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恩捷股份:2021年年度报告(英文版) 下载公告
公告日期:2022-04-13

Announcement No.2022-054

Yunnan Energy New Material Co., Ltd.

2021 Annual Report

April 2022

Section 1 Important Notes, Contents and DefinitionsThe Board of Directors and its members, the Supervisory Committee and its members, and the senior management warrant that the contents ofthe Annual Report are truthful, accurate and complete, without any false statement, misrepresentation or major omission, and that they are jointly andseverally liable for them.Paul Xiaoming Lee, the Company’s legal representative, Li Jian, financial controller, and Deng Jinhuan, financial manager (“AccountingPrincipal”) hereby declare and warrant that the contents of the Financial Statements in this Annual Report are truthful, accurate and complete.

All Directors were present at the Board meeting to review this Annual Report.The forward-looking statements in this Annual Report, such as estimates of operating results, are among the planned matters of the Company,subjected to uncertainties and do not constitute material commitments of the Company to investors. Investors are advised to pay attention toinvestment risks. The future plans, development strategies and other forward-looking descriptions in this Report do not constitute materialcommitments of the Company to investors. Investors and related persons should be fully aware of the risks in connection therewith and shouldunderstand the difference between plan, forecast and commitment. Investors are advised to pay attention to investment risks.For details, please refer to the “3. Risks The Company May Face” under the “XI. Outlook for the Company’s Future Prospects” in the Section 3“Management Discussion and Analysis” of this Report.

1. Risk relating to lithium-ion battery separator film business being regulated by national policies

In recent years, various countries have intensively introduced industry policies to support the development of new energy vehicle industry.Benefiting from policy support, the production value of new energy vehicle industry rapidly increased, driving the rapid development of the upstreamlithium battery industry. If there are significant adverse changes in domestic and overseas subsidy policy, carbon emissions, renewable energyapplication and other relevant industry policies in the future, the relevant policies may have a negative impact on the development of the wholeindustry chain of new energy vehicle, thus having an adverse impact on the upstream lithium-ion battery separator film industry and the Company’soperation result.

2. Fierce market competition risk

The rapid growth of the new energy vehicle industry has driven the fast development of lithium-ion battery separator film in the upstream part.With the high gross profit margin of lithium-ion battery separator film, many domestic enterprises are attracted to invest in this segment. Massiveinvestment funds are driving the rapid increase in production capacity, and this segment is currently becoming increasingly competitive. Theincreasingly fierce competition will have an adverse impact on the results of the Company if it can’t deeply understand the law of industrialdevelopment and make constant efforts for technological innovation and operational management improvement to improve product quality and reduceproduction costs.

3. Risk of price fluctuation of major raw materials

The major raw materials used by the Company are subjected to price fluctuation to some extent, especially polypropylene and polyethylene,whose prices are affected by the strong fluctuations of the international crude oil price. The results of the Company may be adversely affected by thegross profit margin which may be affected to some extent if the prices of major raw materials fluctuate sharply due to the macroeconomicdevelopments, the demand and supply relation for enterprises in the upstream and downstream parts and other factors.

4. Risk relating to construction in progress

The Company needs a great amount of investment funds for the under-construction projects in the production bases, such as Jiangsu Energy,Jiangsu Ruijie, Chongqing Energy, Jiangxi Ruijie, Hungary Project and Jiangxi Enpo. If the Company fails to raise sufficient funds in time, orcomplete the projects and put into operation on schedule, the production, operation and profitability will be adversely affected.

5. Risk of technology leakage and talent outflow

An enterprise engaging in lithium-ion battery separator film requires advanced technology and process, rich management experience and deepunderstanding of the industry. To ensure the ability of constant innovation and the steady growth of business, the Company should have teamsconsisting of steady high-quality employees in scientific research, management and sales. The Company constantly improves the mechanisms fortalent cultivation, incentive, promotion and restriction, but there is still the possibility of the outflow of core employees from the Company. In case ofleakage of the core technology or the departure of core employees, the production and operation of the Company may be adversely affected.

6. Risk of technological progress and alternatives

Lithium-ion battery is mainly used for mobile phones, computers, new energy vehicles and energy storage power stations. After developmentfor many years, lithium-ion batteries have been superior to traditional secondary batteries, such as nickel-cadmium batteries, nickel-hydrogenbatteries and lead-acid batteries with respect to volumetric specific energy, mass specific energy, mass specific power, cycle life, charge/dischargeefficiency, becoming a new energy industry with priority support and key development from the governments. Although the lithium-ion battery iscurrently the first choice for electronics and pure electric vehicles, and other emerging batteries like all-solid-state batteries and other technologies

are not yet mature and still need a long time before commercialization, the market demand for lithium-ion battery will be affected when emergingbatteries such as all-solid-state batteries break the technical bottlenecks, achieve mass production and are fully commercialized, and the lithium-ionbattery separator film in the industry chain will also be affected adversely.

7. Risk of exchange rate fluctuation

The export sales volume of the Company increases constantly as it expands its business scale and gradually strengthens the development in theinternational market. If the RMB exchange rate and the foreign exchange rate in the countries where our products were sold fluctuate sharply in thefuture, the results of the Company may be affected to some extent.

8. Risk of China-US trade frictions

Since 2018, China-US trade disputes have occurred frequently. The U.S. has restricted import of Chinese products by means of tariff increases toreduce the trade deficit with China. Lithium-ion batteries are also among the products subject to the tariff increase. From the perspective of industrychain, the total revenue of the Company has been less affected by the China-US trade disputes because the exports to US account for a smallproportion in the total revenue of the Company. However, if the demands of the downstream customers change due to the China-US trade frictions,the results of the Company may be affected adversely. In addition, some of the Company’s raw materials and mechanical equipment are importedfrom overseas. If the trade frictions between the U.S. and China intensifies and results in changes in the global trade environment, but the Companyfails to make timely adjustments, the stability of the Company’s supply chain may be adversely affected.

9. Risk of COVID-19 pandemic

Since 2020, the COVID-19 pandemic broke out in China and other parts of the world, and spread rapidly. During the Reporting Period, theCompany has resumed normal production and operation in all respects. However, there still exists great uncertainty about the global pandemicsituation and its control, and the overseas spread also imposes risk of importing cases to China. If the international pandemic can’t be controlledeffectively in the future and spread continuously for a long time, the global economy and new energy vehicle industry will be affected adversely, andthe results of the Company will be affected negatively.

10. Management risk after expansion of business scale

With the development of the Company’s business, the scale of the Company’s assets and business will be further expanded, which raises higherrequirements for the management level of the Company. The management risk arises if the capabilities of the Company to manage the production,sales, quality control and risks can’t meet the requirements for scale expansion, and the systems for talent cultivation, organization pattern andmanagement are not further improved.

The Board of Directors has reviewed and approved the following profit distribution scheme:

To distribute a cash dividend of RMB 3.03 (tax inclusive) and 0 bonus share (tax inclusive) forevery 10 shares to all the shareholders, taking 890,821,385 shares as the base, withoutconverting the reserve fund into share capital.

Contents

Section 1 Important Notes, Contents and Definitions ...... 2

Section 2 Company Profile & Key Financial Indicators ...... 9

Section 3 Management Discussion and Analysis ...... 13

Section 4 Corporate Governance ...... 47

Section 5 Environment and Social Responsibility ...... 68

Section 6 Significant Events ...... 72

Section 7 Share Changes and Shareholder Details ...... 107

Section 8 Details about Preferred Shares ...... 116

Section 9 Details about bonds ...... 117

Section 10 Financial Report ...... 122

Documents Available for InspectionI. Financial statements signed and sealed by the legal representative, the person in charge of finance and the person in charge of the accountingdepartment of the Company.II. The original copy of audit report containing the seal of the accounting firm and the signature and seal of the certified public accountant.III. The original copies of all documents and announcements of the Company which have been publicly disclosed in newspapers designated by theChina Securities Regulatory Commission during the Reporting Period.IV. The original text of the 2021 annual report signed by the chairman of the Board of Directors.V. The place where the above documents are maintained: the Company’s Securities Department.

Definitions

Term

TermDefinition
Energy Technology, the listed company, this Company, the CompanyYunnan Energy New Material Co., Ltd.
Actual controller, Paul Xiaoming Lee familyPAUL XIAOMING LEE, Li Xiaohua, Yan Ma, Yanyang Hui, Sherry Lee, JERRY YANG LI
Hongta PlasticYunnan Hongta Plastic Co., Ltd., a wholly-owned subsidiary of the Company
Dexin PaperYunnan Dexin Paper Co., Ltd., a wholly-owned subsidiary of the Company
Hongchuang PackagingYunnan Hongchuang Packaging Co., Ltd., a controlled subsidiary of the Company
Shanghai EnergyShanghai Energy New Material Technology Co., Ltd., a controlled subsidiary of the Company
Zhuhai EnergyZhuhai Energy New Material Technology Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Wuxi EnergyWuxi Energy New Material Technology Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Newmi TechChongqing Energy Newmi Technological Co., Ltd , a controlled subsidiary of Shanghai Energy
Chongqing EnergyChongqing Energy New Material Technology Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Jiangxi TonryJiangxi Tonry New Energy Technology Development Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Jiangxi EnergyJiangxi Energy New Materials Technology Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Jiangxi EnpoJiangxi Enpo New Materials Co., Ltd., formerly known as Jiangxi Mingyang New Material Technology Co., Ltd., a controlled subsidiary of Shanghai Energy
Jiangsu EnergyJiangsu Energy New Materials Technology Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Jiangsu RuijieJiangsu Ruijie New Materials Technology Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Jiangxi RuijieJiangxi Ruijie New Material Technology Co., Ltd., a controlled subsidiary of Jiangsu Ruijie
Suzhou Green PowerSuzhou Green Power New Energy Material Co., Ltd., a wholly-owned subsidiary of Shanghai Energy
Hong Kong ChuangxinChuangxin New Material (Hong Kong) Co., Ltd., a wholly-owned sub-subsidiary of Shanghai Energy
SEMCORP Global Holdings KFTSEMCORP Global Holdings Korlátolt Felel?sség? Társaság (Hungary), a wholly-owned subsidiary of Hong Kong Chuangxin
SEMCORP Hungary KFTSEMCORP Hungary Korlátolt Felel?sség? Társaság (Hungary), a wholly-owned subsidiary of SEMCORP Global Holdings KFT
Heyi InvestmentYuxi Heyi Investment Co., Ltd., a shareholder of the Company holding more than 5% shares
Heli InvestmentYuxi Heli Investment Co., Ltd., a shareholder of the Company
Shanghai HengzouShanghai Hengzou Enterprise Management Office (Limited Partnership), formerly known as Shanghai Hengzou Enterprise Management Office (Limited Partnership), a shareholder of the Company
KunshasiYuxi Kunshasi Plastic Masterbatch Co., Ltd., a joint-stock Company of Hongta Plastic Co., Ltd.

General Meeting of Shareholders

General Meeting of ShareholdersThe general meeting of shareholders of Yunnan Energy New Material Co., Ltd.
Board of DirectorsThe Board of Directors of Yunnan Energy New Material Co., Ltd.
Board of SupervisorsThe Board of Supervisors of Yunnan Energy New Material Co., Ltd.
CSRCChina Securities Regulatory Commission
SZSEShenzhen Stock Exchange
CSDCC Shenzhen BranchShenzhen Branch of China Securities Depository and Clearing Company Limited
Company LawCompany Law of the People’s Republic of China
Securities LawSecurities Law of the People’s Republic of China
Articles of AssociationArticles of Association of Yunnan Energy New Material Co., Ltd.
CITIC SecuritiesCITIC Securities Co., Ltd., the sponsor and financial advisor of the Company
cninfo.comwww.cninfo.com.cn
Media designated for information disclosureChina Securities Journal, Shanghai Securities Journal, Securities Times, Securities Daily, cninfo.com
RMB, RMB 10 thousand, RMB 100 millionRMB, RMB 10 thousand, RMB 100 million
Reporting Period, this Reporting PeriodJanuary 1, 2021 to December 31, 2021
Same period last yearJanuary 1, 2020 to December 31, 2020
Lithium-ion battery, lithium batteryRechargeable battery (chargeable battery), which works through the lithium ion movement between the positive and negative electrodes. It generally used the electrodes contain lithium materials, and is representative of modern high-performance battery.
Lithium-ion battery separator filmIn the structure of lithium battery, the film is one of the key inner components. Its main function is to separate the positive and negative electrodes of the battery, prevent the contact between the two poles and short circuit, and achieve the function of blocking current conduction and preventing the battery from overheating
Aluminum laminated filmAluminum laminated composite film for lithium-ion pouch cell, a packaging material for lithium-ion batteries, which protects the internal materials of lithium-ion batteries
Base filmThe film immersed in the electrolyte of lithium battery is widely distributed with nano-scale micropores on its surface to allow lithium ion to move freely between the positive and negative electrodes
Coating filmThe film with coating treatment
Wet-process, Wet processingA production process of lithium-ion battery separator film, also known as phase separation or thermal phase separation. It is a preparation process of microporous film material by adding small molecules with high boiling point into polyolefin as pore forming agent, heating and melting into a uniform system, extruding the casting piece by screw, extracting the pore forming agent with organic solvent after simultaneous or sequential stretching, and then heat setting with stretching amplitude.
Dry-process, Dry processingAlso known as melt-stretching method, including unilateral stretching and biaxial stretching process, and blow molding process. It refers to a preparation process of melting and extruding polyolefin resin into crystalline thin polymer film, obtaining high crystallinity structure after crystallization treatment and annealing, and then further stretching at high temperature to peel off the crystalline interface to form porous structure.
Cigarette labelCigarette external packing, commonly known as “cigarette box”
Aseptic packagingComposite packaging materials for aseptic filling of dairy products or non-carbonated soft drinks
Special paperSpecial paper refers to paper with special functions, a general term for all kinds of special purpose paper or art paper. The term “special paper” in this Report mainly refers to special packaging paper.
BOPP filmThe film made of high polymer polypropylene melt is drawn at a certain temperature and speed in a special drawing machine before proper process (e.g. corona, coating)

Cigarette film

Cigarette filmBOPP film used for external packing of cigarette, also known as “BOPP cigarette film”
Flat filmBOPP film for general packaging, also known as “BOPP flat film”
PanasonicPanasonic Corporation
SamsungSamsung SDI, a subsidiary of Samsung Group in the field of electronics
LGESLG Energy Solution, Ltd., formerly known as LG Chem, Ltd
CATL Group, CATLContemporary Amperex Technology Co., Ltd.
BYDShenzhen BYD Lithium Battery Co., Ltd.
GOTION HIGH-TECHGOTION HIGH-TECH Co., Ltd.
Farasis EnergyFarasis Energy (Ganzhou) Co., Ltd.
LishenTianjin Lishen Battery Joint-Stock Co., Ltd.
Convertible Bonds, Energy Convertible BondsThe convertible corporate bonds of RMB1.6 billion issued on February 11, 2020, with an abbreviation of “Energy Convertible Bonds, and a code of 128095.
Non-public issuance in 2020Non-public issuance of 69,444,444 new shares and the funds raised (including issuance expenses) of RMB49,999,999,680,000 in 2020
Non-public issuance in 2021Non-public issuance of no more than 267,721,996 new shares and the total amount of funds raised (including issuance expenses) of no more than RMB12.8 billion in 2021

Section 2 Company Profile & Key Financial Indicators

I. Corporate Information

Stock Name

Stock NameEnergy TechnologyStock Code002812
Stock ExchangeShenzhen Stock Exchange
Name of the Company in Chinese云南恩捷新材料股份有限公司
Short Name of the Company in Chinese恩捷股份
Name of the Company in English (If Any)YUNNAN ENERGY NEW MATERIAL CO., LTD.
Short Name of the Company in English (If Any)ENERGY TECHNOLOGY
Legal Representative of the CompanyPaul Xiaoming Lee
Registered AddressNo.125, Fuxian Road, High-tech Zone, Yuxi City, Yunnan Province
Postal Code for Registered Address653100
Historical Changes of the Registered Address of the CompanyNo
Office AddressNo.125, Fuxian Road, High-tech Zone, Yuxi City, Yunnan Province
Postal Code for Office Address653100
Official Websitewww.cxxcl.cn
Emailgroupheadquarter@cxxcl.cn

II. Contact Information

Board SecretarySecurities Affairs Representative
NameYu Xue
Correspondence AddressNo.125, Fuxian Road, High-tech Zone, Yuxi City, Yunnan Province
Tel.0877-8888661
Fax0877-8888677
Emailgroupheadquarter@cxxcl.cn

III. Information Disclosure and Place Where the Annual Report Is Kept

Stock Exchange Website for the Annual Report Disclosed by the CompanyShenzhen Stock Exchange (www.szse.cn)
Media Name and Website for the Annual Report Disclosed by the CompanySecurities Times, China Securities Journal, Shanghai Securities Journal, Securities Daily and the Cninfo website (www.cninfo.com.cn)
Place Where the Annual Report Is KeptSecurities Department of the Company

IV. Registration Changes

OrganizationCode

Organization Code91530000727317703K
Changes in Main Businesses Since the Company’s Listing (If Any)When the Company was listed, its main businesses were divided into two categories: (1) packaging materials: BOPP films (cigarette film and flat film) and special paper products (laser transfer anti-counterfeiting paper, direct plating paper and cellophane); (2) packaging printing: mainly including cigarette label products and aseptic packaging products. Upon the completion of major asset restructuring in 2018, the Company’s main businesses were divided into three categories: (1) Film products (lithium-ion battery separator film, cigarette film and flat film); (2) packaging printing products (cigarette label and aseptic packaging); (3) packaging products (special paper, holographic anti-counterfeiting electrochemical aluminum and other products).
Changes of Previous Controlling Shareholders (If Any)Mr. Paul Xiaoming Lee and Ms. Sherry Lee, who are shareholders of the Company and members of Xiaoming Lee’s family and the de facto controllers of the Company, signed the Power of Attorney for Shareholding on January 14, 2020, by which Ms. Sherry Lee fully delegated the shareholders’ rights, such as rights to question, proposal and vote, in connection with all the shares she held in the Company, to her father Mr. Paul Xiaoming Lee, for a period of three years from the date of the Power of Attorney. After the signing of the above-mentioned Power of Attorney for Shareholding, Mr. Paul Xiaoming Lee becomes the single shareholder of the Company with the most voting shares, and the controlling shareholder of the Company is changed from Heyi Investment to Mr. Paul Xiaoming Lee.

V. Other Related InformationAccounting firm hired by the Company

Name of Accounting FirmDahua CPAs (SGP)
Office Address of the Accounting FirmFloor 12, Building 7, 16 West 4th Ring Middle Road, Haidian District, Beijing
Name of Accountant (Signature)Kang Wenjun, Yao Rui

Sponsor engaged by the Company to perform continuous supervision duties during the Reporting Period

√ Applicable □ N/A

Name of SponsorOffice AddressName of Sponsor RepresentativeContinuous Supervision Period
CITIC SecuritiesCITIC Securities Building, 48 Liangmaqiao Road, Chaoyang District, BeijingWang Jiaji, Liu ChunqinJuly 18, 2019 to December 31, 2021

Financial adviser engaged by the Company to perform continuous supervision duties during the Reporting Period

√ Applicable □ N/A

Name of Financial AdviserOffice AddressName of Principal of Financial AdviserContinuous Supervision Period
CITIC SecuritiesCITIC Securities Building, 48 Liangmaqiao Road, Chaoyang District, BeijingWang Jiaji, Liu ChunqinJuly 18, 2019 to December 31, 2021

VI. Key Accounting Data and Financial IndicatorsWhether the Company is required to retroactively adjust or restate prior years’ accounting data

√ Yes □ No

20212020YoY Increase or Decrease2019
Operating income (RMB)7,982,426,810.594,283,007,589.1186.37%3,159,561,554.91
Net profits attributable to shareholders of the listed company (RMB)2,717,628,798.011,115,604,020.47143.60%849,837,425.81
Net profits attributable to shareholders of the listed company (without non-recurring profit and loss) (RMB)2,567,054,537.19990,507,177.08159.17%752,823,445.85

Net cash flows from operating

activities (RMB)

Net cash flows from operating activities (RMB)1,418,645,377.821,055,180,013.1934.45%763,297,007.77
Basic earnings per share (RMB/share)3.061.34128.36%1.06
Diluted earnings per share (RMB/share)3.051.34127.28%1.06
Weighted average return on net assets21.85%17.15%4.70%20.36%
End of 2021End of 2020YoY Increase or DecreaseEnd of 2019
Total assets (RMB)26,122,184,844.5420,572,234,846.4026.98%12,193,188,361.42
Net assets attributable to shareholders of the listed company (RMB)13,831,866,927.3111,102,880,648.6724.58%4,551,052,876.43

The lower of the Company’s net profit before and after deduction of non-recurring gains or losses for the last three fiscal years is negative, and theaudit report for the latest year shows that there is uncertainty about the Company’s ability to continue as a going concern

□ Yes √ No

The lower of the net profit before and after deduction of non-recurring gains or losses is negative

□ Yes √ No

VII. Differences in Accounting Data under Accounting Standards of the PRC and theInternational Accounting Standards1.Differences in net profits and net assets disclosed in the financial reports prepared under the accountingstandards of the PRC and international accounting standards

□ Applicable √ N/A

There is no difference in the net profits and net assets disclosed in the financial reports for the Reporting Period prepared under the accountingstandards of the PRC and international accounting standards.

2.Differences in net profit and net assets disclosed in the financial reports prepared under the accountingstandards of the PRC and overseas accounting standards.

□ Applicable √ N/A

There is no difference in the net profits and net assets disclosed in the financial reports for the Reporting Period prepared under the accountingstandards of the PRC and overseas accounting standards.VIII. Key Financial Indicators by Quarter

Unit: RMB

Q1Q2Q3Q4
Operating income1,443,231,634.431,950,587,674.691,945,267,100.882,643,340,400.59
Net profits attributable to shareholders of the listed company432,093,790.46618,098,908.97705,230,709.23962,205,389.35
Net profits attributable to shareholders of the listed company (without non-recurring profit and loss)404,953,748.72578,801,911.27644,625,664.09938,673,213.11
Net cash flows from operating activities196,836,825.6947,016,582.63229,748,349.31945,043,620.19

Whether the above financial indicators or their sums are materially different from those disclosed in the quarterly and semiannual reports of theCompany

□ Yes √ No

IX. Items and Amounts of Non-Recurring Gains or Losses

√ Applicable □ N/A

Unit: RMB

Item

ItemAmount in 2021Amount in 2020Amount in 2019Description
Gains or losses on disposal of non-current assets (including the write-off portion of the provision for asset impairment)-1,303,244.16-144,872.282,066.58
Government subsidies recognized in current gains or losses (except for those closely related to the Company’s normal business, comply with the provisions of national policies and are either in fixed amounts or determined under quantitative methods in accordance with a certain standard)140,888,128.01139,305,009.71121,993,732.08
Profit generated for the costs of the Company in the acquisition of subsidiaries, associates or joint ventures are lower than the fair value of the Company’s share in the identifiable net assets of the investees673,727.72
Gains or losses on entrusted investments or assets management25,422,322.797,111,089.67191,780.82
Gains or losses from changes in fair value arising from the holding of trading financial assets and trading financial liabilities and investment income from disposal of trading financial assets, trading financial liabilities and available-for-sale financial assets, excluding the effective hedging business related to the Company’s normal business operations137,194.3410,951,914.18
Write back of the provision for impairment of accounts receivable that is individually tested for impairment11,749,733.34
Other non-operating income/expenses other than items above-mentioned4,316,746.86-4,201,996.76-549,671.34
Other items within the definition of non-recurring gains or losses5,038,461.95357,802.664,692,941.18
Less: amount affected by the income tax27,937,401.4723,107,901.2218,944,093.93
Influences on minority interest (after tax)7,737,680.845,847,930.2910,372,775.43
Total150,574,260.82125,096,843.3997,013,979.96--

Details of other profit and loss items that meet the definition of non-recurring profit or loss:

□ Applicable √ N/A

The Company didn’t have details of other profit and loss items that meet the definition of non-recurring profit or loss.Description of defining the non-recurring profit or loss items illustrated in the Information Disclosure and Presentation Rules for Companies MakingPublic Offering of Securities No. 1 – Non-recurring Profit or Loss as recurring profit or loss items

□ Applicable √ N/A

The Company didn’t define the non-recurring profit or loss items illustrated in the Information Disclosure and Presentation Rules for CompaniesMaking Public Offering of Securities No. 1 – Non-recurring Profit or Loss as recurring profit or loss items.

Section 3 Management Discussion and Analysis

I. Industry Overview of the Company during the Reporting Period

The Company is required to comply with the disclosure requirements for “rubber and plastic product manufacturing” in “chemicalindustry-related business” set forth in the Self-Regulatory Guidelines for Listed Companies of the Shenzhen Stock Exchange No. 3 –Industry Information Disclosure.

1. Industry conditions and the industry position of the Company

In 2021, the global NEV market underwent a period of rapid growth. Major countries around the world have been consistentlyincreasing investment in new energy industries focused on lithium battery technology. Against the backdrop of China’s nationalstrategic objectives of carbon neutrality and carbon peaking, China’s NEV and energy storage industries will also continue to developrapidly. As one of the four key components of lithium batteries, separators are playing an important role in the development of newenergy industries in China and even the world.The Company is a world leader in the lithium battery separator industry, capable of competing on the global scale in terms ofproduction capacity, product quality, cost efficiency, and technology R&D. The Company has been integrated into the supply chainsystems of most mainstream lithium battery manufacturers around the world, supplying products covering the major applicationfields of power lithium batteries, consumer lithium batteries and energy storage lithium batteries. The Company experienced rapidgrowth in 2021 as production capacity and revenue grew substantially, ranking first in the world in terms of production capacity andshipments of separators. In order to actively seize upon development opportunities in the industry, the Company will continue toexpand production capacity and diligently explore domestic and foreign markets, thereby meeting the demand of globalmid-to-high-end lithium battery customers for the Company’s highly consistent and safe wet process separator products and services.

2. Industry development trends

The high-speed growth of NEVs worldwide and expanding market scale of the lithium battery industry have brought broad marketprospects and historic development opportunities to the lithium battery separator industry. According to a research report byChuancai Securities, the domestic yield of separators in 2021 was 7.9 billion sq m, representing a YoY increase of 112.5%, amongwhich the yield of wet separators is 6.06 billion sq m, accounting for 76.7%, representing a YoY growth of 132%. In the future, therapid growth of energy storage will further bring about an incremental market for wet and dry separators.

(1) Downstream customers continue to increase their production capacity requirements of separator companies. With the rapidgrowth of the NEV and energy storage markets, the production capacity and output of lithium battery manufacturers continue toexpand. According to announcements and public information of the Company’s main downstream customers, the production capacityof the Company’s existing customers will reach 1,396GWh by 2025, an increase of more than 1,000GWh from the end of 2020,corresponding to an annual demand for separators in excess of 15 billion sq m. Lithium battery separators are an indispensable andimportant raw material for lithium battery manufacturing, and stable and reliable production capacity has become an importantprerequisite for separator companies to undertake large-scale orders from downstream customers. Therefore, separator manufacturerswith production capacity advantages can continue to deepen cooperation with important customers, which is conducive to furtherincreasing market share.

(2) The proportion of coating films in lithium-ion battery applications is on the rise. The lithium-ion battery is one of the corecomponents in new energy vehicles. As the new energy vehicle market is switching from being policy-oriented to market-driven,manufacturers have continuously raised their requirements of the key indicators such as battery safety, battery life, and service life.While coating inorganic ceramic materials, PVDF, and aramid on the base film can effectively enhance the puncture resistance andheat resistance of lithium-ion battery separator films and provide liquid absorption capacity, improving battery safety, service life andother performances. Therefore, the shipment of coating films occupies an increasing proportion of lithium-ion battery separator films.This trend provides greater future development space for separator companies that have mastered the core formulation andprocessing of high-quality separator coatings. In addition, with safety guaranteed, separator films are becoming thinner and lighter.Thinner and lighter lithium-ion battery separator films effectively raise the energy density in lithium-ion batteries so that moreelectrode materials can be accommodated in the battery per volume or weight, thereby improving battery life. Therefore, regardlessof consumer-related or power-related, under the premise of ensuring safety and service life as well as high-rate and high-powercharging/discharging, the thinner is the better. Becoming thinner and lighter is an important trend in the development of lithium-ionbattery separator film industry.In addition, polypropylene, polyethylene and other polyolefin materials are the main base materials of film materials, which are alsofurther expanded. It is a key direction in the research and development of the base material to improve the temperature resistance ofthe base material through chemical modification or by adding inorganic filler and other composite materials based on the existingbase material system. In addition, because the polarity of polyolefin material is greatly different from that of electrolyte solution, it isalso an important direction in the research and development of base material for power lithium-ion battery separator film to improvethe electrolyte affinity of polyolefin separator by chemical and physical methods.

(3) Against the backdrop of the rapid growth in downstream demand, lithium battery manufacturers have put forward higherrequirements for the product quality of upstream separator manufacturers in order to ensure the competitiveness of their products interms of quality and stability. At the same time, with the rapid increase in overall production capacity of the lithium battery separatorindustry, competition industry-wide has become increasingly fierce. In this context, the importance of product quality, production

efficiency and cost control to separator companies has become increasingly prominent.In addition, the Company has extensive product offerings in other segments such as BOPP film, aseptic packaging, cigarette packs,specialty papers and aluminum laminated film. Over the last three decades, the BOPP film industry in China has undergonetechnological advancements and intensified market competition. The future development of the industry is trending towardsproducing differentiated products that meet customer demand, such as cigarette pack wrapping film and laser film, which are used incigarettes, food and other packaging segments with broad development prospects. The continuous development of these end marketswill drive growth in the BOPP film industry. With the advancement in recent years, China’s aseptic packaging market has establisheda product system with mature technologies, complete product mixes, and adaptability for the aseptic filling of various liquids. Thedownstream industries of aseptic packaging are primarily food and consumer goods such as liquid dairy products and non-carbonatedbeverages. With China’s sustained and rapid economic growth and the rise in the disposable income of urban residents, together withthe increasingly sophisticated consumption and health concepts, dairy products and non-carbonated beverages have been enjoying abooming market. As the government and consumers pay increasing attention to food safety, the food and beverage industries haveraised their requirements and demand for packaging materials, particularly aseptic packaging. Although international packaginggiants still occupy a leading position by leveraging the first-mover advantage in the market, in recent years, with the continuousprogress of material technology and production technology of domestic manufacturers, China’s aseptic packaging market began togrow rapidly. Based on the existing trend, domestic manufacturers will gradually enter high-end aseptic packaging market from themedium and low-end market in the future thanks to the cost-effective advantages, and the market share of domestic aseptic packagingmanufacturers will gradually increase.The cigarette label printing industry is a sub-segment of the packaging and printing industry, and is characterized by advancedtechnologies, complex printing processes and high added value. Its development is highly aligned with the development and changesof the larger cigarette industry, i.e., the stable development of the cigarette industry ensures stable demand for cigarette labels. Thecigarette label printing industry is constantly innovating in terms of printing materials, ink materials and technical processes toremain relevant in the ever-developing cigarette industry. With the increased scrutiny of environmental protection and energyconservation in modern society, the scope of specialty packaging paper used in downstream industries such as tobacco, alcohol,cosmetics and food are becoming more and more extensive, and market application will develop towards differentiation to meet theunique demands of different customers. China’s specialty paper industry is developing in the direction of improving and enhancingthe special functions of products, enriching product varieties, reducing consumption, vigorously advocating comprehensivedevelopment and utilization of resources, and high-quality, high-value-added and serialized production and processing.As the packaging material used in pouch cells, aluminum laminated film is one of the most technically difficult links in thepouch cell industry chain, and has a crucial impact on the quality of the pouch cell. Compared with cylindrical cell and prismatic cell,pouch cell enjoy certain advantages in energy density, cycle life, safety and flexibility. pouch cell have gradually become the standardin high-capacity, thin and lightweight consumer electronics. According to Techno Systems Research, in 2020, pouch cells were usedin more than 80% of mobile phones and laptop computers. In the power battery field, the European and American NEV markets haveshown a preference for soft-pack power batteries. According to GGII, among the top 20 electric vehicle models sold in Europe in2020, 15 use pouch cells. International car companies such as Volkswagen, Daimler, Mercedes-Benz and Renault have adoptedpouch cells as the main battery technology, accounting for more than 70% of the European electric vehicle market. With the steadygrowth of the consumer electronics market represented by 5G communications and emerging consumer electronics products as wellas the rapid increase in sales of NEVs from European and American manufacturers, the market demand for pouch cells andaluminum laminated film will continue to expand. During the Reporting Period, the Company launched the Jiangsu Ruijie PowerAutomobile Lithium Battery Aluminum Laminated Film Industrialization Project, expanded its footprint in the pouch cell field,diversified its product line, strengthened its cooperation with downstream manufacturers, and enhanced its overall competitiveness,which were important steps for deepening its industrial penetration in the field of new energy materials.

3. Industry policies

The Company’s main product, lithium battery separators, is one of the key components of lithium batteries, and stands as one ofthe national key support industries. Relevant industrial policies promulgated by the State in recent years include:

Date

DateIssuing AuthorityName of Policy or RegulationMain Content
February 2017MIIT、NDRC, MOST, MOFPlan of Action for Promoting the Development of Automotive Battery Industry“By 2020, key materials and components such as positive and negative electrodes, separators, and electrolytes will reach world-class status, the upstream industrial chain will achieve balanced and coordinated development, and innovative backbone enterprises with core competitiveness will be formed.”
June 2017MIITCatalogue of the First Batch of Application Demonstration Guidance for Key New Materials (2017 Edition)Includes high-performance lithium battery separators to the first batch of application demonstration guidelines for key new materials
December 2017NDRCImplementation Plan for the Industrialization of Key Technologies for New MaterialsFocuses on the development of functional film materials such as flexible packaging films for lithium-ion batteries
June 2018SAMR, Standardization Administration of ChinaNational Standard for Polyolefin Separators for Lithium-ion SeparatorsSpecifies the terms and definitions, classifications, requirements, test methods, inspection rules, packaging, marking, transportation and storage of polyolefin separators for lithium-ion batteries.
September 2018MIITCatalogue of the First Batch of Application Demonstration Guidance for Key New Materials (2018 Edition)Includes nonwoven ceramic separators for high-performance lithium-ion batteries in the first batch of application demonstration guidelines for key new materials

Date

DateIssuing AuthorityName of Policy or RegulationMain Content
January 2019MIITIndustry Regulation Requirements Lithium-ion BatteriesFurther improves the criteria that relevant enterprises need to meet, and adds relevant requirements for R&D expenditure and actual output; in addition, encourages enterprises to engage in intelligent manufacturing and green manufacturing, proposes to reduce operating costs and improve production efficiency through intelligent manufacturing, and establishes resource-saving and eco-friendly procurement, production, marketing, recycling and logistics systems through green manufacturing to produce green products.

Date

DateIssuing AuthorityName of Policy or RegulationMain Content
August 2019NDRCCatalogue for Guiding Industry Restructuring (2019 Edition)Continues to include “functional separator materials” in the encouraged category
December 2019MIITCatalogue of the First Batch of Application Demonstration Guidance for Key New Materials (2019 Edition)Includes ultrafine alumina material for lithium battery separator coating in the first batch of application demonstration guidelines for key new materials
November 2020State CouncilNew Energy Vehicle Industrial Development Plan (2021-2035)The plan proposes to implement battery technology breakthrough initiatives in core technology research projects on new energy vehicles. Research should be carried out on critical technologies such as positive and negative electrodes, electrolytes, separators, and membrane electrodes, technical research on short-board technologies for high-strength, lightweight, high-safety, low-cost, and long-lasting power batteries and fuel cell systems should be strengthened, and research and development and industrialization of solid-state power battery technology should be accelerated.
December 2020NDRC, MOST, MIIT, MNRCatalogue of Promoted Green Technologies (2020)Accelerates the promotion and application of advanced green technologies; the promotional catalogue includes single large-capacity and solid-state polymer lithium-ion battery technologies packaged with aluminum laminated film
June 2021MIITChina Electric Vehicle Standardization Roadmap (2021)Focuses on key areas and accelerates the development of automotive standards in strategic emerging areas. In the field of new energy vehicles, the roadmap mainly includes strengthening the safety guarantee of electric vehicles, focusing on improving the overall performance of electric vehicles, focusing on the use of fuel cell electric vehicles, supporting the innovative development of battery swapping models and supporting the green development of electric vehicles
July 2021China Plastics Processing Industry AssociationGuiding Opinions on Scientific and Technological Innovation for the Plastics Processing Industry in the 14th Five-Year PlanIncorporates “anti-hydrolysis, anti-aging flame retardant film for power batteries, ultra-thin high-temperature resistant separators, BOPA film for lithium battery packaging, and multi-purpose coating separator material” into the development direction of battery film during the 14th Five-Year Plan
July 2021NDRC, NEAGuiding Opinions on Accelerating the Development of New Energy StorageProposes to “promote research on energy storage theories and key materials, units, modules, and short-board technologies in the system, accelerate the realization of autonomy of core technologies, and strengthen research on electrochemical energy storage safety technology, while adhering to the diversification of energy storage technologies, and promoting continuous cost reduction and commercialization of mature new energy storage technologies such as lithium-ion batteries.”

As an excellent backup power source, energy storage power stations are gradually becoming one of the key technologies for constructing amodern power system. Lithium-ion batteries are currently the most widely used energy storage batteries. Compared with electric vehicles, energystorage power stations have higher requirements for the capacity of lithium-ion batteries, as well as a wider range of application.

II. Main Businesses of the Company during the Reporting Period

1. Main businesses and products of the Company

During the Reporting Period, the Company’s main products are divided into three categories: (1) film products, mainly including lithium-ionbattery separator film (base film and coated film), BOPP film (cigarette film and flat film); (2) packaging printing products, mainly including cigarettelabel and aseptic packaging; (3) paper packaging, mainly including special paper products (laser transfer anti-counterfeiting paper, direct plating paperand coated paper), holographic anti-counterfeiting electrochemical aluminum, transfer film and other products.

The wet-process lithium-ion battery separator film produced by the Company is mainly used for manufacturing lithium-ion battery for the newenergy vehicle, 3C products and energy storage; cigarette film is mainly used for cigarette manufacturing; flat film is mainly used for printing, food,cosmetics and other industries; cigarette label is applied to cigarette packing materials; aseptic packaging is mainly applied to milk boxes, beverageboxes, etc.; among special paper products, laser transfer anti-counterfeiting paper is mainly applied to cigarette labels, cosmetic boxes, toothpasteboxes, pharmaceutical boxes, etc., direct plating paper is mainly used for lining of cigarette label, and packing chocolate and other food, and coatedpaper is mainly applied to tobacco, food, pharmaceutical, cosmetic and food industries. The major customers of the Company are large domestic andforeign producers of lithium-ion battery, cigarette, food and beverage and plastic packaging, and printers. The major customers of wet-processlithium-ion battery separator film of the Company include Panasonic, LGES, Samsung, CATL Group, GOTION HIGH-TECH, BYD, Farasis Energy,Lishen and other domestic well-established lithium-ion battery enterprises. The Company is the a-class supplier of non-exclusive cigarette material inYunnan province. The main customers of its cigarette label products are the large domestic cigarette manufacturing enterprises, including Yunnan

Zhongyan Material (Group) Co., Ltd. and Chongqing Zhongyan Industrial Co., Ltd., etc. Our products are widely used in “Yuxi”, “Hongtashan”,“Yunyan”, “Honghe”, “Snow World”, “Longfengchengxiang”, and other well-known domestic brand of cigarettes. The major customers of cigarettefilms of the Company include cigarette plants of domestic well-known cigarette producers, such as Yunnan Zhongyan, Sichuan Zhongyan, ChongqingZhongyan, Hunan Zhongyan, Anhui Zhongyan, Hubei Zhongyan, Guizhou Zhongyan, Heilongjiang Tobacco, Jiangxi Zhongyan, and Gansu Tobacco.The major customers of aseptic packaging products of the Company include Yili, Mengniu, Bright Dairy, Dongpeng, Royal Group, Dali Foods Group,Guizhou Haoyiduo Dairy, Wondersun Sunshine Dairy, Yunnan Ouya Dairy, and Beijing Sanyuan Food, etc.. Some companies became our newcustomers in 2021, such as New Hope Dairy Co., Ltd., Shenzhen Chenguang Dairy Co., Ltd., Zhuhai VV Bigshot Dairy Co., Ltd., etc.

2. Business models

The Company adopts different business models for different products. Customization applies to wet-process lithium-ion battery separator films,cigarette labels, aseptic packaging, special paper, aluminum laminated film products and cigarette films, subject to the customer requirements, whileflat films are produced based on sales prospects, with appropriate number of inventory stocked up.

(1) Procurement mode: the Supply Department of the Company makes a List of Qualified Suppliers (or a List of Qualified Suppliers/Materials)after evaluating and selecting suppliers. The materials listed on the purchase list can only be purchased from suppliers included on the List ofQualified Suppliers. For each type of materials, at least 2 suppliers should be selected. The Company conducts a comprehensive supplier evaluationevery year and updates the List of Qualified Suppliers (or the List of Qualified Suppliers/Materials) in time.

(2) Production mode: the Company carries out production based on orders and centralized scheduling so as to reasonably control the costs andimprove the efficiency. The Production Scheduling Department makes the production schedule based on orders and sales plan, and manages theproduction and quality in a unified manner so as to ensure the completion of production tasks within the standards in terms of quality, quantity andtime frame.

(3) Sales mode: direct selling is adopted for wet-process lithium-ion battery separator film, and the salespersons of the Marketing Departmentare responsible for the sale, promotion and order solicitation; customization is adopted for cigarette label and cigarette film whose production and saleare organized based on the orders the Company obtains through the participation in the nationwide bids called for by the downstream cigaretteenterprises in the cigarette label printing industry according to Administrative Measures for Cigarette Materials Procurement; flat films are producedbased on sales prospects, with appropriate number of inventory stocked up; aseptic packaging and special paper products are customized pursuant tothe customer requirements.

3. Market position of the Company

(1) Film products

The film products of the Company are divided into two categories: lithium-ion battery separator film, and BOPP film. From a global perspective,the Company and a few other domestic manufacturers have entered the supply chain of the global major battery manufacturers by virtue of theirtechnological accumulation and business scale. The Company has established a good cooperative relationship with three major foreign lithium-ionbattery manufacturers, namely Panasonic, Samsung, LGES, and other domestic well-established lithium-ion battery enterprises, including CATLGroup, BYD, GOTION HIGH-TECH, Farasis Energy and Lishen. With the improvement of technology and capacity scale of domestic lithium-ionbattery manufacturers, the domestic demands for the separator films are basically satisfied by local manufacturers. With the fierce competition,manufacturers of lithium-ion battery separator film without independent R&D design capacity will have narrower space of development. Domesticcompetition of will focus on raw materials and formula technology, micropore preparation technology and design capacity of complete equipment,product quality and sales channels, etc.. Manufacturers with independent core technology, stable product quality and sales channels will grow theirmarket shares. Relying on the accurate market judgment made by the management team and the technical advantages of its own R&D team, theCompany is currently a leader in wet-process lithium-ion battery separator film, with global competitiveness in terms of capacity scale, productquality, cost efficiency, and technological research and development. The Company has established production bases of separator film in Shanghai,Wuxi, Jiangxi, Zhuhai, Suzhou, Changzhou, Chongqing, etc. and constructed the first overseas production base of lithium-ion battery separator film inHungary to expand the overseas market, and meet the demands of the global medium and high-end lithium-ion battery customers for wet-processseparator films and services with high consistency and safety. The Company has established a good brand image in the global medium and high-endseparator film markets, as its wet-process separator films have stable quality and large production capacity. Besides, with the global growth of newenergy vehicles and the rapid rise of the energy storage market, the demands for dry-process lithium-ion battery separator films will increase rapidlyin the power battery segment and the energy storage field which all have low requirements for energy density, brightening the market outlook. Duringthe Reporting period, the Company has started the production base project for dry-process lithium-ion battery separator films in Jiangxi to meet themarket demand for dry-process lithium-ion battery separator films in the future.

As a director member, Shanghai Energy established the Separator Film Manufacturers Association to build an exemplary image and lead thepositive and healthy development of China’s separator film industry. In addition, Shanghai Energy has received many titles and awards, such as“National High-Tech Enterprise”, “Shanghai Municipal Technology Center”, “Top 10 Exemplary Headquarters in Pudong New Area”, and “ShanghaiSpecialized, Sophisticated, Special and New SMEs”.

BOPP films are produced by Hongta Plastic and Chengdu Hongta Plastic, its subsidiary, which are among the few Chinese enterprises withability to produce BOPP cigarette films, and anti-counterfeit printing cigarette films. The production scale of BOPP films ranked among the best of itskind in the Southwest China. Hongta Plastic is a national high-tech enterprise, and was awarded the titles such as “Yunnan Provincial Excellent andStrong Industrial Enterprises”, “Yunnan Provincial Innovative Enterprises”, and “Yunnan Provincial Private Small Giant Enterprises”, and undertooktwo National Torch Plan projects. The trademark of “Hongta Plastic Plus Symbol” (“红塑及图”) was recognized by the Trademark Office of the StateAdministration for Industry and Commerce as a national well-known trademark and was awarded the titles of “Yunnan Provincial FamousTrademark” and “Yunnan Provincial Famous Brand Product”. Chengdu Hongta Plastic was recognized as a “high-tech enterprise”, “SichuanEnterprise Technology Center”, etc.

(2) Packaging printing products

The Company is one of the important cigarette label suppliers in China and Class-A suppliers of the non-exclusive cigarette materials in Yunnan,and its major customers are large domestic well-known cigarette manufacturers. Its products have been widely used by domestic famous cigarettebrands.

The Company independently develops roll-form aseptic brick package, pre-made aseptic brick package, A-type gable top package (mainly usedfor fresh milk) and B-type gable top package (mainly used for tea drinks, fruit juice and non-carbonated beverages), making it become one of the fewenterprises able to produce roll-form aseptic brick package, pre-made aseptic brick package and gable top package. Domestic famous large diary andbeverage producers are the major customers of HongChuang Packaging, such as Yili, Mengniu, Bright Dairy, New Hope Dairy, Dali, Dongpeng,

Beijing Sanyuan Food, Royal Group, Guizhou Haoyiduo Dairy, Wondersun and Ouya Dairy. The product quality and service of HongChuangPackaging have gained recognition of a large number of customers. “Hongchuang Packaging” (红创包装) has been recognized as a Yunnan Provincefamous trademark by Yunnan Administration for Industry and Commerce. The “paper-based aluminum-plastic eight-layer composite packing paper”was certified as the national key new product, and Hongchuang Packaging was awarded the titles of “High-Tech Enterprise”, “Yunnan ProvincialEnterprise Technology Center”, “Yunnan Provincial Leading Packaging Enterprise”, “Yunnan Provincial Growing SMEs”, etc.

(3) Special paper and other products

Dexin Paper mainly produces special paper products, holographic anti-counterfeiting electrochemical aluminum products and transfer films.They are widely used for the cigarette labels for domestic famous cigarette brands, such as “Yunyan”, “Hongtashan”, “Yuxi”, “Hongshuangxi”,“Jiaozi”, “Chunghwa”, etc. Thanks to the Company’s strong capability in product development, excellent product quality and good adaptability, thespecial paper products have developed rapidly and fill the gap of no special paper deep processing enterprise in Southwest China where a largenumber of packaging printing enterprises operate. As a national high-tech enterprise, Dexin Paper has won recognition of downstream customers byvirtue of the seam avoidance technology of laser transfer paper, the positioning and transfer technology of pre-printed cursor, and the transfertechnology of water-based films. Its “rainbow laser transfer anti-counterfeiting paperboard” was certified as National Key New Product and YunnanProvincial Key New Product. Dexin Paper was awarded the titles of “Yunnan Provincial Enterprise Technology Center”, “Yunnan ProvincialTechnology SMEs”, “Yunnan Provincial Specialization, Refinement, Uniqueness and Innovation”, etc.

4. Main performance drivers

The Company focuses its development on lithium-ion battery separator film products and actively exploits in the fields of lithium-ion batteryseparator films, BOPP films, cigarette labels, aseptic packaging, special paper and aluminum laminated film products, etc. Making in-depthcooperation with customers in the lithium-ion battery separator film business, the Company’s revenue from lithium-ion battery separator film productsincreased substantially in the wake of growth of market demands and continuous development of new products. The Company gathers extensiveexperience in the industry, puts forth efforts to introduce and cultivate advanced technical talents and invest more in the technology research anddevelopment, while giving quick responses to provide customized products and service solutions for customers. The Company has a strict qualitycontrol system and rigorous quality control measures, ensuring its products can meet the higher industrial requirements and be recognized bycustomers from various business areas, so as to keep long-term and stable relationships with customers.III. Core Competitiveness Analysis

1. Scale advantage

As at the end of the Reporting Period, the Company has the world’s first production scale of wet-process lithium-ion battery separator film, withthe world’s largest supply capacity. As a supplier of wet-process lithium-ion battery separator film with the world’s first shipments, the Company iscapable of undertaking large-scale orders from large battery manufacturers, such as LGES, Samsung SDI, Panasonic, CATL, and CALB. Furthermore,the Company’s scale advantage also improves the production efficiency, creates the procurement advantage, and effectively reduces the cost. In termsof cost control, the Company’s scale advantage firstly creates the cost advantage for raw materials procurement. Large-scale centralized procurementmakes the cost of raw materials lower than that of the competitors in this industry. Secondly, the Company’s huge sales scale brings a large number oforders to the Company, so that the Company can effectively reduce the frequency of downtime during production and effectively reduce the costcaused by downtime through reasonable production scheduling. As a result, the Company has the largest operating rate and capacity utilization rate.In terms of sales development, the industry concentration of the lithium-ion battery is increasing day by day. The existing and under-constructionproduction lines of domestic first-class lithium-ion battery manufacturers boast huge production scale. Therefore, whether they have a supply capacityto satisfy the current and future demands of international first-class lithium-ion battery manufacturers will be the first consideration in their selectionof suppliers. As the world’s largest lithium-ion battery separator film supplier, the Company has a competitive advantage thanks to its sufficientsupply capacity.

2. Cost advantage

The Company has long been committed to development and improvement of production technology for advanced wet-process lithium-ionbattery separator film. Thanks to the continuous improvement of production equipment and production process by the Company’s productionmanagement and technical teams, the Company’s output from a single production equipment line of lithium-ion battery separator film ranks the bestin the industry to further reduce the cost in unit depreciation, energy consumption and labor. Moreover, thanks to the Company’s continuousimprovement of production technology and production management, the Company’s yield coefficient and first pass yield of lithium-ion batteryseparator film rank the best in the industry. Besides, the Company continues to improve the recovery efficiency of auxiliary materials, so that theconsumption of auxiliary materials is far lower than that of counterparts in the industry.

In addition, the Company, after years of R&D and constant improvement, has applied the online coating technology to its production lines,making it become the only separator film producer in the industry that has grasped this technology and applied it to production lines. Compared withthe conventional offline coating technology, the online coating technology can omit pre-coating processes, such as rolling and slitting, so as tosignificantly enhance production efficiency and save production costs. Also, it can strengthen products’ indicator consistency, such as the uniformityof thickness, thermal contraction, and permeability and effectively reduce the negative influence of offline processes on product quality. On the whole,the Company’s cost advantage is the result of synthetic action, including continuous improvement of production equipment, continuous improvementof production technology, continuous investment in research and development, constant improvement of production management, strong marketdevelopment ability and huge production scale, and the Company will maintain this advantage for a long term.

3. Product advantage

The Company has long been committed to the research and development of lithium-ion battery separator film and committed to creating valuefor customers with high-quality products and excellent service. Mainstream lithium-ion battery manufacturers, especially international first-classlithium-ion battery manufacturers, have strict requirements for material quality. As one of the core materials for lithium-ion batteries, the separatorfilm has high technical barrier and its performance directly affects the discharge capacity, cycle life and safety of lithium-ion battery. Lithium-ionbattery manufacturing requires strong properties of separator films, such as the size, distribution uniformity and consistency of separator filmmicropores. Mainstream lithium-ion battery manufacturers apply a long system verification process covering product, technology and production flowto introduce material suppliers. So far, the Company has successfully passed the product certification of most domestic and foreign mainstreamlithium-ion battery manufacturers, and entered the overseas power battery supply chain system with the most stringent requirements. The productquality has been recognized by many lithium-ion battery manufacturers. In addition, the Company continues to invest in the development of new

products, and carry out product research and forward-looking technical reserve while meeting customized needs. So far, the Company has become asupplier with the most diversified lithium-ion battery separator film products to meet multiple demands of different customers.

4. R&D advantage

The Company has established a research and development team with sound system through years of accumulation. The research anddevelopment scope covers the separator film and coated production equipment, separator film preparation process, raw & auxiliary materialsimprovement, coating process, slurry formula, recovery and energy saving technology, as well as R&D for forward-looking technical reserve projects.The Company’s research and development team of lithium-ion battery separator film has made a series of achievements in improving productionefficiency, enhancing the quality of lithium-ion battery separator film and developing new products. So far, the Company has had 280 effectivepatents currently, including 13 international patents, and 236 ongoing patent applications, including 56 international patent applications. What’s more,the Company’s research and development team of lithium-ion battery separator film can not only customize a variety of new products for downstreamcustomers, but also jointly develop products with downstream customers to meet their diversified demands.

5. Talent advantage

The lithium-ion battery separator film is currently an emerging industry in China, with only more than ten years of history. With the rapid globalgrowth of energy industry in recent years, there are insufficient talents and no qualified professionals in the whole industry of lithium-ion batteryseparator film. The Company relies on the talents accumulated in more than 20 years in BOPP film industry that is similar to the lithium-ion batteryseparator film industry. The Company has established a good talent incentive mechanism and also recruited talents worldwide. As at the end of theReporting Period, the Company has more than 100 professionals with master’s degree or above in the lithium-ion battery separator film, and hasestablished a core technology research and development team composed of professional research and development staff from the United States, Japan,South Korea and other countries. Furthermore, through long-term efforts, the Company has established a complete professional team in productionmanagement, system construction, quality control, market expansion and equipment design, installation and maintenance, etc. All teams of theCompany have achieved fruitful results in their respective professional fields to jointly grow the Company into an internationally competitive leaderin the lithium-ion battery separator film.

6. Advantage of market and customer resources

In 2021, the Company still maintained the leading position in the market of wet-process lithium-ion battery separator film. So far, the Companyhas entered the supply chain system of most mainstream lithium-ion battery manufacturers in the world, including overseas lithium-ion batteryproduction giants, such as Panasonic, LGES and Samsung, and domestic mainstream lithium-ion battery enterprises such as CATL, BYD, GOTIONHIGH-TECH, Farasis Energy and Lishen. The Company has established a stable and good cooperation relationship with downstream customers, andhad an in-depth technical exchange with them during cooperation. Therefore, the Company has a profound understanding of customer needs and isable to quickly respond to customer needs and provide corresponding services. With the rapid development of the industry and continuous release ofthe capacity, the Company will grow along with the rapid growth of downstream customers.

IV. Analysis on Main Businesses

1. Overview

2021 marked the beginning of China’s “14th Five-year” Plan period. In the context of the strategic goals of peak carbon emissions and carbonneutrality, the markets of new energy electric vehicles and energy storage have flourished, as driven by the demand in the global new energy market.Moreover, the sharp increase in the demand for lithium-ion batteries has stimulated the rapid growth in the demand for separator films. During thereporting period, under the leadership of the Board of Directors and thanks to the concerted effort of all employees, the Company fought against thepandemic, seized opportunities, and endeavored to make breakthroughs. Amid the market environment where the demand of the industry grew rapidlywhile the supply of materials was tight, the Company, as a leading player in the industry, vigorously expanded its capacity, continuously enhanced itsmanagement and operation efficiency, and strove to ensure the stable and timely supply of high-quality lithium-ion battery separator films todownstream customers. Furthermore, it raised the technological level and product standard of the whole industry through constant improvements inprocesses, product R&D, and better product quality. Meanwhile, the reporting period witnessed constant growth in the Company’s business scale,profitability, and market position. In 2021, the Company recorded a consolidated operating income of RMB7,982 million, up by 86.37% year on year(YoY), and net profit attributable to shareholders of the listed company of RMB2,718 million, surging by 143.60% YoY.

(1) Description of film products

The Company has focused on the separator film business, kept raising its input in capacity, earnestly expanded its market presence at home andabroad, and reinforced its market status and core competitiveness.The rapid growth in the markets of new energy vehicles (NEVs) and energy storage has benefited the prominent increases in the income scale andprofitability of the Company’s lithium-ion battery separator film business. More than 3 billion square meters of lithium-ion battery separator filmswere delivered during the reporting period, accounting for a leading market share in the industry. In 2021, Shanghai Energy’s operating income stoodat RMB6,437 million, and its net profit attributable to the listed company amounted to RMB2,452 million. Thanks to the accelerated progress of theindustry, domestic and overseas lithium-ion battery manufacturers are raising their capacities and outputs. Therefore, a stable and reliable capacity hasbecome an essential prerequisite for the Company to deliver large orders from downstream customers. It is worth mentioning that the Company isranked top globally in terms of capacity. Its separator film production bases can be found in Shanghai, Wuxi, Jiangxi, Zhuhai, and Suzhou, with a totalcapacity of up to RMB5 billion square meters. Besides, the first overseas lithium-ion battery separator film production base is being constructed inHungary. Additionally, during the reporting period, the Company kept speeding up the investment in and building of production lines, including theChongqing Energy High-performance Lithium-ion Battery Micropore Separator Film Project consisting of 16 production lines, the Jiangsu EnergyEV Lithium Battery Separator Film Industrialization Project consisting of 16 production lines, and the Suzhou Green Power Project of AnnualProduction of 200 Million Square Meters of Lithium-ion Battery Coating Separator Films. Concurrently, the Company constantly raised its capacityto meet the demand for wet-process separator film products and services featuring high consistency and safety from mid- and high-end lithium-ionbattery customers worldwide. At present, the Company’s new projects are in progress. As at the date of disclosure of this report, three production lines

in the lithium-ion battery separator film project (Phase I) of Chongqing Energy had been put into production, while the rest production lines are beingdeveloped, as scheduled. For the coating film project of Suzhou Green Power, the foundation construction and the basic steel-frame structure hadbeen completed, and the subsequent construction is in progress. The project is expected to be put into production by December 2022. The separatorfilm project of the Management Committee of Jiangsu Jintan Economic Development Zone had been filed, and the approval documents onenvironmental assessment had been obtained. Preparation is being made for civil engineering. Besides, the Hungarian project of wet-processlithium-ion battery separator films is being promoted orderly. The project, after being put into operation, will locally supply 400 million square metersof wet-process lithium-ion battery separator films to rapidly respond to the demand of the European market and customers. Along with theimplementation of new projects, the Company will gradually release its capacity and is well positioned to further raise its global market share.Currently, because of the favorable stability, high consistency, and rich variety (more than 110 types) of its lithium-ion battery separator film products,the Company can satisfy customers’ customized and diverse demands and has joined the global supply chain system consisting of the majority ofmainstream lithium-ion battery manufacturers. Based on the strong demand for separator films brought by the rapid growth in the new energyindustry and its competitive edges in products, technologies, and costs, the Company has actively expanded its footprint in domestic and overseasmarkets and deepened its cooperation with strategic downstream customers. Specifically, during the reporting period, the Company and CATL, aleader in the global lithium-ion battery industry, cooperated to invest in a project of dry-process and wet-process lithium-ion battery separator filmswith a total planned investment of RMB8 billion. Besides, a joint venture agreement was signed with EVE Energy Co., Ltd. (EVE), a leading playerin the lithium-ion battery industry, to build a project of wet-process lithium-ion battery separator films of 1.6 billion square meters with a totalplanned investment of RMB5.2 billion in Jingmen City, Hubei Province. Additionally, the Company signed separator film supply agreements withmultiple high-end customers at home and abroad, such as CATL, CALB, and a large-scale overseas automobile enterprise, to constantly deepen thelong-term cooperation with important customers and reinforce its competitiveness.The Company has established a strong presence in the separator film industry and established pioneering advantages in capacity, product quality,technological R&D, and market expansion. Given the increasingly fierce industry competition, production efficiency and cost control are turningprominent day by day. Thus, the Company maximizes the continuous output efficiency of a single production line, based on advanced equipment andadequate orders from quality customers, and adopts measures to cut production costs, such as the recovery of auxiliary materials. In addition, byvirtue of technological advantages, it keeps improving equipment and optimizes processes to raise production efficiency, further reduce costs, andstrengthen the comprehensive competitiveness of products. During the reporting period, the Company applied the worldwide first online coatingtechnology to its production lines, making it become the only separator film producer in the industry that has grasped this technology and applied it tomass production. Due to the removal of pre-coating processes, such as rolling and slitting, the online coating technology can significantly enhanceproduction efficiency and save production costs. Meanwhile, it plays a vital role in improving the indicators of product quality, such as the uniformityof thickness, thermal contraction, and permeability. Moreover, the Company will extensively apply this technology to new projects, build up itsstrength in coating films, and push forward the unceasing progress of the technological level of the industry.As a separator film manufacturer with independent core technologies and processes, the Company has accumulated rich experience in equipmentupgrading. With a strong and improving ability in equipment upgrading, the Company, started to jointly manufacture domestic separator filmproduction equipment with its de facto controller and its designated third party, Suzhou Victory Precision Manufacture Co., Ltd. (Victory Precision),through equity participation, during the reporting period. Additionally, the Company has further reinforced internal management by building digitalfactories. During the reporting period, a system management platform based on the manufacturing execution system (MES) was created at WuxiEnergy. Other factories will successively implement the project of digital factories, which is beneficial to the enhancement of the Company’s overallmanagement and production efficiency.During the reporting period, in order to further improve its strategic layout in the separator film field, the Company completed the integration withNewmi Tech, initiated the Suzhou Green Power Project of Annual Production of 200 Million Square Meters of Lithium-ion Battery Coating SeparatorFilms, raised the capacity and supply of consumer separator films, and earnestly expanded the consumer battery market. In addition, the energystorage market has broad prospects and plays a significant role in promoting peak carbon emissions and carbon neutrality in the energy field. In orderto meet the future demand in the energy storage market, the Company, during the reporting period, continuously promoted the joint venture project ofdry-process lithium-ion battery separator films with Celgard. The capacity will be built up gradually in 2022 to offer more cost-effective products. Inthe meantime, after years of R&D input and technological accumulation, the Company launched the project of Jiangsu Ruijie of eight production linesof aluminum laminated film during the reporting period, with a planned investment of RMB1.6 billion and an annual capacity of approximately 280square meters. Aluminum laminated film are mainly used to pack soft-packing batteries. This project will further enrich the Company’s product lines,further consolidate the presence in the industry chain of new energy materials, based on separator films, and facilitate the Company to raise its statusand sustainable development in the new energy industry. Additionally, during the reporting period, the Company cooperated with Beijing WeLionNew Energy Technology Co., Ltd. (WeLion) and Iopsilion to develop the projects of coating separator films and special and customized coatingseparator films as a push into the field of semi-solid and solid batteries.During the reporting period, the Company’s BOPP film business improved steadily by 8.08% YoY. The BOPP separator film upgrade and expansionproject of Hongta Plastics with an annual output of 70,000 tons was steadily promoted and is expected to be completed in 2022.

(2) Packaging printing products and special paper

The aseptic packaging business of the Company is well developed, focusing on large-scale dairy enterprises and regionally famous dairy enterprises.By constantly developing new products and providing its customers with customized services, the Company has rapidly raised the sales of asepticpackaging products. The year 2021 witnessed rapid growth in the Company’s aseptic packaging business. The operating income reached RMB578million, with a YoY increase of 43.25%, and the sales amounted to 2,898 million, rising by 25.49% YoY. Characterized by superb heat-sealingperformance, strong machine compatibility, and low losses during filling, the Company’s aseptic packaging products are leading in the industry inboth quality and performance. In the future, the Company will keep expanding its market presence, join hands with large-scale dairy enterprises toseize opportunities for market growth, and drive the rapid development of the aseptic packaging business. During the reporting period, the asepticpackaging customers served by the Company included Yili, Mengniu, Bright Dairy, Eastroc Beverage, Dali Food Group, Europe-Asia, and RoyalGroup, all of which are large-scale and renowned dairy enterprises and regionally famous dairy enterprises. Meanwhile, Hongchuang Packagingestablished strategic cooperation with New Hope Dairy Holdings Co., Ltd. and Grass Green Group during the reporting period, became their preferredpartners, and propose innovative measures to turn food packaging materials greener and more personalized and better retain freshness. Thanks to the

growth in the markets of liquid dairy products and non-carbonated beverages in China, the demand for aseptic packaging is rising. During thereporting period, the Company launched an aseptic packaging project in Changzhou to expand the capacity of such packaging. Currently, preparationfor the project is being made orderly. In the meantime, the Company will redouble its effort for packaging printing products and utilize its goodproduct design, material optimization, customization, and timely after-sales services to constantly raise its market share.The cigarette label business recorded an operating income of RMB115 million, down by 10.52% year on year, during the reporting period, mainlybecause of the price reduction of some products. The sales of special paper rose steadily during the reporting period, and its operating income wasRMB203 million, with a year-on-year increase of 16.45%. The Company vigorously expanded its market presence, rapidly responded to customerrequirements, refined its management, and kept reducing costs and strengthening efficiency.

(3) Review of other works

During the Reporting Period, the Company started the non-public offering, and intended to raise no more than RMB12.8 billion, which will be usedfor the Chongqing Energy High-performance Lithium-ion Battery Micropore Separator Film Project Phase I and Phase II, Jiangsu EV Lithium BatterySeparator Film Industrialization Project, Jiangsu Ruijie EV Lithium Battery Aluminum Laminated Film Industrialization Project, Suzhou GreenPower Annual Production of 200 Million Square Meters of Lithium-ion Battery Coating Separator Films Project, and to supplement the workingcapital. The proposed proceeds raised will all be invested in projects related to the Company’s main businesses, which is commensurate with theCompany’s strategic development. The implementation of such projects will help the Company further increase its capacity of separator films andimprove the technological level of the industry. Besides, the Company will expand its business layout and seize opportunities for industrialdevelopment to lay a solid foundation for future expansion and development of potential customers, and consolidate its leading position in the field ofnew energy materials.The Company repurchased 1,585,437 shares during the reporting period to implement the equity incentive plan so as to further establish and improveits long-acting incentive mechanism, attract and retain excellent talents, arouse the working enthusiasm of the senior and middle managementpersonnel as well as core technical and business elites, effectively combine the interests of shareholders, the Company, the core team, and employees,and guide all parties to pay attention to the Company’s long-term development. So far, the Company has completed the repurchase and the registrationof the granting of stock options.The Company plans to invest no more than RMB1.72 billion to construct the New Energy Shanghai Management Headquarters, the Energy Institute,and the Overseas Operations Headquarters at the Jinqiao Economic and Technological Development Zone in Pudong New Area, Shanghai, to addressthe issue of inadequate sites for R&D and work, provide a strong guarantee for the mid- and long-term development strategies, effectively improvethe R&D and office environment, boost its image, improve hardware facilities for production, R&D, operations, management, and market expansion,better attract and retain high-caliber talent at home and abroad, and further intensify its comprehensive strengths.During the Reporting Period, the Company signed the Strategic Cooperation Framework Agreement with Yuxi Municipal People’s Government,based on which the Company will help to introduce manufacturers of battery and battery materials, including but not limited to positive and negativebattery materials, separator films, electrolyte and other battery materials, through the development and utilization of lithium, nickel and other mineralresources in Yuxi City. In February 2022, the Company signed the New Energy Battery Industry Chain Project Cooperation Agreement with YuxiMunicipal People’s Government, EVE Energy Co., Ltd., Zhejiang Huayou Holding Co., Ltd. and Yunnan Yuntianhua Co., Ltd., based on which theparties will establish 2 joint ventures in Yuxi city, and jointly engage in the mining of mineral resources, mineral deep processing, research anddevelopment, production and sales of new energy battery and new energy battery upstream and downstream materials after obtaining exploration andmining rights through the joint venture company in accordance with laws and regulations, so as to promote the construction of new energy batteryindustry chain, and promote the formation of the whole industry chain cluster of new energy battery in Yuxi City. In March 2022, the Company andthe People’s Government of Hongta District, Yuxi City, entered into an Investment Agreement and a supplementary agreement. The Company willinvest approximately RMB4.5 billion in total to establish a company with an independent legal personality in Hongta District, Yuxi City, as theimplementation entity of a project of lithium-ion battery separator films with a capacity of 1.6 billion square meters.Multiple breakthroughs in technological innovation were achieved during the Reporting Period. As at the end of the Reporting Period, the Companyand its subsidiaries had accumulatively obtained 459 patents, including 362 utility model patents, 86 invention patents (including 13 internationalpatents), and 11 design patents. In addition, the Company emphasizes the development of overseas patents. The applications for the registration of 56international patents and 191 domestic patents have been accepted.

2. Income and cost

(1) Breakdown of operating income

Unit: RMB

20212020Year-on-year increase or decrease
AmountProportion in the operating incomeAmountProportion in the operating income
Total operation income7,982,426,810.59100%4,283,007,589.11100%86.37%
By industry
Manufacturing7,866,428,440.2898.55%4,205,724,684.5698.20%87.04%
Other businesses115,998,370.311.45%77,282,904.551.80%50.10%
By product

Film products

Film products6,913,272,941.6686.61%3,464,096,284.0080.88%99.57%
Cigarette label115,404,633.291.45%128,976,058.503.01%-10.52%
Aseptic packaging578,035,152.657.24%403,513,678.809.42%43.25%
Special paper203,465,665.682.55%174,724,290.564.08%16.45%
Other Products56,250,047.000.70%34,414,372.700.80%63.45%
Other businesses115,998,370.311.45%77,282,904.551.80%50.10%
By region
Southwest1,055,816,267.8413.23%652,445,734.8815.23%59.04%
East3,940,320,948.3049.36%1,834,948,385.7542.84%109.83%
North220,578,356.552.76%112,167,705.952.62%96.65%
South Central1,525,714,178.3619.11%809,685,998.4218.90%87.71%
Northwest295,656,593.503.70%137,124,648.483.20%115.55%
Northeast38,818,315.580.49%32,064,502.660.75%21.06%
Abroad905,522,150.4611.34%704,570,612.9716.45%28.27%
Direct sale7,982,426,810.59100.00%4,283,007,589.11100.00%0.00%

(2) Industries, products, regions or sales models with a proportion more than 10% in the Company’soperating income or operating profit

√ Applicable □ N/A

Unit: RMB

Operating incomeOperating costGross margin rateYear-on-year increase or decrease in operating incomeYear-on-year increase or decrease in operating costYear-on-year increase or decrease in gross margin rate
By industry
Manufacturing7,866,428,440.283,978,342,250.2449.43%87.04%63.63%7.24%
By product
Film products6,913,272,941.663,234,546,911.1953.21%99.57%70.99%7.82%
By region
Southwest1,055,816,267.84724,100,518.3831.42%63.92%49.98%6.37%
East3,940,320,948.301,676,989,802.6057.44%114.74%97.70%3.67%
South Central1,525,714,178.36939,241,849.7238.44%88.43%50.39%15.57%
Abroad905,522,150.46388,967,091.5157.04%28.52%24.58%1.36%
By sales model
Direct sale7,982,426,810.594,002,023,714.2349.86%86.37%62.88%7.23%

Under the circumstances that the statistical standards for the Company’s main business data adjusted in the Reporting Period, the Company’s mainbusiness data in the recent year is calculated based on adjusted statistical standards at the end of the Reporting Period.

□ Applicable √ N/A

(3) Whether revenue from physical sales is higher than service revenue

√ Yes □ No

Business segment

Business segmentItemUnit20212020Year-on-year increase or decrease
Film productsSalesTon78,666.4068,730.7314.46%
ProductionTon78,928.3670,450.7212.03%
InventoryTon7,060.706,798.753.85%
Cigarette labelSales10,000 boxes43.1240.436.65%
Production10,000 boxes49.0136.2135.34%
Inventory10,000 boxes9.483.59164.00%
Aseptic packagingSales10,000289,803.12230,943.9725.49%
Production10,000288,974.57232,814.2824.12%
Inventory10,00025,841.9326,670.48-3.11%
Special paperSalesTon13,821.6414,066.68-1.74%
ProductionTon15,701.6914,243.5910.24%
InventoryTon3,363.191,483.14126.76%

Reason for any over 30% YoY movements in the data above

√ Applicable □ N/A

During the reporting period, the significant year-on-year increase in the Company’s production and inventory of cigarette label products and theinventory of special paper is mainly because the Company responded to customer demand, prepared stock to ensure the timeliness of supply, andwaited for customer’s notice of delivery.

(4) Execution of significant sales contracts and significant purchase contracts signed by the Company as atthe Reporting Period

√ Applicable □ N/A

Execution of significant sales contracts signed by the Company as at the Reporting Period

√ Applicable □ N/A

Contract objectCounterpartyTotal contract amountTotal amount paidAmount paid in the current Reporting PeriodAmount to be paidNormal execution or notAmount of sales revenue recognized for the current period or accumulativelyRecovery of accounts receivable
Lithium-ion battery separator filmLGESNo more than $6.17 millionRMB1,127,512,300RMB422,798,600No more than RMB2.883 billion (converted at the exchange rate of 6.5)YesThe sales revenue was RMB423 million, and the accumulated sales revenue was RMB1.128 billion during the reporting periodThe accounts receivable at the end of the Reporting Period was RMB82 million. The amount recovered accumulatively after the Reporting Period at the end of the first quarter of 2022 was RMB46 million, accounting for 55.27%, representing a normal progress of recovery.

Major difference of the progress of the significant contracts from the agreement of the contracts which affects more than 30% of the contract amount

□ Applicable √ N/A

Execution of significant purchase contracts signed by the Company as at the Reporting Period

□ Applicable √ N/A

(5) Breakdown of operating cost

Product category

Unit: RMB

Product category

Product categoryItem20212020Year-on-year increase or decrease
AmountAs a percentage of total operating costAmountAs a percentage of total operating cost
Film productsRaw material2,082,659,169.6664.39%1,085,857,106.8757.40%91.80%
Labor154,825,073.994.79%112,590,099.475.95%37.51%
Manufacturing costs671,396,304.1720.76%385,575,292.1820.38%74.13%
Energy325,666,363.3710.07%307,683,375.4016.26%5.84%
Cigarette labelRaw material59,056,240.4788.33%56,404,482.2087.35%4.70%
Labor1,641,719.572.46%5,455,678.388.45%-69.91%
Manufacturing costs5,555,699.738.31%2,434,225.493.77%128.23%
Energy604,911.230.90%276,988.960.43%118.39%
Aseptic packagingRaw material442,144,630.9491.70%277,755,799.1389.34%59.18%
Labor22,368,092.224.64%15,819,168.055.09%41.40%
Manufacturing costs13,133,577.932.72%13,039,212.574.19%0.72%
Energy4,492,472.930.93%4,278,899.771.38%4.99%
Special paperRaw material147,608,537.6693.00%115,016,516.5282.12%28.34%
Labor3,842,056.172.42%8,604,180.096.14%-55.35%
Manufacturing costs4,932,633.823.11%10,722,052.017.66%-54.00%
Energy2,328,616.991.47%5,717,968.264.08%-59.28%
Other ProductsRaw material32,072,764.2388.88%16,618,594.0868.83%92.99%
Labor1,480,837.594.10%370,795.251.54%299.37%
Manufacturing costs1,540,063.234.27%5,180,564.1521.46%-70.27%
Energy992,484.332.75%1,973,589.928.17%-49.71%

Notes

1. “Film products” include BOPP cigarette film, BOPP flat film and lithium-ion battery separator film products.

2. “Other products” referred to in the “Breakdown of operating income” and “Breakdown of operating cost” in Section IV of this Report mainlyinclude holographic electrochemical aluminum, film products, manual packaging film, aluminum laminated film and other irregular products anddisposed products. This category has a smaller sales volume, and smaller proportion in the total sales, so it is classified as other products within themain business.

3. “Other businesses” referred to in the “Breakdown of operating income” in Section IV of this Report mainly refers to the Company’s income frommaterial sales, asset leasing and scrap sales outside of the main business.

(6) Changes in the scope of the consolidated financial statements for the Reporting Period

√ Yes □ No

Compared with the previous year, 9 new entities were included in and 3 entities were removed from theconsolidated financial statements in the current year:

New subsidiaries included in the consolidated financial statements in the current year:

Name

NameReason for change
Jiangsu Ruijie New Materials Technology Co., Ltd.Newly established
Jiangxi Enpo New Materials Co., Ltd.Newly established
Jiangsu Energy New Materials Technology Co., Ltd.Newly established
Hunan Energy Advanced New Materials Technology Co., Ltd.Newly established
Ningbo Energy New Materials Co., Ltd.Newly established
Jiangxi Energy New Materials Technology Co., Ltd.Newly established
Chongqing Energy New Materials Technology Co., Ltd.Newly established
Hubei Energy New Materials Technology Co., Ltd.Newly established
Jiangsu Sanhe Battery Material Technology Co., Ltd.Newly established

Subsidiaries removed from the consolidated financial statements in the current year:

NameReason for change
Shenzhen Qingsong Jinze Technology Development Co., Ltd.Canceled
Hunan Qingsong Jingze Technology Development Co., Ltd.Canceled
Wuxi Energy Trading Co., Ltd.Canceled

(7) Major changes or adjustments in the business, products or services in the Reporting Period

□ Applicable √ N/A

(8) Major customers and suppliers

Major customers of the Company

Total sales amount from the top five customers (RMB)4,704,969,327.48
Total sales amount from the top five customers in proportion of total annual sales58.94%
Total sales amount from related parties in the top five customers in proportion of total annual sales0.00%

Information on top five customers

No.

No.Customer NameSales (RMB)As a percentage of the total sales revenue for the Year
1Customer 12,666,501,538.7033.40%
2Customer 21,200,887,664.6015.04%
3Customer 3449,471,512.695.63%
4Customer 4216,958,341.212.72%
5Customer 5171,150,270.282.14%

Other information on major customers

√ Applicable □ N/A

Major suppliers of the Company

Total purchase amount of the top five suppliers (RMB)1,844,969,538.22
Total purchase amount of the top five suppliers in proportion of total annual purchase amount27.77%
Total purchase amount of related parties in the top five suppliers in proportion of total annual purchase amount0.00%

Information on top five suppliers

No.Supplier NamePurchase Amount (RMB)As a percentage of the total purchase amount for the Year
1Supplier 1908,503,587.8113.67%
2Supplier 2368,314,581.875.54%
3Supplier 3197,095,161.832.97%
4Supplier 4189,482,720.542.85%
5Supplier 5181,573,486.172.73%

Other information on major suppliers

√ Applicable □ N/A

3. Expense

Unit: RMB

20212020Year-on-year increase or decreaseExplanation on any material change
Selling expenses74,035,002.3656,365,549.9631.35%Mainly due to the expansion of the Company’s business scale
Administrative expenses216,333,939.36155,800,391.6538.85%Mainly due to the expansion of the Company’s business scale
Financial expenses152,982,055.47188,876,241.53-19.00%
R&D expenses409,178,730.28178,243,333.28129.56%Mainly due to the increase of R&D investment

4. R&D investment

√ Applicable □ N/A

Main R&D project nameProject purposeProject progressObjectives to be achievedExpected impact on the future development of the Company
Development of high safety base film products with lower shut down temperatureThe next generation of base film products for international high-end customersThe project entered the pilot test stageThe shut down temperature is lower and the puncture is higher than that of conventional productsImprove the product safety and increase the overseas market share of lithium-ion batteries separators
Development of solvent-basedDevelopment of high-end overseas customersThe mass production was completedTo complete mass production introductionCreate economic and brand benefits and enhance the overseas

coated powerbattery

coated power batteryaccording to customer requirementssales volume
Study on advanced separator for semi-solid state batteryAdvanced research and development of electrolyte/separator for semi-solid batteries and solid batteriesThe sample preparation at laboratory stage was completed, and the technical route for the development of the deparator was defined.To study the feasibility and verify technical route/flow.Prospective research of the technical reserves
Development of 2μm water-based coated film with alumina with high resistance to up to 150 ℃ temperatureDevelopment of the new generation of ultrathin and heat-resisting coated film to keep the technological leadershipThe feasibility test of the production line was completed, and the production line can meet the target of MD & TD thermal shrinkage @150℃/h<5%To pass the mass production feasibility verificationUpgrade the product performance to ensure the technological leadership
Development of ceramic coating product with high heat resistance and low moistureThe product enters the supply chain of local battery companies in Europe to achieve batch supplyShipmentTo achieve homogenization of the microstructure of the base film, develop high heat-resistant coatings with low moisture and achieve batch supplyIncrease the sales of the Company’s separator film products and raise the stickiness of high-quality, major overseas customers to build stable partnership
Development of base film with high safety at simultaneous processBatch supply for a Japanese customerThe project entered lab-scale test with all physical properties meeting customer needsTo achieve batch supplyIncrease the sales of the Company’s separator film products and raise the stickiness of high-quality, major overseas customers to build stable partnership
Development of solvent-based PVDF-coated separator film for powerBatch supply for a Japanese customerMass production and shipmentTo achieve batch supplyIncrease the sales of the Company’s separator film products and raise the stickiness of high-quality, major overseas customers to build stable partnership
Development of aramid-coated filmBatch supply for a US end customerMass production and shipmentTo achieve batch supplyRaise the added value of the Company’s products and enter the supply chain of high-end overseas consumer customers to enhance the Company’s core competitiveness
Development of separate film with high safety for large cylindrical batteriesBatch supply for the need of an overseas customer for large cylindrical batteriesMass production and shipmentTo achieve batch supplyIncrease the sales of the Company’s separator film products and raise the stickiness of high-quality, major overseas customers to build stable partnership
Development of base film with ultra-large porosity and ultra-high strengthImprove film rate performance and cycle life while ensuring safetyThe project passed lab-scale tests at some customersPorosity≥45%, puncture intensity≥50gf/umUse technology innovation to offer power-typed batteries to consolidate market share
Industrialization of online coatingThe project is applied in production and reduces costsSuccessfully put into mass productionTo put into mass productionImprove the quality of coating film and reduce costs to increase competitiveness
Development of water treatment membranes for household water purificationExpand the Company’s business scope and widen separator film applicationsSales increasedTo achieve sales in batch supplyExpand separator film applications and the Company’s business scope to enhance competitiveness
Development of water treatment membranes for municipal wastewater and industrial wastewaterExpand the Company’s business scope and widen separator film applicationsLab-scale testTo achieve sales in batch supplyExpand separator film applications and the Company’s business scope to enhance competitiveness
Development of aluminum laminated filmExpand the Company’s business scopeCompletion of four types of aluminum laminated film,To achieve sales in batch supply, with all performance indicatorsFully improve product performance to reach globally advanced level, which will lay a

includinghigh-forming,high-durability,high-insulation, and

black, withpromotion startedamong customers

including high-forming, high-durability, high-insulation, and black, with promotion started among customersmeeting or exceeding the level of overseas manufacturerssolid foundation for entering the high-end market and enhance the Company’s competitiveness
Development of ultrathin separator filmCorresponds to the development of 4μm ultrathin separator films for lithium-ion batteries with high-energy densityThe mass production and shipmentTo achieve the mass production and shipmentEnhance the product competitiveness
Research and development of new-type degradable film materialsTechnical reserve for adaption to market demandsLab-scale testTo develop degradable film materialsIt is in line with the requirement for ecological and environmental protection, complies with relevant regulations and policies, performs social responsibilities, and benefits the improvement of the market competitiveness of the Company’s products and enhancement of its economic benefits and enterprise image
Development of high safety base film products with lower shut down temperatureThe next generation of base film products for international high-end customersThe project entered the pilot test stageThe shut down temperature is lower and the puncture is higher than that of conventional productsImprove the product safety and increase the overseas market share of lithium-ion batteries separators
Development of solvent-based coated power batteryDevelopment of high-end overseas customersThe mass production was completedTo complete mass production introduction according to customer requirementsCreate economic and brand benefits and enhance the overseas sales volume

Information about the Company’s R&D personnel

20212020Year-on-year change (%)
Number of R&D personnel (Person)40936910.84%
R&D personnel as a percentage in total employees6.87%7.32%-0.45%
Educational background structure of R&D personnel——————
Bachelor’s degree and below3343136.71%
Master’s degree and above755626.53%
Age structure of R&D personnel——————
Under 301401263.97%
Aged 30-401991852.70%

Information about R&D investment

20212020Year-on-year change (%)
R&D investment (RMB)409,178,730.28178,243,333.28129.56%

R&D investment as a percentagein operating income

R&D investment as a percentage in operating income5.13%4.16%0.97%
Capitalized R&D investment (RMB)0.000.000.00%
Capitalized R&D investment as a percentage in total R&D investment0.00%0.00%0.00%

Reason for and impact of any significant change of composition of the Company’s R&D personnel

□ Applicable √ N/A

The Company’s business scale was expanded and the investment in R&D personnel was increased, and R&D personnel with master’s degree andabove increased by 33.93% year on year, which is conducive to further improving the talent advantage and consolidating the core competitiveness ofthe Company.Reason for any significant year-on-year change in the percentage of the R&D investment in the operating income

□ Applicable √ N/A

Explanation of reason and rationality for any sharp variation in the percentage of the capitalized R&D investment

□ Applicable √ N/A

5. Cash flow

Unit: RMB

Item20212020Year-on-year increase or decrease
Subtotal of cash inflows from operating activities6, 846,043,812.833,780,284,210.9281. 10%
Subtotal of cash outflows due to operating activities5,427,398, 435.012,725,104,197.7399.16%
Net cash flows from operating activities1, 418,645,377.821,055,180,013.1934.45%
Subtotal of cash inflows from investment activities1,814,884,845.70873,613,933.13107.74%
Subtotal of cash outflows due to investment activities5,530,360,175.526,149,118,177.71-10.06%
Net cash flows from investment activities-3,715,475,329.82-5,275,504,244.58-29.57%
Subtotal of cash inflows from financing activities6,116,519,647.6213,221,955,416.70-53.74%
Subtotal of cash outflows from financing activities4,503,459,616.597,662,371,315.54-41.23%
Net cash flows from financing activities1,613,060,031.035,559,584,101.16-70.99%
Net increase in cash and cash equivalents-685,616,215.951,339,259,869.77-151.19%

Explanation of main reasons for any significant year-on-year change in the data above

√ Applicable □ N/A

(1) The significant increase in cash inflows from operating activities is mainly due to the Company’s rapid business growth, and increase of theCompany’s recovery of sales. The significant increase in cash outflows due to operating activities is mainly due to the Company’s rapid businessgrowth. The significant increase in net cash flows from operating activities is mainly due to the Company’s rapid business growth during theReporting Period, resulting in the significant increase in cash inflows from operating activities;

(2) The significant increase in cash inflows from investment activities is mainly due to the Company’s recovery of due financial products;

(3) The significant decrease in cash inflows from financing activities is mainly due to the Company’s major refinancing that has not been completedduring the Reporting Period. The significant decrease in cash outflows from financing activities is mainly due to the decrease in debt repayment of theCompany and the Company’s controlled subsidiary. Therefore, net cash flows from financing activities decreased significantly;

(4) The significant decrease in net increase in cash and cash equivalents is mainly due to the decrease in net cash flows from financing activities.

Explanation of main reasons leading to the material difference between net cash flow from operating activities during the Reporting Period and netprofit for the Year

□ Applicable √ N/A

V. Analysis of Non-main Business

□ Applicable √ N/A

VI. Analysis of Assets and Liabilities

1. Material changes of composition of assets

Unit: RMB

End of 2021Beginning of 2021Increase or decrease in percentageExplanation on any material change
AmountAs a percentage of total assetsAmountAs a percentage of total assets
Monetary capital1,833,450,205.697.02%2,374,743,862.7011.55%-4.53%Mainly due to the Company’s repayment of due debts during the Reporting Period, increased construction of production lines of lithium battery separator film business and business growth, resulting in increased capital demand
Accounts receivable4,405,436,085.5216.86%2,328,215,706.2711.33%5.53%Mainly due to the Company’s rapid business growth during the Reporting Period, and the accounts receivable increased accordingly
Inventories1,681,448,170.296.44%1,157,030,660.715.63%0.81%
Investment properties8,933,531.660.03%9,467,762.780.05%-0.02%
Long-term equity investments3,545,984.210.01%3,375,208.870.02%-0.01%
Fixed assets10,877,888,212.9141.64%8,420,764,216.2040.97%0.67%
Construction in progress1,752,915,718.826.71%1,639,803,967.927.98%-1.27%
Short-term borrowings4,116,148,340.3015.76%1,795,679,528.918.74%7.02%Mainly due to the Company’s business growth, increased demand for capitals from daily operating activities and borrowings from the bank
Contractual liabilities761,923,312.382.92%7,677,129.870.04%2.88%
Long-term borrowings2,803,108,832.3010.73%2,666,911,132.3712.97%-2.24%

High percentage of overseas assets

□ Applicable √ N/A

2. Assets and liabilities measured at fair value

√ Applicable □ N/A

Unit: RMB

Item

ItemBeginning amountGain or loss from change at fair value during the current periodAccumulated changes at fair value recognized in equityProvision for impairment for the current periodAmount of purchase during the current periodAmount of sales during the current periodOther changesEnding amount
Financial assets
1. Held-for-trading financial assets (excluding derivative financial assets)1,340,551,914.1884,637,194.341,420,051,914.185,137,194.34
4. Investment in other equity instruments110,000,000.00110,000,000.00
Others399,552,829.70526,473,335.53399,552,829.70-526,473,335.53
Of which: bank acceptance draft22,174,829.70412,477,885.8322,174,829.70412,477,885.83
Accounts receivable377,378,000.00113,995,449.70377,378,000.00113,995,449.70
Total of the above items1,740,104,743.88721,110,529.871,819,604,743.88641,610,529.87
Financial liabilities0.000.00

Other changesWhether there are any significant changes in the measurement attributes of the Company’s major assets during the Reporting Period

□ Yes √ No

3. Restricted asset rights as of the end of the Reporting Period

ItemBalanceReason for restriction
Monetary capital462,772,214.04Bank draft deposit, L/C deposit, L/G deposit

Other non-current assets

Other non-current assets387,856,800.77Bank loan obtained by pledge

Receivable financing

Receivable financing154,912,704.68Bank borrowings obtained by pledge and bank acceptance draft issued

Notes receivable

Notes receivable17,141,467.20Bank loan obtained by pledge
Accounts receivable6,769,341.65Bank loan obtained by pledge

Fixed assets

Fixed assets2,488,699,031.50Bank unified credit and loan obtained by mortgage

Intangible assets

Intangible assets224,635,117.58Bank unified credit and loan obtained by mortgage

Total

Total3,742,786,677.42

VII. Analysis of Investments Made

1. Summary

√ Applicable □ N/A

Total investment amount during the Reporting

Period (RMB)

Total investment amount during the Reporting Period (RMB)Total investment amount in the prior year (RMB)Change (%)
6,676,555,356.593,919,952,513.2270.32%

2. Significant equity investment made in the Reporting Period

□ Applicable √ N/A

3. Significant non-equity investments ongoing in the Reporting Period

√ Applicable □ N/A

Unit: RMB

Item name

Item nameWay of investmentInvestment in fixed assets or notIndustry involved in the investment projectInvestment amount in the Reporting PeriodAccumulative actual investment amount as at the end of the Reporting PeriodSource of fundProgress of projectProjected earningsAccumulative income realized as at the end of the Reporting PeriodReasons for the failure to make the planned progress and receive the projected earningsDisclosure date (if any)Index to disclosed information (if any)
Wuxi Energy New Material Industrial BaseSelf-constructionYesLithium-ion Battery Separator Film130,471,895.312,034,833,716.091. self owned and self raised funds; 2. raise funds by convertible bonds100.00%--335,452,403.82N/AJuly 4, 2018Please refer to the Announcement on Implementation of Wuxi Energy New Material Industrial Base by Wuxi Energy (No.: 2018-062) disclosed on the Cninfo website.
Wuxi Energy New Material Industrial Base Phase IISelf-constructionYesLithium-ion Battery Separator Film850,220,080.021,567,099,065.441. self owned and self raised funds; 2. raise funds by way of non-public offering in 202080.98%--92,379,524.47N/AJuly 2, 2019Please refer to the Announcement on Capital Increase by Shanghai Energy to Wuxi Energy and Investment in Wuxi Energy New Material Industrial Base Phase II - Lithium-ion Battery Separator Film (No.: 2019-076) disclosed on the Cninfo website.
Zhuhai Energy Phase IISelf-constructionYesLithium-ion Battery Separator Film133,438,580.661,338,898,253.74Self owned and self raised funds99.00%--396,956,751.53N/AMarch 15, 2019Please refer to the Announcement on Investment by Zhuhai Energy in Lithium-ion Battery Separator Film Project Phase II (No.: 2019-024) disclosed on the Cninfo website.
Jiangxi Tonry Phase ISelf-constructionYesLithium-ion Battery Separator Film36,146,910.851,737,363,651.081. self owned and self raised funds; 2. raise funds by convertible bonds96.65%--469,491,825.03N/ANovember 2, 2018Please refer to the Announcement on A Controlled Subsidiary’s Acquisition of 100% Equity of Jiangxi Tonry New Energy Technology Development Co., Ltd.(No.: 2018-141) disclosed on the Cninfo website.

Jiangxi TonryPhase I Expansion

Jiangxi Tonry Phase I ExpansionSelf-constructionYesLithium-ion Battery Separator Film1,493,902,276.431,633,307,273.141. self owned and self raised funds; 2. raise funds by way of non-public offering in 202071.35%--77,181,618.56N/AMarch 24, 2020Please refer to the Announcement on Plan for Non-public Offering of A Shares in 2020 (No.: 2020-050) disclosed on the Cninfo website.
Hungary Lithium Battery Separator FilmSelf-constructionYesLithium-ion Battery Separator Film80,981,499.9580,981,499.95Self owned and self raised funds8.12%--0.00N/ANovember 11, 2020Please refer to the Announcement on Construction of Wet-process Lithium Battery Separator Film Project in Hungary (No.: 2020-204) disclosed on the Cninfo website.
Chongqing Energy High-performance Lithium Battery Micropore Separator Film (Phase I)Self-constructionYesLithium-ion Battery Separator Film238,309,290.62238,309,290.62Self owned and self raised funds16.41%--0.00N/ANovember 23, 2021Please refer to the Announcement on Plan for Non-public Offering of A Shares in 2021 (No.: 2021-188) disclosed on the Cninfo website.
Chongqing Energy High-performance Lithium Battery Micropore Separator Film (Phase II)Self-constructionYesLithium-ion Battery Separator Film1,078,827.361,078,827.36Self owned and self raised funds0.04%--0.00N/ANovember 23, 2021Please refer to the Announcement on Plan for Non-public Offering of A Shares in 2021 (No.: 2021-188) disclosed on the Cninfo website.
Chongqing Energy High-performance Lithium Battery Micropore Separator Film (Phase III)Self-constructionYesLithium-ion Battery Separator Film334,467.92334,467.92Self owned and self raised funds0.01%--0.00N/ADecember 8, 2021Please refer to the Announcement on the Progress of Chongqing Energy High-performance Lithium Battery Micropore Separator Film Project (No.: 2021-203) disclosed on the Cninfo website.
Jiangsu Energy EV Lithium Battery Separator Film Industrialization ProjectSelf-constructionYesLithium-ion Battery Separator Film124,028.69124,028.69Self owned and self raised funds0.00%--0.00N/ANovember 23, 2021Please refer to the Announcement on Plan for Non-public Offering of A Shares in 2021 (No.: 2021-188) disclosed on the Cninfo website.

Jiangsu Ruijie EVLithium BatteryAluminumLaminated FilmIndustrialization

Project

Jiangsu Ruijie EV Lithium Battery Aluminum Laminated Film Industrialization ProjectSelf-constructionYesAluminum laminated film485,204.19485,204.19Self owned and self raised funds0.00%--0.00N/ANovember 23, 2021Please refer to the Announcement on Plan for Non-public Offering of A Shares in 2021 (No.: 2021-188) disclosed on the Cninfo website.
Suzhou Green Power Annual Production of 200 Million Square Meters of Lithium-ion Battery Coating Separator Films ProjectSelf-constructionYesLithium-ion Battery Separator Film2,050,087.722,050,087.72Self owned and self raised funds0.21%--0.00N/ANovember 23, 2021Please refer to the Announcement on Plan for Non-public Offering of A Shares in 2021 (No.: 2021-188) disclosed on the Cninfo website.
Dry-process Lithium-ion Battery Separator Films ProjectSelf-constructionYesLithium-ion Battery Separator Film53,280,407.1153,280,407.11Self owned and self raised funds4.63%--0.00N/AFebruary 1, 2021Announcement on Gaoan Municipal People’s Government in Jiangxi Province Signing the Contract for the Construction of Dry-process Lithium-ion Battery Separator Films Project (Announcement No.: 2021-018) disclosed on the Cninfo website.
Total------3,020,823,556.838,688,145,773.05------1,371,462,123.41------

4. Financial asset investments

(1) Securities investments

□ Applicable √ N/A

No such cases in the Reporting Period.

(2) Derivatives investments

□ Applicable √ N/A

No such cases in the Reporting Period.

5. Use of funds raised

√ Applicable □ N/A

(1) Overall use of funds raised

√ Applicable □ N/A

Unit: RMB’0,000

Year ofraising

Year of raisingWay of raisingTotal amount of funds raisedTotal amount used from the funds raised in the YearTotal amount accumulatively used from the funds raisedTotal amount of funds raised with change in use during the Reporting PeriodTotal accumulated amount of funds raised with change in usePercentage of the total accumulated amount funds raised with change in useTotal amount of unused funds raisedPurpose and investment direction of unused funds raisedAmount of funds raised that have been idle for more than two years
2016Initial public offering74,776.7074,776.7010,588.6814.16%10,588.68Deposited in the bank’s special account for raised funds10,588.68
2020Public offering of convertible corporate bonds in 2020158,612.260158,612.26000.00%0N/A0
2020Non-public offering of shares in 2020498,250.46263,774.31489,127.2000.00%10,782.04Deposited in the bank’s special account for raised funds0
Total--731,639.42263,774.31722,516.16010,588.681.45%21,370.72--10,588.68
Explanation on the general use of the funds raised
I. Initial Public Offering With the approval of CSRC ZJXK [2016] No. 1886, the Company made its initial public offering of 33.48 million RMB-denominated ordinary shares. China Merchants Securities Co., Ltd., the main underwriter, issued 33.48 million shares by combining offline inquiry and allotment to investors and online subscription based on market value to public investors. This issuance is all new shares, without transfer of old shares. Among them, 3.348 million shares were allotted offline, 30.1320 million shares were issued online at a price of RMB23.41/share. In addition, after deducting RMB3,599.98 of newly increased external expenses directly related to the issuance of equity securities, such as online issuance fee, prospectus printing fee, reporting accountant fee, lawyer fee and evaluation fee, the net amount of raised funds was RMB747.767 million. The availability of the above raised funds was verified by Dahua CPAs (SGP) with the capital verification report of “DHYZ [2016] No. 000897”. As of September 30, 2016, the self-owned funds invested for the projects for which funds were raised reached RMB236.6591 million, which was audited by Dahua CPAs (SGP) with the appraisal report of DHHZ [2016] No. 004562. In 2017, the total amount of used funds raised was RMB26,067,736.89; in 2018, the total amount of used funds raised was RMB36,288,006.85; in 2019, the total amount of used funds raised was RMB24,728,775.11; in 2020, the total amount of used funds raised was RMB0.00; in this year, the total amount of used funds raised was RMB0.00. As of December 31, 2020, the balance of funds raised is RMB113,962,434.57 (including the net amount of RMB8,075,670.62 as interest income of raised funds after deducting bank charges).

II. Public Offering of Convertible Corporate Bonds in 2020Upon approval from the CSRC with the Reply to Yunnan Energy New Material Co., Ltd. to Approve Its Public Offering of Convertible Corporate Bonds (ZJXK [2019] No. 2701), the Company publicly issued 16million convertible corporate bonds on February 11, 2020, with a face value of RMB100 each bond and a total amount of RMB1,600,000,000. After deducting the underwriting and sponsorship fees (excluding tax)of RMB9,433,962.26 and other offering expenses (excluding tax) of RMB4,443,396.23 from the total amount of proceeds from public offering of convertible corporate bonds, the net amount of proceeds fromoffering by the Company was RMB1,586,122,641.51. The availability of funds raised this time was verified by Dahua CPAs (SGP) with the capital verification report of “DHYZ [2020] No. 000047”. As of March16, 2020, before the availability of funds raised, the self-owned funds invested for the projects for which funds were raised reached RMB1,697,984,425.54, which was replaced fully with theRMB1,586,122,641.51 of funds raised through issuing convertible corporate bonds, and was audited by Dahua CPAs (SGP) with the appraisal report of DHHZ [2020] No. 001799. As of December 31, 2020, theCompany’s proceeds from offering of convertible corporate bonds were all replaced, and the balance of the special account was RMB0.00. The Company completed the cancellation procedure for the specialaccount.

III. Non-public Offering of Shares in 2020Upon approval from the CSRC with the Reply to Yunnan Energy New Material Co., Ltd. to Approve Its Non-public Offering of Shares (ZJXK [2020] No. 1476), the Company non-publicly issued 69,444,444RMB-denominated ordinary shares to 22 specific investors on August 17, 2020, with a face value of RMB 1.00 each share, at the offering price of RMB72.00/share, and the total proceeds from this offering wasRMB4,999,999,968.00. After deducting the underwriting and sponsorship fees (excluding tax) of RMB14,150,943.40 and other offering expenses (excluding tax) of RMB3,344,470.11 from the total amount ofproceeds from this offering, the net amount of proceeds from this offering by the Company was RMB4,982,504,554.49. The availability of funds raised through this offering was verified by Dahua CPAs (SGP)with the capital verification report of “DHYZ [2020] No. 000460”. Before the availability of funds raised, the self-owned funds invested for the projects for which funds were raised reached RMB 254,221,260.11,which was audited by Dahua CPAs (SGP) with the appraisal report of DHHZ [2020] No. 007436. The amount of used funds raised was RMB1,999,307,646.21 in 2020. The amount of used funds raised wasRMB2,637,743,136.15 this year. As of December 31, 2021, the balance in the account of funds raised was RMB144,989,592.08 (including the net amount of RMB53,757,080.06 as interest income of raised fundsafter deducting bank charges)

(2) Projects with committed use of funds raised

√ Applicable □ N/A

Unit: RMB’0,000

II. Public Offering of Convertible Corporate Bonds in 2020Upon approval from the CSRC with the Reply to Yunnan Energy New Material Co., Ltd. to Approve Its Public Offering of Convertible Corporate Bonds (ZJXK [2019] No. 2701), the Company publicly issued 16million convertible corporate bonds on February 11, 2020, with a face value of RMB100 each bond and a total amount of RMB1,600,000,000. After deducting the underwriting and sponsorship fees (excluding tax)of RMB9,433,962.26 and other offering expenses (excluding tax) of RMB4,443,396.23 from the total amount of proceeds from public offering of convertible corporate bonds, the net amount of proceeds fromoffering by the Company was RMB1,586,122,641.51. The availability of funds raised this time was verified by Dahua CPAs (SGP) with the capital verification report of “DHYZ [2020] No. 000047”. As of March16, 2020, before the availability of funds raised, the self-owned funds invested for the projects for which funds were raised reached RMB1,697,984,425.54, which was replaced fully with theRMB1,586,122,641.51 of funds raised through issuing convertible corporate bonds, and was audited by Dahua CPAs (SGP) with the appraisal report of DHHZ [2020] No. 001799. As of December 31, 2020, theCompany’s proceeds from offering of convertible corporate bonds were all replaced, and the balance of the special account was RMB0.00. The Company completed the cancellation procedure for the specialaccount.

III. Non-public Offering of Shares in 2020Upon approval from the CSRC with the Reply to Yunnan Energy New Material Co., Ltd. to Approve Its Non-public Offering of Shares (ZJXK [2020] No. 1476), the Company non-publicly issued 69,444,444RMB-denominated ordinary shares to 22 specific investors on August 17, 2020, with a face value of RMB 1.00 each share, at the offering price of RMB72.00/share, and the total proceeds from this offering wasRMB4,999,999,968.00. After deducting the underwriting and sponsorship fees (excluding tax) of RMB14,150,943.40 and other offering expenses (excluding tax) of RMB3,344,470.11 from the total amount ofproceeds from this offering, the net amount of proceeds from this offering by the Company was RMB4,982,504,554.49. The availability of funds raised through this offering was verified by Dahua CPAs (SGP)with the capital verification report of “DHYZ [2020] No. 000460”. Before the availability of funds raised, the self-owned funds invested for the projects for which funds were raised reached RMB 254,221,260.11,which was audited by Dahua CPAs (SGP) with the appraisal report of DHHZ [2020] No. 007436. The amount of used funds raised was RMB1,999,307,646.21 in 2020. The amount of used funds raised wasRMB2,637,743,136.15 this year. As of December 31, 2021, the balance in the account of funds raised was RMB144,989,592.08 (including the net amount of RMB53,757,080.06 as interest income of raised fundsafter deducting bank charges)

Project with committed investment and investment direction of

funds excessively raised

Project with committed investment and investment direction of funds excessively raisedWhether the project has been changed, including part changeTotal committed investment amount of funds raisedTotal investment amount after adjustment (1)Investment amount in the Reporting PeriodAccumulative investment amount as at the end of the Reporting Period (2)Investment progress as at the end of the Reporting Period (3)=(2)/(1)Date of project reaching intended usable conditionBenefits achieved in the Reporting PeriodWhether the expected benefits are achievedWhether the feasibility of the project has changed significantly
Project with committed investment
1. Reconstruction and expansion project of color packaging boxes with annual production output of 3 billion piecesNo28,414.728,414.7028,414.7100.00%August 15, 20194,928.75NoNo
2. Reconstruction and expansion project of high-grade environmental-friendly special paper with annual production output of 13,000 tonsYes10,684.573,617.503,617.5100.00%N/AYes

3. R&D center construction project

3. R&D center construction projectYes4,993.171,471.5601,471.56100.00%N/AYes
4. Repayment of bank loansNo20,00020,000020,000100.00%YesNo
5. Addition to current capital (IPO)No10,684.2610,684.26010,684.26100.00%YesNo
6. Lithium-ion battery separator film project (Phase I) with annual production output of 400 million square meters of Jiangxi Tonry New Energy Technology Development Co., Ltd.No58,612.2658,612.26058,612.26100.00%December 31, 201942,580.38NoNo
7. Wuxi Energy New Material Industrial BaseNo100,000100,0000100,000100.00%September 30, 202026,819.24NoNo
8. Expansion of lithium-ion battery separator film project (Phase I) of Jiangxi Tonry New Energy Technology Development Co., Ltd.No148,250.46148,250.46109,520.12149,909.24100.00%July 31, 20228,870.91NoNo
9. Expansion of Wuxi Energy New Material Industrial Base Phase IINo200,000200,000154,254.19189,217.9694.61%June 30, 202210,429.7NoNo
10. Addition to current capital (non-public offering)No150,000150,0000150,000100.00%YesNo
Subtotal of committed investment projects--731,639.42721,050.74263,774.31711,927.48----93,628.98----
Investment direction of funds excessively raised
None
Total--731,639.42721,050.74263,774.31711,927.48----93,628.98----
Cases and reasons for failing to reach the planned progress or predicted return (by specific projects)The projected earnings are the estimated annual net profit when the project reaches a usable state and the production capacity is fully released. As of December 31, 2021, the reconstruction and expansion project of color packaging boxes with 3 billion pieces annual production output has reached the production capacity, while the benefit of the current year failed to meet the expected target due to the increase in the price of bulk raw materials; the lithium-ion battery separator film project (Phase I) with annual production output of 400 million square meters of Jiangxi Tonry New Energy Technology Development Co., Ltd., and the Wuxi Energy New Material Industrial Base project are in the climbing up stage; the expansion of lithium-ion battery separator film project (Phase I) of Jiangxi Tonry New Energy Technology Development Co., Ltd., and the expansion of Wuxi Energy New Material Industrial Base Phase II have not been completed.
Significant changes in the feasibility of projectsI. Initial Public Offering 1. The “reconstruction and expansion project of high-grade environmental-friendly special paper with annual production output of 13,000 tons” was planned by the Company based on the market situation and the Company’s production capacity before listing. As time goes by, the market has changed dramatically. Since 2016, the purchase mode of downstream tobacco manufacturers for special paper products has been adjusted from quantity allocation by cigarette manufacturers to the independent purchasing mode through centralized bidding or commercial negotiation by cigarette label printing enterprises. Cigarette-related enterprises can expand the bargaining range from region to the whole country by means of bidding or the commercial negotiation mode of public market inquiry and price negotiation by themselves, breaking the original competition pattern featuring fixed share and region. As a result, special paper manufacturers took active competition strategies like price reduction to seize orders, and the industry pattern changed. As a result of the above industrial policy adjustment, the special paper industry has formed a new pattern featuring full market competition, with more fierce market competition and sharp drop in price. If the

project went on as scheduled previously, it may face the risks that the utilization rate of raised funds will decline and the expectedinvestment objective may not be achieved. Therefore, the Company terminated the implementation of this project in 2019.

2. “R&D center construction project” was to meet the demand of the R&D for the main business before listing. With the completion of theCompany’s major asset restructuring in 2018, the Company’s main business covered lithium-ion battery separator film, which has hightechnological requirements. The manufacturing of lithium-ion battery has a high requirement for the characteristics of separator filmmaterials, especially the consistency, and also for the uniformity of the size and distribution of separator film micropores. Based on theCompany’s business development plan and market demand, in order to better implement the Company’s development strategy, the Companyplanned to integrate the technology centers currently scattered in each subordinate company, so as to ensure that the Company’s R&Dtechnology can further improve production efficiency, product quality and new product development capacity. The above change wasapproved at the 27th meeting of the third Board of Directors of the Company, the 22nd meeting of the third Supervisory Committee and the2018 General Meeting of Shareholders.

project went on as scheduled previously, it may face the risks that the utilization rate of raised funds will decline and the expected investment objective may not be achieved. Therefore, the Company terminated the implementation of this project in 2019. 2. “R&D center construction project” was to meet the demand of the R&D for the main business before listing. With the completion of the Company’s major asset restructuring in 2018, the Company’s main business covered lithium-ion battery separator film, which has high technological requirements. The manufacturing of lithium-ion battery has a high requirement for the characteristics of separator film materials, especially the consistency, and also for the uniformity of the size and distribution of separator film micropores. Based on the Company’s business development plan and market demand, in order to better implement the Company’s development strategy, the Company planned to integrate the technology centers currently scattered in each subordinate company, so as to ensure that the Company’s R&D technology can further improve production efficiency, product quality and new product development capacity. The above change was approved at the 27th meeting of the third Board of Directors of the Company, the 22nd meeting of the third Supervisory Committee and the 2018 General Meeting of Shareholders.
Amount, purpose and actual use of funds excessively raisedN/A
Change in location to implement the projects with investments out of the funds raisedApplicable
Change in previous year
Upon the deliberation and approval for the Proposal on Changing Some Projects with Investments Out of the Funds Raised at the 27th meeting of the 3rd Board of Directors of the Company, it was agreed to terminate the “reconstruction and expansion project of high-grade environmental-friendly special paper with annual production output of 13,000 tons” and the “R&D center construction project”, and invest the balance of the funds raised for these two projects, totaling RMB105.8868 million, and the interest income, in the new project - Energy Technology Research Institute. The Company will invest to establish a wholly-owned subsidiary (which has not been registered so far, subject to the approval of the business registry) as the entity to implement the project of Energy Technology Research Institute, and lease the experimental building in the factory area of Shanghai Energy. The location to implement the project is changed to 155 Nanlu Road, Pudong New Area, Shanghai.
Adjustment to the implementation method of projects with investment out of funds raisedN/A
Preliminary investment in projects and replacement with the funds raisedApplicable
I. Initial Public Offering With the deliberation and approval at the 18th meeting of the second Board of Directors of the Company on the Proposal on Use of Funds Raised to Replace the Preliminarily Invested Self-raised Funds, it is agreed to replace the self-raised funds of RMB236,659,100 that have been invested in the projects for which the funds were raised. RMB197,935,700 was preliminarily invested in the “the reconstruction and expansion project of color packaging boxes with an annual production output of 3 billion pieces”, RMB24,213,800 was preliminarily invested in the “reconstruction and expansion project of high-grade environmental-friendly special paper with annual production output of 13,000 tons”, and RMB14,509,600 was preliminarily invested in the “R&D center construction project”. II. Public Offering of Convertible Corporate Bonds in 2020 At the 42nd meeting of the third Board of Directors of the Company, the Proposal on the Use of Proceeds from Convertible Corporate Bonds to Replace Self-raised Funds Preliminarily Invested in Fund-raising Investment Projects was deliberated and approved, and it was agreed that the Company used the proceeds from this offering to replace part self-raised funds already invested in the projects for which the funds were raised. As of March 16, 2020, the Company accumulatively used self-raised funds of RMB1.6979844 billion for the projects, and the

net amount of proceeds from this offering of convertible corporate bonds was RMB1.5861226 billion, which was used fully to replace thepreliminarily invested self-raised funds, including RMB596.8886 million invested for “Wuxi Energy New Material Industrial Base” andreplaced with the proceeds of RMB586.1226 million; RMB1.1010959 billion invested for the “lithium-ion battery separator film project(Phase I) with annual production output of 400 million square meters of Jiangxi Tonry New Energy Technology Development Co., Ltd.” andreplaced with the proceeds of RMB1.00 billion.III. Non-public Offering of Shares in 2020At the 11st meeting of the fourth Board of Directors and the 11st meeting of the fourth Supervisory Committee, the Proposal onReplacement of Preliminarily Invested Self-raised Funds with the Proceeds from the Non-public Offering of A Shares in 2020 wasdeliberated and approved, and it was agreed to replace the self-raised funds of RMB254.2213 million already invested in the projects withthe proceeds. RMB157.1693 million was preliminarily invested in the “expansion project of lithium-ion battery separator film (Phase I) ofJiangxi Tonry New Energy Technology Development Co., Ltd.”; RMB97.0520 million was preliminarily invested in the “expansion projectof Wuxi Energy New Material Industrial Base Phase II”.

net amount of proceeds from this offering of convertible corporate bonds was RMB1.5861226 billion, which was used fully to replace the preliminarily invested self-raised funds, including RMB596.8886 million invested for “Wuxi Energy New Material Industrial Base” and replaced with the proceeds of RMB586.1226 million; RMB1.1010959 billion invested for the “lithium-ion battery separator film project (Phase I) with annual production output of 400 million square meters of Jiangxi Tonry New Energy Technology Development Co., Ltd.” and replaced with the proceeds of RMB1.00 billion. III. Non-public Offering of Shares in 2020 At the 11st meeting of the fourth Board of Directors and the 11st meeting of the fourth Supervisory Committee, the Proposal on Replacement of Preliminarily Invested Self-raised Funds with the Proceeds from the Non-public Offering of A Shares in 2020 was deliberated and approved, and it was agreed to replace the self-raised funds of RMB254.2213 million already invested in the projects with the proceeds. RMB157.1693 million was preliminarily invested in the “expansion project of lithium-ion battery separator film (Phase I) of Jiangxi Tonry New Energy Technology Development Co., Ltd.”; RMB97.0520 million was preliminarily invested in the “expansion project of Wuxi Energy New Material Industrial Base Phase II”.
Unused proceeds temporarily added to current capitalApplicable
I. Initial Public Offering On February 24, 2020, at the 41st meeting of the third Board of Directors, and the 36th meeting of the third Supervisory Committee, the Proposal on Use of Part Unused Proceeds to Temporarily Supplement the Current Capital was deliberated and approved, and it was agreed to use the unused proceeds to the extent of not more than RMB110 million to temporarily supplement the current capital within 12 months from the date the above proposal was approved, and the independent directors and sponsor also expressed the opinion to agree upon the proposal. On August 26, 2020, the Company transferred the above RMB110 million to the special account for the funds raised, and informed the sponsor CITIC Securities and its representative of such transfer. II. Non-public Offering of Shares in 2020 On September 7, 2020, at the 11st meeting of the fourth Board of Directors and the 11st meeting of the fourth Supervisory Committee, the Proposal on Use of Part Unused Proceeds to Temporarily Supplement the Current Capital was deliberated and approved, and it was agreed to use the unused proceeds from the non-public offering of shares in 2020 to the extent of not more than RMB800 million to temporarily supplement the current capital for the production and operation related to the main business within 12 months from the date the sixth Extraordinary General Meeting of Shareholders of 2020 approved the proposal. The independent directors and sponsor also expressed the opinion to agree upon the proposal.
Amount of and reason for any balance of the funds raised after the project implementationN/A
Defects and other problems in utilization and disclosure of the Raised FundsNone

(3) Project with changed use of funds raised

√ Applicable □ N/A

Unit: RMB’0,000

Projectafterchange

Project after changeProject before changeTotal amount of intended investment from the funds raised in the changed project (1)Actual investment amount in the Reporting PeriodActual accumulative investment amount as at the end of the Reporting Period (2)Investment progress as at the end of the Reporting Period (3)=(2)/(1)Date of project reaching intended usable conditionBenefits achieved in the Reporting PeriodWhether the expected benefits are achievedWhether the feasibility of the changed project has changed significantly
Project of Energy Research Institute1. Reconstruction and expansion project of high-grade environmental-friendly special paper with annual production output of 13,000 tons; 2. R&D center construction project10,588.680.000.000.00%0.00N/ANo
Total--10,588.680.000.00----0.00----
Reason for change, decision making procedure and information disclosure (by specific project)1. The “reconstruction and expansion project of high-grade environmental-friendly special paper with annual production output of 13,000 tons” was planned by the Company based on the market situation and the Company’s production capacity before listing. As time goes by, the market has changed dramatically. Since 2016, the purchase mode of downstream tobacco manufacturers for special paper products has been adjusted from quantity allocation by cigarette manufacturers to the independent purchasing mode through centralized bidding or commercial negotiation by cigarette label printing enterprises. Cigarette-related enterprises can expand the bargaining range from region to the whole country by means of bidding or the commercial negotiation mode of public market inquiry and price negotiation by themselves, breaking the original competition pattern featuring fixed share and region. As a result, special paper manufacturers took active competition strategies like price reduction to seize orders, and the industry pattern changed. As a result of the above industrial policy adjustment, the special paper industry has formed a new pattern featuring full market competition, with more fierce market competition and sharp drop in price. If the project went on as scheduled previously, it may face the risks that the utilization rate of raised funds will decline and the expected investment objective may not be achieved. Therefore, the Company terminated the implementation of this project in 2019. 2. “R&D center construction project” was to meet the demand of the R&D for the main business before listing. With the completion of the Company’s major asset restructuring in 2018, the Company’s main business covered lithium-ion battery separator film, which has high technological requirements. The manufacturing of lithium-ion battery has a high requirement for the characteristics of separator film materials, especially the consistency, and also for the uniformity of the size and distribution of separator film micropores. Based on the Company’s business development plan and market demand, in order to better implement the Company’s development strategy, the Company planned to integrate the technology centers currently scattered in each subordinate company, so as to ensure that the Company’s R&D technology can further improve production efficiency, product quality and new product development capacity. The above change was approved at the 27th meeting of the third Board of Directors of the Company, the 22nd meeting of the third Supervisory Committee and the 2018 General Meeting of Shareholders. For details, please refer to the Announcement on Changing Part Investment Projects for Which Funds Were Raised (Announcement No.: 2019-041) published by the Company on the Cninfo website on April 26, 2019.
Status of and reason for the failure to make planned progress or projected earnings (by specific project)N/A
Description of major changes in project feasibility after changesN/A

VIII. Sale of Significant Assets and Equity Interests

1. Sale of significant assets

□ Applicable √ N/A

The Company did not sell any significant assets during the Reporting Period.

2. Sale of significant equity interests

□ Applicable √ N/A

IX. Analysis of Major Holding Companies and Joint Stock Companies

√ Applicable □ N/A

Major subsidiaries and joint stock companies that contribute over 10% of net profits to the Company

Unit: RMB billion

Companyname

Company nameCompany TypeMain BusinessRegistered CapitalTotal AssetsNet AssetsOperating IncomeOperating ProfitNet Profit
Shanghai EnergySubsidiaryLithium-ion Battery Separator Film0.3923.716.866.442.902.60

Acquisition and disposal of subsidiaries during the Reporting Period

√ Applicable □ N/A

Company nameAcquisition or Disposal of Subsidiaries During the Reporting PeriodImpact on Overall Production Operations and Performance
Ningbo Energy New Material Co., Ltd.Established by investmentUnavailable
Chongqing Energy New Material Technology Co., Ltd.Established by investmentUnder construction and has not been put into operation
Jiangxi Enpo New Materials Co., Ltd.Established by investmentUnder construction and has not been put into operation
Jiangxi Energy New Material Technology Co., Ltd.Established by investmentUnder construction and has not been put into operation
Jiangsu Energy New Material Technology Co., Ltd.Established by investmentUnder construction and has not been put into operation
Jiangsu Ruijie New Material Technology Co., Ltd.Established by investmentUnder construction and has not been put into operation
Hunan Energy Advanced New Material Technology Co., Ltd.Established by investmentUnavailable
Hubei Energy New Material Technology Co., Ltd.Established by investmentUnder construction and has not been put into operation
Jiangsu Sanhe Battery Material Technology Co., Ltd.Established by investmentUnder construction and has not been put into operation

Explanation on major holding companies and joint-stock companiesShanghai Energy is a controlled subsidiary of the Company. As at the end of the Reporting Period, the Company held its 95.22% equity, its majorproduct is lithium-ion battery separator film, and its major subordinate companies include Zhuhai Energy, Wuxi Energy, Jiangxi Tonry, Suzhou GreenPower and Newmi Tech. With the constant increase of the production capacity of the Company in lithium-ion battery separator film, Shanghai Energyachieved an operating income of RMB6,437 million in 2021, representing an increase of 141.99% year on year, and a net profit attributable to theowner of the parent company of RMB2,575 million, representing an increase of 166.52% year on year.

X. Structured Bodies Controlled by the Company

□ Applicable √ N/A

XI. Outlook for the Company’s Future Prospects

1. Corporate strategy

The Company will focus on the lithium-ion battery separator film sector, march towards the vision to become a “world-class polymer materialresearch, development and production enterprise” and bear in mind the philosophy of creating values for customers with quality, price and service.The Company will continuously scale up the capacity, improve product quality, and strengthen research and development. The Company will enrichthe product matrix, seek cost reduction and benefit enhancement through lean management, build up technical innovation capacity to identify newprofit growth drives. The Company will integrate global technical and professional resources, actively expand domestic and overseas markets,improve the core market competitiveness, actively capture development opportunities in the new energy sector, and dedicate itself to creating valuesfor customers. At the same time, the Company will attack the, sterile package, cigarette label, BOPP film, special paper AND aluminum laminatedfilm sectors to become the most competitive new material producer in China.

2. Operating plan for 2022

The global new energy sector has been thriving. As a leader in the wet-process lithium-ion battery separator film sector, the Company offers productscovering the markets of power lithium-ion battery separator film and lithium-ion battery separator film in the 3C field. Meanwhile, the Companycontinued to carry forward the dry-process separator film project in cooperation with Celgard, the global leader in the dry-process separator filmsector, to edge into the energy storage market, and further improve the Company’s strategic presence in the separator film field. The Company paidongoing attention to the development of cutting-edge technologies, launched solid electrolyte separator film projects, and attached importance to thedevelopment of cutting-edge technologies, such as solid electrolyte coating separator film and other projects to further refine the strategic presence inthe separator film field. In addition, the Company further improved its core competitiveness by actively edging into the aluminum laminated filmbusiness and enriching the product lines.In the future, the Company will continue to expand the capacity, continue independent research and development and continuous innovation andconsolidate its industrial position with its comprehensive advantages in technology, capacity, product quality, cost and market. (1) The Company willprocure the world’s most advanced production equipment and build eight separator film production bases in China and overseas regions. In 2022, theCompany will further expand the capacity for lithium-ion battery separator film by accelerating the Jiangsu Energy EV Lithium Battery SeparatorFilm Industrialization Project, the Chongqing Energy High-performance Lithium-ion Battery Micropore Separator Film Project, the lithium-ionbattery coating separator film project of Suzhou Green Power with annual production of 200 million square meters, the wet-process lithium-ionbattery separator film production line and supporting plant project in Hungary, the dry-process separator project in cooperation with Jiangxi Enpo, andproject in cooperation with Hubei Energy, etc. The expansion plan of the Company matches its major downstream customers’ large-scale expansionplans in the future. After the completion of these projects, the Company’s market share will be further improved and its leading position in theindustry will be consolidated. (2) In 2022, the Company will actively promote the Jiangsu Ruijie and Jiangxi Ruijie EV Lithium Battery AluminumLaminated Film Industrialization Project to further enrich its product lines. Besides, the ability to supply multiple types of materials will furtherdeepen the partnership between the Company and its downstream lithium battery customers, thereby raising its profitability as well as consolidatingand strengthening its market position. Ongoing efforts have been made to push forward the aseptic liquid packaging board project in Changzhouestablished by the Company’s controlled subsidiary Hongchuang Packaging and the BOPP separator film upgrade and expansion project by itsexclusively-owned subsidiary Hongta Plastic. (3) The Company will promote lean management. In 2022, the Company will continue to carry forwardthe development of the supplier management platform, the budget management platform, and the financial sharing center in order to improve internalmanagement efficiency and achieve mid- and long-term development targets. In addition, the Company will continuously improve its equipment,process and quality to ensure it can increase the production efficiency and enhance the product quality without cease. The Company will continue toscale up the research and development spending, cooperate with domestic research institutes and universities, reinforce the technical research,development and conversion capacity and gradually establish an integral and high-efficiency research and development system to ensure theCompany can further increase the production efficiency through technical research and development, enhance the product quality and new productdevelopment capacity, provide a mighty technical support for the Company’s implementation of functional polymer separator film products andprovide new profit growth engines powering the future development.

3. Risks the Company may face

(1) National regulatory risk relating to lithium-ion battery separator film business

In recent years, various countries have intensively introduced industry policies to support the development of new energy vehicle industry.Benefiting from policy support, the production value of new energy vehicle industry rapidly increased, driving the rapid development of the upstreamlithium battery industry. If there are significant adverse changes in domestic and overseas subsidy policy, carbon emissions, renewable energyapplication and other relevant industry policies in the future, the relevant policies may have a negative impact on the development of the wholeindustry chain of new energy vehicle, thus having an adverse impact on the upstream lithium-ion battery separator film industry and the Company’soperation result.

Countermeasures: By actively investing in the R&D of new applications of film, the Company will explore its new commercial applicationmarket. At the same time, the Company also invests resources to distribute new product projects to diversify business risks and reduce the impact ofpolicy fluctuations on the Company to a certain extent.

(2) Intensified market competition risk

The rapid growth of the new energy vehicle industry has driven the development of lithium-ion battery separator film in the upstream part, andthe lithium-ion battery separator film industry has attracted many domestic enterprises due to its higher gross margin, with a lot of funds invested in it,increasing its capacity rapidly. Currently, the domestic competition in this segment is becoming increasingly fierce. The increasingly fiercecompetition will have an adverse impact on the results of the Company if it can’t deeply understand the law of industrial development and makeconstant efforts for technological innovation and operational management improvement to improve product quality and reduce production costs.

Countermeasures: The Company’s lithium-ion battery film business has formed certain advantages in production capacity, R&D capacity,product quality, lean management, business channels and other aspects. The company will continue to reduce costs and increase efficiency, improvethe product quality and reduce the production costs through technological innovation, and develop diversified customer groups in domestic andoverseas markets to reduce the impact of domestic and foreign market fluctuations on the Company’s performance.

(3) Risk of price fluctuation of major raw materials

The major raw materials used by the Company are subjected to price fluctuation to some extent, especially polypropylene and polyethylene,whose prices are affected by the strong fluctuations of the international crude oil price. The results of the Company may be adversely affected by thegross profit margin which may be affected to some extent if the prices of major raw materials fluctuate sharply due to the macroeconomic fluctuations,

the demand and supply relation for enterprises in the upstream and downstream parts and other factors.

Countermeasures: The Company has established long-term and stable cooperative relations with major suppliers, established a strategicprocurement system as a whole, and improved the bargaining power and reduced the cost of raw materials by means of large-scale procurement. TheCompany will also reduce the proportion of raw material cost in production cost through technological innovation, process equipment processtransformation, production efficiency improvement and loss reduction.

(4) Risk relating to construction in progress

Current construction in progress includes Jiangxi Tonry, Jiangxi Enpo, Jiangxi Ruijie, Chongqing Energy, Jiangsu Enjie, Jiangsu Ruijie andother production bases, which require a large amount of capital. If the Company fails to raise funds in time, complete and put into operation onschedule, it will have a negative impact on the subsequent production and operation and future profits.

Countermeasures: The Company will make reasonable arrangements for future investment plans (including funds) by making private offering ofA shares and increasing cooperation with financial institutions, and improving bank credit lines.

(5) Risk of technical loss and loss of core personnel

An enterprise engaging in lithium-ion battery separator film requires advanced technology and process, rich management experience and deepunderstanding of the industry. To ensure the ability of constant innovation and the steady growth of business, the Company should have teamsconsisting of steady high-quality employees in scientific research, management and sale. The Company constantly improves the mechanisms fortalent cultivation, incentive, promotion and restriction, but there is still the possibility of the outflow of core employees from the Company. In case ofleakage of the core technology or the departure of core employees, the production and operation of the Company may be adversely affected.Countermeasures: The Company has implemented equity incentive to the core employees, so that the employees can share the value of the growth ofthe enterprise, but also make the interests of the Company and the interests of employees deeply tied. The Company will continue to increase theintroduction and training of core technical personnel, further maintain the stability of core employees, continue to maintain the company’sindustry-leading technical level.

(6) Technological progress and product substitution risk

Lithium-ion battery is mainly used for mobile phones, computers, new energy vehicles, power station for energy storage and other industries.After development for many years, lithium-ion batteries have been superior to traditional storage batteries such as nickel-cadmium batteries,nickel-metal hydride batteries, lead-acid batteries in terms of volumetric specific energy, mass specific energy, mass specific power, cycle life,charge/discharge efficiency, etc., becoming a new energy industry with priority support and key development from national governments. Althoughthe lithium-ion battery is the first choice for electronic products and pure electric vehicles, and it will take quite a long time to commercialize otheremerging batteries such as all-solid-state batteries which are immature technically, the market demands for lithium-ion batteries will be affected whenemerging batteries such as all-solid-state batteries break the technical bottleneck, achieve mass production and are fully commercialized, and thelithium-ion battery separator film in the industry chain will also be affected adversely.

Countermeasures: After years of R&D investment and technology accumulation, the Company has strong research on new products andprospective technology reserves. The R&D Department of the Company continues to pay attention to the market development trend, and organizes adiscussion group on film technology development, develops project development plans for R&D, and actively develops other new products andtechnologies of functional film. In addition, the Company strengthens strategic cooperation with well-known lithium-ion battery manufacturers athome and abroad, develops products together with customers in-depth cooperation, timely grasps the technical development trend and complies withthe market demand.

(7) Risk of exchange rate fluctuation

The export sales volume of the Company increases constantly as the Company expands its business scale and gradually strengthens thedevelopment in the international market. If the RMB exchange rate and the foreign exchange rate in the countries where our products were soldfluctuate sharply in the future, the results of the Company may be affected to some extent.

Countermeasures: The Company will avoid or reduce the exchange risk with such measures as closely watching the exchange rate, adjusting theproduct prices in time based on the exchange rate to guarantee the product profit, strengthening cost control and conducting the foreign exchangederivatives trading for the purpose of hedging.

(8) Risk of China-US trade frictions

Since 2018, China-US trade disputes have occurred frequently. The U.S. has restricted import of Chinese products by means of tariff increasesto reduce the trade deficit with China. Lithium-ion batteries are also among the products subject to the tariff increase. From the perspective of industrychain, the total revenue of the Company has been less affected by the China-US trade disputes because the exports to US account for a very smallproportion in the total revenue of the Company. However, if the demands of the downstream customers change due to the China-US trade frictions,the results of the Company may be affected adversely. In addition, some of the Company’s raw materials and mechanical equipment are importedfrom overseas. If the trade frictions between the U.S. and China intensifies and results in changes in the global trade environment, but the Companyfails to make timely adjustments, the stability of the Company’s supply chain may be adversely affected.

Countermeasures: The current business portfolio of the Company, including printing product and paper product, mainly targets the domesticmarket and domestic customers, so it will suffer a limited impact from the China-US trade frictions. As to the lithium battery film business, China’slithium-ion battery industrial chain is getting increasingly sound, and the global lithium-ion battery industry is gradually shifting to China. At thesame time, Europe and China have continuously improved their market statuses in the new energy vehicle sector, and downstream power batterycustomers of the Company, which are getting increasingly concentrated, mainly come from China, Japan and South Korea, and the China-US tradefrictions are expected not to deliver a material adverse impact on the lithium-ion battery separator film business. However, the Company willcontinuously pay attention to the research, development and technical upgrade of products under different business lines, and improve product qualityand production efficiency. The Company will strengthen market expansion in China and overseas regions while carrying forward cost reduction andefficiency enhancement, and actively establish stable business relations with global customers.

(9) Risk of COVID-19 Pandemic

Since 2020, the COVID-19 pandemic broke out in China and other parts of the world, and spread rapidly. During the Reporting Period, theCompany has resumed normal production and operation in all respects. However, there exists still great uncertainty about the global pandemicsituation and its control, and the overseas spread also imposes risk of importing cases to China. If the international pandemic can’t be controlledeffectively in the future and spread continuously for a long time, the global economy and new energy vehicle industry will be affected adversely, andthe results of the Company will be affected negatively.

Countermeasures: While conducting the COVID-19 pandemic prevention and control in earnest, the Company and its subsidiaries will do thework in every aspect with a focus on the established annual operating plans in accordance with the general arrangements made by the governments inthe regions of the Company and its subsidiaries. The Company will take multiple effective measures to stabilize production, maintain continuousproduction, research and development spending. The Company will deepen cooperation and communication with customers, and strengthen the effortto increase the management level and cost control, and minimize the impact of the pandemic on the production and operation of the Company. Whilethe global pandemic is further coming under effective control, the market demand has recovered to some extent, and the negative impact of thepandemic on the production and operation of the Company will be further reduced.

(10) Management risk after expansion of business scale

With the development of the Company’s business, the scale of the Company’s assets and business will be further expanded, which raises higherrequirements for the management level of the Company. The management risk arises if the capabilities of the Company to manage the production,sales, quality control and risks can’t meet the requirements for scale expansion, and the systems for talent cultivation, organization pattern andmanagement are not further improved.Countermeasures: The Company will continuously refine its management system, assure efficient operation of different operation elements, includingproduction, quality control, sales and management. In the meantime, the Company will strengthen talent cultivation, establish an effective incentivemechanism, and safeguard the Company’s development with multiple measures, including share incentive and cultivation of management members.

XII. Reception of Visitors to the Company for Purposes of Research, Communication,Interview during the Reporting Period

√ Applicable □ N/A

Reception Date

Reception DateReception PlaceReception ModeType of Received VisitorReceived VisitorMajor Discussion and Materials ProvidedIndex to Main Inquiry Information
January 13, 2021Shanghai Energy Conference RoomField researchOrganizationUBS Securities, Green Court Capital Management, Franchise Capital Management, Evalueserve and other institutional investorsImpact of the introduction of semi-solid and solid batteries on the Company and its responses; progress of online coating technology; future development direction of lithium battery separator films.Record on Investor Relations Activities on January 13, 2021 (Updated Version) disclosed at www.cninfo.com.cn
March 18, 2021LivestreamingOthersAll investorsInvestors’ participation through the livestreaming platformFuture competition landscape of the wet-process separator film industry; the Company’s competitive edge in expanding overseas markets; the Company’s Hungary Project and online coating technology; the production capacity and output planning of the Company’s products in global regions; the Company’s results in the first quarter of 2021.Record on Investor Relations Activities on March 18, 2021 disclosed at www.cninfo.com.cn
August 27, 2021Shanghai Energy Conference RoomTelephone communicationOrganizationHillhouse Capital, Changjiang Securities, CITIC Securities, UOB-Kay Hian, GF Fund Management, ABC-CA Fund Management, China Southern Fund Management, AEGON-Industrial Fund Management, Green Court Capital Management, Bosera Fund Management, ICBC Credit Suisse Asset Management, Orient Fund Management, Fullgoal Fund Management, CICC Fund Management, ZO Fund Management, and Goldman Sachs Assets Management (HK) and other institutional investorsProgress of the Company’s self-produced equipment; industry and operation of the Company’s separator film business and future capacity plan; the Company’s online coating, equipment manufacturers, aluminum laminated film project, dry-process separator film project and Hungary Project; the Company’s Stock Ownership Incentive Scheme.Record on Investor Relation Activities on August 27, 2021 disclosed at www.cninfo.com.cn

October 26,2021

October 26, 2021Shanghai Energy Conference RoomTelephone communicationOrganizationChangjiang Securities, Soochow Securities, Bosera Fund Management, China Wealth Management, J.P. Morgan Asset Management, and CITIC Securities and other institutional investorsThe Company’s business operation of separator films; self-developed equipment, online coating and dry-process separator film project; supply of equipment, and raw materials; the Company’s conventional businesses.Record on Investor Relations Activities on October 26, 2021 disclosed at www.cninfo.com.cn

Section 4 Corporate GovernanceI. Basic Information of Corporate GovernanceDuring the Reporting Period, the Company established and improved the modern enterprise system in strict accordance with the Company Law,Securities Law, Shenzhen Stock Exchange Listing Rules, Code of Corporate Governance for Listed Companies in China and other relevant laws andregulations, and constantly improved the corporate governance structure, improved the internal control system and standardized the Company’soperation.During the Reporting Period, the Company held 8 shareholders’ general meetings, 20 board meetings, 17 meetings of the Supervisory Committee. Theprocedures for holding the meetings are legal and the resolutions are legal and effective.Were there any significant differences between the Company’s actual governance status and laws, administrative regulations, and the regulationsissued by CSRC on listed company governance

□ Yes √ No

There was no difference between the Company’s actual governance status and laws, administrative regulations, and the regulations issued by CSRCon listed company governance.II. Details of the Company’s Separation from the Controlling Shareholder and ActualController with Respect to Corporate Assets, Personnel, Finance, Organization, Business, etc.The Company is independent of its shareholders in terms of business, assets, personnel, institutions, financial affairs, etc., has an independent andcomplete business system and market-oriented independent operation ability, and has a complete supply, production and sales system.

1. Assets integrity

The Company has independent and complete business assets that can be used for business activities. The Company has complete sites, facilities,instruments and equipment, trademarks, patents, etc. required for production independent of shareholders and other related parties. The Company’sassets are strictly separated from the shareholders and actual controller, and there is no case that the shareholders and actual controller encroach on theCompany’s assets.

2. Personnel independence

The General Manager, Deputy General Manager, Chief Financial Officer, Secretary of the Board and other senior managers of the Company are allfull-time working in the Company and receiving remuneration, and there is no case that they hold any post other than director or supervisor at thecontrolling shareholder, actual controller and other enterprises under their control, or hold any position in other enterprises with the same or similarbusiness with the Company. The Company’s financial personnel are not doing part-time job in the controlling shareholders, actual controllers andother enterprises under their control. The Company is completely independent in terms of social security and salary.

3. Finance independence

The Company has set up an independent financial department, and established an independent and complete financial accounting system according tothe current accounting standards and relevant laws and regulations, which can help make financial decisions independently. The Company has astandardized financial accounting system and financial management system. The Company has set up an independent bank account and, as anindependent taxpayer, has gone through tax registration with the tax bureau of Yuxi High-tech Zone. The Company does not guarantee the debts ofshareholders or other related parties with the Company’s assets, interests or reputation. The Company has complete control over all assets, and there isno case that monetary funds or other assets are occupied by shareholders and damage the Company’s interests.

4. Institutional independence

The Company has a production and operation place and organization independent of the controlling shareholder, and there is no mixed operation orjoint office with the controlling shareholder. There is no interference of the controlling shareholder and any other units or individuals in theCompany’s organizational structure. In accordance with the requirements of the Company Law, the Company has established and improved theorganizational structure system of the general meeting of shareholders, the Board of Directors, the Supervisory Committee, and the management, andis completely independent of the affiliated enterprises in terms of institutional setting. The shareholder unit nominates directors to participate in themanagement of the Company in accordance with the provisions of the Company Law and the Articles of Association, and does not directly interferewith the production and operation activities of the Company

5. Business independence

The Company has an independent production, supply and marketing system, and independently carries out various businesses. There is no case ofrelying on or entrusting shareholders or other related parties to sell products, or relying on or entrusting shareholders or other related parties topurchase raw materials. There is no horizontal competition with the controlling shareholder, actual controller and the enterprises under their control.III. Horizontal Competition

□ Applicable √ N/A

IV. Details about the Annual General Meeting and Extraordinary General Meeting ofShareholders Convened during the Reporting Period

1. Details about the shareholders’ general meeting during the Reporting Period

Meeting

MeetingMeeting TypeInvestor ParticipationDate ConvenedDisclosure DateMeeting Resolution
First Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders60.14%January 11, 2021January 12, 2021Announcement on Resolutions of the First Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-007) on cninfo.com
Second Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders58.96%January 25, 2021January 26, 2021Announcement on Resolutions of the Second Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-013) on cninfo.com
Annual General Meeting of Shareholders of 2020Annual General Meeting of Shareholders66.89%April 8, 2021April 9, 2021Announcement on Resolutions of the Annual General Meeting of Shareholders of 2020 (Announcement No.: 2021-064) on cninfo.com
Third Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders61.33%April 15, 2021April 16, 2021Announcement on Resolutions of the Third Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-065) on cninfo.com
Fourth Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders62.49%August 19, 2021August 20, 2021Announcement on Resolutions of the Fourth Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-137) on cninfo.com
Fifth Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders16.32%October 25, 2021October 26, 2021Announcement on Resolutions of the Fifth Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-165) on cninfo.com
Sixth Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders56.18%November 22, 2021November 23, 2021Announcement on Resolutions of the Sixth Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-195) on cninfo.com
Seventh Extraordinary General Meeting of Shareholders in 2021Extraordinary General Meeting of Shareholders56.18%December 2, 2021December 3, 2021Announcement on Resolutions of the Seventh Extraordinary General Meeting of Shareholders in 2021 (Announcement No.: 2021-200) on cninfo.com

2. Extraordinary general meeting requested by the preferred shareholder with restituted voting rights

□ Applicable √ N/A

V. Details on Directors, Supervisors, and Senior Management

1. Basic information

NameTitleService statusGenderAgeStart dateEnd dateShares held atShareRestrictedQuantity OfQuantity ofOther increasQuantity ofReason for share

thebeginning oftheperiod(share)

the beginning of the period (share)optionshares granted (share)shares increased in the current period (share)shares decreased in the current period (share)ed or decreased changes (share)shares held at the end of the period (share)increase/decrease
Paul Xiaoming LeeChairmanCurrentMale64April 20, 2011April 7, 2023127,792,6571,600,400126,192,257Own demand for funds
Li XiaohuaVice Chairman and General ManagerCurrentMale60April 20, 2011April 7, 202369,837,88969,837,889
Yan MaDirectorCurrentFemale63April 20, 2011April 7, 2023
Alex ChengDirectorCurrentMale64April 8, 2020April 7, 2023
Ma WeihuaDirectorCurrentMale55November 22, 2021April 7, 2023
FengJieDirectorCurrentMale58January 4, 2017April 7, 2023
Lu JiankaiIndependent DirectorCurrentMale44April 20, 2017April 7, 2023
Tang ChangjiangIndependent DirectorCurrentMale52April 8, 2020April 7, 2023
Zheng HaiyingIndependent DirectorCurrentFemale59April 8, 2020April 7, 2023

Xu Ming

Xu MingDirectorResignedMale47August 31, 2013November 4, 2021
Zhang TaoChairman of the Supervisory CommitteeCurrentMale45January 3, 2019April 7, 2023
ChenTaoSupervisorCurrentMale44April 20, 2011April 7, 2023
Kang WentingSupervisorCurrentFemale35April 8, 2020April 7, 2023
Yu XueVice General Manager and Board SecretaryCurrentFemale35November 4, 2021April 7, 202341,00010041,100Recognition of corporate value
Li JianChief Financial OfficerCurrentMale44September 30, 2020April 7, 2023
Xiong WeiVice General Manager and Board SecretaryResignedMale52March 23, 2012November 4, 2021270,000270,000
Total------------197,941,5461001,600,400196,341,246--

During the reporting Period, did any Director or Supervisor leave office or were any senior executive dismissed?

√ Yes □ No

(1) On November 4, 2021, Mr. Xu Ming resigned from his position as a Director of the Company in order to focus on the development ofHongchuang Packaging, a controlled subsidiary of the Company. After the resignation, he will continue to serve as the General Manager ofHongchuang Packaging.

(2) On November 4, 2021, Mr. Xiong Wei resigned from the positions of Vice General Manager and Board Secretary of the Company for personalreasons. After the resignation, he will no longer serve in any position of the Company.Changes of Directors, Supervisors, and Senior Executives

√ Applicable □ N/A

Name

NameAssumed PositionTypeDateReason
Xiong WeiBoard Secretary and Vice General ManagerDismissedNovember 4, 2021Resigned from the positions of Vice General Manager and Board Secretary of the Company for personal reasons. After the resignation, he no longer serves in any position of the Company.
Yu XueBoard Secretary and Vice General ManagerEngagedNovember 4, 2021Newly engaged
Xu MingDirectorResignedNovember 4, 2021Xu Ming also serves as the General Manager of the Company’s holding subsidiary Hongchuang Packaging. He resigned from his position as a Director of the Company in order to focus on the development of Hongchuang Packaging. After the resignation, he continues to serve as the General Manager of Hongchuang Packaging.
Ma WeihuaDirectorElectedNovember 22, 2021Newly appointed

2. Positions Held

Professional background, main working experience and main duties in the Company of current directors, supervisors, and senior executives of theCompany(I) Members of the Board of Directors

1. Paul Xiaoming Lee, Chairman of the Company, male, born in 1958, American nationality with the right of residence in foreign country, andmaster’s degree. Joined Kunming Plastic Research Institute of China in 1982, acted as the Vice President from 1984 to 1989, graduated from thepolymer material discipline at the University of Massachusetts of America in December 1992, served as the Manager of the Technical Department ofInteplast Corporation in America from 1992 to 1995. Since April 1996, he has successively served as the Vice General Manager, General Manager,Vice Chairman and Chairman of Hongta Plastics, Chairman and General Manager of Dexin Paper, and Chairman of Chengdu Hongta Plastic (成都红塑). Joined Innovative Color Printing as the Chairman in 2006. Now, serves as the Chairman of the Company.

2. Li Xiaohua, Vice Chairman of the Company, male, born in 1962, Chinese nationality with the right of residence in foreign country, and master’sdegree. Graduated from the polymer material discipline at the University of Massachusetts of America in February 1993, and worked at World-PakCorporation in the US from 1993 to 1996. Since April 1996, he has successively served as the Vice General Manager and Vice Chairman of HongtaPlastics, the Vice Chairman of Dexin Paper, and the Vice Chairman and General Manager of Chengdu Hongta Plastic. Joined Innovative ColorPrinting as the Vice Chairman and General Manager in 2006. Now, serves as the Vice Chairman and General Manager of the Company.

3. Yan Ma, Director of the Company, female, born in 1959, American nationality with the right of residence in foreign country, and juniorcollege education. Worked at Kunming Yan’an Hospital from 1981 to 1990, and since April 2011, served as the Director of the Company.

4. Alex Cheng, Director of the Company, male, born in 1958, American nationality with the right of residence in foreign country, master’sdegree in plastic engineering conferred by the University of Massachusetts, and doctor’s degree conferred by the Northeast Agricultural University.Acted as the Technical Manager of Inteplast Corporation in the US from September 1993 to September 2011. Served as the General Manager ofShanghai Energy. from February 2012 to June 2019. Now, serves as the Director of the Company.

5. Ma Weihua, Director of the Company, male, born in 1967, Chinese nationality, bachelor’s degree, engineer. From 1989 to 1997, successivelyserved as Deputy Section Chief of Equipment Section of Zhenyuan Gold Mine, Yunnan Province, and technician of Equipment Section of YuxiHydropower Equipment Factory; from 1997 to 2016, successively served as the Director of Production Department, Vice General Manager andDirector of Hongta Plastics, a wholly-owned subsidiary of the Company. He is now a Director of the Company and General Manager of ShanghaiEnergy.

6. Feng Jie, Director of the Company, male, born in 1964, Chinese nationality, bachelor’s degree and medium industrial economist. Served inSimao Industrial and Commercial Bank of China from 1981 to 1984; served as a statistician of the Comprehensive Management Section, Director ofthe Computer Center and the Secretary of the Communist Youth League at Yunnan Optical Instrument Factory from 1989 to 1997; served as atechnician, statistical officer and Director of the General Manager’s Office at Hongta Plastics Co., Ltd. from 1997 to 2005; served as the Director ofChengdu Office of Yunnan Hongta Plastics Co., Ltd. from 2005 to 2009; since 2009, has successively served as the Director of the Sales Department,the Vice General Manager and General Manager of Chengdu Hongta Plastic. He is now a Director of the Company as well as the Director of the SalesDepartment and General Manager of Chengdu Hongta Plastic.

7. Lu Jiankai, Independent Director of the Company, male, born in 1978, Chinese nationality, master’s degree, Chinese Certified PublicAccountant, is now the Executive Director and General Manager of Shanghai Yangyue Investment Management Co., Ltd. He worked at Ernst &Young Dahua Accounting Firm (Shanghai) as an auditor in 2001 to 2004. He worked at Deloitte Huayong Accounting Firm (Shanghai) as an auditorin 2004 to 2008. He served as the Vice President of the Real Estate and Equity Investment Division of Zhejiang Longsheng Group Co., Ltd. in 2009to 2011. He served as the Officer of the Investment and Financing Department of Jiangsu Changfa Group Co., Ltd. in 2011 to 2013. He served as theInvestment Officer of Shanghai Jingbang Equity Investment Management Co., Ltd. in 2013 to 2015. Now is an Independent Director of the Company.

8. Tang Changjiang, Independent Director of the Company, male, born in 1970, Chinese nationality, Executive Master of BusinessAdministration (EMBA) at Tsinghua University and Master of Business Administration (MBA) at the University of Victoria of Switzerland. Served asthe Vice General Manager of Kelin Side (Huizhou) Co., Ltd. from August 1994 to October 1996. Served as the Deputy Secretary-General ofShenzhen Electronic Industry Association from March 1998 to May 2002. Served as the Managing Director of Shenzhen Tangshi Electronic Co., Ltd.from January 2003 to June 2013. Served as the Director of Shenzhen Xinyuhuan Test Co., Ltd. from July 2013 to May 2019. Now is an Independent

Director of the Company.

9. Zheng Haiying, Independent Director of the Company, female, born in 1963, Chinese nationality, Doctor, Master’s Tutor and Professor at theAccounting School of the Central University of Finance and Economics, Chinese Certified Public Accountant and a senior member of the Associationof Chartered Certified Accountants (ACCA and FCCA). Taught at the Accounting Department of the Central Fiscal Management Cadres’ Collegefrom July 1988 to April 1994 and worked on a part-time basis at the former Zhongzhou Certified Public Accountants in the same period. Engaged inthe audit work at M.B.LEE & CO LTD of Hong Kong from April 1994 to April 1996. Taught at the Accounting Department of the Central FiscalManagement Cadres’ College from April 1996 to April 1999. Since April 1999, has taught at the Accounting School of the Central University ofFinance and Economics with the interest in financial accounting. Now is an Independent Director of the Company.(II) Members of the Supervisory Committee

1. Zhang Tao, Chairman of the Supervisory Committee of the Company, male, born in 1977, Chinese nationality, bachelor’s degree. Worked as afinancial analyst at the Financial Center of Beijing Marketing Company of Haci Co., Ltd. from July 2000 to January 2001; worked as an accountant atthe Finance Department of Yunnan Hongta Plastics Co., Ltd. from August 2001 to August 2006; and since September 2006, has served as theManager of the Finance Department of Yunnan Dexin Paper Co., Ltd. Now serves as the Deputy Chief Financial Officer and Chairman of theSupervisory Committee of the Company.

2. Chen Tao, Supervisor of the Company, male, born in 1978, Chinese nationality, junior college education. Served as the technician of GlobalColor Printing from 1998 to 2003, joined Innovative Color Printing in 2004, and has successively acted as the technical supervisor, Deputy Directorand Director of the Technical Center. Now is the Vice General Manager of Yunnan Hongchuang Package Co., Ltd. and a Supervisor of the Company.

3. Kang Wenting, Supervisor of the Company, female, born in 1987, Chinese nationality, bachelor’s degree. Served as the Personnel Supervisorof Kunming Xinghe Spa Resort & Hotel from 2013 to 2014, and since 2015, has successively served as the Personnel Supervisor of the HumanResources Department and the Supervisor of the Human Resources Planning Department of the Company. Now, is the manager of the OperationSupport Department and Administrative Department and Supervisor of the Company.

(III) Senior Management

1. Li Xiaohua, Vice Chairman of the Company, male, born in 1962, Chinese nationality with the right of residence in foreign country, andmaster’s degree. Graduated from the polymer material discipline at the University of Massachusetts in February 1993, and worked at World-PakCorporation in the US from 1993 to 1996. Since April 1996, has successively served as the Vice Chairman and Vice General Manager of HongtaPlastics, the Vice Chairman of Dexin Paper, and the Vice Chairman and General Manager of Chengdu Hongta Plastic. Joined Innovative ColorPrinting as the Vice Chairman and General Manager in 2006. Now, serves as the Vice Chairman and General Manager of the Company.

2. Yu Xue, Vice General Manager of the Company, Secretary of the Board of Directors, female, born in 1987, Chinese nationality, master’sdegree. Served as the Company’s Securities Affairs Representative from March 2013 to November 2021. Now, serves as the Vice General Managerand Secretary of the Board of Directors of the Company.

3. Li Jian, Chief Financial Officer of the Company, male, Han, born in 1978, bachelor’s degree, Chinese Certified Public Accountant and ChineseCertified Tax Agent. From 1997 to October 2016, has served as the General Budget Accountant at Liujiaqiao Fiscal Office of the Finance Bureau ofChongren County, Jiangxi Province, the Financial Manager of Shunde Ouyadian Building Material Co., Ltd., the Project Manager of ShenzhenPengcheng Accounting Firm, the Assistant to the Chief Financial Officer of Jiangsu Safety Steel Rope Co., Ltd. and the Chief Financial Officer ofSuzhou ALTON Electric Industry Co., Ltd. Since October 2016, has served as the Chief Financial Officer of Shanghai Energy New MaterialTechnology Co., Ltd. Now, serves as the Chief Financial Officer of the Company.

Positions held at the shareholder’s entity

√ Applicable □ N/A

Name

NameShareholder’s NamePosition in shareholderStart dateEnd dateReceiving remuneration and allowance at shareholder
Paul Xiaoming LeeHeyi InvestmentChairmanNovember 3, 2010April 11, 2022No
Paul Xiaoming LeeHeli InvestmentDirectorDecember 8, 2010April 11, 2022No
Li XiaohuaHeyi InvestmentDirectorNovember 3, 2010April 11, 2022No
Li XiaohuaHeli InvestmentChairmanDecember 8, 2010April 11, 2022No
Li XiaohuaShanghai HengzouExecutive PartnerDecember 1, 2016October 29, 2021No
Description of positions held at the shareholder’s entityNone

Positions held at other entities

√ Applicable □ N/A

Name

NameOther Entity NamesPositions in other organizationsStart dateEnd dateReceiving remuneration and allowance at other entities
Paul Xiaoming LeeYuxi KunshasiVice ChairmanMay 1, 1996April 11, 2022No
Paul Xiaoming LeeShanghai Ruiji New Material Technology Co., Ltd.DirectorJanuary 20, 2020April 11, 2022No
Li XiaohuaYuxi KunshasiDirector and General ManagerMay 1, 1996April 11, 2022No
Li XiaohuaSuzhou Jiesheng Technology Co., Ltd.Executive Director and General ManagerOctober 29, 2021April 11, 2022No
Li XiaohuaShanghai Ruiji New Material Technology Co., Ltd.ChairmanJanuary 20, 2020April 11, 2022No
Li XiaohuaJiangsu Jiesheng Intelligent Equipment Technology Co., Ltd.Executive Director and General ManagerNovember 26, 2021April 11, 2022No
Alex ChengShanghai Ruiji New Material Technology Co., Ltd.DirectorJanuary 20, 2020April 11, 2022No
Lu JiankaiAnqiu Huahang Environmental Technology Co., Ltd.Executive Director and General ManagerOctober 13, 2021April 11, 2022No
Lu JiankaiDezhou Shayun Electronic Commerce Co., Ltd.DirectorOctober 30, 2019April 11, 2022No
Lu JiankaiQingdao Huahang Environmental Technology Co., Ltd.ChairmanJune 19, 2017April 11, 2022No
Lu JiankaiQingdao Bopu Photoelectric Technology Co., Ltd.Executive Director and General ManagerAugust 3, 2016April 11, 2022No
Lu JiankaiShanghai Qikai Investment Management Co., Ltd.Executive DirectorMay 18, 2012May 17, 2021No
Lu JiankaiShanghai Yangyue Investment Partners (Limited Partnership)Executive President and PartnerJuly 12, 2012July 11, 2021No
Lu JiankaiShanghai Shengu Investment Management Co., Ltd.Executive DirectorAugust 16, 2012August 15, 2021No
Lu JiankaiFuzhou Shanghe Electronics Co., Ltd.DirectorNovember 5, 2015November 4, 2021No
Lu JiankaiShanghai Yangyue Investment Management Co., Ltd.Executive Director and General ManagerFebruary 13, 2019February 12, 2022Yes
Tang ChangjiangGuangdong Battery AssociationSecretary-GeneralJune 29, 2019April 11, 2022Yes
Tang ChangjiangTianjin Guoan Mengguli New Materials Science & Technology Co., Ltd.Independent DirectorOctober 12, 2021April 11, 2022Yes

Tang Changjiang

Tang ChangjiangShenzhen Nengyi Testing Co., Ltd.DirectorJune 15, 2015April 11, 2022No
Tang ChangjiangShenzhen AGC Standard Technology Co., Ltd.DirectorSeptember 13, 2013April 11, 2022No
Zheng HaiyingCentral China Media Co., Ltd.Independent DirectorApril 21, 2017April 11, 2022Yes
Zheng HaiyingBeijing Automic Technology Co., Ltd.Independent DirectorMarch 9, 2018April 11, 2022Yes
Zheng HaiyingShandong Keyuan Pharmaceutical Co., Ltd.Independent DirectorApril 23, 2019April 11, 2022Yes
Zheng HaiyingArizon Radio Frequency Technology Co., Ltd.Independent DirectorApril 23, 2019April 11, 2022Yes
Zheng HaiyingOrient GroupIndependent DirectorDecember 23, 2019April 11, 2022Yes
Zheng HaiyingBeijing Borui Hongyuan Data Technology Co., Ltd.Independent DirectorFebruary 1, 2016January 21, 2021Yes
Zheng HaiyingChina Marine Bunker (PetroChina) Co. Ltd.Independent DirectorJuly 15, 2007July 9, 2021No
Explanation on positions in other entitiesNone

Penalties to the current directors, supervisors and senior management of the Company and those leaving office during the Reporting Period bysecurities regulatory agencies in the past three years

□ Applicable √ N/A

3. Remuneration for Directors, Supervisors, and Senior Management

Decision-making procedures, determination basis and actual payment of remuneration for directors, supervisors, and senior management

1. Decision-making procedure for remunerations of directors, supervisors and senior management: The Remuneration & Evaluation Committeeof the Board of Directors of the Company studies and establishes the evaluation standard, remuneration policy and plan for the directors, GeneralManager and other senior management members of the Company, the Board of Directors reviews the remunerations for the senior management, theGeneral Meeting of Shareholders reviews the remunerations of the directors and the supervisors, and the Human Resources Department and theFinance Department of the Company assist the Remuneration & Evaluation Committee of the Board of Directors to implement the remuneration planfor the directors and the senior management of the Company.

2. Basis for determining the remunerations of directors, supervisors and senior management: The remunerations for the directors and supervisorsare determined in line with the actual working status of the Company and in combination of the current market situation. The remunerations of thesenior management are determined in line with related provisions of the Company and in combination of the operating objectives of the Company in2021 and specific job responsibilities the senior management members of the Company take to complete the annual operating objectives.

3. Actual payment of remunerations to the directors, supervisors and senior management: The remunerations of the Independent Directors arepaid to personal accounts based on the standard and schedule every quarter. The remunerations of other people are paid based on respective evaluationresult on a monthly basis or at the time specified by the remuneration payment policy.

Remuneration for directors, supervisors, and senior management during the Reporting Period

Unit: RMB0’000

NameTitleGenderAgeService statusTotal pre-tax remunerations received from the CompanyWhether remuneration was received from related parties of the Company

Paul XiaomingLee

Paul Xiaoming LeeChairmanMale64Incumbent161.97No
Li XiaohuaVice Chairman and General ManagerMale60Incumbent139.97No
Yan MaDirectorFemale63Incumbent0No
Alex ChengDirectorMale64Incumbent57.83No
Ma WeihuaDirectorMale55Incumbent9.57No
Feng JieDirectorMale58Incumbent32.44No
Lu JiankaiIndependent DirectorMale44Incumbent5No
Tang ChangjiangIndependent DirectorMale52Incumbent5No
Zheng HaiyingIndependent DirectorFemale59Incumbent5No
Xu MingDirectorMale47Resigned28.77No
Zhang TaoChairman of the Supervisory CommitteeMale45Incumbent26.73No
Chen TaoSupervisorMale44Incumbent31.2No
Kang WentingSupervisorFemale35Incumbent10.44No
Yu XueVice General Manager and Board SecretaryFemale35Incumbent5.48No
Li JianChief Financial OfficerMale44Incumbent56.8No
Xiong WeiVice General Manager and Board SecretaryMale52Resigned85.66No
Total--------661.86--

VI. Performance of Directors during the Reporting Period

1. Meetings of the Board of Directors during the Reporting Period

MeetingDate ConvenedDisclosure DateMeeting Resolution
21st meeting of the 4th board of directorsJanuary 8, 2021January 8, 2021The Proposal on Entry into the Agreement on the Investment in Projects of Changshou Economic and Technological Development Zone between Shanghai Energy and the Administrative Committee of Changshou Economic and Technological Development Zone and the Proposal on Holding the 2nd Extraordinary General Meeting of the Company in 2021 were deliberated and approved.
22nd meeting of the 4th board of directorsJanuary 25, 2021January 26, 2021The Proposal on Not Exercising the Early Redemption of Energy Convertible Bonds was deliberated and approved.
23rd meeting of the 4th board of directorsJanuary 31, 2021February 1, 2021The Proposal on Cooperation between Subsidiaries and Polypore and the Proposal on Entry into the Contract on Building the Dry-process Lithium Battery Separator Film Project and Its Supplementary Agreements between Jiangxi Mingyang New Material Technology Co., Ltd, the Subsidiary and Gaoan Municipal People’s Government, Jiangxi Province were deliberated and approved.

th meeting of the 4

th

board of directors

24th meeting of the 4th board of directorsMarch 17, 2021March 18, 2021The Proposal on Work Report of Board of Directors for 2020 of the Company, the Proposal of the Final Accounts Report for 2020 of the Company and the Proposal on Profit Distribution Plan for 2020 were deliberated and approved.
25th meeting of the 4th board of directorsMarch 29, 2021March 30, 2021The Proposal on the Implementation of Investment Project in Changshou Economic and Technological Development Zone by Chongqing Energy, a Wholly-owned Subsidiary of Shanghai Energy, and the Proposal on Holding the 3rd Extraordinary General Meeting of the Company in 2021 were deliberated and approved.
26th meeting of the 4th board of directorsApril 26, 2021April 27, 2021The Proposal on Change of Accounting Policies and the Proposal on the Full Text and Body of the 2021 Q1 Report of the Company were deliberated and approved.
27th meeting of the 4th board of directorsMay 6, 2021May 7, 2021The Proposal on Changing the Registered Capital and Amending the Articles of Association and Handling the Change of Industrial and Commercial Registration was deliberated and approved.
28th meeting of the 4th board of directorsJune 18, 2021June 19, 2021The Proposal on the Signing of the Investment Cooperation Agreement for Energy Aluminum Laminated Film Project between Shanghai Energy and the Administrative Committee of Jiangsu Jintan Economic Development Zone, and the Proposal on the Signing of the Investment Cooperation Agreement for Energy Membrane Project between Shanghai Energy and the Administrative Committee of Jiangsu Jintan Economic Development Zone were deliberated and approved.
29th meeting of the 4th board of directorsJune 22, 2021June 23, 2021The Proposal on the Company Meeting the Conditions of Issuing Shares and Paying Cash to Purchase Assets and Raising Supporting Funds, the Proposal on the Company Purchasing Assets by Issuance of Shares and Payment of Cash and Raising Supporting Funds and the Related Party Transactions, and the Proposal on the Plan for Issuance of Shares and Cash Payment for Purchasing Assets and Raising Supporting Funds by Yunnan Energy New Material Co., Ltd. and the Connected Transaction and Its Summary were deliberated and approved.
30th meeting of the 4th board of directorsAugust 2, 2021August 3, 2021The Proposal on the Plan to Set Up a Joint Venture with EVE to Construct a Wet-Processing Lithium Battery Separator Film Project, the Proposal on the Plan to Sign the Framework Agreement on Acquisition of Suzhou RS Technology Co., Ltd. and JOT Automation Ltd with Family Members of Paul Xiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party Transaction, and the Proposal on Holding the 4th Extraordinary General Meeting of the Company in 2021 were deliberated and approved.
31st meeting of the 4th board of directorsAugust 18, 2021August 19, 2021The Proposal on the Signing of “Memorandum of Cooperation on Some Properties of the R&D Project of Jinqiao Guopei Plot in Pudong, Shanghai” between the holding subsidiary Shanghai Energy and Shanghai Jinqiao (Group) Co., Ltd was deliberated and approved.
32nd meeting of the 4th board of directorsAugust 26, 2021August 27, 2021The Proposal on Semiannual Report for 2021 of the Company and Its Summary, and the Proposal on Deposit and Actual Use of the Funds Raised in Half Year of 2021 were deliberated and approved.
33rd meeting of the 4th board of directorsSeptember 15, 2021September 16, 2021the Proposal on Signing the Equity Transfer Agreement with Family Members of Paul Xiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party Transaction, and the Proposal on Not Holding a General Meeting Temporarily were deliberated and approved.

th meeting of the 4

th

board of directors

34th meeting of the 4th board of directorsOctober 25, 2021October 26, 2021The Proposal on 2021 Q3 Report of the Company was deliberated and approved.
35th meeting of the 4th board of directorsNovember 4, 2021November 5, 2021The Proposal on the Addition of Candidates for Independent Non-Executive Directors of the Company, the Proposal on Appointment of the Vice General Manager and Secretary of the Board of the Company, and the Proposal on Holding the 6th Extraordinary General Meeting of the Company in 2021 were deliberated and approved.
36th meeting of the 4th board of directorsNovember 10, 2021November 11, 2021The Proposal on Cooperation with CATL was deliberated and approved.
37th meeting of the 4th board of directorsNovember 15, 2021November 16, 2021The Proposal on Increasing the Amount of Guarantee Provided by the Company for Its Subsidiaries, and the Proposal on Holding the 7th Extraordinary General Meeting of the Company in 2021 were deliberated and approved.
38th meeting of the 4th board of directorsNovember 21, 2021November 23, 2021The Proposal on the Company Fulfilling the Conditions for Non-public Offering of Shares, the Proposal on the Plan of the Non-public Offering of Shares by the Company, the Proposal on the Plan of the Non-public Offering of Shares by the Company in 2021, the Proposal on the Termination of Purchasing Assets by Issuance of Shares and Payment of Cash and Raising Supporting Funds and the Related Party Transactions were deliberated and approved.
39th meeting of the 4th board of directorsDecember 20, 2021December 21, 2021The Proposal on the Signing of the Investment Cooperation Agreement for Energy Liquid Package Project between Hongchuang Packaging and the Administrative Committee of Jintan Economic Development Zone in Jiangsu Province, and the Proposal on Making Additional Investment in the Hungarian Wet-process Lithium Battery Isolation Membrane Project were deliberated and approved.
40th meeting of the 4th board of directorsDecember 30, 2021December 31, 2021The Proposal on Correcting the 2021 Q3 Report, and the Proposal on Holding the 1st Extraordinary General Meeting of the Company in 2022 were deliberated and approved.

2. Details of directors’ attendance at board meetings and shareholders’ general meetings

Details of directors’ attendance at board meetings and shareholders’ general meetings
Name of directorMeetings required to attend during the Reporting Period (times)Attendance in person (times)Attendance by way of telecommunication (times)Entrusted presence (times)Absence (times)Non-attendance in person for two consecutive times or notAttendance in shareholders’ general meeting
Paul Xiaoming Lee2018200No8
Li Xiaohua2019100No8
Yan Ma2020000No8
Alex Cheng2018200No8

Xu Ming

Xu Ming1414000No6
Ma Weihua22000No1
Feng Jie2020000No8
Lu Jiankai2002000No8
Tang Changjiang2002000No8
Zheng Haiying2002000No8

Explanations for non-attendance in person for two consecutive timesN/A

3. Details on directors’ objection to relevant events

Did directors object to relevant events of the Company

□ Yes √ No

During the Reporting Period, no directors objected to relevant events of the Company.

4. Other details about the performance of directors

Was advice to the Company from directors adopted

√ Yes □ No

Explanation on advice to the Company from directors being adopted or not adoptedDuring the Reporting Period, directors of the Company were diligent, conscientious, honest and self-disciplined, and faithfully performed theresponsibilities as directors. The directors carefully listened to the report of the Company’s relevant principals on project construction, developmentstrategy, profit distribution plan, effectiveness of internal control, appointment of financial audit institutions, etc., and actively expressed opinions onthe Board of Directors. The independent directors issued independent, fair and objective opinions and prior acknowledgement on issues of theCompany during the Reporting year that need independent directors’ opinions, actively and effectively performed the responsibilities of independentdirectors, improved the Company’s supervision mechanism, and safeguarded the legitimate rights and interests of the Company and minorityshareholders.

VII. Details on Special Committees under the Board of Directors during the Reporting Period

CommitteeName

Committee NameMembersNumber of Meetings HeldDate ConvenedMeeting ContentImportant Opinions and Suggestions ProposedOther Duty Performance InformationDetails on Objection to Matters (If Any)
Strategy Committee of the 4th Board of DirectorsPaul Xiaoming Lee, Li Xiaohua, Feng Jie, Zheng Haiying, Tang Changjiang10January 7, 2021Deliberated on the Proposal on Entry into the Agreement on the Investment in Projects of Changshou Economic and Technological Development Zone between Shanghai Energy and the Administrative Committee of Changshou Economic and Technological Development ZoneThe Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None
January 30, 2021Deliberated on the Proposal on Subsidiary Cooperating with Polypore and Proposal on Subsidiary Jiangxi Mingyang New Material Technology Co., Ltd Signing the Contract on Building the Dry-process Lithium Battery Separator Film Project and Its Supplementary Agreements with Gao’an Municipal People’s Government, Jiangxi Province.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
March 28, 2021Deliberated on the Proposal on Shanghai Energy’s Wholly-Owned Subsidiary Chongqing Energy Implementing Investment in Projects of Changshou Economic and Technological Development Zone.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None
June 17, 2021Deliberated on the Proposal on Signing of the Investment Cooperation Agreement for “Energy Aluminum Laminated Film Project” between Shanghai Energy and the Administrative Committee of Jiangsu Jintan Economic Development Zone and Proposal on the Signing of the Investment Cooperation Agreement for the “Energy Separator Film Project” between Shanghai Energy and the Administrative Committee of Jiangsu Jintan Economic Development Zone.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
June 21, 2021Deliberated on the Proposal on the Company Meeting the Conditions for Issuing Shares and Paying Cash to Purchase Assets and Raise Supporting Funds, Proposal on the Company Issuing Shares and Paying Cash to Purchase Assets and Raise Supporting Funds and Related Party Transactions, Proposal on the Plan for Yunnan Energy New Material Co., Ltd. to Issue Shares and Pay Cash to Purchase Assets and Raise Supporting Funds and Related Party Transactions and Its Summary, and Proposal on Signing the Framework Agreement for Yunnan Energy New Material Co., Ltd. to Issue Shares and Pay Cash to Purchase Assets with Entry-into-Force Conditions Attached.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None

August 1, 2021

August 1, 2021Deliberated on the Proposal on the Plan to Set Up a Joint Venture with EVE to Construct a Wet-Processing Lithium Battery Separator Film Project, and Proposal on the Plan to Sign the Framework Agreement on Acquisition of Suzhou RS Technology Co., Ltd. and JOT Automation Ltd with Family Members of Paul Xiaoming Lee, Victory Precision, and Its Subsidiary and Related Party Transactions.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
September 14, 2021Deliberated on the Proposal on the Company Signing an Equity Transfer Agreement with Family Members of Paul Xiaoming Lee, Victory Precision, and Its Subsidiary and Related Transactions.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None
November 9, 2021Deliberated on the Proposal on Cooperating with CATL.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None
November 20, 2021Deliberated on the Proposal on the Company Fulfilling the Conditions for Non-public Offering of Shares, the Proposal on the Plan of the Non-public Offering of Shares by the Company, the Proposal on the Plan of the Non-public Offering of Shares by the Company in 2021, the Proposal on the Termination of Purchasing Assets by Issuance of Shares and Payment of Cash and Raising Supporting Funds and the Related Party Transactions.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
December 19, 2021Deliberated on the Proposal on the Signing of the Investment Cooperation Agreement for Energy Liquid Package Project between Hongchuang Packaging and the Administrative Committee of Jintan Economic Development Zone in Jiangsu Province, and the Proposal on Making Additional Investment in the Hungarian Wet-process Lithium Battery Isolation Membrane Project.The Strategy Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Strategy Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
Nomination Committee of the 4th Board of DirectorsLu Jiankai, Tang Changjiang, Feng Jie1November 3, 2021Deliberate on the Proposal on the Addition of Candidates for Independent Non-Executive Directors of the Company, the Proposal on Appointment of the Vice General Manager and Secretary of the Board of the Company.The Nomination Committee reviewed the qualifications of the candidates and unanimously passed the proposals.None
Remuneration and Appraisal Committee of the 4th Board of DirectorsPaul Xiaoming Lee, Tang Changjiang, Zheng Haiying1March 16, 2021Deliberated on the Proposal on 2020 Remunerations for the Company’s Directors, Proposal on 2020 Remunerations for the Company’s Senior Management, and Proposal on Adjusting 2020 Remunerations for the Company’s Directors and Senior Management.The Remuneration and Appraisal Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Remuneration and Appraisal Committee of the Board of Directors, and according to the actual circumstances of the Company, unanimously passed the proposals after thorough communication and discussion.None

AuditCommittee ofthe 4th

Board ofDirectors

Audit Committee of the 4th Board of DirectorsLi Xiaohua, Lu Jiankai, Zheng Haiying5March 16, 2021Deliberated on the Proposal on the Company’s 2020 Annual Audit Report and Proposal on Continued Engagement of Dahua CPAs (SGP) as the Company’s Financial Audit Institution and Internal Control Audit Institution for 2021.The Audit Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Audit Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
April 25, 2021Deliberated on the Proposal on the Full Text and Body of the Company’s 2021 Q1 Report and the Proposal on Changes in Accounting Policies.The Audit Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Audit Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposals after thorough communication and discussion.None
August 25, 2021Deliberated on the Proposal on the Company’s 2021 Semiannual Report and Its Summary.The Audit Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Audit Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None
October 24, 2021Deliberated on the Proposal on the Company’s 2021 Q3 Report.The Audit Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Audit Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None
December 29, 2021Deliberated on the Proposal on Correcting the 2021 Q3 Report.The Audit Committee of the Board of Directors carried out its work in strict accordance with the Company Law, Code of Corporate Governance for Listed Companies in China, Articles of Association, and Rules of Procedure for the Audit Committee of the Board of Directors, put forward relevant opinions according to the actual circumstances of the Company, and unanimously passed the proposal after thorough communication and discussion.None

VIII. Details on the Work of the Supervisory CommitteeWere there any risks in the Company according to the supervision of the Supervisory Committee during the Reporting Period

□ Yes √ No

The Supervisory Committee raised no objection to matters under supervision during the Reporting Period.

IX. Employees of the Company

1. Number of employees, composition by profession, and educational level

Incumbent staff of parent company at the end of the Reporting Period(person)

Incumbent staff of parent company at the end of the Reporting Period (person)224
Incumbent staff of major subsidiary at the end of the Reporting Period (person)4,979
Total incumbent staff at the end of the Reporting Period (person)5,954
Total staff receiving remunerations in current period (person)8,679
Number of retirees whose expenses shall be borne by the parent company and major subsidiaries (person)0
Composition by profession
Category of professionNumber of profession (person)
Production staff4,816
Sales people103
Technician409
Financial staff87
Administrative staff539
Total5,954
Educational level
Category of educational levelNumber (person)
Doctor’s degree and above17
Master’s degree89
Bachelor’s degree602
Junior college1,258
Technical secondary school and below3,988
Total5,954

2. Remuneration policy

During the Reporting Period, the Company observed the principles of distribution based on labor, efficiency priority combining fairness andsustainable development, and on this basis, the Company made detailed policies in respect of staff’s remuneration, fringe benefit, performanceevaluation and other aspects. The Company built a new salary architecture featuring a wide range and “hierarchical ladder”, and implemented thetwo-level salary distribution mechanism. At the same time, the Company has linked the salary and bonus to the working time at the Company, output,cost, fixed staff of every position, equipment maintenance and other factors, and established a reasonable evaluation mechanism. The Company hastaken multifaceted measures, including diversification of internal remuneration structure, to motivate employees and attract high-quality humanresources. These measures have helped the Company improve the overall performance, realized a sustainable development of the Company and madethe Company more competitive in the market. The Company has actively explored and continuously deepened the income distribution system. Infuture, the Company will make a moderate adjustment to the remuneration system based on its performance, market situation and industry trend.

3. Training plan

During the Reporting Period, the Company kept taking in excellent talents, actively strengthened internal personnel training, established a soundtraining system and enhanced the professional development ability of employees. The Company has recorded a total of 2,476 training events,

including 2,400 internal training session and 76 external training sessions, and recorded a total of 75,403 class hours. These trainings have benefited atotal of 38,800 people. These trainings cover new employee training, job skill training, general management training, certification training and reservetalent training.

4. Labor outsourcing

□ Applicable √ N/A

X. Profit Distribution and Conversion of Capital Reserve into Share CapitalFormulation, execution or adjustments of profit distribution policy, especially cash dividend policy, in the Reporting Period

√ Applicable □ N/A

(I) According to the Articles of Association, the Company’s profit distribution policy is as follows:

1. The Company’s profit distribution policy shall focus on the reasonable investment return to investors, take into account the sustainabledevelopment of the Company, reflect the strong awareness of rewarding shareholders, and maintain continuity and stability.

2. Form of profit distribution, proportion of cash dividends: The Company pays dividends in cash or by shares in a positive manner. Where theCompany’s audited net profit is positive with no significant investment plan or significant cash expenditure in a year, the Company shall include thecash distribution in its profit distribution scheme for that year. The annual cash dividend of the Company shall not be less than 20% of thedistributable profit realized in the current year (excluding the undistributed profit at the beginning of the year). Where available, the Company maydistribute interim cash dividends. If the Company’s revenue grows rapidly and the Board of Directors considers that the stock price of the Companydoes not match the size of the Company’s share capital, it may make a Plan for dividend distribution by stock while satisfying the above requirementfor cash dividend distribution.

3. Interval for profit distribution: subject to the satisfaction of the cash dividend conditions stipulated in paragraph 4 below, the Company shall,in principle, pay cash dividends once a year, and the Board of Directors of the Company may propose interim cash dividends based on the profitstatus and capital demands of the Company.

The Board of Directors of the Company shall, taking into account the characteristics of the industry in which it operates, its development stage,its own business model, its profitability level, and any plan of its significant capital expenditure, distinguish the following circumstances and proposea differentiated cash dividend policy in accordance with the procedures set forth in the Articles of Association of the Company:

(1) If the Company is in a maturity stage and has no plan of significant expenditure, the proportion of cash dividends in the overall profitdistribution shall account for at least 80%;

(2) If the Company is in a maturity stage and has any plan of significant expenditure, the proportion of cash dividends in the overall profitdistribution shall account for at least 40%;

(3) If the Company is in a growth stage and has any plan of significant expenditure, the proportion of cash dividends in the overall profitdistribution shall account for at least 20%;

If the Company is in an unidentifiable stage and has any plan of significant expenditure, the above paragraphs shall apply.

4. Conditions for distributing cash dividends

(1) The remaining distributable profit of the Company is positive after the profit achieved in the current year is used for making up for the lossesof previous years and making provision for surplus reserves.

(2) The auditor of the Company issues a standard unqualified audit report on the financial statements of the Company in the current year.

(3) The Company has no significant investment plans or significant cash expenditure.

Significant investment plan or significant cash expenditure means that the accumulative expenditure of the Company for the proposed externalinvestment, assets acquisition or equipment purchase within the next twelve months reaches or exceeds 30% of the Company’s latest audited netassets and exceeds RMB300 million.

5. Conditions for distributing stock dividends: where the Company is well-run, with rapid growth of operating income and net profit, and theBoard of Directors believes that the Company is in the growth stage, the level of the Company’s net assets is high and the stock price does not matchthe size of the share capital, it may propose a Plan for stock dividend distribution, subject to the consideration and approval at the general meeting ofshareholders of the Company. Stock dividend may be distributed separately or in conjunction with cash dividend.

(II) The Company will disclose the profit distribution Plan in a timely manner in strict accordance with the relevant provisions of the ChinaSecurities Regulatory Commission and Shenzhen Stock Exchange, and disclose the profit distribution Plan and the implementation of the profitdistribution Plan in the periodic report accordingly.

(III) During the Reporting Period, the Company implemented the 2020 equity distribution in compliance with the relevant provisions of theArticles of Association, in full consideration of the reasonable demands of investors and with full protection of the legitimate rights and interests ofsmall and medium-sized investors. On March 18, 2021, the Company held the 24th meeting of the 4th Board of Directors to deliberate and approve

the Proposal on 2020 Profit Distribution Plan. The independent directors expressed their independent opinions to agree upon the Plan. The 2020general meeting of the Company was held on April 8, 2021 where the Plan was deliberated and approved for implementation. For details, please referto the Announcement on 2020 Profit Distribution Plan published on the Juchao Information Network (www.cninfo.com.cn) (announcement No.:

2021-032).

Special explanation on cash dividend distribution policy

Special explanation on cash dividend distribution policy
Whether or not the policy is in compliance with the provisions of the Articles of Association or requirements of the resolutions of the general meeting of shareholders of the Company:Yes
Whether or not the standard and proportion of dividends are clear and defined:Yes
Whether or not the relevant decision-making process and mechanism are complete:Yes
Whether or not the independent directors fully perform their duties and play their roles:Yes
Whether or not minority shareholders have the opportunity to voice their opinions and demands, and whether or not their legitimate rights and interests are fully protected:Yes
If the cash dividend policy is adjusted or amended, whether or not the conditions and procedures are compliant and transparent:Yes

1. The Company made a profit in the Reporting Period and the profit distributable to the shareholders of the parent Company was positive, but it didnot put forward a plan for cash dividend distribution to shareholders

□ Applicable √ N/A

Profit distribution and conversion of capital reserve into share capital during the Reporting Period

√ Applicable □ N/A

Number of bonus shares distributed per 10 shares held0
Number of dividends per 10 shares (RMB) (Inclusive of tax)3.03
Equity base for the distribution scheme (shares)890,821,385
Cash dividend amount (RMB) (tax inclusive)270,000,000.00
Cash dividend amount by other means (such as share repurchase) (RMB)204,444,302.78
Total cash dividends (including that distributed otherwise) (RMB)474,444,302.78
Distributable Profit (RMB)280,520,062.19
Proportion of total cash dividends (including those distributed by other others) in total profit distribution100.00%
Cash dividend for this time
If the development stage of the Company is in the growth stage and there are major capital expenditure arrangements, when making profit distribution, the proportion of cash dividends in the profit distribution shall be at least 20%.
Particulars of profit distribution and conversion of capital reserves into share capital
A cash dividend of RMB 3.03 (tax inclusive) will be distributed for every 10 shares to all the shareholders, taking 890,821,385 shares, the balance of the total share capital of the Company as of December 31, 2021 deducting the shares in securities account for share repurchase of the Company, as the base, without converting the capital reserve into share capital. In total, a cash dividend of RMB 270,000,000.00 will be distributed, and no bonus shares will be distributed. As of December 31, 2021, the total share capital of the Company was 892,406,822 shares, including 1,585,437 shares in the securities account for share repurchase. According to the Self-regulatory Guidelines for Listed Companies No. 9 of Shenzhen Stock Exchange - Share Repurchase, the share repurchase amount of RMB 204,444,302.78 (excluding commission, transfer fee and other trading fees) paid by the Company in 2021 was deemed as cash dividend amount. If the total share capital of the Company is changed in the period from the disclosure of the distribution scheme to the implementation of distribution scheme due to new share listing, equity incentive vesting, conversion of convertible bonds to equity, share repurchase and other matters, the distribution proportion shall be adjusted correspondingly based on the principle that the total distribution amount remains unchanged.

XI. Implementation of any Equity Incentive Scheme, Employee Stock Ownership Scheme orOther Incentive Measures for Employees

□ Applicable √ N/A

During the Reporting Period, there was no equity incentive scheme, employee stock ownership scheme or other incentive measures for employees, ortheir implementation.XII. Internal Control System Construction and Implementation during the Reporting Period

1. Internal control construction and implementation

During the Reporting Period, the Company, in accordance with the Basic Norms for Enterprises’ Internal Control and related guidelines, updated andperfected its internal control system in due time, and established an internal control system featuring scientific design, simplicity, applicability, andeffective running. The Audit Committee of the Board of Directors and internal audit department jointly formed the Company’s risk management andinternal control organization system to supervise and evaluate the internal control management of the Company. Through the operation, analysis andevaluation of the internal control system, the Company effectively prevented risks in operational management and promoted the realization of internalcontrol objectives.

2. Details on material weakness in the Company’s internal control during the Reporting Period

□ Yes √ No

XIII. Company’s Management and Control of Subsidiaries during the Reporting PeriodNewmi Tech was included in the consolidated statement of the Company in December 2020. During the reporting period, the Companycomprehensively integrated Newmi Tech from the aspects of supply chain, production equipment transformation, technology and process, productionand operation efficiency, and achieved remarkable integration effect. Newmi Tech made a turnaround during the reporting period.According to the Company Law, Articles of Association and other relevant laws, regulations and rules, the Company will continue to manage andsupervise the standardized operation, information disclosure, financial capital, operation and other matters of its subsidiaries, and timely track thefinancial status of its subsidiaries and other important matters, in order to ensure the legal compliance of operation and management, asset safety, andthe accuracy and completeness of the financial reports and related information, and further improve the operation and management and riskmanagement capabilities of subsidiaries.XIV. Internal Control Self-Assessment Report or Internal Control Audit Report

1. Self-assessment report on internal control

Disclosure date of the assessment report on internal control

Disclosure date of the assessment report on internal controlApril 12, 2022
Disclosure index of the assessment report on internal control2021 Assessment Report on Internal Control disclosed on http://www.cninfo.com.cn/ on April 12, 2022
Ratio of total assets of the unit included in the assessment scope to the total assets on the Company’s consolidated financial statements100.00%
Ratio of operating income of the unit included in the assessment scope to the operating income on the Company’s consolidated financial statements100.00%
Defect identification criteria
TypeFinancial reportNon-financial report
Qualitative criteriaGeneral defects: There is little possibility that a failure to take any action will result in potential misstatement, economic loss or unachieved business objectives. Material defects: There is some possibility that a failure to take any action will result in potentialGeneral defects: There is little possibility that a failure to take any action will result in potential misstatement, economic loss or unachieved business objectives. Material defects: There is some possibility that a failure to take any action will result in potential

misstatement, economic loss orunachieved business objectives. Majordefects: There is the possibility that afailure to take any action will result inpotential misstatement, economic lossor unachieved business objectives.

misstatement, economic loss or unachieved business objectives. Major defects: There is the possibility that a failure to take any action will result in potential misstatement, economic loss or unachieved business objectives.misstatement, economic loss or unachieved business objectives. Major defects: There is the possibility that a failure to take any action will result in potential misstatement, economic loss or unachieved business objectives.
Quantitative criteriaGeneral defects: < 0.25% of Total Assets, < 0.5% of Operating Income; material defects: ≥ 0.25% of Total Assets and < 1% of Total Assets, ≥ 0.5% of Operating Income and < 1.5% of Operating Income; major defects: ≥ 1% of Total Assets, ≥ 1.5% of Operating Income.General defects: < 0.25% of Total Assets, < 0.5% of Operating Income; material defects: ≥ 0.25% of Total Assets and <1% of Total Assets, ≥ 0.5% of Operating Income and < 1.5% of Operating Income; major defects: ≥ 1% of Total Assets, ≥ 1.5% of Operating Income.
Number of major defects in the financial report0
Number of major defects in the non-financial report0
Number of material defects in the financial report0
Number of material defects in the non-financial report0

2. Audit report on internal control

√ Applicable □ N/A

Audit opinion in the audit report on internal control
According to the identification of major defects in the internal control of the Company’s financial report, there were no major defects in the internal control of the financial report as of the base date of the internal control assessment report. The Board of Directors believed that the Company maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise internal control standard system and related regulations. According to the identification of major defects in the internal control of the Company’s non-financial report, there were no major defects in the internal control of the non-financial report as of the base date of the internal control assessment report. From the base date of the internal control assessment report to the issue date of the internal control assessment report, no factors affecting the assessment conclusion of the effectiveness of internal control occurred.
Disclosure date of the audit report on internal controlApril 12, 2022
Disclosure index of the audit report on internal controlThe Authentication Report on Internal Control of Yunnan Energy New Material Co., Ltd. (Da Hua Nei Zi [2022] No. 004077) disclosed by the Company on http://www.cninfo.com.cn/ on April 12, 2022
Type of opinion in the audit report on internal controlStandard unqualified opinion
Whether there was any major defect in the non-financial reportNo

Did the accounting firm issue a qualified audit report on internal control

□ Yes √ No

Was the audit report on internal control issued by the accounting firm consistent with the self-assessment report from the Board of Directors

√ Yes □ No

XV. Rectification of Problems Found in Self-Inspection of the Special Operation onImproving Corporate Governance of Listed Companies

According to the requirements of the Opinions on Further Improving the Quality of Listed Companies (Guo Fa (2020) No. 14) issued by the StateCouncil, the Announcement of Special Action on the Governance of Listed Companies of China Securities Regulatory Commission ((2020) No. 69)and the Notice of Yunnan Securities Regulatory Bureau on Special Action of Listed Company Governance (Yun Zheng Jian Han (2021) No. 27)issued by Yunnan Securities Regulatory Bureau of China Securities Regulatory Commission, as well as other requirements and the relevant laws,regulations and rules, the Company carried out strict self-examination of corporate governance, internal control, information disclosure, code ofconduct of stakeholders and controlling shareholders, actual controller, directors, supervisors, senior managers and other “key minority” from 2018 to2020, and checked the fund occupation, illegal guarantee and other aspects. Based on the self-examination, the Company does not have any majorviolations affecting corporate governance, and it has established a complete and standardized corporate governance structure and internal controlsystem in accordance with the Company Law, Securities Law, Listed Company Governance Standards and other relevant laws, regulations andnormative documents. However, with the development of the Company and changes in the internal and external environment, the Company still needsto constantly strengthen standardized operation and internal governance, constantly improve the level of corporate governance and businessmanagement, and continuously improve the internal control system. The Company still needs to continuously strengthen the study and training of

controlling shareholders, directors, supervisors and senior managers in the relevant laws and regulations, and improve their standardization andself-discipline, so as to continuously and practically improve the standard operation level of the Company and the effectiveness of corporategovernance, and promote the healthy and steady development of the Company.

Section 5 Environment and Social ResponsibilityI. Major Environmental Protection Issues

Whether the listed company and its subsidiaries fell into major pollutant-discharge units published by the environmental protection authorities.

√ Yes □ No

Name of theCompany orSubsidiary

Name of the Company or SubsidiaryName of the Major Pollutants and Specific PollutantsDischarge MethodNumber of Discharge OutletsDistribution of Discharge OutletsConcentration of the DischargePollutant Discharge Standards ImplementedTotal Discharge (tons)Total Discharge Approved (tons/year)Excess Discharge
Shanghai EnergyNOxOrganized8Boiler room50mg/m3Comprehensive Emission Standard for Air Pollutant DB31/933-20158.470258.495300None
Particulate matter810mg/m30.120000.127700None
SO2820mg/m30.4400000.443700None
Isopropanol3The whole plant80mg/m3--No requirementNone
Dichloromethane720mg/m3--None
NMHC870mg/m3Pollution Discharge Standard for Synthetic Resin Industry GB31572-20153.42 tons4.218100 tons/yearNone
Wuxi EnergyDichloromethaneOrganized2Recycling area in the plant0.123mg/Nm3Comprehensive Emission Standard for Air Pollutant DB31/933-20152.667849.845None
NOxOrganized3Workshop roof8.1mg/Nm32.1234065.88None
SO2Organized30mg/Nm30.2353.36None
Particulate matterOrganized32.65mg/Nm31.5810962.5372None
Suzhou Green PowerSpent bleaching clayTransferred by qualified third party disposal unitNational Catalogue of Hazardous Wastes (2021 Edition)123.6200None
Sludge40.76100None
Spent activated carbon particle116.3150None
Spent paraffin oil9.61436None

Newmi Tech

Newmi TechUsed mineral oilTransferred by qualified third party disposal unitNational Catalogue of Hazardous Wastes (2021 Edition)--No requirementNone

Spent activatedcarbon

Spent activated carbon--None

Construction and Operation of Pollution Control FacilitiesWith great importance to the economical use of natural resources, the Company strictly complies with the laws and regulations on the prevention andcontrol of environmental pollution, including the Environmental Protection Law of the People’s Republic of China, Law of the People’s Republic ofChina on Environmental Impact Assessment, Water Law of the People’s Republic of China, Law of the People’s Republic of China on EnergyConservation, the Atmospheric Pollution Prevention and Control Law of the People’s Republic of China, Water Pollution Prevention and Control Lawof the People’s Republic of China, and Law of the People’s Republic of China on the Prevention and Control of Environment Pollution Caused bySolid Wastes, to build a resource-saving and environmentally-friendly enterprise, and strive to achieve the coordinated sustainable development ofpeople, resources, and the environment. During the Reporting Period, Shanghai Energy and Wuxi Energy were listed as key pollutant discharge unitsfor atmospheric environment by the administrative department of ecological environment, and Suzhou Green Power and Newmi Tech were listed askey pollutant discharge units for soil environment by the administrative department of ecological environment. These key pollutant discharge unitsrigorously implemented the national and local pollutant discharge standards, with all waste gases emitted with compliance, all solid wastes utilizedcomprehensively and disposed safely, and all hazardous wastes handed over to qualified entities for disposal and use. The Company formulated theResponsibility System for the Prevention and Control of Environment Pollution Caused by Solid Waste and the Provisions on the Management of SolidWaste, Exhaust Gas, Wastewater and Noise. In accordance with the standards of local environmental protection authorities, each company carried outinternal spot inspection and supervision on the discharge of exhaust gas, wastewater, and waste, while accepting external inspections from time totime to ensure the discharge meets the standards.

1. Exhaust emissions

The exhaust emissions generated by the Company mainly include greenhouse gas emissions, VOCs (volatile organic compounds) emissions, andozone emissions. Specifically, VOCs, primarily generated from workshop exhaust gas, is discharged after being treated by exhaust gas recoveryequipment and low-nitrogen burners to meet the standards, and the Company keeps investing in exhaust gas recovery equipment to reduce emissions.At the meantime, the Company set up monitoring instruments in the workshop to alert employees to evacuate once the emission level exceeds thepreset concentration. The VOCs online monitoring system has been running in Wuxi Energy, supervising the emission concentration in real time.

2. Wastewater discharge

Domestic sewage treatment equipment is placed in all factories of subsidiaries of the Company. For example, the factory of Shanghai Energy isequipped with a sewage treatment station, which discharges wastewater to the municipal pipe network after primary and secondary sedimentation andfiltration treatment. The Company conducts strict and effective internal supervision on the compliance of wastewater discharge. Manual inspectionsare carried out by the research institute on a daily basis, and third parties are hired to conduct inspections and issue reports every month. TheCompany run spot inspections every quarter.

3. Waste discharge

During its production and research and development, the Company generates certain types and quantities of hazardous waste and non-hazardouswaste. Specifically, all hazardous waste is handed over to qualified third parties for disposal after being taken away from the factory. The Companycarefully confirm their qualifications when signing contracts with third-party treatment agencies. Hazardous waste is stored in separate warehousesand disposed two to three times a year. Among the non-hazardous waste, paper and plastic bottles are recycled through the recycling bins placed in theCompany, and domestic waste is handed over to and disposed by the disposal agencies recognized by the environmental protection authorities.Assessment of the environmental impact of construction projects and other administrative licenses of environmental protectionFor all construction projects, the Company carries out environmental impact assessment and acceptance in strict accordance with the regulations onenvironmental impact assessment, and obtain the approval of environmental impact assessment as well as the completion and environmentalprotection acceptance opinion issued by the environmental protection authorities. The Company and its subsidiaries hold the Pollution DischargePermit in accordance with the laws and regulations, with complete environmental protection qualification procedures.Environmental emergency response planIn accordance with the Environmental Protection Law of the People’s Republic of China, Administrative Measures for Environmental EmergencyResponse Plan, and National Environmental Emergency Response Plan, the Company prepared the Environmental Emergency Response Plan andsubmitted it to the competent authorities for filing. The Company and its subsidiaries deploy persons in charge of emergency management andregularly organize comprehensive emergency drills, with complete contingency rescue resources.Environmental self-monitoring planThe Company and its subsidiaries developed self-monitoring plans in accordance with the laws and regulations, installed automatic testing facilities instrict accordance with the plans, and regularly conduct or entrust qualified third parties to organize self-monitoring of pollutants such as thedischarged exhaust gas, wastewater, and noise.Administrative penalties imposed for environmental issues during the Reporting Period: None.Other environmental information to be disclosedMeasures taken to reduce carbon emissions during the Reporting Period and their effects

√Applicable □ Not applicable

The Company is committed to developing green products with low carbon and environmental protection, and integrates the concept of low carbon andenvironmental protection into the process of product development, design and production.In terms of new energy products, the Recycling and Energy Saving Research Institute is mainly responsible for the recycling and improvement ofwhite oil, dichloromethane, DMAC, acetone and white soil used in the production process of lithium battery diaphragm, as well as the research on therecovery and treatment of waste water and waste gas. By designing effective solutions and using advanced separation and recovery equipment, weensured the recovery of white oil, dichloromethane, DMAC, acetone and white soil, and improved the recovery rate of waste water and waste gas,making contribution to the energy conservation and consumption reduction and the environmental protection during the product R&D and design.In terms of BOPP film products, to improve the rate of finished products, reduce waste film generation, and reduce environmental pollution, ChengduHongta Plastic adopted various measures, such as enhancing the incentive for offcuts absorption, increasing the reward for the team with maximumoffcuts absorption, and improving the enthusiasm of the staff to absorb the offcuts, the film making workshop carrying out production in strictaccordance with the “film making task list” and the effective width of jumbo roll, the technical quality department shall strictly controlling thesampling quantity of the jumbo roll according to the testing requirements, prohibiting excessive sampling and reducing cutting waste, in order toreduce the waste during the production.In terms of packaging products, we have in-depth cooperation with leading enterprises in the industry to promote the green and recyclabledevelopment of the industrial chain. During the reporting period, Hongchuang Packaging signed strategic cooperation agreements with Grass Greenand New Hope Dairy, to explore the use of alternative biodegradable materials and more renewable energy, improve packaging to reduce foodresidues and reduce packaging recycling and cleaning costs, and research on packaging lightweight, and make constant innovation in theenvironmental protection, personalization and preservation capacity of the food packaging materials.Other information related to environmental protectionPutting resource conservation in a key position in its development strategy and operation method, the Company strengthened the management systemof energy consumption and optimized the conservation measures to continuously monitor and improve the utilization efficiency of our energy andresources. Electricity and natural gas are the primarily used energy in the Company’s production process. Specific targets are set for the consumptionof electricity and natural gas, and each production machine is equipped with a water meter, an electricity meter, and a natural gas meter. With anorder-based production, the Company reduces density of energy consumption by implementing scientific scheduling and time optimization, andimproving equipment production efficiency. In production, water resources are mainly consumed in the heat exchange inside the equipment, whichcan be recycled directly without special treatment. Over the years, the Company has implemented management by objectives for energy consumption.At the end of each year, energy consumption objectives for the follow year will be formulated based on the actual consumption of the year, theforecast of the production in the next year, as well as the known plans for transformation of production equipment (e.g., boilers, refrigerators, andfiber-adsorbed dichloromethane recycling and transformation), the establishment of distributed power stations (i.e. self-power generation), and the useof equipment with lower energy consumption. In the future, the Company will try to establish medium and long-term management by objectives tofurther promote energy conservation and consumption reduction.In the meantime, the Company made efforts in technological innovations to reduce the discharge of hazardous waste, using alcohol-based inks toreplace lipid-based inks and planning to further replace lipid-based inks with water-based inks in feasible usage scenarios. The Company has investeda rotary regenerative combustion furnace as a gas recovery device in the factory in Jiangxi. By recycling the organic solvent gas emitted by theproduction equipment and conducting combustion oxidation treatment, the heat generated is returned to the production equipment for use, with theVOCs treatment efficiency more than 99.5%, reducing emissions and energy consumption. Strictly following the regulations on waste classificationand disposal, each factory of the Company separates and empties the kitchen waste generated in the canteen. Meanwhile, waste classificationinstructions are posted on workplace bulletin boards to help employees comprehend the waste classification method.II. Social ResponsibilityFor details, please refer to the 2021 Environmental, Social and Governance Report (ESG report) disclosed by the Company on April 12, 2022 atwww.cninfo.com.cn.

III. Specifics of Consolidating and Extending the Achievements of Poverty Alleviation and Rural Revitalization

No actions were carried out during the Reporting Period.

Section 6 Significant EventsI. Performance of commitments

1. Commitments of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other commitmentmakers performed in the Reporting Period or ongoing at the end of the Reporting Period

√ Applicable □ N/A

Commitment

CommitmentCommitment made byType of commitmentDetails of commitmentTime of commitmentTerm of commitmentPerformance of commitment
Commitments made during asset restructuringEnergy Technology and all directors, supervisors and senior managementCommitment to submit true, accurate and complete information1. There are no false records, misleading statements or major omissions in the information disclosed and application documents submitted by Energy Technology, and those making the commitments shall be jointly and severally liable for the authenticity, accuracy and integrity of such documents 2. If the information provided or disclosed for this major assets restructuring contains false records, misleading statements or major omissions, and is put on file by the judicial organ for investigation or by the CSRC for investigation, before the conclusion of the investigation is made, those making the commitments will not transfer the shares with interests in Energy Technology, and will submit the application for suspending the transfer and share accounts to the Board of Directors of the Energy Technology within two trading days after receiving the notice of the investigation, and the Board of Directors shall apply for lockup to the stock exchange and the registration and clearing company on behalf of those making the commitments; if the Board of Directors fails to submit the lockup application within two trading days, it will authorize the Board of Directors to directly submit the identity and account information of those making the commitments to the stock exchange and the registration and clearing company after verification and apply for lockup; if the Board of Directors fails to submit the identity and account information of those making the commitments to the stock exchange and the registration and clearing company, those making the commitments will authorize the stock exchange and the registration and clearing company to directly lock up the related shares. If the investigation found that there is any violation of laws or regulations, those making the commitments promise to use voluntarily the shares locked up to compensate the related investors.June 13, 2017Long termStrictly performed
The CompanyCommitment on legal compliance1. The Company and its controlling shareholder and actual controller have not been investigated by judicial authorities for suspected crimes or investigated by the CSRC for suspected violations of laws and regulations in recent 3 years; 2. the Company and its controlling shareholders and actual controllers have not been publicly censured by the stock exchange and have no other major acts of dishonesty in the past 12 months; 3. The Company and its incumbent directors and senior management have not been investigated by judicial authorities for suspected crimes or investigated by the CSRC for suspected violations of laws and regulations.June 13, 2017Long termStrictly performed
Directors and senior management ofCommitment on dilution of current return1. I hereby commit neither to tunnel to other units or individuals without compensation or under unfair conditions, nor to damage the Company’s interests in other ways; 2. I hereby commit to restrict my position-related consumption activities; 3. I hereby commit not to use the Company’s assets for investment and consumption activities not related to execution of myMay 25, 2017Long termStrictly perfor

EnergyTechnology

Energy Technologyand remedial measuresduties; 4. I hereby commit to link the remuneration system formulated by the Board of Directors or the Remuneration Committee or Assessment Committee of the Company with the execution of the return recovery measures; 5. I hereby commit to link the vesting conditions with the implementation of the return recovery measures if the Company will implement any share incentive scheme in the future; 6. Since the date of this commitment up to completion of this major asset restructuring, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC.med
CounterpartyCommitment to submit true, accurate and complete informationThe counterparty will timely provide Energy Technology with information related to restructuring, and guarantee the authenticity, accuracy and completeness of the information provided. In case of any false record, misleading statement or major omission of the information provided, resulting in any loss to Energy Technology or investors, it shall be liable for compensation according to law. In case of any false record, misleading statement or major omission in the information provided or disclosed in this material assets restructuring, which is put on file by the judicial organ for investigation or by the CSRC for investigation, the counterparty will suspend the transfer of the shares with interests in Energy Technology until the case investigation conclusion is clear.June 13, 2017Long termStrictly performed
CounterpartiesCommitment on legal compliance1. Gao Xiang was the CFO of Shanghai Lvxin Packaging Materials Co., Ltd. (Shunhao). Due to Shunhao’s failure to disclose related transactions with related natural persons according to law, in violation of the relevant provisions on information disclosure in the Securities Law and the Administrative Measures for Information Disclosure of Listed Companies, on July 27, 2016, Shanghai Securities Regulatory Bureau issued a warning to Shunhao and related parties, including Gao Xiang, and imposed an administrative penalty of RMB30,000 yuan on Gao Xiang; on January 5, 2017, Shenzhen Stock Exchange made the Decision on Criticism to Shanghai Shunhao New Materials Technology Co., Ltd. and Related Parties through Circulating Notices, and circulated notification of criticism to Shunhao and related parties, including Gao Xiang. In addition, other counterparties have not been subject to administrative or criminal penalties related to the securities market in the past five years, and have not involved in major civil litigation or arbitration related to economic disputes. 2. Counterparties are eligible to purchase shares not publicly offered by Energy Technology, and are not under any circumstances where they are not allowed to purchase shares not publicly offered by Energy Technology as stipulated by laws, regulations, rules or normative documents. 3. Over the last five years, the counterparties have not failed to repay a large amount of debts as scheduled, failed to fulfill its declaration, been subject to administrative measures by the CSRC or disciplined by the stock exchange and there are no ongoing or threatened administrative or judicial proceedings for investigation against my material violation of laws or regulations.June 13, 2017Long termStrictly performed
CounterpartiesCommitment on stock lockup period1. Paul Xiaoming Lee, Li Xiaohua, Wang Yuhua (dead), Sherry Lee and Shanghai Hengzou hereby commit that if their compensation obligations (if any) under the Profit Forecast and Compensation Agreement have been performed at the end of 36 months since the date of listing of their consideration shares, their consideration shares can be unlocked. Within 6 months after the completion of this major asset restructuring, if the closing price of Energy Technology shares is lower than the issuing price for 20 consecutive trading days, or the closing price is lower than the issuing price at the end of 6 months after the completion of the transaction, the lockup period of the consideration shares held by Paul Xiaoming Lee, Li Xiaohua, Wang Yuhua, Sherry Lee and Shanghai Hengzou will be automatically extended for at least 6 months. 2. As of the date when the consideration shares are registered in the name of the counterparties, except Paul Xiaoming Lee, Li Xiaohua, Wang Yuhua (dead), Sherry Lee and Shanghai Hengzou, if the shares of Shanghai Energy used by other counterparties to subscribe for Energy Technology have been continuously owned for less than 12 months from the date of registration in their names, the consideration shares obtained through this major asset reconstruction shall not be listed for trading or transferred within 36 months from the date of registration of the shares in their names. Except the consideration shares mentioned above, the remaining consideration shares obtained by other counterparties through this major asset restructuring shall not be listed for trading or transferred within 12 months from the date of registration of the shares in their names; in order to ensure the performance of the performance commitment obligations in the Profit Forecast and Compensation Agreement, other counterparties (except Paul Xiaoming Lee, Li Xiaohua, Wang Yuhua (dead), Sherry Lee, Shanghai Hengzou and Future Industry Investment Fund mentioned above) commit that at least 25% of the consideration shares held by each of them shallJune 13, 2017From August 15, 2018 to August 14, 2021 for performances by Paul Xiaoming Lee, Li Xiaohua, Wang Yuhua (dead), Sherry Lee and Shanghai Hengzou; the performance period for 75% of the shares of Energy Technology acquired through the major asset restructuring held by other counterparties and Future Industry Investment Fund, which shall bear their own profit forecast and compensation obligations and account for 1.0563% equity of Shanghai Energy, is from August 15, 2018 to August 14, 2019, and the performance period for thePerformed

not be listed for trading or transferred to external parties within 36 months from the date of registration of the relevantshares of Energy Technology in their names until their compensation obligations under the Profit Forecast andCompensation Agreement, if any, have been fully discharged before they can be listed for trading or transferred to externalparties; Future Industry Investment Fund commits that at least 25% of the shares of Energy Technology acquired throughthe major assets restructuring with the 1.0563% equity interest in Shanghai Energy held by it and subject to its own profitforecast compensation obligations shall not be listed for trading or transferred to external parties within 36 months from thedate of registration of the relevant shares of Energy Technology in its name, until the compensation obligations of FutureIndustry Investment Fund under the Profit Forecast and Compensation Agreement, if any, have been fully performed. 3.After the completion of the implementation of the major assets restructuring, the additional shares of Energy Technologyheld by the counterparties as a result of bonus shares and conversion of share capital of Energy Technology shall also besubject to the above commitments. 4. Upon the expiration of the lockup period, the transfer and trading of the shares ofEnergy Technology acquired by the counterparties through the major assets restructuring shall be conducted in accordancewith the laws and regulations and the rules of the Shenzhen Stock Exchange in force at the time.

not be listed for trading or transferred to external parties within 36 months from the date of registration of the relevant shares of Energy Technology in their names until their compensation obligations under the Profit Forecast and Compensation Agreement, if any, have been fully discharged before they can be listed for trading or transferred to external parties; Future Industry Investment Fund commits that at least 25% of the shares of Energy Technology acquired through the major assets restructuring with the 1.0563% equity interest in Shanghai Energy held by it and subject to its own profit forecast compensation obligations shall not be listed for trading or transferred to external parties within 36 months from the date of registration of the relevant shares of Energy Technology in its name, until the compensation obligations of Future Industry Investment Fund under the Profit Forecast and Compensation Agreement, if any, have been fully performed. 3. After the completion of the implementation of the major assets restructuring, the additional shares of Energy Technology held by the counterparties as a result of bonus shares and conversion of share capital of Energy Technology shall also be subject to the above commitments. 4. Upon the expiration of the lockup period, the transfer and trading of the shares of Energy Technology acquired by the counterparties through the major assets restructuring shall be conducted in accordance with the laws and regulations and the rules of the Shenzhen Stock Exchange in force at the time.remaining 25% is from August 15, 2018 to August 14, 2021; the performance period for the shares of Energy Technology acquired through the major asset restructuring held by the Future Industry Investment Fund, which shall not bear their own profit forecast and compensation obligations, is from August 15, 2018 to August 15, 2019.
CounterpartiesCommitment on integrity of asset ownership1. Shares of Shanghai Energy held by counterparties according to law. The counterparty has performed its contribution obligation to Shanghai Energy in accordance with the law, and there is no false contribution, delayed contribution, withdrawal of capital and other acts in violation of its obligations and responsibilities as a shareholder, and there is no situation that may affect the legal survival of Shanghai Energy. 2. The equity of Shanghai Energy held by the counterparty is actually legally owned. There is no ownership dispute, there is no trust, entrusted shareholding or similar arrangement, and there is no pledge, freezing, sealing, property preservation or other rights restrictions on the equity of Shanghai Energy held by the counterparty.June 13, 2017Long termStrictly performed
CounterpartiesCommitment on no insider tradingI/the enterprise and its main management do not leak any insider information of Energy Technology or leverage insider information to conduct insider trading. If the above commitments are violated, all losses caused to the listed company will be borne.June 13, 2017Long termStrictly performed
Heyi .Paul Xiaoming Lee familyCommitment to regulate related transactionsAfter the completion of the major asset restructuring, the enterprises that are controlled by those making the commitments will avoid and reduce the related transactions with Energy Technology as far as possible. For those related transactions that cannot be avoided or have reasonable reasons, the enterprises that are controlled by those making the commitments will sign agreements with Energy Technology and perform legal procedures in accordance with the principles of justice, fairness and compensation for equal value, and shall, in accordance with the provisions of relevant laws, regulations, other normative documents and the Articles of Association of Yunnan Energy New Material Co., Ltd., perform relevant internal decision-making approval procedures in accordance with the law and timely perform information disclosure obligations, guarantee not to trade with Energy Technology under unfair conditions compared with the market, guarantee not to illegally transfer the funds and profits of Energy Technology by using related party transactions, and do not use such transactions to engage in any behavior that damages the legitimate rights and interests of Energy Technology and other shareholders. If a breach of the above commitment results in damage to the interests of Energy Technology, those making the commitments will compensate the Energy Technology for the losses caused by the above acts to Energy Technology.June 13, 2017Long termStrictly performed
Heyi Investment, Paul Xiaoming Lee familyCommitment to avoid horizontal competition1. At present, those making the commitments are not directly or indirectly engaged in the same or similar business with the existing business of Energy Technology or Shanghai Energy through other operating entities directly or indirectly controlled by it or in the name of natural person, and do not hold any position or act as any kind of consultant in any operating entity with the main business same as or similar to that in Energy Technology or Shanghai Energy, or engage in any other competition with Energy Technology or Shanghai Energy. 2. The commitment maker guarantees that after the completion of this major asset restructuring, it will not carry out or operate the same or similar business with the main business of Energy Technology or Shanghai Energy in its own way, directly or indirectly through other business entities under its direct or indirect control; do not hold any position or act as any kind of consultant in any operating entity with the same or similar business with Energy Technology or Shanghai Energy; do not provide technical services for existing customers of EnergyJune 13, 2017Long termStrictly performed

Technology or Shanghai Energy in the name of other than Energy Technology or Shanghai Energy; avoid any horizontalcompetition. 3. If any loss is caused to Energy Technology or Shanghai Energy due to the commitment maker’s breach ofthe above commitments, the operating profit obtained shall be owned by Energy Technology and all losses suffered byEnergy Technology or Shanghai Energy shall be compensated.

Technology or Shanghai Energy in the name of other than Energy Technology or Shanghai Energy; avoid any horizontal competition. 3. If any loss is caused to Energy Technology or Shanghai Energy due to the commitment maker’s breach of the above commitments, the operating profit obtained shall be owned by Energy Technology and all losses suffered by Energy Technology or Shanghai Energy shall be compensated.
Heyi Investment, Paul Xiaoming Lee familyCommitment on ensuring the independence of the listed companyBefore this major asset restructuring, Energy Technology has been completely separated from other enterprises controlled by the commitment maker in terms of business, assets, institutions, personnel and finance. Energy Technology’s business, assets, institutions, personnel and finance are independent. After the completion of this major asset restructuring, the commitment maker undertakes not to use the identity of the controlling shareholder or actual controller of Energy Technology to affect the independence of Energy Technology, and to ensure the independence of Energy Technology in business, assets, institutions, personnel and finance as far as possible.June 13, 2017Long termStrictly performed
Paul Xiaoming Lee familyCommitment on the existence of previous administrative penaltyThere were administrative punishments in fire control and water affairs in Shanghai Energy. As of the date of this letter of commitment, Shanghai Energy and its subsidiaries do not have any administrative penalty that has not been implemented or rectified. In November 2015, Shanghai Pudong New Area Administration of Work Safety ordered Shanghai Energy to rectify the three dichloromethane storage tanks within a time limit. Shanghai Energy has completed the rectification, but has not completed the safety acceptance after the rectification. If the relevant competent departments in the local place where Shanghai Energy and its subordinate companies are located in have made administrative punishment to Shanghai Energy and its subordinate companies for fire control, water service or the three dichloromethane tanks at any time, the commitment maker promises to make cash compensation for all economic losses suffered by Shanghai Energy or its subsidiaries within 30 days after the actual punishment or loss amount is determined, so as to ensure that it will not have a material impact on the production, operation and financial situation of Shanghai Energy and its subsidiaries. Joint and several liability shall be borne by those making the commitments.May 25, 2017Long termStrictly performed
Paul Xiaoming Lee familyCommitment on no other related transactionsThose making the commitments undertake that there are no other related parties and related transactions in Shanghai Energy except for the related transactions that have been publicly disclosed in the restructuring report, legal opinion and audit report.May 25, 2017Long termStrictly performed
All partners of Shanghai HengzouLetter of commitment on stock lockup periodWithin 36 months from the date of the registration of Energy Technology’s shares in the name of Shanghai Hengzou, I promise that I will not require the shares of Energy Technology held by Shanghai Hengzou to be listed or transferred, and I promise not to transfer the property shares of Shanghai Hengzou until Shanghai Hengzou’s compensation obligations (if any) under the Profit Forecast and Compensation Agreement are performed, it can be traded or transferred externally.June 13, 2017June 13, 2017 to August 15, 2021Performed
Li XiaohuaCommitment on capital source of Shanghai EnergyAlthough I hold the certificate of permanent residence right of the United States, I have not changed my nationality, I am still a Chinese nationality; my own investment in Shanghai Energy is all China’s income, and does not involve the contribution of foreign exchange or foreign assets.June 13, 2017Long termStrictly performed
Shanghai HengzouCommitment of the enterprise not belonging to private investment funds or a private fundThis enterprise is the employee stock ownership platform of Shanghai Energy, and the enterprise does not exist to raise funds in a non-public way to qualified investors. There is no asset management by the fund manager or general partner, nor does it serve as the manager of any private equity fund. Therefore, the enterprise does not belong to the private investment fund or a private fund manager in the Interim Measures for the Supervision and Administration of Private Investment Funds and the Measures for the Registration and Filing of Private Investment Fund Managers (for Trial Implementation), and does not need to follow the Interim Measures for the Supervision and Administration of Private Investment Funds and the Measures for the Registration and Filing of Private Investment Fund Managers (for Trial Implementation) and other relevant laws and regulations to fulfill the registration and filing procedures.June 13, 2017Long termStrictly performed

manager

manager
Huachen InvestmentCommitment of the enterprise not belonging to private investment funds or a private fund managerThe Company is not established by raising funds from qualified investors in a non-public way, or doesn’t have the assets managed by the fund manager or the general partner, or act as the manager of any private investment fund. Therefore, the Company does not belong to the private investment funds or a private fund manager in the Interim Measures for the Supervision and Administration of Private Investment Funds and the Measures for the Registration and Filing of Private Investment Fund Managers (for Trial Implementation), and does not need to follow the Interim Measures for the Supervision and Administration of Private Investment Funds and the Measures for the Registration and Filing of Private Investment Fund Managers (for Trial Implementation) and other relevant laws and regulations to fulfill the registration and filing procedures.June 13, 2017Long termStrictly performed
Paul Xiaoming Lee, Li XiaohuaCommitment of term of serviceWithin 3 years from the closing date, he shall continue to serve in Shanghai Energy and fulfill his due diligence obligations. If he voluntarily proposes to leave Shanghai Energy before the expiration of his term of office (except for the case with the consent of Energy Technology), or causes serious losses to Energy Technology and Shanghai Energy due to dereliction of duty, malpractice or other acts that damage the interests of Shanghai Energy and is dismissed by Shanghai Energy according to law, he shall bear the liability for breach of contract to Energy Technology. Energy technology has the right to require the defaulting party to pay the consideration it has obtained in this purchase of assets to Energy Technology as compensation, as follows: 1. If the term of office is less than 12 months since the closing date, the defaulting party shall pay 50% of the total consideration obtained in this purchase of assets to the listed company in cash as compensation; 2. If the term of office has expired from 12 months to 24 months since the closing date, the defaulting party shall pay 40% of the total consideration obtained in this purchase of assets to the listed company in cash as compensation; 3. If he has worked for 24 months but less than 36 months since the closing date, the defaulting party shall pay 30% of the total consideration obtained in this purchase of assets to the listed company in cash as compensation.May 2, 2017July 31, 2018 to July 30, 2021Fulfilled
Paul Xiaoming Lee, Li XiaohuaNon-competition commitmentDuring the term of office of Shanghai Energy or within 2 years after the resignation of Shanghai Energy, it will not directly or indirectly operate the same or similar business with Energy Technology or Shanghai Energy on its own or in the name of others, nor will it hold any post or provide any service in entities with the same or similar business with Energy Technology or Shanghai Energy; if they violate the aforesaid non-competition commitment, they shall pay a penalty of RMB5 million yuan to Energy Technology, and shall turn over all the operating profits, wages, remuneration and other income earned by them due to the violation of the commitment to Energy Technology. The aforesaid compensation still cannot make up for Energy Technology therefore, Energy Technology has the right to request the breach party to be liable for the loss suffered by Energy Technology.May 2, 2017Term of service and within two years after resignationWithin the performance period, strictly performed
Paul Xiaoming Lee, Li XiaohuaCommitment on no part-time workDuring the term of office at Shanghai Energy, without the consent of Energy Technology, it is not allowed to work part-time (except for directors and supervisors) in other companies, and the income violating the prohibition of concurrent operation shall be owned by Innovation Co., Ltd.May 2, 2017Term of serviceWithin the performance period, strictly performed

Jerry Yang Li

Jerry Yang LiCommitment on the lockup periodDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of the Company’s controlling shareholder Heyi Investment of RMB17.955 million. After succession, I directly and indirectly hold 54,655,167 shares of the Company through Heyi Investment, accounting for 11.53% of the total share capital of the Company. As one of the counterparties, Ms. Wang Yuhua directly holds the Company’s shares and purchases the shares of Shanghai Energy through the Company’s issuance of shares. Therefore, with regard to the lock-in period of the Company’s shares directly held by me, I hereby commit as follows: I have obtained the new shares of the listed company through this restructuring, and the shares shall not be traded or transferred externally within 36 months from the date of the end of this issue. Until the compensation obligation under the Profit Forecast and Compensation Agreement (if any) is performed, the shares can be traded or transferred externally. At the same time, the shares of the listed company held by me before the restructuring shall not be transferred within 12 months after the completion of this transaction; if the closing price of the shares of the listed company is lower than the issuing price for 20 consecutive trading days within 6 months after the completion of this transaction, or the closing price is lower than the issuing price at the end of 6 months after the completion of the transaction, the lock-in period of the shares of the Company held by me shall be automatically extended for at least 6 months. If the transaction is put on file by the judicial organ or the CSRC for investigation due to the false records, misleading statements or major omissions of the information provided or disclosed, before the case investigation conclusion is clear, the shares in the listed company owned by myself shall not be transferred.October 25, 2018October 25, 2018 to August 14, 2021Within the performance period, strictly performed
Jerry Yang LiCommitment to legal complianceDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of the Company’s controlling shareholder Heyi Investment of RMB17.955 million. After succession, I directly and indirectly hold 54,655,167 shares of the Company through Heyi Investment, accounting for 11.53% of the total share capital of the Company. My directly holding shares is acquired by Ms. Wang Yuhua as one of counterparties, through purchasing the equity of Shanghai Energy New Material Technology Co., Ltd. through issuing shares of the Company, I hereby commit as follows: 1. I have not been subject to administrative or criminal penalties related to the securities market in the past five years, and have not involved in major civil litigation or arbitration related to economic disputes; 2. I am eligible to purchase shares not publicly offered by Energy Technology, and are not under any circumstances where they are not allowed to purchase shares not publicly offered by Energy Technology as stipulated by laws, regulations, rules or normative documents; 3. Over the last five years, I have not failed to repay a large amount of debts as scheduled, failed to fulfill its declaration, been subject to administrative measures by the CSRC or disciplined by the stock exchange and there are no ongoing or threatened administrative or judicial proceedings for investigation against my material violation of laws or regulations.October 25, 2018Long termStrictly performed
Jerry Yang LiCommitment to ensure the independence of listed companiesDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of the Company’s controlling shareholder Heyi Investment of RMB17.955 million. After succession, I directly and indirectly hold 54,655,167 shares of the Company through Heyi Investment, accounting for 11.53% of the total share capital of the Company. My directly holding shares is acquired by Ms. Wang Yuhua as one of counterparties, through purchasing the equity of Shanghai Energy through issuing shares of the Company. Therefore, with regard to the independence of listed companies involved in this restructuring, I hereby make the following confirmation and commitment: before this restructuring, Shanghai Energy has been completely separated from other enterprises under my control in terms of business, assets, institutions, personnel and finance, and Shanghai Energy’s business, assets, institutions, personnel and finance are independent. After the completion of this restructuring, I promise not to use the identity of the actual controllerOctober 25, 2018Long termStrictly performed

of the listed company to affect the independence of the listed company, and to ensure the independence of the listedcompany in business, assets, institutions, personnel and finance as far as possible.

Jerry Yang LiCommitment on regulating related transactionsDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of the Company’s controlling shareholder Heyi Investment of RMB17.955 million. After succession, I directly and indirectly hold 54,655,167 shares of the Company through Heyi Investment, accounting for 11.53% of the total share capital of the Company. My directly holding shares is acquired by Ms. Wang Yuhua as one of counterparties, through purchasing the equity of Shanghai Energy through issuing shares of the Company. In order to reduce and standardize the related transactions that may occur with the listed company, I hereby make the following commitments: after the completion of this restructuring, the enterprises under my control will avoid and reduce the related transactions with the listed company as much as possible. For the related transactions that cannot be avoided or have reasonable reasons, the enterprises under my control will follow the principles of justice, fairness, equal value and compensation with the listed company in accordance with the law sign the agreement, perform the legal procedures, and in accordance with the provisions of relevant laws, regulations, other normative documents and the Articles of Association of Yunnan Energy New Material Co., Ltd., perform the relevant internal decision-making approval procedures in accordance with the law and timely perform the obligation of information disclosure, ensure that transactions with listed companies will not be conducted in an unfair manner compared with the market, and that the funds and profits of listed companies should not be transferred illegally by related transactions, nor will they engage in any act that damages the legitimate rights and interests of listed companies and other shareholders. If there is any violation of the above commitments, resulting in damages to the interests of the listed company, I will compensate the listed company for the losses caused by the foregoing behavior to the listed Company.October 25, 2018Long termStrictly performed
Jerry Yang LiCommitment on avoiding horizontal competitionDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of the Company’s controlling shareholder Heyi Investment of RMB17.955 million. After succession, I directly and indirectly hold 54,655,167 shares of the Company through Heyi Investment, accounting for 11.53% of the total share capital of the Company. My directly holding shares is acquired by Ms. Wang Yuhua as one of counterparties, through purchasing the equity of Shanghai Energy through issuing shares of the Company. Therefore, in order to protect the legitimate rights and interests of the listed company and other shareholders and avoid horizontal competition with the listed company, I hereby make the following solemn commitment: 1. At present, I have not directly or indirectly engaged in the same or similar business with the existing business of the listed company or Shanghai Energy through other business entities directly or indirectly controlled by me or in the name of natural persons, have not held any position or acted as any kind of consultant in any business entity with the same or similar main business as the listed company or Shanghai Energy, or any other situation of horizontal competition with the listed company or Shanghai Energy. 2. I guarantee that after the completion of this transaction, I will not carry out or operate the same or similar business with the main business of the listed company and Shanghai Energy through other business entities directly or indirectly controlled by myself, directly or indirectly; I will not hold any position or serve as any form of consultant in any business entity with the same or similar business with the listed company or Shanghai Energy; do not provide technical services for listed companies or existing customers of Shanghai Energy in the name of listed companies or other than Shanghai Energy; avoid any horizontal competition. 3. If any loss is caused to the listed company or Shanghai Energy due to my violation of the above commitments, the operating profit obtained shall be owned by the listed company and all losses suffered by the listed company or Shanghai Energy shall be compensated.October 25, 2018Long termStrictly performed
Sherry LeeCommitment on the lockup periodThe 15,624,033 shares I inherited from Ms. Wang Yuhua were acquired by Ms. Wang Yuhua through this restructuring. Therefore, the lock-in period of the Company’s shares directly held by me through this restructuring (including my 11,596,884 shares and 15,624,033 shares inherited from Ms. Wang Yuhua), I hereby committed as follows: the newly increased shares of the listed company obtained by me through this restructuring shall not be traded on the market or transferred externally within 36 months from the date of the end of this issuance until all the compensation obligations (if any) under the Profit Forecast and Compensation Agreement have been performed. At the same time, the shares of the listed company held by me before this restructuring shall not be transferred within 12 months after the completion of this transaction. If the closing price of the listed company’s shares is lower than the issuing price for 20 consecutive trading days within 6 months after the completion of this transaction, or the closing price is lower than the issuing price at the end of 6 months after the completion of the transaction, the lock-in period of the Company’s shares held by myself will be automatically extended for at least 6 months. If the transaction is put on file by the judicial organ or the CSRC for investigation due to the false records, misleading statements or major omissions of the information provided or disclosed, before the case investigation conclusion is clear, the shares in the listed company owned by myself shall not be transferred.October 25, 2018October 25, 2018 to August 14, 2021Within the performance period, strictly performed
Commitments made at the time of IPO or refinancingThe Company, controlling shareholders and the actual controller, directors, supervisors and senior managementCommitment on authenticity, accuracy and completeness of documents related to IPOI. Company’s commitment: 1. there are no false records, misleading statements or major omissions in the prospectus of the Company’s initial public offering. 2. If any competent authority finds that the initial prospectus issued by the Company has false records, misleading statements or major omissions, which will make a significant and substantial impact on judging whether it meets the requirements of the law, the Company will repurchase all the new shares of the IPO in accordance with the law. 3. Within 10 trading days after the competent authority determines that the prospectus of the Company has false records, misleading statements or major omissions that have a significant and substantial impact on the judgment of whether the Company complies with the issuance conditions stipulated by the law, the Board of Directors of the Company shall formulate the share repurchase plan and submit it to the General Meeting of Shareholders for deliberation and approval, and after it is approved, reviewed or filed by the relevant competent department (if necessary), share repurchase measures will be started, and all new shares of the initial public offering will be repurchased according to law; the repurchase price (in case of ex-right and ex-dividend due to cash dividend, share distribution, conversion to share capital and new share issuance, the right shall be restored in accordance with the relevant provisions of Shenzhen Stock Exchange, the same below) shall be determined according to relevant laws and regulations, and shall not be lower than the issuance price of the initial public offering shares. 4. If the prospectus of the Company’s initial public offering contains false records, misleading statements or major omissions, which causes investors to suffer losses in securities trading, the Company will compensate investors for losses according to law. II. commitment of the controlling shareholder and actual controller of the Company: 1. there are no false records, misleading statements or major omissions in the prospectus of the Company’s initial public offering. 2. If any competent authority determines that there are false records, misleading statements or major omissions in the prospectus of the Company’s initial public offering, which have a significant and substantial impact on the judgment of whether it meets the issuance conditions prescribed by law, Heyi Investment and the family will buy back the transferred original restricted shares according to law; Heyi Investment and the family will formulate shares within 10 trading days after the above matters are identified, the original restricted shares issued by the Company’s shareholders at the time of initial public offering shall be repurchased in accordance with the law by means of centralized bidding transaction in secondary market, bulk transaction, agreement transfer, tender offer, etc. The repurchase price is determined according to the negotiated price or secondary market price, but not lower than the original transfer price and the price determined according to relevant laws and regulations and regulatory rules. If Heyi Investment and the family buy back the original restricted shares that have been transferred to trigger the tender offer conditions, Heyi Investment and the family will perform the tender offer procedures in accordance with the law and perform the corresponding information disclosure obligations. 3. If the prospectus of the Company’s initial public offering contains false records, misleading statements or major omissions, which causes investors to suffer losses in securities trading, Heyi Investment and the family will compensate investors forSeptember 14, 2016Long termStrictly performed

losses according to law. III. Commitment of directors, supervisors and senior managers of the Company: 1. the prospectus ofthe issuer’s initial public offering doesn’t contain false records, misleading statements or major omissions, and I am jointlyand severally liable for its authenticity, accuracy and completeness. 2. If the prospectus of the issuer’s initial public offeringcontains false records, misleading statements or major omissions, which causes investors to suffer losses in securitiestrading, I will compensate investors for losses according to law.

losses according to law. III. Commitment of directors, supervisors and senior managers of the Company: 1. the prospectus of the issuer’s initial public offering doesn’t contain false records, misleading statements or major omissions, and I am jointly and severally liable for its authenticity, accuracy and completeness. 2. If the prospectus of the issuer’s initial public offering contains false records, misleading statements or major omissions, which causes investors to suffer losses in securities trading, I will compensate investors for losses according to law.
Controlling shareholder, actual controller, and Shanghai Guohe, a shareholder holding more than 5% sharesAbout shareholding intention and reduction intentionI. Commitment of controlling shareholders and actual controllers’ shareholding intention and reduction intention: 1. as the controlling shareholder and actual controller of the Company, Heyi Investment and the family hold the Company’s shares in strict accordance with the provisions of laws, regulations, normative documents and regulatory requirements, and abide by the share locking period; after the expiration of the locking period, the Company’s shares held by Heyi Investment and the family’s reduction shall comply with the requirements of relevant laws, regulations, normative documents and rules of the stock exchange; 2. Heyi Investment and the family shall not reduce the shares of the Company directly held within three years after the Company’s listing; after the Company’s listing for three years, the shares of the Company directly or indirectly held by Heyi Investment and the family transferred each year shall not exceed 25% of the total shares of the Company directly or indirectly held by them 3. Within two years after the expiration of the equity lock-in period promised by Heyi Investment and the family, the shares of the Company shall be reduced at a price not lower than the issue price of the Company’s initial public offering shares (in case of ex-right and ex-dividend matters, the issue price shall be treated as ex-right and ex-dividend accordingly). Within two years after the expiration of the lock-up period, the total number of shares held by Heyi Investment and the family shall not exceed 30% of the total shares held by Heyi Investment and the family directly or indirectly before the issuance. 4. Within two years after the expiration of the shareholding lock-in period of Heyi Investment and the family’s commitment, the price of shares of the Company reduced by Heyi Investment and the family through the secondary market will be determined according to the market price at that time on the premise of meeting the commitments made by Heyi Investment and the family, and the specific reduction plan will be formulated according to the market situation at that time. 5. Heyi Investment and the family promise to make an announcement through the Company three trading days in advance when carrying out the reduction, and complete the announcement within six months, and fulfill the obligation of information disclosure accurately and completely in accordance with the rules of the stock exchange. II. Shanghai Guohe’s commitment to shareholding intention and reduction intention: 1. Within two years after the expiration of the shareholding locking period promised by the Company, the Company intends to reduce its shareholding by means of, including but not limited to, centralized competitive trading in the secondary market, block trading, agreement-based transfer, etc. The reduction price will not be lower than the price of net assets per share, and the specific reduction price will be determined according to the market price at the time of the reduction on the premise of meeting the commitments made by the Company; the specific reduction plan will be based on the market conditions at that time. The specific reduction plan will be formulated in accordance with the market conditions and the operating condition of the Company. 2. The enterprise commits that it will make an announcement through the Company three days ahead of schedule in the implementation of the reduction. At the same time, it will fulfill the obligation of information disclosure accurately and completely in accordance with the rules of the stock exchange, except when it holds shares less than 5% equity of the Company. 3. The enterprise will strictly fulfill the above commitments, and promise to abide by the following binding measures: (1) if it fails to fulfill the above commitments, the Company’s cash dividends I should receive will be withheld by the Company and owned by the Company; (2) if it fails to fulfill the above commitments, it will bear relevant legal liabilities according to laws and regulations.September 14, 2016Share holding periodWithin the performance period, strictly performed
Energy TechnologyCommitment on remedial measures for breaking faith1. If the Company fails to take the specific measures as promised to stabilize the stock price, the Company undertakes to accept the following binding measures: (1) the Company will publicly explain the specific reasons for not taking the above measures in the General Meeting of Shareholders and the newspapers designated by the CSRC, and apologize to the shareholders of the Company and the public investors; (2) If the investor suffers losses in the securities trading due to the failure to fulfill the commitments, the Company will compensate the investor for the losses according to law after being recognized by the CSRC, the stock exchange or the judicial organ; (3) The commitment of stock price stability is the true meaning of the Company. The responsible parties voluntarily accept the supervision of the regulatory body, self-disciplineSeptember 14, 2016Long termStrictly performed

organization and the public. In case of the violation of the relevant commitments, the main body will bear correspondingresponsibilities according to law. 2. If the controlling shareholder and the actual controller have delivered the notice ofincrease to the Company, but fail to fulfill the obligation of increasing the holdings, the Company has the right to detain theequal amount of the cash dividends payable to the controlling shareholder and the actual controller until the controllingshareholder and the actual controller fulfill their obligation to increase. 3. If a company director or senior manager fails tofulfill his obligation to increase his or her holdings, the Company shall have the right to detain salaries and cash dividendsof directors and senior management until the directors and senior managers fulfill their obligations to increase theirholdings. 4. If there are any false records, misleading statements or major omissions in the prospectus of this public offeringof shares, the Company will make a timely announcement, and the Company will disclose in its regular report that theCompany, its controlling shareholders, actual controllers, and its directors, supervisors and senior management buy backshares due to information disclosure violations, performance of commitments such as acquisition of shares andcompensation for losses, as well as remediation and correction in case of failure to perform commitments. 5. If the Companyfails to perform, has failed to perform or fails to perform on schedule due to objective reasons beyond the control of theCompany, such as changes in relevant laws and regulations, policies, natural disasters and other force majeure, the Companyshall take the following measures: (1) Timely and fully disclose the specific reasons for the Company’s failure, failure tofulfill its commitments or failure to fulfill its commitments on schedule; (2) make supplementary or alternativecommitments to the investors of the Company (relevant commitments shall be subject to relevant approval procedures inaccordance with laws, regulations and the articles of association), so as to protect the rights and interests of investors asmuch as possible.

organization and the public. In case of the violation of the relevant commitments, the main body will bear corresponding responsibilities according to law. 2. If the controlling shareholder and the actual controller have delivered the notice of increase to the Company, but fail to fulfill the obligation of increasing the holdings, the Company has the right to detain the equal amount of the cash dividends payable to the controlling shareholder and the actual controller until the controlling shareholder and the actual controller fulfill their obligation to increase. 3. If a company director or senior manager fails to fulfill his obligation to increase his or her holdings, the Company shall have the right to detain salaries and cash dividends of directors and senior management until the directors and senior managers fulfill their obligations to increase their holdings. 4. If there are any false records, misleading statements or major omissions in the prospectus of this public offering of shares, the Company will make a timely announcement, and the Company will disclose in its regular report that the Company, its controlling shareholders, actual controllers, and its directors, supervisors and senior management buy back shares due to information disclosure violations, performance of commitments such as acquisition of shares and compensation for losses, as well as remediation and correction in case of failure to perform commitments. 5. If the Company fails to perform, has failed to perform or fails to perform on schedule due to objective reasons beyond the control of the Company, such as changes in relevant laws and regulations, policies, natural disasters and other force majeure, the Company shall take the following measures: (1) Timely and fully disclose the specific reasons for the Company’s failure, failure to fulfill its commitments or failure to fulfill its commitments on schedule; (2) make supplementary or alternative commitments to the investors of the Company (relevant commitments shall be subject to relevant approval procedures in accordance with laws, regulations and the articles of association), so as to protect the rights and interests of investors as much as possible.
Controlling shareholder, actual controllerCommitment on remedial measures for breaking faith1. If the controlling shareholder and the actual controller have delivered the notice of increase to the Company, but failed to fulfill the obligation of increasing the holdings, the Company has the right to detain the equal amount of the cash dividends payable to the controlling shareholder and the actual controller until the controlling shareholder and the actual controller fulfill their obligation to increase. 2. The controlling shareholder and the actual controller have signed the commitment letter of false record, misleading statement or major omission in the prospectus of this public offering of shares. The controlling shareholder and the actual controller take the profit distribution enjoyed by the controlling shareholder and the actual controller in the Company’s profit distribution plan of the current year and the following years as the performance guarantee of the above commitment, and if the controlling shareholder and the actual controller fails to fulfill the above-mentioned obligation of acquisition or compensation, the shares of the Company held by the controlling shareholder and the actual controller shall not be transferred before fulfilling the above-mentioned commitment. 3. The controlling shareholder and the actual controller have signed the promise of controlling shareholder and actual controller’s shareholding intention and reduction intention. The controlling shareholder and the actual controller will strictly carry out the above commitments and promise to abide by the following restraint measures: (1) If the above commitments are not performed, the cash dividends to be obtained by the controlling shareholder and the actual controller shall be withheld by the Company and owned by the Company; (2) if the above commitments are not performed, the controlling shareholder and the actual controller shall extend the lock-in period for six months after the lock-in period they promised; (3) The remuneration that the employees in the Company should receive from the Company shall be withheld by the Company and owned by the Company; (4) if the above commitments are not performed and the investors suffer losses in the securities trading, the controlling shareholder and the actual controller will compensate the investors for the losses according to law. 4. If the Company fails to perform, has failed to perform or fails to perform on schedule due to objective reasons beyond the control of the Company, such as changes in relevant laws and regulations, policies, natural disasters and other force majeure, the Company shall take the following measures: (1) Timely and fully disclose the specific reasons for the Company’s failure, failure to fulfill its commitments or failure to fulfill its commitments on schedule; (2) make supplementary or alternative commitments to the investors of the Company (relevant commitments shall be subject to relevant approval procedures in accordance with laws, regulations and the articles of association), so as to protect the rights and interests of investors as much as possible.September 14, 2016Long termStrictly performed
Directors, supervisors and senior managersCommitment on remedial measures for breaking faith1. If any director or senior management of the Company fails to fulfill his obligation to increase the holdings, the Company shall have the right to detain directors and senior management salaries and cash dividends until the directors and senior managers fulfill their obligations to increase their holdings. 2. The directors, supervisors and senior managers have made corresponding commitments on the information disclosure of IPO and listing. The directors, supervisors and senior managers take the dividend of the Company in the current year and the following years obtained by holding the Company’s shares directly or indirectly and the salary received from the Company in the current year and the following years as the performance guarantee of the above commitments. If the director, supervisor or senior manager fails to perform, has failed to perform or fails to perform on schedule due to objective reasons beyond the control of the director, supervisor or senior manager such as changes in relevant laws and regulations, policies, natural disasters and other force majeure, the director, supervisor or senior manager shall take the following measures: (1) Timely and fully disclose the specific reasons for the Company’s failure, failure to fulfill its commitments or failure to fulfill its commitments on schedule; (2) make supplementary or alternative commitments to the investors of the Company (relevant commitments shall be subject to relevant approval procedures in accordance with laws, regulations and the articles of association), so as to protect the rights and interests of investors as much as possible.September 14, 2016Long termStrictly performed
Paul Xiaoming Lee family, Heyi Investment and Heli InvestmentCommitment on avoiding horizontal competition1. The undertaker does not, and will not, directly or indirectly engage in any activity that constitutes horizontal competition with the existing and future business of the Company and its holding subsidiaries, and is willing to assume compensation liability for the economic losses caused to the Company due to violation of the above commitments. 2. For other enterprises directly and indirectly controlled by the undertaker, the undertaker will adopt the representative office and personnel (including but not limited to directors, general managers, etc.) and the controlling position of the undertaker in such enterprises, to ensure that such enterprises perform the same obligations as the undertaker under this letter of commitment, to ensure that such enterprises do not compete with the Company and its holding subsidiaries in the same industry, and the undertaker is willing to bear all compensation liabilities for the economic losses caused to the Company due to violation of the above commitments. 3. If the Company further expands its business scope on the basis of its existing business, and the undertaker and the enterprise controlled by the undertaker have carried out production and operation on this, the undertaker promises to transfer the possible horizontal competition business or equity held by this enterprise, and agrees that the Company has the priority to acquire and operate under the same commercial conditions. 4. Except for the investment in the Company, the undertaker will not invest in or operate the products (or similar products, or products with alternative function) developed, produced or operated by the Company and its holding subsidiaries in any way in any place.November 10, 2012Long termStrictly performed
Company, controlling shareholder and actual controller, director and senior managementThe commitment that the Company’s compensation measures can be effectively performed1. The Company and its controlling shareholder and the actual controller make a commitment to the Company’s ability to fill in the return measures. It does not exceed the authority to interfere in the Company’s management activities and does not occupy the Company’s interests. 2. Directors and senior managers make a commitment to fulfill the Company’s return measures: (1) Promise not to transfer interests to other units or individuals free of charge or under unfair conditions, and not to damage the interests of the Company in other ways; (2) Promise to restrict the post consumption behavior of directors and senior managers; (3) Promise not to use the Company’s assets to engage in investment and consumption activities unrelated to the performance of its duties; (4) Commit that the remuneration system formulated by the board of directors or remuneration committee is linked to the implementation of the Company’s measures to fill the return; (5) Promised that the exercise conditions of the Company’s equity incentive to be announced are linked to the implementation of the Company’s compensation measures.September 14, 2016Long termStrictly performed
Heyi Investment, family members of Paul Xiaoming Lee, the actual controllers of the CompanyCommitment on avoiding occupation of the Company’s fundsThe undertaker, close relative and the affiliated enterprise under control strictly restrict the funds of the Company and its subsidiary companies in the operating capital transactions between the Company and its subsidiaries; the Company and its subsidiaries shall not be required to pay wages, welfare, insurance, advertising and other expenses; the Company and its subsidiary funds are not directly or indirectly provided to the undertaker, close relatives and controlled affiliated enterprises, including: 1. to lend funds to the undertaker, close relatives and controlled affiliated enterprises for use with compensation or free of charge; 2. to provide entrusted loans without commercial substance to the undertaker, close relatives and controlled affiliated enterprises through banks or non-bank financial institutions; 3. Entrust the undertaker, close relatives and controlled affiliated enterprises to carry out investment activities without commercial substance; 4. To issue commercialSeptember 14, 2016Long termStrictly performed

acceptance bills without real transaction background for the undertaker, close relatives and controlled affiliated enterprises;

5. Repay debts on behalf of the undertaker, close relatives and controlled affiliated enterprises; 6. Provide funds to theundertaker, close relatives and controlled affiliated enterprises in other ways without consideration for goods and services; 7.Other methods recognized by China Securities Regulatory Commission.

acceptance bills without real transaction background for the undertaker, close relatives and controlled affiliated enterprises; 5. Repay debts on behalf of the undertaker, close relatives and controlled affiliated enterprises; 6. Provide funds to the undertaker, close relatives and controlled affiliated enterprises in other ways without consideration for goods and services; 7. Other methods recognized by China Securities Regulatory Commission.
Jerry Yang LiCommitment on remedial measures for breaking faithDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of the Company’s controlling shareholder Heyi Investment of RMB17.955 million. I promise that I will strictly fulfill the commitments disclosed in the initial public offering and listing prospectus of the controlling shareholder and actual controller. If the commitments of the controlling shareholder and actual controller are not performed, cannot be performed or cannot be performed on schedule (except for objective reasons beyond the control of controlling shareholders and actual controllers such as changes in relevant laws and regulations, policies, natural disasters and another force majeure), I promise to strictly abide by the following measures: 1. If the controlling shareholder or the actual controller has served the Company with the increase notice but failed to fulfill the increase obligation, the Company has the right to withhold the cash dividends payable to the same amount until the controlling shareholder or the actual controller fulfills the increase obligation; 2. The controlling shareholder and the actual controller have signed the commitment letter of false record, misleading statement or major omission in the prospectus of this public offering of shares. The controlling shareholder and the actual controller take the profit distribution enjoyed by the controlling shareholder and the actual controller in the Company’s profit distribution plan of the current year and the following years as the performance guarantee of the above commitment, and if the controlling shareholder and the actual controller fails to perform the above-mentioned acquisition or compensation obligations, the shares of the Company held by the controlling shareholder and the actual controller shall not be transferred before the above-mentioned commitments are performed; 3. The controlling shareholder and the actual controller have signed the commitment of the controlling shareholder and the actual controller’s shareholding intention and reduction intention. The controlling shareholder and the actual controller will strictly perform the above commitments and promise to abide by the following binding measures: (1) If the above commitments are not performed, the cash dividends to be obtained by the controlling shareholder and the actual controller shall be withheld by the Company and owned by the Company; (2) if the above commitments are not performed, the controlling shareholder and the actual controller shall extend the lock-in period for half a year; (3) The remuneration that the employees in the Company should receive from the Company shall be withheld by the Company and owned by the Company; (4) if the above commitments are not performed and the investors suffer losses in the securities trading, the controlling shareholder and the actual controller will compensate the investors for the losses according to law; 4. If the Company fails to perform, has failed to perform or fails to perform on schedule due to objective reasons beyond the control of the Company, such as changes in relevant laws and regulations, policies, natural disasters and other force majeure, the Company shall take the following measures: (1) Timely and fully disclose the specific reasons for the Company’s failure, failure to fulfill its commitments or failure to fulfill its commitments on schedule; (2) make supplementary or alternative commitments to the investors of the Company (relevant commitments shall be subject to relevant approval procedures in accordance with laws, regulations and the articles of association), so as to protect the rights and interests of investors as much as possible.October 25, 2018Long termStrictly performed
Jerry Yang LiCommitment on avoiding horizontal competition with Energy Technology1. The undertaker commits that he does not, and will not, directly or indirectly engage in any activity that constitutes horizontal competition with the existing and future business of the Company and its holding subsidiaries, and is willing to assume compensation liability for the economic losses caused to the Company due to violation of the above commitments; 2. For other enterprises directly or indirectly holding by the undertaker, the undertaker will adopt the representative offices and personnel (including but not limited to directors, general managers, etc.), as well as the controlling position of the undertaker in such enterprises, to ensure that such enterprises carry out the same obligations as the undertaker in this commitment letter, and ensure that such enterprises do not compete with the Company and its controlling subsidiaries in the same industry, the undertaker is willing to take full responsibility for the economic losses incurred by the Company in violation of the above commitments; 3. If the Company further expands its business scope on the basis of its existing business, and the undertaker and the enterprise controlled by the undertaker have carried out production and operation on this, the undertaker promises to transfer the possible horizontal competition business or equity held by this enterprise, and agrees that the Company has the priority to purchase and operate under the same commercial conditions; 4. In addition toOctober 25, 2018Long termStrictly performed

the investment in the Company, the undertaker will not invest in or operate the products (or similar products, or productswith substitute function) developed, produced or operated by the Company and its holding subsidiaries in any way in anyplace; 5. This letter of commitment is an effective commitment during the period when the undertaker and the companycontrolled by the undertaker have an associated relationship with the Company.

the investment in the Company, the undertaker will not invest in or operate the products (or similar products, or products with substitute function) developed, produced or operated by the Company and its holding subsidiaries in any way in any place; 5. This letter of commitment is an effective commitment during the period when the undertaker and the company controlled by the undertaker have an associated relationship with the Company.
Jerry Yang LiCommitment on reduction intentionDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 10,416,022 shares of the Company held by her according to her will and the contribution of RMB17.955 million by Heyi Investment, the Company’s controlling shareholder. With respect to the Company’s shares indirectly held by me through Heyi Investment, my shareholding intention and reduction intention are as follows: 1. as the actual controller of the Company, I hold the Company’s shares in strict accordance with the provisions of laws, regulations, normative documents and regulatory requirements, and abide by the share locking period; after the expiration of the locking period, I shall reduce my holding of the Company’s shares in accordance with the requirements of relevant laws, regulations, normative documents and rules of the stock exchange; 2. within three years after the listing of the Company, I will not reduce the shares of the Company I directly hold; upon expiry of three years after the listing of the Company, I will transfer the shares of the Company I directly hold each year no more than 25% of the total shares of the Company I directly hold; 3. within two years after the locking period I committed, the Company’s shares will be reduced at a price not lower than the initial public offering price of the Company. If the Company’s shares are subject to ex-right and ex-dividend during the period, such as dividend distribution, stock distribution, capital reserve converted to share capital, the issue price shall be ex-right and ex-dividend accordingly; 4. After two years after the expiration of my commitment to hold shares, I will, through the reduction of the price of the Company’s shares in the secondary market, meet the commitments made on the basis of the market price, and the specific reduction plan will be drawn up according to the market situation at that time; 5. I promise that I will announce the implementation of the reduction through the Company three trading days in advance, and complete the announcement within six months. At the same time, I will fulfill the obligation of information disclosure accurately and completely in accordance with the rules of the stock exchange; 6. I will strictly fulfill the above commitments, and promise to abide by the following binding measures: (1) if I fail to fulfill the above commitments, the Company’s cash dividends I should receive will be withheld by the Company and owned by the Company; (2) the Company will own the profits I get from reducing the shares held in violation of the above commitments; (3) The remuneration that the employees in the Company should receive from the Company shall be withheld by the Company and owned by the Company; (4) if the above commitments are not performed and the investors suffer losses in the securities trading, I will compensate the investors for the losses in accordance with the law.October 25, 2018Holding periodWithin the performance period, strictly performed
Jerry Yang LiCommitment on avoiding capital occupation of Energy Technology(1) Except for the capital occupation disclosed in writing to the relevant intermediary institutions, there is no other capital occupation that shall be disclosed but not disclosed in accordance with the laws and regulations and the relevant provisions of the CSRC for the time being by the undertaker, close relatives, controlled affiliated enterprises and the Company and its subsidiaries; (2) The undertaker, close relatives and controlled affiliated enterprises will strictly limit the occupation of funds of the Company and its subsidiaries in the operational capital transactions with the Company and its subsidiaries; (3) The undertaker, close relatives and controlled affiliated enterprises shall not require the Company and its subsidiaries to advance wages, welfare, insurance, advertising and other expenses, or require the Company and its subsidiaries to bear costs and other expenses on behalf of them; (4) The undertaker, close relatives and controlled affiliated enterprises do not seek to provide the funds of the Company and its subsidiaries directly or indirectly to the undertaker, close relatives and controlled affiliated enterprises in the following ways, including: a. To lend funds to the undertaker, close relatives and controlledOctober 25, 2018Long termStrictly performed

affiliated enterprises for use with compensation or free of charge; b. Provide entrusted loans without commercial substanceto the undertaker, close relatives and controlled affiliated enterprises through banks or non-bank financial institutions; c.Entrust the undertaker, close relatives and controlled affiliated enterprises to carry out investment activities withoutcommercial substance; d. To issue commercial acceptance bills without real transaction background for the undertaker, closerelatives and controlled affiliated enterprises; e. Repay debts on behalf of the undertaker, close relatives and controlledaffiliated enterprises; f. Provide funds to the undertaker, close relatives and controlled affiliated enterprises in other wayswithout consideration for goods and services; g. Other methods recognized by China Securities Regulatory Commission; (5)If the undertaker, close relatives and controlled affiliated enterprises occupy the funds of the Company and its subsidiariesand require the Company and its subsidiaries to provide guarantees in violation of laws and regulations, the Company’sboard of directors shall not transfer the shares of the Company held and controlled before all the occupied funds are returnedand all the illegal guarantees are released, and handle the procedures of share locking for the relevant parties. The board ofdirectors of the Company shall, within 5 trading days from the date of knowing the fact that the undertaker, close relativesand controlled affiliated enterprises occupy the funds of the Company and its subsidiaries, and the Company and itssubsidiaries provide guarantees in violation of laws and regulations, handle the locking procedures for the relevant parties.

affiliated enterprises for use with compensation or free of charge; b. Provide entrusted loans without commercial substance to the undertaker, close relatives and controlled affiliated enterprises through banks or non-bank financial institutions; c. Entrust the undertaker, close relatives and controlled affiliated enterprises to carry out investment activities without commercial substance; d. To issue commercial acceptance bills without real transaction background for the undertaker, close relatives and controlled affiliated enterprises; e. Repay debts on behalf of the undertaker, close relatives and controlled affiliated enterprises; f. Provide funds to the undertaker, close relatives and controlled affiliated enterprises in other ways without consideration for goods and services; g. Other methods recognized by China Securities Regulatory Commission; (5) If the undertaker, close relatives and controlled affiliated enterprises occupy the funds of the Company and its subsidiaries and require the Company and its subsidiaries to provide guarantees in violation of laws and regulations, the Company’s board of directors shall not transfer the shares of the Company held and controlled before all the occupied funds are returned and all the illegal guarantees are released, and handle the procedures of share locking for the relevant parties. The board of directors of the Company shall, within 5 trading days from the date of knowing the fact that the undertaker, close relatives and controlled affiliated enterprises occupy the funds of the Company and its subsidiaries, and the Company and its subsidiaries provide guarantees in violation of laws and regulations, handle the locking procedures for the relevant parties.
Sherry LeeCommitment on reduction intentionDue to the death of Ms. Wang Yuhua, a member of Paul Xiaoming Lee’s family who is the shareholder and actual controller of the Company, I, as one of the heirs, inherited 15,624,033 shares of the Company held by her according to her will and the contribution of RMB9.045 million by Heyi Investment, the Company’s controlling shareholder. Before inheritance, I have held 27,593,884 shares of the Company, of which 15,997,000 shares were held at the time of IPO and listing of the Company, 11,596,884 shares of the Company acquired by the Company’s issuance of shares to purchase shares of Shanghai Energy. After inheritance, I hold directly and hold 65,503,802 shares of the Company indirectly through Heyi Investment, accounting for 13.82% of the total share capital of the Company. With respect to locking period for the Company’s shares directly and indirectly held by me, I commit as follows: 1. as the actual controller of the Company, I hold the Company’s shares in strict accordance with the provisions of laws, regulations, normative documents and regulatory requirements, and abide by the share locking period; after the expiration of the locking period, I shall reduce my holding of the Company’s shares in accordance with the requirements of relevant laws, regulations, normative documents and rules of the stock exchange; 2. within three years after the listing of the Company, I will not reduce the shares of the Company I directly hold; upon expiry of three years after the listing of the Company, I will transfer the shares of the Company I directly hold each year no more than 25% of the total shares of the Company I directly hold; 3. within two years after the locking period I committed, the Company’s shares will be reduced at a price not lower than the initial public offering price of the Company. If the Company’s shares are subject to ex-right and ex-dividend during the period, such as dividend distribution, stock distribution, capital reserve converted to share capital, the issue price shall be ex-right and ex-dividend accordingly; 4. After two years after the expiration of my commitment to hold shares, I will, through the reduction of the price of the Company’s shares in the secondary market, meet the commitments made on the basis of the market price, and the specific reduction plan will be drawn up according to the market situation at that time; 5. I promise that I will announce the implementation of the reduction through the Company three trading days in advance, and complete the announcement within six months. At the same time, I will fulfill the obligation of information disclosure accurately and completely in accordance with the rules of the stock exchange; 6. I will strictly fulfill the above commitments, and promise to abide by the following binding measures: (1) if I fail to fulfill the above commitments, the Company’s cash dividends I should receive will be withheld by the Company and owned by the Company; (2) the Company will own the profits I get from reducing the shares held in violationOctober 25, 2018Share holding periodWithin the performance period, strictly performed

of the above commitments; (3) The remuneration that the employees in the Company should receive from the Companyshall be withheld by the Company and owned by the Company; (4) if the above commitments are not performed and theinvestors suffer losses in the securities trading, I will compensate the investors for the losses in accordance with the law.

of the above commitments; (3) The remuneration that the employees in the Company should receive from the Company shall be withheld by the Company and owned by the Company; (4) if the above commitments are not performed and the investors suffer losses in the securities trading, I will compensate the investors for the losses in accordance with the law.
Directors and senior management of the Company

Commitmenton dilutionon currentreturns as aresult of thepublicoffering ofconvertiblecorporatebonds, andthe returnrecoverymeasures

1. Neither to tunnel to other units or individuals without compensation or under unfair conditions, nor to damage the Company’s interests in other ways; 2. to restrict my position-related consumption activities; 3. not to use the Company’s assets for investment and consumption activities not related to execution of my duties; 4. to link the remuneration system formulated by the Board of Directors or the Remuneration Committee or Assessment Committee of the Company with the execution of the return recovery measures; 5. to link the vesting conditions with the implementation of the return recovery measures if the Company will implement any share incentive scheme in the future; 6. since the date of this commitment up to completion of this public offering of convertible corporate bonds, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC. In order to ensure the proper implementation of the return recovery measures, I commit to strictly perform the above commitments. If I breach or refuse to fulfill the above commitments, I will perform obligations of interpretation and apology as required under the Guiding Opinions on Matters relating to the Dilution on Current Returns as a result of Initial Public Offering, Refinancing and Major Asset Restructuring (CSRC Announcement [2015] No. 31), and agree that relevant regulatory or self-regulation measures shall be imposed or taken in accordance with the relevant provisions and rules specified or published by CSRC and Shenzhen Stock Exchange; if the Company or investors suffered losses as a result of my breach or refusal, I am willing to assume relevant liability for compensation.May 14, 2019Long termStrictly performed
Company’s actual controller and controlling shareholder

Commitmenton dilutionon currentreturns as aresult of thepublicoffering ofconvertiblecorporatebonds, andthe returnrecoverymeasures

1. Not interfere with the operation and management activities of the Company beyond the authority, and not encroach on the interests of the Company; 2. since the date of this commitment up to completion of the convertible corporate bonds, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC. In order to ensure the proper implementation of the return recovery measures, I commit to strictly perform the above commitments. If I breach or refuse to fulfill the above commitments, I will perform obligations of interpretation and apology as required under the Guiding Opinions on Matters relating to the Dilution on Current Returns as a result of Initial Public Offering, Refinancing and Major Asset Restructuring (CSRC Announcement [2015] No. 31), and agree that relevant regulatory or self-regulation measures shall be imposed or taken in accordance with the relevant provisions and rules specified or published by CSRC and Shenzhen Stock Exchange; if the Company or investors suffered losses as a result of my breach or refusal, I am willing to assume relevant liability for compensation.May 14, 2019Long termStrictly performed
All directors of Energy TechnologyCommitment on the authenticity, accuracy and completeness of information submitted in connection with the non-publicAll directors of the Company commit that the report on this offering and the announcement on listing don’t contain false records, misleading statements or major omissions, and they will jointly and severally liable for its authenticity, accuracy and completeness.September 3, 2020Long termStrictly performed

offering of Ashares in2020

offering of A shares in 2020
Controlling shareholder and actual controllerCommitment on dilution on current returns as a result of the non-public offering of A shares in 2020, and the return recovery measures1. I promise not to interfere with the operation and management activities of the Company beyond the authority, and not encroach on the interests of the Company; 2. I commit to properly implementation of the current return recovery measures formulated by the Company and fulfill any commitment I make in relation to the current return recovery measures, and assume the liability for compensation to the Company or investors according to law if I violate such commitments and as a result cause any loss to the Company or investors; 3. since the date of this commitment up to completion of this non-public offering of shares by Energy Technology, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC.March 23, 2020Long termStrictly performed
Directors and senior managementCommitment on dilution on current returns as a result of the non-public offering of A shares in 2020, and the return recovery measures1. I promise not to tunnel to other units or individuals without compensation or under unfair conditions, or to damage the Company’s interests in other ways; 2. I commit to restrict my position-related consumption activities; 3. I commit to not use the Company’s assets for investment and consumption activities not related to execution of my duties; 4. I commit to link the remuneration system formulated by the Board of Directors or the Remuneration Committee or Assessment Committee of the Company with the execution of the return recovery measures; 5. I commit to link the vesting conditions with the implementation of the return recovery measures if the Company will implement any share incentive scheme in the future; 6. since the date of this commitment up to completion of this non-public offering of shares, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC.March 23, 2020Long termStrictly performed
22 shareholders subscribing shares not publicly offered in 2020Commitment on share locking1. The Company agrees to not transfer the subscribed shares for a period of six months from the date of completion of this offering of shares of Energy Technology (meaning the date of listing of the shares in this offering) and entrusts the Board of Directors of Energy Technology to apply to Shenzhen Branch of China Securities Depository and Clearing Company Limited for locking the above subscribed shares of the Company, so as to ensure that the above shares held by the Company will not be transferred for a period of six months from the date of completion of this offering. 2. Guarantee to compensate other shareholders for any losses suffered by them as a result of non-performance or incomplete performance of the above commitment. If there is any sales transaction in violation of the commitment, the Company will authorize the Shenzhen Branch of China Securities Depository and Clearing Company Limited to transfer the proceeds from such transaction to the account of the listed company for the benefit of all shareholders. 3. The Company declares that it will faithfully fulfill its commitments and bear the corresponding legal responsibilities.August 13, 2020September 4, 2020 to March 3, 2021Performed
Directors and senior managementCommitment on dilution on current returns as a result of the non-public offering of A shares in 2021, and the return recovery measures1. I promise not to tunnel to other units or individuals without compensation or under unfair conditions, or to damage the Company’s interests in other ways; 2. I commit to restrict my position-related consumption activities; 3. I commit to not use the Company’s assets for investment and consumption activities not related to execution of my duties; 4. I commit to link the remuneration system formulated by the Board of Directors or the Remuneration Committee or Assessment Committee of the Company with the execution of the return recovery measures; 5. I commit to link the vesting conditions with the implementation of the return recovery measures if the Company will implement any share incentive scheme in the future; 6. since the date of this commitment up to completion of this non-public offering of shares, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC.November 21, 2021Long termStrictly performed

Controllingshareholdersand actualcontroller

Controlling shareholders and actual controllerCommitment on dilution on current returns as a result of the non-public offering of A shares in 2021, and the return recovery measuresI promise not to interfere with the operation and management activities of the Company beyond the authority, and not encroach on the interests of the Company; I commit to properly implementation of the current return recovery measures formulated by the Company and fulfill any commitment I make in relation to the current return recovery measures, and assume the liability for compensation to the Company or investors according to law if I violate such commitments and as a result cause any loss to the Company or investors; since the date of this commitment up to completion of this non-public offering of shares by the Company, if the CSRC imposes other new regulatory requirements in relation to the return recovery measures and its commitments and such commitments cannot meet such rules of the CSRC, I commit to issue supplemental undertakings in accordance with the latest requirements of the CSRC.November 21, 2021Long termStrictly performed
Commitment on stock ownership incentive scheme
Other commitments to small and medium shareholders of the CompanyThe CompanyShareholder return plan for the next three yearsThe Company pays dividends in cash or by shares in a positive manner. Where the Company’s audited net profit is positive and no significant investment plan or significant cash expenditure in a year, the Company shall include the cash distribution in its profit distribution scheme for that year. The annual cash dividend of the Company shall not be less than 20% of the distributable profit realized in the current year (excluding the undistributed profit at the beginning of the year). Where available, the Company may distribute interim cash dividends. If the Company’s revenue grows rapidly and the Board of Directors considers that the stock price of the Company does not match the size of the Company’s share capital, it may make a plan for dividend distribution by stock while satisfying the requirement for cash dividend distribution.May 14, 2019May 14, 2019 to May 14, 2021Within the performance period, strictly performed
Whether the commitment is performed on timeYes

2. Where any earnings forecast was made for any of the Company’s assets or projects and the Reporting Period is still within the forecast period, theCompany shall explain whether the performance of the asset or project reaches the earnings forecast and the reason

□ Applicable √ N/A

II. Occupation of the Listed Company’s Capital by the Controlling Shareholder or Its RelatedParties for Non-Operating Purposes

□ Applicable √ N/A

In the Reporting Period, no controlling shareholder or its related party occupied capital of the listed company for non-operating purposes.III. Illegal external guarantee

□ Applicable √ N/A

The Company didn’t provide any illegal external guarantee during the Reporting Period.IV. Explanation of the Board of Directors Regarding the “Non-standard Audit Report”Issued for the latest period

□ Applicable √ N/A

V. Explanation of the Board of Directors, the Supervisory Committee and IndependentDirectors (If Any) Regarding the “Non-standard Audit Report” Issued by the AccountingFirm for the Reporting Period

□ Applicable √ N/A

VI. Reason for Changes in Accounting Policies or Accounting Estimates and Correction ofMajor Accounting Errors as Compared to the Financial Report for the Previous Fiscal Year

√ Applicable □ N/A

1. On April 26, 2021, the Company held the 26th meeting of the fourth Board of Directors and the 22nd meeting of the fourth Supervisory Committeeto review and approve the Proposal on the Change of Accounting Policy. Since January 1, 2021, the Company has implemented the AccountingStandards for Business Enterprises No. 21 - Leasing revised by the Ministry of Finance in 2018. For details, please refer to the Announcement onChange in Accounting Policy disclosed on cninfo.com.cn. by the Company on April 27, 2021.On the first execution date, the Company chose not to reevaluate whether a pre-existing contract was a lease or included a lease, but applied thismethod to all the contracts. Therefore, only the above-mentioned contracts identified as leases under the original lease standards shall be subject to theconvergence provisions of these standards. In addition, the Company chose to adopt a simplified retroactive adjustment method to link up accountingtreatment of the above lease contracts in accordance with the Accounting Standards for Enterprises No. 28 - Changes in Accounting Policies,Accounting Estimates and Errors Correction, that is, to adjust the amount of retained earnings and other relevant items in the financial statements atthe beginning of the year in which the standards are first implemented, without adjusting the information of comparable periods, and to adopt theright-of-assets measurement and the relevant simplified method for the operating leases based on each lease option, detailed as below:

Operating leases that will be executed within 12 months after the first execution date are treated as short-term leases. The accounting policy of theCompany for the leases of low value assets is not to recognize the right-of-use assets and lease liabilities. According to the convergence provisions ofthe new lease standards, the Company conducted accounting treatment in accordance with the new lease standards since the first execution date forthe low-value asset leases existing before the first execution date, without retroactive adjustment of the low-value asset leases. The implementation ofthe new leasing standards had no material impact on the financial statements for the reporting period.

2. On April 11, 2022, the 45th meeting of the fourth Board of Directors and the 39th meeting of the fourth Board of Directors of the Company washeld to review and approve the Proposal on the Change of Accounting Policy. the Company has implemented the Interpretation of AccountingStandards for Business Enterprises No. 14 issued by the Ministry of Finance since February 2, 2021, and implemented the Interpretation ofAccounting Standards for Business Enterprises No. 15 issued by the Ministry of Finance since December 21, 2021. For details, please refer to theAnnouncement on Accounting Policy Change published on cninfo.com.cn by the Company on April 12, 2022.The implementation of the Interpretation of Accounting Standards for Business Enterprises No. 14 had no significant impact on the financialstatements during the reporting period. The Interpretation of Accounting Standards for Business Enterprises No. 15 has clarified the accountingtreatment of external sales of products or by-products produced before the fixed assets reach a predetermined usable state or in the research anddevelopment process, the judgment of contract loss and the presentation of related issues concerning centralized management of funds. The provisionson “the presentation of related issues concerning centralized management of funds” have taken effect since December 31, 2021; the provisions on “theaccounting treatment of external sales of products or by-products produced before the fixed assets reach a predetermined usable state or in theresearch and development process” and “the judgment of contract loss” have taken effect since January 1, 2022. The Company began to implementthe provisions on “the presentation of related issues concerning centralized management of funds” in the Interpretation of Accounting Standards forBusiness Enterprises No. 15 on December 31, 2021, which had no significant impact on the financial statements during the comparable periods.

VII. Reason for Changes in Scope of the Consolidated Financial Statements as Compared tothe Financial Report for the Previous Fiscal Year

√ Applicable □ N/A

The following additional 9 entities were included in the scope of consolidated financial statements in 2021 as compared to the prior year:

Name

NameReason for change

Ningbo Energy New Materials Co., Ltd.

Ningbo Energy New Materials Co., Ltd.Established by investment

Chongqing Energy New Material Technology Co., Ltd.

Chongqing Energy New Material Technology Co., Ltd.Established by investment
Jiangxi Enpo New Materials Co., Ltd.Established by investment

Jiangxi Energy New Material Technology Co., Ltd.

Jiangxi Energy New Material Technology Co., Ltd.Established by investment

Jiangsu Energy New Material Technology Co., Ltd.

Jiangsu Energy New Material Technology Co., Ltd.Established by investment

Jiangsu Ruijie New Material Technology Co., Ltd.

Jiangsu Ruijie New Material Technology Co., Ltd.Established by investment
Hunan Energy Advanced New Material Technology Co., Ltd.Established by investment
Hubei Energy New Material Technology Co., Ltd.Established by investment
Jiangsu Sanhe Battery Material Technology Co., Ltd.Established by investment

3 entities were reduced as follows:

NameReason for change
Ningbo Energy New Materials Co., Ltd.Established by investment
Chongqing Energy New Material Technology Co., Ltd.Established by investment
Jiangxi Enpo New Materials Co., Ltd.Established by investment

VIII. Engagement and Disengagement of CPAs FirmCPA firm engaged at present

Name of the domestic CPA firmDahua CPAs (SGP)
Fee for domestic auditor (RMB0’000)180
Consecutive years of audit services provided by the domestic auditor10 years
Names of the certified public accountants from domestic accounting firmKang Wenjun, Yao Rui
Consecutive years of audit services provided by the Certified Public Accountants from domestic accounting firmKang Wenjun and Yao Rui provide audit services for one year and two years respectively

Whether the CPAs firm was changed in the current period

□ Yes √ No

Engagement of any CPAs firm, financial advisor or sponsor for internal control and audit

√ Applicable □ N/A

Dahua CPAs (Special General Partnership), engaged by the Company as the accounting firm for the internal control and audit during the ReportingPeriod, issued Authentication Report on the Internal Control of Yunnan Energy New Material Co., Ltd. (DHHZ [2022] No. 004077) for the internalcontrol of the Company.IX. Possibility of Delisting after Disclosure of this Annual Report

□ Applicable √ N/A

X. Matters Related to Bankruptcy and Reorganization

□ Applicable √ N/A

The Company was not bankrupt and reorganized during the Reporting Period.XI. Material Litigation and Arbitration

There was no material litigation or arbitration against the Company during the Reporting Period. During the Reporting Period, the total amountinvolved in other lawsuits of the Company was RMB59.29 million, of which RMB44.76 had not been settled by the end of the Reporting Period,

which would not form estimated liabilities.XII. Punishments and Rectifications

□ Applicable √ N/A

The Company made no punishment or rectification during the Reporting Period.

XIII. Credit Conditions of the Company as well as Its Controlling Shareholder and ActualController

√ Applicable □ N/A

During the Reporting Period, the Company and its controlling shareholder and the actual controller were in good standing, and there were no cases ofnon-performance of court judgments in force or large debts due but unpaid.XIV. Significant related transactions

1. Related transactions arising from routine operation

√ Applicable □ N/A

Relatedtransaction party

Related transaction partyRelationType of related transactionDetails of related transactionPricing principle of the related transactionRelated transaction priceRelated transaction amount (RMB0’000)Proportion in the total amount of transaction of the same typeApproved transaction limit (RMB0’000)Whether the transaction exceeded the approved limit or notSettlement mode for related transactionObtainable market price for the transaction of the same typeDisclosure dateDisclosure Index
KunshasiJoint-stock CompanyPurchase of raw materials from related partiesPurchase of additivesAgreed by both parties based on market price3,888.3659.85%4,000NoBank deposit or acceptance draftRMB15.71/kgMarch 18, 2021For details, please refer to the Announcement on the Expected Routine Related Transactions in 2021 (No.: 2021-037) disclosed on the Cninfo website.
Sale of products and commodities to related partiesSale of raw materials1,182.3264.87%2,000NoRMB9.93/kg

Lease torelatedparties

Lease to related partiesLease of workshop2.42.11%2.4NoBank deposit
Heyi InvestmentShareholder of the CompanyLease to related partiesLease of office0.330.29%0.33NoBank deposit
Heli InvestmentLease of office0.240.21%0.24No
Industrial and Commercial Bank of China (ICBC)The spouse of Ms. Zheng Haiying(independent director) is a non-executive director of the ICBCLoan with related bankLoanMarket pricing, not higher than the loan benchmark interest rate for the same period or the market interest rate level under the same conditions106,791.9113.59%400,000NoMarch 18, 2021For details, please refer to the Announcement on the Expected Deposit, Loan and Guarantee with Related Bank in 2021 (No.: 2021-040) disclosed on the Cninfo website.
Depositswith related bank (including demand deposits, time deposits, call deposits, etc.)DepositMarket pricing, not higher than the deposit benchmark interest rate for the same period12,092.266.60%50,000No
Mutual guarantees between companies for the purpose of the Company’s consolidated financial statements through the related bankGuaranteeAgreed by both parties based on market price358,49021.39%400,000No
Total----488,447.82--856,002.97----------Total----
Details of any sales return of a large amountNo
Give the actual situation in the Reporting Period (if any) where a forecast had been made for the total amounts of routine related transactions by type to occur in the current periodThe actual routine transaction amount between the Company and the related parties did not exceed the total amount of routine related transactions estimated by the Company by type.

Reason for any significant difference between the transactionprice and the market reference price (if applicable)

Reason for any significant difference between the transaction price and the market reference price (if applicable)N/A

2. Related-party transactions relevant to acquisition and sales of assets or equities

□ Applicable √ N/A

The Company didn’t acquire or sell assets or equities during the Reporting Period.

3. Related-party transactions in connection with joint external investments

□ Applicable √ N/A

The Company had no related-party transaction in connection with joint external investments during the Reporting Period.

4. Credits and liabilities with related parties

√ Applicable □ N/A

Whether there were any credits or liabilities with related parties for non-operating purposes

□ Yes √ No

There were no credits or liabilities with related parties for non-operating purpose during the Reporting Period.

5. Dealing with related financial companies

□Applicable √N/A

There was no deposit, loan, credit granting or other financial business between the Company and the related financial companies and the relatedparties.

6. Dealing between the financial companies controlled by the Company and the related parties

□Applicable √N/A

There was no deposit, loan, credit granting or other financial business between the financial companies controlled by the Company and the relatedparties.

7. Other significant related party transactions

√Applicable □N/A

1. “4. Credits and liabilities with related parties” mentioned above mainly refer to: On March 17, 2021, the 24th meeting of the fourth Board ofDirectors of the Company deliberated and approved the Proposal on Deposit, Loan and Guarantee Business Expected to be Carried Out in RelatedBanks in 2021, approving the Company and the subsidiaries within the scope of consolidated financial statements to carry out deposit and loanbusinesses and mutual guarantee business between the companies within the scope of consolidated financial statements at Industrial and CommercialBank of China. The spouse of Ms. Zheng Haiying, the independent director of the Company, served as a non-executive director of ICBC. The deposit,loan and guarantee businesses of the Company and ICBC constituted the related party transactions. This matter was approved by the annual generalmeeting of the Company for 2020.

2. On June 22, 2020, the 29th meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on the CompanyMeeting the Conditions of Issuing Shares and Paying Cash to Purchase Assets and Raising Funds and other proposals, approving the Company topurchase 3.25% and 1.53% of the equity of Shanghai Energy held by Yan Ma and Alex Cheng by issuing shares and paying cash, and raise funds byissuing shares to not more than 35 eligible specific investors. On November 21, 2021, the 38th meeting of the fourth Board of Directors of theCompany deliberated and approved the Proposal on the Termination of Purchasing Assets by Issuance of Shares and Payment of Cash and RaisingFunds and the Related Party Transactions. The Company intended to conduct a non-public share offering and use the proceeds for the lithium batteryseparator film project. After friendly consultation with all parties concerned, it was agreed to terminate the restructuring.

3. On August 2, 2021, the 30th meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on Signing theFramework Agreement for the Acquisition of Suzhou RS Technology Co., Ltd. (RS Tech.) and JOT Automation Ltd with Family Members of PaulXiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party Transaction. The Company signed the Framework Agreement for theAcquisition of RS Tech. and JOT Automation Ltd with Paul Xiaoming Lee (on behalf of Lee family), Victory Precision, RS Tech., VictoryTechnology (Hong Kong) Limited and JOT Automation Ltd. This matter was approved by the fourth extraordinary general meeting of the Companyin 2021.

On September 15, 2021, the 33rd meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on Signingthe Equity Transfer Agreement with Family Members of Paul Xiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party Transaction.The Company, family members of Paul Xiaoming Lee, the actual controller of the Company, and his designated third party and Victory Precisionsigned the Equity Transfer Agreement on the same date, agreeing to make joint investment to establish a joint venture. Based on the agreement, theCompany and Shanghai Energy will hold 10% of the equity in the joint venture, Sherry Lee or her designated person and Jerry Yang Li or hisdesignated person will in aggregate hold 37% of the equity in the joint venture, the third party designated by Lee family will hold 33.2% of the equityin the joint venture, Victory precision will hold 19.80% of the equity in the joint venture; the joint venture will acquire 100% of the equity of RS Tech.,and the Hong Kong subsidiary of the joint venture will acquire 100% of the equity of JOT Automation Ltd. This matter was approved by the fifthextraordinary general meeting of the Company in 2021.Enquiries on the online disclosure of interim report of significant related party transactions

Name of interim announcement

Name of interim announcementDate of disclosure of interim announcementWebsite on which interim announcement is disclosed
Announcement on the Resolutions of the 24th Meeting of the Fourth Board of DirectorsMarch 18, 2021cninfo.com.cn
Announcement on the Deposit, Loan and Guarantee Business Expected to Be Carried Out in Related Banks in 2021March 18, 2021cninfo.com.cn
Announcement on the Resolutions of Annual General Meeting for 2020April 9, 2021cninfo.com.cn
Announcement on Purchase of Assets through Share Offering and Application for SuspensionJune 16, 2021cninfo.com.cn
Announcement on Shareholding of Ten Top Shareholders on One Business Day Before Suspension Due to Purchase of Assets through Share Offering and Payment of Cash and the Related Party TransactionsJune 22, 2021cninfo.com.cn

Announcement on the Resolutions of the 29th Meeting of the Fourth Board of Directors

Announcement on the Resolutions of the 29th Meeting of the Fourth Board of DirectorsJune 23, 2021cninfo.com.cn
Suggestive Announcement on the Disclosure of Plans for Purchase of Assets through Share Offering and Payment of Cash, Raising Funds and the Related Party Transactions and the Resumption of Trading of the Shares and Convertible Bonds of the CompanyJune 23, 2021cninfo.com.cn
Explanation on the Restructuring in Compliance with Article 4 of the Provisions on Standardizing Some Issues Concerning Material Assets Reorganization of Listed CompaniesJune 23, 2021cninfo.com.cn
Explanation on the Completeness and Compliance of the Legal Procedures and the Validity of the Legal Documents Submitted for the RestructuringJune 23, 2021cninfo.com.cn
Explanation on Whether the Parties Involved in the Restructuring Are Not Prohibited from Participating in the Major Asset Restructuring of Any Listed Company according to Article 13 of the Interim Provisions on Strengthening the Supervision of Abnormal Stock Trading Related to Material Assets Reorganization of Listed CompaniesJune 23, 2021cninfo.com.cn
Explanation on Whether the Stock Price Fluctuation Before the Publication of the Restructuring Information Reaches the Threshold Stipulated in Article 5 of the Notice on Regulating the Information Disclosure of Listed Companies and the Behavior of Related PartiesJune 23, 2021cninfo.com.cn
Plans for Purchase of Assets through Share Offering and Payment of Cash, Raising Funds and the Related Party TransactionsJune 23, 2021cninfo.com.cn
Summary of Plans for Purchase of Assets through Share Offering and Payment of Cash, Raising Funds and the Related Party TransactionsJune 23, 2021cninfo.com.cn
General Risk Warning Announcement on the Purchase of Assets through Share Offering and Payment of Cash, Raising Funds and the Related Party TransactionsJune 23, 2021cninfo.com.cn
Announcement on Progress of Purchase of Assets through Share Offering and Payment of Cash, Raising Funds and the Related Party TransactionsJuly 24, 2021cninfo.com.cn
August 25, 2021cninfo.com.cn
September 24, 2021cninfo.com.cn
October 25, 2021cninfo.com.cn
Announcement on the Resolutions of the 38th Meeting of the Fourth Board of DirectorsNovember 23, 2021cninfo.com.cn
Announcement on the Termination of Purchase of Assets through Share Offering and Payment of Cash, Raising Funds and the Related Party TransactionsNovember 23, 2021cninfo.com.cn
Announcement on the Resolutions of the 30th Meeting of the Fourth Board of DirectorsAugust 3, 2021cninfo.com.cn
Announcement on the Intention to Sign the Framework Agreement for the Acquisition of RS Tech. and JOT Automation Ltd with Family Members of Paul Xiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party TransactionAugust 3, 2021cninfo.com.cn
Announcement on Resolutions of the 4th Extraordinary General Meeting in 2021August 20, 2021cninfo.com.cn
Announcement on the Resolutions of the 33rd Meeting of the Fourth Board of DirectorsSeptember 16, 2021cninfo.com.cn
Announcement on the Signing of Equity Transfer Agreement Between the Company and Family Members of Paul Xiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party TransactionSeptember 16, 2021cninfo.com.cn
Announcement on Resolutions of the 5th Extraordinary General Meeting in 2021October 26, 2021cninfo.com.cn
Announcement on the Progress of Signing of Equity Transfer Agreement Between the Company and Family Members of Paul Xiaoming Lee, Victory Precision and Its Subsidiaries and the Related Party TransactionOctober 30, 2021cninfo.com.cn
November 24, 2021cninfo.com.cn

XV. Significant contracts and their execution

1. Trusteeships, Contracts, and Leases

(1) Trusteeships

□ Applicable √ N/A

There was no trusteeship during the Reporting Period.

(2) Contracts

□ Applicable √ N/A

No such cases in the Reporting Period.

(3) Leases

√ Applicable □ N/A

Statement on leasesItems with profits or losses accounting more than 10% of the total profit of the Company for the Reporting Period

□ Applicable √ N/A

The Company had no lease with profits or losses accounting more than 10% of the total profit of the Company during the Reporting Period

2. Significant guarantees

√ Applicable □ N/A

Unit: RMB0’000

External guarantees provided by the Company and its subsidiaries (excluding those for subsidiaries)

External guarantees provided by the Company and its subsidiaries (excluding those for subsidiaries)
Guaranteed partyDisclosure date of the guarantee line announcementGuarantee lineActual occurrence dateActual guarantee amountType of guaranteeCollateral (if any)Counter guarantee (if any)Period of guaranteePerformed or notGuarantee for a related party or not
None
Guarantees provided by the Company for its subsidiaries
Guaranteed partyDisclosure date of the guarantee line announcementGuarantee lineActual occurrence dateActual guarantee amountType of guaranteeCollateral (if any)Counter guarantee (if any)Period of guaranteePerformed or notGuarantee for a related party or not
Hongta PlasticMarch 18, 20214,400April 25, 20213,700.00Joint liability guarantee1 YearNoNo
Hongta PlasticMarch 18, 20214,000August 27, 20210.00Joint liability guarantee1 YearNoNo

HongtaPlastic

Hongta PlasticMarch 18, 202121,000November 10, 202011,673.69Joint liability guarantee5 YearsNoNo
Hongta PlasticMarch 18, 20214,000November 9, 20200.00Joint liability guarantee5 YearsNoNo
Hongta PlasticMarch 18, 20213,490March 18, 20213,490.00Joint liability guarantee2 YearsNoNo
Hongta PlasticMarch 18, 20215,000March 25, 20212,170.00Joint liability guarantee1 YearNoNo
Hongta PlasticMarch 18, 20214,000October 29, 20210.00Joint liability guarantee2 YearsNoNo
Hongta PlasticMarch 18, 20213,000November 22, 20210.00Joint liability guarantee1 YearNoNo
Hongta PlasticMarch 18, 20217,800November 29, 2021765.00Joint liability guarantee3 YearsNoNo
Dexin PaperMarch 18, 20212,230November 13, 20190.00Joint liability guarantee3 YearsNoNo
Dexin PaperMarch 18, 2021800March 30, 20210.00Joint liability guarantee3 YearsNoNo
Hongchuang PackagingMarch 18, 20212,000March 10, 20200.00Joint liability guarantee2 YearsNoNo
Hongchuang PackagingMarch 18, 20213,000October 23, 20202,359.00Joint liability guarantee1 YearNoNo
Hongchuang PackagingMarch 18, 20216,600April 25, 2021607.28Joint liability guarantee2 YearsNoNo
Hongchuang PackagingMarch 18, 20214,000November 30, 20203,154.31Joint liability guarantee2 YearsNoNo

HongchuangPackaging

Hongchuang PackagingMarch 18, 20212,200November 29, 2021280.96Joint liability guarantee2 YearsNoNo
Hongchuang PackagingMarch 18, 20216,500November 22, 20210.00Joint liability guarantee1 YearNoNo
Chengdu Hongta PlasticMarch 18, 20217,500April 13, 2021720.00Joint liability guarantee1 YearNoNo
Chengdu Hongta PlasticMarch 18, 20211,800July 27, 20210.00Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202110,000July 25, 20193,100.00Joint liability guarantee6 YearsNoNo
Shanghai EnergyMarch 18, 202111,000November 30, 20207,000.00Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202155,000December 17, 201930,000.00Joint liability guarantee3 YearsNoNo
Shanghai EnergyMarch 18, 202185,600September 30, 202073,600.00Joint liability guarantee7 YearsNoNo
Shanghai EnergyMarch 18, 20218,000September 27, 20200.00Joint liability guarantee2 YearsNoNo
Shanghai EnergyMarch 18, 202130,000October 23, 20208,033.38Joint liability guarantee3 YearsNoNo
Shanghai EnergyMarch 18, 202136,000March 1, 202121,659.10Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202128,000March 5, 202119,854.18Joint liability guarantee3 YearsNoNo
Shanghai EnergyMarch 18, 202148,900March 16, 202148,800.00Joint liability guarantee5 YearsNoNo

ShanghaiEnergy

Shanghai EnergyMarch 18, 202110,000March 1, 20213,953.16Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202119,600April 15, 20210.00Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202110,000May 27, 20210.00Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202125,000June 2, 202125,000.00Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202122,300.8June 28, 202114,078.42Joint liability guarantee6 YearsNoNo
Shanghai EnergyMarch 18, 202151,000July 14, 202144,000.00Joint liability guarantee5 YearsNoNo
Shanghai EnergyMarch 18, 202110,000September 8, 20214,918.54Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202111,000September 15, 20210.00Joint liability guarantee2 YearsNoNo
Shanghai EnergyMarch 18, 202150,000September 10, 202149,500.00Joint liability guarantee4 YearsNoNo
Shanghai EnergyMarch 18, 202115,000August 20, 202125,000.00Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 20217,080December 12, 20163.38Joint liability guarantee1 YearNoNo
Shanghai EnergyMarch 18, 202110,000January 1, 202210.00Joint liability guarantee3 YearsNoNo
Zhuhai EnergyMarch 18, 20215,000December 11, 20190.00Joint liability guarantee5 YearsNoNo
Zhuhai EnergyMarch 18, 202120,000May 8, 20206,539.40Joint liability guarantee5 YearsNoNo

ZhuhaiEnergy

Zhuhai EnergyMarch 18, 202115,000December 22, 20203,000.00Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 20215,000May 21, 20210.00Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 202110,000May 18, 202110,000.00Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 20213,000June 24, 20213,000.00Joint liability guarantee3 YearsNoNo
Zhuhai EnergyMarch 18, 202111,285September 1, 20210.00Joint liability guarantee4 YearsNoNo
Zhuhai EnergyMarch 18, 202120,000August 18, 202120,000.00Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 202120,000August 25, 202111,568.68Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 20218,000September 18, 20210.00Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 202140,000September 26, 20210.00Joint liability guarantee1 YearNoNo
Zhuhai EnergyMarch 18, 202122,000September 1, 202115,800Joint liability guarantee2 YearsNoNo
Wuxi Energy, Jiangxi Tonry, Chongqing Energy and Jiangxi EnpoMarch 18, 2021150,000April 9, 20211,008.35Joint liability guarantee2 YearsNoNo
Wuxi EnergyMarch 18, 202120,000June 10, 20212,318.88Joint liability guarantee1 YearNoNo
Wuxi EnergyMarch 18, 202110,000August 7, 20214628.033839Joint liability guarantee3 YearsNoNo

WuxiEnergy

Wuxi EnergyMarch 18, 202110,000September 10, 202113.00604Joint liability guarantee1 YearNoNo
Wuxi EnergyMarch 18, 20218,000September 2, 20210.00Joint liability guarantee1 YearNoNo
Jiangxi TonryMarch 18, 202110,000December 11, 202010000Joint liability guarantee1 YearNoNo
Jiangxi TonryMarch 18, 20215,000October 28, 20200.00Joint liability guarantee2 YearsNoNo
Jiangxi TonryMarch 18, 202113,500January 22, 20212,000.00Joint liability guarantee3 YearsNoNo
Jiangxi Tonry, Wuxi Energy, Chongqing Energy, Jiangxi Enpo and Jiangxi RuijieMarch 18, 202180,000May 1, 20211,536.00Joint liability guarantee2 YearsNoNo
Jiangxi TonryMarch 18, 202125,000September 17, 20215024.624416Joint liability guarantee1 YearNoNo
Suzhou Green PowerMarch 18, 202115,000July 1, 2020266.52Joint liability guarantee3 YearsNoNo
Suzhou Green PowerMarch 18, 202110,000April 8, 20203758.222671Joint liability guarantee2 YearsNoNo
Suzhou Green PowerMarch 18, 202110,000November 30, 2021123.764Joint liability guarantee5 YearsNoNo
Chongqing Energy, Jiangsu Energy and Jiangsu RuijieNovember16, 2021130,000November 1, 20210.00Joint liability guarantee2 YearsNoNo
Jiangxi RuijieMarch 18, 202120,000June 10, 202118368.38Joint liability guarantee2 YearsNoNo

SEMCORP HungaryKFT

SEMCORP Hungary KFTMarch 18, 202114,867.2June 28, 20210.00Joint liability guarantee6 YearsNoNo
SEMCORP Hungary KFTMarch 18, 2021100,000July 14, 202118,671.34Joint liability guarantee5 YearsNoNo
SEMCORP Hungary KFTMarch 18, 202145,000December 27, 20217,918.46Joint liability guarantee4 YearsNoNo
Zhuhai EnergyMarch 18, 2021100,000August 14, 20172,219.65Joint liability guarantee6 YearsNoNo
Zhuhai EnergyMarch 18, 202175,000August 1, 201942,000.00Joint liability guarantee6 YearsNoNo
Zhuhai EnergyMarch 18, 202120,000May 8, 20200.00Joint liability guarantee3 YearsNoNo
Zhuhai EnergyMarch 18, 202120,000March 10, 202171,727.61Joint liability guarantee1 YearNoNo
Wuxi EnergyMarch 18, 2021130,000May 17, 201919,800.00Joint liability guarantee7 YearsNoNo
Wuxi EnergyMarch 18, 2021116,000December 1, 20203,700.00Joint liability guarantee9 YearsNoNo
Jiangxi TonryMarch 18, 2021150,000September 17, 20190.00Joint liability guarantee5 YearsNoNo
Total guarantee quota approved for subsidiaries during the reporting period (B1)3,314,900Total actual amount of guarantees for subsidiaries during the reporting period (B2)734,131.99
Total guarantee quota approved for the subsidiaries at the end of the reporting period (B3)3,314,900Total actual guarantee balance for subsidiaries at the end of the reporting period (B4)734,131.99

Guarantees provided by subsidiaries for subsidiaries

Guarantees provided by subsidiaries for subsidiaries
Guaranteed partyDisclosure date of the guarantee line announcementGuarantee lineActual occurrence dateActual guarantee amountType of guaranteeCollateral (if any)Counter guarantee (if any)Period of guaranteePerformed or notGuarantee for a related party or not
Shanghai EnergyMarch 18, 202125,500May 20, 2021Joint liability guarantee1 YearNoYes
Shanghai Energy, Zhuhai Energy, Wuxi Energy and Jiangxi TonryMarch 18, 202120,000September 10, 20212421.2Joint liability guarantee2 YearsNoYes
Jiangxi TonryMarch 18, 20215,000September 23, 2021Joint liability guarantee1 YearNoYes
Total guarantee quota approved for subsidiaries during the reporting period (C1)110,500Total actual amount of guarantees for subsidiaries during the reporting period (C2)2,421.2
Total guarantee quota approved for the subsidiaries at the end of the reporting period (C3)110,500Total actual guarantee balance for subsidiaries at the end of the reporting period (C4)2,421.2
Total guarantee amount provided by the Company (sum of the aforesaid three categories)
Total guarantee quota approved during the reporting period (A1+B1+C1)3,425,400Total actual amount of guarantee during the reporting period (A2+B2+C2)736,553.19
Total guarantee quota approved at the end of the reporting period (A3+B3+C3)3,425,400Total actual guarantee balance at the end of the reporting period (A4+B4+C4)736,553.19
Total guarantee amount (A4+B4+C4) to net assets of the Company53.25%
Including:
Balance of guarantee provided to shareholders, beneficial owners and their related parties (D)0
Amount of debt guarantee provided for guaranteed party whose asset-liability ratio is not less than 70% directly or indirectly (E)574,700.10
Amount of total guarantee over 50% of net assets (F)2,733,806.65
Total amount of the above three guarantees (D+E+F)3,308,506.75

Explanation of warranty liability or possible jointliquidation (if any)

Explanation of warranty liability or possible joint liquidation (if any)No
Explanation of provision of guarantees for external parties in violation of the prescribed procedure (if any)N/A

Explanation on guarantees provided by combined modeNot applicable

3. Entrusted cash assets management

(1) Entrusted wealth management

√ Applicable □ N/A

Overview of entrusted wealth management during the Reporting Period

Unit: RMB0’000

TypeSource of capital under the entrusted wealth managementAmount of the entrusted wealth managementUndue amountOverdue amount not recoveredImpairment of overdue wealth management not recovered
Bank wealth management productsSelf-owned fund82,035.9850,975.9800
Bank wealth management productsFunds raised120,000.00-00
Total202,035.9850,975.9800

Particulars of high-risk entrusted wealth management with significant single amount or low security and low liquidity

□ Applicable √ N/A

Whether there is the case where the principal cannot be recovered at maturity or other case where impairment may occur

□ Applicable √ N/A

(2) Entrusted loans

□ Applicable √ N/A

There was no entrusted loan of the Company during the Reporting Period.

4. Other major contracts

√Applicable □N/A

Name of the company entering into contractName of party involved in the contractContract subjectDate of signaturePricing principleTransaction price (RMB 10 thousand)Related party transaction or notPerformance as of the end of the reporting periodDisclosure dateDisclosure index
Shanghai EnergyLG ESLithium battery separator filmApril 4, 2019Market pricing principle234,220NoIn normal performance, with sales income of RMB 1.128 billion recognized as of the end of the reporting periodMay 20, 2019Announcement on Signing of Major Contract by the Holding Subsidiary Shanghai Energy New Material Technology Co., Ltd. published on cninfo.com.cn (Announcement No.: 2019-061)

Shanghai Energy

Shanghai EnergyUltium Cells, LLCLithium battery separator filmJune 9, 2021Market pricing principle167,700NoUltium Cells, LLC is under construction, no sales have been realized.June 11, 2021Announcement on Signing of Major Contract by the Holding Subsidiary Shanghai Energy New Material Technology Co., Ltd. published on cninfo.com.cn (Announcement No.: 2021-096)
Shanghai EnergyCATLLithium battery separator filmDecember 22, 2021Market pricing principle517,800NoImplemented since 2022December 24, 2021Announcement on Signing of Prepayment Agreement between the Holding Subsidiary and CATL published on cninfo.com.cn (Announcement No.: 2021-210)

XVI. Explanation for Other Significant Events

√Applicable □N/A

1. On May 6, 2021, the 27th meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on Changing theRegistered Capital and Amending the Articles of Association and Handling the Change of Industrial and Commercial Registration. Because theconvertible corporate bonds of the Company (bond abbreviation: Energy Convertible Bond, bond code: 128095) entered the conversion period onAugust 17, 2020, Energy Convertible Bonds have been converted to 13,368,542 shares as of April 29, 2021, increasing the total number of shares ofthe Company from 874,792,094 shares to 888,160,636 shares, and increasing the registered capital of the Company from RMB874,792,094.00 toRMB888,160,636.00. On May 8, 2021, the Company completed the procedures for filing and change of industrial and commercial registration andobtained a new business license. For details, please refer to the Announcement on Changing the Registered Capital and Amending the Articles ofAssociation and Handling the Change of Industrial and Commercial Registration (Announcement No.: 2021-083) and Announcement on Completionof Filing and Change of Industrial and Commercial Registration (Announcement No.: 2021-085) published by the Company on cninfo.com.cn.

2. During the reporting period, due to the change of managing partners of Shanghai Hengzou, change of voting terms of Heli Investment, conversionof convertible bonds and Heli Investment and Paul Xiaoming Lee’s reduction of his shareholding in the Company, the shares of the Companycontrolled by Lee Family, the actual controller of the Company, decreased from 49.83% to 46.48%. For details, please refer to the Announcement onChange in Shareholding Ratio of Controlling Shareholders and Persons Acting in Concert Exceeding 1% (Announcement No.: 2021-002),Announcement on Equity Change of Actual Controller Exceeding 1% (Announcement No.: 2021-159), and Announcement on Equity Change ofActual Controller Exceeding 1% (Announcement No.: 2021-172) published by the Company on cninfo.com.cn.

XVII. Significant Events of the Company and Its Subsidiaries

√Applicable □N/A

1. On January 8, 2021, the 21st meeting of the 4th Board of Directors of the Company deliberated and approved the Proposal on Entry into theAgreement on the Investment in Projects of Changshou Economic and Technological Development Zone between Shanghai Energy and theAdministrative Committee of Changshou Economic and Technological Development Zone, approving Shanghai Energy to invest in the 16high-performance lithium-ion battery micropore separator film production lines and 39 coating lines in Changshou Economic and TechnologicalDevelopment Zone, Chongqing, with the total project investment of RMB5.8 billion. On March 29, 2021, the 25th meeting of the fourth Board ofDirectors of the Company deliberated and approved the Proposal on the Implementation of Investment Project in Changshou Economic andTechnological Development Zone by Chongqing Energy, a Wholly-owned Subsidiary of Shanghai Energy. Due to business development needs,Chongqing Energy will implement the Changshou Economic and Technological Development Zone Project. The total investment and production linequantity of the project will not be changed, but the investment and construction schedule of the first and second phases will be adjusted. For details,please refer to the Announcement on Entry into the Agreement on the Investment in Projects of Changshou Economic and TechnologicalDevelopment Zone between Shanghai Energy and the Administrative Committee of Changshou Economic and Technological Development Zone(Announcement No.: 2021-004), the Announcement on the Implementation of Investment Project in Changshou Economic and TechnologicalDevelopment Zone by Chongqing Energy, a Wholly-owned Subsidiary of Shanghai Energy (Announcement No.: 2021-056) and the Announcementon the Progress of the High-Performance Lithium-Ion Battery Micropore Separator Film Project of Chongqing Energy (Announcement No.: 2021-073and 2021-203) published by the Company on cninfo.com.cn.

2. On January 31, 2021, the 23rd meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on Cooperationbetween Subsidiaries and Polypore. Shanghai Energy and Jiangxi Mingyang New Material Technology Co., Ltd. (“Jiangxi Mingyang”), itswholly-owned subsidiary, signed the Agreement on Subscription For Capital Increase with Polypore Hong Kong Limited (“Polypore Hong Kong”), asubsidiary of Polypore International, LP (“Polypore”), approving Shanghai Energy and Polypore Hong Kong to sign the Joint Venture Agreement andthey will increase the capital of Jiangxi Mingyang within the specified period. Upon the completion of the capital increase, Jiangxi Mingyang willbecome a joint venture, in which Shanghai Energy holds 51% of the equity, and Polypore Hong Kong holds 49% of the equity. On February 24, 2021,due to the operation needs of Polypore, the counterparty was changed from Polypore Hong Kong to PPO Energy Storage Materials HK, Ltd.. In July2021, the transaction was through the anti-monopoly review of

concentration of business operators. In September 2021, both parties completed the first capital increase. The joint venture was renamed from JiangxiMingyang to Jiangxi Enpo. In January 2022, both parties completed the second capital increase. For details, please refer to the Announcement onCooperation between Subsidiaries and Polypore (Announcement No.: 2021-017, 2021-025, 2021-122 and 2022-020) and the Announcement onCompletion of Change and Filing of Industrial and Commercial Registration of Subsidiaries (Announcement No.: 2021-149) published by theCompany on cninfo.com.cn.

3. On January 31, 2021, the 23rd meeting of the 4th Fourth Board of Directors of the Company deliberated and approved the Proposal on Entry intothe Contract on Building the Dry-process Lithium Battery Separator Film Project and Its Supplementary Agreements between Jiangxi Mingyang NewMaterial Technology Co., Ltd., the Subsidiary and Gaoan Municipal People’s Government, Jiangxi Province, based on which, Jiangxi Mingyangwould invest in the building of dry-process lithium battery separator film project in Jiangxi Gaoan Hi-tech Industrial Park, totaling RMB2 billion. Theproject will be constructed in two phases, with RMB1 billion invested for phase 1 and RMB1 billion invested for phase 2. For details, please refer tothe Announcement on Entry into the Contract on Building the Lithium Battery Separator Film Dry-process Project and Its Supplementary Agreementsbetween Jiangxi Mingyang New Material Technology Co., Ltd., the Subsidiary and Gaoan Municipal People’s Government, Jiangxi Province(Announcement No.: 2021-018) published by the Company on cninfo.com.cn.

4. On April 19, 2021, NEEQ issued the Confirmation Letter on the Application for the Agreement Transfer of Specific Matters of Newmi Tech(NEEQ Letter [2021] No. 1128), and completed the review of the transfer of Newmi Tech. On May 7, 2021, China Securities Depository and ClearingCo., Ltd. (“CSDCC”) issued the Confirmation of Securities Transfer Registration (No.: 2104290003, 2104290004), stating that the relevanttransaction participants completed the relevant procedures for the agreement transfer of the above specific matters in CSDCC. In July 2021, NewmiTech changed the company name and legal representative according to the relevant agreements signed and business needs, and completed the relevantindustrial and commercial registration change and filing procedures. For details, please refer to the Announcement on Progress of Acquisition of

76.3574% of the Equity of Newmi Tech by Shanghai Energy New Material Technology Co., Ltd., a Holding Subsidiary (Announcement No.:

2021-027 and 2021-086) and the Announcement on Completion of Change and Filing of Industrial and Commercial Registration of Subsidiaries(Announcement No.: 2021-113) published by the Company on cninfo.com.cn.

5. On April 23, 2021, the Management Committee of Yuxi High-tech Zone, the Company and Yunnan Hongta Plastic Co., Ltd. signed theSupplementary Agreement for BOPP Film Reconstruction and Expansion Project with Annual Output of 70,000 Tons, which further clarified therelevant provisions of the Investment Agreement for BOPP Film Reconstruction and Expansion Project with Annual Output of 70,000 Tons. Fordetails, please refer to the Announcement on Progress of the BOPP Film Reconstruction and Expansion Project of Hongta Plastic, a wholly-ownedSubsidiary (Announcement no.: 2021-070) published by the Company on cninfo.com.cn.

6. During the reporting period, Suzhou Green Power, Dexin Paper, Chongqing Energy, Jiangxi Tonry and Jiangxi Ruijie changed the industrial andcommercial registration due to business needs. For details, please refer to the Announcement on Completion of Change and Filing of Industrial andCommercial Registration of Subsidiaries (Announcement No.: 2021-024, 2021-090, 2021-093 and 2021-119) published by the Companycninfo.com.cn.

7. On August 2, 2021, the 30th meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on Establishing aJoint Venture with EVE to Construct Wet-process Lithium Battery Separator Film Project. The Company has signed the Joint Venture Agreement andSupplementary Agreement with EVE Energy Co., Ltd. (“EVE”), based on which the two parties will establish a joint venture in Jingmen to buildwet-process lithium-ion battery separator film and coating film project with an annual production capacity of 1.6 billion square meters, which will beprovided to EVE and its subsidiaries in priority. It is expected that the registered capital of the joint venture will be RMB1,600 million, of which thedesignated investor of the Company subscribes to contribute RMB880 million and holds 55% equity in the joint venture, EVE subscribes tocontribute RMB720 million and holds 45% equity in the joint venture. On September 18, 2021, Shanghai Energy, EVE and Jingmen High-techIndustrial Development Zone Management Committee signed the Contract for the establishment of the joint venture by Shanghai Energy and EVE inJingmen High-tech Development Zone and the investment and construction of high-performance lithium battery separator film project by the jointventure. With a total investment of RMB5.2 billion, 16 production lines for lithium battery separator film will be constructed in the project. In January2022, Hubei Energy New Material Technology Co., Ltd. completed the procedures for industrial and commercial registration and obtained a businesslicense. For details, please refer to the Announcement on Establishing a Joint Venture with EVE to Construct Wet-process Lithium Battery SeparatorFilm Project (announcement No.: 2021-128) and the Announcement on Progress of Establishment of a Joint Venture with EVE to ConstructWet-process Lithium Battery Separator Film Project (announcement no.: 2021-155 and 2022-003) published by the Company cninfo.com.cn.

8. On December 20, 2021, the 39th meeting of the fourth Board of Directors of the Company deliberated and approved the Proposal on the Signing ofthe Investment Cooperation Agreement for Energy Liquid Package Project between Hongchuang Packaging and the Management Committee ofJintan Economic Development Zone in Jiangsu Province, based on which Hongchuang Packaging will establish a project company to invest in theconstruction of aseptic liquid packaging box project, with a total investment of RMB2 billion. In January 2022, Hongchuang Packaging (Jiangsu) Co.,Ltd., the project company, completed the procedures for industrial and commercial registration and obtained a business license. For details, pleaserefer to the Announcement on the Signing of the Investment Cooperation Agreement for Energy Liquid Package Project between HongchuangPackaging and the Management Committee of Jintan Economic Development Zone in Jiangsu Province (announcement No.: 2021-207) and theAnnouncement on the Progress of the Signing of the Investment Cooperation Agreement for Energy Liquid Package Project between HongchuangPackaging and the Management Committee of Jintan Economic Development Zone in Jiangsu Province (announcement No.: 2022-007) published bythe Company on cninfo.com.cn.

Section 7 Share Changes and Shareholder DetailsI. Changes in Shares

1. Changes in shares

Unit: shares

Before the changeIncrease or decrease (+/-)After the change
Number of sharesProportionNew shares issuedBonus issuanceConversion of reserve into shareOthersSubtotalNumber of sharesProportion
I. Shares subject to restrictions on sale350,103,16139.49%-199,716,053-199,716,053150,387,10816.85%
1. Shares held by state00.00%000.00%
2. Shares held by state-owned legal persons7,113,8960.80%-7,113,896-7,113,89600.00%
3. Shares held by other domestic investors122,263,81513.79%-67,721,200-67,721,20054,542,6156.11%
Including: Shares held by domestic legal persons34,342,4993.87%-34,342,499-34,342,49900.00%
Shares held by domestic natural persons87,921,3169.92%-33,378,701-33,378,70154,542,6156.11%
4. Shares held by overseas investors180,336,56520.34%-84,492,072-84,492,07295,844,49310.74%
Including: Shares held by overseas legal persons13,608,3301.53%-13,608,330-13,608,33000.00%
Shares held by overseas natural persons166,728,23518.81%-70,883,742-70,883,74295,844,49310.74%
5. Fund and wealth management products40,388,8854.56%-40,388,885-40,388,88500.00%
II. Shares not subject to restrictions on Sale536,462,99060.51%205,556,724205,556,724742,019,71483.15%
1. Renminbi denominated common shares536,462,99060.51%205,556,724205,556,724742,019,71483.15%
2. Domestically-listed foreign shares0.00%00.00%
3. Foreign shares listed overseas0.00%00.00%
4. Others0.00%00.00%
III. Total shares886,566,151100.00%5,840,6715,840,671892,406,822100.00%

Reason for changes in shares

√ Applicable □ N/A

(1) Certain restricted shares under the issuance of shares for assets acquisition were listed and traded

On August 18, 2021, certain restricted shares under the issuance of shares for assets acquisition under the major assets restructuring in 2018were released from restriction on sales and traded. 246,432,142 shares were released from restriction on sales in total, involving 21 shareholders, suchas the overseas natural person Paul Xiaoming Lee, overseas natural person Sherry Lee, overseas natural person JERRY YANG LI, domestic legalpersons Huachen Investment, Advanced Manufacturing Fund, Shanghai Hengzou, as well as domestic natural persons Li Xiaohua, Huang Shuhua,Zhang Tao, Gao Xiang, He Baohua, Huang Yuchen, Hu Jiadong, Wang Chizhou, Jiang Xinmin, Zhang Fang, Zhang Fan, Zheng Mei, Liu Wei, Du Junand Cao Ben.

(2) Private offering of A shares in 2020

Under the approval granted by China Securities Regulatory Commission under the Approval of Private Share Offering by Yunnan Energy NewMaterial Co., Ltd. (CSRC License [2020] No. 1476), the Company made a private offering of 69,444,444 shares (A shares) to 22 specific investors,

and completed the registration procedure for these new shares with China Clear Shenzhen Branch on August 21, 2020. These shares started tradingwith a lockup period of 6 months as of the listing date at Shenzhen Stock Exchange on September 4, 2020. As of March 3, 2021, the lockup period of

private offering of 69,444,444 Renminbi-dominated ordinary shares in 2020 has expired, and those shares have been released from selling restrictionsand have been eligible for trading since March 4,2021.

(3) Conversion of convertible corporate bonds into shares

Under the approval granted by China Securities Regulatory Commission under the Approval of Convertible Corporate Bonds by Yunnan EnergyNew Material Co., Ltd. (CSRC License [2019] No. 2701), the Company made a public offering of 16 million convertible corporate bonds (bondsabbreviation: Energy Convertible Bond, bonds code: 128095) with a face value of RMB100.00 each bond, a total amount of RMB1.6 billion and aterm of 6 years on February 11, 2020. Under the approval of Shenzhen Stock Exchange in the document “Shenzhen Stock Exchange Listing [2020]No. 109), the convertible corporate bonds of the Company worth RMB1.6 billion started trading at Shenzhen Stock Exchange on February 28, 2020.The conversion period of “Energy Convertible Bonds” started on August 17, 2020. During the Reporting Period, a total of 5,840,671 shares wereconverted from the bonds, and by the end of the Reporting Period, a total of 17,614,728 shares were converted from the bonds.

(4) Reasons for other changes

The shares held by the directors and senior managers of the Company have been locked in accordance with the Listing Rules of Shenzhen StockExchange, the Guide of Shenzhen Stock Exchange to Compliant Operation of Listed Companies (Revised in 2020), the Several Provisions RegardingShare Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies, the Implementation Rules of Shenzhen StockExchange Regarding Share Reduction by Shareholders, Directors, Supervisors and Senior Executives of Listed Companies and other relatedprovisions.

Approval of changes in shares

√ Applicable □ N/A

(1) Release from selling restrictions on private offering of A shares in 2020

Under the approval granted by China Securities Regulatory Commission under the Approval of Private Share Offering by Yunnan Energy NewMaterial Co., Ltd. (CSRC License [2020] No. 1476), the Company made a private offering of 69,444,444 shares (A shares) to 22 specific investors,and completed the registration procedure for these new shares with China Clear Shenzhen Branch on August 21, 2020. These shares started tradingwith a lock-up period of 6 months as of the listing date at Shenzhen Stock Exchange on September 4, 2020. As of March 3, 2021, the lockup period ofprivate offering of 69,444,444 Renminbi-dominated ordinary shares in 2020 has expired, and those shares have been released from selling restrictionsand have been eligible for trading since March 4, 2021.

(2) Conversion of convertible corporate bonds into shares

Under the approval granted by China Securities Regulatory Commission under the Approval of Convertible Corporate Bonds by Yunnan EnergyNew Material Co., Ltd. (CSRC License [2019] No. 2701), the Company made a public offering of 16 million convertible corporate bonds (bondsabbreviation: Energy Convertible Bond, bonds code: 128095) with a face value of RMB100.00 each bond, a total amount of RMB1.6 billion and aterm of 6 years on February 11, 2020. Under the approval of Shenzhen Stock Exchange in the document “Shenzhen Stock Exchange Listing [2020]No. 109”, the convertible corporate bonds of the Company worth RMB1.6 billion started trading at Shenzhen Stock Exchange on February 28, 2020.The conversion period of “Energy Convertible Bonds” started on August 17, 2020.

Transfer of share ownership

√ Applicable □ N/A

(1) Conversion of convertible corporate bonds into shares

A total of 5,840,671 shares were converted from “Energy Convertible Bonds” during the Reporting Period, and a total of 17,614,728 shares wereconverted by the end of the Reporting Period

Effects of changes in shares on the basic EPS, diluted EPS, net assets per share attributable to ordinary shareholders of the Company, and otherfinancial indicators for the prior year and the last Reporting Period

√ Applicable □ N/A

During the Reporting Period, the conversion of 5,840,671 shares from the “Energy Convertible Bonds” has affected the basic earnings per share byRMB0.01/share, affected the diluted earnings per share by RMB0.01/share and affected the net assets per share by RMB0.05/share.Other contents that the Company considers are necessary, or are required by the securities regulatory authorities, to disclose

□ Applicable √ N/A

2. Changes in restricted shares

√ Applicable □ N/A

Unit: Shares

Name ofshareholder

Name of shareholderNumber of restricted shares at the beginning of periodIncrease of restricted shares in the current periodNumber of restricted shares unlocked in the current periodNumber of restricted shares at the end of periodReason for restrictionDate of relief
Paul Xiaoming Lee102,745,43963,594,07370,495,01995,844,493(1) Locked shares held by senior executives; (2) By the end of the Reporting Period, the shares obtained from the material asset restructuring in 2018 have been released from restrictions(1) The restricted shares obtained from the material asset restructuring in 2018 were unlocked on August 18, 2021; (2) A director can unlock 25% of total shares he or she holds every year.
Li Xiaohua69,833,75952,378,41769,833,75952,378,417
Sherry Lee46,275,55946,275,5590By the end of the Reporting Period, the shares obtained from the material asset restructuring in 2018 have been released from restrictionsThe restricted shares obtained from the material asset restructuring in 2018 were unlocked on August 18, 2021
JERRY YANG LI17,707,23717,707,2370
Xu Ming1,376,905238,9681,615,873Locked shares held by senior executivesHe resigned from the position of the director in November 2021, and during the term determined when he held the position and within six months after the expiration of the term, he shall not transfer the Company’s shares he holds within half a year after resignation, and the shares transferred every year shall be no more than 25% of the total shares of the Company he holds.
Pang Qizhi330,00082,500247,500Locked shares held by senior executivesHe resigned from the position of the Chief Financial Officer in September 2020, and during the term determined when he held the position and within six months after the expiration of the term, he shall not transfer the Company’s shares he holds within half a year after resignation, and the shares transferred every year shall be no more than 25% of the total shares of the Company he holds.
Xiong Wei269,250750270,000Locked shares held by senior executivesHe resigned from the position of the Board Secretary in November 2021, and during the term determined when he held the position and within six months after the expiration of the term, he shall not transfer the Company’s shares he holds within half a year after resignation, and the shares transferred every year shall be no more than 25% of the total shares of the Company he holds.
Yu Xue030,82530,825Locked shares held by senior executivesAs a Board Secretary, she may have 25% of the total shares of the Company she holds unlocked every year.
Total of the other original shareholders of Shanghai Energy before material asset restructuring (17 shareholders)42,120,56842,120,5680By the end of the Reporting Period, the shares obtained from the material asset restructuring in 2018 have been released from restrictionsThe shares obtained from the material asset restructuring in 2018 were released from restrictions on August 18, 2021
Total of shareholders participating in private offering of A shares in 202069,444,44469,444,4440By the end of the Reporting Period, the shares obtained from the private offering of A shares of the Company in 2020 have been releasedThe shares obtained from the private offering of A shares of the Company in 2020 were unlocked on March 4, 2021.

(22 investors)

(22 investors)from restrictions
Total350,103,161116,243,033315,959,086150,387,108----

II. Issuance and Listing of Securities

1. Issuance of securities (excluding preferred shares) during the Reporting Period

□ Applicable √ N/A

2. Statement on changes in total shares and shareholder structure of the Company, and changes in assetsand liabilities of the Company

√ Applicable □ N/A

At the beginning of period, the Company recorded the total share capital of 886,566,151 shares and the asset-liability ratio of 43.63%. During theReporting Period, the “Energy Convertible Bonds” were converted into 5,840,671 shares, which has increased the total share capital of the Companyby 5,840,671 shares. As at the end of the Reporting Period, the Company recorded the total share capital of 892,406,822 shares and the asset-liabilityratio of 44.35%.

3. Existing shares held by internal employees of the Company

□ Applicable √ N/A

III. Details of Shareholders and Actual Controllers

1. Number of shareholders and their shareholdings

Unit: shares

Total common shareholders at the end of the Reporting Period46,438Total ordinary shareholders at the end of the previous month before annual report disclosure date43,546Total preferred shareholders resuming voting right at end of the Reporting Period (if any) (see Note 8)0Total preferred shareholders resuming voting right at the end of the previous month before annual report disclosure date (if any) (see Note 8)0
Shareholders holding more than 5% of shares or shareholdings of the top 10 shareholders
Name of shareholderNature of shareholderShareholding ratioNumber of shares held at the end of the Reporting PeriodIncrease or decrease of shares during the Reporting PeriodNumber of restricted shares heldNumber of unrestricted shares heldPledged, tagged or frozen
Status of sharesNumber of shares
Paul Xiaoming LeeOverseas natural person14.14%126,192,257-1,600,40095,844,49330,347,764Pledged2,800,000
Heyi InvestmentDomestic non-state-owned legal person13.39%119,449,535119,449,535Pledged13,690,000
Hong Kong Securities Clearing Company LimitedOverseas legal person10.91%97,318,30520,085,16797,318,305

Sherry Lee

Sherry LeeOverseas natural person8.23%73,470,45973,470,459
Li XiaohuaDomestic natural person7.83%69,837,88952,378,41717,459,472Pledged26,600,000
Kunming Huachen Investment Co., Ltd.Domestic non-state-owned legal person2.06%18,364,462-5,019,31318,364,462
JERRY YANG LIOverseas natural person1.98%17,707,23717,707,237
Zhang YongDomestic natural person1.81%16,164,007-168,1016,164,007
Shanghai HengzouDomestic non-state-owned legal person1.74%15,526,81715,526,817
Heli InvestmentDomestic non-state-owned legal person1.07%9,558,6869,558,686Pledged1,100,000
Strategic investors or general legal persons who have become top 10 shareholders due to new share allotment (if any) (see Note 3)None
Statement on related party relationship or concerted action between above-mentioned shareholdersPaul Xiaoming Lee, Sherry Lee, Li Xiaohua and JERRY YANG LI are all the family members of the Company’s actual controller Paul Xiaoming Lee and represent the persons acting in concert. Heyi Investment is the enterprise under control by the family of the actual controller Paul Xiaoming Lee. Heli Investment is a related party of the Company. The other shareholders are not known as to whether they have the related party relationships between them or constitute the persons acting in concert.
Explanation of delegation/acceptance of voting right and waiver of voting right involving the above shareholdersMr. Paul Xiaoming Lee and Ms. Sherry Lee signed the Power of Attorney for Shareholding on January 14, 2020, by which Ms. Sherry Lee fully delegated the shareholders’ rights, such as rights to question, proposal and vote, in connection with 73,470,459 shares she held in the Company, to her father Mr. Paul Xiaoming Lee, for a period of three years from the date of the Power of Attorney.
Special explanation on the existence of special repurchase account among the top 10 shareholders (if any) (see Note 10)N/A
Top 10 shareholders holding unrestricted shares
Name of shareholderNumber of unrestricted shares held at the end of the Reporting PeriodType of shares
Type of sharesNumber of shares
Heyi Investment119,449,535Renminbi denominated common shares119,449,535
Hong Kong Securities Clearing Company Limited97,318,305Renminbi denominated common shares97,318,305
Sherry Lee73,470,459Renminbi denominated common shares73,470,459
Paul Xiaoming Lee30,347,764Renminbi denominated common shares30,347,764
Kunming Huachen Investment Co., Ltd.18,364,462Renminbi denominated common shares18,364,462
JERRY YANG LI17,707,237Renminbi denominated common shares17,707,237
Li Xiaohua17,459,472Renminbi denominated common shares17,459,472
Zhang Yong16,164,007Renminbi denominated common shares16,164,007

Shanghai Hengzou

Shanghai Hengzou15,526,817Renminbi denominated common shares15,526,817
Heli Investment9,558,686Renminbi denominated common shares9,558,686
Statement on related party relationships or concerted action between top 10 circulating shareholders without sales restriction and between top 10 circulating shareholders without sales restriction and top 10 shareholdersPaul Xiaoming Lee, Sherry Lee, Li Xiaohua and JERRY YANG LI are all the family members of the Company’s actual controller Paul Xiaoming Lee and represent the persons acting in concert. Heyi Investment is the enterprise under control by the family of the actual controller Paul Xiaoming Lee. Heli Investment is a related party of the Company. The other shareholders are not known as to whether they have the related party relationships between them or constitute the persons acting in concert.
Statement on top 10 ordinary shareholders’ participation in securities margin trading business (if any) (see Note 4)Among the top ten ordinary shareholders, Heyi Investment held 7,900,000 shares through the client account of collateral securities for margin trading of China Merchants Securities Co., Ltd.; and Heli Investment held 1,500,000 shares through the client account of collateral securities for margin trading of Guotai Junan Securities Co.,Ltd..

Did any of the top 10 ordinary shareholders or top 10 ordinary shareholders with unrestricted shares of the Company conduct any transactions onagreed repurchase during the Reporting Period

□ Yes√ No

Top 10 ordinary shareholders and top 10 ordinary shareholders without sales restriction didn’t conduct transactions on agreed repurchase during theReporting Period.

2. Details about the controlling shareholder

Nature of controlling shareholder: The nature of the controlling entity is unclearType of controlling shareholder: Natural person

Controlling shareholder’s nameNationalityAcquisition of right of residence in other countries or regions
Paul Xiaoming LeeAmericanYes
Yan MaAmericanYes
Sherry LeeAmericanYes
Li XiaohuaChineseYes
Yanyang HuiAmericanYes
JERRY YANG LIAmericanYes
Major Occupation and PositionPaul Xiaoming Lee serves as the Chairman of the Company. Li Xiaohua serves as the Vice Chairman and General Manager of the Company. Yan Ma serves as the Director of the Company. Yanyang Hui, Sherry Lee and JERRY YANG LI take no positions at the Company.
Equities in other domestic and overseas listed companies under control and with participation during the Reporting PeriodNone

Change of controlling shareholder during the Reporting Period

□ Applicable √ N/A

The controlling shareholder of the Company has not changed during the Reporting Period.

3. Details about the actual controller and persons acting in concert

Nature of actual controller: Domestic natural person; overseas natural personType of actual controller: Natural person

Name of actual controllerRelationship with actual controllerNationalityAcquisition of right of residence in other countries or regions
Paul Xiaoming LeeAct in concert (including agreement, kinship and common control)AmericanYes

Yan Ma

Yan MaAct in concert (including agreement, kinship and common control)AmericanYes
Sherry LeeAct in concert (including agreement, kinship and common control)AmericanYes
Li XiaohuaAct in concert (including agreement, kinship and common control)ChineseYes
Yanyang HuiAct in concert (including agreement, kinship and common control)AmericanYes
Jerry Yang LiAct in concert (including agreement, kinship and common control)AmericanYes
Major Occupation and PositionPaul Xiaoming Lee serves as the Chairman of the Company. Li Xiaohua serves as the Vice Chairman and General Manager of the Company. Yan Ma serves as the Director of the Company. Yanyang Hui, Sherry Lee and JERRY YANG LI take no positions at the Company.
Control over domestic and overseas listed companies over past 10 yearsNone

Change of actual controller during the Reporting Period

□ Applicable √ N/A

The actual controller of the Company has not changed during the Reporting Period.A block diagram of the property rights and control relationship between the Company and the actual controller

The actual controller controls the Company through trust or other asset management methods

□ Applicable √ N/A

4. The accumulated number of pledged shares of the Company’s controlling shareholder or the largestshareholder of the Company and its persons acting in concert account for 80% of the Company’s sharesheld

□ Applicable √ N/A

5. Other corporate shareholders holding more than 10% of the shares

√ Applicable □ N/A

Name oflegalpersonshareholder

Name of legal person shareholderLegal Representative/Principal of OrganizationDate of IncorporationRegistered CapitalMajor operating activities or management activities
Heyi InvestmentPaul Xiaoming LeeNovember 10, 2010RMB30 millionConduct venture capital activities with free capital; make project investment and manage investment project; investment management, investment consulting and social and economic consultation.

6. Details about restrictions on reduction of shareholdings of controlling shareholders, actual controllers,restructuring parties, and other entities making commitments

□ Applicable √ N/A

IV. Information on implementation of share repurchase during the Reporting Period

Progress in implementation of share repurchase

√ Applicable □ N/A

Scheme disclosure dateNumber of shares intended to be repurchasedPercentage of the general capitalAmount intended to be repurchasedIntended repurchase periodRepurchase purposeNumber of shares repurchasedRatio of shares repurchased to the underlying shares under the stock incentive plan (if any)
March 18, 20211,111,111 shares to 2,222,222 shares0.12% to 0.25%Not less than RMB200 million (inclusive) and not more than RMB400 million (inclusive)March 17, 2021 to March 16, 2022Used for implementation of the stock incentive or employee stock ownership plan1,585,437100.00%

Progress of centralized bidding for reduction of shares repurchased

□ Applicable √ N/A

Section 8 Details about Preferred Shares

□ Applicable √ N/A

During the Reporting Period, there were no preferred shares in the Company.

Section 9 Details about bonds

√ Applicable □ N/A

I. Corporate bonds

□ Applicable √ N/A

During the Reporting Period, there were no corporate bonds of the Company.

II. Debentures

□ Applicable √ N/A

During the Reporting Period, there were no debentures of the Company.

III. Debt financing instruments of non-financial enterprises

□ Applicable √ N/A

During the Reporting Period, there were no non-financial enterprise debt financing tool of the Company.IV. Convertible corporate bonds

√ Applicable □ N/A

1. All Previous Adjustments to the Conversion Price

The initial conversion price of “Energy Convertible Bonds” was RMB64.61 per share.In May 2020, the Company implemented the annual profit distribution plan for 2019: Based on the total share capital of the Company, namely805,370,770 shares, distribute RMB1.25 in cash (inclusive of tax) for every 10 shares to all shareholders, distribute a total cash dividend ofRMB100,671,346.25 (inclusive of tax), distribute no dividend shares, convert no surplus reserve into share capital, and set the ex-dividend date asMay 21, 2020. Pursuant to related articles concerning the adjustment of the conversion price for the convertible corporate bonds, the Company hasmade corresponding adjustment to the conversion price of “Energy Convertible Bonds” from RMB64.61/share before the adjustment toRMB64.49/share after adjustment, and the conversion price after adjustment took effect on May 21, 2020.In September 2020, under the approval granted by China Securities Regulatory Commission under the Approval of Private Share Offering byYunnan Energy New Material Co., Ltd. (CSRC License [2020] No. 1476), the Company made a private offering of 69,444,444 shares (A shares) to 22specific investors. These shares started trading at an issuing price of RMB72.00/share at Shenzhen Stock Exchange on September 4, 2020. Pursuant torelated articles concerning the adjustment of the conversion price for the convertible corporate bonds, the Company has made correspondingadjustment to the conversion price of “Energy Convertible Bonds” from RMB64.49/share before the adjustment to RMB65.09/share after adjustment,and the conversion price after adjustment took effect on September 4, 2020.In September 2020, the Company repurchased and canceled a total of 23,120 restricted shares held by 4 participants with a personal assessmentrating of “good” when the 2017 Restricted Stock Incentive Plan was unlocked for the third time. The repurchase price was RMB8.426 per share. Thecancellation for repurchase was completed on September 28, 2020. Due to the small number of shares canceled in this repurchase, the conversionprice of “Energy Convertible Bonds” remained unchanged at RMB65.09 per share after calculating in accordance with the relevant terms regardingthe adjustment to the conversion price of convertible corporate bonds.In April 2021, the Company implemented the annual profit distribution plan for 2020: Based on the total share capital of the Company, namely888,160,636 shares, distribute RMB1.696948 in cash (inclusive of tax) for every 10 shares to all shareholders, distribute a total cash dividend ofRMB150,716,245.67 (inclusive of tax), distribute no dividend shares, convert no surplus reserve into share capital, and set the ex-dividend date asApril 30, 2021. Pursuant to related articles concerning the adjustment of the conversion price for the convertible corporate bonds, the Company hasmade a corresponding adjustment to the conversion price of “Energy Convertible Bonds” from RMB65.09/share to RMB64.92/share, and theconversion price after adjustment took effect on April 30, 2021.

2. Cumulative Share Conversion

√ Applicable □ N/A

Abbreviationforconvertiblebond

Abbreviation for convertible bondStart and end date of share conversionTotal volume of bond issuance (number of bonds)Total amount of issuanceCumulative conversion amount (RMB)Cumulative number of shares converted (shares)Ratio of the number of shares converted to the total issued shares of the Company before the start of the conversionAmount of shares not yet converted (RMB)Ratio of amount of shares not yet converted to the total amount of issuance
Energy Convertible BondsAugust 17, 2020 to February 11, 202616,000,0001,600,000,000.001,145,914,000.0017,614,7282.19%454,086,000.0028.38%

3. Top Ten Holders of Convertible Bonds

Unit: shares

SNName of holder of convertible bondsNature of holder of convertible bondsNumber of convertible bonds held at the end of the Reporting Period (number of convertible bonds)Amount of convertible bonds held at the end of the Reporting Period (RMB)Percentage of convertible bonds held at the end of the Reporting Period
1Industrial and Commercial Bank of China Limited - Guangfa Convertible Bond Initiated Securities Investment FundOther389,23038,923,000.008.57%
2Agricultural Bank of China Limited - Penghua Convertible Bond Securities Investment FundOther386,70638,670,600.008.52%
3Agricultural Bank of China Limited - Southern Xiyuan Convertible Bond Securities Investment FundOther228,11022,811,000.005.02%
4Dajia Asset - China Minsheng Bank - Dajia Asset - Value Selected No. 1 Collective Asset Management ProductOther219,44121,944,100.004.83%
5Dajia Asset - China Minsheng Bank - Dajia Asset - Shengshi Selected No. 2 Collective Asset Management ProductOther213,11021,311,000.004.69%
6China Minsheng Banking Corporation Limited - Everbright Pramerica Credit Tianyi Bond Securities Investment FundOther197,79019,779,000.004.36%
7National Social Security Fund Portfolio 203Other163,82016,382,000.003.61%
8Basic Pension Insurance Fund - Portfolio 106Other139,00813,900,800.003.06%
9National Social Security Fund Portfolio 1008Other118,73011,873,000.002.61%
10Fullgoal Fuyi Jinqu Fixed Income Pension Product - Industrial and Commercial Bank of China LimitedOther111,04411,104,400.002.45%

4. Significant Changes in the Guarantor’s Profitability, Asset Status, and Credit Status

□ Applicable √ N/A

5. The Company’s Liabilities and Credit Changes at the End of the Reporting Period, and CashArrangements for Debt Repayment in Future Years

(1) The Company’s liabilities: relevant indicators such as the asset-liability ratio, interest coverage multiple, and loan repayment rate at the end of theReporting Period, and year-on-year changes are detailed in the “VIII. Major Accounting data and financial indicators of the Company in the recenttwo years as at the end of the Reporting Period”.

(2) Changes in the Company’s credit standing:

According to the Follow-up Rating Report on Public Offering of Convertible Corporate Bonds by Yunnan Energy New Material Co., Ltd. (No.:

Follow-up Rating on Corporate Bonds by Shanghai Brilliance (2020) 100053) issued by the credit rating agency - Shanghai Brilliance Credit Rating& Investors Service Co, Ltd., the credit rating of the Company on the whole was AA, the credit rating of “Energy Convertible Bonds” was AA, andthe said bonds were affirmed with a “stable” outlook. The above-mentioned follow-up rating results have not changed compared with the previousrating results. For details about the above-mentioned follow-up rating reports, refer to http://www.cninfo.com.cn/.According to the Follow-up Rating Report on Public Offering of Convertible Corporate Bonds by Yunnan Energy New Material Co., Ltd. (No.:

Follow-up Rating on Corporate Bonds by Shanghai Brilliance (2021) 100043) issued by the credit rating agency - Shanghai Brilliance Credit Rating& Investors Service Co, Ltd., the credit rating of the Company on the whole was AA, the credit rating of “convertible corporate bonds of YunnanEnergy New Material Co., Ltd.” was AA, and the said bonds were affirmed with a “stable” outlook. The above-mentioned follow-up rating resultshave not changed compared with the previous rating results. For details about the above-mentioned follow-up rating reports, refer tohttp://www.cninfo.com.cn/.

(3) Cash arrangements for debt repayment in future years: The Company’s credit status is good, the asset-liability structure is reasonable, and banksand other financial institutions grant sufficient comprehensive credit to the Company. The Company can quickly and effectively obtain financingsupport from financial institutions. The Company has stable operations and good performance, and can obtain stable operating cash flow throughendogenous growth. At the same time, the Company actively promotes the implementation of fundraising projects through convertible corporatebonds to further enhance its profitability. If the Company meets the put provision and redemption clauses and repayment of principal and interestwhen due as disclosed in the prospectus of convertible corporate bonds, the Company can pay the bondholders’ principal and interest with its ownfunds and financing.V. Losses in the scope of consolidated statements during the Reporting Period exceeding 10%of the net assets as at the end of the prior year

□ Applicable √ N/A

VI. Overdue repayment of interest-bearing debt other than bonds as at the end of theReporting Period

□ Applicable √ N/A

VII. Violation of rules and regulations during the Reporting Period

□ Yes √ No

VIII. Major Accounting data and financial indicators of the Company in the recent two yearsas at the end of the Reporting Period

Unit: RMB’0,000

Item

ItemAt the end of the Reporting PeriodAt the end of the prior yearIncrease or decrease at the end of the current Reporting Period compared with the end of prior year
Current Ratio1.36472.03-32.77%
Asset-Liability Ratio44.35%43.63%0.72%
Quick ratio1.03081.5937-35.32%
The reporting periodThe corresponding period of prior yearIncrease or decrease of the Reporting Period compared with the corresponding period of prior year
Net profit after deduction of256,705.4599,050.72159.17%

non-recurring gains and losses

non-recurring gains and losses
Debt-to-EBITDA ratio36.66%23.16%13.50%

Interest coverage ratio

Interest coverage ratio14.245.13177.58%
Cash interest coverage ratio8.164.9863.86%
EBITDA interest coverage ratio17.587.03150.07%
Loan repayment rate100.00%100.00%0.00%
Interest coverage rate100.00%100.00%0.00%

Section 10 Financial ReportI. Audit Report

Type of audit opinion

Type of audit opinionStandard unqualified opinion
Audit report signing dateApril 11, 2022
Audit organization nameDahua CPAs (SGP)
Audit report No.Da Hua Shen Zi [2022] No. 005769
Name of Certified Public AccountantKang Wenjun, Yao Rui

Body of the audit reportTo all shareholders of Yunnan Energy New Material Co., Ltd.:

I. Audit OpinionsWe have audited the financial statements of Yunnan Energy New Material Co., Ltd., (“the Company”), including the consolidated and the parentcompany’s balance sheets as of December 31, 2021, the consolidated and parent company’s income statement, the consolidated and the parentcompany’s cash flow statement, the consolidated and the parent company’s statement of changes in equity for 2021, and the relevant notes to financialstatements.In our opinion, the enclosed financial statements were prepared in accordance with the Accounting Standards for Business Enterprises in all materialaspects and fairly reflected the Company’s consolidated and the parent company’s financial positions as of December 31, 2020 as well as theconsolidated and the parent company’s operation results and cash flow for 2021.

II. Basis for Audit OpinionsWe carried out the audit work according to the Auditing Standards for Chinese CPA. Our responsibilities under the Standards are further describedunder the section titled “responsibilities of CPA for auditing financial statements” in this audit report. We are independent from the Company andhave fulfilled the obligations in terms of professional ethics according to Code of Professional Conduct for Chinese CPAs. We believe that theevidences we obtained are adequate and proper, and lay a solid foundation for the audit opinion.III. Key Audit MattersKey audit matters are those that we believe are of most significance in the audit of the financial statements of the current period based on professionaljudgment. These matters are addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and wedo not provide a separate opinion on these matters.We have determined that the following matters are key audit matters to be communicated in the audit report.

1. Revenue recognition

2. Provision for bad debts of accounts receivable

(I) Revenue recognition

1. Description of matters

Please refer to Note IV-(35) and Note VI-43 of the consolidated financial statements for the accounting policies and book amount information of therevenue recognition of the Company in this year.The operating income of the Company in 2021 amounted to RMB7,982,426,800, which was the main source of its profit and affects its keyperformance indicators. In addition, according to the industry practice, after signing the sales order with customer, the Company arranges productionbased on customer’s requirements, delivers it to customers pursuant to the agreed delivery method, obtains the customer’s evidence on the transfer ofthe ownership of goods, and then recognizes the sales revenue. Since the time of revenue recognition is later than the product delivery, and thedelivery time and delivery document recognition are all dependent on the customer, there may be significant risk of misstatement if the sales revenueis fully included in the appropriate accounting period. Therefore, we recognize revenue as a key audit matter.

2. Audit Response

Our key audit procedures for revenue recognition include:

(1) Understand and evaluate the design of internal control of revenue recognition by the management, and test the effectiveness of key controlimplementation;

(2) Obtain a major business contract, identify terms and conditions related to the transfer of commodity ownership, and assess whether the incomerecognition policy of the Company is in line with the relevant provisions of the enterprise accounting standards;

(3) Understand the background and basic information of the main customers, identify whether they are related parties, and confirm the accountsreceivable balance and sales amount of the main customers by confirmation letters;

(4) Select samples from the sales revenue ledger, check the relevant documents such as contracts (orders), invoices, delivery documents, pay attentionto the delivery time, and check the revenue recognition time point;

(5) Check the sales revenue recognized before and after the balance sheet date with supporting documents of sales revenue recognition, andimplement the cut-off test and subsequent inspection procedures for revenue recognition;

(6) Assess whether the management’s disclosure of income statement is appropriate.

According to the audit procedures and the evidence we have obtained, we believe that the income of the Company is real and recorded correctlyduring the accounting period.(II) Provision for bad debts of accounts receivable

1. Description of matters

Please refer to Note IV-(12) and Note VI- 4 of the consolidated financial statements for the accounting policies and book value amount of accountsreceivables of the Company in this year.On December 31, 2021, the original book value of accounts receivable of the Company was RMB4,541,764,000, the bad debt provision wasRMB136,327,900, and the net value was RMB4,405,436,100, accounting for 16.86% of the total assets at the end of the period.Based on the financial situation of the counterparty, the management evaluates the guarantee obtained to the accounts receivable, the aging of theaccounts receivable, the credit rating and historical repayment record of the counterparty, and with reference to the historical credit loss experience,combined with the current situation and the forecast of the future economic situation, the management considers to accrue bad debt for the accountsreceivable according to the expected credit loss in the whole duration. As the determination of the amount of bad debt provision requires themanagement to use significant accounting estimates and judgments, and accounts receivable is important to the financial statements, therefore, weregard the bad debt provision of accounts receivable as a key audit matter.

2. Audit response

(1) Understand and evaluate the management’s key internal control over the daily management and provision for accounts receivable, and carry outthe corresponding walk through test;

(2) For accounts receivable with significant single amount and credit impairment occurred after initial recognition, all the bases for the management’sassessment of the expected future available cash flow shall be reviewed to analyze whether it is reasonable;

(3) For the accounts receivable of bad debt provision withdrawn by the management according to the combination of credit risk characteristics,combined with the credit risk characteristics and aging analysis, evaluate the rationality of the withdrawal of bad debt provision by the management;

(4) The adequacy of the management’s provision for bad debt is evaluated in combination with the check of payment collection after the period;

(5) Assess whether the management’s disclosure of accounts receivable financial statements is appropriate.Based on the audit procedures we have implemented and the evidence we have obtained, we believe that the accounting estimates of the bad debtprovision of accounts receivable made by the Company are fully reasonable.IV. Other InformationThe Company’s management is responsible for the other information. The other information comprises all of the information included in the financialreport other than the financial statements and our auditor’s report thereon.Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the otherinformation is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report thatfact. We have nothing to report in this regard.

V. Responsibilities of Management and Those Charged with Governance for FinancialStatements

The Company’s management is responsible for the preparation of the financial statements that give a fair view in accordance with CAS, and fordesigning, implementing and maintaining such internal control as the management determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going concern, disclosing,as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate theCompany or to cease operations, or have no realistic alternative but to do so.Those charged with governance are responsible for overseeing the Company’s financial reporting process.VI. Responsibilities of CPA for Auditing Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether dueto fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with CAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or errorand are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users takenon the basis of these financial statements.

As part of an audit in accordance with CAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform auditprocedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by themanagement.

4. Conclude on the appropriateness of the management’s use of the going concern basis of accounting. Based on the audit evidence obtained,conclude on whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continueas a going concern. If we conclude that a material uncertainty exists, we are required by CAS to draw users’ attention in our auditor’s report to therelated disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a goingconcern.

5. Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company toexpress an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remainsolely responsible for our audit opinion.We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant auditfindings, including any noteworthy deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,related safeguards.From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of thefinancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law orregulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits ofsuch communication.

II. Financial Statements

The unit of notes to financial statements is: RMB

1. Consolidated balance sheet

Prepared by: Yunnan Energy New Material Co., Ltd.

December 31, 2021

Unit: RMB

Item

ItemDecember 31, 2021December 31, 2020
Current assets:
Monetary funds1,833,450,205.692,374,743,862.70
Settlement reserves
Loans to banks and other financial institutions
Held-for-trading financial assets5,137,194.341,340,551,914.18
Derivative financial assets
Notes receivable368,575,191.23379,739,323.94
Accounts receivable4,405,436,085.522,328,215,706.27
Receivable financing526,473,335.53399,552,829.70
Prepayments226,474,516.69180,532,055.58
Premiums receivable
Reinsurance premium receivable
Reinsurance contract provision receivable
Other receivables8,119,316.7410,861,029.53
Including: Interest receivable
Dividends receivable
Financial assets held under resale agreements
Inventories1,681,448,170.291,157,030,660.71
Contractual assets
Held-for-sales assets
Non-current assets due within one year2,956,802.29
Other current assets407,556,013.80533,769,875.20
Total current assets9,462,670,029.838,707,954,060.10
Non-current assets:
Loans and advances to customers
Debt investment
Other debt investment
Long-term receivables0.00
Long-term equity investments3,545,984.213,375,208.87
Investments in other equity instruments110,000,000.00
Other non-current financial assets

Investment properties

Investment properties8,933,531.669,467,762.78
Fixed assets10,877,888,212.918,420,764,216.20
Construction in progress1,752,915,718.821,639,803,967.92
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets560,863,178.11461,898,594.16
Development expenditures
Goodwill520,230,679.65520,230,679.65
Long-term unamortized expenses3,559,617.176,645,427.28
Deferred income tax assets252,854,470.86202,903,996.37
Other non-current assets2,568,723,421.32599,190,933.07
Total non-current assets16,659,514,814.7111,864,280,786.30
Total assets26,122,184,844.5420,572,234,846.40
Current liabilities:
Short-term borrowings4,116,148,340.301,795,679,528.91
Borrowings from the central bank
Placements from banks and other financial institutions
Held-for-trading financial liabilities
Derivative financial liabilities
Notes payable487,407,828.53695,426,539.69
Accounts payable650,545,657.28471,076,518.22
Advances from customers
Contractual liabilities761,923,312.387,677,129.87
Financial assets sold under repurchase agreements
Customer bank deposits and due to banks and other financial institutions
Customer brokerage deposits
Securities underwriting brokerage deposits
Employee benefits payable33,329,916.7828,144,817.99
Taxes payable190,156,537.78178,984,075.44
Other payables70,277,422.63585,382,427.63
Including: Interest payable
Dividends payable9,778,239.097,871,573.20
Fees and commissions payable

Reinsurance amounts payable

Reinsurance amounts payable
Hold-for-sale liabilities
Non-current liabilities due within one year383,397,992.10526,281,063.88
Other current liabilities240,737,724.261,021,339.34
Total current liabilities6,933,924,732.044,289,673,440.97
Non-current liabilities:
Insurance contract reserves
Long-term borrowings2,803,108,832.302,666,911,132.37
Bonds payable413,239,181.29755,725,620.04
Including: preferred shares
Perpetual bonds
Lease liabilities
Long-term payables
Long-term payroll payable
Estimated liabilities
Deferred income754,958,659.55708,255,614.66
Deferred income tax liabilities141,144,032.72100,406,057.96
Other non-current liabilities538,517,694.55455,517,694.55
Total non-current liabilities4,650,968,400.414,686,816,119.58
Total liabilities11,584,893,132.458,976,489,560.55
Owners’ equity:
Share capital892,406,822.00886,566,151.00
Other equity instruments50,352,323.8092,433,139.11
Including: preferred shares
Perpetual bonds
Capital reserve7,635,639,929.527,229,135,825.83
Less: treasury stock204,444,302.78
Other comprehensive income-3,746,198.57
Special reserve
Surplus reserve173,392,922.26147,950,664.58
General risk provision
Undistributed profits5,288,265,431.082,746,794,868.15
Total owners’ equity attributable to parent company13,831,866,927.3111,102,880,648.67
Minority interests705,424,784.78492,864,637.18

Total owners’ equity

Total owners’ equity14,537,291,712.0911,595,745,285.85
Total liabilities and owners’ equity26,122,184,844.5420,572,234,846.40

Legal representative: Paul Xiaoming Lee Financial Controller: Li Jian Financial Manager: Deng Jinhuan

2. Balance sheet of the parent company

Unit: RMB

ItemDecember 31, 2021December 31, 2020
Current assets:
Monetary funds227,525,602.971,356,011,083.93
Held-for-trading financial assets1,210,015,416.66
Derivative financial assets
Notes receivable3,800,000.00439,422,816.05
Accounts receivable11,098,038.2013,500,863.18
Receivable financing
Prepayments178,525.89424,285.77
Other receivables6,692,163,939.274,145,526,029.74
Including: Interest receivable
Dividends receivable241,040,000.00241,040,000.00
Inventories23,374,673.7511,921,375.85
Contractual assets
Held-for-sales assets
Non-current assets due within one year
Other current assets7,931,629.01571,205.74
Total current assets6,966,072,409.097,177,393,076.92
Non-current assets:
Debt investment
Other debt investment
Long-term receivables
Long-term equity investments4,658,382,761.624,662,093,871.62
Investments in other equity instruments110,000,000.00
Other non-current financial assets
Investment properties
Fixed assets68,543,765.1072,475,302.27
Construction in progress

Productive biological assets

Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets11,017,155.7411,586,803.18
Development expenditures
Goodwill
Long-term unamortized expenses
Deferred income tax assets37,462.0135,786,244.88
Other non-current assets29,841,986.947,703,156.51
Total non-current assets4,877,823,131.414,789,645,378.46
Total assets11,843,895,540.5011,967,038,455.38
Current liabilities:
Short-term borrowings88,118,518.9023,027,741.64
Held-for-trading financial liabilities
Derivative financial liabilities
Notes payable200,000.00111,564,400.00
Accounts payable22,796,504.0232,501,970.95
Advances from customers
Contractual liabilities217,893.81306,389.38
Employee benefits payable
Taxes payable919,028.713,921,261.63
Other payables195,116,109.4298,408,526.81
Including: Interest payable
Dividends payable
Hold-for-sale liabilities
Non-current liabilities due within one year89,570,152.482,806,004.27
Other current liabilities3,828,326.1939,830.62
Total current liabilities400,766,533.53272,576,125.30
Non-current liabilities:
Long-term borrowings116,000,000.00290,000,000.00
Bonds payable413,239,181.29755,725,620.04
Including: preferred shares
Perpetual bonds
Lease liabilities

Long-term payables

Long-term payables
Long-term payroll payable
Estimated liabilities
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities529,239,181.291,045,725,620.04
Total liabilities930,005,714.821,318,301,745.34
Owners’ equity:
Share capital892,406,822.00886,566,151.00
Other equity instruments50,352,323.8092,433,139.11
Including: preferred shares
Perpetual bonds
Capital reserve9,749,414,509.209,347,283,545.82
Less: treasury stock204,444,302.78
Other comprehensive income
Special reserve
Surplus reserve145,640,411.27120,198,153.59
Undistributed profits280,520,062.19202,255,720.52
Total owners’ equity10,913,889,825.6810,648,736,710.04
Total liabilities and owners’ equity11,843,895,540.5011,967,038,455.38

3.Consolidated income statement

Unit: RMB

Item20212020
I. Total operating income7,982,426,810.594,283,007,589.11
Including: Operating income7,982,426,810.594,283,007,589.11
Interest income
Earned premium
Fee and commission incomes
II. Total operating cost4, 891,681,674.543,068,774,846.93
Including: operating cost4,002,023,714.232,456,998,310.23
Interest expense
Fee and commissions expenses

Cash surrender amount

Cash surrender amount
Net payments for insurance claims
Net provision for insurance liability contract reserves
Policy dividend expenses
Reinsurance expenses
Taxes and surcharges37,128,232.8432,491,020.28
Selling expenses74,035,002.3656,365,549.96
Administrative expenses216,333,939.36155,800,391.65
R&D expenses409,178,730.28178,243,333.28
Financial expenses152,982,055.47188,876,241.53
Including: Interest expense221,206,595.88203,597,658.74
Interest income20,299,433.2334,077,648.03
Add: Other income134,079,448.78139,662,812.37
Investment income (loss is indicated with “-”)27,109,413.028,627,395.44
Including: Income from investment in associates and joint ventures1,687,090.231,516,305.77
Derecognized financial assets measured by amortized cost-9,956,624.13
Exchange gain (loss is indicated with “-”)
Net exposure hedging income (loss is indicated with “-”)
Income from changes in fair value (loss is indicated with “-”)137,194.3410,951,914.18
Credit impairment losses (loss is indicated with “-”)-24,846,360.74-38,744,542.00
Asset impairment losses (loss is indicated with “-”)-10,663,472.55-17,810,098.57
Income from disposal of assets (loss is indicated with “-”)308,957.41-144,872.28
III. Operating profit (loss is indicated with “-”)3,216,870,316.311,316,775,351.32
Add: Non-operating income5,349,575.501,696,155.05
Less: Non-operating expenses2,645,030.215,224,424.09
IV. Total profit (total loss is indicated with “-”)3,219,574,861.601,313,247,082.28

Less: Income tax expense

Less: Income tax expense332,720,824.45137,597,621.36
V. Net profit (net loss is indicated with “-”)2,886,854,037.151,175,649,460.92
(I) Classified according to operating continuity
1. Net profit from continuing operations (net loss is indicated with “-”)2,886,854,037.151,175,649,460.92
2. Net profit from discontinuing operations (net loss is indicated with “-”)
(II) Classified according to attribution of the ownership
1. Net profit attributable to shareholders of the parent company2,717,628,798.011,115,604,020.47
2. Profit or loss of minority interest169,225,239.1460,045,440.45
VI. Other comprehensive income, net of tax-3,934,256.01
Other comprehensive income attributable to owners of parent company, net of tax-3,746,198.57
(I) Other comprehensive income that cannot be reclassified to profit or loss
1. Changes arising from re-measurement of the defined benefit plan
2. Other comprehensive income that cannot be reclassified into profit or loss under the equity method
3. Changes in fair value of other equity instrument investments
4. Changes in fair value of the enterprise’s credit risk
5. Others
(II) Other comprehensive income that will be reclassified subsequently to profit or loss-3,746,198.57
1. Other comprehensive income that can be reclassified into profit or loss under the equity method
2. Changes in fair value of other debt investments
3. Amount of the financial asset reclassified into other comprehensive income
4. Provision for credit impairment of other debt investment
5. Cash flow hedging reserve
6. Exchange differences from translation of statements denominated in foreign currencies-4,502,767.45
7.Provision for credit impairment of receivables financing756,568.88

Other comprehensive income attributable to minorityinterests, net of tax

Other comprehensive income attributable to minority interests, net of tax-188,057.44
VII. Total comprehensive income2,882,919,781.141,175,649,460.92
Total comprehensive income attributable to owners of parent company2,713,882,599.441,115,604,020.47
Total comprehensive income attributable to minority interests169,037,181.7060,045,440.45
VIII. Earnings per share:
(I) Basic earnings per share3.061.34
(II) Diluted earnings per share3.051.34

Legal representative: Paul Xiaoming Lee Financial Controller: Li Jian Financial Manager: Deng Jinhuan

4. Income statement of parent company

Unit: RMB

Item20212020
I. Operating income157,499,622.94234,623,935.16
Less: Operating cost103,455,015.75168,222,882.65
Taxes and surcharges2,141,286.642,880,451.60
Selling expenses819,867.31448,512.10
Administrative expenses18,055,936.7419,514,060.89
R&D expenses7,542,189.377,495,274.77
Financial expenses-195,072,440.78-4,489,911.90
Including: Interest expense47,201,667.42103,063,984.02
Interest income242,290,969.91107,278,598.69
Add: Other income2,643,407.78852,455.62
Investment income (loss is indicated with “-”)60,270,487.0858,000,000.00
Including: Income from investment in associates and joint ventures
Derecognized financial assets measured by amortized cost (loss is indicated with “-”)
Net exposure hedging income (loss is indicated with “-”)

Income from changes in fair value (loss is indicated with “-”)

Income from changes in fair value (loss is indicated with “-”)10,015,416.66
Credit impairment losses (loss is indicated with “-”)7,031,935.64-7,013,346.63
Asset impairment losses (loss is indicated with “-”)
Income from disposal of assets (loss is indicated with “-”)6,430.44-11,416.29
II. Operating profit (loss is indicated with “-”)290,510,028.85102,395,774.41
Add: Non-operating income22,407.40305,202.78
Less: Non-operating expenses130,596.96601,273.52
III. Total profit (total loss is indicated with “-”)290,401,839.29102,099,703.67
Less: Income tax expense35,979,262.54-25,870,566.29
IV. Net profit (net loss is indicated with “-”)254,422,576.75127,970,269.96
(I) Net profit from continuing operations (net loss is indicated with “-”)254,422,576.75127,970,269.96
(II) Net profit from discontinuing operations (net loss is indicated with “-”)
V. Other comprehensive income, net of tax
(I) Other comprehensive income that cannot be reclassified to profit or loss
1. Changes arising from re-measurement of the defined benefit plan
2. Other comprehensive income that cannot be reclassified into profit or loss under the equity method
3. Changes in fair value of other equity instrument investments
4. Changes in fair value of the enterprise’s credit risk
5. Others
(II) Other comprehensive income that will be reclassified subsequently to profit or loss
1. Other comprehensive income that can be reclassified into profit or loss under the equity method
2. Changes in fair value of other debt investments

3. Amount of the financial asset reclassified into other

comprehensive income

3. Amount of the financial asset reclassified into other comprehensive income
4. Provision for credit impairment of other debt investment
5. Cash flow hedging reserve
6. Exchange differences from translation of statements denominated in foreign currencies
7. Others
VI. Total comprehensive income254,422,576.75127,970,269.96
VII. Earnings per share:
(I) Basic earnings per share
(II) Diluted earnings per share

5. Consolidated cash flow statement

Unit: RMB

Item20212020
I. Cash flows from operating activities:
Cash received from the sale of goods or rendering of services6,192,723,975.823,191,214,990.25
Net increase in deposits from customers and placements from corporations in the same industry
Net increase in borrowings from the central bank
Net increase in placements from other financial institutions
Cash received for receiving premium of original insurance contract
Net cash received from reinsurance business
Net increase in deposits of the insured and investment
Cash received from interests, fees and commissions
Net increase in placements from banks and other financial institutions
Net increase in repurchasing
Net cash received from acting sale of securities
Receipts of tax refunds357,117,868.83245,563,708.07
Other cash receipts related to operating activities296,201,968.18343,505,512.60

Subtotal of cash inflows from operating activities

Subtotal of cash inflows from operating activities6,846,043,812.833,780,284,210.92
Cash payments for goods purchased and services received3,844,341,884.471,980,955,396.48
Net increase in loans and advances
Net increase in deposits in the Central Bank and other financial institutions
Cash paid for claim settlements on original insurance contract
Net increase in placements to banks and other financial institutions
Cash paid for interests, fees and commissions
Cash paid for policy dividends
Cash paid to and on behalf of employees653,147,819.25375,257,883.44
Payments of all types of taxes705,344,941.58256,970,205.27
Other cash payments relating to operating activities224,563,789.71111,920,712.54
Subtotal of cash outflows due to operating activities5,427,398,435.012,725,104,197.73
Net cash flows from operating activities1,418,645,377.821,055,180,013.19
II. Cash flows from investment activities:
Cash received from disposal of investments1,770,600,000.00860,750,000.00
Cash received from procuring investment income39,541,818.239,784,553.45
Net amount of cash received from disposal of fixed assets, intangible assets and other long-term assets4,743,027.471,981,312.22
Net cash received from disposals of subsidiaries and other business units
Other cash received relating to investment activities1,098,067.46
Subtotal of cash inflows from investment activities1,814,884,845.70873,613,933.13
Cash paid for acquisition of fixed assets, intangible assets and other long-term assets3,995,963,251.242,668,276,730.82
Cash paid for acquisition of investments1,059,810,518.382,190,350,000.00
Net increase in pledge loans
Net cash payments for acquisitions of subsidiaries and other business units768,910,958.56
Other cash paid relating to investment activities474,586,405.90521,580,488.33

Subtotal of cash outflows due to investment activities

Subtotal of cash outflows due to investment activities5,530,360,175.526,149,118,177.71
Net cash flows from investment activities-3,715,475,329.82-5,275,504,244.58
III. Cash flows from financing activities:
Cash received from absorbing investment41,323,782.655,182,504,554.49
Including: Cash received from subsidiaries’ absorbing minority shareholder investment41,323,782.65200,000,000.00
Cash received from borrowings6,075,195,864.976,453,328,220.70
Cash received from bond issuance1,586,122,641.51
Other cash received relating to financing activities
Subtotal of cash inflows from financing activities6,116,519,647.6213,221,955,416.70
Cash paid for debt repayment3,759,907,508.216,828,400,619.55
Cash paid for distributing dividends and profits or paying interests387,731,899.73337,184,434.87
Including: Dividends and profits paid to minority shareholders by subsidiaries
Cash payments relating to other financing activities355,820,208.65496,786,261.12
Subtotal of cash outflows from financing activities4,503,459,616.597,662,371,315.54
Net cash flows from financing activities1,613,060,031.035,559,584,101.16
IV. Effect of changes in exchange rate on cash and cash equivalents-1,846,294.98
V. Net increase in cash and cash equivalents-685,616,215.951,339,259,869.77
Add: Opening balance of cash and cash equivalents2,054,915,784.55715,655,914.78
VI. Closing balance of cash and cash equivalents1,369,299,568.602,054,915,784.55

6. Cash flow statement of parent company

Unit: RMB

Item20212020
I. Cash flows from operating activities:
Cash received from the sale of goods or rendering of services148,332,356.97195,880,806.69
Receipts of tax refunds2,400,340.221,492,265.95
Other cash receipts related to operating activities38,811,850.0883,978,889.93

Subtotal of cash inflows from operating activities

Subtotal of cash inflows from operating activities189,544,547.27281,351,962.57
Cash payments for goods purchased and services received57,469,797.5458,371,825.94
Cash paid to and on behalf of employees23,671,850.6522,027,502.06
Payments of all types of taxes24,606,426.0611,770,532.86
Other cash payments relating to operating activities64,565,222.6616,850,138.72
Subtotal of cash outflows due to operating activities170,313,296.91109,019,999.58
Net cash flows from operating activities19,231,250.36172,331,962.99
II. Cash flows from investment activities:
Cash received from disposal of investments1,203,711,110.00739,219,511.67
Cash received from procuring investment income70,285,903.7489,500,000.00
Net amount of cash received from disposal of fixed assets, intangible assets and other long-term assets2,717,733.88322,000.00
Net cash received from disposals of subsidiaries and other business units
Other cash received relating to investment activities1,318,235,358.191,764,000,000.00
Subtotal of cash inflows from investment activities2,594,950,105.812,593,041,511.67
Cash paid for acquisition of fixed assets, intangible assets and other long-term assets35,192,771.851,261,033.67
Cash paid for acquisition of investments110,000,000.002,433,478,760.67
Net cash payments for acquisitions of subsidiaries and other business units
Other cash paid relating to investment activities3,410,258,479.436,928,358,826.63
Subtotal of cash outflows due to investment activities3,555,451,251.289,363,098,620.97
Net cash flows from investment activities-960,501,145.47-6,770,057,109.30
III. Cash flows from financing activities:
Cash received from absorbing investment4,982,504,554.49
Cash received from borrowings108,000,000.001,416,500,000.00
Cash received from bond issuance1,586,122,641.51
Other cash received relating to financing activities918,990,595.872,207,533,096.38
Subtotal of cash inflows from financing activities1,026,990,595.8710,192,660,292.38

Cash paid for debt repayment

Cash paid for debt repayment130,000,000.001,284,486,222.89
Cash paid for distributing dividends and profits or paying interests166,972,238.46124,393,256.17
Cash payments relating to other financing activities891,825,843.08982,525,785.13
Subtotal of cash outflows from financing activities1,188,798,081.542,391,405,264.19
Net cash flows from financing activities-161,807,485.677,801,255,028.19
IV. Effect of changes in exchange rate on cash and cash equivalents
V. Net increase in cash and cash equivalents-1,103,077,380.781,203,529,881.88
Add: Opening balance of cash and cash equivalents1,329,918,428.70126,388,546.82
VI. Closing balance of cash and cash equivalents226,841,047.921,329,918,428.70

7. Consolidated statement of changes in owners’ equityAmount of current period

Unit: RMB

Item

Item2021
Owner’s equity attributable to parent companyMinority interestsTotal owners’ equity
Share capitalOther equity instrumentsCapital reserveLess: treasury stockOther comprehensive incomeSpecial reserveSurplus reserveGeneral risk provisionUndistributed profitsOtherSubtotal
Preferred stockPerpetual bondsOther
I. Closing balance of the previous year886,566,151.0092,433,139.117,229,135,825.83147,950,664.582,746,794,868.1511,102,880,648.67492,864,637.1811,595,745,285.85
Add: Accounting policy changes
Correction of errors in the prior period
Merger of enterprises under common control
Other
II. Opening balance of the current year886,566,151.0092,433,139.117,229,135,825.83147,950,664.582,746,794,868.1511,102,880,648.67492,864,637.1811,595,745,285.85
III. Increase/decrease for the period (decrease is indicated with “-”)5,840,671.00-42,080,815.31406,504,103.69204,444,302.78-3,746,198.5725,442,257.682,541,470,562.932,728,986,278.64212,560,147.602,941,546,426.24
(I) Total comprehensive income-3,746,198.572,717,628,798.012,713,882,599.44169,037,181.702,882,919,781.14
(II) Contribution and withdrawal of capital by owners5,840,671.00-42,080,815.31406,504,103.69204,444,302.78165,819,656.6045,429,631.79211,249,288.39

1. Common shares

invested by owner

1. Common shares invested by owner-13,222,553.45-13,222,553.4544,546,336.1031,323,782.65
2. Capital invested by other equity instrument holders5,840,671.00-42,080,815.31402,130,963.38365,890,819.07365,890,819.07
3. Amount of share payment credited to owner’s equity17,595,693.76204,444,302.78-186,848,609.02883,295.69-185,965,313.33
4. Other
(III) Profit distribution25,442,257.68-176,158,235.08-150,715,977.40-1,906,665.89-152,622,643.29
1. Withdrawal of surplus reserve25,442,257.68-25,442,257.68
2. Provision for general risk
3. Distribution to owners (or shareholders)-150,715,977.40-150,715,977.40-1,906,665.89-152,622,643.29
4. Other
(IV) Transfers within the owners’ equity
1. Conversion of capital reserve to capital (or share capital)
2. Conversion of surplus reserve to capital (or share capital)
3. Covering loss with surplus reserve
4. Change of defined benefit plan carried forward to retained earning

5. Other

comprehensiveincome carriedforward to retainedearning

5. Other comprehensive income carried forward to retained earning
6. Other
(V) Special reserve
1. Provision for the period
2. Utilization for the period
IV. Other
IV. Closing balance for the period892,406,822.0050,352,323.807,635,639,929.52204,444,302.78-3,746,198.57173,392,922.265,288,265,431.0813,831,866,927.31705,424,784.7814,537,291,712.09

Amount of previous period

Unit RMB

Item2020
Owner’s equity attributable to parent companyMinority interestsTotal owners’’ equity
Share capitalOther equity instrumentsCapital reserveLess: treasury stockOther comprehensive incomeSpecial reserveSurplus reserveGeneral risk provisionUndistributed profitsOtherSubtotal
Preferred stockPerpetual bondsOther
I. Closing balance of the previous year805,370,770.001,894,027,132.1428,137,312.00135,153,637.581,744,638,648.714,551,052,876.43330,073,008.954,881,125,885.38
Add: Accounting policy changes
Correction of errors in the prior period

Merger of enterprisesunder common control

Merger of enterprises under common control
Other
II. Opening balance of the current year805,370,770.001,894,027,132.1428,137,312.00135,153,637.581,744,638,648.714,551,052,876.43330,073,008.954,881,125,885.38
III. Increase/decrease for the period (decrease is indicated with “-”)81,195,381.0092,433,139.115,335,108,693.69-28,137,312.0012,797,027.001,002,156,219.446,551,827,772.24162,791,628.236,714,619,400.47
(I) Total comprehensive income1,115,604,020.471,115,604,020.4760,045,440.451,175,649,460.92
(II) Contribution and withdrawal of capital by owners81,195,381.0092,433,139.115,335,108,693.69-28,137,312.005,536,874,525.80105,657,760.985,642,532,286.78
1. Common shares invested by owner69,444,444.004,592,771,403.984,662,215,847.9881,080,000.004,743,295,847.98
2. Capital invested by other equity instrument holders11,774,057.0092,433,139.11779,622,447.50883,829,643.61883,829,643.61
3. Amount of share payment credited to owner’s equity21,332,629.0421,332,629.04883,295.7022,215,924.74
4. Other-23,120.00-58,617,786.83-28,137,312.00-30,503,594.8323,694,465.28-6,809,129.55

(III) Profit distribution

(III) Profit distribution12,797,027.00-113,447,801.03-100,650,774.03-2,911,573.20-103,562,347.23
1. Withdrawal of surplus reserve12,797,027.00-12,797,027.00
2. Provision for general risk
3. Distribution to owners (or shareholders)-100,650,774.03-100,650,774.03-2,911,573.20-103,562,347.23
4. Other
(IV) Transfers within the owners’ equity
1. Conversion of capital reserve to capital (or share capital)
2. Conversion of surplus reserve to capital (or share capital)
3. Covering loss with surplus reserve
4. Change of defined benefit plan carried forward to retained earning
5. Other comprehensive income carried forward to retained earning
6. Other
(V) Special reserve
1. Provision for the period
2. Utilization for the period
IV. Other
IV. Closing balance for the period886,566,151.0092,433,139.117,229,135,825.83147,950,664.582,746,794,868.1511,102,880,648.67492,864,637.1811,595,745,285.85

8. Statement of changes in owners’ equity of parent companyAmount of current period

Unit: RMB

Item2021
Share capitalOther equity instrumentsCapital reserveLess: treasury stockOther comprehensive incomeSpecial reserveSurplus reserveUndistributed profitsOtherTotal owners’ equity
Preferred stockPerpetual bondsOther
I. Closing balance of the previous year886,566,151.0092,433,139.119,347,283,545.82120,198,153.59202,255,720.5210,648,736,710.04
Add: Accounting policy changes
Correction of errors in the prior period
Other
II. Opening balance of the current year886,566,151.0092,433,139.119,347,283,545.82120,198,153.59202,255,720.5210,648,736,710.04
III. Increase/decrease for the period (decrease is indicated with “-”)5,840,671.00-42,080,815.31402,130,963.38204,444,302.7825,442,257.6878,264,341.67265,153,115.64
(I) Total comprehensive income254,422,576.75254,422,576.75
(II) Contribution and withdrawal of capital by owners5,840,671.00-42,080,815.31402,130,963.38204,444,302.78161,446,516.29
1. Common shares invested by owner
2. Capital invested by other equity instrument holders5,840,671.00-42,080,815.31402,130,963.38365,890,819.07

3. Amount of share

payment credited toowner’s equity

3. Amount of share payment credited to owner’s equity204,444,302.78
4. Other
(III) Profit distribution25,442,257.68-176,158,235.08-150,715,977.40
1. Withdrawal of surplus reserve25,442,257.68-25,442,257.68
2. Distribution to owners (or shareholders)-150,715,977.40-150,715,977.40
3. Other
1. Conversion of capital reserve to capital (or share capital)
2. Conversion of surplus reserve to capital (or share capital)
3. Covering loss with surplus reserve
4. Change of defined benefit plan carried forward to retained earning
5. Other comprehensive income carried forward to retained earning
6. Other
(V) Special reserve
1. Provision for the period
2. Utilization for the period
(VI) Others
IV. Closing balance for the period892,406,822.0050,352,323.809,749,414,509.20204,444,302.78145,640,411.27280,520,062.1910,913,889,825.68

Amount of previous period

Unit: RMB

Item

Item2020
Share capitalOther equity instrumentsCapital reserveLess: treasury stockOther comprehensive incomeSpecial reserveSurplus reserveUndistributed profitsOtherTotal owners’ equity
Preferred stockPerpetual bondsOther
I. Closing balance of the previous year805,370,770.003,651,035,741.6928,137,312.00107,401,126.59187,733,251.594,723,403,577.87
Add: Accounting policy changes
Correction of errors in the prior period
Other
II. Opening balance of the current year805,370,770.003,651,035,741.6928,137,312.00107,401,126.59187,733,251.594,723,403,577.87
III. Increase/decrease for the period (decrease is indicated with “-”)81,195,381.0092,433,139.115,696,247,804.13-28,137,312.0012,797,027.0014,522,468.935,925,333,132.17
(I) Total comprehensive income127,970,269.96127,970,269.96
(II) Contribution and withdrawal of capital by owners81,195,381.0092,433,139.115,696,247,804.13-28,137,312.005,898,013,636.24
1. Common shares invested by owner69,444,444.004,913,060,110.494,982,504,554.49
2. Capital invested by other equity instrument holders11,774,057.0092,433,139.11779,622,447.50883,829,643.61
3. Amount of share payment credited to owner’s equity3,736,935.263,736,935.26

4. Other

4. Other-23,120.00-171,689.12-28,137,312.0027,942,502.88
(III) Profit distribution12,797,027.00-113,447,801.03-100,650,774.03
1. Withdrawal of surplus reserve12,797,027.00-12,797,027.00
2. Distribution to owners (or shareholders)-100,650,774.03-100,650,774.03
1. Conversion of capital reserve to capital (or share capital)
3. Covering loss with surplus reserve
4. Change of defined benefit plan carried forward to retained earning
5. Other comprehensive income carried forward to retained earning
6. Other
(V) Special reserve
1. Provision for the period
2. Utilization for the period
(VI) Others
IV. Closing balance for the period886,566,151.0092,433,139.119,347,283,545.82120,198,153.59202,255,720.5210,648,736,710.04

III. Corporate Information

(i) Company registration address, organization form and headquarters addressYunnan Energy New Material Co., Ltd. (hereinafter referred to as the “Company” or “our Company”) was formerly Yunnan Yuxi InnovationColor Printing Co., Ltd. with the approval of Department of Commerce of Yunnan Province document YSZ [2011] No.50, the shareholders of theCompany signed the sponsor agreement on March 28, 2011, unanimously agreed to change the Company as a whole into a company limited by share,and obtained the business license of enterprise legal person No.530400400000009 issued by Yunnan Provincial Administration for Industry andCommerce, which is now changed to the unified social credit code 91530000727317703K, with the registered address and headquarters address ofNo.125, Fuxian Road, High-tech Zone, Yuxi City, Yunnan Province. The Company’s legal representative is PAUL XIAOMING LEE.In accordance with the resolution of the first extraordinary general meeting of shareholders in 2014 held in March 2014 and the revised articlesof association of the Company, and the Approval of Initial Public Offering of Shares of Yunnan Innovative New Materials Co., Ltd. (ZJXK [2016] No.1886) issued by China Securities Regulatory Commission, the Company issued RMB-denominated ordinary shares (A shares) of 33,480,000 to thepublic. It was priced and issued to the public investors on September 6, 2016, with a par value of RMB1.00 per share, a subscription price ofRMB23.41 per share, and a total of RMB783,766,800.00 raised funds. After deducting the issuance related expenses of RMB35,999,800.00, theactual net amount of raised funds is RMB747,767,000.00 yuan, which is included share capital of RMB33,480,000.00 and capital reserve-sharecapital premium of RMB714,287,000.00. All the above contributions have been paid in place and have been verified by Dahua CPAs (SGP) issuingthe capital verification report (DHYZ [2016] No. 000897).According to the Notice on the Listing of RMB-denominated Ordinary Shares of Yunnan Innovative New Materials Co., Ltd. (SZS (2016)No.618) issued by Shenzhen Stock Exchange, the shares of the Company were listed on Shenzhen Stock Exchange on September 14, 2016.According to the fourth meeting of the third board of directors held on June 1, 2017, which deliberated and passed the Proposal on GrantingRestricted Shares to Participants of 2017 Restricted Stock Incentive Plan of the Company, the Company issued 2.57 million RMB-denominatedordinary shares (issue price: RMB28.65/share) to 84 employees qualified for participants of equity incentive plan, among them: the amount of sharecapital is RMB2,570,000.00, and capital reserve-share capital premium is RMB71,060,500.00. All the above capital contributions have beensubscribed in place and have been verified by Dahua CPAs (SGP) issuing the capital verification report (DHYZ [2017] No.000338).

Whereas the Company has completed capital reserve converted to share capital, according to the resolution of the second extraordinary generalmeeting of shareholders in 2018 held on May 10, 2018 and the revised articles of association, the registered capital of the Company has increasedfrom RMB136,450,000.00 to RMB272,900,000.00.In accordance with the resolution of the fourteenth meeting of the third board of directors held by the Company on July 20, 2018 and the revisedarticles of association, and approved by China Securities Regulatory Commission (hereinafter referred to as “CSRC”) ZJXK [2018] No. 671 andMinistry of Commerce of the People’s Republic of China (hereinafter referred to as “Ministry of Commerce”) SZCH [2018] No. 225, the Companyissued 201,023,712 A-shares in private to Paul Xiaoming Lee, Li Xiaohua, Wang Yuhua, Kunming Huachen Investment Co., Ltd., Sherry Lee, FutureIndustry Investment Fund (Limited Partnership), Shanghai Hengzou Enterprise Management Firm (Limited Partnership), Huang Shuhua, Zhang Tao,Gao Xiang, He Baohua, Huang Yuchen, Hu Jiadong, Wang Chizhou, Jiang Xinmin, Zhang Fang, Zhang Fan, Zheng Mei, Liu Wei, Du Jun and CaoBen, with a par value of RMB1.00 per share and a subscription price of RMB24.87 per share. After the issuance of the shares, the shareholders’ equityassets of RMB4,999,459,975.00 were actually received, and the registered capital of RMB201,023,712.00 was actually paid, and the mode ofcontribution was equity capital contribution. The newly increased share capital is RMB201,023,712.00, the newly increased capital reserve (sharecapital premium) is RMB4,798,436,263.00, and the registered capital after the change is RMB473,923,712.00, which has been verified by DahuaCPAs (SGP) with the capital verification report (DHYZ [2018] No. 000430).According to the resolution of the fourth extraordinary general meeting of shareholders of 2018 held by the Company on September 3, 2018 andthe revised articles of association of the Company, the Company canceled the repurchase of part of incentive shares, repurchased the sharessubscribed by seven natural persons in the form of monetary capital, totaling RMB799,335.00, including: reducing share capital by RMB55,800.00,reducing capital reserve-share capital premium by RMB743,535.00. It has been verified by the capital verification report (DHYZ [2018] No. 000514)issued by Dahua CPAs (SGP).According to the resolution of the 19th meeting of the third board of directors held by the Company on September 28, 2018 and the revisedarticles of association, the Company changed its name from Yunnan Innovative New Material Co., Ltd. to Yunnan Energy New Material Co., Ltd.Whereas the Company has completed the conversion of capital reserve to share capital, according to the resolution of the sixth extraordinarygeneral meeting of shareholders in 2019 held on July 29, 2019 and the revised articles of association, the registered capital of the Company hasincreased from RMB473,867,912.00 to RMB805,575,450.00.According to the resolution of the sixth extraordinary general meeting of shareholders of 2019 held by the Company on July 29, 2019, theresolution of the seventh extraordinary general meeting of shareholders of 2019 held on August 15, 2019 and the amended articles of association, theCompany canceled the repurchase of part of incentive shares, repurchased the shares subscribed by 17 natural persons in monetary funds, with a totalamount of RMB1,151,665.68, including: reduction of share capital by RMB136,680.00, reducing capital reserve-share capital premium byRMB1,014,985.68. In addition, according to the resolution of the seventh extraordinary general meeting of shareholders in 2019 held on August 15,2019 and the revised articles of association, the Company canceled the share buyback of the resigned participants, and repurchased the shares

subscribed by one natural person in the form of monetary capital, with a total amount of RMB601,580.59, including a decrease of share capital ofRMB68,000.00 and a decrease of capital reserve-share capital premium of RMB533,580.59. It has been verified by the capital verification report(DHYZ [2019] No. 000324) issued by Dahua CPAs (SGP).According to the resolutions of the 43rd meeting of the third board of directors held on March 23, 2020, the resolutions of the 2020 firstextraordinary general meeting of shareholders held on April 9, 2020, and the resolutions of the third meeting of fourth board of directors held on June12, 2020 and the Approval of the Non-public Issuance of Shares by Yunnan Energy New Material Co., Ltd.” (ZJXK [2020] No. 1476) issued byChina Securities Regulatory Commission, the Company’s non-public issuance shall not exceed 241,611,231 RMB-denominated ordinary shares. TheCompany non-publicly issued 69,444,444 RMB-denominated ordinary shares (A shares) to specific investors on August 17, 2020, with a par value ofRMB1.00 per share, and a subscription price of RMB72.00 per share. A total of RMB4,999,999,968.00 was raised. Excluding the cost ofRMB17,495,413.51 related to the issuance, the Company’s actual net funds raised were RMB4,982,504,554.49, of which RMB69,444,444.00 wasincluded in the share capital and RMB4,913,060,110.49 was included in the capital reserve-share capital premium. All the above capital contributionshave been subscribed in place and have been verified by Dahua CPAs (SGP) issuing the capital verification report (DHYZ [2020] No. 000460).Approved by the Reply on Approval of Yunnan Energy New Materials Co., Ltd. to Issue Convertible Corporate Bonds Publicly (ZJXK [2019]No. 2701) issued by China Securities Regulatory Commission, the Company publicly issued 16 million convertible corporate bonds on February 11,2020. The conversion period of convertible corporate bonds shall start from the first trading day six months after the end of the issuance to thematurity date of the convertible corporate bonds, that is, from August 17, 2020 to February 11, 2026. As of December 31, 2021, a total of17,614,728.00 shares of convertible corporate bonds were converted into shares.

According to the resolution of the fourth extraordinary general meeting of shareholders of 2020 held by the Company on July 30, 2020 and therevised articles of association of the Company, the Company canceled the repurchase of part of incentive shares, repurchased the shares subscribed byfour natural persons in the form of monetary capital, totaling RMB194,809.12, including: reducing share capital by RMB23,120.00, reducing capitalreserve-share capital premium by RMB171,689.12. It has been verified by the capital verification report (DHYZ [2020] No. 000561) issued by DahuaCPAs (SGP).After years of distribution of bonus shares, allotment of new shares, conversion of share capital and issuance of new shares, as of December 31,2021, the Company has issued a total of 892,406,822.00 shares of share capital, with a registered capital of RMB892,406,822.00.

(ii)Business nature and main business activities of the Company

The business scope of the Company mainly includes: Packaging and decoration and other printing products printing; commodity trademarkprinting (including tobacco and drug trademarks), trademark design; packaging box production, processing and sales; color printing; paper products(excluding paper making), plastic products and other supporting products production, processing and sales; production, processing and sales ofprinting raw materials and auxiliary materials; production, processing, sale of laminated film and modified plastics; production, processing and sale oflaser transfer paper, gold and silver card paper, liquid packaging paper, electrified aluminum, high-grade packaging paper; production, processing andmarketing of anti-counterfeiting labels, anti-counterfeiting materials; packaging machinery, packaging machinery spare parts design, manufacture,processing and marketing; production, processing and sale of new energy materials and corresponding new technologies and new productsdevelopment; import and export of goods (except those with national restrictions and prohibition). (the above projects do not involve specialmanagement measures for foreign investment access) (approvals from competent authorities shall be obtained for the operation of the activitiesrequiring approval in accordance with the laws)

The Company is a rubber and plastic products industry, and the main products can be divided into three categories: (1) film products, mainlyincluding lithium-ion separator film, BOPP film and special paper. Lithium-ion separator film products include base film and coating film, and BOPPfilm products include smoke film and flat film; (2) packaging and printing products, mainly including cigarette label and aseptic packaging; (3) paperproducts packaging mainly includes special paper products, holographic anti-counterfeiting electrified aluminium, transfer film and other products.Special paper products include laser transfer anti-counterfeiting paper, direct plating paper and coated paper.

(iii) Authorization of financial statements for issue

These financial statements were authorized for issue by the Company’s Board of Directors on April 11, 2022.(iv) Scope of the Consolidated Financial Statements

There are 27 subsidiaries included in the consolidated financial statements in this period, including:

Name of subsidiaries

Name of subsidiariesType of subsidiaryTierShareholding ratio (%)Voting ratio (%)

Yunnan Dexin Paper Co., Ltd.

Yunnan Dexin Paper Co., Ltd.Wholly-owned subsidiaryTier 2100.00100.00
Yunnan Hongchuang Packaging Co., Ltd.Holding subsidiaryTier 259.4659.46
Yunnan Hongta Plastic Co., Ltd.Wholly-owned subsidiaryTier 2100.00100.00
Hongta Plastic (Chengdu) Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Yuxi Feiermu Trading Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Shanghai Energy New Material Technology Co., Ltd.Holding subsidiaryTier 295.2295.22

Zhuhai Energy New Material Technology Co., Ltd.

Zhuhai Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Guangdong Energy New Material Institute Co., Ltd.Wholly-owned subsidiaryTier 4100.00100.00
Wuxi Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Jiangxi Tonry New Energy Technology Development Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00

Jiangsu Ruijie New Material Technology Co., Ltd.

Jiangsu Ruijie New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00

Jiangxi Ruijie New Material Technology Co., Ltd.

Jiangxi Ruijie New Material Technology Co., Ltd.Holding subsidiaryTier 482.0082.00
Suzhou Green Power New Energy Material Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Foshan Donghang Photoelectric Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Chongqing Energy Newmi Technological Co., Ltd.Holding subsidiaryTier 376.357476.3574
Jiangxi Enpo New Materials Co., Ltd.Holding subsidiaryTier 351.0051.00
Jiangxi Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Jiangsu Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Hunan Energy Advanced New Material Technology Co., Ltd.Holding subsidiaryTier 365.0065.00
Ningbo Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 2100.00100.00
Chongqing Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Hainan Energy Investment Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Chuangxin New Material (Hong Kong) Co., Ltd.Wholly-owned subsidiaryTier 4100.00100.00
SEMCORP Global Holdings Kft.Wholly-owned subsidiaryTier 5100.00100.00
SEMCORP Hungary Kft.Wholly-owned subsidiaryTier 6100.00100.00
Hubei Energy New Material Technology Co., Ltd.Wholly-owned subsidiaryTier 3100.00100.00
Jiangsu Sanhe Battery Material Technology Co., Ltd.Holding subsidiaryTier 367.105367.1053

For the reason why the proportion of shareholding of the subsidiary is different from the proportion of the voting rights, and holding half orbelow the voting right but still controlling the invested unit, please refer to “1. Interests in Subsidiaries” of “IX. Interests in Other Entities” in thissection.

Compared with the last year, 9 new entities were included in and 3 entities were removed from the consolidated financial statements this year:

1. New subsidiaries included in the consolidated financial statements this year

NameReason for change

Jiangsu Ruijie New Material Technology Co., Ltd.

Jiangsu Ruijie New Material Technology Co., Ltd.Newly established
Jiangxi Enpo New Material Co., Ltd.Newly established
Jiangsu Energy New Material Technology Co., Ltd.Newly established
Hunan Energy Advanced New Material Technology Co., Ltd.Newly established
Ningbo Energy New Material Co., Ltd.Newly established

Jiangxi Energy New Material Technology Co., Ltd.

Jiangxi Energy New Material Technology Co., Ltd.Newly established

Chongqing Energy New Material Technology Co.,Ltd.

Chongqing Energy New Material Technology Co., Ltd.Newly established
Hubei Energy New Material Technology Co., Ltd.Newly established
Jiangsu Sanhe Battery Material Technology Co., Ltd.Newly established

2. Subsidiaries removed from the consolidated financial statements this year

NameReason for change

Shenzhen Qingsong Jinze Technology DevelopmentCo., Ltd.

Shenzhen Qingsong Jinze Technology Development Co., Ltd.Canceled

Hunan Qingsong Jingze Technology DevelopmentCo., Ltd.

Hunan Qingsong Jingze Technology Development Co., Ltd.Canceled
Wuxi Energy Trading Co., Ltd.Canceled

See “VIII change of consolidation scope” for details of the subject in the scope of consolidated financial statements.

IV. Basis for Preparation of Financial Statements

1. Basis for preparation

The preparation of financial statements of the Company is based on the actual transactions and events in accordance with the “AccountingStandards for Business Enterprises - Basic Standards” published by the Ministry of Finance and specific corporate accounting standards, applicationguidelines for corporate accounting standards, corporate accounting standards interpretations and other relevant regulations (hereinafter collectivelyreferred to as “corporate accounting standards”) for confirmation and measurement, combining the provisions of “Regulations on the InformationDisclosure and Compilation of Companies Offering Securities to the Public No. 15 - General Provisions on Financial Reports” (revised in 2014)published by CSRC.

2. Going concern basis

The Company has evaluated the ability to continue as a going concern for 12 months from the end of the Reporting Period and has not identifiedany issues or circumstances that result in significant doubts about its ability to continue as a going concern. Therefore, the financial statements havebeen prepared on a going concern basis.

V. Significant Accounting Policies and Accounting Estimates

Reminders on specific accounting policies and accounting estimates:

According to the characteristics of actual production and operation, the Company has formulated specific accounting policies and accountingestimates for such transactions or events as the provision for bad debts of accounts receivables, depreciation of fixed assets, amortization of intangibleassets and revenue recognition.

1. Statement of compliance with the accounting standards for business enterprises

The financial statements are in compliance with the requirements of accounting standards for business enterprises, and truly and completely reflect thefinancial status, operating results, cash flow and other relevant information of the Company during the Reporting Period.

2. Accounting period

The Company’s accounting year starts on 1 January and ends on 31 December.

3. Operating cycle

Operating cycle refers to the period from the purchase of assets for processing to the realization of cash or cash equivalents. The Company takes 12months as an operating cycle and uses it as the standard for dividing the liquidity of assets and liabilities.

4. Functional currency

The Company’s functional currency is Renminbi (RMB).

5. Accounting treatments for merger of enterprises under common control and not under common control

(1) When the terms, conditions and economic influence of transactions in the process of a step-by-step combination conform to one or moreof the following, accounting for multiple transactions is treated as a package transaction.

1) These transactions are made simultaneously or with consideration of influence on each other;

2) These transactions can only achieve a complete business outcome when treated as a whole;

3) The occurrence of a transaction depends on the occurrence of at least one of the other transactions;

4) A transaction is uneconomical when treated alone, but is economical when considered together with other transactions.

(2) Business combination under common control

The assets and liabilities acquired by the Company in business combinations are measured in accordance with the book value of assets and liabilitiesof the combined party in the ultimate controller’s consolidated financial statements on the date of combination (including the goodwill of the ultimatecontrolling party resulting from the acquisition of the combined party). The difference between the book value of net assets acquired in thecombination and the book value of the consideration paid for the combination (or the total par value of shares issued) is used to adjust the capitalstock premium in the capital reserve, and when the capital stock premium in the capital reserve is insufficient for offset, it is used to adjust theretained earnings.

If there is a contingent consideration and it is necessary to confirm the estimated liabilities or assets, the difference between the estimated amount ofliabilities or assets and the settlement amount of subsequent contingent consideration is used to adjust the capital reserve (capital premium orpremium on capital stock), and when the capital reserve is insufficient, it is used to adjust the retained earnings.

For a business combination that is ultimately realized through multiple transactions, if it is a package transaction, each transaction is treated as atransaction that acquires control; if it is not a package transaction, on the date of acquisition of control, the difference between the initial cost oflong-term equity investment and the book value of long-term equity investment before the combination plus the book value of the new paidconsideration on the date of combination is used to adjust the capital reserve; and when the capital reserve is insufficient for offset, it is used to adjustthe retained earnings. For equity investments held prior to the date of combination, no accounting treatment is carried out for other comprehensiveincome recognized by equity accounting or financial instrument confirmation and measurement standards, and up to the disposal of the investment,the accounting treatment shall be based on the same basis as the direct disposal of the assets or liabilities of the invested entity; other changes inowner’s equity other than net profit or loss, other comprehensive income or profit distribution of net assets of the invested company recognized byequity method are not subject to accounting, and will be transferred to the current profit and loss until the disposal of the investment.

(3) Business combination not under the common control

Purchase date refers to the date when the Company actually obtains the control right over the acquire, that is, the date when the control right over thenet assets or production and operation decision is transferred to the Company. When the following conditions are met at the same time, the Companygenerally considers that the transfer of control right has been realized:

① The business combination contract or agreement has been approved by the internal authority of the Company.

② The business combination matters that need to be examined and approved by the relevant competent departments of the state have been approved.

③ Necessary procedures for transfer of property rights have been completed.

④ The Company has paid most of the merger price, and has the ability and plan to pay the remaining amount.

⑤ In fact, the Company has controlled the financial and operational policies of the acquiree, enjoyed corresponding benefits and assumedcorresponding risks.

The assets paid and liabilities incurred or assumed of the Company as a consideration for the business combination are measured at fair value onthe date of purchase, and the difference between the fair value and the book value is recognized in profit or loss.

The difference between the higher combination cost and lower fair value of identifiable net assets of the acquiree gained in the combination isrecognized as goodwill by the Company. In case that the cost of combination is less than the fair value of the identifiable net assets of the acquireegained in the combination, the difference is included in the current profit and loss by the Company after review.

For the case where a business combination involving enterprises not under common control is finally realized through multiple transactions stepby step, if it is a package transaction, each transaction is treated as a transaction for acquiring control; if it is not a package transaction, if the equityinvestment held before the date of combination is accounted for by equity method, the book value of equity investment of the acquiree held before thedate of acquisition plus the new investment cost on the date of acquisition is recognized as the initial cost of the investment; the other comprehensiveincome confirmed by equity method before the date of acquisition is accounted for, when the investment is disposed, on the same basis as those theinvested party adopted directly to dispose the relevant assets or liabilities. If the equity investment held before the date of combination is accountedfor by financial instrument recognition and measurement criteria, the fair value of equity investment on the date of combination plus the newinvestment cost is taken as the initial investment cost on the date of combination. The difference between the fair value and the book value of theoriginal equity interest, and the accumulated fair value changes originally included in other comprehensive income should be transferred toinvestment income in the current period of combination date.

(4) Related expenses incurred for business combination

The agency fees paid for audits, legal services, assessments and other related expenses incurred in the business combination are recognized inprofit or loss in the period in which they are incurred. The transaction costs for the issuance of equity securities for the business combination that maybe directly attributed to equity transactions can be deducted from equity.

6. Methods for preparation of the consolidated financial statements

(1) The scope of consolidation

The scope of consolidation of the Company’s consolidated financial statements is determined on the basis of control, and all subsidiaries(including separate entities controlled by the Company as the parent) are included in the consolidated financial statements.

(2) Procedures for consolidation

The Company prepares consolidated financial statements based on the financial statements of itself and its subsidiaries and other relevantinformation. While preparing consolidated financial statements, the Company treats the entire enterprise group as an accounting entity, and inaccordance with the requirements for confirmation, measurement and presentation of relevant enterprise accounting standards, and based on unifiedaccounting policies, reflects the overall financial status, operating results and cash flow of the enterprise group.

The accounting policies and accounting periods adopted by all subsidiaries included in the consolidated financial statements are consistent withthe Company. If the accounting policies or accounting periods adopted by the subsidiaries are inconsistent with the Company, necessary adjustmentswill be made in accordance with the Company’s accounting policies and accounting periods when preparing consolidated financial statements.

The impact of internal transactions between the Company and its subsidiaries, and internal transactions between subsidiaries, on the consolidatedbalance sheet, consolidated income statement, consolidated cash flow statement and consolidated statement of changes in shareholders’ equity isoffset in the preparation of consolidated financial statements. If the determination of the same transaction is different from the perspective of theconsolidated financial statements of the enterprise group and with the Company or subsidiaries as the accounting entity, the transaction shall beadjusted from the perspective of the enterprise group.

Subsidiary owners’ equity, current net profit and loss, and current comprehensive income of the minority shareholders are separately presentedunder the owner’s equity item in the consolidated balance sheet, the net profit item in the consolidated income statement, and the total comprehensiveincome item. If the current losses shared by the minority shareholders of a subsidiary exceed the share enjoyed by the minority shareholder in theinitial owner’s equity of the subsidiary, the excess is deducted from the minority interests.

For subsidiaries acquired from a business combination involving enterprises under common control, the individual financial statements of thesubsidiaries shall be adjusted based on the book value of their assets and liabilities (including the goodwill arising from the ultimate controller’sacquisition of the subsidiary) in the ultimate controller’s financial statements.

For subsidiaries acquired from a business combination involving enterprises not under common control, the financial statements of thesubsidiaries are adjusted based on the fair value of the identifiable net assets at the acquisition date.

1) Increase in subsidiary or business

During the reporting period, if a subsidiary or business is added due to a business combination under common control, the opening amount of theconsolidated balance sheet shall be adjusted; the income, expenses and profits of the subsidiary or business combination from the beginning of thecurrent period to the end of the reporting period shall be included in the consolidated income statement; the cash flow from the beginning of thecurrent period to the end of the reporting period of the subsidiary or business combination is included in the consolidated cash flow statement, and therelevant items in the comparative statement are adjusted at the same time, as if the consolidated reporting entity has been in existence since theultimate controller begins the control.

If the investee under the common control can be controlled due to additional investment or other reasons, the parties involved in the merger shallbe deemed to have made adjustments in their current state when the ultimate controlling party begins the control. For the equity investment held by

the merging entity prior to obtaining control over the merged entity, the relevant profit and loss, other comprehensive income and other changes to netassets recognized in the period from the date of acquiring the original equity or the date when the merging entity and merged entity are under commoncontrol, whichever is later, to the date of merger, shall be covered by writing down the opening retained earnings or current profit and loss of thecomparison period.

During the Reporting Period, if a subsidiary or business is added due to a business combination involving enterprises under non-common control,the opening balance of the consolidated balance sheet is not adjusted; the income, expenses and profits of the subsidiary and business from the date ofacquisition to the end of the Reporting Period are included in the consolidated income statement; the cash flows of the subsidiary and business fromthe date of acquisition to the end of the Reporting Period are included in the consolidated cash flow statement.

If the investee under the common control can be controlled due to additional investment or other reasons, the equity interest held in the acquireeprior to the date of acquisition is re-measured according to its fair value at the date of acquisition. The difference between the fair value and the bookvalue is recognized as investment income for the current period. If the equity held in the acquiree held before the acquisition date involves othercomprehensive income under the equity method and other changes in owner’s equity other than net profit and loss, other comprehensive income andprofit distribution, related other comprehensive income, and other changes in owner’s equity are converted into the investment income of the currentperiod on the acquisition date, except for other comprehensive gains arising from the re-measurement of net liabilities of the defined benefit planmade by the invested party or changes in net assets.

2) Disposal of subsidiary or business

① General treatment method

During the Reporting Period, if the Company disposes of a subsidiary or business, the income, expenses and profits of the subsidiary or businessfrom the beginning of the period to the disposal date are included in the consolidated income statement; the cash flows of the subsidiary or businessfrom the beginning of the Reporting Period to the disposal date are included in the consolidated cash flow statement.

When the Company loses control over the invested party due to disposal of part of the equity investment or other reasons, the remaining equityinvestment after disposal will be re-measured according to its fair value by the Company on the date of loss of control. The difference of the sum ofthe consideration obtained from the disposal of the equity and the fair value of the remaining equity, less the sum of the share of net assets andgoodwill of the original subsidiary that should be enjoyed in accordance with the original share-holding ratio since the date of acquisition orcombination, is accounted for the investment income in the current period of loss of control. Other comprehensive income related to the equityinvestment of the original subsidiary or other changes in owner’s equity other than net profit and loss, other comprehensive income and profitdistribution, will be converted into current investment income when control is lost, except for other comprehensive gains arising from there-measurement of net liabilities of the defined benefit plan made by the invested party or changes in net assets.

② Disposal of subsidiaries in steps

If the equity investment in a subsidiary is disposed of in steps through multiple transactions until the loss of control, the terms, conditions, andeconomic impact of the disposal of the equity investment in the subsidiary meet one or more of the following conditions, it usually indicates thatmultiple transactions shall be accounted as a package deal:

A. These transactions are made simultaneously or with consideration of influence on each other;B. These transactions can only achieve a complete business outcome when treated as a whole;C. The occurrence of a transaction depends on the occurrence of at least one of the other transactions;D. A transaction is uneconomical when treated alone, but is economical when considered together with other transactions.

If all transactions from disposal of equity investment in subsidiaries to loss of control belong to a package deal, each transaction shall be treated as atransaction for disposal of equity investment in subsidiaries and loss of control. The difference between each disposal price and the share of thesubsidiary’s net assets corresponding to the disposal investment before the loss of the control is recognized as other comprehensive income in theconsolidated financial statements, which is transferred into the current profit and loss when the control is lost.

If the disposal of the equity investment in the subsidiary until the loss of control is not a package deal, before the loss of control, the accountingtreatment shall be carried out in accordance with the relevant policies for partial disposal of the equity investment of the subsidiary without loss ofcontrol; when the control is lost, the accounting treatment shall be carried out in accordance with the general treatment method for the disposal of thesubsidiary.

3)Acquisition of minority’ equity in subsidiary

The difference between the additional long-term equity investment arising from the acquisition of minority equity and the net assets of the subsidiary,which is calculated according to the new holding proportion since the date of acquisition (or the date of merger) shall be covered by adjusting theequity premium in capital reserve of the consolidated balance sheet; if the equity premium in capital reserve is not sufficient for write-off, retainedearnings shall be adjusted.

4)Partial disposal of the equity investment of the subsidiary without loss of control

If the parent company disposes of part of its long-term equity investment in the subsidiary without losing its control, the difference between thedisposal price and the net assets of the subsidiary corresponding to the equity investment disposed of since the date of acquisition or the date ofmerger shall be covered by adjusting the equity premium in capital reserve of the consolidated balance sheet; if the equity premium in capital reserveis not sufficient for write-off, retained earnings shall be adjusted.

7. Classification of joint venture arrangements and accounting treatment method for joint operations

(1) Classification of joint arrangements

The Company divides joint venture arrangements into joint operations and joint ventures based on factors such as the structure, legal form, and termsin the joint venture arrangement and other relevant facts and circumstances.

Joint venture arrangements that are not reached through separate entities are classified as joint operations; joint arrangements reached throughseparate entities are usually classified as joint ventures; there is conclusive evidence that joint arrangements that meet any of the following conditionsand comply with relevant laws and regulations are classified as joint operations:

1) The legal form of the joint arrangement indicates that the joint venture party has the rights and obligations of the related assets and liabilities inthe arrangement.

2) According to contractual terms of the joint arrangement, the joint venture party has the rights and obligations of the related assets and liabilitiesin the arrangement

3) Other relevant facts and circumstances indicate that the joint venture party has the rights and obligations of the related assets and liabilities inthe arrangement. For example, the joint venture party enjoys almost all the output related to the joint venture arrangement, and the settlement ofthe liabilities in the arrangement continues to rely on the support from the joint venture party.

(2) Accounting treatment for joint operations

The Company recognizes the following items related to the share of interests in joint operations and makes accounting treatment according to therelevant ASBE:

1) Recognizes the assets held separately, and the assets held jointly according to its proportion;

2) Recognizes the liabilities assumed separately, and the liabilities assumed jointly according to its proportion;

3) Recognizes the income from the sales of its share in the outputs of joint operation;

4) Recognizes the income from the sales of the outputs of joint operation according to is proportion;

5) Recognizes the expenses incurred separately, and recognize the expenses incurred jointly according to its proportion.

If the Company invests or sells assets, etc. to a joint operation (except that if the asset constitutes a business), before the asset, etc., is sold by the jointoperation to a third party, only the profit and loss arising from the transaction attributable to other participants in the joint operation is recognized. Inthe event of asset impairment losses complying with the “Accounting Standards for Business Enterprises No. 8 - Asset Impairment” and otherprovisions of assets invested or sold, the Company shall recognize the loss in full.

If the Company purchases assets, etc. from a joint operation (except that if the asset constitutes a business), before the asset, etc., is sold to a thirdparty, only the profit and loss arising from the transaction attributable to other participants in the joint operation is recognized. In the event of assetimpairment losses complying with the “Accounting Standards for Business Enterprises No. 8 - Asset Impairment” and other provisions of assetspurchased, the Company shall recognize the loss based on the share it holds.

The Company does not have joint control over the joint operation. If the Company enjoys the joint operation-related assets and assumes the jointoperation-related liabilities, the accounting treatment shall still be carried out in accordance with the above principles; otherwise, the accountingtreatment shall be carried out in accordance with the relevant corporate accounting standards.

8. Determination standards for cash and cash equivalents

In the preparation of the cash flow statement, the Company’s cash on hand and deposits that can be readily used for payment are recognized as cash.The investment that has the four conditions of short maturity (generally due within three months from the date of purchase), strong liquidity, easyconversion into cash of a known amount, and low risk of value changes will be determined as cash equivalents.

9. Foreign currency business and foreign currency statement translation

(1) Foreign currency business

In the initial confirmation of foreign currency transactions, the spot exchange rate on the date of occurrence of the transaction shall be used as theconversion rate to convert into RMB for accounting.At the balance sheet date, foreign currency monetary items are translated at the spot exchange rate on the balance sheet date, and the resultingexchange differences are included in the current profit and loss, except for the exchange differences arising from foreign currency special borrowingsrelated to the acquisition and construction of assets eligible for capitalization, which are treated in accordance with the principle of capitalization ofborrowing costs. The foreign currency non-monetary items measured at historical cost are still translated at the spot exchange rate on the date oftransaction without changing the amount of recording currency.

Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rate on the date of determination of fair value.The difference between the translated amount of recording currency and the original amount of recording currency shall be treated as fair valuechanges (including changes in exchange rate), and included in the current profit and loss or recognized as other comprehensive income.

(2) Translation of foreign currency financial statements

The assets and liabilities items in the balance sheet shall be treated at the spot exchange rate on the balance sheet date. Except for the “undistributedprofit” items, other owner’s equity items shall be translated at the spot exchange rate at the time of occurrence. The income and expense items in theincome statement shall be translated at the spot exchange rate on the date of transaction. The exchange differences on translation of foreign currencyfinancial statements generated in accordance with the above translation shall be included in other comprehensive income.

When disposing of an overseas operation, the difference in translation of the foreign currency financial statements related to the overseas operationlisted in other comprehensive income items in the balance sheet shall be transferred from other comprehensive income items to the profits and lossesof the current period for disposal. When the proportion of overseas business interests held is reduced due to the disposal of part of equity investmentor other reasons but the right of control over overseas business is not lost, the difference of translation of foreign currency statements related to thedisposal part of overseas business will be attributed to minority shareholders’ rights and interests and will not be transferred to current profit and loss.When disposing of part of the equity of an overseas operation that is an associate or a joint venture, the difference on translation of the foreigncurrency statement related to the overseas operation shall be transferred to the disposal of the current profit and loss according to the proportion of thedisposal of the overseas operation.

10. Financial instruments

When the Company becomes a party to a financial instrument, it recognizes a financial asset or liability.

The effective interest method refers to the method of calculating the amortized cost of financial assets or liabilities and allocating interest income orinterest expense into each accounting period.

The effective interest rate refers to the interest rate used to discount the estimated future cash flow of a financial asset or financial liability during itsexpected duration to the book balance of the financial asset or the amortized cost of the financial liability. When determining the effective interest rate,the expected cash flow is estimated on the basis of considering all contract terms of financial assets or liabilities (such as prepayment, extension, calloptions or other similar options), but the expected credit loss is not considered.

The amortized cost of a financial asset or financial liability is the accumulated amortization amount formed by deducting the repaid principal from theinitial recognition amount of the financial asset or financial liability, adding or subtracting the difference between the initial recognition amount andthe maturity amount by using the effective interest method, and then deducting the accumulated accrued loss reserve (only applicable to financialassets).

(1) Classification, recognition and measurement of financial assets

According to the business model of the financial assets under management and the contractual cash flow characteristics of the financial assets, theCompany divides the financial assets into the following three categories:

1) Financial assets measured at amortized cost.

2) Financial assets measured at fair value and whose changes are included in other comprehensive income.

3) Financial assets measured at fair value and whose changes are included in the current profit and loss.Financial assets are measured at fair value when initially recognized, but if the accounts or notes receivable arising from the sale of goods or theprovision of services do not contain significant financing components or do not consider financing components for no more than one year, the initialmeasurement shall be made at the transaction price.

For financial assets measured at fair value and whose changes are included in the current profit and loss, transaction expenses are directly recognizedin the current profit and loss. For other financial assets, transaction expenses are included in the initial recognition amount.

Subsequent measurement of financial assets depends on their classification. All related financial assets affected will be reclassified when and onlywhen the Company changes its business model of managing financial assets.

1) Financial assets classified as measured at amortized cost

The contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the payment of the principal and the interest onthe amount of outstanding principal, and the business model for managing the financial asset is to collect the contractual cash flow, then the Companyclassifies the financial asset as measured at amortized cost. Financial assets of the Company that are classified as measured at amortized cost includemonetary funds, some notes receivable and accounts receivable measured at amortized cost, other receivables, etc.

The Company recognizes interest income from such financial assets with the effective interest method, and carries out subsequent measurement atamortized cost. Gains or losses arising from impairment or derecognition or modification are included in the current profit and loss. The Companycalculates and determines the interest income based on the book balance of financial assets multiplied by the effective interest rate except for thefollowing circumstances:

① For purchased or originated credit-impaired financial assets, the Company calculates and determines their interest income at the amortized cost ofthe financial asset and the credit-adjusted effective interest rate since the initial recognition.

② For financial assets that have not been credit-impaired at the time of being purchased or originated but become credit-impaired in the subsequentperiod, the Company calculates and determines their interest income at the amortized cost and the effective interest rate of the financial assets in thesubsequent period. If the financial instrument is no longer credit-impaired due to the improvement of its credit risk in the subsequent period, theCompany calculates and determines the interest income by multiplying the effective interest rate by the book balance of the financial asset.

2) Financial assets classified as measured at fair value and whose changes are included in other comprehensive income

The contract terms of a financial asset stipulate that the cash flow generated on a specific date is only the payment of the principal and the interest onthe amount of outstanding principal, and the business model for managing the financial asset is both to collect contractual cash flows and for its sale,then the Company classifies the financial asset as measured at fair value and whose changes are included in other comprehensive income.

The Company recognizes interest income from such financial assets with the effective interest method. Except that the interest income, impairmentloss and exchange difference are recognized as the current profit and loss, other changes in fair value are included in other comprehensive income.When the financial asset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out andincluded in the current profit and loss.

Notes and accounts receivable measured at fair value with changes included in other comprehensive income are reported as receivables financing, andsuch other financial assets are reported as other creditors’ investments. Among them, other creditors’ investments maturing within one year from thebalance sheet date are reported as non-current assets maturing within one year, and other creditors’ investments maturing within one year are reportedas other current assets.

3) Financial assets designated as measured at fair value and whose changes are included in other comprehensive income

At the time of initial recognition, the Company may irrevocably designate non-trading equity instrument investments as financial assets measured atfair value and whose changes are included in other comprehensive income on the basis of individual financial assets.

Changes in the fair value of such financial assets are included in other comprehensive income without provision for impairment. When the financialasset is derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred out and included in theretained earnings. During the investment period when the Company holds the equity instrument, the dividend income is recognized and included inthe current profit and loss when the Company’s right to receive dividends has been established, the economic benefits related to dividends are likelyto flow into the Company, and the amount of dividends can be measured reliably. The Company reported such financial assets under other equityinstrument investment items.

An investment in equity instruments is a financial asset measured at fair value and whose changes are included in the current profit and loss when it isobtained mainly for recent sale, or is part of the identifiable portfolio of financial assets centrally managed, and objective evidence exists for ashort-term profit model in the near future when initially recognized, or is a derivative (except derivatives defined as financial guarantee contracts anddesignated as effective hedging instruments).

4) Financial assets classified as measured at fair value and whose changes are included in the current profit and loss

If failing to be classified as measured at amortized cost or at fair value and whose changes are included in other comprehensive income, or notdesignated as measured at fair value and whose changes are included in other comprehensive income, financial assets are all classified as measured atfair value and whose changes are included in the current profit and loss.

The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fairvalue as well as dividends and interest income associated with such financial assets into current profit and loss.

The Company reports such financial assets as trading financial assets and other non-current financial assets according to their liquidity.

5) Financial assets designated as measured at fair value and whose changes are included in the current profit and loss

At the time of initial recognition, the Company may irrevocably designate financial assets as measured at fair value and whose changes are includedin the current profit and loss on the basis of individual financial assets in order to eliminate or significantly reduce accounting mismatches.

If the mixed contract contains one or more embedded derivative instruments and its main contract is not any financial asset as above, the Companymay designate the whole of the mixed contract as a financial instrument measured at fair value and whose changes are included in the current profitand loss. Except under the following circumstances:

① Embedded derivatives do not significantly change the cash flow of mixed contracts.

② When determining for the first time whether similar mixed contracts need to be split, it is almost clear that embedded derivatives contained inthem should not be split without analysis. If the prepayment right embedded in a loan allows the holder to prepay the loan at an amount close to theamortized cost, the prepayment right does not need to be split.

The Company carries out subsequent measurement of such financial assets at fair value, and includes gains or losses arising from changes in fairvalue as well as dividends and interest income associated with such financial assets into current profit and loss.

The Company reports such financial assets as trading financial assets and other non-current financial assets according to their liquidity.

(2) Classification, recognition and measurement of financial liabilities

The Company classifies a financial instrument or its components into financial liabilities or equity instruments upon initial recognition according tothe contract terms of and the economic essence reflected by the financial instrument issued, rather than only in legal form, in combination with thedefinitions of financial liabilities and equity instruments. Financial liabilities are classified at initial recognition as measured at fair value and whosechanges are included in current profit and loss, or other financial liabilities, or derivatives designated as effective hedging instruments.

Financial liabilities are measured at fair value upon initial recognition. For financial liabilities measured at fair value and whose changes are includedin current profit and loss, relevant transaction expenses are directly included in current profit and loss. For other categories of financial liabilities,relevant transaction expenses are included in the initial recognition amount.

Subsequent measurement of financial liabilities depends on their classification:

1) Financial liabilities measured at fair value and whose changes are included in the current profit and loss

Such financial liabilities include trading financial liabilities (including derivatives falling under financial liabilities) and financial liabilities designatedas measured at fair value and whose changes are included in current profit and loss upon initial recognition.

The financial liability is a trading financial liability if it is mainly undertaken for recent sale or repurchase, or is part of the identifiable portfolio offinancial instruments centrally managed, and there is objective evidence that the enterprise has recently employed a short-term profit model, or is aderivative instrument, except derivatives designated as effective hedging instruments and derivatives conforming to financial guarantee contracts.Trading financial liabilities (including derivatives belonging to financial liabilities) shall be subsequently measured according to fair value. Except inrelation to hedge accounting, all changes in fair value shall be recorded into current profit and loss.

The Company irrevocably designates financial liabilities as measured at fair value and whose changes are included in current profit and loss at thetime of initial recognition in order to provide more relevant accounting information if:

① Such financial liabilities can eliminate or significantly reduce accounting mismatches.

② The financial liability portfolio or the portfolio of financial assets and liabilities is managed and evaluated for performance on the basis of fairvalue according to the enterprise risk management or investment strategy stated in the official written documents, and is reported to key managementpersonnel within the enterprise on this basis.

The Company subsequently measures such financial liabilities at fair value. Except changes in fair value that are brought about by changes in theCompany’s own credit risk are included in other comprehensive income, other changes in fair value are included in current profit and loss. Unlessincluding such changes in other comprehensive income will cause or expand accounting mismatch in profit or loss, the Company will include allchanges in fair value (including the amount affected by changes in its own credit risk) in current profit and loss.

2) Other financial liabilities

The Company classifies financial liabilities except for the following items as measured at amortized cost. Such financial liabilities are recognized bythe effective interest method and subsequently measured at amortized cost. Gains or losses arising from derecognition or amortization are included inthe current profit and loss:

① Financial liabilities measured at fair value and whose changes are included in the current profit and loss.

② Financial liabilities resulting from the transfer of financial assets that do not meet the conditions for derecognition or continue to be involved inthe transferred financial assets.

③ Financial guarantee contracts that do not fall under the first two categories of this article, and loan commitments that do not fall under category 1)of this article and lend at a below-market interest rate.

Financial guarantee contracts refer to contracts that require the issuer to pay a specific amount to the contract holder who has suffered losses when aspecific debtor fails to pay the debt in accordance with the original or modified terms of the debt instrument. Financial guarantee contracts that are notfinancial liabilities designated as measured at fair value and whose changes are included in current profit and loss are measured after initialrecognition according to the loss reserve amount and of the initial recognition amount, less the accumulated amortization amount during the guaranteeperiod, whichever is higher.

(3) Derecognition of financial assets and liabilities

1) Financial asset are derecognized, i.e. written off from its account and balance sheet if:

① The contractual right to receive cash flow from the financial asset is terminated; or

② The financial asset has been transferred, which meets the requirements for derecognition of financial assets.

2) Conditions for derecognition of financial liabilities

If the current obligation of a financial liability (or part thereof) has been discharged, such financial liability (or part thereof) is derecognized.

The existing financial liability is derecognized with a new one recognized, and the difference between the carrying amount and the consideration paid(including transferred non-cash assets or assumed liabilities) is included in the current profit and loss, if an agreement is signed between the Companyand the lender to replace the existing financial liability by assuming a new one, and the contract terms of these two financial liabilities aresubstantially different, or the contract terms of the existing financial liability (or part thereof) are substantially modified.

If the Company repurchases part of a financial liability, the carrying amount of the financial liability shall be distributed according to the proportionof the fair value of the continuing recognition portion and the derecognition portion to the overall fair value on the repurchase date. The differencebetween the carrying amount allocated to the derecognized portion and the consideration paid (including transferred non-cash assets or liabilitiesassumed) shall be included in the current profit and loss.

(4) Recognition basis and measurement method of financial asset transfer

When a financial asset is transferred, the Company evaluates the risks and rewards retained of the financial asset ownership:

1) If almost all the risks and rewards of the financial asset ownership are transferred, such financial asset shall be derecognized, and the rights andobligations generated or retained in the transfer shall be separately recognized as assets or liabilities.

2) If almost all the risks and rewards of the financial asset ownership are retained, such financial asset shall continue to be recognized.

3) In circumstances when the Company neither transfers nor retains almost all the risks and rewards of the financial asset ownership (i.e.circumstances other than 1) and 2) of this article), according to whether it retains control over such financial asset:

① The financial asset shall be derecognized, and the rights and obligations generated or retained in the transfer shall be separately recognized asassets or liabilities if such control is not retained; or

② the relevant financial asset shall continue to be recognized to the extent that it continues to be involved in the transferred financial asset, and therelevant liabilities shall be recognized accordingly if such control is retained. The extent that it continues to be involved in the transferred financialasset refers to the extent the Company bears the risks or rewards on changes in the value of the transferred financial asset.When judging whether the transfer of financial assets meets the above conditions for derecognition of financial assets, the principle of substance overform shall be adopted. The Company divides the transfer of financial assets into overall transfer and partial transfer.

1) If the overall transfer of financial assets meets the conditions for derecognition, the difference between the following two amounts shall beincluded in the current profit and loss:

① The carrying amount of the transferred financial asset on the date of derecognition.

② The sum of the consideration received for the transfer of financial assets and the amount of the corresponding derecognized portion of theaccumulated changes in fair value originally included in other comprehensive income directly (the financial assets involved in the transfer arefinancial assets measured at fair value and whose changes are included in other comprehensive income).

2) If the financial asset is partially transferred and the transferred part meets the conditions for derecognition, the carrying amount of the financialasset before transfer shall be allocated between the derecognition portion and the continuing recognition portion (in this case, the retained serviceasset shall be regarded as the continuing recognition part of the financial asset) according to the respective relative fair values on the transfer date, andthe difference between the following two amounts shall be included in the current profit and loss:

① The carrying amount of the derecognized portion on the derecognition date.

② The sum of the consideration received for the derecognized portion and the amount of the corresponding derecognized portion of the accumulatedchanges in fair value originally included in other comprehensive income (the financial assets involved in the transfer are financial assets measured atfair value and whose changes are included in other comprehensive income).If the transfer of a financial asset does not meet the conditions for derecognition, the financial asset shall continue to be recognized and theconsideration received shall be recognized as a financial liability.

(5) Determination of fair value of financial assets and liabilities

The fair value of a financial asset or liability with an active market shall be determined by the quoted price in the active market, unless the financialasset has a sell-off period for the asset itself. For the financial assets restricted for the assets themselves, the compensation amount demanded bymarket participants due to the risk of not being able to sell the financial assets on the open market within the specified period shall be deducted fromthe quoted price in the active market. Quoted prices in the active market includes those for related assets or liabilities that can be easily and regularlyobtained from exchanges, dealers, brokers, industry groups, pricing or regulatory agencies, and can represent actual and recurring market transactionson the basis of fair trade.

The fair value of financial assets initially acquired or derived or financial liabilities assumed shall be determined on the basis of market transactionprice.

The fair value of financial assets or liabilities without an active market shall be determined by valuation techniques. At the time of valuation, theCompany adopts valuation techniques that are applicable under the current circumstances and are supported by sufficient available data and otherinformation, selects input values consistent with the characteristics of relevant assets or liabilities considered by market participants in the transactionsthereof, and gives priority to the use of relevant observable input values whenever possible. If the relevant observable input value cannot be obtainedor be feasibly obtained, the unobservable input value shall be used.

(6) Impairment of financial instruments

Based on the expected credit loss, the Company conducts impairment accounting of financial assets classified as measured at amortized cost, financialassets classified as measured at fair value and whose changes are included in other comprehensive income, lease receivables, contractual assets andfinancial guarantee contracts and recognizes loss reserves.

Expected credit loss refers to the weighted average of the credit losses of financial instruments weighted by the risk of default. Credit loss refers to thedifference between all contractual cash flows discounted at the original effective interest rate and receivable according to the contract and all cashflows expected to be collected of the Company, i.e. the present value of all cash shortfalls. Among them, credit-impaired purchased or originatedfinancial assets of the Company shall be discounted at the credit-adjusted effective interest rate of such financial assets.

For receivables, contractual assets and lease receivables arising from transactions regulated by the income criteria, the Company uses the simplifiedmeasurement method to measure the loss reserve according to the amount equivalent to the expected credit loss during the entire duration.

For credit-impaired purchased or originated financial assets, only the accumulated changes in the expected credit losses during the entire durationsince the initial recognition are recognized as loss reserves on the balance sheet date. On each balance sheet date, the amount of change in theexpected credit loss during the entire duration is included in the current gains and losses as impairment losses or gains. Even if the expected creditloss during the entire duration on the balance sheet date is less than that reflected in the estimated cash flow upon initial recognition, the favorablechange in the expected credit loss is recognized as impairment gains.

In addition to other financial assets adopting the above simplified measurement method and other than the credit-impaired purchased or originatedones, the Company evaluates whether the credit risk of relevant financial instruments has increased significantly since the initial recognition,measures its loss reserves and recognizes the expected credit loss and its changes respectively according to the following circumstances on eachbalance sheet date:

1) If the credit risk of the financial instrument has not increased significantly since its initial recognition and is in the first stage, its loss reserveshall be measured according to an amount equivalent to its expected credit loss in the next 12 months, and the interest income shall be calculated atthe book balance and the effective interest rate.

2) If the credit risk of the financial instrument has increased significantly since the initial recognition but no credit impairment has occurred, it isin the second stage, then its loss reserve shall be measured according to an amount equivalent to its expected credit loss throughout its life, and theinterest income shall be calculated at the book balance and the effective interest rate.

3) If the financial instrument is credit-impaired since its initial recognition, it is in the third stage, and the Company shall measure its loss reserveaccording to an amount equivalent to its expected credit loss throughout its life, and calculate the interest income at the amortized cost and theeffective interest rate.

The increase or reversed amount of the credit loss reserve for financial instruments shall be included in the current profit and loss as impairmentlosses or gains. Except for financial assets classified as measured at fair value and whose changes are included in other comprehensive income, thecredit loss reserve will offset the carrying amount of the financial assets. For financial assets classified as measured at fair value and whose changesare included in other comprehensive income, the Company recognizes its credit loss reserve in other comprehensive income without reducing itscarrying amount presented in the balance sheet.

In the previous accounting period, the Company has measured the loss reserve, the amount of which is equivalent to the expected credit loss of thefinancial instrument throughout its life. However, on the balance sheet date of the current period, the financial instrument no longer conforms to thesituation of significant increase in credit risk since initial confirmation; on the balance sheet date of the current period, the Company has measured theloss reserve of the financial instrument, the amount of which is equivalent to the expected credit loss in the next 12 months, and the reversed amountof the loss reserve thus formed is included in the current profit and loss as impairment profit.

1) Significant increase of credit risk

In order to determine whether the credit risk of financial instruments has increased significantly since the initial recognition, the Company uses theavailable reasonable and based forward-looking information and compares the risk of default of financial instruments on the balance sheet date withthe risk of default on the initial confirmation date. When the Company applies provisions on depreciation of financial instruments to financialguarantee contracts, the initial recognition date shall be regarded as the date when the Company becomes a party to make irrevocable commitments.

For the assessment of whether the credit risk has increased significantly, the Company will consider the following factors

① Whether the actual or expected operating results of the debtor have changed significantly;

② Whether the regulatory, economic or technological environment of the debtor has undergone significant adverse changes;

③ Whether the following items have changed significantly: the value of collateral as debt mortgage, or the guarantee provided by a third party, or thequality of credit enhancement; these changes will reduce the debtor’s economic motivation to repay the loan within the time limit stipulated in thecontract or impact the probability of default;

④ Whether the debtor’s expected performance and repayment behavior have changed significantly;

⑤ Whether the Company’s credit management methods for financial instruments have changed, etc.

If, on the balance sheet date, the credit risk of the financial instrument is judged to be low by the Company, the Company assumes that the credit riskof the financial instrument has not increased significantly since the initial recognition. The financial instrument will be deemed to have lower creditrisk under the following circumstances: the default risk of the financial instrument is lower; the borrower has a strong ability to fulfill its contractual

cash flow obligations in a short time; furthermore, even if there are adverse changes in the economic situation and operating environment for a longperiod of time, it may not necessarily reduce the borrower’s ability to fulfill its contractual cash flow obligations.

2) Financial assets with depreciation of credit

If one or more events have adverse effects on the expected future cash flow of a financial asset, the financial asset will become a financial asset thathas suffered credit impairment. The following observable information can be regarded as evidence of credit impairment of financial assets:

① The issuer or debtor is in serious financial difficulties;

② The debtor breaches the contract, such as default or overdue payment of interest or principal, etc.;

③ The creditor gives concessions to the debtor due to economic or contractual considerations related to the debtor’s financial difficulties; theconcessions will not be made under any other circumstances;

④ There is a great possibility of bankruptcy or other financial restructuring of the debtor;

⑤ The financial difficulties of the issuer or debtor cause the disappearance of the active market for the financial asset;

⑥ The purchase or origin of a financial asset at a substantial discount that reflects the fact that a credit loss has occurred.

Credit impairment of financial assets may not be caused by separately identifiable events, but may be caused by the combined effect of multipleevents.

3) Determination of expected credit loss

The Company’s assessment of the expected credit losses of financial instruments is based on single items and combinations. During the evaluation,the Company will take into account reasonable and reliable information about past events, current situation and future economic situation forecast.

The Company divides financial instruments into different combinations on the basis of common credit risk characteristics. Common credit riskcharacteristics adopted by the Company include: financial instrument type, aging combination, contract settlement cycle, etc. To understand theindividual evaluation criteria and combined credit risk characteristics of relevant financial instruments, please refer to the accounting policies ofrelevant financial instruments for details.

The Company adopts the following methods to determine the expected credit losses of relevant financial instruments:

① In terms of financial assets, credit loss is equivalent to the present value of the difference between the contract cash flow that the Company shallreceive and the expected cash flow.

② In terms of lease receivables, credit loss is equivalent to the present value of the difference between the contract cash flow that the Company shallreceive and the expected cash flow.

③ In terms of the financial guarantee contract, credit loss is equal to the expected amount of payment made by the Company to the holder of thecontract for credit loss incurred, less the present value of the difference between the amount expected to be collected from the holder of the contract,the debtor or any other party.

④ If, on the balance sheet date, a financial asset has suffered credit impairment, but one does not purchase or originate a financial asset that hassuffered credit impairment, the credit loss is equivalent to the difference between the book balance of the financial asset and the present value of theestimated future cash flow discounted at the original actual interest rate.

Factors reflected in the Company’s method of measuring the expected credit losses for financial instruments include: unbiased probability weightedaverage amount determined by evaluating a series of possible results; time value of money; reasonable and reliable information about past events,current situation and future economic situation forecast that can be obtained on the balance sheet date without unnecessary extra costs or efforts.

4) Write-off of financial assets

If the Company cannot reasonably expect the contract cash flow of the financial asset to be fully or partially recovered, the book balance of thefinancial asset will be written off directly. This write-off constitutes the derecognition of relevant financial assets.

(7) Offset of financial assets and financial liabilities

In the balance sheet, financial assets and financial liabilities are shown separately without offsetting each other. However, if the following conditionsare met at the same time, the net amount after offset will be listed in the balance sheet:

1) The Company has the legal right, which is currently enforceable, to offset the confirmed amount;

2) The Company plans to settle on a net basis, or realize the financial assets and settle the financial liabilities at the same time.

11. Notes receivable

For the determination method and accounting treatment method of the Company for the expected credit losses on notes receivable, please refer to“V-10-(6) Impairment of financial instruments” in this section.The Company separately determines credit losses for notes receivables that have sufficient evidence to assess expected credit losses at a reasonablecost at the level of a single instrument.

When sufficient evidence of expected credit loss cannot be evaluated at a reasonable cost at the level of single instrument, the Company will refer tothe experience of historical credit loss, combine the current situation and judgment on future economic situation, divide bills receivable into severalcombinations according to the characteristics of credit risk, and calculate expected credit loss on the basis of combinations. The basis for determiningthe portfolio is as follows:

Item

ItemBasis for determining portfolioMethod
Bank acceptance bill portfolioType of billRefer to the experience of historical credit loss, combine the current situation and judgment on future economic situation to measure the expected credit loss

Commercial acceptancebill portfolio

Commercial acceptance bill portfolioType of billRefer to the experience of historical credit loss, combine the current situation and judgment on future economic situation to measure the expected credit loss

12. Accounts receivable

For the determination method and accounting treatment method of the Company for the expected credit losses on accounts receivable, please refer to“V-10-(6) Impairment of financial instruments” in this section.

The Company separately determines credit losses for accounts receivable that have sufficient evidence to assess expected credit losses at a reasonablecost at the level of a single instrument.

If sufficient evidence of expected credit loss cannot be assessed at reasonable cost at the level of single instrument, the Company will divide theaccounts receivable into several combinations according to the credit risk characteristics, and calculate the expected credit loss on the basis of thecombinations (with reference to the experience of historical credit loss, and in combination with the current situation with the judgment of futureeconomic situation). The basis for determining the portfolio is as follows:

ItemBasis for determining portfolioMethod
Related party within the consolidation scopeAccounts receivable between companies included in the consolidation scopeNo provision for expected credit loss shall be made with reference to historical credit loss experience

Aging portfolio

Aging portfolioAccounts receivable with similar credit risk characteristics by aging, except for the portfolio of related parties within the consolidation scopeReferring to historical credit loss experience, combined with the current situation and the forecast of future economic situation, according to the expected credit loss during the entire duration, a comparative table of age and expected credit loss rate is worked out, based on which the expected credit loss is calculated.

13. Receivables financing

For the determination method and accounting treatment method of the Company for the expected credit losses on receivables financing, please referto “V-10-(6) Impairment of financial instruments” in this section.

14. Other receivables

Determination method and accounting treatment method of expected credit loss of other receivables

For the determination method and accounting treatment method of the Company’s expected credit loss on other receivables, please refer to “V-10-(6)Impairment of financial instruments” in this section.

The Company separately determines credit losses for other receivables that have sufficient evidence to assess expected credit losses at a reasonablecost at the level of a single instrument.

If sufficient evidence of expected credit loss cannot be assessed at reasonable cost at the level of single instrument, the Company will divide the otherreceivables into several combinations according to the credit risk characteristics, and calculate the expected credit loss on the basis of thecombinations (with reference to the experience of historical credit loss, and in combination with the current situation with the judgment of futureeconomic situation). The basis for determining the portfolio is as follows:

Item

ItemBasis for determining portfolioMethod
Related party within the consolidation scopeOther receivables between companies included in the consolidation scopeNo provision for expected credit loss shall be made with reference to historical credit loss experience
Aging portfolioOther receivables with similar credit risk characteristics by aging, except for the portfolio of the related parties within the consolidation scopeWith reference to historical credit loss experience, combined with current conditions and forecasts of future economic conditions, the expected credit loss is calculated through the default risk exposure and the credit loss rate in the next 12 months or the entire duration

15. Inventories

(1) Classification of inventories

Inventories refer to the finished products or commodities held for sale by the Company in the course of its daily activities, the products being in theprocess of production, and the materials and supplies consumed in the process of production or provision of labor services, etc. The Companyclassifies inventories into raw materials, turnover materials, entrusted processing materials, work-in-process products, self-made semi-finishedproducts, finished products (inventory goods), issued goods, etc.

(2) Valuation method of inventories

When the inventories is acquired, it is initially measured at cost, including purchase cost, processing cost and other costs. When the inventories aredelivered, it shall be valued by the first-in, first-out method and weighted average method at the end of the month.

(3) Basis for the determination of the net realizable value of inventories and method for the provision of provision for inventory impairment

Provision for inventory impairment is recognized or adjusted at the lower of costs and the net realizable value after conducting a thorough check ofinventories at the end of the year. For inventories of goods directly used for sale, such as finished goods, merchandise inventories and materials forsale, in the normal production and operation process, the net realizable value is determined by the amount of the estimated selling price of theinventory less the estimated sales cost and relevant taxes and fees; for material inventories that need to be processed, in the normal production andoperation process, the net realizable value is determined by the amount of the estimated selling price of finished products produced less the estimatedcost to be occurred at the time of completion, the estimated selling expenses and related taxes; for inventories held for the execution of sales contractsor labor contracts, the net realizable value is calculated on the basis of the contract price, and if the quantity of inventories held is more than thequantity specified in sales contracts, the net realizable value of excess inventories is calculated based on the general sales price.

At the end of the year, inventory valuation allowance is accrued according to individual inventory items; but for a large number of inventories withlower unit prices, inventory valuation allowance is accrued according to inventory category; for inventories related to the product series produced andsold in the same region with the same or similar end use or purpose, and that is difficult to be measured separately from other items, inventoryvaluation allowance is accrued combined with other items.

If the influencing factors of the write-down of inventory value have disappeared, the amount written-down is recovered and reversed to the amount ofinventory valuation allowance already accrued, and the amount reversed is included in the current profit and loss.

(4)Inventory system

A perpetual inventory system is adopted.

(5)Amortization method of low-value consumables and packages

1) Low-value consumables are amortized by the one-off writing-off method;

2) Packages are amortized by the one-off writing-off method.

3) Other turnover materials are amortized by the one-off writing-off method.

16. Contractual assets

Where the Company has transferred goods to customers and has the right to receive consideration, and the right depends on factors other than thepassage of time, it shall be recognized as contract assets. The Company’s unconditional (that is, depending only on the passage of time) right to

collect consideration from customers is separately listed as receivables.

For the determination method and accounting treatment method of the Company’s expected credit loss on contractual assets, please refer to “V-10-(6)Impairment of financial instruments” in this section.

17. Contract costs

18. Held-for-sales assets

(1) Classified as held-for-sale recognition criteria

The Company recognizes non-current assets or disposal groups that meet the following conditions as held-for-sale components:

1) According to the practice of selling such assets or disposal groups in similar transactions, they can be sold immediately in the current situation;

2) The sale is highly likely to occur, that is, the Company has made a resolution on a sale plan, obtained regulatory approval (if applicable), andobtained a certain purchase commitment, and it is expected that the sale will be completed within one year.

The confirmed purchase commitment refers to the legally binding purchase agreement signed by the Company and other parties. The agreementincludes important terms such as transaction price, time and sufficiently severe penalty for breach of contract, which makes the possibility ofsignificant adjustment or cancellation of the agreement extremely small.

(2) Accounting method of held for sale

The Company does not accrue depreciation or amortization for non-current assets or disposal groups held for sale. If the book value is higher than thenet amount of fair value minus selling expenses, the book value shall be written down to the net amount of fair value minus selling expenses. Theamount written down shall be recognized as asset impairment loss and included in the current profit and loss, and the assets held for sale impairmentreserves shall be accrued at the same time.

For the non-current assets or disposal groups classified as held for sale on the acquisition date, the initial measurement amount and the net amount ofthe fair value less the selling expenses under the condition that they are not classified as held for sale are comparatively assumed in the initialmeasurement, whichever is lower.

The above principles apply to all non-current assets, but do not include investment properties that are subsequently measured using the fair valuemodel, biological assets that are measured using the net amount of fair value less selling expenses, assets formed by employee compensation, deferredtax assets, financial assets regulated by accounting standards related to financial instruments, and rights generated by insurance contracts regulated byaccounting standards related to insurance contracts.

19. Debt investments

20. Other debt investments

For the determination method and accounting treatment method of the Company’s expected credit loss on other debt investments, please refer to“V-10-(6) Impairment of financial instruments” in this section.

21. Long-term receivables

For the determination method and accounting treatment method of the Company’s expected credit loss on long-term receivables, please refer to“V-10-(6) Impairment of financial instruments” in this section.

The Company separately determines credit losses for long-term receivables that have sufficient evidence to assess expected credit losses at areasonable cost at the level of a single instrument.

If sufficient evidence of expected credit loss cannot be assessed at reasonable cost at the level of single instrument, the Company will divide thelong-term receivables into several combinations according to the credit risk characteristics, and calculate the expected credit loss on the basis of thecombinations (with reference to the experience of historical credit loss, and in combination with the current situation with the judgment of futureeconomic situation). The basis for determining the portfolio is as follows:

Item

ItemBasis for determining portfolioMethod

Overdueportfolio

Overdue portfolioOverdue long-term receivablesProvision in accordance with the comparison table of the number of overdue days and the expected credit loss rate of the entire duration
Unexpired portfolioLong-term receivables other than those in the portfolio aboveRefer to the experience of historical credit loss, combine the current situation and judgment on future economic situation to measure the expected credit loss

22. Long-term equity investment

(1) Recognition of initial investment cost

1) For the long-term equity investment formed by the merger of enterprises, the specific accounting policies are detailed in “V-5 Accountingtreatments for merger of enterprises under common control and not under common control” in this section.

2) Long-term equity investment acquired by other means

For long-term equity investment acquired by cash payment, the actual acquisition price is recognized as initial investment cost. The initial investmentcost includes expenses, taxes and other necessary expenses directly related to the acquisition of the long-term equity investment.

For a long-term equity investment obtained by issuing equity securities, the initial investment cost shall be the fair value of the equity securities issued.Transaction costs incurred in the issuance or acquisition of one’s own equity instruments those can be directly attributable to the equity transactionshall be deducted from the equity.

Provided that the non-monetary asset exchange contains commercial substance and the fair value of the assets received or assets surrendered can bereliably measured, the initial investment cost of the long-term equity investment received with non-monetary assets is determined based on the fairvalue of the assets surrendered, except that there is conclusive evidence indicates that the fair value of assets received is more reliable. Fornon-monetary asset exchange that do not satisfy the above condition, the book value of assets surrendered and related taxes and fees payable arerecognized as the initial investment cost of the long-term equity investment.

The initial investment cost of a long-term equity investment acquired by debt restructuring is determined on the basis of fair value.

(2) Subsequent measurement and recognition of related profit and loss

1) Cost method

The Company can use the cost method to calculate the long-term equity investment controlled by the invested entity, price it according to the initialinvestment cost, and increase or recoup the cost of investment on adjusting a long-term equity investment.Except for the declared but undistributed cash dividends or profits included in the actual payment or consideration when the investment is obtained,the Company shall recognize the cash dividends or profits declared to be distributed by the invested entity as current investment income.

2) Equity method

The Company adopts equity method for accounting of long-term equity investments in associates and joint ventures. For the equity investment inassociates in which part of it is held indirectly through venture capital institutions, mutual funds, trust companies or similar entities includinginvestment-linked insurance funds, it shall be measured at fair value and its changes shall be recorded into profits and losses.

For the balance that the initial investment cost of long-term equity investments is bigger than the fair value shares of invested units’ distinguished netassets which shall be enjoyed by the Company, the Company will not adjust the initial investment cost of long-term equity investments; for thebalance that the initial investment cost is smaller than the fair value shares of invested units’ distinguished net assets which shall be enjoyed by theCompany, it shall be included in the current profit and loss.

After the Company obtains long-term equity investment, it shall recognize investment income and other comprehensive income respectivelyaccording to its share of the net profit or loss realized by the invested entity and other comprehensive income, and adjust the book value of long-termequity investment at the same time. In addition, the part to be enjoyed shall be calculated according to the profit or cash dividend declared by theinvested entity to be distributed, and the book value of long-term equity investment shall be reduced accordingly. For other changes in owners’ equityother than net profit and loss, other comprehensive income and profit distribution of the invested entity, the book value of long-term equityinvestment shall be adjusted and recorded into owners’ equity.

When confirming the shares of invested units’ net gain or loss to be enjoyed, the Company will adjust and confirm the invested units’ net profit basedon the fair value of the invested units’ distinguishable assets when investments are obtained. For the gain or loss on the non-realized internaltransactions between the Company and associates enterprises / joint ventures, the part attributing to the Company will be calculated as per theproportion to be enjoyed, will be written down, and on this basis, the investment profit and loss will be confirmed.

The Company recognizes that the loss suffered by the invested unit should be dealt with in the following order: first, reduce the book value oflong-term equity investments. Secondly, if the book value of long-term equity investments is not sufficient to offset, the book value of other long-termequity that substantially constitute the net investment in the invested entity shall be used to continue to recognize the investment loss and offset the

book value of long-term receivables. Finally, after the above treatment, according to the investment contract or agreement, the enterprise still assumesthe additional obligations, and it will confirm the provisions according to the expected obligations and shall be included in the current investmentlosses.

If the investee makes profits in the future, the Company shall, after deducting the unrecognized loss share, deal with it in the reverse order, writedown the book balance of the confirmed provisions, recover other long-term equity that substantially constitute the net investment to the investee andthe book value of long-term equity investments, and resume the recognition of investment income.

(3)Transformation of accounting method of long term equity investments

1) Transfer of fair value measurement to equity method

The equity investment originally held by the Company that does not have control, joint control or significant influence on the investee and is subjectto accounting treatment according to the recognition and measurement standards of financial instruments can exert significant influence on theinvestee or implement joint control but does not constitute control due to additional investment and other reasons, the sum of the fair value of theoriginally held equity investment plus the newly increased investment cost determined in accordance with the Accounting Standards for BusinessEnterprises No. 22 - Recognition and Measurement of Financial Instruments shall be regarded as the initial investment cost calculated according tothe equity method.

The initial investment cost calculated by the equity method is less than the difference between the fair value of the identifiable net assets of theinvestee on the additional investment date calculated and determined according to the new shareholding ratio after the additional investment, the bookvalue of long-term equity investments is adjusted and included in the non-operating income of the current period.

2) Transfer of fair value measurement or equity method to cost method

The equity investment originally held by the Company that does not have control, joint control or significant impact on the investee and is subject toaccounting treatment in accordance with the recognition and measurement standards of financial instruments, or the long-term equity originally heldby the Company for joint ventures and joint ventures: If the investee under different control can be controlled due to additional investment and otherreasons, when preparing individual financial statements, the book value of equity investment originally held plus new investment cost shall be takenas the initial investment cost calculated by cost method instead.

The other comprehensive income, which is recognized as equity investment held before the purchase date, is accounted for by the equity method.When disposing the investment, it adopts the same basis as the relevant assets or liabilities directly disposed of by the invested entity for accountingtreatment.If the equity investment held before the acquisition date is accounted for in accordance with the relevant provisions of the Accounting Standards forBusiness Enterprises No. 22 - Recognition and Measurement of Financial Instruments, the changes in the accumulated fair value originally includedin other comprehensive income are transferred to the current profit and loss when the cost method is used for accounting.

3) Transfer of equity method accounting to fair value measurement

If the Company loses joint control or significant impact on the invested entity due to disposal of part of equity investment, the remaining equity afterdisposal shall be accounted according to Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of FinancialInstruments, and the difference between the fair value and book value on the date of loss of joint control or significant impact shall be included in thecurrent profit and loss.

The other comprehensive income of the original equity investment recognized due to the use of equity method shall be accounted on the same basis asthe invested unit’s direct disposal of relevant assets or liabilities when the equity method is terminated.

4) Transfer of cost method to equity method

If the Company loses the control over the investee due to the disposal of part of the equity investment and other reasons, when preparing individualfinancial statements, if the residual equity after disposal can exercise joint control or exert significant influence on the investee, the equity methodshall be used for accounting instead, and the residual equity shall be deemed to be adjusted by the equity method when it is obtained.

5) Transfer of cost method to fair value measurement

If the Company loses control over the investee due to the disposal of part of equity investment and other reasons, when preparing individual financialstatements, if the residual equity after disposal cannot exercise joint control or exert significant influence on the investee, the accounting treatmentshall be carried out in accordance with the relevant provisions of the Accounting Standards for Business Enterprises No. 22 - Recognition andMeasurement of Financial Instruments. The difference between the fair value and the book value on the date of loss of control is included in thecurrent profit and loss.

(4) Disposal of Long-Term Equity Investments

For the disposal of long term equity investments, the difference between the book value and the actually obtained price shall be included in the currentprofit and loss. Long-term equity investments accounted by the equity method shall be disposed on the same basis as the investee’s direct disposal ofrelevant assets or liabilities, and the part originally included in other comprehensive income shall be accounted according to the correspondingproportion.

If the terms, conditions and economic impact of the disposal of various transactions of equity investment in subsidiaries meet one or more of thefollowing conditions, multiple transactions shall be accounted as a package deal:

1) These transactions are made simultaneously or with consideration of influence on each other;

2) These transactions can only achieve a complete business outcome when treated as a whole;

3) The occurrence of a transaction depends on the occurrence of at least one of the other transactions;

4) A transaction is uneconomical when treated alone, but is economical when considered together with other.

If the control over the original subsidiary company is lost due to the disposal of part of equity investment or other reasons, and it does not belong to apackage deal, the relevant accounting treatment shall be made by distinguishing individual financial statements and consolidated financial statements:

1) In individual financial statements, for the equity disposed, the difference between the book value and the actually obtained price is included in thecurrent profit and loss. If the residual equity after disposal can exercise joint control or exert significant influence on the investee, it shall beaccounted by equity method, and the residual equity shall be deemed as adjusted by equity method when it is acquired; If the residual equity afterdisposal cannot exercise joint control or exert significant influence on the investee, it shall be accounted in accordance with the relevant provisions ofthe Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, and the difference between thefair value and book value on the date of loss of control shall be included in the current profit and loss.

2) In the consolidated financial statements, for the difference between the disposal price and the corresponding share of net assets of the subsidiarycalculated continuously from the purchase date or the merger date for each transaction before the loss of control over the subsidiary, the capitalreserve (share capital premium) shall be adjusted. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted; if the controlright over the subsidiary is lost, the remaining equity shall be remeasured according to its fair value on the date of losing the control right. Thedifference between the sum of the consideration obtained from the disposal of equity and the fair value of the remaining equity minus the share of thenet assets of the original subsidiary calculated continuously from the purchase date calculated according to the original shareholding ratio shall beincluded in the investment income of the current period when the control right is lost, and goodwill shall be offset at the same time. Othercomprehensive income related to the equity investment of the original subsidiary will be converted into the current investment income when thecontrol right is lost.If all transactions from disposal of equity investment in subsidiaries to loss of control belong to a package deal, each transaction shall be treated as atransaction for disposal of equity investment in subsidiaries and loss of control, and relevant accounting treatment shall be conducted according toindividual financial statements and consolidated financial statements:

1) In individual financial statements, the difference between each disposal price and the long-term equity investment book value corresponding to thedisposed equity before the loss of control right is recognized as other comprehensive income, which is transferred to the loss and profit of the currentperiod when the control right is lost.

2) In the consolidated financial statements, the difference between each disposal price and the share of the subsidiary’s net assets corresponding to thedisposal investment before the loss of the control right is recognized as other comprehensive income, which is transferred into the current profit andloss when the control right is lost.

(5) Judgment criteria for joint control and significant impact

If the Company controls an arrangement collectively with other participants in accordance with relevant agreements, and the activity decision-makingthat has a significant impact on the return of the arrangement needs to exist after the consensus of the participants sharing the control right, it isdeemed that the Company and other participants jointly control an arrangement, which is a joint venture arrangement.

When the joint venture arrangement is reached by a single body, the individual entity shall be judged as a joint venture and the equity method shall beused for accounting when the Company has the right to enjoy the net assets of the individual entity according to the relevant agreement. If it is judgedthat the Company does not have the right to the net assets of the individual subject according to the relevant agreement, the individual subject shall beregarded as the joint operation, the Company shall recognize the items related to the share of interests of the joint operation, and carry out accountingtreatment in accordance with the provisions of the relevant accounting standards for business enterprises.

Significant influence means that the investor has the right to participate in the decision-making of the financial and operational policies of the investee,but cannot control or jointly control the formulation of these policies with other parties. The Company judges to have a significant impact on theinvestee through one or more of the following circumstances and comprehensive consideration of all facts and circumstances: 1) having arepresentative on the board of directors or similar authority of the investee; 2) participate in the financial and operational policy-making process of theinvestee; 3) there are significant transactions with the investee; 4) dispatch management personnel to the investee; and 5) provide key technical data tothe investee.

23. Investment properties

Measuring mode of investment propertiesMeasured at costDepreciation or amortization method

The Company’s investment property means the property held for the purpose of earning rent or capital appreciation, or both, including the land userights that have been leased, the land use rights that are held for transfer upon appreciation, and the leased buildings. In addition, for the vacantbuildings held by the Company for the purpose of leases, if the Board of Directors makes a written resolution that expressly indicates that thebuildings will be used for leases and the intention of holding will not change in a short term, the building will also be reported as investment property.

The Company’s investment properties are recorded at their cost. The cost of outsourcing investment properties includes the purchase price, relevanttaxes and other expenses that can be directly attributable to the asset. The cost of self-construction investment properties is composed of the necessaryexpenses incurred before the construction of the asset reaches the expected usable state.

The Company adopts the cost model for subsequent measurement of investment property. Depreciation or amortization is accrued on buildings andland use rights according to the estimated service life and net residual value rate. The estimated service life, net residual value rate and annualdepreciation (amortization) rate of investment properties are listed as follows:

Type

TypeThe estimated service life (Year)The estimated net residual value rate (%)Annual depreciation (amortization) rate (%)
Land use rightsservice life of land use rights1/Service life*100
Property and plant205-104.50-4.75

When the purpose of investment properties is changed to self-use, from the date of change, the Company will convert the investment properties tofixed assets or intangible assets. When the purpose of self-use properties is changed to earn rent or capital appreciation, the Company will convertfixed assets or intangible assets to investment properties from the date of change. In case of conversion, the book value before conversion shall betaken as the entry value after conversion.

When the investment properties are disposed, or permanently withdrawn from use, and no economic benefits are expected to be obtained from thedisposal, the confirmation of the investment properties shall be terminated. The amount of disposal income from sale, transfer, scrap or damage ofinvestment properties after deducting its book value and relevant taxes shall be included in the current profit and loss.

The Company’s investment property means the property held for the purpose of earning rent or capital appreciation, or both, including the land userights that have been leased, the land use rights that are held for transfer upon appreciation, and the leased buildings. In addition, for the vacantbuildings held by the Company for the purpose of leases, if the Board of Directors makes a written resolution that expressly indicates that thebuildings will be used for leases and the intention of holding will not change in a short term, the building will also be reported as investment property.

The Company’s investment properties are recorded at their cost. The cost of outsourcing investment properties includes the purchase price, relevanttaxes and other expenses that can be directly attributable to the asset. The cost of self-construction investment properties is composed of the necessaryexpenses incurred before the construction of the asset reaches the expected usable state.

The Company adopts the fair value model for the subsequent measurement of investment properties. The Company does not accrue depreciation oramortize the investment properties. The Company adjusts its book value based on the fair value of the investment properties on the balance sheet date,and the difference between the fair value and the original book value is included in the current profit and loss.

The basis for subsequent measurement of investment property at the fair value is: ① there is an active property trading market where the investmentproperty is located; ② The Company can obtain the information of the market price or other relevant information of same or similar properties fromthe trading market, so as to measure the investment properties at the fair value properly.

The Company measures the fair value of investment property according to the current market price of the property in the same type or similar one inthe active market; If the current price of the same or similar properties cannot be obtained, the fair value of the investment property shall be properlyestimated in terms of the recent trading price of the same or similar properties in the active market, the asset status, location, transaction situation,transaction date and other factors; Or the fair value is measured based on the expected future rental income and the present value of relevant cashflows.

When there is conclusive evidence that the use of the property has converted into self-use, the fair value on the date of conversion shall be taken asthe book value of the self-used property, and the difference between the fair value and the original book value shall be included in the current profitand loss. When the self-used property or inventory is converted into the investment property measured by the fair value model, the investmentproperty is measured at the fair value on the date of conversion. If the fair value on the date of conversion is less than the original book value, thedifference is included in the current profit and loss; if the fair value on the date of conversion is greater than the original book value, the difference isincluded in other comprehensive income.

When the investment properties are disposed, or permanently withdrawn from use, and no economic benefits are expected to be obtained from thedisposal, the confirmation of the investment properties shall be terminated. The amount of disposal income from sale, transfer, scrap or damage ofinvestment properties after deducting its book value and relevant taxes shall be included in the current profit and loss.

24. Fixed assets

(1) Recognition criteria

1) Recognition criteria of fixed assets

Fixed assets mean tangible assets held for the purpose of producing goods, rendering of services, leases or operation management, whose service lifeis more than one fiscal year. Fixed assets satisfying the following conditions are recognized:

? The economic benefits associated with the fixed assets are likely to flow into the enterprise;?The cost of the fixed asset can be measured in a reliable way

2) Initial measurement of fixed assets

The Company’s fixed assets shall be initially measured according to cost.

① The cost of purchased fixed assets includes the purchase price, import duties and other related taxes, as well as other expenses directly attributableto the fixed assets incurred before they reach the predetermined usable state.

② The cost of self-constructed fixed assets consists of the necessary expenditures incurred before the asset is constructed to a predetermined usablestate.

③ The fixed assets invested by the investor shall be recorded at the value agreed upon in the investment contract or agreement, but if the valueagreed upon in the contract or agreement is not fair, it shall be recorded at the fair value.

④ If payments for the purchase of fixed assets are extended beyond the normal credit terms with financing nature, the costs of fixed assets aredetermined on the basis of present values of the purchase prices. The difference between the actual price paid and the present value of the purchaseprice, except for those that should be capitalized, shall be included in the current profit and loss during the credit period.

3) Subsequent measurement and disposal of fixed assets

① Depreciation of fixed assets

Depreciation of fixed assets shall be accrued within the estimated service life after deducting the estimated net residual value from its recorded value.For fixed assets with provision for impairment, the amount of depreciation shall be determined in the future periods based on the book value afterdeduction of the impairment provision and based on the remaining service life; and fixed assets that have been fully depreciated and are still in useshall not be depreciated.

The Company shall determine the service life and estimated net residual value of the fixed assets according to their nature and usage. At the end of theyear, the service life, estimated net residual value and depreciation method of the fixed assets shall be reviewed, and if there is any difference from theoriginal estimate, corresponding adjustments shall be made.

② Subsequent expenditures on fixed assets

Subsequent expenditures related to fixed assets that meet the conditions for the recognition of fixed assets shall be included into the cost of fixedassets; and those do not meet the conditions for the recognition of fixed assets shall be recorded into the current profit and loss at the time ofoccurrence.

③ Disposal of fixed assets

When a fixed asset is disposed of or is not expected to generate economic benefits through use or disposal, the recognition of the fixed asset shall beterminated. The amount of disposal income from sale, transfer, scrap or damage of fixed assets after deducting its book value and relevant taxes shallbe included in the current profit and loss.

(2) Depreciation method

Type

TypeDepreciation methodDepreciation lifeRate of residual valueAnnual depreciation rate
Property and plantStraight-line method205-10%4.50-4.75%
Machinery and equipmentStraight-line method10-135-10%6.92-9.50%
Transportation equipmentStraight-line method55-10%18.00-19.00%
Electronic equipmentStraight-line method55-10%18.00-19.00%
Office equipmentStraight-line method55-10%18.00-19.00%
Other equipmentStraight-line method55-10%18.00-19.00%

(3) Recognition basis, valuation and depreciation method of fixed assets acquired under financing leases

When the fixed assets leased by the company meet one or more of the conditions as follows, the lease will be recognized as fixed assets under financelease:

1) The ownership of the leasing asset belongs to the Company at the expiration of the lease.

2) The Company has the option to buy the leased asset at a price to be far lower than the fair value of the leased asset at the date when the optionbecomes exercisable; and therefore it is reasonable to be certain that the Company will exercise the option at the inception of lease.

3) The lease term covers the major part of the service life of the leased asset even if the ownership of the asset is not transferred.

4) The present value of the minimum lease payments on the lease beginning date does not have too large differences with the fair value of the leasedasset.

5) The nature of the leased assets is special. Only the Company can use the leased assets without major transformation.

For the fixed assets under finance lease, on the date of the lease starts, the Company recognizes the fair value of the leased asset or the present valueof the minimum lease payment as the book value of the leased asset, whichever is lower. The minimum lease payment shall be recorded as the valueof the long-term payables and the difference shall be recorded as an unrecognized financing expense. The initial direct expenses incurred during thelease negotiation and signing of the lease contract, such as handling fee, lawyer’s fee, travel expense and stamp duty, which can be attributed to thelease project, shall be included in the value of the leased asset. Unrecognized financing expenses are apportioned over the lease term by the effectiveinterest method.

The Company adopts the depreciation policy consistent with its own fixed assets to accrue the depreciation of fixed assets under financing lease. Ifthe ownership of the leased asset can be reasonably determined at the end of the lease term, depreciation shall be accrued within the service life of theleased asset. If the ownership of the leased asset cannot be reasonably determined at the end of the lease term, depreciation shall be accrued within theshorter of the lease term and the service life of the leased asset.

25. Construction in progress

(1) Initial measurement of construction in progress

Construction in progress built by the Company is valued at the actual cost, which consists of the necessary expenses incurred before the constructionof the asset is reaches the expected usable status, including engineering materials costs, labor costs, related taxes and fees, borrowing costs that shouldbe capitalized and indirect costs that should be apportioned.

(2) Standards and time points for carrying forward construction in progress to fixed assets

For the construction in progress project, all expenses incurred before the construction of the asset reaches the expected serviceable state shall be takenas the entry value of fixed assets. If the construction in progress has reached the expected serviceable condition, but the final accounts of completionhave not yet been handled, from the date of reaching the expected serviceable condition, it shall be transferred to fixed assets according to theestimated value according to the project budget, cost or actual cost of the project, and the depreciation of fixed assets shall be accrued according to theCompany’s fixed assets depreciation policy. The original estimated value shall be adjusted according to the actual cost after the completion of finalaccounts, but the amount of depreciation that has been accrued shall not be adjusted.

26. Borrowing costs

(1) Recognition principles of capitalization of borrowing costs

Borrowing costs incurred by the Company that are directly attributable to the acquisition, construction or production of qualifying assets, shall becapitalized and included in the cost of relevant assets. Other borrowing costs shall be recognized as expenses according to the amount incurred andincluded in the profits or losses in the current period.

Assets eligible for capitalization refer to fixed assets, investment properties, inventory and other assets that are expected to be usable or salable after aconsiderable period of purchase and construction or production activities.

Capitalization shall commence when:

1) Expenditures are being incurred, which comprise disbursements incurred in the form of payments of cash, transfer of non-monetary assets orassumption of interest-bearing debts;

2) Borrowing costs are being incurred, and;

3) Purchase, construction or manufacturing activities that are necessary to prepare the assets for their intended use or sale are in progress.

(2) Capitalization period for borrowing costs

Capitalization period refers to the period from commencement of capitalization of borrowing costs to its cessation; period of suspension forcapitalization is excluded.

Capitalization of borrowing costs shall cease when the qualifying asset under acquisition, construction or production gets ready for intended use orsale.

Where part of the project of acquisition, construction or production of qualifying assets has been completed respectively and can be put into useindividually, capitalization of borrowing costs of that part should cease.

Where each part of assets purchased, constructed or manufactured has been completed separately but can be used or sold only after all parts have beencompleted, capitalization of borrowing costs shall cease at the completion of all parts of the said assets.

(3) Period of suspension for capitalization

Capitalization of borrowing costs shall be suspended during periods in which purchase, construction or manufacturing of assets eligible forcapitalization is interrupted abnormally, and the interruption is for a continuous period of more than 3 months; if the interruption is the necessaryprocedure to prepare the assets purchased, constructed or manufactured assets eligible for capitalization for their intended use or sale, the borrowingcosts shall continue to be capitalized. Borrowing costs incurred during the interruption shall be recognized in current profit or loss, and shall continueto be capitalized when purchase, construction or manufacturing of the relevant assets resumes.

(4) Measurement of capitalized amounts of borrowing costs

Interest charges on special borrowings (excluding interest income on unused borrowings deposited in the bank, or investment income on temporaryinvestment) and their ancillary expenses shall be capitalized before the assets purchased, constructed or produced that meet the capitalizationconditions are ready for intended use or sale。

The amount of capitalized interest on general borrowings is calculated by the weighted average of the excess portion of the accumulative assetexpenditures over the special borrowings multiplied by the capitalization rate of general borrowings. The capitalization rate is determined based onthe weighted average interest rate of general borrowings.

Where there are discounts or premiums on borrowings, the amounts of interest for each accounting period shall be adjusted taking account ofamortizable discount or premium amounts for the period by effective interest method.

27. Biological assets

28. Oil and gas assets

29. Right-of-use assets

The Company initially measures the right-of-use assets on the basis of the cost, which includes:

(1) The amount of initial measurement of lease liabilities;

(2) For the lease payment paid on or before the beginning of the lease term, if there is lease incentive plan, the relevant amount of lease incentive

enjoyed shall be deducted;

(3) The initial direct costs incurred by the company;

(4) The costs expected to be incurred by the Company to dismantle or remove the leased assets, restore the site where the leased assets are located

or restore the leased assets to the state agreed in the lease terms (excluding the costs incurred for the production of inventories).

After the beginning date of the lease term, the Company adopts the cost model for subsequent measurement of the right-of-use assets.

If it can be reasonably determined that the ownership of the leased asset is obtained at the expiration of the lease term, the Company shall accruedepreciation within the remaining service life of the leased asset. If it is impossible to reasonably determine that the ownership of the leased asset canbe obtained at the expiration of the lease term, the Company shall accrue depreciation within the shorter term between the lease term and theremaining service life of the leased asset. For the right-of-use assets with impairment provision, the depreciation shall be accrued on the basis of thebook value after deducting the impairment provision in the future with reference to the above principles.

30. Intangible assets

(1) Measurement method, service life, and impairment test

Intangible assets are non-monetary assets with no physical form that can be identified and owned or controlled by the Company, including land useright, computer software, patent right, non-proprietary technology, etc.

1) Initial measurement of intangible assets

Costs of purchased intangible assets include purchase prices, relevant taxes, and other expenditures that are directly attributable to the intangibleassets before they reach working conditions for their intended use. If payments for the purchase of intangible assets are extended beyond the normal

credit terms with financing nature, the costs of intangible assets are determined on the basis of present values of the purchase prices.

For intangible assets obtained from debtors in settlement of their liabilities in case of debt restructuring, the book value is determined based on the fairvalue of the intangible assets, and the difference between the book values of debt restructuring and the fair values of the intangible assets used to paythe debt shall be included in the current profits or losses.

If the exchange of non-monetary assets has commercial substance, and the fair values of the assets received or surrendered can be measured reliably,the book values of intangible assets received from the exchange of non-monetary assets shall be determined based on the fair values of the assetssurrendered unless there is any conclusive evidence that the fair values of the assets traded in are more reliable. If the exchange of non-monetaryassets does not meet the above criteria, the costs of the intangible assets received shall be the book values of the assets surrendered and relevant taxespaid, and no profits or losses shall be recognized.

For intangible assets obtained through business absorption or combination under common control, the book value is determined by the carryingamounts of the combined party. For intangible assets obtained through business absorption or combination not under common control, the book valueis determined by the fair value of the intangible assets.

The costs of internally developed intangible assets include: the materials consumed during the development, labor costs, registration fees,amortization of other patents and licenses applied during the development, interest expense eligible for capitalization, as well as other direct costsincurred for the intangible assets to reach working condition for their intended use.

2) Subsequent measurement of intangible assets

The Company determines the useful life of intangible assets on acquisition, which are classified as intangible assets with limited useful life andindefinite useful life.

① Intangible assets with limited useful lives

For the intangible assets with limited service life, they are amortized by the straight-line method within the period of bringing economic benefits tothe enterprise. The estimated life and basis of intangible assets with limited service life are as follows:

Item

ItemExpected service lifeBasis for estimates

Software

Software10 yearsExpected service life

Land use rights

Land use rights50 yearsCertificate of land using right

Patent rights

Patent rights10 yearsBenefit period

Non-proprietary technology

Non-proprietary technology10 yearsBenefit period

The service life of the intangible assets with limited service life and its amortization method shall be reviewed at the end of each period. If it differsfrom its previous estimate, adjustment will be made accordingly.

After review, the service life and amortization method of the intangible assets at the end of the period this year are not different from that estimatedpreviously.

? Intangible assets with uncertain useful lives

Intangible assets with unforeseeable economic benefits to the Company are deemed to be intangible assets with an indefinite useful life. Intangiblesassets with uncertain useful lives are not amortized during the holding period, but are reviewed for remaining useful lives at each year end. If theuseful lives are still uncertain after another review at the end of the year, the impairment tests will continue to be conducted during each accountingperiod.

After review, the useful lives for such intangible assets are still uncertain.

(2) Accounting policies on internal research and development expenditures

1) Criteria for classification of research phase and development phase of internal research and development projects of the Company

Research phase: the phase in which original and planned investigation and research are carried out with purpose of gaining and understanding newscientific or technical knowledge.

Development phase: before commercial production and utilization, the phase in which the research achievement or other knowledge is applied to aparticular project or design in order to produce new or substantially improved materials, devices, products, etc.

The expenditure of internal research and development projects incurred during research phase is recognized in profit or loss when incurred.

2) Criteria expenditures during the development phase qualifying for capitalization

Expenditures arising from development phase on internal research and development projects must be capitalized if the Company can satisfy all of thefollowing criteria:

(1) There is technical feasibility of completing the intangible assets (so that they will be available for use or sale);

(2) There is an intention to complete and use or sell the assets;

(3) how the intangible asset will generate economic benefits including there is evidence that the products produced using the intangible asset has amarket or the intangible asset itself has a market; if the intangible asset is for internal use, there is evidence that there exists usage for the intangibleasset;

(4) There are adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible assets;

(5) The expenditure attributable to the development phase of intangible assets can be reliably measured.

If the expenditure at the development phase does not meet the above condition, it shall be charged to current profits or losses when occurring. Thedevelopment expenditures which have been included in the profit or loss in the previous periods will not be recognised as an asset in the future period.The capitalised expenditures in the development phase are shown in the balance sheet as development expenditures and are converted into intangibleassets from the date of the project’s intended use.

31. Impairment of long-term assets

On the balance sheet date, the Company judges whether there is any sign of possible impairment of long-term assets. If there is any sign ofimpairment of a long-term asset, the recoverable amount shall be estimated on the basis of a single asset; if it is difficult to estimate the recoverableamount of a single asset, the recoverable amount of the asset group to which the asset belongs shall be determined.

The recoverable amount of an asset is estimated based on the higher of the net amount of its fair value less disposal expenses and the present value ofthe expected future cash flow of the asset.

If the measurement results of the recoverable amount show that the recoverable amount of the long-term asset is lower than its book value, the bookvalue of the long-term asset shall be written down to the recoverable amount, and the writedown amount shall be recognized as the impairment loss ofthe asset, which shall be recorded into the current profit and loss, and the corresponding asset impairment provision shall be drawn at the same time.Once the impairment loss of assets is recognized, it shall not be reversed in the future accounting period.After the asset impairment loss is recognized, the depreciation or amortization expenses of the impaired asset shall be adjusted accordingly in thefuture period, so that the adjusted asset book value (deducting the estimated net residual value) will be systematically apportioned over the remainingservice life of the asset.For goodwill and intangible assets with uncertain service life due to business combination, no matter whether there is any sign of impairment or not,impairment test shall be carried out every year.

In the impairment test of goodwill, the book value of goodwill would be apportioned to asset group or portfolio of asset group expected to benefitfrom the synergy effect of an enterprise merger. When carrying out an impairment test on the relevant asset group or portfolio of asset groupcontaining goodwill, if there is a sign of impairment on the asset group or portfolio of asset group related to the goodwill, the Company first calculatesthe recoverable amount after testing the asset group or portfolio of asset group which does not contain the goodwill for impairment, and thencompares it with the related book value to recognise the corresponding impairment loss. Next, the Company conducts an impairment test on the assetgroup or portfolio of asset group which contains the goodwill and compares the book value of the related asset group or portfolio of asset group (bookvalue includes the share of goodwill) with the recoverable amount. If the recoverable amount of the related asset group or portfolio of asset group islower than the book value, the Company will recognise the impairment loss of goodwill.

32. Long-term deferred expenses

(1) Amortization method

Long-term deferred expenses refer to expenses that have already been spent by the Company, but shall be apportioned in the current period and thefuture periods and the benefit period is over 1 year. Long-term prepaid expenses are amortized using the straight-line method over the period ofprojected earnings.

(2) Amortization period

Type

TypeAmortization periodNotes
Leasehold improvementExpected service life or lease term, whichever is lower

Renovation costs

Renovation costs3 years
Filling machineBased on contract
Power Grid access fee10 years

Software system implementation fee

Software system implementation fee5 years
Repair and maintenance fee2-3 years

33. Contractual liabilities

The Company recognizes as a contractual liability the portion of its obligation to transfer commodities to a customer for which the customerconsideration has been received or is receivable.

34. Employee compensation

(1) Accounting treatment of short-term employee benefits

Short term compensation refers to the employee compensation that shall be paid by the Company within 12 months after the end of the annual reportperiod when employees provide relevant services, except for post-employment welfare and dismissal welfare. During the accounting period whenemployees provide services, the Company recognizes the short-term benefits payable as a liability and includes the same in the relevant asset costsand expenses on the basis of the beneficiaries of the services provided by employees.

(2) Accounting treatment for post-employment benefits

Post-employment benefits refer to various forms of remuneration and benefits provided by the Company after employees retire or terminate laborrelations with the enterprise in order to obtain the services provided by employees, except short-term remuneration and dismissal benefits.All post-employment benefit plans of the Company are defined contribution plans.The defined contribution plan for post-employment benefits is mainly to participate in the social basic endowment insurance, unemploymentinsurance, etc., organized and implemented by local labor and social security institutions. During the accounting period when employees provideservices to the Company, the amount of deposit payable calculated according to the defined deposit plan shall be recognized as liabilities and includedin the current profit and loss or related asset costs.The Company shall have no other payment obligations after regularly making the above-mentioned payments in accordance with the standards andannuity plans stipulated by the State.

(3) Accounting treatment for termination benefits

Termination benefits refer to the compensation paid to an employee when the Company terminates the labor relationship with an employee before thelabor contract expires, or offers compensation for encouraging the employee to accept the redundancies voluntarily. The liabilities arising from thetermination of labor relations with the employee are determined, and also included in the current profit and loss, at the time when the Companycannot unilaterally withdraw the termination of the labor relationship plan or redundancies proposal, or the time when the cost associated withrestructuring involving payment of termination benefits is confirmed, whichever is earlier.

The Company provides early retirement benefits to employees who accept internal retirement arrangements. Early retirement welfare refers to thewages paid to the employees who fail to reach the retirement age stipulated by the state and voluntarily quit their jobs with the approval of theCompany’s management and the social insurance premiums paid for them. The Company shall pay the internal retirement benefits to the early retiredemployees from the commencement date of the internal retirement arrangement to the date when the employees reach the normal retirement age. Forthe early retirement welfare, the Company shall carry out accounting treatment according to the termination benefits. When the relevant recognitionconditions of the termination benefits are met, the wages and social insurance premiums to be paid to the early retired employees from the date whenthe employees stop providing services to the normal retirement date shall be recognized as liabilities and included in the current profit and loss on a

lump-sum basis. The difference caused by the change of actuarial assumption and the adjustment of welfare standard of early retirement welfare shallbe included in the current profit and loss when it occurs.

(4) Accounting treatment for other long-term employee benefits

35. Lease liabilities

The Company initially measures the lease liabilities according to the present value of the unpaid lease payments at the beginning of the lease term.When calculating the present value of lease payments, the Company takes the interest rate implicit in lease as the discount rate; If the interest rateimplicit in lease cannot be determined, the incremental borrowing rate of interest of the Company shall be used as the discount rate. Lease paymentsinclude:

(1) The fixed payment amount and actual fixed payment amount after deducting the relevant amount of lease incentive;

(2) Variable lease payments depending on index or ratio;

(3) When the Company reasonably determines that the option will be exercised, the lease payment includes the exercise price of the option;

(4) When the lease term reflects that the Company will exercise the option of terminating the lease, the lease payment includes the payment requiredto exercise the option of terminating the lease;

(5) The amount expected to be paid in the light of the guarantee residual value provided by the Company.

The Company determines the expense of the interest of lease liability in each period of the lease term in the light of the fixed discount rate, andincludes it in the current profit and loss or the cost of relevant assets.

The amount of variable lease payments not included in the lease liabilities shall be included in the current profits and losses or relevant asset costswhen actually incurred.

36. Estimated Liabilities

(1) Recognition criteria of estimated liabilities

When an obligation related to the contingent events satisfies all the following conditions, it is recognized by the Company as estimated liabilities:

The obligation is the current obligation of the Company;

The performance of obligation is likely to result in the outflow of economic benefits from the Company;

The cost of the obligation can be measured in a reliable way.

(2) Measurement of estimated liabilities

The estimated liabilities of the Company are initially measured on the basis of the best estimate of the expenditure required to perform the relevantcurrent obligations.

When determining the best estimate, the Company considers factors such as risks, uncertainties and time value of money related to contingent events.Where the time value of money has a significant impact, the best estimate is determined by discounting the relevant future cash outflows.

The best estimates are handled as follows:

In case that there is a continuous range (or interval) of required expenditures, within which the possibility of occurrence of various results is the same,the best estimate is determined by the average of the middle value of the range, that is, the average of the upper and lower limits.

In case that there is no continuous range (or interval) of required expenditures, or there is a continuous range but the possibility of various results inthe range is different, if the contingency involves a single item, the best estimate should be determined based on the most probable amount; if acontingency involves multiple items, the best estimate is determined based on various possible outcomes and associated probabilities.

If all or part of the expenses required by the Company to settle the provisions are expected to be compensated by a third party, the compensationamount is separately recognized as an asset when it is basically confirmed to be received, and the recognized compensation amount should not exceedthe book value of estimated liabilities.

37. Share-based payments

(1) Categories of share-based payments

The share based payment of the Company is divided into equity-settled share-based payment and cash-settled share-based payment.

(2) Determination method of fair value of equity instruments

For the granted equity instruments such as options with active market, their fair value shall be determined according to the quoted price in the activemarket. For the granted equity instruments without active market, the option pricing model is used to determine their fair value. The following factorsare considered in the option pricing model: 1) the exercise price of the option; 2) the validity period of the option; 3) the current price of the targetshare; 4) the expected volatility of the share price; 5) the expected dividend of the share; 6) the risk free interest rate.

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