Chairlady's Statement in the 2010/11 Annual Report

Dear Shareholders,

On behalf of Nine Dragons Paper (Holdings) Limited, I hereby present the results for the year of 2010/2011.

During the Year, slow recovery of the global economy, together with the European debt crisis and the quantitative easing policy of the U.S., have resulted in continuous volatility in the external market. Furthermore, inflation concerns have caused China to strengthen its austerity measures, which to a certain extent exerted pressure on the business operations of all industries. As market sentiment became conservative but operating costs remained high, during the Year, the Group operated in a cautious manner, with costs and risks under strict control, while the best efforts were made to ensure the development projects which were planned to be completed this year to commence production as scheduled.

BOTH PRODUCTION CAPACITY AND SALES HIT RECORDS

During the Year, the Group's production capacity scale and sales both hit records. PM29 and PM30 in Taicang base commenced production at the end of 2010, bringing the Group's total design production capacity to 9.52 million tpa. By the end of June this year, the Group had another four new paper machines and three upgraded paper machines commenced production, namely PM3, PM27 and PM28 in Dongguan, PM20 and PM21 in Taicang, and PM31 and PM32 in Tianjin. Currently, the Group's total design production capacity has reached 11.45 million tpa, nearly 24% of which being high-margin products including coated duplex board, food grade and pharmaceutical grade white board, coated linerboard and recycled printing and writing paper (uncoated woodfree paper, copy paper, etc.), representing a substantial increase as compared with around 11% in the last financial year, creating rooms for the Group to elevate its profit in the future.

The Group's sales for the Year reached approximately RMB24.4 billion, representing a growth of approximately 36% as compared with the corresponding period last year and another record high. Gross profit amounted to approximately RMB4.2 billion, representing a growth of approximately 8% as compared with the corresponding period last year. Net profit attributable to equity holders amounted to approximately RMB1.97 billion, with basic earnings per share at approximately RMB0.42. The Board has resolved to recommend the payment of a final dividend of RMB8 cents per share.

YEARS OF PLANNING AND IMPLEMENTATION EFFORTS REACHING A PEAK IN DEVELOPMENT

We believe the current environment of unfavourable market and tight liquidity is an inevitable stage in any economic cycle. Notwithstanding the market volatility faced by the Group during the Year, with years of planning and accumulated resources in management, production and marketing, the Group was able to maintain normal operations while expanding proactively. Compared with other economic systems, China's strong economic foundation will enable it to sustain steady and long-term growth. Furthermore, the PRC Government's "12th 5-Year Program" will benefit those paper manufacturing enterprises which possess economies of scale and emphasize environmental protection. In the past few years, the Group formulated its long-term strategic development plans according to the market situations, and invested billions of RMB every year to materialize these plans, so as to successfully capture valuable market development opportunities.

With the commencement of production of six new paper machines and three upgraded paper machines, 2011 is a landmark year for ND Paper, in which it has reached its peak in development pace since its foundation. Starting from 2012, the Group will migrate to the next stage of steady growth. The Group will further expand its business and raise its profitability return based on the local market supply and demand environment for each production base and the Group's financial conditions.

BALANCE BETWEEN CONTINUOUS LONG-TERM DEVELOPMENT AND FINANCIAL CONDITIONS

The Group's development plan will carry on with a total of 6 new paper machines planned for completion and commencing production successively in the period from 2012 to 2013, bringing the Group's total design production capacity to possibly over 14 million tpa, representing an increase of over 21% as compared with the current production capacity scale. For Tianjin and Chongqing bases, each of them will have a new paper machine of 0.55 million tpa in design production capacity, for the production of coated duplex board, food grade and pharmaceutical grade white board. The new PM35 and PM36 in Quanzhou base and the new PM37 and PM38 in Shenyang base will be used for producing kraftlinerboard and testlinerboard with a total design production capacity of 1.35 million tpa. These 6 new paper machines will not only satisfy demands of customers in those regions in terms of product types and address the problem of insufficient supply in the local markets, they are also in line with the strategic goal of the Group in terms of geographical network, achieving a wider coverage.

After phase 1 construction is completed in the new paper manufacturing bases in Quanzhou and Shenyang, the Group will have a complete network of production bases in China, and there is no more new production base development plan at this stage. In the future, the Group will continue to position Chongqing, Shenyang and Tianjin as the key markets for development, continuously strengthening the Group's coverage in the markets in the Bohai Economic Rim, mid-western regions of China and northeastern China.

Apart from relying on the strong cash flow from operations, the Group's development is also backed by the wholehearted support from the banks. As at the end of June 2011, the Group had cash and cash equivalents of approximately RMB2.5 billion and total undrawn banking facilities of over RMB15.2 billion. In August 2011, the Group had also fully redeemed the senior notes due 2013. In the past few years, rapid development has brought relatively high debt gearing to the Group. In the future, the Group will proactively monitor its debt situation, striking a balance between development and the Group's financial conditions.

STAY FIRM ON SOCIAL OBLIGATIONS IN ACCORDANCE WITH THE GREEN POLICIES OF THE "12TH 5-YEAR PROGRAM"

The PRC Government announced the "12th 5-Year Program" and imposed more stringent requirements for corporate environmental protection, energy conservation and emission reduction. Since its establishment, ND Paper has always been proactively strengthening environmental protection, energy conservation and emission reduction, with its various environmental management parameters outperforming state requirements, and made the best use of every resource during the production and operation processes. Under the "12th 5-Year Program", the Group will cooperate fully with China's related development policies and be continuously devoted to environmental protection. The Group actively expands domestic recovered paper purchase. During the Year, domestic recovered paper purchase accounted for 27.8% of the Group's total recovered paper purchase. It is expected that this percentage will further increase to over 30% in the future. In addition, the Group also actively participates in social services. The "Special Funds for Community Welfare" set up across the bases operated well and a total of RMB12 million was donated for charitable purpose in the Year. The Group was also honoured the title of "National Workers' Pioneer" ("全國工人先鋒號") by All China Federation of Trade Unions during the Year.

OUTLOOK AND ACKNOWLEDGEMENT

Although we maintain a bearish view on the current market and for the coming year, and the Group will keep operating in a conservative and cautious manner, it is our conviction that successful capture of market opportunities and improvement in the areas such as sales, customer base, corporate operations, etc. have to be achieved by the expansion of economies of scale and continual optimization of its resources, and further fueled by improving market conditions and accelerating market consolidation. Little efforts accumulate and help. In the future, the Group can certainly leverage on its long-established advantages. As the most resourceful paper manufacturing enterprise in the PRC, the Group will, by employing its existing strengths in management and finance, make steady development in order to strive for better investment return for its Shareholders in the foreseeable future. On behalf of all members of the Board, I would like to take this opportunity to express my heartfelt gratitude to the management and all the staff for their dedication to and the trust they have bestowed on ND Paper, as well as my appreciation for governments at all levels, investors, banks and business partners who have been supporting the Group all along.

Cheung Yan
Chairlady

Hong Kong, 20 September 2011