Zhanjiang Chenming Paper in China to build 3.1M-yuan, 190,000 tonnes/year printing and writing paper mill and 1.3M-yuan, 180,000 tonnes/year mill to produce paper for paper cups; construction period is 18 months for each project, but startup dates not set

SHANDONG, China , September 27, 2013 (press release) – This announcement is made pursuant to Rule 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Shandong Chenming Paper Holdings Limited (the “Company”) published “Shandong Chenming Paper Holdings Limited: Announcement on External Investment” dated 27 September 2013 on the website of Shenzhen Stock Exchange. The following is a translation of the official announcement solely for the purpose of providing information.

By order of the Board
Shandong Chenming Paper Holdings Limited
Chen Hongguo
Chairman
Shandong, PRC
27 September 2013

As at the date of this announcement, the executive Directors are Mr. Chen Hongguo, Mr. Yin Tongyuan, Mr. Li Feng, Mr. Geng Guanglin, Mr. Hou Huancai and Mr. Zhou Shaohua, the non-executive Directors are Mr. Cui Youping and Mr. Wang Xiaoqun and the independent non-executive Directors are Mr. Wang Aiguo, Mr. Zhang Zhiyuan, Ms. Zhang Hong and Ms. Pan Ailing.

* For identification purposes only

Chenming Paper, Chenming B
Stock code: 000488 200488
Announcement No.: 2013-089
Shandong Chenming Paper Holdings Limited
Announcement on External Investment

The Company and all members of the board of directors (the “Board”) hereby warrant the truthfulness, accuracy and completeness of the contents of information disclosure which do not contain any false information, misleading statements or material omissions, and jointly and severally accept responsibility for the truthfulness,accuracy and completeness of its contents.

I. Overview of external investment

1. General description of external investment
In order to fully leverage the advantages of the self-made pulp of the project of Zhanjiang Chenming and of its close proximity to the South China market, enhance the overall competitiveness of the products of the Company in the market, and improve the profitability of the Company, the Board of the Company has agreed to the construction of a paper for paper cup project with annual production capacity of 180,000 tonnes and a high-grade cultural paper project with annual production capacity of 190,000 tonnes by Zhanjiang Chenming.

2. Consideration and approval of the Board The second extraordinary meeting of the seventh session of the Board of the Company was convened on 27 September 2013 through means of electronic communications. All of the 12 directors were present at the meeting. The resolution on “Construction of paper for paper cup and high-grade cultural Paper Projects by Zhanjiang Chenming” was considered and approved at the meeting with a voting result of 12 votes for, 0 vote against and 0 vote abstained.

3. Necessary procedures for investment to become effective This external investment was subject to approval at the general meeting. The external investment is not a connected transaction and will not constitute a material asset reorganisation under the Administrative Rules on Material Asset Reorganisation of Listed Companies.

II. General description of the investment entity
Company name: Zhanjiang Chenming Paper Pulp Co., Ltd.
Registered address: 6/F., Tai Hua Building, No. 42 Middle of Renmin Avenue, Zhanjiang City
Legal representative: Geng Guanglin
Registered capital: RMB3 billion
Company type: limited liability company
Scope of business: principally engaged in breeding, afforestation, soil improvement, forestry research, raw material forest base construction; operation and acquisition of timber; implementation, management and operation of pulp plant construction; manufacture, production, processing and sale of pulp and related products; design, development, construction,operation and maintenance of thermal power plants and other ancillary facilities as well as sale of electricity and other by-products, machinery equipment, chemical products (excluding dangerous chemicals); import and export of goods and technologies.

III. General description of the subject of investment Raw materials of the proposed 180,000 tonnes paper for paper cup project mainly include commercial softwood pulp and broadleaf wet pulp and utilize the most advanced skills and equipment in the world. The total investment for the project amounts to RMB1,323 million, of which the investment for construction amounts to RMB1,138 million, interests during the construction period amounts to RMB38.47 million and the working capital amounts to RMB146.63 million. The construction period is 18 months.

The major products of the 190,000 tonne high-end culture paper project are uncoated printing and writing paper and coated printing and writing paper. The project mainly uses the raw materials such as commercial softwood pulp, mechanical pulp and broadleaf wet pulp and employs the most advanced skills and equipment in the world. The total investment for the project amounts to RMB3,097 million, of which the investment for construction amounts to RMB2,896 million, interests during the construction period amounts to RMB95.44 million and current capital amounts to RMB105.79 million. The construction period is 18 months.

VI. Major terms of the external investment contract The Company has not executed any major equipment acquisition contract.

V. Purpose of the external investment and its effect on the Company The overall competitiveness and the gross profit margin of the products of the Company in the market will be further enhanced and the Company will take full advantage of its economies of scale upon completion of the projects, thereby further strengthening the competitiveness of the Company.

According to the estimation of the current market situation, the unit selling price of paper for paper cup products of 180,000 tonnes will be approximately RMB6,200/tonne (inclusive of tax) and the unit cost of the products will be approximately RMB4,985/tonne. Based on the annual production of 180,000 tonnes upon operation, the project will generate a revenue of approximately RMB1,100 million every year and profit before tax of approximately RMB204 million, in which the net profit amounts to approximately RMB109 million.

According to the estimation of the current market situation, the unit selling price of high-grade cultural paper products of 190,000 tonnes will be approximately RMB6,915/tonne (inclusive of tax) and the unit cost of the products will be approximately RMB4,900/tonne. Based on the annual production of 190,000 tonnes upon operation, the project will generate a revenue of approximately RMB1,314 million every year and profit before tax of approximately RMB260 million, in which the net profit amounts to approximately RMB131 million.

VI. Risk warning
There is a risk that the project may not generate the expected return due to factors such as operation and management, market and industrial competition,the price volatility of raw materials and environmental protection. The investing public should be aware of investment risks.

VII.Documents available for inspection
Resolutions of the Second Extraordinary Meeting of the Seventh Session of the Board of Shandong Chenming Paper Holdings Limited

Notice is hereby given.

Board of Shandong Chenming Paper Holdings Limited
27 September 2013

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