C&S Paper Co., Ltd. - Annual Report 2020

C&S Paper Co., Ltd. Annual Report 2020

C&S Paper Co., Ltd. Annual Report 2020

April 2021

C&S Paper Co., Ltd. Annual Report 2020

Section I Important Notice, Contents and Definitions

The Board of Directors and the Board of Supervisors of the Company and its directors, supervisors and senior management warrant that the information contained in this annual report is true, accurate and complete without any false and misleading statements or material omissions, and severally and jointly accept legal liability thereof.

Deng Yinzhong, the legal representative of the Company, Dong Ye, the person in charge of accounting of the Company, and Xu Xianjing, the person in charge of the accounting department of the Company, have declared that they warrant the truthfulness, accuracy and completeness of the financial statements set out in this annual report.

All directors of the Company attended the Board meeting on which this report was reviewed. In the annual report, the decimal sum error is caused by rounding

The forward-looking statements in this annual report, including future plans, do not constitute substantive commitments of the Company to investors. Investors should be aware of the investment risks.

I. Risk of great fluctuations in pulp prices

Pulp is an international bulk raw material and its price is obviously affected by the world economic cycle. Since 2019, pulp prices have tumbled sharply owing to weaker Chinese market demand, trade disputes across the world, exchange rate movement, and increased pulp inventories. In 2020, pulp prices were generally maintained at a relatively low level and started to rise in the fourth quarter. Pulp is the primary raw material of the Company’s production, accounting for 40%-60% of the total production costs. Therefore, substantial fluctuations in pulp prices pose a risk to the Company.

II. Risk of exchange rate

The import of machinery equipment and pulp and the export of products to overseas market of the Company are mainly settled in USD, HKD, and EUR. Since exchange rates fluctuate under the impact of the international economic situation, the Company faces exchange rate risks.

III. Risk of regional market competition

Household paper is a vast market in China in terms of both geography and market space.

C&S Paper Co., Ltd. Annual Report 2020

Given the low unit value, transportation expenses taking up a large part of the sales price, and limitations of the transportation radius, the main competition in the household paper industry lies in regional markets. High-end, mid-end, and low-end products compete in regional markets, with the influence of spending power and consumption habit. Judging from the development trend of the industry, mid- and high-end household paper of national brands has more competitive edge. However, at present, some regional brands have an advantage in some regional markets. Compared with overseas counterparts, China's household paper industry requires continued integration. The Company embraces production bases and a sales network across the country and offers mid- and high-end products under national brands. Nevertheless, it is inescapable from the risk of regional market competition.

IV. Risk of industrial policies

Stricter requirements have been raised for the papermaking industry in the aspects of scale, technology, equipment, and environmental protection, as multiple industry plans and supporting policies have been successively issued by relevant departments, including the Papermaking Industry Development Policy , the Notice on the Management of Elevated Source Pollution Discharge Permits in Thermal Power and Papermaking Industries and Pilot Cities of Beijing-Tianjin-Hebei Region , and the Opinions of China Paper Association on "Thirteenth Five-year" Development Plan of the Papermaking Industry . Particularly, a number of measures have been introduced through environmental protection policies to drive the all-round, coordinated, and sustainable development of the household paper industry, including 1) optimizing the industrial distribution to reasonably allocate resources and promoting clean production to preserve the ecological environment; 2) pushing energy conservation and emission reduction to shut down outdated production facilities, and adjusting product structure and improving product quality; 3) developing resource-saving models to advocate green consumption; and 4) optimizing enterprise structure and driving M&A and restructuring. These policies are designated to strengthen household paper industry concentration, close backward production facilities, and optimize resource allocation. The Company, as an enterprise in the first echelon of the domestic household paper industry, is underpinned by national policies related to the sustainable development of the household paper industry. Precisely because of this, industrial policy adjustment, if any, will impact the production and operations of the Company to some extent.

V. Risk of safe production

Most of the materials involved in the household paper industry are flammable, including the

C&S Paper Co., Ltd. Annual Report 2020

main raw material of pulp, the main packing materials of plastic-film packing bags and cartons, the semi-finished product of body paper, and finished products. Due to the characteristics of low unit value and large market consumption, household paper manufacturers have to keep a mass of pulp, packing materials, and semi-finished and finished products from the entry of raw materials into the plant to the delivery of products to the market. Thus, fire can cause enormous losses to such manufacturers. In view of this, the Company has formulated strict fire management regulations for raw materials and semi-finished and finished products, established a full-time safety management department, equipped adequate fire protection equipment in production areas, and bought full insurance for risky properties. As such, the Company’s fire safety risk is low. In addition, a large number of production lines have been put into use, which may pose certain occupational health hazard and cause harm to the occupational health of employees. In response to possible occupational health hazards, the Company, at the equipment design and procurement stages, requires suppliers to carry out intrinsic safety design and fulfill the protection measures during the installation process. At the same time, the Company has passed the ISO45001 occupational health and safety (OHS) management system and continues to maintain its effective operations to reduce the occupational health and safety risks of employees. Even though the execution of all these measures has enabled the overall safe production risk to be controllable, the Company still faces certain safe production risks.

VI. Risk of logistics transportation

The spread of the COVID-19 pandemic since the beginning of 2020 has hindered domestic and foreign logistics transportation by sea and land to varying degrees, affecting both the Company's procurement and sales and upstream suppliers and downstream dealers. In other words, the Company has suffered from multiple dimensions. Though impacts of the pandemic are phased and temporary, risks are unavoidable for the Company as being at the mid- and downstream of the household paper industry chain.

The Board meeting has deliberated and approved the following profit distribution preplan: distribute cash dividend of RMB 1.0 (tax included) for every 10 shares to all shareholders and issue 0 bonus shares (tax included) based on the Company’s total share capital minus the number of repurchased shares as of the registration date of the Company’s implementation of the profit distribution plan; meanwhile, the Company will not transfer capital reserve into share capital.

C&S Paper Co., Ltd. Annual Report 2020

Section I Important Notice, Contents and Definitions ......................................................................... 2 Section II Company Profile and Key Financial Indicators .................................................................. 9 Section III Summary of the Company’s Business ............................................................................. 15 Section IV Discussion and Analysis of the Operations ...................................................................... 20 Section V Significant Events ............................................................................................................. 47 Section VI Changes in Shareholding and Information of Shareholders ............................................ 90 Section VII Particulars of Preference Shares ................................................................................... 103 Section VIII Particulars of Convertible Corporate Bonds ............................................................... 104 Section IX Particulars of Directors, Supervisors, Senior Management and Employees ................. 105 Section X Corporate Governance .................................................................................................... 118 Section XI Corporate Bonds ............................................................................................................ 131 Section XII Financial Report ........................................................................................................... 132 Section XIII Documents Available for Inspection ........................................................................... 320

C&S Paper Co., Ltd. Annual Report 2020

Definitions

Term		Definition
The Company, Company, C&S		C&S Paper Co., Ltd.
Zhongshun Group		Guangdong Zhongshun Paper Group Co., Ltd.
Hong Kong C&S		Chung Shun Co., a Hong Kong-based company
Zhongshan Trading		Zhongshan Zhongshun Trading Co., Ltd.
Zhong Shun International		Zhong Shun International Co., Ltd., a Hong Kong-based company
C&S Hong Kong		C&S Hong Kong Co., Ltd., a Hong Kong-based company
Beijing Trading		Beijing C&S Paper Co., Ltd.
Xiaogan Trading		Xiaogan C&S Trading Co., Ltd.
Chengdu Trading		Chengdu Zhongshun Paper Co., Ltd.
Hangzhou Trading		Hangzhou Jie Rou Trading Co., Ltd.
Shanghai Trading		Shanghai Huicong Paper Co., Ltd.
		C&S (Sichuan) Paper Co., Ltd., formerly known as Chengdu Tiantian
Sichuan C&S
		Paper Co., Ltd.


Jiangmen C&S		Jiangmen Zhongshun Paper Co., Ltd.

Zhejiang C&S		Zhejiang Zhongshun Paper Co., Ltd.
		C&S (Hubei) Paper Co., Ltd., formerly known as Hubei Zhongshun
Hubei C&S
		Hongchang Paper Co., Ltd.

Yunfu C&S		C&S (Yunfu) Paper Co., Ltd.
		Yunfu Hengtai Trading Co., Ltd., formerly known as C&S (Yunfu)
Yunfu Trading
		Trading Co., Ltd.

Tangshan C&S, Tangshan branch.		C&S Paper Co., Ltd. Tangshan Branch
		C&S (Zhongshan) Paper Co., Ltd., formerly known as Zhongshan Tongfu
Zhongshan Paper
		Trade Co., Ltd.

Macao C&S		C&S (Macao) Co., Ltd.

C&S Paper Co., Ltd. Annual Report 2020

Dazhou C&S		C&S (Dazhou) Paper Co., Ltd.
Sun C&S		Sun Daily Necessities Co., Ltd.
Dolemi		Dolemi Sanitary Products Co., Ltd.
Jiangsu C&S		C&S (Jiangsu) Paper Co., Ltd.
Mazars		Mazars Certified Public Accountants (LLP)

C&S Paper Co., Ltd. Annual Report 2020

Section II Company Profile and Key Financial Indicators

I. Company Information

Stock name	C&S	Stock code	002511
Stock exchange on which the
	Shenzhen Stock Exchange
shares are listed

Chinese name of the Company	中顺洁柔纸业股份有限公司
Abbreviation of Chinese name
	中顺洁柔
of the Company

English name of the Company	C&S Paper Co., Ltd.
Abbreviation of English name
	C&S
of the company

Legal representative of the	Deng Yingzhong
Company
Registered address	Shenglong Village, Tanbei, Dongsheng Town, Zhongshan City
Postal code of registered
	528414
address

Office address	No. 136 Caihong Avenue, West District, Zhongshan City
Postal code of office address	528401
Company website	http://www.zhongshungroup.com
Email	[email protected]

II. Contact Persons and Contact Methods

	Sectary to the Board	Representative of securities affairs
Name	Zhou Qichao	Cao Hui and Liang Yao
	No. 136 Caihong Avenue, West District,	No. 136 Caihong Avenue, West District, Zhongshan
Address
	Zhongshan City	City

Tel	0760-87883333	0760-87883333

C&S Paper Co., Ltd. Annual Report 2020

Fax	0760-23886886	0760-23886886
Email	[email protected]	[email protected]. [email protected]

III. Information Disclosure and Location for Inspection of Documents

Newspapers designated for disclosure of the
	China Securities Journal, Securities Times, Securities Daily
Company’s information

Website designated by CSRC for
	www.cninfo.com.cn
publication of the annual report

Location for inspection of annual report	Office of the Board of Directors

IV. Changes of Registration Information

Unified social credit code	914420007123239244
	The Company’s business scope was changed from “production and sales of high-end
	household paper series products (excluding printing processes); products are sold
	domestically and internationally” at the listing of the Company in 2010 to the current
	“General items: paper product manufacturing; paper product sales; Internet sales (excluding
	the sales of commodities requiring a permit); sales of daily necessities; sales of personal
	hygiene products; sales of household products; sales of sanitary products and disposable
	medical products; retail of cosmetics; wholesale of cosmetics; sales of knitwear; sales of
	plastic products; sales of metal products; sales of rubber products; manufacture of daily-sue
	ceramic products; wholesale of kitchen utensils and daily groceries; sales of Class I medical
Changes of principal businesses since
	devices; manufacture of Class I medical devices; sales of Class II medical devices; sales of
listing (if any)
	disinfectants (excluding hazardous chemicals). (The company may carry out business

	operations independently according to the law based on the business license, except for
	items that must be licensed according to the law). Licensed items: import and export of
	goods or technologies (excluding the import and export of goods and technologies prohibited
	by the State or involving administrative approval); manufacture of Class II medical devices;
	operation of Class III medical devices; manufacture of Class III medical devices. (For items
	that must be approved in accordance with the law, the company may carry out business
	operations upon approval by competent departments, and the specific business items are
	subject to the approval document or the permit issued by relevant department.) (The above

C&S Paper Co., Ltd. Annual Report 2020

business scope involves import and export of goods and technologies, business operation of Class II and Class III medical devices, and manufacture of medical devices.) (The above items do not involve special management measures for the access of foreign investment).” Previous changes of controlling No change shareholders (if any)

V. Other Relevant Information

Accounting firm engaged by the Company

Name of accounting firm	Mazars Certified Public Accountants (LLP)
Office address	Zhongshen Zhonghuan Building, No. 169 Donghu Road, Wuchang District, Wuhan
Name of signing accountants	Wang Bing, Pan Guiquan

Sponsor engaged by the Company to fulfill continuous supervision obligation during the reporting period

□ Applicable √ Not applicable

Financial advisor engaged by the Company to fulfill continuous supervision obligation during the reporting period

□ Applicable √ Not applicable

VI. Main Accounting Data and Financial Indicators

Whether the Company needs to perform retrospective adjustment or restatement of accounting data for previous

years

□ Yes √ No

	2020	2019	Changes over last year	2018
Operating income (RMB)	7,823,528,416.32	6,634,914,352.68	17.91%	5,678,517,623.29
Net profit attributable to shareholders	905,889,081.41	603,832,650.83
			50.02%	406,993,183.92
of the listed company (RMB)

Net profit attributable to shareholders
of the listed company after deducting	891,552,986.81	588,728,468.59	51.44%	392,524,980.16
non-recurring profit and loss (RMB)
Net cash flow from operating activities	828,200,862.25	1,360,374,901.86
			-39.12%	437,254,844.25
(RMB)

Basic earnings per share (RMB/share)	0.70	0.47	48.94%	0.32

C&S Paper Co., Ltd. Annual Report 2020

Diluted earnings per share	0.69	0.46
			50.00%	0.32
(RMB/share)

Weighted average return on net assets	19.86%	16.42%	3.44%	12.67%
			Changes over end of
	End of 2020	End of 2019		End of 2018
			last year

Total assets (RMB)	7,478,439,747.77	6,026,271,823.64	24.10%	5,145,910,974.02
Net assets attributable to shareholders	5,042,146,076.42	4,077,004,459.23
			23.67%	3,311,242,723.53
of the listed company (RMB)

The lower of the net profits before and after deducting the non-recurring profit and loss in the most recent three

accounting years is all negative, and the audit report of the most recent year shows that the Company’s ability to continue operations is uncertain.

□ Yes √ No

The lower of the net profits before and after deducting the non-recurring profit and loss is negative.

□ Yes √ No

VII. Difference in Accounting Data under Domestic and International Accounting Standards

1. Net profit and net asset differences under International Financial Reporting Standards (IFRS) and Chinese Accounting Standards (CAS)

□ Applicable √ Not applicable

No such differences for the reporting period

2. Net profit and net asset differences under foreign accounting standards and Chinese Accounting Standards (CAS)

□ Applicable √ Not applicable

No such differences for the reporting period

VIII. Major Financial Indicators by Quarter

Unit: RMB

Q1 Q2 Q3 Q4

C&S Paper Co., Ltd. Annual Report 2020

Operating income	1,670,909,073.75	1,945,292,326.05	1,939,114,329.20	2,268,212,687.32
Net profit attributable to
shareholders of the listed	183,429,517.35	269,269,967.26	218,993,617.46	234,195,979.34
company
Net profit attributable to
shareholders of the listed company
	186,893,864.62	259,641,873.34	215,156,319.23	229,860,929.62
after deducting non-recurring profit

and loss
Net cash flow from operating
	330,547,734.57	174,010,853.76	-93,239,029.05	416,881,302.97
activities

Whether there are significant differences between the above-mentioned financial indicators or its total number and

the relevant financial indicators disclosed in the Company’s quarterly reports and semi-annual report □ Yes √ No

IX. Non-recurring Items and Amounts

√ Applicable □ Not applicable

Unit: RMB

Item	Amount in 2020	Amount in 2019	Amount in 2018	Description
Profits/losses from the disposal of	-2,980,604.57
non-current asset (including the write-off		-2,002,045.02	-5,113,177.55
that accrued for impairment of assets)
Governmental grants reckoned into current	28,533,162.96
profits/losses (not including grants enjoyed
in quota or ration according to national		18,422,795.06	14,259,920.14
standards, which are closely relevant to the
company’s business)
	3,868,134.28			Returns on principal-protected wealth management products at maturity and reverse repo of treasury
Profits/losses from assets entrusted to others
		333,745.61	10,637,420.00
for investment or management

C&S Paper Co., Ltd. Annual Report 2020

				bonds
Other non-operating income and expenses	-13,442,144.41
		1,320,617.95	362,480.53
except for the aforementioned items

Less: Influence of income tax	1,642,453.66	2,970,931.36	5,678,439.36
Total	14,336,094.60	15,104,182.24	14,468,203.76	--

Reason shall be provided if the company defines non-recurring profit and loss items as defined or listed in the No.

1 Explanatory Announcement on Information Disclosure for Companies Offering their Securities to the Public—Non-recurring Profit and Loss as recurring profit and loss items.

□ Applicable √ Not applicable

The Company did not define any non-recurring profit and loss items defined or listed in the No. 1 Explanatory Announcement on Information Disclosure of Companies Offering Securities to the Public—Non-recurring Profit and Loss as recurring profit and loss items during the reporting period.

C&S Paper Co., Ltd. Annual Report 2020

Section III Summary of the Company’s Business

I. Principal Businesses of the Company during the Reporting Period

Mr. Deng Yinzhong, founder of the Company, initiated his entrepreneurial process in 1978. Starting from intensive paper processing, the Company has developed into a leading household paper enterprise integrating R&D, production and sales after forty-two years of striving. With an adherence to its corporate values of “products need brands, enterprises need brands, and people need brands”, the Company has extended its products from household paper to cross-category household daily necessities including cotton series products, sanitary wipes, baby diapers, etc.

Currently, the Company features three major brands, namely, Jie Rou, Sun, and Dolemi. Main products include paper rolls, coreless rolls, facial tissues, tissue handkerchiefs, wipes, personal care products, baby diapers, cotton tissues, etc. Product series involve Face series, Lotion series, Natural Wood series, Antibacterial Paper series, Jin Zun series, wipes, Sun series, Dolemi series, OKBEBE series, and Cotton Tissue series. Specifics are given in the following:

1. Household paper (Jie Rou brand + Sun brand)

Face Series: Face wettable facial tissue is a feature product of the Company. Through constant quality upgrading, the newly developed four-layer thick facial tissues remain pliable and thick even when they are wet. One piece of this facial tissue is as thick as two pieces of average tissues, which optimizes the products’ user experience and fashion sense. In 2020, in order to better reflect the brand’s image and high-end style, the Company incorporated oil painting elements into its packaging and launched Face oil painting series products, which is called the “artwork of paper tissues”.

Lotion Series: Lotion water retention facial tissues are characterized by the skin-friendly lotion and moisturizing factor. They feel soft and smooth, thanks to the water retention factors. This product is especially suitable for delicate skin and applicable to mothers and infants, people with nasal allergy, and people wearing makeup.

Natural Wood Series: The Company launched the first noble yellow tissues (with low whiteness), "Jie Rou Natural Wood Series" in 2018, based on the consumption concepts of health and safety. Its soft and pliable texture is attributable to 100% imported raw wood pulp. Quality of the whole series is superb.

Antibacterial Series: With the advent of the post-pandemic era in China, the Company introduced the antibacterial series products to keep abreast with changes in the consumption habits of consumers in early 2021. The products contain antibacterial factors and have been proved with experiments to effectively reduce the growth of more than 99% of bacteria on paper tissues. They can effectively inhibit bacteria such as E. coli and staphylococcus aureus, thereby protecting the health of consumers.

C&S Paper Co., Ltd. Annual Report 2020

Jin Zun Series: Made from 100% imported raw wood pulp, Jin Zun products are thick, pliable, and cost-effective. Wipes: Wipe products of the Company are diversified, including mother and baby wipes, disinfection wipes, personal care wipes, kitchen wipes, and pure water wipes, which can meet the needs of consumers in different scenarios.

Sun Series: The Company launched the new brand Sun in 2019 in conjunction with the 300,000-ton bamboo-pulp-paper integration project in order to accelerate the coverage of high-, mid- and low-end household paper markets in China and satisfy consumption needs at different levels. This initiated the Company’s “dual brand” business strategy. Sun is positioned to be a highly cost-effective product that has good quality yet lower prices. It is the key to raise the market share of the Company in the future.

2. Personal care products (Dolemi brand)

Dolemi Series: In 2019, the Company launched a new personal care brand, Dolemi, to cater for upgrading consumption. The surface of Dolemi pads is made from natural cotton. The products feature two-way air circulation and are elastic, soft, and fit. Thanks to the good air circulation, consumers will feel at ease. They enable women pursuing better quality of life to experience "thin pads and get rid of side leakage".

OKBEBE Series: This care brand for newborn babies was rolled out in 2021. Products include baby diapers and pull-up pants. With medical level high standards, the products are skin-friendly, breathable, dry and easy to absorb. They are dedicated to providing babies with safer and more comfortable growth experience, having passed the surveillance on six product performance indicators including allergenic microbial inspection and production environment bacteria.

3. Quality health products

Cotton Tissue Series: In 2018, the Company stepped out of the household paper field and introduced the "Cotton Tissue" products, which feature 100% fresh cotton, complete physical processes, and unbleached. As being natural, healthy, soft, skin-friendly, and dry-wet dual use, they can be used for personal cleaning and care as cotton pads and face towels, especially by infants and women.

Medical surgical masks: In response to the government’s call, the Company quickly initiated medical mask production and rolled out medical surgical mask products. The products are characterized by “high efficiency filtration, low breathing resistance, and comfortable wearing”, and have passed the EU CE and US FDA certifications. Third-party laboratory testing from US, EU and Japan proves the products to have reached the highest quality standards of their kind.

Other quality health products: In line with the Company’s strategic planning and market needs, the Company successively launched personalized products that are fit with consumer needs since 2020, including makeup removal wipes, feminine care wipes, alcohol disinfectant wipes, mouthwashes, disinfectant hand sanitizers, face wash towels, disposable sweat-absorbent wipes, insoles, etc. This enables the Company to form a diversified development pattern on the basis of pursuing high quality and individualization.

C&S Paper Co., Ltd. Annual Report 2020

The competition in China’s household paper industry is still fierce and industry concentration is increasing. With strengthened awareness on the concept of healthy living, consumers pay increasing attention to brands. Product quality is still a prominent concern in the industry. Amid all these, the Company has become one of the representative brands of high-end household paper in the market through continuous brand building and quality assurance, and robust production capacity layout and channel expansion. It is ranked among the first echelon in the household paper industry and is well recognized by consumers and capital markets. In addition, with an adherence to the value concept of “Only Care About You”, the Company continues to tap consumer needs and constantly upgrades and optimizes products with leverage on its strong R&D and innovation capabilities. The Company is committed to providing consumers with products of better quality, more comfort, and more tailored to their individual needs. The Company aims to achieve national product coverage which is underpinned by continuously improved product reputation among consumes and strengthened and consolidated brand awareness.

II. Significant Changes in Main Assets

1. Significant changes in main assets



Main assets	Description of Significant changes

Equity assets	No significant changes during the reporting period
Fixed assets	No significant changes during the reporting period
Intangible assets	No significant changes during the reporting period
Construction work in progress	No significant changes during the reporting period

2. Main overseas assets

□ Applicable √ Not applicable

III. Analysis of Core Competitiveness

1. Belong to the first echelon of the domestic household paper industry

The Company is a top-performing enterprise in the first echelon of the domestic household paper industry. Its products are sold at home and abroad including Southeast Asia, the Middle East, and Europe.

2. Constantly optimized product structure

The Company boasts three major brands, namely, Jie Rou, Sun, and Dolemi. Main products include paper rolls, coreless rolls, facial tissues, tissue handkerchiefs, wipes, personal care products, baby diapers, cotton tissues, etc.

C&S Paper Co., Ltd. Annual Report 2020

The Company continuously optimizes its product structure and raises the sales proportion of high-end products, high-gross profit products and non-roll categories. In addition, it has strengthened the sales of major series like Face, Lotion, and Natural Wood, formulated distribution standards for each major channel, raised the market share in each channel, and continuously improved the gross profit and profitability of products.

3. Stable and effective management team

The R&D, production, procurement, sales, quality control, and operation teams have successively introduced excellent professionals since 2014. At present, the Company boasts the most outstanding R&D, production, and sales teams in the industry. Its product R&D, quality and marketing management has been effectively reinforced. The management team of the Company has formulated long-term and strategic plans in line with actual situation of the Company, industry development level, and market demands. Moreover, the management team is capable of making reasonable decisions on operation management issues with relation to R&D, production, marketing, investment, and financing, and effectively implementing such decisions. The excellent management team fundamentally guarantees the Company’s competitiveness and sustainable development in the future.

4. Nationwide marketing network

The Company has been building and improving its marketing networks based on its keen and strategic insights and reasonable layout. The Company has enhanced its profitability by expanding its channels from a single dealer channel in 2015 to six channels at present, namely, GT (general trade channels), KA (key account channels), AFH (away from home channels), EC (e-commerce channels), RC (new retail channels), and SC (maternal and infant channels). Its current marketing network covers most of the prefecture-level (and county-level) cities. Products are directly sold to counties and then distributed to towns. This helps achieve segmented and flat market operation and expand the dealer network.

Furthermore, while ensuring the smooth operation of other channels, the Company has established a professional e-commerce operation team, devoted more resources to e-commerce platforms, built and improved the corresponding supply chain system, and intensified its routine operation management. It has reached cooperation with renowned platforms such as Tmall, JD, Pinduoduo, Taobao, Vipshop, Suning, Kuaishou, TikTok, Yunji and NetEase. In addition, it has developed an AFH service team for AFH channels and customer bases to match the growing AFH market. Attributable to a robust sales network plus quality and diversified products, the Company is able to constantly consolidate its market basis, improve consumer experience, and enhance brand reputation, which can help achieve sustainable and stable growth in the future.

5. Nationwide layout of production bases

The Company has developed a production layout covering East China, South China, West China, North China, and Central China, through its subsidiaries including Jiangmen C&S, Yunfu C&S, Sichuan C&S, Zhejiang C&S, Hubei C&S, and Tangshan Branch. Thanks to the nationwide layout of production bases, the Company has narrowed the distance to customers, reduced transportation costs, and enhanced transportation efficiency.

C&S Paper Co., Ltd. Annual Report 2020

6. Product quality at an international level

The Company has always regarded product quality as its lifeline of survival and development ever since its incorporation. First-class quality derives from first-class raw materials. Raw materials of the Company have passed the ISO quality management system certification. Besides strict feed inspection procedures, it has introduced HACCP food hygiene and safety management system to control the hygiene and quality of products from the source. Moreover, its products have passed ISO9001 quality management system certification which is the strictest detecting system for product quality. The Company has observed internationally-advanced quality management system standards and utilized advanced processes, formulas, and control procedures in production to ensure each technical performance indicator.

7. Good R&D capabilities

The Company is equipped with a complete product development system and the subordinate R&D department boasts strong independent R&D capabilities and excellent product formula technologies. In recent years, the Company has continuously upgraded and optimized its products, in a bid to provide consumers with products of better quality, more comfort, and more aligned with their individual needs. Products of the Company have extended from household paper to cross-category household daily necessities including cotton series products, sanitary wipes, baby diapers, etc. The Company’s speed of bringing forth new products is at the forefront of the industry.

8. First-class production equipment

The Company drives development via technology and has introduced cutting-edge papermaking and processing equipment. Advanced technology and highly automatic equipment have strengthened the Company's efficiency, further satisfied the ever-growing market demands, and served as an unstoppable driving force to development.

9. Outstanding environmental protection awareness and technology

Along with the deepening of industrialization, the concept of environmental protection has been deeply rooted among the people. The Company has adhered to the concept of "seeking green benefits and fulfilling corporate social responsibilities", and utilized advanced environmental protection technologies to pursue its objective of environmental protection. Its waste water and gas emissions are superior to the national standards and industry-leading.

C&S Paper Co., Ltd. Annual Report 2020

Section IV Discussion and Analysis of the Operations

I. Overview

In 2020, the COVID-19 pandemic swept across the world, exerting a short-term influence on the procurement, production, and sales of the household paper industry. Nevertheless, management of the Company rapidly responded at the beginning of the outbreak and demonstrated strong comprehensive operational capabilities and anti-risk capabilities. Having gone through the journey of fighting the pandemic, resuming work and production, and orderly arranging pandemic prevention and control work, the Company has converted challenges to opportunities. Meanwhile, the Company has upheld its core strategies and operation objectives. Through united efforts and effective measures including expanding categories, deepening channels and accelerating marketing and promotion, the Company was able to boost results and profits steadily.

In 2020, the Company recorded an operating income of RMB7.824 billion with a YoY increase of 17.91% and a net profit attributable to shareholders of the listed company of RMB906 million, up by 50.02% YoY. This not only successfully fulfills the preset goals for the year, but also lays a solid foundation for the Company to march onto the road of high quality and efficiency development.

1. Expansion of product categories to drive sales

During the reporting period, the Company quickly initiated the production of medical masks in response to the government’s call. In addition, with the arrival of the post-epidemic era, consumption habits of consumers are changed. Amid this, the Company quickly adapted to market demands, seized opportunities, and successively launched products like antibacterial paper, alcohol disinfectant wipes, disinfectant hand sanitizers, and mouthwash. This effectively helped raise its brand effect and form a diversified product strategy. Favorable sales results were achieved for the new products during the reporting period, which promoted the continuous improvement of the operating results and became another profit growth point of the Company.

2. Constant optimization of product structure and improvement of channels to push steady growth in sales

During the reporting period, the Company constantly optimized its product structure and raised the sales proportion of key products and high-gross margin products. In addition, in view of consumers’ preference of online consumption during the pandemic, the Company quickly adapted to market consumption changes, devoted more resources to online channels while ensuring the smooth operation of other channels, and intensified the layout and development of EC channels. As a result, favorable results were achieved in EC channels. In 2020, the Company's gross margin in household paper reached 46.19%, making it the top enterprise in the domestic household paper industry.

3. Increase in gross margin thanks to decrease in international pulp prices

C&S Paper Co., Ltd. Annual Report 2020

The price of pulp, the main raw material of the Company, was generally maintained at a relatively low level during the reporting period. Thanks to the decrease in production costs and the Company’s scale effects, its gross profit margin and profitability were boosted. At the end of 2020, pulp prices began to rebound. Nevertheless, procurement team of the Company has stored raw materials in advance with a reliance on its professional predictive ability of the pulp market and sufficient financial strengthen. Thus, this could effectively smooth the cost pressure caused by rise of raw material prices in the future and lay the foundation for the Company to grab market shares and expand sales scale.

4. Employee enthusiasm boosted as the first unlocking/exercise period of the equity incentive plan was

successfully completed

During the reporting period, the Company successfully completed the first unlocking period for first-grant restricted stocks or reserved restricted stocks and the initiation of the first exercise period for stock options under the 2018 Restricted Stock and Stock Option Incentive Plan . The incentive recipients reaped gratifying results. This could enable employees to enjoy the development dividends of the Company and continuously stimulate their enthusiasm, which is conducive to giving full play to the values of all employees and laying a solid foundation for the long-term stable development of the Company.

5. Fulfillment of corporate social responsibilities and demonstrating the corporate culture as a

top-performing enterprise

As a nation enterprise with important social influence and a leading enterprise in the household paper industry, the Company has always been concerned about the medical staff and people at the frontline of the fight against the epidemic and actively fulfilled its corporate social responsibilities. To fight against the pandemic and respond to the government’s call, the Company quickly initiated the production of medical masks and donated RMB10.80 million in cash and disinfectant wipes and other household paper products worth RMB500,000 to support pandemic prevention and control. Viewing the shortage of pandemic prevention materials, the Company also donated over one million pieces of surgical masks and over 5,000 pads for women to front-line epidemic prevention areas and other support units. In February 2021, the Company contributed materials worth more than RMB1 million to front-line epidemic control personnel in Shijiazhuang. In March 2021, the Company helped international fight against the pandemic by giving 4 million pieces of medical masks to Russia, Pakistan, Myanmar and other “Belt and Road” countries. All of these efforts of helping pandemic prevention and control and providing the strongest support for the front-line pandemic fight personnel have embodied the Company’s humanistic spirit of taking responsibility.

C&S Paper Co., Ltd. Annual Report 2020

II. Analysis of Principal Businesses

1. Overview

Products of the Company has been extended from household paper to cross-category household daily necessities including cotton series products, sanitary wipes, baby diapers, etc.

tissues, etc. Product series involve Face series, Lotion series, Natural Wood series, Antibacterial Paper series, Jin

Zun series, wipes, Sun series, Dolemi series, OKBEBE series, and Cotton Tissue series.


Item	2020 (RMB)	2019 (RMB)	YoY changes (%)	2018 (RMB)

	7,823,528,416.32	6,634,914,352.68	17.91%	5,678,517,623.29
Operating income
Operating cost	4,590,904,040.35	4,005,421,052.70	14.62%	3,744,105,124.57
Selling expenses	1,544,562,244.71	1,369,553,843.95	12.78%	1,013,014,207.75

Administrative expenses	364,914,344.30	294,516,937.35	23.90%	202,132,450.43
Finance expenses	-18,001,546.24	21,476,411.75	-183.82%	55,843,921.52
Net cash flows from operating	828,200,862.25	1,360,374,901.86	-39.12%	437,254,844.25
activities

2. Revenue and cost

(1) Composition of operating income

Unit: RMB

	2020	2020	2019	2019
		Proportion in		Proportion in	YoY changes
	Amount		Amount
		operating income		operating income

Total operating	7,823,528,416.32		6,634,914,352.68		17.91%
		100%		100%
income

By industry
Household paper	7,499,908,172.64	95.86%	6,562,535,665.60	98.91%	14.28%

C&S Paper Co., Ltd. Annual Report 2020

Personal care	100,000,774.38	1.28%	3,218,698.97	0.05%	3,006.87%
Others	223,619,469.30	2.86%	69,159,988.11	1.04%	223.34%
By product
Finished products	7,585,449,858.45	96.96%	6,531,531,717.68	98.44%	16.14%
Semi-finished
	14,459,088.57	0.18%	34,222,646.89	0.52%	-57.75%
products

Others	223,619,469.30	2.86%	69,159,988.11	1.04%	223.34%
By region
Domestic	7,652,670,691.06	97.82%	6,501,041,000.07	97.98%	17.71%
Overseas	170,857,725.26	2.18%	133,873,352.61	2.02%	27.63%

(2) Industries, products, or regions that accounted for over 10% of the Company's operating income or operating profit

√ Applicable □ Not applicable

Unit: RMB

						YoY changes of
			Gross profit	YoY changes of	YoY changes of
	Operating income	Operating cost				operating gross
			margin	operating income	operating cost
						profit margin

By industry
Household paper	7,499,908,172.64	4,342,663,520.12	42.10%	14.28%	10.21%	2.15%
By product
Finished products	7,585,449,858.45	4,367,115,588.55	42.43%	16.14%	11.71%	2.28%
By region
Domestic	7,652,670,691.06	4,499,766,586.64	41.20%	17.71%	14.97%	1.40%

Where the statistical standards for the Company’s principal business data were adjusted in the reporting period, principal business data of the Company in the recent year adjusted as per statistical standards at the end of the reporting period

□ Applicable √ Not applicable

C&S Paper Co., Ltd. Annual Report 2020

(3) Whether the Company’s goods selling income higher than the service income

√ Yes □ No

Industry	Item	Unit	2020	2019	YoY changes
	Sales volume	10,000 boxes	11,691.68	8,724.84	34.00%
Household paper	Production volume	10,000 boxes	11,691.94	8,866.53	31.87%
	Inventory	10,000 boxes	882.65	768.51	14.85%

Reasons for YoY changes of relevant data over 30%

√ Applicable □ Not applicable

Sales volume: Compared with 2019, the sales volume in 2020 increased by 29.6684 million boxes or 34%, mainly owing to sales boosting measures adopted by the Company in the reporting period like product structure adjustment, accelerated promotion of key products and new products, continuously improved channel development, etc.

Production volume: Compared with 2019, production volume in 2020 increased by 28.2541 million boxes or 31.87%, mainly owing to the release of production capacity and the increase in sales during the reporting period.

(4) Fulfillment of significant sales contracts signed by the Company as of the end of the reporting period

□ Applicable √ Not applicable

(5) Composition of operating cost

By industry and product

Unit: RMB

		2020	2020	2019	2019
By industry	Item		Proportion in		Proportion in	YoY changes
		Amount		Amount
			operating cost		operating cost

	Principal business
Household paper		4,342,663,520.12	94.59%	3,940,489,471.54	98.38%	10.21%
	cost

	Principal business
Personal care		36,713,107.52	0.80%	1,258,487.46	0.03%	2,817.24%
	cost

Others	Other business	211,527,412.71	4.61%	63,673,093.70	1.59%	232.21%

C&S Paper Co., Ltd. Annual Report 2020

cost

Unit: RMB

		2020	2020	2019	2019
By product	Item		Proportion in		Proportion in	YoY changes
		Amount		Amount
			operating cost		operating cost

	Principal business
Finished products		4,367,115,588.55	95.13%	3,909,345,003.17	97.60%	11.71%
	cost

Semi-finished	Principal business
		12,261,039.09	0.27%	32,402,955.83	0.81%	-62.16%
products	cost

	Other business
Others		211,527,412.71	4.61%	63,673,093.70	1.59%	232.21%
	cost

Description: None

(6) Whether the consolidated scope changed during the reporting period

√ Yes □ No

As of December 31, 2020, the Company has 19 subsidiaries which are included in the consolidated scope, as detailed in “Note IX. Equities in other Entities”. Compared with last year, one subsidiary has been newly added into the consolidated scope this year. For details, see “Note VIII. Changes in Consolidated Scope”.

(7) Description on significant changes or adjustments of the Company’s businesses, products or services in the reporting period

□ Applicable √ Not applicable

(8) Major customers and suppliers

Major customers of the Company

Major customers of the Company
Total sales to the top five customers (RMB)	2,445,154,280.92
Proportion of sales to top five customers in total annual sales	31.25%
Proportion of sales to related party among the top five
	0.00%
customers in total annual sales

C&S Paper Co., Ltd. Annual Report 2020

Information of the top five customers of the Company

No.	Name of customer	Sales (RMB)	Proportion in total annual sales
1	1st	876,396,661.34	11.20%
2	2nd	650,635,800.84	8.32%
3	3rd	418,807,020.50	5.35%
4	4th	288,547,374.69	3.69%
5	5th	210,767,423.55	2.69%
Total	--	2,445,154,280.92	31.25%

Other descriptions of major customers

√ Applicable □ Not applicable

There is no related party relationship between the top five customers and the Company.

Major suppliers of the Company

Major suppliers of the Company
Total purchase amount from the top five suppliers (RMB)	2,393,268,000.87
Proportion of the total purchase amount from the top five
	50.40%
suppliers in total annual purchase amount

Proportion of purchase amount from related parties among the
	0.00%
top five suppliers in total annual purchase amount

Information of the top five suppliers of the Company

			Proportion in total annual purchase
No.	Name of supplier	Purchase amount (RMB)
			amount

1	1st	1,256,589,068.94	26.46%
2	2nd	509,980,063.97	10.74%
3	3rd	256,897,941.48	5.41%
4	4th	234,163,222.56	4.93%
5	5th	135,637,703.92	2.86%
Total	--	2,393,268,000.87	50.40%

Other descriptions of major suppliers

√ Applicable □ Not applicable

There is no related party relationship between the top five suppliers and the Company.

C&S Paper Co., Ltd. Annual Report 2020

3. Expenses

Unit: RMB

	2020	2019	YoY changes	Description of significant changes
Selling expenses	1,544,562,244.71	1,369,553,843.95	12.78%
Administrative expenses	364,914,344.30	294,516,937.35	23.90%
	-18,001,546.24	21,476,411.75		Finance expenses: A reduction of
				RMB39,477,957.99 or 183.82% was
				witnessed in the reporting period
Finance expenses			-183.82%	compared with 2019, mainly due to the
				decrease in bank interest expenses and
				in exchange gains and losses during the
				reporting period.
R&D expenses	190,298,633.61	176,374,287.34	7.89%

4. R&D investment

√ Applicable □ Not applicable

Main R&D projects of the Company in 2020 included the following:

Debut of Jie Rou oil painting series products: Being thick, pliable, and soft with exquisite high-definition embossing, the products are “artwork” of paper towels.
Antibacterial tissue and roller series products: The products can remain initial cleanliness despite that their use environment is contaminated by bacteria or after they wipe the bacteria daily. They have no irritation to the skin and mucous membranes.
High-quality medical surgical masks: The products are characterized by “high efficiency filtration, low breathing resistance, and comfortable wearing”, and have passed the EU CE and US FDA certifications. Third-party laboratory testing from US, EU and Japan proves the products to have reached the highest quality standards of their kind. The Company’s R&D, production and sales of medical masks was a response to the government’s call at the outbreak of the epidemic, which both fulfilled the Company’s social responsibilities and solved employees’ use of masks.
Antibacterial hand sanitizers: The products can effectively inhibit intestinal pathogenic bacteria and pyogenic bacilli. With plant extracts and water rendition ingredients, they can keep the skin soft and moisturizing.
Small-package sanitary pads: The Company developed easy-to-carry pads by catering to the demands of girls

C&S Paper Co., Ltd. Annual Report 2020

aging 15 to 25 who prefer small and cute packaging. Launched in June 2020, the products can attract young consumers for the Dolemi brand.

R&D investment of the Company

	2020	2019	Change
Number of R&D personnel (person)	397	438	-9.36%
Proportion of R&D personnel
	6.00%	7.25%	-1.25%
headcount

Amount of R&D investment (RMB)	190,298,633.61	176,374,287.34	7.89%
Proportion of R&D investment in
	2.43%	2.66%	-0.23%
total operating income

Amount of capitalized R&D
	0.00	0.00	0.00%
investment (RMB)

Proportion of capitalized R&D
	0.00%	0.00%	0.00%
investment in total R&D investment

Reason for marked changes over the last year of the proportion of R&D investment in operating income

□ Applicable √ Not applicable

Reason for marked changes of the proportion of R&D investment capitalization and its reasonable explanation

□ Applicable √ Not applicable

5. Cash flow

Unit: RMB

Item	2020	2019	YoY changes
Subtotal of cash in-flow from	7,802,290,765.25	7,225,605,514.97
			7.98%
operating activities

Subtotal of cash out-flow from	6,974,089,903.00	5,865,230,613.11
			18.91%
operating activities

Net cash flow from operating	828,200,862.25	1,360,374,901.86	-39.12%

C&S Paper Co., Ltd. Annual Report 2020

activities
Subtotal of cash in-flow from	179,801,840.88	1,489,516.51
			11,971.15%
investing activities

Subtotal of cash out-flow from	561,677,417.02	730,059,032.35
			-23.06%
investing activities

Net cash flow from investing	-381,875,576.14	-728,569,515.84
			47.59%
activities

Subtotal of cash in-flow from	411,994,677.00	515,060,991.14
			-20.01%
financing activities

Subtotal of cash out-flow from	481,103,146.23	842,676,049.62
			-42.91%
financing activities

Net cash flow from financing	-69,108,469.23	-327,615,058.48
			78.91%
activities

Net increase in cash and cash	374,037,282.75	304,867,380.91
			22.69%
equivalents

Main influencing factors of significant YoY changes in relevant data

√ Applicable □ Not applicable
Net cash flow from operating activities: This item recorded a decrease of RMB532,174,039.61 or 39.12% in the reporting period compared with 2019, mainly due to the increase in payment for materials and various taxes and fees during the reporting period.
Net cash flow from investing activities: This item recorded an increase of RMB346,693,939.70 or 47.59% in the reporting period compared with 2019, mainly due to the increase in received financial principals and the decrease in payment for engineering equipment during the reporting period.
Net cash flow from financing activities: This item recorded an increase of RMB258,506,589.25 or 78.91% in the reporting period compared with 2019, mainly due to the increase in cash received from borrowings and the decrease in cash paid for debt repayment during the reporting period.

Reason for significant differences between the net cash flow from operating activities and the net profit of the year during the reporting period

□ Applicable √ Not applicable

C&S Paper Co., Ltd. Annual Report 2020

III. Analysis of Non-principal Businesses

√ Applicable □ Not applicable

Unit: RMB

		Proportion in total		Is it consistently
	Amount		Explanation of reason
		profit		applied?

			Returns on principal-protected wealth
Investment income	3,868,134.28	0.36%	management products at maturity and reverse	No
			repo of treasury bonds
Profit and loss from
changes in fair		0.00%
value
			Provision for impairment of inventories and
Asset impairment	-15,863,724.17	-1.46%		No
			provision for impairment of fixed assets

Non-operating			Government grants, income from fine and
	5,429,670.00	0.50%		No
income			compensation, and others

Non-operating
	20,912,859.12	1.92%	External donations and others	No
expense

IV. Analysis of Assets and Liabilities

1. Significant changes in the composition of assets

The Company implemented the new revenue standard or the new lease standard for the first time from 2020 and adjusted the relevant items of the financial statements as at the beginning of the year of adoption Applicable

Unit: RMB

	End of 2020	End of 2020	Beginning of 2020	Beginning of 2020
		Proportio		Proportion	Proportio
						Explanation of significant changes
	Amount	n in total	Amount	in total	n changes

		assets		assets
	1,125,196,199.56					Monetary funds: This item recorded an
Monetary funds		15.05%	703,746,624.42	11.68%	3.37%
						increase of RMB421,449,575.14 or

C&S Paper Co., Ltd. Annual Report 2020

						59.89% in the reporting period
						compared with the end of 2019, mainly
						owing to the increase in the net cash
						flow from investing activities and
						financing activities during the reporting
						period.
	1,051,423,939.59					Accounts receivable: This item
						recorded an increase of
						RMB243,651,041.91 or 30.16% in the
Accounts
		14.06%	807,772,897.68	13.40%	0.66%	reporting period compared with the end
receivable
						of 2019, mainly owing to the increase

						in accounts receivable during the
						reporting period.
	1,661,274,495.32					Inventory: This item recorded an
						increase of RMB674,868,806.15 or
						68.42% in the reporting period
Inventory		22.21%	986,405,689.17	16.37%	5.84%
						compared with the end of 2019, mainly

						owing to the increase in raw material
						inventories during the reporting period.
Investment	34,575,365.94
		0.46%	36,039,381.30	0.60%	-0.14%
property

Long-term equity
		0.00%		0.00%	0.00%
investment

Fixed assets	2,792,587,302.21	37.34%	2,921,392,106.87	48.48%	-11.14%
	275,904,617.95					Construction work in progress: This
						item recorded an increase of
						RMB220,170,381.04 or 395.049% in
Construction
		3.69%	55,734,236.91	0.92%	2.77%	the reporting period compared with the
work in progress
						end of 2019, mainly owing to the

						increase in construction projects during
						the reporting period.
Short-term	142,942,941.34	1.91%	14,721,492.38	0.24%	1.67%	This item recorded an increase of

C&S Paper Co., Ltd. Annual Report 2020

borrowings					RMB128,221,448.96 or 870.98% in the
					reporting period compared with the end
					of 2019, mainly owing to the increase
					in short-term borrowings from banks
					during the reporting period.
					This item recorded a decrease of
					RMB22,500,000.00 or 100.00% in the
Long-term					reporting period compared with the end
	0.00%	22,500,000.00	0.37%	-0.37%
borrowings					of 2019, mainly owing to the early

					repayment of long-term borrowings
					during the reporting period.

2. Assets and liabilities measured at fair value

□ Applicable √ Not applicable

3. Restriction of asset rights as at the end of the reporting period

Item	2020.12.31	Reason for restriction
Monetary funds (RMB)	75,162,063.84	Security deposits for issuing letter of credit and notes
Total (RMB)	75,162,063.84

V. Analysis of Investment

1. Overview

√ Applicable □ Not applicable

Investment amount during the reporting	Investment amount of previous year
		Changes
period (RMB)	(RMB)

561,677,417.02	730,059,032.35	-23.06%

2. Major equity investment during the reporting period

□ Applicable √ Not applicable

C&S Paper Co., Ltd. Annual Report 2020

3. Major non-equity investment during the reporting period

□ Applicable √ Not applicable

4. Financial asset investment

(1) Security investment

□ Applicable √ Not applicable

The Company did not invest in securities during the reporting period.

(2) Derivative investment

□ Applicable √ Not applicable

The Company did not invest in derivatives during the reporting period.

5. Use of raised funds

□ Applicable √ Not applicable

No raised funds were used by the Company during the reporting period.

VI. Major Asset and Equity Sales

1. Sales of major assets

□ Applicable √ Not applicable

The Company did not sell major assets during the reporting period.

2. Sales of major equity

□ Applicable √ Not applicable

C&S Paper Co., Ltd. Annual Report 2020

VII. Analysis of Main Holding and Joint-stock Companies

√ Applicable □ Not applicable

Description of main subsidiaries and of joint-stock companies which have influence on the Company’s net profit by over 10%

Unit: RMB

Company	Company		Registered
		Principal businesses		Total assets	Net assets	Operating income	Operating profit	Net profit
name	type		capital

		R&D, production, and sales (including online sales):
		household paper, maternal and infant products,
		cosmetics, wipes, non-woven products, daily necessities,
		and cleaning supplies; sales (including online sales) of
Jiangmen		Class I and II medical devices. (The above items do not	RMB345,985,
	Subsidiary			1,762,755,225.91	1,503,245,893.46	1,481,156,722.41	238,073,124.23	204,403,346.14
C&S		involve special management measures for the access of	031

		foreign investment.) (For items that must be approved in
		accordance with the law, the company may carry out
		business operations upon approval by competent
		departments.)
		R&D, production, wholesale, retail and online sales:
		household paper, sanitary products, maternal and infant
Yunfu			RMB650 mill
	Subsidiary	products, daily necessities, cosmetics, medical devices,		2,159,000,142.58	1,359,647,571.56	2,842,001,060.24	396,387,504.77	348,421,782.34
C&S			ion
		sanitary materials, non-woven fabrics and products,

		polymer materials and products, daily sundries, and

C&S Paper Co., Ltd. Annual Report 2020

		disinfection supplies (excluding hazardous chemicals);
		wholesale, retail and online sales: food; import and
		export of goods and technologies (excluding the import
		and export of goods and technologies prohibited by the
		State or involving administrative approval); warehousing
		services (limited to warehouses qualified in fire
		protection without hazardous chemicals). (For items that
		must be approved in accordance with the law, the
		company may carry out business operations upon
		approval by competent departments.)
		Licensed items: production of sanitary products and
		disposable medical supplies; import and export of goods
		(for items that must be approved in accordance with the
		law, the company may carry out business operations upon
		approval by competent departments, and the specific
		business items are subject to the approval document or
Sichuan			RMB100 mill
	Subsidiary	the permit issued by relevant department). General items:		1,190,428,729.88	853,862,145.19	1,783,389,934.49	218,982,290.16	185,928,308.11
C&S			ion
		sales of sanitary products and disposable medical

		supplies; sales of personal hygiene products; sales of
		daily necessities; manufacture of paper products; sales of
		paper products; manufacture of paper; manufacture of
		daily chemical products; sales of daily chemical
		products; sales of Class II medical devices; sales of Class

C&S Paper Co., Ltd. Annual Report 2020

		I medical devices; manufacture of industrial textile
		products; sales of industrial textile products; manufacture
		of maternal and infant products; sales of maternal and
		infant products. (The company may carry out business
		operations independently according to the law based on
		the business license, except for items that must be
		licensed according to the law.)
		Licensed items: production of sanitary products and
		disposable medical supplies; production of cosmetics (for
		items that must be approved in accordance with the law,
		companies may carry out business operations upon
		approval by relevant departments, and the specific
		business items are subject to the approval document or
		the permit issued by competent department). General
Hubei		items: sales of sanitary products and disposable medical	RMB200 mill
	Subsidiary			1,361,067,365.05	373,922,157.82	1,075,896,640.52	144,907,802.92	106,898,341.64
C&S		supplies; retail of cosmetics; wholesale of cosmetics;	ion

		manufacture of paper; sales of personal hygiene products;
		sales of knitwear; manufacture of maternal and infant
		products; sales of maternal and infant products; sales of
		paper products; manufacture of paper products; sales of
		daily necessities; sales of daily chemical products; sales
		of disinfectants (excluding hazardous chemicals);
		Internet sales (excluding the sales of commodities

C&S Paper Co., Ltd. Annual Report 2020

==> picture [85 x 165] intentionally omitted <==

requiring a permit); sales of Class I medical devices; sales of Class II medical devices; import and export of goods and technologies (excluding the import and export of goods and technologies prohibited by the State or involving administrative approval). (For items that must be approved in accordance with the law, the company may carry out business operations upon approval by competent departments.)

==> picture [397 x 165] intentionally omitted <==

Acquisition and disposal of subsidiaries during the reporting period

□ Applicable √ Not applicable

Description of main holding and joint-stock companies

C&S Paper Co., Ltd. Annual Report 2020

VIII. Structured Entities Controlled by the Company

□ Applicable √ Not applicable

IX. Outlook of the Company’s Future Development

1. Future development trend of the industry in which the Company lies

(1) Analysis of industry status quo

China’s household paper market is growing steadily, while market competition is extremely fierce. New project investments are led by the capacity expansion of leading companies and the equipment upgrading of existing central companies, which facilitates further concentration of the industry and improvement of overall equipment level. The relative overcapacity and demanding environmental protection requirements put more pressure on small- and medium-sized enterprises. Leveraging the sharp drop in pulp prices and economies of scale, leading companies have adopted a series of effective measures to better their gross profit margin, including energy saving and consumption reduction, increasing inputs on the development of EC channels and other new channels, optimizing product structure, and launching new products with high value addition.

The household paper market, especially the high-end household paper market, will be substantially boosted along with the continuous growth of China’s economy, improvement of people’s living standards, and the advancement of consumption concepts. However, owing to China-US trade frictions and uncertainties brought by exchange rate fluctuations and future pulp prices, operating pressure is still great for the household paper industry.

(2) Industry development trend

1) Outdated capacity will be phased out and companies of the first echelon will gain greater market opportunities. Competent government departments at all levels have strengthened supervision, administration and enforcement of the household paper industry and released a series of regulations and policies, including the Development Policy of the Paper Industry , Notice of the State Council on Printing the Comprehensive Work Plan for Energy Conservation and Emission Reduction , W ater Pollutant Discharge Standards for the Pulp and Water Industry , Norm of Water Intake for Paper Products , Twelfth Five-Year Plan for Paper Industry Development , and Catalogs for the Management of Imported Wastes . Companies with reasonable economic scale, high energy and water consumption or not up to discharge standards were shut down or ordered for rectification within a time frame. Thus, a large number of backward production capacities have been eliminated. With increasingly stringent environmental protection polices, small- and medium-sized enterprises in the industry are further phased out, thereby releasing certain market shares. Meanwhile, first echelon enterprises in the industry are rapidly expanding production scale to meet market demands and seize market shares.

2) Operating models are continually innovated and product structures are constantly optimized. At present,

C&S Paper Co., Ltd. Annual Report 2020

marketing of the household paper industry is still dominated by traditional distributors and modern supermarkets. However, with the continuous improvement of e-commerce channels in recent years, the percentage of e-commerce shares is rapidly growing. Some leading companies have been promoting social media marketing such as WeChat official accounts, Weibo, and live webcasting, and have increased inputs in the development of e-commerce channels. At the same time, in order to cater to the rapidly growing demands of consumers, companies continue to carry out product innovations, upgrade product specifications and packaging designs, optimize product structures, and develop new products by capturing in time changes in the consumption concepts of consumers. Diversified operating models emerge in the industry and product structures are further optimized. 3) Equipment upgrading and product R&D are intensified. People’s demand for household paper is bound to rise along with the improvement of living standards, requiring constant product capacity expansion in the household paper industry. As such, it is inevitable for companies of the industry to choose large-scale and automated production equipment, which can also meet the demands for low energy consumption, low water consumption, and low pulp consumption specified in the overall requirements of the State’s industrial policies for energy conservation, consumption reduction and pollution reduction. In recent years, imports of household paper equipment have been trending up in China, with a focus on the imports of body paper machines. Meanwhile, some large-scale domestic equipment is also constantly optimized and improved. It is foreseeable that large scale and automation of production equipment will be the development direction of the household paper industry in the future.

4) Competitiveness of China’s household paper production companies in the international market will be further intensified. With the rapid development of the household paper industry in China, local enterprises occupy most of the domestic market shares. On the basis of meeting domestic demands, household paper manufactured in China has been exported to a range of countries and regions around the world with certain competitive advantages. In the future, the competitiveness of Chinese household paper production enterprises in the international market will be steadily enhanced.

2. Development strategy and planning of the Company

(1) The Company’s development strategy

As a member of the first echelon in the domestic household paper industry, the Company will continue to better its independent R&D capabilities and tap product formulas and production processes to meet multi-layered and differentiated product needs of the market. Adhering to the development vision of “building a century-old enterprise with hundred billion market value”, the Company uses cutting-edge equipment and first-class raw materials to produce quality products. Corporate values are “putting consumers first, partners at the focus and employees at the core; pursuing win in doing things and virtue in daily life”, which is the basis for improving return to shareholders. The Company will continue horizontal integration and establish strategic alliances with key customers. It will further enhance its core competitiveness and product R&D capabilities with a focus on core

C&S Paper Co., Ltd. Annual Report 2020

businesses. When it comes to marketing, the Company will further expand marketing networks, fulfill the management requirements of building first-class brands, systems and talents, and grab channel networks and terminal resources.

(2) The Company’s development planning

With the continuous expansion of sales scale, the Company steadily puts in production capacity in alignment with the market environment and sales expansion tempo, to reach a dynamic balance of production and sales. Meanwhile, it has strengthened the construction of each base. In the future, the Company will expand product categories based on the development trends of the industry. Beyond making household paper of highest quality, the Company will also explore new product categories with product quality always coming first. In addition, the Company will tap deeper into channel development, further increase product coverage, and promote its steady development in an all-round manner.

C&S Paper Co., Ltd. Annual Report 2020

X. Reception of Researches, Communications, Interviews and Other Activities

1.Registraiton form for the reception of researches, communications, interviews and other activities during the reporting period

√ Applicable □ Not applicable

			Type of
	Reception	Reception			Main content discussed	Index of the basic
Reception time			reception	Reception object
	location	method			and information provided	situation of the survey
			object

				Taikang Asset Management, Torq Capital Management, Norges Bank Investment
				Management, Teng Yue Partners, Snow Lake Capital, Snow Lake Capital, Green
						Please refer to the record
				Court Capital, Kaizen, Golden Nest Capital, Lygh Capital, Yiheng Capital, Kora	Status quo and future
		Field				sheet of IR activities
January 7, 2020	Beijing		Institution	Management, Toona Tree Capital Partners, Wt Capital, Keywise Capital, Pinpoint,	development plan of the
		research				disclosed on CNINFO for
				Keywise Capital, Safe & Sic, 3w Fund Management, Goldstream Capital	Company
						details.
				Management, Oxbow Capital Management, Invesco, China Orient Asset

				Management, Janchor Partners
			Institution	CITI Millennium Capital Management, Fidelity Management&Research, Amundi	Status quo and future	Please refer to the record
				Pioneer (Asia), BlackRock Inv Mgmt LLC (NJ), Bosera Asset Management Co Ltd,	development plan of the	sheet of IR activities
				Bosvalen Asset Management, China Southem Fund Management, Eastspring	Company	disclosed on CNINFO for
		Field
January 8, 2020	Hong Kong			Investments Singapore Ltd, Eurzon Capital SGR SPA, Fuh Hwa Asset Management,		details.
		research
				Green Court Management Holding, JK Capital Mgmt Ltd, Macquane Investment

				Mgmt(Asia), Morgan Stanley AM Singapore, Optimas Capital Limited, Pinebridge
				investments Asia Ltd, PingAn Ins Group Co of china, SPARX Asia Investment

C&S Paper Co., Ltd. Annual Report 2020

				Advisors, Sumitomo Mitsui DS AM CO, T Rowe Price, Point72 Asset Management,
				Allianz Asia, BEA Union investment Management Ltd, JK Capital Mgmt Ltd,
				Pinpoint Asset management Ltd, RBC IM (AsIa) LTD, SPARX ASia Investment
				Advisors, Sumitomo Mitsui DS AM CO, Trivest Advisors, Value Partners
		Field	Institution		Status quo and future	Please refer to the record
		research			development plan of the	sheet of IR activities
January 16, 2020	Shenzhen			Perseverance Asset Management
					Company	disclosed on CNINFO for

						details.
		Field	Institution		Status quo and future	Please refer to the record
		research			development plan of the	sheet of IR activities
January 17, 2020	Zhongshan			Causeway Capital Management LLC., Golden Nest Capital Management
					Company	disclosed on CNINFO for

						details.
			Institution	GOLDMAN SACHS, NOMURA ASSET MANAGEMENT, MACQUARIE	Status quo and future	Please refer to the record
				SECURITIES, ALLIANZ GLOBAL INVESTORS HONG KONG LTD, ASPEX	development plan of the	sheet of IR activities
				MANAGEMENT (HK) LIMITED, BEA UNION INVESTMENT MANAGEMENT	Company	disclosed on CNINFO for
				LTD, PAG CAPITAL, PICTET ASSET MANAGEMENT (HONG KONG) LTD,		details.
February 17,		Telephone		SAMSUNG ASSET MANAGEMENT HK LTD, TORG CAPITAL
	/
2020		research		MANAGEMENT(HK) LIMITED, BLACKROCK FINANCIAL

				MANAGEMENT(HONG KONGLFIDELITY INVESTMENT MANAGEMENT
				(HK), APS, BANK OF COMMUNICATIOAND SCHRODERS, BARINGS, BNP
				PARIBAS, BOSERA, BOSHENG CAPITAL, CENTERLINE, CHINA
				EVERBRIGHT, CIS ASSET MANAGEMENT, COMGEST, CSFG

C&S Paper Co., Ltd. Annual Report 2020

				INTERNATIONAL ASSET MANAGEMENT, HARVEST GLOBAL
				INVESTMENTS LTDINVESCO HONG KONG LIMITED, EAST CAPITAL,
				EASTSPRING, FIDELITY MANAGEMENT RESEARCH (HONG KONG),
				FIDELITY INVESTMENT MANAGEMENT (HK), FIL, FORCHN, FOSUN
				GROUP, LAZARD ASSET MANAGEMENT, MANULIFE ASSET
				MANAGEMENT(HONG KONG)CO LTD, FULLGOAL FUND, GAVEKAL, GIC,
				GREENWOOD ASSET MANAGEMENT, MILLENNIUM CAPITAL
				MANAGEMENT (HONGKONG), GUOTAI JUNAN ASSETS (ASIA) LIMITED,
				HORIZON ASSET, HT INTERNATIONAL, HUATAI BAIRUI JIJING, INVENTIO,
				INVESCO, KADENSA, LMR, LYGH CAPITAL, MIGHTY DIVINE, MLP, MOON
				CAPITAL, MORGAN STANLEY, NORGES BANK, OBERWEIS, OLD PEAK, OP
				CAPITAL, OPTIMAS, ORIENT, OXBOW, PARANTOUX, PAT, PINPOINT,
				POINT 72, POWER PACIFIC, PACIFIC ALLIANCE, PRUDENCE, SAFE,
				SCHONFELD, SEVARA CAPITAL, SUMMER CAPITAL, SUMOTOMO MITSUI,
				TBP, TORQ, TRIKON, TX CAPITAL, UBS, VALUE PARTNERS, WELLINGTON,
				TYBOURNE CAPITAL MANAGEMENT, WELLS CAPITAL MANAGEMENT,
				POINT 72 ASSET MGT, GREENWOODS ASSET MGT , BNP PARIBAS
				INVESTMENT, FOSUN ASSET MGT, FUH HWA ASSET MGT, NEW SILK
				ROAD INVESTMENT, JK CAPITAL MGT, WININGTON, CMBI SINGAPORE,
				AVEREST CAPITAL, CGS-CIMB
				Bank of China Investment Management, China Asset Management, Huatai Asset	Status quo and future	Please refer to the record
		Telephone
March 23, 2020	/		Institution	Management, Huatai Baoxing Fund Management, Huatai PineBridge Investments,	development plan of the	sheet of IR activities
		research
				HuaAn Funds proprietary trading, Hongde Fund, HFT Fund, Guotai Asset	Company	disclosed on CNINFO for

C&S Paper Co., Ltd. Annual Report 2020

				Management, GF Fund Management, Changsheng Fund, CITIC AMC, CICC Asset		details.
				Management, CITIC self-owned equity investment, Bank of Beijing Scotiabank
				Asset Management, Zhonghai Fund, CMB Wealth Management, Maxwealth Fund,
				Yingda Securities self-owned equity investment, Aegon-Industrial Fund, StarRock
				Investment, First State Cinda Fund, Xinyuan Asset Management, New China Fund,
				Xiangcai Fund, Tianfeng Asset Management, Taikang Asset, Taiping Asset,
				Schroders, SWS MU Fund Management, Shenjiu Asset, National Council for Social
				Security Fund, AXA SPDB Investment Managers, Penghua Fund, Panhou Dongliang
				Capital Management, Nuode Asset Management, Lion Fund Management, Southern
				Asset Management, Morgan Stanley Huaxin Fund Management, HSBC Jintrust Fund
				Management, ICBC Credit Suisse, Fullgoal Fund, Donghai Funds, Dacheng Fund,
				Caitong Asset, Caitong Fund Management
				FOUNTAIN CAP, ALLIANZ, SUMITOMO, CIFM, PING AN ASSET, FUHHWA,
				AGI, MIGHTY DEVINE, BNP, ESG, ORCHID ASIA, CENTERLINE, VALUE
				PARTNERS, JK CAPITAL, CLOUGH CAPITAL, HK, MACQ, ATLANTIS, MLP,
		Telephone		XING TAI, AR CAPITAL SG, MANULE LIFE, WELLINGTON, MANULIFE,
						Please refer to the record
		research,		LYGH CPT, CITI, FIL, BARINGS, 3W FUND MGMT LTD,	Status quo and future
						sheet of IR activities
May 8, 2020	/	Internet	Institution	ALLIANCEBERNSTEIN LP, ALLIANZ GLOBAL INVESTORS ASIA PACIFIC	development plan of the
						disclosed on CNINFO for
		communic		LTD, ARISAIG PARTNERS (ASIA) PTE LTD, ARTISAN PARTNERS ASSET	Company
						details.
		ation		MANAGEMENT INC, CHAMPLAIN INV PARTNERS LLC, CHINA ASSET

				MGMT (HONG KONG) LTD, CHINA EVERBRIGHT ASSETS MGMT LTD,
				CHINA ORIENT INTL ASSET MGMT LTD, CLIENT 8888 - BEIJING, CLOUGH
				CAPITAL PARTNERS, CREDIT SUISSE - COMMERCIAL BANK, CSFG ASSET

C&S Paper Co., Ltd. Annual Report 2020

==> picture [201 x 467] intentionally omitted <==

MGMT LTD, DAIWA SB INVS (HK) LTD, EASTSPRING INVS (SINGAPORE) LTD, FIL - HONG KONG, FORCHN INTL ASSET MGMT CO LTD, FULLGOAL FUND MGMT CO LTD, GAVEKAL CAPITAL LTD, GIC PTE LTD, GLG PARTNERS LP, GOLDMAN SACHS ASSET MGMT, GREENWOODS ASSET MGMT HK LTD, HAITONG INTL SECS, HARVEST GLOBAL INVS LTD (HGI), INVESCO ASIA LTD - HONG KONG, KADENSA CAPITAL LTD, LYGH CAPITAL PTE LTD, MIGHTY DIVINE INV MGMT, MILESTONE CAPITAL, MILLENNIUM PARTNERS LP, NEW SILK ROAD INV, NORGES BANK, OXBOW CAPITAL MGMT (HK) LTD, PACIFIC ALLIANCE INV MGMT (HK) LTD, PAG CAPITAL - HONG KONG, PICC ASSET MGMT, PICEA INV MGMT LTD, PINEBRIDGE INVS LLC, PING AN INS (GROUP) CO OF CHINA LTD, PINPOINT ASSET MGMT LTD, POINT72 HONG KONG LTD, SAGA TREE CAPITAL ADVISORS PTE LTD, SEIGA ASSET MGMT LTD, SPQ ASIA CAPITAL LTD, SPRINGS CAPITAL (HONG KONG) LTD, SUMITOMO MITSUI TRUST (HK) LTD, TIAA-CREF INV MGMT LLC - NEW YORK, TX CAPITAL (HK) LTD, WELLINGTON MGMT CO LLP, WELLS CAPITAL MANAGEMENT, CHANG XIN ASSET MANAGEMENT, YUANCE INVESTMENT, GALAXY AMC, AEGON-INDUSTRIAL FUND, WESTERN LEADBANK FMC, TONGTAI AMC, CHINA NATURE ASSET MANAGEMENT, CHINA INTERNATIONAL FUND MANAGEMENT, ORIENT SECURITIES ASSET MANAGEMENT, AXA SPDB INVESTMENT MANAGERS, PENGHUA FUND, SOUTHERN ASSET MANAGEMENT, CHINA UNIVERSAL ASSET MANAGEMENT, HUATAI-PINEBRIDGE INVESTMENTS, HUANENG CAPITAL, HUAAN

==> picture [197 x 467] intentionally omitted <==

C&S Paper Co., Ltd. Annual Report 2020

FUNDS, HONGDE FUND, CHINA LIFE AMP ASSET MANAGEMENT, GF SECURITIES, GF FUND MANAGEMENT, TOPSPERITY FUND, DACHENG FUND, BOSHENG CAPITAL MANAGEMENT, BINYUAN CAPITAL, and investors that attended the Company’s online 2019 annual performance briefing

C&S Paper Co., Ltd. Annual Report 2020

Section V Significant Events

I. Profit Distribution of the Ordinary Shares and Conversion of Capital Reserve to Share Capital of the Company

Formulation, implementation or adjustment of profit distribution policies of ordinary shares especially the cash dividend plan in the reporting period

√ Applicable □ Not applicable

The Company convened the 19th meeting of the fourth session of the Board of Directors on December 5, 2019 and the 2019 Fourth Extraordinary General Meeting of Shareholders on December 23, 2019. These meetings reviewed and approved the Proposal on the Formulation of the Shareholder Return Plan for the Next Three Years (2020-2022) . During the reporting period, the Company strictly implemented the Articles of Association , the Dividend Management Regulations , and the Shareholder Return Plan for the Next Three Years (2020-2022) , which specified the Company’s dividend distribution standards, ratio and decision-making procedures. This could guarantee the continuity and stability of dividend distribution policies from an institutional perspective and fully protect the legitimate rights and interests of minority investors.

Special explanation on cash dividend policy	Special explanation on cash dividend policy
Whether the policy complies with provisions of the Articles of
Association or requirements of the resolutions made on the	Yes
shareholders’ general meeting:
Whether dividend standards and ratio are definite and clear:	Yes
Whether relevant decision-making procedure and mechanism are	Yes
well-established:
Whether independent directors have performed duties and played their	Yes
roles properly:
Whether minority shareholders have sufficient opportunities to express	Yes
opinions and requests, and whether their legitimate rights and interests
were sufficiently protected:
Where the cash dividend policy undergoes any adjustment or change,	Yes
whether the conditions and procedures are compliant and transparent:

C&S Paper Co., Ltd. Annual Report 2020

Dividend distribution plan (preplan) of ordinary shares and conversion plan (preplan) of capital reserve into share capital of the Company in the latest three years (including the reporting period)

Profit distribution plan in 2018: Based on the number of shares of the Company’s total share capital minus 11,709,583 repurchased shares as at the equity registration date of the implementation of this profit distribution plan, distribute a cash dividend of RMB0.23 (tax included) for every 10 shares to all shareholders; no bonus shares will be issued and no capital reserve will be converted into share capital. In addition, the Company started the share repurchase plan in 2018 and completed the plan on December 4, 2018. A total of 11,709,583 shares were repurchased, with a total amount of RMB94,581,547.35. Article 7 of the Implementation Rules of Shenzhen Stock Exchange on the Share Repurchase of Listed Companies stipulates that “Where a listed company uses cash as the consideration and repurchases shares through offer or centralized bidding, the amount paid for share repurchase shall be deemed as cash dividend, which shall be included in the calculation of relevant cash dividend ratios of the year”. Therefore, the amount paid by the Company for share repurchase, i.e. RMB94,581,547.35, is considered as cash dividend.
Profit distribution plan in 2019: Based on the number of shares of the Company’s total share capital minus the number of repurchased shares as at the equity registration date of the implementation of this profit distribution plan, distribute a cash dividend of RMB0.75 (tax included) for every 10 shares to all shareholders; no bonus shares will be issued and no capital reserve will be converted into share capital.
Profit distribution preplan in 2020: Based on the number of shares of the Company’s total share capital minus the number of repurchased shares as at the equity registration date of the implementation of this profit distribution plan, distribute a cash dividend of RMB1.00 (tax included) for every 10 shares to all shareholders; no bonus shares will be issued and no capital reserve will be converted into share capital. In addition, the Company conducted share repurchase in 2020 and ended the share repurchase plan on May 21, 2020. A total of 1,895,900 shares were repurchased, with a total amount of RMB27,680,721.76. Article 7 of the Implementation Rules of Shenzhen Stock Exchange on the Share Repurchase of Listed Companies stipulates that “Where a listed company uses cash as the consideration and repurchases shares through offer or centralized bidding, the amount paid for share repurchase shall be deemed as cash dividend, which shall be included in the calculation of relevant cash dividend ratios of the year”. Therefore, the amount paid by the Company for share repurchase, i.e. RMB27,680,721.76, is considered as cash dividend.

Cash dividend of ordinary shares in latest three years (including the reporting period)

Unit: RMB

	Amount of	Net profit	Percentage of	Cash dividend	Percentage of	Total amount	Percentage of
Year	cash dividend	attributable to	cash dividend	by other ways	cash dividend	of cash	total amount of
	(tax included)	holders of	in net profit	(such as share	by other ways	dividend	cash dividend

C&S Paper Co., Ltd. Annual Report 2020

		ordinary shares	attributable to	repurchase)	in net profit	(including	(including
		of the	holders of		attributable to	other ways)	other ways) in
		Company	ordinary shares		holders of		net profit
		based on the	of the		ordinary shares		attributable to
		consolidated	Company		of the		holders of
		statements for	based on the		Company		ordinary shares
		the	consolidated		based on the		of the
		corresponding	statements		consolidated		Company
		year			statements		based on the
							consolidated
							statements
2020	130,106,877.80	905,889,081.41	14.36%	27,680,721.76	3.06%	157,787,599.56	17.42%
2019	98,024,652.98	603,832,650.83	16.23%	0.00	0.00%	98,024,652.98	16.23%
2018	29,777,149.13	406,993,183.92	7.32%	94,581,547.35	23.24%	124,358,696.48	30.56%

The Company gained profits in the reporting period and the retained profit of the Parent Company for holders of ordinary shares is positive, but no plan of cash dividend is proposed

□ Applicable √ Not applicable

II. Profit Distribution and Conversion of Capital Reserve to Share Capital during the Reporting Period

√ Applicable □ Not applicable

√ Applicable □ Not applicable
Number of bonus shares for every 10 shares (share)	0
Amount of dividend for every 10 shares (tax	1
included) (RMB)
Basis of the shares for distribution preplan (share)	1,301,068,778
Amount of cash dividends (RMB) (tax included)	130,106,877.80
Cash dividend amount in other ways (such as share
	27,680,721.76
repurchase) (RMB)

Total amount of cash dividends (including other
	157,787,599.56
ways) (RMB)

Distributable profit (RMB)	157,409,974.07

C&S Paper Co., Ltd. Annual Report 2020

Proportion of total cash dividends (including other 100.24% ways) in distributable profit Cash dividend in the reporting period If the Company is in the growth period and there are major capital expenditure arrangements, when the profit is distributed, the proportion of cash dividends in this profit distribution should be at least 20%. Details of the profit distribution preplan or share conversion preplan from capital reserve Note: The total amount of cash dividends is estimated based on 1,301,068,778 shares, which is the Company’s existing total share capital of 1,311,948,555 shares minus 10,879,777 shares repurchased by the Company as of March 25, 2021. The number of share basis for actual cash dividends will be subject to the figure of the Company’s total share capital minus actual repurchased shares as of the equity registration date for the Company’s implementation of this profit distribution plan. Where the Company’s share capital changes due to repurchase and cancellation of restricted shares, option exercise, and other reasons on the future equity registration date for the implementation of this distribution plan, the Company will maintain the same distribution amount for every 10 shares and change the total distributed amount accordingly.

III. Implementation of Commitments

1. Commitments completed by actual controllers, shareholders, related parties, purchasers, or the Company within the reporting period and commitments not fulfilled by the end of the reporting period

C&S Paper Co., Ltd. Annual Report 2020

√ Applicable □ Not applicable

Cause of		Type of				Fulfillment of
	Undertaking Party		Content of commitment	Time of commitment	Term of commitment
Commitment		commitment				commitment

Share reform

commitment

Commitments in the
acquisition report or

the equity change

report
Commitments made
during asset
restructuring
			Directors, supervisors, and senior management
			promise that they will not transfer more than
			25% of the total shares of the Company they
			hold each year during the term of office. If they
Commitments made
during the initial	Directors, supervisors, and		leave office before the expiry of the term of	November 25, 2010	Long-term	Strictly observed
public offering or	senior management		office, they promise not to transfer more than
refinancing
			25% of the total shares of the Company they

			hold each year within the term of office and
			within six months after the term of office
			expires (which is agreed when they took

C&S Paper Co., Ltd. Annual Report 2020

		office). Moreover, they will not transfer their
		shares of the Company within half a year after
		they leave office.
		They promise not to sell all their shares			Strictly observed
		(including shares obtained from exercise and


Equity incentive	Dai Zhenji, Dong Ye, Ye	other shares) within six months after the end of	June 5, 2020	During the implementation
		the exercise of the last stock options. Besides,
commitments	Longfang and Liu Jinfeng	they promise to strictly conform to stock	November 12, 2020	of the equity incentive plan

		trading-related laws and regulations.

	Deng Guanbiao, Deng			Long-term	Strictly observed
	Guanjie, Deng Yingzhong, and	They promise not to compete with the
			January 1, 2009
	Guangdong Zhongshun Paper	Company in the same business.

	Group Co., Ltd.
		Cash dividends shall be distributed when		Long-term	Strictly observed
Other commitments		dividend conditions are met. The Board of
		Directors of the Company shall
to minority
		comprehensively consider industry
shareholders
		characteristics, development stage, business
	C&S Paper Co., Ltd.		August 28, 2014
		model, profitability, and major capital spending

		(if any), distinguish the following
		circumstances, and propose differentiated cash
		dividend policies in compliance with the
		procedures stipulated in the_Articles of_

C&S Paper Co., Ltd. Annual Report 2020

		Association,.
				Between the end of the	Strictly observed
				repurchase plan and the start
		The 2019 repurchase plan was terminated due
				of the next repurchase plan
		to objective reasons. The Company will
				(the Company reviewed and
	C&S Paper Co., Ltd.	perform the necessary procedures and	May 21, 2020
				passed the share repurchase
		immediately restart the repurchase work upon
				plan on January 5, 2020,
		the end of the exercise period.
				and will continue the share

				repurchase plan)
		He promises not to reduce any shares of the			Strictly observed
		Company he holds within six months upon the
				Within six months from the
		completion of the share increase plan, not to
	Deng Yinzhong		November 04, 2020	completion of the share
		engage in insider trading and short-term
				increase plan
		trading, and not to trade shares of the Company

		during sensitive periods.
Whether
commitments are	Yes
fulfilled on time

2. If there are assets or projects of the Company which have profit forecast while the reporting period is still in the forecast period, the Company should state whether the assets or projects have attained the profit forecast and explain reasons

□ Applicable √ Not applicable

C&S Paper Co., Ltd. Annual Report 2020

IV. Appropriation of Funds for Non-operating Purposes by Controlling Shareholder and Its Related Parties

□ Applicable √ Not applicable

During the reporting period, the Company did not have any funds appropriated for non-operating purposes by the controlling shareholder and its related parties.

V. Explanation by the Board of Directors, the Board of Supervisors, and Independent Directors (if any) of the "Non-standard Audit Report" for the Reporting Period Issued by the Accounting Firm

□ Applicable √ Not applicable

VI. Explanation of Changes in Accounting Policies, Estimates and Calculation Methods Compared with the Financial Report of Last Year

√ Applicable □ Not applicable

(1) Accounting policy changes
1) Accounting policy changes resulted from the execution of the New Revenue Standards

The Ministry of Finance promulgated the Accounting Standards for Business Enterprises No. 14 –Revenue (C.K. [2017] No. 22) (hereinafter referred to as the “New Revenue Standards”) on July 5, 2017. Upon deliberation, the 21st meeting of the fourth session of the Board of Directors passed a resolution on February 25, 2020 that the Company would implement the New Revenue Standards from January 1, 2020.

The New Revenue Standards set up a new revenue recognition model to regulate revenues generated from contracts with customers. In order to implement the New Revenue Standards, the Company reassessed the recognition, measurement, accounting and presentation of revenues from major contracts. Pursuant to the New Revenue Standards, the Company chose to only adjust the accumulative impact amount for contracts that have not been completed on January 1, 2020. The amounts of retained earnings and other relevant items in the financial statements at the beginning of the period for the first time adoption of the new standards (i.e. January 1, 2020) are adjusted based on the accumulative impact amount at the first time adoption, while comparative financial information for the previous accounting periods is not adjusted.

2) Major changes and impacts upon implementation of the New Revenue Standards are as follows:

The Company changes the contractual consideration received from customers in advance for the transfer of goods from the “payments received in advance” item to the “contract liabilities” item.

C&S Paper Co., Ltd. Annual Report 2020

The Company’s implementation of the New Revenue Standards did not have an impact on the retained earnings at

the beginning of 2020. Impacts on other relevant items in the financial statements dated January 1, 2020 are listed in the following:

			Unit: RMB	Unit: RMB
	Amount on December 31, 2019 (prior to		Amount on January 1, 2020 (after changes)
Statement item	changes)
	Consolidated statement	Parent Company’s	Consolidated statement	Parent Company’s
		statement		statement
Payments received in advance	142,476,562.31	28,227,454.47
Contract liabilities			142,476,562.31	28,227,454.47

(2) Changes of accounting estimates

There were no changes of accounting estimates within the reporting period.

VII. Description of Major Accounting Errors within the Reporting Period That Need Retrospective Restatement

□ Applicable √ Not applicable

There were no major accounting errors within the reporting period that need retrospective restatement.

VIII. Description of Changes in the Scope of Consolidated Statements Compared with the Financial Report of Last Year

√ Applicable □ Not applicable

December 29, 2020, The Company and its wholly-owned subsidiary Zhongshan Zhongshun Trading Co., Ltd. jointly invested and established Dolemi Sanitary Products Co., Ltd. with a registered capital of RMB50 million. The Company holds 60% of the shares while Zhongshan Zhongshun Trading holds 40% of the shares. Since December 2020, the Company has incorporated Dolemi Sanitary Products Co., Ltd into the scope of its consolidated statements. Currently, Dolemi Sanitary Products has no operating activities.

IX. Engagement and Dismissal of Accounting Firm

Accounting firm engaged

Name of the domestic accounting firm Mazars CPA Limited (LLP)

C&S Paper Co., Ltd. Annual Report 2020


Remuneration for the domestic accounting firm (RMB 10,000)	156

Term of auditing service provided by the domestic accounting
firm	2

Name of domestic certified public accountants
	Wang Bing, Pan Guiquan

Term of auditing services provided by domestic certified public
accountants	2

Whether the accounting firm was changed in the reporting period

□ Yes √ No

Appointment of accounting firm, financial advisor or sponsor for internal control audit

□ Applicable √ Not applicable

X. The Company Facing Delisting after the Disclosure of the Annual Report

□ Applicable √ Not applicable

XI. Matters relating to Bankruptcy and Restructuring

□ Applicable √ Not applicable

No bankruptcy and restructuring-related matters of the Company happened during the reporting period.

XII. Material Litigations and Arbitrations

□ Applicable √Not applicable

The Company had no material litigations or arbitrations during the reporting period. Other litigations are listed as follows:

			Whether		Hearing results and	Execution of
		Amount		Litigation
	Basic information of the		projected		influences of the	judgment of the
No.		involved		(arbitration)
	litigation (arbitration)		liabilities were		litigation	litigation
		(RMB 10,000)		progress
			incurred		(arbitration)	(arbitration)

	Zhongshan Trading sued			Both the first	The verdict of
	Shenzhen Yongxinghua			instance and the	second instance
1	Trading Co., Ltd., Feng, &	660.374109	No	second instance	came into force.	Ongoing
	Liang for a sales contract			ruled that	Zhongshan
	dispute			Zhongshan	Trading has

C&S Paper Co., Ltd. Annual Report 2020

				Trading won the	applied for
				case.	execution.
					The verdict of first
				The first instance		The first round
	Zhongshan Trading sued				instance came into
				supported all the		of execution
	Guangzhou Yingjing Trade				force. Zhongshan
2		31.3604	No	claims by		ended. No
	Co., Ltd. for a sales contract				Trading has
				Zhongshan		properties have
	dispute				applied for
				Trading.		been recovered.
					execution.

					The verdict of first
				The first instance
	Zhongshan Trading sued				instance came into
				supported all the
	Shaoyang Jiahe Trading Co.,				force. Zhongshan
3		33.638552	No	claims by		Ongoing
	Ltd. for a sales contract				Trading has
				Zhongshan
	dispute				applied for
				Trading.
					execution.

				Both the first	The verdict of
	Zhongshan Trading sued			instance and the	second instance
	Shanghai Tongli Trading Co.,			second instance	came into force.
4	Ltd. and eight natural person	2932.009863	No	ruled that	Zhongshan	Ongoing
	defendants including Liu for			Zhongshan	Trading has
	a sales contract dispute			Trading won the	applied for
				case.	execution.
				The first instance
				ruled that C&S
			No (Note:
				won the case. The
			Whether
				second instance
			projected
				sent the case back	Wait for the verdict
	Yin sued C&S Paper for a		liabilities will
				to the first	and judgment of
5	dispute over the right to	30.247331	be incurred			Not applicable
				instance court for	the first instance
	health		cannot be
				a retrial. The first	retrial.
			determined
				instance retrial has
			prior to the
				been opened.
			verdict.)
				C&S is waiting

				for the verdict.
6	Sichuan Hua Xi Da Cheng Construction Co., Ltd. Zhuhai Branch sued Sichuan Luxian No. 9 Construction	The original claim was RMB7,516,03 2.39, which	Yes	The case was mediated and closed in the first instance.	All parties of the lawsuit fulfilled their respective settlement	The paper of civil mediation has been fulfilled.

C&S Paper Co., Ltd. Annual Report 2020

	Engineering Co., Ltd. and Yunfu C&S for a contract dispute over the Yunfu C&S construction project	was changed to RMB9,124,48 9.89 during the first instance.			obligation for relevant project costs agreed in the contract.
				Both the first
	Guangdong Weihong Plastics			instance and the
					The verdict of
	Technology Co., Ltd. sued			second instance		The verdict has
7		225.9055	No		second instance
	Hubei C&S for a contractor			ruled that Hubei		been fulfilled.
					came into force.
	contract dispute			C&S won the

				case.
					Xi'an Minsheng
					has not fulfilled
					the repayment	The first round
	Sichuan C&S sued Xi'an			The case was
					obligation in line	of enforcement
	Minsheng Department Store			mediated and
8		5.651847	No		with the paper of	ended;
	Management Co., Ltd. for a			closed in the first
					civil mediation.	RMB5,000 were
	contract dispute			instance.
					Sichuan C&S has	recovered.

					applied for legal
					enforcement.
			No (Note:
			Whether
				The first instance	Zhongshan
			projected
	Zhongshan Trading sued			is being heard.	Trading will apply
			liabilities will
	Guangzhou Jv Se Mai Ke			Zhongshan	for legal
9		28.554681	be incurred			Not applicable
	Internet Service Co., Ltd. for			Trading is waiting	enforcement after
			cannot be
	a sales contract dispute			for the verdict to	the verdict comes
			determined
				come into force.	into effect.
			prior to the

			verdict.)
				The case was
				mediated and	Fulfill repayment
	Xiaogan C&S sued Wuhan			closed in the first	obligation by	Performing
	Xincheng Tongda Trading			instance (with a	installments	according to the
10		525.162529	No
	Co., Ltd. for a sales contract			mediation amount	according to the	civil mediation

	dispute			of	civil mediation	paper
				RMB4,496,05235)	paper.
				.

C&S Paper Co., Ltd. Annual Report 2020

					Arbitration ruled in
				Arbitration ruled
	Ouyang sued C&S Paper for				favor of the
11		2	No	in favor of the		Not applicable
	a labor dispute				Company. Case
				Company.
					closed.

	Sichuan Zhongshun sued
					The settlement
	Yunan Yiya Tongmei Shikang			The case was
					paper has been
	Deep Supply Chain			settled and closed
12		109.09999	No		fulfilled	Not applicable
	Management Co., Ltd., Yang			in the first
					(RMB1,001,739,9
	& Li for a sales contract			instance.
					4 were recovered)
	dispute

					The plaintiff
	Huang sued Xiaogan Trading			The plaintiff
					withdrew at the
13	for a labor provider liability	24.189454	No	withdrew at the		Not applicable
					first instance. Case
	dispute			first instance.
					closed.

XIII. Penalty and Rectification

□ Applicable √ Not applicable

No penalties and rectifications of the Company occurred during the reporting period.

XIV. Integrity Records of the Company and its Controlling Shareholder and Actual Controller

□ Applicable √ Not applicable

XV. Implementation of the Stock Incentive Plan, Employee Stock Ownership Plan, and Other Employee Incentives of the Company

√ Applicable □ Not applicable

1. Implementation of the Phase II stock incentive plan

On May 21, 2020, the Company convened the 23rd meeting of the fourth session of the Board of Directors and the 19th meeting of the fourth session of the Board of Supervisors, which considered and approved the Proposal on Achieving the Unlock Conditions of the First Unlock Period for Restricted Stocks Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan . There were 533 holders of restricted stocks meeting the unlock conditions, and the number of stocks that could be unlocked was 5,593,428. The unlock date of these restricted stocks was June 8, 2020. The above meetings also reviewed and approved the Proposal on

C&S Paper Co., Ltd. Annual Report 2020

the Repurchase and Deregistration of Partial Restricted Stocks Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan. The Board of Directors of the Company approved to repurchase and deregister a total of 802,722 restricted shares that had been granted but not unlocked. In addition, the aforesaid meetings also deliberated and approved the Proposal on Achieving the Exercise Conditions of the First Exercise Period for Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan. There were 2,522 holders of stock options meeting the exercise conditions, and the number of options that could be exercised was 3,431,505. The Proposal on the Repurchase and Deregistration of Partial Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan was also considered and approved. The Board agreed to deregister 2,110,545 options that had been granted but not exercised.

On May 28, the Company held the 24th meeting of the fourth session of the Board of Directors and the 20th meeting of the fourth session of the Board of Supervisors, which reviewed and approved the Proposal on Adjusting the Exercise Price of Stock Options . Pursuant to the Company’s profit distribution plan in 2019 and relevant provisions of the 2018 Stock Option and Restricted Stock Incentive Plan (Draft) , the Company adjusted the exercise price of first-granted stock options from RMB8.67/share to RMB8.572/share, and adjusted the exercise price of reserved stock options from RMB14.04/share to RMB13.965/share.

On June 15, 2020, the cancellation procedures for 2,110,54 first-granted stock options that had been granted but not exercised were completed at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.

On September 7, 2020, the cancellation procedures for 802,722 first-granted restricted shares that had been granted but not unlocked were completed at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.

On October 29, 2020, the Company convened the 28th meeting of the fourth session of the Board of Directors and the 22nd meeting of the fourth session of the Board of Supervisors, which considered and approved the Proposal on Achieving the Unlock Conditions of the First Unlock Period for Reserved Restricted Stocks under the Company's 2018 Stock Option and Restricted Stock Incentive Plan . A total of 43 incentive recipients of the reserved restricted stocks met the unlock conditions of the first unlock period, and the number of stocks that could be applied for unlock was 765,270. The unlock date was November 10, 2020. The above meetings also reviewed and approved the Proposal on Achieving the Exercise Conditions of the First Exercise Period for Reserved Stock Options under the Company's 2018 Stock Option and Restricted Stock Incentive Plan. A total of 88 incentive recipients of the reserved stock options met the exercise conditions of the first exercise period, and the number of options that could be exercised was 640,389. In addition, the Proposal on the Repurchase and Deregistration of Partial Reserved Restricted Stocks under the Company's 2018 Stock Option and Restricted Stock Incentive Plan was also reviewed and approved . The Company agreed to repurchase and deregister 211,890 restricted shares that

C&S Paper Co., Ltd. Annual Report 2020

had been granted but not unlocked. In addition, the Proposal on the Repurchase and Deregistration of Partial Reserved Stock Options under the Company's 2018 Stock Option and Restricted Stock Incentive Plan was also considered and approved. The Company agreed to deregister 151,111 stock options that had been granted but not exercised.

On November 20, 2020, the cancellation procedures for 151,111 reserved stock options that had been granted but not exercised were completed at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.

Please continue to pay attention to the Company's information disclosure for subsequent implementation progress or changes.

2. Implementation of the Phase II employee stock ownership plan

In conformity with Accounting Standards for Enterprises No.11–Share-based Payments and relevant application guidelines and other documents, the Company's Phase II Employee Stock Ownership Plan meets the definition of share-based payment, and the total share-based payment expenses incurred were RMB56.44 million, of which RMB4.7 million were allocated in 2019 and RMB51.74 million in 2020.

The lockup period for the Phase II Employee Stock Ownership Plan expired on November 30, 2020.

As of January 5, 2021, all stocks held under the Company’s Phase II Employee Stock Ownership Plan, i.e. 11,709,583 shares, had been sold out. As per relevant provisions of the Phase II Employee Stock Ownership Plan, the implementation of the Plan is completed and thus the Plan is terminated.

C&S Paper Co., Ltd. Annual Report 2020

XVI. Material Related Party Transaction

1. Related party transactions relating to daily operations

√ Applicable □ Not applicable

Party of	Related	Type of	Content of	Pricing	Price of	Amount of	Proportion	Approved	Whether	Settlement	Available	Date of	Index of
related	relationship	related	related party	rules of	related party	related party	in the	transaction	to outstrip	of related	market prices	disclosure	disclosure
party		party	transaction	related	transactions	transaction	amount of	limit	the	party	for similar
transaction		transaction		party		(RMB10,000)	similar	(RMB10,00	approved	transaction	transactions
				transaction			transactions	0)	limit
Deng
Yingzhong
	Actual
, Deng				Market fair	Market fair					Transfer	Market fair	December 6,
	controller of the	Lease	Rental			294.81	28.97%	294.81	No				2019-93
Guanbiao,				price	price					settlement	price	2019
	Company
Deng

Guanjie
Deng	Actual	Lease	Rental							Transfer
Yingzhong	controller of the									settlement
, Deng	Company			Market fair	Market fair						Market fair	October 30,
						5.56	0.55%	5.56	No				2020-82
Guanbiao,				price	price						price	2020

Deng
Guanjie

C&S Paper Co., Ltd. Annual Report 2020

Deng	Actual	Lease	Rental							Transfer
Yingzhong	controller of the									settlement
, Deng	Company			Market fair	Market fair						Market fair
						0.11	0.01%		Yes
Guanbiao,				price	price						price

Deng
Guanjie
	A company			Market fair	Market fair				No	Transfer	Market fair	December 6,
Pengzhou	where the senior			price	price					settlement	price	2019
Lexiangsh	manager Yue	Daily
			Sale of
enghuo	Yong's son holds	operation				137.8	0.02%	300					2019-93
			goods
Trading	shares and	transaction

Co., Ltd.	serves as a
	supervisor
	A company	Daily	Sale of	Market fair	Market fair				No	Transfer	Market fair	December 6,
Sichuan
	where the senior	operation	goods	price	price					settlement	price	2019
West
	manager Yue	transaction
Lexiangsh
	Yong's son holds					64.12	0.01%	100					2019-93
enghuo
	shares and
Trading
	serves as a
Co., Ltd.
	supervisor

Chongqin	A company	Daily	Sale of	Market fair	Market fair				No	Transfer	Market fair	December 6,
						33.05	0.00%	240					2019-93
g Qinyue	where the senior	operation	goods	price	price					settlement	price	2019

C&S Paper Co., Ltd. Annual Report 2020

Trading	manager Yue	transaction
Co., Ltd.	Yong's brother
	holds shares and
	serves as a
	supervisor
Guangdon		Daily	Sale of	Market fair		Market fair					Transfer	Market fair
g		operation	goods	price		price					settlement	price
	Controlling
Zhongshu		transaction
	shareholder of						5.66	0.00%		Yes
n Paper
	the Company
Group

Co., Ltd.
Total					--	--	541.11	--	940.37	--	--	--	--	--
Details of returns of large sales					Not applicable
					The excessive amounts of related party transactions of RMB1,100 and RMB56,600 in the reporting period are the Company's
Where the total amount of daily related-party transactions
					business of renting properties from and selling mask products to related parties, respectively. They are temporary new related
occurred in the current period is estimated by category,
					transactions during the reporting period, fall within the authority of the Chairman of the Company and can be implemented without
actual performance during the reporting period (if any)
					the approval of the Board of Directors.

Reason(s) for a large difference between the transaction
					Exercise at fair price
price and the market reference price (if applicable)

C&S Paper Co., Ltd. Annual Report 2020

2. Related party transactions relating to acquisition and sale of assets or equity

□ Applicable √ Not applicable

During the reporting period, there was no related party transaction relating to acquisition and sale of assets or equity.

3. Related party transactions relating to joint outbound investment

□ Applicable √ Not applicable

During the reporting period, there was no related party transaction relating to joint outbound investment.

4. Related party transactions relating to creditor's rights and debts

√ Applicable □ Not applicable

Whether there was non-operating related party transaction relating to creditor's rights and debts

□ Yes √ No

During the reporting period, there was no non-operating related party transaction relating to creditor's rights and debts.

5. Other significant related party transactions

□ Applicable √ Not applicable

During the reporting period, there were no other significant related party transactions.

XVII. Significant Contracts and Their Performance

1. Custody, contracting and leasing matters

(1) Custody

□ Applicable √ Not applicable

During the reporting period, there was no custody.

(2) Contracting

□ Applicable √ Not applicable

C&S Paper Co., Ltd. Annual Report 2020

During the reporting period, there was no contracting.

(3) Leasing

√ Applicable □ Not applicable Description of leasing matters

On December 5, 2019, the Company convened the 19th meeting of the fourth session of the Board of Directors and the 16th meeting of the fourth session of the Board of Supervisors, on which the Proposal on Daily Related Party Transactions in 2021 was reviewed and approved. Due to the needs of operation and business, the Board of Directors of the Company agreed that the Company and its wholly-owned subsidiary, Zhongshan Zhongshun Trading Co., Ltd., leased the real estate jointly owned by Mr. Deng Yingzhong, Mr. Deng Guanbiao and Mr. Deng Guanjie, the actual controllers of the Company. The lease term is from January 1, 2020 to December 31, 2021, and the total rent involved is RMB5,896,200. During the deliberation of this proposal, the Company's three related directors, Mr. Deng Yingzhong, Mr. Deng Guanbiao and Mr. Deng Guanjie, withdrew from voting, while the remaining six attending directors unanimously approved this related party transaction. The three independent

directors of the Company respectively issued Prior Approval Opinions and Opinions of Independent Directors on the proposal, agreeing to submit the proposal to the Board of Directors for deliberation and agreeing to the related party transaction.

On October 29, 2020, the Company convened the 20th meeting of the fourth session of the Board of Directors and the 22nd meeting of the fourth session of the Board of Supervisors, on which the Proposal on Adding to Related-Party Leasing Transactions was reviewed and approved. The Board of Directors of the Company agreed that the Company’s wholly-owned subsidiary, C&S (Yunfu) Paper Co., Ltd., leased the real estate jointly owned by the actual controllers of the Company Mr. Deng Yingzhong, Mr. Deng Guanbiao and Mr. Deng Guanjie to be used as its R&D center. The lease term is from November 1, 2020 to December 31, 2021, and the total rent involved is RMB389,300. During the deliberation of this proposal, the Company's three related directors, Mr. Deng Yingzhong, Mr. Deng Guanbiao and Mr. Deng Guanjie, withdrew from voting, while the remaining six attending directors unanimously approved this related party transaction. The three independent directors of the Company respectively issued Prior Approval Opinions and Opinions of Independent Directors on the proposal, agreeing to submit the proposal to the Board of Directors for deliberation and agreeing to the related party transaction.

The Company’s holding subsidiary, Dolemi Sanitary Products Co., Ltd., leased the real estate jointly owned by actual controllers of the Company Mr. Deng Yingzhong, Mr. Deng Guanbiao and Mr. Deng Guanjie to be used as residence. The lease term is from December 1, 2020 to December 31, 2021, and the total rent involved is RMB14,100. The amount of this related party transaction falls within the approval authority of the Company’s

C&S Paper Co., Ltd. Annual Report 2020

Chairman and has been approved by the Chairman.

Projects whose profits or losses brought to the Company reached more than 10% of the total profits of the Company during the reporting period

□ Applicable √ Not applicable

During the reporting period, there were no leasing projects whose profits or losses brought to the Company reached more than 10% of the total profits of the Company during the reporting period.

2. Material guarantee

√ Applicable □ Not applicable

(1) Guarantee

Unit: RMB10,000

External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)	External guarantee of the Company and subsidiaries (excluding guarantee for subsidiaries)
	Disclosure	Guarantee	Actual date of	Actual	Guarantee	Guarantee	Whether it	Whether
	date of	limit	occurrence	guarantee	type	period	has been	it is
	relevant			amount			completed	related
Name of guarantee
	announcem							party
object
	ent on							guarantee

	guarantee
	limit
		Guarantee of the Company for subsidiaries
	Disclosure	Guarantee	Actual date of	Actual	Guarantee	Guarantee	Whether it	Whether
	date of	limit	occurrence	guarantee	type	period	has been	it is
	relevant			amount			completed	related
Name of guarantee
	announcem							party
object
	ent on							guarantee

	guarantee
	limit
					Joint and
	December		September 15,			2020.9.15-2
Zhongshan Trading		15,000		11,582.11	several		No	Yes
	5, 2019		2020			023.8.31
					liability

C&S Paper Co., Ltd. Annual Report 2020

					guarantee
Zhongshan Trading					Joint and		No	Yes
	December		December 30,		several	2020.12.30-
		3,000		0
	5, 2019		2020		liability	2024.12.31

					guarantee
Zhongshan Trading					Joint and		No	Yes
	December		December 15,		several	2020.12.15-
		25,000		0
	5, 2019		2020		liability	2024.12.9

					guarantee
Zhongshan Trading					Joint and		No	Yes
	December				several	2019.7.12-2
		9,000	July 12, 2019	0
	19, 2018				liability	024.12.31

					guarantee
					Joint and		No	Yes
	December		October 15,		several	2020.10.15-
Jiangmen C&S		12,000		0
	5, 2019		2020		liability	2023.8.31

					guarantee
Jiangmen C&S					Joint and		No	Yes
	December				several	2018.3.27-2
		10,000	March 27, 2018	0
	15, 2017				liability	023.12.31

					guarantee
Jiangmen C&S					Joint and		No	Yes
	December				several	2020.7.9-20
		7,000	July 9, 2020	2,809.88
	5, 2019				liability	22.9.23

					guarantee
Jiangmen C&S					Joint and		No	Yes
	December		November 16,		several	2020.11.26-
		10,000		1,206.54
	5, 2019		2020		liability	2023.11.25

					guarantee
Jiangmen C&S					Joint and		No	Yes
	December		December 23,			2020.12.23-
		5,000		0	several
	5, 2019		2020			2025.12.23
					liability

C&S Paper Co., Ltd. Annual Report 2020

					guarantee
Jiangmen C&S					Joint and		No	Yes
	December				several	2018.5.30-2
		16,000	May 30, 2018	0
	15, 2017				liability	023.5.30

					guarantee
					Joint and		No	Yes
	December				several	2020.4.14-2
Yunfu C&S		8,000	April 14, 2020	125.31
	5, 2019				liability	028.4.14

					guarantee
Yunfu C&S					Joint and		No	Yes
	December		November 20,		several	2020.11.20-
		5,000		0
	5, 2019		2020		liability	2023.12.31

					guarantee
Yunfu C&S			October 15,		Joint and		No	Yes
	December		2020		several	2020.10.15-
		10,000		1,372.31
	5, 2019				liability	2023.8.31

					guarantee
Yunfu C&S			October 15,		Joint and		No	Yes
	December		2020		several	2020.11.16-
		10,000		0
	5, 2019				liability	2023.11.15

					guarantee
Yunfu C&S					Joint and		No	Yes
	December				several	2020.7.9-20
		4,000	July 9, 2020	1,511.95
	5, 2019				liability	22.9.23

					guarantee
					Joint and		No	Yes
	December		February 25,		several	2020.2.25-2
Hubei C&S		10,000		0
	5, 2019		2020		liability	025.12.4

					guarantee
Hubei C&S					Joint and		No	Yes
	December		September 16,			2020.9.16-2
		9,822.45		571.51	several
	5, 2019		2020			023.9.11
					liability

C&S Paper Co., Ltd. Annual Report 2020

					guarantee
Hubei C&S					Joint and		No	Yes
	December				several	2020.6.3-20
		10,000	June 3, 2020	9,000
	5, 2019				liability	23.5.29

					guarantee
					Joint and		No	Yes
Jiangmen C&S, Yunfu	December				several	2019.1.8-20
		25,000	January 8, 2019	4,047.24
C&S, Hubei C&S	19, 2018				liability	21.1.8

					guarantee
C&S Hong Kong,					Joint and		No	Yes
Zhong Shun	December				several	2020.7.8-20
		32,741.5	July 8, 2020	13,272.59
International, Macao	5, 2019				liability	24.7.31

C&S					guarantee
					Joint and		No	Yes
C&S Hong Kong,
	December				several	2020.3.20-2
Zhong Shun		17,145.38	March 20, 2020	0
	5, 2019				liability	022.9.19
International
					guarantee

					Joint and		No	Yes
C&S Hong Kong,,	December		September 7,		several	2020.9.7-20
		33,784		4,493.79
Macao C&S	5, 2019		2020		liability	22.12.23

					guarantee
C&S Hong Kong,					Joint and		No	Yes
Zhong Shun	December		February 12,		several	2020.2.12-2
		41,581.71		23,283.94
International, Macao	5, 2019		2020		liability	022.2.12

C&S					guarantee
C&S Hong Kong,,					Joint and		No	Yes
Macao C&S	December		February 25,		several	2020.2.25-2
		13,096.6		0
	5, 2019		2020		liability	022.2.25

					guarantee
C&S Hong Kong,,					Joint and		No	Yes
	December		November 12,			2020.11.12-
Macao C&S		6,548.3		0	several
	5, 2019		2020			2024.3.1
					liability

C&S Paper Co., Ltd. Annual Report 2020

					guarantee
C&S Hong Kong,,					Joint and		No	Yes
Macao C&S	December				several	2020.3.27-2
		15,715.92	March 27, 2020	5,202.81
	5, 2019				liability	022.2.19

					guarantee
C&S Hong Kong,					Joint and		No	Yes
Zhong Shun	December		September 28,		several	2018.9.28-2
		18,243.36		0
International, Macao	15, 2017		2018		liability	022.8.31

C&S					guarantee
C&S Hong Kong,					Joint and		No	Yes
Zhong Shun	December				several	2020.1.30-2
		19,644.9	January 30, 2020	7,630.17
International, Macao	5, 2019				liability	022.1.30

C&S					guarantee
Macao C&S					Joint and		No	Yes
	December				several	2018.3.23-2
		7,203.13	March 23, 2018	1,506.11
	15, 2017				liability	021.9.23

					guarantee
Macao C&S					Joint and		No	Yes
	December				several	2018.8.15-2
		7,000	August 15, 2018	1,212.3
	15, 2017				liability	025.8.15

					guarantee
C&S Hong Kong					Joint and		No	Yes
	December		September 1,		several	2020.9.1-20
		22,919.05		1,851.98
	5, 2019		2020		liability	22.7.9

					guarantee
C&S Hong Kong					Joint and		No	Yes
	December				several	2020.7.1-20
		14,275.29	July 1, 2020	7,341.22
	5, 2019				liability	21.6.30

					guarantee
					Joint and		No	Yes
	December					2020.7.1-20
Macao C&S		27,371.89	July 1, 2020	13,818.35	several
	5, 2019					21.6.30
					liability

C&S Paper Co., Ltd. Annual Report 2020

					guarantee
				Total actual amount of
Total approved amount of
				guarantee for subsidiaries
guarantee for subsidiaries during		388,646.99				105,074.46
				during the reporting period
the reporting period (B1)
				(B2)

				Total actual guarantee
Total approved amount of
				balance to subsidiaries at
guarantee for subsidiaries at the		481,093.48				111,840.11
				the end of the reporting
end of the reporting period (B3)
				period (B4)

Guarantee of subsidiaries to subsidiaries
	Disclosure	Guarantee	Actual date of	Actual	Guarantee	Guarantee	Whether	Whether
	date of	limit	occurrence	guarantee	type	period	it has	it is
	relevant			amount			been	related
Name of guarantee
	announcem						complete	party
object
	ent on						d	guarantee

	guarantee
	limit
Total amount of the Company's guarantee (the sum of the first three items)
				Total actual amount of
Total approved amount of
				guarantee during the
guarantee during the reporting		388,646.99				105,074.46
				reporting period (A2 + B2 +
period (A1 + B1 + C1)
				C2)

				Total actual guarantee
Total approved amount of
				balance at the end of the
guarantee at the end of the		481,093.48				111,840.11
				reporting period
reporting period (A3 + B3 + C3)
				(A4+B4+C4)

Proportion of the total actual amount of guarantee (A4 + B4 + C4)
				22.18%
in the net assets of the Company

Wherein:
Balance of guarantee for shareholders, actual controllers and their
				0
related parties (D)

C&S Paper Co., Ltd. Annual Report 2020

==> picture [481 x 206] intentionally omitted <==

----- Start of picture text -----

Balance of debt guarantee provided directly or indirectly for
0
objects whose asset-liability ratio exceeds 70% (E)
Amount of guarantees in excess of 50% of net assets (F) 25,200.86
Total amount of the above three guarantees (D + E + F) 25,200.86
Description of situations that the guarantee liability has occurred
or the Company may be jointly and severally liable for undue No
guarantees during the reporting period (if any)
Description of providing external guarantee in violation of
No
prescribed procedures (if any)
----- End of picture text -----

Detailed description on the guarantees with different types: None

(2) External guarantee in violation of prescribed procedures

□ Applicable √ Not applicable

During the reporting period, there was no external guarantee in violation of prescribed procedures.

3. Entrusting others to manage cash assets

(1) Entrusted wealth management

√ Applicable □ Not applicable

Overview of entrusted wealth management during the reporting period

Unit: RMB10,000

Specific type	Source of entrusted	Incurred amount of	Undue balance	Amount overdue but not
	wealth management funds	entrusted wealth		recovered
		management
Wealth management
	Self-owned fund	21,320	0	0
product of bank

Wealth management
product of securities	Self-owned fund	8,710.5	5,000	0
company
Total		30,030.5	5,000	0

Explanation of high-risk entrusted wealth management with large individual amount or low safety, poor liquidity

C&S Paper Co., Ltd. Annual Report 2020

and no principal guarantee

□ Applicable √ Not applicable

Entrusted wealth management is expected to fail to recover the principal or there are other circumstances that may lead to impairment

□ Applicable √ Not applicable

(2) Entrusted loans

□ Applicable √ Not applicable

There were no entrusted loans during the reporting period.

4. Significant contracts for daily operation

□ Applicable √ Not applicable

5. Other significant contracts

□ Applicable √ Not applicable

There were no other significant contracts during the reporting period.

XVIII. Social Responsibilities

1. Performance of social responsibilities

The Company actively fulfills its social responsibilities and initiatively discloses its performance of the social responsibilities. While safeguarding the legitimate rights and interests of shareholders, employees, consumers, partners, the society and other stakeholders, the Company upholds the tenet of integrity and commitment, and makes positive contributions to the sustainable development of the society and environment. For details on the Company’s performance of social responsibilities in 2020, please refer to the 2020 Environmental, Social and Governance (ESG) Report published on the designated information disclosure media CNINFO (http://www.cninfo.com.cn)

2. Performance of social responsibilities for targeted poverty alleviation

(1) Targeted poverty relief planning

The Company carried out targeted poverty alleviation in 2020, and the follow-up work plan will be conducted in

C&S Paper Co., Ltd. Annual Report 2020

accordance with the Company’s situation and work arrangement.

(2) Summary of annual targeted poverty alleviation

In order to implement General Secretary Xi Jinping’s important guidance that poverty alleviation and development should be precise and non-public enterprises are encouraged to participate in poverty alleviation by taking a turnkey approach in terms of resources, the Company has actively responded to the government’s appeal of targeted poverty alleviation, deepened poverty alleviation and rural revitalization. In 2002, we visited poverty-stricken areas many times and carried out targeted poverty relief work from three aspects of providing funds, providing materials and helping poor people to work. Specifics are as follows:

Based on the framework agreement of achieving well-off with joint efforts signed with Jinzhai Village, Huanghua Town, Yongshan County, Zhaotong City, the Company donated RMB40,000 to Jinzhai Village for improving local infrastructure and environment for residents. This could consolidate the achievements of poverty alleviation work.
The Company carried out targeted poverty alleviation actions in Heishui County of Aba Tibetan and Qiang Autonomous Prefecture (Sichuan Province), with a total assistance amount of RMB5,000.
The Company visited Wupu Middle School in Wupu Town, Yunmeng County, Xiaogan City, Hubei Province, and donated epidemic prevention materials worth RMB30,000.
The Company absorbed five local poverty alleviation targets from Xiaogan City of Hubei Province and signed labor contracts with them. In addition, the Company also, in response to local government’s call to participate in poverty alleviation and agricultural assistance, purchased agricultural aid products worth RMB50,000.
The Company donated a poverty relief fund of RMB100,000 to Luoding City of Guangdong Province; to help poverty-stricken households with registration cards to achieve employment, the Company absorbed 12 targets of targeted poverty alleviation and signed labor contracts with them.

(3) Targeted poverty relief achievements

Indicator	Unit of	Amount and description
	measurement
I. Overall situation	——	——
Including: 1. Capital	RMB10,000	19.5
2. Money equivalent of supplies	RMB10,000	3
3. Number of registered	Person	17

C&S Paper Co., Ltd. Annual Report 2020

poverty-stricken people helped to lift out of
poverty
II. Investments by items	——	——
1. Poverty alleviation initiatives to promote
	——	——
industry development

2. Poverty alleviation initiatives to transfer
	——	——
employment

2.3 Number of registered
	Person	17
poverty-stricken people helped to get employed

3. Poverty alleviation initiatives to relocate
	——	——
impoverished residents

4. Poverty alleviation initiatives to promote
	——	——
education

5. Poverty alleviation initiatives to promote
	——	——
healthcare

6. Poverty alleviation initiatives to promote
	——	——
ecological protection

7. Poverty alleviation initiatives to strengthen
	——	——
security guarantee

8. Poverty alleviation initiatives to promote
	——	——
social causes

8.3 Investment in poverty
	RMB10,000	22.5
alleviation charity funds

9. Other projects	——	——
	——	——
III. Awards (including content and level)

(4) Subsequent targeted poverty alleviation plan

The Company will decide whether to carry out follow-up targeted property alleviation plans based on results of visits and inspections.

C&S Paper Co., Ltd. Annual Report 2020

3. Situations relating to environmental protection

Whether the listed company and its subsidiaries are the key pollution discharge units published by the environmental protection department

√ Yes □ No

C&S Paper Co., Ltd. Annual Report 2020

				Number			Implemente
									Total
	Main pollutants and			of		Concentration of	d pollutant	Total		Excessive
Name of company			Ways of discharge		Distribution of discharge outlets				approved
	particular pollutants			discharge		discharge	discharge	discharge		discharge
									discharge
				outlets			standards

Jiangmen		COD	After treatment, it is			148mg/L	200mg/L	294.058t	335.600 t/a	None
	Waste				Centralized processing facilities in the
Zhongshun Paper		Ammonia	discharged to the	1		5.8mg/L	8mg/L	11.52t	13.4 t/a
	water				factory					None
Co., Ltd.		nitrogen	sewage treatment plant

		COD	After treatment, it			33 mg/L	80mg/L	27.4413 t	96 t/a	None
					Production waste water discharge
			enters the water			0.496 mg/L	8mg/L	0.4125 t	9.6 t/a
	Waste				(DW001) flows through the channel
		Ammonia	purification station	1
	water				into the main outlet DW002 (confluent					None
		nitrogen	through urban sewage
					with domestic waste water)
			pipeline


		PM				1#furnace 5.2mg/m³ 2# furnace 3.6 mg/m³ 3# furnace 4.6 mg/m³	20mg/Nm³	0.6781t	/
C&S (Sichuan)
		(particulate								None
Paper Co., Ltd.
		matter)			Three chimneys (reconstruction of low

			Discharge directly		nitrogen boilers was completed in June	1# furnace 26 mg/m³
	Waste gas	Nitrogen		3
			through the flue		2020; two boilers are commonly used	2# furnace 81mg/m³	150mg/Nm³	9.5484t	31.35t/a	None
		oxide
					and one boiler serves as the standby)	3# furnace 27 mg/m³


		Sulfur
						0	50mg/Nm³	0	/	None
		dioxide

		COD	After treatment, it is			40.1mg/L	500mg/L	8.55t	13.97 t/a	None
Zhejiang
Zhongshun Paper	Waste	Ammonia	discharged to Jiaxing	1	Centralized processing facilities in the
	water		Union Sewage		factory	0.965mg/L	35mg/L	0.2t	9.78 t/a	None
Co., Ltd.		nitrogen
			Treatment Co., Ltd.

C&S Paper Co., Ltd. Annual Report 2020

			through municipal pipe
		COD	After treatment, it is			70.579 mg/L	400mg/L	77.974t	152.25t/a	None
					After pre-processing of centralized
			discharged to Biquan
	Waste				processing facilities in the factory, it is
		Ammonia	Sewage Treatment	1
	water				discharged to Biquan Sewage	3.880 mg/L	30mg/L	4.286t	15.25t/a	None
		nitrogen	Plant through
					Treatment Plant
			municipal pipe


C&S (Hubei)		PM
Paper Co., Ltd.		(particulate				9.0 mg/Nm³	30mg/Nm³	9.998t	28.63 t/a	None
			Dedusting by bag filter,
		matter)
			desulfurization by
	Waste gas	Sulfur		1	One chimney
			limestone-gypsum and			18.5 mg/Nm³	200mg/Nm³	29.171t	203.87t/a	None
		dioxide
			denitration by SNCR
		Nitrogen
						58.0 mg/Nm³	200mg/Nm³	81.501t	239.85t/a	None
		oxide

		COD	Continuous discharge	1	Sewage treatment station in the factory	23.99 mg/L	80mg/L	44.81t	197.1 t/a	None
C&S (Yunfu)	Waste
		Ammonia
Paper Co., Ltd.	water		Continuous discharge	1	Sewage treatment station in the factory	1.66 mg/L	8mg/L	3.18t	19.76 t/a	None
		nitrogen

		COD	After being treated by			24.96 mg/L	50mg/L	5.74t	16.5 t/a	None
			the plant sewage
			treatment station, it is
C&S Paper Co.,	Waste				The main outlet of the zone (Lvyuan
		Ammonia	discharged to the	1
Ltd. Tangshan	water				Sewage Treatment Plant)	0.464 mg/L	5mg/L	0.103t	1.65t/a	None
		nitrogen	Lvyuan Sewage
Branch
			Treatment Plant in the


			zone
	Waste gas	PM	Discharge directly	1	One chimney	2.12mg/m³	5mg/Nm³	0.22t	2.46 t/a	None

		C&S Paper Co.,Ltd. Annual Report 2020	C&S Paper Co.,Ltd. Annual Report 2020	C&S Paper Co.,Ltd. Annual Report 2020	C&S Paper Co.,Ltd. Annual Report 2020	C&S Paper Co.,Ltd. Annual Report 2020
(particulate	through the flue
matter)
Nitrogen
		17.50mg/m³	30mg/Nm³	1.837t	18.46t/a	None
oxide

Sulfur
		3mg/m³	10mg/Nm³	0.3128t	6.15 t/a	None
dioxide

Construction and operation of pollution prevention and control facilities

(1) Compliance obligation fulfillment: The Company and its subsidiaries strictly abide by national and local environmental laws and regulations; all new projects strictly implement the environmental impact assessment system and "three simultaneous" system; all production activities strictly comply with the Environmental Protection Law of the People's Republic of China , the Law of the People's Republic of China on the Prevention and Control of Water Pollution , the Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution , the Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste and the Action Plan for Prevention and Control of Water Pollution , and ensure that all pollutant treatment and discharge are in line with the requirements of laws and regulations.

(2) Configuration and operation of water treatment equipment and facilities: Each subsidiary has a complete set of environmental protection treatment equipment and facilities. The main sewage treatment processes are anaerobic, aerobic and subsequent deep treatment processes, which can achieve the discharge standards of various sewage indicators. In addition, each subsidiary is equipped with a recycling water system, in which the reclaimed water that meets the usage standard is used for re-production to reduce the discharge of sewage as far as possible. The sewage of Jiangmen, Zhejiang, Hubei and Tangshan companies is discharged after centralized treatment in the company and treated by the local sewage treatment plants. After centralized treatment in the company, the sewage of Sichuan Company enters water purification station through urban sewage pipeline; the sewage of Yunfu Company, after treated by the company's sewage treatment station and reaching the standard, is discharged in an organized manner.

C&S Paper Co., Ltd. Annual Report 2020

(3) Online monitoring and operation of water treatment facilities: Four subsidiaries in Yunfu, Sichuan, Zhejiang and Hubei have all installed on-line sewage monitoring facilities, which are directly supervised by local environmental protection bureau. The sewage of Tangshan Company, after centralized treatment in the Company, is discharged to the sewage plant of the local paper industry base without any other sewage outlet. Monitoring facilities are installed in the company for internal control reference. After the centralized treatment within the Company, the sewage of Jiangmen Company is discharged to the sewage plant of the local paper industry base; there is no other sewage outlet and no online monitoring facilities. The environmental protection bureau goes to the company regularly every quarter to compare the on-line monitoring data, which all meet the requirements.

(4) Boiler waste gas emission: Sichuan Branch and Tangshan Branch are equipped with natural gas boilers. Hubei Branch is equipped with a coal-fired boiler, and waste gas is emitted uniformly after desulfurization and denitrification. Boiler waste gas emission conforms to GB13271-2014 Emission Standard of Air Pollutants for Boiler .

Environmental impact assessment of construction projects and other administrative permits for environmental protection

(1) Administrative permits: According to the Measures for the Administration of Pollutant Discharge Permit of the Ministry of Environmental Protection of the People's Republic of China , the applications were submitted to the Environmental Protection Bureau. All the subsidiaries attained the new pollutant discharge permit in 2017, and completed its renewal and change in May 2020.

(2) Construction projects: the Company has always been strictly in accordance with environmental laws and regulations to implement the control of construction projects. Environmental impact assessment was carried out for all construction projects and environmental protection project construction was arranged according to construction plan, to ensure that the environmental protection facilities and the main project are designed, constructed and put into use at the same time. At present, all construction projects put into production have completed environmental impact assessment and acceptance and approval.

Emergency plan for sudden environmental events

(1) Preparation and reporting of emergency plan for sudden environmental events: The Company strictly implements emergency response rules for sudden environmental events, and, in accordance with the technical requirements in the Technical Guidelines for Preparation of Emergency Plans for Environmental Pollution Accidents, employs a professional advisory and guidance organization to formulate the Emergency Plan for Sudden Environmental Events , which has been reviewed by and filed with the Environmental Protection Bureau.

(2) Emergency response supplies, training and drill: The Company has matched the corresponding emergency response supplies according to the requirements of the Emergency Plan for Sudden Environmental Events . Emergency response measures for hazardous chemicals have been prepared according to environmental protection

C&S Paper Co., Ltd. Annual Report 2020

requirements, and necessary labor protection supplies and emergency response supplies have been provided in accordance with safety technical instructions, and checked and updated regularly. The Company regularly carries out emergency training and drill and suitability assessment of the emergency plan to ensure the effectiveness and enforceability of the emergency plan.

Environmental self-monitoring program

(1) Self-monitoring ledger: The Company strictly abides by laws and regulations, carries out self-monitoring work in accordance with environmental protection requirements, establishes environmental management ledger and data, and constantly improves it.

(2) Waste water monitoring: At present, self-monitoring is a combination of manual monitoring and automatic monitoring, and qualified units are entrusted to carry out monitoring regularly. Automatic monitoring projects: main discharge outlet of waste water (COD, ammonia nitrogen, flow rate, PH, total nitrogen); Manual monitoring projects: COD, BOD, ammonia nitrogen, SS, chroma, PH, total phosphorus and total nitrogen indicators are monitored daily; for other sewage monitoring items, uncontrolled emissions, solid waste and factory boundary noise, each subsidiary entrusts qualified units to carry out monitoring work monthly or quarterly according to the local environmental protection requirements.

(3) Waste gas monitoring: The main testing items are nitrogen oxide, ringelman emittance, sulfur dioxide and soot. The testing frequency is in compliance with the requirements of regulations.

(4) The self-monitoring data of pollutant discharge and environmental monitoring plans of each subsidiary are disclosed on the national key pollution source information disclosure website and the provincial key pollution source information disclosure website.

Other environmental information that should be disclosed

(1) The information regarding pollution discharge permit and relevant environmental information required by pollution permits is published on the National Pollution Discharge Permit Management Information Platform. If the competent government department in the location of the subsidiary has specific requirements, the information will be published on its required environmental information platform in local area.

(2) Other information related to environmental protection is published in the “News” section of our website. Other relevant information on environmental protection: None

XIX. Other Significant Events

√ Applicable □ Not applicable

No.	Announcement time	Announcement name	Announcement	Disclosure
			number	media

C&S Paper Co., Ltd. Annual Report 2020

1	January 9, 2020	Announcement on Pre-disclosure of the Share Reduction Plan by Directors and Senior Management of the Company	2020-01
2	February 3, 2020	Announcement on Resolutions of the 20th Meeting of the Fourth Session of the Board of Directors	2020-02
3	February 3, 2020	Announcement on External Donations	2020-03
4	February 10, 2020	Announcement on the Production and Sales of Medical Masks by Wholly-owned Subsidiaries	2020-04
5	February 12, 2020	Announcement on Completion of the Share Reduction Plan by Directors and Senior Management	2020-05
6	February 13, 2020	Announcement on the Acquisition of Emergency Medical Device Production and Emergency Medical Device Record Certificate by Wholly-owned Subsidiaries	2020-06
7	February 15, 2020	Announcement on Progress of the Share Reduction Plan by Senior Management of the Company	2020-07
8	February 26, 2020	Announcement on Resolutions of the 21st Meeting of the Fourth Session of the Board of Directors	2020-08
9	February 26, 2020	Announcement on Resolutions of the 17th Meeting of the Fourth Session of the Board of Supervisors	2020-09
10	February 26, 2020	Announcement on Changes to Accounting Policies	2020-10
11	February 26, 2020	Notice on Convening 2020 First Extraordinary General Meeting	2020-11
12	February 29, 2020	Annual Performance Bulletin 2019	2020-12
13	March 6, 2020	Announcement on Completion of the Share Reduction Plan by Senior Management of the Company	2020-13
14	March 11, 2020	Announcement on the Completion of Industrial and Commercial Registration Amendment of Subsidiaries	2020-14
15	March 14, 2020	Announcement on Resolutions of 2020 First Extraordinary General Meeting of Shareholders	2020-15
16	March 18, 2020	Announcement on the Resignation of the Representative of Securities Affairs	2020-16
17	March 20, 2020	Announcement on the First Repurchase of Company Shares	2020-17
18	March 21, 2020	Announcement on the Progress of Repurchase of Company Shares	2020-18
19	March 31, 2020	Announcement on the Completion of Industrial and Commercial Registration Amendment of the Company and Holding Subsidiaries	2020-19

C&S Paper Co., Ltd. Annual Report 2020

20	April 3, 2020	Announcement on the Progress of Repurchase of Company Shares	2020-20
21	April 8, 2020	Announcement on Pre-disclosure of the Share Reduction Plan by Directors and Senior Management of the Company	2020-21
22	April 30, 2020	Announcement on Resolutions of the 22nd Meeting of the Fourth Session of the Board of Directors	2020-22
23	April 30, 2020	Announcement on Resolutions of the 18th Meeting of the Fourth Session of the Board of Supervisors	2020-23
24	April 30, 2020	Summary of Annual Report 2019	2020-24
25	April 30, 2020	Announcement on the Proposal on 2019 Profit Distribution Plan	2020-25
26	April 30, 2020	Notice on Convening 2019 Annual General Meeting	2020-26
27	April 30, 2020	Notice on Convening the Online Performance Presentation for Annual Report 2019	2020-27
28	April 30, 2020	Text of the First Quarter Report 2020	2020-28
29	May 8, 2020	Announcement on Progress of Repurchase of Company Shares	2020-29
30	May 8, 2020	Announcement on Progress of the Share Reduction Plan by Senior Management of the Company	2020-30
31	May 15, 2020	Announcement on the Completion of Industrial and Commercial Registration Amendment of Subsidiaries	2020-31
32	May 15, 2020	Announcement on Completion of the Share Reduction Plan by Directors and Senior Management the Company	2020-32
33	May 16, 2020	Announcement on Expiry of the Share Reduction Plan by Senior Management of the Company and Pre-disclosure on the Next Share Reduction Plan	2020-33
34	May 22, 2020	Announcement on Resolutions of 2019 Annual General Meeting of Shareholders	2020-34
35	May 22, 2020	Announcement on Resolutions of 23rd Meeting of the Fourth Session of the Board of Directors	2020-35
36	May 22, 2020	Announcement on Resolutions of the 19th Meeting of the Fourth Session of the Board of Supervisors	2020-36
37	May 22, 2020	Announcement on Termination of Repurchase of Company Shares	2020-37
38	May 22, 2020	Announcement on Achieving the Unlock Conditions of the First Unlock Period for Restricted Stocks Awarded in the First Grant under	2020-38

C&S Paper Co., Ltd. Annual Report 2020

		the Company's 2018 Stock Option and Restricted Stock Incentive Plan
39	May 22, 2020	Announcement on Achieving the Exercise Conditions of the First Exercise Period for Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-39
40	May 22, 2020	Announcement on the Repurchase and Deregistration of Partial Restricted Stocks Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-40
41	May 22, 2020	Announcement on the Deregistration of Partial Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-41
42	May 23, 2020	Announcement on Implementation of 2019 Annual Equity Allocation	2020-42
43	May 27, 2020	Announcement on Resignation of the Company’s Director	2020-43
44	May 29, 2020	Announcement on Resolutions of the 24th Meeting of the Fourth Session of the Board of Directors	2020-44
45	May 29, 2020	Announcement on Resolutions of the 20th Meeting of the Fourth Session of the Board of Supervisors	2020-45
46	May 29, 2020	Announcement on Adjusting the Exercise Price of Stock Options under 2018 Stock Option and Restricted Stock Incentive Plan	2020-46
47	May 29, 2020	Announcement on By-election of non-Independent Directors of the Fourth Session of the Board of Directors	2020-47
48	May 29, 2020	Notice on Convening 2020 Second Extraordinary General Meeting	2020-48
49	June 4, 2020	Indicative Announcement on Lifting the Sales Restrictions in the First Unlock Period for Restricted Stocks Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-49
50	June 8, 2020	Indicative Announcement on Adopting the Autonomous Exercise Mode in the First Exercise Period for Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-50
51	June 16, 2020	Announcement on Progress of the Share Reduction Plan by Senior Management of the Company	2020-51
52	June 16, 2020	Announcement on the Deregistration Completion of Partial Stock Options Awarded in the First Grant under the 2018 Stock Option and Restricted Stock Incentive Plan	2020-52

C&S Paper Co., Ltd. Annual Report 2020

53	June 16, 2020	Announcement on Resolutions of 2020 Second Extraordinary General Meeting of Shareholders	2020-53
54	June 16, 2020	Announcement on Capital Decrease	2020-54
55	June 23, 2020	Announcement on Resolutions of the 25th Meeting of the Fourth Session of the Board of Directors	2020-55
56	June 23, 2020	Announcement on Election of the Vice Chairman of the Fourth Session of the Board of Directors	2020-56
57	June 23, 2020	Announcement on Appointment of the Joint General Manager of the Company	2020-57
58	July 2, 2020	Announcement on Completion of the Share Reduction Plan by Directors and Senior Management of the Company	2020-58
59	July 13, 2020	Semi-annual Performance Forecast 2020	2020-59
60	August 7, 2020	Announcement on Resolutions of the 26th Meeting of the Fourth Session of the Board of Directors	2020-60
61	August 7, 2020	Announcement on Resolutions of the 21st Meeting of the Fourth Session of the Board of Supervisors	2020-61
62	August 7, 2020	Summary of Semi-annual Report 2020	2020-62
63	August 7, 2020	Announcement on Continued Engagement of the Accounting Firm	2020-63
64	August 7, 2020	Notice on Convening the 2020 Third Extraordinary General Meeting	2020-64
65	August 26, 2020	Announcement on Resolutions of the 2020 Third Extraordinary General Meeting	2020-65
66	August 26, 2020	Announcement on Resolutions of the 27th Meeting of the Fourth Session of the Board of Directors	2020-66
67	August 26, 2020	Announcement on Adjusting the Annual Remuneration of the Joint General Manager	2020-67
68	August 26, 2020	Notice on Convening the 2020 Fourth Extraordinary General Meeting	2020-68
69	September 8, 2020	Announcement on the Repurchase and Deregistration Completion of Partial Restricted Awarded in the First Grant under the 2018 Stock Option and Restricted Stock Incentive Plan	2020-69
70	September 11, 2020	Announcement on Over Half Time of the Share Reduction Plan by Senior Management of the Company	2020-70
71	September 16, 2020	Announcement on the Completion of Industrial and Commercial	2020-71

C&S Paper Co., Ltd. Annual Report 2020

		Registration Amendment of Subsidiaries
72	September 16, 2020	Announcement on Resolutions of the 2020 Fourth Extraordinary General Meeting	2020-72
73	October 12, 2020	Performance Forecast of the First Three Quarters 2020	2020-73
74	October 17, 2020	Announcement on Completion of the Industrial and Commercial Registration Amendment of the Company	2020-74
75	October 30, 2020	Announcement on Resolutions of the 28th Meeting of the Fourth Session of the Board of Directors	2020-75
76	October 30, 2020	Announcement on Resolutions of the 22nd Meeting of the Fourth Session of the Board of Supervisors	2020-76
77	October 30, 2020	Text of the Third Quarter Report 2020	2020-77
78	October 30, 2020	Announcement on Achieving the Unlock Conditions of the First Unlock Period for Reserved Restricted Stocks under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-78
79	October 30, 2020	Announcement on Achieving the Exercise Conditions of the First Exercise Period for Reserved Stock Options under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-79
80	October 30, 2020	Announcement on the Repurchase and Deregistration of Partial Reserved Restricted Stocks under the 2018 Stock Option and Restricted Stock Incentive Plan	2020-80
81	October 30, 2020	Announcement on the Deregistration of Partial Reserved Stock Options under the 2018 Stock Option and Restricted Stock Incentive Plan	2020-81
82	October 30, 2020	Announcement on Increase of Related Lease	2020-82
83	October 30, 2020	Notice on Convening the 2020 Fifth Extraordinary General Meeting	2020-83
84	November 5, 2020	Announcement on Share Increase by Actual Controllers and Chairman of the Company	2020-84
85	November 9, 2020	Indicative Announcement on Lifting the Sales Restrictions in the First Unlock Period for Reserved Restricted Stocks under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-85
86	November 13, 2020	Indicative Announcement on Adopting the Autonomous Exercise Mode in the First Exercise Period for Reserved Stock Options under the Company's 2018 Stock Option and Restricted Stock Incentive Plan	2020-86

C&S Paper Co., Ltd. Annual Report 2020

87	November 17, 2020	Announcement on Resolutions of the 2020 Fifth Extraordinary General Meeting	2020-87
88	November 17, 2020	Announcement on Capital Reduction	2020-88
89	November 21, 2020	Announcement on the Deregistration Completion of Partial Reserved Stock Options under the 2018 Stock Option and Restricted Stock Incentive Plan	2020-89
90	December 1, 2020	Indicative Announcement on Expiry of the Lockup Period of Phase II Employee Stock Ownership Plan	2020-90
91	December 12, 2020	Announcement on Expiry of the Share Reduction Plan by Senior Management of the Company	2020-91
92	December 16, 2020	Announcement on Resolutions of the 29th Meeting of the Fourth Session of the Board of Directors	2020-92
93	December 16, 2020	Announcement on Resolutions of the 23rd Meeting of the Fourth Session of the Board of Supervisors	2020-93
94	December 16, 2020	Announcement on the Company’s Application for Credit Line from Banks in 2021	2020-94
95	December 16, 2020	Announcement on the Company’s Provision of Guarantee for Subsidiaries in 2021	2020-95
96	December 16, 2020	Announcement on Use of Self-owned Idle Funds to Purchase Wealth Management Products in 2021	2020-96
97	December 16, 2020	Announcement on Engaging in Financial Derivatives Trading in 2021	2020-97
98	December 16, 2020	Announcement on Provision of Guarantee for Credit Line Offered by Bank to Dealers	2020-98
99	December 16, 2020	Announcement on Daily Related Party Transactions in 2021	2020-99
100	December 16, 2020	Notice on Convening the 2020 Third Extraordinary General Meeting	2020-100
101	December 19, 2020	Announcement on Reduction of Company Shares by Senior Management Through Block Transactions	2020-101
102	December 30, 2020	Announcement on Investment and Establishment of a Holding Subsidiary and Completion of Industrial and Commercial Registration	2020-102

C&S Paper Co., Ltd. Annual Report 2020

XX. Significant Events of Subsidiaries of the Company

√ Applicable □ Not applicable

No.	Announcement time	Announcement name	Announcement	Disclosure media
			number
1	February 10, 2020	Announcement on the Production and Sales of Medical Masks by Wholly-owned Subsidiaries	2020-04	Securities Times, Securities Daily, China Securities Journal, Shanghai _Securities News_and CNINF
2	February 13, 2020	Announcement on the Acquisition of Emergency Medical Device Production and Emergency Medical Device Record Certificate by Wholly-owned Subsidiaries	2020-06
3	March 11, 2020	Announcement on Completion of Industrial and Commercial Registration Amendment of Subsidiaries	2020-14
4	March 31, 2020	Announcement on the Completion of Industrial and Commercial Registration Amendment of the Company and Holding Subsidiaries	2020-19
5	May 15, 2020	Announcement on the Completion of Industrial and Commercial Registration Amendment of Subsidiaries	2020-31
6	December 30, 2020	Announcement on Investment and Establishment of a Holding Subsidiary and Completion of Industrial and Commercial Registration	2020-102

C&S Paper Co., Ltd. Annual Report 2020

Section VI Changes in Shareholding and Information of Shareholders

I. Changes in Share Capital

1. Changes in shares

Unit: share

	Before change	Before change	Increase/decrease (+,	Increase/decrease (+,	Increase/decrease (+,	-) of this change	-) of this change	After change	After change
					Reserve
			New
		Percenta		Bonus	s				Percenta
	Number		shares			Others	Subtotal	Number
		ge		shares	capitaliz				ge
			issued
					ed

I. Shares subject to selling
	43,764,852	3.34%	116,250			-7,022,779	-6,906,529	36,858,323	2.81%
restrictions

1. Shares held by the state
2. Shares held by
state-owned legal
person
3. Shares held by other
domestic	41,134,807	3.14%	116,250			-6,344,768	-6,228,518	34,906,289	2.66%
shareholders
Including: Shares held
by domestic legal
persons
Shares held by
	41,134,807	3.14%	116,250			-6,344,768	-6,228,518	34,906,289	2.66%
domestic natural persons

4. Shares held by foreign
	2,630,045	0.20%				-678,011	-678,011	1,952,034	0.15%
shareholders

Including: Shares held

by foreign legal

C&S Paper Co., Ltd. Annual Report 2020

persons
Shares held by
	2,630,045	0.20%		-678,011	-678,011	1,952,034	0.15%
foreign natural persons

II. Shares without selling
	1,265,126,421	96.66%	3,494,166	6,220,057	9,714,223	1,274,840,644	97.19%
restrictions

1. RMB-denominated
	1,265,126,421	96.66%	3,494,166	6,220,057	9,714,223	1,274,840,644	97.19%
ordinary shares

2. Domestic listed foreign

shares

3. Overseas listed foreign

shares

4. Others
III. Total number of shares	1,308,891,273	100.00%	3,610,416	-802,722	2,807,694	1,311,698,967	100.00%

Explanation on changes in shares

√ Applicable □ Not applicable

During the first unlock period for restricted shares awarded in the first grant under the 2018 Stock Option and Restricted Stock Incentive Plan , 241 incentive recipients were unable to unlock the shares since they left the Company or failed to pass performance appraisal or unable to unlock all the shares since they passed the performance appraisal but failed to get a full mark and therefore could only lock shares proportioned to their mark. As a result, the Company had to repurchase and cancel a total of 802,722 restricted shares that had been granted but not unlocked. The deregistration procedures for the aforementioned restricted shares had been completed at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited as at September 9, 2020. As a result, the Company’s total share capital decreased by 802,722 shares.
During June 10, 2020 and December 31, 2020, vesting incentive recipients of stock options awarded in the first grant and reserved stock options under the 2018 Stock Option and Restricted Stock Incentive Plan exercised the right of 3,610,416 shares. As a result, the Company’s total share capital increased by 3,610,416 shares.

Approval of changes in shares

√ Applicable □ Not applicable

The Board of Directors’ disposition of the repurchase and deregistration matters for the first unlocking of partial restricted shares awarded in the first grant under the 2018 Stock Option and Restricted Stock Incentive Plan had been authorized by the first extraordinary general meeting of shareholders and reviewed and approved by the

C&S Paper Co., Ltd. Annual Report 2020

23rd meeting of the fourth session of the Board of Directors and 19th meeting of the fourth session of the Board of Supervisors.

The Board of Directors’ disposition of the exercise matters for the first exercise period of restricted stock options awarded in the first grant and reserved stock options under the 2018 Stock Option and Restricted Stock Incentive Plan had been authorized by the first extraordinary general meeting of shareholders and reviewed and approved by the 23rd meeting of the fourth session of the Board of Directors and 19th meeting of the fourth session of the Board of Supervisors.

Transfer of title of changed shares

□ Applicable √ Not applicable

Implementation of share repurchase

√ Applicable □ Not applicable

On April 18, 2019, the 12th meeting of the fourth session of the Board of Directors passed the Proposal on Share Repurchase of the Company . The Company aims to repurchase part of the Company's shares by centralized bidding transaction, with a total amount of RMB200 million (inclusive) to RMB400 million (inclusive). The buyback price shall not outstrip RMB13.69/share (inclusive). All shares to be repurchased will be used for employee stock ownership plans.

On August 5, 2019, the Company held the 15th meeting of the fourth session of the Board of Directors and passed the Proposal on Adjusting the Upper Limit of Share Repurchase Price . In line with the positive changes in the capital market and the Company's stock price, the Company adjusted the upper limit of share repurchase price to RMB18.81/share (inclusive), to ensure the smooth implementation of share repurchase based on the confidence in the Company's future business development and market value.

From March 19 to March 20, 2020, the Company conducted share repurchase by centralized bidding. The number of shares repurchased was 1,895,900 accumulatively, accounting for 0.1448% of the Company's total share capital. The highest transaction price was RMB15/share, the lowest one was RMB14.34/share, and the total transaction amount was RMB27,680,721.76 (with no transaction costs included).

On May 21, 2020, after holding the 23rd meeting of the fourth session of the Board of Directors, the Company passed the Proposal on Termination of Share Repurchase of the Company . The Company decided to terminate the share repurchase.

Implementation of share repurchase by centralized bidding

□ Applicable √ Not applicable

Impact of share changes on basic earnings per share and diluted earnings per share, net assets per share

C&S Paper Co., Ltd. Annual Report 2020

attributable to ordinary shareholders of the Company, and other financial indicators in last year and the latest period

□ Applicable √ Not applicable

Other contents considered necessary by the Company or required to be disclosed by the securities regulatory authority

□ Applicable √ Not applicable

2. Changes in shares subject to selling restrictions

√ Applicable □ Not applicable

Unit: share

	Number of shares	Increase in shares	Number of shares	Number of shares
	subject to selling	subject	released	subject to selling	Reason for	Date of release
Shareholder’s
	restrictions at the	to selling	from selling	restrictions at the	Selling	from selling
name
	beginning of the	restrictions	restrictions	end of	restrictions	restrictions

	period	during the period	during the period	the year
Deng Yingzhong					Lock-up shares of
					senior
					management; the
					increase in
					restricted shares
					is due to the
	4,679,558	385,050		5,064,608		Long-term
					locking of

					shareholding
					increase
					proportional to
					the position of the
					director.
Deng Guanbiao					Lock-up shares of	Long-term
	3,718,105			3,718,105	senior
					management
Deng Guanjie	900,730			900,730	Lock-up shares of	Long-term

C&S Paper Co., Ltd. Annual Report 2020

					senior
					management
					Lock-up shares of	Long-term
					senior
					management; the
					increase in
					restricted shares
					is due to the
Dai Zhenji	220,045	600,000	555,011	265,034	locking of
					unlocked
					restricted shares
					proportional to
					the position of the
					senior
					management.
					Lock-up shares of	Long-term
					senior
					management; the
					increase in
					restricted shares
					is due to the
					locking of
Liu Jinfeng	1,733,967	549,000	703,492	1,579,475	unlocked
					restricted shares
					or exercised stock
					options
					proportional to
					the position of the
					senior
					management.
					Lock-up shares of	Long-term
Yue Yong	9,206,243	55,000		9,261,243	senior
					management; the

C&S Paper Co., Ltd. Annual Report 2020

					increase in
					restricted shares
					is due to the
					locking of
					unlocked
					restricted shares
					proportional to
					the position of the
					senior
					management.
Zhou					Lock-up shares of	Long-term
QichaoZhou	663,579		165,825	497,754	senior
Qichao					management
					Lock-up shares of	Long-term
					senior
					management; the
					increase in
					restricted shares
					is due to the
Ye LongfangYe
		112,500	37,500	112,500	locking of
Longfang
					exercised stock

					options
					proportional to
					the position of the
					senior
					management.
					Lock-up shares of	Long-term
					senior
					management; the
Dong Ye	134,625	56,250	71,081	119,794	increase in
					restricted shares
					is due to the
					locking of

C&S Paper Co., Ltd. Annual Report 2020

					unlocked
					restricted shares
					or exercised stock
					options
					proportional to
					the position of the
					senior
					management.
					Lock-up shares of	Long-term
Li Youquan	40,800		7,500	33,300	senior
					management
					In accordance
					with_2018 Stock_
					Option and
					Restricted Stock
					Incentive Plan
					(Draft), the first
					unlocking was	Pursuant to_2018_
Equity incentive					conducted for	Stock Option and
recipients	22,467,200		7,161,420	15,305,780	partial restricted	Restricted Stock
					stocks awarded in	Incentive Plan
					the first grant and	(Draft)
					partial reserved
					stocks; 30% of
					the shares were
					unlocked and
					70% were still
					locked.
Total	43,764,852	1,757,800	8,701,829	36,858,323	--	--

C&S Paper Co., Ltd. Annual Report 2020

II. Issuance and Listing of Securities

1. Issuance of securities (excluding preference shares) during the reporting period

□ Applicable √ Not applicable

2. Changes in total shares and shareholder structure as well as changes in asset and liability structure of the Company

√ Applicable □ Not applicable

During the first unlock period for restricted shares awarded in the first grant under the 2018 Stock Option and Restricted Stock Incentive Plan , 241 incentive recipients were unable to unlock the shares since they left the Company or failed to pass performance appraisal or unable to unlock all the shares since they passed the performance appraisal but failed to get a full mark and therefore could only lock shares proportioned to their mark. As a result, the Company had to repurchase and cancel a total of 802,722 restricted shares that had been granted but not unlocked. The deregistration procedures for the aforementioned restricted shares had been completed at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited as at September 9, 2020. As a result, the Company’s total share capital decreased by 802,722 shares.
During June 10, 2020 and December 31, 2020, vesting incentive recipients of stock options awarded in the first grant and reserved stock options under the 2018 Stock Option and Restricted Stock Incentive Plan exercised the right of 3,610,416 shares. As a result, the Company’s total share capital increased by 3,610,416 shares.

3. Internal employee shares

□ Applicable √ Not applicable

III. Information of Shareholders and Actual Controllers

1. Total number of shareholders

Unit: share

						Total number of
Total number		Total number of		Total number of
						preferred shareholders
of ordinary		ordinary		preferred shareholders
						whose voting rights
shareholders as		shareholders at		whose voting rights
	108,366		63,824		0	were resumed at the	0
at the end		the end of the		were resumed at the end
						end of the month
of the reporting		month preceding		of the reporting period
						preceding the
period		the disclosure		(if any) (see Note VIII)
						disclosure date of the

C&S Paper Co., Ltd. Annual Report 2020

		date of the	date of the	date of the				annual report (if any)	annual report (if any)	annual report (if any)
		annual						(see Note VIII)
		report
	Shareholdings of shareholders with more than 5% or the top 10 shareholders
					Increase/d				Pledged or frozen
			Shareh			Number of	Number of
				Shares held at	ecrease
	Nature of		olding			shares subject	shares without
Name of shareholder				the end of the	during the				Share	Number
	shareholder		percent			to selling	selling
				reporting period	reporting				status	of shares
			age (%)			restrictions	restrictions
					period

Guangdong Zhongshun Paper Group Co., Ltd.	Domestic non-state-owne d legal person		28.64%	375,655,958			375,655,958


Chung Shun Co.	Foreign legal person		20.32%	266,504,789			266,504,789


Hong Kong Securities Clearing Co., Ltd.	Foreign legal person		6.29%	82,484,484	Underwei ght		82,484,484


National Social Security Fund Portfolio 406	Others		1.00%	13,112,327	New		13,112,327


Investec Asset Management Co., Ltd. -- Investec Global Fund Strategy -- China Stock Fund (Exchange)	Foreign legal person		0.84%	11,033,861	New		11,033,861


Yue Yong	Domestic natural person		0.80%	10,537,741	Underwei ght	10,031,243	506,498


National Social Security Fund Portfolio 101	Others		0.74%	9,700,878	New		9,700,878


Deng Yinzhong	Domestic natural person		0.51%	6,752,811	New	5,064,608	1,688,203

C&S Paper Co., Ltd. Annual Report 2020

Cascade Investment Foreign legal New 0.48% 6,326,197 6,326,197 LLC—self-run capital person Zhongshan Xinda Domestic Investment non-state-owne 0.46% 6,083,636 New 6,083,636 Management Co., d legal person Ltd. 1. Among the top ten shareholders mentioned above, Guangdong Zhongshun Paper Group Co., Ltd. and Chung Shun Co. are the enterprises controlled by actual controllers of the Description on the related relationship Company, i.e. Deng Yingzhong, Deng Guanbiao and Deng Guanjie. That is, Guangdong or parties acting-in-concert Zhongshun Paper Group Co., Ltd. and Chung Shun Co. are related parties. arrangements among the above 2. It is unknown to the Company whether there is related party relationship among other shareholders, or whether there is acting-in-concert among other shareholders as stipulated shareholders in the Administrative Measures for the Disclosure of Information on Changes in Shareholders' Shareholding of Listed Companies .

Shareholdings of top 10 shareholders not subject to selling restrictions	Shareholdings of top 10 shareholders not subject to selling restrictions	Shareholdings of top 10 shareholders not subject to selling restrictions	Shareholdings of top 10 shareholders not subject to selling restrictions
	Number of shares held not subject to selling	Type of shares
Name of shareholder
	restrictions	Type of shares	Number of shares

Guangdong Zhongshun Paper Group Co., Ltd.	375,655,958	RMB-denominate d ordinary shares
			375,655,958

Chung Shun Co.	266,504,789	RMB-denominate d ordinary shares
			266,504,789

Hong Kong Securities Clearing Co., Ltd.	82,484,484	RMB-denominate d ordinary shares
			82,484,484

National Social Security Fund Portfolio 406	13,112,327	RMB-denominate d ordinary shares
			13,112,327

Investec Asset Management Co., Ltd. -- Investec Global Fund Strategy -- China Stock Fund (Exchange)	11,033,861	RMB-denominate d ordinary shares
			11,033,861

National Social Security Fund Portfolio 101	9,700,878	RMB-denominate d ordinary shares
			9,700,878

Cascade Investment LLC—self-run capital	6,326,197	RMB-denominate d ordinary shares
			6,326,197

Zhongshan Xinda Investment Management Co., Ltd.	6,083,636	RMB-denominate d ordinary shares
			6,083,636

Li Hong	5,075,400	RMB-denominate d ordinary shares
			5,075,400

C&S Paper Co., Ltd. Annual Report 2020

National Social Security Fund Portfolio 105	4,995,800
		4,995,800

	1. Among the top ten shareholders mentioned above, Guangdong Zhongshun Paper Group Co., Ltd. and Chung Shun Co. are the enterprises controlled by actual controllers of the Company, i.e. Deng Yingzhong, Deng Guanbiao and Deng Guanjie. That is, Guangdong Zhongshun Paper Group Co., Ltd. and Chung Shun Co. are related parties. 2. It is unknown to the Company whether there is related party relationship among other shareholders, or whether there is acting-in-concert among other shareholders as stipulated in the_Administrative Measures for the Disclosure of Information on Changes in_ Shareholders' Shareholding of Listed Companies.
Description on the related relationship
or parties acting-in-concert among the
top ten ordinary shareholders without
selling restrictions and between the top
ten ordinary shareholders without
selling restrictions and the top ten
ordinary shareholders

Whether the top ten ordinary shareholders and the top ten shareholders without selling restrictions conducted the agreed repurchase transaction during the reporting period

□ Yes √ No

The Company's top ten ordinary shareholders and top ten ordinary shareholders without selling restrictions did not

conduct agreed repurchase transactions during the reporting period.

2. Controlling shareholder of the Company

Nature of controlling shareholder: Natural person holding

Type of controlling shareholder: Legal person

	Legal representative or
Name of controlling			Organization code of the
	person in charge of the	Date of establishment		Principal businesses
shareholder			entity
	institution

Guangdong Zhongshun Paper				Investment
	Deng Yingzhong	November 21, 1997	91442000617775375D
Group Co., Ltd.				management

Equity interests in other
controlled and invested
companies whose shares were	None
listed in the PRC or overseas
during the reporting period

Changes of controlling shareholders during the reporting period

□ Applicable √ Not applicable

There was no change of the Company’s controlling shareholder during the reporting period.

100

C&S Paper Co., Ltd. Annual Report 2020

3. Actual controller and person acting in concert

Nature of actual controller: Domestic natural person

Type of actual controller: Natural person

	Relationship with actual		Whether obtain the right of abode in
Name		Nationality
	controller		other countries or regions

Deng Yingzhong	Self	Chinese	No
Deng Guanbiao	Self	Chinese	Yes
Deng Guanjie	Self	Chinese	No
	Refer to Section IX “Particulars of Directors, Supervisors, Senior Management and Employees”
Main occupation and position
	for details.

Holding of domestic and
overseas listed companies over	None
the past ten years

Changes of actual controllers during the reporting period

□ Applicable √ Not applicable

There was no change of the Company’s actual controllers during the reporting period.

Diagram on equity and control relationship between the Company and actual controllers

==> picture [98 x 44] intentionally omitted <==

==> picture [179 x 179] intentionally omitted <==

----- Start of picture text -----

0.09% 0.51%
----- End of picture text -----

101

C&S Paper Co., Ltd. Annual Report 2020

Actual controller controls the Company by entrust or other asset management methods

□ Applicable √ Not applicable

4. Other legal person shareholders holding 10% or more of shares

√ Applicable □ Not applicable

Name of legal	Legal representative or person in			Principal activities or
		Date of establishment	Registered capital
person shareholder	charge of the institution			management activities

				No engagement in any
				specific business except for
Chung Shun Co.	Deng Yingzhong	June 1, 1996	HKD10,000
				holding the Company’s

				equities

5. Restrictions on share reductions of controlling shareholders, actual controllers, restructuring parties and other commitment subjects

□ Applicable √ Not applicable

102

C&S Paper Co., Ltd. Annual Report 2020

Section VII Particulars of Preference Shares

□ Applicable √ Not applicable

The Company had no preference shares during the reporting period.

103

C&S Paper Co., Ltd. Annual Report 2020

Section VIII Particulars of Convertible Corporate Bonds

□ Applicable √ Not applicable

The Company had no convertible corporate bonds during the reporting period.

104

C&S Paper Co., Ltd. Annual Report 2020

Section IX Particulars of Directors, Supervisors, Senior Management and

Employees

I. Changes in Shareholding of Directors, Supervisors and Senior Management

							Number of
								Increase	Decrease		Number of
		Positio					shares held			Other
			Gende		Start date of	Expiry date of		of shares	of shares		shares held
Name	Position	n		Age			at the			increase/d
			r		term of office	term of office		during the	during the		at the end of
		status					beginning			ecrease
								year	year		the year
							of the year

Deng		Incum			December 12,	January 20,
	Director		Male	70			6,239,411	513,400			6,752,811
Yingzhong		bent			2008	2024

		Incum				January 20,
Liu Peng	Chairman		Male	41	April 12, 2021
		bent				2024

		Incum			March 22,	January 20,
Liu Peng	President		Male	41
		bent			2021	2024

Deng	Vice	Incum			December 21,	January 20,
			Male	43			4,957,473				4,957,473
Guanbiao	Chairman	bent			2011	2024

Deng	Vice	Incum				January 20,
			Male	37	June 22, 2020		1,200,974				1,200,974
Guanjie	Chairman	bent				2024

		Incum			June 15, 2020	January 20,
Dai Zhenji	Director		Male	55			2,220,045		550,045		1,670,000
		bent				2024

	Joint	Incum				January 20,
Dai Zhenji			Male	55	June 22, 2020
	President	bent				2024

		Incum			September 11,	January 20,
Liu Jinfeng	Director		Male	45			2,813,967		703,417	300,000	2,410,550
		bent			2015	2024

	Vice	Incum			January 31,	January 20,
Liu Jinfeng			Male	45
	President	bent			2018	2024

	Vice	Incum				January 20,
Yue Yong			Male	55	July 09, 2019		13,374,991		2,837,250		10,537,741
	President	bent				2024

105

C&S Paper Co., Ltd. Annual Report 2020

	Independe	Incum			March 10,	January 20,
He Haidi			Male	53
	nt Director	bent			2017	2024

He	Independe	Incum			January 21,	January 20,
			Male	47
Guoquan	nt Director	bent			2021	2024

	Independe	Incum			January 21,	January 20,
Liu Die			Male	43
	nt Director	bent			2021	2024

Zhou	Vice	Incum				January 20,
			Male	41	June 30, 2017		663,672	165,000		498,672
Qichao	President	bent				2024

Zhou	Board	Incum			August 16,	January 20,
			Male	41
Qichao	Secretary	bent			2017	2024

Ye	Vice	Incum				January 20,
			Male	45	July 09, 2019				150,000	150,000
Longfang	President	bent				2024

	Vice	Incum				January 20,
Li Zhaojin			Male	58	April 12, 2021
	President	bent				2024

	Chief					January 20,
		Incum			December 12,
Dong Ye	Financial		Male	57		2024	284,725	71,000	15,000	228,725
		bent			2011
	Officer

	Chairman					January 20,
	of the					2024
Chen		Incum			September 22,
	Board of		Male	67
Haiyuan		bent			2015
	Supervisor

	s
Liang		Incum			December 12,	January 20,
	Supervisor		Male	42
Yongliang		bent			2011	2024

		Incum			January 31,	January 20,
Li Youquan	Supervisor		Male	42			62,280			62,280
		bent			2018	2024

Deng		Resign			December 12,
	Chairman		Male	70		April 09, 2021
Yingzhong		ed			2008

Deng		Resign			January 06,	March 19,
	President		Male	43
Guanbiao		ed			2015	2021

Yue Yong	Director	Resign	Male	55	January 21,	March 18,

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C&S Paper Co., Ltd. Annual Report 2020

		ed			2021	2021
Deng	Vice	Resign			January 06,
			Male	37		June 22, 2020
Guanjie	President	ed			2015

Zhou		Resign			November 07,
	Director		Male	41		May 26, 2020
Qichao		ed			2017

		Resign	Femal		January 31,	January 21,
Zeng Yi	Director			45
		ed	e		2018	2021

Huang	Independe	Resign			January 06,	January 21,
			Male	51
Hongyan	nt Director	ed			2015	2021

Ge	Independe	Resign	Femal		January 06,	January 21,
				54
Guangrui	nt Director	ed	e		2015	2021

Total	--	--	--	--	--	--	31,817,538	513,400	4,326,712	465,000	28,469,226

II. Changes in Directors, Supervisors and Senior Management of the Company

√ Applicable □ Not applicable

Name	Position	Type	Date	Reason
Deng Yingzhong	Chairman	Resigned	April 09, 2021	Voluntary resign
Deng Guanbiao	President	Resigned	March 19, 2021	Voluntary resign
Yue Yong	Director	Resigned	March 18, 2021	Voluntary resign
Deng Guanjie	Vice President	Resigned	June 22, 2020	Voluntary resign
Zhou Qichao	Director	Resigned	May 26, 2020	Voluntary resign
		Resigned upon	January 21, 2021
Zeng Yi	Director	expiry of term of		Expiry of term of office
		office
		Resigned upon	January 21, 2021
	Independent Director
Huang Hongyan		expiry of term of		Expiry of term of office
		office

		Resigned upon	January 21, 2021
	Independent Director
Ge Guangrui		expiry of term of		Expiry of term of office
		office

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III. Main Working Experience

Professional background, main working experience and main current responsibilities of the Company’s in-service directors, supervisors and senior management

Mr. Deng Yingzhong, male and born in 1951, is the founder of the Company. Mr. Deng started to engage in the paper industry in 1979 and thereby has more than 40 years of industry experience. He served as the Chairman of Zhongshan Zhongshun Paper Manufacturing Co., Ltd. from 1992 to 1999, the Chairman and Legal Representative of that company from 1999 to 2005, and a director of that company from 2005 and 2008. He was the Chairman of the Company from 2008 to April 2021 and is currently a director and chairman of the Strategic Committee of the Company. He has been rewarded titles like “National Township Entrepreneur”, “China Excellent Private Entrepreneurs of Technology Firms”, “Excellent Private Entrepreneur of Guangdong Province”, “Excellent Manager of Quality Work of Guangdong Province”, “Excellent Entrepreneur of Zhongshan City”, etc.

Liu Peng, male, has a bachelor’s degree and is a CPC member and of Chinese nationality. He successively served as the president of Industrial Bank Jiangmen Branch and Zhongshan Branch. Currently, he acts as the Chairman and President of the Company.

Mr. Deng Guanbiao, male and born in 1978, is of Chinese nationality and has the permanent residency in Republic of Gambia and the permanent resident status in Macao Special Administrative Region. He holds a bachelor’s degree. Starting to work in Zhongshan Zhongshun Paper Manufacturing Co., Ltd. in 1999, he was once a director and deputy general manager of that company and a director and General Manager of the Company. He served as the General Manager of the Company from 2015 to March 2021 and has been the Vice Chairman of the Company since 2011. Currently, he is also a member of the Household Paper and Paperboard Subcommittee of the National Paper Industry Standardization Technical Committee.

Mr. Deng Guanjie, male and born in 1984, studied at Oxford Brookes University in England from 2004 to 2007 and obtained a bachelor’s degree. He acted as the Assistant to the Chairman of Zhongshan Zhongshun Paper Manufacturing Co., Ltd. from 2005 to 2007 and the Assistant to the Chairman of the Company from 2008 to February 2011. Afterwards, he was the Assistant to the Chairman and the Director of the HR Department from March 2011 to January 2012 and the Assistant to the Chairman of the Company from February 2012 to March 2013. He has been a director of the Company ever since December 2011 and served as the Deputy General Manager of the Company from April 2013 to June 2006 and as the Vice Chairman of the Company from June 2020.

Dai Zhenji, male and born in 1966, is from Taiwan China with an MBA degree. He served as the Marketing General Manager, General Manager of the Eastern District BU, Special Assistant to CEO and General Manager of the Commercial Consumer BU in Gold Hongye Paper Co., Ltd. from January 2013 to March 2015. He joined the Company as the Marketing President in October 2015 and became the Operating President in October 2018.

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C&S Paper Co., Ltd. Annual Report 2020

Afterwards, he started to act as the Deputy General Manager of the Company from July 2019 and a director and Joint General Manager of the Company since June 2020.

Liu Jinfeng, male and born in 1976, is of Chinese nationality and has no permanent residency abroad. He holds a bachelor’s degree and an EMBA degree. Mr. Liu served as the manager of Hunan Province, Central China Region, Household Paper BU of APP from August 2005 to May 2008 and as the BU’s General Manager of the Central China Region and Northwest Region from June 2008 and September 2009. Afterwards, he was promoted to the Operations General Manager of the Central China and Northwest Regions from February 2009 to April 2013, and then the Central Region VP of the BU from May 2013 to December 2014, during which he part-timed as the National Strategic Brand Marketing General Manager and the General Manger of Shanghai Yuanzesheng Trade Co., Ltd. from September 2014 to March 2015. He joined the Company in April 2015 as the Marketing VP and started to act as a director of the Company since September 2015 and the Deputy General Manager of the Company since January 2018.

He Haidi, male and born in September 1968, is of Chinese nationality and has no permanent residency abroad. He graduated from the Library Science of Wuhan University and was awarded a bachelor’s degree in arts, and then received a master’s degree in management from Wuhan University in 2006. Mr. He is a CPC member. Currently, with technical title of associate researcher, he works in the University of Electronic Science and Technology of China, Zhongshan Institute, engaging in the teaching and research of information consulting, services, analysis, retrieval, etc. He has presided over and been involved in a dozen of scientific research projects at the provincial level of Guangdong Province and the municipal level of Zhongshan City, and has published more than twenty academic papers in major core journals of the professional field. He has been hired as an expert for the Review Committee of Medium-Grade Professional Title for Book Information of Zhongshan City and a review expert for government procurements of Zhongshan City. He also part-times in Zhongshan Information Research Institute and provides information consulting, information analysis, technology novelty search, development and support for IPR and technological innovation projects, and other services to enterprises. He has been an independent director of the Company since March 2017.

He Guoquan, male and born in 1976, is of Chinese nationality and has no permanent residency abroad. He has a bachelor’s degree and is a senior certified public accountant in China and Australia, an international certified internal auditor, and national accounting leading talent as ascertained by the Ministry of Finance. He once served as a non-independent director of Singapore-listed Debao Property Group and resigned in 2018. From 1997, he works as a partner in GP Certified Public Accountants (Limited Liability Partnership). He acts as an independent director of the Company since January 2021.

Liu Die, male and born in 1978, is of Chinese nationality and has no permanent residency abroad. He graduated from South-Central University for Nationalities in 2005 with a master’s degree in law theory. He passed the national judicial examination and obtained the lawyer’s qualification certificate in 2004. From 2007 to 2018, he

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successively served as a lawyer in Guangdong Yashang Law Firm, Guangdong Hengyun Law Firm, and Guangdong Xiangshan Law Firm. Currently, he is the lead lawyer in Guangdong Liu Zhi Jun Law Firm. Mr. Liu has been an independent director of the Company since January 2021.

Zhou Qichao, male and born in 1980, is of Chinese nationality and has a master’s degree. He has successively served as the public affairs director, media director, vice president and secretary of the board of directors in Hub Gate International Group, Hubei Daily Media Group, and Surfilter Network Technology Co., Ltd. He joined the Company in July 2017 and has successively worked as a director, Deputy General Manager, and secretary of the Board of Directors. He started to serve as an independent director of Shenzhen KSTAR Technology Co., Ltd. from November 2019 and a director of Shenzhen Senior Technology Material Co., Ltd. from November 2020.

Yue Yong, male and born in 1966, is of Chinese nationality. He joined Zhongshan Zhongshun Paper Manufacturing Co., Ltd. in 1993 and successively served as the production manager of Zhongshan Zhongshun and the General Manager of C&S (Sichuan) Paper Co., Ltd. He was a director and deputy general manager of Zhongshan Zhongshun between 2005 and 2008. Afterwards, he became a director and Deputy General Manager of the Company from 2009 to 2015, and has been the Procurement President since 2015 and the Deputy General Manager since July 2019. Currently he part-times the deputy director of the China National Household Paper Industry Association.

Ye Longfang, male and born in 1976, is of Chinese nationality. From July 1997 to November 2015, he successively acted as the production deputy manager, production manager and factory manager of Vinda (Hubei) and Vinda (Sichuan). Currently he is the Production President of the Company and has been the Deputy General Manager since July 2019.

Li Zhaojin, male and born in April 1962, is from Taiwan China and has an MBA degree. He joined the Gold Hongye Paper Group in 2005 and successively served as the production manager, papermaking (pre-production) general manager, manufacturing general manager, etc. Mr. Li started to work for the Company since November 2019.

Dong Ye, male and born in 1964, is of Chinese nationality and has no permanent residency abroad. He has a college degree and is an assistant accountant. He joined Zhongshan Zhongshun Paper Manufacturing Co., Ltd. in 2006 and successively served as its finance supervisor, finance manager, and finance deputy director. He is the person responsible for the accounting department of the Company, and acted as a director of the Company between 2011 and 2014 and became the Chief Financial Officer of the Company since 2011.

Chen Haiyuan, male, was born in 1954. He served as the party branch secretary and director of the village committee of Shenglong Village, Tanbei Town, Zhongshan City between 1991 and 1999 and the village’s party branch secretary between 1999 and 2005. He was the Deputy Director and Assistant to Director of the Dongshen Township Water Authority from 2005 to 2014, and retired in July 2014. Afterwards, he worked as the Company’s supervision specialist since March 2015, a supervisor since April 2015 and the Chairman of the Board of

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C&S Paper Co., Ltd. Annual Report 2020

Supervisors since September 2015.

Liang Yongliang, male and born in 1979, is of Chinese nationality and has no permanent residency abroad. Mr. Liang has a college degree. He joined Zhongshan Zhongshun Paper Manufacturing Co., Ltd. in 2002 and successively served as the Assistant to Finance President of Zhongshan Zhongshun and the General Manager of the Investment Management Department and head of the Audit Department of C&S Paper. Currently, he works as the Deputy General Manager of the Company’s Finance Department and started to serve as a supervisor of the Company since 2011.

Li Youqua, male and born in 1979, has a college degree. He worked in Sichuan Tongda Electric Co., Ltd. and engaged in sales and accounting between 2001 and 2003, and handled accounting affairs in Zhongshan Huheng Craft Products Co., Ltd. between 2004 and 2006. From October 2006 to 2008, he served as the finance supervisor in Zhongshan Zhongshun Paper Manufacturing Co., Ltd. and then became the finance manager of the Company and the finance director of the South China region from 2009 to December 2011. He became person in charge of the Company’s auditing work in December 2011 and has held that position ever since.

Positions in shareholder entities

√ Applicable □ Not applicable

				Expiry	Whether receiving
		Position held in	Starting date of term	date of	remuneration and
Name	Name of shareholder entity
		shareholder entities	of office	term of	allowance from

				office	shareholder entities
Deng	Guangdong Zhongshun Paper	Legal reprehensive and
			May 28, 1999		No
Yingzhong	Group Co., Ltd.	executive director

Deng					No
	Chung Shun Co.	Legal representative	June 01, 1996
Yingzhong

	Guangdong Zhongshun Paper				No
Deng Guanbiao		Supervisor	May 28, 1999
	Group Co., Ltd.

Description on
position held in
	Mr. Deng Yingzhong is a director and Mr. Deng Guanbiao is the Vice Chairman of the Company.
shareholder

entity

Positions in other entities

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C&S Paper Co., Ltd. Annual Report 2020

√ Applicable □ Not applicable

					Whether
		Position held	Starting date of	Expiry date of	receiving
Name	Name of other entity
		in other entity	term of office	term of office	remuneration

					from other entity
	Household Paper and Paperboard Subcommittee				No
Deng
	of the National Paper Industry Standardization	Member
Guanbiao
	Technical Committee

	China National Household Paper Industry	Deputy			No
Yue Yong
	Association	director

	University of Electronic Science and Technology
He Haidi		Researcher			Yes
	of China, Zhongshan Institute

He	GP Certified Public Accountants (Limited				Yes
		Partner
Guoquan	Liability Partnership)

Liu Die	Guangdong Liu Zhi Jun Law Firm	Lead lawyer			Yes
Zhou		Independent			Yes
	Shenzhen KSTAR Technology Co., Ltd.
Qichao		director

Zhou					Yes
	Shenzhen Senior Technology Material Co., Ltd.	Director
Qichao

Descriptio
n on	Mr. Deng Guanbiao is the Vice Chairman, Mr. Yue Yong is the Vice President, Mr. He Haidi, Mr. He Guoquan and Mr.
position	Liu Die are independent directors, and Mr. Zhou Qichao is the secretary of the Board of Directors and Vice President of
held in	the Company.
other
entity

Penalties by securities regulatory authorities in the last three years

□ Applicable √ Not applicable

IV. Remuneration of Directors, Supervisors and Senior Management

Procedures and basis for determining the remuneration of directors, supervisors and senior management and

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C&S Paper Co., Ltd. Annual Report 2020

actual payment

Procedure for determining the remuneration of directors, supervisors and senior management:

The Remuneration and Review Committee under the Company’s Board of Directors proposes remuneration plans for directors, supervisors and senior management, which should be approved by the Board of Directors. Wherein, the plan for directors and supervisors should be submitted to the shareholder general meetings for approval.

Basis for determining the remuneration of directors, supervisors and senior management:

Remunerations of directors, supervisors and senior management are determined based on the Company’s Remuneration Management System for Directors, Supervisors and Senior Management (April 2019) and their performance appraisal results conducted by the Remuneration and Review Committee, with reference to the remuneration level in the sector.

Actual payment of remuneration to directors, supervisors and senior management

Remuneration of the Company’s incumbent directors, supervisors and senior management comprises two parts of fixed salary and annual performance salary. Wherein, the fixed salary has been distributed monthly based on performance appraisal results; annual performance salary will be distributed after the Remuneration and Review Committee establishes an appraisal team which evaluates the annual performance of the aforementioned personnel upon the end of the business year.

Remuneration of directors, supervisors and senior management of the Company during the reporting period

Unit: RMB10,000

						Whether
					Total
						receiving
					remuneration
						remuneration
Name	Position	Gender	Age	Position status	before tax
						from related
					received from the
						parties of the
					Company
						Company

Deng Yingzhong	Director	Male	70	Incumbent	480.78	No
Deng Guanbiao	Vice Chairman	Male	43	Incumbent	297.16	No
Deng Guanjie	Vice Chairman	Male	37	Incumbent	257.07	No
	Director, Joint					No
Dai Zhenji		Male	55	Incumbent	1,001.26
	President

	Director, Vice					No
Liu Jinfeng		Male	45	Incumbent	402.48
	President

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C&S Paper Co., Ltd. Annual Report 2020

He Haidi	Independent Director	Male	53	Incumbent	10	No
	Vice President,					No
Zhou Qichao	Secretary of the Board	Male	41	Incumbent	260.02
	of Directors
Yue Yong	Vice President	Male	55	Incumbent	301.53	No
Ye Longfang	Vice President	Male	45	Incumbent	191.83	No
	Chief Financial					No
Dong Ye		Male	57	Incumbent	101.53
	Officer

	Chairman of the Board					No
Chen Haiyuan		Male	67	Incumbent	5.39
	of Supervisors

Liang Yongliang	Supervisor	Male	42	Incumbent	35.74	No
Li Youquan	Supervisor	Male	42	Incumbent	34.61	No
Zeng Yi	Director	Female	45	Resigned	18	No
Huang Hongyan	Independent Director	Male	51	Resigned	10	No
Ge Guangrui	Independent Director	Female	54	Resigned	10	No
Total	--	--	--	--	3,417.4	--

Note: Chairman and President of the Company Mr. Liu Peng, Vice President Mr. Li Zhaojin and independent directors Mr. He Guoquan and Mr. Liu Die are all elected/appointed in 2021. Therefore, their remuneration is not included in the reporting period (i.e. the year 2020).

Equity incentives granted to directors and senior management during the reporting period

√ Applicable □ Not applicable

Unit: share

						Number of
								Number of		Number of
				Exercise		shares
		Number of	Number of					shares	Grant	shares
				price of	Market	subject to	Number of
		shares	shares					subject to	price of	subject to
				exercised	price at the	selling	shares
		exercisable	exercised					selling	shares	selling
Name	Position			shares	end of the	restrictions	unlocked
		during the	during the					restrictions	subject to	restrictions
				during the	reporting	at the	during the
		reporting	reporting					newly	selling	at the end
				reporting	period	beginning	period
		period	period					granted in	restrictions	of the
				period		of the
								the period		period
						period

	Director.
Dai Zhenji		300,000				2,000,000	600,000	0		1,400,000
	Joint

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C&S Paper Co., Ltd. Annual Report 2020

	President
	Director.
Liu
	Vice	300,000	300,000	13.965		1,080,000	324,000	0		756,000
Jinfeng
	President

	Vice
Yue Yong						1,100,000	330,000	0		770,000
	President

Ye	Vice
		150,000	150,000	8.572				0
Longfang	President

	Chief
Dong Ye	Financial	15,000	15,000	8.572		150,000	45,000	0		105,000
	Officer
Total	--	765,000	465,000	--	--	4,330,000	1,299,000	0	--	3,031,000
		1. During the first unlocking period for restricted stocks awarded in the first grant and reserved restricted
		stocks under the_2018 Stock Option and Restricted Stock Incentive Plan_, the unlocking ratio was 30% and
		the date of releasing from sales restrictions was June 8, 2020 and November 10, 2020, respectively. The
		restricted shares held by the above staff at the beginning of the period have been unlocked as per 30%.
Notes (if any)		2. During the first exercise period for stock options awarded in the first grant and reserved stock options
		under the_2018 Stock Option and Restricted Stock Incentive Plan_, the exercise ratio was 30% and the start
		date for exercise was June 10, 2020 and November 17, 2020, respectively. Mr. Liu Jinfeng, Mr. Ye
		Longfang and Mr. Dong Ye have exercised the rights during the reporting period and Mr. Dai Zhenji has
		not exercised the rights during the reporting period.

V. Employees of the Company

1. Number, profession composition and education level of employees

Number of in-service employees of the Parent Company	906
Number of in-service employees of major subsidiaries	5,712
Total number of in-service employees	6,618
Total number of employees receiving remuneration	6,765
Number of retired employees whose expenses are borne by the
	5
Parent Company and its major subsidiaries

Composition	of professions
Type of profession	Number of staff in the profession

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C&S Paper Co., Ltd. Annual Report 2020

Production staff	2,502
Sales staff	2,852
Technical staff	511
Finance staff	118
Administrative staff	635
Total	6,618
Education level
Type of education level	Number of persons
University graduates or above	572
College graduates	1,471
High school graduates or below	4,575
Total	6,618

2. Remuneration policy

The Company has established the following reward and incentive policies:

Bonus Package Program for Marketing Teams 2020
Reward Program for Team Breakthroughs of the Marketing Department 2020—Business Team
Indicator Competition Program of the Marketing Department 2020—Business Team
Reward Program for Production Teams 2020
Indicator Competition Program of the Production Department 2020
Reward Program for Accounting Teams 2020
Reward Program for Finance Teams 2020
Reward Program for Supply Chain Teams 2020
Management System of C&S Paper for Marketing Staff Promotion 2020
Procurement Reward Program 2020

3. Training program

Training programs carried out by the Company in 2020 are as follows:

1) Class 2 of the Start-up Program (a program to cultivate production managers; mainly courses include manager role recognition and growth, Everything DiSC to improve workplace interpersonal relations, structured thinking

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C&S Paper Co., Ltd. Annual Report 2020

and expression, QC seven tools, plan organization and execution, objective management, leadership, etc.);

2) Class 1 of the Direction Program (a program to cultivate manufacturing managers/production deputy mangers; the learning chain in 2020 was: management practices  leadership second study  guideline management  quarterly review of objective/guideline-based management  analysis and risk management/control of project investment decisions);

3) Class 1 of the Lighthouse Program (a program to cultivate internal lecturers; studies include 13 micro-classes of three modules, i.e. class management, curriculum design and teaching methods);
4) Subsidiaries across the country have carried out annual training programs involving knowledge, skills, attitudes, safety, quality and orientation training courses.

4. Labor outsourcing

□ Applicable √ Not applicable

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C&S Paper Co., Ltd. Annual Report 2020

Section X Corporate Governance

I. Basic Situation of Corporate Governance

1. Basic situation of corporate governance

During the reporting period, the Company has been operating in strict compliance with requirements of the Company Law , the Securities Law , the Standards on Corporate Governance of Listed Companies , the Rules Governing the Listing of Shares on Shenzhen Stock Exchange , and relevant laws and regulations promulgated by China Securities Regulatory Commission (CSRC) and Shenzhen Stock Exchange. To standardize actions, the Company has developed the Articles of Association , constantly improved its corporate governance structure, and optimized its internal management systems. Its corporate governance structure meets requirements set out in relevant normative documents of CSRC on the governance of listed companies.

(1) In respect of shareholders and general meetings

During the reporting period, the convening, holding, and voting procedures of shareholder meetings were standardized and in strict compliance with provisions and requirements of the Rules of Procedure of the General Meetings and the Articles of Association . All shareholders were treated equally and were able to fully exercise their rights. The general meetings during the reporting period were convened by the Board of Directors and lawyers were invited to the site for witnessing.

(2) In respect of the controlling shareholder and the Company

The Company’s controlling shareholder strictly regulated its behaviors in accordance with the Standards on Corporate Governance of Listed Companies , the Rules Governing the Listing of Shares on Shenzhen Stock Exchange , and the Articles of Association . The controlling shareholder exercised its shareholder rights through the general meeting of shareholders, and there were no actions of the controlling shareholder of bypassing the general meeting and directly or indirectly interfering with the Company’s operations and decision making.

(3) In respect of the directors and the Board of Directors

The Board of Directors of the Company currently comprises 9 directors, among which 3 are independent directors. The number and composition of the Board of Directors meet requirements of laws and regulations. The Company conducts the selection of directors in strict accordance with provisions of the Company Law and the Articles of Association , to ensure open, fair, just and independent engagement of directors. All directors are able to carry out work as per requirements set out in the Rules of Procedure of the Board of Directors , the Guidelines on Conduct of Corporate Directors of SME Board Listed Companies , etc. They attend Board meetings and shareholder meetings, actively participate in relevant knowledge training to familiarize with and acquire relevant laws and regulations, and earnestly perform their duties as directors of being honest and trustworthy, diligent and

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C&S Paper Co., Ltd. Annual Report 2020

conscientious.

(4) In respect of supervisors and the Board of Supervisors

The Board of Supervisors of the Company currently comprises 3 directors, among which one is employee supervisor. The Company conducts the selection of supervisors in strict accordance with provisions of the Company Law and the Articles of Association , and the number and composition of the Board of Supervisors meet requirements of laws and regulations. All supervisors earnestly perform their duties as per requirements of the Rules of Procedure of the Board of Supervisors and other relevant regulations, to supervise the decision-making procedures and resolutions of the Board of Directors and the Company’s legal operations and to effectively oversee the legality and compliance of directors, managers and other senior executives of the Company in their duty performance.

(5) In respect of performance appraisal and incentive restriction mechanism

The Company’s appointment of senior management is open and transparent and in compliance with relevant laws and regulations. The Company has established a sound performance appraisal mechanism under which the remuneration of the senior management is linked to the Company’s business performance indicators.

(6) In respect of investor relations (IR) management

The Sectary of the Board of Directors of the Company is responsible for IR management while the Office of the Board of Directors carries out daily affairs of IR management. In order to further strengthen and improve IR management, the Company has formulated the Investor Relations Management System , Investor Compliant Management System , and Measures for the Management of Reception of Institutional Investors . IR activities must be conducted in strict accordance with relevant provisions and it is strictly forbidden to disclose any undisclosed information of the Company. Personnel from the Office of the Board of Directors are dedicated to answering calls of investors, replying their emails, and responding to questions raised by investors on relevant interaction platforms, to maintain smooth and sound communication with investors. Response of investors has been positive. The Office of the Board of Directors is responsible for the reception of investors and archival of relevant documents. Dedicated personnel are arranged to well receive investor visits. The Company properly arranges individual investors, analysts and fund managers who come to the Company for onsite research to visit the sites of the Company, discuss with them and sign the Letter of Commitment with them for information confidentiality. Records are well documented for each visit and the IR activity form is submitted to Shenzhen Stock Exchange within two working days. On the basis of not violating relevant provisions of CSRC, Shenzhen Stock Exchange and the Company’s Information Disclosure Management System , situations of the Company are presented in an objective, true, accurate and complete manner. The Company attaches great importance to IR management in its daily work by actively communicating with investors, understanding relevant situations, and listing to relevant suggestions. Attention is also paid to the cultivation of healthy long-term investors.

The Company will continue the good work in information disclosure and IR management, and ensure true,

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C&S Paper Co., Ltd. Annual Report 2020

accurate, timely and complete information disclosure and smooth, convenient, fair and effective communication channels with investors.

(7) In respect of information disclosure and transparency

The Company has set up the Office of Board of Directors which is equipped with professionals, and discloses information of the Company in a true, accurate, timely and complete manner in strict compliance with relevant laws and regulations as well as systems of the Company including the I nformation Disclosure Management System , Management System for External Information Users , Accountability System for Significant Errors in Information Disclosure of Annual Reports , and Internal Reporting System for Significant Events . This ensures that all shareholders of the Company could obtain information with equal opportunities.

(8) In respect of stakeholders

The Company fully respects and safeguards the legitimate rights and interests of relevant stakeholders and actively cooperates with them. In order to coordinate and balance the interests of shareholders, employees, society and other parties, the Company strengthens communication and exchange with all parties, to jointly promote its sustainable and healthy development.

Corporate governance regulations established or revised by the Company during the reporting period During the reporting period, the Company revised the External Donation Management System and the Articles of Association based on its operating conditions and relevant provisions and timely improved its internal control management system.

Whether there are significant differences between the Company’s actual status of corporate governance and normative documents on the governance of listed companies issued by CSRC

□ Yes √ No

There were no significant differences between the Company’s actual conditions and normative documents on listed company governance issued by CSRC.

II. The Company’s Independence from Its Controlling Shareholders in terms of Business, Personnel, Assets, Organization and Finance

There were no situations where the Company couldn’t guarantee its independence or maintain its self-operating capabilities from its controlling shareholders in terms of business, personnel, assets, organization and finance.

III. Horizontal Competition

□ Applicable √ Not applicable

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C&S Paper Co., Ltd. Annual Report 2020

IV. Annual General Meeting and Extraordinary General Meetings Held during the Reporting Period

1. Shareholder meetings during the reporting period

		Ratio of investor
Session of meeting	Type		Date of convening	Date of disclosure	Index of disclosure
		participation

					Announcement on
					Resolutions of 2020 First
					Extraordinary General
					Meeting of Shareholders
	Extraordinary				(Announcement No.:
2020 First
	general				2020-15). See_Securities_
Extraordinary		59.84%	March 13, 2020	March 14, 2020
	meeting of				Times,Securities Daily,
General Meeting
	shareholders				China Securities Journal,

					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.
					Announcement on
					Resolutions of 2019 Annual
					General Meeting of
					Shareholders(Announcement
2019 Annual General					No.: 2020-34). See_Securities_
	Annual general
Meeting of		55.09%	May 21, 2020	May 22, 2020	Times,Securities Daily,
	meeting
Shareholders					China Securities Journal,

					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.
2020 Second	Extraordinary				Announcement on
Extraordinary	general				Resolutions of 2020 Second
		53.75%	June 15, 2020	June 16, 2020
General Meeting	meeting of				Extraordinary General

	shareholders				Meeting of Shareholders

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C&S Paper Co., Ltd. Annual Report 2020

					(Announcement No.:
					2020-53). See_Securities_
					Times,Securities Daily,
					China Securities Journal,
					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.
2020 Third	Extraordinary				Announcement on
Extraordinary	general				Resolutions of 2020 Third
General Meeting	meeting of				Extraordinary General
	shareholders				Meeting of Shareholders
					(Announcement No.:
					2020-65). See_Securities_
		54.42%	August 25, 2020	August 26, 2020
					Times,Securities Daily,

					China Securities Journal,
					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.
2020 Fourth	Extraordinary				Announcement on
Extraordinary	general				Resolutions of 2020 Fourth
General Meeting	meeting of				Extraordinary General
	shareholders				Meeting of Shareholders
					(Announcement No.:
					2020-72). See_Securities_
		51.91%	September 15, 2020	September 16, 2020
					Times,Securities Daily,

					China Securities Journal,
					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.
2020 Fifth	Extraordinary	53.57%	November 16, 2020	November 17, 2020	Announcement on

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C&S Paper Co., Ltd. Annual Report 2020

Extraordinary	general				Resolutions of 2020 Fifth
General Meeting	meeting of				Extraordinary General
	shareholders				Meeting of Shareholders
					(Announcement No.:
					2020-87). See_Securities_
					Times,Securities Daily,
					China Securities Journal,
					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.
2020 Sixth	Extraordinary				Announcement on
Extraordinary	general				Resolutions of 2020 Sixth
General Meeting	meeting of				Extraordinary General
	shareholders				Meeting of Shareholders
					(Announcement No.:
					2020-103). See_Securities_
		54.80%	December 31, 2020	January 04, 2021
					Times,Securities Daily,

					China Securities Journal,
					Shanghai Securities News,
					and CNINFO
					(www.cninfo.com.cn) for
					details.

2. Extraordinary general meetings of shareholders proposed to be convened by preferred shareholders whose voting rights were resumed

□ Applicable √ Not applicable

V. Performance of Duties by Independent Directors during the Reporting Period

1. Attendance of independent directors to Board meetings and general meetings of shareholders

Attendance of independent directors to general meetings of shareholders

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C&S Paper Co., Ltd. Annual Report 2020

			Attendance of
	Required					Any failure in
		Attendance of	Board	Attendance of			Attendance of
Name of	attendance of					attending in
		Board	meetings by	Board	Number of		general
independent	Board					person for two
		meetings in	way of	meetings by	absence		meetings
director	meetings for					consecutive
		person	communicatio	proxy			(times)
	the year					meetings
			n

Huang Hongyan	10	3	7			No	6
Ge Guangrui	10	2	8			No	7
He Haidi	10	4	6			No	6

Description of failure in attending in person for two consecutive meetings

There were no situations where the Company’s independent directors did not attend Board meetings in person for two consecutive times during the reporting period.

2. Objections by independent directors to the Company’s relevant matters

Whether independent directors raised objections to relevant matters of the Company

□ Yes √ No

Independent directors did not raise objections to relevant matters of the Company during the reporting period.

3. Other descriptions on independent directors’ performance of duty

Whether opinions from independent directors were adopted

√ Yes □ No

Description on whether opinions from independent directors were adopted

Independent directors of the Company gave full play to the role of independent director in their work in 2020 and performed their duties of independent directors faithfully and diligently in compliance with provisions and requirements of relevant laws and regulations such as the Company Law , Guiding Opinions on the Establishment of Independent Director System in Listed Companies , Guidelines of Shenzhen Stock Exchange on Conduct of Corporate Directors of SME Board Listed Companies as well as the Company’s Articles of Association and Independent Director System . The independent directors actively attended relevant meetings, regularly checked reports of the Company, carefully deliberated proposals of the Board of Directors and expressed independent options, in an effort to safeguard the overall interests of the Company and legitimate rights and interests of

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minority shareholders.

VI. Performance of Duties by Special Committees under the Board of Directors

1. Performance of the Audit Committee under the Board of Directors

The Audit Committee convened 4 meetings during the reporting period.

On February 21, 2020, the Audit Committee convened a meeting and reviewed and approved the Internal Audit Work Report 2019, the Audit Report on External Guarantees in 2019, the Audit Report on the Purchase and Sales of Assets in 2019, the Audit Report on Related Party Transactions in 2019, and the Audit Report on the Appropriation of Funds by Controlling Shareholder and Its Related Parties in 2019. The Committee also communicated with Mazars Certified Public Accountants with regard to the audit of the Annual Report 2019.

On April 30, 2020, the Audit Committee convened a meeting and reviewed and approved the Internal Audit Work Report for Q1 2020, the Audit Report on External Guarantees in Q1 2020, the Audit Report on External Investments in Q1 2020, the Audit Report on the Purchase and Sales of Assets in Q1 2020, the Audit Report on Related Party Transactions in Q1 2020, and the Audit Report on the Appropriation of Funds by Controlling Shareholder and Its Related Parties in Q1 2020.

On August 6, 2020, the Audit Committee held a meeting and reviewed and agreed to recommend to the Board of Directors for continued engagement of Mazars Certified Public Accountants (LLP) as the audit service provision agency of the Company in 2020. The Committee also deliberated and approved the Internal Audit Work Report for H1 2020, the Audit Report on External Guarantees in H1 2020, the Audit Report on External Investments in H1 2020, the Audit Report on the Purchase and Sales of Assets in H1 2020, the Audit Report on Related Party Transactions in H1 2020, and the Audit Report on the Appropriation of Funds by Controlling Shareholder and Its Related Parties in H1 2020.

On December 7, 2020, the Audit Committee convened a meeting and reviewed and approved the Internal Audit Work Plan for 2021, Internal Audit Work Report for Q3 2020, the Audit Report on External Guarantees in Q3 2020, the Audit Report on External Investments in Q3 2020, the Audit Report on the Purchase and Sales of Assets in Q3 2020, the Audit Report on Related Party Transactions in Q3 2020, and the Audit Report on the Appropriation of Funds by Controlling Shareholder and Its Related Parties in Q3 2020.

Performance of the Remuneration and Review Committee under the Board of Directors

The Remuneration and Review Committee convened 4 meetings during the reporting period.

On April 17, 2020, the Remuneration and Review Committee convened a meeting on which the Proposal on the Remuneration of Senior Management of the Company in 2019 and the Proposal on the Remuneration of Directors of the Company in 2019 were reviewed and approved. The assessment of the salaries of the Company’s directors and senior management in 2019 was in line with the Company’s actual assessment indicators, and the remunerations they received from the Company also matched the Company’s actual development and the industry

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C&S Paper Co., Ltd. Annual Report 2020

level, which was conducive to tap the creativity and enthusiasm of directors and senior management. There were no situations that harmed interests of the Company and shareholders.

On a meeting held on May 15, 2020, the Committee reviewed and approved the Proposal on Achieving the Unlock Conditions of the First Unlock Period for Restricted Stocks Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan and the Proposal on Achieving the Exercise Conditions of the First Exercise Period for Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan . The Committee believed that the conditions of the first unlock/exercise period for restricted stocks/stock options awarded in the first grant were met, and the qualifications of the incentive recipients for unlocking/exercising were valid and effective. Therefore, it agreed for the Company to handle matters relevant to the first unlocking/exercise period of the concerned stocks/stock options.

On August 18, 2020, the Committee convened a meeting and reviewed and approved the Proposal on Adjusting the Annual Remuneration of the Joint General Manager , according to which the pre-tax annual remuneration of the Joint General Manager Mr. Dai Zhenji was raised to no more than RMB10 million.

On a meeting held on May 15, 2020, the Committee reviewed and approved the Proposal on Achieving the Unlock Conditions of the First Unlock Period for Reserved Restricted Stocks under the Company's 2018 Stock Option and Restricted Stock Incentive Plan and the Proposal on Achieving the Exercise Conditions of the First Exercise Period for Reserved Stock Options under the Company's 2018 Stock Option and Restricted Stock Incentive Plan . The Committee believed that the conditions of the first unlock/exercise period for reserved restricted stocks/stock options were met, and the qualifications of the incentive recipients for unlocking/exercising were valid and effective. Therefore, it agreed for the Company to handle matters relevant to the first unlocking/exercise period of the concerned stocks/stock options.

Performance of the Nomination Committee under the Board of Directors The Nomination Committee convened 3 meetings during the reporting period.

On May 27, 2020, the Committee convened a meeting and reviewed and approved the Proposal on By-election of Non-Independent Directors of the Fourth Session of the Board of Director s, agreeing to by-elect Mr. Dai Zhenji as a non-independent director of the fourth session of the Board of Directors.

On June 15, 2020, the Committee convened a meeting and reviewed and approved the Proposal on Election of the Vice Chairman of the Fourth Session of the Board of Directors , agreeing to elect Mr. Deng Guanjie as the Vice Chairman of the fourth session of the Board of Directors; the Proposal on Appointment of the Joint General Manager of the Company was also reviewed and approved, and Mr. Dai Zhenji was appointed the Joint General Manager of the Company.

On December 28, 2020, the Committee convened a meeting and reviewed and approved the Proposal on Election of Non-Independent Directors of the Fifth Session of the Board of Directors , agreeing to nominate Mr. Deng Yingzhong, Mr. Deng Guanbiao, Mr. Deng Guanjie, Mr. Dai Zhenji, Mr. Liu Jinfeng, and Mr. Yue Yong as

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candidates for non-independent directors of the fifth session of the Board of Directors; the Committee also reviewed and passed the Proposal on Election of Independent Directors of the Fifth Session of the Board of Directors , and agreed to nominate Mr. He Haidi, Mr. He Guoquan and Mr. Liu Die as candidates for independent directors of the fifth session of the Board of Directors.

VII. Work of the Board of Supervisors

Risks discovered by the Board of Supervisors in supervisory activities during the reporting period

□ Yes √ No

The Board of Supervisors had no objections to supervised events during the reporting period.

VIII. Performance Appraisal and Incentives of Senior Management

The Company comprehensively appraises the performance of senior executives in compliance with provisions of the Remuneration Management System for Directors, Supervisors and Senior Management and in combination with annual financial budgets, production and operation indicators and the attainment of management objectives. Their individual incomes are linked with the business performance of the Company. During the reporting period, incentives to the Company’s senior management mainly included remuneration incentive, restricted stock incentive plan, and employee stock ownership plan, with a purpose of effectively stimulating the work enthusiasm of the senior management, promoting the steady improvement of the Company’s performance, achieving its development strategies and business objectives, and maintaining a steady and sound development.

The Company rolled out the second phase equity incentive plan under which employees were motived in the form of options + restricted stocks. The unlocking/exercise for the first phase was completed in 2020.

The Company introduced the second phase employee stock ownership plan in 2019 to incentivize directors, senior executives and backbone employees. The lockup period of the plan had expired as at November 30, 2020, and the liquidation and distribution of the plan were completed in January 2021.

IX. Self-assessment Report on Internal Control

1. Details of the significant defects in internal control detected during the reporting period

□ Yes √ No

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C&S Paper Co., Ltd. Annual Report 2020

2. Self-assessment report on internal control

Date of disclosure of the full text of the	Date of disclosure of the full text of the	April 29, 2021	April 29, 2021
internal control assessment report
Disclosure index of full text of the internal		Please refer to the_Self-assessment Report on Internal Control 2020 of C&S Paper Co.,_
control assessment report		_Ltd._published on CNINFO(http://www.cninfo.com.cn )for details.
Percentage of total assets of units included in
the assessment scope to the total assets in the			100.00%
Company’s consolidated financial statements
Percentage of total operating income of units
included in the assessment scope to the
			100.00%
operating income in the Company’s

consolidated financial statements
	Defect identification criteria
Category	Financial report		Non-financial report
	Material defect: refers to one or a combination of control		Non-financial report defects are identified mainly
	defects that may cause the Company to materially deviate from		based on their degree of impact on business
	the objectives of internal control. When there are one or several		processes and their probability of occurrence.
	material defects in internal control, it should be concluded that		A defect is termed as a general defect if its
	the internal control is invalid in the internal control assessment		probability of occurrence is low or the defect
	report.		reduces work efficiency or effectiveness, or
Qualitative criteria	(1) Directors, supervisors and senior management have		increases the uncertainty of effects or causes
	committed fraud and caused serious losses and severe adverse		deviations from expected objectives.
	impacts to the company.		A defect is termed as a major defect if its
	(2) Corrections were made to published financial reports due to		probability of occurrence is relatively high or the
	significant accounting errors.		defect significantly reduces work efficiency or
	(3) Significant errors in the current financial reports were		effectiveness, or significantly increases the
	identified by the certified public accountants but not by internal		uncertainty of effects or causes obvious

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C&S Paper Co., Ltd. Annual Report 2020

	control.	deviations from expected objectives.
	(4) The internal control and supervision by the company’s audit	A defect is termed as a material defect if its
	committee and internal audit were invalid, or significant	probability of occurrence is high or the defect
	problems were found but not corrected.	severely reduces work efficiency or effectiveness,
	Major defect: refers to one or a combination of defects in	or severely increases the uncertainty of effects or
	internal control that is with less severity than a material defect,	causes severe deviations from expected
	but may still cause the Company to deviate from the objectives	objectives.
	of internal control. A major defect is less severe than a material
	defect and would not seriously endanger the overall
	effectiveness of internal control, but should arouse the
	sufficient attention of the board of directors and mangers.
	(1) Failure to select and apply accounting policies based on
	generally accepted accounting standards;
	(2) There were one or multiple defects in the financial reports
	of the current period that did not meet the criteria for material
	defect.
	(3) There were one or multiple defects in the control of the
	financial reporting process at the end of the period such that the
	authenticity and completeness of the prepared financial reports
	could not be reasonably guaranteed.
	General defect: refers to defects other than material defect or
	major defect.
	General defect: The misstated amount is less than 0.5% of	General defect: The direct property losses are less
	operating income.	than 0.5% of operating income.
	Major defect: The misstated amount is between 0.5%	Major defect: The direct property losses are
Quantitative criteria
	(inclusive) and 1.5% of the operating income.	between 0.5% (inclusive) and 1.5% of operating

	Material defect: The misstated amount is more than 1.5%	income.
	(inclusive) of operating income.	Material defect: The direct property losses are

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		more than 1.5% (inclusive) of operating income.

		.
Number of material defects in financial reports	0
Number of material defects in non-financial
	0
reports

Number of major defects in financial reports	0
Number of major defects in non-financial
	0
reports

X. Internal Control Audit Report or Assurance Report

Not applicable

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C&S Paper Co., Ltd. Annual Report 2020

Section XI Corporate Bonds

Whether there are any bonds of the Company that are publicly issued and listed on the stock exchange and are not due at the date of issuance of the annual report or are due but unable to be redeemed for full face value at maturity

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Section XII Financial Report

I. Audit Report

Type of auditor’s opinion	Standard and unqualified
Signing date of the Audit Report	April 27, 2021
Name of auditing organization	Mazars Certified Public Accountants (LLP)
Reference number of the Audit Report	Zhong-Huan-Shen-Zi (2021) No. 0500115
Name of certified public accountants	Wang Bing, Pan Guiquan

Audit Report

To all shareholders of C&S Paper Co., Ltd.,

I. Opinion

We have audited the accompanying financial statements of C&S Paper Co., Ltd. (hereinafter “the Company”), which comprise the consolidated and the Parent Company’s balance sheet as at 31 December 2020, the consolidated and the Parent Company’s income statement, the consolidated and the Parent Company’s cash flow statement, and the consolidated and the Parent Company’s statement of the changes in equity for 2020, and notes to the financial statements.

In our opinion, the accompanying financial statements have been prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects, and they fairly present the consolidated and the Parent Company’s financial position as of 31 December 2020, and the consolidated and the Parent Company’s operating results and cash flows for 2020.

II. Basis of Opinion

We conducted our audit in accordance with the Auditing Standards for PRC Certified Public Accountants. Our responsibilities under those standards are further described in the “Certified Public Accountants’ Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the Company in accordance with the Code of Ethics for Chinese Certified Public Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

III. Key audit matters

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C&S Paper Co., Ltd. Annual Report 2020

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We determine the followings are key audit matters in need of communication in our report.

(I) Recognition of operating income

Key audit matter

How the matter was addressed in our audit

As stated in Note V (34) in the
Company’s
financial
statements,
the
Company recorded an operating income
of RMB7,823,528,416.32 in 2020. Since
the amount of operating income is
significant
and
a
key
performance
indicator, there is a relatively high
inherent
risk,
so
we
identify
the
recognition of operating income as a key
audit matter.

Our audit procedures included:
(1) We obtained an understanding of and evaluated the internal control design over the
recognition of operating income and its operating effectiveness;
(2) We obtained an understanding and evaluated whether policies for recognizing operating
income were in compliance with requirements of accounting standards for business
enterprises via interviewing the management, consulting the Company’s accounting
policies, etc.;
(3) We checked whether there were any abnormalities in the operations of the Company’s
major customers and whether there was related relationship between such customers and
the Company or its related parties by checking the business registration information of the
customers and contracts with them;
(4) We adopted the sampling method to select some customers and send them the
confirmation letter to verify the balance of accounts receivable, the balance of prepayment,
and the amount of sales income;
(5) In respect of domestic sales, we adopted the sampling method to check the large-value
contracts and sales orders as well as their corresponding invoices, outbound orders,
delivery orders, customer receipts, etc.; for export sales, we used the sampling method to
check large-value contracts and sales orders as well as their corresponding invoices,
customs declarations, freight bills of lading, customer receipts, etc.;
(6) We conducted cutoff test for operating income to assess whether operating income was
recognized in an appropriate period.

(II) Recognition of selling expenses

Key audit matter	How the matter was addressed in our audit
As stated in Note V (36) in the Company’s financial statements, the Company recorded a selling expense of RMB1,544,562,244.71 in	Our audit procedures included: (1) We obtained an understanding of and evaluated the internal control design over the recognition of selling expense and its operating effectiveness;

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C&S Paper Co., Ltd. Annual Report 2020

2020. accounting for 19.74% of operating
income. Since selling expense has a great impact
on the Company’s financial results, which may
cause a major misstatement risk, we identify the
recognition of selling expense as a key audit
matter.

(2) We obtained the detailed list of selling expenses, and analyzed the
reasonableness of each expense item based on features of the Company’s businesses;
we also analyzed the proportion of main expense items in the main business income
and whether the change trend of selling expense consistent with that of income;
(3) We conducted a spot check of main items under selling expense and selected and
checked some selling expense vouchers against corresponding contracts, invoices,
bank receipts and other original documents, as well as the Company’s sales
promotion policies, remuneration policies, etc.;
(4) We conducted cutoff test for selling expense to assess whether selling expense
was recognized across periods.

IV. Other information

The Company’s management is responsible for other information. Other information includes the information included in the Company’s 2020 annual report, but excludes the financial statements and our audit report.

Our audit 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 other information is materially inconsistent with the financial statements or our knowledge obtained in the audit process or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that if there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

V. Responsibilities of Management and Governance Layer for Financial Statements

The management of C&S Paper Co., Ltd. (hereinafter the “Management”) is responsible for preparing financial statements in accordance with the Accounting Standards for Business Enterprises, and fairly presenting them; the Management also needs to design, implement and maintain necessary internal control to enable that the financial statements 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 matters in relation to going concern (if applicable) and applying the going-concern assumption unless the Management intends to liquidate the Company, cease operations, or have no realistic alternative but to do so.

The governance layer is responsible for overseeing the financial reporting process of the Company.

VI. Certified Public Accountants’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether these financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion.

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C&S Paper Co., Ltd. Annual Report 2020

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

(I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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

(III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

(IV) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to drawing attention in our audit report to the related disclosures in these financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence 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 going concern.

(V) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

(VI) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit, and remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we comply with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and related safeguards (if applicable).

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the period and are therefore the key audit matters. We

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C&S Paper Co., Ltd. Annual Report 2020

describe these matters in our audit report unless law or regulation precludes public disclosure about the matter or when, in tiny minority circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Mazars Certified Public Accountants (LLP) Chinese Certified Public Accountant: Wang Bing

Chinese Certified Public Accountant: Pan Guiquan

Wuhan, PRC

April 27, 2021

II. Financial Statements

Unit of financial statements: RMB

1.Consolidated balance sheet

Prepared by: C&S Paper Co., Ltd.

December 31, 2020

Unit: RMB

Item	December 31, 2020	December 31, 2029
Current assets:
Monetary funds	1,125,196,199.56	703,746,624.42
Settlement reserve
Lending to banks and other

financial institutions

Tradable financial assets
Derivative financial assets

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C&S Paper Co., Ltd. Annual Report 2020

Notes receivable	724,419.74	301,904.32
Accounts receivable	1,051,423,939.59	807,772,897.68
Accounts receivable financing
Prepayments	26,819,108.57	14,877,757.16
Premium receivable
Reinsurance payables
Reinsurance contract reserves

receivable

Other receivables	15,824,945.56	8,240,417.99
Including: Interest receivable
Dividends receivable
Financial assets held under resale

agreements

Inventory	1,661,274,495.32	986,405,689.17
Contract assets
Assets held for sale	57,073,059.69	57,073,059.69
Non-current assets due within one

year

Other current assets	101,584,569.30	165,567,805.78
Total current assets	4,039,920,737.33	2,743,986,156.21
Non-current assets:
Loans and advances to customers
Investments in creditor’s rights
Investments in other creditor’s

rights

Long-term receivable
Long-term equity investment
Investment in other equity

instruments

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C&S Paper Co., Ltd. Annual Report 2020

Other non-current financial assets
Investment property	34,575,365.94	36,039,381.30
Fixed assets	2,792,587,302.21	2,921,392,106.87
Construction work in progress	275,904,617.95	55,734,236.91
Productive biological assets
Oil & gas assets
Right-of-use assets
Intangible assets	169,355,772.24	168,731,781.83
Development expenses
Goodwill	64,654.15	64,654.15
Long-term deferred expenses	26,635,983.14	13,686,397.24
Deferred income tax assets	111,367,362.66	80,331,080.17
Other non-current assets	28,027,952.15	6,306,028.96
Total non-current assets	3,438,519,010.44	3,282,285,667.43
Total assets	7,478,439,747.77	6,026,271,823.64
Current liabilities:
Short-term borrowings	142,942,941.34	14,721,492.38
Borrowings from PBC
Placements from banks and other

financial institutions

Tradable financial liabilities
Derivative financial liabilities
Notes payable	234,887,563.22	202,653,860.31
Accounts payable	761,519,389.26	578,212,781.22
Payments received in advance		142,476,562.31
Contract liabilities	137,333,617.40
Proceeds from financial assets sold

under repo

138

C&S Paper Co., Ltd. Annual Report 2020

Customer bank deposits and due to

banks and other financial institutions

Funds from securities trading

agency

Funds from securities underwriting

agency

Employee remuneration payable	123,524,627.11	106,413,600.27
Tax and fees payable	112,608,054.87	101,670,618.11
Other payables	754,844,580.09	635,834,511.05
Including: Interests payable		173,259.89
Dividends payable	1,437,466.77	452,536.50
Transaction fee and commission

receivable

Reinsurance payable
Liabilities held for sale
Non-current liabilities due within
		32,400,000.00
one year

Other current liabilities	17,628,086.63
Total current liabilities	2,285,288,859.92	1,814,383,425.65
Non-current liabilities:
Insurance contract reserves
Long-term borrowings		22,500,000.00
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities
Long-term payable
Long-term employee remuneration

payable

139

C&S Paper Co., Ltd. Annual Report 2020

Provision
Deferred income	115,101,158.13	82,367,831.33
Deferred income tax liabilities	35,903,653.30	30,016,107.43
Other non-current liabilities
Total non-current liabilities	151,004,811.43	134,883,938.76
Total liabilities	2,436,293,671.35	1,949,267,364.41
Owner's equity:
Share capital	1,311,487,077.00	1,308,891,273.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserve	907,006,505.05	760,731,416.57
Less: Treasury shares	96,480,911.29	104,792,649.00
Other comprehensive income
Special reserves
Surplus reserves	61,469,258.27	53,205,582.86
General reserves
Retained earnings	2,858,664,147.39	2,058,968,835.80
Total equity attributable to owners of
	5,042,146,076.42	4,077,004,459.23
the parent company

Equities of minority shareholders
Total owner's equity	5,042,146,076.42	4,077,004,459.23
Total liabilities and owners' equities	7,478,439,747.77	6,026,271,823.64

Legal representative: Deng Yingzhong Person in charge of accounting: Dong Ye Person in charge of accounting

department: Xu Xianjing

2. Balance sheet of the Parent Company

140

C&S Paper Co., Ltd. Annual Report 2020

Unit: RMB

Item	December 31, 2020	December 31, 2029
Current assets:
Monetary funds	170,229,178.13	156,202,659.45
Tradable financial assets
Derivative financial assets
Notes receivable
Accounts receivable	92,647,372.33	127,203,426.87
Accounts receivable financing
Prepayments	7,940,396.34	2,565,716.66
Other receivables	136,987,584.64	637,511,752.54
Including: Interest receivable
Dividends receivable
Inventory	156,605,546.36	84,567,041.98
Contract assets
Assets held for sale
Non-current assets due within one

year

Other current assets	52,517,725.87	129,377,576.74
Total current assets	616,927,803.67	1,137,428,174.24
Non-current assets:
Investments in creditor’s rights
Investments in other creditor’s

rights

Long-term receivable
Long-term equity investment	1,928,113,219.50	1,231,245,128.96
Investment in other equity

instruments

141

C&S Paper Co., Ltd. Annual Report 2020

Other non-current financial assets
Investment property	17,939,329.51	18,745,192.09
Fixed assets	257,354,688.59	222,724,273.70
Construction work in progress		35,260,100.44
Productive biological assets
Oil & gas assets
Right-of-use assets
Intangible assets	25,205,232.21	21,259,498.66
Development expenses
Goodwill
Long-term deferred expenses
Deferred income tax assets	46,811,106.77	18,366,334.29
Other non-current assets	2,619,959.27	4,521,074.21
Total non-current assets	2,278,043,535.85	1,552,121,602.35
Total assets	2,894,971,339.52	2,689,549,776.59
Current liabilities:
Short-term borrowings
Tradable financial liabilities
Derivative financial liabilities
Notes payable
Accounts payable	420,061,168.44	325,506,510.90
Payments received in advance		28,227,454.47
Contract liabilities	17,388,431.01
Employee remuneration payable	44,678,713.21	24,280,403.99
Tax and fees payable	5,995,417.05	3,225,793.88
Other payables	126,072,040.24	167,279,884.09
Including: Interests payable
Dividends payable	1,437,466.77	452,536.50

142

C&S Paper Co., Ltd. Annual Report 2020

Liabilities held for sale
Non-current liabilities due within

one year

Other current liabilities	2,260,496.03
Total current liabilities	616,456,265.98	548,520,047.33
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities
Long-term payable
Long-term employee remuneration

payable

Provision
Deferred income	5,855,467.25	7,062,818.69
Deferred income tax liabilities	7,202,336.33	5,575,323.82
Other non-current liabilities
Total non-current liabilities	13,057,803.58	12,638,142.51
Total liabilities	629,514,069.56	561,158,189.84
Owner's equity:
Share capital	1,311,487,077.00	1,308,891,273.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserve	831,693,206.19	690,241,724.38
Less: Treasury shares	96,480,911.29	104,792,649.00
Other comprehensive income

143

C&S Paper Co., Ltd. Annual Report 2020

Special reserves
Surplus reserves	61,347,923.99	53,084,248.58
Retained earnings	157,409,974.07	180,966,989.79
Total owner's equity	2,265,457,269.96	2,128,391,586.75
Total liabilities and owners' equities	2,894,971,339.52	2,689,549,776.59

3. Consolidated income statement

Unit: RMB

Item	2020	2019
I. Total Operating Income	7,823,528,416.32	6,634,914,352.68
Including: Operating income	7,823,528,416.32	6,634,914,352.68
Interest income
Gross earned premiums
Service charge and commission income
II. Total Operating Cost	6,728,790,634.82	5,910,158,735.56
Including: Operating costs	4,590,904,040.35	4,005,421,052.70
Interest expenses
Service charge and commission expenses
Surrender value
Net compensation expenses
Net appropriation of insurance reserve
Policy dividends expenses
Reinsurance costs
Tax and surcharges	56,112,918.09	42,816,202.47
Selling expenses	1,544,562,244.71	1,369,553,843.95
Administrative expenses	364,914,344.30	294,516,937.35
R&D expenses	190,298,633.61	176,374,287.34
Finance expenses	-18,001,546.24	21,476,411.75

144

C&S Paper Co., Ltd. Annual Report 2020

Including: Interest fees	2,903,635.12	13,452,104.83
Interest income	8,202,097.37	3,504,368.80
Plus: Other income	29,224,284.70	16,012,562.77
Return on investment ("-" indicates loss)	3,868,134.28	333,745.61
Including: Return on investment in associates and

joint ventures

Income from the derecognition of financial

assets measured at amortized cost

Exchange gains ("-" indicates loss)
Gains from net exposure hedging ("-" indicates

loss)

Gains from changes in fair value ("-" indicates

loss)

Credit impairment losses ("-" indicates loss)	-6,462,152.71	-2,778,561.87
Asset impairment losses ("-" indicates loss)	-15,863,724.17	-19,053,460.18
Return on disposal of assets ("-" indicates loss)	-1,630,681.60	198,268.96
III. Operating Profit ("-" indicates loss)	1,103,873,642.00	719,468,172.41
Plus: Non-operating income	5,429,670.00	5,851,556.70
Less: Non-operating expenditure	20,912,859.12	4,321,020.44
IV. Total Profit ("-" indicates total loss)	1,088,390,452.88	720,998,708.67
Less: Income tax expense	182,501,371.47	117,166,057.84
V. Net Profit ("-" indicates net loss)	905,889,081.41	603,832,650.83
i. Classified by operation continuity
1. Net profit from continued operation ("-" indicates net
	905,889,081.41	603,832,650.83
loss)

2. Net profit from discontinued operation ("-" indicates

net loss)

ii. Classified by attribution of ownership
1. Net profit attributable to owners of the parent	905,889,081.41	603,832,650.83

145

C&S Paper Co., Ltd. Annual Report 2020

company 2. Minority shareholders' profits and losses VI. Net Amount of Other Comprehensive Income after Tax Total other comprehensive after-tax net income attributable to owners of the parent company i. Other comprehensive income not able to be reclassified into the profit or loss 1. Changes of re-measurement of the defined benefit plan 2. Other comprehensive income that cannot be transferred into the profit or loss under equity method 3. Changes in fair value of investment in other equity instruments 4. Changes in fair value of credit risk of the enterprise 5. Others ii. Other comprehensive income reclassified into the profit or loss 1. Other comprehensive income to be transferred into the profit or loss under equity method 2. Changes in fair value of investment in other creditor's rights 3. Financial assets reclassified into other comprehensive income 4. Impairment provision for credit of investment in other creditor's rights 5. Reserve of cash flow hedge 6. Converted difference in foreign currency financial statements 7. Others

146

C&S Paper Co., Ltd. Annual Report 2020

Total other comprehensive after-tax net income

attributable to minority shareholders

VII. Total Comprehensive Income	905,889,081.41	603,832,650.83
Total comprehensive income attributable to owners of
	905,889,081.41	603,832,650.83
the parent company

Total comprehensive income attributable to minority

shareholders

VIII. Earnings per Share:
i. Basic earnings per share	0.70	0.47
ii. Diluted earnings per share	0.69	0.46

For business combinations of the current period under common control, the net profit realized by the combined party before the combination is: RMB0.00; the net profit realized by the combined party in last period is: RMB0.00.

Legal representative: Deng Yingzhong Person in charge of accounting: Dong Ye Person in charge of accounting department: Xu Xianjing

4. Income statement of the Parent Company

Unit: RMB

Item	2020	2019
I. Operating Income	1,632,515,354.88	1,287,647,693.35
Less: Operating cost	1,377,798,965.81	1,084,476,382.79
Tax and surcharges	5,201,738.09	4,116,684.80
Selling expenses	127,888,051.22	122,236,408.01
Administrative expenses	179,278,540.50	85,790,130.74
R&D expenses
Finance expenses	-5,095,985.70	-9,773,667.34
Including: Interest fees		9,422,954.52
Interest income	2,906,543.07	20,679,432.95
Plus: Other income	1,988,938.21	1,948,033.25
Return on investment ("-" indicates loss)	143,256,231.99	60,333,745.61
Including: Return on investment in associates and

147

C&S Paper Co., Ltd. Annual Report 2020

joint ventures
Profits from derecognition of financial assets

at amortized cost

Gains from net exposure hedging ("-" indicates

loss)

Gains from changes in fair value ("-" indicates

loss)

Credit impairment losses ("-" indicates loss)	-457,064.44	-106,437.03
Asset impairment losses ("-" indicates loss)	-572,411.86	-944,304.47
Return on disposal of assets ("-" indicates loss)	-613,479.84	-21,577.69
II. Operating Profit ("-" indicates loss)	91,046,259.02	62,011,214.02
Plus: Non-operating income	393,442.74	470,286.60
Less: Non-operating expenditure	15,848,705.74	1,651,977.28
III. Total Profit ("-" indicates total loss)	75,590,996.02	60,829,523.34
Less: Income tax expense	-7,045,758.08	1,820,524.82
IV. Net Profit ("-" indicates net loss)	82,636,754.10	59,008,998.52
i. Net profit from continued operation ("-" indicates net
	82,636,754.10	59,008,998.52
loss)

ii. Net profit from discontinued operation ("-" indicates

net loss)

V. Net Amount of Other Comprehensive Income after Tax
i. Other comprehensive income not able to be

reclassified into the profit or loss

1. Changes of re-measurement of the defined

benefit plan

2. Other comprehensive income that cannot be

transferred into the profit or loss under equity method

3. Changes in fair value of investment in other

equity instruments

148

C&S Paper Co., Ltd. Annual Report 2020

4. Changes in fair value of credit risk of the

enterprise

5. Others
ii. Other comprehensive income reclassified into the

profit or loss

1. Other comprehensive income to be transferred

into the profit or loss under equity method

2. Changes in fair value of investment in other

creditor's rights

3. Financial assets reclassified into other

comprehensive income

4. Impairment provision for credit of investment

in other creditor's rights

5. Reserve of cash flow hedge
6. Converted difference in foreign currency

financial statements

7. Others
VI. Total Comprehensive Income	82,636,754.10	59,008,998.52
VII. Earnings per Share:
i. Basic earnings per share
ii. Diluted earnings per share

5. Consolidated cash flow statement

Unit: RMB

Item	2020	2019
I. Cash Flows from Operating Activities:
Cash received from sale of goods or
	7,641,541,541.60	6,946,974,117.36
rendering of services

Net increase in deposits from customers,

149

C&S Paper Co., Ltd. Annual Report 2020

banks and non-bank financial institutions
Net increase in due to central banks
Net increase in placements from other

financial institutions

Cash received from the premium of direct

insurance contracts

Net cash from reinsurance business
Net increase in deposits and investment of

the insured

Cash obtained from interest, net fee and

commission

Net increase in placements from banks

and other financial institutions

Net increase in repo service fund
Net cash from agent securities trading
Tax rebates	8,043,686.95	29,267,082.90
Cash received related to other operating
	152,705,536.70	249,364,314.71
activities

Sub-total of cash inflow from operating
	7,802,290,765.25	7,225,605,514.97
activities

Cash paid for goods purchased and
	4,999,555,647.15	4,213,639,113.14
services rendered

Net loans and advances to customers
Net increase in deposits with the central

bank, banks and non-bank financial institutions

Cash paid for claims of direct insurance

contracts

Net increase in placements with banks and

non-bank financial institutions

Cash paid for interest, fee and commission

150

C&S Paper Co., Ltd. Annual Report 2020

Cash paid for dividends of the insured
Cash paid to and on behalf of employees	665,109,162.40	543,660,724.86
Tax payments	534,941,400.79	320,611,778.10
Cash payments related to other operating
	774,483,692.66	787,318,997.01
activities

Sub-total of cash outflow from operating
	6,974,089,903.00	5,865,230,613.11
activities

Net cash flows from operating activities	828,200,862.25	1,360,374,901.86
II. Cash Flows from Investing Activities:
Cash from realization of investment
Cash received from the return on
	3,868,134.28	333,745.61
investments

Net cash received from the disposal of
fixed assets, intangible assets, and other	48,828,706.60	1,155,770.90
long-term assets
Net amount of cash received from the
disposal of subsidiaries and other operating
organizations
Cash received related to other investing
	127,105,000.00
activities

Sub-total of cash inflow from investing
	179,801,840.88	1,489,516.51
activities

Cash paid for the acquisition and
construction of fixed assets, intangible assets,	511,677,417.02	602,954,032.35
and other long-term assets
Cash paid for investments
Net increase in pledged loans
Net amount of cash paid for acquisition of

subsidiaries and other operating organizations

Cash payments related to other investing	50,000,000.00	127,105,000.00

151

C&S Paper Co., Ltd. Annual Report 2020

activities
Sub-total of cash outflow from investing
	561,677,417.02	730,059,032.35
activities

Net cash flows from investing activities	-381,875,576.14	-728,569,515.84
III. Cash Flows from Financing Activities:
Cash received from capital contribution	28,101,700.23	104,792,649.00
Including: Proceeds received by subsidiaries

from minority shareholders' investment

Cash received from borrowings	383,892,976.77	299,514,563.03
Cash received related to other financing
		110,753,779.11
activities

Sub-total of cash inflow from financing
	411,994,677.00	515,060,991.14
activities

Cash paid for repayments of borrowings	301,057,260.06	796,290,846.44
Cash payment for interest expenses and
	99,989,760.28	45,925,148.44
distribution of dividends or profits

Including: Dividend and profit paid by

subsidiaries to minority shareholders

Cash payments related to other financing
	80,056,125.89	460,054.74
activities

Sub-total of cash outflow from financing
	481,103,146.23	842,676,049.62
activities

Net cash flows from financing activities	-69,108,469.23	-327,615,058.48
IV. Effect of Exchange Rate Changes on Cash
	-3,179,534.13	677,053.37
and Cash Equivalents

V. Net Increase in Cash and Cash Equivalents	374,037,282.75	304,867,380.91
Plus: Opening balance of cash and cash
	675,996,852.97	371,129,472.06
equivalents

VI. Closing Balance of Cash and Cash
	1,050,034,135.72	675,996,852.97
Equivalents

152

C&S Paper Co., Ltd. Annual Report 2020

6. Cash flow statement of the Parent Company

Unit: RMB

Item	2020	2019
I. Cash Flows from Operating Activities:
Cash received from sale of goods or
	1,317,396,402.58	1,056,147,896.18
rendering of services

Tax rebates	120,214.00	73,675.36
Cash received related to other operating
	1,834,396,504.14	1,539,185,832.09
activities

Sub-total of cash inflow from operating
	3,151,913,120.72	2,595,407,403.63
activities

Cash paid for goods purchased and
	985,895,534.46	686,517,835.07
services rendered

Cash paid to and on behalf of employees	127,413,062.62	61,651,247.93
Tax payments	31,053,247.68	21,024,211.02
Cash payments related to other operating
	1,414,912,983.81	1,482,289,208.78
activities

Sub-total of cash outflow from operating
	2,559,274,828.57	2,251,482,502.80
activities

Net cash flows from operating activities	592,638,292.15	343,924,900.83
II. Cash Flows from Investing Activities:
Cash from realization of investment
Cash received from the return on
	143,256,231.99	60,333,745.61
investments

Net cash received from the disposal of
fixed assets, intangible assets, and other	48,336.80	430,375.00
long-term assets
Net amount of cash received from the

disposal of subsidiaries and other operating

153

C&S Paper Co., Ltd. Annual Report 2020

organizations
Cash received related to other investing
	127,105,000.00
activities

Sub-total of cash inflow from investing
	270,409,568.79	60,764,120.61
activities

Cash paid for the acquisition and
construction of fixed assets, intangible assets,	32,119,334.97	18,996,988.31
and other long-term assets
Cash paid for investments	665,600,000.00	6,200,000.00
Net amount of cash paid for acquisition of

subsidiaries and other operating organizations

Cash payments related to other investing
	50,000,000.00	127,105,000.00
activities

Sub-total of cash outflow from investing
	747,719,334.97	152,301,988.31
activities

Net cash flows from investing activities	-477,309,766.18	-91,537,867.70
III. Cash Flows from Financing Activities:
Cash received from capital contribution	28,101,700.23	104,792,649.00
Cash received from borrowings
Cash received related to other financing
		98,045,766.24
activities

Sub-total of cash inflow from financing
	28,101,700.23	202,838,415.24
activities

Cash paid for repayments of borrowings		352,600,000.00
Cash payment for interest expenses and
	97,014,306.99	41,327,992.18
distribution of dividends or profits

Cash payments related to other financing
	32,970,709.24	460,054.74
activities

Sub-total of cash outflow from financing
	129,985,016.23	394,388,046.92
activities

154

C&S Paper Co., Ltd. Annual Report 2020

Net cash flows from financing activities	-101,883,316.00	-191,549,631.68
IV. Effect of Exchange Rate Changes on Cash
	254,432.97	26,189.80
and Cash Equivalents

V. Net Increase in Cash and Cash Equivalents	13,699,642.94	60,863,591.25
Plus: Opening balance of cash and cash
	156,151,560.82	95,287,969.57
equivalents

VI. Closing Balance of Cash and Cash
	169,851,203.76	156,151,560.82
Equivalents

7. Consolidated statement of changes in owner’s equity

155

C&S Paper Co., Ltd. Annual Report 2020

Amount of the current period

Unit: RMB

		2020	2020	2020	2020	2020	2020	2020	2020	2020
		Owner's equity attributable to the Parent Company
		Other equity			Capital reserve	Less: Treasury	Other comp rehen sive inco me	Special	Surplus reserves	General	Retained earnings	Other s	Subtotal	Equity
Item		instrument				shares		reserves		reserves				of	Total owner’s
														minority

	Share capital	Prefer	Perpet												equity
														sharehol
		ence	ual	Others
														ders
		shares	bonds


I. Balance at the
	1,308,891,273.00				760,731,416.57	104,792,649.00			53,205,582.86		2,058,968,835.80		4,077,004,459.23		4,077,004,459.23
End of Last Year

Plus:
Alternation to

accounting

policies

Correction to
previous errors


Business

156

C&S Paper Co., Ltd. Annual Report 2020

combinations
involving
enterprises
under common
control
Others
II. Balance at
the Beginning of	1,308,891,273.00	760,731,416.57	104,792,649.00	53,205,582.86	2,058,968,835.80	4,077,004,459.23	4,077,004,459.23
the Year
III. Changes in
the Period ("-"
	2,595,804.00	146,275,088.48	-8,311,737.71	8,263,675.41	799,695,311.59	965,141,617.19	965,141,617.19
Indicates

Decrease)
i. Total
comprehensive					905,889,081.41	905,889,081.41	905,889,081.41
income
ii. Capital
contributed or
	2,595,804.00	146,275,088.48	-8,311,737.71			157,182,630.19	157,182,630.19
decreased by

owner
1. Ordinary
	3,610,416.00	34,809,136.79				38,419,552.79	38,419,552.79
shares

157

C&S Paper Co., Ltd. Annual Report 2020

contributed by
owners
2. Capital
contributed by
owners of other
equity
instruments
3. Share based
payments
	-1,014,612.00	111,465,951.69	-35,992,459.47			146,443,799.16	146,443,799.16
recognized as

owner's equity
4. Others			27,680,721.76			-27,680,721.76	-27,680,721.76
iii. Profit
				8,263,675.41	-106,193,769.82	-97,930,094.41	-97,930,094.41
distribution

1. Appropriation
of surplus				8,263,675.41	-8,263,675.41
reserves
2. Appropriation
of general risk
reserves
3. Distribution					-97,930,094.41	-97,930,094.41	-97,930,094.41

158

C&S Paper Co., Ltd. Annual Report 2020

to owners (or shareholders) 4. Others iv. Interior balance from owner's equity 1. Added capital (or share capital) from capital reserves 2. Added capital (or share capital) from surplus reserves 3. Compensation of loss with surplus reserves 4. Retained earnings of carry-over of the defined benefit plan

159

C&S Paper Co., Ltd. Annual Report 2020

5. Retained
earnings of
carry-over of

other

comprehensive
income
6. Others
v. Special

reserves

1. Appropriation

for the period

2. Use for the

period

vi. Others
IV. Closing							5,042,146,076.42
Balance of the	1,311,487,077.00	907,006,505.05	96,480,911.29	61,469,258.27	2,858,664,147.39	5,042,146,076.42
Period

Amount of last period

160

C&S Paper Co., Ltd. Annual Report 2020

Unit: RMB

					2019	2019	2019	2019	2019	2019
					Owner's equity attributable to the Parent Company
		Other equity			Capital reserve	Less: Treasury	Other	Specia	Surplus	General	Retained earnings	Othe rs	Subtotal	Equity
Item		instrument				shares	compr	l	reserves	reserves				of	Total owner’s
			Perp etual bond s				ehensi	reserv						minority
	Share capital	Prefer													equity
				Othe rs			ve	es						sharehol
		ence
							incom							ders
		shares
							e



I. Balance at
the End of	1,286,692,741.00				609,403,941.54	122,916,831.04			47,304,683.01		1,490,758,189.02		3,311,242,723.53		3,311,242,723.53
Last Year
Plus:
Alternation to

accounting

policies

Correction to

previous

errors

Business

combinations

involving

161

C&S Paper Co., Ltd. Annual Report 2020

enterprises
under
common
control


Others

II. Balance at
the Beginning	1,286,692,741.00	609,403,941.54	122,916,831.04	47,304,683.01	1,490,758,189.02	3,311,242,723.53	3,311,242,723.53
of the Year
III. Changes in
the Period ("-"
	22,198,532.00	151,327,475.03	-18,124,182.04	5,900,899.85	568,210,646.78	765,761,735.70	765,761,735.70
Indicates

Decrease)
i. Total
comprehensiv					603,832,650.83	603,832,650.83	603,832,650.83
e income
ii. Capital
contributed or
	22,198,532.00	151,327,475.03	-18,124,182.04			191,650,189.07	191,650,189.07
decreased by

owner
1. Ordinary
shares
	22,467,200.00	82,325,449.00				104,792,649.00	104,792,649.00
contributed by

owners

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2. Capital
contributed by
owners of
other equity
instruments
3. Share based
payments
	-268,668.00	69,002,026.03	76,457,365.31			-7,724,007.28	-7,724,007.28
recognized as

owner's equity
4. Others			-94,581,547.35			94,581,547.35	94,581,547.35
iii. Profit
				5,900,899.85	-35,622,004.05	-29,721,104.20	-29,721,104.20
distribution

1.
Appropriation
				5,900,899.85	-5,900,899.85
of surplus

reserves
2.
Appropriation

of general risk

reserves
3. Distribution
to owners (or					-29,721,104.20	-29,721,104.20	-29,721,104.20
shareholders)
4. Others

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iv. Interior balance from owner's equity 1. Added capital (or share capital) from capital reserves 2. Added capital (or share capital) from surplus reserves 3. Compensation of loss with surplus reserves 4. Retained earnings of carry-over of the defined benefit plan 5. Retained earnings of

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carry-over of
other
comprehensiv
e income
6. Others
v. Special

reserves

1.
Appropriation
for the period
2. Use for the

period

vi. Others
IV. Closing
Balance of the	1,308,891,273.00	760,731,416.57	104,792,649.00	53,205,582.86	2,058,968,835.80	4,077,004,459.23	4,077,004,459.23
Period

8.Statement of changes in owner’s equity of the Parent Company

Amount of the current period

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C&S Paper Co., Ltd. Annual Report 2020

Unit: RMB

					2020	2020	2020
	Share capital	Other equity instruments			Capital reserve	Less: Treasury	Other	Spec ial reser ves	Surplus	Retained	Othe rs	Total owner's
Item		Preferen	Perpetual	Others		shares	compreh		reserves	earnings		equity
		ce	bonds				ensive
							income
		shares

I. Balance at the End of Last Year	1,308,891,273.00				690,241,724.38	104,792,649.00			53,084,248.58	180,966,989.79		2,128,391,586.75
Plus: Alternation to accounting policies
Correction to previous errors
Others
II. Balance at the Beginning of the Year	1,308,891,273.00				690,241,724.38	104,792,649.00			53,084,248.58	180,966,989.79		2,128,391,586.75
III. Changes in the Period ("-" Indicates
	2,595,804.00				141,451,481.81	-8,311,737.71			8,263,675.41	-23,557,015.72		137,065,683.21
Decrease)

i. Total comprehensive income										82,636,754.10		82,636,754.10
ii. Capital contributed or decreased by owner	2,595,804.00				141,451,481.81	-8,311,737.71						152,359,023.52
1. Ordinary shares contributed by owners	3,610,416.00				34,809,136.79							38,419,552.79
2. Capital contributed by owners of other

equity instruments

3. Share based payments recognized as
	-1,014,612.00				106,642,345.02	-35,992,459.47						141,620,192.49
owner's equity

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4. Others			-27,680,721.76
iii. Profit distribution	8,263,675.41	-106,193,769.82	-97,930,094.41
1. Appropriation of surplus reserves	8,263,675.41	-8,263,675.41
2. Distribution to owners (or shareholders)		-97,930,094.41	-97,930,094.41
3. Others
iv. Interior balance from owner's equity
1. Added capital (or share capital) from

capital reserves

2. Added capital (or share capital) from

surplus reserves

3. Compensation of loss with surplus reserves
4. Retained earnings of carry-over of the

defined benefit plan

5. Retained earnings of carry-over of other

comprehensive income

6. Others
v. Special reserves
1. Appropriation for the period
2. Use for the period
vi. Others
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IV. Closing Balance of the Period		1,311,487,077.00				831,693,206.19	96,480,911.29			61,347,923.99	157,409,974.07		2,265,457,269.96

Amount of last period

Unit: RMB

					2019	2019	2019
	Share capital	Other equity instruments			Capital reserve	Less: Treasury	Other	Spec ial reser ves	Surplus	Retained	Othe rs	Total owner's
Item
		Preference	Perpetua	Others		shares	compreh		reserves	earnings		equity
		shares	l bonds				ensive
							income

I. Balance at the End of Last Year	1,286,692,741.00				545,219,407.25	122,916,831.04			47,183,348.73	157,579,995.32		1,913,758,661.26
Plus: Alternation to accounting policies
Correction to previous errors
Others
II. Balance at the Beginning of the Year	1,286,692,741.00				545,219,407.25	122,916,831.04			47,183,348.73	157,579,995.32		1,913,758,661.26
III. Changes in the Period ("-" Indicates
	22,198,532.00				145,022,317.13	-18,124,182.04			5,900,899.85	23,386,994.47		214,632,925.49
Decrease)

i. Total comprehensive income										59,008,998.52		59,008,998.52
ii. Capital contributed or decreased by owner	22,198,532.00				145,022,317.13	-18,124,182.04						185,345,031.17
1. Ordinary shares contributed by owners	22,467,200.00				82,325,449.00							104,792,649.00
2. Capital contributed by owners of other

equity instruments

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C&S Paper Co., Ltd. Annual Report 2020

3. Share based payments recognized as
	-268,668.00	62,696,868.13	76,457,365.31			-14,029,165.18
owner's equity

4. Others			-94,581,547.35			94,581,547.35
iii. Profit distribution				5,900,899.85	-35,622,004.05	-29,721,104.20
1. Appropriation of surplus reserves				5,900,899.85	-5,900,899.85
2. Distribution to owners (or shareholders)					-29,721,104.20	-29,721,104.20
3. Others
iv. Interior balance from owner's equity
1. Added capital (or share capital) from

capital reserves

2. Added capital (or share capital) from

surplus reserves

3. Compensation of loss with surplus reserves
4. Retained earnings of carry-over of the

defined benefit plan

5. Retained earnings of carry-over of other

comprehensive income

6. Others
v. Special reserves
1. Appropriation for the period

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2. Use for the period
vi. Others
IV. Closing Balance of the Period	1,308,891,273.00	690,241,724.38	104,792,649.00	53,084,248.58	180,966,989.79	2,128,391,586.75

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C&S Paper Co., Ltd. Annual Report 2020

III. Basic Information of the Company

1. Development history of the Company

C&S Paper Co., Ltd. (hereinafter referred to as "the Company") is a joint stock limited company restructured from Zhongshan Zhongshun Paper Manufacturing Co., Ltd., with all shareholders of the original company as its initiators. The Company has obtained a business license of enterprise legal person with the registration number of 442000400013713 issued by Guangdong Province Administration for Industry and Commerce on December 31, 2008.

In November 2010, under the approval of the Notice on the Approval of the Initial Public Offering of Shares of C&S Paper Co., Ltd. (CSRC Xu Ke [2010] No. 1539) issued by China Securities Regulatory Commission, the Company issued 40,000,000 RMB-denominated ordinary shares (A shares) to the public, each having a par value of RMB1. The share capital after the public offering was RMB160,000,000.00.

On May 22, 2012, the Company held the 2011 Annual General Meeting of Shareholders and approved the Proposal on the 2011 Profit Distribution Plan , applying for an increase of registered capital by RMB48,000,000.00. With the base number of 160,000,000.00 total shares as at the end of 2011, the Company planned to convert capital reserve into new shares on the basis of three shares for every ten existing shares. The registered capital after the change was RMB208,000,000.00.

On June 3, 2013, the Company held the 2012 Annual General Meeting of Shareholders and approved the Proposal on the 2012 Profit Distribution Plan , applying for an increase of registered capital by RMB104,000,000.00. With the base number of 208,000,000.00 total shares as at the end of 2012, the Company planned to convert capital reserve into new shares on the basis of five shares for every ten existing shares. The registered capital after the change was RMB312,000,000.00.

On May 8, 2014, the Company held the 2013 Annual General Meeting of Shareholders and approved the Proposal on the 2013 Profit Distribution Plan , applying for an increase of registered capital by RMB93,600,000.00. With the base number of 312,000,000.00 total shares as at the end of 2013, the Company planned to convert capital reserve into new shares on the basis of three shares for every ten existing shares. The registered capital after the change was RMB405,600,000.00.

On May 8, 2015, the Company held the 2014 Annual General Meeting of Shareholders and approved the Proposal on the 2014 Profit Distribution Plan , applying for an increase of registered capital by RMB81,120,000.00. With the base number of 405,600,000.00 total shares as at the end of 2014, the Company planned to convert capital reserve into new shares on the basis of two shares for every ten existing shares. The registered capital after the change was RMB486,720,000.00.

Pursuant to the resolutions of the 7th meeting of the third session of the Board of Directors, the 9th meeting of the third session of the Board of Directors, the third extraordinary general meeting of 2015 and the 10th meeting of the

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C&S Paper Co., Ltd. Annual Report 2020

third session of the Board of Directors, the Company planned to grant 17,133,000.00 restricted RMB-denominated ordinary shares (A shares) to 242 incentive recipients including Liu Jinfeng through private placement, with a par value of RMB1 per share and a grant price of RMB4.25 per share. Upon completion, 16,957,000.00 restricted RMB-denominated ordinary shares (A shares) were actually granted to a total of 199 incentive recipients with 43 employees withdrawing from the plan. The registered capital after the change was RMB503,677,000.00.

Pursuant to the resolutions of the third extraordinary general meeting of 2015, the 11th meeting of the third session of the Board of Directors and the 9th meeting of the third session of the Board of Supervisors, the Company planned to grant 1,867,000.00 restricted RMB-denominated ordinary shares (A shares) to 68 incentive recipients including Duan Xianglei through private placement, with a par value of RMB1 per share and a grant price of RMB4.80 per share. Upon completion, 1,847,000.00 restricted RMB-denominated ordinary shares (A shares) were granted to a total of 54 incentive recipients with 14 employees withdrawing from the plan. The registered capital after the change was RMB505,524,000.00.

On October 24, 2016, at the 15th meeting of the third session of the Board of Directors, Proposal on the Repurchase and Deregistration of Partial Restricted Stocks under the Company's Restricted Stock Incentive Plan and Proposal on Changing the Registered Capital and Amending the Articles of Association of the Compan y were reviewed and approved. Pursuant to the resolution of the meeting of the Board of Directors, the Company applied for the repurchase and deregistration of 266,000.00 restricted stocks. Among them, the repurchase price of restricted stocks awarded in the first grant was RMB4.25 per share, the repurchase price of reserved restricted stocks was RMB4.80 per share, and the registered capital after the change was RMB505,258,000.00.

On May 10, 2017, the Company held the 2016 Annual General Meeting of Shareholders and approved the Proposal on the 2016 Profit Distribution Plan , applying for an increase of registered capital by RMB252,629,000.00. With the base number of 505,258,000.00 total shares as at the end of 2016, the Company planned to convert capital reserve into new shares on the basis of five shares for every ten existing shares. The registered capital after the change was RMB757,887,000.00.

Pursuant to the resolutions of the 22nd and 24th meeting of the third session of the Board of Directors in 2017, as some incentive recipients were disqualified to hold incentive stocks after leaving the Company or failing the appraisal, the Company planned to repurchase and deregister the restricted stocks of 35 incentive recipients. Among them, 25 incentive recipients were granted in the first period with 382,462.50 restricted stocks and ten incentive recipients were granted with 39,997.50 reserved restricted stocks. A total of 422,460.00 shares were repurchased and deregistered. The registered capital after the reduction was RMB757,464,540.00.

On May 8, 2018, the Company held the 2017 Annual General Meeting of Shareholders and approved the Proposal

on the 2017 Profit Distribution Plan , applying for an increase of registered capital by RMB530,225,178.00. With the base number of 757,464,540.00 total shares, the Company planned to convert capital reserve into new shares on the basis of seven shares for every ten existing shares. The registered capital after the change was

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C&S Paper Co., Ltd. Annual Report 2020

RMB1,287,689,718.00.

Pursuant to the resolution of the 5th meeting of the fourth session of the Board of Directors in 2018, as some incentive recipients were disqualified to hold incentive stocks after leaving the Company or failing the appraisal at the second unlocking period under the Restricted Stock Incentive Plan, the Company planned to repurchase and deregister the restricted stocks of 46 incentive recipients. Among them, 38 incentive recipients were granted in the first grant with 985,426.00 restricted stocks and eight incentive recipients were granted with 11,551.00 reserved restricted stocks. A total of 996,977.00 shares were repurchased and deregistered. The registered capital after the reduction was RMB1,286,692,741.00.

Pursuant to the resolutions of the 9th meeting of the fourth session of the Board of Directors and the first extraordinary general meeting in 2019, the Company planned to grant 21,717,500.00 restricted RMB-denominated ordinary shares (A shares) to 671 incentive recipients including Dong Ye through private placement, with a par value of RMB1 per share. Upon completion, 19,675,500.00 restricted RMB-denominated ordinary shares (A shares) were granted to a total of 569 incentive recipients at the price of RMB4.33, with 102 employees withdrawing from the plan. The registered capital after the change was RMB1,306,368,241.00.

Pursuant to the resolutions of the 12th and 13th meeting of the fourth session of the Board of Directors, as some incentive recipients were disqualified to hold incentive stocks after leaving the Company or failing the appraisal, the Company planned to repurchase and deregister the restricted stocks of 32 incentive recipients. Among them, 211,803.00 restricted stocks were granted to 22 incentive recipients in the first grant and 56,865.00 reserved restricted stocks were granted to ten incentive recipients. A total of 268,668.00 shares were repurchased and deregistered.

Pursuant to the Proposal on Granting Reserved Stock Options and Restricted Stocks to Incentive Recipients reviewed and approved at the 16th meeting of the fourth session of the Board of Directors in 2019, the Company planned to grant 64 incentive recipients with 3,500,000.00 restricted stocks with a grant price of RMB7.02 per share. The incentive plan actually granted 46 incentive recipients with 2,791,700.00 restricted ordinary shares as 18 incentive recipients did not subscribe for the restricted stocks due to resignation or voluntary abandonment and 13 incentive recipients did not fully pay for the subscribed restricted stocks. The registered capital after the grant was RMB1,308,891,273.00.

The 23rd meeting of the fourth session of the Board of Directors and the second extraordinary general meeting of 2020 reviewed and approved the Proposal on the Repurchase and Deregistration of Partial Restricted Stocks Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan. Pursuant to the proposal, as some incentive recipients were disqualified to hold incentive stocks after leaving the Company or failing the appraisal or some recipients passed the appraisal but did not attain a full score and hence could not unlock all the stocks, the Company decided to repurchase and deregister total 802,722 restricted shares of 241 incentive recipients. The registered capital after the reduction was RMB1,308,088,551.00.

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C&S Paper Co., Ltd. Annual Report 2020

The 28th meeting of the fourth session of the Board of Directors and the fifth extraordinary general meeting of 2020 reviewed and approved the Proposal on the Repurchase and Deregistration of Partial Reserved Restricted Stocks under the Company's 2018 Stock Option and Restricted Stock Incentive Plan. Pursuant to the proposal, as some incentive recipients were disqualified to hold incentive stocks after leaving the Company or failing the appraisal or some recipients passed the appraisal but did not attain a full score and hence could not unlock all the stocks, the Company decided to repurchase and deregister total 211,890 restricted shares of 24 incentive recipients. The registered capital after the reduction was RMB1,307,876,661.00.

At the 23rd meeting of the fourth session of the Board of Directors, the Proposal on Achieving the Exercise Conditions of the First Exercise Period for Stock Options Awarded in the First Grant under the Company's 2018 Stock Option and Restricted Stock Incentive Plan was reviewed and approved. The proposal agreed that the exercise conditions under the first exercise period for the stock options awarded in the first grant had been met as set out in the 2018 Stock Option and Restricted Stock Incentive Plan (Draft) , and the exercise method was independent exercise. The number of incentive recipients in conformity with the exercise conditions reached 2,522 and the number of stock options that had met exercise conditions was 3,431,505.00. The exercise period was from June 10, 2020 to February 26, 2021. At the 28th meeting of the fourth session of the Board of Directors, the Proposal on Achieving the Exercise Conditions of the First Exercise Period for Reserved Stock Options under the Company's 2018 Stock Option and Restricted Stock Incentive Plan was reviewed and approved. The proposal agreed that the exercise conditions under the first exercise period for the reserved stock options had been met as set out in the 2018 Stock Option and Restricted Stock Incentive Plan (Draft) , and the exercise method was independent exercise. The number of incentive recipients in conformity with the exercise conditions reached 88 and the number of stock options that have met exercise conditions was 640,389. The exercise period was from November 17, 2020 to September 10, 2021. As of December 31, 2020, the incentive recipients who had met the above exercise conditions have successively begun to exercise their rights, and a total of 3,610,416 shares have been subscribed.

As at December 31, 2020, the Company has had a registered capital of RMB1,311,487,077.00 and a share capital of RMB1,311,487,077.00.

Registered address, form of organization, and headquarters of the Company

Form of organization: Company limited by shares

Registered address: Shenglong Village, Tanbei, Dongsheng Town, Zhongshan City

Address of the headquarters the Company: 136 Caihong Avenue, West District, Zhongshan City

Business nature and main business activities of the Company

C&S Paper Co., Ltd. and its subsidiaries (hereafter generally referred to as “the Company”) are in the household paper industry. The Company mainly engages in the following: “General items: paper product manufacturing; paper product sales; Internet sales (excluding the sales of commodities requiring a permit); sales of daily

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C&S Paper Co., Ltd. Annual Report 2020

necessities; sales of personal hygiene products; sales of household products; sales of sanitary products and disposable medical products; retail of cosmetics; wholesale of cosmetics; sales of knitwear; sales of plastic products; sales of metal products; sales of rubber products; manufacture of daily-sue ceramic products; wholesale of kitchen utensils and daily groceries; sales of Class I medical devices; manufacture of Class I medical devices; sales of Class II medical devices; sales of disinfectants (excluding hazardous chemicals). (The company may carry out business operations independently according to the law based on the business license, except for items that must be licensed according to the law). Licensed items: import and export of goods or technologies (excluding the import and export of goods and technologies prohibited by the State or involving administrative approval); manufacture of Class II medical devices; operation of Class III medical devices; manufacture of Class III medical devices. (For items that must be approved in accordance with the law, the company may carry out business operations upon approval by competent departments, and the specific business items are subject to the approval document or the permit issued by relevant department.) (The above business scope involves import and export of goods and technologies, business operation of Class II and Class III medical devices, and manufacture of medical devices.) (The above items do not involve special management measures for the access of foreign investment).”

Actual controller of the Company

The actual controllers of the Company are Deng Yingzhong, Deng Guanbiao, and Deng Guanjie (Deng Yingzhong is the other two’s father).

Approver for the issue of the financial statements and date of approval

The financial statements were approved for issue by the Board of Directors of the Company on April 27, 2021.

Scope of the consolidation of financial statements

As of December 31, 2020, the Company has 19 subsidiaries which are included in the consolidated scope, as detailed in “Note IX. Equities in Other Entities”. Compared with last year, one subsidiary has been newly added into the consolidated scope this year. For details, see “Note VIII. Changes in Consolidated Scope”.

IV. Preparation Basis for Financial Statements

1. Basis of preparation

The financial statements of the Company have been prepared on a going concern basis based on actual transactions and events and according to the Accounting Standards for Business Enterprises - Basic Standards promulgated by the Ministry of Finance (MOF No. 33 Document and No. 76 Revision), the 42 accounting standards, Guidelines for the Application of the Accounting Standards for Business Enterprises , interpretation to the accounting standards for business enterprises and other relevant regulations that are successively promulgated on or after February 15, 2006 (hereinafter collectively referred to as "Accounting Standards for Business Enterprises"), and rules set out in No. 15 Preparation and Reporting Rules of Information Disclosure of Public

175

C&S Paper Co., Ltd. Annual Report 2020

Offering Companies - General Rules for Financial Statements (2014 Revision) issued by China Securities Regulatory Commission based on actual transactions and events.

In accordance with the relevant rules of Accounting Standards for Business Enterprises , the financial accounting of the Company is based on accrual basis. Apart from some financial tools, the accounting measurement of the financial statements is based on historical cost method. Provision for impairment of asset is set aside if it is recognized.

2. Going concern

The Company shall be a going concern for at least 12 months following the end of the reporting period. There are no major events that will affect the Company’s operational ability; therefore the assumption on which the financial statements are based is reasonable.

V. Significant Accounting Policies and Accounting Estimates

Specific accounting policies and accounting estimates:

C&S Paper Co., Ltd. and all its subsidiaries have set out several specific accounting policies and accounting estimates for transactions and events with relation to the recognition of incomes and income taxes in accordance with the Accounting Standards for Business Enterprises and their own operational characteristics. Please refer to “Note V (39) Revenue” for details. As for explanations of significant accounting judgments and estimates made by the management, please refer to “Note V (44) significant changes of accounting policies and accounting estimates”.

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

The financial statements of the Company conform to the requirements set out in the Accounting Standards for Business Enterprises . The statements truthfully and completely reflect the financial status, operating results, cash flow, and other relevant information of the Company. In addition, the financial statements of the Company are also in accordance with disclosure requirements for financial statements and notes in No. 15 Preparation and Reporting Rules of Information Disclosure of Public Offering Companies - General Rules for Financial Statements of the China Securities Regulatory Commission (2014 Revision) in all material aspects

2. Accounting period

The accounting year of the Company is from January 1 to December 31 of each calendar year.

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C&S Paper Co., Ltd. Annual Report 2020

3. Operating cycle

The operating cycle of the Company normally refers to the periods during which the Company purchases assets for processing and then gets cash or cash equivalents from the processed items. Normally, the operating cycle of a company is shorter than a year. The Company sets 12 months as a full operating cycle and uses the 12-month period as a standard for the liquidity of assets and liabilities.

4. Standard currency for accounting

RMB is the main currency in the main economic environments in which the Company and its domestic subsidiaries operate. Therefore, the Company and its subsidiaries use RMB as the standard currency for bookkeeping. The currency for accounting used in the Company’s financial statements is RMB.

5. Accounting treatment measures of business combinations involving enterprises under common control and business combinations involving enterprises not under common control

Business combinations refer to the combination of two or more independent enterprises to form a reporting entity of transactions or events. Business combination can be classified as business combinations involving enterprises under common control and business combinations involving enterprises not under common control.

(1) Business combinations involving enterprises under common control

Business combinations under common control means enterprises involved in the business combination are under ultimate control by one party or the same multi-parties before and after combination, and such control is not temporary. For business combinations under common control, those who obtain control of enterprises involved in the business combination on the combination date are the acquirer while other enterprises involved in the business combination are the acquiree. Combination date is the date that the combining party actually obtains control of the combined party.

Assets and liabilities that the acquirer gets from the acquiree are calculated and measured at the book values on the combination date. If there are differences between the book values of the net assets the acquirer receives and the book values of the combination consideration it pays (or the face values of the issued shares), the differences will be used to adjust capital reserves (share premium). Where capital reserves (share premium) are insufficient to offset, retained earnings shall be adjusted.

All direct expenses related to the business combinations paid by the acquirer shall be included in current profits and losses upon occurrence.

(2) Business combinations involving enterprises not under common control

Business combinations not under common control means enterprises involved in the business combination are not

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C&S Paper Co., Ltd. Annual Report 2020

under ultimate control by one party or the same multi-parties before and after combination. For business combinations not under common control, those who obtain control of enterprises involved in the business combination on the acquisition date are the acquirer, while other enterprises involved in the business combination are the acquiree. Acquisition date is the date that the acquirer actually obtains control of the acquiree.

For business combinations not under common control, the costs of combination include the assets the acquirer pays, liabilities the acquirer bears, and the fair value of the equity securities issued on the date of combination for the acquisition of control over the acquiree. The costs of auditing, legal services, evaluation consulting, other intermediary expenses and other management fees incurred for business combination shall be included in current profits and losses. The transaction costs of the equity securities and debt securities issued by the acquirer shall be included in the initially confirmed amounts of equity securities and debt securities. The contingent consideration involved shall be included in the costs of business combination based on its fair value at the acquisition date. If, within 12 months after the acquisition, there is new or further evidence for conditions that have already existed on the acquisition date and the contingent consideration shall be re-adjusted, the combination goodwill shall be adjusted accordingly. The acquirer’s costs of business combinations and its identifiable net assets obtained from business combinations shall be assessed at the fair values on the acquisition date. If the costs of business combinations are higher than the identifiable net assets of the acquiree on the acquisition date, the gap between them shall be confirmed as goodwill. If the costs of business combinations are lower than the fair values of the identifiable net assets of the acquiree on the acquisition date, the fair values of identifiable assets, liabilities and continent liabilities as well as the measurement of combination costs shall be reassessed; if, upon reassessment, the business combination costs are still lower than the fair values of the identifiable net assets of the acquiree, the difference shall be included in profits and losses of the current period.

If the deductible temporary differences the acquirer gets from the acquiree are not eligible to be confirmed as deferred tax asset on the acquisition date, and within 12 months of the acquisition, there are new or further evidence for the conditions that have already existed on the acquisition date that the economic profits brought by the deductible temporary differences of the acquiree could be achieved, such differences shall be confirmed as deferred tax asset. At the same time, the goodwill shall be reduced. Where the goodwill is insufficient to be deducted, the gap between them shall be included in current profits and losses. Apart from the aforementioned situations, all deductible temporary differences confirmed to be relevant to the business combination shall be recorded in current profits and losses.

For business combinations not under common control that are achieved through multiple steps, whether they can be regarded as package deals shall be judged in accordance with Notice No.5 of the Interpretation of Accounting Standards for Business Enterprises of the Ministry of Finance (C.K. [2012] No.19), and the standards of “package deals” set out in Article 51 of the Accounting Standard for Business Enterprises No. 33 – Consolidated Financial Statements (please refer to Note V (6) "Methods for preparation of consolidated financial statements" (2)). In the

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C&S Paper Co., Ltd. Annual Report 2020

event that the combination is regarded as "package deals", accounting treatment shall be done by referring to the descriptions in previous paragraphs of this section and “Note V (22) Long-term equity investments" herein; if not, accounting treatment shall be done by distinguishing individual financial statements from consolidated financial statements:

In individual financial statements, the initial investment costs shall be the sum of the book value of the equity investment of the acquiree held before the acquisition date and the new investment costs on the acquisition date; if other comprehensive income is involved in the equities of the acquiree before the acquisition date, accounting processing shall be done for the comprehensive income related to this investment by adopting the same basis for directly disposing of relevant assets or liabilities of the acquiree during the disposal of this investment (that is, except for the corresponding shares of the changes caused by re-measurement of the net liabilities or net assets of the defined benefit plan by the acquiree, which are accounted by the equity method, others shall be transferred to the return on investment of the current period).

In consolidated financial statements, the equities of the acquiree held before the acquisition date shall be re-measured at the fair value of the equities on the acquisition date, and the difference between the fair value and the book value shall be recognized as the return on investment of the current period; if other comprehensive income is involved in the equities of the acquiree before the acquisition date, accounting processing shall be done for the comprehensive income related to this investment by adopting the same basis for directly disposing of relevant assets or liabilities of the acquiree (that is, except for the corresponding shares of the changes caused by re-measurement of the net liabilities or net assets of the defined benefit plan by the acquiree, which are accounted by the equity method, others shall be transferred to the return on investment of the current period).

6. Methods for preparation of consolidated financial statements

(1) Principles of determining the scope of consolidated financial statements

The scope of consolidation of consolidated financial statements shall be subject to the basis of control. Control refers to the power the investor owns against the investee, which allows the investor to enjoy the variable return by attending relevant activities held by the investee, and to be capable of using such power to affect the amount of return. The scope of consolidation is the Company and all of its subsidiaries. Subsidiaries refer to entities controlled by the Company.

The Company shall reassess whether it controls an investee if facts and circumstances indicate that there are changes to the relevant elements of control as defined above.

(2) Methods for preparation of consolidated financial statements

The Company shall include the subsidiaries in the scope of consolidation from the date it acquires the actual control over the net assets and the decision-making of production and operations of such subsidiaries; accordingly, the Company shall terminate including them in the scope of consolidation from the date it loses the actual control.

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In terms of subsidiaries already disposed of, the operating results and cash flows before the disposal date have been included in the consolidated income statements and the consolidated cash flow statements appropriately; as for subsidiaries disposed in the current period, the opening balance in the consolidated balance sheet shall not be adjusted. In case of subsidiaries added through business combinations not under the same control, the operating results and cash flows after the acquisition date have been included in the consolidated income statements and the consolidated cash flow statements appropriately, and the opening and comparative balance in the consolidated balance sheet shall not be adjusted. In case of subsidiaries added through business combinations under the same control among which the Company absorbs the combined party, the operating results and cash flows of the combined party from the beginning of the period in which the combination happens to the combination date have been included in the consolidated income statements and the consolidated cash flow statements appropriately, and the comparative balance in the consolidated balance sheet shall be adjusted simultaneously.

In case of inconsistencies in the accounting policies or periods between subsidiaries and the Company during preparation of consolidated financial statements, financial statements of subsidiaries shall be adjusted according to the accounting policies and periods adopted by the Company. For subsidiaries acquired by business combinations not under the same control, their financial statements shall be adjusted based on the fair value of the identifiable net assets on the acquisition date.

All major business transaction balance, transactions, and unrealized profit of the Company shall be offset during preparation of consolidated financial statements.

Shareholders' equities of subsidiaries and the part of the net profit and loss of the current period not attributable to the Company shall be presented separately under the shareholders' equities and the net profit in the consolidated financial statements as equities of minority shareholders and minority shareholders' profits and losses. Shares of equities of minority shareholders in the net profit and loss of the current period of subsidiaries shall be presented under the "minority shareholders' profits and losses" in the consolidated income statement. If the loss of a subsidiary which is shared by its minority shareholders exceeds the minority shareholders' share in the opening balance of the subsidiary, the minority interest shall be reduced.

If the Parent Company loses control of a subsidiary due to partial disposal of equity investment or other reasons, it shall re-measure the remaining equity at fair value on the date of loss of control. The sum of consideration obtained from equity disposal and fair value of the remaining equity, minus the difference between the Parent Company's share of the subsidiary's net assets that is continuously calculated from the acquisition date, shall be recognized as investment income for the reporting period when the loss of control takes place. Accounting processing shall be done for the other comprehensive income related to this investment in the subsidiary's equities by adopting the same basis for directly disposing of relevant assets or liabilities of the acquiree during the loss of control (that is, except for the changes caused by re-measurement of the net liabilities or net assets of the defined benefit plan by the previous subsidiary, others shall be transferred to the return on investment of the current

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period). After that, subsequent measurement shall be done for the remaining equity of this part as per relevant provisions in the Accounting Standards for Enterprises No. 2 - Long-term Equity Investment or the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments . See "Note V (22)" or "Note V (10)" for details.

If the Company disposes of investments in a subsidiary's equities by steps via transactions until it loses control, it shall check whether these transactions from disposal of the investments in the subsidiary's equities to the loss of control are package deals. If the terms, conditions, and economic effects of transactions on disposing of equity investment in the subsidiary conform to one or more of the following circumstances, that means these multiple transactions should be treated as package deals in accounting processing: 1) Those transactions are reached at the same time or after taking into consideration the influence of each other; 2) those transactions together produce a complete commercial outcome; 3) the occurrence of one transaction depends on the occurrence of at least one other transaction; 4) one transaction alone does not seem to be economical, but all those transactions are economical when are considered as a whole. In terms of transactions that are not package deals, accounting processing shall be done for each transaction following the principles applicable to the "partial disposal of long-term equity investment in a subsidiary without loss of control" (see 22 Long-term equity investments (2) 4) under Note V for details) or the "loss of control over a subsidiary due to partial disposal of equity investment or other reasons" (see the previous paragraph for details). If those transactions are package deals, each transaction shall be treated as a transaction that results in loss of control of the subsidiary in accounting processing. However, the difference between each disposal price before loss of control and the Parent Company's share of the subsidiary's net assets corresponding to the disposal investment shall be recognized as other comprehensive income in the consolidated financial statements and, upon loss of control, transferred to the profit and loss of the current reporting period.

7. Classification of joint operation arrangements and accounting treatment methods for joint operations

None

8. Criteria for recognition of cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits that can be used for payment at any time, and short-term (due within three months from the acquisition date) investment held by the Company with high liquidity, easy to convert to cash in a known amount, and small risk of value changes.

9. Translation of transactions and financial statements denominated in foreign currencies

(1) Methods for translation of transactions denominated in foreign currencies

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At the initial recognition of foreign currency transactions of the Company, foreign currency will be translated into the amount of standard currency for accounting at the spot exchange rate or its approximate exchange rate on the transaction date. However, the business of exchange of foreign currencies or transactions related to the exchange of foreign currencies, foreign currency will be translated into the amount of standard currency for accounting at the exchange rate actually adopted.

(2) Methods for translation of monetary and non-monetary items in foreign currencies

On the balance sheet date, the foreign currency monetary items are translated at the spot exchange rate on that date. Exchange difference resulting from the difference between the spot exchange rate on the balance sheet date and that at the initial recognition or on the previous balance sheet date shall be recognized as the profit and loss of the current period.

Non-monetary items that are measured at historical cost in foreign currencies shall still be converted at the spot exchange rate on the transaction date with the amount of standard currency for accounting unchanged. Non-monetary items that are measured at fair value in foreign currencies are translated using the foreign exchange rate at the date the fair value is recognized. The difference between the amount of standard currency for accounting after translation and the original amount of the standard currency for accounting shall be treated as a change in fair value (including the change in the exchange rate) and recognized as the profit and loss of the current period or other comprehensive income.

(3) Methods for translation of foreign-currency financial statements

Foreign-currency financial statements of overseas operations shall be translated into RMB financial statements by the following methods: The assets and liabilities in the balance sheet shall be converted at the spot exchange rate on the balance sheet date; except "undistributed profits", all the other owner's equity items are converted at the spot exchange rate at the time of occurrence. Income and expense items in the income statement shall be translated using the foreign exchange rates ruling at the dates of the transactions. Difference resulting from translation of foreign-currency financial statements by the above methods shall be recognized as other comprehensive income. Translation of comparative financial statements shall be subject to the above provisions.

10. Financial instruments

When the Company becomes a party to a financial instrument contract, the financial instrument is confirmed to be either financial assets or financial liabilities.

(1) Classification, recognition, and measurement of financial assets

According to the business model of managing financial assets and the contractual cash flow characteristics of financial assets, the Company classified financial assets into the following categories: financial assets measured at the amortized cost, financial assets measured at fair value through other comprehensive income and financial assets measured at fair value through profit and loss of the current period.

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Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair value through profit and loss of the current period, transaction costs are directly included in profit and loss of the current period. For other types of financial assets, related transaction costs are included in their initial recognized amounts. In terms of the accounts receivable or notes receivable arising from selling products or providing labor service without or not considering major financing component, the Company shall regard the expected consideration amount that it has rights to charge as the initial recognition amount.

1) Financial assets measured at amortized cost

For the business model where the Company manages the financial assets carried at amortized cost, the Company aims to charge the contract cash flows, and the characteristics of the contract cash flows of this kind of financial assets are consistent with the basic lending arrangements. That is, cash flows generated on specified dates are solely payments of principal and interest on the principal amount outstanding. This kind of financial assets are subsequently measured at amortized cost using the effective interest method. Gain or loss arising from amortization or impairment is recognized in profit and loss of the current period.

2) Financial assets measured at fair value through other comprehensive income

The business model for the Company to manage this type of financial assets aims at both obtaining the contract cash flows and selling the financial assets, and the characteristics of the contract cash flows of this kind of financial assets are consistent with the basic lending arrangements. The Company measures this kind of financial assets at fair value through other comprehensive income, but recognizes the impairment losses or gains, exchange profit and loss, and interest income calculated by the effective interest method as the profit and loss of the current period.

Additionally, the Company designates some non-tradable equity instruments as financial assets at fair value through other comprehensive income. The Company recognizes relevant dividend income from such financial assets as the profit and loss of the current period, and changes in fair value as other comprehensive income. When such financial assets are derecognized, the accumulated gains or losses previously recognized as other comprehensive income shall be transferred from other comprehensive income to retained earnings and not recognized as the profit and loss of the current period.

3) Financial assets measured at fair value through profit and loss of the current period

All financial assets other than the other two preceding types are classified as financial assets measured at fair value through profit and loss of the current period. Moreover, at initial recognition, to eliminate or significantly reduce accounting mismatches, the Company may designate some financial assets as financial assets measured at fair value through profit and loss of the current period. Such financial assets shall be measured at fair value, and changes in fair value are recognized as the profit and loss of the current period.

(2) Classification, recognition, and measurement of financial liabilities

At initial recognition, financial liabilities are classified into financial liabilities measured at fair value through

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profit or loss and other financial liabilities. For financial liabilities at fair value through profit and loss of the current period, transaction costs are directly included in profit and loss of the current period. For other types of financial liabilities, related transaction costs are included in their initial recognized amounts.

1) Financial liabilities measured at fair value through profit and loss of the current period

Financial liabilities measured at fair value through profit and loss of the current period include tradable financial liabilities (including derivatives belonging to financial liabilities) and financial liabilities designated to be measured at fair value through profit and loss of the current period at initial recognition.

Tradable financial liabilities (including derivatives that are financial liabilities) are subsequently measured at fair value, and changes in fair value -- except for those related to hedging accounting -- are recognized as profit and loss of the current period.

For those that are designated as financial liabilities measured at fair value through profit or loss, the changes in fair value resulting from changes in the credit risk of the Company shall be recognized as other comprehensive income; besides, when such liabilities are derecognized, the amount of accumulative changes in fair value resulting from credit risk changes that are recognized as other comprehensive income shall be transferred to retained earnings. Other changes in fair value shall be recognized as the profit and loss of the current period. If the treatment of the credit risk changes in such financial liabilities by the above methods will result in expansion of the accounting mismatch in the profit and loss, the Company shall recognize all gains or losses in such financial liabilities (including the amount subject to the credit risk changes of the Company) as the profit and loss of the current period.

2) Other financial liabilities

Except for financial liabilities resulting from financial asset transfers not meeting the conditions for derecognition or the continuous involvement in the transferred financial asset, or financial guarantee contracts, other financial liabilities shall be classified into the financial liabilities measured at amortized cost, which shall be subsequently measured at amortized cost, and the gains or losses resulting from derecognition or amortization shall be recognized as the profit and loss of the current period.

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

Once one of the following conditions is met, the financial assets shall be derecognized: 1) The contract right to charge the cash flows of the financial assets is terminated; 2) the financial assets have been transferred, and almost all the risks and rewards of the ownership of the financial assets are transferred to the transferee; 3) the financial assets have been transferred, and the Company has given up the control over the financial assets although it does not transfer or retain almost all the risks and rewards of the ownership of the financial assets.

If the Company has neither transferred nor retained almost all the risks and rewards of the ownership of the financial assets, and the Company does not waive its control of the financial assets, it shall recognize the relevant financial assets within the extent of its continuous involvement in the transferred financial assets and recognize

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the relevant liabilities. The continuous involvement in the transferred financial assets refers to the level of risk with which the Company is faced due to changes in the financial asset values.

When overall transfer of financial assets meets the conditions for derecognization, the book value of the transferred financial assets and the difference between the consideration received due to transfer and the accumulative changes in fair value that is originally recognized as other comprehensive income shall be recognized as the profit and loss of the current period.

When partial transfer of financial assets meets the conditions for derecognization, the book value of the transferred financial assets shall be apportioned to the fair value between the derecognized part and the recognized part, and the consideration received due to transfer and the difference between the accumulative changes in fair value that is originally recognized as other comprehensive income, which shall be apportioned to the derecognized part, and the apportioned book value as mentioned above shall be recognized as the profit and loss of the current period.

When the Company sells financial assets with additional recourse or transfers the endorsed financial assets held, it shall check whether almost all the risks and rewards of the ownership of the financial assets are transferred. If the Company has transferred almost all the risks and rewards of the ownership of the financial assets to the transferee, it shall derecognize the financial assets; if the Company retains almost all the risks and rewards of the ownership of the financial assets, it shall not derecognize the financial assets; if the Company neither transfers nor retains almost all the risks and rewards of the ownership of the financial assets, it shall judge whether it has retained control over the assets and conduct accounting processing following the principles described in previous paragraphs.

(4) Derecognition of financial liabilities

If current obligations of the financial liabilities (or some of the liabilities) have been released, the Company shall derecognize the financial liabilities (or some of the liabilities). Where the Company (borrower) and a lender sign an agreement to replace the existing financial liability by way of assumption of new financial liability with the terms of the new financial liability substantially different from those of the existing financial liability, it derecognizes the existing financial liability while recognizing the new financial liability. If the contract terms of the existing financial liability are materially changed in whole (or in part), the existing financial liability will be derecognized, and the financial liability after changes of terms will be recognized as a new financial liability.

If a financial liability is derecognized in whole (or in part), the difference between the book value of the derecognized portion and the consideration paid (including the non-cash assets transferred out or the new financial liability assumed) is recognized as the profit and loss of the current period.

(5) Offsetting financial assets and financial liabilities

When the Company has the statutory right to offset the recognized amount of financial assets and financial liabilities, and this statutory right is currently enforceable, and the Company plans to net the financial assets or

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simultaneously realize the financial assets and pay off the financial liabilities, the financial assets and financial liabilities are presented in the balance sheet at the net amount after offsetting each other. Otherwise, financial assets and financial liabilities are presented separately in the balance sheet and are not offset against each other.

(6) Methods for determining the fair value of financial assets and financial liabilities

The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If there are active markets for a financial instrument, the Company establishes its fair value by using quotes in the active markets. Quotes in active markets refer to prices that are readily available on a regular basis from exchanges, brokers, trade associations, pricing service institutions, etc., and represent the prices of market transactions that actually occur in a fair trade. If there is no active market, the Company establishes fair value by using valuation techniques. Valuation techniques include reference to price used in recent market transactions between knowledgeable, willing parties, reference to the current fair value of other financial instruments that are substantially the same, discounted cash flow analysis, option pricing models, etc. During valuation, the Company adopts the valuation techniques that are applicable under current circumstances and supported by sufficient available data and other information, selects the input values that are consistent with the characteristics of the assets or liabilities considered by the market participants in the transaction of the relevant assets or liabilities, and preferentially uses the relevant observable inputs. Unobservable input values are used where the relevant observable input values are not available or are not practicable.

(7) Equity instruments

An equity instrument refers to a contract that can prove the Company owns the remaining equity in the assets after deducting all liabilities. The Company's issuance (including refinancing), repurchase, sales or cancellation of equity instruments are treated as changes in equities, and transaction costs related to equity transactions are deducted from equities. The Company does not recognize changes in the fair value of equity instruments.

Where equity instruments of the Company distribute dividends in its duration (including “interests” generated by instruments classified as equity instruments), it shall be treated as profit distribution.

(8) Impairment of financial assets

The financial assets for which the Company needs to recognize impairment losses are financial assets measured at amortized cost, debt instrument investments measured at fair value through other comprehensive income, and lease receivables, mainly including notes receivable, accounts receivable, and other receivables. In addition, for some financial guarantee contracts, impairment reserves are set aside and credit impairment losses are recognized as per the accounting policies described in this section.

1) Methods for recognizing impairment reserves

Based on the expected credit loss, the Company sets aside provisions for impairment of the above items by methods (general method or simplified method) for measuring expected credit loss applicable to them and

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recognizes credit impairment loss.

Credit loss refers to the difference between all contract cash flow receivables discounted at the original effective interest rate under the contract and all expected cash flow receivables, i.e., the present value of all cash shortages. Specifically, for financial assets that have been credit-impaired at the time of purchase or origin, the Company discounts the financial assets at the credit-adjusted actual interest rate.

The general method for measuring expected credit loss means that the Company assesses on each balance sheet date whether the credit risk of financial assets has increased significantly since the initial recognition. If yes, the Company measures loss reserves at an amount equivalent to the expected credit loss in the entire duration; if not, the Company measures loss reserves at an amount equivalent to the expected credit loss in the next 12 months. The Company considers all reasonable and evidence-based information, including forward-looking information, when assessing expected credit loss;

As for financial instruments with low credit risk on the balance sheet date, the Company measures the loss reserves according to the expected credit loss in the future 12 months, assuming that its credit risk has had no significant increase since its initial recognition. The Company chooses to measure loss reserves according to the expected credit loss in the next 12 months or in the entire duration based on whether the credit risk has increased significantly since initial recognition.

2) Standards for judging whether credit risk has increased significantly since initial recognition

If the probability of default (PD) of a financial asset in the expected duration recognized on the balance sheet date is significantly higher than that in the expected duration recognized at the time of initial recognition, the credit risk of the financial asset has increased significantly. Except for special circumstances, the Company determines whether credit risk has increased significantly since initial recognition by reasonably assessing the changes in the PD in the entire duration with the changes in the coming 12 months.

3) Portfolio method for assessing expected credit risk based on portfolios

The Company assesses individual credit risk of financial assets with significantly different credit risks. Examples include the following: receivables from related parties; receivables that have disputes with counterparties or those involved in litigation or arbitration; there are obvious signs that the debtor is very unlikely to fulfill the repayment obligation.

In addition to financial assets whose individual credit risk is assessed, the Company divides financial assets into different groups based on common risk characteristics, and assesses credit risk on a portfolio basis.

4) Accounting treatment methods for impairment of financial assets

At the end of the reporting period, the Company calculates the expected credit loss of financial assets. If the expected credit loss is greater than the book value of its current impairment provisions, the difference is recognized as an impairment loss; if it is less than the current book value of the impairment provisions, the difference is recognized as impairment gains.

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5) Methods for recognizing credit losses of financial assets

a. Notes receivable

The Company measures loss reserves for notes receivable at an amount equivalent to expected credit loss in the entire duration. The Company divides notes receivable into different portfolios based on their credit risk characteristics:

Item	Basis for determining the portfolio
Banker's acceptance	Acceptors are banks with low credit risks.
Trade acceptance	The aging of trade acceptance is used as credit risk characteristics.

b. Accounts receivable

The Company measures loss reserves for accounts receivable without major financing component at an amount equivalent to expected credit loss in the entire duration.

The Company measures loss reserves for accounts receivable and lease receivables with major financing component at an amount equivalent to expected credit loss in the duration.

Except for accounts receivable whose individual credit risk is assessed, the Company divides accounts receivable into different portfolios based on their credit risk characteristics:

Item	Basis for determining the portfolio
Aging portfolio	This portfolio uses aging of accounts receivable as credit risk characteristics.
Related party portfolio	This portfolio comprises amounts of related parties within the consolidated scope.

c. Other receivables

The Company adopts the amount equivalent to the expected credit loss in the coming 12 months or in the entire duration to measure impairment losses based on whether the credit risk of other receivables has increased significantly since initial recognition. Except for other receivables whose individual credit risk is assessed, the Company divides other receivables into different portfolios based on their credit risk characteristics:

Item	Basis for determining the portfolio
Aging portfolio	This portfolio uses aging of other receivables as credit risk characteristics.
Related party portfolio	This portfolio comprises amounts of related parties within the consolidated scope.

11. Notes receivable

For details, please refer to 10. Financial instruments in V. Significant Accounting Policies and Accounting Estimates of Section XII.

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12. Accounts receivable

For details, please refer to 10. Financial instruments in V. Significant Accounting Policies and Accounting Estimates of Section XII.

13. Accounts receivable financing: None

14. Other receivables

Recognition methods and accounting treatment methods for expected credit loss in other receivables

For details, please refer to 10. Financial instruments in V. Significant Accounting Policies and Accounting Estimates of Section XII.

15. Inventories

(1) Classification of inventories

Inventories mainly include raw materials, goods in process, materials for consigned processing, commodity stocks, packages, and low-value consumables.

(2) Pricing methods for inventory acquisition and delivery

Inventories are priced at actual cost when they are acquired. Inventory costs include procurement costs, processing cost, and other costs. Inventories are priced by the weighted average method during receipt and delivery.

(3) Methods for recognition of the net realizable value of inventories and the provisions for impairment of inventories

The net realizable value refers to the amount of the estimated selling price of the inventory minus the estimated cost, estimated selling expenses, and related taxes and fees at the time of completion in daily activities. When recognizing the net realizable value of inventories based on the substantial evidence obtained, the Company also considers the purpose of holding the inventories and the impact on matters after the balance sheet date.

On the balance sheet date, inventories are measured at the lower of costs and the net realizable value. When the net realizable value is lower than costs, the Company sets aside provisions for inventory impairment. Provisions for inventory impairment are set aside based on the difference between the cost of individual inventory item and its net realizable value.

After provisions for the inventory impairment are set aside, if the influencing factors in previous write-down of the inventory value disappear, causing the net realizable value of the inventory to be higher than its book value, it shall be reversed within the amount of the provisions for inventory impairment that have been set aside and recognized as the profit and loss of the current period.

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(4) The perpetual inventory system is adopted for the inventories.

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

The one-time amortization method is adopted for low-value consumables and packages upon receipt.

16. Contract assets: None

17. Contract costs: None

18. Assets held for sale

The Company classifies non-current assets or a disposal group as held for sale (including exchange of non-monetary assets with commercial substance, the same below) if their book values are recovered principally through disposal rather than through continuing use. Specifically, the following conditions shall be met simultaneously: A certain non-current asset or disposal group can be sold immediately under the current conditions according to the practice of selling such assets or disposal groups in similar transactions; the Company has made a resolution of an offer and obtained the purchase commitment; the sale is expected to be completed within one year. Among them, the disposal group refers to a group of assets that are disposed of as a whole through sale or other means in a transaction, and the liabilities directly related to these assets that are transferred in the transaction. If the asset group or the combination of asset groups to which the goodwill (obtained from business combination) has been allocated in accordance with the Accounting Standards for Business Enterprises No. 8 -- Impairment of Assets , the disposal group shall include the goodwill allocated to it.

During initial measurement or re-measurement of the non-current assets and disposal groups classified into held-for-sale assets on the balance sheet date, if the book value of such assets is higher than the net value deducting the cost of offer, the book value is written down to the recoverable amount by the Company, the written-down amount is recognized as profit and loss of the current period and impairment provisions are set aside at the same time. For the disposal group, the recognized asset impairment loss is first deducted from the book value of the goodwill in the disposal group, and then deducted in proportion from the book value of non-current assets specified in the applicable Accounting Standards for Business Enterprises No. 42 - Non-Current Assets and Disposal Groups Held for Sale and Discontinued Operations (hereinafter referred to as the "Standards for Assets Held for Sale"). If the fair value of the disposal group held for sale on the subsequent balance sheet date increases after deducting the selling expenses, the previously written down amount shall be restored, and reversed within the amount of the asset impairment losses recognized for non-current assets as per the Standards for Assets Held for Sale applicable after the assets are classified into those held for sale, and the reversed amount shall be recognized as the profit and loss of the current period. Besides, the book value of the reversed amount shall be increased in proportion according to the proportion of the book value of the non-current assets specified in the

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Standards for Assets Held for Sale applicable to those except for the goodwill in the disposal group. The book value of the goodwill that has been deducted, and the asset impairment losses recognized before the non-current assets are classified into assets held for sale as per the Standards for Assets Held for Sale shall not be reversed.

Non-current assets held for sale and non-current assets in the disposal group are not subject to depreciation or amortization. Interest and other expenses on liabilities in the disposal group held for sale continue to be recognized.

When the non-current assets or disposal group no longer meets the conditions for classification into the assets held for sale, the Company no longer classifies them into the category or removes the non-current assets from the disposal group held for sale, and measures them at the lower of the following two: (1) in terms of the book value before classification into assets held for sale, for which the measurement standard is the amount after adjustment according to the depreciation, amortization, or impairment that should have been recognized under the assumption that they are not classified into assets held for sale; and (2) the recoverable amount.

19. Investments in creditor's rights: None

20. Other investments in creditor's rights: None

21. Long-term receivables: None

22. Long-term equity investments

The long-term equity investments herein refer to the long-term equity investments in which the Company has control, joint control, or significant influence on the investee. Long-term equity investments where the Company has no control, joint control, or significant influence on the investee are accounted as financial assets measured at fair value through profit and loss of the current period. Among them, for those that are non-tradable, the Company may choose to designate them as the financial assets measured at fair value through other comprehensive income for accounting during initial recognition. See "Note V (10)" for their detailed accounting policies.

Joint control refers to the common control over a particular arrangement according to relevant agreement, and that the decisions on relevant activities under such arrangement are subject to the unanimous consent from the parties sharing the joint control. Significant influence means having the power to participate in the financial and operating policy decision-making of the investee, but cannot control or, together with other parties, jointly control the formulation of these policies.

(1) Determination of investment cost

For long-term equity investments obtained from combination of enterprises under common control, the share of the combined party’s owner's equity in the book value of the consolidated financial statements of the final

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controlling party which is acquired on the combination date shall be regarded as the initial investment cost for long-term equity investments. The capital reserves shall be adjusted if there is difference between the initial investment cost of long-term equity investment and the cash paid, the transferred non-cash assets, and the book value of the debts assumed; if the capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the equity securities issued are used as the combination consideration, the share of the combined party's owner's equity in the book value of the consolidated financial statements of the final controlling party which is acquired on the combination date shall be regarded as the initial investment cost for long-term equity investments; the total book value of the shares issued shall be the share capital; the capital reserves shall be adjusted if there is difference between the initial investment cost of long-term equity investments and the total book value of the shares issued; if the capital reserves are insufficient to balance the difference, retained earnings shall be adjusted.

For long-term equity investments obtained from combination of enterprises under different control, the combination costs on the acquisition date shall be used as the initial investment costs of the long-term equity investment; the combination costs include the sum of the assets paid by the acquirer, the liabilities incurred or assumed, and the fair value of the equity securities issued.

Intermediary expenses such as auditing, legal services, assessment and consulting and other related management expenses incurred by the combining party or acquirer for the business combination shall be recognized as the profit and loss of the current period.

Other equity investments except for long-term equity investments formed via business combination are initially measured at cost. Subject to the way the long-term equity investments are obtained, the costs shall be recognized based on the cash actually paid by the Company for acquisition, the fair value of the equity securities issued by the Company, the value agreed in the investment contract or agreement, the fair value or original book value of the assets swapped out in a non-monetary asset exchange transaction, and the fair value of the long-term equity investment itself. Expenses, taxes, and other necessary expenditures directly related to acquisition of long-term equity investments are also recognized as investment costs.

(2) Subsequent measurement and recognition of profit and loss

If the Company has common control or significant influence over the investee (except for constituting co-proprietors), the long-term equity investment shall be accounted for by using the equity method. Additionally, the Company’s financial statements apply the cost method for long-term equity investments that can make control in the investee

1) Long-term equity investments accounted for using the cost method

When the cost method is used, the long-term equity investments are calculated according to the initial investment cost. In the event that the investment is added or recovered, the cost of the long-term equity investments shall be adjusted. With the exception of the price actually paid at the acquisition of investment or cash dividends or profits

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included in consideration, declared but not issued yet, the return on investment of the current period shall be recognized according to the cash dividends or profits declared to be issued by the investee.

2) Long-term equity investments accounted for using the equity method

When using equity method, if the initial investment cost of long-term equity investments is greater than the fair value share of the identifiable net assets entitled of the investee at the time of investment, the initial investment of the long-term equity investments shall not be adjusted. If the initial investment cost of long-term equity investments is lower than the fair value share of the identifiable net assets entitled of the investee at the time of investment, the difference shall be recognized as profit and loss of the current period and the cost of the long-term equity investments shall be adjusted at the same time.

When the equity method is used, return on investment and other comprehensive income shall be respectively determined based on the share of net profit or loss and other comprehensive income realized by the investee that shall be attributable or assumed, and the book value of long-term equity investments shall be adjusted at the same time. Attributable share shall be calculated based on the profit or cash dividends declared by the investee and the book value of long-term equity investments shall be accordingly decreased. In respect to other changes of owner's equity of the investee in addition to net profit or loss, other comprehensive income and profit distribution, the book value of long-term equity investments shall be adjusted and recognized as capital surplus. When confirming the share of the investee's net profit and loss, the Company shall confirm the investee's net profit after adjustment based on the fair value of the identifiable net assets of the investee at the acquisition of the investment. Where the accounting policy and accounting period adopted by the investee differs from those of the Company, the investee's financial statements shall be adjusted according to the Company's accounting policy and accounting period, and the return on investment and other comprehensive income shall be recognized accordingly. Where the transactions are between the Company and the associates and joint ventures, and the assets that are invested or sold do not constitute business, unrealized internal transaction profits and losses incurred between the Company and the associates and joint ventures shall be offset with the part attributable to the Company which is calculated on a due pro-rata basis, and the return on investment shall be recognized on this basis. However, unrealized internal transaction losses incurred between the Company and the investees shall not be offset if they fall under the impairment losses on assets transferred.

When confirming the limit of net loss incurred by the investee, the limit is the extent that the book value of the long-term equity investments and other long-term equity that substantially constitutes a net investment in the investment target is written down to zero. Additionally, if the Company has obligations to assume additional losses of the investee, provisions are recognized according to the expected obligation, and recognized as investment losses for the period. Where the investee records net profit in the future, the Company resumes and recognizes the profit-sharing amount after such amount makes up the unrecognized loss-sharing amount.

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23. Investment property

Measurement model for investment property

Measurement by the cost method

Depreciation or amortization method

Investment properties are real estate held to generate rental income or earn capital gains or both. Investment properties include land use rights leased out, land use rights held for transfer after appreciation, buildings leased out, etc.

Investment property is initially measured at cost. Subsequent costs are included in the investment property's cost only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably; other subsequent costs are recognized as profit and loss of the current period when incurred.

The Company adopts the cost model for subsequent measurement of investment property, and depreciates or amortizes it according to policies consistent with those for buildings or land use rights.

Impairment test method and impairment provision method for investment property are detailed in "Note V (31)".

Investment properties are derecognized when they are disposed of or permanently withdrawn from use and it is expected that no economic benefit can be generated from its disposal. The income from selling, transferring, writing off or destroying investment property, less its book value and relevant taxes and fees, is recognized as profit and loss of the current period.

24. Fixed assets

(1) Recognition conditions

Fixed assets are tangible assets with a useful life of more than one accounting year that are held for production or supply of goods or labor services, for rental to third parties, or for use in the organizations.

Fixed assets shall only be recognized when relevant economic interest may flow into the Company and costs thereof can be reliably measured. Fixed assets shall be initially measured at cost and by taking into account the impact of estimated disposal expense.

(2) Depreciation method

Type	Depreciation method	Depreciation life	Residual value rate	Annual depreciation rate
Properties and buildings	Straight-line depreciation	10 to 30 years	5%. 10%	3.00%, 3.17% to 9.00%,

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				9.50%
	Straight-line depreciation			4.50%, 4.75% to 45.00%,
Equipment		2 to 20 years	5%. 10%
				47.50%

	Straight-line depreciation			6.43%, 6.79% to 18.00%,
Motor vehicles		5 to 14 years	5%. 10%
				19.00%

	Straight-line depreciation			11.25%, 11.88% to
Office equipment		3 to 8 years	5%. 10%
				30.00%, 31.67%

	Straight-line depreciation			18.00%, 19.00% to
Production equipment		2 to 5 years	5%. 10%
				45.00%, 47.50%

Estimated residual value refers to the current amount where, supposed the service life of a fixed asset has expired and it is in the expected status of such expiration, the Company obtains from the disposal of such asset after the estimated disposal expense is deducted.

(3) Determination basis, pricing method and depreciation method of fixed assets acquired under finance leases

Leases of assets where substantially all the risks and rewards of ownership have been transferred are classified as finance leases. Title may or may not eventually be transferred. The fixed asset leased in through finance leases adopts the same depreciation policy self-owned fixed assets. If it can be reasonably ascertained that the ownership of the asset leased can be obtained by the expiration of the tenancy, the asset is depreciated over its service life; if not, the asset is depreciated over the shorter of the tenancy and the service life of the leased asset.

25. Construction work in process

Construction work in progress is measured at actual project expenditure, comprising project expenditure incurred during construction and other necessary cost incurred.

The Company's Construction work in progress is transferred to fixed assets when the assets are ready for their intended use. If the fixed assets under construction have reached the expected usable status but have not yet completed the final account for completed project, they shall be recognized as fixed assets according to the estimated value, and accrue depreciation. After the completion of the final account for completed project, the original estimated value is adjusted according to the actual cost, but the original accrued depreciation amount is not adjusted.

Impairment test method and impairment provision method for Construction work in progress are detailed in "Note V (31)".

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26. Borrowing costs

Borrowing costs include interest on borrowings, amortizations of discounts or premiums, incidental expenses, exchange difference resulting from foreign-currency borrowings, etc. The borrowing costs that can be directly attributable to the acquisition, construction or production of an asset eligible for capitalization shall be capitalized if the capital expenditures have been incurred, the borrowing costs have been incurred, or the necessary purchase, construction or production activities to make the asset reach the expected available or marketable state have begun. When the assets with the purchase, construction or production meeting the capitalization conditions reach the expected available or marketable state, they cease to be capitalized. Any other borrowing costs are recognized as an expense in the period when they are incurred.

The amount of interest that shall be capitalized is determined based on the interest expenses incurred in the period when a specifically borrowed fund is obtained less any income earned on the unused borrowing fund as a deposit in a bank or as a temporary investment. Where funds are borrowed for a general purpose, the amount of interest that shall be capitalized is determined by multiplying the part of the accumulative asset disbursements in excess of the weighted average asset disbursement for the specifically borrowed fund by the capitalization rate of the general borrowing used. The capitalization rate is the weighted average interest rates applicable to the general-purpose borrowings.

During the capitalization, all exchange differences arising from earmarked foreign-currency borrowings shall be capitalized; exchange differences arising from general-purpose foreign-currency borrowings shall be recognized as profit and loss of the current period.

Assets eligible for capitalization refer to assets such as fixed assets, investment real estates and inventories that can reach the expected available or marketable status after a long period of purchase, construction or production

activities.

If the acquisition, construction or production of an asset eligible for capitalization is continuously suspended for over three months for abnormal reasons, capitalization of the borrowing costs shall be suspended, until the acquisition, construction or production of the asset is resumed.

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27. Biological assets: None

28. Oil & gas assets: None

29. Right-of-use assets: None

30. Intangible assets

(1) Pricing method, service life, and impairment test

Intangible assets refer to identifiable non-monetary assets without physical substance owned or controlled by the Company.

Intangible assets are initially measured at cost. Costs of intangible assets are included in intangible assets' book value, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Other costs of intangible assets are recognized as profit and loss of the current period when incurred.

Land use rights acquired are generally accounted for as intangible assets. With respect to self-built buildings including plants, the relevant land use right expenses and buildings' construction costs are accounted for as intangible assets and fixed assets, respectively. For purchased houses and buildings, the price paid is distributed between the land use right and the building. If it is difficult to distribute, it shall all be included in fixed assets.

From the beginning of use of intangible assets with finite service life, the accumulated amount of the original value less estimated net residual value and the provisions for asset impairment set aside shall be amortized evenly in stages by straight-line method over their service life. Intangible assets with uncertain service lives are not amortized.

The Company reviews the service life and amortization method of intangible asset with finite service life at the end of the reporting period, and a change therein (if any) shall be accounted for as a change in accounting estimates. Additionally, the Company reviews the service life and amortization method of intangible asset with uncertain service life. If there is evidence that the period when it brings economic benefits to the enterprise is foreseeable, its service life shall be estimated and it is amortized according to the amortization policy for intangible assets with finite service life.

Impairment test method and impairment provision method for intangible assets are detailed in "Note V (31)".

(2) Accounting policy for expenditure on internal research and development

The Company classifies the expenditure on an internal research and development project into expenditure on the research phase and expenditure on the development phase.

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Expenditure on the research phase is recognized as profit and loss of the current period when incurred.

Expenditure on the development phase is recognized as intangible asset when all the following criteria are met, while expenditure in the development phase that does not meet the following criteria is recognized as profit and loss of the current period when incurred:

1) technically feasible to complete the intangible asset so that it will be available for use or sale;

2) the intention to complete the intangible asset and use or sell it;

3) how the intangible asset will generate probable future economic benefits. Among other things, the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;

4) the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset;

5) the ability to measure reliably the expenditure attributable to the intangible asset during the development. Where the expenditure on research and development incurred cannot be classified into the expenditure on research phase or the expenditure on development phase, it shall be recognized as profit and loss of the current period when incurred.

31. Long-term asset impairment

The Company determines on the balance sheet date whether there is any indication that the non-current and non-financial assets may have been impaired, including fixed assets, construction work in progress, intangible assets with limited service life, and investment properties measured using the cost model, and long-term equity investments in subsidiaries, joint ventures and associates. If there is any indication that the asset is likely to be impaired, the Company will estimate the recoverable amount and carry out the impairment test. Impairment tests shall be conducted each year for goodwill and intangible assets with uncertain service life and not yet in use, whether or not there is any indication of impairment.

If an impairment test shows that the recoverable amount of an asset is lower than its book value, the difference is recognized as a provision for impairment and recognized as the impairment loss. The recoverable amount is determined based on the higher of the net amount of the fair value of the asset minus the disposal expenses and the present value of the expected future cash flow of the asset. The fair value of asset is determined according to the price of the sales agreement in fair trade. If there is no sales agreement but an active market for the asset, the fair value is determined according to the price offered by the buyer for the asset. If there is neither sales agreement nor active market for the asset, the fair value of the asset shall be estimated based on the best information available. The disposal costs include legal fees, relevant taxes and fees, as well as handling fees related to the disposal of asset, and the direct costs incurred to ensure the asset reaches the marketable state. The present value of the expected future cash flow of an asset shall be determined by the discounted cash at an appropriate discount

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rate, on the basis of the expected future cash flow generated during the continuous use or final disposal of an asset. Provisions for asset impairment are calculated and recognized on an individual basis. If it is difficult to estimate the recoverable amount of individual assets, the Company will determine the recoverable amount of the asset group on the basis of the asset group to which the asset belongs. Asset group refers to the smallest asset portfolio which can independently generate cash inflows.

When an impairment test is performed on the goodwill separately listed in the financial statement, book value of such goodwill is apportioned to the asset group or combination of asset groups that can benefit from the synergy effect of business combination. If the test result shows that the recoverable amount of the asset group or combination of asset groups is lower than their book value, corresponding impairment losses on goodwill will be recognized. The impairment loss shall first offset against the book value of goodwill that is apportioned to asset group or a combination of asset groups, and then offset against the book value of assets excluding goodwill in the asset group or the combination of asset groups on a pro-rata basis according to the proportion of their book value. Once the aforementioned asset impairment loss is recognized, it will not be reversed in subsequent accounting periods even if the value can be recovered.

32. Long-term unamortized expenses

Long-term unamortized expenses are expenses which have been incurred but shall be amortized over a period longer than one year, including the reporting period and the future periods. Long-term unamortized expenses shall be amortized based on the straight-line method over the expected benefit period.

33. Contract liabilities

A contract liability is the Group's obligation to transfer goods or services to a customer for which the Group has received consideration from the customer.

Contract assets and liabilities within a single contract should be presented on a net basis. If the net amount is debit balance, it shall be presented in the item of "contract assets" or "other non-current assets" based on its liquidity. If the net amount is credit balance, it shall be presented in the item of "contract liabilities" or "other non-current liabilities" based on its liquidity.

34. Employee remuneration

(1) Accounting treatment method for short-term remuneration

Short-term remuneration includes salaries, bonuses, allowances and subsidies, employee welfare, medical insurance fees, maternity insurance fees, employment injury insurance fees, housing provident funds, labor union

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fees, staff education funds, and non-monetary welfare. The Company shall, within the accounting period when its employees provide service, recognize actual short-term remuneration as liabilities which shall be recognized as profit and loss of the current period or relevant asset costs. Wherein, non-monetary benefits are measured at fair value.

(2) Accounting treatment method for post-employment benefits

Post-employment benefit includes basic endowment insurance, unemployment insurance, etc. It also includes defined contribution plans. Where defined contribution plans are adopted, the corresponding amount payable shall be recognized as profit and loss of the current period or relevant asset costs in which it is incurred.

(3) Accounting treatment method for dismissal benefits

If the Company terminates the labor relationship with an employee before the employee's labor contract expires, or proposes to give the employee compensation for encouraging the employee to voluntarily accept dismissal, the liabilities arising from the compensation giving to the employee for the termination of the labor relationship with the employee shall be recognized as profit and loss of the current period, when the Company cannot unilaterally withdraw the termination of the labor relationship plan or the dismissal proposal, or when it recognizes the costs related to the restructuring of the payment of the dismissal benefits, whichever is earlier. However, if it is expected that the dismissal benefits cannot be paid in full within twelve months after the end of the annual reporting period, they shall be accounted for according to other long-term employee remunerations.

Internal retirement schemes for employees shall be accounted for following the same principles of the above dismissal benefits. Where the salaries and social insurance fees of early retirees to be paid by the Company from the date when employees stop providing services to the normal retirement date meet the recognition conditions for projected liabilities, they shall be recognized as profit and loss of the current period.

(4) Accounting treatment method for other long-term employee benefits

Other long-term benefits provided by the Company to employees that meet the conditions of the defined contribution plan are accounted for in accordance with the defined contribution plan; other long-term benefits are accounted for in accordance with the defined benefit plan.

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35. Lease liabilities: None

36. Provision

An obligation related to contingent issues and meeting the following conditions shall be deemed a provision: (1) such an obligation is a current one assumed by the Company; (2) fulfilling such an obligation might cause economic benefits to flow out of the Company; and (3) the amount of such an obligation is measurable reliably. On the balance sheet date, a provision is measured at the best estimate of the expenditure required to settle the related present obligation, with comprehensive consideration of factors such as the risks, uncertainty and time value of money relating to a contingency.

A provision is separately recognized as an asset and the recognized compensation amount shall not exceed the book value of the provision, when all or part of the expenses required to pay off the provision are expected to be compensated by a third party and the amount of compensation is basically determined to be receivable.

37. Share-based payment

Share-based payment is the transaction made through granting equity instruments or bearing the liabilities recognized based on such instruments in exchange for services rendered by employees or other parties. The Company's share-based payment includes equity-settled share-based payment and cash-settled share-based payment.

(1) Equity-settled share-based payment

Where the share payment is settled through equity for acquisition of service from employees, it shall be measured at the fair value of the equity instruments granted to the employees. If the right cannot be exercised until the vesting period ends or until the prescribed performance conditions are met, the amount of such fair value shall, based on the best estimate of the number of vested equity instruments, be recognized as the relevant costs or expenses by straight-line method; if the right can be exercised immediately following the grant, the amount of such fair value shall be recognized as the relevant costs or expenses on the grant date, and the capital reserve shall be increased accordingly.

On each balance sheet date within the vesting period, the Company carries out the best estimation based on such follow-up information such as the variation of the number of vested staff acquired recently, and revises the number of estimated vested equity instruments. The impact of the above estimates shall be recognized as the relevant costs or expenses of the current period, and the capital reserve shall be adjusted accordingly. For an equity-settled share-based payment in return for the service of any other party, if the fair value of the service of any other party can be reliably measured, it shall be measured at the fair value of the service of any other party on the acquisition date; if the fair value of the service of any other party cannot be reliably measured,

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but the fair value of the equity instruments can be reliably measured, it shall be measured at the fair value of the equity instruments on the acquisition date and included in the relevant costs or expenses, and the shareholders' equity shall be increased correspondingly.

(2) Cash-settled share payment

The cash-settled share-based payment shall be measured at the fair value of the Company's liabilities determined based on shares or other equity instruments. If the right may be exercised immediately after the grant, relevant costs or expenses shall be recognized the grant date, and the liabilities shall be increased accordingly. If the right may not be exercised until the vesting period ends or until the specified performance conditions are met, on each balance sheet date within the vesting period, the services obtained in the current period shall, based on the best estimate of the information about the exercisable right, be recognized as the relevant costs or expenses at the fair value of the liability undertaken by the Company, and liabilities shall be increased accordingly.

The fair value of liabilities is re-measured and any change thereto is recognized as profit and loss of the current period on each balance sheet date and settlement date prior to settlement of the relevant liabilities.

38. Preference shares, perpetual bonds and other financial instruments: None

39. Revenue

Accounting policy for recognition and measurement of revenue

The revenue is recognized when the customers take control of the relevant goods or services if the contract between the Company and the customers meet all the following conditions: 1) the parties to the contract have approved such contract and undertake to perform their respective obligations; 2) the contract has specified the rights and obligations of the parties thereto and in connection with the transfer of goods or provision of labor services; 3) the contract sets out clear payment terms related to the transfer of goods; 4) the contract has commercial substance, meaning that the performance thereof will change the risk, time distribution or amount of the Company's future cash flow; 5) the Company is very likely to recover the consideration obtained by transferring goods to customers.

On the enforcing date of the contract, the Company identifies all individual performance obligations in the contract, and apportions the transaction price to each individual performance obligation according to the relative proportion of the individual selling price of the goods. When determining the transaction price, the Company has considered the impact of such factors including variable consideration, major financing component of the contract, non-cash consideration, and consideration payable to the customer.

With respect to each individual performance obligation of the contract, the Company will recognize the transaction price apportioned to such obligation as revenue based on the progress of performance during the relevant performance periods, if any of the following conditions is met: 1) the customer obtains and consumes the

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economic benefits brought by the Company's performance during such performance; 2) the customer can control the goods in progress during the Company's performance; 3) the goods produced from the Company's performance has irreplaceable use, and in respect of the portion of revenue arising from the Company's performance completed to date, the Company is entitled to collect revenue during the entire validity period of the contract. The progress of performance is determined according to the nature of the transferred goods using the input or output method. When such progress cannot be reasonably determined, if the costs incurred are expected to be compensated, the Company recognizes revenue based on the amount of costs incurred, until the progress of performance can be reasonably determined.

If none of the aforesaid conditions is met, the Company will recognize the transaction price apportioned to such individual performance obligation when the customer obtains the control over relevant goods. To decide whether the customer has obtained the control over goods, the Company takes into account the following indications: 1) the enterprise has the present right to collection for the goods, meaning the customer bears the present obligation to payment for the goods; 2) the enterprise has passed the legal title to the goods to the customer, meaning the customer has had the legal title to the goods; 3) the enterprise has transferred the physical possession of the goods to the customer, meaning the customer has had the physical possession of the goods; 4) the enterprise has transferred the major risks and remunerations concerning the title to the goods to the customer, meaning the customer has obtained the major risks and remunerations concerning the title to the goods; 5) the customer has accepted the goods; 6) other indications to show that the customer has obtained the control over the goods.

Generally, the Company’s business of goods selling only comprises the performance obligation of transferring the goods. The control of the goods is transferred when they are sent out and the Company receives the signed receipt and other documents from the customer, so the Company confirms the realization of revenue at that point in time. The discounts, rewards and other arrangements in some contracts between the Company and customers constitute variable consideration. The Company uses the expected value method or the most likely amount to determine the best estimates for variable consideration, but the transaction price containing variable consideration shall not exceed the amount of cumulatively recognized revenue that is unlikely to have major reversals when the relevant uncertainties are eliminated.

40. Government grants

Government grants are monetary or non-monetary assets acquired by the Company from the government free of charge, excluding the capital invested by the government as an investor and granted corresponding owner's equity. Government grants are classified into government grants related to assets and government grants related to income. The Company defines the government grants for purchasing or constructing or otherwise forming long-term assets as asset-related government grants; other government grants are defined as the income-related government grants. Government grants shall be measured at the amount received or receivable if they are

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monetary assets. Non-monetary government grants shall be measured at fair value; if the fair value cannot be reliably obtained, they shall be measured at the nominal amount. The government grants measured at the nominal amount shall be directly recognized as the profit and loss of the current period.

Asset-related government grants are recognized as deferred income, and included in the profit and loss of the current period in stages according to a reasonable and systematic method over the service life of the relevant assets. The income-related government grants shall be recognized as deferred income if they are used to compensate relevant expenses or losses in subsequent periods, and shall be recognized as profit and loss of the current period during the recognition of related expenses; the grants used to compensate related expenses or losses already incurred shall be directly recognized as profit and loss of the current period.

The government grants related to both assets and income shall be accounted for by distinguishing different parts; if it is difficult to distinguish, they shall be, as a whole, classified as income-related government grants.

Government grants related to the Company's daily activities shall be recognized as other profit and loss or write down relevant costs according to the essence of economic business; those unrelated to the Company's daily activities shall be recognized as non-operating income and expenditure.

If the recognized government grants need to be returned and there is relevant deferred income balance, the book balance of relevant deferred income shall be written off, and the excess shall be recognized as profit and loss of the current period; otherwise, government grants shall be directly recognized as profit and loss of the current period.

41. Deferred income tax assets/deferred income tax liabilities

(1) Current income tax

On the balance sheet date, the Company measures a current tax liability (or asset) arising from the current and prior periods based on the amount of income tax expected to be paid by the Company (or returned by tax authority) calculated by related tax laws. The taxable income which is the basis for calculation of the current income tax is calculated after appropriate adjustments to the pretax accounting profits for the reporting period.

(2) Deferred income tax assets and deferred income tax liabilities

For the difference between the book value of certain assets and liabilities and their tax bases, and the temporary differences between the book values and the tax bases of items, of which the tax bases can be determined for tax purposes according to the tax laws but which have not been recognized as assets and liabilities, the Company recognizes deferred income tax assets and deferred income tax liabilities using the balance sheet debt method.

Where the taxable temporary differences arise from the initial recognition of goodwill and the initial recognition of an asset or liability arising from the transaction that is not a business combination, nor, at the time of the transaction, affects neither accounting profit and taxable profit (or deductible loss), the relevant deferred income tax liability shall not be recognized. Additionally, in respect of taxable temporary difference associated with

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investments in subsidiaries, joint ventures and associates, where the Company can control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not be reversed in the foreseeable future, the relevant deferred income tax liability shall not be recognized. Other than the above exceptions, the Company shall recognize deferred income tax liabilities arising out from all other taxable temporary differences.

Where the deductible temporary differences arise from the initial recognition of an asset or liability arising from the transaction that is not a business combination, nor, at the time of the transaction, affects neither accounting profit and taxable profit (or deductible loss), the relevant deferred income tax liability shall not be recognized. Additionally, in respect of deductible temporary difference associated with investments in subsidiaries, joint ventures and associates, where it is probable that the temporary differences will not be reversed in the foreseeable future or taxable profit will not be available against which the deductible temporary differences can be utilized in the future, the relevant deferred income tax liability shall not be recognized. Other than the above exceptions, the Company recognizes a deferred tax asset for other deductible temporary differences, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized.

The tax effects of deductible losses and taxes available for carrying over are recognized as an asset when it is probable that future taxable profits would be available against which these losses can be utilized.

At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, according to the requirements of tax laws.

The book value of deferred tax assets is reviewed at the balance sheet date and written down to the extent that it is no longer probable that sufficient taxable profit will be available in future periods to allow the deferred tax assets to be utilized. Such write-down is reversed when it becomes probable that sufficient taxable profits will be available.

(3) Income tax expenses

Income taxes comprise current income tax and deferred income tax.

The current income tax and deferred income tax expense or income is recognized as the profit and loss of the current period except that the current income tax and deferred income tax is related to transactions or events, which are recognized as other comprehensive income or directly recognized as shareholders' equity, and thus recognized as other comprehensive income or shareholders' equity, and that the book value of goodwill is adjusted due to deferred income tax arising from business combination.

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42. Leases

(1) Accounting treatment method for operating lease

1) The Company records operating lease business as the lessee

Lease payments under an operating lease are recognized on a straight-line basis over the lease term, and recognized as the cost of the related asset or as profit and loss of the current period. Initial direct costs are recognized as the profit and loss of the current period. Contingent rentals are recognized as profit and loss of the current period when they are actually incurred.

2) The Company records operating lease business as the lessor

Lease income under an operating lease are recognized on a straight-line basis over the lease term, and recognized as profit and loss of the current period. The large-amount initial direct costs are capitalized when incurred, and recognized as profit and loss of the current period on the same basis as the recognized lease income over the lease term; the small-amount initial direct costs are recognized as profit and loss of the current period when incurred. Contingent rentals are recognized as profit and loss of the current period when they are actually incurred.

(2) Accounting treatment method for finance lease

Leases of assets where substantially all the risks and rewards of ownership have been transferred are classified as finance leases. Title may or may not eventually be transferred.

43. Other important accounting policies and accounting estimates: None

44. Significant changes of accounting policies and accounting estimates

(1) Significant changes of accounting policies

√ Applicable □ Not applicable

Contents and reasons for changes to	Approval procedure	Remarks
accounting policies
On July 5, 2017, the Ministry of Finance	On February 25, 2020, the Company	Details can be found in the_Announcement_
issued the revised A_ccounting Standards_	convened the 21st meeting of the fourth	on Changes to Accounting Policies
for Business Enterprises No. 14 -- Revenue	session of the Board of Directors and the	(Announcement No.: 2020-10) dated
(C.K. [2017] No. 22), requiring that	17th meeting of the fourth session of the	February 26, 2020 on CNINFO
enterprises listed both within the borders	Board of Supervisors, and approved the	(http://www.cninfo.com.cn).
and abroad as well as enterprises listed	Proposal on Changes to Accounting

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abroad and adopting IFRS or Accounting Standards for Business Enterprises to prepare financial statements should implement these revised Standards from January 1, 2018; other enterprises listed within China shall implement these revised Standards from January 1, 2020.	Policies.

1) Accounting policy changes resulted from the execution of the New Revenue Standards

The Ministry of Finance promulgated the Accounting Standards for Business Enterprises No. 14 –Revenue (C.K.

[2017] No. 22) (hereafter referred to as the “New Revenue Standards”) on July 5, 2017. Upon deliberation, the 21st meeting of the fourth session of the Board of Directors passed a resolution on February 25, 2020 that the Company would implement the New Revenue Standards from January 1, 2020.

The New Revenue Standards set up a new revenue recognition model to regulate revenues generated from

contracts with customers. In order to implement the New Revenue Standards, the Company reassessed the

recognition, measurement, accounting and presentation of revenues from major contracts. Pursuant to the New

Revenue Standards, the Company chose to only adjust the accumulative impact amount for contracts that have not

been completed on January 1, 2020. The amounts of retained earnings and other relevant items in the financial

statements at the beginning of the period for the first time adoption of the new standards (i.e. January 1, 2020) are adjusted based on the accumulative impact amount at the first time adoption, while comparative financial information for the previous accounting periods is not adjusted.

2) Major changes and impacts upon implementation of the New Revenue Standards are as follows:

The Company changes the contractual consideration received from customers in advance for the transfer of goods from the “payments received in advance” item to the “contract liabilities” item for presentation.

The Company’s implementation of the New Revenue Standards did not have an impact on the retained earnings at the beginning of 2020. Impacts on other relevant items in the financial statements dated January 1, 2020 are listed in the following:

Unit: RMB

	Amount on December 31, 2019 (prior to changes)	Amount on December 31, 2019 (prior to changes)	Amount on January 1, 2020 (after changes	Amount on January 1, 2020 (after changes
Statement item	Consolidated statement	Parent Company’s	Consolidated statement	Parent Company’s
		statement		statement
Payments received in	142,476,562.31	28,227,454.47

207

C&S Paper Co., Ltd. Annual Report 2020

advance
Contract liabilities			142,476,562.31	28,227,454.4

(2) Significant changes of accounting estimates

□ Applicable √ Not applicable

(3) Description on the adjustment of relevant items in the financial statements at the beginning of the year for the first time adoption of the New Revenue Standards and the new leasing standards since 2020

Applicable

Whether to adjust the subjects of the balance sheet at the beginning of the year

√ Yes □ No

Consolidated balance sheet

Unit: RMB

Item	December 31, 2019	January 1, 2020
Current assets:
Monetary funds	703,746,624.42	703,746,624.42
Settlement reserve
Lending to banks and

other financial institutions

Tradable financial assets
Derivative financial

assets

Notes receivable	301,904.32	301,904.32
Accounts receivable	807,772,897.68	807,772,897.68
Accounts receivable

financing

Prepayments	14,877,757.16	14,877,757.16
Premium receivable
Reinsurance payables

208

C&S Paper Co., Ltd. Annual Report 2020

Reinsurance contract

reserves receivable

Other receivables	8,240,417.99	8,240,417.99
Including: Interest

receivable

Dividends

receivable

Financial assets held

under resale agreements

Inventory	986,405,689.17	986,405,689.17
Contract assets
Assets held for sale	57,073,059.69	57,073,059.69
Non-current assets due

within one year

Other current assets	165,567,805.78	165,567,805.78
Total current assets	2,743,986,156.21	2,743,986,156.21
Non-current assets:
Loans and advances to

customers

Investments in creditor’s

rights

Investments in other

creditor’s rights

Long-term receivable
Long-term equity

investment

Investment in other

equity instruments

Other non-current

financial assets

209

C&S Paper Co., Ltd. Annual Report 2020

Investment property	36,039,381.30	36,039,381.30
Fixed assets	2,921,392,106.87	2,921,392,106.87
Construction work in	55,734,236.91
		55,734,236.91
progress

Productive biological

assets

Oil & gas assets
Right-of-use assets
Intangible assets	168,731,781.83	168,731,781.83
Development expenses
Goodwill	64,654.15	64,654.15
Long-term deferred	13,686,397.24
		13,686,397.24
expenses

Deferred income tax	80,331,080.17
		80,331,080.17
assets

Other non-current assets	6,306,028.96	6,306,028.96
Total non-current assets	3,282,285,667.43	3,282,285,667.43
Total assets	6,026,271,823.64	6,026,271,823.64
Current liabilities:
Short-term borrowings	14,721,492.38	14,721,492.38
Borrowings from PBC
Placements from banks
and other financial
institutions
Tradable financial

liabilities

Derivative financial

liabilities

Notes payable	202,653,860.31	202,653,860.31

210

C&S Paper Co., Ltd. Annual Report 2020

Accounts payable	578,212,781.22	578,212,781.22
Payments received in	142,476,562.31
			-142,476,562.31
advance

Contract liabilities		142,476,562.31	142,476,562.31
Proceeds from financial

assets sold under repo

Customer bank deposits
and due to banks and other
financial institutions
Funds from securities

trading agency

Funds from securities

underwriting agency

Employee remuneration	106,413,600.27
		106,413,600.27
payable

Tax and fees payable	101,670,618.11	101,670,618.11
Other payables	635,834,511.05	635,834,511.05
Including: Interests	173,259.89
		173,259.89
payable

Dividends	452,536.50
		452,536.50
payable

Transaction fee and

commission receivable

Reinsurance payable
Liabilities held for sale
Non-current liabilities	32,400,000.00
		32,400,000.00
due within one year

Other current liabilities
Total current liabilities	1,814,383,425.65	1,814,383,425.65
Non-current liabilities:

211

C&S Paper Co., Ltd. Annual Report 2020

Insurance contract

reserves

Long-term borrowings	22,500,000.00	22,500,000.00
Bonds payable
Including: Preference

shares

Perpetual

bonds

Lease liabilities
Long-term payable
Long-term employee

remuneration payable

Provision
Deferred income	82,367,831.33	82,367,831.33
Deferred income tax	30,016,107.43
		30,016,107.43
liabilities

Other non-current

liabilities

Total non-current liabilities	134,883,938.76	134,883,938.76
Total liabilities	1,949,267,364.41	1,949,267,364.41
Owner's equity:
Share capital	1,308,891,273.00	1,308,891,273.00
Other equity instruments
Including: Preference

shares

Perpetual

bonds

Capital reserve	760,731,416.57	760,731,416.57
Less: Treasury shares	104,792,649.00	104,792,649.00

212

C&S Paper Co., Ltd. Annual Report 2020

Other comprehensive

income

Special reserves
Surplus reserves	53,205,582.86	53,205,582.86
General reserves
Retained earnings	2,058,968,835.80	2,058,968,835.80
Total equity attributable to	4,077,004,459.23
owners of the parent		4,077,004,459.23
company
Equities of minority

shareholders

Total owner's equity	4,077,004,459.23	4,077,004,459.23
Total liabilities and owners'	6,026,271,823.64
		6,026,271,823.64
equities

Description of adjustment

Balance sheet of the Parent Company

Unit: RMB

Item	December 31, 2019	January 1, 2020
Current assets:
Monetary funds	156,202,659.45	156,202,659.45
Tradable financial assets
Derivative financial

assets

Notes receivable
Accounts receivable	127,203,426.87	127,203,426.87
Accounts receivable

financing

Prepayments	2,565,716.66	2,565,716.66
Other receivables	637,511,752.54	637,511,752.54

213

C&S Paper Co., Ltd. Annual Report 2020

Including: Interest

receivable

Dividends

receivable

Inventory	84,567,041.98	84,567,041.98
Contract assets
Assets held for sale
Non-current assets due

within one year

Other current assets	129,377,576.74	129,377,576.74
Total current assets	1,137,428,174.24	1,137,428,174.24
Non-current assets:
Investments in creditor’s

rights

Investments in other

creditor’s rights

Long-term receivable
Long-term equity	1,231,245,128.96
		1,231,245,128.96
investment

Investment in other

equity instruments

Other non-current

financial assets

Investment property	18,745,192.09	18,745,192.09
Fixed assets	222,724,273.70	222,724,273.70
Construction work in	35,260,100.44
		35,260,100.44
progress

Productive biological

assets

214

C&S Paper Co., Ltd. Annual Report 2020

Oil & gas assets
Right-of-use assets
Intangible assets	21,259,498.66	21,259,498.66
Development expenses
Goodwill
Long-term deferred

expenses

Deferred income tax	18,366,334.29
		18,366,334.29
assets

Other non-current assets	4,521,074.21	4,521,074.21
Total non-current assets	1,552,121,602.35	1,552,121,602.35
Total assets	2,689,549,776.59	2,689,549,776.59
Current liabilities:
Short-term borrowings
Tradable financial

liabilities

Derivative financial

liabilities

Notes payable
Accounts payable	325,506,510.90	325,506,510.90
Payments received in	28,227,454.47
			-28,227,454.47
advance

Contract liabilities		28,227,454.47	28,227,454.47
Employee remuneration	24,280,403.99
		24,280,403.99
payable

Tax and fees payable	3,225,793.88	3,225,793.88
Other payables	167,279,884.09	167,279,884.09
Including: Interests

payable

215

C&S Paper Co., Ltd. Annual Report 2020

Dividends	452,536.50
		452,536.50
payable

Liabilities held for sale
Non-current liabilities

due within one year

Other current liabilities
Total current liabilities	548,520,047.33	548,520,047.33
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preference

shares

Perpetual

bonds

Lease liabilities
Long-term payable
Long-term employee

remuneration payable

Provision
Deferred income	7,062,818.69	7,062,818.69
Deferred income tax	5,575,323.82
		5,575,323.82
liabilities

Other non-current

liabilities

Total non-current liabilities	12,638,142.51	12,638,142.51
Total liabilities	561,158,189.84	561,158,189.84
Owner's equity:
Share capital	1,308,891,273.00	1,308,891,273.00
Other equity instruments

216

C&S Paper Co., Ltd. Annual Report 2020

Including: Preference

shares

Perpetual

bonds

Capital reserve	690,241,724.38	690,241,724.38
Less: Treasury shares	104,792,649.00	104,792,649.00
Other comprehensive

income

Special reserves
Surplus reserves	53,084,248.58	53,084,248.58
Retained earnings	180,966,989.79	180,966,989.79
Total owner's equity	2,128,391,586.75	2,128,391,586.75
Total liabilities and owners'	2,689,549,776.59
		2,689,549,776.59
equities

Explanation of adjustment

(4) Description on the retrospective adjustment of previous comparable data at the first time adoption of the new Revenue Standards and the new leasing standards in 2020

□ Applicable √ Not applicable

45. Others: None

VI. Taxes

1. Main tax types and tax rates

Tax	Tax basis	Tax rate
Value-added tax	Taxable VAT (calculated based on the difference of
	deducting the amount of input tax which is allowed to be
		13%
	deducted in the current period from the result of

	multiplying taxable sales by applicable tax rate)

217

C&S Paper Co., Ltd. Annual Report 2020

City construction and maintenance tax	Turnover tax paid	5%, 7%
Corporate income tax	Taxable income	15%, 16.5%, 20%, 25%,
		progressive rate
Education surcharges	Turnover tax paid	3%
Local education surcharges	Turnover tax paid	1.5%, 2%

Description of disclosure if different income tax rates apply to different corporate taxpayers

Name of taxpayer	Income tax rate
C&S Paper Co., Ltd., Zhongshan Zhongshun Trading Co., Ltd., C&S (Hubei) Paper Co., Ltd.,	25%
Xiaogan C&S Trading Co., Ltd., Zhejiang Zhongshun Paper Co., Ltd., Chengdu Zhongshun Paper
Co., Ltd., Hangzhou Jie Rou Trading Co., Ltd., Beijing C&S Paper Co., Ltd., and Sun Daily
Necessities Co., Ltd.
C&S (Zhongshan) Paper Co., Ltd., C&S (Dazhou) Paper Co., Ltd., Shanghai Huicong Paper Co., Ltd.,	20%
and C&S (Yunfu) Trading Co., Ltd.
Zhong Shun International Co., Ltd., and C&S Hong Kong Co., Ltd. (Note 1)	16.50%
Jiangmen Zhongshun Paper Co., Ltd., C&S (Sichuan) Paper Co., Ltd., and C&S (Yunfu) Paper Co.,	15%
Ltd.
C&S (Macao) Co., Ltd. (Note 2)	Progressive rate

2. Tax incentive

Jiangmen Zhongshun Paper Co., Ltd. was certified as a high-tech enterprise of Guangdong Province in 2018, and was awarded the Certificate of High-tech Enterprise (No. GR201844008474) on November 28, 2018, with a valid term of three years. Therefore, the corporate income tax is calculated at a tax rate of 15% in 2020.

C&S (Sichuan) Paper Co., Ltd. was certified as a high-tech enterprise of Sichuan Province in 2020, and was awarded the Certificate of High-tech Enterprise (No. GR202051001193) on September 11, 2020, with a valid term of three years. Therefore, the corporate income tax is calculated at a tax rate of 15% in 2020.

C&S (Yunfu) Paper Co., Ltd. was certified as a high-tech enterprise of Guangdong Province in 2020, and was awarded the Certificate of High-tech Enterprise (No. GR202044006774) on December 9, 2020, with a valid term of three years. Therefore, the corporate income tax is calculated at a tax rate of 15% in 2020.

In accordance with relevant provisions of the Announcement of the State Administration of Taxation on Issues Concerning the Implementation of the Inclusive Income Tax Deduction and Exemption Policies for Small Low-profit Enterprises (STA Doc. [2019] No. 2), the policy on inclusive income tax deduction and exemption for

218

C&S Paper Co., Ltd. Annual Report 2020

small low-profit enterprises is applicable to C&S (Zhongshan) Paper Co., Ltd., C&S (Dazhou) Paper Co., Ltd., Shanghai Huicong Paper Co., Ltd., and C&S (Yunfu) Trading Co., Ltd. in 2020. To be specific, the annual taxable income of these enterprises that is not more than RMB1 million shall be included in their taxable income at the reduced rate of 25%, with the applicable corporate income tax rate of 20%; and the annual taxable income that is not less than RMB1 million nor more than RMB3 million shall be included in their taxable income at the reduced rate of 50%, with the applicable enterprise income tax rate of 20%.

3. Others

Note 1: C&S Hong Kong Co., Ltd. is a Hong Kong-based company incorporated according to the laws of Hong Kong, and adopts the tax laws thereof. The tax rate for its income tax is 16.50%;

Note 2: C&S (Macao) Co., Ltd. is a Macao-based company incorporated according to the laws of Macao. Its complementary tax adopts a progressive rate (tax on taxable income that is less than MOP300,000 is exempted, and the taxable income that is more than MOP300,000 is taxed at 12%).

VII. Notes to Items of the Consolidated Financial Statements

1. Monetary fund

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Cash on hand	36,349.55	76,152.38
Bank deposits	1,047,785,634.71	675,589,471.75
Other monetary funds	77,374,215.30	28,081,000.29
Total	1,125,196,199.56	703,746,624.42
Including: Total deposits in overseas
	99,311,423.25	63,089,915.23
banks

Other description:

Balance of other monetary funds at the end of the reporting period is the security deposit for issuing letters of credit and bank acceptance bill and balance of Alipay. Refer to "Note VII (81)" for circumstances where ownership of monetary funds is restricted.

219

C&S Paper Co., Ltd. Annual Report 2020

2. Transactional financial assets ： None

3. Derivative financial assets ： None

4. Notes receivable

(1) Notes receivable presentation by category

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Bank acceptance bill	724,419.74	301,904.32
Total	724,419.74	301,904.32

If the bad debt reserve of notes receivable is set aside according to general model of expected credit loss, please

refer to the disclosure method of other receivables to disclose relevant information on bad debt reserve:

□ Applicable √ Not applicable

(2) Bad debt reserve that is set aside, recovered or transferred back in the reporting period

Wherein, the amount of recovered or transferred back bad debt reserve in the reporting period is important:

□ Applicable √ Not applicable

(3) Notes receivable that the Company has pledged at the end of the reporting period: None

(4) Notes receivable that the Company has endorsed or discounted at the end of the reporting period and are not due on the balance sheet date: None

(5) Notes that are transferred to notes receivable because the drawer does not perform the contract at the end of the reporting period: None

Other descriptions:

The Company has no pledged notes receivable as at the end of the year.
The Company has no derecognized notes receivable that are endorsed or discounted but not due as at the end of the year.
The Company has no notes that are transferred to notes receivable because the drawer does not perform the contract as at the end of the year.

220

C&S Paper Co., Ltd. Annual Report 2020

(6) Notes receivable actually written off in the reporting period: None

5. Accounts receivable

(1) Accounts receivable disclosure by category

Unit: RMB

	Balance at the end of the year	Balance at the end of the year	Balance at the end of the year	Balance at the end of the year	Balance at the end of the year	Balance at the beginning of the year	Balance at the beginning of the year	Balance at the beginning of the year	Balance at the beginning of the year	Balance at the beginning of the year
Type	Book balance		Impairment			Book balance		Impairment
			provision		Book			provision
										Book value
	Amount	Percenta	Amount	Provision	value	Amount	Percentag	Amount	Provision

		ge		ratio			e		ratio
Accounts receivable
for which bad debt	34,567,6		10,681,0		23,886,58	34,567,65		10,681,06		23,886,582.
		3.17%		30.90%			4.11%		30.90%
reserve is set aside	51.21		68.59		2.62	1.21		8.59		62

individually
Including:
Accounts receivable
for which bad debt	1,054,95		27,415,9		1,027,537	805,681,1		21,794,80		783,886,31
		96.83%		2.60%			95.89%		2.71%
reserve is set aside in	3,298.93		41.96		,356.97	15.48		0.42		5.06

portfolios
Including:
Portfolio based on	1,054,95		27,415,9		1,027,537	805,681,1		21,794,80		783,886,31
		96.83%		2.60%			95.89%		2.71%
aging	3,298.93		41.96		,356.97	15.48		0.42		5.06

	1,089,52		38,097,0		1,051,423 ,939.59	840,248,7		32,475,86		807,772,89 7.68
Total		100.00%		3.50%			100.00%		3.87%
	0,950.14		10.55			66.69		9.01

Bad debt reserve set aside individually: 10,681,068.59

Unit: RMB

	Balance at the end of the period	Balance at the end of the period	Balance at the end of the period	Balance at the end of the period
Name	Book balance	Impairment	Provision ratio	Reason for provision
		provision
Institution 1	28,279,537.67	8,218,072.46	29.06%	It is difficult to recover all goods payments due

221

C&S Paper Co., Ltd. Annual Report 2020

				to the poor business performance of the
				customer.
				It is difficult to recover all goods payments due
Institution 2	6,288,113.54	2,462,996.13	39.17%	to the poor business performance of the
				customer.
Total	34,567,651.21	10,681,068.59	--	--

Bad debt reserve set aside in portfolios: 27,415,941.96

Unit: RMB

	Balance at the end of the period	Balance at the end of the period	Balance at the end of the period
Name
	Book balance	Impairment provision	Provision ratio

Within the credit period	900,595,441.14	18,011,908.84	2.00%
Credit period - 1 year	147,420,485.43	7,371,024.27	5.00%
1 to 2 years	2,605,538.69	390,830.80	15.00%
2 to 3 years	3,186,429.84	955,928.95	30.00%
3 to 5 years	918,309.47	459,154.74	50.00%
Over 5 years	227,094.36	227,094.36	100.00%
Total	1,054,953,298.93	27,415,941.96	--

Description of reason for the portfolio:

Accounts receivable with the same aging have similar credit risk characteristics.

If the bad debt reserve of accounts receivable is set aside according to general model of expected credit loss, please refer to the disclosure method of other receivables to disclose relevant information on bad debt reserve: □ Applicable √ Not applicable

Disclose by aging

Unit: RMB

Aging	Book balance
Within 1 year (inclusive)	1,048,015,926.57
1 to 2 years	2,605,538.69

222

C&S Paper Co., Ltd. Annual Report 2020

2 to 3 years	3,186,429.84
Over 3 years	35,713,055.04
3 to 4 years	28,542,337.67
4 to 5 years	2,795,515.45
Over 5 years	4,375,201.92
Total	1,089,520,950.14

(2) Bad debt reserve that is set aside, recovered or transferred back

Provision of bad debt reserve of the reporting period:

Unit: RMB

Type	Balance at the	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period	Balance at the
	beginning of the	Provision	Recovery or	Write-off	Others	end of the period
	period		reversal

Accounts
	32,475,869.01	5,735,079.40		113,937.86		38,097,010.55
receivable

Total	32,475,869.01	5,735,079.40		113,937.86		38,097,010.55

Wherein, the amount of recovered or transferred back bad debt reserve in the reporting period is important: None

(3) Accounts receivable actually written off in the reporting period

Unit: RMB

Item	Write-off amount
Accounts receivable actually written off	113,937.86

Description of write-offs of important accounts receivable: None

(4) Top five debtors in closing balance of accounts receivable

Unit: RMB

Name of institution Balance of accounts receivable at Percentage in total balance of Balance for bad debt reserve at

223

C&S Paper Co., Ltd. Annual Report 2020

	the end of the period	accounts receivable at the end of	the end of the period
		the period
1st	289,513,741.56	26.57%	5,790,274.83
2nd	118,555,127.86	10.88%	3,789,979.81
3rd	59,957,146.79	5.50%	1,659,474.39
4th	58,786,865.25	5.40%	1,175,737.31
5th	32,383,538.18	2.97%	647,670.76
Total	559,196,419.64	51.32%

(5) Accounts receivable derecognized due to transfer of financial assets

The Company has no accounts receivable derecognized due to the transfer of financial assets as at the end of the reporting period.

(6) Amounts of assets and liabilities that are formed by the transfer and ongoing involvement of accounts receivable

The Company has no amounts of assets and liabilities that are formed by the transfer and ongoing involvement of accounts receivable as at the end of the reporting period.

Other description: None

6. Accounts receivable financing

Increase and decrease of accounts receivable financing and changes in fair value in the reporting period

□ Applicable √ Not applicable

If the provisions for asset impairment of accounts receivable financing are set aside according to general model of expected credit loss, please refer to the disclosure method of other receivables to disclose relevant information on provisions for asset impairment:

□ Applicable √ Not applicable

7. Prepayments

(1) Prepayments presentation by aging

Unit: RMB

224

C&S Paper Co., Ltd. Annual Report 2020

	Balance at the end of the period	Balance at the end of the period	Balance at the beginning of the period	Balance at the beginning of the period
Aging
	Amount	Percentage	Amount	Percentage

Within 1 year	26,819,108.57	100.00%	14,430,801.70	97.00%
1 to 2 years			446,955.46	3.00%
Total	26,819,108.57	--	14,877,757.16	--

Explanation on the reason of untimely settlement of prepayments whose age exceeds one year with significant amount: None

(2) Top five payees in closing balance of prepayment

The Company’s total prepayment amount of the top five payees in closing balance of prepayment is RMB15,636,993.89, accounting for 58.31% of closing balance of prepayment.

8. Other receivables

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Other receivables	15,824,945.56	8,240,417.99
Total	15,824,945.56	8,240,417.99

(1) Interest receivable

1) Classification of interest receivable

2) Significant overdue interest

Other description: None

3) Provision of bad debt reserve

□ Applicable √ Not applicable

225

C&S Paper Co., Ltd. Annual Report 2020

(2) Dividends receivable

1) Classification of dividends receivable: None

2) Significant dividends receivable exceeding one year: None

3) Provision of bad debt reserve

□ Applicable √ Not applicable

Other description: None

(3) Other receivables

1) Classification of other receivables by nature

Unit: RMB

		Book balance at the beginning of the
Nature	Book balance at the end of the period
		period

Margins and deposits	4,621,457.93	4,098,736.90
Current accounts	5,350,546.55	3,395,872.47
Reserve	1,704,120.13	1,621,094.57
Others	5,999,332.44	255,741.34
Total	17,675,457.05	9,371,445.28

2) Provision of bad debt reserve

Unit: RMB

	Phase I	Phase II	Phase III
	Expected credit loss	Expected credit losses in	Expected credit losses in
Bad debt provision				Total
	in the next 12 months	the whole duration (without	the whole duration (with

		credit impairment)	credit impairment)
Balance as at January 1,
	1,131,027.29			1,131,027.29
2020

Balance as at January 1,	——	——	——	——

226

C&S Paper Co., Ltd. Annual Report 2020

2020 in the reporting
period
Provision in the reporting
	727,073.31	727,073.31
period

Write-off in the reporting
	7,589.11	7,589.11
period

Balance as at December
	1,850,511.49	1,850,511.49
31, 2020

Description of changes in the book balance where there are significant changes in provision for the current period

□ Applicable √ Not applicable

Disclosure by aging

Unit: RMB

Aging	Book balance
Within 1 year (inclusive)	13,675,426.56
1 to 2 years	1,463,727.95
2 to 3 years	2,172,174.66
Over 3 years	364,127.88
3 to 4 years	109,354.05
4 to 5 years	27,844.60
Over 5 years	226,929.23
Total	17,675,457.05

3) Bad debt reserve that is set aside, recovered or transferred back in the reporting period

Provision of bad debt reserve of the reporting period:

Unit: RMB

	Balance at the	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period
						Balance at the end of the period
Category	beginning of	Provision	Recovery or	Write-off	Others
	the period		reversal

Other receivables	1,131,027.29	727,073.31		7,589.11		1,850,511.49

227

C&S Paper Co., Ltd. Annual Report 2020

Total 1,131,027.29 727,073.31 7,589.11 1,850,511.49

4) Other receivables actually written off in the reporting period

Unit: RMB

Item	Write-off amount
Other receivables actually written off	7,589.11

Description on the write-offs of other receivables: None

5) Top five debtors in closing balance of other accounts receivable

Unit: RMB

				Percentage in total
					Balance of bad debt
		Balance at the end of		balance of other
Name of institution	Nature of the amount		Aging		reserve at the end of
		the period		receivables at the
					the period
				end of the period

1st	Others	5,431,871.82	Within 1 year	30.73%	271,593.59
2nd	Margins and deposits	1,100,000.00	2-3 years	6.22%	330,000.00
	Margins and deposits		1-2 years, over 5
3rd		786,229.23		4.45%	276,229.23
			years

	Margins and deposits		Within 1 year, 2-3
4th		650,000.00		3.68%	182,500.00
			years

			Within 1 year , 1-2
5th	Others	381,138.93		2.16%	31,582.19
			years

Total	--	8,349,239.98	--	47.24%	1,091,905.01

228

C&S Paper Co., Ltd. Annual Report 2020

6) Receivables involving government grants: None

7) Other receivables derecognized due to the transfer of financial assets: None

8) Amount of assets and liabilities that are formed by the transfer and ongoing involvement of other receivables: None

9. Inventory

Whether the Company needs to comply with requirements for disclosure in the real estate industry: No

(1) Classification of inventories

Unit: RMB

	Balance at the end of the period	Balance at the end of the period	Balance at the end of the period	Balance at the beginning of the period	Balance at the beginning of the period	Balance at the beginning of the period
		Provision for			Provision for
		impairment of			impairment of
Item
		inventories or			inventories or
	Book balance		Book value	Book balance		Book value
		provision for			provision for

		contract			contract
		performance cost			performance cost
Raw materials	1,148,312,808.05	133,039.11	1,148,179,768.94	524,569,054.30	11,942.85	524,557,111.45
Work-in-process
	40,777,441.76	306,847.08	40,470,594.68	47,577,009.45	357,365.13	47,219,644.32
products

Commodity
	410,313,722.29	2,738,280.52	407,575,441.77	375,752,356.14	1,562,936.40	374,189,419.74
stocks

Packages	32,644,525.84	145,489.07	32,499,036.77	24,152,524.80	154,311.71	23,998,213.09
Low-value
	13,889,922.62	529,767.94	13,360,154.68	11,353,098.88	675,834.25	10,677,264.63
consumables

Materials for
consigned	19,189,498.48		19,189,498.48	5,764,035.94		5,764,035.94
processing
Total	1,665,127,919.04	3,853,423.72	1,661,274,495.32	989,168,079.51	2,762,390.34	986,405,689.17

229

C&S Paper Co., Ltd. Annual Report 2020

(2) Provision for impairment of inventories or provision for contract performance cost

Unit: RMB

	Balance at the	Increase in the current period	Increase in the current period	Decrease in the current period	Decrease in the current period
						Balance at the
Item	beginning of the	Provision	Others	Reversal or	Others
						end of the period
	period			written off

Raw materials	11,942.85	346,679.55		225,583.29		133,039.11
Work-in-process
	357,365.13	522,955.12		573,473.17		306,847.08
products

Commodity
	1,562,936.40	2,872,026.41		1,696,682.29		2,738,280.52
stocks

Packages	154,311.71	272,785.17		281,607.81		145,489.07
Low-value
	675,834.25	625,420.70		771,487.01		529,767.94
consumables

Total	2,762,390.34	4,639,866.95		3,548,833.57		3,853,423.72

(3) Explanation that balance of inventory at the end of the reporting period includes amount of capitalization of borrowing costs

(4) Explanation on amortized amount of contract performance cost in the reporting period

10. Contract assets

If the bad debt reserve of contrast assets is set aside according to general model of expected credit loss, please

refer to the disclosure method of other receivables to disclose relevant information on bad debt reserve:

□ Applicable √ Not applicable

Provision for impairment of contract assets in the reporting period

Other description: None

11. Assets held for sale

Unit: RMB

Item Book balance at the Impairmen Book value at Fair value Estimated Estimated

230

C&S Paper Co., Ltd. Annual Report 2020

	end of the period	the end of the		disposal time
		period
Immovable assets of the old
				December 31,
factory of Hubei C&S	57,073,059.69	57,073,059.69	66,285,118.00
				2020
(including land use rights)

Total	57,073,059.69	57,073,059.69	66,285,118.00	--

Other description:

In December 2019, in order to boost the investment and construction of Phase II of the high-end household paper project in the industrial zone in the Economic Development Area of Xiaonan District, Xiaogan City, the Company signed an agreement on the acquisition of the immovable assets in the old factory of Hubei C&S (including land use rights) upon consultation with Xiaonan District People's Government of Xiaogan City. The Company believed that the immovable assets of the old factory of Hubei C&S (including land use rights) could be sold immediately in the current situation, according to similar transactions where such assets were sold. The Company signed a binding purchase agreement with Xiaogan Changxing Investment Co., Ltd. and Xiaonan District People's Government of Xiaogan City regarding the transfer of such assets in December 2019. The Agreement contained important terms and conditions including the price and time of the transaction as well as penalty for breach of contract that was strict enough. Therefore, there is little possibility for the agreement to be significantly changed or canceled. The Company originally estimated that the ultimate transfer would be completed before December 2020. However, under the impact of the Covid-19 pandemic in 2020, the government shifted its focus to anti-pandemic work with people’s interests above everything else. Especially, Xiaogan City of Hubei Province was one of the hardest-hit areas, so the government has put all efforts in the fight against the virus and post-pandemic economic rejuvenation. As a result, it was unable to pay all asset transfer amount within the agreed period. As of the reporting date, the Company has received most of the asset transfer payment (RMB58.14 million).

12. Non-current assets due within one year: None

13. Other current assets

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Reverse repos of treasury bonds		87,105,000.00
Wealth management products	50,000,000.00	40,000,000.00
Input VAT to be deducted	51,550,834.13	32,822,256.90

231

C&S Paper Co., Ltd. Annual Report 2020

Prepaid corporate income tax	33,735.17	5,640,548.88
Total	101,584,569.30	165,567,805.78

Other description: None

14. Investments in creditor's rights

Provisions for asset impairment

Description of changes in the book balance where there are significant changes in provision for the current period

□ Applicable √ Not applicable

Other description: None

15. Other investments in creditor's rights

Description of changes in the book balance where there are significant changes in provision for the current period

□ Applicable √ Not applicable

Other description: None

16. Long-term receivables

(1) Long-term receivables

Description of changes in the book balance where there are significant changes in provision for the current period □ Applicable √ Not applicable

(2) Long-term receivables derecognized due to the transfer of financial assets

(3) Amounts of assets and liabilities that are formed by the transfer and ongoing involvement of long-term receivables

Other description: None

232

C&S Paper Co., Ltd. Annual Report 2020

17. Long-term equity investment: None

18. Investment in other equity instruments: None

19. Other non-current financial assets: None

20. Investment property

(1) Investment property measured at cost

√ Applicable □ Not applicable

Unit: RMB

	Properties and	Land use rights	Construction work in	Total
Item
	buildings		progress

I. Original Book Value
1. Balance at the
	31,142,650.03	21,661,131.29		52,803,781.32
beginning of the period

2. Increase in the

current period

(1) External purchase
(2) Inventory\fixed
assets\transfer from

construction work in

progress
(3) Increase in

business combination

3. Decrease in the
	70,017.11			70,017.11
current period

(1) Disposal	70,017.11			70,017.11
(2) Other transfers out
4. Balance at the end
	31,072,632.92	21,661,131.29		52,733,764.21
of the period

233

C&S Paper Co., Ltd. Annual Report 2020

II. Accumulated
Depreciation and
Amortization
1. Balance at the
	11,923,174.46	4,841,225.56	16,764,400.02
beginning of the period

2. Increase in the
	1,100,254.54	321,695.40	1,421,949.94
current period

(1) Provision or
	1,100,254.54	321,695.40	1,421,949.94
amortization

3. Decrease in the
	27,951.69		27,951.69
current period

(1) Disposal	27,951.69		27,951.69
(2) Other transfers out
4. Balance at the end
	12,995,477.31	5,162,920.96	18,158,398.27
of the period

III. Impairment Provision
1. Balance at the

beginning of the period

2. Increase in the

current period

(1) Provision
3. Decrease in the

current period

(1) Disposal
(2) Other transfers out
4. Balance at the end

of the period

IV. Book Value
1. Book value at the			34,575,365.94
	18,077,155.61	16,498,210.33
end of the period

234

C&S Paper Co., Ltd. Annual Report 2020

2. Book value at the
	19,219,475.57	16,819,905.73
beginning of the period

(2) Investment property measured at fair value

□ Applicable √ Not applicable

(3) Investment property that the certificate of title has not been issued

The Company does not have investment property that the certificate of title has not been issued as at the end of the year.

21. Fixed assets

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Fixed assets	2,792,587,302.21	2,921,392,106.87
Total	2,792,587,302.21	2,921,392,106.87

(1) Information on fixed assets

Unit: RMB

Item	Properties and	Equipment	Office equipment	Motor vehicles	Production	Total
	buildings				equipment
I. Original Book

Value

1. Balance at
the beginning of	1,055,604,437.13	2,958,625,080.21	47,464,949.76	15,446,847.51	69,259,291.88	4,146,400,606.49
the period
2. Increase
in the current	66,939,711.30	97,821,291.65	10,951,427.25	1,740,223.44	10,081,107.77	187,533,761.41
period
(1) Purchase		2,143,089.37	10,203,739.83	1,740,223.44	5,832,610.78	19,919,663.42
(2)	66,939,711.30	95,678,202.28	747,687.42		4,248,496.99	167,614,097.99

235

C&S Paper Co., Ltd. Annual Report 2020

Inventory\fixed
assets\transfer
from construction
work in progress
(3) Increase
in business
combination

3. Decrease in
	2,521,774.14	41,693,285.43	3,733,832.28		48,290.60	47,997,182.45
the current period

(1) Disposal
	2,521,774.14	41,693,285.43	3,733,832.28		48,290.60	47,997,182.45
or scrap

4. Balance at
the end of the	1,120,022,374.29	3,014,753,086.43	54,682,544.73	17,187,070.95	79,292,109.05	4,285,937,185.45
period
II. Accumulated

Depreciation

1. Balance at
the beginning of	190,985,787.16	952,947,310.00	22,508,285.71	7,191,366.34	32,365,697.61	1,205,998,446.82
the period
2. Increase in
	40,086,159.01	236,975,142.10	6,815,097.93	1,268,020.74	9,300,712.53	294,445,132.31
the current period

(1) Provision	40,086,159.01	236,975,142.10	6,815,097.93	1,268,020.74	9,300,712.53	294,445,132.31
3. Decrease in
	444,915.23	19,780,749.33	3,299,420.35		37,666.72	23,562,751.63
the current period

(1) Disposal
	444,915.23	19,780,749.33	3,299,420.35		37,666.72	23,562,751.63
or scrap

4. Balance at
the end of the	230,627,030.94	1,170,141,702.77	26,023,963.29	8,459,387.08	41,628,743.42	1,476,880,827.50
period
III. Impairment

236

C&S Paper Co., Ltd. Annual Report 2020

Provision
1. Balance at
the beginning of		18,970,596.52	29,332.40		10,123.88	19,010,052.80
the period
2. Increase in
		14,186,655.02	1,219.51		51,865.96	14,239,740.49
the current period

(1) Provision		14,186,655.02	1,219.51		51,865.96	14,239,740.49
3. Decrease in
		16,741,281.27	29,332.40		10,123.88	16,780,737.55
the current period

(1) Disposal
		16,741,281.27	29,332.40		10,123.88	16,780,737.55
or scrap

4. Balance at
the end of the		16,415,970.27	1,219.51		51,865.96	16,469,055.74
period
IV. Book Value
1.Book value
at the end of the	889,395,343.35	1,828,195,413.39	28,657,361.93	8,727,683.87	37,611,499.67	2,792,587,302.21
period
2.Book value
at the beginning	864,618,649.97	1,986,707,173.69	24,927,331.65	8,255,481.17	36,883,470.39	2,921,392,106.87
of the period

(2) Information on temporarily idle fixed assets

Unit: RMB

Item	Original book value	Accumulated	Impairment	Book value
		depreciation	provision
Equipment	34,175,187.87	16,895,212.30	16,415,970.27	864,005.30
Office equipment	6,001.36	4,561.85	1,219.51	220.00
Production
	182,633.33	130,267.37	51,865.96	500.00
equipment

237

C&S Paper Co., Ltd. Annual Report 2020

Total 34,363,822.56 17,030,041.52 16,469,055.74 864,725.30

(3) Fixed assets acquired through finance lease: None

(4) Fixed assets leased through operating lease: None

(5) Fixed assets that the certificate of title has not been issued

Unit: RMB

Item	Book value	Reasons for the certificate of title having
		not been issued
Workshops of Zhejiang C&S	3,741,710.06	Processing
Plants and warehouses of Tangshan Branch	46,916,577.15	Processing
Workshops, warehouses, and dormitories		Processing
	148,272,896.93
of Hubei C&S

Total	198,931,184.14

Other description

There was no limitation on the ownership of fixed assets of the Company at the end of the reporting period.

(6) Disposal of fixed assets

Other description: None

22. Construction work in process

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Construction work in process	275,904,617.95	55,734,236.91
Total	275,904,617.95	55,734,236.91

(1) Construction work in progress

Unit: RMB

Project Balance at the end of the period Balance at the beginning of the period

238

C&S Paper Co., Ltd. Annual Report 2020

	Book balance	Impairment	Book value	Book balance	Impairment	Book value
		provision			provision
Construction
work of Tangshan				35,260,100.44		35,260,100.44
Branch
Construction
work of Jiangmen	1,028,646.43		1,028,646.43	8,149,431.17		8,149,431.17
C&S
Construction
work of Yunfu	24,342,285.15		24,342,285.15	6,611,423.72		6,611,423.72
C&S
Construction
work of Hubei	244,523,934.15		244,523,934.15	5,219,006.80		5,219,006.80
C&S
Construction
work of Zhejiang	249,608.17		249,608.17	494,274.78		494,274.78
C&S
Construction
work of Sichuan	5,760,144.05		5,760,144.05
C&S
Total	275,904,617.95		275,904,617.95	55,734,236.91		55,734,236.91

(2) Changes of significant construction work in progress in the current period

Unit: RMB

	Budget	Balance	Increase	Amount	Decrease	Balance	Proporti	Construc	Accumul	Includin	Interest	Source
	number	at the	in the	of fixed	in the	at the	on of the	tion	ative	g:	capitaliz	of fund
		beginnin g of the year	current	assets	current	end of	cumulati	progress	amount	Amount a	tion rate
Project			period	transferr	period	the year	ve		of	of	in the
				ed in the			construct		interest	interest	current
				current			ion input		capitaliz	capitaliz	period
				period			in budget		ation	ation in

239

C&S Paper Co., Ltd. Annual Report 2020

								the
								period
Construc
tion
	335,775,	35,260,1	20,832,4	56,092,5
work of					0.00	19.61%	19.61%		Others
	000.00	00.44	59.99	60.43
Tangsha

n Branch
Construc									Others
tion
	25,712,3	8,149,43	17,429,2	24,550,0	1,028,64
work of						99.48%	99.48%
	78.02	1.17	22.81	07.55	6.43
Jiangme

n C&S
Construc									Others
tion
	101,430,	6,611,42	59,756,1	42,025,2	24,342,2
work of						76.34%	76.34%
	908.80	3.72	36.05	74.62	85.15
Yunfu

C&S
Construc									Others
tion
	1,353,00	5,219,00	254,551,	15,246,4	244,523,
work of						71.46%	71.46%
	0,000.00	6.80	411.81	84.46	934.15
Hubei

C&S
Construc									Others
tion
	5,540,87	494,274.	5,014,14	5,258,81	249,608.
work of						99.41%	99.41%
	1.83	78	8.00	4.61	17
Zhejiang

C&S
Construc									Others
tion
	30,949,9		30,201,1	24,440,9	5,760,14
work of		0.00				97.58%	97.58%
	19.11		00.37	56.32	4.05
Sichuan

C&S

240

C&S Paper Co., Ltd. Annual Report 2020

	1,852,40	55,734,2	387,784,	167,614,	275,904,
Total						--	--	--
	9,077.76	36.91	479.03	097.99	617.95

(3) Construction-in-progress provision set aside in the current period

There was no situation where the recoverable amount of the construction work in progress is lower than the book value which required provisions in the Company in the reporting period.

(4) Construction materials

Other description: None

23. Productive biological assets

(1) Productive biological assets measured at cost

□ Applicable √ Not applicable

(2) Productive biological assets measured at fair value

□ Applicable √ Not applicable

24. Oil & gas assets

□ Applicable √ Not applicable

25. Right-of-use assets

Other description: None

26. Intangible assets

(1) Intangible assets

Unit: RMB

241

C&S Paper Co., Ltd. Annual Report 2020

	Land use right	Patent right	Non-patented	Application	Trademark	Total
Item
			technology	software	right

I. Original Book Value
1. Balance at the beginning
	189,064,322.15	1,342,721.84		12,433,710.50	168,370.83	203,009,125.32
of the period

2. Increase in the current
				6,385,724.17	0.00	6,385,724.17
period

(1) Purchase				6,385,724.17	0.00	6,385,724.17
(2) Internal R&D
(3) Increase in business

combination


3. Decrease in the current

period

(1) Disposal

4. Balance at the end of the
	189,064,322.15	1,342,721.84		18,819,434.67	168,370.83	209,394,849.49
period

II. Accumulated Amortization
1. Balance at the beginning
	26,533,474.35	790,967.09		6,784,531.22	168,370.83	34,277,343.49
of the period

2. Increase in the current
	2,917,485.79	94,269.96		2,749,978.01		5,761,733.76
period

(1) Provision	2,917,485.79	94,269.96		2,749,978.01		5,761,733.76

3. Decrease in the current

period

(1) Disposal

242

C&S Paper Co., Ltd. Annual Report 2020

4. Balance at the end of the
	29,450,960.14	885,237.05	9,534,509.23	168,370.83	40,039,077.25
period

III. Impairment Provision
1. Balance at the beginning

of the period

2. Increase in the current

period

(1) Provision

3. Decrease in the current

period

(1) Disposal

4. Balance at the end of the

period

IV. Book Value
1. Book value at the end of
	159,613,362.01	457,484.79	9,284,925.44		169,355,772.24
the period

2. Book value at the
	162,530,847.80	551,754.75	5,649,179.28		168,731,781.83
beginning of the period

The intangible assets generated other than internal R&D of the Company at the end of the period occupy 0.00% of the balance of intangible assets.

(2) Information on the land use rights that the certificate of title has not been issued

Other description: None

27. Development expenses

Other description: None

243

C&S Paper Co., Ltd. Annual Report 2020

28. Goodwill

(1) Original book value of goodwill

Unit: RMB

		Increase in the current period	Decrease in the current
	Balance at the		period
Name of investee or the matters				Balance at the
	beginning of the	Formed by
forming goodwill				end of the period
	period	business	Disposal

		combination
Merger of Zhongshan Jie Rou
Paper involving enterprises not	64,654.15			64,654.15
under common control
Total	64,654.15			64,654.15

(2) Provision for impairment of goodwill

Relevant information on the asset group or asset group portfolio in which the goodwill is located

Explain the method to confirm the process of goodwill impairment test, key parameters (e.g. the growth rate in the predictive period when predicting the present value of future cash flow, the growth rate in the stable period, profit rate, discount rate, and predictive period), and the goodwill impairment loss:

After conducting the asset impairment test by combining the goodwill with corresponding asset groups, there was no impairment as at June 30, 2020, and provisions at the end of the reporting period were not set aside.

Influence of the goodwill impairment test

Other description: None

29. Long-term unamortized expenses

Unit: RMB

	Balance at the
		Increase in the	Amortized amount		Balance at the end of
Item	beginning of the			Other decreases
		current period	of the current period		the period
	period

Use rights of sewage
	3,763,858.78		1,455,259.85		2,308,598.93
discharge

244

C&S Paper Co., Ltd. Annual Report 2020

Decoration fees of
	8,942,538.46	19,387,140.38	5,964,044.63	22,365,634.21
office buildings

Electricity use rights	980,000.00	1,191,750.00	210,000.00	1,961,750.00
Total	13,686,397.24	20,578,890.38	7,629,304.48	26,635,983.14

Other description: None

30. Deferred income tax assets/deferred income tax liabilities

(1) Deferred income tax assets that were not offset

Unit: RMB

	Balance at the end of the period	Balance at the end of the period	Balance at the beginning of the period	Balance at the beginning of the period
Item	Deductible temporary	Deferred income tax	Deductible temporary	Deferred income tax
	differences	assets	differences	assets
Provision for asset
	37,236,661.77	8,048,641.53	33,522,565.26	7,354,388.34
impairment

Unrealized profit in
	59,038,241.84	11,427,908.55	32,400,998.88	6,052,001.45
internal transaction

Deductible loss	157,221,067.56	39,305,266.89	133,306,241.56	33,326,560.39
Provision for impairment
	3,853,423.72	702,165.91	2,762,390.34	535,522.47
of inventories

Provision for impairment
	16,469,055.74	2,795,038.08	19,010,052.80	3,472,180.20
of fixed assets

Equity incentive cost	136,647,479.87	33,312,991.30	73,883,673.67	17,319,732.41
Accrued expenses	60,267,582.48	15,066,895.62	49,082,779.64	12,270,694.91
Deferred income	2,833,819.12	708,454.78
Total	473,567,332.10	111,367,362.66	343,968,702.15	80,331,080.17

(2) Deferred income tax liabilities that were not offset

Unit: RMB

245

C&S Paper Co., Ltd. Annual Report 2020

	Balance at the end of the period	Balance at the end of the period	Balance at the beginning of the period	Balance at the beginning of the period
Item	Taxable temporary	Deferred income tax	Taxable temporary	Deferred income tax
	differences	liabilities	differences	liabilities
Pre-tax deduction of
fixed assets at one time
	190,069,258.27	35,903,653.30	152,874,671.45	30,016,107.43
as stipulated in the tax

law
Total	190,069,258.27	35,903,653.30	152,874,671.45	30,016,107.43

(3) Presentation of deferred income tax assets or liabilities by the net amount after offset

Unit: RMB

	Offset amount of the	Balance of the deferred	Offset amount of the	Balance of the deferred
	deferred income tax	income tax assets or	deferred income tax	income tax assets or
Item	assets and liabilities at	liabilities after offset at	assets and liabilities at	liabilities after offset at
	the end of the reporting	the end of the reporting	the beginning of the	the beginning of the
	period	period	reporting period	reporting period
Deferred income tax		111,367,362.66		80,331,080.17

assets

Deferred income tax		35,903,653.30		30,016,107.43

liabilities

(4) Breakdown of unconfirmed deferred income tax assets

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Deductible temporary differences	2,710,860.27	84,331.04
Total	2,710,860.27	84,331.04

(5) Deductible losses of the unconfirmed deferred income tax assets due in the next year

Other description: None

246

C&S Paper Co., Ltd. Annual Report 2020

31. Other non-current assets

Unit: RMB

	Balance at the end of the period	Balance at the end of the period	Balance at the end of the period	Balance at the beginning of the period	Balance at the beginning of the period	Balance at the beginning of the period
Item	Book balance	Impairment	Book value	Book balance	Impairment	Book value
		provision			provision
Prepayment for software	2,027,042.24		2,027,042.24	3,326,948.93		3,326,948.93
Prepayment for engineering equipment	26,000,909.91		26,000,909.91	2,979,080.03		2,979,080.03
Total	28,027,952.15		28,027,952.15	6,306,028.96		6,306,028.96

Other description: None

32. Short-term borrowings

(1) Classification of short-term borrowings

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Guaranteed borrowings	142,942,941.34	14,721,492.38
Total	142,942,941.34	14,721,492.38

(2) Short-term borrowings overdue but unpaid

There were no short-term borrowings overdue but unpaid in the Company at the end of the reporting period.

33. Tradable financial liabilities

Other description: None

34. Derivative financial liabilities

Other description: None

35. Notes payable

Unit: RMB

247

C&S Paper Co., Ltd. Annual Report 2020

Category	Balance at the end of the period	Balance at the beginning of the period
Banker’s acceptance	234,887,563.22	202,653,860.31
Total	234,887,563.22	202,653,860.31

The total amount of the notes payable due but unpaid at the end of the reporting period is RMB0.00.

36. Accounts payable

(1) List of accounts payable

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Accounts payable	761,519,389.26	578,212,781.22
Total	761,519,389.26	578,212,781.22

(2) Significant accounts payable with aging over one year

The Company has no significant accounts payable with aging over one year in the reporting period.

37. Payments received in advance

(1) List of payments received in advance

(2) Significant payments received in advance with aging over one year

38. Contract liabilities

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Advances on sales	137,333,617.40	142,476,562.31
Total	137,333,617.40	142,476,562.31

248

C&S Paper Co., Ltd. Annual Report 2020

39. Employee remuneration payable

(1) List of employee remuneration payable

Unit: RMB

				Balance at the
	Balance at the beginning	Increase in the current	Decrease in the
Item				end of the
	of the period	period	current period
				period

I. Short-term Compensation	106,224,592.83	667,758,043.16	650,476,516.56	123,506,119.43
II. Post-employment Benefits - Defined
	189,007.44	14,805,067.85	14,975,567.61	18,507.68
Contribution Plan

III. Dismissal Benefits		1,091,053.15	1,091,053.15
Total	106,413,600.27	683,654,164.16	666,543,137.32	123,524,627.11

(2) List of short-term remuneration

Unit: RMB

	Balance at the
		Increase in the current	Decrease in the current	Balance at the end of the
Item	beginning of the
		period	period	period
	period

1. Salary, bonus and subsidy	105,632,187.56	607,176,927.11	590,213,332.43	122,595,782.24
2. Employee welfare		24,566,473.91	24,566,473.91
3. Social insurance premiums	138,180.30	18,123,146.79	18,008,560.58	252,766.51
Including: Medical
	123,961.21	16,122,317.17	15,996,172.85	250,105.53
insurance

Employment injury
	7,474.96	453,061.36	460,369.26	167.06
insurance

Maternity
	6,744.13	1,547,768.26	1,552,018.47	2,493.92
insurance

4. Housing provident fund	235,586.00	14,778,764.05	14,640,039.05	374,311.00
5. Labor union fee and staff
	218,638.97	3,112,731.30	3,048,110.59	283,259.68
education fee

249

C&S Paper Co., Ltd. Annual Report 2020

Total 106,224,592.83 667,758,043.16 650,476,516.56 123,506,119.43

(3) List of defined contribution plans

Unit: RMB

	Balance at the beginning	Increase in the current	Decrease in the current	Balance at the end of the
Item
	of the period	period	period	period

1. Basic endowment
	182,767.82	14,307,295.62	14,472,135.90	17,927.54
insurance

2. Unemployment
	6,239.62	497,772.23	503,431.71	580.14
insurance

Total	189,007.44	14,805,067.85	14,975,567.61	18,507.68

Other description: There was no delinquency of employee remuneration payable in the Company at the end of the reporting period.

40. Tax and fees payable

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Value-added tax	25,574,167.63	40,202,978.00
Corporate income tax	79,266,423.94	53,355,863.46
Individual income tax	1,840,329.83	1,419,250.54
City construction and maintenance tax	1,593,768.94	1,943,704.81
Property tax	1,087,129.90	1,074,531.92
Education surcharges	829,794.94	998,926.69
Local education surcharges	524,068.91	665,951.12
Land use tax	796,430.89	796,430.83
Stamp tax	596,629.80	561,017.55
Disabled security fund	334,989.76	364,478.02
Environmental protection tax	97,465.13	218,414.57
Resource tax	66,855.20	69,070.60

250

C&S Paper Co., Ltd. Annual Report 2020

Total 112,608,054.87 101,670,618.11

Other description: None

41. Other payables

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Interest payable		173,259.89
Dividend payable	1,437,466.77	452,536.50
Other payables	753,407,113.32	635,208,714.66
Total	754,844,580.09	635,834,511.05

(1) Interest payable

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Interest of long-term borrowings with
interest repayment by installment and		85,143.46
principal repayment upon maturity
Interest payable of short-term borrowings		88,116.43
Total		173,259.89

(2) Dividends payable

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Dividends for restricted shares	1,437,466.77	452,536.50
Total	1,437,466.77	452,536.50

Other descriptions, including important dividends payable exceeding one year, and the reasons for non-payment that should be disclosed: None

251

C&S Paper Co., Ltd. Annual Report 2020

(3) Other payables

1) Other payables based on amount nature

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Unpaid fees	658,391,225.24	502,706,478.59
Repurchase obligation of restricted shares	68,800,189.53	104,792,649.00
Margins and deposits	20,964,424.40	15,743,185.19
Authorized collection and payment of
individual income tax under the equity	2,877,482.40	9,354,253.42
incentive
Others	2,373,791.75	2,612,148.46
Total	753,407,113.32	635,208,714.66

2) Other important payables with aging exceeding one year

Unit: RMB

Item	Balance at the end of the period	Reason for unsettlement or not carry-over
1st	6,323,465.21	Not yet settled
Total	6,323,465.21	--

Other description: None

42. Liabilities held for sale: None

43. Non-current liabilities due within one year

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Long-term borrowings due within one year		32,400,000.00
Total		32,400,000.00

Other description: None

252

C&S Paper Co., Ltd. Annual Report 2020

44. Other current liabilities

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Tax pending changeover	17,628,086.63
Total	17,628,086.63

45. Long-term borrowings

(1) List of long-term borrowings

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Guaranteed borrowings		22,500,000.00
Total		22,500,000.00

Other descriptions, including the interval of interest rate: None

46. Bonds payable

(1) Bonds payable: None

(2) Changes in the increase and decrease of the bonds payable (excluding other financial instruments such as preference shares and perpetual bonds that are divided into financial liabilities): None

(3) Descriptions of the conditions for converting conditions and time of converting bonds: None

(4) Descriptions of other financial instruments that are divided into financial liabilities

Basic information on other financial instruments in issue at the end of the reporting period, such as the preference shares and perpetual bonds: None

Description of the basis for other financial instruments to be divided into financial liabilities: None

Other description: None

253

C&S Paper Co., Ltd. Annual Report 2020

47. Lease liabilities

Other description: None

48. Long-term payables

(1) Long-term payables listed based on amount nature

Other description: None

(2) Special payables

Other description: None

49. Long-term employee remuneration payable

(1) Table of long-term employee remuneration payable

(2) Changes of the defined benefit plan

Other description: None

50. Projected liabilities

Other descriptions, including description of important assumptions and estimations relevant to significant project liabilities: None

51. Deferred income

Unit: RMB

	Balance at the
		Increase in the	Decrease in the	Balance at the end of
Item	beginning of the				Reason
		current period	current period	the period
	period

					Government grants
Government grants	82,367,831.33	42,985,900.00	10,252,573.20	115,101,158.13
					related to assets

Total	82,367,831.33	42,985,900.00	10,252,573.20	115,101,158.13	--

254

C&S Paper Co., Ltd. Annual Report 2020

Projects involving government grants:

Unit: RMB

		Increased	Amount	Amount	Amount of	Other
		amount of	included	included in	offset	change
		grants in the	in	other	costs in	s
	Balance at the						Balance at the
		current period	non-operat	income in	the current			Related to
Liability item	beginning of						end of the
			ing	the current	period			asset/income
	the period						period
			income in	period

			the current
			period
Support funds for sewage
								Related to
centralized water treatment	1,093,500.00			121,500.00			972,000.00
								asset
project

Ex-post funds awarded to the								Related to
first batch of the union								asset
	4,716,165.98			634,586.64			4,081,579.34
enterprises for technical

transformation in 2017
Support funds for the								Related to
technical transformation of	4,447,359.44			806,623.44			3,640,736.00	asset
equipment production line
Support funds for enterprise								Related to
		3,880,000.00		660,311.90			3,219,688.10
technical upgrading								asset

Subsidies for the								Related to
				1,071,436.3			30,535,934.0
infrastructure construction of	31,607,370.32							asset
				2			0
new factory in Hubei

Provincial funds for								Related to
traditional industry		1,000,000.00		89,285.70			910,714.30	asset
transformation projects
Subsidies for the expansion of								Related to
the high-grade household								asset
	2,066,666.79			159,999.96			1,906,666.83
paper project with an annual

output of 25,000 tons

255

C&S Paper Co., Ltd. Annual Report 2020

Discount interest funds for					Related to
	2,633,468.75		193,875.00	2,439,593.75
imported equipment					asset

Financial support funds for					Related to
construction expansion of					asset
	8,078,701.55		625,447.80	7,453,253.75
25,000-ton high-grade

household paper project
Subsidies for "water					Related to
treatment" project	1,524,940.00		155,078.64	1,369,861.36	asset
construction
Subsidies for sewage					Related to
	3,142,045.43		477,272.76	2,664,772.67
treatment station					asset

Special funds for capacity					Related to
expansion of 25,000-ton					asset
	2,395,833.26		575,000.04	1,820,833.22
high-grade household paper

project
Support funds for the					Related to
construction of environmental	3,351,587.39		319,047.60	3,032,539.79	asset
protection facilities
Support funds for equipment			1,971,248.1		Related to
	11,438,819.16			9,467,571.00
of Phase II project			6		asset

Support funds for the					Related to
				16,172,657.6
transformation of Phase I	3,708,873.26	13,063,500.00	599,715.61		asset
				5
project

Support funds for the					Related to
				21,188,970.5
construction of Automated	2,162,500.00	20,000,000.00	973,529.42		asset
				8
Storage & Retrieval System

Project fund for automatic					Related to
		2,042,400.00	652,433.33	1,389,966.67
production line reconstruction					asset


Subsidy funds for the smart					Related to
		3,000,000.00	166,180.88	2,833,819.12
factory project					asset

Total	82,367,831.33	42,985,900.00	10,252,573.	115,101,158.

256

C&S Paper Co., Ltd. Annual Report 2020

20 13

Other description: None

52. Other non-current liabilities

Other description: None

53. Share capital

Unit: RMB

		Increase and decrease of this change (+ and -)	Increase and decrease of this change (+ and -)	Increase and decrease of this change (+ and -)	Increase and decrease of this change (+ and -)	Increase and decrease of this change (+ and -)
	Balance at the	Issuance of	Bonus shares	Shares	Others	Subtotal
							Balance at the
	beginning of the	additional		transferred
							end of the period
	period	shares		from surplus

				reserve
Total number	1,308,891,273.00						1,311,487,077.00
		3,610,416.00			-1,014,612.00	2,595,804.00
of shares

For details about changes in the Company’s share capital in the reporting period, please refer to "1. Development

history of the company in III. Basic Information of the Company of Section XII" for details.

54. Other equity instruments

(1) Basic information on other financial instruments in issue at the end of the reporting period, such as the preference shares and perpetual bonds: None

(2) Table of changes in other financial instruments in issue at the end of the reporting period, such as the preference shares and perpetual bonds

Other description: None

55. Capital reserve

Unit: RMB

	Balance at the beginning	Increase in the current	Decrease in the current	Balance at the end of the
Item
	of the period	period	period	period

257

C&S Paper Co., Ltd. Annual Report 2020

Capital premium (share
	595,936,687.24	34,809,136.79	3,948,642.06	626,797,181.97
premium)

Other capital reserve	164,794,729.33	120,299,657.28	4,885,063.53	280,209,323.08
Total	760,731,416.57	155,108,794.07	8,833,705.59	907,006,505.05

Other descriptions, including increase/decrease in the reporting period and reasons of change:

(1) The exercise of stock options awarded in the first grant and the exercise of reserved stock options as per the 2018 Stock Option and Restricted Stock Incentive Plan increased “capital reserve-share premium” by RMB34,809,136.79 and decreased “capital reserve-other capital reserve” by RMB4,885,063.53. The repurchase and deregistration of incentive stocks decreased “capital reserve-other capital reserve” by RMB3,948,642.06.

(2) The Company set aside provision for equity incentive costs and fees in the reporting period and RMB95,705,148.72 was included in "capital reserve - other capital reserve". Difference between the deductible amount before tax under the 2018 Stock Option and Restricted Stock Incentive Plan and recognized book expense was confirmed as deferred income tax asset and RMB24,594,508.56 was included in "capital reserve - other capital reserve".

56. Treasury shares

Unit: RMB

	Balance at the beginning	Increase in the current	Decrease in the current	Balance at the end of the
Item
	of the period	period	period	period

Restricted shares	104,792,649.00		35,992,459.47	68,800,189.53
Ordinary shares		27,680,721.76		27,680,721.76
Total	104,792,649.00	27,680,721.76	35,992,459.47	96,480,911.29

Other descriptions, including increase/decrease in the reporting period and reasons of change:

Notes: (1) The first unlock period unlocked 5,593,428 shares of first-grant stock options at RMB4.33/share and 765,270 shares of reserved stock options at RMB7.02/share granted under the 2018 Stock Option and Restricted Stock Incentive Plan. Totally RMB29,591,738.64 was included in the decrease of the current period. The total amount of revocable cash dividends of RMB 1,437,466.77 was included in the decrease of the current period.

(2) As some incentive recipients for stocks awarded in the first grant left the Company or failed to pass the appraisal, the Company repurchased and deregistered 802,722 shares with RMB4.33 per share. As some incentive recipients for reserved stocks left the Company or failed to pass the appraisal, the Company repurchased and deregistered 211,890 shares with RMB7.02 per share. Totally 1,014,612 shares were repurchased with an amount of RMB4,963,254.06, which was included in the decrease of the current period.

258

C&S Paper Co., Ltd. Annual Report 2020

(3) The share repurchase amount of RMB27,680,721.76 was included in the increase of the current period.

57. Other comprehensive income: None

58. Special reserves

Other descriptions, including increase/decrease in the reporting period and reasons of change: None

59. Surplus reserve

Unit: RMB

	Balance at the beginning	Increase in the current	Decrease in the current	Balance at the end of the
Item
	of the period	period	period	period

Statutory surplus reserve	53,205,582.8	6 8,263,675.41		61,469,258.27
Total	53,205,582.8	6 8,263,675.41		61,469,258.27

Explanation of surplus reserves, including increase/decrease in the reporting period and reasons of change: None

60. Retained earnings

Unit: RMB

Item	Current period	Last period
Retained earningsbefore adjustment at the end
	2,058,968,835.80	1,490,758,189.02
of the last period

Retained earningsat the beginning of the	2,058,968,835.80
		1,490,758,189.02
period after adjustment

Plus: Net profit attributable to owners of the
	905,889,081.41	603,832,650.83
parent company of the current period

Less: Withdraw of statutory surplus reserve	8,263,675.41	5,900,899.85
Dividends on ordinary shares payable	97,930,094.41	29,721,104.20
Retained earningsat the end of the period	2,858,664,147.39	2,058,968,835.80

Details on adjusting retained earnings at the beginning of the period:

(1) As a result of retrospective adjustments according to the Accounting Standards for Business Enterprises and its

related new provisions, the impact on retained earnings at the beginning of the period was RMB0.00.

259

C&S Paper Co., Ltd. Annual Report 2020

(2) Due to the changes in accounting policies, the impact on retained earnings at the beginning of the period was RMB0.00.
(3) Due to the correction of material accounting errors, the impact on retained earnings at the beginning of the period was RMB0.00.
(4) Due to the changes in the scope of combination caused by the same control, the impact on retained earnings at the beginning of the period was RMB0.00.
(5) Other adjustments affected retained earnings at the beginning of the period by a total of RMB0.00.

61. Operating income and operating cost

Unit: RMB

	Incurred in the current period	Incurred in the current period	Incurred in the last period	Incurred in the last period
Item
	Income	Cost	Income	Cost

Principal business	7,599,908,947.02	4,379,376,627.64	6,565,754,364.57	3,941,747,959.00
Other businesses	223,619,469.30	211,527,412.71	69,159,988.11	63,673,093.70
Total	7,823,528,416.32	4,590,904,040.35	6,634,914,352.68	4,005,421,052.70

Whether the lower of the audited net profit before and after deduction of non-recurring profits and losses is

negative:

□ Yes √ No

Information related to income:

Unit: RMB

Contract classification	Branch 1	Total
By product type	7,823,528,416.32	7,823,528,416.32
Including:
Household paper	7,499,908,172.64	7,499,908,172.64
Personal care	100,000,774.38	100,000,774.38
Others	223,619,469.30	223,619,469.30
By operating region	7,823,528,416.32	7,823,528,416.32
Including:
Domestic	7,652,670,691.06	7,652,670,691.06

260

C&S Paper Co., Ltd. Annual Report 2020

Abroad	170,857,725.26	170,857,725.26
Including:
Including:
Including:
Including:
Including:
Total	7,823,528,416.32	7,823,528,416.32

Information related to performance obligation: None

Information related to the transaction price apportioned to the remaining performance obligation:

The amount of income corresponding to the obligations of contract performance with an executed contract that is not performed or fully performed at the end of the reporting period is RMB32,714,606.53, of which the income of RMB32,714,606.53 is expected to be confirmed as income in the year of 2021.

Other description: None

62. Tax and surcharges

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
City construction and maintenance tax	20,149,751.80	12,936,585.63
Education surcharges	9,597,106.24	6,897,849.76
Resource tax	107,367.57	111,579.16
Property tax	9,604,943.14	8,636,350.56
Land use tax	3,492,720.58	3,335,708.17
Vehicle and vessel tax	18,240.00	17,355.00
Stamp tax	6,425,868.35	5,715,389.63
Local education surcharges	6,368,693.14	4,593,846.46
Environmental protection tax	348,227.27	571,538.10
Total	56,112,918.09	42,816,202.47

Other description: None

261

C&S Paper Co., Ltd. Annual Report 2020

63. Selling expenses

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Employee remuneration	289,793,524.85	243,696,299.26
Product promotion fees	891,673,851.97	607,944,031.45
Transportation expenses	90,696,221.79	297,280,743.60
Advertising expenses	117,926,339.81	88,475,224.58
Shopping mall management fees	101,261,590.30	82,659,469.17
Traveling expenses	24,141,592.40	21,502,938.35
Rental fees	17,791,905.46	12,325,145.27
Business entertainment expenses	2,004,195.01	1,682,162.96
Others	9,273,023.12	13,987,829.31
Total	1,544,562,244.71	1,369,553,843.95

Other description: None

64. Administrative expenses

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Employee remuneration	123,787,011.29	122,518,188.82
Equity incentive cost	95,705,148.72	51,897,249.18
Depreciation and amortization fees	64,793,200.48	48,088,129.24
Office allowance	28,815,372.03	23,650,606.93
Consulting service fees	11,152,882.86	14,358,982.09
Outsourcing warehouse management fees	13,476,942.90	10,775,007.49
Business entertainment expenses	4,250,313.01	4,599,026.44
Traveling expenses	2,007,217.94	4,418,275.25
Environmental protection fees	2,920,486.57	2,504,089.42

262

C&S Paper Co., Ltd. Annual Report 2020

Rental fees	4,972,311.62	2,101,996.13
Others	13,033,456.88	9,605,386.36
Total	364,914,344.30	294,516,937.35

Other description: None

65. R&D expenses

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Employee remuneration	35,421,883.98	30,880,261.59
Direct investment	123,888,034.21	123,639,467.65
Depreciation and amortization fees	26,261,981.44	18,810,812.39
Other expenses	4,726,733.98	3,043,745.71
Total	190,298,633.61	176,374,287.34

Other description: None

66. Finance expenses

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Interest fees	2,903,635.12	13,452,104.83
Less: interest income	8,202,097.37	3,504,368.80
Exchange profit and loss	-18,603,312.21	4,507,136.43
Transaction fee	5,954,447.70	6,987,828.86
Others	-54,219.48	33,710.43
Total	-18,001,546.24	21,476,411.75

Other description: None

67. Other income

Unit: RMB

263

C&S Paper Co., Ltd. Annual Report 2020

Sources of other income	Incurred in the current period	Incurred in the last period
Refund of individual income tax	702,121.74
Financial support funds allocated by the
	7,892,985.55
bureau of finance

Subsidies for internship, employment, job
	6,168,474.94
stabilization and training

Support funds for equipment of Phase II
	1,971,248.16	246,480.84
project

Support policy rewards of the bureau of
economy, science and information	1,310,000.00
technology
Infrastructure construction subsidies for
	1,071,436.32	535,718.15
the new factory of Hubei C&S

Support funds for the construction of
	973,529.42	150,000.00
Automated Storage & Retrieval System

VAT exemption for employment of retired
	961,750.00	850,100.03
soldiers and poor population

Support funds for equipment and
	806,623.44	228,640.56
technology upgrading

Provincial support funds for enterprise
	660,311.90
technical upgrading

Reconstruction project of automatic
	652,433.33
production lines

Ex-post funds awarded to the first batch of
the union enterprises for the technical	634,586.64	684,763.88
transformation in 2017
Partial 2013-2017 financial support funds
of the Management Committee of
	625,447.80	625,447.83
Pengzhou Industrial Development Zone,

Sichuan Province
Support funds for the transformation of	599,715.61	74,926.74

264

C&S Paper Co., Ltd. Annual Report 2020

Phase I project
25,000 tons capacity expansion project of
	575,000.04	575,000.04
Tangshan Branch

Financial support for the sewage treatment
	477,272.76	357,954.57
station project of Tangshan Branch

Special award funds for the restructuring
	410,000.00
of industrial enterprises

Subsidies of production resumption and
	320,000.00
development under Covid-19 impact

Support funds for the construction of
	319,047.60	319,047.60
environmental protection facilities

Award for breakthroughs with increases in
	300,000.00
businesses

Subsidies for supporting enterprises to
	257,200.00
expand import and export scale

Subsidies for photovoltaic power rooftop	224,640.00
Import interest discounts on imported
	193,875.00	193,875.00
equipment in 2014

Subsidy funds for the smart factory project	166,180.88
Special funds for the construction
expansion of the 25,000-ton household	159,999.96	159,999.96
paper project
Subsidies for water treatment project	155,078.64	155,078.64
Wage subsidiaries of Hong Kong	126,835.56
Financial support for sewage centralized
	121,500.00	121,500.00
water treatment project

Provincial funds for traditional industry
	89,285.70
transformation projects

Employment subsidies from the epidemic
	73,156.71
prevention and control fund

265

C&S Paper Co., Ltd. Annual Report 2020

Enterprise assistance funding plan of the
	66,525.00
ten billion anti-epidemic fund

Social security subsidies from the labor
	53,532.00
and employment administration

Support fund for advanced energy
conservation and cleaner production in	30,000.00
2020
Subsidies for epidemic prevention and
	24,750.00
control

Energy efficiency special fund 2019	20,000.00
Management system certification rewards
	10,000.00
2018

Subsidies for pandemic prevention system
building of enterprises by the bureau of
	9,000.00
economy, science, and information

technology
One-off subsidy for delayed resumption of
	7,440.00
work

Subsidies for industrial patents	3,300.00
Technical transformation funds of the
Finance Division, Shuangshui Town,		6,243,528.93
Xinhui District, Jiangmen City
Financial support funds for industry
collaboration in 2018 from the Finance		1,677,400.00
Bureau of Luoding City
Subsidies for the renovation of coal-fired
boilers from the Environmental Protection		800,000.00
Bureau of Yutian County
Subsidy funds for high-tech enterprise
evaluation and certification (cultivation)		800,000.00
from the Finance Bureau, Luoding City in

266

C&S Paper Co., Ltd. Annual Report 2020

2018
Fourth batch of municipal industrial
development funds in 2019 from the
		600,000.00
Central Treasury Payment Center of

Pengzhou City
Tax incremental awards 2018		307,100.00
Provincial subsidies from Pengzhou
Municipal Bureau of Commerce and		156,000.00
Investment Promotion
Development subsidies for high-tech
		150,000.00
enterprises

Total	29,224,284.70	16,012,562.77

68. Return on investment

Unit: RMB

Items	Incurred in the current period	Incurred in the last period
Others	3,868,134.28	333,745.61
Total	3,868,134.28	333,745.61

Other description:

"Others" refer to returns on principal-protected wealth management products at maturity and reverse repo of treasury bonds of the Company.

69. Profit of net exposure hedging

Other description: None

70. Income from changes in fair value

Other description: None

71. Credit impairment loss

Unit: RMB

267

C&S Paper Co., Ltd. Annual Report 2020

Item	Incurred in the current period	Incurred in the last period
Bad debt loss from other receivables	-727,073.31	-160,682.27
Impairment loss from accounts receivable	-5,735,079.40	-2,617,879.60
Total	-6,462,152.71	-2,778,561.87

Other description: None

72. Asset impairment loss

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
II. Impairment Loss of Inventories and
	-1,623,983.68	-727,254.87
Contract Performance Cost

V. Impairment Loss of Fixed Assets	-14,239,740.49	-18,326,205.31
Total	-15,863,724.17	-19,053,460.18

Other description: None

73. Return on disposal of assets

Unit: RMB

Source	Incurred in the current period	Incurred in the last period
Disposal of fixed assets	-1,630,681.60	198,268.96
Total	-1,630,681.60	198,268.96

74. Non-operating income

Unit: RMB

	Incurred in the current period	Incurred in the last period	Amount recognized as profit or
Item
			loss for the current period

Profit from damage and
	147,882.19	128,947.02	147,882.19
retirement of non-current assets

Including: Fixed assets	147,882.19	128,947.02	147,882.19
Intangible assets

268

C&S Paper Co., Ltd. Annual Report 2020

Donations accepted
Government grants not related
to daily activities of the	11,000.00	2,410,232.29	11,000.00
enterprise
Income from fine and
	3,993,312.79	1,937,871.09	3,993,312.79
compensation

Amounts with no payments
	614,936.63	415,420.52	614,936.63
required

Others	662,538.39	959,085.78	662,538.39
Total	5,429,670.00	5,851,556.70	5,429,670.00

Government grants recognized as profit and loss of the current period:

Unit: RMB

Grants	Issuer	Reaso	Nature and type	Whether	Whether	Amount	Amount	Related to
		n		the grant	a special	incurred in	incurred in	asset/income
				affected	grant	the current	the last
				the profit		period	period
				and loss of
				the year
Party				No	No
building
funds for new
economic
			Grants received for the
organizations	Mobile Party
			performance of the
and new	Member
			State's function of
social	Management Service							Related to
		Grant	ensuring the supply or			10,000.00
organizations	Center of Dongsheng							income
			price control of a public
from the	Town, Zhongshan
			utility or socially
Mobile Party	City
			necessary product
Member

Management
Service
Center of

269

C&S Paper Co., Ltd. Annual Report 2020

Dongsheng
Town,
Zhongshan
City
Subsidies for		Grant		No	No			Related to
west district								income
			Grants received for the
from the
			performance of the
Human
	Social Security		State's function of
Resources
	Bureau of		ensuring the supply or			1,000.00
and Social
	Zhongshan City		price control of a public
Security
			utility or socially
Bureau of
			necessary product
Zhongshan

City
Financial		Grant		No	No			Related to
support funds								income
for
enterprises in			Grants received as a
	Industrial
2015 from			result of compliance
	Development Zone
the Industrial			with local government
	Management
Development			policies such as				1,295,600.00
	Committee of
Zone			investment attraction and
	Pengzhou City,
Management			other local support
	Sichuan Province
Committee of			policies

Pengzhou
City, Sichuan
Province
		Grant	Grants received for the	No	No			Related to
	Labor and
			performance of the					income
Subsidies for	Employment
			State's function of
stable	Administration of						252,028.31
			ensuring the supply or
employment	Pengzhou City,
			price control of a public
	Sichuan Province
			utility or socially

270

C&S Paper Co., Ltd. Annual Report 2020

			necessary product
Funds for		Grant		No	No		Related to
construction							income
of party
member			Grants received as a
service center			result of compliance
	Finance Division of
from the			with local government
	Xiaonan Economic
Finance			policies such as			200,000.00
	Development Zone,
Division of			investment attraction and
	Hubei Province
Xiaonan			other local support

Economic			policies
Development
Zone, Hubei
Province
Subsidies for		Grant		No	No		Related to
stable							income
			Grants received for the
employment
	Labor and		performance of the
in 2018 from
	Employment		State's function of
the Labor and
	Administration of		ensuring the supply or			135,000.00
Employment
	Xiaonan District,		price control of a public
Administratio
	Xiaogan City		utility or socially
n of Xiaonan
			necessary product
District,

Xiaogan City
Subsidies for		Grant		No	No		Related to
enterprise			Grants received for the				income
social	Labor and		performance of the
insurance	Employment		State's function of
from the	Administration of		ensuring the supply or			128,000.00
Labor and	Xiaonan District,		price control of a public
Employment	Xiaogan City		utility or socially
Administratio			necessary product
n of Xiaonan

271

C&S Paper Co., Ltd. Annual Report 2020

District,
Xiaogan City
Government				No	No		Related to
support fund			Grants received as a				income
2017 from			result of compliance
	Bureau of Economy
the Bureau of			with local government
	and Information	Rewar
Economy and			policies such as			100,000.00
	Technology	d
Information			investment attraction and
	Pengzhou City
Technology			other local support

Pengzhou			policies
City
Online		Grant		No	No		Related to
subsidy in							income
2017 from
the Jiaxing
	Jiaxing Port District
Port District
	(Comprehensive		Grants received as a
(Comprehens
	Free Trade Zone)		result of compliance
ive Free
	Brigade,		with local government
Trade Zone)
	Comprehensive		policies such as			80,000.00
Brigade,
	Administrative Law		investment attraction and
Comprehensi
	Enforcement		other local support
ve
	Detachment, Jiaxing		policies
Administrativ
	City
e Law

Enforcement
Detachment,
Jiaxing City
Refund of		Grant	Grants received for the	No	No		Related to
employment			performance of the				income
	Social Insurance
stabilization			State's function of
	Bureau of Yutian					65,312.15
from Social			ensuring the supply or
	County
Insurance			price control of a public

Bureau of			utility or socially

272

C&S Paper Co., Ltd. Annual Report 2020

Yutian			necessary product
County
Subsidies for		Grant		No	No		Related to
employment							income
			Grants received for the
stabilization
	Special payment		performance of the
from
	account of		State's function of
Zhongshan
	Zhongshan Human		ensuring the supply or			41,498.83
Human
	Resources and Social		price control of a public
Resources
	Security Bureau		utility or socially
and Social
			necessary product
Security

Bureau
		Grant	Grants received as a	No	No		Related to
Special funds			result of compliance				income
for promoting			with local government
	Zhongshan Bureau
the stable			policies such as			41,093.00
	of Commerce
growth of			investment attraction and

foreign trade			other local support
			policies
Subsidies for		Grant		No	No		Related to
stable							income
			Subsidies received for
employment
	Labor and		the performance of the
from Labor
	Employment		State's function of
and
	Administration of		ensuring the supply or			32,200.00
Employment
	Xiaonan District,		price control of a public
Administratio
	Xiaogan City		utility or socially
n of Xiaonan
			necessary product
District,

Xiaogan City
Subsidies for		Grant	Grants received as a	No	No		Related to
water-saving	Water Authority of		result of compliance				income
						30,000.00
enterprises	Yutian County		with local government

from Water			policies such as

273

C&S Paper Co., Ltd. Annual Report 2020

Authority of			investment attraction and
Yutian			other local support
County			policies
Compensatio		Grant		No	No			Related to
n for								income
employment
			Grants received for the
of enterprise
	Labor and		performance of the
employee
	Employment		State's function of
from Labor
	Administration of		ensuring the supply or				8,000.00
and
	Xiaonan District,		price control of a public
Employment
	Xiaogan City		utility or socially
Administratio
			necessary product
n of Xiaonan

District,
Xiaogan City
Unemployme		Grant		No	No			Related to
nt insurance			Grants received for the					income
from the			performance of the
Social	Social Insurance		State's function of
Insurance	Fund Administration		ensuring the supply or				1,500.00
Fund	of Luoding City		price control of a public
Administratio			utility or socially
n of Luoding			necessary product
City
Total						11,000.00	2,410,232.29

Other description: None

75. Non-operating expenses

Unit: RMB

	Incurred in the current period	Incurred in the last period	Amount recognized as profit or
Item
			loss of the current period

External donations	15,470,536.45	741,655.70	15,470,536.45

274

C&S Paper Co., Ltd. Annual Report 2020

Loss from damage and
	1,497,805.16	2,329,261.00	1,497,805.16
retirement of non-current assets

Including: Fixed assets	1,497,805.16	2,329,261.00	1,497,805.16
Intangible assets
Others	3,944,517.51	1,250,103.74	3,944,517.51
Total	20,912,859.12	4,321,020.44	20,912,859.12

Other description: None

76. Income tax expenses

(1) Table of income tax expenses

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Current income tax expense	181,314,018.95	109,627,747.60
Deferred income tax expense	1,187,352.52	7,538,310.24
Total	182,501,371.47	117,166,057.84

(2) Adjustment process of accounting profits and income tax expenses

Unit: RMB

Item	Incurred in the current period
Total profit	1,088,390,452.88
Income tax expenses calculated at the statutory/applicable tax
	272,097,613.22
rate

Impacts of different tax rates applied to subsidiaries	-92,418,323.76
Impacts of adjustments to income taxes during the prior period	-17,976,884.62
Impacts of non-deductible costs, expenses and losses	20,798,966.63
Income tax expenses	182,501,371.47

Other description: None

275

C&S Paper Co., Ltd. Annual Report 2020

77. Other comprehensive income

Please refer to the notes for details.

78. Items of the cash flow statement

(1) Cash received related to other operating activities

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Current accounts	49,688,516.72	34,915,227.30
Fiscal appropriation	60,126,856.61	55,389,320.76
Interest income	8,196,797.10	3,531,225.34
Authorized collection of individual income
	22,976,763.21	19,769,719.72
tax under the equity incentive

Authorized collection of payments for the
		131,997,028.57
first Employee Stock Ownership Plan

Others	11,716,603.06	3,761,793.02
Total	152,705,536.70	249,364,314.71

Explanation of cash received related to other operating activities: None

(2) Cash payments related to other operating activities

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Expenses paid	550,689,649.13	580,514,369.25
Current accounts	178,777,668.81	52,916,045.49
Authorized payment of individual income
	26,757,243.77	20,737,286.80
tax under the equity incentive

Authorized payment of Phase I employee
		131,997,028.57
stock ownership plan

276

C&S Paper Co., Ltd. Annual Report 2020

External donations	14,145,244.02	126,370.00
Others	4,113,886.93	1,027,896.90
Total	774,483,692.66	787,318,997.01

Explanation of cash paid related to other operating activities: None

(3) Cash received related to other investing activities

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Principal repayment on maturity of wealth
	40,000,000.00
management products

Principal repayment on maturity of
	87,105,000.00
treasury bonds reverse repo

Total	127,105,000.00

Explanation of cash received related to other investment activities: None

(4) Cash payments related to other investing activities

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Purchasing wealth management products	50,000,000.00	40,000,000.00
Purchase of treasury bonds reverse repo
		87,105,000.00
products

Total	50,000,000.00	127,105,000.00

Explanation of cash paid related to other investment activities: None

(5) Cash received related to other financing activities

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Payments of employee stock ownership
		94,613,430.64
plan

277

C&S Paper Co., Ltd. Annual Report 2020

Collection of security deposits for bills and
		16,140,348.47
letters of credit

Total		110,753,779.11

(6) Cash payments related to other financing activities

Unit: RMB

Item	Incurred in the current period	Incurred in the last period
Deposits of security deposits for bills,
	47,412,150.07
letters of guarantee and letters of credit

Repurchase and deregistration of equity
	4,963,254.06	460,054.74
incentives

Share repurchase	27,680,721.76
Total	80,056,125.89	460,054.74

Explanation of cash paid related to other financing activities: None

79. Supplementary information to cash flow statement

(1) Supplementary information to cash flow statement

Unit: RMB

Supplementary information	Amount of the current period	Amount of last period
1. Reconciliation of net profit to cash flows from operating
	--	--
activities:

Net Profit	905,889,081.41	603,832,650.83
Plus: Provisions for asset impairment	22,325,876.88	21,832,022.05
Depreciation of fixed assets, oil and gas assets
	298,227,998.50	256,437,191.50
and productive biological assets

Depreciation of use right assets
Intangible asset amortization	5,761,733.76	5,271,129.93
Long-term unamortized expenses	7,629,304.48	857,321.08

278

C&S Paper Co., Ltd. Annual Report 2020

Losses from disposal of fixed assets, intangible assets and
	1,630,681.60	-198,268.96
other long-term assets ("-" indicates income)

Losses from fixed assets write-off ("-" indicates income)	1,349,922.97	2,200,313.98
Losses from changes in fair value ("-" indicates

income)

Finance expenses ("-" indicates income)	6,083,169.25	12,775,051.46
Investment losses ("-" indicates income)	-3,868,134.28	-333,745.61
Decrease in deferred income tax assets ("-"
	-4,700,193.35	-8,473,165.51
indicates increase)

Increase in deferred income tax liabilities ("-"
	5,887,545.87	16,011,475.75
indicates decrease)

Decrease in inventories ("-" indicates increase)	-673,208,087.17	-128,117,214.81
Decrease in operating receivables ("-" indicates
	-283,241,489.30	-25,573,783.82
increase)

Increase in operating payables ("-" indicates
	442,728,302.91	551,956,674.81
decrease)

Others	95,705,148.72	51,897,249.18
Net cash flows from operating activities	828,200,862.25	1,360,374,901.86
2. Significant investment and financing activities not
	--	--
involving cash:

Conversion of debt to capital
Convertible corporate bonds due within one year
Fixed assets acquired under finance lease
3. Net changes in cash and cash equivalents:	--	--
Balance of cash at the end of the period	1,050,034,135.72	675,996,852.97
Less: Balance of cash at the beginning of the period	675,996,852.97	371,129,472.06
Plus: Balance of cash equivalents at the end of the

period

Less: Balance of cash equivalents at the beginning of

279

C&S Paper Co., Ltd. Annual Report 2020

the period
Net increase in cash and cash equivalents	374,037,282.75	304,867,380.91

(2) Net cash paid to acquire subsidiaries during the period

Other description: None

(3) Net cash received from the disposal of subsidiaries during the period

Other description: None

(4) Constitution of cash and cash equivalents

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
I. Cash	1,050,034,135.72	675,996,852.97
Including: Cash on hand	36,349.55	76,152.38
Bank deposits always available for
	1,047,785,634.71	675,589,471.75
payment

Other monetary funds always
	2,212,151.46	331,228.84
available for payment

III. Balance of Cash and Cash Equivalents at
	1,050,034,135.72	675,996,852.97
the End of the Period

Other description: None

80. Notes to items in the statement of changes in owner's equity

Description on the name and amount of items under "Others" whose closing balance in last year was adjusted and other relevant issues: None

81. Assets with restricted right to use or ownership

Unit: RMB

Item Book value at the end of the period Reason for restriction

280

C&S Paper Co., Ltd. Annual Report 2020

		Security deposits for issuing letter of credit
Other monetary funds	75,162,063.84
		and notes

Total	75,162,063.84	--

Other description: None

82. Foreign currency monetary items

(1) Foreign currency monetary items

Unit: RMB

	Balance of foreign currency at		Balance of converted RMB at
Item		Conversion rate
	the end of the period		the end of the period

Monetary funds	--	--	300,324,631.68
Including: USD	44,976,762.61	6.5483	294,521,334.60
EUR
HKD	6,871,059.77	0.8446	5,803,297.08
Accounts receivable	--	--	134,768,125.93
Including: USD	17,172,702.19	6.5483	112,452,005.75
EUR
HKD	26,422,117.19	0.8446	22,316,120.18
Long-term borrowings	--	--
Including: USD
EUR
HKD
Other receivables			18,250.47
Including: HKD	21,608.42	0.8446	18,250.47
Accounts payable			270,776,743.22
Including: USD	41,334,220.06	6.5483	270,668,873.22
EUR	13,400.00	8.0500	107,870.00

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C&S Paper Co., Ltd. Annual Report 2020

Other payables			936,644.12
Including: HKD	1,108,979.54	0.8446	936,644.12
Short-term borrowings			52,896,691.34
Including: USD	8,077,927.30	6.5483	52,896,691.34

Other description: None

(2) For overseas business entities, especially important ones, disclose their main overseas business address, the standard currency for accounting and selection basis. If there are changes in the standard currency for accounting, reasons shall be also provided.

√ Applicable □ Not applicable

Overseas business entity	Business address	Standard currency for accounting
Zhong Shun International Co., Ltd.	Hong Kong	RMB
C&S Hong Kong Co., Ltd.	Hong Kong	RMB
C&S (Macao) Co., Ltd.	Macao	RMB

83. Hedges

Disclosure of hedged items and related hedging instruments and qualitative and quantitative information about hedged risks according to the type of hedging: None

84. Government grants

(1) Basic information on government grants

Unit: RMB

Category	Amount	Reporting items	Amount recognized as profit or
			loss for the current period
Related to asset	42,985,900.00	Deferred income
Related to asset	10,252,573.20	Other income	10,252,573.20
Related to income	18,269,589.76	Other income	18,269,589.76
Related to income	11,000.00	Non-operating income	11,000.00

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C&S Paper Co., Ltd. Annual Report 2020

Total 71,519,062.96 28,533,162.96

(2) Return of government grants

□ Applicable √ Not applicable

Other description:

Please refer to Note VII (51), (67) and (74) for details.

85. Others

VIII. Changes in the Consolidated Scope

1. Business combinations of enterprises not under common control

(1) Business combinations of enterprises not under common control in the reporting period

Other description: None

(2) Combination costs and goodwill

Method of determining the fair value of combination costs and descriptions of contingent consideration and its

changes: None

Main reasons for the formation of huge goodwill: None

Other description: None

(3) Acquiree's identifiable assets and liabilities on the acquisition date

Method of determining the fair value of identifiable assets and liabilities: None

Acquiree's contingent liabilities assumed in a business combination: None

Other description: None

(4) Profit or loss arising from the recalculation based on fair value of equities held before the acquisition date

Whether there are transactions through which business combination is achieved in stages while control is obtained

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C&S Paper Co., Ltd. Annual Report 2020

within the reporting period

□ Yes √ No

(5) Descriptions of being unable to determine the consideration or the fair value of acquiree's identifiable assets and liabilities on the acquisition date or at the end of the current period of combination

None

(6) Other descriptions

None

2. Business combinations of enterprises under common control

(1) Business combinations of enterprises under common control in the current period

Other description: None

(2) Combination costs

Description on contingent consideration and its changes: None

Other description: None

(3) Book value of assets and liabilities of the combined party on the date of combination

Contingent liabilities of the combined party assumed in a business combination: None

Other description: None

3. Reverse purchase

Basic information of transactions, basis for transactions constituting reverse purchase, whether assets and liabilities retained by listed companies constitute a business and its basis, determination of combination costs, adjustment of equity amount and calculation when dealing as equity transactions: None

4. Disposal of subsidiaries

Whether there is situation that one disposal of investment in a subsidiary results in a loss of control

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C&S Paper Co., Ltd. Annual Report 2020

□ Yes √ No

Whether there is situation that the disposal of investment in a subsidiary is achieved in stages through multiple transactions while the control is lost in the reporting period

□ Yes √ No

5. Changes in the scope of consolidation due to other reasons

Description of changes in the scope of combination due to other reasons (establishment or liquidation of subsidiaries, etc.) and related situations: None

The Company and its wholly-owned subsidiary Zhongshan Zhongshun Trading Co., Ltd. jointly invested and established Dolemi Sanitary Products Co., Ltd. with a registered capital of RMB50 million. The Company holds 60% of the shares while Zhongshan Zhongshun Trading holds 40% of the shares. Since December 2020, the Company has incorporated Dolemi Sanitary Products Co., Ltd into the scope of its consolidated statements. Currently, Dolemi Sanitary Products has no operating activities.

6. Others: None

IX. Equities in Other Entities

1. Equities in subsidiaries

(1) Composition of the enterprise group

	Main			Shareholding	Shareholding
Name of		Registered				Obtaining
	business		Principal businesses	percentage
subsidiary		address				method
	address			Direct	Indirect

Jiangmen	Jiangmen,	Jiangmen,	R&D, production, and sales (including online sales):
Zhongshun Paper	Guangdong	Guangdon	household paper, maternal and infant products,			Capital
Co., Ltd.		g	cosmetics, wipes, non-woven products, daily			contributi
			necessities, and cleaning supplies; sales (including	88.25%	11.75%	on for
			online sales) of Class I and II medical devices. (The			establish
			above items do not involve special management			ment
			measures for the access of foreign investment.) (For

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C&S Paper Co., Ltd. Annual Report 2020

			items that must be approved in accordance with the
			law, the company may carry out business operations
			upon approval by competent departments.)
Zhejiang	Jiaxing,	Jiaxing,	General items: manufacture of paper products; sales
Zhongshun Paper	Zhejiang	Zhejiang	of paper products; sales of paper pulp; sales of
Co., Ltd.			personal hygiene products; sales of hygiene products
			and disposable medical products; sales of
			disinfectants (excluding hazardous chemicals); sales
			of Class I medical devices; retail of Class I medical
			devices; sales of Class II medical devices; retail of
			class II medical devices; wholesale of medical face
			masks; retail of medical face masks; sales of general
			merchandise; retail of daily necessities; sales of
			maternal and infant products; wholesale of			Capital
			kitchenware, sanitary ware and daily sundries;			contributi
			wholesale of cosmetics; retail of cosmetics; wholesale	75.00%	25.00%	on for
			of needle textiles and raw materials; sales of needle			establish
			textiles; sales of chemical industry products			ment
			(excluding chemical products that need to be
			licensed); Internet sales (excluding the sales of
			commodities requiring a permit) (The company may
			carry out business operations independently
			according to the law based on the business license,
			except for items that must be licensed according to
			the law.) (For items that must be approved in
			accordance with the law, the company may carry out
			business operations upon approval by competent
			departments.)
C&S Hong Kong	Hong Kong	Hong	Purchase of pulp			Capital
Co., Ltd.		Kong				contributi
					100.00%	on for
						establish
						ment

286

C&S Paper Co., Ltd. Annual Report 2020

C&S (Yunfu)	Yunfu,	Yunfu,	R&D, production, wholesale, retail and online sales:			Capital
Paper Co., Ltd.	Guangdong	Guangdon	household paper, sanitary products, maternal and			contributi
		g	infant products, daily necessities, cosmetics, medical			on for
			devices, sanitary materials, non-woven fabrics and			establish
			products, polymer materials and products, daily			ment
			sundries, and disinfectant products (excluding
			hazardous chemicals); wholesale, retail and online
			sales: food; import and export of goods and
				100.00%
			technologies (excluding the import and export of

			goods and technologies prohibited by the State or
			involving administrative approval); warehousing
			services (limited to warehouses qualified in fire
			protection without hazardous chemicals). (For items
			that must be approved in accordance with the law, the
			company may carry out business operations upon
			approval by competent departments.)
	Yunfu,	Yunfu,	Wholesale, retain and online sales: paper, wood pulp,			Capital
	Guangdong	Guangdon	sanitary products, maternal and infant products,			contributi
		g	cosmetics, daily necessities, medical equipment, daily			on for
			sundries, disinfection supplies (excluding dangerous			establish
Yunfu Hengtai			chemicals); import and export of goods or			ment
Trading Co., Ltd.			technologies (excluding the import and export of	100.00%
(note)			goods and technologies prohibited by the State or
			involving administrative approval). (For items that
			must be approved in accordance with the law, the
			company may carry out business operations upon
			approval by competent departments.)
C&S (Macao)	Macau	Macau	Wholesale, trade			Capital
Co., Ltd.						contributi
					100.00%	on for
						establish
						ment
Zhongshan	Zhongshan,	Zhongsha	Wholesale, retail and online sales (sales only on	100.00%		Business

287

C&S Paper Co., Ltd. Annual Report 2020

Zhongshun	Guangdong	n,	third-party platforms) of paper supplies, paper		combinati
Trading Co., Ltd.		Guangdon	products (excluding printing products), wood pulp,		ons
		g	general merchandise, hygiene products, cosmetics,		involving
			nonwoven products, chemical products for daily use,		enterprise
			Class I medical devices and food; warehousing		s under
			(excluding hazardous chemicals and precursor		common
			chemicals); import and export of goods and		control
			technologies; operations of Class II and Class III
			medical devices. (The above business scope involves
			food operations, import and export of goods, and
			import and export of technologies.) (Exclude items
			prohibited by laws and administrative regulations;
			items whose operations are restricted by laws and
			administrative regulations shall not be carried out
			unless the permit has been obtained.) (For items that
			must be approved in accordance with the law, the
			company may carry out business operations upon
			approval by competent departments.)
Xiaogan C&S	Xiaogan,	Xiaogan,	Import, export and sales of paper products, general		Business
Trading Co., Ltd.	Hubei	Hubei	merchandise and pulp boards; sales of cosmetics,		combinati
			shower gel and sanitary pads; sales of baby products		ons
			(excluding food) (For items that must be approved in		involving
				100.00%
			accordance with the law, the company may carry out		enterprise

			business operations upon approval by competent		s under
			departments.)		common
					control
Beijing C&S	Beijing	Beijing	Sales of paper products, daily necessities, paper pulp,		Business
Paper Co., Ltd.			and pulp boards; import and export of goods. (The		combinati
			company may independently select business items		ons
			and carry out business activities in accordance with	100.00%	involving
			the law; for items that must be approved in		enterprise
			accordance with the law, the company may carry out		s under
			business operations upon approval by competent		common

288

C&S Paper Co., Ltd. Annual Report 2020

			departments based on contents of the approval; it is		control
			prohibited to engage in business activities of items
			prohibited and restricted by the city’s industrial
			policies.)
Chengdu	Pengzhou,	Pengzhou,	Sales of household paper, cleaning products, general
Zhongshun Paper	Sichuan	Sichuan	merchandise, hygiene products, baby products,		Business
Co., Ltd.			cosmetics, nonwoven products, feminine hygiene		combinati
			products, chemical products for daily use, daily		ons
			necessities, medical devices, medical supplies and		involving
				100.00%
			disinfectant products (excluding hazardous		enterprise

			chemicals); e-commerce (For items that must be		s under
			approved in accordance with the law, the company		common
			may carry out business operations upon approval by		control
			competent departments.)
Hangzhou Jie	Hangzhou,	Hangzhou,	Wholesale, retail: paper products, paper pulp, general		Business
Rou Trading Co.,	Zhejiang	Zhejiang	merchandise; import and export of goods and		combinati
Ltd.			technologies (exclude items prohibited by laws and		ons
			administrative regulations; items whose operations		involving
			are restricted by laws and administrative regulations		enterprise
			shall not be carried out unless the permit has been	100.00%	s under
			obtained); other legitimate items that do not need		common
			approval according to the law) (for items that must be		control
			approved in accordance with the law, the company
			may carry out business operations upon approval by
			competent departments)
Shanghai	Shanghai	Shanghai	Household paper, paper pulp, pulp boards, import and		Business
Huicong Paper			export of goods and technologies. (For items that		combinati
Co., Ltd.			must be approved in accordance with the law, the		ons
			company may carry out business operations upon		involving
				100.00%
			approval by competent departments.)		enterprise

					s under
					common
					control

289

C&S Paper Co., Ltd. Annual Report 2020

C&S (Hubei)	Xiaogan,	Xiaogan,	Licensed items: production of sanitary products and
Paper Co., Ltd.	Hubei	Hubei	disposable medical supplies; production of cosmetics
			(for items that must be approved in accordance with
			the law, companies may carry out business operations
			upon approval by relevant departments, and the
			specific business items are subject to the approval
			document or the permit issued by competent
			department). General items: sales of sanitary products
			and disposable medical supplies; retail of cosmetics;
						Business
			wholesale of cosmetics; manufacture of paper; sales
						combinati
			of personal hygiene products; sales of knitwear;
						ons
			manufacture of maternal and infant products; sales of
						involving
			maternal and infant products; sales of paper products;	93.375%	6.625%
						enterprise
			manufacture of paper products; sales of daily
						s under
			necessities; sales of daily chemical products; sales of
						common
			disinfectants (excluding hazardous chemicals);
						control
			Internet sales (excluding the sales of commodities

			requiring a permit); sales of Class I medical devices;
			sales of Class II medical devices; import and export
			of goods and technologies (excluding the import and
			export of goods and technologies prohibited by the
			State or involving administrative approval). (For
			items that must be approved in accordance with the
			law, the company may carry out business operations
			upon approval by competent departments.)
Zhong Shun	Hong Kong,	Hong	Sales of paper products			Business
International Co.,	China	Kong,				combinati
Ltd.		China				ons
						involving
					100.00%
						enterprise

						s under
						common
						control

290

C&S Paper Co., Ltd. Annual Report 2020

C&S (Sichuan)	Pengzhou,	Pengzhou,	Licensed items: production of sanitary products and
Paper Co., Ltd.	Sichuan	Sichuan	disposable medical supplies; import and export of
			goods (for items that must be approved in accordance
			with the law, the company may carry out business
			operations upon approval by competent departments,
			and the specific business items are subject to the
			approval document or the permit issued by relevant
			department). General items: sales of sanitary products		Business
			and disposable medical supplies; sales of personal		combinati
			hygiene products; sales of daily necessities;		ons
			manufacture of paper products; sales of paper		involving
				100.00%
			products; manufacture of paper; manufacture of daily		enterprise

			chemical products; sales of daily chemical products;		s under
			sales of Class II medical devices; sales of Class I		common
			medical devices; manufacture of industrial textile		control
			products; sales of industrial textile products;
			manufacture of maternal and infant products; sales of
			maternal and infant products. (The company may
			carry out business operations independently
			according to the law based on the business license,
			except for items that must be licensed according to
			the law.)
C&S	Zhongshan,	Zhongsha	Production, processing and sales: high-class
(Zhongshan)	Guangdong	n,	household paper products (excluding printing		Business
Paper Co., Ltd.		Guangdon	process); import and export of pulp boards (exclude		combinati
		g	items prohibited by laws and administrative		ons
			regulations; items whose operations are restricted by		involving
				100.00%
			laws and administrative regulations shall not be		enterprise

			carried out unless the permit has been obtained). (For		s under
			items that must be approved in accordance with the		common
			law, the company may carry out business operations		control
			upon approval by competent departments.)
C&S (Dazhou)	Dazhou,	Dazhou,	R&D, production, processing, and sales (including	100.00%	Capital

291

C&S Paper Co., Ltd. Annual Report 2020

Paper Co., Ltd.	Sichuan	Sichuan	online sales): household paper, tissue boxes, hygiene			contributi
			products, cosmetics, non-woven products, plastic			on for
			products, metalware, rubber products, ceramics, baby			establish
			products, feminine hygiene products and daily			ment
			necessities; bamboo and forest trees planting;
			acquisition of raw materials of bamboo and wood for
			paper making; R&D, production and sales of bamboo
			pulp, wood pulp, bamboo chips and wood chips;
			combined heat and power and sales; warehouse
			leasing; processing and sales of lime and limestone;
			processing of industrial wastewater and gray water
			reuse; general import and export business; sales of
			construction materials, hardware and electrical
			products, and chemical products (excluding
			hazardous products). (For items that must be
			approved in accordance with the law, the company
			may carry out business operations upon approval by
			competent departments.)
Sun Daily	Yunfu,	Yunfu,	R&D, production, processing, and online sales: paper
Necessities Co.,	Guangdong	Guangdon	products, hygiene products, cosmetics, nonwoven
Ltd.		g	products, plastic products for daily use, chemical
			products for daily use, metalware for daily use, rubber
						Capital
			products for daily use, and ceramics for daily use;
						contributi
			import and export of goods or technologies
				50.00%	50.00%	on for
			(excluding the import and export of goods and
						establish
			technologies prohibited by the State or involving
						ment
			administrative approval). (For items that must be

			approved in accordance with the law, the company
			may carry out business operations upon approval by
			competent departments.)
Dolemi Sanitary		Zhongsha	General items: manufacture of paper products;			Capital
	Zhongshan,
Products Co.,		n,	Internet sales (sales only on third-party platforms)	60.00%	40.00%	contributi
	Guangdong
Ltd.		Guangdon	(excluding the sales of commodities requiring a			on for

292

C&S Paper Co., Ltd. Annual Report 2020

		g	permit); sales of personal hygiene products; sales of			establish
			household products, sales of hygiene products and			ment
			disposable medical products; retail of cosmetics; sales
			of general merchandise; sales of plastic products;
			sales of metal products; sales of rubber products;
			manufacture of daily-use ceramic products. (The
			company may carry out business operations
			independently according to the law based on the
			business license, except for items that must be
			licensed according to the law.) (For items that must be
			approved in accordance with the law, the company
			may carry out business operations upon approval by
			competent departments.)

==> picture [69 x 267] intentionally omitted <==

Description of the difference between the percentage of shares held in a subsidiary and the percentage of voting rights: None

Basis for holding 50% or less than of the voting rights but controlling the investee, or holding 50% or more of the voting rights but not controlling the investee: None

Basis for controlling the important consolidated structured entities: None

Basis for determining whether the Company is an agent or a principal: None

Other descriptions: all shares held indirectly belong to the shares held by wholly-owned subsidiaries of the Company

(2) Important non-wholly-owned subsidiaries

Description that the percentage of shares held by minority shareholders in a subsidiary is different from the percentage of their voting rights: None

Other description: The Company does not have important non-wholly-owned subsidiaries.

(3) Main financial information of important non-wholly-owned subsidiaries

Other description: None

(4) Significant restrictions on the use of the assets and the repayment of the debts of the enterprise group

None

293

C&S Paper Co., Ltd. Annual Report 2020

(5) Financial or other support provided to consolidated structured entities

Note: C&S (Yunfu) Co., Ltd. was changed to Yunfu Hengtai Trading Co., Ltd. in March 2021.

2. Transactions in which the share of owner's equity in a subsidiary changes while control of the subsidiary

is still retained

(1) Description of changes in the share of owner’s equity in the subsidiary

None

(2) Impact of the transaction on the equity of minority shareholders and the equity attributable to owners of the Parent Company

Other description: There are no transactions of the Company in which the share of owner's equity in a subsidiary changes and control of the subsidiary is retained.

3. Interests in joint arrangements or associates

(1) Important joint ventures or associates

Description that the percentage of shares in joint ventures or associates is different from the percentage of voting

rights: None

Basis for holding less than 20% of the voting rights but with significant influence, or holding 20% or more of the voting rights but without significant influence: None

(2) Main financial information of important joint ventures

Other description: None

(3) Main financial information of important associates

Other description: None

(4) Summary financial information of unimportant joint ventures and associates

Other description: None

294

C&S Paper Co., Ltd. Annual Report 2020

(5) Description of significant restrictions on the ability of joint ventures or associates to transfer funds to the Company

None

(6) Excess losses incurred by joint ventures or associates

Other description: None

(7) Unconfirmed commitments related to the investment in joint ventures

None

(8) Contingent liabilities related to the investment in joint ventures or associates

None

4. Important joint operation

There was no important joint operation of the Company.

5. Interests in unconsolidated structured entities

Description of unconsolidated structured entities:

The Company does not have interests in unconsolidated structured entities.

6. Others

None

X. Risks Associated with Financial Instruments

The main financial instruments of the Company include monetary funds, notes receivable, accounts receivable, notes payable, accounts payable, other payables, loans, etc. Please refer to relevant items of "Note VII" for detailed information of all financial instruments. The risks associated with these financial instruments and the risk management policies adopted by the Company to reduce these risks are as follows. The management of the Company manages and monitors these risk exposures to ensure that the above risks are kept within control. The Company adopts the sensitivity analysis method to analyze the possible impact of reasonable and possible

295

C&S Paper Co., Ltd. Annual Report 2020

changes in risk variables on the profit and loss or shareholder equities in the current period. Since any risk variable rarely changes in isolation and the correlation between the variables will have a significant effect on the ultimate financial impact of changes in a certain risk variable, the following contents are under the consumption that changes of a variable are independent.

The goal of the Company's risk management is to strike a proper balance between risks and gains and to minimize the negative impact of risks on the business performance of the Company while maximizing the interests of shareholders and other equity investors. Based on this risk management goal, the basic strategy of the Company’s risk management is to determine and analyze all kinds of risks faced by the Company, clarify the minimum of risk acceptance and conduct risk management, and monitor risks of all kinds in a timely and reliable manner to control risks within the limits.

1. Credit risk

Credit risk refers to the risk of financial losses of one party caused by the failure of the other party to perform its obligations. As of December 31, 2020, the largest credit exposure that may cause financial losses to the Company mainly comes from the losses of the Company’s financial assets due to failure of the other contractual party to perform its obligations.

In order to reduce credit risk, the Company only conducts transactions with recognized customers with good credit status, and continuously monitors the accounts receivable through credit monitoring of existing customers and aging analysis to ensure that the Company does not face the risk of bad debts and keep the overall credit risk within control.

2. Interest rate risk

Interest rate risk refers to the risk of fluctuations in the fair value or future cash flow of financial instruments due to changes in market interest rates. The interest rate risk faced by the Company mainly comes from bank borrowings (please refer to “Note VII (32), (43) and (45)” for details). By developing a good relationship with banks and carrying out proper design of credit lines, types of credits, and credit terms, the Company ensures sufficient bank credit lines to meet its various financing needs. The risk of interest rate fluctuation can be reasonably reduced by shortening the term of a single loan and specially stipulating early prepayment terms.

3. Foreign exchange risk

Foreign exchange risk refers to the risk of fluctuations in the fair value or future cash flow of financial instruments due to changes in foreign exchange rates. The Company tries its best to match foreign currency income with foreign currency expenditure to reduce foreign exchange risks.

Foreign exchange risks borne by the Company are mainly related to USD and HKD. Except for purchasing and selling in USD and HKD by its overseas subsidiaries, other major business activities of the Company are priced and settled in RMB. See "Note VII (82)" for the conversion of foreign currency financial assets and liabilities into RMB as of December 31, 2020. During the reporting period, the Company generated exchange profit and loss of

296

C&S Paper Co., Ltd. Annual Report 2020

-RMB18,603,312.21.

Sensitivity analysis of foreign exchange risk:

Analysis assumption: On the basis that all other variables remain constant on the balance sheet date, the possible, reasonable changes of foreign exchange rate will have the following pre-tax effects on the Company’s profit and loss and shareholders’ equity in the current period:

Unit: RMB

	End of year	End of year
Item		Impact on shareholders’ equity
	Impact on profit


Depreciation of RMB against foreign currency by 1.00%	-1,105,009.29	-1,105,009.29
Appreciation of RMB against foreign currency by 1.00%	1,105,009.29	1,105,009.29

4. Liquidity risk

Liquidity risk refers to the risk of capital shortage when an enterprise fulfills its obligation to settle accounts by delivering cash or other financial assets. The Company's policy is to ensure that it has sufficient cash to repay mature debts. Liquidity risk is centrally controlled by the financial departments of the Company. The financial departments monitor cash balances, negotiable securities that can be cashed in at any time, and carry out rolling forecasts on cash flows in the next six months to ensure that the Company has sufficient funds to repay debts under all reasonable forecasts.

Financial liabilities held by the Company as of December 31, 2021 analyzed based on the maturity period of undiscounted remaining contractual obligations are as follows:

Unit: RMB

Item	Within 1 year	Over 1 year	Total
Short-term borrowing	142,942,941.34		142,942,941.34
Notes payable	234,887,563.22		234,887,563.22
Accounts payable	758,915,601.87	2,603,787.39	761,519,389.26
Other payables	675,601,882.84	79,242,697.25	754,844,580.09
Total	1,812,347,989.27	81,846,484.64	1,894,194,473.91

297

C&S Paper Co., Ltd. Annual Report 2020

XI. Disclosure of Fair Value

1. Fair value of assets and liabilities measured at fair value at the end of the reporting period

2. Basis for determining the market price of recurring and non-recurring fair value measurement items in Level 1: None

3. Qualitative and quantitative information on important parameters and valuation techniques used for recurring and non-recurring fair value measurement items in Level 2: None

4. Qualitative and quantitative information on important parameters and valuation techniques used for recurring and non-recurring fair value measurement items in Level 3: None

5. Adjustment information and sensitivity analysis of unobservable parameters between the opening and closing book values of recurring fair value measurement items of Level 3: None

6. For recurring fair value measurement items with transfer between different levels, reasons for such transfer and policies for determining the time of conversion: None

7. Changes in valuation techniques within the reporting period and reasons for such changes: None

8. Fair value of financial assets and financial liabilities not measured at fair value: None

9. Others: None

XII. Related Parties and Related Party Transactions

1. Information on the Parent Company of the Company

==> picture [480 x 171] intentionally omitted <==

----- Start of picture text -----

Name of Parent Registered address Principal businesses Registered capital Shareholding Percentage of voting
Company percentage of the right of the Parent
Parent Company to Company to the
the Company Company
Guangdong Zhongshan, External investment; RMB30 million
Zhongshun Paper Guangdong consulting of
28.64% 28.64%
Group Co., Ltd. information on
commodities
----- End of picture text -----

298

C&S Paper Co., Ltd. Annual Report 2020

circulation (exclusive of real estate, labor services, financial futures, and studying abroad)

==> picture [159 x 125] intentionally omitted <==

Information on the Company’s Parent Company

The ultimate controller of the Company is Mr. Deng Yingzhong, the father, and Mr. Deng Guanbiao and Mr. Deng Guanjie, whose two sons.

Other description: None

2. Information on subsidiaries of the Company

See Note IX Equities in Other Entities for detailed information on the subsidiaries of the Company.

3. Information on the joint ventures and associates of the Company

Other descriptions

The Company does not have interests in joint venture arrangements or associate.

4. Information on other related parties

Name of other related parties	Relationship between other related parties and the Company
(Hong Kong) Zhongshun Co., Ltd.	The second-largest shareholder of the Company, with 20.32% of
	the Company's shares
Guangzhou Zhongshun Trade Co., Ltd.	A company controlled by the nephew and the husband of the
	niece of Mr. Deng Yingzhong, the Chairman of the Company
Bama Zhongshun Health Products Co., Ltd.	A company controlled by Guangdong Zhongshun Paper Group
	Co., Ltd., the Company's controlling shareholder
Yantai Zhongshun Network Technology Co., Ltd.	The partially-owned subsidiary of Bama Zhongshun Health
	Products Co., Ltd. controlled by the Company's controlling
	shareholders
Shenzhen Zhongshun Caizhi Investment Co., Ltd.	Formerly known as Zhongshun Industrial Investment (Shenzhen)
	Co., Ltd., a company controlled by the Company’s actually

299

C&S Paper Co., Ltd. Annual Report 2020

	controllers, i.e. Mr. Deng Yingzhong, Mr. Deng Guanbiao and
	Mr. Deng Guanjie
Pengzhou Lexiangshenghuo Trading Co., Ltd.	A company where the senior manager Yue Yong's son holds
	shares and serves as a supervisor
Sichuan West Lexiangshenghuo Trading Co., Ltd.	A company where the senior manager Yue Yong's son holds
	shares and serves as a supervisor
Chongqing Qinyue Trading Co., Ltd.	A company where the senior manager Yue Yong's brother holds
	shares and serves as a supervisor

Other descriptions

Note: The Company's directors, supervisors, senior managers and their close family members are related parties of the Company.

5. Information on related party transactions

(1) Related party transactions for purchase and sale of goods, and provision and acceptance of labor services

Purchase of goods/acceptance of labor services

Unit: RMB

	Content of related	Incurred in the	Approved transaction	Whether to outstrip	Incurred in the prior
Related party
	party transaction	current period	limit	the transaction limit	period

Bama Zhongshun
	Purchase of water,
Health Products				No	123,516.43
	office supplies
Co., Ltd.

Table of sale of goods/provision of labor services

Unit: RMB

	Content of related party
Related party		Incurred in the current period	Incurred in the prior period
	transactions

Pengzhou Lexiangshenghuo
	Sale of goods	1,378,011.50	1,096,199.07
Trading Co., Ltd.

Sichuan West Lexiangshenghuo
	Sale of goods	641,228.34	776,211.46
Trading Co., Ltd.

300

C&S Paper Co., Ltd. Annual Report 2020

Chongqing Qinyue Trading Co.,
	Sale of goods	330,512.87	726,966.96
Ltd.

Guangdong Zhongshun Paper
	Sale of goods	56,637.17
Group Co., Ltd.

Explanation of the related party transactions for purchase and sale of goods, and provision and acceptance of labor

services: None

(2) Related entrusted management/contracting and entrusting management/contracting out

Description of related entrusted party/contracting: None

Description of related entrusting management/contracting out: None

(3) Related lease

The Company as the lessee:

Unit: RMB

Name of lessor	Type of leased assets	Lease fee confirmed in the	Lease fee confirmed in the last
		current period	period
Mr. Deng Yingzhong, Mr. Deng	Housing lease
Guanbiao and Mr. Deng		3,004,787.91	1,742,553.60
Guanjie

Explanation of related lease: None

(4) Related guarantee

Explanation of related guarantee: None

(5) Interbank borrowing between related parties

(6) Asset transfer and debt reorganization between related parties

(7) Remuneration for key managers

Unit: RMB

Item Incurred in the current period Incurred in the prior period

301

C&S Paper Co., Ltd. Annual Report 2020

Remuneration for key managers 34,173,895.09 26,693,829.67

(8) Other related party transactions

6. Receivables from and payables to related parties

(1) Receivables

Unit: RMB

		Balance at the end of the period	Balance at the end of the period	Balance at the beginning of the period	Balance at the beginning of the period
Item	Related party	Book balance	Impairment	Book balance	Impairment
			provision		provision
Accounts receivable	Chongqing Qinyue Trading
		60,876.03	3,043.80	130,446.49	2,608.93
	Co., Ltd.

	Chongqing Qinyue Trading
Other receivables		44.63	2.23
	Co., Ltd.

(2) Payables

Unit: RMB

		Book balance at the end of the	Book balance at the beginning
Item	Related party
		period	of the period

Contract liabilities	Sichuan West Lexiangshenghuo
		195.90	4,783.90
	Trading Co., Ltd.

Contract liabilities	Pengzhou Lexiangshenghuo
		1.67	503.67
	Trading Co., Ltd.

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C&S Paper Co., Ltd. Annual Report 2020

7. Commitments of related parties: None

8. Others: None

XIII. Share-based Payment

1. Overall information on share-based payment

√ Applicable □ Not applicable

Unit: RMB

The Company's total amount of all equity instruments granted in the 0.00 current period The Company's total amount of all equity instruments exercised in the 9,969,114.00 current period The Company's total amount of all equity instruments expired in the 3,276,268.00 current period The grant price for restricted stock options awarded by the Company in the first grant period as at the end of reporting period is RMB8.572/share, and that for Scope of exercise prices and remaining contractual term of the Company' reserved stock options is RMB13.965/share; the validity stock options issued as at the end of the reporting period period is from the grant date of the stock options to the date when all stock options are exercised or cancelled, with a maximum period of 60 months.

Other description: None

2. Equity-settled share-based payment

√ Applicable □ Not applicable

Unit: RMB

	1. Restricted shares: the stock closing prices at the grant date
Method of determining the fair value of equity instruments at the	2. Stock options: Black-Scholes model for option pricing
grant date	3. Employee stock ownership plan: the stock closing prices
	at the grant date.
Basis for determining the number of vested equity instruments	Upon approval of the general meeting of shareholders

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C&S Paper Co., Ltd. Annual Report 2020

Reasons for significant differences between current estimates and None previous estimates Cumulative amount of equity-settled share-based payments 159,384,997.90 recognized as capital surplus Total fees confirmed by the equity-settled share-based payment in 95,705,148.72 the current period

Other description: None

3. Cash-settled share-based payment

□ Applicable √ Not applicable

4. Revision and termination of share-based payment

There was no revision and termination of share-based payment of the Company during the reporting period.

5. Others: None

XIV. Commitments and Contingencies

1. Significant commitments

Significant commitments on the balance sheet date: None

As at December 31, 2020, the Company had no significant commitments that should have been disclosed but are not disclosed.

2. Contingencies

(1) Significant contingent matters on the balance sheet date

As at December 31, 2020, the Company had no significant contingent matters that should have been disclosed but are not disclosed.

304

C&S Paper Co., Ltd. Annual Report 2020

(2) Explanations are also necessary if the Company has no significant contingent matters to be disclosed

There are no significant contingent matters to be disclosed in the Company.

3. Others: None

XV. Events after Balance Sheet Date

1. Significant non-adjusting events:None

2. Profit distribution:None

3. Sales return: None:None

4. Explanation on other events after the balance sheet date: None

1. Important external investment

The Company convened the 31st Meeting of the fourth session of the Board of Directors and the 2nd extraordinary meeting of shareholders on January 13, 2021 and January 29, 2021, respectively. The meetings reviewed and adopted the Proposal on Building a New 400,000-ton High-grade Household Paper Project . The new project aims to promote the Company to further expand its production capacity, meet the demands for future sales growth in East China market, and create new profit growth points for the Company. With a total projected investment of RMB2.550 billion and a planned capacity of 400,000 tons, the project will be implemented in phases. The first phase is planned to have an investment of RMB600 million and an output of 100,000 tons of high grade household paper.

In order to meet the development needs of the new project, the Company, with its own funds of RMB200 million, established a wholly-owned subsidiary C&S (Jiangsu) Paper Co., Ltd. on February 27, 2021 in Suqian City of Jiangsu Province.

On March 15, 2021, the Company signed the Investment Agreement for the New 400,000-ton High-grade Household Paper Project in Suqian with Sucheng District People’s Government of Suqian City and the Management Committee of Yunhe Suqian Port Industrial Park, respectively.

2. Profit distribution plan

Pursuant to resolutions made on the fourth meeting of the fifth session of the Board of Directors on April 27, 2021, the profit distribution proposal in 2020 is as follows: distribute cash dividend of RMB 1.0 (tax included) for every 10 shares to all shareholders and issue 0 bonus shares (tax included) based on the Company’s total share capital minus the number of repurchased shares as of the registration date of the Company’s implementation of the profit

305

C&S Paper Co., Ltd. Annual Report 2020

distribution plan; meanwhile, the Company will not transfer capital reserve into share capital. Where the Company’s share capital changes due to repurchase and cancellation of restricted shares, option exercise, and other reasons on the future equity registration date for the implementation of the distribution plan, the Company will maintain the same distribution amount for every 10 shares and change the total distributed amount accordingly. This proposal can be implemented only after being reviewed and passed on the shareholder’s general meeting.

XVI. Other Significant Matters

1. Corrections to previous accounting errors

(1) Retroactive restatement approach:None

(2) Prospective approach:None

2. Debt restructuring: None

3. Assets replacing

(1) Exchange of non-monetary assets: None

(2) Other asset replacing: None

4. Annuities plan: None

5. Operation discontinuation

Other description: None

6. Segment information

(1) Determination basis and accounting policies of reporting segments

The Company does not have operating segments with different economic features and hence has not identified operating segments according to internal organization structure, management requirements and internal reporting policies. Therefore, there was no information on reporting segments based on operating segments to be disclosed.

306

C&S Paper Co., Ltd. Annual Report 2020

(2) Financial information on reporting segments:None

(3) Explanation on reasons if the Company has no reporting segments or is unable to disclose the total assets and liabilities of the reporting segments: None

(4) Other description: None

7. Other important transactions and matters that may affect the decisions of investors: None

8. Others

External guarantees of the Company

In 2020, the Company signed the XIAOYIDA Business Cooperation Agreement with Bank of China Limited Zhongshan branch and Shanghai Junmeng E-commerce Co., Ltd. (No. 2020-XYDXY-33725001), under which the bank offers a credit line of XIAOYIDA service up to RMB130 million to Shanghai Junmeng and the Company provides a joint and several liability guarantee. The line of credit is valid until June 4, 2021. As of December 31, 2020, Shanghai Junmeng had no financing balance of the XIAOYIDA service.

In 2020, Zhongshan Trading signed the XIAOYIDA Business Cooperation Agreement with Bank of China Limited Zhongshan branch and Wuhan Jie Rou E-commerce Co., Ltd. (No. 2020-XYDXY-33725002), under which the bank offers a credit line of XIAOYIDA service up to RMB80 million to Wuhan Jie Rou and the Company provides a joint and several liability guarantee. The line of credit is valid until June 4, 2021. As of December 31, 2020, Wuhan Jie Rou had no financing balance of the XIAOYIDA service.

XVII. Notes to Major Items of Financial Statements of the Parent Company

1.Accounts receivable

(1) Accounts receivable disclosure by category

Unit: RMB

	Balance at the end of the year	Balance at the end of the year	Balance at the end of the year	Balance at the end of the year		Balance at	Balance at	the beginning of the year	the beginning of the year	the beginning of the year
Type	Book balance		Impairment			Book balance		Impairment
			provision		Book			provision
										Book value
	Amount	Percenta	Amount	Provision	value	Amount	Percentag	Amount	Provision

		ge		ratio			e		ratio

307

C&S Paper Co., Ltd. Annual Report 2020

Including:
Accounts receivable				1.49%
for which bad debt	94,047,3		1,399,99		92,647,37	128,480,8		1,277,442		127,203,42
		100.00%					100.00%		0.99%
reserve is set aside in	65.99		3.66		2.33	69.70		.83		6.87

portfolios
Including:
Portfolio based on	56,099,6		1,399,99	2.50%	54,699,68	44,573,10		1,277,442		43,295,665.
		59.65%					34.69%		2.87%
aging	81.03		3.66		7.37	8.11		.83		28

Portfolio based on	37,947,6				37,947,68	83,907,76				83,907,761.
		40.35%					65.31%
related parties	84.96				4.96	1.59				59

	94,047,3		1,399,99	1.49%	92,647,37 2.33	128,480,8		1,277,442		127,203,42 6.87
Total		100.00%					100.00%		0.99%
	65.99		3.66			69.70		.83

Bad debt reserve set aside individually: None

Bad debt reserve set aside in portfolios: 1,399,993.66

Unit: RMB

	Balance at the end of the period	Balance at the end of the period	Balance at the end of the period
Name
	Book balance	Impairment provision	Book balance

Within the credit period	47,886,975.14	957,739.50	2.00%
Credit period - 1 year	8,058,493.48	402,924.67	5.00%
1 to 2 years	46,228.20	6,934.23	15.00%
2 to 3 years	107,984.21	32,395.26	30.00%
3 to 5 years			50.00%
Over 5 years			100.00%
Total	56,099,681.03	1,399,993.66	--

Description of reason for the portfolio:

Accounts receivable with the same aging have similar credit risk characteristics.

Description of reason for the portfolio: None

Provision of bad debt reserve by portfolio:

Description of reason for the portfolio:

If the bad debt reserve of accounts receivable is set aside according to general model of expected credit loss,

308

C&S Paper Co., Ltd. Annual Report 2020

please refer to the disclosure method of other receivables to disclose relevant information on bad debt reserve: Relevant information:

□ Applicable √ Not applicable

Disclosure by aging

Unit: RMB

Aging	Book balance
Within 1 year (inclusive)	93,893,153.58
1 to 2 years	46,228.20
2 to 3 years	107,984.21
Total	94,047,365.99

(2) Bad debt reserve that is set aside, recovered or transferred back in the reporting period

Provision of bad debt reserve of the reporting period:

Unit: RMB

Type	Balance at the	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period	Balance at the
	beginning of the	Provision	Recovery or	Write-off	Others	end of the period
	period		reversal

Accounts
	1,277,442.83	122,550.83				1,399,993.66
receivable

Total	1,277,442.83	122,550.83				1,399,993.66

(3) Accounts receivable actually written off in the reporting period

Description of write-offs of accounts receivable: The Company did not have written-off accounts receivable in the reporting period.

(4) Top five debtors in closing balance of accounts receivable

Unit: RMB

Name of institution Balance of accounts receivable Percentage in total balance of Balance for bad debt reserve at

309

C&S Paper Co., Ltd. Annual Report 2020

	at the end of the period	accounts receivable at the end	the end of the period
		of the period
1st	16,054,158.77	17.07%
2nd	11,773,496.66	12.52%	235,469.93
3rd	11,018,467.37	11.72%
4th	10,804,984.84	11.49%
5th	10,644,841.40	11.32%	295,062.16
Total	60,295,949.04	64.12%

(5) Accounts receivable derecognized due to transfer of financial assets

The Company has no accounts receivable derecognized due to the transfer of financial assets as at the end of the reporting period.

(6) Amounts of assets and liabilities that are formed by the transfer and ongoing involvement of accounts receivable

The Company has no amounts of assets and liabilities that are formed by the transfer and ongoing involvement of accounts receivable as at the end of the reporting period.

Other description: None

2. Other receivables

Unit: RMB

Item	Balance at the end of the period	Balance at the beginning of the period
Other receivables	136,987,584.64	637,511,752.54
Total	136,987,584.64	637,511,752.54

310

C&S Paper Co., Ltd. Annual Report 2020

(1) Interest receivable

1) Classification of interest receivable: None

2) Significant overdue interest

Other description: None

3) Provision of bad debt reserve

□ Applicable √ Not applicable

(2) Dividends receivable

1) Classification of dividends receivable: None

2) Significant dividends receivable exceeding one year: None

3) Provision of bad debt reserve

□ Applicable √ Not applicable

Other description: None

(3) Other receivables

1) Classification of other receivables by nature

Unit: RMB

		Book balance at the beginning of the
Nature	Book balance at the end of the period
		period

Current accounts	131,125,900.41	636,793,035.80
Reserve	639,681.19	702,001.66
Margins and deposits	113,606.00	31,500.00
Others	5,494,420.94	44,314.48
Total	137,373,608.54	637,570,851.94

311

C&S Paper Co., Ltd. Annual Report 2020

2) Provision of bad debt reserve

Unit: RMB

	Phase I	Phase II	Phase III
	Expected credit loss in	Expected credit losses in the	Expected credit losses in
Bad debt provision				Total
	the next 12 months	whole duration (without	the whole duration (with

		credit impairment)	credit impairment)
Balance as at January 1, 2020	59,099.40			59,099.40
Balance as at January 1, 2020
	——	——	——	——
in the reporting period

Provision in the reporting
	334,513.61			334,513.61
period

Write-off in the reporting
	7,589.11			7,589.11
period

Balance as at December 31,
	386,023.90			386,023.90
2020

Description of changes in the book balance where there are significant changes in provision for the current period

□ Applicable √ Not applicable

Disclosure by aging

Unit: RMB

Aging	Book balance
Within 1 year (inclusive)	137,361,254.49
1 to 2 years	2,000.00
Over 3 years	10,354.05
4 to 5 years	8,354.05
Over 5 years	2,000.00
Total	137,373,608.54

3) Bad debt reserve that is set aside, recovered or transferred back in the reporting period

Provision of bad debt reserve of the reporting period:

312

C&S Paper Co., Ltd. Annual Report 2020

Unit: RMB

	Balance at the	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period	Amount of change in the reporting period
						Balance at the end
Category	beginning of	Provision	Recovery or	Write-off	Others
						of the period
	the period		reversal

Other receivables	59,099.40	334,513.61		7,589.11		386,023.90
Total	59,099.40	334,513.61		7,589.11		386,023.90

The amount of other accounts receivable written-off by the Company in the year was RMB7,589.11.

Where the amount of recovered or reversed bad debt reserve in the reporting period is important: None

4) Other receivables actually written off in the reporting period

Unit: RMB

Item	Write-off amount
Other receivables actually written off	7,589.11

Description on the write-offs of other receivables: None

5) Top five debtors in closing balance of other accounts receivable

Unit: RMB

				Percentage in total
					Balance of bad debt
	Nature of the amount	Balance at the end		balance of other
Name of institution			Aging		reserve at the end of
		of the period		receivables at the end
					the period
				of the period

1st	Current accounts	109,851,720.66	Within 1 year	79.97%
2nd	Current accounts	15,148,739.75	Within 1 year	11.03%
3rd	Others	5,431,871.82	Within 1 year	3.95%	271,593.59
4th	Current accounts	4,769,618.48	Within 1 year	3.47%
5th	Others	226,614.54	Within 1 year	0.16%	11,330.73
Total	--	135,428,565.25	--	98.58%	282,924.32

313

C&S Paper Co., Ltd. Annual Report 2020

6) Receivables involving government grants: None

7) Other receivables derecognized due to the transfer of financial assets: None

8) Amount of assets and liabilities that are formed by the transfer and ongoing involvement of other receivables: None

3. Long-term equity investment

Unit: RMB

	Balance at the end of the	Balance at the end of the	period	Balance at the beginning of t	Balance at the beginning of t	he period
Item		Impairment			Impairment provision
	Book balance		Book value	Book balance		Book value
		provision

Investment in
	1,928,113,219.50		1,928,113,219.50	1,231,245,128.96		1,231,245,128.96
subsidiaries

Total	1,928,113,219.50		1,928,113,219.50	1,231,245,128.96		1,231,245,128.96

(1) Investment in subsidiaries

Unit: RMB

Investee	Opening balance	Increase/decrease in the period	Increase/decrease in the period	Increase/decrease in the period	Increase/decrease in the period	Closing balance	Closing
	(book value)	Increase in	Decrease in	Impairmen	Others	(book value)	balance of
		investment	investment	t Provision			impairme
							nt

							provision
Jiangmen Zhongshun Paper					1,114,
	697,499,879.18					698,614,821.47
Co., Ltd.					942.29

					12,156
C&S (Sichuan) Paper Co.,
	161,228,847.04				,592.9	173,385,439.98
Ltd.
					4

					4,431,
C&S (Yunfu) Paper Co., Ltd.	135,405,965.05	518,000,000.00				657,837,465.42
					500.37

314

C&S Paper Co., Ltd. Annual Report 2020

Zhongshan Zhongshun			3,205,
	91,611,393.55			94,817,296.68
Trading Co., Ltd.			903.13

Zhejiang Zhongshun Paper			5,265,
	51,259,117.44			56,524,520.15
Co., Ltd.			402.71

			5,379,
C&S (Hubei) Paper Co., Ltd.	43,037,008.50	147,600,000.00		196,016,245.13
			236.63

C&S (Yunfu) Trading Co.,
	30,200,274.51			30,200,274.51
Ltd.

C&S (Zhongshan) Paper Co.,
	12,683,100.00			12,683,100.00
Ltd.

C&S (Dazhou) Paper Co.,
	6,000,000.00			6,000,000.00
Ltd.

Chengdu Zhongshun Paper			-610,1
	1,237,694.60			627,524.58
Co., Ltd.			70.02

Xiaogan C&S Trading Co.,			-227,7
	539,220.62			311,467.66
Ltd.			52.96

Zhong Shun International			503,25
	281,784.47			785,042.74
Co., Ltd.			8.27

Sun Daily Necessities Co.,
	200,000.00			200,000.00
Ltd.

Hangzhou Jie Rou Trading			46,047
	58,048.00			104,095.00
Co., Ltd.			.00

			3,130.
Huicong Paper Co., Ltd.	2,796.00			5,926.18
			18

	1,231,245,128.96		31,268	1,928,113,219.50
Total		665,600,000.00	,090.5
			4

315

C&S Paper Co., Ltd. Annual Report 2020

(2) Investment in associates and joint ventures

(3) Other description: None

4. Operating income and operating cost

Unit: RMB

	Incurred in the current period	Incurred in the current period	Incurred in the prior period	Incurred in the prior period
Item
	Income	Cost	Income	Cost

Principal business	1,034,162,235.27	822,204,492.12	986,520,042.70	803,354,181.11
Others	598,353,119.61	555,594,473.69	301,127,650.65	281,122,201.68
Total	1,632,515,354.88	1,377,798,965.81	1,287,647,693.35	1,084,476,382.79

Information related to income:

Unit: RMB

Contract classification	Branch 1	Total
By product type	1,632,515,354.88	1,632,515,354.88
Including:
Household paper	1,025,893,623.14	1,025,893,623.14
Personal care	8,268,612.13	8,268,612.13
Others	598,353,119.61	598,353,119.61
By operating region	1,632,515,354.88	1,632,515,354.88
Including
Domestic	1,632,515,354.88	1,632,515,354.88
Abroad	0.00	0.00
Including:
Including:
Including:
Including:
Including:
Total	1,632,515,354.88	1,632,515,354.88

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C&S Paper Co., Ltd. Annual Report 2020

Information related to performance obligation: None

Information related to the transaction price apportioned to the remaining performance obligation:

The amount of income corresponding to the obligations of contract performance with an executed contract that is

not performed or fully performed at the end of the reporting period is RMB5,720,659.36, of which the income of RMB5,720,659.36 is expected to be confirmed as income in the year of 2021.

Other description: None

5. Return on investment

	Unit: RMB Incurred in the current period Incurred in the last period 140,000,000.00 60,000,000.00 3,256,231.99 333,745.61 143,256,231.99 60,333,745.61	Unit: RMB Incurred in the current period Incurred in the last period 140,000,000.00 60,000,000.00 3,256,231.99 333,745.61 143,256,231.99 60,333,745.61
Item	Incurred in the current period	Incurred in the last period
Income from long-term equity-based
investment accounted for using the cost	140,000,000.00	60,000,000.00
method
Others	3,256,231.99	333,745.61
Total	143,256,231.99	60,333,745.61

6. Others: None

XVIII. Supplementary Information

1.List of non-recurring profits and losses of the reporting period

√ Applicable □ Not applicable

	Unit: RMB Amount Description -2,980,604.57 28,533,162.96	Unit: RMB Amount Description -2,980,604.57 28,533,162.96
Item	Amount	Description
Profits/losses from the disposal of
	-2,980,604.57
non-current asset

Governmental grants reckoned into current
profits/losses (not including grants enjoyed
	28,533,162.96
in quota or ration according to national

standards, which are closely relevant to the

317

C&S Paper Co., Ltd. Annual Report 2020

company’s business)
		Returns on principal-protected wealth
Profits/losses from assets entrusted to others
	3,868,134.28	management products at maturity and
for investment or management
		reverse repo of treasury bonds

Other non-operating income and expenses
	-13,442,144.41
except for the aforementioned items

Less: Influence of income tax	1,642,453.66
Total	14,336,094.60	--

Reason shall be provided if the company defines non-recurring profit and loss items as defined or listed in the No.

1 Explanatory Announcement on Information Disclosure for Companies Offering their Securities to the

Public—Non-recurring Profit and Loss as recurring profit and loss items.

□ Applicable √ Not applicable

2. Return on net assets and earnings per share

		Earnings per share	Earnings per share
Profit in the reporting period	Weighted average return on net assets	Basic earnings per share	Diluted earnings per
		(RMB/share)	share (RMB/share)
Net profit attributable to the		0.70	0.69
ordinary shareholders of the	19.86%
Company
Net profit attributable to the
ordinary shareholders of the
	19.55%	0.69	0.68
Company after excluding

non-recurring profit and loss

3. Difference in accounting data under domestic and international accounting standards

(1) Net profit and net asset differences under International Financial Reporting Standards (IFRS) and Chinese Accounting Standards (CAS)

□ Applicable √ Not applicable

318

C&S Paper Co., Ltd. Annual Report 2020

(2) Net profit and net asset differences under foreign accounting standards and Chinese Accounting Standards (CAS)

□ Applicable √ Not applicable

(3) Explanation of reasons for the differences between accounting data disclosed under domestic and overseas accounting standards. If differences are adjusted based on data audited by overseas audit institutions, the name of the institution should be noted.

4. Others

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C&S Paper Co., Ltd. Annual Report 2020

Section XIII Documents Available for Inspection

1. The Annual Report 2020 affixed with the signature of Mr. Deng Yinzhong, the Company’s legal representative

2. Financial statements affixed with the signatures and stamps of Mr. Deng Yingzhong, the legal representative of the Company, Mr. Dong Ye, person in charge of accounting, and Ms. Xu Xianjing, person in charge of accounting department of the Company

3. Original of the audit report affixed with the stamp of Mazars Certified Public Accountants

(LLP) and the signatures and stamps of certified public accountants Mr. Wang Bing and Mr. Pan Guiquan.

4. All original copies of the Company’s documents and the original drafts of the Company’s announcements as disclosed in the newspaper designated by the CSRC during the reporting period

5. Other relevant documents

6. Place for document inspection: Office of the Board of Directors

320

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C&S Paper Co., Ltd. — Annual Report 2020

54537_rns_2021-04-28_cf36cf72-99a6-4805-8fb0-31de92c37088.PDF

Section I Important Notice, Contents and Definitions

I. Risk of great fluctuations in pulp prices

II. Risk of exchange rate

III. Risk of regional market competition

V. Risk of safe production

Contents

Definitions

Section II Company Profile and Key Financial Indicators

I. Company Information

II. Contact Persons and Contact Methods

III. Information Disclosure and Location for Inspection of Documents

IV. Changes of Registration Information

V. Other Relevant Information

□ Applicable √ Not applicable

VI. Main Accounting Data and Financial Indicators

VII. Difference in Accounting Data under Domestic and International Accounting Standards

1. Net profit and net asset differences under International Financial Reporting Standards (IFRS) and Chinese Accounting Standards (CAS)

2. Net profit and net asset differences under foreign accounting standards and Chinese Accounting Standards (CAS)

VIII. Major Financial Indicators by Quarter

IX. Non-recurring Items and Amounts

□ Applicable √ Not applicable

Section III Summary of the Company’s Business

I. Principal Businesses of the Company during the Reporting Period

1. Household paper (Jie Rou brand + Sun brand)

2. Personal care products (Dolemi brand)

3. Quality health products

II. Significant Changes in Main Assets

1. Significant changes in main assets

2. Main overseas assets

III. Analysis of Core Competitiveness

1. Belong to the first echelon of the domestic household paper industry

2. Constantly optimized product structure

3. Stable and effective management team

4. Nationwide marketing network

5. Nationwide layout of production bases

6. Product quality at an international level

7. Good R&D capabilities

8. First-class production equipment

9. Outstanding environmental protection awareness and technology

Section IV Discussion and Analysis of the Operations

I. Overview

1. Expansion of product categories to drive sales

2. Constant optimization of product structure and improvement of channels to push steady growth in sales

3. Increase in gross margin thanks to decrease in international pulp prices

4. Employee enthusiasm boosted as the first unlocking/exercise period of the equity incentive plan was

successfully completed

5. Fulfillment of corporate social responsibilities and demonstrating the corporate culture as a

top-performing enterprise

II. Analysis of Principal Businesses

1. Overview

2. Revenue and cost

(1) Composition of operating income

(3) Whether the Company’s goods selling income higher than the service income

√ Yes □ No

√ Applicable □ Not applicable

(4) Fulfillment of significant sales contracts signed by the Company as of the end of the reporting period

(5) Composition of operating cost

(6) Whether the consolidated scope changed during the reporting period

√ Yes □ No

(8) Major customers and suppliers

√ Applicable □ Not applicable

Major suppliers of the Company

√ Applicable □ Not applicable

3. Expenses

4. R&D investment

5. Cash flow

III. Analysis of Non-principal Businesses

IV. Analysis of Assets and Liabilities

1. Significant changes in the composition of assets

2. Assets and liabilities measured at fair value

3. Restriction of asset rights as at the end of the reporting period

V. Analysis of Investment

1. Overview

√ Applicable □ Not applicable

2. Major equity investment during the reporting period

3. Major non-equity investment during the reporting period

4. Financial asset investment

C&S Paper Co., Ltd. Annual Report 2020