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个股公告正文

晨 鸣B:2017年年度报告(英文版)

日期:2018-03-28附件下载

    I Important Notice, Table of Contents and Definitions
    
    The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
    
    supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the
    
    truthfulness, accuracy and completeness of the contents of the 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, Hu Jinbao, head in charge of accounting and Zhang Bo, head of the accounting
    
    department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial
    
    statements in the annual report.
    
    All Directors were present in person at the Board meeting to consider and approve this Report except the following Director.
    
    Name of the Director Capacity of the Director
    
    unable to attend unable to attend Reason for failure to attend
    
    the meeting in person the meeting in person the meeting in person Name of the proxy
    
    Pan Ailing Independent Director Health reasons Wang Fengrong
    
    The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy and competition
    
    in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factors likely to be faced
    
    and the measures to be taken to address them as set out in the outlook on the future development of the Company in Discussion
    
    and Analysis of Operations.
    
    The proposed profit distribution plan of the Company was considered and passed by the Board:
    
    The audited consolidated net profit attributable to shareholders of the Company for 2017 prepared in accordance with Accounting
    
    Standards for Business Enterprises by the Company amounted to RMB3,769,325,450.93. When deducting the interest for
    
    perpetual bonds of RMB153,140,000 for 2017 and the dividend for preference shares of RMB333,702,107.35, the distributable
    
    profit realised for 2017 amounted to RMB3,282,483,343.58.
    
    In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
    
    Shares, based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017 and the 774,526,678 simulated
    
    ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the end of
    
    2017, a cash dividend of RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders, a cash dividend of
    
    RMB6 (tax inclusive) per ten simulated ordinary shares converted from the preference shares will be distributed to holders of
    
    preference shares, and a capitalisation issue made out of the capital reserves of 5 shares for every ten shares held to ordinary
    
    shareholders. A cash dividend of RMB of RMB1,161,843,280.20 will be distributed to ordinary shareholders and a variable cash
    
    dividend of RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a cash dividend of RMB10.33
    
    (tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference shares. No
    
    bonus shares (tax inclusive) will be issued.
    
    2017 ANNUAL REPORT 1
    
    3704827-t01fnar (Shandong Chenming) p.1 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:21I Important Notice, Table of Contents and DefinitionsTable of Contents
    
    I Important Notice, Table of Contents and Definitions.............................................................................................. [?]
    
    II Company Profile and Key Financial Indicators ....................................................................................................... [?]
    
    III Chairman’s Report .................................................................................................................................................. [?]
    
    IV Business Overview .................................................................................................................................................. [?]
    
    V Discussion and Analysis of Operations................................................................................................................... [?]
    
    VI Directors’ Report ..................................................................................................................................................... [?]
    
    VII Material Matters ...................................................................................................................................................... [?]
    
    VIII Changes in Share Capital and Shareholders .......................................................................................................... [?]
    
    IX Preference Shares. .................................................................................................................................................. [?]
    
    X Directors, Supervisors and Senior Management and Staff..................................................................................... [?]
    
    XI Corporate Governance............................................................................................................................................ [?]
    
    XII Corporate Bonds..................................................................................................................................................... [?]
    
    XIII Financial Report ...................................................................................................................................................... [?]
    
    XIV Documents Available for Inspection........................................................................................................................ [?]2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.2 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:21
    
    I Important Notice, Table of Contents and Definitions
    
    Definitions
    
    Item means 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
    
    Finance Company means Shandong Chenming Group Finance Co., Ltd.
    
    Financial Leasing Company means Shandong Chenming Financial Leasing Co., Ltd.
    
    reporting period or the year means The period from 1 January 2017 to 31 December 2017
    
    the beginning of the year or means 1 January 2017
    
    the period
    
    the end of the year or the period means 31 December 2017
    
    the prior year means The period from 1 January 2016 to 31 December 2016
    
    2017 ANNUAL REPORT 3
    
    3704827-t01fnar (Shandong Chenming) p.3 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:21II Company Profile and Key Financial IndicatorsI. Company profile
    
    Stock abbreviation 晨鳴紙業 Stock code 000488
    
    晨鳴B Stock code 200488
    
    晨鳴優01 Stock code 140003
    
    晨鳴優02 Stock code 140004
    
    晨鳴優03 Stock code 140005
    
    Stock exchanges on which the shares are listed Shenzhen Stock Exchange
    
    Stock abbreviation 晨鳴紙業 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 山東晨鳴紙業集團股份有限公司
    
    Legal short name in Chinese of the Company 晨鳴紙業
    
    Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    Legal short name in English of the Company (if any) SCPH
    
    Legal representative of the Company Chen Hongguo
    
    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.comII. Contact persons and contact methods
    
    Secretary to the Board (Acting) Securities Affairs Representative Hong Kong Company Secretary
    
    Name Chen Hongguo Yuan Xikun Poon Shiu Cheong
    
    Correspondence address No. 2199 Nongsheng East Road, No. 2199 Nongsheng East Road, 22nd Floor, World Wide House,
    
    Shouguang City, Shandong Province Shouguang City, Shandong Province Central, Hong Kong
    
    Telephone (86)-0536-2158008 (86)-0536-2158008 (852)-2501 0088
    
    Facsimile (86)-0536-2158977 (86)-0536-2158977 (852)-2501 0028
    
    Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hkIII. 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 the Company’s Securities investment department of the Company
    
    Annual ReportIV. Change in registration
    
    Organisation registration code 913700006135889860
    
    Change of principal activities since its listing No
    
    (if any)
    
    Change of the controlling shareholder (if any) No
    
    4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.4 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:23
    
    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 4/F, Tower 2, No. 16 Xisihuanzhong Road, Haidian District, Beijing
    
    Name of the Signing Certified Zhao Yanmei and Wang Zongpei
    
    Public Accountants
    
    Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
    
    √ Applicable □ Not applicable
    
    Name of the
    
    Name of sponsor Sponsor’ office address representatives of sponsor Period under ongoing supervision
    
    CSC Financial Co., Ltd. 9/F, Block B and E, Kaiheng Center, Song Shuangxi and 1 January 2017 - 31 December 2017
    
    No. 2 Chaonei Avenue, Shen Xiqiang
    
    Dongcheng District, Beijing
    
    Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period
    
    □ Applicable √ Not applicableVI. Major accounting data and financial indicators
    
    Retrospective adjustment to or restatement of the accounting data for prior years by the Company
    
    √ Yes □ No
    
    Reason for retrospective adjustment or restatement
    
    Correction of accounting errors
    
    Increase/decrease
    
    for the year as
    
    compared to the
    
    2017 2016 prior year 2015
    
    Before After After Before After
    
    adjustment adjustment adjustment adjustment adjustment
    
    Revenue (RMB) 29,851,743,848.13 22,907,118,241.84 22,907,118,241.84 30.32% 20,241,906,131.81 20,241,906,131.81
    
    Net profit attributable to shareholders
    
    of the Company (RMB) 3,769,325,450.93 2,063,986,822.25 1,998,578,788.75 88.60% 1,021,224,678.04 1,086,632,711.54
    
    Net profit after extraordinary gains or losses
    
    attributable to shareholders
    
    of the Company (RMB) 3,425,779,016.95 1,611,533,699.22 1,546,125,665.72 121.57% 719,891,359.63 785,299,393.13
    
    Net cash flows from operating activities (RMB) 23,766,042.93 2,153,049,269.84 2,153,049,269.84 -98.90% -9,721,363,524.30 -9,721,363,524.30
    
    Basic earnings per share (RMB per share) 1.70 0.99 0.95 78.95% 0.50 0.53
    
    Diluted earnings per share (RMB per share) 1.70 0.99 0.95 78.95% 0.50 0.53
    
    Rate of return on net assets on weighted
    
    average basis 15.80% 9.59% 9.23% 6.57% 6.73% 7.17%VI. Major accounting data and financial indicators
    
    2017 ANNUAL REPORT 5
    
    3704827-t01fnar (Shandong Chenming) p.5 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:23II Company Profile and Key Financial IndicatorsVI. Major accounting data and financial indicators (Cont’d)
    
    Increase/decrease
    
    as at the end of
    
    the year compared
    
    As at the As at the to the end of As at the
    
    end of 2017 end of 2016 the prior year end of 2015
    
    Before After After Before After
    
    adjustment adjustment adjustment adjustment adjustment
    
    Total assets (RMB) 105,625,096,076.92 82,285,354,532.15 82,285,354,532.15 28.36% 77,961,699,547.59 77,961,154,948.14
    
    Net assets attributable to shareholders
    
    of the Company (RMB) 27,778,529,074.90 22,218,808,367.43 22,218,808,367.43 25.02% 16,871,494,584.82 16,936,902,618.321. Reason for accounting policy change and correction of accounting errors:
    
    Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, proceeded to apply for the certification as a
    
    high and new technology enterprise in 2015. The Company received its high and new technology enterprise certificate and
    
    made a related announcement on 28 March 2016. The annual report of the Company was published on 30 March 2016.
    
    As the time of receipt of the certificate and the publication date were close, the Company continued to make a provision
    
    for the income tax expenses of Zhanjiang Chenming at an income tax rate of 25% for 2015. In May 2016, when Zhanjiang
    
    Chenming made the final settlement and payment of the income tax for 2015, the taxation authority agreed that the income
    
    tax for 2015 was calculated and paid at a tax rate of 15%, and returned the excessive tax amount of RMB65,952,632.95
    
    in August 2016. The excessive tax amount received by the Company was directly used to offset against the income tax
    
    expenses for 2016. As a result, the respective income tax amounts for 2015 and 2016 contained errors and the Company
    
    made a correction for prior years during the year. The deferred income tax assets as at 31 December 2015 deceased by
    
    RMB544,599.45 and the income tax expenses for 2015 decreased by RMB65,408,033.50 when the Company made a
    
    provision for the income tax expenses at an income tax rate of 15% for 2015 (The income tax expenses for the period also
    
    decreased by RMB65,952,632.95 and the deferred income tax expenses increased by RMB544,599.45).2. Data specification of basic earnings per share, diluted earnings per share, weighted average return on
    
    equity:
    
    The net profit attributable to the shareholders of the listed company did not deduct any other equity instruments—perpetual
    
    debt can be deferred and accrued to the interest paid in subsequent periods and the impact of dividends on the preference
    
    shares of other equity instruments that have been released after being reviewed and approved. When calculating the
    
    financial indicators of earnings per share and weighted average return on net assets, the interest on perpetual bonds of
    
    RMB 153,140,000.00 and dividends on issuance of preference shares of RMB 333,702,107.35 are deducted during the
    
    reporting period. For details, please refer to section 13 and note 17.2 of this report.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.
    
    6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.6 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:23
    
    II Company Profile and Key Financial Indicators
    
    VIII. Key Financial Indicators by Quarter
    
    Unit: RMB
    
    Q1 Q2 Q3 Q4
    
    Revenue 6,274,273,821.63 7,474,961,185.61 8,179,965,762.07 7,922,543,078.82
    
    Net profit attributable to shareholders
    
    of the Company 702,517,923.91 1,042,996,914.32 966,000,240.51 1,057,810,372.19
    
    Net profit after extraordinary gains or losses
    
    attributable to shareholders of the Company 615,479,547.22 1,007,815,010.99 927,544,638.20 874,939,820.54
    
    Net cash flows from operating activities -1,799,933,755.66 -2,313,008,012.73 2,499,802,074.06 1,636,905,737.26
    
    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 √ NoIX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
    
    Rules
    
    Unit: RMB’0,000
    
    For the year ended 31 December
    
    2017 2016 2015 2014 2013
    
    Before After Before After a
    
    adjustment adjustment adjustment djustment
    
    Revenue 2,985,174 2,290,711 2,290,711 2,024,191 2,024,191 1,910,168 2,038,889
    
    Profit before tax 453,648 258,317 258,317 141,017 141,017 56,101 86,629
    
    Tax 77,752 56,056 62,597 43,224 36,683 10,770 17,594
    
    Profit for the current period
    
    attributable to shareholders
    
    of the listed company 376,933 206,399 199,858 102,122 108,663 50,520 71,066
    
    Minority interests -1,036 -4,138 -4,138 -4,329 -4,329 -5,190 -2,030
    
    Basic earnings per share
    
    (RMB/share) 1.7 0.99 0.95 0.50 0.53 0.26 0.35
    
    Rate of return on net assets
    
    on weighted average basis (%) 15.80% 9.59% 9.23% 6.73% 7.17% 3.62% 5.11%
    
    Unit: RMB’0,000
    
    For the year ended 31 December
    
    2017 2016 2015 2014 2013
    
    Before After Before After
    
    adjustment adjustment adjustment adjustment
    
    Total assets 10,562,510 8,228,535 8,228,535 7,796,170 7,796,116 5,682,203 4,752,188
    
    Total liabilities 7,535,092 5,972,050 5,972,050 6,070,277 6,063,736 4,247,396 3,288,353
    
    Minority interests 249,565 34,605 34,605 38,743 38,743 43,073 59,847
    
    Equity attributable to shareholders
    
    of the listed company 2,777,853 2,221,881 2,221,881 1,687,149 1,693,690 1,391,734 1,403,989
    
    Net current assets/(liabilities) -783,090 -1,094,182 -1,094,182 -1,347,029 -1,340,488 -452,549 -106,347
    
    Total assets less current liabilities 4,837,646 3,557,671 3,557,671 2,932,756 2,939,242 2,872,637 2,823,321
    
    2017 ANNUAL REPORT 7
    
    3704827-t01fnar (Shandong Chenming) p.7 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:23II Company Profile and Key Financial IndicatorsX. Items and amounts of extraordinary gains or losses
    
    √ Applicable □ Not applicable
    
    Unit: RMB
    
    Item Amount for 2017 Amount for 2016 Amount for 2015 Explanation
    
    Profit or loss from disposal of non-current
    
    assets (including write-off of provision
    
    for assets impairment) 65,853,273.77 -1,536,454.18 18,317,909.85
    
    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 392,774,230.02 472,476,962.83 244,716,579.78
    
    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 143,867,008.14
    
    Profit or loss from debt restructuring 24,309.62 -90,997.90 32,089,863.80
    
    Gain or loss arising from contingent items
    
    unrelated to the ordinary course of
    
    business of the Company -325,259,082.28
    
    Except for effective hedging business
    
    conducted in the ordinary course of
    
    business of the Company, gain or
    
    loss arising from the change in fair
    
    value of financial assets held for trading
    
    and financial liabilities held for trading,
    
    as well as investment gains from disposal
    
    of financial assets held for trading and
    
    financial liabilities held for trading and
    
    available-for-sale financial assets 94,000,000.00
    
    Gain or loss on external entrusted loans 13,312,368.97 87,608,490.56 94,777,777.77
    
    Gain or loss from changes in fair value of
    
    consumable biological assets
    
    subsequently measured at fair value -21,000,042.33 -20,084,425.90 -19,078,538.02
    
    Non-operating gains and losses other than
    
    the above items 33,659,216.99 10,022,635.89 10,274,311.04
    
    Less: Effect of income tax 50,196,013.15 92,004,074.27 76,729,624.38
    
    Effect of minority interests (after tax) 3,488,835.77 3,939,014.00 3,034,961.43Total 343,546,433.98 452,453,123.03 301,333,318.41 -8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.8 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:23
    
    II Company Profile and Key Financial Indicators
    
    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.
    
    2017 ANNUAL REPORT 9
    
    3704827-t01fnar (Shandong Chenming) p.9 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:23III Chairman’s ReportDear Shareholders,
    
    I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2017. On behalf
    
    of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to Chenming Paper.
    
    The supply-side reform continuously developed. The industrial structure was consistently adjusted. The environmental protection
    
    policies became more specific and stricter. Commercial and development opportunities arose for some enterprises and an
    
    industry reshuffle accelerated to deepen the industry concentration, and therefore the industry continued to prosper. On the
    
    one hand, the prices of paper products increased due to the increased costs of, among other things, wood pulp, waste paper
    
    and logistics. The leading enterprises maintained their cost advantage with their pulp inventories and their own pulp production
    
    capacity and improved their profitability. On the other hand, the financial leasing business became an integral part of the
    
    Company’s profit while enjoying good development momentum.
    
    In 2017, facing the complex macroeconomic conditions, as well as the pressure from the market, environmental protection and
    
    increasing costs, the Company, aiming at “developing into an enterprise with hundreds of billions in value and forging Chenming
    
    into a centennial brand”, committed itself to “team building, management enhancement, outstanding business performance and
    
    good results” to strive for progress and be innovative and practical, and comprehensively improved its quality and efficiency,
    
    management level, technology application, sense of happiness and brand image. It successfully completed all the work targets for
    
    the year and achieved very satisfactory results.
    
    I. Results of Operations
    
    In 2017, the Company completed the production of machine-made paper of 5.10 million tonnes with sales of 4.96 million
    
    tonnes and achieved revenue of RMB29.852 billion, a year-on-year increase of 30.32%. The Company recorded operating
    
    costs of RMB19.729 billion, a year-on-year increase of 24.97%. Total profit and net profit attributable to equity holders of
    
    the Company were RMB4,536 million and RMB3,769 million respectively, up by 75.62% and 88.60% from the prior year.
    
    The Company’s total assets amounted to RMB105.625 billion. The financial segment experienced stable development
    
    across businesses with ever improving management systems and effective risk preventions.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 its corporate governance system in a timely manner and amended and improved the amended
    
    management systems including the Rules of Procedures for General Meetings, the Rules of Procedures for Board Meetings
    
    and the 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.
    
    10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.10 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:24
    
    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. The audited consolidated net profit attributable to
    
    shareholders of the Company for 2017 prepared in accordance with Accounting Standards for Business Enterprises by the
    
    Company amounted to RMB3,769,325,450.93. When deducting the interest for perpetual bonds of RMB153,140,000 and
    
    the dividend of preference shares of RMB333,702,107.35 for 2017, the distributable profit realised for 2017 amounted to
    
    RMB3,282,483,343.58. In accordance with the requirements of the Articles of Association and the Prospectus of Non-public
    
    Issuance of Preference Shares, the proposed profit distribution plan of the Company for 2017 is as follows:
    
    Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017 and the 774,526,678 simulated
    
    ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the
    
    end of 2017, a cash dividend of RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders; a cash
    
    dividend of RMB6 (tax inclusive) per ten simulated ordinary shares converted from the preference shares will be distributed
    
    to holders of preference shares; and a capitalisation issue will be made out of the capital reserves of 5 shares for every ten
    
    shares held to ordinary shareholders. A cash dividend of RMB1,161,843,280.20 will be distributed to ordinary shareholders
    
    and a variable cash dividend of RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a
    
    cash dividend of RMB10.33 (tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to
    
    holders of preference shares.
    
    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
    
    Benefiting from the continuous stable macroeconomic growth, the development of the paper making industry will maintain
    
    stable growth in the long run. In recently years, the central government has been introducing various industry policies
    
    such as production capacity reduction, the supply-side reform, ten rules regarding water pollution and ten rules regarding
    
    air pollution. Different measures such as setting higher emission standards and strictly restricting corporate size and
    
    structure put stricter restrictions on the enterprises in the paper making industry and force those enterprises with backward
    
    production capacity to actively exit the paper making market. With the continuous introduction of the supply-side reform,
    
    substitution of new production capacity for backward production capacity and other policies, the environmental protection
    
    policies have becoming stricter. The elimination of backward production capacity in the paper making industry has been
    
    progressing smoothly. New production capacity mainly comes from large enterprises. It is expected that the industry
    
    concentration ratio will further increase. The improvement in the supply in the industry has effectively boosted the dual
    
    growth in revenue and profitability of the enterprises in the paper making industry. The downstream demand in the paper
    
    making industry will continue to grow along with the domestic economic growth. The turning point in the supply and
    
    demand structure in the industry has gradually developed with a boom in the industry to be prolonged.
    
    2017 ANNUAL REPORT 11
    
    3704827-t01fnar (Shandong Chenming) p.11 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:24III Chairman’s Report
    
    Since the implementation of the “Thirteenth Five Year Plan”, the accelerated urbanisation and industrialisation in China, the
    
    change in driver of economic growth, upgrade of traditional industries, development of emerging industries, and continuous
    
    infrastructure construction require substantial investment in fixed assets. China will become the largest leasing market in the
    
    world. According to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial
    
    Leasing Industry 2016-2021 issued by ASKCI Consulting Co. Ltd., the financial leasing industry will grow at a compound
    
    annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial leasing
    
    industry in China will amount to RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China
    
    are promising.
    
    Looking forward, the Company will adhere to the main theme of emphasising 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, further reorganised methodology and restructuring so as to achieve taxable profit over RMB10 billion and strive to
    
    become one of the world-class companies with the highest growth rate during the “Thirteenth Five Year Plan” period.Chen Hongguo
    
    Chairman
    
    27 March 201812 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.12 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:24
    
    IV Business Overview
    
    I. Principal operations of the Company during the Reporting Period
    
    Whether the Company needs to comply with the disclosure requirements of specific industries
    
    No
    
    (I) Principal operations of the Company during the Reporting Period
    
    The Company is a large conglomerate principally engaged in paper making, finance, pulp and fibre and mining
    
    businesses while also involved in forestry, logistics, construction materials, and others. The Company is the first
    
    industrial and financing company in the paper making industry having a finance company and a financial leasing
    
    company and also the only listed company with A shares, B shares, H shares and preference shares in issue. The
    
    Company have maintained a leading position among its industry peers for 20 consecutive years in terms of its main
    
    indicators of corporate economic efficiency. The machine-made paper business and the financial leasing business are
    
    main sources of revenue and profit of the Company. During the reporting period, there was no significant change in
    
    the principal operations of the Company.
    
    1. Machine-made paper business
    
    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
    
    10,000,000 tonnes. Currently, it has the largest integrated forestry, pulp and paper project with the most
    
    advanced technology in the world and dozens of pulp and paper production lines of international advanced
    
    standards. The product mix of the Company has gradually diversified into eight major product series which
    
    focus on high and middle end products, including high-end offset paper, coated paper, white paper board, light
    
    weight coated paper, household paper, electrostatic copy paper, thermal paper and glassine paper.
    
    The Company has scientific research institutions including the national enterprise technology centre, the
    
    postdoctoral working station as well as state certified CNAS pulp and paper testing centre and has obtained
    
    over 150 national patents including 12 patents for invention, with 7 products selected as national new products
    
    and 35 products filling the gap in China. The Company has obtained 21 Science and Technology Progress
    
    Awards above the provincial level and undertaken five national science and technology projects and 26
    
    provincial technological innovation projects. The Company has obtained the ISO9001 quality certification,
    
    ISO14001 environmental protection certification and FSC-COC certification, leading among its industry peers.2. Financial leasing business
    
    Since its establishment, the Financial Leasing Company, relying on strong capital strength of the Company and
    
    leveraging its excellent business project design ability, strong ability in credit integration and outstanding risk
    
    control capability while giving full play to the advantages of internationalisation and market-oriented operations,
    
    has sustained rapid business development and has been seeking the organic combination between industrial
    
    capital and financial capital. On the basis of serving the upper- and lower-stream of the paper making industry,
    
    it actively provides financing and value-added service solutions to large state-owned enterprises, listed
    
    companies, government financing platforms, quality private enterprises, new and high-tech enterprises, schools
    
    and hospitals, thus greatly promoting the healthy and rapid development of the real economy. The financial
    
    leasing business is mainly conducted on a leaseback basis. Recently, the financial leasing business has become
    
    an integral part of profit of the Company with sound momentum for future growth.
    
    2017 ANNUAL REPORT 13
    
    3704827-t01fnar (Shandong Chenming) p.13 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:25IV Business OverviewI. Principal operations of the Company during the Reporting Period (Cont’d)
    
    (II) General information of the industries where the Company operated in during the reporting period
    
    1. Paper making industry
    
    The paper making industry is an important basic raw materials industry which is closely related to the national
    
    economy and social development. Since 2017, China’s economy extended its development trend at stable
    
    pace, and gradually showed steady growth with favourable momentum. The Thirteenth Five Year Plan imposed
    
    much more stringent environmental protection requirements on the paper making industry. The successive
    
    implementation of environmental protection inspections, licensing system for pollutant discharge and others
    
    reflected that more stringent environmental protection measures will become a prolonged trend in the industry.
    
    Different measures such as setting higher emission standards and strictly restricting corporate size and structure
    
    put stricter restrictions on the enterprises in the paper making industry and forced those enterprises with
    
    backward production capacity to actively exit the paper making market. The large leading enterprises having
    
    comprehensive environmental facilities with significant economies of scale became the actual beneficiaries
    
    under these environmental protection policies.
    
    Policies such as production capacity reduction and the supply-side reform were continuously introduced.
    
    The environmental protection policies continued to become stricter. The elimination of backward production
    
    capacity in the paper making industry progressed smoothly. New production capacity mainly came from large
    
    enterprises. The situation will bring about both commercial and development opportunities for some enterprises
    
    while facilitating an industry reshuffle to deepen the industry concentration, and therefore the industry will
    
    continue to prosper. The prices of paper products increase due to the increased costs of, among other things,
    
    wood pulp, waste paper and logistics. The leading enterprises maintain their cost advantage with their pulp
    
    inventories and their own pulp production capacity and improve their profitability with a boom in the industry to
    
    be prolonged.
    
    The Company is a leading player in the paper making industry of China and is ranked among the top ten paper
    
    manufacturers in the world with an annual pulp and paper production capacity of over 10 million tonnes. The
    
    Company have maintained a leading position among its industry peers for 20 consecutive years in terms of
    
    its main indicators of corporate economic efficiency. Therefore, the Company enjoyed significant economies
    
    of scale in the industry and was relatively favourably positioned for its future development. As the first listed
    
    company with A shares, B shares, H shares and preference shares in issue in China, the Company had gained
    
    access to the capital market, thus providing effective support for the future project investments of the Company.
    
    The overall listing of the machine-made paper business of the Company also made the management of the
    
    Company more regulated and the operations more transparent, thus laying a solid foundation for the sustainable
    
    development of the Company.
    
    14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.14 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:25
    
    IV Business Overview
    
    I. Principal operations of the Company during the Reporting Period (Cont’d)
    
    (II) General information of the industries where the Company operated in during the reporting period
    
    (Cont’d)
    
    2. Financial leasing industry
    
    The Guiding Opinions on Accelerating the Development of Financial Leasing Industry and the Guiding Opinions
    
    on Promoting the Sound Development of Financial Leasing Industry were issued by the State Council in 2015.
    
    As the first national policy on promoting the financial leasing industry in China, the above opinions had paved
    
    the way for the development of the financial leasing industry in the future.
    
    Under the new normal of the economic development, the financial leasing industry in China entered its golden
    
    years. According to the statistics of China Leasing Alliance and Tianjin Binhai Financial Leasing Research
    
    Institute, there were about 9,090 enterprises engaging in financial leasing in China, representing a year-on-
    
    year increase of approximately 1,954, as at the end of the 2017. The outstanding financial leasing contracts
    
    amounted to RMB6.06 trillion, representing a year-on-year increase of approximately 13.70%. According to the
    
    Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
    
    Industry 2016-2021 issued by ASKCI Consulting Co., Ltd., the financial leasing industry will grow at a compound
    
    annual growth rate of over 20% in the future and it is expected that the output of the industry will amount to
    
    RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China are promising.
    
    II. Material Changes of Major Assets
    
    1. Material Changes of Major Assets
    
    Major assets Description
    
    Equity The Company principally had new equity investments in Ningbo Kaichen Huamei
    
    and Weifang Sime Darby West Port during the reporting period.
    
    Investment property The Company disposed of its properties at Digital Building in Beijing and made
    
    an investment in investment property at Pujiang International Financial Plaza in
    
    Shanghai during the reporting period.
    
    Fixed assets The Company had the new fixed assets at Pujiang International Financial Plaza
    
    in Shanghai for its own use during the reporting period.
    
    Construction in progress Continued investment was made in the Shouguang Meilun chemical pulp
    
    project, the 510,000 tonne high-end cultural paper project and the Huanggang
    
    pulp and paper project, and investment was made in the newsprint paper-for-
    
    cultural paper project during the reporting period.
    
    2. Major Assets Overseas
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 15
    
    3704827-t01fnar (Shandong Chenming) p.15 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:25IV Business OverviewIII. Analysis of Core Competitiveness
    
    Whether the Company needs to comply with the disclosure requirements of specific industries
    
    No
    
    The Company is a leading player in the paper making industry of China. After innovation and development for more than
    
    half a century, it has developed into a large conglomerate principally engaged in paper making, finance, pulp and fibre
    
    and mining businesses while also involved in forestry, logistics, construction materials, and others. It is also the only listed
    
    company with A shares, B shares and H shares and preference shares in issue in China and the first company 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, being a leading player in the paper making industry in China, has achieved
    
    annual pulp and paper production capacity of over 10 million tonnes and is capable to compete with international
    
    paper making enterprises in scale. The large-scale centralised production and operation model has provided
    
    the Company with obvious economic benefits. The Company also has strong market influence over 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 food
    
    packaging paper and high-end white paper board. The product mix of the Company has gradually diversified into
    
    eight major product series which focus on high and middle end products, including high-end offset paper, coated
    
    paper, white paper board, light weight coated paper, household paper, electrostatic copy paper, thermal paper and
    
    glassine 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.3. Advantages in technical equipment
    
    Currently, the Company has the largest integrated forestry, pulp and paper project with the most advanced technology
    
    in the world and dozens of pulp and paper production lines of international advanced standards. The Company’s
    
    overall technical equipment has reached the advanced international level. The major production equipment has been
    
    imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of Finland, Voith of
    
    Germany and TBC of the United States.
    
    The technical equipment used by the Company generally reflects the characteristics of being technology-intensive
    
    and the integration of mechanical and electrical in the paper making industry nowadays. The degassing technology,
    
    wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet
    
    coating technology, multi-nip pressure balanced calender technology and the technical processes independently
    
    developed by the Company of the pulp systems have all reached the international advanced level.
    
    16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.16 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:25
    
    IV Business Overview
    
    III. Analysis of Core Competitiveness (Cont’d)
    
    4. Advantages in research and innovation and new product development
    
    The Company is a high and new-technology enterprise and gives full play to its strong research capability. Supported
    
    by the national enterprise technology centre and the post-doctoral working station, the Company has established
    
    a comprehensive intellectual property system and put more and more efforts in technical innovation and scientific
    
    research and development to develop new products with high technology contents and high added value as well
    
    as proprietary technologies. Meanwhile, the technology centre of the Company has actively engaged in technical
    
    cooperation with schools, research institutions and international advanced enterprises. The Company has obtained
    
    over 150 national patents including 12 patents for invention, with 7 products selected as national new products
    
    and 35 products filling the gap in China. The Company participated in the formulation of 4 national standards and
    
    was awarded honours including “China Patent Shandong Star Enterprise”, becoming the “green engine” of the
    
    transformation and upgrading in the paper making industry and leading the direction of the latest and most advanced
    
    technology in the paper making industry in China.5. Funding advantages
    
    The paper making industry is a capital-intensive industry, and funding is one of the most important factors in the
    
    development of the industry. The Company has high profitability and credit status, and has maintained long-term
    
    stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing
    
    capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance
    
    structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained
    
    have been applied effectively with good market image, the Company has stronger abilities in direct financing in the
    
    capital market.6. Team advantages
    
    The key management members and the core personnel of the Company remain stable. In the business development
    
    of Chenming Paper, an internal corporate culture developed by the stable core staff team favourable to the growth of
    
    the Company consolidates the management experience specific to the industry, thus resulting in a team advantage
    
    blended with management and culture. Meanwhile, the Company has attracted experienced professionals with
    
    financial, legal, financial management backgrounds through its advanced management philosophy and ample room
    
    for development. The high quality and professional team secures the sustainable development of the Company with a
    
    solid supply of talents.7. Advantages in environmental governance capacity
    
    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. The environmental emission indicators of the Company rank high among industry peers. Besides,
    
    the national policy of eliminating obsolete production capacity will facilitate the development of the paper making
    
    industry while the replenishment and replacement of advanced production capacity will bring new blood and
    
    momentum into the paper making industry, favouring industry concentration to establish a sound industry cycle.
    
    2017 ANNUAL REPORT 17
    
    3704827-t01fnar (Shandong Chenming) p.17 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:25V Discussion and Analysis of OperationsI. Overview
    
    In 2017, facing the complex macroeconomic conditions, as well as the pressure from the market, environmental protection
    
    and increasing costs, the Company, aiming at “developing into an enterprise with hundreds of billions in value and forging
    
    Chenming into a centennial brand”, committed itself to “team building, management enhancement, outstanding business
    
    performance and good results” to strive for progress and be innovative and practical, and comprehensively improved its
    
    quality and efficiency, management level, technology application, sense of happiness and brand image. It successfully
    
    completed all the work targets for the year and achieved very impressive results.
    
    In 2017, the Company completed the production of machine-made paper of 5.10 million tonnes with sales of 4.96 million
    
    tonnes and achieved revenue of RMB29.852 billion, a year-on-year increase of 30.32%. The Company recorded operating
    
    costs of RMB19.729 billion, a year-on-year increase of 24.97%. Total profit and net profit attributable to equity holders of
    
    the Company were RMB4,536 million and RMB3,769 million respectively, up by 75.62% and 88.60% from the prior year.
    
    The Company’s total assets amounted to RMB105.625 billion. The financial segment experienced stable development
    
    across businesses with ever improving management systems and effective risk preventions.
    
    (I) New breakthroughs in operation management
    
    Facing the complex and ever-changing market conditions, the sales system persistently executed the decision
    
    and planning made by the management of the Company in spite of challenges with a pioneering attitude, thus
    
    opening up an unprecedented new era. By adopting measures such as strengthening business training, enhancing
    
    appraisal methods and incentive measures, focusing on performance and caring for employees’ living, the sales team
    
    significantly improved its capability with refreshed spirits. Under strengthened market operations and the regulated
    
    market order, the marking strategies were useful and highly effective. The market construction was steadily enhanced
    
    through strengthened management on accounts receivable and channel construction.(II) New progress in production management
    
    Benefiting from the strengthened basic management, the progress made in team building and improved operation
    
    skills of employees, the production system was stable and under control and continued to perform well as a whole.
    
    The machines were under stable and efficient operation during the year through strengthened management, control
    
    and appraisal. The Company also conducted production capacity enhancement in its own pulp production, adjusted
    
    product structure, focused on the development of products with high efficiency, optimised techniques and promoted
    
    the application of new technologies and raw materials to improve efficiency.
    
    18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.18 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    I. Overview (Cont’d)
    
    (III) Stable operation in the financial segment
    
    For the financial segment, the Company constructed a financial business system with a more reasonable structure
    
    through active business expansion and strict risk control. In order to strengthen the centralised management of its
    
    financial business, the Company set up the headquarters for the management of financial leasing and also established
    
    two financial leasing companies in Shanghai and Guangzhou, and two commercial factoring companies in Shandong
    
    and Guangzhou to further mitigate business risks and improve internal management and profitability. By issuing
    
    perpetual bonds of RMB3.0 billion and corporate bonds of RMB1.2 billion, the Company reduced its gearing ratio and
    
    improved its debt structure. The Company also stepped up efforts in cooperation between banks and enterprises by
    
    reaching a strategic cooperation with Qilu Bank and expanding the scope of cooperation with Industrial Bank, Postal
    
    Savings Bank and other banks, and obtained additional credit facilities of over RMB18.0 billion.(IV) Flourishing project construction in full swing
    
    The phase I of the magnesite mining project of Haiming Mining commenced operation in January 2018. The
    
    400,000-tonne chemical pulp project and 510,000 tonne high-end culture paper project of Shouguang Meilun and
    
    the 300,000 tonne wood pulp project of Huanggang Chenming progressed smoothly according to the schedule. After
    
    being put into production, these projects will play a very important role in enhancing the sustainable development and
    
    achieving the strategic objectives of the Company.(V) Effective corporate management
    
    The Company fully implemented the adjustments in the organisational structure and the remuneration system as
    
    planned to further enhance the functional management as well as the effectiveness of remuneration as incentives. The
    
    Company promoted reform on management and system upgrade through the construction of process and information
    
    technology. The Company also further improved its management system to keep track of the basic management. By
    
    focusing on strengthening level management, formulating management measures and specifying management duties,
    
    the capabilities of discovering and solving problems at all levels were enhanced with stronger team execution. The
    
    Company motivated its team by enhancing remuneration and incentives and providing more positive incentives, thus
    
    significantly improving the enthusiasm and creativity of its management personnel.
    
    2017 ANNUAL REPORT 19
    
    3704827-t01fnar (Shandong Chenming) p.19 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsII. Analysis of principal operations
    
    1. Overview
    
    Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.2. Revenue and cost
    
    (1) Components of revenue
    
    Unit: RMB
    
    2017 2016 Increase/Amount % of revenue Amount % of revenue decreaseTotal revenue 29,851,743,848.13 100% 22,907,118,241.84 100% 30.32%By industry
    
    Machine-made paper 26,280,449,337.82 88.04% 19,536,639,601.47 85.29% 34.52%
    
    Financial leasing 2,347,173,531.64 7.86% 2,339,925,682.07 10.21% 0.31%
    
    Electricity and steam 198,073,854.15 0.66% 338,702,429.21 1.48% -41.52%
    
    Construction materials 255,747,205.45 0.86% 227,629,265.80 0.99% 12.35%
    
    Chemicals 109,914,856.68 0.37% 129,003,963.48 0.56% -14.80%
    
    Hotel 24,368,815.97 0.08% 26,677,286.19 0.12% -8.65%
    
    Others 636,016,246.42 2.13% 308,540,013.62 1.35% 106.14%
    
    By product
    
    Duplex press paper 6,368,897,144.23 21.34% 4,966,155,905.70 21.68% 28.25%
    
    Coated paper 5,489,860,030.01 18.39% 4,428,162,301.09 19.33% 23.98%
    
    White paper board 6,906,078,714.80 23.13% 2,815,701,912.71 12.29% 145.27%
    
    Electrostatic paper 2,371,439,780.86 7.94% 2,107,489,078.57 9.20% 12.52%
    
    Anti-sticking raw paper 1,207,953,706.05 4.05% 1,009,523,792.88 4.41% 19.66%
    
    Newsprint paper 793,309,261.25 2.66% 996,218,028.98 4.35% -20.37%
    
    Household paper 689,570,026.52 2.31% 659,518,362.24 2.88% 4.56%
    
    Light weight coated paper 515,092,105.82 1.73% 463,577,121.66 2.02% 11.11%
    
    Writing paper 275,304,569.70 0.92% 274,469,632.58 1.20% 0.30%
    
    Other machine-made paper 1,662,943,998.58 5.57% 1,815,823,465.06 7.93% -8.42%
    
    Financial leasing 2,347,173,531.64 7.86% 2,339,925,682.07 10.21% 0.31%
    
    Electricity and steam 198,073,854.15 0.66% 338,702,429.21 1.48% -41.52%
    
    Construction materials 255,747,205.45 0.86% 227,629,265.80 0.99% 12.35%
    
    Chemicals 109,914,856.68 0.37% 129,003,963.48 0.56% -14.80%
    
    Hotel 24,368,815.97 0.08% 26,677,286.19 0.12% -8.65%
    
    Others 636,016,246.42 2.13% 308,540,013.62 1.35% 106.14%
    
    By geographical segment
    
    Mainland China 25,920,834,960.98 86.83% 19,628,612,055.93 85.69% 32.06%
    
    Other countries and regions 3,930,908,887.15 13.17% 3,278,506,185.91 14.31% 19.90%
    
    20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.20 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    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
    
    Whether the Company needs to comply with the disclosure requirements of specific industries
    
    No
    
    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 26,280,449,337.82 18,620,269,325.34 29.15% 34.52% 25.03% 5.38%
    
    Financial leasing 2,376,560,324.10 282,366,339.02 88.12% 1.57% 28.67% -2.50%
    
    By product
    
    Duplex press paper 6,368,897,144.23 4,681,114,971.82 26.50% 28.25% 25.85% 1.40%
    
    Coated paper 5,489,860,030.01 3,806,504,813.36 30.66% 23.98% 15.77% 4.91%
    
    White paper board 6,906,078,714.80 4,769,506,903.63 30.94% 145.27% 124.22% 6.49%
    
    Electrostatic paper 2,371,439,780.86 1,503,657,404.54 36.59% 12.52% 8.70% 2.23%
    
    Anti-sticking
    
    raw paper 1,207,953,706.05 795,913,212.90 34.11% 19.66% 11.05% 5.10%
    
    Financial leasing 2,376,560,324.10 282,366,339.02 88.12% 1.57% 28.67% -2.50%
    
    By geographical segment
    
    Mainland China 25,920,834,960.98 16,111,178,123.56 37.84% 59.43% 34.15% 11.71%
    
    Other countries
    
    and regions 3,930,908,887.15 3,618,012,351.53 7.96% 19.90% 25.47% -4.09%
    
    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
    
    2017 ANNUAL REPORT 21
    
    3704827-t01fnar (Shandong Chenming) p.21 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsII. Analysis of principal operations (Cont’d)
    
    2. Revenue and cost (Cont’d)
    
    (3) Whether revenue from sales in kind is higher than revenue from services
    
    √ Yes □ No
    
    Increase/
    
    By industry Item Unit 2017 2016 decrease
    
    Machine-made paper Sales ’0,000 tonnes 496 452 9.73%
    
    Production output ’0,000 tonnes 510 436 16.97%
    
    Inventories ’0,000 tonnes 47 33 42.42%
    
    Explanation on why the related data varied by more than 30%
    
    √ Applicable □ Not applicable
    
    The inventories of machine-made paper increased by 42.42% year on year mainly due to the production
    
    capacity increase after the operation of the Zhanjiang 600,000-tonne liquid packaging paper project.(4) Performance of material sales contracts of the Company during the reporting period
    
    □ Applicable √ Not applicable
    
    22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.22 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    II. Analysis of principal operations (Cont’d)
    
    2. Revenue and cost (Cont’d)
    
    (5) Composition of operating costs
    
    By industry
    
    Unit: RMB
    
    2017 2016 Increase/
    
    By industry Item Amount % of operating costs Amount % of operating costs decrease
    
    Machine-made paper Raw materials 11,321,010,554.29 60.80% 8,974,526,123.35 60.26% 26.15%
    
    Depreciation 875,140,104.87 4.70% 768,639,922.25 5.16% 13.86%
    
    Labour costs 259,402,371.05 1.40% 186,978,418.54 1.26% 38.73%
    
    Energy and power 2,041,148,096.91 11.00% 1,526,753,692.29 10.25% 33.69%
    
    Chemicals 2,649,089,266.03 14.20% 2,014,239,925.46 13.52% 31.52%
    
    Other production costs 1,474,478,932.18 7.90% 1,421,923,493.98 9.55% 3.70%
    
    Subtotal 18,620,269,325.34 100.00% 14,893,061,575.87 100.00% 25.03%
    
    Power and steam Raw materials 106,044,022.66 80.20% 161,521,323.47 75.37% -34.35%
    
    Depreciation 9,800,393.22 7.40% 19,858,908.35 9.27% -50.65%
    
    Labour costs 3,756,021.82 2.80% 7,643,082.12 3.57% -50.86%
    
    Energy and power 2,850,799.43 2.20% 2,769,566.68 1.29% 2.93%
    
    Chemicals 345,197.70 0.30% 697,230.84 0.33% -50.49%
    
    Other production costs 9,400,888.63 7.10% 21,811,402.07 10.18% -56.90%
    
    Subtotal 132,197,323.45 100.00% 214,301,513.53 100.00% -38.31%
    
    Construction materials Raw materials 151,042,972.58 72.70% 116,872,767.63 67.09% 29.24%
    
    Depreciation 7,247,023.47 3.50% 4,589,639.45 2.63% 57.90%
    
    Labour costs 14,112,147.05 6.80% 11,218,728.30 6.44% 25.79%
    
    Energy and power 23,009,884.02 11.10% 22,500,486.99 12.92% 2.26%
    
    Other production costs 12,319,837.64 5.90% 19,011,859.48 10.91% -35.20%
    
    Subtotal 207,731,864.76 100.00% 174,193,481.85 100.00% 19.25%
    
    2017 ANNUAL REPORT 23
    
    3704827-t01fnar (Shandong Chenming) p.23 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsII. Analysis of principal operations (Cont’d)
    
    2. Revenue and cost (Cont’d)
    
    (6) Change of scope of consolidation during the reporting period
    
    √ Yes □ No
    
    ① Business combination not under common control
    
    Revenue of Net profit of
    
    acquiree from acquiree from
    
    Equity Equity the acquisition the acquisition
    
    Point of time of acquisition acquisition Equity Acquisition Basis for the date to the end of date to the end of
    
    Name of acquiree equity acquisition costs (RMB’0000) proportion (%) acquisition mode date acquisition date the period (RMB) the period (RMB)
    
    Shanghai Hongtai Real October 2017 159,064.67 45.00 Merger 2017.11.1 Date of substantive 485,784.40 -36,856,878.73
    
    Estate Co., Ltd. and acquisition control② Change in scope of consolidation due to other reasons
    
    During the year, the scope of consolidation included 9 newly established subsidiaries, namely Shanghai
    
    Chenming Industry Co., Ltd., Shanghai Chenming Financial Leasing Co., Ltd., Guangzhou Chenming
    
    Financial Leasing Co., Ltd., Shandong Chenming Commercial Factoring Co., Ltd., Guangzhou Chenming
    
    Commercial Factoring Co., Ltd., Qingdao Chenming Pulp and Paper Electronic Commodity Exchange
    
    Co., Ltd., Xuchang Chenming Paper Co., Ltd., Chengdu Chenming Culture Communication Co., Ltd. and
    
    Beijing Chenming Culture Communication Co., Ltd.
    
    During the year, the scope of consolidation excluded 2 companies: a former subsidiary, namely
    
    Shouguang Chenming Hongxin Packaging Co., Ltd was deregistered upon merger and acquisition by
    
    another subsidiary Shouguang Hongxiang Printing and Packaging Co., Ltd, whereas Jilin Chenming
    
    Machinery Manufacturing Co., Limited was transferred.
    
    (7) Significant change in or adjustment of the businesses, products or services of the Company during the
    
    reporting period
    
    □ Applicable √ Not applicable
    
    24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.24 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    II. Analysis of principal operations (Cont’d)
    
    2. Revenue and cost (Cont’d)
    
    (8) Sales to major customers and major suppliers
    
    Sales to major customers of the Company
    
    Total sales to top 5 customers (RMB) 1,948,080,321.71
    
    Total sales to top 5 customers as a percentage of the total sales for the year 6.53%
    
    Sales to top 5 customers who are related parties
    
    as a percentage of the total sales for the year 0.00%
    
    Information on top 5 customers of the Company
    
    As a percentage
    
    of the total sales
    
    No. Name of customer Sales (RMB) for the year (%)
    
    1 Customer A 520,359,524.99 1.74%
    
    2 Customer B 397,167,618.02 1.33%
    
    3 Customer C 375,786,051.33 1.26%
    
    4 Customer D 342,484,499.61 1.15%
    
    5 Customer E 312,282,627.76 1.05%
    
    Total — 1,948,080,321.71 6.53%
    
    Other explanation of major customers
    
    □ Applicable √ Not applicable
    
    Major suppliers of the Company
    
    Total purchases from top 5 suppliers (RMB) 4,905,829,110.64
    
    Total purchases from top 5 suppliers as a percentage of the total purchases for the year 24.87%
    
    Total purchases from top 5 suppliers who are related parties as a percentage
    
    of the total purchases for the year 0.00%
    
    Information on top 5 suppliers of the Company
    
    As a percentage of
    
    the total purchases
    
    No. Name of supplier Purchases (RMB) for the year (%)
    
    1 Supplier A 1,199,824,640.13 6.08%
    
    2 Supplier B 1,191,365,504.15 6.04%
    
    3 Supplier C 1,029,110,865.91 5.22%
    
    4 Supplier D 867,095,512.68 4.39%
    
    5 Supplier E 618,432,587.77 3.13%
    
    Total — 4,905,829,110.64 24.86%
    
    Other explanation of major suppliers
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 25
    
    3704827-t01fnar (Shandong Chenming) p.25 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsII. Analysis of principal operations (Cont’d)
    
    3. Expenses
    
    Unit: RMB
    
    Increase/
    
    2017 2016 decrease (%) Reasons for material changes
    
    Selling and distribution 1,304,465,552.27 1,166,484,567.20 11.83% Mainly due to the increase of
    
    expenses transportation expenses resulting
    
    from higher sales
    
    General and 1,909,369,899.86 1,441,458,586.06 32.46% Mainly due to an increase in research
    
    administrative and development expenditure and
    
    expenses employee’s compensation
    
    Finance expenses 2,496,592,415.87 1,818,564,890.78 37.28% Mainly due to an increase in interest
    
    expenses and exchange loss
    
    Loss on impairment 141,361,141.80 413,711,106.31 -65.83% Mainly due to impairment of assets
    
    of asset incurred by Fuyu Chenming and
    
    Jiangx i Chenming dur ing the
    
    corresponding period of the prior
    
    year
    
    26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.26 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    II. Analysis of principal operations (Cont’d)
    
    4. Research and development expenditure
    
    √ Applicable □ Not applicable
    
    The Company had been closely following the economic and market conditions in China and in the industry since
    
    2017. Driven by customers’ demand and targeting at enhancing economic benefits, the Company put more efforts
    
    into technical innovation, promoted the application of new technology and new raw materials such as enzymes
    
    for pulping and filler modification enhancers, and developed new products with high technology contents and
    
    high economic benefits, striving to conduct R&D on product differentiation and refining. Six R&D projects such as
    
    “technical development of light weight colour duplex press paper”, “technical development of low ink absorption
    
    one-side coated paper”, “technical development of copy raw paper for construction” and “technical development of
    
    oxidised starch for glassine paper”, were listed on the technological innovative project plans of Shandong Province
    
    for 2017. The Company was awarded the second tier prize of the Science and Technology Progress Awards of the
    
    Ministry of Education in 2017 for its “Key Technology and Application of Water Saving and Clean Production in Paper
    
    Making” under collaborative development with Nanjing Forestry University on production, learning and research in
    
    the water saving and clean production area in paper making. Meanwhile, the Company completed the development
    
    and upgrade of high value-added products such as micro coated paper, exquisite duplex press paper and white
    
    solid bleached board, thereby accelerating the adjustment in product structure and facilitating transformation and
    
    upgrading after industrial application.
    
    Research and development expenditure of the Company
    
    2017 2016 Percentage change
    
    R&D headcount 1,434 1,161 23.51%
    
    Ratio of R&D personnel 10.56% 8.94% 1.62%
    
    R&D expenditure (RMB) 1,017,306,281.19 735,689,011.01 38.28%
    
    R&D expenditure to revenue 3.41% 3.21% 0.20%
    
    Reasons for significant change in total R&D expenditure to revenue
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 27
    
    3704827-t01fnar (Shandong Chenming) p.27 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsII. Analysis of principal operations (Cont’d)
    
    5. Cash flows
    
    Unit: RMB
    
    Increase/
    
    decrease
    
    Item 2017 2016 (%)
    
    Subtotal of cash inflows from operating activities 25,185,850,961.77 23,640,327,789.01 6.54%
    
    Subtotal of cash outflows from operating activities 25,162,084,918.84 21,487,278,519.17 17.10%
    
    Net cash flows from operating activities 23,766,042.93 2,153,049,269.84 -98.90%
    
    Subtotal of cash inflows from investing activities 1,018,367,966.90 660,100,177.22 54.27%
    
    Subtotal of cash outflows from investing activities 4,649,220,322.66 4,327,554,352.96 7.43%
    
    Net cash flows from investing activities -3,630,852,355.76 -3,667,454,175.74 1.00%
    
    Subtotal of cash inflows from financing activities 66,918,619,679.44 59,667,079,610.56 12.15%
    
    Subtotal of cash outflows from financing activities 62,441,482,879.29 58,037,514,000.21 7.59%
    
    Net cash flows from financing activities 4,477,136,800.15 1,629,565,610.35 174.74%
    
    Net increase in cash and cash equivalents 824,547,328.84 91,753,551.86 798.65%
    
    Explanation on main effects of material changes
    
    √ Applicable □ Not applicable
    
    (1) Net cash flows from operating activities decreased by 98.90% as compared to the corresponding period of the
    
    prior year mainly due to the external business growth of the financial leasing business.(2) Net cash flows from financing activities increased by 174.74% as compared to the corresponding period of the
    
    prior year mainly due to the increase in borrowings during the year.Explanation on main reasons leading to the material difference between net cash flows from operating activities duringthe reporting period and net profit for the year
    
    √ Applicable □ Not applicable
    
    The main reasons were the increase in amounts receivable of the Company settled through bills during the reporting
    
    period and the external business growth of the financing leasing business.
    
    III. Analysis of non-principal operations
    
    □ Applicable √ Not applicable
    
    28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.28 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    IV. Assets and liabilities
    
    1. Material changes of asset items
    
    Unit: RMB
    
    As at the end of 2017 As at the end of 2016
    
    As a percentage of As a percentage ofAmount total assets Amount total assets Percentage change Description of major changesMonetary funds 14,443,492,461.43 13.67% 10,109,930,319.49 12.29% 1.38% Mainly due to the increase of the sales revenueAccounts receivable 3,665,865,577.03 3.47% 3,974,065,104.15 4.83% -1.36% —
    
    Inventories 6,022,805,491.17 5.70% 4,862,668,746.90 5.91% -0.21% Mainly due to the increase of inventories of raw materials and
    
    finished goods as the production capacity of the Company
    
    increased
    
    Investment properties 4,809,535,109.82 4.55% 14,258,675.83 0.02% 4.53% Mainly due to the inclusion of Shanghai Hongtai in the scope
    
    of consolidation
    
    Long-term equity investments 391,868,827.45 0.37% 67,251,992.88 0.08% 0.29% Mainly due to the new equity investments made in Kaichen
    
    Huamei and Sime Darby West Port during the reporting period
    
    Fixed assets 28,227,509,503.05 26.72% 28,811,555,365.39 35.01% -8.29% —
    
    Construction in progress 7,668,669,413.87 7.26% 4,115,194,870.23 5.00% 2.26% Mainly due to the continued investment in the Meilun chemical
    
    pulp project, the 510,000 tons of cultural paper project and the
    
    Huanggang pulp and paper project
    
    Short-term borrowings 35,096,574,873.03 33.23% 27,875,506,988.53 33.88% -0.65% Mainly due to the increase of the short-term liquidity demand
    
    from the expanded production scale
    
    Long-term borrowings 7,646,122,995.91 7.24% 6,935,598,781.23 8.43% -1.19% —
    
    Bills receivable 4,220,231,853.56 4.00% 1,590,460,875.23 1.93% 2.07% Mainly due to the increase of the bills and letters of credit and
    
    the increase of the bills pledged for loans
    
    Prepayments 1,962,151,473.35 1.86% 1,511,362,674.64 1.84% 0.02% Mainly due to the increase of the prepayments for raw
    
    materials of the Company
    
    Other receivables 538,734,656.55 0.51% 1,614,214,645.49 1.96% -1.45% Mainly due to the recovery of the financial support granted
    
    to Wuhan Chenming Wanxing Real Estate Co. Ltd by the
    
    Company
    
    Non-current assets due 6,901,695,875.94 6.53% 5,487,376,588.22 6.67% -0.14% Mainly due to the increase of amounts receivable due within
    
    within one year one year of the long-term financing leasing business of the
    
    Company
    
    Other current assets 11,568,757,330.26 10.95% 6,616,744,831.28 8.04% 2.91% Mainly due to the increase of receivables under financial lease
    
    due within one year of the Company
    
    Intangible assets 2,059,221,379.09 1.95% 1,540,959,330.74 1.87% 0.08% Mainly due to the increase of the land use rights of Huanggang
    
    Chenming and Haiming Mining
    
    Bills payable 1,278,395,090.71 1.21% 515,301,703.08 0.63% 0.58% Mainly due to the increase of the payment for goods settled by
    
    bills by the Company
    
    Advance receipts 243,182,891.22 0.23% 377,135,566.33 0.46% -0.23% Mainly due to the decrease of advance receipts received by
    
    the Company
    
    Other receivables 1,426,629,545.41 1.35% 948,919,195.81 1.15% 0.20% Mainly due to the increase of the deposits received by the
    
    Company during the reporting period
    
    Non-current liabilities 3,625,430,347.40 3.43% 6,237,021,557.17 7.58% -4.15% Mainly due to the repayment of the matured corporate bonds
    
    due within one year of RMB3.8 billion
    
    Other current liabilities 10,797,248,631.76 10.22% 6,602,863,069.45 8.02% 2.20% Mainly due to the increase of the short-term and ultra-short-
    
    term commercial paper by the Company at the end of this year
    
    Long-term payables 5,550,881,435.64 5.26% 3,951,368,854.00 4.80% 0.46% Mainly due to the proceeds from the financing leasing
    
    business by the Company during the reporting period
    
    2017 ANNUAL REPORT 29
    
    3704827-t01fnar (Shandong Chenming) p.29 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsIV. Assets and liabilities (Cont’d)
    
    2. Assets and liabilities measured at fair value
    
    √ Applicable □ Not applicable
    
    Unit: RMB
    
    Profit or loss
    
    from change in Cumulative Impairment
    
    fair value during fair value change provided during Purchases Disposal during
    
    Item Opening balance the period charged to equity the period during the period the period Closing balance
    
    Financial assets
    
    1.financial assets measured at fair
    
    value with changes carried
    
    through profit or loss 94,000,000.00 94,000,000.00 94,000,000.00
    
    Consumable biological assets 1,633,513,994.28 -21,000,042.33 99,474,798.31 170,118,925.16 26,256,923.04 1,756,375,954.07
    
    Total 1,633,513,994.28 72,999,957.67 193,474,798.31 0.00 170,118,925.16 26,256,923.04 1,850,375,954.07
    
    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 √ No3. Restriction on asset rights as at the end of the reporting period
    
    Unit: RMB
    
    Carrying amount as
    
    Item at the end of the year Reasons for such restriction
    
    Monetary funds 11,639,084,086.97 As deposits for bank acceptance bills, letters of credit and bank
    
    borrowings, and deposit reserves
    
    Bills receivable 2,108,159,820.71 As collateral for short-term borrowings, bills payable, letters of
    
    guarantee and letters of credit
    
    Investment properties 4,809,535,109.82 As collateral for bank borrowings
    
    Fixed assets 5,663,286,231.38 As collateral for bank borrowings and long-term payables
    
    Intangible assets 597,992,087.19 As collateral for bank borrowings and long-term payables
    
    Total 24,818,057,336.07
    
    V. Investments
    
    1. Overview
    
    √ Applicable □ Not applicable
    
    Investments during
    
    Investments during the the corresponding period of
    
    reporting period (RMB) prior year (RMB) Change
    
    10,071,391,422.52 4,603,144,781.24 118.79%
    
    30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.30 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    V. Investments (Cont’d)
    
    2. Material equity investments during the reporting period
    
    √ Applicable □ Not applicable
    
    Unit: RMB
    
    Form of Investment Period of aPtrothgeredsasteasof Estimated fromPrionfviet sotrmloesnst iLsaiwnvsoulivt ed dDiastceloosfure
    
    Name of investee Principal activities investment amount Shareholding Source of fund Partner(s) investment Product type balance sheet return for the period or not (if any) Disclosure index (if any)
    
    ShIanndguhsatriyCChoe.n,mLtidng. Icnodnussutlrtiaatlioinnveasntdmpernotp, ecrotmy mercial Nesetwablylished 1,000,000,000.00 100.00% Sfuenlfd-sowned A wholly-owned subsidiary t1o5 September 2017 Eetnct.erprise investment Completed — -6,832,513.72 No 22061S7eptember http://www.cninfo.com.cn
    
    Shanghai Chenming Fminaannacgieaml leenast ing and operating Newly 0.00 100.00% Self-owned A wholly-owned subsidiary 164NSoevpemtembebre2r0210737 Financial leasing Not completed — 0.00 No 26 September http://www.cninfo.com.cn
    
    Financial Leasing Co., Ltd. leasing established funds t5oNovember 2047 2017
    
    ShaonudguEaxnpgorCt hTerandmeinCgoI.m, Lptodr.t tImecphonrot laongdieesxwpiothrtinotfhgeosocdospaenads iCnacpreitaasle 150,000,000.00 100.00% fSuenlfd-sowned A wholly-owned subsidiary t3o0 December 2011 Itmrapdoert and export Completed — 2,389,702.11 No 14 October 2017 http://www.cninfo.com.cn
    
    Shandong Chenming pBeursminiettsesdabsyptehremSitttaetde by the Capital 1,000,000,000.00 100.00% Self-owned A wholly-owned subsidiary 3L0onDge-cteermmber 2031 Corporate financial Completed — 200,067,991.63 No 14 October 2017 http://www.cninfo.com.cn
    
    Group Finance Co., Ltd. CChoimnamBisasniokninpguRrseugaunlat ttooryrelevant increase funds business
    
    alanwdso, tahdemr irneigsutrlaattiivoensregulations
    
    ShEasntgahteaiCHoo.,nLgttda.i Real aRnedaloepsetaratetiodnevaenldoppmroepnetrty Acquisition 1,590,646,717.76 45.00% fSuenlfd-sowned GMuaannaggdeomnegnDt Cejou.n, LIntvde.satnmdent t3o1 January 1994 Real estate Completed — -36,856,878.73 No 31 October 2017 http://www.cninfo.com.cn
    
    management ESshtaanteghCaoi .X, iLnthdu.angpu Real 30 January 2044
    
    GuFainnagnzchioaul LCehaesninmginCgo., Ltd. Financial leasing Nesetwablylished 465,779,506.00 100.00% Sfuenlfd-sowned A wholly-owned subsidiary t1o7 November 2017 Financial leasing Completed — 98,465.85 No 12601N7ovember http://www.cninfo.com.cn
    
    Guangzhou Chenming Commercial factoring Newly 51,000,000.00 51.00% Self-owned Weifang Haiyue Corporate 1Lo6nNgo-tveermmber 2047 Commercial factoring Completed — 404.34 No 16 November http://www.cninfo.com.cn/
    
    CFaocmtomrienrgciCalo., Ltd. established funds Management Co., Ltd. 2017
    
    NinEgqbuoityKIanivcehsetnmHeunat mei Private equity investment eNsetwablylished 200,000,000.00 40.00% Sfuenlfd-sowned ZInhvuehsatmi KeanitcAhednvxisinogry Long-term Equity investment Completed — -1,018,826.99 No 16 August 2017 http://www.cninfo.com.cn/
    
    (FLuimnditePdarPtnaertrnsehrisphip) CPaormtnpearsnhyip(G),eBneeirjainlg Taihe
    
    LOtrdie.,nTt iIbnevteGstumaenngtqCi Vo.e,nture
    
    CLtadp.,itSalhMenaznhaegnePmeenngtcChoo.n,g
    
    LIntvde.,sWtmaenngt CMhaennaggjeiamnegn, tYCuo.,
    
    Weifang Sendamei West Port Engaged in port construction, Acquisition 106,110,000.00 50.00% Self-owned SXieanodjiaemaenidOSvueirXseinapse(nHgong Long-term Port Completed — -1,325,077.59 No — Not applicable
    
    ShCaon.dLotndg. Chenming Rmealneavagnetmceonntsaunltdatoiopnersaetriovinces Newly 150,000,000.00 100.00% Sfuenlfd-sowned KAownhgo) llliym-oitwedn.ed subsidiary Long-term Commercial factor Completed — 843,198.40 No Not applicable
    
    CFaocmtomrienrgciCalo., Ltd. ffaocr tdoorimngesatnicdfacoctmorminegr,ceiaxlport established funds
    
    fcaocntsourilntagt;iocno;rpaonrdataessmeatnvaaglueamtioennt
    
    Xuchang Chenmig Paper sPearpveicrepsulp, finished paper, paper Newly 60,000,000.00 60.00% Self-owned A holding subsidiary Long-term Machine-made paper Completed — -17,007,455.36 No Not applicable Not applicable
    
    Co. Ltd. psaroledsu.cts, packaging production, established funds
    
    ZhPaunljpian&gPCahpeenr mCoin.gLtd. Pelreocdtruocsttioanticanpdapsearl,edsuopflex press iCnacpreitaasle 2,000,000,000.00 100.00% fSuenlfd-sowned A subsidiary Long-term edluepclteroxsptaretiscsppaappeerr,, Completed — 1,684,736,236.73 No 21071N6ovember http://www.cninfo.com.cn/
    
    pparopdeurcatniodnwahnidtespaalepseor fbpoualrpd; and ewthci.te paper board,
    
    QinFgindaanociCalhLeenamsiinngg NCoon.,gLhtadi. Ctraodnidnugcotifnagnsdpeoltetcrtarnosnaicctions, iCnacpreitaasle 3,297,855,218.76 100.00% Sfuenlfd-sowned A wholly-owned subsidiary Long-term Financial leasing Completed — 196,608,697.71 No 31 March 2016 http://www.cninfo.com.cn/
    
    pcoromdmucetrsc,epoafppeur-lmp,afkininisgheaduxpilaiapreyr
    
    mpualpte,rpiaalsp,eer,tcp.a, panedr pornoldinuects,aeletco. f
    
    Total — — 10,071,391,442.52 — — — — — — — 2,021,703,944.38 — — —
    
    2017 ANNUAL REPORT 31
    
    3704827-t01fnar (Shandong Chenming) p.31 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsV. Investments (Cont’d)
    
    3. Material non-equity investments during the reporting period
    
    √ Applicable □ Not applicable
    
    Unit: RMB
    
    Accumulated
    
    Industry in Accumulated realised
    
    which the actual amount return as of Reasons for failureFixed assets investment Investment invested as of the end of in meeting scheduled Date ofForm of investment project amount during the the end of the reporting progress and disclosureProject name investment or not operates reporting period reporting period Source of fund Progress Estimated return period estimated return (if any) Disclosure index (if any)Forestry paper Self- Yes Pulp 802,532,697.23 2,482,982,255.45 Self-raised and 78.00% The expected net profit 0.00 Not yet completed 2 August 2013 http://www.cninfo.com.cn/integration project of constructed production borrowings of the forest base will
    
    Huanggang Chenming amount to RMB102 million
    
    and the expected average
    
    total profit per annum of
    
    the industrial project will
    
    amount to RMB350 million.
    
    510,000 tonne high-end Self- Yes Paper making 577,977,304.68 697,210,244.24 Self-raised and 1.44% Upon the completion 0.00 Not yet completed 18 February 2017 http://www.cninfo.com.cn/
    
    cultural paper project constructed borrowings of construction and
    
    of Shouguang Meilun commencement of
    
    production of the project,
    
    the expected profit will
    
    amount to RMB308 million.
    
    400,000 tonne chemical Self- Yes Pulp 1,188,512,282.02 1,801,971,276.32 Self-raised and 43.84% Upon the completion 0.00 Not yet completed 21 March 2014 http://www.cninfo.com.cn/
    
    pulp project of constructed production borrowings of construction and
    
    Shouguang Meilun commencement of
    
    production of the project,
    
    the expected total profit
    
    will amount to RMB410
    
    million.
    
    Magnesite project Self- Yes Mining 289,216,242.71 1,047,440,597.94 Self-raised and 99.00% The expected average total 0.00 Not yet transfer to fixed 25 October 2012 http://www.cninfo.com.cn/
    
    constructed borrowings profit per annum RMB184 assets as at the end of
    
    million the reporting period
    
    Newsprint paper to Self- Yes Paper making 902,644,220.48 902,644,220.48 Self-raised and 30.00% — 0.00 Not yet completed Not applicable
    
    cultural paper machine constructed and pulp borrowings
    
    and transformation production
    
    of the ancillary pulp
    
    production lines
    
    Total — — — 3,760,882,747.12 6,932,248,594.43 — — — 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.
    
    32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.32 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    V. Investments (Cont’d)
    
    5. Use of proceeds
    
    √ Applicable □ Not applicable
    
    (1) General use of proceeds
    
    √ Applicable □ Not applicable
    
    Unit: RMB’0,000
    
    Total Total Proportion
    
    amount of amount of Total of total Total
    
    utilised Total proceeds amount of amount of amount
    
    proceeds amount of with change accumulated accumulated Total Use and of idle
    
    Fund- Total during the accumulated in use during proceeds proceeds amount of status of proceeds
    
    raising amount of current utilised the reporting with change with change unutilised unutilised for over
    
    Year method proceeds period proceeds period in use in use proceeds proceeds 2 years
    
    2017 Public 119,820 119,820 119,820 0 0 0.00% 0 Not 0
    
    offering of applicable
    
    corporate
    
    bonds
    
    Description of the general use of proceeds
    
    On 13 March 2017, the Company received the Approval (Zheng Jian Xu Ke [2017] No. 342) from the China
    
    Securities Regulatory Commission for the public offering of corporate bonds of not more than RMB4.0 billion.
    
    On 21 August 2017, the Company issued the first tranche of corporate bonds for 2017 to qualified investors,
    
    with total proceeds raised of RMB1,200 million. After deducting the issuance expense paid of RMB1.80 million,
    
    the net proceeds raised of RMB1,198.20 million were deposited to the designated account for the proceeds of
    
    corporate bonds.
    
    2017 ANNUAL REPORT 33
    
    3704827-t01fnar (Shandong Chenming) p.33 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsV. Investments (Cont’d)
    
    5. Use of proceeds (Cont’d)
    
    (2) Commitment of proceeds
    
    √ Applicable □ Not applicable
    
    Unit: RMB’0,000
    
    Change Invested Accumulated Investment Return
    
    in project Total Total amount invested progress as realised Expected
    
    Committed (including committed investment during the amount as at at the end Expect date during the return being Significant
    
    investment project partial investment after reporting the end of of the Period of operation reporting achieved change in
    
    and excess proceeds change) of proceeds adjustment (1) period the period (2) (3)=(2)/(1) of the project period or not project
    
    Committed investment project
    
    Swap of bank loans No 119,820 119,820 119,820 119,820 100.00% 22 August 2017 Not Not No
    
    applicable applicable
    
    Subtotal of committed — 119,820 119,820 119,820 119,820 — — Not — —
    
    investment project applicable
    
    Amount, use and Not applicable
    
    utilisation of
    
    excess proceeds
    
    Change in place of Not applicable
    
    implementation of
    
    investment project
    
    of proceeds
    
    Adjustment on Not applicable
    
    implementation
    
    method of investment
    
    project of proceeds
    
    Pre-investment and Not applicable
    
    swap of investment
    
    project of proceeds
    
    Temporary Not applicable
    
    replenishment of
    
    liquidity by idle
    
    proceeds
    
    Balance and reason Not applicable
    
    for proceeds
    
    arising from project
    
    implementation
    
    Use and direction of Proceeds had been fully utilised.
    
    unused proceeds
    
    Use of proceeds and None.
    
    problems disclosed or
    
    other issues
    
    34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.34 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    V. Investments (Cont’d)
    
    5. Use of proceeds (Cont’d)
    
    (3) Change in use of proceeds
    
    □ Applicable √ Not applicable
    
    The Company did not have any change in use of proceeds during the reporting period.
    
    VI. Disposal of material assets and equity interest
    
    1. Disposal of material assets
    
    √ Applicable □ Not applicable
    
    Net profit
    
    contribution to
    
    the Company Ratio of net profit
    
    from the beginning contribution to Carried out on
    
    of the period the Company Relationship with schedule or not,Transaction up to the of disposal of Related party counterparty (ies) Relevant asset if not, the reasonsconsideration disposal date Effect of disposal on the asset over total Pricing basis of disposal transaction (in case of related title fully Relevant debt fully and measures takenCounterparty(ies) Asset disposed of Disposal date (RMB’0,000) (RMB’0,000) Company (note 3) net profit (%) of asset or not party transaction) transferred or not transferred or not by the Company Disclosure date Disclosure indexJ i n r u n F a n g z h o u Property 2601- 2617, 2 4 F e b r u a r y 8,200 5,832 The d isposa l o f asset 1.55% Determined by part ies No Not applicable Yes Yes Not applicable 1 March 2017 http://www.cninfo.com.cnScience Block A, Cyber Tower, 2017 i s b e n e f i c i a l f o r t h e i n v o l v e d t h r o u g h
    
    and Techno logy No. 2 Zhongguancun r e v i t a l i s a t i o n o f t h e n e g o t i a t i o n a f t e r
    
    Co., Ltd. South Street, Haidian C o m p a n y ’ s a s s e t s , c o n s i d e r i n g v a r i o u s
    
    District, Beijing o p t i m i s a t i o n o f fac tors , inc lud ing the
    
    resources allocation and basic condition of subject
    
    enhancemen t o f f und project, transaction price
    
    u t i l i s a t i on e f f i c i ency . of nearby property and
    
    Relevant income has been other factors.
    
    accounted for profit for the
    
    period, which can boost
    
    the profitability for 2017.
    
    2. Disposal of material equity interest
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 35
    
    3704827-t01fnar (Shandong Chenming) p.35 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsVII. 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
    
    Name of company cToypmepoafny Principal activities Regicsateprietadl Total assets Net assets Revenue Operpartoinfgit Net profit
    
    ZhPaunljpian&gPCahpeenr mCoin.g, Ltd. Subsidiary pPurolpd,udcutipolnexanpdressaslepaopf er, 5,550,000,000 19,637,972,265.93 7,674,094,388.74 9,314,971,712.72 1,980,723,132.50 1,684,736,236.73
    
    Shandong Chenming Subsidiary ePlaepcetrropsrtoatdicucptatpraedr ing and 7,700,000,000 35,412,243,151.58 26,091,740,690.40 2,768,375,693.24 1,074,327,081.23 875,802,429.89
    
    ShFoiunganucainagl LMeeaisluinngPCaop.e, rLCtdo.., Ltd. Subsidiary fPinroadnucciatliolenaasnindgsale of coated 3,000,000,000 9,882,253,940.98 5,286,042,008.02 4,940,598,286.91 221,294,183.74 202,049,304.67
    
    Jiangxi Chenming Paper Co., Ltd. Subsidiary pParopdeurcatniodnhaonudseshaoleldopf laigphetr 2,038,116,000 5,081,399,764.50 2,390,668,674.54 3,323,823,190.88 338,019,850.01 293,490,046.91
    
    bwoeaigrdht paper and white paper
    
    Acquisition and disposal of subsidiaries during the reporting period
    
    √ Applicable □ Not applicable
    
    dMisepthoosdesotfosaucbqsuidiriaeraiensd Impact on overall production and
    
    Name of companies during the reporting period operation and results
    
    SShhaanngghhaaii HCohenngmtaiinRgeIanldEussttaryteCCoo.,.,LLtdtd. . NEqeuwitlyy easctqaubilsisithioend NFreotmprotfhiteofd–aRteMoBf6,i8n3c2l,u5s1i3o.n72into the scope of
    
    pcoronfsitoalimdaotuionntetdo ttohe– eRnMdBo3f6t,h8e56re,8p7o8rt.i7n3g period, net
    
    ShLaenagshinagi CChoe.n, mLtidn.g Financial Newly established No effect on overall operation and results
    
    GuLaenagszinhgouCCo.h,eLntdm.ing Financial Newly established Net profit of RMB98,465.85
    
    GuCaonmgzmheoruciCahl Fenacmtoinrging Co., Ltd. Newly established NRMetBp4r0o4fi.t34attributable to the parent company was
    
    ShCaonmdomnegrCcihael Fnamcitnogring Co., Ltd. Newly established Net profit of RMB843,198.40
    
    ChCeunlgtudrueCChoemnmmuinngication Co., Ltd. Newly established No effect on overall and operation and results
    
    BeCijiunlgtuCrehCenommimngunication Co., Ltd. Newly established No effect on overall and operation and results
    
    QinPgadpaeor EClehcetnrmoninicg Pulp and Newly established Net profit of RMB2,327,743.51
    
    XuCchoamnmgoCdhiteynEmxicnhgaPnagpeeCr oC.o, .LLtdtd. . Newly established Net profit RMB attributable to the parent company
    
    Shouguang Chenming Consolidation by merger oNfo–eRffMecBt1o7n,0o0v7e,r4a5ll5a.3n6d operation and results
    
    JiliHnoCnigtyxiCnhPeancmkaingginMgaCcoh.i,nLetrdy. Equity transfer Effect on current net profit of RMB480,189.88
    
    Manufacturing Co., Ltd.
    
    P(1a) rticZulhaarnsjioafnmg aCjoher nsmubinsgid’siamrieasjoarnpdroindvuecstste, einscluding high-end cultural paper and white paper board, had higher average
    
    selling prices, higher gross profit margin and stronger profitability.(2) Financial Leasing Company made steady progress and delivered better profit.(3) Benefiting from the higher prices of coated paper and living paper, Shouguang Meilun recorded better profit.(4) Jiangxi Chenming’s major products, including high-end cultural paper, had higher selling price, higher gross profit and
    
    stronger profitability.
    
    36 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.36 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    VIII. Structured entities controlled by the Company
    
    □ Applicable √ Not applicableIX. Outlook on the future development of the Company
    
    (I) Competition overview and development trend of the industry
    
    Paper making industry
    
    The growth in production and consumption in the paper making industry is closely related to the domestic economic
    
    development. Benefiting from the continuous stable macroeconomic growth, the development of the paper making
    
    industry will maintain stable growth in the long run. In recently years, the central government has been introducing
    
    various industry policies such as production capacity reduction, the supply-side reform, ten rules regarding water
    
    pollution and ten rules regarding air pollution. Different measures such as setting higher emission standards and
    
    strictly restricting corporate size and structure put stricter restrictions on the enterprises in the paper making industry
    
    and force those enterprises with backward production capacity to actively exit the paper making market. With the
    
    continuous introduction of production capacity reduction, the supply-side reform and other policies, the environmental
    
    protection policies have becoming stricter. The elimination of backward production capacity in the paper making
    
    industry has been progressing smoothly. New production capacity mainly comes from large enterprises. It is expected
    
    that the industry concentration ratio will further increase. The improvement in the supply in the industry has effectively
    
    boosted the dual growth in revenue and profitability of the enterprises in the paper making industry. The downstream
    
    demand in the paper making industry will continue to grow along with the domestic economic growth. The turning
    
    point in the supply and demand structure in the industry has gradually developed with a boom in the industry to be
    
    prolonged.
    
    Financial leasing industry
    
    As the financial reforms advance further, the integration of industrial capital and financial capital gradually accelerate
    
    in China. The financial leasing industry as a favoured supplementary corporate financing channel and an effective tool
    
    to use assets at hand embraces continuously mounting market demand. Since the implementation of the “Thirteenth
    
    Five Year Plan”, the accelerated urbanisation and industrialisation in China, the change in drivers of economic growth,
    
    upgrade of traditional industries, development of emerging industries, and continuous infrastructure construction
    
    require substantial investment in fixed assets. China will become the largest leasing market in the world. According
    
    to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
    
    Industry 2016-2021 issued by ASKCI Consulting Co. Ltd, the financial leasing industry will grow at a compound
    
    annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial
    
    leasing industry in China will amount to RMB20.79 trillion by 2021.
    
    In view of the establishment and optimisation of trading rules, accounting standards, industry regulation and tax
    
    policies for the financial leasing industry, the financial leasing in China will present a development trend with stable
    
    growth in scale, in-depth expansion of scope of business, further enlarged agglomeration, improving professionalism,
    
    further strengthening risk prevention and control, and consolidating foundation for development in the future. The
    
    size of the financial leasing business in China will expand significantly. Financial leasing will become an important
    
    alternative of financing for enterprises, especially small and medium-sized enterprises. The business prospects of the
    
    financial leasing industry in China are promising.
    
    2017 ANNUAL REPORT 37
    
    3704827-t01fnar (Shandong Chenming) p.37 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsIX. Outlook on the future development of the Company (Cont’d)
    
    (II) Development strategy
    
    Looking forward, the Company will adhere to the principal of emphasising 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
    
    achieve taxable profit over RMB10 billion and strive to become one of the world-class companies with the highest
    
    growth rate during the “Thirteenth Five Year Plan” period.
    
    Transformation and upgrade strategy: The Company will comprehensively improve the industrial structure and
    
    regional layout; emphasise on the development of the five leading businesses, namely paper making, finance, fibre
    
    yarn, forestry and so on; and construct an efficient industrial system with synergies.
    
    Green development strategy: Remaining steadfast in the operation philosophy of “forestry-pulp-paper-fibre-yarn
    
    integration”; with technical progress, advanced equipment and strict and prudent management, the Company will
    
    promote clean production and recycling economy, become a low-energy consumption and environmentally-friendly
    
    enterprise. The Company seeks for development while protecting the environment and maintains higher environmental
    
    protection standards while seeking for scientific development, thus achieving a “win-win” situation in economic
    
    development and environmental protection.
    
    International operation strategy: The Company, based in China with a global reach, will follow the national strategy of
    
    the “Belt and Road” initiative, accelerate its pace of “going global”, reinforce global exchanges and communication
    
    and gradually expand its overseas market.
    
    Operational excellence strategy: By adhering to the management policy of “management enhancement, team building,
    
    outstanding business performance and good results”, the Company will constantly heighten its whole process
    
    management including production and operation, marketing, financial costs and project construction, effectively
    
    integrate its systems and resources, and strive to upgrade the Company’s management capacity and profitability.
    
    Strengthening the Company through talent strategy: By improving talent development, introduction, application and
    
    incentive mechanisms, and nurturing high-end, versatile, innovative and international talents, Chenming will become
    
    one of the world-class companies with the highest growth rate.
    
    Harmonious development strategy: By comprehensively enhancing enterprise culture building, caring for the
    
    employees, acting on its corporate social responsibilities, and elevating its integrated value-creating ability in terms of
    
    economy, society and environment, Chenming will create a positive corporate image for itself and strive to become a
    
    harmonious enterprise.
    
    38 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.38 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    IX. Outlook on the future development of the Company (Cont’d)
    
    (III) Operation plans for 2018
    
    In 2018, the main goal of the Company is adherence to the main theme of achieving growth amid stability, the general
    
    goal of “developing into an enterprise with hundreds of billions in value and forging Chenming into a centennial brand”
    
    and the guiding principal of work of “team building, management enhancement, outstanding business performance
    
    and good results”. The Company will fully carry forward its corporate style of “tackling problems once discovered”
    
    and strive to enhance management and efficiency while emphasising project construction and committing itself to,
    
    among other things, operating steadily, boosting growth, adjusting the structure, preventing risks and benefiting the
    
    employees, so as to take corporate development to a new level. The major measures are as follows:
    
    1. Determined to upgrade corporate management
    
    The guiding ideology of the Company’s management in 2018 is “solid foundation, new talents, guaranteed
    
    implementation and strict evaluation”.
    
    (1) Enhance team building: ① The Company will focus on staff training, training system building, hierarchical
    
    training material preparation and overall elevation of all employees’ comprehensive capabilities and
    
    management capacity of each level, ensuring qualified work. ② The Company will further nurture young
    
    management personnel, revitalise the management, and introduce high-end talents to effectively support
    
    the Company’s development. ③ The Company will further improve its performance appraisal, widen the
    
    gap in distribution hierarchy and motivate the entire staff.(2) Solidify basic management: ① The Company will apply a firmer grip on systematic and procedural
    
    early warning and feasibly elevate the scientific and standardised level. ② The Company will perform
    
    supervision and inspection on the implementation of policies and performance of functions of each
    
    department, provide assistance and rewards as appropriate and further promote the management
    
    capacity of the Company.
    
    2. Determined to strengthen operations management and innovation
    
    In 2018, with new projects going into production, the Company, facing tougher market conditions, will march on
    
    with “confidence, courage, positiveness and initiative”.
    
    (1) Enhance basic management: ① The Company will dedicate itself to the information technology
    
    development for the sales and full mechanical operation. ② The Company will increase its efforts into
    
    market survey, and conduct comprehensive follow-up inspections and appraisal for basic management
    
    and business priorities on a monthly basis.(2) Focus on return management:① With confidence, the Company will increase the selling prices in a timely
    
    manner based on the actual market conditions and reap the returns on higher prices. ② The Company
    
    will promote its returns through product structure adjustments and launch of products of higher returns.
    
    ③ The Company will standardise channel management and deepen its cooperation with the major
    
    customers.④ The Company will increase its investments in markets of close proximity to realise returns.(3) Determined to enhance risk management: ① Collection of past due accounts, being a critical part of our
    
    marketing, must be personally handled by the management. The Company will tighten its assessment
    
    procedure and increase its efforts into preventing new past due accounts and past due collection. ②
    
    The Company will standardise its credit management by extending credit based on effective assets of
    
    customers and reduce the payment period and credit extended to customers in default. ③ The Company
    
    will continue to promote real estate mortgage with certain customers. ④ The Company will heighten
    
    prepayment operations.
    
    2017 ANNUAL REPORT 39
    
    3704827-t01fnar (Shandong Chenming) p.39 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsIX. Outlook on the future development of the Company (Cont’d)
    
    (III) Operation plans for 2018 (Cont’d)
    
    3. Determined to enhance production management, innovation and efficiency
    
    (1) Enhance basic management: ① The Company will comprehensively streamline the control procedure of
    
    its subsidiaries and enhance supervision and appraisal.② The Company will add talents to the teams and
    
    break through barriers currently suppressing its efficiency and elevate the management capacity.(2) Promote technological innovations: ① The Company will recruit technicians of high calibre, advance
    
    the industry-university-research cooperation, accelerate the introduction and integration of international
    
    advanced technologies such as high-efficient production and water saving while upgrading its own
    
    independent capability of research and development. ② The Company will continue to optimise its
    
    product structure and increase its returns by focusing on the development of new products such as pure
    
    texture paper, super electro-static paper and food package board as well as increasing the production
    
    of high-margin products. ③ The Company will introduce new technologies and new materials such as
    
    dipropylene latex, mechanical pulp penetrant and surface enhancement to increase its returns.(3) Enhance safety and environmental protection: ① The Company will implement safety standardisation
    
    management and provide basic safety educational training to enhance awareness and capabilities
    
    on safety protection of the employees, sparing no efforts in the prevention of major accidents. ② The
    
    Company will continue to invest in environmental protection with new projects such as membrane
    
    treatment for reclaimed water recycling and comprehensive utilisation of solid waste, becoming a first-
    
    rate company in the industry. ③ The Company will identify, rectify and assess potential hazards with zero
    
    tolerance, ensuring rectification rate of 100%.(4) Step up in project management: ① The Company will strengthen monthly inspections and appraisals and
    
    delegate more power to the management to enhance project supplies and progress management, prevent
    
    any issue from arising in project management and provide rewards in cases of timely or early completion.
    
    ② The Company will build a production team with sound personnel allocation with proper training to
    
    design mechanical production plans, striving for production that excels in efficiency, quantity and quality.
    
    4. Determined to enhance financial management and achieve steady growth
    
    (1) Enhance risk management in the finance sector:① The Company will be professionally equipped, improve
    
    and strictly implement its risk management system and realise mechanical control with information
    
    technology system, preventing business risks. ② The Company will standardise the finance leasing
    
    business and reinforce the post-lease management for existing projects.(2) Strengthen financing management: ① The Company will advance the issuance of privately placed bonds,
    
    renewable corporate bonds, perpetual medium-term notes and private placement to improve its debt
    
    structure and reduce the gearing ratio. ② The Financial Leasing Company and the Finance Company will
    
    together form a complete financing system and gradually achieve a virtuous financing circle.
    
    40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.40 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    IX. Outlook on the future development of the Company (Cont’d)
    
    (III) Operation plans for 2018 (Cont’d)
    
    5. Determined to enhance supply chain building and increase business value
    
    (1) Enhance basic management: The Company, by virtue of information technology platforms such as
    
    process building, international tender network and contract management, will strengthen its control over
    
    suppliers and business processes, comprehensively enhancing the level of information management for
    
    procurement.(2) Focus on procurement efficiency: The Company will focus on and rely on the sources of procurement of
    
    bulk materials, optimise its supplier teams and procurement channels and strengthen market analysis to
    
    keep abreast of market conditions and reduce procurement costs.(3) Extend the scope of business: ① The Company will conduct the financing business relating to the
    
    supply chain to ensure zero risk and improve efficiency. ② The Company will extend the channels of
    
    raw materials to deepen the development of high-quality source customers and establish strategic
    
    cooperation relationship with quality suppliers. The Company will also set up a dedicated team to ensure
    
    the supply of raw materials for the production of new projects and the sustainable development of the
    
    Company.(4) Strengthen logistics construction: ① The Company will introduce logistics professionals for the
    
    construction of a logistics information platform to establish an intelligent logistics system and facilitate
    
    the logistics construction of the Group. ② The Company will promote the construction of the Shouguang
    
    Chenming International Logistics Centre project and the Qingdao Innovative Industrial Park project.
    
    6. Caring for employees and sharing the results of development
    
    Firstly, the Company will establish a scientific training system to provide a smooth promotion channel,
    
    strengthen internal training, helping its employees grow quickly and provide them with more development
    
    opportunities and a promotion platform. Secondly, the Company will redesign and change the work uniform
    
    for employees to showcase the brand new spirits of the employees, which will greatly improve the image and
    
    satisfaction of employees. Thirdly, the Company will continue to build more garden-like factories to create a
    
    beautiful Chenming and a more pleasant working environment for the employees. Fourthly, the Company will
    
    rationalise the salary increment mechanism to improve the staff’s income in real terms so as to make sure the
    
    salary level of its staff is relatively higher than those of its local counterparts and industry peers.
    
    2017 ANNUAL REPORT 41
    
    3704827-t01fnar (Shandong Chenming) p.41 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsIX. Outlook on the future development of the Company (Cont’d)
    
    (IV) Future capital requirements, source of funds and plan for use
    
    The Company has established a conglomerate principally engaged in paper making, finance, pulp and fibre and
    
    mining businesses, etc.. With the further development of the existing principal businesses of the Company, the future
    
    capital requirements of the Company will be: (1) investment in the existing projects under construction and proposed
    
    new projects; (2) consistent investment in the existing production facilities because of technological transformation
    
    or production expansion; and (3) business expansion and general working capital requirements. As the demand for
    
    capital has been growing for the Company’s production and operation, there is a strong need to replenish the working
    
    capital to enhance the Company’s capability for sustainable operations.
    
    In order to meet the business development requirements of the Company and further extend and expand the industry
    
    chain, the Company will establish diversified financing channels and increase the proportion of direct financing
    
    through diversified financing channels such as private placement, corporate bonds, perpetual bonds, short-term
    
    commercial paper and cross-border financing so as to improve the debt structure of the Company and provide stable
    
    financial support for the operation and development of the Company.
    
    Diversified financing channels to meet the Company’s capital requirements: (1) The Company will use RMB3.7 billion
    
    from private placement to reduce the cost of paper making. The investment in the 400,000-tonne chemical pulp
    
    project through private placement will improve the self-sufficiency of pulp of the Company and the raw materials
    
    structure of the paper making segment, in the expectation of reducing the production costs of paper making and
    
    enhancing profitability of paper making business. At the same time, non-public issuance of shares will optimise the
    
    debt structure and reduce financial costs as well as the gearing ratio. (2) The Company will reduce the financing
    
    costs and optimise the capital structure by issuing corporate bonds, medium-term notes, short-term financing,
    
    super short-term financing, perpetual bonds and other means for financing so as to provide financial support for the
    
    Company’s long-term healthy development. (3) The Company will facilitate cross-border financing by making full
    
    use of the financing platform in Hong Kong market to increase its credit facilities. Besides, the Company will also
    
    mitigate exchange rate risk through multi-currency financing and improve the efficiency of use of capital to reduce
    
    financial costs. As at the end of 2017, the credit facilities utilised by the Company amounted to RMB47.7 billion and
    
    the banking credit facilities obtained by the Company amounted to RMB75.6 billion with an utilisation rate of 63.07%.
    
    (4) The Company will make use of the advantages of the Finance Company and the Financial Leasing Company in the
    
    financial industry to expand the financing channels for the Group, bring new momentum for business development.
    
    42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.42 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    IX. Outlook on the future development of the Company (Cont’d)
    
    (V) Risk factors likely to be faced and the measures to be taken
    
    1. Risk on paper making industry
    
    Policy risk
    
    Paper making industry is a basic raw materials industry and its growth has been faster than the average
    
    growth of the national economy in recent years. However, the paper making industry’s profitability is closely
    
    correlated to the economic cycle, and the industry is therefore a cyclical industry fluctuating with the national
    
    macroeconomic performance, which will further affect the profitability of the Company.
    
    Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
    
    will comprehensively improve its industrial structure and regional layout through the integration between its
    
    production and manufacture segment and financial services segment, and incorporation of smart technology
    
    into its industrial activities. The Company will emphasise on the development of leading businesses including
    
    paper making, finance, pulp and fibre and mining so as to construct an efficient industrial system with synergies.
    
    Market fluctuation risk
    
    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. Leveraging the strength and
    
    capital accumulated over the years, domestic enterprises have further expanded their size and improved their
    
    technological levels and product quality. Well-known paper making enterprises overseas have also directly set
    
    up production bases in China through sole proprietorship or joint ventures so as to participate in the domestic
    
    market competition by virtue of their advantages in size and technology. Besides, tariff reduction on China after
    
    accession to the WTO has also further intensified the impact on the international market.
    
    Hence, the Company will strive to enhance the quality of paper products and achieve the target of establishing
    
    a layout for high-end paper industry so as to increase the proportion of high-end paper. In recent years, the
    
    Company has been expanding its business size and optimising its product mix and has set up a few production
    
    lines for high-end paper. A diversified and high-end product mix enables the Company to spread market risk
    
    and strengthen the resistance towards market volatility. Besides, as high-end products have better profit
    
    margins, the Company can increase the proportion of high-end products through consistent improvement in
    
    product mix, thereby enhancing its profitability and comprehensive competitiveness.
    
    2017 ANNUAL REPORT 43
    
    3704827-t01fnar (Shandong Chenming) p.43 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsIX. 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)
    
    1. Risk on paper making industry (Cont’d)
    
    Risk of overcapacity and slowdown in demand
    
    Overcapacity is a prominent problem in the paper making and paper product industry in China such that
    
    there has been fierce competition among enterprises. Since 2013, affected by slowdown in macroeconomic
    
    growth, the demand in paper making industry has been weak. At the same time, China has been encouraging
    
    energy conservation and emission reduction. The obsolete production capacity will be phased out, and thus
    
    the new projects will be on a large scale. By virtue of the economies of scale in the paper making industry,
    
    the production capacity of individual paper making projects which are under construction or planning for
    
    construction in China is large, which affects the demand and supply relationship in the whole paper making
    
    industry.
    
    Hence, the Company will make advancements in equipment and technological level, expand its product mix,
    
    improve the grading of products and focus on the research and development of high-end products so as to
    
    improve competitiveness.
    
    Risk of price fluctuation of raw materials
    
    The major raw materials used by the Company are wood pulp and waste paper. The market prices of wood pulp
    
    and waste paper fluctuate significantly. The market price fluctuation of raw material has significantly affected the
    
    production costs of the Company. In addition to intensified market competition resulting from surging capacity
    
    in the industry in recent years, the increases in prices of a number of paper products were not in line with the
    
    increases in prices of raw materials. 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 the Zhanjiang Chenming pulp project, the Huanggang Chenming pulp project and the
    
    Shouguang chemical pulp project, thereby eliminating the limitations of upstream resources on the Company’s
    
    development and enhancing the Company’s sustainable development.
    
    Risk of change in environmental protection policies
    
    China has been raising the standards for environmental protection in recent years. More stringent environmental
    
    protection policies have been implemented in the paper making industry with successive implementation
    
    of environmental inspections and licensing system for pollutant discharge. 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. A higher emission standard is bound to increase the Company’s
    
    environmental protection costs and a high entry standard may result in the slowdown of scale expansion.
    
    The Company always strives 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.
    
    44 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.44 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    V Discussion and Analysis of Operations
    
    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)
    
    2. Risk on financial leasing business
    
    Policy risk
    
    Recently, the financial leasing business is regulated by the commerce departments at different levels instead of
    
    being directly regulated by the People ‘s Bank of China or China Banking Regulatory Commission. The financial
    
    leasing industry in China is still at the exploration stage with incomplete laws and regulations. If there is any
    
    material adjustment or change in national or local policies for the financial leasing industry, the Company’s
    
    financial leasing business may be adversely affected, in turn harming the Company’s profitability.
    
    In September 2015, the General Office of the State Council promulgated the Guiding Opinions on Accelerating
    
    the Development of Financial Leasing Industry, which formulated comprehensive systematic planning on
    
    accelerating the development of the financial leasing industry. The financial leasing industry embraced a rare
    
    opportunity for leap-forward development. In February 2016, the General Office of People’s Government of
    
    Shandong Province promulgated the Opinions of the General Office of People’s Government of Shandong
    
    Province on Accelerating the Development of Financial Leasing Industry by Implementing Document Guo Ban
    
    Fa [2015] No. 68, formulating specific measures to refine policy measures and ensure the measures being
    
    carries out properly, which provided actual policy support for the development of the financial leasing industry
    
    in Shandong Province.
    
    Liquidity risk
    
    In a market economy, the macroeconomic operation tends to be in cycles and the Company is inevitably
    
    affected by those cycles. At the same time, there is fierce competition in the financial industry and the interest
    
    margin is a main source of income for the financial leasing business. The market interest rate is affected by
    
    the benchmark interest rate of the People’s Bank of China, the macroeconomic environment, market demand
    
    and supply and other factors, bringing uncertainties to the fluctuation of the market interest rate, which in turn
    
    causes uncertainties in revenue from the financial leasing business.
    
    Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
    
    will comprehensively improve its industrial structure and regional layout through the integration between its
    
    production and manufacture segment and financial services segment, and incorporation of smart technology
    
    into its industrial activities. The Company will emphasise on the development of leading businesses including
    
    paper making, finance, pulp and fibre, real estate and mining so as to construct an efficient industrial system
    
    with synergies.
    
    2017 ANNUAL REPORT 45
    
    3704827-t01fnar (Shandong Chenming) p.45 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26V Discussion and Analysis of OperationsIX. 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)
    
    2. Risk on financial leasing business (Cont’d)
    
    Credit risk
    
    The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
    
    payment on time due to any reason and there are abuses on equipment or any other short-term behaviour.
    
    Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provision
    
    as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be
    
    exposed to risk of bad debts.
    
    The stringent risk management measures of Chenming Leasing provide comprehensive risk prevention
    
    and management for the Company’s projects. Besides, the Company usually cooperates with state-owned
    
    enterprises and local governments, so it has strong risk resistance and low risk of default. The Company does
    
    not have any non-performing or overdue loans so far. Chenming Leasing will develop quality customers and
    
    strengthen risk management so as to enhance risk resistance and maintain high quality services.
    
    Operation risk
    
    Recently, there is still a gap between the practitioners working in the financial leasing industry and those working
    
    in traditional financial institutions such as banks in terms of their expertise and experience in financial profession
    
    in China. There is also a large gap in terms of investment in infrastructure. If internal control procedures are
    
    not implemented properly and involve operation risk as a result of operation errors, violations or non-standard
    
    execution, the Company may suffer from loss.
    
    Learning from the risk management experience of outstanding financial leasing companies at home and abroad,
    
    the leasing company has formulated and optimised the internal management system of the leasing business
    
    and established an effective system for risk assessment, risk control and risk tracking. The Company has
    
    also exercised proper control on business risk by regulating the key business procedures including quotation,
    
    guarantee review, contract signing, leased assets management and archives management.
    
    X. Reception of research investigations, communications and interviews
    
    □ Applicable √ Not applicable
    
    During the reporting period, there was no reception of research investigations, communications and interviews by the
    
    Company.
    
    46 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.46 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:26
    
    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 2017.
    
    I. Principal activities
    
    Please refer to section IV “Business Overview”, and “I. Principal operations of the Company during the Reporting Period”
    
    and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
    
    activities of the Company.II. Results and profit distribution
    
    Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2017.III. Dividends and Conversion of Shares
    
    After the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2017 (“final
    
    dividend”) of RMB6.00 in cash for every 10 Shares (tax inclusive) and a capitalisation issue made out of the capital revers
    
    for 5 shares for every ten shares (2016: dividend of RMB6.00 in cash for every 10 Shares (tax inclusive)) to the ordinary
    
    shareholders of the Company, subject to approval of shareholders at the forthcoming Annual General Meeting (“AGM”) of
    
    the Company held on 18 May 2018. Upon approval of shareholders of the Company at the AGM, the Company is expected
    
    to pay the final dividend on or by 17 July 2018 to shareholders whose names appear on the register of members of the
    
    Company on 18 May 2018.
    
    In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008,
    
    where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
    
    enterprise shareholders, it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.
    
    Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of final dividends as corporate income
    
    tax, distribute the final dividends to non-resident enterprise shareholders, i.e. any shareholders who hold the Company’s
    
    Shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, or other
    
    nominees, trustees, or holders of H Shares registered in the name of other organisations and groups.
    
    Due to changes in the PRC tax laws and regulations, according to the Announcement on the List of Fully and Partially
    
    Invalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation (《關於公佈全文失效廢止、
    
    部份條款失效廢止的稅收規範性文件目錄的公告》) on 4 January 2011, individual Shareholders who hold the Company’s H
    
    Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
    
    income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer
    
    and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign
    
    Individuals (Guo Shui Fa [1993] No. 045) (《關於外商投資企業、外國企業和外籍個人取得股票 (股權)轉讓收益和股息所得
    
    稅收問題的通知》 (國稅發[1993]045號)) issued by the State Administration of Taxation, whilst pursuant to the letter titled
    
    Tax Arrangements on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to
    
    the issuers on 4 July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax
    
    after the Repeal of Guo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) (《國
    
    家稅務總局關於國稅發[1993]045號文件廢止後有關個人所得稅徵管問題的通知》 (國稅函[2011]348號)), it is confirmed that
    
    the overseas resident individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong
    
    Kong are entitled to the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the
    
    countries where they reside and the PRC or the tax arrangements between the PRC and Hong Kong or the Macau Special
    
    Administrative Region of the PRC. Therefore, the Company will withhold 10% of the dividend as individual income tax,
    
    unless it is otherwise specified in the relevant tax regulations and tax agreements, in which case the Company will withhold
    
    individual income tax of such dividends in accordance with the tax rates and according to the relevant procedures as
    
    specified by the relevant regulations.
    
    2017 ANNUAL REPORT 47
    
    3704827-t01fnar (Shandong Chenming) p.47 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32VI Directors’ ReportIV. Closure of register of members
    
    The register of members of the Company will be closed from 17 April 2018 (Tuesday) to 18 May 2018 (Friday), (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 18 May 2017 (Friday), all share transfer documents accompanied by
    
    the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
    
    Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
    
    East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 16 April 2018 (Monday).V. Five-year financial summary
    
    Please refer to “IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
    
    under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five
    
    financial years.VI. Donations
    
    During the year, the Company donated RMB1,950,000 (2016: RMB1,000,000) to non-profit making organisations.VII. Subsidiaries
    
    Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
    
    and “XX. Matters of significant of subsidiaries of the Company” under section VII “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 XIII “Financial Report” for the details of changes in property,
    
    plant and equipment of the Group for the year ended 31 December 2017.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 2017.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 2017, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
    
    surplus of the Company, amounted to RMB9,514,629,584.05 (2016: RMB7,393,989,520.67) as set out in “1. Consolidated
    
    Balance Sheet” under section XII “Financial Report”.
    
    48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.48 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32
    
    VI Directors’ Report
    
    XII. Directors
    
    As at 31 December 2017, the Directors of the Company were:
    
    1. Executive Directors
    
    Mr. Chen Hongguo
    
    Mr. Yin Tongyuan
    
    Mr. Geng Guanglin
    
    Mr. Li Feng2. Non-executive Directors
    
    Ms. Zhang Hong
    
    Ms. Yang Guihua3. Independent Non-executive Directors
    
    Ms. Liang Fu
    
    Ms. Wang Fengrong
    
    Mr. Huang Lei
    
    Ms. Pan AilingAccording to the Articles of Association of the Company, all Directors, including non-executive Directors, have been electedat the general meetings with a term of three years from May 2016 to May 2019. They may be re-elected for another termupon expiry of tenure.
    
    XIII. Directors’ service contracts
    
    All Directors have entered into service contracts with the Company for a term from 18 May 2016 to 17 May 2019.
    
    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 the Senior Management’s remuneration and the five highest paid individuals of the Company or/and
    
    its subsidiaries are set out in part V of section X and part XII of section XII.
    
    In 2017, the Company had 23 Senior Management members in total, which included directors, supervisors and the Senior
    
    Management. The remuneration of the Senior Management falls within the following ranges:
    
    Range of remuneration (RMB) Number
    
    4.8 million to 5.2 million 1
    
    3.6 million to 4.0 million
    
    3.2 million to 3.6 million
    
    2.8 million to 3.2 million 1
    
    2.4 million to 2.8 million 1
    
    2.0 million to 2.4 million 2
    
    1.6 million to 2.0 million 3
    
    1.2 million to 1.6 million 1
    
    0.8 million to 1.2 million
    
    Below 0.8 million 14
    
    2017 ANNUAL REPORT 49
    
    3704827-t01fnar (Shandong Chenming) p.49 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32VI Directors’ ReportXV. 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.XVI. Securities interests held by Directors, Supervisors and Chief Executives
    
    As at 31 December 2017, 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 6,696,296
    
    Yin Tongyuan Executive Director and Vice Chairman 2,423,640
    
    Li Feng Executive Director 471,818
    
    Geng Guanglin Executive Director and General Manager 437,433
    
    Yang Guihua Non-executive Director —
    
    Zhang Hong Non-executive Director —
    
    Huang Lei Independent non-executive Director —
    
    Liang Fu Independent non-executive Director —
    
    Wang Fengrong Independent non-executive Director —
    
    Pan Ailing Independent non-executive Director —
    
    Supervisors
    
    Li Dong Supervisor 100,000
    
    Sun Yinghua Supervisor —
    
    Yang Hongqin Supervisor —
    
    Zhang Xiaofeng Supervisor —
    
    50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.50 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32
    
    VI Directors’ Report
    
    XVI. Securities interests held by Directors, Supervisors and Chief Executives (Cont’d)
    
    Associated corporations
    
    Number of Number ofshares held at the shares held atbeginning of the the end of theName of reporting period Change during reporting periodName Position associated corporations (shares) the period +/- (shares)Chen Hongguo Chairman Shouguang Henglian 231,000,000 — 231,000,000
    
    Enterprise Investment
    
    Co. Ltd. (Note 2)
    
    Note 1: Save for the 6,696,296 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 18.65% of the total share capital of Chenming Holdings) held by Shouguang
    
    Henglian is also deemed to be held by Chen Hongguo.Save as disclosed above, as at 31 December 2017, none of the Directors, Supervisors or chief executives of the Companyhad any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associatedcorporations which were required to be filed in the register of the Company required to be maintained pursuant to section352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to theModel Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governingthe Listing of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
    
    As at 31 December 2016, 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.XVII. Interests and short position of substantial shareholders in shares and underlying shares
    
    As at 31 December 2017, 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
    
    Shouguang Chenming Holdings Co., Ltd. 137,122,226 B shares (L) 7.08 29.12
    
    Chenming Holdings (Hong Kong) Limited 137,122,226 B shares (L) 7.08 29.12
    
    Shouguang Chenming Holdings Co., Ltd. 102,276,000 H shares (L) 5.28 29.04
    
    Chenming Holdings (Hong Kong) Limited 102,276,000 H shares (L) 5.28 29.04
    
    The National Social Security Fund Council 31,638,500 H shares (L) 1.63 8.98
    
    (L) - Long position (S) - Short position (P) - Lending pool
    
    Save as disclosed above, as at 31 December 2017, 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.
    
    2017 ANNUAL REPORT 51
    
    3704827-t01fnar (Shandong Chenming) p.51 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32VI Directors’ ReportXVIII. Relationship with employees, customers and suppliers
    
    Please refer to “VI. Personnel of the Company” under section X “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
    
    “Discussion and Analysis of Operations” for details of the relationship between the Company and its employees, customers
    
    and suppliers.XIX. Directors’ interests in material contracts and indemnity provision
    
    None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
    
    interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
    
    period. The Company did not have any indemnity provision in favour of any Director.XX. Interests in competing business
    
    None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
    
    likely to compete with the businesses of the Company and any of its subsidiaries.XXI. 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.XXII. Preference shares
    
    Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.XXIII. 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 2017.XXIV.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 “Discussion and Analysis of Operations” for details of major risk factors of the Company.XXV.Material matters
    
    Please refer to section VII “Material Matters” for details of material matters of the Company.XXVI.Future development
    
    Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
    
    plan for 2018” 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 “Discussion and Analysis of Operations” for details of future development of
    
    the Company.XXVII. Environment, social and governance report and social responsibility
    
    Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
    
    responsibility. Please refer to the environment, social and governance report as required by the Hong Kong Listing Rules,
    
    which will be issued separately by the Company before 27 June 2018.
    
    52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.52 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32
    
    VI Directors’ Report
    
    XXVIII. 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.XXIX.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.XXX.Review of the Audit Committee
    
    The audited consolidated financial statements of the Company for the year ended 31 December 2017 has been reviewed by
    
    the Audit Committee of the Company.XXXI.Gearing ratio
    
    As at 31 December 2017, the Company’s gearing ratio (including minority interest) was 60.80%, representing a decrease
    
    of 1.61 percentage points from 62.41% for 2016, mainly due to the issuance of perpetual bonds of RMB3.0 billion as the
    
    Company sought to improve its capital and debt structure.
    
    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).XXXII.Going Concern Basis
    
    The Company is a leading player in the paper making industry in China. After innovation and development for more than
    
    half a century, it has developed into a large conglomerate principally engaged in paper making, finance, pulp and fibre
    
    and mining businesses while also involved in forestry, logistics, construction materials, and others. It is also the only listed
    
    company with A shares, B shares and H shares and preference shares in issue in China and the first company in the paper
    
    making industry having a finance company and a financial leasing company integrated with its industrial activities in China.
    
    The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi and Jilin, which deliver annual pulp and paper
    
    production capacity of over 10,000,000 tonnes.
    
    The Company has good sustainable profitability. In 2017, the Company achieved revenue of RMB29.852 billion, net
    
    profit attributable to shareholders of the Company of RMB3,769 million and net cash inflows from operating activities
    
    of RMB25.186 billion. 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 at the end of December 2017, the Company obtained, from major financial institutions, comprehensive
    
    credit facilities of RMB75,600 million, of which the unutilised credit facilities amounted to RMB27.9 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 has established financial leasing companies, finance
    
    companies and commercial factoring companies 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 2017 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.
    
    2017 ANNUAL REPORT 53
    
    3704827-t01fnar (Shandong Chenming) p.53 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:32VII Material MattersI. 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 2016 profit distribution plan for ordinary shareholders: Based on the number of the ordinary shares
    
    as at the dividend distribution registration date of 1,936,405,467 shares, a cash dividend of RMB6 (tax inclusive) was
    
    to be paid to all ordinary shareholders for every 10 shares held. The total cash dividend to be distributed amounted to
    
    RMB1,161,843,280.20 (tax inclusive). The dividend distribution was implemented and completed on 16 June 2017. 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 1 June 2017, and the
    
    announcement on the implementation of the 2016 profit distribution plan for A share and B share published on CNINFO on
    
    9 June 2017.
    
    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 2017 profit distribution plan for ordinary shares
    
    Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017, a cash dividend of RMB6
    
    (tax inclusive) per ten shares and a transfer of five shares for every ten shares from capital reserve to ordinary
    
    shareholders, and RMB1,161,843,280.20, representing 30.82% of the consolidated net profit attributable to ordinary
    
    shareholders of the Company, will be distributed to ordinary shareholders.
    
    54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.54 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
    
    share capital (Cont’d)
    
    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) (Cont’d)
    
    (2) The 2016 profit distribution plan for ordinary shares
    
    The 2016 profit distribution plan was considered and approved in the 2016 annual general meeting convened by the
    
    Company on 21 April 2017. Based on the number of the ordinary shares as at the dividend distribution registration
    
    date of 1,936,405,467 shares, a cash dividend of RMB6.00 (tax inclusive) was to be paid to all ordinary shareholders
    
    for every 10 shares held. The total cash dividend distributed during 2016 amounted to RMB1,161,843,280.20 (tax
    
    inclusive).(3) The 2015 profit distribution plan
    
    The 2015 profit distribution plan was considered and approved in the 2015 annual general meeting convened by
    
    the Company on 18 May 2016. 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 distributed during 2015 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 apercentageNet profit of net profitattributable to attributable
    
    ordinary to ordinaryshareholders of shareholdersthe Company in of the Amountthe consolidated Company of cash Ratio of cash
    
    financial in the dividends dividends
    
    Amount of statements consolidated distribution distributioncash dividends during the year financial through throughYear of distribution (tax inclusive) of distribution statements other means other means2017 1,161,843,280.20 3,769,325,450.93 30.82% 0.00 0.00%2016 1,161,843,280.20 1,998,578,788.75 58.13% 0.00 0.00%2015 580,921,640.10 1,086,632,711.54 53.46% 0.00 0.00%The Company made a profit and had positive retained profit available for ordinary shareholders of parent companyduring the reporting period without cash dividend for ordinary shares being proposed
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 55
    
    3704827-t01fnar (Shandong Chenming) p.55 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersII. Proposals on profit distribution and conversion of capital reserves into share capital during
    
    this reporting period (including preference shares)
    
    √ Applicable□ Not applicable
    
    Numbers of bonus share per 10 shares (share(s))
    
    Dividend distribution per 10 shares (RMB) (tax inclusive) C a s h d i v i d e n d o f R M B 6 ( t a x
    
    inclusive) per 10 shares to ordinary
    
    shareholders and cash dividend of
    
    RMB6 (tax inclusive) per 10 simulated
    
    shares converted from preference
    
    shares into ordinary shares to holders
    
    of preference shares
    
    Conversion per 10 shares (share(s)) Converted every 10 shares of the
    
    ordinary shareholders into 5 shares
    
    by using capital reserve
    
    Share base of the distribution proposal (shares) 1,936,405,467 ordinary shares
    
    and 774,526,678 simulated shares
    
    converted from preference shares
    
    on a conversion ratio of 1 preference
    
    share valued at RMB5.81; the share
    
    base of the distribution proposal was
    
    2,710,932,145 shares
    
    Total cash dividend (RMB) (tax inclusive) 1,626,559,287.08
    
    Distributable profits (RMB) 8,866,614,844.39
    
    Percentage of cash dividend to total profits distribution 62.69%
    
    Cash dividend policy
    
    For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the
    
    percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
    
    Particulars of profit distribution and conversion of capital reserves into share capital
    
    The audited consolidated net profit attributable to shareholders of the Company for 2017 prepared in accordance with
    
    Accounting Standards for Business Enterprises by the Company amounted to RMB3,769,325,450.93. When deducting the
    
    interest for perpetual bonds of RMB153,140,000 and dividend for preference shares of RMB333,702,107.35 for 2017, the
    
    distributable profit realised for 2017 amounted to RMB3,282,483,343.58. In accordance with the requirements of the Articles
    
    of Association and the Prospectus of Non-public Issuance of Preference Shares, the proposed profit distribution plan of the
    
    Company for 2017 is as follows:
    
    Based on the total ordinary share capital of 1,936,405,467 shares and the 774,526,678 simulated ordinary shares converted
    
    from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the end of 2017, a cash dividend of
    
    RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders; a cash dividend of RMB6 (tax inclusive) per
    
    ten simulated ordinary shares converted from the preference shares will be distributed to holders of preference shares; and
    
    a capitalisation issue will be made out of the capital reserves of 5 shares for every ten shares held to ordinary shareholders.
    
    A cash dividend of RMB1,161,843,280.20 will be distributed to ordinary shareholders and a variable cash dividend of
    
    RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a cash dividend of RMB10.33 (tax
    
    inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference shares.
    
    56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.56 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    III. Performance of undertakings
    
    1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
    
    shareholders, related parties, bidders and the Company during the reporting period or prior periods
    
    but subsisting to the end of the reporting period
    
    √ Applicable□ Not applicable
    
    Undertaking Party involved in Type of Details of undertaking Undertaking date Term Particulars on the
    
    undertaking undertaking 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 Ho ld ings Co . , L td . 22 May 2008 During the period Implementing as
    
    initial public offering Chenming Holdings undertaking (“Shouguang Chenming Holdings”) shall not engage, when Chenming normal
    
    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
    
    associates (as defined in The Listing Rules of Hong of 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.
    
    2017 ANNUAL REPORT 57
    
    3704827-t01fnar (Shandong Chenming) p.57 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersIII. Performance of undertakings (Cont’d)
    
    1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
    
    shareholders, related parties, bidders and the Company during the reporting period or prior periods
    
    but subsisting to the end of the reporting period (Cont’d)
    
    Undertaking Party involved in Type of Details of undertaking Undertaking date Term Particulars on the
    
    undertaking undertaking performance
    
    Shouguang Defective properties (1) According to the plan on defective properties of the 16 January 2008 During the period Implementing as
    
    Chenming Holdings Company, Shouguang Chenming Holdings Co., Ltd. when Chenming normal
    
    Co., Ltd. (“Shouguang Chenming Holdings”) has guaranteed Holdings was the
    
    and undertaken that: according to the application of major shareholder
    
    the Company, for defective property(ies) owned by the of 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.
    
    Shandong Specific remedial In view of the impacts on dilution of current returns 25 March 2016 9999-12-31 Implementing as
    
    Chenming Paper measures for for ordinary shareholders under the preference shares normal
    
    Holdings Limited non-public issuance issuance, and in order to implement the Notice of
    
    of preference shares the General Office of the State Council on Further
    
    Strengthening Protection of the Lawful Rights of Small
    
    Investors in Capital Markets, protect the interests
    
    of ordinary shareholders and provide remedies for
    
    the possible dilution on current returns as a result
    
    of preference shares issuance, the Company has
    
    undertaken that it will implement various measures
    
    to ensure the effective utilisation of proceeds raised,
    
    which can prevent dilution on current returns effectively,
    
    thereby enhancing future returns.
    
    58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.58 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    III. Performance of undertakings (Cont’d)
    
    1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
    
    shareholders, related parties, bidders and the Company during the reporting period or prior periods
    
    but subsisting to the end of the reporting period (Cont’d)
    
    Undertaking Party involved in Type of Details of undertaking Undertaking date Term Particulars on the
    
    undertaking undertaking performance
    
    Equity incentive
    
    undertakings
    
    Other undertakings
    
    made to the
    
    Company’s minority
    
    shareholders
    
    Whether undertakings Yes
    
    performed on time
    
    Specific reasons why Not applicable
    
    undertakings were not
    
    performed on time
    
    and next steps2. 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
    
    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 applicableVI. Reason for changes in accounting policies, accounting estimates and accounting methods
    
    as compared to the financial report for the prior year
    
    √ Applicable□ Not applicable
    
    2017 ANNUAL REPORT 59
    
    3704827-t01fnar (Shandong Chenming) p.59 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material Matters
    
    (1) Change in accounting policies
    
    Change of accounting policies due to the implementation of new Accounting Standard for Business Enterprises
    
    On 28 April 2017, the Ministry of Finance issued the Accounting Standard for Business Enterprises No. 42 - Non-
    
    current Assets Held-for-sale, Disposal Groups and Termination of Operations (Cai Kuai [2017] No. 13) which became
    
    effective on 28 May 2017 for implementation. On 10 May 2017, the Ministry of Finance issued the Accounting
    
    Standard for Business Enterprises No. 16 - Government Grants (Revised in 2017) (Cai Kuai [2017] No. 15) which
    
    became effective on 12 June 2017 for implementation.
    
    The Accounting Standard for Business Enterprises No. 42 - Non-current Assets, Disposal Groups for Sale and
    
    Termination of Operations defines the classification, measurement and disclosure of non-current assets or disposal
    
    groups for sale, and the disclosure of termination of operations. The financial statements have adjusted the disclosure
    
    of the annual financial statements in the comparable year and the notes thereof with respect to the termination of
    
    operations existed on the implementation date (28 May 2017) in accordance with the standard.
    
    Prior to the implementation of the Accounting Standard for Business Enterprises No. 16 - Government Grants (Revised
    
    in 2017), the Company included the government grants obtained in non-operating income or the government grants
    
    related to assets in deferred income, and the average amortization is included in the profit or loss for the current
    
    period. After the implementation of the Accounting Standard for Business Enterprises No. 16 - Government Grants
    
    (Revised in 2017), the government grants related to daily activities after 1 January 2017 is recognized in other income,
    
    if not, it is recognized in non-operating income or non-operating expenses.
    
    60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.60 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    (2) Change in accounting estimates
    
    Unit: RMB
    
    Details, reason and time of application of Procedure for
    
    change in accounting estimates approval Items affected Amount affected
    
    The debts arising from the financial leasing business 29 Resolved and Long-term Decreased by
    
    of the Company’s subsidiary shall be provided for bad approved at the receivables RMB6,177,445.94
    
    debts from at 5% to 10% to by the following ways from 19th extraordinary
    
    December 2017: meeting of the
    
    eighth session of
    
    the Board on 29
    
    December 2017
    
    ① Individual assessment of impairment
    
    When assessing the probability of recovery of lease receivables Loss on impairment Increased by
    
    from a customer, the ability and willingness to pay lease payments, of assets RMB32,800,396.14
    
    and the payment record of the customer, profitability of the lease
    
    projects, and guarantees for leased assets will be analysed. If there
    
    are evidences indicating that the customer is unable to repay and its
    
    willingness to repay is not strong, and the principal and interest are
    
    still not recoverable, or only a very small portion can be recovered,
    
    after taking all possible measures or all necessary legal procedures,
    
    the receivables are subject to individual impairment assessment, and
    
    the difference between the present value of the future cash flows
    
    expected to be derived from the receivables and the carrying amount
    
    shall be accounted for as provision for bad debts and recognised in
    
    profit or loss.② Collective assessment of impairment based on credit r isk
    
    characteristics
    
    At the end of the period, each individual leasing contract is classified Non-current assets Increased by
    
    based on the amount past due and recovery, and the major basis for due within one year RMB45,914,608.78
    
    classification and provision for impairment are as follows:
    
    Category Basis for classification Proportion
    
    of provision (%)
    
    Normal Not yet past due 0.30
    
    Overdue 180 days past due 5.00
    
    181- 365 days past 10.00
    
    due (inclusive)
    
    1-3 years past 30.00
    
    due (inclusive)
    
    3- 5 years past 50.00
    
    due (inclusive)
    
    Over 5 years past due 100.00
    
    ③ No bad debt provision will be made for lease receivables from related Other current assets Decreased by
    
    parties unless there is objective evidence that the Company is unable RMB172,537,558.98
    
    to recover the lease receivables from related parties.
    
    If there is objective evidence that the lease receivables from related
    
    parties are recovered and can be linked objectively to an event
    
    occurring after the write-down, the impairment losses recognised will
    
    be reversed and accounted for in profit or loss. The carrying amount
    
    reversed shall not exceed the assumed amortised costs on the date
    
    of reversal of the lease receivables had no impairment provision been
    
    made.
    
    2017 ANNUAL REPORT 61
    
    3704827-t01fnar (Shandong Chenming) p.61 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersVII. Reason for retrospective restatement to correct major accounting errors during the reporting
    
    period
    
    □ Applicable √ Not applicable
    
    Unit: RMB
    
    The name of the
    
    report projects
    
    during the periods
    
    of comparison Cumulative
    
    The contents of the correction of accounting errors. Procedure affected impacted number
    
    Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, Correction of financial Income tax expense Increased by
    
    applied for high-tech enterprise certification in 2015. The company received statement for 2016 (year 2016) RMB65,408,033.50
    
    the high-tech enterprise certificate on 28 March 2016 and issued a public
    
    announcement. The company’s annual report was announced on 30 Initial undistributed Decreased by
    
    March 2016, which is very close to the time that the company received the profit (1 January RMB65,408,033.50
    
    certificate, thus in 2015, Zhanjiang Chenming was still withholding tax at a 2016)
    
    25% income tax rate. In May 2016, when Zhanjiang Chenming settled the
    
    annual income tax for 2015, the tax authorities approved that the income
    
    tax may be paid at the rate of 15% for 2015. In addition, the tax authorities
    
    also refunded the overpaid taxes of RMB 65,952,632.95 in August 2016.
    
    The company directly offset the current income tax expense for 2016 after
    
    receiving it. As a result, there was an error in the amount of income tax
    
    for 2015 and 2016, but in this year, the company has made corrections to
    
    previous mistakes. In 2015, the company prepaid income tax at a rate of
    
    15%, which would reduce the deferred income tax assets of RMB 544,599.45
    
    as of 31 December 2015, and reduce the income tax expenses of RMB
    
    65,408,033.50 for the year of 2015 (among which, the current income tax
    
    expense was reduced by RMB 65,952,632.95, and the deferred income tax
    
    expense increased by RMB 544,599.45).
    
    62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.62 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    VIII. Reason for changes in scope of the consolidated financial statements as compared to the
    
    financial report for the prior year
    
    √ Applicable□ Not applicable
    
    ① Business combinations not under common control
    
    Revenue of Net profit of
    
    acquiree from acquiree from
    
    Equity the acquisition the acquisition
    
    Point of time acquisition Equity Equity Basis for the date to the end date to the end
    
    of equity costs acquisition acquisition Acquisition acquisition of the period of the period
    
    Name of acquiree acquisition (RMB’0000) proportion (%) mode date date (RMB) (RMB)
    
    2017.10 159,064.67 45.00 Merger and 2017.11.1 Date of 485,784.40 -36,856,878.73
    
    Shanghai Hongtai Real acquisition substantive
    
    Estate Co., Ltd. control② Changes in scope of consolidation due to other reasons
    
    During the year, the scope of consolidation included 9 newly established subsidiaries, namely Shanghai Chenming
    
    Industry Co., Ltd., Shanghai Chenming Financial Leasing Co., Ltd., Guangzhou Chenming Financial Leasing Co.,
    
    Ltd., Shandong Chenming Commercial Factoring Co., Ltd., Guangzhou Chenming Commercial Factoring Co., Ltd.,
    
    Qingdao Chenming Pulp and Paper Electronic Commodity Exchange Co., Ltd., Xuchang Chenming Paper Co., Ltd.,
    
    Chengdu Chenming Culture Communication Co., Ltd. and Beijing Chenming Culture Communication Co., Ltd.
    
    During the year, the scope of consolidation excluded 2 companies: a former subsidiary, namely Shouguang Chenming
    
    Hongxin Packaging Co., Ltd was deregistered upon merger and acquisition by another subsidiary Shouguang
    
    Hongxiang Printing and Packaging Co., Ltd, whereas Jilin Chenming Machinery Manufacturing Co., Limited was
    
    transferred.
    
    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 5
    
    Name of certified public accountants of the domestic accounting firm Zhao Yanmei and Wang Zongpei
    
    Whether to appoint another accounting firm during the period
    
    Continued term of service of certified public accountants of the 2
    
    domestic accounting firm
    
    □Yes √ No
    
    Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
    
    √ Applicable□ Not applicable
    
    1. In 2017, 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;2. In 2017, 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;3. Due to the working requirements for the non-public issuance of A shares, the Company engaged CSC Financial Co.,
    
    Ltd. as the sponsor for the non-public issuance. The term for ongoing supervisory will be expired on 31 December
    
    2017.
    
    2017 ANNUAL REPORT 63
    
    3704827-t01fnar (Shandong Chenming) p.63 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersX. Suspension in trading or delisting upon publication of annual report
    
    □ Applicable √ Not applicableXI. Matters related to bankruptcy and reorganisation
    
    □ Applicable √ Not applicable
    
    There was no matter related to bankruptcy and reorganisation during the reporting period.
    
    64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.64 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XII. Material litigation and arbitration
    
    √ Applicable□ Not applicable
    
    Judgment
    
    execution of
    
    Basic information about Amount Will liability Judgment result of the litigation the litigation
    
    litigation (arbitration) (RMB’0,000) be incurred Progress of litigation (arbitration) (arbitration) and its effect (arbitration) Disclosure date Disclosure index
    
    Statutory demand and RMB167.86 million and Yes 1 The Court of First Instance in the 1. The office address of the Company Not applicable 25 February 2017, http://www.cninfo.com.cn,
    
    Winding-up Petition the interest thereon, High Court of the HKSAR completed in Hong Kong received the notice in 17 July 2017, 20 October announcement number: 2017-015,
    
    USB3,548.9 thousand the hearing held from 21 February relation to the injunction order with 2017, 29 August 2017, 2017-067, 2017-069, 2017-070,
    
    and the interest thereon, 2017 to 23 February 2017. a case number of HCMP3060/2016 12 September 2017, 2017-071, 2017-076, 2017-084,
    
    HK$ 3303.9 thousand to the legal representative of the 20 October 2017 2017-128, 2017-103, 2017-106,
    
    and the interest thereon 2. TinhHe oonffgicKeoandgdrreecsesivoefdthteheCnoomtipceaniny CInosmtapncaenyinfrtohme HthigehCCoouurrttofofFitrhset 2017-[?]
    
    relation to the injunction order with HKSAR on 15 June 2017: (1) the
    
    a case number of HCMP3060/2016 amended originating summonses for
    
    to the legal representative of the the injunction order be dismissed;
    
    Company from the Court of First and (2) an order nisi be made on
    
    Instance in the High Court of the the costs of the legal proceedings.
    
    HKSAR on 15 June 2017. The Company paid the costs to
    
    3. On 26 June 2017, there was an ex- the defendant (including the fees
    
    parte hearing in chambers in the payable to two counsels). The
    
    High Court of the HKSAR in which costs shall be taxed if not agreed.
    
    the petitioner applied for an interim The High Court of the HKSAR
    
    injunction order to prohibit the anticipated the reasons for decision
    
    Company from distribution of the of the case would be handed down
    
    2016 final dividend to the holders of on 7 July 2017.
    
    H shares. 2. On 15 June 2017, the office address
    
    4. On 30 June 2017, the Hon Mr. of the Company in Hong Kong
    
    Justice Harris of the High Court of received a winding-up petit ion
    
    the HKSAR discharged the interim dated 15 June 2017 filed by the
    
    injunction order on the same date defendant to the High Court of the
    
    after the hearing. HKSAR.
    
    5. The decision was handed down by 3. The decision was handed down by
    
    the Hon Mr. Justice Harris of the the Hon Mr. Justice Harris of the
    
    High Court of the HKSAR on 7 July High Court of the HKSAR on 7 July
    
    2017. 2017.
    
    6. The wind ing-up pet i t ion was 4. Having considered the reasons for
    
    scheduled to be heard before the decision and the consequences
    
    High Court of the HKSAR at 9:30 to the Company once the winding
    
    a.m. on 23 August 2017. uappppleietidtiofnoirs agniveanp,ptheealCaogmapiannsyt
    
    7. The Company through its legal the decision to the High Court
    
    adviser applied to the Court of of HKSAR on 12 July 2017. The
    
    HKSAR for the validation order hearing was scheduled to be heard
    
    relating to the transfer of ful ly before the Court of Appeal of the
    
    paid-up shares of the Company High Court of the HKSAR at 10:00
    
    o n 1 9 J u l y 2 0 1 7 ( c a s e n o . am on 11 May 2018.
    
    HCCW175/2017). The hearing of the
    
    application of the validation order 5. The High Court of HKSAR granted
    
    was scheduled to be heard at 9:30 t h e V a l i d a t i o n O r d e r t o t h e
    
    a.m. on 19 October 2017. Cfuollymppaaindy-.uTphsehraerfeosreo, fththeetCraonmsfpear noyf
    
    8. The winding-up petition was heard since the Winding Up Petition (i.e.
    
    by the Hon Mr. Justice Harris of 15 June 2017) would not be deemed
    
    the High Court of the HKSAR on 28 void because of the Winding Up
    
    August 2017. Petition.
    
    2017 ANNUAL REPORT 65
    
    3704827-t01fnar (Shandong Chenming) p.65 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXII. Material litigation and arbitration (Cont’d)
    
    Judgment
    
    execution of
    
    Basic information about Amount Will liability Judgment result of the litigation the litigation
    
    litigation (arbitration) (RMB’0,000) be incurred Progress of litigation (arbitration) (arbitration) and its effect (arbitration) Disclosure date Disclosure index
    
    9. On 5 July 2017, the Company 6. The Court ordered an adjournment
    
    initiated legal proceedings for a of the Winding-up Petit ion, on
    
    civil complaint against Arjowiggins the Company’s undertaking that
    
    HKK2 Limited (“HKK2”) and related it would procure a third party to
    
    parties (the “Civil Complaint”) at pay into court the amount of the
    
    the Intermediate People’s Court Statutory Demand plus interest
    
    o f Wei fang Ci ty in Shandong to 27 Augus t 2018 , to ta l l i ng
    
    Province of the People’s Republic approximately HK$389 million within
    
    of China (“Weifang Court”). The Civil 14 days. The costs of the Winding-
    
    Complaint was admitted to be heard up Petition were kept.
    
    by Weifang Court on 8 July 2017. 7. T h e C o m p a n y h a d p r o c u r e d
    
    Justice Mimmie Chan of the Court payment by a third party into the
    
    of First Instance of the High Court of High Court of the HKSAR in the
    
    the HKSAR on 19 January 2018 in sum of HK$389,112,432.44 (this
    
    chambers (open to public) ordered sum being the Hong Kong dollar
    
    that the Company be restrained equivalent of the amount set out in
    
    from further proceeding with the the Statutory Demand and interest
    
    Civil Complaint that it had filed thereon from 19 October 2016 to 27
    
    on 5 July 2017 against HKK2 and August 2018).
    
    the related parties before Weifang
    
    Court.
    
    The Company withdrew the Civil
    
    Complaint from Weifang Court on
    
    22 February 2018.
    
    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 applicableXV. 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.
    
    66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.66 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XVI. Significant related party transactions
    
    1. Related party transactions associated with day-to-day operation
    
    √ Applicable□ Not applicable
    
    Percentage
    
    Subject Pricing basis Amount of as the amount Amount of Market price
    
    Types of the matter of the of the related Price of related party of similar transactions Whether Settlement of of available
    
    Related party related party related party party related party transactions transactions approved exceeding related party similar Disclosure
    
    Related party relationship transactions transactions transactions transactions (RMB’0,000) (%) (RMB’0,000) approved cap transactions transaction date Disclosure index
    
    Jiangxi Chenming Natural Pursuant to the requirement Procurement N a t u r a l g a s , Market price Market price 14,767.27 0.75% 35,000 No Bank acceptance Not applicable 1 8 F e b r u a r y http://www.cninfo.
    
    Gas Co., Ltd under Paragraph (2) of heavy oil etc. and te l eg raph ic 2017 com.cn
    
    Article 10.1.6 of the transfer
    
    Rules Governing the
    
    Listing of Stocks on
    
    Shenzhen Stock Exchange
    
    Total — — 14,767.27 — 35,000 — — — — —
    
    Particulars on refund of bulk sale No2. Related party transaction in connection with purchase or sale of assets or equity interest
    
    □ Applicable √ Not applicable
    
    There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
    
    during the reporting period.3. Related party transaction connected to joint external investment
    
    □ Applicable √ Not applicable
    
    There was no related party transaction of the Company connected to joint external investment during the reporting
    
    period.
    
    2017 ANNUAL REPORT 67
    
    3704827-t01fnar (Shandong Chenming) p.67 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXVI. Significant related party transactions (Cont’d)
    
    4. Related creditors’ rights and debts transactions
    
    √ Applicable□ Not applicable
    
    Was there any non-operating related creditors’ rights and debts transaction?
    
    √ Yes□ No
    
    Debts payable to any related party:
    
    Amount Amount
    
    Any appropriation increased recovered
    
    of funds for Opening during the during the Interest for the
    
    Relationship with non-operating balance current period current period current period
    
    Related party the Company Reason purposes (RMB’0,000) (RMB’0,000) (RMB’0,000) Interest rate (RMB’0,000)
    
    Shouguang Chenming Controlling shareholder Provision of financial support 0 1,996,093,650.42 1,996,093,650.42 0.00% 0 0
    
    Holdings Company Limited to the Company from the
    
    controlling shareholder
    
    Shouguang Hengtai Enterprise A company controlled by Provision of financial support 4,037.27 0 0 4.35% 181.70% 4,218.97
    
    Investment Company Limited some directors and Senior from Hengtai Investment and
    
    Management members of the Company on the same
    
    the Company proportion of shareholdings in
    
    Haiming Mining.
    
    Effect of related debts on the operating results and The related debts are financial support to the Company and its subsidiaries from Chenming Holdings and Hengtai Investment to help ease the financial
    
    financial position of the Company pressure on the Company and its subsidiaries and promote the operation and production of the Company and its subsidiaries.5. Other significant related party transactions
    
    □ Applicable √ Not applicable
    
    There was no other significant related party transaction of the Company during the reporting period.
    
    68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.68 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XVII. Material contracts and implementation
    
    1. Custody, contracting and leasing
    
    (1) Custody
    
    □ Applicable √ Not applicable
    
    There was no custody of the Company during the reporting period.(2) Contracting
    
    □ Applicable √ Not applicable
    
    There was no contracting of the Company during the reporting period.(3) Leasing
    
    □ Applicable √ Not applicable
    
    There was no leasing of the Company during the reporting period.
    
    2. Significant guarantees
    
    √ Applicable□ Not applicable
    
    (1) Guarantees
    
    During the reporting period, the Company provided guarantee to Weifang Sime Darby West Port Co., Ltd., a
    
    joint venture and the guarantee amount incurred was RMB50.00 million. The Company provided guarantee
    
    to subsidiaries and the guarantee amount incurred was RMB12,860.0440 million. The subsidiaries provided
    
    guarantee to their subsidiaries and the guarantee amount incurred was RMB1,851.2499 million.
    
    As at 31 December 2017, the balance of the external guarantee provided by the Company (including the
    
    guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)
    
    amounted to RMB18,452.7438 million, representing 66.43% of the equity attributable to shareholders of the
    
    Company as at the end of 2017.
    
    The Company did not provide any guarantee to external parties (excluding the guarantee provided to its
    
    subsidiaries and investees and the guarantee provided to subsidiaries by subsidiaries) and did not provide any
    
    guarantee against the rules and regulations.
    
    Unit: RMB’0,000
    
    External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)
    
    Date of the related Guarantee
    
    announcement to related
    
    disclosing the Amount of Guarantee date Guarantee Fulfilled parties
    
    Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term or not or not
    
    Weifang Sime Darby West Port Co., Ltd. 24 July 2017 17,500 5,000 General guarantee 10 years No No
    
    Total external guarantees approved during the reporting period (A1) 17,500 Total actual external guarantees during the reporting period (A2) 5,000
    
    Total external guarantees approved at the end of the reporting period (A3) 17,500 Balance of total actual guarantees at the end of the reporting period (A4) 5,000
    
    2017 ANNUAL REPORT 69
    
    3704827-t01fnar (Shandong Chenming) p.69 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXVII. Material contracts and implementation (Cont’d)
    
    2. Significant guarantees (Cont’d)
    
    (1) Guarantees (Cont’d)
    
    Guarantees between the Company and its subsidiaries
    
    Date of the related Guarantee
    
    announcement to related
    
    disclosing the Amount of Guarantee date Guarantee parties
    
    Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term Fulfilled or not or not
    
    Zhanjiang Chenming Pulp & Paper Co., Ltd. 30 March 2016 150,000 General guarantee 3 years No No
    
    Zhanjiang Chenming Pulp & Paper Co., Ltd. 17 February 2017 650,000 342,060.64 General guarantee 3 years No No
    
    Shandong Chenming Financial Leasing Co., Ltd. 26 March 2015 500,000 224,968.29 General guarantee 7 years No No
    
    Shandong Chenming Financial Leasing Co., Ltd. 30 March 2016 300,000 General guarantee 7 years No No
    
    Huanggang Chenming Arboriculture Development Co., Ltd. 17 February 2017 5,000 General guarantee 3 years No No
    
    Huanggang Chenming Pulp & Paper Co., Ltd. 26 March 2015 400,000 116,161.34 General guarantee 7 years No No
    
    Huanggang Chenming Pulp & Paper Co., Ltd. 30 March 2016 550,000 General guarantee 7 years No No
    
    Jiangxi Chenming Paper Co., Ltd. 30 March 2016 150,000 91,467.48 General guarantee 3 years No No
    
    Jiangxi Chenming Paper Co., Ltd. 17 February 2017 200,000 General guarantee 3 years No No
    
    Shouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 50,000 General guarantee 10 years No No
    
    Shouguang Meilun Paper Co., Ltd. 17 February 2017 100,000 General guarantee 3 years No No
    
    Shandong Chenming Paper Sales Company Limited 30 March 2016 200,000 General guarantee 3 years No No
    
    Shandong Chenming Paper Sales Company Limited 17 February 2017 400,000 342,479.49 General guarantee 3 years No No
    
    Chenming (HK) Limited 30 March 2016 100,000 General guarantee 3 years No No
    
    Chenming (HK) Limited 17 February 2017 500,000 470,012.15 General guarantee 3 years No No
    
    Shouguang Chenming Import and Export Trade Co., Ltd. 17 February 2017 50,000 18,000 General guarantee 3 years No No
    
    Jilin Chenming Paper Co., Ltd. 17 February 2017 150,000 General guarantee 3 years No No
    
    Shandong Chenming Group Finance Co., Ltd. 17 February 2017 500,000 General guarantee 3 years No No
    
    Zhanjiang Chenming Arboriculture Development Co., Ltd. 17 February 2017 5,000 General guarantee 3 years No No
    
    Nanchang Chenming Arboriculture Development Co., Ltd. 15 August 2017 10,000 General guarantee 3 years No No
    
    Total amount of guarantee provided for subsidiaries approved during 2,570,000 Total amount of guarantee provided for subsidiaries during the reporting period (B2) 1,286,004.40
    
    the reporting period (B1)
    
    Total amount of guarantee provided for subsidiaries approved as at 5,520,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting 1,655,149.38
    
    the end of the reporting period (B3) period (B4)
    
    Guarantees between subsidiaries
    
    Date of the related Guarantee
    
    announcement to related
    
    disclosing the Amount of Guarantee date Guarantee Fulfilled parties
    
    Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term or not or not
    
    Chenming (HK) Limited 30 March 2016 100,000 99,620.41 General guarantee 3 years No No
    
    Chenming (HK) Limited 30 March 2016 100,000 85,504.58 General guarantee 3 years No No
    
    Chenming (HK) Limited 30 March 2016 100,000 General guarantee 3 years No No
    
    Total amount of guarantee provided for subsidiaries approved during 0 Total amount of guarantee provided for subsidiaries during the reporting period (C2) 185,124.99
    
    the reporting period (C1)
    
    Total amount of guarantee provided for subsidiaries approved as at 300,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting 185,124.99
    
    the end of the reporting period (C3) period (C4)
    
    Total amount of guarantee provided (i.e. sum of the above three guarantee amount)
    
    Total amount of guarantee approved during the reporting period (A1+B1+C1) 2,587,500 Total amount of guarantee during the reporting period (A2+B2+C2) 1,476,129.39
    
    Total amount of guarantee approved as at the end of the reporting period (A3+B3+C3) 5,837,500 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 1,845,274.37
    
    The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to 66.43%
    
    the net assets of the Company
    
    Of which:
    
    Balance of guarantee provided for shareholders, beneficial controllers 0
    
    and its related parties (D)
    
    Balance of guarantee directly or indirectly provided for obligors 1,240,584.92
    
    with gearing ratio over 70% (E)
    
    Total amount of guarantee provided in excess of 50% of net assets (F) 604,689.45
    
    Sum of the above three amount of guarantee (D+E+F) 1,845,274.37
    
    70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.70 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XVII. Material contracts and implementation (Cont’d)
    
    2. Significant guarantees (Cont’d)
    
    (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.
    
    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
    
    Entrusted loans during the reporting period
    
    During the reporting period, the Company did not have other entrusted loans except for the entrusted loans
    
    of RMB900 million recovered from Shouguang Jin Choi Public Assets Management Co., Ltd. according to the
    
    agreement.
    
    The specific circumstances of a high-risk entrusted loan with single significant amount or low security, poor
    
    liquidity, and no principal protection.
    
    Unit: RMB’0,000
    
    Actual gainsActual gains or losses Summary ofor losses recovered events andExpected during the during the Impairment Statutory Any entrusted relatedTypes of Interest rate Sources of Commencement return reporting reporting provision procedure loan plan searchBorrower borrower of loans Loan amount funds date Expiry date (if any) period period (if any) passed in the future index (if any)Shouguang Jin Choi Local
    
    Public Assets government ht tp : / /www.
    
    Management Co., Ltd. platform Self-owned 17 January Recovered on cn in fo .com.
    
    company 10.00% 50,000 funds 18 January 2014 2017 375.00 time 0 Yes No cn/
    
    Shouguang Jin Choi Local
    
    Public Assets government ht tp : / /www.
    
    Management Co., Ltd. platform Self-owned Recovered on cn in fo .com.
    
    company 10.00% 40,000 funds 18 April 2014 18 April 2017 1,311.11 time 0 Yes No cn/
    
    Total 90,000 — — — 1,686.11 — — — —
    
    Unable to recover the principal of entrusted loans or other circumstances that may result in impairment
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 71
    
    3704827-t01fnar (Shandong Chenming) p.71 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXVII. Material contracts and implementation (Cont’d)
    
    4. Other material contracts
    
    □ Applicable √ Not applicable
    
    The Company did not have any other material contract during the reporting period.
    
    XVIII. Fulfilment of Social Responsibility
    
    1. Fulfilment of social responsibility (Cont’d)
    
    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 become 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.
    
    72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.72 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XVIII. Fulfilment of Social Responsibility
    
    1. 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 tens of 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”.2. Fulfilment of social responsibility regarding targeted poverty relief
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 73
    
    3704827-t01fnar (Shandong Chenming) p.73 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXVIII. Fulfilment of Social Responsibility (Cont’d)
    
    3. Environmental protection matters
    
    Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
    
    protection authority?
    
    Yes
    
    Name of major Pollutant
    
    pollutants Number of emission
    
    Name of company and specific Way of emission Distribution of Emission standards Approved total Excessive
    
    or subsidiary pollutants emission outlets emission outlets concentration implemented Total emissions emissions emissions
    
    Shandong Chenming COD Organised 3 Within Chenming 200mg/L 300mg/L 4547t 7666.64t No
    
    Paper Holdings Limited emission Industrial Park
    
    Ammonia nitrogen Organised 3 Within Chenming 2.90mg/L 45 mg/L 58.40t 766.66t No
    
    emission Industrial Park
    
    Sulphur dioxide Organised 2 Within Chenming 4.70mg/m3 35mg/m3 17.22t 247.16t No
    
    emission Industrial Park
    
    Nitrogen oxide Organised 2 Within Chenming 48.05mg/m3 100 mg/m3 163.10t 941.81t No
    
    emission Industrial Park
    
    Smoke Organised 2 Within Chenming 0.64 mg/m3 10 mg/m3 12.91t 70.62t No
    
    emission Industrial Park
    
    Shouguang Meiun Sulphur dioxide Organised 2 Within Chenming 4.87mg/m3 35mg/m3 55.30t 348.10t No
    
    Paper Co., Ltd. emission Industrial Park
    
    Nitrogen oxide Organised 2 Within Chenming 48.35mg/m3 100 mg/m3 464t 709.32t No
    
    emission Industrial Park
    
    Smoke Organised 2 Within Chenming 0.58mg/m3 5mg/m3 30.80t 73.62t No
    
    emission Industrial Park
    
    Wuhan Chenming Hanyang COD Organised 1 East of the 33.97mg/l 80mg/L 40.47t 184.30t No
    
    Paper Holdings Co., Ltd. emission factory area
    
    Ammonia nitrogen Organised 1 East of the 0.45mg/l 8 mg/L 0.53t 17.30t No
    
    emission factory area
    
    Wuhan Chenming Qianneng Sulphur dioxide Organised 2 Within Qianneng 13mg/m3 50mg/m3 32.95t 102.58t No
    
    Electric Power Co., Ltd. emission Electric Power
    
    factory area
    
    Nitrogen oxide Organised 2 Within Qianneng 25mg/m3 100 mg/m3 77.21t 205.16t Nitrogen oxide
    
    emission Electric Power emission
    
    factory area exceeded the
    
    standards in
    
    the first quarter
    
    of 2017 due
    
    to changes
    
    in emission
    
    standards.
    
    Smoke Organised 2 Within Qianneng 15mg/m3 20mg/m3 14.47t 41.03t No
    
    emission Electric Power
    
    factory area
    
    Jiangxi Chenming Paper COD Organised 1 At the boundary 45mg/L 90mg/L 584.62t 1260t No
    
    Co., Ltd. emission of factory area
    
    Ammonia nitrogen Organised 1 At the boundary 1.5mg/L 8mg/L 48.78t 112t No
    
    emission of factory area
    
    Sulphur dioxide Organised 2 Within factory area 60mg/m3 200mg/m3 446.06t 806t No
    
    emission
    
    Nitrogen oxide Organised 2 Within factory area 100mg/m3 200 mg/m3 715.35t 806t No
    
    emission
    
    Smoke Organised 2 Within factory area 15mg/m3 30mg/m3 115.73t 135t No
    
    emission
    
    74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.74 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XVIII. Fulfilment of Social Responsibility (Cont’d)
    
    3. Environmental protection matters (Cont’d)
    
    Name of major Pollutant
    
    pollutants Number of emission
    
    Name of company and specific Way of emission Distribution of Emission standards Approved total Excessive
    
    or subsidiary pollutants emission outlets emission outlets concentration implemented Total emissions emissions emissions
    
    Jilin Chenming Paper COD Organised 1 At the boundary 61.70mg/L 90mg/L 315t 357t No
    
    Co., Ltd. emission of factory area
    
    Ammonia nitrogen Organised 1 At the boundary 1.02mg/L 8mg/L 5.41t 34t No
    
    emission of factory area
    
    Sulphur dioxide Organised 1 Within factory area 34.30mg/m3 100mg/m3 53.28t 97t No
    
    emission
    
    Nitrogen oxide Organised 1 Within factory area 54.90mg/m3 100mg/m3 73.16t 213t No
    
    emission
    
    Smoke Organised 1 Within factory area 13.65mg/m3 30mg/m3 23.51t 51.66t No
    
    emission
    
    Zhanjiang Chenming COD Organised 1 Within Zhanjiang 63mg/L 90mg/L 1311.90t 1943t No
    
    Pulp & Paper Co., Ltd. emission Chenming
    
    factory area
    
    Ammonia nitrogen Organised 1 Within Zhanjiang 1.53mg/L 8mg/L 39t 43.90t No
    
    emission Chenming
    
    factory area
    
    Smoke Organised 6 Within Zhanjiang Lime kiln Lime kiln 80mg/ 165.75t 196t No
    
    emission Chenming 21.96mg/m3; m3; Alkali
    
    factory area Alkali recovered recovered
    
    18.60mg/m3; 30mg/m3; 1#—
    
    1#—3# circulating 3# circulating
    
    fluidised bed fluidised bed
    
    boiler 5.83mg/ boiler30mg/m3;
    
    m3; 4# circulating 4# circulating
    
    fluidised bed fluidised bed
    
    boiler2.63mg/m3 boiler10mg/m3
    
    Sulphur dioxide Organised 6 Within Zhanjiang Lime kiln Lime kiln 160.65t 620t No
    
    emission Chenming 1.67mg/m3; 400mg/m3;
    
    factory area Alkali recovered Alkali recovered
    
    22.87mg/m3; 200mg/m3; 1#—
    
    1#—3# circulating 3# circulating
    
    fluidised bed fluidised bed
    
    boiler 4.63mg/ boiler 100mg/
    
    m3; 4# circulating m3; 4# circulating
    
    fluidised bed fluidised bed
    
    boiler2.47mg/m3 boiler35mg/m3
    
    Nitrogen oxide Organised 6 Within Zhanjiang Lime kiln Lime kiln 1588.60t 2169.70t No
    
    emission Chenming 198.95mg/m3; 300mg/m3;
    
    factory area Alkali recovered Alkali recovered
    
    192.10mg/m3; 200mg/m3; 1#—
    
    1#—3# circulating 3# circulating
    
    fluidised bed fluidised bed
    
    boiler 6.90.mg/ boiler 100mg/
    
    m3; 4# circulating m3; 4# circulating
    
    fluidised bed fluidised bed
    
    boiler 4.25mg/m3 boiler 50mg/m3
    
    2017 ANNUAL REPORT 75
    
    3704827-t01fnar (Shandong Chenming) p.75 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXVIII. Fulfilment of Social Responsibility (Cont’d)
    
    3. Environmental protection matters (Cont’d)
    
    Construction and operation of facilities for pollution prevention and control
    
    (1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding
    
    environmental protection of the central and local government. The construction of projects strictly executed
    
    the evaluation system on impacts of project construction on environment. In order to ensure pollutants are
    
    discharged strictly in accordance to requirements under laws and regulation and disposed properly, production
    
    and operation strictly comply with the national Law on the Prevention and Control of Environmental Pollution,
    
    Law on the Prevention and Control of Air Pollution, Ten Rules Regarding Water Pollution and Law on the
    
    Prevention and Control of Environmental Pollution by Solid Waste.(2) Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
    
    facilities. The aerobic-anaerobic-in-depth treatment technology is the major technology for water treatment,
    
    which can achieve standardised discharge of waste water. Moreover, subsidiaries are equipped with recycling
    
    system for process effluent, and reuse treated waste water to the greatest extent in order to minimise pollution.
    
    The Company has constructed a total of 8 water treatment plants, with daily treatment capacity of 350,000 m3.
    
    A total of ten online water monitor facilities were installed in subsidiaries. Five online water monitor facilities are
    
    directly managed by the environmental protection bureau, while the remaining five online water monitor facilities
    
    are operated by entrusted enterprises qualified for running such facilities. In addition, governmental authority
    
    will regularly visit the Company to conduct comparison of online monitor data every quarter. All data meets the
    
    standards.(3) All subsidiaries have their own power plants. Each self-owned plant has its own environmental protection
    
    facilities for de-dusting, desulphurisation and denitrification. Denitrification is conducted through SNCR; while
    
    desulphurisation is primarily conducted through gypsum desulphurisation (ammonia desulphurisation is adopted
    
    in self-owned plant of Jiangxi Chenming).Environmental impact assessment of construction projects and other environmental protection administrativelicensing
    
    The Company strictly complied with environmental laws and regulations all along to carry out environmental impact
    
    assessment of construction projects. The construction projects are all subject to environmental impact assessment.
    
    During the construction process, a reasonable environmental protection project construction plan is formulated and
    
    strictly implemented. The environmental protection facilities and the main project are designed, constructed and put
    
    into operation at the same time. At present, all construction projects put into production have obtained environmental
    
    impact assessment approval and acceptance approval.
    
    In 2017, the Company applied to the Environmental Protection Bureau in accordance with the Measures for the
    
    Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection. All subsidiaries completed
    
    the formalities for new discharge permits in June.
    
    76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.76 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XVIII. Fulfilment of Social Responsibility (Cont’d)
    
    3. Environmental protection matters (Cont’d)
    
    Emergency plan for emergency environmental incidents
    
    The Company has strictly implemented emergency regulations for emergency environmental incidents, and
    
    formulated the “Emergency plan for emergency environmental incidents” according to the technical requirements in
    
    the “Technical Guidelines for Emergency Environmental Pollution Accidents”. The plan is reviewed by and filed with
    
    the Environmental Protection Bureau, and regular emergency training and emergency drills are conducted. Emergency
    
    measures in relation to dangerous chemicals are formulated in accordance with the environmental protection
    
    requirements. At the same time, necessary emergency supplies are provided with regularly inspections and updates.
    
    Environmental self-monitoring programme
    
    The Company has strictly complied with self-monitoring laws and regulations and conducted self-monitoring in
    
    accordance with environmental protection requirements to establish and perfect the corporate environmental
    
    management ledgers and materials. At present, self-monitoring is a combination of manual monitoring and automatic
    
    monitoring. At the same time, qualified units are engaged to conduct regular monitoring. Automatic monitoring
    
    projects include: Total wastewater discharge (COD, Ammonia nitrogen, flow rate); power plant, Alkali recovered
    
    furnace, and lime kiln exhaust emission (Sulphur dioxide, Nitrogen oxide, Smoke). Manually monitored items include:
    
    Daily monitoring of COD, Ammonia nitrogen, SS, chroma, pH, total phosphorus, and total nitrogen indicators. Sewage
    
    and other monitoring projects, unorganised exhaust emission, solid waste, and noise at the plant boundary, are
    
    monitored on a monthly or quarterly basis by qualified units engaged in accordance with the local environmental
    
    protection requirements in relation to each subsidiary.
    
    The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries
    
    are published on the national key pollution source information disclosure website and the provincial key pollution
    
    source information disclosure website.
    
    Other environmental information to be disclosed
    
    The relevant environmental protection information of the pollutant discharge permit information and the pollutant
    
    discharge permit requirements is announced on the national sewage discharge permit management information
    
    platform.
    
    Other environmental protection related information
    
    Other environmental protection related information is announced on the Company’s website.
    
    2017 ANNUAL REPORT 77
    
    3704827-t01fnar (Shandong Chenming) p.77 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXIX. Other matters of significance
    
    √ Applicable□ Not applicable
    
    1. Non-public issue of A shares
    
    At the 8th extraordinary meeting of the eighth session of the Board, relevant resolutions, including the Resolutions
    
    in Respect of the Extension of the Validity of the Resolutions in Respect of the Non-Public Issue of Shares of the
    
    Company were considered and approved. In view of the fact that the application for non-public issue of shares of the
    
    Company was still under review, it was proposed to extend the validity of the shareholders’ meeting resolutions in
    
    respect of the non-public issue of shares for a period of 12 months (i.e. 2 June 2018) to ensure the smooth progress
    
    of the non-public issue of shares and related matters. The Fourth Revision of Non-public Offering for 2016 was
    
    disclosed on 8 June 2017, and the Announcement on Adjustments to the Issue Price and Size for the Non-Public
    
    Issue of A Shares after Implementation of the 2016 Profit Distribution Plan was published on 26 July 2017.
    
    As of the disclosure date of the Report, the Company has not received the related approval of the CSRC. The
    
    Company will perform its obligations to disclose the related information on a timely basis based on the approval of the
    
    CSRC.2. Issue of medium-term notes with an amount of RMB3,000 million.
    
    The public issue of the 2017 first tranche of medium-term notes in the national inter-bank bond market was launched
    
    by the Company on 11 July 2017. The amount of the issue was RMB1,000 million with a nominal value of RMB100
    
    each at the interest rate of 6.80%.
    
    The public issue of the 2017 second tranche of medium-term notes in the national inter-bank bond market was
    
    launched by the Company on 27 September 2017. The amount of the issue was RMB2,000 million with a nominal
    
    value of RMB100 each at the interest rate of 6.30%.3. Establishment of Shanghai Chenming Industry Co., Ltd.
    
    In order to promote the diversified development of the Company, further expand its business scope, extend its
    
    market influence, enhance its overall strength and comprehensive competitiveness, and develop new sources of profit
    
    growth, the Company established a wholly-owned subsidiary in Shanghai named Shanghai Chenming Industry Co.,
    
    Ltd. with self-owned funds of RMB1,000 million.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-113) of the Company published on
    
    CNINFO on 26 September 2017.4. Capital increase in Chenming Finance Company
    
    In order to further improve the fund settlement, management and investment and financing standards, acquire more
    
    interbank funds and improve the profitability of Chenming Finance Company, the Company and Jiangxi Chenming
    
    Paper Co., Ltd. intended to increase the capital of Chenming Finance Company by RMB800 million and RMB200
    
    million with their own funds respectively. After the completion of the capital increase, the registered capital of
    
    Chenming Finance Company increased to RMB3,000 million from RMB2,000 million.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-120) of the Company published on
    
    CNINFO on 14 October 2017.
    
    78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.78 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XIX. Other matters of significance (Cont’d)
    
    5. Establishment of new financial leasing companies
    
    In order to promote the diversified development of the financial segment of the Group, further expand the business
    
    scope of the financial leasing business, enhance the overall strength and comprehensive competitiveness of the
    
    Company and create new sources of profit growth for the Company, the Company proposed to establish Shanghai
    
    Chenming Financial Leasing Co., Ltd. and Guangzhou Chenming Financial Leasing Co., Ltd in Shanghai and
    
    Guangzhou respectively.
    
    For details, please refer to the relevant announcements (announcement no.: 2017-114, 2017-143) of the Company
    
    published on CNINFO on 26 September 2017 and 16 November 2017.6. Disposal of 30% equity interest in Xuchang Chenming
    
    In order to further integrate resources of the Company, optimise its asset structure and reduce its management risk,
    
    the Resolution on the disposal of 30% equity interest in Xuchang Chenming was considered and approved at the
    
    eighteenth extraordinary meeting of the eighth session of the Board of the Company, pursuant to which the Company
    
    proposed to dispose of 30% equity interest in its controlling subsidiary Xuchang Chenming Paper Co., Ltd. through
    
    public tender.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-148) of the Company published on
    
    CNINFO on 28 November 2017.7. Issue of super & short-term commercial paper approved for registration
    
    In order to further expand the finance channels of the Company, lower the finance expenses, improve the debt
    
    structure and enhance the benefits of the Company, the Resolution on the issue of super & short-term commercial
    
    paper was considered and approved at the 2016 Annual General Meeting of the Company held on 21 April 2017. The
    
    issue of super & short-term commercial paper of the Company was filed and approved by the National Association of
    
    Financial Market Institutional Investors and received the acceptance of registration notice (Zhong Shi Xie Zhu [2017]
    
    SCP242), by which the Company was approved to issue super & short-term commercial paper with registered amount
    
    of RMB 15 billion. The registered amount is valid for 2 years from the date of receipt of the notice and can be issued
    
    in phases within the valid registration period.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-085) of the Company published on
    
    CNINFO on 5 August 2017.
    
    2017 ANNUAL REPORT 79
    
    3704827-t01fnar (Shandong Chenming) p.79 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXIX. Other matters of significance (Cont’d)
    
    8. Information disclosure index for 2017
    
    Announcement No. Subject matter Date of publication Publication website and index
    
    2017-001 Announcement on Estimated Annual Results for 2016 10 January 2017 http://www.cninfo.com.cn
    
    2017-002 Announcement on Result of the Issue of 2017 First Tranche of 10 January 2017 http://www.cninfo.com.cn
    
    Short-term Commercial Paper
    
    2017-003 Announcement on Result of the Issue of 2017 First Tranche of 12 January 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-004 Indicative Announcement on Subsidiary Receiving Subsidy 19 January 2017 http://www.cninfo.com.cn
    
    2017-005 Supplementary Announcement Subsidiary Receiving Subsidy 20 January 2017 http://www.cninfo.com.cn
    
    2017-006 Announcement in respect of Resolutions of the Fourth Meeting 18 February 2017 http://www.cninfo.com.cn
    
    of the Eighth Session of the Board of Directors
    
    2017-007 Notice of 2016 Annual General Meeting 18 February 2017 http://www.cninfo.com.cn
    
    2017-008 2016 Annual Report Summary 18 February 2017 http://www.cninfo.com.cn
    
    2017-009 Announcement in respect of Resolutions of the Fifth Meeting of the 18 February 2017 http://www.cninfo.com.cn
    
    Eighth Session of the Supervisory Committee
    
    2017-010 Announcement on Provision of Guarantee for General Credit Lines 18 February 2017 http://www.cninfo.com.cn
    
    of Relevant Subsidiaries
    
    2017-011 Announcement on External Investment (I) 18 February 2017 http://www.cninfo.com.cn
    
    2017-012 Announcement on Provision of Financial Support to Haiming 18 February 2017 http://www.cninfo.com.cn
    
    Mining and Related Party Transaction
    
    2017-013 Announcement on External Investment (II) 18 February 2017 http://www.cninfo.com.cn
    
    2017-014 Announcement on Expected Ordinary Connected Transactions 18 February 2017 http://www.cninfo.com.cn
    
    in 2017
    
    2017-015 Indicative Announcement 25 February 2017 http://www.cninfo.com.cn
    
    2017-016 Announcement on Asset Disposal 1 March 2017 http://www.cninfo.com.cn
    
    2017-017 Announcement in respect of Resolutions of the Seventh Extraordinary 7 March 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-018 Notice of 2016 Annual General Meeting 7 March 2017 http://www.cninfo.com.cn
    
    2017-019 Announcement in respect of Resolutions of the Fourth Extraordinary 7 March 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Supervisory Committee
    
    2017-020 Announcement on the Cancellation of Proposal for the 2016 Annual 8 March 2017 http://www.cninfo.com.cn
    
    General Meeting
    
    2017-021 Supplemental Notice of 2016 Annual General Meeting 8 March 2017 http://www.cninfo.com.cn
    
    2017-022 Announcement on the Distribution of Dividend for Preference Share 10 March 2017 http://www.cninfo.com.cn
    
    2017-023 Announcement on Result of the Issue of 2017 Second Tranche 10 March 2017 http://www.cninfo.com.cn
    
    of Super & Short-term Commercial Paper
    
    2017-024 Full Report of Changes in Equity 15 March 2017 http://www.cninfo.com.cn
    
    2017-025 Announcement on Result of the Issue of 2017 Third Tranche of 17 March 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-026 Announcement on Entering into a Strategic Cooperation Agreement 21 March 2017 http://www.cninfo.com.cn
    
    with the People’s Government of Weidu District, Xuchang City
    
    2017-027 Announcement on Approval of Public Issuance of Corporate Bonds 24 March 2017 http://www.cninfo.com.cn
    
    by the China Securities Regulatory Commission
    
    80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.80 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XIX. Other matters of significance (Cont’d)
    
    8. Information disclosure index for 2017 (Cont’d)
    
    Announcement No. Subject matter Date of publication Publication website and index
    
    2017-028 Indicative Announcement on Subsidiary Receiving Subsidy 31 March 2017 http://www.cninfo.com.cn
    
    2017-029 Second Supplementary Notice of the 2016 Annual General Meeting 6 April 2017 http://www.cninfo.com.cn
    
    2017-030 Announcement on Estimated Results for the First Quarter of 2017 11 April 2017 http://www.cninfo.com.cn
    
    2017-031 Announcement on Entering into a Strategic Cooperation Agreement 11 April 2017 http://www.cninfo.com.cn
    
    with Qilu Bank
    
    2017-032 Announcement in respect of Resolutions of the Eighth Extraordinary 13 April 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-033 Announcement in respect of Resolutions of the Fifth Extraordinary 13 April 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Supervisory Committee
    
    2017-034 Announcement in Relation to the Extension of the Validity 13 April 2017 http://www.cninfo.com.cn
    
    of the Resolutions in Respect of the Non-Public Issue of Shares
    
    of the Company and the Authorisation Granted to the Board to Deal
    
    with the Relevant Matters
    
    2017-035 Notice of 2017 First Extraordinary General Meeting 13 April 2017 http://www.cninfo.com.cn
    
    2017-036 Notice of the 2017 First Domestic Listed Share Class Meeting and 2017 13 April 2017 http://www.cninfo.com.cn
    
    First Overseas Listed Share Class Meeting
    
    2017-037 Announcement on Result of the Issue of 2017 Second Tranche of 18 April 2017 http://www.cninfo.com.cn
    
    Short-term Commercial Paper
    
    2017-038 Indicative Announcement on 2016 Annual General Meeting 19 April 2017 http://www.cninfo.com.cn
    
    2017-039 Announcement in respect of Resolutions of the Ninth Extraordinary 19 April 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-040 Announcement in respect of Resolutions of the Sixth Extraordinary 19 April 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Supervisory Committee
    
    2017-041 Announcement on Third Revision of Non-public Offering for 2016 19 April 2017 http://www.cninfo.com.cn
    
    2017-042 Announcement on Dilution of Current Returns and Remedial Measures 19 April 2017 http://www.cninfo.com.cn
    
    upon Non-public Offering (Third Revision)
    
    2017-043 Announcement on Resolutions of the 2016 Annual General Meeting 22 April 2017 http://www.cninfo.com.cn
    
    2017-044 Announcement on Result of the Issue of 2017 Fourth Tranche of 26 April 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-045 Announcement in respect of Resolutions of the Fifth Meeting of the 28 April 2017 http://www.cninfo.com.cn
    
    Eighth Session of the Board of Directors
    
    2017-046 Announcement on Provision of Financial Support to Investee 28 April 2017 http://www.cninfo.com.cn
    
    2017-047 Announcement in respect of Resolutions of the Sixth Meeting of the 28 April 2017 http://www.cninfo.com.cn
    
    Eighth Session of the Supervisory Committee
    
    2017-048 2017 First Quarterly Report 28 April 2017 http://www.cninfo.com.cn
    
    2017-049 Indicative Announcement on Receipt of Subsidy 28 April 2017 http://www.cninfo.com.cn
    
    2017-050 Announcement on the Total New Borrowings for the Year Exceeding 20% 9 May 2017 http://www.cninfo.com.cn
    
    of the Net Assets as at the End of the Previous Year
    
    2017-051 Announcement on Additional Resolutions Proposed at the 2017 16 May 2017 http://www.cninfo.com.cn
    
    First Extraordinary General Meeting
    
    2017-052 Supplementary Notice of 2017 First Extraordinary General Meeting 16 May 2017 http://www.cninfo.com.cn
    
    2017 ANNUAL REPORT 81
    
    3704827-t01fnar (Shandong Chenming) p.81 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXIX. Other matters of significance (Cont’d)
    
    8. Information disclosure index for 2017 (Cont’d)
    
    Announcement No. Subject matter Date of publication Publication website and index
    
    2017-053 Second Supplementary Notice of the 2017 First Domestic Listed Share 16 May 2017 http://www.cninfo.com.cn
    
    Class Meeting and 2017 First Overseas Listed Share Class Meeting
    
    2017-054 Announcement on Pledge of Shares by Shareholders 1 June 2017 http://www.cninfo.com.cn
    
    2017-055 Announcement on Resolution of the 2017 First Extraordinary 3 June 2017 http://www.cninfo.com.cn
    
    General Meeting
    
    2017-056 Poll Results Announcement of the 2017 First Domestic A Shareholders’ 3 June 2017 http://www.cninfo.com.cn
    
    and B Shareholders’ Class Meeting and the 2017 First Overseas
    
    H Shareholders’ Class Meeting
    
    2017-057 Announcement on Release of Stock Pledge by Shareholders 3 June 2017 http://www.cninfo.com.cn
    
    2017-058 Announcement on Pledge of Shares by Shareholders 8 June 2017 http://www.cninfo.com.cn
    
    2017-059 Announcement in respect of Resolutions of the Tenth Extraordinary 8 June 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-060 Announcement in respect of Resolutions of the Seventh Extraordinary 8 June 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Supervisory Committee
    
    2017-061 Announcement on Entering into Conditional Share Purchase Agreement 8 June 2017 http://www.cninfo.com.cn
    
    and Connected Transactions under the Non-public Offering of A Share
    
    (Second Revision)
    
    2017-062 Announcement on Dilution of Current Returns and Remedial Measures 8 June 2017 http://www.cninfo.com.cn
    
    upon Non-public Offering (Fourth Revision)
    
    2017-063 Announcement on Adjustment to the Price Determination Date 8 June 2017 http://www.cninfo.com.cn
    
    for the Non-public Issue of A Shares
    
    2017-064 Notice of 2017 Second Extraordinary General Meeting 8 June 2017 http://www.cninfo.com.cn
    
    2017-065 Notice of the 2017 Second Domestic Listed Share Class Meeting and 8 June 2017 http://www.cninfo.com.cn
    
    2017 Second Overseas Listed Share Class Meeting
    
    2017-066 Announcement on the Implementation of Dividend Distribution to Holders 9 June 2017 http://www.cninfo.com.cn
    
    of A Shares and B Shares for 2016
    
    2017-067 Indicative Announcement 17 June 2017 http://www.cninfo.com.cn
    
    2017-068 Announcement on Resumption of Trading 17 June 2017 http://www.cninfo.com.cn
    
    2017-069 Indicative Announcement 23 June 2017 http://www.cninfo.com.cn
    
    2017-070 Indicative Announcement 30 June 2017 http://www.cninfo.com.cn
    
    2017-071 Indicative Announcement 3 July 2017 http://www.cninfo.com.cn
    
    2017-072 Indicative Announcement of 2017 Second Extraordinary General Meeting, 8 July 2017 http://www.cninfo.com.cn
    
    2017 Second Class Meeting For Domestic Shareholders and 2017
    
    Second Class Meeting For Overseas Shareholders
    
    2017-073 Announcement on the Accumulated New Borrowing of the Current Year 8 July 2017 http://www.cninfo.com.cn
    
    2017-074 Announcement on Estimated Interim Results for 2017 10 July 2017 http://www.cninfo.com.cn
    
    2017-075 Announcement on Result of the Issue of 2017 First Tranche of 15 July 2017 http://www.cninfo.com.cn
    
    Medium-term Notes
    
    2017-076 Indicative Announcement 17 July 2017 http://www.cninfo.com.cn
    
    2017-077 Announcement in Respect of Resolutions of The Eleventh Extraordinary 25 July 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-078 Announcement on the Commencement of Financial Leasing Business 25 July 2017 http://www.cninfo.com.cn
    
    2017-079 Announcement on the Provision of Guarantee to Wholly-Owned 25 July 2017 http://www.cninfo.com.cn
    
    Subsidiary and Investee
    
    82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.82 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XIX. Other matters of significance (Cont’d)
    
    8. Information disclosure index for 2017 (Cont’d)
    
    Announcement No. Subject matter Date of publication Publication website and index
    
    2017-080 Notice of 2017 Third Extraordinary General Meeting 25 July 2017 http://www.cninfo.com.cn
    
    2017-081 Announcement in Respect of Resolutions of 2017 Second Extraordinary 25 July 2017 http://www.cninfo.com.cn
    
    General Meeting, 2017 Second Class Meeting For Domestic
    
    Shareholders and 2017 Second Class Meeting For
    
    Overseas Shareholders
    
    2017-082 Announcement on Adjustments to the Issue Price and Size for the 26 July 2017 http://www.cninfo.com.cn
    
    Non-Public Issue of A Shares after Implementation of the 2016
    
    Profit Distribution Plan
    
    2017-083 Announcement on Release of Stock Pledge by Shareholders 26 July 2017 http://www.cninfo.com.cn
    
    2017-084 Indicative Announcement 31 July 2017 http://www.cninfo.com.cn
    
    2017-085 Announcement on Issue of Super & Short-term Commercial 5 August 2017 http://www.cninfo.com.cn
    
    Paper Approved for Registration
    
    2017-086 Announcement in respect of Resolutions of the Twelfth Extraordinary 9 August 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-087 Announcement on the Distribution of Dividend for Second Tranche 9 August 2017 http://www.cninfo.com.cn
    
    of Preference Share
    
    2017-088 Announcement on Pledge of Shares by Shareholders 9 August 2017 http://www.cninfo.com.cn
    
    2017-089 Announcement on Result of the Issue of 2017 Fifth Tranche of 12 August 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-090 Announcement on 2017 Public Issue of Corporate Bonds to 15 August 2017 http://www.cninfo.com.cn
    
    Qualified Investors (First Tranche)
    
    2017-091 Announcement in respect of Resolutions of the Sixth Meeting of the 16 August 2017 http://www.cninfo.com.cn
    
    Eighth Session of the Board of Directors
    
    2017-092 2017 Interim Report Summary 16 August 2017 http://www.cninfo.com.cn
    
    2017-093 Announcement on External Investment 16 August 2017 http://www.cninfo.com.cn
    
    2017-094 Announcement on the Provision of Guarantee to Wholly-Owned Subsidiary 16 August 2017 http://www.cninfo.com.cn
    
    2017-095 Announcement on Release of Stock Pledge by Shareholders 16 August 2017 http://www.cninfo.com.cn
    
    2017-096 Announcement on the Implementation of the Distribution of Residual 16 August 2017 http://www.cninfo.com.cn
    
    Profits of 2016 to Preference Shareholders
    
    2017-097 Announcement on the Coupon Rate of 2017 Public Issue of Corporate 17 August 2017 http://www.cninfo.com.cn
    
    Bonds to Qualified Investors (First Tranche)
    
    2017-098 Announcement on the Participation in 2017 Online Collective Reception 19 August 2017 http://www.cninfo.com.cn
    
    Activity for Investors of Listed Companies in Shandong Jurisdiction
    
    2017-099 Announcement on the Result of 2017 Public Issue of Corporate Bonds 22 August 2017 http://www.cninfo.com.cn
    
    to Qualified Investors (First Tranche)
    
    2017-100 Supplementary Announcement of 2017 Third Extraordinary 25 August 2017 http://www.cninfo.com.cn
    
    General Meeting
    
    2017-101 Supplementary Notice of 2017 Third Extraordinary General Meeting 25 August 2017 http://www.cninfo.com.cn
    
    2017-102 Indicative Announcement 25 August 2017 http://www.cninfo.com.cn
    
    2017-103 Indicative Announcement 29 August 2017 http://www.cninfo.com.cn
    
    2017-104 Announcement on Result of the Issue of 2017 Sixth Tranche of 9 September 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017 ANNUAL REPORT 83
    
    3704827-t01fnar (Shandong Chenming) p.83 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXIX. Other matters of significance (Cont’d)
    
    8. Information disclosure index for 2017 (Cont’d)
    
    Announcement No. Subject matter Date of publication Publication website and index
    
    2017-105 Announcement on Release of Stock Pledge by Shareholders 9 September 2017 http://www.cninfo.com.cn
    
    2017-106 Indicative Announcement 12 September 2017 http://www.cninfo.com.cn
    
    2017-107 Announcement on the Distribution of Dividend for Third Tranche 13 September 2017 http://www.cninfo.com.cn
    
    of Preference Share
    
    2017-108 Poll Results Announcement of the 2017 Third Extraordinary 13 September 2017 http://www.cninfo.com.cn
    
    General Meeting
    
    2017-109 Announcement on Completion of Transfer of Shares Granted to Chairman 15 September 2017 http://www.cninfo.com.cn
    
    2017-110 Announcement On Result Of The Issue Of 2017 Seventh Tranche Of 22 September 2017 http://www.cninfo.com.cn
    
    Super & Short-Term Commercial Paper
    
    2017-111 Corrigendum to 2017 Interim Report 22 September 2017 http://www.cninfo.com.cn
    
    2017-112 Announcement in respect of Resolutions of the Thirteenth Extraordinary 26 September 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-113 Announcement on External Investment 26 September 2017 http://www.cninfo.com.cn
    
    2017-114 Announcement on External Investment 26 September 2017 http://www.cninfo.com.cn
    
    2017-115 Announcement on the Listing of 2017 Public Issue of Corporate Bonds 27 September 2017 http://www.cninfo.com.cn
    
    to Qualified Investors (First Tranche)
    
    2017-116 Announcement on Result of the Issue of 2017 Second Tranche of 30 September 2017 http://www.cninfo.com.cn
    
    Medium-term Notes
    
    2017-117 Announcement on Pledge of Shares by Shareholders 30 September 2017 http://www.cninfo.com.cn
    
    2017-118 Announcement on Estimated Results for the First Three Quarters of 2017 11 October 2017 http://www.cninfo.com.cn
    
    2017-119 Announcement in respect of Resolutions of the Fourteenth Extraordinary 14 October 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-120 Announcement on External Investment 14 October 2017 http://www.cninfo.com.cn
    
    2017-121 Announcement on External Investment 14 October 2017 http://www.cninfo.com.cn
    
    2017-122 Announcement on Provision of Secured Borrowings to Xuchang Chenming 14 October 2017 http://www.cninfo.com.cn
    
    2017-123 Notice of 2017 Fourth Extraordinary General Meeting 14 October 2017 http://www.cninfo.com.cn
    
    2017-124 Announcement on Result of the Issue of 2017 Eighth Tranche of 14 October 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-125 Announcement in respect of Resolutions of the Fifteenth Extraordinary 20 October 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-126 Announcement on External Investment 20 October 2017 http://www.cninfo.com.cn
    
    2017-127 Announcement on Pledge of Shares by Shareholders 20 October 2017 http://www.cninfo.com.cn
    
    2017-128 Indicative Announcement 20 October 2017 http://www.cninfo.com.cn
    
    2017-129 Announcement on Result of the Issue of 2017 Ninth Tranche of 24 October 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-130 2017 Third Quarterly Report 26 October 2017 http://www.cninfo.com.cn
    
    2017-131 Announcement on Result of the Issue of 2017 Tenth Tranche of 28 October 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-132 Announcement on Resignation of Supervisor 30 October 2017 http://www.cninfo.com.cn
    
    2017-133 Announcement in respect of Resolutions of the Sixteenth Extraordinary 31 October 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-134 Announcement on the Transfer of 45% Equity Interest in Hongtai 31 October 2017 http://www.cninfo.com.cn
    
    Real Estate to the Company
    
    84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.84 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    VII Material Matters
    
    XIX. Other matters of significance (Cont’d)
    
    8. Information disclosure index for 2017 (Cont’d)
    
    Announcement No. Subject matter Date of publication Publication website and index
    
    2017-135 Announcement on the Provision of Guarantee to the Syndicated Loan 31 October 2017 http://www.cninfo.com.cn
    
    of Zhanjiang Chenming
    
    2017-136 Announcement on Pledge of Shares by Shareholders 31 October 2017 http://www.cninfo.com.cn
    
    2017-137 Announcement on Release of Stock Pledge by Shareholders 3 November 2017 http://www.cninfo.com.cn
    
    2017-138 Announcement on Increase in Shareholding by Senior Management 10 November 2017 http://www.cninfo.com.cn
    
    2017-139 Announcement on Resignation of General Manager 10 November 2017 http://www.cninfo.com.cn
    
    2017-140 Announcement on Additional Resolutions Proposed at the 2017 11 November 2017 http://www.cninfo.com.cn
    
    Fourth Extraordinary General Meeting
    
    2017-141 Supplemental Notice of 2017 Fourth Extraordinary General Meeting 11 November 2017 http://www.cninfo.com.cn
    
    2017-142 Announcement in respect of Resolutions of the Seventeenth Extraordinary 16 November 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-143 Announcement on External Investment 16 November 2017 http://www.cninfo.com.cn
    
    2017-144 Announcement on External Investment 16 November 2017 http://www.cninfo.com.cn
    
    2017-145 Announcement on Result of the Issue of 2017 Eleventh Tranche of 18 November 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-146 Announcement on Receipt of Government Subsidy 25 November 2017 http://www.cninfo.com.cn
    
    2017-147 Announcement in respect of Resolutions of the Eighteenth Extraordinary 28 November 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-148 Announcement on the Disposal of 30% Equity Interest in 28 November 2017 http://www.cninfo.com.cn
    
    Xuchang Chenming
    
    2017-149 Poll Results Announcement of the 2017 Fourth Extraordinary 1 December 2017 http://www.cninfo.com.cn
    
    General Meeting
    
    2017-150 Announcement on Release of Stock Pledge by Shareholders 13 December 2017 http://www.cninfo.com.cn
    
    2017-151 Announcement on Pledge of Shares by Shareholders 16 December 2017 http://www.cninfo.com.cn
    
    2017-152 Announcement on the Results of Redemption and Delisting of 20 December 2017 http://www.cninfo.com.cn
    
    “12 Chenming Bond”
    
    2017-153 Announcement on Result of the Issue of 2017 Twelfth Tranche of 21 December 2017 http://www.cninfo.com.cn
    
    Super & Short-term Commercial Paper
    
    2017-154 Announcement on Pledge of Shares by Shareholders 23 December 2017 http://www.cninfo.com.cn
    
    2017-155 Announcement on Progress of Receipt of Government Subsidy 28 December 2017 http://www.cninfo.com.cn
    
    2017-156 Announcement in respect of Resolutions of the Nineteenth Extraordinary 30 December 2017 http://www.cninfo.com.cn
    
    Meeting of the Eighth Session of the Board of Directors
    
    2017-157 Announcement on the Provision of Guarantee for the Issue of USD Bonds 30 December 2017 http://www.cninfo.com.cn
    
    2017-158 Announcement on External Investment(I) 30 December 2017 http://www.cninfo.com.cn
    
    2017-159 Announcement on External Investment (II) 30 December 2017 http://www.cninfo.com.cn
    
    2017-160 Announcement on the Commencement of Financial Leasing Business 30 December 2017 http://www.cninfo.com.cn
    
    2017-161 Announcement in respect of Changes in Accounting Policy and 30 December 2017 http://www.cninfo.com.cn
    
    Accounting Estimation
    
    2017-162 Notice of 2018 First Extraordinary General Meeting 30 December 2017 http://www.cninfo.com.cn
    
    2017-163 Announcement on Release of Stock Pledge by Shareholders 30 December 2017 http://www.cninfo.com.cn
    
    2017-164 Announcement on Receipt of Government Subsidy 30 December 2017 http://www.cninfo.com.cn
    
    2017-165 Announcement on Resolution of the Eighth Extraordinary Meeting of the 30 December 2017 http://www.cninfo.com.cn
    
    Eighth Session of the Supervisory Committee
    
    2017 ANNUAL REPORT 85
    
    3704827-t01fnar (Shandong Chenming) p.85 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33VII Material MattersXX. Matters of significant of subsidiaries of the Company
    
    √ Applicable□ Not applicable
    
    1. Construction of 510,000-tonne high-end cultural paper project of Shouguang Meilun
    
    In order to make full use of the existing pulping capacity and cost advantages of Zhanjiang Chenming Pulp & Paper
    
    Co., Ltd. and optimise the Company’s market layout, it was proposed to construct a new production line with an
    
    annual output of 510,000-tonne high-end cultural paper in the original product line with a capacity of 600,000-tonne
    
    coating linerboard.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-013) of the Company published on
    
    CNINFO on 18 February 2017.2. Transfer of 45% equity interest in Hongtai Real Estate to Shanghai Chenming Industry
    
    Shanghai Chenming Industry Co., Ltd. and Shanghai Hongkelong Investment Co., Ltd. entered into the Equity
    
    Acquisition Agreement. Based on the appraised value of the total shareholders’ equity of Shanghai Hongtai Real
    
    Estate Co., Ltd. of RMB 3,908,397 thousand, Shanghai Chenming proposed to acquire 45% equity interest in and
    
    the loan due from Hongtai Real Estate held by Hongkelong at a consideration of RMB1,714,356,217.76, in which the
    
    equity interest amounted to RMB 1,590,646,717.76 and loan amounted to RMB123,709,500.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-134) of the Company published on
    
    CNINFO on 31 October 2017.3. Construction of Differential Viscose Fibre and Ancillary Production Facilities Project of Huanggang
    
    Chenming
    
    In order to expand the industrial chain of the Company, facilitate the project construction of Huanggang Chenming,
    
    optimise the industrial deployment, cultivate new sources of profit growth and further enhance the competitiveness
    
    of the Company, Huanggang Chenming intended to establish a new production line with annual production capacity
    
    of 500,000 tonnes of differential viscose fibre and ancillary production facilities with annual production capacity of
    
    320,000 tonnes of caustic soda, 170,000 tonnes of hydrogen peroxide, 150,000 tonnes of chloroacetic acid, 240,000
    
    tonnes of epichlorohydrin, 260,000 tonnes of refined glycerine, 50,000 tonnes of carbon disulfide, 420,000 tonnes of
    
    sulfuric acid and 232,000 tonnes of calcium chloride, as well as the site construction of ancillary production facilities,
    
    and living quarters in Huanggang City, Hubei Province.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-158) of the Company published on
    
    CNINFO on 30 December 2017.4. Construction of Cogeneration Project in the Chemical Industrial Park of Huanggang Chenming
    
    In order to facilitate the project construction of Huanggang Chenming, satisfy the steam load of Huanggang
    
    Chenming’s viscose and ancillary chemicals project and provide stable steam supply to enterprises and public service
    
    units in the chemical industrial park with the construction of supporting facilities of high standards and high-quality
    
    landscape and environment, Huanggang Chenming intended to construct two 125MW high-temperature and high-
    
    pressure extraction back pressure steam generators and four 580t/h circulating fluidised bed boilers in Huanggang
    
    City, Hubei Province, as the source of heat supply for the industrial park with related supporting facilities.
    
    For details, please refer to the relevant announcement (announcement no.: 2017-159) of the Company published on
    
    CNINFO on 30 December 2017.
    
    86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.86 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:33
    
    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
    
    Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage
    
    I. Restricted shares 7,787,180 0.40% 0 0 0 147,921 147,921 7,935,101 0.41%
    
    1. Shares held by other
    
    domestic investors 7,787,180 0.40% 0 0 0 147,921 147,921 7,935,101 0.41%
    
    Including: shares held
    
    by domestic
    
    natural persons 7,787,180 0.40% 0 0 0 147,921 147,921 7,935,101 0.41%II. Non-restricted shares 1,928,618,287 99.58% 0 0 0 -147,921 -147,921 1,928,470,366 99.59%1. RMB ordinary shares 1,105,591,276 57.07% 0 0 0 -201,721 -201,721 1,105,389,555 57.08%2. Domestic listed
    
    foreign shares 470,823,511 24.32% 0 0 0 53,800 53,800 470,877,311 24.32%
    
    3. Overseas listed
    
    foreign shares 352,203,500 18.19% 0 0 0 0 0 352,203,500 18.19%III. Total number of shares 1,936,405,467 100.00% 0 0 0 0 0 1,936,405,467 100.00%The reasons for such changes
    
    √ Applicable □ Not applicable
    
    Before the change, the number of restricted shares held by domestic natural persons decreased by 147,921 shares
    
    from 7,787,180 shares to 7,935,101 shares due to the fact that:
    
    According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and Senior
    
    Management of the Listed Companies of Shenzhen Stock Exchange, 196,327 RMB ordinary shares (A shares) without
    
    restriction granted to the Senior Management were put under restriction; 45,000 RMB ordinary shares (A shares)
    
    without restriction additionally acquired by the Senior Management and supervisors were put under restriction;
    
    and 46,200 domestic-listed foreign RMB shares (B shares) without restriction additionally acquired by the Senior
    
    Management were put under restriction during the reporting period;
    
    39,606 restricted RMB ordinary shares (A shares) held by the Senior Management who had resigned for more than
    
    half a year were released; 100,000 domestic-listed foreign RMB shares (B shares) held by the Senior Management
    
    who had resigned for more than half a year without restriction were released.
    
    Approval of changes in shareholding
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 87
    
    3704827-t01fnar (Shandong Chenming) p.87 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40VIII Changes in Share Capital and ShareholdersI. Changes in shares (Cont’d)
    
    1. Changes in shares (Cont’d)
    
    Transfer of shares arising from changes in shareholding
    
    √ Applicable □ Not applicable
    
    The Company issued the Announcement on Completion of Transfer of Shares Granted to Chairman (announcement
    
    no.: 2017-109) on 15 September 2017 in relation to the transfer of the 261,769 tradable A shares without restriction
    
    held by the former chairman of the Company, Mr. Chen Yongxing before his death to the current chairman, Mr. Chen
    
    Hongguo. The transfer was filed to China Securities Depository and Clearing Company Limited, Shenzhen Branch and
    
    the date of transfer was 11 September 2017.
    
    As at the disclosure date of this report, Mr. Chen Hongguo held 6,696,296 A shares of the Company, representing
    
    0.3458% of the total share capital of the Company.
    
    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 applicable2. Changes in restricted shares
    
    □ Applicable √ Not applicable
    
    88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.88 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40
    
    VIII Changes in Share Capital and Shareholders
    
    II. Issuance and listing of securities
    
    1. Issuance of securities (excluding preference shares) during the reporting period
    
    □ Applicable √ Not applicable2. Changes in the total number of shares and structure of shareholders and the structure of the assets
    
    and liabilities of the Company
    
    □ Applicable √ Not applicable3. Existing staff shares
    
    □ Applicable √ Not applicable
    
    III. Shareholders and beneficial controllers
    
    1. Total number of shareholders and shareholdings
    
    Unit: share
    
    Total number of 94,435, of which 74,291 Total number of 97,370, of which 78,263 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 19,731 were holders of shares as at the end of 18,735 were holders of preference shares with preference shares with
    
    of the reporting period B shares and 413 were the month prior to the B shares and 372 were restored voting right restored voting right as
    
    holders of H shares publication date of this holders of H shares as at the end of the at the end of the month
    
    annual report reporting period prior to the disclosure
    
    date of the annual report
    
    2017 ANNUAL REPORT 89
    
    3704827-t01fnar (Shandong Chenming) p.89 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40VIII Changes in Share Capital and ShareholdersIII. Shareholders and beneficial controllers (Cont’d)
    
    1. Total number of shareholders and shareholdings (Cont’d)
    
    Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
    
    Changes
    
    (increase or
    
    Number of decrease)
    
    shares held at during the Number of Number of
    
    Percentage of the end of the reporting restricted non-restrict
    
    Name of shareholders Nature of shareholders shareholding reporting period period shares held shares held Share pledged or locked-up
    
    Status of shares Number
    
    SHOUGUANG CHENMING HOLDINGS State-owned legal person 15.13% 293,003,657 0 0 293,003,657 Pledged 171,599,100
    
    COMPANY LIMITED
    
    HKSCC NOMINEES LIMITED Overseas legal person 12.85% 248,867,250 2,288,100 0 248,867,250
    
    CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 12.54% 242,754,375 69,660,975 0 242,754,375
    
    CENTRAL HUIJIN ASSET MANAGEMENT LTD. Sate-owned legal person 2.07% 40,137,900 0 0 40,137,900
    
    NATIONAL SOCIAL SECURITY FUND 403 Others 0.61% 11,853,596 7,111,563 0 11,853,596
    
    VANGUARD EMERGING MARKETS Overseas legal person 0.44% 8,608,238 0 0 8,608,238
    
    STOCK INDEX FUND
    
    JIAO Yanxi Domestic nature person 0.37% 7,111,563 7,111,563 0 7,111,563
    
    CHEN Hongguo Domestic nature person 0.35% 6,696,296 261,769 5,022,222 1,674,074
    
    LSV EMERGING MARKETS EQUITY FUND, L.P. Overseas legal person 0.32% 6,102,800 0 0 6,102,800
    
    VANGUARD TOTAL INTERNATIONAL Overseas legal person 0.31% 6,088,072 509,267 0 6,088,072
    
    STOCK INDEX FUND
    
    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. Shareholder Chen Hongguo is the legal representative, chairman and general manager of Shouguang
    
    Chenming Holdings Company Limited. 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.
    
    90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.90 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40
    
    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
    
    Name of shareholders reporting 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 248,867,250 Overseas listed 248,867,250
    
    foreign shares
    
    CHENMING HOLDINGS (HONG KONG) LIMITED 242,754,375 Domestic listed 140,478,375
    
    foreign shares
    
    Overseas listed 102,276,000
    
    foreign shares
    
    CENTRAL HUIJIN ASSET MANAGEMENT LTD. 40,137,900 RMB ordinary shares 40,137,900
    
    NATIONAL SOCIAL SECURITY FUND 403 11,853,596 RMB ordinary shares 11,853,596
    
    VANGUARD EMERGING MARKETS 8,608,238 Domestic listed 8,608,238
    
    STOCK INDEX FUND foreign shares
    
    JIAO Yanxi 7,111,563 RMB ordinary shares 7,111,563
    
    LSV EMERGING MARKETS EQUITY FUND, L.P. 6,102,800 Domestic listed 6,102,800
    
    foreign shares
    
    VANGUARD TOTAL INTERNATIONAL 6,088,072 Domestic listed 6,088,072
    
    STOCK INDEX FUND foreign shares
    
    JIN Xing 5,789,200 Domestic listed 5,789,200
    
    foreign shares
    
    Connected relationship or connected A shareholder, Chenming Holdings (Hong Kong) Limited, which
    
    party relationship among the top ten is an overseas legal person, is a wholly-owned subsidiary
    
    shareholders of non-restricted shares, of a shareholder, Shouguang Chenming Holdings Company
    
    and between the top ten shareholders of Limited, which is a state-owned legal person. Hence, they are
    
    non-restricted shares and the persons acting in concert under Administration of Disclosure of
    
    top ten shareholders 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.
    
    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.
    
    2017 ANNUAL REPORT 91
    
    3704827-t01fnar (Shandong Chenming) p.91 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40VIII Changes in Share Capital and ShareholdersIII. 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 Chen Hongguo 30 December 78348518-9 Investment in paper
    
    Holdings Company Limited 2005 making, electricity,
    
    heat and arboriculture
    
    by its own capital.
    
    Shareholdings of controlling Save for the Company, Shouguang Chenming Holdings Company Limited does not
    
    shareholders who have have control over or hold any equity interest of other domestic or overseas listed
    
    control or hold shares in companies.
    
    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 Fu Xingang 1 August 1991 F5108355-4 Responsible for the
    
    Supervision and management and
    
    Administration Office of capital operation of the
    
    Shouguang City 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 during over or hold any equity interest of other domestic or overseas
    
    the reporting period listed companies.
    
    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.
    
    92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.92 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40
    
    VIII Changes in Share Capital and Shareholders
    
    III. Shareholders and beneficial controllers (Cont’d)
    
    3. Beneficial owner of the Company (Cont’d)
    
    Chart illustrating the relationship between the Company and the beneficial owner
    
    Beneficial owner controlling the Company through trust or other asset management method
    
    □ Applicable √ Not applicable4. Other legal person shareholders interested in over 10% of the shares of the Company
    
    □ Applicable √ Not applicable5. Restrictions on decrease in shareholding by controlling shareholders, beneficial owner, reorganising
    
    party and other undertaking parties
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 93
    
    3704827-t01fnar (Shandong Chenming) p.93 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:40IX Preference Shares√ Applicable □ Not applicable
    
    I. Issue and listing of preference shares during the past three years at the end of the reporting
    
    period
    
    √ Applicable □ Not applicable
    
    Issue price With listing
    
    (RMB/ Coupon Issue size permission Information of Information of
    
    Method Issue date share) rate (share) Listing date (share) Delisting date use of proceeds changes to proceeds
    
    Private 16 March 2016 100 4.36% 22,500,000 8 April 2016 22,500,000 NA http://www.cninfo.com.cn Not applicable
    
    Private 16 August 2016 100 5.17% 10,000,000 12 September 2016 10,000,000 NA http://www.cninfo.com.cn Not applicable
    
    Private 21 September 2016 100 5.17% 12,500,000 24 October 2016 12,500,000 NA http://www.cninfo.com.cn Not applicableII. Holders of preference shares and their shareholdings
    
    Unit: share
    
    Total number of shareholders of 7 Total number of shareholders of 7
    
    preference shares as at the end of preference shares as at the end of
    
    the reporting period the month prior to the publication
    
    date of this annual report
    
    Holders holdings more than 5% of the preference shares of the Company or top ten holders of preference shares
    
    Changes
    
    (increase or
    
    Number of decrease)
    
    shares held at during the Number of Number of
    
    Percentage of the end of the reporting restricted non-restrict
    
    Name of shareholders Nature of shareholders shareholding reporting period period shares held shares held Share pledged or locked-up
    
    Status of shares Number
    
    BEIJING YIBEN ZHONGXING Domestic non-state- 27.78% 12,500,000 0 0 12,500,000 Pledged 12,500,000
    
    INVESTMENT MANAGEMENT CO., LTD. owned legal person
    
    BANK OF COMMUNICATIONS Others 22.44% 10,100,000 0 0 10,100,000
    
    INTERNATIONAL TRUST CO., LTD. –
    
    HUILI NO.167 SINGLE CAPITAL TRUST
    
    BANK OF COMMUNICATIONS Others 14.22% 6,400,000 0 0 6,400,000
    
    INTERNATIONAL TRUST CO., LTD. – HUILI
    
    NO.136 SINGLE CAPITAL TRUST
    
    QILU BANK CO., LTD. - QILU BANK QUANXIN Others 13.33% 6,000,000 0 0 6,000,000
    
    WEALTH MANAGEMENT PRODUCT SERIES
    
    HENGFENG BANK CO., LTD. Domestic non-state- 11.11% 5,000,000 0 0 5,000,000
    
    owned legal person
    
    SHANGHAI STATE-OWNED State-owned legal person 6.67% 3,000,000 0 0 3,000,000
    
    ASSETS OPERATION CO., LTD.
    
    NCF - MINSHENG BANK - CHINA FORTUNE Others 4.44% 2,000,000 0 0 2,000,000
    
    INTERNATIONAL TRUST – CHINA
    
    FORTUNE TRUST?MIN XIN NO. 11
    
    SINGLE CAPITAL TRUST
    
    Connected relationship or connected The aforesaid holders of preference shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD.
    
    party relationship among the top ten - HUILI NO.167 SINGLE CAPITAL TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO.,
    
    holders of preference shares, and LTD. - HUILI NO.136 SINGLE CAPITAL TRUST”, are persons acting in concert. Save for the above, it is not aware
    
    between the top ten holders of that the remaining holders of preference shares are persons acting in concert, and it is also not aware whether
    
    preference shares and the top ten there is any connected relationship between the above holders of preference shares and top ten holders of
    
    holders of ordinary shares ordinary shares.
    
    94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.94 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:42
    
    IX Preference Shares
    
    III. Profit distribution for preference shares
    
    √ Applicable □ Not applicable
    
    Profit distribution for preference shares during the reporting period
    
    √ Applicable □ Not applicable
    
    Whether it is in
    
    compliance with Whether it
    
    the conditions Whether participates
    
    Distributed and the relevant Way of it was an in distribution
    
    Dividend amount procedures of dividend accumulated of remaining
    
    Date of Distribution Ratio (tax inclusive) distribution payment dividend profit
    
    17 March 2017 4.36% 98,100,000.00 Yes Cash No Yes
    
    16 August 2017 5.17% 51,700,000.00 Yes Cash No Yes
    
    24 August 2017 5.30% 119,277,108.41 Yes Cash No Yes
    
    21 September 2017 5.17% 64,625,000.00 Yes Cash No Yes
    
    Distribution for preference shares of the Company for the past three years
    
    Unit: RMBExplanation on
    
    shortfall
    
    Net profit accumulated toattributable to Percentage to the nextshareholders of the net profit accounting yearlisted company attributable to due to
    
    under the shareholders of insufficient
    
    consolidated listed company distributable
    
    financial under the profits or portion
    
    Distributed statements consolidated can be allocated
    
    amount for the financial to remaining
    
    Year of distribution (tax inclusive) distribution year statements profit distribution
    
    2017 679,141,006.88 3,769,325,450.93 18.02% Chenming You 01,
    
    Chenming You 02
    
    and Chenming You
    
    03 participated in the
    
    proposal of remaining
    
    profit distribution for
    
    RMB464,716,006.88
    
    in 2017.
    
    2016 119,277,108.41 1,998,578,788.75 5.97% Chenming You 01
    
    participated in the
    
    remaining profit
    
    distribution forRMB119,277,108.41
    
    in 2016.
    
    2015 0.00 1,086,632,711.54 0.00%
    
    Any adjustment or change in profit distribution policy for preference shares
    
    □ Yes √ No 2017 ANNUAL REPORT 95
    
    3704827-t01fnar (Shandong Chenming) p.95 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:42IX Preference SharesIII. Profit distribution for preference shares (Cont’d)
    
    Both earnings of the Company and retained profit of the parent company are positive during the reporting
    
    period but without profit distribution for preference shares
    
    □ Applicable √ Not applicable
    
    Explanation on other matters regarding distribution for preference shares
    
    √ Applicable □ Not applicable
    
    Shareholders of preference shares participate in profit distribution in two portions, namely the fixed dividend distributed
    
    based on a fixed dividend rate and the distribution of retained earnings realised for the year.
    
    1. Distribution of fixed dividend
    
    According to the Articles of Association, the Company shall distribute fixed dividends to holders of the preference
    
    shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
    
    reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
    
    the preference shares in accordance with the issuance plan under the framework and principles considered and
    
    approved in the general meeting in respect of the preference shares. The general meeting of the Company has the
    
    right to cancel part of or all of the current dividends on the preference shares. However, when the general meeting
    
    of the Company will consider the cancellation of part of or all of the current dividends on the preference shares, the
    
    Company shall inform the shareholders of preference shares at least 10 working days before the date of dividend
    
    payment in accordance with the requirements of the related authorities.2. Participation in the distribution of retained earnings realised for the year.
    
    Holders of preference shares participate in the distribution of the retained earnings through receipt of cash which
    
    is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
    
    according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of preference shares can
    
    also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
    
    retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
    
    basis upon distribution of relevant fixed income to holders of financial instruments such as the preference shares
    
    which may be classified under equity. 50% of the retained earnings shall be distributed to holders of preference
    
    shares and ordinary shareholders. Holders of preference shares shall participate in the distribution of the retained
    
    earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained
    
    earnings by receiving cash dividends or dividends on ordinary shares.
    
    96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.96 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:42
    
    IX Preference Shares
    
    IV. Repurchase or conversion
    
    □ Applicable √ Not applicable
    
    There was no repurchase or conversion during the reporting period.V. Resumption of voting rights of preference shares
    
    1. Resumption and exercise of voting rights
    
    □ Applicable √ Not applicable2. Shareholders and beneficial owner involved in resumption of voting rights of preference shares
    
    □ Applicable √ Not applicable
    
    VI. Accounting policy and reasons thereof
    
    √ Applicable □ Not applicable
    
    Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of
    
    Financial Instruments, Accounting Standard for Business Enterprises No. 37 - Presentation of Financial Instruments and
    
    Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
    
    preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
    
    2017 ANNUAL REPORT 97
    
    3704827-t01fnar (Shandong Chenming) p.97 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:42X Directors, Supervisors and Senior Management and StaffI. Changes in shareholding of Directors, Supervisors and Senior Management
    
    Increase
    
    Shares held in the number Decrease
    
    as at the of shares in the number Other changes Shares held
    
    beginning of held during of shares held (increase or as at the end
    
    Start date End date the period the period during the decrease) of the period
    
    Name Position Status Sex Age of the term of the term (shares) (shares) period (shares) (shares) (shares)
    
    Chen Hongguo Chairman In office M 53 6 September 2001 18 May 2019 6,434,527 261,769 6,696,296
    
    Yin Tongyuan Vice Chairman In office M 60 6 September 2001 18 May 2019 2,423,640 2,423,640
    
    Geng Guanglin Director In office M 44 27 May 2009 18 May 2019 437,433 437,433
    
    General manager In office 15 November 2017 18 May 2019
    
    Li Feng Director In office M 45 19 April 2006 18 May 2019 471,818 471,818
    
    Zhang Hong Director In office F 53 12 April 2010 18 May 2019
    
    Yang Guihua Director In office F 52 9 May 2014 18 May 2019
    
    Pan Ailing Independent Director In office F 53 15 May 2013 18 May 2019
    
    Wang Fengrong Independent Director In office F 49 18 May 2016 18 May 2019
    
    Huang Lei Independent Director In office M 61 18 May 2016 18 May 2019
    
    Liang Fu Independent Director In office F 50 18 May 2016 18 May 2019
    
    Li Dong Chairman of Supervisory Committee In office M 35 13 December 2016 18 May 2019 0 10,000 10,000
    
    Sun Yinghua Supervisor In office F 49 18 May 2016 18 May 2019
    
    Yang Hongqin Supervisor In office F 50 30 April 2007 18 May 2019
    
    Zhang Xiaofeng Supervisor In office M 40 18 May 2016 18 May 2019
    
    Li Xueqin Deputy general manager In office F 52 1 September 2004 18 May 2019 429,348 429,348
    
    Hu Changqing Deputy general manager In office M 52 12 March 2010 18 May 2019 1,238 1,238
    
    Hu Jinbao Financial controller In office M 51 16 November 2016 18 May 2019
    
    Li Zhenzhong Deputy general manager In office M 44 20 March 2011 18 May 2019
    
    Yang Weiming Deputy general manager In office M 43 18 May 2016 18 May 2019
    
    Zhang Qingzhi Deputy general manager In office M 52 18 May 2016 18 May 2019
    
    Poon Shiu Cheong Company secretary and In office M 48 28 May 2008 18 May 2019
    
    qualified accountant
    
    Xiao Peng Secretary to the Board Resigned M 35 16 November 2016 18 January 2018 0 111,600 111,600
    
    Liu Jilu Supervisor Resigned M 51 18 May 2016 29 October 2017
    
    Total 10,198,004 121,600 0 261,769 10,581,373
    
    98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.98 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43
    
    X Directors, Supervisors and Senior Management and Staff
    
    II. Changes of Directors, Supervisors and Senior Management of the Company
    
    √ Applicable □ Not applicable
    
    Name Position Type Date Reason
    
    Chen Hongguo General Manager Dismissed 09 November 2017 Dismissed from the
    
    general manager
    
    due to work
    
    arrangement
    
    Xiao Peng Secretary to the Board Dismissed 18 January 2018 Dismissed from the
    
    secretary to the
    
    Board due to
    
    personal
    
    work change
    
    Liu Jilu Supervisor Resigned 29 October 2017 Resigned from
    
    Supervisory due to
    
    his personal work
    
    2017 ANNUAL REPORT 99
    
    3704827-t01fnar (Shandong Chenming) p.99 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43X Directors, Supervisors and Senior Management and StaffIII. Employment
    
    Professional background, major working experiences and current duties at the Company of Directors, Supervisors and The
    
    Senior Management
    
    1. Brief biographies of Directors
    
    (1) Brief biographies of executive Directors
    
    Mr. Chen Hongguo, with Chinese nationality but without the right of permanent residence abroad, joined the
    
    Company in 1987, had held different positions including chief officer of manufacturing section, chief officer of
    
    branch factory, the chairman of Wuhan Chenming Hanyang Paper Holdings Co., Ltd., deputy general manager,
    
    director and general manager of the Company etc. He is currently the chairman of the Company and the
    
    chairman cum general manager of Shouguang Chenming Holdings Company Limited. Mr. Chen Hongguo is the
    
    spouse of Ms. Li Xueqin, a deputy general manager of the Company.
    
    Mr. Yin Tongyuan, with Chinese nationality but without the right of permanent residence abroad, joined the Company
    
    in 1982, had held different positions including the chief officer of manufacturing section, the chairman of Wuhan
    
    Chenming Hanyang Paper Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd., the chairman of
    
    Jiangxi Chenming Paper Co., Ltd., the director of Shouguang Chenming Holdings Co., Ltd. and the deputy general
    
    manager of the Company. He is currently the Director and deputy general manager of the Company.
    
    Mr. Geng Guanglin, with Chinese nationality but without the right of permanent residence abroad, joined the
    
    Company in 1992, had held different positions including the chief officer of manufacturing section of the Company,
    
    deputy general manager of Chibi Chenming Paper Co., Ltd., the chairman of Wuhan Chenming Hanyang Paper
    
    Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd. and the chairman of Jiangxi Chenming Paper
    
    Co., Ltd. He is currently a Director and the deputy general manager of the Company, and a director of Shouguang
    
    Chenming Holdings Company Limited, and is in charge of the operation of Zhanjiang Chenming.
    
    Mr. Li Feng, with Chinese nationality but without the right of permanent residence abroad, joined the Company
    
    in 1992, had held different positions including the chief officer of manufacturing section and assistant to the
    
    general manager of the Company, deputy general manager and chairman of Wuhan Chenming Hanyang Paper
    
    Holdings Co., Ltd.. He is currently the executive Director and deputy general manager of the Company in charge
    
    of the sales of cultural paper products. Mr. Li Feng is the brother of Ms. Li Xueqin, a deputy general manager of
    
    the Company.(2) Brief biographies of non-executive Directors
    
    Ms. Yang Guihua, with Chinese nationality but without the right of permanent residence abroad, is a doctor of
    
    engineering, an advisor to doctoral students and an candidate for the Ten Million Talents Project (百千萬人才
    
    工程國家級人選). Ms. Yang is a professor of Qilu University of Technology, a standing director of Shandong
    
    Technical Association of Paper Industry, a committee member of Nano and Composite Materials Committee of
    
    China Technical Association of Paper Industry (中國造紙學會納米纖維素及複合材料專業委員會) and evaluation
    
    experts in National Natural Science Foundation of China. She has served as a non-executive Director of the
    
    Company since May 2014.
    
    Ms. Zhang Hong, with Chinese nationality but without the right of permanent residence abroad, holds a doctoral
    
    degree in Economics. She is currently a professor and advisor to doctoral students at Shandong University,
    
    head of a multinational corporation research institute, a non-practising member of the Chinese Institute of
    
    Certified Public Accountants, a director of China Association of International Trade, a director of Shandong
    
    Province External Trade Association, an independent director of Shandong Gettop Acoustic Co., Ltd., an
    
    independent director of Shandong Zhangqiu Blower Co., Ltd., an independent director of Shandong Delisi Food
    
    Co., Ltd. and an independent director of Cisen Pharmaceutical Co., Ltd.. She has served as an non-executive
    
    Director of the Company since April 2010.
    
    100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.100 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43
    
    X Directors, Supervisors and Senior Management and Staff
    
    III. Employment (Cont’d)
    
    1. Brief biographies of Directors (Cont’d)
    
    (3) Brief biographies of independent non-executive Directors
    
    Ms. Pan Ailing, with Chinese nationality but without the right of permanent residence abroad, is currently a
    
    professor of the School of Management, and the chief of the Investment and Financing Research Centre (投融
    
    資研究中心) in Shandong University. She is also a director of the Accounting Institute, Shandong Province (山
    
    東省會計學會), a council member of Shandong Comparative Management Association, a visiting professor at
    
    Soochow University in Taiwan, and a visiting scholar at University of Connecticut in the United States. She is
    
    also an independent director of Sinotruck Jinan Truck Co., Ltd. (中國重汽集團濟南卡車股份有限公司) and Inspir
    
    Software Co., Ltd. She has served as an independent non-executive director of the Company since May 2013.
    
    Ms. Wang Fengrong, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D.
    
    in Economics and a visiting scholar at West Virginia University in the United States. She was previously a
    
    lecturer at the Department of Finance of Shandong Economic University (山東經濟學院財金系) and an associate
    
    professor at the Economic Research Center of Shandong University (山東大學經濟研究中心). She currently
    
    holds positions including professor and advisor to doctoral students at the Economic Research School of
    
    Shandong University (山東大學經濟研究院) and Shandong School of Development at Shandong University (山
    
    東大學山東發展研究院), evaluation experts in both National Social Science Fund and National Natural Science
    
    Foundation of China, guest analyst regarding policy implementation of currency and credit matters for the Jinan
    
    branch of the People’s Bank of China, as well as the executive director of Shandong Young Social Science
    
    Workers Association (山東省青年社會科學工作者協會). She concurrently serves as an independent director
    
    of Shandong Xinneng Taishan Power Generation Co., Ltd. (山東新能泰山發電股份有限公司) and Shandong
    
    Denghai Seeds Co., Ltd.
    
    Mr. Huang Lei, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
    
    Economics. He was the chief of the Department of Finance and the dean of School of Finance in Shandong
    
    University of Finance (山東財政大學). He currently holds the positions including the dean of School of
    
    Finance in Shandong University of Finance and Economics, the director of the professor committee and the
    
    deputy director of the academic committee of Shandong University of Finance and Economics, a member
    
    of the Guiding Committee on Education of Financial Majors (金融學類專業教學指導委員會) of the Ministry of
    
    Education, a deputy director of the Collaborative Innovation Centre for Financial Optimisation and Regional
    
    Development in Shandong (山東金融產業優化與區域管理協同創新中心), a director of the Taishan Capital Market
    
    Research Center (泰山資本市場研究中心) of the Shandong University of Finance and Economics, a director of
    
    the Shandong Capital Market Training Base (山東資本市場人才培訓基地) as well as an independent director of
    
    Wanjia Asset Management Co., Ltd.
    
    Ms. Liang Fu, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
    
    management, a Young and Middle-aged Expert with Outstanding Contributions in Shandong Province (山東
    
    省有突出貢獻的中青年專家) and a visiting scholar at Tsinghua University. She concurrently holds the positions
    
    including a professor and an advisor to doctoral students of the business school of Shandong University of
    
    Finance and Economics, a visiting professor at Shandong Youth University of Political Science, an evaluation
    
    expert in National Social Science Fund, a director of Talents Research Association of Shandong Higher
    
    Education (山東省高等教育人才研究會), a director of Shandong Economic Association (山東省經濟學會),
    
    an executive director of Shandong Management Association (山東省管理學會), an independent director of
    
    Shandong Shengli Co., Ltd. and an external director of Shandong Steel Group Co., Limited.
    
    2017 ANNUAL REPORT 101
    
    3704827-t01fnar (Shandong Chenming) p.101 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43X Directors, Supervisors and Senior Management and StaffIII. Employment (Cont’d)
    
    2. Brief biographies of Supervisors
    
    Mr. Li Dong, with Chinese nationality but without the right of permanent residence abroad. After joining the Company
    
    in 2004, he had held different positions including the deputy chief of cost auditing section and the chief of general
    
    section under the financial department of the Company, the financial controller of Zhanjiang Chenming and the
    
    chief of financial department of the Group. He is currently the director and deputy general manager of Shouguang
    
    Chenming Holdings Company Limited and the chairman of the supervisory committee of the Company.
    
    Mr. Liu Jilu, with Chinese nationality but without the right of permanent residence abroad, graduated from the School
    
    of Economics and Management of China University of Geosciences with a master’s degree. He currently serves as an
    
    associate professor of the accounting specialty of Weifang Vocational College and has years of teaching and practical
    
    experience in financial accounting, financial management, audit and tax laws. He participated in the core training of
    
    the preparatory courses for the accountant and certified public accountant examinations and was invited to conduct
    
    seminars for the continuing education classes for the middle and high level accounting personnel in the Weifang City
    
    for many times. He resigned as a supervisor of the Company on 30 October 2017.
    
    Mr. Zhang Xiaofeng, with Chinese nationality but without the right of permanent residence abroad, graduated from the
    
    School of Management of Shandong University with a doctorate’s degree and his research direction was corporate
    
    strategies and corporate governance, traditional culture and modern management, etc. He currently serves as an
    
    associate professor of the Business Management Discipline and the deputy head of the Department of Business
    
    Management in the School of Management of Shandong University, offering management courses for undergraduate,
    
    MBA, EDP and EMBA students for a long time as well as providing training to large enterprises both inside and
    
    outside the province for hundreds of times. He concurrently holds positions including the committee member of
    
    the Professional Committee of Corporate Governance in the PRC (中國公司治理專業委員會), the part-time case
    
    researcher of China Europe International Business School and the secretary general of Shandong Young Social
    
    Science Workers Association (山東省青年社會科學工作者協會).
    
    Ms. Sun Yinghua, with Chinese nationality but without the right of permanent residence abroad, is an associate
    
    economist. She joined the Company in 1993, serving as price audit officer, audit director and other positions of the
    
    Company, and is currently an assistant to the general manager of the Company responsible for the audit department.
    
    Ms. Yang Hongqin, with Chinese nationality but without the right of permanent residence abroad, joined the Company
    
    in 1987, serving as the chief officer of quality control section and the chief of after sale services department of the
    
    Company and the manager of property management company, and is currently a Supervisor of the Company and
    
    assistant to general manager of Shandong Chenming Power Supply Holdings Co., Ltd.
    
    102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.102 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43
    
    X Directors, Supervisors and Senior Management and Staff
    
    III. Employment (Cont’d)
    
    3. Brief biographies of Senior Management
    
    Ms. Li Xueqin, with Chinese nationality but without the right of permanent residence abroad, is a deputy general
    
    manager of the Company. She joined the Company in 1987 and held the positions of the chief of audit department,
    
    deputy general manager, etc. Ms. Li has been a deputy general manager of the Company and a director of Shouguang
    
    Chenming Holdings Company Limited since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo, chairman
    
    of the Company.
    
    Mr. Hu Changqing, with Chinese nationality but without the right of permanent residence abroad, is a deputy general
    
    manager of the Company. He joined the Company in 1988 and had held positions as the chief of the technological
    
    reform department, chief officer of branch factory, deputy general manager and Director of the Company, etc. He is
    
    currently the director of Shouguang Chenming Holdings Company Limited, a deputy general manager of the Company
    
    in charge of the Huanggang Chenming Pulp and Paper project.
    
    Mr. Li Zhenzhong, with Chinese nationality but without the right of permanent residence abroad, joined the Company
    
    in 1995. He had served as principal representative of the Shanghai management region of a sales company, sales
    
    manager of light weight coated cultural paper products. He is currently a deputy general manager of the Company
    
    and marketing director of the Sales Company.
    
    Mr. Yang Weiming, with Chinese nationality but without the right of permanent residence abroad, joined the Company
    
    in 1998 and had held positions as the deputy manager, manager, general manager and principal representative of
    
    Chenming Sales Company, and the deputy manager, leader in charge, and general manager of a product company.
    
    He is currently a deputy general director of the Company in charge of overseas sales.
    
    Mr. Zhang Qingzhi, with Chinese nationality but without the right of permanent residence abroad, joined the Company
    
    in 1982 and had held positions as the chief officer of branch factory, head of the production department, assistant
    
    to the general manager and vice production director. He is currently a deputy general manager of the Company in
    
    charge of Shouguang Chenming.
    
    Mr. Hu Jinbao, with Chinese nationality but without the right of permanent residence abroad, a senior project manager
    
    in energy saving, joined the Company in 2016. He had held different positions including the director of the business
    
    department and the vice president of the Shouguang sub-branch of Bank of China in Weifang City of Shandong
    
    Province, the president of the Kuiwen sub-branch, the deputy director of the business department of the branch and
    
    the president of the Changyi sub-branch of Bank of China in Weifang City of Shandong Province. He is currently the
    
    financial controller of the Company.
    
    Mr. Xiao Peng, with Chinese nationality but without the right of permanent residence abroad, holds a bachelor degree
    
    in management. He had held different positions including the chief officer of the capital section, the chief officer of
    
    information disclosure section, head of securities investment department, and representative of securities affairs of
    
    the Company. He was the secretary to the Board of the Company during the reporting period. He resigned as the
    
    secretary to the Board of the Company on 18 January 2018.
    
    Mr. Poon Shiu Cheong is a Fellow Certified Public Accountant of Hong Kong Institute of Certified Public Accountants
    
    and CPA Australia. He obtained a master degree in Accounting from Central Queensland University and a master
    
    degree in Business Administration from Southern Cross University. He joined the Company in 2008, and is currently
    
    the qualified accountant and company secretary of the Company.
    
    2017 ANNUAL REPORT 103
    
    3704827-t01fnar (Shandong Chenming) p.103 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43X Directors, Supervisors and Senior Management and StaffIII. Employment (Cont’d)
    
    3. Brief biographies of Senior Management (Cont’d)
    
    Employment at the shareholder of the Company
    
    √ Applicable □ Not applicable
    
    Whether receiving
    
    any remuneration
    
    Position at the or allowance from
    
    Name of shareholder shareholder of the shareholder
    
    Name of employee of the Company the Company Start date of the term End date of the term of the Company
    
    Chen Hongguo Shouguang Chenming Holdings Chairman 22 September 2016 29 December 2020 No
    
    Company Limited
    
    Yin Tongyuan Shouguang Chenming Holdings Director 22 September 2016 29 December 2017 No
    
    Company Limited
    
    Geng Guanglin Shouguang Chenming Holdings Director 22 September 2016 29 December 2017 No
    
    Company Limited
    
    Li Xueqin Shouguang Chenming Holdings Director 22 September 2016 29 December 2020 No
    
    Company Limited
    
    Hu Changqing Shouguang Chenming Holdings Director 22 September 2016 29 December 2020 No
    
    Company Limited
    
    Li Dong Shouguang Chenming Holdings Director 29 December 2017 29 December 2020 No
    
    Company Limited
    
    Explanation of the Shouguang Chenming Holdings Company Limited held a general meeting on 29 December 2017 for re-election of new directors and
    
    employment at the supervisors.
    
    shareholder of
    
    the Company
    
    104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.104 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43
    
    X Directors, Supervisors and Senior Management and Staff
    
    III. Employment (Cont’d)
    
    3. Brief biographies of Senior Management (Cont’d)
    
    Employment at other units
    
    √ Applicable □ Not applicable
    
    Whether receiving
    
    any remuneration
    
    Position at the or allowance from
    
    Name of employee Name of other units other units Start date of the term End date of the term other units
    
    Zhang Hong Sinoer Men’s Clothes Co., Ltd. Independent director 05 September 2014 04 September 2017 Yes
    
    Shandong Gettop Acoustic Independent director 16 September 2014 15 September 2017 Yes
    
    Co., Ltd.
    
    Shandong Zhangqiu Blower Independent director 12 July 2015 11 July 2018 Yes
    
    Co., Ltd.
    
    Shandong Delisi Food Co., Ltd. Independent director 26 September 2017 25 September 2020 Yes
    
    Cisen Pharmaceutical Co., Ltd. Independent director 28 November 2017 27 November 2020 Yes
    
    Pan Ailing Sinotruck Jinan Truck Co., Ltd. Independent director 28 April 2017 27 April 2020 Yes
    
    Inspir Software Co., Ltd. Independent director 19 April 2017 18 April 2020 Yes
    
    Wang Fengrong Shandong Xinneng Taishan Independent director 23 May 2017 22 May 2020 Yes
    
    Power Generation Co., Ltd.
    
    Shandong Denghai Seeds Co., Ltd. Independent director 12 May 2016 11 May 2019 Yes
    
    Huang Lei Wanjia Asset Management Independent director 16 October 2015 16 October 2018 Yes
    
    Co., Ltd.
    
    Liang Fu Shandong Shengli Co., Ltd. Independent director 15 May 2015 15 May 2018 Yes
    
    Shandong Steel Group External director 13 September 2017 13 September 2020 Yes
    
    Co., Limited
    
    Explanation of the On 2 February 2018, Shandong Gettop Acoustic Co., Ltd. issued the Announcement on Delay of Re-election for Board and Supervisory
    
    employment at the Board. Prior to the completion of re-election for the Board of the Company, Zhang Hong would continue to carry out the obligations and
    
    other unit duties of a director pursuant to the laws and regulations as well as the articles of association the company.
    
    Sanctions against current Directors, Supervisors and Senior Management of the Company and those who
    
    resigned during the reporting period by securities regulatory authorities in the past three years
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 105
    
    3704827-t01fnar (Shandong Chenming) p.105 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43X Directors, Supervisors and Senior Management and StaffIV. Remuneration of Directors, Supervisors and Senior Management
    
    Decision process, basis for determining the remuneration and actual payment for the remuneration of
    
    Directors, Supervisors and the Senior Management
    
    (1) Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual remuneration
    
    of each of the executive Directors and the Senior Management of the Company was in the band of RMB0.20 million to
    
    5.00 million and the specific amount for each of them was determined by the remuneration committee based on the
    
    main financial indicators and operation target completed by the Company, the scope of work and main responsibilities
    
    of the Directors and Senior Management of the Company, the target completion of the Directors and Senior
    
    Management as assessed by the duty and performance appraisal system, as well as business innovation capability
    
    and profit generation ability of the Directors and the Senior Management. During the reporting period, the Company
    
    will pay each of the independent non-executive Directors and non-executive Directors of the Company allowance of
    
    RMB120,000 (before tax). The travel expenses for attending board meetings and general meetings of the Company
    
    and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-
    
    executive Directors and non-executive Directors are reimbursed as expensed. The annual remuneration of Supervisors
    
    assuming specific managerial duties in the Company were determined by the general manager office of the Company
    
    based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external
    
    Supervisors who did not hold actual management positions in the Company. During the reporting period, the fixed
    
    remuneration of external Supervisors was RMB25,000 (before tax).(2) Decision process for remuneration of Directors, Supervisors and Senior Management: In accordance with the relevant
    
    policies and regulations such as the Implementation Rules Of The Remuneration And Assessment Committee
    
    Under The Board, any remuneration plan for the Company’s executive Directors proposed by the remuneration and
    
    assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
    
    and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management
    
    officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
    
    directors, non-executive directors and external supervisors of the Company shall be agreed on by the Board and then
    
    submitted to the general meeting for consideration and approval prior to implementation.(3) The remuneration and assessment committee, which was set up by the Board according to the resolution of the
    
    general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-
    
    independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and
    
    scheme of the non-independent Directors and Senior Management of the Company, and accountable to the Board.
    
    106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.106 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43
    
    X Directors, Supervisors and Senior Management and Staff
    
    IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
    
    Decision process, basis for determining the remuneration and actual payment for the remuneration of
    
    Directors, Supervisors and the Senior Management (Cont’d)
    
    Unit: RMB’0,000Total Receivedremuneration remuneration
    
    before tax from related
    
    received from parties of
    
    Name Position Sex Age Status the Company the Company
    
    Chen Hongguo Chairman M 53 In office 499 No
    
    Yin Tongyuan Vice-chairman M 60 In office 298 No
    
    Geng Guanglin Director, General Manager M 44 In office 193.11 No
    
    Li Feng Director M 45 In office 242.22 No
    
    Zhang Hong Director F 53 In office 12 No
    
    Yang Guihua Director F 52 In office 12 No
    
    Pan Ailing Independent Director F 53 In office 12 No
    
    Wang Fengrong Independent Director F 49 In office 12 No
    
    Huang Lei Independent Director M 61 In office 12 No
    
    Liang Fu Independent Director F 50 In office 12 No
    
    Li Dong Chairman of Supervisory Committee M 35 In office 59.54 No
    
    Sun Yinghua Supervisor F 49 In office 51.4 No
    
    Yang Hongqin Supervisor F 50 In office 19.36 No
    
    Zhang Xiaofeng Supervisor M 40 In office 2.5 No
    
    Li Xueqin Supervisor M 52 In office 211.68 No
    
    Hu Changqing Deputy general manager F 52 In office 200 No
    
    Hu Jinbao Financial controller M 51 In office 180.65 No
    
    Li Zhenzhong Deputy general manager M 44 In office 175.13 No
    
    Yang Weiming Deputy general manager M 43 In office 135.7 No
    
    Zhang Qingzhi Deputy general manager M 52 In office 61.79 No
    
    Poon Shiu Cheong Company secretary and M 48 In office 12.85 No
    
    qualified accountant
    
    Xiao Peng Secretary to the Board M 35 Resigned 36.96 No
    
    Liu Jilu Supervisor M 51 Resigned 2.08 No
    
    Total — — — — 2,453.97 —
    
    Directors, Supervisors and Senior Management of the Company granted share options as incentives during
    
    the reporting period
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 107
    
    3704827-t01fnar (Shandong Chenming) p.107 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43X Directors, Supervisors and Senior Management and StaffV. Personnel of the Company
    
    1. Number of staff, specialty composition and education level
    
    Number of staff at the Company (person) 4,510
    
    Number of staff at major subsidiaries (person) 9,069
    
    Total number of staff (person) 13,579
    
    Total number of staff receiving remuneration during the period (person) 13,579
    
    Number of retired/resigned staff the parent comany and its principal subsidiaries
    
    are required to compensate (person) 0
    
    Specialty composition
    
    Category of specialty composition Number of people (person)
    
    Production staff 7,364
    
    Sales staff 542
    
    Technical staff 2,214
    
    Financial staff 206
    
    Administrative staff 1,746
    
    Other staff 1,507
    
    Total 13,579
    
    Education level
    
    Category of education level Number of people (person)
    
    Postgraduate and above 45
    
    Undergraduate 1,293
    
    Post-secondary 3,039
    
    Technical secondary and below 9,202
    
    Total 13,579
    
    108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.108 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43
    
    X Directors, Supervisors and Senior Management and Staff
    
    V. Personnel of the Company (Cont’d)
    
    2. Remuneration policies
    
    The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject
    
    to the relevant laws and regulations, the Company adopts different standards of remuneration for different employees,
    
    which are determined based on their position, skill variety, performance etc. with reference to the remuneration level
    
    in the market, the average level of salary in the society and the corporate reference line set by the government. The
    
    Company provides various benefits to the employees, including social insurance, housing accumulation funds and
    
    various holidays etc. The Company regularly investigated into the remuneration level, realising a fair job place with
    
    incentives; and stipulated a differentiated analysis remuneration strategy to attract key personnel and enhanced the
    
    Company’s overall human resources competitiveness benefiting the Company’s development and human resources
    
    strategy.3. Training programmes
    
    The Company attaches importance to personnel training, implements the corporate spirit of “learning, surpassing
    
    and leading” and establishes a learning organisation. In 2018, the Company will further enhance the cooperation with
    
    management consultancies and professional training institutions in order to build a scientific training system, prepare
    
    practical and efficient high-quality training materials and initiate targeted training programs by levels and by classes.
    
    All employees are given training on corporate culture. For the junior level staff, the training focuses on professional
    
    skills and business knowledge. For the middle level staff, the training focuses on team management and execution.
    
    For the senior management, training focuses on leadership. A staff team of high quality is made through training.4. Labour outsourcing
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 109
    
    3704827-t01fnar (Shandong Chenming) p.109 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:43XI Corporate GovernanceI. Corporate governance in practice
    
    The Company operated in compliance with the requirement of Companies Law (《公司法》), Securities Law (《證券法》),
    
    Code of Corporate Governance for Listed Companies (《上市公司治理準則》), Rules Governing Listing of Stocks on
    
    Shenzhen Stock Exchange (《深圳證券交易所股票上市規則》), the Listing Rules of Hong Kong Stock Exchange and the
    
    related requirements as required by CSRC, and continued to improve and optimise its legal person governance structure
    
    during the reporting period. The Company also continuously improved its internal control system and proactively carried
    
    out management works in relation to investor relations during the reporting period, so as to further improve corporate
    
    governance standards and promote the Company’s standardised operations. As of the end of the reporting period, the
    
    actual practice of corporate governance complied with the requirements of the regulatory documents issued by the CSRC
    
    regarding the governance of listed companies.
    
    (I) Shareholders and general meeting
    
    The Company had established a corporate governance structure that ensured shareholders’ ability to fully exercise
    
    their rights and enjoy equal status. Shareholders enjoyed their rights and undertook corresponding obligations in
    
    accordance with the shares held by them. The convening and holding of general meeting of the Company were legal
    
    and compliant, and on the premise of guaranteeing the legality and effectiveness of the general meeting, both on-site
    
    voting and online voting were provided as channels to participate in such meetings. Where significant matters which
    
    had an impact on the interests of minority investors were being considered, the votes by minority investors were
    
    counted separately for the convenience of shareholders and for the sake of making public and timely disclosures. At
    
    the same time, investors present at the general meeting could communicate with the management of the Company in
    
    person, which effectively safeguard the rights and demands of investors to participate in the Company’s management.
    
    We ensured that all investors could participate in corporate governance on an equal basis, which effectively safeguard
    
    the legitimate interests of shareholders, especially those of minority shareholders.(II) Controlling shareholder and the listed company
    
    During the reporting period, the Company remained independent of its controlling shareholder, beneficial controllers
    
    and related parties in terms of its business, assets, finance, personnel and organisations, and complied with the
    
    relevant provisions of the China Securities Regulatory Commission on the independence of listed companies. The
    
    controlling shareholders and beneficial controllers strictly regulated their behaviour, and exercised their rights and
    
    performed their obligations in accordance with the laws. The Company had business independence and self-operation
    
    capability.(III) Directors and the Board
    
    The composition of the Board of the Company complied with the laws and regulations and the requirements of the
    
    Articles of Association. Directors of the Company possessed the knowledge, skills, and qualities necessary to the
    
    performance of their duties. All of them were able to earnestly, faithfully, and diligently perform their duties and powers
    
    as stipulated in the Articles of Association. The convening and holding of Board meetings was in strict compliance
    
    the Articles of Association and Rules of Procedure of Board Meetings and other relevant provisions. The four special
    
    committees under the Board of the Company, namely the Strategic Committee, the Audit Committee, the Nomination
    
    Committee and the Remuneration and Assessment Committee, performed their duties normally and provided
    
    scientific and professional opinions for the decision-making of the Board.
    
    110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.110 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    I. Corporate governance in practice (Cont’d)
    
    (IV) Supervisors and the Supervisory Committee
    
    The Supervisory Committee strictly followed the requirement of relevant laws and regulations including the Companies
    
    Law, the Articles of Associations and the Rules of Procedure of the Supervisory Committee in fulfilling its duties. In
    
    the spirit of being accountable to the shareholders and the Company, the Supervisory Committee independently and
    
    effectively exercised its supervision and inspection functions. By attending Board meetings and conducting regular
    
    inspections on the legal compliance of the Company’s operations and finance, the Supervisory Committee supervised
    
    the decision-making procedures of the Board, resolutions and the legal compliance of the Company’s operations, so
    
    as to safeguard the legitimate interests of the Company and the shareholders.(V) Information disclosure and management of investor relations
    
    In accordance with the requirements of the relevant rules, the Company strictly enforced the relevant information
    
    disclosure regulations and fully fulfilled its information disclosure obligations. The Company disclosed information in
    
    a timely and fair manner and ensured that the information disclosed was true, accurate and complete, and did not
    
    contain false information, misleading statements or major omissions. During the reporting period, the Company issued
    
    a total of more than 490 periodic reports, interim announcements, and related documents through the designated
    
    information disclosure media. The Company performed its information disclosure obligations in a timely manner with
    
    respect to the Company’s operations, related party transactions, external investment, external guarantees, and the
    
    implementation of annual profit distribution, so as to further safeguard the legitimate rights of investors.
    
    Under the premise of strictly fulfilling disclosure obligations, the Company attached importance to the management
    
    of investor relations. The Company made public our address, contact number, facsimile, e-mail and other information
    
    on its official website and CNINFO, in an attempt to facilitate investors’ communication with the company through
    
    the above channels. The Company also made full use of the investor hotline, Shenzhen Stock Exchange’s “EasyIR”
    
    platform, field investigation and research and other channels and methods to actively interact with investors and
    
    listen to what they had to say. We patiently answered questions from investors, and worked at enhancing investors’
    
    understanding and recognition of the Company. We passed investors’ reasonable opinions and suggestions to the
    
    management of the Company in a timely manner, building a bridge between investors and the Company.(VI) Management on registration of personnel with insider information
    
    The Company strictly complied with the provisions of the “Registration Management System of Personnel with Insider
    
    Information” and other relevant systems to strengthen the confidentiality of insider information and improved the
    
    registration and management of personnel with insider information. The Directors, Supervisors, Senior Management
    
    and other related personnel of the Company were able to strictly observe their confidentiality obligations throughout
    
    the preparation of periodic reports, temporary announcements and the planning of major events. With the
    
    development of the Company, the Company will continue to strictly abide by the requirements of relevant laws and
    
    regulations and continuously promote corporate governance to ensure that the Company operates in a standardised
    
    manner.
    
    Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
    
    CSRC in respect of actual governance of the Company
    
    □ Yes √ No
    
    There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
    
    the CSRC in respect of the actual governance of the Company.
    
    2017 ANNUAL REPORT 111
    
    3704827-t01fnar (Shandong Chenming) p.111 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceII. Particulars about the independence in terms of businesses, personnel, assets, organisations,
    
    and finance from the controlling shareholder
    
    The Company was completely separated from the controlling shareholder in terms of business, personnel, assets,
    
    organisations and finance. The Company had a comprehensive internal structure, independent and complete businesses as
    
    well as the capability of self-operation.
    
    1. In terms of business: the Company had its own R&D, production, procurement and sales system, and was completely
    
    independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiaries
    
    were not competitors of the Company in the same industry.2. In terms of personnel: the Company had an independent workforce, and had established independent departments
    
    including the research and development department, production department, finance department, administration
    
    department, procurement department and sales department. The Company had also established a comprehensive
    
    management system with respect of labour, personnel and salary. Personnel of the Company were independent of
    
    the controlling shareholder. The Company’s Chairman was elected at the general meeting, while the general manager,
    
    deputy general manager, secretary to the Board, chief financial officer and other senior management members all
    
    worked at and received remuneration from the Company. They did not receive remuneration from related companies
    
    of the controlling shareholder, nor did they serve at any position therein other than a director or supervisor. The
    
    appointment of the Company’s Directors, supervisors and senior management was conducted through legal
    
    procedures and in strict compliance with the relevant requirements of Companies Law and the Articles of Association.
    
    None of the controlling shareholders interfered with the Company’s Board, or the appointment and dismissal
    
    decisions at general meetings.3. In terms of assets: the title relationship between the Company and the controlling shareholder was clear, and the
    
    Company’s funds, assets and other resources were not illegally occupied or dominated by the controlling shareholder.
    
    The Company’s assets were complete, and possessed production equipment, auxiliary production equipment,
    
    patents and other assets that were in line with its production and operation scope. The Company had complete
    
    control and dominance over all assets.4. In terms of organisations: the Board, Supervisory Committee, management and other internal organisations of the
    
    Company operated independently. Each functional department was completely separated from the controlling
    
    shareholder in terms of authority, personnel, etc. There was no subordinate relationship between the controlling
    
    shareholder and its functional departments, and the Company and its functional departments. The Company’s
    
    independence in terms of its production, operation and management was not affected by the controlling shareholder.5. In terms of finance: the Company had its own finance department, accounting and auditing system and financial
    
    management system, and was able to make independent financial decisions, with a standardised financial accounting
    
    system and financial management system for subsidiaries. None of the controlling shareholders interfered with the
    
    Company’s finance and accounting activities. The Company had a separate account in a commercial bank and there
    
    was no sharing of bank accounts with the controlling shareholder. The Company reported on tax return and fulfilled its
    
    tax obligations independently in accordance with the law.
    
    112 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.112 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    III. Competition in the industry
    
    □ Applicable √ Not applicableIV. Annual general meeting and extraordinary general meeting convened during the reporting
    
    period
    
    1. General meetings during the reporting period
    
    Attendance
    
    rate of
    
    Meeting Type of meeting investors Convening date Disclosure date Disclosure index
    
    2016 annual general meeting Annual 20.36% 21 April 2017 22 April 2017 http://www.cninfo.com.cn
    
    general meeting
    
    2017 first extraordinary Extraordinary 30.24% 2 June 2017 3 June 2017 http://www.cninfo.com.cn
    
    general meeting general meeting
    
    2017 first domestic listed Extraordinary 28.91% 2 June 2017 3 June 2017 http://www.cninfo.com.cn
    
    share class meeting general meeting
    
    2017 first overseas listed Extraordinary 39.08% 2 June 2017 3 June 2017 http://www.cninfo.com.cn
    
    share class meeting general meeting
    
    2017 second extraordinary Extraordinary 31.97% 24 July 2017 25 July 2017 http://www.cninfo.com.cn
    
    general meeting general meeting
    
    2017 second domestic Extraordinary 29.95% 24 July 2017 25 July 2017 http://www.cninfo.com.cn
    
    listed share class meeting general meeting
    
    2017 second overseas Extraordinary 41.05% 24 July 2017 25 July 2017 http://www.cninfo.com.cn
    
    listed share class meeting general meeting
    
    2017 third extraordinary Extraordinary 26.48% 12 September 2017 13 September 2017 http://www.cninfo.com.cn
    
    general meeting general meeting
    
    2017 fourth extraordinary Extraordinary 27.15% 30 November 2017 1 December 2017 http://www.cninfo.com.cn
    
    general meeting general meeting2. Extraordinary general meeting requested by holders of the preference shares with voting rights
    
    restored
    
    □ Applicable √ Not applicable
    
    2017 ANNUAL REPORT 113
    
    3704827-t01fnar (Shandong Chenming) p.113 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceV. Performance of Independent Directors during the reporting period
    
    1. Attendance of Independent Directors at Board meetings and general meetings
    
    Attendance of Independent Directors at Board meetings and general meetingsNumber of
    
    attendance
    
    required
    
    for Board Absent
    
    meetings Attendance Attendance Attendance from Board
    
    Name of during the at Board at Board at Board Absence meetings twice Attendance
    
    Independent reporting meetings meetings by meetings from Board in a row at general
    
    Directors period in person communication by proxy meetings (in person) meetings
    
    Pan Ailing 17 1 16 0 0 No 0
    
    Wang Fengrong 17 1 16 0 0 No 0
    
    Huang Lei 17 1 16 0 0 No 0
    
    Liang Fu 17 1 16 0 0 No 0
    
    Explanation on absence from the Board meeting twice in a row
    
    None of the independent Directors was absent from the Board meeting twice in a row.2. Objections from Independent Directors on related issues of the Company
    
    Were there any objections on related issues of the Company from the Independent Directors?
    
    □ Yes √ No
    
    There was no objection on related issues of the Company from the Independent Directors during the reporting period.3. Other details about the performance of duties by the independent Directors
    
    Were there any suggestions from the independent Directors adopted by the Company?
    
    √ Yes □ No
    
    Explanation on the adoption or non-adoption with related suggestions from the independent Directors
    
    114 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.114 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    V. Performance of Independent Directors during the reporting period (Cont’d)
    
    3. Other details about the performance of duties by the independent Directors (Cont’d)
    
    During the reporting period, the independent Directors of the Company focused on the operation of the Company
    
    and performed their duties strictly in accordance with relevant laws and regulations and the Articles of Association.
    
    They provided a lot of valuable professional recommendations on optimising the Company’s system and decision on
    
    daily operation. They also issued independent and fair opinion on matters arising during the reporting period which
    
    requested opinions from Independent Directors. This helped optimising the supervisory system of the Company, as
    
    well as protecting the legal rights of the Company and all shareholders
    
    Publication time Subject matter Opinion
    
    17 February 2017 Independent opinions on the Company’s internal control self-assessment Agreement
    
    report, particulars and independent opinions on external guarantees,
    
    and independent opinions on the determination of remuneration
    
    of directors and senior management for 2016, use of proceeds by
    
    related parties and related party transactions, provision of guarantee
    
    for comprehensive credit line of relevant subsidiaries, related party
    
    transactions, appointment of accounting firm and day-to-day related
    
    party transactions.
    
    7 March 2017 Independent opinions on the cancellation of appointment for accounting Agreement
    
    firm
    
    12 April 2017 Independent opinions on the extension of the validity of the resolutions in Agreement
    
    respect of the non-public issue of shares at the general meeting
    
    18 April 2017 Independent opinions on matters relating to the non-public issue of Agreement
    
    shares
    
    27 April 2017 Independent opinions on provision of financial support to investee Agreement
    
    7 June 2017 Independent opinions on matters relating to the non-public issue of Agreement
    
    shares and appointment of accounting firm, the related party transactions
    
    and entering into of conditional share subscription agreement with
    
    specific parties; and prior approval opinions on matters relating to the
    
    non-public issue of shares
    
    24 July 2017 Independent opinions on the provision of guarantee for wholly-owned Agreement
    
    subsidiaries and investee
    
    15 August 2017 Independent opinions on the provision of guarantee to wholly-owned Agreement
    
    subsidiaries, utilisation of funds by controlling shareholders and other
    
    related parties and external guarantee
    
    30 October 2017 Independent opinions on the provision of guarantee to the syndicated Agreement
    
    loan of Zhanjiang Chenming
    
    15 November 2017 Independent opinions on the appointment of general manager Agreement
    
    27 November 2017 Independent opinions on the disposal of 30% equity interest in Xuchang Agreement
    
    Chenming
    
    29 November 2017 Independent opinions on the provision of guarantee for the issue of USD Agreement
    
    bonds and changes in accounting policies and estimates
    
    2017 ANNUAL REPORT 115
    
    3704827-t01fnar (Shandong Chenming) p.115 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceVI. Performance of duties by special committees under the Board during the reporting period
    
    (I) Audit Committee
    
    1. The following major tasks were completed in 2017:
    
    (1) it conducted pre-audit communication with external auditing institution engaged by the Company in
    
    respect of the 2016 financial report auditing, reviewed the 2016 auditors’ report and financial report, which
    
    were submitted to the Board of the Company for consideration and approval;(2) it reviewed the 2017 first quarter report of the Company as of 31 March 2017, which was submitted to the
    
    Board for consideration and approval.(3) it reviewed the 2017 interim financial statements as of 30 June 2017, which were submitted to the Board
    
    for consideration and approval.(4) it reviewed the 2017 third quarter report of the Company as of 30 September 2017, which was submitted
    
    to the Board for consideration and approval.
    
    2. Auditing work conducted on the 2017 financial report of the Company is as follows:
    
    (1) it convened a meeting to review with due consideration the 2017 auditing plan and the related information
    
    of the Company with the auditing certified public accountants and the finance department of the
    
    Company prior to the on-site audit, and negotiated and determined the schedule of an audit of the 2017
    
    financial statements of the Company with Ruihua Certified Public Accountants, which was responsible for
    
    the Company’s auditing work during the year;(2) with due consideration, it reviewed the draft of financial statements of the Company prior to an annual on-
    
    site audit performed by the auditing certified public accountants and issued its approval to audit;(3) it kept in close contact with the auditors upon the annual on-site audit performed by the auditing certified
    
    public accountants and issued a letter to the auditors to urge that they submit the auditors’ report on
    
    schedule;(4) it reviewed the financial statements of the Company again upon the issue of preliminary opinion on the
    
    annual audit by the auditing certified public accountants appointed for the annual audit, and considered
    
    the financial statements of the Company to be true, accurate and complete to reflect the overall position
    
    of the Company;(5) at the first meeting of the Audit Committee in 2018, the audit summary on the annual audit issued by the
    
    accounting firm was approved and submitted to the Board;(6) it reviewed the 2017 report on internal audit and internal control of the Company as of 31 December 2017.116 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.116 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    VI. Performance of duties by special committees under the Board during the reporting period
    
    (Cont’d)
    
    (II) Remuneration and Assessment Committee
    
    The Remuneration and Assessment Committee under the Board of the Company were primarily responsible for
    
    formulating the remuneration and assessment for the Directors and the Senior Management of the Company and
    
    formulating and examining the remuneration package of the Directors and the Senior Management of the Company,
    
    and accountable to the Board. During the reporting period, the Remuneration and Assessment Committee formulated
    
    the 2016 remuneration package of the Directors and the Senior Management of the Company, which was arrived
    
    at based on the operation conditions of 2016 and assessment of the Directors and the Senior Management of the
    
    Company. The remuneration package was then submitted to the Board for consideration.(III) Strategy Committee
    
    The Strategy Committee conducted research on major investment decisions of the Company and made
    
    recommendations, and inspected and evaluated the implementation of related matters. At the same time, the Strategy
    
    Committee actively discussed the Company’s future long-term strategic development plan based on the Company’s
    
    industry characteristics and development stage in combination with the Company’s production and operation
    
    conditions, providing valuable and constructive opinions for the company’s steady development.
    
    During the reporting period, the Strategy Committee held two meetings. The first meeting in 2017 considered the
    
    resolution in relation to “the construction of 510,000-tonne high-end cultural paper project “, which was submitted
    
    to the fourth meeting of the eighth session of the Board of the Company for consideration and approval. The second
    
    meeting in 2017 considered the resolutions in relation to “the construction of differential viscose fibre and ancillary
    
    production facilities project of Huanggang Chenming” and “the construction of cogeneration project in the chemical
    
    industrial park of Huanggang Chenming”, which were submitted to the nineteenth extraordinary general meeting of
    
    the eighth session of the Board for consideration and approval.(IV) Nomination Committee
    
    During the reporting period, the Nomination Committee held one meeting. The first meeting in 2017 considered and
    
    approved the resolution in relation to “the proposal of the agreement to Mr. Geng Guanglin’s appointment as the
    
    general manager of the Company”, which was submitted to the seventeenth extraordinary general meeting of the
    
    eighth session of the Board for consideration and approval.
    
    2017 ANNUAL REPORT 117
    
    3704827-t01fnar (Shandong Chenming) p.117 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceVII. Performance of duties by the Supervisory Committee
    
    Were there any risks of the Company identified by the Supervisory Committee when performing its duties during the
    
    reporting period?
    
    □ Yes √ No
    
    None of those issues under the supervision was objected by the Supervisory Committee during the reporting period.VIII. Assessment and incentive mechanism for the Senior Management
    
    The senior management of the Company is assessed on monthly and annually basis. Monthly assessments were conducted
    
    in line with the direction of the annual major tasks, and were focused on appraisals of two fixed indicators, namely the
    
    completion status of each month and the evaluation on important performance indicators. It was carried out monthly by
    
    way of cross assessment and supervision among the related departments. The annual assessments were carried out by the
    
    Remuneration and Assessment Committee with reference to the results of monthly assessments and overall performances
    
    during the year, including the integrated quality of Senior Management and internal training of talents.IX. Internal control
    
    1. Particulars of material deficiencies in internal control detected during the reporting period
    
    □ Yes √ No2. Self-assessment Report on Internal Control
    
    Date of Disclosure of Assessment Report on Internal Controls 28 March 2018
    
    Index of Assessment Report on Internal Controls Disclosure http://www.cninfo.com.cn
    
    Percentage of Total Assets Included in Assessment
    
    to Total Assets in Consolidated Financial Statements of the Company 99.00%
    
    Percentage of Revenue Included in Assessment to Revenue
    
    in Consolidated Financial Statements of the Company 99.80%
    
    118 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.118 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    IX. Internal control
    
    2. Self-assessment Report on Internal Control (Cont’d)
    
    Basis for identifying deficiencies
    
    Type Financial reporting Non-financial reporting
    
    Qualitative criteria (1) Indicators of material deficiencies in the Indicators of material deficiencies in the
    
    internal control of financial reporting include: internal control of non-financial reporting
    
    ineffective control environment, material loss include: major failure as a result of the decision
    
    to and adverse impact on the Company as a making process; lack of control system or
    
    result of misconduct by Directors, Supervisors occurrence of systematic failure in principal
    
    and senior management; material misstatement activities and lack of effective compensation
    
    of non-exceptional incidents; ineffectiveness in control, high turnover rate of mid to senior level
    
    supervision of internal control of the Company management and senior technical staff; failure
    
    by the Board, or its delegated authorities, and to address the findings of internal control
    
    the internal audit department. (2) Indicators of assessment, in particular material deficiencies;
    
    major deficiencies in internal control of financial and other factors which impose material
    
    reporting include: failure in selecting and adverse impact on the Company. Indicators
    
    applying accounting policies in accordance of major deficiencies in internal control of
    
    with generally accepted accounting principles; nonfinancial reporting include: general failure
    
    failure to establish procedures and control as a result of the decision-making process;
    
    measures to prevent corrupt practices; deficiencies in major business procedure or
    
    failure to establish corresponding control system; high turnover rate of key staff; failure
    
    mechanism for the accounting of unusual or to address the findings of internal control
    
    special transactions or failure to implement assessment, in particular major deficiencies;
    
    or set up the corresponding compensation and other factors which impose great adverse
    
    control; failure to reasonably ensure the impact to the Company. Indicators of general
    
    truthfulness and accuracy in the preparation of deficiencies in internal control of non-financial
    
    financial statement, as a result of one or more reporting include: low efficiency of decision
    
    deficiencies in the control of financial reporting making process; deficiencies in general
    
    as of the end of the period. (3) General business procedure or system; high turnover
    
    deficiencies: other deficiencies in internal rate of employees; and failure to rectify general
    
    control that do not constitute material or major deficiencies.
    
    deficiencies.
    
    Quantitative criteria General deficiencies: deviation of less than or General deficiencies: quantitative criterion
    
    equal to 0.1% from the target of accounting (financial loss) less than RMB5,000,000;
    
    error/the total revenue; Major deficiencies: major deficiencies: quantitative criterion
    
    deviation of 0.1% - 0.5% from the target of ( f inancial loss) between RMB5,000,000
    
    accounting error/the total revenue; material and RMB20,000,000; material deficiencies:
    
    deficiencies: deviation greater than 0.5% quantitative criterion (financial loss) over
    
    from the target of accounting error/the total RMB20,000,000.
    
    revenue.
    
    Number of material deficiencies in financial reporting: (number) 0
    
    Number of material deficiencies in non-financial reporting: (number) 0
    
    Number of major deficiencies in financial reporting: (number) 0
    
    Number of major deficiencies in non-financial reporting: (number) 0
    
    2017 ANNUAL REPORT 119
    
    3704827-t01fnar (Shandong Chenming) p.119 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceX. Auditors’ report on internal control
    
    √ Applicable □ Not applicable
    
    Auditors’ opinion contained in the Auditors’ report on internal control
    
    We are of the opinion that Shandong Chenming Paper Holdings Limited had in all material aspects maintained effective
    
    internal control over the financial statements in accordance with the Basic Internal Control Norms for Enterprises as of 31
    
    December 2017.
    
    Disclosure of Auditors’ Report on Internal Control Disclosed
    
    Date of Disclosure of Auditors’ report on internal control 28 March 2018
    
    Index of Auditors’ Report on Internal Control Disclosure http://www.cninfo.com.cn
    
    Type of Opinion in Auditors’ Report on Internal Control Standard and unqualified opinion
    
    Material deficiencies in non-financial reporting No
    
    Any opinions of non-standardisation set out in the Auditors’ Report on Internal Control issued by accountants
    
    □ Yes √ No
    
    Auditors’ Report on Internal Control issued by accountants was in line with Directors’ opinions contained in Self-assessment
    
    Report
    
    √ Yes □ NoXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited
    
    (I) Compliance with the Code on Corporate Governance
    
    The Company maintained high standards of corporate governance through various internal controls. The Board
    
    reviewed the corporate governance practices of the Company from time to time to enhance the corporate governance
    
    standards of the Company.
    
    Save for the details set out in III Board and XVII Communications with shareholders in this section, the Company
    
    had fully complied with all the principles and code provisions of the Code on Corporate Governance as set out in
    
    Appendix 14 to the Hong Kong Listing Rules during the reporting period.(II) Securities transactions by Directors
    
    The Directors of the Company confirmed that the Company had adopted the Model Code for Securities Transactions
    
    by Directors of Listed Companies as set out in Appendix 10 to the Hong Kong Listing Rules. Having made adequate
    
    enquiries with all Directors and Supervisors of the Company, the Company was not aware of any information that
    
    reasonably suggested that the Directors and Supervisors had not complied with the requirements as stipulated in this
    
    code during the reporting period.
    
    120 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.120 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (III) Board
    
    The members of the Board of the Company are elected at the general meeting and held accountable to the general
    
    meeting, and shall exercise the following functions and powers: (1) to be responsible for convening the general
    
    meeting and to report on its work to the general meeting; (2) to carry out the resolutions of general meetings; (3)
    
    to decide on the business plans and investment proposals of the Company; (4) to formulate the proposed annual
    
    financial budget and final accounts of the Company; (5) to formulate the plan for profit distribution and the plan
    
    making up losses of the Company; (6) to formulate plans for the increase or reduction in the registered capital of the
    
    Company and for the issue and listing of Company’s debentures or other securities; (7) to draft plans for material
    
    acquisition and repurchase of the Company’s own shares; (8) to draft plans for the merger, division or dissolution or
    
    the change of formation of the Company; (9) to decide on external investment, acquisition and disposal of assets,
    
    pledge of assets, matter in relation to external guarantee, entrusted wealth management, connected transactions,
    
    etc. within the scope of mandate of the general meeting; (10) to decide on the establishment of the Company’s
    
    internal management organisation; (11) to employ or dismiss the manager or secretary to the Board of the Company;
    
    to employ or dismiss the Senior Management, such as the deputy general manager(s) and personnel in charge
    
    of financial affairs, as proposed by the general manager; and to decide on their remuneration and rewards and
    
    punishments; (12) to formulate the basic management system of the Company; (13) to formulate proposals for
    
    amending the Articles of Association; (14) to administrate matter related to information disclosure of the Company;
    
    (15) to propose to the general meeting for the engagement or replacement of accounting firm performing audit for the
    
    Company; (16) to review work reports from managers of the Company and to inspect on their work; (17) to exercise
    
    the functions and powers as conferred upon by the Articles of Association or the general meeting.
    
    The Board comprised four executive Directors: Chen Hongguo (Chairman), Yin Tongyuan, Li Feng, Geng Guanglin;
    
    two non-executive Directors: Yang Guihua, Zhang Hong; and four independent non-executive Directors: Pan Ailing,
    
    Wang Fengrong, Huang Lei and Liang Fu. Please refer to section VIII of this Annual Report for their brief biographies.
    
    The Board is responsible for leading and monitoring the Company, and is wholly responsible for the administration
    
    and supervision of company businesses to facilitate its success. The Executive Director or the senior management is
    
    authorised to be responsible for the various divisions and functions and management of the processing. Directors of
    
    the Company shall act objectively and make decisions in the interests of the Company. The management and senior
    
    management of the Company held regular meetings with the Board to discuss the ordinary business operations
    
    and performance of the Company, and carried out the relevant decisions of the Board. The Company will arrange
    
    independent legal advice upon the request from the Directors or any committees of the Board, if the Board or any
    
    committees of the Board consider it necessary to seek for independent professional advice.
    
    Pursuant to Code A.1.8 of the code provisions, the Company should arrange appropriate insurance cover in respect
    
    of legal action against its Directors. The Company believes that it has sufficient resources to deal with such potential
    
    risks, and therefore the Company did not make such arrangements.
    
    2017 ANNUAL REPORT 121
    
    3704827-t01fnar (Shandong Chenming) p.121 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (III) Board (Cont’d)
    
    During the reporting period, the Board held 17 meetings, 4 of which were regular meetings and 13 were extraordinary
    
    meetings. All Directors of the Company attended 17 Board meetings.
    
    Attendance at the relevant meetings (attention required/attended)
    
    Remuneration
    
    and
    
    Audit Nomination assessment Strategic
    
    Board committee committee committee committee General
    
    Name Position meetings meetings meetings meetings meetings meetings
    
    I. Executive Directors
    
    Chen Hongguo Chairman 17/17 N/A 1/1 N/A 2/2 9/1
    
    Yin Tongyuan Vice Chairman 17/17 N/A N/A N/A 2/2 9/8
    
    Geng Guanglin Director and 17/17 N/A N/A N/A N/A 9/0
    
    General Manager
    
    Li Feng Director 17/17 N/A N/A N/A N/A 9/1
    
    II. Non-executive Directors
    
    Yang Guihua Director 17/17 7/7 N/A N/A N/A 9/1
    
    Zhang Hong Director 17/17 N/A N/A 1/1 2/2 9/0
    
    III. Independent non-executive Directors
    
    Pan Ailing Independent Director 17/17 7/7 N/A N/A N/A 9/0
    
    Wang Fengrong Independent Director 17/17 7/7 1/1 N/A N/A 9/0
    
    Huang Lei Independent Director 17/17 N/A N/A 1/1 N/A 9/0
    
    Liang Fu Independent Director 17/17 N/A 1/1 1/1 N/A 9/0
    
    Save for those disclosed in the brief profile of Directors of the Company in this Report, none of the members of the
    
    Board had any financial, business, family relations or material connections with each other.
    
    The Board held 4 regular meetings during the year, each by giving a 14-day notice in advance to ensure that all
    
    Directors could participate in discussions of matters in the agenda. Reasonable prior notification was given for the
    
    other meetings of the Board to ensure all Directors could take time to attend.
    
    All Directors had access to opinions and services of the secretary to the Board to ensure the procedures governing
    
    the Board and all applicable regulations and rules were complied with.
    
    122 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.122 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (III) Board (Cont’d)
    
    Directors’ trainings and professional development
    
    All newly appointed Directors are provided with necessary orientation information, with an aim to ensure that they will
    
    have a better understanding of operations and business of the Company as well as relevant laws and regulations and
    
    obligations under the Listing Rules.
    
    Directors and Supervisors of the Company were arranged by the Company to attend the 1st and the 2nd session
    
    of training courses 2017 for directors and supervisors held by China Securities Regulatory Commission, Shandong;
    
    and, briefing paper in respect of amendments to Hong Kong Listing Rules prepared by Advisor to Hong Kong Law of
    
    the Company was distributed to all Directors and Supervisors, the above of which were to ensure all Directors and
    
    Supervisors to comply with relevant laws and sound corporate governance practice, and enhance their awareness of
    
    sound corporate governance practice.(IV) Chairman and General Manager
    
    The chairman of the Company is Mr. Chen Hongguo, and the general manager of the Company is Mr. Geng Guanglin.
    
    Please refer to section X of this annual report for his brief biographies. These two positions have been held separately
    
    by two different persons.
    
    According to the Articles of Association of the Company, the chairman shall exercise the following powers: (1)
    
    presiding over general meetings, and convening and presiding over Board meetings; (2) supervising and inspecting
    
    the implementation of the resolutions of the Board; (3) signing the shares, the securities and bonds issued by the
    
    Company; (4) signing important documents of the Board and other documents which are required to be signed by
    
    legal representative of the Company; (5) performing the powers of a legal representative; (6) nominating candidates
    
    for general manager for the Board; (7) exercising the special right to operate the Company in accordance with the
    
    laws and acting for the benefits of the Company in the event of emergency situation as a result of act of God or
    
    natural disaster, and reporting to the Board meetings and general meeting afterwards; and (8) exercising other powers
    
    authorised by the Board.
    
    2017 ANNUAL REPORT 123
    
    3704827-t01fnar (Shandong Chenming) p.123 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (IV) Chairman and General Manager (Cont’d)
    
    The general manager shall exercise the following powers: (1) in charge of the operation and management of the
    
    Company, and organising the implementation of the resolutions of the Board; (2) organising the implementation of
    
    the Company’s annual business plans and investment plans; (3) drafting plans for the establishment of the internal
    
    organisational structure of the Company; (4) drafting the basic management system of the Company; (5) formulating
    
    specific rules and regulations for the Company; (6) proposing the appointment or dismissal of the deputy general
    
    manager and chief financial officer; (7) appointing or dismissing management personnel other than those required
    
    to be appointed or dismissed by the Board; (8) proposing the wages, welfare, rewards, and penalties of staff and to
    
    decide the appointment or dismissal of staff of the Company; (9) proposing the convening of extraordinary meeting of
    
    the Board; and (10) exercising other powers conferred by the Articles of Association of the Company and the Board.
    
    Mr. Chen Hongguo performs the roles of the chairman and the general manager for the overall management of
    
    the Company. This constitutes a deviation from the principle and code provisions under the Code on Corporate
    
    Governance Practices as set out in Appendix 14 to Hong Kong Listing Rules. However, the Directors of the Company
    
    believe that Mr. Chen Hongguo as the chairman and the general manager will enable the Company to more effectively
    
    plan and implement the business strategies so that the Group can effectively and rapidly seize business opportunities.
    
    As all major decisions will be made after consultation with other members of the Board, the Company believes that
    
    the supervision of the Board and independent non-executive directors will strike a sufficient balance of power and
    
    authority.(V) Independent Non-executive Directors
    
    There are four independent non-executive Directors in the Board, which is in compliance with the minimum
    
    requirement of the number of independent non-executive directors set out in the Hong Kong Listing Rules. Wang
    
    Fengrong and Pan Ailing, the independent non-executive Directors of the Company, have appropriate accounting
    
    or related financial management expertise, which is compliance with the requirement of Rule 3.10 of the Hong Kong
    
    Listing Rules. Please refer to section X of this annual report for their brief biographies. The Company has received
    
    from each of the independent non-executive Directors a confirmation of independence for the year pursuant to Rule
    
    3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to be independent
    
    during the year.
    
    124 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.124 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (VI) Terms of Directors
    
    According to the Articles of Association of the Company, all Directors, including non-executive Directors, are elected
    
    at general meetings with a term of three years from May 2016 to May 2019. They may be re-elected for another term
    
    upon expiry of tenure.(VII) Directors’ Responsibility for the Financial Statements
    
    The Directors acknowledged their responsibility to prepare financial statements for each financial year which give
    
    a true and fair view of the state of affairs of the Company. The Directors believed that the Company had adopted
    
    and applied consistently appropriate accounting policies in preparing the financial statements in compliance with all
    
    related accounting standards.(VIII) Board Committees
    
    Pursuant to Code on Corporate Governance, the Board has established three committees, namely, Audit Committee,
    
    Remuneration and Assessment Committee and Nomination Committee, for overseeing particular aspects of the
    
    Company’s affairs. Each Board Committee has its own defined written terms of reference. The written terms of
    
    reference of each Board Committee are published on websites of stock exchange and the Company.
    
    Save for requirements of Code on Corporate Governance, the Company also set up Strategic Committee, for
    
    overseeing and studying long-term strategic development plan of the Company and making recommendations.(IX) Audit Committee
    
    The Audit Committee of the Company comprises three members, including Pan Ailing (as the chairman), Yang
    
    Guihua and Wang Fengrong. Two of them, including the chairman, are independent non-executive Directors. The
    
    primary duties of the Audit Committee are serving as a communication media between internal and external audit
    
    and the related review and supervision. Pan Ailing and Wang Fengrong have appropriate professional qualifications
    
    or appropriate accounting or related financial management expertise, which is in compliance with the requirement
    
    of the Hong Kong Listing Rules. The primary duties of the Audit Committee of the Company are: (1) proposing the
    
    appointment or dismissal of the external auditors; (2) supervising the internal control system of the Company and its
    
    implementation; (3) serving as a communication media between internal and external audit; (4) auditing the financial
    
    information of the Company and its disclosures; (5) reviewing the financial control, risk control and internal control
    
    system of the Company and audit the significant connected transactions; (6) discussing the risk management and
    
    internal control system with the management to ensure the management has performed its duties to establish
    
    effective systems. The discussion should include the adequacy of resources, staff qualifications and experience,
    
    training programs and budget of the accounting and financial reporting functions of the Company; (7) studying the
    
    major investigation findings on risk management and internal control matters on its own initiative or as delegated
    
    by the Board and the management’s response to these findings; (8) where the annual report includes statements
    
    in relation to the risk management and internal control system of the Company, reviewing such statements prior to
    
    submission to the Board for approval; and (9) dealing with other matters as delegated by the Board.
    
    2017 ANNUAL REPORT 125
    
    3704827-t01fnar (Shandong Chenming) p.125 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (IX) Audit Committee (Cont’d)
    
    The Audit Committee discussed with the management of the Company the accounting standards and practices
    
    adopted by the Group and discussed and reviewed this report, including the review of the financial statements of the
    
    Group for the year ended 31 December 2017 prepared in accordance with China Accounting Standards for Business
    
    Enterprises.
    
    Particulars of the meetings held by the Audit Committee during the reporting period were detailed in part VI of this
    
    section.
    
    Risk Management and Internal Control
    
    The Board is responsible for the risk management and internal control systems and reviewing their effectiveness.
    
    Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can
    
    only provide reasonable but not absolute assurance against material misstatement or loss.
    
    The Audit Committee (on behalf of the Board) oversees management in the design, implementation and monitoring
    
    of the risk management and internal control systems, and the management has provided a confirmation to the Audit
    
    Committee (and the Board) on the effectiveness of these systems for the year ended 31 December 2017.
    
    In respect of internal control system, procedures have been designed for safeguarding assets against unauthorised
    
    use or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financial
    
    information for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations.(X) Remuneration and Assessment Committee
    
    The Remuneration and Assessment Committee of the Company comprises three members, including Liang Fu,
    
    the Chairman, and other members, namely Zhang Hong and Huang Lei. Two members, including the Chairman,
    
    are independent non-executive Directors, which is in compliance with Code on Corporate Governance Practices.
    
    The Remuneration and Assessment Committee is primarily responsible for formulating the criteria of appraisal of
    
    the Directors and managers and conducting the appraisal, and studying and formulating the remuneration policy
    
    and package of the Directors and the Senior Management of the Company. The Remuneration and Assessment
    
    Committee is accountable to the Board.
    
    126 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.126 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (X) Remuneration and Assessment Committee (Cont’d)
    
    The primary duties of the Remuneration and Assessment Committee of the Company are: (1) formulating the
    
    remuneration plan or package based on the major scope of work, duties and importance of the Directors and the
    
    management and the remuneration level of other counterparts; (2) formulating the remuneration plan or package
    
    which mainly includes but not limited to standards, procedures and a system for performance appraisals as well
    
    as major plans and a system for rewards and sanctions; (3) examining the performance of the Directors, excluding
    
    the independent non-executive Directors, and the Senior Management and conduct annual performance appraisals
    
    for them; (4) supervising the implementation of the remuneration policy of the Company; and (5) dealing with other
    
    matters as delegated by the Board.
    
    Particulars of the meetings held by the Remuneration and Assessment Committee during the reporting period are
    
    detailed in part VI of this section.(XI) Nomination Committee
    
    The Nomination Committee of the Company comprises three members, including Wang Fengrong (as the chairman),
    
    Chen Hongguo and Liang Fu. Two of them, including the chairman, are independent non-executive Directors, which
    
    is in compliance with Code on Corporate Governance Practices. The Nomination Committee is primarily responsible
    
    for selecting candidates for directors and the management of the Company, determining the selection criteria and
    
    procedure and making recommendations.
    
    The primary duties of the Nomination Committee are (1) advising the Board on the size and composition of the Board
    
    in light of the Company’s operating activities, asset scale and shareholding structure; (2) studying the selection criteria
    
    and procedure for Directors and the management and advising the Board on the same; (3) extensively identifying
    
    qualified candidates for Directors and the management; (4) examining candidates for Director and the management
    
    and advising on the same; (5) examining other Senior Management staff pending referral to the Board for decision on
    
    their employment and advising on the same; (6) advising to the Board on appointment and re-appointment of directors
    
    and on skills, knowledge, experience, background, gender and other characteristics required in serving as a director
    
    taking into consideration diversity, balance and efficiency of the Board and benefits thereto; (7) reviewing the Board
    
    diversity policy, revising thereon in a timely manner and making relevant disclosure in the corporate governance report
    
    in the corresponding annual report; and (8) dealing with other matters as delegated by the Board.
    
    2017 ANNUAL REPORT 127
    
    3704827-t01fnar (Shandong Chenming) p.127 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XI) Nomination Committee (Cont’d)
    
    During the reporting period, the Nomination Committee, after studying the needs of the Company for new Directors
    
    and managerial personnel and taking into consideration the Board diversity policy, identified suitable candidates for
    
    Director and managerial positions through various channels (including from the Group internally and from the human
    
    resources market). Upon acceptance of nomination by the nominated person, the Nomination Committee performed
    
    qualification review on preliminary candidates by holding meetings, review criteria include the academic qualifications,
    
    relevant experience and specialised skills of the preliminary candidates. One to two months prior to election of new
    
    Directors, the Nomination Committee submitted recommendations and relevant materials of the directorial candidates
    
    to the Board; prior to engaging new Senior Management, the Nomination Committee submitted recommendations
    
    and relevant materials of the new Senior Management personnel to the Board.
    
    Particulars of the meetings held by the Nomination Committee during the reporting period are detailed in part VI of
    
    this section.(XII) Strategic Committee
    
    The Company set up a Strategic Committee which comprised three members, including Chen Hongguo, the
    
    Chairman, and other members, namely, Yin Tongyuan and Huang Lei. The Strategic Committee is primarily
    
    responsible for studying the long term strategic development and major investments of the Company and making
    
    recommendations.
    
    The primary duties of the Strategic Committee are (1) conducting research and submitting proposals regarding the
    
    long term development strategic plan; (2) conducting research and submitting proposals regarding the financing
    
    plans for major investments which require approval from the Board as stipulated in the Articles of Association of the
    
    Company; (3) conducting research and submitting proposals regarding major capital operations and assets operation
    
    projects which require approval from the Board as stipulated in the Articles of Association of the Company; (4)
    
    conducting research and submitting proposals regarding other material matters that may affect the development of
    
    the Company; (5) carrying out examination on the implementation of the above matters; (6) dealing with other matters
    
    as delegated by the Board.
    
    128 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.128 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XIII) Auditors
    
    On 15 May 2015, the 2014 annual general meeting of the Company agreed to continue to engage Ruihua Certified
    
    Public Accountants (Special General Partnership) as the domestic auditors of the Company for 2015 and be
    
    responsible for domestic auditing of the Company for 2015.
    
    On 13 December 2016, the 2016 fourth extraordinary general meeting of the Company agreed to continue to engage
    
    Ruihua Certified Public Accountants (Special General Partnership) as the domestic auditors of the Company for 2016
    
    and be responsible for domestic auditing of the Company for 2016.
    
    On 24 July 2017, the 2017 second extraordinary general meeting of the Company agreed to continue to engage
    
    Ruihua Certified Public Accountants (Special General Partnership) as the domestic auditors of the Company for 2017
    
    and be responsible for domestic auditing of the Company for 2017.(XIV) Remuneration for the Auditors
    
    The financial statements for 2017 prepared in accordance with Accounting Standards for Business Enterprises by
    
    the Group were audited by Ruihua Certified Public Accountants (Special General Partnership). In 2017, the Company
    
    paid the auditors in aggregate RMB2,000,000 and RMB600,000 in respect of audit financial statements and non-audit
    
    services in relation to internal control respectively. Save the above, no other non-audit fee was incurred during the
    
    year.
    
    Ruihua Certified Public Accountants (Special General Partnership) have stated their reporting responsibilities on the
    
    financial statements of the Group in XII. Financial Report.(XV) Supervisors and Supervisory Committee
    
    The Supervisory Committee is accountable to the shareholders. It monitors the financial position of the Company
    
    and the performance of the Directors, managers and Senior Management of the Company as to whether they are
    
    in accordance with relevant requirements of the laws and regulations to protect the lawful rights of the Company
    
    and the shareholders. The Supervisory Committee comprises three shareholder representatives, as shareholder
    
    and supervisor Li Jilu resigned as shareholder and supervisor in October 2017, and two staff representatives. The
    
    shareholder representatives shall be elected and removed at a general meeting and the staff representatives shall be
    
    elected and removed democratically by the staff of the Company.
    
    Details of the work of the Supervisory Committee during the reporting period are set forth in part VII of this section.
    
    2017 ANNUAL REPORT 129
    
    3704827-t01fnar (Shandong Chenming) p.129 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XVI) Company Secretary
    
    During the year, the company secretary confirmed that he has received relevant professional training for not less than
    
    15 hours in accordance with Rule 3.29 of the Listing Rules.(XVII) Communications with Shareholders
    
    The Company considers effective communication with Shareholders is essential to enable them to have a clear
    
    assessment of the Group’s performance as well as accountability of the Board. Principal means of communication
    
    with Shareholders of the Company are as follows:
    
    Information disclosure on the Company’s website
    
    The Company endeavours to disclose all material information about the Group to all interested parties as widely and
    
    timely as possible. The Company maintains its website at www.chenmingpaper.com where important information
    
    about the Group’s activities and corporate matters such as annual reports and interim reports to Shareholders,
    
    announcements, business development and operations, corporate governance practices and other information are
    
    available for review by Shareholders and other stakeholders.
    
    When announcements are made through the Stock Exchange, the same information will be made available on the
    
    Company’s website.
    
    General meetings
    
    The Company’s annual general meeting provides a useful platform for direct communication between the Board and
    
    Shareholders. Various resolutions are proposed on each substantially separate issue at the general meetings. Save for
    
    the annual general meeting held on 21 April 2017 by the Company, four extraordinary general meetings and four class
    
    meetings were convened in 2017. The attendance record of Directors at each general meeting is set out below:
    
    Name Directors attending general meetings in person
    
    2016 Annual General Meeting Yi Tongyuan, Li Feng and Yang Guihua
    
    2017 First extraordinary general meeting Yi Tongyuan
    
    2017 Second extraordinary general meeting Yi Tongyuan
    
    2017 Third extraordinary general meeting Yi Tongyuan
    
    2017 Fourth extraordinary general meeting Chen Hongguo
    
    2017 First domestic and overseas listed Yi Tongyuan
    
    share class meeting
    
    2017 Second domestic and overseas Yi Tongyuan
    
    listed share class meeting
    
    130 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.130 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XVII) Communications with Shareholders (Cont’d)
    
    General meetings (Cont’d)
    
    The Company’s external auditor also attended the Annual General Meeting.
    
    Code E.1.2 of the code provisions – This code provision requires the chairman to invite the chairmen of the audit,
    
    remuneration and nomination committees to attend the Annual General Meeting.
    
    Mr. Chen Hongguo, the chairman of the Company and its strategy committee, Ms. Pan Ailing, the chairman of the
    
    audit committee, and Mr. Ms. Wang Fengrong, the chairman of the nomination committee, were absent from the
    
    annual general meeting due to business commitments.
    
    Code A.6.7 of the code provisions – This code provision requires independent non-executive Directors and other
    
    non-executive Directors, as equal board members, should give the Board and any committees on which they serve
    
    the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and active
    
    participation. They should also attend general meetings and develop a balanced understanding of the views of
    
    shareholders.
    
    Ms. Zhang Hong, Ms. Pan Ailing, Ms. Liang Fu, Mr. Huang Lei and Ms. Wang Fengrong were absent from the 2016
    
    annual general meeting due to business commitments.
    
    Ms. Zhang Hong, Ms. Yang Guihua, Ms. Pan Ailing, Ms. Wang Fengrong, Ms. Liang Fu and Mr. Huang Lei were
    
    absent from the 2017 first extraordinary general meeting due to business commitments.
    
    Ms. Zhang Hong, Ms. Yang Guihua, Ms. Pan Ailing, Ms. Wang Fengrong, Ms Liang Fu and Mr. Huang Lei were absent
    
    from the 2017 second extraordinary general meeting due to business commitments.
    
    Ms. Zhang Hong, Ms. Yang Guihua, Ms. Pan Ailing, Ms. Wang Fengrong, Ms Liang Fu and Mr. Huang Lei were absent
    
    from the 2017 third extraordinary general meeting due to business commitments.
    
    Ms. Zhang Hong, Ms. Yang Guihua, Ms. Pan Ailing, Ms. Wang Fengrong, Ms Liang Fu and Mr. Huang Lei were absent
    
    from the 2017 fourth extraordinary general meeting due to business commitments.
    
    Ms. Zhang Hong, Ms. Yang Guihua, Ms. Pan Ailing, Ms. Wang Fengrong, Ms Liang Fu and Mr. Huang Lei were absent
    
    from the 2017 First domestic and overseas listed share class meeting due to business commitments.
    
    Ms. Zhang Hong, Ms. Yang Guihua, Ms. Pan Ailing, Ms. Wang Fengrong, Ms. Liang Fu and Mr. Huang Lei were
    
    absent from the 2017 Second domestic and overseas listed share class meeting due to business commitments.
    
    2017 ANNUAL REPORT 131
    
    3704827-t01fnar (Shandong Chenming) p.131 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XVII) Communications with Shareholders (Cont’d)
    
    Voting by poll
    
    Resolutions put to vote at the general meetings of the Company are taken by poll. Procedures regarding the conduct
    
    of the poll are explained to the shareholders at the commencement of each general meeting, and questions from
    
    shareholders regarding the voting procedures are answered. The poll results are posted on the websites of the Stock
    
    Exchange and the Company respectively on the same day.
    
    Shareholders’ right
    
    1. Procedures for convening an extraordinary general meeting by Shareholder
    
    Pursuant to Article 90 of the Articles of Association of the Company, Shareholder(s) alone or in aggregate
    
    holding 10% or more of the Company’s shares shall be entitled to request the Board to convene extraordinary
    
    general meetings, provided that such request shall be made in writing. The Board shall, in accordance with
    
    provisions of the laws, administrative regulations and the Articles of Association, furnish a written reply
    
    stating its agreement or disagreement to the convening of an extraordinary general meeting within ten days
    
    after receiving such proposal of the same. In the event that the Board agrees to convene an extraordinary
    
    general meeting, the notice of general meeting shall be issued within five days after the passing of the relevant
    
    resolution of the Board. Any changes in the original request made in the notice shall require prior approval of
    
    Shareholders concerned.
    
    In the event that the Board does not agree to convene an extraordinary general meeting or does not furnish any
    
    reply within ten days after receiving such proposal, Shareholder(s) alone or in aggregate holding 10% or more of
    
    the Company’s Shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary
    
    general meeting, provided that such proposal shall be made in writing.
    
    In the event that the Supervisory Committee agrees to convene an extraordinary general meeting, the notice of
    
    general meeting shall be issued within five days after receiving such request. Any changes in the original request
    
    made in the notice shall require prior approval of Shareholders concerned.
    
    Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shall
    
    be deemed as failure of the Supervisory Committee to convene and preside over a general meeting, and
    
    Shareholder(s) alone or in aggregate holding 10% or more of the Company’s shares for ninety consecutive days
    
    or more shall be entitled to convene and preside over the meeting on a unilateral basis.
    
    132 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.132 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XVII) Communications with Shareholders (Cont’d)
    
    Shareholders’ right (Cont’d)
    
    1. Procedures for convening an extraordinary general meeting by Shareholder (Cont’d)
    
    Pursuant to Article 91 of the Articles of Association of the Company, if Shareholders determine to convene a
    
    general meeting on their own, they shall give a written notice to the Board and file the same with the local office
    
    of CSRC at the place where the Company is located and the stock exchange for records. The shareholding
    
    percentage of shareholders who convened shall not be lower than 10% prior to the announcement of
    
    resolutions of the general meeting.
    
    Shareholders who convened shall submit relevant certifications to the local office of CSRC at the place where
    
    the Company is located and the stock exchange upon the issuance of the notice of general meeting and the
    
    announcement of resolutions of the general meeting.
    
    The Board and its secretary shall cooperate with respect to matters relating to general meetings convened
    
    by Shareholders on their own. The Board shall provide Shareholder registers as of the date of shareholding
    
    register. If a general meeting is convened by Shareholders on their own, all necessary expenses incurred shall
    
    be borne by the Company.2. Procedures for sending shareholders’ enquiries to the Board
    
    Shareholders may at any time send their enquiries and concerns to the Board of the Company in writing through
    
    the Company Secretary/Secretary to the Board whose contact details are as follows:
    
    Company Secretary Secretary to the Board (acting)
    
    Poon Siu Cheong Chen Hongguo
    
    Address: 22nd Floor, World Wide House, Central, Address: No. 2199 East Nongsheng Road,
    
    Hong Kong Shouguang City, Shandong Province
    
    Email Address: kentpoon_1009@yahoo.com.hk Email Address:chenmmingpaper@163.com
    
    Telephone: (852)-2501 0088 Telephone: (86)-0536- 2158008
    
    Facsimile: (852)-2501 0028 Facsimile: (86)-0536-2158977
    
    The Company secretary and the secretary to the Board shall forward shareholders’ enquiries and concerns
    
    to the Board and/or relevant Board Committees of the Company, where appropriate, to answer shareholders’
    
    questions.
    
    2017 ANNUAL REPORT 133
    
    3704827-t01fnar (Shandong Chenming) p.133 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XI Corporate GovernanceXI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XVII) Communications with Shareholders (Cont’d)
    
    Shareholders’ right (Cont’d)
    
    3. Procedures for putting forward proposals of Shareholders at general meetings
    
    Pursuant to Article 102 of the Articles of Association of the Company, shareholders individually or jointly holding
    
    over 3% of the total shares of the Company are entitled to propose motions to the Company.
    
    Shareholders individually or jointly holding over 3% of the total shares of the Company may submit extraordinary
    
    motions to the Board or the secretary to the Board ten working days before the convening of the General
    
    Meeting. The Board or the secretary to the Board shall issue supplementary notice of the General Meeting to
    
    announce the extraordinary motions within two working days after receiving the proposed motions.
    
    Save for provided above, the Board or Secretary to the Board shall not amend proposals stated in the notice of
    
    general meeting or add new proposals therein following the notice of general meeting has been issued.
    
    No voting or resolution shall be effected or adopted at the general meeting for proposals that have not been
    
    stated in the notice of general meeting or that do not comply with provisions of the Articles of Association.
    
    Extraordinary general meeting shall not resolve issues that are not contained in the notice.Relationships with investors
    
    The Company recognises its responsibility to explain its activities to those with a legitimate interest and to respond to
    
    their questions. Investors are received and visited at appropriate times to explain the Group’s business. In addition,
    
    questions received from the general public and individual shareholders are answered promptly. In all cases, great care
    
    is taken to ensure that no price-sensitive information is disclosed selectively.(XVIII) Internal Control
    
    For details of internal control of the Company, please refer to IX. Internal Control hereunder.(XIX) Articles of Association
    
    On 29 December 2017, the Company amended the Articles of Association. The amendments were primarily relating to
    
    the number of Directors, the collection of shareholders’ voting rights and other matters. Memorandum of Association
    
    and the amended version of the new Articles of Association of the Company are available on websites of the
    
    Company and Stock Exchange.
    
    134 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.134 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45
    
    XI Corporate Governance
    
    XI. Disclosures as required by the Hong Kong Listing Rules issued by the Stock Exchange of
    
    Hong Kong Limited (Cont’d)
    
    (XX) Board Diversity
    
    On 21 August 2013, the Company formulated policies to diversify Board members and amended the implementing
    
    rules of the nomination committee. Pursuant to the new policies, the nomination committee shall regularly review the
    
    Board diversity policy to improve efficiency and ensure interest thereof.
    
    Such policies are summarised as follows:
    
    The Company recognises and embraces the benefits of having a diverse Board, and sees diversity at Board level as
    
    an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use
    
    of differences in the talents, skills, regional and industry experience, backgrounds, genders and other qualities of the
    
    members of the Board. These differences will be considered in determining the optimum composition of the Board
    
    and when possible should be balanced appropriately. All appointments of the members of the Board are made on
    
    merit, and in the context of the talents, skills and experience of the Board as a whole.
    
    The Nomination Committee of the Company reviews and assesses the composition of the Board and makes
    
    recommendations to the Board on appointment of new directors of the Company. The Nomination Committee
    
    also oversees the conduct of the annual review of the effectiveness of the Board. In reviewing and assessing the
    
    composition of the Board, the Nomination Committee will consider the benefits of all aspects of diversity, including
    
    without limitation those described above, in order to maintain an appropriate range and balance of talents, skills,
    
    experience and backgrounds on the Board. In recommending candidates for appointment to the Board, the
    
    Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits
    
    of diversity on the Board.
    
    The composition of the Board of the Company is basically diversified. For details, please refer to (III) Composition of
    
    the Board under section XI.
    
    2017 ANNUAL REPORT 135
    
    3704827-t01fnar (Shandong Chenming) p.135 (P98738) 27-03-2018 16:29
    
    OUTPUT: 27-03-2018 16:29:45XII Corporate bondsAre there any corporate bonds offered to the public and listed on stock exchanges which do not become due as at the date ofapproval of annual report or overdue but not fully settled?
    
    Yes
    
    I. 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
    
    The public issuance of the corporate 17 Chenming Bond 112570 21 August 21 August 120,000 6.50% Interest is paid annually. The principal
    
    bonds of Shandong 01 2017 2022 amount and the last interest payment
    
    Chenming Paper Holdings will be paid on the maturity date.
    
    Limited to qualified investors
    
    in 2017 (phase I)
    
    2012 corporate bonds of 12 Chenming Bond 112144 26 December 26 December 380,000 5.65% Interest is paid annually. The principal
    
    Shandong Chenming 2012 2017 amount and the last interest payment
    
    Paper Holdings Limited will be paid on the maturity date.
    
    Stock exchange on which corporate Shenzhen Stock Exchange
    
    bonds 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 The payment of interest on and redemption of 12 Chenming Bond were completed on 26 December 2017. For details,
    
    during the reporting period please refer to the Announcement on Redemption, Dividend Payment and Delisting of “12 Chenming Bond” for 2017
    
    published by the Company on 20 December 2017.
    
    II. Information on bond custodian and credit rating agency
    
    Bond custodian of “12 Chenming Bond”
    
    Name UBS Securities Office address 12/F and 15/F, Contact person Chen Yang Telephone of 010-5832 8888
    
    Co., Ltd. Winland International contact person
    
    Finance Centre, 7 Financial
    
    Street, Xicheng District,
    
    Beijing
    
    Bond custodian of “17 Chenming Bond 01”
    
    Name GF Securities Co., Ltd. Office address 38th Floor, Metro Plaza, Contact person Xu Duwei Telephone of 020-87555888
    
    No.183 Tianhe North Road, contact person
    
    Guangzhou
    
    Credit rating agency(ies) which conducted rating on corporate bonds during the reporting period:
    
    Name China Chengxin Office address 8/F, Anji Building, 760 Xizang South Road, Huangpu District, Shanghai
    
    Securities Valuation
    
    Company Limited
    
    136 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.136 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:49
    
    XII Corporate bonds
    
    III. Use of proceeds from corporate bonds
    
    Use of proceeds from corporate bonds The use of proceeds from issuance of corporate bonds has strictly
    
    and its implementation completed relevant application and approval procedures. As at the
    
    end of the reporting period, the proceeds from 12 Chenming Bond
    
    and 17 Chenming Bond 01 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?IV. Credit rating of corporate bonds
    
    The credit rating of 12 Chenming Bond as granted by China Chengxin Securities Valuation Company Limited remained at
    
    AA+, and the credit rating for the Company was AA+ (stable outlook). The 2012 corporate bond updated rating report (2017)
    
    was published on CNINFO on 19 April 2017. The credit rating of 17 Chenming Bond 01 as granted by China Chengxin
    
    Securities Valuation Company Limited was AA+, and the credit rating for the Company was AA+ (stable outlook). The credit
    
    rating report in respect of the public issuance of the corporate bonds to qualified investors by the Company in 2017 (phase I)
    
    was published on CNINFO on 15 August 2017.V. 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.VI. Convening of meeting for bondholders during the reporting period
    
    Not applicable.VII. Performance of bond custodian during the reporting period
    
    The bond custodian performed its duties in accordance with the agreement during the reporting period.
    
    2017 ANNUAL REPORT 137
    
    3704827-t01fnar (Shandong Chenming) p.137 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:49XII Corporate bondsVIII. 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-yearincrease/decreaseItem 2017 2016 in percentageEBITDA 682,958.92 598,014.61 14.20%Current ratio 86.32% 76.57% 9.75%Gearing ratio 71.34% 72.58% -1.24%Quick ratio 75.80% 66.16% 9.64%Proportion of EBITDA to total debts 9.06% 10.01% -0.95%Interest coverage ratio 2.83 2.19 29.22%Cash interest coverage ratio 0.01 1 -99.00%EBITDA interest coverage ratio 3.31 3.67 -9.81%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
    
    Explanation: The cash interest protection ratio was 0.01, a decrease of 99.00% over the same period of last year, which was
    
    mainly due to the increase in the company’s financial leasing business, resulting in a smaller net cash flow from operating
    
    activities.IX. Interest payment on other bonds, debt and financing instruments during the reporting period
    
    Amount of
    
    Item interest payment
    
    Corporate bonds 4,014,700,000.00
    
    Medium-term notes 1,154,010,000.00
    
    Super & short-term commercial papers 9,792,371,780.78
    
    Short-term commercial papers 1,557,675,205.51
    
    Total 16,518,756,986.29X. Bank credit obtained, its use and repayment of bank loans during the reporting period
    
    During the reporting period, the Company obtained bank credit of RMB75,600 million, of which RMB47,700 million was
    
    utilised with RMB27,900 million outstanding. The Company repaid bank loans of RMB36,461 million.
    
    138 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.138 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:49
    
    XII Corporate bonds
    
    XI. Performance of relevant agreements or commitments under the prospectus of corporate
    
    bonds during the reporting period
    
    NilXII. Matters of significance during the reporting period
    
    Search index of interim
    
    Summary of significant matters Date of disclosure report disclosure website
    
    Accumulated new borrowings for the year exceeded twenty http://www.cninfo.com.cn,
    
    percent of the net assets at the end of the previous year 9 May 2017 announcement no.: 2017-050
    
    The announcement in relation to the accumulated new http://www.cninfo.com.cn,
    
    borrowings for the year 8 July 2017 announcement no.: 2017-073
    
    The interim report issued by UBS Securities Co., Ltd.
    
    in relation to the custodianship of Corporate Bonds for
    
    Shandong Chenming Paper Holdings Limited for 2012 12 May 2017 http://www.cninfo.com.cn
    
    The interim report issued by UBS Securities Co., Ltd.
    
    in relation to the custodianship of Corporate Bonds for
    
    Shandong Chenming Paper Holdings Limited for 2012 24 June 2017 http://www.cninfo.com.cn
    
    The interim report issued by UBS Securities Co., Ltd.
    
    in relation to the custodianship of Corporate Bonds for
    
    Shandong Chenming Paper Holdings Limited for 2012 8 July 2017 http://www.cninfo.com.cn
    
    The interim report issued by GF Securities Co., Ltd.
    
    in relation to the custodianship of the public issue of
    
    corporate bonds of the Company in 2017 8 September 2018 http://www.cninfo.com.cnXIII. Is there any guarantor for corporate bonds?
    
    □ Yes √ No
    
    2017 ANNUAL REPORT 139
    
    3704827-t01fnar (Shandong Chenming) p.139 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:49XIII Financial ReportI. Auditors’ Report
    
    Type of auditors’ opinion Standard and unqualified opinions
    
    The date of the audit report signed 27 March 2018
    
    Name of the auditor Ruihua Certified Public Accountants (Special General Partnership)
    
    Reference number of the auditors’ report
    
    Name of certified public accountants Zhao Yanmei and Wang Zongpei
    
    Text of the auditors’ report
    
    To shareholders of Shandong Chenming Paper Holdings Limited:
    
    (I) Auditors’ opinions
    
    We have audited the financial statements of Shandong Chenming Paper Holdings Limited (hereinafter as “Chenming
    
    Paper Company”), which comprise the consolidated and company balance sheets as at 31 December 2017, the
    
    consolidated and company income statements, the consolidated and company cash flow statements and the
    
    consolidated and company statements of changes in shareholders’ equity for 2017 and notes to the relevant financial
    
    statements.
    
    In our opinion, the accompanying financial statements were prepared in accordance with the Accounting Standards
    
    for Business Enterprises in all material aspects and give a true and fair view of the consolidated and company financial
    
    position of Chenming Paper Company as at 31 December 2017 and of its consolidated and company operating
    
    results and cash flows for 2017.(II) Basis of opinions
    
    We have conducted our audit in accordance with the Chinese Auditing Standards issued by the Chinese Institute of
    
    Certified Public Accountants. Our responsibilities under those standards are further described in the responsibilities
    
    of certified public accountants for the audit of the financial statements section of the auditors’ report. We are
    
    independent of Chenming Paper Company in accordance with the ethical codes of Chinese certified public
    
    accountants, and we have fulfilled our other ethical responsibilities in accordance with the codes. We believe that the
    
    audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
    
    140 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.140 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    (III) Key audit matters
    
    Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
    
    financial statements for the current period. These matters were addressed in the context of our audit of the financial
    
    statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.
    
    The key audit matter we identified is as follows:
    
    1. Consumable biological assets measured at fair value
    
    (1) Details
    
    For detailed disclosures of relevant information, please see notes 4.11 and 6.7 to the financial statements.
    
    As at 31 December 2017, the balance of consumable biological assets reflected in the notes to the
    
    financial statements of Chenming Paper Company amounted to RMB1,756,376,000, of which the balance
    
    of consumable biological assets measured at fair value amounted to RMB1,212,770,400.
    
    Consumable biological assets of Chenming Paper Company without a stock are stated at cost at initial
    
    recognition, and subsequently measured at fair value when there is a stock. Changes in fair value shall
    
    be recognised as profit or loss for the current period. As there is no active market reference price for the
    
    consumable biological assets of Chenming Paper Company, the Company adopted valuation techniques
    
    and recognised the fair value of the consumable biological assets which have formed a stock (the
    
    “Biological Assets”).
    
    As the consumable biological assets measured at fair value belong to the special assets of Chenming
    
    Paper Company, changes in such fair value will significantly impact the financial statements. Valuation
    
    for the consumable biological assets is complicated and requires the management to make significant
    
    judgments, therefore, we have regarded the measurement of consumable biological assets as a key audit
    
    matter.(2) Application for auditing
    
    When addressing the fair value measurement of the Biological Assets, the key auditing procedures we
    
    implemented mainly include:
    
    (1) we assessed the design and implementation of internal control of Chenming Paper Company
    
    relating to the Biological Assets;(2) we comprehended and evaluated the definition and judgment of the management relating to stock;(3) we evaluated the independence, objectivity, experience and quality of the external valuer engaged
    
    by the management;(4) comprehended and evaluated the methods of valuation for the Biological Assets and discussed with
    
    the valuation experts regarding the methods of valuation and their practical applications;(5) considered and evaluated the valuation parameters and the discount rate used in the valuation.
    
    2017 ANNUAL REPORT 141
    
    3704827-t01fnar (Shandong Chenming) p.141 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    2. Measurement of lease receivables
    
    (1) Details
    
    For detailed disclosures of relevant information, please see notes 4.27, 6.8, 6.9 and 6.11 to the financial
    
    statements.
    
    As at 31 December 2017, the carrying amount of lease receivables in the notes to the consolidated
    
    financial statements of Chenming Paper Company amounted to approximately RMB26,921,056,300
    
    in aggregate, accounting for approximately 25.49% of total consolidated assets, which include lease
    
    receivables due within one year, long-term receivables due within one year and long-term receivables.
    
    Lease receivables are mainly due to the financial leasing-related business carried out in the financial
    
    business segment of Chenming Paper Company which belongs to the riskier financial assets of Chenming
    
    Paper Company.
    
    The management of Chenming Paper Company judges whether or not to make bad debt provision of
    
    lease receivables based on the assessment of the recoverability of lease receivables and estimates the
    
    provision amount for impairment. The recognition of the lease receivables, changes in unsecured balance
    
    and provision for bad debt involve management’s judgment, actual outcome may differ from expectations.
    
    We are concerned about the foregoing matters because the carrying value of lease receivables above is
    
    significant for the consolidated financial statements of Chenming Paper Company, and the measurement
    
    of lease receivables involve significant judgment, therefore, we have regarded the measurement of lease
    
    receivables as a key audit matter.(2) Application for auditing
    
    When addressing the fair value measurement of lease receivables, the key auditing procedures we
    
    implemented mainly include:
    
    (1) we have identified, evaluated and tested the internal control related to the financial leasing business
    
    in respect of business process from the inspection of financial status of customers to the signing
    
    of financial leasing contracts and the assessment of the recoverability of the lease receivables,
    
    including aging analysis and overdue analysis of lease receivables and periodic assessment of the
    
    recoverability of the balance of lease receivables;(2) we reviewed financial leasing contracts and related information on early investigation of customers,
    
    conducted interviews with management to understand and evaluate the operations of financial
    
    leasing business and the policy on revenue recognition;(3) we examined the risks and rewards arising from the ownership of the leased properties in the
    
    financial leasing contracts, for example, examined other rights of the leased properties;(4) we examined and estimated the entry value and the term of amortisation of unrecognised financing
    
    income; and examined whether the payment status of the lessees is consistent with the contractual
    
    payment terms;
    
    142 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.142 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    (5) we have obtained the documents on the management’s assessment of the recoverability of
    
    the lease receivables, in particular the amounts of provision for impairment categorized by the
    
    management as individually made or made by credit risk characteristics; verified the reasonableness
    
    of management judgement through evidence obtained from procedures such as investigations
    
    on the background, business status and cash flow of customers, interviewed with customers and
    
    reviewed on historical transactions and repayments;(6) we determined the likelihood of impairment and the accuracy of bad debt provision in accordance
    
    with the Company’s accounting policy by checking the follow-up guarantee procedures of the
    
    customers, the financial strength of the guarantor, and the inventory and value determination of the
    
    collaterals;(7) we sought external confirmations for lease receivables with balances of significant amount and, in
    
    certain cases, with balances of smaller amount at the end of the year.
    
    3. Recognition of revenue from machine-made paper
    
    (1) Details
    
    For detailed disclosures of relevant information, please see notes 4.24 and 6.45 to the financial
    
    statements.
    
    In 2017, Chenming Paper Company recorded revenue of RMB29,881,130,600, of which
    
    RMB26,280,449,300 was attributed to revenue of machine-made paper, accounting for 88.74% of the
    
    revenue.
    
    Revenue of machine-made paper is recognised when Chenming Paper Company transferred to the
    
    customers the risks and rewards of ownership of the goods. Differentiated accounting methods were
    
    applied when addressing the differences in business models of domestic and overseas operations: in
    
    terms of domestic sales of machine-made paper, revenue is recognised when goods are delivered to the
    
    customers and such deliveries are confirmed; while in terms of overseas sales of machine-made paper,
    
    revenue is recognised on the day when goods are loaded on board and declared.
    
    Revenue is one of the key performance indicators of Chenming Paper Company, and the revenue from
    
    machine-made paper accounted for a relatively large proportion of the total revenue due to enormous
    
    sales, there may be potential misstatement in relation to whether revenue recognition is accounted for
    
    in the appropriate period of the financial statements, therefore, we identified recognition of revenue from
    
    machine-made paper as a key audit matter.(2) Application for auditing
    
    When addressing the fair value measurement of machine-made paper, the key auditing procedures we
    
    implemented mainly include:
    
    (1) we identified and evaluated the effectiveness of the design and operation of key internal controls
    
    conducted by the management related to revenue recognition;(2) we conducted sampling inspections on sales contracts, identified contract terms and conditions
    
    related to the transfer of risks and rewards of the ownership of the goods, assessed whether the
    
    timing of recognition of sales revenue from Chenming Paper Company meets the requirements of
    
    the Accounting Standards for Business Enterprises;
    
    2017 ANNUAL REPORT 143
    
    3704827-t01fnar (Shandong Chenming) p.143 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    (3) we conducted sampling inspections on transactions recorded during the year and verified with
    
    sales invoices, sales contracts, letters of credit, letters of guarantee, declaration forms, customers’
    
    confirmation of receipt and delivery orders, etc; evaluated whether the relevant revenue recognition
    
    meets the accounting policy on revenue recognition of Chenming Paper Company;(4) we analysed revenue and gross profit by taking into account product types and identified abnormal
    
    fluctuations in the amount of revenue in the current period;(5) we collected samples from sales revenue recorded around the balance sheet date for cut-off
    
    tests; verified delivery orders and other supporting documents to assess whether sales revenue is
    
    recorded in the appropriate accounting period; inspected the occurrence of on-the-spot recognition
    
    of sales at the end of the inspection period and inspected goods returns after the inspection period
    
    to determine the accuracy of revenue recognition during the period.
    
    (IV) Other information
    
    Chenming Paper Company’s management is responsible for other information. Other information includes the
    
    information covered in the annual report, but does not include the financial statements and our audit report.
    
    Our audit opinions published in the financial statements do not cover other information and we do not publish any
    
    form of assurance conclusion on other information.
    
    In conjunction with our audit of the financial statements, our responsibility is to read other information, during which
    
    we consider whether there is significant inconsistency or other material misstatement of other information with the
    
    financial statements or what we have learned during the audit.
    
    Based on the work we have performed, if we determine that there is a material misstatement of other information, we
    
    should report that fact. In this regard, we have nothing to report.(V) Management and management responsibility for financial statements
    
    The management of Chenming Paper Company (hereinafter referred to as “the management”) is responsible for the
    
    preparation of financial statements in accordance with the requirements of the Accounting Standards for Business
    
    Enterprises to enable them to achieve fair reflection, and to achieve the design, implementation and maintenance of
    
    necessary internal controls so that the financial statements are free of material misstatements due to fraud or errors.
    
    In the preparation of the financial statements, the management is responsible for assessing the continuing operations
    
    capabilities pf Chenming Paper Company, disclosing issues related to going concern (if applicable), and applying the
    
    going concern assumption unless management plans to liquidate Chenming Paper Company, terminate operations or
    
    have no other realistic options
    
    The management is responsible for supervising the financial reporting process of Chenming Paper Company.(VI) Auditor’s responsibility for auditing financial statements
    
    Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from material
    
    misstatement due to fraud or errors and to issue an audit report containing audit opinions. Reasonable assurance is
    
    a high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standards
    
    can always discover a major misstatement when it exists. Misstatements are generally considered to be material if it
    
    is reasonably expected that misstatements, individually or in aggregate, may affect the economic decision made by
    
    users of financial statements based on the financial statements.
    
    144 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.144 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    In the process of conducting audit work in accordance with auditing standards, we use professional judgment and
    
    maintain professional suspicion. At the same time, we also perform the following tasks:
    
    I. To identify and assess risks of material misstatement of financial statements due to fraud or errors, design
    
    and implement audit procedures to address these risks, and obtain adequate and appropriate audit evidence,
    
    together perform as a basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentional
    
    omission, misrepresentation or override of internal controls, the risk of failing to detect a material misstatement
    
    due to fraud is higher than the risk of failing to detect a material misstatement due to an error.II. To understand audit-related internal controls to design appropriate audit procedures.
    
    III. To evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of
    
    accounting estimates and related disclosures.IV. To conclude on the appropriateness of management’s use of the continuing operation assumption. At the
    
    same time, according to the audit evidence obtained, it may lead to conclusions as to whether there are
    
    significant uncertainties in matters or circumstances that have significant doubts about the ability of Chenming
    
    Paper Company to continue its operations. If we conclude that there are significant uncertainties, the auditing
    
    standards require us to request the users of the report to pay attention to the relevant disclosures in the financial
    
    statements in the audit report; if the disclosure is not sufficient, we should publish modified audit report. Our
    
    conclusions are based on the information available as of the date of the audit report. However, future events or
    
    circumstances may cause Chenming Paper Company to not continue its operations.V. Evaluate the overall presentation, structure, and content (including disclosures) of the financial statements and
    
    evaluate whether the financial statements fairly reflect the relevant transactions and matters.VI. To obtain sufficient and appropriate audit evidence on the financial information of entities or business activities
    
    in Chenming Paper Company to express opinions on the financial statements. We are responsible for guiding,
    
    supervising and executing group audits. We take full responsibility for the audit opinion.We communicate with the management on planned audit scope, time arrangements and major audit findings,including communication of the internal control deficiencies that we identified during the audit.
    
    We also provide statements to the management on compliance with ethical requirements related to independence,
    
    and communicate with the management on all relationships and other matters that may reasonably be considered to
    
    affect our independence, as well as related preventive measures.
    
    From the matters we communicated with the management, we determine which matters are most important for the
    
    audit of the financial statements for the current period and thus constitute the key audit matters. We describe these
    
    matters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare
    
    cases, if it is reasonably expected that the negative consequences of disclosing something in the audit report will
    
    outweigh the benefits to the public interest, we determine that the matter should not be reported in the audit report
    
    Ruihua Certified Public Accountants Chinese Certified Public Accountant (Project Partner):
    
    (Special General Partnership)
    
    Beijing· China Chinese Certified Public Accountant:
    
    27 March 2018
    
    2017 ANNUAL REPORT 145
    
    3704827-t01fnar (Shandong Chenming) p.145 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial ReportII. Financial Statements
    
    Unless otherwise stated, the unit in the financial statements of the financial report is: RMB
    
    1. Consolidated Balance Sheet
    
    Prepared by: Shandong Chenming Paper Holdings Limited
    
    31 December 2017
    
    Unit: RMB
    
    Item Closing balance Opening balance
    
    CURRENT ASSETS:
    
    Monetary funds 14,443,492,461.43 10,109,930,319.49
    
    Financial assets measured at fair value through profit or loss 94,000,000.00
    
    Bills receivable 4,220,231,853.56 1,590,460,875.23
    
    Accounts receivable 3,665,865,577.03 3,974,065,104.15
    
    Prepayments 1,962,151,473.35 1,511,362,674.64
    
    Other receivables 538,734,656.55 1,614,214,645.48
    
    Inventories 6,022,805,491.17 4,862,668,746.90
    
    Non-current assets due within one year 6,901,695,875.94 5,487,376,588.22
    
    Other current assets 11,568,757,330.26 6,616,744,831.28
    
    Total current assets 49,417,734,719.29 35,766,823,785.39
    
    NON-CURRENT ASSETS:
    
    Available-for-sale financial assets 2,453,000,000.00 1,945,000,000.00
    
    Long-term receivables 9,400,862,089.18 8,844,262,173.65
    
    Long-term equity investments 391,868,827.45 67,251,992.88
    
    Investment properties 4,809,535,109.82 14,258,675.83
    
    Fixed assets 28,227,509,503.05 28,811,555,365.39
    
    Construction in progress 7,668,669,413.87 4,115,194,870.23
    
    Construction materials 15,275,630.45 18,847,584.79
    
    Intangible assets 2,059,221,379.09 1,540,959,330.74
    
    Goodwill 20,283,787.17 20,283,787.17
    
    Long-term prepaid expenses 139,122,569.45 157,772,100.69
    
    Deferred income tax assets 522,288,850.40 497,457,826.70
    
    Other non-current assets 499,724,197.70 485,687,038.68
    
    Total non-current assets 56,207,361,357.63 46,518,530,746.75
    
    Total assets 105,625,096,076.92 82,285,354,532.14
    
    146 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.146 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    Unit: RMB
    
    Item Closing balance Opening balance
    
    CURRENT LIABILITIES:
    
    Short-term borrowings 35,096,574,873.03 27,875,506,988.53
    
    Bills payable 1,278,395,090.71 515,301,703.08
    
    Accounts payable 4,013,936,527.74 3,724,266,382.06
    
    Advance receipts 243,182,891.22 377,135,566.33
    
    Staff remuneration payables 185,130,892.10 159,968,262.82
    
    Taxes payable 496,626,014.68 236,927,459.78
    
    Interest payable 85,480,380.32 30,731,253.71
    
    Other payables 1,426,629,545.41 948,919,195.80
    
    Non-current liabilities due within one year 3,625,430,347.40 6,237,021,557.17
    
    Other current liabilities 10,797,248,631.76 6,602,863,069.45
    
    Total current liabilities 57,248,635,194.37 46,708,641,438.73
    
    NON-CURRENT LIABILITIES:
    
    Long-term borrowings 7,646,122,995.91 6,935,598,781.23
    
    Bonds payable 2,196,261,279.57
    
    Long-term payables 5,550,881,435.64 3,951,368,854.00
    
    Special payables 681,039,716.66 681,039,716.66
    
    Provisions 325,259,082.28
    
    Deferred income 1,452,717,833.55 1,443,846,526.33
    
    Other non-current liabilities 250,000,000.00
    
    Total non-current liabilities 18,102,282,343.61 13,011,853,878.22
    
    TOTAL LIABILITIES 75,350,917,537.98 59,720,495,316.95
    
    OWNERS’ EQUITY:
    
    Share capital 1,936,405,467.00 1,936,405,467.00
    
    Other equity instruments 10,048,300,000.00 7,060,300,000.00
    
    Including: Preference shares 4,477,500,000.00 4,477,500,000.00
    
    Perpetual bonds 5,570,800,000.00 2,582,800,000.00
    
    Capital reserves 6,149,257,784.90 6,149,257,784.90
    
    Other comprehensive income -354,165,127.80 -805,245,771.89
    
    Surplus reserves 1,132,116,106.40 1,132,116,106.40
    
    Retained profit 8,866,614,844.40 6,745,974,781.02
    
    Total equity attributable to equity holders of the company 27,778,529,074.90 22,218,808,367.43
    
    Minority interest 2,495,649,464.04 346,050,847.76
    
    Total owners’ equity 30,274,178,538.94 22,564,859,215.19
    
    TOTAL LIABILITIES AND OWNERS’ EQUITY 105,625,096,076.92 82,285,354,532.14
    
    Legal Representative: Financial controller: Head of the financial department:
    
    Chen Hongguo Hu Jinbao Zhang Bo
    
    2017 ANNUAL REPORT 147
    
    3704827-t01fnar (Shandong Chenming) p.147 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    2. Balance sheet of the Company
    
    Unit: RMB
    
    Item Closing balance Opening balance
    
    CURRENT ASSETS:
    
    Monetary funds 9,580,548,200.88 7,934,163,265.76
    
    Financial assets measured at fair value through profit or loss 94,000,000.00
    
    Bills receivable 787,095,075.51 112,943,069.85
    
    Accounts receivable 8,188,750.45 84,089,911.81
    
    Prepayments 742,107,273.09 1,003,699,885.05
    
    Other receivables 22,351,203,484.83 22,848,685,985.74
    
    Inventories 751,426,520.51 663,006,714.42
    
    Non-current assets due within one year 900,000,000.00
    
    Other current assets 2,488,977.72
    
    Total current assets 34,317,058,282.99 33,546,588,832.63
    
    NON-CURRENT ASSETS:
    
    Available-for-sale financial assets 2,453,000,000.00 1,909,000,000.00
    
    Long-term receivables 456,925,607.06
    
    Long-term equity investments 18,674,034,243.49 14,558,097,658.49
    
    Investment properties 14,258,675.83
    
    Fixed assets 2,364,990,246.94 3,343,366,320.45
    
    Construction in progress 973,375,557.42 52,757,799.47
    
    Construction materials 71,973.35
    
    Intangible assets 470,379,203.58 300,218,996.05
    
    Deferred income tax assets 186,935,887.68 164,139,190.27
    
    Other non-current assets 54,800,000.00 67,400,000.00
    
    Total non-current assets 25,634,440,746.17 20,409,310,613.91
    
    TOTAL ASSETS 59,857,499,029.16 53,955,899,446.54
    
    148 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.148 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    Unit: RMB
    
    Item Closing balance Opening balance
    
    CURRENT LIABILITIES:
    
    Short-term borrowings 7,522,637,247.14 8,203,392,554.58
    
    Bills payable 6,375,070,000.00 3,057,000,000.00
    
    Accounts payable 570,706,495.21 654,411,787.56
    
    Advance receipts 956,040,917.07 537,139,483.60
    
    Staff remuneration payables 47,546,116.66 58,599,576.37
    
    Taxes payable 116,173,781.96 43,087,056.70
    
    Interest payable 28,428,028.58 30,731,253.71
    
    Other payables 2,162,553,106.46 3,689,371,275.46
    
    Non-current liabilities due within one year 1,318,429,260.12 5,647,952,554.05
    
    Other current liabilities 10,797,248,631.76 6,602,863,069.45
    
    Total current liabilities 29,894,833,584.96 28,524,548,611.48
    
    NON-CURRENT LIABILITIES:
    
    Long-term borrowings 908,182,122.65 1,521,611,382.77
    
    Bonds payable 1,198,305,304.75 908,755.99
    
    Long-term payables 4,605,691,332.13 3,005,178,750.49
    
    Provisions 325,259,082.28
    
    Deferred income 50,753,189.60 56,572,797.75
    
    Other non-current liabilities 250,000,000.00
    
    Total non-current liabilities 7,338,191,031.41 4,584,271,687.00
    
    Total liabilities 37,233,024,616.37 33,108,820,298.48
    
    OWNERS’ EQUITY:
    
    Share capital 1,936,405,467.00 1,936,405,467.00
    
    Other equity instruments 10,048,300,000.00 7,060,300,000.00
    
    Including: Preference shares 4,477,500,000.00 4,477,500,000.00
    
    Perpetual bonds 5,570,800,000.00 2,582,800,000.00
    
    Capital reserves 5,938,960,168.19 5,938,960,168.19
    
    Surplus reserves 1,119,926,524.49 1,119,926,524.49
    
    Retained profit 3,674,882,253.11 4,791,486,988.38
    
    TOTAL OWNERS’ EQUITY 22,718,474,412.79 20,847,079,148.06
    
    TOTAL LIABILITIES AND OWNERS’ EQUITY 59,951,499,029.16 53,955,899,446.54
    
    2017 ANNUAL REPORT 149
    
    3704827-t01fnar (Shandong Chenming) p.149 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    3. Consolidated Income Statement
    
    Unit: RMB
    
    Amount forthe Amount for
    
    Item reporting period the prior period
    
    I. Total revenue 29,851,743,848.13 22,907,118,241.84
    
    Including: Revenue 29,851,743,848.13 22,907,118,241.84
    
    II. Total operating costs 25,800,053,864.52 20,878,998,805.65
    
    Including: Operating costs 19,729,190,475.09 15,787,340,418.80
    
    Taxes and surcharges 219,074,379.63 251,439,236.50
    
    Sales and distribution expenses 1,304,465,552.27 1,166,484,567.20
    
    General and administrative expenses 1,909,369,899.86 1,441,458,586.06
    
    Finance expenses 2,496,592,415.87 1,818,564,890.78
    
    Loss on impairment of assets 141,361,141.80 413,711,106.31
    
    Plus: Gain on change in fair value (“-” denotes loss) 72,999,957.67 -20,084,425.90
    
    Investment income (“-” denotes loss) 161,009,000.23 84,369,949.52
    
    Including: Investment income from associates
    
    and joint ventures 18,506,834.57 -3,240,263.50
    
    Foreign exchange gains (“-” denotes losses)
    
    Gain on disposal of assets (“-” denotes loss) -2,757,178.42 -1,536,454.18
    
    Other income 135,530,257.77
    
    III. Operating profit (“-” denotes loss) 4,418,472,020.86 2,090,868,505.63
    
    Plus: Non-operating income 445,266,368.30 495,395,587.51
    
    Less: Non-operating expenses 327,259,815.63 3,097,753.53
    
    IV. Total profit (“-” denotes total loss) 4,536,478,573.53 2,583,166,339.61
    
    Less: Income tax expenses 777,515,726.86 625,968,563.76
    
    150 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.150 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    Unit: RMB
    
    Amount forthe Amount for
    
    Item reporting period the prior period
    
    V. Net profit (“-” denotes net loss) 3,758,962,846.67 1,957,197,775.85
    
    (I) Net profit from continuing operations (“-” denotes net loss) 3,758,962,846.67 1,957,197,775.85
    
    (II) Net profit from discontinued operations (“-” denotes net loss)
    
    Net profit attributable to shareholders of the Company 3,769,325,450.93 1,998,578,788.75
    
    Profit or loss of minority interest -10,362,604.26 -41,381,012.90
    
    VI. Net other comprehensive income after tax
    
    Net other comprehensive income after tax attributable
    
    to shareholders of the Company 451,080,644.09 -460,230,907.63
    
    (I) Other comprehensive income that will not be reclassified to profit
    
    and loss in subsequent periods(II) Other comprehensive income that will be reclassified to profit and
    
    loss in subsequent periods 451,080,644.09 -460,230,907.63Exchange differences on translation of foreign operations 451,080,644.09 -460,230,907.63Other comprehensive income attributable to minority interest,
    
    net of taxVII. Total comprehensive income 4,210,043,490.76 1,496,966,868.22
    
    Total comprehensive income attributable to shareholders
    
    of the Company 4,220,406,095.02 1,538,347,881.12
    
    Total comprehensive income attributable to minority interest -10,362,604.26 -41,381,012.90
    
    VIII.Earnings per share:
    
    (I) Basic earnings per share 1.70 0.99
    
    (II) Diluted earnings per share 1.70 0.99
    
    Legal Representative: Financial controller: Head of the financial department:
    
    Chen Hongguo Hu Jinbao Zhang Bo
    
    2017 ANNUAL REPORT 151
    
    3704827-t01fnar (Shandong Chenming) p.151 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    4. Income statement of the Company
    
    Unit: RMB
    
    Amount for the Amount for
    
    Item reporting period the prior period
    
    I. Revenue 7,200,923,503.96 7,244,440,954.56
    
    Less: Operating costs 4,991,353,566.95 5,754,160,315.51
    
    Taxes and surcharges 70,868,721.40 35,657,866.56
    
    Selling and distribution expenses 246,355,160.28 265,529,373.13
    
    General and administrative expenses 615,445,501.19 575,686,201.40
    
    Finance expenses 833,482,860.73 643,728,400.29
    
    Loss on impairment of assets 19,570,118.05 -11,742,221.32Plus: Gain on change in fair value (“-” denotes loss) 94,000,000.00
    
    Investment income (“-” denotes loss) 138,737,944.94 229,752,961.82
    
    Including: Investment income from associates
    
    and joint ventures -3,265,824.03 143,952.00
    
    Gain on disposal of assets (“-” denotes loss) -2,279,308.98 -2,383,135.72
    
    Other income 15,298,245.10
    
    II. Operating profit (“-” denotes loss) 669,604,456.42 208,790,845.09
    
    Plus: Non-operating income 165,438,580.73 112,367,395.82
    
    Less: Non-operating expenses 325,759,082.28 890,997.90
    
    III. Total profit (“-” denotes total loss) 509,283,954.87 320,267,243.01
    
    Less: Income tax expenses -22,796,697.41 -20,108,731.71
    
    IV. Net profit (“-” denotes net loss) 532,080,652.28 340,375,974.72
    
    (I) Net profit from continuing operations (“-” denotes net loss) 532,080,652.28 340,375,974.72
    
    (II) Net profit from discontinued operations (“-” denotes net loss)
    
    V. Net other comprehensive income after tax
    
    (I) Other comprehensive income that will not be reclassified
    
    to profit and loss in subsequent periods(II) Other comprehensive income that will be reclassified to
    
    profit and loss in subsequent periods
    
    VI. Total comprehensive income 532,080,652.28 340,375,974.72
    
    152 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.152 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    5. Consolidated cash flow statement
    
    Unit: RMB
    
    Amount for the Amount for
    
    Item reporting period the prior period
    
    I. Cash flows from operating activities:
    
    Cash received from sales of goods and rendering of services 24,349,119,464.84 22,452,690,922.41
    
    Tax rebates received 8,465,388.45 9,863,432.16
    
    Cash received relating to other operating activities 828,266,108.48 1,177,773,434.44
    
    Subtotal of cash inflows from operating activities 25,185,850,961.77 23,640,327,789.01
    
    Cash paid for goods and services 14,516,886,986.15 15,711,107,188.05
    
    Cash paid to and for employees 1,022,490,275.52 1,094,003,908.09
    
    Payments of taxes and surcharges 1,631,366,603.20 1,452,433,419.20
    
    Cash paid relating to other operating activities 7,991,341,053.97 3,229,734,003.83
    
    Subtotal of cash outflows from operating activities 25,162,084,918.84 21,487,278,519.17
    
    Net cash flows from operating activities 23,766,042.93 2,153,049,269.84
    
    II. Cash flows from investing activities
    
    Cash received from investments 20,000,519.26
    
    Cash received from investment income 16,861,111.11 98,684,481.52
    
    Net cash received from disposal of fixed assets, intangible
    
    assets and other long-term assets 2,165,782.79 4,478,976.44
    
    Net cash received from disposal of subsidiaries and
    
    other business units 1,000,000.00
    
    Cash received relating to other investing activities 999,341,073.00 535,936,200.00
    
    Subtotal of cash inflows from investing activities 1,018,367,966.90 660,100,177.22
    
    Cash paid for purchase of fixed assets, intangible assets
    
    and other long-term assets 2,252,963,203.35 2,477,554,352.96
    
    Cash paid on investments 813,511,220.00 1,850,000,000.00
    
    Net cash paid for acquiring subsidiaries and other business units 1,582,745,899.31
    
    Subtotal of cash outflows from investing activities 4,649,220,322.66 4,327,554,352.96
    
    Net cash flows from investing activities -3,630,852,355.76 -3,667,454,175.74
    
    2017 ANNUAL REPORT 153
    
    3704827-t01fnar (Shandong Chenming) p.153 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    Amount for the Amount for
    
    Item reporting period the prior period
    
    III. Cash flows from financing activities:
    
    Cash received from investments 40,000,000.00
    
    Including: cash received from by subsidiaries
    
    from minority investment 40,000,000.00
    
    Cash received from borrowings 44,462,208,111.60 38,340,144,109.70
    
    Cash received relating to other financing activities 22,416,411,567.84 21,326,935,500.86
    
    Subtotal of cash inflows from financing activities 66,918,619,679.44 59,667,079,610.56
    
    Cash repayments of amounts borrowed 36,461,483,259.93 36,965,476,126.70
    
    Cash paid for dividend and profit distribution or interest payment 2,998,835,276.61 2,924,565,741.98
    
    Cash paid relating to other financing activities 22,981,164,342.75 18,147,472,131.53
    
    Subtotal of cash outflows from financing activities 62,441,482,879.29 58,037,514,000.21
    
    Net cash flows from financing activities 4,477,136,800.15 1,629,565,610.35
    
    IV. Effect of foreign exchange rate changes on cash and
    
    cash equivalents -45,503,158.48 -23,407,152.59V. Net increase in cash and cash equivalents 824,547,328.84 91,753,551.86
    
    Plus: Balance of cash and cash equivalents as at the beginning
    
    of the period 1,979,861,045.62 1,888,107,493.76
    
    VI. Balance of cash and cash equivalents as at the end of the period 2,804,408,374.46 1,979,861,045.62
    
    154 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.154 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    6. Cash flow statement of the Company
    
    Unit: RMB
    
    Amount for the Amount for
    
    Item reporting period the prior period
    
    I. Cash flows from operating activities:
    
    Cash received from sales of goods and rendering of services 3,463,130,926.30 8,327,441,977.80
    
    Cash received relating to other operating activities 1,689,891,672.88 1,018,890,721.29
    
    Subtotal of cash inflows from operating activities 5,153,022,599.18 9,346,332,699.09
    
    Cash paid for goods and services 2,236,436,321.89 2,179,876,627.93
    
    Cash paid to and for employees 391,883,575.09 260,230,463.91
    
    Payments of taxes and surcharges 357,296,733.15 320,755,030.84
    
    Cash paid relating to other operating activities 1,054,760,413.57 933,164,769.74
    
    Subtotal of cash outflows from operating activities 4,040,377,043.70 3,694,026,892.42
    
    Net cash flows from operating activities 1,112,645,555.48 5,652,305,806.67
    
    II. Cash flows from investing activities:
    
    Cash received from investments 20,000,519.26
    
    Cash received from investment income 16,861,111.11 448,684,481.52
    
    Net cash received from disposal of fixed assets,
    
    intangible assets and other long-term assets 1,686,062.41 4,356,816.44
    
    Net cash received from disposal of subsidiaries and
    
    other business units 1,000,000.00
    
    Cash received relating to other investing activities 900,000,000.00
    
    Subtotal of cash inflows from investing activities 918,547,173.52 474,041,817.22
    
    Cash paid for purchase of fixed assets, intangible assets
    
    and other long-term assets 95,795,315.34 42,989,916.52
    
    Cash paid on investments 4,823,511,220.00 3,090,000,000.00
    
    Subtotal of cash outflows from investing activities 4,919,306,535.34 3,132,989,916.52
    
    Net cash flows from investing activities -4,000,759,361.82 -2,658,948,099.30
    
    2017 ANNUAL REPORT 155
    
    3704827-t01fnar (Shandong Chenming) p.155 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50XIII Financial Report
    
    Unit: RMB
    
    Amount for the Amount for
    
    Item reporting period the prior period
    
    III. Cash flows from financing activities:
    
    Cash received from borrowings 26,018,893,778.41 14,218,918,082.13
    
    Cash received relating to other financing activities 22,716,411,567.84 17,486,500,000.00
    
    Subtotal of cash inflows from financing activities 48,735,305,346.25 31,705,418,082.13
    
    Cash repayments of amounts borrowed 22,130,699,777.14 14,723,402,085.03
    
    Cash paid for dividend and profit distribution or interest payment 3,596,708,489.03 1,215,953,029.42
    
    Cash paid relating to other financing activities 19,674,703,816.85 18,210,806,209.95
    
    Subtotal of cash outflows from financing activities 45,402,112,083.02 34,150,161,324.40
    
    Net cash flows from financing activities 3,333,193,263.23 -2,444,743,242.27
    
    IV. Effect of foreign exchange rate changes on cash
    
    and cash equivalents -7,395,813.66 -15,474,775.43V. Net increase in cash and cash equivalents 437,683,643.23 533,139,689.67
    
    Plus: Balance of cash and cash equivalents as
    
    at the beginning of the period 582,578,426.62 49,438,736.95
    
    VI. Balance of cash and cash equivalents as at the end of the period 1,020,262,069.85 582,578,426.62
    
    156 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.156 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    XIII Financial Report
    
    2017 ANNUAL REPORT 157
    
    3704827-t01fnar (Shandong Chenming) p.157 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    I:\Chi\FOR7D.ILL PDFCIIIIAI.IIVt.Ie..(mCmoh((((((BBCBIIIIVV)IVIiaaah)I)In)))nlllaoaaaennnnsg123TCPTSOcccsuee...oreeerpataosh_tepnaaaafeoncidiissslsnttriaOCiD(cfsaendoaaaetloltiaprhsirltttrspsdrmptetstttteiwtarirhhhi)rnuhsptiipfdiib\eeedabamtaerewhuloerurrebeiryeievpnthtninneitaoneihoaeosaddagrdostoinnhnsdiniwlnoosa\d(tdt“3bniffronevt-eiyertt7e”ernoeshhhsrgh0ddweesi)pnoe’u4donappcelnecdfe8ioredoqeietrmro2htsduirbeorse7iertssybdyyo-yeydsetfeah0etoaoracw1rtparhrefneenhearootrsaeselrdqe)reu(riettsmy)i(n27eg111-,,,9990n3333S666p-h,,,4442ta000re0e5551,,,oc444r8a666)ip777fo...i(t000a1000l6cd.2h7P.4445rae,,,1444fe777)nr777\e1,,,n5553c000g.e000A,,,s000euh000a000dr...si000et000sorOsit-hn4e8r222225Pe2,,,,,,e559995qo7r888887up-228880iett,,,,,,w880008y0tu0000001ian000000els,,,,,,000000n.btir000000oun000000nmde......d000000ed000000snrtss’ equOthietrsy 666C,,,111a444p999it,,,22a255l5Er777qe,,,u777si88e8ty44r4v...a999et000stributable to owtnrseeharLsaseurosersfsy:thFeoCr othm---ec88443por00555aem55114np,,,,,py22001o44886rret55005ihin,,,,,n77661egcO77442no11447psthm.....ie88008vere9e9990irod Special reserves 111S,,,u111r333p222lu,,,111s111r666e,,,111s00e066r6v...444e000s Gepnroevraisliorinsks --6623118,,,,,,,7771668R4426446e5590886t,,,,,,,a9963666in77428814405554e,,,,,,,d77403388865884p1130774ro.......0039554fi2238550t 2222M,,,,331114-i4445159n6699095o,,,,,,,r0059396it5596664y0081219i,,,,,,,n8862624t4412026e7760404re.......7725250s6684644tUn223--2247522110i,,,,,,,,,,5527119662ot6610458447w:4409798884n,,,,,,,,,,8803990661eR5541660887r’9993110558s,,,,,,,,,,2243220335Me1129220883Tq5530000778ou..........t1177550559iBta9956440554ylXIII Financial Report
    
    158 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.158 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    IIIIAIII.VtI.e..mm((((((BBCBIIIIVV)IIVaaah)I)I)))lllaoaaannnng123TCTPSOcccue...oreeerpataoshtepnaaaafenciiissslsnttriaCeOD(cfsadoaaaetlqoltiathirtttrspshurmpetstttewtaeirhhhirthsptiipfriyibeeedabtaserehuoleiurrbeeinrievpnthtninneisoeihoaeoddatgrdosoinnrndniuwlnoosd(dtm“nibffonevt-iryttee”ernoehhhsrnghddweesi)ntoe’usonppcelnecdfeoreoqeietrmrohtsduireorseieptsbdyyoyeydefaeoraorcwrtirhneoeearrssre) per111,,,i999o333S666h,,,444da000re555,,,c444a666p777...it000a000l P444re,,,444fe777r777e,,,n555c000e000,,,s000h000a000r...000e000s Other222Pe,,,e555qr888uIp222:iet,,,\888ytCu000ian000hls,,,i000bt\r000Fou000nmO...d000e000sRntsDILL PDF (OCthheirnsese_d666C,,,e111ap444p999ti)t,,,11111a2\w11331l5Er998897qet,,,,,,ua552257si00770e8it\y88668r43v......a008809e7t991190st0ri4b8ut2a7bl-terte0tao1sofunwryanrsehrL(saeeros)esfs(:t2he7C-F0oor3m-----tc-44338hp2o66440eam055050np,,,,,1py20202r13314r8ioe04045)rhi,,,,,n99887ep(Oc66007n1eo74741str6hmi.....io26628v.e2d6e336e9r7.51)S\1pe3c.Aialuredsietorvress-4827111S-,,,ut1110r333p1222lu,,,e111s.111ir666ne,,,111ds00e0d66r6v...444e000s Gpenroevraisliorinsks 55116--,,,,,2494777R8968334e1841445t,,,,,,,a5445009in71556677778114e,,,,,,,d67166678334448p2882001ro.......7336110fi7755002t M333--i88444n77116o,,,,,r44330it33885y11110i,,,,,n88008t66114e00227re.....66997s66006tUn1121757442--i,,,,,,,433244775ot924277336w:640477444n,,,,,,,,,3539650018eR3632106615r’4464901199s,,,,,,,,,,4784506652Me6377004401Tq6888800085ou..........t9229001101iBta1288900099yl
    
    XIII Financial Report
    
    2017 ANNUAL REPORT 159
    
    3704827-t01fnar (Shandong Chenming) p.159 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    I:\Chi\FOR8D.ILL PDFSIIIIIAVII.tI.e.(.mCmth((((((BCBBaVVIIII)VIIiaaah)II)n)))olllaaaaetnnnns121TOCSTPgeuccce...orrpaeteeeao_htepsnanfmedaaaciislittrDeCTsssnieafcsadqretpilaaaaoltasiruhppsttttrmtnei)ewretaittttfstir\yhhhspbiaiwifdpboteeeeernuliheenurrptitiebevnrhisatntroaieinneooettoiainrsodd\gdndnun3switstmnoodubo(7oi“nnvhffrye0-rpeoeitt”ennhhh4rlwfudesigtdoeen8ssn’uelco2dppeecnrocfeer7qereormsitrsrodu-htsieeteo(hrieeotb0rsodyyvry1yfpedeasefoaosehanrtwcoahranrnrereeerrah(rgssoetel)di)e(ne2rs7sg)-03pi-n2e01111,,,r8999e333)iS666o(qh,,,1444a6000drue555.2,,,c4447ia666.tp7775...i1yt000a)000l\1o3.AfPu444rdeo,,,i444fte777orw777re,,,sn555-c0004ne0008,,,s0002he0007a000-r...tr000e0000ss1eO.tihonedrdf522222eP,,,,,,qe599955utr887888pi088822they,,,,,,000888tui000000nea000000sl,,,,,,t000000bru000000oC000000mn......d000000e000000snotsmpanyOthers 555C,,,999a333p888it,,,999a666l r000e,,,111s666e888rv...111e999s FLoerstsh:etrreeapsourtriyngshpaerreisod comprehineOcnosthmiveeer Special reserves 111S,,,u111r111p999lu,,,999s222r666e,,,555s222e444rv...444e999s ---311414,,,,,,6567167R7314499e4218681t,,,,,,,a8066644in88088882045566e,,,,,,,d26793395538888p3278758ro.......1235523fi1857588t U222--n22120110,,,,,,,,798956868oi138784444wt888128877:n,,,,,,,,,430006600e789007887rR’450009559s,,,,,,,,,406023131eM100564884Tq200428778ou.........t702705500itaB900835566ylXIII Financial Report
    
    160 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.160 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:50
    
    IIIIIAV.IIt.Ie..mBma((((((CBBVIVIIIlVI)IaaahI))I)))onllaaacnnn142OPTSCTegucc...ropraeteeaaohtepssnanfeaaciislittrDODassniafcsadtetiiltaaoltssihrthpsttrmttheewrretattfeiirrhhspbbiiisdpboteeeeruuheeurnittibevnrhiitndrooieineoeoannsodgondnnwitfsttnodoo(it“nnvhfh-reooeit”eenhrwwdesigdepnnn’ueceopeeecnorfrrqreiopmossitoduhtde((rieeootbrsyyrryyeidsseaooehharwcaarrnrrreeeeahhrssoopelldd)eeerrssr)) iod111,,,999333S666h,,,444a000re555,,,c444a666p777...it000a000l P4444re,,,,4444fe7777r7777e,,,,n5555c0000e0000,,,,s0000h0000a0000Ir:....0000e\C0000s hOi\tFheOrR222eP,,,qe555Dur888pi222Itey,,,L888tuiL000na000slP,,,t000brDu000o000mnF...d000e(000snCtshinese_dept)\wOttahie\r3s704827555C-,,,999ta0333p1888it,,,f191188an611414lar909009er,,,,,,515665s(600066ee888080r)v......010101e(2999900s7-0LeF3so-s2r:0tth1ree8ap)sr(uio1rry6p.s2ehr7aio.r5eds1)\13.Aucdoimtoprrse-h4ine8Ocn2ost7hmive-eetr01e.indSdpecial reserves 111S,,,u111r111p999lu,,,999s222r666e,,,555s222e444rv...444e999s 455---,,,7773311R9339488e1440355t,,,,,,,a4006311in86678776115522e,,,,,,,d96669668447655p8004533ro.......3113777fi8002866t U211n044466--,,,,,,877443077oi433774866wt744770333:n,,,,,,,,,1000563911e1766017344rR’9911095355s,,,,,,,,,,1566059833eM0444007400Tq8800084255ou..........t0011007733itaB6900092155yl
    
    XIII Financial Report
    
    III. General Information of the Company
    
    Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was incorporated in May 1993 in
    
    Shouguang City, Shandong Province, with its headquarters at No. 2199 Nongsheng Road East, Shouguang City, Shandong
    
    Province.
    
    The Company and its subsidiaries are principally engaged in processing and sale of paper products (including machine
    
    made paper and paper board), paper making raw materials and machinery; generation and sale of electric power and
    
    thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing and sale of wood
    
    products; and manufacturing and sale of laminated boards and fortified wooden floorboards, marine engineering project
    
    investment, hotel service, equipment financial and operating leasing, etc.
    
    The financial statements were considered and approved by the board of directors of the Company (the “Board”) on 27
    
    March 2018. According to the Articles of Association, these financial statements will be submitted to the general meeting for
    
    its approval.
    
    Subsidiaries of the Company included in the scope of consolidation in 2017 totalled 63. For details, please refer to Note
    
    VIII “Equity in other entities”. The scope of consolidation of the Company during the year had 11 more companies included
    
    and two companies excluded compared to the prior year. For details, please refer to Note VII “Changes in the scope of
    
    consolidation”.IV. Basis of Preparation of the Financial Statements
    
    1. Basis of preparation
    
    The Company’s financial statements are prepared on a going concern and based on actual transactions and events,
    
    in accordance with the Accounting Standards for Business Enterprises-Basic Standards promulgated by the Ministry
    
    of Finance (Order of Ministry of Finance No. 33, as amended by Order of Ministry of Finance No. 76) and 42 specific
    
    accounting standards as promulgated and amended on and after 15 February 2006, the application guidelines of the
    
    Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards
    
    for Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on
    
    the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for
    
    Financial Reports” (revised in 2014) of China Securities Regulatory Commission. The Company’s financial statements
    
    have been prepared on an accrual basis in accordance with the ASBEs. Except for certain financial instruments and
    
    consumable biological assets, the financial statements are prepared under the historical cost convention. In the event
    
    that depreciation of assets occurs, a provision for impairment is made accordingly in accordance with the relevant
    
    regulations.
    
    The Company has been implementing the ASBEs since 1 January 2007.
    
    In addition to preparing and issuing financial statements in accordance with the new accounting standards, the
    
    Company, as an H-share listed company, also has to provide financial statements for the public in accordance with
    
    the Hong Kong Financial Reporting Standards. Pursuant to the relevant requirements under Rule 1 of “Accounting
    
    Standards for Business Enterprises Interpretation No. 1”, with respect to the transactions or matters which do not
    
    have any difference in terms of standards between the new accounting standards and the Hong Kong Financial
    
    Reporting Standards, the Company shall make retrospective adjustments in accordance with Rules 5 to 19 of
    
    “Accounting Standards for Business Enterprises No. 38 – First-time Implementation of Accounting Standards
    
    for Business Enterprises” (“Standard No. 38”) and other relevant requirements. The Company shall also make
    
    retrospective adjustments to the financial statements for the comparable years in respect of the changes in
    
    accounting policies due to the implementation of new accounting standards for the transactions and matters other
    
    than those attributable to Rules 5 to 19 of Standard No. 38 with reference to the relevant available information based
    
    on the financial statements prepared by the Company according to the Hong Kong Financial Reporting Standards.
    
    2017 ANNUAL REPORT 161
    
    3704827-t01fnar (Shandong Chenming) p.161 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:55XIII Financial ReportIV. Basis of Preparation of the Financial Statements (Cont’d)
    
    2. Going concern
    
    No facts or circumstances comprise a material uncertainty about the Company’s going concern basis within 12
    
    months since the end of the reporting period.
    
    V. Significant Accounting Policies and Accounting Estimates
    
    Whether the Company needs to comply with the disclosure requirements for specific industries
    
    No
    
    Specific accounting policies and accounting estimates are indicated as follows:
    
    The Company and its subsidiaries are principally engaged in processing and sale of paper products (including machine
    
    made paper and paper board), paper making raw materials and machinery. The Company and its subsidiaries formulated
    
    certain specific accounting policies and accounting estimates for the transactions and matters such as revenue recognition
    
    based on their actual production and operation characteristics pursuant to the requirements under the relevant accounting
    
    standards for business enterprises. For details, please refer to this Note IV. 24 “Revenue”. For the critical accounting
    
    judgments and estimates made by the management, please refer to Note IV. 30 “Critical accounting judgments and
    
    estimates”.
    
    1. Statement of compliance with the Accounting Standards for Business Enterprises
    
    The financial statements have been prepared by the Company in conformity with the ASBEs, which truly and fully
    
    reflect the financial position of the Company as at 31 December 2017 and relevant information such as the operating
    
    results and cash flows for 2017. In addition, the financial statements of the Company also comply with, in all material
    
    respects, the disclosure requirements of the “Regulation on the Preparation of Information Disclosures of Companies
    
    Issuing Public Shares, No. 15: General Requirements for Financial Reports” revised by the China Securities Regulatory
    
    Commission in 2014 and the notes thereto.2. Accounting period
    
    The accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to
    
    reporting periods that are shorter than a full accounting year. The accounting year of the Company is from 1 January
    
    to 31 December of each calendar year.3. Operating cycle
    
    Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Company until
    
    their realisation in cash or cash equivalents. The operating cycle of the Company lasts for 12 months, and acts as an
    
    indicator for classification of liquidity of assets and liabilities.
    
    Our subsidiaries, including Zhanjiang Chenming Arboriculture Development Co., Ltd., Yangjiang Chenming
    
    Arboriculture Development Co., Ltd., Nanchang Chenming Arboriculture Development Co., Ltd., Huanggang
    
    Chenming Arboriculture Development Co., Ltd. and Chenming Arboriculture Co., Ltd., were engaged in arboriculture
    
    cultivating, plantation and sale. Their ordinary operating cycle lasts for over 1 year.
    
    162 SHANDONG CHENMING PAPER HOLDINGS LIMITED
    
    3704827-t01fnar (Shandong Chenming) p.162 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:55
    
    XIII Financial Report
    
    V. Significant Accounting Policies and Accounting Estimates (Cont’d)
    
    4. Functional currency
    
    The Company and its domestic subsidiaries recognise RMB as their functional currency according to the primary
    
    economic environment in which they operate. The functional currency of the Company and its domestic subsidiaries
    
    is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or “US$”), Japanese yen
    
    (“JPY”), Euro (“EUR”) and South Korean Won (“KRW”) as their respective functional currency according to the general
    
    economic environment in which these subsidiaries operate. The Company prepares its financial statements in RMB.5. Accounting treatment of business combinations under common control and not under common
    
    control
    
    Business combinations refer to the transactions or events in which two or more separate enterprises merged as a
    
    single reporting entity. Business combinations are divided into business combinations under common control and not
    
    under common control.
    
    (1) Business combinations under common control
    
    A business combination involving enterprises under common control is a business combination in which
    
    all of the combining enterprises are ultimately controlled by the same party or parties before and after the
    
    combination, and that control is not transitory. The party that, on the combination date, obtains control
    
    of another enterprise participating in the combination is the absorbing party, while that other enterprise
    
    participating in the combination is a party being absorbed. The combination date is the date on which the
    
    absorbing party effectively obtains control of the party being absorbed.
    
    Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination
    
    date as recorded by the party being merged. The difference between the carrying amount of the net assets
    
    obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value
    
    of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve
    
    (share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained
    
    earnings.
    
    Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to
    
    profit or loss in the period in which they are incurred.
    
    2017 ANNUAL REPORT 163
    
    3704827-t01fnar (Shandong Chenming) p.163 (P98738) 27-03-2018 16:28
    
    OUTPUT: 27-03-2018 16:29:55XIII Financial ReportV. Significant Accounting Policies and Accounting Estimates (Cont’d)
    
    5. Accounting treatment of business combinations under common control and not under common
    
    control (Cont’d)
    
    (2) Business combination not under common control
    
    A business combination not involving enterprises under common control is a business combination in which
    
    all of the combining enterprises are not ultimately controlled by the same party or parties before and after the
    
    combination. For a business combination not involving enterprises under common control, the party that, on the
    
    acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that
    
    other enterprise participating in the combination is the acquiree. The acquisition date is the date on&