恒力石化：2022年年度报告(英文删节版)

Focus on innovative nature

build a better life2022 Annual Report AbridgementHengli Petrochemical Co., Ltd.

Stock Code :

600346

2022ANNUALREPORT

Lettertoshareholders,partnersandemployees

Dearshareholders,partnersandemployees:

Thepassingyearsneverlinger,yetouroriginalaspirationsendure.Asseasonsflowand

anotheryeardawns,weareremindedthat'thereisnowinterthatcannotbesurpassed,andnospringthatwillnotarrive.'Througharduoustrialsandovercomingcountlessobstacles,wehavebravedchallengesandsurmounteddifficulties,onceagainreunitingamidstthisradiantspringtime.

Inthepastyear,ournationandhomelandfacegreatchallengs.Geopoliticalcomplexities

persist,globaleconomyremainssluggish,andexternalcircumstanceshavebeentempestuous,surpassinganticipatedrisksandchallenges.GuidedbythecentralleadershipunderthecoreofComradeXiJinping,thePartyhassteeredthecourse,leadingtheentirenationtovigorouslyaccomplishthedemandingtasksofreform,development,andstability,strivingtoturnthetide.

Duringthisyear,HengliPetrochemicalhasalsoweatherednumeroustestsinitsoperations.Crudeoilpricessoaredandfluctuateddramatically,whiletheend-marketwitnessedweakconsumerdemandandinsufficientneeds.Theindustryasawholeenduredoperationalpressuresarisingfromnarrowedpricedifferentialsandtheinabilitytoshiftcosts.Inthelatterhalfoftheyear,thecompany'soperationalperformancedeclinedalongsideindustryfluctuations,resultinginlosses.Confrontedwithformidablechallenges,wehavecutthroughthicketsandadvancedtowardthelight,steadfastlygrowingamidsttremendouschangesanduncertainty,resoluteinourforwardpursuit.

"Weventureintothemostdifficultchallengesandstriveforthefarthestgoals."Despite

thetremendousdifficultiesfacedin2022,weconfrontedthemhead-onandachievedsomesmallaccomplishments.Intermsofproductionandoperation,wehaveimplementedthe"DualExcellenceStrategy"ofstrengtheningproductionmanagement,optimizingproductionprocesses,

2022ANNUALREPORT

enhancingnewproductdevelopment,andoptimizingproductstructure,resultinginimprovedquantityandquality.Intermsofindustriallayout,wehavereliedontheintegratedindustrialsystemof"oil,coal,andchemicals"andleveragedtheaccumulatedresearchanddevelopmentin"newmaterials"indownstreamsectorssuchas"fiber,membrane,andplastics"toconsolidateourcorebusinessandstrengthenthefoundationsforfuturedevelopment.Intermsofcapitaloperation,wehaveexcavatedhighlights,extractedvalue,andcomprehensivelyandvigorouslypromotedinvestmentandmarketvaluemanagementthroughvariouschannelsandforms,yieldingnoticeableresults.Intermsofsafetyandenvironmentalprotection,wehaveremainedcommittedtogreenandlow-carbondevelopment,andoureffortshavebeenrecognizedwithmultiplehonors,includingbeingawardedthenational-level"GreenFactory"and"NationalLow-CarbonEnterpriseintheTextileIndustry".

Withintherealmoflifeandtheworld,thepathislongandperilous.Standingatanotherhistoricaljuncture,wefeelthehowlingwindsofacenturyofupheaval:Geopoliticalconflictsshownosignsofabating,inflationreacheshistorichighsinEuropeandAmerica,andthe"triplepressure"ofshrinkingdemand,supplyshocks,andweakeningexpectationsremainsheavy.Tearingapartandintegrating,upheavalandreconstruction,allindicatethatthisyearmayyetbeanextraordinaryone.Undoubtedly,therecoveryofdemandcannothappenovernight,andtheeconomicrevivalmaybealengthyhealingprocess.

Withhopeinourheartsandstarsinoursights,despitetheimmenseuncertaintythatlies

aheadandthepotentialforunexpectedfactorstodisrupt,we,unitedasonewithourcountryandhomeland,willnavigatethroughtreacherouswatersandembarkonaneraofvastpossibilitieswithtremendousresilience.Wewillcontinuetoupholdthepatienceanddeterminationtofightatoughbattle,withtheresolveandconvictiontoachievevictory,andaddresstheessentialquestionsthatbelongtoHenglipeople.

Strengthinactionleadstogreaterprogress,anddeepunderstandingleadstomoreeffectiveaction.Regardlessoftheever-changingworld,weremainsteadfastandunwavering.Henglicontinuestobeacompanythatperseveresthroughhardworkandsteadfastdedication,andHenglipeopleremainpioneerswhowillinglyexploreandfirmlybelievethatevenatinystreamcan

2022ANNUALREPORT

breakthroughtoweringcliffs.Withanunwaveringcommitmenttoouroriginalaspirationsandunwaveringdetermination,inthenewyear,wewillcontinuetofocuson"onegoal,twostrategicimplementations,threefundamentalfoundations,fourkeyindustries,andsixcomprehensivesystems,"upholdingourcraftsmanshipspiritandstrivingforupwardadvancement.Afterenduringhardships,themountainsandriversregaintheirradiance.Eachtrialandtribulation,eachcallusandscarleftbehindfromcountlessstormsandtempests,isatestamenttoourgrowthandagiftfromtime.Recognizingourinadequacies,weforgeahead,gazingatdistantmountainswhiletakingdeterminedsteps.Wearemoreacutelyawarethatonlyby"puttingfortheffortsthatarenolessthananyoneelse's"andcourageouslyadvancingcanwepersistamidstthestormsandflourish.Catchingupwithagreatera,thegrandjourneyofChinese-stylemodernizationhasbegun.Achievinggrandvisionsandfar-reachinggoalsrequirespassingthroughobstaclestogetherwithmillionsoflike-mindedindividualsandthediligentperseveranceofcountlessunsungheroes.Eachoneofusisbothawitnessandaparticipant."Withaheartreachingbeyondtheskyandabodycommittedtothepresent."Thestarswillnotdisappointthosewhostriveforward.Webelievethatthejourneyweembarkonwillnotbeinvain!Thewindsandwaveswillcarryusforward,andwewillmeetagaininthevastblueexpanse,fartherandwiderthaneverbefore!

Chairman:

Content

Chapter 1 Definitions ...... 5

Chapter 2 Company Profile and Key Financial Indicators ...... 9

Chapter 3 Management Discussion and Analysis ...... 13

Chapter 4 Corporate Governance ...... 45

Chapter 5 Environmental and Social Responsibility ...... 64

Chapter 6 Important events ...... 78

Chapter 7 Share Changes and Shareholders ...... 85

Chapter 8 Information of Bonds ...... 93

Reference File Directory	Financial statements signed and sealed by the legal representative, person in charge of accounting, and person in charge of the accounting organization (accounting supervisor).
	Original audit report sealed by the accounting firm and signed and sealed by a certified public accountant.
	Original copies of all company documents and announcements publicly disclosed during the reporting period.

Chapter 1 DefinitionsI. DefinitionIn this report, the terms listed below are defined as follows, unless the context otherwiseimplies:

Definition of Frequently-Used Terms
Reporting Period	Refer to	From 1/1/2022 to 31/12/2022
Company, the Company, or Hengli Petrochemical	Refer to	Hengli Petrochemical Co., Ltd.
CSRC	Refer to	China Securities Regulatory Commission
Ministry of Industry and Information Technology	Refer to	Ministry of Industry and Information Technology of the People’s Republic of China
SSE	Refer to	Shanghai Stock Exchange
《Company Law》	Refer to	《Company Law of the People’s Republic of China》
《Securities Law》	Refer to	《Securities Law of the People’s Republic of China》
《Articles of Association》	Refer to	《Hengli Petrochemical Co., Ltd. Articles of Association》
Hengli Group	Refer to	Hengli Group Co., Ltd., controlling shareholder of the listed company
Hailaide	Refer to	Hailaide International Investment Ltd., person acting-inconcert with controlling shareholder of the listed company
Tak Shing Li	Refer to	Tak Shing Li International Holdings Ltd., person acting-inconcert with controlling shareholder of the listed company
Hegao Investment	Refer to	Jiangsu Hegao Investment Co., Ltd., person acting-inconcert with controlling shareholder of the listed company
Hengneng Investment	Refer to	Hengneng Investment (Dalian) Co., Ltd., person acting-inconcert with controlling shareholder of the listed company
Hengfeng Investment	Refer to	Hengfeng Investment (Dalian) Co., Ltd., person acting-inconcert with controlling shareholder of the listed company
Hengli Chemical Fiber	Refer to	Jiangsu Hengli Chemical Fiber Co., Ltd., subsidiary to the listed company
Susheng Thermal Power	Refer to	Suzhou Susheng Thermal Power Co., Ltd., subsidiary to the Hengli Chemical Fiber, sub-subsidiary to the listed company
Hengke Advanced Materials	Refer to	Jiangsu Hengke Advanced Materials Co. Ltd., subsidiary to the Hengli Chemical Fiber, sub-subsidiary to the listed company
Deli Chemical Fiber	Refer to	Jiangsu Deli Chemical Fiber Co., Ltd., subsidiary to the Hengli Chemical Fiber, sub-subsidiary to the listed company
Kanghui New Material	Refer to	Kanghui New Material Technology Co., Ltd., subsidiary to the listed company
Hengli Petrochemical Chemical	Refer to	Hengli Petrochemical (Dalian) Chemical Co., Ltd., subsidiary to the listed company
Hengli Investment	Refer to	Hengli Investment (Dalian) Co., Ltd., subsidiary to the listed company
Hengli Petrochemical (Dalian)	Refer to	Hengli Petrochemical (Dalian) Co., Ltd., subsidiary to the Hengneng Investment, sub-subsidiary to the listed company

Hengli Petrochemical (Huizhou)	Refer to	Hengli Petrochemical (Huizhou) Co., Ltd., subsidiary to the Hengneng Investment, sub-subsidiary to the listed company
Hengli Petrochemical Refining	Refer to	Hengli Petrochemical (Dalian) Refining Co., Ltd., subsidiary to the listed company
Crude Oil	Refer to	Crude oil is petroleum directly exploited from an oil well without being processed, and is a dark-brown or dark-green viscous liquid or semisolid flammable substance that is composed of various hydrocarbons.
Aromatic Hydrocarbon	Refer to	A hydrocarbon containing a benzene ring structure in its molecule.Aromatic hydrocarbons, mainly including benzene, methylbenzene, xylene, etc., are one of the most important basic raw materials for the production of petrochemicals.
Ethylene	Refer to	A compound consisting of two carbon atoms and four hydrogen atoms. It is the basic chemical raw material of synthetic fiber, synthetic rubber, synthetic plastic- (polyethylene and polyvinyl chloride), synthetic ethanol (alcohol), and also used in manufacturing chloroethylene, styrene, ethylene oxide, acetic acid, acetaldehyde, ethanol, and explosives, etc.
Polyethylene	Refer to	A thermoplastic resin obtained by polymerization of Ethylene. Polyethylene is odorless, non-toxic, feels like wax, has excellent low temperature resistance, good chemical stability, and is resistant to most acids and alkalis.
POLYPROPYLENE (PP)	Refer to	A semi-crystalline synthetic resin material with strong acid and alkali resistance, excellent electrical insulation performance, harder and higher melting point than PE.
Styrene	Refer to	An organic compound, usually a colorless, aromatic liquid, used primarily in the production of plastics, resins, and rubber.
Butadiene	Refer to	An organic compound, a colorless gas with a special smell, the main raw material for the production of synthetic rubber.
PARAXYLENE (PX)	Refer to	A kind of Aromatic Hydrocarbon, a colorless transparent liquid, is one of the raw materials for the production of purified terephthalic acid (PTA), which is used to produce plastics, Polyester Fiber and films.
PURIFIED TEREPHTHALIC ACID (PTA)	Refer to	It is white crystal or powder at normal temperature, non-toxic, flammable, if mixed with air within a certain limit, it will burn when exposed to fire.
METHYLENE GLYCOL (MEG OR EG)	Refer to	Colorless, odorless, sweet, viscous liquid, mainly used in the production of Polyester Fiber, antifreeze, unsaturated polyester resin, lubricants, plasticizers, non-ionic surfactants and explosives.
BDO, 1, 4-Butanediol	Refer to	Colorless oily liquid, flammable, miscible with water. Soluble in methanol, ethanol, acetone, slightly soluble in ether.
Acetic Acid	Refer to	Organic compound, a colorless liquid with a pungent odor. It is the raw material for the manufacture of rayon, film, aspirin, etc.
Polyester, Polyester Chip or PET	Refer to	Polyethylene terephthalate (referred to as polyester) is a fiber-forming high polymer prepared from PTA and MEG as raw materials through transesterification or esterification and polycondensation reactions. Fiber-grade

		polyester chips are used to make polyester staple fiber and Polyester Filament Yarn (PFY), and film-grade chips are used to make various film products.
PBAT	Refer to	Polybutylene terephthalate-adipate, a petrochemical-based biodegradable plastic, has excellent biodegradability. It is very active in the research of biodegradable plastics and one of the best degradable materials in the market.
PBS	Refer to	Polybutylene succinate, polymerized from succinic acid and 1, 4-butanediol (BDO), has good thermal performance and mechanical processing performance, and is easily destroyed by various microorganisms in nature or animals and plants. Enzyme decomposes, metabolizes, and finally decomposes into carbon dioxide and water, which is a typical fully biodegradable material.
Polyester Fiber	Refer to	Synthetic fiber obtained by spinning polyester obtained by polycondensation of organic dibasic acid and dibasic alcohol. Industrialized mass-produced Polyester Fiber is made of polyethylene terephthalate, and the trade name in China is polyester. It is the largest variety of synthetic fibers at present.
Polybutylene Terephthalate (PBT), PBT	Refer to	Also known as polytetramethylene terephthalate, it is a condensation polymer of terephthalic acid and 1, 4-butanediol. It can be obtained by polycondensation through transesterification or direct esterification. Together, PBT and PET are known as thermoplastic polyesters.
Biaxially-Oriented Polyethylene Terephthalate (BOPET), BOPET	Refer to	Biaxially-Oriented Polyethylene Terephthalate (BOPET) has the characteristics of high strength, good rigidity, transparency, high gloss, excellent wear resistance, folding resistance, pinhole resistance and tear resistance, etc.; heat shrinkage is extremely small and has good antistatic properties.
Denier (D)	Refer to	A fiber of 9, 000 meters in length weighs 1 gram and is called 1 Denier (D).
Polyester Filament Yarn (PFY)	Refer to	Filament with a length of more than one kilometer, the filament is wound into a ball.
PFY for Civil Use, Textile Yarn	Refer to	Polyester Filament Yarn (PFY) for apparel or home textiles.
PFY for Industrial Use, Industrial Yarn	Refer to	It is a polyester long fiber with high strength, high modulus and large denier used in industrial fields.
Differential Fiber	Refer to	Through chemical modification or physical deformation, mainly to improve the wearing performance, there are great innovations in technology or performance, or new fiber varieties with certain characteristics that are different from conventional varieties.
POY	Refer to	Polyester pre-oriented yarn, full name PRE-ORIENTED YARN or PARTIALLY ORIENTED YARN, is an incompletely drawn Polyester Filament Yarn (PFY) obtained by high-speed spinning with an orientation degree between the unoriented yarn and the drawn yarn.
DTY	Refer to	Stretched textured yarn, also known as polyester stretched yarn, full name DRAW TEXTURED YARN, is made of POY as raw yarn, stretched and false twisted, and often has a certain degree of elasticity and shrinkage.
FDY	Refer to	Full drawn yarn, also known as polyester drawn yarn, full

Chapter 2 Company Profile and Key Financial IndicatorsI. Company information

Company's Chinese Name	恒力石化股份有限公司
Abbreviation of Chinese Name	恒力石化
Company's Foreign Name	HENGLI PETROCHEMICAL CO., LTD.
Legal representative of the Company	Fan Hongwei

II. Contacts and contact information

	Secretary of the Board	Securities Affairs Representative
Name	Li Feng	Wang Shan, Duan Mengyuan
Contact address	Floor 31, Building B, Victoria Plaza, No. 52 Gangxing Road, Renmin Road Street, Zhongshan District, Dalian City, Liaoning Province	Floor 31, Building B, Victoria Plaza, No. 52 Gangxing Road, Renmin Road Street, Zhongshan District, Dalian City, Liaoning Province
Telephone	0411-39865111	0411-39865111
Fax	0411-39901222	0411-39901222
E-mail	[e-mail]	[e-mail] [e-mail]

III. Basic information

Registered address	OSBL Project-Public Office Building, No. 298, Changsong Road, Lingang Industrial Zone, Changxing Island, Dalian City, Liaoning Province
Company office address	Floor 31, Building B, Victoria Plaza, No. 52 Gangxing Road, Renmin Road Street, Zhongshan District, Dalian City, Liaoning Province
Postal code of the Company's business address	116001
Company website	hengliinc.com
E-mail	[e-mail]

IV. Information disclosure and location

Media name and website of the Company’s annual report disclosure	China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily
Website of the stock exchange where the company discloses the annual report	www.sse.com.cn
The place where the Company's annual report is ready for inspection	Office of the Company's board of directors

V. Company stock profile

Company stock profile
Stock category	Stock exchange	Stock abbreviation	Stock code	Stock abbreviation before change
A shares	Shanghai Stock Exchange	Hengli Petrochemical	600346	Hengli Stock

VI. Other relevant information

Accounting firm engaged by the Company (Domestic)	Name	Zhonghui Certified Public Accountants (Special General Partnership)
	Office address	Room 601, Building A, Hualian Times Building, No. 8 Xinye Road, Jianggan District, Hangzhou
	Name of signing accountant	Han Jian, Fang Sai

VII. Key accounting data and financial indicators in the past three years(I) Key Accounting Data

Unit: ten thousand yuan Currency: RMB

Key Accounting Data	2022	2021	Increase/decrease (%)	2020
Revenue from operations	22, 232, 358.40	19, 797, 034.49	12.30	15, 237, 339.57
Net profit attributable to shareholders of listed company	231, 830.32	1, 553, 107.67	-85.07	1, 346, 178.57
Net profit attributable to shareholders of listed company after deduction of non-recurring gains and losses	104, 528.51	1, 452, 069.80	-92.80	1, 287, 432.41
Net cash flows from operating activities	2, 595, 397.08	1, 867, 017.37	39.01	2, 414, 288.13
Net assets attributable to shareholders of listed company	5, 286, 254.36	5, 723, 138.30	-7.63	4, 690, 507.69
Total assets	24, 143, 047.46	21, 029, 622.56	14.80	19, 102, 872.66

(II) Key Financial Indicators

Key Accounting Data	2022	2021	Increase/decrease (%)	2020
Basic earnings per share (Yuan/Share)	0.33	2.21	-85.07	1.92
Diluted earnings per share (Yuan/Share)	0.33	2.21	-85.07	1.92
Basic earnings per share after deducting non-recurring gains and losses (Yuan/Share)	0.15	2.07	-92.75	1.83
Weighted average return on equity (%)	4.30	30.07	Reduced by 25.77 percentage points	32.55
Weighted average return on equity after deducting non-recurring gains and losses (%)	1.94	28.11	Reduced by 26.17 percentage points	31.13

Note of the key accounting data and financial indicators of the company in the prior threeyears at the end of the reporting period

During the Reporting Period, the prices of crude oil and other major raw materials roserapidly and oscillated at high levels and in a wide range. The prices of products near crudeoil also rose sharply due to the impact of crude oil prices. At the same time, the traditionaldemand for the company's main products such as chemicals, functional films, civilian yarns,and industrial yarns related to terminal consumption and infrastructure real estate is at a lowmarket level. The weak recovery of market demand in the industry, the delayed transmissionof upstream and downstream product prices, and the company's double operating squeezeof historically high operating costs and low industry demand are the main reasons for thecompany's revenue from operations growth but profit decline. Secondly, the companyimplemented a refinery overhaul in the second half of 2022, which affected the overall loadrate and processing cost level of the refining and chemical integration unit, and inaccordance with the requirements of accounting standards, the inventory loss caused bythe periodic decline in the international crude oil price has been accounted for, which hasfurther affected the company's annual profitability.

VIII. Main financial data by quarter in 2022

Unit: ten thousand yuan Currency: RMB

	First quarter (January to March)	Second Quarter (April-June)	Third quarter (July-September)	Fourth quarter (October-December)
Revenue from operations	5, 339, 665.19	6, 575, 862.87	5, 120, 188.76	5, 196, 641.58
Net profit attributable to shareholders of listed company	422, 268.92	380, 346.92	-193, 946.96	-376, 838.56
Net profit attributable to shareholders of listed company after deducting non-recurring gains and losses	411, 359.48	330, 324.85	-262, 602.68	-374, 553.14
Net cash flows from operating activities	1, 061, 775.26	601, 761.03	583, 868.05	347, 992.74

IX. Non-recurring gains and losses items and amount

Unit: yuan Currency: RMB

Item of non-recurring gains and losses	2022	2021	2020
Gain or loss on disposal of non-current assets	-8, 794, 093.17	1, 788, 290.01	-2, 353, 388.34
Government subsidies included in the current profit and loss, except for government subsidies that are closely related to the company's normal business operations, comply with national policies and regulations, and are continuously enjoyed in accordance with certain standards or quantities	1, 594, 250, 334.30	760, 570, 495.82	937, 331, 851.91
Gain on investment costs in acquisition of subsidiaries, associates and joint venture less than the fair value of identifiable net assets of the investees	79, 415, 493.16
Except for the effective hedging business related to the Company's normal business operations, income from the holding of trading financial assets, Derivative financial assets, Trading financial liabilities, and derivative financial	-46, 001, 895.50	375, 366, 888.97	-158, 168, 853.40

liabilities generates changes in fair value gains and losses, and the disposal of Trading financial assets, Derivative financial assets, Trading Investment income from financial liabilities, derivative financial liabilities and other debt investments
Other non-operating income/(expenses), net	10, 695, 487.35	-5, 096, 728.57	-11, 127, 746.48
Other gain or loss items met the definition of non-recurring item	3, 692, 791.90	45, 080, 477.29	1, 561, 440.57
Less: Impact on income tax	360, 240, 063.26	183, 394, 674.73	200, 533, 876.52
Impact on minority interests (after tax)	-	-16, 064, 003.29	-20, 752, 079.27
Total	1, 273, 018, 054.78	1, 010, 378, 752.08	587, 461, 507.01

X. Items measured at fair value

Unit: ten thousand yuan Currency: RMB

Item	Beginning balance	Closing balance	Changes in the period	Impact on profit for the current period
Derivative financial assets	69, 643.31	49, 043.06	-20, 600.25	45, 675.63
Derivative financial liabilities	29, 681.70	34, 602.07	4, 920.37	-50, 022.39
Wealth management products and structured deposits	2, 000.00	6, 500.00	4, 500.00	243.05
Receivable financing	341, 995.77	228, 727.12	-113, 268.65	-
Fund trust and asset management products	9, 793.85	4, 698.39	-5, 095.46	-150.78
Treasury bond reverse repurchase	16, 499.00	1, 734.90	-14, 764.10	59.41
Total	469, 613.63	325, 305.54	-144, 308.09	-4, 195.08

Chapter 3 Management Discussion and Analysis

I. Business discussion and analysisIn 2022, under the impact of complex geopolitical conflicts, deep adjustments in globalsupply chains, and frequent major climate disasters, prices of commodities such as energy,industrial metals, and food continued to rise, leading to a global surge in inflation. Weakerglobal economic fundamentals further intensified financial market volatility, promptingcentral banks in developed economies to swiftly and significantly tighten monetary policies,resulting in a phase of capital outflows. The central banks of some emerging markets anddeveloping economies took a more aggressive stance in raising interest rates, greatlyweighing down their economic growth. The global economic growth rate significantlydeclined in 2022, and the divergence in the recovery became more pronounced. Asgeopolitical influences deepen, the subsequent effects of rapid interest rate hikes by majorcentral banks, and inflationary pressures, the world economy may face even greaterchallenges in its recovery in 2023. The International Monetary Fund predicts a globaleconomic growth rate of only 2.9% in 2023.From a domestic perspective, "China's economy maintains strong resilience, has greatpotential, and remains vibrant, with the long-term positive fundamentals unchanged." Facedwith a complex and challenging situation, China adheres to the principle of seeking progresswhile maintaining stability, efficiently coordinates economic and social development, and hasachieved positive results, stabilizing the overall macroeconomic situation. In 2022, China'sgross domestic product (GDP) reached 121.02 trillion yuan, an increase of 3.0% comparedto the previous year. It outpaced the growth rates of other major economies in the world,maintaining a continuous expansion of the overall economic size and solidifying itsdevelopment foundation. However, despite this, the international situation remains complexand challenging, and the Chinese economy still faces significant "contractions in demand,supply shocks, and weakened expectations, " with a fragile foundation for economicrecovery. In 2023, the Central Economic Work Conference made it clear that it will adhereto the principle of seeking progress while maintaining stability, vigorously boost marketconfidence, emphasize stable growth, employment, and prices, promote overallimprovement in economic performance, and strive for qualitative and quantitativeimprovements. "Placing the restoration and expansion of consumption in a prioritizedposition, " adopting multiple measures to promote stable consumption growth, enhanceresidents' consumption capacity, improve the consumption environment, and cultivate newdrivers of consumption growth. "Persisting in making the focus of economic development onthe real economy and promoting new industrialization." Cultivating and expanding emergingindustries, continuously focusing on key areas such as 5G, artificial intelligence,biomanufacturing, industrial internet, intelligent connected vehicles, green and low-carbonsectors, and constantly enriching and expanding new application scenarios.

In our industry, in 2022, affected by the slowdown in macroeconomic growth, risingenergy prices, weak terminal consumption, and a continued decline in the real estate sector,the industry as a whole faced the dual pressures of high costs and insufficient demand,resulting in a general decline in profitability. From the cost side, the high prices of majorenergy sources such as crude oil and natural gas have increased production costs forenterprises. International crude oil prices experienced fluctuations after an initial increase.According to monitoring data from the China Petroleum and Chemical Industry Federation,in 2022, the average spot price of Brent crude oil was $101.2 per barrel, a year-on-yearincrease of 43.0%, and the average spot price of WTI crude oil was $94.5 per barrel, a year-on-year increase of 39.1%. From the demand side, insufficient terminal consumer demandand ineffective price transmission between upstream and downstream products have led to

lower product price increases compared to upstream raw materials, further squeezingenterprise profit margins. In the aromatics-PTA-polyester fiber industry chain, downstreamtextile and apparel are important terminal consumer markets. In 2022, due to factors suchas slowing growth in household income and slow recovery of consumption scenarios, thedomestic consumer market faced pressure, and domestic demand for textile and apparelproducts was insufficient. Although export volumes reached new highs, export growth ratesdeclined month by month in the second half of the year. According to data from the NationalBureau of Statistics, the retail sales of apparel, shoes, hats, and textiles above the quotanationwide decreased by 6.5% compared to the previous year, and the growth rate hasremained negative since March. Insufficient downstream demand for textile and apparelproducts led to a general decline in the operating rates of major industries in the chemicalfiber downstream, compared to the same period in 2021. In the olefin chemical industrychain, real estate and infrastructure, as important terminal consumer markets, bearenormous consumption volumes. Due to multiple factors, the deep adjustment trend in thereal estate market continued in 2022. Data from the National Bureau of Statistics shows thatnationwide real estate development investment decreased by 10.0% compared to theprevious year.Against the backdrop of high and volatile crude oil and natural gas prices, prices ofproducts closer to crude oil have also risen significantly, influenced by crude oil prices. Onthe other hand, the prices of chemical products closer to the consumer end depend moreon their own supply and demand dynamics. According to data from the National Bureau ofStatistics, the profits of the upstream oil and gas sector increased by 1.15 times year-on-year, while the profits of the downstream refining and chemical sectors experienced negativegrowth. In the face of a turbulent external environment, the integrated operation of highvalue-added and multi-variety industrial chains and the supply composition of productshighlight the industry's prominent risk resistance and profit capturing capabilities in the faceof high oil price volatility and market fluctuations.Year 2023 is the starting year for comprehensively implementing the spirit of the 20thNational Congress of the Communist Party of China and a crucial year for carrying forwardthe goals set in the 14th Five-Year Plan. "High-quality development is the primary task forbuilding a socialist modern country." The new generation of information technology and newmaterials serve as the two fundamental technologies of the manufacturing industry, withnew materials being the cornerstone of upgrading traditional industries and developingstrategic emerging industries. The chemical new materials industry is an important basicmaterial for strategic fields such as new energy, high-end equipment, green environmentalprotection, and biotechnology. In recent years, driven by the implementation of the domestic"dual carbon" strategy, the green transformation and upgrading of the national industry, andchanges in consumption patterns, the demand for upstream chemical new materials hascontinued to grow. This has prompted industry enterprises to actively transition from "energy+ chemicals" to "platformization + new materials" and from "scale economy dominance" to"green and circular-driven" business models. Leading industry players, such as HengliGroup, have implemented fully integrated development of the entire industry chain, relyingon a rich portfolio of basic chemical raw materials from integrated refining and petrochemicalprojects. They have extended their presence into downstream new materials fields such ashigh-end polyolefins, lithium battery materials, engineering plastics, and petroleum-baseddegradable plastics. By increasing value-added and internally consuming intermediateproducts, these companies effectively buffer the intense homogenized competition andstructural imbalances in high-end scarcity in the upstream sector, aiming to achievesecondary growth.

In recent years, the company has actively adapted to new situations, new developments,and new changes, closely focusing on the innovation chain based on national industrial

strategic transformation deployments, and deploying the industrial chain based on theinnovation chain. The company has focused on "supply chain enhancement and researchand development innovation." Building upon the advantageous integration of "oil, coal, andchemicals" in the deep integration of the "large-scale chemical platform, " and relying on finechemical park projects, the company has accelerated the development of a high-end finechemical industry cluster. This aims to further expand the industry's support anddevelopment foundation for high-end chemical raw materials, solidify the role andoperational efficiency of the upstream "large-scale chemical" platform. Targeting newdirections and markets in downstream polyester and polyesters, as well as fine chemicalsand specialty new materials in the olefin downstream sector, the company aims toconsolidate its traditional market advantages, benchmark breakthroughs in key newmaterials areas, and focus on the development of PBS/PBAT degradable materials,functional polyester materials, high-performance resin materials, high-end fiber materials,and new energy materials. The company strategically positions itself in high-growth trackswith high technological barriers and high added value, actively constructing an ecologicalcircle for the fine chemical and new materials industry chain in the "Dalian Changxing Island," and striving to become a leading enterprise in the entire value chain of research,development, and manufacturing of platform-based chemical new materials.

During the reporting period, the listed company faced the dual operational pressure ofhistorically high operating costs and low industry demand in a challenging economicenvironment and a complex and volatile market situation. As a result, the companyexperienced a significant decline in profitability. The company achieved operating income of

222.324 billion yuan, a year-on-year increase of 12.30%, and a net profit attributable to

shareholders of the listed company of 2.318 billion yuan, a decrease of 85.07% comparedto the same period last year. The decline in profit was mainly due to the rapid and volatileincrease in prices of major raw materials such as crude oil, coupled with weak recovery inindustry market demand. The company faced the dual operational squeeze of historicallyhigh operating costs and low industry demand. The company's main products, such aschemical products, functional films, civilian silk, industrial silk, and others related totraditional demand in end-consumption and infrastructure construction, were at a low levelin the market, putting pressure on the company's profitability. In the second half of 2022, thecompany implemented a major overhaul of its refinery, which affected the overall load rateand processing cost level of its integrated refining and petrochemical units. The companyalso made provisions in accordance with accounting standards for inventory losses causedby the temporary downward trend in international crude oil prices, further impacting thecompany's annual profitability.

Despite the extremely challenging external environment in 2022, under the correctleadership of the Board of Directors, the company's management actively sought certaintyamid uncertainty, maintained composure, and sought steady progress. Through overallcoordination and actively eliminating environmental factors, the company efficiently andrapidly advanced key project construction, continuously expanded the industrial chain,improved scarce production capacity, and strengthened the development of new supports.The company solidified the foundation of safety and environmental protection, activelypromoted green and low-carbon transformation, and achieved efficient operations with highstandards, green practices, and environmental protection. The company also strengthenedits risk control, refined management, and flexible operational capabilities, controlled costswhile increasing efficiency, and maximized the stability and efficiency of production andoperations.During the reporting period, the company's key operational highlights are as follows:

I. Steady operations, flexible management, and strengthened fine managementlevel and cost advantage, striving to achieve overall maximization of benefits.

During the reporting period, faced with a complex market environment, the companyfully leveraged the unique advantages of Hengli's quality and speed in maximizing profitsthrough "quality, cost, and rapid response, " as well as the characteristics of flexibility,efficiency, and agility in its mechanisms. The company made every effort to ensure theefficient and coordinated operation of production facilities and industrial parks in the refining,petrochemical, chemical, and polyester new materials major production bases. On the"mega-chemical" platform, the company fully utilized the technological and processadvantages of refining, ethylene, and integrated coal chemical units, continuously optimizedunit operations, timely adjusted product structures based on fluctuations in raw materialprices and market demand trends, and organized production according to the principle ofmaximizing benefits, achieving a balance between production and sales, smooth operations,and maximized efficiency.

During the reporting period, the company continued to strengthen fine managementand explore potential for quality improvement and efficiency enhancement. By carefullycalculating production needs, analyzing raw material trends and market conditions,optimizing procurement plans, and properly controlling raw material inventory, the companyachieved the best matching of raw material inventory, processing units, and productstructures, while simultaneously focusing on risk prevention and efficiency improvement. Inequipment management, the company diligently implemented daily equipment maintenanceand repair, addressing any issues promptly and ensuring the long-term stable operation ofproduction units. Spare parts management was strengthened, and spare parts wereprocured in the most economical and reasonable quantities and batches while meeting therequirements for equipment maintenance and repair. Common supplies were shared toreduce inventory costs. Through measures such as equipment technology transformation,technological innovation, refurbishment, production increase, and consumption reduction,and optimization of performance indicators, the company achieved cost control andefficiency improvement.

II. Efficient and rapid progress in key project construction, solid acceleration ofthe layout in the new materials and new energy industries, accumulating momentumfor promoting high-quality development.

1. In the field of fine chemicals and chemical new materials, relying on the "mega-

chemical" platform and leveraging years of experience in new material development, thecompany accelerated the layout of downstream high-end chemical new material productioncapacity, optimized the raw material supply structure of the "mega-chemical" platform,

continuously expanded the industrial chain, and improved scarce capacity. The progress ofmajor projects is as follows:

(1) The 1.6 million tons/year high-performance resin and new materials project is

expected to gradually commence production in mid-2023. The project mainly includes200,000 tons/year battery-grade dimethyl carbonate (DMC), 300,000 tons/year ABS,231,800 tons/year bisphenol A production capacity, and 260,000 tons/year polycarbonate(PC) downstream. This project achieves efficient penetration and deep integration from rawmaterial supply to process technology to the consumer market, further consolidating thesynergy and industrial depth of the listed company's chemical new materials businesssegment and optimizing market coverage.

(2) The Hengli Chemical New Material supporting project (300,000 tons/year adipic acid

project) is expected to gradually commence production in mid-2023. After its completion, theproject will further integrate and improve the company's fully degradable new materialindustry chain from "crude oil-PTA, adipic acid-PBAT." Adipic acid is also an important rawmaterial for the production of nylon 66 and the purification of carbon dioxide emissions fromlow-temperature methanol washing equipment to food-grade level (purity of 99.99%),enabling the recovery of industrial waste gas carbon dioxide while increasing the company'sbenefits.

(3) The 600,000 tons/year BDO (1, 4-butanediol) and supporting project is progressing

in an orderly manner and is expected to gradually commence production in mid-2023. Theproject mainly includes 411,600 tons/year BDO, 60,000 tons/year PTMEG, 100,000tons/year adipic acid, and other high-end chemical products. After the project is completed,the company will have a complete degradable new material industry chain from "crude oil-PTA, adipic acid-BDO-PBAT, " enhancing its profit-generating capabilities.

2. In the field of polyester new materials, based on consolidating the existing polyester

new material production capacity and industrial competitiveness, the company relies onHengli's research and development efficiency and the upstream "mega-chemical" platformsupport to further develop and expand emerging market demands and business areas suchas PBS/PBAT degradable new materials, high-performance industrial fibers, high-endpolyester films, lithium battery separators, electrolytes, PET copper foils, and solarphotovoltaic backsheet films. The progress of key projects is as follows:

(1) Jiangsu Kanghui New Materials' annual production of 800,000 tons functional films

and functional plastics project mainly includes 470,000 tons of high-end functional polyesterfilms, 100,000 tons of specialty functional films, 150,000 tons of modified PBT, and 80,000tons of modified PBAT. This project is expected to commence production gradually in thefirst quarter of 2023.

(2) The 450,000 tons PBS/PBAT/PBT degradable new materials project has gradually

reached production in the first quarter of 2023, effectively expanding the company's capacityand scale in the degradable new materials sector, and increasing its market share indegradable plastics.

(3) Jiangsu Xuanda (Hengke Phase III) 1.5 million tons/year green multifunctional textile

new materials project mainly includes 150,000 tons/year new elastic fibers, 150,000tons/year environmentally friendly fibers, 300,000 tons/year cationic POY, 300,000 tons/yearfully dull POY, and 600,000 tons/year differentiated fibers (300,000 tons/year POY, 300,000tons/year FDY). Currently, the production of 150,000 tons/year elastic fibers, 150,000tons/year environmentally friendly fibers, and 250,000 tons/year fully dull POY has beensuccessfully completed, achieving breakthroughs in differentiated polyester production.

3. Lithium battery separator project: The Yingkou plant will have an annual production

capacity of 440 million square meters of high-performance wet-process lithium batteryseparators (including 220 million square meters of coated separators), with the firstproduction line expected to commence operation in May 2023. The Nantong plant will have

an annual production capacity of 1.2 billion square meters of wet-process lithium batteryseparators and 600 million square meters of dry-process lithium battery separators. Theproject is progressing in an orderly manner, and gradual production is expected in the firstquarter of 2024.

III. Innovation-driven efficiency and gains, continuous promotion of digitaltransformation, and the creation of a powerful development "engine."In recent years, the company has implemented the "end-to-end bidirectional qualitymanagement model, " establishing an integrated technology innovation system throughoutthe upstream and downstream sectors, overcoming numerous bottleneck technologies, andacquiring a significant number of core patents both domestically and internationally. Theseefforts have facilitated the transformation and application of scientific and technologicalachievements in production. During the reporting period, the company's research anddevelopment investment amounted to 1, 184.71 million yuan, representing a year-on-yeargrowth of 16.21%. As of December 31, 2022, the company has accumulated a total of 1,116 domestic and foreign patent authorizations, including 261 new patents granted duringthe reporting period.

Leveraging its advantages in raw materials, the company continuously enhances theresearch and development attributes, technological content, and technical weight of thepolyester new materials business segment. This further increases the added value ofdownstream new material products and upgrades the product structure of the polyester newmaterials business segment. As for polyester fibers, the company persistently develops inthe direction of refinement, differentiation, high-end, and high-quality. For instance, DeliChemical Fiber, adhering to the concept of "achieving the utmost in a single strand, " hasexcelled in the field of ultrafine fibers, becoming the first in China to achieve large-scaleproduction of 5-8D/6f high-uniformity super-soft polyester fibers through melt direct spinning.This fiber has the finest bus density among domestically produced polyester fibers, breakingthrough technological bottlenecks. During the reporting period, Deli Chemical Fiber wasawarded the title of "National Intellectual Property Advantage Enterprise, " becoming thesecond subsidiary of the listed company to receive national recognition for its intellectualproperty efforts.

In the field of chemical new materials, the company aims at the application demandsfor new materials generated by the integration of new consumption, new energy, and newmanufacturing in China. During the reporting period, Kanghui New Materials independentlydeveloped PET composite film for copper foil/aluminum foil has been validated bydownstream battery factories, enabling mass production. The independently developedsolar backsheet film has achieved mass production with an annual capacity of 24,000 tons,equivalent to 62.4 million square meters, and its production and sales have steadilyincreased. The release liner film product for LCD polarizing films has also achieved massproduction, ensuring stable production of conventional and wide-width liner films.Furthermore, a significant breakthrough has been made in low-tilt angle polarizing filmrelease liners, successfully replacing imports and becoming the first Chinese enterprise topass the full industry chain verification.

Empowered by technology, the continuous drive for digital transformation persists.Hengke Advanced Materials' intelligent factory for functional polyester fibers is equippedwith fully automated equipment throughout the production process. Through theestablishment of information systems such as the DeltaV-DCS distributed control system,ERP, and MES, it collects production data and realizes real-time monitoring, fault alarms,and diagnostic analysis of production equipment operations. Hengke Advanced Materialshas also established a factory-level industrial Internet, achieving 100% equipment

connectivity. The intelligent factory, through the integration and interconnection of intelligentequipment and software-level basic networks, achieves centralized control and intelligentproduction throughout the process, maximizing the efficiency of raw materials, equipment,and human resources. In 2022, Hengke Advanced Materials was awarded the "JiangsuProvince Intelligent Factory" title. Hengli Refining & Chemical vigorously promotes intelligentmanagement, implements advanced process control (APC) projects, and achieves on-edgeoperation of key parameters based on stable plant production. By utilizing Petrosim processsimulation software, it assists in problem-solving and provides robust data support foroptimizing company benefits.

IV. Continuously strengthening the foundation of safety and environmentalprotection, reducing pollution and carbon emissions, and promoting coordinatedefficiency to achieve high standards, green, and environmentally friendly operations.Based on high starting points in design planning, construction, operation, and detailedmanagement, the company practices high standards of inherent safety and green, low-carbon operations, which serve as the lifeline, efficiency line, and scenic line for promotingstable, efficient, and sustainable development of the listed company.

The company adheres to the principle of "safety first, prevention-oriented, andcomprehensive management" to enhance the level of inherent safety and establish a soliddefense line for safety production. It comprehensively implements the responsibility ofenterprise safety, signing responsibility agreements at all levels, ensuring that responsibilityis implemented at the workshop, team, and individual levels, forming a safety productionresponsibility system that extends horizontally and vertically. The company improves safetyregulations and systems, conducts self-assessment based on updated HSE standards andspecifications, analyzes policy guidance, and timely revises and improves the company'sHSE system. It strengthens employee safety skill training to enhance compliance with safetyregulations. It strengthens process control in key areas, risk control in operations, conductssafety hazard investigations and rectification, emergency drills, enhances risk preventionand control capabilities, eliminates various major safety risks, visualizes inherent andresidual risks, and ensures the safe operation of employees and production facilities.

The company firmly implements the concept of green development, consistentlypursuing high-quality and low-carbon energy-saving development, reducing pollution, andcarbon emissions, and promoting coordinated efficiency to transform environmentaladvantages into economic benefits. It integrates green development into project design,process package selection, equipment procurement, installation, and operation, achievingsubstantial energy savings. It strengthens the efficient and economical use of energy andresources, reduces resource and energy consumption through optimizing processoperations, technological innovations, and other multidimensional approaches, improvesenergy efficiency, and establishes an integrated upstream and downstream flow, mutualsupply of materials, and energy coupling in the entire industry chain, achieving energysavings and sustainable development throughout the production process. For example,Hengli Petrochemical (Dalian) recovers and treats the oxidized residue produced in theoxidation process of purified terephthalic acid through R2R equipment, recovering valuablecobalt and manganese catalyst components and benzoic acid, which are returned to theoxidation unit for recycling, and the generated benzoic acid is sold as a by-product. HengliRefining optimizes the operation of the distillation tower by replacing catalysts, increasingthe production capacity of xylene and reducing the comprehensive energy consumption ofthe unit. Hengli Chemical's ethylene glycol unit adds a decarbonization tower on the basisof the current washing tower, improving the performance of the catalyst, increasing product

yield, and reducing carbon dioxide emissions by 39,600 tons annually. The ethylene unitutilizes a back-pressure turbine unit to utilize surplus high-pressure steam for powergeneration, meeting the process requirements while increasing electricity generation by

24.53 million kWh per year and reducing energy consumption by 3,014 tons of standard

coal.

Incremental progress and unwavering dedication are key. Since the introduction of the"dual carbon" targets, the company has focused on technological innovation and technicalresearch, continuously working on wastewater recycling, solid waste disposal, cascadingutilization of energy, waste heat utilization, carbon emissions reduction, VOCs management,and other aspects through equipment upgrades and process improvements, activelypursuing energy-saving, cost reduction, and efficiency enhancement, yielding certain results.Hengli Refining, Hengli Chemical, and Hengli Petrochemical (Dalian) were respectivelyawarded the "2022 Key Energy Efficiency Leader" champion in the xylene industry, ethyleneindustry, and purified terephthalic acid industry, jointly issued by the Ministry of Industry andInformation Technology, the National Development and Reform Commission, and the StateAdministration for Market Regulation. Hengli Refining ranked second in energy efficiency asa "leader" in the crude oil processing industry. At the same time, Hengli Refining and HengliChemical were awarded the "2022 Key Water Efficiency Leader for Enterprises andIndustrial Parks" by the Ministry of Industry and Information Technology, the Ministry ofWater Resources, the National Development and Reform Commission, and the StateAdministration for Market Regulation. Hengli Refining and Hengli Chemical topped the waterefficiency index in the petroleum refining industry, coal-to-methanol industry, and ethyleneindustry. For example, in the petroleum refining industry, Hengli Refining's unit water intakewas 0.27 m?/t, with a water reuse rate of 98.79%. In the ethylene industry, Hengli Chemical'sunit water intake was 0.43 m?/t, mainly using seawater, with a water reuse rate as high as

99.87%.

Following Hengli Petrochemical (Dalian), Hengli Petrochemical Refining, HengkeAdvanced Materials, and Hengli Chemical Fiber, Hengli Petrochemical Chemical wasawarded the national-level "Green Factory" title at the beginning of 2023. With this, thecompany now has five subsidiaries recognized as national-level "Green Factories".

In response to the future trend of "carbon neutrality" in industrial development, the listedcompany firmly embraces the direction of green and low-carbon development and activelypromotes the transition to green and low-carbon. It vigorously develops green manufacturing,leveraging distinctive industries to drive innovation and inject robust vitality into thecompany's development.

V. By fully utilizing the capital platform for financing, operations, and incentives,the listed company is driving standardized and sustainable development.

1. Successful completion of the third and fourth phase of share repurchase: During the

reporting period, to safeguard the interests of the company and its shareholders, thecompany successfully implemented the third and fourth phase of share repurchase plans,with a total repurchase fund of 2 billion yuan. Despite the complex and challenging domesticand international economic conditions in 2022, as well as the irrational downward valuationof the A-share market, the company consistently fulfilled its market responsibilities towardsall shareholders, especially small and medium shareholders. Through tangible actions, thecompany effectively maintained reasonable and stable market value and protected the coreinterests of all shareholders. This also fully demonstrates the firm and long-term confidenceof the listed company and its management in the company's operating performance,strategic development, and investment value.

2. Completion of the sixth phase of employee stock ownership plan: In order to

effectively motivate the management team, core employees, and all staff of the listedcompany, and achieve a close integration and mutual promotion of employee value andcorporate value, the company implemented the sixth phase of the employee stockownership plan on a larger scale and with a broader range of participants, allowingemployees to share in the company's development achievements.

3. High proportion of cash dividends: To share the company's growth benefits with

shareholders, the company completed the annual equity distribution for the year 2021, witha total cash dividend of 7.109 billion yuan (including taxes). The amount of a single cashdividend reached a historical high, in line with the company's established "ShareholderReturns Plan for the Next Five Years (2020-2024) ", which provides shareholders with stableexpectations and mechanisms for returns. This fully reflects the company's businessphilosophy of consistently and sustainably rewarding investors.

4. Completion of a 2 billion yuan short-term financing bond issuance: To ensure

diversified financing channels, meet the working capital turnover needs of businessoperations, and enhance the flexibility of fund management, the company applied to theChina Interbank Market Dealers Association to register for the issuance of short-termfinancing bonds with an amount not exceeding 3 billion yuan (inclusive). As of now, thecompany has successfully issued 2 billion yuan of short-term financing bonds.

II. Industry situation of the company during the reporting period

(1) Petroleum Refining Sector:

The company has a designed production capacity of 4.5 million tons per year ofparaxylene (PX), primarily used to meet the raw material demand of downstream purifiedterephthalic acid (PTA) production. Additionally, the company is involved in the productionof high-value and domestically scarce chemical products, such as 1.8 million tons ofethylene glycol, 400,000 tons of acetic acid, 1.2 million tons of benzene, 850, 000 tons ofpolypropylene, 720,000 tons of styrene, 400,000 tons of high-density polyethylene, and 140,000 tons of butadiene. It also produces finished oil products, including gasoline, diesel, andaviation kerosene meeting China VI emission standards. As smaller and outdated refinerieswith high production costs are gradually phased out, the industry concentration and thecompetitiveness of large-scale new refineries will significantly improve. The company standsout in terms of policy support, process technology, and industrial synergy. Compared toother oil refining companies, it has a distinct advantage of high quality and low cost, makingit highly competitive in the market.

(2) PTA Sector:

PTA is the direct upstream raw material for polyester production, and China is theworld's largest producer and consumer of PTA. The company currently has a PTAproduction capacity of 16.6 million tons per year, making it the largest PTA producer withthe most advanced technology and the most significant cost advantage in the industry. It isthe only company with a capacity exceeding 10 million tons.

(3) Polyester New Materials Sector:

One of the company's main business segments involves the research, production, andsale of polyester-related new materials. The main products include PET, POY, FDY, DTY,BOPET, PBT, PBS/PBAT, and other polyester and chemical new materials. The companyranks among the top five in civil filament production capacity nationwide and second inindustrial filament production capacity. It is one of the largest and technologically advancedmanufacturers of polyester filament in China.

The company's subsidiary, Kanghui New Materials, has an annual production capacityof 240,000 tons of PBT engineering plastics in its Yingkou base, making it the largest PBTproducer in China. The PBT is mainly used in automotive parts, polymer alloys, opticalcables, and electronics industries. It also has an annual production capacity of 386,000 tons

of BOPET functional films, which are used in high-value-added sectors such as opticalequipment, release protection, electronics, automotive decoration, construction, andpackaging. With independently developed technology, the company has the largestdomestic annual production capacity of 33,000 tons of PBAT, which is used inenvironmentally friendly applications such as food-grade shopping bags, tableware, andstraws made from PBS/PBAT. The company partially commenced production of a 450,000-ton biodegradable plastic project on Dalian Changxing Island during the reporting period. InSuzhou Fenhu, the construction of a 470,000-ton high-end functional polyester film,100,000-ton specialty functional film, 150,000-ton modified PBT, and 80,000-ton modifiedPBAT is underway. Additionally, a 2.6 million-ton high-performance polyester engineeringproject and a new lithium battery separator project in Nantong are making efficient andsteady progress. The company possesses strong overall competitiveness in the market.

III. Business situation of the company during the reporting periodThe company's main business encompasses the entire industry chain of refining,petrochemicals, and polyester new materials, including the production, research, and salesof PX, acetic acid, PTA, ethylene glycol, polyester chips, civil filament, industrial filament,functional films, engineering plastics, and PBS/PBAT biodegradable new materials. It is thefirst listed company in the industry to achieve integration of the entire industry chain fromcrude oil to aromatics, olefins to PTA, and ethylene glycol to polyester new materials.In the upstream segment, the company has an annual production capacity of 4.5 milliontons of PX and 400,000 tons of acetic acid. In the midstream, it possesses 16.6 million tonsof PTA capacity and 1.8 million tons of fiber-grade ethylene glycol capacity. Some of theself-produced PTA and ethylene glycol are for internal use, while the remainder is soldexternally. In the downstream segment, the company offers a wide range of chemical newmaterials with various product specifications, targeting the medium and high-end marketdemand. These products include civil filament, industrial filament, BOPET, PBT, PBS/PBAT,and other polyester and chemical new materials, which are used in textile, pharmaceutical,automotive, environmental new energy, electronics, photovoltaic, and optical industries,meeting the extensive demand for industrial and civil applications.With the complete production of key capacities in world-class refining and ethyleneprojects in the upstream, as well as the consolidation and expansion of its competitiveadvantage in the midstream PTA business and various scarce chemical raw materialproducts, the company has accelerated the establishment of a "large-scale chemical"platform to support and complement downstream high-end new materials and fine chemicalindustries. This has created a continuous and extended value chain for new materialindustries.

IV. Analysis of Core Competitiveness in Reporting Period

1. Strategic Leadership in Full Industry Chain Development

The company is the industry leader in implementing the strategy of full industry chaindevelopment for polyester new materials in China. It actively promotes the coordinated andbalanced development of various business segments and vigorously expands high-endcapacity in the upstream and downstream. The company is committed to building a world-class integrated platform for the entire industry chain, from "crude oil-aromatics, olefins-PTA,ethylene glycol-polyester-civil filament, industrial filament, films, plastics." The HengliIntegrated Refining and Petrochemical Project with an annual capacity of 20 million tons andthe Ethylene Project with a capacity of 1.5 million tons have been fully put into operation,achieving strategic breakthroughs in the refining, aromatics, and olefins segments. Thecompany has become the first enterprise in the industry to achieve integrated operation and

development of the entire industry chain from "crude oil-aromatics, olefins-PTA, ethyleneglycol-polyester new materials." With the sequential construction and operation of newlybuilt capacities, such as PTA, chemical new materials, PBS/PBAT biodegradable newmaterials, the company continuously upgrades and optimizes its industrial model,consolidates and expands the advantages of each link's production capacity, promotes thequantitative change in business scale, and the qualitative change in business structure. Itestablishes a strategic leadership advantage in adapting to the high-quality competitivesituation of the industry's full industry chain collaboration, production capacity structurequality, equipment scale cost, technological process accumulation, project start-up speed,and the development of listed platforms.

2. Comprehensive Operation Advantage of Scale, Technology, and Support

The company continuously introduces internationally leading production equipment andmature technology packages, digests, absorbs, and utilizes them, and continuouslyinnovates and improves technology and processes. It has established a high-quality andefficient production capacity structure and supporting public engineering in the upstream,midstream, and downstream of the polyester new materials industry chain, characterized by"large-scale equipment, large-scale production capacity, integrated structure, advancedtechnology, green and environmental protection, and comprehensive supporting facilities."Whether it is individual equipment, total production capacity, or production processes, thecompany is at the industry's leading processing scale and technological level. This ensuresthe company's advantages in unit investment cost, material and energy consumption saving,unit processing cost, product delivery cycle, product quality, and diversification. Moreover,the company has the most comprehensive supporting capabilities in the industry, includingpower supply, energy, ports, terminals, tank farms, storage, and transportation. It stands outin terms of comprehensive cost savings, service quality performance, and operationalefficiency improvement. The complementary relationships among refining, petrochemicals,and coal chemicals in the industrial park form an efficient synergy of operations and costs.The refining business has the largest coal-to-hydrogen unit in the country, producing low-cost coal chemicals such as pure hydrogen, methanol, acetic acid, and synthesis gas. Inaddition, the advantages of raw material and product storage and transportation systemsgreatly enhance the operational flexibility and comprehensive cost advantages of projects.

3. Market Competition Advantage Driven by High-end Research and Development

The company follows a development path that emphasizes market differentiation, high-end technology, and large-scale facilities while integrating business operations. It has along-term accumulated market-technology innovation mechanism and has established aninternational R&D team and a high-level scientific research platform. Its technologicalresearch and development strength and innovation capability in new products are leadingin the industry. The company can quickly respond to the latest market consumption demandchanges and has a stable reserve of mid-to-high-end customer resources. The four mainoperating entities of the company, Hengli Fibre, Deli Fibre, Hengke Advanced Materials, andKanghui New Materials, are all national high-tech enterprises. Through fine management ofthe production process and continuous improvement of technology and processes, thecompany has independently developed and accumulated a series of differentiated andfunctional products, holds numerous production patents for various products, and hasgained wide market recognition. The company's products are superior to competitors interms of quality and stability. It is the only company in China that can produce specification5DFDY products on a large scale. Its market share in MLCC separator films exceeds 65%domestically. It is also the only domestic and the second global enterprise capable ofproducing 12-micrometer silicon-coated stacked lithium battery protection films online. Thecompany has absolute technological advantages and process accumulation in functional

films and civil polyester filament, forming a competitive moat that is difficult to replicate inthe industry in the short term.

4. Efficient Management Advantage of Intelligence and Lean Manufacturing

The company strives to promote the deep integration of "Internet, big data, artificialintelligence, and the real economy" and develop advanced manufacturing capacity toregenerate internal growth momentum. It regards "intelligent interconnection" as animportant entry point for industrial upgrading and transformation. By gradually implementingmethods such as "machine replacing human, " "automatic equipment change, " "completeset replacement of single machine, " and "intelligence replacing digitization, " the companytransforms its development model from relying on "population dividends" to "technologydividends." Through the integration and application of intelligent manufacturing, the Internet,and the Internet of Things, the company continuously improves the level of intelligentmanufacturing throughout the entire process. It seamlessly integrates key links such ascontrol, research and development, manufacturing, business management, and financethrough self-developed product testing systems, automatic barcode systems, intelligentwarehousing systems, and sales systems, and interfaces with ERP systems to achieveproduct traceability and full-process control. This promotes the company's transformationfrom "manufacturing" to "intelligent manufacturing" and from single business managementto highly synergistic operation of the industrial chain.

5. Accumulated Talent Management Advantage

The company has formed a multidisciplinary and multi-professional scientific researchteam, including disciplines such as refining, petrochemicals, polymer materials, chemicalfiber engineering, textile engineering, electrical engineering, etc. Its scientific research anddevelopment capabilities are ahead of domestic peers. While introducing external talents,the company attaches great importance to the cultivation of internal talents and provides agood career development path for employees. The company has also established a soundinternal training system, covering research and development, production, sales,management, and other aspects, and has cultivated a large number of backbone personnel.

V. Main operating information in the reporting period

As of the end of 2022, the company's total assets were 241.430 billion yuan, a year-on-year increase of 14.80%, and the net assets attributable to shareholders of listed companieswere 52.863 billion yuan, a year-on-year decrease of 7.63%.

In 2022, the Company recognised a revenue from operations of 222.324 billion yuan, ayear-on-year increase of 12.30%; a net profit attributable to shareholders of listed companyof 2.318 billion yuan, a year-on-year decrease of 85.07%.(I) Analysis of Primary operations

1. Analysis of changes in items related to income statement and cash flow

statement

Unit: ten thousand yuan Currency: RMB

Item	Amount in the reporting period	Amount in the same period of last year	Variance (%)
Revenue from operations	22, 232, 358.4	19, 797, 034.49	12.30
Cost of sales	20, 407, 759.71	16, 751, 808.61	21.82
Selling expenses	39, 276.92	29, 136.58	34.80
Administrative expenses	188, 929.87	198, 539.57	-4.84
Financial expense	428, 737.15	491, 620.56	-12.79
Research and development expenses	118, 471.10	101, 945.24	16.21
Net cash flows from operating	2, 595, 397.08	1, 867, 017.37	39.01

activities
Net cash flows from investing activities	-2, 629, 706.99	-1, 309, 772.25	Not applicable
Net cash flows from financing activities	1, 040, 541.64	-738, 758.74	Not applicable

Reasons for changes in selling expenses: mainly due to the increase in employee salariesand storage-related expenses in the current period.Reason for changes in Net Cash Flow from Operating Activities: The main reason for thechange is a decrease in accounts receivable, an increase in advance payments received,and improved collection of sales proceeds. The increase in inventory is smaller than theprevious year, and there is a decrease in purchase expenses.

2. Revenue and Cost Analysis

(1). Segmentation of Main Business by Sector, Product, Region, and Sales Model

Unit: ten thousand yuan Currency: RMB

Segmentation of main operations by sector
By sector	Revenue from operations	Cost of sales	Gross margin (%)	Year-on-year change of revenue(%)	Year-on-year change of cost of sales(%)	Year-on-year change of gross margin(%)
Petrochemical industry	20, 944, 731.95	19, 154, 348.71	8.55	16.12	27.64	-8.25 pts
Other industries	1, 223, 649.95	1, 232, 828.05	-0.75	-27.36	-28.13	1.08 pts
Segmentation of main operations by product
By product	Revenue from operations	Cost of sales	Gross margin (%)	Year-on-year change of revenue(%)	Year-on-year change of cost of sales(%)	Year-on-year change of gross margin(%)
Refining products	12, 367, 533.63	10, 473, 930.91	15.31	17.86	29.44	-7.58 pts
PTA	5, 663, 585.82	6, 031, 109.58	-6.49	17.59	28.22	-8.83 pts
Polyester products	2, 913, 612.50	2, 649, 308.21	9.07	6.82	19.8	-9.85 pts
Others	1, 223, 649.95	1, 232, 828.05	-0.75	-27.36	-28.13	1.08 pts
Segmentation of main operations by region
By region	Revenue from operations	Cost of sales	Gross margin (%)	Year-on-year change of revenue(%)	Year-on-year change of cost of sales(%)	Year-on-year change of gross margin(%)
Domestic	20, 449, 458.40	18, 704, 171.85	8.53	16.66	27.18	- 7.57 pts
Overseas	1, 718, 923.51	1, 683, 004.91	2.09	-21.6	-16.52	-5.96 pts

Description of main business by industry, by product, by region, and by sales model

Revenues, costs and gross margins for refined products, PTA and polyester productsinclude sale revenues, purchase costs and gross margins.

(2). Production and sales volume analysis

Main products	Unit	Production volume	Sales volume	Inventory quantity	Year-on-year change of production(%)	Year-on-year change of sale(%)	Year-on-year change of inventory(%)
Refining products	10, 000 tons	2, 338.95	2, 135.85	93.27	-0.54	-7.85	101.19
PTA	10, 000 tons	1, 153.46	1, 061.41	26.99	-5.35	-6.88	25.13
New material products	10, 000 tons	357.68	326.20	42.20	7.36	4.10	33.29

Explanation of production and sales volume:

1. Refining and chemical products include all products of Hengli Refining and Hengli

Petrochemical;

2. New material products include polyester new materials, engineering plastics, functional

films, and biodegradable materials;

3. The sales volume of refining and chemical products and PTA includes trade volume but

excludes internal consumption within the company.

(3). Cost Analysis

Unit: ten thousand yuan

By Sector
By sector	Cost composition	Amount in the reporting period	Proport ion in total costs of the reporting period (%)	Amount in the same period of last year	Proportion in total costs of the same period of last year (%)	Year-on-year change (%)	Explanation
Petrochemical industry	Direct materials	17, 435, 956.16	85.52	13, 661, 754.88	81.7	27.63
	Direct labor	168, 283.79	0.83	161, 635.81	0.97	4.11
	Power fuel	703, 924.33	3.45	543, 939.11	3.25	29.41
	Manufacturing expenses	673, 959.64	3.31	639, 526.39	3.82	5.38
Other industries	Direct materials	1, 154, 573.45	5.66	1, 540, 512.50	9.21	-25.05
	Direct labor	176, 343.65	0.86	169, 328.56	1.01	4.14
	Power fuel	64, 379.42	0.32	2, 495.71	0.01	2, 479.6
	Manufacturing expenses	9, 756.32	0.05	3, 114.69	0.02	213.24
By Product
By	Cost	Amount in	Proport	Amount in the	Proportio	Year-	Explan

product	composition	the reporting period	ion in total costs of the reporting period (%)	same period of last year	n in total costs of the same period of last year (%)	on-year change (%)	ation
Refining products	Direct materials	9, 574, 213.92	46.96	7, 340, 860.24	43.9	30.42
	Direct labor	56, 910.15	0.28	58, 156.39	0.35	-2.14
	Power fuel	327, 732.97	1.61	274, 442.43	1.64	19.42
	Manufacturing expenses	440, 075.17	2.16	418, 070.47	2.5	5.26
PTA	Direct materials	5, 681, 885.50	27.87	4, 454, 279.79	26.64	27.56
	Direct labor	24, 616.91	0.12	21, 314.61	0.13	15.49
	Power fuel	143, 261.15	0.70	107, 722.00	0.64	32.99
	Manufacturing expenses	113, 145.96	0.55	120, 496.65	0.72	-6.1
Polyester products	Direct materials	2, 179, 856.74	10.69	1, 866, 614.85	11.16	16.78
	Direct labor	86, 756.73	0.43	82, 164.81	0.49	5.59
	Power fuel	232, 930.21	1.14	161, 774.69	0.97	43.98
	Manufacturing expenses	120, 738.51	0.59	100, 959.27	0.6	19.59
Others	Direct materials	1, 154, 573.45	5.66	1, 540, 512.50	9.21	-25.05
	Direct labor	176, 343.65	0.86	169, 328.56	1.01	4.14
	Power fuel	64, 379.42	0.32	2, 495.71	0.01	2, 479.6
	Manufacturing expenses	9, 756.32	0.05	3, 114.69	0.02	213.24

(4). Key Sales Customers and Key Suppliers Situation

A. Overview of Key Sales CustomersThe sales revenue from the top five customers amounted to 28.20 billion yuan, accountingfor 12.68% of the total annual sales. Among the sales revenue from the top fivecustomers, there were no sales made to related parties, representing 0% of the totalannual sales.

B. Overview of Key SuppliersThe purchasing amount from the top five suppliers amounted to 72.55 billion yuan,accounting for 34.96% of the total annual procurement. Among the purchasing amountfrom the top five suppliers, there were no purchases made from related parties,representing 0% of the total annual procurement.

3. Research and Development Investment

(1). Table of Research and Development Investment Status

Unit: ten thousand yuan

Expensed research and development investment in the current period	118, 471.10
Capitalized research and development investment in the current period	-

Total R&D investment	118, 471.10
Percentage of research and development investment to operating revenue (%)	0.53
Percentage of capitalized research and development investment to total research and development investment (%)	-

(2). Table of Research and Development Personnel Status

The number of R&D personnel in the company	3, 128
The ratio of the number of R&D personnel to the total number of the company (%)	8.11
Educational structure of R&D personnel
Educational Structure Category	Educational Structure Headcount
PhD student	12
Postgraduate	93
Undergraduate and below	3, 023
Age structure of R&D personnel
Age Structure Category	Age Structure Headcount
Under 30 years old (excluding 30 years old)	1, 035
30-40 years old (including 30 years old, excluding 40 years old)	1, 522
40-50 years old (including 40 years old, excluding 50 years old)	410
50-60 years old (including 50 years old, excluding 60 years old)	133
60 and over	28

(II) Analysis of Asset and Liability Situation

1. Asset and Liability Status

Unit: ten thousand yuan

Item	Closing balance of current period	Ratio of closing balance of current period to total assets (%)	Closing balance of previous period	Ratio of closing balance of previous period to total assets (%)	Percentage change in closing balance compared between current period to previous period(%)	Explanation
Cash and bank balances	2, 807, 640.59	11.63	1, 598, 605.29	7.60	75.63	Mainly due to an increase in operating cash flow during the

						current period.
Accounts receivable	37, 244.59	0.15	264, 384.34	1.26	-85.91	Mainly due to the company intensifying its collection efforts on accounts receivable during the current period.
Receivable financing	228, 727.12	0.95	341, 995.77	1.63	-33.12	Mainly due to a decrease in the amount of cash received from bank acceptance bills and letters of credit during the current period.
Construction in progress	2, 728, 749.15	11.30	778, 285.36	3.70	250.61	Mainly due to a further increase in investment in Construction in progress, including the Annual output of 5 million tons of PTA project and Annual output of 1.5 million tons of green multi-functional textile new materials project.
Deferred tax assets	89, 222.72	0.37	18, 882.71	0.09	372.51	Mainly due to an increase in deferred tax assets recognized as a result of the provision for decline in value of inventories made during the current period.
Other non-	632, 724.84	2.62	390, 259.25	1.86	62.13	Mainly due to

current assets						an increase in long-term asset purchase payments related to construction in progress made during the current period.
Contract liabilities	1, 209, 098.33	6.41	612, 654.68	4.00	97.35	Mainly due to an increase in advance payments received for sales contracts during the current period.
Non-current liabilities due within one year	934, 902.82	4.96	542, 322.70	3.54	72.39	Mainly due to an increase in the amount of long-term loans and bonds payable that will mature within one year.
Other current liabilities	338, 212.76	1.79	139, 926.92	0.91	141.71	Mainly due to an increase in output tax corresponding to advance payments received for sales contracts during the current period.
Long-term payables	85, 883.33	0.46	2, 189.93	0.01	3, 821.74	Mainly due to the addition of new financing leases payable during the current period.

2. Overseas Asset Situation

(1) Assets Scale

Including: Overseas assets 73.42(Unit: hundred million yuan Currency: RMB), accountingfor 3.04% of the total assets.

3. Major assets under restriction at the end of the reporting period

Unit: ten thousand yuan Currency: RMB

Item	Carrying value at year end	Reason of restriction
Cash and bank balances	761, 763.21	Pledge cash and bank balances to obtain financing credit from financial institutions
Cash and bank balances	1, 258.62	Security deposits for trading in futures and financial derivatives
Cash and bank balances	11, 960.00	Freezing funds involved in litigation
Financial assets held for trading	1, 000.00	Pledge financial assets held for trading to obtain financing credit from financial institutions
Receivable financing	146, 957.20	Pledge notes receivable to obtain financing credit from financial institutions
Fixed assets	8, 543, 637.15	Mortgage fixed assets to obtain financing credit from financial institutions
Fixed assets	154, 626.67	Mortgage is used to provide security for the sale and leaseback contract
Intangible assets	378, 138.19	Mortgage intangible assets to obtain financing credit from financial institutions
Construction in progress	67, 573.80	Mortgage construction in progress to obtain financing credit from financial institutions
Total	10, 066, 914.84

(III) Analysis of Industry Operating InformationAnalysis of Operating Information in the Chemical Industry1 Overview of the Industry

(1). Industry Policies and Their Changes

① 《Guiding Opinions on Promoting the High-Quality Development of the

Petrochemical and Chemical Industry During the "14th Five-Year Plan"》In March 2022, the Ministry of Industry and Information Technology and five otherdepartments jointly issued the Guiding Opinions on Promoting High-Quality Development ofthe Petrochemical and Chemical Industry during the 14th Five-Year Plan. It proposed thatby 2025, the petrochemical and chemical industry should establish a high-qualitydevelopment pattern characterized by strong independent innovation capability, rationalstructural layout, green and low-carbon practices. The industry's ability to ensure the supplyof high-end products should be significantly improved, core competitiveness should benoticeably enhanced, and substantial progress should be made in achieving self-reliance ata high level.

② 《Notification on Further Improving the Work Related to Excluding Raw Material

Energy Consumption from the Total Energy Consumption Control》

In October 2022, the National Development and Reform Commission and the NationalBureau of Statistics issued a notification on further improving the work related to excludingraw material energy consumption from the total energy consumption control. The notificationexplicitly states that "coal, petroleum, natural gas, and their derivatives used for the

the diversity and high-end level of chemical new material products, thus bridging the gapsand filling the blanks in the industry.○5 《The "14th Five-Year Plan" for the ecological economic development of LiaoningProvince》

In January 2022, the General Office of the People's Government of Liaoning Provinceissued the "14th Five-Year Plan" for the ecological economic development of LiaoningProvince. The plan highlights the following key points:

Extending the Petrochemical Industry Chain: The plan aims to maintain the scaleadvantage of bulk basic chemical raw materials such as ethylene, propylene, PX(paraxylene), and PTA (purified terephthalic acid). It also seeks to promote the developmentof the petrochemical industry towards higher value-added products, focusing on the olefin,aromatic hydrocarbon, new materials, and fine chemical industrial chains.

Promoting the "Reduction of Oil and Increase of Chemicals" in the PetrochemicalIndustry: The plan aims to transform the refining and chemical production towards safe,clean, green, and efficient practices. The goal is to achieve intensive, high-end, green, andintegrated development of the refining and chemical industry. Key areas of focus include thedevelopment of high-end polyolefins, specialty resins, specialty engineering plastics, high-end membrane materials, and other chemical new materials.

(2). Basic information on the main industrial segment and industrial status of the

Company

① In the petroleum refining and chemical sector

The company has a designed production capacity of 4.5 million tons of PX per year,which is primarily used to meet the raw material demand of downstream PTA production.Additionally, the company is designed to produce 1.8 million tons of ethylene glycol, 400,000tons of acetic acid, 1.2 million tons of pure benzene, 850,000 tons of polypropylene, 720,000tons of styrene, 400,000 tons of high-density polyethylene, 140,000 tons of butadiene, andother domestically scarce and high-value-added chemical products, as well as Refined oilproducts such as gasoline, diesel, and aviation kerosene that meet the national standardsabove China VI. As smaller refineries with higher production costs and outdated facilitiesare gradually phased out, the concentration of the refining and chemical industry and thecompetitiveness of large-scale newly built refineries will greatly improve. The company hasprominent advantages in policy support, process technology, and industrial synergy.Compared to other refineries, it has characteristics of high quality and low cost, making ithighly competitive in the market.

② In the PTA sector

PTA serves as the direct upstream raw material for polyester production, and China isthe world's largest producer and consumer of PTA. The company currently has a PTAproduction capacity of 16.6 million tons per year (including the capacity under constructionin Huizhou). It is the largest PTA production supplier in the world in terms of capacity, withthe most advanced technology and the most significant cost advantages. It is also the onlycompany in the industry with a capacity of over 10 million tons per year.

③ In the polyester new materials sector

One of the company's primary operations is the research, production, and sales ofrelated products. The main products include PET (Polyethylene Terephthalate), POY(Partially Oriented Yarn), FDY (Fully Drawn Yarn), DTY (Drawn Textured Yarn), BOPET(Biaxially Oriented PET), PBT (Polybutylene Terephthalate), PBS/PBAT (PolybutyleneSuccinate/Polybutylene Adipate Terephthalate), and other polyester and chemical newmaterials products. The company ranks among the top five in the national civil filamentcapacity and second in the national industrial filament capacity. It is one of the largest and

technologically advanced manufacturers of polyester filament for both civilian and industrialapplications in China.

The subsidiary company Kanghui New Material, located in Yingkou Base, has anannual production capacity of 240,000 tons of PBT engineering plastics, making it the largestPBT producer in China. The PBT products are primarily used in industries such asautomotive components, polymer alloys, optical cable protective sleeves, electronics, andelectrical appliances. Kanghui New Material also has an annual production capacity of386,000 tons of functional BOPET (Biaxially Oriented PET) film. This high-value film is usedin various applications, including optical equipment, release liners, electronics, automotivedecorations, construction, and packaging. Furthermore, the company has the largest single-set annual production capacity of 33,000 tons of PBAT (Polybutylene Adipate Terephthalate)in China, based on its proprietary technology. PBAT is applied in eco-friendly applicationssuch as food-grade shopping bags, utensils, and straws within the PBS/PBAT field. In DalianChangxing Island, the company is gradually launching its project for 450,000 tons ofdegradable plastics, with qualified products already being produced. Additionally, in SuzhouFenhu, the construction of a project for 470,000 tons of high-end functional polyester film,100,000 tons of specialty functional film, 150,000 tons of modified PBT, and 80,000 tons ofmodified PBAT is underway. Overall, the company demonstrates strong comprehensivecompetitiveness in the industry.

2 Products and production

(1). Main business model

The company's main business model involves the procurement of crude oil and relatedadditives, primarily producing PX products and finished oil, as well as other chemicals. ThePX products are mainly used as raw materials for the company's PTA plant, with a portionof the PTA products being used internally by the company's polyester factory, and the restbeing sold to downstream customers in the fiber industry for the production of polyesterfibers and other products. Various polyester products are sold to downstream weavingfactories for the production of textiles, industrial yarn is sold to construction and automotivecomponent manufacturers, polyester chips are sold to spinning companies, BOPET filmsare sold to downstream printing, packaging, and electronics companies, and PBT resins aresold to downstream automotive, electronics, and machinery companies. The specificoperating modes are as follows:

(1) Petroleum Refining Sector

Petroleum products, also known as oil products, are processed from crude oil throughvarious refining processes such as atmospheric distillation, hydrogenation cracking, andreforming. These processes produce various fuel oils (gasoline, kerosene, diesel, etc.),lubricants, coke, paraffin wax, asphalt, basic organic materials (ethylene, propylene, butene,benzene, toluene, xylene, acetylene, naphthalene), as well as various synthetic organicmaterials derived from the basic organic materials.

(2) PTA Sector

PTA (Purified Terephthalic Acid) is an important bulk organic material widely used invarious sectors of the national economy, including chemical fibers, light industry, electronics,and construction. In the domestic market, the main downstream products of PTA arepolyester fibers, which are primarily used in clothing, home textiles, and industrial textiles.The main business process involves purchasing para-xylene (PX) and producing PTAthrough oxidation reactions, crystallization, drying, hydrogenation, and further crystallizationprocesses, followed by selling the product to downstream customers.

The profit model in the PTA industry is based on producing and selling PTA products togenerate profits. Since the fixed investment for the products is significant, improvingprofitability relies mainly on reducing the fixed cost per unit. Companies achieve this by

capitalizing on economies of scale, adopting advanced processing technologies andequipment, establishing efficient public infrastructure, enhancing production safety andproduct quality stability, and ultimately lowering production costs to increase profitability.

(3) Polyester Sector

The primary business process involves the procurement of petrochemical productssuch as PTA, MEG, and other additives, followed by polymerization reactions usingappropriate production equipment. Subsequently, the polyester filaments are producedthrough spinning and drawing processes, and the products are sold to downstream weavingcompanies for the production of civil and industrial textiles.

The profit model in the polyester filament industry is based on producing and sellingpolyester filaments to generate profits. Due to the significant fixed costs associated with theproducts, improving profitability depends on three main factors: reducing the fixed cost perunit, increasing the rate of new product development, and adding differentiated products.Companies achieve this by focusing on increasing the rate of new product development,pursuing differentiation in product lines, enhancing product value, and ultimately improvingoverall profitability.

(4) Polyester Film Sector

The main business process involves the procurement of petrochemical products suchas PTA, MEG, and other additives. Unlike the polyester industry, the equipment and processroutes differ. In the polyester industry, equipment is used to extrude the film into polyesterfilaments, while in the polyester film industry, equipment is used to extrude the film directly.Consequently, the downstream customer base is different.

The profit model in the polyester film industry is based on producing and sellingpolyester films to generate profits. Due to the significant fixed investment required, improvingprofitability depends mainly on two factors: reducing the fixed cost per unit and developingnew products. For companies, the future primarily involves capitalizing on economies ofscale to seize market share, increasing product added value, and improving overallprofitability.

(5) Engineering Plastics Sector

The primary business process involves the procurement of petrochemical productssuch as PTA, BDO, and other additives. The production process includes polymerization,extrusion, pulverization, and granulation, ultimately producing engineering plastics. Theproducts are then sold to downstream customers.

The profit model in the engineering plastics industry is based on producing and sellingplastic pellets to generate profits. Due to the significant fixed investment associated with theproducts, improving profitability relies mainly on two factors: reducing the fixed cost per unitand developing new products. For companies, the future primarily involves capitalizing oneconomies of scale to seize market share, increasing product added value, and improvingoverall profitability.

(2). Main products

Product	Business sector	Primary upstream raw materials	Applications of major downstream materials	Main factors affecting prices
Refined oil	Petroleum refining	Crude Oil	Aviation kerosene, gasoline, and diesel and other power fuels	Upstream raw materials like crude oil and downstream demand
PX	Chemical raw materials and chemicals manufacturing	Crude Oil	PTA	Upstream raw materials like crude oil and downstream demand

Ethylene	Chemical raw materials and chemicals manufacturing	Crude Oil	Polyethylene, ethylene glycol	Upstream raw materials like crude oil and downstream demand
PTA	Chemical raw materials and chemicals manufacturing	PX	Polyester fiber, bottle grade chips, film grade chips, etc.	Crude oil and PX supply and downstream demand
Polyester Filament Yarn (PFY)	Polyester manufacturing	PTA, MEG	Advertising light box cloth, geotextile, conveyor belt, automobile fiber and tire meridian, clothing and home textiles, etc.	Upstream raw materials like crude oil and downstream textile prosperity
Polyester Filament	Polyester manufacturing	PTA, MEG	Filature	Upstream raw materials like crude oil and downstream demand
BOPET	Plastics product manufacturing	PTA, MEG	Packaging film, insulating film, capacitor film, etc.	Upstream raw materials like crude oil and downstream demand
PBT	Plastics product manufacturing	PTA, BDO	Auto parts, electronic appliances, aerospace materials, etc.	Upstream raw materials like crude oil and downstream demand
PBS/PBAT	Plastics product manufacturing	PTA, BDO, Adipic acid	Packaging materials, shrink film, agricultural film, etc.	Upstream raw materials like crude oil and downstream demand

(3). R&D and innovation

As of the end of 2022, the company has accumulatively held 1, 116 patents, of which 261were newly approved during the reporting period.

(4). Production Technology and Process

During the reporting period, there were no significant changes in the company's mainproducts and their production processes.For specific details regarding the production processes of the company's mainproducts in the polyester fiber sector, please refer to Section 4, "Discussion and Analysisof Operating Conditions, " subsection "II. (IV) Analysis of Operational Information in theChemical Industry, " and the section "Production Processes and Flow" (page 33) in thecompany's "2016 Annual Report."For information on the production process of the company's PTA industry, pleaserefer to Section 4, "Discussion and Analysis of Operating Conditions, " subsection "II. (IV)Analysis of Operational Information in the Chemical Industry, " and the section "ProductionProcesses and Flow" (page 39) in the company's "2018 Annual Report."Regarding the production processes of the company's refining and ethyleneengineering, as well as the PBAT project, please refer to Section 4, "Discussion andAnalysis of Operating Conditions, " subsection "II. (IV) Analysis of Operational Informationin the Chemical Industry, " and the section "Production Processes and Flow" (page 34) inthe company's "2020 Annual Report."

(5). Production capacity and construction work

Unit: hundred million yuan Currency: RMB

Major plants/projects	Designed capacity	Capacity utilization(%)	Capacity under construction	Investment in capacity under construction	Planned completion time
Polyester Filament Yarn (PFY) of Suzhou plant	1.4 million tons/Year	100	High-performance industrial yarn project with an annual output of 400, 000 tons	12.20
PFY for civil use of Nantong plant	1.75 million tons/Year	100	Annual output of 1.5 million tons of green multi-functional textile new materials project(Part of the production capacity has been put into production during the reporting period)	54.24
PFY for civil use of Suqian plant	200,000 tons/Year	100
Polyester film of Kanghui New Material (Yingkou) Industrial Park	386,000 tons/Year	100
Engineering plastics of Kanghui New Material (Yingkou) Industrial Park	240,000 tons/Year	100
PBS bio-degradable advanced materials project of Kanghui New Material (Yingkou) Industrial Park	33,000 tons/Year	100

PTA of Dalian plant	11.6 million tons/Year	99.44
Refining and chemical project of Dalian plant	20 million tons/Year	102.44
Ethylene project of Dalian plant	1.5 million tons/Year	106.06
PBS biodegradable plastics in Kanghui Dalian plant	/	/	450,000 tons/Year	22.41	Gradually put into production in the first quarter of 2023
Lithium battery separator in Kanghui Yingkou Plant	/	/	440 million square meters/Year	1.15	Gradually put into production in the middle of 2023
PTA of Huizhou Plant	/	/	2 sets of 2.5 million tons/year PTA plant	86.25	Gradually put into production in the first quarter of 2023
Hengli Petrochemical Chemical New Material Supporting Chemical Project	/	/	300,000 tons/Year Adipic acid, etc.	3.01	Gradually put into production in the middle of 2023
Annual output of 1.6 million tons of high-performance resin and new material projects	/	/	Bisphenol A, isopropanol, ethylene oxide, electronic grade DMC (including EC, EMC and DEC), ABS, etc.	13.68	Gradually put into production in the middle of 2023
Annual output of 800,000 tons of functional films and functional plastics	/	/	Functional polyester film 346,000 tons/year device, high-end functional polyester film 124,000 tons/year device,	17.70	Gradually put into production in the first quarter of 2023

Electricity	Market-oriented procurement	Monthly settlement		4, 078.97 million kwh	4, 752.87 million kwh
Thermal coal	Market-oriented procurement	Monthly settlement		7.94 million tons	7.94 million tons
Natural gas	Market-oriented procurement	Monthly settlement		192.82 million cubic meters	199.79 million cubic meters

The price of major energy sources is directly proportional to the Company's operating costs.The prices of major energies are affected by national policies, the supply and demandstructure of the regional markets, and the stability of supply.

(3). Risk response measures for raw material price fluctuations

The main situation of holding derivatives and other financial productsTo reasonably mitigate the significant price fluctuations of major raw materials, the companyand its subsidiaries engaged in hedging activities during the reporting period. The hedgingprimarily involved commodities related to production and operations, such as Crude Oil,petroleum products, PTA, and chemicals (including but not limited to Styrene, EthyleneGlycol, Polypropylene).

4 Product sales

(1). Basic situation of the company's main operations by segment

Unit: ten thousand yuan Currency: RMB

Business segment	Revenue from operations	Cost of sales	Gross margin (%)	YOY changes in operating revenue(%)	YOY changes in operating cost(%)	YOY changes in gross margin(%)	Gross margins among the peers
Petrochemical segment	20, 944, 731.95	19, 154, 348.71	8.55	16.12	27.64	-8.25
Other segments	1, 223, 649.95	1, 232, 828.05	-0.75	-27.36	-28.13	1.08

(IV) Investment Status AnalysisGeneral Analysis on External Equity InvestmentDuring the reporting period, the company did not have any significant equity investments.However, it initiated two major construction projects.

1. Major non-equity investment

During the reporting period, the following are the basic details of the major investmentprojects undertaken by the company:

1. Hengli Petrochemical (Dalian) New Materials Technology Co., Ltd. - 1.6 million

tons/year High-performance Resin and New Materials Project

The total investment is 19, 988.26 million yuan. The project is located in Hengli (DalianChangxing Island) Industrial Park and has a construction period of 18 months. According tothe feasibility study report, it is estimated that after the project reaches full capacity, the

annual average operating income will be 25, 375.37 million yuan, with an annual averagetotal profit of 9, 151.57 million yuan.

2. Hengli Petrochemical (Dalian) New Materials Technology Co., Ltd. - 2.6 million

tons/year High-performance Polyester Engineering Project

The total investment is 4,001.36 million yuan. The project is located in Hengli (DalianChangxing Island) Industrial Park and has a construction period of 18 months. According tothe feasibility study report, it is estimated that after the project reaches full capacity, theannual average operating income will be 16, 613.96 million yuan, with an annual averagetotal profit of 990.54 million yuan.

(V) Analysis of Major Holding and Participating Companies

Unit: hundred million yuan

Company name	Shareholding (%)	Business nature	Registered capital	Total assets	Net assets	Net profit
Hengli Petrochemical Refining	100.00	Manufacturing	175.96	1, 249.62	297.26	13.66
Hengli Petrochemical (Dalian)	100.00	Manufacturing	58.90	355.93	114.04	-2.33
Hengli Chemical Fiber	100.00	Manufacturing	22.08	395.19	54.70	3.67
Hengli Petrochemical Chemical	100.00	Manufacturing	45.75	350.48	63.74	4.73
Kanghui New Material	100.00	Manufacturing	16.78	110.46	61.46	2.19

Note: Jiangsu Hengli Chemical Fiber Co., Ltd. includes its subsidiaries Jiangsu HengkeAdvanced Materials Co., Ltd., Nantong Teng'an Logistics Co., Ltd., Jiangsu XuandaPolymer Material Co., Ltd., Jiangsu Deli Chemical Fiber Co., Ltd., Suqian Deya NewMaterials Co., Ltd., Hengli Futures Co., Ltd., Hengli Hengxin Industry and Trade (Shanghai)Co., Ltd., Suzhou Susheng Thermal Power Co., Ltd., Suzhou Binglin Trading Co., Ltd.,Sichuan Hengli New Material Co., Ltd., Hengli New Materials (Suqian) Co., Ltd., SuzhouHengli Chemical New Material Co., Ltd., Hengli Petrochemical (Dalian) Co., Ltd. includingits subsidiaries Hengli Shipping (Dalian) Co., Ltd., HENGLI PETROCHEMICAL Co.,LIMITED, and Shenzhen Ganghui Trading Co., Ltd.

Hengli Petrochemical (Dalian) Refining Co., Ltd. includes its subsidiaries HENGLIPETROCHEMICAL INTERNATIONAL PTE. LTD., HENGLI OILCHEM PTE. LTD., HENGLISHIPPING INTERNATIONAL PTE. LTD., Hengli Energy (Hainan) Co., Ltd., HengliPetrochemical (Hainan) Co., Ltd., Suzhou Hengli Petrochemical Chemical Import andExport Co., Ltd., Shenzhen Shengang Trading Co., Ltd., Hengli Petrochemical RefiningProduct Sales (Dalian) Co., Ltd., Hengli Aviation Oil Co., Ltd., Hengli Oilchem (Suzhou) Co.,Ltd., Hengli Energy (Suzhou) Co., Ltd., Hengli Energy (Jiangsu) Co., Ltd., Hengli Logistics(Dalian) Co., Ltd., Suzhou Hengli Chemical Polymer Co., Ltd., Suzhou Hengli EnergyChemical Import & Export Co., Ltd.

Hengli Petrochemical (Dalian) Chemical Co., Ltd. includes its subsidiaries HengliPetrochemical (Dalian) New Material Technology Co., Ltd., Hengli Petrochemical Utilities(Dalian) Co., Ltd., Dalian Hengzhong Special Materials Co., Ltd.(VI) Structured entities controlled by the company

On December 31, 2022, structured entities related to the company but not included inthe scope of the financial statements are mainly engaged in asset management business,

operating client assets, and providing clients with investment management services forsecurities, futures and other financial products. The total assets of this type of structuredentity on December 31, 2022 are 227.29 million yuan.

VI. Discussions and analysis of the Company’s future development(I) Industrial landscape and trend

1. Petrochemical industry

(1) Leaning towards intensive, efficient, and low-carbon development

Under the goal of “carbon neutrality and carbon emission peaking”, our peers will workharder to reduce energy consumption and emissions, and improve crude oil conversion.Through process intensification, optimization of device design and process flow, and thedevelopment and application of energy management systems, the companies will minimizeenergy and raw material consumption, maximize device operation efficiency and productionflexibility, reduce the restrictions of other factors, and efficiently respond to the changingdevelopment environment, to achieve low carbon and high-quality development.

(2) Accelerating industrial upgrading and expanding demand for new chemical

materials lead to a broader market space

New chemical materials are important basic materials for strategic emerging materialssuch as new energy, high-end equipment, green environmental protection, andbiotechnology. Entering the “14th Five-Year Plan” period, with the rapid growth of strategicemerging industries as high-end equipment, automobile manufacturing, electronicinformation, new energy, energy conservation and environmental protection, newconstruction, bio-medicine application, smart grid, and 3D printing, the demand for newmaterials such as high-quality synthetic resin, high-performance synthetic rubber,engineering plastics, degradable materials, electronic chemicals and high-performancemembrane materials continue to grow, driving the rapid growth of new chemical materialsproduction capacity. With the development of downstream industries, the future marketspace for new chemical materials tends to be broad.

2. PTA

China is the largest producer and consumer of PTA. Under the competitive landscapeof the integrated industrial chain, leading companies in the PTA industry have strong marketcompetitiveness in terms of the scale of a single set of facility, stable production andoperation, material consumption, energy consumption, and product quality. As the PTAindustry is going through more fierce competition, its concentration will be further increased.

3. Polyester fiber

(1) Differentiated and high-end new fiber materials

The Company will develop differentiated and functional fiber products such as intelligent,super-simulation, and dope dyeing, and expand the application of functional fibers in clothing,home textiles, industry, and environmental protection, continue to optimize the productionand application of high-performance fibers, improve the technological maturity of high-performance fibers that have been engineered and industrialized, improve the stability anduniformity of the existing product quality, and meet the needs of downstream applications,enhance the differentiation and functioning of basic fibers through copolymerization,blending, and composite spinning to achieve high-quality, efficient production and low costfibers, strive to make breakthroughs in key technologies for large-scale production of bio-based chemical fibers, develop high-quality differentiated products, and strengthenapplication technology development.

(2) Accelerating intelligent and digitized transformation

The Company will build an intelligent manufacturing standard system for the chemicalfiber industry, improve the R&D and application of intelligent manufacturing industrializationtechnologies such as chemical fiber, seek breakthroughs in key software and hardware

systems, form integrated solutions and full-process intelligent manufacturing technologyintegration, and build smart factories based on big data, artificial intelligence, and theindustrial internet.The Company will push forward its digital transformation and the application of artificialintelligence, big data, cloud computing, and other emerging digital technologies in chemicalfiber enterprises, improve the digitalization of the whole industrial chain such as R&D, design,manufacturing, operation and maintenance. By applying digital technology to dovetailbusiness processes, management systems, and ANNUAL REPORT 2021 55 supply chaindata, it will innovate the management model as organizational structure optimization,dynamic and accurate services, and auxiliary management decision-making to raiseenterprise management capabilities.

(3) Seeking green and low carbon transformation

The Company will carry forward energy-saving and low-carbon development, guideenterprises to purchase green electricity, expand the proportion of new energy applicationssuch as solar energy. It will increase the R&D of green process technology and equipment,strengthen the technological transformation of clean production and the application of keyenergy-saving and emission-reduction technologies, accelerate the development andconstruction of green factories, green products, green supply chains, and green parks in thechemical fiber industry, carry out the construction of a leading water and energy efficiencydemonstration company, and proceed with carbon footprint accounting and socialresponsibility building. Through the recycling improvement, the Company is to speed up theoptimization of the industrial structure of recycled chemical fibers and the upgrading of itself.(II) Development strategyGeneral development strategy: we are committed to providing quality fiber and creatinga better life for the society. Under the principle of “doing the right things at the right time”,we adhere to the development philosophy of “innovation, coordination, green, and sharing”,the operation concept of “winning global markets with surpassing quality, persistence, andwill”, and the management ideal of “people-centered, scientific, institutionalized, andprofessional”, foster a company spirit of “solidarity, integrity, steadiness, and innovation”,increase the industrial innovation capacity, improve industrial structures, and drive theCompany into high-end, intelligent, green, integrated, and international development.

(1) The Company will take solid steps in “improving the upstream and enhancing the

downstream”. In the first place, the Company will continue to strengthen the upstreamindustrial platform to support the development of “refining+ethylene+coalification”underpinning the “big chemicals”, and implement “making up and enhancing the industrialchains” and “R&D and innovations”, reserving space and paving ways for the newdownstream material businesses in the future. On top of that, the Company will redouble itsefforts in the downstream businesses, consolidate traditional market strengths, benchmarkthe breakthroughs in major new materials as the development and upgrading of “newconsumption” and “key&core technologies”, nurture new leading material business growthpoints in scale, and make strides toward a world leading petrochemical new materialcompany that covers the whole industrial chain.

(2) The Company will take unswerving steps in adopting integrated development

strategy across the board. The Company will focus on diversifying the specs of the products,expanding capacity, differentiating the products through R&D, technology and innovationupgrading, and strive to realize the industrial development goal of “industrial growth in bases,scale production, meticulous products, professional technology, and sound management”.(III) Operational plan

2023 is a crucial year for the implementation of the "14th Five-Year Plan" and a keyyear for the company's transition to a "platform + new materials" development model. The

company's management will adhere to a systematic approach in planning its development,with effective innovation and reform as important drivers. The focus will be on the corebusiness, with a deep and meticulous approach, combining tradition with innovation, strivingfor growth and strength, and achieving high-quality development for the enterprise. Theultimate goal is to continue progressing towards the grand vision of "Centennial Hengli." Thekey areas of focus for the year include:

1. Continuously strengthening quality, cost, and rapid response to ensure high-quality

and efficient operations.

Emphasis will be placed on quality and brand awareness, with a focus on research anddevelopment and innovation to continually improve quality standards and enhance productquality. Cost management will be strengthened through the rational integration of resourcesand control of expenses to achieve cost reduction and increased efficiency. The companywill adhere to the business principles of "production based on sales, and sales driven byproduction, " as well as the operational concepts of "customer-centered, market-oriented,and full-team marketing." By proactively adapting to the market and swiftly responding tochanges, the company will continuously optimize its product structure, increase theproduction of high-efficiency products, strengthen the linkage between production and sales,and strive to achieve the annual production and operational goals, ensuring the company'shigh-quality growth and benefits.

2. Continuously optimizing and strengthening the four major business segments,

consolidating the competitive advantages of the entire industry chain, and striving to improvebusiness performance.

Based on maintaining the existing industrial advantages, Hengli Dalian Industrial Parkwill highlight the advantages of park scale and centralized management. It will coordinateand plan operations in a comprehensive and rational manner, leveraging the costadvantages brought by scale, and emphasizing the core competitiveness of products in themarket. The construction of ongoing projects will be accelerated, with strict control overconstruction progress and quality to ensure timely completion and further enhance thecompany's performance center.

3. Continuously improving the company's management system, strengthening

management empowerment, and laying a solid foundation for high-quality development.

Further improving the safety and environmental management system, enhancing theability to prevent and resolve risks and hazards, strengthening safety supervision, andconducting special drills to ensure strict, meticulous, and practical work in safety production.Adhering to green development and low-carbon production, focusing on the research anddevelopment of green and low-carbon technologies.

Continuously optimizing and improving the internal management system, enhancingfinancial internal control mechanisms, timely identifying and preventing risks, strengtheninginternal supervision to ensure zero financial risk. Adhering to the principles of "managingpeople with systems, managing tasks with processes, and managing efficiency with forms"to enhance risk prevention capabilities. Continuously promoting intelligent transformationand digitalization, actively utilizing new technologies such as the Internet of Things and bigdata to accelerate industrial upgrading and enhance development quality and efficiency.

Continuing to promote the construction of talent and corporate culture systems, activelyengaging in industry-academia-research cooperation, deepening school-enterprisecooperation, and cultivating high-quality, application-oriented, and innovative talents.Attracting high-quality talents to provide momentum for the company's development.Improving internal promotion mechanisms to provide a broader platform for outstandingtalents. Fostering and promoting corporate culture to create a sense of belonging within theHengli family. Strengthening brand building, enhancing brand competitiveness, andexpanding brand influence.

(IV) Potential Risks

1. Risk of industry cyclical fluctuations

The development of the polyester fiber and petrochemical industry is influenced byindustry demands and its own development status, thus featuring a certain level of cyclicity.Changes of the macro environment, such as China’s national economy and export policy,would bring risks of cyclical fluctuations to the industry. During adjustment cycles, fallingproduct prices, insufficient utilization of capacity and decreasing profitability would be seen.

2. Risk of raw material price fluctuations

The Company’s production and operation are greatly affected by the price changes ofupstream raw materials, especially crude oil and coal. If the Company’s inventory,procurement management, and price adjustment of downstream product market cannoteffectively reduce or absorb the impact of price fluctuations of raw materials, its operation,production and business performance could be adversely impacted.

3. Foreign exchange risk

If the RMB continues to fluctuate substantially, great uncertainties would be posed tothe Company’s exchange gains or losses, export product prices denominated in foreigncurrencies, raw material prices and other operational factors. The Company will leverageforward foreign exchange contracts and other methods to establish and improve theexchange rate hedging mechanism and reduce the amount of foreign currency receipts andpayments in order to reduce the impact of exchange rate changes on the Company’sprofitability.

4. Environmental protection and safety risk

With the enhancement of environmental awareness and stricter environmentalprotection requirements from the government, the Company proactively takesenvironmental protection measures, increase corresponding investments, strictly complieswith relevant laws, regulations and production specifications in its daily management andestablishes strict standard operation procedures. However, environmental or safetyproduction accidents caused by human errors or accidents still could not be eliminated,which could affect the Company’s normal businesses. Therefore, there are certainenvironmental protection and production safety risks.

Chapter 4 Corporate GovernanceI. Notes on Corporate GovernanceIn strict accordance with the requirements of the Company Law, the Securities Law, theCode of Corporate Governance for Listed Companies, the Rules Governing the Listing ofStocks on Shanghai Stock Exchange and other laws, regulations and regulatory documents,the Company continuously improved the corporate governance structure, established andimproved a sound system of internal management including General Shareholders Meetings,the Board of Directors and the Supervisory Committee to regulate its operations. TheCompany has formed a corporate governance structure with clear rights and responsibilities,effective checks and balances, scientific decision-making and coordinated operationsamong organs of authority, decision-making organs, supervisory organs and the seniormanagement teams. The structure ensures the effective implementation of the decision-making power of the general shareholders’ meeting and the Board of Directors and thesupervisory power of the supervisory committee as well as efficient and compliantoperations and management of the senior management team. The Board of Directors of theCompany established four special committees, i.e., the strategy committee, the auditcommittee, the nomination committee and the remuneration and appraisal committee, toprovide consultation and advice for the Board of Directors and make sure that its deliberationand decision-making is professional and efficient. The Company continued to follow closelynew changes in regulatory laws and rules, implement new regulatory policies and

requirements, strengthen risk prevention and control, push forward internal controlmanagement, carry out high-quality information disclosure, narrow the scope of insidersunder the principle of validity, accuracy, timeliness, completeness and fairness to ensureequitable access to information of all shareholders. The Company managed investorrelations proactively and treated all investors fairly with integrity and openness. TheCompany carried forward the ESG system and delivered its social responsibilities tosafeguard the legitimate rights and interests of the Company and all shareholders andensured a sustainable and stable development.

II. Notes on General Shareholders Meetings

Meeting session	Date of meeting	Inquiry index of the designated website where the resolution is published	Disclosure date of resolution publication	Meeting resolution
2022 First Extraordinary Shareholders' Meeting	January 18, 2022	http://www.sse.com.cn/	January 19, 2022	For details, please refer to the "Announcement on Resolutions of Hengli Petrochemical's 2022 First Extraordinary General Meeting of Shareholders" (Announcement No.: 2022-008)
2022 Second Extraordinary Shareholders' Meeting	February 11, 2022	http://www.sse.com.cn/	February 12, 2022	For details, please refer to the "Announcement on Resolutions of Hengli Petrochemical's 2022 Second Extraordinary General Meeting of Shareholders" (Announcement No.: 2022-015)
2022 Third Extraordinary Shareholders' Meeting	March 22, 2022	http://www.sse.com.cn/	March 23, 2022	For details, please refer to the "Announcement on Resolutions of Hengli Petrochemical's 2022 Third Extraordinary General Meeting of Shareholders" (Announcement No.: 2022-033)
2021 Annual General Meeting	April 27, 2022	http://www.sse.com.cn/	April 28, 2022	For details, please refer to the "Announcement on the Resolutions of Hengli

Note to the general meeting of shareholdersDuring the reporting period, the company held a total of four shareholder meetings,including one annual shareholder meeting and three extraordinary shareholder meetings.The convening and procedures of the shareholder meetings complied with the provisions oflaws, administrative regulations, the "Rules of Shareholders' General Meetings of ListedCompanies, " and the company's articles of association. The attendees and the convener ofthe meetings were qualified and valid. The voting procedures and results of the shareholdermeetings were legal and effective.

III. Information about directors, supervisors and senior executives(I) Changes in shareholding and remuneration of current and resigned directors, supervisors and senior executives within thereporting period

Unit: Share

Name	Position (Note)	Sex	Age	Position start date	Position end date	Number of shares held at the beginning of the year	Number of shares held at the end of the year	Increase or decrease of shares during the year	Reason for increase or decrease	The total pre-tax remuneration received from the company within the Reporting Period (10, 000 yuan)	Whether to get paid at the company’s related party
Fan Hongwei	Chairman of the board	Female	56	2022-04-27	2025-04-27	886, 105, 969	791, 494, 169	-94, 611, 800		120	No
Wang Zhiqing	General Manager	Male	61	2022-12-29	2025-04-27	-	-	-		0	No
Li Feng	Director, Deputy General Manager, Board Secretary	Male	44	2022-04-27	2025-04-27	-	-	-		84	No
Gong Tao	director	Male	43	2022-04-27	2025-04-27	-	-	-		107.55	No
Liu Dunlei	Director, Deputy General Manager	Male	51	2022-04-27	2025-04-27	-	-	-		72.64	No
Liu Jun	Independent Director	Male	59	2022-04-27	2025-04-27	-	-	-		13.28	No
Wu Yongdong	Independent Director	Male	43	2022-04-27	2025-04-27	-	-	-		13.28	No

	Supervisory Committee (resigned)
Mo Youjian	Employee Supervisor

(resigned

		Male	39	2019-05-06	2022-04-06	-	-	-		10.39	No
Xu Yinfei	Supervisor

(resigned)

		Male	37	2019-05-06	2022-04-27	-	-	-		18.25	No
Total	/	/	/	/	/	886, 120, 309	791, 498, 809	-94, 621,500	/	804.95	/

Name

Name	Main work experience
Fan Hongwei	Born in 1967, Chinese nationality, no overseas permanent residence, college degree. From May 1994 to December 2001, he served as the general manager of Wujiang Chemical Fiber Weaving Factory Co., Ltd.; from January 2002, he served as the director of Hengli Group Co., Ltd.; from November 2002 to August 2011, he served as the director of Jiangsu Hengli Chemical Fiber Limited; From August 2011 to March 2016, served as the vice chairman and general manager of Jiangsu Hengli Chemical Fiber Co., Ltd.; since March 2016, he has served as the chairman of Jiangsu Hengli Chemical Fiber Co., Ltd. From March 2016 to December 2022, he served as the chairman and general manager of the Company; since December 2022, he has served as the chairman of the Company.
Wang Zhiqing	Born in 1962, Chinese nationality, no overseas permanent residence, Doctor of Engineering, professor-level senior engineer. Started to work in 1983, successively served as chief engineer of Luoyang Petrochemical General Plant, deputy manager and manager of Sinopec Luoyang Branch, leader of Sinopec Guangxi Oil Refining Preparatory Team, general manager of Sinopec Jiujiang Branch, Director of Jiujiang Petrochemical Complex, chairman, general manager, and deputy secretary of the party committee of Shanghai Petrochemical Co., Ltd. Since December 2022, he has served as the general manager of the Company.
Li Feng	Born in 1979, Chinese nationality, no overseas permanent residence, master's degree, senior economist, member of the third M&A financing committee of China Association of Listed Companies. Served as project manager, office director, and deputy general manager of Jiangsu Hengli Chemical Fiber Co., Ltd.; served as deputy general manager and secretary of the board of directors of Jiangsu Hengli Chemical Fiber Co., Ltd. from August 2011 to March 2016; Since March 2016, he has served as director and deputy general manager of Jiangsu Hengli Chemical Fiber Co., Ltd.; since March 2016, he has served as director, deputy general manager and secretary of the board of directors of the Company.
Gong Tao	Born in 1980, Chinese nationality, no overseas permanent residence, master degree. He used to be a technician of Xianglu Petrochemical (Xiamen) Co., Ltd., a monitor of Zhejiang Yisheng Petrochemical Co., Ltd., and an engineer of Hanbang (Jiangyin) Petrochemical Co., Ltd.; from February 2011 to May 2015 years, he was the director and manager of Hengli Petrochemical (Dalian) Co., Ltd. ; From May 2015 to now, he has been the deputy general manager of Hengli Petrochemical (Dalian) Co., Ltd. Since March 2018, he has served as a director of the Company.

Liu Dunlei	Born in 1972, Chinese nationality, no overseas permanent residence, bachelor degree. Served as assistant to the general manager and manager of Qingdao Gaohe Co., Ltd.; successively served as FDY engineer, workshop director, and manager of Area E of the filament department of Jiangsu Hengli Chemical Fiber Co., Ltd.; Since August 2012, he has served as the general manager of Jiangsu Hengke Advanced Materials Co. Ltd.; since March 2016, he has served as the Company's deputy general manager; since March 2018, he has served as the Company's director and deputy general manager.
Liu Jun	Born in 1964, Chinese nationality, no overseas permanent residence, Ph.D. He used to be an associate professor, professor, and vice president of Nanjing Normal University, and served as a member of the party group, vice president, member of the judicial committee, and judge of Yangzhou Intermediate People's Court. He is currently a professor at the Law School of Nanjing Normal University. Since April 2022, he has served as an independent director of the Company.
Wu Yongdong	Born in 1980, Chinese nationality, no overseas permanent residence, bachelor degree, Chinese certified public accountant. Served as senior project manager of Tianjian Certified Public Accountants (Special General Partnership), credit partner of Ruihua Certified Public Accountants (Special General Partnership) Zhejiang Branch, Internal audit director and director of Hangzhou Shunwang Technology Co., Ltd., and financial director of Zhejiang Chuangke Network Co., Ltd. He is currently the financial director of Hangzhou Jierui Air Treatment Equipment Co., Ltd. Since April 2022, he has served as an independent director of the Company.
Xue Wenliang	Born in 1979, Chinese nationality, no overseas permanent residence, Ph.D., once served as an associate researcher and master tutor at the Textile College of Donghua University, and is now a professor and doctoral tutor at the Textile College of Donghua University. Since April 2022, he has served as an independent director of the Company.
Kang Yunqiu	Born in 1980, Chinese nationality, no permanent residence abroad, bachelor degree, senior economist. Served as general ledger accountant of Jiangsu Hengli Chemical Fiber Co., Ltd., financial manager of Jiangsu Boyada Textile Co., Ltd., financial director of Suzhou Wujiang Tongli Lake Tourist Resort Co., Ltd. He is currently the assistant to the chief financial officer of Hengli Group Co., Ltd., and the director of Suzhou Wujiang Tongli Lake Tourist Resort Co., Ltd. Since April 2022, he has served as the chairman of the Company's board of supervisors.
Shen Guohua	Born in 1978, Chinese nationality, no overseas permanent residence, college degree. Previously served as deputy manager of the general ledger accountant and finance department of Jiangsu Hengli Chemical Fiber Co., Ltd.; from December 2017 to August 2021, he served as the manager of the Company's audit department. Since August 2021, he has served as the Company's audit director. Since April 2022, he has served as a supervisor of the Company.
Tang Fangming	Born in 1980, Chinese nationality, no overseas permanent residence, bachelor degree, senior engineer, successively worked as a technician, engineer, and director of the enterprise management department of Jiangsu Hengli Chemical Fiber Co., Ltd.; he is currently the assistant to the general manager of Jiangsu Hengli Chemical Fiber Co., Ltd. Since April 2022, he has served as the employee supervisor of the Company.
Liu Qianhan	Born in 1977, Chinese nationality, no overseas permanent residence, master degree. Served as business representative, deputy sales manager and sales manager of Jiangsu Hengli Chemical Fiber Co., Ltd.; Deputy General Manager of Jiangsu Hengli Chemical Fiber Co., Ltd. from September 2010 to now; current Deputy General Manager of the Company.
Liu Xuefen	Born in 1972, Chinese nationality, no overseas permanent residence, college degree. Worked as cashier and accountant of Wujiang Silk Sample Factory; teller, loan officer and accounting supervisor of Shengze Branch of China Construction Bank; from April 2004 to April 2012, manager of the audit department of Jiangsu Hengli Chemical Fiber Co., Ltd; Since April 2012, he has served as the financial director of Hengli

of Directors, " "Election of Independent Directors of the 9th Board of Directors, " and "Election of Supervisor Candidates of the 9th SupervisoryBoard" were approved. Fan Hongwei, Li Feng, Liu Dunlei, Gong Tao, Liu Jun, Xue Wenliang, and Wu Yongdong were elected as directors, whileKang Yunqiu and Shen Guohua were elected as supervisors. Tang Fangming was elected as the staff representative supervisor by theCompany's Staff Representative Assembly.

During the first meeting of the 9th Board of Directors, the relevant resolutions were approved, appointing Fan Hongwei as the GeneralManager, Li Feng as the Deputy General Manager and Board Secretary, Liu Xuefen as the Deputy General Manager and Chief Financial Officer,and Liu Dunlei and Liu Qianhan as Deputy General Managers.

After Fan Hongwei applied to resign as the General Manager, the company held the 6th meeting of the 9th Board of Directors onDecember 29, 2022, and approved the resolution on "Appointment of General Manager, " agreeing to appoint Wang Zhiqing as the GeneralManager.

For detailed information, please refer to the announcements published by the company on April 7, 2022, April 28, 2022, and December30, 2022, respectively, in designated information disclosure media, including the "Announcement of Hengli Petrochemical on the Election ofStaff Representative Supervisor" (Announcement No.: 2022-047), "Announcement of Resolutions of Hengli Petrochemical's 2021 AnnualShareholders' Meeting" (Announcement No.: 2022-054), "Announcement of Resolutions of the 1st Meeting of the 9th Board of Directors of HengliPetrochemical" (Announcement No.: 2022-055), and "Announcement of Hengli Petrochemical on the Change of General Manager"(Announcement No.: 2022-092).

(II) Positions of current and resigned directors, supervisors and senior executivesduring the reporting period

(III) Remuneration of Directors, Supervisors and Senior Management

Decision-making procedures for the remuneration of directors, supervisors and senior executives	The compensation plan for the company's directors and the salary distribution plan for senior executives proposed by the Remuneration and Appraisal Committee, and reported to the Board of Directors for approval
Basis for Determination of Remuneration of Directors, Supervisors and Senior Management	According to the company's overall operating conditions and the annual salary level of previous years, it is determined by comparing the director and executive salary levels of similar listed companies and Others companies in the same industry
Actual Payment of Remuneration to Directors, Supervisors and Senior Management	The payment has been completed according to the results of the performance appraisal. For details, please refer to the "Statement of Shareholding Changes and Remuneration of Directors, Supervisors and Senior Management"
Total remuneration actually received by all directors, supervisors and senior management at the end of the reporting period	8.0495 million yuan

(IV) Changes in Directors, Supervisors and Senior Management of the Company

Name	Position held	Changes	Reason for change
Fan Hongwei	General manager	resign	Company work arrangement
Wang Zhiqing	General manager	hire	Company work arrangement
Liu Jun	Independent Director	election	General Election of the Board of Directors
Xue Wenliang	Independent Director	election	General Election of the Board of Directors
Wu Yongdong	Independent Director	election	General Election of the Board of Directors
Kang Yunqiu	Chairman of the Supervisory Board	election	General Election of the Board of Supervisors
Shen Guohua	Supervisor	election	General Election of the Board of Supervisors
Tang Fangming	Employee Supervisor	election	General Election of the Board of Supervisors
Li Li	Independent Director	resign	Served as independent director of the company for 6 years
Fu Yuanlue	Independent	resign	Served as

	Director		independent director of the company for 6 years
Cheng Longdi	Independent Director	resign	Served as independent director of the company for 6 years
Wang Weiming	Chairman of the Supervisory Board	resign	General Election of the Board of Supervisors
Xu Yinfei	Supervisor	resign	General Election of the Board of Supervisors
Mo Youjian	Employee Supervisor	resign	General Election of the Board of Supervisors
Liu Jian	Deputy General Manager	resign	Company work arrangement

IV. Relevant information on board meetings held during the reporting period

Meeting session	Date of Meeting	Meeting resolutions
Announcement of Resolutions of the Sixth Meeting of the Ninth Board of Directors	2022-12-29	"Proposal on the Appointment of the General Manager of the Company"
Announcement on Resolutions of the Fifth Meeting of the Ninth Board of Directors	2022-10-28	"2022 Third Quarter Report"
Announcement on Resolutions of the Fourth Meeting of the Ninth Board of Directors	2022-08-15	"2022 Semi-Annual Report" Full Text and Abstract
Announcement on Resolutions of the Third Meeting of the Ninth Board of Directors	2022-06-02	"Proposal on Purchasing Assets and Related Transactions"
Announcement on Resolutions of the Second Meeting of the Ninth Board of Directors	2022-04-29	1. "First Quarter Report 2022" 2. "Proposal on Revising the Corporate Governance System"
Announcement on Resolutions of the First Meeting of the Ninth Board of Directors	2022-04-27	1. "Proposal on the Election of the Chairman of the Company" 2. "Proposal on Election of Members of Special Committees of the Ninth Board of Directors" 3. "Proposal on the Appointment of the General Manager of the Company"

		4. "Proposal on the Appointment of the Company Secretary to the Board of Directors" 5. "Proposal on the Appointment of the Company's Deputy General Manager and Chief Financial Officer" 6. "Proposal on the Appointment of the Company's Securities Affairs Representative"
Announcement on Resolutions of the Twenty-eighth Meeting of the Eighth Board of Directors	2022-04-06	1. "2021 General Manager Work Report" 2. "2021 Annual Work Report of the Board of Directors" 3. "2021 Annual Report" and its summary 4. "2021 Annual Financial Final Account Report" 5. "Profit Distribution Plan for 2021" 6. "Company's 2021 Internal Control Evaluation Report" 7. "Proposal on the Remuneration of Directors and Senior Management of the Company in 2021" 8. "Proposal on the Estimated Status of Routine Related Transactions in 2022" 9. "Proposal on Launching Foreign Exchange Derivatives Trading Business in 2022" 10. "Proposal on Launching Futures Hedging Business in 2022" 11. "Proposal on Entrusted Financial Management Investment Plan for 2022" 12. "Proposal on the 2022 Guarantee Plan" 13. "Proposal on Applying for Comprehensive Credit Lines from Banks and Other Financial Institutions in 2022" 14. "Proposal on Renewing the Engagement of Accounting Firms" 15. "Proposal on Election of Non-Independent Director Candidates for the Ninth Board of Directors" 16. "Proposal on Election of Independent Director Candidates for the Ninth Board of Directors" 17. "Proposal on the Remuneration Plan for Directors of the Ninth Board of Directors of the Company" 18. "Proposal on Amending Articles of Association and Charter Annex" 19. "Proposal on Amending the <Working System of Independent Directors of the Company>" 20. "Proposal on Amending the System of Related Transactions" 21. "Proposal on Convening the Company's 2021 Annual General Meeting of Shareholders"
Announcement on Resolutions of the Twenty-Seventh Meeting of the Eighth Board of Directors	2022-03-09	1. "Proposal on the Fourth Phase Repurchase Report of Shares Repurchased by Centralized Bidding Transactions" 2. "Proposal on authorizing the company's management to handle matters related to this Share repurchase"
Announcement on Resolutions of the Twenty-sixth Meeting of the Eighth Board of Directors	2022-03-03	1. "Hengli Petrochemical Co., Ltd. Phase Six Employee Stock Ownership Plan (Draft) " and its summary 2. "Hengli Petrochemical Co., Ltd. Sixth Phase Employee Stock Ownership Plan Management Measures" 3. "Proposal on Proposing to the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the Employee Stock Ownership Plan" 4. "Proposal on Changing the Purpose of Share Repurchase in 2020"

		5."Proposal on Convening the Third Extraordinary GeneralMeeting of Shareholders in 2022"
Announcement on Resolutions of the Twenty-fifth Meeting of the Eighth Board of Directors	2022-01-26	1."Proposal on Investment and Construction of 16010, 000tons/year High Performance Resin and New MaterialProject"2."Proposal on Investing in the Construction of a High-performance polyester project with an annual output of 2.6million tons"3."Proposal on Convening the Second ExtraordinaryGeneral Meeting of Shareholders in 2022"

V.Performance of duties by directors(I)Participation of Directors in the Board of Directors and General Meetings ofShareholders

Director's name	Whether independent director	Participation in the board of directors						Participation in the general meeting of shareholders
		Number of board meetings this year	In-person attendance	Participation by means of communication	Entrusted attendance	Number of absences	Did not attend two meetings in person in a row	Attendance at general meetings of shareholders
Fan Hongwei	No	10	10	0	0	0	No	4
Li Feng	No	10	10	0	0	0	No	4
Gong Tao	No	10	10	9	0	0	No	2
Liu Dunlei	No	10	10	8	0	0	No	1
Liu Jun	Yes	6	6	5	0	0	No	0
Xue Wenliang	Yes	6	6	5	0	0	No	0
Wu Yongdong	Yes	6	6	5	0	0	No	0
Li Li

(resigned）

	Yes	4	4	3	0	0	No	0
Fu Yuanlue

(resigned

)	Yes	4	4	3	0	0	No	0
Cheng Longdi	Yes	4	4	3	0	0	No	1

(resigned

)Number of board meetings held during the year

Number of board meetings held during the year	10
Including: Number of on-site meetings	0
Number of meetings held by means of communication	2
Number of meetings held on site combined with communication	8

VI.Special committees under the board of directors

(1). Membership of special committees under the board of directors

Special committee	Members
Audit Committee	Wu Yongdong, Liu Jun, Li Feng
Nominating Committee	Liu Jun, Xue Wenliang, Liu Dunlei
Remuneration and Appraisal Committee	Xue Wenliang, Wu Yongdong, Gong Tao
Strategy Committee	Fan Hongwei, Xue Wenliang, Li Feng

(2). During the reporting period, the Audit Committee held 6 meetings

Date of meeting	Meeting content	Material comments and suggestions	Other performance of duties
March 20, 2022	The second annual audit communication meeting was held to express opinions on matters such as the preliminary audit opinion to be issued by the accountant for the annual audit on the company's financial accounting statements.	Nil	Nil
April 6, 2022	Reviewed the "Company's 2021 Financial Accounting Statement", "Summary Report of the Audit Committee of the Board of Directors on the 2021 Audit Work", "Proposal on Reappointment of an Accounting Firm", "2021 Annual Report and Its Summary", "Proposal on the Estimated Situation of Routine Related Party Transactions in 2022"	Nil	Nil
April 29, 2022	Review the "2022 First Quarterly Report" and issue a written review opinion	Nil	Nil
August 15, 2022	Review the "2022 Semi-Annual Report" and issue a written review opinion	Nil	Nil
October 28, 2022	Review the "2022 Third Quarterly Report" and issue a written review opinion	Nil	Nil
December 6, 2022	Held the first annual review communication meeting for the 2022 annual report	Nil	Nil

(3). During the reporting period, the Nomination Committee held 3 meetings

Date of meeting	Meeting content	Material comments and suggestions	Other performance of duties
April 6, 2022	Review the qualifications of director candidates for the ninth board of directors of the company	Nil	Nil
April 27, 2022	Review the qualifications of candidates for senior management personnel to be hired by the company	Nil	Nil

December 29, 2022

Review the qualifications of the company's general manager candidates

Nil

Nil

(4). During the reporting period, the Remuneration and Appraisal Committee held 1

meeting

Date of meeting	Meeting content	Material comments and suggestions	Other performance of duties
April 5, 2022	Reviewed the "Proposal on the Company's 2021 Directors and Senior Managers' Remuneration" and the "Proposal on the Company's Ninth Board of Directors' Remuneration Plan"	Nil	Nil

(5). During the reporting period, the Strategy and Investment Committee held 1

meeting

Date of meeting	Meeting content	Material comments and suggestions	Other performance of duties
January 25, 2022	Reviewed the "Proposal on Investment and Construction of 1.6 million tons/year High-performance Resin and New Materials Project", "Proposal on Investment and Construction of High-performance polyester project with an annual output of 2.6 million tons"	Nil	Nil

VII. Explanation of the Board of Supervisors’ discovery of risks in the companyThe Supervisory Committee had no objection to the supervisory matters during thereporting period.

VIII. Employees of the parent company and major subsidiaries at the end of the

reporting period(I) Employees

The number of employees employed by the parent company	31
The number of employees in the main subsidiary	28, 075
Total Number of Employees	38, 550
Number of retired employees whose parent company and main subsidiaries need to bear the expenses	359
Professional composition
Professional composition category	Headcount
Production staff	27, 883
Sales staff	776
Technical staff	6, 158
Financial officer	358
Administrative staff	1, 465
Service staff	485
Others	1, 425
Total	38, 550
Education level
Education level category	Headcount
Postgraduate and above	289

Undergraduate	5, 857
College	10, 136
Secondary school and below	22, 268
Total	38, 550

(II) Remuneration policyThe company has established a legal, standardized, and effective salary and jobgrading system, taking into account the internal and external labor market conditions,regional and industry differences, and the value of employee positions. The principlesguiding the system are "competitiveness externally, fairness internally, and protection ofemployee development space." The grading and salary determination are based on factorssuch as responsibilities, capabilities, and performance contributions. Each subsidiarycompany refines and implements specific compensation plans, promotion channels, andassessment indicators that are suitable for its own development, based on its businessscope, industry, and regional factors.

The company's compensation and benefits primarily include basic salary, position-based salary, seniority-based salary, piecework wages, bonuses, overtime pay, night shiftallowances, management allowances, skill allowances, etc. The company also providessocial insurance and housing fund contributions for employees, offers free entry medicalexaminations, free work meals, holiday allowances, birthday cakes, etc. Annual salaryincreases are determined based on market benchmarks and the company's salary range,while annual bonuses are distributed based on company performance and individualachievements. The fair, reasonable, and competitive compensation system aims to attractand retain outstanding talents, provide employees with a sense of belonging and identity,motivate their sense of responsibility and enthusiasm, and promote the mutual enhancementof company and employee value.

IX. Profit distribution or capital reserve conversion plan(I) Formulation, implementation or adjustment of cash dividend policy

During the reporting period, there was no adjustment to the company's cash dividendpolicy. The company strictly follows the relevant provisions of the "Articles of Association"and "Shareholder Return Plan for the Next Five Years (2020-2024) ".

(II) Special Notes on Cash Dividend Policy

Does it comply with the provisions of the company's bylaws or requirements set by the shareholders' meeting resolutions?	YES
Are the dividend standards and ratios clear and explicit?	YES
Are the relevant decision-making procedures and mechanisms complete?	YES
Have the independent directors fulfilled their duties and played their expected roles?	YES
Do minority shareholders have sufficient opportunities to express their opinions and demands, and have their legal rights and interests been adequately protected?	YES

(III) If the company has made profits during the reporting period and the parent

company has distributable profits, but no proposed cash dividend distribution

plan has been put forward, the company should provide detailed disclosure of

the reasons as well as the purpose and utilization plan of the undistributed profits

Profit during the reporting period and the parent company’s profit available for shareholders to

Purpose and utilization plan of undistributed profits

distribute is positive, but the reason for not proposing a cash profit distribution plan

During the current year, the company repurchased shares through a centralized bidding process with a total amount of 2 billion yuan. According to the relevant provisions of the "Shanghai Stock Exchange Listed Company Self-discipline Supervision Guidelines No. 7 - Repurchase of Shares, " the above-mentioned amount is treated as equivalent to cash dividends and accounts for over 80% of the net profit. This is in line with the requirements stated in the company's Articles of Association and the company's "Shareholder Return Plan for the Next Five Years (2020-2024)." Considering the significant investment plans and substantial cash expenditures currently undertaken by the company, the board of directors has made a prudent decision. It is proposed not to distribute cash dividends, bonus shares, or carry out capital reserve capitalization, and the undistributed profits will be carried forward to the following year.

The main purpose of the funds is to support the company's ongoing projects, including a 1.6 million tons/year high-performance resin and new materials project, a 300, 000 tons/year adipic acid project for Hengli Chemical's new materials, an 800, 000 tons/year functional film and functional plastics project for Jiangsu Kanghui New Materials, a 600, 000 tons/year BDO and related project, and a lithium battery separator project.

(IV) Profit distribution and conversion of capital reserve into share capital during thereporting period

Unit: hundred million yuan Currency: RMB

Bonus shares for every 10 shares (shares)	0
Dividend per 10 shares (yuan) (tax included)	0
Number of conversions per 10 shares (shares)	0
Cash dividend amount (tax included)	0
Net profit attributable to ordinary shareholders of listed companies in the annual consolidated statement of dividends	23.18
Ratio of net profit attributable to ordinary shareholders of listed companies in the consolidated statements (%)	0
Repurchase of shares in cash is included in the amount of cash dividends	20.00
Total dividend amount (tax included)	20.00
The ratio of the total dividend amount to the net profit attributable to ordinary shareholders of the listed company in the consolidated statement (%)	86

X. The status and impact of the company's equity incentive plan, employee stockownership plan or other employee incentives(I) Relevant incentives have been disclosed in temporary announcements and

there is no progress or change in subsequent implementation

Event	Index
The company's fourth employee stock ownership plan was sold and terminated	For details, please refer to the "Hengli Petrochemical Announcement on the Completion and Termination of the Stock Sale and Termination of the Fourth Phase Employee Stock Ownership Plan" disclosed by the company on the website of the Shanghai Stock Exchange on January 18, 2022 (Announcement No.: 2022-006)

The company's sixth employee stock ownership plan was launched	For details, please refer to the "Hengli Petrochemical Phase Six Employee Stock Ownership Plan (Draft) " and other relevant announcements disclosed by the company on the website of the Shanghai Stock Exchange on March 4, 2022
Part of the lock-up period of the company's fifth employee stock ownership plan expires	For details, please refer to the "Hengli Petrochemical Indicative Announcement Regarding the Expiration of the Partial Share Lock-up Period of the Fifth Employee Stock Ownership Plan" disclosed by the company on the website of the Shanghai Stock Exchange on March 10, 2022 (announcement number: 2022-026)
The company's sixth employee stock ownership plan completed the stock purchase	For details, please refer to the "Hengli Petrochemical Announcement on the Completion of Stock Purchase under the Sixth Employee Stock Ownership Plan" disclosed by the company on the website of the Shanghai Stock Exchange on May 12, 2022 (Announcement No.: 2022-065)
Proposed to change the asset management organization of the third and fifth employee stock ownership plans	For details, please refer to the "Announcement of Hengli Petrochemical on Changing the Asset Management Organization of the Third and Fifth Employee Stock Ownership Plans" disclosed by the company on the website of the Shanghai Stock Exchange on February 18, 2023 (Announcement No.: 2023-003)

(II) The establishment and implementation of the evaluation mechanism for senior

management personnel and the incentive mechanism during the reportingperiodThe company has established a senior management performance evaluation andincentive mechanism, with a compensation and assessment committee under the board ofdirectors. This committee is responsible for studying and formulating the standards andprocedures for evaluating senior management personnel and reviewing their compensationpolicies and plans. The company continuously improves its long-term incentive policiesbased on actual circumstances, aiming to motivate senior management to fulfill theirresponsibilities diligently and responsibly.

XI. Construction and implementation of internal control system during the reportingperiodDuring the reporting period, the company strictly adhered to various laws andregulations, such as the "Company Law, " "Basic Norms for Enterprise Internal Control, ""Listing Rules of the Shanghai Stock Exchange, " and "Self-regulatory Guidelines for ListedCompanies of the Shanghai Stock Exchange - Standard Operations." The company alsofollowed internal control system standards to operate and manage risks effectively. Thecompany established a robust internal control management system, taking into accountindustry characteristics and actual business operations. The internal control system wascontinuously optimized and improved to ensure the lawful and compliant operation andmanagement of the company, asset security, and the accuracy and integrity of financialreporting and related information. These measures aimed to enhance operational efficiency,actual results, and protect the interests of the company and all shareholders.

XII. Management and control over subsidiaries during the reporting period

In compliance with the requirements of the "Company Law, " the company hasestablished and continuously improved a modern corporate system. Through theshareholders' meeting, the board of directors, and the supervisory board, effectivemanagement of subsidiary companies has been implemented. The company has developeda comprehensive management system that covers its major business areas, achieving

institutionalization of management practices. The management system has also beendisseminated to the subsidiary companies, which have formulated their own managementsystems based on it.

XIII. Explanation on the relevant situation of the internal control audit reportAccording to the "Basic Norms for Enterprise Internal Control" and its supportingguidelines, as well as other internal control regulatory requirements, the company, inconjunction with its internal control system and evaluation methods, conducted anassessment of the effectiveness of internal controls as of the benchmark date for the internalcontrol evaluation report. The company prepared the "2022 Annual Internal ControlEvaluation Report" in accordance with the format, content, and requirements specified bythe China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange(SSE).The company engaged an external auditing firm, Zhong Hui Certified PublicAccountants LLP (Special General Partnership), to perform an internal control audit. Theaudit firm issued a standard unqualified opinion in the internal control audit report.Whether to disclose the internal control audit report: YesType of internal control audit report opinion: standard unqualified opinion

XIV. The rectification of problems in the self-examination of the special action of listedcompany governanceDuring the reporting period, there were no significant differences between thecompany's corporate governance status and the relevant regulations of the China SecuritiesRegulatory Commission (CSRC) regarding the governance of listed companies. Thecompany will continue to enhance its corporate governance level and improve itsgovernance framework in accordance with legal regulations and regulatory requirements.This ongoing effort aims to continuously enhance the quality of the listed company.

Chapter 5 Environmental and Social ResponsibilityI. Environmental information

Whether to establish relevant mechanisms for environmental protection	Yes
Investment in environmental protection funds during the reporting period (unit: ten thousand yuan)	24, 776.30

(I) Explanation on the environmental protection status of companies and their majorsubsidiaries that belong to the key pollutant discharge units announced by theenvironmental protection department

1. Sewage Information

The Company pays great heed to environmental protection, and strictly acts upon theEnvironmental Protection Law of the People’s Republic of China, the Law of the People’sRepublic of China on Promoting Clean Production, and the Law of the People’s Republic ofChina on the Prevention and Control of Environmental Pollution by Solid Wastes and otherrelevant laws and regulations. The key pollutant discharging companies and their subsidiariesmainly include Hengli Chemical Fiber, Susheng Thermal Power, Deli Chemical Fiber, HengkeAdvanced Materials, Kanghui New Material, Hengli Petrochemical (Dalian), HengliPetrochemical Refining and Hengli Petrochemical Chemical.During the reporting period, each pollutant discharging subsidiary carried out self-monitoringof their environmental impact and engaged professional third parties to test various pollutantfactors. The test results showed that the emission concentrations of various pollutants were incompliance with national and local pollutant discharge standards and other relevant standards.The total discharge of pollutants is under the required limit as outlined by operation permits. (Dueto the switch between old and new pollutant discharge licenses, there were some changes in theapproved total annual pollutant discharge amount and discharge calculation methods of somekey pollutant discharge subsidiaries.)The specific pollutant discharge is as follows:

1. Hengli Chemical Fiber

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Indirect emissions	1	In the factory area	/	51038	/

GB31572-2015Synthetic ResinIndustrial PollutantDischarge Standard,Wujiang ShengzeWater TreatmentDevelopment Co.,Ltd. TakeoverStandard

Nil

Chemical

oxygendemand

	Chemical oxygen demand				16.67mg/L	0.8492	8.623
	Ammonia nitrogen				0.70mg/L	0.0417	0.675
	Total Phosphorus				0.06mg/L	0.003	0.0684
	Total nitrogen				7.95mg/L	0.5861	5.748
Exhaust gas	Sulfur dioxide	Direct emissions	3		9.137mg/m?	16.04	152.25	GB13271-2014 Boiler Air Pollutant Emission Standard
	Nitrogen oxides				54.317mg/m?	97.517	201.13
	Particles				2.340mg/m?	4.2	30.16
	VOCs		2		0.608mg/m?	0.7417	1.9008	DB32/4041-2021 Comprehensive Discharge Standard of Air Pollutants in Jiangsu Province

2. Susheng Thermal Power

3. Deli Chemical Fiber

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Indirect emissions	1	In the factory area		10733	11000	31962-2015, comprehensive sewage discharge standard GB8978-1996	Nil
Exhaust gas	Sulfur dioxide	Direct emissions	3		5.71 mg/m?	26.056	434.337	Air Pollutant Emission Standards for Coal-fired Power Plants DB32/4148—2021
	Nitrogen oxides				30.91 mg/m?	134.136	868.674
	Particles				1.64 mg/m?	7.185	172.424
	VOCs		2			/	/	DB32/4041-2021 Comprehensive Discharge Standard of Air Pollutants in Jiangsu Province

Typeofpollutant

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste wat	Wastewater volume	Indire	1	In the fact	/	82592.114	105160	GB31572-2015 Synthetic Resin Industrial Pollutant Discharge Standard	Nil
	Chemical oxygen demand				24.528 mg/L	2.025862	42.06

er	Ammonia nitrogen	ct emissions		ory area	0.352mg/L	0.029141	0.601
Exhaust gas	Sulfur dioxide	Direct emissions	3		6.476 mg/m?	1.17683	39.20	GB13271-2014 Boiler Air Pollutant Emission Standard GB16297-1996 comprehensive discharge standard of air pollutants
	Nitrogen oxides				104.78mg/m?	19.99731	33.75
	Particles				2.316 mg/m?	0.42264	6.75
	VOCs		2		/	/	/	GB37822-2019 Volatile Organic Compound Fugitive Emission Control Standard

4. Kanghui New Material

5. Hengke Advanced Materials

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Continuous emission	1	Fence on the south side of the factory area	/	425950	659400	/	Nil
	Chemical oxygen demand				12.8223mg/L	8.471	28.808	Standards in Table 2 of DB21-1627-2008 Liaoning Provincial Comprehensive Wastewater Discharge Standard
	Ammonia nitrogen				0.337 mg/L	0.309	2.9109	Standards in Table 2 of DB21-1627-2008 Liaoning Provincial Comprehensive Wastewater Discharge Standard
Exhaust gas	Sulfur dioxide		1	Factory central chimney	3.16 mg/m?	3.14	20.23	GB31572-2015 Synthetic Resin Industrial Pollutant Discharge Standard
	Nitrogen oxides				28.05 mg/m?	27.278	89.71	GB31572-2015 Synthetic Resin Industrial Pollutant Discharge Standard
	Particles				2.55 mg/m?	27.448	50.59168	GB13271-2014 Boiler Air Pollutant Emission Standard

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Indirect emissions	1	In the factory area	/	940744	/	Sewage discharged into urban sewer water quality standard GB/T 31962-2015, textile dyeing and finishing industry water pollutant discharge standard GB 4287-2012GB 4287-2012, comprehensive sewage discharge standard GB8978-1996, petrochemical industry pollutant discharge standard GB 31571-2015 , Synthetic Resin Industrial Pollutant Discharge Standard GB 31572-2015	Nil
	Chemical oxygen demand				20.66 mg/L	15.2	281.95
	Ammonia nitrogen				1.17 mg/L	0.97	6.05
	Total Phosphorus				0.15 mg/L	0.074	0.92
	Total nitrogen				14.1 mg/L	5.22	6.05
Exhaust gas	Sulfur dioxide	Direct emissions	1		2.04 mg/m3	5	279.51	"Emission Standards of Air Pollutants for Boilers" (DB32/438
	Nitrogen oxides				18.4 mg/m3	8.82	349.39
	Particles				3.59 mg/m3	4.44	52.41

							5—2022), Emission Standards for Industrial Pollutants of Synthetic Resin GB 31572-2015, "Emission Standards for Air Pollutants for Boilers" (DB32/4385—2022), Comprehensive Emission Standards for Air Pollutants DB32/4041—2021 Petrochemical Industry Pollutant Discharge Standard GB 31571 2015, Odor Pollutant Discharge Standard GB14554-93
VOCs		1		2.52 mg/m3	0.66	28.86	DB32/4041-2021 Comprehensive Discharge Standard of Air Pollutants in Jiangsu Province

6. Hengli Petrochemical Refining

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Continuous emission	1	DW001 discharge port	/	2107548.58	/	/	Nil
	Chemical oxygen demand		1		18.65mg/L	39.306	249.23	DB21/1627-2008 Comprehensive Wastewater Discharge Standard
	Ammonia nitrogen		1		0.187mg/L	0.394	19.86	GB31570-2015 Pollutant Discharge Standard for Petroleum Refining Industry
	Total Phosphorus		1		0.223mg/L	0.47	/	GB31570-2015 Pollutant Discharge Standard for Petroleum Refining Industry
	Total nitrogen		1		8.061mg/L	16.988	70.90	DB21/1627-2008 Comprehensive Wastewater Discharge Standard
Exhaust gas	Sulfur dioxide	Organized emissions	16	/	11.214mg/m?	1043.104	2121.7	GB31570-2015 Pollutant Discharge Standard for Petroleum Refining Industry
	Nitrogen oxides		15		30.255mg/m?	2004.638	5064.92	GB31570-2015 Pollutant Discharge Standard for Petroleum Refining Industry

7. Hengli Petrochemical Chemical

Smoke dust		15		0.669mg/m?	96.494	965.78	GB31570-2015 Pollutant Discharge Standard for Petroleum Refining Industry
Non-methane total hydrocarbons		/		/	3224.911	3274.58	/

Typeofpollutant

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Continuous emission	1	DW001 discharge port	/	1701882	/	/	Nil
	Chemical oxygen demand		1		15.766mg/L	26.016	204.3	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
	Ammonia nitrogen		1		0.037mg/L	0.061	32.7	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Total Phosphorus		1		0.116mg/L	0.197	/	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
	Total nitrogen		1		7.488mg/L	12.743	61.3	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
Exhaust gas	Sulfur dioxide	Organized emissions	4	/	4.068mg/m?	37.603	116.5	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Nitrogen oxides		4		43.916mg/m?	423.495	974.4	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Smoke dust		4		1.999mg/m?	7.292	149	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Non-methane		4		9.474mg/m?	239.511	745.6	/

8. Hengli Petrochemical (Dalian)

Type of pollutant	Main Pollutants and Characteristic Pollutants	Emission method	Number of discharge ports	The distribution of discharge ports	Emission Concentration	Total emissions (tons/year)	Approved total emissions (tons/year)	Pollutant Emission Standards Executed	Excessive emission situation
Waste water	Wastewater volume	Continuous emission	1	DW001 discharge port	/	11233566.06	/	/	Nil
	Chemical oxygen demand		1		27.021mg/L	303.542	559	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
	Ammonia nitrogen		1		0.048mg/L	0.539	111.8	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
	Total Phosphorus		1		0.18mg/L	2.3273	/	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
	Total nitrogen		1		8.048mg/L	90.408	239.81	DB21/1627-2008 "Comprehensive Wastewater Discharge Standard"
Exhaust gas	Sulfur dioxide	Organized emissions	2	/	15.193mg/m?	198.177	477.44	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Nitrogen oxides		2		26.470mg/m?	345.05	682.06	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Smoke dust		2		0.891mg/m?	11.611	319.52	GB31571-2015 "Petrochemical Industry Pollutant Discharge Standard"
	Non-methane total hydrocarbo		/		6.593mg/m?	76.843	914.05	/

2. Construction and operation of pollution prevention and control facilities

During the reporting period, the above companies who discharged pollutants all builttheir pollutant control facilities following the requirements for environmental impactassessment of the construction project. Currently, the facilities are under normal operation.The companies carry out daily maintenance of the facilities to ensure their efficient andstable operations of keeping emissions within the standards.

3. Environmental Impact Assessment of Construction Projects and Other

Environmental Protection Administrative Licensing

During the reporting period, the company's construction and renovation projects havebeen accompanied by the preparation of environmental impact assessment reports byrelevant construction units. These reports have received approval from the correspondingecological and environmental departments, granting permission for construction. Variouspollution prevention and control facilities (including those for air, water, noise, and solidwaste classification and disposal) and environmental management during the constructionperiod have been implemented in accordance with the approved content of theenvironmental impact assessment report. The company strictly adheres to the "design,construction, and production simultaneously" system for environmental protection.

4. Emergency plan for environmental emergencies

Company	Emergency plan	Filing party	Filing number
Hengli Chemical Fiber	《Jiangsu Hengli Chemical Fiber Co., Ltd. Emergency plan for environmental emergencies 》	Suzhou Wujiang Ecological Environment Bureau	320509-2022-042-M
Deli Chemical Fiber	《Jiangsu Deli Chemical Fiber Co., Ltd. Emergency plan for environmental emergencies 》	Suqian Sucheng Ecological Environment Bureau	321302-2021-006-L
Susheng Thermal Power	《Suzhou Susheng Thermal Power Co., Ltd. Emergency plan for environmental emergencies 》	Suzhou Wujiang Ecological Environment Bureau	320509-2020-043-M
Kanghui New Material	《Kanghui New Material Technology Co., Ltd. Emergency plan for environmental emergencies 》	Environmental Protection Bureau of Administrative Committee of Xianrendao Economic Development Zone	210881-2021-037-M
Hengke Advanced Materials	《Jiangsu Hengke Advanced Materials Co., Ltd. Contingency plans for environmental emergencies》	Nantong Tongzhou Ecological Environment Bureau	320682-2020-057-M
Hengli Petrochemical Refining	《Hengli Petrochemical (Dalian) Refining Co., Ltd. Emergency plan for	Dalian Wafangdian (Changxing Island Economic Zone)	210281-2021-052-H

ns

	environmental emergencies 》	Ecological Environment Branch
Hengli Petrochemical (Dalian)	《Hengli Petrochemical (Dalian) Co., Ltd. Emergency plan for environmental emergencies 》	Dalian Wafangdian (Changxing Island Economic Zone) Ecological Environment Branch	210281-2022-068-H
Hengli Petrochemical Chemical	《Hengli Petrochemical (Dalian) Chemical Co., Ltd. Emergency plan for environmental emergencies 》	Dalian Wafangdian (Changxing Island Economic Zone) Ecological Environment Branch	210281-2022-069-H

Note:《Jiangsu Hengke Advanced Materials Co. Ltd. Risk Contingency Plan forEnvironmental Emergencies》is in the process of updating.

5. Environmental Self-Monitoring Program

The company's key pollutant-emitting subsidiaries under its jurisdiction have developedenvironmental monitoring plans in accordance with relevant national self-monitoringstandards and environmental management system requirements. These plans aresubmitted to the local environmental regulatory authorities for record-keeping while applyingfor pollutant discharge permits. The company regularly organizes its environmentalmonitoring station to conduct tests on various pollutants emitted from each workshop'sdischarge outlets. For projects where the company lacks testing capabilities, it entrusts third-party institutions with environmental monitoring qualifications to conduct emission testing forspecific pollutants, such as wastewater and exhaust gases. The company assigns dedicatedpersonnel to inspect and aggregate data on various pollutant indicators. Additionally, dataanalysis is performed to provide timely feedback to relevant departments as a basis foradjusting process parameters and ensuring compliance with emission standards. Thissystematic approach ensures that the company achieves standardized emissions.

(II) Measures and effects taken to reduce its carbon emissions during the reporting

period

Whether to take carbon reduction measures	Yes
Reduction of carbon dioxide equivalent emissions (unit: tons)	Not applicable
Types of carbon reduction measures (such as using clean energy to generate electricity, using carbon reduction technologies in the production process, developing and producing new products that help reduce carbon emissions, etc.)	Use carbon reduction technology in the production process, clean energy power generation, research and development of new products that help reduce carbon

Specific notePlease refer to the relevant cases in the "5.3 Resource Conservation" section of thecompany's "2022 Annual Corporate Social Responsibility Report, " which was disclosed onthe SSE website (www.sse.com.cn) on April 28, 2023.

II. Social Responsibility Work Situation(I) Whether to disclose social responsibility report, sustainable development report

or ESG report separatelyThe company has prepared and disclosed its separate Annual Corporate SocialResponsibility Report for the year 2022. For specific details, please refer to the "2022 AnnualCorporate Social Responsibility Report" disclosed by the company on April 28, 2023, on theSSE website (www.sse.com.cn).(II) Specific situation of social responsibility work

External donation, public welfare projects	Quantity/Content	Detail
Total investment (ten thousand yuan)	40	Kanghui New Material donated 200, 000 yuan each to the Bayuquan District Charity Federation of Yingkou City and the Gaizhou New Crown Epidemic Headquarters.
Including: capital (ten thousand yuan)	40
Material discount (ten thousand yuan)	0
Number of people benefited (person)

III. Consolidate and expand the achievements of poverty alleviation and rural

revitalization

Poverty Alleviation and Rural Revitalization Projects	Quantity/Content	Details
Total investment (ten thousand yuan)	53.90
Including: capital (ten thousand yuan)	52.40	Hengli Petrochemical Refining donated 100, 000 yuan to Liaoning Petrochemical Vocational and Technical College; Hengli Futures donated 424, 000 yuan to rural revitalization and poverty alleviation.
Material discount (ten thousand yuan)	1.50	Hengli Futures is a financial institution in response to the call of the Dalian Futures Industry Association to carry out the "New Semester, New School Bags, and Warm Food Plan" for elementary schools in Dalian for 15, 000 yuan.
Number of people benefited (person)
Forms of assistance (such as industrial poverty alleviation, employment poverty alleviation, education poverty alleviation, etc.)	Rural revitalization, education and poverty alleviation

Chapter 6 Important events

I. Appointment and Dismissal of Accounting Firms

Unit: ten thousand yuan Currency: RMB

	Currently employed
Domestic accounting firm name	Zhonghui Certified Public Accountants (Special General Partnership)
Domestic accounting firm remuneration	379
Audit period for domestic accounting firms	4
The name of the certified public accountant of the domestic accounting firm	Han Jian, Fang Sai
Consecutive years of audit services of CPAs of domestic accounting firms	Han Jian (4 years), Fang Sai (1 year)

	Name	Remuneration
Internal control audit accounting firm	Zhonghui Certified Public Accountants (Special General Partnership)	60

II. Major litigation and arbitration mattersNo major litigation and arbitration matters during the reporting period.

III. Significant related party transactions(I) Related party transactions related to daily operations

1. Matters that have been disclosed in the temporary announcement and have no progress or change in subsequent implementation

Matter	Index
Estimated daily related party transactions in 2022	Please refer to the announcement titled "Hengli Petrochemical Announcement on the Expected Situation of Routine Related Party Transactions for the Year 2022" (Announcement No.: 2022-038) disclosed on the SSE website on April 7, 2022 for more details.

(II) Related party transactions in asset or equity acquisition and sale

1. Matters that have been disclosed in the temporary announcement and have no progress or change in subsequent implementation

Matter	Index
Subsidiary companies Jiangsu Xuanda Polymer Materials Co., Ltd. has acquired assets from Nantong Guangzhen Textile Intelligent Technology Co., Ltd., including a building, ongoing construction projects, engineering materials, and the rights to use three industrial land plots located in Wujie Town, Tongzhou District, Nantong City.	Please refer to the announcement titled "Hengli Petrochemical Announcement on Subsidiary's Purchase of Assets and Related Party Transactions" (Announcement No.: 2022-002), disclosed on the SSE website on January 1, 2022.
The company has purchased assets related to an apartment and parking spaces located in Building B of Victoria Plaza in the Donggang Business District of Dalian City, held by Hengli Real Estate (Dalian) Co., Ltd	Please refer to the announcement titled "Hengli Petrochemical Announcement on Purchase of Assets and Related Party Transactions" (Announcement No.: 2022-071), disclosed on the SSE website on June 3, 2022.

(III) Guarantee

Unit: hundred million yuan Currency: RMB

The company's external guarantees (excluding guarantees for subsidiaries)

Guarantor

Guarantor's relationship with the listed company

The party being guaranteed

Guarantee amount

Guarantee date (signing date of the agreement)

Guarantee start date

Guarantee expiry date

Guarantee type

Collateral (if any)

Whether the guarantee has been fulfilled

Whether the guarantee is overdue

Guarantee overdue amount

Counter guarantee

Whether to guarantee for related parties

Relationship with related party

Nil

Total amount of guarantees incurred during the reporting period (excluding guarantees to subsidiaries)

-

Total balance of guarantees at the end of the reporting period (A) (excluding guarantees to subsidiaries)

-

Guarantees provided by the company and subsidiaries to its subsidiaries

Total amount of guarantees for subsidiaries during the reporting period

2, 778.29

Total balance of guarantees to subsidiaries at the end of the reporting period (B)	1, 748.38
Total company guarantees (including guarantees to subsidiaries)
Total Guarantee (A+B)	1, 748.38
The ratio of the total guarantee amount to the company's net assets (%)	330.38
Including:
Amount of guarantee provided for shareholders, actual controllers and their related parties (C)	0
Amount of debt guarantee provided directly or indirectly for guaranteed objects whose asset-liability ratio exceeds 70% (D)	1.00
The amount of the part where the total guarantee exceeds 50% of the net assets (E)	1, 385.81
The total amount of the above three guarantees (C+D+E)	1, 386.81
Explanation on possible joint and several liability for unexpired guarantees
Guarantee information	During the reporting period, the company's guarantees were mutual guarantees between the company and its subsidiaries (sub-subsidiaries).

(IV) Entrusting others to manage cash assets

1. Entrusted financial management

(1) Overall situation of entrusted financial management

Unit: ten thousand yuan Currency: RMB

Type	Source of fund	Amount	Outstanding balance	Overdue uncollected amount
Bank financial management	Self-owned funds	19, 511.00	6, 500.00
Brokerage products	Self-owned funds	34, 985.30	1, 934.90
Others	Self-owned funds	8, 000.00	3, 300.00

(2) Individual entrusted financial management

Unit: ten thousand yuan Currency: RMB

Trustee

Entrusted financial management type

Entrusted financial management amount

Entrusted financial management start date

Entrusted financial management maturity date

Sources of funds

Capital investment

Remuneration determination method

Annualized rate of return

Expected income (if any)

Actual gain or loss

Actual recovery

Whether it has gone through legal procedures

Is there any entrusted financial plan in the future

Amount of provision for impairment (if any)

Rural Commercial Bank

Bank wealth management products

1, 000.00

2022/1/29

2022/2/7

Self-owned funds

2.65%

0.65

Collected

Yes

Rural Commercial Bank

Bank wealth management products

2, 600.00

2022/3/31

2022/4/1

Self-owned funds

2.66%

0.19

Collected

Yes

Bank of China

Bank wealth management products

3, 700.00

2022/6/9

2022/6/17

Self-owned funds

2.64%

2.14

Collected

Yes

Postal Savings Bank

Bank wealth management products

1, 120.00

2022/6/12

2022/6/17

Self-owned funds

1.32%

0.20

Collected

Yes

Industrial Bank

Bank wealth management products

1, 400.00

2022/7/26

2022/9/9

Self-owned funds

3.15%

5.43

Collected

Yes

Zheshang Bank

Bank wealth management products

5, 500.00

2022/12/13

2023/1/4

Self-owned funds

2.30%

0.00

Uncollected

Yes

Bank of Ningbo

Structured deposits

2, 000.00

2021/12/17

2022/12/14

Self-owned funds

3.19%

63.27

Collected

Yes

Bank of Jiangsu

Structured deposits

10, 000.00

2022/2/16

2022/8/16

Self-owned funds

3.45%

171.23

Collected

Yes

Bank of Nanjing

Structured deposits

1, 000.00

2022/3/16

2023/3/15

Self-owned funds

3.00%

0.00

Uncollected

Yes

Guolian Securities

Treasury bond reverse repurchase

15, 115.60

2022/12/21

2022/12/22

Self-owned funds

1.79%

0.74

Collected

Yes

Guolian Securities

Treasury bond reverse repurchase

6, 000.00

2022/12/22

2022/12/26

Self-owned funds

2.20%

1.45

Collected

Yes

Guolian Securities

Treasury bond reverse repurchase

7, 000.00

2022/12/26

2022/12/27

Self-owned funds

4.19%

0.80

Collected

Yes

Guolian Securities

Treasury bond reverse repurchase

8, 521.00

2022/12/23

2022/12/30

Self-owned funds

5.17%

8.45

Collected

Yes

Lianchu Securities

Income certificate

6, 000.00

2022/2/8

2022/12/26

Self-owned funds

3.80%

200.35

Collected

Yes

Guolian Securities

Quote repurchase

4, 004.30

2022/10/10

2022/10/11

Self-owned funds

1.50%

0.16

Collected

Yes

Guolian Securities

Quote repurchase

4, 004.40

2022/10/11

2022/10/12

Self-owned funds

1.50%

0.16

Collected

Yes

Chapter 7 Share Changes and Shareholders

I. Changes in SharesDuring the reporting period, the total number of shares and share capital structure of thecompany remained unchanged.

II. Securities Issuance and Listing(I) Securities issuance as of the reporting period

Unit: share Currency: RMB

Types of stocks and their derivative securities	Issuance date	Issue price (or interest rate)	Issue quantity	Listing date	The number of transactions approved for listing	Transaction end date
Bonds (including corporate bonds, corporate bonds, and non-financial corporate bond financing instruments)
Short-term bond	2022-05-31	3.03%	1.00 billion yuan	2022-06-02		2023-06-01
Short-term bond	2022-07-22	3.18%	1.00 billion yuan	2022-07-26		2023-07-25

Explanation on securities issuance as of the reporting period (for bonds with different interestrates during the duration, please explain separately) :

On November 10, 2021, and November 26, 2021, the company convened the 23rdmeeting of the eighth Board of Directors and the second extraordinary general meeting ofshareholders in 2021. The meetings reviewed and approved the Proposal on Registeringand Issuing Short-Term Financing Bonds, agreeing that the company would apply to theChina Interbank Market Dealers Association to register and issue short-term financing bondswith an amount not exceeding RMB 3 billion (including 3 billion yuan).On March 11, 2022, the company received the Acceptance of Registration Notice(Zhong Shi Xie Zhu [2022] CP14) from the Dealers Association, stating that the DealersAssociation accepted the registration of the company's short-term financing bonds with aregistered amount of 3 billion yuan. The registered quota is valid for a period of 2 years fromthe date of the notice.On May 31, 2022, the company issued the first tranche of short-term financing bondsfor the year 2022 in the national interbank market. The bonds have a maturity of 1 year, witha total issuance amount of 1 billion yuan and an issuance interest rate of 3.03%.

On July 22, 2022, the company issued the second tranche of short-term financing bondsfor the year 2022 in the national interbank market. The bonds have a maturity of 1 year, witha total issuance amount of 1 billion yuan and an issuance interest rate of 3.18%.

III. Shareholders and actual controllers(I) Total number of shareholders

Total number of ordinary shareholders as of the end of the reporting period (accounts)	114, 006
The total number of ordinary shareholders at the end of the previous month before the annual report disclosure date (accounts)	113, 210
Total number of preferred shareholders with voting rights restored as of the end of the reporting period (accounts)	0
The total number of preference shareholders whose voting rights have been restored at the end of the previous month before the annual report disclosure date (accounts)	0

(II) Table of shareholdings of the top ten shareholders and top ten tradable shareholders (or shareholders not subject to sales

restrictions) as of the end of the reporting period

Unit: share

Shareholdings of the top ten shareholders
Shareholder's name (Full name)	Changes during the reporting period	Number of shares held at the end of the period	Ratio (%)	Number of restricted shares held	Pledge, Mark or Freeze Situation		Shareholder nature
					Share status	Quantity
Hengneng Investment (Dalian) Co., Ltd.	0	1, 498, 478, 926	21.29	0	None	0	Domestic non-state-owned legal person
Hengli Group Co., Ltd.	-155, 000, 000	1, 243, 172, 342	17.66	0	Pledged	279, 000, 000	Domestic non-state-owned legal person
Hengli Group - Southwest Securities－21 Hengli E1 Guarantee and Trust Property Account	155, 000, 000	857, 440, 000	12.18	0	None	0	Other
Fan Hongwei	-94, 611, 800	791, 494, 169	11.24	0	None	0	Domestic natural person
Tak Shing Li International Holdings Ltd.	0	732, 711, 668	10.41	0	None	0	Foreign legal person
Hong Kong Securities Clearing Company Limited	-1, 413, 344	117, 237, 227	1.67	0	Unknown	0	Other
Xuanyuan Private Equity Fund Investment Management (Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 16 Private Securities Investment Fund	83, 666, 983	83, 666, 983	1.19	0	None	0	Other
Xuanyuan Private Equity Fund Investment Management (Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 15 Private Securities Investment Fund	75, 124, 294	75, 124, 294	1.07	0	None	0	Other
Dalian State-owned Assets Investment and Operation Group Co., Ltd.	59, 170, 000	68, 898, 123	0.98	0	Pledged	15, 000, 000	State-owned legal entity

Xuanyuan Private Equity Fund Investment Management (Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 17 Private Equity Securities Investment Fund	67, 163, 623	67, 163, 623	0.95	0	None	0	Other
Shareholdings of the top ten shareholders not subject to sales restrictions
Shareholder's name		Number of unrestricted tradable shares held			Share type and quantity
					Type		Quantity
Hengneng Investment (Dalian) Co., Ltd.		1, 498, 478, 926			Renminbi ordinary shares		1, 498, 478, 926
Hengli Group Co., Ltd.		1, 243, 172, 342			Renminbi ordinary shares		1, 243, 172, 342
Hengli Group－Southwest Securities－21 Hengli E1 Guarantee and Trust Property Account		857, 440, 000			Renminbi ordinary shares		857, 440, 000
Fan Hongwei		791, 494, 169			Renminbi ordinary shares		791, 494, 169
Tak Shing Li International Holdings Ltd.		732, 711, 668			Renminbi ordinary shares		732, 711, 668
Hong Kong Securities Clearing Company Limited		117, 237, 227			Renminbi ordinary shares		117, 237, 227
Xuanyuan Private Equity Fund Investment Management (Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 16 Private Securities Investment Fund		83, 666, 983			Renminbi ordinary shares		83, 666, 983
Xuanyuan Private Equity Fund Investment Management (Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 15 Private Securities Investment Fund		75, 124, 294			Renminbi ordinary shares		75, 124, 294
Dalian State-owned Assets Investment and Operation Group Co., Ltd.		68, 898, 123			Renminbi ordinary shares		68, 898, 123
Xuanyuan Private Equity Fund Investment Management (Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 17 Private Equity Securities Investment Fund		67, 163, 623			Renminbi ordinary shares		67, 163, 623
Explanation of the repurchase accounts among the top ten shareholders		As of the end of the reporting period, none of the top ten shareholders had a corporate repurchase account.

Explanation on proxy voting rights, proxy voting rights and waiver of voting rights of the above-mentioned shareholders	When Hengli Group, the controlling shareholder of the company, conducted a non-public issuance of exchangeable corporate bonds, it established a guarantee and trust account through the trustee, using a portion of Hengli Petrochemical's legally owned A-share stocks as collateral and trust property. The account is held in the name of Southwest Securities Co., Ltd. and is registered as the securities holder in the company's shareholder register under the name "Hengli Group-Southwest Securities-21 Hengli E1 Guarantee and Trust Property Account." When exercising voting rights, Southwest Securities Co., Ltd. will act in accordance with the opinions of Hengli Group, while ensuring the interests of the holders of the exchangeable bonds are not compromised.
Explanation on the related relationship or concerted action of the above-mentioned shareholders	Hengli Group, Hengneng Investment, Fan Hongwei and Dechengli are parties acting in concert with each other; the relationship between other shareholders is unknown.
Explanation on preferred stockholders with restored voting rights and the number of shares held	During the reporting period, the company had no preferred shareholders.

IV. Controlling Shareholders and Actual Controllers(I) Controlling Shareholders1 Legal person

Name	Hengli Group Co., Ltd.
The person in charge or legal representative of the entity	Chen Jianhua
Date of establishment	January 16, 2002
Main operating business	Production and sales of needle textiles and paper packaging materials (excluding printing) ; sales of chemical fiber raw materials, plastics, mechanical and electrical equipment, instruments, ash residue, purified terephthalic acid (PTA), and monoethylene glycol (MEG) ; industrial investment; research and development of new textile raw materials products; self-operated and agency import and export of various commodities and technologies; limited branch operations include thermal power generation and steam production and supply. (Business activities in projects that require approval by law can only be conducted after obtaining approvals from relevant departments).
Shareholdings of other domestic and foreign listed companies controlled and participated in during the reporting period	Hengli Group is the controlling shareholder of the listed company Guangdong Songfa Ceramics Co., Ltd. (stock code: 603268) and the listed company Suzhou Wujiang Tongli Lake Tourist Resort Co., Ltd. (stock code: 834199).
Other information	Nil

2 Block diagram of the property rights and control relationship between thecompany and the controlling shareholder

Note :

When calculating the shareholding ratio of the controlling shareholder Hengli Group, thenumber of shares held indirectly through the "Hengli Group-Southwest Securities-21 HengliE1 Guarantee and Trust Property Account" is included.

(II) Actual controller1 Natural person

Name	Chen Jianhua and Fan Hongwei (Spouse)
Nationality	China
Whether to obtain the right of residence in other countries or	Nil

regions
Main occupation and position	Chen Jianhua is the chairman and general manager of Hengli Group Co., Ltd., the controlling shareholder of the listed company; Fan Hongwei is the current chairman of the listed company
Domestic and foreign listed companies that have been controlled in the past 10 years	Chen Jianhua and Fan Hongwei are the actual controllers of the listed company Guangdong Songfa Ceramics Co., Ltd. (stock code: 603268) and the listed company Suzhou Wujiang Tongli Lake Tourist Resort Co., Ltd. (stock code: 834199).

2 Block diagram of the property rights and control relationship between thecompany and the actual controller

V. Other legal person shareholders holding more than 10% of the shares

Unit: ten thousand yuan Currency: RMB

Legal entity shareholder name	The person in charge or legal representative of the entity	Date of establishment	Organization Code	Registered capital	Main operating business or management activities, etc.
Hengneng Investment (Dalian) Co., Ltd.	Fan Hongwei	2014-03-06	912102440890861452	50, 000	Project investment (excluding special approval)
Tak Shing Li International Holdings Ltd.	Fan Hongwei	2003-08-27	Registration number: 859250	500	Mainly engaged in trade and investment business
Other information	Hengneng Investment and Tak Shing Li are persons acting in concert with Hengli Group, the controlling shareholder of the company

VI. Specific implementation of share repurchase during the reporting period

Unit: hundred million yuan Currency: RMB

Name of share repurchase plan	Share repurchase in the third phase
Disclosure time of share repurchase plan	November 6, 2021
The number of shares to be repurchased and the proportion of the total share capital (%)	0.41%
Proposed repurchase amount	5-10
Proposed repurchase period	Within 12 months from the date when the board of directors considers and approves the share repurchase plan (November 5, 2021)
Repurchase purpose	For Employee Stock Ownership Plans
Repurchased quantity (share)	38, 692, 489
Ratio (%) of the repurchased quantity to the underlying stocks involved in the equity incentive plan (if any)	Not applicable
The progress of the company's reduction of repurchased shares by means of centralized bidding transactions	None

Name of share repurchase plan	Share repurchase in the fourth phase
Disclosure time of share repurchase plan	March 10, 2022
The number of shares to be repurchased and the proportion of the total share capital (%)	0.47-0.71
Proposed repurchase amount	10-15
Proposed repurchase period	Within 12 months from the date when the board of directors considers and approves the share repurchase plan (March 9, 2022)
Repurchase purpose	For Employee Stock Ownership Plans
Repurchased quantity (share)	44, 991, 970
Ratio (%) of the repurchased quantity to the underlying stocks involved in the equity incentive plan (if any)	Not applicable
The progress of the company's reduction of repurchased shares by means of centralized bidding transactions	None

Chapter 8 Information of Bonds

I. Corporate bonds, company bonds and non-financial corporate debt financing

instruments

(I) Debt financing instruments for non-financial enterprises in the inter-bank bondmarket

1. Non-financial corporate debt financing instruments

Unit: hundred million yuan Currency: RMB

Bond name

Abbreviation

Code

Issuance date

Value date

Maturity date

Bond balance

Interest rate(%)

Payment of principal and interest

Trading places

Investor Suitability Arrangements (if any)

Trading Mechanism

Whether there is a risk of termination of listing transactions

2022 Phase I Short-term Financing Bonds

22 Hengli Petrochemical CP001

042280254

2022-05-31

2022-06-01

2023-06-01

10

3.03

One-time repayment of principal and interest at maturity

China Interbank Market

No

2022 Phase II Short-Term Financing Bonds

22 Hengli Petrochemical CP002

042280341

2022-07-22

2022-07-25

2023-07-25

10

3.18

One-time repayment of principal and interest at maturity

China Interbank Market

No

2. Intermediaries providing services for bond issuance and duration business

Intermediary name	Office address	Name of Signing Accountant	Contact person	Contact number
China Merchants Bank Co., Ltd.	China Merchants Bank Building, No. 7088 Shennan Avenue, Shenzhen		Sun Ziqi, Guo Wei	0755-88026087 or 0411-39853306
Beijing Tianyuan Law Firm	Floor 10, Block B, Pacific Insurance Building, No. 28 Fengsheng Hutong,		Huang Jingya, Sun Chunyan	010-57763888

	Xicheng District, Beijing
Zhonghui Certified Public Accountants (Special General Partnership)	Room 601, Building A, Hualian Times Building, No. 8 Xinye Road, Jianggan District, Hangzhou	Han Jian, Fang Sai	Han Jian	0571-88879999
Oriental Jincheng International Credit Rating Co., Ltd.	Floor 12, Block C, Zhaotai International Center, No. 3 Chaowai West Street, Chaoyang District, Beijing		Guo Zhebiao	010-62299800

3. Use of raised funds at the end of the reporting period

Unit: hundred million yuan Currency: RMB

Bond name	Total amount of funds raised	Amount used	Unused amount	Operation of special account for raised funds (if any)	Rectification of illegal use of raised funds (if any)	Whether it is consistent with the purpose, use plan and other agreements promised in the prospectus
22 Hengli Petrochemical CP001	10	10	0			Yes
22 Hengli Petrochemical CP002	10	10	0			yes

(II) Accounting Data and Financial Indicators of the Company in the Previous Two

Years by the End of the Reporting Period

Unit: ten thousand yuan Currency: RMB

Key indicators	2022	2021	YOY changes(%)	Reason of changes
Net profit excluding extraordinary profit and loss	104, 528.51	1, 452, 069.80	-92.80
Current ratio	0.61	0.67	-8.96
Quick ratio	0.25	0.24	4.17
Debt-to-assets ratio (%)	78.08	72.75	5.33
Total debt-to-EBITDA ratio	0.09	0.22	-58.92
Interest coverage ratio	1.36	4.93	-72.41
Cash flow interest coverage ratio	5.94	4.73	25.58
EBITDA-to-interest coverage ratio	3.20	6.74	-52.52
Loan repayment rate (%)	100.00	100.00
Interest coverage rate (%)	100.00	100.00