financial statements

                Subsidiaries are consolidated from the date on which the Company obtains net assets and the effective control of
                decision making of production and operation and are deconsolidated from the date that such control ceases. For
                disposal of subsidiaries, the operating results and cash flows of such subsidiaries before the date of disposal are
                properly included into the consolidated income statement and consolidated cash flow statements; for disposal of
                subsidiaries during the reporting period, no adjustment shall be made to the opening balance of the consolidated
                balance sheet. For those subsidiaries acquired through business combination not under common control, the
                operating results and cash flows after the acquisition date have been properly included in the consolidated income
                statements and consolidated cash flow statements. No adjustments shall be made to the opening balance of the
                consolidated balance sheet and the comparative consolidated financial statements amount. For those subsidiaries
                acquired through business combination under common control, the operating results and cash flows from the
                                                                                                                                         15
                                                                                                                                         INTERIM
                beginning of the consolidation period to the consolidation date are also presented in the consolidated income             REPORT
                statement and the consolidated cash flow statements. The comparative amounts presented in the consolidated
                financial statements are also adjusted accordingly.

                The financial statements of the subsidiaries are adjusted in accordance with the accounting policies and
                accounting period of the Company in the preparation of the consolidated financial statements, where the
                accounting policies and the accounting periods are inconsistent between the Company and the subsidiaries. For
                acquisition of subsidiaries arising from merger of entities not under same control, the financial statements of the
                subsidiaries will be adjusted according to the fair value of the identifiable net assets.

                All intra-company significant balances, transactions and unrealised profit are eliminated in the consolidated
                financial statements.

                The shareholders’ equity and the portion of the profit or loss for the period that is not attributable to the Company
                are presented separately under shareholders’ equity and net profit in the consolidated financial statements.
                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”“net profit” line item as “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.




                                                                            SHANDONG CHENMING PAPER HOLDINGS LIMITED                       61
          IX Financial Report


          V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
               6.   Preparation of consolidated financial statements (Cont’d)
                    (2)   Basis for preparation of the consolidated financial statements (Cont’d)

                          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 share of net assets of the former subsidiary calculated continuously since the purchase date based on the
                          shareholding percentage before disposal are recognised as investment income in the period when the control is
                          lost. Other comprehensive income related to equity investment in the subsidiary is accounted for on the same
                          accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time when the control
                          is lost (i.e. to be transferred to investment income, except for the changes arising from re-measuring net assets
                          or net liabilities of defined benefit plan of the subsidiary using the equity method). The remaining equity interests
                          are measured subsequently according to “Accounting Standard for Business Enterprises No. 2 – Long-term
                          Equity Investments” or “Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of
                          Financial Instruments”. See Note V. 13 “Long-term equity investments” or Note V. 10 “Financial instruments” for
                          details.

                          When the Company disposes of equity investment in a subsidiary by a stage-up approach with several
                          transactions until the control over the subsidiary is lost, it shall determine whether these several transactions
                          related to the disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong to
                          “transactions in a basket”. Usually, these several transactions related to the disposal of equity investment in a
                          subsidiary are accounted for as transactions in a basket when the terms, conditions and economic impacts of
15                        these several transactions meet the following one or more conditions: (i) these transactions are entered into at the
INTERIM                   same time or after considering their impacts on each other; (ii) these transactions as a whole can reach complete
 REPORT
                          business results; (iii) the occurrence of a transaction depends on at least the occurrence of an other transaction;
                          (iv) an individual transaction is not deemed as economic, but is deemed as economic when considered with
                          other transactions. If they are not transactions in a basket, each of which are accounted for in accordance with
                          applicable rules in “partial disposal of long-term equity investment of a subsidiary without losing control over a
                          subsidiary” (see Note V. 13 (2) ) separately, and “the control over a subsidiary is lost due to partial disposal
                          of equity investment or other reasons” (see the preceding paragraph). When several transactions related to the
                          disposal of equity investment in a subsidiary until the control over the subsidiary is lost belong to transactions
                          in a basket, each of which is accounted for as disposal of a subsidiary with a transaction until the control over a
                          subsidiary is lost; however, the different between the amount of disposal prior to the loss of control and the net
                          assets of a subsidiary attributable to the disposal investment shall be recognised as other comprehensive income
                          in consolidated financial statements and transferred to profit or loss at the time when the control is lost.




 62       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
     7.   Classification of joint arrangements and accounting treatment for joint ventures
          A joint arrangement refers to an arrangement of two or more parties have joint control. In accordance with the Group’s
          rights and obligations under a joint arrangement, the Group classifies joint arrangements into: joint ventures and joint
          operations. Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets and
          obligations of this arrangement. Joint ventures refer to a joint arrangement during which the Group only is entitled to net
          assets of this arrangement.

          The Group treats investments in joint ventures by using the equity method of accounting in accordance with accounting
          policies as set out in Note V.13. (2) “long-term equity investments by using equity method of accounting”.

          The Group shall, as a joint venture, recognise the assets held and obligations assumed solely by the Group, and
          recognise assets held and obligations assumed jointly by the Group in appropriation to the share of the Company;
          recognise revenue from disposal of the share of joint operations of the Group; recognise fees solely occurred by Group
          and recognise fees from joint operations in appropriation to the share of the Group.

          When the Group, as a joint venture, invests or sells assets (the assets dose not constitute a business, the same below)
          to or purchase assets from joint operations, the Group shall only recognise the part of profit or lost from this transaction
          attributable to other parties of joint operations before these assets are sold to the third party. If the occurrence of these
          assets meet the impairment loss of asset as set our in “Accounting Standard for Business Enterprises No. 8 – Asset
          Impairment”, the Company shall recognise the full amount of this loss in relation to the Group invests in or sells assets
          to joint operations; the Group recognise the loss according to the Group’s share of commitment in relation to the Group
          purchase assets from joint operations.

     8.   Standards for recognising cash and cash equivalents
                                                                                                                                          15
                                                                                                                                          INTERIM
                                                                                                                                           REPORT
          Cash and cash equivalents of the Group include cash on hand, deposits readily available for payment purpose and
          short-term (normally fall due within three months from the date of acquisition) and highly liquid investments held the
          Company which are readily convertible into known amounts of cash and which are subject to insignificant risk of value
          change.

     9.   Foreign currency operations and translation of statements denominated in foreign currency
          (1)   Basis for translation of foreign currency transactions

                The foreign currency transactions of the Group, when initially recognised, are translated into functional currency at
                the prevailing spot exchange rate on the date of exchange, i.e. the middle price of RMB exchange rate published
                by the People’s Bank of China on that date in general and the same hereinafter, while the foreign currency
                exchange operations and transactions in connection with foreign currency exchange shall be translated into
                functional currency at the exchange rate actually adopted.

          (2)   Basis for translation of foreign currency financial statements

                Basis for translation of foreign currency monetary items and foreign currency non-monetary items On the balance
                sheet date, foreign currency monetary items shall be translated at the spot exchange rate (generally, a spot
                exchange rate is the middle price quoted by the People’s Bank of China on the day of transaction) on the balance
                sheet date. All differences are included in the consolidated income statement, except for: (i) the differences arising
                from foreign currency borrowings related to the acquisition or construction of fixed assets which are qualified for
                capitalisation; and (ii) other carrying amounts of the amortisation costs, the differences arising from changes of the
                foreign currency items available for sale.

                Exchange differences arising from change in exchange rate where the preparation of consolidated financial
                statements relates to foreign operations and foreign currency monetary items materially constitute net investment
                in foreign operations shall be recorded into “other comprehensive income”; disposal of foreign operations shall be
                included into profits and losses on disposal in the current period.




                                                                             SHANDONG CHENMING PAPER HOLDINGS LIMITED                       63
          IX Financial Report


          V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
               9.   Foreign currency operations and translation of statements denominated in foreign currency (Cont’d)
                    (2)   Basis for translation of foreign currency financial statements (Cont’d)

                          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 reporting currency before and after the translation will be treated as
                          changes in fair value (including changes in foreign exchange rates) and recognised in profit or loss for the period
                          or recognised as other comprehensive income.

                    (3)   Basis for translation of foreign currency financial statements

                          Exchange differences arising from change in exchange rate where the preparation of consolidated financial
                          statements relates to foreign operations and foreign currency monetary items materially constitute net investment
                          in foreign operations shall be recorded into “other comprehensive income” under “translation reserve”; disposal of
                          foreign operations shall be included into profits and losses on disposal in the current period.

                          The financial statements denominated in foreign currency of a foreign operation are translated to RMB in
                          compliance with the following requirements: 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 spot exchange rate at the date of transaction. The retained profit brought
15                        forward are reported at the prior year’s closing balance; the retained profit as at the end of the year are presented
                          after translated the profit appropriation items; differences between the aggregate of asset and liability items and
INTERIM
 REPORT                   owners’ equity items are recognised as “translation differences arising on the translation of financial statements
                          denominated in foreign currencies” in other comprehensive income. 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 owners’ 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.

                          Cash flow dominated in foreign currency or from foreign subsidiaries shall be translated at the spot exchange rate
                          when it incurs. Effects arising from changes of exchange rate of cash shall be presented separately in the cash
                          flow statements.

                          The opening balance and the prior year’s figures are presented according to the translated amounts of the prior
                          year.

                          On disposal of the entire owners’ equity in a foreign operation of the Company, or upon a loss of control over
                          a foreign operation due to disposal of certain equity investment or other reasons, the Company transfers the
                          exchange differences arising on translation of financial statements of this foreign operation attributable to owners’
                          equity of parent company presented under owners’ equity in the balance sheet, to profit or loss in the period in
                          which the disposal took place.

                          In case of partial disposal of equity investment or other reason that result in reduction in shareholding in a
                          foreign operation without losing control over it, the proportionate share of exchange differences arising from the
                          translation of financial statements will attributable to minority interests and will not recognised in profit or loss. For
                          partial disposals of equity interests in foreign operations which are associates or joint ventures, the proportionate
                          share of the exchange differences arising from the translation of financial statements of foreign operations is
                          reclassified to profit or loss.




 64       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
     10. Financial instruments
         Financial asset or financial liability will be recognised when the Group became one of the parties under a financial
         instrument contract. Financial assets and financial liabilities are initially recognised at fair value, except for equity
         instruments that are not quoted in an active market, the fair value of which cannot be reliably measured and over
         relevant investees of which the Company does not have control, joint control or significant influence, and debt financing
         instruments subsequently measured at amortised cost using the effective interest method. For financial assets and
         financial liabilities measured at fair value and whose changes are carried through profit or loss, relevant transaction
         costs are directly recognised in profit or loss for the period. For financial assets and financial liabilities classified as other
         categories, relevant transaction costs are included in the amount initially recognised.

         (1)   Determination of fair values for financial assets and financial liabilities

               The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a
               liability in an orderly transaction between market participants on the date of measurement. Financial instruments
               exist in an active market. Fair value is determined based on the quoted price in such market. An active market
               refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organisations and
               price fixing service organisations, representing the actual price of a market transaction that takes place in a fair
               deal. While financial instruments do not exist in an active market, the fair value is determined using valuation
               techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent
               market transactions entered into by both willing parties, reference to present fair values of similar other financial
               instruments, cash flow discounting method and option pricing models.

         (2)   Classification, recognition and measurement of financial assets
                                                                                                                                              15
                                                                                                                                              INTERIM
                                                                                                                                               REPORT
               Conventionally traded financial assets shall be recognised and derecognised at the trading date. Financial assets
               shall be classified into loans and accounts receivable, available-for-sale financial assets and others for initial
               recognition.

                     Loans and receivables

                     They are non-derivative financial assets with fixed or determinable payments that are not quoted in an
                     active market. Financial assets, including bills receivable, accounts receivable, interest receivable, dividends
                     receivable and other receivables are classified as loans and receivables by the Company.

                     Loans and receivables are measured subsequently at the amortised cost by using the effective interest rate
                     method. Gains or losses incurred at the time of derecognition, impairment or amortisation are charged to
                     profit or loss in the current period.

                     Available-for-sale financial assets

                     Available-for-sale financial assets represent equity instruments of relevant investees over which the
                     Company does not have control, joint control or significant influence.

                     Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change
                     in fair value are recognised as other comprehensive income, except for impairment loss and exchange
                     differences arising from foreign monetary financial assets and amortised cost which are accounted for
                     through profit or loss for the current period. The financial assets will be transferred out of the financial assets
                     on derecognition and accounted for through profit or loss for the current period. However, equity investment
                     that is not quoted in an active market and the fair value of which cannot be measured reliably are subsequently
                     measured at cost.

                     Interests received from available-for-sale financial assets held and the cash dividends declared by the
                     investee are recognised as investment income.




                                                                              SHANDONG CHENMING PAPER HOLDINGS LIMITED                          65
          IX Financial Report


          V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
               10. Financial instruments (Cont’d)
                    (3)   Impairment of financial assets

                          In addition to financial assets at fair value through profit or loss for the current period, the Group reviews the book
                          value of other financial assets at each balance sheet date and provide for impairment where there is objective
                          evidence that financial assets are impaired.

                          For a financial asset that is individually significant, the Group assesses the asset individually for impairment.
                          For a financial asset that is not individually significant, the Group assess the asset individually for impairment or
                          include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them
                          for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed
                          financial asset, whether the financial asset is individually significant or not, the financial asset is included in a
                          group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Financial
                          assets for which an impairment loss is individually recognised are not included in the collective assessment for
                          impairment.

                               Impairment of loans and receivables

                                The carrying amount of financial assets measured as costs or amortised costs are subsequently reduced
                                to the present value discounted from its projected future cash flow. The reduced amount is recognised as
                                impairment loss and recorded as profit or loss for the period. After recognition of the impairment loss from
                                financial assets, if there is objective evidence showing recovery in value of such financial assets impaired
                                and which is related to any event occurring after such recognition, the impairment loss originally recognised
15                              shall be reversed to the extent that the carrying value of the financial assets upon reversal will not exceed
INTERIM                         the amortised cost as at the reversal date assuming there is no provision for impairment.
 REPORT
                               Impairment of available-for-sale financial assets

                                In the event that decline in fair value of the available-for-sale equity instrument is regarded as “severe
                                decline” or “non-temporary decline” on the basis of comprehensive related factors, it indicates that
                                there is impairment loss of the available-for-sale equity instrument. In particular, “severe decline” refers
                                to accumulative decline in fair value is more than 20%. “Non-temporary decline” refers to the fair value
                                decreased continuously for more than 12 months. The continuous decreasing period is determined on the
                                basis of the drop of fair value accumulated over 10%.

                                When the available-for-sale financial assets impair, the accumulated loss originally included in the other
                                comprehensive income arising from the decrease in fair value was transferred out from the capital reserve
                                and included in the profit or loss for the period. The accumulated loss that transferred out from the capital
                                reserve is the balance of the acquired initial cost of asset, after deduction of the principal recovered,
                                amortised amounts, current fair value and the impairment loss originally included in the profit or loss.

                                After recognition of the impairment loss, if there is objective evidence showing recovery in value of such
                                financial assets impaired and which is related to any event occurring after such recognition in subsequent
                                periods, the impairment loss originally recognised shall be reversed. The impairment loss reversal of the
                                available-for-sale equity instrument will be recognised as other comprehensive income, and the impairment
                                loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period.

                                When an equity investment that is not quoted in an active market and the fair value of which cannot be
                                measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that
                                shall be settled by delivery of that equity instrument, then it will not be reversed.




 66       SHANDONG CHENMING PAPER HOLDINGS LIMITED
IX Financial Report


V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
     10. Financial instruments (Cont’d)
          (4)   Recognition and measurement of transfers of financial asset

                Financial asset that satisfied any of the following criteria shall be derecognised:      the contract right to recover
                the cash flows of the financial asset has terminated;     the financial asset, along with substantially all the risk and
                return arising from the ownership of the financial asset, has been transferred to the transferee; and       the financial
                asset has been transferred to the transferee, and the transferor has given up the control on such financial asset,
                though it does not assign maintain substantially all the risk and return arising from the ownership of the financial
                asset.

                When the entity does not either assign or maintain substantially all the risk and return arising from the ownership
                of the financial asset and does not give up the control on such financial asset, to the extent of its continuous
                involvement in the financial asset, the entity recognises it as a related financial asset and recognises the relevant
                liability accordingly. The extent of the continuous involvement is the extent to which the entity exposes to changes
                in the value of such financial assets.

                On derecognition of a financial asset, the difference between the following amounts is recognised in profit or loss
                for the current period: the carrying amount and the sum of the consideration received and any accumulated gain
                or loss that had been recognised directly in equity.

                If a part of the financial assets qualifies for derecognition, the carrying amount of the financial asset is allocated
                between the part that continues to be recognised and the part that qualifies for derecognition, based on the fair
                values of the respective parts. The difference between the following amounts is recognised in profit or loss for the
                period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition             15
                and the aforementioned carrying amount.                                                                                        INTERIM
                                                                                                                                                REPORT
                For financial assets that are sold or transferred with recourse or endorsement, the Company need to determine
                whether the risk and rewards of ownership of the financial asset have been substantially transferred. If the risk
                and rewards of ownership of the financial asset have been substantially transferred, the financial assets shall be
                derecognised. If the risk and rewards of ownership of the financial asset have been retained, the financial assets
                shall not be derecognised. If the Company neither transfers nor retains substantially all the risks and rewards of
                ownership of the financial asset, the Company shall assess whether the control over the financial asset is retained,
                and the financial assets shall be accounting for according to the above paragraphs.

          (5)   Classification and measurement of financial liabilities

                Financial liabilities are classified at initial recognition: at fair value and changes are carried through profit or loss as
                financial liabilities and other financial liabilities. For financial liabilities measured at fair value and whose changes
                are carried through profit or loss, relevant transaction costs are directly recognised in profit or loss for the period.
                For financial liabilities classified as other categories, relevant transaction costs are included in the amount initially
                recognised and subsequently measured at amortised cost using the effective interest method, and relevant gain
                or loss arising from derecognition or amortisation are included in current profit or loss.




                                                                               SHANDONG CHENMING PAPER HOLDINGS LIMITED                          67
          IX Financial Report


          V.   Significant Accounting Policies and Accounting Estimates (Cont’d)
               10. Financial instruments (Cont’d)
                    (6)   Derecognition of financial liabilities

                          Financial liabilities are derecognised in full or in part only when the present obligation is discharged in full or in
                          part. An agreement is entered between the Group (debtor) and a creditor to replace the original financial liabilities
                          with new financial liabilities with substantially different terms, derecognise the original financial liabilities as well as
                          recognise the new financial liabilities.

      &e