Annual Report 2023 Stock Code: 603605 Stock Abbreviation: Proya Bond Code: 113634 Bond Abbreviation: Proya Convertible Bond Proya Cosmetics Co., Ltd. Annual Report 2023 1 / 272 Annual Report 2023 Important Notes I.The Board of Directors, Board of Supervisors, directors, supervisors and senior management of the Company warrant that the content of the Annual Report is authentic, accurate and complete, free from false records, misleading statements and major omissions, and shall be jointly and severally liable therefore. II.All directors of the Company attended the meeting of the Board of Directors. III.Pan-China Certified Public Accountants (Special General Partnership) has issued a standard unqualified audit report to the Company. IV.HOU Juncheng, chairman of the Company, and WANG Li, CFO (and Head of Accounting Department) of the Company represent and warrant that the financial report in the Annual Report is authentic, accurate and complete. V.The profit distribution plan or capital reserve capitalization plan for the Reporting Period approved by the Board of Directors 1. Based on the total share capital (excluding the shares in the Company's special securities account for repurchase) as of the record date on which equity distribution is implemented, the Company proposes to distribute to all shareholders registered a cash dividend of RMB9.10 (tax inclusive) per 10 shares. Based on the total share capital of 396,757,184 shares on December 31, 2023, deducting 2,210,825 shares in the Company's special securities account for repurchase, it is estimated that the cash dividend to be distributed will amount to RMB359,037,186.69 (tax inclusive) without converting the capital reserve into share capital or giving any bonus shares. In case of a change in the Company's total share capital due to the conversion of convertible bonds before the record date for equity distribution, the Company maintains the said distribution ratios and yet adjusts the total distribution amounts. 2. On October 23, 2023, the Company completed the implementation of the 2023 semi-annual profit distribution plan. Based on the Company's total share capital of 396,823,346 shares before the implementation of the plan, a cash dividend of RMB0.38 per share (tax inclusive) was distributed, with a total of RMB150,792,871.48 cash dividends distributed. 3. According to the Guideline No. 7 for the Self-regulatory Rules of Companies Listed on the Shanghai Stock Exchange - Share Repurchase and other relevant regulations, for listed companies that repurchase shares using cash as consideration through centralized bidding or tender offer, the amount of repurchased shares in the current year shall be treated as the amount of cash dividends and counted in the calculation of the cash dividend proportion for that year. In 2023, the Company repurchased shares amounting to RMB39,076,754.20 (excluding transaction expenses) through centralized bidding. To conclude, the amount of cash dividends for the year 2023 (including the proposed annual dividend for 2023, the semi-annual cash dividend for 2023, and the amount of repurchased shares through centralized bidding for 2023) accounts for 45.98% of the net profit attributable to the shareholders of the Company in the consolidated statement of 2023. VI.Disclosure of risks involved in forward-looking statements √ Applicable □ Not applicable The Report contains forward-looking statements which involve the future plans, development strategies, etc. of the Company, yet do not constitute substantive undertakings of the Company to investors. Investors should exercise caution prior to making investment decisions. 2 / 272 Annual Report 2023 VII.Whether there is any non-operating capital occupation by a controlling shareholder and other related parties No VIII.Whether there is any external guarantee provided in violation of specified decision-making procedures No IX.Whether the majority of the directors are unable to warrant the authenticity, accuracy and completeness of the Annual Report disclosed by the Company No X.Disclosure of major risks The Company has described the existing risks in details in this Report. Refer to "(IV) Possible risks", "VI. Discussion and Analysis of the Company's Future Development", "Section III Management Discussion and Analysis". XI.Other □ Applicable √ Not applicable 3 / 272 Annual Report 2023 Contents Section I Definitions........................................................................................................................... 5 Section II Company Profile and Key Financial Indicators .................................................................. 7 Section III Management Discussion and Analysis .............................................................................. 12 Section IV Corporate Governance ...................................................................................................... 46 Section V Environmental and Social Responsibility ......................................................................... 66 Section VI Important Matters .............................................................................................................. 71 Section VII Shareholders and Changes in Shares............................................................................... 104 Section VIII Information on Preference Shares ................................................................................... 114 Section IX Information on Bonds ..................................................................................................... 115 Section X Financial Report .............................................................................................................. 120 Financial statements signed and sealed by the Legal Representative, CFO of the Company, Documents and person in charge of Accounting Department. Available Original copy of the audit report stamped by the accounting firm and signed and sealed by for certified public accountants. Inspection Original copies of all documents and announcements of the Company disclosed during the Reporting Period in newspapers designated by China Securities Regulatory Commission. 4 / 272 Annual Report 2023 Section I Definitions I.Definitions In this Report, unless the context otherwise requires, the following terms have the following meanings: Definition Proya Cosmetics, refers this Company, or the Proya Cosmetics Co., Ltd. to Company refers Huzhou Branch Proya Cosmetics Co., Ltd. Huzhou Branch, a branch of the Company to refers Shanghai Branch Proya Cosmetics Co., Ltd. Shanghai Branch, a branch of the Company to refers Hangzhou Proya Trade Co., Ltd., a wholly-owned subsidiary of the Proya Trade to Company refers Hanna Cosmetics Co., Ltd., a wholly-owned subsidiary of the Korea Hanna to Company refers Anya (Huzhou) Cosmetics Co., Ltd., a wholly-owned subsidiary of Anya (Huzhou) to Korea Hanna refers Yueqing Laiya Trading Co., Ltd., a wholly-owned subsidiary of the Yueqing Laiya to Company refers Huzhou UZERO Trading Co., Ltd., a wholly-owned subsidiary of the Huzhou UZERO to Company Mijing Siyu refers Mijing Siyu (Hangzhou) Cosmetics Co., Ltd., a wholly-owned (Hangzhou) to subsidiary of the Company refers Zhejiang Meiligu Electronic Commerce Co., Ltd., a wholly-owned Meiligu to subsidiary of the Company Chuangdai refers Huzhou Chuangdai E-commerce Co., Ltd., a wholly-owned subsidiary Electronics to of Meiligu Hangzhou refers Hangzhou CORRECTORS Trade Co.,Ltd., a wholly-owned subsidiary CORRECTORS to of Meiligu refers Huzhou Keyan E-commerce Co., Ltd., a wholly-owned subsidiary of Huzhou Keyan to Meiligu Hapsode refers Hapsode (Hangzhou) Cosmetics Co., Ltd., a wholly-owned subsidiary (Hangzhou) to of the Company refers Korea Hapsode Hapsode Co., Ltd., a wholly-owned subsidiary of Hapsode (Hangzhou) to refers Huzhou Hapsode Trading Co., Ltd., a wholly-owned subsidiary of Huzhou Hapsode to Hapsode (Hangzhou) refers Hangzhou Proya Commercial Management Co., Ltd., a wholly-owned Proya Commercial to subsidiary of the Company refers Hangzhou Tielexin Aini Catering Management Co., Ltd., a wholly- Tielexin Aini to owned subsidiary of Proya Commercial refers Hangzhou Luxiaotie Fitness Co., Ltd., a wholly-owned subsidiary of Luxiaotie to Proya Commercial refers Hong Kong Keshi Trading Co., Ltd., a holding subsidiary of the Hong Kong Keshi to Company refers Hong Kong Xinghuo Industry Limited, a wholly-owned subsidiary of Hong Kong Xinghuo to the Company Hong Kong refers Hong Kong Zhongwen Electronic Commerce Co., Limited, a wholly- Zhongwen to owned subsidiary of Hong Kong Xinghuo refers Hong Kong Xuchen Trading Limited, a wholly-owned subsidiary of Hong Kong Xuchen to Hong Kong Xinghuo refers Proya Europe SARL, a wholly-owned subsidiary of Hong Kong Proya Luxembourg to Xinghuo Shanghai Zhongwen refers Shanghai Zhongwen Electronic Commerce Co., Ltd., a wholly-owned 5 / 272 Annual Report 2023 to subsidiary of the Company refers Huzhou Niuke Technology Co., Ltd., a wholly owned subsidiary of the Huzhou Niuke to Company refers Hangzhou Wanyan Culture Media Co., Ltd., a wholly-owned Hangzhou Wanyan to subsidiary of Huzhou Niuke refers Hong Kong Wanyan Electronic Commerce Co., Limited, a wholly- Hong Kong Wanyan to owned subsidiary of Huzhou Niuke refers Huzhou Younimi Cosmetics Co., Ltd., a wholly-owned subsidiary of Huzhou Younimi to the Company refers Ningbo TIMAGE Cosmetics Co., Ltd., a holding subsidiary of the Ningbo TIMAGE to Company refers Hangzhou TIMAGE Cosmetics Co., Ltd., a wholly-owned subsidiary Hangzhou TIMAGE to of Ningbo TIMAGE refers Ningbo Keshi Ningbo Keshi Trading Limited, a holding subsidiary of the Company to refers Zhejiang Beauty Cosmetics Co., Ltd., a wholly-owned subsidiary of the Zhejiang Beauty to Company refers Ningbo Proya Enterprise Consulting Management Co., Ltd., a wholly- Ningbo Proya to owned subsidiary of the Company refers Zhejiang Qingya Culture Art Communication Co., Ltd., a holding Zhejiang Qingya to subsidiary of the Company refers Boya (Hong Kong) Investment Management Co., Limited, a wholly- Boya (Hong Kong) to owned subsidiary of the Company refers Japan OR OR Off & Relax, a holding subsidiary of Boya (Hong Kong) to refers Ningbo Tangyu Trading Co., Ltd., a wholly-owned subsidiary of Japan Ningbo Tangyu to OR refers Hangzhou Weiluoke Cosmetics Co., Ltd., a wholly-owned subsidiary Hangzhou Weiluoke to of the Company refers Hangzhou Yizhuo Culture Media Co., Ltd., a wholly-owned subsidiary Hangzhou Yizhuo to of the Company refers Hangzhou Oumisi Trading Co., Ltd., a wholly-owned subsidiary of the Hangzhou Oumisi to Company refers Guangzhou Qianxi Network Technology Co., Ltd., a wholly-owned Guangzhou Qianxi to subsidiary of the Company refers Proya (Hainan) Cosmetics Co., Ltd., a wholly-owned subsidiary of the Proya (Hainan) to Company Singuladerm refers Singuladerm (Hangzhou) Cosmetics Co., Ltd., a wholly-owned (Hangzhou) to subsidiary of the Company refers Xuzhou Laibo Information Technology Co., Ltd., a wholly-owned Xuzhou Laibo to subsidiary of the Company refers Proya (Zhejiang) Cosmetics Co., Ltd., a wholly-owned subsidiary of Proya (Zhejiang) to the Company refers Hubei Laibo Technology Co., Ltd., a wholly-owned subsidiary of the Hubei Laibo to Company refers PROYA PTE PROYA PTE. LTD., a wholly-owned subsidiary of the Company to PROYA refers PROYA BEAUTY MALAYSIA SDN. BHD., a wholly-owned MALAYSIA to subsidiary of PROYA PTE refers CSRC China Securities Regulatory Commission to refers SSE Shanghai Stock Exchange to refers Pan-China Pan-China Certified Public Accountants (Special General Partnership) to CSC refers China Securities Co., Ltd. 6 / 272 Annual Report 2023 to refers Company Law Company Law of the People's Republic of China to refers Securities Law Securities Law of the People's Republic of China to Articles of refers Articles of Association of Proya Cosmetics Co., Ltd. Association to refers RMB/RMB'0,000 RMB/RMB '0,000 to refers Reporting Period January 1, 2023 to December 31, 2023 to Section II Company Profile and Key Financial Indicators I.Company Information Chinese name of the Company Proya Cosmetics Co., Ltd. Short name of the Company in Chinese 珀莱雅 English name of the Company Proya Cosmetics Co.,Ltd. Abbreviation of English name of the Proya Company Legal representative of the company HOU Juncheng II.Contact Details Board Secretary Securities Affairs Representative Name WANG Li WANG Xiaoyan 10/F, Proya Building, No. 588 Xixi 10/F, Proya Building, No. 588 Xixi Mailing address Road, Xihu District, Hangzhou City, Road, Xihu District, Hangzhou City, Zhejiang Province Zhejiang Province Telephone 0571-87352850 0571-87352850 Fax 0571-87352813 0571-87352813 Email proyazq@proya.com proyazq@proya.com III.General Information No. 588, Xixi Road, Liuxia Street, Xihu District, Hangzhou City, Registered address Zhejiang Province For details, please refer to the Announcement on Amending the Historical changes in the Articles of Association and Applying for Changing Business Company's registered address Registration (No.2019-008) disclosed by the Company on the designated media on February 27, 2019. Proya Building, No. 588 Xixi Road, Xihu District, Hangzhou City, Office address of the Company Zhejiang Province Postal code of the registered 310023 office address Company website http://www.proya-group.com Email proyazq@proya.com IV.Information Disclosure and Place for Obtaining the Report Shanghai Securities News, Securities Times, China Media for the Company's information Securities Journal, Securities Daily, Economic disclosure Information Daily, China Daily CSRC's designated website for the http://www.sse.com.cn Company's Annual Report disclosure 7 / 272 Annual Report 2023 The Company's Annual Report may be Board of Director’s Office, Proya Building, No.588 Xixi obtained at Road, Xihu District, Hangzhou City, Zhejiang Province V.Stock Information Stock Information Stock class Stock exchange Stock abbreviation Stock code Stock abbreviation before changes A share Shanghai Stock Proya 603605 None Exchange VI.Other Relevant Information Name Pan-China Certified Public Accountants (Special General Partnership) Auditor of the Office address Office Tower 2, Run'ao Business Center, Xiaoshan Company District, Hangzhou (domestic) Name of the signing YIN Zhibin, WU Shaofang accountant Sponsor Name China Securities Co., Ltd. performing Office address Room 2203, North Tower, Shanghai Securities continuous Building, No.528, Pudong South Road, Shanghai supervisory Names of the sponsor's GE Liang, WANG Zhan duty during the signing representatives Reporting Period of continuous Period January 4, 2022 - December 31, 2023 supervision VII.Major Accounting Data and Financial Indicators for the Past Three Years (I) Major accounting data Unit: Yuan Currency: RMB Year-on- Major accounting 2023 2022 year change 2021 data (%) Operating revenue 8,904,573,501.39 6,385,451,424.00 39.45 4,633,150,538.43 Net profit attributable to 1,193,868,141.81 817,400,223.93 46.06 576,119,025.56 shareholders of the listed company Net profit attributable to shareholders of the 1,174,144,260.32 788,513,237.01 48.91 568,092,480.38 listed company net of non-recurring profit or loss Net cash flow from 1,468,793,814.58 1,111,136,117.23 32.19 829,670,943.82 operating activities Year-on- As of the end of As of the end of As of the end of year change 2023 2022 2021 (%) Net assets attributable to 4,349,545,381.60 3,524,488,659.96 23.41 2,876,975,835.98 shareholders of the listed company Total assets 7,323,078,222.45 5,778,071,824.19 26.74 4,633,049,783.03 8 / 272 Annual Report 2023 (II) Key financial indicators Year-on-year change Key financial indicators 2023 2022 2021 (%) Basic earnings per share 3.01 2.07 45.41 2.05 (RMB/share) Diluted earnings per share 2.97 2.05 44.88 2.01 (RMB/share) Basic earnings per share net of non-recurring profit and loss 2.96 2.00 48.00 2.02 (RMB/share) Up by 3.99 Weighted average ROE (%) 29.94 25.95 22.25 percentage points Weighted average ROE net of Up by 4.41 29.44 25.03 21.94 non-recurring profit and loss (%) percentage points Description of the Company's major accounting data and financial indicators for the recent three years as of the end of the Reporting Period □ Applicable √ Not applicable VIII.Differences in Accounting Data under Chinese and International Accounting Standards 1. Difference in net profit and net assets attributable to shareholders of the listed company in the financial report disclosed in accordance with International accounting standards and Chinese accounting standards □ Applicable √ Not applicable 2. Differences in net profit and net assets attributable to shareholders of the listed company in the financial report disclosed in accordance with International accounting standards and Chinese accounting standards □ Applicable √ Not applicable 3. Description of differences between international and Chinese accounting standards: □ Applicable √ Not applicable IX.Major Financial Data for 2023 by Quarter Unit: Yuan Currency: RMB Q4 Q1 Q2 Q3 (October - (January - March) (April - June) (July - September) December) Operating 1,621,514,039.25 2,005,477,838.97 1,621,577,872.94 3,656,003,750.23 revenue Net profit attributable to shareholders of 208,032,832.00 291,461,165.71 246,469,143.36 447,905,000.74 the listed company Net profit attributable to shareholders of the listed 197,980,896.41 280,910,955.86 246,996,239.57 448,256,168.48 company net of non-recurring profit and loss Net cash flow 409,773,960.44 771,494,111.59 -382,251,543.16 669,777,285.71 from operating 9 / 272 Annual Report 2023 activities Description of differences between quarterly data and disclosed regular report data □ Applicable √ Not applicable X.Non-recurring Profit and Loss Items and Amounts √ Applicable □ Not applicable Unit: Yuan Currency: RMB Notes Non-recurring profit and Amount for Amount for Amount for 2023 (if loss item 2022 2021 applicable) Gains or losses from disposal of non-current assets, including write-offs -703,593.33 60,155.60 -112,183.24 of provision for adjusted asset impairment Government grants recognized in profit or loss for the current period (excluding government grants that are closely related to the Company’s business operations, 44,043,618.77 38,463,732.07 15,448,962.01 compliant with national policies, granted at set standards, and imposing sustaining influence on the Company's gains and losses) Gains or losses from change in fair value generated by financial assets and liabilities held by non-financial businesses as well as gains or losses from disposal of financial assets and liabilities Capital occupation fees charged to the non- financial enterprises and included in profit or loss for the current period Gains or losses from entrusting others with investment or asset management Gains or losses from outward entrusted loaning Asset loss incurred by force majeure such as natural disasters Reversal of impairment provisions of accounts receivable that have 289,706.45 2,782,350.76 undergone impairment testing alone 10 / 272 Annual Report 2023 Gains when the investment cost of acquiring a subsidiary, an associate and a joint venture is less than the fair value of the identifiable net assets of the invested entity Current net gains or losses of subsidiaries established by business combination involving enterprises under common control from the beginning of the period to the combination date Gains or losses from exchange of non-monetary assets Gains or losses from debt restructuring One-time expenses incurred due to the cessation of relevant business activities, such as staffing expenses One-time impact on current profit and loss due to the adjustments of taxes and accounting laws and regulations One-time share-based payment recognized for cancellation and modification of equity incentive plans Gains and losses from changes in the fair values of employee compensation payable for share-based payment in cash after the exercise date Gains or losses from changes in the fair values of Investment real estate that are subsequently measured using the fair value model Profits generated from transactions with unreasonable transaction price Gains or losses on contingencies that have no relation with the normal operation of the Company Custody fees of entrusted operation 11 / 272 Annual Report 2023 Other non-operating revenue and expenses -7,456,554.85 -2,926,959.81 -3,078,442.83 besides the above items Other items that conform Investment to the definition of non- income recurring profit or loss from -113,212.70 disposal of long-term equity investment Less: Effect of income tax 10,105,613.47 3,689,885.55 1,917,310.27 Effect of minority equity 6,230,469.38 5,802,406.15 2,314,480.49 (after tax) Total 19,723,881.49 28,886,986.92 8,026,545.18 The reasons should be explained for the Company defining the non-recurring gains and losses items not listed in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No. 1 – Non-Recurring Gains and Losses as non-recurring gains and losses items of high value and defining the non-recurring profit and loss items listed in the same document as recurring gains and losses items. □ Applicable √ Not applicable XI.Items Measured at Fair Value √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount of Item Opening balance Ending balance Current change impact on the current profit Receivable 7,378,700.06 7,378,700.06 financing Other equity instrument 146,402,400.00 107,660,400.00 -38,742,000.00 investments Total 146,402,400.00 115,039,100.06 -31,363,299.94 XII.Other □ Applicable √ Not applicable Section III Management Discussion and Analysis I.Business Discussion and Analysis 1. Year-on-year growth in operating revenue Operating revenue - RMB8.905 billion, up by 39.45% YOY RMB8.89billion prime operating revenue, up by 39.74% YOY RMB15 million non-operating revenue Prime operating revenue: (1) By channel Change in Change in Change in 2023 over 2022 over 2021 over Amount 2023 2022 2021 the the the Channel (RMB100 Percentage Percentage Percentage previous previous previous million) (%) (%) (%) year year year YOY (%) YOY (%) YOY (%) 12 / 272 Annual Report 2023 Direct sales 67.48 50.70 59.79 76.16 75.91 70.40 60.66 Online Distribution 15.26 16.49 16.79 8.56 17.16 20.58 24.27 Subtotal 82.74 42.96 47.50 49.54 93.07 90.98 84.93 Household 4.94 11.59 -11.96 -40.52 5.56 6.96 10.88 chemicals Offline Other 1.22 -6.98 -32.32 -30.50 1.37 2.06 4.19 Subtotal 6.16 7.35 -17.62 -38.03 6.93 9.02 15.07 Total 88.90 39.74 37.69 23.28 100.00 100.00 100.00 Note: The percentage of sales from each channel is the proportion of its sales in the prime operating revenue. (2) By brand Change in Change in Change in 2021 over Amount 2023 over 2022 over 2023 2022 2021 the Brand (RMB100 the previous the previous Percentage Percentage Percentage previous million) year year (%) (%) (%) year YOY (%) YOY (%) YOY (%) Proya 71.77 36.36 37.46 28.25 80.73 82.74 82.87 TIMAGE 10.01 75.06 132.04 103.48 11.26 8.99 5.33 Self- OR 2.15 71.17 509.93 - 2.42 1.98 - owned Hapsode 3.03 61.82 188.27 - 3.41 2.94 - brands Other 1.94 18.86 -60.11 -5.96 2.18 2.57 8.85 brands Subtotal 88.90 40.86 40.74 26.63 100.00 99.22 97.05 Cross- Agency border 0.00 -100.00 -63.01 -34.04 0.00 0.78 2.95 brands agency brands Total 88.90 39.74 37.69 23.28 100.00 100.00 100.00 Note: The percentage of sales of each brand is the proportion of its sales in primary operating revenue. The sales of OR and Hapsode were incorporated into other brands for 2021 and prior years, but they have been shown separately since 2022. (3) By category Change in Change in Change in Amount 2023 2022 2021 2023 over the 2022 over the 2021 over the Category (RMB100 Percentage Percentage Percentage previous year previous year previous year million) (%) (%) (%) YOY (%) YOY (%) YOY (%) Skincare (including 75.59 37.85 38.56 22.70 85.03 86.20 86.10 cleansing) Make-up 11.16 48.28 21.70 32.97 12.55 11.82 13.38 cosmetics Body & hair 2.15 71.17 509.93 - 2.42 1.98 - Others 0.00 - -100.00 -41.05 0.00 0.00 0.52 Total 88.90 39.74 37.69 23.28 100.00 100.00 100.00 Note: The "Body & hair" category is included in the "Skin care (including cleansing)" category before 2021, and is separately listed after 2022. 2. YOY growth in net profit RMB1.194 billion net profit attributable to shareholders of the listed company, up by 46.06% YOY RMB1.174 billion net profit attributable to shareholders of the listed company net of non-recurring profit and loss, up by 48.91% YOY 13 / 272 Annual Report 2023 Indicator 2023 2022 2021 Note Mainly due to: 1. Increase in gross profit 1. Net profit margin 13.82% 13.02% 12.02% margin; 2. Decrease in income tax expenses. Mainly due to increased 2. Gross profit margin 69.93% 69.70% 66.46% percentage of online direct sales. Mainly due to the increased 3. Sales expense ratio 44.61% 43.63% 42.98% prepayment for image promotion expenses. Of which: Image promotion fee 39.69% 37.90% 36.12% rate 4. Administrative expense ratio 5.11% 5.13% 5.12% The parent company's R&D expense ratio was 4.13% in 5. R&D expense ratio 1.95% 2.00% 1.65% 2023 (compared with 4.31% for the same period the previous year). Mainly due to increased 6. Accounts receivable turnover sales incurred by Beijing 39.87 53.04 21.88 rate (times/year) Jingdong Century Trading Co., Ltd. 7. Accounts receivable turnover 9.03 6.79 16.45 days (days) 8. Inventory turnover rate 3.65 3.46 3.39 (times/year) 9. Inventory turnover days 98.57 103.91 106.19 (days) II.The Company's Industry Situation during the Reporting Period According to the Guidelines for the Industry Classification of Listed Companies by the CSRC, the Company falls under chemical raw material and chemical product manufacturing (classification code: C26); according to the Industrial Classification for National Economic Activities (GB/T 4754-2017), the Company falls under the manufacturing of daily chemical products (C268) and further under the manufacturing of cosmetics (C2682). According to statistics from the National Bureau of Statistics, in 2023, the total retail sales of consumer goods reached RMB47,149.5 billion, up by 7.2% YOY; the total retail sales of cosmetics reached RMB414.2billion, up by 5.1% YOY (covering consumer goods above designated units). III.The Company's Business Operations during the Reporting Period (I) Main business The Company seeks to build a new domestic cosmetics industry platform, and is primarily engaged in R&D, production and sales of cosmetic products. Main brands owned by the Company include Proya, TIMAGE, Off&Relax, Hapsode, CORRECTORS, INSBAHA, UZERO and Anya. The Company's own brands have covered fields such as popular skincare, make-up, body & hair, and high-efficiency skincare: 1. Popular exquisite skincare brand (1) Proya, focusing on technology skincare, designed for young white-collar female customers, generally priced at RMB200 to RMB500, sold both online and offline. (2) Hapsode, positioned as an “expert in oily skin care”, focusing on college students and other young female customers, generally priced at RMB50 to RMB200, sold mainly online. 2. Make-up brand TIMAGE, a professional make-up artist brand customized for Chinese faces, generally priced at RMB150 to RMB300, sold mainly online. 14 / 272 Annual Report 2023 3. Body & hair brand Off&Relax, positioned as an “expert in Asian scalp health, generally priced at RMB150 to RMB200, sold mainly online. 4. High-efficiency skincare brand CORRECTORS, a high-efficiency skincare brand, generally priced at RMB260 to RMB600, sold online. (II) Business models 1. Sales models Mainly online sales, supplemented by offline sales. Online sales are mainly operated through direct sales and distribution. Direct sales are mainly carried out through platforms such as Tmall, TikTok, JD, Kwai, and Pinduoduo, and distribution is based on platforms such as Taobao, JD, and Vipshop. Offline sales are mainly operated through dealers. Channels include cosmetics franchise stores and department stores. 2. Production/R&D models Self-production is the main production model of the Company, supplemented by OEM production. The skincare products of the Company are self-produced while make-up products are both self-produced and OEM-produced. The Company has self-built skincare and make-up factories. Independent R&D is the main R&D model of the Company, supplemented by industry-university-research cooperation. The Company maintains R&D cooperation with front-end research institutions and high- quality raw material suppliers including Zhejiang University, Zhejiang University of Technology, Hangzhou Dianzi University, Jiangnan University, Beijing Technology and Business University, BASF China, Ashland China, DSM Shanghai, CRODA China, Evonik China, Spanish LIPOTRUE, S.L., and Shenzhen Siyomicro Bio-tech. IV.Analysis of Core Competitiveness during the Reporting Period √ Applicable □ Not applicable The Company's core competitiveness is mainly embodied by: Facing the rapidly changing external market, the Company was firmly committed to the leadership and implementation of the 6*N Strategy. We consolidated and deepened precise operation management system highlighting "R&D, products, contents, operation". Supplemented by the construction of a self-driven organization featuring "culture-strategy-mechanism-talents". We flexibly responded to market development changes, rapidly established our presence and invested in emerging channels. Furthermore, we explored overseas development opportunities, seized the chance for Chinese brands to expand globally, and drove business growth with an expanded market scope and enhanced responsiveness. We continued to make our "hero products" more competitive, and developed and improved the portfolio of "hero products", strengthened brand appeal, and enhanced brand vitality based on our keen insight into consumer needs. This was possible because of our strong R&D and our ability to rapidly respond to internal organizational requirements. A self-driven agile organization was built to serve the second-brand product pipeline and the brands at the incubation stage, forming a fledgling brand matrix in skincare, make-up, and personal care products. By building our own MCN team and content marketing team, we strengthened the internal circular ecology and fostered the external ecosystem of Proya brand. V.Main Operations during the Reporting Period 1. New product strategy Proya: During the Reporting Period, Proya continued to consolidate the hero product strategy and performed all- around upgrades for the hero products "Double Effect Brightening Series" and "Advanced Firming Nourishing Series" and used exclusive ingredients. Proya also improved product efficacy and user experiences and enhanced the sustainability. In the second half of 2023, Proya launched the first patented new cyclic peptide raw material approved and filed in China's makeup industry, and applied it in Advanced Firming Nourishing Light Cream 3.0 as a way to further secure our professionalism and technological capability in peptide, marking Proya's leadership in independent ingredient development. Meanwhile, Proya launched the first premium product line, the "Energy Series", which marked a brand new solution to the anti-aging of mature skin by utilizing the unique and advanced skin energy enhancement and awakening technology Cellergy that helps repair skin wrinkles mildly and efficiently. 15 / 272 Annual Report 2023 In 2023, Proya maintained 1st in the essence category, ranked 1st in the face cream category, 2nd in the mask category, and 5th in the eye cream category on Tmall. TIMAGE: During the Reporting Period, TIMAGE continued to improve the hero product strategy in the facial make- up category, with core products ranking top in all categories. The "tri-colored contour palette" ranked 1st in the highlighter category on Tmall. The "dual-colored highlighter palette" ranked 2nd in the highlighter category on Tmall. The "face primer" ranked 2nd in the sun block/primer category on Tmall. The "tri- colored concealer palette" ranked 1st in the concealer category on Tmall. In the first half of the year, TIMAGE launched the colorful brilliance product. In March, the brand introduced the brand new "Vigorous and Flowing Jade Series" and launched three new products: the "Tri- color Blush Palette", the "All-in-one Brow Palette", and the "Matte Lipstick". Among them, the "Tri-color Blush Palette" ranked 1st in the blush category on Tmall. Additionally, TIMAGE launched the all-new "Original Skin Cushion Compact" and upgraded the "Soft Mist Powder Compact (For Oily Skin)." In the second half of the year, TIMAGE launched the "Soft Mist Powder Compact (for dry skin)" to create hero products in the powder category, gaining momentum for the growth in 2024. The "Porcelain Flawless Foundation" maintained remarkable growth and skyrocketed in the rankings on Tmall and TikTok. Off&Relax (OR): During the Reporting Period, OR continued to increase the market share and word of mouth of the hero products "OR Refreshing Springs Bouncy Shampoo" and "OR Refreshing Springs Hair Masque." Meanwhile, OR established and furthered the brand awareness of an "Expert in Asian Scalp Health" by launching the advanced oil-control and anti-hair loss series. The oil-control hero product "OR Purifying Scalp Cleanser" ranked 1st in the pre-shampoo category on both Tmall and Little Red Book during the promotion period. The "OR Medicated Hair Tonic" ranked 9th in the anti-hair loss category on Tmall, as well as ranked 1st in the Imported Scalp Essence Leaderboard and the Pre-sale Leaderboard on Tmall during the 11.11 period. Hapsode: During the Reporting Period, Hapsode continuously enhanced the brand awareness of an "Expert in Oily Skin Care" among consumers. In the first half of the year, the brand focused on upgrading "Cleansing Honey 2.0" and "Multi-Acid Clay Mask 2.0" to strengthen its capability in cleansing product lines. In the second half of the year, the brand focused on addressing oxidation and dullness on oily skin, and launched the "Energizing Brightening Facial Mask" and the "Energizing Brightening Serum". Based on the pain points of users with oily skin, the brand perfected the care process by expanding not only the range of products, but their efficacy. 2. New marketing strategy Proya: During the Reporting Period, Proya brand strategy around two brand keywords: "youthfulness" and "technological prowess". Embracing the "spirit of exploration", the brand has addressed the multifaceted factors behind specific skin concerns. The following brand marketing initiatives have been undertaken: (1) "Thank You for Participation" in January. In this event, Proya expressed the most important "thank you" to our users through short films posted in user stories and offline user story exhibitions. Proya expressed its gratitude to them for staying with us throughout 2022. (2) "It's Gender, Not Border" on Women’s Day in March. In this event, Proya created educational picture books focusing on gender equality, produced thematic short films adapted from real stories, and collaborated with law firms to launch the "Proya Public Welfare Labor Legal Consultation Service". Through concrete efforts, Proya not only encouraged mention and discussion of "gender equality" on Women's Day, but helped push for the issues to be considered on all other days of the year. (3) On Mother's Day in May, Proya showed care for mothers and acknowledged both the visible physical labor and the invisible mental labor they undertake as they support their families. Proya mentioned that "Mom can take care of family, but every family member can do the same". Through the short film "More Than Just Moms", Proya called on every family member to not only recognize the goodness of mothers but also collectively take on family responsibilities. (4) "Scientific Formulation, the Scientific Choice for Skin" in June. In this event, Proya organized 7 "Daytime Coffee and Evening Alcohol Pop-Up stores" in 6 cities around China. The purpose of these pop- 16 / 272 Annual Report 2023 up stores was to communicate the brand's concept of "scientific formulas" to consumers. Through offline interactions between the stores and consumers, participants had the opportunity for in-depth experience of the products and technological concepts. (5) "Scientific Formulation, the Scientific Choice for Skin" light&shade technology exhibition in August. In this event, Proya interpreted the scientific skincare concept of "scientific formula" with a dynamic experiential installation that utilized digital interaction technologies. (6) "Glimmering Project" in September. In this event, Proya appealed for action against school bullying and released the public welfare film "Aftermath of School Bullying", the "School Bullying Evidence" posters, and the public welfare picture book "It's Not Your Fault: A Healing Guide for the Aftermath of School Bullying". Proya also worked with the Beijing New Sunshine Charity Foundation to establish the "Glimmering Project" anti-school-bullying helpline. (7) "Echo Project" in October. In this event, Proya advocated that "We are not alone in the face of emotions". By producing healing videos, Proya partnered with Dejavu and nine publishing houses to create a curated list of emotional healing books and blind boxes of books. It also worked with Tencent Music to hold public campus concerts at 30 universities in 6 cities across China, teaching people how to cope with their emotions in multiple ways. (8) In the "Brand 20th Anniversary" event in late November, Proya produced a microfilm to capture the real-life experiences of YANG Jianjun, a representative inheritor of the national-level intangible cultural heritage project "Iron Flower," over the past 30 years. The film showcases the spirit of the brand that has been dedicated to scientific research in the past 20 years. Also, Proya interpreted the "Stupid Genius" spirit with six true stories, paying tribute to resilient and hardworking people in all industries. With those "Stupid Genius" stories, Proya hopes to spark the aspiration in the heart of people. TIMAGE: During the Reporting Period, TIMAGE continued to carry out marketing activities by following the "Chinese make-up, original beauty" brand philosophy. By launching and marketing new products through e-commerce channels, TIMAGE carried out the following marketing events to enrich the core of Chinese aesthetics: (1) In March, the "Vigorous and Flowing Jade Series" products were launched, accompanied by the unveiling of concept advertisement. Instructor TANG Yi hosted an online master class, collaborating with beauty bloggers to create the "Vigorous and Flowing Jade Makeup" and sparking a trend of imitation makeup. On March 2, a new product launch conference was held, with celebrities GAO Ye and MA Sichun appearing in person to arouse discussions on the Internet. The whole campaign received more than 500 million views and topped the chart on Sina, TikTok, and Kwai, bringing up voices and discussions around the brand. (2) "Beyond Love" in May. In this event, TIMAGE produced a video to convey the brand idea of how to better love our partners, ourselves, and life. The brand also released TIMAGE 520 gift boxes to communicate brand emotions on holidays through KOLs in love life and female growth. (3) On the Chinese Valentine's Day in August, TIMAGE established a partnership with the Zibo Ceramic and Glass Museum by virtue of the cultural heat in Shandong. With the theme "The Unique Love amidst Myriad Glimmers", TIMAGE extended its Chinese aesthetic legacy via the millennium-old intangible cultural heritage craftsmanship. Meanwhile, TIMAGE launched limited-edition blush and lipstick for Chinese Valentine's Day, which included a pair of glass cups to imprint the brand image of "Chinese culture" and "craftsmanship." (4) In September, the "Revitalizing Hue" blush of the Vigorous and Flowing Jade Series was launched. With the theme "Origin of Primitive", the event debuted at the physical pop-up store in Huaihai Center in Shanghai, bringing primitive nature into the city to create an immersive and original makeup experience. As for the online platform, the brand worked with the physiological media KnowYourself to jointly launch the White Paper of Color Emotions, trying to bond colors and emotions. Inspired by autumn landscapes, Mr. Tang Yi launched the autumn edition of "Mountain Makeup", which has taken social media by storm. 3. New channel strategy Proya: Online: (1) Tmall flagship store During the Reporting Period, the Company continued to deepen the hero product strategy, optimize the portfolio, and improve the ranking of core categories and hero products; expanded product offerings across 17 / 272 Annual Report 2023 various price segments and enhanced customer perception, thereby increasing average customer spending and market penetration; refined operations, optimized the advertising strategy with decreased costs and increased efficiency, and deepened collaboration between on-site and off-site audiences. By relying on the user operation system, the Company increased the purchase frequency of customers to gain a higher customer retention. In 2023, the gross merchandise volume (GMV) of Proya Flagship Store ranked 2nd on Tmall Beauty and 1st among all domestic products. During the November 11 campaign, the GMV of Proya Flagship Store climbed to 1st on Tmall Beauty. (2) TikTok During the Reporting Period, the Company strengthened the universal operation of TikTok, completed the transformation and efficiency enhancement of livestreaming accounts, and divided those accounts by product lines and target audience. The KOL livestreaming accounts kept a keen sight into market needs, and expanded the cooperation with more KOLs, while discovering new KOLs with high potential. Based on the features of KOLs and fans, the Company customized the matchmaking mechanism to maximize the value of exposure and unique visitors. The e-commerce channel focused on key platforms and gained more visitor flows from livestreaming accounts to further enhance the sales ratio. Efforts were made to refine population-based operation, improve the advertising strategy, and enhance efficiency. In 2023, Proya ranked 3rd on TikTok Beauty and 2nd among all domestic products in terms of the gross merchandise volume (GMV). During the November 11 campaign, Proya ranked 1st on TikTok Beauty in terms of GMV. (3) JD During the Reporting Period, the Company continued to strengthen the hero product strategy, improved the ranking of core hero products, optimized the brand layout in the long run, and increased the market share; refined operations based on target audience, established more targeted promotion strategies, sought opportunities for collaboration between on-site and off-site audiences, and drew the attention of new customers with fewer costs and higher efficiency; continuously improved the product portfolios across all channels and added more value for customers; sensed the bellwether for the industry and channels, and took swift actions to explode the word of mouth. In 2023, Proya ranked 7th on JD Beauty and 1st among all domestic products in terms of the gross merchandise volume (GMV). During the November 11 campaign, Proya ranked 4th on JD Beauty and 1st among all domestic products in terms of GMV. Offline: (1) Department store channel: In 2023, the main goal for the department channel was to optimize the store structure by phasing out low-performing and low-potential stores, and transitioning flagship stores to a directly operated model. Meanwhile, the Company continuously strengthened internal management, further improved the training system for counter consultants, enhanced retail management skills, and increased the average sales per counter. (2) Cosmetics store channel: In terms of market positioning, the Company leveraged the potential of the Proya brand to solidify our existing channels and increase the frequency of cooperation with major clients. Also, the Company actively sought opportunities for market growth and expanded collaboration with new store clusters. In the first and second half of 2023, promotional measures were taken for the high-end anti- aging Capture Totale Series and the mid-end Youth Activating series, helping retail stores increase their average customer spending and expand the customer base. 4. New organizational strategy (1) Institutional construction: Based on strategic planning, the Company maintains a sophisticated front, middle, and back office coordination model, deepens the application of digital technology, and develops a flexible and efficient organizational operation mechanism. Based on the value return philosophy of "high investments, performance, and return", the Company has established a multifaceted and effective incentive system around the existing business strategy. (2) Talent development: The Company insists on a talent strategy of introducing and cultivating young talents with international backgrounds to engage in research and development, design, and brand construction, aiming to build a dynamic, self-driven, and creative team of young talents. The dual-channel 18 / 272 Annual Report 2023 promotion mechanism provides career opportunities for professional and managerial individuals to increase the vitality and talent accumulation of the Company. 5. New R&D strategy During the Reporting Period, the Longwu R&D Center and the Shanghai R&D Center were put into use. The Company continuously improved the R&D layout of all key stages from raw material to finished products, including fundamental research, formula development, physical and chemical analysis, raw material and product efficacy evaluation, etc. The focus was to conduct research on skin texture, design active substances, verify their efficacy, as well as research and develop new skin care, make-up, and body&hair products. (1) Patents: During the Reporting Period, the Company newly applied for 14 national invention patents, 6 utility model patents, and 27 design patents, totaling 47 new patents applied for; obtained 15 nationally licensed invention patents, 9 utility model patents, and 17 design patents, totaling 41 patents obtained. As of the end of the Reporting Period, the Company had 122 nationally licensed invention patents, 22 utility model patents, and 112 design patents, totaling 256 patents obtained. (2) Standard releasing: During the Reporting Period, the Company released 12 group standards, 3 national standards and 1 light industry standard as a drafter. As of the end of the Reporting Period, the Company had led or participated in the development of 17 national standards, 4 light industry standards, and 26 group standards. (3) Achievements and awards: During the Reporting Period, the Company was granted the Excellence Participation Award in the “2020-2022 Zhejiang Province Cosmetics Safety Popular Science Week” by Zhejiang Medical Products Administration, the No.1 of Top 10 Enterprises in the Cosmetics Sector of China Light Industry (Universal Leaderboard), the Advanced Unit in Cosmetic Standardization of 2023 by the Secretariat of Zhejiang Provincial Cosmetics Standardization Technology Committee. The paper on the research of the Deep Ocean Energy Series was published in the journal Skin Health and Disease of the British Association of Dermatologists. The paper Research on Preparation and Properties of Crystalline Amino Acid Cleaning Cream was published in the journal Detergent & Cosmetics. The paper Enhancing Sun Protection through Zinc Oxide and Titanium Dioxide Processed by Bead Milling was published in the journal Frontiers in Materials. Additionally, the Company showcased a number of scientific research achievements at the IFSCC 2023. (4) Strategic cooperation: During the Reporting Period, the Company deepened the cooperation with existing strategic partners, including Zhejiang University and Hangzhou Dianzi University, Beijing Technology and Business University, and Jiangnan University in areas such as materials, functional active substances, and skin texture. 6. New supply chain guarantee (1) During the Reporting Period, the Company realized green, low-carbon, and sustainable development by following the national "dual carbon" strategy; built a green supply chain system with a focus on resource conservation and environmental friendliness; promoted upstream and downstream enterprises to improve resource utilization efficiency; reduced carbon emissions, and take active measures to become an enterprise featuring green supply chain management. (2) During the Reporting Period, the Company continuously upgraded the supply chain information platform to achieve seamless data connectivity, enabling transparency in material procurement, production, product inspection, equipment operation, and logistics delivery throughout the entire supply chain, thereby creating a truly modern and intelligent transparent factory in the cosmetics industry. Additionally, with the three intelligent engines (intelligent procurement platform, intelligent production scheduling, and intelligent logistics operations), the Company enhanced the efficiency of data transmission and business collaboration among business units on the supply chain, providing sustained support for brand promotions. (3) During the Reporting Period, the Huzhou production base added multiple fully automated production lines and installed several sets of emulsification equipment to ensure the enhancement of future capacity. The Company also installed fire water monitors and sprinkler systems in the warehouse to safeguard the security of buildings and property. Additionally, the Company continues to strengthen safety training and emergency drills, represented by the "Employee Safety Training" that has been conducted for three consecutive years to ensure that every employee possesses safety awareness, concepts, and capabilities, thereby improving the capability and responsibility of all staff in safety management. Furthermore, the Company conducted internal safety compliance assessments, graded the risks, established a control list for graded risks, and created a spatial color-coded map to prevent safety hazards. Based on the assessment 19 / 272 Annual Report 2023 result, the Company formulated and implemented improvement plans, identified key risks, and enhanced intrinsic safety. (4) During the Reporting Period, the Company was honored with the title "National Green Supply Chain Management Companies 2023" by the General Office of the Ministry of Industry and Information Technology of the PRC, and the Huzhou Factory was awarded the "2023 Zhejiang Provincial Level Green and Low-Carbon Factory" by the Economy and Information Technology Department of Zhejiang. (I) Analysis of main business 1. Analysis of changes in accounts in the Income Statement and the Cash Flow Statement Unit: Yuan Currency: RMB Account Amount for the Amount for the same Change ratio (%) current period period last year Operating revenue 8,904,573,501.39 6,385,451,424.00 39.45 Operating cost 2,677,445,706.61 1,934,850,203.65 38.38 Selling expenses 3,972,201,152.49 2,785,837,352.95 42.59 General and administrative 455,441,770.70 327,296,749.37 39.15 expenses Financial expenses -59,079,577.33 -40,996,523.01 Not applicable Research and development 173,570,127.49 128,009,104.49 35.59 expenses Net cash flow from operating 1,468,793,814.58 1,111,136,117.23 32.19 activities Net cash flow from investing -475,831,195.84 -298,215,550.57 Not applicable activities Net cash flow from financing -460,280,193.92 -65,251,320.73 Not applicable activities Cause for changes in operating revenue: mainly due to increased online sales. Cause for changes in operating costs: mainly due to increased operating revenue. Cause for change in sales expenses: In 2023, sales expenses amounted to RMB3.972billion, accounting for 44.61% of the operating revenue (compared with 43.63% for the same period last year). Sales expenses increased by RMB1.186 billion or 42.59% YOY, mainly due to an increase of RMB1.114 billion or 46.04% in the image promotion expenses in the current period (used for the incubation of new brands as well as development of offline channels and overseas channels). Cause for change in administrative expenses: In 2023, administrative expenses amounted to RMB455million, accounting for 5.11% of the operating revenue (compared with 5.13% for the same period last year). General and administrative expenses increased by RMB128 million or 39.15% YOY, mainly due to increased equity incentive expenses for restricted shares, employee compensation, and service fees. Cause for change in financial expenses: mainly due to increased interest income. Cause for change in R&D expenses: In 2023, R&D expenses amounted to RMB174million, an increase of RMB45.56million YOY, accounting for 1.95% of the operating revenue (compared with 2.00% for the same period last year). The parent company's R&D expense ratio was 4.13% in 2023 (compared with 4.31% for the same period the previous year). Cause for change in net cash flow from operating activities: mainly due to 1. A YOY increase in operating revenue and the increase in cash received from the sale of goods; 2. The increase in the payment for goods; 3. The increase in the payment for image promotion expenses. Cause for change in net cash flow from investment activities: 1. RMB90million was paid for the equity investment in Gaolang Holdings Co., Ltd. in the previous period. No such event exists in the current period. 2. RMB300million was increased in other cash paid related to investment activities. Cause for change in net cash flow from financing activities: 1. RMB165million of equity incentive expense for restricted shares was received in the previous period. The event is not recognized in the current period. 2. RMB224million was increased in cash paid for distribution of dividends or profits or settlement of interest expenses. 20 / 272 Annual Report 2023 A detailed description of major changes in the Company's activities, profit composition or sources of profit during the current period □ Applicable √ Not applicable 2. Revenue and cost analysis √ Applicable □ Not applicable For details, see the analysis in "1. Analysis of changes in accounts in the Income Statement and the Cash Flow Statement", "(I) Analysis of main business", "V. Main Operations during the Reporting Period", "Section III Management Discussion and Analysis" of this Report. (1). Main business activities by industry, product, region and sales model Unit: Yuan Currency: RMB Main business activities by industry Change in Gross Change in Change in gross profit operating operating Industry Operating revenue Operating cost profit margin revenue cost YOY margin (%) YOY (%) (%) YOY (%) Up by Household 0.13 chemicals 8,890,227,788.97 2,666,864,872.50 70.00 39.74 39.16 percentage industry points Main business activities by product Change in Gross Change in Change in gross profit operating operating Product Operating revenue Operating cost profit margin revenue cost YOY margin (%) YOY (%) (%) YOY (%) Decreased Skincare by 0.23 (including 7,559,420,109.98 2,246,373,210.16 70.28 37.85 38.92 percentage cleansing) points Up by Make-up 2.92 1,115,712,421.20 340,597,637.72 69.47 48.28 35.34 cosmetics percentage points Up by Body & 0.81 215,095,257.79 79,894,024.62 62.86 71.17 67.54 hair percentage points Up by 0.13 Total 8,890,227,788.97 2,666,864,872.50 70.00 39.74 39.16 percentage points Main business activities by region Change in Gross Change in Change in gross profit operating operating Region Operating revenue Operating cost profit margin revenue cost YOY margin (%) YOY (%) (%) YOY (%) Decreased Northeast by 0.51 19,623,333.54 7,297,459.08 62.81 18.92 20.56 China percentage points North 66,141,324.36 25,601,181.22 61.29 -5.22 -2.97 Decreased 21 / 272 Annual Report 2023 China by 0.90 percentage points Up by 3.10 East China 682,273,015.88 264,640,456.25 61.21 -4.28 -11.36 percentage points Up by South 3.44 52,827,183.21 19,406,138.04 63.26 17.59 7.53 China percentage points Decreased Central by 0.05 127,858,964.46 52,800,759.63 58.70 -14.74 -14.63 China percentage points Decreased Northwest by 1.98 42,799,826.73 15,112,592.49 64.69 22.04 29.28 China percentage points Up by Southwest 0.66 74,752,733.67 27,725,014.63 62.91 -5.64 -7.30 China percentage points Up by Hong 3.43 Kong and 83,159,245.45 32,884,507.37 60.46 24.19 14.28 percentage overseas points Decreased Others (e- by 1.03 7,740,792,161.67 2,221,396,763.79 71.30 49.25 54.79 commerce) percentage points Up by 0.13 Total 8,890,227,788.97 2,666,864,872.50 70.00 39.74 39.16 percentage points Main business activities by sales model Change in Gross Change in Change in gross Sales profit operating operating Operating revenue Operating cost profit model margin revenue cost YOY margin (%) YOY (%) (%) YOY (%) Decreased by 0.07 Online 8,274,350,956.67 2,413,275,186.30 70.83 42.96 43.29 percentage points Decreased by 0.71 Offline 615,876,832.30 253,589,686.20 58.82 7.35 9.23 percentage points Up by 0.13 Total 8,890,227,788.97 2,666,864,872.50 70.00 39.74 39.16 percentage points Explanation on main business activities by industry, product, region and sales model 22 / 272 Annual Report 2023 (1) Description of growth in household chemicals: The growth in prime operating revenue this year was mainly due to RMB8.274billion online sales (accounting for 93.07% of the online sales revenue), an increase of RMB2.486billion or 42.96% YOY. (2) Description of growth in make-up cosmetics: Mainly due to RMB1.001billion sales of TIMAGE that falls under the make-up cosmetics category during the Reporting Period, an increase of RMB429 million or 75.06% YOY. (3) Description of growth in body & hair: Mainly due to RMB215million sales of OR that falls under the body & hair category during the Reporting Period, an increase of RMB89million or 71.17% YOY. (4) Description by region: The main reason for the increase in revenue in the Northeast China, South China, and Northwest China is the growth in offline sales of household chemicals. The decline in revenue in the North China, East China, Central China, and Southwest China is primarily due to a decrease in online distribution sales. The growth in revenue in Hong Kong, overseas markets, and e- commerce is mainly due to the growth in online direct sales. (2). Analysis table of production and sales √ Applicable □ Not applicable Change Change Change in in Major in sales Unit Production Sales Inventory production inventory products YOY YOY (%) YOY (%) (%) Household Piece 355,211,533 336,222,351 109,169,214 13.10 21.81 21.06 chemicals Description of production and sales The quantities in the above table include self-produced and OEM products, excluding the quantity of products produced through cross-border brand agency. (3). Performance of major purchase contracts and major sales contracts □ Applicable √ Not applicable (4). Cost statement analysis Unit: Yuan Statement by industry Proportion % Proportion % in total cost in total cost for the Amount for the for the same YOY Cost Amount for the Description Industry current same period last period last change composition current period Note period year year ratio (%) (%) (%) Raw materials 1,675,244,940.56 62.82 1,268,693,580.45 66.20 32.04 Labor and Household manufacturing 162,684,501.36 6.10 107,432,847.50 5.61 51.43 chemicals cost industry Outsourcing 444,682,665.46 16.67 302,956,467.34 15.81 46.78 Freight 384,252,765.12 14.41 237,269,640.00 12.38 61.95 Subtotal 2,666,864,872.50 100.00 1,916,352,535.29 100.00 39.16 Statement by product Proportion % Proportion % in total cost in total cost Amount for the YOY Cost Amount for the for the for the Description Product current same period last current change composition current period Note period year period ratio (%) (%) (%) 23 / 272 Annual Report 2023 Raw materials 1,633,516,443.19 72.72 1,228,433,567.23 75.97 32.98 Labor and Skincare manufacturing 153,451,655.40 6.83 101,753,659.87 6.29 50.81 (including cost cleansing) Outsourcing 151,422,368.92 6.74 92,297,157.26 5.71 64.06 Freight 307,982,742.65 13.71 194,513,686.83 12.03 58.33 Subtotal 2,246,373,210.16 100.00 1,616,998,071.19 100.00 38.92 Raw materials 39,373,413.99 11.56 40,084,933.46 15.93 -1.78 Labor and manufacturing 8,443,255.33 2.48 5,679,187.63 2.26 48.67 Make-up cost cosmetics Outsourcing 232,107,427.47 68.15 174,194,228.29 69.21 33.25 Freight 60,673,540.93 17.81 31,708,656.87 12.60 91.35 Subtotal 340,597,637.72 100.00 251,667,006.25 100.00 35.34 Raw materials 2,355,083.38 2.95 175,079.76 0.37 1,245.15 Labor and Not manufacturing 789,590.63 0.99 0.00 0.00 Body & applicable cost hair Outsourcing 61,152,869.07 76.54 36,465,081.79 76.46 67.70 Freight 15,596,481.54 19.52 11,047,296.30 23.17 41.18 Subtotal 79,894,024.62 100.00 47,687,457.85 100.00 67.54 Other explanations None (5). Changes in consolidation due to changes in the equity of major subsidiaries during the Reporting Period √ Applicable □ Not applicable For details, refer to the particulars contained in "IX. Changes in the Consolidation Scope", "Section X Financial Report" of this Report. (6). Significant changes or adjustments to the Company's business activities, products or services during the Reporting Period □ Applicable √ Not applicable (7). Major sales customers and major suppliers A. The Company's major customers √ Applicable □ Not applicable The sales of top five customers amounted to RMB1.12billion, accounting for 12.57% of the total annual sales; the sales of related parties of such top five customers amounted to RMB0, accounting for 0.00% of the total annual sales. Circumstances where a single customer contributed to more than 50% of the total sales, top 5 customers included a new customer, or the Company relied heavily on a small number of customers during the Reporting Period □ Applicable √ Not applicable B. The Company's major suppliers √ Applicable □ Not applicable The purchase amount of top 5 suppliers amounted to RMB513.36million, accounting for 22.31% of the total annual purchase amount; the purchase amount of related parties of such top 5 suppliers amounted to RMB0, accounting for 0.00% of the total annual purchase amount. Circumstances where a single supplier accounted for more than 50% of the total procurement, top 5 suppliers included a new supplier, and the Company relied heavily on a small number of suppliers during the Reporting Period 24 / 272 Annual Report 2023 □ Applicable √ Not applicable Other explanations None 3. Expenses √ Applicable □ Not applicable Unit: Yuan Change for the current Growth rate Expense item 2023 2022 period (%) 3,972,201,15 2,785,837,35 Selling expenses 1,186,363,799.54 42.59 2.49 2.95 General and administrative 455,441,770. 327,296,749. 128,145,021.33 39.15 expenses 70 37 173,570,127. 128,009,104. R&D expenses 45,561,023.00 35.59 49 49 - - Not Financial expenses 59,079,577.3 40,996,523.0 -18,083,054.32 applicable 3 1 4. R&D investment (1).Statement of R&D investment √ Applicable □ Not applicable Unit: Yuan Expensed R&D investment for the 173,570,127.49 current period Capitalized R&D investment for the 0.00 current period Total R&D investment 173,570,127.49 Total R&D investment in operating 1.95 revenue (%) Capitalization of R&D investment (%) 0.00 (2).Statement of R&D personnel √ Applicable □ Not applicable Number of R&D personnel 322 Percentage of R&D personnel (%) 10.84 Educational background structure Educational level Number of persons PhD 8 Master 126 Bachelor 152 Associate 32 High school and below 4 Age structure Age range Number of persons Under 30 (exclusive) 154 30-40 (incl. 30 and excl. 40) 131 40-50 (incl. 40 and excl. 50) 34 50-60 (incl. 50 and excl. 60) 3 60 and above 0 25 / 272 Annual Report 2023 (3).Description □ Applicable √ Not applicable (4).Cause for significant changes in the composition of R&D personnel and the impact on the future development of the Company □ Applicable √ Not applicable 5. Cash flow √ Applicable □ Not applicable Unit: Yuan Amount for the Amount for the Growth Item same period last Description current period rate (%) year Mainly due to: 1. YOY increase in the operating revenue and the Net cash increase in cash received flow from 1,468,793,814.58 1,111,136,117.23 32.19 from commodity sales; operating 2. Increased payment for activities goods; 3. Increased payment for image promotion fees. Mainly due to: 1. A payment of RMB90 million for the equity investment in Gaolang Net cash Holdings Co., Ltd. in the flow from Not previous period. The -475,831,195.84 -298,215,550.57 investing applicable event is not recognized in activities the current period. 2. An increase of RMB300 million in cash paid related to investment activities. Mainly due to: 1. The Company received RMB165 million of equity incentive expense for restricted shares in the Net cash previous period. The flow from Not -460,280,193.92 -65,251,320.73 event is not recognized in financing applicable the current period. activities 2. The cash paid to distribute dividends, profits, or repay interest was increased by RMB224 million. Cash received from the Mainly due to the YOY sale of 9,328,552,717.55 7,088,465,997.21 31.60 increased operating goods and revenue. the rendering of 26 / 272 Annual Report 2023 services Payments of Mainly due to the various expanded sales scale and 1,017,756,020.64 660,096,624.31 54.18 types of the improved profitability taxes of the Company. Mainly due to the Other cash expanded sales scale and paid related 3,761,423,719.98 2,616,308,090.91 43.77 the increased payment for to operating image promotion activities expenses. Net cash received from Mainly due to the disposal of decreased cash receipts fixed assets, 285,500.00 3,751,463.96 -92.39 from disposals of fixed intangible assets in the current assets and period. other long- term assets Mainly due to the new equity investment of RMB90 million to Cash paid Gaolang Holdings Co., for 18,636,363.64 131,003,609.10 -85.77 Ltd. in the previous investments period. The event is not recognized in the current period. Other cash Mainly due to the paid related Not purchase of fixed-term 300,000,000.00 to investing applicable deposits in the current activities period. Mainly due to the receipt of payment for the equity Cash incentive expense for received restricted shares from from capital 165,676,000.00 -100.00 employees in the previous contribution period. The event is not s recognized in the current period. Cash paid for distribution Mainly due to the of dividends 407,092,087.41 182,663,748.85 122.86 increased cash dividends or profits or paid in the current period. settlement of interest expenses (II) Description of significant changes in profit caused by non-primary business activities □ Applicable √ Not applicable (III) Analysis of assets and liabilities √ Applicable □ Not applicable 1. Assets and liabilities Unit: Yuan 27 / 272 Annual Report 2023 % in Amount as of the % in YOY Amount as of the end Item total end of the total change Explanation of the current period assets previous period assets ratio (%) Mainly due to the increased end balance for the receivables Accounts 344,570,196.54 4.71 102,157,898.41 1.77 237.29 of Beijing receivable Jingdong Century Trading Co., Ltd. Mainly due to the increased Receivable Not 7,378,700.06 0.10 0.00 0.00 bank financing applicable acceptance bills receivable. Mainly due the increased prepayment for image Prepayments 202,870,195.58 2.77 91,483,523.15 1.58 121.76 promotion expenses as of the end of the current period. Mainly due to Other current the increased 99,765,073.07 1.36 49,735,996.57 0.86 100.59 assets input VAT to be deducted. Mainly due to the conversion of completed works of the Huzhou Expansion Production Base Fixed assets 827,350,985.29 11.30 570,376,309.67 9.87 45.05 Construction Project (Phase I) and the Longwu R&D Center Construction Project into fixed assets. Mainly due to the conversion of completed works of the Huzhou Construction Expansion 52,038,642.94 0.71 207,378,935.86 3.59 -74.91 in progress Production Base Construction Project (Phase I) and the Longwu R&D 28 / 272 Annual Report 2023 Center Construction Project into fixed assets, as well as long- term prepaid expenses. Mainly due to the addition of an office site Right-of-use 14,104,821.34 0.19 6,410,634.25 0.11 120.02 and the signing assets of lease contracts in the current period. Mainly due to converting the completed work of the Longwu R&D Long-term Center prepaid 67,184,328.83 0.92 19,142,604.46 0.33 250.97 Construction expenses Project from construction in progress to long-term prepaid expenses. Mainly due to the increased deductible temporary difference caused by Deferred unrealized income tax 108,494,364.60 1.48 48,305,338.82 0.84 124.60 profit from assets internal transactions and unredeemed gifts for sold products. Mainly due to the increase in Other non- prepayments 16,974,946.99 0.23 5,554,726.06 0.10 205.59 current assets for long-term asset purchase funds. Mainly due to the reduced Notes payable 36,959,074.14 0.50 69,626,352.12 1.21 -46.92 balance of bank acceptance bills payable. Mainly due to the increased Accounts 1,018,522,358.60 13.91 475,427,484.23 8.23 114.23 end balance of payable payables for goods and 29 / 272 Annual Report 2023 expenses payable. Mainly due to (1) an increase in the number of members and the point Contract conversion 301,014,873.58 4.11 174,602,833.91 3.02 72.40 liabilities rate; (2) the Company had not distributed unredeemed gifts for sold products. Mainly due to the increased benefits payable to employees at the end of the Employee period because compensation 166,444,494.43 2.27 124,938,749.36 2.16 33.22 of the expanded payable operation scale and continuous staffing adjustment in the current period. Mainly due to the expanded sales scale and Taxes payable 222,765,869.94 3.04 152,918,871.45 2.65 45.68 the improved profitability of the Company. Mainly due to Non-current the transfer of liabilities due 3,970,060.11 0.05 2,549,452.14 0.04 55.72 lease liabilities within one due within one year year. The tax on items to be sold in advance receipt was listed in other current Other current 15,022,173.42 0.21 10,820,499.59 0.19 38.83 liabilities due to liabilities the expanded sales and increased advance receipt in the current period. Mainly due to the addition of Lease 9,970,306.87 0.14 3,718,119.41 0.06 168.15 an office site liabilities and the signing of lease 30 / 272 Annual Report 2023 contracts in the current period. Mainly due to the change in the amount of anticipated Estimated return caused 33,063,299.45 0.45 59,282,928.68 1.03 -44.23 liabilities by the adjustment of supermarket and department store channels. Mainly due to the listing of Deferred net deferred income tax 19,019,431.67 0.33 -100.00 income tax liabilities assets/liabilities for the same legal entity. Mainly due to that the Company implemented Share capital 396,757,184.00 5.42 283,519,469.00 4.91 39.94 the plan for the capitalization of capital reserves. Mainly due to changes in fair value of other equity instrument investments Other and changes in Not comprehensive -53,847,100.91 -0.74 -1,918,603.07 -0.03 other applicable income comprehensive income that cannot be reclassified to profit or loss under the equity method. Mainly due to the withdrawal of statutory surplus reserve according to the net profit of the parent Surplus 198,411,582.50 2.71 141,759,734.50 2.45 39.96 company. The reserve statutory surplus reserve does not need to be withdrawn if the cumulative amount reaches 31 / 272 Annual Report 2023 fifty percent or more of the registered capital. Mainly due to the increased profit available for distribution Undistributed 3,040,145,490.59 41.51 2,300,384,763.19 39.81 32.16 attributable to profit shareholders of the Company in the current period. Mainly due to the increase in the profit of the Company's subsidiary Minority Ningbo 50,765,849.41 0.69 12,734,670.33 0.22 298.64 interests TIMAGE as well as gains or losses attributable to minority interests. Other explanations None 2. Overseas assets √ Applicable □ Not applicable (1) Scale of assets Including RMB23,718.20 (Unit: RMB '0,000 Currency: RMB) of overseas assets, accounting for 3.23% of the total assets. (2) Description of a high percentage of overseas assets □ Applicable √ Not applicable 3. Restrictions on prime assets as of the end of the Reporting Period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending book Ending book Type of Item Cause for restrictions balance value restrictions Cannot be 335,288,251.36 335,288,251.36 withdrawn at Fixed-term deposit any time Frozen 8,800,000.00 8,800,000.00 L/C deposit Cash and Frozen cash 250,000.00 250,000.00 Transformer deposit equivalents Frozen 70,000.00 70,000.00 Vehicle ETC deposit Frozen 5,298,890.00 5,298,890.00 Pinduoduo deposit 2,110,704.68 2,110,704.68 Frozen Direct store deposit 32 / 272 Annual Report 2023 Ending book Ending book Type of Item Cause for restrictions balance value restrictions Total 351,817,846.04 351,817,846.04 4. Other explanations □ Applicable √ Not applicable (IV) Analysis of industry operational information √ Applicable □ Not applicable Refer to the "Analysis of chemical operational information" below 33 / 272 Annual Report 2023 Analysis of chemical operational information 1. Basic industry information (1). Industry policies and changes □ Applicable √ Not applicable (2). Major sub-industries and industrial status of the Company √ Applicable □ Not applicable See the description in "(I) Industry pattern and trends", "VI. Discussion and Analysis of the Company's Future Development", "Section III Management Discussion and Analysis". Industrial status of the Company: According to comprehensive industry data analysis, the Company has gained some market share in the domestic cosmetics market. 2. Products and production (1). Major business models √ Applicable □ Not applicable See the description of business models in "III. Business Activities Carried out by the Company during the Reporting Period", "Section III Management Discussion and Analysis". Adjusted business models during the Reporting Period □ Applicable √ Not applicable (2). Major products √ Applicable □ Not applicable Major upstream raw Major downstream Major price Products Sub-industry materials application areas influencing factors Humectant, active Personal income, Skincare substance, grease skin type, lifestyle (including Skincare wax, emulsifier, Skincare, cleansing habits, brand cleansing) surfactant, essence, preference packaging Grease wax, Personal income, Make-up Make-up, beauty, Make-up emulsifier, toner, living habits, brand cosmetics contour essence, packaging preference Personal income, Surfactant, skin type, lifestyle Body & hair Body & hair humectant, essence, Body & hair habits, brand packaging preference (3). R&D innovation √ Applicable □ Not applicable See the description in "5. New R&D strategy", "V. Main Operations during the Reporting Period", "Section III Management Discussion and Analysis". (4). Production technologies and process √ Applicable □ Not applicable The Company's products are mainly divided into skincare (including cleansing) and make-up cosmetics. Their production processes are shown as follows: 1. Production process of skincare cosmetics 34 / 272 Annual Report 2023 Skincare raw Functional materials components Heating to Homogeneous Heat preservation Cooling Filtration and dissolve emulsification and mixing discharge Inspection of semi- finished products Warehousing Cartoning Packing Filling Storage Inspection of finished products 2. Production process of cleansing cosmetics Cleansing raw materials Heating and Heat preservation Cooling Filtration and mixing and mixing discharge Inspection of semi- finished products Warehousing Cartoning Packing Filling Storage Inspection of finished products 3. Production process of make-up cosmetics (1) Cosmetic powder blocks: Inspection of semi- Powder raw materials Functional components finished products Mixing Toning Crushing and Discharge Powder storage sieving Warehousing Cartoning Packing Forming Filling Aluminum plate Inspection of Visual finished products inspection 35 / 272 Annual Report 2023 (2) Lipstick cosmetics Wax-based raw Functional materials components Heating to Toning Defoaming Filtration and dissolve discharge Inspection of semi- finished products Warehousing Cartoning Packing Molding Storage Inspection of Visual finished products inspection (3) Eyelashes and eyeliners Basic raw Functional materials components Heating to Homogeneous Toning Cooling Discharge dissolve emulsification Inspection of semi- finished products Warehousing Cartoning Packing Filling Storage Inspection of finished products (5). Production capacity and operation status √ Applicable □ Not applicable Unit: RMB '0,000 Currency: RMB Amount of Estimated Capacity Capacity investment time of Main plant or Designed utilization under in capacity completion of project capacity ratio (%) construction under capacity under construction construction Huzhou Skincare 380 million pcs 82.20 21.18 4,019.40 December Factory million pcs 2024 Huzhou Cosmetics 40 million pcs 20.75 Factory Change in production capacity □ Applicable √ Not applicable Adjustment of product line and optimization of capacity structure □ Applicable √ Not applicable Unexpected shutdown □ Applicable √ Not applicable 36 / 272 Annual Report 2023 3. Procurement of raw materials (1). Basic information on major raw materials √ Applicable □ Not applicable YOY price Major raw Settlement Purchase Purchase model change ratio Consumption materials method quantity (%) Mainly by Settle competitive About About within the Packaging procurement, 1,870 1,857.28 payment 2.63 materials except for some million million period as strategic pieces pieces agreed suppliers Mainly by competitive procurement, Settle while within the Raw establishing About About 1,878 payment -3.65 material_humectant long-term 1,815 tons tons period as strategic agreed cooperation with advantageous suppliers Mainly by price inquiry and comparison, Settle Raw while performing within the About 597 About 634 material_active diversified payment 73.45 tons tons substance cultivation of period as suppliers with a agreed single source of supply Mainly by competitive procurement, Settle while Raw within the establishing About 744 About 755 material_grease payment 3.58 long-term tons tons wax period as strategic agreed cooperation with advantageous suppliers Mainly by competitive procurement, Settle while within the Raw About 125 About 136 cooperating with payment 1.22 material_emulsifier tons tons industry-leading period as suppliers on agreed some raw materials Mainly by Settle competitive within the Raw About 29 About 31 procurement, payment -9.84 material_sunscreen tons tons while period as establishing agreed 37 / 272 Annual Report 2023 long-term strategic cooperation with advantageous suppliers Impact of changes in the prices of major raw materials on the Company's operating costs: Rising prices of raw materials increase operating costs. (2). Basic information on major sources of energy √ Applicable □ Not applicable YOY price Major Settlement Purchase Purchase model change ratio Consumption energy method quantity (%) Prepayment and monthly settlement or Fixed agreement payment on Water with the local 0.00 224,917 tons 224,917 tons demand water company according to the local requirements Prepayment and monthly Fixed agreement settlement or with the local payment on Electricity 0.00 1,450 tons 1,450 tons power supply demand company according to the local requirements Prepayment and monthly settlement or Fixed agreement payment on Gas with the local gas -11.52 397,114 cbm 397,114 cbm demand supply company according to the local requirements Impact of changes in the prices of major energy sources on the Company's operating costs: Minor impact on operating costs. (3). Countermeasures for risks of fluctuations in the prices of raw materials Major financial products such as derivatives □ Applicable √ Not applicable (4). Basic information on other methods adopted such as staged reserves □ Applicable √ Not applicable 4. Product sales (1). Basic information on the Company's primary business activities by sub-industry √ Applicable □ Not applicable Unit: RMB '0,000 Currency: RMB Change in Gross Change in Change in Gross profit gross Sub- Operating Operating profit operating operating margin for profit industry revenue cost margin revenue cost YOY products in margin (%) YOY (%) (%) the same YOY (%) 38 / 272 Annual Report 2023 industry and field Skincare No public (including 755,942.01 224,637.32 70.28 37.85 38.92 -0.23 information cleansing) available No public Make-up 111,571.24 34,059.76 69.47 48.28 35.34 2.92 information cosmetics available No public Body & hair 21,509.53 7,989.40 62.86 71.17 67.54 0.81 information available (2). Basic information on the Company's primary business activities by sales channel √ Applicable □ Not applicable Unit: RMB '0,000 Currency: RMB Change in operating revenue Sales channel Operating revenue YOY (%) Online 827,435.10 42.96 Offline 61,587.68 7.35 Statement of accounting policies □ Applicable √ Not applicable 5. Environmental protection and safety (1). Basic information on major work safety accidents of the Company during the Reporting Period □ Applicable √ Not applicable (2). Major environmental violations □ Applicable √ Not applicable 39 / 272 Annual Report 2023 (V) Analysis of investment Overall analysis of external equity investments √ Applicable □ Not applicable Unit: RMB Item Ending amount Beginning amount Other equity instrument investments 107,660,400.00 146,402,400.00 Investment in joint ventures 3,059,991.91 3,068,948.16 Investment in associates 110,514,166.58 135,464,429.30 Total 221,234,558.49 284,935,777.46 For details, refer to the particulars contained in "17. Description of long-term equity investments", "VII. Notes to the Items of Consolidated Financial Statements", "Section X Financial Report" of this Report. 1. Significant equity investments □ Applicable √ Not applicable 2. Significant non-equity investments □ Applicable √ Not applicable 3. Financial assets measured at fair value √ Applicable □ Not applicable Unit: Yuan Currency: RMB Profit and Amount loss from of Amount of Accumulated Impairment Asset changes in purchase sale/redemption Other Beginning amount change in fair value accrued for the Ending amount category fair value for for the for the current changes included in equities current period the current current period period period Other 146,402,400.00 -38,742,000.00 107,660,400.00 Total 146,402,400.00 -38,742,000.00 107,660,400.00 For details, refer to the particulars contained in "18. Description of other equity instrument investments", "VII. Notes to the Items of Consolidated Financial Statements", "Section X Financial Report" of this Report. 40 / 272 Annual Report 2023 Description of securities investment □ Applicable √ Not applicable Description of securities investment □ Applicable √ Not applicable Description of private equity investment □ Applicable √ Not applicable Description of derivatives investment □ Applicable √ Not applicable 41 / 272 Annual Report 2023 4. Progress of major asset restructuring and integration during the Reporting Period □ Applicable √ Not applicable (VI) Sale of major assets and equity □ Applicable √ Not applicable (VII) Analysis of major holding companies √ Applicable □ Not applicable Unit: RMB '0,000 Major Major Nature of products Registered Total Net Holding or Net assets subsidiary business and capital assets profit shareholding services Zhejiang Meiligu Cosmetics Electronic Cosmetics 1,000.00 118,374.88 35,491.97 8,436.47 Holding sales Commerce Co., Ltd. Hangzhou Proya Cosmetics Cosmetics 5,000.00 33,320.09 10,823.95 5,182.01 Holding Trade sales Co.,Ltd. (VIII) Structured entities controlled by the Company □ Applicable √ Not applicable VI.Discussion and Analysis of the Company's Future Development (I) Industry pattern and trends √ Applicable □ Not applicable According to statistics from the National Bureau of Statistics, in 2023, the total retail sales of consumer goods reached RMB47,149.5 billion, up by 7.2% YOY; the total retail sales of cosmetics reached RMB414.2billion, up by 5.1% YOY (covering consumer goods above designated units). (II) Development strategy of the Company √ Applicable □ Not applicable "6" refers to new consumption, new marketing, new organization, new mechanism, new technology and new intelligent manufacturing; "N" refers to creating N brands (1) New consumption: Refers to innovative services to meet more consumer needs and consumer value. It involves catering to consumers‘ diverse preferences in consumption channels and establishing a presence in emerging channels, such as the development of the Tiktok platform. Furthermore, it involves adapting to the overseas market environment and embracing new challenges; (2) New marketing: Refers to digital marketing, fine omni-channel operation, and accurate and advanced consumer insight, focusing on improving the overall efficiency of the marketing process. It also involves paying attention to future marketing possibilities in new areas and making preparations; (3) New organization: Refers to an efficient organization that is flat, platform-based, self-driven and collaborative, taking into account both supporting the efficient operation of mature brands and empowering the rapid growth of incubated brands; (4) New mechanism: Refers to a flexible, diversified, business-oriented incentive mechanism to be established to enhance strategy execution (with a flexible project mechanism to promote business communication efficiency and integrated synergies between various departments and business units); (5) New technology: Refers to focusing on basic scientific research, establishing the presence of independent development of new raw materials and foreign innovative raw materials reserve, jointly developing innovative technologies, seeking more R&D partners and resources in different fields, building internal and external cooperation platforms, actively exploring R&D resources worldwide to 42 / 272 Annual Report 2023 form a global R&D landscape, provide technological guarantee for targeted product enhancement, and create a sustainable and unique R&D technological competitiveness; Additionally, measures are taken to further improve the intelligent operation management system and carry out targeted transformation toward digital intelligence and informatization to improve operational refinement and management efficiency in business and organization and achieve process transparency and accurate decision-making. By comprehensively planning and further enhancing the digital management system, we explore the application possibilities of new technological developments (such as artificial intelligence) at the consumer end, catering to the demands of large-scale and rapidly evolving businesses; (6) New intelligent manufacturing: Refers to the creation of an agile and flexible supply chain to serve the hero product matrix and the application of the digital management system to improve production quality, strengthen the supply chain supervision, and guarantee product quality. In addition, we actively assume social responsibilities and contribute to sustainable development by establishing green production bases and introducing green raw materials and operational models. —— The core connotation of "6*N" is to enable or incubate different brands that meet different needs of different consumers based on the above six capabilities. (III) Business plan √ Applicable □ Not applicable I. Construction of a multi-category and multi-brand matrix 1 Skincare products - Proya, Hapsode Proya: (1) Brand: Continuously upgrade the brand. Shape the brand with a new image, new products, and new technologies. Further consolidate the brand mindset of "A Scientific Choice for Skin" with better product portfolios. Meanwhile, better improve the service and logistics systems, and refine operations in all dimensions related to consumers. Better communicate with consumers regarding our dedication to products and scientific formulas, making Proya the preferred choice of skincare for Chinese women. (2) Product: Further study the cause of skin problems for female Chinese consumers and expand the product portfolio to meet more requirements. Strengthen more formulas for mature product lines, upgrade the formulas and efficacy of various products, and provide better solutions for consumers. Establish and improve a large product portfolio with extensive efficacy, build up the word of mouth for products, and improve user loyalty and brand reputation. (3) Marketing: Continue to center the brand strategy around two brand keywords: "youthfulness" and "technological prowess." Embrace the "spirit of exploration," and address the multifaceted factors behind specific skin concerns. In addition to carrying out promotional campaigns around key social topics such as gender equality, family responsibility, intimate relationships, young people's growth, and mental health, the brand also plans to extend its philosophy "Not Just Today" and expand the impact of brand long- termism beyond brand incidents: 1) Based on the all-year-round brand marketing philosophy, Proya has established its own online public welfare platform to accommodate long-lasting public welfare activities under the brand tenet. The platform debuted in March 2023 and added the "Glimmering Project" anti- school-bullying helpline in September 2023. 2) The brand's TikTok account "Second Life in Proya" was created to convey brand attitudes with life-oriented and scenario-based plays. (4) Channel: 1) Tmall: Better refine operations on Tmall and improve the operating strategy. In terms of products, continuously improve the product portfolio, enhance the market share of mature hero products, and create opportunities for new categories while deepening the product layout to seize the market. In terms of consumer attraction, draw the attention of visitors from touch points, take more advantages of content, and strengthen cooperation with IPs on the platform to increase the quantity and quality of attractive content and continuously increase the precise traffic of stores. Value the creation of customer perception, enrich forms of gifts for key products, and launch coordinative marketing activities to cover more core consumers of the brand. In terms of membership, secure the traditional member attraction channels with sample distribution while expanding presence to more channels. Better draw the attention of users and increase the frequency of repeated purchases with a point mechanism. In terms of livestreaming, organically combine key and secondary KOLs as well as store-owned livestreaming accounts to create a network of abundant portfolios including new products, exclusive products, and brand benefits, thus boosting the surge of attention from livestreaming platforms. 43 / 272 Annual Report 2023 2) TikTok: Establish a comprehensive presence that locates the right people for the right products, expands to new consumers, and breaks the circle with KOLs. Establish a presence in 6 major account matrices and sort out the connection between target audience in the livestreaming room and products sold to break through the popularity barriers of hero products. Reach intensive cooperation with KOLs and match them with corresponding products. Refine the operation of the e-commerce platform, attract consumers through search, activities, and paid functions to promote the conversion ratio and further improve the sales proportion. Improve the advertising quality and efficiency and increase the use of selected materials. 3) JD: Seize industrial consumers from the perspectives of people, products, and venues to link up business modes inside out. Improve the hero product strategy, deepen product combos, and try scenario- based sales. Reach deeper cooperation with platforms, continuously improve the advertising efficiency, and increase the sales at key promotional nodes. 4) Offline: Cosmetics store channel: Continuously explore sales opportunities through the channel and find more opportunities to cooperate with different industries and business sectors to expand the sales network. Optimize the product portfolio and increase the "dynamic sales" efficiency at the point of sale to satisfy the needs of consumers at different ages. Help clients to complete sales with online tools and intensify the image building of management at the point of sale. Department store channel: Focus on influential business districts and large department store chains, make plans to open brick-and-mortar stores in multiple shopping centers nationwide, enhance the brand image design, and provide consumers with a completely new shopping experience. Furthermore, continue to upgrade and optimize offline pop-up stores, maintain brand theme of "scientific formula" and enhance in-store sample distribution to attract more consumers to participate. Hapsode: (1) Brand: Continue to upgrade the brand, enhance the scientific efficacy of products to create cost- efficient options that are suitable for oily skin, with noticeable effectiveness. Try a "less is more" marketing approach and convey the core user keyword "companionship" by collaborating on product IPs and optimizing brand-consumer touchpoints. (2) Product: 1) Continuously monitor the health of oily skin types and develop a more comprehensive and targeted solution for the health of oily skin. Committed to a visually delicate state of oily skin, deeply protecting the health of oily skin. 2) Streamlined product lines and provide solutions for oily and acne- prone skin. (3) Marketing: Continue to collaborate with popular IPs and engage in cross-industry projects to connect with the younger generation and have direct conversations with them. Collaborate with the most popular female celebrity, Loopy, a zoomer, to create a limited edition product packaging, thereby breaking into the market by leveraging the popularity of the trendiest celebrity among young people. (4) Channel: Utilize TikTok as the primary channel for growth and simultaneously enhance the refined operations of other online channels such as Tmall. 2. Make-up - TIMAGE (1) Brand: Continue to express the brand theme of "Chinese make-up, original beauty", and strive to collaborate with various partners to break boundaries and constantly enhance brand awareness. 1) Officially announce the appointment of actress CHEN Duling as the brand ambassador to attract fans from different circles. 2) Launch limited edition products by cooperating with popular IPs and continue to explore TIMAGE's "Chinese aesthetics". (2) Product: Continue to strengthen the hero product strategy, maintain the leading position in the facial makeup category, build up reputation in the large makeup base category, and make breakthroughs in the foundation makeup, compact, and pressed powder categories, so as to complete the makeup base portfolio. (3) Marketing: Transform the brand into "a professional makeup artist brand customized for Chinese faces", build a professional brand image, and form an impression in the mind of consumers. 1) Communicate with consumers on "professional makeup techniques and product features", while providing professional makeup solutions. 2) Utilize a professional service team and expert tutorials to advance the customized service system established by TIMAGE to the forefront. 3) Concentrate on leveraging TIMAGE's "professional endorsements" and "expertise" at brand milestones for impactful marketing output. (4) Channel: Establish the brand image on Tmall, TikTok, JD, and other core channels and earn top ranking positions. 44 / 272 Annual Report 2023 3. Body & Hair - Off&Relax (OR): (1) Brand: Persist in the long-term goal of "becoming an enabler of a healthy and caring lifestyle for Asian scalps," establish and deepen the mindset of being an "expert in Asian scalp health." (2) Product: 1) Position the brand as an "expert in Asian scalp health," apply the product development concept of "prevention through nurturing, gradual improvement, and an inside-out approach." Continuously upgrade hero products while expanding the range of supplementary products to achieve comprehensive benefits to scalp health. 2) Enhance the efficacy and clinical validation of products for the Chinese market by synchronizing with third-party testing agencies to improve the efficacy validation and collaborating with the Hair Disease Medical Consortium of the China-Japan Friendship Hospital to achieve clinical validation. (3) Marketing: 1) Implement an aggressive breakout strategy for hero products, create the core hero product "OR Refreshing Springs Bouncy Shampoo", enhance the layout of the shampoo category, and increase the market penetration of the repair, anti-hair loss, and nourishing series. 2) Continue to increase the market share of the "anti-hair loss" hero product by emphasizing professionalism and strong endorsement. 3) Improve the product layout and create a second-tier "Hair Care Series" (hair mask and hair care essence oil) bestsellers, continue to improve the market penetration of the oil control series (Purifying Scalp Cleanser). (4) Channel: Focus on further enhancing the brand ranking on Tmall, JD, and TikTok to increase brand visibility and market position. II. R&D construction In 2024, the Company will continue to improve and upgrade the R&D system based on the internationalization strategy. (1) Fundamental research: Continue to plan for and apply the development pipeline of new technologies and new raw materials, and continue to develop advanced enabling technologies in computational biology, genomics, and proteomics. (2) Applied research: Guided by market demand, develop skincare and makeup products of various levels with obvious efficacy, great skin feel and favorable costs, and complete the technological layout for future iterations of all hero products. (3) Clinical research: Continue with the clinical research and verification of products, and explore new methods to verify the efficacy of raw materials and products. Develop new efficacy testing methods by using advanced instruments and statistics. (4) External cooperation: Stabilize existing cooperation channels while expanding and deepening the cooperation with universities and research institutions. Leverage their advanced equipment and cutting- edge technologies to empower and facilitate research work. (IV) Possible risks √ Applicable □ Not applicable 1. Industry competition risks (1) The Company's brand strategy and channel strategy fail to come up to expectations due to intensified competition from various brands in the industry; (2) The control of digital and precise delivery costs fails to come up to expectations due to intensified competition in marketing and ads delivery. 2. Project incubation risks (1) New brand incubation risk: Performance fails to come up to expectations despite big investment in marketing; (2) New category cultivation risk: Performance fails to come up to expectations due to different operation modes for different categories and the incompetent team. (V) Other □ Applicable √ Not applicable 45 / 272 Annual Report 2023 VII.Circumstances Where the Company Fails to Disclose Due to Non-applicability or Special Reasons Such as State Secrets and Trade Secrets and Statement of Reasons □ Applicable √ Not applicable Section IV Corporate Governance I.Description of Corporate Governance √ Applicable □ Not applicable During the Reporting Period, the Company continuously improved its standard operation and corporate governance structure based on the actual situation pursuant to applicable laws and regulations, including the Company Law, the Securities Law, the Listing Rules of the Shanghai Stock Exchange and the Code of Corporate Governance of Listed Companies as well as the Articles of Association. The Company has set up the general meeting of shareholders, Board of Directors, Board of Supervisors and special committees under the Board of Directors as required and developed corresponding rules of procedure. Such rules define the duties, powers, procedures and obligations of organizations at all levels in terms of decision-making, supervision and implementation. They form a scientific and effective governance structure featuring clear rights and responsibilities, mutual checks and balances, and mutual coordination. During the Reporting Period, the Company consciously fulfilled the obligation for information disclosure, managed investor relationships, and promoted the Company to continuously improve its standard operation. The corporate governance status complies with the requirements of the normative documents on the governance of listed companies issued by the CSRC. Whether there are significant differences between the Company's corporate governance and the requirements of laws, administrative regulations and CSRC's regulations on the governance of listed companies; if so, explain the reasons. □ Applicable √ Not applicable II.Specific measures taken by the Company's controlling shareholders and actual controllers to ensure the Company's independence in assets, personnel, finance, organization and business activities as well as solutions, work progress and subsequent work plans taken due to influence on the Company's independence □ Applicable √ Not applicable Circumstances where any controlling shareholders, actual controllers and other entities under their control engage in the same or similar business activities, as well as the impact of horizontal competition or major changes in horizontal competition on the Company, resolutions taken, progress and follow-up resolutions □ Applicable √ Not applicable III.Meetings of the General Meeting of Shareholders during the Reporting Period Date of Session Date Reference Resolution release 2022 Annual May 11, Announcement No. May 12, The meeting approved proposals General 2023 2023-026 on SSE 2023 including the Company's Annual Meeting of website Report 2022 and its Summary, Shareholders (www.sse.com.cn) and the Plan for Annual Profit Distribution and Capitalization of Capital Reserves for 2022. For details, see the Announcement on Resolutions of the 2022 Annual General Meeting of Shareholders (No.: 2023-026) released on the SSE website on May 12, 2023 (http://www.sse.com.cn) and 46 / 272 Annual Report 2023 relevant media. 1st September Announcement No. September The meeting approved the Extraordinary 14, 2023 2023-056 on SSE 15, 2023 Company's 2023 Semi-Annual General website Profit Distribution Plan, the Meeting of (www.sse.com.cn) Proposal on Changing the Shareholders Company's Registered Capital, in 2023 Revising the Articles of Association, and Applying for Business Change Registration, the Proposal on Revising the External Investment and Operation Decision-Making System, and other proposals. For details, see the Announcement on Resolutions of the 1st Extraordinary General Meeting of Shareholders in 2023 (No.: 2023-056) released on the SSE website on September 15, 2023 (http://www.sse.com.cn) and relevant media. 2nd November Announcement No. November The meeting approved the Extraordinary 9, 2023 2023-076 on SSE 10, 2023 Proposal on Revising the General website Articles of Association and Meeting of (www.sse.com.cn) Applying for Business Change Shareholders Registration. For details, see the in 2023 Announcement on Resolutions of the 2nd Extraordinary General Meeting of Shareholders in 2023 (No.: 2023-076) released on the SSE website on November 10, 2023 (http://www.sse.com.cn) and relevant media. 3rd December Announcement No. December The meeting approved the Extraordinary 29, 2023 2023-092 on SSE 30, 2023 Proposal on revising the Rules General website of Procedures, the Proposal on Meeting of (www.sse.com.cn) revising the Working Policies for Shareholders Independent Directors, the in 2023 Proposal on Revising the Accounting Firm Selection System, and other proposals. For details, see the Announcement on Resolutions of the 3rd Extraordinary General Meeting of Shareholders in 2023 (No.: 2023-092) released on the SSE website on December 30, 2023 (http://www.sse.com.cn) and relevant media. Request of preferred shareholders with restored voting rights for convening an extraordinary general meeting □ Applicable √ Not applicable Description of the General Meeting of Shareholders □ Applicable √ Not applicable 47 / 272 Annual Report 2023 IV.Directors, Supervisors and Senior Management (I) Changes in shareholding and remuneration of current and resigned directors, supervisors and senior management during the Reporting Period √ Applicable □ Not applicable Unit: Share Any Total pre-tax remune remuneration Number of ration Number of Change in received from shares held from Gend Term start Term end shares held at shares Cause for the Company Name Position Age at the the er date date the end of the during the change during the beginning Compa year year Reporting of the year ny's Period related (RMB'0,000) parties HOU Chairman of Male 60 7/30/2015 9/8/2024 97,670,741 136,739,037 39,068,296 Shares 331.59 No Junche the Board of converted ng Directors from capital reserve FANG Director, Male 55 7/30/2015 9/8/2024 45,772,470 59,625,258 13,852,788 Shares 329.45 No Yuyou General converted Manager from capital reserve and shares reduced for personal capital need HOU Director Male 36 9/9/2021 9/8/2024 0 0 0 82.63 No Yamen g HOU Deputy Male 36 9/15/2021 9/8/2024 0 0 0 0.00 No Yamen General g Manager MA Independent Male 54 5/13/2021 9/8/2024 0 0 0 15.00 No Dongm Director ing 48 / 272 Annual Report 2023 GE Independent Male 49 9/9/2021 9/8/2024 0 0 0 15.00 No Weijun Director HOU Supervisor Fema 35 5/2/2018 9/8/2024 0 0 0 29.09 No Luting le FANG Supervisor Fema 34 5/8/2018 9/8/2024 0 0 0 36.88 No Qin le HU Supervisor Fema 36 9/9/2021 9/8/2024 0 0 0 19.25 No Lina le JIN Deputy Male 62 4/16/2018 9/14/2024 216,973 303,762 86,789 Shares 255.61 No Yanhu General converted a Manager from capital reserve WAN CFO Fema 46 9/3/2018 9/14/2024 225,251 315,491 90,240 Capital 252.57 No G Li le reserve conversion to share capital and increase in shareholding by personal centralized bidding trading WAN Deputy Fema 46 9/15/2021 9/14/2024 0 0 0 0.00 No G Li General le Manager, Secretary of the Board of Directors Total / / / / / 143,885,435 196,983,548 53,098,113 / 1,367.05 / Note: Main reasons for the change in the total pre-tax remuneration received by Company inside directors HOU Juncheng, FANG Yuyou, HOU Yameng and senior management employees JIN Yanhua and WANG Li during the Reporting Period are as follows: (1) The total pre-tax remuneration of 2023 includes the annual overperformance incentives of 2022 and quarterly overperformance bonuses of 2023 (the Company exceeded its sales target in 2022, resulting in the first overperformance incentive payout for that year; the Company exceeded its sales targets for the 6.18 and 11.11 promotion campaigns in 2023). 49 / 272 Annual Report 2023 (2) The Company paid cash bonuses to core management employees at the 20th anniversary in November 2023. Name Working experience HOU He once worked in Yiwu Liaoyuan Daily Chemical Co., Ltd., Hangzhou Proya Cosmetics Co., Ltd., and Hangzhou Proya Holding Co., Ltd. Since Juncheng 2007, he has been working in the Company and its predecessor. From September 2007, he has been serving as Executive Director of the Company. From August 2012, he been serving as Chairman of the Company and its predecessor. As of the disclosure date of the Reporting Period, he concurrently served as Executive Director and General Manager of Proya Trade, Executive Director of Meiligu, Executive Director of Chuangdai Electronics, Executive Director of Yueqing Laiya, Inside Director and Representative Director of Korea Hanna, Executive Director and General Manager of Hapsode (Hangzhou), Executive Director and General Manager of Huzhou Hapsode, Executive Director and General Manager of Mijing Siyu (Hangzhou), Executive Director of Proya (Hainan), Executive Director of Proya (Zhejiang), Chairman of CBI (Cosmetics Industry (Huzhou) Investment Development Co., Ltd., Executive Director and General Manager of Huzhou Beauty Town Technology Incubation Park Co., Ltd., Director of Yongxinou (Ningbo) International Trading Co., Ltd., and Executive Director of Zhejiang Zhujin Enterprise Management Co., Ltd. FANG He once worked in Shijiazhuang Liaoyuan Cosmetics Co., Ltd., Hangzhou Proya Cosmetics Co., Ltd., and Hangzhou Proya Holdings Co., Ltd. Yuyou Since 2007, he has been working in the Company and its predecessor. Since August 2012, he has served as Director and General Manager of the Company and its predecessor. As of the disclosure date of the Reporting Period, he concurrently served as General Manager of Meiligu, General Manager of Yueqing Laiya, Inside Director of Korea Hanna, Director of Hong Kong Xinghuo, Executive Director and General Manager of Hangzhou Fangxiake Investment Co., Ltd., Director of Hangzhou Tairentang Biotechnology Co., Ltd., Supervisor of Zhejiang Boweihui Grapevine Technology Co., Ltd., and Director of Jiangsu Lenong Weimei Agricultural Technology Development Co., Ltd. HOU He once worked in the E-commerce Department of Proya Cosmetics Co., Ltd., and has been serving as Director and Deputy General Manager of Yameng the Company since September 2021. As of the disclosure date of the Reporting Period, he concurrently served as Executive Director and General Manager of Hainan Mengya Enterprise Consulting Co., Ltd. and Executive Director and General Manager of Hangzhou TIMAGE, Director of PROYA MALAYSIA, and Executive Partner of Sanya WaveDash Technology Partnership (Limited Partnership). MA He used to be Deputy Director and Director of CSRC Zhejiang Branch, Director of the Commissioner's Office of CSRC Shanghai Branch, and Dongming Deputy General Manager and Secretary of the Board of Directors of Yongan Futures Co., Ltd. Since May 2021, he has been serving as Independent Director of the Company. As of the end of the Reporting Period, he concurrently served as Independent Director of Transwarp Technology (Shanghai) Co., Ltd. and Independent Director of Merit Interactive Co., Ltd. GE Weijun He once worked in Zhejiang Xingyun Law Firm and Xingyun Law Firm Shanghai Branch. From February 2006 to December 2021, he served as Professor, Doctoral Supervisor, and Legal Adviser at Shanghai University of Finance and Economics. Since January 2022, he has been serving as a full-time teacher (professor) at the Law School of Fudan University. Since September 2021, he has been serving as Independent Director of the Company. He also serves as Arbitrator at the China International Economic and Trade Arbitration Commission, Arbitrator at the Shanghai International Economic and Trade Arbitration Commission, Arbitrator at the Shanghai Arbitration Commission, Arbitrator at the Shenzhen Court of International Arbitration, Executive Officer of the China Commercial Law Society, Vice President of the Commercial Research Branch of Shanghai Judicial Think Tank Institution, Vice President of the Commercial Law Research Association of the Shanghai Law Society, Vice President of the Cultural Law Law Research Association of the Shanghai Law Society, Independent Director of Shanghai Huace Navigation Technology Ltd., Independent Director of Changzhou ECTEK Automotive Electronics System Co., Ltd. (Non-Listed Company), Independent Director of 50 / 272 Annual Report 2023 Hangzhou EZVIZ Network Co., Ltd. and Supervisor of Shanghai Fudan Asset Management Co., Ltd. HOU Luting From July 2013 to January 2014, she served as an expatriate financial specialist at Zhonghui Accounting Firm. From February 2014 to June 2017, she served as a packaging material procurement specialist at the Purchasing Department of the Company. From June 2017 to April 2019, she served as a raw material procurement specialist at the Purchasing Department of the Company. From April 2019 to March 2021, she served as a raw material evaluation engineer. From March 2021 to December 2022, she served as a deputy price review manager. From December 2022 to present, she has been serving as a price review manager. Since May 2018, she has served as Supervisor of the Company. FANG Qin From November 2008 to January 2018, she served as Director of the Planning Department of the Company and its predecessor. From January 2018 to July 2022, she served as Planning Strategy Manager of the Company. Since July 2022, she has served as Senior Planning Strategy Manager of the Company. Since May 2018, she has been serving as Supervisor of the Company. HU Lina She once worked in Pan-China Certified Public Accountants (Special General Partnership), and has served as Strategy Supervisor at the Company since 2013, and has been serving as Supervisor of the Company since September 2021. JIN Yanhua He once worked in Zhejiang Sanmen Fertilizer Factory, Zhejiang InBev Yandangshan Beer Co., Ltd., Zhejiang InBev Jinhua Beer Co., Ltd., Hangzhou Proya Cosmetics Co., Ltd., and Hangzhou Proya Holding Co., Ltd. From 2007 to August 2012, he served as General Manager of the Huzhou Factory under the Company and its predecessor. Since August 2012, he has served as General Manager of the Company's Supply Chain Management Center; since April 2018, he has been serving as Deputy General Manager of the Company. As of the disclosure date of the Reporting Period, he concurrently served as Executive Director of Hanya (Huzhou), Executive Director of Huzhou UZERO, Manager of Chuangdai Electronics, Executive Director and General Manager of Proya Commercial, Executive Director and General Manager of Huzhou Niuke, Executive Director and General Manager of Hangzhou Wanyan, Executive Director and General Manager of Zhejiang Beute, Executive Director of Shanghai Zhongwen, Executive Director and General Manager of Ningbo Proya, Chairman of Ningbo Keshi, Chairman of Ningbo TIMAGE, Director of Hong Kong Keshi, Director of Hong Kong Wanyan, Director of Hong Kong Zhongwen, Executive Director of Zhejiang Qingya, Executive Director and Manager of Luxiaotie, Executive Director and General Manager of Hangzhou Yizhuo, Executive Director and General Manager of Hangzhou Weiluoke, Executive Director and General Manager of Hangzhou OOMS, Director of Japan OR, Executive Director and Manager of Guangzhou Qianxi, Director of Ningbo Xiyou Interactive Entertainment Culture Media Co., Ltd., General Manager of Proya (Hainan), Director of Korea Hapsode, Executive Director and General Manager of Xuzhou Laibo, Executive Director and General Manager of Singuladerm (Hangzhou), Chairman and General Manager of Ningbo Tangyu, Manager of Proya (Zhejiang), Executive Director and General Manager of Hangzhou CORRECTORS, Executive Director and General Manager of Huzhou Keyan, Executive Director and General Manager of Hubei Laibo, Executive Director and General Manager of Ningbo JIngzhe Cosmetics Co., Ltd., and Executive Director and General Manager of Hangzhou Gloris Trading Co., Ltd. WANG Li She once served as CFO of Guangzhou Yingtai Digital Power Technology Co., Ltd., Financial Representative of US CELLSTAR (Phonest Star), Financial Manager of Shanghai Ruili Sports Co., Ltd., Financial Director of Vgrass Fashion Co., Ltd., Financial Director of Zhuoshang Clothing (Hangzhou) Co., Ltd., and Financial Director of Nanjing Sunport Photovoltaics Co., Ltd. Since April 2023, she has been serving as Independent Director of Zhejiang Wazam New Materials Co., Ltd. She is currently Deputy General Manager, Secretary of the Board of Directors, and CFO of Proya Cosmetics Co., Ltd. Other explanations 51 / 272 Annual Report 2023 □ Applicable √ Not applicable 52 / 272 Annual Report 2023 (II) Positions of current and resigned directors, supervisors and senior management during the Reporting Period 1. Positions held in shareholder entities □ Applicable √ Not applicable 2. Positions held in other entities □ Applicable □ Not applicable Name of Name of another entity Position held Term start date Term end date employee HOU Executive Director and Proya Trade June 2011 Juncheng General Manager November Meiligu Executive Director 2012 December Chuangdai Electronics Executive Director 2016 September Yueqing Laiya Executive Director 2015 Inside Director and November Korea Hanna Representative Director 2011 Executive Director and Hapsode (Hangzhou) February 2018 General Manager Executive Director and Huzhou Hapsode May 2016 General Manager Executive Director and December Danyang Hapsode December 2023 General Manager 2016 Mijing Siyu Executive Director and February 2018 (Hangzhou) General Manager Executive Director and November Huzhou Younimi January 2024 General Manager 2022 Proya (Hainan) Executive Director January 2021 Proya (Zhejiang) Executive Director May 2022 Hangzhou Kunyi Chairman and General April 2014 February 2024 Industrial Co., Ltd. Manager Cosmetics Industry Chairman of the Board of December (Huzhou) Investment Directors 2018 Development Co., Ltd. Huzhou Beauty Town Executive Director and Technology Incubation January 2019 General Manager Park Co., Ltd. Xinjiang Huanyu New Silk Road Investment Director March 2021 March 2024 Development Co., Ltd. Yongxinou (Ningbo) International Trade Co., Director May 2022 Ltd. Zhejiang Zhujin September Enterprise Executive Director 2022 Management Co., Ltd. FANG November Meiligu General Manager Yuyou 2012 September Yueqing Laiya General Manager 2015 November Korea Hanna Inside Director 2011 Hong Kong Xinghuo Director March 2019 53 / 272 Annual Report 2023 Hangzhou Fangxiake Executive Director and May 2018 Investment Co., Ltd. General Manager Hangzhou Kunyi Director April 2014 February 2024 Industrial Co., Ltd. Hangzhou Tairentang December Biotechnology Co., Director 2014 Ltd. Zhejiang Poweihui November Grapevine Technology Supervisor 2021 Co., Ltd. Jiangsu Lenong Weimei Agricultural Director May 2022 Technology Development Co., Ltd. HOU Hainan Mengya Executive Director and November Yameng Enterprise Consulting General Manager 2021 Co., Ltd. Executive Director and Hangzhou TIMAGE March 2022 General Manager November PROYA MALAYSIA Director 2023 Sanya WaveDash Technology Executive Partner March 2024 Partnership (Limited Partnership) MA Transwarp Technology December Independent Director Dongming (Shanghai)Co., Ltd. 2020 Zhejiang Shuangyuan December Science & Technology Independent Director December 2023 2020 Development Co., Ltd. Merit Interactive Co., Independent Director May 2022 Ltd. GE Weijun Shanghai Huace December Navigation Technology Independent Director 2020 Ltd. Changzhou ECTEK Automotive Electronics September Independent Director System Co., Ltd. (Non- 2021 Listed Company) Hangzhou EZVIZ Independent Director March 2022 Network Co., Ltd. Zheshang Development Independent Director May 2022 December 2023 Group Co., Ltd. Shanghai Fudan Asset Supervisor August 2022 Management Co., Ltd. JIN December Anya (Huzhou) Executive Director Yanhua 2016 Huzhou UZERO Executive Director January 2018 Chuangdai Electronics Manager February 2018 Executive Director and September Proya Commercial General Manager 2018 Executive Director and December Huzhou Niuke General Manager 2018 Executive Director and Hangzhou Wanyan January 2019 General Manager Zhejiang Beauty Executive Director and March 2019 54 / 272 Annual Report 2023 General Manager Shanghai Zhongwen Executive Director April 2019 Executive Director and December Ningbo Proya General Manager 2019 September Ningbo Keshi Director 2019 Ningbo TIMAGE Director July 2019 Hong Kong Keshi Director March 2019 Hong Kong Wanyan Director October 2019 Hong Kong Zhongwen Director July 2019 Zhejiang Qingya Executive Director May 2020 Luxiaotie Executive Director August 2020 Luxiaotie Manager March 2023 Executive Director and Hangzhou Yizhuo July 2020 General Manager Executive Director and Hangzhou Weiluoke July 2020 General Manager Executive Director and Hangzhou Oumisi August 2020 General Manager Japan OR Director August 2020 Executive Director and Guangzhou Qianxi October 2020 Manager Ningbo Xiyou Interactive September Director Entertainment Culture 2020 Media Co., Ltd. Proya (Hainan) General Manager January 2021 Korea Hapsode Director of the Company June 2021 Executive Director and Xuzhou Laibo January 2022 General Manager Singuladerm Executive Director and October 2021 (Hangzhou) General Manager Chairman and General Ningbo Tangyu October 2021 Manager Proya (Zhejiang) Manager May 2022 Hangzhou Executive Director and December CORRECTORS General Manager 2022 Executive Director and Huzhou Keyan March 2023 General Manager Executive Director and Hubei Laibo July 2023 General Manager Ningbo Jingzhe Executive Director and January 2024 Cosmetics Co., Ltd. General Manager Hangzhou Gloris Executive Director and March 2024 Trading Co., Ltd. General Manager WANG Li Zhejiang Wazam New Independent Director April 2023 Materials Co., Ltd. Description None of position held in other entities (III) Remuneration of directors, supervisors and senior management √ Applicable □ Not applicable 55 / 272 Annual Report 2023 Decision-making procedures The remuneration of directors and supervisors of the Company shall for remuneration of directors, be approved by the Remuneration and Appraisal Committee, the supervisors and senior Board of Directors and the Board of Supervisors respectively. Then, management the remuneration plan shall be submitted to the general meeting of shareholders for deliberation. The remuneration of senior management shall be deliberated by the Remuneration and Appraisal Committee and the Board of Directors. Whether the director recuses himself/herself when the board Yes of directors is discussing his/her compensation Specific recommendations made by the Remuneration and Appraisal Committee or a The remuneration of directors, supervisors, and senior management special meeting of independent shall be determined based on industry benchmarks and regional directors regarding the standards, as well as the Company's specific circumstances. remuneration of directors, supervisors, and senior management. Basis for determination of The annual remuneration of the Company's directors, supervisors remuneration of directors, and senior management shall be paid based on basic pay and supervisors and senior performance appraisal results. management Actual payment of remuneration of directors, Paid. supervisors and senior management Total remuneration actually received by all directors, During the Reporting Period, the Company's directors, supervisors supervisors and senior and senior management actually received a total remuneration of management as of the end of the RMB13.67million from the Company. Reporting Period (IV) Changes in the Company's directors, supervisors and senior management □ Applicable √ Not applicable (V) Description of punishments by the CSRC in the past three years □ Applicable √ Not applicable (VI) Other □ Applicable √ Not applicable V.Meetings of the Board of Directors held during the Reporting Period Session Date Resolution 10th meeting of March 8, The meeting approved the Proposal on No Early Redemption of the 3rd session of 2023 "Proya Convertible Bonds". For details, see the Announcement on Board of Directors No Early Redemption of "Proya Convertible Bonds" (No.: 2023- 005) released on the SSE website on March 9, 2023 (http://www.sse.com.cn) and relevant media. 11th meeting of April 19, The meeting approved the Company's Annual Report 2022 and the 3rd session of 2023 its Summary, the Company's Sustainable Development & Board of Directors Environmental, Social, and Governance (ESG) Report 2022, the Company's Plan for Profit Distribution and Capitalization of Capital Reserves for 2022, and other proposals. For details, see the Announcement on Resolutions of the 11th Meeting of the 3rd 56 / 272 Annual Report 2023 Session of Board of Directors (No.: 2023-010) released on the SSE website on April 21, 2023 (http://www.sse.com.cn) and relevant media. 12th meeting of June 20, The meeting approved the Proposal on Adjusting the Price and the 3rd session of 2023 Quantity of Restricted Shares Repurchased under the 2022 Board of Directors Restricted Shares Incentive Plan, the Proposal on Repurchasing and De-registering Part of Restricted Incentive Shares, and the Proposal on the Adjustment of the Conversion Price of "Proya Convertible Bond". For details, see the Announcement on Resolutions of the 12th Meeting of the 3rd Session of Board of Directors (No.: 2023-034) released on the SSE website on June 21, 2023 (http://www.sse.com.cn) and relevant media. 13th meeting of August 28, The meeting approved the Company's 2023 Semi-annual Report the 3rd session of 2023 and its Summary, the 2023 Special Report on the Semi-annual Board of Directors Storage and Actual Use of Raised Fund, the Company's 2023 Semi-Annual Profit Distribution Plan, and other proposals. For details, see the Announcement on Resolutions of the 13th Meeting of the 3rd Session of Board of Directors (No.: 2023-046) released on the SSE website on August 30, 2023 (http://www.sse.com.cn) and relevant media. 14th meeting of September The meeting approved the Proposal on Satisfying the Conditions the 3rd session of 8, 2023 for Release from Sales Restrictions in the First Release Period Board of Directors under the 2022 Restricted Shares Incentive Plan. For details, see the Announcement on Satisfying the Conditions for Release from Sales Restrictions in the First Release Period under the 2022 Restricted Shares Incentive Plan (No.: 2023-055) released on the SSE website on September 12, 2023 (http://www.sse.com.cn) and relevant media. 15th meeting of September The meeting approved the Proposal on Repurchasing and De- the 3rd session of 14, 2023 registering Part of Restricted Incentive Shares. For details, see Board of Directors the Announcement on Repurchasing and De-registering Part of Restricted Incentive Shares (No.: 2023-058) released on the SSE website on September 15, 2023 (http://www.sse.com.cn) and relevant media. 16th meeting of October 23, The meeting approved the Company's 2023 Q3 Report, the the 3rd session of 2023 Proposal on Adjusting the Repurchase Price under the 2022 Board of Directors Restricted Shares Incentive Plan, and other proposals. For details, see the Announcement on Resolutions of the 16th Meeting of the 3rd Session of Board of Directors (No.: 2022-067) released on the SSE website on October 24, 2023 (http://www.sse.com.cn) and relevant media. 17th meeting of December The meeting approved the Proposal on Revising the Articles of the 3rd session of 13, 2023 Association and Applying for Business Change Registration, the Board of Directors Proposal on Revising the Rules of Procedures, the Proposal on Revising the Working Policies for Independent Directors, and other proposals. For details, see the Announcement on Resolutions of the 17th Meeting of the 3rd Session of Board of Directors (No.: 2022-082) released on the SSE website on December 14, 2023 (http://www.sse.com.cn) and relevant media. VI.Performance of Duties by Directors (I) Directors attending meetings of the Board of Directors and general meetings of shareholders Independent Attendance Director director or Attendance at meetings of the Board of Directors at general Name not meetings of 57 / 272 Annual Report 2023 shareholders Number Number Number Number Fail to of of of Number of of attend two meetings meetings Number of meetings meetings of the meetings consecutive of the of the general of the Board of of the meetings of Board of Board of meetings of Board of Directors Board of the Board Directors Directors shareholders Directors attended by Directors of to be absent attended attended communication attended Directors attended from in person by proxy or not this year HOU No 8 8 0 0 0 No 4 Juncheng FANG No 8 8 0 0 0 No 4 Yuyou HOU No 8 8 1 0 0 No 4 Yameng MA Yes 8 8 4 0 0 No 4 Dongming GE Yes 8 8 5 0 0 No 4 Weijun Description of absence from two consecutive meetings of the Board of Directors □ Applicable √ Not applicable Number of meetings of the Board of Directors held 8 during the year Including: number of on-site meetings 3 Number of meetings held by communication 0 Number of meetings held both on site and by 5 communication (II) Circumstances where directors object to the Company's relevant matters □ Applicable √ Not applicable (III) Other □ Applicable √ Not applicable VII.Special Committees under the Board of Directors √ Applicable □ Not applicable (I) Members of special committees under the Board of Directors Category of special Name of member committee Audit Committee HOU Yameng, MA Dongming, GE Weijun Nomination Committee HOU Juncheng, MA Dongming, GE Weijun Remuneration and FANG Yuyou, MA Dongming, GE Weijun Appraisal Committee Strategy Committee HOU Juncheng, MA Dongming, GE Weijun (II) Six meetings held by the Audit Committee during the Reporting Period Important Other Date Description comments and performance suggestions of duties 58 / 272 Annual Report 2023 April 19, The 7th meeting of the 3rd session of the Audit Approve these None 2023 Committee was held to deliberate on and approve proposals and the Company's Annual Report 2022 and its agree to submit Summary, the Company's 2023 Q1 Report, the them to the Board Company's Annual Financial Final Report 2022, of Directors for the Performance Report 2022 of the Audit deliberation Committee under the Company's Board of Directors, the Company's Internal Control Evaluation Report 2022, the 2022 Special Report on the Annual Storage and Actual Use of Raised Fund, the Company's Plan for Profit Distribution and Capitalization of Capital Reserves for 2022, the Proposal on Payment of Audit Fees for 2022 and Further Employment of the Accounting Firm for 2023, the Proposal on the Accrual of Asset Impairment Provision for 2022, the Proposal on the Adjustment of the Conversion Price of "Proya Convertible Bond", the Proposal on the Partial Delay of Raising Funds for Investment Projects, and the Company's Annual Internal Audit Work Report 2022. June 20, The 8th meeting of the 3rd session of the Audit Approve these None 2023 Committee was held to deliberate on and approve proposals and the Proposal on Adjusting the Price and Quantity of agree to submit Restricted Shares Repurchased under the 2022 them to the Board Restricted Shares Incentive Plan, the Proposal on of Directors for Repurchasing and De-registering Part of Restricted deliberation Incentive Shares, and the Proposal on the Adjustment of the Conversion Price of "Proya Convertible Bond". August The 9th meeting of the 3rd session of the Audit Approve these None 28, 2023 Committee was held to deliberate on and approve proposals and the Company's 2023 Semi-annual Report and its agree to submit Summary, the 2023 Special Report on the Semi- them to the Board annual Storage and Actual Use of Raised Fund, the of Directors for Company's 2023 Semi-Annual Profit Distribution deliberation Plan, the Proposal on the Adjustment of the Conversion Price of "Proya Convertible Bond", and the Proposal on Revising the Internal Audit Management Policies. September The 10th meeting of the 3rd session of the Audit Approve these None 14, 2023 Committee was held to deliberate on and approve proposals and the Proposal on Repurchasing and De-registering agree to submit Part of Restricted Incentive Shares. them to the Board of Directors for deliberation October The 11th meeting of the 3rd session of the Audit Approve these None 23, 2023 Committee was held to deliberate on and approve proposals and the Company's 2023 Q3 Report, the Proposal on agree to submit Adjusting the Repurchase Price under the 2022 them to the Board Restricted Shares Incentive Plan, the Proposal on of Directors for the Adjustment of the Conversion Price of "Proya deliberation Convertible Bond", and the Proposal on the Accrual of Asset Impairment Provision for the First Three Quarters of 2022. December The 12th meeting of the 3rd session of the Audit Approve these None 13, 2023 Committee was held to deliberate on and approve proposals and 59 / 272 Annual Report 2023 the Proposal on Revising the Work Rules for the agree to submit Audit Committee of the Board of Directors, the them to the Board Proposal on Developing the Accounting Firm of Directors for Selection System, and the Proposal on the Plan for deliberation Repurchasing the Company's Shares Through Centralized Bidding. (III) Two meetings held by the Remuneration and Appraisal Committee during the Reporting Period Important Other Date Description comments and performance suggestions of duties April 19, The 4th meeting of the 3rd session of Remuneration Approve these None 2023 and Appraisal Committee was held to deliberate on proposals and and approve the Proposal on Confirming the agree to submit Remuneration of Directors for 2022 and the them to the Board Proposal on Confirming the Remuneration of Senior of Directors for Management for 2022. deliberation September The 5th meeting of the 3rd session of Remuneration Approve these None 8, 2023 and Appraisal Committee was held to deliberate on proposals and and approve the Proposal on Satisfying the agree to submit Conditions for Release from Sales Restrictions in them to the Board the First Release Period under the 2022 Restricted of Directors for Shares Incentive Plan. deliberation (IV) One meeting held by the Strategy Committee during the Reporting Period Important Other Date Description comments and performance suggestions of duties April 19, The 3rd meeting of the 3rd session of Strategy Approve these None 2023 Committee was held to deliberate on and approve proposals and the Proposal on the Company's Strategic Business agree to submit Plan 2023. them to the Board of Directors for deliberation (V) Dissenting matters □ Applicable √ Not applicable VIII.Description of the Company's Risks Identified by the Board of Supervisors □ Applicable √ Not applicable The Board of Supervisors had no objection to matters supervised during the Reporting Period. IX.Employees of the Parent Company and Major Subsidiaries as of the End of the Reporting Period (I) Employees Number of current employees of the parent 1,477 company Number of current employees of major 1,494 subsidiaries Total number of employees 2,971 Number of retired employees to be supported by 4 the parent company and major subsidiaries Specialty distribution 60 / 272 Annual Report 2023 Category Number of employees Production workers 310 Sales specialists 1,996 Management 343 R&D personnel 322 Total 2,971 Educational background Education level Number (persons) Bachelor and above 1,584 Associate 740 High school and below 647 Total 2,971 (II) Remuneration policy √ Applicable □ Not applicable Value creation is the Company's basis for salary distribution. Performance is an intuitive reflection of value. By establishing a comprehensive and objective performance evaluation system, the Company combines salary distribution and performance evaluation of employees with an aim to fully guide and motivate employees to create value. (III) Training program √ Applicable □ Not applicable The Company adheres to the goal of gathering and training outstanding professionals by always considering staff learning and growth as a primary task, and continuously innovating in and optimizing training research, training topics, training forms, training implementation, training evaluation and improvement, and trainer management. In terms of the form of learning, the Company combines internal and external learning and fully improves the engagement of employees in training, thus making the training more effective. (IV) Labor outsourcing √ Applicable □ Not applicable Total man-hours for labor outsourcing Total remuneration paid for labor outsourcing RMB76,520,604.14 (1) Huzhou Branch and Zhejiang Beauty signed the Service Project Contracting Agreement with Puji Labor Service Co., Ltd. to outsource auxiliary services including canteen, greening, cleaning, and goods handling, loading and unloading, and packaging to the latter and pay consideration for the agreed quantities. (2) Huzhou Branch signed the Service Project Contracting Agreement with Yancheng Dafeng Xinxinyuan Enterprise Management Co., Ltd. to outsource services such as partial goods handling, loading and unloading, combined packaging, and mask folding to the latter, and pay consideration for the agreed quantities. (3) Huzhou Branch signed the Service Project Contracting Agreement with Zhejiang Hongfu Supply Chain Management Co., Ltd. to outsource services such as partial goods handling, loading and unloading, combined packaging, and mask folding to the latter, and pay consideration for the agreed quantities. X.Profit Distribution or Capital Reserve Conversion Plan (I) Development, implementation or adjustment of the cash dividend distribution policy √ Applicable □ Not applicable The Company held the 16th meeting of the second session of Board of Directors and the 3rd extraordinary General Meeting of Shareholders on October 12, 2020 and October 28, 2020 respectively and approved the Proposal on the Company's Planning for Dividends to Shareholders for the Next Three Years (2020- 2022), as detailed below: I. Factors considered in developing the planning for dividend distribution to shareholders 61 / 272 Annual Report 2023 To promote the long-term and sustainable development, based on a comprehensive analysis of the corporate development strategy, shareholder requirements and expectations, social capital costs, and external financing environment, the Company has solicited and listened to the requirements and expectations of shareholders, especially small and medium shareholders, fully considered the Company's current and future profitability, cash flow, development stage, project investment capital needs, and bank credit, balanced the short-term and long-term interests of shareholders, and made institutional arrangements for profit distribution, so as to establish a sustainable and stable mechanism for dividend distribution to investors to ensure the continuity and stability of the Company's profit distribution policy. Ⅱ. Principles for planning for dividend distribution to shareholders The Company implements a continuous and stable profit distribution policy, attaches importance to reasonable investment returns to investors while considering sustainable development, and has established a continuous and stable mechanism for returns to investors in combination with the Company's profitability and actual needs for the future development strategy. The Company shall make a profit distribution plan in accordance with the Articles of Association. The Company's Board of Directors, Board of Supervisors and General Meeting of Shareholders shall fully consider the opinions of independent directors, supervisors and public investors in deciding and demonstrating the profit distribution policy. III. Planning for dividend distribution to shareholders (2020-2022) 1. The Company shall implement a continuous and stable profit distribution policy, and consider reasonable investment returns to investors as well as the Company's actual operating conditions and sustainable development for the current year in profit distribution. 2. The Company may distribute profits in the form of cash or shares or both, or other methods permitted by laws and regulations. The distribution shall not exceed the accumulated distributable profits, and shall not undermine the Company's ability to continue as a going concern. When eligible for cash dividends, the Company shall distribute profits first in cash. When eligible for cash dividends under the Company's Articles of Association, the Company shall, in principle, distribute profits in cash on a yearly basis. The Company's Board of Directors may propose that the Company should distribute interim cash dividends according to the Company's profitability and capital needs. The Company shall maintain the continuity and stability of the profit distribution policy, and distribute every year at least 20% of the distributable profits achieved for the current year. The Company's Board of Directors shall propose a differentiated cash dividend policy in line with the procedure under the Company's Articles of Association after a comprehensive analysis of factors such as industry characteristics, development stage, its own business mode, profitability, and major spending arrangements. 3. Adjustment of the profit distribution plan and related decision-making mechanism (1) The Company shall evaluate the implemented plan for dividend distribution to shareholders once every three years. According to applicable laws and regulations, the Company's operating conditions, and the opinions of shareholders (especially small and medium investors) and independent directors, the Company may modify its current profit distribution policy when necessary and make a new plan for dividend distribution to shareholders. Upon adjustment, the plan for dividend distribution to shareholders shall be approved by voting at the General Meeting of Shareholders. (2) The Company's Board of Directors shall make an appropriate annual distribution plan or an interim profit distribution plan as necessary for development after fully considering the Company's profitability, cash flow, development capital needs, financing costs, and the external financing environment, and implement them upon the approval by the Company's General Meeting of Shareholders. During the Reporting Period, the Company's 2022 Annual General Meeting of Shareholders deliberated on and approved the profit distribution plan of 2022: Based on the Company's total share capital of 283,520,339 shares before the implementation of the plan, a cash dividend of RMB0.87 per share (tax inclusive) was distributed, with a total of RMB246,662,694.93 cash dividends distributed. The said dividend distribution was completed on May 29, 2023. During the Reporting Period, the Company's 2023 Annual General Meeting of Shareholders deliberated on and approved the 2023 semi-annual profit distribution plan: Based on the Company's total share capital of 396,823,346 shares before the implementation of the plan, a cash dividend of RMB0.38 per share (tax inclusive) was distributed, with a total of RMB150,792,871.48 cash dividends distributed. The said dividend distribution was completed on October 23, 2023. (II) Special description of the cash dividend policy √ Applicable □ Not applicable 62 / 272 Annual Report 2023 Is the cash dividend policy acceptable under the Company's Articles of Association or as required by resolutions at the General Meeting of √Yes □No Shareholders? Are dividend distribution standard and ratio clearly defined? √Yes □No Are decision-making procedures and mechanisms complete? √Yes □No Do independent directors fulfill their duties and play their roles diligently? √Yes □No Do minority shareholders have the opportunity to fully express their opinions √Yes □No and demands, and are their legitimate rights and interests fully protected? (III) Where the Company made profits and the parent company could provide positive profits available to shareholders for distribution but did not propose a cash profit distribution plan during the Reporting Period, the Company shall disclose the reasons in details and the purpose and use of undistributed profits. □ Applicable √ Not applicable (IV) Profit distribution and capitalization of capital reserves during the Reporting Period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Number of bonus shares distributed per 10 shares 0 (shares) Dividends per 10 shares (RMB) (tax included) 9.10 Conversions per 10 shares (shares) 0 Amount of cash dividends (tax included) 359,037,186.69 Net profit attributable to ordinary shareholders of the Company in the annual consolidated 1,193,868,141.81 statement of dividends Proportion in the net profit attributable to ordinary shareholders of the Company in the 30.07 consolidated statement (%) Amount of shares repurchased in cash included 39,076,754.20 in cash dividends Total dividend amount (tax included) 398,113,940.89 Proportion of the dividend amount in the net profit attributable to ordinary shareholders of the 33.35 Company in the consolidated statement (%) Note: 1. The Company held the 18th meeting of the 3rd session of Board of Directors on April 17, 2024, during which the Company deliberated on and approved the 2023 Annual Profit Distribution Plan. Based on the total share capital (excluding the shares in the Company's special securities account for repurchase) as of the record date on which equity distribution is implemented, the Company proposes to distribute to all shareholders registered a cash dividend of RMB9.10 (tax inclusive) per 10 shares. Based on the total share capital of 396,757,184 shares on December 31, 2023, deducting 2,210,825 shares in the Company's special securities account for repurchase, it is estimated that the cash dividend to be distributed will amount to RMB359,037,186.69 (tax inclusive) without converting the capital reserve into share capital or giving any bonus shares. In case of a change in the Company's total share capital due to the conversion of convertible bonds before the record date for equity distribution, the Company maintains the said distribution ratios and yet adjusts the total distribution amounts. 2. On October 23, 2023, the Company completed the implementation of the 2023 semi-annual profit distribution plan. Based on the Company's total share capital of 396,823,346 shares before the implementation of the plan, a cash dividend of RMB0.38 per share (tax inclusive) was distributed, with a total of RMB150,792,871.48 cash dividends distributed. 3. According to the Guideline No. 7 for the Self-regulatory Rules of Companies Listed on the Shanghai Stock Exchange - Share Repurchase and other relevant regulations, for listed companies that repurchase shares using cash as consideration through centralized bidding or tender offer, the amount of repurchased shares in the current year shall be treated as the amount of cash dividends and counted in the calculation 63 / 272 Annual Report 2023 of the cash dividend proportion for that year. In 2023, the Company repurchased shares amounting to RMB39,076,754.20 (excluding transaction expenses) through centralized bidding. To conclude, the amount of cash dividends for the year 2023 (including the proposed annual dividend for 2023, the semi-annual cash dividend for 2023, and the amount of repurchased shares through centralized bidding for 2023) accounts for 45.98% of the net profit attributable to the shareholders of the Company in the consolidated statement of 2023. XI.The Company's Equity Incentive Plans, Employee Stock Ownership Plans or Other Employee Incentives and Their Impact (I) Relevant incentive matters disclosed in the temporary announcement and with no progress or changes in subsequent implementation √ Applicable □ Not applicable Matter Reference Announcement on Adjusting the No. 2023-036 announcement published on the SSE website, Price and Quantity of Restricted Shanghai Securities News, and Securities Times on June 21, Shares Repurchased under the 2022 2023 Restricted Shares Incentive Plan Announcement on the Repurchase No. 2023-037 announcement published on the SSE website, and Cancellation of Some Equity Shanghai Securities News, and Securities Times on June 21, Incentive Restricted Shares 2023 Announcement on the Implementation of the Repurchase No. 2023-044 announcement published on the SSE website, and Cancellation of Some Shanghai Securities News, and Securities Times on August Restricted Shares under the 2022 22, 2023 Restricted Shares Incentive Plan No. 2023-058 announcement published on the SSE website, Announcement on the Repurchase Shanghai Securities News, Securities Times, China Securities and Cancellation of Some Equity Journal, Securities Daily, Economic Information Daily, and Incentive Restricted Shares China Daily on September 15, 2023 Announcement on the Satisfaction of Conditions for Release from No. 2023-061 announcement published on the SSE website, Sales Restrictions in the First Shanghai Securities News, Securities Times, China Securities Release Period under the 2022 Journal, Securities Daily, Economic Information Daily, and Restricted Shares Incentive Plan China Daily on September 20, 2023 and Listing No. 2023-069 announcement published on the SSE website, Announcement on Adjusting the Shanghai Securities News, Securities Times, China Securities Repurchase Price of the 2022 Journal, Securities Daily, Economic Information Daily, and Restricted Shares Incentive Plan China Daily on October 24, 2023 Announcement on the No. 2023-080 announcement published on the SSE website, Implementation of the Repurchase Shanghai Securities News, Securities Times, China Securities and Cancellation of Some Journal, Securities Daily, Economic Information Daily, and Restricted Shares under the 2022 China Daily on December 11, 2023 Restricted Shares Incentive Plan (II) Incentives not disclosed in the interim announcement or with subsequent progress Equity incentives □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable Employee stock ownership plans □ Applicable √ Not applicable 64 / 272 Annual Report 2023 Other incentives □ Applicable √ Not applicable (III) Equity incentives granted to directors and senior management during the Reporting Period □ Applicable √ Not applicable √ Applicable □ Not applicable Unit: Share Number Number Number of of newly of Market restricted granted Price of restricted price as shares restricted restricted shares of the end Unlocked Locked Name Position held at shares shares held at of the shares shares the during granted the end of Reporting beginning the (RMB) the Period of the Reporting Reporting (RMB) year Period Period Deputy JIN General 140,000 0 78.56 58,800 137,200 137,200 99.40 Yanhua Manager Deputy General Manager, WANG Secretary 180,000 0 78.56 75,600 176,400 176,400 99.40 Li of the Board of Directors, CFO Total / 320,000 0 / 134,400 313,600 313,600 / Note: The Company implemented the 2022 Equity Distribution Plan on May 29, 2023, in which the Company distributed to all shareholders a cash dividend of RMB8.70 (tax inclusive) per 10 shares based on the total share capital as of the record date on which equity distribution is implemented and issued 4 shares for every 10 shares to all shareholders through capitalization of the capital reserve. The "locked shares", "unlocked shares" and "number of restricted shares held at the end of the period" mentioned in the table above include the shared converted through the capitalization of the capital reserve in 2022. (IV) Evaluation mechanism for senior management as well as the establishment and implementation of the incentive mechanism during the Reporting Period √ Applicable □ Not applicable During the Reporting Period, the Company's General Manager and other senior management were evaluated based on performance indicators and their annual performance remuneration was submitted by the Remuneration and Appraisal Committee to the Board of Directors for deliberation. XII.Construction and Implementation of the Internal Control System during the Reporting Period √ Applicable □ Not applicable The Company has developed relevant systems including the Internal Audit Management Policies, the External Guarantee Decision-making Management System, the Related Transaction Decision-Making Policies, the Raised Funds Management System, and the Information Disclosure Management System, and established processes for company establishment/investment/change applications, entrusted wealth management application, and guarantee application. The Company continuously improves the internal control system and related processes, regulates the implementation of the internal control system, strengthens the supervision and inspection of internal control, and promotes the healthy and sustainable 65 / 272 Annual Report 2023 development of the Company. Description of material deficiencies in internal control during the Reporting Period □ Applicable √ Not applicable XIII.Management and Control of Subsidiaries during the Reporting Period √ Applicable □ Not applicable The Company has developed systems including the External Investment and Operation Decision- Making System and the Subsidiary Management System to implement centralized control over subsidiaries. The Company HQ is responsible for its finance, asset operation and overall strategic planning while all subsidiaries develop their strategic plans based on the Company's overall strategic planning. XIV.Description of the Internal Control Audit Report √ Applicable □ Not applicable During the Reporting Period, Pan-China Certified Public Accountants (Special General Partnership), the Company's internal control auditing firm, issued the Internal Control Audit Report (T.J.S.[2024] No.[2241]),in which opinion the Company had maintained effective internal control over financial reporting in all material aspects as of December 31, 2023 pursuant to the Basic Rules for Internal Control and other applicable provisions. Whether to disclose the internal control audit report:Yes Type of opinion in the internal control audit report: Standard unqualified opinion XV.Correction of Problems Identified in the Special Campaign for Governance of Listed Companies None XVI.Other □ Applicable √ Not applicable Section V Environmental and Social Responsibility I.Environmental Information Whether to establish the environmental protection Yes mechanism Investment in environmental protection during the 402.44 Reporting Period (Unit: RMB '0,000) (I) Description of environmental issues of the Company and major subsidiaries included in the list of primary pollutant discharge entities announced by the environmental authority □ Applicable √ Not applicable (II) Description of environmental issues of the Company not included in the list of primary pollutant discharge entities √ Applicable □ Not applicable 1. Administrative penalties due to environmental issues □ Applicable √ Not applicable 2. Disclosure of other environmental information with reference to primary pollutant discharge entities √ Applicable □ Not applicable 66 / 272 Annual Report 2023 The Company strictly complies with environmental laws and regulations, including 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 Environmental Pollution by Solid Wastes, and the Regulations on the Safety Management of Hazardous Chemicals. We follow an environmental management policy to save energy, reduce consumption and emissions, and increase efficiency. The Company continuously strengthens its environmental risk management to ensure that its production and operations comply with relevant laws, regulations, and standards. The Company has established management documentation covering all environmental impact factors. Additionally, the Company implements various management policies in its production and operations to ensure effective control of environment-related risks. During the Reporting Period, the Company's resource use had no significant impact on the environment. In addition, the Company paid environmental protection taxes and fees in full, and no violations of environmental protection laws or regulations occurred. The Company passed the ISO14001:2015 Environmental Management System certification (valid until February 14, 2025). The Company's Huzhou Factory was designed and built in accordance with GMP standards. All production workshops meet the environmental control standards for cosmetic clean areas. The intelligent warehousing center has fully optimized the data and the robot-driven automation system, maximizing the sustainability of healthy and ecological production and achieving our strategic goals of cost reduction and efficiency enhancement. In September 2023, the Company's Huzhou Factory was awarded the title "Green and Low-Carbon Factory of Zhejiang 2023". During the Reporting Period, the Company's Huzhou factory was honored as a water-saving enterprise for the year 2023. In 2023, the Company submitted the Climate Change Questionnaire to the Carbon Disclosure Project (CDP) and achieved grade "B", reflecting its effective management in sustainability and climate action. The discharge of industrial wastewater, waste gas, and residues mainly occur from product production. Main administrative measures taken during the Reporting Period include: (1) Wastewater: ① Constructed a wastewater treatment system to ensure that the treated wastewater is highly purified and recycled. ② Installed the Multi Vision COD online automatic monitoring instrument to monitor the COD content in treated water 24 hours a day. ③ Installed a new sludge pressing device at the Huzhou factory to ensure class-A sewage discharge. ④ Excavated, replaced, repaired and retested some damaged rain and sewage pipes in the factory area in accordance with the result reported by the underground pipeline CCTV detection system (CCTV detection). (2) Waste gas: ① Added a waste gas treatment facility for the cream production line to reduce the emission of dust and organic waste gas. After being used, the facility can collect 99% dust and remove 75% organic waste gas. ② Installed a highly-precise volatile organic chemical (VOC) gas collection device to effectively reduce unorganized gas emissions. (3) Solid waste: The Company properly disposed of solid waste generated in production and operations. The Company managed solid waste in a macroscopical manner and the factories can track the whole process data on solid waste and prevent risks by requesting to report the amount of generated hazardous waste on the Zhejiang Information System Platform for the Supervision of Solid Wastes every year, selecting hazardous waste treatment service providers through open bidding on the platform, and requesting for the treatment of hazardous waste on the platform. During the Reporting Period, the sludge pressing device at the Huzhou factory reduced the sludge production by 75%, resulting in an annual reduction of approximately 540 tons of sludge. 3. Reasons for non-disclosure of other environmental information □ Applicable √ Not applicable 67 / 272 Annual Report 2023 (III)The Company's performance in helping protect the environment, prevent pollution and fulfill environmental responsibilities √ Applicable □ Not applicable The Company's emissions of greenhouse gasesare generated throughout the product lifecycle, with a small percentage arising from office operations. Based on identified sources of greenhouse gas emissions, we set greenhouse gas emission reduction goals in the Proya Sustainable Development Strategic Plan and collect greenhouse gas emission data every year to assess our performance in climate change management. In the sales process, all the Company's stores choose the best energy-saving solutions during renovation to reduce carbon emissions during operation. The Company's extensive sales are also engaged in carbon reduction initiatives. For example, a photovoltaic power generation facility has been installed at Haining Intime Department Store to partially replace traditional energy sources. During the Reporting Period, the Company reached a consensus with top ten strategic partners on the Proya Sustainable Development Strategic Plan and released the "Together for A Zero Carbon Future, Beauty in Harmony" carbon reduction manifesto, committing to reduce carbon emissions by 2025. During the Reporting Period, the Company carried out energy-saving and technology upgrade in an orderly manner, resulting in a reduction of 177.21 tons of carbon dioxide emissions.Additionally, the Company's initiatives such as purchasing green electricity and implementing photovoltaic power generation led to a reduction of 4,744.30 tons of carbon dioxide emissions, and the Company's reduction of packaging and use of replacement packaging led to a further reduction of 650.42 tons of carbon dioxide emissions. The Company actively communicates and collaborates with original equipment manufacturers (OEMs) and original design manufacturers (ODMs) to seek carbon reduction opportunities in production. During the Reporting Period, an OEM factory reduced its electricity consumption by using automated products, saving approximately 28 mWh of electricity per year. The Company promotes carbon reduction policies to its raw material suppliers and plans for the establishment of a system for collecting and evaluating suppliers’ carbon emission data. The Company prioritizes suppliers with lower carbon emissions. During the Reporting Period, the range of carbon data collection covered 156 suppliers, accounting for 90% (cooperation amount) of raw material suppliers. Additionally, during the Reporting Period, the Company's e-commerce delivery boxes (May 1, 2023 - December 31, 2023) had achieved carbon neutrality by suppliers through carbon offset, reducing the carbon footprint of products in the distribution and transportation processes. (IV) Measures taken to reduce carbon emissions during the Reporting Period and their effects Whether to take carbon emission Yes reduction measures Carbon dioxide emission equivalent 5,571.93 reduced (unit: tons) 1. Implement energy-saving and technology upgrades: Carried out clean production as well as energy-saving and technology upgrades in an orderly manner. Reduced carbon dioxide emissions by 177.21 tons. 2. Use clean energy: (1) Used 6,121.42 megawatt-hours of green electricity. Type of carbon emission reduction (2) Installed a photovoltaic system on the roof of the new measures (such as electricity generation warehouse, with an installation area of 38,197 square with clean energy, carbon reduction meters and a capacity of 2,000 kilowatts. The annual technologies used in production, or the electricity output reached around 2,000 mWh. During the development and production of new Reporting Period, the photovoltaic system generated products that help reduce carbon 2,197.53 mWh of electricity. emissions) (3) All forklifts at the factory were replaced with new energy forklifts. The Company reduced carbon dioxide emissions by 4,744.30 tons. 3. Carbon reduction in packaging: (1) PROYA Advanced Firming Nourishing Light Cream 3.0 simplified packaging design compared with PROYA Advanced Firming Nourishing Light Cream 2.0, reducing 68 / 272 Annual Report 2023 the use of plastic by about 100.49 tons during the Reporting Period; (2) PROYA Double Effect Brightening Essence was changed to a replacement design, reducing the use of plastic by about 107.97 tons during the Reporting Period; The Company reduced carbon dioxide emissions by 650.42 tons. Specific description □ Applicable √ Not applicable II.Social Responsibility (I) Whether to independently disclose social responsibility reports, sustainable development reports, or ESG reports √ Applicable □ Not applicable For details, see the Proya Sustainability & Environmental, Social, and Governance (ESG) Report 2023 disclosed by the Company on the SSE website (www.sse.com.cn) disclosed on the same day. (II) Description of social responsibilities √ Applicable □ Not applicable External donation and charity Quantity/content Description projects Include funds and materials donated by Total investment (RMB'0,000) 866.12 the Company to various community philanthropy and charitable activities 1. The Company donated RMB300,000 to Shanghai Adream Foundation for charitable purposes. 2. The Company donated RNB100,000 to the Yunhe County Charity Association for the rural revitalization project in Yunhe, Huzhou. 3. The Company donated RMB494,593.80 to the Beijing New Sunshine Charity Foundation for the Glimmering Project and RMB404,525 Including: fund (RMB'0,000) 850.14 for the Echo Project. 4. The Company donated RMB800,000 to the Wuxing Charity Federation. 5. The Company donated RMB6,402,271.85 to the Zhejiang Proya Public Welfare Foundation. The fund will be used for promoting educational development, facilitating social innovation, providing emergency relief assistance, and supporting employee volunteerism. The Company donated personal care Cash value of materials items (such as coral fleece towels and 15.98 (RMB'0,000) skincare products) to the Zhejiang Proya Public Welfare Foundation. Number of beneficiaries 92,319 (person) Specific description 69 / 272 Annual Report 2023 □ Applicable √ Not applicable III.Poverty Alleviation and Rural Revitalization Progress √ Applicable □ Not applicable Poverty alleviation and rural Quantity/content Description revitalization project 1. The Company donated RNB100,000 to the Yunhe County Charity Association for the rural revitalization project in Yunhe, Huzhou. 2. The Company donated RMB402,271.85 to the Total investment (RMB'0,000) 69.43 Zhejiang Proya Public Welfare Foundation for the Proya Hope Primary School project. 3. The Company purchased agricultural products worth RMB192,000. Including: fund (RMB'0,000) 69.43 Cash value of materials 0 (RMB'0,000) The number of beneficiaries cannot be calculated Number of beneficiaries 38 for the donation of agricultural products to the (person) Yunhe County Charity Association. Rural Form of support (such as revitalization, industrial support, employment education support, education support, etc) support Specific description □ Applicable √ Not applicable 70 / 272 Annual Report 2023 Section VI Important Matters I.Fulfillment of Commitments (I) Commitments made by the Company's actual controllers, shareholders, related parties, acquirers and the Company and other relevant parties during the Reporting Period or continuing to the Reporting Period √ Applicable □ Not applicable The next Whether the Cause for step in Any commitment any the event Promise Promise Background Promisor Date deadline for Duration is timely failure to of failure Type Description performance and strictly perform to performed in time perform in time Restrictions Directors, (1) During their terms as the November No From Yes Not Not on sales senior Company's director/senior 15, 2017 November applicable applicable management management, they shall not 15, 2017 HOU transfer more than 25% of their onwards Juncheng, total shares directly or indirectly FANG held in the Company each year. Yuyou and Within six months after leaving CAO office, they shall not transfer Liangguo their shares directly or indirectly IPO-related held in the Company. (2) If their commitments shares in the Company are sold within two years upon expiration of the lock-up period, the selling price shall not be lower than the offering price. If the closing price of the Company's shares is lower than the offering price for 20 consecutive trading days within 6 months after the Company's 71 / 272 Annual Report 2023 IPO, or the closing price as of the end of the 6-month period after the Company's IPO is lower than the offering price, the lock-up period for their shares in the Company will be automatically extended for 6 months. Their commitments above shall survive job change and resignation. (3) Should any of them/their partnership violate the said share lock-up commitments, the lock-up period for their/their partnership's shares in the Company will be automatically extended for 6 months. Restrictions Senior (1) Within 12 months from the April 16, No From Yes Not Not on sales management date of the Company's IPO, they 2018 April 16, applicable applicable JIN Yanhua shall not transfer or authorize 2018 any other to manage their shares onwards directly or indirectly held in the Company or have the Company repurchase such shares. (2) During their terms as the Company's senior management, they shall not transfer more than 25% of their total shares directly or indirectly held in the Company each year. Within six months after leaving office, they shall not transfer their shares directly or indirectly held in the Company. (3) If their shares in the Company are sold within 72 / 272 Annual Report 2023 two years upon expiration of the lock-up period, the selling price shall not be lower than the offering price. If the closing price of the Company's shares is lower than the offering price for 20 consecutive trading days within 6 months after the Company's IPO, or the closing price as of the end of the 6- month period after the Company's IPO is lower than the offering price, the lock-up period for their shares in the Company will be automatically extended for 6 months. Their commitments above shall survive job change and resignation. (4) Should any of them or their partnership violate the said share lock-up commitments, the lock-up period for their or their partnership's shares in the Company will be automatically extended for 6 months. Restrictions Senior (1) Within 12 months from the September No From Yes Not Not on sales management date of the Company's IPO, they 3, 2018 September applicable applicable WANG Li shall not transfer or authorize 3, 2018 any other to manage their shares onwards directly or indirectly held in the Company or have the Company repurchase such shares. (2) During their terms as the Company's senior management, 73 / 272 Annual Report 2023 they shall not transfer more than 25% of their total shares directly or indirectly held in the Company each year. Within six months after leaving office, they shall not transfer their shares directly or indirectly held in the Company. (3) If their shares in the Company are sold within two years upon expiration of the lock-up period, the selling price shall not be lower than the offering price. If the closing price of the Company's shares is lower than the offering price for 20 consecutive trading days within 6 months after the Company's IPO, or the closing price as of the end of the 6- month period after the Company's IPO is lower than the offering price, the lock-up period for their shares in the Company will be automatically extended for 6 months. Their commitments above shall survive job change and resignation. (4) Should any of them or their partnership violate the said share lock-up commitments, the lock-up period for their or their partnership's shares in the Company will be automatically extended for 6 months. 74 / 272 Annual Report 2023 Restrictions Controlling (1) Within 24 months upon November No From Yes Not Not on sales shareholder expiration of the lock-up period, 15, 2017 November applicable applicable and actual they shall not directly or 15, 2017 controller indirectly reduce their shares in onwards HOU the Issuer by more than 6% of Juncheng the total number of shares of the and FANG Issuer before such IPO. (2) They Aiqin must sell shares in the Company through methods including but not limited to collective trading through bidding, block trading, and transfer by agreement and transfer by agreement in line with applicable laws, regulations and rules. (3) Before selling the Company's shares, they shall announce the same three trading days in advance, discharge the obligation to disclose information in a timely and accurate manner as per the rules of the securities exchange, except to the extent that their shares in the Company are less than 5%. (4) Should they fail to perform the said intent of share reduction, they must explain the cause for failing to do so in the Company's General Meeting of Shareholders and the media designated by the CSRC and publicly apologize to the Company's shareholders and public investors. 75 / 272 Annual Report 2023 Restrictions Shareholders (1) If they intend to reduce November No From Yes Not Not on sales FANG shares after the lock-up period 15, 2017 November applicable applicable Yuyou and expires, they will prudently 15, 2017 LI Xiaolin make a share reduction plan as onwards directly necessary for the Company to holding stabilize the share price and more than conduct operations and capital 5% shares in operations as required by the the CSRC and the exchange on Company shareholders for share reduction, whereby reducing shares gradually upon expiration of the lock-up period. (2) They must sell shares in the Company with methods including but not limited to collective trading through bidding, block trading, and transfer by agreement in line with applicable laws, regulations and rules. (3) Before selling the Company's shares, they shall announce the same three trading days in advance, discharge the obligation to disclose information in a timely and accurate manner as per the rules of the securities exchange except to the extent that their shares in the Company are less than 5%. (4) Should they fail to perform the said intent of share reduction, they must explain the cause for failing to do so in the Company's General Meeting of Shareholders and the media 76 / 272 Annual Report 2023 designated by the CSRC and publicly apologize to the Company's shareholders and public investors. Other The When the preconditions for November No From Yes Not Not Company enabling the share price 15, 2017 November applicable applicable stabilization plan are met, if the 15, 2017 Company fails to take specific onwards measures to stabilize the share price, the Company must explain the cause for failing to do so in the Company's General Meeting of Shareholders and the media designated by the CSRC and publicly apologize to the Company's shareholders and public investors. In the event of losses to investors not as a result of force majeure, the Company will be liable for compensation to investors by law, and be liable otherwise as required by laws, regulations and competent regulators; if the losses are caused due to force majeure, the Company shall work out a plan in the shortest possible time to minimize losses to investors and submit it to the General Meeting of Shareholders for deliberation, so as to protect the interests of the Company's investors as much as possible. Within three years from the date of the Company's IPO, if the Company 77 / 272 Annual Report 2023 appoints new directors and senior management, the Company will require such new directors and senior management to fulfill the commitments made by the directors and senior management at the time of the Company's IPO. Other The When the preconditions for November No From Yes Not Not Company's enabling the share price 15, 2017 November applicable applicable controlling stabilization plan are met, if 15, 2017 shareholders failing to take specific measures onwards and actual to stabilize the share price, they controllers must explain the cause for failing to do so at the Issuer's General Meeting of Shareholders and the media designated by the CSRC and publicly apologize to the Issuer's shareholders and public investors. Where the commitment is not fulfilled, they will not receive shareholder dividends from the Issuer within 5 working days from the date when the said incident occurs, and they will not be able to transfer their shares until they take measures to stabilize the share price as per the said plan and achieve results. Other The When the preconditions for November No From Yes Not Not Company's enabling the share price 15, 2017 November applicable applicable directors stabilization plan are met, if 78 / 272 Annual Report 2023 (excluding failing to take specific measures 15, 2017 independent to stabilize the share price as per onwards directors) the plan to stabilize the share and senior price, they must explain the management cause for failing to do so at the Issuer's General Meeting of Shareholders and the media designated by the CSRC and publicly apologize to the Issuer's shareholders and public investors. Where the commitment is not fulfilled, they will not receive remuneration and shareholder dividends (if any) from the Issuer within 5 working days from the date when the said incident occurs, and they will not be able to transfer their shares until they take measures to stabilize the share price as per the said plan and achieve results. Other The If the Company's prospectus November No From Yes Not Not Company contains false records, 15, 2017 November applicable applicable misleading statements or major 15, 2017 omissions, which causes onwards investors to suffer losses in securities transactions, the Company will compensate investors for such losses by law. After the illegal facts mentioned above are identified by the CSRC or the stock exchange or the judicial authority where the 79 / 272 Annual Report 2023 Company is located, the Company will actively compensate investors for direct economic losses incurred therefrom by settling with investors with respect to measurable economic losses directly incurred to investors, mediating with investors through a third party and establishing an investor compensation fund based on the principles of procedure simplification, active negotiation, compensation in advance, and effective protection of investors' interests, especially small and medium investors. If found to have violated the said commitments, the Company will publicly apologize to shareholders and public investors for failing to perform the said compensation measures at the General Meeting of Shareholders and the media designated by the CSRC and compensate investors for the actual losses identified by the CSRC and the judicial authority. Other The Issuer's If the Issuer's prospectus November No From Yes Not Not controlling contains false records, 15, 2017 November applicable applicable shareholders misleading statements or major 15, 2017 and actual omissions, which causes onwards controllers investors to suffer losses in 80 / 272 Annual Report 2023 securities transactions, they will compensate investors for such losses by law. After the illegal facts mentioned above are identified by the CSRC or the stock exchange or the judicial authority where the Company is located, the Company will actively compensate investors for direct economic losses incurred therefrom by settling with investors with respect to measurable economic losses directly incurred to investors, mediating with investors through a third party and establishing an investor compensation fund based on the principles of procedure simplification, active negotiation, compensation in advance, and effective protection of investors' interests, especially small and medium investors. If found to have violated the said commitments, the Company's controlling shareholders and actual controllers will publicly apologize to the Issuer's shareholders and public investors for failing to perform the said compensation measures at the Issuer's General Meeting of Shareholders and the media 81 / 272 Annual Report 2023 designated by the CSRC and will not receive shareholder dividends from the Issuer within 5 working days from the date when the said commitments are violated, and their shares in the Issuer will not be transferred until they take compensation measures as per the said commitments and achieve results. Other Directors, If the Issuer's prospectus November No From Yes Not Not supervisors contains false records, 15, 2017 November applicable applicable and senior misleading statements or major 15, 2017 management omissions, which causes onwards investors to suffer losses in securities transactions, they will compensate investors for such losses by law. After the illegal facts mentioned above are identified by the CSRC or the stock exchange or the judicial authority where the Company is located, the Company will actively compensate investors for direct economic losses incurred therefrom by settling with investors with respect to measurable economic losses directly incurred to investors, mediating with investors through a third party and establishing an investor compensation fund based on the principles of procedure 82 / 272 Annual Report 2023 simplification, active negotiation, compensation in advance, and effective protection of investors' interests, especially small and medium investors. If found to have violated the said commitments, the Company's directors, supervisors and senior management will publicly apologize to the Issuer's shareholders and public investors for failing to perform the said compensation measures at the Issuer's General Meeting of Shareholders and the media designated by the CSRC and will not receive remuneration (or allowances) and shareholder dividends (if any) from the Issuer within 5 working days from the date when the said commitments are violated, and their shares in the Issuer will not be transferred until they take compensation measures as per the said commitments and achieve results. Other The In order to ensure the effective November No From Yes Not Not Company use of the proceeds from the 15, 2017 November applicable applicable IPO, effectively prevent the risk 15, 2017 of diluting immediate returns onwards and improve future returns, the Company intends to take measures including tightening 83 / 272 Annual Report 2023 operation management and internal control, accelerating the progress of fundraising projects, and strengthening the investor return mechanism, so as to improve asset quality, increase operation revenue, raise future earnings, and achieve sustainable development to fill the diluted immediate returns. The Company promises to continuously improve various measures to fill the diluted spot returns in accordance with the implementation rules issued by the CSRC and Shanghai Stock Exchange. If found to have violated the said commitments, the Company will promptly announce the facts and cause of such violation, except for force majeure or other reasons not attributable to the Company, apologize to the Company's shareholders and public investors, make supplementary commitments or substitute commitments to investors to protect the interests of investors as much as possible, and implement such supplementary commitments or substitute commitments subject to the approval by the Company's 84 / 272 Annual Report 2023 General Meeting of Shareholders. Other Controlling In order to ensure that the November No From Yes Not Not shareholder Company's measures to fill the 15, 2017 November applicable applicable and actual diluted immediate returns can be 15, 2017 controller effectively performed, they, as onwards HOU the Company's controlling Juncheng shareholder and actual and FANG controller, promise that: (1) Aiqin Under no circumstances will they abuse the position as the controlling shareholder and actual controller by ultra vires interfering with the Company's operation and management activities or encroaching on the Company's interests; (2) After the CSRC and Shanghai Stock Exchange have otherwise released opinions and implementation rules on measures to fill the diluted immediate returns and relevant commitments, if the Company's relevant provisions and their commitments contradict such rules, they will immediately make supplementary commitments in line with such rules of the CSRC and Shanghai Stock Exchange, and actively promote the Company to issue new commitments or measures up to the requirements of the CSRC and Shanghai Stock 85 / 272 Annual Report 2023 Exchange; (3) They will fully, completely and timely perform the Company's measures to fill the diluted immediate returns and their commitments regarding the measures to fill the diluted immediate returns. If found to have violated such commitments, which causes losses to the Company or shareholders, they are willing to: ① state the cause and apologize at the General Meeting of Shareholders and the media designated by the CSRC; ② be liable for compensation to the Company and/or shareholders by law; ③ unconditionally accept the penalties or regulatory measures taken by the CSRC and/or Shanghai Stock Exchange and other securities regulators as per their current rules. The said measures to fill the diluted immediate returns shall not be deemed to constitute a guarantee for the Company's future profits. Other Directors, In order to ensure that the November No From Yes Not Not senior Company's measures to fill the 15, 2017 November applicable applicable management diluted immediate returns can be 15, 2017 effectively performed, they, as onwards the Company's directors and senior management, promise that: (1) They will not offer 86 / 272 Annual Report 2023 benefits to other entities or individuals for free or on unfair terms, or otherwise harm the Company's interests; (2) They will strictly follow the Company's budget management by limiting their duty-related consumption to the extent required, subject to the Company's supervision, and free from waste or extravagance; (3) They will not use the Company's assets to engage in investment and consumption activities unrelated to their duties; (4) They will actively promote the improvement of the Company's compensation system to better meet the requirements for filling the diluted immediate returns; support the Company's Board of Directors or Remuneration Committee to link the development, revision, and supplementation of the Company's compensation system with the implementation of the measures to fill the diluted immediate returns; promise that the vesting conditions for the Company's equity incentives will be linked to the implementation of the Company's measures to fill the diluted immediate returns; (5) 87 / 272 Annual Report 2023 After the CSRC and Shanghai Stock Exchange have otherwise released the opinions and implementation rules on the measures to fill the diluted immediate returns and relevant commitments, if the Company's relevant provisions and their commitments contradict such rules, they will immediately make supplementary commitments in line with such rules of the CSRC and Shanghai Stock Exchange, and actively promote the Company to issue new commitments or measures up to the requirements of the CSRC and Shanghai Stock Exchange; (6) They will fully, completely and timely perform the Company's measures to fill the diluted immediate returns and their commitments regarding the measures to fill the diluted immediate returns. If found to have violated such commitments, which causes losses to the Company or shareholders, they are willing to: ① state the cause and apologize at the General Meeting of Shareholders and the media designated by the CSRC; ② be liable for compensation to the Company and/or shareholders 88 / 272 Annual Report 2023 by law; ③ unconditionally accept the penalties or regulatory measures taken by the CSRC and/or Shanghai Stock Exchange and other securities regulators as per their current rules. The said measures to fill the diluted immediate returns shall not be deemed to constitute a guarantee for the Issuer's future profits. Avoiding Controlling 1. They do not and will not November No From Yes Not Not horizontal shareholder directly or indirectly engage in 15, 2017 November applicable applicable competition and actual any activities constituting 15, 2017 controller horizontal competition with the onwards HOU existing and future businesses of Juncheng the Company and its holding and FANG subsidiaries, including but not Aiqin limited to the R&D, production and sale of any products same as or similar to those of the Company and its holding subsidiaries. They shall be liable for the economic losses to the Company caused by violation of the above commitments. 2. For the enterprises under their control, They will perform their obligations under such commitments by assigning agencies and personnel (including but not limited to directors and managers), and They shall be liable for the economic losses to the 89 / 272 Annual Report 2023 Company caused by violation of the above commitments. 3. From the date of signing this letter of commitment, if the Company further expands its product and business scope, the enterprises under their control shall not compete with the Company within the expanded product or business scope, or will, in case of any possible competition with the Company within the expanded product or business scope, withdraw from the competition by: (1) stopping the production of competing or potentially competing products; (2) stopping the operation of competing or potentially competing business; (3) transferring the competing business to the Company; or (4) transferring the competing business to an unrelated third party. 4. Their shareholding companies, including Hangzhou Huazhuang Industrial Investment Co., Ltd., Huzhou Mogan Wangshu Cosmetics Industry Phase I Venture Capital Partnership (Limited Partnership), and companies that they invest in, engage in no cosmetics business or related upstream and downstream 90 / 272 Annual Report 2023 business. If they engage in such businesses in the future, They commit that they will withdraw their investment in those business through equity transfer and other means, and that the Company will be given priority to invest in the said enterprises according to legal provisions and the consent of other shareholders of those enterprises. Other Controlling Commitments on the effective April 21, No From Yes Not Not shareholder fulfillment of the Company's 2021 April 21, applicable applicable and actual measures to fill the diluted 2021 controller immediate returns: 1. Under no onwards HOU circumstances will they interfere Juncheng with the Company's operation and FANG and management activities or Aiqin encroach on the company's interests by ultra vires; 2. From the date of the issuance of these Commitments commitments to the date of the on Company's public issuance of refinancing A-share convertible corporate bonds, if the CSRC releases new regulatory rules on the measures to fill the diluted immediate returns and relevant commitments and the above- mentioned commitments can no longer satisfy the new regulatory rules, they will make supplementary commitments in line with the latest rules of the 91 / 272 Annual Report 2023 CSRC; 3. They will practically fulfill the Company's measures for filling the diluted immediate returns and their commitments regarding the measures to fill the diluted immediate returns. Where they violate those commitments, causing losses to the Company or investors, they will assume the compensation liability to the Company or investors according to law. As one of the parties responsible for the measures to fill the immediate returns, should they violate or refuse to fulfill the above commitments, they shall be subject to the punishment or relevant regulatory measures imposed on them by the securities regulatory authorities such as the CSRC and the SSE in accordance with the relevant regulations and rules. Other Directors, Commitments on the effective April 21, No From Yes Not Not senior fulfillment of the Company's 2021 April 21, applicable applicable management measures to fill the diluted 2021 immediate returns: 1. They will onwards not offer benefits to other entities or individuals for free or on unfair terms, or otherwise harm the Company's interests; 2. They will limit their duty- related consumption; 3. They will not use the Company's 92 / 272 Annual Report 2023 assets to engage in investment and consumption activities unrelated to their duties; 4. The compensation system developed by the Board of Directors and the Remuneration and Appraisal Committee will be linked to the implementation of the measures for filling the diluted immediate returns; 5. If the Company issues equity incentives in the future, the vesting conditions for the Company's equity incentives will be linked to the implementation of the Company's measures to fill the diluted immediate returns; 6. From the date of the issuance of these commitments to the date of the Company's public issuance of A-share convertible corporate bonds, if the CSRC releases new regulatory rules on the measures to fill the diluted immediate returns and relevant commitments and the above- mentioned commitments can no longer satisfy the new regulatory rules, they will make supplementary commitments in line with the latest rules of the CSRC. As one of the parties responsible for the measures to fill the immediate returns, should they violate or refuse to 93 / 272 Annual Report 2023 fulfill the above commitments, they shall be subject to the punishment or relevant regulatory measures imposed on them by the securities regulatory authorities such as the CSRC and the SSE in accordance with the relevant regulations and rules. 94 / 272 Annual Report 2023 (II) Statement of whether the Company's assets or projects fulfilled the original profit forecast and its reason where the Company had profit forecasts on assets or projects and the Reporting Period fell within the term of profit forecasts Whether the original profit forecast is reached and the description of reasons □ Fulfilled □ Unfulfilled √ Not applicable (III) Execution of the performance undertakings and their impact on the goodwill impairment testing □ Applicable √ Not applicable 95 / 272 Annual Report 2023 II.Non-operating Occupation of Funds by the Controlling Shareholders and Other Related Parties during the Reporting Period □ Applicable √ Not applicable III.Illegal Guarantee □ Applicable √ Not applicable 96 / 272 Annual Report 2023 IV.Description of the Company's Board of Directors on the "Non-standard Audit Report" from the Accounting Firm □ Applicable √ Not applicable V.Analysis and Explanation from the Company on the Reasons and Impact of Changes in Accounting Policies, Accounting Estimates or Correction on Significant Accounting Errors (I) Analysis and explanation from the Company on the reasons and impact of changes in accounting policies or accounting estimates □ Applicable √ Not applicable (II) Analysis and explanation from the Company on the reasons and impact of the correction on significant accounting errors □ Applicable √ Not applicable (III) Communication with the previous accounting firm □ Applicable √ Not applicable (IV) Approval process and other explanations □ Applicable √ Not applicable VI.Appointment and Dismissal of the Accounting Firm Unit: Yuan Currency: RMB Current accounting firm Name of the domestic accounting firm Pan-China Certified Public Accountants (Special General Partnership) Remuneration of the domestic accounting firm 1,400,000 Term of office of the domestic accounting firm 13 Names of CPAs from the domestic accounting YIN Zhibin, WU Shaofang firm Continual term of audit service provided by the YIN Zhibin: 4 years of continual term of audit CPAs from the domestic accounting firm service WU Shaofang: 1 year of continual term of audit service Name Remuneration Accounting firm for internal Pan-China Certified Public Accountants 200,000 control and audit (Special General Partnership) Description of appointment and dismissal of the accounting firm □ Applicable √ Not applicable Description of the change of accounting firm during the Auditing Period □ Applicable √ Not applicable Description of the decrease in audit fees by more than 20% (inclusive) compared to the previous year. □ Applicable √ Not applicable VII.Particulars on Risk of Delisting (I) Reasons for the delisting risk warning □ Applicable √ Not applicable 97 / 272 Annual Report 2023 (II) Measures to be taken by the Company □ Applicable √ Not applicable (III) Situation and causes for termination of listing □ Applicable √ Not applicable VIII.Matters Related to Bankruptcy and Reorganization □ Applicable √ Not applicable IX.Material Litigations and Arbitrations □ The Company had material litigations and arbitrations during the year √The Company had no material litigations and arbitrations during the year X.Suspected Violations, Penalties and Rectifications of the Company and Its Directors, Supervisors, Senior Management, Controlling Shareholders and Actual Controllers □ Applicable √ Not applicable XI.Description of the Integrity of the Company and Its Controlling Shareholders and Actual Controllers During the Reporting Period √ Applicable □ Not applicable During the Reporting Period, the Company and its controlling shareholders and actual controllers were in good faith. XII.Significant Related-party Transactions (I) Related-party transactions pertaining to daily operation 1. Matters that have been disclosed in the interim announcement without progress or change in the follow-up implementation □ Applicable √ Not applicable 2. Matters that have been disclosed in the interim announcement with progress or changes in the follow-up implementation □ Applicable √ Not applicable 3. Matters not disclosed in the interim announcement □ Applicable √ Not applicable (II) Related-party transactions arising from acquisition and disposal of assets or equity 1. Matters that have been disclosed in the interim announcement without progress or change in the follow-up implementation □ Applicable √ Not applicable 2. Matters that have been disclosed in the interim announcement with progress or changes in the follow-up implementation □ Applicable √ Not applicable 3. Matters not disclosed in the interim announcement □ Applicable √ Not applicable 98 / 272 Annual Report 2023 4. Disclosable performance achievements during the Reporting Period involving agreed- upon performance □ Applicable √ Not applicable (III) Significant related-party transactions pertaining to joint external investment 1. Matters that have been disclosed in the interim announcement without progress or change in the follow-up implementation □ Applicable √ Not applicable 2. Matters that have been disclosed in the interim announcement with progress or changes in the follow-up implementation □ Applicable √ Not applicable 3. Matters not disclosed in the interim announcement □ Applicable √ Not applicable (IV) Credits and debits with related parties 1. Matters that have been disclosed in the interim announcement without progress or change in the follow-up implementation □ Applicable √ Not applicable 2. Matters that have been disclosed in the interim announcement with progress or changes in the follow-up implementation □ Applicable √ Not applicable 3. Matters not disclosed in the interim announcement □ Applicable √ Not applicable (V) Financial business between the Company and related financial companies, holding financial companies and related parties □ Applicable √ Not applicable (VI) Other 1. □ Applicable √ Not applicable XIII.Significant Contracts and Their Performance (I) Trusteeship, contracting and leasing 1、 Trusteeship □ Applicable √ Not applicable 2、 Contracting □ Applicable √ Not applicable 3、 Leasing □ Applicable √ Not applicable 99 / 272 Annual Report 2023 (II) Guarantee □ Applicable √ Not applicable (III) Entrusting others to manage cash assets 1. Entrusted wealth management (1) Overall condition of entrusted wealth management □ Applicable √ Not applicable Others □ Applicable √ Not applicable (2) Individual entrusted wealth management □ Applicable √ Not applicable Others □ Applicable √ Not applicable (3) Impairment provisions of entrusted wealth management □ Applicable √ Not applicable 2. Entrusted loans (1) Overall condition of entrusted loans □ Applicable √ Not applicable Others □ Applicable √ Not applicable (2) Individual entrusted loans □ Applicable √ Not applicable Others □ Applicable √ Not applicable 100 / 272 Annual Report 2023 (3) Impairment provisions of entrusted loans □ Applicable √ Not applicable 3. Others □ Applicable √ Not applicable (IV) Other material contracts □ Applicable √ Not applicable XIV.Progress on the Use of Raised Funds √ Applicable □ Not applicable (I) Overall use of raised funds √ Applicable □ Not applicable Unit: RMB '0,000 Progress Net Amount of of fund Percentage Amount amount of Including: Adjusted raised raising as of amount of fund raised Amount Source of Amount of Amount of Amount of amount of fund as of of the end invested in raising Time of funds after invested in raised raised over- fund raising fund raising the end of of the the current whose paying in deduction the current funds funds raised commitment commitment the Reporting year (%) purpose of year (4) funds (1) Reporting Period (%) (5) = (4) / is issuance Period (2) (3) = (2) / (1) changed expenses (1) Issuance of December 75,171.30 74,450.87 75,171.30 74,450.87 58,165.74 78.13 25,828.34 34.69 0.00 convertible 14, 2021 bonds (II) Details of fund raising projects √ Applicable □ Not applicable Unit: RMB '0,000 101 / 272 Annual Report 2023 Whether Progress there is a Amount of fund Benefit significant of raised raising as or Amount Whether Reason change in Whether Whether Adjusted Amount fund as of the Date Benefit research of fund investment for the investme Source of over- amount invested of the end of when the achieved achievem Amount Time of raising Settled progress in failure to feasibility Item Project nt subject raised raised of fund in the end of the project in the ent that of paying in commitm or not line with the keep up of the is funds funds are raising current the Reportin becomes current has been balance ent in the planned with the project. If changed used (1) year Reportin g Period available year realized project schedule schedule so, please g Period (%) in this provide (2) (3) = (2) / project specific (1) details Huzhou Productio Issuance Not Not n Base Construct of December 33,850.0 33,850.0 23,435.6 Decembe 22,255.4 11,190.8 No No 6,634.05 69.23 No Yes applicabl applicabl No Expansio ion convertib 14, 2021 0 0 9 r 2024 0 3 e e n Project le bonds (Phase I) Longwu R&D Research Issuance Not Not Center and of December 19,450.0 19,450.0 19,053.4 June No No 7,370.18 97.96 No Yes applicabl applicabl No 646.59 Construct developm convertib 14, 2021 0 0 5 2024 e e ion ent le bonds Project Informati Operatio Issuance on Not Not n of December Decembe System No No 9,050.00 8,801.27 2,265.11 3,143.45 35.72 No Yes applicabl applicabl No 5,929.55 managem convertib 14, 2021 r 2024 Upgrade e e ent le bonds Project Supplem enting Addition Issuance working Not Not al of December 12,821.3 12,349.6 12,533.1 capital No No 9,559.00 101.49 applicabl applicabl No 34.13 working convertib 14, 2021 0 0 5 and e e capital le bonds repaying debts [Note] The adjusted amount of fund raising is RMB744.51million, while the amount of fund raising commitment is RMB751.71million yuan, which differs by RMB7.20million. Due to underwriting and sponsorship fees, lawyer fees, accountant fees, credit rating fees, and issuance handling charges incurred in the issuance of raised funds, the actual net amount of raised funds is RMB744.51million. For the difference, the Company adjusted the amount of fund raising for the Information System Upgrade Project and the additional working capital. As of the end of the period, the amount invested in additional working capital exceeded the adjusted amount of fund raising, and the progress at the end of the period exceeded 100.00%. This was due to the use of interest income generated from idle funds in the fundraising account for additional working capital. (III)Change or termination of fund raising during the Reporting Period □ Applicable √ Not applicable 102 / 272 Annual Report 2023 (IV) Other uses of funds raised during the Reporting Period 1. Advance investment and replacement in the project invested by the raised fund √ Applicable □ Not applicable During the Reporting Period, the Company did not have any advance investment or replacement in the project invested by the raised fund. 2. Use of idle raised fund to temporarily refill working capital □ Applicable √ Not applicable 3. Management of idled raised fund through investment √ Applicable □ Not applicable Unit: RMB '0,000 Currency: RMB Balance of cash Effective quota of raised Whether the peak balance exceeds Review data by the management as of fund approved for cash Start date End date the authorized quota during the board meeting the end of the management Reporting Period Reporting Period April 19, 2023 20,000 April 19, 2023 April 18, 2024 0 No Other explanations None 4. Use of over-raised fund to permanent refill working capital or repay bank loans □ Applicable √ Not applicable 5. Other □ Applicable √ Not applicable XV.Description of Other Major Matters That Have A Significant Impact on Investors' Value Judgments and Investment Decisions □ Applicable √ Not applicable 103 / 272 Annual Report 2023 Section VII Shareholders and Changes in Shares I.Changes in Share Capital (I) Table of changes in shares 1. Table of changes in shares Unit: '0,000 shares Before this After this Increase or decrease (+ or -) due to this change change change Shares Issuan Perce converted Perce ce of Bonus Numbe Number ntage from Other Subtotal ntage new shares r (%) capital (%) shares reserve I. Restricted - 0.740 195.70 0.493 shares 210 84 98.29 -14.2940 7 60 3 40 1. Shares held by the state 2. Shares held by state-owned legal persons 3. Shares held by - 0.740 195.70 0.493 other 210 84 98.29 -14.2940 7 60 3 domestic 40 funds Including: Shares held by domestic non-state- owned legal persons Shares held - by domestic 0.740 195.70 0.493 210 84 98.29 -14.2940 natural 7 60 3 40 persons 4. Shares held by foreign funds Wherein: Shares held by foreign legal persons Shares held by foreign natural persons 104 / 272 Annual Report 2023 II. Unrestricted 28,141.9 99.25 11,256.81 81.25 11,338.0 39,480. 99.50 outstanding 469 93 36 19 655 0124 67 shares 1. RMB 28,141.9 99.25 11,256.81 81.25 11,338.0 39,480. 99.50 Ordinary 469 93 36 19 655 0124 67 Shares 2. Foreign- funded shares listed domesticall y 3. Foreign- funded shares listed overseas 4. Others III. Total - 28,351.9 100.0 11,340.81 11,323.7 39,675. 100.0 shares 17.04 469 0 36 715 7184 0 21 2. Description of changes in shares √ Applicable □ Not applicable On May 11, 2023, the 2022 annual General Meeting of Shareholders was held to deliberate on and approve the Company's Plan for Profit Distribution and Capitalization of Capital Reserves for 2022, in which the Company distributed to all shareholders a cash dividend of RMB8.70 (tax inclusive) per 10 shares based on the total share capital as of the record date on which equity distribution is implemented and issued 4 shares for every 10 shares to all shareholders through capitalization of the capital reserve, totaling 113,408,136 shares converted. Wherein, the number of restricted circulating shares is increased by 840,000, from 2,100,000 to 2,940,000. The number of unrestricted circulating shares is increased by 112,568,136, from 281,419,469 to 393,987,605. On June 20, 2023, the 12th meeting of the 3rd session of Board of Directors and the 11th meeting of the 3rd session of Board of Supervisors were held to deliberate on and approve the Proposal on Repurchasing and De-registering Part of Restricted Incentive Shares. Considering that the 6 incentive recipients who were eligible for the 2022 Restricted Shares Incentive Plan had left the Company and no longer meet the incentive conditions, it was agreed to repurchase and cancel 78,008 restricted shares that have been granted but not yet released from restriction. Additionally, as 3 incentive recipients did not meet the performance criteria for 2022, they do not qualify for the full release of restricted shares. Therefore, it was agreed to repurchase and cancel 27,342 restricted shares that have been granted but not yet released from restriction. The total number of restricted shares repurchased and canceled in this transaction amounted to 105,350 shares. On August 24, 2023, the Company completed the repurchase and cancellation of 105,350 incentive restricted shares under the 2022 Restricted Shares Incentive Plan. As a result, the number of restricted circulating shares decreased from 2,940,000 to 2,834,650. On September 8, 2023, the 14th meeting of the 3rd session of Board of Directors and the 13th meeting of the 3rd session of Board of Supervisors were held to deliberate on and approve the Proposal on Satisfying the Conditions for Release from Sales Restrictions in the First Release Period under the 2022 Restricted Shares Incentive Plan. It was agreed that the conditions for release from sales restrictions in the first release period under the 2022 Restricted Shares Incentive Plan were satisfied and the sales restrictions on 89 eligible incentive recipients were lifted, amounting to 811,398 restricted shares. The circulation date of released shares is September 26, 2023. The number of the unrestricted circulating shares of the Company increased from 393,987,605 before the listing to 394,799,003, while the number of the restricted circulating shares decreased from 2,834,650 before the listing to 2,023,252. On September 14, 2023, the 15th meeting of the 3rd session of Board of Directors and the 14th meeting of the 3rd session of Board of Supervisors were held to deliberate on and approve the Proposal on Repurchasing and De-registering Part of Restricted Incentive Shares. Considering that the 8 eligible incentive recipients had left the Company and no longer meet the incentive conditions, it was agreed to 105 / 272 Annual Report 2023 repurchase and cancel 66,192 restricted shares that have been granted but not yet released from restriction. On December 13, 2023, the Company completed the repurchase and cancellation of 66,192 incentive restricted shares under the 2022 Restricted Shares Incentive Plan. As a result, the number of restricted circulating shares decreased from 2,023,252 to 1,957,060. With the Approval of the CSRC, namely, the Reply on Approving Proya Cosmetics Co., Ltd.'s Public Issuance of Convertible Corporate Bonds (CSRC Approval [2021] No. 3408), on December 8, 2021, the Company publicly issued 7,517,130 convertible bonds with a face value of RMB100 per share and a total face value of RMB751,713,000, with a term of 6 years. With the approval of the SSE's Self-Regulatory Supervision Decision Letter [2021] No. 503, the convertible corporate bonds issued by the Company amounting to RMB751,713,000 would be listed and traded on the Shanghai Stock Exchange from January 4, 2022, with the short name of "Proya Convertible Bond" and the bond code of "113634". Proya Convertible Bonds began to be converted into shares on June 14, 2022. During the Reporting Period, RMB148,000 of Proya Convertible Bond had been converted to A-share stocks of the Company, generating 1,121 shares. The number of the unrestricted circulating shares of the Company increased by 1,121. 3. Impact of changes in shares on the earnings per share, net asset value per share and other financial indicators in the last year and period (if any) √ Applicable □ Not applicable Implementation of the 2022 plan for capitalization of capital reserves: calculated based on the diluted total share capital after the capitalization of capital reserves. Changes in other shares: no material impact. 4. Disclosure of other content that the Company deems necessary or the securities regulatory authority requires □ Applicable √ Not applicable (II) Changes in restricted shares √ Applicable □ Not applicable Unit: Share Number of Number of Number of Number of restricted restricted Date of restricted restricted Reason for Name of shares shares releasing shares at the shares at the sales shareholder released increased the sales beginning end of the restriction during the during the restriction of the year year year year JIN Yanhua 140,000 58,800 56,000 137,200 2022 September Restricted 26, 2023 Shares Incentive Plan WANG Li 180,000 75,600 72,000 176,400 2022 September Restricted 26, 2023 Shares Incentive Plan 99 persons 1,780,000 676,998 540,458 1,643,460 2022 September granted for Restricted 26, 2023 the first time Shares under 2022 Incentive Restricted Plan Shares Incentive Plan Total 2,100,000 811,398 668,458 1,957,060 / / 106 / 272 Annual Report 2023 II.Issuance and Listing of Securities (I) Issuance of securities as of the Reporting Period □ Applicable √ Not applicable Description of the issuance of securities in the Reporting Period (provide separate description of bonds with different interest rates in their duration): □ Applicable √ Not applicable (II) Changes in the total number of shares and shareholder structure of the Company and changes in the structure of assets and liabilities of the Company √ Applicable □ Not applicable The total number of the Company's ordinary shares at the beginning and end of the Reporting Period was 283,519,469 and 396,757,184 respectively. The Company's total assets and total liabilities at the beginning of the Reporting Period amounted to RMB5,778,071,824.19 and RMB2,240,848,493.90 respectively, with the asset-liability ratio of 38.78%. The Company's total assets and total liabilities at the end of the Reporting Period amounted to RMB7,323,078,222.45 and RMB2,922,766,991.44 respectively, with the asset-liability ratio of 39.91%. (III) Existing internal employee shares □ Applicable √ Not applicable III.Shareholders and Actual Controllers (I) Total number of shareholders Total number of shareholders of ordinary shares as 19,133 of the end of the Reporting Period Total number of shareholders of ordinary shares at the end of last month prior to the disclosure date 23,713 of the Annual Report Total number of shareholders of preferred shares whose voting rights have been restored as of the 0 end of the Reporting Period Total number of shareholders of preferred shares whose voting rights have been restored at the end 0 of last month prior to the disclosure date of the Annual Report (II) Table of shareholdings of the top ten shareholders and the top ten shareholders of circulating shares (or unrestricted shareholders) as of the end of the Reporting Period Unit: Share Shareholdings of the top ten shareholders (excluding securities lending and refinancing) Number Pledged, Change Number of Nature Name of Perce of marked or during the shares held at of shareholder ntage restricte frozen Reporting the end of the shareho (full name) (%) d shares Share Num Period period lder held status ber Domest ic HOU Juncheng 39,068,296 136,739,037 34.46 0 None natural person Hong Kong Securities Clearing 14,836,428 79,309,897 19.99 0 None Other Company Limited 107 / 272 Annual Report 2023 Domest 17,04 ic FANG Yuyou 13,852,788 59,625,258 15.03 0 Frozen 1,269 natural person Aberdeen Standard Investment Management (Asia) Co., Ltd. - 2,514,120 5,066,413 1.28 0 None Other Aberdeen Fund - China A-share Sustainable Equity Fund China Construction Bank Co., Ltd. - CUAM Consumer 1,250,045 4,350,058 1.10 0 None Other Industry Hybrid Securities Investment Fund Industrial and Commercial Bank of China Limited - Jingshun 952,000 3,332,000 0.84 0 None Other Changcheng Emerging Growth Hybrid Securities Investment Fund TEMASEK FULLERTON 2,855,734 3,014,734 0.76 0 None Other ALPHA PTE LTD National Social Security Fund 109 3,010,974 3,010,974 0.76 0 None Other Portfolio GIC PRIVATE 2,890,269 2,890,269 0.73 0 None Other LIMITED Abu Dhabi Investment 1,530,571 2,376,168 0.60 0 None Other Authority (ADIA) Shareholdings of the top ten unrestricted shareholders Type and number of Number of unrestricted circulating Name of shareholder shares shares held Type Number RMB 136,739,03 HOU Juncheng 136,739,037 ordinary 7 shares RMB Hong Kong Securities Clearing 79,309,897 ordinary 79,309,897 Company Limited shares RMB FANG Yuyou 59,625,258 ordinary 59,625,258 shares Aberdeen Standard Investment RMB Management (Asia) Co., Ltd. - 5,066,413 ordinary 5,066,413 Aberdeen Fund - China A-share shares Sustainable Equity Fund 108 / 272 Annual Report 2023 China Construction Bank Co., Ltd. RMB - CUAM Consumer Industry 4,350,058 ordinary 4,350,058 Hybrid Securities Investment Fund shares Industrial and Commercial Bank of RMB China Limited - Jingshun 3,332,000 ordinary 3,332,000 Changcheng Emerging Growth shares Hybrid Securities Investment Fund RMB TEMASEK FULLERTON ALPHA 3,014,734 ordinary 3,014,734 PTE LTD shares RMB National Social Security Fund 109 3,010,974 ordinary 3,010,974 Portfolio shares RMB GIC PRIVATE LIMITED 2,890,269 ordinary 2,890,269 shares RMB Abu Dhabi Investment Authority 2,376,168 ordinary 2,376,168 (ADIA) shares Description of the special account N/A. The Company opened a special securities account for the for repurchase among the top ten repurchase of shares for Proya Cosmetics Co., Ltd. during the shareholders Reporting Period. Securities account No.: B882678426. Description of the above- mentioned shareholders' entrusting voting rights, entrusted voting None rights and abstention from voting rights Description of the related FANG Yuyou is the younger brother of HOU Juncheng's relationship or parties acting in spouse FANG Aiqin, so HOU Juncheng and FANG Yuyou are concert among the above related. shareholders Description of the shareholders of preferred shares with voting rights None restored and their shareholdings Securities lending and refinancing involved by top ten shareholders √ Applicable □ Not applicable Unit: Share Securities lending and refinancing involved by top ten shareholders Shareholdings in Shares lent but not Shareholdings in the regular and credit Shares lent but not returned at the regular and credit Name of accounts at the returned at the end of beginning of the accounts at the end sharehol beginning of the the period period of the period der (full period name) Percent Percent Percent Total Total Total Total Percent age age age number number number number age (%) (%) (%) (%) National Social Security 3,010,9 0 0.00 0 0.00 0.76 88,800 0.02 Fund 74 109 Portfolio Note: Shareholdings in the regular and credit accounts of the National Social Security Fund 109 Portfolio at the beginning of the period are not included in the top 200 shareholders. 109 / 272 Annual Report 2023 Changes in the top ten shareholders over the previous period √ Applicable □ Not applicable Unit: Share Changes in the top ten shareholders over the end of the previous period Number of shares held in the Number of shares lent but regular and credit accounts Name of Addition/exit in not returned at the end of the and shares lent but not shareholder (full the Reporting period returned at the end of the name) Period period Percentage Percentage Total number Total number (%) (%) TEMASEK FULLERTON Addition 0 0.00 3,014,734 0.76 ALPHA PTE LTD National Social Security Fund 109 Addition 88,800 0.02 3,010,974 0.76 Portfolio GIC PRIVATE Addition 0 0.00 2,890,269 0.73 LIMITED Abu Dhabi Investment Addition 0 0.00 2,376,168 0.60 Authority (ADIA) China Construction Bank Co., Ltd. - Yinhua Exit 0 0.00 - - Fuyu Theme Hybrid Securities Investment Fund CAO Liangguo Exit 0 0.00 1,528,702 0.39 Industrial and Commercial Bank of China Limited - CUAM Exit 0 0.00 1,350,006 0.34 Consumption Upgrade Hybrid Securities Investment Fund J. P. Morgan Securities PLC - Exit 0 0.00 1,142,425 0.29 Self-owned Capital Note: Shareholdings in the regular and credit accounts of China Construction Bank Co., Ltd. - Yinhua Fuyu Theme Hybrid Securities Investment Fund at the end of the period are not included in the top 200 shareholders. Shareholdings and sales restrictions of the top ten restricted shareholders √ Applicable □ Not applicable Unit: Share Number of Availability of restricted Sales Num Name of shareholder of restricted restricted shares shares for circulation restrictio ber shares held and trading ns 110 / 272 Annual Report 2023 Number of Time of new shares availability available for for circulation circulation and trading and trading 1 See the note Equity incentive recipient 1,957,060 below for details Explanation on the related relationship or None parties acting in concert among the above shareholders Note: The restricted shares held by equity incentive recipients are those granted under the 2022 Restricted Shares Incentive Plan. The restricted period was 12 months, 24 months, and 36 months from the completion of their registration with CSDC Shanghai Branch (September 6, 2022). (III) Strategic investors or general legal persons becoming the top ten shareholders because of placing of new shares □ Applicable √ Not applicable IV.Controlling Shareholders and Actual Controllers (I) Controlling shareholders 1. Legal person □ Applicable √ Not applicable 2. Natural person √ Applicable □ Not applicable Name HOU Juncheng and Fang Aiqin Nationality Chinese Acquire residence permits in other countries or No regions or not HOU Juncheng and Fang Aiqin are husband and wife. HOU Juncheng serves as the Chairman of the Main job and title Company, and Fang Aiqin serves as the Senior Purchasing Consultant of the Company. 3. Special description of the situation that the Company has no controlling shareholders □ Applicable √ Not applicable 4. Description of changes in controlling shareholders during the Reporting Period □ Applicable √ Not applicable 5. Diagram of the ownership and controlling relationship between the Company and its controlling shareholders √ Applicable □ Not applicable 111 / 272 Annual Report 2023 (II) Actual controllers 1. Legal person □ Applicable √ Not applicable 2. Natural person √ Applicable □ Not applicable Name HOU Juncheng and Fang Aiqin Nationality Chinese Acquire residence permits in other countries or No regions or not HOU Juncheng and Fang Aiqin are husband and wife. HOU Juncheng serves as the Chairman of the Main job and title Company, and Fang Aiqin serves as the Senior Purchasing Consultant of the Company. Shareholdings in other domestic or overseas listed None companies over the past 10 years 3. Special description of the situation that the Company has no actual controllers □ Applicable √ Not applicable 4. Description of changes in the control of the Company during the Reporting Period □ Applicable √ Not applicable 5. Diagram of the ownership and controlling relationship between the Company and its actual controllers √ Applicable □ Not applicable 112 / 272 Annual Report 2023 6. Control of the Company by actual controllers by way of trust or other means of asset management □ Applicable √ Not applicable (III) Other explanations on controlling shareholders and actual controllers □ Applicable √ Not applicable V.The accumulative number of pledged shares of the Company's controlling shareholders or the largest shareholder and its persons acting in concert accounted for more than 80% of the Company's shares held by them □ Applicable √ Not applicable VI.Other Legal Person Shareholders with More Than 10% Shareholdings □ Applicable √ Not applicable VII.Description of Limitation on Reduction of Shareholding □ Applicable √ Not applicable VIII.Specific Implementation of Share Repurchase During the Reporting Period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Name of the share repurchase plan Plan for Repurchase of Company Shares Through Centralized Bidding Disclosure time of the share repurchase plan December 14, 2023 Number of shares to be repurchased and its Based on the minimum amount of RMB100 million percentage in total share capital (%) and the maximum amount of RMB 200 million for the repurchase, and the maximum repurchase price of RMB130 per share, the estimated number of repurchased shares ranges from approximately 769,200 to 1,538,400, accounting for approximately 0.19% to 0.39% of the Company's total share capital. Amount of proposed repurchase Not less than RMB100 million (inclusive), and not more than RMB200 million (inclusive) Period of proposed repurchase Within 12 months from the date when the share repurchase plan is deliberated on and approved by the 17th meeting of the 3rd session of Board of Directors Purpose of repurchase Equity incentives or employee stock ownership plans Number of shares repurchased (share) 395,980 Percentage of repurchased shares in the Not applicable underlying stocks involved in the equity incentive plan, if applicable Progress of reducing repurchased shares held Not applicable by the Company by means of centralized bidding Note: 1. In the above table, the "total share capital" in the "number of shares to be repurchased and its percentage in total share capital" refers to the total share capital of the Company as of December 12, 2023, which is 396,823,366 shares. 2. As of January 31, 2024, the Company has completed the share repurchase plan, repurchasing a total of 2,210,825 shares of the Company. For details, see the Announcement on the Implementation Results of 113 / 272 Annual Report 2023 Share Repurchase and Changes in Shareholding (No.: 2024-004) released on the SSE website on February 1, 2024 (www.sse.com.cn). Section VIII Information on Preference Shares □ Applicable √ Not applicable 114 / 272 Annual Report 2023 Section IX Information on Bonds I.Enterprise Bonds, Corporate Bonds and Non-financial Corporate Debt Financing Instruments □ Applicable √ Not applicable II.Information on Convertible Corporate Bonds √ Applicable □ Not applicable (I) Information on issuance of convertible bonds √ Applicable □ Not applicable With the Approval of the CSRC, namely, the Reply on Approving Proya Cosmetics Co., Ltd.'s Public Issuance of Convertible Corporate Bonds (Zheng Jian Xu Ke [2021] No. 3408), on December 8, 2021, the Company publicly issued 7,517,130 convertible bonds with a face value of RMB100 per share and a total face value of RMB751,713,000. These convertible bonds were issued at face value with a term of 6 years. With the approval of the SSE's Self-Regulatory Supervision Decision Letter [2021] No. 503, the convertible corporate bonds issued by the Company amounting to RMB751,713,000 would be listed and traded on the Shanghai Stock Exchange from January 4, 2022, with the short name of "Proya Convertible Bond" and the bond code of "113634". The nominal interest rate of the convertible corporate bonds issued this time was as follows: 0.30% in the first year, 0.50% in the second year, 1.00% in the third year, 1.50% in the fourth year, 1.80% in the fifth year, and 2.00% in the sixth year. The duration of the convertible corporate bonds runs from December 8, 2021 to December 7, 2027. According to relevant regulations and the Prospectus of Proya Cosmetics Co., Ltd. for the Public Offering of A-Share Convertible Corporate Bonds, this Proya Convertible Bond issued by the Company can be converted to the Company's shares from June 14, 2022. The convertible period is from June 14, 2022 to December 7, 2027. The initial conversion price is RMB195.98/share. The latest conversion price is RMB98.25/share. The historical adjustments to the conversion price are as follows: 1. Since the 2021 Equity Distribution Plan was implemented by the Company, the conversion price of the Proya Convertible Bond was adjusted to RMB139.37/share on May 30, 2022. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to 2021 Equity Distribution Plan (No.: 2022-029) released by the Company on the SSE website on May 24, 2022 (www.sse.com.cn). 2. Since the registration of restricted shares involved in the grant under the 2022 Restricted Shares Incentive Plan was completed, the conversion price of the Proya Convertible Bond has been adjusted to RMB138.92/share since September 9, 2022. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to Additional Issuance from Granting of Restricted Shares (No.: 2022-052) released by the Company on the SSE website on September 8, 2022 (www.sse.com.cn). 3. Since the 2022 Equity Distribution Plan was implemented by the Company, the conversion price of the Proya Convertible Bond was adjusted to RMB98.61/share on May 29, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to 2022 Equity Distribution Plan (No.: 2023-030) released by the Company on the SSE website on May 23, 2023 (www.sse.com.cn). 4. Since the Company completed the repurchase and cancellation of 105,350 incentive restricted shares under the 2022 Restricted Shares Incentive Plan, the conversion price of the Proya Convertible Bond was adjusted to RMB98.62/share on August 29, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Completion of Repurchase and Cancellation of Some Incentive Restricted Shares and Adjustment of Conversion Price (No.: 2023-045) released by the Company on the SSE website on August 28, 2023 (www.sse.com.cn). 5. Since the 2023 Semi-Annual Equity Distribution Plan was implemented by the Company, the conversion price of the Proya Convertible Bond was adjusted to RMB98.24/share on October 23, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to 2023 Semi-Annual Equity Distribution Plan (No.: 2023-065) released by the Company on the SSE website on October 17, 2023 (www.sse.com.cn). Since the Company completed the repurchase and cancellation of 66,192 incentive restricted shares under the 2022 Restricted Shares Incentive Plan, the conversion price of the Proya Convertible Bond was adjusted to RMB98.25/share on December 18, 2023. For details, see the Announcement of Proya 115 / 272 Annual Report 2023 Cosmetics Co., Ltd. on Adjustment of Conversion Price and Trading Suspension for Conversion (No.: 2023-086) released by the Company on the SSE website on December 15, 2023 (www.sse.com.cn). (II) Holders and guarantors of convertible bonds during the Reporting Period √ Applicable □ Not applicable Name of the convertible corporate bond Proya Convertible Bond Number of holders of the convertible corporate bond 8,553 at the end of the Reporting Period Guarantors of the convertible bond of the Company None The top ten holders of the convertible bond are as follows: Number of bonds held at the end of the Name of holders of the convertible corporate bond Holding ratio (%) Reporting Period (RMB) Dajia Assets - China CITIC Bank - Dajia Assets 39,960,000 5.32 Houkun No.40 Collective Asset Management Product Agricultural Bank of China Co., Ltd. - South Xiyuan 26,790,000 3.57 Convertible Bond Securities Investment Fund Industrial and Commercial Bank of China Limited - 24,664,000 3.29 Southern Profitable Return Bond Securities Investment Fund Bank of China Co., Ltd. - South Changyuan 23,567,000 3.14 Convertible Bond Securities Investment Fund Dajia Assets - Minsheng Bank - Dajia Assets - 23,173,000 3.09 Selected Conservative Portfolio No.3 (Issue 5) Collective Asset Management Product China Southern Asset Management Ningkang 21,311,000 2.84 Convertible Bonds Fixed-benefit Pension Products - Bank of China Co., Ltd. Industrial and Commercial Bank of China Limited - 20,000,000 2.66 GF Convertible Bond Issuing Securities Investment Fund Dajia Assets - Postal Savings Bank of China - Dajia 17,462,000 2.33 Assets - Selected Conservative Portfolio No.6 (Issue 2) Collective Asset Management Product National Social Security Fund 201 Portfolio 17,298,000 2.30 Taikang Pension Insurance Co., Ltd. - Self-Owned 16,246,000 2.16 Funds (III) Changes in convertible bonds during the Reporting Period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Name of the Increase or decrease due to this change convertible Before this After this Share corporate change Redemption Sell-back change conversion bond Proya 750,937,000 148,000 750,789,000 Convertible Bond Cumulative conversion of convertible bonds during the Reporting Period √ Applicable □ Not applicable 116 / 272 Annual Report 2023 Name of the convertible corporate bond Proya Convertible Bond Amount of shares converted from bonds in the 148,000 Reporting Period (RMB) Number of shares converted from bonds in the 1,121 Reporting Period (share) Accumulated number of shares converted from 6,638 bonds (share) Proportion of the accumulated number of 0.0024 converted shares in the total number of issued shares of the Company before conversion (%) Amount of bonds not converted into shares (RMB) 750,789,000 Proportion of unconverted convertible bonds in 99.8771 the total amount of convertible bonds issued (%) (IV) Historical adjustments to the conversion price √ Applicable □ Not applicable Unit: Yuan Currency: RMB Name of the convertible Proya Convertible Bond corporate bond Description of Date of Adjusted Time of adjustments to the Media of disclosure adjustment conversion price disclosure conversion price Note May 30, RMB139.37/share May 24, SSE website Since the 2021 Equity 2022 2022 (http://www.sse.com.cn), Distribution Plan was Shanghai Securities implemented by the News, Securities Times Company, the conversion price of the Proya Convertible Bond was adjusted to RMB139.37/share on May 30, 2022. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to 2021 Equity Distribution Plan (No.: 2022-029) released by the Company on the SSE website on May 24, 2022 (www.sse.com.cn). September RMB138.92/share September SSE website Since the registration of 9, 2022 8, 2022 (http://www.sse.com.cn), restricted shares involved Shanghai Securities in the grant under the News, Securities Times 2022 Restricted Shares Incentive Plan was completed, the conversion price of the Proya Convertible Bond has been adjusted to RMB138.92/share since September 9, 2022. For details, see the Announcement of Proya 117 / 272 Annual Report 2023 Cosmetics Co., Ltd. on Adjustment of Conversion Price due to Additional Issuance from Granting of Restricted Shares (No.: 2022-052) released by the Company on the SSE website on September 8, 2022 (www.sse.com.cn). May 29, RMB98.61/share May 23, SSE website Since the 2022 Equity 2023 2023 (http://www.sse.com.cn), Distribution Plan was Shanghai Securities implemented by the News, Securities Times Company, the conversion price of the Proya Convertible Bond was adjusted to RMB98.61/share on May 29, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to 2022 Equity Distribution Plan (No.: 2023-030) released by the Company on the SSE website on May 23, 2023 (www.sse.com.cn). August 29, RMB98.62/share August 28, SSE website Since the Company 2023 2023 (http://www.sse.com.cn), completed the repurchase Shanghai Securities and cancellation of News, Securities Times 105,350 incentive restricted shares under the 2022 Restricted Shares Incentive Plan, the conversion price of the Proya Convertible Bond was adjusted to RMB98.62/share on August 29, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Completion of Repurchase and Cancellation of Some Incentive Restricted Shares and Adjustment of Conversion Price (No.: 2023-045) released by the Company on the SSE website on August 28, 2023 (www.sse.com.cn). October RMB98.24/share October SSE website Since the 2023 Semi- 23, 2023 17, 2023 (www.sse.com.cn), Annual Equity Shanghai Securities Distribution Plan was News, Securities Times, implemented by the 118 / 272 Annual Report 2023 China Securities Journal, Company, the conversion Securities Daily, price of the Proya Economic Information Convertible Bond was Daily, China Daily adjusted to RMB98.24/share on October 23, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price due to 2023 Semi- Annual Equity Distribution Plan (No.: 2023-065) released by the Company on the SSE website on October 17, 2023 (www.sse.com.cn). December RMB98.25/share December SSE website Since the Company 18, 2023 15, 2023 (www.sse.com.cn), completed the repurchase Shanghai Securities and cancellation of News, Securities Times, 66,192 incentive China Securities Journal, restricted shares under the Securities Daily, 2022 Restricted Shares Economic Information Incentive Plan, the Daily, China Daily conversion price of the Proya Convertible Bond was adjusted to RMB98.25/share on December 18, 2023. For details, see the Announcement of Proya Cosmetics Co., Ltd. on Adjustment of Conversion Price and Trading Suspension for Conversion (No.: 2023- 086) released by the Company on the SSE website on December 15, 2023 (www.sse.com.cn). Latest conversion price as of the RMB98.25/share end of the Reporting Period (V) The Company's liabilities, changes in credit, and cash arrangements for debt repayment in future years □ Applicable √ Not applicable (VI) Other explanations on convertible bonds □ Applicable √ Not applicable 119 / 272 Annual Report 2023 Section X Financial Report I.Audit Report √ Applicable □ Not applicable Audit Report T.J.S. [2024] No.2241 To all shareholders of Proya Cosmetics Co., Ltd.: I. Audit Opinion We have audited the financial statements of Proya Cosmetics Co., Ltd. (hereinafter referred to as "Proya"), which comprise the consolidated and parent company's balance sheets as of December 31, 2023, the consolidated and parent company's income statements, the consolidated and parent company's cash flow statements, and the consolidated and parent company's statements of changes in shareholders' equity for the year of 2023, as well as notes to financial statements. In our opinion, the accompanying financial statements were prepared in accordance with the Accounting Standards for Business Enterprises in all material aspects and give a true and fair view of the consolidated and parent company's financial position of Proya as at December 31, 2023 and of its consolidated and parent company's operating results and cash flows for the year of 2023. II. Basis of Audit Opinion We have conducted our audit in accordance with the Chinese Auditing Standards for Certified Public Accountants. The "Responsibilities of CPAs for the Audit of the Financial Statements" herein further illustrate our responsibilities under those standards. In accordance with the Code of Professional Ethics of Chinese Certified Public Accountants, we are independent of Proya and have performed other responsibilities in respect of professional ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. III. Key Audit Matters Key audit matters are, in our professional judgment, most significant in our audit of the financial statements for 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, we do not provide a separate opinion on these matters. (I) Recognition of revenue 1. Description of matters For relevant information disclosure, refer to "34. Revenue" in "V. Significant Accounting Policies and Estimates", "61. Operating income and cost" in "VII. Notes to the Items of Consolidated Financial Statements", and "6. Segment information" in "XVIII. Other Important Matters" of "Section X Financial Report" herein. The operating revenue of Proya primarily comes from the sale of cosmetics. The operating revenue for 2023 shown in Proya's financial statements was RMB8.90billion. Since operating revenue is one of the key performance indicators of Proya, there is an inherent risk that the management of Proya (hereinafter referred to as the "management") achieves specific goals or expectations through inappropriate recognition of revenue. Therefore, we identify the recognition of revenue as a key audit matter. 2. Audit response For recognition of revenue, we primarily implemented the following audit procedures: (1) Understood the key internal controls related to the recognition of revenue, evaluated the design of these controls, determined whether these controls were implemented, and tested the operational effectiveness of these controls. (2) Issued letters to the main customers to confirm the sales amount in 2023 and the balance of accounts receivable as at the end of 2023; 120 / 272 Annual Report 2023 (3) Tested details and performed a spot-check on supporting documents for recognition of revenue (including sales contracts, delivery documents, receipts, agency sales lists, and sales invoices), understood major contract terms or conditions, and evaluated the appropriateness of the method for recognition of revenue; (4) Implemented analysis procedures, including analysis on fluctuations in revenue of each month of 2023 and analysis on changes in sales revenue of major customers; (5) Obtained the rebate and subsidy policies, rebate and subsidy calculation sheets and other information, and checked whether the withholding amount of rebate and subsidy as at the end of 2023 was sufficient; analyzed whether the amount of rebate and subsidy and the withholding amount were reasonable based on the rebate and subsidy policy as well as the revenue in 2023 and checked the settlement after the rebate and subsidy withholding period as at the end of 2023; (6) Obtained the return and exchange policy, calculation sheet of estimated liabilities and other information, and checked whether the estimated future return and exchange rate was reasonable; checked the subsequent return and exchange situation and compared it with the estimated return and exchange data; (7) Learned about the inventory and stock age of each major dealer as of the end of 2023 and checked whether the inventory amounts and structures of dealers were reasonable; (8) Analyzed the sales data of main online chain stores by calculating the consumption per capita, consumption per time, purchase times and repurchase information of customers of online chain stores and comparing them with the selling prices and normal use days of Proya products, so as to judge the rationality of the above data in combination with normal consumption habits and analyze the authenticity and rationality of the income of online chain stores; (9) Compared the background transaction data, receipt data of capital accounts such as Alipay, and sales revenue data on financial accounts of online chain stores, and analyzed the consistency of data, so as to check the authenticity of sales from the online chain stores; (10) Checked whether the information related to the operating revenue was properly presented in the financial statements. (II) Net realizable value of inventories 1. Description of matters For relevant information disclosure, refer to "16. Inventories" in "V. Significant Accounting Policies and Estimates" and "10. Inventories" in "VII. Notes to the Items of Consolidated Financial Statements" of "Section X Financial Report" herein. As at December 31, 2023, the book balance of inventories of Proya amounted to RMB901.11million, the provision for devaluation of inventories amounted to RMB103.89million, and the carrying value of inventories amounted to RMB797.22million. Inventories are measured at the lower of cost and net realizable value. The management determines the estimated selling price based on the historical selling price, actual selling price, and future market trends, and also determines the net realizable value based on the amount after deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of inventories. Since the amount of inventories is significant and the determination of the net realizable value of inventories involves significant judgment by the management, we identified the net realizable value of inventories as a key audit matter. 2. Audit response For net realizable value of inventories, we primarily implemented the following audit procedures: (1) Obtained an understanding of key internal controls related to the net realizable value of inventories, evaluated the design of these controls, determined whether these controls were implemented, and tested the operational effectiveness of these controls; (2) Obtained the calculation process of the net realizable value of inventories of Proya, and re-checked the calculation process; (3) Obtained the list of products that are no longer sold, counted the products rolling off the production lines in the inventories and the corresponding raw material inventories, and verified whether the provision for devaluation of inventories was accrued for the raw material inventories; (4) Checked whether the inventories as at the end of the period had long stock ages, outdated models and changes in market demand in combination with the inventory monitoring, and evaluated whether the management reasonably estimated the net realizable value; (5) Checked whether the information related to the net realizable value of inventories was properly presented in the financial statements. 121 / 272 Annual Report 2023 IV. Other Information The management is responsible for the other information, which comprises all the information covered in the Annual Report other than the financial statements and this 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 or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that 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 the Management and Those Charged With Governance for the Financial Statements The management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of necessary internal control to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the management is responsible for assessing Proya's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The governance of Proya (hereinafter referred to as "governance") is responsible for overseeing the financial reporting process of Proya. VI. Responsibilities of CPAs for the Audit of the Financial Statements Our objective is to obtain reasonable assurance of whether there is a material misstatement in the financial statements as a whole due to fraud or error and to issue an audit report containing audit opinion. Reasonable assurance is a highly reliable assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always identify a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in 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 in accordance with the auditing standards, 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 identifying a material misstatement resulting from fraud is higher than that of failing to detect 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 related to the audit to design the appropriate audit procedures. (III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. (IV) Conclude on the appropriateness of the 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 significantly affect Proya's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related disclosures in the 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 audit report. However, future events or conditions may cause Proya to cease to continue as a going concern. (V) Evaluate the overall presentation, structure and content of the financial statements, and determine whether the financial statements reflect the related transactions and events fairly. 122 / 272 Annual Report 2023 (VI) Obtain sufficient and appropriate audit evidence of the financial information of the entity or business activity of Proya in order to express an opinion on the financial statements. We are responsible for directing, supervising and performing group audits. We take full responsibility for the audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during the audit. We also provide a statement to management on compliance with ethical requirements related to independence, and communicate with governing bodies about all relationships and other matters that may be reasonably considered to affect our independence, as well as related precautions (if applicable). From the matters we discuss with the governing bodies, we confirmed which matters are most important to the audit of the financial statements for the current period and thus constitute the key audit matters. We describe these matters in the audit report unless laws or regulations preclude public disclosure about these matters or when, in extremely rare circumstances, we determine that a matter should not be communicated in our audit report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Pan-China Certified Public Accountants LLP Chinese CPA: YIN Zhibin (Project Partner) Hangzhou, China Chinese CPA: WU Shaofang April 17, 2024 II.Financial Statements Consolidated Balance Sheet As of December 31, 2023 Prepared by: Proya Cosmetics Co., Ltd. Unit: Yuan Currency: RMB As of December 31, Item Notes As of December 31, 2023 2022 Current assets: Cash and cash equivalents VII. 1 4,011,085,558.07 3,161,003,085.05 Clearing settlement funds Loans to banks and other financial institutions Held-for-trading financial assets Derivative financial assets Notes receivable Accounts receivable VII. 5 344,570,196.54 102,157,898.41 Receivable financing VII. 7 7,378,700.06 Prepayments VII. 8 202,870,195.58 91,483,523.15 Premiums receivable Reinsurance premium receivable Reserves for reinsurance contract receivable Other receivables VII. 9 81,966,213.90 73,564,083.63 Including: Interest receivable Dividend receivable Financial assets purchased under resale agreements Inventories VII. 10 797,215,155.68 669,051,326.73 123 / 272 Annual Report 2023 Contract assets Held-for-sale assets Non-current assets due within one year Other current assets VII. 13 99,765,073.07 49,735,996.57 Total current assets 5,544,851,092.90 4,146,995,913.54 Non-current assets: Loans and advances to customers Debt investments Other debt investments Long-term receivables Long-term equity investments VII. 17 113,574,158.49 138,533,377.46 Other equity instrument 146,402,400.00 VII. 18 107,660,400.00 investments Other non-current financial assets Investment real estate VII. 20 66,156,471.91 68,654,700.81 Fixed assets VII. 21 827,350,985.29 570,376,309.67 Construction in progress VII. 22 52,038,642.94 207,378,935.86 Productive biological assets Oil and gas assets Right-of-use assets VII. 25 14,104,821.34 6,410,634.25 Intangible assets VII. 26 404,688,009.16 420,316,883.26 Development expenditure Goodwill Long-term prepaid expenses VII. 28 67,184,328.83 19,142,604.46 Deferred income tax assets VII. 29 108,494,364.60 48,305,338.82 Other non-current assets VII. 30 16,974,946.99 5,554,726.06 Total non-current assets 1,778,227,129.55 1,631,075,910.65 Total assets 7,323,078,222.45 5,778,071,824.19 Current liabilities: Short-term borrowings VII. 32 200,155,555.56 200,195,890.41 Loans from the central bank Loans from banks and other financial institutions Held-for-trading financial liabilities Derivative financial liabilities Notes payable VII. 35 36,959,074.14 69,626,352.12 Accounts payable VII. 36 1,018,522,358.60 475,427,484.23 Receipts in advance VII. 37 30,514.45 464,328.26 Contract liabilities VII. 38 301,014,873.58 174,602,833.91 Financial assets sold under repurchase agreements Customer deposits and deposits from banks and other financial institutions Funds from securities trading agencies Funds from underwriting securities agencies Employee compensation 166,444,494.43 124,938,749.36 VII. 39 payable 124 / 272 Annual Report 2023 Taxes payable VII. 40 222,765,869.94 152,918,871.45 Other payables VII. 41 155,345,148.68 216,392,183.41 Including: Interest payable Dividends payable Fees and commissions payable Amounts payable under reinsurance contracts Held-for-sale liabilities Non-current liabilities due 3,970,060.11 2,549,452.14 VII. 43 within one year Other current liabilities VII. 44 15,022,173.42 10,820,499.59 Total current liabilities 2,120,230,122.91 1,427,936,644.88 Non-current liabilities: Insurance contract reserves Long-term borrowings Bonds payable VII. 46 753,119,902.88 724,491,557.93 Including: Preference shares Perpetual bonds Lease liabilities VII. 47 9,970,306.87 3,718,119.41 Long-term payables Long-term employee compensation payable Estimated liabilities VII. 50 33,063,299.45 59,282,928.68 Deferred income VII. 51 6,383,359.33 6,399,811.33 Deferred income tax liabilities VII. 29 19,019,431.67 Other non-current liabilities Total non-current liabilities 802,536,868.53 812,911,849.02 Total liabilities 2,922,766,991.44 2,240,848,493.90 Owners' equity (or shareholders' equity): Paid-in capital (or share 396,757,184.00 283,519,469.00 VII. 53 capital) Other equity instruments VII. 54 50,893,986.60 50,903,510.12 Including: Preference shares Perpetual bonds Capital reserve VII. 55 864,150,974.43 914,815,786.22 Less: Treasury stock VII. 56 146,966,735.61 164,976,000.00 Other comprehensive income VII. 57 -53,847,100.91 -1,918,603.07 Special reserve Surplus reserve VII. 59 198,411,582.50 141,759,734.50 General risk reserve Retained profits VII. 60 3,040,145,490.59 2,300,384,763.19 Total owners' equity (or 3,524,488,659.96 shareholders' equity) 4,349,545,381.60 attributable to equity holders of the parent company Minority interests 50,765,849.41 12,734,670.33 Total owners' equity (or 3,537,223,330.29 4,400,311,231.01 shareholders' equity) Total liabilities and owners' 5,778,071,824.19 7,323,078,222.45 equity (or shareholders' equity) The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li 125 / 272 Annual Report 2023 Parent Company's Balance Sheet As of December 31, 2023 Prepared by: Proya Cosmetics Co., Ltd. Unit: Yuan Currency: RMB As of December 31, Item Notes As of December 31, 2023 2022 Current assets: Cash and cash equivalents 2,816,366,399.45 2,169,179,716.12 Held-for-trading financial assets Derivative financial assets Notes receivable Accounts receivable XIX. 1 586,728,691.35 289,883,063.24 Receivable financing 4,732,700.06 Prepayments 66,223,228.82 34,908,418.05 Other receivables XIX. 2 80,702,024.60 141,574,549.59 Including: Interest receivable Dividend receivable Inventories 516,042,533.80 458,341,886.37 Contract assets Held-for-sale assets Non-current assets due within one year Other current assets 38,762,926.06 32,667,616.71 Total current assets 4,109,558,504.14 3,126,555,250.08 Non-current assets: Debt investments Other debt investments Long-term receivables Long-term equity investments XIX. 3 418,748,241.23 394,321,950.41 Other equity instrument 110,580,000.00 71,838,000.00 investments Other non-current financial assets Investment real estate 95,815,110.34 348,408,309.83 Fixed assets 783,893,280.52 278,011,361.35 Construction in progress 51,841,256.80 206,756,324.14 Productive biological assets Oil and gas assets Right-of-use assets 13,640,458.38 5,707,540.03 Intangible assets 371,083,311.38 382,584,698.57 Development expenditure Goodwill Long-term prepaid expenses 62,969,904.19 13,494,337.73 Deferred income tax assets 8,256,631.70 11,372,733.52 Other non-current assets 17,197,966.38 4,916,417.58 Total non-current assets 1,895,284,160.92 1,756,153,673.16 Total assets 6,004,842,665.06 4,882,708,923.24 Current liabilities: Short-term borrowings 200,155,555.56 200,195,890.41 Held-for-trading financial liabilities Derivative financial liabilities Notes payable 36,959,074.14 69,626,352.12 126 / 272 Annual Report 2023 Accounts payable 603,314,221.56 217,330,371.42 Receipts in advance Contract liabilities 220,349,629.19 68,099,041.17 Employee compensation 88,243,004.64 58,246,111.22 payable Taxes payable 161,141,517.93 69,952,710.78 Other payables 113,223,667.48 167,125,433.78 Including: Interest receivable Dividends payable Held-for-sale liabilities Non-current liabilities due 3,488,575.66 2,210,449.03 within one year Other current liabilities 28,645,451.80 Total current liabilities 1,455,520,697.96 852,786,359.93 Non-current liabilities: Long-term borrowings Bonds payable 753,119,902.88 724,491,557.93 Including: Preference shares Perpetual bonds Lease liabilities 9,970,306.87 3,354,028.30 Long-term payables Long-term employee compensation payable Estimated liabilities Deferred income 6,383,359.33 6,399,811.33 Deferred income tax liabilities 18,758,960.23 Other non-current liabilities Total non-current liabilities 769,473,569.08 753,004,357.79 Total liabilities 2,224,994,267.04 1,605,790,717.72 Owners' equity (or shareholders' equity): Paid-in capital (or share 396,757,184.00 283,519,469.00 capital) Other equity instruments 50,893,986.60 50,903,510.12 Including: Preference shares Perpetual bonds Capital reserve 917,524,533.21 964,613,342.84 Less: Treasury stock 146,966,735.61 164,976,000.00 Other comprehensive income -53,180,700.00 Special reserve Surplus reserve 198,411,582.50 141,759,734.50 Retained profits 2,416,408,547.32 2,001,098,149.06 Total owners' equity (or 3,779,848,398.02 3,276,918,205.52 shareholders' equity) Total liabilities and owners' 6,004,842,665.06 4,882,708,923.24 equity (or shareholders' equity) The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li Consolidated Income Statement January - December 2023 Unit: Yuan Currency: RMB Item Notes 2023 2022 I. Total operating revenue VII. 61 8,904,573,501.39 6,385,451,424.00 Including: Operating revenue VII. 61 8,904,573,501.39 6,385,451,424.00 127 / 272 Annual Report 2023 Interest income Premiums earned Fee and commission income II. Total operating costs 7,310,234,937.16 5,191,391,396.39 Including: Operating cost VII. 61 2,677,445,706.61 1,934,850,203.65 Interest expenses Fee and commission expenses Surrenders Claims and policyholder benefits (net of amounts recoverable from reinsurers) Net provision for insurance liability reserves Insurance policyholder dividends Expenses for reinsurance accepted Taxes and surcharges 90,655,757.20 56,394,508.94 Selling expenses VII. 63 3,972,201,152.49 2,785,837,352.95 General and administrative expenses VII. 64 455,441,770.70 327,296,749.37 R&D expenses VII. 65 173,570,127.49 128,009,104.49 Financial expenses VII. 66 -59,079,577.33 -40,996,523.01 Including: Interest expenses 18,355,694.64 13,019,503.91 Interest income 75,347,198.04 51,707,124.62 Add: Other income VII. 67 45,026,299.74 39,065,105.62 Investment income ("-" refers to -17,392,371.65 -5,658,023.28 VII. 68 losses) Including: Income from investments -17,279,158.95 -5,658,023.28 in associates and joint ventures Income from derecognition of financial assets measured at amortized cost Foreign exchange gains ("-" refers to losses) Net gains on exposure hedging ("-" refers to losses) Gains on changes in fair value ("-" refers to losses) Credit impairment losses ("-" refers -10,397,224.17 -5,057,425.43 VII. 71 to losses) Asset impairment losses ("-" refers to -108,095,314.38 -164,884,555.28 VII. 72 losses) Gains from disposal of assets ("-" -703,593.33 60,155.60 VII. 73 refers to losses) III. Operating profits ("-" refers to 1,502,776,360.44 1,057,585,284.84 losses) Add: Non-operating revenue VII. 74 4,166,661.77 1,178,886.33 Less: Non-operating expenses VII. 75 11,623,216.62 4,613,645.24 IV. Total profits ("-" refers to total 1,495,319,805.59 1,054,150,525.93 losses) Less: Income tax expenses VII. 76 264,515,655.25 222,866,719.56 V. Net profits ("-" refers to net 1,230,804,150.34 831,283,806.37 losses) (I) Classified by the nature of continuing operations 1. Net profits from continuing 1,230,804,150.34 831,283,806.37 operations ("-" refers to net losses) 128 / 272 Annual Report 2023 2. Net profits from discontinued operations ("-" refers to net losses) (II) Classified by ownership 1. Net profits attributable to 1,193,868,141.81 817,400,223.93 shareholders of the parent company ("-" refers to net losses) 2. Profits or losses attributable to 36,936,008.53 13,883,582.44 minority interests ("-" refers to net losses) VI. Other comprehensive income, net VII. 77 -670,928.97 -51,928,497.84 of tax (I) Other comprehensive income -670,928.97 attributable to owners of the parent -51,928,497.84 company, net of tax 1. Other comprehensive income that -53,180,700.00 cannot be reclassified to profit or loss (1) Changes arising from re- measurement of defined benefit plans (2) Other comprehensive income that cannot be reclassified to profit or loss -20,250,000.00 under the equity method (3) Changes in fair value of other -32,930,700.00 equity instrument investments (4) Changes in fair value of enterprises' own credit risks 2. Other comprehensive income that 1,252,202.16 -670,928.97 will be reclassified into profit or loss (1) Other comprehensive income that will be reclassified to profit or loss under the equity method (2) Changes in fair value of other debt investments (3) Amounts of financial assets reclassified into other comprehensive income (4) Provision for credit impairment of other debt investments (5) Reserve for cash flow hedges (6) Translation differences of 1,252,202.16 -670,928.97 financial statements denominated in foreign currencies (7) Others (II) Other comprehensive income attributable to minority interests, net of tax VII. Total comprehensive income 1,178,875,652.50 830,612,877.40 (I) Total comprehensive income 1,141,939,643.97 816,729,294.96 attributable to owners of the parent company (II) Total comprehensive income 36,936,008.53 13,883,582.44 attributable to minority interests VIII. Earnings per share (I) Basic earnings per share 3.01 2.07 (RMB/share) (II) Diluted earnings per share 2.97 2.05 (RMB/share) 129 / 272 Annual Report 2023 In case of business combination under common control, net profit realized by the combined before the combination in the current period was RMB0.00; net profit realized by the combined in the previous period was RMB0.00. The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li Parent Company's Income Statement January - December 2023 Unit: Yuan Currency: RMB Item Notes 2023 2022 I. Operating revenue XIX. 4 4,244,455,041.32 3,081,136,936.75 Less: Operating cost XIX. 4 1,966,981,451.80 1,424,725,111.00 Taxes and surcharges 44,411,104.27 24,372,917.75 Selling expenses 597,090,222.91 472,193,858.89 General and administrative expenses 318,149,093.59 218,455,156.75 R&D expenses 175,400,671.99 132,656,295.93 Financial expenses -46,265,107.81 -41,965,768.21 Including: Interest expenses 18,219,770.96 13,019,503.91 Interest income 59,296,736.20 42,503,905.91 Add: Other income 11,113,880.99 15,650,274.95 Investment income ("-" refers to -19,824,288.29 -4,161,437.71 XIX. 5 losses) Including: Income from investments -17,279,158.95 -5,149,438.13 in associates and joint ventures Income from derecognition of financial assets measured at amortized cost Net gains on exposure hedging ("-" refers to losses) Gains on changes in fair value ("-" refers to losses) Credit impairment losses ("-" refers -82,262,296.44 53,589,117.29 to losses) Asset impairment losses ("-" refers to -71,022,124.11 -126,987,703.77 losses) Gains from disposal of assets ("-" -603,420.52 60,155.60 refers to losses) II. Operating profits ("-" refers to 1,026,089,356.20 788,849,771.00 losses) Add: Non-operating revenue 681,685.66 22,010.99 Less: Non-operating expenses 10,162,782.71 1,516,181.13 III. Total profits ("-" refers to total 1,016,608,259.15 787,355,600.86 losses) Less: Income tax expenses 147,190,446.48 116,008,968.02 IV. Net profits ("-" refers to net 869,417,812.67 671,346,632.84 losses) (I) Net profits from continuing 869,417,812.67 671,346,632.84 activities ("-" refers to net losses) (II) Net profits from discontinuing activities ("-" refers to net losses) V. Net amount of other -53,180,700.00 comprehensive income after tax (I) Other comprehensive income that cannot be reclassified into profit or -53,180,700.00 loss 130 / 272 Annual Report 2023 1. Changes arising from re- measurement of defined benefit plans 2. Other comprehensive income that cannot be reclassified to profit or loss -20,250,000.00 under the equity method 3. Changes in the fair value of other -32,930,700.00 equity instrument investments 4. Changes in the fair value of the enterprise's own credit risk (II) Other comprehensive income to be reclassified into profit or loss 1. Other comprehensive income that may be reclassified to profit or loss under equity method 2. Changes in the fair value of other debt investments 3. Amount included in other comprehensive income on reclassification of financial assets 4. Credit impairment provisions of other debt investments 5. Cash flow hedging reserve 6. Exchange differences from translation of financial statements 7. Others VI. Total comprehensive income 816,237,112.67 671,346,632.84 VII. Earnings per share: (I) Basic earnings per share (RMB/share) (II) Diluted earnings per share (RMB/share) The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li Consolidated Cash Flow Statement January - December 2023 Unit: Yuan Currency: RMB Item Notes 2023 2022 I. Cash flows from operating activities: Cash received from the sale of 9,328,552,717.55 7,088,465,997.21 goods and the rendering of services Net increase in customer deposits and deposits from banks and other financial institutions Net increase in loans from the central bank Net increase in taking from other financial institutions Cash received from premiums under original insurance contracts Net cash received from reinsurance business 131 / 272 Annual Report 2023 Net cash received from policyholders' deposits and investment contract liabilities Cash received from interest, fees and commissions Net increase in taking from banks and other financial institutions Net increase in financial assets sold under repurchase arrangements Net cash received from securities trading agencies Receipts of tax refunds 3,525,948.82 Other cash received related to 125,413,607.47 99,500,140.40 VII. 78(1) operating activities Sub-total of cash inflows from 9,457,492,273.84 7,187,966,137.61 operating activities Cash paid for goods purchased 2,509,354,309.80 2,241,842,834.78 and services received Net increase in loans and advances to customers Net increase in balance with the central bank and due from banks and other financial institutions Cash paid for compensation payments under original insurance contracts Net increase in loans to banks and other financial institutions Cash paid for interest, fees and commissions Cash paid for insurance policyholder dividends Cash payments to and on behalf 700,164,408.84 558,582,470.38 of employees Payments of various types of 1,017,756,020.64 660,096,624.31 taxes Other cash paid related to 3,761,423,719.98 2,616,308,090.91 VII. 78(1) operating activities Sub-total of cash outflows from 7,988,698,459.26 6,076,830,020.38 operating activities Net cash flow from operating 1,468,793,814.58 1,111,136,117.23 activities II. Cash flows from investing activities: Cash received from disposal and 5,500,000.00 recovery of investments Cash received from investment 466,821.72 income Net cash received from disposal 285,500.00 3,751,463.96 of fixed assets, intangible assets and other long-term assets Net cash received from disposal 3,018,142.61 of subsidiaries and other business entities Other cash received related to 13,193,392.00 VII.78 (2) investing activities 132 / 272 Annual Report 2023 Sub-total of cash inflows from 22,463,856.33 3,751,463.96 investing activities Cash paid for acquisition or 179,658,688.53 170,963,405.43 construction of fixed assets, VII.78 (2) intangible assets and other long- term assets Cash paid for investments VII.78 (2) 18,636,363.64 131,003,609.10 Net increase in pledged loans receivables Net cash paid for acquiring subsidiaries and other operating entities Other cash paid related to 300,000,000.00 VII.78 (2) investing activities Sub-total of cash outflows from 498,295,052.17 301,967,014.53 investing activities Net cash flow from investing -475,831,195.84 -298,215,550.57 activities III. Cash flows from financing activities: Cash received from capital 165,676,000.00 contributions Including: Cash received from 700,000.00 capital contributions from minority shareholders of subsidiaries Cash received from borrowings 300,000,000.00 300,000,000.00 Other cash received related to financing activities Sub-total of cash inflows from 300,000,000.00 465,676,000.00 financing activities Cash repayments of borrowings 300,000,000.00 300,000,000.00 Cash paid for distribution of 407,092,087.41 182,663,748.85 dividends or profits or settlement of interest expenses Including: Payments for distribution of dividends or profits to minority owners of subsidiaries Other cash paid related to VII.78 (3) 53,188,106.51 48,263,571.88 financing activities Sub-total of cash outflows from 760,280,193.92 530,927,320.73 financing activities Net cash flow from financing -460,280,193.92 -65,251,320.73 activities IV. Impact of foreign exchange 1,252,202.16 -670,928.97 rate changes on cash and cash equivalents V. Net increase in cash and 533,934,626.98 746,998,316.96 cash equivalents Add: Opening balance of cash 3,125,333,085.05 2,378,334,768.09 and cash equivalents VI. Closing balance of cash and 3,659,267,712.03 3,125,333,085.05 cash equivalents The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li 133 / 272 Annual Report 2023 Parent Company's Cash Flow Statement January - December 2023 Unit: Yuan Currency: RMB Item Notes 2023 2022 I. Cash flows from operating activities: Cash received from the sale of 4,644,368,388.33 3,625,216,143.38 goods and the rendering of services Receipts of tax refunds 3,525,948.82 Other cash received related to 96,881,632.24 1,133,863,796.96 operating activities Sub-total of cash inflows from 4,744,775,969.39 4,759,079,940.34 operating activities Cash paid for goods purchased 1,945,629,515.66 1,830,694,703.17 and services received Cash payments to and on behalf 373,444,752.18 265,940,955.35 of employees Payments of various types of 375,674,085.29 276,743,971.90 taxes Other cash paid related to 772,902,793.66 595,570,988.89 operating activities Sub-total of cash outflows from 3,467,651,146.79 2,968,950,619.31 operating activities Net cash flow from operating 1,277,124,822.60 1,790,129,321.03 activities II. Cash flows from investing activities: Cash received from disposal and 1,700,000.00 recovery of investments Cash received from investment income Net cash received from disposal 1,946,534.67 1,057,300.53 of fixed assets, intangible assets and other long-term assets Net cash received from disposal 2,501,326.27 of subsidiaries and other business entities Other cash received related to 22,272,596.52 1,271,529,576.13 investing activities Sub-total of cash inflows from 26,720,457.46 1,274,286,876.66 investing activities Cash paid for acquisition or 173,025,274.68 163,990,474.83 construction of fixed assets, intangible assets and other long- term assets Cash paid for investments 23,236,363.64 179,238,922.10 Net cash paid for acquiring subsidiaries and other operating entities Other cash paid related to 315,549,000.00 2,248,367,720.97 investing activities Sub-total of cash outflows from 511,810,638.32 2,591,597,117.90 investing activities Net cash flow from investing -485,090,180.86 -1,317,310,241.24 activities III. Cash flows from financing activities: 134 / 272 Annual Report 2023 Cash received from capital 164,976,000.00 contributions Cash received from borrowings 300,000,000.00 300,000,000.00 Other cash received related to financing activities Sub-total of cash inflows from 300,000,000.00 464,976,000.00 financing activities Cash repayments of borrowings 300,000,000.00 300,000,000.00 Cash paid for distribution of 407,092,087.41 182,663,957.72 dividends or profits or settlement of interest expenses Other cash paid related to 51,844,122.36 766,654.65 financing activities Sub-total of cash outflows from 758,936,209.77 483,430,612.37 financing activities Net cash flow from financing -458,936,209.77 -18,454,612.37 activities IV. Impact of foreign exchange rate changes on cash and cash equivalents V. Net increase in cash and 333,098,431.97 454,364,467.42 cash equivalents Add: Opening balance of cash 2,138,929,716.12 1,684,565,248.70 and cash equivalents VI. Closing balance of cash and 2,472,028,148.09 2,138,929,716.12 cash equivalents The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li 135 / 272 Annual Report 2023 Consolidated Statements of Changes in Owners' Equity January - December 2023 Unit: Yuan Currency: RMB 2023 Equity attributable to owners of the parent company Total Item Other equity instruments Gene Minority equity Paid-in Other Spec Less: ral interests attributable capital (or Prefer Perpe Capital comprehe ial Surplus Retained Oth Treasury risk Subtotal to owners share reserve nsive reser reserve profits er ence tual Other stock reser capital) shares bonds income ve ve I. Balance 283,519,4 50,903,5 914,815,7 164,976,0 - 141,759,7 2,300,384, 3,524,488, 12,734,6 3,537,223, at the end 69.00 10.12 86.22 00.00 1,918,603 34.50 763.19 659.96 70.33 330.29 of the .07 previous year Add: Changes in accountin g policies Correctio n for previous errors Other II. 283,519,4 50,903,5 914,815,7 164,976,0 - 141,759,7 2,300,384, 3,524,488, 12,734,6 3,537,223, Balance 69.00 10.12 86.22 00.00 1,918,603 34.50 763.19 659.96 70.33 330.29 at the .07 beginning of the current year III. 113,237,7 -9,523.52 - - Increase 15.00 50,664,81 18,009,26 - 56,651,84 739,760,72 825,056,72 38,031,1 863,087,90 of the 1.79 4.39 51,928,49 8.00 7.40 1.64 79.08 0.72 current 7.84 period ("- 136 / 272 Annual Report 2023 " refers to decrease) (I) Total - comprehe 1,193,868, 1,141,939, 36,936,0 1,178,875, 51,928,49 nsive 141.81 643.97 08.53 652.50 7.84 income (II) - -9,523.52 66,340,89 29,588,21 36,572,735 36,572,735 Owners' 170,421.0 2.08 1.71 .85 .85 contributi 0 on and capital reduction 1. - - - Ordinary 171,542.0 9,322,685 9,494,227 shares 0 .24 .24 contribute d by the owners 2. Capital contributi ons by other equity instrumen t holders 3. 75,515,05 75,515,052 75,515,052 Amount 2.71 .71 .71 of share- based payments credited to owners' equity 4. Other 1,121.00 -9,523.52 148,524.6 39,082,43 - - 1 8.95 38,942,316 38,942,316 .86 .86 (III) - - - Profit 56,651,84 397,455,56 397,455,56 454,107,41 distributi 8.00 6.41 6.41 4.41 on 137 / 272 Annual Report 2023 1. Withdraw - 56,651,84 al of 56,651,848 8.00 surplus .00 reserve 2. Withdraw al of general risk provision 3. - - - Distributi 397,455,56 397,455,56 397,455,56 on to 6.41 6.41 6.41 owners (or sharehold ers) 4. Other (IV) 113,408,1 - Internal 36.00 113,408,1 carry- 36.00 forward of owners' equity 1. 113,408,1 - Transfer 36.00 113,408,1 of capital 36.00 reserve to capital (or share capital) 2. Transfer of surplus reserve to capital (or share capital) 138 / 272 Annual Report 2023 3. Surplus reserve to cover loss 4. Changes in defined benefit scheme carried forward to retained earnings 5. Carry- forward of other comprehe nsive income to retained earnings 6. Other (V) Special reserve 1. Withdraw al for the period 2. Utilizatio n for the period (VI) - - 43,999,908 1,095,17 45,095,078 Others 3,597,567 47,597,47 .23 0.55 .78 .87 6.10 IV. 396,757,1 50,893,9 864,150,9 146,966,7 Balance 84.00 86.60 74.43 35.61 - 198,411,5 3,040,145, 4,349,545, 50,765,8 4,400,311, at the end 53,847,10 82.50 490.59 381.60 49.41 231.01 of the 0.91 period 139 / 272 Annual Report 2023 2022 Equity attributable to owners of the parent company Gene Total Item Paid-in Other equity instruments Other Spec Minority equity Less: ral interests attributable capital (or Capital comprehe ial Surplus Retained Oth Prefer Perpe Treasury risk Subtotal to owners share reserve nsive reser reserve profits er ence tual Other stock reser capital) shares bonds income ve ve I. Balance 201,009,9 50,956,6 834,272,2 5,628,128 - 100,634,7 1,696,978, 2,876,975, 9,864,59 2,886,840, at the end 66.00 22.11 05.66 .21 1,247,674 80.00 064.52 835.98 1.09 427.07 of the .10 previous year Add: Changes in accountin g policies Correctio n for previous errors Other II. 201,009,9 50,956,6 834,272,2 5,628,128 - 100,634,7 1,696,978, 2,876,975, 9,864,59 2,886,840, Balance 66.00 22.11 05.66 .21 1,247,674 80.00 064.52 835.98 1.09 427.07 at the .10 beginning of the current year III. 82,509,50 - 80,543,58 159,347,8 - 41,124,95 603,406,69 647,512,82 2,870,07 650,382,90 Increase 3.00 53,111.9 0.56 71.79 670,928.9 4.50 8.67 3.98 9.24 3.22 of the 9 7 current period ("- " refers to decrease) 140 / 272 Annual Report 2023 (I) Total - 817,400,22 816,729,29 13,883,5 830,612,87 comprehe 670,928.9 3.93 4.96 82.44 7.40 nsive 7 income (II) 2,105,517 - 210,987,9 159,347,8 53,692,467 700,000. 54,392,467 Owners' .00 53,111.9 34.74 71.79 .96 00 .96 contributi 9 on and capital reduction 1. 2,100,000 162,876,0 159,347,8 5,628,128. 700,000. 6,328,128. Ordinary .00 00.00 71.79 21 00 21 shares contribute d by the owners 2. Capital contributi ons by other equity instrumen t holders 3. 47,357,12 47,357,121 47,357,121 Amount 1.24 .24 .24 of share- based payments credited to owners' equity 4. Other 5,517.00 - 754,813.5 707,218.51 707,218.51 53,111.9 0 9 (III) 41,124,95 - - - Profit 4.50 213,993,52 172,868,57 172,868,57 distributi 5.26 0.76 0.76 on 1. 41,124,95 - Withdraw 4.50 41,124,954 al of .50 141 / 272 Annual Report 2023 surplus reserve 2. Withdraw al of general risk provision 3. - - - Distributi 172,868,57 172,868,57 172,868,57 on to 0.76 0.76 0.76 owners (or sharehold ers) 4. Other (IV) 80,403,98 - Internal 6.00 80,403,98 carry- 6.00 forward of owners' equity 1. 80,403,98 - Transfer 6.00 80,403,98 of capital 6.00 reserve to capital (or share capital) 2. Transfer of surplus reserve to capital (or share capital) 3. Surplus reserve to cover loss 4. Changes 142 / 272 Annual Report 2023 in defined benefit scheme carried forward to retained earnings 5. Carry- forward of other comprehe nsive income to retained earnings 6. Other (V) Special reserve 1. Withdraw al for the period 2. Utilizatio n for the period (VI) - - - - Others 50,040,36 50,040,368 11,713,5 61,753,871 8.18 .18 03.20 .38 IV. 283,519,4 50,903,5 914,815,7 164,976,0 - 141,759,7 2,300,384, 3,524,488, 12,734,6 3,537,223, Balance 69.00 10.12 86.22 00.00 1,918,603 34.50 763.19 659.96 70.33 330.29 at the end .07 of the period The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li Parent Company's Statement of Changes in Owners' Equity January - December 2023 143 / 272 Annual Report 2023 Unit: Yuan Currency: RMB 2023 Other equity instruments Total Paid-in Other Less: equity Item capital (or Capital comprehen Special Surplus Retained Preference Perpetual Treasury attributabl share Other reserve sive reserve reserve profits shares bonds stock e to capital) income owners I. Balance at the end of the 283,519,46 50,903,510. 964,613,34 164,976,00 141,759,7 2,001,098, 3,276,918, previous year 9.00 12 2.84 0.00 34.50 149.06 205.52 Add: Changes in accounting policies Correction for previous errors Other II. Balance at the beginning of 283,519,46 50,903,510. 964,613,34 164,976,00 141,759,7 2,001,098, 3,276,918, the current year 9.00 12 2.84 0.00 34.50 149.06 205.52 III. Increase of the current 113,237,71 -9,523.52 - - - 56,651,84 415,310,3 502,930,19 period ("-" refers to decrease) 5.00 47,088,809 18,009,264 53,180,70 8.00 98.26 2.50 .63 .39 0.00 (I) Total comprehensive - 869,417,8 816,237,11 income 53,180,70 12.67 2.67 0.00 (II) Owners' contribution and - -9,523.52 66,340,892 29,588,211 36,572,735 capital reduction 170,421.00 .08 .71 .85 1. Ordinary shares contributed - - - by the owners 171,542.00 9,322,685. 9,494,227. 24 24 2. Capital contributions by other equity instrument holders 3. Amount of share-based 75,515,052 75,515,052 payments credited to owners' .71 .71 equity 4. Other 1,121.00 -9,523.52 148,524.61 39,082,438 - .95 38,942,316 .86 (III) Profit distribution - - 56,651,84 454,107,4 397,455,56 8.00 14.41 6.41 1. Withdrawal of surplus - 56,651,84 reserve 56,651,84 8.00 8.00 144 / 272 Annual Report 2023 2. Distribution to owners (or - - shareholders) 397,455,5 397,455,56 66.41 6.41 3. Other (IV) Internal carry-forward of 113,408,13 - owners' equity 6.00 113,408,13 6.00 1. Transfer of capital reserve 113,408,13 - to capital (or share capital) 6.00 113,408,13 6.00 2. Transfer of surplus reserve to capital (or share capital) 3. Surplus reserve to cover loss 4. Changes in defined benefit scheme carried forward to retained earnings 5. Carry-forward of other comprehensive income to retained earnings 6. Other (V) Special reserve 1. Withdrawal for the period 2. Utilization for the period (VI) Others -21,565.71 - 47,575,910 47,597,476 .39 .10 IV. Balance at the end of the 396,757,18 50,893,986. 917,524,53 146,966,73 - 198,411,5 2,416,408, 3,779,848, period 4.00 60 3.21 5.61 53,180,70 82.50 547.32 398.02 0.00 2022 Other equity instruments Total Paid-in Other Less: equity Item capital (or Capital comprehen Special Surplus Retained Preference Perpetual Treasury attributabl share Other reserve sive reserve reserve profits shares bonds stock e to capital) income owners I. Balance at the end of the 201,009,96 50,956,622. 834,563,92 5,628,128. 100,634,7 1,543,745, 2,725,282, previous year 6.00 11 0.32 21 80.00 041.48 201.70 145 / 272 Annual Report 2023 Add: Changes in accounting policies Correction for previous errors Other II. Balance at the beginning 201,009,96 50,956,622. 834,563,92 5,628,128. 100,634,7 1,543,745, 2,725,282, of the current year 6.00 11 0.32 21 80.00 041.48 201.70 III. Increase of the current 82,509,503. -53,111.99 130,049,42 159,347,87 41,124,95 457,353,1 551,636,00 period ("-" refers to decrease) 00 2.52 1.79 4.50 07.58 3.82 (I) Total comprehensive 671,346,6 671,346,63 income 32.84 2.84 (II) Owners' contribution and 2,105,517.0 -53,111.99 210,987,93 159,347,87 53,692,467 capital reduction 0 4.74 1.79 .96 1. Ordinary shares 2,100,000.0 162,876,00 159,347,87 5,628,128. contributed by the owners 0 0.00 1.79 21 2. Capital contributions by other equity instrument holders 3. Amount of share-based 47,357,121 47,357,121 payments credited to owners' .24 .24 equity 4. Other 5,517.00 -53,111.99 754,813.50 707,218.51 (III) Profit distribution 41,124,95 - - 4.50 213,993,5 172,868,57 25.26 0.76 1. Withdrawal of surplus 41,124,95 - reserve 4.50 41,124,95 4.50 2. Distribution to owners (or - - shareholders) 172,868,5 172,868,57 70.76 0.76 3. Other (IV) Internal carry-forward of 80,403,986. - owners' equity 00 80,403,986 .00 1. Transfer of capital reserve 80,403,986. - to capital (or share capital) 00 80,403,986 .00 2. Transfer of surplus reserve to capital (or share capital) 3. Surplus reserve to cover loss 146 / 272 Annual Report 2023 4. Changes in defined benefit scheme carried forward to retained earnings 5. Carry-forward of other comprehensive income to retained earnings 6. Other (V) Special reserve 1. Withdrawal for the period 2. Utilization for the period (VI) Others - - 534,526.22 534,526.22 IV. Balance at the end of the 283,519,46 50,903,510. 964,613,34 164,976,00 141,759,7 2,001,098, 3,276,918, period 9.00 12 2.84 0.00 34.50 149.06 205.52 The chairman of the Company: HOU Juncheng CFO of the Company: WANG Li Person in charge of Accounting Department: WANG Li 147 / 272 Annual Report 2023 III.General Information about the Company 1. Company profile √ Applicable □ Not applicable Proya Cosmetics Co., Ltd. (hereinafter referred to as "Company" or the "Company"), formerly known as Proya (Huzhou) Cosmetics Co., Ltd., was registered in the Huzhou Municipal Administration for Industry and Commerce on May 24, 2006. Headquartered in Hangzhou, Zhejiang, the Company now holds the business license with the unified social credit code of 91330100789665033F. The Company's registered capital is RMB396,823,165.00, and the paid-in capital is RMB396,757,184.00 (the paid-in capital is RMB65,981.00 less than the registered capital due to the conversion of convertible bonds and the repurchasing and de-registering of the granted but unreleased restricted shares without industrial and commercial change registration). The Company has 1,957,060 restricted circulating A shares and 394,800,124 unrestricted circulating A shares. The Company’s shares were listed for trading on SSE on November 15, 2017. The Company is a beauty and personal care company mainly engaged in cosmetics R&D, production, and sales. The financial statements were approved for external disclosure by the 18th meeting of the 3rd session of Board of Directors of the Company on April 17, 2024. IV.Preparation Basis of Financial Statements 1. Preparation basis The financial statements of the Company are prepared based on going concern. 2. Going concern √ Applicable □ Not applicable There are no matters or situations that may substantially affect the Company's ability to continue as a going concern within 12 months since the end of the Reporting Period. V.Significant Accounting Policies and Estimates Notes to specific accounting policies and accounting estimates: √ Applicable □ Not applicable Important notes: The Company has formulated specific accounting policies and estimates for transactions or events related to impairment of financial instruments, inventories, depreciation of fixed assets, construction in progress, intangible assets, and revenue recognition based on the actual production and operation characteristics. 1. Statement of compliance with accounting standards for business enterprises The financial statements have been prepared by the Company in compliance with the China Accounting Standards for Business Enterprises, and give an accurate and complete view of the Company's financial position, operating results, changes in shareholders' equity, cash flow and other related information. 2. Accounting period The accounting period of the Company is from January 1 to December 31 of each calendar year. 3. Operating cycle √ Applicable □ Not applicable The operating cycle of the Company's businesses is short; the Company adopts 12 months as the liquidity classification criteria for assets and liabilities. 4. Functional currency The Company and our domestic subsidiaries use RMB as the functional currency, while our overseas subsidiaries, such as Hapsode Co., Ltd., Hanna Cosmetics Co., Ltd., and OR Off&Relax choose the 148 / 272 Annual Report 2023 currency of the main economic environment in which they operate as the functional currency since they engage in overseas operations. 5. Determination method and selection basis of importance criteria √ Applicable □ Not applicable Item Importance criteria Accounts receivable The Company recognizes accounts receivable that individually exceed 0.3% of the total assets as important accounts receivable. Receivable financing The Company recognizes receivable financing that individually exceed 0.3% of the total assets as important receivable financing. Other receivables The Company recognizes other receivables that individually exceed 0.3% of the total assets as important other receivables. Important prepayments with an account age of The Company recognizes prepayments that more than one year individually exceed 0.3% of the total assets as important prepayments. Important construction in progress The Company recognizes construction in progress that individually exceeds 0.3% of the total assets as important construction in progress. Important accounts payable with an account age of The Company recognizes accounts payable that more than one year individually exceed 0.3% of the total assets as important accounts payable. Important receipts in advance with an account age The Company recognizes receipts in advance that of more than one year or overdue individually exceeds 0.3% of the total assets as important Receipts in advance. Important contract liabilities with an account age The Company recognizes contract liabilities that of more than one year individually exceed 0.3% of the total assets as important contract liabilities. Important other payables with an account age of The Company recognizes other payables that more than one year individually exceed 0.3% of the total assets as important other payables. Important estimated liabilities The Company recognizes estimated liabilities that individually exceed 0.3% of the total assets as important estimated liabilities. Important cash flows from investing activities The Company recognizes cash flows from investing activities that individually exceed 5% of the total assets as important cash flows from investing activities. Important subsidiaries and non wholly-owned The Company recognizes subsidiaries with subsidiaries absolute value of contribution to total profits that exceeds 5% of the absolute value of consolidated profits as important subsidiaries or important non- wholly-owned subsidiaries. Important joint ventures, affiliates and joint The Company recognizes joint ventures, affiliates operations and joint operations with absolute value of contribution to total profits that exceeds 5% of the absolute value of consolidated profits as important joint ventures, affiliates and joint operations. Important contingencies The Company recognizes contingencies that have an impact on balance sheet items exceeding 1% of total assets or an impact on income statement items exceeding 5% of total profits as important contingencies. Important commitments The Company recognizes commitments that have 149 / 272 Annual Report 2023 an impact on balance sheet items exceeding 1% of total assets or an impact on income statement items exceeding 5% of total profits as important commitments. Important events after the balance sheet date The Company recognizes events after the balance sheet date that have an impact on balance sheet items exceeding 1% of total assets or an impact on income statement items exceeding 5% of total profits as important events after the balance sheet date. 6. Accounting treatment of business combination under or not under common control √ Applicable □ Not applicable 1. Accounting treatment of business combination under common control The assets and liabilities acquired by the Company through business combination are measured at the carrying value of the combined party in the consolidated financial statements of the ultimate controlling party at the combination date. The Company adjusts the capital reserve in accordance with the difference between the carrying value share of the owner’s equity of the combined party in the consolidated financial statements of the ultimate controlling party and the carrying value of the consideration paid for the business combination or the total nominal value of the issued shares. If the capital reserve is not sufficient to offset the difference, the retained earnings will be adjusted. 2. Accounting treatment of business combination not under common control The difference by which the cost of combination is greater than the fair value of the net identifiable assets of the acquiree is recognized by the Company as goodwill on the acquisition date; the difference by which the combination cost is less than the fair value share of the net identifiable assets of the acquiree is recorded into the profit or loss after the re-check of the measurement of the fair value of identifiable assets, liabilities or contingent liabilities acquired from the acquiree, and the combination cost. 7. Criteria for judgment of control and preparation of consolidated financial statements √ Applicable □ Not applicable 1. Judgment of control Control is having the power over the invested party, enjoying variable returns through participating in related activities of the invested party, and having the ability to use the power over the invested party to influence its variable return amount. 2. Preparation of consolidated financial statements (1) The parent company incorporates all subsidiaries under its control into the consolidation scope of the consolidated financial statements. The consolidated financial statements are based on the financial statements of the parent company and its subsidiaries, and prepared by the parent company in accordance with the Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements. (2) Accounting treatment of buying and then selling, or selling and then buying the equity of the same subsidiary in two consecutive fiscal years: the acquisition of the equity of the acquiree is to control its operating and financial policies and to obtain long-term benefits from its operating activities. When the right to control the acquiree is acquired, it is included in the consolidation scope of the consolidated financial statements. Due to changes in the Company's business plans and arrangements, if the equity of the acquiree is disposed of in the second fiscal year to the point of losing control over it, the acquiree will be excluded from the consolidation scope of the consolidated financial statements when the control is lost. 8. Classification of joint arrangement and accounting treatment of joint operation √ Applicable □ Not applicable 1. Joint arrangement can be divided into joint operation and joint venture. 2. When the Company is a joint party of a joint operation, the Company recognizes the following items related to the share of interests in the joint operation: 150 / 272 Annual Report 2023 (1) Assets solely held, and assets jointly held on proportion; (2) Liabilities solely undertaken, and liabilities jointly undertaken on proportion; (3) Income generated from selling the Company's output share of the joint operation; (4) Income of the joint operation generated from selling assets according to the Company's holding share; (5) Cost incurred alone, and cost incurred from the joint operation on proportion. 9. Determination of cash and cash equivalents Cash presented in the cash flow statement refers to cash on hand and deposits that can be used for payment at any time. Cash equivalents refer to the short-term and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. 10. Foreign currency transactions and translation of foreign-currency statements √ Applicable □ Not applicable 1. Translation of foreign currency transactions Foreign currency transactions are translated into RMB at the approximate rate of spot rate on the transaction date during initial recognition. At the balance sheet date, the foreign currency monetary items are translated based on the spot rate at the balance sheet date. The exchange difference arising from the different exchange rate is included in the current profit or loss, except the exchange difference between the principal and interest of the foreign currency borrowed for meeting the capitalization requirements. The foreign currency non-monetary items measured at historical cost are also translated based on the approximate rate of the spot rate on the transaction date, and the RMB amount is not changed. The foreign currency non-monetary items measured at fair value are translated based on the spot rate on the determination date of the fair value, and the difference is included in the current profit or loss or other comprehensive income. 2. Translation of foreign-currency financial statements Assets and liabilities items in the balance sheet are translated at the spot rates prevailing at the balance sheet date. Owners' equity items other than "undistributed profits" are translated at the spot rates on the transaction dates. Income and expense items in the income statement are translated at the approximate rates of the spot rates on the transaction dates. Any balance incurred from the translation of foreign- currency financial statements by the above method is included in other comprehensive income. 11. Financial instruments √ Applicable □ Not applicable 1. Classification of financial assets and liabilities Financial assets are classified into the following three categories at initial recognition: (1) financial assets measured at amortized cost; (2) financial assets measured at fair value through other comprehensive income; (3) financial assets measured at fair value through profit or loss. Financial liabilities are classified into the following four categories at initial recognition: (1) financial liabilities measured at fair value through profit or loss; (2) financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or that are accounted for using the continuing- involvement method; (3) loan commitments not belonging to the financial guarantee contracts mentioned in item (1) or (2) above and those not belonging to item (1) above and given at a rate lower than the market interest rate; (4) financial liabilities measured at amortized cost. 2. Recognition basis, measurement method and derecognition conditions for financial assets and liabilities (1) Recognition basis and initial measurement method for financial assets and financial liabilities A financial asset or liability is recognized when the Company becomes a party to a financial instrument contract. Financial assets and liabilities are measured at the fair value at initial recognition. For financial assets and liabilities measured at fair value through profit or loss, relevant transaction expenses are directly included in the current profit or loss; for other categories of financial assets or liabilities, relevant transaction costs are recognized as expenses at initial recognition. However, where the accounts receivable initially recognized by the Company do not contain a significant financing component or the Company does not consider the financing component in the contract of less than one year, the initial 151 / 272 Annual Report 2023 measurement is made according to the transaction price defined in the Accounting Standards for Business Enterprises No. 14 – Revenue. (2) Subsequent measurement of financial assets 1) Financial assets measured at amortized cost Such financial assets are subsequently measured at amortized cost using the effective interest method. The gains and losses incurred by the financial assets measured at amortized cost but not belonging to any hedging relationship are included in the current profit or loss during derecognition, reclassification, amortization according to the effective interest method or impairment recognition. 2) Debt instrument investments measured at fair value through other comprehensive income They are subsequently measured at fair value. The interest, impairment losses or gains and exchange gains or losses calculated with the effective interest method are included in the current profit or loss, and other gains or losses are included in other comprehensive income. At derecognition, the gains or losses accumulated previously through comprehensive income are transferred from other comprehensive income and included into the current profit or loss. 3) Equity instrument investments measured at fair value through other comprehensive income They are subsequently measured at fair value. The dividends obtained (except for the part from investment cost recovery) are included in the current profit or loss, and other gains or losses are included in other comprehensive income. At derecognition, the gains or losses accumulated previously through other comprehensive income are transferred from other comprehensive income and included into retained earnings. 4) Financial assets measured at fair value with changes included in the current profit or loss They are subsequently measured at fair value. The generated gains or losses (including interest and dividend income) are included in the current profit or loss, unless the financial assets belong to part of the hedging relationship. (3) Subsequent measurement of financial liabilities 1) Financial liabilities measured at fair value through profit or loss Such financial liabilities include held-for-trading financial liabilities (including derivative instruments belonging to financial liabilities) and those designated as financial liabilities measured at fair value through profit or loss. Such financial liabilities are subsequently measured at fair value. Changes in the fair value of financial liabilities measured at fair value through profit or loss due to changes in the Company's own credit risk are included in other comprehensive income, unless the treatment will cause or enlarge the accounting mismatch in the profit or loss. Other gains or losses generated from such financial liabilities (including interest expenses, except the changes in the fair value arising from the credit risk change of the Company) are included in the current profit or loss, unless the financial liabilities belong to part of the hedging relationship. At derecognition, the gains or losses accumulated previously through other comprehensive income are transferred from other comprehensive income and included into retained earnings. 2) Financial liabilities from failure of transfer of financial assets to meet the derecognition conditions or continued involvement in transferred financial assets They are measured in accordance with the Accounting Standards for Business Enterprises No. 23 - Transfer of Financial Assets. 3) Loan commitments not belonging to the financial guarantee contracts mentioned in item 1) or 2) above and those not belonging to item 1) above and given at a rate lower than market interest rate They are subsequently measured at the higher one of the following two amounts, after initial recognition: ① loss provisions determined according to regulations on impairment of financial instruments; ② balance of the initially recognized amount after deducting cumulative amortization recognized in accordance with the regulations set out in the Accounting Standards for Business Enterprises No. 14 – Revenue. 4) Financial liabilities measured at amortized cost They are measured at amortized cost using the effective interest method. The gains and losses incurred by the financial liabilities measured at amortized cost but not belonging to any hedging relationship are included in the current profit or loss during derecognition or amortization according to the effective interest method. (4) Derecognition of financial assets and liabilities 1) Financial assets satisfying one of the following conditions are derecognized: ① the contract right to collect cash flow from the financial assets has terminated; 152 / 272 Annual Report 2023 ② the financial assets have been transferred and such transfer satisfies the provisions for derecognition of financial assets in the Accounting Standards for Business Enterprises No. 23 - Transfer of Financial Assets. 2) When the present obligations under the financial liabilities (or part thereof) are released, such financial liabilities (or that part thereof) are derecognized. 3. Recognition basis and measurement of transfer of financial assets If the Company has transferred almost all the risks and rewards related to the ownership of financial assets, the financial assets are derecognized, and the rights and obligations resulting from or retained in the transfer are separately recognized as assets or liabilities. In case that almost all the risks and rewards related to the ownership of the financial assets are retained, the recognition of the transferred financial assets is continued. In case that almost all the risks and rewards related to the ownership of the financial assets are neither transferred nor retained, disposal applies depending on the following circumstances: (1) if the control over the financial assets is not retained, the financial assets are derecognized, and the rights and obligations resulting from or retained in the transfer are separately recognized as assets or liabilities; (2) if the control over the financial assets is retained, the relevant financial assets are recognized according to the degree of continued involvement in the transferred financial assets, and the relevant liabilities are recognized accordingly. If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the two amounts below are included in the current profit or loss: (1) the carrying value of the transferred financial assets at the date of derecognition; (2) the sum of consideration received for the transfer of the financial asset, plus the corresponding derecognized portion of accumulated change in fair value previously included in other comprehensive income (in cases where the transferred financial asset is a debt instrument investment measured at fair value with changes included in other comprehensive income). If part of the financial assets is transferred and the transfer satisfies the conditions for derecognition, the overall carrying value before the transfer of financial assets is apportioned according to their respective relative fair value at the transfer date between the portion of derecognized part and the remaining part, and the difference between the two amounts below is included in the current profit or loss: If part of the financial assets is transferred and the transfer satisfies the conditions for derecognition, the overall carrying value before the transfer of financial assets is apportioned according to their respective relative fair value at the transfer date between the portion of derecognized part and the remaining part, and the difference between the two amounts below is included in the current profit or loss: 4. Determination of the fair value of financial assets and liabilities The Company adopts valuation techniques appropriate to the prevailing circumstances with the support of sufficient data and other information available to determine the fair value of relevant financial assets and liabilities. The Company divides the inputs for the estimation technique into the following levels and uses them in turn: (1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. (2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, including: the quotation of similar assets or liabilities in an active market; the quotation of identical or similar assets or liabilities in an inactive market; other observable inputs other than the quotation, such as the interest rate and yield curves that can be observed during the normal quotation intervals; and the market validation inputs; (3) Level 3 inputs are unobservable inputs of related assets or liabilities, including the interest rate, stock volatility, future cash flow of retirement obligations borne during the business combination, and financial forecasts made based on its own data, which cannot be observed directly or cannot be verified according to observable market data. 5. Impairment of financial instruments Based on the expected credit loss, the Company carries out accounting treatment for impairment and recognizes the loss provision for the financial assets measured at amortized cost, the debt instrument investment measured at fair value through other comprehensive income, contract assets, lease receivables, loan commitments other than financial liabilities measured at fair value through profit or loss, and financial guarantee contracts of financial liabilities not measured at fair value through profit or loss or financial liabilities not from failure of transfer of financial assets to meet the derecognition conditions or continued involvement in transferred financial assets. 153 / 272 Annual Report 2023 Expected credit loss refers to the weighted average of credit losses of financial instruments weighted by the risk of default. Credit loss refers to the balance between all contractual cash flows discounted according to the original effective interest rate and receivable under contracts by the Company and all cash flows as expected, i.e. the present value of all cash shortages. The purchased or underlying financial assets of the Company with credit impairment incurred are discounted according to their effective interest rates upon credit adjustment. For purchased or underlying financial assets with credit impairment incurred, only accumulative changes in the expected credit loss in the whole duration after initial recognition are recognized by the Company as loss provisions at the balance sheet date. For lease receivables, and receivables and contract assets from transactions in accordance with the Accounting Standards for Business Enterprises No. 14 – Revenue, excluding significant financing components or without consideration, by the Company, to the financing components in the contract of no more than one year, the Company measures the loss provision according to the amount equal to the expected credit loss in the whole duration by applying the simplified measurement method. For financial assets other than those applicable to the above measurement methods, the Company assess on each balance sheet date whether their credit risk has increased significantly since initial recognition. If the credit risk has increased significantly since the initial recognition, the Company will measure the loss provision based on the amount of expected credit loss in the whole duration; if the credit risk has not significantly increased since the initial recognition, the Company will measure the loss provision based on the amount of expected credit loss for the financial instruments in the next 12 months. The Company determines whether the credit risk of financial instruments has increased significantly since initial recognition by utilizing the available, reasonable and well-grounded information, including forward-looking information, and comparing the default risks of the financial instruments at the balance sheet date and on the initial recognition date. If the Company determines that the financial instruments bear a low credit risk at the balance sheet date, we assume that the credit risk of the financial instruments has not increased significantly since initial recognition. The Company evaluates the expected credit risk and measures the expected credit loss based on single financial instrument or portfolio of financial instruments. When the portfolio of financial instruments is used as the basis, the Company divides financial instruments into different portfolios on the basis of the common risk characteristics. The Company re-measures the expected credit loss on each balance sheet date, and the increased or reversed amount of the loss provision arising therefrom, as losses or gains from impairment, are included in the current profit or loss. For financial assets measured at amortized cost, the carrying value of the financial assets listed in the balance sheet is deducted from the loss provision; for the debt investment measured at fair value with changes included in other comprehensive income, the Company recognizes its loss provision in other comprehensive income without deducting the carrying value of the financial assets. 6. Offset of financial assets and liabilities Financial assets and liabilities are presented in the balance sheet respectively without offsetting. However, when the following conditions are met simultaneously, the financial assets and liabilities are presented at the net amount after mutual offset in the balance sheet: (1) the Company has the legal right of offsetting the recognized amount and such legal right is currently executable; (2) the Company plans to settle by net amount or simultaneously realize the financial assets and clear off the financial liabilities. When the financial assets that do not meet the derecognition conditions are transferred, the Company does not offset the transferred financial assets with the relevant liabilities. 12. Notes receivable □ Applicable √ Not applicable 13. Accounts receivable √ Applicable □ Not applicable Determination and accounting treatment of the expected credit loss of accounts receivable √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. 154 / 272 Annual Report 2023 Classification and determination basis of portfolios with bad debt provisions accrued by portfolio of credit risk characteristics √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Calculation of account ages of portfolios of credit risk characteristics recognized on the account age basis √ Applicable □ Not applicable The expected credit loss is calculated through a table that compares the account age of accounts receivable and expected credit loss rate by referring to historical experience in credit loss and according to the current situation and the forecast on future economic conditions. Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Criteria for judgment of recognized bad debt provisions accrued individually √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. 14. Receivable financing √ Applicable □ Not applicable Determination and accounting treatment of the expected credit loss of receivable financing √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Classification and determination basis of portfolios with bad debt provisions accrued by portfolio of credit risk characteristics √ Applicable □ Not applicable The expected credit loss is calculated through the default risk exposure and the expected credit loss rate in the whole duration by referring to historical experience in credit loss and according to the current situation and the forecast on future economic conditions. Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Calculation of account ages of portfolios of credit risk characteristics recognized on the account age basis √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Criteria for judgment of provision for bad debts accrued individually √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. 15. Other receivables √ Applicable □ Not applicable Determination and accounting treatment of the expected credit loss of other receivables √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. 155 / 272 Annual Report 2023 Classification and determination basis of portfolios with bad debt provisions accrued by portfolio of credit risk characteristics √ Applicable □ Not applicable The expected credit loss is calculated through a table that compares the account age of other receivables and expected credit loss rate by referring to historical experience in credit loss and according to the current situation and the forecast on future economic conditions. Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Calculation of account ages of portfolios of credit risk characteristics recognized on the account age basis √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. Criteria for judgment of provision for bad debts accrued individually √ Applicable □ Not applicable Refer to "11. Financial instruments" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" in this Report. 16. Inventories √ Applicable □ Not applicable Classification of inventories, valuation method for delivered inventories, inventory system, and amortization of low-value consumables and packaging √ Applicable □ Not applicable 1. Classification of inventories Inventories include finished goods or commodities for sale in daily operations, work in process, materials consumed during production or rendering of service. 2. Valuation method for delivered inventories The moving weighted average is adopted for delivered inventories. 3. Inventory system The Company adopts a perpetual inventory system. 4. Amortization of low-value consumables and packaging (1) Low-value consumables Amortization is performed via the immediate write-off method. (2) Packaging Amortization is performed via the immediate write-off method. Recognition and accrual of provision for devaluation of inventories √ Applicable □ Not applicable At the balance sheet date, inventories are measured at the lower of cost and net realizable value, and provision for devaluation of inventories is accrued based on the positive difference between cost and net realizable value. The net realizable value of inventories directly for sale is determined by the amount of the estimated selling price after subtracting the estimated selling expenses and relevant taxes during the normal production and operation; the net realizable value of inventories required to be processed is determined by the amount of the estimated selling price of the finished products after subtracting the estimated cost by the end of processing, the estimated selling expenses and relevant taxes during the normal production and operation. At the balance sheet date, the net realizable value is determined separately for the two parts of the same inventory with or without contract price, and is compared with the relevant costs to separately determine the amount withdrawn or reversed for provision for devaluation of inventories. Classification and determination basis of portfolios with provision for devaluation of inventories accrued by portfolio and determination basis of net realizable value of different categories of inventories □ Applicable √ Not applicable 156 / 272 Annual Report 2023 Calculation method and determination basis of net realizable value of each stock age portfolio for inventories with net realizable value recognized based on stock age □ Applicable √ Not applicable 17. Contract assets √ Applicable □ Not applicable Recognition methods and standards of contract assets √ Applicable □ Not applicable The rights of the Company to collect consideration from the customer unconditionally (i.e. only depending on time) are presented as receivables; the rights (dependent on factors other than time) to collect consideration for transferring goods to the customer are presented as contract assets. Determination and accounting treatment of the expected credit loss of contract assets □ Applicable √ Not applicable Classification and determination basis of portfolios with bad debt provisions accrued by portfolio of credit risk characteristics □ Applicable √ Not applicable Calculation of account ages of portfolios of credit risk characteristics recognized on the account age basis □ Applicable √ Not applicable Criteria for judgment of recognized bad debt provisions accrued individually □ Applicable √ Not applicable 18. Held-for-sale non-current assets or disposal groups □ Applicable √ Not applicable Recognition and accounting treatment of non-current assets or disposal groups classified as held- for-sale □ Applicable √ Not applicable Recognition and presentation of termination of operation □ Applicable √ Not applicable 19. Long-term equity investments √ Applicable □ Not applicable 1. Joint control or significant influence criterion Joint control is the contractually agreed sharing of control of an arrangement. It exists only when decisions about the relevant activities of the arrangement require the unanimous consent of the parties sharing control. Significant influence refers to the power to participate in the decision-making process on the financial and operating policies of the investee, but not to control or impose joint control together with other parties over the formulation of these policies. 2. Determination of investment cost (1) For a long-term equity investment obtained from a business combination under common control: where the combining party pays cash, transfers non-cash assets, bears debts or issues equity securities as combination consideration, the initial investment cost is the share with reference to the carrying value of the owners’ equity of the combined party in the consolidated financial statements of the ultimate controlling party on the combination date. The difference between the initial investment cost of the long- term equity investment and the carrying value of the consideration paid for the business combination or the total nominal value of the issued shares is adjusted to capital reserve. If the capital reserve is not sufficient to offset the difference, the retained earnings are adjusted. 157 / 272 Annual Report 2023 For a long-term equity investment obtained from a business combination under common control through multiple transactions by step, the Company judges whether the transactions are a "package deal". If yes, the transactions are subject to accounting treatment as one deal that has acquired control right. If no, the initial investment cost is determined on the basis of the share with reference to the carrying value of the net asset of the combined party in the consolidated financial statements of the ultimate controlling party on the combination date. The difference between the initial investment cost of long-term equity investment at the combination date and the sum of the carrying amount of long-term equity investment before business combination and the carrying value of newly paid consideration for additional shares acquired on the combination date is adjusted to the capital reserve. If the capital reserve is not sufficient to be offset, the retained earnings are adjusted. (2) For a long-term equity investment obtained from a business combination not under common control, the fair value of consideration paid for business combination is regarded as the initial investment cost on the acquisition date. For the long-term equity investment achieved by the Company via a business combination not under common control through multiple transactions by step, the relevant accounting treatment is based on individual financial statements or consolidated financial statements: 1) In the individual financial statements, the initial investment cost calculated with the cost method is the sum of the carrying value of the equity investment originally held and the newly increased investment cost. 2) In the consolidated financial statements, the item is determined based on whether the transactions are a "package deal". If yes, the transactions are subject to accounting treatment as one deal that has acquired control right. If no, the equity of the acquiree held before the acquisition date is re-measured at the fair value of the equity on the acquisition date, and the difference between the fair value and its carrying value is included in the current investment income. If the equity of the acquiree held before the acquisition date is related to other comprehensive income under the equity method, the other related comprehensive income is converted into the current income on the acquisition date, excluding the other comprehensive income derived from changes in net liabilities or assets due to re-measurement on defined benefit plans by the investee. (3) For a long-term equity investment obtained by means other than business combination: If it is obtained by cash, the initial investment cost is the actual payment; if it is obtained through issuing equity securities, the initial investment cost is the fair value of the issued equity securities. If it is obtained through debt restructuring, the initial investment cost is determined based on the Accounting Standards for Business Enterprises No. 12 - Debt Restructuring. If it is obtained through the exchange of non- monetary assets, the initial investment cost is determined based on the Accounting Standards for Business Enterprises No. 7 - Exchange of Non-Monetary Assets. 3. Subsequent measurement and recognition of profit or loss For a long-term equity investment controlled by the investee, the cost method is adopted for accounting. For a long-term equity investment in associates and joint ventures, the equity method is adopted for accounting. 4. Treatment methods for loss of control upon a stepwise disposal of investment to subsidiaries through multiple transactions (1) Judgment of whether transactions are a "package deal" In case of loss of control upon stepwise disposal of investment to subsidiaries through multiple transactions, the Company judges whether such transactions are a "package deal" based on the terms of the transaction agreement of each step of stepwise transactions, the disposal consideration obtained respectively, the target of equity sale, the disposal method, the disposal time and other information. When the terms, conditions and economic impact of each transaction meet one or more of the following circumstances, it usually indicates that the multiple transactions are a "package deal": 1) these transactions were entered into simultaneously or after considering the effects of each other; 2) these transactions constituted a complete commercial result as a whole; 3) one transaction was conditional upon at least one of the other transaction; 4) one transaction was not economical on its own but was economical when considering other transactions. (2) Accounting treatment of transactions which are not a "package deal" 1) Individual financial statements For disposal of equity, the difference between the carrying value and the consideration actually received is included in the current profit or loss. The accounting of remaining equity is completed via the equity 158 / 272 Annual Report 2023 method in case of significant influence on the investee or implementation of joint control with other parties. However, in case of no control, joint control or significant influence on the investee, the accounting of remaining equity must comply with the relevant provisions of the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments. 2) Consolidated financial statements Before the loss of control, the difference between the price of disposal and the subsidiary's net assets entitled from the disposal of long-term equity investment cumulatively calculated from the acquisition date or the combination date, is adjusted to capital reserve (capital premium). If the capital premium is insufficient to offset the difference, the retained earnings are adjusted. When the control over the original subsidiary is lost, the remaining equity is re-measured at fair value as of the date on which the control is lost. The difference between the sum of the consideration received from equity disposal and the fair value of the remaining equity and the net assets of the original subsidiary proportionate to the original shareholding accumulated from the date of acquisition or business combination is included in investment gains of the period during which the control is lost, and meanwhile, the goodwill is offset. Other comprehensive income related to the equity investment in the original subsidiary is transferred to investment gains of the period during which the control is lost. (3) Accounting treatment of transactions which are a "package deal" 1) Individual financial statements All transactions are regarded as one transaction disposing the subsidiary and losing the control right for accounting treatment. However, the difference between the amount received each time for disposal before the control is lost and the carrying value of long-term equity investments corresponding to the disposal of investment is recognized as other comprehensive income in the individual financial statements, and is transferred to profit or loss of the period during which the control is lost upon loss of control. 2) Consolidated financial statements All transactions are regarded as one transaction disposing the subsidiary and losing the control right for accounting treatment. However, the difference between the amount received each time for disposal before the control is lost and the net assets of such subsidiary corresponding to the disposal of investment is recognized as other comprehensive income in the consolidated financial statements, and is transferred to profit or loss of the period during which the control is lost upon loss of control. 20. Investment real estate (1). In case of applying a cost measurement model: Depreciation or amortization method 1. Investment real estate includes leased land use rights, land use rights held for transfer upon appreciation, and leased buildings. 2. Investment real estate is initially measured at cost and subsequently measured with the cost model, and depreciated or amortized with the same method as that for fixed assets and intangible assets. 21. Fixed assets (1). Conditions for recognition √ Applicable □ Not applicable Fixed assets are tangible assets that are held for use in the production or rendering of goods or services, for rental to others, or for administrative purposes, and have a service life of more than one accounting year. The fixed assets are recognized when the following conditions are satisfied simultaneously: the economic benefits are likely to inflow to the Company and the costs of such fixed assets can be measured reliably. (2). Depreciation method √ Applicable □ Not applicable Depreciation Depreciation life Annual Category Residual value method (year) depreciation rate Houses and Straight-line 10 or 30 5% 9.50% or 3.17% buildings method 159 / 272 Annual Report 2023 General Straight-line 3-10 5% 31.67%-9.50% equipment method Dedicated Straight-line 5-10 5% 19.00%-9.50% equipment method Means of Straight-line 5 5% 19.00% transportation method 22. Construction in progress √ Applicable □ Not applicable 1. Construction in progress is recognized when the following conditions are satisfied simultaneously: the economic benefits are likely to inflow to the Company and the costs of such construction in progress can be measured reliably. Construction in progress is measured at the actual cost incurred to prepare the assets for their intended use. 2. Construction in progress is transferred to fixed assets at the actual cost when it reaches the expected conditions for service. When construction in progress has achieved serviceable conditions but final settlement has not been finished, it is first transferred to fixed assets as per estimated value. After final settlement is finished, the estimated value is adjusted based on actual cost, but the depreciated amount is not adjusted. Category Criteria and timing for the transfer of construction in progress to fixed assets Dedicated After installation and commissioning, the construction meets the design equipment requirements or the standards stipulated in the contract Houses and When the physical construction has been fully or substantially completed and can buildings be put into use 23. Borrowing costs √ Applicable □ Not applicable 1. Criteria for recognition of capitalized borrowing costs Borrowing costs incurred by the Company, which are directly attributable to the purchase and construction of assets eligible for capitalization, are capitalized and included in the costs of the related assets. Other borrowing costs are recognized as expenses in the period in which they are incurred and are included in the current profit or loss. 2. Capitalization period of borrowing costs (1) The capitalization of borrowing costs begins when the following three conditions are fully satisfied: 1) expenditures for the assets have been incurred; 2) borrowing costs have been incurred; 3) acquisition and construction or production that are necessary to enable the assets to reach the intended usable or salable conditions have commenced. (2) Where abnormal interruption of assets eligible for capitalization occurs during the acquisition and construction or production process and such interruption has lasted for more than three consecutive months, the capitalization of borrowing costs is suspended; the borrowing costs during the interruption are recognized as current expenses till resumption of purchasing or production of the assets. (3) Capitalization of borrowing costs is suspended during periods in which the qualifying asset under acquisition and construction or production is ready for the intended use or sale. 3. Capitalization rate and amount of borrowing costs In case of special borrowing for the acquisition and construction or production of assets meeting the capitalization conditions, interest amount to be capitalized is recognized after deducting the bank interests for the unused portion or the investment income for temporary investment from the interest costs (including recognized depreciation or amortization of premium under the effective interest method) actually incurred in the current period of specific borrowing; for general borrowing occupied for the acquisition and construction or production of assets meeting the capitalization conditions, the interest amount to be capitalized is determined via the result obtained by multiplying the capitalization rate of occupied general borrowing with the weighted average value of the asset expenditure for the accumulated expenditure exceeding the specific borrowing portion. 160 / 272 Annual Report 2023 24. Biological assets □ Applicable √ Not applicable 25. Oil and gas assets □ Applicable √ Not applicable 26. Intangible assets (1). Service life and its determination basis, estimation, amortization method or review procedure √ Applicable □ Not applicable 1. Intangible assets, including land use rights, patent rights and non-patented technologies, are initially measured at cost. 2. Intangible assets with limited service life are amortized systematically and reasonably over their service life in accordance with the expected realization method of the economic benefits related to the intangible assets. If the expected realization method cannot be reliably determined, the straight-line method is used for amortization. The specific information is shown as below: Service life Amortization Item Determination basis of service life (year) method Straight-line Land use rights 40 or 50 Estimated service life method Non-patented Straight-line 5 Estimated service life technologies method Straight-line Office software 3-10 Estimated service life method Straight-line Patent right 5 Estimated service life method Straight-line Customer resources 3 Estimated earning life method Straight-line Trademark rights 10 Estimated service life method (2). Collection scope of R&D expenditures and related accounting treatment methods √ Applicable □ Not applicable 1. Collection scope of R&D expenditures (1) Labor costs Labor costs include salaries, basic endowment insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, maternity insurance premiums and housing provident funds of the Company's R&D personnel, as well as labor costs of external R&D personnel. If R&D personnel serve multiple R&D projects at the same time, the labor costs are allocated proportionally among different R&D projects based on the working hour records of R&D personnel of various R&D projects provided by the management department of the Company. If the personnel directly engaged in R&D activities and external R&D personnel are also engaged in non-R&D activities, the Company will allocate the actual labor costs between R&D expenses and production & operation expenses by adopting reasonable methods such as the proportion of actual working hours based on the working hour records of R&D personnel at different positions. (2) Direct input costs Direct input costs refer to the relevant expenses actually incurred by the Company for the implementation of R&D activities, Including: 1) costs of directly consumed materials, fuel and power; 2) development and manufacturing expenses of molds and process equipment used for intermediate tests and product trial production, purchase expenses of samples, prototypes and general testing means which do not constitute fixed assets, and inspection expenses of trial production products; 3) expenses for operation, maintenance, adjustment, inspection, testing and maintenance of instruments and equipment used for R&D activities. (3) Depreciation expenses and long-term prepaid expenses 161 / 272 Annual Report 2023 Depreciation expenses refer to the depreciation expenses of instruments, equipment and buildings in use for R&D activities. If the instruments, equipment and buildings in use for R&D activities are also used for non-R&D activities, the use of such instruments, equipment and buildings in use are recorded as necessary, and the depreciation expenses actually incurred are allocated between R&D expenses and production & operation expenses in a reasonable way based on the actual working hours, usable area and other factors. Long-term prepaid expenses refer to the long-term prepaid expenses incurred in the process of reconstruction, modification, decoration and repair of R&D facilities, which are collected according to the actual expenditures and amortized evenly by stages within the prescribed period. (4) Amortization expenses of intangible assets Amortization expenses of intangible assets refer to the amortization expenses of software, intellectual property rights and non-patented technologies (including proprietary technology, licenses, designs and calculation methods) used for R&D activities. (5) Entrusted external R&D expenses Entrusted external R&D expenses refer to the expenses incurred by the Company in entrusting other institutions or individuals at home and abroad to carry out R&D activities (the results of R&D activities are owned by the Company and closely related to the Company's main operations). (6) Others expenses Other expenses refer to other expenses directly related to R&D activities other than the above expenses, including costs of technical books and materials, data translation fees, expert consultation fees, high-tech R&D insurance premiums, retrieval, demonstration, evaluation, appraisal and acceptance fees of R&D results, intellectual property application fees, registration fees, agency fees, conference fees, travel expenses, and communication fees. 2. Expenditure incurred during the research phase of internal R&D projects is included in the current profit or loss when actually incurred. Expenditure incurred during the development phase is recognized as expenditure on an intangible asset when all of the following conditions are satisfied simultaneously: (1) Completing the intangible asset so that it will be available for use or sale is technically feasible; (2) The intention to complete the intangible asset so that it will be available for use or sale exists; (3) The intangible asset will generate probable future economic benefits. Amongst 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 used internally, the usefulness of the intangible asset; (4) Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; (5) The expenditure attributable to the intangible asset during its development can be reliably measured. 27. Impairment of long-term assets √ Applicable □ Not applicable For long-term assets such as long-term equity investments, investment real estate measured with the cost model, fixed assets, construction in progress, right-of-use assets and intangible assets with limited service life, in case that there are signs indicating impairment at the balance sheet date, the recoverable amount should be estimated. Whether there is a sign of impairment or not, the goodwill acquired through the business combination and intangible assets with indefinite service life is tested for impairment each year. The impairment test on goodwill is carried out in combination with its related asset group or asset group portfolio. In case the recoverable amount of the above long-term assets is less than its carrying value, the provision for asset impairment is recognized according to its differences and included in the current profit or loss. 28. Long-term prepaid expenses √ Applicable □ Not applicable For long-term assets such as long-term equity investments, investment real estate measured with the cost model, fixed assets, construction in progress, right-of-use assets and intangible assets with limited service life, in case that there are signs indicating impairment at the balance sheet date, the recoverable amount should be estimated. Whether there is a sign of impairment or not, the goodwill acquired through the business combination and intangible assets with indefinite service life is tested for impairment each year. The impairment test on goodwill is carried out in combination with its related asset group or asset group portfolio. 162 / 272 Annual Report 2023 In case the recoverable amount of the above long-term assets is less than its carrying value, the provision for asset impairment is recognized according to its differences and included in the current profit or loss. 29. Contract liabilities √ Applicable □ Not applicable The Company recognizes the obligation to transfer goods to customers for the consideration received or receivable from the customers as contract liabilities. 30. Employee compensation (1). Accounting treatment of short-term compensation √ Applicable □ Not applicable During the accounting period when employees render services for the Company, the short-term compensation actually incurred is recognized as liabilities and included in the current profit or loss or the costs of the related assets. (2). Accounting treatment of post-employment benefits √ Applicable □ Not applicable Post-employment benefits are divided into the defined contribution plan and the defined benefit plan. (1) During the accounting period when employees render services for the Company, the amount to be deposited as calculated according to the defined contribution plan is recognized as a liability and included in the current profit or loss or the costs of the related assets. (2) The accounting treatment for the defined benefit plan generally comprises the following steps: 1) According to the expected cumulative benefit unit method, the demographic variables, financial variables, and other variables are estimated through unbiased and mutually consistent actuarial assumption, so as to measure the obligations arising from the defined benefit plan and determine the period of relevant obligations. In addition, the obligation generated from the defined benefit plan is discounted, so as to determine the present value of defined benefit plan obligation and current service cost; 2) In case assets exist in the defined benefit plan, the deficit or surplus generated from the present value of obligations of the defined benefit plan minus the fair value of the assets of the defined benefit plan is recognized as a net liability or net asset in the defined benefit plan. When the defined benefit plan has surplus, the net assets of the defined benefit plan are measured at the lower of the surplus of the defined benefit plan and the upper limit of the assets; 3) At the end of the period, the employee compensation costs generated by the defined benefit plan are recognized as three parts, i.e., service costs, net interest of the net liabilities or net assets of the defined benefit plan, and the changes generated by re-measurement of the net liabilities or net assets of the defined benefit plan, in which the service costs and the net interest of the net liabilities or net assets of the defined benefit plan are included in the current profit or loss or the costs of the related assets, and the changes generated by re-measurement of the net liabilities or net assets of the defined benefit plan are included in other comprehensive income, and cannot be reversed to profit or loss in the subsequent accounting period. However, the amount recognized in other comprehensive income can be transferred within the equity scope. (3). Accounting treatment of termination benefits √ Applicable □ Not applicable If termination benefits are provided to employees, the employee compensation liabilities arising from the termination benefits are recognized on the earlier date of the following and included in the current profit or loss: (1) when the Company cannot unilaterally withdraw the termination benefits provided due to termination of labor relation plan or layoff proposal; (2) when the Company recognizes the cost or expenses related to the restructuring involving payment of termination benefits. (4). Accounting treatment of other long-term employee benefits √ Applicable □ Not applicable 163 / 272 Annual Report 2023 Other long-term employee benefits satisfying the conditions in the defined contribution plan are treated in accounting as stipulated in the defined contribution plan; other long-term benefits beyond those are treated in accounting as stipulated in the defined benefit plan. In order to simplify the related accounting treatment, the generated employee compensation cost is recognized as the service cost. The total net amount of items, including the net interest of net liabilities or assets of other long-term employee compensation and the changes generated from re-measuring net liabilities or assets of other long-term employee compensation, is included in the current profit or loss or the costs of the related assets. 31. Estimated liabilities √ Applicable □ Not applicable 1. The obligations imposed by contingencies, such as providing external guarantees, lawsuits, product quality assurance and onerous contracts, become the current obligations assumed by the Company, which are determined by the Company as provisions when their performance is very likely to result in economic benefit outflow from the Company and their amount can be measured as estimated liabilities. 2. The estimated liabilities are initially measured by the Company based on the optimal estimate to be paid for performing relevant current obligations and their carrying value is reviewed at the balance sheet date. 32. Share-based Payments √ Applicable □ Not applicable 1. Types of share-based payments There are equity-settled and cash-settled share-based payments. 2. Relevant accounting treatment of implementing, modifying and terminating the share-based payment schedule (1) Equity-settled share-based payments These equity-settled share-based payments vested immediately after the grant date and exchanged for employee services are included in relevant costs or expenses as per the fair value of the equity instruments on the grant date, and the capital reserve is adjusted accordingly. For the equity-settled share-based payments that are vested only after the services within the waiting period are completed or the specified performance conditions are satisfied and that are exchanged for employee services, the services acquired in the current period are included in relevant costs or expenses as per the fair value of the equity instruments on the grant date based on the optimal estimate of the number of vesting equity instruments on each balance sheet date within the waiting period, and the capital reserve is adjusted accordingly. The equity-settled share-based payments exchanged for services of other parties are measured as per the fair value of the services of other parties on the date of acquiring if its reliable measurement is possible. If the reliable measurement of the fair value of other parties services is impossible, but the reliable measurement of the fair value of the equity instruments is possible, they are measured as per the fair value of the equity instruments on the date of acquiring the services and included in relevant costs or expenses, with the owners' equity is increased accordingly. (2) Cash-settled share-based payments Cash-settled share-based payments vested immediately after the grant date and exchanged for employee services are included in relevant costs or expenses as per the fair value of the liabilities assumed by the Company on the grant date, and the liabilities are increased accordingly. For cash-settled share-based payments that are vested only after the services within the waiting period are completed or the specified performance conditions are satisfied and that are exchanged for employee services, the services acquired in the current period are included in relevant costs or expenses and corresponding liabilities as per the fair value of the liabilities assumed by the Company based on the optimal estimate of the vesting conditions on each balance sheet date within the waiting period. (3) Modifying and terminating the share-based payment schedule If the fair value of the granted equity instruments is increased, the Company recognizes the increase of the acquired services according to the fair value of the equity instruments. If the number of the granted equity instruments is increased, the Company recognizes the increased fair value of the equity instruments as the increase of the acquired services accordingly. If the Company modifies the vesting conditions in a way favorable to employees, the Company considers the modified vesting conditions when dealing with the vesting conditions. 164 / 272 Annual Report 2023 If the fair value of the granted equity instruments is decreased, the Company continues to recognize the amount of the acquired services according to the fair value of the equity instruments on the grant date, without taking into account the decrease of the fair value of the equity instruments. If the number of the granted equity instruments is decreased, the Company treats the decreased part as cancellation of the granted equity instruments. If the Company modifies the vesting conditions in a way unfavorable to employees, the Company will not consider the modified vesting conditions when dealing with the vesting conditions. If the Company cancels or settles the granted equity instruments within the waiting period (other than the cancellation arising from failure to meet the vesting conditions), the cancellation or settlement is regarded as accelerated vesting treatment to immediately recognize the amount that should be recognized within the remaining waiting period. 33. Preferred shares, perpetual bonds and other financial instruments √ Applicable □ Not applicable According to the relevant standards for financial instruments and the Regulations on the Provisions on Accounting Treatment of Perpetual Bonds (C.C. [2019] No. 2), for financial instruments such as convertible corporate bonds issued, the Company classifies these financial instruments or their components as financial assets, financial liabilities or equity instruments during initial recognition, based on the contractual terms of the financial instruments issued and the economic substance they reflect, not only in legal form, but in combination with the definitions of financial assets, financial liabilities and equity instruments. At the balance sheet date, for financial instruments classified as equity instruments, interest expenses or dividend distributions are treated by the Company as profit distribution. Repurchases, cancellations, and similar transactions are treated as changes in equity. For financial instruments classified as financial liabilities, their interest expense or dividend distribution are treated as borrowing costs, and the gains or losses from repurchase or redemption are included in the current profit or loss. 34. Revenue (1). Accounting policy applied for recognition and measurement of revenues disclosed by business type √ Applicable □ Not applicable 1. Revenue recognition principle On the commencement date of the contract, the Company evaluates the contract, identifies the individual performance obligations provided in the contract and determines whether to perform them within a period or at a time point. The performance obligations are deemed to be performed within a period if one of the following conditions is satisfied, otherwise, at a time point: (1) The customer acquires and consumes the economic benefits brought by the Company's performance while the Company is performing its obligations; (2) the customer is capable to control the commodities under creation during the Company's performance; (3) the commodities produced during the Company's performance have an irreplaceable purpose and the Company has the right to collect the amounts for the performance part already completed to date within the whole contract term. For the obligations performed within a period, the Company recognizes the revenue according to the performance progress in that period. If the performance progress cannot be determined in a reasonable way, but the incurred costs are expected to be reimbursed, the revenue is recognized according to the incurred amount of costs until the performance progress can be determined in a reasonable way. For the obligations performed at a time point, the revenue is recognized at the time of the customer's acquiring the control of related commodities or services. The Company takes into account the following when judging whether the customer has acquired the control over a commodity: (1) The Company has the current right for collection, namely the customer has the current obligation for payment with respect to the commodity; (2) the Company has transferred the legal title of the commodity to the customer, namely the customer has possessed the legal title of the commodity; (3) the Company has transferred the physical commodity to the customer, namely the customer has physical possession of the commodity; (4) the Company has transferred the main risks and returns on the commodity’s title to the customer, namely the customer has acquired the same; (5) the customer has accepted the commodity; and (6) there are other signs indicating that the customer has acquired control over the commodity. 165 / 272 Annual Report 2023 2. Revenue measurement principle (1) The Company measures the revenue according to the transaction price apportioned to the individual performance obligations. Transaction price refers to the consideration amount of which the Company is expected to have right for collection due to transfer of commodities or services to the customer, excluding the amounts charged on behalf of a third party and expected to refund to the customer. (2) In case of a variable consideration in the contract, the Company determines the optimal estimate of the variable consideration according to the expected value or the amount most likely to incur, while the transaction price including the variable consideration cannot exceed the amount under the circumstance where the accumulatively recognized revenue will be highly unlikely to suffer major reversal when relevant uncertainties are eliminated. (3) In case of a major financing composition in the contract, the Company determines the transaction price according to the payable amount assumed to be paid by the customer in cash immediately after it acquires the control over the commodities or services. The difference between the transaction price and the contract consideration is amortized with the effective interest method within the contract term. If the Company expects, on the commencement date of the contract, that the interval between the customer's acquisition of the control of the commodities or services and its payment is not more than one year, the major financing composition in the contract is not taken into account. (4) In case of two or more performance obligations in the contract, the Company apportions the transaction price to the individual performance obligations according to the relative proportion of the individual sales price of the commodities undertaken as per the individual performance obligations on the commencement date of the contract. (2). Difference in accounting policies for revenue recognition and measurement resulting from different business models for similar businesses √ Applicable □ Not applicable The Company mainly sells cosmetics. We have different sales models classified as distribution, direct selling and sales on commission. (1) Distribution The sales revenue is recognized after the Company delivers the products to the buyer according to the provisions of the contract and the buyer accepts the same. (2) Direct selling The sales revenue is recognized after the Company delivers the commodities to the consumer and the consumer confirms receipt and makes payment. (3) Sales on commission The sales revenue is recognized after the Company delivers the products to the commissioned party according to the provisions of the contract and the commissioned party provides the list of sales on commission to the Company upon selling the products to others. 35. Contract cost □ Applicable √ Not applicable 36. Government subsidies √ Applicable □ Not applicable 1. Government subsidies are recognized when all of the following conditions are satisfied: (1) the Company is able to meet the conditions attached to the Government subsidies; (2) the Company is able to receive the government subsidies. In case of government subsidies as monetary assets, they are measured at the amount received or receivable. In case of government subsidies as non-monetary assets, they are measured at the fair value; in case that the fair value cannot be acquired in a reliable way, they are measured at the nominal amount. 2. Determination and accounting treatment method for government subsidies related to assets Government subsidies that are used for purchasing and construction or otherwise forming long-term assets as specified in government documents are classified as government subsidies related to assets. In case of no provision in government documents, the government subsidies are determined on the basis of the essential condition required for obtaining the subsidies, and considered as related to assets if the essential condition is purchasing and construction or otherwise forming long-term assets. Government 166 / 272 Annual Report 2023 subsidies related to assets offset the carrying value of relevant assets or are recognized as deferred income. If the government subsidies related to assets are recognized as deferred income, they are included in the profit and loss in a reasonable and systematic way within the service life of relevant assets. Government subsidies measured at nominal amount are directly included in the current profit or loss. If related assets are sold, transferred, scrapped or damaged before the end of their service life, related deferred income balance unallocated is transferred into the profit and loss for the period of asset disposal. 3. Determination and accounting treatment of government subsidies related to income Government subsidies other than those related to assets are classified as government subsidies related to income. If it is difficult to distinguish whether the government subsidies containing both the part related to assets and the part related to income are related to assets or income, the government subsidies are entirely classified as government subsidies related to income. Government subsidies related to income that are used for compensation for relevant costs or losses in subsequent periods are recognized as deferred income, and included in the current profit or loss or offset relevant costs in the period in which relevant costs or losses are recognized; those used for compensation for relevant costs or losses that have incurred are directly included in the current profit or loss or offset relevant costs. 4. Government subsidies related to daily business activities of the Company are included in other income or offset relevant costs according to the nature of the economic business. Government subsidies unrelated to the daily business activities of the Company are included in non-operating revenue or expenses. 37. Deferred income tax assets/liabilities √ Applicable □ Not applicable 1. Based on the difference between the carrying value of the assets or liabilities and their tax basis (if the tax basis of the items not recognized as assets or liabilities can be determined according to the provisions of the tax law, the difference between that tax basis and their physical count quantity), the deferred income tax assets or liabilities are calculated and recognized according to the tax rate applicable in the period where it is expected to recover the assets or liquidate the liabilities. 2. Deferred income tax assets are recognized to the extent that it is very likely to obtain the taxable income to deduct the deductible temporary differences. If at the balance sheet date, there is conclusive evidence proving that it is very likely that sufficient taxable income will be obtained in future periods to deduct the deductible temporary differences, the deferred income tax assets not recognized in previous accounting periods is recognized. 3. At the balance sheet date, the carrying value of the deferred income tax assets is reviewed. When it is very likely that sufficient taxable income will not be obtained in future periods to deduct their benefits, the carrying value of the deferred income tax assets is written down. When it is very likely that sufficient taxable income will be obtained, the amount written down is reversed. 4. The current income tax and deferred income tax of the Company are included in the current profit or loss as income tax expense or income, except for the income tax arising from the following circumstances: (1) business combination; (2) transaction or matters recognized directly in the owners' equity. 5. Where the following conditions are met simultaneously, the Company will present the deferred income tax assets and deferred income tax liabilities at the net amount after offset: (1) the Company has a legal right to settle the current income tax assets and liabilities; (2) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity, or different taxable entities. However, in the future, for each significant period of deferred income tax assets and liabilities being reversed, the involved taxable entity intends to either settle current tax liabilities and assets on a net basis, or to acquire the assets and settle the liabilities simultaneously. 38. Lease √ Applicable □ Not applicable Judgment and accounting treatment of the Company as the lessee for short-term leases and low- value asset leases subject to simplified treatment √ Applicable □ Not applicable On the start date of the lease term, the Company recognizes leases with a lease term not exceeding 12 months and no purchase option as short-term leases; leases with low value when individual leased assets 167 / 272 Annual Report 2023 are brand-new assets are recognized as leases of low-value assets. If the Company subleases or is expected to sublease the leased assets, the original lease is not recognized as a lease of low-value assets. For all short-term leases and leases of low-value assets, the Company records the lease payments in the cost of related assets or the current profit or loss by applying the straight-line method over each period of the lease term. Except for the above-mentioned short-term leases and leases of low-value assets that adopt simplified treatment, the Company recognizes leases as right-of-use assets and lease liabilities, on the start date of the lease term. (1) Right-of-use assets Right-of-use assets are initially measured at cost which includes: 1) the initial measurement amount of lease liabilities; 2) the lease payments made on or before the start date of the lease term, deducting the amounts related to the lease incentive given if a lease incentive exists; 3) the initial direct costs incurred by the lessee; 4) the estimated costs to be incurred by the lessee to dismantle and remove leased assets, restore the site where the leased assets are located, or restore the leased assets to the condition agreed upon in the lease terms. The Company depreciates right-of-use assets with the straight-line method. If it can be reasonably determined that the Company will acquire ownership of the leased assets at the expiration of the lease term, the Company accrues depreciation over the remaining service life of the leased assets. If it cannot be reasonably determined that the Company will acquire ownership of the leased assets at the expiration of the lease term, the Company accrues depreciation over the lease term or the remaining service life of the leased assets, whichever is shorter. (2) Lease liabilities On the start date of the lease term, the Company recognizes the present value of the outstanding lease payments as lease liabilities. When calculating the present value of lease payments, the interest rate implicit in the lease is used as the discount rate. If the interest rate implicit in the lease cannot be determined, the Company’s incremental borrowing rate is used as the discount rate. The difference between the lease payment and its present value is regarded as the unrecognized financing expense, and the interest expense is recognized in each period of the lease term according to the discount rate of the present value of the recognized lease payment, and is included in the current profit or loss. Variable lease payments that are not included in the measurement of lease liabilities are included in the current profit or loss when actually incurred. After the start date of the lease term, when there is a change in the actual amount of fixed payment, a change in the estimated payable amount of the guaranteed residual value, a change in the index or ratio used to determine the lease payment amount, or a change in the evaluation results or actual exercise of the purchase option, renewal option or termination option, the Company re-measures the lease liabilities according to the present value of the changed lease payments, and adjusts the carrying value of the right- of-use assets accordingly. If the carrying value of the right-of-use assets has been reduced to zero, but the lease liabilities still need to be further reduced, the remaining amount is included in the current profit or loss. Classification and accounting treatment of the Company as the lessor for leases √ Applicable □ Not applicable On the start date of the lease term, the Company classifies the leases that have almost all the risks and rewards related to the ownership of the leased assets substantially transferred as financial leases, and other leases as operating leases. (1) Operating leases During each period of the lease term, the Company recognizes the lease receipts as rental income by applying the straight-line method, capitalizes the initial direct expenses incurred and amortizes the expenses on the same basis as for rental income recognition, to be included in the current profit or loss in installments. The variable lease payments obtained by the Company related to operating leases but not included in the lease receipts are included in the current profit or loss when actually incurred. (2) Financial leases On the start date of the lease term, the Company recognizes the financial lease receivables based on the net lease investment (the sum of the unguaranteed residual value and the present value of the lease receipts that have not been received on the start date of the lease term discounted at the interest rate implicit in lease), and derecognizes financial lease assets. During each period of the lease term, the Company calculates and recognizes interest income based on the interest rate implicit in the lease. 168 / 272 Annual Report 2023 The variable lease payments obtained by the Company that are not included in the measurement of net lease investment are included in the current profit or loss when actually incurred. 39. Other significant accounting policies and estimates √ Applicable □ Not applicable Accounting treatment related to repurchasing the Company’s shares If the Company’s shares are acquired due to reasons such as reducing registered capital or rewarding employees, the actual amount paid is treated as treasury shares and recorded for future reference. Where the repurchased shares are canceled, the difference between the total face value of the shares calculated based on the face value and number of canceled shares and the actual amount paid for the repurchase will be offset against the capital reserve. If the capital reserve is insufficient to be offset, the retained earnings will be offset. Where the repurchased shares are rewarded to employees of the Company as equity-settled share-based payments, the cost of treasury shares delivered to employees and the cumulative amount of capital reserves (other capital reserves) during the waiting period is charged off when employees exercise their rights to purchase shares of the Company and relevant payments are received, and the capital reserves (share premium) are also adjusted according to the difference. 40. Changes in significant accounting policies and estimates (1). Changes in significant accounting policies □ Applicable √ Not applicable (2). Changes in significant accounting estimates □ Applicable √ Not applicable (3). Financial statements at the beginning of the year of the first implementation which are adjusted due to the first implementation of new accounting standards or relevant interpretations from 2023 □ Applicable √ Not applicable 41. Other □ Applicable √ Not applicable VI.Taxes 1. Major tax types and tax rates Particulars on major tax types and tax rates √ Applicable □ Not applicable Tax type Taxing basis Tax rate The output tax is calculated on the basis of the income from sales of products and taxable income from rendering of services calculated 13%, Value-added tax according to the provisions of the tax law. The difference between the 9%, 6%, (VAT) output tax and the amount after deducting the input tax which is 1% allowed to be deductible in the current period is the payable VAT. Consumption tax Taxable sales (volume) 15% In case of ad valorem taxation, it is calculated and paid as per 1.2% of the remaining value after 30% of the original value of the property is 12%, Property tax deducted in a lump sum; in case of taxation according to lease, it is 1.2% calculated and paid as per 12% of the rental income. Urban maintenance and Actual turnover tax paid 7%, 5% construction tax Education Actual turnover tax paid 3% surcharge 169 / 272 Annual Report 2023 Surcharge for Actual turnover tax paid 2% local education Enterprise income Taxable income [Note] tax [Note]: Descriptions on tax payers with different enterprise income tax rates If there are taxpayers with different enterprise income tax rates, details will be disclosed √ Applicable □ Not applicable Name of taxpayer Income tax rate (%) The Company 15 Huzhou Niuke Technology Co., Ltd. 20 Xuzhou Laibo Information Technology Co., Ltd. 20 Hangzhou CORRECTORS Trade Co., Ltd. 20 Hangzhou Weiluoke Cosmetics Co., Ltd. 20 Relevant taxes are calculated and paid according Hanna Cosmetics Co., Ltd. to local tax regulations in South Korea Relevant taxes are calculated and paid according Hapsode Co., Ltd. to local tax regulations in South Korea Relevant taxes are calculated and paid according Hong Kong Keshi Trading Co., Ltd. to local tax regulations in Hong Kong, China Relevant taxes are calculated and paid according Hong Kong Xinghuo Industry Limited to local tax regulations in Hong Kong, China Hong Kong Wanyan Electronic Commerce Co., Relevant taxes are calculated and paid according Limited to local tax regulations in Hong Kong, China Hong Kong Zhongwen Electronic Commerce Co., Relevant taxes are calculated and paid according Limited to local tax regulations in Hong Kong, China Relevant taxes are calculated and paid according Hong Kong Xuchen Trading Limited to local tax regulations in Hong Kong, China Boya (Hong Kong) Investment Management Co., Relevant taxes are calculated and paid according Limited. to local tax regulations in Hong Kong, China Relevant taxes are calculated and paid according Proya Europe SARL to local tax regulations in Luxembourg Relevant taxes are calculated and paid according PROYA PTE. LTD to local tax regulations in Singapore Relevant taxes are calculated and paid according PROYA BEAUTY MALAYSIA SDN. BHD to local tax regulations in Malaysia Relevant taxes are calculated and paid according OR Off&Relax to local tax regulations in Japan Tax payers other than the above 25 2. Tax preference √ Applicable □ Not applicable The Company passed the high-tech enterprise review on December 8, 2023 and obtained the high-tech enterprise certificate, which is valid for 3 years. The preferential period of corporate income tax is from 2023 to 2025. The Company was subject to the enterprise income tax at the preferential rate of 15% during the Reporting Period. According to the Announcement of the Ministry of Finance and the State Taxation Administration on Further Implementing Preferential Policies of Income Tax for Small and Micro Enterprises (Announcement No. 13 of 2022 of the Ministry of Finance and the State Taxation Administration) and the Announcement on Preferential Policies of Income Tax for Small and Micro Enterprises and Individual Industrial and Commercial Households (Announcement No. 6 of 2023 of the Ministry of Finance and the State Taxation Administration), the subsidiaries Huzhou Niuke Technology Co., Ltd., Xuzhou Laibo Information Technology Co., Ltd., Hangzhou CORRECTORS Trade Co., Ltd., and Hangzhou Weiluoke Cosmetics Co., Ltd. meet the tax standards for small low-profit enterprises. Thus, the portion of taxable income not exceeding RMB1 million in the current period is reduced by 25% to be included in the taxable income and the enterprise income tax is paid by such subsidiaries at the rate of 170 / 272 Annual Report 2023 20%, and the portion of taxable income exceeding RMB1 million but not exceeding RMB3 million in the current period is also reduced by 25% to be included in the taxable income and the enterprise income tax is also paid by such subsidiaries at the rate of 20%. According to the Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying Policies for Value-Added Tax Reduction and Exemption for Small-Scale Taxpayers (Announcement No. 1 of 2023 of the Ministry of Finance and the State Taxation Administration), the subsidiary Hangzhou Proya Commercial Management Co., Ltd. meets the conditions for general taxpayers engaging in the life service industry. From January 1, 2023 to December 31, 2023, the subsidiary is allowed to offset the tax payable by an additional 5% of the deductible input tax amount for the current period. 3. Other □ Applicable √ Not applicable VII.Notes to the Items in Consolidated Financial Statements 1. Cash and cash equivalents √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Cash on hand 29,332.00 20,176.08 Cash at bank 3,783,575,412.37 3,078,501,723.18 Other monetary capital 227,480,813.70 82,481,185.79 Deposits with finance companies Total 4,011,085,558.07 3,161,003,085.05 Including: Total cash deposited outside 79,895,831.50 73,162,153.00 China Other explanations At the end of the period, bank deposits subject to restricted use included the fixed-term deposit of RMB335,288,251.36, the transformer fixed-term deposit of RMB250,000.00, and the L/C deposit of RMB8,800,000.00, ETC vehicle deposit of RMB70,000.00, Pinduoduo deposit of 5,298,890.00, and the Tmall and Alipay deposits of RMB2,110,704.68 in other monetary capital. At the beginning of the period, bank deposits subject to restricted use included the fixed-term deposit of RMB30,000,000.00, the transformer fixed deposit of RMB250,000.00, the ETC vehicle deposit of RMB70,000.00, the Pinduoduo deposit of RMB5,000,000.00, and the Tmall and Alipay deposits of RMB350,000.00. 2. Held-for-trading financial assets □ Applicable √ Not applicable 3. Derivative financial assets □ Applicable √ Not applicable 4. Notes receivable (1). Presentation of notes receivable by category □ Applicable √ Not applicable (2). Notes receivable pledged by the Company at the end of the period □ Applicable √ Not applicable 171 / 272 Annual Report 2023 (3). Notes receivable endorsed or discounted by the Company at the end of the period and not yet due on the balance sheet date □ Applicable √ Not applicable (4). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of notes receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (5). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (6). Notes receivable actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important notes receivable: □ Applicable √ Not applicable Explanation on the write-off of notes receivable: □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 5. Accounts receivable (1). Disclosed by account age √ Applicable □ Not applicable Unit: Yuan Currency: RMB Account age Ending book balance Opening book balance Within 1 year Including: Sub-items within 1 year Within 1 year 361,290,118.83 102,578,046.19 Sub-total within 1 year 361,290,118.83 102,578,046.19 1-2 years 1,358,203.20 3,828,412.88 172 / 272 Annual Report 2023 2-3 years 787,682.79 5,152,061.48 Above 3 years 12,055,855.34 14,301,950.43 3-4 years 4-5 years Above 5 years Total 375,491,860.16 125,860,470.98 (2). Disclosed by the classification of bad debt accrual method √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Provision for bad Provision for bad Carrying amount Carrying amount debts debts Category Per Accr Book Per Accr Book cent ual value cent ual value Amount Amount Amount Amount age ratio age ratio (%) (%) (%) (%) Provision 8,401,266. 2.2 8,401,266. 100. 13,574,973 10. 13,574,97 100. for bad 23 4 23 00 .09 79 3.09 00 debts accrued individua lly Including: Provision 8,401,266. 2.2 8,401,266. 100. 13,574,973 10. 13,574,97 100. for bad 23 4 23 00 .09 79 3.09 00 debts accrued individua lly Provision 367,090,59 97. 22,520,39 6.13 344,570,19 112,285,49 89. 10,127,59 9.02 102,157,89 for bad 3.93 76 7.39 6.54 7.89 21 9.48 8.41 debts accrued by portfolio Including: Account 367,090,59 97. 22,520,39 6.13 344,570,19 112,285,49 89. 10,127,59 9.02 102,157,89 age 3.93 76 7.39 6.54 7.89 21 9.48 8.41 portfolio 375,491,86 / 30,921,66 / 344,570,19 125,860,47 / 23,702,57 / 102,157,89 Total 0.16 3.62 6.54 0.98 2.57 8.41 Provision for bad debts accrued individually: √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Name Provision for Reason for Carrying amount Accrual ratio (%) bad debts accrual Provision for bad 8,401,266.23 8,401,266.23 100.00 Expected to be debts accrued unrecoverable individually Total 8,401,266.23 8,401,266.23 100.00 / Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: √ Applicable □ Not applicable By portfolio: Account age portfolio Unit: Yuan Currency: RMB 173 / 272 Annual Report 2023 Ending balance Name Accounts receivable Provision for bad debts Accrual ratio (%) Account age 367,090,593.93 22,520,397.39 6.13 portfolio Total 367,090,593.93 22,520,397.39 6.13 Explanation on provision for bad debts accrued by portfolio: √ Applicable □ Not applicable Ending amount Account age Carrying amount Provision for bad debts Accrual ratio (%) Within 1 year 361,290,118.83 18,064,505.92 5.00 1-2 years 1,358,203.20 407,460.96 30.00 2-3 years 787,682.79 393,841.40 50.00 Above 3 years 3,654,589.11 3,654,589.11 100.00 Subtotal 367,090,593.93 22,520,397.39 6.13 Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of accounts receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (3). Information on provisions for bad debts √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount of changes in the current period Opening Withdrawal Other Ending Category Charge-off balance Accrual or write- change balance or write-off back s Provision 13,574,973.0 124,369.15 289,706.45 5,008,369.5 8,401,266.23 for bad 9 6 debts accrued individual ly Provision 10,127,599.4 13,254,766.4 861,968.51 22,520,397.39 for bad 8 2 debts accrued by portfolio Total 23,702,572.5 13,379,135.5 289,706.45 5,870,338.0 30,921,663.62 7 7 7 Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable 174 / 272 Annual Report 2023 Other explanations: None (4). Accounts receivable actually written off in the current period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Written off amount Accounts receivable actually written off 5,870,338.07 Among them, information on accounts receivable significantly written off □ Applicable √ Not applicable Explanation on the write-off of the account receivable: □ Applicable √ Not applicable (5). Accounts receivable and contract assets of the top five ending balances collected by debtor √ Applicable □ Not applicable Unit: Yuan Currency: RMB Proportion of total Balance Balance of balance of of Balance of accounts accounts contract Ending balance Company accounts receivable and receivable assets at of provision for name receivable at the contract assets at and the end bad debts end of the period the end of the contract of the period assets at the period end of the period (%) Beijing 318,502,679.98 318,502,679.98 84.82 15,925,134.00 Jingdong Century Trading Co., Ltd. Vipshop 21,478,514.58 21,478,514.58 5.72 1,073,925.73 (China) Co., Ltd. Zhejiang 3,779,622.99 3,779,622.99 1.01 188,981.15 Haochao Network Technology Co., Ltd. BOTANIERA 3,622,381.28 3,622,381.28 0.96 181,119.06 (Hangzhou) Health Technology Co., Ltd. Hangzhou 3,199,647.18 3,199,647.18 0.85 254,859.68 Zhishang Technology Co., Ltd. Total 350,582,846.01 350,582,846.01 93.36 17,624,019.62 Other explanations None 175 / 272 Annual Report 2023 Other explanations: □ Applicable √ Not applicable 6. Contract assets (1). Description of contract assets □ Applicable √ Not applicable (2). Amount of and reasons for significant changes in carrying amount during the Reporting Period □ Applicable √ Not applicable (3). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of contract assets with changes in provision for loss in the current period: □ Applicable √ Not applicable (4). Provision for bad debts of contract assets accrued in the current period □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (5). Contract assets actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important contract assets: □ Applicable √ Not applicable Explanation on write-off of contract assets: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 176 / 272 Annual Report 2023 7. Receivable financing (1). Presentation of receivable financing by category √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Bank acceptance bills 7,378,700.06 Total 7,378,700.06 (2). Receivable financing pledged by the Company at the end of the period □ Applicable √ Not applicable (3). Receivable financing endorsed or discounted by the Company at the end of the period and not yet due on the balance sheet date √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount derecognized at the end Amount not derecognized at the Item of the period end of the period Bank acceptance bills 600,000.00 Total 600,000.00 It is unlikely that a bank acceptance note will be overdue, as the acceptor of bank acceptance note is a high-credit commercial bank. Therefore, the Company has derecognized endorsed or discounted bank acceptance notes. If any of such notes is overdue, the Company will be still jointly and severally liable to the holder according to the Negotiable Instruments Law. (4). Disclosed by the classification of bad debt accrual method √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Provision for bad Provision for bad Carrying amount Carrying amount Category debts debts Book Book Accrual Accrual Percentage value Percentage value Amount Amount ratio Amount Amount ratio (%) (%) (%) (%) Provision for bad debts accrued individually Including: Provision 7,378,700.06 100.00 7,378,700.06 for bad debts accrued by portfolio Including: Bank 7,378,700.06 100.00 7,378,700.06 acceptance bills 7,378,700.06 / / 7,378,700.06 / / Total Provision for bad debts accrued individually: □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable 177 / 272 Annual Report 2023 Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of receivable financing with changes in provision for loss in the current period: □ Applicable √ Not applicable (5). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (6). Receivable financing actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important receivable financing: □ Applicable √ Not applicable Explanation on write-off of receivable financing: □ Applicable √ Not applicable (7). Changes in the current period of receivables financing and changes in fair value: □ Applicable √ Not applicable (8). Other explanations: □ Applicable √ Not applicable 8. Prepayments (1). Prepayments are presented by account age √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Account age Amount Percentage (%) Amount Percentage (%) Within 1 200,521,100.41 98.84 88,898,806.55 97.18 year 1-2 years 1,427,668.59 0.70 1,696,085.16 1.85 2-3 years 383,035.66 0.19 829,263.44 0.91 Above 3 538,390.92 0.27 59,368.00 0.06 years Total 202,870,195.58 100.00 91,483,523.15 100.00 Explanation on reasons for prepayments with an account age of more than one year and a significant amount are not settled in time: None 178 / 272 Annual Report 2023 (2). Prepayments of the top five ending balances collected by prepaid objects √ Applicable □ Not applicable Ratio of total ending Company name Ending balance balance of prepayment (%) Hangzhou Alimama Software Service Co., 57,138,476.76 28.17 Ltd. [Note 1] Wuhan Juliang Xingtu Technology Co., 34,771,709.17 17.14 Ltd. [Note 2] Guangxi Jingdong Qingchuan E- 29,688,880.41 14.63 commerce Co., Ltd. [Note 3] Shanghai Boguan Ruisi Media Technology 12,671,442.01 6.25 Co., Ltd. Shanghai Zhuiji Information Technology 9,140,806.81 4.51 Co., Ltd. Total 143,411,315.16 70.70 Other explanations [Note 1] The prepayments are the consolidated statistics of Hangzhou Alimama Software Service Co., Ltd. and Zhejiang Alibaba Communication Technology Co., Ltd. under common control. [Note 2] The prepayments are the consolidated statistics of Hubei Juliang Engine Technology Co., Ltd. and Wuhan Juliang Xingtu Technology Co., Ltd. under common control. [Note 3] The prepayments are the consolidated statistics of Guangxi Jingdong Qingchuan E-commerce Co., Ltd. and Chongqing Jingdong Haijia e-commerce Co., Ltd.. under common control. Other explanations □ Applicable √ Not applicable 9. Other receivables Presentation by item √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Interest receivable Dividend receivable Other receivables 81,966,213.90 73,564,083.63 Total 81,966,213.90 73,564,083.63 Other explanations: □ Applicable √ Not applicable Interest receivable (1). Classification of interest receivable □ Applicable √ Not applicable (2). Significant overdue interest □ Applicable √ Not applicable (3). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: 179 / 272 Annual Report 2023 □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable (4). Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of interest receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (5). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (6). Interest receivable actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important interest receivable □ Applicable √ Not applicable Explanation on write-off of receivable financing: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable Dividend receivable (1). Dividend receivable □ Applicable √ Not applicable (2). Important dividends receivable with an account age of more than one year □ Applicable √ Not applicable (3). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable 180 / 272 Annual Report 2023 Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable (4). Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of dividends receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (5). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (6). Dividends receivable actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important dividends receivable □ Applicable √ Not applicable Explanation on write-off of receivable financing: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable Other receivables (1). Disclosed by account age √ Applicable □ Not applicable Unit: Yuan Currency: RMB Account age Ending book balance Opening book balance Within 1 year Including: Sub-items within 1 year Within 1 year 83,104,304.36 65,862,919.09 Sub-total within 1 year 83,104,304.36 65,862,919.09 1-2 years 3,463,981.21 19,331,287.17 2-3 years 5,143,264.28 22,496,350.23 Above 3 years 28,159,425.53 6,470,493.57 3-4 years 4-5 years Above 5 years Total 119,870,975.38 114,161,050.06 (2). Classification by nature of payment √ Applicable □ Not applicable 181 / 272 Annual Report 2023 Unit: Yuan Currency: RMB Nature of payment Ending book balance Opening book balance Security deposits 10,750,199.61 22,781,728.37 Suspense payment receivables 105,147,206.95 90,500,345.08 Reserve funds 620,596.53 552,985.89 Temporary loans 3,000,000.00 Other 352,972.29 325,990.72 Total 119,870,975.38 114,161,050.06 (3). Information on provision for bad debts √ Applicable □ Not applicable Unit: Yuan Currency: RMB First stage Second stage Third stage Expected credit loss Expected credit loss Expected Provision for bad for the entire for the entire credit losses Total debts duration (credit duration (credit over the next impairment not impairment has 12 months occurred) occurred) Balance as of 3,293,145.99 4,430,510.11 32,873,310.33 40,596,966.43 January 1, 2023 Balance as of January 1, 2023 in the current period – Transferred into -173,199.06 173,199.06 the second stage – Transferred into -355,402.74 355,402.74 the 3rd stage – Transferred back to the second stage – Transferred back to the first stage Amount accrued 1,035,268.26 -3,209,112.07 -518,361.14 -2,692,204.95 in the current period Amount written back in the current period Amount charged- off in the current period Amount written off in the current period Other changes Balance as of 4,155,215.19 1,039,194.36 32,710,351.93 37,904,761.48 December 31, 2023 Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of other receivables with changes in provision for loss in the current period: 182 / 272 Annual Report 2023 □ Applicable √ Not applicable The amount of provision for bad debts in the current period and the basis for evaluating whether the credit risk of financial instruments increases significantly: □ Applicable √ Not applicable (4). Information on provisions for bad debts √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount of changes in the current period Charge- Opening Withdrawal Ending Category off or Other balance Accrual or write- balance write- changes back off Provision 25,821,363.11 382,862.44 26,204,225.55 for bad debts accrued individually Provision 14,775,603.32 -3,075,067.39 11,700,535.93 for bad debts accrued by portfolio Total 40,596,966.43 -2,692,204.95 37,904,761.48 Among them, significant amount of bad-debt provision written back or withdrawn in the current period: □ Applicable √ Not applicable Other explanations None (5). Other receivables actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of other important receivables: □ Applicable √ Not applicable Explanation on write-off of other receivables: □ Applicable √ Not applicable (6). Other receivables of the top five ending balances collected by debtor √ Applicable □ Not applicable Unit: Yuan Currency: RMB As a proportion of total Provision for Ending ending Nature of bad debts Company name Account age balance balance in payment Ending other balance receivables (%) 183 / 272 Annual Report 2023 Beijing 58,826,562.99 49.07 Suspense RMB58,801,56 2,952,578.15 Youzhuju payment 2.99 with an Network receivables account age Technology within 1 year, Co., Ltd. and RMB25,000.00 with an account age of 2-3 years Zhejiang Tmall 18,463,296.17 15.40 Suspense Within 1 year 923,164.81 Technology payment Co., Ltd. receivables EURL 18,169,451.02 15.16 Suspense Above 3 years 18,169,451.0 PHARMATIC payment 2 A receivables SIKEROM 8,034,774.53 6.70 Suspense Above 3 years 8,034,774.53 EURPOE payment GMBH receivables Hangzhou 4,708,614.72 3.93 Security Above 3 years 4,708,614.72 Property deposits Maintenance Fund Management Center Total 108,202,699.4 90.26 / / 34,788,583.2 3 3 (7). Presented as other receivables due to centralized fund management □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 10. Inventories (1). Classification of inventories √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Provision for Provision for devaluation of devaluation of Item Carrying Carrying inventories/Impairment Carrying value inventories/Impairment Carrying value amount amount provision of contract provision of contract performance cost performance cost Raw 64,320,795.95 10,411,607.57 53,909,188.38 80,114,114.87 1,703,611.59 78,410,503.28 materials Packaging 54,811,928.32 4,460,418.42 50,351,509.90 42,300,426.18 1,016,137.11 41,284,289.07 Work in 22,883,723.89 252,167.47 22,631,556.42 18,952,830.41 134,093.52 18,818,736.89 process Outsourcing 22,364,071.52 171,660.98 22,192,410.54 12,011,197.41 65,685.51 11,945,511.90 gifts Inventory 725,768,386.69 88,209,742.39 637,558,644.30 546,279,426.61 37,780,598.48 508,498,828.13 commodities Low-value 10,957,787.46 385,941.32 10,571,846.14 10,474,077.34 380,619.88 10,093,457.46 consumables Total 901,106,693.83 103,891,538.15 797,215,155.68 710,132,072.82 41,080,746.09 669,051,326.73 184 / 272 Annual Report 2023 (2). Provision for devaluation of inventories and impairment provision of contract performance cost √ Applicable □ Not applicable Unit: Yuan Currency: RMB Increased amount in the Decreased amount in Opening current period the current period Item Ending balance balance Write-back or Accrual Other Other charge-off Raw 1,703,611.59 9,254,051.84 546,055.86 10,411,607.57 materials Packaging 1,016,137.11 4,393,756.45 949,475.14 4,460,418.42 Work in 134,093.52 250,947.19 132,873.24 252,167.47 process Outsourcing 65,685.51 1,106,061.12 1,000,085.65 171,660.98 gifts Inventory 37,780,598.48 91,647,961.79 41,218,817.88 88,209,742.39 commodities Low-value 380,619.88 105,003.73 99,682.29 385,941.32 consumables Total 41,080,746.09 106,757,782.12 43,946,990.06 103,891,538.15 Reason for write-back or charge-off of provisions for devaluation of inventories in the current period √ Applicable □ Not applicable At the end of the current period, the net realizable value of some products was lower than their corresponding cost, so the provision for devaluation of inventories was accrued based on the difference between the cost and the net realizable value; In the current period, the Company consumed, sold or scraped some of the inventories of which the Company had already accrued provisions for devaluation, so the provisions for devaluation was charged off in the current period. Provision for devaluation of inventories accrued by portfolio □ Applicable √ Not applicable Accrual standards for provision for devaluation of inventories accrued by portfolio □ Applicable √ Not applicable (3). Capitalized amount of borrowing expenses included in ending balance of inventories and its calculation standard and basis □ Applicable √ Not applicable (4). Explanation on current amortization amount of contract performance cost □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 11. Held-for-sale assets □ Applicable √ Not applicable 12. Non-current assets due within one year □ Applicable √ Not applicable Debt investments due within one year □ Applicable √ Not applicable 185 / 272 Annual Report 2023 Other debt investments due within one year □ Applicable √ Not applicable Other explanations on non-current assets due within one year None 13. Other current assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Contract acquisition cost Return cost receivable 9,190,580.83 8,782,156.33 Input VAT to be deducted 90,306,570.44 36,944,213.35 Advance payment of taxes 267,921.80 4,009,626.89 Total 99,765,073.07 49,735,996.57 Other explanations None 14. Debt investments (1). Information on debt investments □ Applicable √ Not applicable Changes in impairment provisions of debt investments in the current period □ Applicable √ Not applicable (2). Significant debt investments at the end of the period □ Applicable √ Not applicable (3). Information on accrual of impairment provisions □ Applicable √ Not applicable Classification basis and accrual ratio of impairment provisions for each stage: None Explanation on significant changes in book balance of debt investments with changes in provision for loss in the current period: □ Applicable √ Not applicable Amount of impairment provision accrued in the current period and the basis for evaluating whether the credit risk of financial instruments increases significantly □ Applicable √ Not applicable (4). Information on debt investments actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important debt investments □ Applicable √ Not applicable Explanation on write-off of debt investments: □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 186 / 272 Annual Report 2023 15. Other debt investments (1). Information on other debt investments □ Applicable √ Not applicable Changes in impairment provisions of other debt investments in the current period □ Applicable √ Not applicable (2). Important other debt investments at the end of the period □ Applicable √ Not applicable (3). Information on accrual of impairment provisions □ Applicable √ Not applicable Classification basis and accrual ratio of impairment provisions for each stage: None Explanation on significant changes in book balance of other debt investments with changes in provision for loss in the current period: □ Applicable √ Not applicable Amount of impairment provision accrued in the current period and the basis for evaluating whether the credit risk of financial instruments increases significantly □ Applicable √ Not applicable (4). Information on other debt investments actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important other debt investments □ Applicable √ Not applicable Explanation on write-off of other debt investments: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 16. Long-term receivables (1). Information on long-term receivables □ Applicable √ Not applicable (2). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable 187 / 272 Annual Report 2023 (3). Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of long-term receivables with changes in provision for loss in the current period: □ Applicable √ Not applicable Amount of provision for bad debts accrued in the current period and the basis for evaluating whether the credit risk of financial instruments increases significantly □ Applicable √ Not applicable (4). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (5). Information on long-term receivables actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important long-term receivables: □ Applicable √ Not applicable Explanation on the write-off of long-term receivables: □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 188 / 272 Annual Report 2023 17. Long-term equity investments (1). Information on long-term equity investments √ Applicable □ Not applicable Unit: Yuan Currency: RMB Current changes Recognized Declared Ending investment Other Other Invested Opening payment Impairment Ending balance of Additional Investment gain and loss comprehensi chang entity balance of cash provision Other balance impairment investment decrease under the -ve income es in dividends accrued provisions equity adjustments equity or profits method I. Joint Venture Huzhou 3,068,948 -8,956.25 3,059,9 Panrui .16 91.91 Industry Investment Partnership (Limited Partnership) Subtotal 3,068,948 -8,956.25 3,059,9 .16 91.91 II. Affiliate Xiongke 2,649,619 -31,784.81 2,617,8 Culture .70 34.89 Media (Hangzhou) Co., Ltd. Jiaxing 111,253,2 18,636,363. Woyong 21.93 64 - Investment - 100,964 20,250,000.0 Partnership 8,675,141.73 ,443.84 0 (Limited Partnership) Zhuhai 10,576,29 Haishilong 8.67 - 2,401,2 81,442,213. Biotechnolo 8,175,090.89 07.78 22 gy Co., Ltd. Beijing 4,918,865 Xiushi .34 4,530,6 Cultural -388,185.27 80.07 Developmen t Co., Ltd. Matis 6,066,423 6,066,423. Information .66 66 Technology (Guangzhou ) Co., Ltd. Subtotal 135,464,4 18,636,363. 6,066,423. - - 110,514 81,442,213. 29.30 64 66 17,270,202.7 20,250,000.0 ,166.58 22 0 0 138,533,3 18,636,363. 6,066,423. - - 113,574 81,442,213. Total 77.46 64 66 17,279,158.9 20,250,000.0 ,158.49 22 5 0 189 / 272 Annual Report 2023 (2). Information on impairment testing of long-term equity investments □ Applicable √ Not applicable Other explanations None 190 / 272 Annual Report 2023 18. Other equity instrument investments (1). Information on other equity instrument investments √ Applicable □ Not applicable Unit: Yuan Currency: RMB Current changes Reason for other equity Gains Losses Dividend Accumulated Accumulated instrument recognized in recognized in income gains losses investments Opening other other Ending recognized recognized in recognized in designated as Item Additional Investment balance comprehensi- comprehensi- Other balance in the other other measured at investment decrease ve income in ve income in current comprehensi- comprehensive fair value the current the current period ve income income through other period period comprehensi- ve income Hangzhou Refer to Regenovo Bio- 20,580,0 20,580,0 “Other technology Co., 00.00 00.00 explanations” Ltd. Refer to 35,822,4 35,822,4 LIPOTRUE,S.L. “Other 00.00 00.00 explanations” Refer to Golong Holdings 90,000,0 - 51,258,0 -38,742,000.00 “Other Co., Ltd. 00.00 38,742,000.00 00.00 explanations” 146,402, - 107,660, Total -38,742,000.00 / 400.00 38,742,000.00 400.00 (2). Explanation on derecognition in the current period □ Applicable √ Not applicable Other explanations: √ Applicable □ Not applicable Reason for equity instrument investments designated as measured at fair value through other comprehensive income The Company invests in equity for strategic investment purposes, and the investees will take the Company's investments as equity instruments. Therefore, the Company designates such equity instrument investments as financial assets at fair value through other comprehensive income. 191 / 272 Annual Report 2023 19. Other non-current financial assets □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 20. Investment real estate Measurement mode of investment real estate (1). Investment real estate with the cost measurement mode Unit: Yuan Currency: RMB Building and Land use Construction Item Total construction rights in progress I. Original carrying value 1. Beginning balance 78,781,143.26 78,781,143.26 2. Current increase (1) Outsourcing (2) Transfer-in of inventories, fixed assets, or construction in process (3) Increase due to business combination 3. Current decrease (1) Disposal (2) Other transfer-out 4. Ending balance 78,781,143.26 78,781,143.26 II. Accumulated depreciation and amortization 1. Beginning balance 10,126,442.45 10,126,442.45 2. Current increase 2,498,228.90 2,498,228.90 (1) Accrual or amortization 2,498,228.90 2,498,228.90 3. Current decrease (1) Disposal (2) Other transfer-out 4. Ending balance 12,624,671.35 12,624,671.35 III. Impairment provision 1. Beginning balance 2. Current increase (1) Accrual 3. Current decrease (1) Disposal (2) Other transfer-out 4. Ending balance IV. Carrying value 1. Ending carrying value 66,156,471.91 66,156,471.91 2. Opening carrying value 68,654,700.81 68,654,700.81 (2). Real estate held for investment with pending proprietorship certificate □ Applicable √ Not applicable 192 / 272 Annual Report 2023 (3). Information on impairment testing of investment real estate with the cost measurement mode □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 21. Fixed assets Presentation by item √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Fixed assets 827,350,985.29 570,376,309.67 Disposal of fixed assets Total 827,350,985.29 570,376,309.67 Other explanations: □ Applicable √ Not applicable Fixed assets (1). Information on fixed assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Houses and General Dedicated Means of Item Total buildings equipment equipment transportation I. Original carrying value: 1. Beginning 539,295,502.97 80,477,003.51 249,649,332.67 20,584,593.97 890,006,433.12 balance 2. Current 202,409,554.02 11,394,343.95 103,401,559.42 6,037,463.71 323,242,921.10 increase (1) Purchase 9,613,663.30 11,847,662.98 6,037,463.71 27,498,789.99 (2) Transfer- in of 202,409,554.02 1,780,680.65 91,553,896.44 295,744,131.11 construction in process (3) Increase due to business combination 3. Current 4,685,530.91 11,082,474.20 510,746.31 16,278,751.42 decrease (1) Disposal 4,685,530.91 11,082,474.20 510,746.31 16,278,751.42 or scrapping 4. Ending 741,705,056.99 87,185,816.55 341,968,417.89 26,111,311.37 1,196,970,602.80 balance II. Accumulated depreciation 1. Beginning 127,549,692.50 41,778,273.41 133,987,291.36 16,314,866.18 319,630,123.45 balance 2. Current 21,550,471.57 10,992,033.33 24,581,637.89 3,356,409.23 60,480,552.02 increase (1) Accrual 21,550,471.57 10,992,033.33 24,581,637.89 3,356,409.23 60,480,552.02 3. Current 946,981.73 10,457,692.86 423,915.63 11,828,590.22 decrease 193 / 272 Annual Report 2023 (1) Disposal 946,981.73 10,457,692.86 423,915.63 11,828,590.22 or scrapping 4. Ending 149,100,164.07 51,823,325.01 148,111,236.39 19,247,359.78 368,282,085.25 balance III. Impairment provision 1. Beginning balance 2. Current 1,337,532.26 1,337,532.26 increase (1) Accrual 1,337,532.26 1,337,532.26 3. Current decrease (1) Disposal or scrapping 4. Ending 1,337,532.26 1,337,532.26 balance IV. Carrying value 1. Ending carrying 592,604,892.92 35,362,491.54 192,519,649.24 6,863,951.59 827,350,985.29 value 2. Opening carrying 411,745,810.47 38,698,730.10 115,662,041.31 4,269,727.79 570,376,309.67 value (2). Information on temporarily idle fixed assets □ Applicable √ Not applicable (3). Fixed assets leased out through operating lease □ Applicable √ Not applicable (4). Information on fixed assets without property right certificate √ Applicable □ Not applicable Unit: Yuan Currency: RMB Reason for failure to obtain the Item Carrying value property right certificate Expansion of Huzhou 123,603,623.54 The property right certificate is Production Base still being processed Longwu R&D Center 77,580,055.84 The property right certificate is still being processed Total 201,183,679.38 (5). Information on impairment testing of fixed assets √ Applicable □ Not applicable The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value □ Applicable √ Not applicable Unit: Yuan Currency: RMB Determination Determination Carrying Recoverable Impairment of fair value Key Item basis of key value amount amount and disposal parameter parameters costs 194 / 272 Annual Report 2023 It is the equipment to be scrapped, Dedicated 1,337,53 1,337,532.2 with the equipment 2.26 6 estimated disposal value of RMB0 1,337,53 1,337,532.2 Total / / / 2.26 6 The recoverable amount is determined based on the present value of expected future cash flows □ Applicable √ Not applicable Reasons for significant discrepancies between the aforementioned information and the information used in previous years’ impairment tests or external information □ Applicable √ Not applicable Reasons for significant discrepancies between the information used in previous years’ impairment tests of the Company and the actual situation of the current year □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable Disposal of fixed assets □ Applicable √ Not applicable 22. Construction in progress Presentation by item √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Construction in progress 52,038,642.94 207,378,935.86 Engineering materials Total 52,038,642.94 207,378,935.86 Other explanations: □ Applicable √ Not applicable Construction in progress (1). Information on construction in progress √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Item Carrying Impairment Carrying Carrying Impairment Carrying amount provision value amount provision value Huzhou 24,853,830. 24,853, 141,886,053. 141,886,05 Production 82 830.82 44 3.44 Base Expansion Project (Phase I) 195 / 272 Annual Report 2023 Longwu 8,377,199.0 8,377,1 34,804,789.7 34,804,789 R&D 3 99.03 1 .71 Center Constructio n Project Decoration 4,759,533.9 4,759,5 5,282,700.29 5,282,700. engineering 3 33.93 29 Information 8,545,628.8 8,545,6 4,266,606.14 4,266,606. System 3 28.83 14 Upgrade Project Makeup 14,323,636.4 14,323,636 Factory 7 .47 Other 5,502,450.3 5,502,4 6,815,149.81 6,815,149. sporadic 3 50.33 81 projects 52,038,642. 52,038, 207,378,935. 207,378,93 Total 94 642.94 86 5.86 (2). Information on changes in important construction in progress projects in the current period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Proport Including Interest ion of Accum : Amount Amount of Amount capitali Increased accum- -ulated of transfer to of other Progres -zation amount in ulated amount interest Source Opening fixed decrease Ending -s of rate in Item Budget the project of capitaliza of balance assets in -s in the balance works the current invest- interest -tion in funds the current current (%) current period ment to capitali the period period period budget -zation current (%) (%) period Huzhou RMB4 141,886, 77,130,71 194,162,9 15,611, 5,220,46 4.57 Raised Production 16.78m 053.44 9.15 41.77 853.14 5.60 funds Base illion 24,853, and 61.15 61.15 Expansion 830.82 self- Project owned (Phase I) funds Longwu RMB1 34,804,7 89,143,73 77,580,05 37,991,2 8,377,1 96.37 96.37 14,857, 7,969,29 4.57 Raised R&D 28.61m 89.71 5.33 5.84 70.17 99.03 625.44 4.09 funds Center illion and Constructio self- n Project owned funds Information RMB1 4,266,60 10,963,78 1,780,680. 4,904,08 8,545,6 13.55 13.55 5,338,1 2,702,09 4.57 Raised System 12.40m 6.14 8.53 65 5.19 28.83 34.02 1.44 funds Upgrade illion and Project self- owned funds Makeup RMB6 14,323,6 84,955.75 14,408,59 43.45 100.00 Factory 6.11mil 36.47 2.22 lion RMB7 / / 195,281, 177,323,1 287,932,2 42,895,3 41,776, 35,807, 15,891,8 Total 23.90m / / 085.76 98.76 70.48 55.36 658.68 612.60 51.13 illion [Note 1] Amount of other decreases in the current period of Longwu R&D Center Construction Project was incurred due to the partial transfer of decoration fees of lease houses to long-term deferred expenses [Note 2] Amount of decrease in the current period of the Information System Upgrade Project was incurred due to the partial transfer of the Information System Upgrade Project to intangible assets or long-term prepaid expenses upon completion 196 / 272 Annual Report 2023 (3). Information on impairment provision of construction in progress accrued in the current period □ Applicable √ Not applicable (4). Information on impairment testing of construction in progress □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable Engineering materials (1). Information on engineering materials □ Applicable √ Not applicable 23. Productive biological assets (1). Productive biological assets with the cost measurement mode □ Applicable √ Not applicable (2). Information on impairment testing of productive biological assets with the cost measurement mode □ Applicable √ Not applicable (3). Productive biological assets with fair value econometric mode □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 24. Oil and gas assets (1) Information on oil and gas assets □ Applicable √ Not applicable (2) Information on impairment testing of oil and gas assets □ Applicable √ Not applicable Other explanations: None 25. Right-of-use assets (1) Information on right-of-use assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Houses and buildings Total I. Original carrying value 1. Beginning balance 7,481,934.15 7,481,934.15 2. Current increase 12,158,843.83 12,158,843.83 1) Lease-in 12,158,843.83 12,158,843.83 3. Current decrease 4. Ending balance 19,640,777.98 19,640,777.98 II. Accumulated depreciation 197 / 272 Annual Report 2023 1. Beginning balance 1,071,299.90 1,071,299.90 2. Current increase 4,464,656.74 4,464,656.74 (1) Accrual 4,464,656.74 4,464,656.74 3. Current decrease (1) Disposal 4. Ending balance 5,535,956.64 5,535,956.64 III. Impairment provision 1. Beginning balance 2. Current increase (1) Accrual 3. Current decrease (1) Disposal 4. Ending balance IV. Carrying value 1. Ending carrying value 14,104,821.34 14,104,821.34 2. Opening carrying value 6,410,634.25 6,410,634.25 (2) Information on impairment testing of right-of-use assets □ Applicable √ Not applicable Other explanations: None 26. Intangible assets (1). Information on intangible assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Non- Land use Office Patent patented Customer Trademar Item Total rights software right technolo resources k rights gies I. Original carrying value 1. 472,400,13 24,280,27 475,089 563,293. 12,833,68 39,897,00 550,449,47 Beginnin 0.10 8.43 .70 07 4.00 0.00 5.30 g balance 2. 2,891,511. 2,891,511.7 Current 70 0 increase (1) 90,515.95 90,515.95 Purchase (2) Internal R&D (3) Increase due to business combinat ion (4) 2,800,995. 2,800,995.7 Transfer- 75 5 in of 198 / 272 Annual Report 2023 construct ion in process 3. 4,000.0 4,000.00 Current 0 decrease (1) 4,000.0 4,000.00 Disposal 0 4. 472,400,13 27,171,79 471,089 563,293. 12,833,68 39,897,00 553,336,98 Ending 0.10 0.13 .70 07 4.00 0.0 7.00 balance II. Accumulated amortization 1. 92,279,870. 21,721,92 430,621 539,820. 12,819,61 2,340,748. 130,132,59 Beginnin 46 0.25 .47 37 0.79 70 2.04 g balance 2. 11,948,578. 2,552,061. 6,705.9 5,966.14 14,073.21 3,989,700. 18,517,085. Current 91 57 7 00 80 increase (1) 11,948,578. 2,552,061. 6,705.9 5,966.14 14,073.21 3,989,700. 18,517,085. Accrual 91 57 7 00 80 3. 700.00 700.00 Current decrease (1) 700.00 700.00 Disposal 4. 104,228,44 24,273,98 436,627 545,786. 12,833,68 6,330,448. 148,648,97 Ending 9.37 1.82 .44 51 4.00 70 7.84 balance III. Impairment provision 1. Beginnin g balance 2. Current increase (1) Accrual 3. Current decrease (1) Disposal 4. Ending balance IV. Carrying value 1. 368,171,68 2,897,808. 34,462. 17,506.5 33,566,55 404,688,00 Ending 0.73 31 26 6 1.30 9.16 carrying value 2. 380,120,25 2,558,358. 44,468. 23,472.7 14,073.21 37,556,25 420,316,88 Opening 9.64 18 23 0 1.30 3.26 carrying value 199 / 272 Annual Report 2023 At the end of the current period, the proportion of intangible assets formed through internal R&D of the Company to the balance of intangible assets is 0.00%. (2). Information on land use rights without the property ownership certificate □ Applicable √ Not applicable (3) Information on impairment testing of intangible assets □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 27. Goodwill (1). Original carrying value of goodwill □ Applicable √ Not applicable (2). Impairment provision of goodwill □ Applicable √ Not applicable (3). Information about the asset group or combination of asset groups of goodwill □ Applicable √ Not applicable Changes to the asset group or combination of asset groups □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable (4). Specific methods for determining the recoverable amount The recoverable amount is determined based on the net amount after deducting disposal expenses from fair value □ Applicable √ Not applicable The recoverable amount is determined based on the present value of expected future cash flows □ Applicable √ Not applicable Reasons for significant discrepancies between the aforementioned information and the information used in previous years’ impairment tests or external information □ Applicable √ Not applicable Reasons for significant discrepancies between the information used in previous years’ impairment tests of the Company and the actual situation of the current year □ Applicable √ Not applicable (5). Information on performance commitments and corresponding goodwill impairment When goodwill is formed, there is a performance commitment and the reporting period or its previous period is within the performance commitment period □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 200 / 272 Annual Report 2023 28. Long-term prepaid expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Opening Increased Amortized Other Ending balance balance amount in the amount in the decreased current period current period amount Renovation 19,109,585.61 56,322,765.83 9,581,084.61 65,851,266.83 costs Software 33,018.85 1,999,593.00 699,549.85 1,333,062.00 service fees Total 19,142,604.46 58,322,358.83 10,280,634.46 67,184,328.83 Other explanations: None 29. Deferred income tax assets or liabilities (1). Deferred income tax assets without offset √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Item Deductible Deferred Deductible Deferred temporary income taxes temporary income taxes difference Assets difference Assets Impairment provision of assets Provision for bad debts 22,142,965.55 5,533,579.62 14,181,029.90 3,545,098.74 of accounts receivable Provision for devaluation 82,737,837.07 15,220,065.94 24,366,081.72 4,518,122.80 of inventories Impact of share-based 31,715,129.69 5,935,847.80 31,280,678.91 5,940,147.52 payments Unrealized profit from 159,567,947.59 39,891,986.91 42,025,801.32 10,506,450.33 internal transactions Unused membership 127,713,129.39 31,928,282.35 83,272,601.46 20,818,150.36 points Government subsidies 6,383,359.33 957,503.90 6,399,811.33 959,971.70 pertinent to assets Anticipated return losses 6,686,117.43 1,671,529.37 4,541,544.48 1,135,386.12 Estimated unused gifts 50,074,244.87 12,518,561.21 for sold products Interest expenses on 1,321,312.76 198,196.91 convertible bonds Lease expenses 13,940,366.98 2,139,203.47 449,832.92 67,474.94 Advertising and business 10,339,382.64 2,584,845.66 3,258,145.25 814,536.31 promotion expenses Accrued expenses 14,451,922.15 2,914,846.09 Changes in the fair value 38,742,000.00 5,811,300.00 of other equity instrument investments Total 565,815,715.45 127,305,749.23 209,775,527.29 48,305,338.82 (2). Deferred income tax liabilities without offset √ Applicable □ Not applicable Unit: Yuan Currency: RMB 201 / 272 Annual Report 2023 Ending balance Opening balance Item Taxable Deferred Taxable Deferred income temporary income taxes temporary taxes difference Liabilities difference Liabilities Assets assessment appreciation in businesses consolidation under common control Changes in the fair value of other debt investments Changes in the fair value of other equity instrument investments One-time deduction for 110,300,243.62 16,649,225.12 126,101,620.56 19,019,431.67 depreciation of fixed assets Deferred income tax 14,104,821.34 2,162,159.51 recognized on right-of- use assets Total 124,405,064.96 18,811,384.63 126,101,620.56 19,019,431.67 (3). Deferred income tax assets or liabilities presented in net amount after offset √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening Deferred income Deferred income of deferred balance of tax assets and tax assets and income tax deferred income Item liabilities offset liabilities offset assets or tax assets or at the end of the at the beginning liabilities after liabilities after period of the period offset offset Deferred income tax 18,811,384.63 108,494,364.60 48,305,338.82 assets Deferred income tax 18,811,384.63 19,019,431.67 liabilities (4). Details of unrecognized deferred income tax assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Deductible temporary 200,424,961.81 218,452,946.39 difference Deductible losses 414,387,984.35 393,391,257.51 Total 614,812,946.16 611,844,203.90 (5). Deductible loss of unrecognized deferred income tax assets will expire in the following years √ Applicable □ Not applicable Unit: Yuan Currency: RMB Year Ending balance Beginning balance Remarks 2023 44,562,908.90 2024 71,058,103.62 89,520,734.89 2025 61,988,728.89 66,686,117.23 202 / 272 Annual Report 2023 2026 53,623,347.32 63,349,129.45 2027 127,093,665.49 129,272,367.04 2028 100,624,139.03 Total 414,387,984.35 393,391,257.51 / Other explanations: □ Applicable √ Not applicable 30. Other non-current assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Item Carrying Impairmen Carrying Carrying Impairmen Carrying amount t provision value amount t provision value Contract acquisition cost Contract performanc e cost Return cost receivable Contract assets Funds 8,775,522.84 8,775,522.84 prepaid for purchase of long-term assets Other long- 8,199,424.15 8,199,424.15 5,554,726.0 5,554,726.0 term assets 6 6 16,974,946.9 16,974,946.9 5,554,726.0 5,554,726.0 Total 9 9 6 6 Other explanations: None 31. Assets with limited ownership or use rights √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending Opening Carrying Carrying Type Descrip Carrying Carrying Type Descrip Item amount value of tion amount value of tion restricti restricti ons ons Cash 351,817,8 351,817,8 Other Note 1 35,670,00 35,670,00 Frozen Note 2 and 46.04 46.04 0.00 0.00 cash equival ents Accoun ts receiva ble Invento 203 / 272 Annual Report 2023 ries Fixed assets Intangi ble assets Total 351,817,8 351,817,8 / / 35,670,00 35,670,00 / / 46.04 46.04 0.00 0.00 Note 1: It includes fixed-term deposits of RMB335,288,251.36 that cannot be withdrawn at any time, and frozen monetary funds of RMB16,529,594.68, including: the L/C deposit of RMB8,800,000.00, the transformer deposit of RMB250,000.00, ETC vehicle deposit of RMB70,000.00, Pinduoduo deposit of RMB5,298,890.00, and the direct-sales store deposit of RMB2,110,704.68. Note 2: It includes the transformer deposit of RMB250,000.00, ETC vehicle deposit of RMB70,000.00, Pinduoduo deposit of RMB5,000,000.00, and the direct-sales store deposit of RMB350,000.00. Other explanations: None 32. Short-term borrowings (1). Classification of short-term borrowings √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Pledged borrowings Mortgaged borrowings Guaranteed borrowings Credit loans 200,155,555.56 200,195,890.41 Total 200,155,555.56 200,195,890.41 Explanation on classification of short-term borrowings None (2). Information on overdue but yet unrepaid short-term borrowings □ Applicable √ Not applicable Particulars of important overdue but yet unrepaid short-term borrowings: □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 33. Held-for-trading financial liabilities □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 34. Derivative financial liabilities □ Applicable √ Not applicable 35. Notes payable (1). Presentation of notes payable √ Applicable □ Not applicable Unit: Yuan Currency: RMB 204 / 272 Annual Report 2023 Type Ending balance Opening balance Commercial acceptance bills Bank acceptance bills 36,959,074.14 69,626,352.12 Total 36,959,074.14 69,626,352.12 The amount of notes payable due and unpaid at the end of this period is RMB0.00. The reason for failure to pay is that such notes do not exist. 36. Accounts payable (1). Presentation of accounts payable √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Payment for goods 524,325,866.69 252,113,782.78 Expenses 422,130,510.68 213,566,905.71 Payment for acquisition of 72,065,981.23 9,746,795.74 long-term assets Total 1,018,522,358.60 475,427,484.23 (2). Important accounts payable with an account age of more than one year or overdue □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 37. Receipts in advance (1). Presentation of receipts in advance √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Rents receivable in advance 30,514.45 464,328.26 Total 30,514.45 464,328.26 (2). Important receipts in advance with an account age of more than one year □ Applicable √ Not applicable (3). Amount of and reasons for significant changes in carrying amount during the Reporting Period □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 38. Contract liabilities (1). Information on contract liabilities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Advance receipt of payment 116,005,079.06 83,234,612.24 for goods Unused membership points 134,935,549.65 91,368,221.67 Unused gifts for sold products 50,074,244.87 205 / 272 Annual Report 2023 Total 301,014,873.58 174,602,833.91 (2). Important contract liabilities with an account age of more than one year □ Applicable √ Not applicable (3). Amount of and reasons for significant changes in carrying amount during the Reporting Period □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 39. Employee compensation payable (1). Presentation of employee compensation payable √ Applicable □ Not applicable Unit: Yuan Currency: RMB Opening Current Current Item Ending balance balance increase decrease I. Short-term compensation 124,278,743.01 713,532,993.76 672,990,610.04 164,821,126.73 II. Post-employment 660,006.35 22,525,305.34 22,200,906.95 984,404.74 benefits – Defined contribution plans III. Dismissal benefits 3,252,390.82 2,613,427.86 638,962.96 IV. Other benefits due within one year Total 124,938,749.36 739,310,689.92 697,804,944.85 166,444,494.43 (2). Presentation of short-term compensation √ Applicable □ Not applicable Unit: Yuan Currency: RMB Opening Current Current Item Ending balance balance increase decrease I. Salaries, bonuses, 123,139,326.87 650,994,994.44 611,956,277.51 162,178,043.80 allowances and subsidies II. Welfare expense of 26,617,247.44 26,617,247.44 employee III. Social insurance 764,855.85 15,244,969.41 13,835,210.62 2,174,614.64 premium Including: Medical 747,556.58 14,300,711.60 12,909,467.01 2,138,801.17 insurance premium Work-related injury 13,253.30 913,366.91 893,997.66 32,622.55 insurance premium Maternity insurance 4,045.97 30,890.90 31,745.95 3,190.92 premium IV. Housing provident fund 374,560.29 16,192,604.20 16,098,696.20 468,468.29 V. Trade union fund and 4,483,178.27 4,483,178.27 staff education fund VI. Short-term paid leave VII. Short-term profit sharing plan Total 124,278,743.01 713,532,993.76 672,990,610.04 164,821,126.73 206 / 272 Annual Report 2023 (3). Presentation by defined contribution plan √ Applicable □ Not applicable Unit: Yuan Currency: RMB Opening Ending Item Current increase Current decrease balance balance 1. Basic endowment 637,429.90 21,749,419.31 21,435,853.57 950,995.64 insurance 2. Unemployment 22,576.45 775,886.03 765,053.38 33,409.10 insurance 3. Enterprise annuity payment Total 660,006.35 22,525,305.34 22,200,906.95 984,404.74 Other explanations: □ Applicable √ Not applicable 40. Taxes payable √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Enterprise income tax 127,005,079.31 111,162,751.37 Value-added tax (VAT) 71,556,095.69 27,112,038.46 Consumption tax Income tax Urban maintenance and 7,644,618.17 1,288,999.75 construction tax Property tax 6,734,175.81 6,689,657.49 Education surcharge 4,287,830.76 1,003,854.07 Surcharge for local education 2,866,440.40 619,094.66 Withholding of personal 1,867,193.08 4,226,657.07 income tax Stamp duties 804,436.72 796,591.64 Disabled security fund 19,226.94 Total 222,765,869.94 152,918,871.45 Other explanations: None 41. Other payables (1). Presentation by item √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Interest payable Dividends payable Other payables 155,345,148.68 216,392,183.41 Total 155,345,148.68 216,392,183.41 Other explanations: □ Applicable √ Not applicable (2). Interest payable Presentation by category □ Applicable √ Not applicable 207 / 272 Annual Report 2023 Important overdue interest payable: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable (3). Dividends payable Presentation by category □ Applicable √ Not applicable (4). Other payables Other payables presented by nature of payment √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Security deposits 41,092,318.36 46,394,144.19 Restricted share repurchase 107,884,296.66 164,976,000.00 obligations Other 6,368,533.66 5,022,039.22 Total 155,345,148.68 216,392,183.41 Important other payables with an account age of more than one year or overdue √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Reason for failure to repay or carry forward Restricted share repurchase 107,884,296.66 Restricted share repurchase obligations have obligations not been fulfilled yet Total 107,884,296.66 / Other explanations: □ Applicable √ Not applicable 42. Held-for-sale liabilities □ Applicable √ Not applicable 43. Non-current liabilities due within one year √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Long-term borrowings due within one year Bonds payable due within one year Long-term payables due within one year Lease liabilities due within 3,970,060.11 2,549,452.14 one year Total 3,970,060.11 2,549,452.14 Other explanations: None 208 / 272 Annual Report 2023 44. Other current liabilities Information on other current liabilities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Short-term bonds payable Return payment payable Tax on items to be resold 15,022,173.42 10,820,499.59 Total 15,022,173.42 10,820,499.59 209 / 272 Annual Report 2023 Changes in short-term bonds payable: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 210 / 272 Annual Report 2023 45. Long-term borrowings (1). Classification of long-term loans □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 46. Bonds payable (1). Bonds payable √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Convertible corporate bonds 753,119,902.88 724,491,557.93 Total 753,119,902.88 724,491,557.93 211 / 272 Annual Report 2023 (2). Specific information on bonds payable (excluding other financial instruments such as preferred shares and perpetual bonds classified as financial liabilities): √ Applicable □ Not applicable Unit: Yuan Currency: RMB Premium Interest Current Impact of Current or Bonds Face Coupon Issuance Bonds Issuance Opening accrued period current Ending Default period discount Name value rate (%) Date Period Amount balance by face Repaym share balance or not Issuance amortiza value ent conversion tion Proya 100.0 0.5 December 6 years 751,713, 724,491, 4,000,21 28,522,1 3,753,95 140,122.09 753,119, No Convertible 0 8, 2021 000.00 557.93 9.29 97.85 0.00 902.88 Bond Total / / / / 751,713, 724,491, 4,000,21 28,522,1 3,753,95 140,122.09 753,119, / 000.00 557.93 9.29 97.85 0.00 902.88 (3). Explanation on convertible corporate bonds √ Applicable □ Not applicable Item Share conversion conditions Share conversion time 212 / 272 Annual Report 2023 Proya With the approval of the CSRC, namely, the Reply on Approving Proya Cosmetics Co., Ltd.’s Public Issuance June 14, 2022 to December 7, Convertible of Convertible Corporate Bonds (CSRC Approval [2021] No. 3408), the Company publicly issued 7,517,130 2027 Bond convertible bonds to non-specific targets on December 8, 2021, each bond with a face value of RMB 100.00. The total amount of issuance is RMB751,713,000.00. The coupon rate of the aforesaid convertible corporate bonds is 0.30% for the first year, 0.50% for the second year, 1.00% for the 3rd year, 1.50% for the fourth year, 1.80% for the fifth year and 2.00% for the sixth year. Annual interest payment dates are anniversaries of the date of initial offering of convertible bonds. The Company will, no later than five trading days after the interests payment day of each year, pay the interests of the year and, no later than five trading days after the maturity date of convertible corporate bonds, redeem all unconverted convertible bonds from investors at a price of 115% of the par value of the convertible bonds issued that time (including the annual interests of the last tranche). The convertible period of convertible bonds starts from the first trading day after the expiration of six months from the issuance date of convertible bonds until the maturity date of convertible bonds. The initial conversion price is RMB195.98/share, in no case, lower than the average trading price of A shares of the Company in the twenty trading days prior to the publication of the prospectus (if the stock price is adjusted for ex-dividend or ex-dividend in the twenty trading days, the closing price of the trading day before such adjustment is calculated according to the price after the ex-dividend or ex-dividend adjustment) or the average trading price of A shares of the Company in the previous trading day, and is not adjusted up. Due to the implementation of the equity distribution plan and the repurchase and cancellation of some equity incentive restricted shares by the Company, according to the relevant provisions of the Prospectus of Proya Cosmetics Co., Ltd. for Public Issuance of A-share Convertible Corporate Bonds and the relevant provisions of the CSRC on the issuance of convertible corporate bonds, the conversion price of Proya convertible bonds was adjusted from RMB195.98/share to RMB98.25/share, and the adjusted price took effect on December 18, 2023. Accounting treatment and judgment basis of share conversion rights √ Applicable □ Not applicable In the current period, a total of 1,480 convertible corporate bonds were converted, with an increase of RMB1,121.00 in capital stock, an increase of RMB148,524.61 in capital reserve (capital stock premium), and a decrease of RMB9,523.52 in other equity instruments. (4). Explanation on other financial instruments classified as financial liabilities Basic information on other financial instruments such as preferred shares and perpetual bonds issued at the end of the period □ Applicable √ Not applicable Statement of changes in financial instruments such as preferred shares and perpetual bonds issued at the end of the period □ Applicable √ Not applicable 213 / 272 Annual Report 2023 Explanation on the basis for classifying other financial instruments as financial liabilities: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 214 / 272 Annual Report 2023 47. Lease liabilities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Payable operating lease payment 11,172,403.17 3,814,629.83 Unrecognized financing expenses -1,202,096.30 -96,510.42 Total 9,970,306.87 3,718,119.41 Other explanations: None 48. Long-term payable Presentation by item □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable Long-term payable (1). Long-term payables presented by nature □ Applicable √ Not applicable Special accounts payable (1). Special payables presented by nature □ Applicable √ Not applicable 49. Long-term employee compensation payable □ Applicable √ Not applicable 50. Estimated liabilities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Opening balance Ending balance Cause of formation Provide external guarantees Pending litigations Product quality assurance Restructuring obligation Loss-making contract to be performed Return payment 59,282,928.68 33,063,299.45 Estimated future payable potential return losses Other Total 59,282,928.68 33,063,299.45 / Other particulars, including the particulars on key assumptions and estimates concerning estimated significant liabilities None 215 / 272 Annual Report 2023 51. Deferred income Information on deferred income √ Applicable □ Not applicable Unit: Yuan Currency: RMB Opening Current Current Ending Cause of Item balance increase decrease balance formation Government 6,399,811.33 2,062,638.00 2,079,090.00 6,383,359.33 Government subsidies subsidies Total 6,399,811.33 2,062,638.00 2,079,090.00 6,383,359.33 / Other explanations: □ Applicable √ Not applicable 52. Other non-current liabilities □ Applicable √ Not applicable 53. Share capital √ Applicable □ Not applicable Unit: Yuan Currency: RMB Increase or decrease in the change (+, -) Opening Provident Ending balance Issuance Bonus fund balance Other Subtotal of shares shares Share conversion Total 283,519,469 -171,542 113,408,136 1,121 113,237,715 396,757,184 shares Other explanations: According to the resolution of the 11th meeting of the 3rd session of Board of Directors, the resolution of the 13th meeting of the 3rd session of Board of Directors, the resolution of the 2022 annual General Meeting of Shareholders, the resolution of the First Extraordinary General Meeting of Shareholders in 2023 and the revised articles of association of the Company, the Company applied for an increase in registered capital of RMB113,408,136.00, which is increased from capital reserve. The base date of increase is the registration date of implementing equity distribution, and the registered capital after change is RMB396,927,605.00. The above matter has been verified by Pan-China Certified Public Accountants LLP (Special General Partnership) which has issued the Capital Verification Report (TJY (2023) No. 551). According to the resolution of the 12th meeting of the 3rd session of Board of Directors, the resolution of the 13th meeting of the 3rd session of Board of Directors, the resolution of the First Extraordinary General Meeting of Shareholders in 2023 and the revised articles of association of the Company, the Company applied for cash repurchase of 105,350 restricted RMB ordinary shares (A shares) granted but not yet released, and paid a total share repurchase amount of RMB5,846,187.54, of which RMB105,350.00 was reduced in share capital and RMB5,740,837.54 was reduced in capital reserve (equity premium). The above matter has been verified by Pan-China Certified Public Accountants LLP (Special General Partnership) which has issued the Capital Verification Report (T.J.Y. (2023) No. 552). According to the resolution of the 15th meeting of the 3rd session of Board of Directors and the resolution of the 14th meeting of the 3rd session of Board of Supervisors of the Company in 2023, the Company applied for cash repurchase of 66,192 restricted RMB ordinary shares (A shares) granted but not yet released, and paid a total share repurchase amount of RMB3,648,039.70, of which RMB66,192.00 was reduced in share capital and RMB3,581,847.70 was reduced in capital reserve (equity premium). The above matter has been verified by Pan-China Certified Public Accountants LLP (Special General Partnership) which has issued the Capital Verification Report (T.J.Y. (2024) No.93). In the current period, a total of 1,480 convertible corporate bonds were converted, with an increase of RMB1,121.00 in capital stock, an increase of RMB148,524.61 in capital reserve (capital stock premium), and a decrease of RMB9,523.52 in other equity instruments. 216 / 272 Annual Report 2023 54. Other equity instruments (1). Basic information on other financial instruments such as preferred shares and perpetual bonds issued at the end of the period □ Applicable √ Not applicable (2). Statement of changes in financial instruments such as preferred shares and perpetual bonds issued at the end of the period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Outstandi Opening Current increase Current decrease Ending ng financial Carryi Carryi Carrying Numb Numb Carrying instrumen Number ng ng Number value er er value ts value value Proya 7,509,3 50,903,510. 1,480 9,523.5 7,507,8 50,893,986. Convertib 70 12 2 90 60 le Bond Total 7,509,3 50,903,510. 1,480 9,523.5 7,507,8 50,893,986. 70 12 2 90 60 Information on changes of other equity instruments in the current period, explanation on reasons for changes, and basis for relevant accounting treatment: □ Applicable √ Not applicable Other explanations: √ Applicable □ Not applicable In the current period, there was a decrease of RMB9,523.52 due to the current conversion of 1,480 convertible corporate bonds into shares, with an increase of RMB1,121.00 in capital stock, an increase of RMB148,524.61 in capital reserve (capital stock premium), and a decrease of RMB9,523.52 in other equity instruments. 55. Capital reserve √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Opening balance Current increase Current decrease Ending balance Capital premium 858,188,638.87 51,289,781.41 126,433,214.30 783,045,205.98 (Equity premium) Other capital 56,627,147.35 75,619,877.90 51,141,256.80 81,105,768.45 reserve Total 914,815,786.22 126,909,659.31 177,574,471.10 864,150,974.43 Other explanations, including the information on current changes and the explanation on reasons for the changes: 1) Changes in capital premium Capital reserve (capital stock premium) increased by RMB51,289,781.41 in the current period, of which: ① RMB148,524.61 was increased due to the current conversion of convertible corporate bonds into shares. For relevant details, refer to the particulars contained in "46. Bonds payable", "VII. Notes to the Items of Consolidated Financial Statements", "Section X Financial Report" of this Report; ② RMB51,141,256.80 was increased due to the transfer of other capital reserves recognized during the waiting period for the released portion of restricted shares issued by the equity incentive plan into capital stock premium; Capital reserve (capital stock premium) decreased by RMB126,433,214.30, of which: ① RMB113,408,136.00 was decreased due to capitalization of capital reserves. For relevant details, refer to 217 / 272 Annual Report 2023 the particulars contained in "53. Capital stock", "VII. Notes to the Items of Consolidated Financial Statements", "Section X Financial Report" of this Report; ② RMB9,322,685.24 was decreased due to the Company's cash repurchase of restricted RMB ordinary shares (A shares) granted but not yet released. For relevant details, refer to the particulars contained in "53. Capital stock", "VII. Notes to the Items of Consolidated Financial Statements", "Section X Financial Report" of this Report; ③ RMB3,702,393.06 was decreased due to the difference between the payment for purchase of minority equity of the subsidiary Huzhou Niuke Technology Co., Ltd. and the attributable share of identifiable net assets of the subsidiary calculated according to the newly increased shareholding ratio. 2) Changes in other capital reserves Other capital reserve increased by RMB75,619,877.90 in the current period, of which: ① RMB104,825.19 was increased due to the deferred income tax assets accrued for the positive difference between the amount expected to be deducted before tax in the future period and the recognized restricted stock incentive expenses, which is included in other capital reserves increased; ② RMB75,515,052.71 was increased due to the incentive expenses of RMB75,515,052.71 for restricted shares in 2023 recognized according to the Company's equity incentive plan, which are included in other capital reserves. Other capital reserve decreased by RMB51,141,256.80 in the current period due to the transfer of other capital reserves recognized during the waiting period for the released portion of restricted shares issued by the equity incentive plan into capital stock premium. 56. Treasury stock √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Opening balance Current increase Current decrease Ending balance Restricted shares 164,976,000.00 57,091,703.34 107,884,296.66 with repurchase obligation Share repurchase 39,082,438.95 39,082,438.95 Total 164,976,000.00 39,082,438.95 57,091,703.34 146,966,735.61 Other explanations, including the information on current changes and the explanation on reasons for the changes: RMB39,082,438.95 was increased in the current period due to the Company's repurchase of shares through centralized bidding trading with its own funds according to the Proposal on Repurchasing the Company's Shares Through Centralized Bidding Trading, which was approved at the 17th meeting of the 3rd session of Board of Directors in December 13, 2023. As of December 31, 2023, the Company had cumulatively repurchased 395,980 shares of the Company through centralized bidding trading, with a total payment of RMB39,076,754.20 and the transaction costs of RMB5,684.75. RMB57,091,703.34 was decreased in the current period, of which: ① RMB2,570,682.80 was decreased since dividends allocated to restricted stocks that have not yet been released were offset against treasury stocks and other payables were adjusted accordingly; ② RMB9,494,227.24 was decreased since the Company repurchased in form of cash 171,542 restricted RMB ordinary shares (A shares) granted but not yet released. For relevant details, refer to Note V(I) 33 Capital stock herein; ③ RMB45,026,793.30 was decreased since the Company released 811,398 restricted shares according to the Proposal on Satisfying the Conditions for Release from Sales Restrictions in the First Release Period Under 2022 Restricted Share Incentive Plan deliberated and approved at the 14th meeting of the 3rd session of Board of Directors of the Company held on September 8, 2023 (the Company issued 0.40 share for every 1 share to all shareholders through capital reserve in May 2023, resulting in a total of 579,570 shares before the capital reserve was increased), and the grant price per share was RMB77.31 after the deduction of the distributed cash dividends. 57. Other comprehensive income √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Opening Amount incurred in the current period Ending 218 / 272 Annual Report 2023 balance Less: balance Included in Less: Included other in other Amount comprehens comprehensiv incurred Attributed ive income e income for before Less: Attributed to for the the previous income Income to parent minority previous period and tax in tax company sharehold period and transferred in the expenses after tax ers after transferred retained current tax in profit or earnings for period loss for the the current current period period I. Other comprehensive income that will - - - - not be 58,992,0 5,811,300. 53,180,70 53,180,70 subsequently 00.00 00 0.00 0.00 reclassified into profit and loss Including: Changes arising from re- measurement of defined benefit plans Other comprehensive income that - - - can't be reversed 20,250,0 20,250,00 20,250,00 through profit 00.00 0.00 0.00 and loss under the equity method Changes in the fair value of - - - - other equity 38,742,0 5,811,300. 32,930,70 32,930,70 instrument 00.00 00 0.00 0.00 investments Changes in the fair value of enterprise’s own credit risk II. Other comprehensive - - income that will 1,252,20 1,252,202. 1,918,60 666,400.9 be reclassified 2.16 16 3.07 1 into profit or loss Including: Other comprehensive income that will be reclassified to profit or loss under the equity method Changes in the fair value of other debt investments Amount of financial assets reclassified into other comprehensive income 219 / 272 Annual Report 2023 Credit impairment provision of other debt investments Cash flow hedge reserve Difference from translation - - 1,252,20 1,252,202. of financial 1,918,60 666,400.9 2.16 16 statements in 3.07 1 foreign currency Total other - - - - - comprehensive 1,918,60 57,739,7 5,811,300. 51,928,49 53,847,10 income 3.07 97.84 00 7.84 0.91 Other explanations, including the adjustment of the effective part of cash flow hedging gains and losses into the initially recognized amount of the hedged item: None 58. Special reserve □ Applicable √ Not applicable 59. Surplus reserve √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Opening balance Current increase Current decrease Ending balance Legal surplus 141,759,734.50 56,651,848.00 198,411,582.50 Discretionary surplus reserve Reserve fund Enterprise development fund Other Total 141,759,734.50 56,651,848.00 198,411,582.50 Explanation on surplus reserves, including the current changes and the explanation on the reasons for the changes: RMB56,651,848.00 was increased in the current period due to the withdrawal of statutory surplus reserve according to the net profit of the parent company. The statutory surplus reserve does not need to be withdrawn if the cumulative amount reaches 50% or more of the registered capital. 60. Undistributed profits √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Current period Prior period Undistributed profit at the end of previous period 2,300,384,763.19 1,696,978,064.52 before adjustment Total undistributed profit at the beginning of the adjustment period (+ for increase, - for decrease) Unappropriated earnings at the beginning of the 2,300,384,763.19 1,696,978,064.52 period after adjustment Add: Net profit attributable to the owner of the 1,193,868,141.81 817,400,223.93 parent company in the current period Less: Withdrawal of statutory surplus reserve 56,651,848.00 41,124,954.50 220 / 272 Annual Report 2023 Withdrawal of any surplus reserves Withdrawal of general risk provision Dividends payable on common stock 397,455,566.41 172,868,570.76 Common stock dividends converted to share capital Undistributed profit at the end of the period 3,040,145,490.59 2,300,384,763.19 According to the Resolution of the 2022 annual General Meeting of Shareholders of the Company, the Company distributed cash dividends of RMB8.70 (tax inclusive) per 10 shares to all shareholders based on the total share capital of 283,520,339 shares registered on the registration date of dividend-paying equity, totaling RMB246,662,694.93 (tax inclusive). According to the Resolution of the First Extraordinary General Meeting of Shareholders of the Company in 2023, the Company distributed cash dividends of RMB3.80 (tax inclusive) per 10 shares to all shareholders based on the total share capital of 396,823,346 shares registered on the registration date of dividend-paying equity, totaling RMB150,792,871.48 (tax inclusive). Details of the adjustment of the undistributed profit at the beginning of the period: 1. The undistributed profit affected by the retroactive adjustment in accordance with Accounting Standards for Business Enterprises and its related new regulations at the beginning of the period is RMB0.00. 2. The undistributed profit affected by the change of accounting policy at the beginning of the period is RMB0.00. 3. The undistributed profit affected by the correction of major accounting errors at the beginning of the period is RMB0.00. 4. The undistributed profit affected by the change of combination scope caused by common control at the beginning of the period is RMB0.00. 5. The undistributed profit affected by other adjustments at the beginning of the period is RMB0.00. 61. Operating revenue and costs (1). Information of operating revenue and costs √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the current period Amount incurred in the previous period Item Revenue Cost Revenue Cost Main 8,890,227,788.97 2,666,864,872.50 6,361,763,550.69 1,916,352,535.29 business Other 14,345,712.42 10,580,834.11 23,687,873.31 18,497,668.36 business Total 8,904,573,501.39 2,677,445,706.61 6,385,451,424.00 1,934,850,203.65 221 / 272 Annual Report 2023 (2). Breakdown of operating revenue and costs □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable (3). Explanation on performance obligations □ Applicable √ Not applicable (4). Explanation on remaining performance obligations allocated □ Applicable √ Not applicable (5). Significant contract changes or significant transaction price adjustments □ Applicable √ Not applicable Other explanations: Breakdown of revenue 1) Breakdown of income generated from contracts with clients by goods or service type Amount for the current period Amount for the same period last year Item Revenue Cost Revenue Cost Products 8,890,227,788.97 2,666,864,872.50 6,363,192,536.17 1,920,643,747.84 sales Other 14,345,712.42 10,580,834.11 22,258,887.83 14,206,455.81 Subtotal 8,904,573,501.39 2,677,445,706.61 6,385,451,424.00 1,934,850,203.65 2) Breakdown of income generated from contracts with clients by goods or service transfer time Amount for the current Amount for the same period Item period last year Income recognized at a certain point 8,901,828,883.95 6,383,224,182.76 Income recognized in a certain 2,744,617.44 2,227,241.24 period Subtotal 8,904,573,501.39 6,385,451,424.00 3) Revenue recognized in the current period and included in the beginning carrying value of contract liabilities is RMB174,418,612.87. 62. Taxes and surcharges √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the current Amount incurred in the previous Item period period Income tax Urban maintenance and 43,276,504.94 25,692,368.39 construction tax Education surcharge 21,357,013.35 12,641,385.47 Surcharge for local education 14,122,981.38 8,447,813.01 Stamp duties 3,999,013.74 2,921,661.26 Property tax 7,672,905.13 6,663,485.15 Consumption tax 186,353.52 14,370.78 Vehicle and vessel use tax 35,456.20 10,724.88 222 / 272 Annual Report 2023 Cultural undertaking 5,528.94 2,700.00 construction tax Resource tax Land use tax Total 90,655,757.20 56,394,508.94 Other explanations: None 63. Selling expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the Amount incurred in the Item current period previous period Image promotion expenses 3,533,952,237.22 2,419,867,469.08 Employee compensation and 362,407,560.34 314,177,020.39 service fees Office allowances 37,424,067.84 28,106,339.49 Travel expenses 15,189,368.08 11,852,844.96 Meeting affair charges 12,158,679.33 4,094,821.02 Equity incentive expenses for 4,186,552.14 3,815,630.91 restricted shares Survey consulting fees 4,761,013.66 3,156,462.06 Other 2,121,673.88 766,765.04 Total 3,972,201,152.49 2,785,837,352.95 Other explanations: None 64. General and administrative expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Employee compensation and service fees 199,180,004.62 156,737,777.08 Office allowance and business 86,374,110.35 61,368,432.01 entertainment expenses Equity incentive expenses for restricted 62,868,293.10 38,406,625.33 shares Expenses for depreciation, amortization 47,863,814.80 45,778,417.02 and lease Travel expense and conference fees 28,771,703.61 5,024,738.17 Consultation and intermediary fees 26,131,927.56 12,338,732.18 Other 4,251,916.66 7,642,027.58 Total 455,441,770.70 327,296,749.37 Other explanations: None 65. R&D expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Labor cost 87,886,568.10 66,055,676.59 223 / 272 Annual Report 2023 Outsourced R&D expenses 49,917,542.88 41,417,003.04 Expenses for depreciation, amortization 14,907,715.74 5,485,513.91 and lease Direct input costs 9,067,633.86 8,833,694.90 Equity incentive expenses for restricted 8,460,207.47 5,134,865.00 shares Other 3,330,459.44 1,082,351.05 Total 173,570,127.49 128,009,104.49 Other explanations: None 66. Financial expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Interest expenses 18,355,694.64 13,019,503.91 Handling fees 712,455.44 634,636.61 Exchange gains and losses -2,800,529.37 -2,943,538.91 Interest income -75,347,198.04 -51,707,124.62 Total -59,079,577.33 -40,996,523.01 Other explanations: None 67. Other income √ Applicable □ Not applicable Unit: Yuan Currency: RMB Classification by nature Amount incurred in the current Amount incurred in the period previous period Government subsidies pertinent 2,079,090.00 2,079,090.00 to assets Government subsidies related to 41,964,528.77 36,384,642.07 income Refund of service charges for 702,780.68 507,799.10 withholding personal income tax Additional deduction for VAT 279,900.29 93,574.45 Total 45,026,299.74 39,065,105.62 Other explanations: None 68. Investment income √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the Amount incurred in the Item current period previous period Long-term equity investment income -17,279,158.95 -5,658,023.28 calculated by the equity method Investment income from disposal of -113,212.70 long-term equity investment Investment income of held-for-trading financial assets during the holding period 224 / 272 Annual Report 2023 Dividend income from other equity instrument investments during the holding period Interest income from debt investment during the holding period Interest income from other debt investments during the holding period Investment income from disposal of held-for-trading financial assets Investment income from disposal of other equity instrument investments Investment income from disposal of debt investment Investment income from disposal of other debt investments Gains of debt restructuring Total -17,392,371.65 -5,658,023.28 Other explanations: None 69. Net exposure hedging income □ Applicable √ Not applicable 70. Income from the change in fair values □ Applicable √ Not applicable 71. Credit impairment loss √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the Amount incurred in the Item current period previous period Loss on bad debts of notes receivable Loss on bad debts of accounts -13,089,429.12 741,308.99 receivable Loss on bad debts of other receivables 2,692,204.95 -5,798,734.42 Impairment losses of debt investment Impairment losses of other debt investments Loss on bad debts of long-term receivables Impairment losses related to financial guarantees Total -10,397,224.17 -5,057,425.43 Other explanations: None 72. Asset impairment losses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the Amount incurred in the previous Item current period period I. Impairment losses of contract assets 225 / 272 Annual Report 2023 I. Loss for devaluation of -106,757,782.12 -94,640,937.84 inventories and impairment loss of contract performance cost II. Impairment loss of long-term -66,771,744.63 equity investment III. Impairment loss of investment real estate IV. Impairment loss of fixed assets -1,337,532.26 V. Impairment loss of engineering materials VI. Impairment loss of construction in progress VII. Impairment loss of productive biological assets VIII. Impairment loss of oil and gas assets IX. Impairment loss of intangible assets X. Impairment loss of goodwill XI. Others Anticipated return losses -3,471,872.81 Total -108,095,314.38 -164,884,555.28 Other explanations: None 73. Income from disposal of assets √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the current Amount incurred in the period previous period Income from disposal of non- -703,593.33 60,155.60 current assets Total -703,593.33 60,155.60 Other explanations: None 74. Non-operating revenue Information on non-operating revenue √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount included in Amount incurred in the Amount incurred in the Item current non-recurring current period previous period gains and losses Total profit from disposal of non- current assets Including: Gains from disposal of fixed assets Gains from disposal of intangible assets Non-monetary asset exchange profits Accepting donations 226 / 272 Annual Report 2023 Government subsidies Revenue from fines 1,787,058.74 252,782.71 1,787,058.74 and liquidated damages Amount not required 686,774.60 505,051.10 686,774.60 to be paid Income from right 1,528,566.87 1,528,566.87 protection funds Other 164,261.56 421,052.52 164,261.56 Total 4,166,661.77 1,178,886.33 4,166,661.77 Other explanations: □ Applicable √ Not applicable 75. Non-operating expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount included in Amount incurred in the Amount incurred in the Item current non-recurring current period previous period gains and losses Total loss from disposal of non- current assets Including: Losses from disposal of fixed assets Loss from disposal of intangible assets Non-monetary asset exchange losses External donation 8,865,320.50 1,434,600.00 8,865,320.50 Late fees 2,320,528.94 2,320,528.94 Fines 220,000.00 2,915,707.07 220,000.00 Other 116,512.19 126,645.38 116,512.19 Loss from damage 100,854.99 136,692.79 100,854.99 and scrapping of non-current assets Total 11,623,216.62 4,613,645.24 11,623,216.62 Other explanations: None 76. Income tax expenses (1). Income tax expense statement √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the current Amount incurred in the Item period previous period Current income tax expense 337,808,223.91 239,665,217.82 Deferred income tax expense -73,292,568.66 -16,798,498.26 Total 264,515,655.25 222,866,719.56 227 / 272 Annual Report 2023 (2). Adjustment process of accounting profit and income tax expense √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the current period Total profit 1,495,319,805.59 Income tax expense calculated at statutory or 373,829,951.41 applicable tax rate Impact of different tax rates applicable to subsidiaries Impact of adjusting income tax in previous 2,053,410.29 periods Impact of non-taxable income Impact of non-deductible costs, expenses and 11,462,350.79 losses Impact of using deductible losses of deferred -13,652,192.96 income tax assets unrecognized in the previous period Impact of deductible temporary differences or 27,431,942.45 deductible losses of deferred income tax assets unrecognized in the current period Impact of applicable preferential tax rates -114,497,159.95 Additional deductions for R&D expenditures -22,112,646.78 Income tax expenses 264,515,655.25 Other explanations: □ Applicable √ Not applicable 77. Other comprehensive income √ Applicable □ Not applicable For details, refer to the particulars contained in "57. Other comprehensive income", "VII. Notes to the Items of Consolidated Financial Statements", "Section X Financial Report" of this Report. 78. Items in the cash flow statement (1). Cash related to operating activities Other cash received related to operating activities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Interest income from bank deposits 74,557,758.90 51,707,124.62 Government subsidies 45,009,847.74 38,447,280.07 Receivables and payables and others 5,846,000.83 9,345,735.71 Total 125,413,607.47 99,500,140.40 Explanation on other cash received related to operating activities: None Other cash paid related to operating activities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Expenses paid in cash 3,732,844,574.91 2,579,629,003.60 Receivables and payables 28,579,145.07 36,679,087.31 Total 3,761,423,719.98 2,616,308,090.91 228 / 272 Annual Report 2023 Explanation on other cash paid related to operating activities: None (2). Cash related to investing activities Important cash received related to investing activities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Cash received for construction deposit 13,193,392.00 Total 13,193,392.00 Explanation on important cash received related to investing activities None Important cash paid related to investing activities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the Amount incurred in the Item current period previous period Payment for the purchase and 179,658,688.53 170,963,405.43 construction of long-term assets Capital increase by Jiaxing Woyong Investment Partnership (Limited 18,636,363.64 41,003,609.10 Partnership) Investment by Golong Holdings 90,000,000.00 Co., Ltd. Purchase of fixed-term deposits 300,000,000.00 Total 498,295,052.17 301,967,014.53 Explanation on important cash paid related to investing activities None Other cash received related to investing activities □ Applicable √ Not applicable Other cash paid related to investing activities □ Applicable √ Not applicable (3). Cash related to financing activities Other cash received related to financing activities □ Applicable √ Not applicable Other cash paid related to financing activities √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the current Amount incurred in the period previous period Payment for equity incentive repurchase 9,494,227.24 Payment for repurchase of the Company’s shares 39,082,438.95 Payment for acquisition of minority 46,085,313.00 equity Payment for operating lease rent 3,607,485.92 1,319,087.27 229 / 272 Annual Report 2023 Payment for liquidation funds to 859,171.61 minority shareholders 1,003,954.40 Total 53,188,106.51 48,263,571.88 Explanation on other cash paid related to financing activities: None Information on changes in liabilities arising from financing activities: √ Applicable □ Not applicable Unit: Yuan Currency: RMB Current increase Current decrease Opening Ending Item Cash changes Non-cash Cash changes Non-cash balance balance changes changes Short-term 200,195,890. 300,000,000. 300,000,000. 40,334.85 200,155,555. borrowing 41 00 00 56 s Bonds 724,491,557. 33,093,877.8 3,753,950.00 711,582.92 753,119,902. payable 93 7 88 (including bonds payable due within one year) Lease 6,267,571.55 12,997,592.6 3,607,485.92 1,717,311.3 13,940,366.9 liabilities 5 0 8 (including lease liabilities due within one year) Total 930,955,019. 300,000,000. 46,091,470.5 307,361,435. 2,469,229.0 967,215,825. 89 00 2 92 7 42 (4). Explanation on presentation of cash flows at net amount □ Applicable √ Not applicable (5). Significant activities and financial impacts that do not involve current cash receipts and payments but affect the financial condition of the enterprise or may affect the cash flow of the enterprise in the future √ Applicable □ Not applicable Amount for the Amount for the Item same period last current period year Amount of the commercial paper transferred by 3,900,925.86 26,020,864.88 endorsement Including: Payment for goods 3,900,925.86 26,020,864.88 79. Supplementary information to cash flow statement (1). Supplementary information to cash flow statement √ Applicable □ Not applicable Unit: Yuan Currency: RMB 230 / 272 Annual Report 2023 Amount for the current Supplementary Information Amount of previous period period 1. Reconciliation of net profits to cash flows from operating activities: Net profit 1,230,804,150.34 831,283,806.37 Add: Impairment provision of assets 118,492,538.55 169,941,980.71 Credit impairment loss Depreciation of fixed assets, 62,978,780.92 52,552,861.25 depletion of oil and gas assets and depreciation of productive biological assets Amortization of right-to-use assets 4,464,656.74 1,071,299.90 Amortization of intangible assets 18,517,085.80 17,445,985.14 Amortization of long-term 10,280,634.46 17,522,556.64 unamortized expenses Losses on disposal of fixed assets, 703,593.33 -60,155.60 intangible assets and other long-term assets ("-" refers to income) Losses on retirement of fixed assets 100,854.99 136,692.79 ("-" refers to income) Losses on changes in fair value ("-" refers to income) Financial expenses ("-" refers to 13,067,443.28 13,019,503.91 income) Investment loss ("-" refers to income) 17,392,371.65 5,658,023.28 Decrease in deferred income tax -54,273,136.99 -27,409,771.12 assets ("-" refers to increase) Increase in deferred income tax -19,019,431.67 10,611,272.86 liabilities ("-" refers to decrease) Decrease in inventories ("-" refers to -234,921,611.07 -315,753,506.27 increase) Decrease in operating receivables ("- -449,560,276.02 -28,573,373.07 " refers to increase) Decrease in operating payables ("-" 674,251,107.56 316,331,819.20 refers to increase) Other 75,515,052.71 47,357,121.24 Net cash flow from operating 1,468,793,814.58 1,111,136,117.23 activities 2. Major investment and financing activities that do not involve cash receipts and payments: Conversion of debt into capital Convertible corporate bonds due within one year Fixed assets under finance lease 3. Net changes in cash and cash equivalents: Ending balance of cash 3,659,267,712.03 3,125,333,085.05 Less: Beginning balance of cash 3,125,333,085.05 2,378,334,768.09 Add: Ending balance of cash equivalents Less: Beginning balance of cash equivalents Net increase in cash and cash 533,934,626.98 746,998,316.96 equivalents (2). Net cash paid for acquisition of subsidiaries in the current period □ Applicable √ Not applicable 231 / 272 Annual Report 2023 (3). Net cash received from disposal of subsidiaries in the current period □ Applicable √ Not applicable (4). Composition of cash and cash equivalents √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance I. Cash 3,659,267,712.03 3,125,333,085.05 Including: Cash on hand 29,332.00 20,176.08 Bank deposits that can be used 3,448,037,161.01 3,048,251,723.18 for payment at any time Other monetary funds that can 211,201,219.02 77,061,185.79 be used for payment at any time Funds deposited with the central bank for payment Deposits in interbank Funds for interbank lending II. Cash equivalents Including: Bond investments due within three months III. Ending balance of cash and cash 3,659,267,712.03 3,125,333,085.05 equivalents Including: Cash and cash equivalents with restricted use by 257,906,850.60 507,079,183.81 the parent company or a subsidiary of the group (5). Information on funds with restricted use but still presented as cash and cash equivalents √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount for the current Reason Item period 178,011,019.10 Special account of Raised funds raised funds Cash subject to foreign exchange control of 79,895,831.50 Subject to foreign overseas operating subsidiaries exchange control Total 257,906,850.60 / (6). Monetary funds not belonging to cash and cash equivalents √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount for the Amount of previous Item Reason current period period Fixed-term deposit 335,288,251.36 30,000,000.00 No withdrawal at any time L/C deposit 8,800,000.00 No withdrawal at any time Transformer deposit 250,000.00 250,000.00 No withdrawal at any time Vehicle ETC deposit 70,000.00 70,000.00 No withdrawal at any time Pinduoduo deposit 5,298,890.00 5,000,000.00 No withdrawal at any time Direct store deposit 2,110,704.68 350,000.00 No withdrawal at any time Total 351,817,846.04 35,670,000.00 / Other explanations: 232 / 272 Annual Report 2023 □ Applicable √ Not applicable 80. Notes on items in the statement of changes in owners’ equity Explanation on the names of "other" items for adjusting the ending balance of the previous year and adjustment amounts: □ Applicable √ Not applicable 81. Foreign-currency monetary items (1). Foreign-currency monetary items √ Applicable □ Not applicable Unit: Yuan Converted RMB at Ending foreign Converted exchange Item the end of period currency balance rate balance Cash and cash equivalents - - 284,606,933.99 Including: USD 7,847,098.42 7.0827 55,578,643.98 EUR 26,105,651.86 7.8592 205,169,539.10 HKD 22,387,179.89 0.9062 20,287,262.42 SF 193,233.76 8.4184 1,626,719.09 JPY 32,304,317.77 0.0502 1,621,676.75 KRW 58,744,118.00 0.0055 323,092.65 Accounts receivable - - 4,164,394.64 Including: EUR 218,942.52 7.8592 1,720,713.05 HKD 66,999.18 0.9062 60,714.66 JPY 47,465,900.00 0.0502 2,382,788.18 KRW 32,499.71 0.0055 178.75 Other receivables - - 26,732,449.48 Including: USD 558,965.44 7.0827 3,958,984.52 EUR 2,832,778.86 7.8592 22,263,375.62 HKD 99,313.63 0.9062 89,998.01 JPY 8,368,353.22 0.0502 420,091.33 Accounts payable - - 8,078,057.66 Including: EUR 777,723.41 7.8592 6,112,283.82 HKD 610,942.50 0.9062 553,636.09 JPY 28,130,234.00 0.0502 1,412,137.75 Other payables - - 865,815.54 Including: HKD 5,975.00 0.9062 5,414.55 JPY 683,412.06 0.0502 34,307.29 KRW 150,198,853.99 0.0055 826,093.70 Other explanations: None (2). Explanation on overseas operating entities, including the main overseas operating location, bookkeeping currency, selection criteria, and reasons for change in the bookkeeping currency of important overseas operating entities, which should be disclosed √ Applicable □ Not applicable Hapsode Co., Ltd.and Hanna Cosmetics Co., Ltd. operate in South Korea, and their business income and expenditures are mainly in KRW, thus they choose KRW as the bookkeeping currency. Hong Kong Xinghuo Industry Limited, LIMITED, Hong Kong Zhongwen Electronic Commerce Co., Limited, Hong Kong Xuchen Trading Limited, Hong Kong Keshi Trading Co., Ltd., Boya (Hong Kong) Investment Management Co., Limited and Hong Kong Wanyan Electronic Commerce Co., Limited operate in Hong Kong, thus they choose HKD as the bookkeeping currency. OR Off&Relax operates in Japan and its 233 / 272 Annual Report 2023 business income and expenditures are mainly in JPY, thus it chooses JPY as the bookkeeping currency.PROYA PTE. LTD. operates in Singapore, and its business income and expenditures are mainly in SGD, thus it chooses SGD as the bookkeeping currency; PROYA BEAUTY ALAYSIA SDH BHD. operates in Malaysia and its business income and expenditures are mainly in MYR, thus it chooses MYR as the bookkeeping currency. 82. Lease (1) The Company as the lessee √ Applicable □ Not applicable 1) For details on right-of-use assets, refer to the particulars contained in "25. Right-of-use assets" in "VII. Notes to the Items of Consolidated Financial Statements" of "Section X Financial Report" hereof. 2) For the details on accounting policies for short-term leases and low-value asset leases of the Company, refer to the particulars contained in "38. Lease" in "V. Significant Accounting Policies and Estimates" of "Section X Financial Report" of this Report. Variable lease payments not included in the measurement of lease liabilities □ Applicable √ Not applicable Lease expenses of short-term leases or low-value asset leases subject to simplified treatment √ Applicable □ Not applicable Amount for the Amount for the Item same period last current period year Short-term lease expenses 6,986,080.67 2,725,585.47 Low value asset lease expenses (except for short-term 2,169,311.63 178,817.29 lease expenses) Total 9,155,392.30 2,904,402.76 Sale and leaseback transactions and judgment basis □ Applicable √ Not applicable Total cash outflows related to leases is 13,312,201.76 (Unit: Yuan Currency: RMB) For the details of maturity analysis and corresponding liquidity risk management of lease liabilities, refer to the particulars contained in "1(II) Liquidity risk" in "XII. Risks related to Financial Instruments" in "Section X Financial Report" hereof. (2) The Company as the lessor Operating lease where the Company is the lessor √ Applicable □ Not applicable Unit: Yuan Currency: RMB Including: Income related to Item Lease income variable lease payments not included in lease receipts Investment real estate 2,744,617.44 Total 2,744,617.44 For the details of fixed assets leased out through operating lease, refer to the particulars contained in "20 Investment real estate" in "VII. Notes to the Items of Consolidated Financial Statements" of "Section X Financial Report" hereof. Financing lease where the Company is the lessor □ Applicable √ Not applicable Reconciliation of undiscounted lease receipts and net lease investments 234 / 272 Annual Report 2023 □ Applicable √ Not applicable Undiscounted lease receipts in the next five years □ Applicable √ Not applicable (3) Profits and losses of financial lease sales recognized by the Company as a manufacturer or distributor □ Applicable √ Not applicable Other explanations None 83. Other □ Applicable √ Not applicable VIII.R&D expenditures (1). Presentation by nature of expenses √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount incurred in the Amount incurred in the current period previous period Labor cost 87,886,568.10 66,055,676.59 Outsourced R&D expenses 49,917,542.88 41,417,003.04 Expenses for depreciation, amortization 14,907,715.74 5,485,513.91 and lease Direct input costs 9,067,633.86 8,833,694.90 Equity incentive expenses for restricted 8,460,207.47 5,134,865.00 shares Other 3,330,459.44 1,082,351.05 Total 173,570,127.49 128,009,104.49 Including: Expensed R&D expenditures 173,570,127.49 128,009,104.49 Capitalized R&D expenditures Other explanations: None (2). R&D project development expenditures eligible for capitalization □ Applicable √ Not applicable Important capitalized R&D project □ Applicable √ Not applicable Impairment provision of development expenditures □ Applicable √ Not applicable Other explanations None (3). Important outsourcing projects under research □ Applicable √ Not applicable IX.Change of Consolidation Scope 1. Business combination not under common control □ Applicable √ Not applicable 235 / 272 Annual Report 2023 2. Business combination under common control □ Applicable √ Not applicable 3. Counter purchase □ Applicable √ Not applicable 236 / 272 Annual Report 2023 4. Disposal of subsidiaries Were there any transactions or events that resulted in the loss of control over a subsidiary in the current period □ Applicable √ Not applicable Unit: Yuan Currency: RMB Difference between the Amount of Determination disposal price other Carrying Fair value methods and and the comprehensive value of of major attributable Proportion Gains or income related Disposal Disposal remaining remaining assumptions Judgment share of net of losses to equity Disposal ratio at method equity at the equity at the for fair value Time basis of assets of the remaining arising from investments in price at the the time at the level of level of of remaining Name of point of the time subsidiary at equity on re- original time point of point of time consolidated consolidated equity at the subsidiary loss of point of the level of the date of measurement subsidiaries loss of loss of point of financial financial level of control loss of consolidated loss of of remaining transferred to control control loss of statements statements consolidated control financial control equity at fair investment (%) control on the date on the date financial statements (%) value gains and of loss of of loss of statements on corresponding losses or control control the date of to the retained loss of control disposal of earnings investment Hangzhou February 1,500,000.00 100.00 Selling Completed -12,828.43 Tiedingxian 2023 equity to equity Catering external delivery Management parties Co., Ltd. Hangzhou February 3,500,000.00 100.00 Selling Completed -11,332.08 Xiake Bar 2023 equity to equity Catering external delivery Management parties Co., Ltd. Other explanations: □ Applicable √ Not applicable Was there a stepwise disposal of investment to subsidiaries through multiple transactions and a loss of control in the current period 237 / 272 Annual Report 2023 □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 5. Change of combination scope for other reasons Explain the changes in the consolidation scope caused by other reasons (for example, newly established subsidiary, liquidated subsidiary, etc.) and the specific information: √ Applicable □ Not applicable 1. Expansion of consolidation scope Company name Equity acquisition method Time point of equity acquisition Contribution amount Contribution ratio Huzhou Keyan Trading Co., Ltd. Newly established subsidiary March 2023 100.00% Hubei Laibo Information Co., Ltd. Newly established subsidiary July 2023 100,000.00 100.00% PROYA PTE. LTD Newly established subsidiary November 2023 100.00% PROYA BEAUTY MALAYSIA SDH. BHD. Newly established subsidiary November 2023 100.00% 2. Narrowing of consolidation scope From the beginning of the period to Equity disposal Time point of equity Net assets as at the Company name the disposal date method disposal disposal date Net profit Korea Younimi Cosmetics Co., Ltd. Cancel April 2023 1,801,826.67 -1,740,215.20 Hangzhou Donghai Wangchao Catering Cancel June 2023 Management Co., Ltd. Danyang Hapsode Cosmetics Trading Co., Cancel December 2023 970.33 7,268,352.65 Ltd. 6. Other □ Applicable √ Not applicable 238 / 272 Annual Report 2023 X.Equity in Other Entities 1. Equity in subsidiaries (1). Composition of enterprise group √ Applicable □ Not applicable Unit: Yuan Currency: RMB Main Shareholding Subsidiary Registered Registration Nature of ratio (%) Mode of place of Name capital place business acquisition business Direct Indirect Zhejiang Meiligu Wholesale and Electronic Hangzhou 10 million Hangzhou 100.00 Establishment retail Commerce Co., Ltd. Ningbo TIMAGE Wholesale and Ningbo 1 million Ningbo 71.36 Establishment Cosmetics retail Co., Ltd. Proya (Zhejiang) Huzhou 10 million Huzhou Manufacturing 100.00 Establishment Cosmetics Co., Ltd. Explanation on the shareholding ratio in subsidiaries different from the voting ratio: None Basis for holding half or less voting rights but still controlling the investee, and holding more than half voting rights but not controlling the investee: None Basis for controlling the important structured entities included in the consolidation scope: None Basis for determining whether a company is an agent or a principal: None Other explanations: The Company incorporated 46 subsidiaries, including Hangzhou Proya Trade Co.,Ltd. and Zhejiang Meiligu Electronic Commerce Co., Ltd., into the consolidation scope of the consolidated financial statements. (2). Important non-wholly-owned subsidiaries √ Applicable □ Not applicable Unit: Yuan Currency: RMB Shareholding Gain or loss Dividends declared Balance of ratio of the attributable to and distributed to Name of minority interest minority minority minority subsidiary at the end of the shareholder shareholders in the shareholders in the period Percentage current period current period Ningbo TIMAGE 28.64% 37,167,220.38 55,449,339.11 Cosmetics Co., Ltd. Explanation on the shareholding ratio of minority shareholders in subsidiaries different from the voting ratio: □ Applicable √ Not applicable 239 / 272 Annual Report 2023 Other explanations: □ Applicable √ Not applicable (3). Major financial information of important non-wholly-owned subsidiaries √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Non- Curre Non- Curre Non- Name of Total Curre Non- Total Curren curren Total nt current Total nt current subsidiary liabilit nt current liabili t assets t assets liabili liabilit assets liabili liabilit ies assets assets ties assets ties ies ties ies Ningbo 11,0 173,7 5,19 178,9 112,2 1,67 113,9 TIMAGE 297,73 308,7 111,9 1,07 113,0 12,88 8,05 10,94 48,42 2,65 21,07 52,0 Cosmetics 3,820.7 26.2 85,84 87,80 9,01 66,82 2.33 9.78 2.11 3.70 5.27 8.97 Co., Ltd. 4 6.95 9.76 7.49 7.25 1 Amount incurred in the current period Amount incurred in the previous period Cash Cash Total flows Total flows Name of Operating Net comprehe generated Operating Net comprehen generate subsidiary revenue profit nsive from revenue profit sive d from income operating income operating activities activities Ningbo 1,000,707, 129,773 129,773,8 98,459,95 571,701,5 76,09 76,095,82 36,940,3 TIMAGE 718.37 ,814.16 14.16 0.02 21.25 5,826 6.44 77.15 Cosmetics .44 Co., Ltd. Other explanations: None (4). Major restrictions on using enterprise group assets and paying off enterprise group debts □ Applicable √ Not applicable (5). Financial support or other support provided to structured entities included in the scope of consolidated financial statements □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 2. Transactions where the share of owners' equity in a subsidiary changes and the subsidiary is still controlled □ Applicable √ Not applicable 3. Rights and interests in joint ventures and affiliates √ Applicable □ Not applicable (1). Important joint ventures and affiliates □ Applicable √ Not applicable (2). Major financial information of important joint ventures □ Applicable √ Not applicable 240 / 272 Annual Report 2023 (3). Major financial information of important affiliates □ Applicable √ Not applicable (4). Summary financial information of unimportant joint ventures and affiliates √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance or amount Beginning balance or amount incurred in the current period incurred in the previous period Joint ventures: Total carrying value of 3,059,991.91 3,068,948.16 investment Total of the following items calculated according to the shareholding ratio – Net profit -8,956.25 -5,810.52 – Other comprehensive income – Total comprehensive income Affiliates: Total carrying value of 110,514,166.58 135,464,429.30 investment Total of the following items calculated according to the shareholding ratio – Net profit -17,270,202.70 -5,652,212.76 – Other comprehensive -20,250,000.00 income – Total comprehensive income Other explanations None (5). Explanation on major restrictions on the ability of joint ventures or associates to transfer capital to the Company □ Applicable √ Not applicable (6). Excess losses incurred by joint ventures or affiliates □ Applicable √ Not applicable (7). Unconfirmed commitments related to investments in joint ventures □ Applicable √ Not applicable (8). Contingent liabilities related to investments in joint ventures or associates □ Applicable √ Not applicable 4. Important joint operations □ Applicable √ Not applicable 5. Rights and interests in structured entities not included in the scope of consolidated financial statements Explanation on structured entities not included in the scope of consolidated financial statements: □ Applicable √ Not applicable 6. Other □ Applicable √ Not applicable 241 / 272 Annual Report 2023 XI.Government subsidies 1. Government subsidies recognized by amount receivable at the end of the Reporting Period □ Applicable √ Not applicable Reasons for failure to receive the expected amount of government subsidies at the expected time point □ Applicable √ Not applicable 2. Liability items involving government subsidies: √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount Amount Relate Amount of included in transferre Other Items in d to new non- d in other change financial Opening Ending assets subsidies in operating income in s in the statement balance balance or the current revenue in the current s incom period the current current period e period period Deferred 6,399,811.3 2,062,638.0 2,079,090.0 6,383,359.3 Relate income 3 0 0 3 d to assets Total 6,399,811.3 2,062,638.0 2,079,090.0 6,383,359.3 / 3 0 0 3 3. Government subsidies included in the current profit or loss √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the current Amount incurred in the previous Type period period Related to income 44,043,618.77 38,463,732.07 Total 44,043,618.77 38,463,732.07 Other explanations: None XII.Risks Related to Financial Instruments 1. Risks of financial instruments √ Applicable □ Not applicable The Company's risk management aims to reach balancing between risks and benefits, to minimize the negative impact of risks on the Company's operating results, and to maximize the interests of shareholders and other equity investors. Based on these risk management goals, the Company's basic strategy for risk management is to determine and analyze various risks faced by the Company, establish an appropriate risk tolerance bottom line and conduct risk management, and supervise various risks in a timely and reliable manner to control the risks within a limited scope. The Company faces various risks related to financial instruments in its daily activities, including credit risk, liquidity risk and market risk. The management has deliberated and approved the policing governing these risks as outlined below: (I) Credit risk Credit risk refers to the risk that one party of a financial instrument fails or is unable to fulfill its obligations, resulting in financial losses to the other party. 1. Credit risk management practice (1) Assessment method of credit risk The Company, on each balance sheet date, assesses whether the credit risk of relevant financial instruments has increased significantly since initial recognition. In determining whether the credit risk 242 / 272 Annual Report 2023 has increased significantly since initial recognition, the Company takes into account the reasonable and well-founded information available without unnecessary additional costs or efforts, including qualitative and quantitative analyses based on historical data, external credit risk rating and forward-looking information. The Company determines the changes that may result in default risk of financial instruments within their expected duration by comparing the default risk of the financial instruments on the balance sheet date and the initial recognition date based on an individual financial instrument or combined financial instruments with similar credit risk characteristics. The Company deems that the credit risk of the financial instruments has increased significantly if one or more of the following quantitative and qualitative standards are reached: 1) The main quantitative standard is that the probability of default within the remaining duration on the balance sheet date has increased by more than a certain proportion compared with that at the initial recognition; 2) The main qualitative standard is that there are material adverse changes occurring to the business or financial conditions of the debtor and changes in the exiting or anticipated technology, market, economic or legal environment which have a material adverse effect on the debtor's ability to make repayment to the Company. (2) Definitions of default and assets with credit impairment If the financial instruments meet one or more of the following conditions, the Company defines the financial assets as in default, with its standard consistent with the definition of credit impairment: 1) The debtor faces major financial difficulties; 2) The debtor breaches the provisions governing it in the contract; 3) The debtor is very likely to become bankrupt or go into other financial restructuring proceedings; 4) The creditor makes a concession to the debtor which it will not make under any other circumstances for the economic or contractual considerations in connection with the debtor’s financial difficulties. 2. Measurement of expected credit loss The key parameters for measurement of expected credit loss include the probability of default, loss given default and default risk exposure. The Company builds the models of probability of default, loss given default and default risk exposure considering the quantitative analysis of historical statistical data (such as counterparty rating, guarantee type, category of collateral and pledge, repayment method) and forward-looking information. 3. For the details of the Reconciliation of Beginning Balance and Ending Balance of Provision for Loss of Financial Instruments, refer to the particulars contained in "5. Accounts receivable", “7. Receivable financing” and “9. Other receivables” in "VII. Notes to the Items of Consolidated Financial Statements" of "Section X Financial Report" of this Report. 4. Credit risk exposure and credit risk concentration The credit risk of the Company is derived mainly from the monetary capital and accounts receivable. To control the above related risk, the Company has respectively taken the following measures. (1) Monetary capital The bank deposit and other monetary capitals of the Company were deposited with financial institutions with high credit rating; therefore, the credit risk was low. (2) Accounts receivable The Company continuously carries out credit assessments on customers who trade in credit. According to the results of credit assessments, the Company deals with approved and credible customers, and monitors the balance of its accounts receivable, so as to prevent significant bad debt risk. No guarantee is required as the Company only transacts with recognized and reputable 3rd parties. Credit risk concentration is managed on a per-customer basis. As of December 31, 2023, the Company had a certain credit concentration risk of 93.36% (as of December 31, 2022: 68.05%) of the Company's accounts receivable originating from the top five customers in the balance. The Company had no guarantee or other credit enhancement on the balance of the accounts receivable. The maximum credit risk exposure of the Company is the book value of the financial assets in the balance sheet. (II) Liquidity risk Liquidity risk refers to the risk of shortage of funds when the Company fulfills its obligation to settle by delivering cash or other financial assets. Liquidity risk may arise from the inability to sell financial assets at fair value as soon as possible, the counterparty's inability to pay off its contractual debt, the acceleration of debt or the inability to generate expected cash flow. 243 / 272 Annual Report 2023 To control such risk, the Company applies various financing methods, such as bill settlements and bank loans, in appropriate combination of long-term and short-term financing to optimize the financing structure and keep the balancing between financing sustainability and flexibility. The Company has obtained lines of credit from several commercial banks to satisfy its working capital demand and capital expenditure. Classification of financial liabilities by the remaining due days Ending amount Item Undiscounted Carrying value Within 1 year 1-3 years Above 3 years contract value Short-term 200,155,555.56 204,136,925.42 204,136,925.42 borrowings Notes 36,959,074.14 36,959,074.14 36,959,074.14 payable Accounts 1,018,522,358.60 1,018,522,358.60 1,018,522,358.60 payable Other 155,345,148.68 155,345,148.68 155,345,148.68 payables Bonds 753,119,902.88 902,651,337.03 7,500,387.51 31,446,772.75 863,704,176.77 payable Lease 9,970,306.87 14,684,876.69 5,269,969.69 9,414,907.00 liabilities Non-current liabilities 3,970,060.11 4,213,792.92 4,213,792.92 due within one year Subtotal 2,178,042,406.84 2,336,513,513.48 1,426,677,687.27 36,716,742.44 873,119,083.77 (Continued) Balance at the end of the previous year Item Undiscounted Carrying value Within 1 year 1-3 years Above 3 years contract value Short-term 200,195,890.41 201,900,886.94 201,900,886.94 borrowings Notes 69,626,352.12 69,626,352.12 69,626,352.12 payable Accounts 475,427,484.23 475,427,484.23 475,427,484.23 payable Other 216,392,183.41 216,392,183.41 216,392,183.41 payables Bonds 724,491,557.93 900,552,174.00 3,754,685.00 18,773,425.00 877,094,416.00 payable Lease 3,718,119.41 3,718,119.41 3,718,119.41 liabilities Non-current liabilities 2,549,452.14 2,549,452.14 2,549,452.14 due within one year Subtotal 1,692,401,039.65 1,870,166,652.25 969,651,043.84 22,491,544.41 877,094,416.00 (III) Market risk Market risk refers to the risk of fluctuations in the fair value or future cash flow of financial instruments due to changes in market prices. Market risks include interest rate and foreign exchange risks. 1. 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. Interest-bearing financial instruments with a fixed interest rate cause the interest rate risk of fair value, and those with a floating interest rate cause the interest rate risk of cash flow. The Company determines the proportion of financial instruments with a fixed interest rate and financial instruments with a floating interest rate according to the market 244 / 272 Annual Report 2023 environment, and maintains an appropriate combination of financial instruments through regular review and monitoring. 2. 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 the change of foreign exchange rates. The risk of changes in foreign exchange rates faced by the Company is mainly related to the Company's foreign currency assets and liabilities. The Company carries out business in the Chinese mainland, and therefore has main activities valuated in RMB. Therefore, the market risk of foreign exchange changes faced by the Company is minor. For the details on foreign-currency monetary assets and liabilities of the Company at the end of the period, refer to the particulars contained in "81. Foreign-currency monetary items" in "VII. Notes to the Items of Consolidated Financial Statements" of "Section X Financial Report" of this Report. 2. Hedging (1) The Company carries out hedging business for risk management □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable (2) The Company carries out qualified hedging business and applies hedging accounting □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable (3) The Company carries out hedging business for risk management, expects to achieve risk management objectives, but does not apply hedging accounting □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 3. Transfer of financial assets (1) Classification of transfer methods □ Applicable √ Not applicable (2) Financial assets derecognized due to transfer □ Applicable √ Not applicable (3) Financial assets transferred due to continued involvement □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable XIII.Disclosure of Fair Value 1. Ending fair value of assets and liabilities measured at fair value √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending fair value The first level The 3rd level of Item The second of fair value fair value Total level of fair measurement measurement 245 / 272 Annual Report 2023 value measurement I. Continuous fair value measurement (I) Held-for-trading financial assets 1. Financial assets measured at fair value through profit or loss (1) Debt instrument investment (2) Equity instrument investment (3) Derivative financial assets 2. Financial assets designated as measured at fair value through profit or loss (1) Debt instrument investment (2) Equity instrument investment (II) Other debt investments (III) Other equity 107,660,400.00 107,660,400.00 instrument investments (IV) Investment real estate 1. Land use rights for lease 2. Leased buildings 3. Land use rights that are held for transfer upon appreciation (V) Biological assets 1. Consumable biological assets 2. Productive biological assets Receivable financing 7,378,700.06 7,378,700.06 Total assets continuously measured 115,039,100.06 115,039,100.06 at fair value (VI) Held-for-trading financial liabilities 1. Financial liabilities measured at fair value through profit or loss Including: Trading bonds issued Derivative financial liabilities Other 246 / 272 Annual Report 2023 2. Financial liabilities designated to be measured at fair value through profit or loss Total liabilities continuously measured at fair value II. Non-continuous Fair Value Measurement (I) Held-for-sale assets Total assets not continuously measured at fair value Total liabilities not continuously measured at fair value 2. Determination basis for the market price of continuous and non-continuous first-level fair value measurement items □ Applicable √ Not applicable 3. Qualitative and quantitative information on the valuation techniques and important parameters used in continuous and non-continuous second-level fair value measurement items □ Applicable √ Not applicable 4. Qualitative and quantitative information on the valuation techniques and important parameters used in continuous and non-continuous 3rd-level fair value measurement items √ Applicable □ Not applicable 1. For bank acceptance bills held by the Company, the fair value is determined by the par value. 2. As for investments in other equity instruments held by the Company, due to important changes in business environment, operating conditions, financial conditions and external valuation of the investees, including Hangzhou Regenovo Bio-technology Co., Ltd., Golong Holdings Co., Ltd., and LIPOTRUE,S.L., the Company takes the investment cost as a reasonable estimate of fair value for measurement. Due to the difference between the financial situation of the investee Golong Holdings Co., Ltd. in 2023 and the expectations at the time of investment, the Company determines the fair value at the end of the period based on the asset evaluation report issued by a professional evaluation agency, the valuation technique adopted by the Company is based on the reasonably available information, and the important parameters adopted include the EBITDA, and the P/E ratio and EV/EBITDA value ratio of listed companies in the same industry. 5. Adjustment information and sensitivity analysis of non-observable parameters between beginning and ending carrying value for continuous 3rd-level fair value measurement items □ Applicable √ Not applicable 6. For continuous fair value measurement items, if the conversion occurs among different levels within the current period, the reasons for the conversion and the policy for determining the conversion time point □ Applicable √ Not applicable 7. Changes in valuation techniques during the current period and the reasons for the changes □ Applicable √ Not applicable 247 / 272 Annual Report 2023 8. Information on Fair value of financial assets and liabilities not measured at fair value □ Applicable √ Not applicable 9. Other □ Applicable √ Not applicable XIV.Related Parties and Transactions 1. Information on the parent company of the Company □ Applicable √ Not applicable 2. Information on subsidiaries of the Company Refer to the notes for the details on subsidiaries of the Company √ Applicable □ Not applicable For the details on subsidiaries of the Company, refer to the particulars contained in "X. Equity in Other Entities","Section X Financial Report" of this Report. 3. Information on joint ventures and affiliates of the Company Refer to the notes for details of the important joint ventures or affiliates of the Company √ Applicable □ Not applicable For the details on important joint ventures or affiliates of the Company, refer to the particulars contained in "X. Equity in Other Entities","Section X Financial Report" of this Report. Information about other joint ventures or associates that have related transactions with the Company in the current period, or have balance resulting from related transactions with the Company in the previous period is as follows □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 4. Information on other related parties √ Applicable □ Not applicable Name of other related party Relationship between other related party and the Company Huzhou Beauty Town Technology Other Incubation Park Co., Ltd. Ningbo Weiman Cosmetics Co., Ltd. Other Cosmetics Industry (Huzhou) Investment Other Development Co., Ltd. Beijing Xiushi Cultural Development Co., Other Ltd. Hangzhou Regenovo Bio-technology Co., Other Ltd. Hangzhou Slow Coral Cultural Tourism Other Planning and Design Co., Ltd. PARISEZHAN HK LIMITED Other EURL PHARMATICA Other SARL ORTUS Other S.A.S AREDIS Other Shanghai Youke Brand Management Co., Other Ltd. Shanghai Youke Jiabei Technology Co., Other Ltd. Beauty Hi-tech Innovation Co.Ltd Other 248 / 272 Annual Report 2023 Other explanations None 5. Information on related transactions (1). Related transactions of purchasing and selling goods, and providing and receiving labor services Statement of purchasing goods or accepting labor services √ Applicable □ Not applicable Unit: Yuan Currency: RMB Approved Whether the Amount Related Amount Related transaction transaction limit incurred in transaction incurred in the parties limit (if is exceeded (if the previous content current period applicable) applicable) period Hangzhou Promotional 621,966.94 Not applicable Slow Coral services Cultural Tourism Planning and Design Co., Ltd. Beijing Xiushi Promotional 169,811.41 Not applicable Cultural services Development Co., Ltd. Ningbo Purchase of 121,884.94 Not applicable 107,862.78 Weiman goods Cosmetics Co., Ltd. Hangzhou Purchase of 41,663.72 Not applicable Regenovo goods Bio- technology Co., Ltd. Beauty Hi- Purchase of 4,545,263.84 Not applicable 324,982.00 tech goods Innovation Co.Ltd Statements of sales of goods or provision of services √ Applicable □ Not applicable Unit: Yuan Currency: RMB Related transaction Amount incurred in Amount incurred in Related parties content the current period the previous period Shanghai Youke Brand Sales of goods 12,289,045.76 Management Co., Ltd. Shanghai Youke Jiabei Sales of goods 33,616,486.42 Technology Co., Ltd. Ningbo Weiman Sales of goods 14,321.36 630,810.70 Cosmetics Co., Ltd. Cosmetics Industry Sales of goods 3,396.23 (Huzhou) Investment Development Co., Ltd. Explanation on related party transactions in purchasing and selling goods, and providing and receiving labor services □ Applicable √ Not applicable 249 / 272 Annual Report 2023 (2). Related entrusted management, contracting and entrusted management, and outsourcing Statement of entrusted management or contracting of the Company: □ Applicable √ Not applicable Explanation on related trusteeship or contracting □ Applicable √ Not applicable Statement of entrusted management or outsourcing of the Company □ Applicable √ Not applicable Explanation on related management or outsourcing □ Applicable √ Not applicable (3). Information on related lease The Company as the lessor: □ Applicable √ Not applicable 250 / 272 Annual Report 2023 The Company as the lessee: √ Applicable □ Not applicable Unit: Yuan Currency: RMB Variable lease Rent expenses of short- payments not term leases and low- Interest expenses on included in the value asset leases Rent paid lease liabilities Right-of-use assets increased measurement of subject to simplified assumed Types of lease liabilities (if Name of treatment (if applicable) leased applicable) lessor assets Amount Amount Amount Amount Amount Amount Amount Amount Amount incurred incurred in incurred incurred incurred in incurred incurred Amount incurred in incurred in in the the in the in the the in the in the incurred in the the current the previous current previous current previous previous current previous current period period period period period period period period period period Huzhou Beauty Town Technology Field 85,715.77 214,434.03 517,536.00 386,182.00 27,952.40 15,292.30 -229,315.75 693,678.71 Incubation Park Co., Ltd. Explanation on related lease □ Applicable √ Not applicable 251 / 272 Annual Report 2023 (4). Information on related guarantee The Company as the guarantor □ Applicable √ Not applicable The Company as the guarantee □ Applicable √ Not applicable Description of related guarantee □ Applicable √ Not applicable (5). Borrowing of related party funds □ Applicable √ Not applicable (6). Information of asset transfer and debt restructuring of related parties □ Applicable √ Not applicable (7). Remuneration of key management personnel √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the current Amount incurred in the Item period previous period Remuneration of key management 9,373,634.51 6,664,014.49 personnel Note: The above remuneration excludes the relevant remuneration recognized by share-based payment (8). Other related party transactions □ Applicable √ Not applicable 6. Information on unsettled items such as accounts receivable from and accounts payable to related parties (1). Receivable items √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Item Related parties Provision for Carrying Provision for Carrying amount bad debts amount bad debts Accounts receivable Ningbo Weiman 15,052.00 752.60 Cosmetics Co., Ltd. Subtotal 15,052.00 752.60 Prepayments Huzhou Beauty Town Technology 43,000.00 Incubation Park Co., Ltd. Beauty Hi-tech Innovation 21,021.52 Co.Ltd Subtotal 21,021.52 43,000.00 252 / 272 Annual Report 2023 Other receivables EURL PHARMATICA 18,169,451.02 18,169,451.02 18,232,635.52 18,232,635.52 [Note] Huzhou Beauty Town Technology 132,568.20 132,568.20 133,568.20 132,868.20 Incubation Park Co., Ltd. Beauty Hi-tech Innovation Co., 82,767.74 4,138.39 Ltd. Subtotal 18,384,786.96 18,306,157.61 18,366,203.72 18,365,503.72 [Note] Other receivables from EURL PHARMATICA are the consolidated statistics of receivables from PAN Xiang and receivables from EURL PHARMATICA, PARISEZHAN HK LIMITED, SARLORTUS, and S.A.SAREDIS controlled by PAN Xiang. (2). Payable items √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Related parties Ending book balance Opening book balance Accounts payable Hangzhou Slow 199,622.64 Coral Cultural Tourism Planning and Design Co., Ltd. Ningbo Weiman 121,884.94 121,884.94 Cosmetics Co., Ltd. S.A.S AREDIS 243,598.94 Subtotal 321,507.58 365,483.88 Other payables HOU Juncheng 2,000,000.00 Subtotal 2,000,000.00 (3). Other items □ Applicable √ Not applicable 7. Commitment of related parties □ Applicable √ Not applicable 8. Other □ Applicable √ Not applicable XV.Share-based Payments 1. Equity instruments √ Applicable □ Not applicable Quantity unit: Share Amount unit: Yuan Currency: RMB Categories Awarded in the Exercised in the Released in the current Invalid in the current of granted current period current period period period objects Number Amount Number Amount Number Amount Number Amount Management 679,770 42,844,932.00 110,404 6,105,220.21 R&D 91,518 5,768,248.80 13,720 761,363.96 personnel 253 / 272 Annual Report 2023 Sales 40,110 2,528,076.00 47,418 2,627,643.07 specialists Total 811,398 51,141,256.80 171,542 9,494,227.24 [Note] On May 29, 2023, the Company implemented the annual equity distribution for 2022, distributing a cash dividend of RMB0.87 (including tax) per share and issuing 0.40 shares for every 1 share to all shareholders through capitalization of the capital reserve, so this number is the number of shares after the capitalization of the capital reserve. Outstanding stock options and other equity instruments at the end of the period √ Applicable □ Not applicable Outstanding stock options at the end Outstanding other equity instruments at Categories of of the period the end of the period granted objects Scope of exercise Remaining term Scope of exercise Remaining term price of contract price of contract Management Not applicable Not applicable RMB78.56/Share 31 months R&D personnel Not applicable Not applicable RMB78.56/Share 31 months Sales specialists Not applicable Not applicable RMB78.56/Share 31 months Other explanations On July 25, 2022, the Company, according to the Proposal on the 2022 Restricted Shares Incentive Plan of the Company (Draft) and Its Summary deliberated and approved at the First Extraordinary General Meeting of Shareholders of the Company in 2022, under the Incentive Plan, proposed to grant up to 2,100,000 restricted shares to incentive objects. The grant date of restricted shares is July 25, 2022, and the incentive objects are 101 persons including senior managers, middle managers and core backbone personnel of the Company (excluding independent directors, supervisors and shareholders or actual controllers holding more than 5% of the company's shares alone or in total, as well as their spouses, parents and children). The grant price is RMB78.56 per share. The subject shares under the Incentive Plan are derived from the A-share ordinary shares of the Company privately issued by the Company to the incentive objects. The validity period of the Incentive Plan begins from the date when the registration of the grant of restricted shares is completed to the date when all the restricted shares granted to the incentive objects are released or repurchased and de-registered, in no case taking longer than 48 months. The granted restricted shares will be released in 3 installments (30%, 30%, 40%) over 36 months after the first 12 months after the initial grant of the restricted shares. The performance condition for the first release is that: On the basis of the operating revenue and net profit in 2021, the growth rates of operating revenue and net profit in 2022 were no less than 25% and 25%, respectively. The performance condition for the second release is that: On the basis of the operating revenue and net profit in 2021, the growth rates of operating revenue and net profit in 2023 were no less than 53.75% and 53.75%, respectively. The performance condition for the 3rd release is that: On the basis of the operating revenue and net profit in 2021, the growth rates of operating revenue and net profit in 2024 were no less than 87.58% and 87.58%, respectively. According to the Proposal on Satisfying the Conditions for Release from Sales Restrictions in the First Release Period under the 2022 Restricted Shares Incentive Plan deliberated and approved at the 14th meeting of the 3rd session of Board of Directors of the Company in 2023, the Company released the 811,398 restricted shares held by the incentive objects who had satisfied the first release conditions (and issued 0.40 shares for every 1 share to all shareholders through capitalization of the capital reserve, so this number is the number of shares after the capitalization of the capital reserve). The circulating date of the sales was September 26, 2023. 2. Equity-settled share-based payment √ Applicable □ Not applicable Unit: Yuan Currency: RMB Determination method of the fair value of equity Determined as per the share price on the grant instruments on the grant date date and the grant price of restricted shares Important parameters of fair value of equity instruments on the grant date Basis for determining the quantity of feasible Determined according to the estimated equity instruments performance conditions in the release period 254 / 272 Annual Report 2023 Reason for significant difference with estimation Not applicable in the current period and estimation in the previous period Cumulative amount of equity-settled share-based 163,564,812.98 payments included in the capital reserve Other explanations None 3. Information on cash-settled share-based payments □ Applicable √ Not applicable 4. Share-based payment expenses in the current period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Categories of granted objects Equity-settled share-based Cash-settled share-based payment expenses payment expenses Management 62,868,293.10 R&D personnel 8,460,207.47 Sales specialists 4,186,552.14 Total 75,515,052.71 Other explanations None 5. Information on modification and termination of share-based payments □ Applicable √ Not applicable 6. Other □ Applicable √ Not applicable XVI.Commitments and Contingencies 1. Important commitments √ Applicable □ Not applicable Important external commitments, nature and amount existing at the balance sheet date As of December 31, 2023, the investment projects conducted by the Company through public issuance of convertible bonds were as follows: Unit: RMB '0,000 Adjusted Total Ending investment Project filing Item investment accumulated amount of raised or approval No. amount investment funds Huzhou Production Base 2011-330502-04-01- 43,752.54 33,850.00 23,435.69 Expansion Project (Phase I) 178735 Longwu R&D Center 2101-330106-04-02- 21,774.45 19,450.00 19,053.45 Construction Project 307916 Information System 11,239.50 8,801.27 3,143.45 Upgrade Project Additional working capital 18,000.00 12,349.60 12,533.15 Total 94,766.49 74,450.87 58,165.74 255 / 272 Annual Report 2023 2. Contingencies (1). Important contingencies on the balance sheet date □ Applicable √ Not applicable (2). Even if the Company does not have important contingencies to be disclosed, it must also state: □ Applicable √ Not applicable 3. Other □ Applicable √ Not applicable XVII.Events after the balance sheet date 1. Important non-adjustment matters □ Applicable √ Not applicable 2. Information on profit distribution √ Applicable □ Not applicable Unit: Yuan Currency: RMB Profits or dividends to be distributed 359,037,186.69 Profits or dividends declared after 397,455,566.41 deliberation and approval According to the 18th meeting of the 3rd session of Board of Directors on April 17, 2024, the Company distributed a cash dividend of RMB9.10 (including tax) per 10 shares to all shareholders registered on the equity registration date based on the total share capital on the registration date of dividend distribution (deducting the shares in the Company's special securities account for repurchase), totaling RMB 359,037,186.69 (including tax). In case of a change in the Company's total share capital due to the conversion of convertible bonds before the date of record for equity distribution, the Company maintains the said distribution and conversion ratios and adjusts the total distribution and conversion amounts. The above matter is yet to be deliberated and approved at the shareholders’ meeting. 3. Sales return □ Applicable √ Not applicable 4. Explanation on other events after the balance sheet date □ Applicable √ Not applicable XVIII.Other Important Matters 1. Correction of early accounting errors (1). Retrospective restatement □ Applicable √ Not applicable (2). Prospective application □ Applicable √ Not applicable 2. Important debt restructuring □ Applicable √ Not applicable 256 / 272 Annual Report 2023 3. Asset replacement (1). Exchange of non-monetary assets □ Applicable √ Not applicable (2). Replacement of other assets □ Applicable √ Not applicable 4. Annuity plan □ Applicable √ Not applicable 5. Termination of operation □ Applicable √ Not applicable 6. Segment information (1). Determination basis and accounting policy of reportable segment √ Applicable □ Not applicable The Company's main business is the production and sale of cosmetics. The Company regards this business as a whole to implement management and evaluate business results. Therefore, the Company has no need to disclose segment information. For the details on revenue breakdown of the Company, refer to the particulars contained in Note V(II)1 of the Financial Statements. The details of main business income and main business cost of the Company classified by brands are as follows: 2023 Brand Income from main Cost of main business Gross profit business Proya brand 7,177,344,635.84 2,097,878,713.27 5,079,465,922.57 Other brands 1,712,883,153.13 568,986,159.23 1,143,896,993.90 Subtotal 8,890,227,788.97 2,666,864,872.50 6,223,362,916.47 2022 Brand Income from main Cost of main business Gross profit business Proya brand 5,263,675,333.17 1,520,575,295.77 3,743,100,037.40 Other brands 1,098,088,217.52 395,777,239.52 702,310,978.00 Subtotal 6,361,763,550.69 1,916,352,535.29 4,445,411,015.40 (2). Financial information of the reportable segment □ Applicable √ Not applicable (3). If the Company has no reportable segment, or cannot disclose the total assets and liabilities of each reportable segment, the reasons must be explained □ Applicable √ Not applicable (4). Other explanations □ Applicable √ Not applicable 7. Other important transactions and matters that have an impact on investors' decisions □ Applicable √ Not applicable 8. Other □ Applicable √ Not applicable 257 / 272 Annual Report 2023 XIX.Notes on Main Items of the Financial Statements of the Parent Company 1. Accounts receivable (1). Disclosed by account age √ Applicable □ Not applicable Unit: Yuan Currency: RMB Account age Ending book balance Opening book balance Within 1 year Including: Sub-items within 1 year Within 1 year 601,922,452.45 259,683,548.62 Sub-total within 1 year 601,922,452.45 259,683,548.62 1-2 years 21,289,087.90 54,333,721.43 2-3 years 10,300,174.10 Above 3 years 3-4 years 4-5 years Above 5 years Total 623,211,540.35 324,317,444.15 (2). Disclosed by the classification of bad debt accrual method √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Provision for bad Provision for bad Carrying amount Carrying amount Category debts debts Book Book Percen Accrual Accrual value Percentage value Amount tage Amount ratio Amount Amount ratio (%) (%) (%) (%) Provision for bad debts accrued individua lly Including: Provision 623,211, 100.00 36,482, 5.85 586,7 324,317, 100.00 34,434,3 10.62 289,88 for bad 540.35 849.00 28,69 444.15 80.91 3,063. debts 1.35 24 accrued by portfolio Including: Account 623,211, 100.00 36,482, 5.85 586,7 324,317, 100.00 34,434,3 10.62 289,88 age 540.35 849.00 28,69 444.15 80.91 3,063. portfolio 1.35 24 623,211, / 36,482, / 586,7 324,317, / 34,434,3 / 289,88 Total 540.35 849.00 28,69 444.15 80.91 3,063. 1.35 24 Provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: √ Applicable □ Not applicable By portfolio: Account age portfolio Unit: Yuan Currency: RMB Ending balance Name Accounts receivable Provision for bad debts Accrual ratio (%) 258 / 272 Annual Report 2023 Within 1 year 601,922,452.45 30,096,122.63 5.00 1-2 years 21,289,087.90 6,386,726.37 30.00 Total 623,211,540.35 36,482,849.00 5.85 Explanation on provision for bad debts accrued by portfolio: □ Applicable √ Not applicable Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of accounts receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (3). Information on provisions for bad debts √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount of changes in the current period Charge- Opening Withdrawal Category off or Other Ending balance balance Accrual or write- write- changes back off Provision 34,434,380.91 2,048,468.09 36,482,849.00 for bad debts accrued by portfolio Total 34,434,380.91 2,048,468.09 36,482,849.00 Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations None (4). Accounts receivable actually written off in the current period □ Applicable √ Not applicable Among them, information on accounts receivable significantly written off □ Applicable √ Not applicable Explanation on the write-off of the account receivable: □ Applicable √ Not applicable (5). Accounts receivable and contract assets of the top five ending balances collected by debtor √ Applicable □ Not applicable Unit: Yuan Currency: RMB 259 / 272 Annual Report 2023 Proportion of Balance of total balance Balance of Balance of accounts of accounts Ending accounts contract Company receivable and receivable balance of receivable at assets at the name contract assets and contract provision for the end of the end of the at the end of assets at the bad debts period period the period end of the period (%) Proya 260,909,671.88 260,909,671.88 41.87 13,045,483.59 (Zhejiang) Cosmetics Co., Ltd. Huzhou 84,267,184.00 84,267,184.00 13.52 4,213,359.20 Hapsode Trading Co., Ltd. Huzhou 51,127,826.40 51,127,826.40 8.20 2,556,391.32 UZERO Trading Co., Ltd. Ningbo 49,945,434.71 49,945,434.71 8.01 2,497,271.74 Tangyu Trading Co., Ltd. Hangzhou 43,959,624.86 43,959,624.86 7.05 6,633,111.85 Proya Commercial Management Co., Ltd. Total 490,209,741.85 490,209,741.85 78.65 28,945,617.70 Other explanations None Other explanations: □ Applicable √ Not applicable 2. Other receivables Presentation by item √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Ending balance Opening balance Interest receivable Dividend receivable Other receivables 80,702,024.60 141,574,549.59 Total 80,702,024.60 141,574,549.59 Other explanations: □ Applicable √ Not applicable Interest receivable (1). Classification of interest receivable □ Applicable √ Not applicable 260 / 272 Annual Report 2023 (2). Significant overdue interest □ Applicable √ Not applicable (3). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable (4). Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of interest receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (5). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (6). Interest receivable actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important interest receivable □ Applicable √ Not applicable Explanation on write-off of receivable financing: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable Dividend receivable (1). Dividend receivable □ Applicable √ Not applicable (2). Important dividends receivable with an account age of more than one year □ Applicable √ Not applicable 261 / 272 Annual Report 2023 (3). Disclosed by the classification of bad debt accrual method □ Applicable √ Not applicable Provision for bad debts accrued individually: □ Applicable √ Not applicable Explanation on provision for bad debts accrued individually: □ Applicable √ Not applicable Provision for bad debts accrued by portfolio: □ Applicable √ Not applicable (4). Provision for bad debts accrued according to the general model of expected credit loss □ Applicable √ Not applicable Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of dividends receivable with changes in provision for loss in the current period: □ Applicable √ Not applicable (5). Information on provisions for bad debts □ Applicable √ Not applicable Among them, significant amount of bad-debt provision withdrawn or written back in the current period: □ Applicable √ Not applicable Other explanations: None (6). Dividends receivable actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of important dividends receivable □ Applicable √ Not applicable Explanation on write-off of receivable financing: □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable Other receivables (1). Disclosed by account age √ Applicable □ Not applicable Unit: Yuan Currency: RMB Account age Ending book balance Opening book balance Within 1 year Including: Sub-items within 1 year Within 1 year 36,258,395.66 33,856,482.33 Sub-total within 1 year 36,258,395.66 33,856,482.33 1-2 years 32,135,546.26 62,659,488.92 2-3 years 47,523,332.69 131,098,498.27 262 / 272 Annual Report 2023 Above 3 years 135,780,112.99 4,741,614.72 3-4 years 4-5 years Above 5 years Total 251,697,387.60 232,356,084.24 (2). Classification by nature of payment √ Applicable □ Not applicable Unit: Yuan Currency: RMB Nature of payment Ending book balance Opening book balance Current accounts receivable 244,184,515.37 210,637,812.50 Security deposits 6,322,669.24 18,833,006.72 Suspense payment receivables 234,768.29 2,334,148.44 Other 955,434.70 551,116.58 Total 251,697,387.60 232,356,084.24 (3). Information on provision for bad debts √ Applicable □ Not applicable Unit: Yuan Currency: RMB First stage Second stage Third stage Expected credit loss Expected credit loss Expected Provision for bad for the entire for the entire Total credit losses debts duration (credit duration (credit over the next impairment not impairment has 12 months occurred) occurred) Balance as of 1,692,824.12 18,797,846.68 70,290,863.86 90,781,534.65 January 1, 2023 Balance as of January 1, 2023 in the current period – Transferred into -1,606,777.31 1,606,777.31 the second stage – Transferred into -7,128,499.90 7,128,499.90 the Third stage – Transferred back to the second stage – Transferred back to the first stage Amount accrued 1,726,872.98 -3,635,460.21 82,122,415.58 80,213,828.35 in the current period Amount written back in the current period Amount charged- off in the current period Amount written off in the current period Other changes 263 / 272 Annual Report 2023 Balance as of 1,812,919.79 9,640,663.88 159,541,779.34 170,995,363.00 December 31, 2023 Classification basis and accrual ratio of provision for bad debts for each stage None Explanation on significant changes in book balance of other receivables with changes in provision for loss in the current period: □ Applicable √ Not applicable The amount of provision for bad debts in the current period and the basis for evaluating whether the credit risk of financial instruments increases significantly: □ Applicable √ Not applicable (4). Information on provisions for bad debts √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount of changes in the current period Opening Withdrawal Charge- Ending Category Other balance Accrual or write- off or balance changes back write-off Account 90,781,534.65 70,995,363.00 age 80,213,828.35 portfolio Total 90,781,534.65 80,213,828.35 70,995,363.00 Among them, significant amount of bad-debt provision written back or withdrawn in the current period: □ Applicable √ Not applicable Other explanations None (5). Other receivables actually written off in the current period □ Applicable √ Not applicable Wherein, write-off of other important receivables: □ Applicable √ Not applicable Explanation on write-off of other receivables: □ Applicable √ Not applicable (6). Other receivables of the top five ending balances collected by debtor √ Applicable □ Not applicable Unit: Yuan Currency: RMB As a proportion Provision for bad Company of total ending Nature of Account Ending balance debts name balance in other payment age Ending balance receivables (%) Hong Kong 158,596,921.24 63.01 Current Note [1] 138,826,631.30 Xinghuo accounts Industry receivable Limited 264 / 272 Annual Report 2023 Boya (Hong 37,724,160.00 14.99 Current 2-3 years 18,862,080.00 Kong) accounts Investment receivable Management Co., Limited Zhejiang 17,430,278.00 6.93 Current Within 1 871,513.90 Meiligu accounts year Electronic receivable Commerce Co., Ltd. Hangzhou 7,491,913.31 2.98 Current Note [2] 2,484,299.62 Yizhuo accounts Culture receivable Media Co., Ltd. Ningbo 7,053,500.14 2.80 Current Note [3] 978,425.05 Keshi accounts Trading receivable Limited Total 228,296,772.69 90.71 / / 162,022,949.87 [Note 1] RMB1,378,625.13 with an account age within 1 year, RMB25,296,150.57 with an account age of 1-2 years, RMB1,506,581.35 with an account age of 2-3 years, and RMB130,415,564.19 with an account age of above 3 years. [Note 2] RMB2,253,097.49 with an account age within 1 year, RMB1,238,815.82 with an account age of 1-2 years, and RMB4,000,000.00 with an account age of 2-3 years. [Note 3] RMB5,609,833.36 with an account age within 1 year, RMB119,500.04 with an account age of 1-2 years, and RMB1,324,166.74 with an account age of 2-3 years. (7). Presented as other receivables due to centralized fund management □ Applicable √ Not applicable Other explanations: □ Applicable √ Not applicable 3. Long-term equity investments √ Applicable □ Not applicable Unit: Yuan Currency: RMB Ending balance Opening balance Item Carrying Impairment Carrying Carrying Impairment Carrying amount provision value amount provision value Investments 347,674,082. 42,500,000.0 305,174,082. 304,354,996. 42,500,000.0 261,854,996. in 74 0 74 61 0 61 subsidiaries Investments 195,016,371. 81,442,213.2 113,574,158. 213,909,167. 81,442,213.2 132,466,953. in affiliates 71 2 49 02 2 80 and joint ventures 542,690,454. 123,942,213. 418,748,241. 518,264,163. 123,942,213. 394,321,950. Total 45 22 23 63 22 41 (1) Investments in subsidiaries √ Applicable □ Not applicable Unit: Yuan Currency: RMB Impai Opening Current Current Ending Ending Invested entity rment balance increase decrease balance balance of provi 265 / 272 Annual Report 2023 sion impairment accru provisions ed in the curre nt perio d Hangzhou Proya 32,241,059.0 2,338,647.3 1,468,369.2 33,111,337.2 Trade Co.,Ltd. 9 2 1 0 Hanna Cosmetics Co., 2,094,048.00 2,094,048.00 Ltd. Zhejiang Meiligu 26,913,422.6 19,870,916. 3,208,555.1 43,575,783.6 Electronic Commerce 9 12 3 8 Co., Ltd. Yueqing Laiya 1,000,000.00 1,000,000.00 Trading Co., Ltd. Hapsode (Hangzhou) 42,500,000.0 42,500,000.0 42,500,000. Cosmetics Co., Ltd. 0 0 00 Mijing Siyu 18,000,000.0 18,000,000.0 (Hangzhou) 0 0 Cosmetics Co., Ltd. Huzhou UZERO 5,460,276.70 5,460,276.70 Trading Co., Ltd. Huzhou Niuke 3,500,000.00 3,500,000.00 Technology Co., Ltd. Hangzhou Proya 5,000,000.00 5,000,000.00 Commercial Management Co., Ltd. Huzhou Younimi 21,393,476.0 21,393,476.0 Cosmetics Co., Ltd. 0 0 Shanghai Zhongwen 5,929,948.75 936,247.72 6,866,196.47 Electronic Commerce Co., Ltd. Korea Younimi 5,046,455.61 5,046,455.6 Cosmetics Co., Ltd. 1 Hong Kong Keshi 24,736,491.0 24,736,491.0 Trading Co., Ltd. 0 0 Hong Kong Xinghuo 10,185,924.0 10,185,924.0 Industry Limited 0 0 Ningbo TIMAGE 61,330,669.1 756,966.23 62,087,635.4 Cosmetics Co., Ltd. 9 2 Ningbo Keshi Trading 520,000.00 520,000.00 Limited Zhejiang Beauty 10,181,983.2 10,181,983.2 Cosmetics Co., Ltd. 1 1 Ningbo Proya 19,558,487.3 24,613,354. 272,867.22 43,898,974.3 Enterprise Consulting 3 27 8 Management Co., Ltd. Hangzhou Yizhuo 1,000,000.00 1,000,000.00 Culture Media Co., Ltd. Hangzhou Oumisi 3,900,000.00 3,900,000.00 Trade Co., Ltd. 266 / 272 Annual Report 2023 Guangzhou Qianxi 1,000,000.00 1,000,000.00 Network Technology Co., Ltd. Zhejiang Qingya 1,650,000.00 1,650,000.00 Culture Art Communication Co., Ltd. Hangzhou Weiluoke 500,000.00 500,000.00 Cosmetics Co., Ltd. Singuladerm 500,000.00 4,500,000.0 5,000,000.00 (Hangzhou) 0 Cosmetics Co., Ltd. Proya (Hainan) 100,000.00 100,000.00 Cosmetics Co., Ltd. Hangzhou TIMAGE 112,755.04 199,201.64 311,956.68 Cosmetics Co., Ltd. Hubei Laibo 100,000.00 100,000.00 Information Co., Ltd. 304,354,996. 53,315,333. 9,996,247.1 347,674,082. 42,500,000. Total 61 30 7 74 00 (2) Investments in affiliates and joint ventures √ Applicable □ Not applicable Unit: Yuan Currency: RMB Current changes Recogniz ed Other Ending Declared Investment Opening investme compre Other Ending balance of Investme payment Impairment Unit balance Additional nt gain hensive changes balance impairment nt of cash provision Other investment and loss income in provisions decrease dividends accrued under the adjustm equity or profits equity ents method I. Joint Venture Huzhou Panrui 3,068,948 -8,956.25 3,059,99 Industry Investment .16 1.91 Partnership (Limited Partnership) Subtotal 3,068,948 -8,956.25 3,059,99 .16 1.91 II. Affiliate Xiongke Culture 2,649,619 - 2,617,83 Media (Hangzhou) .70 31,784.8 4.89 Co., Ltd. 1 Jiaxing Woyong 111,253,2 18,636,363. - - 100,964, Investment 21.93 64 8,675,14 20,250, 443.84 Partnership (Limited 1.73 000.00 Partnership) Zhuhai Haishilong 10,576,29 - 2,401,20 81,442,213. Biotechnology Co., 8.67 8,175,09 7.78 22 Ltd. 0.89 267 / 272 Annual Report 2023 Beijing Xiushi 4,918,865 - 4,530,68 Cultural Development .34 388,185. 0.07 Co., Ltd. 27 Subtotal 129,398,0 18,636,363. - - 110,514, 81,442,213. 05.64 64 17,270,2 20,250, 166.58 22 02.70 000.00 132,466,9 18,636,363. - - 113,574, 81,442,213. 53.80 64 17,279,1 20,250, 158.49 22 Total 58.95 000.00 (3). Information on impairment testing of long-term equity investments □ Applicable √ Not applicable Other explanations: None 4. Operating revenue and costs (1). Information of operating revenue and costs √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the current Amount incurred in the previous Item period period Revenue Cost Revenue Cost Main business 4,208,203,129.11 1,951,916,303.90 3,061,899,622.39 1,407,736,680.98 Other business 36,251,912.21 15,065,147.90 19,237,314.36 16,988,430.02 Total 4,244,455,041.32 1,966,981,451.80 3,081,136,936.75 1,424,725,111.00 (2). Breakdown of operating revenue and costs □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable (3). Explanation on performance obligations □ Applicable √ Not applicable (4). Explanation on remaining performance obligations allocated □ Applicable √ Not applicable (5). Significant contract changes or significant transaction price adjustments □ Applicable √ Not applicable Other explanations: 1) Breakdown of income generated from contracts with clients by goods or service type Item Amount for the current period Amount for the same period last year Revenue Cost Revenue Cost Products sales 4,208,203,129.11 1,951,916,303.90 3,063,670,101.01 1,407,736,680.98 Other 36,251,912.21 15,065,147.90 17,466,835.74 16,988,430.02 268 / 272 Annual Report 2023 Item Amount for the current period Amount for the same period last year Revenue Cost Revenue Cost Subtotal 4,244,455,041.32 1,966,981,451.80 3,081,136,936.75 1,424,725,111.00 2) Breakdown of income generated from contracts with clients by goods or service transfer time Amount for the Amount for the Item same period last current period year Income recognized at a certain point 4,215,112,328.12 3,063,670,101.01 Income recognized in a certain period 29,342,713.20 17,466,835.74 Subtotal 4,244,455,041.32 3,081,136,936.75 3) Revenue recognized in the current period and included in the beginning carrying value of contract liabilities is RMB68,099,041.17. 5. Investment income √ Applicable □ Not applicable Unit: Yuan Currency: RMB Amount incurred in the Amount incurred in the Item current period previous period Long-term equity investment income calculated by applying the cost method Long-term equity investment income -17,279,158.95 -5,149,438.13 calculated by the equity method Investment income from disposal of -2,545,129.34 988,000.42 long-term equity investment Investment income of held-for-trading financial assets during the holding period Dividend income from other equity instrument investments during the holding period Interest income from debt investment during the holding period Interest income from other debt investments during the holding period Investment income from disposal of held-for-trading financial assets Investment income from disposal of other equity instrument investments Investment income from disposal of debt investment Investment income from disposal of other debt investments Gains of debt restructuring Total -19,824,288.29 -4,161,437.71 Other explanations: None 6. Other □ Applicable √ Not applicable 269 / 272 Annual Report 2023 XX.Supplementary Information 1. Statement of non-recurring gains and losses for the current period √ Applicable □ Not applicable Unit: Yuan Currency: RMB Item Amount Note Gains or losses from disposal of non-current assets, including write-offs of provision for -703,593.33 adjusted asset impairment Government grants recognized in profit or loss for the current period (excluding government grants that are closely related to the Company’s business operations, compliant with national 44,043,618.77 policies, granted at set standards, and imposing sustaining influence on the Company's gains and losses) Gains or losses from change in fair value generated by financial assets and liabilities held by non-financial businesses as well as gains or losses from disposal of financial assets and liabilities Capital occupation fees charged to the non- financial enterprises and included in profit or loss for the current period Gains or losses from entrusting others with investment or asset management Gains or losses from outward entrusted loaning Asset loss incurred by force majeure such as natural disasters Reversal of impairment provisions of accounts receivable that have undergone impairment 289,706.45 testing alone Gains when the investment cost of acquiring a subsidiary, an associate and a joint venture is less than the fair value of the identifiable net assets of the invested entity Current net gains or losses of subsidiaries established by business combination involving enterprises under common control from the beginning of the period to the combination date Gains or losses from exchange of non-monetary assets Gains or losses from debt restructuring One-time expenses incurred due to the cessation of relevant business activities, such as staffing expenses One-time impact on current profit and loss due to the adjustments of taxes and accounting laws and regulations One-time share-based payment recognized for cancellation and modification of equity incentive plans Gains and losses from changes in the fair values of employee compensation payable for share- based payment in cash after the exercise date Gains or losses from changes in the fair values of Investment real estate that are subsequently 270 / 272 Annual Report 2023 measured using the fair value model Profits generated from transactions with unreasonable transaction price Gains or losses on contingencies that have no relation with the normal operation of the Company Custody fees of entrusted operation Other non-operating revenue and expenses -7,456,554.85 besides the above items Other items that conform to the definition of Investment income from non-recurring profit or loss -113,212.70 disposal of long-term equity investment Less: Effect of income tax 10,105,613.47 Effect of minority equity (after tax) 6,230,469.38 Total 19,723,881.49 Impact of the implementation of the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gains and Losses (Revised in 2023) on the amount of non-recurring gains and losses for the year of 2022 Item Amount Net non-recurring gains and losses attributable to 28,886,986.92 owners of the parent company for the year of 2022 Net non-recurring gains and losses attributable to owners of the parent company for the year of 2022 calculated in accordance with the Explanatory Announcement on Information Disclosure for 28,474,794.06 Companies Offering Their Securities to the Public No.1 - Non-recurring Gains and Losses (Revised in 2023) Difference 412,192.86 The reasons should be explained for the Company defining the non-recurring gains and losses items not listed in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No. 1 – Non-Recurring Gains and Losses as non-recurring gains and losses items of high value and defining the non-recurring profit and loss items listed in the same document as recurring gains and losses items. □ Applicable √ Not applicable Other explanations □ Applicable √ Not applicable 2. Return on equity and earnings per share √ Applicable □ Not applicable Weighted Earnings per share Profit during the Reporting Period average ROE Basic earnings per Diluted earnings per (%) share share Net profits attributable to ordinary 29.94 3.01 2.97 shareholders of the Company Net profits attributable to ordinary 29.44 2.96 2.92 shareholders of the Company after deducting non-recurring gains and losses 271 / 272 Annual Report 2023 3. Differences in Accounting Data under Chinese and International Accounting Standards □ Applicable √ Not applicable 4. Other □ Applicable √ Not applicable Chairman of the Board of Directors: HOU Juncheng Date of submission approved by the Board of Directors: April 17, 2024 Revision information □ Applicable √ Not applicable 272 / 272