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Hengl
    iPet
       rochemi
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               Co.
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                   d.
                            Focusoni
                                   nnovat
                                        iv
                                         enatur
                                              e
              tAbr
                 idgement          bui
                                     ldabett
                                           erli
                                              f
                                              e
           Letter to shareholders, partners and employees
Dear shareholders, partners and employees:
     The passing years never linger, yet our
original aspirations endure. As seasons flow and
another year dawns, we are reminded that 'there is
no winter that cannot be surpassed, and no spring
that will not arrive.' Through arduous trials and
overcoming countless obstacles, we have braved
challenges and surmounted difficulties, once again
reuniting amidst this radiant springtime.
     In the past year, our nation and homeland face great challengs. Geopolitical complexities
persist, global economy remains sluggish, and external circumstances have been tempestuous,
surpassing anticipated risks and challenges. Guided by the central leadership under the core of
Comrade Xi Jinping, the Party has steered the course, leading the entire nation to vigorously
accomplish the demanding tasks of reform, development, and stability, striving to turn the tide.
     During this year, Hengli Petrochemical has also weathered numerous tests in its operations.
Crude oil prices soared and fluctuated dramatically, while the end-market witnessed weak
consumer demand and insufficient needs. The industry as a whole endured operational pressures
arising from narrowed price differentials and the inability to shift costs. In the latter half of the year,
the company's operational performance declined alongside industry fluctuations, resulting in
losses. Confronted with formidable challenges, we have cut through thickets and advanced
toward the light, steadfastly growing amidst tremendous changes and uncertainty, resolute in our
forward pursuit.
     "We venture into the most difficult challenges and strive for the farthest goals." Despite
the tremendous difficulties faced in 2022, we confronted them head-on and achieved some small
accomplishments. In terms of production and operation, we have implemented the "Dual
Excellence Strategy" of strengthening production management, optimizing production processes,
enhancing new product development, and optimizing product structure, resulting in improved
quantity and quality. In terms of industrial layout, we have relied on the integrated industrial system
of "oil, coal, and chemicals" and leveraged the accumulated research and development in "new
materials" in downstream sectors such as "fiber, membrane, and plastics" to consolidate our core
business and strengthen the foundations for future development. In terms of capital operation, we
have excavated highlights, extracted value, and comprehensively and vigorously promoted
investment and market value management through various channels and forms, yielding
noticeable results. In terms of safety and environmental protection, we have remained committed
to green and low-carbon development, and our efforts have been recognized with multiple
honors, including being awarded the national-level "Green Factory" and "National Low-Carbon
Enterprise in the Textile Industry".
     Within the realm of life and the world, the path is long and perilous. Standing at another
historical juncture, we feel the howling winds of a century of upheaval: Geopolitical conflicts show
no signs of abating, inflation reaches historic highs in Europe and America, and the "triple
pressure" of shrinking demand, supply shocks, and weakening expectations remains heavy.
Tearing apart and integrating, upheaval and reconstruction, all indicate that this year may yet be an
extraordinary one. Undoubtedly, the recovery of demand cannot happen overnight, and the
economic revival may be a lengthy healing process.
     With hope in our hearts and stars in our sights, despite the immense uncertainty that lies
ahead and the potential for unexpected factors to disrupt, we, united as one with our country and
homeland, will navigate through treacherous waters and embark on an era of vast possibilities
with tremendous resilience. We will continue to uphold the patience and determination to fight a
tough battle, with the resolve and conviction to achieve victory, and address the essential
questions that belong to Hengli people.
     Strength in action leads to greater progress, and deep understanding leads to more effective
action. Regardless of the ever-changing world, we remain steadfast and unwavering. Hengli
continues to be a company that perseveres through hard work and steadfast dedication, and
Hengli people remain pioneers who willingly explore and firmly believe that even a tiny stream can
break through towering cliffs. With an unwavering commitment to our original aspirations and
unwavering determination, in the new year, we will continue to focus on "one goal, two strategic
implementations, three fundamental foundations, four key industries, and six comprehensive
systems, " upholding our craftsmanship spirit and striving for upward advancement.
    After enduring hardships, the mountains and rivers regain their radiance. Each trial and
tribulation, each callus and scar left behind from countless storms and tempests, is a testament to
our growth and a gift from time. Recognizing our inadequacies, we forge ahead, gazing at distant
mountains while taking determined steps. We are more acutely aware that only by "putting forth
efforts that are no less than anyone else's" and courageously advancing can we persist amidst the
storms and flourish.
    Catching up with a great era, the grand journey of Chinese-style modernization has begun.
Achieving grand visions and far-reaching goals requires passing through obstacles together with
millions of like-minded individuals and the diligent perseverance of countless unsung heroes. Each
one of us is both a witness and a participant.
    "With a heart reaching beyond the sky and a body committed to the present." The stars will
not disappoint those who strive forward. We believe that the journey we embark on will not be in
vain! The winds and waves will carry us forward, and we will meet again in the vast blue expanse,
farther and wider than ever before!
                                                                 Chairman:
                                                     Content
                         Financial statements signed and sealed by the legal representative,
                         person in charge of accounting, and person in
                         charge of the accounting organization (accounting supervisor).
Reference File Directory 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 Definitions
I. Definition
In this report, the terms listed below are defined as follows, unless the context otherwise
implies:
 Definition of Frequently-Used Terms
 Reporting Period              Refer to    From 1/1/2022 to 31/12/2022
 Company, the Company,         Refer to    Hengli Petrochemical Co., Ltd.
 or Hengli Petrochemical
 CSRC                          Refer to    China Securities Regulatory Commission
 Ministry of Industry and      Refer to    Ministry of Industry and Information Technology of the
 Information Technology                    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                  Refer to    ¡¶Hengli Petrochemical Co., Ltd. Articles of Association¡·
 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              Refer to     Jiangsu Hengke Advanced Materials Co. Ltd., subsidiary
 Materials                                 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         Refer to     Hengli Petrochemical (Dalian) Chemical Co., Ltd.,
 Chemical                                  subsidiary to the listed company
 Hengli Investment            Refer to     Hengli Investment (Dalian) Co., Ltd., subsidiary to the
                                           listed company
 Hengli Petrochemical         Refer to     Hengli Petrochemical (Dalian) Co., Ltd., subsidiary to the
 (Dalian)                                  Hengneng Investment, sub-subsidiary to the listed
                                           company
Hengli Petrochemical        Refer to    Hengli Petrochemical (Huizhou) Co., Ltd., subsidiary to
(Huizhou)                               the Hengneng Investment, sub-subsidiary to the listed
                                        company
Hengli Petrochemical        Refer to    Hengli Petrochemical (Dalian) Refining Co., Ltd.,
Refining                                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                    Refer to    It is white crystal or powder at normal temperature, non-
TEREPHTHALIC ACID                       toxic, flammable, if mixed with air within a certain limit, it
(PTA)                                   will burn when exposed to fire.
METHYLENE GLYCOL            Refer to    Colorless, odorless, sweet, viscous liquid, mainly used in
(MEG OR EG)                             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   Refer to    Polyethylene terephthalate (referred to as polyester) is a
or PET                                  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                 Refer to    Also known as polytetramethylene terephthalate, it is a
Terephthalate (PBT),                     condensation polymer of terephthalic acid and 1, 4-
PBT                                      butanediol. It can be obtained by polycondensation
                                         through transesterification or direct esterification.
                                         Together, PBT and PET are known as thermoplastic
                                         polyesters.
Biaxially-Oriented           Refer to    Biaxially-Oriented Polyethylene Terephthalate (BOPET)
Polyethylene                             has the characteristics of high strength, good rigidity,
Terephthalate (BOPET),                   transparency, high gloss, excellent wear resistance,
BOPET                                    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      Refer to    Filament with a length of more than one kilometer, the
(PFY)                                    filament is wound into a ball.
PFY for Civil Use, Textile   Refer to    Polyester Filament Yarn (PFY) for apparel or home
Yarn                                     textiles.
PFY for Industrial Use,      Refer to    It is a polyester long fiber with high strength, high modulus
Industrial Yarn                          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
 name FULL DRAWN YARN, is a synthetic fiber filament
 further prepared by spinning and drawing process. The
 fiber has been fully drawn and can be directly used for
 textile processing.
         Chapter 2 Company Profile and Key Financial Indicators
I.      Company information
Company's Chinese Name                     ºãÁ¦Ê¯»¯¹É·ÝÓÐÏÞ¹«Ë¾
Abbreviation of Chinese Name               ºãÁ¦Ê¯»¯
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   Floor 31, Building B, Victoria Plaza, No.     Floor 31, Building B, Victoria Plaza, No. 52
address   52 Gangxing Road, Renmin Road Street,         Gangxing Road, Renmin Road Street,
          Zhongshan District, Dalian City, Liaoning     Zhongshan District, Dalian City, Liaoning
          Province                                      Province
Telephone 0411-39865111                                 0411-39865111
Fax       0411-39901222                                 0411-39901222
E-mail                                                  wangshan@hengli.com
          lifeng@hengli.com
                                                        duanmengyuan@hengli.com
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         116001
Company's business
address
Company website            hengliinc.com
E-mail                     hlzq@hengli.com
IV.    Information disclosure and location
Media name and website of the Company¡¯s       China Securities Journal, Shanghai Securities
annual report disclosure                      News, Securities Times, Securities Daily
Website of the stock exchange where the       www.sse.com.cn
company discloses the annual report
The place where the Company's annual          Office of the Company's board of directors
report is ready for inspection
V.      Company stock profile
                                       Company stock profile
     Stock category   Stock exchange    Stock abbreviation       Stock code       Stock abbreviation
                                                                                    before change
       A shares       Shanghai Stock           Hengli              600346            Hengli Stock
                        Exchange           Petrochemical
VI.   Other relevant information
                           Name                Zhonghui Certified Public Accountants (Special
                                               General Partnership)
 Accounting firm           Office address      Room 601, Building A, Hualian Times Building, No. 8
 engaged by the                                Xinye Road, Jianggan District, Hangzhou
 Company (Domestic)        Name of             Han Jian, Fang Sai
                           signing
                           accountant
VII. Key accounting data and financial indicators in the past three years
(I) Key Accounting Data
                                                Unit: ten thousand yuan Currency: RMB
                                                                     Increase/decre
 Key Accounting Data            2022                 2021                                    2020
                                                                         ase (%)
 Revenue from
 operations
 Net profit attributable
 to shareholders of            231, 830.32       1, 553, 107.67              -85.07       1, 346, 178.57
 listed company
 Net profit attributable
 to shareholders of
 listed company after
 deduction of non-
 recurring gains and
 losses
 Net cash flows from
 operating activities
 Net assets
 attributable to
 shareholders of listed
 company
 Total assets              24, 143, 047.46     21, 029, 622.56                14.80      19, 102, 872.66
(II) Key Financial Indicators
                                                                     Increase/decrease
      Key Accounting Data               2022                2021                               2020
                                                                            (%)
 Basic earnings per share
 (Yuan/Share)
 Diluted earnings per share
 (Yuan/Share)
 Basic earnings per share after
 deducting non-recurring gains                0.15            2.07              -92.75               1.83
 and losses (Yuan/Share)
 Weighted average return on                                          Reduced by 25.77
 equity (%)                                                          percentage points
 Weighted average return on                                          Reduced by 26.17
 equity after deducting non-                  1.94           28.11   percentage points              31.13
 recurring gains and losses (%)
Note of the key accounting data and financial indicators of the company in the prior three
years at the end of the reporting period
During the Reporting Period, the prices of crude oil and other major raw materials rose
rapidly and oscillated at high levels and in a wide range. The prices of products near crude
oil also rose sharply due to the impact of crude oil prices. At the same time, the traditional
demand 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 low
market level. The weak recovery of market demand in the industry, the delayed transmission
of upstream and downstream product prices, and the company's double operating squeeze
of historically high operating costs and low industry demand are the main reasons for the
company's revenue from operations growth but profit decline. Secondly, the company
implemented a refinery overhaul in the second half of 2022, which affected the overall load
rate and processing cost level of the refining and chemical integration unit, and in
accordance with the requirements of accounting standards, the inventory loss caused by
the periodic decline in the international crude oil price has been accounted for, which has
further affected the company's annual profitability.
VIII. Main financial data by quarter in 2022
                                                                Unit: ten thousand yuan Currency: RMB
                                  First quarter          Second            Third quarter        Fourth quarter
                                  (January to         Quarter (April-          (July-             (October-
                                     March)               June)             September)           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              422, 268.92             380, 346.92        -193, 946.96      -376, 838.56
 company
 Net profit attributable to
 shareholders of listed
 company after deducting             411, 359.48             330, 324.85        -262, 602.68      -374, 553.14
 non-recurring gains and
 losses
 Net cash flows from
 operating activities
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,         1, 788,        -2, 353,
 Government subsidies included in the current
 profit and loss, except for government subsidies
 that are closely related to the company's normal                1, 594, 250,       760, 570,      937, 331,
 business operations, comply with national policies                   334.30          495.82         851.91
 and regulations, and are continuously enjoyed in
 accordance with certain standards or quantities
 Gain on investment costs in acquisition of
 subsidiaries, associates and joint venture less                    79, 415,
 than the fair value of identifiable net assets of the               493.16
 investees
 Except for the effective hedging business related
 to the Company's normal business operations,
                                                                    -46, 001,       375, 366,     -158, 168,
 income from the holding of trading financial
 assets, Derivative financial assets, Trading
 financial liabilities, and derivative financial
 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,         -5, 096,     -11, 127,
 Other gain or loss items met the definition of non-                                45, 080,       1, 561,
 recurring item                                                                      477.29        440.57
 Less: Impact on income tax                                       360, 240,        183, 394,     200, 533,
 Impact on minority interests (after tax)                                          -16, 064,     -20, 752,
                         Total
X. Items measured at fair value
                                                             Unit: ten thousand yuan Currency: RMB
                                                                                          Impact on profit
                                 Beginning          Closing         Changes in the
           Item                                                                            for the current
                                  balance           balance            period
                                                                                                period
 Derivative financial                                                                            45, 675.63
 assets
 Derivative financial                                                                          -50, 022.39
 liabilities
 Wealth management                                                                                 243.05
 products and structured           2, 000.00          6, 500.00               4, 500.00
 deposits
 Receivable financing            341, 995.77       228, 727.12          -113, 268.65                     -
 Fund trust and asset                                                                              -150.78
 management products
 Treasury bond reverse                                                                               59.41
 repurchase
             Total               469, 613.63       325, 305.54          -144, 308.09            -4, 195.08
            Chapter 3 Management Discussion and Analysis
I. Business discussion and analysis
     In 2022, under the impact of complex geopolitical conflicts, deep adjustments in global
supply 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. Weaker
global economic fundamentals further intensified financial market volatility, prompting
central 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 and
developing economies took a more aggressive stance in raising interest rates, greatly
weighing down their economic growth. The global economic growth rate significantly
declined in 2022, and the divergence in the recovery became more pronounced. As
geopolitical influences deepen, the subsequent effects of rapid interest rate hikes by major
central banks, and inflationary pressures, the world economy may face even greater
challenges in its recovery in 2023. The International Monetary Fund predicts a global
economic growth rate of only 2.9% in 2023.
     From a domestic perspective, "China's economy maintains strong resilience, has great
potential, and remains vibrant, with the long-term positive fundamentals unchanged." Faced
with a complex and challenging situation, China adheres to the principle of seeking progress
while maintaining stability, efficiently coordinates economic and social development, and has
achieved positive results, stabilizing the overall macroeconomic situation. In 2022, China's
gross domestic product (GDP) reached 121.02 trillion yuan, an increase of 3.0% compared
to 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 its
development foundation. However, despite this, the international situation remains complex
and challenging, and the Chinese economy still faces significant "contractions in demand,
supply shocks, and weakened expectations, " with a fragile foundation for economic
recovery. In 2023, the Central Economic Work Conference made it clear that it will adhere
to the principle of seeking progress while maintaining stability, vigorously boost market
confidence, emphasize stable growth, employment, and prices, promote overall
improvement in economic performance, and strive for qualitative and quantitative
improvements. "Placing the restoration and expansion of consumption in a prioritized
position, " adopting multiple measures to promote stable consumption growth, enhance
residents' consumption capacity, improve the consumption environment, and cultivate new
drivers of consumption growth. "Persisting in making the focus of economic development on
the real economy and promoting new industrialization." Cultivating and expanding emerging
industries, continuously focusing on key areas such as 5G, artificial intelligence,
biomanufacturing, industrial internet, intelligent connected vehicles, green and low-carbon
sectors, and constantly enriching and expanding new application scenarios.
     In our industry, in 2022, affected by the slowdown in macroeconomic growth, rising
energy 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 major
energy sources such as crude oil and natural gas have increased production costs for
enterprises. 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-year
increase 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 demand
and ineffective price transmission between upstream and downstream products have led to
lower product price increases compared to upstream raw materials, further squeezing
enterprise profit margins. In the aromatics-PTA-polyester fiber industry chain, downstream
textile and apparel are important terminal consumer markets. In 2022, due to factors such
as slowing growth in household income and slow recovery of consumption scenarios, the
domestic consumer market faced pressure, and domestic demand for textile and apparel
products was insufficient. Although export volumes reached new highs, export growth rates
declined month by month in the second half of the year. According to data from the National
Bureau of Statistics, the retail sales of apparel, shoes, hats, and textiles above the quota
nationwide decreased by 6.5% compared to the previous year, and the growth rate has
remained negative since March. Insufficient downstream demand for textile and apparel
products led to a general decline in the operating rates of major industries in the chemical
fiber downstream, compared to the same period in 2021. In the olefin chemical industry
chain, real estate and infrastructure, as important terminal consumer markets, bear
enormous consumption volumes. Due to multiple factors, the deep adjustment trend in the
real estate market continued in 2022. Data from the National Bureau of Statistics shows that
nationwide real estate development investment decreased by 10.0% compared to the
previous year.
      Against the backdrop of high and volatile crude oil and natural gas prices, prices of
products closer to crude oil have also risen significantly, influenced by crude oil prices. On
the other hand, the prices of chemical products closer to the consumer end depend more
on their own supply and demand dynamics. According to data from the National Bureau of
Statistics, 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 negative
growth. In the face of a turbulent external environment, the integrated operation of high
value-added and multi-variety industrial chains and the supply composition of products
highlight the industry's prominent risk resistance and profit capturing capabilities in the face
of high oil price volatility and market fluctuations.
      Year 2023 is the starting year for comprehensively implementing the spirit of the 20th
National Congress of the Communist Party of China and a crucial year for carrying forward
the goals set in the 14th Five-Year Plan. "High-quality development is the primary task for
building a socialist modern country." The new generation of information technology and new
materials serve as the two fundamental technologies of the manufacturing industry, with
new materials being the cornerstone of upgrading traditional industries and developing
strategic emerging industries. The chemical new materials industry is an important basic
material for strategic fields such as new energy, high-end equipment, green environmental
protection, and biotechnology. In recent years, driven by the implementation of the domestic
"dual carbon" strategy, the green transformation and upgrading of the national industry, and
changes in consumption patterns, the demand for upstream chemical new materials has
continued 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 Hengli
Group, have implemented fully integrated development of the entire industry chain, relying
on a rich portfolio of basic chemical raw materials from integrated refining and petrochemical
projects. They have extended their presence into downstream new materials fields such as
high-end polyolefins, lithium battery materials, engineering plastics, and petroleum-based
degradable plastics. By increasing value-added and internally consuming intermediate
products, these companies effectively buffer the intense homogenized competition and
structural imbalances in high-end scarcity in the upstream sector, aiming to achieve
secondary 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 the
innovation chain. The company has focused on "supply chain enhancement and research
and development innovation." Building upon the advantageous integration of "oil, coal, and
chemicals" in the deep integration of the "large-scale chemical platform, " and relying on fine
chemical park projects, the company has accelerated the development of a high-end fine
chemical industry cluster. This aims to further expand the industry's support and
development foundation for high-end chemical raw materials, solidify the role and
operational efficiency of the upstream "large-scale chemical" platform. Targeting new
directions and markets in downstream polyester and polyesters, as well as fine chemicals
and specialty new materials in the olefin downstream sector, the company aims to
consolidate its traditional market advantages, benchmark breakthroughs in key new
materials 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 tracks
with high technological barriers and high added value, actively constructing an ecological
circle 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 of
historically high operating costs and low industry demand in a challenging economic
environment and a complex and volatile market situation. As a result, the company
experienced a significant decline in profitability. The company achieved operating income of
shareholders of the listed company of 2.318 billion yuan, a decrease of 85.07% compared
to the same period last year. The decline in profit was mainly due to the rapid and volatile
increase in prices of major raw materials such as crude oil, coupled with weak recovery in
industry market demand. The company faced the dual operational squeeze of historically
high operating costs and low industry demand. The company's main products, such as
chemical products, functional films, civilian silk, industrial silk, and others related to
traditional demand in end-consumption and infrastructure construction, were at a low level
in the market, putting pressure on the company's profitability. In the second half of 2022, the
company implemented a major overhaul of its refinery, which affected the overall load rate
and processing cost level of its integrated refining and petrochemical units. The company
also made provisions in accordance with accounting standards for inventory losses caused
by the temporary downward trend in international crude oil prices, further impacting the
company's annual profitability.
      Despite the extremely challenging external environment in 2022, under the correct
leadership of the Board of Directors, the company's management actively sought certainty
amid uncertainty, maintained composure, and sought steady progress. Through overall
coordination and actively eliminating environmental factors, the company efficiently and
rapidly 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, actively
promoted green and low-carbon transformation, and achieved efficient operations with high
standards, green practices, and environmental protection. The company also strengthened
its risk control, refined management, and flexible operational capabilities, controlled costs
while increasing efficiency, and maximized the stability and efficiency of production and
operations.
      During the reporting period, the company's key operational highlights are as follows:
      I. Steady operations, flexible management, and strengthened fine management
level and cost advantage, striving to achieve overall maximization of benefits.
      During the reporting period, faced with a complex market environment, the company
fully leveraged the unique advantages of Hengli's quality and speed in maximizing profits
through "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 the
efficient 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 process
advantages of refining, ethylene, and integrated coal chemical units, continuously optimized
unit operations, timely adjusted product structures based on fluctuations in raw material
prices and market demand trends, and organized production according to the principle of
maximizing benefits, achieving a balance between production and sales, smooth operations,
and maximized efficiency.
      During the reporting period, the company continued to strengthen fine management
and explore potential for quality improvement and efficiency enhancement. By carefully
calculating production needs, analyzing raw material trends and market conditions,
optimizing procurement plans, and properly controlling raw material inventory, the company
achieved the best matching of raw material inventory, processing units, and product
structures, while simultaneously focusing on risk prevention and efficiency improvement. In
equipment management, the company diligently implemented daily equipment maintenance
and repair, addressing any issues promptly and ensuring the long-term stable operation of
production units. Spare parts management was strengthened, and spare parts were
procured in the most economical and reasonable quantities and batches while meeting the
requirements for equipment maintenance and repair. Common supplies were shared to
reduce 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 and
efficiency improvement.
     II. Efficient and rapid progress in key project construction, solid acceleration of
the layout in the new materials and new energy industries, accumulating momentum
for promoting high-quality development.
chemical" platform and leveraging years of experience in new material development, the
company accelerated the layout of downstream high-end chemical new material production
capacity, optimized the raw material supply structure of the "mega-chemical" platform,
continuously expanded the industrial chain, and improved scarce capacity. The progress of
major 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 includes
(PC) downstream. This project achieves efficient penetration and deep integration from raw
material supply to process technology to the consumer market, further consolidating the
synergy and industrial depth of the listed company's chemical new materials business
segment 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, the
project will further integrate and improve the company's fully degradable new material
industry chain from "crude oil-PTA, adipic acid-PBAT." Adipic acid is also an important raw
material for the production of nylon 66 and the purification of carbon dioxide emissions from
low-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's
benefits.
      (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. The
project mainly includes 411,600 tons/year BDO, 60,000 tons/year PTMEG, 100,000
tons/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.
new material production capacity and industrial competitiveness, the company relies on
Hengli's research and development efficiency and the upstream "mega-chemical" platform
support to further develop and expand emerging market demands and business areas such
as PBS/PBAT degradable new materials, high-performance industrial fibers, high-end
polyester films, lithium battery separators, electrolytes, PET copper foils, and solar
photovoltaic 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 polyester
films, 100,000 tons of specialty functional films, 150,000 tons of modified PBT, and 80,000
tons of modified PBAT. This project is expected to commence production gradually in the
first 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 capacity
and scale in the degradable new materials sector, and increasing its market share in
degradable 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, 150,000
tons/year environmentally friendly fibers, 300,000 tons/year cationic POY, 300,000 tons/year
fully dull POY, and 600,000 tons/year differentiated fibers (300,000 tons/year POY, 300,000
tons/year FDY). Currently, the production of 150,000 tons/year elastic fibers, 150,000
tons/year environmentally friendly fibers, and 250,000 tons/year fully dull POY has been
successfully completed, achieving breakthroughs in differentiated polyester production.
capacity of 440 million square meters of high-performance wet-process lithium battery
separators (including 220 million square meters of coated separators), with the first
production 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 battery
separators and 600 million square meters of dry-process lithium battery separators. The
project is progressing in an orderly manner, and gradual production is expected in the first
quarter of 2024.
     III. Innovation-driven efficiency and gains, continuous promotion of digital
transformation, and the creation of a powerful development "engine."
     In recent years, the company has implemented the "end-to-end bidirectional quality
management model, " establishing an integrated technology innovation system throughout
the upstream and downstream sectors, overcoming numerous bottleneck technologies, and
acquiring a significant number of core patents both domestically and internationally. These
efforts have facilitated the transformation and application of scientific and technological
achievements in production. During the reporting period, the company's research and
development investment amounted to 1, 184.71 million yuan, representing a year-on-year
growth of 16.21%. As of December 31, 2022, the company has accumulated a total of 1,
the reporting period.
     Leveraging its advantages in raw materials, the company continuously enhances the
research and development attributes, technological content, and technical weight of the
polyester new materials business segment. This further increases the added value of
downstream new material products and upgrades the product structure of the polyester new
materials business segment. As for polyester fibers, the company persistently develops in
the direction of refinement, differentiation, high-end, and high-quality. For instance, Deli
Chemical Fiber, adhering to the concept of "achieving the utmost in a single strand, " has
excelled in the field of ultrafine fibers, becoming the first in China to achieve large-scale
production 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, breaking
through technological bottlenecks. During the reporting period, Deli Chemical Fiber was
awarded the title of "National Intellectual Property Advantage Enterprise, " becoming the
second subsidiary of the listed company to receive national recognition for its intellectual
property efforts.
     In the field of chemical new materials, the company aims at the application demands
for new materials generated by the integration of new consumption, new energy, and new
manufacturing in China. During the reporting period, Kanghui New Materials independently
developed PET composite film for copper foil/aluminum foil has been validated by
downstream battery factories, enabling mass production. The independently developed
solar 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 steadily
increased. The release liner film product for LCD polarizing films has also achieved mass
production, ensuring stable production of conventional and wide-width liner films.
Furthermore, a significant breakthrough has been made in low-tilt angle polarizing film
release liners, successfully replacing imports and becoming the first Chinese enterprise to
pass 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 equipped
with fully automated equipment throughout the production process. Through the
establishment 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 Materials
has also established a factory-level industrial Internet, achieving 100% equipment
connectivity. The intelligent factory, through the integration and interconnection of intelligent
equipment and software-level basic networks, achieves centralized control and intelligent
production throughout the process, maximizing the efficiency of raw materials, equipment,
and human resources. In 2022, Hengke Advanced Materials was awarded the "Jiangsu
Province Intelligent Factory" title. Hengli Refining & Chemical vigorously promotes intelligent
management, implements advanced process control (APC) projects, and achieves on-edge
operation of key parameters based on stable plant production. By utilizing Petrosim process
simulation software, it assists in problem-solving and provides robust data support for
optimizing company benefits.
     IV. Continuously strengthening the foundation of safety and environmental
protection, reducing pollution and carbon emissions, and promoting coordinated
efficiency to achieve high standards, green, and environmentally friendly operations.
     Based on high starting points in design planning, construction, operation, and detailed
management, the company practices high standards of inherent safety and green, low-
carbon operations, which serve as the lifeline, efficiency line, and scenic line for promoting
stable, efficient, and sustainable development of the listed company.
     The company adheres to the principle of "safety first, prevention-oriented, and
comprehensive management" to enhance the level of inherent safety and establish a solid
defense line for safety production. It comprehensively implements the responsibility of
enterprise safety, signing responsibility agreements at all levels, ensuring that responsibility
is implemented at the workshop, team, and individual levels, forming a safety production
responsibility system that extends horizontally and vertically. The company improves safety
regulations and systems, conducts self-assessment based on updated HSE standards and
specifications, analyzes policy guidance, and timely revises and improves the company's
HSE system. It strengthens employee safety skill training to enhance compliance with safety
regulations. It strengthens process control in key areas, risk control in operations, conducts
safety hazard investigations and rectification, emergency drills, enhances risk prevention
and control capabilities, eliminates various major safety risks, visualizes inherent and
residual risks, and ensures the safe operation of employees and production facilities.
     The company firmly implements the concept of green development, consistently
pursuing high-quality and low-carbon energy-saving development, reducing pollution, and
carbon emissions, and promoting coordinated efficiency to transform environmental
advantages into economic benefits. It integrates green development into project design,
process package selection, equipment procurement, installation, and operation, achieving
substantial energy savings. It strengthens the efficient and economical use of energy and
resources, reduces resource and energy consumption through optimizing process
operations, technological innovations, and other multidimensional approaches, improves
energy efficiency, and establishes an integrated upstream and downstream flow, mutual
supply of materials, and energy coupling in the entire industry chain, achieving energy
savings and sustainable development throughout the production process. For example,
Hengli Petrochemical (Dalian) recovers and treats the oxidized residue produced in the
oxidation process of purified terephthalic acid through R2R equipment, recovering valuable
cobalt and manganese catalyst components and benzoic acid, which are returned to the
oxidation unit for recycling, and the generated benzoic acid is sold as a by-product. Hengli
Refining optimizes the operation of the distillation tower by replacing catalysts, increasing
the production capacity of xylene and reducing the comprehensive energy consumption of
the unit. Hengli Chemical's ethylene glycol unit adds a decarbonization tower on the basis
of 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 unit
utilizes a back-pressure turbine unit to utilize surplus high-pressure steam for power
generation, meeting the process requirements while increasing electricity generation by
coal.
      Incremental progress and unwavering dedication are key. Since the introduction of the
"dual carbon" targets, the company has focused on technological innovation and technical
research, continuously working on wastewater recycling, solid waste disposal, cascading
utilization of energy, waste heat utilization, carbon emissions reduction, VOCs management,
and other aspects through equipment upgrades and process improvements, actively
pursuing energy-saving, cost reduction, and efficiency enhancement, yielding certain results.
Hengli Refining, Hengli Chemical, and Hengli Petrochemical (Dalian) were respectively
awarded the "2022 Key Energy Efficiency Leader" champion in the xylene industry, ethylene
industry, and purified terephthalic acid industry, jointly issued by the Ministry of Industry and
Information Technology, the National Development and Reform Commission, and the State
Administration for Market Regulation. Hengli Refining ranked second in energy efficiency as
a "leader" in the crude oil processing industry. At the same time, Hengli Refining and Hengli
Chemical were awarded the "2022 Key Water Efficiency Leader for Enterprises and
Industrial Parks" by the Ministry of Industry and Information Technology, the Ministry of
Water Resources, the National Development and Reform Commission, and the State
Administration for Market Regulation. Hengli Refining and Hengli Chemical topped the water
efficiency index in the petroleum refining industry, coal-to-methanol industry, and ethylene
industry. For example, in the petroleum refining industry, Hengli Refining's unit water intake
was 0.27 m?/t, with a water reuse rate of 98.79%. In the ethylene industry, Hengli Chemical's
unit water intake was 0.43 m?/t, mainly using seawater, with a water reuse rate as high as
      Following Hengli Petrochemical (Dalian), Hengli Petrochemical Refining, Hengke
Advanced Materials, and Hengli Chemical Fiber, Hengli Petrochemical Chemical was
awarded the national-level "Green Factory" title at the beginning of 2023. With this, the
company now has five subsidiaries recognized as national-level "Green Factories".
      In response to the future trend of "carbon neutrality" in industrial development, the listed
company firmly embraces the direction of green and low-carbon development and actively
promotes the transition to green and low-carbon. It vigorously develops green manufacturing,
leveraging distinctive industries to drive innovation and inject robust vitality into the
company's development.
     V. By fully utilizing the capital platform for financing, operations, and incentives,
the listed company is driving standardized and sustainable development.
reporting period, to safeguard the interests of the company and its shareholders, the
company 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 domestic
and international economic conditions in 2022, as well as the irrational downward valuation
of the A-share market, the company consistently fulfilled its market responsibilities towards
all shareholders, especially small and medium shareholders. Through tangible actions, the
company effectively maintained reasonable and stable market value and protected the core
interests of all shareholders. This also fully demonstrates the firm and long-term confidence
of the listed company and its management in the company's operating performance,
strategic development, and investment value.
effectively motivate the management team, core employees, and all staff of the listed
company, and achieve a close integration and mutual promotion of employee value and
corporate value, the company implemented the sixth phase of the employee stock
ownership plan on a larger scale and with a broader range of participants, allowing
employees to share in the company's development achievements.
shareholders, the company completed the annual equity distribution for the year 2021, with
a total cash dividend of 7.109 billion yuan (including taxes). The amount of a single cash
dividend reached a historical high, in line with the company's established "Shareholder
Returns Plan for the Next Five Years (2020-2024) ", which provides shareholders with stable
expectations and mechanisms for returns. This fully reflects the company's business
philosophy of consistently and sustainably rewarding investors.
diversified financing channels, meet the working capital turnover needs of business
operations, and enhance the flexibility of fund management, the company applied to the
China Interbank Market Dealers Association to register for the issuance of short-term
financing bonds with an amount not exceeding 3 billion yuan (inclusive). As of now, the
company 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 of
paraxylene (PX), primarily used to meet the raw material demand of downstream purified
terephthalic acid (PTA) production. Additionally, the company is involved in the production
of high-value and domestically scarce chemical products, such as 1.8 million tons of
ethylene glycol, 400,000 tons of acetic acid, 1.2 million tons of benzene, 850, 000 tons of
polypropylene, 720,000 tons of styrene, 400,000 tons of high-density polyethylene, and 140,
aviation kerosene meeting China VI emission standards. As smaller and outdated refineries
with high production costs are gradually phased out, the industry concentration and the
competitiveness of large-scale new refineries will significantly improve. The company stands
out in terms of policy support, process technology, and industrial synergy. Compared to
other oil refining companies, it has a distinct advantage of high quality and low cost, making
it highly competitive in the market.
      (2) PTA Sector:
      PTA is the direct upstream raw material for polyester production, and China is the
world's largest producer and consumer of PTA. The company currently has a PTA
production capacity of 16.6 million tons per year, making it the largest PTA producer with
the most advanced technology and the most significant cost advantage in the industry. It is
the 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, and
sale 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 company
ranks among the top five in civil filament production capacity nationwide and second in
industrial filament production capacity. It is one of the largest and technologically advanced
manufacturers of polyester filament in China.
      The company's subsidiary, Kanghui New Materials, has an annual production capacity
of 240,000 tons of PBT engineering plastics in its Yingkou base, making it the largest PBT
producer in China. The PBT is mainly used in automotive parts, polymer alloys, optical
cables, 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 optical
equipment, release protection, electronics, automotive decoration, construction, and
packaging. With independently developed technology, the company has the largest
domestic annual production capacity of 33,000 tons of PBAT, which is used in
environmentally friendly applications such as food-grade shopping bags, tableware, and
straws 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. In
Suzhou Fenhu, the construction of a 470,000-ton high-end functional polyester film,
PBAT is underway. Additionally, a 2.6 million-ton high-performance polyester engineering
project and a new lithium battery separator project in Nantong are making efficient and
steady progress. The company possesses strong overall competitiveness in the market.
III. Business situation of the company during the reporting period
      The company's main business encompasses the entire industry chain of refining,
petrochemicals, and polyester new materials, including the production, research, and sales
of PX, acetic acid, PTA, ethylene glycol, polyester chips, civil filament, industrial filament,
functional films, engineering plastics, and PBS/PBAT biodegradable new materials. It is the
first listed company in the industry to achieve integration of the entire industry chain from
crude 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 million
tons of PX and 400,000 tons of acetic acid. In the midstream, it possesses 16.6 million tons
of PTA capacity and 1.8 million tons of fiber-grade ethylene glycol capacity. Some of the
self-produced PTA and ethylene glycol are for internal use, while the remainder is sold
externally. In the downstream segment, the company offers a wide range of chemical new
materials with various product specifications, targeting the medium and high-end market
demand. 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 ethylene
projects in the upstream, as well as the consolidation and expansion of its competitive
advantage in the midstream PTA business and various scarce chemical raw material
products, the company has accelerated the establishment of a "large-scale chemical"
platform to support and complement downstream high-end new materials and fine chemical
industries. This has created a continuous and extended value chain for new material
industries.
IV. Analysis of Core Competitiveness in Reporting Period
     The company is the industry leader in implementing the strategy of full industry chain
development for polyester new materials in China. It actively promotes the coordinated and
balanced development of various business segments and vigorously expands high-end
capacity 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 Hengli
Integrated Refining and Petrochemical Project with an annual capacity of 20 million tons and
the 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. The
company 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, ethylene
glycol-polyester new materials." With the sequential construction and operation of newly
built capacities, such as PTA, chemical new materials, PBS/PBAT biodegradable new
materials, the company continuously upgrades and optimizes its industrial model,
consolidates and expands the advantages of each link's production capacity, promotes the
quantitative change in business scale, and the qualitative change in business structure. It
establishes a strategic leadership advantage in adapting to the high-quality competitive
situation of the industry's full industry chain collaboration, production capacity structure
quality, equipment scale cost, technological process accumulation, project start-up speed,
and the development of listed platforms.
      The company continuously introduces internationally leading production equipment and
mature technology packages, digests, absorbs, and utilizes them, and continuously
innovates and improves technology and processes. It has established a high-quality and
efficient 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, advanced
technology, green and environmental protection, and comprehensive supporting facilities."
Whether it is individual equipment, total production capacity, or production processes, the
company is at the industry's leading processing scale and technological level. This ensures
the 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, including
power supply, energy, ports, terminals, tank farms, storage, and transportation. It stands out
in terms of comprehensive cost savings, service quality performance, and operational
efficiency 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. In
addition, the advantages of raw material and product storage and transportation systems
greatly enhance the operational flexibility and comprehensive cost advantages of projects.
      The company follows a development path that emphasizes market differentiation, high-
end technology, and large-scale facilities while integrating business operations. It has a
long-term accumulated market-technology innovation mechanism and has established an
international R&D team and a high-level scientific research platform. Its technological
research and development strength and innovation capability in new products are leading
in the industry. The company can quickly respond to the latest market consumption demand
changes and has a stable reserve of mid-to-high-end customer resources. The four main
operating entities of the company, Hengli Fibre, Deli Fibre, Hengke Advanced Materials, and
Kanghui New Materials, are all national high-tech enterprises. Through fine management of
the production process and continuous improvement of technology and processes, the
company has independently developed and accumulated a series of differentiated and
functional products, holds numerous production patents for various products, and has
gained wide market recognition. The company's products are superior to competitors in
terms of quality and stability. It is the only company in China that can produce specification
domestically. It is also the only domestic and the second global enterprise capable of
producing 12-micrometer silicon-coated stacked lithium battery protection films online. The
company has absolute technological advantages and process accumulation in functional
films and civil polyester filament, forming a competitive moat that is difficult to replicate in
the industry in the short term.
      The company strives to promote the deep integration of "Internet, big data, artificial
intelligence, and the real economy" and develop advanced manufacturing capacity to
regenerate internal growth momentum. It regards "intelligent interconnection" as an
important entry point for industrial upgrading and transformation. By gradually implementing
methods such as "machine replacing human, " "automatic equipment change, " "complete
set replacement of single machine, " and "intelligence replacing digitization, " the company
transforms its development model from relying on "population dividends" to "technology
dividends." Through the integration and application of intelligent manufacturing, the Internet,
and the Internet of Things, the company continuously improves the level of intelligent
manufacturing throughout the entire process. It seamlessly integrates key links such as
control, research and development, manufacturing, business management, and finance
through self-developed product testing systems, automatic barcode systems, intelligent
warehousing systems, and sales systems, and interfaces with ERP systems to achieve
product traceability and full-process control. This promotes the company's transformation
from "manufacturing" to "intelligent manufacturing" and from single business management
to highly synergistic operation of the industrial chain.
      The company has formed a multidisciplinary and multi-professional scientific research
team, including disciplines such as refining, petrochemicals, polymer materials, chemical
fiber engineering, textile engineering, electrical engineering, etc. Its scientific research and
development capabilities are ahead of domestic peers. While introducing external talents,
the company attaches great importance to the cultivation of internal talents and provides a
good career development path for employees. The company has also established a sound
internal 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 companies
were 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, a
year-on-year increase of 12.30%; a net profit attributable to shareholders of listed company
of 2.318 billion yuan, a year-on-year decrease of 85.07%.
(I) Analysis of Primary operations
     statement
                                                    Unit: ten thousand yuan Currency: RMB
 Item                                                         Amount in the
                                     Amount in the
                                                            same period of last   Variance (%)
                                    reporting period
                                                                   year
 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                  118, 471.10             101, 945.24             16.21
 expenses
 Net cash flows from operating          2, 595, 397.08          1, 867, 017.37             39.01
 activities
 Net cash flows from investing         -2, 629, 706.99          -1, 309, 772.25       Not applicable
 activities
 Net cash flows from financing          1, 040, 541.64             -738, 758.74       Not applicable
 activities
Reasons for changes in selling expenses: mainly due to the increase in employee salaries
and storage-related expenses in the current period.
Reason for changes in Net Cash Flow from Operating Activities: The main reason for the
change 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 the
previous year, and there is a decrease in purchase expenses.
(1). Segmentation of Main Business by Sector, Product, Region, and Sales Model
                                            Unit: ten thousand yuan Currency: RMB
                           Segmentation of main operations by sector
                                                                             Year-on-       Year-on-
                                                                 Year-on-
                    Revenue                        Gross                       year           year
                                                                   year
   By sector          from        Cost of sales    margin                   change of      change of
                                                                change of
                   operations                       (%)                       cost of         gross
                                                               revenue(%)
                                                                             sales(%)      margin(%)
 Petrochemical         20, 944,       19, 154,     8.55         16.12            27.64       -8.25 pts
 industry               731.95         348.71
 Other                  1, 223,        1, 232,    -0.75        -27.36             -28.13     1.08 pts
 industries             649.95         828.05
                           Segmentation of main operations by product
                                                                             Year-on-       Year-on-
                                                                 Year-on-
                    Revenue                        Gross                       year           year
                                                                   year
  By product          from        Cost of sales    margin                   change of      change of
                                                                change of
                   operations                       (%)                       cost of         gross
                                                               revenue(%)
                                                                             sales(%)      margin(%)
 Refining              12, 367,       10, 473,   15.31          17.86            29.44       -7.58 pts
 products               533.63         930.91
 PTA                    5, 663,        6, 031,    -6.49         17.59             28.22     -8.83 pts
 Polyester              2, 913,        2, 649,     9.07          6.82              19.8     -9.85 pts
 products               612.50         308.21
 Others                 1, 223,        1, 232,    -0.75        -27.36             -28.13     1.08 pts
                           Segmentation of main operations by region
                                                                             Year-on-       Year-on-
                                                                 Year-on-
                    Revenue                        Gross                       year           year
                                                                   year
   By region          from        Cost of sales    margin                   change of      change of
                                                                change of
                   operations                       (%)                       cost of         gross
                                                               revenue(%)
                                                                             sales(%)      margin(%)
 Domestic              20, 449,        18, 704,         8.53        16.66        27.18      - 7.57 pts
 Overseas               1, 718,         1, 683,         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 products
    include sale revenues, purchase costs and gross margins.
    (2).     Production and sales volume analysis
                                                                                     Year-
                                                                                                     Year-on-
                                                                    Year-on-year    on-year
      Main                   Production     Sales     Inventory                                        year
                    Unit                                              change of     change
      products                volume       volume      quantity                                     change of
                                                                    production(%)      of
                                                                                                  inventory(%)
                                                                                    sale(%)
      Refining     10,       2, 338.95    2,          93.27         -0.54           -7.85         101.19
      products     000                    135.85
                   tons
      PTA          10,       1, 153.46    1,          26.99         -5.35           -6.88         25.13
                   tons
      New          10,       357.68       326.20      42.20         7.36            4.10          33.29
      material     000
      products     tons
    Explanation of production and sales volume:
    Petrochemical;
    films, and biodegradable materials;
    excludes internal consumption within the company.
    (3).     Cost Analysis
                                                                                           Unit: ten thousand yuan
                                                    By Sector
                                                                                    Proportio
                                                  Proport                              n in
                                                   ion in                             total
                               Amount in                                                            Year-
                                                    total         Amount in the       costs
                 Cost             the                                                              on-year    Explan
By sector                                          costs          same period of     of the
              composition      reporting                                                           change      ation
                                                   of the           last year        same
                                period                                                               (%)
                                                 reporting                           period
                                                period (%)                           of last
                                                                                    year (%)
             Direct                17, 435,             85.52           13, 661,          81.7        27.63
             materials               956.16                               754.88
Petroche
             Direct labor       168, 283.79              0.83        161, 635.81           0.97        4.11
  mical
             Power fuel         703, 924.33              3.45        543, 939.11           3.25       29.41
industry
             Manufacturin       673, 959.64              3.31        639, 526.39           3.82        5.38
             g expenses
             Direct           1, 154, 573.45             5.66     1, 540, 512.50           9.21      -25.05
             materials
  Other      Direct labor       176, 343.65              0.86        169, 328.56           1.01        4.14
industries   Power fuel          64, 379.42              0.32          2, 495.71           0.01    2, 479.6
             Manufacturin         9, 756.32              0.05          3, 114.69           0.02     213.24
             g expenses
                                                    By Product
   By            Cost          Amount in            Proport    Amount in the        Proportio       Year-     Explan
 product     composition         the              ion in       same period of        n in      on-year        ation
                              reporting            total         last year          total      change
                               period             costs                            costs         (%)
                                                  of the                           of the
                                                reporting                          same
                                               period (%)                          period
                                                                                   of last
                                                                                  year (%)
            Direct          9, 574, 213.92            46.96    7, 340, 860.24           43.9     30.42
            materials
Refining    Direct labor        56, 910.15             0.28         58, 156.39         0.35      -2.14
products    Power fuel         327, 732.97             1.61        274, 442.43         1.64      19.42
            Manufacturin       440, 075.17             2.16        418, 070.47          2.5       5.26
            g expenses
            Direct          5, 681, 885.50            27.87    4, 454, 279.79         26.64      27.56
            materials
            Direct labor        24, 616.91             0.12         21, 314.61         0.13      15.49
PTA
            Power fuel         143, 261.15             0.70        107, 722.00         0.64      32.99
            Manufacturin       113, 145.96             0.55        120, 496.65         0.72       -6.1
            g expenses
            Direct          2, 179, 856.74            10.69    1, 866, 614.85         11.16      16.78
            materials
Polyester   Direct labor        86, 756.73             0.43         82, 164.81         0.49       5.59
products    Power fuel         232, 930.21             1.14        161, 774.69         0.97      43.98
            Manufacturin       120, 738.51             0.59        100, 959.27          0.6      19.59
            g expenses
            Direct          1, 154, 573.45             5.66    1, 540, 512.50          9.21     -25.05
            materials
            Direct labor       176, 343.65             0.86        169, 328.56         1.01        4.14
 Others
            Power fuel          64, 379.42             0.32          2, 495.71         0.01    2, 479.6
            Manufacturin         9, 756.32             0.05          3, 114.69         0.02     213.24
            g expenses
      (4). Key Sales Customers and Key Suppliers Situation
      A. Overview of Key Sales Customers
      The sales revenue from the top five customers amounted to 28.20 billion yuan, accounting
      for 12.68% of the total annual sales. Among the sales revenue from the top five
      customers, there were no sales made to related parties, representing 0% of the total
      annual sales.
      B. Overview of Key Suppliers
      The 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 amount
      from the top five suppliers, there were no purchases made from related parties,
      representing 0% of the total annual procurement.
      (1). Table of Research and Development Investment Status
                                                                                 Unit: ten thousand yuan
       Expensed research and development                                                     118, 471.10
       investment in the current period
       Capitalized research and development                                                               -
       investment in the current period
  Total R&D investment                                                                         118, 471.10
  Percentage of research and                                                                          0.53
  development investment to operating
  revenue (%)
  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                                                         8.11
  the total number of the company (%)
  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
  excluding 40 years old)
  excluding 50 years old)
  excluding 60 years old)
 (II) Analysis of Asset and Liability Situation
                                                                                  Unit: ten thousand yuan
                                                                               Percentage
                                                                   Ratio of
                                Ratio of                                        change in
                                                                    closing
                                 closing                                           closing
                                                                   balance
                    Closing   balance of           Closing                        balance
                                                                          of
                 balance of      current        balance of                      compared
Item                                                              previous                   Explanation
                    current    period to          previous                       between
                                                                  period to
                     period         total           period                         current
                                                                       total
                                  assets                                         period to
                                                                    assets
                                     (%)                                         previous
                                                                        (%)
                                                                                period(%)
Cash and            2, 807,        11.63            1, 598,           7.60          75.63    Mainly due to
bank                640.59                          605.29                                   an increase in
balances                                                                                     operating
                                                                                             cash flow
                                                                                             during the
                                                                          current
                                                                          period.
Accounts        37, 244.59    0.15    264, 384.34         1.26   -85.91   Mainly due to
receivable                                                                the company
                                                                          intensifying its
                                                                          collection
                                                                          efforts on
                                                                          accounts
                                                                          receivable
                                                                          during the
                                                                          current
                                                                          period.
Receivable     228, 727.12    0.95    341, 995.77         1.63   -33.12   Mainly due to
financing                                                                 a decrease in
                                                                          the amount of
                                                                          cash received
                                                                          from bank
                                                                          acceptance
                                                                          bills and
                                                                          letters of
                                                                          credit during
                                                                          the current
                                                                          period.
Construction       2, 728,   11.30    778, 285.36         3.70   250.61   Mainly due to
in progress        749.15                                                 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    89, 222.72    0.37      18, 882.71        0.09   372.51   Mainly due to
assets                                                                    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                                                                    an increase in
assets                                                                     long-term
                                                                           asset
                                                                           purchase
                                                                           payments
                                                                           related to
                                                                           construction
                                                                           in progress
                                                                           made during
                                                                           the current
                                                                           period.
Contract          1, 209,   6.41    612, 654.68         4.00      97.35    Mainly due to
liabilities       098.33                                                   an increase in
                                                                           advance
                                                                           payments
                                                                           received for
                                                                           sales
                                                                           contracts
                                                                           during the
                                                                           current
                                                                           period.
Non-current   934, 902.82   4.96    542, 322.70         3.54      72.39    Mainly due to
liabilities                                                                an increase in
due within                                                                 the amount of
one year                                                                   long-term
                                                                           loans and
                                                                           bonds
                                                                           payable that
                                                                           will mature
                                                                           within one
                                                                           year.
Other         338, 212.76   1.79    139, 926.92         0.91     141.71    Mainly due to
current                                                                    an increase in
liabilities                                                                output tax
                                                                           corresponding
                                                                           to advance
                                                                           payments
                                                                           received for
                                                                           sales
                                                                           contracts
                                                                           during the
                                                                           current
                                                                           period.
Long-term      85, 883.33   0.46       2, 189.93        0.01   3, 821.74   Mainly due to
payables                                                                   the addition of
                                                                           new financing
                                                                           leases
                                                                           payable
                                                                           during the
                                                                           current
                                                                           period.
(1) Assets Scale
Including: Overseas assets 73.42(Unit: hundred million yuan Currency: RMB), accounting
for 3.04% of the total assets.
                                                 Unit: ten thousand yuan Currency: RMB
 Item               Carrying value at year                   Reason of restriction
                             end
 Cash and bank                761, 763.21    Pledge cash and bank balances to obtain financing
 balances                                    credit from financial institutions
 Cash and bank                  1, 258.62    Security deposits for trading in futures and financial
 balances                                    derivatives
 Cash and bank                 11, 960.00    Freezing funds involved in litigation
 balances
 Financial assets               1, 000.00    Pledge financial assets held for trading to obtain
 held for trading                            financing credit from financial institutions
 Receivable                   146, 957.20    Pledge notes receivable to obtain financing credit
 financing                                   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                   378, 138.19    Mortgage intangible assets to obtain financing credit
 assets                                      from financial institutions
 Construction in               67, 573.80    Mortgage construction in progress to obtain financing
 progress                                    credit from financial institutions
 Total                    10, 066, 914.84
(III) Analysis of Industry Operating Information
Analysis of Operating Information in the Chemical Industry
(1). Industry Policies and Their Changes
      ¢Ù ¡¶ 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 other
departments jointly issued the Guiding Opinions on Promoting High-Quality Development of
the Petrochemical and Chemical Industry during the 14th Five-Year Plan. It proposed that
by 2025, the petrochemical and chemical industry should establish a high-quality
development pattern characterized by strong independent innovation capability, rational
structural layout, green and low-carbon practices. The industry's ability to ensure the supply
of high-end products should be significantly improved, core competitiveness should be
noticeably enhanced, and substantial progress should be made in achieving self-reliance at
a high level.
      ¢Ú ¡¶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 National
Bureau of Statistics issued a notification on further improving the work related to excluding
raw material energy consumption from the total energy consumption control. The notification
explicitly 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 gaps
and filling the blanks in the industry.
     ¡ð
Province¡·
     In January 2022, the General Office of the People's Government of Liaoning Province
issued the "14th Five-Year Plan" for the ecological economic development of Liaoning
Province. The plan highlights the following key points:
     Extending the Petrochemical Industry Chain: The plan aims to maintain the scale
advantage of bulk basic chemical raw materials such as ethylene, propylene, PX
(paraxylene), and PTA (purified terephthalic acid). It also seeks to promote the development
of 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 Petrochemical
Industry: 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, and
integrated development of the refining and chemical industry. Key areas of focus include the
development 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
     ¢Ù 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, 400,000
tons of acetic acid, 1.2 million tons of pure benzene, 850,000 tons of polypropylene, 720,000
tons of styrene, 400,000 tons of high-density polyethylene, 140,000 tons of butadiene, and
other domestically scarce and high-value-added chemical products, as well as Refined oil
products such as gasoline, diesel, and aviation kerosene that meet the national standards
above China VI. As smaller refineries with higher production costs and outdated facilities
are gradually phased out, the concentration of the refining and chemical industry and the
competitiveness of large-scale newly built refineries will greatly improve. The company has
prominent advantages in policy support, process technology, and industrial synergy.
Compared to other refineries, it has characteristics of high quality and low cost, making it
highly competitive in the market.
     ¢Ú In the PTA sector
     PTA serves as the direct upstream raw material for polyester production, and China is
the world's largest producer and consumer of PTA. The company currently has a PTA
production capacity of 16.6 million tons per year (including the capacity under construction
in Huizhou). It is the largest PTA production supplier in the world in terms of capacity, with
the most advanced technology and the most significant cost advantages. It is also the only
company in the industry with a capacity of over 10 million tons per year.
     ¢Û In the polyester new materials sector
     One of the company's primary operations is the research, production, and sales of
related 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 (Polybutylene
Succinate/Polybutylene Adipate Terephthalate), and other polyester and chemical new
materials products. The company ranks among the top five in the national civil filament
capacity 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 industrial
applications in China.
     The subsidiary company Kanghui New Material, located in Yingkou Base, has an
annual production capacity of 240,000 tons of PBT engineering plastics, making it the largest
PBT producer in China. The PBT products are primarily used in industries such as
automotive components, polymer alloys, optical cable protective sleeves, electronics, and
electrical appliances. Kanghui New Material also has an annual production capacity of
in various applications, including optical equipment, release liners, electronics, automotive
decorations, 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 applications
such as food-grade shopping bags, utensils, and straws within the PBS/PBAT field. In Dalian
Changxing Island, the company is gradually launching its project for 450,000 tons of
degradable plastics, with qualified products already being produced. Additionally, in Suzhou
Fenhu, the construction of a project for 470,000 tons of high-end functional polyester film,
modified PBAT is underway. Overall, the company demonstrates strong comprehensive
competitiveness in the industry.
(1). Main business model
     The company's main business model involves the procurement of crude oil and related
additives, primarily producing PX products and finished oil, as well as other chemicals. The
PX products are mainly used as raw materials for the company's PTA plant, with a portion
of the PTA products being used internally by the company's polyester factory, and the rest
being sold to downstream customers in the fiber industry for the production of polyester
fibers and other products. Various polyester products are sold to downstream weaving
factories for the production of textiles, industrial yarn is sold to construction and automotive
component manufacturers, polyester chips are sold to spinning companies, BOPET films
are sold to downstream printing, packaging, and electronics companies, and PBT resins are
sold to downstream automotive, electronics, and machinery companies. The specific
operating modes are as follows:
     (1) Petroleum Refining Sector
     Petroleum products, also known as oil products, are processed from crude oil through
various refining processes such as atmospheric distillation, hydrogenation cracking, and
reforming. 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 organic
materials derived from the basic organic materials.
     (2) PTA Sector
     PTA (Purified Terephthalic Acid) is an important bulk organic material widely used in
various sectors of the national economy, including chemical fibers, light industry, electronics,
and construction. In the domestic market, the main downstream products of PTA are
polyester fibers, which are primarily used in clothing, home textiles, and industrial textiles.
The main business process involves purchasing para-xylene (PX) and producing PTA
through oxidation reactions, crystallization, drying, hydrogenation, and further crystallization
processes, followed by selling the product to downstream customers.
     The profit model in the PTA industry is based on producing and selling PTA products to
generate profits. Since the fixed investment for the products is significant, improving
profitability relies mainly on reducing the fixed cost per unit. Companies achieve this by
capitalizing on economies of scale, adopting advanced processing technologies and
equipment, establishing efficient public infrastructure, enhancing production safety and
product quality stability, and ultimately lowering production costs to increase profitability.
     (3) Polyester Sector
     The primary business process involves the procurement of petrochemical products
such as PTA, MEG, and other additives, followed by polymerization reactions using
appropriate production equipment. Subsequently, the polyester filaments are produced
through spinning and drawing processes, and the products are sold to downstream weaving
companies for the production of civil and industrial textiles.
     The profit model in the polyester filament industry is based on producing and selling
polyester filaments to generate profits. Due to the significant fixed costs associated with the
products, improving profitability depends on three main factors: reducing the fixed cost per
unit, 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 improving
overall profitability.
     (4) Polyester Film Sector
     The main business process involves the procurement of petrochemical products such
as PTA, MEG, and other additives. Unlike the polyester industry, the equipment and process
routes differ. In the polyester industry, equipment is used to extrude the film into polyester
filaments, 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 selling
polyester films to generate profits. Due to the significant fixed investment required, improving
profitability depends mainly on two factors: reducing the fixed cost per unit and developing
new products. For companies, the future primarily involves capitalizing on economies of
scale to seize market share, increasing product added value, and improving overall
profitability.
     (5) Engineering Plastics Sector
     The primary business process involves the procurement of petrochemical products
such as PTA, BDO, and other additives. The production process includes polymerization,
extrusion, pulverization, and granulation, ultimately producing engineering plastics. The
products are then sold to downstream customers.
     The profit model in the engineering plastics industry is based on producing and selling
plastic pellets to generate profits. Due to the significant fixed investment associated with the
products, improving profitability relies mainly on two factors: reducing the fixed cost per unit
and developing new products. For companies, the future primarily involves capitalizing on
economies of scale to seize market share, increasing product added value, and improving
overall profitability.
(2). Main products
                                 Primary
                                                        Applications of major   Main factors affecting
  Product      Business sector   upstream raw
                                                        downstream materials    prices
                                 materials
 Refined oil   Petroleum         Crude Oil              Aviation kerosene,      Upstream raw
               refining                                 gasoline, and diesel    materials like crude oil
                                                        and other power fuels   and downstream
                                                                                demand
 PX            Chemical raw      Crude Oil              PTA                     Upstream raw
               materials and                                                    materials like crude oil
               chemicals                                                        and downstream
               manufacturing                                                    demand
 Ethylene    Chemical raw       Crude Oil               Polyethylene, ethylene      Upstream raw
             materials and                              glycol                      materials like crude oil
             chemicals                                                              and downstream
             manufacturing                                                          demand
 PTA         Chemical raw       PX                      Polyester fiber, bottle     Crude oil and PX
             materials and                              grade chips, film grade     supply and
             chemicals                                  chips, etc.                 downstream demand
             manufacturing
 Polyester   Polyester          PTA, MEG                Advertising light box       Upstream raw
 Filament    manufacturing                              cloth, geotextile,          materials like crude oil
 Yarn                                                   conveyor belt,              and downstream
 (PFY)                                                  automobile fiber and        textile prosperity
                                                        tire meridian, clothing
                                                        and home textiles, etc.
 Polyester   Polyester          PTA, MEG                Filature                    Upstream raw
 Filament    manufacturing                                                          materials like crude oil
                                                                                    and downstream
                                                                                    demand
 BOPET       Plastics product   PTA, MEG                Packaging film,             Upstream raw
             manufacturing                              insulating film,            materials like crude oil
                                                        capacitor film, etc.        and downstream
                                                                                    demand
 PBT         Plastics product   PTA, BDO                Auto parts, electronic      Upstream raw
             manufacturing                              appliances, aerospace       materials like crude oil
                                                        materials, etc.             and downstream
                                                                                    demand
 PBS/PBAT    Plastics product   PTA, BDO,               Packaging materials,        Upstream raw
             manufacturing      Adipic acid             shrink film, agricultural   materials like crude oil
                                                        film, etc.                  and downstream
                                                                                    demand
(3). R&D and innovation
As of the end of 2022, the company has accumulatively held 1, 116 patents, of which 261
were newly approved during the reporting period.
(4). Production Technology and Process
     During the reporting period, there were no significant changes in the company's main
products and their production processes.
     For specific details regarding the production processes of the company's main
products in the polyester fiber sector, please refer to Section 4, "Discussion and Analysis
of Operating Conditions, " subsection "II. (IV) Analysis of Operational Information in the
Chemical Industry, " and the section "Production Processes and Flow" (page 33) in the
company's "2016 Annual Report."
     For information on the production process of the company's PTA industry, please
refer to Section 4, "Discussion and Analysis of Operating Conditions, " subsection "II. (IV)
Analysis of Operational Information in the Chemical Industry, " and the section "Production
Processes and Flow" (page 39) in the company's "2018 Annual Report."
     Regarding the production processes of the company's refining and ethylene
engineering, as well as the PBAT project, please refer to Section 4, "Discussion and
Analysis of Operating Conditions, " subsection "II. (IV) Analysis of Operational Information
in the Chemical Industry, " and the section "Production Processes and Flow" (page 34) in
the company's "2020 Annual Report."
(5). Production capacity and construction work
                                                  Unit: hundred million yuan Currency: RMB
                                                                 Investment
                                                  Capacity                      Planned
Major                Designed      Capacity                      in capacity
                                                  under                         completion
plants/projects      capacity      utilization(%)                under
                                                  construction                  time
                                                                 construction
                                                  High-
                                                  performance
                                                  industrial
Polyester Filament                                yarn project
Yarn (PFY) of                      100            with an        12.20
                     tons/Year
Suzhou plant                                      annual
                                                  output of
                                                  tons
                                                  Annual
                                                  output of 1.5
                                                  million tons
                                                  of green
                                                  multi-
                                                  functional
                                                  textile new
PFY for civil        1.75                         materials
use of Nantong       million       100            project(Part   54.24
plant                tons/Year                    of the
                                                  production
                                                  capacity has
                                                  been put into
                                                  production
                                                  during the
                                                  reporting
                                                  period)
PFY for civil
use of Suqian                      100
                     tons/Year
plant
Polyester film
of Kanghui
New Material                       100
                     tons/Year
(Yingkou)
Industrial Park
Engineering
plastics of
Kanghui New          240,000
Material             tons/Year
(Yingkou)
Industrial Park
PBS bio-
degradable
advanced
materials project                  100
                     tons/Year
of Kanghui New
Material (Yingkou)
Industrial Park
PTA of Dalian
                      million       99.44
plant
                      tons/Year
Refining and
chemical project                    102.44
                      tons/Year
of Dalian plant
Ethylene project of   1.5 million
Dalian plant          tons/Year
                                                                                 Gradually
PBS
                                                                                 put into
biodegradable
plastics in           /             /                                    22.41
                                                        tons/Year                in the first
Kanghui Dalian
                                                                                 quarter of
plant
                                                                                 Gradually
Lithium battery                                                                  put into
separator in                                                                     production
                      /             /                   square           1.15
Kanghui Yingkou                                                                  in the
                                                        meters/Year
Plant                                                                            middle of
                                                                                 Gradually
PTA of Huizhou                                          million                  production
                      /             /                                    86.25
Plant                                                   tons/year                in the first
                                                        PTA plant                quarter of
Hengli                                                                           Gradually
Petrochemical                                           300,000                  put into
Chemical New                                            tons/Year                production
                      /             /                                    3.01
Material                                                Adipic acid,             in the
Supporting                                              etc.                     middle of
Chemical Project                                                                 2023
                                                        Bisphenol A,             Gradually
                                                        isopropanol,             put into
                                                        ethylene                 production
Annual output of
                                                        oxide,                   in the
                                                        electronic               middle of
high-performance      /             /                                    13.68
                                                        grade DMC                2023
resin and new
                                                        (including
material projects
                                                        EC, EMC
                                                        and DEC),
                                                        ABS, etc.
                                                        Functional
                                                        polyester film
                                                                                 Gradually
Annual output of                                        tons/year
                                                                                 put into
                                                                                 production
functional films      /             /                   end              17.70
                                                                                 in the first
and functional                                          functional
                                                                                 quarter of
plastics                                                polyester film
                                                        tons/year
                                                        device,
                     Market-
                                    Monthly                         4, 078.97 million    4, 752.87 million
  Electricity        oriented
                                    settlement                                  kwh                  kwh
                     procurement
                     Market-
  Thermal                           Monthly
                     oriented                                       7.94 million tons    7.94 million tons
  coal                              settlement
                     procurement
                     Market-
                                    Monthly                            192.82 million       199.79 million
  Natural gas        oriented
                                    settlement                          cubic meters         cubic meters
                     procurement
 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 demand
 structure 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 products
 To reasonably mitigate the significant price fluctuations of major raw materials, the company
 and its subsidiaries engaged in hedging activities during the reporting period. The hedging
 primarily involved commodities related to production and operations, such as Crude Oil,
 petroleum products, PTA, and chemicals (including but not limited to Styrene, Ethylene
 Glycol, Polypropylene).
 (1). Basic situation of the company's main operations by segment
                                                Unit: ten thousand yuan Currency: RMB
                                                                   YOY                   YOY
                                                                              YOY
                                                                  chang                 chang     Gross
                                                                            changes
                                                       Gross       es in                  es     margins
Business        Revenue from                                                   in
                                    Cost of sales      margin     operati                 in     among
segment          operations                                                 operatin
                                                        (%)         ng                  gross      the
                                                                               g
                                                                  revenu                margin    peers
                                                                            cost(%)
                                                                   e(%)                  (%)
Petroche
  mical         20, 944, 731.95    19, 154, 348.71       8.55     16.12      27.64      -8.25
 segment
  Other
segments
 (IV) Investment Status Analysis
 General Analysis on External Equity Investment
 During the reporting period, the company did not have any significant equity investments.
 However, it initiated two major construction projects.
      During the reporting period, the following are the basic details of the major investment
 projects undertaken by the company:
 tons/year High-performance Resin and New Materials Project
      The total investment is 19, 988.26 million yuan. The project is located in Hengli (Dalian
 Changxing Island) Industrial Park and has a construction period of 18 months. According to
 the 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 average
total profit of 9, 151.57 million yuan.
tons/year High-performance Polyester Engineering Project
     The total investment is 4,001.36 million yuan. The project is located in Hengli (Dalian
Changxing Island) Industrial Park and has a construction period of 18 months. According to
the feasibility study report, it is estimated that after the project reaches full capacity, the
annual average operating income will be 16, 613.96 million yuan, with an annual average
total profit of 990.54 million yuan.
(V) Analysis of Major Holding and Participating Companies
                                                                        Unit: hundred million yuan
                   Shareholding     Business             Registered   Total       Net        Net
 Company name
                   (%)              nature               capital      assets      assets     profit
 Hengli
 Petrochemical     100.00           Manufacturing           175.96                  297.26      13.66
 Refining
 Hengli
 Petrochemical     100.00           Manufacturing            58.90      355.93      114.04       -2.33
 (Dalian)
 Hengli Chemical
 Fiber
 Hengli
 Petrochemical     100.00           Manufacturing            45.75      350.48       63.74        4.73
 Chemical
 Kanghui    New
 Material
     Note: Jiangsu Hengli Chemical Fiber Co., Ltd. includes its subsidiaries Jiangsu Hengke
Advanced Materials Co., Ltd., Nantong Teng'an Logistics Co., Ltd., Jiangsu Xuanda
Polymer Material Co., Ltd., Jiangsu Deli Chemical Fiber Co., Ltd., Suqian Deya New
Materials 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., Suzhou
Hengli Chemical New Material Co., Ltd., Hengli Petrochemical (Dalian) Co., Ltd. including
its 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 HENGLI
PETROCHEMICAL INTERNATIONAL PTE. LTD., HENGLI OILCHEM PTE. LTD., HENGLI
SHIPPING INTERNATIONAL PTE. LTD., Hengli Energy (Hainan) Co., Ltd., Hengli
Petrochemical (Hainan) Co., Ltd., Suzhou Hengli Petrochemical Chemical Import and
Export Co., Ltd., Shenzhen Shengang Trading Co., Ltd., Hengli Petrochemical Refining
Product 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 Energy
Chemical Import & Export Co., Ltd.
     Hengli Petrochemical (Dalian) Chemical Co., Ltd. includes its subsidiaries Hengli
Petrochemical (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 in
the scope of the financial statements are mainly engaged in asset management business,
operating client assets, and providing clients with investment management services for
securities, futures and other financial products. The total assets of this type of structured
entity 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) Leaning towards intensive, efficient, and low-carbon development
      Under the goal of ¡°carbon neutrality and carbon emission peaking¡±, our peers will work
harder to reduce energy consumption and emissions, and improve crude oil conversion.
Through process intensification, optimization of device design and process flow, and the
development and application of energy management systems, the companies will minimize
energy and raw material consumption, maximize device operation efficiency and production
flexibility, reduce the restrictions of other factors, and efficiently respond to the changing
development 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 materials
such as new energy, high-end equipment, green environmental protection, and
biotechnology. Entering the ¡°14th Five-Year Plan¡± period, with the rapid growth of strategic
emerging industries as high-end equipment, automobile manufacturing, electronic
information, new energy, energy conservation and environmental protection, new
construction, bio-medicine application, smart grid, and 3D printing, the demand for new
materials such as high-quality synthetic resin, high-performance synthetic rubber,
engineering plastics, degradable materials, electronic chemicals and high-performance
membrane materials continue to grow, driving the rapid growth of new chemical materials
production capacity. With the development of downstream industries, the future market
space for new chemical materials tends to be broad.
      China is the largest producer and consumer of PTA. Under the competitive landscape
of the integrated industrial chain, leading companies in the PTA industry have strong market
competitiveness in terms of the scale of a single set of facility, stable production and
operation, material consumption, energy consumption, and product quality. As the PTA
industry is going through more fierce competition, its concentration will be further increased.
      (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 production
and application of high-performance fibers, improve the technological maturity of high-
performance fibers that have been engineered and industrialized, improve the stability and
uniformity 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 cost
fibers, strive to make breakthroughs in key technologies for large-scale production of bio-
based chemical fibers, develop high-quality differentiated products, and strengthen
application technology development.
      (2) Accelerating intelligent and digitized transformation
      The Company will build an intelligent manufacturing standard system for the chemical
fiber industry, improve the R&D and application of intelligent manufacturing industrialization
technologies such as chemical fiber, seek breakthroughs in key software and hardware
systems, form integrated solutions and full-process intelligent manufacturing technology
integration, and build smart factories based on big data, artificial intelligence, and the
industrial internet.
      The Company will push forward its digital transformation and the application of artificial
intelligence, big data, cloud computing, and other emerging digital technologies in chemical
fiber enterprises, improve the digitalization of the whole industrial chain such as R&D, design,
manufacturing, operation and maintenance. By applying digital technology to dovetail
business processes, management systems, and ANNUAL REPORT 2021 55 supply chain
data, it will innovate the management model as organizational structure optimization,
dynamic and accurate services, and auxiliary management decision-making to raise
enterprise management capabilities.
      (3) Seeking green and low carbon transformation
      The Company will carry forward energy-saving and low-carbon development, guide
enterprises to purchase green electricity, expand the proportion of new energy applications
such 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 key
energy-saving and emission-reduction technologies, accelerate the development and
construction of green factories, green products, green supply chains, and green parks in the
chemical fiber industry, carry out the construction of a leading water and energy efficiency
demonstration company, and proceed with carbon footprint accounting and social
responsibility building. Through the recycling improvement, the Company is to speed up the
optimization of the industrial structure of recycled chemical fibers and the upgrading of itself.
(II) Development strategy
      General development strategy: we are committed to providing quality fiber and creating
a 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, and
will¡±, and the management ideal of ¡°people-centered, scientific, institutionalized, and
professional¡±, foster a company spirit of ¡°solidarity, integrity, steadiness, and innovation¡±,
increase the industrial innovation capacity, improve industrial structures, and drive the
Company 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 upstream
industrial platform to support the development of ¡°refining+ethylene+coalification¡±
underpinning the ¡°big chemicals¡±, and implement ¡°making up and enhancing the industrial
chains¡± and ¡°R&D and innovations¡±, reserving space and paving ways for the new
downstream material businesses in the future. On top of that, the Company will redouble its
efforts in the downstream businesses, consolidate traditional market strengths, benchmark
the breakthroughs in major new materials as the development and upgrading of ¡°new
consumption¡± and ¡°key&core technologies¡±, nurture new leading material business growth
points in scale, and make strides toward a world leading petrochemical new material
company 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 innovation
upgrading, 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
year 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 core
business, with a deep and meticulous approach, combining tradition with innovation, striving
for growth and strength, and achieving high-quality development for the enterprise. The
ultimate goal is to continue progressing towards the grand vision of "Centennial Hengli." The
key areas of focus for the year include:
and efficient operations.
      Emphasis will be placed on quality and brand awareness, with a focus on research and
development and innovation to continually improve quality standards and enhance product
quality. Cost management will be strengthened through the rational integration of resources
and control of expenses to achieve cost reduction and increased efficiency. The company
will adhere to the business principles of "production based on sales, and sales driven by
production, " as well as the operational concepts of "customer-centered, market-oriented,
and full-team marketing." By proactively adapting to the market and swiftly responding to
changes, the company will continuously optimize its product structure, increase the
production of high-efficiency products, strengthen the linkage between production and sales,
and strive to achieve the annual production and operational goals, ensuring the company's
high-quality growth and benefits.
consolidating the competitive advantages of the entire industry chain, and striving to improve
business performance.
      Based on maintaining the existing industrial advantages, Hengli Dalian Industrial Park
will highlight the advantages of park scale and centralized management. It will coordinate
and plan operations in a comprehensive and rational manner, leveraging the cost
advantages brought by scale, and emphasizing the core competitiveness of products in the
market. The construction of ongoing projects will be accelerated, with strict control over
construction progress and quality to ensure timely completion and further enhance the
company's performance center.
management empowerment, and laying a solid foundation for high-quality development.
      Further improving the safety and environmental management system, enhancing the
ability to prevent and resolve risks and hazards, strengthening safety supervision, and
conducting special drills to ensure strict, meticulous, and practical work in safety production.
Adhering to green development and low-carbon production, focusing on the research and
development of green and low-carbon technologies.
      Continuously optimizing and improving the internal management system, enhancing
financial internal control mechanisms, timely identifying and preventing risks, strengthening
internal supervision to ensure zero financial risk. Adhering to the principles of "managing
people with systems, managing tasks with processes, and managing efficiency with forms"
to enhance risk prevention capabilities. Continuously promoting intelligent transformation
and digitalization, actively utilizing new technologies such as the Internet of Things and big
data to accelerate industrial upgrading and enhance development quality and efficiency.
      Continuing to promote the construction of talent and corporate culture systems, actively
engaging in industry-academia-research cooperation, deepening school-enterprise
cooperation, 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 outstanding
talents. Fostering and promoting corporate culture to create a sense of belonging within the
Hengli family. Strengthening brand building, enhancing brand competitiveness, and
expanding brand influence.
(IV) Potential Risks
     The development of the polyester fiber and petrochemical industry is influenced by
industry 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, falling
product prices, insufficient utilization of capacity and decreasing profitability would be seen.
     The Company¡¯s production and operation are greatly affected by the price changes of
upstream raw materials, especially crude oil and coal. If the Company¡¯s inventory,
procurement management, and price adjustment of downstream product market cannot
effectively reduce or absorb the impact of price fluctuations of raw materials, its operation,
production and business performance could be adversely impacted.
     If the RMB continues to fluctuate substantially, great uncertainties would be posed to
the Company¡¯s exchange gains or losses, export product prices denominated in foreign
currencies, raw material prices and other operational factors. The Company will leverage
forward foreign exchange contracts and other methods to establish and improve the
exchange rate hedging mechanism and reduce the amount of foreign currency receipts and
payments in order to reduce the impact of exchange rate changes on the Company¡¯s
profitability.
     With the enhancement of environmental awareness and stricter environmental
protection requirements from the government, the Company proactively takes
environmental protection measures, increase corresponding investments, strictly complies
with relevant laws, regulations and production specifications in its daily management and
establishes strict standard operation procedures. However, environmental or safety
production accidents caused by human errors or accidents still could not be eliminated,
which could affect the Company¡¯s normal businesses. Therefore, there are certain
environmental protection and production safety risks.
                       Chapter 4 Corporate Governance
I. Notes on Corporate Governance
In strict accordance with the requirements of the Company Law, the Securities Law, the
Code of Corporate Governance for Listed Companies, the Rules Governing the Listing of
Stocks on Shanghai Stock Exchange and other laws, regulations and regulatory documents,
the Company continuously improved the corporate governance structure, established and
improved a sound system of internal management including General Shareholders Meetings,
the Board of Directors and the Supervisory Committee to regulate its operations. The
Company has formed a corporate governance structure with clear rights and responsibilities,
effective checks and balances, scientific decision-making and coordinated operations
among organs of authority, decision-making organs, supervisory organs and the senior
management teams. The structure ensures the effective implementation of the decision-
making power of the general shareholders¡¯ meeting and the Board of Directors and the
supervisory power of the supervisory committee as well as efficient and compliant
operations and management of the senior management team. The Board of Directors of the
Company established four special committees, i.e., the strategy committee, the audit
committee, the nomination committee and the remuneration and appraisal committee, to
provide consultation and advice for the Board of Directors and make sure that its deliberation
and decision-making is professional and efficient. The Company continued to follow closely
new changes in regulatory laws and rules, implement new regulatory policies and
requirements, strengthen risk prevention and control, push forward internal control
management, carry out high-quality information disclosure, narrow the scope of insiders
under the principle of validity, accuracy, timeliness, completeness and fairness to ensure
equitable access to information of all shareholders. The Company managed investor
relations proactively and treated all investors fairly with integrity and openness. The
Company carried forward the ESG system and delivered its social responsibilities to
safeguard the legitimate rights and interests of the Company and all shareholders and
ensured a sustainable and stable development.
II. Notes on General Shareholders Meetings
                                    Inquiry index of the     Disclosure
 Meeting           Date of          designated website         date of
                                                                           Meeting resolution
 session           meeting        where the resolution is    resolution
                                         published           publication
 Extraordinary   2022                                       2022           refer to the
 Shareholders'                                                             "Announcement on
 Meeting                                                                   Resolutions of
                                                                           Hengli
                                                                           Petrochemical's
                                                                           Extraordinary
                                                                           General Meeting of
                                                                           Shareholders"
                                                                           (Announcement
                                                                           No.: 2022-008)
 Extraordinary   2022                                       2022           refer to the
 Shareholders'                                                             "Announcement on
 Meeting                                                                   Resolutions of
                                                                           Hengli
                                                                           Petrochemical's
                                                                           Extraordinary
                                                                           General Meeting of
                                                                           Shareholders"
                                                                           (Announcement
                                                                           No.: 2022-015)
 Extraordinary   2022                                       2022           refer to the
 Shareholders'                                                             "Announcement on
 Meeting                                                                   Resolutions of
                                                                           Hengli
                                                                           Petrochemical's
                                                                           Extraordinary
                                                                           General Meeting of
                                                                           Shareholders"
                                                                           (Announcement
                                                                           No.: 2022-033)
 General         2022                                       2022           refer to the
 Meeting                                                                   "Announcement on
                                                                           the Resolutions of
                                                                           Hengli
                                                                       Petrochemical's
                                                                       Shareholders'
                                                                       Meeting"
                                                                       (Announcement
                                                                       No.: 2022-054)
Note to the general meeting of shareholders
     During 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 of
laws, administrative regulations, the "Rules of Shareholders' General Meetings of Listed
Companies, " and the company's articles of association. The attendees and the convener of
the meetings were qualified and valid. The voting procedures and results of the shareholder
meetings 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 the
reporting period
                                                                                                                     Unit: Share
                                                                                                                                   The total pre-    Whether
                                                                                                                                        tax         to get paid
                                                                         Number of                        Increase or    Reason    remuneration        at the
                                                                                             Number of
                                                                        shares held                       decrease of      for     received from    company¡¯s
                Position                        Position    Position                        shares held
   Name                          Sex     Age                               at the                           shares      increase   the company        related
                 (Note)                        start date   end date                         at the end
                                                                         beginning                         during the       or       within the        party
                                                                                            of the year
                                                                        of the year                           year      decrease     Reporting
                                                                                                                                    Period (10,
 Fan          Chairman     of   Female         2022-04-     2025-04-       886, 105,          791, 494,     -94, 611,                               No
 Hongwei      the board                        27           27                  969                169           800
 Wang         General           Male           2022-12-     2025-04-                                                                                No
 Zhiqing      Manager                          29           27
 Li Feng      Director,         Male                                                                                                                No
              Deputy
              General                          2022-04-     2025-04-
              Manager,                         27           27
              Board
              Secretary
 Gong Tao     director          Male           2022-04-     2025-04-                                                                                No
 Liu Dunlei   Director,         Male                                                                                                                No
              Deputy                           2022-04-     2025-04-
              General                          27           27
              Manager
 Liu Jun      Independent       Male           2022-04-     2025-04-                                                                                No
              Director                         27           27
 Wu           Independent       Male           2022-04-     2025-04-                                                                                No
 Yongdong     Director                         27           27
            Supervisory
            Committee
            (resigned)
Mo          Employee       Male                                                                                                                 No
Youjian     Supervisor                 39                                               -           -           -                       10.39
            (resigned
Xu Yinfei   Supervisor     Male               2019-05-     2022-04-                                                                             No
            (resigned)                        06           27
                   /           /        /         /            /           886, 120,        791, 498,   -94, 621,       /              804.95        /
  Total
  Name                                                                 Main work experience
             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.,
   Fan       Ltd.; from November 2002 to August 2011, he served as the director of Jiangsu Hengli Chemical Fiber Limited; From August 2011 to March
 Hongwei     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.
             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
   Wang
             Branch, leader of Sinopec Guangxi Oil Refining Preparatory Team, general manager of Sinopec Jiujiang Branch, Director of Jiujiang
  Zhiqing
             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        Born in 1980, Chinese nationality, no overseas permanent residence, bachelor degree, Chinese certified public accountant. Served as senior
Yongdong     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         Born in 1979, Chinese nationality, no overseas permanent residence, Ph.D., once served as an associate researcher and master tutor at the
Wenliang     Textile College of Donghua University, and is now a professor and doctoral tutor at the Textile College of Donghua University. Since April
  Kang       Born in 1980, Chinese nationality, no permanent residence abroad, bachelor degree, senior economist. Served as general ledger accountant
 Yunqiu      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       Born in 1978, Chinese nationality, no overseas permanent residence, college degree. Previously served as deputy manager of the general
 Guohua      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       Born in 1980, Chinese nationality, no overseas permanent residence, bachelor degree, senior engineer, successively worked as a technician,
Fangming     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       Born in 1977, Chinese nationality, no overseas permanent residence, master degree. Served as business representative, deputy sales
 Qianhan     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 Supervisory
Board" were approved. Fan Hongwei, Li Feng, Liu Dunlei, Gong Tao, Liu Jun, Xue Wenliang, and Wu Yongdong were elected as directors, while
Kang Yunqiu and Shen Guohua were elected as supervisors. Tang Fangming was elected as the staff representative supervisor by the
Company's Staff Representative Assembly.
        During the first meeting of the 9th Board of Directors, the relevant resolutions were approved, appointing Fan Hongwei as the General
Manager, 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 on
December 29, 2022, and approved the resolution on "Appointment of General Manager, " agreeing to appoint Wang Zhiqing as the General
Manager.
        For detailed information, please refer to the announcements published by the company on April 7, 2022, April 28, 2022, and December
Staff Representative Supervisor" (Announcement No.: 2022-047), "Announcement of Resolutions of Hengli Petrochemical's 2021 Annual
Shareholders' Meeting" (Announcement No.: 2022-054), "Announcement of Resolutions of the 1st Meeting of the 9th Board of Directors of Hengli
Petrochemical" (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 executives
during the reporting period
(III)    Remuneration of Directors, Supervisors and Senior Management
 Decision-making procedures    The compensation plan for the company's directors and the
 for the remuneration of       salary distribution plan for senior executives proposed by the
 directors, supervisors and    Remuneration and Appraisal Committee, and reported to the
 senior executives             Board of Directors for approval
 Basis for Determination of    According to the company's overall operating conditions and
 Remuneration of Directors,    the annual salary level of previous years, it is determined by
 Supervisors and Senior        comparing the director and executive salary levels of similar
 Management                    listed companies and Others companies in the same
                               industry
 Actual Payment of             The payment has been completed according to the results of
 Remuneration to Directors,    the performance appraisal. For details, please refer to the
 Supervisors and Senior        "Statement of Shareholding Changes and Remuneration of
 Management                    Directors, Supervisors and Senior Management"
 Total remuneration actually   8.0495 million yuan
 received by all directors,
 supervisors and senior
 management at the end of
 the reporting period
(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               election           General Election of
                          Director                                     the Board of
                                                                       Directors
 Xue Wenliang             Independent               election           General Election of
                          Director                                     the Board of
                                                                       Directors
 Wu Yongdong              Independent               election           General Election of
                          Director                                     the Board of
                                                                       Directors
 Kang Yunqiu              Chairman of the           election           General Election of
                          Supervisory Board                            the Board of
                                                                       Supervisors
 Shen Guohua              Supervisor                election           General Election of
                                                                       the Board of
                                                                       Supervisors
 Tang Fangming            Employee                  election           General Election of
                          Supervisor                                   the Board of
                                                                       Supervisors
 Li Li                    Independent               resign             Served as
                          Director                                     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               resign           Served as
                        Director                                   independent director
                                                                   of the company for 6
                                                                   years
 Wang Weiming           Chairman of the           resign           General Election of
                        Supervisory Board                          the Board of
                                                                   Supervisors
 Xu Yinfei              Supervisor                resign           General Election of
                                                                   the Board of
                                                                   Supervisors
 Mo Youjian             Employee                  resign           General Election of
                        Supervisor                                 the Board of
                                                                   Supervisors
 Liu Jian               Deputy General            resign           Company work
                        Manager                                    arrangement
IV.  Relevant information on board meetings held during the reporting period
                      Date of
   Meeting session                                 Meeting resolutions
                     Meeting
 Announcement of    2022-12-29 "Proposal on the Appointment of the General Manager of
 Resolutions of the             the Company"
 Sixth Meeting of
 the Ninth Board of
 Directors
 Announcement on 2022-10-28 "2022 Third Quarter Report"
 Resolutions of the
 Fifth Meeting of
 the Ninth Board of
 Directors
 Announcement on 2022-08-15 "2022 Semi-Annual Report" Full Text and Abstract
 Resolutions of the
 Fourth Meeting of
 the Ninth Board of
 Directors
 Announcement on 2022-06-02 "Proposal on Purchasing Assets and Related
 Resolutions of the             Transactions"
 Third Meeting of
 the Ninth Board of
 Directors
 Announcement on 2022-04-29 1. "First Quarter Report 2022"
 Resolutions of the             2. "Proposal on Revising the Corporate Governance
 Second Meeting of              System"
 the Ninth Board of
 Directors
 Announcement on 2022-04-27 1. "Proposal on the Election of the Chairman of the
 Resolutions of the             Company"
 First Meeting of               2. "Proposal on Election of Members of Special
 the Ninth Board of             Committees of the Ninth Board of Directors"
 Directors                      3. "Proposal on the Appointment of the General Manager
                                of the Company"
                                  Secretary to the Board of Directors"
                                  Deputy General Manager and Chief Financial Officer"
                                  Securities Affairs Representative"
Announcement on      2022-04-06   1. "2021 General Manager Work Report"
Resolutions of the                2. "2021 Annual Work Report of the Board of Directors"
Twenty-eighth                     3. "2021 Annual Report" and its summary
Meeting of the                    4. "2021 Annual Financial Final Account Report"
Eighth Board of                   5. "Profit Distribution Plan for 2021"
Directors                         6. "Company's 2021 Internal Control Evaluation Report"
                                  Management of the Company in 2021"
                                  Transactions in 2022"
                                  Trading Business in 2022"
                                  Investment Plan for 2022"
                                  from Banks and Other Financial Institutions in 2022"
                                  Firms"
                                  Candidates for the Ninth Board of Directors"
                                  Candidates for the Ninth Board of Directors"
                                  Ninth Board of Directors of the Company"
                                  Charter Annex"
                                  Independent Directors of the Company>"
                                  Transactions"
                                  General Meeting of Shareholders"
Announcement on      2022-03-09   1. "Proposal on the Fourth Phase Repurchase Report of
Resolutions of the                Shares Repurchased by Centralized Bidding Transactions"
Twenty-Seventh                    2. "Proposal on authorizing the company's management to
Meeting of the                    handle matters related to this Share repurchase"
Eighth Board of
Directors
Announcement on      2022-03-03   1. "Hengli Petrochemical Co., Ltd. Phase Six Employee
Resolutions of the                Stock Ownership Plan (Draft) " and its summary
Twenty-sixth                      2. "Hengli Petrochemical Co., Ltd. Sixth Phase Employee
Meeting of the                    Stock Ownership Plan Management Measures"
Eighth Board of                   3. "Proposal on Proposing to the General Meeting of
Directors                         Shareholders to Authorize the Board of Directors to Handle
                                  Matters Related to the Employee Stock Ownership Plan"
                                  Repurchase in 2020"
                                         Meeting of Shareholders in 2022"
 Announcement on        2022-01-26       1. "Proposal on Investment and Construction of 16010, 000
 Resolutions of the                      tons/year High Performance Resin and New Material
 Twenty-fifth                            Project"
 Meeting of the                          2. "Proposal on Investing in the Construction of a High-
 Eighth Board of                         performance polyester project with an annual output of 2.6
 Directors                               million tons"
                                         General Meeting of Shareholders in 2022"
V. Performance of duties by directors
(I) Participation of Directors in the Board of Directors and General Meetings of
    Shareholders
                                                                                              Participati
                                                                                               on in the
                                                                                               general
                                     Participation in the board of directors                   meeting
                                                                                                  of
                                                                                              sharehold
             Whether                                                                             ers
 Directo
            independ                                                                   Did
   r's
                ent                                                                    not    Attendan
 name                   Numb
             director                         Participatio                           attend     ce at
                         er of       In-                         Entruste   Numbe
                                                 n by                                  two     general
                        board     person                             d        r of
                                               means of                              meetin   meetings
                        meetin    attenda                        attenda    absenc
                                              communica                               gs in       of
                        gs this     nce                            nce         es
                                                 tion                                person   sharehold
                         year
                                                                                      in a       ers
                                                                                      row
    Fan
  Hongw        No         10         10             0               0         0       No          4
     ei
 Li Feng       No         10         10             0               0         0       No          4
   Gong
               No         10         10             9               0         0       No          2
    Tao
    Liu
               No         10         10             8               0         0       No          1
  Dunlei
  Liu Jun     Yes         6          6              5               0         0       No          0
    Xue
  Wenlia      Yes         6          6              5               0         0       No          0
     ng
    Wu
 Yongdo       Yes         6          6              5               0         0       No          0
     ng
    Li Li
(resigned     Yes         4          4              3               0         0       No          0
£©
     Fu
  Yuanlu
      e       Yes         4          4              3               0         0       No          0
(resigned
      )
  Cheng
              Yes         4          4              3               0         0       No          1
  Longdi
(resigned
     )
 Number of board meetings held during the year        10
 Including: Number of on-site meetings                0
 Number of meetings held by means of                  2
 communication
 Number of meetings held on site combined             8
 with communication
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
                                                                           Material
                                                                                         Other
   Date of                                                               comments
                                   Meeting content                                    performance
   meeting                                                                  and
                                                                                        of duties
                                                                        suggestions
 March 20,       The second annual audit communication meeting          Nil           Nil
                 the preliminary audit opinion to be issued by the
                 accountant for the annual audit on the company's
                 financial accounting statements.
 April 6, 2022   Reviewed the "Company's 2021 Financial                 Nil           Nil
                 Accounting Statement", "Summary Report of the
                 Audit Committee of the Board of Directors on the
                 an Accounting Firm", "2021 Annual Report and Its
                 Summary", "Proposal on the Estimated Situation
                 of Routine Related Party Transactions in 2022"
 April 29,       Review the "2022 First Quarterly Report" and           Nil           Nil
 August 15,      Review the "2022 Semi-Annual Report" and issue         Nil           Nil
 October 28,     Review the "2022 Third Quarterly Report" and           Nil           Nil
 December        Held the first annual review communication             Nil           Nil
(3). During the reporting period, the Nomination Committee held 3 meetings
                                                                           Material
                                                                                         Other
   Date of                                                               comments
                                   Meeting content                                    performance
   meeting                                                                  and
                                                                                        of duties
                                                                        suggestions
 April 6,        Review the qualifications of director candidates for   Nil           Nil
 April 27,       Review the qualifications of candidates for senior     Nil           Nil
                 company
 December        Review the qualifications of the company's general   Nil            Nil
(4). During the reporting period, the Remuneration and Appraisal Committee held 1
     meeting
                                                                         Material
                                                                                        Other
   Date of                                                              comments
                                   Meeting content                                   performance
   meeting                                                                 and
                                                                                       of duties
                                                                       suggestions
 April 5, 2022    Reviewed the "Proposal on the Company's 2021         Nil           Nil
                  Directors and Senior Managers' Remuneration"
                  and the "Proposal on the Company's Ninth Board
                  of Directors' Remuneration Plan"
(5). During the reporting period, the Strategy and Investment Committee held 1
     meeting
                                                                         Material
                                                                                        Other
   Date of                                                              comments
                                   Meeting content                                   performance
   meeting                                                                 and
                                                                                       of duties
                                                                       suggestions
 January 25,      Reviewed the "Proposal on Investment and             Nil           Nil
                  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"
VII. Explanation of the Board of Supervisors¡¯ discovery of risks in the company
The Supervisory Committee had no objection to the supervisory matters during the
reporting 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                                                31
 company
 The number of employees in the main subsidiary                                            28, 075
 Total Number of Employees                                                                 38, 550
 Number of retired employees whose parent company                                              359
 and main subsidiaries need to bear the expenses
                                      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 policy
     The company has established a legal, standardized, and effective salary and job
grading system, taking into account the internal and external labor market conditions,
regional and industry differences, and the value of employee positions. The principles
guiding the system are "competitiveness externally, fairness internally, and protection of
employee development space." The grading and salary determination are based on factors
such as responsibilities, capabilities, and performance contributions. Each subsidiary
company refines and implements specific compensation plans, promotion channels, and
assessment indicators that are suitable for its own development, based on its business
scope, 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 shift
allowances, management allowances, skill allowances, etc. The company also provides
social insurance and housing fund contributions for employees, offers free entry medical
examinations, free work meals, holiday allowances, birthday cakes, etc. Annual salary
increases are determined based on market benchmarks and the company's salary range,
while annual bonuses are distributed based on company performance and individual
achievements. The fair, reasonable, and competitive compensation system aims to attract
and retain outstanding talents, provide employees with a sense of belonging and identity,
motivate their sense of responsibility and enthusiasm, and promote the mutual enhancement
of 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 dividend
policy. 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              YES
 set by the shareholders' meeting resolutions?
 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         YES
 roles?
 Do minority shareholders have sufficient opportunities to express their                 YES
 opinions and demands, and have their legal rights and interests been
 adequately protected?
(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           Purpose and utilization plan of
    company¡¯s profit available for shareholders to                 undistributed profits
       distribute is positive, but the reason for not
         proposing a cash profit distribution plan
 During the current year, the company repurchased          The main purpose of the funds is to
 shares through a centralized bidding process with a       support the company's ongoing projects,
 total amount of 2 billion yuan. According to the          including a 1.6 million tons/year high-
 relevant provisions of the "Shanghai Stock                performance resin and new materials
 Exchange Listed Company Self-discipline                   project, a 300, 000 tons/year adipic acid
 Supervision Guidelines No. 7 - Repurchase of              project for Hengli Chemical's new
 Shares, " the above-mentioned amount is treated           materials, an 800, 000 tons/year functional
 as equivalent to cash dividends and accounts for          film and functional plastics project for
 over 80% of the net profit. This is in line with the      Jiangsu Kanghui New Materials, a 600,
 requirements stated in the company's Articles of          000 tons/year BDO and related project,
 Association and the company's "Shareholder                and a lithium battery separator project.
 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.
(IV) Profit distribution and conversion of capital reserve into share capital during the
     reporting 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
 Ratio of net profit attributable to ordinary shareholders of listed companies in the
 consolidated statements (%)
 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 (%)
X. The status and impact of the company's equity incentive plan, employee stock
    ownership 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        For details, please refer to the "Hengli Petrochemical
 stock ownership plan was sold        Announcement on the Completion and Termination of the
 and terminated                       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        For details, please refer to the "Hengli Petrochemical Phase
 stock ownership plan was            Six Employee Stock Ownership Plan (Draft) " and other
 launched                            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   For details, please refer to the "Hengli Petrochemical
 company's fifth employee stock      Indicative Announcement Regarding the Expiration of the
 ownership plan expires              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        For details, please refer to the "Hengli Petrochemical
 stock ownership plan completed      Announcement on the Completion of Stock Purchase under
 the stock purchase                  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        For details, please refer to the "Announcement of Hengli
 management organization of the      Petrochemical on Changing the Asset Management
 third and fifth employee stock      Organization of the Third and Fifth Employee Stock Ownership
 ownership plans                     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 reporting
       period
     The company has established a senior management performance evaluation and
incentive mechanism, with a compensation and assessment committee under the board of
directors. This committee is responsible for studying and formulating the standards and
procedures for evaluating senior management personnel and reviewing their compensation
policies and plans. The company continuously improves its long-term incentive policies
based on actual circumstances, aiming to motivate senior management to fulfill their
responsibilities diligently and responsibly.
XI. Construction and implementation of internal control system during the reporting
     period
     During the reporting period, the company strictly adhered to various laws and
regulations, such as the "Company Law, " "Basic Norms for Enterprise Internal Control, "
"Listing Rules of the Shanghai Stock Exchange, " and "Self-regulatory Guidelines for Listed
Companies of the Shanghai Stock Exchange - Standard Operations." The company also
followed internal control system standards to operate and manage risks effectively. The
company established a robust internal control management system, taking into account
industry characteristics and actual business operations. The internal control system was
continuously optimized and improved to ensure the lawful and compliant operation and
management of the company, asset security, and the accuracy and integrity of financial
reporting 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 has
established and continuously improved a modern corporate system. Through the
shareholders' meeting, the board of directors, and the supervisory board, effective
management of subsidiary companies has been implemented. The company has developed
a comprehensive management system that covers its major business areas, achieving
institutionalization of management practices. The management system has also been
disseminated to the subsidiary companies, which have formulated their own management
systems based on it.
XIII.    Explanation on the relevant situation of the internal control audit report
    According to the "Basic Norms for Enterprise Internal Control" and its supporting
guidelines, as well as other internal control regulatory requirements, the company, in
conjunction with its internal control system and evaluation methods, conducted an
assessment of the effectiveness of internal controls as of the benchmark date for the internal
control evaluation report. The company prepared the "2022 Annual Internal Control
Evaluation Report" in accordance with the format, content, and requirements specified by
the China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange
(SSE).
    The company engaged an external auditing firm, Zhong Hui Certified Public
Accountants LLP (Special General Partnership), to perform an internal control audit. The
audit firm issued a standard unqualified opinion in the internal control audit report.
    Whether to disclose the internal control audit report: Yes
    Type of internal control audit report opinion: standard unqualified opinion
XIV. The rectification of problems in the self-examination of the special action of listed
    company governance
     During the reporting period, there were no significant differences between the
company's corporate governance status and the relevant regulations of the China Securities
Regulatory Commission (CSRC) regarding the governance of listed companies. The
company will continue to enhance its corporate governance level and improve its
governance 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 Responsibility
I.   Environmental information
 Whether to establish relevant mechanisms for                                                 Yes
 environmental protection
 Investment in environmental protection funds                                          24, 776.30
 during the reporting period (unit: ten thousand
 yuan)
(I) Explanation on the environmental protection status of companies and their major
     subsidiaries that belong to the key pollutant discharge units announced by the
     environmental protection department
     The Company pays great heed to environmental protection, and strictly acts upon the
Environmental Protection Law of the People¡¯s Republic of China, the Law of the People¡¯s
Republic of China on Promoting Clean Production, and the Law of the People¡¯s Republic of
China on the Prevention and Control of Environmental Pollution by Solid Wastes and other
relevant laws and regulations. The key pollutant discharging companies and their subsidiaries
mainly include Hengli Chemical Fiber, Susheng Thermal Power, Deli Chemical Fiber, Hengke
Advanced Materials, Kanghui New Material, Hengli Petrochemical (Dalian), Hengli
Petrochemical Refining and Hengli Petrochemical Chemical.
     During the reporting period, each pollutant discharging subsidiary carried out self-monitoring
of their environmental impact and engaged professional third parties to test various pollutant
factors. The test results showed that the emission concentrations of various pollutants were in
compliance 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. (Due
to the switch between old and new pollutant discharge licenses, there were some changes in the
approved total annual pollutant discharge amount and discharge calculation methods of some
key pollutant discharge subsidiaries.)
     The specific pollutant discharge is as follows:
                                  Th
                                   e                                                                         Ex
                            Nu
                                  dis                                                                        ce
                            m
                       E          tri                                                                        ssi
Ty                          be
                      mi          bu                                    Approved                             ve
pe       Main                r                               Total
                      ssi         tio                                      total                              e
of     Pollutants           of                             emissio
                      on           n      Emission                      emission     Pollutant Emission      mi
po        and               dis                               ns
                      m           of    Concentration                        s      Standards Executed       ssi
llu   Characteristi         ch                             (tons/ye
                      et          dis                                   (tons/yea                            on
ta    c Pollutants          ar                                ar)
                      ho          ch                                         r)                              sit
nt                          ge
                       d          ar                                                                         ua
                            po
                                  ge                                                                         tio
                            rts
                                  po                                                                          n
                                  rts
      Wastewater
                                              /                51038        /
        volume        In                                                            GB31572-2015
       Chemical       dir                                                           Synthetic Resin
W
        oxygen        ec                 16.67mg/L             0.8492    8.623      Industrial Pollutant
as
       demand          t                                                            Discharge Standard,
te
       Ammonia         e    1                                                       Wujiang Shengze
w                                         0.70mg/L             0.0417    0.675
       nitrogen       mi                                                            Water Treatment
at                                In
         Total        ssi                                                           Development Co.,
er                                th      0.06mg/L             0.003     0.0684
      Phosphorus      on                                                            Ltd. Takeover
                                   e
         Total         s                                                            Standard
                                  fa      7.95mg/L             0.5861    5.748
       nitrogen                   ct                                                                         Nil
         Sulfur                   or    9.137mg/m?             16.04     152.25
        dioxide                    y                                                GB13271-2014 Boiler
                      Dir
Ex     Nitrogen       ec    3     ar                                                Air Pollutant Emission
ha      oxides         t          ea                                                Standard
us      Particles      e                2.340mg/m?              4.2      30.16
 t                    mi
                                                                                    DB32/4041-2021
ga                    ssi
                                                                                    Comprehensive
 s                    on
         VOCs               2           0.608mg/m?             0.7417    1.9008     Discharge Standard
                       s
                                                                                    of Air Pollutants in
                                                                                    Jiangsu Province
                                        Th                                                                           Ex
                                         e                                                                           ce
                                Nu
                                        dis                                                                          ss
                                m
                                        tri                                                                           iv
Ty                      E       be
                                        bu                                    Approv                                   e
pe        Main          mi       r                                 Total
                                        tio                                  ed total                                  e
of      Pollutants     ssi      of               Emission        emissio
                                         n                                   emissio       Pollutant Emission        mi
po         and         on       dis             Concentratio        ns
                                        of                                      ns        Standards Executed         ss
llu    Characteristi   me       ch                  n            (tons/ye
                                        dis                                  (tons/ye                                 io
ta     c Pollutants    tho      ar                                  ar)
                                        ch                                      ar)                                    n
nt                      d       ge
                                        ar                                                                           sit
                                po
                                        ge                                                                           ua
                                rts
                                        po                                                                           tio
                                        rts                                                                            n
                       Ind
W
                        ire
as                                                                                      31962-2015,
                         ct
te     Wastewater                                                                       comprehensive sewage
                       em         1                               10733      11000
w       volume                                                                          discharge standard
                       iss
at                                      In                                              GB8978-1996
                       ion
er                                      th
                         s
                                         e
          Sulfur                        fa      5.71 mg/m?        26.056     434.337    Air Pollutant Emission
         dioxide                        ct                                                                           Nil
         Nitrogen                                                                       Standards for Coal-fired
Ex                     Dir        3     or      30.91 mg/m?      134.136     868.674
          oxides                                                                        Power Plants
ha                     ect               y
                                                                                        DB32/4148¡ª2021
us       Particles     em               ar      1.64 mg/m?         7.185     172.424
 t                     iss              ea
                                                                                        DB32/4041-2021
ga                     ion
                                                                                        Comprehensive
 s        VOCs          s         2                                    /        /       Discharge Standard of Air
                                                                                        Pollutants in Jiangsu
                                                                                        Province
                                      Th
                                                                                                                      E
                                       e
                       E                                                                                             xc
                              Nu      di
                       m                                                                                             es
                              m       str
                       is                                                                                             si
Ty                            be      ib
                       si                                                     Approv                                 ve
pe        Main                 r      uti
                       o                       Emission                      ed total                                 e
of      Pollutants            of      on                          Total
                       n                      Concentratio                   emissio        Pollutant Emission       mi
po         and                dis     of                        emissions
                       m                          n                             ns         Standards Executed        ss
llu    Characteristi          ch      di                       (tons/year)
                       e                                                     (tons/ye                                io
ta     c Pollutants           ar      sc
                        t                                                       ar)                                   n
nt                            ge      ha
                       h                                                                                             sit
                              po      rg
                       o                                                                                             ua
                              rts      e
                       d                                                                                             tio
                                      po
                                                                                                                      n
                                      rts
W      Wastewater       I             In
                                                   /           82592.114     105160
as       volume        n              th                                                GB31572-2015 Synthetic
                                                                                                                     Ni
te      Chemical       d      1        e                                                Resin Industrial Pollutant
                                                                                                                     l
w        oxygen        ir             fa      24.528 mg/L      2.025862       42.06     Discharge Standard
at      demand         e               ct
er                c       or
                  t        y
                 e        ar
                 m        ea
     Ammonia
                 is            0.352mg/L        0.029141     0.601
     nitrogen
                 si
                 o
                 n
                  s
      Sulfur     D                                                   GB13271-2014 Boiler Air
     dioxide     ir                                                  Pollutant Emission
     Nitrogen    e             104.78mg/m                            Standard
E     oxides      c   3             ?                                GB16297-1996
xh                t                                                  comprehensive
au   Particles   e             2.316 mg/m?       0.42264     6.75    discharge standard of air
st               m                                                   pollutants
ga               is
                                                                     GB37822-2019 Volatile
 s               si
                                                                     Organic Compound
      VOCs       o    2             /                   /      /
                                                                     Fugitive Emission
                 n
                                                                     Control Standard
                  s
                                  Th                                                                        E
                                   e                                                                       xc
                            Nu
                                  dis                                                                      es
                            m
                       E          tri                                                                       si
Ty                          be
          Main        mi          bu                                   Approv                              ve
pe                           r                             Total
        Pollutants    ssi         tio                                 ed total                              e
 of                         of           Emission        emissio
           and        on           n                                  emissio        Pollutant Emission    mi
po                          dis         Concentratio        ns
        Characteris   m           of                                     ns         Standards Executed     ss
llut                        ch              n            (tons/ye
            tic       et          dis                                 (tons/ye                             io
an                          ar                              ar)
        Pollutants    ho          ch                                     ar)                                n
  t                         ge
                       d          ar                                                                       sit
                            po
                                  ge                                                                       ua
                            rts
                                  po                                                                       tio
                                  rts                                                                       n
        Wastewate                 Fe
                                             /           425950       659400                 /
         r volume                 nc
                                   e                                             Standards in Table 2 of
                                  on                                             DB21-1627-2008
         Chemical                 th                                             Liaoning Provincial
          oxygen                   e    12.8223mg/L        8.471      28.808
         demand
                                                                                 Comprehensive
                                  so
                                  ut
                                                                                 Wastewater Discharge
W                                                                                Standard
                                   h
as                                                                               Standards in Table 2 of
                                  sid
 te                         1
                                   e                                             DB21-1627-2008
wa
                                  of                                             Liaoning Provincial
ter                   Co          th                                             Comprehensive
                      nti          e
         Ammonia      nu                                                         Wastewater Discharge
                                  fa    0.337 mg/L         0.309      2.9109
         nitrogen     ou                                                         Standard
                                   ct                                                                      Ni
                       s          or                                                                       l
                       e           y
                      mi          ar
                      ssi         ea
                      on
                                                                                 GB31572-2015
                                  Fa
           Sulfur
                                   ct
                                                                                 Synthetic Resin
          dioxide                                                                Industrial Pollutant
                                  or
Ex                                                                               Discharge Standard
                                   y
ha                                                                               GB31572-2015
                                  ce
us
 t
         Nitrogen           1     ntr                                            Synthetic Resin
          oxides                   al                                            Industrial Pollutant
ga
                                  chi                                            Discharge Standard
 s
                                  m                                              GB13271-2014 Boiler
                                  ne                                  50.5916
         Particles                      2.55 mg/m?        27.448
                                                                                 Air Pollutant Emission
                                   y
                                                                                 Standard
            Main                           The                               Approv                     Excess
                                Numb                                Total
Type     Pollutants   Emissi             distribut                           ed total    Pollutant         ive
                                 er of                 Emission    emissio
  of         and       on                 ion of                             emissio    Emission        emissi
                                discha                 Concentr       ns
pollut   Character    metho              dischar                                ns      Standards          on
                                  rge                   ation      (tons/y
 ant         istic      d                   ge                               (tons/y    Executed        situatio
                                 ports                               ear)
         Pollutants                        ports                               ear)                         n
         Wastewat                                                                       Sewage
                                                               /   940744       /
         er volume                                                                      discharged
         Chemical                                                                       into urban
          oxygen                                                    15.2     281.95     sewer
                                                         mg/L
          demand                                                                        water
         Ammonia                                                                        quality
          nitrogen
            Total                                                                       GB/T
         Phosphor                                     0.15 mg/L    0.074      0.92      31962-
              us                                                                        2015,
                                                                                        textile
                                                                                        dyeing and
                                                                                        finishing
                                                                                        industry
                                                                                        water
                                                                                        pollutant
                                                                                        discharge
                                                                                        standard
                                                                                        GB 4287-
                      Indirec
Wast                                                                                    4287-2012,
                         t
 e                                1                                                     comprehen
                      emissi
water                                                                                   sive
                        ons
                                          In the                                        sewage
                                         factory                                        discharge         Nil
                                           area                                         standard
           Total                                                                        GB8978-
         nitrogen                                                                       1996,
                                                                                        petrochemi
                                                                                        cal industry
                                                                                        pollutant
                                                                                        discharge
                                                                                        standard
                                                                                        GB 31571-
                                                                                        Synthetic
                                                                                        Resin
                                                                                        Industrial
                                                                                        Pollutant
                                                                                        Discharge
                                                                                        Standard
                                                                                        GB 31572-
          Sulfur                                         2.04                           "Emission
         dioxide                                        mg/m3                           Standards
Exha                  Direct
         Nitrogen                                        18.4                           of        Air
 ust                  emissi      1                                 8.82     349.39
          oxides                                        mg/m3                           Pollutants
 gas                   ons
         Particles                                                  4.44      52.41
                                                        mg/m3                           (DB32/438
                                               Emission
                                               Standards
                                               for
                                               Industrial
                                               Pollutants
                                               of
                                               Synthetic
                                               Resin GB
                                               "Emission
                                               Standards
                                               for      Air
                                               Pollutants
                                               for Boilers"
                                               (DB32/438
                                               Comprehe
                                               nsive
                                               Emission
                                               Standards
                                               for      Air
                                               Pollutants
                                               DB32/4041
                                               ¡ª2021
                                               Petrochemi
                                               cal Industry
                                               Pollutant
                                               Discharge
                                               Standard
                                               GB 31571
                                               Pollutant
                                               Discharge
                                               Standard
                                               GB14554-
                                               DB32/4041
                                               -2021
                                               Comprehe
                                               nsive
VOCs   1                        0.66   28.86
                    mg/m3                      Standard
                                               of       Air
                                               Pollutants
                                               in Jiangsu
                                               Province
                                         T
                                         h
                                         e
                                         d
                                          i
                                         s
                                         tr
                                          i
                                         b                                                                               Ex
                           Nu
                                         u                                                                               ce
                           m
                      E                  ti                                                                              ssi
Ty                         be
         Main        mi                  o                                             Approve                           ve
pe                          r
       Pollutants    ssi                 n                                              d total                           e
 of                        of                            Emission           Total
          and        on                  o                                             emissio      Pollutant Emission   mi
pol                        dis                          Concentratio      emissions
       Characteris   m                    f                                               ns       Standards Executed    ssi
lut                        ch                               n            (tons/year)
           tic       et                  d                                             (tons/ye                          on
an                         ar
       Pollutants    ho                   i                                               ar)                            sit
  t                        ge
                      d                  s                                                                               ua
                           po
                                         c                                                                               tio
                           rts
                                         h                                                                                n
                                         a
                                         r
                                         g
                                         e
                                         p
                                         o
                                         rt
                                         s
       Wastewate
        r volume
                                                                                                  DB21/1627-2008
        Chemical
                                                                                                  Comprehensive
         oxygen            1                             18.65mg/L         39.306      249.23
        demand
                                                                                                  Wastewater
                                                                                                  Discharge Standard
                     Co                                                                           GB31570-2015
                                 DW001 discharge port
                     nti                                                                          Pollutant Discharge
W       Ammonia      nu    1                             0.187mg/L          0.394       19.86     Standard for
ast     nitrogen     ou                                                                           Petroleum Refining
 e                    s
                                                                                                  Industry
wa                    e
ter                  mi                                                                           GB31570-2015
         Total       ssi                                                                          Pollutant Discharge
       Phosphoru     on    1                             0.223mg/L           0.47         /       Standard for
           s                                                                                      Petroleum Refining
                                                                                                                         Nil
                                                                                                  Industry
                                                                                                  DB21/1627-2008
          Total                                                                                   Comprehensive
        nitrogen                                                                                  Wastewater
                                                                                                  Discharge Standard
                                                                                                  GB31570-2015
                     Or                                                                           Pollutant Discharge
          Sulfur     ga                                 11.214mg/m?
         dioxide
Ex                   niz                                                                          Petroleum Refining
ha                   ed
                                                                                                  Industry
ust                   e
                                 /
ga                   mi                                                                           GB31570-2015
 s                   ssi                                                                          Pollutant Discharge
        Nitrogen
                     on    15                           30.255mg/m?       2004.638     5064.92    Standard for
         oxides
                      s                                                                           Petroleum Refining
                                                                                                  Industry
                                                                                                     GB31570-2015
                                                                                                     Pollutant Discharge
         Smoke                                          0.669mg/m?
          dust
                                                                                                     Petroleum Refining
                                                                                                     Industry
          Non-
        methane
          total             /                                /             3224.911       3274.58                  /
       hydrocarbo
           ns
                                 Th
                                  e
                           Nu
                                 dis                                                                                         Ex
                           m
                      E          tri                                                                                          ce
Ty                         be
         Main        mi          bu                                                   Approve                                ssi
pe                          r                                                Total
       Pollutants    ssi         tio                                                   d total                                ve
 of                        of                             Emission         emissio
          and        on           n                                                   emissio          Pollutant Emission    em
pol                        dis                           Concentratio         ns
       Characteris   m           of                                                      ns           Standards Executed     iss
lut                        ch                                n             (tons/ye
           tic       et          dis                                                  (tons/ye                               ion
an                         ar                                                 ar)
       Pollutants    ho          ch                                                      ar)                                  sit
  t                        ge
                      d          ar                                                                                          uat
                           po
                                 ge                                                                                          ion
                           rts
                                 po
                                 rts
       Wastewater                                                          170188
        volume                                                             2
                                                                                                    DB21/1627-2008
        Chemical
                                                                                                    "Comprehensive
         oxygen            1                            15.766mg/L         26.016     204.3
        demand                                                                                      Wastewater Discharge
                     Co                                                                             Standard"
                                 DW001 discharge port
                     nti                                                                            GB31571-2015
W       Ammonia      nu                                                                             "Petrochemical
ast                  ou    1                            0.037mg/L          0.061      32.7
        nitrogen                                                                                    Industry     Pollutant
 e                    s
                                                                                                    Discharge Standard"
wa                    e
ter                  mi                                                                             DB21/1627-2008
         Total
                     ssi                                                                            "Comprehensive
       Phosphoru           1                            0.116mg/L          0.197      /
           s         on                                                                             Wastewater Discharge
                                                                                                    Standard"
                                                                                                    DB21/1627-2008
          Total                                                                                     "Comprehensive
        nitrogen                                                                                    Wastewater Discharge
                                                                                                    Standard"
                                                                                                    GB31571-2015
          Sulfur
                                                                                                    "Petrochemical
         dioxide                                                                                    Industry     Pollutant
                     Or                                                                             Discharge Standard"
                     ga                                                                             GB31571-2015
Ex                   niz
        Nitrogen                                        43.916mg/m?
                                                                                                    "Petrochemical
ha                   ed    4                                               423.495    974.4
         oxides                                                                                     Industry     Pollutant
ust                   e                /
ga                   mi                                                                             Discharge Standard"
 s                   ssi                                                                            GB31571-2015
                     on                                 1.999mg/m?
                                                                                                    "Petrochemical
       Smoke dust          4                                               7.292      149
                      s                                                                             Industry     Pollutant
                                                                                                    Discharge Standard"
         Non-
        methane
   total
hydrocarbo
    ns
                                 Th
                                  e                                                                                       Ex
                           Nu
                                 dis                                                                                      ce
                           m
                      E          tri                                                                                      ssi
Ty                         be
         Main        mi          bu                                                      Approve                          ve
pe                          r
       Pollutants    ssi         tio                                                      d total                          e
 of                        of                            Emission            Total
          and        on           n                                                      emissio     Pollutant Emission   mi
pol                        dis                          Concentratio       emissions
       Characteris   m           of                                                         ns      Standards Executed    ssi
lut                        ch                               n             (tons/year)
           tic       et          dis                                                     (tons/ye                         on
an                         ar
       Pollutants    ho          ch                                                         ar)                           sit
  t                        ge
                      d          ar                                                                                       ua
                           po
                                 ge                                                                                       tio
                           rts
                                 po                                                                                        n
                                 rts
       Wastewater
        volume
                                                                                                    DB21/1627-2008
        Chemical                                                                                    "Comprehensive
         oxygen            1                            27.021mg/L             303.542     559      Wastewater
        demand                                                                                      Discharge
                                                                                                    Standard"
                     Co                                                                             DB21/1627-2008
                                 DW001 discharge port
                     nti                                                                            "Comprehensive
W       Ammonia      nu
        nitrogen
ast                  ou                                                                             Discharge
 e                    s
                                                                                                    Standard"
wa                    e
ter                  mi                                                                             DB21/1627-2008
         Total       ssi                                                                            "Comprehensive
       Phosphoru     on    1                             0.18mg/L              2.3273       /       Wastewater
           s                                                                                        Discharge
                                                                                                    Standard"
                                                                                                    DB21/1627-2008
                                                                                                    "Comprehensive
          Total
        nitrogen
                                                                                                    Discharge             Nil
                                                                                                    Standard"
                                                                                                    GB31571-2015
                                                                                                    "Petrochemical
          Sulfur                                        15.193mg/m?
         dioxide
                                                                                                    Discharge
                                                                                                    Standard"
                     Or                                                                             GB31571-2015
                     ga                                                                             "Petrochemical
        Nitrogen
Ex                   niz   2                            26.470mg/m?            345.05    682.06     Industry Pollutant
         oxides
ha                   ed                                                                             Discharge
ust                   e                 /                                                           Standard"
ga                   mi                                                                             GB31571-2015
 s                   ssi
                                                                                                    "Petrochemical
                     on
       Smoke dust          2                            0.891mg/m?             11.611    319.52     Industry Pollutant
                      s
                                                                                                    Discharge
                                                                                                    Standard"
          Non-
        methane
                            /                           6.593mg/m?             76.843    914.05              /
          total
       hydrocarbo
           ns
     During the reporting period, the above companies who discharged pollutants all built
their pollutant control facilities following the requirements for environmental impact
assessment of the construction project. Currently, the facilities are under normal operation.
The companies carry out daily maintenance of the facilities to ensure their efficient and
stable operations of keeping emissions within the standards.
     Environmental Protection Administrative Licensing
     During the reporting period, the company's construction and renovation projects have
been accompanied by the preparation of environmental impact assessment reports by
relevant construction units. These reports have received approval from the corresponding
ecological and environmental departments, granting permission for construction. Various
pollution prevention and control facilities (including those for air, water, noise, and solid
waste classification and disposal) and environmental management during the construction
period have been implemented in accordance with the approved content of the
environmental impact assessment report. The company strictly adheres to the "design,
construction, and production simultaneously" system for environmental protection.
     Company          Emergency plan                         Filing party        Filing number
                  ¡¶Jiangsu Hengli Chemical               Suzhou Wujiang
      Hengli                                          Ecological Environment
                  Fiber Co., Ltd. Emergency                                     320509-2022-042-
     Chemical                                                 Bureau
                    plan for environmental                                             M
      Fiber
                       emergencies ¡·
                   ¡¶Jiangsu Deli Chemical                Suqian Sucheng
 Deli Chemical    Fiber Co., Ltd. Emergency           Ecological Environment    321302-2021-006-
      Fiber         plan for environmental                    Bureau                   L
                       emergencies ¡·
                 ¡¶Suzhou Susheng Thermal                 Suzhou Wujiang
     Susheng                                          Ecological Environment
                 Power Co., Ltd. Emergency                                      320509-2020-043-
     Thermal                                                  Bureau
                   plan for environmental                                              M
      Power
                      emergencies ¡·
                   ¡¶Kanghui New Material             Environmental Protection
                    Technology Co., Ltd.             Bureau of Administrative
 Kanghui New                                               Committee of         210881-2021-037-
                    Emergency plan for
   Material                                           Xianrendao Economic              M
                       environmental
                      emergencies ¡·                    Development Zone
                 ¡¶Jiangsu Hengke Advanced               Nantong Tongzhou
      Hengke                                          Ecological Environment
                       Materials Co., Ltd.                                      320682-2020-057-
     Advanced                                                 Bureau
                     Contingency plans for                                             M
     Materials
                 environmental emergencies¡·
     Hengli        ¡¶Hengli Petrochemical                  Dalian Wafangdian
 Petrochemical    (Dalian) Refining Co., Ltd.             (Changxing Island
                                                                                       H
   Refining          Emergency plan for                    Economic Zone)
                         environmental                Ecological Environment
                        emergencies ¡·                         Branch
                   ¡¶Hengli Petrochemical                Dalian Wafangdian
     Hengli                                             (Changxing Island
                 (Dalian) Co., Ltd. Emergency                                  210281-2022-068-
 Petrochemical                                           Economic Zone)
                    plan for environmental                                            H
    (Dalian)                                          Ecological Environment
                        emergencies ¡·
                                                              Branch
                    ¡¶Hengli Petrochemical               Dalian Wafangdian
     Hengli       (Dalian) Chemical Co., Ltd.           (Changxing Island
                                                         Economic Zone)        210281-2022-069-
 Petrochemical       Emergency plan for
                                                      Ecological Environment          H
   Chemical              environmental
                        emergencies ¡·                         Branch
Note: ¡¶ Jiangsu Hengke Advanced Materials Co. Ltd. Risk Contingency Plan for
Environmental Emergencies¡·is in the process of updating.
     The company's key pollutant-emitting subsidiaries under its jurisdiction have developed
environmental monitoring plans in accordance with relevant national self-monitoring
standards and environmental management system requirements. These plans are
submitted to the local environmental regulatory authorities for record-keeping while applying
for pollutant discharge permits. The company regularly organizes its environmental
monitoring station to conduct tests on various pollutants emitted from each workshop's
discharge outlets. For projects where the company lacks testing capabilities, it entrusts third-
party institutions with environmental monitoring qualifications to conduct emission testing for
specific pollutants, such as wastewater and exhaust gases. The company assigns dedicated
personnel to inspect and aggregate data on various pollutant indicators. Additionally, data
analysis is performed to provide timely feedback to relevant departments as a basis for
adjusting process parameters and ensuring compliance with emission standards. This
systematic 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         Not applicable
 (unit: tons)
 Types of carbon reduction measures (such as using        Use carbon reduction technology in the
 clean energy to generate electricity, using carbon       production process, clean energy power
 reduction technologies in the production process,        generation, research and development of
 developing and producing new products that help          new products that help reduce carbon
 reduce carbon emissions, etc.)
Specific note
Please refer to the relevant cases in the "5.3 Resource Conservation" section of the
company's "2022 Annual Corporate Social Responsibility Report, " which was disclosed on
the 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 separately
The company has prepared and disclosed its separate Annual Corporate Social
Responsibility Report for the year 2022. For specific details, please refer to the "2022 Annual
Corporate Social Responsibility Report" disclosed by the company on April 28, 2023, on the
SSE website (www.sse.com.cn).
(II) Specific situation of social responsibility work
    External donation, public       Quantity/Content                          Detail
         welfare projects
 Total investment (ten                               40    Kanghui New Material donated 200, 000
 thousand yuan)                                            yuan each to the Bayuquan District Charity
                                                           Federation of Yingkou City and the
                                                           Gaizhou New Crown Epidemic
                                                           Headquarters.
   Including: capital (ten                           40
 thousand yuan)
     Material discount (ten                            0
 thousand yuan)
 Number of people benefited
 (person)
III. Consolidate and expand the achievements of poverty alleviation and rural
      revitalization
  Poverty Alleviation and Rural     Quantity/Content                         Details
     Revitalization Projects
 Total investment (ten                            53.90
 thousand yuan)
   Including: capital (ten                        52.40    Hengli Petrochemical Refining donated
 thousand yuan)                                            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                         1.50    Hengli Futures is a financial institution in
 thousand yuan)                                            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      Rural revitalization,
 industrial poverty alleviation,   education and
 employment poverty                poverty alleviation
 alleviation, education poverty
 alleviation, etc.)
                                                          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       Han Jian, Fang Sai
 domestic accounting firm
 Consecutive years of audit services of CPAs of           Han Jian (4 years), Fang Sai (1 year)
 domestic accounting firms
                                                     Name                              Remuneration
 Internal control audit accounting   Zhonghui Certified Public Accountants                            60
 firm                                (Special General Partnership)
II. Major litigation and arbitration matters
No major litigation and arbitration matters during the reporting period.
III. Significant related party transactions
(I) Related party transactions related to daily operations
           Matter                                              Index
 Estimated daily related      Please refer to the announcement titled "Hengli Petrochemical
 party transactions in 2022   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
                                      Matter                                                                            Index
 Subsidiary companies Jiangsu Xuanda Polymer Materials Co., Ltd. has                  Please refer to the announcement titled "Hengli Petrochemical
 acquired assets from Nantong Guangzhen Textile Intelligent Technology                Announcement on Subsidiary's Purchase of Assets and Related Party
 Co., Ltd., including a building, ongoing construction projects, engineering          Transactions" (Announcement No.: 2022-002), disclosed on the SSE
 materials, and the rights to use three industrial land plots located in Wujie        website on January 1, 2022.
 Town, Tongzhou District, Nantong City.
 The company has purchased assets related to an apartment and parking                 Please refer to the announcement titled "Hengli Petrochemical
 spaces located in Building B of Victoria Plaza in the Donggang Business              Announcement on Purchase of Assets and Related Party Transactions"
 District of Dalian City, held by Hengli Real Estate (Dalian) Co., Ltd                (Announcement No.: 2022-071), disclosed on the SSE website on June 3,
(III) Guarantee
                                                                                                                            Unit: hundred million yuan Currency: RMB
                                           The company's external guarantees (excluding guarantees for subsidiaries)
         Guarantor's                      Guarantee                                              Whether Whether                          Whether
         relationship The party               date               Guarantee                         the        the    Guarantee                to     Relationship
                                Guarantee             Guarantee            Guarantee Collateral                                 Counter
Guarantor with the     being                (signing              expiry                        guarantee guarantee overdue              guarantee with related
                                 amount               start date              type     (if any)                                guarantee
             listed  guaranteed           date of the              date                         has been       is     amount             for related    party
          company                         agreement)                                             fulfilled overdue                         parties
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)
                                                     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)
Amount of debt guarantee provided directly or indirectly for guaranteed
objects whose asset-liability ratio exceeds 70% (D)
The amount of the part where the total guarantee exceeds 50% of the net
assets (E)
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) Overall situation of entrusted financial management
                                               Unit: ten thousand yuan        Currency: RMB
                                                         Outstanding     Overdue uncollected
        Type      Source of fund     Amount
                                                          balance             amount
 Bank financial   Self-owned
 management       funds
 Brokerage        Self-owned
 products         funds
 Others           Self-owned
                  funds
(2) Individual entrusted financial management
                                                                                                                Unit: ten thousand yuan Currency: RMB
                                                                                                                                                 Is    Amount
                                                                                                                                               there      of
                                   Entruste    Entruste                                                                          Whethe
           Entruste    Entruste                                                                                                                 any    provisio
                                        d          d                            Remuner     Annuali   Expec    Actu               r it has
                d          d                                Sour                                                                             entrus      n for
                                   financial   financial            Capital       ation       zed       ted     al     Actual      gone
           financial   financial                            ces                                                                                 ted     impair
 Trustee                           manage      manage               invest      determina   rate of   incom    gain   recover    through
           manage      manage                                of                                                                              financi   ment (if
                                     ment        ment                ment          tion      return    e (if    or       y         legal
             ment        ment                              funds                                                                             al plan     any)
                                      start    maturity                          method                any)    loss               proced
              type      amount                                                                                                                in the
                                      date        date                                                                              ures
                                                                                                                                              future
  Rural      Bank        1,        2022/1/2    2022/2/7     Self-                           2.65%              0.65   Collecte     Yes
 Comme      wealth     000.00         9                    owne                                                          d
  rcial    manage                                            d
  Bank       ment                                          funds
           products
  Rural      Bank        2,        2022/3/3    2022/4/1     Self-                           2.66%              0.19   Collecte     Yes
 Comme      wealth     600.00         1                    owne                                                          d
  rcial    manage                                            d
  Bank       ment                                          funds
           products
 Bank of     Bank        3,        2022/6/9    2022/6/1     Self-                           2.64%              2.14   Collecte     Yes
  China     wealth     700.00                     7        owne                                                          d
           manage                                            d
             ment                                          funds
           products
  Postal     Bank        1,        2022/6/1    2022/6/1     Self-                           1.32%              0.20   Collecte     Yes
 Savings    wealth     120.00         2           7        owne                                                          d
  Bank     manage                                            d
             ment                                          funds
           products
Industri     Bank        1,     2022/7/2   2022/9/9    Self-                        3.15%           5.43   Collecte   Yes
al Bank     wealth     400.00      6                  owne                                                    d
           manage                                       d
             ment                                     funds
           products
Zhesha       Bank        5,     2022/12/   2023/1/4    Self-                                2.30%   0.00   Uncolle    Yes
ng Bank     wealth     500.00     13                  owne                                                  cted
           manage                                       d
             ment                                     funds
           products
Bank of    Structure     2,     2021/12/   2022/12/    Self-                        3.19%           63.2   Collecte   Yes
Ningbo         d       000.00     17         14       owne                                           7        d
           deposits                                     d
                                                      funds
Bank of    Structure     10,    2022/2/1   2022/8/1    Self-                        3.45%           171.   Collecte   Yes
Jiangsu        d       000.00      6          6       owne                                           23       d
           deposits                                     d
                                                      funds
Bank of    Structure     1,     2022/3/1   2023/3/1    Self-                                3.00%   0.00   Uncolle    Yes
Nanjing        d       000.00      6          5       owne                                                  cted
           deposits                                     d
                                                      funds
Guolian    Treasury      15,    2022/12/   2022/12/    Self-                        1.79%           0.74   Collecte   Yes
Securiti     bond      115.60     21         22       owne                                                    d
  es        reverse                                     d
           repurcha                                   funds
               se
Guolian    Treasury      6,     2022/12/   2022/12/    Self-                        2.20%           1.45   Collecte   Yes
Securiti     bond      000.00     22         26       owne                                                    d
  es        reverse                                     d
           repurcha                                   funds
               se
Guolian    Treasury       7,     2022/12/   2022/12/    Self-                        4.19%   0.80   Collecte   Yes
Securiti     bond       000.00     26         27       owne                                            d
  es        reverse                                      d
           repurcha                                    funds
               se
Guolian    Treasury       8,     2022/12/   2022/12/    Self-                        5.17%   8.45   Collecte   Yes
Securiti     bond       521.00     23         30       owne                                            d
  es        reverse                                      d
           repurcha                                    funds
               se
Lianchu     Income        6,     2022/2/8   2022/12/    Self-                        3.80%   200.   Collecte   Yes
Securiti   certificat   000.00                26       owne                                   35       d
   es           e                                        d
                                                       funds
Guolian      Quote        4,     2022/10/   2022/10/    Self-                        1.50%   0.16   Collecte   Yes
Securiti   repurcha     004.30     10         11       owne                                            d
  es          se                                         d
                                                       funds
Guolian      Quote        4,     2022/10/   2022/10/    Self-                        1.50%   0.16   Collecte   Yes
Securiti   repurcha     004.40     11         12       owne                                            d
  es          se                                         d
                                                       funds
               Chapter 7 Share Changes and Shareholders
I. Changes in Shares
During the reporting period, the total number of shares and share capital structure of the
company remained unchanged.
II. Securities Issuance and Listing
(I) Securities issuance as of the reporting period
                                                                  Unit: share Currency: RMB
    Types of                   Issue                                The number
   stocks and                   price                                      of
                  Issuance                 Issue                                   Transaction
      their                      (or                 Listing date transactions
                     date                quantity                                    end date
    derivative                interest                                approved
    securities                  rate)                                 for listing
 Bonds (including corporate bonds, corporate bonds, and non-financial corporate bond financing
 instruments)
 Short-term
 bond
                                        yuan
 Short-term
 bond
                                        yuan
Explanation on securities issuance as of the reporting period (for bonds with different interest
rates during the duration, please explain separately) :
      On November 10, 2021, and November 26, 2021, the company convened the 23rd
meeting of the eighth Board of Directors and the second extraordinary general meeting of
shareholders in 2021. The meetings reviewed and approved the Proposal on Registering
and Issuing Short-Term Financing Bonds, agreeing that the company would apply to the
China Interbank Market Dealers Association to register and issue short-term financing bonds
with 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 Dealers
Association accepted the registration of the company's short-term financing bonds with a
registered amount of 3 billion yuan. The registered quota is valid for a period of 2 years from
the date of the notice.
      On May 31, 2022, the company issued the first tranche of short-term financing bonds
for the year 2022 in the national interbank market. The bonds have a maturity of 1 year, with
a 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 bonds
for the year 2022 in the national interbank market. The bonds have a maturity of 1 year, with
a 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   114, 006
 (accounts)
 The total number of ordinary shareholders at the end of the previous month    113, 210
 before the annual report disclosure date (accounts)
 Total number of preferred shareholders with voting rights restored as of            0
 the end of the reporting period (accounts)
 The total number of preference shareholders whose voting rights have                0
 been restored at the end of the previous month before the annual report
 disclosure date (accounts)
(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              Changes          Number of                                 Pledge, Mark or Freeze
                                                                                           Number of
                                             during the     shares held at       Ratio                          Situation               Shareholder
                                                                                           restricted
                  (Full name)                reporting      the end of the        (%)                    Share                            nature
                                                                                          shares held                  Quantity
                                              period            period                                   status
                                                                                                                                      Domestic non-
 Hengneng Investment (Dalian) Co., Ltd.                 0    1, 498, 478, 926       21.29           0    None                     0   state-owned
                                                                                                                                      legal person
                                                                                                                                      Domestic non-
 Hengli Group Co., Ltd.                     -155, 000, 000   1, 243, 172, 342       17.66           0   Pledged                       state-owned
                                                                                                                                      legal person
 Hengli Group - Southwest Securities£­21
 Hengli E1 Guarantee and Trust Property     155, 000, 000      857, 440, 000        12.18           0    None                     0   Other
 Account
                                                                                                                                      Domestic
 Fan Hongwei                                 -94, 611, 800     791, 494, 169        11.24           0    None                     0
                                                                                                                                      natural person
                                                                                                                                      Foreign legal
 Tak Shing Li International Holdings Ltd.               0      732, 711, 668        10.41           0    None                     0
                                                                                                                                      person
 Hong Kong Securities Clearing Company
                                              -1, 413, 344     117, 237, 227         1.67           0   Unknown                   0   Other
 Limited
 Xuanyuan Private Equity Fund Investment
 Management (Guangdong) Co., Ltd. -
 Xuanyuan Yuanbao No. 16 Private
 Securities Investment Fund
 Xuanyuan Private Equity Fund Investment
 Management (Guangdong) Co., Ltd. -
 Xuanyuan Yuanbao No. 15 Private
 Securities Investment Fund
 Dalian State-owned Assets Investment and                                                                                             State-owned
 Operation Group Co., Ltd.                                                                                                            legal entity
Xuanyuan Private Equity Fund Investment
Management (Guangdong) Co., Ltd. -
Xuanyuan Yuanbao No. 17 Private Equity
Securities Investment Fund
                                         Shareholdings of the top ten shareholders not subject to sales restrictions
                      Shareholder's name                           Number of unrestricted tradable shares                  Share type and quantity
                                                                                     held                                  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
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                                          83, 666, 983 Renminbi ordinary shares          83, 666, 983
Securities Investment Fund
Xuanyuan Private Equity Fund Investment Management
(Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 15 Private                                          75, 124, 294 Renminbi ordinary shares          75, 124, 294
Securities Investment Fund
Dalian State-owned Assets Investment and Operation Group
Co., Ltd.
Xuanyuan Private Equity Fund Investment Management
(Guangdong) Co., Ltd. - Xuanyuan Yuanbao No. 17 Private                                          67, 163, 623 Renminbi ordinary shares          67, 163, 623
Equity Securities Investment Fund
Explanation of the repurchase accounts among the top ten         As of the end of the reporting period, none of the top ten shareholders had a corporate
shareholders                                                     repurchase account.
                                                                 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
Explanation on proxy voting rights, proxy voting rights and
                                                                 Securities Co., Ltd. and is registered as the securities holder in the company's shareholder
waiver of voting rights of the above-mentioned shareholders
                                                                 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   Hengli Group, Hengneng Investment, Fan Hongwei and Dechengli are parties acting in
the above-mentioned shareholders                                 concert with each other; the relationship between other shareholders is unknown.
Explanation on preferred stockholders with restored voting
                                                                 During the reporting period, the company had no preferred shareholders.
rights and the number of shares held
IV. Controlling Shareholders and Actual Controllers
(I) Controlling Shareholders
 Name                          Hengli Group Co., Ltd.
 The person in charge or       Chen Jianhua
 legal representative of the
 entity
 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        Hengli Group is the controlling shareholder of the listed company
 domestic and foreign listed   Guangdong Songfa Ceramics Co., Ltd. (stock code: 603268) and the
 companies controlled and      listed company Suzhou Wujiang Tongli Lake Tourist Resort Co., Ltd.
 participated in during the    (stock code: 834199).
 reporting period
 Other information             Nil
    company and the controlling shareholder
Note :
When calculating the shareholding ratio of the controlling shareholder Hengli Group, the
number of shares held indirectly through the "Hengli Group-Southwest Securities-21 Hengli
E1 Guarantee and Trust Property Account" is included.
(II) Actual controller
 Name                                  Chen Jianhua and Fan Hongwei (Spouse)
 Nationality                           China
 Whether to obtain the right of        Nil
 residence in other countries or
 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           Chen Jianhua and Fan Hongwei are the actual controllers of
 companies       that   have    been   the listed company Guangdong Songfa Ceramics Co., Ltd.
 controlled in the past 10 years       (stock code: 603268) and the listed company Suzhou
                                       Wujiang Tongli Lake Tourist Resort Co., Ltd. (stock code:
     company and the actual controller
V.   Other legal person shareholders holding more than 10% of the shares
                                             Unit: ten thousand yuan Currency: RMB
                                                                                      Main
                The person in
                                                                                    operating
 Legal entity     charge or         Date of
                                                                     Registere    business or
 shareholder         legal      establishmen      Organization Code
                                                                     d capital   managemen
    name        representativ           t
                                                                                   t activities,
                e of the entity
                                                                                       etc.
 Hengneng       Fan Hongwei 2014-03-06          91210244089086145                Project
 Investment                                     2                                investment
 (Dalian)                                                              50, 000 (excluding
 Co., Ltd.                                                                       special
                                                                                 approval)
 Tak Shing      Fan Hongwei 2003-08-27          Registration number:             Mainly
 Li                                             859250                           engaged in
 Internationa                                                              500 trade         and
 l Holdings                                                                      investment
 Ltd.                                                                            business
 Other          Hengneng Investment and Tak Shing Li are persons acting in concert with Hengli
 information    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      November 6, 2021
 plan
 The number of shares to be               0.41%
 repurchased and the proportion of
 the total share capital (%)
 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    Not applicable
 to the underlying stocks involved in
 the equity incentive plan (if any)
 The progress of the company's            None
 reduction of repurchased shares by
 means of centralized bidding
 transactions
 Name of share repurchase plan            Share repurchase in the fourth phase
 Disclosure time of share repurchase      March 10, 2022
 plan
 The number of shares to be               0.47-0.71
 repurchased and the proportion of
 the total share capital (%)
 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    Not applicable
 to the underlying stocks involved in
 the equity incentive plan (if any)
 The progress of the company's            None
 reduction of repurchased shares by
 means of centralized bidding
 transactions
                              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 bond
      market
                                                Unit: hundred million yuan Currency: RMB
                                                                                                      Tr   Wheth
                                                                                                      a       er
                                                                                             Inve
                                                                                                      di    there
                                                                                             stor
                                                                                                      n      is a
                                                                                             Suit
                                                                        Paymen                        g    risk of
          Abb    C                                            Interes                        abilit
                               Valu                Bond                    t of     Tradin            M    termin
Bond      revi   o Issuan             Maturit                     t                            y
                                e                 balanc                principal      g              e     ation
name      atio   d ce date            y date                  rate(%                         Arra
                               date                 e                      and      places            c       of
           n     e                                               )                           nge
                                                                        interest                      h    listing
                                                                                             men
                                                                                                      a    transa
                                                                                             ts (if
                                                                                                      ni   ctions
                                                                                             any)
                                                                                                      s
                                                                                                      m
          Hen    4                                                      time
Phase
          gli    2                                                      repaym      China
I
          Petr   2             2022                                     ent of      Interb
Short-               2022-            2023-
          och    8             -06-                   10        3.03    principal   ank                    No
term                 05-31            06-01
          emi    0             01                                       and         Marke
Financ
          cal    2                                                      interest    t
ing
          CP     5                                                      at
Bonds
          Hen    4                                                      time
Phase
          gli    2                                                      repaym      China
II
          Petr   2             2022                                     ent of      Interb
Short-               2022-            2023-
          och    8             -07-                   10        3.18    principal   ank                    No
Term                 07-22            07-25
          emi    0             25                                       and         Marke
Financ
          cal    3                                                      interest    t
ing
          CP     4                                                      at
Bonds
                                                         Name of
      Intermediary name         Office address           Signing         Contact person      Contact number
                                                        Accountant
  China Merchants            China     Merchants                         Sun Ziqi, Guo       0755-88026087
  Bank Co., Ltd.             Bank Building, No.                          Wei                 or        0411-
                             Avenue, Shenzhen
  Beijing Tianyuan           Floor 10, Block B,                          Huang Jingya,       010-57763888
  Law Firm                   Pacific    Insurance                        Sun Chunyan
                             Building,  No.    28
                             Fengsheng Hutong,
                          Xicheng         District,
                          Beijing
 Zhonghui Certified       Room 601, Building A,            Han Jian,        Han Jian               0571-88879999
 Public Accountants       Hualian          Times           Fang Sai
 (Special General         Building, No. 8 Xinye
 Partnership)             Road,         Jianggan
                          District, Hangzhou
 Oriental Jincheng        Floor 12, Block C,                                Guo Zhebiao            010-62299800
 International Credit     Zhaotai International
 Rating Co., Ltd.         Center, No. 3 Chaowai
                          West             Street,
                          Chaoyang        District,
                          Beijing
                                              Unit: hundred million yuan Currency: RMB
                                                                                                  Whether it is
                                                                   Operation                     consistent with
                                                                                 Rectification
                            Total                                  of special                     the purpose,
                                                                                   of illegal
                          amount      Amount      Unused            account                       use plan and
     Bond name                                                                       use of
                          of funds     used       amount           for raised                         other
                                                                                 raised funds
                           raised                                   funds (if                      agreements
                                                                                    (if any)
                                                                      any)                         promised in
                                                                                                 the prospectus
 Petrochemical                   10         10              0                                    Yes
 CP001
 Petrochemical                   10         10              0                                    yes
 CP002
(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
                                                                                      YOY              Reason of
         Key indicators                  2022                      2021
                                                                                   changes(%)           changes
 Net profit excluding
 extraordinary profit and loss
 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
 EBITDA-to-interest coverage
 ratio
 Loan repayment rate (%)                     100.00                    100.00
 Interest coverage rate (%)                  100.00                    100.00