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个股公告正文

晨 鸣B:2015年年度报告(英文版)

日期:2016-03-31附件下载




















SHANGDONG CHENMING PAPER HOLDINGS LIMITED


          THE 2015 ANNUAL REPORT




                March 2016
I    Important Notice, Table of Contents and Definitions



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

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

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

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 to address them as set out in the outlook on the
future development of the Company in Management Discussion and Analysis.

The proposed profit distribution plan of the Company was considered and passed by the Board: based on the number of the
shares as at the dividend distribution registration date, a dividend of RMB3 (tax inclusive) per 10 shares was to be paid and no
bonus shares (tax inclusive) were to be delivered to all shareholders without increase of share capital from reserves.




                                                                                                                                           1
    I      Important Notice, Table of Contents and Definitions



    Table of contents
    I          Important Notice, Table of Contents and Definitions ...............................................................................................                          1

    II         Company Profile and Key Financial Indicators ........................................................................................................                        4

    III        Chairman’s Report ...................................................................................................................................................       9

    IV         Business Overview ...................................................................................................................................................       11

    V          Management Discussion and Analysis ....................................................................................................................                     16

    VI         Directors Report .......................................................................................................................................................    39

    VII        Material Matters .......................................................................................................................................................    46

    VIII       Changes in Share Capital and Shareholders ...........................................................................................................                       73

    IX         Preference Shares ....................................................................................................................................................     78

    X          Directors, Supervisors, Senior Management and Staff ............................................................................................                            79

    XI         Corporate Governance.............................................................................................................................................           89

    XII        Financial Report .......................................................................................................................................................   109

    XIII       Documents Available for Inspection ........................................................................................................................                253




2
I      Important Notice, Table of Contents and Definitions



Definitions
Item                                Definition

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

Parent Company or           means   Shandong Chenming Paper Holdings Limited
  Shouguang Headquarters

Chenming Holdings           means   Shouguang Chenming Holdings Company Limited

Shenzhen Stock Exchange     means   Shenzhen Stock Exchange

Stock Exchange              means   The Stock Exchange of Hong Kong

CSRC                        means   China Securities Regulatory Commission

Shandong CSRC               means   Shandong branch of China Securities Regulatory Commission

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

Jiangxi Chenming            means   Jiangxi Chenming Paper Co., Ltd.

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

Chenming (HK)               means   Chenming (HK) Limited

Haiming Mining              means   Haicheng Haiming Mining Company Limited

Jilin Chenming              means   Jilin Chenming Paper Co., Ltd.

Shouguang Meilun            means   Shouguang Meilun Paper Co., Ltd.

Chenming Sales Company      means   Shandong Chenming Paper Sales Company Limited

Chenming Power              means   Shandong Chenming Power Supply Holdings Co., Ltd.

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

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

reporting period            means   The period from 1 January 2015 to 31 December 2015




                                                                                                    3
    II Company Profile and Key Financial Indicators



    I.    Company profile
          Stock abbreviation                                              ,    B            Stock Code                000488, 200488
          Stock exchanges on which the shares are listed          Shenzhen Stock Exchange
          Stock abbreviation                                      Chenming Paper            Stock Code                01812
          Stock exchanges on which the shares are listed          The Stock Exchange of Hong Kong Limited
          Legal name in Chinese of the Company
          Legal short name in Chinese of the Company
          Legal name in English of the Company (if any)           SHANDONG CHENMING PAPER HOLDINGS LIMITED
          Legal short name in English of the Company (if any)     SCPH
          Legal representative of the Company                     Chen Hongguo
          Registered address                                      No. 595 Shengcheng Road, Shouguang City, Shandong Province
          Postal code of registered address                       262700
          Office address                                          No. 2199 Nongsheng East Road, Shouguang City, Shandong Province
          Postal code of office address                           262705
          Website of the Company                                  http://www.chenmingpaper.com
          Email address                                           chenmmingpaper@163.com

    II.   Contact persons and contact methods
                                   Secretary to the Board              Securities Affairs 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, Shandong Province   Shouguang City, Shandong Province   Central, Hong Kong
          Telephone                (86)-0536-2158008                   (86)-0536-2158008                   (852)-25010088
          Facsimile                (86)-0536-2158977                   (86)-0536-2158977                   (852)-25010028
          Email address            chenmmingpaper@163.com              chenmmingpaper@163.com              kentpoon_1009@yahoo.com.hk

    III. Information disclosure and places for inspection
          Designated media for information disclosure         China Securities Journal, Shanghai Securities News, Securities Times,
                                                                Securities Daily and Hong Kong Commercial Daily
          Designated websites for the publication of          Domestic: http://www.cninfo.com.cn; Overseas: http://www.hkex.com.hk
            the Annual Report as approved by CSRC
          Places for inspection of                            Securities and investment management department of the Company
            the Company’s Annual Report

    IV. Change in registration
          Organisation Code                                   61358898-6
          Change of principal activities since its listing    No
          Change of the controlling shareholder               No




4
II Company Profile and Key Financial Indicators



V.   Other relevant information
     CPAs engaged by the Company

     Name of CPAs                                             Ruihua Certified Public Accountants (Special General Partnership)
     CPAs’ Office Address                                    8-9/F, Block A, Corporation Building, No. 35 Finance Street,
                                                              Xicheng District, Beijing
     Name of the Signing Certified                            Wang Yan and Jing Chuanxuan
       Public Accountants

     Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period

         Applicable √ Not applicable

     Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period

         Applicable √ Not applicable


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

         Ye √ No

                                                                                                                   Increase/decrease for
                                                                                                                 the year as compared to
                                                                                 2015                    2014            the prior year (%)                   2013

     Revenue (RMB)                                                  20,241,906,131.81       19,101,677,077.69                      5.97%         20,388,890,067.41
     Net profit attributable to shareholders of
       the Company (RMB)                                             1,021,224,678.04          505,204,384.73                    102.14%            710,655,331.72
     Net profit after extraordinary gains or losses
       attributable to shareholders of the Company (RMB)               719,891,359.63          130,445,644.83                    451.87%            406,170,148.25
     Net cash flows from operating activities (RMB)                 -9,721,363,524.30          985,399,735.85                 -1,086.54%          1,122,616,800.91
     Basic earnings per share (RMB per share)                                    0.50                    0.26                     92.31%                      0.35
     Diluted earnings per share (RMB per share)                                  0.50                    0.26                     92.31%                      0.35
     Rate of return on net assets on weighted average basis                    6.73%                   3.62%                       3.11%                    5.11%


                                                                                                                 Increase/decrease as at
                                                                                                                      the end of the year
                                                                                                                  compared to the end of
                                                                 As at the end of 2015   As at the end of 2014          the prior year (%)    As at the end of 2013

     Total assets (RMB)                                             77,961,699,547.59       56,822,026,545.21                     37.20%         47,521,883,569.18
     Net assets attributable to shareholders of
       the Company (RMB)                                            16,871,494,584.82       13,917,343,301.15                     21.23%         14,039,888,226.11


     Explanation: Net profit attributable to ordinary shareholders of the Company should exclude the effect of interest
     payment deferred and accumulated to subsequent periods for perpetual bonds under other equity instruments. When
     calculating financial indicators such as earnings per share and rate of return on net assets on weighted average basis,
     the interests incurred but not declared for perpetual bonds from the value date up to 31 December 2015 (amounted to
     RMB61,506,739.43) are deducted. For details, please refer to Note XVII. 2 of section XII of this report.




                                                                                                                                                                      5
    II Company Profile and Key Financial Indicators



    VII. Differences in accounting data under domestic and overseas accounting standards
        1.      Differences between the net profit and net assets disclosed in accordance with international
                accounting standards and China accounting standards in the financial report
                    Applicable √ Not applicable

                There was no difference between the net profit and net assets disclosed in accordance with international accounting
                standards and China accounting standards in the financial report during the reporting period.

        2.      Differences between the net profit and net assets disclosed in accordance with overseas accounting standards
                and China accounting standards in the financial report

                    Applicable √ Not applicable

                There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
                standards and China accounting standards in the financial report during the reporting period.


    VIII. Key Financial Indicators by Quarter
                                                                                                                                 Unit: RMB

                                                                              1Q                  2Q                  3Q                  4Q

        Revenue                                                  4,456,654,640.64   5,262,043,037.12    5,176,528,453.85    5,346,680,000.20
        Net profit attributable to shareholders of the Company      96,137,359.80     180,250,710.71      284,937,568.33      459,899,039.20
        Net profit after extraordinary gains or losses
          attributable to shareholders of the Company              47,531,100.97       126,931,118.97      209,199,874.65      336,229,265.04
        Net cash flows from operating activities                 -524,893,745.34    -1,697,861,889.39   -6,401,707,699.70   -1,096,900,189.87


        Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
        disclosed in the quarterly report or interim report

             Yes √ No




6
II Company Profile and Key Financial Indicators



IX. Five-year financial summary under Hong Kong Financial Reporting Standards
                                                                                                      Unit: RMB’ 0,000

                                                                For the year ended 31 December
                                                      2015        2014           2013          2012             2011

    Revenue                                      2,024,191    1,910,168    2,038,889      1,976,168        1,774,749
    Profit before tax                              141,017       56,101       86,629         -1,614           69,899
    Tax                                             43,224       10,770       17,594         -6,283           11,026
    Profit for the current period attributable
      to shareholders of the listed company        102,122      50,520        71,066         22,103           60,827
    Minority interests                              -4,329      -5,190        -2,030        -17,435           -1,954
    Basic earnings per share (RMB/share)              0.50        0.26          0.35           0.11             0.29
    Rate of return on net assets on
      weighted average basis (%)                    6.73%        3.62%        5.11%          1.63%            4.50%


                                                                                                      Unit: RMB’ 0,000

                                                                For the year ended 31 December
                                                      2015        2014           2013          2012             2011

    Total assets                                 7,796,170    5,682,203    4,752,188      4,772,542        4,563,083
    Total liabilities                            6,070,277    4,247,396    3,288,353      3,338,000        3,064,305
    Minority interests                              38,743       43,073       59,847         58,592          145,915
    Equity attributable to shareholders of
      the listed company                          1,687,149   1,391,734    1,403,989      1,375,950        1,352,862
    Net current assets/(liabilities)             -1,347,029    -452,549     -106,347         24,638         -268,280
    Total assets less current liabilities         2,932,756   2,872,637    2,823,321      2,775,419        2,571,188




                                                                                                                          7
    II Company Profile and Key Financial Indicators



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

                                                                                                                                 Unit: RMB

         Item                                             Amounts for 2015   Amounts for 2014   Amounts for 2013   Explanation

         Profit or loss from disposal of non-current
           assets (including write-off of provision for
           assets impairment)                                18,317,909.85      65,276,190.37      -6,367,477.99
         Government grants (except for
           the government grants closely related to
           the normal operation of the company
           and granted constantly at a fixed amount
           or quantity in accordance with a certain
           standard based on state policies)
           accounted for in profit or loss for
           the current period                               244,716,579.78     260,000,612.10     174,947,619.19
         Gain arising from investment costs for
           acquisition of subsidiaries, associates
           and joint-ventures by the corporation
           being less than its share of fair value of
           identifiable net assets of the investees
           on acquisition                                                                           2,408,368.37
         Profit or loss from debt restructuring              32,089,863.80       1,725,797.17         268,577.19
         Gain or loss on external entrusted loans            94,777,777.77      82,833,581.81
         Non-operating gains and losses other than
           the above items                                   10,274,311.04      49,781,358.66     299,225,913.46
         Gain or loss from changes in fair value of
           consumable biological assets
           subsequently measured at fair value              -19,078,538.02       6,856,815.32      11,221,828.76
         Less: Effect of income tax                          76,729,624.38      81,221,136.75      98,299,197.38
         Effect of minority interests (after tax)             3,034,961.43      10,494,478.78      78,920,448.13

         Total                                              301,333,318.41     374,758,739.90     304,485,183.47   –


         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.




8
III Chairman’s Report



Dear Shareholders,

I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2015. On behalf
of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to Chenming Paper.

On the one hand, the imbalance between the demand and supply in the paper making industry improved to a certain extent
last year with protracted low product price due to continued overcapacity of certain products and sluggish market demand.
However, in the long run, the results of the Company were likely to turn around due to the improvement of the supply and demand
fundamentals in the paper making industry, the stabilisation of the prices of raw materials, and the further concentration of the
industry as a result of the more stringent environmental protection policies, elimination of obsolete production capacity and
slowdown in new production capacity growth, as well as new growth points resulting from business transformation.

On the other hand, under the slowing macro-economic growth and economic transformation, the financial leasing industry as a
favoured supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously mounting
market demand and was stepping into a golden age for its development. This industry is a sunrise one in China, and has bright
prospects in China as a result of its growth momentum under the “new normal” of the economy.

Confronted by the continuous economic slowdown and weak industry demand, the Company adopted “Team Building, Strict
Management, Outstanding Business Performance, Achieving Good Results” as its policy for 2015 to cope with difficulties and
make practical innovations for fulfilling its annual goals. Its development showed favourable signs including stronger efficiency,
management, capabilities and growth momentum with significantly higher position in the industry.

The financial segment, which was based primarily on the Financial Leasing Company and the Finance Company, experienced
rapid development across businesses after a year of steady operation with ever improving management systems and effective risk
preventions. Through the leaseback business of the Financial Leasing Company and the credit business of the Finance Company,
the Company found a new profit growth point.


I.    Results of Operations
      During the reporting period, the Company conducted sales of machine-made paper of 4.15 million tonnes and achieved
      revenue of RMB20.242 billion, a year-on-year increase of 5.97%. The Company recorded operating costs of RMB14.765
      billion, a year-on-year decrease of 3.64%. Total profit and net profit attributable to equity holders of the Company were
      RMB1,411 million and RMB1,021 million respectively, up by 151.36% and 102.14% from the prior year.


II.   Corporate Governance
      During the reporting period, the Company regulated its operation under the requirements of Companies Law, Securities
      Law, Code of Corporate Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock
      Exchange, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related
      provisions of the China Securities Regulatory Commission. The Company kept on improving and optimising its legal person
      governance structure and regulating its operation in practice. The Board considered the state of the Company’s corporate
      governance was substantially in compliance with the requirements and requests of the regulatory documents such as Code
      of Corporate Governance for Listed Companies.

      During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
      governance. It improved corporate governance system in a timely manner and formulated and optimised management
      systems including the amended the Implementing Rules for Audit Committee under the Board and amended Articles of
      Association in accordance with the regulatory requirements.

      Strict enforcement of relevant internal control systems had promoted a regulated operation and healthy development of the
      Company, protecting the legitimate rights and interests of our investors. The overall state of corporate governance was in
      compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development strives
      forward, its state of regulated operation and internal control will continue to improve.




                                                                                                                                     9
     III Chairman’s Report



     III. Dividend Distribution
          Consistent with our long-term goal of pursuing the maximisation of corporate values, the Company has always placed
          much emphasis on the benefits of and returns to our shareholders. In view of the operating results realised in 2015 and after
          considering the overall financial position and cash flow condition of the Company, the Board of Directors recommended
          a proposed profit distribution plan for 2015 as follows: Based on the number of shares as at the dividend distribution
          registration date, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10 shares held.
          Based on the total share capital of 1,936,405,467 shares of the Company as at 31 December 2015, cash dividend for
          2015 amounted to RMB580,921,640.10 (tax inclusive), which represented 60.53% of the net profit attributable to ordinary
          shareholders of the Company as set out in the 2015 consolidated financial statements prepared in accordance with
          Accounting Standards for Business Enterprises. After such profit distribution, the undistributed profit would be rolled over
          for distribution in subsequent years. As always, the Company will continue to stay focused on its long-term development
          and maximise returns for our shareholders by delivering better results.


     IV. Future Development
          Elimination of obsolete production capacity in the paper making industry 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. Raw material prices have
          been hovering at a low level, easing the pressure of operating costs on paper making enterprises. Eliminating obsolete
          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.

          The financial leasing industry as a favoured supplementary corporate financing channel and an effective tool to use assets
          at hand embraced continuously mounting market demand and was stepping into a golden age for its development.

          Looking forward, the Company will adhere to the principal of achieving growth amid stability, and emphasise on
          environmental protection, low carbon, recycling and sustainable development. Following the “Made in China 2025 Plan” and
          the principles of scientific development and quality and efficiency enhancement, it will comprehensively improve its quality
          and efficiency, management level, technology application, sense of happiness and brand image through the integration
          between its production and manufacture segment and financial services segment, incorporation of smart technology into
          its industrial activities, reorganised methodology and restructuring so as to expand and improve itself and strive to become
          one of the world-class companies with the highest growth rate in the “Thirteenth Five Year Plan” period.




     Chen Hongguo
     Chairman

     30 March 2016




10
IV Business Overview



I.   Principal operations of the Company during the Reporting Period
     The Company is a large and integrated modern conglomerate principally engaged in paper making, finance, forestry and
     real estate businesses while also involved in mining, energy, logistics, construction materials, hotel operation and others.
     It is also the only listed company with three types of listed shares (i.e. A shares, B shares and H shares) and the first in the
     paper making industry having a finance company and a financial leasing company integrated with its industrial activities in
     China.

     (I)    Paper Making Segment
            The Company is a leading player in the paper making industry in China. It has established production bases in
            Shandong, Guangdong, Hubei, Jiangxi and Jilin with annual pulp and paper production capacity of over 8,500,000
            tonnes. It has the largest pulp paper production base in the world and tens of pulp and paper production lines of
            international advanced standards. 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 cultural paper, coated paper,
            white paper board, news press paper, light weight coated paper, copy paper, industrial paper, special paper and
            household paper.

     (II)   Financial Segment
            The Company has established the financial segment which was based on the Shandong Chenming Financial Leasing
            Co., Ltd., Shandong Chenming Investment Co., Ltd., and Shandong Chenming Group Finance Co., Ltd. Since the
            establishment of the financial segment, the Company, relying on strong capital strength and talent advantageous of
            the Chenming Paper Group while giving full play to the advantages of internationalisation and marketised operation
            mechanisms of a listed company, has been actively seeking the organic combination between industrial capital and
            financial capital. Externally, it provided financing and value-added service solutions to state-owned enterprises, listed
            companies, quality private enterprises, new and high-tech enterprise with good growth and government financing
            platforms. Internally, it adapted to the trend of diverse demand for the domestic financial market and financial services
            comprehensiveness within the Group, and established a business structure focused on intensive capital management
            and based on four core areas, namely the traditional commercial banking business, industrial financial services,
            investment banking business and financial investment business, which constructed a diversified and value-added
            business development pattern.

            The financial segment experienced rapid development across businesses after steady operation for more than a year
            with ever improving management systems and effective risk preventions. In 2015, the financial segment maintained
            good development momentum and, through the leaseback business of the Financial Leasing Company and the credit
            business of the Finance Company, became a new profit growth point of the Company.




                                                                                                                                        11
     IV Business Overview



     I.   Principal operations of the Company during the Reporting Period (Cont’d)
          (III) Other business segments
              1.   Electricity and heat

                   Based on the operating principle of “energy-saving, serving production and environmental protection”, the
                   Company has established its own power plants in all of its production bases, which mainly provide electricity
                   and gas to each subsidiary with the surplus sold externally to contribute sales revenue. The green, low-carbon
                   and sustainable ecological cycle constructed had substantial economic and social benefits.

              2.   Hotel

                   Chenming International Hotel is a luxury business hotel that integrates accommodation, catering, entertainment
                   and conference. The hotel follows the European-style architecture of compounds with a beautiful environment
                   and elegant style. The guest rooms are comfortable and luxurious, the cuisine is distinctive, a comprehensive
                   set of recreational and leisure facilities are at service and business centres with advanced facilities are ready to
                   provide thoughtful and fast services. In addition, the majestic and fully functional hotel meeting centres will help
                   you achieve unexpected success for your commercial activities.

              3.   Construction materials

                   Chenming Construction Materials integrates the manufacturing, processing and sales of new-type environmental
                   materials such as planks, cement and aerated concrete brickwork. Leveraging the strong platform and brand
                   influence of the Chenming Group, it has introduced advanced production equipment and established a quality
                   guaranteeing system of high-starting point, high-level and all-roundness with first-class quality products that
                   apply to various buildings.

              4.   Logistics

                   With the deepening of “One Belt One Road” strategy of China, the Chenming Group has made huge investment
                   to establish an international logistics centre and auxiliary proprietary railways, which not only provided
                   comprehensive logistic services including container transportation, bonded warehousing, transit and terminal
                   storage, but also realised “one-stop” customs clearance. This helps Chenming Paper and Chinese enterprises
                   fully explore the international market and open a modern logistic “express way”.

              5.   Mining

                   Haicheng Haiming Mining Company Limited was established on 6 November 2012. The Phase I project mainly
                   carried out magnesite mining and high purity magnesium grains production. The subsequent project will realise
                   diversification of products including manufacturing of magnesium products including firebrick and magnesium
                   metal, which will fill the blank of relevant industries in China.




12
IV Business Overview



II.   Material Changes of Major Assets
      1.    Material Changes of Major Assets
            Major assets                          Description

            Equity                                The Company made equity investments in Zhuhai Dechen New Third Board
                                                  Equity Investment Fund Company (Limited Partnership) and Shanghai Leadbank
                                                  Asset Management Co., Ltd. during the reporting period, and corresponding
                                                  adjustments were made to long-term equity investments under the equity
                                                  method.
            Intangible assets                     Land use rights were acquired by the Shouguang Headquarters and Haiming
                                                  Mining during the year.
            Construction in progress              Further investments were made to the 600,000-tonne liquid packaging
                                                  cardboard project of Zhanjiang Chenming, food packaging paper project of
                                                  Jiangxi Chenming, forestry pulp integration project of Huanggang Chenming and
                                                  chemical pulp project of Shouguang Meilun during the reporting period.

      2.    Major Assets Overseas
              Applicable √ Not applicable


III. Analysis of Core Competitiveness
      The Company is a leading player in the paper making industry of China. After entrepreneurship and innovation for more
      than half a century, it has developed into a large and integrated modern conglomerate principally engaged in paper making,
      finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials, hotel
      operation and others. It is also the only listed company with three types of listed shares (i.e. A shares, B shares and H
      shares) and the first in the paper making industry having a finance company and a financial leasing company integrated with
      its industrial activities in China. Compared with other enterprises in the industry, the Company has the following advantages:

      1.    Scale advantages
            After years of development, the Company has achieved annual pulp and paper production capacity of 8.50 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 is expanding rapidly, its product mix also continues to optimise. In recent
            years, the Company has built production lines for cultural paper such as high-end coated paper, high-end 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




                                                                                                                                       13
     IV Business Overview



     III. Analysis of Core Competitiveness(Cont’d)
         3.   Comprehensive cost advantages
              The Company has a relative advantage in comprehensive cost, which is mainly reflected in: firstly, the Company
              has optimised the operation of the production lines through stringent management, which has substantially lowered
              the waste of resources in evaporating, emitting, dripping or leaking, and the Company’s energy consumption per
              ton of paper was also controlled at a relatively low level; secondly, the Company has established several advanced
              pulp production lines, thus increasing the supply of major raw materials through the 700,000-tonne pulp project of
              Zhanjiang Chenming and forestry pulp integration project of Huanggang Chenming; thirdly, the Company has reduced
              costs through the construction of the captive power plant to ensure energy supply.

         4.   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.

         5.   Advantages in research and innovation and new product development
              The Company is an important high and new-technology enterprise listed in national torch plan. It established various
              technology carriers including the national enterprise technology centre and the national post-doctoral working
              station as well as an international high-quality innovation team, injecting endless vitality to its technology research.
              It undertook the national “863” plan, national science support plans for the “11th Five Years” and “12th Five Years”,
              and tens of key provincial technological special projects, making outstanding contribution to the scientific progress
              within the industry. The Company has obtained over 150 national patents, with 7 products selected as national new
              products and 29 products covering blank areas in China. It also participated in formulating 4 national standards, as
              well as obtained the honours including “China Patent Shandong Star Enterprise”. The Company became the “green
              engine” to promote transformation and upgrading of the paper making industry and lead China’s paper making
              industry into the direction of the newest and most advanced technology.

         6.   Funding advantages
              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.




14
IV Business Overview



III. Analysis of Core Competitiveness(Cont’d)
    7.   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.

    8.   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. The financial segment maintained
         a good development momentum, which becomes a new profit growth point through the leaseback business of the
         Financial Leasing Company and the credit business of the Finance 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.




                                                                                                                                 15
     V Management Discussion and Analysis



     I.   Overview
          In 2015, the global economy continued to fluctuate and there had been downward pressure in China’s macro-economy
          with a slowdown in growth rate. The paper making industry remained in the stage of eliminating obsolete production
          capacity and adjusting the product mix, and prices of paper products hovered at a low level facing the imbalanced supply
          and demand. However, in the long run, the results of the Company were likely to turn around due to the improvement of
          the supply and demand fundamentals in the paper making industry, the stabilisation of the prices of raw materials, and
          the further concentration of the industry as a result of the more stringent environmental protection policies, elimination of
          obsolete production capacity and slowdown in new production capacity growth, as well as new growth points resulting
          from business transformation.

          Under the slowing macro-economic growth and economic transformation, the financial leasing industry as a favoured
          supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously mounting
          market demand and was stepping into a golden age for its development. The financial segment set up by the Company,
          which was based primarily on the Financial Leasing Company and Finance Company, experienced rapid development
          across businesses after steady operation for more than a year with ever improving management systems and effective
          risk preventions. In 2015, the segment maintained good development momentum and, through the leaseback business of
          the Financial Leasing Company and the credit business of the Finance Company, became a new profit growth point of the
          Company.

          In 2015, the Company had been actively adapting to the “new normal” economic development by accelerating
          transformation and upgrade and enhancing operation quality. Confronted by the continuous economic slowdown and
          weak industry demand, the Company adopted “Team Building, Strict Management, Outstanding Business Performance,
          Achieving Good Results” as its policy to cope with difficulties and make practical innovations for fulfilling its annual goals. Its
          development was showing favourable signs including stronger efficiency, management, capabilities and growth momentum.

          During the reporting period, the Company conducted production and sales of machine-made paper of 4.18 million tonnes
          and 4.15 million tonnes respectively and achieved revenue of RMB20.242 billion, a year-on-year increase of 5.97%. The
          Company recorded operating costs of RMB14.765 billion, a year-on-year decrease of 3.64%. Total profit and net profit
          attributable to equity holders of the Company were respectively RMB1,411 million and RMB1,021 million, up by 151.36%
          and 102.14% from the prior year.

          (1)   Strengthening sub-divided management lifting corporate management to a new level. Firstly, the overall management
                of the Company was comprehensively enhanced through continuously strengthening primary management and
                measures to improve systems, inspections and rectifications. Secondly, dynamics for team building were heightened
                through increased training, position management and introduction of talents, which produced stronger teams, internal
                energy and thus significant progress in this respect.

          (2)   Flexible strategies attaining breakthroughs in marketing. Firstly, team building efforts were revamped. Excellent human
                resources were actively introduced under a competition mechanism based on merits. The appraisal methodology was
                optimised to reward the diligent. Regular training for all staff was organised and sales personnel were equipped with
                better theoretical knowledge and hands-on competence. Secondly, marketing strategies were effective and efficient.
                The market-based sales work assignment toolkit significantly enhanced performance while the development of major
                and new customers was strengthened. Thirdly, structural optimisation was actively carried out. High value-added
                products such as cigarette card, cigarette pack, high-bulk white paper board, rosewood copperplate card, premium
                electrostatic paper and Biyuntian duplex press paper were prioritised with a view to enlarging market share.




16
V Management Discussion and Analysis



I.   Overview (Cont’d)
     (3)   Proprietary innovations to revamp production and operation. Firstly, the operational efficiency was significantly
           enhanced. The operational parameters and technical standards of machinery were standardised and the appraisal
           methodology was improved to strengthen real-time control over and adjustment to production lines and enhance
           efficiency. Secondly, the effect of primary management was taking shape. Standardised management and processes
           was consistently adhered to while production management systems were improved by adding regular inspection and
           continuous rectification of issues. A competition mechanism based on merits was put in place to promote and make
           good use of competent and outstanding staff, which significantly improved the primary management. Thirdly, flexible
           restructuring produced efficiency. The production of high value-added products such as mid-level aging resistant
           paper, high-bulk white paper board for export, Biyuntian electrostatic paper, glassine paper and cigarette card was
           boosted to enlarge market share and gain the initiative in the market as well as increase efficiency. Fourthly, quality
           management was steadily enhanced. Through the strict implementation of a defective product examination system,
           wholesale orders for cigarette cards were received and the market recognition of glassine paper and thermal paper
           was significantly raised.

     (4)   Accelerated projects and new blood. During the reporting period, new projects picked up speed. The 300,000-tonne
           high-end cultural paper project and the biomass vaporisation upgrade project of Zhanjiang Chenming and the
           350,000 food packaging paper project of Jiangxi Chenming had commenced operation upon completion and became
           new efficiency growth points of the Company. The 400,000 chemical pulp project of Shouguang Chenming completed
           the tender of its principal equipment and preparations for full operation. The white coated linerboard project of
           Shouguang Chenming was safely relocated to Zhanjiang. The magnesite project of Haiming Mining started to install
           equipment. The pulp and paper project integrated forestry of Huanggang Chenming has commenced construction.
           These new projects are vital forces to drive up the core competitiveness of the Company.

     (5)   Stronger financing management to create new advantages for the financial segment. In order to proactively adapt
           to the “new normal”, the Company put greater efforts in transformation and upgrade through the strategies of being
           high-end, high-quality and highly-efficient and by striving to reinforce its principal operations while diversifying its
           businesses. The Company is a large and comprehensive modern corporate group mainly engaged in paper making,
           finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials,
           hospitality and others. The financial segment made exceptional contribution for 2015 with significantly higher revenue
           and operating profit and became a new growth point bearing the strongest and advantageous profitability. The
           Company, through innovative financing instruments, registered its first super and short term commercial paper and
           perpetual note amounting to RMB13.8 billion and RMB2.6 billion respectively in the interbank market and entered into
           a RMB20.0 billion strategic cooperation agreement with the Bank of China, which elevated its cooperation with banks
           to a new height.




                                                                                                                                      17
     V Management Discussion and Analysis



     II.   Analysis of principal operations
           1.   Overview
                Please see “I. Overview” under “Management Discussion and Analysis” for relevant information.


           2.   Revenue and cost
                (1)   Components of revenue

                                                                                                                                      Unit: RMB

                                                                      2015                                 2014                  Increase/decrease
                                                                Amount       % of revenue            Amount       % of revenue                  (%)

                      Total revenue                    20,241,906,131.81           100%     19,101,677,077.69           100%                5.97%
                      By industry
                      Machine-made paper               18,072,997,652.53          89.29%    17,975,118,165.42          94.10%               0.54%
                      Financial leasing                 1,084,860,187.11           5.36%        86,657,969.85           0.45%           1,151.89%
                      Electricity and steam               437,772,691.42           2.16%       513,786,969.44           2.69%             -14.79%
                      Construction materials              223,266,272.44           1.10%       225,322,331.60           1.18%              -0.91%
                      Chemicals                           124,008,406.45           0.61%        59,945,519.46           0.32%             106.87%
                      Hotel                                27,136,077.49           0.13%        26,793,066.32           0.14%               1.28%
                      Others                              271,864,844.37           1.35%       214,053,055.60           1.12%              27.01%
                      By products
                      Light weight coated paper           612,237,436.63           3.02%       693,819,246.02           3.63%             -11.76%
                      Duplex press paper                4,460,441,279.15          22.04%     2,967,684,563.34          15.54%              50.30%
                      Writing paper                       289,489,121.26           1.43%       211,560,370.68           1.11%              36.84%
                      Coated paper                      4,365,890,220.92          21.57%     4,428,510,204.03          23.18%              -1.41%
                      Newsprint paper                     970,297,912.12           4.79%     1,091,419,636.72           5.71%             -11.10%
                      Paperboard                          183,744,883.99           0.91%       754,167,430.95           3.95%             -75.64%
                      White paper board                 1,915,153,293.25           9.46%     1,991,690,191.45          10.43%              -3.84%
                      Electrostatic paper               1,580,897,670.32           7.81%     1,742,073,088.67           9.12%              -9.25%
                      Other machine-made paper          3,694,845,834.89          18.25%     4,094,193,433.56          21.43%              -9.75%
                      Financial leasing                 1,084,860,187.11           5.36%        86,657,969.85           0.45%           1,151.89%
                      Electricity and steam               437,772,691.42           2.16%       513,786,969.44           2.69%             -14.79%
                      Construction materials              223,266,272.44           1.10%       225,322,331.60           1.18%              -0.91%
                      Chemicals                           124,008,406.45           0.61%        59,945,519.46           0.32%             106.87%
                      Hotel                                27,136,077.49           0.13%        26,793,066.32           0.14%               1.28%
                      Others                              271,864,844.37           1.35%       214,053,055.60           1.12%              27.01%
                      By geographical segment
                      Mainland China                   16,431,182,080.91          81.17%    15,678,674,819.92          82.08%               4.80%
                      Other countries and regions       3,810,724,050.90          18.83%     3,423,002,257.77          17.92%              11.33%




18
V Management Discussion and Analysis



II.   Analysis of principal operations (Cont’d)
      2.   Revenue and cost (Cont’d)
           (2)   Industries, products or regions accounting for over 10% of revenue or operating profit of the Company

                 √ Applicable               Not applicable

                                                                                                                                                                     Unit: RMB

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

                 By industry
                 Machine-made paper        18,072,997,652.53   13,935,285,230.54               22.89%                    0.54%                    -4.49%                      4.06%
                 Financial leasing          1,084,860,187.11      127,769,086.46               88.22%                 1151.89%                   754.06%                      5.49%
                 By products
                 Duplex press paper         4,460,441,279.15    3,359,857,786.59               24.67%                   50.30%                    42.26%                      4.26%
                 Coated paper               4,365,890,220.92    3,258,280,750.13               25.37%                   -1.41%                    -9.56%                      6.73%
                 White paper board          1,915,153,293.25    1,463,666,571.72               23.57%                   -3.84%                    -9.67%                      4.93%
                 Electrostatic paper        1,580,897,670.32    1,043,674,436.61               33.98%                   -9.25%                   -20.29%                      9.14%
                 Financial leasing          1,084,860,187.11      127,769,086.46               88.22%                 1151.89%                   754.06%                      5.49%
                 By geographical segment
                 Mainland China            14,262,273,601.63   11,202,087,734.99               21.46%                    -1.99%                   -2.49%                      0.40%
                 Other countries
                   and regions              3,810,724,050.90    2,733,197,495.55               28.28%                   11.33%                   -11.91%                    18.92%


                 Under the circumstances that the statistics specification for the Company‘s principal operations data
                 experienced adjustment in the reporting period, the principal operations data upon adjustment of the statistics
                 specification at the end of the reporting period in the latest year

                     Applicable            √ Not applicable

           (3)   Whether revenue from sales in kind is higher than revenue from services

                 √ Yes           No

                                                                                                                                                                    Increase/
                                                                                                                                                                    decrease
                 By industry                           Item                        Unit                                 2015                      2014                    (%)

                 Machine-made paper                    Sales                       ’0,000 tonnes                         415                       419                 -0.95%
                                                       Production output           ’0,000 tonnes                         418                       426                 -1.88%
                                                       Inventories                 ’0,000 tonnes                          49                        46                  6.52%


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

                     Applicable            √ Not applicable




                                                                                                                                                                                        19
     V Management Discussion and Analysis



     II.   Analysis of principal operations (Cont’d)
           2.   Revenue and cost (Cont’d)
                (4)   Performance of material sales contracts of the Company during the reporting period

                          Applicable            √ Not applicable

                (5)   Composition of operating costBy industry

                                                                                                                                                              Unit: RMB

                                                                                     2015                                      2014                       Increase/decrease
                      By industry            Item                              Amount     % of operating cost            Amount     % of operating cost                  (%)

                      Machine-made           Raw materials             8,201,192,813.92               58.85%     8,270,309,911.65               56.68%              -0.84%
                       paper                 Depreciation                717,089,611.94                5.15%       798,497,976.35                5.47%             -10.20%
                                             Labour costs                155,963,303.02                1.12%       146,157,235.36                1.00%               6.71%
                                             Energy and power          1,431,585,168.47               10.27%     1,710,914,100.72               11.73%             -16.33%
                                             Chemicals                 2,239,539,323.75               16.07%     2,364,613,555.39               16.21%              -5.29%
                                             Other production costs    1,189,915,009.44                8.54%     1,300,267,209.62                8.91%              -8.49%
                                             Subtotal                 13,935,285,230.54              100.00%    14,590,759,989.08              100.00%              -4.49%

                      Power and steam        Raw materials              212,564,419.12                76.48%      285,462,227.22                82.28%             -25.54%
                                             Depreciation                26,248,475.37                 9.44%       27,982,337.63                 8.07%              -6.20%
                                             Labour costs                 9,007,758.17                 3.24%       10,256,856.25                 2.96%             -12.18%
                                             Energy and power             6,764,518.93                 2.43%        3,090,405.29                 0.89%             118.89%
                                             Chemicals                    3,670,407.74                 1.32%        1,270,455.70                 0.37%             188.90%
                                             Other production costs      19,675,742.40                 7.08%       18,857,391.98                 5.44%               4.34%
                                             Subtotal                   277,931,321.73               100.00%      346,919,674.07               100.00%             -19.89%

                      Construction           Raw materials              130,797,042.19                74.04%      140,409,930.75                77.58%              -6.85%
                       materials             Depreciation                 4,696,431.30                 2.66%        4,532,363.38                 2.50%               3.62%
                                             Labour costs                 7,362,629.26                 4.17%        6,756,070.59                 3.73%               8.98%
                                             Energy and power            21,178,593.05                11.99%       18,611,421.65                10.28%              13.79%
                                             Chemicals                            0.00                 0.00%        2,424,223.60                 1.34%            -100.00%
                                             Other production costs      12,628,034.78                 7.15%        8,247,964.35                 4.56%              53.10%
                                             Subtotal                   176,662,730.59               100.00%      180,981,974.32               100.00%              -2.39%


                (6)   Change of scope of consolidation during the reporting period

                          Yes        √ No




20
V Management Discussion and Analysis



II.   Analysis of principal operations (Cont’d)
      2.   Revenue and cost (Cont’d)
           (7)   Significant change in or adjustment of the businesses, products or services of the Company during the
                 reporting period

                 √ Applicable      Not applicable

                 The Company has established the financial segment primarily based on the Shandong Chenming Financial
                 Leasing Co., Ltd., Shandong Chenming Investment Co., Ltd., and Shandong Chenming Group Finance Co., Ltd.
                 in order to promote diversified development of the Chenming Group, further expand its business, improve risk
                 resistance and enhance the overall strength and comprehensive competitiveness.

                 Since the establishment of the financial segment, the Company, relying on strong capital strength and talent
                 advantageous of the Chenming Paper Group while giving full play to the advantages of internationalisation and
                 marketised operation mechanisms of a listed company, has been actively seeking the organic combination
                 between industrial capital and financial capital. Externally, it provided financing and value-added service
                 solutions to state-owned enterprises, listed companies, quality private enterprises, new and high-tech enterprise
                 with good growth and government financing platforms. Internally, it adapted to the trend of diverse demand
                 for the domestic financial market and financial services comprehensiveness within the Group, and established
                 a business structure focused on intensive capital management and based on four core areas, namely the
                 traditional commercial banking business, industrial financial services, investment banking business and financial
                 investment business, which constructed a diversified and value-added business development pattern.

                 The financial segment experienced rapid development across businesses after steady operation for more than
                 a year with ever improving management systems and effective risk preventions. In 2015, the financial segment
                 maintained good development momentum and, through the leaseback business of the Financial Leasing
                 Company and the credit business of the Finance Company, became a new profit growth point of the Company.

           (8)   Sales to major customers and major suppliers

                 Sales to major customers of the Company

                 Total sales to top 5 customers (RMB)                                                         1,362,000,050.80
                 Total sales to top 5 customers as a percentage of the total sales for the year                         6.72%

                 Information on top 5 customers of the Company

                                                                                                          As a percentage of
                                                                                                           the total sales for
                 No.     Name of customer                                                     Sales (RMB)        the year (%)

                 1       ANHUI TIME SOURCE CORPORATION                                     348,929,757.23                1.72%
                 2       GUANGZHOU KEERUN PAPER CO., LTD.                                  272,207,428.83                1.34%
                 3       SHANGHAI YAOJI PLAYING CARD CO., LTD.                             257,972,396.90                1.27%
                 4       SUN HING PAPER COMPANY LIMITED                                    256,146,560.47                1.27%
                 5       SHANXI PRINTING MATERIALS COMPANY                                 226,743,907.37                1.12%
                 Total                                                                   1,362,000,050.80                6.72%




                                                                                                                                     21
     V Management Discussion and Analysis



     II.   Analysis of principal operations (Cont’d)
           2.   Revenue and cost (Cont’d)
                (8)   Sales to major customers and major suppliers (Cont’d)

                      Major suppliers of the Company

                      Total purchases from top 5 suppliers (RMB)                                                  2,149,780,469.63
                      Total purchases from top 5 suppliers as a percentage of the total purchases for the year             14.57%

                      Information on top 5 suppliers of the Company

                                                                                                            As a percentage of
                                                                                                            the total purchases
                      No.     Name of supplier                                              Purchases (RMB)      for the year (%)

                      1       ITOCHU HONGKONG LTD                                             553,664,267.00                 3.75%
                      2       SHANDONG HEXIN CHEMICAL GROUP CO., LTD.                         448,199,024.64                 3.04%
                      3       GUANGDONG LEPENG TRADING CO., LTD                               414,175,736.05                 2.81%
                      4       JIANGXI COAL SALES CO., LTD.                                    378,223,872.37                 2.56%
                      5       Central National Gottesman INC                                  355,517,569.57                 2.41%
                      Total                                                                 2,149,780,469.63                14.57%


           3.   Expenses
                                                                                                                           Unit: RMB

                                                                                   Increase/
                                                       2015                2014 decrease (%)      Reasons for material changes

                Selling and distribution   1,190,961,739.99   1,148,055,535.23          3.74%     Mainly due to wage increase
                  expenses
                General and                1,384,652,496.82   1,160,542,907.39         19.31%     Mainly due to increased scientific
                  administrative                                                                  research expenditure and wage
                  expenses                                                                        increase
                Finance expenses           1,669,400,051.76   1,229,259,157.47         35.81%     Mainly due to the increase in
                                                                                                  exchange loss and interest
                                                                                                  expenses
                Business taxes and          133,046,735.23        91,030,073.05        46.16%     Mainly due to the expansion of the
                  surcharges                                                                      Financial Leasing Company
                Profit or loss from          -19,078,538.02        6,856,815.32      -378.24%     Mainly due to loss on change in
                  change in fair value                                                            fair value of forestry assets of the
                                                                                                  Company
                Investment gains             88,715,519.36        69,035,637.19        28.51%     Mainly due to the increase in gains
                                                                                                  on external entrusted loan and
                                                                                                  disposal of equity interest




22
V Management Discussion and Analysis



II.   Analysis of principal operations (Cont’d)
      4.   Research and development expenditure
           √ Applicable   Not applicable

           The research and development expenditure for 2015 totalled RMB649.3681 million, representing an increase of
           RMB179.5416 million or 38.21% as compared with RMB469.8265 million of the corresponding period of the prior
           year. In 2015, the Company actively carried out research and development of new products and technologies, and
           promoted product portfolio adjustment. It made progress in the “research and production of enzyme in papermaking”
           in exploring bio-pulping technology under the National Programs for Science and Technology Development 863
           Project, developed technologies for developing paper for milk tea paper cups, incorporated the key technology for
           production and application of new emission-and-consumption-reducing PRC APMP into the technological innovative
           project plans of the province for 2015 and made delighting progress in developing new products and technologies
           such as matt white copperplate paper, high-bulk white paper board and environmental drawing paper, which
           optimised the product portfolio, improved the product quality and enhanced market competitiveness, thus injecting
           new impetus into the Company’s new development.

           Research and development expenditure

                                                                              2015               2014              Changes

           R&D headcount                                                    1,108               1,004               10.36%
           Ratio of R&D personnel                                          9.32%               7.82%                 1.50%
           R&D expenditure (RMB)                                   649,368,119.76      469,826,539.65               38.21%
           R&D expenditure to revenue                                      3.21%               2.46%                 0.75%


           Reasons for significant change in total R&D expenditure to revenue

              Applicable    √ Not applicable

           Reasons and basis for significant change in R&D capitalisation ratio

              Applicable    √ Not applicable




                                                                                                                                 23
     V Management Discussion and Analysis



     II.   Analysis of principal operations (Cont’d)
           5.     Cash flows
                                                                                                                              Unit: RMB

                                                                                                                              Increase/
                                                                                                                              decrease
                  Item                                                                2015                  2014                    (%)

                  Subtotal of cash inflows from operating activities     20,059,101,045.18      17,924,508,169.86               11.91%
                  Subtotal of cash outflows from operating activities    29,780,464,569.48      16,939,108,434.01               75.81%
                  Net cash flows from operating activities               -9,721,363,524.30         985,399,735.85           -1,086.54%
                  Subtotal of cash inflows from investing activities        641,826,148.96       1,022,916,113.63              -37.26%
                  Subtotal of cash outflows from investing activities     4,102,411,633.83       4,096,185,535.33                0.15%
                  Net cash flows from investing activities               -3,460,585,484.87      -3,073,269,421.70              -12.60%
                  Subtotal of cash inflows from financing activities     42,750,073,812.63      25,487,820,197.15               67.73%
                  Subtotal of cash outflows from financing activities    28,686,399,578.97      23,159,468,612.66               23.86%
                  Net cash flows from financing activities               14,063,674,233.66       2,328,351,584.49              504.02%
                  Net increase in cash and cash equivalents                 912,010,632.46         249,563,932.34              265.44%


                  Explanation on main effects of material changes

                  √ Applicable    Not applicable

                  (1)    Net cash flows from operating activities decreased by 1,086.54% as compared to the corresponding period of
                         the prior year mainly due to the increased external investment of the financial leasing business.

                  (2)    Net cash flows from investing activities decreased by 12.60% as compared to the corresponding period of
                         the prior year mainly due to more cash used in the investment in the projects such as the forestry-pulp-paper
                         integration and Zhanjiang 600,000 tonne liquid packaging paper project of the Company during the year.

                  (3)    Net cash flows from financing activities increased by 504.02% as compared to the corresponding period of the
                         prior year mainly due to the increase in borrowings resulting from the strengthened development of the financial
                         segment by the Company and the investment in projects.

                  Explanation on main reasons leading to the material difference between net cash flows from operating activities during
                  the reporting period and net profit for the year

                  √ Applicable    Not applicable

                  Net cash flows from operating activities decreased by 1,086.54% as compared to the corresponding period of the
                  prior year but net profit attributable to the Company increased by 115.73% as compared to the corresponding period
                  of the prior year mainly due to the increased external investment of the financial leasing business of the Company.


     III. Analysis of non-principal operations
                Applicable    √ Not applicable




24
V Management Discussion and Analysis



IV. Assets and liabilities
    1.   Material changes of asset items
                                                                                                                                                                                        Unit: RMB

                                               As at the end of 2015                       As at the end of 2014
                                                                             As a                                        As a    Change in
                                                                   percentage of                               percentage of
                                                Amounts              total assets           Amounts              total assets   percentage   Description of major changes

         Monetary funds                  8,984,326,016.01                11.52%      5,475,658,186.10                 9.64%         1.88%    Mainly due to the increase in the deposits for bankers’
                                                                                                                                             acceptances issued by the Company, letters of guarantee and
                                                                                                                                             letters of credit in China
         Accounts receivable             3,951,287,979.32                 5.07%      3,489,409,369.20                 6.14%        -1.07%    Mainly due to the increase in sales as at the year end
         Bills receivable                3,998,782,845.65                 5.13%      3,047,541,556.15                 5.36%        -0.23%    Mainly due to the increase in amounts receivable settled
                                                                                                                                             through bills as at the end of the period.
         Non-current assets due          2,893,133,653.86                 3.71%       865,738,333.65                  1.52%         2.19%    Mainly due to the increase in long-term finance lease
           within one year                                                                                                                   payments due within one year.
         Other current assets            7,582,839,356.54                 9.73%      1,656,602,232.09                 2.92%         6.81%    Mainly due to the increase in finance lease receivables due
                                                                                                                                             within one year.
         Available-for-sale               109,000,000.00                  0.14%        73,000,000.00                  0.13%         0.01%    Mainly due to the investment in Shanghai Leadbank Asset
           financial assets                                                                                                                  Management Co., Ltd.
         Long-term receivables           9,084,087,143.84                11.65%      1,420,598,667.99                 2.50%         9.15%    Mainly due to the increase in the financial leasing business
                                                                                                                                             operated for more than one year
         Long-term equity investments      70,492,256.38                  0.09%        36,087,848.12                  0.06%         0.03%    Mainly due to the equity investments in Zhuhai Dechen New
                                                                                                                                             Third Board Equity Investment Fund Company (Limited
                                                                                                                                             Partnership).
         Construction in progress        5,829,619,258.48                 7.48%      3,709,270,828.53                 6.53%         0.95%    Mainly due to the increase in investment in projects including
                                                                                                                                             Zhanjiang 600,000 tonne liquid packaging paper project,
                                                                                                                                             Jiangxi food packaging paper project and Huanggang
                                                                                                                                             Chenming integrated forestry, pulp and paper project
         Short-term borrowings          24,755,535,672.86                31.75%     20,470,296,592.92                36.03%        -4.28%    Mainly due to higher working capital needs resulting from the
                                                                                                                                             increase in investment in projects and the operation scale
                                                                                                                                             expansion
         Bills payable                   3,281,599,412.31                 4.21%      1,598,110,792.85                 2.81%         1.40%    Mainly due to the increase in bank acceptance bills issued by
                                                                                                                                             the Company for payment of goods
         Advance receipts                 180,504,227.01                  0.23%       270,056,726.88                  0.48%        -0.25%    Mainly due to the decrease in advance receipts from
                                                                                                                                             customers resulting from intensified market competition
         Other payables                  1,158,567,353.38                 1.49%       783,790,884.61                  1.38%         0.11%    Mainly due to the increase in deposits received by the
                                                                                                                                             Financial Leasing Company from other companies for the
                                                                                                                                             launch of short-term operation
         Non-current liabilities due     5,471,286,735.91                 7.02%      1,099,968,900.00                 1.94%         5.08%    Mainly due to the reclassification of corporate bonds and
         within one year                                                                                                                     privately placed bonds maturing within one year as bonds
                                                                                                                                             maturing within one year
         Other current liabilities      10,293,543,297.00                13.20%                  0.00                 0.00%        13.20%    Mainly due to the issue of short-term commercial paper during
                                                                                                                                             the year
         Bond payables                   3,788,539,249.59                 4.86%      5,777,131,308.01                10.17%        -5.31%    Mainly due to the reclassification of corporate bonds as bond
                                                                                                                                             maturing within one year
         Long-term payables               344,000,000.00                  0.44%                  0.00                 0.00%         0.44%    Mainly due to receipt of deposits for long-term financial leasing
                                                                                                                                             business and special funds from China Development Bank




                                                                                                                                                                                                                 25
     V Management Discussion and Analysis



     4.   Assets and liabilities (Cont’d)
          1.   Material changes of asset items (Cont’d)
                                                                                                                                                                                                          Unit: RMB

                                                         As at the end of 2015                          As at the end of 2014
                                                                                       As a                                           As a          Change in
                                                                             percentage of                                  percentage of
                                                          Amounts              total assets              Amounts              total assets         percentage   Description of major changes

               Other non-current liabilities       1,094,621,421.67                 1.40%         2,584,768,359.64                 4.55%              -3.15%    Mainly due to reclassification of privately placed bonds of
                                                                                                                                                                RMB1,500 million as bonds maturing within one year
               Other equity instruments            2,582,800,000.00                 3.31%                    0.00                  0.00%               3.31%    Mainly due to the issue of perpetual medium-term notes of
                                                                                                                                                                RMB2,600 million during the year
               Other comprehensive income          -345,014,864.26                 -0.44%           33,763,168.13                  0.06%              -0.50%    Mainly due to the loss on differences on translation of foreign
                                                                                                                                                                operations incurred by overseas subsidiaries as a result of
                                                                                                                                                                RMB depreciation



          2.   Assets and liabilities measured at fair value
               √ Applicable                   Not applicable

                                                                                                                                                                                                          Unit: RMB

                                                                               Profit or loss
                                                                                from change Cumulative fair                            Impairment
                                                                                  in fair value  value change                      provided during Purchases during        Disposal during
               Item                                        Opening balance during the period charged to equity                          the period       the period             the period            Closing balance

               Financial assets
               Consumable biological assets                1,407,588,229.46            -19,078,538.02      176,821,919.46                            176,026,063.51           54,571,043.08 1,509,964,711.87
               Total                                       1,407,588,229.46            -19,078,538.02      176,821,919.46                            176,026,063.51           54,571,043.08 1,509,964,711.87
               Financial liabilities                                   0.00                                                                                                                             0.00


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

                     Yes            √ No




26
V Management Discussion and Analysis



V.   Analysis of Investments
     1.   Overview
          √ Applicable                                 Not applicable

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

                                                              4,664,143,400.00                                                                             6,714,267,162.28                                                                                                   -30.53%


     2.   Material equity investments during the reporting period
          √ Applicable                                 Not applicable

                                                                                                                                                                                                                                                                               Unit: RMB

                                                                                                                                                                                                Progress as
                                                                                                                                                                                                at the date                        Profit or l ss Lawsuit i
                                                                   Form of                                                                                  Period of                           of balance Estimated        from i vestment for i volved Date of disclosure
          Name of i vestees            Principal activ t es        i vestment Investment amount Sharehold ng Source of fund   Partner(s)                    i vestment         Product type     sheet       return         the reporting period or not      (if any)           Disclosure i dex (if any)

          Shandong Chenming Financia   Financia l asing business, Capital        5,000,000,000.00    100.00% Self-owned       Whol y-owned subsid ary       21 February      Financia l asing   Completed Not appl cable       618,695,309.31 No           27 March 2015       http://www.cninfo.com.cn/
            Leasing Co., Ltd.          operating l asing business, i crease                                  funds                                          2014 -
                                       domestic and overseas                                                                                                20 February 2044
                                       l ased assets acquis t on,
                                       disposal and maintenance
                                       of l ased assets, and
                                       consultation on l asing
                                       transactions.
          Shanghai Leadbank Asset      Financia consultation,      Acquis t on     36,000,000.00       3.00% Self-owned       Wanzhen Investment            17 January         Asset            Completed Not appl cable                       No          30 December 2014    http://www.cninfo.com.cn/
            Management Co., Ltd.       corporate management                                                  funds            Management (Bei i g)          2008 -             management
                                       consultation, marketing                                                                Co., Ltd., Shanghai           16 January 2018
                                       planning and conference                                                                Hengxun Information
                                       service                                                                                Technology Services
                                                                                                                              Co., Ltd., Bontai Hold ngs
                                                                                                                              Group Co., Ltd., Shanghai
                                                                                                                              Xunde Investment
                                                                                                                              Management Centre,
                                                                                                                              Suzhou Haihui Investment
                                                                                                                              Co., Ltd. and Bei i g
                                                                                                                              Taifu Rongcheng
                                                                                                                              Investment Co., Ltd.
          Jinan Chenming Investment    Investment with self-      Newly           100,000,000.00     100.00% Self-owned       Whol y-owned subsid ary       Long term          Investment       Completed Not appl cable          173,810.09 No            Not appl cable      Not appl cable
            Management Co., Ltd.       owned assets, i vestment establ shed                                  funds                                                             management
                                       management, i vestment
                                       consultation, corporate
                                       management consultation,
                                       commercia i formation
                                       consultation, and financia
                                       consultation, etc.




                                                                                                                                                                                                                                                                                                           27
     V Management Discussion and Analysis



     V.   Analysis of Investments (Cont’d)
          2.   Material equity investments during the reporting period (Cont’d)
                                                                                                                                                                                               Progress as
                                                                                                                                                                                               at the date                          Profit or l ss Lawsuit i
                                                                      Form of                                                                              Period of                           of balance Estimated          from i vestment for i volved Date of disclosure
               Name of i vestees           Principal activ t es       i vestment Investment amount Sharehold ng Source of fund   Partner(s)                i vestment       Product type       sheet       return           the reporting period or not      (if any)          Disclosure i dex (if any)

               Zhuhai Dechen New           Equity i vestment          Newly           50,000,000.00      33.33% Self-owned       Zhuhai Kaichenxing        7 May            Investment funds Completed Not appl cable              343,241.28 No            2 Apri 2015        http://www.cninfo.com.cn/
                 Third Board Equity        i unl sted enterprises,    establ shed                               funds            Investment Advisory       2015-
                 Investment Fund Company   equity i vestment,                                                                    Company (General          6 May 2019
                 (Lim ted Partnership)     and l sting consultation                                                              Partnership) and
                                           for enterprises.                                                                      Shenzhen Qianhai
                                                                                                                                 Financia Development
                                                                                                                                 Ltd. and Zhang
                                                                                                                                 Guangquan
               Shanghai Zhongneng          Industria i vestment,     Acquis t on     300,000,000.00      30.00% Self-owned       Yu Jianming and           October 2007-24 Industry            Transfer    Not appl cable         9,533,333.33 No           2 Apri 2015        http://www.cninfo.com.cn/
                 Enterprise Development    construction works,                                                  funds            China Del x Hold ng       October 2017    i vestment
                 (Group) Co., Ltd.         commercia consultation,                                                               Group Co., Ltd.
                                           and sales of electric ty,
                                           power station equipment
                                           sets, automated devices,
                                           electromechanical
                                           equipment, engineering
                                           equipment,
                                           environmental y
                                           friendly equipment,
                                           and construction
                                           materia s.
               Chenming Paper Korea        Trading of paper products Newly              6,143,400.00    100.00% Self-owned       Whol y-owned subsid ary   Long term        Trading            Completed Not appl cable           -347,992.47 No            Not appl cable     Not appl cable
                Co., Ltd.                                            establ shed                                funds
               Huanggang Chenming Pulp     Construction of raw       Capital        1,000,000,000.00    100.00% Self-owned       Whol y-owned subsid ary   26 September     Manufacturing of   Completed Not appl cable           -674,989.71 No            28 August 2015     http://www.cninfo.com.cn/
                & Paper Co., Ltd.          materia bases and wood i crease                                      funds                                      2008-            paper pulp
                                           procurement; manufacture,                                                                                       26 September
                                           production, processing,                                                                                         2058
                                           sale of paper pulp and
                                           related products, project
                                           construction and related
                                           i port and export
                                           business.




28
V Management Discussion and Analysis



V.   Analysis of Investments (Cont’d)
     3.   Material non-equity investments during the reporting period
          √ Applicable                       Not applicable

                                                                                                                                                                                                                   Unit: RMB

                                                                                                                                                        Accumulated
                                                        Industry                                                                                            realised
                                                        in which                               Accumulated                                                 return as    Reasons for
                                             Fixed      the                Investment         actual amount                                               of the end    failure in meeting
                                             assets     investment      amount during            invested as                                                   of the   scheduled            Date of
                                  Form of    investment project          the reporting             of the end                                Estimated     reporting    progress and         disclosure
          Project name            investment or not     operates                period   of reporting period    Source of fund    Progress       return       period    estimated return     (if any)        Disclosure index (if any)

          Jiangxi Chenming’s Self-       Yes            Paper         380,377,149.54     1,299,929,248.95      Self-raised and      99%                        0.00    Asset                28 June 2013    http://www.cninfo.com.cn/
            350,000 tonne     constructed                making                                                 borrowings                                              reclassification
            high-end                                                                                                                                                    during the
            packaging                                                                                                                                                   reporting period
            paper project                                                                                                                                               without profit
                                                                                                                                                                        contribution
          Shouguang’s            Self-       Yes        Paper         250,533,449.19       259,738,841.00      Self-raised         8.66%                       0.00    Not yet completed    21 March 2014   http://www.cninfo.com.cn/
            400,000               constructed            making                                                 and borrowings
            tonne chemical
            pulp project
          Forestry paper          Self-       Yes        Pulp          340,935,789.73       660,485,661.78      Self-raised and    18.95%                       0.00    Not yet completed    2 August 2013   http://www.cninfo.com.cn/
            integration project   constructed            production                                             borrowings
            of Huanggang
            Chenming
          600,000 tonne liquid    Self-       Yes        Paper        2,589,556,896.31    2,589,556,896.31      Self-raised and    68.15%                       0.00    Not yet completed    19 December     http://www.cninfo.com.cn/
            packaging paper       constructed            making                                                 borrowings                                                                   2015

          Total                                                       3,561,403,284.77    4,809,710,648.04                                                      0.00



     4.   Financial asset investment
          (1)          Security investments

                              Applicable √ Not applicable

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

          (2)          Derivatives investments

                              Applicable √ Not applicable

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

     5.   Use of proceeds
                  Applicable √ Not applicable

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




                                                                                                                                                                                                                                         29
     V Management Discussion and Analysis



     VI. Disposal of material assets and equity interest
         1.   Disposal of material assets
                    Applicable √ Not applicable

              The Company did not have any disposal of material assets during the reporting period.

         2.   Disposal of material equity interest
              √ Applicable                         Not applicable

                                                                                                                                     Ratio of
                                                                                           Net profit                                 the net
                                                                                        contribution                                    profit
                                                                                                   to                           contribution
                                                                                      the Company                                      to the
                                                                                                from                              Company                                                                  Carried out as
                                                                                      the beginning                              of disposal                                                               scheduled or
                                                                                       of the period                                of equity                                             Relevant         not, if not,
                                                                                               up to                                 interest                              Relationship   equity           the reasons
                                                                       Transaction      the disposal    Effect of                 over total Pricing basis Related party   with           interest fully   and measures
              Counterparty   Equity interest                         consideration              date    disposal on                net profit of disposal of transaction   counterparty   transferred      taken by         Disclosure
              (ies)          disposed                Disposal date    (RMB ’0,000)     (RMB ’0,000)   the Company                        (%) equity interest or not      (ies)          or not           the Company      date           Disclosure index

              Yu Jianming    30 % of equity          20 July 2015       30,953.33            810.33     The disposal                0.79% Agreement         No             Not applicable Yes              Not applicable   4 August 2015 http://www.cninfo.com.cn
                             interest in Shanghai                                                       effectively averted
                             Zhongneng                                                                  the uncertainty
                             Enterprise                                                                 faced by the
                             Development                                                                Company due to
                             (Group) Co., Ltd.                                                          the recent volatility
                                                                                                        in the capital
                                                                                                        market, ensured
                                                                                                        the income of
                                                                                                        the Company,
                                                                                                        concentrated the
                                                                                                        capital resources
                                                                                                        of the Company
                                                                                                        on its principal
                                                                                                        activities and
                                                                                                        business
                                                                                                        diversification,
                                                                                                        thereby
                                                                                                        maximising its
                                                                                                        competitiveness
                                                                                                        and profitability.




30
V Management Discussion and Analysis



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

    Major subsidiary and investees accounting for over 10% of the net profit of the Company

                                                                                                                                  Unit: RMB ’0,000

                         Type of                                  Registered                                 Revenue from   Operating
    Name of companies    companies    Principal activities           capital   Total assets     Net assets     operations       profit     Net profit

    Zhanjiang Chenming   Subsidiary   Pulp, duplex press and      300,000.00   1,540,950.01     329,238.71     437,536.89   55,033.37      40,512.17
      Pulp & Paper                    electrostatic paper
      Co., Ltd.
    Chenming (HK)        Subsidiary   Sales of paper               18,347.29   2,574,819.16      60,990.46     690,811.62   72,731.69      59,017.92
      Limited                         products, import of
                                      raw materials
                                      and processing
    Shouguang Meilun     Subsidiary   Coated paper and            300,000.00   2,456,800.19     423,788.10     561,769.58   58,253.91      46,374.99
      Paper Co., Ltd.                 household paper


    Acquisition and disposal of subsidiaries during the reporting period

    √ Applicable        Not applicable

                                                               Methods to acquire
                                                               and dispose of
                                                               subsidiaries during            Impact on overall
    Name of companies                                          the reporting period           production and operation and results

    Jinan Chenming Investment                                  Capital contribution           Net profit for 2015 was RMB173,800.
      Management Co., Ltd.                                     for establishment
    Chenming Paper Korea Co., Ltd.                             Capital contribution           Net profit for 2015 was –RMB378,000.
                                                               for establishment


    Particulars of major controlling companies 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.

    (2)      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, Financial Leasing Company delivered good profit as
             its financial leasing business gradually rolled out.

    (3)      With the higher gross profit margin from coated paper and the gains from sale of electricity, the profitability of
             Shouguang Meilun gradually improved.


VIII. Structured entities controlled by the Company
          Applicable √ Not applicable




                                                                                                                                                        31
     V Management Discussion and Analysis



     IX. Outlook on the future development of the Company
         (I)   Competition overview and development trend of the industry
               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. Elimination of
               obsolete 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 obsolete 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.

               Under the slowing macro-economic growth and economic transformation, the financial leasing industry as a favoured
               supplementary corporate financing channel and an effective tool to use assets at hand embraced continuously
               mounting market demand and was stepping into a golden age for its development. As an important bridge
               between the financial industry and the industries in the real economy, the financial leasing industry and the modern
               business model that centres on it will provide substantial capital support to the upgrade and transformation of the
               manufacturing industry in China. However, the penetration rate of financial leasing in the Chinese market is only
               around 5%, as compared with 20% in the European and US markets in general. The financial leasing industry in China
               is at the early stage and has a promising outlook. In fact, it is on a solid track of rapid growth. It is expected that the
               market size will reach RMB1,200 billion by 2020. The financial leasing industry has bright prospects in China as a
               result of its growth momentum under the “new normal” of the economy.

               Looking forward, the Company will adhere to the principal of achieving growth amid stability, and emphasise on
               environmental protection, low carbon, recycling and sustainable development. Following the “Made in China 2025
               Plan” and the principles of scientific development and quality and efficiency enhancement, it will comprehensively
               improve its quality and efficiency, management level, technology application, sense of happiness and brand
               image through the integration between its production and manufacture segment and financial services segment,
               incorporation of smart technology into its industrial activities, reorganised methodology and restructuring so as to
               expand and improve itself and strive to become one of the world-class companies with the highest growth rate in the
               “Thirteenth Five Year Plan” period.




32
V Management Discussion and Analysis



IX. Outlook on the future development of the Company (Cont’d)
    (II)   Development strategy
           Transformation and upgrade strategy: the Company will optimise its business structure and regional development
           planning, focus on developing the major industries, namely paper making, finance, forestry and real estate, and
           develop an industrial system that gives synergy and high efficiency.

           Green development strategy: the Company will adhere to the operating philosophy of integration of the “forestry,
           pulp and paper businesses”. It will achieve clean production through technology upgrade, advanced equipment and
           refined management in order to promote circular economy and establish itself as a benchmark enterprise in resources
           conservation and environmental protection. It strives to maintain balance between development and environmental
           protection by stepping up environmental protection efforts in scientific development so as to seek for a win-win
           solution for both economic benefits and environmental conservation.

           International strategy: the Company will expand to the international market based on its development in China. It will
           leverage the PRC “One Belt One Road” strategy to accelerate its pace of “going global”. It will reinforce cooperation
           with international companies to gradually develop the overseas market.

           Excellent operation strategy: the management of the Company will aim to achieve “management enhancement, team
           building, outstanding business performance and good results”. The Company will continuously enhance the whole
           process management on production and operation, marketing, finance costs and project construction, which will
           effectively integrate resources and keep on promoting management quality and profitability.

           Talent strategy: the Company will enhance the nurturing, recruitment, appointment and incentive mechanism of
           employees, with a view to developing a high-end, comprehensive, innovative and international team of talents to
           establish Chenming as a world leading and fast growing enterprise.

           Harmonious development strategy: the Company will step up efforts to build its corporate culture, and care for
           its employees. It will actively fulfil its corporate social responsibility and enhance value creation in areas such as
           economic, social and environmental development so as to develop a good corporate image of Chenming and
           establish it as an enterprise that develops in a harmonious manner.

    (III) Operating plan for 2016
           The main goal of the Company for 2016 is to “develop into an enterprise with hundreds of billions in value” by
           adhering to the principle of “achieving growth amid stability”. The Company will stick to its diversification strategy
           and develop an industrial system that centres on pulp production, paper making and finance to achieve synergy with
           forestry, real estate and mining so as to boost the core competiveness and profitability. Meanwhile, the Company will
           be committed to “team building, management enhancement, outstanding business performance and good results” in
           order to upgrade management quality. The measures to be taken by the Company are as follows:

           1.    Enhance management to upgrade management quality

                 The Company will work with leading management consultants in China. It will identify the problems in
                 management and formulate practical plans to address the issues with the help of external experts in order to
                 enhance the management level. It will improve fundamental management and recruit competent employees
                 in a timely manner to the management team to deal with the current problems arising from lack of sufficient
                 management. The Company will also further optimise the management system and procedures to provide
                 strong support to the strengthening of management standard.




                                                                                                                                       33
     V Management Discussion and Analysis



     IX. Outlook on the future development of the Company (Cont’d)
         (III) Operating plan for 2016 (Cont’d)
              2.    Enhance operation management and take initiatives to expand market

                    The Company will step up efforts in team building and talent recruitment to develop a talent pool and promotion
                    channels while laying off unqualified employees. It will focus on efficiency in performance evaluation to stimulate
                    employees’ incentives. It will enhance fundamental management and perform monthly inspection to groundwork
                    so as to “cover all aspects of the system”. The Company will also optimise the system in a timely manner and
                    set up standards for procedures, so that the implementation will be strict, effective and highly efficient. The
                    Company will formulate plans for major and difficult tasks and closely monitor, inspect and evaluate such tasks
                    to rectify problems. It will enhance efficiency management, adjust product structure, boost overseas sales, raise
                    price, and make investment in places with close proximity, in the pursuit of higher efficiency. Meanwhile, it will
                    support strategic customers, boost volume of trade, secure contracts and strengthen control of cash in transit
                    to reduce appropriation of funds. It will enhance risk control and the marketing team will set its priority on the
                    collection of receivables. The dedicated receivables collection team will carry out their work and strictly monitor
                    receivables. The Company will also accelerate the process in relation to collateral security.

              3.    Enhance and refine production management

                    The Company will boost production efficiency through refining management. It will cooperate with professional
                    consultants to optimise management and actively recruit and nurture talents in order to enhance fundamental
                    management capability. It will aim at a higher market share of high value-added products and optimise the
                    product structure by developing products with competiveness, such as wine label, logistics label and liquid
                    packaging paper. The Company will adjust the structure of pulp materials, upgrade production process, and
                    utilise new raw materials to promote technological progress. It will step up inspection efforts to identify safety
                    risks and protect the environment in accordance with the new national standards and requirements, thereby
                    ensuring the fulfilment of targets on time.

              4.    Enhance project management for high quality and efficiency

                    The Company will enhance implementation and management of Zhanjiang Chenming’s 600,000 tonne liquid
                    packaging paper project, Haiming Mining, Huanggang Chenming’s integrated forestry, pulp and paper project
                    and Shouguang Chenming’s 400,000 tonne chemical pulp project so as to ensure the timely commencement
                    of operation, which will provide new sources of profit growth. The Company will adopt strict quality control
                    on project construction by clarifying responsibility and enhancing control so as to ensure construction quality
                    and safety at the work sites. The Company will fully prepare for the projects and optimise the organisational
                    structure. It will set up a management team and recruit technicians, while developing training programmes
                    for the staff at all levels, so as to lay a solid foundation for production and operation and ensure the smooth
                    operation of the projects upon completion.

              5.    Enhance financing management to create extra value

                    The Financial Leasing Company will focus on risk control. It will actively explore for quality customers, seek
                    to increase the direct credit lines of domestic banks and obtain additional banking facilities. The Company
                    will enhance the management of the Finance Company with a focus on its fundamental business in relation
                    to settlement, deposit and loans as well as bills, so as to boost the recovery rate of funds. The Company will
                    actively solicit interbank credit extension and diversify its interbank product offerings in order to increase
                    efficiency. At the same time, Qingdao Chenming will commence financial leasing business at bonded areas to
                    provide liquidity support to the Company’s operation and lower the financing cost.




34
V Management Discussion and Analysis



IX. Outlook on the future development of the Company (Cont’d)
    (III) Operating plan for 2016 (Cont’d)
         6.    Enhance procurement management to raise resources efficiency

               Leveraging the development of “cross-border e-commerce” and “Internet Plus”, the Company will seek to gain
               market influence by establishing an online marketing platform for import and export of goods. The Company will
               also develop complementary distributor management policy and pricing policy to boost efficiency of external
               sales. In addition, it will set up an electronic merchandise exchange centre for pulp and paper products, and
               develop an integrated supply chain for the storage and logistics of pulp and paper products in the country, with
               the goal of building China’s market price index centre of pulp and paper products, and a global information
               centre of paper products.

         7.    Enhance service operation and business expansion

               The Company will enhance the management of the brick plant, cement and construction materials companies.
               In terms of internal measure, it will enhance the service quality; and in terms of external measure, it will actively
               expand business to boost profit.

    (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. The issue of preference shares which may be accounted
         for in equity will also help reduce the Company’s gearing ratio, thus improving the Company’s capital structure and
         enhancing the Company’s risk aversion capability.

         Secondly, the Company will establish diversified financing channels. Various financing methods, such as increasing
         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 Chenming (HK), 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 the Finance Company and the Financial Leasing
         Company to expand the Group’s financing channels. They will grow amid stability, provide new impetus for the
         Company’s earnings growth and boost profit.

         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.




                                                                                                                                       35
     V Management Discussion and Analysis



     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 impact on the operating
               results of the Company to a certain extent 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 has supported the rapid
               development of the paper making industry in the past currently face the dual pressures of resources and environment.
               From the point of view of China’s policy, China will change the mode of growth through optimising 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.

               Elimination of obsolete production capacity and stricter environmental protection policy have forced some small and
               medium-sized enterprises to exit the industry. Hence, the Company is expected to record long-term revenue.

               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 upstream resources on the Company’s development and enhancing the
               Company’s sustainable development.




36
V Management Discussion and Analysis



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)
          Environmental protection risk

          The new Environmental Protection Law took effect on 1 January 2015. More stringent environmental protection
          policies have been implemented in the paper making industry. 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 costs and
          high entry standards may result in the slowdown of scale expansion, thus affecting the production and operation of
          the Company.

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

          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$. The operations of raw material imports, product exports and US$ 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.




                                                                                                                                  37
     V Management Discussion and Analysis



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

                                                  Manner of          Class of parties   Index of particulars of
               Date of reception                  reception          accommodated       research investigations

               13 January 2015                    On-site research   Institution        Details are disclosed in the investor
                                                  investigation                         relationship event record on CNINFO on 15
                                                                                        January 2015
               13 January 2015                    On-site research   Institution        Details are disclosed in the investor
                                                  investigation                         relationship event record on CNINFO on 15
                                                                                        January 2015
               28 January 2015                    On-site research   Institution        Details are disclosed in the investor
                                                  investigation                         relationship event record on CNINFO on 29
                                                                                        January 2015
               Number of receptions                                                                                             3
               Number of institutions received                                                                                 29
               Number of individuals received                                                                                   0
               Number of other                                                                                                  0
               entities received
               Disclosure, leakage or                                                                                         No
               divulgence of undisclosed
               significant information




38
VI Directors’ Report



The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2015.


I.    Principal activities
      Please refer to section IV “Business Overview”, “I. Principal operations of the Company during the Reporting Period” and “II.
      Analysis of principal operations” under section V “Management Discussion and Analysis” for details of principal activities of
      the Company.


II.   Results and profit distribution
      Please refer to section XII “Financial Report” for the results of the Group for the year ended 31 December 2015.


III. Dividends
      As of the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2015 (“final
      dividend”) of RMB3.00 in cash for every 10 Shares (tax inclusive) (2014: dividend of RMB1.4 in cash for every 10 Shares
      (tax inclusive)) to the shareholders of the Company, subject to approval of shareholders at the forthcoming Annual General
      Meeting (“AGM”) of the Company held on 17 May 2016. Upon approval of shareholders of the Company at the AGM, the
      Company is expected to pay the final dividend on or around 17 July 2016 to shareholders whose names appear on the
      register of members of the Company on 25 May 2016.


IV. Closure of register of members
      The register of members of the Company will be closed from 16 April 2016 (Saturday) to 17 May 2016 (Tuesday), (both
      days inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
      vote at the annual general meeting to be held on 17 May 2016 (Tuesday), all share transfer documents accompanied by
      the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
      Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
      East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on 15 April 2016 (Friday).


V.    Five year financial summary
      Please refer to “IX. Five-year financial summary under Hong Kong Financial Reporting Standards” under section II “Company
      Profile and Key Financial Indicators” for the financial summary of the Company for the past five financial years.


VI. Donations
      During the year, the Company donated RMB600,000 (2014: RMB1,000,000) to non-profit making organisations.


VII. Subsidiaries
      Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Management Discussion and Analysis”
      and “XIX. Matters of significant of subsidiaries of the Company” under section VI “Material Matters” for the details of
      acquisition and disposal of subsidiaries by the Company during the year.


VIII. Property, plant and equipment
      Please refer to “1. Consolidated Balance Sheet” under section XII “Financial Report” for the details of changes in property,
      plant and equipment of the Group for the year ended 31 December 2015.




                                                                                                                                           39
     VI Directors’ Report



     IX. Share capital
          Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
          in share capital of the Company for the year ended 31 December 2015.


     X.   Pre-emptive rights
          In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
          shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.


     XI. Transfer into reserves
          The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
          December 2015, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
          surplus of the Company, amounted to RMB6,002,557,599.09 (2014: RMB5,313,936,425.86) as set out in “1. Consolidated
          Balance Sheet” under section XII “Financial Report”.


     XII. Directors
          As at 31 December 2015, the Directors of the Company were:

     1.   Executive Directors
          Mr. Chen Hongguo
          Mr. Yin Tongyuan
          Mr. Li Feng
          Mr. Geng Guanglin
          Mr. Hou Huancai
          Mr. Zhou Shaohua

     2.   Non-executive Directors
          Mr. Wang Xiaoqun
          Ms. Yang Guihua

     3.   Independent Non-executive Directors
          Mr. Wang Aiguo
          Mr. Zhang Zhiyuan
          Mr. Zhang Hong
          Ms. Pan Ailing

          According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been elected
          at the general meetings with a term of three years from May 2013 to May 2016. They may be re-elected for another term
          upon expiry of tenure.




40
VI Directors’ Report



XIII. Directors’ service contracts
    All Directors have entered into service contracts with the Company for a term from 16 May 2013 to 16 May 2016, except for
    non-executive Director Ms. Yang Guihua, whose service contract commenced from 9 May 2014.

    None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
    contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
    payment of compensation other than statutory compensation


XIV. Directors and senior management’s remuneration and the five highest paid individuals
    Details of Directors and senior management’s remuneration and those of the five highest paid individuals in the Company
    and its subsidiaries are set out in part V of section X and part XII of section XII.

    In 2015, the Company has 24 senior management in total, which include directors, supervisors and senior management.
    The remuneration of senior management falls within the following ranges:

    Range of remuneration                                                                                           Number

    RMB4.8 million to RMB5.2 million                                                                                       1
    RMB3.6 million to RMB4.0 million
    RMB3.2 million to RMB3.6 million
    RMB2.8 million to RMB3.2 million                                                                                       1
    RMB2.4 million to RMB2.8 million
    RMB2.0 million to RMB2.4 million                                                                                       1
    RMB1.6 million to RMB2.0 million                                                                                       3
    RMB1.2 million to RMB1.6 million                                                                                       1
    RMB0.8 million to RMB1.2 million                                                                                       1
    Below RMB0.8 million                                                                                                  16



XV. Independent Non-executive Directors
    The Company has received from each of the independent non-executive Directors a confirmation of independence for the
    year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
    be independent during the year.




                                                                                                                                 41
     VI Directors’ Report



     XVI. Securities interests held by Directors, Supervisors and Chief Executives
         As at 31 December 2015, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
         held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
         as follows:

                                                                                                                                  Number of shares
                                                                                                                                  (A shares) held as
                                                                                                                                    at the end of the
                                                                                                                                    reporting period
         Name                                                              Position                                                          (shares)

         Directors
         Chen Hongguo (Note 1)                                             Chairman and General Manager                                     6,434,527
         Yin Tongyuan                                                      Executive Director and Vice Chairman                             2,423,640
         Li Feng                                                           Executive Director                                                 471,818
         Geng Guanglin                                                     Executive Director                                                 437,433
         Hou Huancai                                                       Executive Director                                                 628,915
         Zhou Shaohua                                                      Executive Director                                                 123,007
         Yang Guihua                                                       Non-executive Director                                                  —
         Wang Xiaoqun                                                      Non-executive Director                                                  —
         Wang Aiguo                                                        Independent non-executive Director                                      —
         Zhang Zhiyuan                                                     Independent non-executive Director                                      —
         Zhang Hong                                                        Independent non-executive Director                                      —
         Pan Ailing                                                        Independent non-executive Director                                      —

         Supervisors
         Gao Junjie                                                        Supervisor                                                           39,606
         Wang Ju                                                           Supervisor                                                               —
         Yang Hongqin                                                      Supervisor                                                               —
         Yin Qixiang                                                       Supervisor                                                               —
         Guo Guangyao                                                      Supervisor                                                               —


         Associated corporations

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

         Chen Hongguo         Chairman       Shouguang Henglian                         231,000,000                          —          231,000,000
                                             Enterprise Investment
                                             Co. Ltd. (note 2)


         Note 1:   Save for the 6,334,527 A shares held personally, Chen Hongguo is deemed to be interested in the 429,348 A shares held by his spouse, Li
                   Xueqin.

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




42
VI Directors’ Report



     Save as disclosed above, as at 31 December 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 for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
     the Listing of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).

     As at 31 December 2015, none of the Directors, Supervisors or chief executives or their respective spouses or children
     under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
     associated corporations.


XVI. Interests and short position of substantial shareholders in shares and underlying shares
     As at 31 December 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):

                                                                                               Approximate shareholding
                                                                                                  as a percentage of
                                                       Number of shares held                   Total share             Class of
     Name                                              (shares)                                 capital (%)          shares (%)

     Shouguang Chenming Holdings Co., Ltd              293,003,657 A shares (L)                      15.13                  26.32
     The National Social Security Fund Council         35,570,000 H shares (L)                        1.84                  10.10
     Shouguang Chenming Holdings Co., Ltd              58,914,500 H shares (L)                        3.04                  16.73
     Chenming Holdings (Hong Kong) Limited             58,914,500 H shares (L)                        3.04                  16.73


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

     Save as disclosed above, as at 31 December 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.


XVII. Relationship with employees, customers and suppliers
     Please refer to “VI. Personnel of the Company” under section IX “Directors, Supervisors and Senior Management and Staff”,
     “2.(8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V “Management
     Discussion and Analysis” for details of the relationship between the Company and its employees, customers and suppliers.


XVIII. Directors’ interests in material contracts
     None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
     interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
     period.


XIX. Interests in competing business
     None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
     likely to compete with the businesses of the Company and any of its subsidiaries.




                                                                                                                                       43
     VI Directors’ Report



     XX. Directors’ rights to purchase shares or debentures
          At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors
          to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.


     XXI. Preference shares
          Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.


     XXII. Management contracts
          No contracts concerning the management and administration of the whole or any substantial part of the business of the
          Company were entered into or existed in 2015.


     XXIII. Major risk factors
          Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
          of the Company” under section V “Management Discussion and Analysis” for details of major risk factors of the Company.


     XIV. Material matters
          Please refer to section VI “Material Matters” for details of material matters of the Company.


     XV. Future development
          Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
          plan for 2016” and “(IV) Future capital requirements, source of funds and plan for use” of “IX. Outlook on the future
          development of the Company” under section V “Management Discussion and Analysis” for details of future development of
          the Company.


     XVI. Environmental protection policy and performance and compliance with laws and regulations
          Please refer to XX. Fulfilment of Social Responsibility under section VI “Material Matters” for details of environmental
          protection policy and performance of the Company and compliance with laws and regulations.


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


     XVIII. Sufficiency of public float
          During the reporting period, based on the information that is publicly available to the Company and within the knowledge of
          the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
          Listing Rules.


     XXIX. Review of the Audit Committee
          The audited consolidated financial statements of the Company for the year ended 31 December 2015 has been reviewed by
          the Audit Committee of the Company.




44
VI Directors’ Report



XXX. Gearing ratio
    As at 31 December 2015, the Company’s gearing ratio (including minority interest) was 65.06%, representing an increase
    of 4.61 percentage points from 60.45% for 2014, mainly due to the increase in financing as the Company sought to obtain
    sufficient liquidity for the financial leasing business and project investment during the period.

    The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
    year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).


XXXI. Going Concern Basis
    The Company is a leading player in the paper making industry in China. After entrepreneurship and innovation for more
    than half a century, it has developed into a large and integrated modern conglomerate principally engaged in paper making,
    finance, forestry and real estate businesses while also involved in mining, energy, logistics, construction materials, hotel
    operation and others. It is the only Chinese company with three types of listed shares, i.e., A shares, B shares and H shares,
    and the first enterprise in the paper making industry to integrate finance and industry and own both finance company and
    financial leasing company. The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi and Jilin, which
    deliver annual pulp and paper production capacity of over 8,500,000 tonnes.

    The Company has a good sustained profitability. In 2015, the Company achieved revenue of RMB20.2 billion, net profit
    attributable to shareholders of the Company of RMB102.1 million and an net increase in cash and cash equivalents of
    RMB912 million. Meanwhile, the Company always places emphasis on the interests of and return to shareholders, and has
    paid generous cash dividends for several years. With the improvement of the economic situation, the future performance of
    the Company is worth looking forward to.

    In addition, as of the end of December 2015, the Company obtained a comprehensive credit line of RMB55.9 billion from
    major financial institutions, of which unused credit line amounted to RMB22.0 billion, which provided important support to
    the Company’s business development. As an A-share, B-share and H-share listed company, the Company has convenient
    financing channels. The Company established Shandong Chenming Financial Leasing Co., Ltd., Shandong Chenming
    Investment Limited and Shandong Chenming Group Finance Co., Ltd. as the core of the financial segment. The rapid
    business development, improving management system and effective risk control provide new sources of profit growth for
    the Company, further increase the Group’s fund settlement, management, investment and financing ability, and reduce its
    financing cost while improving its debt structure.

    The auditors of the Company have prepared the 2015 annual financial report on a going concern basis, and have issued a
    standard unqualified audit opinion (see Financial Report section).

    Therefore, the Board believes the Company has the ability to continue as a going concern.




                                                                                                                                     45
     VII Material Matters



     I.   Profit distribution for ordinary shares of the Company and conversion of capital reserves into
          share capital
          Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
          cash dividend during the reporting period
          √ Applicable   Not applicable

          The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
          dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
          resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
          of the small shareholders were fully protected as the related decision making process and mechanism were in place,
          the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
          opportunities to sufficiently voice their opinion and make requests.

          Implementation of the 2014 profit distribution plan: 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 CNINFO 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

          The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital reserves into
          share capital (proposed) over the past three years (the reporting period inclusive)

          (1)   The 2015 profit distribution plan

                Based on the number of the total shares as at the dividend distribution registration date, a cash dividend of
                RMB3.00 was to be paid to all shareholders for every 10 shares held (tax inclusive). Based on the total share
                capital of 1,936,405,467 shares of the Company as at 31 December 2015, cash dividend for 2015 amounted to
                RMB580,921,640.10 (tax inclusive), which represented 60.53% of the net profit attributable to ordinary shareholders
                of the Company as set out in the 2015 consolidated financial statements prepared in accordance with Accounting
                Standards for Business Enterprises.




46
VII Material Matters



I.   Profit distribution for ordinary shares of the Company and conversion of capital reserves into
     share capital (Cont’d)
     Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
     cash dividend during the reporting period (Cont’d)
     (2)   The 2014 profit distribution plan

           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).

     (3)   The 2013 profit distribution plan

           The 2013 profit distribution plan was considered and approved in the 2013 annual general meeting convened by
           the Company on 9 May 2014. Based on the number of the shares as at the dividend distribution registration date
           of 1,936,405,467 shares, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10
           shares held. The total cash dividend to be distributed amounted to RMB580,921,640.10 (tax inclusive).

           Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)

                                                                                                                       Unit: RMB

                                                                                                   As a
                                                                                          percentage
                                                                            Net profit    of net profit
                                                                         attributable     attributable
                                                                          to ordinary      to ordinary
                                                                    shareholders of      shareholders
                                                                    the Company in               of the    Amount         Ratio
                                                                   the consolidated          Company        of cash     of cash
                                                                             financial           in the  dividends   dividends
                                                    Amount of            statements      consolidated distribution distribution
                                               cash dividends        during the year          financial    through     through
           Year of distribution                  (tax inclusive)      of distribution      statements other means other means

           2015                                580,921,640.10       959,717,938.31           60.53%           0.00        0.00%
           2014                                271,096,765.38       505,204,384.73           53.66%           0.00        0.00%
           2013                                580,921,640.10       710,655,331.72           81.74%           0.00        0.00%

           Explanation: In 2015, net profit attributable to ordinary shareholders of the Company excluded the effect of interest
           payment deferred and accumulated to subsequent periods for perpetual bonds under other equity instruments
           (amounted to RMB61,506,739.43). For details, please refer to Note XVII. 2 of section XII of this report.

           The Company made a profit and had positive retained profit available for ordinary shareholders during the reporting
           period without cash dividend for ordinary shares being proposed

             Applicable √ Not applicable




                                                                                                                                   47
     VII Material Matters



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

           Numbers of bonus share per 10 shares (share(s))                                                                                         0
           Dividend distribution per 10 shares (RMB) (tax inclusive)                                                                               3
           Conversion per 10 shares (share(s))                                                                                                     0
           Share base of the distribution proposal (shares)                                                                            1,936,405,467
           Total cash dividend (RMB) (tax inclusive)                                                                                  580,921,640.10
           Distributable profits (RMB) (Note 1)                                                                                     5,354,542,859.44
           Percentage of cash dividend to total profits distribution                                                                        100.00%

                                                                      Cash dividend policy

           The Company proactively implemented cash dividend. The Company shall distribute dividend by way of cash providing that
           there are sufficient cash flow to meet the Company’s normal operations and long-term development. Accumulated profit
           distribution in cash over the recent three years shall not be less than 30% of profit distributable annually realised over the
           past three years.

                                Particulars of profit distribution and conversion of capital reserves into share capital

           Please refer to I. herein for particulars of profit distribution proposal for 2015.
           Note 1:   Distributable profits excluded the effect of interest payment deferred and accumulated to subsequent periods for perpetual bonds under
                     other equity instruments (amounted to RMB61,506,739.43).




48
VII Material Matters



III. Performance of undertakings
    1.   Undertakings made by the Company, shareholders, beneficial controllers, bidders, directors,
         supervisors, senior management or other related parties during the reporting period or prior periods
         but subsisting to the end of the reporting period
         √ Applicable              Not applicable

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




                                                                                                                                                                                                             49
     VII Material Matters



     III. Performance of undertakings (Cont’d)
         1.   Undertakings made by the Company, shareholders, beneficial controllers, bidders, directors,
              supervisors, senior management or other related parties during the reporting period or prior periods
              but subsisting to the end of the reporting period (Cont’d)
                                          Party involved        Type of                                                                                                                   Particulars on
              Undertaking                 in undertaking        undertaking            Details of undertaking                                      Undertaking date   Term                the performance

                                          Shouguang             Defective properties (1) According to the plan on defective properties of the      16 January 2008    During the period Strictly implemented
                                          Chenming Holdings                          Company, Shouguang Chenming Holdings Co., Ltd.                                   when Chenming
                                          Co., Ltd.                                  (“Shouguang Chenming Holdings”) has guaranteed                                 Holdings was the
                                                                                     and undertaken that: according to the application of                             major shareholder of
                                                                                     the Company, for defective property(ies) owned by the                            the Company
                                                                                     Company and its holding subsidiary company which
                                                                                     situated in the administrative area of Shouguang city,
                                                                                     Shouguang Chenming Holdings will purchase it(them)
                                                                                     and have it(them) being transferred to itself pursuant
                                                                                     to the law in accordance with the result of the related
                                                                                     asset valuation if the Company decides to transfer and
                                                                                     dispose of it(them) and there is no other transferee;
                                                                                     (2) before the Company transfers and disposes of the
                                                                                     defective properties pursuant to the law, if the Company
                                                                                     suffers any economic losses due to the defects of the
                                                                                     title (including but not limited to damages, penalties and
                                                                                     relocation costs), Shouguang Chenming Holdings will
                                                                                     bear such economic losses; (3) during the regulatory
                                                                                     process taken to the defective properties of buildings
                                                                                     and land of subsidiaries of the Company situated
                                                                                     outside the local areas (outside the administrative area of
                                                                                     Shouguang city), the economic losses such as penalties
                                                                                     or relocation costs imposed by competent administrative
                                                                                     authorities to be borne by the subsidiaries arising from
                                                                                     defects of insufficient title documents shall be paid
                                                                                     pursuant to the law by Shouguang Chenming Holdings
                                                                                     after verification.
              Equity incentive undertaking
              Other undertakings           Shouguang            Not conducting         As Chenming Holdings is confident of the prospects          8 July 2015        From 8 July 2015 to Completed
                made to minority           Chenming             shareholding           of the economic development in China and the future                            8 January 2016
                shareholders of            Holdings Co., Ltd.   reduction              development of the Company, in order to maintain the
                the Company                                                            stability of capital market and promote the sustainable,
                                                                                       stable and healthy development of the Company,
                                                                                       Chenming Holdings has undertaken that it will not
                                                                                       reduce its shareholding in the Company in the coming
                                                                                       six months.
              Does the undertaking        Yes
                performed timely?


         2.   Description on the Company’s assets and items in meeting original profit forecast and its explanation
              as there is profit forecast for assets and items of the Company and the reporting period is still within
              the profit forecast period
                  Applicable √ Not applicable




50
VII Material Matters



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

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


V.   Opinions of the Board, the Supervisory Committee and independent Directors (if any)
     regarding the “modified auditor’s report” for the reporting period issued by the accountants
        Applicable √ Not applicable


VI. Reason for changes in accounting policies, accounting estimates and accounting methods
    as compared to the financial report for the prior year
        Applicable √ Not applicable

     There was no change in accounting policies, accounting estimates and accounting methods during the reporting period.


VII. Reason for retrospective restatement to correct major accounting errors during the reporting
     period
        Applicable √ Not applicable

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


VIII. Reason for changes in scope of the consolidated financial statements as compared to the
      financial report for the prior year
     √ Applicable   Not applicable

     During the reporting period, the Company invested and established two companies, namely Jinan Chenming Investment
     Management Co., Ltd. and Chenming Paper Korea Co., Ltd.

     In order to expand the customer base of the Finance Company, fully utilise the investment and financing functions of the
     Finance Company and enhance its profitability, the Company established Jinan Chenming Investment Management Co.,
     Ltd. The registered capital of Jinan Chenming was RMB100.00 million. Its operations complemented those of the Finance
     Company. Moreover, Jinan Chenming was consolidated into the financial statements of the Company since January 2015.

     In order to strengthen the paper product sales of the Company, further increase the market share of the Company’s
     products in Korea and establish a wider and more comprehensive sales network, the Company established Chenming Paper
     Korea Co., Ltd. The registered capital of Chenming Korea was US$1.00 million and Chenming Korea was consolidated into
     the financial statements of the Company since April 2015.




                                                                                                                                   51
     VII Material Matters



     IX. Engagement or dismissal of accounting firms
          Current accounting firm engaged

          Name of the domestic accounting firm                                            Ruihua Certified Public Accountants
                                                                                          (Special General Partnership)
          Remuneration of the domestic accounting firm (RMB ‘0,000)                      260
          Continued term of service of the domestic accounting firm                       3
          Name of certified public accountants of the domestic accounting firm            Wang Yan and Jing Chuanxuan

          Whether to appoint another accounting firm during the period

             Yes √ No

          Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes

          √ Applicable   Not applicable

          During the year, the Company engaged Ruihua Certified Public Accountants as the internal control and auditing firm of the
          Company. The Company paid RMB600,000 as internal control and auditing fees during the period. The Company engaged
          King & Wood Mallesons (Qingdao) Law Firm as its regular legal advisor and paid RMB100,000 as legal advisory fees during
          the period.


     X.   Suspension in trading or delisting upon publication of annual report
             Applicable √ Not applicable


     XI. Matters related to bankruptcy and reorganisation
             Applicable √ Not applicable

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


     XII. Material litigation and arbitration
             Applicable √ Not applicable

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


     XIII. Punishment and rectification
             Applicable √ Not applicable

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


     XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
             Applicable √ Not applicable




52
VII Material Matters



XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
    incentive measure of the Company
         Applicable √ Not applicable

    There was no implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure
    of the Company during the reporting period.


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

                                                                                        Subject                 Pricing                                      Amount of                      Amount of
                                                                    Types of the        matter of the           basis of the         Price of             related party Percentage as the transactions         Whether        Settlement of          Market price of
                                            Related                 related party       related party           related party        related party        transactions amount of similar     approved          exceeding      related party          available similar
            Related party                   party relationship      transactions        transactions            transactions         transactions          (RMB ‘0,000) transactions (%) (RMB ‘0,000)        approved cap   transactions           transaction       Disclosure date Disclosure index

            Jiangxi Chenming Natural        Enterprise control      Procurement         Natural gas             Market price         Market price            12,325.53              0.83%             32,000   No             Bank acceptance and    Not appl cable   27 March 2015     http://www.cninfo.com.cn
              Gas Co., Ltd.                 by senior                                                                                                                                                                         telegraphic transfer
                                            management of
                                            the Company
            Total                                                                                               —                   —                      12,325.53                   —           32,000   —             —                     —               —                —

            Particulars on refund of bulk sale                                                                                                                                                                                No
            Estimated total amount for day-to-day related party transactions to be conducted during the period (by types of transactions) and their actual i plementing during the reporting period                           Not appl cable
            Reason for the difference between transaction price and market reference price (if appl cable)                                                                                                                    Not appl cable


    2.      Related party transaction in connection with purchase or sale of assets or equity interest
                    Applicable √ Not applicable

            There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
            during the reporting period.

    3.      Related party transaction in connection with joint external investment
                    Applicable √ Not applicable

            There was no related party transaction of the Company connected to joint external investment during the reporting
            period.




                                                                                                                                                                                                                                                                                                                   53
     VII Material Matters



     XVI. Significant related party transactions (Cont’d)
         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 significant related party transactions
                    Applicable √ Not applicable

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


     XVII. Material contracts and implementation
         1.   Custody, contracting and leasing


              (1)      Custody

                          Applicable √ Not applicable



              (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.




54
VII Material Matters



XVII. Material contracts and implementation (Cont’d)
    2.   Significant guarantees
         √ Applicable           Not applicable

         (1)   Guarantees

               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 RMB10,536.6329 million. As at 31 December 2015, the
               balance of the guarantee provided by the Company to its subsidiaries amounted to RMB11,484.9321 million,
               representing 68.07% of the equity attributable to shareholders of the Company as at the end of 2015.

                                                                                                                                                                                        Unit: RMB ’0,000

                                                                                            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 Pulp & Paper Co., Ltd.                   27 October 2014              650,000    27 October 2014         140,913.3       General guarantee 3 years      No            No
               Shandong Chenming Financial Leasing Co., Ltd.               26 March 2015                500,000    22 May 2015            210,098.42       General guarantee 7 years      No            No
               Huanggang Chenming Arboriculture Co., Ltd.                  27 October 2014               10,000    18 December 2014            4,500       General guarantee 3 years      No            No
               Huanggang Chenming Pulp & Paper Co., Ltd.                   26 March 2015                400,000    28 July 2015            40,337.84       General guarantee 7 years      No            No
               Jiangxi Chenming Paper Co., Ltd.                            27 October 2014              200,000    6 January 2015          53,059.92       General guarantee 3 years      No            No
               Shouguang Meilun Paper Co., Ltd.                            16 December 2010             600,000    13 April 2015           31,366.27       General guarantee 10 years     No            No
               Shandong Chenming Paper Sales Company Limited               27 October 2014              400,000    9 January 2015         316,114.46       General guarantee 3 years      No            No
               Chenming (HK) Limited                                       27 October 2014              500,000    10 February 2015       352,103.00       General guarantee 3 years      No            No
               Shouguang Chenming Import and Export Trade Co., Ltd. 27 October 2014                     200,000    —                               0      General guarantee 3 years      No            No
               Jilin Chenming Paper Co., Ltd.                              27 October 2014              150,000                                     0      General guarantee 3 years      No            No
               Haicheng Haiming Mining Company Limited                     27 August 2014                60,000    —                               0      General guarantee 3 years      No            No
               Shandong Chenming Group Finance Co., Ltd.                   13 February 2015             400,000    —                               0      General guarantee 3 years      No            No
               Total amount of guarantee provided for subsidiaries approved during the reporting period               1,300,000 Total amount of guarantee provided for subsidiaries                   1,053,663.29
                                                                                                                                  during the reporting period
               Total amount of guarantee provided for subsidiaries approved                                           4,070,000 Total balance of guarantee provided for subsidiaries                  1,148,493.21
                 as at the end of the reporting period                                                                            as at the end of the reporting period
               The percentage of total amount of guarantee provided to the net assets of the Company                                                                                                      68.07%
               Of which:
               Amount of guarantee provided for shareholders, beneficial controllers and its related parties (D)                                                                                                 0
               Amount of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E)                                                                                       1,055,095.45
               Total amount of guarantee provided in excess of 50% of net assets (F)                                                                                                                    285,546.89
               Sum of the above three amount of guarantee (D+E+F)                                                                                                                                     1,340,642.34


         (2)   External guarantees against the rules and regulations

                    Applicable √ Not applicable

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




                                                                                                                                                                                                                     55
     VII Material Matters



     XVII. Material contracts and implementation (Cont’d)
         3.   Entrusted cash and asset management
              (1)   Entrusted wealth management

                         Applicable √ Not applicable

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

              (2)   Entrusted loans

                    √ Applicable                   Not applicable

                                                                                                                                                                                             Unit: RMB ’0,000

                                                                                                                                              Actual
                                                                                                                                            principal
                                                  Related party                                                                           recovered         Impairment                Actual gains or  Gains or losses
                                                  transaction        Interest                                                                 during          provision     Expected losses during the recovered during
                    Borrower                      or not        rate of loans       Loan amount    Commencement date   Expiry date        the period             (if any)      return reporting period the reporting period

                    Shouguang Jin Choi Public
                      Assets Management
                      Co., Ltd.               No                        10.00%            90,000   18 January 2014     17 January 2017             0                   0      27,000        9,477.48     Recovered on time
                    Total                     —                             —           90,000   —                  —                          0                   0      27,000        9,477.48     —

                    Source of entrusted loans                                                                                            Self-owned funds
                    Accumulated principal and return overdue but not yet recover                                                         0
                    Dispute                                                                                                              None
                    Disclosure date of approval of entrusted loans in board meeting                                                      18 January 2014
                    Disclosure date of approval of entrusted loans at a general meeting                                                  Not applicable
                    Any entrusted loan plan in the future?                                                                               Not applicable




56
     4.   Other material contracts
          √ Applicable               Not applicable

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

          Shandong Chenming Paper     Jinan Hi-Tech Holding Group   A7-2 plot of the   9 May 2014              Not applicable Not applicable Not applicable Not applicable Market price               36,000     No            Not applicable   In progress        10 May 2014       http://www.cninfo.com.cn
                                                                                                                                                                                                                                                                                                                VII Material Matters




            Holdings Limited          Co., Ltd.                     Han Yu Jin Gu
          Huanggang Chenming Pulp &   FMW Foerderanlagen Gmbh.      Materials and      1 July 2015             Not applicable Not applicable Not applicable Not applicable Market price       EUR7.80 million    No            Not applicable   Market price       23 July 2015      http://www.cninfo.com.cn
            Paper Co., Ltd.                                         equipment for
                                                                    chemical pulp
          Huanggang Chenming Pulp &   Valmet Technologies Oy        Equipment          1 July 2015             Not applicable Not applicable Not applicable Not applicable Market price     EUR65.631 million    No            Not applicable   In progress        23 July 2015      http://www.cninfo.com.cn
            Paper Co., Ltd.
          Huanggang Chenming Pulp &   Valmet (China) Co., Ltd.      Equipment and      1 July 2015             Not applicable Not applicable Not applicable Not applicable Market price             36,076.4     No            Not applicable   In progress        23 July 2015      http://www.cninfo.com.cn
            Paper Co., Ltd.                                         spare parts
          Huanggang Chenming Pulp &   Andritz Oy                    Steam equipment    1 July 2015             Not applicable Not applicable Not applicable Not applicable Market price      EUR7.044 million    No            Not applicable   In progress        23 July 2015      http://www.cninfo.com.cn
            Paper Co., Ltd.                                         system
          Huanggang Chenming Pulp &   Andritz (China) Ltd.          Steam equipment    1 July 2015             Not applicable Not applicable Not applicable Not applicable Market price               3,060.4    No            Not applicable   In progress        23 July 2015      http://www.cninfo.com.cn
            Paper Co., Ltd.




57
     VII Material Matters



     VXIII. Other matters of significance
         √ Applicable    Not applicable

         1.    Capital injection to Huanggang Chenming
               In order to fulfil the capital requirements for the subsequent construction of the integrated forestry and paper project
               of Huanggang Chenming and bank borrowings, as well as to ensure smooth project construction, the Company
               intended to increase the capital of Huanggang Chenming by RMB1,000 million with its own funds. Upon the capital
               injection, the registered capital of Huanggang Chenming increased to RMB1,200 million from RMB200 million. For
               details, please refer to relevant announcement (announcement no.: 2015-054) of the Company published on CNINFO
               on 28 August 2015.

         2.    Approval from the CSRC in relation to the application for non-public issuance of preference shares
               On 17 September 2015, the Company received the Approval of the Non-Public Issuance of Preference Shares of
               Shandong Chenming Paper Holdings Limited (Zheng Jian Xu Ke (2015) No. 2130) from the CSRC, pursuant to which
               the non-public issuance of not more than 45 million preference shares by the Company was approved. Preference
               shares shall be issued in tranches. The issuance of the first tranche of not less than 22.5 million shares was to be
               completed within six months and the issuance of outstanding preference shares was to be completed within 24
               months.

         3.    Disposal of equity interest in Fuyu Chenming
               The Board of the Company agreed to dispose of Fuyu Chenming due to the small production capability and low
               product competitiveness of Fuyu Chenming, which did not fit with the overall development plan of the Group.
               The disposal price was determined based on the price under the valuation conducted by a qualified intermediary.
               The disposal was conducted through public tender at an equity exchange. For details, please refer to relevant
               announcement (announcement no.: 2015-040) of the Company published on CNINFO on 18 July 2015.

         4.    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 was 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 was 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.

               For details, please refer to relevant announcement (announcement no.: 2015-030) of the Company published on
               CNINFO on 20 June 2015.




58
VII Material Matters



VXIII. Other matters of significance (Cont’d)
    5.   Establishment of Zhuhai Dechen New Third Board Equity Investment Fund
         To capitalise on the expertise of professional investment institutions to strengthen its capability of investment
         and speed up the upgrade of its businesses and the diversification of development so as to enhance its market
         competitiveness and profitability, the Company intended to contribute as a limited partner RMB50.00 million from
         its own funds to the establishment of Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited
         Partnership) in cooperation with Zhuhai Kaichenxing Investment Advisory Company (General Partnership), Shenzhen
         Qianhai Financial Development Ltd. and Zhang Guangquan. For details, please refer to relevant announcement
         (announcement no.: 2015-015) of the Company published on CNINFO on 2 April 2015.

    6.   Establishment of Jinan Chenming Investment Management Co., Ltd. and Chenming Paper Korea Co.,
         Ltd.
         In order to expand the customer base of the Finance Company, fully utilise the investment and financing functions of
         Finance Company and enhance its profitability, the Company established Jinan Chenming Investment Management
         Co., Ltd. The registered capital of Jinan Chenming is RMB100.00 million. Its operations complemented those of the
         Finance Company.

         In order to strengthen the paper product sales of the Company, further increase the market share of the Company’s
         products in Korea and establish a wider and more comprehensive sales network, the Company established Chenming
         Paper Korea Co., Ltd. The registered capital of Chenming Korea was US$1.00 million.




                                                                                                                                59
     VII Material Matters



     VXIII. Other matters of significance (Cont’d)
         7.   Information disclosure index for 2015
              Announcement
              No.            Subject matter                                                     Date of publication   Publication website and index

              2015-001       Announcement on Additional Resolutions Proposed at                 29 January 2015       http://www.cninfo.com.cn
                               the 2015 First Extraordinary General Meeting
              2015-002       Supplemental Notice of 2015 First Extraordinary General Meeting    29 January 2015       http://www.cninfo.com.cn
              2015-003       Second supplementary notice of the 2015 First Domestic Listed      29 January 2015       http://www.cninfo.com.cn
                               Share Class Meeting and 2015 First Overseas Listed Share
                               Class Meeting
              2015-004       Announcement on Resolutions of the 2015 First Extraordinary        14 February 2015      http://www.cninfo.com.cn
                               General Meeting
              2015-005       Announcement on Resolutions of the 2015 First Class Meeting        14 February 2015      http://www.cninfo.com.cn
                               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 Acceptance of            3 March 2015          http://www.cninfo.com.cn
                               Application for Administrative Approval
              2015-007       Results of the Eighth Extraordinary Meeting of the Seventh         27 March 2015         http://www.cninfo.com.cn
                               Session of the Board
              2015-008       Announcement of Annual Results for                                 27 March 2015         http://www.cninfo.com.cn
                               the Year 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 Comprehensive           27 March 2015         http://www.cninfo.com.cn
                               Credit Line of Wholly-Owned Subsidiaries
              2015-011       Announcement on Expected Ordinary Related                          27 March 2015         http://www.cninfo.com.cn
                               Party 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                      27 March 2015         http://www.cninfo.com.cn
                               the Seventh Session of the Supervisory Committee
              2015-014       Announcement in relation to External Investment                    2 April 2015          http://www.cninfo.com.cn
              2015-015       Announcement in relation to External Investment                    2 April 2015          http://www.cninfo.com.cn
              2015-016       Announcement on Result of the Issue of                             24 April 2015         http://www.cninfo.com.cn
                               2015 First Tranche of Short-term Commercial Paper
              2015-017       Results of the Ninth Meeting of the Seventh Session of the Board   28 April 2015         http://www.cninfo.com.cn
              2015-018       2015 First Quarter Report                                          28 April 2015         http://www.cninfo.com.cn
              2015-019       Announcement on Equity Transfer at Nil Consideration between       28 April 2015         http://www.cninfo.com.cn
                               Wholly-owned Subsidiaries
              2015-020       Announcement in Respect of Resignation of Senior Management        28 April 2015         http://www.cninfo.com.cn
              2015-021       Result of the Issue of 2015 Second Tranche of Short-term           28 April 2015         http://www.cninfo.com.cn
                               Commercial Paper
              2015-022       Supplementary Notice of 2014 Annual General Meeting                29 April 2015         http://www.cninfo.com.cn
              2015-023       Warning on reduction of shareholding by shareholders               8 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                      6 June 2015           http://www.cninfo.com.cn
                               the Seventh Session of the Board
              2015-026       Announcement on the Proposed Issue of                              6 June 2015           http://www.cninfo.com.cn
                               Non-Public Preference Shares
              2015-027       Notice of 2015 Second Extraordinary General Meeting                6 June 2015           http://www.cninfo.com.cn




60
VII Material Matters



VXIII. Other matters of significance (Cont’d)
    7.   Information disclosure index for 2015 (Cont’d)
         Announcement
         No.            Subject matter                                                  Date of publication   Publication website and index

         2015-028       Announcement in Respect of Reply on Application for             9 June 2015           http://www.cninfo.com.cn
                          Non-Public Issue of Preference Shares
         2015-029       Announcement in Respect of Supplementary Disclosure Required    9 June 2015           http://www.cninfo.com.cn
                          under the Reply from CSRC on Application for Non-Public
                          Issue of Preference Shares
         2015-030       Announcement on Approval of Registration on Medium-term         20 June 2015          http://www.cninfo.com.cn
                          Notes and Super & Short-term Commercial Papers
         2015-031       Announcement on 2015 Dividend Payment in Respect of             30 June 2015          http://www.cninfo.com.cn
                          “11 Chenming Bond”
         2015-032       Second Supplementary Notice of the 2015 Second                  4 July 2015           http://www.cninfo.com.cn
                          Extraordinary General Meeting
         2015-033       Announcement on the Implementation of Equity Distribution       4 July 2015           http://www.cninfo.com.cn
                          to Holders of A Shares and B Shares for 2014
         2015-034       Indicative Announcement on Undertaking of the Controlling       9 July 2015           http://www.cninfo.com.cn
                          Shareholder on no Reduction of Shareholding and Undertaking
                          of Some Directors, Supervisors and Senior Management
                          Members on Increasing Their Shareholding
         2015-035       Announcement on Result of the Issue of 2015 First Tranche of    9 July 2015           http://www.cninfo.com.cn
                          Super & Short-term Commercial Paper
         2015-036       Announcement on Result of the Issue of                          11 July 2015          http://www.cninfo.com.cn
                          2015 First Tranche of Medium-term note
         2015-037       Announcement on Unusual Movement in Share Trading               13 July 2015          http://www.cninfo.com.cn
         2015-038       Indicative Announcement on Increase in Shareholding by          18 July 2015          http://www.cninfo.com.cn
                          Party Acting in Concert with Directors of the Company
         2015-039       Results of the Seventh Extraordinary Meeting of                 18 July 2015          http://www.cninfo.com.cn
                          the Seventh Session of the Board
         2015-040       Announcement on Disposal of Fuyu Chenming                       18 July 2015          http://www.cninfo.com.cn
         2015-041       Indicative Announcement on Resolution of                        18 July 2015          http://www.cninfo.com.cn
                          the 2015 Second Extraordinary General Meeting
         2015-042       Indicative Announcement on                                      23 July 2015          http://www.cninfo.com.cn
                          Entering into Equipment Purchase Contracts
         2015-043       Results of the 2015 Second Extraordinary General Meeting        23 July 2015          http://www.cninfo.com.cn
         2015-044       Announcement on the Progress of External Investment             4 August 2015         http://www.cninfo.com.cn
         2015-045       Announcement on Result of the Issue of 2015 Second Tranche of   11 August 2015        http://www.cninfo.com.cn
                          Super & Short-term Commercial Paper
         2015-046       Resignation of Non-Executive Director                           22 August 2015        http://www.cninfo.com.cn




                                                                                                                                              61
     VII Material Matters



     VXIII. Other matters of significance (Cont’d)
         7.   Information disclosure index for 2015 (Cont’d)
              Announcement
              No.            Subject matter                                                      Date of publication   Publication website and index

              2015-047       Announcement on Approval of the Application for Non-public Issue    22 August 2015        http://www.cninfo.com.cn
                               of Preference Shares by the Public Offering Review Committee of
                               China Securities Regulatory Commission
              2015-048       Announcement on Result of the Issue of 2015 Third Tranche of        27 August 2015        http://www.cninfo.com.cn
                               Super & Short-term Commercial Paper
              2015-049       Results of the Tenth Meeting of the Seventh Session of the Board    28 August 2015        http://www.cninfo.com.cn
              2015-050       2015 Interim Report Summary                                         28 August 2015        http://www.cninfo.com.cn
              2015-051       Announcement on Commencement of Asset Securitisation Operation      28 August 2015        http://www.cninfo.com.cn
                               by Financial Leasing Company
              2015-052       Announcement on External Investment                                 28 August 2015        http://www.cninfo.com.cn
              2015-053       Notice of 2015 Third Extraordinary General Meeting                  28 August 2015        http://www.cninfo.com.cn
              2015-054       Announcement on External Investment                                 28 August 2015        http://www.cninfo.com.cn
              2015-055       Announcement on Result of the Issue of                              12 September 2015     http://www.cninfo.com.cn
                               2015 Second Tranche of Medium-term Note
              2015-056       Announcement on Approval of Application for Non-public Issue of     23 September 2015     http://www.cninfo.com.cn
                               Preference Shares by China Securities Regulatory Commission
              2015-057       Second Supplementary Notice of                                      1 October 2015        http://www.cninfo.com.cn
                               the 2015 Third Extraordinary General Meeting
              2015-058       Indicative Announcement on Auction of                               1 October 2015        http://www.cninfo.com.cn
                               Equity Interest in Controlling Shareholder
              2015-059       Indicative Announcement of                                          10 October 2015       http://www.cninfo.com.cn
                               2015 Third Extraordinary General Meeting
              2015-060       Resignation of Independent Non-Executive Director                   13 October 2015       http://www.cninfo.com.cn
              2015-061       Announcement on Estimated Results for                               13 October 2015       http://www.cninfo.com.cn
                               the First Three Quarter of 2015
              2015-062       Announcement on Resolution of                                       16 October 2015       http://www.cninfo.com.cn
                               the 2015 Third Extraordinary General Meeting
              2015-063       2015 Third Quarter Report                                           23 October 2015       http://www.cninfo.com.cn
              2015-064       Announcement on Result of Issue of 2015 Fourth Tranche of           23 October 2015       http://www.cninfo.com.cn
                               Super & Short-term Commercial Papers
              2015-065       Announcement on Entering into a Strategic Cooperation Agreement     2 November 2015       http://www.cninfo.com.cn
                               with Bank of China (Shandong Branch)
              2015-066       Indicative Announcement on Proposed Reduction                       6 November 2015       http://www.cninfo.com.cn
                               in Registered Capital of Controlling Shareholder
              2015-067       Announcement on Result of Issue of 2015 Fifth and                   13 November 2015      http://www.cninfo.com.cn
                               Sixth Tranche of Super & Short-term Commercial Papers




62
VII Material Matters



VXIII. Other matters of significance (Cont’d)
    7.   Information disclosure index for 2015 (Cont’d)
         Announcement
         No.            Subject matter                                                       Date of publication   Publication website and index

         2015-068       Announcement on Increase in shareholding of H shares                 14 November 2015      http://www.cninfo.com.cn
                           by Hong Kong Company of Controlling Shareholder
         2015-069       Announcement on Increase in shareholding of the Company of 1%        17 November 2015      http://www.cninfo.com.cn
                           by Controlling Shareholder
         2015-070       Resignation of Supervisor                                            20 November 2015      http://www.cninfo.com.cn
         2015-071       First Indicative Announcement on the Non-adjustment of               30 November 2015      http://www.cninfo.com.cn
                           Coupon Rate of “12 Chenming Bond” and Repurchase Measure
                           for Bondholders
         2015-072       Second Indicative Announcement on the Non-adjustment of              1 December 2015       http://www.cninfo.com.cn
                           Coupon Rate of “12 Chenming Bond” and Repurchase Measure
                           for Bondholders
         2015-073       Announcement on Progress of Increase in shareholding of              1 December 2015       http://www.cninfo.com.cn
                           the Company by Controlling Shareholder
         2015-074       Third Indicative Announcement on the Non-adjustment of               2 December 2015       http://www.cninfo.com.cn
                           Coupon Rate of “12 Chenming Bond” and Repurchase Measure
                           for Bondholders
         2015-075       Announcement on Repurchase Report of Investor of                     3 December 2015       http://www.cninfo.com.cn
                           “12 Chenming Bond”
         2015-076       Announcement on Progress of Increase in shareholding of              10 December 2015      http://www.cninfo.com.cn
                           the Company by Controlling Shareholder
         2015-077       Results of the Twelfth Meeting of the Seventh Session of the Board   18 December 2015      http://www.cninfo.com.cn
         2015-078       Announcement on Provision of Guarantee for                           18 December 2015      http://www.cninfo.com.cn
                           Financial Leasing Company
         2015-079       Announcement on External Investment                                  18 December 2015      http://www.cninfo.com.cn
         2015-080       Announcement on External Investment                                  18 December 2015      http://www.cninfo.com.cn
         2015-081       Notice of 2016 First Extraordinary General Meeting                   18 December 2015      http://www.cninfo.com.cn
         2015-082       Announcement on External Investment                                  18 December 2015      http://www.cninfo.com.cn
         2015-083       Announcement on 2015 Dividend Payment in                             22 December 2015      http://www.cninfo.com.cn
                           respect of “12 Chenming Bond”
         2015-084       Results of the Eight Extraordinary Meeting of                        25 December 2015      http://www.cninfo.com.cn
                           the Seventh Session of the Board
         2015-085       Announcement on Release of Stock-pledged                             25 December 2015      http://www.cninfo.com.cn
                           Repurchase Transactions by Shareholders
         2015-086       Announcement on the Result of Repurchase of                          28 December 2015      http://www.cninfo.com.cn
                           Investors of “12 Chenming Bond”




                                                                                                                                                   63
     VII Material Matters



     XIX. Matters of significant of subsidiaries of the Company
         √ Applicable    Not applicable

         1.    Commencement of asset securitisation operation of Financial Leasing Company
               To facilitate the launch of project financing and leasing operations, the Financial Leasing Company intended to
               conduct asset securitisation operation for cash flow receivables from leaseback arrangements. It intended to issue
               asset-backed securities of not more than RMB3.0 billion by tranches with terms of not more than 5 years. The
               Financial Leasing Company Through conducted asset securitisation to revitalise idle assets, facilitate capital transfer,
               broaden financing channels and optimise asset and liability structure, as well as provide a solid foundation for further
               expansion of financing operations in other capital markets in the future. For details, please refer to the relevant
               announcement (announcement no.: 2015-051) of the Company published on CNINFO on 28 August 2015.

         2.    Establishment of Qingdao Chenming Financial Leasing Co., Ltd. by Chenming (HK)
               In order to promote diversified development, further expand the scale of financial leasing business, enhance overall
               strength and competitiveness, and foster new sources of profit growth, the Company intended to invest to establish
               Qingdao Chenming Financial Leasing Co., Ltd. in Qingdao through a wholly-owned subsidiary, Chenming (HK)
               Limited. For details, please refer to the relevant announcement (announcement no.: 2015-052) of the Company
               published on CNINFO on 28 August 2015.

         3.    Signing of equipment purchase contracts by Huanggang Chenming
               In order to construct the 300,000-tonne bleached sulfate pine pulp project, Huanggang Chenming entered into
               overseas and domestic equipment purchase contracts with FMW Foerderanlagen Gmbh., Valmet Technologies Oy,
               Valmet (China) Co., Ltd., Andritz Oy and Andritz (China) Ltd., respectively. Total consideration for the nine contracts
               was approximately RMB951 million, which will be financed by self-funds of Huanggang Chenming and bank loans.
               For details, please refer to the relevant announcement (announcement no.: 2015-042) of the Company published on
               CNINFO on 23 July 2015.

         4.    Capital injection to Financial Leasing Company by Chenming (HK)
               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), a wholly-owned
               subsidiary of the Company, intended to increase the capital of the Financial Leasing Company by RMB5.0 billion by
               instalments with its own funds. After the completion of the capital increase, the registered capital of the Financial
               Leasing Company will change to RMB9,072 million from RMB4,072 million. For details, please refer to the relevant
               announcement (announcement no.: 2015-009) of the Company published on CNINFO on 27 March 2015.

         5.    Establishment of Zhanjiang Chenming Port Co., Ltd. through capital contribution by Zhanjiang
               Chenming
               In order to ensure the ordinary production and operation of Zhanjiang Chenming, lower the transportation cost of the
               Company, create economic synergy and strengthen the profitability of Zhanjiang Chenming, Zhanjiang Chenming
               established Zhanjiang Chenming Port Co., Ltd. with registered capital of RMB100 million through capital contribution.




64
VII Material Matters



XX. Fulfilment of Social Responsibility
    √ Applicable    Not applicable

    The state is the strongest support for the development of Chenming, while the society is the greatest origin for Chenming’s
    development and growth. During its development for more than half a century, Chenming has always adhered to its
    philosophy of “building the country through industry development and paying back to society”. It has voluntary performed
    its social responsibility, and cultivated the “tree of responsibility”, which has already achieved fruitful results.

    The Company has established its corporate governance structure in accordance with the requirements of the Companies
    Law, Securities Law, Articles of Association and other relevant laws and regulations and the actual situation of the
    Company. There is a clear separation of powers and responsibilities between the general meeting, the Board, the
    Supervisory Committee and the management which is accountable to the general manager. The management system under
    the structure is characterised by a mechanism of checks and balances of a legal person with separation of ownership and
    operation, separation of the decision-making, execution and supervisory powers, as well as the co-existence of the general
    meeting, the Board and the Supervisory Committee. Strict provisions on the rights, duties and responsibilities of the general
    meeting, the Board, the Supervisory Committee and general managers have been stipulated. The Company has placed
    great emphasis on fulfilment of social responsibility and goes beyond the concept of “profit as the only goal”. While creating
    value for shareholders during the process of production, operation and business development, the Company, in line with
    the development of the State and the society, has strived to reach a compromise between economic benefits and social
    benefits, short-term benefits and long-term benefits, as well as corporate development and social development, with the
    aim to achieve a healthy and harmonious development between the Company and its employees, the Company and the
    society, and the Company and the environment.

    Centring the corporate mission of “Creating Sharing Culture within Chenming and Achieving Win-Win Situation”, the core
    value of “Good Faith, Win-Win and Sharing”, the corporate spirit of “Learning, Surpass and Leading” as well as the human
    resources philosophy of “Providing Staff Trainings, Recruiting Talents, Allocating Human Resources Properly and Retaining
    Talents”, the Company has established its own corporate culture, which has became the spirit and driver for the sustainable
    and health development of the Company.

    The Company strives to the development path of new type industrialisation with high technology contents, low energy
    consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In addition, the
    Company endeavours to facilitate business development in line with ecological development, enhance its competitiveness
    in economic development and environmental protection, and establish its economic and ecological culture. It also seeks for
    development while protecting the environment and maintains higher environmental protection while seeking for scientific
    development, thus achieving “win-win” situation in economic development and environmental protection. The Company
    has strictly in compliance with relevant environmental protection policies, laws and regulations in China. It has mitigated
    the impact on environment through industrial optimisation and upgrade, reduced resources utilisation through innovative
    operation, and implemented strict management with the concept of environmental protection and safety operation being
    penetrated into every procedure in production and operation, thereby promoting the harmonious development between
    the people and the Company, as well as that of the Company and the environment. The Company is the first in the industry
    in China which passes ISO14001 environmental management system certification. The Company has been named the
    environmental friendly enterprise, the recycling economy exemplary enterprise, the outstanding water efficiency unit and the
    outstanding unit in comprehensive utilisation of resources of Shandong province.




                                                                                                                                       65
     VII Material Matters



     XX. Fulfilment of Social Responsibility (Cont’d)
         Leveraging its advanced production technology and manufacture equipment, extensive experience in waste treatment and
         various comprehensive treatment systems, the Company strives to implement horizontal and vertical control throughout its
         production processes, thus achieving low carbon emission through low energy consumption, as well as reduction of use
         of resources through recycling. The Company has passed the clean production assessment organised by United Nations
         Development Programme in May 1999. The Company focuses on its works in various aspects, including the establishment
         of eco-friendly energy consumption system, implementation of on-site 6S management, launch of environmental protection
         and hazard inspection works, wide application of new energy conservation and emission reduction technology, promotion
         of key energy conservation and emission reduction projects, enhancement of innovative technology, promotion of the
         industrialisation of comprehensive resources utilisation, implementation of scientific proposal on “multi-usage of water”
         based on the quality, quantity and working procedure, as well as strengthening of the awareness on energy saving and
         environmental protection of all staff and habit building. Hence, the Company has achieved whole process control and
         management over clean and efficient production.

         The Company has strictly implemented in-depth corporate governance. It has put great efforts and huge investments in
         promoting the management of “the three wastes” so as to facilitate energy conservation and emission reduction, aiming to
         become a low energy consumption and environment friendly enterprise. In respect of waste water treatment, the Company
         has established world-class waste water treatment system. It has over 10 waste water treatment facilities for various
         purposes, with the most advanced treatment technology in domestic and overseas market being adopted. Hence, the
         Company has realised the comprehensive integration and upgrade of waste water treatment facilities in plants, with different
         emission indicators better than relevant regulatory benchmark. In respect of solid waste treatment, the Company has
         discontinued the traditional landfilling treatment. It has enhanced its technology innovation, strengthened comprehensive
         resources utilisation, as well as expanded its industrial chain, thereby achieving recycling and harmless utilisation of solid
         wastes. In respect of waste gas treatment, the Company has introduced advanced international environmental protection
         equipment and technology for desulphurisation, denitrification and de-dusting, smelly gas treatment and closure of coal
         plants. It has adopted scientific waste gas treatment as to ensure our waste gas emission is in compliance with all relevant
         environmental protection standards and requirements in China.

         The Company strives to create a wealthy society. It has offered more job vacancies, thereby contributing more taxes to
         the government, and sharing the achievements of the Company with our staff and society. While caring our staff sincerely
         and building up a harmonious relationship with the staff, the Company also greatly supports different charity programmes.
         Over the past few years, the Company has donated several ten millions to Shouguang Education Fund, Shouguang Charity
         Federation, Weifang Venture Association, Shandong Red Cross and districts suffered from earthquake, which reflects the
         outstanding contribution of the Company to building a harmonious society in China. The Company has been honoured with
         the title of “Most Caring Donating Enterprise” by Weifang and Shouguang Municipal Committee and Municipal Government
         for serval times, while our chairman Mr. Chen Hongguo has been honoured with the title of “Most Caring Person”.




66
VII Material Matters



XX. Fulfilment of Social Responsibility (Cont’d)
    Are the Company and its subsidiaries within the heavily-polluted industry as specified by the national environmental
    protection authority?

    √ Yes       No      Not applicable

    1.       During the reporting period, there were no significant environmental problems and rectification.

    2.       During the reporting period, major pollutants such as wastewater, waste gas and factory noise were emitted in
             compliance with the required standards.

    3.       During the reporting period, the environmental protection facilities operated properly.

    4.       During the reporting period, in accordance with relevant provisions set out in “Clean Production Promotion Law”
             and “Disclosure of Environmental Information (Trial)”, the Company, combined with its actual situation, had prepared
             environmental pollution emergency plans, hazardous waste emergency plans and radioactive emergency plans. Data
             related to major pollutants’ emission in compliance with the required standards were published in the environmental
             protection column of the Company’s website in a timely manner. The Company’s environmental protection work has
             been at the forefront of the industry over the past years.

    5.       During the reporting period, the Company’s environmental protection facilities and production facilities performed
             properly. Currently, environmental protection facilities being operated mainly include anaerobic reactor, primary
             sedimentation tank, aeration tank, secondary settling tank, sludge thickener, depth treatment works (wastewater
             treatment); desulfurisation and denitrification equipment, and electrostatic precipitators (gas treatment). We set up a
             specific post for facilities, which are managed and maintained by a designated person. Operational and examination
             records are complete and the operation is normal.




                                                                                                                                       67
     VII Material Matters



     XXI. Corporate bonds
         Are there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date
         of approval of annual report or overdue but not fully settled?

         Yes

         1.    Basic information on corporate bonds
                                                                                                                             Outstanding
                                                                                                                               amount of
                                                                                                                               the bonds
               Name of bond                  Bond abbreviation Bond code      Issue date              Maturity date          (RMB ’0,000) Interest rate      Payment method

               2011 corporate bonds     11 Chenming Bond 112031               6 July 2011             6 July 2016                 200,000          5.95%      Interest is paid
                 of Shandong Chenming                                                                                                                         annually. The principal
                 Paper Holdings Limited                                                                                                                       amount and the last
                                                                                                                                                              interest payment will
                                                                                                                                                              be paid on the maturity
                                                                                                                                                              date.
               2012 corporate bonds     12 Chenming Bond 112144               26 December 2012        26 December 2017            380,000          5.65%      Interest is paid
                 of Shandong Chenming                                                                                                                         annually. The principal
                 Paper Holdings Limited                                                                                                                       amount and the last
                                                                                                                                                              interest payment will
                                                                                                                                                              be paid on the maturity
                                                                                                                                                              date.

               Stock exchange on which corporate bonds        Shenzhen Stock Exchange
                 are listed or transferred

               Investor eligibility arrangement               Online subscription: Public investors with A share security account opened under China Securities Depository and
                                                              Clearing Co., Ltd. Offline subscription: Institutional investors with A share security account opened under China
                                                              Securities Depository and Clearing Co., Ltd.

               Interest payment of corporate bonds            1. The interests of 11 Chenming Bond for the period from 6 July 2014 (the value date) to 5 July 2015 were paid on
                  during the reporting period                 6 July 2015. For details, please refer to the Announcement on 2015 Dividend Payment in respect of “11 Chenming
                                                              Bond” published by the Company on 30 June 2015. 2. The interests of 11 Chenming Bond for the period from 26
                                                              December 2014 (the value date) to 25 December 2015 started to pay on 28 December 2015. For details, please refer
                                                              to the Announcement on 2015 Dividend Payment in respect of “12 Chenming Bond” published by the Company on 23
                                                              December 2015.

               Implementation of special terms such as        In accordance to the rules under Prospectus on Public Offering of Corporate Bonds of Shandong Chenming Paper
                 terms in relation to options to issuer or    Holdings Limited, the Company has published the First Indicative Announcement on the Non-adjustment of Coupon
                 investor, or exchange terms attached         Rate of “12 Chenming Bond” and Repurchase Measure for Bondholders, the Second Indicative Announcement on the
                 to corporate bonds during the reporting      Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure for Bondholders and the Third
                 period (if applicable)                       Indicative Announcement on the Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure
                                                              for Bondholders on 30 November 2015, 1 December 2015 and 2 December 2015, respectively. Investors can choose
                                                              to sell all or partial of their “12 Chenming Bond” to the Company at a price of RMB100 each (excluding interest) during
                                                              the repurchase registration period (30 November 2015, 1 December 2015 and 2 December 2015). According to bond
                                                              repurchase application report provided by Shenzhen Office of China Securities Depository and Clearing Co., Ltd., the
                                                              effective repurchase application for “12 Chenming Bond” was 0 with amount of RMB0. The number of outstanding
                                                              bonds in custody in Shenzhen Office of China Securities Depository and Clearing Co., Ltd. was 38 million.




68
VII Material Matters



XXI. Corporate bonds (Cont’d)
     2.   Information on bond custodian and credit rating agency
          Bond custodian:
          Name      UBS Securities Co., Ltd.    Office        12/F and 15/F,            Contact        Wen Zhe         Telephone        010-5832 8888
                                                address       Winland International person                             of contact
                                                              Finance Centre,                                          person
                                                              7 Financial Street,
                                                              Xicheng District, Beijing

          Credit rating agency(ies) which conducted rating on corporate bonds during the reporting period:
          Name        China Chengxin Securities Valuation Company Limited                Office        8/F, Anji Building, 760 Xizang South Road,
                                                                                         address       Huangpu District, Shanghai

3.   Use of proceeds from corporate bonds
          Use of proceeds from corporate bonds and                          The use of proceeds from issuance of corporate bonds has
            ts implementation                                               strictly completed relevant application and approval procedures.
                                                                            As at the end of the reporting period, the proceeds from 11
                                                                            Chenming Bond and 12 Chenming Bond were fully used.
          Balance as at the end of the year (RMB ’0,000)                   0
          Operation of special account for proceeds                         Special account for proceeds is used for the deposit of special
                                                                            capital from bonds.
          Is the use of proceeds consistent with the use                    Yes
             of proceeds guaranteed under the prospectus,
             proposed use of proceeds and other agreement?

     4.   Credit rating of corporate bonds
          The credit rating of 11 Chenming Bond and 12 Chenming Bond as granted by China Chengxin Securities Valuation
          Company Limited remained at AA+, and the rating for the Company was AA+ (stable outlook). The 2015 rating report
          is expected to be published on CNINFO by the end of April 2016.

     5.   Credit enhancement mechanism, repayment plan and other repayment guarantee measures for
          corporate bonds
          There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures,
          which were consistent with relevant commitments as set out in the prospectuses, during the reporting period.

     6.   Convening of meeting for bondholders during the reporting period
          Not applicable.

     7.   Performance of bond custodian during the reporting period
          The bond custodian performed its duties in accordance with the agreement during the reporting period.




                                                                                                                                                        69
     VII Material Matters



     XXI. Corporate bonds (Cont’d)
         8.   Major accounting data and financial indicators of the Company over the past two years as at the end
              of the reporting period
                                                                                                                   Unit: RMB ’0,000

                                                                                                                      Year-on-year
                                                                                                                increase/decrease
              Item                                                               2015                   2014         in percentage

              EBITDA                                                       435,954.20             324,673.37               34.27%
              Net cash flows from investing activities                    -346,058.55            -307,326.94              -12.60%
              Net cash flows from financing activities                   1,406,367.42             232,835.16              504.02%
              Balance of cash and cash equivalents
                 as at the end of the period                               188,810.75              97,609.69               93.43%
              Current ratio                                                   72.30%                 83.89%               -11.59%
              Gearing ratio                                                   77.86%                 74.75%                 3.11%
              Quick ratio                                                     61.59%                 64.60%                -3.01%
              Proportion of EBITDA to total debts                                9.74                  10.26               -0.52%
              Interest coverage ratio                                            1.05                   0.40              162.50%
              Cash interest coverage ratio                                      -7.23                   0.88             -921.59%
              EBITDA interest coverage ratio                                     3.24                   2.88               12.50%
              Loans payment ratio                                            100.00%                100.00%                 0.00%
              Interest payment ratio                                         100.00%                100.00%                 0.00%


              Major reason for more than 30% in year-on-year change for the above accounting data and financial indicators

              √ Applicable   Not applicable

              To be provided by the financial department

              (1)    Profit before interest, tax, depreciation and amortisation increased by 34.27% as compared to last year mainly
                     due to the gradual realisation of profit made by the financial segment of the Company with higher profitability.

              (2)    Net cash flows from financing activities increased by 504.02% as compared to last year mainly due to greater
                     financing efforts made by the Company through the issue of short-term commercial papers and perpetual
                     bonds.

              (3)    Cash and cash equivalents as at the end of the period increased by 93.43% as compared to last year mainly
                     due to the increase in amounts received by the Company as at the end of the year.

              (4)    Interest coverage multiples increased by 162.50% as compared to last year mainly due to higher profitability of
                     the Company.

              (5)    Cash interest coverage multiples decreased by 921.59% as compared to last year mainly due to the increase
                     in cash outflows from operating activities due to the commencement of the financing leasing business of the
                     Company.

         9.   Restriction on asset rights as at the end of the reporting period
              Item                                                            Amount       Purpose

              Fixed assets                                           4,567,649,044.39      As pledge for bank borrowings
              Intangible assets                                        311,229,271.55      As pledge for bank borrowings




70
VII Material Matters



XXI. Corporate bonds (Cont’d)
    10. Interest payment on other bonds, debt and financing instruments during the reporting period
                                                                                                                    Amount of
         Item                                                                                                interest payment

         Corporate bonds                                                                                       333,671,607.19
         Privately placed bonds                                                                                 54,010,000.00
         Medium-term notes                                                                                      87,000,000.00

         Total                                                                                                 474,681,607.19


    11. Bank credit obtained, its use and repayment of bank loans during the reporting period
         During the reporting period, the Company obtained bank credit of RMB55,900 million, of which RMB33,900 million
         was utilised with RMB22,000 million outstanding. The Company repaid bank loans of RMB22,431 million.

    12. Performance of relevant agreements or commitments under the prospectus of corporate bonds during
        the reporting period
         In accordance to the rules under Prospectus on Public Offering of Corporate Bonds of Shandong Chenming Paper
         Holdings Limited, the Company published the First Indicative Announcement on the Non-adjustment of Coupon Rate
         of “12 Chenming Bond” and Repurchase Measure for Bondholders, the Second Indicative Announcement on the
         Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure for Bondholders and the Third
         Indicative Announcement on the Non-adjustment of Coupon Rate of “12 Chenming Bond” and Repurchase Measure
         for Bondholders on 30 November 2015, 1 December 2015 and 2 December 2015, respectively. Investors may choose
         to sell all or part of their “12 Chenming Bond” to the Company at a price of RMB100 each (without interest) during the
         repurchase registration period (30 November 2015, 1 December 2015 and 2 December 2015).

         According to the bond repurchase application report provided by Shenzhen Office of China Securities Depository and
         Clearing Co., Ltd., the effective repurchase application for “12 Chenming Bond” was 0 with amount of RMB0. The
         number of outstanding bonds in custody in Shenzhen Office of China Securities Depository and Clearing Co., Ltd.
         was 38 million.

    13. Matters of significance happened during the reporting period
         Nil.

    14. Is there any guarantor for corporate bonds?
           Yes √No




                                                                                                                                    71
     VII Material Matters



     XXII. Post balance sheet events
         1.   Reduction of registered capital of controlling shareholder
              Chenming Holdings has completed relevant industrial and commercial alteration registration procedures for capital
              reduction with Shouguang Market Supervisory Administration Bureau, and obtained new business license. Its
              registered capital has decreased from RMB1,685,425,500 to RMB1,238,787,742.5, of which the shareholding of each
              of Shandong Shouguang Jinxin Investment Development Holdings Group Limited, Shouguang Henglian Enterprise
              Investment Limited and Shouguang Ruifeng Enterprise Investment Limited was 45.21%, 18.65% and 36.14%,
              respectively. Upon the completion of the capital reduction of Chenming Holdings, Shandong Shouguang Jinxin
              Investment Development Holdings Group Limited (a wholly-owned subsidiary of Shouguang Office of State-Owned
              Asset Supervision and Management) remains as the major shareholder of Chenming Holdings. There will not be
              any change in controlling shareholder and beneficial controller of the Company. Chenming Holdings remains as the
              controlling shareholder of the Company while Shouguang Office of State-Owned Asset Supervision and Management
              remains as the beneficial controller of the Company. For details, please refer to the relevant announcement
              (announcement no.: 2016-010) of the Company published on CNINFO on 23 January 2016.

         2.   Continued increase in shareholding of the Company by controlling shareholder
              From 4 January 2016 to 29 January 2016, Chenming Holdings (Hong Kong) Limited, a wholly-owned subsidiary
              of Chenming Holdings, acquired 20,285,500 H shares of the Company and 9,042,243 B shares of the Company,
              representing approximately 1.51% of the total share capital of the Company, through the trading system. Upon the
              completion of increase in shareholding, Chenming Holdings and its parties acting in concert held 394,114,580 shares
              of the Company in aggregate, representing approximately 20.35% of the total share capital of the Company.




72
VIII Changes in Share Capital and Shareholders



I.   Changes in shares
     1.   Changes in shares


                                                                                                                                                                          Unit: share

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

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

              Applicable √ Not applicable

          The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings
          per share and net assets per share attributable to shareholders of ordinary shares of the Company for the latest
          year and the latest period

              Applicable √ Not applicable

          Other information considered necessary by the Company or required by the securities regulatory authorities to be
          disclosed

              Applicable √ Not applicable

     2.   Changes in restricted shares
              Applicable √ Not applicable




                                                                                                                                                                                             73
     VIII Changes in Share Capital and Shareholders



     II.   Issuance and listing of securities
           1.   During the reporting period, issuance of securities (excluding preference shares)
                    Applicable √ Not applicable

           2.   Changes in the total number of shares and structure of shareholders and the structure of the assets
                and liabilities of the Company
                    Applicable √ Not applicable

           3.   Existing staff shares
                    Applicable √ Not applicable


     III. Shareholders and beneficial controllers
           1.   Total number of shareholders and shareholdings
                                                                                                                                                                                                            Unit: share

                Total number of             111,976, of which 84,823     Total number of              109,021, of which 82,311      Total number of                         0      Total number of                         0
                shareholders of ordinary    were holders of A shares,    shareholders of ordinary     were holders of A shares,     shareholders of                                shareholders of
                shares as at the end of     26,646 were holders of       shares as at the end of      26,206 were holders of        preference shares with                         preference shares with
                the reporting period        B shares and 507 were        the month prior to           B shares and 504 were         restored voting right                          restored voting right as
                                            holders of H shares          the publication date of      holders of H shares           as at the end of                               at the end of the month
                                                                         this annual report                                         the reporting period                           prior to the disclosure
                                                                                                                                                                                   date of the annual report

                                                             Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders

                                                                                                                    Number of           Changes
                                                                                                                   shares held      (increase or
                                                                                                                  at the end of        decrease)       Number of            Number of
                                                                                                Percentage        the reporting       during the restricted shares         non-restrict
                Name of shareholders                         Nature of shareholders         of shareholding              period reporting period              held         shares held         Share pledged or locked-up
                                                                                                                                                                                          Status of shares          Number

                SHOUGUANG CHENMING HOLDINGS
                 COMPANY LIMITED                             State-owned legal person               15.13%        293,003,657                   0                  0       293,003,657            Pledged         47,000,000
                HKSCC NOMINEES LIMITED                       Overseas legal person                  15.08%        292,010,900         -58,623,600                  0       292,010,900
                CHENMING HOLDINGS (HONG KONG) LIMITED
                 (Note 1)                                    Overseas legal person                   3.71%          71,783,180        71,783,180                   0        71,783,180
                CENTRAL HUIJIN ASSET MANAGEMENT LTD.         Others                                  2.07%          40,137,900        40,137,900                   0        40,137,900
                NATIONAL SOCIAL SECURITY FUND 110            Others                                  1.51%          29,261,612        29,261,612                   0        29,261,612
                AGRICULTURAL BANK OF CHINA LIMITED -
                 BAOYING TRANSITIONAL MOMENTUM
                 FLEXIBLE ALLOCATION HYBRID SECURITIE
                 INVESTMENT FUND                             Others                                  1.06%          20,502,241        20,502,241                   0        20,502,241
                HUATAI SECURITIES CO., LTD.                  Others                                  0.91%          17,694,768        17,694,768                   0        17,694,768
                AGRICULTURAL BANK OF CHINA LIMITED -
                 E FUND RUIHUI FLEXIBLE CONFIGURATION
                 HYBRID SECURITIES INVESTMENT FUND           Others                                  0.88%          16,974,585        16,974,585                   0        16,974,585
                NATIONAL SOCIAL SECURITY FUND 118            Others                                  0.62%          12,084,249        12,084,249                   0        12,084,249
                BBH A/C VANGUARD EMERGING MARKETS
                 STOCK INDEX FUND                            Overseas legal person                     0.44%           8,608,238          -3,338,747                  0      8,608,238
                Connected relationship or connected party    A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming
                 relationship among the above shareholders   Holdings Company Limited, which is a state-owned legal person. Hence they are persons acting in concert under Administration of Disclosure of Information on the
                                                             Change of Shareholdings in Listed Companies Procedures. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in
                                                             concert and is also not aware that any other shareholders of tradable shares are connected with each other.




74
VIII Changes in Share Capital and Shareholders



III. Shareholders and beneficial controllers (Cont’d)
    1.   Total number of shareholders and shareholdings (Cont’d)
                              Shareholdings of the top ten shareholders of non-restricted shares
                                                               Number of
                                                            non-restricted
                                                         shares held as at
                                                                the end of
                                                             the reporting
         Name of shareholders                                       period                 Class of shares
                                                                            Class of shares                                             Number

         SHOUGUANG CHENMING HOLDINGS                                         293,003,657       RMB ordinary shares                 293,003,657
          COMPANY LIMITED
         HKSCC NOMINEES LIMITED                                              292,010,900       Overseas listed                     292,010,900
                                                                                               foreign shares
         CHENMING HOLDINGS                                                    71,783,180       Domestic listed                       12,868,680
          (HONG KONG) LIMITED (Note 2)                                                         foreign shares
                                                                                               Overseas listed                       58,914,500
                                                                                               foreign shares
         CENTRAL HUIJIN ASSET MANAGEMENT LTD.                                 40,137,900       RMB ordinary shares                   40,137,900
         NATIONAL SOCIAL SECURITY FUND 110                                    29,261,612       RMB ordinary shares                   29,261,612
         AGRICULTURAL BANK OF CHINA LIMITED                                   20,502,241       RMB ordinary shares                   20,502,241
          — BAOYING TRANSITIONAL MOMENTUM
          FLEXIBLE ALLOCATION HYBRID SECURITIE
          INVESTMENT FUND
         HUATAI SECURITIES CO., LTD.                                          17,694,768       RMB ordinary shares                   17,694,768
         AGRICULTURAL BANK OF CHINA LIMITED -                                 16,974,585       RMB ordinary shares                   16,974,585
          E FUND RUIHUI FLEXIBLE CONFIGURATION
          HYBRID SECURITIES INVESTMENT FUND
         NATIONAL SOCIAL SECURITY FUND 118                                    12,084,249  RMB ordinary shares              12,084,249
         BBH A/C VANGUARD EMERGING MARKETS                                     8,608,238  Domestic listed                   8,608,238
          STOCK INDEX FUND                                                                foreign shares
         Connected relationship or connected party                  A shareholder, Chenming Holdings (Hong Kong) Limited, which
          relationship among the top ten shareholders of            is an overseas legal person, is a wholly-owned subsidiary
          non-restricted shares, and between the top ten            of a shareholder, Shouguang Chenming Holdings Company
          shareholders of non-restricted shares and                 Limited, which is a state-owned legal person. Hence they are
          the top ten shareholders                                  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 other.
         Note 1 and Note 2: As at the disclosure date of this report, Chenming Holdings (Hong Kong) Limited holds 21,910,923 B shares and 79,200,000
         H shares of the Company, amounting to 101,110,923 shares and accounting 5.22% of the share capital.

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

            Yes √ No

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



                                                                                                                                                       75
     VIII Changes in Share Capital and Shareholders



     III. Shareholders and beneficial controllers (Cont’d)
         2.   Controlling shareholders of the Company
              Nature of controlling shareholder: regional state-owned enterprise

              Type of controlling shareholder: legal person

                                                Legal
                                                representative
              Name of controlling               Person in charge Date of
              shareholders                      of the unit      establishment            Enterprise code    Principal business

              Shouguang Chenming Holdings       Chen Hongguo        30 December 2005          78348518-9         Investment in paper
                Company Limited                                                                                  making, electricity, heat
                                                                                                                 and arboriculture
              Shareholdings of controlling      Save for the Company, Shouguang Chenming Holdings Company Limited does not have
                shareholders who have           control over or hold any equity interest of other domestic or overseas listed companies.
                control or hold shares in
                other domestic or
                overseas listed
                companies during
                the reporting period

              Change of controlling shareholders during the reporting period

                 Applicable √ Not applicable

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

         3.   Beneficial owner of the Company
              Nature of the beneficial owner: Regional state-owned assets administration authority

              Type of the beneficial owner: legal person

                                                  Legal
                                                  representative/
                                                  Person in
                                                  charge of         Date of
              Name of beneficial owner            the unit          establishment          Enterprise code   Principal business

              State-owned Assets Supervision and Fu Xingang         1 August 1991              F5108355-4Responsible for the
                Administration Office of                                                                 management and capital
                Shouguang City                                                                           operation of the state-owned
                                                                                                         assets of enterprises and
                                                                                                         business units in
                                                                                                         Shouguang city
              Shareholdings of beneficial owner who has             Save for the Company, State-owned Assets Supervision and
                control or holds shares in other domestic           Administration Office of Shouguang City does not have control
                or overseas listed companies                        over or hold any equity interest of other domestic or overseas
                during the reporting period                         listed companies.




76
VIII Changes in Share Capital and Shareholders



III. Shareholders and beneficial controllers (Cont’d)
    3.   Beneficial owner of the Company (Cont’d)
         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.

                                        State-owned Assets Supervision and
                                       Administration Office of Shouguang City


                                                                       100.00%


                           Shandong Shouguang Jinxin Investment Holdings Limited


                                                                       59.73% (Note 1)


                                 Shouguang Chenming Holdings Company Limited


                                                                                        100.00%


                                15.13%                                 Chenming Holdings
                                                                      (Hong Kong) Limited


                                                                                        3.71% (Note 2)


                                    Shandong Chenming Paper Holdings Limited


         Note 1:    On 19 January 2016, Chenming Holdings completed the change in the industrial and commercial registration in relation to
                    reduction of registered capital with the Market Supervision Administration of Shouguang City and obtained the new business
                    licence. Its registered capital decreased from RMB1,685.42555 million to RMB1,238.7877425 million, of which Shangdong
                    Shouguang Jinxin Investment Holdings Limited held 45.21%.

         Note 2:    As at the disclosure date of this report, Chenming Holdings (Hong Kong) Limited holds 21,910,923 B shares and 79,200,000 H
                    shares of the Company, amounting to 101,110,923 shares and accounting 5.22% of the share capital.

         Beneficial owner controlling the Company through trust or other asset management method

            Applicable √ Not applicable

    4.   Other legal person shareholders interested in over 10% of the shares of the Company
            Applicable √ Not applicable

    5.   Restrictions on decrease in shareholding by controlling shareholders, beneficial owner, reorganising party and
         other undertaking parties

            Applicable √ Not applicable

                                                                                                                                                 77
     IX Preference Shares



     As at the disclosure date of this report, the progress of the non-public issue of preference shares of the Company is as follows:

     Procedure Related procedure          Details of the procedure                                                 Date

     1           Resolution of the        The extraordinary Board meeting considered and approved the              29 December 2014
                 Board                    Resolution on Proposal of Non-public Issue of Preference Shares of
                                          Shandong Chenming Paper Holdings Limited on 29 December 2014.
     2           Resolution of the        The first extraordinary general meeting for 2015 considered and          13 February 2015
                 general meeting          approved the Resolution on Proposal of Non-public Issue of
                                          Preference Shares of Shandong Chenming Paper Holdings Limited.
     3           Resolution of the        The extraordinary Board meeting considered and approved the              5 June 2015
                 Board                    Resolution on Proposal of Non-public Issue of Preference Shares of
                                          Shandong Chenming Paper Holdings Limited on 5 June 2015.
     4           Approval of the          The Public Offering Review Committee of the CSRC reviewed the            21 August 2015
                 Public Offering          application of the non-public issue of preference shares. Based on
                 Review Committee         the results of the review, the application of the Company for the non-
                                          public issue of preference shares was approved.
     5           Approval of the          Obtained the “Reply on Approving the Non-public Issue of Preference     17 September 2015
                 CSRC                     Shares of Shandong Chenming Paper Holdings Limited” (Zheng Jian
                                          Xu Ke [2015] No. 2130) issued by the CSRC.
     6           Receipt of proceeds      As of 16 March 2016, the target subscribers of the issue have            16 March 2016
                                          deposited the full amount of the subscription money to the bank
                                          account for the issue designated by the lead underwriter, which
                                          totaled to RMB2.25 billion.
                                          As of 17 March 2016, the total proceeds from the non-public issue of     17 March 2016
                                          preference shares amounted to RMB2,250,000,000. After deducting
                                          the issue expenses paid amounting to RMB11,250,000, on 17
                                          March 2016, the lead underwriter deposited RMB2,238,750,000 to
                                          the special account for proceeds from issue of preference shares
                                          (account number: 377899991010003031390) opened at the Weifang
                                          Xiguan Branch of Bank of Communications. All proceeds were
                                          deposited to the above account in RMB.
     7           Verification of          On 17 March 2016, Ruihua Certified Public Accountants (Special           17 March 2016
                 proceeds                 General Partnership) issued the “Verification Report on Actual
                                          Subscription Money Received from Non-public Issue of Preference
                                          Shares of Shandong Chenming Paper Holdings Limited” (Ruihua
                                          Yan Zi [2016] No. 37020007). As of 12 noon on 17 March 2016, the
                                          lead underwriter deposited all amount received for valid subscription,
                                          which amounted to RMB2,238,750,000 (net of issue expenses), to
                                          the special account of the issuer.
     8           Custody registration     The preference shares under this issue will be registered for custody    24 March 2016
                                          at the Shenzhen Branch of the China Securities Depository and
                                          Clearing Corporation Limited.




78
X. Directors, Supervisors and Senior Management and Staff



I.    Changes in shareholding of Directors, Supervisors and Senior Management
                                                                                                                                                 Increase in      Decrease in
                                                                                                                          Shares held as      the number of     the number of     Other changes     Shares held as
                                                                                                                         at the beginning       shares held       shares held       (increase or      at the end of
                                                                                        Start date    End date               of the period during the period during the period         decrease)         the period
      Name               Position                              Status      Sex   Age    of the term   of the term                  (shares)          (shares)          (shares)          (shares)           (shares)

      Chen Hongguo       Chairman and general manager          In office   M     51     16 May 2013   16 May 2016              6,434,527                  0                  0                 0         6,434,527
      Yin Tongyuan       Vice Chairman                         In office   M     58     16 May 2013   16 May 2016              2,423,640                  0                  0                 0         2,423,640
      Li Feng            Director and deputy general manager   In office   M     43     16 May 2013   16 May 2016                471,818                  0                  0                 0           471,818
      Geng Guanglin      Director and deputy general manager   In office   M     42     16 May 2013   16 May 2016                437,433                  0                  0                 0           437,433
      Hou Huancai        Director                              In office   M     54     16 May 2013   16 May 2016                628,915                  0                  0                 0           628,915
      Zhou Shaohua       Director and deputy general manager   In office   M     54     16 May 2013   16 May 2016                123,007                  0                  0                 0           123,007
      Yang Guihua        Director                              In office   F     50     9 May 2014    16 May 2016                      0                  0                  0                 0                 0
      Wang Xiaoqun       Director                              In office   M     60     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Zhang Zhiyuan      Independent Director                  In office   M     53     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Wang Aiguo         Independent Director                  In office   M     52     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Zhang Hong         Independent Director                  In office   F     51     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Pan Ailing         Independent Director                  In office   F     51     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Gao Junjie         Chairman of Supervisory Committee     In office   M     45     16 May 2013   16 May 2016                 39,606                  0                  0                 0            39,606
      Wang Ju            Supervisor                            In office   F     50     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Yang Hongqin       Supervisor                            In office   F     48     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Yin Qixiang        Supervisor                            In office   M     78     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Guo Guangyao       Supervisor                            Resigned    M     73     16 May 2013   18 November 2015                 0                  0                  0                 0                 0
      Li Xueqin          Deputy general manager                In office   F     50     16 May 2013   16 May 2016                429,348                  0                  0                 0           429,348
      Wang Chunfang      Secretary to the Board and            In office   M     40     16 May 2013   16 May 2016                130,000                  0                  0                 0           130,000
                           deputy general manager
      Hu Changqing       Deputy general manager                In office   M     50     16 May 2013   16 May 2016                  1,238                  0                  0                 0             1,238
      Shao Zhenzhong     Deputy general manager                Resigned    M     55     16 May 2013   27 April 2015                    0                  0                  0                 0                 0
      Chang Liting       Deputy general manager                Resigned    M     62     16 May 2013   27 April 2015                    0                  0                  0                 0                 0
      Li Zhenzhong       Deputy general manager                In office   M     42     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
      Poon Shiu Cheong   Company secretory and                 In office   M     46     16 May 2013   16 May 2016                      0                  0                  0                 0                 0
                           qualified accountant

      Total              –                                    –          –     –    –            –                     11,119,532                   0                  0                 0        11,119,532



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

      Guo Guangyao                            Supervisor             Resigned                                                              18 November 2015 For personal reasons.
      Shao Zhenzhong                          Deputy general manager Dismissed                                                             27 April 2015    For personal reasons.
      Chang Liting                            Deputy general manager Resigned on expiry of                                                 27 April 2015    Retirement.
                                                                       term of office




                                                                                                                                                                                                                       79
     X. Directors, Supervisors and Senior Management and Staff



     III. Changes in the information of Directors and Supervisors
         Under Rule 13.51(B) of the Hong Kong Listing Rules, changes in the information of Directors and Supervisors since the date
         of the annual report for the year ended 31 December 2015 are set out below:

         Name of Supervisor                                    Details of the change

         Guo Guangyao                                        &en