BEST
Annual Report 2022

Plain-text annual report

Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 1 of 250 Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 20-F☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022. OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from to Commission file number 001-38198BEST Inc.(Exact name of Registrant as specified in its charter) Cayman Islands(Jurisdiction of incorporation or organization) 2nd Floor, Block A, Huaxing Modern Industry Park No. 18 Tangmiao Road, Xihu District, Hangzhou Zhejiang Province 310013 People’s Republic of China(Address of principal executive offices) Ms. Gloria Fan, Chief Financial Officer Telephone: +86-571-88995656 Email: ir@best-inc.com 2nd Floor, Block A, Huaxing Modern Industry Park No. 18 Tangmiao Road, Xihu District, Hangzhou Zhejiang Province 310013 People’s Republic of China* (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act.Title of each classTrading Symbol(s)Name of each exchange on which registeredClass A ordinary shares, par value $0.01 per share*American Depositary Shares, each representing twenty (20) Class A ordinary sharesBESTNew York Stock Exchange, Inc.* Not for trading, but only in connection with the registration of American Depositary Shares representing such Class A ordinary shares pursuant to the requirements of the Securities and Exchange Commission.Securities registered or to be registered pursuant to Section 12(g) of the Act. NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act. NoneIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 255,648,452 Class A ordinary shares were outstanding as of December 31, 2022 (including 4,305,128 ClassA ordinary shares issued to the depositary bank of the Issuer and reserved for future issuances of ADSsupon exercise or vesting of awards granted under the Issuer’s share incentive plans) 94,075,249 Class B ordinary shares were outstanding as of December 31, 2022 47,790,698 Class C ordinary shares were outstanding as of December 31, 2022Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.☐ Yes ☒ NoIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.☐ Yes ⌧ NoNote — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.⌧ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submit such files).⌧ Yes ☐ NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer☐Accelerated filer☐Non-accelerated filer☒ Emerging growthcompany ☐If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of theSarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 2 of 250 Table of ContentsIf securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issuedfinancial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevantrecovery period pursuant to §240.10D-1(b). ☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP ⌧International Financial Reporting Standards as issued by the International Accounting Standards Board ☐Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.◻ Item 17 ◻ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐ Yes ⌧ No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities undera plan confirmed by a court.☐ Yes ☐ No Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 3 of 250 Table of ContentsiBEST INC.FORM 20-F ANNUAL REPORTFISCAL YEAR ENDED DECEMBER 31, 2022 PagePART I1Item 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS1Item 2.OFFER STATISTICS AND EXPECTED TIMETABLE1Item 3.KEY INFORMATION1Item 4.INFORMATION ON THE COMPANY43ITEM 4A.UNRESOLVED STAFF COMMENTS82Item 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS82Item 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES118Item 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS130Item 8.FINANCIAL INFORMATION132Item 9.THE OFFER AND LISTING132Item 10.ADDITIONAL INFORMATION133Item 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK140Item 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES141PART II144Item 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES144Item 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS144Item 15.CONTROLS AND PROCEDURES144Item 16.145ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT145ITEM 16B.CODE OF ETHICS145ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES145ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES146ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS146ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT146ITEM 16G.CORPORATE GOVERNANCE146ITEM 16H.MINE SAFETY DISCLOSURE146ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS146ITEM 16J.INSIDER TRADING POLICIES147PART III147Item 17.FINANCIAL STATEMENTS147Item 18.FINANCIAL STATEMENTS147Item 19.EXHIBITS148 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 4 of 250 Table of ContentsiiConventions that Apply to this Annual Report on Form 20-FIn this annual report, unless otherwise indicated:●“2008 equity and performance incentive plan” are to our equity and performance incentive plan adopted in 2008, as amended;●“2017 equity incentive plan” are to BEST Inc. 2017 Equity Incentive Plan adopted in September 2017;●“2024 Convertible Notes” are to the 1.75% convertible senior notes due 2024 in an aggregate principal amount of US$200 millionthat we offered and sold in September 2019 in the United States to qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933;●“2025 Convertible Notes” are to the 4.50% convertible senior notes due 2025 in an aggregate principal amount of US$150 millionthat we issued and sold in June 2020 to Alibaba.com Hong Kong Limited, an entity affiliated with Alibaba;●“ADRs” are to the American depositary receipts, which, if issued, evidence our ADSs;●“ADSs” are to our American depositary shares, each of which represents twenty (20) Class A ordinary shares;●“AGVs” are to automated guided vehicles;●“Alibaba” are to Alibaba Group Holding Limited and its consolidated subsidiaries and affiliated consolidated entities, two of which(Alibaba Investment Limited and Cainiao Smart Logistics Investment Limited) are record shareholders of us;●“B2B” are to business-to-business, or commercial transactions between businesses;●“B2C” are to business-to-consumers, or commercial transactions between businesses and consumers;●“Cainiao Network” are to Cainiao Smart Logistics Network Limited, a consolidated subsidiary of Alibaba Group Holding Limited asof March 31, 2022, as disclosed in the annual report on Form 20-F filed with the SEC by Alibaba Group Holding Limited on July 26,2022, and its consolidated subsidiaries and affiliated consolidated entities, one of which (Cainiao Smart Logistics InvestmentLimited) is a record shareholder of us;●“China” and the “PRC” are to the People’s Republic of China, including Taiwan, the Hong Kong Special Administrative Region andthe Macao Special Administrative Region; “mainland China” are to the People’s Republic of China, excluding Taiwan, the HongKong Special Administrative Region and the Macao Special Administrative Region;●“Cloud OFC” or “OFC” are to our cloud-based order fulfillment centers through which we take full responsibility for the optimalallocation of our customers’ inventory;●“franchisee partners” are to our direct business partners that operate our Cloud OFCs for BEST Supply Chain Management or servicestations on our supply chain service network for BEST Freight and provide related services under our brands;●“freight” are to full-truckload and less-than-truckload road transportation services;●“freight volume” in any given period are to the tonnage of freight cargo collected by us or our franchisee partners using our waybillsin that period;●“FTL” are to full-truckload freight services;●“hubs” are to large logistics facilities located in major cities in the PRC that are connected by line-haul transportation to most of ourother hubs; Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 5 of 250 Table of Contentsiii●“LTL” are to less-than-truckload freight services;●“membership stores” as of any date are to convenience stores that have registered on our B2B platform Dianjia.com as of that date;●“New Retail” are to the seamless integration of online and offline retail to offer a consumer-centric, omni-channel and globalshopping experience through digitization and just-in-time delivery;●“orders fulfilled” in any given period are to the number of orders processed by our self-operated or franchised OFCs, as applicable,which were delivered to intended recipients in that period;●“ordinary shares” are to, collectively, our Class A ordinary shares, Class B ordinary shares and Class C ordinary shares, par valueUS$0.01 per share;●“parcel volume” in any given period are to the number of parcels collected by us or our franchisee partners using our waybills in thatperiod;●“RMB” or “Renminbi” are to the legal currency of the PRC;●“Smart Supply Chain” are to a supply chain built upon a technology infrastructure that is designed to analyze massive amounts ofdata to provide the customization, productivity and efficiency needed in the New Retail era, which can be defined by characteristicsincluding data and information visibility to all participants, timely predictions and real-time responses, flexibility, efficiency andintegration of supply chain services;●“SMEs” are to small and medium enterprises;●“sortation centers” are to generally smaller-scale logistics facilities compared to hubs, primarily connected to nearby hubs and othersortation centers by feeder services;●“store orders fulfilled” in any given period are to the number of orders placed through Dianjia.com and fulfilled in that period;●“swap bodies” are to standard freight containers that can be conveniently mounted on tractors for road transportation;●“US$,” “U.S. dollars,” or “dollars” are to the legal currency of the United States;●“U.S. GAAP” are to accounting principles generally accepted in the United States;●“variable interest entities” or “VIEs” are to Hangzhou BEST Information Technology Services Co., Ltd. (formerly known asHangzhou Baisheng Investment Management Co., Ltd.), or Hangzhou BEST IT, and Hangzhou Baijia Business ManagementConsulting Co., Ltd., or Hangzhou Baijia, which are PRC entities owned by PRC legal persons, and are consolidated into ourconsolidated financial statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries; we disposed ofHangzhou BEST Network as part of our sale and transfer of BEST Express to J&T Express China, which sale was completed inDecember 2021;●“we,” “us,” “our company,” “our” and “BEST” are to BEST Inc., our Cayman Islands holding company, its subsidiaries, and, in thecontext of describing our operations and consolidated financial information, the variable interest entities in mainland China,including, but not limited to, Hangzhou BEST Information Technology Services Co., Ltd. or BEST Information Technology,Hangzhou Baijia Business Management Consulting Co., Ltd. or Hangzhou Baijia and all of the variable interest entities are domesticcompanies incorporated in mainland China in which we do not have any equity ownership but whose financial results have beenconsolidated into our consolidated financial statements based solely on contractual arrangements in accordance with U.S. GAAP. See“Item 4. Information on the Company—C. Organizational Structure” for an illustrative diagram of our corporate structure; and●“CAGR” are to compound annual growth rate;●“WOWO” are to Sichuan Wowo Supermarket Chain Co., Ltd., which we acquired in May 2017 and disposed in November 2021. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 6 of 250 Table of ContentsivThis annual report includes our audited consolidated financial statements for the years ended December 31, 2020, 2021 and 2022, and asof December 31, 2021 and 2022.Our ADSs, each representing twenty (20) Class A ordinary shares, are listed on the New York Stock Exchange under the symbol “BEST.”Before February 19, 2019, our ADSs were listed on the same stock exchange under the symbol “BSTI.” Before May 20, 2022, each of our ADSsrepresented one of our Class A ordinary shares. Before April 4, 2023, each of our ADSs represented five of our Class A ordinary shares.In December 2021, we completed the sale of BEST Express, our express delivery business in China, and since then we have started toreflect the historical financial results of BEST Express for the periods prior to the sale in our consolidated financial statements as discontinuedoperations. Unless otherwise stated, the results presented in this annual report do not include the results of BEST Express.Currency Translation and Exchange RateWe have translated certain Renminbi, or RMB, amounts included in this annual report into U.S. dollars for the convenience of the readers.The rate we used for the translations was RMB6.8972 = US$1.00, which was the noon buying rate on December 30, 2022 in New York for cabletransfers in Renminbi as set forth in the H.10 weekly statistical release of the Federal Reserve Board. The translation does not mean that RMBcould actually be converted into U.S. dollars at that rate.Special Note Regarding Forward-Looking StatementsThis annual report contains forward-looking statements that involve risks and uncertainties, including statements based on our currentexpectations, assumptions, estimates and projections about us and our industry. These statements involve known and unknown risks, uncertaintiesand other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by theforward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,”“expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. Theforward-looking statements included in this annual report relate to, among others:●our goals and growth strategies;●our future business development, financial condition and results of operations;●trends in the logistics and supply chain industry in China and globally;●competition in our industry;●fluctuations in general economic and business conditions in China and other regions where we operate;●the regulatory environment in which we and companies integral to our ecosystem operate;●conditions and events that raise doubt about our ability to continue as a going concern; and●assumptions underlying or related to any of the foregoing. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 7 of 250 Table of ContentsvThis annual report also contains market data relating to the logistics and supply chain industry in China, including market position, marketsize, and growth rates of the markets in which we operate, that are based on industry publications and reports. Statistical data in these publicationsand reports also include projections based on a number of assumptions. The logistics and supply chain industry in China may not grow at the ratesprojected by market data, or at all. The failure of these markets to grow at the projected rates may have a material adverse effect on our businessand the market price of our ADSs. If any one or more of the assumptions underlying the market data turns out to be incorrect, actual results maydiffer from the projections based on these assumptions. In addition, projections, assumptions and estimates of our future performance and the futureperformance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, includingthose described in “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. You should not place undue reliance on theseforward-looking statements.The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements aremade in this annual report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events orcircumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annualreport and the documents that we have referred to in this annual report and have filed as exhibits to this annual report, completely and with theunderstanding that our actual future results may be materially different from what we expect. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 8 of 250 Table of Contents1PART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot required.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot required.ITEM 3.KEY INFORMATIONA. [Reserved]B. Capitalization and IndebtednessNot required.C. Reasons for the Offer and Use of ProceedsNot required.D. Risk FactorsSummary of Risk FactorsAn investment in our ADSs involves significant risks. Below is a summary of material risks we face, organized under relevant headings.These risks are discussed more fully below in “Item 3. Key Information—D. Risk Factors.”Risks Related to Doing Business in the People’s Republic of China•We face various legal and operational risks and uncertainties as a company based in and primarily operating in China.•Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financialcondition and results of operations and may result in our inability to sustain our growth and expansion strategies.•There are uncertainties with respect to the PRC legal system, including uncertainties regarding the interpretation and enforcement ofPRC laws, rules and regulations, and sudden or unexpected changes in policies, laws, rules and regulations in the PRC that couldadversely affect us.Risks Related to Our Corporate Structure•If the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRCregulations, or if these regulations change or are interpreted differently in the future, we could be subject to severe penalties or beforced to relinquish our interests in the operations of the VIEs.•Our contractual arrangements with the VIEs may result in adverse tax consequences to us.•We rely on contractual arrangements with the VIEs and their shareholders for our China operations, which may not be as effective asdirect ownership in providing operational control and otherwise have a material adverse effect as to our business. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 9 of 250 Table of Contents2Risks Relating to Our Business and Industry•We have fallen below the continued listing requirements of the New York Stock Exchange, and if we are unable to regain compliancein time, our ADSs may be delisted and the liquidity and the trading price of our ADSs would be materially and adversely affected.•We are highly reliant on our proprietary technology infrastructure in our business operations, and failure to continue to improve andeffectively utilize our technology infrastructure or successfully develop new technologies could harm our business operations,reputation and prospects.•We may not be able to maintain and enhance our ecosystem, which could negatively affect our business and prospects.•If we are unable to continue to innovate, meet evolving market trends, adapt to changing customer demands and maintain our cultureof innovation, our ability to sustain and grow our business may suffer.•We operate in a competitive industry, and if we fail to compete effectively, our business could suffer.•Our business and growth are significantly affected by the emergence of New Retail, the continued development of e-commerce inChina and elsewhere and related demand for integrated supply chain solutions.•We have a history of net losses and negative cash flows from operating activities, which may continue or occur again in the future.While we believe we can continue our business as a going concern and have prepared our consolidated financial statements on thatbasis, we cannot assure you that we will be able to continue as a going concern in light of the adverse conditions we are facing.Risks Related to Our ADSs•The trading price of our ADSs has been and may continue to be volatile, which could result in substantial losses to you.•If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the marketprice for our ADSs and trading volume could decline.•Techniques employed by short sellers may drive down the market price of our ADSs.Risks Related to Doing Business in the People’s Republic of ChinaWe face various legal and operational risks and uncertainties as a company based in and primarily operating in China.We face various legal and operational risks and uncertainties as a company based in and primarily operating in China. The PRCgovernment has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept foreigninvestments or list on a U.S. stock exchange. For example, we face risks associated with regulatory approvals of offshore offerings, anti-monopolyregulatory actions, cybersecurity and data privacy, as well as the lack of inspection from the U.S. Public Company Accounting Oversight Board, orPCAOB, on our auditors. The PRC government may also intervene with or influence our operations as the government deems appropriate to furtherregulatory, political and societal goals. The PRC government has recently published new policies that significantly affected certain industries suchas the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding ourindustry that could adversely affect our business, financial condition and results of operations. See “—There are uncertainties with respect to thePRC legal system, including uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations, and sudden orunexpected changes in policies, laws, rules and regulations in the PRC that could adversely affect us.” Any such action, once taken by the PRCgovernment, could cause the value of our securities, including our ADSs, to significantly decline or become worthless. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 10 of 250 Table of Contents3Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial conditionand results of operations and may result in our inability to sustain our growth and expansion strategies.Substantially all of our operations are conducted in the PRC and substantially all of our revenue is sourced from the PRC. Accordingly,our financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC.The PRC economy differs from the economies of most developed countries in many respects, including the extent of governmentinvolvement, level of development, growth rate, and control of foreign exchange and allocation of resources. Although the PRC government hasimplemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, andthe establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by thegovernment. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrialpolicies. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling payment offoreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferentialtreatment to particular industries or companies.While the PRC economy has experienced significant growth in the past, growth has been uneven, both geographically and among varioussectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation ofresources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition andresults of operations could be materially and adversely affected by government control over capital investments or changes in tax regulations thatare applicable to us. The PRC government also has significant authority to exert influence on the ability of an issuer with substantial operations inChina, such as our company, to conduct securities offerings overseas and/or allow any foreign investments in issuers with substantial operations inChina. The PRC government may intervene or influence the operations of an issuer with substantial operations in China, such as our company, atany time, which could result in a material change in our operations and/or the value of our ADSs. In particular, there have been recent statementsby the PRC government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreigninvestment in China-based issuers with substantial operations in China. Any such regulatory oversight or control could significantly limit orcompletely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities, including our ADSs, tosignificantly decline or become worthless. See “—There are uncertainties with respect to the PRC legal system, including uncertainties regardingthe interpretation and enforcement of PRC laws, rules and regulations, and sudden or unexpected changes in policies, laws, rules and regulations inthe PRC that could adversely affect us.” In addition, the PRC government has implemented in the past certain measures to control the pace ofeconomic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for our services andconsequently have a material adverse effect on our businesses, financial condition and results of operations.There are uncertainties with respect to the PRC legal system, including uncertainties regarding the interpretation and enforcement of PRClaws, rules and regulations, and sudden or unexpected changes in policies, laws, rules and regulations in the PRC that could adversely affectus.Substantially all of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiariesare subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on writtenstatutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters ingeneral. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreigninvestment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may notsufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies.In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and thenonbinding nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how toenforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent andunpredictable. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on atimely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules untilafter the occurrence of the violation. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 11 of 250 Table of Contents4Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources andmanagement attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory andcontractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection weenjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and couldmaterially and adversely affect our business, financial condition and results of operations.The PRC government has significant oversight and discretion over the conduct of our business and may intervene with or influence ouroperations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published newpolicies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it willin the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results ofoperations. See “—We face various legal and operational risks and uncertainties as a company based in and primarily operating in China.”Furthermore, the PRC government has also recently indicated an intent to exert more oversight and control over securities offerings and othercapital markets activities that are conducted overseas and foreign investment in China-based companies like us. For example, on July 6, 2021, therelevant PRC government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with theLaw, or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision onoverseas listings by Chinses companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systemsto deal with the risks and incidents faced by overseas-listed Chinese companies, enhancing cross-border regulatory cooperation, and improvingrelevant regulations to specify responsibilities of overseas-listed Chinese companies with respect to data security and information security. Thereare great uncertainties with respect to the interpretation and implementation of the Opinions. See “Item 4. Information on the Company—B.Business Overview—Regulatory Matters—Regulations Relating to Overseas Listing and M&A Rules.” If the relevant PRC regulatory agencieslater promulgate new rules or explanations requiring that we obtain their approvals for our future offshore offerings, we may be unable to obtainsuch approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such action, once taken by the PRCgovernment, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of oursecurities, including our ADSs, to significantly decline or become worthless.Our business operations are extensively impacted by the policies and regulations of the PRC government. Any policy or regulatory change maycause us to incur significant compliance costs.We are subject to extensive national, provincial and local governmental regulations, policies and controls. Central governmentalauthorities and provincial and local authorities and agencies regulate many aspects of Chinese industries, including, among others and in additionto specific industry-related regulations, the following aspects: (i) operation of logistics and supply chain services; (ii) traffic and transport-relatedservices; (iii) provision of supply chain solutions, transport services, financial services, retail services and operation of high technology businesses;(iv) environmental laws and regulations; (v) security laws and regulations; (vi) establishment of or changes in shareholder of foreign investmententerprises; (vii) foreign exchange; (viii) taxes, duties and fees; (ix) customs; and (x) land planning and land use rights, including establishment ofurban transformation initiatives.The liabilities, costs, obligations and requirements associated with these laws and regulations may cause interruptions to our operations orimpact our financial position and results of operations. Failure to comply with the relevant laws and regulations in our operations may result invarious penalties, including, among others the suspension of our operations and thus adversely and materially affect our business, prospects,financial condition and results of operations. Additionally, there can be no assurance that the relevant government agencies will not change suchlaws or regulations or impose additional or more stringent laws or regulations. Compliance with such laws or regulations may require us to incurmaterial capital expenditures or other obligations or liabilities.The successful operation of our business depends upon the performance and reliability of the Internet infrastructure in China and othercountries in which we operate.Our business depends on the performance and reliability of the Internet infrastructure in China and other countries in which we operate.Almost all access to the Internet in China is maintained through state-owned telecommunication operators under the administrative control andregulatory supervision of the MIIT. In addition, the national networks in China are connected to the Internet through state-owned internationalgateways, which are the only channels through which a domestic user can connect to the Internet outside of China. We may not have access toalternative networks in the event of disruptions, failures or other problems with the Internet infrastructure in China or elsewhere. In addition, theInternet infrastructure in the countries in which we operate may not support the demands associated with continued growth in Internet usage. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 12 of 250 Table of Contents5The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed andavailability of our websites. We have no control over the costs of the services provided by the telecommunications operators. If the prices that wepay for telecommunications and Internet services rise significantly, our gross margins could be adversely affected. In addition, if Internet accessfees or other charges to Internet users increase, activities in our ecosystem may decrease, which in turn may significantly decrease our revenue.Certain PRC regulations establish more complex procedures for acquisitions conducted by foreign investors that could make it more difficultfor us to grow through acquisitions.On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and AdministrationCommission, or the SASAC, the State Administration of Taxation, the State Administration for Industry and Commerce, the predecessor of theState Administration for Market Regulation, the CSRC, and the SAFE, jointly adopted the Regulations on Mergers and Acquisitions of DomesticEnterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&ARules include, among other things, provisions that purport to require that an offshore special purpose vehicle formed for the purpose of an overseaslisting of securities in a PRC company obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securitieson an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseaslistings by special purpose vehicles. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshorespecial purpose vehicles.While the application of the M&A Rules remains unclear, we believe, based on the advice of our PRC counsel, King & Wood Mallesons,that the CSRC approval is not required in the context of our initial public offering because (i) our PRC subsidiaries were incorporated as foreign-invested enterprises by means of foreign direct investments at the time of their incorporation, and (ii) we did not acquire any equity interests orassets of a PRC company owned by its controlling shareholders or beneficial owners who are PRC companies or individuals, as such terms aredefined under the M&A Rules. There can be no assurance that the relevant PRC government agencies, including the CSRC, would reach the sameconclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC’s approvalfor our initial public offering or if the CSRC or any other PRC government authorities promulgates any interpretation or implements rules beforeour listing that would require us to obtain CSRC or other governmental approvals for our initial public offering, we may face adverse actions orsanctions by the CSRC or other PRC regulatory agencies. In any such event, these regulatory agencies may impose fines and penalties on ouroperations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our initial public offering into thePRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation andprospects.In addition, the Anti-Monopoly Law, which was most recently revised on June 24, 2022, requires that the anti-trust governmentalauthority, such as Anti-monopoly Bureau of the SAMR, shall be notified in advance of any concentration of undertaking if certain thresholds aretriggered. The Anti-monopoly Committee of the State Council published the Anti-Monopoly Guidelines for the Internet Platform Economy Sectoron February 7, 2021, which specifically provides that concentration of undertakings involving VIEs shall be subject to anti-monopoly review. If aconcentration of undertakings meets the criteria for declaration as stipulated by the State Council, the entity conducting the concentration shallreport such concentration to the anti-monopoly law enforcement agency under the State Council in advance. On November 15, 2021, we receivedfrom the SAMR an administrative penalty decision imposing a fine of RMB500,000 on us as a result of our failure to report concentration ofundertaking in connection with Hangzhou BEST Network’s acquisition of shares of WOWO in 2017. We have made full payment of the penaltyand we do not expect further penalty from the SAMR in connection with this matter. However, our other prior concentration of undertaking(whether by ourselves, our subsidiaries or through the VIEs) that meet the criteria for declaration may be subject to a reporting requirement, and inthe future we may be subject to penalties including but not limited to fines if we fail to comply with such requirement. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 13 of 250 Table of Contents6The new regulations, such as Measures for the Security Review of Foreign Investment, also established additional procedures andrequirements that are expected to make merger and acquisition activities in China by foreign investors more time-consuming and complex,including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreigninvestor takes control of a PRC domestic enterprise, or that the approval from the MOFCOM be obtained in circumstances where overseascompanies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. We may grow our business in part byacquiring other companies operating in our industry. Complying with the requirements of the new regulations to complete such transactions couldbe time-consuming, and any required approval processes, including approval from the MOFCOM or Anti-monopoly Bureau of the SAMR, maydelay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. See“Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Overseas Listing and M&A Rules”and “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Foreign Investment—ForeignInvestment Security Review.”PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRCsubsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increasetheir registered capital or distribute profits.SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investmentand Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the formercircular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to registerwith local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseasinvestment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests,referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of anysignificant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, sharetransfer or exchange, merger, division or other material events. In the event that a PRC shareholder holding interests in a special purpose vehiclefails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profitdistributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle maybe restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registrationrequirements described above could result in liability under PRC law for evasion of foreign exchange controls. According to the Notice on FurtherSimplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by SAFE,qualified local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchangeregistration and amendment registration, under SAFE Circular 37 from June 1, 2015.We have notified our substantial beneficial owners who we know are PRC residents of their obligations of applications, filings andamendments as required under SAFE Circular 37 and other related rules. Nevertheless, we may not be aware of the identities of all of ourbeneficial owners who are PRC residents. We do not have control over our beneficial owners and there can be no assurance that all of our PRC-resident beneficial owners will comply with SAFE Circular 37, its implementation rules and other applicable foreign exchange rules, and there isno assurance that the registration under SAFE Circular 37 and any amendment will be completed in a timely manner, or will be completed at all.The failure of our beneficial owners who are PRC residents to register or amend their foreign exchange registrations in a timely manner pursuant toSAFE Circular 37, its implementation rules and other applicable foreign exchange rules, or the failure of future beneficial owners of our companywho are PRC residents to comply with these registration requirements, may subject such beneficial owners or our PRC subsidiaries to fines andlegal sanctions. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRCsubsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to our company, or we may be penalized by SAFE. These risks may havea material adverse effect on our business, financial condition and results of operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 14 of 250 Table of Contents7PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currencyconversion may delay or prevent us from using the proceeds of our initial public offering and convertible senior notes issuances to make loansto or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability tofund and expand our business.We are an offshore holding company conducting our operations in China through our PRC subsidiaries, the VIEs and their subsidiaries.Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by orregistration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises, or FIEs, inChina, capital contributions to our PRC subsidiaries are subject to the filing with the MOFCOM or its local branches and registration with othergovernmental authorities in China. In addition, (i) any foreign loan procured by our PRC subsidiaries is required to be registered with the StateAdministration of Foreign Exchange, or the SAFE, or its local branches, and (ii) each of our PRC subsidiaries may not procure loans which exceedthe difference between its registered capital and its total investment amount as approved. Any medium or long term loan to be provided by us to theVIEs must be filed with the National Development and Reform Commission, or the NDRC, and the SAFE or its local branches in advance. Wemay not obtain these governmental approvals or complete such registrations on a timely basis, if at all, with respect to future capital contributionsor foreign loans by us to our PRC subsidiaries. If we fail to receive such approvals or complete such registrations, our ability to use the proceeds ofour initial public offering and convertible senior notes issuances and to capitalize our PRC operations may be negatively affected, which couldadversely affect our liquidity and our ability to fund and expand our business.In 2008, the SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of thePayment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFE Circular 142 regulates theconversion by FIEs of foreign currency into Renminbi by restricting the usage of converted Renminbi. SAFE Circular 142 provides that anyRenminbi capital converted from registered capitals in foreign currency of FIEs may only be used for purposes within the business scopes approvedby PRC governmental authority and such Renminbi capital may not be used for equity investments within China unless otherwise permitted by thePRC law. In addition, the SAFE strengthened its oversight of the flow and use of the Renminbi capital converted from registered capital in foreigncurrency of FIEs. The use of such Renminbi capital may not be changed without SAFE approval, and such Renminbi capital may not in any case beused to repay Renminbi loans if the proceeds of such loans have not been utilized. As a result, we are required to apply Renminbi funds convertedfrom the net proceeds we received from our initial public offering and convertible senior notes issuances within the business scopes of our PRCsubsidiaries. On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign ExchangeCapital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June 1, 2015 and superseded SAFECircular 142 on the same date. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchangecapitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbifund converted from their foreign exchange capitals for expenditure beyond their business scopes. SAFE promulgated the Notice of the StateAdministration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, orSAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition againstusing RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans toa prohibition against using such capital to issue loans to non-associated enterprises.Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our initial public offering andconvertible senior notes issuances, to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand ourbusiness in the PRC. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer to and use in China the net proceedsfrom our initial public offering and convertible senior notes issuances, which may adversely affect our business, financial condition and results ofoperations. Additionally, the Notice for Further Advancing the Facilitation of Cross-border Trade and Investment, or the SAFE Circular 28, waspromulgated by the SAFE on October 23, 2019. SAFE Circular 28, among other things, allows FIEs to use Renminbi converted from foreigncurrency-denominated capital for equity investments in China so long as the equity investment complies with the then-effective SpecialAdministrative Measures for Access of Foreign Investment (Negative List) and is genuine and legitimate. However, since the SAFE Circular 28 isnewly promulgated, it remains uncertain how the SAFE and competent banks will implement this circular. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 15 of 250 Table of Contents8In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holdingcompanies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary governmentapprovals on a timely basis, if at all, with respect to future loans or capital contributions by us to our PRC subsidiaries or the VIEs. If we fail tocomplete such registrations or obtain such approvals, our ability to use the proceeds we receive from our initial public offering and convertiblesenior notes issuances and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adverselyaffect our liquidity and our ability to fund and expand our business.Any failure to comply with PRC regulations regarding our employee share incentive plans may subject the PRC plan participants or us to finesand other legal or administrative sanctions.Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies due totheir position as director, senior management or employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE orits local branches for the foreign exchange registration with respect to offshore special purpose companies. Our directors, executive officers andother employees who are PRC residents or who are non-PRC residents residing in China for a continuous period of not less than one year, subjectto limited exceptions, and who have been granted options may follow SAFE Circular 37 to apply for the foreign exchange registration before ourcompany becomes an overseas listed company. As a U.S. public company, we and our directors, executive officers and other employees who arePRC residents and who have been granted options are subject to the Notice on Issues Concerning the Foreign Exchange Administration forDomestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, or SAFE Circular 7, issued by SAFE in February2012, according to which, employees, directors, supervisors and other management members participating in any stock incentive plan of anoverseas publicly listed company who are PRC residents or who are non-PRC residents residing in China for a continuous period of not less thanone year, subject to limited exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary ofsuch overseas listed company, and complete certain other procedures. We are making efforts to comply with these requirements. However, therecan be no assurance that they can successfully register with SAFE in full compliance with the rules. Failure to complete the SAFE registrationsmay subject them to fines and legal sanctions and may also limit the ability to make payment under our share incentive plans or receive dividendsor sales proceeds related thereto, or our ability to contribute additional capital into our wholly-foreign owned enterprises in China and limit ourwholly-foreign owned enterprises’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adoptadditional share incentive plans for our directors and employees under PRC law.The enforcement of the PRC Labor Contract Law, and other labor-related regulations in the PRC may increase our labor costs and limit ourflexibility to use labor. Our failure to comply with PRC labor-related laws may expose us to penalties.On June 29, 2007, the Standing Committee of the National People’s Congress of China enacted the PRC Labor Contract Law, whichbecame effective on January 1, 2008 and was amended on December 28, 2012. The PRC Labor Contract Law introduces specific provisions relatedto fixed-term employment contracts, part-time employment, probation, consultation with labor unions and employee assemblies, employmentwithout a written contract, dismissal of employees, severance, and collective bargaining, which together represent enhanced enforcement of laborlaws and regulations. According to the PRC Labor Contract Law, an employer is obliged to sign an unfixed-term labor contract with any employeewho has worked for the employer for 10 consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that hasalready been entered into twice consecutively, the resulting contract must have an unfixed term, with certain exceptions. The employer must payeconomic compensation to an employee where a labor contract is terminated or expires in accordance with the PRC Labor Contract Law, except forcertain situations which are specifically regulated. As a result, our ability to terminate employees is significantly restricted. In addition, thegovernment has issued various labor-related regulations to further protect the rights of employees. According to such laws and regulations,employees are entitled to annual leave ranging from five to 15 days and are able to be compensated for any untaken annual leave days in theamount of three times their daily salary, subject to certain exceptions. In the event that we decide to change our employment or labor practices, thePRC Labor Contract Law and its implementation rules may also limit our ability to effect those changes in a manner that we believe to be cost-effective. In addition, as the interpretation and implementation of these new regulations are still evolving, our employment practices may not be atall times deemed in compliance with the new regulations. If we are subject to severe penalties or incur significant liabilities in connection withlabor disputes or investigations, our business and financial conditions may be adversely affected. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 16 of 250 Table of Contents9Companies operating in China are required to participate in various government sponsored employee benefit plans, including certainsocial insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentagesof salaries, including bonuses and allowances, of their employees up to a maximum amount specified by the local government from time to time.The requirement to maintain employee benefit plans has not been implemented consistently by local governments in China given the differentlevels of economic development in different locations. We did not pay, or were not able to pay, certain past social security and housing fundcontributions in strict compliance with the relevant PRC regulations for and on behalf of our employees due to differences in local regulations andinconsistent implementation or interpretation by local authorities in the PRC and varying levels of acceptance of the housing fund system by ouremployees. We may be subject to fines and penalties for our failure to make payments in accordance with the applicable PRC laws and regulations.We may be required to make up the contributions for these plans as well as to pay late fees and fines. We have not made any accruals for theinterest on underpayments and penalties that may be imposed by the relevant PRC government authorities in the financial statements. If we aresubject to penalties, late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may beadversely affected.We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries to fund offshore cashand financing requirements. Any limitation on the ability of our operating subsidiaries to make payments to us could have a material andadverse impact on our ability to operate our business.We are a holding company and rely to a significant extent on dividends and other distributions on equity paid by our principal operatingsubsidiaries and on remittances from the VIEs, for our offshore cash and financing requirements, including the funds necessary to pay dividendsand other cash distributions to our shareholders, fund inter-company loans, service any debt and interest we may incur outside of China and pay ourexpenses. When our principal operating subsidiaries or the VIEs incur additional debt, the instruments governing the debt may restrict their abilityto pay dividends or make other distributions or remittances to us. Furthermore, the laws, rules and regulations applicable to our PRC subsidiariesand certain other subsidiaries permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicableaccounting standards and regulations.Under PRC laws, rules and regulations, each of our subsidiaries incorporated in China is required to set aside at least 10% of its netincome each year to fund certain statutory reserves until the cumulative amount of such reserves reaches 50% of its registered capital. Thesereserves, together with the registered capital, are not distributable as cash dividends. As a result of these laws, rules and regulations, oursubsidiaries incorporated in China are restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends,loans or advances.In response to the persistent capital outflow in China and RMB’s depreciation against U.S. dollar in the fourth quarter of 2016, the PBOCand the SAFE have implemented a series of capital control measures over recent months, including stricter vetting procedures for China-basedcompanies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. For instance, on January 26,2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Review of Authenticity and Compliance to FurtherPromote Foreign Exchange Control, or the SAFE Circular 3, which stipulates several capital control measures with respect to the outboundremittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check boardresolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shallhold income to account for previous years’ losses before remitting the profits. The PRC government may continue to strengthen its capital controls,and more restrictions and substantial vetting process may be put in place by SAFE for cross-border transactions falling under both the currentaccount and the capital account. Limitations on the ability of VIEs to make remittances to wholly-foreign owned enterprises and on the ability ofour subsidiaries to pay dividends to us could limit our ability to access cash generated by the operations of those entities, including to makeinvestments or acquisitions that could be beneficial to our businesses, pay dividends to our shareholders, service debt and interest, or otherwisefund and conduct our business. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 17 of 250 Table of Contents10We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subjectto PRC income tax on our global income.Under the PRC Enterprise Income Tax Law and its implementing rules, enterprises established under the laws of jurisdictions outside ofChina with “de facto management bodies” located in China may be considered PRC tax resident enterprises for tax purposes and may be subject tothe PRC enterprise income tax at the rate of 25% on their global income. “De facto management body” refers to a managing body that exercisessubstantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise. TheState Administration of Taxation issued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRCTax Resident Enterprises on the Basis of De Facto Management Bodies, or SAT Circular 82, on April 22, 2009. SAT Circular 82 provides certainspecific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located inChina. Although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those controlled by foreign enterprises orindividuals, the determining criteria set forth in SAT Circular 82 may reflect the State Administration of Taxation’s general position on how the “defacto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they arecontrolled by PRC enterprises. If we were to be considered a PRC resident enterprise, we would be subject to PRC enterprise income tax at the rateof 25% on our global income. In such case, our profitability and cash flow may be materially reduced as a result of our global income being taxedunder the Enterprise Income Tax Law. We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes.However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to theinterpretation of the term “de facto management body.”Dividends payable to our foreign investors and gains on the sale of our ADSs or Class A ordinary shares by our foreign investors may becomesubject to PRC tax.Under the PRC Enterprise Income Tax Law and its implementing rules issued by the State Council, a 10% PRC withholding tax, subjectto any reduction or exemption set forth in applicable tax treaties or under applicable tax arrangements between jurisdictions, is applicable todividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which havesuch establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extentsuch dividends are derived from sources within the PRC. Similarly, any gain realized on the transfer of ADSs or Class A ordinary shares by suchinvestors is also subject to PRC tax at a current rate of 10%, subject to any reduction or exemption set forth in applicable tax treaties or underapplicable tax arrangements between jurisdictions, if such gain is regarded as income derived from sources within the PRC. If we are deemed aPRC resident enterprise, dividends paid on our Class A ordinary shares or ADSs, and any gain realized from the transfer of our Class A ordinaryshares or ADSs, would be treated as income derived from sources within the PRC and would as a result be subject to PRC taxation. Furthermore, ifwe are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on thetransfer of ADSs or Class A ordinary shares by such investors may be subject to PRC tax at a current rate of 20%, subject to any reduction orexemption set forth in applicable tax treaties or under applicable tax arrangements between jurisdictions. If we or any of our subsidiariesestablished outside China are considered a PRC resident enterprise, it is unclear whether holders of our ADSs or Class A ordinary shares would beable to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends payable to ournon-PRC investors, or gains from the transfer of our ADSs or Class A ordinary shares by such investors, are deemed as income derived fromsources within the PRC and thus are subject to PRC tax, the value of your investment in our ADSs or Class A ordinary shares may declinesignificantly. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 18 of 250 Table of Contents11We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises, assets attributed toa PRC establishment of a non-Chinese company, or real property located in China owned by non-Chinese companies.On February 3, 2015, the State Administration of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers ofAssets by Non-PRC Resident Enterprises, or Bulletin 7, which was recently amended on December 29, 2017. Pursuant to this Bulletin, an “indirecttransfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be recharacterized and treated as adirect transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose ofavoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise incometax. According to Bulletin 7, “PRC taxable assets” include assets attributed to an establishment or place of business in China, real propertieslocated in China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable commercial purpose”of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshoreenterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment inChina or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxableassets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business modeland organizational structure; the foreign income tax liabilities arising from the indirect transfer of PRC taxable assets; the replicability of thetransaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similararrangements. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business, the resulting gain is to be includedwith the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRCenterprise income tax at a rate of 25%. Where the underlying transfer relates to the real properties located in China or to equity investments in aPRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income taxof 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who isobligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor shalldeclare and pay such tax to the tax authority by itself within the statutory time limit. Bulletin 7 does not apply to transactions of sale of shares byinvestors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange. On October 17,2017, the SAT issued the Bulletin on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which,among others, repeals certain rules related to treatment of situations where a payor has failed to timely withhold tax as stipulated in Bulletin 7. Inparticular, Bulletin 37 provides that when a payor as the withholding agent fails to or is unable to perform its withholding duty, on the conditionthat the relevant non-PRC resident enterprise voluntarily makes payment before being ordered to do so in a timely manner or within a time limitprescribed by relevant tax authorities, the tax shall be deemed as having been timely paid. The Bulletin 37 further specifies and clarifies taxwithholding methods applicable to income of non-PRC resident enterprises.There is uncertainty as to the application of Bulletin 7. Bulletin 7 may be determined by the tax authorities to be applicable to our offshorerestructuring transactions or sale of our ordinary shares or preferred shares, or those of our offshore subsidiaries, where non-resident enterprises,being the transferors, were involved. We thereby may be subject to the tax filing and withholding or tax payment obligation, while our PRCsubsidiaries may be requested to assist in the filing. Furthermore, we, our non-resident enterprises and PRC subsidiaries may be required to spendvaluable resources to comply with Bulletin 7 or to establish that we and our non-resident enterprises should not be taxed under Bulletin 7, for ourprevious and future restructuring or disposal of shares of our offshore subsidiaries, which may have a material adverse effect on our financialcondition and results of operations.The PRC tax authorities have the discretion under Bulletin 7 to make adjustments to the taxable capital gains based on the differencebetween the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments to the taxableincome of the transactions under Bulletin 7, our income tax costs associated with such potential acquisitions or disposals could increase, which mayhave an adverse effect on our financial condition and results of operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 19 of 250 Table of Contents12Restrictions on currency exchange may limit our ability to utilize our cash effectively.Substantially all of our revenue is denominated in Renminbi. The Renminbi is currently convertible under the “current account,” whichincludes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign directinvestment and loans, including loans we may secure from or for our onshore subsidiaries or the VIEs. Currently, certain of our PRC subsidiariesmay purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval ofSAFE by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our abilityto purchase foreign currencies in the future for current account transactions. Foreign exchange transactions under the capital account remain subjectto limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. Since a significant amountof our future revenue will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilizecash generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, includingholders of our ADSs, and may limit our ability to obtain foreign currency through debt or equity financing for our subsidiaries and the VIEs.The audit reports included in this annual report are prepared by an auditor which the U.S. Public Company Accounting Oversight Board wasunable to inspect and investigate completely before 2022 and, as such, our investors have been deprived of the benefits of such inspection in thepast, and may be deprived of the benefits of such inspections again in the future.Our independent registered public accounting firm that issues the audit reports included in this annual report, as auditors of companies thatare traded publicly in the U.S. and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, is required by thelaws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards.According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directlyconduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRCsecurities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities businessactivities to overseas parties. In 2021, PCAOB made determinations that the positions taken by PRC authorities prevented the PCAOB frominspecting and investigating firms headquartered in mainland China and Hong Kong completely. On August 26, 2022, the PCAOB signed aStatement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the PRC, taking the first step towardopening access for the PCAOB to inspect and investigate completely registered public accounting firms headquartered in mainland China andHong Kong including our auditor. According to its announcement, the PCAOB sent staff to conduct on-site inspections and investigations in HongKong from September to November 2022 and conducted inspection field work and investigative testimony in a manner consistent with thePCAOB’s methodology and approach to inspections and investigations in the U.S. and globally. The PCAOB inspections have preliminarilyidentified numerous deficiencies in the audit firms in China, which are consistent with the types and number of findings the PCAOB hasencountered in other first-time inspections around the world, and the final inspection reports is expected to be completed and made public in 2023.If audit firms in China had been subject to such inspections in the past, such deficiencies may have been identified earlier and these audit firms,including our auditor, may have taken remedial measures to address any such deficiencies, and the historical inability of the PCAOB to inspectaudit firms in China has deprived our investors of the benefits of such inspections. Because our auditor was not subject to such inspections before2022, we cannot assure you that it will have sufficient time to fully address any deficiency that may be identified as part of the inspection processto improve future audit quality. The inability of the PCAOB to conduct complete inspections of auditors in China before 2022 may have made itmore difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of Chinathat are subject to PCAOB inspections, which could cause investors or potential investors in our ADSs to lose confidence in the quality of ourconsolidated financial statements.In addition, while the PCAOB announced in December 2022 that it secured complete access to inspect and investigate registered publicaccounting firms headquartered in China, we cannot assure you that the PCAOB will continue to have such access in the future. If the PCAOB isnot able to inspect and investigate completely auditors in China for any reason, such as any change in the position of the governmental authoritiesin China in the future, our investors may be deprived of the benefits of such inspections again. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 20 of 250 Table of Contents13If the PCAOB determines that it is unable to inspect or investigate completely our auditor at any point in the future, our ADSs may beprohibited from trading in the United States under the Holding Foreign Companies Accountable Act, as amended, or the HFCA Act, and anysuch trading prohibition on our ADSs or threat thereof may materially and adversely affect the price of our ADSs and value of your investment.The HFCA Act was signed into law on December 18, 2020 and amended pursuant to the Consolidated Appropriations Act, 2023 onDecember 29, 2022. Under the HFCA Act and the rules issued by the SEC and the PCAOB thereunder, if we have retained a registered publicaccounting firm to issue an audit report where the registered public accounting firm has a branch or office that is located in a foreign jurisdictionand the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreignjurisdiction, the SEC will identify us as a “covered issuer”, or SEC-identified issuer, shortly after we file with the SEC a report required under theSecurities Exchange Act of 1934, or the Exchange Act (such as our annual report on Form 20-F) that includes an audit report issued by suchaccounting firm; and if we were to be identified as an SEC-identified issuer for two consecutive years, the SEC would prohibit our securities(including our shares or ADSs) from being traded on a national securities exchange or in the over-the-counter trading market in the United States.In December 2021, the PCAOB made its determinations, or the 2021 determinations, pursuant to the HFCA Act that it was unable toinspect or investigate completely registered public accounting firms headquartered in mainland China or Hong Kong including our auditor, Ernst &Young Hua Ming LLP. After we filed our annual report on Form 20-F for the fiscal year ended December 31, 2021 that included an audit reportissued by Ernst & Young Hua Ming LLP on April 18, 2022, the SEC conclusively identified us as an SEC-identified issuer on May 13, 2022. Assuch, we are required to satisfy additional disclosure requirement for SEC-identified issuers that are also foreign issuers in this annual report. See“Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.”Following the Statement of Protocol signed between the PCAOB and the China Securities Regulatory Commission and the Ministry ofFinance of the PRC in August 2022 and the on-site inspections and investigations conducted by the PCAOB staff in Hong Kong from September toNovember 2022, the PCAOB Board voted in December 2022 to vacate the previous 2021 determinations, and as a result, our auditor, Ernst &Young Hua Ming LLP, is no longer a registered public accounting firm that the PCAOB is unable to inspect or investigate completely as of the dateof this annual report or at the time of issuance of the audit report included herein. As such, we do not expect to be identified as an SEC-identifiedissuer again in 2023 after we file this annual report on Form 20-F for the fiscal year ended December 31, 2022. However, the PCAOB may changeits determinations under the HFCA Act at any point in the future. In particular, if the PCAOB finds its ability to completely inspect and investigateregistered public accounting firms headquartered in mainland China or Hong Kong is obstructed by the PRC authorities in any way in the future,the PCAOB may act immediately to consider the need to issue new determinations consistent with the HFCA Act. We cannot assure you that thePCAOB will always have complete access to inspect and investigate our auditor, or that we will not be identified as an SEC-identified issuer againin the future.If we are identified as an SEC-identified issuer again in the future, we cannot assure you that we will be able to change our auditor or takeother remedial measures in a timely manner, and if we were to be identified as an SEC-identified issuer for two consecutive years, we would bedelisted from the NYSE and our securities (including our shares and ADSs) will not be permitted for trading “over-the-counter” either. If oursecurities are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a marketfor our shares will develop outside of the United States. Such a prohibition or any threat thereof would substantially impair your ability to sell orpurchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of ourADSs. Also, such a prohibition or any threat thereof would significantly affect our ability to raise capital on terms acceptable to us, or at all, whichwould have a material adverse impact on our business, financial condition, and prospects. Moreover, the implementation of the HFCA Act andother efforts to increase the U.S. regulatory access to audit information could cause investor uncertainty as to China-based issuers’ ability tomaintain their listings on the U.S. national securities exchanges and the market price of the securities of China-based issuers, including us, could beadversely affected. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 21 of 250 Table of Contents14If additional remedial measures are imposed on the “big four” China-based accounting firms, including our independent registered publicaccounting firm, in administrative proceedings brought by the SEC alleging such firms’ failure to meet specific criteria set by the SEC withrespect to requests for the production of documents, we could be unable to timely file future financial statements in compliance with therequirements of the Exchange Act.In December 2012, the SEC instituted proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against five China-basedaccounting firms, including our independent registered public accounting firm, alleging that these firms had violated the U.S. securities laws andthe SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ work papers related to their audits of certain China-basedcompanies that are publicly traded in the U.S. Rule 102(e)(1)(iii) grants the SEC the authority to deny to any person, temporarily or permanently,the ability to practice before the SEC who is found by the SEC, after notice and opportunity for a hearing, to have willfully violated any such lawsor rules and regulations. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspendingfour of the five firms from practicing before the SEC for a period of six months. Four of these China-based accounting firms appealed to the SECagainst this decision and, on February 6, 2015, each of the four China-based accounting firms agreed to a censure and to pay a fine to the SEC tosettle the dispute and avoid suspension of their ability to practice before the SEC. The firms’ ability to continue to serve all their respective clientsis not affected by the settlement. The settlement requires the firms to follow detailed procedures to seek to provide the SEC with access to Chinesefirms’ audit documents via the China Securities Regulatory Commission. If the firms do not follow these procedures, the SEC could imposepenalties such as suspensions, or it could restart the administrative proceedings. The settlement did not require the firms to admit to any violation oflaw and preserves the firms’ legal defenses in the event the administrative proceeding is restarted. Our audit committee is aware of the policyrestriction and has regularly communicated with our independent auditor to ensure compliance. If additional remedial measures are imposed on theChina-based “big four” accounting firms, including our independent registered public accounting firm, in administrative proceedings brought bythe SEC alleging the firms’ failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could beunable to timely file future financial statements in compliance with the requirements of the Exchange Act.In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, companies listed in the U.S. withmajor Chinese operations may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in financialstatements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, anynegative news about any such future proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listedcompanies and the trading price of our ADSs may be adversely affected.If our independent registered public accounting firm were denied, even temporarily, the ability to practice before the SEC and we wereunable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statementscould be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delistingof the ADSs representing our Class A ordinary shares from the New York Stock Exchange or deregistration from the SEC, or both, which wouldsubstantially reduce or effectively terminate the trading of our ADSs in the U.S.Risks Related to Our Corporate StructureIf the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRCregulations, or if these regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced torelinquish our interests in the operations of the VIEs.Under current PRC laws and regulations, foreign enterprises or individuals may not invest in or operate domestic mail delivery servicesand tobacco retail business and foreign ownership of Internet information services is subject to restrictions. According to the Interim Measures forthe Operation and Administration of Road Freight Transport based on Internet Platforms promulgated by the Ministry of Transport and the StateTaxation Administration in 2019, enterprises that operate an internet platform for road freight transport must satisfy legal requirements regardingoperational internet information service such as obtaining their own ICP licenses. Foreign investors are generally not permitted to own more than50% of the equity interests in a value-added telecommunication service provider (other than business of e-commerce, domestic multipartycommunication, store-and-forward business and call center). See “Item 4. Information on the Company—B. Business Overview—RegulatoryMatters—Regulations Relating to Foreign Investment—Foreign Investment in Telecommunication Businesses.” Also, foreign investors areforbidden to invest in wholesale or retail business of tobacco leaves, cigarettes, redried tobacco leaves or other tobacco products. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 22 of 250 Table of Contents15We are a Cayman Islands company and our PRC subsidiaries wholly owned by us are considered wholly-foreign owned enterprises.Accordingly, none of these subsidiaries are eligible to operate domestic mail delivery services, value-added telecommunications business andtobacco retail business in China, including operation of an internet platform for road freight transport. It is also practically and economically notpossible to separate the delivery of mail from the delivery of non-mail items in our day-to-day services. To ensure compliance with the PRC lawsand regulations, we conducted such domestic mail delivery services and value-added telecommunications business in connection with BESTUCargo, before the business was wound down by the end of 2022, through Hangzhou BEST Information Technology Services Co., Ltd., the VIE,and its subsidiaries. Our company and BEST Logistics Technology (China) Co., Ltd., or BEST Logistics China, our wholly-owned subsidiary inChina, have entered into a series of contractual arrangements with Hangzhou BEST Information Technology Services Co., Ltd. and itsshareholders, and our company and BEST Store Network (Hangzhou) Co., Ltd., or BEST Store Network, our wholly-owned subsidiary in China,have entered into a series of contractual arrangements with Hangzhou Baijia Business Management Consulting Co., Ltd. and its shareholders,which enable us to (i) receive substantially all of the economic benefits of the VIEs and are also obligated to absorb the expected losses of theVIEs, and (ii) have an exclusive option to purchase all or part of the equity interests and assets in the VIEs when and to the extent permitted byPRC law. As a result of these contractual arrangements, we have control over and are the primary beneficiary of the VIEs and hence consolidatetheir financial results as the VIEs under U.S. GAAP.If the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with itsrestrictions on foreign investment in value-added telecommunications business or tobacco retail business, if such restrictions change or areinterpreted differently in the future, or if the PRC government otherwise finds that we, the VIEs, or any of its subsidiaries are in violation of PRClaws or regulations or lack the necessary permits or licenses to operate our business, we could be subject to severe penalties or be forced torelinquish our interests in the operations of the VIEs. The relevant PRC regulatory authorities would have broad discretion in dealing with suchviolations or failures, including, without limitation: (i) revoking the business licenses and/or operating licenses of these entities; (ii) discontinuingor placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and VIEs; (iii) imposingfines, confiscating the income from our PRC subsidiaries or VIEs, or imposing other requirements with which such entities may not be able tocomply; (iv) requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEsand deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate, or to receive substantially all of theeconomic benefits from, the VIEs; or (v) restricting or prohibiting our use of the proceeds of our initial public offering and convertible senior notesissuances to finance our business and operations in China.Any of these actions would cause significant disruption to our business operations and severely damage our reputation, which would inturn materially and adversely affect our business, financial condition and results of operations. The enforceability of the agreements under thecontractual arrangements has not been tested in a court of law, and new PRC laws, rules and regulations may be introduced to impose additionalrequirements that may impose additional challenges to our corporate structure and contractual arrangements. In addition, relevant PRC regulatoryauthorities could disallow the VIE structure. If any of the foregoing were to occur, and as a result we were unable to direct the activities of theVIEs, receive the economic benefits from the VIEs and/or claim our contractual control rights over the assets of the VIEs and their subsidiaries thatconduct substantially all of our operations in China, we may not be able to consolidate the entities in our consolidated financial statements inaccordance with U.S. GAAP, which would likely materially and adversely affect our financial condition and results of operations, and cause thevalue of our securities, including our ADSs, to significantly decline or become worthless.Our contractual arrangements with the VIEs may result in adverse tax consequences to us.Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge bythe PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that our contractualarrangements with the VIEs were not made on an arm’s length basis and adjust our income and expenses for PRC tax purposes by requiring atransfer pricing adjustment. A transfer pricing adjustment could adversely affect us by (i) increasing the tax liabilities of the VIEs without reducingthe tax liability of our PRC subsidiaries, which could further result in late payment fees and other penalties to the VIEs for underpaid taxes; or (ii)limiting the ability of the VIEs to obtain or maintain preferential tax treatments and other financial incentives. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 23 of 250 Table of Contents16We rely on contractual arrangements with the VIEs and their shareholders for our China operations, which may not be as effective as directownership in providing operational control and otherwise have a material adverse effect as to our business.We rely on contractual arrangements with the VIEs and their shareholders to operate our business in China. For a description of thesecontractual arrangements, see “Item 4. Information on the Company—Variable Interest Entity Contractual Arrangements.” In 2020, 2021 and 2022,21%, 27% and 5% of our total revenue from continuing operations, respectively, was attributed to the VIEs. These contractual arrangements maynot be as effective as direct ownership in providing us with control over the VIEs. If the VIEs or their shareholders fail to perform their respectiveobligations under these contractual arrangements, we may have to incur substantial costs and expend significant resources to enforce sucharrangements in reliance on legal remedies under PRC law as we will only have indirect recourse to the assets held by the VIEs. These remediesmay not always be effective, particularly in light of uncertainties in the PRC legal system. Furthermore, in connection with litigation, arbitration orother judicial or dispute resolution proceedings, assets under the name of any of the record holders of equity interest in the VIEs, including suchequity interest, may be put under court custody. As a consequence, we cannot be certain that the equity interest will be disposed of pursuant to thecontractual arrangements or ownership by the record holder of the equity interest.All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through litigation in the PRC.Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legalprocedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRClegal system could limit our ability to enforce these contractual arrangements. In the event that we are unable to enforce these contractualarrangements, or if we suffer significant time delays or other obstacles in the process of enforcing these contractual arrangements, it would be verydifficult to exert effective control over the VIEs for accounting purposes, and our ability to conduct our business and our financial condition andresults of operations may be materially and adversely affected. See “—Risks Related to Doing Business in the People’s Republic of China—Thereare uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.”The shareholders of the VIEs may have conflicts of interest with us, which may materially and adversely affect our business and financialcondition.In connection with our operations in China, we rely on the shareholders of the VIEs to abide by the obligations under such contractualarrangements. Hangzhou BEST IT and Hangzhou Baijia, the two VIEs of ours, is each 50% owned by Wei Chen, a PRC individual who is arelative of Mr. Shao-Ning Johnny Chou, and 50% owned by Lili He, another PRC individual who is a relative of Mr. Shao-Ning Johnny Chou. Theinterests of Wei Chen, Lili He and Hangzhou Ali Venture Capital Co., Ltd. in their own capacities as the shareholders of the VIEs, as applicable,may differ from the interests of our company as a whole, as what is in the best interests of the VIEs, including matters such as whether to distributedividends or to make other distributions to fund our offshore requirement, may not be in the best interests of our company. There can be noassurance that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company, or that conflicts ofinterest will be resolved in our favor. In addition, these shareholders may breach or cause the VIEs to breach or refuse to renew the existingcontractual arrangements with us.We currently do not have arrangements to address potential conflicts of interest the shareholders of the VIEs may encounter. We believethat we can, at all times, exercise our option under the exclusive call option agreement to cause these shareholders of the VIEs to transfer all oftheir equity ownership in the VIEs to a PRC entity or individual designated by us as permitted by then applicable PRC laws.In addition, if such conflicts of interest arise, we could also, in the capacity of attorney-in-fact of the then-existing shareholders of theVIEs as provided under the shareholder voting rights proxy agreement, directly appoint new directors of the VIEs. If we cannot resolve anyconflicts of interest or disputes between us and the shareholders of the VIEs, we would have to rely on legal proceedings, which could result indisruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 24 of 250 Table of Contents17We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by the VIEs, which could severely disrupt ourbusiness, render us unable to conduct some or all of our business operations and constrain our growth.As part of our contractual arrangements with the VIEs, the VIEs and their subsidiaries hold certain assets, licenses and permits that arematerial to our business operations, including courier service operation permits, ICP licenses and road transportation operation permits. Thecontractual arrangements contain terms that specifically obligate VIE equity holders to ensure the valid existence of the VIEs and restrict thedisposal of material assets of the VIEs. However, in the event the VIE equity holders breach the terms of these contractual arrangements andvoluntarily liquidate the VIEs, or the VIEs declare bankruptcy and all or part of their assets become subject to liens or rights of third-partycreditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of our business operations or otherwisebenefit from the assets held by the VIEs, which could have a material adverse effect on our business, financial condition and results of operations.Furthermore, if the VIEs undergo a voluntary or involuntary liquidation proceeding, its equity holders or unrelated third-party creditors may claimrights to some or all of the assets of the VIEs, thereby hindering our ability to operate our business as well as constrain our growth.Our corporate actions are significantly influenced by our principal shareholders, including our founder, chairman and chief executive officer,Mr. Shao-Ning Johnny Chou, and Alibaba (including Cainiao Network), which have the ability to exert significant influence over importantcorporate matters that require approval of shareholders, which may deprive you of an opportunity to receive a premium for your ADSs andmaterially reduce the value of your investment.Our outstanding share capital consists of Class A ordinary shares, Class B ordinary shares and Class C ordinary shares. Each Class Aordinary share is entitled to one vote, each Class B ordinary share is entitled to 15 votes, and each Class C ordinary share is entitled to 30 votes atgeneral meetings of our shareholders. As of February 28, 2023, Alibaba (including Cainiao Network) beneficially owned, in aggregate, 2.5% of ourClass A ordinary shares and 100% of our Class B ordinary shares, representing approximately 45.9% of the aggregate voting power of our issuedand outstanding share capital, and Mr. Shao-Ning Johnny Chou beneficially owned 100% of the Class C ordinary shares issued and outstanding,representing approximately 46.2% of the aggregate voting power of our issued and outstanding share capital. Our amended and restatedmemorandum and articles of association that are currently in effect also provide that all matters submitted to our shareholders for approval shouldbe decided by a special resolution, which requires at least two-thirds of the votes cast by shareholders who are present in person or by proxy at ageneral meeting of our company, unless a greater majority is required. Therefore, our shareholders will not be able to pass any resolution withoutthe affirmative votes of Mr. Shao-Ning Johnny Chou or Alibaba (including Cainiao Network) if one or more of them continue to hold more thanone-third of the aggregate voting power of our issued and outstanding share capital. In addition, Mr. Shao-Ning Johnny Chou has nominated twodirectors to our board of directors; Alibaba (including Cainiao Network) has nominated two directors to our board of directors; and they generallyhave the right to appoint replacements of these directors unless they do not hold any of our shares.This concentration of ownership and the protective provisions in our amended and restated memorandum and articles of association maydiscourage, delay or prevent a change in control of our company, which could have the dual effect of depriving our shareholders of an opportunityto receive a premium for their shares as part of a sale of our company and reducing the price of the ADSs. As a result of the foregoing, the value ofyour investment could be materially reduced.If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, ormisappropriate or misuse these assets, our business and operations may be materially and adversely affected.Under PRC law, legal documents for corporate transactions that our business relies on are executed using the chop or seal of the signingentity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the StateAdministration for Market Regulation.The chops of our PRC subsidiaries and VIEs are generally held by the relevant entities so that documents can be executed locally.Although we usually utilize chops to execute contracts, the registered legal representatives of our PRC subsidiaries and VIEs have the apparentauthority to enter into contracts on behalf of such entities without chops, unless such contracts set forth otherwise. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 25 of 250 Table of Contents18In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to thedesignated key employees of our legal, administrative or finance departments. Although we have approval procedures in place and monitor our keyemployees, including the designated legal representatives of our PRC subsidiaries and the VIEs, the procedures may not be sufficient to prevent allinstances of abuse or negligence. There is a risk that our key employees or designated legal representatives could abuse their authority, for example,by binding our PRC subsidiaries and the VIEs with contracts against our interests, as we would be obligated to honor these contracts if the othercontracting party acts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designatedlegal representative obtains control of the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or boardresolution to designate a new legal representative and to take legal action to seek the return of the chop, apply for a new chop with the relevantauthorities, or otherwise seek legal remedies for the legal representative’s misconduct. If any of the designated legal representatives obtains andmisuses or misappropriates our chops and seals or other controlling intangible assets for whatever reason, we could experience disruption to ournormal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve whiledistracting management from our operations, and our business and operations may be materially and adversely affected.Our current corporate structure and business operations may be affected by the newly enacted Foreign Investment Law.On March 15, 2019, the National People’s Congress of China approved the Foreign Investment Law, which took effect on January 1,2020. Since it is relatively new, uncertainties exist with respect to its interpretation and implementation. The Foreign Investment Law does notspecify whether VIEs that are controlled through contractual arrangements would be deemed as foreign-invested enterprises if they are ultimately“controlled” by foreign investors. However, it has a catch-all provision under its definition of “foreign investment” that includes investments madeby foreign investors in China through other means as provided by laws, administrative regulations or the State Council. As such, there is stillleeway for future laws, administrative regulations or provisions of the State Council to classify contractual arrangements as a form of foreigninvestment. Therefore, there can be no assurance that our control over the VIEs through contractual arrangements will not be deemed as foreigninvestment in the future.The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operatein industries specified as either “restricted” or “prohibited” to foreign investment in a “negative list”. On December 27, 2021, the MOFCOM andthe NDRC jointly promulgated the Negative List 2021. If, in the future, our control over the VIEs through contractual arrangements were deemedas foreign investment, and if the VIEs are engaged in any business which is “restricted” or “prohibited” to foreign investment under the then-effective “negative list”, we may be deemed to be in violation of the Foreign Investment Law, the contractual arrangements that allow us to havecontrol over the VIEs may be deemed as invalid and illegal, and we may be required to unwind such contractual arrangements and/or restructureour business operations, any of which may have a material adverse effect on our business operations.Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect toexisting contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.Any failure on our part to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges couldmaterially and adversely affect our current corporate structure and business operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 26 of 250 Table of Contents19We could be adversely affected by political tensions between the United States and China.Political tensions between the U.S. and China have escalated in recent years due to, among other things, the trade war between the twocountries since 2018, the COVID-19 outbreak, the PRC National People’s Congress’ passage of Hong Kong national security legislation, theimposition of U.S. sanctions on certain Chinese officials from China’s central government and the Hong Kong Special Administrative Region bythe U.S. government, the imposition of sanctions on certain individuals from the U.S. by the Chinese government, various executive orders issuedby former U.S. President Donald J. Trump, such as the one issued in August 2020 that prohibits certain transactions with two major Chineseinternet technology companies and their respective subsidiaries, the executive order issued in November 2020 that prohibits U.S. persons fromtransacting publicly traded securities of certain “Communist Chinese military companies” named in such executive order, and the executive orderissued in January 2021 that prohibits such transactions as are identified by the U.S. Secretary of Commerce with certain “Chinese connectedsoftware applications,” as well as the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measurespromulgated by China’s Ministry of Commerce, or the MOFCOM, on January 9, 2021, which will apply to Chinese individuals or entities that arepurportedly barred by a foreign country’s law from dealing with nationals or entities of a third country. Such rules provide, among others, thatChinese individuals or entities are required to report to the MOFCOM within 30 days if they are prohibited or restricted from engaging in normalbusiness activities with third-party countries or their nationals or entities due to foreign laws or measures; and the MOFCOM may issue prohibitionorders contravening such non-Chinese laws or measures after confirmed by a designated working mechanism. Disobedience with such prohibitionorders may be subject to warning, order to rectify and fines. Rising political tensions between China and the U.S. could reduce levels of trade,investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effecton global economic conditions and the stability of global financial markets. The measures taken by the U.S. and Chinese governments may havethe effect of restricting our ability to transact or otherwise do business with entities within or outside of China and may cause investors to loseconfidence in Chinese companies and counterparties, including us. If we were unable to conduct our business as it is currently conducted as a resultof such regulatory changes, our business, results of operations and financial condition would be materially and adversely affected.Furthermore, there have been recent media reports on deliberations within the U.S. government regarding potentially limiting orrestricting China-based companies from accessing U.S. capital markets, and delisting China-based companies from U.S. national securitiesexchanges. In January 2021, after reversing its own delisting decision, the NYSE ultimately resolved to delist three top telecommunicationscompanies in China in compliance with the executive order issued in November 2020, after receiving additional guidance from the U.S.Department of Treasury and its Office of Foreign Assets Control. These delistings have introduced greater confusion and uncertainty about thestatus and prospects of Chinese companies listed on the U.S. stock exchanges. If any further such deliberations were to materialize, the resultinglegislation may have a material and adverse impact on the stock performance of China-based issuers listed in the United States such as us, and wecannot assure you that we will be able to maintain the listing of our ADSs on a national stock exchange in the U.S., such as the NYSE or theNASDAQ Stock Market, or that you will be allowed to continue to trade our shares or ADSs.Risks Relating to Our Business and IndustryWe have fallen below the continued listing requirements of the New York Stock Exchange, and if we are unable to regain compliance in time,our ADSs may be delisted and the liquidity and the trading price of our ADSs would be materially and adversely affected.We received a letter from the New York Stock Exchange, or the NYSE, in October 2022, notifying our company that we were not incompliance with applicable price criteria in the NYSE’s continued listing standards because the average closing price of our American DepositaryShares, or the ADSs, was less than US$1.00 per ADS over a consecutive 30 trading-day period. We notified the NYSE in October 2022 of ourintent to cure the deficiency and regain compliance with the minimum share price requirement. Pursuant to Section 802.01C of the NYSE’s ListedCompany Manual, we have a cure period of six months following receipt of the NYSE’s notice, or until April 2023, to regain such compliance.If we fail to regain compliance with NYSE’s continued listing standards before April 2023, our ADSs will be delisted from the NYSE.There can be no assurance that the NYSE will not commence suspension and delisting procedures for our ADSs earlier and before the expiration ofthe six-month cure period. If our ADSs were delisted from the NYSE, the liquidity and the trading price of our ADSs would be materially andadversely affected. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 27 of 250 Table of Contents20We are highly reliant on our proprietary technology infrastructure in our business operations, and failure to continue to improve andeffectively utilize our technology infrastructure or successfully develop new technologies could harm our business operations, reputation andprospects.Technology is critical to our integrated solutions, connecting our systems with those of our ecosystem participants. While we havecontinuously enhanced our proprietary technology infrastructure, we may not be able to continue to improve our technology infrastructure anddevelop new technologies to meet the future needs of our business. If we are unable to maintain, improve and effectively utilize our technologyinfrastructure or to realize the expected results from our technology investments, our business, financial condition, results of operations andprospects, as well as our reputation, could be materially and adversely affected. Any problem with the functionality and effectiveness of oursoftware or platforms could also result in unanticipated system disruptions, slower response times, impaired user experiences, delays in reportingaccurate operating and financial information and inefficient management of our systems. In addition, enhancing our technology infrastructurerequires significant investments of time and financial and managerial resources, including recruiting and training new technology personnel, addingnew hardware and updating software and strengthening research and development. If our technology investments are unsuccessful, our businesscould suffer and we may be unable to recover the resources we commit to such initiatives.We may not be able to maintain and enhance our ecosystem, which could negatively affect our business and prospects.Our ability to maintain a healthy and rich ecosystem that creates strong network effects among our ecosystem participants is critical to oursuccess. While our ecosystem provides synergies and economies of scale across service lines and among our ecosystem participants, the extent towhich we are able to maintain and strengthen the attractiveness of our ecosystem depends on our ability to offer a mutually beneficial platform forall participants, maintain the quality of our services and solutions, develop attractive services and solutions that meet the evolving needs of ourecosystem participants, reinforce the scope and scale of our ecosystem, and retain our participants. We must also provide sufficient geographiccoverage to cement the effectiveness of our service network, continue to utilize data to improve service quality and operational efficiency of allecosystem participants and maintain and improve our technology infrastructure as part of our single interoperable system to ensure seamlessoperations.In addition, our ecosystem participants may compete with one another, which may complicate the management of our ecosystem. Further,changes made to enhance our ecosystem or balance the interests of participants may be viewed positively by one participant but may have negativeeffects upon another. If we fail to balance the interests of all participants in our ecosystem, we may fail to further attract and retain additionalecosystem participants, which could adversely impact our business and financial condition.If we are unable to continue to innovate, meet evolving market trends, adapt to changing customer demands and maintain our culture ofinnovation, our ability to sustain and grow our business may suffer.The ongoing success of our business depends on our ability to continue to introduce innovative solutions and services to meet evolvingmarket trends and satisfy changing customer demands. We must continue to adapt by continuing innovation, improving our services and modifyingour strategies, which could cause us to incur substantial costs. We may not be able to continue to innovate or adapt to changing market andcustomer needs in a timely and cost-effective manner, if at all. This could adversely impact our ability to embrace the changes brought by the NewRetail era, expand our ecosystem and grow our business. Failure to develop new services to meet evolving market demands through innovationcould cause us to lose current and potential customers and harm our operating results and financial condition.In addition, we may not be able to maintain our culture of innovation, which has been critical to our success and has helped us create valuefor our shareholders, succeed as a leader in our industry and attract, retain and motivate employees and other ecosystem participants. Among otherchallenges, we may not be able to identify and promote people in leadership positions who share our culture and can always focus on technologyand innovation. Competitive pressure may also cause us to move in directions that may divert us from our mission, vision and values. If we cannotmaintain our culture of innovation, our long-term business prospects could be materially and adversely affected. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 28 of 250 Table of Contents21We operate in a competitive industry, and if we fail to compete effectively, our business could suffer.We compete with total supply chain solution providers. As our operations encompass a broad range of areas, certain service lines may alsoface competition from other service providers in China, including supply chain management service providers, freight service providers, SaaSsoftware service providers and logistics brokers. As we continue to expand our local express delivery and other services in certain Southeast Asiancountries, we also face intense competition from both international and local service providers. In addition to established players, we facecompetition from new market entrants. Increased competition may lead to a loss of market share, increasing difficulty in launching new serviceofferings, reduction in revenue or increase in loss, any one of which could harm our business, financial condition and results of operations.Our competitors may have a broader service or network coverage, more advanced technology infrastructure, stronger brand recognitionand greater capital resources than we do. In addition, our competitors may reduce their rates to gain business, especially during times of reducedeconomic growth, and such reductions may limit our ability to maintain or increase our rates, maintain our operating margins or achieve growth inour business.The establishment by our competitors of cooperative relationships or competing networks to increase their ability to address the needs ofour customers and other ecosystem participants could also negatively impact us. We may not be able to successfully compete against current orfuture competitors, and competitive pressures may have a material and adverse effect on our business, financial condition and results of operations.Our business and growth are significantly affected by the emergence of New Retail, the continued development of e-commerce in China andelsewhere and related demand for integrated supply chain solutions.We serve merchants that conduct business in the retail industry in China, and these merchants rely on our services to fulfill orders placedby consumers. As we focus on providing integrated supply chain solutions for the New Retail era, our future business opportunities depend uponthe continued integration of online and offline retail channels and the adoption of the New Retail paradigm by an increasing number of merchantsin China and elsewhere, both in terms of large platforms and brands as well as small and medium enterprises, or SMEs, and micro-merchants.The future development and landscape of the retail industry in China and elsewhere are affected by a number of factors, many of whichare beyond our control. These factors include the consumption power and disposable income of consumers, as well as changes in demographics andconsumer preferences. The development of the retail industry is also subject to the selection, price and popularity of products offered throughonline and offline retail channels of original brand manufacturers and changes in the availability, reliability and security of such channels. Further,the emergence of alternative channels or business models that better suit the needs of consumers and the development of online-to-offline supplychain integration by retailers can also affect the development of the retail industry. Another important factor is the development of fulfillment,payment and other ancillary services associated with the retail industry. Macroeconomic conditions, particularly as retail spending tends to declineduring recessions and other economic factors affecting consumer confidence, including inflation and deflation, fluctuation of currency exchangerates, volatility of stock and property markets, interest rates, tax rates and changes in unemployment rates, can also impact the development of theretail industry in China and elsewhere. Finally, other factors, such as changes in government policies, laws and regulations, in particular those thatgovern the retail industry, as well as changes in domestic and international politics, including military conflicts, economic disputes, politicalturmoil and social instability, can also influence the development of the retail industry in China and elsewhere. It is difficult to predict how marketforces, or China or U.S. government policy, in particular, the outbreak of a trade war between China and the U.S. and the imposition starting in2018 of additional tariffs on bilateral imports, trade bans and trade restrictions, may continue to impact China’s economy, the retail industry, e-commerce in China and the U.S., as well as related demand for integrated supply chain solutions going forward. If New Retail, the e-commerceindustry in China and elsewhere and their respective demand for integrated supply chain solutions fail to develop as we expect, our business andgrowth could be harmed. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 29 of 250 Table of Contents22We have a history of net losses and negative cash flows from operating activities, which may continue or occur again in the future. While webelieve we can continue our business as a going concern and have prepared our consolidated financial statements on that basis, we cannotassure you that we will be able to continue as a going concern in light of the adverse conditions we are facing.We incurred a net loss of RMB2,051.2 million, net income of RMB209.6 million, and a net loss of RMB1,503.3 million (US$218.0million) in 2020, 2021 and 2022, respectively, including net loss of RMB1,028.4 million, RMB1,263.9 million and RMB1,464.8 million(US$212.4 million) from our continuing operations and net loss of RMB1,022.8 million, net income of RMB1,473.5 million and net loss ofRMB38.5 million (US$5.6 million) from our discontinued operations comprising BEST Express, which we sold in late 2021, and our Store+business, which we wound down by the end of 2020. In addition, we do not have a stable history of positive cash flows from operating activities.We used net cash in operating activities (including continuing and discontinued operations) in the amounts of RMB231.2 million, RMB2,804.0million and RMB1,117.8 million (US$162.1 million) in 2020, 2021 and 2022, respectively, primarily due to the increase in net loss (includingcontinuing and discontinued operations) in 2021 and the decrease in net loss (including continuing and discontinued operations) in 2022, afterexcluding gains on disposal from discontinued operations. In addition, holder of our 2025 Convertible Notes have the right to require us torepurchase their notes within 90 days after June 3, 2023, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased,plus accrued and unpaid interest, if any. As of the date of this annual report, an aggregate principal amount of US$150 million of our 2025Convertible Notes were outstanding. In April 2023, we and Alibaba.com Hong Kong Limited, the holder of our 2025 Convertible Notes, agreedthat Alibaba.com Hong Kong limited would not require us to repurchase all of their notes in 2023, and would instead require us to repurchase onehalf of their notes, or US$75 million aggregate principal amount, in 2023, and the other half of their notes, or US$75 million aggregate principalamount in 2024. All of the foregoing adverse conditions may indicate there is substantial doubt about our ability to continue as a going concern.Our management has developed the following plans to improve these conditions, including, to (i) realign our businesses to adapt to theevolving, competitive market conditions and execute additional measures to manage and reduce our costs and expenditures to better improveoperating cash flows; and (ii) seek other strategic alternatives in certain business segments or raise additional financing in the near term. However,there is uncertainty as to whether, and there can be no assurance that our strategic refocusing plan and other aforesaid plans, even if they aresuccessfully executed, will generate sufficient operating cash flow to remove the substantial doubt about our ability to continue as a going concern.Such uncertainty is due to, among other things, the unpredictability of the continued impact of the COVID-19 outbreak on the PRC and globaleconomy. Although we achieved encouraging initial results from the execution of our strategic refocusing plan and reduced our costs andexpenditures in 2022 for certain business segments, if we are unsuccessful in our efforts or are unable to seek other strategic alternatives or raiseadditional financing in the near term, we may be required to further reduce or scale back our operations significantly, in addition to the windingdown of BEST Store+ in late 2020, the sale of BEST Express in late 2021 and the winding down of BEST UCargo and BEST Capital by the end of2022. For more details about our liquidity and cash position, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and CapitalResources.” The consolidated financial statements included elsewhere in this annual report have been prepared assuming that we will continue tooperate as a going concern. However, in light of the aforesaid adverse conditions, and despite our plans to address or improve these conditions,there can be no assurance that we will be able to continue as a going concern.In addition, we expect our costs and expenses to decrease in absolute amounts due to (i) the implementation of cost saving plan;and (ii)the improvement of operating efficiency.Our ability to achieve and maintain profitability also depends on our ability to enhance our market position, maintain competitive pricing,leverage technology and business model innovation to expand and enhance our service offerings, and increase our operational efficiency. Ourability to achieve and maintain profitability are also affected by many factors which may be beyond our control, such as the overall demand forsupply chain services and general economic conditions, including levels of consumption, as well as global pandemics such as COVID-19 thatstarted in late 2019. If we are unable to achieve profitability, we may have to cut down the scale of our operation, which may impact our businessgrowth and adversely affect our financial condition and results of operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 30 of 250 Table of Contents23Our historical growth rates may not be indicative of our future growth, and if we are unable to manage our growth or execute our strategieseffectively, our business and prospects may be materially and adversely affected.Our past growth rates may not be indicative of future growth and our planned growth initiatives may not be successful. Our total revenuefrom continuing operations increased from RMB10,528.2 million in 2020, to RMB11,425.8 million in 2021, but decreased to RMB7,744.1 million(US$1,122.8 million) in 2022.Our rapid growth has placed, and will continue to place significant demands on our management and our technology infrastructure, aswell as our administrative, operational and financial systems. We intend to achieve growth by continuing innovation, expanding market share,growing our service lines, broadening value-added services, expanding global reach, enhancing operational efficiency and quality, as well asgrowing through mergers, acquisitions and strategic alliances. There can be no assurance that we will be able to effectively manage our growth. Ifour growth initiatives fail, our businesses and prospects may be materially and adversely affected.We are affected by seasonality experienced in the consumer retail and logistics and supply chain industries.Our businesses are affected by seasonality experienced in the consumer retail and logistics and supply chain industries. We typicallyexperience a seasonal surge in sales in our freight e-commerce parcel operations during the fourth quarter of each year as a result of stronger salesin connection with the Singles’ Day and December 12 promotions, which may impose challenging resource and capacity demands on our businessoperations. Activity levels across our business lines are typically lower around Chinese national holidays, including Chinese New Year in the firstquarter of each year, as consumer spending levels and shipment levels tend to be weaker.Seasonality also makes it challenging to forecast demand for our services, as freight and supply chain management sales volumes can varysignificantly and unexpectedly. We make planning and spending decisions, including capacity expansion, procurement commitments, personnelneeds and other resource requirements based on our estimates of demand. Failure to meet demand associated with the seasonality in a timelymanner may adversely affect our financial condition and results of operations.Our success depends to a substantial degree upon our senior management, including Mr. Shao-Ning Johnny Chou and other key personnel,and our business operations would be negatively affected if we fail to attract and retain highly competent senior management.We depend to a significant degree on the continued service of Mr. Shao-Ning Johnny Chou, our founder, chairman and chief executiveofficer, our experienced senior management and other key personnel. If members of our senior management team or other key personnel resign,join a competitor or form a competing company, it could negatively impact our business operations and create uncertainty as we search for andintegrate a replacement and could have an adverse effect on our financial condition and results of operations.We have entered into employment and confidentiality agreements with our senior management and other key personnel. However, theseemployment and confidentiality agreements do not ensure the continued service of these senior management and key personnel, and we may not beable to enforce these agreements. In addition, we do not maintain key man life insurance for any of the senior members of our management team orother key personnel.We utilize franchisee partners to conduct certain aspects of our business, and face risks associated with these relationships, their employees andother personnel.We utilize franchisee partners to conduct certain aspects of our business. As of December 31, 2022, we had approximately 18,452franchisee partners in China. We also have franchisee partners in certain Southeast Asian countries where we operate local express deliverynetworks, such as Thailand, Vietnam and Singapore. Many of our franchisee partners sub-contract part of their businesses to sub-franchisees. Ourcontrol over franchisee partners and their sub-franchisees may not be as effective as if we had directly owned these partners’ businesses, whichcould potentially make it difficult for us to manage them. Particularly, as we do not enter into agreements with sub-franchisees of our franchiseepartners, we are unable to exert a significant degree of influence over them. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 31 of 250 Table of Contents24Our franchisee partners, sub-franchisees and their employees directly interact with merchants and consumers in our ecosystem, and theirperformance directly affects our reputation and brand image. If our service personnel or those of our franchisee partners or sub-franchisees fail tosatisfy the needs of our ecosystem participants, respond effectively to their complaints, which we have received from time to time, or provideservices in a reliable, safe and secure manner, our reputation and the loyalty of our ecosystem participants could be negatively affected. As a result,we may lose ecosystem participants or experience a decrease in our business volume, which could have a material adverse effect on our business,financial condition and results of operations. We do not directly supervise the services provided by our franchisee partners and may not be able tosuccessfully maintain and improve the quality of their services. Our franchisee partners may also fail to implement sufficient control over the pick-up and delivery personnel who work at the service stations in connection with their conduct, such as proper collection and handling of the items wetransport and delivery service fees, adherence to privacy standards and timely delivery. As a result, we may suffer financial losses, incur liabilitiesand suffer reputational damages in the event of theft or late delivery of the items we ship, embezzlement of delivery service fees or mishandling ofprivate information. In addition, while violation of laws and regulations by franchisee partners had not led to any material claim against us in thepast, we cannot assure you that such claim will not arise in the future which may harm our brand or reputation or have other adverse impacts.Further, suspension or termination of a franchisee partner’s services in a particular geographic area may cause interruption to or failure inour services in the corresponding geographic area. A franchisee partner may suspend or terminate its services voluntarily or involuntarily due tovarious reasons, including disagreement or dispute with us, failure to make a profit, failure to maintain requisite approvals, licenses or permits or tocomply with other governmental regulations, and events beyond our or its control, such as inclement weather, natural disasters, epidemics,transportation interruptions or labor unrest or shortage. Due to the intense competition in the logistics and supply chain industry in China andSoutheast Asian countries, our existing franchisee partners may also choose to discontinue their cooperation with us and work with our competitorsinstead. We may not be able to promptly replace our franchisee partners or find alternative ways to provide services in a timely, reliable and cost-effective manner, or at all. As a result of any service disruptions associated with our franchisee partners, satisfaction, brand, reputation, operationsand financial performance of our ecosystem participants may be materially and adversely affected.Our BEST Global service line has a limited operating history.We have a limited history in providing BEST Global services, which was launched or significantly expanded in the last few years. Whilethis service line has experienced rapid expansion, we cannot assure you that we will be able to continue its expansion or successfully address anyfuture problems or issues, nor can we assure you that it will ultimately become profitable. To reduce cash outflows and reallocate resources to ourcore businesses, by the end of 2020, we wound down our BEST Store+ business and have since then started to account for BEST Store+ asdiscontinued operations. In addition, in 2021 we suspended the provision of certain fleet and equipment lease services under BEST Capital for theforeseeable future. Furthermore, by the end of 2021, we sold BEST Express; accordingly, BEST Express has been deconsolidated from ourcompany, and its historical financial results are reflected in our consolidated financial statements as discontinued operations. We expect to continueto adjust our existing operating model and explore new operating models for our BEST Global service line which may subject us to furtheruncertainties and negative effects on our overall business and results of operations. As we intend to grow the scale of this service line, we mayincur significant ramp-up costs to support such growth, which may negatively affect our profitability, particularly if we are unable to achieveeconomies of scale. We may not be able to recoup all or any of our investments made in this business. In addition to organically growing thisservice line, we may seek to expand it through strategic acquisitions, which would subject us to additional risks. See “—Any difficulties inidentifying, consummating and integrating acquisitions, investments or alliances may expose us to potential risks and have an adverse effect on ourbusiness, results of operations or financial condition.” Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 32 of 250 Table of Contents25Macroeconomic and other factors that reduce demand for supply chain services, in China or globally, could have a material adverse impact onour business.The global logistics and supply chain industry has historically experienced cyclical fluctuations in financial performance due to economicrecessions, reductions in per capita disposable income and levels of consumer spending, downturns in the business cycles of customers, interest ratefluctuations and economic factors beyond our control. During economic downturns, whether in China or globally, reduced overall demand forsupply chain services will likely reduce demand for our services and solutions and exert downward pressures on our rates and margins. As wefocus on providing integrated supply chain solutions in the New Retail era, if the online and offline retail channel integration trend or any othertrend required for the emergence of New Retail does not develop as we expect, our business prospect may be adversely affected. In periods ofstrong economic growth, demand for limited transportation resources can also result in increased network congestion and operating inefficiencies.In addition, any deterioration in the economic environment subjects our business to various risks that may have a material impact on our operatingresults and future prospects. For instance, some of our customers may face economic difficulties due to events such as COVID-19 outbreak andmay not be able to pay us, and some may go out of business. These customers may not complete their payments as quickly as they have in the past,causing our working capital needs to increase.In an economic downturn, we may not be able to appropriately adjust our expenses to changing market demands and it may be moredifficult to match our staffing levels to our business needs. In addition, we have certain significant fixed expenses and other variable expenses thatare fixed for a period of time, which we may not be able to adequately adjust in a period of rapid change in market demand.We have started to recognize a substantial amount of share-based compensation expense upon the completion of our initial public offering,which will have a significant impact on our results of operations.We adopted our 2008 equity and performance incentive plan in June 2008 pursuant to which we were permitted grant options to purchaseup to 20,934,684 of our ordinary shares, and our 2017 equity incentive plan in September 2017 pursuant to which we may grant equity-basedawards representing initially 10,000,000 Class A ordinary shares, which number automatically increases by a maximum of 2% of our totaloutstanding shares at the end of preceding calendar year on January 1, 2019 and on every January 1 thereafter for eight years (subject to certainlimitations). As of February 28, 2023, we had in aggregate outstanding options with respect to 2,489,430 ordinary shares and outstanding restrictedshare units with respect to 6,360,395 ordinary shares that have been granted to our employees, directors and consultants under the 2008 equity andperformance incentive plan and the 2017 equity incentive plan. We are required to account for share options and restricted share units granted toour employees, directors and consultants in accordance with Codification of Accounting Standards, or ASC 718, “Compensation—StockCompensation” and ASC 505-50, “Equity, Equity-Based Payments to Non-Employees” prior to 2018 and we early adopted ASU 2018-07:Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting in fiscal 2018. We classifyshare options and restricted share units granted to our employees, directors and consultants as equity awards and recognize share-basedcompensation expense based on the fair value of such share options and restricted share units, with the share-based compensation expenserecognized over the period in which the recipient is required to provide service in exchange for the equity award. Because the exercisability of theshare options granted by us before our initial public offering was conditional upon completion of our initial public offering or, in case we hadwaived such restriction, our obligation to issue ordinary shares pursuant to any exercise of the options was conditional upon the completion of ourinitial public offering, we did not recognize any share-based compensation expense relating to these share options granted by us before thecompletion of our initial public offering. Upon the completion of our initial public offering in September 2017, we immediately recognized asubstantial amount of share-based compensation expense associated with vested option awards.To better incentivize contribution to the growth our BEST Global business, in December 2020, BEST Asia Inc., our wholly-ownedCayman Islands subsidiary that holds our Southeast Asian business, adopted the 2020 Equity Incentive Plan, or the BEST Asia Plan, pursuant towhich BEST Asia Inc. may issue a certain maximum number of ordinary shares pursuant to awards granted thereunder. As of February 28, 2023,we had issued options to purchase 44,957,240 ordinary shares of BEST Asia Inc. to certain employees under the BEST Asia Plan. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 33 of 250 Table of Contents26We will incur additional share-based compensation expenses in the future as we continue to grant share-based awards to our employees,directors and consultants. We believe the granting of share-based awards is important for us to attract and retain talented employees, directors andconsultants. As a result, our expense associated with share-based compensation may increase, which may have an adverse effect on our results ofoperations. For further information on our share incentive plans and information on our recognition of related expenses, please see “Item 5.Operating and Financial Review and Prospects—A. Operating Results—Components of Results of Operations—Share—Based Compensation” and“Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plans.”We have been deriving a significant portion of our revenue from consumer activity on a limited number of prominent e-commerce platforms,and a reduction of demand from these platforms may negatively affect our business.A significant portion of our revenue has been derived from a number of major e-commerce platforms in China, such as TaobaoMarketplace and Tmall. If these platforms are to suffer a decline in their usage or if our relationships with them are to be harmed, it couldmaterially and negatively impact our business and operating results and financial condition. We generally do not have long-term contractualrelationships with e-commerce platforms, and instead individual merchants on such platforms select us as their shipping and other supply chainservice provider. If we are unable to remain a preferred service provider for the merchants on these e-commerce platforms, our business volumemay decrease significantly, which could adversely affect our business and results of operations.If our customers are able to reduce their logistics and supply chain costs or increase utilization of their internal solutions, our business andoperating results may be materially and adversely affected.A major driver for merchants and other customers to use third-party logistics and supply chain service providers is the high cost anddegree of difficulty associated with developing in-house logistics and supply chain expertise and operational efficiencies. If, however, ourcustomers are able to develop their own logistics and supply chain solutions, increase utilization of their in-house supply chain, reduce theirlogistics spending, or otherwise choose to terminate our services, our logistics and supply chain management business and operating results may bematerially and adversely affected. In addition, certain of our major e-commerce platform partners may develop their own logistics capabilities,which could reduce the scope of services we provide to users on their platforms.Decreased availability or increased costs of key logistics and supply chain inputs, including third-party transportation, equipment and materialscould impact our cost of operations and our profitability across business lines.We depend on reliable access to third-party transportation, supplies of equipment, including vehicles and the sorting machines, conveyorsystems and Automated Guided Vehicles, or AGVs, used at our Cloud OFCs and other network facilities, replacement parts and materials such aspacking. The supplier base providing logistics equipment is relatively consolidated, which has resulted in a limited number of suppliers for certaintypes of equipment and supplies. Conversely, the market for third-party transportation services is fragmented with a large number of serviceproviders, and it can be difficult to find reliable partners whose performance and reliability meet our standards at the scale our operations require.Any significant reduction in availability or increase in cost of any logistics and supply chain inputs could adversely affect our operations andincrease our costs, which could adversely affect our operating results and cash flows.Overall tightening of the labor market, increases in labor costs or any labor unrest, including strikes, may affect our business as we operate in alabor-intensive industry.Our business requires a substantial number of personnel. Labor costs comprised 15.6%, 13.5% and 16.1% of our total cost of revenuefrom continuing operations in 2020, 2021 and 2022, respectively. Any failure to retain stable and dedicated labor by us, our franchisee partners orservice providers may lead to disruptions to or delays in our services. We, our franchisee partners and service providers often hire additional ortemporary workers to handle the significant increase in freight volumes during peak periods of e-commerce activities. We have observed an overalltightening labor market. We have experienced increase in labor costs, and expect to improve labor efficiency to cope with seasonal labor shortages.We, our franchisee partners and service providers compete with other companies for labor, and we may not be able to offer competitive salaries andbenefits compared to them. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 34 of 250 Table of Contents27We, our franchisee partners and service providers have been subject to labor disputes from time to time in the ordinary course of business,although none of them, individually or in the aggregate, has had a material adverse impact on us. We expect to continue to be subject to variouslegal or administrative proceedings related to labor disputes in the ordinary course of our business, due to the magnitude of the labor force involvedin our service network. Any labor unrest or strikes directed against us, our franchisee partners or service providers could directly or indirectlyprevent or hinder our normal operating activities, and if not resolved in a timely manner, lead to delays in fulfilling our customer orders. We, ourfranchisee partners and service providers are not able to predict or control any labor unrest, especially those involving labor not directly employedby us. Further, labor unrest may affect general labor market conditions or result in changes to labor laws, which in turn could materially andadversely affect our business, financial condition and results of operations.We engage outsourcing firms to provide outsourced personnel for our operations and have limited control over these personnel and may beliable for violations of applicable PRC labor laws and regulations.We engage outsourcing firms who send large numbers of their employees to work at our network facilities. As of December 31, 2022, over14,117 outsourced personnel were active in our operations. We enter into agreements with the outsourcing firms only and do not have anycontractual relationship with these outsourced workers. Since these outsourced personnel are not directly employed by us, our control over them ismore limited as compared to our own employees. If any outsourced personnel fail to operate in accordance with our instructions, policies andbusiness guidelines, our market reputation, brand image and results of operations could be materially and adversely affected.Our agreements with the outsourcing firms provide that we are not liable to the outsourced personnel if the outsourcing firms fail to fulfilltheir duties to these personnel. However, if the outsourcing firms violate any relevant requirements under the applicable PRC labor laws,regulations or their employment agreements with the personnel, such personnel may claim compensation from us as they provide their services atour network facilities. As a result, we may incur legal liability, and our market reputation, brand image as well as our business, financial conditionand results of operations could be materially and adversely affected.Our business depends on our reputation and brand image, and any damage to them or any failure to effectively adjust our branding strategy inour international expansion could adversely impact our business.Our brand name in Chinese, “百世,” means hundreds of generations. We believe that our BEST brand name and our other brands stand forlong-term commitment, comprehensive and high-quality service, reliability and efficiency, and are part of our most important and valuable assets.We have registered our major trademarks critical to our business in Chinese with the relevant PRC authorities, including “百世” (BEST), “百世物流” (BEST Logistics), “百世供应链” (BEST Supply Chain), “百世快运” (BEST Freight), “百世国际” (BEST Global) and “百世云” (BESTCloud). We have also used and registered our various trademarks in other jurisdictions. Our brands and reputation are significant sales andmarketing tools, and we devote substantial resources to promoting and protecting them. Adverse publicity (whether or not justified) such asaccidents, customer service mishaps or noncompliance with laws relating to activities by our franchisee partners, service providers, contractors oragents, could tarnish our reputation and reduce the value of our brand. With the increased use of social media outlets, adverse publicity can bedisseminated quickly and broadly, making it increasingly difficult for us to effectively respond.As we continue our international expansion, we may need to adjust our branding strategy in new countries and regions that we enter into.For example, our existing brands may be viewed as similar to brands used by existing players in the local markets that provide similar services. Assuch, we may need to adopt a new brand name in these markets and our efforts in establishing the reputation of the new brand in a new market maynot be successful and could lead to brand disruption and harm our operations in these markets. Existing players in the local markets may also claimthat our brands are similar to theirs and thereby bring claims against us for infringement upon their brand names or trademark rights, which maycause harm to our reputation and disrupt our branding strategy in the relevant local market. In addition, we may experience difficulty or prolongeddelay in registering our trademarks in local countries due to regulatory uncertainties and malicious third-party trademark registrations. Damage toour reputation and loss of brand equity could reduce demand for our services and thus have an adverse effect on our financial condition, liquidityand results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 35 of 250 Table of Contents28We may not be able to attract and retain the qualified and skilled employees needed to support our business.We believe our success depends on the efforts, effectiveness and talent of our employees, including research and development, supplychain management, operations, engineering, risk management, and sales and marketing personnel. Our future success depends on our continuedability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled personnel is extremely intense. Wemay not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some ofthe companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractiveterms of employment.In addition, we invest significant time and resources in training our employees, which increases their value to competitors who may seekto recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality ofour services and our ability to serve our customers could diminish, resulting in a material adverse effect to our business.A significant system disruption could adversely affect the operations of us and our ecosystem participants, which could severely impact ourbusiness and prospects.We rely on our technology infrastructure to process, transmit and store digital information, and to manage or support a variety of businessprocesses and activities. In addition, the provision of service to our customers and the operation of our service network infrastructure involves thestorage and transmission of proprietary information and sensitive or confidential data, including business and personal information of ourecosystem participants, who are reliant on the use of our technology infrastructure to manage their business processes and activities. Ourtechnology infrastructures and those of our customers and our franchisee partners are connected through various interfaces. Some of theseinfrastructures are managed by third parties and are susceptible to damage, disruptions or shutdowns due to failures during the process of upgradingor replacing software, databases or components thereof, power outages, hardware failures, computer viruses, malicious insiders, telecommunicationfailures, user errors or other catastrophic events. Hackers, acting individually or in coordinated groups, may also launch distributed denial ofservice attacks or other coordinated attacks that may cause service outages or other interruptions in our business.The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be difficult todetect and often are not recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implementadequate preventative measures. If our systems were to suffer an operational failure, it could harm our reputation and have a material adverse effecton our business and prospects.Our business generates and processes a large quantity of data, and improper handling of or unauthorized access to such data may adverselyaffect our business.We face risks related to complying with applicable laws, rules and regulations relating to the collection, use, disclosure and security ofpersonal information, as well as any requests from regulatory and government authorities relating to such data. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 36 of 250 Table of Contents29The PRC regulatory and enforcement regime with regard to data security and data protection has continued to evolve. There areuncertainties on how certain laws and regulations will be implemented in practice. PRC regulators have been increasingly focused on regulatingdata security and data protection. We expect that these areas will receive greater attention from regulators, as well as attract public scrutiny andattention going forward. This greater attention, scrutiny and enforcement, including more frequent inspections, could increase our compliance costsand subject us to heightened risks and challenges associated with data security and protection. For example, the PRC Data Security Law, which waspromulgated by the Standing Committee of the National People’s Congress on June 10, 2021, and certain other recently promulgated rules andregulations (i.e. the Regulations on the Protection of the Security of Critical Information Infrastructure, which became effective on September 1,2021) impose data security and privacy obligation on entities involved in data activities, which may vary based upon the importance of data and theharm it may cause. We mainly engage in logistics and ancillary business and our business operation generally involve data related to logisticsbusiness operation. Such data have not been specifically categorized as important data or core data as by the PRC Data Security Law. As of the dateof this annual report, we are not the operator of critical information infrastructure under the Regulations on the Protection of the Security of CriticalInformation Infrastructure. We believe that the PRC Data Security Law would not impose any substantial difficulties on us. However, we could notrule out the possibility that our data may be deemed as important data/core data or we may be deemed to be a critical information infrastructureoperator, which would subject us to additional supervisory requirements. Any incompliance on such additional supervisory requirements maysubject us to fines, order to rectify, suspension of users registration, revocation of business certificate and other penalties, which may have materialadverse effect on our business, operations and financial condition as well as the price of our securities. For further details please see “Item 4.Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Internet Security.”In addition, we could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future. ThePRC Data Security Law provides that the state shall establish a data security review mechanism on data processing activities that do or may affectnational security. Cybersecurity Review is conducted by an office under the Cyberspace Administration of China, or the CAC, pursuant to theCybersecurity Review Measures, which became effective on June 1, 2020. Any failure or delay in the completion of the cybersecurity reviewprocedures or any other non-compliance with the cybersecurity related laws and regulations may result in fines or other penalties, includingsuspension of business, website closure, removal of app from the relevant app stores, and revocation of prerequisite licenses, as well as reputationaldamage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results ofoperations. On December 28, 2021, the CAC, the NDRC, the SAMR, the MIIT and certain other PRC governmental authorities, jointly released therevised Cybersecurity Review Measures, which took effect on February 15, 2022. The revised Cybersecurity Review Measures provides thatoperators of critical information infrastructure that intend to purchase network products and services that affect or may affect national security shallfile for cybersecurity review with the Cybersecurity Review Office under the CAC. As of the date of this annual report, we have not been informedby any PRC governmental authority of any requirement that we file for a cybersecurity review. We have not been involved in any investigations oncybersecurity review initiated by the CAC or other competent authorities nor do we expect that current PRC laws on cybersecurity or data securitywould have a material adverse impact on our business operations, and we have not received any inquiry, notice, warning, or sanction in suchrespect. However, the scope of network products or data processing activities that affect or may affect national security is still unclear, and thereremains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations. For further details pleasesee “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Internet Security.”On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal InformationProtection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November1, 2021. The Personal Information Protection Law sets forth detailed rules on processing personal information, clarifies the relevant rights of theindividuals and the obligations of the personal information processors, and further strengthens the liabilities for illegal process of personalinformation. We do not collect any sensitive personal information or other excessive personal information that is not related to the correspondingbusiness services. We update our privacy policies from time to time to meet the latest regulatory requirements of the CAC and other authorities andadopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the Personal Information Protection Law raisesthe protection requirements for processing personal information, and many specific requirements of the Personal Information Protection Lawremain to be clarified by the CAC, other regulatory authorities, and courts in practice. We may be required to make further adjustments to ourbusiness practices to comply with the personal information protection laws and regulations. For further details please see “Item 4. Information onthe Company—B. Business Overview—Regulatory Matters—Regulations Relating to Internet Security.” Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 37 of 250 Table of Contents30We believe that we are in compliance with the regulations and policies that have been issued by the CAC and other competent PRCregulatory authorities on cybersecurity as of the date of this annual report. However, as uncertainties remain regarding the interpretation andimplementation of applicable PRC laws and regulations, we cannot assure you that we will comply with such laws and regulations in all respectsand we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to finesand/or other sanctions which may have material adverse effect on our business, operations and financial condition as well as price of our securities.If we are unable to manage these risks, our reputation and results of operations could be materially and adversely affected. For further details pleasesee “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Internet Security.”We also grant limited access to specified data on our technology platform to certain other ecosystem participants. These third parties facethe same challenges and risks inherent in handling and protecting large volumes of data. Any system failure or security breach or lapse on our partor on the part of any of such third parties that results in the release of user data could harm our reputation and brand and, consequently, ourbusiness, in addition to exposing us to potential legal liability.In addition, we are subject to additional laws in other jurisdictions in which we operate and where our ecosystem participants are located.The laws, rules and regulations of other jurisdictions, such as the U.S., Europe and Southeast Asian countries, may impose more stringent orconflicting requirements and penalties than those in China, compliance with which could require significant resources and costs. Our policies andpractices concerning the collection, use and disclosure of user data are posted on our websites. Any failure, or perceived failure, by us to complywith any regulatory requirements or privacy protection-related laws, rules and regulations could result in proceedings or actions against us bygovernmental entities or others. These proceedings or actions could subject us to significant penalties and negative publicity, require us to changeour business practices, increase our costs and severely disrupt our business.We face risks associated with the items we deliver and the contents of shipments and inventories handled through our service network.We handle a large volume of shipments and inventories across our service network, and face challenges with respect to the protection andcontrol of these items. Shipments and inventories in our service network may be stolen, damaged or lost for various reasons, and we, our franchiseepartners and service providers may be perceived or found to be liable for such incidents. In addition, we may fail to screen shipments andinventories and detect unsafe or prohibited/restricted items. Unsafe items, such as flammables and explosives, toxic or corrosive items andradioactive materials, may damage other items or facilities in our service network, injure recipients and harm our personnel and assets or those ofour franchisee partners and service providers. Furthermore, if we fail to prevent prohibited or restricted items from entering into our servicenetwork and if we participate in the transport and delivery of such items, we may be subject to administrative or even criminal penalties, and if anypersonal injury or property damage is concurrently caused, we may be further liable for civil compensation.Our delivery operations also involve inherent risks. We constantly have a large number of vehicles and personnel in transportation and alarge number of items in storage facilities that we rent, and are therefore subject to risks associated with storage and transportation safety. Theinsurance maintained by us may not fully cover the damages caused by transportation-related injuries or loss. From time to time, our vehicles andpersonnel may be involved in accidents, and the items they transport may be lost or damaged. In addition, frictions or disputes may occasionallyarise from the personal interactions between our pick-up and delivery personnel and senders or recipients and those of our franchisees partners andservice providers. Personal injury or property damage may occur in connection with such incidents.Any of the foregoing could disrupt our services, cause us to incur substantial expenses and divert the time and attention of ourmanagement. We, our franchisee partners and service providers may face claims and incur significant liabilities if found liable or partially liable forany injuries, damages or losses. Claims against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all.Governmental authorities may also impose significant fines on us or require us to adopt costly preventive measures. Furthermore, if our servicesare perceived to be insecure or unsafe by our ecosystem participants, our business volume may be significantly reduced, and our business, financialcondition and results of operations may be materially and adversely affected. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 38 of 250 Table of Contents31We have limited ability to protect our intellectual property rights, including our brand and our proprietary information technology platform,and unauthorized parties may infringe upon or misappropriate our intellectual property.Our success depends in part upon our proprietary technology infrastructure, including certain methodologies, practices, tools and technicalexpertise we utilize in designing, developing, implementing and maintaining applications and processes used in providing our services. We rely ona combination of patent, copyright, trademark, trade secrets and other intellectual property protections, confidentiality agreements with our keypersonnel, customers and other relevant persons and other measures to protect our intellectual property, including our brand and our proprietarytechnology infrastructure. Nevertheless, it may be possible for third parties to obtain and use our intellectual property without authorization. Theunauthorized use of intellectual property is common in China and certain Southeast Asian countries and enforcement of intellectual property rightsby regulatory agencies may not be as consistent as in more developed countries. As a result, litigation may be necessary to enforce our intellectualproperty rights. Litigation could result in substantial costs and diversion of our management’s attention and resources, and could disrupt ourbusiness, as well as have a material adverse effect on our financial condition and results of operations. There is no guarantee that we would be ableto halt any unauthorized use of our intellectual property through litigation.We may be accused of infringing the intellectual property rights of others.Our success depends in part on the use of our proprietary intellectual property and the intellectual property of other ecosystemparticipants, including technology, software products, business policies, plans, and trade secrets. Many of our contracts with third parties require usnot to engage in the unauthorized use of such intellectual property or information, and to indemnify such third parties for any resulting loss. Thesteps taken by us in this regard may not be adequate to safeguard such intellectual property and confidential information. Moreover, most of ourcontracts do not include any limitation on our liability with respect to our infringement or breach of our obligation to keep confidential theintellectual property or confidential information. In addition, we may not always be aware of intellectual property registrations or applicationsrelating to trademarks, source codes, software products or other intellectual property of such third parties, whether in China or other jurisdictions.As a result, if the proprietary rights of our ecosystem participants or other third parties are misappropriated by us or our employees, we may beliable for damages or other compensation.Assertions of infringement of intellectual property or misappropriation of confidential information against us, if successful, could have amaterial adverse effect on our business, financial condition and results of operations. Protracted litigation could divert our management’s attentionand our resources and also result in existing or potential customers deferring or limiting their procurement or use of our services until the resolutionof such litigation. Even if such assertions against us are unsuccessful, they may cause us to lose existing and future business and incur reputationalharm and substantial legal fees.Any difficulties in identifying, consummating and integrating acquisitions, investments or alliances may expose us to potential risks and havean adverse effect on our business, results of operations or financial condition.We have in the past made and may in the future seek to make acquisitions and investments and enter into strategic alliances to furtherexpand our business. We acquired a local express delivery company in Vietnam in July 2019 and a local express delivery company in Malaysia inApril 2020. If we are presented with appropriate opportunities, we may acquire additional businesses, services, resources, or assets, includingsupply chain service providers and transport solution providers that are accretive to our core business. We cannot assure you that we will always beable to complete such acquisitions successfully or on terms acceptable to us. Integration of entities or assets we acquire into our business may notbe successful and may prevent us from expanding into new services, customer segments or operating locations. This could significantly affect theexpected benefits of these acquisitions. Moreover, the integration of any acquired entities or assets into our operations could require significantattention from our management. The diversion of our management’s attention and any difficulties encountered in any integration process couldhave an adverse effect on our ability to manage our business.Our possible future acquisitions, investments or strategic alliances may also expose us to other potential risks, including risks associatedwith unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, our inability to generate sufficientrevenue to offset the costs, expenses of acquisitions and potential loss of, or harm to, relationships with employees and customers as a result of ourintegration of new businesses. In addition, we may recognize impairment losses on goodwill arising from our acquisitions. The occurrence of anyof these events could have a material and adverse effect on our ability to manage our business, our financial condition and our results of operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 39 of 250 Table of Contents32Our international expansion exposes us to significant risks.We provide inbound and outbound cross-border supply chain management services and plan to continue to expand our footprintinternationally as part of our growth strategy. In addition to China, we currently operate Cloud OFCs in the U.S. and Thailand, and have coveragein Malaysia, Vietnam and Singapore through partners, and expect to open additional foreign facilities and hire employees to work at these offices inorder to reach new customers and expand the reach of our service network. We started to provide local express delivery services in Thailand in late2018, Vietnam in July 2019, Malaysia in April 2020, and Singapore and Cambodia in July 2020. Operating in international markets requiressignificant resources and management attention and will subject us to regulatory, economic and political risks in addition to those we already facein China. Because of our limited experience with international operations as well as developing and managing operations in international markets,our international expansion efforts may not produce the results we expect.In addition, we will face risks in doing business internationally that could adversely affect our business. For instance, we face difficultiesmanaging and staffing international operations and the increased operating, travel, infrastructure and legal compliance costs associated withinternational business. We must comply with laws and regulations in foreign jurisdictions, particularly in the areas of data privacy and customs. Wemust also comply with technical and environmental standards in these jurisdictions. In addition, we must offer customer service in variouslanguages, cater to local cultures, adapt and localize our service offerings for specific countries, appropriately price our products and services andwork with overseas merchants, partners and other third parties, such as local transportation service providers. We are also subject to general risksinherent in international operations, such as fluctuations in exchange rates, changes in trade policies, tariff regulations, embargoes and customerclearances, or other trade restrictions, as well political or social unrest or economic instability in regions in which we operate.Our failure to manage any of these risks successfully could harm our international operations, and adversely affect our business, results ofoperations and financial condition.We may not be able to obtain sufficient capital to fund our business expansion.Our business expansion requires a substantial amount of capital. In 2020, 2021 and 2022, we incurred capital expenditures for ourcontinuing operations of RMB311.0 million, RMB160.0 million and RMB143.3 million (US$20.8 million), respectively, representing purchases ofproperty and equipment. We have incurred substantial costs to launch and ramp-up new service offerings as well as to expand geographically andwe may only be able to recover such costs over the long term. The continued improvement and upgrade of our supply chain service network mayalso require a substantial amount of capital investments, such as purchasing equipment, funding leasehold improvements at our hubs, sortationcenters and Cloud OFCs. Further, we may encounter development delays and excess development costs.We have historically funded our operations by issuance of equity or equity-linked securities (including convertible senior notes),redeemable convertible preferred shares, asset-backed securities and short-term and long-term bank borrowings. There can be no assurance that wewill be able to generate sufficient cash from our operations to fund our capital requirements or raise additional funds through equity or debtfinancings on satisfactory terms or at all, in which case we may be required to prioritize projects or curtail capital expenditures, and our results ofoperations could be adversely affected. On the other hand, if we raise funds through debt financings, we may also become subject to restrictivecovenants that could limit our future capital raising activities and other financial and operational matters. If we raise funds through furtherissuances of equity or equity-linked securities, our existing shareholders could suffer significant dilution in their percentage ownership of ourcompany. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 40 of 250 Table of Contents33We may not have the ability to raise the funds necessary to repurchase our convertible senior notes on the repurchase date or upon theoccurrence of a fundamental change, and our future debt may contain limitations on our ability to pay cash upon required repurchase orredemption of the notes.Holder of our 2025 Convertible Notes has the right to require us to repurchase half of their notes within 90 days after June 3, 2023 andupon the occurrence of a fundamental change, in each case at a repurchase price equal to 100% of the principal amount of the notes to berepurchased, plus accrued and unpaid interest, if any. However, we may not have enough available cash or be able to obtain financing at the timewe are required to make repurchases of notes surrendered therefor or redeem the notes. In addition, our ability to repurchase or redeem the notesmay be limited by law, by regulatory authority or by agreements governing our current or future indebtedness. Our failure to repurchase notes orpay the tax redemption price at a time when the repurchase or such payment is required by the convertible note instrument governing the 2025Convertible Notes would constitute a default under the note instrument. A default under the note instrument or the fundamental change itself wouldalso lead to a default under agreements governing our existing indebtedness and could also lead to a default under agreements governing our futureindebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not havesufficient funds to repay the indebtedness and repurchase or redeem the notes.Failure of us or our franchisee partners to obtain, maintain or update necessary licenses and permits may have a material adverse effect on ourbusiness, financial condition and results of operations.We and our franchisee partners are required to hold a number of licenses and permits in connection with our business operation including,but not limited to, with respect to our China businesses, road transportation operation permit and the value-added telecommunication servicelicense concerning Internet information service, or the ICP license.Under PRC laws, an enterprise engaging in road freight transportation is required to obtain a road transportation operation permit from therelevant county-level transportation department, unless such enterprise is engaging in general cargo transportation with a general cargo vehicleweighing 4,500 kilograms or less. If an enterprise engaging in road freight transportation intends to establish a branch, it is required to make afiling with the local transportation department where the branch is to be established. While two of our PRC subsidiaries are engaging in roadfreight transportation, and both subsidiaries have obtained their road transportation operation permits, we are in the process of renewing the filingsfor some of the branches, and if we cannot complete the renewal in a timely manner, these branches may be subject to business suspension andother penalties.New laws and regulations that are enforced from time to time may require additional licenses and permits other than those we and ourfranchisee partners currently have. If the PRC government or the government of any country in which we operate a franchised logistics networkconsiders us or our franchisee partners to be operating without the proper approvals, licenses or permits or promulgates new laws and regulationsthat require additional approvals or licenses, it has the authority, among other things, to levy fines, confiscate our income, revoke our businesslicenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions bythe PRC or other government may have a material and adverse effect on our results of operations.Failure to comply with PRC laws and regulations by us or our franchisee partners may materially and adversely impact our business, financialcondition and results of operations.Our business is subject to governmental supervision and regulation by the relevant PRC governmental authorities, including but notlimited to the State Post Bureau and the Ministry of Transport. Together, these governmental authorities promulgate and enforce regulations thatcover many aspects of our day-to-day operations, and we may fail to fully comply with these regulations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 41 of 250 Table of Contents34Pursuant to the Administrative Regulations on Commercial Franchising Operation promulgated by the State Council in February 2007 andProvisions on Administration of the Record Filing of Commercial Franchises issued by the MOFCOM in December 2011, or collectively theRegulations and Provisions on Commercial Franchising, commercial franchising refers to the business activities where an enterprise that possessesthe registered trademarks, enterprise logos, patents, proprietary technology or any other business resources allows such business resources to beused by another business operator through a contract and the business operator follows the uniform business model to conduct business operationsand pay franchising fees according to the contract. Therefore, if the relationship between us and our franchisee partners and other ecosystemparticipants constitute such regulated commercial franchising, we will be subject to these regulations and will be required to file such franchisingarrangements with the MOFCOM or its local counterparts and update the filings when there are changes to relevant information. While we hadcompleted such filings with respect to our BEST Freight and Cloud OFC services as of December 31, 2022, we cannot assure you that we canupdate such filings in a timely manner or our relationships with other existing and future ecosystem participants will not be found to constitute suchregulated commercial franchising in the future. As of December 31, 2022, we had not received any request from any governmental authorities tomake any of such filings. If relevant authorities determine that we failed to make any filing with respect to any regulated commercial franchisingactivity in the future, we may be subject to an order to rectify or fines ranging from RMB10,000 to RMB50,000, and if we fail to rectify within therectification period determined by competent government authorities, we may be subject to an additional fine ranging from RMB50,000 andRMB100,000 as well as public reprimand.In addition, our franchisee partners have full discretion over their daily operations and make localized decisions with respect to theirfacilities, vehicles and hiring and pricing strategies. Their operations are regulated by various PRC laws and regulations, including localadministrative rulings, orders and policies that are pertinent to their localized freight delivery business and retail business. For example, localregulations may specify the models or types of vehicles to be used in pickup and delivery services or require the franchisee partners to implementheightened safety screening procedures, which could materially drive up the operating costs and impact the delivery efficiency of the pickup anddelivery outlets.We are also subject to a number of retail industry regulations including, but not limited to, regulations relating to pricing, consumerprotection, product quality, food safety and public safety. Local regulatory authorities conduct periodic inspections, examinations and inquiries inrespect of our compliance with relevant regulatory requirements. If we fail to comply with these laws and regulations, we may be exposed topenalties, fines, the suspension or revocation of our licenses or permits to conduct business, administrative proceedings and litigation.New laws and regulations may be enforced from time to time and substantial uncertainties exist regarding the interpretation andimplementation of current and any future PRC laws and regulations applicable to our businesses. If the PRC government promulgates new lawsand regulations that impose additional restrictions on our daily operations, it has the authority, among other things, to levy fines, confiscate income,revoke business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any ofthese actions by the PRC government may have a material and adverse effect on our results of operations. If our franchisee partners are found to bein violation of any applicable law or regulation then in effect, such franchisee partners may be subject to similar penalties or administrative ordersand may not be able to continue to deliver satisfactory services or at all. As a result, our business, reputation, financial condition and results ofoperations may be materially and adversely affected.We face risks related to the termination and renewal of leases on which we rely for our operations.Substantially all of our Cloud OFCs, hubs and sortation centers are located in properties for which we have entered into long-termoperating leases. In some instances, we may negotiate an option to renew the lease according to the terms and conditions under the relevant leaseagreements. However, upon the expiration of such leases, we may not be able to renew these leases on commercially reasonable terms, if at all.Under certain lease agreements, the lessor may terminate the agreement by giving prior notice and paying default penalties to us. Such defaultpenalties nonetheless may not be sufficient to cover our losses. Even though the lessors for most of our Cloud OFCs, hubs and sortation centers donot have the right of unilateral early termination unless they provide the required notice, the lease may nonetheless be terminated early if we are inmaterial breach of the lease agreements. We may assert claims for compensation against the landlords if they elect to terminate a lease agreementearly and without due cause. If the leases for our Cloud OFCs, hubs or sortation centers were terminated prior to their expiration dates,notwithstanding any compensation we may receive for early termination of such leases, or if we are not able to renew such leases, we may have toincur significant cost related to relocation. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 42 of 250 Table of Contents35Our use of certain leased properties could be challenged by third parties or governmental authorities, which may cause interruptions to ourbusiness operations.As of December 31, 2022, some lessors of our leased properties in China have not provided us with their property ownership certificatesor any other documentation proving their right to lease those properties to us. If our lessors are not the owners of the properties and they have notobtained consents from the owners or their lessors or permits from the relevant governmental authorities, our leases could be invalidated. If thisoccurs, we may have to renegotiate the leases with the owners or other parties who have the right to lease the properties, and the terms of the newleases may be less favorable to us. Although we may seek damages from such lessors, such leases may be void and we may be forced to relocate.Any relocation would require us to locate and secure additional facilities, expenditures of additional funds in connection with the relocation andpreparation of replacement facilities. This could affect our ability to provide uninterrupted services to our customers and harm our reputation. As ofDecember 31, 2022, we had not incurred expenditures associated with the relocation and preparation of replacement facilities. In addition, asubstantial portion of our leasehold interests in leased properties have not been registered with the relevant PRC governmental authorities asrequired by relevant PRC laws. The failure to register leasehold interests may expose us to potential warnings and penalties.In addition, some of our leased properties in China may not have filed the fire-control registration as required by relevant PRC laws and asa result, our use of the leased property may be affected. In the event that our use of properties is successfully challenged by the regulators or due tofire incidents, we may be forced to relocate from the affected operations.Our failure or alleged failure to comply with China’s anti-corruption laws or the U.S. Foreign Corrupt Practices Act could result in penalties,which could harm our reputation and have an adverse effect on our business, results of operations and financial condition.We are subject to PRC laws and regulations related to anti-corruption, which prohibit bribery to government agencies, state orgovernment-owned or controlled enterprises or entities, to government officials or officials that work for state or government-owned enterprises orentities, as well as bribery to non-government entities or individuals. As a U.S. public company, we are also subject to the U.S. Foreign CorruptPractices Act, or the FCPA, which generally prohibits companies and any individuals or entities acting on their behalf from offering or makingimproper payments or providing benefits to foreign officials for the purpose of obtaining or keeping business, along with various other anti-corruption laws. Our existing policies prohibit any such conduct and we continually refine and update our policies and procedures to keep up withbusiness and regulatory developments. We also provide ongoing training to our employees, franchisee partners and other third parties in order toensure that we comply with PRC anti-corruption laws and regulations, the FCPA and other anti-corruption laws to which we are subject. There is,however, no assurance that such policies or procedures will work effectively all the time or protect us against liability under the FCPA or other anti-corruption laws. There is no assurance that our employees, franchisee partners and other third parties would always obey our policies andprocedures. Further, there is uncertainty in connection with the implementation of PRC anti-corruption laws. We could be held liable for actionstaken by our employees, franchisee partners and other third parties with respect to our business or any businesses that we may acquire. In additionto the PRC, we also operate Cloud OFCs in the U.S. and Thailand, and have coverage in Malaysia, Vietnam and Singapore through partners. Wealso provide local express delivery services in Thailand, Vietnam, Malaysia and Singapore. This puts us in frequent contact with persons who maybe considered “foreign officials” under the FCPA, resulting in an elevated risk of potential FCPA violations. If we are found not to be incompliance with PRC anti-corruption laws, the FCPA and other applicable anti-corruption laws, we may be subject to criminal, administrative, andcivil penalties and other remedial measures, which could have an adverse impact on our business, results of operations and financial condition. Anyinvestigation of any potential violations of the FCPA or other anti-corruption laws by the U.S. or foreign authorities, including Chinese authorities,could adversely impact our reputation, cause us to lose customer relationships and lead to other adverse impacts on our business, results ofoperations and financial condition.We are subject to various claims and lawsuits in the ordinary course of business, and increases in the amount or severity of these claims andlawsuits could adversely affect us.We are exposed to various claims and litigation related to commercial disputes, personal injury, property damage, labor disputes and othermatters in the ordinary course of our business. Developments in regulatory, legislative or judicial standards, material changes to litigation trends, ora catastrophic accident or series of accidents, including accidents that affect our franchisee partners or service providers, involving any or all ofcommercial disputes, property damage, personal injury, and labor disputes could have a material adverse effect on our operating results, financialcondition and reputation. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 43 of 250 Table of Contents36We may not have sufficient insurance coverage.We maintain various insurance policies to safeguard against risks and unexpected events. We have purchased certain life insurance, suchas group accident insurance; property loss insurance, such as cargo transportation insurance and all-risk property insurance; and liability insurance,such as non-motor vehicle liability insurance, public liability insurance and logistics liability insurance. Some of our insurance also covers fire orother damages. We also provide social security insurance, including pension insurance, unemployment insurance, work-related injury insurance andmedical insurance for our full-time employees. We are not legally required to maintain insurance for the items we ship. We do not maintainbusiness interruption insurance or general third-party liability insurance, nor do we maintain key-man life insurance. We cannot assure you that ourinsurance coverage is sufficient to prevent us from any losses or that we will be able to successfully claim for losses under our current insurancepolicies on a timely basis, or at all. If we incur losses that are not covered by our insurance policies, or if the amount reimbursed is significantlyless than our actual losses, our business, financial condition and results of operations could be materially and adversely affected.Fluctuations in exchange rates could result in foreign currency exchange losses, which may adversely affect our financial condition, results ofoperations and cash flows.We have in the past raised significant funds in U.S. dollars and have received net proceeds in U.S. dollars from our initial public offeringand convertible senior notes issuances. We have historically incurred substantial short-term borrowings in Renminbi to fund our working capitalrequirement in the PRC while holding significant U.S. dollar balances. As such, any appreciation in the value of Renminbi against U.S. dollar andother currencies would have a negative impact on our financial position and results of operations. In addition, while we currently incur only a smallportion of our expenses and generate only a small portion of our revenue in currencies other than Renminbi, we may incur more of such expensesand generate more of such revenues in the future as we continue our international expansion. As a result, we may be subject to increased foreignexchange rate risk in the future.The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes inpolitical and economic conditions and the foreign exchange policy adopted by the PRC and other governments. Specifically in the PRC, on July 21,2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. In 2016, the Renminbi depreciatedapproximately 6.7% against the U.S. dollar. In 2017, however, the RMB appreciated approximately 6.7% against the U.S. dollar. While the RMBappreciated approximately 6.5% and 2.3%, respectively, against the U.S. dollar in 2020 and 2021, the RMB depreciated approximately 9.2%against the U.S. dollar in 2022. It remains unclear what further fluctuations may occur or what impact this will have on our results of operations.It is difficult to predict how market forces or PRC, U.S. or other government policies may impact the exchange rate between theRenminbi, U.S. dollar and other currencies in the future. There remains significant international pressure on the PRC government to adopt a moreflexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar. Substantially all of our revenue and costsare currently denominated in Renminbi, and a large portion of our financial assets and a portion of our financial liabilities are denominated in U.S.dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollarwould have an adverse effect on the Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars forother business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount we wouldreceive. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect ourfinancial condition, results of operations and cash flows.We face risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which couldsignificantly disrupt our operations.Significant natural disasters, including earthquakes, extreme weather conditions, as well as health scares related to epidemic or pandemicdiseases, and any similar event in China and elsewhere could materially impact our business. For example, in March 2022, the operations ofwarehouses for our Supply Chain Management business were impacted by the lockdown in Shanghai, which led to a decrease in Supply ChainManagement volume. Furthermore, during December 2022, the lift of COVID-19 controls in China led to temporary stagnation of our Freight andSupply Chain Management businesses, which then struggled with resulting decreases in volume. As COVID-19 resurged throughout the year of2022, deliveries for our Freight and Supply Chain Management businesses were affected by driver absences, due to COVID-19 infections andquarantines, as well as by road closures as part of transportation control policies implemented by the government in response to COVID-19outbreaks. COVID-19 may affect our results of operations in a manner that is presently unknown to us and/or cannot be reasonably anticipated byus. If any of our employees are suspected of having contracted a contagious disease, we may be required to implement quarantine measures orsuspend our operations. Furthermore, any continuing outbreak may restrict economic activities in affected regions, resulting in reduced businessvolume, temporary closure of our business premises or otherwise disrupt our business operations and adversely affect our results of operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 44 of 250 Table of Contents37Our business could also be affected by other public health epidemics or pandemics, such as the outbreak of avian influenza, severe acuterespiratory syndrome, or SARS, Zika virus, Ebola virus or other diseases. If a disaster or other disruption were to occur in the future that affects theregions where we have or are developing Cloud OFCs or hubs and sortation centers, our operations could be materially and adversely affected dueto loss of personnel and damages to property. Even if we are not directly affected, such a disaster or disruption could affect the operations orfinancial condition of our ecosystem participants, which could harm our results of operations.If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could beimpaired.As a U.S. public company, we are subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended, or theExchange Act, the Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange. The Sarbanes-Oxley Act requires, amongother things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. As required by Section404 of the Sarbanes-Oxley Act, we must perform system and process evaluation and testing of our internal controls over financial reporting toallow management to report on the effectiveness of our internal controls over financial reporting in our Form 20-F filing for that year. In addition,our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Ourmanagement has concluded that our internal control over financial reporting was effective as of December 31, 2022. See “Item 15. Controls andProcedures—Management’s Annual Report on Internal Control over Financial Reporting.”However, our internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter howwell designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of theinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will notoccur or that all control issues and instances of fraud will be detected.If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable tomaintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. This will require that weincur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significantmanagement efforts. In addition, the trading price of our ADSs could decline and we could be subject to sanctions or investigations by the NewYork Stock Exchange, SEC or other regulatory authorities.Risks Related to Our ADSsThe trading price of our ADSs has been and may continue to be volatile, which could result in substantial losses to you.The trading price of our ADSs has been and is likely to remain volatile and fluctuate widely due to factors beyond our control. This mayhappen because of broad market and industry factors, such as global and China’s economic and geopolitical conditions, as well as the performanceand fluctuation in the market prices or the underperformance or deteriorating financial results of other listed companies based in China. Thesecurities of some of the listed companies based in China have experienced significant volatility since their initial public offerings, including, insome cases, substantial declines in the trading prices of their securities. The trading performances of other Chinese companies’ securities after theirofferings, including Internet and e-commerce companies, may affect the attitudes of investors toward Chinese companies listed in the U.S., whichconsequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news orperceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or matters of other Chinese companiesmay also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conductedany inappropriate activities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are notrelated to our operating performance, such as the large decline in share prices in the U.S., China and other jurisdictions in late 2008, early 2009, thesecond half of 2011 and in 2015, which may have a material and adverse effect on the trading price of our ADSs. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 45 of 250 Table of Contents38In addition to the above factors, the price and trading volume of our ADSs may be highly volatile due to multiple factors, such asannouncements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures, capital raisingsor capital commitments, additions or departures by our senior management and by actual or anticipated fluctuations in our quarterly results ofoperations and changes or revisions of our expected results. The trading price and volume of our ADSs may also be affected by studies and reportsrelating to the quality of our service offerings or those of our competitors and reports by securities research analysts. Other factors includeregulatory developments affecting us or our industry, customers or suppliers, as well as changes in the market for our services and the economicperformance or market valuations of other companies offering supply chain services may affect trading in our ADSs. Further, the trading price andvolume of our ADSs may also be influenced by fluctuations of exchange rates between the RMB and the U.S. dollar, or restrictions on ouroutstanding shares or ADSs and sales or perceived potential sales of additional Class A ordinary shares or ADSs.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price forour ADSs and trading volume could decline.The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgradesour ADSs or publishes inaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or moreof these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which,in turn, could cause the market price or trading volume for our ADSs to decline.Techniques employed by short sellers may drive down the market price of our ADSs.Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intentionof buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securitiesbetween the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase thanit received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for thepublication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generateprofits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.Public companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny andnegative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accountingirregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As aresult, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject toshareholder lawsuits and/or SEC enforcement actions.It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations,whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegationsand/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which wecan proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such asituation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations areultimately proven to be groundless, allegations against us could severely impact our business operations and stockholders equity, and anyinvestment in our ADSs could be greatly reduced or rendered worthless.Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on yourinvestment.We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of ourbusiness. As a result, we do not expect to pay any cash dividends in the foreseeable future. See “Item 8. Financial Information—A. ConsolidatedStatements and Other Financial Information—Dividend Policy and Distributions.” Therefore, you should not rely on an investment in our ADSs asa source for any future dividend income. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 46 of 250 Table of Contents39Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islandslaw. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in nocircumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course ofbusiness. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will dependon, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any,received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is noguarantee that our ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return onyour investment in our ADSs and you may even lose your entire investment in our ADSs.Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.Substantial sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of ourADSs to decline significantly. As of February 28, 2023, we had 403,514,399 ordinary shares outstanding, comprising 261,648,452 Class Aordinary shares (including 9,637,628 Class A ordinary shares issued to our depositary bank and reserved for future issuances of ADSs uponexercise or vesting of awards granted under our share incentive plans), 94,075,249 Class B ordinary shares and 47,790,698 Class C ordinary shares,including 197,364,354 Class A ordinary shares represented by ADSs (including 9,637,628 Class A ordinary shares held by our depositary bank forour account and reserved for future issuances of ADSs upon exercise or vesting of awards granted under our share incentive plans). All ADSsrepresenting our Class A ordinary shares are freely transferable by persons other than our “affiliates” without restriction or additional registrationunder the U.S. Securities Act of 1933, as amended, or the Securities Act. All of the other Class A ordinary shares outstanding are available for salein the public market subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. In addition, as of thedate of this annual report, our 2025 Convertible Notes are convertible into 1,235,798 ADSs representing a total of 24,715,957 Class A ordinaryshares at any time at the option of the holders thereof, and our remaining 2024 Convertible Notes are convertible into 78 ADSs representing a totalof 1,560 Class A ordinary shares at any time at the option of the holders thereof. Subject to applicable Rule 144 restrictions or additionalregistration under the Securities Act, the ADSs converted from the convertible notes may be freely traded in the public market. The affiliate ofAlibaba who is the current holder of the 2025 Convertible Notes has registration rights with respect to the ADSs or Class A ordinary sharesconvertible from the 2025 Convertible Notes in accordance with the terms of the 2025 Convertible Notes.Certain major holders of our ordinary shares have the right to cause us to register under the Securities Act the sale of their shares.Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restrictionunder the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the publicmarket could cause the price of our ADSs to decline significantly.We have adopted share incentive plans under which we have the discretion to grant a broad range of equity-based awards to eligibleparticipants. We have registered all ordinary shares that we may issue under these share incentive plans. Since these ordinary shares have beenregistered, they can be freely sold in the public market in the form of ADSs upon issuance, subject to volume limitations applicable to affiliates. Ifa large number of our ordinary shares or securities convertible into our ordinary shares are sold in the public market in the form of ADSs after theybecome eligible for sale, the sales could reduce the trading price of our ADSs and impede our ability to raise future capital. In addition, anyordinary shares that we issue under our share incentive plans would dilute the percentage ownership held by our investors.Any conversion of our convertible senior notes will dilute the ownership interest of existing ordinary shareholders and holders of our ADSs,including holders who have previously converted their notes.The conversion of some or all of the US$150 million aggregate principal amount of our 2025 Convertible Notes currently outstanding, andof the US$11,000 aggregate principal amount of our 2024 Convertible Notes currently outstanding, will dilute the ownership interests of existingordinary shareholders and holders of the ADSs. Any sales of the ADSs issuable upon such conversion could adversely affect prevailing tradingprices of the ADSs. In addition, the anticipated conversion of the notes into ADSs could depress the trading price of the ADSs. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 47 of 250 Table of Contents40As a holder of ADSs, you have fewer rights than holders of our ordinary shares and must act through the depositary to exercise those rights.Holders of ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you will not have any direct right toattend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which attach tothe underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with theprovisions of the deposit agreement. Upon receipt of your voting instructions, the depositary will try, as far as is practicable, to vote the underlyingClass A ordinary shares in accordance with your instructions. You will not be able to exercise directly any right to vote with respect to theunderlying Class A ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the record date for thegeneral meeting. Under our ninth amended and restated articles of association currently in effect, the minimum notice period required to be givenby our company to our registered shareholders to convene a general meeting will be 10 calendar days. When a general meeting is convened, youmay not receive sufficient notice of the meeting to enable you to withdraw the Class A ordinary shares represented by your ADSs and become theregistered holder of such shares to allow you to attend the general meeting or to cast your vote directly with respect to any specific matter orresolution to be considered and voted upon at the general meeting. In addition, under our ninth amended and restated articles of associationcurrently in effect, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors mayclose our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting ofsuch a record date may prevent you from withdrawing the underlying Class A ordinary shares represented by your ADSs and becoming theregistered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. Where anymatter is to be put to a vote at a general meeting, we will make all reasonable efforts to cause the depositary to notify you of the upcoming vote andto deliver our voting materials to you in a timely manner, but there can be no assurance that you will receive the voting materials in time to ensurethat you can instruct the depositary to vote the Class A ordinary shares underlying your ADSs. Furthermore, the depositary and its agents will notbe responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As aresult, you may not be able to exercise your right to direct how the underlying Class A ordinary shares represented by your ADSs are voted, andyou may lack recourse if the underlying Class A ordinary shares represented by your ADSs are not voted as you requested. In addition, in yourcapacity as an ADS holder, you will not be able to call a shareholders’ meeting.Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rightsavailable to you in the U.S. unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemptionfrom the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both therights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration underthe Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to causesuch a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under theSecurities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.You may not receive cash dividends if the depositary decides it is impractical to make them available to you.The depositary will pay cash dividends on the ADSs only to the extent that we decide to distribute dividends on our ordinary shares orother deposited securities, and we do not have any present plan to pay any cash dividends in the foreseeable future. See “Item 8. FinancialInformation—A. Consolidated Statements and Other Financial Information—Dividend Policy and Distributions.” To the extent that our companypays any cash dividends or other distributions to our shareholders, we will pay such distributions which are payable in respect of our Class Aordinary shares (or other deposited securities) represented by ADSs to the depositary of our ADSs or the custodian (as the registered holder of suchClass A ordinary shares or other deposited securities), and the depositary has agreed to pay the cash dividends or other distributions it or thecustodian receives on our Class A ordinary shares or other deposited securities after deducting its fees and expenses, to the holders of the ADSs.You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary may, atits discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary maydetermine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the costof mailing them. In these cases, the depositary may decide not to distribute such property to you. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 48 of 250 Table of Contents41You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from timeto time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer orregister transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems itadvisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement,or for any other reason.Our ordinary shares and ADSs are equity securities of a Cayman Islands holding company rather than equity securities of our subsidiaries andthe VIEs that have substantive business operations in China. As a result, certain judgments obtained against us by our shareholders may not beenforceable.We are an exempted company incorporated under the laws of the Cayman Islands with no business operations. Substantially all of ourassets are located outside the U.S. Our business is mainly conducted through our wholly-foreign owned enterprises and the VIEs in the PRC. Wedo not and are not, and holders of our ordinary shares and ADSs do not and are not, legally permitted to have any, or more than the permittedpercentage of, equity interest in the VIEs as current PRC laws and regulations restrict foreign ownership and investment in, among other areas,domestic mail delivery services, value-added telecommunication business as well as tobacco retail business. As a result, we provide the servicesthat may be subject to such restrictions in the PRC through the VIEs, and we operate our businesses in the PRC through certain contractualarrangements with the VIEs. For a summary of such contractual arrangements, see “Item 4. Information on the Company—Variable Interest EntityContractual Arrangements.” Our ordinary shares and ADSs are equity securities of a Cayman Islands holding company rather than equity securitiesof our subsidiaries and the VIEs. In addition, all of our directors and executive officers and the experts named in this annual report reside outsidethe U.S., and most of their assets are located outside the U.S. As a result, it may be difficult or impossible for you to bring an action against us oragainst them in the U.S. in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Evenif you are successful in bringing an action of this kind, the laws of the Cayman Islands, China or other relevant jurisdiction may render you unableto enforce a judgment against our assets or the assets of our directors and officers.You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we areincorporated under Cayman Islands law.We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed byour memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands.The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to usunder Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands isderived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions ofwhose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciaryduties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in somejurisdictions in the U.S. In particular, the Cayman Islands has a less developed body of securities laws than the U.S. Some U.S. states, such asDelaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islandscompanies may not have standing to initiate a shareholder derivative action in a federal court of the U.S.Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporaterecords (other than copies of our memorandum and articles of association, our register of mortgages and charges, and any special resolutionspassed by our shareholders) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our ninth amendedand restated articles of association currently in effect to determine whether or not, and under what conditions, our corporate records may beinspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain theinformation needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with aproxy contest.As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken bymanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated inthe U.S. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 49 of 250 Table of Contents42Our articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit ourshareholders’ opportunity to sell their shares, including Class A ordinary shares represented by our ADSs, at a premium. The fundamentalchange repurchase feature of our convertible senior notes may delay or prevent an otherwise beneficial takeover attempt of our company.Our ninth amended and restated articles of association currently in effect contain provisions that limit the ability of others to acquirecontrol of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving ourshareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtaincontrol of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by ourshareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating,optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms ofredemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADSor otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or makeremoval of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the votingand other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.These provisions could have the effect ofdepriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties fromseeking to obtain control of our company in a tender offer or similar transaction.Furthermore, the convertible note instrument governing our 2025 Convertible Notes requires us to repurchase the notes for cash upon theoccurrence of a fundamental change.A takeover of our company may trigger the requirement that we purchase the notes and/or increase the conversion rate, which could makeit more costly for a potential acquirer to engage in a combinatory transaction with us. Such additional costs may have the effect of delaying orpreventing a takeover of our company that would otherwise be beneficial to investors.We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisionsapplicable to U.S. domestic public companies.Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules andregulations in the U.S. that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing with the SECof quarterly reports on Form 10-Q or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies,consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders tofile public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and(iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publishour results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the New York Stock Exchange. Press releasesrelating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to filewith or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As aresult, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domesticissuer.As a foreign private issuer, we are permitted to adopt certain practices of our home country, the Cayman Islands, in relation to corporategovernance matters that differ significantly from the New York Stock Exchange corporate governance listing standards; these practices affordless protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listingstandards.Our ADSs are listed on the New York Stock Exchange. The New York Stock Exchange Listed Company Manual permits a foreign privateissuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands,which is our home country, may differ significantly from the New York Stock Exchange corporate governance listing standards. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 50 of 250 Table of Contents43For instance, we are not required to: (i) have a majority of the board be independent; (ii) have a compensation committee or a corporategovernance and nominating committee consisting entirely of independent directors; (iii) have regularly scheduled executive sessions with onlyindependent directors each year; or (iv) have a minimum of three members on our audit committee. We rely on some of these exemptions. As aresult, you may not be provided with the benefits of certain corporate governance requirements of the New York Stock Exchange.We believe that we will be classified as a passive foreign investment company, or PFIC, which could result in adverse United States taxconsequences to United States investors.A non-United States corporation will be a passive foreign investment company for United States federal income tax purposes for anytaxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (generallydetermined based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for theproduction of passive income. Based on the past and projected composition of our income and assets, and the valuation of our assets, includinggoodwill (which we have determined based on the trading price of our ADSs), we believe that we were a PFIC in prior taxable years, we will be aPFIC for the current taxable year, and that we may be a PFIC in future taxable years. The determination of whether we are a PFIC is madeannually. Accordingly, changes in our asset or income composition may affect our PFIC status. For these purposes, fluctuations in the market priceof our ADSs (which may be volatile) may affect the value of our goodwill, and thus the composition of our assets, and accordingly, may affect ourPFIC status.If we are a PFIC for any taxable year during which a United States person holds ADSs or Class A ordinary shares, certain adverse UnitedStates federal income tax consequences could apply to such United States person. For example, if we are a PFIC, our United States investors maybecome subject to increased tax liabilities under United States federal income tax laws and regulations and will become subject to burdensomereporting requirements. See “Item 10. Additional Information — E. Taxation — Certain United States Federal Income Tax Considerations—Passive Foreign Investment Company.”We will continue to incur increased costs as a result of being a public company.As a U.S. public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. TheSarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the New York Stock Exchange, impose variousrequirements on the corporate governance practices of public companies. These rules and regulations increase our legal and financial compliancecosts and make some corporate activities more time-consuming and costly. We expect to continue to incur significant expenses and devotesubstantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the otherrules and regulations of the SEC. For example, as a result of becoming a public company, we have increased the number of independent directorsand adopted policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company willcontinue to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to acceptreduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we incur additional costsassociated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board ofdirectors or as executive officers.In the past, shareholders of a public company often brought securities class action suits against the company following periods ofinstability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of ourmanagement’s attention and other resources from our business and operations, which could harm our results of operations and require us to incursignificant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability toraise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could havea material adverse effect on our financial condition and results of operations.ITEM 4.INFORMATION ON THE COMPANYOur Corporate StructureThe following diagram illustrates our corporate structure as of the date of this annual report. It omits certain entities that are immaterial toour results of operations, business and financial condition. Unless otherwise indicated, equity interests depicted in this diagram are held as to 100%. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 51 of 250 Table of Contents44We disposed of Hangzhou BEST Network as part of our sale and transfer of BEST Express to J&T Express China, which sale wascompleted in December 2021.The relationship between us and the VIEs as illustrated in this diagram is governed by contractual arrangements and does not constituteequity ownership.Notes:(1)Two PRC individuals, Wei Chen and Lili He, who are relatives of Mr. Shao-NingJohnny Chou, hold 50%, and 50%, respectively, equity interest in the VIEs.(2)Primarily involved in the provision of BEST Cloud services.(3)Primarily involved in the provision of BEST Supply Chain Management andBEST Freight.(4)Primarily involved in the provision of BEST Supply Chain Management services.(5)Shareholders’ Voting Rights Proxy Agreement; Exclusive Call Option Agreement.(6)Shareholders’ Voting Rights Proxy Agreement; Exclusive Call Option Agreement.(7)Shareholders’ Voting Rights Proxy Agreement; Exclusive Call Option Agreement.(8)Loan Agreements; Exclusive Call Option Agreement; Shareholders’ Voting RightsProxy Agreement; Equity Pledge Agreement.(9)Exclusive Technical Services Agreement; Exclusive Call Option Agreement;Shareholders’ Voting Rights Proxy Agreement; Equity Pledge Agreement. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 52 of 250 Table of Contents45Variable Interest Entity Contractual ArrangementsDue to PRC legal restrictions on foreign ownership and investment in, among other areas, domestic mail delivery services, value-addedtelecommunication business as well as tobacco retail business, we, similar to all other entities with foreign-incorporated holding companystructures operating in our industry in the PRC, provide the services that may be subject to such restrictions in the PRC through Hangzhou BESTIT Information Technology Services Co., Ltd., or Hangzhou BEST IT, and Hangzhou Baijia Business Management Consulting Co., Ltd., orHangzhou Baijia, the VIEs, all of which are incorporated in the PRC and 100% owned by PRC legal persons. Two PRC individuals, Wei Chen andLili He, who are relatives of Mr. Shao-Ning Johnny Chou, each holds 50% equity interest in each of Hangzhou BEST IT and Hangzhou Baijia.The currently effective contractual arrangements by and among us, our wholly-owned PRC subsidiaries, the VIEs, and the VIEs’shareholders include (i) certain equity pledge agreements, shareholders’ voting rights proxy agreements, exclusive call option agreements andcertain loan agreements, which provide us with effective control over the VIEs; (ii) certain exclusive technical services agreements, which allow usto receive substantially all of the economic risks and benefits generated from the operations of the VIEs and their subsidiaries. As a result of ourcontractual arrangements with the VIEs and their shareholders, we are the primary beneficiary of the VIEs, and, therefore, include the financialresults of the VIEs and their subsidiaries in our consolidated financial statements in accordance with U.S. GAAP as if they were our wholly-ownedsubsidiaries.These contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs. If the VIEs or theirshareholders fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by the VIEs is indirectand we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRClaw. These remedies may not always be effective, particularly in light of uncertainties regarding the interpretation and enforcement of the relevantlaws and regulations. The enforceability of the agreements under the contractual arrangements has not been tested in a court of law. Furthermore, inconnection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any record holder of equityinterest in the VIEs, including such equity interest, may be put under court custody. As a consequence, we cannot be certain that the equity interestwill be disposed pursuant to the contractual arrangement or ownership by the record holder of the equity interest.Certain subsidiaries of Hangzhou BEST IT have obtained ICP licenses that would allow them to provide value-added telecommunicationservices.We generated 5% of our revenue from continuing operations through the VIEs for the year ended December 31, 2022. The following is asummary of the currently effective contractual arrangements among VIEs, VIEs’ shareholders and BEST Inc. that enable us to receive substantiallyall of the economic benefits from their operations.The following is a summary of the material provisions of the contractual arrangements relating to BEST Logistics China, HangzhouBEST IT and BEST Inc.Loan AgreementBEST Logistics China entered into a loan agreement with Wei Chen and Lili He in 2020, which replaced the original loan agreemententered into in 2019. Pursuant to this loan agreement, BEST Logistics China has granted an interest-free loan to each of Hangzhou BEST IT’sequity holders, which may only be used for the purpose of a capital contribution to Hangzhou BEST IT. BEST Logistics China agreed not to askthe Hangzhou BEST IT’s equity holders to repay the loans unless the relevant equity holder violates its undertakings provided in the loanagreements. Hangzhou BEST IT’s equity holders undertook, among others, not to transfer any of its equity interests in Hangzhou BEST IT to anythird party. The loans are repayable by such equity holders through a transfer of their equity interests in Hangzhou BEST IT to BEST LogisticsChina or its designated party, in proportion to the amount of the loans to be repaid. The loan agreements remain effective until the relevant loansare repaid in full or BEST Logistics China relinquishes its rights under the relevant loan agreements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 53 of 250 Table of Contents46Exclusive Call Option AgreementPursuant to the exclusive call option agreement among us, BEST Logistics China, Hangzhou Baisheng Investment Management Co., Ltd.(later renamed as Hangzhou BEST IT) and its equity holders, dated October 23, 2019, Hangzhou BEST IT’s equity holders have granted BESTLogistics China and us, or a party designated by us or BEST Logistics China, the exclusive and irrevocable call option rights to purchase part or allof their equity interests in Hangzhou BEST IT at an exercise price equal to the minimum price as permitted by applicable PRC laws. HangzhouBEST IT has further granted BEST Logistics China and us, or a party designated by us or BEST Logistics China, an exclusive call option topurchase part or all of its assets also at an exercise price equal to the minimum price as permitted by applicable PRC laws. At our sole discretion,we have the right to decide whether the option and other rights granted under the agreement will be exercised by us, BEST Logistics China or aparty designated by us. Each of Hangzhou BEST IT’s equity holders may not, among other things, transfer any part of their equity interests to anyparty other than to us or BEST Logistics China, or a party designated by us or BEST Logistics China, pledge or create or permit any securityinterest or similar encumbrance to be created on all or any part of its equity interests, increase or decrease the registered capital of Hangzhou BESTIT, terminate or cause to terminate any material contracts of Hangzhou BEST IT, or cause Hangzhou BEST IT to declare or distribute profits,bonuses or dividends. We are obligated, to the extent permitted by PRC laws, to provide financing support to Hangzhou BEST IT in order to meetthe cash flow requirements of its ordinary operations and to offset any loss from such operations. We and BEST Logistics China are not entitled torequest repayment if Hangzhou BEST IT or its equity holders are unable to repay such financial support. The exclusive call option agreementremains in effect until all the equity interests or assets that are the subject of the agreement are transferred to us or BEST Logistics China, or a partydesignated by us or BEST Logistics China, or if we or BEST Logistics China unilaterally terminate the agreement with 30 days’ prior writtennotice. Unless otherwise provided by law, Hangzhou BEST IT and its equity holders are not entitled to unilaterally terminate this agreement underany circumstances.Shareholders’ Voting Rights Proxy AgreementPursuant to the shareholders’ voting rights proxy agreement among us, BEST Logistics China, Hangzhou Baisheng InvestmentManagement Co., Ltd. (later renamed as Hangzhou BEST IT) and its equity holders, dated October 23, 2019, each of Hangzhou BEST IT’s equityholders has irrevocably authorized any person designated by BEST Logistics China, with our consent, to exercise its rights as an equity holder ofHangzhou BEST IT in a manner approved by us, including but not limited to the rights to attend and vote at equity holders’ meetings and appointdirectors and senior management. The proxy agreement remains effective until such time as the relevant equity holder no longer holds any equityinterest in Hangzhou BEST IT.Equity Pledge AgreementPursuant to the equity pledge agreement among BEST Logistics China, Hangzhou Baisheng Investment Management Co., Ltd. (laterrenamed as Hangzhou BEST IT) and its equity holders, dated October 23, 2019, the relevant equity holders of Hangzhou BEST IT have pledged allof their equity interests in Hangzhou BEST IT as a continuing first priority security interest in favor of BEST Logistics China to secure theoutstanding amounts advanced under the relevant loan agreements described above and to secure the performance of obligations by HangzhouBEST IT and/or its equity holders under the other contractual arrangements. BEST Logistics China is entitled to exercise its right to dispose of thepledged interests held by Hangzhou BEST IT’s equity holders in the equity of Hangzhou BEST IT and has priority in receiving payment by theapplication of proceeds from the auction or sale of such pledged interests, in the event of any breach or default under the loan agreements or othercontractual arrangements, if applicable. All of the equity pledges have been registered with the relevant office of the Administration for MarketRegulation in China. The equity pledge agreement will expire when all obligations under this equity pledge agreement or under the aforementionedloan agreement, exclusive call option agreement, shareholders’ voting rights proxy agreement and exclusive technical services agreement havebeen satisfied. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 54 of 250 Table of Contents47Exclusive Technical Services AgreementOn October 23, 2019, Hangzhou Baisheng Investment Management Co., Ltd. (later renamed as Hangzhou BEST IT) entered into anexclusive technical services agreement with BEST Logistics China, pursuant to which BEST Logistics China provides exclusive technical servicesto Hangzhou BEST IT. In exchange, Hangzhou BEST IT pays a service fee to BEST Logistics China that is based on a predetermined formulabased on the financial performance of Hangzhou BEST IT. During the term of this agreement, BEST Logistics China is entitled to adjust theservice fee at its sole discretion without the consent of Hangzhou BEST IT. BEST Logistics China will exclusively own any intellectual propertyarising from the performance of this agreement. This exclusive technical services agreement has an initial contract term of 20 years and may beautomatically renewed for another 20 years unless BEST Logistics China notifies Hangzhou BEST IT of its intent not to renew with at least threemonths’ prior notice. BEST Logistics China is entitled to terminate the agreement unilaterally with 30 days’ prior written notice, while HangzhouBEST IT is not entitled to unilaterally terminate this agreement under any circumstances.The following is a summary of the material provisions of the contractual arrangements relating to BEST Store Network, HangzhouBaijia and BEST Inc.Loan AgreementBEST Store Network entered into a loan agreement with Wei Chen and Lili He in 2020, which agreement was terminated in November2021 to facilitate the sale of WOWO. After we completed the sale of WOWO, BEST Store Network then reentered into the same form of loanagreement with Wei Chen and Lili He in December 2021. Pursuant to this loan agreement, BEST Store Network has granted an interest-free loan toeach of Hangzhou Baijia’s equity holders, which may only be used for the purpose of a capital contribution to Hangzhou Baijia. BEST StoreNetwork agreed not to ask Hangzhou Baijia’s equity holders to repay the loans unless the relevant equity holder violates its undertakings providedin the loan agreements. Hangzhou Baijia’s equity holders undertook, among others, not to transfer any of its equity interests in Hangzhou Baijia toany third party. The loans are repayable by such equity holders through a transfer of their equity interests in Hangzhou Baijia to BEST StoreNetwork or its designated party, in proportion to the amount of the loans to be repaid. The loan agreements remain effective until the relevant loansare repaid in full or BEST Store Network relinquishes its rights under the relevant loan agreements.Exclusive Call Option AgreementPursuant to the exclusive call option agreement among us, BEST Store Network, Hangzhou Baijia and its equity holders, dated December15, 2021, Hangzhou Baijia’s equity holders have granted BEST Store Network and us, or a party designated by us or BEST Store Network, theexclusive and irrevocable call option rights to purchase part or all of their equity interests in Hangzhou Baijia at an exercise price equal to theminimum price as permitted by applicable PRC laws. Hangzhou Baijia has further granted BEST Store Network and us, or a party designated by usor BEST Store Network, an exclusive call option to purchase part or all of its assets also at an exercise price equal to the minimum price aspermitted by applicable PRC laws. At our sole discretion, we have the right to decide whether the option and other rights granted under theagreement will be exercised by us, BEST Store Network or a party designated by us. Each of Hangzhou Baijia’s equity holders may not, amongother things, transfer any part of their equity interests to any party other than to us or BEST Store Network, or a party designated by us or BESTStore Network, pledge or create or permit any security interest or similar encumbrance to be created on all or any part of its equity interests,increase or decrease the registered capital of Hangzhou Baijia, terminate or cause to terminate any material contracts of Hangzhou Baijia, or causeHangzhou Baijia to declare or distribute profits, bonuses or dividends. We are obligated, to the extent permitted by PRC laws, to provide financingsupport to Hangzhou Baijia in order to meet the cash flow requirements of its ordinary operations and to offset any loss from such operations. Weand BEST Store Network are not entitled to request repayment if Hangzhou Baijia or its equity holders are unable to repay such financial support.The exclusive call option agreement remains in effect until all the equity interests or assets that are the subject of the agreement are transferred tous or BEST Store Network, or a party designated by us or BEST Store Network, or if we or BEST Store Network unilaterally terminate theagreement with 30 days’ prior written notice. Unless otherwise provided by law, Hangzhou Baijia and its equity holders are not entitled tounilaterally terminate this agreement under any circumstances. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 55 of 250 Table of Contents48Shareholders’ Voting Rights Proxy AgreementPursuant to the shareholders’ voting rights proxy agreement among us, BEST Store Network, Hangzhou Baijia and its equity holders,dated December 15, 2021, each of Hangzhou Baijia’s equity holders has irrevocably authorized any person designated by BEST Store Network,with our consent, to exercise its rights as an equity holder of Hangzhou Baijia in a manner approved by us, including but not limited to the rights toattend and vote at equity holders’ meetings and appoint directors and senior management. The proxy agreement remains effective until such time asthe relevant equity holder no longer holds any equity interest in Hangzhou Baijia.Equity Pledge AgreementPursuant to the equity pledge agreement among BEST Store Network, Hangzhou Baijia and its equity holders, dated December 15, 2021,the relevant equity holders of Hangzhou Baijia have pledged all of their equity interests in Hangzhou Baijia as a continuing first priority securityinterest in favor of BEST Store Network to secure the outstanding amounts advanced under the relevant loan agreements described above and tosecure the performance of obligations by Hangzhou Baijia and/or its equity holders under the other contractual arrangements. BEST Store Networkis entitled to exercise its right to dispose of the pledged interests held by Hangzhou Baijia’s equity holders in the equity of Hangzhou Baijia and haspriority in receiving payment by the application of proceeds from the auction or sale of such pledged interests, in the event of any breach or defaultunder the loan agreements or other contractual arrangements, if applicable. All of the equity pledges have been registered with the relevant office ofthe Administration for Market Regulation in China. The equity pledge agreement will expire when all obligations under this equity pledgeagreement or under the aforementioned loan agreement, exclusive call option agreement, shareholders’ voting rights proxy agreement andexclusive technical services agreement have been satisfied.Exclusive Technical Services AgreementOn May 13, 2020, Hangzhou Baijia entered into an exclusive technical services agreement with BEST Store Network, which agreementwas terminated in November 2021 to facilitate the sale of WOWO. After we completed the sale of WOWO, BEST Store Network then re-enteredinto the same form of exclusive technical services agreement with Wei Chen and Lili He in December 2021. Pursuant to this agreement, BESTStore Network provides exclusive technical services to Hangzhou Baijia. In exchange, Hangzhou Baijia pays a service fee to BEST Store Networkthat is based on a predetermined formula based on the financial performance of Hangzhou Baijia. During the term of this agreement, BEST StoreNetwork is entitled to adjust the service fee at its sole discretion without the consent of Hangzhou Baijia. BEST Store Network will exclusivelyown any intellectual property arising from the performance of this agreement. This exclusive technical services agreement has an initial contractterm of 20 years and may be automatically renewed for another 20 years unless BEST Store Network notifies Hangzhou Baijia of its intent not torenew with at least three months’ prior notice. BEST Store Network is entitled to terminate the agreement unilaterally with 30 days’ prior writtennotice, while Hangzhou Baijia is not entitled to unilaterally terminate this agreement under any circumstances.We have been advised by our PRC legal counsel that there are substantial uncertainties regarding the interpretation and application ofcurrent and future PRC laws, rules and regulations. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to theopinion of our PRC legal counsel. We have been further advised by our PRC legal counsel that if the PRC government finds that the agreementsthat establish the structure for operating our domestic mail delivery services, Internet related value-added business and tobacco retail business donot comply with PRC government restrictions on foreign investment in the aforesaid business we engage in, we could be subject to severe penaltiesincluding being prohibited from continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our CorporateStructure.”A.History and Development of the CompanyOur founder established Eight Hundred Logistics Technologies Corporation, or BEST BVI, a British Virgin Islands company, and itswholly owned subsidiary in Hong Kong, BEST Logistics Technologies Limited, or BEST HK, in May 2007. In March 2008, BEST LogisticsTechnologies Limited was established under the laws of the Cayman Islands, which became our current ultimate holding company. In June 2017,the name of BEST Logistics Technologies Limited was changed to BEST Inc. In December 2017, we established BEST Capital Inc., a CaymanIslands company, and its wholly owned subsidiaries, namely BEST Capital Holding Limited, a British Virgin Islands company, and BEST CapitalManagement Limited, a Hong Kong company. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 56 of 250 Table of Contents49In March 2018, Xinyuan Financial Leasing (Zhejiang) Co., Ltd., which operated our BEST Capital business before it was wound down bythe end of 2022, was transferred from BEST Logistics Technologies Limited to BEST Capital Management Limited. We conduct our businessesmainly through our wholly-foreign owned enterprises and the VIEs in China. See “—Contractual Arrangements with Our Affiliated ConsolidatedEntities.”We have a track record of successful organic growth and strategic acquisitions, as evidenced by the following corporate milestones:●In 2007, BEST was founded in Hangzhou;●In 2008, we launched BEST Supply Chain Management;●In 2010, we launched BEST Express through the acquisition of Huitong Express;●In 2012, we launched BEST Freight through the acquisition of Quanjitong;●In 2013, we launched BEST Capital;●In 2015, we launched BEST Global and BEST Store+; and●In 2016, we launched BEST UCargo.Each of these service lines serves to expand the scope and scale of our supply chain service network while harnessing our technologyinfrastructure and service network to provide integrated solutions.On September 20, 2017, our ADSs began trading on the New York Stock Exchange under the ticker symbol “BSTI.” Our ticker symbol onthe New York Stock Exchange changed from “BSTI” to BEST” effective at the start of trading on February 19, 2019.To reduce cash outflows and reallocate capital to our core businesses, by the end of 2020, we had wound down our BEST Store+ businessand have since then started to account for BEST Store+ as discontinued operations.In March 2021, as an initial step to the establishment of a strategic partnership with a third party, we sold RMB603.6 million worth ofassets pertaining to the external B2C truck leasing business of BEST Capital to the third party.In October 2021, we agreed to sell BEST Express to J&T Express Co., Ltd, or J&T Express China. The sale closed and was completed inDecember 2021. Since then, BEST Express has been deconsolidated from the Company, and its historical financial results are reflected in ourconsolidated financial statements as discontinued operations.To further reduce cash outflows and increase capital allocations to our core businesses, by the end of 2022, we had wound down our BESTUCargo and BEST Capital businesses.Principal OfficesOur principal executive offices are located at 2nd Floor, Block A, Huaxing Modern Industry Park, No. 18 Tangmiao Road, Xihu District,Hangzhou, Zhejiang Province 310013, People’s Republic of China. Our telephone number at this address is +86- 571-8899-5656. Our registeredoffice in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 801 2nd Avenue,Suite 403, New York, New York 10017. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 57 of 250 Table of Contents50Offering and Issuance of 2024 Convertible NotesOn September 17, 2019, we completed our offering of US$200 million aggregate principal amount of 1.75% convertible senior notes due2024 (including full exercise of the initial purchasers’ option to purchase additional notes) in the United States to qualified institutional buyerspursuant to Rule 144A and to non U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, raisingUS$194.5 million in net proceeds to us after deducting underwriting discounts and commissions and other offering expenses.In 2022, we repurchased substantially all of our US$200 million aggregate principal amount of our 1.75% convertible senior notes due2024, and the repurchased notes were canceled accordingly. Of these repurchases, (i) approximately US$95 million principal amount of notes wererepurchased in multiple transactions pursuant to definitive agreements that were privately negotiated and entered into by us and certain holders ofthe notes, and (ii) approximately US$105 million principal amount of notes were repurchased pursuant the holders’ right to require us to repurchaseall of their notes or any portion thereof that is an integral multiple of US$1,000 principal amount for cash on September 30, 2022 pursuant to therelevant indenture dated as of September 17, 2019. Notes in the principal amount of approximately US$11,000 remain outstanding after suchrepurchases.Share Repurchase ProgramIn November 2019, we announced the adoption of a share repurchase program in an aggregate amount of up to US$100 million worth ofour outstanding ADSs from time to time over a period of 18 months, or the 2019 Share Repurchase Program. For details about the ADSsrepurchased in 2020, see “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”Private Placement and Issuance of 2025 Convertible NotesOn June 3, 2020, we completed the issuance and sale of US$150 million aggregate principal amount of 4.50% convertible senior notesdue 2025 to Alibaba.com Hong Kong Limited, an entity affiliated with Alibaba, one of our principal shareholders, outside the United States inreliance on Regulation S under the Securities Act.Holder of the notes may require us to repurchase all or part of their notes within 90 days after June 3, 2023 and upon the occurrence of afundamental change, in each case at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued andunpaid interest, if any. In April 2023, we and Alibaba.com Hong Kong Limited ("Alibaba HK") agreed that Alibaba HK would require us torepurchase one half of their notes, or US$75 million aggregate principal amount, in 2023, and we have agreed to grant an extra repurchase option toAlibaba HK, such that Alibaba HK would be able to require us to repurchase the other half of their notes, or US$75 million aggregate principalamount, in 2024. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We have a history of net lossesand negative cash flows from operating activities, which may continue or occur again in the future. While we believe we can continue our businessas a going concern and have prepared our consolidated financial statements on that basis, we cannot assure you that we will be able to continue as agoing concern in light of the adverse conditions we are facing.”Sale of WOWOIn November 2021, we completed the sale of WOWO by Hangzhou Baijia Business Management Consulting Co., Ltd., a variable interestentity, to Chongqing Lawson Convenience Store Co., Ltd., for a cash consideration of RMB250 million.Sale of BEST ExpressIn October 2021, we agreed to sell BEST Express, our express delivery business in China, to J&T Express Co., Ltd., or J&T ExpressChina, at approximately RMB6.8 billion enterprise value. The sale did not include any of our other businesses, namely, Supply Chain Management,Freight and Global. The sale closed and was completed in December 2021, following approval by relevant regulatory agencies of the definitiveagreement entered into by the parties. The final transaction was completed pursuant to the terms of the agreement, and BEST Express wastransferred to J&T Express China. Since December 2021, BEST Express has been deconsolidated from our company, and its historical financialresults are reflected in our consolidated financial statements as discontinued operations. The share and asset purchase agreement entered into by theparties has been incorporated by reference in this annual report as exhibit 4.26. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 58 of 250 Table of Contents51B.Business OverviewOverviewWe are a leading integrated Smart Supply Chain service provider in China. Our multi-sided platform combines integrated logistics andsupply chain services, last-mile services, value-added services and proprietary technology infrastructure. Our integrated logistics and supply chainservices encompass B2B and B2C supply chain management, less-than-truckload delivery, cross-border supply chain management, Southeast Asialocal delivery, and a real-time bidding platform to source truckload capacity. Our last -mile services include online merchandise sourcing and storemanagement for convenience stores as well as B2C services. In addition, we provide value-added services to support our ecosystem participantsand help them grow. BEST Cloud, our proprietary technology platform that seamlessly connects our systems with those of our ecosystemparticipants, is the backbone that powers our integrated services and solutions.We believe we are well positioned to transform the logistics and supply chain industry in China and capture growth opportunities in theNew Retail era, which is the seamless integration of online and offline retail to offer a consumer-centric, omni-channel and global shoppingexperience through digitization and just-in-time delivery.In December 2021, we completed the sale of BEST Express, our express delivery business in China, and since then we have started toreflect the historical financial results of BEST Express for the periods prior to the sale in our consolidated financial statements as discontinuedoperations. Unless otherwise stated, the results presented in this annual report do not include the results of BEST Express.Our Integrated Logistics and Supply Chain Services and SolutionsBEST Freight: We achieved a 37.5% CAGR in freight volume between 2014 and 2022. Our nationwide freight network covers 100% ofChina’s provinces and 100% of China’s cities as of December 31, 2022.BEST Supply Chain Management: Since its establishment, BEST Supply Chain has always integrated the “gene” of scientific andtechnological innovation into the development of enterprises, constantly innovating business models, using information technology, artificialintelligence and big data to build comprehensive online and offline logistics services and supply chain service capabilities. We are committed toestablishing a more intelligent and efficient supply chain through the innovation of technology and business model in order to provide ourcustomers with full-link digital and intelligent solutions and landing services from the finished product to the end delivery.BEST Global: We offer door-to-door integrated cross-border supply chain services to and from China, including international express,LTL, fulfillment and freight forwarding through our own network and global transportation and warehouse partners. We operate Cloud OFCs in theU.S. and Thailand, and have coverage in Malaysia, Vietnam, and Singapore through partners. We also provide local express delivery services inThailand, Vietnam, Malaysia and Singapore.Our Technology InfrastructureBEST Cloud is our proprietary technology platform. It enables our ecosystem participants to operate their businesses effectively througha diverse range of SaaS-based applications. We utilize big data analytics, machine learning, artificial intelligence, or AI, and mobile technologies toefficiently design, manage and operate complex supply chain services and solutions for our ecosystem. We apply our technologies to a diverserange of applications, such as network and route optimization, swap bodies, sorting line automation, smart warehouses and store management toenhance operational efficiency and service quality.Our EcosystemMerchants, consumers, franchisee partners, transportation service providers and other suppliers are participants in our ecosystem, which isstrategically designed to benefit from its inherent network effect. As our platform grows and our suite of solutions and services expands, ourecosystem will continue to attract new participants. The growing number of participants in our ecosystem enlarges our scale and extends our reach,which drives network density and improves its overall efficiency. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 59 of 250 Table of Contents52Our Technology InfrastructureBEST Cloud, our proprietary technology platform, is the backbone that powers our integrated solutions. It seamlessly connects oursystems with those of our ecosystem participants. We utilize big data analytics, machine learning, AI, and mobile technologies to efficiently design,manage and operate complex supply chain systems for our ecosystem. Our technology allows us to provide end-to-end support for our customersand enables our ecosystem participants to grow and prosper. We have also built a large and experienced technology team of over 450 professionalsincluding software engineers and other technology specialists.We believe BEST Cloud and our strong technology team are key advantages distinguishing us from our competitors.Fundamental System ArchitectureThe system architecture of BEST Cloud differs from traditional information systems. While traditional information systems focus onmonitoring, controlling and coordinating business processes individually, BEST Cloud focuses on connecting all endpoints in our ecosystem,including those of our own service lines, facilities, equipment and employees and those of our customers and business partners. We believe thisoffers the following advantages:●We are able to weave together services from different networks to create new solutions for our customers.●We are able to rapidly develop and launch new applications which can be deployed across the network.●Our network users benefit from technology improvements instantly as they all have access to our centrally hosted systems.Single Interoperable SystemBEST Cloud connects all of our ecosystem participants by establishing millions of interlinkages among endpoints in our network. Theseendpoints include human interfaces, such as web portals and mobile apps, our customers’ information systems and our own smart devices andlogistics equipment.We plan to continue to increase the scale of our endpoints through development of more software and application interfaces and expandthe scope of our service offerings and attract more participants into our ecosystem. This will allow us to collect and analyze an increasing amountand variety of data to provide better, more innovative services.Big Data AnalyticsWe view the data collected through BEST Cloud’s millions of endpoints as one of our most valuable assets. Through our big data analyticsengines, optimization engines and machine learning tools, we analyze this data to identify correlations and derive insights. These data insightsenable us to develop and improve our services and solutions, improve operating efficiency and reduce operating costs for us and our ecosystemparticipants.We help merchants manage inventory, optimize their procurement and select merchandise with our big data analytics. We also apply bigdata analytics to optimize operations of our freight service networks, including analysis of delayed deliveries and targeted service improvements,load rate, and sort operations. Our big data analytics systems also aid in the calculation of labor costs in our hubs and sortation centers based onprocessing volumes, which has been important in controlling our costs. Our hubs and sortation centers use this information in planning their dailyoperations. We expect to utilize big data analytics in the development of new value-added services and to manage our financial and operating risks.We have also internally developed XingNG, a data bus that can support billions of data exchanges between system components on a daily basis.These technologies allow us to process data more rapidly to support our operations in real-time and facilitate the growth of our technologyinfrastructure in line with the growth of our service lines. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 60 of 250 Table of Contents53Machine Learning and Artificial IntelligenceWe have deployed AI and machine learning technology to produce valuable insights using the massive amount of data collected by BESTCloud. The following examples illustrate the role AI and machine learning play in our business:●Sorting operations. Our internally developed, patented smart sorting technology is able to learn to recognize non-standard addressesand maps international express parcels (excluding China) to appropriate service stations at an accuracy rate of over 99.99% and at arate of two milliseconds per address. Traditionally, mapping of these non-standard addresses required manual processing andextensive local knowledge.●Station monitoring. Using machine learning technology, we are able to generate a station performance index for BEST Freightfranchisee partners using operating data in our system. With this index, we are able to identify at-risk service stations, address relatedissues and maintain the stability and service quality of our network.●Inventory planning. Based on predicted order volume and inventory operational cost, our AI technology calculates estimatedreplacement volumes of goods needed at our Cloud OFCs to increase operational efficiency.●Shipment planning. Based on the dimensions, weights, destinations and shipping times entered into our system, AI-poweredplanning technology can automatically assign vehicles and routes to reduce delivery costs.●Performance tracking. By applying machine learning technology to data from the thousands of routes in our network, we are able toevaluate driver performance and estimate vehicle arrival times to optimize transportation resource allocation.Data and Service IntegrationBEST Cloud weaves information collected through the millions of endpoints and from our application and technology layers with thecapabilities available across our ecosystem to create smart solutions. For example, data collected from our Thunder () routing engine is usedto optimize route planning for BEST Freight which allows it to provide on-time delivery while reducing costs.Red Sun (), Big Dipper () and Thunder () are our proprietary big data analytics applications that respectively power ourautomated sorting, provide service station mapping and optimize routes on our service network. We have also developed a number of mobileapplications for use by various ecosystem participants. The Zhanggui () application is used by BEST Freight service station management toprovide instant dispatch monitoring, account settlement, reporting and customer relationship management.Asset-Light Business ModelWe are an asset-light company. We lease facilities used in our operations and outsource the majority of our transportation needs to third-party service providers. We have established a flat franchise network that minimizes the number of tiers of franchisees in order to maintainflexibility and control. For BEST Supply Chain Management, we operate large scale Cloud OFCs in tier 1 and tier 2 cities and franchise the rest.For BEST Freight, we directly operate all of the hubs and sortation centers at provincial, city and district levels, as well as certain strategic servicestations at street levels and franchise the majority of service stations. As of December 31, 2022, our franchisee partners operated 64% of our CloudOFCs and 97.3% of our service stations for BEST Freight. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 61 of 250 Table of Contents54Our asset-light business model allows us to optimize levels of self-operated and franchised operations to ensure the right balance ofscalability and control, and helps us expand our network in a cost-effective manner. By directly operating the critical parts of the network andproviding key services, we are able to achieve standardization, ensure technology integration and data visibility. Direct operation of the hubs andsortation centers also gives us the flexibility to dynamically reconfigure and optimize our network, including consolidating sortation centers androute optimization to improve operating efficiency and reduce costs. For instance, when volume generated by a service station reaches criticalmass, we may route its feeder service directly to hubs and bypass sortation centers with which it was previously connected. We spentapproximately RMB650 million from 2010 to 2016 to buy back the operational rights of 247 former franchisee partners in 191 cities in order toexpand our network and achieve synergies. Our franchisee partners are responsible for investing in their own operations, thus allowing us tooptimize the level of our capital investment. We train and provide our franchisee partners with best business practices. Through BEST Cloud, weconnect their systems to ours for performance monitoring and data transparency. As a result, we can achieve scalability and growth whilecapitalizing on the franchisee partners’ strong local expertise and proximity to customers. Our flat franchise network minimizes the number of tiersof franchisees, which ensures consistent service quality and mitigates risk of service disruption.Relationship with Our Franchisee PartnersAs of December 31, 2022, we had approximately 18,113 franchisee partners in China. We believe our relationships with franchiseepartners are mutually beneficial. Our technology infrastructure and supply chain service network empower our franchisee partners to increaseoperating efficiency and improve their service quality. Our franchisee partners are also our marketing champions for customer acquisition, whichsignificantly reduces the need for a large centralized sales force. The success of our franchisee partners in turn contributes to the success of ournetwork, allowing us to provide a broader range of services, and attracts more participants to our ecosystem.We carefully evaluate potential franchisee partners before they are allowed to join our network. Once approved, we enter into agreementsto govern our relationships with franchisee partners. Pursuant to these agreements:●We grant franchisee partners the right to provide service under our brand name in a specific geographic region during the term of theagreements. We support franchisee partners with technology infrastructure, facilitating their integration into our broader ecosystem.Franchisee partners are not allowed to provide similar services under their own names or the brand names of other parties and are notallowed to assign their rights under the agreement to any third party without our consent.●Franchisee partners are required to provide services that meet our quality standards as stipulated in our comprehensive operatingmanual which covers every aspect of their operations. We also regularly provide training to the franchisee partners’ employees. Wehave the right to inspect their service quality, demand correction, impose fines on them, or unilaterally terminate the contract if theirservice quality cannot satisfy our standards within a remedial period.●Our franchisee partners are required to pay a one-off fee as well as a performance deposit. The performance deposit may be forfeitedif they breach the agreement such as when their service quality does not meet our standards. We also provide them with guidelines onthe various fees they will pay us for use of our network.As of December 31, 2022, we had a team of 727 local managers based across China, directly interacting with our franchisee partners on adaily basis to ensure that our quality standards are followed and to help our franchisee partners solve problems and improve and expand theirservices. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 62 of 250 Table of Contents55Our Service OfferingsThrough our leading proprietary technology infrastructure and extensive supply chain service network, we offer comprehensive servicesand solutions that include the following major categories:Service Line Description ● BEST FreightDoor-to-door, LTL and FTL freight services● BEST Supply Chain ManagementIntegrated, customizable supply chain management services● BEST GlobalInternational supply chain, cross-border logistics services and local express delivery services inThailand, Vietnam, Malaysia, and Singapore● BEST CloudProprietary technology powering our services and solutionsBEST FreightOur total freight volume increased from 8,392 thousand tonnes in 2020 to 8,659 thousand tonnes in 2022, representing a CAGR of 1.58%.Our nationwide freight network covers 100% of China’s cities as of December 31, 2022.BEST Freight servicesBEST Freight’s core business involves LTL transportation. Through BEST Freight’s comprehensive network across China spanning pick-up, distribution, transportation and delivery, we transport parcels and other goods generally weighing 15 kg or more.BEST Freight provides door-to-door freight services for B2B and B2C shippers. Historically, the majority of items transported by BESTFreight were shipped by B2B sellers to other businesses. As online sales of large consumer products, such as home appliances and furniture, havesignificantly increased in recent years, shipments of these large consumer products directly to consumers from online and offline B2C sellerscomprise a greater proportion of the items we ship. In addition, BEST Freight provides value-added services including pre-shipment inspection,cargo insurance, oversized item delivery, COD facilitation, evidence of delivery, and upstairs delivery services. BEST Freight also provides freightservices that support BEST Supply Chain Management’s fulfillment operations. We believe that consumption upgrade and increased sales of largeitems through e-commerce will accelerate the development of LTL market, which is currently the focus of development for BEST Freight.Freight service processWhile the goods shipped through BEST Freight are larger and heavier and thereby require different equipment, facilities and vehicles tosort and deliver, the major steps in the transportation process are essentially the same. In addition, as we do not directly operate endpoint servicestations for freight services, operations before the goods are sent to our sortation centers and/or hubs and after the goods have left the destinationsortation centers and/or hubs are normally provided by our franchisee partners. However, BEST Freight also has certain direct merchant customersfor which we directly provide door-to-door services that include first-mile pick-up and last-mile delivery.Freight service pricingSubstantially all of our endpoint service stations for freight services are operated by franchisee partners and we derive the vast majority ofour freight service revenue from franchisee partners that operate our service stations. Starting in 2017, in order to enhance the freight deliveryexperience and our control over service quality throughout our network, we revised our arrangements with franchisee partners and the scope of ourservice. As a result, we became the principal that is directly responsible for last-mile delivery of all goods sent through our network, and we areliable to senders for damage to or loss of goods in connection with last-mile delivery. In consideration of such expanded service scope andincreased responsibilities, we increased the fee that we charge to pick-up franchised service stations. We provide the last-mile delivery servicemainly through destination franchised service stations under our supervision and are responsible for paying service fees to them for the provision oflast-mile delivery services.We determine and periodically evaluate and adjust our fee levels based on prevailing market conditions, our operating costs and servicequality. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 63 of 250 Table of Contents56BEST Supply Chain ManagementThe table below sets forth information regarding the scale of our supply chain management services in China as of and for the periodsindicated:As of and for the year ended December 31, 2020 2021 2022Number of Cloud OFCs:Self-Operated 82 78 65Franchised 358 350 339Total 440 428 404GFA of Cloud OFCs (‘000 sq m) 3,546 3,221 2,848Number of total orders fulfilled (‘000)(1) 433,224 448,202 373,673Self-Operated 218,554 179,925 133,686Franchised 214,670 268,276 239,987Note:(1)Includes orders fulfilled by franchised Cloud OFCs.BEST Supply Chain Management servicesBEST Supply Chain has a full-scenario integrated logistics service system, which can integrate omni-channel supply chain management,warehousing services, LTL and vehicle express, terminal distribution, cross-border e-commerce logistics, and supply chain information services.We provide customers with comprehensive digital, intelligent, customized, one-stop integrated supply chain solutions, and are a reliable provider ofintelligent supply chain solutions and services.BEST Supply Chain Management services include the following categories:●Digital and intelligent supply chain solutions and information services.We insist on using technology to promote the transformation of logistics and supply chain industries. After more than ten years of development and accumulation, we have created a digital and intelligent supply chain system cluster “Skynet” (EM, OMS, TMS, WMS and other logistics systems) with omni-channel coverage, and a “ground network” consists of Cloud OFCs, cloud transportation network and freight network. We target to provide customers with efficient digital information services and full-link digital solutions, relying on “information technology + network service”.For the logistics operation layer, we can realize digital operations and real-time data collection of the whole process; for the operationmanagement layer, the omni-channel management system is opened to realize data interactive application; for the decision-makinglayer, we can use big data and algorithm models to realize the scientific layout of the supply chain, improve forecasting and planningaccuracy, and improve production and sales coordination. Based on big data analysis, we can also provide customers with moreintelligent decision, which can meet the personalized needs of enterprises and merchants in all scenarios, and help enterprises toachieve intelligent management in all aspects of production, distribution and marketing.●The application of advanced technology in logistics industry--- supply chain (transportation) paperless blockchain solutionTo solve the problem of fetching paper documents slowly and of difficulty in settlement in the process of transportation business,BEST Supply Chain builds up the BEST Supply Chain blockchain certification platform by taking the advantages of the fully-developed TMS system combined with blockchain technology so that BEST Supply Chain can achieve the goal to apply the paperlesstransactions through the whole chain and to provide top-notch customer service. The supply chain (transportation) blockchainsolution greatly reduces the printing cost and makes transportation management environmentally friendly, green, convenient andefficient; with that said, we endeavor to achieve carbon peak and carbon neutrality practice. BEST Supply Chain plays a role modelfor the development of green logistics in the supply chain industry. As the first company to apply blockchain technology to logisticsscenarios domestically, we have applied for related patents of this technology. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 64 of 250 Table of Contents57●BEST Cloud WarehouseBEST Cloud Warehouse is a professional warehouse and distribution integrated service brand under BEST Supply Chain. It mainlyrelies on the nationwide warehouse and distribution network system, integrates and manages transportation and express resources, andapplies the self-developed digital supply chain system to provide customers with omni-channel integrated logistics services for all-scenario warehousing and distribution.As the core product of BEST Supply Chain, BEST Cloud Warehouse has been deeply involved in beauty, shoes and apparel, fast-moving consumer goods and other industries for many years since its establishment in 2013, and continue to deepen the layout of thewarehouse network across the country, to provide customers with warehouse services such as self-operated warehouses, franchisedwarehouses, and collaborative warehouses to meet the needs of warehouse distribution services in different scenarios and levels. Withthe support of cloud-based WMS, TMS systems and big data analysis applications, BEST Cloud Warehouse has also derivedintelligent applications such as intelligent warehouse division, intelligent order division, intelligent wave, intelligent scheduling,intelligent customer service, etc., which can fully meet the personalized needs of enterprise merchants, small and medium-sizedmerchants, B2B, and B2C businesses in all scenarios.Whether it is considered from the dimensions of order complexity, process complexity, digitalization degree or supply chain planningcapability, BEST Cloud Warehouse has reached the true level of “smart supply chain”. At present, Best Cloud Warehouse hasprovided smart supply chain services for more than 3,000 brand enterprises. With the increasing diversification of business formats,the transformation of traditional distribution supply chains into digital and integrated supply chains is the general trend of the market.In the next ten years, Best Cloud Warehouse will continue to consolidate the construction of the underlying warehouse network,complete the cloud warehouse network coverage in third- and fourth-tier cities, deepen the integrated digital network, and build anindustry-leading digital service platform for warehouse and distribution integration to serve more customers. Industry customersprovide omni-channel and omni-scenario comprehensive logistics services.●BEST Cloud DeliveryBEST Cloud Delivery is a professional B2B delivery network within the provinces under BEST Supply Chain. The network providescustomers with “one-day delivery” in provincial capital cities and “next-day delivery” in other cities in same provinces, with theadvantage of trunk transport resources and destination landing sites. We are committed to being a new choice for regional B2Bdistribution services in the footwear and apparel industry.BEST Cloud Delivery currently serves nearly 18,000 stores per day, with an average monthly shipment of 980,000 pieces, and itsbusiness scope has expanded to 18 provinces across the country. At the same time, with the strong technical advantages of BEST andthe Beidou satellite positioning system, it has realized the operational visibility, stability and controllable trajectory throughout thewhole process. BEST supply chain can meet tailored made demand from key accounts and help them to achieve their business goalwith lower cost and higher efficiency.BEST Supply Chain Management Service PricingWe serve customers of varying sizes and are able to tailor our services to accommodate their business needs.●As a one-stop supply chain solution provider, we are able to serve our customers’ entire supply chain. Most of our customers arewell-known brands in the international/Asia-Pacific region. We normally sign service contracts with customers on an annual basis.According to the different operational requirements of the customer’s products and the different storage conditions required forstorage in stock, we will communicate with the customer to nail down service details. In the contract, we will indicate the unit priceof each service. Taking the venue fee as an example, when the service is provided at our Cloud Warehouse rather than our customer’spremises, the price will be calculated using the floor area of the Cloud Warehouse. Therefore, the amount of revenue we generatedepends on the unit price of each service we provide and the detailed business volume of each type of service we provide. Ourservice types include but not limited to: various operation services in warehouses nationwide, system docking and various operationalreport support services, supply chain data visualization services, domestic and foreign vehicles, LTL, express, and othertransportation business with value-added services. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 65 of 250 Table of Contents58●For franchised Cloud OFCs, we charge a service system usage fee for each order processed through our network for their usage ofour technology infrastructure plus other fees such as for training. When franchised Cloud OFCs use our freight services, we chargethem our normal rates for such services, and such revenue is recognized by BEST Freight.●For small and medium customers, most of whom are online sellers, we offer a full range of standardized services, and we chargedifferent prices for different services.BEST GlobalIn order to meet the strong demand for cross-border e-commerce transactions, we provide inbound and outbound door-to-door integratedcross-border supply chain services, including international express, LTL, fulfillment and freight forwarding through our own network and globaltransportation and warehouse partners. We provide direct mail and bonded warehouses, customs clearance and fulfillment to overseas merchantsoffering goods into China. We also provide full supply chain services, including local fulfillment, as well as other market advisory services toChinese merchants selling into overseas markets.We operate Cloud OFCs in the U.S., and Thailand, occupying approximately 2,202,000 square feet of space. We also offer coveragethrough our partners in Malaysia, Vietnam and Singapore. We also manage eight bonded Cloud OFCs in China, including one of the largest cross-border bonded warehouses that fulfills orders generated on Tmall Global. In addition, our Urumqi Frontier Cloud OFC facilitates shipments todestinations in Central Asia, Russia and other destinations using land transport links across Eurasia. We contract with third-party transportationservice providers for transportation services, including transportation within China, international air and sea freight providers, and local fulfillmentcompanies. In China, we may also provide transportation services through our other service lines, such as BEST Freight. Pricing of services isprimarily determined by prevailing market rates.To further expand our footprint and capture growth opportunities in Southeast Asia, BEST Global launched its express delivery services inThailand’s Greater Bangkok area in the fourth quarter of 2018. The service has been expanded nationwide to provide flexible, fast and high-qualitydelivery services across Thailand with operation centers in Bangkok, Khon Kaen, Phitsanulok and Suratthani. In July 2019, we started to operate alocal express network in Vietnam after acquiring a local express delivery company. In April 2020, we further expanded our local express deliveryservices to Malaysia through a strategic acquisition of a local express delivery company. In July 2020, we officially launched our local expressdelivery services in Singapore and Cambodia.As of December 31, 2022, BEST Global had ten hubs and sortation centers in Thailand, twelve hubs and sortation centers in Vietnam,eight hubs and sortation centers in Malaysia, and one hub in Singapore. We directly operate all of these hubs and sortation centers as they arecritical to ensuring the service quality of our network.BEST Cross-border ServiceIn addition to domestic market, we also actively expand the international market to provide supply chain cross-border e-commerceservices, taking solid steps in globalization. By now, we operate our business overseas such as the United States, Thailand, Malaysia, Vietnam,Singapore, and Cambodia, providing one-stop all-round smart supply chain solutions and landing services for customers at home and abroad.Since 2018, we began to deploy warehousing and express delivery networks in Southeast Asia. At the beginning of 2019, we havesuccessively completed the layout of local express delivery networks in five countries: Thailand, Vietnam, Malaysia, Singapore and Cambodia. Atthe end of 2020, we launched a full-scenario “door-to-door” delivery service between China and five Southeast Asian countries. Among them, B2Band B2C businesses focus on providing cross-border e-commerce customers with omni-channel, door-to-door, and integrated cross-border logisticsservices, to fully promote Chinese brands to the international market. Up to now, we have a total of 30 transit centers, more than 1,400 sites, and16,000 square meters of overseas warehouse management area in five countries: Thailand, Vietnam, Malaysia, Singapore and Cambodia.BEST CloudOur proprietary BEST Cloud service platform powers the technology solutions and applications for our ecosystem. Our franchiseepartners use BEST Cloud to run their operations, including to manage franchised Cloud OFCs and BEST Freight operations. Our best-in-classtechnology and big data analytics capabilities drive operational excellence and enhance value creation across our ecosystem. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 66 of 250 Table of Contents59BEST Cloud offers integrated web and mobile portals, which we refer to as our network endpoints, for merchants, consumers, franchiseepartners and employees, providing access to a wide range of applications and services, such as SMS, OMS, TMS, WMS, billing and paymentsettlement, CRM and customer data tracking and analytics. We refer to these applications and services as the application layer. Applications may beintegrated with the data and systems of our customers, such as their ERP, messaging, payment gateway and business intelligence. The applicationlayer is supported by the technology layer, which consists of a robust set of tools such as AI, big data analytics, geographic information system,address mapping, performance monitoring, mobile apps and others. In the data integration layer, we weave information collected through millionsof endpoints and from the application and technology layers with the capabilities available across our ecosystem to create smart solutions.Our Supply Chain Service NetworkWe have established a nationwide, integrated supply chain service network. The seamless integration of this network with our technologyinfrastructure has laid the foundation for our service offerings and our rich and growing ecosystem. We are asset-light as we lease facilities used inour operations and outsource the majority of our transportation needs to third-party service providers.Network FacilitiesOur network facilities include Cloud OFCs, hubs and sortation centers, service stations and convenience stores.Order Fulfillment Centers (BEST Cloud Warehouse)BEST Cloud Warehouse are warehouses with direct order fulfillment functions, which allow us to manage inventory for our customersand dispatch products from warehouse directly to our customers. As of December 31, 2022, we had 404 Cloud Warehouse with an aggregate grossfloor area of approximately 2.8 million square meters. Among these Cloud Warehouse, 65 were directly operated by us and 339 were operated byour franchisee partners.BEST Cloud DeliveryAcross the country, our landing distribution network covers 18 provinces, over 250 prefecture-level cities, and 100% of over 1,900districts and counties.Collaborative Network——BEST International Express NetworkBy the end of December 2022, we have 31 self-operated express distribution centers and more than 1,380 sites in Southeast Asia.Hubs and Sortation CentersAll of our hubs and sortation centers can collect, sort and dispatch parcels or goods to hubs and sortation centers in other regions andcities.Our hubs are generally large logistics facilities located in major cities in China. Each of our hubs is connected to most of our other hubs byline-haul transportation and therefore can dispatch parcels and goods directly to most other regions in China.Our sortation centers are generally smaller-scale logistics facilities compared to hubs and each of them is primarily connected to nearbyhubs and/or other sortation centers by feeder services. They can dispatch parcels and goods to other regions through nearby hub or directly tonearby cities and regions. When a sortation center reaches critical mass, we will connect it directly to hubs and sortation centers in other regions byline-haul transportation.As of December 31, 2022, BEST Freight had 50 hubs and 49 sortation centers. We directly operate all of these hubs and sortation centersas they are critical to ensuring the service quality of our network. We continue to optimize our hubs and sortation centers as our volume grows. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 67 of 250 Table of Contents60Service StationsService stations are responsible for developing relationships with senders within its coverage area and picking up parcels and other goodsfrom senders for delivery through our network. They also handle last-mile delivery of parcels and other goods sent through our network torecipients located within their coverage areas.As of December 31, 2022, we had over 18,615 BEST Freight service stations. BEST Freight service stations cover 100% of China’sprovinces, 100% of China’s cities and 98.33% of China’s districts and counties. As of December 31, 2022, substantially all of our BEST Freightservice stations were operated by franchisee partners.Transportation FleetLine-Haul and Feeder ServicesWe generally use line-haul services for long-distance, cross-region transportation and feeder services for shorter-distance, inter-regiontransportation.We are responsible for arranging all of the line-haul transportation in our network. As of December 31, 2022, our network had over 2,044BEST Freight line-haul routes.We are also responsible for arranging feeder services between our hubs and sortation centers as well as between our different sortationcenters. We also arrange feeder services between our self-operated Cloud OFCs and our hubs or sortation centers. In addition, we also arrangefeeder services between our directly-served customers and our self-operated Cloud OFCs, hubs and sortation centers.Our franchisee partners are responsible for arranging feeder services from their service stations to our sortation centers or hubs. They alsoarrange transportation for their directly-served customers and franchised Cloud OFCs.Fleet ManagementWe have historically relied on trucks and other vehicles owned and operated by independent transportation service providers.We have taken various measures to enhance our control over the trucks used in our network and increase their utilization to reducetransportation costs across our network. For example,●While we continue to rely on independent transportation service providers to provide trucks and drivers, we provided financing tothem through BEST Capital for truck purchases, before the business was wound down by the end of 2022, install data collectionequipment and truck management system on these trucks, and hire these trucks together with their drivers for our use andmanagement on a time charter basis.●We use swap bodies, which are standard freight containers that can be conveniently mounted on tractors for road transportation. Thisallows us to increase the utilization rate of tractors and their drivers by reducing the waiting time during loading and unloading. Thisalso allows us to better match swap bodies to freight volume and thereby minimize empty containers and save on fuel cost. We arealso utilizing our technology infrastructure to optimize route planning and tractor-to-swap body ratio to further reduce ourtransportation costs.●In 2016, we also launched our real-time bidding platform, BEST UCargo, to source truckload capacity from independenttransportation service providers and agents at more competitive costs. We wound down our BEST UCargo business by the end of2022.Operating Efficiency and CapacityWe have continuously expanded the capacity and improved the operating efficiency of our Cloud OFCs, hubs, sortation centers andservice stations through optimization of our operating processes as well as the increased adoption of automation and AI. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 68 of 250 Table of Contents61As of December 31, 2022, four of our Cloud OFCs used 172 AGVs, which have increased the order fulfillment capacity of these CloudOFCs while increasing efficiency and accuracy and reducing labor costs.We utilize big data analytics, AI and machine learning to optimize our network operations, route planning and line-haul routes to reducecosts. We also capitalize on synergies from our different services.We continue to introduce technological enhancements to improve our capabilities and increase efficiency. BEST Cloud integratesconvenience stores’ POS and membership rewards program with Store and Supply Chain Management for full data visibility. It also integratesBEST Freight’s dynamic routing calculation, which is expected to further reduce transportation costs. In addition, BEST Cloud has started a pilotsimulation process in Cloud OFCs to analyze and optimize personnel resources planning in order to increase labor utilization efficiency.Our Ecosystem ParticipantsWe have built a rich and growing ecosystem with various types of participants. Many of our ecosystem participants not only receive butalso provide services to us and therefore are both our customers and suppliers. Our ecosystem participants also provide services to other ecosystemparticipants. Our technology infrastructure and supply chain service network enable us and our ecosystem participants to provide better servicesand improve operating efficiency, which ultimately benefit all participants in our ecosystem.MerchantsMerchants in our ecosystem include (i) brands, (ii) distributors, (iii) large online and offline retailers, and (iv) other sellers on various e-commerce platforms, or online sellers, most of which are SMEs and individuals.We provide BEST Supply Chain Management services to brands, large online and offline retailers and an increasing number of onlinesellers. We also offer BEST Cloud services and cross-sell BEST Freight and BEST Global services to them as part of our integrated solution. Insuch transactions, these merchants are our customers.Merchants are our direct customers when they use BEST Freight and Cloud OFC services directly through us. Merchants are customers ofour franchisee partners when they use BEST Freight and Cloud OFC services through our franchisee partners.After more than 10 years of development and accumulation, our business has expanded rapidly and has served more than 3,000 domesticbrand enterprises and top 500 foreign enterprises, including COFCO, Unilever, L’Oreal, 3M, Johnson & Johnson, Procter & Gamble, Schneider,bilibili, BYD, CHINA FAW GROUP, CONTINENTAL, etc., involving FMCG, shoes and clothing, daily chemicals, internet electronics,telecommunications, electrical and other industries. Our largest merchant customers include brands such as 3M, Li Ning, hotwind, bilibili, BYD,Geely, Cainiao Network and other large online and offline retailers. Additionally, many of our merchant clients conduct business in China’s majore-commerce platforms.ConsumersWhen individual consumers make a purchase at our self-operated convenience stores, or order goods from overseas through our platform,they are our direct customers. For most of our other services and solutions, we serve consumers indirectly through merchants and our franchiseepartners.Franchisee partnersFranchisee partners for BEST Freight and our Cloud OFCs are our customers. We may also provide additional services, such as feederservices connecting franchised service stations and our hubs and sortation centers, to our franchisee partners in the future.Prior to 2017, we were not responsible for last-mile delivery of parcels or freight items unless we directly operated the destination servicestations, and therefore franchisee partners were directly liable to franchised service stations for their delivery service charges. Starting in 2017, allof our franchisee partners for BEST Freight also provide last-mile delivery services to us and therefore are our suppliers. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 69 of 250 Table of Contents62Other ecosystem participantsOther participants in our ecosystem include transportation service providers and other suppliers.Transportation service providers have traditionally been our suppliers as we use them for line-haul transportation and feeder services thatconnect our network.Given the variety of participants and transactions in our ecosystem, we rely on many other suppliers to provide products and services to usand our ecosystem participants. These include other capacity carriers such as airlines and shipping companies that provide cross-bordertransportation services, truck and logistics equipment manufacturers from which transportation service providers and our franchisee partnersprocure trucks and other equipment using our financial services, landlords from which we and our franchisee partners lease premises for ournetwork facilities, insurance providers from which we procure insurance products for various ecosystem participants, and financial institutionsfrom which we may obtain financing.As we continue to grow our ecosystem and expand our service offerings, we expect to attract an increasing number and variety ofparticipants into our ecosystem.Marketing and SalesWe have established our brand awareness through continuous innovation and high service quality. While we have mainly relied on word-of-mouth referrals, we also utilize various advertising channels to increase our brand awareness among potential customers.Marketing and sales of our supply chain solutions and transportation services was led by a team of 282 personnel as of December 31,2022. Our senior management is also significantly involved in building relationships with customers, especially current and potential majorpartners. In addition, from time to time, we initiate promotions to expand our customer base and build familiarity with our brand. As we havemultiple service lines, there are many opportunities for cross-selling across our platform as we seek to introduce customers to our other serviceofferings in addition to the service line with which they engage initially. We also believe our strong reputation is a factor in retaining and attractingcustomers.In addition to our centralized marketing efforts, we empower our franchisee partners to promote BEST services. Successful initiatives willincrease demand for services in their franchised areas across our entire network. Our marketing team assists franchisee partners in the identificationof new marketing leads and coordination of new initiatives.Customer ServiceThe quality of our service directly affects our customer loyalty and brand image. We directly operate the critical parts of our network andselectively franchise out services to franchisee partners. To maintain consistent standards within our network, we provide periodical training to ourfranchisee partners’ employees and regularly inspect franchisee partners’ service quality.We have established a customer relationship management system, or CRM, that allows us to effectively manage service quality issues andpromptly address customer inquiries. Customers can access the system by phone or online channels. Our call center representatives provide real-time assistance from 8:00 a.m. to 8:00 p.m., seven days a week. Our call system automatically forwards each incoming call to an availablerepresentative from one of the call centers. After the submission of each enquiry, we ask the customer to rate the quality of our customer service,and we follow up on instances where customers are not completely satisfied. For each complaint, we strive to provide an initial response within 24hours, and to resolve the issue within three days.In the process of providing customer service, we implement our corporate culture of “customer respect” and “adherence to responsibility”,emphasize the integration, guidance, and management of data and intelligence of core supply chain service, and continuously improve our ownservices. We provide customers with efficient, high-quality, cost-reducing logistics services, and have earned recognition from many customers inour industry. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 70 of 250 Table of Contents63Intellectual PropertyWe regard our trademarks, trade secrets, domain names, copyrights, patents, know-how, proprietary technologies and similar intellectualproperty as critical to our business. As of December 31, 2022, we had 671 trademark registrations in China, including those of “百世” and “百世物流” and were in the process of making 9 trademark applications in China. As of December 31, 2022, we had 87 trademark registrations outsideChina and were in the process of making 93 trademark applications outside China. We have also been granted 65 copyrights in China in respect ofour proprietary information systems. We are the registered holder of 194 domain names, including best-inc.com. We have 284 issued patents and261 publicly filed patents under application in China. We also rely on confidentiality and invention assignment provisions in the employmentagreements that we enter into with key employees engaged in research and development. We have implemented a data security system whichstrictly controls access to our technology and information systems.In December 2021, we completed the sale of BEST Express, our express delivery business in China, and we are still in the process oftransferring ownership of intellectual properties relating to BEST Express according to the share and asset purchase agreement. Such agreementhas been incorporated by reference in this annual report as exhibit 4.26.Security and SafetyWe have integrated safety policies and procedures across our businesses. Our key safety measures include:Operational security and SafetyWe have enacted a full range of operational security measures to ensure the safety of our employees, customers and partners. We screen allitems processed through our network for dangerous and prohibited materials, enforce handling procedures across hubs and sortation centers,service stations and at each level of our network and raise transportation safety awareness among our workers and others. Each worksite in ournetwork is required to conduct a general safety assessment with regard to onsite activities, including maintenance as well as non-routine tasks. Wetrain our employees as well as those of our franchisee partners and service providers and use periodic follow-up training to maintain skills andsafety awareness. We have further improved our safety management system by setting up safety management teams at each worksite. These teamsprovide comprehensive onsite safety management training including operational safety, work health and safety, daily transportation safety, goodssafety and security checks.TechnologyWe and our partners operate trucks configured with GPS tracking as well as integrated safety features such as ESP body stability systems,VDS dynamic steering systems, EBS electronically controlled braking systems, hydraulic brakes, ramp-assist starters and ABS anti-lock brakingsystems. We are able to provide updates and alerts to drivers, warehouse employees and others involved in our operations as needed. In addition,we utilize advanced equipment at our facilities to reduce risks to workers involved in sorting and moving goods as well as loading and offloadingitems from vehicles. We also employ digital workforce management technology to monitor employee work hours to ensure compliance withregulations and reduce fatigue-related risks. Using BEST Cloud, we are able to monitor vehicles and goods as they move across our network andsystem and can leverage BEST Cloud’s insights to identify risk areas and address them proactively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 71 of 250 Table of Contents64EmployeesAs of December 31, 2020, 2021 and 2022, we had a total of 6,927, 4,381 and 3,628 employees, respectively. We believe we have a goodworking relationship with our employees and have not experienced any significant labor disputes in the past. The majority of our employees arebased in China, and we also have employees in certain other countries. The following table sets forth details of our employees as of December 31,2022 by function: Number of FunctionEmployees% of Total BEST Supply Chain Management 761 20.98%BEST Freight 1,111 30.62%BEST Global 673 18.55%Technology 450 12.40%Management, Administration and Others(1) 633 17.45%Total3,628 100.0%(1)Includes management and administration personnel at headquarters and local level and discontinued operations.In addition to our own employees, we engage outsourcing firms that provide large numbers of their employees to work at our facilities. Asof December 31, 2022, over 14,117 outsourced personnel were active in our operations, including approximately 13,923 for our continuingoperations. Our franchisee partners and service providers engage their own employees in connection with their operations.In order to maintain a high standard of performance, reliability and safety across our network, we conduct training for our employees aswell as those of our franchisee partners and service providers. We provide these trainings through a variety of programs led by our internal BESTUniversity initiative, which includes specialized programs for individuals of each job type and level of seniority. Many of our technologyprofessionals have received training and certifications from globally-recognized technology service organizations.As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds,namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternityinsurance plan (which shall be consolidated into the medical insurance) and a housing provident fund. We are required under PRC law to makecontributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees up to a maximumamount specified by the local government from time to time.PropertiesAs part of our asset-light strategy, we currently lease all of the facilities that we occupy from independent third parties. Our headquartersare located at 2nd Floor, Block A, Huaxing Modern Industrial Park, No. 18 Tangmiao Road, Xihu District, Hangzhou, Zhejiang Province 310013,People’s Republic of China. As of December 31, 2022, our headquarters had an aggregate gross area of approximately 10,476.93 square meters.We believe that the facilities that we currently lease are adequate to meet the needs of our current operations, and that we will be able toobtain adequate facilities to accommodate our future expansion plans.InsuranceWe have in place insurance coverage up to a level which we consider to be reasonable and typical for companies in our industry in China.Our insurance broadly falls under the following categories: life insurance, such as group accident insurance; property loss insurance, such as cargotransportation insurance; all-risk property insurance; and liability insurance, such as non-motor vehicle liability insurance, public liability insuranceand logistics liability insurance. We also provide benefits to our employees pursuant to local social insurance laws, including pension insurance,unemployment insurance, work-related injury insurance, maternity insurance (which shall be consolidated into the medical insurance) and medicalinsurance. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 72 of 250 Table of Contents65CompetitionOur extensive supply chain solutions encompass a wide range of operational areas, and as a result we may compete with a broad range ofcompanies, including supply chain management service providers, freight delivery service providers, B2B platforms for convenience stores, SaaSsoftware service providers and logistics brokers.We compete with total supply chain solution providers, such as JD Logistics and SF Holdings. Certain service lines may also facecompetition from other service providers, such as P.G. Logistics and Annto Logistics for supply chain management services; DEPPON Logisticsand ANE Logistics for freight services; and Kerry Express and J&T Express for our BEST Global business. In addition, our other services mayface competition from companies that provide similar or competing services.Legal ProceedingsWe may become subject to legal proceedings, investigations, claims and administrative fines incidental to the conduct of our businessfrom time to time. We are not currently a party to, nor are we aware of, any legal proceeding, investigation or claim which, in the opinion of ourmanagement, is likely to have a material adverse effect on our business, financial condition or results of operations.Regulatory MattersThe following is a summary of the most significant rules and regulations that affect our business activities in China or our shareholders’rights to receive dividends and other distributions from us.Regulations Relating to Foreign InvestmentIndustry Catalogue and Negative List Relating to Foreign Investment. Investment activities in China by foreign investors are principallygoverned by the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2021 Version), or the Negative List 2021,and the Encouraged Foreign Investment Catalogue (2022 version), or the Encouraged Industry Catalogue 2022, both of which were promulgated bythe NDRC and the MOFCOM and took effect in January 2022 and January 2023 respectively.Pursuant to the Encouraged Industry Catalogue 2022 and the Negative List 2021, foreign-invested projects are categorized as encouraged,restricted and prohibited. Industries that are not listed in either of the Negative List 2021 and Encouraged Industry Catalogue 2022 are permittedareas for foreign investments, and are generally open to foreign investment unless specifically restricted by other PRC regulations. Foreigninvestment activities in China are subject to the special administrative measures prescribed in the Negative List 2021.Pursuant to the Negative List 2021, foreign investments in tobacco retail business are prohibited, and foreign investments in value-addedtelecommunications services (other than business of e-commerce, domestic multiparty communication, store-and-forward business and call center)are subject to special administrative measures including restriction on foreign shareholding. Therefore, in China we provided value-addedtelecommunications services in connection with our BEST UCargo business, before the business was wound down by the end of 2022, throughHangzhou BEST IT, the VIE, and its subsidiaries in China.Our PRC subsidiaries also operate in certain industries which are industries listed in the Encouraged Industry Catalogue 2022, such asroad transportation and software development. Most of our PRC subsidiaries mainly engage in software development, technical services andconsultations, which are industries listed in the Encouraged Industry Catalogue 2022.Under current PRC law, the establishment of a foreign-invested enterprise is no longer subject to the approval of the MOFCOM or itslocal counterparts. The foreign investors or foreign-invested enterprise shall report investment information to competent authority of commercethrough enterprise registration system and Enterprise Credit Information Disclosure System. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 73 of 250 Table of Contents66Foreign Investment Law. On March 15, 2019, the National People’s Congress of China approved the Foreign Investment Law, whichtook effect on January 1, 2020 and replace three existing laws on foreign investments in China, namely, the Sino-Foreign Equity Joint VentureEnterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Law and the Foreign Owned Enterprise Law, together with theirimplementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreigninvestment regulatory regime in line with prevailing international practice and legislative efforts to unify corporate legal requirements for bothforeign and domestic invested enterprises in China. The Foreign Investment Law establishes a basic framework for the access to, and thepromotion, protection and administration of foreign investments with a view to investment protection and fair competition.According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one ormore natural persons, business entities, or other organizations of a foreign country (collectively referred to as “foreign investors”) within China,and such investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes aforeign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other similar rights andinterests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project withinChina; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council. As such, there is still leeway forfuture laws, administrative regulations or provisions of the State Council to classify contractual arrangements as a form of foreign investment.Therefore, there can be no assurance that our control over the VIEs through contractual arrangements will not be deemed as foreign investment inthe future. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Our current corporate structure andbusiness operations may be affected by the newly enacted Foreign Investment Law.”In addition, according to the Foreign Investment Law, the State Council will publish, or approve to publish, a catalogue for specialadministrative measures, or the “negative list.” The Foreign Investment Law grants national treatment to foreign-invested entities, except for thoseforeign-invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list.”On December 26, 2019, the State Council promulgated the Implementation Rules to the Foreign Investment Law, which took effect onJanuary 1, 2020. The implementation rules further clarified that the state encourages and promotes foreign investment, protects the lawful rightsand interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and advancesa higher-level opening.As required by the State Council, the MOFCOM, the NDRC and the Ministry of Justice are leading the abolishment or revisions of otherforeign investment related laws, which are inconsistent with the Foreign Investment Law. It may be anticipated that further revisions to regulationsrelating to foreign investment would be promulgated.Foreign Investment Security Review. On December 19, 2020, the NDRC and the MOFCOM jointly promulgated the Measures for theSecurity Review of Foreign Investment, which became effective on January 18, 2021. The NDRC and the MOFCOM will establish a workingmechanism office in charge of conducting a security review of foreign investment. Any foreign investment that has or may have an impact on statesecurity shall be subject to such security review. A foreign investor or a party concerned in China shall take the initiative to make a declaration tothe working mechanism office prior to making the investment in certain key areas with bearing on national security, such as important culturalproducts and services, important information technology and internet services and products, key technologies and other important areas withbearing on national security which results in the acquisition of de facto control of investee companies.Foreign Investment in Road Transportation Businesses. According to the Administrative Provisions for Foreign Investment in theRoad Transportation Industry, promulgated in November 2014 by the Ministry of Transport and the MOFCOM, and its supplements andimplementing rules, investment in a road transportation business (including, among other things, road freight transportation, and flitting, loading,unloading and storage of road cargo) by a foreign investor is subject to the approval of the relevant provincial counterparts of the Ministry ofTransport, and the newly established foreign-invested enterprise must obtain a road transportation operation permit from the relevant provincialcounterparts of the Ministry of Transport after the completion of other foreign investment registration procedures. The incorporation of any director indirect subsidiary of a foreign-invested enterprise that intends to engage in road transportation business is subject to the same approvalprocedure. The Administrative Provisions for Foreign Investment in the Road Transportation Industry were abolished by the Ministry of Transportand the MOFCOM on October 25, 2018 for the purpose of reducing regulation. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 74 of 250 Table of Contents67Foreign Investment in Telecommunication Businesses. Foreign direct investment in telecommunications companies in China is governedby the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, which was promulgated by the State Council onDecember 11, 2001 and last amended on March 29, 2022. According to the Regulations for the Administration of Foreign-InvestedTelecommunications Enterprises, a foreign investor’s beneficial equity ownership in an entity providing value-added telecommunications servicesin China is not permitted to exceed 50%, unless otherwise stipulated by the government. In addition, the main foreign investor who invests in aforeign-invested value-added telecommunications enterprise operating the value-added telecommunications business in China, and who is a majorone among the foreign investors, will be no longer required to must demonstrate a good track record and experience in operating a value-addedtelecommunications business. However, foreign investors that meet the requirements shall still obtain approvals from the Ministry of Industry andInformation Technology, or the MIIT, and the MOFCOM, or their authorized local counterparts, which retain considerable discretion in grantingapprovals, for its commencement of value-added telecommunications business in China.The MIIT’s Notice Regarding Strengthening Administration of Foreign Investment in Operating Value-Added TelecommunicationBusinesses, or the MIIT Notice, issued on July 13, 2006 prohibits holders of these services licenses from leasing, transferring or selling theirlicenses in any form, or providing any resources, sites or facilities, to any foreign investors intending to conduct such businesses in China.Based on the Notice regarding the Strengthening of Ongoing and Post Administration of Foreign Investment TelecommunicationEnterprises issued by the MIIT on October 15, 2020, the MIIT will no longer issue Examination Letter for Foreign Investment inTelecommunication Business. Foreign invested enterprises will need to submit relevant foreign investment materials to the MIIT for theestablishment or change of telecommunication operating permits.Regulations Relating to Road TransportationPursuant to the Regulations on Road Transportation promulgated by the State Council in April 2004 and most recently amended in March2022, and the Provisions on Administration of Road Freight Transportation and Stations (Sites) issued by the Ministry of Transport in June 2005and last amended in September 2022, or the Road Freight Provisions, the business operations of road freight transportation refer to commercialroad freight transportation activities that provide public services. The road freight transportation includes general road freight transportation,special road freight transportation, road transportation of large articles, and road transportation of dangerous cargos. Special road freighttransportation refers to freight transportation using special vehicles such as vehicles with containers, refrigeration equipment, or tank containers.The Road Freight Provisions set forth detailed requirements with respect to vehicles and drivers.Under the Road Freight Provisions, except those engaging in general cargo transportation with a general cargo vehicle weighing 4,500kilograms or less, anyone engaging in the business of operating road freight transportation must obtain a road transportation operation permit fromthe local county-level transportation department, and each vehicle used for road freight transportation must have a road transportation certificatefrom the same authority. Anyone engaging in the business of operating road freight stations (sites) shall file with the local county-leveltransportation department no later than 15 days after starting the relevant business activities. The incorporation of a subsidiary of a road freighttransportation operator that intends to engage in road transportation business is subject to the same approval procedure. If a road freighttransportation operator intends to establish a branch, it should file with the local transportation department where the branch is to be established.Although the road transportation operation permits have no limitation with respect to geographical scope, several provincial governmentsin China, including Shanghai and Beijing, promulgated local rules on administration of road transportation, stipulating that permitted operators ofroad freight transportation registered in other provinces should also make filing with the local transportation department where it carries out itsbusiness. The requirement to obtain operation permits with respect to operating road freight stations (sites) was abolished by the State Council onFebruary 27, 2019. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 75 of 250 Table of Contents68Interim Measures for the Operation and Administration of Road Freight Transport based on Internet Platforms was promulgated by theMinistry of Transport and the State Taxation Administration on September 6, 2019 and came into effect on January 1, 2020. An operator of aninternet platform for road freight transport is defined as entity which consolidates and allocates resources using an internet platform as its basis,undertakes responsibility of transportation for the whole course as carrier, and appoints the actual carrier and enters into a transport contract with itto undertake the road freight transport mission. Merely providing information intermediary or deal making services will not be deemed as internetfreight transport. Such operator may apply for a road transportation certificate specifying the business scope as “internet freight transport”. Suchentities shall comply with the ICP measures and other relevant laws and regulations regarding operational internet information service and beequipped with corresponding online service capabilities. The operator of such internet freight transport should set up corresponding mechanismsand undertake corresponding measures as required by the Safe Production Law of the People’s Republic of China, the E-commerce Law of thePeople’s Republic of China, the Law on the Administration of Tax Collection of the People’s Republic of China, the Network Security Law of thePeople’s Republic of China and certain other laws, regulations and standards.BEST Logistics Technologies (China) Co., Ltd., one of our PRC subsidiaries, has obtained a road transportation operation permit tooperate general road freight transportation while BEST Chi Cheng (Hangzhou) Logistics Service Co., Ltd., another one of our PRC subsidiaries,has also obtained a general road transportation operation permit. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Businessand Industry—Failure of us or our franchisee partners to obtain, maintain or update necessary licenses and permits may have a material adverseeffect on our business, financial condition and results of operations.”Regulations on Cargo VehiclesPursuant to the Administrative Provisions concerning the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated by theMinistry of Transport, which took effect on September 21, 2016 and was amended on August 11, 2021, cargo vehicles running on public roadsshall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth in the sameregulation. Vehicle operators who violate this regulation may be subject to a fine of up to RMB30,000 for each violation. In the event of repeatedviolations, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration ofthe relevant vehicle.We rely on trucks and other vehicles owned and operated by third-party trucking companies, while the operation of our fleet is subject tothis new regulation. We have an obligation to educate and manage vehicle operators as well as to urge them to comply with this regulation. Weweigh each cargo truck as they enter and leave our hubs and sortation centers to ensure their compliance with this regulation in terms of cargoweight. If any truck is not in compliance with this regulation, we may be required to replace it with another vehicle that complies with thisregulation. Otherwise, we may be subject to penalties under this regulation if we continue to operate those trucks that exceed the limits set forth inthe regulation.Regulations Relating to International Freight Forwarding BusinessRegulations on Management of International Freight Forwarders promulgated by the Ministry of Foreign Trade and EconomicCooperation (now known as the MOFCOM) in 1995 and its detailed rules regulate the business of international freight forwarding. According tothe provisions and its detailed rules, the minimum amount of registered capital must be RMB5 million for an international freight forwarder by sea,RMB3 million for an international freight forwarder by air and RMB2 million for an international freight forwarder by land or for an entityoperating international express delivery services. Additionally, an international freight forwarder must, when applying for setting up its branches,increase its registered capital (or the excess amount over its minimum registered capital) by RMB500,000. Furthermore, under the ProvisionalMeasures on Filing of International Freight Forwarders announced by the MOFCOM in March 2005 and most recently amended in August 2016,all international freight forwarders and their branches registered with the state industrial and commercial administration must be filed with theMOFCOM or its authorized agencies.BEST Logistics Technologies (China) Co., Ltd., one of our PRC subsidiaries, is engaged in the international freight forwarding businessand has made a filing with the relevant agency for carrying out such business. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 76 of 250 Table of Contents69Regulations Relating to Commercial FranchisingPursuant to the Administrative Regulations on Commercial Franchising Operation promulgated by the State Council in February 2007 andProvisions on Administration of the Record Filing of Commercial Franchises issued by the MOFCOM in December 2011, collectively theRegulations and Provisions on Commercial Franchising, commercial franchising refers to the business activities where an enterprise that possessesthe registered trademarks, enterprise logos, patents, proprietary technology or any other business resources allows such business resources to beused by another business operator through contract and the franchisee follows the uniform business model to conduct business operations and paysfranchising fees according to the contract. We and our franchisee partners are therefore subject to regulations on commercial franchising. Under theRegulations and Provisions on Commercial Franchising, within 15 days of the first conclusion of franchising contract, the franchisor must carry outrecord-filing with the MOFCOM or its local counterparts and must report the current status of its franchising contracts in the first quarter of eachyear after record-filing. The MOFCOM announces the names of franchisors who have completed filing on the government website and makesprompt updates. If the franchisor fails to comply with these Regulations and Provisions on Commercial Franchising, the MOFCOM or its localcounterparts have the discretion to take administrative measures against the franchisor, including fines and public announcements. The Regulationsand Provisions on Commercial Franchising also set forth requirements on the contents of franchising contracts.We have completed the requisite filings with respect to our BEST Freight and Cloud OFC services. We cannot assure you that we canupdate such filing in a timely manner or that our relationships with other existing and future ecosystem participants will not be found to constitutesuch regulated commercial franchising in the future. As of the date of this annual report, we have not received any order from any governmentalauthorities to make such filing. See “Item 3. Key Information—D. Risk Factors— Risks Relating to Our Business and Industry—Failure to complywith PRC laws and regulations by us or our franchisee partners may materially and adversely impact our business, financial condition and results ofoperations.”Regulations Relating to Telecommunications and Internet Information ServicesRegulations Relating to Telecommunication BusinessesUnder the Telecommunications Regulations of the PRC, or the Telecommunications Regulations, promulgated by the State Council onSeptember 25, 2000 and most recently amended on February 6, 2016, a telecommunication services provider in China must obtain an operatinglicense from the MIIT or its provincial counterparts. The Telecommunications Regulations categorize all telecommunication services in China aseither basic telecommunications services or value-added telecommunications services. Our online and mobile commerce businesses are classifiedas value-added telecommunications services. The Administrative Measures for Telecommunications Business Operating Licensing, which waspromulgated by the MIIT and recently amended on July 3, 2017, further regulate the telecommunications business licensing.In addition to restricting dealings with foreign investors, the MIIT Notice contains a number of detailed requirements applicable to holdersof value-added telecommunications services licenses, including that license holders or their shareholders must directly own the domain names andtrademarks used in their daily operations and each license holder must possess the necessary facilities for its approved business operations andmaintain such facilities in the regions covered by its license, including maintaining its network and providing Internet security in accordance withthe relevant regulatory standards. The MIIT or its provincial counterpart has the power to require corrective actions after it discovers any non-compliance of the license holders, and where such license holders fail to take such steps, the MIIT or its provincial counterpart has the power torevoke the value-added telecommunications services licenses.Regulations Relating to Internet Information ServicesAs a subsector of the telecommunications industry, Internet information services are regulated by the Administrative Measures on InternetInformation Services, or the ICP Measures, promulgated on September 25, 2000 by the State Council and amended on January 8, 2011. “Internetinformation services” are defined as services that provide information to online users through the Internet. Internet information services providers,also called Internet content providers, or ICPs, that provide commercial services are required to obtain an operating license from the MIIT or itsprovincial counterpart. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 77 of 250 Table of Contents70To the extent the Internet information services provided relate to certain matters, including news, publication, education or medical andhealth care (including pharmaceutical products and medical equipment), approvals must also be obtained from the relevant industry regulators inaccordance with the laws, rules and regulations governing those industries.The PRC government has promulgated measures relating to Internet content through various ministries and agencies, including the MIIT,the News Office of the State Council, the Ministry of Culture and Tourism and the National Radio and Television Administration. In addition tovarious approval and license requirements, these measures specifically prohibit Internet activities that result in the dissemination of any contentwhich is found to contain pornography, promote gambling or violence, instigate crimes, undermine public morality or the cultural traditions of thePRC or compromise state security or secrets. ICPs must monitor and control the information posted on their websites. If any prohibited content isfound, they must remove such content immediately, keep a record of it and report to the relevant authorities. If an ICP violates these measures, thePRC government may impose fines and revoke any relevant business operation licenses.In June 2020, the MIIT promulgated the Notice regarding Strengthening the Management of Call Center Business, which has strengthenedmanagement of the admittance, codes, accessing, operation activities and certain other aspects of call centers.We conduct our value-added telecommunications business through the VIE, Hangzhou Baijia, which has obtained the requisite licenses.Certain subsidiaries of the VIE, Hangzhou BEST IT, have obtained such requisite licenses as well.Regulations Relating to Internet SecurityThe Criminal Law of the People’s Republic of China, promulgated by the National People’s Congress of China on July 6, 1979 andrecently amended on December 26, 2020, imposes a number of Internet security requirements on Internet service providers. These requirements aremainly provided in the Ninth Amendment to the Criminal Law of the People’s Republic of China, or the Ninth Amendment. According to theNinth Amendment, an Internet service provider who does not perform its duties of security management on information network may be subject tocriminal punishment, if such non-performance results in certain serious consequences.The Decision in Relation to Protection of the Internet Security, enacted by the Standing Committee of the National People’s Congress ofChina on December 28, 2000 and amended on August 27, 2009, provides that certain activities, including but not limited to the following,conducted through the Internet are subject to criminal punishment: (i) gaining improper entry into a computer or system of strategic importance; (ii)bringing out abnormal operation of Internet by cultivating or transmitting computer virus or interrupting network without authorization; (iii)disseminating politically disruptive information or obscenities; (iv) leaking State secrets; (v) spreading false commercial information; (vi)infringing intellectual property rights; (vii) providing information concerning pornography; or (viii) violating lawful rights of any other nationalperson, legal person or other institution.The Regulations of the People’s Republic of China on the Security Protection of Computer Information System, promulgated by the StateCouncil on February 18, 1994 and amended on January 8, 2011, require that no entity or individual may make use of computer information systemsto engage in activities jeopardizing the interests of the state or collectives or the legitimate rights of the citizens, or endanger the security ofcomputer information systems. A user of a computer information system shall establish and improve a security management system for itscomputer information system. A user of a computer information system is also required to take other security protection measures, such asreporting any incidents arising from the computer system to the public authority of the local government at or above the county level within 24hours.On December 28, 2012, the Standing Committee of the National People’s Congress of China promulgated the Decision on StrengtheningNetwork Information Protection to enhance the legal protection of information security and privacy on the Internet. On July 16, 2013, the MIITpromulgated the Provisions on Protection of Personal Information of Telecommunication and Internet Users to regulate the collection and use ofusers’ personal information in the provision of telecommunication services and Internet information services in China. Personal informationincludes a user’s name, birth date, identification card number, address, phone number, account name, password and other information that can beused for identifying a user.On July 1, 2015, the Standing Committee of the National People’s Congress of China promulgated the New National Security Law whichtook effect on the same date and replaced the former National Security Law promulgated in 1993. According to the New National Security Law,the state shall ensure that the information system and data in important areas are secure and controllable. There are uncertainties on how the NewNational Security Law will be implemented in practice. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 78 of 250 Table of Contents71The Network Security Law of the People’s Republic of China, which was promulgated by the Standing Committee of the NationalPeople’s Congress of China on November 7, 2016 and became effective on June 1, 2017, provides that network operators shall comply with lawsand regulations and fulfill their obligations to safeguard security of the network when conducting business and providing services. Those whoprovide services through networks shall take technical measures and other necessary measures pursuant to laws, regulations and compulsorynational requirements to safeguard the safe and stable operation of the networks, respond to network security incidents effectively, prevent illegaland criminal activities, and maintain the integrity, confidentiality and usability of network data.On April 11, 2017, the CAC announced the Measures for the Security Assessment of Personal Information and Important Data to beTransmitted Abroad (consultation draft), or the Consultation Draft of Security Assessment Measures. The Consultation Draft of SecurityAssessment Measures requires network operators to conduct security assessments and obtain consents from owners of personal information prior totransmitting personal information and other important data abroad. Moreover, under the Consultation Draft of Security Assessment Measures, thenetwork operators are required to apply to the relevant regulatory authorities for security assessments under several circumstances, including butnot limited to: (i) if data to be transmitted abroad contains personal information of more than 500,000 users in aggregate; (ii) if the quantity of thedata to be transmitted abroad is more than 1,000 gigabytes; (iii) if data to be transmitted abroad contains information regarding nuclear facilities,chemical biology, national defense or military projects, population and health, or relates to large-scale engineering activities, marine environmentissues or sensitive geographic information; (iv) if data to be transmitted abroad contains network security information regarding systemvulnerabilities or security protection of critical information infrastructure; (v) if key information infrastructure network operators transmit personalinformation and important data abroad; or (vi) if any other data to be transmitted abroad contains information that might affect national security orpublic interest and are required to be assessed as determined by the relevant regulatory authorities. On June 13, 2019, the CAC further announcedthe Measures for the Security Assessment of Personal Information to be Transmitted Abroad (consultation draft). Both drafts are still underconsultation.On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law, which took effect onSeptember 1, 2021. The Data Security Law introduces a data classification and hierarchical protection system based on the level of importance ofthe data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate rightsand interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. The appropriate levelof protection measures is required to be taken for each respective category of data. For example, a processor of important data shall designate thepersonnel and the management body responsible for data security, carry out risk assessments for its data processing activities and file the riskassessment reports with the competent authorities. In addition, the Data Security Law provides a national security review procedure for those dataactivities which affect or may affect national security and imposes export restrictions on certain data and information. No entity or individualwithin the territory of the PRC may provide foreign judicial or law enforcement authorities with the data stored within the territory of the PRCwithout the approval of the competent PRC authorities.On April 13, 2020, the CAC and several other administrations jointly promulgated the Cybersecurity Review Measures, which becameeffective on June 1, 2020. The Cybersecurity Review Measures establish the basic framework for national security reviews of network productsand services, and provide the principal provisions for undertaking cyber security reviews. On December 28, 2021, the CAC, the NDRC, theSAMR, the MIIT and certain other PRC governmental authorities, jointly released the revised Cybersecurity Review Measures, which took effecton February 15, 2022. The revised Cybersecurity Review Measures provide, among others, that operators of critical information infrastructure thatintend to purchase network products and services that affect or may affect national security shall file for cybersecurity review with theCybersecurity Review Office under the CAC. The cybersecurity review will evaluate, among others, (i) the risk of critical informationinfrastructure being illegally controlled, interfered, or destructed, (ii) the risk of core data, important data, or a large amount of personal informationbeing stolen, disclosed, damaged, or illegally used or exported, and (iii) the risk of critical information infrastructure, core data, important data, or alarge amount of personal information being influenced, controlled, or maliciously used by foreign governments after public listing, and cyberinformation security risk. However, the scope of network products or data processing activities that affect or may affect national security is stillunclear, and there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 79 of 250 Table of Contents72On July 30, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure,which took effect on September 1, 2021. The Critical Information Infrastructure Regulations supplement and specify the provisions on the securityof critical information infrastructure as stated in the revised Cybersecurity Review Measures. The regulations provide that, among others, criticalinformation infrastructure, or the CII, means important network facilities and information systems in important industries such as publiccommunications and information services, energy, transportation, water conservancy, finance, public services, e-government, defense technologyindustry and others that may seriously harm national security, national economy, people’s livelihood and public interests once damaged, disabled orits data leaked. Operators shall, based on leveled system for cybersecurity protection, adopt technical protection measures and other necessarymeasures to deal with cybersecurity security events, defend against cyber attack and criminal activities, to ensure the safe and stable operation ofCII, maintain data integrity, confidentiality, and availability pursuant to relevant laws, regulations and the mandatory requirements of nationalstandards. Moreover, the competent supervisory departments of relevant important industries abovementioned shall organize the recognition of theCII and promptly notify the operators and Public Security Department of the State Council of the results of the identification.On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal InformationProtection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November1, 2021. The Personal Information Protection Law sets forth detailed rules on processing personal information, clarifies the relevant rights of theindividuals and the obligations of the personal information processors, and further strengthens the liabilities for illegal process of personalinformation. In addition to other rules and principles of personal information processing, the Personal Information Protection Law specificallyprovides rules for processing sensitive personal information. Sensitive personal information refers to personal information that, once leaked orillegally used, could easily lead to the infringement of human dignity or harm to the personal or property safety of an individual, includingbiometric recognition, religious belief, specific identity, medical and health, financial account, personal whereabouts and other information of anindividual. Only where there is a specific purpose and sufficient necessity, and under circumstances where strict protection measures are taken, maypersonal information processors process sensitive personal information. A personal information processor shall inform the individual of thenecessity of processing such sensitive personal information and the impact thereof on the individual’s rights and interest. Nonetheless, the PersonalInformation Protection Law raises the protection requirements for processing personal information, and many specific requirements of the PersonalInformation Protection Law remain to be clarified by the CAC, other regulatory authorities, and courts in practice.On July 7, 2022, the CAC released the Data Outbound Transfer Security Assessment Measures (the “Security Assessment Measures”)which came into effect on September 1, 2022. The Security Assessment Measures provide that, among others, data processors shall apply tocompetent authorities for security assessment prior to transferring any data abroad if the transfer involves (i) important data; (ii) personalinformation transferred overseas by an operator of CII and a data processor that has processed personal information of more than one millionindividuals; (iii) personal information transferred overseas by a data processor who has already provided personal information of 100,000 personsor sensitive personal information of 10,000 persons overseas since January 1 of the previous year; or (iv) other circumstances as requested by theCAC. Furthermore, on August 31, 2022, the CAC promulgated the Guidelines for filing the Outbound Data Transfer Security Assessment (Version1), which provides that acts of outbound data transfer include (i) overseas transmission and storage by data processors of data generated duringdomestic operations; (ii)inquiry, access to, download or export of the data by overseas institutions, organizations or individuals with such databeing collected and generated by data processors and stored in mainland China; and (iii) other acts as specified by the CAC. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 80 of 250 Table of Contents73On November 14, 2021, the CAC published for public comment the Regulations on Network Data Security Management (Draft forComments) (the “Draft Network Data Security Regulations”), which applies to activities relating to the use of networks to carry out data processingactivities within the territory of the PRC. In accordance with the Draft Network Data Security Regulations, data processors shall apply for acybersecurity review for the following activities: (i) merger, reorganization or division of Internet platform operators that have acquired a largenumber of data resources related to national security, economic development or public interests to the extent that affects or may affect nationalsecurity; (ii) overseas listing of data processors which process over one million users’ personal information; (iii) the listing of data processors inHong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security. TheDraft Network Data Security Regulations also provide that operators of large internet platforms that set up headquarters, operation centers or R&Dcenters overseas shall report to the national cyberspace administration and competent authorities. In addition, the Draft Regulations also requirethat data processors processing important data or going public overseas shall conduct an annual data security self-assessment or entrust a datasecurity service institution to do so, and submit the data security assessment report of the previous year to the local branch of CAC before January31 each year. As of the date of this annual report, the Draft Network Data Security Regulations have not been formally adopted and their finalcontent, interpretation, implementation and effective date may be subject to change with substantial uncertainty.On December 8, 2022, the MIIT published the Administrative Measures for Data Security in the Field of Industry and InformationTechnology (Trial) (the “Industry and Information Technology Measures”), which took effect on January 1, 2023. The Industry and InformationTechnology Measures are aimed to regulate the data processing activities in the field of industry and information technology conducted by relevantdata processors in mainland China. The Industry and Information Technology Measures apply to, among others, industrial enterprises, software andinformation technology service companies, and companies holding licenses for operation of telecommunications services that collect, store, use,process, transfer, provide, and disclose data in the field of industry and information technology. Such data includes industrial data,telecommunication data, and radio data generated and collected during the operation of relevant services. Pursuant to the Industry and InformationTechnology Measures, relevant data processors shall further implement data classification and hierarchical management, take necessary measuresto ensure that data remains effectively protected and being lawfully applied and conduct data security risk monitoring.Regulations Relating to Finance LeasingCBIRC issued the Interim Measures for Supervision and Administration of the Finance Leasing Companies, or the Interim FinanceLeasing Measures, on May 26, 2020. Finance leasing companies may conduct businesses as prescribed in the Interim Finance Leasing Measure andshall not conduct businesses or activities prohibited therein. The Interim Finance Leasing Measures further provide certain regulatory indicators forfinance leasing companies, including that the proportion of finance leasing and other leasing assets of finance leasing companies shall be no lessthan 60% of their total assets. Finance leasing companies established before the introduction of the Interim Finance Leasing Measures shall complywith prescribed requirements within a transition period as provided by the provincial financing regulators which shall be no longer than three yearsunless prolonged.Xinyuan Financial Leasing (Zhejiang) Co., Ltd., one of our PRC subsidiaries, has obtained an approval to conduct financing leasebusiness from the competent regulatory authority in the PRC.Regulations Relating to Retail IndustryRegulations Relating to Consumer ProtectionUnder the Law on the Protection of the Rights and Interests of Consumers, which was promulgated by the Standing Committee of theNational People’s Congress on October 31, 1993, became effective on January 1, 1994 and was recently amended on October 25, 2013, a businessoperator providing a commodity or service to a consumer is subject to a number of requirements, including the following:●to ensure that commodities and services meet with certain safety requirements;●to disclose serious defects of a commodity or a service and adopt preventive measures against damage occurrence;●to provide consumers with true information and to refrain from conducting false advertising; Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 81 of 250 Table of Contents74●not to set unreasonable or unfair terms for consumers or alleviate or release itself from civil liability for harming the legal rights andinterests of consumers by means of standard contracts, circulars, announcements, shop notices or other means; and●not to insult or slander consumers or to search the person of, or articles carried by, a consumer or to infringe upon the personalfreedom of a consumer.Business operators may be subject to civil liabilities for failing to fulfill the obligations discussed above. These liabilities include restoringthe consumer’s reputation, eliminating the adverse effects suffered by the consumer, and offering an apology and compensation for any lossesincurred. The following penalties may also be imposed upon business operators for the infraction of these obligations: issuance of a warning,confiscation of any illegal income, imposition of a fine, an order to cease business operations, revocation of its business license or imposition ofcriminal liabilities under circumstances that are specified in laws and statutory regulations.Regulations Relating to Product QualityPursuant to the Product Quality Law of the PRC, or the Product Quality Law, which was promulgated by the Standing Committee of theNational People’s Congress on February 22, 1993, became effective on September 1, 1993, and was recently amended on December 29, 2018,business operators, including manufacturers and sellers, are required to assume certain obligations in respect of product quality. Violations of theProduct Quality Law may result in the imposition of fines. In addition, a company in violation of the Product Quality Law may be ordered tosuspend its operations and its business license may be revoked. Criminal liability may be incurred in serious cases. A consumer or other victim whosuffers injury or property losses due to product defects may demand compensation from the manufacturer as well as from the seller. Where theresponsibility lies with the manufacturer, the seller shall, after settling compensation with the consumer, have the right to recover suchcompensation from the manufacturer, and vice versa.Regulations Relating to PricingIn China, the prices of a very small number of products and services are guided or fixed by the government. According to the Pricing Law,which was promulgated by Standing Committee of the National People’s Congress on December 29, 1997 and became effective on May 1, 1998,business operators must, as required by the government departments in charge of pricing, mark the prices explicitly and indicate the service items,charging standards and other related particulars clearly. Business operators may not charge any fees that are not explicitly indicated. Businessoperators must not commit unlawful pricing activities, such as colluding with others to manipulate the market price, using false or misleadingprices to deceive consumers to transact, or conducting price discrimination against other business operators. Failure to comply with the PricingLaw may subject business operators to administrative sanctions such as warning, ceasing unlawful activities, compensation, confiscating illegalgains and fines. The business operators may be ordered to suspend business for rectification, or have their business licenses revoked if thecircumstances are severe. We are subject to the Pricing Law as a service provider and believe that our pricing activities are currently in compliancewith the law in all material aspects.Regulations Relating to LeasingWe currently lease all of the facilities that we occupy from independent third parties. Pursuant to the Law on Administration of UrbanReal Estate which took effect in January 1995 with the latest amendment in August 2019, lessors and lessees are required to enter into a writtenlease contract, containing such provisions as the term of the lease, the use of the premises, liability for rent and repair, and other rights andobligations of both parties. Both lessor and lessee are also required to register the lease with the real estate administration department. Pursuant toimplementing rules stipulated by certain provinces or cities, such as Tianjin, if the lessor and lessee fail to go through the registration procedures,both lessor and lessee may be subject to warnings, rectifications and/or other penalties.According to the PRC Civil Code which took effect in January 2021, the lessee may sublease the leased premises to a third party, subjectto the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. The lessoris entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers thepremises, the lease contract between the lessee and the lessor will still remain valid. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 82 of 250 Table of Contents75The PRC Civil Code further provides that if a mortgagor leases and occupies the mortgaged property before the mortgage contract isexecuted, the previously established leasehold interest will not be affected by the subsequent mortgage. The Supreme People’s Court has revised ajudicial interpretation regarding disputes over lease contracts on urban buildings, which took effect in January 2021, providing that if the ownershipof the leased premises changes during the term of lessee’s occupation in accordance with the lease contract, and the lessee requests the assignee ofsuch premises to continue to perform the original lease contract, the PRC court shall support such request unless the mortgage right has beenestablished before the leasing and the ownership changes due to the mortgagee’s realization of the mortgage right.Regulations Relating to Intellectual Property RightsThe PRC government has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents,trademarks and domain names.Copyright. Copyright in China, including copyrighted software, is principally protected under the Copyright Law and its implementationrules. Under the Copyright Law, the term of protection for copyrighted software is 50 years.Patent. The Patent Law provides for patentable inventions, utility models and designs, which must meet three conditions: novelty,inventiveness and practical applicability. The National Intellectual Property Administration is responsible for examining and approving patentapplications. The duration of a patent right is either 10 years or 20 years from the date of application, depending on the type of patent right.Trademark. The Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Office of NationalIntellectual Property Administration is responsible for the registration and administration of trademarks throughout China. The Trademark Law hasadopted a “first-to-file” principle with respect to trademark registration. Where registration is sought for a trademark that is identical or similar toanother trademark which has already registered or given preliminary examination and approval for use in the same or similar category ofcommodities or services, the application for registration of such trademark may be rejected. Trademark registration is effective for a renewable ten-year period, unless otherwise revoked.Domain Name. Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT.The MIIT is the major regulatory body responsible for the administration of the PRC Internet domain names, under supervision of which the ChinaInternet Network Information Center is responsible for the daily administration of “.cn” domain names and Chinese domain names. Domain nameregistration is handled through domain name service agencies established under the relevant regulations, and applicants become domain nameholders upon successful registration.Regulations Relating to EmploymentPursuant to the Labor Law, which was promulgated by National People’s Congress in January 1995 and amended in December 2018, andthe Labor Contract Law, promulgated by Standing Committee of the National People’s Congress in June 2007 and amended in December 2012,employers must execute written labor contracts with full-time employees. If an employer fails to enter into a written employment contract with anemployee within one year from the date on which the employment relationship is established, the employer must rectify the situation by enteringinto a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following thelapse of one month after the date of establishment of the employment relationship to the day prior to the execution of the written employmentcontract. All employers must comply with local minimum wage standards. Violation of the Labor Law and the Labor Contract Law may result inthe imposition of fines and other administrative and criminal liability in the case of serious violation.In December 2012, the Labor Contract Law was amended to impose more stringent requirements on the use of employees of tempagencies, who are known in China as “dispatched workers.” Dispatched workers are entitled to equal pay with full-time employees for equal work.Employers are only allowed to use dispatched workers for temporary, auxiliary or substitutive positions, and the number of dispatched workersmay not exceed 10% of the total number of employees. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 83 of 250 Table of Contents76Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurancefunds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternityinsurance plan (which, as provided in Opinions of the General Office of the State Council on Comprehensively Advancing CombinedImplementation of Maternity Insurance and Basic Medical Insurance for Employees which was promulgated on March 6, 2019, shall beconsolidated into the medical insurance), and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentagesof salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where theyoperate their businesses or where they are located. According to the PRC Social Insurance Law, which was promulgated by the StandingCommittee of the National People’s Congress on October 28, 2010 and became effective on July 1, 2011 and recently amended on December 29,2018, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the requiredcontributions within a stipulated deadline and be subject to a late fee of up to 0.05% or 0.2% per day, as the case may be. If the employer still failsto rectify the failure to make social insurance contributions within the stipulated deadline, it may be subject to a fine ranging from one to threetimes the amount overdue. According to the Regulations on Management of Housing Fund, which was promulgated by the State Council on April3, 1999 and recently amended on March 24, 2019, an enterprise that fails to make housing fund contributions may be ordered to rectify thenoncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to a local court forcompulsory enforcement. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in the People’s Republic of China—The enforcement of the Labor Contract Law of the People’s Republic of China, or the PRC Labor Contract Law, and other labor-related regulationsin the PRC may increase our labor costs, impose limitations on our labor practices and adversely affect our business and our results of operations,and our failure to comply with PRC labor-related laws may expose us to penalties.”Regulations Relating to Foreign ExchangeThe principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, mostrecently amended in August 2008. Payments of current account items, such as profit distributions and trade and service-related foreign exchangetransactions, can usually be made in foreign currencies without prior approval from the SAFE, by complying with certain procedural requirements.By contrast, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreigncurrency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.On March 30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Management Approachregarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19. Pursuant to SAFE Circular 19, theforeign exchange capital of foreign-invested enterprises is subject to the discretional foreign exchange settlement, which means the foreignexchange capital in the capital account of foreign-invested enterprises upon the confirmation of rights and interests of monetary contribution by thelocal foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) may be settled at the banks based on theactual operation needs of the enterprises. The proportion of discretionary settlement of foreign exchange capital of foreign-invested enterprises iscurrently 100%. SAFE can adjust such proportion in due time based on the circumstances of international balance of payments. SAFE promulgatedthe Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policyof Capital Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changesthe prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issueRMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 orSAFE Circular 16 could result in administrative penalties.On January 26, 2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Review of Authenticity andCompliance to Further Promote Foreign Exchange Control, or SAFE Circular 3, which stipulates several capital control measures with respect tothe outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shallcheck board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domesticentities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to SAFE Circular 3, domesticentities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and otherproof when completing the registration procedures in connection with an outbound investment. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 84 of 250 Table of Contents77The Notice for Further Advancing the Facilitation of Cross-border Trade and Investment, or the SAFE Circular 28, was promulgated bythe SAFE on October 23, 2019. SAFE Circular 28, among other things, allows FIEs to use Renminbi converted from foreign currency-denominatedcapital for equity investments in China so long as the equity investment complies with the then-effective Special Administrative Measures forAccess of Foreign Investment (Negative List) and is genuine and legitimate. However, since the SAFE Circular 28 is newly promulgated, itremains uncertain how the SAFE and competent banks will implement this circular.According to the Notice on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business, whichwas promulgated by the SAFE on April 10, 2020, the reform on facilitating the payments of incomes under the capital accounts shall be promotednationwide. On the condition that the use of funds is authentic and complies with the regulatory provisions on use of income from capital account,enterprises which satisfy given criteria are allowed to use income under the capital account, such as capital funds, foreign debt and overseas listing,for domestic payment, without the need to provide proof materials for authenticity to the bank prior to each transaction.Regulations Relating to Dividend DistributionThe principal laws, rules and regulations governing dividend distribution by foreign-invested enterprises in the PRC are the Company Lawof the PRC, as amended, the Foreign Investment Law and its implementation regulations. Under these laws, rules and regulations, foreign-investedenterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance with PRC accounting standards andregulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to set aside as general reserves at least 10% oftheir after-tax profit each year, until the cumulative amount of such reserves reaches 50% of their registered capital. A PRC company is notpermitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may bedistributed together with distributable profits from the current fiscal year.Regulations Relating to Offshore FinancingSAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investmentand Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the formercircular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to registerwith local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseasinvestment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests,referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of anysignificant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, sharetransfer or exchange, merger, division or other material events. In the event that a PRC shareholder holding interests in a special purpose vehiclefails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profitdistributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle maybe restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registrationrequirements described above could result in liability under PRC law for evasion of foreign exchange controls. According to the Notice on FurtherSimplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by SAFE, localbanks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration andamendment registration, under SAFE Circular 37 from June 1, 2015.We have notified substantial beneficial owners of ordinary shares who we know are PRC residents of their obligations of applications,filings and amendments as required under SAFE Circular 37 and other related rules. Nevertheless, we may not be aware of the identities of all ofour beneficial owners who are PRC residents. We do not have control over our beneficial owners and there can be no assurance that all of our PRC-resident beneficial owners will comply with SAFE Circular 37, its implementation rules and other applicable foreign exchange rules, and there isno assurance that the registration under SAFE Circular 37 and any amendment will be completed in a timely manner, or will be completed at all.The failure of our beneficial owners who are PRC residents to register or amend their foreign exchange registrations in a timely manner pursuant toSAFE Circular 37, its implementation rules and other applicable foreign exchange rules, or the failure of future beneficial owners of our companywho are PRC residents to comply with these registration requirements may subject such beneficial owners or our PRC subsidiaries to fines andlegal sanctions. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRCsubsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to our company, or we may be penalized by SAFE. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 85 of 250 Table of Contents78Regulations Relating to Employee Stock Incentive Plan of Overseas Publicly-Listed CompanyPursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies maysubmit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. Inaddition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share IncentivePlans of Overseas Publicly-Listed Companies, or the Share Option Rules, issued by SAFE on February 15, 2012, PRC residents who are grantedshares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (i) register with SAFE or itslocal branches, (ii) retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institutionselected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the share incentive plans on behalf of theparticipants, and (iii) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of sharesor interests and funds transfers. We are making efforts to comply with these requirements.The State Administration of Taxation, or SAT, has issued certain circulars concerning employee share options or restricted shares. Underthese circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individualincome tax. Our PRC subsidiaries have obligations to file documents related to employee share options or restricted shares with relevant taxauthorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail towithhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRCgovernmental authorities.Regulations Relating to TaxUnder the PRC Enterprise Income Tax Law, or the EIT Law, which became effective on January 1, 2008 and was recently amended onDecember 29, 2018, an enterprise established outside the PRC with its “de facto management body” within the PRC is considered a “residententerprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income.The Implementing Rules of the Enterprise Income Tax Law further define the term “de facto management body” as the management body thatexercises substantial and overall management and control over the business, personnel, accounts and properties of an enterprise. In 2009, the SATissued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on theBasis of De Facto Management Bodies, or SAT Circular 82, which provides certain specific criteria for determining whether the “de factomanagement body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Further to SAT Circular 82, in 2011, the SATissued the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SATBulletin 45, to provide more guidance on the implementation of SAT Circular 82.According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will beconsidered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise incometax on its worldwide income only if all of the following conditions are met: (i) the senior management and core management departments in chargeof its daily operations function have their presence mainly in the PRC; (ii) its financial and human resources decisions are subject to determinationor approval by persons or bodies in the PRC; (iii) its major assets, accounting books, company seals, and minutes and files of its board of directorsand shareholders’ meetings are located or kept in the PRC; and (iv) more than half of the enterprise’s directors or senior management with votingrights habitually reside in the PRC.Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore-incorporated enterprises controlled by PRC enterprises or PRCenterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’sgeneral position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises,regardless of whether they are controlled by PRC enterprises, individuals or foreigners.We do not believe that we meet all of the conditions under SAT Circular 82. We believe that BEST Inc. and our offshore subsidiariesshould not be treated as a “resident enterprise” for PRC tax purposes if the criteria for “de facto management body” as set forth in SAT Circular 82were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities anduncertainties remain with respect to the interpretation of the term “de facto management body” as applicable to our offshore entities, we may betreated as a resident enterprise for PRC tax purposes under the EIT Law, and we may therefore be subject to PRC income tax on our global income.We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriateorganizational changes to avoid this treatment, to the extent possible. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 86 of 250 Table of Contents79In the event that BEST Inc. or any of our offshore subsidiaries is considered to be a PRC resident enterprise: BEST Inc. or our offshoresubsidiaries, as the case may be, may be subject to the PRC enterprise income tax at the rate of 25% on our worldwide taxable income; dividendincome that BEST Inc. or our offshore subsidiaries, as the case may be, received from our PRC subsidiaries may be exempt from the PRCwithholding tax; and dividends paid to our overseas shareholders or ADS holders who are non-PRC resident enterprises as well as gains realized bysuch shareholders or ADS holders from the transfer of our shares or ADSs may be regarded as PRC-sourced income and as a result be subject toPRC withholding tax at a rate of up to 10%, subject to any reduction or exemption set forth in relevant tax treaties, and similarly, dividends paid toour overseas shareholders or ADS holders who are non-PRC resident individuals, as well as gains realized by such shareholders or ADS holdersfrom the transfer of our shares or ADSs, may be regarded as PRC-sourced income and as a result be subject to PRC withholding tax at a rate of20%, subject to any reduction or exemption set forth in relevant tax treaties. See “Item 3. Key Information—D. Risk Factors—Risks Related toDoing Business in the People’s Republic of China—We may be treated as a resident enterprise for PRC tax purposes under the PRC EnterpriseIncome Tax Law, and we may therefore be subject to PRC income tax on our global income” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in the People’s Republic of China—Dividends payable to our foreign investors and gains on the sale of our ADSsor Class A ordinary shares by our foreign investors may become subject to PRC tax.”On February 3, 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRCResident Enterprises, or Bulletin 7, which was recently amended on December 29, 2017. Pursuant to this Bulletin, an “indirect transfer” of assets,including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be recharacterized and treated as a direct transfer ofPRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding paymentof PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According toBulletin 7, “PRC taxable assets” include assets attributed to an establishment or place of business in China, immovable properties located in China,and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC residententerprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable commercial purpose” of thetransaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshoreenterprise derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct orindirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectlyholding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence ofthe business model and organizational structure; the foreign income tax liabilities arising from the indirect transfer of PRC taxable assets; thereplicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties orsimilar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business, the resulting gain is to beincluded with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subjectto PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or to equityinvestments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRCenterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, andthe party who is obligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, thetransferor shall declare and pay such tax to the tax authority by itself within the statutory time limit. Bulletin 7 does not apply to transactions of saleof shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange. OnOctober 17, 2017, the SAT issued the Bulletin on Issues Concerning the Withholding of Non resident Enterprise Income Tax at Source, or Bulletin37, which, among others, repeals certain rules related to treatment of situations where a payor has failed to timely withhold tax as stipulated inBulletin 7. In particular, Bulletin 37 provides that when a payor as the withholding agent fails to or is unable to perform its withholding duty, on thecondition that the relevant non-PRC resident enterprise voluntarily makes payment before being ordered to do so in a timely manner or within atime limit prescribed by relevant tax authorities, the tax shall be deemed as having been timely paid. The Bulletin 37 further specifies and clarifiestax withholding methods applicable to income of non-PRC resident enterprises. There is uncertainty as to the application of Bulletin 7. Especiallyas Bulletin 7 is lately promulgated, it is not clear how it will be implemented. Bulletin 7 may be determined by the tax authorities to be applicableto our offshore restructuring transactions or sale of our ordinary shares or preferred shares, or those of our offshore subsidiaries where non-residententerprises, being the transferors, were involved. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 87 of 250 Table of Contents80Under the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax to Replace Business Tax, orCircular 36, which was promulgated by the Ministry of Finance and the SAT on March 23, 2016 and became effective on May 1, 2016, entities andindividuals engaging in the sale of services, intangible assets or fixed assets within the territory of the PRC are required to pay value-added tax, orVAT, instead of business tax. According to the Circular 36, our PRC subsidiaries and VIEs are subject to VAT, at a rate of 6% to 17% (13% afterApril 1, 2019, pursuant to the Announcement on Policies for Deepening the VAT Reform promulgated by the Ministry of Finance, the SAT and theGeneral Administration of Customs on March 20, 2019) on proceeds received from customers, and are entitled to a refund for VAT already paid orborne on the goods purchased by it and utilized in the production of goods or provisions of services that have generated the gross sales proceeds.Regulations Relating to Overseas Listing and M&A RulesOn July 6, 2021, the relevant PRC government authorities made public the Opinions on Strictly Cracking Down Illegal SecuritiesActivities in Accordance with the Law, or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securitiesactivities and the supervision on overseas listings by Chinses companies and proposed to take effective measures, such as promoting theconstruction of relevant regulatory systems to deal with the risks and incidents faced by overseas-listed Chinese companies, enhancing cross-borderregulatory cooperation, improving relevant regulations to specify responsibilities of overseas-listed Chinese companies with respect to data securityand information security, etc.There are substantial uncertainties with respect to the interpretation and implementation of the Opinions. Furthermore, on December 24,2021, the China Securities Regulatory Commission, or the CSRC, released Provisions of the State Council on the Administration of OverseasSecurities Offering and Listing by Domestic Enterprises (Draft for Comments) and the Administrative Measures for the Filing of OverseasSecurities Offering and Listing by Domestic Enterprises (Draft for Comments), which are open for public comments. On February 17, 2023, theCSRC officially adopted the Trial Measures for the Administration of Overseas Securities Offering and Listing by Domestic Enterprises andcorresponding guidelines (the “Trail Measures”), which took effect on March 31, 2023, together with the Circular on Administrative Arrangementsfor the Filing of Overseas Offering and Listing by Domestic Enterprises (the “Circular on Administrative Arrangements for the Filing”) released onFebruary 17, 2023.The Trail Measures and the Circular on Administrative Arrangements for the Filing lay out a new filing-based regime to regulate overseasofferings and listings by domestic enterprises. According to the Trail Measures and the Circular on Administrative Arrangements for the Filing, anoverseas offering and listing by a domestic enterprise, whether directly or indirectly, shall be filed with the CSRC. To clarify, the Circular onAdministrative Arrangements for the Filing stipulated that domestic enterprises which have obtained the approval of the application for indirectoverseas offering and listing by overseas regulators or overseas stock exchanges before the implementation of the Trail Measures and havecompleted the overseas listing before September 30, 2023 are defined as “stock enterprises”. Pursuant to the Circular on AdministrativeArrangements for the Filing Stock enterprises, “stock enterprises” are not required to file with the CSRC immediately for its prior offerings butshall fulfill their filing obligations and report relevant information to the CSRC, as the case may be, for its follow-on offering and other equivalentoffering activities in overseas markets within three business days after conducting such follow-on offering activities. The Trail Measures also list anumber of circumstances where overseas offering is prohibited, including where (i) the offering is prohibited by PRC laws, (ii) the offering mayendanger national security, (iii) in the recent three years, the company’s Chinese operating entities and their controlling shareholders and actualcontrollers have committed certain criminal offenses, (iv) the company’s Chinese operating entities are currently under investigations for suspicionof criminal offenses or major violations, or (v) there are major disputes over ownership of the issuer’s equity held by the controlling shareholders orthe shareholders controlled by the controlling shareholders or the actual controllers. According to the Trail Measures, if we fail to comply with thefiling obligations with the CSRC for any of our follow-on offerings or fall within any of the above circumstances where our follow-on offering isprohibited, our follow-on offering application, if any, may be discontinued and we may be subject to fines, sanctions and penalties on the relevantdomestic enterprises. In severe circumstances, we may be ordered to suspend our businesses and our business licenses and operation permits maybe revoked. Furthermore, the controlling shareholder, actual controllers, and other responsible persons may be warned or fined either individuallyor collectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 88 of 250 Table of Contents81On February 24, 2023, the CSRC, together with certain other PRC governmental authorities, issued the Provisions on StrengtheningConfidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Enterprises, or the Revised Confidentialityand Archives Administration Provisions, to revise the currently effective Provisions on Strengthening Confidentiality and Archives Administrationof Overseas Securities Offering and Listing. The new regulation took effect on March 31, 2023. According to the Revised Confidentiality andArchives Administration Provisions, Chinese companies, which include both PRC-incorporated joint-stock companies that offer and list securitiesdirectly in overseas markets and the PRC operating entities of companies indirectly listed in overseas markets, shall strictly abide by the relevantlaws and regulations on confidentiality when providing or publicly disclosing, either directly or through their overseas listed entities, documentsand materials to domestic and overseas securities companies, securities services providers and overseas regulators in the process of their overseasoffering and listing. In the event such documents or materials contain state secrets or government work secrets, the Chinese companies shall firstobtain approval from competent authorities with the power of examination and approval according to law, and file with the secrecy administrativedepartment at the same level; in the event that such documents or materials, if divulged, will jeopardize national security or public interest, theChinese companies shall strictly fulfill relevant procedures stipulated by applicable national regulations. The Chinese companies shall also providea written statement of the specific state secrets and sensitive information provided when providing documents and materials to securities companiesand securities service providers, and the securities companies and securities service providers shall properly retain such written statements forinspection. Since the Revised Confidentiality and Archives Administration Provisions have just been released recently, their interpretation andimplementation remain substantially uncertain.The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, issued by six PRCgovernmental and regulatory agencies, including the MOFCOM and the CSRC, on August 8, 2006 and amended on June 22, 2009, require that anSPV formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC in theevent that the SPV acquires equity interests in the PRC companies in exchange for the shares of offshore companies.The application of the M&A Rules remains unclear. Our PRC counsel, King & Wood Mallesons, has advised us that, under current PRClaws, rules and regulations and the M&A Rules, prior approval from the CSRC is not required under the M&A Rules for our initial public offeringbecause (i) our PRC subsidiaries were incorporated as foreign-invested enterprises by means of foreign direct investments at the time of theirincorporation, and (ii) we did not acquire any equity interests or assets of a PRC company owned by its controlling shareholders or beneficialowners who are PRC companies or individuals, as such terms are defined under the M&A Rules. However, as there has been no officialinterpretation or clarification of the M&A Rules, there is uncertainty as to how these rules will be implemented in practice. See “Item 3. KeyInformation—D. Risk Factors—Risks Related to Doing Business in the People’s Republic of China—Certain PRC regulations establish morecomplex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.”C.Organizational StructurePlease refer to “Item 4. Information on the Company—Our Corporate Structure” for our corporate structure diagram and “Item 4.Information on the Company—Variable Interest Entity Contractual Arrangements” for a discussion of the VIE contractual arrangements.Subsidiaries of BEST Inc.An exhibit containing a list of our significant subsidiaries has been filed with this annual report.D.Property, Plants and EquipmentPlease refer to “B. Business Overview—Properties” for a discussion of our property, plants and equipment. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 89 of 250 Table of Contents82ITEM 4A.UNRESOLVED STAFF COMMENTSNone.ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSUnless otherwise stated, the discussion and analysis of our financial condition and results of operation in this section apply to our financialinformation as prepared according to U.S. GAAP. You should read the following discussion and analysis of our financial condition and operatingresults in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. The followingdiscussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and thetiming of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, includingthose set forth under “Item 3. Key Information—D. Risk Factors.”In December 2021, we completed the sale of BEST Express, our express delivery business in China. As a result, our China expressbusiness has been deconsolidated from our company, and its historical financial results are reflected in our consolidated financial statements asdiscontinued operations. Unless otherwise stated, the results presented in this annual report do not include the results of BEST Express.A.Operating ResultsOverviewOur Chairman and Chief Executive Officer, Mr. Shao-Ning Johnny Chou, founded BEST in 2007, in the belief that technology andbusiness model innovation can disrupt and transform the inefficient logistics and supply chain industry in China. We are focused on maximizinglong-term value propositions to businesses and consumers in our ecosystem through comprehensive integrated services and enhanced experiencesdriven by technology and service quality. Our multi-sided platform combines technology, integrated logistics and supply chain services, last-mileservices and value-added services. We believe we are well positioned to transform the logistics and supply chain industry in China and capturegrowth opportunities in the New Retail era.Our total revenue from continuing operations increased from RMB10,528.2 million in 2020 to RMB11,425.8 million in 2021, anddecreased by 32.2% to RMB7,744.1 million (US$1,122.8 million) in 2022. We had net losses from continuing operations of RMB1,028.4 million,RMB1,263.9 million and RMB1,464.8 million (US$212.4 million) in 2020, 2021 and 2022, respectively. Our gross margin for continuingoperations decreased from 2.3% in 2020 to negative 1.7% in 2021, and further decreased to negative 3.4% in 2022.Our Business PhilosophyOur brand name in Chinese, “百世”means hundreds of generations. Our business philosophy is to build and invest for the long-term. Sinceinception, we have focused on building a platform to meet evolving market demands with Smart Supply Chain solutions. We are committed tocontinuing investment in and enhancement of our platform, which we believe will generate long-term benefits.Platform Infrastructure. We have invested in and established our proprietary technology infrastructure, which is the backbone of theintegrated solutions we offer, as well as our integrated supply chain service network, which has significant scale and density. With the platforminfrastructure in place, we expect to continue to reap the benefits of our investments. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 90 of 250 Table of Contents83Comprehensive Solutions. Leveraging our platform, we have successfully launched multiple services, which allow customers to enjoycomprehensive solutions from a single source. We believe this gives us a strong competitive advantage, especially over monoline service providers.Our platform also allows us to introduce additional innovative solutions and services, capture more cross-selling opportunities and generate strongnetwork effects, driving further growth.Operating Leverage. Our business enjoys significant operating leverage, and as our business continues to expand, we expect to enjoygreater economies of scale. In addition, we will leverage our technology and synergies across our different services to increase operationalefficiency.Asset-Light Business Model. Our business model allows us to scale quickly while optimizing our levels of capital investment andenables us to maintain effective control over our network and service quality that will cultivate customer stickiness. See also “Business—OurCompetitive Strengths—Flexible asset-light business model for control and scale” and “Business—Asset-Light Business Model.”Guided by our business philosophy, we believe our platform will enable us to continue driving growth, increasing operating leverage andgenerating long-term value to our ecosystem participants and our shareholders.Our Scale and GrowthWe have achieved significant scale and growth in our business. The following table illustrates the growth in key operating metrics of ourmajor service lines:For the three months endedMar. 31,Jun. 30,Sep. 30,Dec. 31,Mar. 31,Jun. 30,Sep. 30,Dec. 31,Mar. 31,Jun. 30,Sep. 30,Dec. 31,202020202020202020212021202120212022202220222022BEST Supply Chain Management Number of orders fulfilled by self-operated CloudOFCs (in thousands) (1) 43,159 57,677 48,686 69,031 47,981 47,349 35,662 48,933 33,291 35,040 29,418 35,938Number of orders fulfilled by franchised CloudOFCs (in thousands) 40,436 53,654 53,485 67,095 52,804 73,121 67,975 74,376 54,056 58,920 58,870 68,141BEST Freight Freight volume (tonnage in thousands) (1) 1,074 2,230 2,464 2,623 1,945 2,438 2,427 2,408 1,683 2,223 2,527 2,226Note:(1)Includes services performed for external customers both directly and indirectly through our other segments. For discussion of our totalsegment revenue, which includes both external revenue and intersegment revenue, please see “—Segment Financial Information.”Selected Operating DataThe table below sets forth the selected operating data for the periods indicated:For the year ended December 31, 2020 2021 2022BEST Supply Chain ManagementNumber of orders fulfilled by self-operated Cloud OFCs (in thousands)(1) 218,554 179,925 133,686Number of orders fulfilled by franchised Cloud OFCs (in thousands) 214,670 268,276 239,987BEST FreightFreight volume (tonnage in thousands)(1) 8,392 9,218 8,659Note:(1)Includes services performed for external customers both directly and indirectly through our other segments. For discussion of our totalsegment revenue, which includes both external revenue and intersegment revenue, please see “—A. Operating Results—Segment FinancialInformation.”Key Factors Affecting Our Results of OperationsWe believe that our results of operations are directly affected by the following key factors. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 91 of 250 Table of Contents84Macroeconomic Trends and Consumption in Our MarketsOur results of operations and financial condition are affected by the general factors driving the economies, the retail industries, andlogistics and supply chain markets of China and other countries and regions in which we operate our business. These factors include levels of percapita disposable income, levels of consumer spending, rate of Internet and mobile penetration, and other general economic conditions in Chinaand our other markets that affect consumption and business activities in general. Our results of operations are also affected by seasonal patterns.For example, the fourth quarter has historically been our strongest quarter by volume, led by the Singles’ Day and December 12 promotion periods.As our customers reduce activity in connection with Chinese holidays, such as Chinese New Year, the first quarter historically has been a lowvolume quarter.In particular, we anticipate additional growth from the trend toward a New Retail paradigm, which is the seamless integration of onlineand offline retail enabled by Smart Supply Chain. The emergence of New Retail and transformation of the logistics and supply chain industry affectthe demand for our services and our business opportunities.Competitive LandscapeWe are able to provide comprehensive, integrated supply chain solutions leveraging our technology infrastructure and supply chain servicenetwork, which differentiates us from monoline service providers. Our ability to strengthen our market position as a leading comprehensive supplychain solution provider and offer innovative services in the New Retail era will continue to affect our results of operations.Each of our service lines is also subject to trends specific to such services, including market demand and competitive landscape.Therefore, we also compete with companies providing similar services, especially with respect to more standard services such as freight services.This will affect the pricing of our services, our ability to acquire customers for such services and our results of operation.Service OfferingsWe provide a variety of services to meet the needs of our customers. We plan to continue leveraging technology and business modelinnovation to expand and enhance our service offerings.Each of our service offerings may have different revenue sources, cost structures and customer bases and may face different marketconditions. Therefore, the ability to adjust our service offerings to adapt to changing market conditions may impact our results of operations.Our consolidated results of operations may also be affected by the timing of the launch of new service offerings. We may incur start-upcosts in the early stages. A certain amount of time may be needed to ramp up operations. The timing and trend in revenue growth and profitabilityof new services may vary over time.Our ability to cross-sell various service offerings to existing and new customers will also affect our results of operations.Operating Leverage and EfficiencyOur ability to control costs, increase operating efficiencies and scale our business effectively may affect our results of operations.Costs to operate our businesses, including transportation, labor, lease and other costs are subject to factors such as fluctuations in fuelprices, increases in wage rates and leasing costs, among other things. These factors will affect our ability to control costs.Our results of operations are also affected by our ability to (i) utilize latest technology to improve efficiencies across our business and datainsights to drive optimization in our services, and (ii) take full advantage of our asset-light business model to expand our business operations in acost-effective manner, leverage the resources and operating capabilities of our franchisee partners and transportation service providers, anddynamically adjust our network design and capacity. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 92 of 250 Table of Contents85The growth of our business and expansion of our market share will impact our ability to benefit from economies of scale, includingoptimization of our supply chain service network, reduction of unit costs and the strengthening of our bargaining power with suppliers and serviceproviders.Technology and TalentWe have made investments in developing our proprietary technology infrastructure. We believe the further enhancement of our technologyinfrastructure is important to our future performance. We expect to continue to make investments for development and implementation of newtechnologies. We will continue to hire, train and retain our talent to reinforce our culture of innovation. We have in the past granted and will in thefuture grant share-based awards to incentivize and retain talent.Strategic Acquisitions and InvestmentsWe may selectively pursue acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary toour operations and technology. These acquisitions, investments, joint ventures and partnerships may affect our results of operations.Components of Results of OperationsRevenueThe following table sets forth our revenue from different service lines and as a percentage of our total revenue for the periods indicated:For the year ended December 31, 202020212022 % of % of % of RMBRevenueRMBRevenueRMBUS$Revenue (in thousands)Revenue:Freight 7,695,749 73.0% 8,244,435 72.2% 4,888,278 708,734 63.2%Supply chain management 1,912,323 18.2% 1,815,104 15.9% 1,822,075 264,176 23.5%Global 777,656 7.4% 1,193,855 10.4% 916,907 132,939 11.8%Others(1) 142,506 1.4% 172,442 1.5% 116,812 16,936 1.5%Total revenue(2) 10,528,234 100% 11,425,836 100% 7,744,072 1,122,785 100%Note:(1)“Others” Segment primarily represents Capital business units. Results from UCargo’s legacy contracts with external customers are nowreported under “Freight” segment and prior period segment information were retrospectively revised to conform to current period presentation.(2)Revenue in the table above represents revenue from external customers.FreightWe have historically derived most of our freight service revenue from franchisee partners which operate substantially all of the servicestations in our freight network, with a small amount derived from our direct customers for whom we provide door-to-door freight services. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 93 of 250 Table of Contents86Starting in 2017, in order to enhance the freight delivery experience and our control over service quality throughout our network, werevised our arrangements with franchisee partners and the scope of our service. As a result, we became the principal that is directly responsible forlast-mile delivery of all goods processed through our network, and we are liable to senders for damage to or loss of goods in connection with last-mile delivery. Therefore, in consideration of such expanded scope of services and increased responsibilities, we increased the fee that we charge topick-up service stations. We provide the last-mile delivery service through destination franchised service stations under our supervision and areresponsible for paying service fees to such destination franchised service stations for the provision of last-mile delivery services, which arerecorded in our cost of revenue. We also generate freight service revenue from value-added services such as pre-shipment inspection, cargoinsurance, COD facilitation, evidence of delivery, upstairs delivery and installation services.Our freight service revenue is primarily driven by our freight volume and the fees we collect from our franchisee partners. We determineand periodically evaluate and adjust our fee levels based on prevailing market conditions, our operating costs and service quality.Since January 1, 2022, UCargo’s operations and financial results have been consolidated with Freight. We generate BEST UCargo revenueprimarily from operating our truckload capacity brokerage platform, which provides truckload capacity sourcing solutions via real-time bidding totransportation service providers and customers. The revenue is primarily comprised of transportation fee collected from customers according to thedistance and weight for their shipment needs from origin to destination.For the years ended December 31, 2020, 2021 and 2022, the revenue recognized from UCargo service was RMB2,519,919,RMB2,809,081, and RMB35,979 (US$5,216), respectively. Prior year’s comparative figures related to UCargo services revenue under “Revenue -Others” for the years ended December 31, 2020 and 2021 have been reclassified to “Revenue - Freight delivery” to conform to the current year’spresentation.’Supply Chain ManagementWe generate supply chain management service revenue primarily from order fulfillment services and transportation services. Our orderfulfillment service revenue is mainly generated from service fees paid by our customers for order fulfillment services offered through our self-operated Cloud OFCs. We also generate a small amount of order fulfillment service revenue from service system usage fee for each orderprocessed through our network and other fees charged to franchisee partners operating Cloud OFCs.Order fulfillment service revenue of our self-operated Cloud OFCs is generated from various service fees charged on a volume basis inconnection with various order fulfillment services, which include warehouse management, in-warehouse processing, order fulfillment,transportation services and value-added services. Transportation from our self-operated Cloud OFCs is included in order fulfillment servicerevenue.Transportation service revenue is generated from transportation of goods to and from locations designated by our customers, such as theirfactories, warehouses, distributors, stores, end-customers or consumers, including to our Cloud OFCs.Our supply chain management service revenue is primarily driven by the number of orders fulfilled, the volume of the goods we processand the fees we negotiate with our customers. The fees we charge primarily depend on the scope of services they require, their size and scale, andthe estimated amount of business volume.GlobalWe generate BEST Global revenue primarily from international logistics services provided in multiple countries and regions across NorthAmerica, Europe and Asia, such as cross-border logistic coordination service and local express delivery services outside China. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 94 of 250 Table of Contents87OthersOthers mainly represent SaaS software business and Capital business we provided to customers.For SaaS software business, we serve as a proprietary technology platform to provide solution services to the ecosystem participants. We are the principal to the transaction for these services and revenue from these transactions is recognized on a gross basis. For Capital business, we generate BEST Capital revenue primarily from providing tailored financing solutions to our ecosystemparticipants, such as fleet and equipment financing lease service and factoring service. The fee we charge our customers is based on the financingamount and interest rate in the respective financing periods.Cost of RevenueOur cost of revenue primarily consists of costs of transportation, labor, lease and materials, operating costs for hubs and sortation centers,depreciation and other costs. The following table presents our costs of revenue by service lines for the periods indicated:For the year ended December 31,202020212022RMBRMBRMBUS$(in thousands)Cost of revenue Freight 7,537,093 8,506,738 5,114,937 741,596Supply chain management 1,846,901 1,741,832 1,711,818 248,190Global 875,733 1,258,511 1,081,587 156,815Others 26,225 118,143 99,288 14,395Total cost of revenue 10,285,952 11,625,224 8,007,630 1,160,996FreightCost of revenue for our freight services mainly consists of (i) transportation costs paid to third-party service providers operating the routesin our network mainly connecting our hubs and sortation centers, (ii) labor costs for our hub and sortation center operations, including costs paid tooutsourced workers, (iii) lease costs for our hubs and sortation centers and self-operated service stations, and (iv) starting from January 1, 2017,costs related to last-mile delivery services. Starting in 2017, in order to enhance the freight delivery experience and our control over service qualitythroughout our network, we revised our arrangements with franchisee partners and the scope of our service to provide that we are directlyresponsible for last-mile delivery services. Other cost of revenue for freight services includes costs for materials, depreciation of property andequipment, and utility and maintenance payments related to our operations.Cost of revenue for our freight services is comprised of fixed costs, such as lease costs, other facility costs and equipment costs, as well asvariable costs, such as outsourced labor costs and materials used in our operations. As operational scale increases over time, we will generally beable to reduce unit fixed costs. Transportation costs are variable in nature but we are able to enjoy scale benefits by increasing capacity utilizationof fleet for our core routes connecting our hubs and sortation centers and by employing larger vehicles to satisfy greater delivery volumes to drivelower unit transportation costs.Supply Chain ManagementCost of revenue for our supply chain management services primarily consists of costs associated with our self-operated Cloud OFCs andtransportation costs paid to transportation service providers. Costs associated with our self-operated Cloud OFCs primarily include labor costs,lease costs, equipment depreciation, costs of materials, such as for labeling and packing, utility and maintenance payments. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 95 of 250 Table of Contents88Some of these costs are relatively fixed in nature, such as lease and equipment costs. Other costs are more variable in nature, such astransportation, outsourced labor and materials costs. The launch of new self-operated Cloud OFCs or new projects will generally incur start-upcosts in the early stages and requires time to ramp-up business volume. As operational scale increases over time, we will generally be able toreduce unit fixed costs.GlobalCost of revenue for our BEST Global services generally corresponds to the cost components of our express delivery services when weprovide express service in Southeast Asia. For the cross-border logistic coordination service, cost of revenue mainly consists of the transportationcost paid to third-party service providers.Operating ExpensesOur operating expenses consist of selling expenses, general and administrative expenses, and research and development expenses. Thefollowing table sets forth a breakdown of our operating expenses for the periods indicated:For the year ended December 31,202020212022RMBRMBRMBUS$(in thousands)Selling expenses 235,419 260,219 237,918 34,495General and administrative expenses 867,517 881,498 889,345 128,943Research and development expenses 136,065 180,204 144,181 20,904Other operating income, net (24,777) (58,337) (108,817) (15,777)Total operating expenses 1,214,224 1,263,584 1,162,627 168,565Selling ExpensesOur selling expenses primarily consist of (i) salaries and benefit expenses for our network management personnel responsible formanaging relationships with our franchisee partners, our customer service personnel and other sales and marketing personnel, and (ii) travel,marketing and advertising expenses. Our selling expenses are expected to decrease due to the implementation of strategic refocusing plan andeffective cost control measurement.General and Administrative ExpensesOur general and administrative expenses consist primarily of salaries and benefit expenses for management and administrative personnel,depreciation and amortization expenses, office expenses, travel expenses, legal, accounting and other professional fees, accrued provision oncertain trade receivables and losses on disposal of fixed assets. We expect general and administrative expenses to decrease as we continue toimplement strategic refocusing plan and improve the efficiency to control expenses.Research and Development ExpensesResearch and development expenses consist primarily of salaries and benefits for our research and development personnel anddepreciation of property and equipment. We expect research and development expenses to decrease in the future due to the implemention ofstrategic refocusing plan and effective cost control measurement.Other operating income, netOther operating income consist primarily of government subsidy and tax refund arise from normal operating business.Share-Based CompensationWe account for share options granted to our employees, directors and consultants in accordance with ASC 718 prior to 2018 and ASU2018-07: “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” starting in 2018.We are required to classify share options and restricted share units granted to our employees, directors and consultants as equity awards andrecognize share-based compensation expense based on the fair value of such equity awards with the share-based compensation expense recognizedover the period in which the recipient is required to provide service in exchange for the equity awards. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 96 of 250 Table of Contents89You may find additional information on our share incentive plans as well as our options granted as of the date of this annual report in thesection entitled “Management—Share Incentive Plans.”Results of OperationsThe following table sets forth our consolidated statements of loss data for the years indicated. This information should be read togetherwith our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are notnecessarily indicative of the results you may expect for future periods.For the year ended December 31, 202020212022RMBRMBRMBUS$(in thousands)Revenue Freight 7,695,749 8,244,435 4,888,278 708,734Supply chain management 1,912,323 1,815,104 1,822,075 264,176Global 777,656 1,193,855 916,907 132,939Others 142,506 172,442 116,812 16,936Total revenue 10,528,234 11,425,836 7,744,072 1,122,785Cost of revenue Freight (7,537,093) (8,506,738) (5,114,937) (741,596)Supply chain management (1,846,901) (1,741,832) (1,711,818) (248,190)Global (875,733) (1,258,511) (1,081,587) (156,815)Others (26,225) (118,143) (99,288) (14,395)Total cost of revenue (10,285,952) (11,625,224) (8,007,630) (1,160,996)Gross profit/(loss) 242,282 (199,388) (263,558) (38,211)Selling expenses (235,419) (260,219) (237,918) (34,495)General and administrative expenses (867,517) (881,498) (889,345) (128,943)Research and development expenses (136,065) (180,204) (144,181) (20,904)Other operating income, net 24,777 58,337 108,817 15,777Loss from operations (971,942) (1,462,972) (1,426,185) (206,776)Interest income 55,527 49,658 80,361 11,651Interest expense (119,177) (142,751) (89,058) (12,912)Foreign exchange (loss)/gain (8,243) 44,556 (132,730) (19,244)Other income, net 33,134 265,822 31,677 4,593(Loss)/Gain on changes in the fair value of derivative assets/liabilities — (14,918) 71,619 10,384Loss before income tax and share of net loss of equity investees (1,010,701) (1,260,605) (1,464,316) (212,304)Income tax expense (17,553) (3,198) (511) (74)Loss before share of net loss of equity investees (1,028,254) (1,263,803) (1,464,827) (212,378)Share of net loss of equity investees (180) (58) — —Net loss from continuing operations (1,028,434) (1,263,861) (1,464,827) (212,378)Net (loss)/income from discontinued operations (1,022,790) 1,473,489 (38,464) (5,577)Net (loss)/income (2,051,224) 209,628 (1,503,291) (217,955)Net loss from continuing operations attributable to non-controlling interests (25,716) (52,279) (39,980) (5,797)Net (loss)/income attributable to BEST Inc. (2,025,508) 261,907 (1,463,311) (212,158) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 97 of 250 Table of Contents90Non-GAAP MeasuresWe use EBITDA and adjusted EBITDA, non-GAAP financial measures, in the evaluation of our operating results and in our financial andoperational decision-making. We believe that EBITDA and adjusted EBITDA help us to identify underlying trends in our business that couldotherwise be distorted by the effect of certain expenses and income that we include in net loss. We believe that EBITDA and adjusted EBITDAprovide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allowfor greater visibility with respect to key metrics used by our management in its financial and operational decision-making.EBITDA and adjusted EBITDA should not be considered in isolation or construed as an alternative to net loss or any other measure ofperformance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to themost directly comparable GAAP measures. EBITDA and adjusted EBITDA presented here may not be comparable to similarly titled measurespresented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparativemeasures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financialmeasure.EBITDA represents net loss plus depreciation, amortization, interest expense and income tax expense and minus interest income.Adjusted EBITDA represents EBITDA before share-based compensation expenses and fair value change of equity investments, if any.The table below sets forth a reconciliation of our net loss to EBITDA and adjusted EBITDA for the periods indicated:For the year ended December 31,202020212022 RMB RMB RMB US$(in thousands)Net loss from continuing operations (1,028,434) (1,263,861) (1,464,827) (212,378)Add: Depreciation and amortization 157,495 191,365 189,387 27,459Interest expense 119,177 142,751 89,058 12,912Income tax expense 17,553 3,198 511 74Subtract: Interest income (55,527) (49,658) (80,361) (11,651)EBITDA from continuing operations (789,736) (976,205) (1,266,232) (183,584)Add Share-based compensation expenses 115,463 107,681 72,096 10,453Subtract: Fair value change of equity investments (18,687) (58,643) 12,312 1,785Adjusted EBITDA from continuing operations (692,960) (927,167) (1,181,824) (171,346)Year-over-Year Comparisons of Results of OperationsThe results presented below exclude discontinued operations related to each of BEST Store+ and BEST Express.Year Ended December 31, 2022 Compared to Year Ended December 31, 2021RevenueOur revenue decreased by 32.2% to RMB7,744.1 million (US$1,122.8 million) in 2022 from RMB11,425.8 million in 2021 primarily dueto the wind-down of the BEST UCargo business and decreased volume in Freight and Global. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 98 of 250 Table of Contents91Freight. Our freight service revenue decreased by 40.7% to RMB4,888.3 million (US$708.7 million) in 2022 from RMB8,244.4 million in2021. This decrease in revenue was primarily due to the wind-down of the BEST UCargo business and 6.1% decrease in freight volume.Supply Chain Management. Our supply chain management service revenue increased by 0.4% to RMB1,822.1 million (US$264.2 million)in 2022 from RMB1,815.1 million in 2021. Such increase was primarily due to newly signed customers with high unit economics followingdiscontinuation of certain low margin legacy accounts, as well as improved service capability.Global. Revenue from our BEST Global services decreased by 23.2% to RMB916.9 million (US$132.9 million) in 2022 fromRMB1,193.9 million in 2021, primarily due to decreased parcel volumes in Southeast Asia.Others. Revenue from our others services decreased by 32.3% to RMB116.8 million (US$16.9 million) in 2022 from RMB172.4 millionin 2021, primarily due to the decreased volume of financing amount provided to ecosystem customers.Cost of RevenueOur cost of revenue decreased by 31.1% to RMB8,007.6 million (US$1,161.0 million) in 2022 from RMB11,625.2 million in 2021. Thedecrease was primarily attributable to decrease in cost of revenue in our Freight, Global and Others service, as discussed below. Cost of revenue asa percentage of revenue increased to 103.4% in 2022 from 101.7% in 2021, which was primarily due to lower parcel volume from BEST Globalbusiness.Freight. Cost of revenue for our freight services decreased by 39.9% to RMB5,114.9 million (US$741.6 million) in 2022 fromRMB8,506.7 million in 2021. This decrease in cost of revenue was primarily attributable to the wind-down of the BEST UCargo business anddecreased freight volume, which decreased by 6.1% to 8.7 million tonnes from 9.2 million tonnes in 2021. Cost of revenue as a percentage ofrevenue from our freight services increased to 104.6% in 2022 from 103.2% in 2021, primarily due to lower volume in Freight business.Supply Chain Management. Cost of revenue for our supply chain management services decreased by 1.7% to RMB1,711.8 million(US$248.2 million) in 2022 from RMB1,741.8 million in 2021. Cost of revenue as a percentage of revenue from our supply chain managementservices decreased to 93.9% in 2022 from 96.0% in 2021, primarily due to effective cost control measures and customer structure optimization.Global. Cost of revenue for our BEST Global services decreased by 14.1% to RMB1,081.6 million (US$156.8 million) in 2022 fromRMB1,258.5 million in 2021 primarily due to decreased parcel volume in Southeast Asia.Others. Cost of revenue for our others services decreased by 16.0% to RMB99.3 million (US$14.4 million) in 2022 from RMB118.1million in 2021. Cost of revenue as a percentage of revenue increased to 85.0% in 2022 from 68.5% in 2021, primarily due to decreased volume offinancing amount provided to ecosystem customers.Operating ExpensesOperating expenses decreased by 8.0% to RMB1,162.6 million (US$168.6 million) in 2022 from RMB1,263.6 million in 2021. Operatingexpenses as a percentage of our total revenue increased to 15.0% in 2022 from 11.1% in 2021.Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by 1.3% to RMB1,127.3 million(US$163.4 million) in 2022 from RMB1,141.7 million in 2021. This decrease was primarily attributable to reduced employee headcount.Research and Development Expenses. Research and development expenses decreased by 20.0% to RMB144.2 million (US$20.9 million)in 2022 from RMB180.2 million in 2021. This decrease was primarily due to reduced employee headcount.Other operating income, net. Other operating income increased to RMB108.8 million (US$15.8 million) in 2022 from RMB58.3 millionin 2021, primarily due to the increase of government subsidies. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 99 of 250 Table of Contents92Interest IncomeOur interest income increased by 61.8% to RMB80.4 million (US$11.7 million) in 2022 from RMB49.7 million in 2021, primarily due tothe changes in average short-term investments balance during 2022 compared with 2021.Interest ExpenseOur interest expenses decreased by 37.6% to RMB89.1 million (US$12.9 million) in 2022 from RMB142.8 million in 2021, primarily a result of decreased bank loan in 2022 compared with 2021, as well as the repurchase of US$199,989 (equivalent to RMB1,379,364) aggregate principal amount of the 2024 Convertible Notes issued in September 2019.Foreign Exchange (Loss)/GainWe recorded a foreign exchange loss of RMB132.7 million (US$19.2 million) in 2022 as compared to exchange income of RMB44.6million in 2021, which mainly reflected the fluctuation in exchange rates between Renminbi and U.S. dollars during the respective years.Other Income, netOther income, net decreased to RMB31.7 million (US$4.6 million) in 2022 from RMB265.8 million in 2021, primarily due to the realizedgain of selling our certain equity investments of RMB 241.6 million in 2021.(Loss)/Gain on changes in the fair value of derivative assets/liabilitiesWe recorded a gain on changes in the fair value of derivative assets/liabilities of RMB71.6 million (US$10.4 million) in 2022 as comparedto loss of RMB14.9 million in 2021, which mainly reflected the fluctuation in exchange rates between Renminbi and U.S. dollars during therespective years.Income Tax ExpenseIncome tax expense decreased to RMB0.5 million (US$0.1 million) in 2022 from RMB3.2 million in 2021, reflecting decreased taxableincome from certain of our PRC subsidiaries.Net Loss from continuing operationsAs a result of the foregoing, net loss from continuing operations increased to RMB1,464.8 million (US$212.4 million) in 2022 from netloss from continuing operations of RMB1,263.9 million in 2021.Net (Loss)/IncomeNet Loss was RMB1,503.3 million (US$218.0 million) in 2022, compared to net income of RMB209.6 million in 2021. The decrease wasprimarily due to the gain related to the sale of our China express business in 2021.Year Ended December 31, 2021 Compared to Year Ended December 31, 2020RevenueOur revenue increased by 8.5% to RMB11,425.8 million in 2021 from RMB10,528.2 million in 2020 primarily due to increased volume inFreight and Global, partially offset by a decrease in Freight average selling price.Freight. Our freight service revenue increased by 7.1% to RMB8,244.4 million in 2021 from RMB7,695.7 million in 2020. This increasein revenue was primarily due to 9.8% increase in freight volume, partially offset by a 4.2% decrease in ASP per tonne. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 100 of 250 Table of Contents93Supply Chain Management. Our supply chain management service revenue decreased by 5.1% to RMB1,815.1 million in 2021 fromRMB1,912.3 million in 2020. Such decrease was primarily due to discontinuation of certain legacy key account customers, partially offset by a3.5% increase in the total number of orders fulfilled by Cloud OFCsGlobal. Revenue from our BEST Global services increased by 53.5% to RMB1,193.9 million in 2021 from RMB777.7 million in 2020,primarily due to strong growth in parcel volumes in Southeast Asia.Others. Revenue from our others services increased by 21.0% to RMB172.4 million in 2021 from RMB142.5 million in 2020.Cost of RevenueOur cost of revenue increased by 13.0% to RMB11,625.2 million in 2021 from RMB10,286.0 million in 2020. The increase was primarilyattributable to increase in cost of revenue in our Freight, Global and Others service, as discussed below. Cost of revenue as a percentage of revenueincreased to 101.7% in 2021 from 97.7% in 2020, which was primarily due to attributable to additional costs resulting from higher oil price andlabor costs.Freight. Cost of revenue for our freight services increased by 12.9% to RMB8,506.7 million in 2021 from RMB7,537.1 million in 2020.This increase in cost of revenue was primarily attributable to increased freight volume, which increased by 9.8% to 9.2 million tonnes from 8.4million tonnes in 2020, partially offset by a decrease in unit cost per tonne. Cost of revenue as a percentage of revenue from our freight servicesincreased to 103.2% in 2021 from 97.9% in 2020, primarily due to a decrease in ASP that outpaced reduction in unit cost in Freight business.Supply Chain Management. Cost of revenue for our supply chain management services decreased by 5.7% to RMB1,741.8 million in 2021from RMB1,846.9 million in 2020. This decrease in cost of revenue generally in line with the decrease of revenue. Cost of revenue as a percentageof revenue from our supply chain management services decreased to 96.0% in 2021 from 96.6% in 2020, primarily due to the operationimprovement after the discontinuation of certain legacy key account customers.Global. Cost of revenue for our BEST Global services increased by 43.7% to RMB1,258.5 million in 2021 from RMB875.7 million in2020 primarily due to BEST Global’s expanded operations in Southeast Asia.Others. Cost of revenue for our others services increased by 350.5% to RMB118.1 million in 2021 from RMB26.2 million in 2020. Costof revenue as a percentage of revenue increased to 68.5% in 2021 from 18.4% in 2020, primarily due to decreased volume of financing amountprovided to ecosystem customers.Operating ExpensesOperating expenses increased by 4.1% to RMB1,263.6 million in 2021 from RMB1,214.2 million in 2020. Operating expenses as apercentage of our total revenue decreased slightly to 11.1% in 2021 from 11.5% in 2020.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by 3.5% to RMB 1,141.7 million in2021 from RMB1,102.9 million in 2020. This increase was primarily attributable to increased staff related expenditure to support the businessespecially in Southeast Asia.Research and Development Expenses. Research and development expenses increased by 32.4% to RMB180.2 million in 2021 fromRMB136.1 million in 2020. This increase was primarily due to expenses to support BEST Global’s business expansion in Southeast Asia.Other operating income, net. Other operating income increased to RMB58.3 million in 2021 from RMB24.8 million in 2020, primarilydue to the increase of government subsidies.Interest IncomeOur interest income decreased by 10.6% to RMB49.7 million in 2021 from RMB55.5 million in 2020, primarily due to the changes inaverage short-term investments balance during 2021 compared with 2020. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 101 of 250 Table of Contents94Interest ExpenseOur interest expenses increased by 19.8% to RMB142.8 million in 2021 from RMB119.2 million in 2020, primarily a result of the interestincurred due to the issuances of convertible senior notes June 2020.Foreign Exchange (Loss)/GainWe recorded a foreign exchange income of RMB 44.6 million in 2021 as compared to exchange loss of RMB8.2 million in 2020, whichmainly reflected the fluctuation in exchange rates between Renminbi and U.S. dollars during the respective years.Other Income, netOther income, net increased to RMB265.8 million in 2021 from RMB33.1 million in 2020, primarily due to the realized gain of sellingour certain equity investments of RMB 241.6 million in 2021.(Loss)/Gain on changes in the fair value of derivative assets/liabilitiesWe recorded a loss on changes in the fair value of derivative assets/liabilities of RMB14.9 million in 2021 as compared to nil in 2020.Income Tax ExpenseIncome tax expense decreased to RMB3.2 million in 2021 from RMB17.6 million in 2020, reflecting decreased taxable income fromcertain of our PRC subsidiaries.Net Loss from continuing operationsAs a result of the foregoing, net loss from continuing operations increased to RMB1,263.9 million in 2021 from net loss from continuingoperations of RMB1,028.4 million in 2020.Net (Loss)/IncomeNet income was RMB209.6 million in 2021, compared to net loss of RMB2,051.2 million in 2020. The increase was primarily due to thegain related to the sale of our China express business.Variable Interest Entity Financial InformationSet forth below is the selected consolidated statements of operations and cash flows information for the fiscal years ended December 31,2020, 2021 and 2022, and selected consolidated balance sheet information as of December 31, 2021 and 2022 showing financial information forparent company Best Inc., non-VIE subsidiaries, the VIEs and VIEs’ subsidiaries, eliminating entries and consolidated information (RMB inthousands). In the tables below, the column headings correspond to the following entities in the organizational diagram on page 44.-“Parent” refers to BEST Inc., a Cayman company, which is an investment holding company and the primary beneficiary of the VIEs.-“Other subsidiaries” refer to the sum of non-VIE subsidiaries, which mainly include holding companies in Cayman, BVI and HongKong, the overseas subsidiaries providing global business, and the wholly foreign owned enterprises (“WFOE”) of the VIEs andother WFOEs, such as (1) Zhejiang BEST Technology Co., Ltd., an entity providing technology support to the Group and the WFOEof Hangzhou BEST Network Technologies Co., Ltd. (2) BEST Logistics Technologies (China) Co., Ltd., an entity providing freightand supply chain management business and the WFOE of Hangzhou BEST Information Technology Services Co., Ltd. (3) BESTStore Network (Hangzhou) Co., Ltd., an entity providing Store+ business and the WFOE of Hangzhou Baijia Commercial consultingCo., Ltd, and (4) Xinyuan Financial Leasing (Zhejiang) Co., Ltd., an entity providing capital business and the primary beneficiary ofthe Plans. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 102 of 250 Table of Contents95-“VIEs and VIEs’ subsidiaries” refer to the sum of (1) Hangzhou BEST Network Technologies Co., Ltd., one of the VIEs providingthe express delivery business and its subsidiaries, which was discontinued in 2021; (2) Hangzhou BEST Information TechnologyServices Co., Ltd., one of the VIEs that provided the UCargo business, before the business was wound down by the end of 2022, andits subsidiaries; and (3) Hangzhou Baijia Commercial consulting Co., Ltd, one of the VIEs providing Store+ business and itssubsidiaries, which was discontinued in 2020. (4) Xinyuan Leasing Asset Backed Special Plan I and Plan II (collectively the “ABSPlans”) as well as the Yunnan Trust Plan created by Yunnan International Trust Co., Ltd., (the “Trust Plan”) which are vehiclesholding securitized lease rental and other financing receivables transferred by Xinyuan Financial Leasing (Zhejiang) Co., Ltd., one ofour subsidiaries and the primary beneficiary of the Plans.The following tables set forth the Selected Condensed Consolidated Statements of operations for our company, non-VIE subsidiaries, theVIEs and VIEs’ subsidiaries, and eliminations, for the years ended December 31, 2020, 2021 and 2022. For the year ended December 31, 2022Parent（Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalRevenue from third parties Freight delivery — 4,812,190 30,931 — 4,843,121Supply chain management — 1,678,619 — — 1,678,619Global — 708,745 — — 708,745Others — 85,214 31,598 — 116,812 — 7,284,768 62,529 — 7,347,297Revenue from related parties Freight delivery — 45,157—— 45,157Supply chain management — 143,456 — — 143,456Global — 208,162 — — 208,162Inter-company revenues (1) — 114,778 349,427 (464,205) —Total revenue — 7,796,321 411,956 (464,205) 7,744,072Cost of revenue Freight delivery — (5,090,673) (24,264) — (5,114,937)Supply chain management — (1,711,818) — — (1,711,818)Global — (1,081,587) — — (1,081,587)Others — (97,663) (1,625) — (99,288)Inter-company cost (1) — (73,550) (390,655) 464,205 —Total cost of revenue — (8,055,291) (416,544) 464,205 (8,007,630)Operating expenses (40,747) (1,108,866) (13,014) — (1,162,627)(Loss)/income from non-operations (51,040) 16,252 (3,343) — (38,131)Loss from VIEs and VIEs’ subsidiaries (2) (20,957) — — 20,957 —Loss from subsidiaries (2) (1,312,103) — — 1,312,103 -Income tax expense — (499) (12) — (511)Net loss from continuing operations (1,424,847) (1,352,083) (20,957) 1,333,060 (1,464,827)Operating expenses — (31,617) — — (31,617)Income/(loss) from non-operations — (6,847) — — (6,847)Income from subsidiaries (2) (38,464)—— 38,464—Net Income/(Loss) from discontinued operations (38,464) (38,464) — 38,464 (38,464)Net Income/(Loss) (1,463,311) (1,390,547) (20,957) 1,371,524 (1,503,291)Net loss from continuing operations attributable to non-controlling interests — (39,980) — — (39,980)Net Income/(Loss) attributable to BEST Inc. (1,463,311) (1,350,567) (20,957) 1,371,524 (1,463,311) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 103 of 250 Table of Contents96 For the year ended December 31, 2021Parent（Primary BeneficiaryOtherVIEs and VIEs’Consolidated of VIEs) subsidiaries subsidiaries Eliminations TotalRevenue from third parties Freight delivery — 5,662,525 2,581,910 — 8,244,435Supply chain management — 1,476,743 — — 1,476,743Global — 992,518 — — 992,518Others — 92,413 80,029 — 172,442 — 8,917,219 2,661,939 — 10,886,138Revenue from related parties Supply chain management — 338,361 — — 338,361Global — 201,337 — — 201,337Inter-company revenues (1) — 153,399 534,689 (688,088) —Total revenue — 9,184,234 3,196,628 (688,088) 11,425,836Cost of revenue Freight delivery — (5,884,888) (2,621,850) — (8,506,738)Supply chain management — (1,741,832) — — (1,741,832)Global — (1,258,511) — — (1,258,511)Others — (92,531) (25,612) — (118,143)Inter-company cost (1) — (114,188) (573,900) 688,088 —Total cost of revenue — (9,091,950) (3,221,362) 688,088 (11,625,224)Operating expenses (44,897) (1,157,365) (61,322) — (1,263,584)(Loss)/income from non-operations (80,044) 295,861 (13,450) — 202,367Loss from VIEs and VIEs’ subsidiaries (2) (99,506) — — 99,506 —Loss from subsidiaries (2) (987,135) — — 987,135 —Income tax expense — (3,198) — — (3,198)Share of net loss of equity investees — (58) — — (58)Net loss from continuing operations (1,211,582) (1,039,414) (99,506) 1,086,641 (1,263,861)Revenue from third parties Express delivery — 25,728 15,618,517 — 15,644,245Store+ — 5,598 534,896 — 540,494 — 31,326 16,153,413 — 16,184,739Revenue from related parties Express delivery — — 149,624 — 149,624Inter-company revenues — — 183,770 (183,770) —Revenue from discontinued operations 31,326 16,486,807 (183,770) 16,334,363Express delivery — — (16,949,375) — (16,949,375)Store+ — (5,943) (357,789) — (363,732)Inter-company cost (1) — — (285,244) 285,244 —Total cost of revenue from discontinued operations — (5,943) (17,592,408) 285,244 (17,313,107)Operating expenses — 34,652 (636,648) (101,474) (703,470)Income/(loss) from non-operations — 136,646 (160,266) — (23,620)Loss from VIEs and VIEs’ subsidiaries (2) (1,936,791) — — 1,936,791 —Income from subsidiaries (2) 196,681 — — (196,681) —Gains/(Losses) on disposal, net of tax 3,213,599 — (34,276) — 3,179,323Net Income/(Loss) from discontinued operations 1,473,489 196,681 (1,936,791) 1,740,110 1,473,489Net Income/(Loss) 261,907 (842,733) (2,036,297) 2,826,751 209,628Net loss from continuing operations attributable to non-controlling interests — (52,279) — — (52,279)Net Income/(Loss) attributable to BEST Inc. 261,907 (790,454) (2,036,297) 2,826,751 261,907 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 104 of 250 Table of Contents97 For the year ended December 31, 2020Parent（Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalRevenue from third parties Freight delivery — 5,712,081 1,983,668 — 7,695,749Supply chain management — 1,391,686 — — 1,391,686Global — 616,934 — — 616,934Others — 142,506 — 142,506 — 7,863,207 1,983,668 — 9,846,875Revenue from related parties Supply chain management — 520,637 — — 520,637Global — 160,722 — — 160,722Inter-company revenues (1) — 93,519 259,162 (352,681) —Total revenue — 8,638,085 2,242,830 (352,681) 10,528,234Cost of revenue Freight delivery — (5,580,910) (1,956,183) — (7,537,093)Supply chain management — (1,846,901) — — (1,846,901)Global — (875,733) — — (875,733)Others — (26,225) — — (26,225)Inter-company cost (1) — (63,009) (258,299) 321,308 —Total cost of revenue — (8,392,778) (2,214,482) 321,308 (10,285,952)Operating expenses (8,620) (1,193,116) (43,861) 31,373 (1,214,224)(Loss)/income from non-operations (64,986) 31,348 (5,121) — (38,759)Loss from VIEs and VIEs’ subsidiaries (2) (20,634) — — 20,634 —Loss from subsidiaries (2) (908,478) — — 908,478 —Income tax expense — (17,553) — — (17,553)Share of net loss of equity investees — (180) — — (180)Net loss from continuing operations (1,002,718) (934,194) (20,634) 929,112 (1,028,434)Revenue from third parties Express delivery — 49,236 19,165,049 — 19,214,285Store+ — 1,563,967 636,592 — 2,200,559 — 1,613,203 19,801,641 — 21,414,844Revenue from related parties Express delivery — — 252,510 — 252,510Inter-company revenues — 205,856 186,457 (392,313) —Revenue from discontinued operations 1,819,059 20,240,608 (392,313) 21,667,354Express delivery — — (19,470,937) — (19,470,937)Store+ — (1,451,574) (466,888) — (1,918,462)Inter-company cost (1) — (205,856) (217,817) 423,673 —Total cost of revenue from discontinued operations — (1,657,430) (20,155,642) 423,673 (21,389,399)Operating expenses — (406,455) (867,600) (31,360) (1,305,415)Income/(loss) from non-operations — 141,815 (134,059) — 7,756Loss from VIEs and VIEs’ subsidiaries (2) (915,208) — — 915,208 —Loss from subsidiaries (2) (107,582) — — 107,582 —Income tax benefits — (4,571) 1,485 — (3,086)Net loss from discontinued operations (1,022,790) (107,582) (915,208) 1,022,790 (1,022,790)Net loss (2,025,508) (1,041,776) (935,842) 1,951,902 (2,051,224)Net loss from continuing operations attributable to non-controlling interests — (25,716) — — (25,716)Net loss attributable to BEST Inc. (2,025,508) (1,016,060) (935,842) 1,951,902 (2,025,508) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 105 of 250 Table of Contents98The following tables set forth the Selected Condensed Consolidated cash flows for our company, non-VIE subsidiaries, the VIEs and VIEs’subsidiaries, and eliminations, for the years ended December 31, 2020, 2021 and 2022. For the year ended December 31, 2022Parent(Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalNet cash used in continuing operating activities (119,115) (1,106,415) 173,868 — (1,051,662)Net cash generated from/(used in) discontinued operating activities — (66,174) — — (66,174)Net cash generated from/(used in) continuing investing activities 1,492,777 (1,255,743) 156,660 (242,938) 150,756Loans to VIEs and VIEs’ subsidiaries (4) — (812,902) — 812,902 —Repayment of loans to VIEs and VIEs’ subsidiaries (4) — 1,055,840 — (1,055,840) —Other investing activities 1,492,777 (1,498,681) 156,660 — 150,756Net cash used in discontinued investing activities — — — — —Loans to VIEs and VIEs’ subsidiaries (4) — — — — —Repayment of loans to VIEs and VIEs’ subsidiaries (4) — — — — —Other investing activities — — — — —Net cash generated from/ (used in) continuing financing activities (1,373,764) (337,885) (479,656) 242,938 (1,948,367)Borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — 812,902 (812,902) —Repayment of borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — (1,055,840) 1,055,840 —Other financing activities (1,373,764) (337,885) (236,718) — (1,948,367)Net cash (used in)/generated from discontinued financing activities — — — — —Borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — — — —Repayment of borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — — — —Other financing activities — — — — — For the year ended December 31, 2021Parent(Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalNet cash used in continuing operating activities (111,208) (567,230) (212,697) — (891,135)Net cash generated from/(used in) discontinued operating activities — 25,628 (1,938,454) — (1,912,826)Net cash generated from/(used in) continuing investing activities 82,099 4,921,416 (582,998) 570,217 4,990,734Loans to VIEs and VIEs’ subsidiaries (4) — (1,118,676) — 1,118,676 —Repayment of loans to VIEs and VIEs’ subsidiaries (4) — 1,009,120 — (1,009,120) —Other investing activities 82,099 5,030,972 (582,998) 460,661 4,990,734Net cash used in discontinued investing activities — (2,199,038) (448,016) 2,199,038 (448,016)Loans to VIEs and VIEs’ subsidiaries (4) — (4,882,089) — 4,882,089 —Repayment of loans to VIEs and VIEs’ subsidiaries (4) — 2,683,051 — (2,683,051) —Other investing activities — — (448,016) — (448,016)Net cash generated from/ (used in) continuing financing activities 2,604 (28,655) 358,346 (570,217) (237,922)Borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — 1,118,676 (1,118,676) —Repayment of borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — (1,009,120) 1,009,120 —Other financing activities 2,604 (28,655) 248,790 (460,661) (237,922)Net cash (used in)/generated from discontinued financing activities — (274,999) 2,136,199 (2,199,038) (337,838)Borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — 4,882,089 (4,882,089) —Repayment of borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — (2,683,051) 2,683,051 —Other financing activities (274,999) (62,839) — (337,838) For the year ended December 31, 2020Parent(Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries Subsidiaries Eliminations TotalNet cash (used in)/generated from continuing operating activities (11,320) (11,777) 93,624 — 70,527Net cash used in discontinued operating activities — (142,990) (158,772) — (301,762)Net cash (used in)/generated from continuing investing activities (812,649) 1,135,404 (260,024) 205,744 268,475Loans to VIEs and VIEs’ subsidiaries (4) — (214,400) — 214,400 —Repayment of loans to VIEs and VIEs’ subsidiaries (4) — 243,225 — (243,225) —Other investing activities (812,649) 1,106,579 (260,024) 234,569 268,475Net cash used in discontinued investing activities — (751,816) (1,141,564) 751,972 (1,141,408)Loans to VIEs and VIEs’ subsidiaries (4) — (4,934,979) — 4,934,979 —Repayment of loans to VIEs and VIEs’ subsidiaries (4) — 4,183,007 — (4,183,007) —Other investing activities — 156 (1,141,564) — (1,141,408)Net cash generated from continuing financing activities 847,346 655,243 261,868 (205,744) 1,558,713Borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — 214,400 (214,400) —Repayment of borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — (243,225) 243,225 —Other financing activities 847,346 655,243 290,693 (234,569) 1,558,713Net cash (used in)/generated from discontinued financing activities — (203,404) 944,847 (751,972) (10,529)Borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — 4,934,979 (4,934,979) —Repayment of borrowings of VIEs and VIEs’ subsidiaries from Group companies (4) — — (4,183,007) 4,183,007 —Other financing activities — (203,404) 192,875 — (10,529) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 106 of 250 Table of Contents99The following tables set forth the balance sheets depicting the financial position for our company, non-VIE subsidiaries, the VIEs and VIEs’subsidiaries, and eliminations, as of December 31, 2021 and 2022. As at December 31, 2022Parent （Primary Beneficiary Other VIEs and VIEs’ Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalASSETS Current assets: Cash and cash equivalents 6,703 515,174 11,604 — 533,481Restricted cash — 399,337— — 399,337Accounts and notes receivables, net — 649,967 41,357 — 691,324Inventories — 16,436 44 — 16,480Prepayments and other current assets 3,420 723,449 50,973 — 777,842Short-term investments — 725,043— — 725,043Lease rental receivables — 43,067— — 43,067Amounts due from related parties — 76,368— — 76,368Amount due from Group companies (3) — 447,845 268,909 (716,754)—Total current assets 10,123 3,596,686 372,887 (716,754) 3,262,942Non-current assets: Restricted cash — 1,544,131 1,474 — 1,545,605Property and equipment, net — 656,060 128,672 — 784,732Intangible assets, net — 75,553— — 75,553Goodwill — 54,135— — 54,135Long-term investments — 156,859— — 156,859Non-current deposits — 50,767— — 50,767Operating lease right-of-use assets — 1,743,798— — 1,743,798Lease rental receivables — 40,188— — 40,188Amount due from Group companies (3) — 408,118— (408,118)—Investment in subsidiaries and VIEs (2) 2,135,384—— (2,135,384)—Other non-current assets 719 74,947— — 75,666Total non-current assets 2,136,103 4,804,556 130,146 (2,543,502) 4,527,303Total assets 2,146,226 8,401,242 503,033 (3,260,256) 7,790,245 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 107 of 250 Table of Contents100 As at December 31, 2022Parent （Primary Beneficiary Other VIEs and VIEs’ Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalLIABILITIES Current liabilities: Short-term bank loans — 73,128 110,142 — 183,270Long-term borrowings-current portion — 79,148— — 79,148Accounts and notes payable — 1,407,625 22,379 — 1,430,004Accrued expenses and other liabilities — 1,124,913 20,741 — 1,145,654Customer advances and deposits and deferred revenue — 277,737 — — 277,737Operating lease liabilities — 543,886 376 — 544,262Financing lease liabilities — 1,490 10,383 — 11,873Convertible senior notes held by a related party-current 522,744—— — 522,744Convertible senior notes held by third parties-current 77—— — 77Amounts due to related parties — 1,315— — 1,315Amount due to Group companies (3) — 268,909 447,845 (716,754)—Income tax payable — 1,563— — 1,563Liabilities held for sale ——— ——Total current liabilities 522,821 3,779,714 611,866 (716,754) 4,197,647Non-current liabilities: Convertible senior notes held by a related party 522,744—— — 522,744Operating lease liabilities — 1,292,057— — 1,292,057Financing lease liabilities — 1,322 24,702 — 26,024Amount due to Group companies (3) 403,652— 4,466 (408,118)—Long-term bank loan — 928,894— — 928,894Long-term borrowings — 381— — 381Other non-current liabilities — 18,314 438 — 18,752Total non-current liabilities 926,396 2,240,968 29,606 (408,118) 2,788,852Total liabilities 1,449,217 6,020,682 641,472 (1,124,872) 6,986,499Total mezzanine equity — 191,865— — 191,865BEST Inc. shareholders’ equity 697,009 2,273,823 (138,439) (2,135,384) 697,009Non-controlling interests — (85,128)— — (85,128)Total shareholders’ equity (2) 697,009 2,188,695 (138,439) (2,135,384) 611,881Total liabilities, mezzanine equity and shareholders’equity 2,146,226 8,401,242 503,033 (3,260,256) 7,790,245 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 108 of 250 Table of Contents101As at December 31, 2021Parent（Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalASSETS Current assets: Cash and cash equivalents 6,805 3,402,910 162,030 — 3,571,745Restricted cash — 675,159 — — 675,159Accounts and notes receivables, net — 713,931 113,700 — 827,631Inventories — 25,611 11 — 25,622Prepayments and other current assets 4,166 1,118,088 50,218 — 1,172,472Short-term investments — 147,359 — — 147,359Lease rental receivables — 298,364 — — 298,364Amounts due from related parties — 125,198 — — 125,198Amount due from Group companies (3) — 574,176 331,952 (906,128) —Total current assets 10,971 7,080,796 657,911 (906,128) 6,843,550Non-current assets:Restricted cash — 1,069,244 — — 1,069,244Property and equipment, net — 677,443 85,199 — 762,642Intangible assets, net — 55,632 52 — 55,684Goodwill — 54,135 — — 54,135Long-term investments — 219,171 — — 219,171Non-current deposits — 92,866 — — 92,866Operating lease right-of-use assets — 1,899,334 188 — 1,899,522Lease rental receivables — 235,429 — — 235,429Amount due from Group companies (3) — 417,085 41,248 (458,333) —Investment in subsidiaries and VIEs (2) 4,684,363 — — (4,684,363) —Other non-current assets 1,646 109,994 — — 111,640Total non-current assets 4,686,009 4,830,333 126,687 (5,142,696) 4,500,333Total assets 4,696,980 11,911,129 784,598 (6,048,824) 11,343,883 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 109 of 250 Table of Contents102 As at December 31, 2021Parent（Primary BeneficiaryOtherVIEs and VIEs’Consolidatedof VIEs) subsidiaries subsidiaries Eliminations TotalLIABILITIESCurrent liabilities: Short-term bank loans — 409,995 120,500 — 530,495Long-term borrowings-current portion — 203,808 84,006 — 287,814Accounts and notes payable — 1,292,481 60,669 — 1,353,150Accrued expenses and other liabilities 38,387 1,535,001 18,251 — 1,591,639Customer advances and deposits and deferred revenue — 298,012 341 — 298,353Operating lease liabilities — 517,368 880 — 518,248Financing lease liabilities — 1,851 — — 1,851Convertible senior notes held by a related party-current 633,475 — — — 633,475Convertible senior notes held by third parties-current 633,475 — — — 633,475Amounts due to related parties — 2,763 — — 2,763Amount due to Group companies (3) — 331,952 574,176 (906,128) —Income tax payable — 587 — — 587Liabilities held for sale — — — — —Total current liabilities 1,305,337 4,593,818 858,823 (906,128) 5,851,850Non-current liabilities: Convertible senior notes held by a related party 955,097 — — 955,097Operating lease liabilities — 1,456,843 — — 1,456,843Financing lease liabilities — 2,121 — — 2,121Amount due to Group companies (3) 365,586 41,248 51,499 (458,333) —Long-term bank loan — 769,767 — — 769,767Long-term borrowings — 67,080 — — 67,080Other non-current liabilities — 24,261 — — 24,261Total non-current liabilities 1,320,683 2,361,320 51,499 (458,333) 3,275,169Total liabilities 2,626,020 6,955,138 910,322 (1,364,461) 9,127,019Total mezzanine equity — 191,865 — — 191,865BEST Inc. shareholders’ equity 2,070,960 4,810,087 (125,724) (4,684,363) 2,070,960Non-controlling interests — (45,961) — — (45,961)Total shareholders’ equity (2) 2,070,960 4,764,126 (125,724) (4,684,363) 2,024,999Total liabilities, mezzanine equity and shareholders’equity 4,696,980 11,911,129 784,598 (6,048,824) 11,343,883(1)It represents the elimination of the intercompany service charge at the consolidation level.(2)It represents the elimination of the investment among the Parent, other subsidiaries, VIEs and VIEs’ subsidiaries and the Plans.(3)It represents the elimination of intercompany balances among the Parent, other subsidiaries, VIEs and VIEs’ subsidiaries and the Plans.(4)It represents the elimination of the cash support from the other subsidiaries to VIEs and VIEs’ subsidiaries and the repayment from VIEs andVIEs’ subsidiaries through our inter-company cash pool. For the years ended December 31, 2020, 2021 and 2022, subsidiaries of our companyprovided cash support to the VIEs in the amounts of RMB5.1 billion, RMB6.0 billion and RMB0.8 billion, respectively, through our inter-company cash pool. During the same periods, the VIEs made repayments to certain subsidiaries in the amounts of RMB4.4 billion, RMB3.7billion and RMB1.1 billion (US$159.5 million), respectively, through the inter-company cash pool. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 110 of 250 Table of Contents103B.Liquidity and Capital ResourcesOur primary sources of liquidity have been issuance of equity securities, redeemable convertible preferred shares, convertible senior notesand short-term borrowings, which historically were sufficient to meet our working capital and capital expenditure requirements.As of December 31, 2022, we had cash and cash equivalents of RMB533.5 million (US$77.3 million) and restricted cash (current portion)of RMB399.3 million (US$57.9 million). As of December 31, 2022, we had short-term bank loans of RMB183.3 million (US$26.6 million), all ofwhich were cash-collateralized. The weighted average interest rate for the outstanding short-term bank loans as of December 31, 2022 was 1.06%.We also had borrowing from third party financing lease companies of RMB11.9 million (US$1.7 million), long-term borrowings of RMB79.1million (US$11.5 million) as well as convertible senior notes of RMB522.8 million (US$75.8 million), which are due within the next 12 months asof December 31, 2022.The continuous negative impact of COVID-19 in 2022 and intense market competition had an adverse impact on our business operationsand liquidity. We have incurred net losses from continuing operations of RMB1,464.8 million (US$212.4 million) and generated negative cash flowfrom continuing operating activities of RMB1,051.7 million (US$152.5 million) during the year ended December 31, 2022. As of December 31,2022, We have a total cash position of RMB1,657.9 million (US$240.4 million) which included cash and cash equivalents, current restricted cashand short-term investments, a working capital deficiency of RMB934.7 million (US$135.5 million) and an accumulated deficit of RMB18,934.9million (US$2,745.3 million) which included accumulated losses from operations of RMB9,441.1 million (US$1,368.8 million) and accumulatedaccretion to redemption value and deemed dividend in relation to redeemable convertible preferred shares issued and outstanding prior to our initialpublic offering of RMB9,493.8 million (US$1,376.5 million).These adverse conditions indicate that there is substantial doubt about our ability tocontinue as a going concern.Our management has implemented cost saving plans to reduce discretionary operational expenses and secure additional financingincluding, but not limited to, obtaining additional credit facilities from banks in the normal course of business, and re-financing certain existingnotes payables. In the first quarter of 2023, we have successfully obtained new financing of RMB137,000 (US$19,863) short-term bank loans oncredit maturing in one year, which allows us to enhance liquidity.Based on our current level of operations and available cash, and on the assumption that we are able to successfully execute the above-saidplans to improve our liquidity and cash position, we believe that our cash and cash equivalents, cash generated from our operations will providesufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spendingrequirements for at least the next 12 months.In addition, we may require additional cash resources due to other changing business conditions or future developments, including anyinvestments or acquisitions we may decide to selectively pursue. When we seek additional financing, we may seek to sell equity or equity-linkedsecurities, debt securities or borrow from banks. We cannot assure you that financing will be available in the amounts we need or on termsacceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would result in additional dilution to ourshareholders. The incurrence of indebtedness and issuance of debt securities would result in debt service obligations and could result in operatingand financial covenants that restrict our operations and our ability to pay dividends to our shareholders.Material Cash Requirements. Our material cash requirements include: (1) capital expenditures for construction of warehouse and equipment forour freight delivery, global logistic service and supply change management service (see Note 26 of the Notes to the Financial Statements); (2)rental payment to landlord for our hubs, sortation centers and warehouses under operating lease agreements(see Note 10 of the Notes to theFinancial Statements) ; (3) payment to our fleet suppliers for transportation services and payment to labor suppliers for outsource personnel neededin our normal business practice;(4) repayments of short-term and long-term bank loans(see Note 13 of the Notes to the Financial Statements); (5)repayment of long-term borrowings, including asset backed plans(see Note 15 of the Notes to the Financial Statements); (6) repayment ofconvertible senior notes, including 2025 Convertible Notes and 2024 Convertible Notes (see Note 16 of the Notes to the Financial Statements). Inaddition, subject to approval by our Board of Directors, shareholder distributions in the form of dividend payments and/or a share repurchaseprogram may require the expenditure of a material amount of cash. Moreover, we may be subject to additional material cash requirements that arecontingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 111 of 250 Table of Contents104Tabular Disclosure of Contractual ObligationsThe following table sets forth our contractual obligations and commercial commitments as of December 31, 2022:Payment due by period Total Less than 1 year More than 1 yearIn thousands of RMBShort-term bank loans 183,270 183,270 —Long-term bank loan 928,894 — 928,894Convertible senior notes 1,046,151 523,114 523,037Capital expenditure commitments 39,529 39,529-Operating lease obligations 2,229,155 669,495 1,559,660Long-term borrowings 84,842 84,452 390Borrowings from third party financing lease companies 41,560 13,840 27,720Total 4,553,401 1,513,700 3,039,701As a holding company with no material operations of our own, we are a corporation separate and apart from our subsidiaries and the VIEsand, therefore, must provide for our own liquidity. We conduct our operations in China primarily through our PRC subsidiaries and VIEs. As aresult, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our subsidiaries. If our PRC subsidiariesor any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability topay dividends to us. In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their respective retained earnings, if any, asdetermined in accordance with Chinese accounting standards and regulations. Under applicable PRC laws and regulations, our PRC subsidiariesare each required to set aside a portion of its after-tax profits each year to fund certain statutory reserves, and funds from such reserves may not bedistributed to us as cash dividends except in the event of liquidation of such subsidiaries. These statutory limitations affect, and future covenantdebt limitations might affect, our PRC subsidiaries’ ability to pay dividends to us. We currently believe that such limitations will not impact ourability to meet our ongoing short-term cash obligations although we cannot assure you that such limitations will not affect our ability in the futureto meet our short-term cash obligations and to distribute dividends to our shareholders. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Doing Business in the People’s Republic of China—We rely to a significant extent on dividends and other distributions on equity paidby our principal operating subsidiaries to fund offshore cash and financing requirements. Any limitation on the ability of our operating subsidiariesto make payments to us could have a material and adverse impact on our ability to operate our business” and “—Statutory Reserves.”Our main sources of cash funding for the VIEs have included short-term loans from local banks and financial institutions, cash generatedfrom operations, and inter-company loans provided by other subsidiaries of our company. As of December 31, 2021 and 2022, the VIEs held cashand cash equivalents of RMB162.0 million and RMB11.6 million (US$1.7 million), respectively.For the years ended December 31, 2020, 2021 and 2022, subsidiaries of our company provided cash support to the VIEs in the amounts ofRMB5.1 billion, RMB6.0 billion and RMB0.8 billion, respectively, through our inter-company cash pool. During the same periods, the VIEs maderepayments to certain subsidiaries in the amounts of RMB4.4 billion, RMB3.7 billion and RMB1.1 billion (US$159.5 million), respectively,through the inter-company cash pool. Other than the aforementioned cash transfers, there was no other asset transfer between our subsidiaries, theVIEs and our company.No dividend or distribution was made through the VIEs to our company during the years ended December 31, 2020, 2021 and 2022.During the years ended December 31, 2020, 2021 and 2022, there was no restriction or limitation on our company’s ability to receiveearnings from our subsidiaries or to distribute them to U.S. investors. Likewise, there was no restriction or limitation on the VIEs to settleobligations under the VIE contractual arrangements. Historically, no distribution of earnings has been made due to the fact that a majority of oursubsidiaries and the VIEs were still in a cumulative loss financial position. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 112 of 250 Table of Contents105We have established stringent cash management policies and procedures for cash flows within our organization. Each transfer of fundsamong our Cayman Islands holding company, our subsidiaries and the VIE is subject to internal approval. In general, transfer of funds is requiredto be effected through online banking system. Cash is transferred through our organization primarily in the manner as follows: (i) BEST maytransfer funds to the WFOE, BEST Logistics Technology (China) Co., Ltd., , through its Hong Kong subsidiary, BEST Logistics TechnologiesLimited (Hong Kong), by additional capital contributions or shareholder loans, as the case may be, (ii) the WFOE may provide loans to the VIE,subject to statutory limits and restrictions, (iii) the VIE may repay loans to the WFOE at a fixed annual rate, and (iv) the WFOE may makedividends or other distributions to BEST through BEST Logistics Technologies Limited (Hong Kong). Our management is directly supervisingcash management. The VIE initiates a cash request by putting forward a cash demand plan, which explains the specific amount and timing of cashrequested, and submitting it to the finance department. The cashier specialists of our financial department examine the needs of cash and submit itto the director of financial department or the CEO of the Company for final approval. To ensure the liquidity, there is no limit on the amount ofcash that can be transferred through our organization. However, the annual cash flow plan between the VIE and the WFOE will be determinedbased on our annual business objectives approved by the board of directors and approved by the CEO. In addition, we monitor our cash balance ona daily basis and conduct periodic review on our cash holdings.The following table sets forth a summary of the movements of our cash and cash equivalents for the periods indicated: For the year ended December 31,202020212022 RMB RMB RMB US$(in thousands)Net cash generated from/(used in) operating activities for continuing operations 70,527 (891,135) (1,051,662) (152,478)Net cash used in operating activities for discontinued operations (301,762) (1,912,826) (66,174) (9,594)Net cash used in operating activities (231,235) (2,803,961) (1,117,836) (162,072)Net cash generated from investing activities for continuing operations 268,475 4,990,734 150,756 21,858Net cash used in investing activities for discontinued operations (1,141,408) (448,016) — —Net cash (used in)/generated from investing activities (872,933) 4,542,718 150,756 21,858Net cash generated from/(used in) financing activities for continuing operations 1,558,713 (237,922) (1,948,367) (282,487)Net cash used in financing activities for discontinued operations (10,529) (337,838) — —Net cash generated from/(used in) financing activities 1,548,184 (575,760) (1,948,367) (282,487)Effect of exchange rate changes on cash, cash equivalents and restricted cash (192,110) (55,970) 77,722 11,269Net increase/(decrease) in cash, cash equivalents and restricted cash 251,906 1,107,027 (2,837,725) (411,432)Cash, cash equivalents and restricted cash at the beginning of the year 3,957,215 4,209,121 5,316,148 770,769Cash, cash equivalents and restricted cash at the end of the year 4,209,121 5,316,148 2,478,423 359,337Operating ActivitiesNet cash used in operating activities for continuing operations was RMB1,051.7 million (US$152.5 million) in 2022, compared toRMB891.1 million used in operating activities for continuing operations in 2021. This increase was primarily due to the increase of RMB201.0million (US$29.1 million) in net loss from continuing operations, which was mainly attributable to the competitive market dynamics and pricinglag.Net cash used in operating activities for continuing operations was RMB891.1 million in 2021, compared to RMB70.5 million generatedfrom operating activities for continuing operations in 2020. This decrease was primarily due to extending the payment term due to the pandemic in2020, which gradually became normalized in 2021, as well as the increase of RMB235.4 million in net loss from continuing operations, which wasmainly attributable to the competitive market dynamics and pricing lag. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 113 of 250 Table of Contents106Investing ActivitiesNet cash generated from investing activities for continuing operations was RMB150.8 million (US$21.9 million) in 2022, which wasprimarily due to (i) payments for purchase of property and equipment of RMB143.3 million (US$20.8 million), which property and equipmentwere used in the expansion and optimization of our freight service and global logistics services in Southeast Asia; (ii) receipt of repayment on leaserental and other financing receivables—principal portion in an aggregate amount of RMB554.2 million (US$80.4 million); (iii) a net change inshort-term investments of RMB428.8 million (US$62.2 million), which were proceeds from maturities of short-term investments of RMB1,804.3million (US$261.6 million) offset by purchase of short-term investments of RMB2,233.1 million (US$323.8 million), and (iv) origination offactoring receivables of RMB230.5 million (US$33.4 million), mainly for factoring service provided to certain third-party suppliers who transfertheir rights to future cash receipts from accounts receivable with recourse, partially offset by receipt of repayment on factoring receivables—principal portion in an aggregate amount of RMB391.0 million (US$56.7 million).Net cash generated from investing activities for continuing operations was RMB4,990.7 million in 2021, which was primarily due to (i)payments for purchase of property and equipment of RMB160.0 million, which property and equipment were used in the expansion andoptimization of our freight service and global logistics services in Southeast Asia; (ii) origination of lease rental and other financing receivables ofRMB45.7 million, mainly for financing lease related services provided to franchisee partners and transportation service providers, partially offsetby receipt of repayment on lease rental and other financing receivables—principal portion in an aggregate amount of RMB1,165.8 million; (iii) anet change in short-term investments of RMB75.9 million, which were proceeds from maturities of short-term investments of RMB425.1 millionoffset by purchase of short-term investments of RMB349.2 million, and (iv) proceeds from disposal of subsidiaries and long-term investments ofRMB3,904.3 million, mainly including the proceeds from BEST express business.Financing ActivitiesNet cash used in financing activities for continuing operations was RMB1,948.4 million (US$282.5 million) in 2022, which was mainlydue to (i) repayment of 2024 Convertible Notes of RMB1,363.9 million (US$197.7 million); (ii) proceeds from short-term and long-term bankloans of RMB248.8 million (US$36.1 million), partially offset by repayment of short-term and long-term bank loans of RMB531.4 million(US$77.1 million), and (iii) repayment of long-term borrowings of RMB301.8 million (US$43.8 million).Net cash used in financing activities for continuing operations was RMB237.9 million in 2021, which was mainly due to (i) proceeds fromissuance of series A preferred shares of RMB191.9 million in our Asia subsidiary; (ii) proceeds from short-term and long-term bank loans ofRMB1,607.4 million, partially offset by repayment of short-term bank loans of RMB2,245.1 million, and (iii) proceeds from issuance of asset-backed securities and long-term borrowings of RMB585.5 million, partially offset by repayment of asset-backed securities and long-termborrowings of RMB378.8 million.Convertible Senior NotesIn September 2019, we completed an offering of US$200 million aggregate principal amount of 1.75% convertible senior notes due 2024(including full exercise of the initial purchasers’ option to purchase additional notes), including US$100 million principal amount of notes sold toan entity affiliated with Alibaba Group Holding Limited. These convertible senior notes were offered to qualified institutional buyers in reliance onthe exemption from registration provided by Rule 144A under the Securities Act, and to certain non-U.S. persons in offshore transactions inreliance on Regulation S under the Securities Act. The notes will mature on October 1, 2024. Holders may convert their notes at their option at anytime prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, we will cause tobe delivered, for each US$1,000 principal amount of converted notes, a number of ADSs equal to the conversion rate. The notes may be convertedinto our ADSs at an initial conversion rate of 7.0922 ADSs per US$1,000 principal amount of notes (equivalent to an initial conversion price ofapproximately US$141.00 per ADS), which rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaidinterest. In 2022, we repurchased approximately US$200 million aggregate principal amount of our 1.75% convertible senior notes due 2024, andthe repurchased notes were canceled accordingly. Of these repurchases, (i) approximately US$95 million principal amount of notes wererepurchased in multiple transactions pursuant to definitive agreements that were privately negotiated and entered into by us and certain holders ofthe notes, and (ii) approximately US$105 million principal amount of notes were repurchased pursuant the holders’ right to require us to repurchaseall of their notes or any portion thereof that is an integral multiple of US$1,000 principal amount for cash on September 30, 2022 pursuant to therelevant indenture dated as of September 17, 2019. Notes in the principal amount of approximately US$0.011 million remain outstanding after suchrepurchases. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 114 of 250 Table of Contents107In June 2020, we completed a private placement of US$150 million aggregate principal amount of 4.5% convertible senior notes due 2025to Alibaba.com Hong Kong Limited, an entity affiliated with Alibaba, one of our principal shareholders. These convertible senior notes were issuedand sold outside the United States in an offshore transaction in reliance on the exemption from registration provided by Regulation S under theSecurities Act. The notes will mature on June 3, 2025. Holders may convert their notes at their option at any time prior to the close of business onthe second business day immediately preceding the maturity date. Upon conversion, we will cause to be delivered, for each US$100,000 principalamount of converted notes, a number of Class A ordinary shares equal to the conversion rate. The notes may be converted into our Class Aordinary shares at an initial conversion price of approximately US$121.40 per ADS, which rate is subject to adjustment in some events but will notbe adjusted for any accrued and unpaid interest. Holders of the notes may require us to repurchase all or part of their notes within 90 days afterJune 3, 2023 and upon the occurrence of a fundamental change, in each case at a repurchase price equal to 100% of the principal amount of thenotes to be repurchased, plus accrued and unpaid interest, if any. In April 2023, we and Alibaba.com Hong Kong Limited agreed that Alibaba.comHong Kong Limited would require us to repurchase one half of the 2025 Convertible Notes in 2023 and we have granted an extra repurchase optionto Alibaba.com Hong Kong Limited such that Alibaba.com Hong Kong Limited would be able to require us to repurchase the other one half of the2025 Convertible Notes, or US$75,000 aggregate principle amount within 90 days after June 3, 2024. However, we may not have enough availablecash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or redeem the notes. See “Item 3.Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may not have the ability to raise the funds necessary torepurchase our convertible senior notes on the repurchase date or upon the occurrence of a fundamental change, and our future debt may containlimitations on our ability to pay cash upon required repurchase or redemption of the notes.”Segment Financial InformationThe table below provides a summary of our operating segment results for the years ended December 31, 2020, 2021 and 2022, which havebeen derived from the notes to our consolidated financial statements included elsewhere in this annual report.With the exception of the below, all segment information in this annual report is presented after inter-segment eliminations:For the year ended December 31, 202020212022RMBRMBRMBUS$(in thousands)Revenue: Freight 7,853,680 8,353,703 4,890,823 709,103Supply Chain Management 1,912,323 1,820,239 1,852,153 268,537Global 777,657 1,194,146 963,505 139,695Others 142,506 172,447 116,859 16,943Inter-segment eliminations (157,932) (114,699) (79,268) (11,493)Consolidated revenue 10,528,234 11,425,836 7,744,072 1,122,785Gross profit:Freight 158,656 (262,303) (226,659) (32,862)Supply Chain Management 65,422 73,272 110,257 15,986Global (98,077) (64,656) (164,680) (23,876)Others 116,281 54,299 17,524 2,541Consolidated gross profit 242,282 (199,388) (263,558) (38,211)Since January 1, 2021, together with the strategic refocusing plan executed from late 2020, we grouped Capital service and UCargoservice into “Others” segment. Also after the disposal of Express business in December 2021, we report our financial results in four operatingsegments: (i) freight delivery services, or the Freight segment, (ii) supply chain management services, or the Supply Chain Management segment,(iii) Global logistics services, or the Global segment, (iv) Other segment. This change in segment reporting aligns with the manner in which wecurrently receive and use financial information to allocate resource and evaluate the performance of our operating segments. As the financial resultsfrom our (i) Store+ services, and (ii) Express services, each formerly reported as a separate reportable segment, are now disclosed as discontinuedoperations, they are not reflected in the segment disclosures above. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 115 of 250 Table of Contents108Since January 1, 2022, due to the winding down of UCargo, the Company reported UCargo services together with Freight deliveryservices, and prior year’s comparative figures related to UCargo services revenue of RMB2,519,919 and RMB2,809,081 under “Revenue - Others”for the years ended December 31, 2020 and 2021, respectively, have been reclassified to “Revenue - Freight delivery” to conform to the currentyear’s presentation. We continue to report our financial results in four operating segments: (1) Freight delivery, or the Freight segment, (2) Supplychain management, or the Supply Chain Management segment, (3) Global logistics, or the Global segment, (4) Others segment.The inter-segment eliminations for the periods indicated above mainly consisted of (i) segment revenue of the Freight segment provided tothe Supply Chain Management segment, and (ii) segment revenue of the Global segment provided to our Supply Chain Management segment, allof which were eliminated as intergroup transactions as a result of consolidation.The table below provides a summary of the principal markets in which we compete, including a breakdown of total revenues by categoryof activity and geographic market for the years ended December 31, 2020, 2021 and 2022, which have been derived from the notes to ourconsolidated financial statements included elsewhere in this annual report. For the years ended December 31,202020212022 RMB RMB RMB US$(in thousands)PRC 9,750,578 10,231,981 6,827,165 989,846Non-PRC 777,656 1,193,855 916,907 132,939 10,528,234 11,425,836 7,744,072 1,122,785Year Ended December 31, 2022 Compared to Year Ended December 31, 2021Revenue by SegmentSegment revenue of our Supply Chain Management segment increased from 2021 to 2022 primarily due to an increase in segment revenuefrom external customers. Segment revenue of our Freight segment, Global segment and Other segments decreased from 2021 to 2022 primarily dueto a decrease in segment revenue from external customers. For additional information regarding these trends, please see “—Year-over-YearComparisons of Results of Operations—Year Ended December 31, 2022 Compared to Year Ended December 31, 2021.”Year Ended December 31, 2021 Compared to Year Ended December 31, 2020Revenue by SegmentSegment revenue of our Supply Chain Management segment decreased from 2020 to 2021 primarily due to a decrease in segment revenuefrom external customers. Segment revenue of our Freight segment, Global segment and Other segments increased from 2020 to 2021 primarily dueto an increase in segment revenue from external customers. For additional information regarding these trends, please see “—Year-over-YearComparisons of Results of Operations—Year Ended December 31, 2021 Compared to Year Ended December 31, 2020.”Statutory ReservesUnder applicable PRC laws and regulations, our PRC subsidiaries are required to provide for certain statutory reserves. Pursuant to suchlaws and regulations, we may pay dividends only out of our after-tax profits, if any, determined in accordance with Chinese accounting standardsand regulations. Further, we are required to allocate at least 10% of our after-tax profits to fund the general reserve until such reserve has reached50% of our registered capital. In addition, we may also set aside, at our or our Board’s discretion, a portion of our after-tax profits to fund theemployee welfare and bonus fund. These reserves may only be used for specific purposes and are not distributable to us in the form of loans,advances, or cash dividends.As of December 31, 2020, 2021 and 2022, our PRC subsidiaries had appropriated an aggregate of RMB8,038, RMB167 and nil,respectively, in their statutory reserves. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 116 of 250 Table of Contents109Recent Accounting PronouncementsPlease see Note 2 to our consolidated financial statements included elsewhere in this annual report.C.Research and Development, Patents and Licenses, etc.Technology and Service Offering DevelopmentSee “Item 4. Information on the Company—B. Business Overview—Our Technology Infrastructure” and “Item 4. Information on theCompany—B. Business Overview—Our Service Offerings.”Intellectual PropertySee “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”D.Trend InformationPlease refer to “—A. Results of Operations” for a discussion of the most recent trends in our services, sales and marketing as of the end of2022. In addition, please refer to discussions included in such Item for a discussion of known trends, uncertainties, demands, commitments orevents that we believe are reasonably likely to have a material effect on our net sales and operating revenues, income from continuing operations,profitability, liquidity or capital resources, or that would cause reported financial information to be not necessarily indicative of our futureoperating results or financial condition.E.Critical Accounting Policies and EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions thataffect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reportedamounts of revenue and expenses during the reporting periods. We consider an accounting estimate to be critical if: (1) the accounting estimaterequires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in theestimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the currentperiod, would have a material impact on our financial condition or results of operations. In addition, there are other items within our financialstatements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have amaterial impact on our financial statements.We base our estimates on historical experience and various other assumptions that are believed to be reasonable, the results of which formthe basis for making judgments about the carrying values of assets and liabilities. Our actual results could materially differ from those estimates.The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and thesensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financialstatements. For further information on our critical accounting policies, see Note 2 to our consolidated financial statements. We believe thefollowing accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.GoodwillWe assess goodwill for impairment in accordance with ASC 350-20, Intangibles—Goodwill and Other: Goodwill (“ASC 350-20”), whichrequires that goodwill be tested for impairment at the reporting unit level at least annually and more frequently upon the occurrence of certainevents. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 117 of 250 Table of Contents110We have determined it has four reporting units (that also represent operating segments) in 2021, which excludes the former Store+reporting unit and BEST Express which were reported as discontinue operations in the consolidated statements of comprehensive income/(loss) andthe corresponding goodwill allocated to the Store+ reporting unit and BEST Express was classified as assets held for sale on the consolidatedbalance sheets (Note 4) before the subsidiaries disposal. Goodwill was allocated to two reporting units including Freight delivery reporting unit andGlobal unit as of December 31, 2020 and 2021. We have the option to assess qualitative factors first to determine whether it is necessary to performthe quantitative test in accordance with ASC 350-20. In the qualitative assessment, we consider primary factors such as industry and marketconsiderations, overall financial performance of the reporting unit, and other specific information related to the operations. If we believe, as a resultof the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the quantitativeimpairment test described above is required. Otherwise, no further testing is required. The quantitative impairment test compares the fair value ofthe reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment lossshall be recognized in an amount equal to that excess.Methodologies and significant estimates utilized in determining the fair value of reporting unitsThe fair value of each reporting unit was estimated using a discounted cash flow methodology. The discounted cash flow analysis requiressignificant estimates, including projections of future operating results and cash flows of each reporting unit that are based on internal budgets andstrategic plans, expected long-term growth rates, terminal values, weighted average cost of capital and the effects of external factors and marketconditions. Changes in these estimates and assumptions could materially affect the estimated fair value of each reporting unit that could result in animpairment charge to reduce the carrying value of goodwill, which could be material to our financial position and results of operations.The sensitivity analyses on the future cash flows and WACC assumptions are described below. These key assumptions utilized in thediscounted cash flow valuation methodology require significant management judgment:Future cash flow assumptions - The projections for future cash flows utilized in the models are derived from historical experience and assumptionsregarding future growth and profitability of each reporting unit. These projections are consistent with our operating budget and strategic plan. Cashflows for the five years subsequent to the date of the quantitative goodwill impairment test were utilized in the determination of the fair value ofeach reporting unit. The growth rates assumed a gradual increase in revenue based on new customer acquisition and market expansion. Beyond fiveyears a terminal value was determined using a perpetuity growth rate based on inflation and real GDP growth rates. A sensitivity analysis of therevenue growth rates, gross profit and operating expenses were performed on all reporting units. For each reporting unit analyzed, a 10% reductionin the revenue growth rates used, or a 10% increase in operating expense, or 10% reduction in gross profit respectively would not have resulted inits carrying value exceeding its estimated fair value.WACC - The WACC is the rate used to discount each reporting unit’s estimated future cash flows. The WACC is calculated based on theproportionate weighting of the cost of debt and equity. The cost of equity is based on a risk-free interest rate and an equity risk factor, which isderived from public companies similar to the reporting unit and which captures the perceived risks and uncertainties associated with the reportingunit’s cash flows. The cost of debt component is calculated as the weighted average cost associated with all of the Company’s outstandingborrowings as of the date of the impairment test and was immaterial to the computation of the WACC. The cost of debt and equity is weightedbased on the debt to market capitalization ratio of publicly traded companies with similarities to the reporting unit being tested. The WACC forGlobal reporting unit is 15% as of December 31, 2022. A sensitivity analysis of the WACC was performed as of December 31, 2022. An increasein the WACC of ten percentage would not result in the carrying value of the reporting unit exceeding its fair value.Impairment of long-lived assets held for use other than goodwillWe evaluate our long-lived assets, including fixed assets, intangible assets with finite lives and operating lease right-of-use assets, forimpairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future useof the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, we evaluate the recoverability oflong-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assetsand their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, we recognize animpairment loss based on the excess of the carrying amount of the assets over their fair value. Impairment losses are included in general andadministrative expenses. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 118 of 250 Table of Contents111The calculation of undiscounted cash flow analysis requires significant estimates and judgement, in particular, these estimates are sensitiveto significant assumptions, including revenue growth rate, operating margin and operating expenses, which can be affected by expectations aboutinternal budgets and strategic plans and expected long-term growth rates. Changes in these estimates and assumptions could materially affect theestimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition, which could result in animpairment charge to reduce the carrying value of long-lived assets, and could be material to our financial position and results of operations.The sensitivity analyses on the future cash flows are described below. These key assumptions utilized in the undiscounted cash flowvaluation methodology require significant management judgment:Future cash flow assumptions - The projections for future cash flows utilized in the models are derived from historical experience andassumptions regarding future growth and profitability of long lived asset group. These projections are consistent with our operating budget andstrategic plan. We also make assumptions about our cost levels (e.g., capacity utilization, cost performance in various volume level) based on ourhistorical operating results to drive our future operating margin. Cash flows for estimated useful lives of the long lived asset group subsequent tothe balance sheet date of the impairment test were utilized in the determination of recoverability of long lived asset group. The growth ratesassumed a gradual increase in revenue based on new customer acquisition and market expansion. A sensitivity analysis of the revenue growth rates,gross profit margin and operating expenses were performed on all reporting units. For each reporting unit analyzed, a 10% reduction in the revenuegrowth rates used or gross profit margin, or a 10% increase in operating expense respectively would not have resulted in its carrying valueexceeding its estimated fair value.Accounts receivable and notes receivable, and allowance for credit lossesWe maintain an allowance for credit losses and records the allowance for credit losses as an offset to accounts receivable and contractassets and the estimated credit losses charged to the allowance is classified as “General and administrative expenses” in the consolidated statementsof comprehensive (loss)/income. We assesse collectability by reviewing accounts receivable and contract assets on a collective basis where similarcharacteristics exist, primarily based on similar business line, service or product offerings and on an individual basis when we identify specificcustomers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, we consider historicalcollectability based on past due status, the age of the accounts receivable balances and contract assets balances, credit quality of our customersbased on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and otherfactors that may affect our ability to collect from customers.We estimate the allowance for credit losses for receivables that share similar risk characteristics based on a collective assessment using acombination of measurement models and management judgment. The models consider factors such as historical trends in credit losses, recentportfolio performance, and forward-looking macroeconomic conditions. If we do not believe the models reflect lifetime expected credit losses forthe portfolio, an adjustment is made to reflect management judgment regarding qualitative factors including economic uncertainty, observablechanges in portfolio performance, and other relevant factors.Assumptions Used. Our allowance for credit losses is based on its assumptions regarding:●Probability of default. The expected probability of payment and time to default, which include assumptions about macroeconomicfactors and recent performance; and●Loss given default. The percentage of the expected balance due at default that is not recoverable. The loss given default takes intoaccount expected collateral value and future recoveries. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 119 of 250 Table of Contents112Fair value measurement of equity investments without readily determinable fair valueFor equity securities accounted for under the measurement alternative, when there are observable price changes in orderly transactions foridentical or similar investments of the same issuer, the investments are re-measured to fair value. The non-recurring fair value measurements to thecarrying amount of an investment usually requires management to estimate a price adjustment for the different rights and obligations between asimilar instrument of the same issuer with an observable price change in an orderly transaction and the investment held by us. These non-recurringfair value measurements were measured as of the observable transaction dates. The valuation methodologies involved require management to usethe observable transaction price at the transaction date and other unobservable inputs (level 3) such as expected volatility and probability of exitevents as it relates to liquidation and redemption preferences. When there is impairment of equity securities accounted for under the measurementalternative and equity method investments, the non-recurring fair value measurements are measured at the date of impairment. Estimating the fairvalue of investees without observable market prices is highly judgmental due to the subjectivity of the unobservable inputs (level 3) used in thevaluation methodologies used to determine fair value, especially considering the increased market volatility in the global financial markets after theCOVID-19 outbreak. The fair value information is sensitive to changes in the unobservable inputs used to determine fair value and such changescould result in the fair value at the reporting date to be different from the fair value presented. When our assessment indicates that an impairmentexists, we write down the investment to its fair value.Income taxWe follow the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). Under thismethod, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets andliabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. We record a valuationallowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of thedeferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includesthe enactment date of the change in tax rate.We accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties arising from underpayment of incometaxes shall be computed in accordance with the related PRC tax law. The amount of interest expense is computed by applying the applicablestatutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken in a taxreturn. Interest and penalties recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive (loss)/incomeas income tax expense.We recognize in its consolidated financial statements the impact of a tax position if a tax return position or future tax position is “morelikely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not” recognitionthreshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Ourestimated liability for unrecognized tax benefits included in “Other noncurrent liabilities” in the accompanying consolidated balance sheets isperiodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/ordevelopments with respect to tax audits, and expiration of the statute of limitations. The actual benefits ultimately realized may differ from theCompany’s estimates. As each audit is concluded, adjustments, if any, are recorded in the Company’s consolidated financial statements.Additionally, in future periods, changes in facts, circumstances, and new information may require the Company to adjust the recognition andmeasurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period inwhich the changes occur.Revenue recognitionRevenue is recognized when control of promised goods or services is transferred to our customers in an amount of consideration to whichan entity expects to be entitled to in exchange for those goods or services. We present value-added taxes as a reduction from revenues. We do notdisclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts forwhich we recognize revenue at the amount to which it has the right to invoice for services performed. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 120 of 250 Table of Contents113Our revenue recognition policies are as follows:Freight delivery servicesWe provide freight services that comprise of sorting, line-haul and feeder transportation services mainly to our franchisees, which are alsoour customers. We offer an integrated service to franchisee service stations that includes last-mile delivery service to end recipients and acts as theprincipal that is directly responsible for all shipments sent through its network, from the point when customers drop off the shipments at our firsthub or sortation center all the way through to the point when the shipments are delivered to end recipients.Customers are required to prepay for freight delivery services and we record such amounts as “Customer advances and deposits anddeferred revenue” in the consolidated balance sheets. The transaction price we earn from its customers are based on the shipment’s weight androute to the end recipient’s destination.Our freight delivery services contracts with customers include only one performance obligation. Performance obligations are generallyshort-term in nature with transit days being a week or less for each shipment. We recognize revenue over time as customers receive the benefit ofour services as the goods are shipped from one location to another. As such, freight delivery services revenue is recognized proportionally as ashipment moves from origin to destination and the related costs are recognized as incurred. We use an output method of progress based on time-in-transit as it best depicts the transfer of control to the customer.Freight delivery services revenue also includes initial non-refundable franchise fees. The initial non-refundable franchise fees arerecognized over the franchise period due to the franchisees’ rights to access our logos and brand names which are considered symbolic intellectualproperties. The initial non-refundable franchise fees are negotiated under a separate agreement and represent a very small percentage of revenue forall periods presented.UCargo serviceWe serve as a truckload capacity brokerage platform to provide truckload capacity sourcing solutions via real-time bidding totransportation service providers and customers. We are the principal to the transaction for these services and revenue from these transactions isrecognized on a gross basis. Revenue is recognized proportionally as a shipment moves from origin to destination using an output method ofprogress based on time-in-transit while the related costs are recognized as incurred. Since January 1, 2022, due to the winding down of UCargo, theCompany reported UCargo services together with Freight delivery services. Prior year’s comparative figures related to UCargo services revenueunder “Revenue - Others” for the years ended December 31, 2020 and 2021 have been reclassified to “Revenue - Freight delivery” to conform tothe current year’s presentation.Supply chain management servicesWe provide warehouse management, order fulfillment services and transportation services to our offline and online enterprise customers(“enterprise customers”). We enter into supply chain warehouse management service agreements with these customers to provide warehousemanagement and order fulfillment services through our self-operated order fulfillment centers and transportation services agreements fortransportation services. The majority of the contracts have an effective term of one year. Order fulfillment service revenue is generated fromvarious service fees charged on a volume basis in connection with various order fulfillment services, which may include in-warehouse processing,order fulfillment, freight delivery and other value-added services. Pursuant to the warehouse management service agreements and transportationservices agreements, enterprise customers have the right to terminate the contracts by providing one month’s advance notice. Therefore, eventhough the contract term for the majority of the contracts is one year, due to the termination rights provided to enterprise customers, warehousemanagement service agreements and transportation services agreements are considered month-to-month service contracts. Enterprise customers arebilled on a monthly basis and make payments according to their granted credit terms which ranges from 5 to 120 days.Under some situations, enterprise customers may request to add a transportation route or increase the warehouse rental space by entering into a separate contract with us. The additional services are considered distinct and the service fees are priced at their standalone selling prices, i.e. they cannot be purchased at a significant or incremental discount. Therefore, we account for this type of contract modification as a separate contract and the revenue recognized to date on the original contract is not adjusted.  Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 121 of 250 Table of Contents114The warehouse management service agreements comprise various service offerings that can be purchased at the option of the customer.Although the service options are interrelated, none of the services modify the other services and they are not integrated to provide a combinedoutput. Each of the service options is substantive and the enterprise customers cannot purchase each additional service at a significant andincremental discount. Therefore, each service is accounted for as a separate performance obligation. We are the primary obligor and do notoutsource any portion of the order fulfillment services to supply chain franchisee partners. We recognize warehouse management and orderfulfillment services revenue upon completion of the services as that is when we transfer control of the services and have right to payment.For transportation services, we provide the service of arranging transportation and coordinating shipments to and from locationsdesignated by our enterprise customers. Each transportation order for delivery of goods from origin to destination is considered a performanceobligation. Performance obligations are generally short-term in nature with transit days being a week or less for each shipment. We recognizetransportation services revenue over time as customers receive the benefit of our services as the goods are shipped from origin to destination. Assuch, transportation service revenue is recognized proportionally as a shipment moves from origin to destination and the related costs arerecognized as incurred. We use an output method of progress based on time-in-transit as it best depicts the transfer of control to the customer.A small percentage of revenue is also earned from supply chain franchisee partners that can access our supply chain network. Thesefranchisee partners pay an initial non-refundable fee for a comprehensive operating manual and orientation training, as well as an agreed systemusage fee for each order processed through our supply chain network. The initial non-refundable fees and system usage fees were insignificant forall periods presented.Global logistics servicesWe provide international logistics services in multiple countries and regions across North America, Europe and Asia, such as cross-borderlogistic coordination service as well as international and local express delivery services outside China. Revenue for our global logistics services isrecognized proportionally as a shipment moves from origin to destination using an output method of progress based on time-in-transit while therelated costs are recognized as incurred.Other servicesOther services are mainly represent SaaS software service and Capital service the Company provided to customers.SaaS software serviceWe services as a proprietary technology platform to provide solution services to the ecosystem participants. We are the principal to thetransaction for these services and revenue from these transactions is recognized on a gross basis. Revenue is recognized ratably over the contractperiod and is initially recorded as “Customer advances and deposits and deferred revenue”.Capital serviceWe serve as a financing platform to provide tailored financing solutions to our ecosystem participants, such as fleet and equipmentfinancing lease service and factoring services. Revenue generated from provision of capital services primarily consists of interest income on leaserental and other financing receivables, which is recognized as revenue using the effective interest rate method.Express delivery services (now disclosed as discontinued operations)We provide express services that comprise sorting, line-haul and feeder transportation services to our franchisee service stations, which arealso our customers, when parcels (under 15 kg) are dropped off by our franchisee service station customers at our first hub or sortation center.We offer an integrated service to the franchised service stations that includes last-mile delivery service to end recipients and we act as theprincipal that is directly responsible for all parcels sent through our network, from the point when customers drop off the parcels at our first hub orsortation center all the way through to the point when the parcels are delivered to end recipients. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 122 of 250 Table of Contents115Customers are required to prepay for express delivery services and we record such amounts as “customer advances and deposits anddeferred revenue” in the balance sheet. The transaction price we earn from our customers are based on the parcel’s weight and route to the endrecipient’s destination. In addition, we provide certain discounts, incentives and rebates based on explicitly agreed upon terms with our customersthat can decrease the transaction price and estimates variable consideration based on the most likely amount to be provided. The amount of variableconsideration included in the transaction price is limited to the amount that will not result in a significant revenue reversal. We review the estimateof variable consideration and updates the transaction price at the end of each reporting period as necessary. Uncertainties related to the variableconsideration for transactions are resolved in a short time frame. Adjustments to variable consideration are recognized in the period the adjustmentsare identified and were insignificant for the periods presented.Our express delivery services contracts with customers include only one performance obligation. Performance obligations are generallyshort-term in nature and with transit days being a week or less for each parcel. We recognize revenue over time as customers receive the benefit ofour services as the goods are delivered from one location to another. As such, express delivery services revenue is recognized proportionally as aparcel moves from origin to destination and the related costs are recognized as incurred. We use an output method of progress based on time-in-transit as it best depicts the transfer of control to the customer.A minor percentage of our express delivery services are performed by our self-operated service stations for direct customers (“directcustomers express delivery services”) who are the senders of the parcels. We are directly responsible for the parcel from the point it is receivedfrom the senders all the way through the point when the parcels are delivered to end recipients. Direct customer express delivery services revenueis recognized proportionally as parcels are transported to end recipients and the related costs are recognized as incurred.Express delivery services revenue also includes initial non-refundable franchise fees. The initial non-refundable franchise fees arerecognized over the franchise period due to the franchisees’ rights to access our logos and brand names which are considered symbolic intellectualproperties. The initial non-refundable franchise fees are negotiated under a separate agreement and represent a very small percentage of revenue forall periods presented.LeasesWe determine whether an arrangement is or contains a lease at inception. Our accounting policy effective on the adoption date of ASU2016-02 is as follows:Sales-type, direct financing and operating leases as LessorWe classify a lease as a sales-type lease when the lease meets any one of the following criteria at lease commencement:a.The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.b.The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.c.The lease term is for a major part of the remaining economic life of the underlying asset.d.The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in thelease payments equals or exceeds substantially all of the fair value of the underlying asset.e.The underlying asset is of such a specialized nature that it is expected to have no alternative use to our company at the end of thelease term.For sales-type leases, when collectability is probable at lease commencement, we derecognize the underlying asset and recognize the netinvestment in the lease which is the sum of the lease receivable. Initial direct costs are expensed, at the commencement date, if the fair value of theunderlying asset is different from its carrying amount. Interest income is recognized in financing income over the lease term using the interestmethod.When none of the criteria above are met, we classify a lease as either a direct financing lease or an operating lease. We will classify thelease as a direct financing lease if (i) the present value of the sum of lease payments and any residual value guaranteed by the lessee and any otherthird party unrelated to us equals or exceeds substantially all the fair value of the underlying asset; and (ii) it is probable that we will collect thelease payments plus any amount necessary to satisfy a residual value guarantee. If both of the criteria above are not met, we will classify the leaseas an operating lease. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 123 of 250 Table of Contents116The new standard requires lessors within the scope of ASC 942, Financial Services – Depository and Lending, to classify principalpayments received from sales-type and direct financing leases in investing activities in the statement of cash flows. We continue to present cashreceipts from sales-type and direct financing leases as an investing cash inflow.Sale-leaseback transactions as LessorWhen we enter into sale-leaseback transactions as lessor, we assess whether a contract exists and whether the seller-lessee satisfies aperformance obligation by transferring control of an asset when determining whether the transfer of an asset shall be accounted for as a sale of theasset. If the seller-lessee transfers the control of the leased asset to us, it accounts for the purchase of the leased asset in accordance with ASC360.The subsequent leaseback of the asset is accounted for in accordance with ASC842 in the same manner as any other lease. If the seller-lessee doesnot transfer the control of the leased asset to us, it is a failed sales-leaseback transaction which is accounted for as a financing. We do not recognizethe transferred asset and record the amounts paid as other financing receivables for which the current portion is included in “Prepayments and othercurrent assets” and the non-current portion is included in “Other non-current assets” in our consolidated balance sheets.Financing lease and operating lease as Lessee We classify a lease as a financing lease when the lease meets any one of the criteria specified as (a) to (e) in the “Sales-type, directfinancing and operating leases as Lessor” policy at lease commencement. When none of the criteria are met, we classify a lease as an operatinglease.For both operating and financing leases, we record a lease liability and corresponding right-of-use (ROU) asset at lease commencement.Lease terms are based on the non-cancellable term of the lease and may contain options to extend the lease when it is reasonably certain that wewill exercise the option. Lease liabilities represent the present value of the lease payments not yet paid, discounted using the discount rate for thelease at lease commencement.We estimate its incremental borrowing rate for its leases at the commencement date to determine the present value of future leasepayments when the implicit rate is not readily determinable in the lease. In estimating its incremental borrowing rate, we consider its credit ratingand publicly available data of borrowing rates for loans of similar amount, currency and term as the lease.Operating leases are presented as “Operating lease ROU assets” and “Operating lease liabilities”. Lease liabilities that become due withinone year of the balance sheet date are classified as current liabilities. At lease commencement, operating lease ROU assets represent the right to useunderlying assets for their respective lease terms and are recognized at amounts equal to the lease liabilities adjusted for any lease payments madeprior to the lease commencement date, less any lease incentives received and any initial direct costs incurred by us.After lease commencement, operating lease liabilities are measured at the present value of the remaining lease payments using thediscount rate determined at lease commencement. Operating lease ROU assets are measured at the amount of the lease liabilities and furtheradjusted for prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs andimpairment of the ROU assets, if any. Operating lease expense is recognized as a single cost on a straight-line basis over the lease term.Financing lease ROU assets are included in “Property and equipment” and “Financing lease liabilities” on the consolidated balance sheet.Lease liabilities that become due within one year of the balance sheet date are classified as current liabilities. Financing lease ROU assets areamortized on a straight-line basis from the lease commencement date. After initial measurement, the carrying value of financing lease liabilities areincreased to reflect interest at a constant rate and reduced to reflect any lease payments made during the period.Leases that have a term of 12 months or less at the commencement date (“short-term leases”) are not included in operating lease ROUassets and operating lease liabilities. Lease expense for the short-term leases are recognized on a straight-line basis over the lease term. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 124 of 250 Table of Contents117Sale-leaseback transactions as LesseeWhen we enter into sale-leaseback transactions as a seller-lessee, it applies the requirements in ASC 606 by assessing whether a contractexists and whether it satisfies a performance obligation by transferring control of an asset when determining whether the transfer of an asset shallbe accounted for as a sale of the asset. If we transfer the control of an asset to the buyer-lessor, it accounts for the transfer of the asset as a sale andrecognizes a corresponding gain or loss on disposal. The subsequent leaseback of the asset is accounted for in accordance with ASC842 in the samemanner as any other lease. If we do not transfer the control of an asset to the buyer-lessor, the failed sale-leaseback transaction is accounted for as afinancing. We do not derecognize the transferred asset and accounts for proceeds received as borrowings for which the current portion is includedin “Accrued expenses and other liabilities” and the non-current portion is included in “Other non-current liabilities” in the consolidated balancesheets.Going ConcernThe continuous negative impact of COVID-19 in 2022 and intense market competition had an adverse impact on our business operationsand liquidity. We have incurred net losses from continuing operations of RMB1,464.8 million (US$212.4 million) and generated negative cashflows from continuing operating activities of RMB1,051.7 million (US$152.5 million) during the year ended December 31, 2022, and had anaccumulated deficit of RMB18,934.9 million (US$2,745.3 million) and a working capital deficiency of RMB934.7 million (US$135.5 million) asof December 31, 2022. As of December 31, 2022, the balance of our total cash and cash equivalents, current restricted cash and short-terminvestments was RMB1,657.9 million (US$240.4 million).These adverse conditions indicate that there is substantial doubt about our ability to continue as a going concern. Our management hasimplemented cost saving plans to reduce discretionary operational expenses and secure additional financing including, but not limited to, obtainingadditional credit facilities from banks in the normal course of business, and re-financing certain existing notes payables. In the first quarter of 2023,we have successfully obtained new financing of RMB137.0 million (US$19.9 million) short-term bank loans on credit maturing in one year, whichallows us to enhance liquidity. Although we have achieved encouraging initial results from our plans to reduce our costs and expenditures in thefirst quarter of 2023 for certain business segments, if we are unsuccessful in our efforts or are unable to raise additional financing in the near term,we may be required to significantly reduce or scale back our operations. There are uncertainties as to whether, and there can be no assurance thatthe aforesaid plans can be successfully executed. The accompanying consolidated financial statements have been prepared assuming we willcontinue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course ofbusiness. The consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or theamounts and classifications of liabilities that may be necessary should we be unable to continue as a going concern.Other EstimatesIn addition to the critical accounting estimates described above, there are other accounting estimates within our consolidated financialstatements. Management believes the current assumptions and other considerations used to estimate amounts reflected in our consolidated financialstatements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amountsreflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results ofoperations or financial condition. See Note 2 to the consolidated financial statements for further information on significant accounting policies thatimpact us. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 125 of 250 Table of Contents118ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementThe following table sets forth certain information relating to our current directors, executive officers and senior management as of the dateof this annual report:Name Age Position/TitleShao-Ning Johnny Chou 61 Director, chairman and chief executive officerLin Wan 47 DirectorXiao Hu 43 DirectorGeorge Chow 55 Director, chief strategy and investment officerWenbiao Li 56 DirectorYing Wu 63 DirectorKlaus Anker Petersen 50 DirectorGloria Fan 58 Chief financial officerMangli Zhang 66 Senior vice president, general manager of supply chain management service lineXiaoqing Wang 42 Vice president, general manager of global service lineTao Liu 46Senior vice president, general manager of freight service lineYanbing Zhang 47 Senior vice president of engineering, general manager of cloud service lineJimei Liu 51 Senior vice president of human resources and administrationMr. Shao-Ning Johnny Chou is our founder, and has served as our chairman and chief executive officer since 2007. Prior to foundingour company, he served as a global vice president and Greater China president of Google with responsibility for Google’s sales and marketing inGreater China from 2005 to 2006. From 1996 to 2005, Mr. Chou served as president of UTStarcom China with responsibility for China operations.From 1986 to 1996, Mr. Chou served as a director of wireless software and system development with AT&T Bell Laboratory. From 1978 to 1980,Mr. Chou studied computer science at Fudan University. Mr. Chou earned a bachelor’s degree in science, specializing in electrical engineering,from City College of New York, a master’s degree in science, specializing in engineering science, from Princeton University, and an MBA fromRutgers University. Mr. Chou was nominated by himself as a Founder Director under our amended and restated memorandum and articles ofincorporation.Mr. Lin Wan has been a director of our company since March 2018. Mr. Wan has been the president of Cainiao Network, where heoversees strategic planning and business operation, since January 2017. Before that, Mr. Wan had been a vice president of Cainiao Network since2014. Prior to joining Cainiao Network, he served as director of global transportation strategy of Amazon. He received a Ph.D. in operationalresearch & industrial engineering from The University of Texas at Austin.Ms. Xiao Hu has been a director of our company since February 2022. Ms. Hu is a managing director of Strategic Investments at AlibabaGroup Holding Limited. She joined Alibaba in 2017 and previously served as an investment director of Strategic Investments. She served as vicepresident and then director at Merrill Lynch (Asia Pacific) Limited from 2012 to 2017 and associate and then vice president at Citigroup GlobalMarkets Asia Limited from 2008 to 2012. She also served as an assistant equity research analyst at China International Capital Corporation Limitedfrom 2003 to 2006 and an auditor with KPMG Huazhen LLP from 2002 to 2003. Ms. Hu holds an MBA degree from the Hong Kong University ofScience and Technology and a bachelor’s degree from Peking University.Mr. George Chow joined as our chief strategy and investment officer in 2017 and has served as our director since September 2017.Mr. Chow brings with him over 22 years of experience in investment banking, trading and risk management. From 2004 to 2017, he served as amanaging director at Credit Suisse, having held several senior positions in securities and investment banking division, including most recently theCo-Head of Investment Banking and Capital Markets for Greater China. He also worked for UBS and Merrill Lynch. Mr. Chow received an MBAin finance from the Stern School of Business at New York University. He is Mr. Shao-Ning Johnny Chou’s brother. Mr. Chow was nominated byMr. Shao-Ning Johnny Chou as a Founder Director under our amended and restated memorandum and articles of incorporation. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 126 of 250 Table of Contents119Mr. Wenbiao Li has served as our independent director since September 2017. Mr. Li has served as a managing director of WaldenInternational since 2008 and as a managing partner of Kaiwu Walden Capital, L.P. since 2013. From 2004 to 2007, Mr. Li served as a director ofmobile engineering at Google. From 2000 to 2003, Mr. Li served as a vice president of engineering with Skire, Inc. From 1997 to 1999, Mr. Liserved as a director of engineering at Internet Image, Inc. Mr. Li received a bachelor’s degree in computer engineering from Huazhong Universityof Science and Technology, a master’s degree in computer science from the University of San Francisco, and an EMBA degree from Golden GateUniversity.Mr. Ying Wu has served as our independent director since May 2022. Mr. Wu currently serves as a global board member of The NatureConservancy (TNC), and a board member of TNC China. Ying also serves as a founding board member of the Future Forum in China. He has beenthe president of China Capital Management Limited since October 2008. Mr. Wu is currently the chairman of ZJBC Information Technology Co.,Ltd. (SZSE: 000889), an independent non-executive director of JD Health International Inc. (HKSE: 6618), an independent non-executive directorof Zall Smart Commerce Group Ltd. (HKSE: 2098), and chairman of the board of supervisors of Huayi Brothers Media Corporation Ltd. (SZSE:300027). Mr. Wu was an independent non-executive director of Zhong An Online P&C Insurance Co., Ltd, (HKSE: 6060), a director of HyUnionHoldings Co., Ltd. (SZSE: 002537), an independent director of TCL Corporation Ltd. (SZSE: 000100), a director of Joyoung Co., Ltd. (SZSE:002242), and an independent director of Guangzhou TechLong Packaging Machinery Co., Ltd. (SZSE: 002209). Mr. Wu was also the co-founderof UTStarcom (NASDAQ: UTSI), a global telecommunication infrastructure business and served as Chairman and CEO of UTStarcom China fortwelve years. He obtained a bachelor’s degree in electronic engineering from Beijing Institute of Technology, a master’s degree in science and adoctor’s degree (honoris causa) from New Jersey Institute of Technology.Mr. Klaus Anker Petersen has served as our independent director since May 2022. Mr. Petersen is currently the chairman and owner ofLane House Limited, a multi-brand specialty retailer that supports Western and Chinese companies develop retail presence in China. He is also theCEO and co-founder of Green Planet Foods, an innovator of plant-based food and beverage products, as well as a co-founder and investor inBrandhouse Group, a cross-border e-commerce parcel delivery business that focuses on Scandinavian markets. From 2014 to 2015, Mr. Petersenwas a managing director of Sunshine Insurance Group, an insurance, healthcare and asset management services provider. From 2004 to 2014 heheld various roles as associate, vice president and executive director at Morgan Stanley in London and Beijing. From 1998 to 2003, he worked asan associate and engagement manager with McKinsey & Company. Mr. Petersen earned a master’s degree in science in engineering and appliedmathematics from the Technical University of Denmark, and an MBA from INSEAD in 2003.Ms. Gloria Fan currently services as our chief financial officer. Prior to joining us in November 2019, she served as CFO of CorporateVisions, Inc., a software as a service company, from September 2015. Previously Ms. Fan spent nearly 10 years as CFO for a number of cleantechnology companies, including Bridgelux, Inc. and ClearEdge Powers, Inc. From 1999 to 2006, Ms. Fan worked at UTStarcom Inc. where sheheld senior management roles including Vice President of Finance and Global Business Operations and oversaw the company’s listing on theNASDAQ. Ms. Fan passed the U.S. CPA exam, and she holds a Master of Science degree from Purdue University.Ms. Mangli Zhang currently serves as the senior vice president and general manager of our supply chain management service line, andserved as our vice president of operations from 2007 to 2011. Prior to joining us in 2007, Ms. Zhang held various positions with UTStarcom Chinaas manager of the contract execution department, director of business operations, and vice president of business operations in China from 1996 to2007. From 1993 to 1996, Ms. Zhang served as a department manager of Zhejiang Province Economic and Construction Development ConsultingCompany. From 1982 to 1993, Ms. Zhang served as a product development engineer in the technology division, and served as vice president of thequality management division, of Hangzhou Wireless Equipment Factory. Ms. Zhang received a bachelor’s degree in wireless electronic engineeringfrom Zhejiang University.Mr. Xiaoqing Wang currently serves as the vice president and general manager of our global service line. Prior to that, he had beengeneral manager of our express service line since the end of 2020, general manager of our company’s Jiangsu province branch since 2009,spearheading BEST Express and other service lines in Jiangsu province, China. From 2004 to 2009, Mr. Wang was senior sales manager of theNanjing branch of UTStarcom China. Mr. Wang received a bachelor’s degree in economics and management from Nanjing Agricultural Universityand an EMBA degree from the University of Texas. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 127 of 250 Table of Contents120Mr. Tao Liu currently serves as the senior vice president and general manager of our freight service line. Before that, between 2009 and2017, he had held various positions with our company as deputy general manager of our freight service line, general manager of our Shanghaibranch, and general manager of our Shandong branch. Prior to joining us, Mr. Liu served as a deputy general manager at Shandong ZitongInternational Logistics Company from 2007 to 2009. From 2000 to 2004, Mr. Liu held various positions with Zhilian Logistics (a group companyof China Kejian Co., Ltd.) as assistant to general manager, general manager of its Jinan branch, general manager of the Northern China region, andthen general manager of Shandong Zhongtie Modern Logistics and Technology Co. Ltd., a joint venture established by Zhilian Logistics and ChinaRailway Jinan Group. Mr. Liu received a bachelor’s degree in international business administration from Shandong University of Finance andEconomics.Mr. Yanbing Zhang currently serves as our senior vice president of engineering and the general manager of our cloud service line. Priorto joining us, Mr. Zhang served as a senior project manager at the IT department of UTStarcom China from 2004 to 2007. From 2003 to 2004,Mr. Zhang served as a project manager at China TravelSky Holding Company. Mr. Zhang received a bachelor’s degree in computer science fromthe National University of Defense Technology and a master’s degree in computer science from the University of Karlsruhe (now known as theKarlsruhe Institute of Technology).Ms. Jimei Liu currently serves as our senior vice president of human resources and administration. Prior to joining us, Ms. Liu served asthe director of human resources at UTStarcom China from 2000 to 2007. From 1996 to 2000, Ms. Liu served as the training supervisor at Ting HsinInternational Group. Ms. Liu received a bachelor’s degree in machinery design and manufacturing from Central South University and an executivemaster of business administration degree from the University of Texas at Arlington.B.CompensationFor the year ended December 31, 2022, we paid an aggregate of approximately US$4.69 million in cash to our executive officers anddirectors. Our PRC subsidiaries and consolidated affiliated entities are required by law to make contributions equal to certain percentages of eachemployee’s salary for his or her pension insurance, medical insurance, housing fund, unemployment insurance and other statutory benefits. Otherthan the above-mentioned statutory contributions mandated by applicable PRC law, we have not set aside or accrued any amount to providepension, retirement or other similar benefits to our executive officers and directors. No executive officer is entitled to any severance benefits upontermination of his or her employment with our company except as required under applicable PRC law.Share Incentive Plans2008 Equity and Performance Incentive PlanOur 2008 equity and performance incentive plan provides for the grant of options or restricted share units, which we refer to collectivelyas awards. Up to 20,934,684 ordinary shares upon exercise of awards may be granted under the 2008 equity and performance incentive plan. Webelieve that the 2008 equity and performance incentive plan will aid us in attracting, motivating and retaining employees, non-employee directors,officers and consultants through the granting of awards.AdministrationThe 2008 equity and performance incentive plan is administered by our board of directors or our compensation committee or any personto whom the board shall delegate any of its authority under the plan. The plan administrator is authorized to interpret the plan and to determine theprovisions of each award. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 128 of 250 Table of Contents121Change in ControlIn the event of a change in control or another transaction having a similar effect, then the plan administrator may, in its sole discretion,adjust the number of ordinary shares subject to options then held by a participant in the plan as needed to prevent dilution or enlargement of theparticipant’s rights that otherwise would result from such event. The plan administrator may also, in its sole direction, provide in substitution forthe participant’s rights such alternative consideration as it may determine to be equitable in the circumstances. A “change of control” under the2008 equity and performance incentive plan is defined as (i) a sale of our company for cash consideration approved by our shareholders, (ii) ourcompany is merged into or with another entity, resulting in our original shareholders, namely, Mr. Shao-Ning Johnny Chou, Mr. George Chow,Mr. Shaohan Joe Chou, Mr. David Hsiaoming Ting and The 2012 MKB Irrevocable Trust ceasing to own, collectively with their affiliates, thelargest percentage of the outstanding securities of our company, (iii) the sale or transfer of all or substantially all of our assets to another entity,other than one of our subsidiaries, resulting in our original shareholders, namely, Mr. Shao-Ning Johnny Chou, Mr. George Chow, Mr. Shaohan JoeChou, Mr. David Hsiaoming Ting and The 2012 MKB Irrevocable Trust ceasing to own, collectively with their affiliates, the largest percentage ofthe outstanding securities of our company, or (iv) our shareholders approve the liquidation or dissolution of our company.TermThe 2008 equity and performance incentive plan expired in June 2018. Awards made under the plan on or prior to the date of itstermination will continue in effect subject to the terms of the plan and the award.Vesting ScheduleIn general, the plan administrator determines, or the award agreement specifies, the vesting schedule.Amendment and Termination of PlanOur board of directors may at any time amend, alter or discontinue the 2008 equity and performance incentive plan, subject to certainexceptions.Granted OptionsAs of February 28, 2023, we had outstanding options with respect to 2,489,430 ordinary shares that have been granted to our directors,officers, employees and consultants, or the option holders, under the 2008 equity and performance incentive plan.The table below summarizes, as of February 28, 2023, the options we had granted to our directors and executive officers under the 2008equity and performance incentive plan: Number of shares underlying Exercise priceName options granted(US$ per share)Grant dateExpiration dateGeorge Chow* 0.75 June 30, 2017 June 30, 2032Mangli Zhang* 0.75 Various dates from June 30, 2008to September 30, 2017 Various dates from June 30, 2018to September 30, 2032Xiaoqing Wang* 0.50 or 0.75 Various dates from December 31,2009 to September 30, 2017 Various dates from December 31,2024 to September 30, 2032Tao Liu*0.50 or 0.75Various dates from June 30, 2009to September 30, 2017Various dates from June 30, 2024to September 30, 2032Jimei Liu* 0.01 or 0.75 Various dates from June 30, 2008to September 30, 2017 Various dates from June 30, 2023to September 30, 2032Ying Wu* 0.75 September 30, 2017 September 30, 2032* Less than 1% of our total ordinary shares outstanding on an as-converted basis. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 129 of 250 Table of Contents122All of our option grant agreements under the 2008 equity and performance incentive plan provide that the options may not be exercisedbefore the first date on which the ADSs are publicly traded on the New York Stock Exchange, or the listing date. In July 2017, we granted aconditional, one-time waiver of this restriction for certain option holders, and pursuant to this waiver, vested options with respect to an aggregate of12,599,520 ordinary shares were exercised by their holders in July 2017. These option holders have paid the exercise price to us in full.2017 Equity Incentive PlanIn September 2017, we adopted our 2017 equity incentive plan, pursuant to which equity-based awards may be granted to eligibleparticipants. The purpose of the 2017 equity incentive plan is to attract and retain the services of key personnel and to provide means for directors,officers, employees, consultants and advisors to acquire and maintain an interest in us, which interest may be measured by reference to the value ofClass A ordinary shares.The 2017 equity incentive plan provides for an aggregate amount of no more than 10,000,000 Class A ordinary shares to be issuedpursuant to equity-based awards granted under the plan. In addition, the number of Class A ordinary shares available for issuance under the 2017equity incentive plan automatically increased by a maximum of 2% of the total number of Class A ordinary shares issued and outstanding at theend of preceding calendar year on January 1, 2019 and will automatically be increased on every January 1 thereafter for eight years, provided thatthe maximum aggregate number of Class A ordinary shares which may be subject to awards granted under the plan does not exceed 10% of thetotal number of Class A ordinary shares issued and outstanding at the end of the preceding calendar year. As a result, as of January 1, 2022, themaximum aggregate number of Class A ordinary shares which may be issued pursuant to all awards under the 2017 equity incentive plan has beenincreased to 25,564,845. No more than 10,000,000 Class A ordinary shares may be issued upon the exercise of incentive stock options. Generally,if any award (or portion thereof) under the 2017 equity incentive plan terminates, expires, lapses or is cancelled for any reason without being vestedor exercised, as applicable, the Class A ordinary shares subject to such award will again be available for future grant.Granted Restricted Share UnitsAs of February 28, 2023, we had outstanding restricted share units with respect to 6,360,395 ordinary shares that have been granted to ourdirectors, officers, employees and consultants under the 2017 equity incentive plan. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 130 of 250 Table of Contents123The table below summarizes, as of February 28, 2023, the share-based awards we had granted to our directors and executive officers underthe 2017 equity incentive plan, which were all restricted share units: Number of restricted share unitsName grantedGrant date Expiration dateShao-Ning Johnny Chou* Various dates from June 1, 2018 to January 1,2022 Various dates from June 1, 2028 to January 1,2032George Chow* Various dates from March 1, 2018 to March 1,2022 Various dates from March 1, 2028 to March 1,2032Wenbiao Li* Various dates from February 1, 2018 to February1, 2023 Various dates from February 1, 2028 to February1, 2033Ying Wu* Various dates from July 31, 2022 to February 1,2023 Various dates from July 31, 2032 to February 1,2033Klaus Anker Petersen* Various dates from July 31, 2022 to February 1,2023 Various dates from July 31, 2032 to February 1,2033Gloria Fan* Various dates from November 30, 2019 to March1, 2022 Various dates from November 30, 2029 to March1, 2032Mangli Zhang* Various dates from March 1, 2018 to March 1,2022 Various dates from March 1, 2028 to March 1,2032Xiaoqing Wang* Various dates from March 1, 2018 to March 1,2022 Various dates from March 1, 2028 to March 1,2032Tao Liu*Various dates from March 1, 2018 to March 1,2022Various dates from March 1, 2028 to March 1,2032Yanbing Zhang* Various dates from March 1, 2018 to March 1,2022 Various dates from March 1, 2028 to March 1,2032Jimei Liu* Various dates from March 1, 2018 to March 1,2022 Various dates from March 1, 2028 to March 1,2032* Less than 1% of our total ordinary shares outstanding on an as-converted basis.AdministrationThe 2017 equity incentive plan will be administered by our board of directors, our compensation committee, or any other committee ofboard of directors or any member(s) of the board of directors or officer(s) who have been delegated any authority pursuant to the 2017 equityincentive plan. The plan administrator is authorized to interpret the plan and to determine the provisions of each award including the number ofshares covered, the type of award, the exercise price, if applicable, and the vesting schedule. In addition, the plan administrator may (i) select therecipients of awards, (ii) prescribe the forms of award agreements and amend any award agreement (subject to certain limitations), (iii) allow aparticipant to satisfy minimum tax withholding obligations by withholding shares to be issued pursuant to an award and (iv) to make otherdecisions and determinations as provided in the 2017 equity incentive plan. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 131 of 250 Table of Contents124Change in ControlIn the event of a change in control, the plan administrator may, in its sole discretion, (i) adjust the number and kind of shares and pricessubject to awards then held by a participant in the 2017 equity incentive plan in connection with the assumption, conversion or replacement of anyaward (as the plan administrator determines to be reasonable, equitable and appropriate) (ii) accelerate the vesting, in whole or in part, of anyaward, or (iii) purchase any award for an amount of cash or shares (in accordance with the terms of the 2017 equity incentive plan). In the event asuccessor or surviving company refuses to assume, convert or replace an award, then the outstanding awards shall fully vest. A “change of control”under the 2017 equity incentive plan is defined as (i) an amalgamation, arrangement, merger, consolidation or scheme of arrangement in which ourcompany is not the surviving entity, except for a transaction the principal purpose of which is to change the jurisdiction in which our company isincorporated or which following such transaction the holders of our company’s voting shares immediately prior to such transaction own more thanfifty percent (50%) of the voting shares of the surviving entity; (ii) the sale, transfer or other disposition of all or substantially all of the assets ofour company (other than to one of our subsidiaries); (iii) the completion of a voluntary or insolvent liquidation or dissolution of our company;(iv) any takeover, reverse takeover, scheme of arrangement, or series of related transactions culminating in a reverse takeover or scheme ofarrangement (including, but not limited to, a tender offer followed by a takeover or reverse takeover) in which our company survives but (A) theshares of our company outstanding immediately prior to such transaction are converted or exchanged by virtue of the transaction into otherproperty, whether in the form of shares, securities, cash or otherwise, or (B) the shares carrying more than 50% of the total combined voting powerof our company’s then issued and outstanding shares are transferred to a person or persons different from those who held such shares immediatelyprior to such transaction culminating in such takeover, reverse takeover or scheme of arrangement, or (C) our company issues new voting shares inconnection with any such transaction such that holders of our company’s voting shares immediately prior to the transaction no longer hold morethan 50% of the voting shares of our company after the transaction; or (v) the acquisition in a single or series of related transactions by any personor related group of persons (other than employees of our company or any of its affiliates or entities established for the benefit of the employees ofour company or any of its affiliates) of (A) control of our board of directors or the ability to appoint a majority of the members of our board ofdirectors, or (B) beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of shares carrying more than 50% of the totalcombined voting power of our company’s then issued and outstanding shares.TermUnless terminated earlier, the 2017 equity incentive plan will expire ten years from the date the 2017 equity incentive plan becomeseffective. Awards made under the 2017 equity incentive plan on or prior to the date of its termination will continue in effect subject to the terms ofthe 2017 equity incentive plan and the applicable award agreement.Vesting ScheduleIn general, the plan administrator determines the vesting schedule of each award as evidenced by an award agreement. The planadministrator may accelerate the vesting of any award.Amendment and Termination of PlanOur board of directors, in its sole discretion, may at any time amend, alter or discontinue the 2017 equity incentive plan, subject to certainexceptions.BEST Asia PlanTo better incentivize contribution to the growth our BEST Global business, in December 2020, BEST Asia Inc., our wholly-ownedCayman Islands subsidiary that holds our Southeast Asian business, adopted the 2020 Equity Incentive Plan, or the BEST Asia Plan, pursuant towhich BEST Asia Inc. may issue a certain maximum number of ordinary shares pursuant to awards granted thereunder. The BEST Asia Plan isadministered by the board of directors of BEST Asia Inc. or a committee or a member of the board of directors designated by the board of directorsof BEST Asia Inc., which shall determine the participants to receive awards, the type and number of awards to be granted to each participant, andthe terms and conditions of each grant. Under the BEST Asia Plan, BEST Asia Inc. may grant dividend equivalents, options, restricted shares,restricted share units, share appreciation rights or share payments to the eligible participants, including employees, directors and consultants ofBEST Asia Inc. and its subsidiaries, parents and “related entities” as defined in the BEST Asia Plan. The term of the awards granted under theBEST Asia Plan may not exceed ten years from the date of grant, unless extended by the board of directors of BEST Asia Inc. As of February 28,2023, we had issued options to purchase ordinary shares of BEST Asia Inc. to certain employees, including certain of our directors and executiveofficers, under the BEST Asia Plan. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 132 of 250 Table of Contents125BEST CloudSoft PlanTo better incentivize contribution to the growth our SaaS software service business, in March 2022, BEST CloudSoft Inc., our wholly-owned Cayman Islands subsidiary that holds our SaaS software service business, adopted the 2022 Equity Incentive Plan, or the BEST CloudSoftPlan, pursuant to which BEST CloudSoft Inc. may issue a certain maximum number of ordinary shares pursuant to awards granted thereunder. TheBEST CloudSoft Plan is administered by the board of directors of BEST Inc. or the compensation committee or a member of the board of directorsdesignated by the board of directors of BEST Inc., which shall determine the participants to receive awards, the type and number of awards to begranted to each participant, and the terms and conditions of each grant. Under the BEST CloudSoft Plan, BEST CloudSoft Inc. may grant options,restricted shares, restricted share units, dividend equivalents, share appreciation rights and share payments to eligible participants, includingemployees, consultants and directors of BEST CloudSoft Inc. and its subsidiaries, parents and “related entities” as defined in the BEST CloudSoftPlan. The term of the awards granted under the BEST CloudSoft Plan may not exceed ten years from the date of grant, unless extended by theboard of directors of BEST Inc. As of February 28, 2023, we had issued options to purchase ordinary shares of BEST CloudSoft Inc. to certainemployees, including certain of our directors and executive officers, under the BEST CloudSoft Plan.C.Board PracticesBoard of DirectorsPursuant to our ninth amended and restated articles of association currently in effect, our board of directors currently consists of sevendirectors, including (i) Mr. Shao-Ning Johnny Chou and Mr. George Chow, or the Founder Directors, who were nominated by our founder, Mr.Shao-Ning Johnny Chou; (ii) Mr. Lin Wan and Ms. Xiao Hu, or collectively, the Alibaba Directors, who were nominated by Alibaba (includingCainiao Network); and (iii) Mr. Wenbiao Li, Mr. Ying Wu and Mr. Klaus Anker Petersen, who are independent directors. As long as Mr. Shao-NingJohnny Chou is a director, he will serve as the chairman of the board.Unless otherwise determined by our shareholders in a general meeting, our board will consist of not less than three directors.There is no requirement for our directors to own any shares in our company in order for them to qualify as a director.Committees of the Board of DirectorsOur board of directors has established an audit committee, a compensation committee, and a corporate governance and nominatingcommittee. As a foreign private issuer, we are permitted to follow home country corporate governance practices under the Corporate GovernanceRules of the New York Stock Exchange.Audit CommitteeOur audit committee consists of Mr. Ying Wu, Mr. Klaus Anker Petersen and Mr. Wenbiao Li. Mr. Ying Wu is the chairman of our auditcommittee. Mr. Ying Wu satisfies the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Each of Mr.Ying Wu, Mr. Klaus Anker Petersen and Mr. Wenbiao Li satisfies the requirements for an “independent director” within the meaning of Section303A of the Corporate Governance Rules of the New York Stock Exchange, or the NYSE, and meets the criteria for independence set forth in Rule10A-3 of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. Our audit committee consists solely of independentdirectors.The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our auditcommittee is responsible for, among other things:●selecting, and evaluating the qualifications, performance and independence of, the independent auditor;●pre-approving or, as permitted, approving auditing and non-auditing services permitted to be performed by the independent auditor;●considering the adequacy of our internal accounting controls and audit procedures;●reviewing with the independent auditor any audit problems or difficulties and management’s response; Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 133 of 250 Table of Contents126●reviewing and approving related party transactions between us and our directors, senior management and other persons specified inItem 7B of Form 20-F;●reviewing and discussing the quarterly financial statements and annual audited financial statements with management and theindependent auditor;●establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting,internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regardingquestionable accounting or auditing matters;●meeting separately, periodically, with management, internal auditors and the independent auditor; and●reporting regularly to the full board of directors.Compensation CommitteeOur compensation committee consists of Mr. Ying Wu, Mr. Lin Wan and Mr. George Chow. Mr. Ying Wu is the chairman of ourcompensation committee. Mr. Ying Wu satisfies the requirements for an “independent director” within the meaning of Section 303A of the NYSECorporate Governance Rules.Our compensation committee is responsible for, among other things:●reviewing, evaluating and, if necessary, revising our overall compensation policies;●reviewing and evaluating the performance of our directors and executive officers and determining the compensation of our directorsand executive officers;●reviewing and approving our executive officers’ employment agreements with us;●determining performance targets for our executive officers with respect to our annual bonus plan and share incentive plans;●administering our share incentive plans in accordance with the terms thereof; and●carrying out such other matters that are specifically delegated to the compensation committee by our board of directors from time totime.Corporate Governance and Nominating CommitteeOur corporate governance and nominating committee consists of Mr. Shao-Ning Johnny Chou, Mr. Lin Wan and Mr. Wenbiao Li.Mr. Shao-Ning Johnny Chou is the chairman of our corporate governance and nominating committee. Mr. Wenbiao Li satisfies the requirements foran “independent director” within the meaning of Section 303A of the NYSE Corporate Governance Rules.Our corporate governance and nominating committee is responsible for, among other things:●selecting the board nominees for election by the shareholders or appointment by the board;●periodically reviewing with the board the current composition of the board with regards to characteristics such as independence,knowledge, skills, experience and diversity;●making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of theboard; and●advising the board periodically with regards to significant developments in corporate governance law and practices as well as ourcompliance with applicable laws and regulations, and making recommendations to the board on corporate governance matters. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 134 of 250 Table of Contents127Duties of DirectorsUnder Cayman Islands law, all of our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly anda duty to act in good faith and in a manner they believe to be in our best interests. Our directors must also exercise their powers only for a properpurpose. Our directors also owe to our company a duty to act with skill and care. It was previously considered that a director need not exhibit in theperformance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience.However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and theseauthorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with ourmemorandum and articles of association, as amended and restated from time to time. Our company has the right to seek damages if a duty owed byany of our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a dutyowed by our directors is breached.A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required todeclare the nature of his interest at a meeting of our directors. Subject to the rules of the New York Stock Exchange and disqualification by thechairman of the relevant board meeting, a director may vote in respect of any contract, proposed contract, or arrangement notwithstanding that hemay be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors at whichany such contract or proposed contract or arrangement is considered. Our directors may exercise all the powers of our company to borrow money,and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, and issue debentures,debenture stock, bonds or other securities whenever outright or as collateral security for any debt, liability or obligation of the company or of anythird party.Terms of Directors and OfficersMr. Shao-Ning Johnny Chou may remove any Founder Director from office by written notice to us; Alibaba may remove any AlibabaDirector from office by written notice to us; and our shareholders may remove any of our directors from office by a special resolution. In addition,a director will cease to be a director if he or she becomes bankrupt or makes any arrangement or composition with his or her creditors, dies or isfound to be or becomes of unsound mind, resigns, or is absent from meetings of the board for three consecutive meetings without special leave ofabsence from the board and the board resolves that his or her office be vacated.If a Founder Director ceases to be a director for any reason, Mr. Shao-Ning Johnny Chou will have the right to appoint another FounderDirector as long as Mr. Shao-Ning Johnny Chou and his affiliates hold any of our shares. If an Alibaba Director ceases to be a director for anyreason, Alibaba will have the right to appoint another Alibaba Director as long as Alibaba (including Cainiao Network) and their affiliates hold anyof our shares. If the aggregate number of shares held by Alibaba (including Cainiao Network) and their affiliates represent less than 10% of ourtotal outstanding shares, Alibaba will not be able to exercise such appointment right if there is one remaining Alibaba Director on our board, andAlibaba may be required to remove one Alibaba Director if there are two Alibaba Directors on our board.By special resolution, our shareholders may appoint any person to be a director, either to fill a vacancy resulting from the removal of adirector by special resolution or as an addition to the existing board. Our board may, by the affirmative vote of a simple majority of the remainingdirectors present and voting at a board meeting, appoint any person as a director in order to fill a vacancy other than as a result of the removal of adirector by our shareholders, Mr. Shao-Ning Johnny Chou or Alibaba.D.EmployeesSee “Item 4. Information on the Company—B. Business Overview—Employees.”E.Share OwnershipThe following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the ExchangeAct, of our ordinary shares, as of February 28, 2023 by:●each of our directors and executive officers;●our directors and executive officers as a group; and Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 135 of 250 Table of Contents128●each person known to us to own beneficially 5.0% or more of our ordinary shares.Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to thesecurities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included sharesthat the person has the right to acquire within 60 days, including through the exercise of any option or other right or the conversion of anyother security.The calculations in the table below are based on (i) 252,010,824 Class A ordinary shares, (ii) 94,075,249 Class B ordinary shares, and (iii)47,790,698 Class C ordinary shares, that were issued and outstanding as of February 28, 2023. The aforesaid 252,010,824 Class A ordinary sharesexcludes the 9,637,628 Class A ordinary shares issued to our depositary bank as of February 28, 2023 and reserved for future issuances of ADSsupon exercise or vesting of awards granted under our share incentive plans that are not deemed outstanding for the purpose of calculatingpercentage ownership and voting power in this annual report.Class AClass BClass C Number Percentage Number Percentage Number Percentage Voting Power****Shao-Ning Johnny Chou* * — — 47,790,698 100.0 46.2Lin Wan— — — — — — —Xiao Hu— — — — — — —George Chow 6,755,407 2.6 — — — — **Wenbiao Li* * — — — — **Ying Wu* * — — — — **Klaus Anker Petersen* * — — — — **Gloria Fan* * — — — — **Mangli Zhang* * — — — — **Xiaoqing Wang* * — — — — **Tao Liu* * — — — — **Yanbing Zhang* * — — — — **Jimei Liu* * — — — — **Directors and Executive officers as aGroup 9,983,914 3.8 — — 47,790,698 100.0 46.5Alibaba Group Holding Limited(1) 34,715,957 13.3 94,075,249 100.0—— 46.2Shao-Ning Johnny Chou**—— 47,790,698 100.0 46.2CR Entities (2) 33,548,304 12.8 — — — — 1.1The Goldman Sachs Group, Inc.(3) 12,443,429 4.8 — — — — 0.4*Beneficially owns less than 1% of our total ordinary shares outstanding on an as-converted basis.**Holds less than 1% of voting power of our total ordinary shares outstanding.***The business address for our directors and executive officers is 2nd Floor, Block A, Huaxing Modern Industry Park, No. 18 Tangmiao Road,Xihu District, Hangzhou, Zhejiang Province 310013, People’s Republic of China.****For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially ownedby such person or group by the voting power of all of our Class A, Class B and Class C ordinary shares as a single class. In respect of mattersrequiring a shareholder vote, each Class A ordinary share is entitled to one vote, each Class B ordinary share is entitled to 15 votes, and eachClass C ordinary share is entitled to 30 votes. Each Class B ordinary share or Class C ordinary share is convertible into one Class A ordinaryshare at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares or Class C ordinary shares,Class B ordinary shares are not convertible to Class C ordinary shares, and Class C ordinary shares are not convertible into Class B ordinaryshares under any circumstances. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 136 of 250 Table of Contents129(1)The number of ordinary shares beneficially owned was reported in an Amendment No. 3 to Schedule 13D filed by Alibaba Group HoldingLimited, Alibaba Investment Limited and other reporting persons on June 3, 2020, and consists of (i) 10,000,000 Class A ordinary sharesrepresented by ADSs held by Alibaba Investment Limited, (ii) 75,831,692 Class B ordinary shares held by Alibaba Investment Limited, (iii)18,243,557 Class B ordinary shares held by Cainiao Smart Logistics Investment Limited, and (iv) 24,000,000 Class A ordinary sharesconvertible at any time from the 2025 Convertible Notes in the principal amount of US$150,000,000 after 30 consecutive trading days afterMay 27, 2020 at the option of Alibaba.com Hong Kong Limited, the holder of such senior notes issued by us in June 30, 2020, subject to theadjustment as provided under the 2025 Convertible Notes. We subsequently determined that, upon the aforesaid adjustment, a total of24,715,957 Class A ordinary shares will be convertible from the 2025 Convertible Notes in the principal amount of US$150,000,000. AlibabaGroup Holding Limited is a public company listed on the New York Stock Exchange. Alibaba Investment Limited is a British Virgin Islandscompany wholly owned by Alibaba Group Holding Limited. Cainiao Smart Logistics Investment Limited is a British Virgin Islands companywholly owned by Cainiao Smart Logistics Network Limited, a company incorporated under the laws of the Cayman Islands. Alibaba GroupHolding Limited owned a 66% equity interest in Cainiao Smart Logistics Network Limited as of March 31, 2020 as disclosed in the annualreport on Form 20-F filed with the SEC by Alibaba Group Holding Limited on July 9, 2020. Beneficial ownership of the Class B ordinaryshares held by Cainiao Smart Logistics Investment Limited is attributed to Alibaba Group Holding Limited as a result of its ownership of the66% equity interest in Cainiao Smart Logistics Network Limited. Alibaba.com Hong Kong Limited is a Hong Kong company wholly ownedby Alibaba Group Holding Limited. The registered address of Alibaba Group Holding Limited is the offices of Trident Trust Company(Cayman) Limited, Fourth Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands.(2)The number of ordinary shares beneficially owned was reported in a Schedule 13G filed by the CR Entities and other reporting persons onFebruary 14, 2019 and consists of (i) 25,778,872 Class A ordinary shares held by Florence Star Worldwide Limited, and (ii) 7,769,432 Class Aordinary shares held by Brackenhill Tower Limited. Florence Star Worldwide Limited and Brackenhill Tower Limited are collectively referredto as the CR Entities. Each of Florence Star Worldwide Limited and Brackenhill Tower Limited is a limited liability company established inthe British Virgin Islands, and each of them has its registered address at Trident Chambers, P.O. Box 146, Road Town, Tortola, British VirginIslands. The CR Entities are special purpose vehicles of both China Harvest Fund II, L.P. and China Harvest Co-Investors II, L.P., or the ChinaHarvest Funds. The general partner of the China Harvest Funds is China Renaissance Capital Investment II, L.P. The general partner of ChinaRenaissance Capital Investment II, L.P. is China Renaissance Capital II GP. The voting powers and investment powers of the CR Entities areexercised in accordance with the direction of the board of directors of China Renaissance Capital II GP.(3)The number of ordinary shares beneficially owned was reported in the Amendment No. 1 to Schedule 13G filed by The Goldman SachsGroup, Inc. and other reporting persons on February 9, 2021 and consists of an aggregate of 12,443,429 Class A ordinary shares owned byBroad Street Principal Investments, L.L.C., Bridge Street 2014, L.P., Stone Street 2014, L.P., MBD 2014, L.P., Bridge Street 2014 Offshore,L.P., Stone Street 2014 Offshore, L.P. and MBD 2014 Offshore, L.P. (collectively, the “GS Stockholders”), and are owned, or may be deemedto, or to have been beneficially owned, by Goldman Sachs & Co. LLC (“Goldman Sachs”) and The Goldman Sachs Group, Inc. (“GS Group”).MBD Advisors, L.L.C. is a wholly-owned subsidiary of GS Group and is the general partner of MBD 2014, L.P. and MBD 2014 Offshore,L.P., and Bridge Street Opportunity Advisors, L.L.C. is a wholly-owned subsidiary of GS Group and is the general partner of the other GSInvesting Entities. Goldman Sachs is a subsidiary of GS Group. Goldman Sachs owns certain of the shares on behalf of managed accounts andis the investment manager of the GS Stockholders. Each of the GS Group, Broad Street Principal Investments, L.L.C., MBD Advisors, L.L.C.and Bridge Street Opportunity Advisors, L.L.C. is a limited liability company incorporated in Delaware. Each of MBD 2014, L.P., BridgeStreet 2014, L.P. and Stone Street 2014, L.P. is a Delaware limited partnership. Goldman Sachs is a limited liability company incorporated inNew York. Each of Bridge Street 2014 Offshore, L.P., Stone Street 2014 Offshore, L.P. and MBD 2014 Offshore, L.P. is a Cayman Islandslimited partnership.To our knowledge, as of February 28, 2023, 193,638,120 Class A ordinary shares or 76.8% of our outstanding Class A ordinary shareswere held by six record holders in the United States, including our ADS depositary bank, which held 187,726,725 Class A ordinary shares or74.5% of our outstanding Class A ordinary shares (excluding 9,637,628 Class A ordinary shares issued and reserved for future issuances of ADSsupon exercise or vesting of awards granted under our share incentive plans). Because many of these shares are held by brokers or other nominees,we cannot ascertain the exact number of beneficial shareholders with addresses in the United States. As of February 28, 2023, 47,790,698 Class Cordinary shares representing all of our outstanding Class C ordinary shares were held by one record holder in the United States, namely, Shao-NingJohnny Chou, our founder, chairman and chief executive officer. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 137 of 250 Table of Contents130We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.F.Disclosure of a registrant’s action to recover erroneously awarded compensationNot applicable.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersSee “Item 6. Directors, Senior Management and Employees—E. Share Ownership”B.Related Party TransactionsContractual Arrangements with our Variable Interest Entity and its ShareholdersSee “Item 4. Information on the Company—C. Organizational Structure—Variable Interest Entity Contractual Arrangements.”Offering of Convertible Senior NotesIn September 2019, we completed an offering of US$200 million aggregate principal amount of 1.75% convertible senior notes due 2024(including full exercise of the initial purchasers’ option to purchase additional notes), including US$100 million principal amount of notes sold toan entity affiliated with Alibaba Group Holding Limited. The notes will mature on October 1, 2024. Holders may convert their notes at their optioninto our ADSs at an initial conversion rate of 7.0922 ADSs per US$1,000 principal amount of notes (equivalent to an initial conversion price ofapproximately US$141.00 per ADS), which rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaidinterest.Private Placement of Convertible Senior NotesIn June 2020, we completed a private placement of US$150 million aggregate principal amount of 4.5% convertible senior notes due 2025to Alibaba.com Hong Kong Limited, an entity affiliated with Alibaba, one of our principal shareholders. The notes will mature on June 3, 2025.Holders may convert their notes at their option into our Class A ordinary shares at an initial conversion price of approximately US$121.40 perADS, which rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.Holders of the notes may require us to repurchase all or part of their notes within 90 days after June 3, 2023 and upon the occurrence of afundamental change, in each case at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued andunpaid interest, if any. In April 2023, we and Alibaba.com Hong Kong Limited agreed that Alibaba.com Hong Kong Limited would not require usto repurchase all of their notes in 2023, and would instead require us to repurchase one half of their notes, or US$75 million aggregate principalamount, in 2023, and the other half of their notes, or US$75 million aggregate principal amount, in 2024. However, we may not have enoughavailable cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or redeem the notes. See“Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may not have the ability to raise the fundsnecessary to repurchase our convertible senior notes on the repurchase date or upon the occurrence of a fundamental change, and our future debtmay contain limitations on our ability to pay cash upon required repurchase or redemption of the notes.”Shareholders AgreementOn April 5, 2016, we, our subsidiaries, and all of our then-existing shareholders entered into the shareholders agreement, as amended onSeptember 6, 2017, which replaced and superseded our previous shareholders agreements. The shareholders agreement addresses certain matters inrelation to shareholder rights, corporate governance arrangements and other related obligations. Except for our non-compete undertaking to AlibabaInvestment Limited, or AIL, and certain registration rights, all other rights and obligations of us and the shareholders under the shareholdersagreement terminated upon completion of our initial public offering. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 138 of 250 Table of Contents131Sale of Equity in YizhanIn July 2021, our subsidiary, BEST Logistics Technologies (China) Co., Ltd. transferred 1% equity interest in 浙江驿栈网络科技有限公司 (“Yizhan”) to Zhejiang Cainiao Supply Chain Management Co. Ltd, an affiliate of Alibaba, for a cash consideration of RMB219,999,955.Bridge Loan from AlibabaIn August 2021, BEST Logistics technologies (China) Co., Ltd. entered into a facility agreement with Alibaba (China) NetworkTechnology Co., Ltd, a company affiliated with Alibaba and drew down a bridge loan in the principal amount of RMB600,000,000 from suchcompany. The bridge loan was repaid in December 2021 in accordance with the terms of the facility agreement.Other Transactions with Certain Directors and AffiliatesSee “Item 6. Directors, Senior Management and Employees—B. Compensation.”Share Incentive PlansSee “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plans.”Other Transactions with Related PartiesWe provided supply chain management services to Cainiao Network, and the related service fees amounted to RMB555.8 million,RMB418.8 and RMB237.0 million (US$34.4 million) for the years ended December 31, 2020, 2021 and 2022, respectively. As of December 31,2021 and 2022, we had balances of RMB76.7 million and RMB45.4 million (US$6.6 million), respectively, due from Cainiao Network, whichrepresent service fees payable to us.We provided supply chain management services to Zhejiang Xinyi Supply Chain Management Co. Ltd, and the related service feesamounted to nil, nil and RMB11.1 million, (US$1.6 million) for the years ended December 31, 2020, 2021 and 2022, respectively. We sold assetsto Zhejiang Xinyi Supply Chain Management Co. Ltd, and the related proceeds amounted to nil, nil and RMB16.0 million, (US$2.3 million) for theyears ended December 31, 2020, 2021 and 2022, respectively. As of December 31, 2021 and 2022, we had balances of nil and RMB5.7 million(US$0.8 million), respectively, due from Zhejiang Xinyi Supply Chain Management Co. Ltd, which represent service fees payable to usCainiao Network leased warehouses to us resulting in rental expense of RMB18.0 million, nil and nil for the years ended December 31,2020, 2021 and 2022, respectively. As of December 31, 2021 and 2022, we had a balance of nil and RMB0.2 million (US$0.04 million),respectively, due to Cainiao Network.Alibaba Cloud Computing Co. Ltd., or Ali Cloud, an affiliate of Alibaba, provided certain cloud services to us resulting in service expenseincurred by us of RMB14.9 million, RMB13.6 million and RMB9.0 million (US$1.3 million) for the years ended December 31, 2020, 2021 and2022, respectively. Ali Cloud also paid on our behalf certain operating costs of RMB 2.8 million, nil and nil for the years ended December 31,2020, 2021 and 2022, respectively. As of December 31, 2021 and 2022, we had a balance of RMB0.5 million and RMB0.4 million (US$0.05million), respectively, due from Ali Cloud, which represents service fees prepaid to Ali Cloud; and we had a balance of nil and RMB0.4 million(US$0.07 million), respectively, due to Ali Cloud, which represents service fees payable by us.We provided express delivery service to Lazada Express Limited, or Lazada, an affiliate of Alibaba, and the related service fees amountedto RMB125.6 million, RMB120.9 million and RMB148.6 million (US$21.5 million) for the years ended December 31, 2020, 2021 and 2022,respectively. Lazada introduced customers to us and we incurred commission fees of nil, nil and RMB2.5 million (US$0.4 million) to Lazada forthe years ended December 31, 2020, 2021 and 2022, respectively. As of December 31, 2021 and 2022, we had a balance of RMB48.0 million andRMB24.9 million (US$3.6 million), respectively, due from Lazada, which represents service fees payable to us; and we had a balance of nil andRMB0.5 million (US$0.07 million), respectively, due to Lazada, which represents service fees payable by us. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 139 of 250 Table of Contents132C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATIONA.Consolidated Statements and Other Financial InformationPlease refer to Item 18 for a list of our annual consolidated financial statements filed as part of this annual report on Form 20-F.Legal ProceedingsSee “Item 4. Information on the Company—B. Business Overview—Legal Proceedings.”Dividend Policy and DistributionsSince our inception, we have not declared or paid any dividends on our shares. We do not have any present plan to pay any dividends onour ordinary shares or ADSs in the foreseeable future. We intend to retain most, if not all, of our available funds and any future earnings to operateand expand our business.Any future determination to pay dividends will be made at the discretion of our board of directors, subject to certain requirements ofCayman Islands law. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account,provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in theordinary course of business. Even if our directors decide to pay dividends, the form, frequency and amount of dividends will be based on a numberof factors, including our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions andother factors that the board of directors may deem relevant. If we pay any dividends on our ordinary shares, we will pay those dividends which arepayable in respect of the underlying Class A ordinary shares represented by our ADSs to the depositary, as the registered holder of such Class Aordinary shares, and the depositary then will pay such amounts to our ADS holders in proportion to the underlying Class A ordinary sharesrepresented by the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payablethereunder. Cash dividends on our Class A ordinary shares, if any, will be paid in U.S. dollars.We are a holding company incorporated in the Cayman Islands. In order for us to distribute any dividends to our shareholders and ADSholders, we rely on dividends distributed by our subsidiaries in China and other jurisdictions. Distributions from our subsidiaries to us may besubject to various local taxes, such as withholding tax. In addition, regulations in China currently permit payment of dividends of a Chinesecompany only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and the accountingstandards and regulations in China.B.Significant ChangesWe have not experienced any significant changes since the date of our audited consolidated financial statements included in this annualreport.ITEM 9.THE OFFER AND LISTINGA.Offer and Listing DetailsOur ADSs have been listed on the New York Stock Exchange since September 20, 2017. Our ticker symbol on the New York StockExchange changed from “BSTI” to BEST” effective at the start of trading on February 19, 2019. The ratio of our ADSs to our Class A ordinaryshares changed from one (1) ADS to one (1) Class A ordinary share, to one (1) ADS to five (5) Class A ordinary shares, effective at the start oftrading on May 20, 2022. The ratio of our ADSs to our Class A ordinary shares changed from one (1) ADS to five (5) Class A ordinary shares, toone (1) ADS to twenty (20) Class A ordinary shares, effective at the start of trading on April 4, 2023. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 140 of 250 Table of Contents133B.Plan of DistributionNot applicable.C.MarketsOur ADSs have been trading on the New York Stock Exchange since September 20, 2017. From September 20, 2017 to February 18,2019, our ticker symbol on the New York Stock Exchange was “BSTI.” Our ticker symbol on the New York Stock Exchange changed from “BSTI”to BEST” effective at the start of trading on February 19, 2019.From September 20, 2017 to May 19, 2022, each of our ADSs represented one (1) of our Class A ordinary shares. The ratio of our ADSsto our Class A ordinary shares changed from one (1) ADS to one (1) Class A ordinary share, to one (1) ADS to five (5) Class A ordinary shares,effective at the start of trading on May 20, 2022.From May 20, 2022 to April 3, 2023, each of our ADSs represented five (5) of our Class A ordinary shares. The ratio of our ADSs to ourClass A ordinary shares changed from one (1) ADS to five (5) Class A ordinary shares, to one (1) ADS to twenty (20) Class A ordinary shares,effective at the start of trading on April 4, 2023.D.Selling ShareholdersNot applicable.E.DilutionNot applicable.F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationWe incorporate by reference into this annual report the description of our ninth amended and restated memorandum and articles ofassociation contained in our Form F-1 registration statement (File No. 333-218959), as amended, initially filed with the Securities and ExchangeCommission on June 26, 2017. Our shareholders adopted our ninth amended and restated memorandum and articles of association on September 6,2017 which became effective immediately prior to the completion of the initial public offering of our company’s ADSs representing its Class Aordinary shares.C.Material ContractsIn the past three fiscal years, we have not entered into any material contracts other than in the ordinary course of business and other thanthose described in “Item 4. Information on the Company” or elsewhere in this annual report.D.Exchange ControlsSee “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Foreign Exchange.” Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 141 of 250 Table of Contents134E.TaxationCayman Islands TaxationThe Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there isno taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of theCayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within, the jurisdiction ofthe Cayman Islands. The Cayman Islands is not a party to any double tax treaties which are applicable to any payments made to or by our company.There are no exchange control regulations or currency restrictions in the Cayman Islands.Payments of dividends and capital in respect of our ordinary shares and ADSs will not be subject to taxation in the Cayman Islands and nowithholding will be required on the payment of dividends or capital to any holder of our ordinary shares or ADSs, nor will gains derived from thedisposal of our ordinary shares or ADSs be subject to Cayman Islands income or corporation tax. No stamp duty is payable in respect of the issueof our ordinary shares or on an instrument of transfer in respect of our ordinary shares.Pursuant to Section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, we have obtained an undertaking from theGovernor in Cabinet:(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciationshall apply to us or our operations; and(2) in addition, that no tax to be levied on profits, income, gains or appreciation or which is in the nature of estate duty orinheritance tax shall be payable on or in respect of our shares, debentures or other obligations, or by way of the withholding in whole or inpart of any relevant payment as defined in Section 6(3) of the Tax Concessions Act (As Revised).The undertaking for us is for a period of twenty years from March 18, 2008.People’s Republic of China TaxationIn March 2007, the National People’s Congress of China enacted the Enterprise Income Tax Law, which became effective on January 1,2008 and was recently amended on December 29, 2018. The Enterprise Income Tax Law provides that enterprises organized under the laws ofjurisdictions outside China with their “de facto management bodies” located within China may be considered China resident enterprises andtherefore subject to Chinese enterprise income tax at the rate of 25% on their worldwide income. The Implementing Rules of the Enterprise IncomeTax Law further defines the term “de facto management body” as the management body that exercises substantial and overall management andcontrol over the business, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular,known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlledenterprise that is incorporated offshore is located in China. Further to SAT Circular 82, in 2011, the State Administration of Taxation issued theAdministrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45,to provide more guidance on the implementation of SAT Circular 82.According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will beconsidered a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on itsworldwide income only if all of the following conditions are met: (i) the senior management and core management departments in charge of itsdaily operations function have their presence mainly in the PRC; (ii) its financial and human resources decisions are subject to determination orapproval by persons or bodies in the PRC; (iii) its major assets, accounting books, company seals, and minutes and files of its board of directorsand shareholders’ meetings are located or kept in the PRC; and (iv) more than half of the enterprise’s directors or senior management with votingrights habitually reside in the PRC.Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprisegroups, not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the State Administration ofTaxation’s general position on how the “de facto management body” test could be applied in determining the tax resident status of offshoreenterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 142 of 250 Table of Contents135Although a substantial majority of the members of our management team are located in the PRC, we believe that BEST Inc. is not a PRCresident enterprise for PRC tax purposes. BEST Inc. is not controlled by a PRC enterprise or PRC enterprise group and we do not believe thatBEST Inc. meets all of the conditions above. BEST Inc. is a company incorporated outside the PRC. As a holding company, its key assets are itsownership interests in its subsidiaries, which are located outside the PRC. However, the tax resident status of an enterprise is subject todetermination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”If the PRC tax authorities determine that BEST Inc. is a PRC resident enterprise for enterprise income tax purposes, we may be required towithhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. Inaddition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or otherdisposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC residententerprise, dividends payable to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSsor ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% unless a reduced rate is available under an applicable tax treaty.It is also unclear whether non-PRC shareholders of BEST Inc. would be able to claim the benefits of any tax treaties between their country of taxresidence and the PRC in the event that BEST Inc. is treated as a PRC resident enterprise.Certain United States Federal Income Tax ConsiderationsThe following discussion describes certain United States federal income tax consequences of the purchase, ownership and disposition ofour ADSs and Class A ordinary shares.This discussion deals only with ADSs and Class A ordinary shares that are held as capital assets by a United States Holder (as definedbelow).As used herein, the term “United States Holder” means a beneficial owner of our ADSs or Class A ordinary shares that is, for UnitedStates federal income tax purposes, any of the following:●an individual citizen or resident of the United States;●a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or underthe laws of the United States, any state thereof or the District of Columbia;●an estate the income of which is subject to United States federal income taxation regardless of its source; or●a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons havethe authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United StatesTreasury regulations to be treated as a United States person.This discussion is based upon provisions of the Internal Revenue Code of 1986, as amended, or the Code, and regulations, rulings andjudicial decisions thereunder as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federalincome tax consequences different from those summarized below. In addition, this discussion assumes that the deposit agreement, and all otherrelated agreements, will be performed in accordance with their terms.This discussion does not represent a detailed description of the United States federal income tax consequences applicable to you if you aresubject to special treatment under the United States federal income tax laws, including if you are:●a dealer or broker in securities or currencies;●a financial institution;●a regulated investment company;●a real estate investment trust;●an insurance company; Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 143 of 250 Table of Contents136●a tax-exempt organization;●a person holding our ADSs or Class A ordinary shares as part of a hedging, integrated or conversion transaction, a constructive saleor a straddle;●a trader in securities that has elected the mark-to-market method of accounting for your securities;●a person liable for alternative minimum tax;●a person who owns or is deemed to own 10% or more of our stock by vote or value;●a partnership or other pass-through entity for United States federal income tax purposes;●a person required to accelerate the recognition of any item of gross income with respect to our ADSs or Class A ordinary shares as aresult of such income being recognized on an applicable financial statement; or●a person whose “functional currency” is not the United States dollar.If an entity or other arrangement treated as a partnership for United States federal income tax purposes holds our ADSs or Class Aordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are apartner of a partnership holding our ADSs or Class A ordinary shares, you should consult your tax advisors.As discussed below under “Passive Foreign Investment Company,” we believe that we were classified as a passive foreign investmentcompany, or PFIC, for prior taxable years, that we will be classified as a PFIC for the current taxable year, and that we may be a PFIC in futuretaxable years. Accordingly, United States Holders are urged to review the discussion below under “Passive Foreign Investment Company,” and toconsult with their tax advisors regarding the tax consequences to them if we were classified as a PFIC for prior taxable years, or are classified as aPFIC in our current taxable year or future taxable years.This discussion does not contain a detailed description of all the United States federal income tax consequences to you in light ofyour particular circumstances and does not address the Medicare tax on net investment income, United States federal estate and gift taxesor the effects of any state, local or non-United States tax laws. If you are considering the purchase of our ADSs or Class A ordinary shares,you should consult your tax advisors concerning the particular United States federal income tax consequences to you of the purchase,ownership and disposition of our ADSs or Class A ordinary shares, as well as the consequences to you arising under other United Statesfederal tax laws and the laws of any other taxing jurisdiction.ADSsIf you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying Class Aordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs will not be subject toUnited States federal income tax.Passive Foreign Investment CompanyBased on our financial statements and the composition of our income and assets and the valuation of our assets, we believe that we were aPFIC in prior taxable years, we will be a PFIC for the current taxable year, and that we may be a PFIC in future taxable years.In general, we will be a PFIC for any taxable year in which:●at least 75% of our gross income is passive income, or●at least 50% of the value (generally determined based on a quarterly average) of our assets is attributable to assets that produce or areheld for the production of passive income. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 144 of 250 Table of Contents137For this purpose, passive income generally includes dividends, interest, gains from the sale or exchange of investment property, royaltiesand rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). Cash and otherassets readily convertible into cash are generally treated as an asset that produces or is held for the production of passive income. If we own at least25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning ourproportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income. However, there isuncertainty as to the treatment of our corporate structure and ownership of the VIEs for United States federal income tax purposes. For UnitedStates federal income tax purposes, we consider ourselves to own the equity of the VIEs. If it is determined, contrary to our view, that we do notown the equity of the VIEs for United States federal income tax purposes (for instance, because the relevant PRC authorities do not respect thesearrangements), we are more likely to be treated as a PFIC (as discussed below).Based on the past and projected composition of our income and assets, and the valuation of its assets, including goodwill (which we havedetermined based on trading price of our ADSs), we believe that we were a PFIC in prior taxable years, we will be a PFIC for the current taxableyear, and that we may be a PFIC in future taxable years. The determination of whether we are a PFIC is made annually. Accordingly, changes inour asset or income composition may affect our PFIC status. For these purposes, fluctuations in the market price of our Class A ordinary shares andADSs (which may be volatile) may affect the value of our goodwill, and thus the composition of its assets, and accordingly, may affect our PFICstatus. The composition of our assets and income may also be affected by how, and how quickly, we use the cash and liquid assets that we currentlyhold. If we are a PFIC for any taxable year during which you hold our ADSs or Class A ordinary shares, you will be subject to special tax rulesdiscussed below.If we are a PFIC for any taxable year during which you hold our ADSs or Class A ordinary shares and you do not make a timely mark-to-market election, as described below, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realizedfrom a sale or other disposition, including a pledge and a deemed sale discussed in the following paragraph, of ADSs or Class A ordinary shares.Distributions received in a taxable year, other than the taxable year in which your holding period in the ADSs or Class A ordinary shares begins,will be treated as excess distributions to the extent that they are greater than 125% of the average annual distributions received during the shorter ofthe three preceding taxable years or the portion of your holding period for the ADSs or Class A ordinary shares that preceded the taxable year ofthe distribution. Under these special tax rules:●the excess distribution or gain will be allocated ratably over your holding period for the ADSs or Class A ordinary shares,●the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will betreated as ordinary income, and●the amount allocated to each other year will be subject to tax at the highest tax rate in effect for individuals or corporations, asapplicable, for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting taxattributable to each such year.Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which you hold our ADSsor Class A ordinary shares, you will generally be subject to the special tax rules described above for that year and for each subsequent year inwhich you hold the ADSs or Class A ordinary shares (even if we do not qualify as a PFIC in such subsequent years). However, if we cease to be aPFIC, you can avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if your ADSs or Class A ordinaryshares had been sold on the last day of the last taxable year during which we were a PFIC. You are urged to consult your tax advisor about thiselection.In lieu of being subject to the special tax rules discussed above, you may make a mark-to-market election with respect to your ADSs orClass A ordinary shares provided such ADSs or Class A ordinary shares are treated as “marketable stock.” The ADSs or Class A ordinary sharesgenerally will be treated as marketable stock if the ADSs or Class A ordinary shares are regularly traded on a “qualified exchange or other market”(within the meaning of the applicable Treasury regulations). The ADSs are listed on the NYSE, which constitutes a qualified exchange, althoughthere can be no assurance that the ADSs will be “regularly traded” for purposes of the mark-to-market election. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 145 of 250 Table of Contents138If you make an effective mark-to-market election, for each taxable year that we are a PFIC you will include as ordinary income the excessof the fair market value of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will be entitled to deduct as an ordinaryloss in each such year the excess of your adjusted tax basis in the ADSs over their fair market value at the end of the year, but only to the extent ofthe net amount previously included in income as a result of the mark-to-market election. Your adjusted tax basis in the ADSs will be increased bythe amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. In addition, upon the sale orother disposition of your ADSs in a year that we are a PFIC, any loss will be treated as ordinary loss, but only to the extent of the net amount ofpreviously included income as a result of the mark-to-market election, and any gain will be treated as ordinary income. If you make a mark-to-market election, any distributions that we make would generally be subject to the tax rules discussed below under “—Taxation of Dividends.”If you make a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxableyears unless the ADSs are no longer regularly traded on a qualified exchange or other market, or the Internal Revenue Service, or the IRS, consentsto the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whethermaking the election would be advisable in your particular circumstances.Alternatively, U.S. taxpayers can sometimes avoid the special tax rules described above by electing to treat a PFIC as a “qualified electingfund” under Section 1295 of the Code. However, this option is not available to you because we do not intend to prepare or provide you with the taxinformation necessary to permit you to make this election.If we are a PFIC for any taxable year during which you hold our ADSs or Class A ordinary shares and any of our non-United Statessubsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of theapplication of the PFIC rules. You will not be able to make the mark-to-market election described above in respect of any lower-tier PFIC. You areurged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.You will generally be required to file IRS Form 8621 if you hold our ADSs or Class A ordinary shares in any year in which we are aPFIC. You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding ADSs or Class Aordinary shares if we are a PFIC for any taxable year.Taxation of DividendsSubject to the discussion under “—Passive Foreign Investment Company” above, the gross amount of distributions on the ADSs or ClassA ordinary shares (including any amounts withheld to reflect PRC withholding taxes, as discussed above under “—E. Taxation — People’sRepublic of China Taxation”) will be taxable as dividends to the extent paid out of our current or accumulated earnings and profits, as determinedunder United States federal income tax principles. To the extent that the amount of any distribution exceeds our current and accumulated earningsand profits for a taxable year, the distribution will first be treated as a tax-free return of capital, causing a reduction in the tax basis of the ADSs orClass A ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain recognizedon a sale or exchange. We do not, however, expect to determine earnings and profits in accordance with United States federal income taxprinciples. Therefore, you should expect that a distribution will generally be reported as a dividend.Any dividends that you receive (including any withheld taxes) will be includable in your gross income as ordinary income on the dayactually or constructively received by you, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Such dividends willnot be eligible for the dividends received deduction allowed to corporations under the Code.Subject to applicable limitations (including a minimum holding period requirement), dividends received by non-corporate United StatesHolders from a qualified foreign corporation may be treated as “qualified dividend income” that is subject to reduced rates of taxation. A foreigncorporation generally is treated as a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive income tax treaty with theUnited States which the United States Treasury Department determines to be satisfactory for these purposes and which includes an exchange ofinformation provision or (ii) with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradableon an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs (which are listed onthe NYSE), but not our Class A ordinary shares, are readily tradable on an established securities market in the United States. Therefore, we do notbelieve that dividends that we pay on our Class A ordinary shares that are not represented by ADSs currently meet the conditions required for thesereduced rates of taxation. In addition, dividends received from us by non-corporate United States Holders will not be treated as “qualified dividendincome” that is subject to reduced rates of taxation if we are a PFIC in the taxable year in which such dividends are paid or in the Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 146 of 250 Table of Contents139preceding taxable year. As discussed above under “—Passive Foreign Investment Company,” we believe that we were a PFIC in prior taxableyears, we will be a PFIC for the current taxable year, and that we may be a PFIC in future taxable years. Therefore, if you are a non-corporateUnited States Holder, you should not assume that any dividends will be taxed at a preferential rate. You should consult your tax advisors regardingthe application of these rules given your particular circumstances.Subject to certain conditions and limitations (including a minimum holding period requirement), any PRC withholding taxes on dividendswill generally be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating theforeign tax credit, dividends paid on the ADSs or Class A ordinary shares will generally be treated as income from sources outside the UnitedStates and will generally constitute passive category income. The rules governing the foreign tax credit are complex. You are urged to consult yourtax advisors regarding the availability of the foreign tax credit under your particular circumstances. Instead of claiming a foreign tax credit, youmay, at your election, deduct such otherwise creditable PRC withholding taxes in computing your taxable income, but only for a taxable year inwhich you elect to do so with respect to all foreign income taxes and subject to generally applicable limitations under United States law.Distributions of ADSs, Class A ordinary shares or rights to subscribe for ADSs or Class A ordinary shares that are received as part of apro rata distribution to all of our shareholders generally will not be subject to United States federal income tax.Sale, Exchange or Other Disposition of ADSs or Class A Ordinary SharesFor United States federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other disposition of theADSs or Class A ordinary shares in an amount equal to the difference between the amount realized for the ADSs or Class A ordinary shares andyour tax basis in the ADSs or Class A ordinary shares, both determined in U.S. dollars. Subject to the discussion under “—Passive ForeignInvestment Company” above, such gain or loss will generally be capital gain or loss and will generally be long-term capital gain or loss if you haveheld the ADSs or Class A ordinary shares for more than one year. Long-term capital gains of non-corporate United States Holders (includingindividual) are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by youwill generally be treated as United States source gain or loss. However, if PRC tax is imposed on any gain (for instance, because we are treated as aPRC resident enterprise for PRC tax purposes), and if you are eligible for the benefits of the income tax treaty between the United States and thePRC, or the Treaty, you may elect to treat such gain as PRC source gain under the Treaty. If you are not eligible for the benefits of the Treaty or ifyou fail to make the election to treat any gain as PRC source, then you generally would not be eligible for a foreign tax credit for any PRC taximposed on the disposition of ADSs or Class A ordinary shares unless such credit can be applied (subject to applicable limitations) against tax dueon other income derived from foreign sources. However, pursuant to recently issued Treasury regulations that apply to taxes paid or accrued intaxable years beginning on or after December 28, 2021, if you do not claim the benefits of the Treaty, any such PRC tax would generally not be aforeign income tax eligible for a foreign tax credit (regardless of any other income that you may have that is derived from foreign sources). You areurged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.Information Reporting and Backup WithholdingIn general, information reporting will apply to distributions in respect of our ADSs or Class A ordinary shares and the proceeds from thesale, exchange or other disposition of our ADSs or Class A ordinary shares that are paid to you within the United States (and in certain cases,outside the United States), unless you establish that you are an exempt recipient. A backup withholding tax may apply to such payments if you failto provide a taxpayer identification number and a certification of exempt status or (in the case of dividend payments) if you fail to certify that youare not subject to backup withholding or fail to report in full dividend and interest income.Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or acredit against your United States federal income tax liability provided the required information is timely furnished to the IRS.Certain United States Holders are required to report information relating to our ADSs or Class A ordinary shares, subject to certainexceptions (including an exception for ADSs or Class A ordinary shares held in accounts maintained by certain financial institutions), by attachinga complete IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold the ADSs orClass A ordinary shares. You are urged to consult your tax advisors regarding information reporting requirements relating to your ownership of ourADSs or Class A ordinary shares. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 147 of 250 Table of Contents140F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable.H.Documents on DisplayWe have filed this annual report on Form 20-F, including exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual report,we incorporate by reference certain information we filed with the SEC. This means that we can disclose important information to you by referringyou to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the SEC’s PublicReference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices in New York, New York, and Chicago, Illinois.You can also request copies of this annual report, including the exhibits incorporated by reference in this annual report, upon payment of aduplicating fee, by writing to the SEC’s Public Reference Room for information.The SEC also maintains a website that contains reports, proxy statements and other information about issuers, such as us, who fileelectronically with the SEC. The address of that website is http://www.sec.gov. The information on that website is not a part of this annual report.I.Subsidiary InformationNot applicable.J.Annual Report to Security HoldersNot applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate RiskOur exposure to interest rate risk primarily relates to interest expenses incurred in respect of bank borrowings, capital lease obligationsand interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. We have not significantly used derivativefinancial instruments in our investment portfolio. Interest earning instruments and interest-bearing obligations carry a degree of interest rate risk.We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in market interest rates. However, our futureinterest income and interest expenses may fluctuate due to changes in market interest rates.Foreign Exchange RiskSubstantially all of our revenue and expenses are denominated in Renminbi. We do not believe that we currently have any significantdirect foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Although in general ourexposure to foreign exchange risks should be limited, the value of your investment in our ADSs will be affected by the exchange rate between theU.S. dollar and the Renminbi because the value of our business is effectively denominated in Renminbi, while our ADSs will be traded in U.S.dollars.The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the PBOC. The Chinese governmentallowed the Renminbi to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010,the exchange rate between the Renminbi and the U.S. dollar had been stable and traded within a narrow band. Since June 2010, the Chinesegovernment has allowed the Renminbi to appreciate slowly against the U.S. dollar, though there have been periods when the Renminbi hasdepreciated against the U.S. dollar. In particular, on August 11, 2015, the PBOC allowed Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 148 of 250 Table of Contents141the Renminbi to depreciate by approximately 2% against the U.S. dollar. It is difficult to predict how long the current situation may last and whenand how the relationship between the Renminbi and the U.S. dollar may change again.We have historically incurred short-term borrowings in Renminbi to fund our working capital requirements in the PRC while holdingsignificant U.S. dollar balances. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbiagainst the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convertRenminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes,appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amounts available to us.InflationSince our inception, inflation in China has not materially affected our results of operations. According to the National Bureau of Statisticsof China, the year-over-year percent changes in the consumer price index were increases of 2.5%, 0.9% and 2.0% in 2020, 2021 and 2022,respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates ofinflation in the future.Commodity Price RiskOur exposure to commodity price risk primarily relates to the fuel price in connection with our transportation network. The price andavailability of fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, global politics and otherfactors. Historically, fluctuations in the price of fuel, especially gasoline, have been the commodity with the greatest impact on our results ofoperations. Despite the recent decline in fuel prices, there is a risk that fuel prices could rise in future periods. In the event of significant fuel pricerise, our transportation expenses may rise and our gross income may decrease if we are unable to adopt any effective cost control-measures or passon the incremental costs to our customers in the form of service surcharges.We are also exposed to a lesser degree to the price of paper used in packing of the parcels and other goods we ship and the price ofelectricity that powers our technology and that is used in our facilities.ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt SecuritiesNot applicable.B.Warrants and RightsNot applicable.C.Other SecuritiesNot applicable.D.American Depositary SharesIn September 2017, we appointed Citibank, N.A., or Citibank, as the depositary bank for our ADR program. We entered into a depositagreement with Citibank, as depositary, and all holders from time to time of our ADRs on September 22, 2017. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 149 of 250 Table of Contents142Fees and ChargesAs an ADS holder, you will be required to pay the following fees under the terms of the deposit agreement:Service Fees ● Issuance of ADSs (e.g., an issuance of ADS upon adeposit of Class A ordinary shares, upon a change in theADS(s)-to-Class A ordinary share(s) ratio, or for anyother reason), excluding ADS issuances as a result ofdistributions of Class A ordinary sharesUp to U.S. 5¢ per ADS issued● Cancellation of ADSs (e.g., a cancellation of ADSs fordelivery of deposited property, upon a change in theADS(s)-to-Class A ordinary share(s) ratio, or for anyother reason)Up to U.S. 5¢ per ADS cancelled● Distribution of cash dividends or other cash distributions(e.g., upon a sale of rights and other entitlements)Up to U.S. 5¢ per ADS held● Distribution of ADSs pursuant to (i) stock dividends orother free stock distributions, or (ii) exercise of rights topurchase additional ADSsUp to U.S. 5¢ per ADS held● Distribution of securities other than ADSs or rights topurchase additional ADSs (e.g., upon a spin-off)Up to U.S. 5¢ per ADS held● ADS ServicesUp to U.S. 5¢ per ADS held on the applicable recorddate(s) established by the depositary bankAs an ADS holder you will also be responsible to pay certain charges such as:●taxes (including applicable interest and penalties) and other governmental charges;●the registration fees as may from time to time be in effect for the registration of Class A ordinary shares on the share register andapplicable to transfers of Class A ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon themaking of deposits and withdrawals, respectively;●certain cable, telex and facsimile transmission and delivery expenses;●the expenses and charges incurred by the depositary bank in the conversion of foreign currency;●the fees and expenses incurred by the depositary bank in connection with compliance with exchange control regulations and otherregulatory requirements applicable to Class A ordinary shares, ADSs and ADRs; and●the fees and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the servicing or delivery ofdeposited property. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 150 of 250 Table of Contents143ADS fees and charges payable upon (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person to whom theADSs are issued (in the case of ADS issuances) and to the person whose ADSs are cancelled (in the case of ADS cancellations). In the case ofADSs issued by the depositary bank into DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions madethrough DTC, and may be charged to the DTC participant(s) receiving the ADSs being issued or the DTC participant(s) holding the ADSs beingcancelled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicablebeneficial owner(s) in accordance with the procedures and practices of the DTC participants as in effect at the time. ADS fees and charges inrespect of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash,the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and(ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees andcharges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributionsother than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants inaccordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and chargesto the beneficial owners for whom they hold ADSs.In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the deposit agreement, refuse therequested service until payment is received or may set off the amount of the depositary bank fees from any distribution to be made to the ADSholder. Certain of the depositary fees and charges (such as the ADS services fee) may become payable shortly after the closing of the ADS offering.Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary bank. You willreceive prior notice of such changes. The depositary bank may reimburse us for certain expenses incurred by us in respect of the ADR program, bymaking available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and thedepositary bank agree from time to time.Payments by DepositaryDuring and for the year 2022, we did not receive any payment from Citibank, the depositary bank for our ADR program, forreimbursement of investor relations expenses and other program-related expenses. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 151 of 250 Table of Contents144PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNoneITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSA.Modifications of RightsSee “Item 10. Additional Information—B. Memorandum and Articles of Association” for a description of the rights of securities holders,which remain unchanged.E.Use of ProceedsFor the period from September 19, 2017, the date that the F-1 Registration Statement was declared effective by the SEC, to December 31,2022, we used approximately all the proceeds from our initial public offering to expand and optimize our express, freight and supply chain servicenetwork and further expand our global logistics service in Southeast Asia as well as for us to provide financing services to our ecosystemparticipants through BEST Capital. We still intend to use the remainder of the proceeds from our initial public offering, as disclosed in ourregistration statements on Form F-1, for (i) continued investments in our technology infrastructure and development of additional services andsolutions, (ii) further expansion of our integrated logistics and supply chain service network, and (iii) general corporate purposes, including theacquisition of, or investment in, technologies, solutions or businesses that complement our existing business, although we have no presentcommitments or agreements to enter into any acquisitions or investments.ITEM 15.CONTROLS AND PROCEDURESDisclosure Controls and ProceduresWe maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed inreports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated andcommunicated to our management, including our principal executive officer and principal accounting officer, as appropriate, to allow timelydecisions regarding required disclosure.Our management, under the supervision and with the participation of our principal executive officer and our principal accounting officer,evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the ExchangeAct, as of December 31, 2022. Based on that evaluation, our principal executive officer and principal accounting officer have concluded that ourdisclosure controls and procedures are effective in ensuring that material information required to be disclosed in this annual report is recorded,processed, summarized and reported to them for assessment, and required disclosure is made within the time period specified in the rules and formsof the Commission.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rule 13a-15(c) of the Exchange Act, our management conducted an evaluation ofour company’s internal control over financial reporting as of December 31, 2022 based on the framework in Internal Control — IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our managementconcluded that our internal control over financial reporting was effective as of December 31, 2022.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 152 of 250 Table of Contents145Because our company is a non-accelerated filer, this annual report does not include an attestation report of our registered publicaccounting firm regarding internal control over financial reporting.Changes in Internal Control over Financial ReportingThere were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 16.ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur Board of Directors has determined that Mr. Ying Wu, who is an independent director, qualifies as an audit committee financial expertas defined in Item 16A of the instruction to Form 20-F.ITEM 16B.CODE OF ETHICSWe have adopted a code of business conduct and ethics which applies to our directors, employees, advisors and officers, including ourChief Executive Officer and Chief Financial Officer. No changes have been made to the code of business conduct and ethics since its adoption andno waivers have been granted therefrom to our directors or employees. We have filed our code of business conduct as an exhibit to our F-1registration statement (File No. 333-218959), as amended, initially filed with the Securities and Exchange Commission on June 26, 2017, and acopy is available to any shareholder upon request. This code of business conduct and ethics is also available on our website at ir.best-inc.com.ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe following table sets forth the aggregate fees by categories specified below in connection with certain professional services renderedby Ernst & Young Hua Ming LLP, for the years indicated.For the Years EndedDecember 31, 2021 2022(In thousands of US dollars)Audit Fees(1) 2,546 2,029Tax Fees(2) — 78All Other Fees(3) 17 —Total 2,563 2,107(1)“Audit Fees” represents the aggregate fees billed for each of the fiscal years listed for professional services rendered by our principal auditorsfor the audit of our annual financial statements and assistance with and review of documents filed with the SEC and other statutory andregulatory filings.(2)“Tax Fees” represents the fees for tax compliance, tax advice and tax planning.(3)“All Other Fees” represents transaction advisory services related to certain restructuring in each of the fiscal years listed for services renderedby our principal auditors associated with certain due diligence and advisory projects in 2022. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 153 of 250 Table of Contents146Pre-Approval Policies and ProceduresOur audit committee is responsible for the oversight of our independent accountants’ work. The policy of our audit committee is to pre-approve all audit and non-audit services provided by Ernst & Young Hua Ming LLP, including audit services as described above, other than thosefor de minimis services which are approved by the audit committee prior to the completion of the audit.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNone.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSIn November 2019, we announced the adoption of a share repurchase program in an aggregate amount of up to US$100 million worth ofour outstanding ADSs from time to time over a period of 18 months, or the 2019 Share Repurchase Program. During the year ended December 31,2020, 2021 and 2022, we repurchased an aggregate of 319,752.50 ADSs, representing 6,395,050 Class A ordinary shares, nil and nil, respectively.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCEWe are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs, each representing twenty(20) Class A ordinary shares, are listed on the New York Stock Exchange. Under Section 303A of the New York Stock Exchange Listed CompanyManual, New York Stock Exchange listed companies that are foreign private issuers are permitted to follow home country practice in lieu of thecorporate governance provisions specified by the New York Stock Exchange with limited exceptions. The following summarizes some significantways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the New YorkStock Exchange.●In respect of independent directors on our board of directors: As our home country practice does not require a majority of our boardof directors to be independent, only three of our seven directors are independent.●In respect of the oversight of our executive officer compensation and director nominations matters: As our home country practicedoes not require independent director oversight of executive officer compensation and director nomination matters, our compensationand corporate governance and nominating committees are not comprised solely of independent directors.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS(a) Please see the Certification by the Chief Executive Officer Pursuant to Item 16I(a) of Form 20-F, which has been furnished as Exhibit15.3 to this annual report. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 154 of 250 Table of Contents147(b) For the fiscal year ended December 31, 2021, Ernst & Young Hua Ming LLP, which was a registered public accounting firm that thePCAOB determined in December 2021 that it was unable to inspect or investigate completely because of the positions taken by the PRCauthorities, issued an audit report for us, and such audit report was included in our annual report on Form 20-F for the fiscal year ended December31, 2021. On May 13, 2022, we were conclusively identified by the SEC as an SEC-identified issuer pursuant to Section 104(i)(2)(A) of theSarbanes-Oxley Act of 2002 (15 U.S.C. 7214(i)(2)(A)). The PCAOB vacated its 2021 determinations in December 2022, and as a result, Ernst &Young Hua Ming LLP, which issued an audit report included in this annual report, is no longer a registered public accounting firm that the PCAOBdetermines it is unable to inspect or investigate completely because of the positions taken by an authority in any foreign jurisdiction.Our company is incorporated in the Cayman Islands. The VIEs and other operating entities being consolidated in our financial statements,or our consolidated foreign operating entities, are incorporated or otherwise organized in the PRC.To the best of our knowledge, no governmental entity in the PRC or the Cayman Islands owns any shares of our company or any of ourconsolidated foreign operating entities.To the best of our knowledge, no governmental entity in the PRC has a controlling financial interest with respect to our company or any ofour consolidated foreign operating entities.No member of the board of directors of our company or any of our consolidated foreign operating entities is any official of the ChineseCommunist Party.Neither the memorandum and articles of association of our company nor the articles of incorporation (or equivalent organizing document)of our consolidated foreign operating entities contains any charter of the Chinese Communist Party.ITEM 16J.INSIDER TRADING POLICIESNot applicable.PART IIIITEM 17.FINANCIAL STATEMENTSThe Registrant has elected to provide the financial statements and related information specified in Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements of BEST Inc. are included at the end of this annual report. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 155 of 250 Table of Contents148ITEM 19.EXHIBITSExhibit Number Description of Exhibits1.1Ninth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 to ourRegistration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and Exchange Commission on June 26, 2017).2.1Registrant’s Form of American Depositary Receipt evidencing American Depositary Shares (incorporated by reference to Exhibit (a) to ourRegistration Statement on Form F-6 (File No. 333-220361) filed with the Securities and Exchange Commission on September 6, 2017 withrespect to American depositary shares representing our Class A ordinary shares).2.2Registrant’s Specimen of Ordinary Share Certificate (incorporated by reference Exhibit 4.1 to our Registration Statement on Form F-1 (FileNo. 333-218959), initially filed with the Securities and Exchange Commission on June 26, 2017).2.3Form of Deposit Agreement between the Registrant and Citibank, N.A., as depositary (incorporated by reference to Exhibit (a) to ourRegistration Statement on Form F-6 (File No. 333-220361) filed with the Securities and Exchange Commission on September 6, 2017 withrespect to American depositary shares representing our Class A ordinary shares).*2.4Description of Securities Registered under Section 12 of the Securities Exchange Act of 19344.1Seventh Amended and Restated Shareholders Agreement among the Registrant, its then shareholders, subsidiaries and variable interestentity, dated April 5, 2016 (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form F-1 (File No. 333-218959),initially filed with the Securities and Exchange Commission on June 26, 2017).4.2Amendment No. 1 to Seventh Shareholders Agreement, as adopted by shareholder resolutions on September 6, 2017 (incorporated byreference to Exhibit 4.5 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and ExchangeCommission on June 26, 2017).4.3Loan Agreement between Zhejiang BEST Technology Co., Ltd., Wei Chen and Lili He, dated October 12, 2011 (English Translation)(incorporated by reference to Exhibit 10.1 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with theSecurities and Exchange Commission on June 26, 2017).4.4Loan Agreement between Zhejiang BEST Technology Co., Ltd. and Hangzhou Ali Venture Capital Co., Ltd., dated February 15, 2015(English Translation) (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (File No. 333-218959), initiallyfiled with the Securities and Exchange Commission on June 26, 2017).4.5BEST Logistics Technologies Limited Series G Preferred Share Purchase Agreement, among the Registrant, its then shareholders,subsidiaries and variable interest entity and certain investors named therein, dated January 18, 2016 (incorporated by reference to Exhibit10.7 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and Exchange Commission onJune 26, 2017).4.6BEST Logistics Technologies Limited Series G-2 Preferred Share Purchase Agreement, among the Registrant, its then shareholders,subsidiaries and variable interest entity and certain investors named therein, dated April 5, 2016 (incorporated by reference to Exhibit 10.8to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and Exchange Commission on June 26,2017).4.7Share Repurchase Agreement, among the Registrant and certain selling shareholders named therein, dated April 5, 2016 (incorporated byreference to Exhibit 10.9 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and ExchangeCommission on June 26, 2017).4.8Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by reference to Exhibit10.10 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and Exchange Commission onJune 26, 2017).4.9Form of Employment Agreement between the Registrant and its executive officers who are not PRC citizens (incorporated by reference toExhibit 10.11 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and ExchangeCommission on June 26, 2017). Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 156 of 250 Table of Contents149Exhibit Number Description of Exhibits4.10Form of Employment Agreement between the Registrant and its executive officers who are PRC citizens (English Translation)(incorporated by reference to Exhibit 10.12 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with theSecurities and Exchange Commission on June 26, 2017).4.11Form of Letter of Commitment and Non-Compete between the Registrant and its executive officers who are PRC citizens (incorporated byreference to Exhibit 10.13 to our Registration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities andExchange Commission on June 26, 2017).4.12BEST Logistics Technologies Limited 2008 Equity and Performance Incentive Plan (incorporated by reference to Exhibit 10.14 to ourRegistration Statement on Form F-1 (File No. 333-218959), initially filed with the Securities and Exchange Commission on June 26, 2017).4.13BEST Inc. 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.15 to our Registration Statement on Form F-1 (File No.333-218959), initially filed with the Securities and Exchange Commission on June 26, 2017).4.14Indenture, dated September 17, 2019, between the Registrant and Citicorp International Limited, as Trustee, relating to the issuance of theRegistrant’s 1.75% Convertible Senior Notes due 2024 in the aggregate principal amount of US$200 million (incorporated by reference toExhibit 4.18 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2019, initially filed with the Securities andExchange Commission on April 17, 2020).4.15Loan Agreement between BEST Logistics Technology (China) Co., Ltd., Wei Chen and Lili He, dated October 23, 2019 (EnglishTranslation) (incorporated by reference to Exhibit 4.19 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2019,initially filed with the Securities and Exchange Commission on April 17, 2020).4.16Exclusive Technical Services Agreement between Hangzhou Baisheng Investment Management Co., Ltd. (later renamed as HangzhouBEST Information Technology Services Co., Ltd.) and BEST Logistics Technology (China) Co., Ltd., dated October 23, 2019 (EnglishTranslation) (incorporated by reference to Exhibit 4.20 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2019,initially filed with the Securities and Exchange Commission on April 17, 2020).4.17Equity Pledge Agreement concerning Hangzhou Baisheng Investment Management Co., Ltd. (later renamed as Hangzhou BESTInformation Technology Services Co., Ltd.), among Wei Chen, Lili He, BEST Logistics Technology (China) Co., Ltd. and HangzhouBaisheng Investment Management Co., Ltd. (later renamed as Hangzhou BEST Information Technology Services Co., Ltd.), dated October23, 2019 (English Translation) (incorporated by reference to Exhibit 4.21 to our Annual Report on Form 20-F for the fiscal year endedDecember 31, 2019, initially filed with the Securities and Exchange Commission on April 17, 2020).4.18Shareholders’ Voting Rights Proxy Agreement concerning Hangzhou Baisheng Investment Management Co., Ltd. (later renamed asHangzhou BEST Information Technology Services Co., Ltd.), among Wei Chen, Lili He, BEST Inc., BEST Logistics Technology (China)Co., Ltd. and Hangzhou Baisheng Investment Management Co., Ltd. (later renamed as Hangzhou BEST Information Technology ServicesCo., Ltd.), dated October 23, 2019 (English Translation) (incorporated by reference to Exhibit 4.22 to our Annual Report on Form 20-F forthe fiscal year ended December 31, 2019, initially filed with the Securities and Exchange Commission on April 17, 2020).4.19Exclusive Call Option Agreement concerning Hangzhou Baisheng Investment Management Co., Ltd. (later renamed as Hangzhou BESTInformation Technology Services Co., Ltd.), among Wei Chen, Lili He, BEST Inc., BEST Logistics Technology (China) Co., Ltd. andHangzhou Baisheng Investment Management Co., Ltd. (later renamed as Hangzhou BEST Information Technology Services Co., Ltd.),dated October 23, 2019 (English Translation) (incorporated by reference to Exhibit 4.23 to our Annual Report on Form 20-F for the fiscalyear ended December 31, 2019, initially filed with the Securities and Exchange Commission on April 17, 2020).4.20Convertible Note Purchase Agreement, dated May 28, 2020, between the Registrant, Alibaba.com Hong Kong Limited and Mr. Shao-NingJohnny Chou, relating to the issuance of the Registrant’s 4.5% Convertible Senior Notes due 2025 in the aggregate principal amount ofUS$150 million (incorporated by reference to Exhibit 4.24 to our Annual Report on Form 20-F for the fiscal year ended December 31,2020, initially filed with the Securities and Exchange Commission on April 16, 2021).4.21Convertible Note Instrument, dated June 3, 2020, between the Registrant and Alibaba.com Hong Kong Limited, relating to the issuance ofthe Registrant’s 4.5% Convertible Senior Notes due 2025 in the aggregate principal amount of US$150 million (incorporated by referenceto Exhibit 4.25 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2020, initially filed with the Securities andExchange Commission on April 16, 2021). Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 157 of 250 Table of Contents150Exhibit Number Description of Exhibits4.22Facility Agreement, between Alibaba (China) Technology Co., Ltd. and BEST Logistics Technologies (China) Co., Ltd., dated August 19,2021, in respect of two facilities in an aggregate principal amount of RMB600,000,000 (English Translation) (incorporated by reference toExhibit 4.22 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, initially filed with the Securities andExchange Commission on April 18, 2022).4.23Letter of Undertaking, to Alibaba (China) Technology Co., Ltd., from Zhejiang BEST Technology Co., Ltd., dated August 19, 2021(English Translation) (incorporated by reference to Exhibit 4.23 to our Annual Report on Form 20-F for the fiscal year ended December 31,2021, initially filed with the Securities and Exchange Commission on April 18, 2022).4.24Share Pledge Agreement, among BEST Freight Network Technology Management Limited, BEST Chi Cheng (Hangzhou) LogisticsService Co., Ltd. and Alibaba (China) Technology Co., Ltd., dated August 19, 2021 (English Translation) (incorporated by reference toExhibit 4.24 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, initially filed with the Securities andExchange Commission on April 18, 2022).4.25Share Pledge Agreement, among BEST Logistics Technologies Limited, BEST Logistics Technology (China) Co., Ltd. and Alibaba (China)Technology Co., Ltd., dated August 19, 2021 (English Translation) (incorporated by reference to Exhibit 4.25 to our Annual Report onForm 20-F for the fiscal year ended December 31, 2021, initially filed with the Securities and Exchange Commission on April 18, 2022).4.26Share and Asset Purchase Agreement, among BEST Inc., J&T Global Express Limited and other parties thereto, dated October 29, 2021(English Translation) (incorporated by reference to Exhibit 10.1 to our Current Report on Form 6-K for the month of December 2021,initially filed with the Securities and Exchange Commission on December 17, 2021).4.27Loan Agreement between BEST Store Network (Hangzhou) Co., Ltd., Wei Chen and Lili He, dated December 15, 2021 (EnglishTranslation) (incorporated by reference to Exhibit 4.27 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2021,initially filed with the Securities and Exchange Commission on April 18, 2022).4.28Exclusive Services Agreement between Hangzhou Baijia Business Management Consulting Co., Ltd. and BEST Store Network (Hangzhou)Co., Ltd., dated December 15, 2021 (English Translation) (incorporated by reference to Exhibit 4.28 to our Annual Report on Form 20-F forthe fiscal year ended December 31, 2021, initially filed with the Securities and Exchange Commission on April 18, 2022).4.29Equity Pledge Agreement for Hangzhou Baijia Business Management Consulting Co., Ltd., among Wei Chen, Lili He, BEST StoreNetwork (Hangzhou) Co., Ltd. and Hangzhou Baijia Business Management Consulting Co., Ltd., dated December 15, 2021 (EnglishTranslation) (incorporated by reference to Exhibit 4.29 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2021,initially filed with the Securities and Exchange Commission on April 18, 2022).4.30Shareholders’ Voting Rights Proxy Agreement for Hangzhou Baijia Business Management Consulting Co., Ltd., among Wei Chen, Lili He,BEST Inc., BEST Store Network (Hangzhou) Co., Ltd. and Hangzhou Baijia Business Management Consulting Co., Ltd., dated December15, 2021 (English Translation) (incorporated by reference to Exhibit 4.30 to our Annual Report on Form 20-F for the fiscal year endedDecember 31, 2021, initially filed with the Securities and Exchange Commission on April 18, 2022).4.31Exclusive Call Option Agreement for Hangzhou Baijia Business Management Consulting Co., Ltd., among Wei Chen, Lili He, BEST Inc.,BEST Store Network (Hangzhou) Co., Ltd. and Hangzhou Baijia Business Management Consulting Co., Ltd., December 15, 2021 (EnglishTranslation) (incorporated by reference to Exhibit 4.31 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2021,initially filed with the Securities and Exchange Commission on April 18, 2022).*8.1List of Subsidiaries.11.1Code of Business Conduct of the Registrant (incorporated by reference to Exhibit 99.1 to our Registration Statement on Form F-1 (File No.333-218959), initially filed with the Securities and Exchange Commission on June 26, 2017).*12.1Certification of our Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*12.2Certification of our Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**13.1Certification of our Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 158 of 250 Table of Contents151Exhibit Number Description of Exhibits**13.2Certification of our Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*15.1Consent of Independent Registered Public Accounting Firm*15.2Consent of King and Wood Mallesons**15.3Certification by the Chief Executive Officer Pursuant to Item 16I(a) of Form 20-F*101.INSXBRL Instance Document.*101.SCHXBRL Taxonomy Extension Schema Document.*101.CALXBRL Taxonomy Extension Calculation Linkbase Document.*101.DEFXBRL Taxonomy Extension Definition Linkbase Document.*101.LABXBRL Taxonomy Extension Labels Linkbase Document.*101.PREXBRL Taxonomy Extension Presentation Linkbase Document.*104Cover Page Interactive Data File (embedded within the Inline XBRL document)* Filed herewith** Furnished herewith Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 159 of 250 Table of Contents152SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized theundersigned to sign this annual report on its behalf.BEST Inc.By:/s/ Shao-Ning Johnny ChouName:Shao-Ning Johnny ChouTitle:Chairman and Chief Executive OfficerDate: April 21, 2023 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 160 of 250 Table of ContentsF-1BEST INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReports of Independent Registered Public Accounting Firm (PCAOB ID: 1408)F-2 - F-4Consolidated Balance Sheets as of December 31, 2021 and 2022F-5 - F-6Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2021 and 2022F-7 - F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022F-8 - F-10Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2020, 2021 and 2022F-11 – F-13Notes to the Consolidated Financial StatementsF-14 – F-91 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 161 of 250 Table of ContentsF-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of BEST Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of BEST Inc. (the “Company”) as of December 31, 2022 and 2021, the relatedconsolidated statements of comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period endedDecember 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidatedfinancial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results ofits operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally acceptedaccounting principles.The Company’s Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Asdiscussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capitaldeficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of theevents and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do notinclude any adjustments that might result from the outcome of this uncertainty. As explained below, auditing the Company’s evaluation of itsability to continue as a going concern was a critical audit matter.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits includedperforming procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statementsand (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter inany way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 162 of 250 Table of ContentsF-3 Impairment assessment of long-lived assetsDescription of the MatterAt December 31, 2022, the Company’s long-lived assets in the Company’s business, comprising of property andequipment, intangible assets and operating lease right-of-use assets were RMB2,604 million. As discussed inNote 2 to the consolidated financial statements, the Company groups long-lived assets at the lowest level ofidentifiable cash flows and assesses the asset group for impairment whenever events or changes in circumstancesindicate that their carrying amounts may not be fully recoverable. If the sum of the expected undiscounted cashflows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on theexcess of the carrying amount of the asset group over its fair value. The Company concluded no impairmentexisted as of December 31, 2022 as the estimated future undiscounted cash flows of its long-lived asset groupsexceeded their carrying values.Auditing management’s impairment assessment of long-lived assets was complex due to the significant estimatesand judgments involved in the projection of future cash flows of the asset groups used in the quantitative test ofimpairment. In particular, these estimates are sensitive to significant assumptions, including revenue growth rate,operating margin and operating expenses, which can be affected by expectations about future market andeconomic conditions.How We Addressed the Matterin Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over theCompany’s long-lived assets impairment assessment process. For example, we tested the controls overmanagement’s review of the significant assumptions described above used to develop the undiscounted cashflows projections.To test the Company’s impairment assessment of the asset groups, our audit procedures included, among others,evaluating the significant assumptions used to develop the future undiscounted cash flows of the asset groupsand testing the completeness and accuracy of the underlying data used by the Company. We assessed thesignificant assumptions used in the calculations which included, amongst others, the revenue growth rate,operating margin and operating expenses, by comparing to current industry and economic trends, and againsthistorical performance and budgets. We also performed sensitivity analyses by assessing the changes to thefuture undiscounted cash flows of the asset groups resulting from changes in these significant assumptions. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 163 of 250 Table of ContentsF-4Going concernDescription of the MatterAs discussed in Note 2 to the consolidated financial statements, the continuous negative impact of COVID-19 in2022 and intense market competition had an adverse impact on the Company’s business operations and liquidity.The Company has incurred net losses from continuing operations of RMB1,465 million and generated negativecash flows from continuing operating activities of RMB1,052 million during the year ended December 31, 2022,and has an accumulated deficit of RMB18,935 million and a working capital deficit of RMB935 million as ofDecember 31, 2022. The Company has implemented cost saving plans to reduce discretionary operationalexpenses and secure additional financing including, but not limited to, obtaining additional credit facilities frombanks in the normal course of business, and re-financing certain existing notes payables. However, there areuncertainties as to whether the aforesaid plans can be successfully executed. These factors raised substantialdoubt regarding the Company’s ability to continue as a going concern. Auditing management’s evaluation of whether their plans to alleviate the substantial doubt regarding its ability tocontinue as a going concern is complex and involves subjective auditor judgment when assessing (i) thereasonableness of the cash flow forecasts and (ii) whether it is probable that management’s plans will beeffectively implemented and alleviate substantial doubt.How We Addressed the Matterin Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over theCompany’s going concern assessment process. For example, we tested controls over management’s review ofestimates and assumptions in the Company’s cash flow forecasts and the assessment of whether it is probablethat their plans will be effectively implemented and alleviate substantial doubt.To test the Company’s assessment regarding its ability to continue as a going concern, we performed auditprocedures that included, among others, evaluating the reasonableness of management’s cash flow forecasts bymaking inquiries with management, comparing the forecasts used by management against historical performanceand budgets, and to current industry and economic trends. We also performed sensitivity analyses of significantassumptions to evaluate the change in the cash flow forecasts that would result from changes in theseassumptions. We considered the impact of subsequent events on the Company’s going concern assessment, andthe Company’s financing arrangements in place as of the report date. In addition, we assessed the adequacy ofthe Company’s disclosures of the going concern uncertainty included in Note 2 to the consolidated financialstatements./s/ Ernst & Young Hua Ming LLPWe have served as the Company’s auditor since 2016.Shanghai, The People’s Republic of ChinaApril 21, 2023 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 164 of 250 Table of ContentsF-5BEST INC.CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)As at December 31 Notes 2021 2022 2022RMBRMBUS$ASSETS Current assets: Cash and cash equivalents (including cash and cash equivalents of the consolidated VIEs that can be used only to settleobligations of the consolidated VIEs of RMB26,166 and RMB5,042 (US$731) as of December 31, 2021 and 2022,respectively) 3,571,745 533,481 77,347Restricted cash 675,159 399,337 57,898Short-term investments147,359725,043105,121Accounts and notes receivable, net of allowance of RMB227,593 and RMB263,956 (US$38,270) as of December 31, 2021 and 2022, respectively 6 827,631 691,324 100,237Prepayments and other current assets (including prepayments and other current assets of the consolidated VIEs that can beused only to settle obligations of the consolidated VIEs of RMB12,046 and RMB17,909 (US$2,597) as of December 31,2021 and 2022, respectively) 7 1,172,472 777,842 112,773Lease rental receivables10298,36443,0676,244Amounts due from related parties 23 125,198 76,368 11,072Inventories25,62216,4802,389Total current assets 6,843,550 3,262,942 473,081Non-current assets: Restricted cash 1,069,244 1,545,605 224,092Non-current deposits92,86650,7677,361Operating lease right-of-use assets101,899,5221,743,798252,827Lease rental receivables10235,42940,1885,827Long-term investments11219,171156,85922,742Property and equipment, net8762,642784,732113,775Intangible assets, net955,68475,55310,954Goodwill1254,13554,1357,849Other non-current assets111,64075,66610,971Total non-current assets 4,500,333 4,527,303 656,398Total assets 11,343,883 7,790,245 1,129,479LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts and notes payable (including accounts and notes payable of the consolidated VIEs without recourse to the primarybeneficiary of RMB60,669 and RMB22,379 (US$3,246) as of December 31, 2021 and 2022, respectively) 1,353,150 1,430,004 207,331Accrued expenses and other liabilities (including accrued expenses and other liabilities of the consolidated VIEs withoutrecourse to the primary beneficiary of RMB18,251 and RMB20,741 (US$3,005) as of December 31, 2021 and 2022,respectively) 14 1,591,639 1,145,654 166,103Customer advances and deposits and deferred revenue (including customer advances and deposits and deferred revenue of theconsolidated VIEs without recourse to the primary beneficiary of RMB341 and nil as of December 31, 2021 and 2022,respectively) 298,353 277,737 40,268Operating lease liabilities (including operating lease liabilities of the consolidated VIEs without recourse to the primarybeneficiary of RMB880 and RMB376 (US$55) as of December 31, 2021 and 2022, respectively) 10 518,248 544,262 78,911Financing lease liabilities (including financing lease liabilities of the consolidated VIEs without recourse to the primarybeneficiary of nil and RMB10,383 (US$1,505) as of December 31, 2021 and 2022, respectively)101,85111,8731,721Amounts due to related parties 23 2,763 1,315 191Income tax payable 17 587 1,563 227Short-term bank loans (including short-term bank loans of the consolidated VIEs without recourse to the primary beneficiaryof RMB120,500 and RMB110,142 (US$15,969) as of December 31, 2021 and 2022, respectively)13530,495183,27026,572Long-term borrowings - current portion (including long-term borrowings - current portion of the consolidated VIEs withoutrecourse to the primary beneficiary of RMB84,006 and nil as of December 31, 2021 and 2022, respectively)15287,81479,14811,475Convertible senior notes held by a related party-current16, 23633,475522,74475,791Convertible senior notes held by third parties-current16633,4757711Total current liabilities 5,851,850 4,197,647 608,601The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 165 of 250 Table of ContentsF-6BEST INC.CONSOLIDATED BALANCE SHEETS (CONTINUED)(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)As at December 31 Notes 2021 2022 2022RMBRMBUS$Non-current liabilitiesOperating lease liabilities101,456,8431,292,057187,331Financing lease liabilities (including financing lease liabilities of the consolidated VIEs without recourse to the primarybeneficiary of nil and RMB24,702 (US$3,581) as of December 31, 2021 and 2022, respectively)102,12126,0243,772Long-term bank loans13769,767928,894134,677Long-term borrowings1567,08038155Convertible senior notes held by a related party16, 23955,097522,74475,791Other non-current liabilities (including other non-current liabilities of the consolidated VIEs without recourse to the primarybeneficiary of nil and RMB438 (US$64) as of December 31, 2021 and 2022, respectively)24,26118,7522,719Total non-current liabilities3,275,1692,788,852404,345Total liabilities 9,127,019 6,986,499 1,012,946Commitments and contingencies26Mezzanine Equity:Convertible non-controlling interests22, 23191,865191,86527,818Total mezzanine equity191,865191,86527,818Shareholders’ equity:Class A ordinary shares (par value of US$0.01 per share as of December 31, 2021 and 2022; 1,858,134,053 shares authorized asof December 31, 2021 and 2022; 255,648,452 shares issued and outstanding as of December 31, 2021 and 2022, respectively)2116,53216,5322,397Class B ordinary shares (par value of US$0.01 per share as of December 31, 2021 and 2022; 94,075,249 shares authorized, issuedand outstanding as of December 31, 2021 and 2022, respectively)216,1786,178896Class C ordinary shares (par value of US$0.01 per share as of December 31, 2021 and 2022; 47,790,698 shares authorized, issuedand outstanding as of December 31, 2021 and 2022, respectively)213,2783,278475Treasury shares 21 (113,031)— —Statutory reserves 21 167— —Additional paid-in-capital19,522,17319,481,4172,824,540Accumulated deficit(17,471,716)(18,934,860)(2,745,297)Accumulated other comprehensive income 28 107,379124,464 18,046BEST Inc. shareholders’ equity2,070,960697,009101,057Non-controlling interests (45,961)(85,128) (12,342)Total shareholders’ equity2,024,999611,88188,715Total liabilities, mezzanine equity and shareholders’ equity11,343,8837,790,2451,129,479The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 166 of 250 Table of ContentsF-7BEST INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)For the Years ended December 31, Notes2020202120222022 RMB RMB RMB US$Revenue from third parties Freight delivery 7,695,749 8,244,435 4,843,121 702,187Supply chain management1,391,6861,476,7431,678,619243,377Global616,934992,518708,745102,758Others142,506172,442116,81216,936 9,846,875 10,886,138 7,347,297 1,065,258Revenue from related parties Freight delivery23 — — 45,157 6,547Supply chain management23 520,637 338,361 143,456 20,799Global23160,722201,337208,16230,181 681,359 539,698 396,775 57,527Total revenue 10,528,234 11,425,836 7,744,072 1,122,785Cost of revenue Freight delivery(7,537,093)(8,506,738)(5,114,937)(741,596)Supply chain management (including rental of warehouse as a lessee from a related party of RMB18,011, nil and nil forthe years ended December 31, 2020, 2021 and 2022, respectively) (1,846,901) (1,741,832) (1,711,818) (248,190)Global(875,733)(1,258,511)(1,081,587)(156,815)Others(26,225)(118,143)(99,288)(14,395)Total cost of revenue (10,285,952) (11,625,224) (8,007,630) (1,160,996)Gross profit (loss) 242,282 (199,388) (263,558) (38,211)Selling expenses (235,419) (260,219) (237,918) (34,495)General and administrative expenses (including operating costs paid to a related party of RMB14,861, RMB13,608 andRMB9,041 (US$1,311) for the years ended December 31, 2020, 2021 and 2022, respectively) (867,517) (881,498) (889,345) (128,943)Research and development expenses (136,065) (180,204) (144,181) (20,904)Other operating income, net 24,777 58,337 108,817 15,777Total operating expenses (1,214,224) (1,263,584) (1,162,627) (168,565)Loss from operations (971,942)(1,462,972)(1,426,185)(206,776)Interest income 55,52749,65880,36111,651Interest expense (including interest expense to related parties of RMB46,460, RMB63,561 and RMB62,192 (US$9,017)for the years ended December 31, 2020, 2021 and 2022, respectively) (119,177)(142,751)(89,058)(12,912)Foreign exchange (loss) gain (8,243)44,556(132,730)(19,244)Other income, net 33,134265,82231,6774,593(Loss)/gain on change in fair value of derivative assets/liabilities—(14,918)71,61910,384Loss before income taxes and share of net loss of equity investees (1,010,701)(1,260,605)(1,464,316)(212,304)Income tax expense 17 (17,553)(3,198)(511)(74)Loss before share of net loss of equity investees (1,028,254)(1,263,803)(1,464,827)(212,378)Share of net loss of equity investees (180)(58)——Net loss from continuing operations(1,028,434)(1,263,861)(1,464,827)(212,378)Net (loss) income from discontinued operations, net of tax4(1,022,790)1,473,489(38,464)(5,577)Net (loss) income (2,051,224) 209,628 (1,503,291) (217,955)Net loss from continuing operations attributable to non-controlling interests(25,716)(52,279)(39,980)(5,797)Net (loss) income attributable to BEST Inc.(2,025,508)261,907(1,463,311)(212,158)Net (loss) earnings per Class A, Class B and Class C ordinary share: Basic and diluted Continuing operations19(2.59)(3.12)(3.63)(0.53)Discontinued operations19(2.64)3.80(0.10)(0.01)Basic and diluted net (loss) earnings per share attributable to Class A, Class B and Class C ordinary shareholders 19(5.23)0.68(3.73)(0.54)Net (loss) earnings per ADS (1 ADS equals 20 Class A ordinary shares)Basic and diluted net (loss) earnings per ADS19, 21(104.60)13.60(74.60)(10.80)Shares used in net (loss) earnings per share computation: Class A ordinary shares:Basic19245,626,959246,207,464250,326,701Diluted19387,492,906388,073,411392,192,648Class B ordinary shares:Basic1994,075,24994,075,24994,075,249Diluted1994,075,24994,075,24994,075,249Class C ordinary shares:Basic1947,790,69847,790,69847,790,698Diluted1947,790,69847,790,69847,790,698Other comprehensive (loss) income, net of tax of nil Foreign currency translation adjustments (11,519)(44,298) 17,085 2,477Comprehensive loss from continuing operations(1,039,953)(1,308,159)(1,447,742)(209,901)Comprehensive (loss) income from discontinued operations4(1,022,790)1,473,489(38,464)(5,577)Comprehensive loss from continuing operations attributable to non-controlling interests(25,716)(52,279)(39,980)(5,797)Comprehensive (loss) income attributable to BEST Inc. (2,037,027) 217,609 (1,446,226) (209,681)The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 167 of 250 Table of ContentsF-8BEST INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)For the Years ended December 31,Notes2020202120222022 RMB RMB RMB US$CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income (2,051,224) 209,628 (1,503,291) (217,955)Less: Net (loss) income from discontinued operations, net of tax(1,022,790)1,473,489(38,464)(5,577)Net loss from continuing operations (1,028,434) (1,263,861) (1,464,827) (212,378)Adjustments to reconcile net (loss) income to net cash used in operating activities: Share of net loss of equity investees18058——Fair value change of equity investments without readily determinable fair values under themeasurement alternative11(18,687)(58,643)——Deferred income tax 17 (828) — — —Change in fair value change of derivative assets and derivative liabilities—14,918(71,619)(10,384)Impairment of long-term investments11—10,69112,3121,785Depreciation and amortization157,495191,365188,91027,389Lease expense to reduce operating lease right-of -use assets600,923769,005713,799103,491Share-based compensation20115,463107,68172,09610,453Accretion on secured bank borrowings and convertible senior notes held by third parties 13,461 81,290 51,445 7,459Accretion on convertible senior notes held by a related party7,8765,9491,342195Allowance for credit losses 112,142 64,366 201,155 29,165Loss (gain) on disposal of property and equipment21,62410,386(6,919)(1,003)Gain on disposal of long-term investments11(5,658)(247,145)——Gain from the repurchase of convertible senior notes 16 — — (17,356) (2,516)Foreign exchange loss (gain)8,243(44,556)132,73019,244Changes in operating assets and liabilities:Accounts and notes receivable3,107,415(2,796,772)93,45113,549Inventories (4,510) 2,647 9,142 1,325Prepayments and other current assets 393,718 (1,391,552) 20,404 2,958Amounts due from related parties (49,982) 57,211 50,211 7,280Non-current deposits (24,647) 3,850 — —Other non-current assets 16,584 11,166 (49,223) (7,137)Lease rental receivables - interest portion(5,648)(10,885)4,748688Accounts and notes payable (3,081,236) 2,697,827 76,854 11,143Income tax payable7,192(13,963)976142Customer advances and deposits and deferred revenue70,23517,672(20,616)(2,989)Accrued expenses and other liabilities311,2431,626,075(352,380)(51,093)Amounts due to related parties(20,462)(972)(1,448)(210)Other non-current liabilities (3,003) — — —Operating lease liabilities(630,172)(734,943)(696,849)(101,034)Net cash generated from (used in) continuing operating activities70,527(891,135)(1,051,662)(152,478)Net cash used in discontinued operating activities(301,762)(1,912,826)(66,174)(9,594)Net cash used in operating activities(231,235)(2,803,961)(1,117,836)(162,072)The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 168 of 250 Table of ContentsF-9BEST INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”) For the Years ended December 31,Note2020202120222022 RMB RMB RMB US$CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment (311,026) (160,012) (143,276) (20,773)Origination of lease rental and other financing receivables (1,071,963) (45,671) — —Receipt of repayment on lease and other financing receivables-principalportion 876,230 1,165,834 554,195 80,351Disposal of property and equipment and intangible assets to third parties4,15617,91325,2733,664Disposal of property and equipment and intangible assets to a related party23——16,0132,322Cash paid for business acquisitions (net of cash acquired of RMB562, niland nil for the years ended December 31, 2020, 2021 and 2022,respectively)5(12,628)(1,749)——Acquisition of intangible assets (35,940) (19,355) (32,505) (4,713)Disposal of long-term investments 11 26,896 354,018 — —Acquisition of long-term investments — (50,000) — —Proceeds from disposal of subsidiaries (net of cash disposed of nil, 576,051and nil for the years ended December 31, 2020, 2021 and 2022,respectively)—3,550,235——Proceeds from maturities of short-term investments913,099425,1201,804,329261,603Purchase of short-term investments (242,026) (349,212) (2,233,094) (323,768)Other investing activities, net 121,677 103,613 159,821 23,172Net cash generated from continuing investing activities 268,475 4,990,734 150,756 21,858Net cash used in discontinued investing activities (1,141,408) (448,016) — —Net cash (used in) generated from investing activities(872,933)4,542,718150,75621,858CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term bank loans 2,044,227 906,341 110,142 15,969Proceeds from long-term bank loans75,838701,085138,63520,100Repayment of short-term bank loans (1,401,500) (2,245,093) (530,495) (76,915)Repayment of long-term bank loans — (2,797) (932) (135)Proceeds from loan from a related party—600,000——Repayment of loan from a related party—(600,000)——Proceeds from issuance of series A preferred shares of a subsidiary, net ofissuance cost—191,865——Proceeds from convertible senior notes held by a related party, net ofissuance costs161,061,421———Proceeds from long-term borrowings, net of issuance costs15198,074585,529——Principal repayment of long-term borrowings15(210,991)(378,829)(301,765)(43,752)Redemption of convertible senior notes held by a related party16——(746,538)(108,238)Redemption of convertible senior notes held by third parties16——(617,368)(89,510)Proceeds from other financing activities102,0242,4401,722250Principal repayment of financing lease liabilities10(1,179)(1,481)(1,772)(257)Contributions from non-controlling interest shareholders—415——Proceeds from the exercise of share options2,1512,60341Repurchase of ordinary shares 21(211,352)———Net cash generated from (used in) continuing financing activities1,558,713(237,922)(1,948,367)(282,487)Net cash used in discontinued financing activities(10,529)(337,838)——Net cash generated from (used in) financing activities1,548,184(575,760)(1,948,367)(282,487)Exchange rate effect on cash, cash equivalents and restricted cash(192,110)(55,970)77,72211,269Net increase (decrease) in cash, cash equivalents and restricted cash251,9061,107,027(2,837,725)(411,432)Cash, cash equivalents and restricted cash at the beginning of the year 3,957,215 4,209,121 5,316,148 770,769Cash, cash equivalents and restricted cash at the end of the year 4,209,121 5,316,148 2,478,423 359,337The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 169 of 250 Table of ContentsF-10BEST INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)Reconciliation of cash, cash equivalents and restricted cash: For the Years ended December 31,2020202120222022 RMB RMB RMB US$Cash and cash equivalents 1,180,787 3,571,745 533,481 77,347Restricted cash – current 1,998,323 675,159 399,337 57,898Restricted cash – non-current 333,313 1,069,244 1,545,605 224,092Cash and cash equivalents held-for-sale 216,060 — — —Restricted cash – current included in assets held-for-sale 104,103 — — —Restricted cash – non-current included in assets held-for-sale376,535———Total cash, cash equivalents and restricted cash shown in the statement of cash flows 4,209,121 5,316,148 2,478,423 359,337 For the Years ended December 31,Notes2020202120222022 RMB RMB RMB US$Supplemental disclosures of cash flow information: Income taxes paid 15,760 17,161 (1,487) (216)Interest expense paid 47,353 152,348 87,387 12,670Supplemental disclosures of non-cash investing and financing activities: Purchase of property and equipment included in accrued expenses and otherliabilities 14 40,530 29,545 71,234 10,328Acquisition of property and equipment through financing leases 4,279 3,972 37,8975,493Purchase consideration for business acquisitions included in accrued expensesand other liabilities 14 1,502 — — —The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 170 of 250 Table of ContentsF-11BEST INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares) Attributable to BEST Inc. AccumulatedOrdinary SharesAdditionalotherNon-TotalNumber ofTreasurypaid-inStatutorycomprehensiveAccumulatedcontrollingshareholders’shares Amount shares capital Reserves income deficitinterestsequityRMBRMBRMBRMBRMBRMBRMBRMBBalance as of December 31, 2019 392,514,399 25,988— 19,353,400 7,865 163,196 (15,629,537) (5,628) 3,915,284Cumulative effect of accounting change——————(55,746)(42)(55,788)Net loss for the year——————(2,025,508)(25,716)(2,051,224)Other comprehensive loss — —— — — (11,519) — — (11,519)Appropriation to statutory reserves — —— — 173 — (173) — —Share-based compensation———138,201————138,201Repurchase of ordinary shares (Note 21)(6,395,050)—(211,352)—————(211,352)Contributions from non-controlling interest shareholders———(4,874)———5,071197Acquisition of non-controlling interests———————300300Settlement of exercised share options and vested restrictedshares with shares held by Citi(2,869,291)————————Exercise of share options and vesting of restricted shares2,869,291——505————505Balance as of December 31, 2020 386,119,349 25,988(211,352) 19,487,232 8,038 151,677 (17,710,964) (26,015)1,724,604The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 171 of 250 Table of ContentsF-12BEST INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares)Attributable to BEST Inc. Accumulated Ordinary SharesAdditionalotherNon- TotalNumber ofTreasurypaid-inStatutorycomprehensiveAccumulatedcontrollingshareholders’sharesAmountsharescapitalReservesincomedeficitinterestsequityRMBRMBRMBRMBRMBRMBRMBRMBBalance as of December 31, 2020 386,119,349 25,988 (211,352)19,487,2328,038 151,677 (17,710,964) (26,015)1,724,604Net income (loss) for the year — — ——— — 261,907 (21,749)240,158Other comprehensive loss — — ——— (44,298) — —(44,298)Reversal of statutory reserves————(7,871)—7,871——Share-based compensation———134,926————134,926Adjustment of convertible non-controlling interests——————(30,530)—(30,530)Purchase from non-controlling interest shareholders———(4,269)———1,262(3,007)Contributions from non-controlling interest shareholders———————541541Newly deposited and issued to depository bank-Citibank, N.A.(“Citi”)5,000,000————————Settlement of exercised share options and vested restrictedshares with shares held by Citi(170,492)————————Settlement of exercised share options and vested restrictedshares with treasury shares(2,974,987)—98,321(98,321)—————Exercise of share options and vesting of restricted shares3,145,479——2,605————2,605Balance as of December 31, 2021391,119,34925,988 (113,031)19,522,173167 107,379 (17,471,716) (45,961)2,024,999The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 172 of 250 Table of ContentsF-13BEST INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares) Attributable to BEST Inc. Accumulated Ordinary SharesAdditionalotherNon- TotalNumber ofTreasurypaid-inStatutorycomprehensiveAccumulatedcontrollingshareholders’sharesAmountsharescapitalReservesincomedeficitinterestsequityRMBRMBRMBRMBRMBRMBRMBRMBBalance as of December 31, 2021391,119,349 25,988 (113,031)19,522,173167 107,379 (17,471,716) (45,961)2,024,999Net loss for the year — — ——— — (1,463,311) (39,980)(1,503,291)Other comprehensive income — — ——— 17,085 — —17,085Reversal of statutory reserves————(167)—167——Share-based compensation———72,096————72,096Purchase from non-controlling interest shareholders———(1,547)———813(734)Gain from early redemption of convertible senior notes———1,721————1,721Settlement of exercised share options and vested restrictedshares with shares held by Citi(694,872)————————Settlement of exercised share options and vested restrictedshares with treasury shares(3,420,063)—113,031(113,031)—————Exercise of share options and vesting of restricted shares4,114,935——5————5Balance as of December 31, 2022 391,119,34925,988—19,481,417—124,464(18,934,860)(85,128)611,881Balance as of December 31, 2022 in US$ 3,768 —2,824,540— 18,046 (2,745,297) (12,342)88,715The accompanying notes are an integral part of the consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 173 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-141.ORGANIZATION AND BASIS OF PRESENTATIONThe Company is a limited liability company incorporated in the Cayman Islands on March 3, 2008.The Company does not conduct any substantive operations on its own but instead conducts its primary business operations through itssubsidiaries, variable interest entities (the “VIEs”) and VIEs’ subsidiaries, which are mainly located in the People’s Republic of China (the “PRC”).The accompanying consolidated financial statements include the financial statements of the Company, its subsidiaries, VIEs and VIEs’subsidiaries. The Company, its subsidiaries, VIEs and VIEs’ subsidiaries are hereinafter collectively referred to as the “Group”.On September 20, 2017, the Company completed its initial public offering (“IPO”) on the New York Stock Exchange.Prior to December 2021, the Group was principally engaged in the business of providing express delivery services, freight deliveryservices, supply chain management services, Store+ services, global logistic services and other value-added services. The Group’s principalgeographic market is in the PRC.In November 2020, the Company approved a disposal plan to wind down its Dianjia.com services business by the end of December 31,2020 and committed to a plan to sell its Wowo convenience stores (“Store+ disposal plan”) in order to increase focus on the Company’s corebusinesses. In November 2021, the Company completed the disposal transaction of Sichuan Wowo Supermarket Chain Co., Ltd. (“SichuanWowo”).In October 2021, the Company entered into a series of agreements with J&T Global Express Limited (“J&T”), a PRC limited liabilitycompany and a logistics services provider in China to sell its express delivery business in China. On December 9, 2021, the disposal was completedand Hangzhou BEST Network Technologies Co., Ltd. (“BEST Network”) and its subsidiaries were sold to J&T.As a result, the related historical financial results of Store+ services and BEST Express delivery services (“BEST Express”) are reflectedin the Company’s consolidated statements of comprehensive (loss) income as discontinued operations and the related assets and liabilities arereclassified as assets held-for-sale and liabilities held-for-sale on the Company’s consolidated balance sheets accordingly. See additional disclosuresregarding the discontinued operation in Note 4 to the consolidated financial statements.Subsequent to December 2021, the Group is principally engaged in the business of providing freight delivery services, supply chainmanagement services, global logistic services and other value-added services. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 174 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-151.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Details of the Company’s principal subsidiaries, VIEs and VIEs’ subsidiaries as of December 31, 2022 are as follows: Place of Percentage of incorporation,equity interest registration andDate ofattributable Name of Companybusinessincorporation/acquisitionto the CompanyPrincipal activitiesSubsidiaries: Eight Hundred Logistics Technologies CorporationBritish Virgin IslandsMay 22, 2007100% Investment holding(“BEST BVI”) (“BVI”) BEST Logistics Technologies LimitedHong KongMay 29, 2007100% Investment holding(“BEST HK”) (“HK”) BEST Capital Inc (“BEST Capital”)Cayman IslandsDecember 13, 2017100% Investment holdingBEST Capital Holding LimitedBVIDecember 13, 2017100% Investment holding(“BEST Capital BVI”)BEST Store Network Limited (“Store Cayman”)Cayman IslandsJuly 24, 2017100%Investment holdingBEST Store Network Holding LimitedBVINovember 13, 2018100%Investment holding(“Store BVI”)BEST Store Network Management LimitedHKNovember 16, 2018100%Investment holding(“Store HK”)BEST Capital Management LimitedHKDecember 20, 2017100% Investment holding(“BEST Capital HK”)BEST Logistics Technologies (China) Co., Ltd.PRCApril 23, 2008100% Freight delivery and Supply chain(“BEST China”) management servicesBEST Store Network (Hangzhou) Co., Ltd.PRCMay16, 2013100% Store + services(“BEST Store”) Zhejiang BEST Technology Co., Ltd.PRCJuly 26, 2007100% Logistics technical services(“BEST Technology”) Xinyuan Financial Leasing (Zhejiang) Co., Ltd.PRCJanuary 15, 2015100% Financial services(“BEST Finance”) BEST Logistics Technologies (Ningbo Free Trade Zone) Co.,Ltd. (“BEST Ningbo”)PRCMay 22, 2015100% Supply chain management servicesVIEs Hangzhou BEST Information Technology Services Co., Ltd.(“BEST Information Technology”)PRCOctober 23, 2019NilUCargo transportation servicesHangzhou Baijia Business Management Consulting Co., Ltd.(“Hangzhou Baijia”)PRCDecember 20, 2019NilConvenience store operationsYunnan Trust Plan (“Trust Plan”)PRCMarch 11, 2021NilTrust PlanVIEs’ subsidiaries:BEST UCargo Technologies (Hangzhou) Co., LtdPRCSeptember 8, 2017NilUCargo transportation services(“BEST UCargo”) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 175 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-161.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)To comply with PRC legal restrictions on foreign ownership and investment in, among other areas, domestic mail delivery services, value-added telecommunication business as well as tobacco retail business, the Company provides the services that may be subject to such restrictions inthe PRC through the VIEs, namely BEST Network (prior to the disposal in December 2021), BEST Information Technology, and Hangzhou Baijia,which are all incorporated in the PRC and 100% owned by PRC individuals (the “nominee shareholders”).BEST Network holds a courier service operation permit that allows it to provide domestic mail delivery services in addition to parceldelivery services and an ICP license that allows it to provide value-added telecommunication services, all of which may constitute part of theCompany’s comprehensive service offerings. Certain subsidiaries of BEST Information Technology have obtained ICP licenses that would allowthem to provide value-added telecommunication services in connection with the BEST UCargo business. Sichuan Wowo, a subsidiary of HangzhouBaijia, has obtained the tobacco monopoly retail license that would allow it to conduct tobacco retail business in connection with BEST Store+business.The contractual arrangements entered into among the Company, the wholly-owned PRC subsidiaries, the VIEs, and the VIEs’shareholders include (i) certain equity pledge agreements, shareholders’ voting rights proxy agreements, exclusive call option agreements andcertain loan agreements, which provide the Company the power to direct the activities that most significantly affect the economic performance ofthe VIEs and to acquire the equity interests in the VIEs when permitted by the laws of mainland China, respectively; and (ii) certain exclusivetechnical services agreements, which allow the Company to receive substantially all of the economic risks and benefits generated from theoperations of the VIEs and their subsidiaries (the “Contractual Agreements”). As a result of these Contractual Agreements, the Company has thepower to direct the activities of the VIEs and their subsidiaries that most significantly impact their economic performance and is entitled tosubstantially all of the economic benefits from their operations. Therefore, the Company is the primary beneficiary of the VIEs and consolidates theVIEs and their subsidiaries in accordance with SEC Regulation SX-3A-02 and Accounting Standards Codification (“ASC”) 810-10, Consolidation:Overall.The following is a summary of the Contractual Agreements.BEST NetworkThe following is a summary of the material provisions of the contractual arrangements relating to BEST Technology, BEST Networkand BEST Inc.Loan AgreementsBEST Technology entered into loan agreements with the nominee shareholders of BEST Network on October 12, 2011 and February 15,2015 respectively. Pursuant to this loan agreement, BEST Technology has granted an interest-free loans with an aggregate amount of RMB13,780to the nominee shareholders of BEST Network, which may only be used for the purpose of a capital injection of BEST Network. The nomineeshareholders of BEST Network undertook, among others, not to transfer any of its equity interests in BEST Network to any third party. The loansare only repayable by the nominee shareholders through a transfer of their equity interests in BEST Network to BEST Technology or its designatedparty unless the nominee shareholders are in breach of the agreements, in which BEST Technology can request immediate repayment of the loans.The loan agreements are effective until full repayment of the loans or BEST Technology agrees to waive the loan. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 176 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-171.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Exclusive Call Option AgreementPursuant to the exclusive call option agreement among BEST Technology, BEST Network and nominee shareholders of BEST Networkdated June 21, 2017, the nominee shareholders of BEST Network have granted BEST Technology (i) an exclusive option to purchase, when and tothe extent permitted under PRC laws, all or part of the equity interests in BEST Network or all or part of the assets held by BEST Network and (ii)an exclusive right to cause the nominee shareholders to transfer their equity interest in BEST Network to BEST Technology or any designated thirdparty. BEST Technology has the sole discretion to decide when to exercise the option, whether in part or full. The exercise price of the option topurchase all or part of the equity interests in BEST Network or assets held by BEST Network will be the minimum amount of considerationpermitted under the then-applicable PRC laws. Any proceeds received by the nominee shareholders from the exercise of the option exceeding theloan amount, distribution of profits or dividends, shall be remitted to BEST Technology, to the extent permitted under PRC laws. The exclusive calloption agreement will remain in effect until all the equity interests or the assets held by BEST Network are transferred to BEST Technology or itsdesignated party. BEST Technology may terminate the exclusive call option agreement at their sole discretion, whereas under no circumstancesmay BEST Network or its nominee shareholders terminate this agreement.To ensure that the cash flow requirements of BEST Network’s daily operations are met and/or to set off any losses that may be incurred,the Company is obliged, only to the extent permissible under PRC laws, to provide financial support to BEST Network, whether or not BESTNetwork actually incurs any such operational loss. The Company will not request repayment if BEST Network or its nominee shareholders areunable to do so. Without the Company’s prior consent, BEST Network and its nominee shareholders shall not enter into any material agreementsoutside of the ordinary course of business. The Company, at its sole discretion, has the right to decide whether the option and other rights grantedunder the agreement will be exercised by the Company, BEST Technology or its designated party.Shareholders’ Voting Rights Proxy AgreementPursuant to the shareholders’ voting rights proxy agreement among BEST Technology, BEST Network and its nominee shareholders datedJune 21, 2017, each of BEST Network’s shareholders agreed to entrust all the rights to exercise their voting power to the person designated byBEST Technology. The nominee shareholders irrevocably authorize the person designated by BEST Technology as its attorney-in-fact (“AIF”) toexercise on such nominee shareholder’s behalf any and all rights that such shareholder has in respect of its equity interests in BEST Network.BEST Technology has the right to replace the authorized AIF at any time upon written notice but not consent from the other parties. Theappointment of any individuals to exercise the powers and rights assigned pursuant to the shareholders’ voting rights proxy agreement requires theapproval of the Company. All the activities in relation to such powers and rights assigned are directed and approved by the Company. Theshareholders’ voting rights proxy agreement is valid as long as the nominee shareholders remain shareholders of BEST Network. The nomineeshareholders may not terminate the shareholders’ voting rights proxy agreement or revoke the appointment of the AIF without BEST Technology’sprior written consent. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 177 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-181.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Equity Pledge AgreementPursuant to the equity pledge agreement among BEST Technology, BEST Network and its nominee shareholders dated June 21, 2017, thenominee shareholders of BEST Network have pledged all of their equity interests in BEST Network in favor of BEST Technology to secure theperformance by BEST Network and its nominee shareholders under the various contractual agreements, including the exclusive technical serviceagreement, loan agreements and exclusive call option agreement. The nominee shareholders further undertake that they will remit any distributionsas a result in connection with such shareholder’s equity interests in BEST Network to BEST Technology, to the extent permitted by PRC laws. IfBEST Network or any of their respective nominee shareholders breach any of their respective contractual obligations under the above agreements,BEST Technology, as pledgee, will be entitled to certain rights, including the right to sell, transfer or dispose the pledged equity interest. Thenominee shareholders of BEST Network agree not to create any encumbrance on or otherwise transfer or dispose of their respective equity interestin BEST Network, without the prior consent of BEST Technology. All of the equity pledges have been registered with the relevant office of theAdministration for Market Regulation in China. The equity pledge agreement will expire when all obligations under this equity pledge agreementor under the aforementioned loan agreement, exclusive call option agreement, shareholders’ voting rights proxy agreement and exclusive technicalservices agreement have been satisfied.Exclusive Technical Service AgreementPursuant to the exclusive technical service agreement between BEST Technology and BEST Network dated June 21, 2017, BESTTechnology has the exclusive right to provide services to BEST Network related to BEST Network’s business, including but not limited to themanagement, development and maintenance of software, databases and websites, training and recruitment of employees and other services requiredby BEST Network. In return, BEST Network agrees to pay a service fee that is based on a predetermined formula based on the financialperformance of BEST Network. BEST Technology has the right to unilaterally adjust the service fee. The Exclusive Technical Service Agreementis valid for 20 years and will be automatically renewed on an annual basis unless terminated by BEST Technology at its sole discretion, whereasunder no circumstances may BEST Network terminate this agreement.Through the design of the contractual agreements, the nominee shareholders of BEST Network effectively assigned their full voting rightsto the Company, which gives the Company the power to direct the activities that most significantly impact BEST Network’s economicperformance. In addition, BEST Technology is entitled to substantially all of the economic benefits from BEST Network. The Company and BESTTechnology, as a group of related parties, hold all of the variable interests of BEST Network. The Company has been determined to be most closelyassociated with BEST Network within the group of related parties. As a result of these contractual Agreements, the Company is determined to bethe primary beneficiary of BEST Network.On December 9, 2021, the Company closed the sale of the BEST Network to J&T. BEST Network was no longer the VIE of the Companyand the related contractual agreements were terminated as of December 8, 2021. The operation results and cashflows of BEST Network and itssubsidiaries prior to the disposal date on December 9, 2021 are reflected as discontinued operations (Note 4) in the consolidated statements ofcomprehensive (loss) income and cash flows for all periods presented. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 178 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-191.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)BEST Information TechnologyTo comply with changes to PRC laws and regulations that became effective in 2020 which prohibit foreign ownership of more than 50%of the equity interests in companies that engage in value-added telecommunication services, the Group effected a restructuring of its UCargotransportation services business. In October 2019, BEST China, the nominee shareholders of BEST Information Technology and the Companysigned a series of contractual arrangements, through which, the Company obtained the power to direct the activities of BEST InformationTechnology that most significantly impact its economic performance and, is entitled to substantially all of the economic benefits from BESTInformation Technology through BEST China. As a result, the Company is the primary beneficiary of BEST Information Technology andconsolidates the entity in accordance with ASC 810-10. At the same time, BEST China transferred its equity interests in BEST UCargo and itssubsidiaries to BEST Information Technology. As the restructuring transaction to transfer the assets and liabilities relating to the UCargotransportation services business described above are between entities under common control and do not change the control at the ultimate parentlevel, the transaction was accounted for as a common control transaction based on the carrying amount of the net assets transferred.The following is a summary of the material provisions of the contractual arrangements relating to BEST China, BEST InformationTechnology and BEST Inc.Loan AgreementsBEST China entered into loan agreements with the nominee shareholders of BEST Information Technology in 2020, which replaced theoriginal loan agreement entered into in 2019. Pursuant to this loan agreement, BEST China has granted an interest-free loan to each of BESTInformation Technology’s nominee shareholders, which may only be used for the purpose of a capital contribution to BEST InformationTechnology. BEST China agreed not to ask the BEST Information Technology’s nominee shareholders to repay the loans unless the relevantnominee shareholder violates its undertakings provided in the loan agreements. BEST Information Technology’s equity holders undertook, amongothers, not to transfer any of its equity interests in BEST Information Technology to any third party. The loans are repayable by such equity holdersthrough a transfer of their equity interests in BEST Information Technology to BEST China or its designated party, in proportion to the amount ofthe loans to be repaid. The loan agreements remain effective until the relevant loans are repaid in full or BEST China relinquishes its rights underthe relevant loan agreements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 179 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-201.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Exclusive Call Option AgreementPursuant to the exclusive call option agreement among the Company, BEST China, Hangzhou Baisheng Investment Management Co.,Ltd. (later renamed as BEST Information Technology) and its equity holders, dated October 23, 2019, BEST Information Technology’s equityholders have granted BEST China and the Company, or a party designated by the Company or BEST China, the exclusive and irrevocable calloption rights to purchase part or all of their equity interests in BEST Information Technology at an exercise price equal to the minimum price aspermitted by applicable PRC laws. BEST Information Technology has further granted BEST China and the Company, or a party designated by theCompany or BEST China, an exclusive call option to purchase part or all of its assets also at an exercise price equal to the minimum price aspermitted by applicable PRC laws. At the Company’s sole discretion, the Company has the right to decide whether the option and other rightsgranted under the agreement will be exercised by the Company, BEST China or a party designated by the Company. Each of BEST InformationTechnology’s equity holders may not, among other things, transfer any part of their equity interests to any party other than the Company or BESTChina, or a party designated by the Company or BEST China, pledge or create or permit any security interest or similar encumbrance to be createdon all or any part of its equity interests, increase or decrease the registered capital of BEST Information Technology, terminate or cause to terminateany material contracts of BEST Information Technology, or cause BEST Information Technology to declare or distribute profits, bonuses ordividends. The Company is obligated, to the extent permitted by PRC laws, to provide financing support to BEST Information Technology in orderto meet the cash flow requirements of its ordinary operations and to offset any loss from such operations. The Company and BEST China are notentitled to request repayment if BEST Information Technology or its equity holders are unable to repay such financial support. The exclusive calloption agreement remains in effect until all the equity interests or assets that are the subject of the agreement are transferred to the Company orBEST China, or a party designated by the Company or BEST China, or if the Company or BEST China unilaterally terminate the agreement with30 days’ prior written notice. Unless otherwise provided by law, BEST Information Technology and its equity holders are not entitled tounilaterally terminate this agreement under any circumstances.Shareholders’ Voting Rights Proxy AgreementPursuant to the shareholders’ voting rights proxy agreement among the Company, BEST China, Hangzhou Baisheng InvestmentManagement Co., Ltd. (later renamed as BEST Information Technology) and its equity holders, dated October 23, 2019, each of BEST InformationTechnology’s equity holders has irrevocably authorized any person designated by BEST China, with the Company’s consent, to exercise its rightsas an equity holder of BEST Information Technology in a manner approved by the Company, including but not limited to the rights to attend andvote at equity holders’ meetings and appoint directors and senior management. The proxy agreement remains effective until such time as therelevant equity holder no longer holds any equity interest in BEST Information Technology. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 180 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-211.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Equity Pledge AgreementPursuant to the equity pledge agreement among BEST China, Hangzhou Baisheng Investment Management Co., Ltd. (later renamed asBEST Information Technology) and its equity holders, dated October 23, 2019, the relevant equity holders of BEST Information Technology havepledged all of their equity interests in BEST Information Technology as a continuing first priority security interest in favor of BEST China tosecure the outstanding amounts advanced under the relevant loan agreements described above and to secure the performance of obligations byBEST Information Technology and/or its equity holders under the other contractual arrangements. BEST China is entitled to exercise its right todispose of the pledged interests held by BEST Information Technology’s equity holders in the equity of BEST Information Technology and haspriority in receiving payment by the application of proceeds from the auction or sale of such pledged interests, in the event of any breach or defaultunder the loan agreements or other contractual arrangements, if applicable. The equity pledge agreement will expire when all obligations under thisequity pledge agreement or under the aforementioned loan agreement, exclusive call option agreement, shareholders’ voting rights proxyagreement and exclusive technical services agreement have been satisfied.Exclusive Technical Services AgreementOn October 23, 2019, Hangzhou Baisheng Investment Management Co., Ltd. (later renamed as BEST Information Technology) enteredinto an exclusive technical services agreement with BEST China, pursuant to which BEST China provides exclusive technical services to BESTInformation Technology. In exchange, BEST Information Technology pays a service fee to BEST China that is based on a predetermined formulabased on the financial performance of BEST Information Technology. During the term of this agreement, BEST China is entitled to adjust theservice fee at its sole discretion without the consent of BEST Information Technology. BEST China will exclusively own any intellectual propertyarising from the performance of this agreement. This exclusive technical services agreement has an initial contract term of 20 years and may beautomatically renewed for another 20 years unless BEST China notifies BEST Information Technology of its intent not to renew with at least threemonths’ prior notice. BEST China is entitled to terminate the agreement unilaterally with 30 days’ prior written notice, while BEST InformationTechnology is not entitled to unilaterally terminate this agreement under any circumstances.Through the design of the contractual agreements, the nominee shareholders of BEST Information Technology effectively assigned theirfull voting rights to the Company, which gives the Company the power to direct the activities that most significantly impact BEST InformationTechnology’s economic performance. In addition, BEST China is entitled to substantially all of the economic benefits from BEST InformationTechnology. The Company and BEST China, as a group of related parties, hold all of the variable interests of BEST Information Technology. TheCompany has been determined to be most closely associated with BEST Information Technology within the group of related parties. As a result ofthese contractual agreements, the Company is determined to be the primary beneficiary of BEST Information Technology.Hangzhou BaijiaTo comply with changes to PRC laws and regulations which prohibit foreign ownership of the equity interests in companies that engage intobacco business, the Group effected a restructuring of its convenience store business. In April 2020, BEST Store, the nominee shareholders ofHangzhou Baijia and the Company signed a series of contractual arrangements, through which, the Company obtained the power to direct theactivities of Hangzhou Baijia that most significantly impact its economic performance and, is entitled to substantially all of the economic benefitsfrom Hangzhou Baijia through BEST Store. As a result, the Company is the primary beneficiary of Hangzhou Baijia and consolidates the entity inaccordance with ASC810-10. At the same time, BEST Network transferred its equity interests in Sichuan Wowo and Shanxi Wowo SupermarketChain Co., Ltd. (“Shanxi Wowo”) to Hangzhou Baijia. BEST Store, together with Sichuan Wowo and Shanxi Wowo, constituted the former Store+reporting unit. As the restructuring transaction are between entities under common control and do not change the control at the ultimate parentlevel, the transaction was accounted for as a common control transaction based on the carrying amount of the net assets transferred. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 181 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-221.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)The following is a summary of the material provisions of the contractual arrangements relating to BEST Store, Hangzhou Baijia andBEST Inc.Loan AgreementBEST Store entered into a loan agreement with the nominee shareholders of Hangzhou Baijia in 2020. Pursuant to this loan agreement,BEST Store has granted an interest-free loan to each of Hangzhou Baijia’s nominee shareholders, which may only be used for the purpose of acapital contribution to Hangzhou Baijia. BEST Store agreed not to ask Hangzhou Baijia’s equity holders to repay the loans unless the relevantequity holder violates its undertakings provided in the loan agreements. Hangzhou Baijia’s nominee shareholders undertook, among others, not totransfer any of its equity interests in Hangzhou Baijia to any third party. The loans are repayable by such equity holders through a transfer of theirequity interests in Hangzhou Baijia to BEST Store or its designated party, in proportion to the amount of the loans to be repaid. The loanagreements remain effective until the relevant loans are repaid in full or BEST Store relinquishes its rights under the relevant loan agreements.Exclusive Call Option AgreementPursuant to the exclusive call option agreement among the Company, BEST Store, Hangzhou Baijia and its nominee shareholders, datedMay 13, 2020, Hangzhou Baijia’s nominee shareholders have granted BEST Store and the Company, or a party designated by the Company orBEST Store, the exclusive and irrevocable call option rights to purchase part or all of their equity interests in Hangzhou Baijia at an exercise priceequal to the minimum price as permitted by applicable PRC laws. Hangzhou Baijia has further granted BEST Store and the Company, or a partydesignated by the Company or BEST Store, an exclusive call option to purchase part or all of its assets also at an exercise price equal to theminimum price as permitted by applicable PRC laws. At the Company’s sole discretion, the Company has the right to decide whether the optionand other rights granted under the agreement will be exercised by the Company, BEST Store or a party designated by the Company. Each ofHangzhou Baijia’s nominee shareholders may not, among other things, transfer any part of their equity interests to any party other than to theCompany or BEST Store, or a party designated by the Company or BEST Store, pledge or create or permit any security interest or similarencumbrance to be created on all or any part of its equity interests, increase or decrease the registered capital of Hangzhou Baijia, terminate orcause to terminate any material contracts of Hangzhou Baijia, or cause Hangzhou Baijia to declare or distribute profits, bonuses or dividends. TheCompany is obligated, to the extent permitted by PRC laws, to provide financing support to Hangzhou Baijia in order to meet the cash flowrequirements of its ordinary operations and to offset any loss from such operations. The Company and BEST Store are not entitled to requestrepayment if Hangzhou Baijia or its equity holders are unable to repay such financial support. The exclusive call option agreement remains ineffect until all the equity interests or assets that are the subject of the agreement are transferred to the Company or BEST Store, or a partydesignated by the Company or BEST Store, or if the Company or BEST Store unilaterally terminate the agreement with 30 days’ prior writtennotice. Unless otherwise provided by law, Hangzhou Baijia and its equity holders are not entitled to unilaterally terminate this agreement under anycircumstances.Shareholders’ Voting Rights Proxy AgreementPursuant to the shareholders’ voting rights proxy agreement among the Company, BEST Store, Hangzhou Baijia and its equity holders,dated May 13, 2020, each of Hangzhou Baijia’s nominee shareholders has irrevocably authorized any person designated by BEST Store, with theCompany’s consent, to exercise its rights as an equity holder of Hangzhou Baijia in a manner approved by the Company, including but not limitedto the rights to attend and vote at equity holders’ meetings and appoint directors and senior management. The proxy agreement remains effectiveuntil such time as the relevant equity holder no longer holds any equity interest in Hangzhou Baijia. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 182 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-231.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Equity Pledge AgreementPursuant to the equity pledge agreement among BEST Store, Hangzhou Baijia and its equity holders, dated May 13, 2020, the relevantequity holders of Hangzhou Baijia have pledged all of their equity interests in Hangzhou Baijia as a continuing first priority security interest infavor of BEST Store to secure the outstanding amounts advanced under the relevant loan agreements described above and to secure theperformance of obligations by Hangzhou Baijia and/or its nominee shareholders under the other contractual arrangements. BEST Store is entitledto exercise its right to dispose of the pledged interests held by Hangzhou Baijia’s nominee shareholders in the equity of Hangzhou Baijia and haspriority in receiving payment by the application of proceeds from the auction or sale of such pledged interests, in the event of any breach or defaultunder the loan agreements or other contractual arrangements, if applicable. All of the equity pledges have been registered with the relevant office ofthe Administration for Market Regulation in China. The equity pledge agreement will expire when all obligations under this equity pledgeagreement or under the aforementioned loan agreement, exclusive call option agreement, shareholders’ voting rights proxy agreement andexclusive technical services agreement have been satisfied.Exclusive Technical Services AgreementOn May 13, 2020, Hangzhou Baijia entered into an exclusive technical services agreement with BEST Store, pursuant to which BESTStore provides exclusive technical services to Hangzhou Baijia. In exchange, Hangzhou Baijia pays a service fee to BEST Store that is based on apredetermined formula based on the financial performance of Hangzhou Baijia. During the term of this agreement, BEST Store is entitled to adjustthe service fee at its sole discretion without the consent of Hangzhou Baijia. BEST Store will exclusively own any intellectual property arisingfrom the performance of this agreement. This exclusive technical services agreement has an initial contract term of 20 years and may beautomatically renewed for another 20 years unless BEST Store notifies Hangzhou Baijia of its intent not to renew with at least three months’ priornotice. BEST Store is entitled to terminate the agreement unilaterally with 30 days’ prior written notice, while Hangzhou Baijia is not entitled tounilaterally terminate this agreement under any circumstances.On November 19, 2021 and December 8, 2021, the Company completed the disposal of Sichuan Wowo and legally deregistered ShanxiWowo, the subsidiaries of Hangzhou Baijia, respectively. As a result, Sichuan Wowo and Shanxi Wowo were no longer the VIE’s subsidiaries ofthe Company as of December 31, 2021. The operation results and cashflows of Sichuan Wowo prior to the disposal date on November 19, 2021 forall periods presented are now reflected as discontinue operations (Note 4) in the consolidated statements of comprehensive (loss) income and cashflows for all periods presented. To facilitate the disposal, the Company cancelled the equity pledge of Sichuan Wowo, terminated theaforementioned original contractual arrangements and resigned a new set of contractual arrangements on December 15, 2021 with no changes inthe key terms. The Company is still the primary beneficiary of Hangzhou Baijia.Through the design of the contractual agreements, the nominee shareholders of Hangzhou Baijia effectively assigned their full votingrights to the Company, which gives the Company the power to direct the activities that most significantly impact Hangzhou Baijia’s economicperformance. In addition, BEST Store is entitled to substantially all of the economic benefits from Hangzhou Baijia. The Company and BESTStore, as a group of related parties, hold all of the variable interests of Hangzhou Baijia. The Company has been determined to be most closelyassociated with Hangzhou Baijia within the group of related parties. As a result of these contractual Agreements, the Company is determined to bethe primary beneficiary of Hangzhou Baijia.In the opinion of the Company’s management and legal counsel, (i) the ownership structure of the Group, including its subsidiaries and theVIEs, is not in violation with any applicable PRC laws and regulations; (ii) each of the VIE agreements is legal, valid, binding and enforceable toeach party of such agreements in accordance with its terms and applicable PRC Laws and (iii) Shareholder’s Voting Rights Proxy Agreement isnot, conflict with or result in a breach of the terms or provisions of the Caymans Islands Law. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 183 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-241.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)The carrying amounts of the assets, liabilities and the results of operations of the VIEs and VIEs’ subsidiaries are presented in aggregatedue to the similarity of the purpose and design of the VIEs and VIEs’ subsidiaries, the nature of the assets in these VIEs and VIEs’ subsidiaries andthe type of the involvement of the Company in these VIEs and VIEs’ subsidiaries. The carrying amounts of the assets, liabilities and the results ofoperations of the VIEs and VIEs’ subsidiaries included in the Company’s consolidated balance sheets and statements of comprehensive (loss)income are as follows:As at December 31 2021 2022 2022RMBRMBUS$ASSETS Current assets: Cash and cash equivalents 135,864 6,562 951Accounts and notes receivable, net 113,700 41,357 5,996Prepayments and other current assets 38,172 33,064 4,794Amounts due from Group companies 156,699 233,032 33,786Inventories11446Total current assets 444,446 314,059 45,533Non-current assets: Operating lease right-of-use assets188——Property and equipment, net 85,199 128,672 18,656Intangible assets, net52——Restricted cash—1,474214Total non-current assets 85,439 130,146 18,870Total assets 529,885 444,205 64,403LIABILITIES Current liabilities: Accounts and notes payable 60,669 22,379 3,246Accrued expenses and other liabilities17,29420,3902,954Customer advances and deposits and deferred revenue341——Operating lease liabilities 880 376 55Financing lease liabilities—10,3831,505Amounts due to Group companies 455,925 393,834 57,101Short-term bank loans120,500110,14215,969Total current liabilities 655,609 557,504 80,830Non-current liabilities:Financing lease liabilities—24,7023,581Other non-current liabilities—43864Total non-current liabilities — 25,140 3,645Total liabilities 655,609 582,644 84,475 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 184 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-251.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)The revenue producing assets that are held by the VIEs comprise mainly of machinery and electronic equipment. The VIEs contributed anaggregate of 21%, 27% and 5% of the Group’s consolidated revenue for the years ended December 31, 2020, 2021 and 2022 respectively, afterelimination of intercompany transactions. As of December 31, 2021 and 2022, except for the VIE’s assets of Trust Plan previously mentioned,there are no other assets of the consolidated VIEs that can be used only to settle obligations of the consolidated VIEs.Other than the amounts due to related parties (which are eliminated upon consolidation) all remaining liabilities of the VIEs are withoutrecourse to the primary beneficiary. The Company did not provide or intend to provide financial or other supports not previously contractuallyrequired to the VIEs during the years presented.For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Revenue from continuing operations 2,242,830 3,116,599 380,358 55,147Revenue from discontinued operations20,240,60816,486,807——Total revenue22,483,43819,603,406380,35855,147Net loss from continuing operations(20,634)(104,999)(12,182)(1,766)Net loss from discontinued operations(915,208)(1,936,791)——Net cash generated from (used in) continuing operating activities93,624(266,070)152,48322,110Net cash used in discontinued operating activities (158,772) (1,938,454) — —Net cash used in continuing investing activities (25,455) (349,795) (28,269) (4,099)Net cash used in discontinued investing activities (1,141,564) (448,016) — —Net cash (used in) generated from continuing financing activities (22,701) 242,350 (252,218) (36,568)Net cash generated from discontinued financing activities944,8472,136,199——Exchange rate effect on cash, cash equivalents and restricted cash in continuingoperating activities—(18)17626 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 185 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-261.ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Consolidated ABS Plans and Trust PlanIn June 2019 and September 2020, BEST Finance transferred certain lease rental and other financing receivables to a securitizationvehicle through Xinyuan Leasing Asset Backed Special Plan I and Plan II (collectively the “ABS Plans”), respectively. In March 2021, BESTFinance transferred certain lease rental receivables to Yunnan International Trust Co., Ltd., a third party, which then created Yunnan Trust Plan (the“Trust Plan”). The ABS Plan I and ABS Plan II was due and repaid during the years ended December 31, 2020 and 2021, respectively.The Company provides payment collection services for the underlying lease rental and other financing receivables. The Companyconsolidates the ABS Plans and Trust Plan as it has the power to direct the activities that most significantly impacts their economic performance,the right to share residual profits and the obligation to absorb losses of the ABS Plans and Trust Plan that potentially could be significant to theABS Plans and Trust Plan.The table sets forth the assets and liabilities of the consolidated ABS Plans and Trust Plan included in the Company’s consolidated balancesheets:As at December 31, 202120222022 RMB RMB US$Cash and cash equivalents26,1665,042731Amounts due from related parties 175,253 35,877 5,202Prepayments and other current assets12,04617,9092,597Total current assets 213,465 58,828 8,530Amounts due from related parties 41,248 — —Total non-current assets 41,248 — —Total assets 254,713 58,828 8,530Long-term borrowings – current portion84,006——Amounts due to related parties 118,251 54,011 7,831Accrued expenses and other liabilities 957 351 51Total current liabilities 203,214 54,362 7,882Amounts due to related parties51,4994,466648Total non-current liabilities 51,499 4,466 648Total liabilities 254,713 58,828 8,530 For the years ended December 31,2020 2021 2022 2022RMBRMBRMBUS$Revenue from third parties—80,02931,5984,581Cost of revenue—64,31237,1355,384Net income (loss) — 5,493 (8,775) (1,272) For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Net cash generated from operating activities—53,37321,3853,100Net cash (used in) generated from investing activities (234,569) (233,203) 184,929 26,812Net cash generated from (used in ) financing activities 284,569 115,996 (227,438) (32,974) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 186 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-272.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentationThe accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accountingprinciples (“U.S. GAAP”).Principles of ConsolidationThe consolidated financial statements of the Group include the financial statements of the Company, its subsidiaries, the VIEs and VIEs’subsidiaries for which the Company is the primary beneficiary. All significant intercompany balances and transactions between the Company, itssubsidiaries and VIEs have been eliminated on consolidation.Going ConcernThe continuous negative impact of COVID-19 in 2022 and intense market competition had an adverse impact on the Company’s businessoperations and liquidity. The Company has incurred net losses from continuing operations of RMB1,464,827 (US$212,378) and generated negativecash flows from continuing operating activities of RMB1,051,662 (US$152,478) during the year ended December 31, 2022, and had anaccumulated deficit of RMB18,934,860 (US$2,745,297) and a working capital deficiency of RMB934,705 (US$135,520) as of December 31,2022. As of December 31, 2022, the balance of the Group’s total cash and cash equivalents, current restricted cash and short-term investments wasRMB1,657,861 (US$240,366).These adverse conditions indicate that there is substantial doubt about the Group’s ability to continue as a going concern. Management hasimplemented cost saving plans to reduce discretionary operational expenses and secure additional financing including, but not limited to, obtainingadditional credit facilities from banks in the normal course of business, and re-financing certain existing notes payables. In the first quarter of 2023,the Group has successfully obtained new financing of RMB137,000 (US$19,863) short-term bank loans on credit maturing in one year, whichallows the Group to enhance liquidity. Although the Group has achieved encouraging initial results from its plans to reduce its costs andexpenditures in the first quarter of 2023 for certain business segments, if the Group is unsuccessful in its efforts or is unable to raise additionalfinancing in the near term, the Group may be required to significantly reduce or scale back its operations. There are uncertainties as to whether, andthere can be no assurance that the aforesaid plans can be successfully executed. The accompanying consolidated financial statements have beenprepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement ofliabilities in the normal course of business. The consolidated financial statements do not include any adjustments related to the recoverability andclassification of assets or the amounts and classifications of liabilities that may be necessary should the Group be unable to continue as a goingconcern.Use of estimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates andthe reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in the Group’s financialstatements include, but are not limited to, allowance for credit losses, the estimated fair value less costs to sell for assets and liabilities of a businessor asset group held-for-sale, cashflow projections used by the Company in its going concern assessment, fair value measurements of equityinstruments without readily determinable fair values, incremental borrowing rates for operating lease liabilities, standalone selling prices related tolease and non-lease components in the Company’s lease arrangements, useful lives of long-lived assets, the purchase price allocation with respectto business combinations, impairment assessment of long-lived assets and goodwill, realization of deferred tax assets, uncertain tax positions,share-based compensation, fair value of financial instruments and contingent liabilities. Management bases the estimates on historical experienceand various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carryingvalues of assets and liabilities. Actual results could materially differ from those estimates. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 187 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-282.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Assets held-for-saleA long-lived asset (or disposal group) to be disposed of by sale (including an asset group considered a component of an entity) isconsidered held for sale when all of the following criteria for a qualifying plan of sale are met:●Management, having the authority to approve the action, commits to a plan to sell the asset or disposal group;●The asset or disposal group is available for immediate sale (i.e., a seller currently has the intent and ability to transfer the asset (group) toa buyer) in its present condition, subject only to conditions that are usual and customary for sales of such assets or disposal groups;●An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;●The sale of the asset or disposal group is probable (i.e., likely to occur) and the transfer is expected to qualify for recognition as acompleted sale within one year;●The long-lived asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value;and●Actions necessary to complete the plan indicate that it is unlikely significant changes to the plan will be made or that the plan will bewithdrawn.The Company initially measures the assets and liabilities of a business or asset group that are held for sale at the lower of their carryingamount or fair value less costs to sell. A loss is recognized for any initial adjustment of the disposal group’s carrying amount to its fair value lesscosts to sell in the period the held-for-sale criteria are met. Long-lived assets are not depreciated/amortized while they are classified as held-for-sale. The Company continues to accrue interest and other expenses attributable to the liabilities of a disposal group classified as held for sale.The fair value less costs to sell of the asset or disposal group is assessed each reporting period it remains classified as held-for-sale andsubsequent changes in fair value less costs to sell (increases or decreases) are reported as an adjustment to it carrying amount, except that theadjusted carrying amount should not exceed the carrying amount of the asset or disposal group at the time it was initially classified as held-for-sale.The Company presents assets and liabilities as held-for-sale in the period that a disposal group meets the held for sale criteria and for allprior periods presented. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 188 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-292.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Discontinued operationsClassification and Measurement - The Company classifies the results of a component (or group of components) to be disposed (“disposalgroup”) as a discontinued operation when the disposal group meets the held-for-sale criteria, is disposed of by sale or is disposed of other than bysale (e.g. abandonment) and when the disposal group represents a strategic shift that has, or will have, a major effect on the Company’s operationsand its financial results.The Company reports the operating results and cash flows related to the disposal group as discontinued operations for all periodspresented in the consolidated statements of comprehensive (loss) income and consolidated statements of cash flows, respectively.The Company recognized the difference of sale price and carrying value allocated to the discontinued operation as disposal gain or loss innet income (loss) from discontinued operations, net of tax in the consolidated statements of comprehensive (loss) income.Allocation of Interest Expense to Discontinued Operations – The Company elects to allocate the interest on debt that is to be assumed bythe buyer and interest on debt that is required to be repaid as a result of a disposal transaction to discontinued operations. The allocation of theinterest expense based on the actual amount for each business during each period.Convenience translationAmounts in U.S. dollars are presented for the convenience of the reader and are translated at the noon buying rate of RMB 6.8972 perUS$1.00 on December 30, 2022 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bankof New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.Foreign currencyThe functional currency of the Company’s subsidiaries located outside the PRC is determined based on the criteria of ASC Topic 830,Foreign Currency Matters. The Company’s subsidiaries, VIEs and VIEs’ subsidiaries located in the PRC determined their functional currency to beRMB. The Company uses the RMB as its reporting currency.Each entity in the Company maintains its financial records in its own functional currency. Transactions denominated in foreign currenciesare measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies areremeasured at the exchange rates prevailing at the balance sheet date. Nonmonetary items that are measured in terms of historical cost in foreigncurrency are remeasured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidatedstatements of comprehensive (loss) income.The Company uses the average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating resultsand financial position, respectively. Translation differences are recorded in accumulated other comprehensive income, a component ofshareholders’ equity.Cash and cash equivalentsCash and cash equivalents consist of cash on hand and demand deposits or other highly liquid investments placed with banks or otherfinancial institutions which are unrestricted as to withdrawal and use and have original maturities of less than three months. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 189 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-302.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Restricted cashThe Company’s restricted cash mainly represents (a) deposits held in designated bank accounts for issuance of notes payable, short-termloans and long-term loans; (b) deposits held in designated bank accounts for the issuance of Trust Plan; and (c) security deposits required by theCompany’s operating leases for sortation centers and warehouses.As of December 31, 2021 and 2022, the restricted cash related to the deposits held in designated bank accounts as pledged security ofnotes payable was RMB198,350 and RMB775,692 (US$112,464), respectively. As of December 31, 2021 and 2022, the restricted cash related tothe deposits held in designated bank accounts for the issuance of Trust Plan was RMB16,650 and RMB16,650 (US$ 2,414), respectively. As ofDecember 31, 2021 and 2022, restricted cash related to the security deposit required by the Company’s operating leases for sortation centers andwarehouses was RMB166,082 and RMB144,613 (US$ 20,967), respectively.Short-term investmentsThe Company’s short-term investments comprise primarily of cash deposits at fixed or floating rates based on daily bank deposit rateswith maturities ranging from three months to one year.Accounts and notes receivable, and allowance for credit lossesAccounts and notes receivables are recognized and carried at the original invoiced or note amount less an allowance of credit losses. TheCompany maintains an allowance for credit losses in accordance with ASC 326, Credit Losses (“ASC 326”) and records the allowance for creditlosses as an offset to accounts and notes receivable and the estimated credit losses charged to the allowance is classified as “General andadministrative expenses” in the consolidated statements of comprehensive (loss) income. The Company assesses collectability by reviewingaccounts and notes receivable on a collective basis where similar characteristics exist, primarily based on similar business line, service or productofferings and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determiningthe amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the accountsreceivable balances and notes receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, currenteconomic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s abilityto collect from customers. Accounts and notes receivable are written off after all collection efforts have ceased.Property and equipment, netProperty and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets,as follows:Category Estimated Useful LifeMachinery and electronic equipment3-10 yearsMotor vehicles3 yearsLeasehold improvementsLesser of useful life or lease termRepair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterments that extend the useful livesof property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing thecost and accumulated depreciation from the asset and accumulated depreciation accounts with any resulting gain or loss reflected in theconsolidated statements of comprehensive (loss) income.Direct costs that are related to the construction of property and equipment, and incurred in connection with bringing the assets to theirintended use are capitalized as construction in progress. Construction in progress is transferred to specific property and equipment, and thedepreciation of these assets commences when the assets are ready for their intended use. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 190 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-312.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Business CombinationsThe Company accounts for its business combinations using the purchase method of accounting in accordance with ASC 805, BusinessCombinations (“ASC 805”). The purchase method of accounting requires that the consideration transferred to be allocated to the assets, includingseparately identifiable assets and liabilities the Company acquired, based on their estimated fair values. The consideration transferred in anacquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instrumentsissued as well as the contingent considerations and all contractual contingencies as of the acquisition date. The costs directly attributable to theacquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at theirfair values as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total cost of acquisition, fairvalue of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value ofthe identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of thesubsidiary acquired, the difference is recognized directly in earnings.The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and non-controlling interests is basedon various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in thesevaluations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used todetermine the cash inflows and outflows. The Company determines the discount rates to be used based on the risk inherent in the related entity’scurrent business model and industry comparisons.GoodwillThe Company assesses goodwill for impairment in accordance with ASC 350-20, Intangibles—Goodwill and Other: Goodwill(“ASC 350-20”), which requires that goodwill be tested for impairment at the reporting unit level at least annually and more frequently upon theoccurrence of certain events.The Company has determined it has four reporting units (that also represent operating segments) in 2021, excluding the former Store+reporting unit and BEST Express reporting unit which were reported as discontinued operations in the consolidated statements of comprehensive(loss) income and the corresponding goodwill allocated to the Store+ reporting unit and BEST Express reporting unit was classified as assets held-for-sale on the consolidated balance sheets prior to their disposals (Note 4). As of December 31, 2021 and 2022, goodwill was allocated to tworeporting units including Freight delivery reporting unit and Global reporting unit (Note 12). The Company has the option to assess qualitativefactors first to determine whether it is necessary to perform the quantitative test in accordance with ASC 350-20. In the qualitative assessment, theCompany considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and otherspecific information related to the operations. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not thatthe fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing isrequired. The quantitative impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carryingamount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 191 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-322.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Intangible assetsIntangible assets with finite lives are carried at cost less accumulated amortization. All intangible assets with finite lives are amortizedusing the straight-line method over the estimated useful lives.Intangible assets have weighted average estimated useful lives from the date of purchase/capitalization as follows:Category Estimated Useful LifeCustomer relationships 3.89 yearsSoftware 3.43 yearsThe Company capitalizes salaries and benefits of research and development personnel and other expenses that are directly attributable tothe development of new technology system for internal use pursuant to ASC350-40, Intangibles—Goodwill and Other—Internal use software. TheCompany capitalizes the costs during the development of the project, when it is determined that it is probable that the project will be completed,and the software will be used as intended. Costs related to preliminary project activities, post-implementation activities, training and maintenanceare expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life when the assets are ready for theirintended use, which is generally three years.Impairment of long-lived assets held-for-use other than goodwillThe Company evaluates its long-lived assets, including fixed assets, intangible assets with finite lives and operating lease right-of-useassets, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact thefuture use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Companyevaluates its long-lived asset groups recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscountedcash flows expected to result from the use of the assets and their eventual disposition. The future undiscounted cash flows are sensitive tosignificant assumptions, including revenue growth rate, operating margin and operating expenses, which can be affected by expectations aboutfuture market and economic conditions. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, theCompany recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. The Company identifieseach business unit as an asset group at the lowest level of identifiable cash flows. Impairment losses, if any, are included in general andadministrative expense.Transfer of financial assetsThe Company accounts for transfers of financial assets in accordance with ASC 860, Transfers and Servicing (“ASC 860”). For a transferof financial assets considered as a sale, the assets would be removed from the Company’s consolidated balance sheets. If the conditions for a salerequired by ASC 860 are not met, the transfer is considered to be a secured borrowing and the assets remain on the consolidated balance sheetwhile the sale proceeds are recognized as a liability.Pursuant to ASC 860, the issuance of debt securities securitized by the Company’s lease rental and other financing receivables arisingfrom its financing lease business (Note 15) and the factoring of intercompany note receivables to domestic banks (Note 13) do not constitute a saleof the underlying financial assets for accounting purposes due to the recourse obligations retained by the Company. Therefore, these transactionsare accounted for as borrowings on the consolidated balance sheets and the financial assets are not derecognized. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 192 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-332.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Fair value measurements of financial instrumentsThe Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes aframework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided for fairvalue measurements.ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2—Includes other inputs that are directly or indirectly observable in the marketplace.Level 3—Unobservable inputs which are supported by little or no market activity.ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach;and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical orcomparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. Themeasurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amountthat would currently be required to replace an asset.Financial instruments include cash and cash equivalents, restricted cash, accounts and notes receivables, certain other current assets, short-term investments, amounts due from related parties, long-term investments, certain other non-current assets, accounts and notes payable, short-termbank loans, derivative liabilities, long-term bank loans, long-term borrowings, convertible senior notes and amounts due to related parties, certainother current liabilities and certain other non-current liabilities. The carrying values of the financial instruments included in current assets andliabilities excluding derivative liabilities approximate their fair values due to their short-term maturities. The carrying amount of other non-currentfinancial assets, long-term bank loans, convertible senior notes and other non-current financial liabilities approximates its fair value as the relatedinterest rates approximate market rates for similar debt instruments of comparable maturities. The fair value of the Company’s derivatives assetsand derivatives liabilities is determined utilizing market observable forward exchange rates (Note 25).Non-controlling interestsNon-controlling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is notattributable, directly or indirectly, to the controlling shareholder.Non-controlling interests are presented as a separate component of equity in the consolidated balance sheets. Consolidated net loss on theconsolidated statements of comprehensive (loss) income includes the net income (loss) attributable to non-controlling interests. The cumulativeresults of operations attributable to non-controlling interests are recorded as non-controlling interests in the consolidated balance sheets. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 193 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-342.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Convertible Non-controlling InterestsConvertible non-controlling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which isnot attributable, directly or indirectly, to the controlling shareholder.Convertible non-controlling interests represent redeemable equity interests issued by the Company’s subsidiary to certain investors (Note22) and have been classified as mezzanine equity in the consolidated balance sheets as these redeemable interests are contingently redeemable uponthe occurrence of certain conditional event, which is not solely within the control of the Company. Convertible non-controlling interests areinitially measured at fair value at issuance date and recorded at issuance price, net of issuance cost. Net income of the subsidiary attributable to theconvertible non-controlling interests was subsequently recorded pursuant to ASC 810, Consolidation. After the attribution, the Company considersthe provisions of ASC 480, Distinguish Liabilities from Equity (“ASC 480”) to determine whether any further adjustments are necessary to increasethe carrying value of the convertible non-controlling interests. Adjustments to the carrying amount of the convertible non-controlling interests arerecorded through retained earnings.Revenue recognitionRevenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount ofconsideration to which an entity expects to be entitled to in exchange for those goods or services. The Group presents value-added taxes as areduction from revenues. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an originalexpected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoicefor services performed.The Company’s revenue recognition policies are as follows:Freight delivery servicesThe Company provides freight services that comprise of sorting, line-haul and feeder transportation services mainly to its franchisees,which are also the Company’s customers. The Company offers an integrated service to franchisee service stations that includes last-mile deliveryservice to end recipients and acts as the principal that is directly responsible for all shipments sent through its network, from the point whencustomers drop off the shipments at the Company’s first hub or sortation center all the way through to the point when the shipments are delivered toend recipients.Customers are required to prepay for freight delivery services and the Company records such amounts as “Customer advances anddeposits and deferred revenue” in the consolidated balance sheets. The transaction price the Company earns from its customers are based on theshipment’s weight and route to the end recipient’s destination.The Company’s freight delivery services contracts with customers include only one performance obligation. Performance obligations aregenerally short-term in nature with transit days being a week or less for each shipment. The Company recognizes revenue over time as customersreceive the benefit of the Company’s services as the goods are shipped from one location to another. As such, freight delivery services revenue isrecognized proportionally as a shipment moves from origin to destination and the related costs are recognized as incurred. The Company uses anoutput method of progress based on time-in-transit as it best depicts the transfer of control to the customer. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 194 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-352.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Revenue recognition (continued)Freight delivery service (continued)Freight delivery services revenue also includes initial non-refundable franchise fees. The initial non-refundable franchise fees arerecognized over the franchise period due to the franchisees’ rights to access the Company’s logos and brand names which are considered symbolicintellectual properties. The initial non-refundable franchise fees are negotiated under a separate agreement and represent a very small percentage ofrevenue for all periods presented.UCargo serviceThe Company services as a truckload capacity brokerage platform to provide truckload capacity sourcing solutions via real-time biddingto transportation service providers and customers. The Company is the principal to the transaction for these services and revenue from thesetransactions is recognized on a gross basis. Revenue is recognized proportionally as a shipment moves from origin to destination using an outputmethod of progress based on time-in-transit while the related costs are recognized as incurred. Since January 1, 2022, due to the winding down ofUCargo, the Company reported UCargo services together with Freight delivery services. Prior year’s comparative figures related to UCargoservices revenue of RMB2,519,919 and RMB2,809,081 under “Revenue -Others” for the years ended December 31, 2020 and 2021, respectivelyhave been reclassified to “Revenue - Freight delivery” to conform to the current year’s presentation.Supply chain management servicesThe Company provide warehouse management, order fulfillment services and transportation services to its offline and online enterprisecustomers (“enterprise customers”). The Company enters into supply chain warehouse management service agreements with these customers toprovide warehouse management and order fulfillment services through its self-operated order fulfillment centers and also enters into transportationservices agreements to provide transportation services. The majority of these contracts having an effective term of one year. Order fulfillmentservices revenue is generated from various service fees charged on a volume basis in connection with various order fulfillment services, which mayinclude in-warehouse processing, order fulfillment, express delivery, freight delivery and other value-added services. Pursuant to the warehousemanagement service agreements and transportation services agreements, enterprise customers have the right to terminate the contracts by providinga one-month advance notice. Therefore, even though the contract term for the majority of the contracts is one year, due to the termination rightsprovided to enterprise customers, warehouse management service agreements and transportation services agreements are considered month-to-month service contracts. Enterprise customers are billed on a monthly basis and make payments according to their granted credit terms whichranges from 5 to 120 days.Under some situations, enterprise customers may request to add a transportation route or increase the warehouse rental space by enteringinto a separate contract with the Company. The additional services are considered distinct and the service fees are priced at their standalone sellingprices, i.e. they cannot be purchased at a significant or incremental discount. Therefore, the Company accounts for this type of contractmodification as a separate contract and the revenue recognized to date on the original contract is not adjusted.The warehouse management service agreements comprise various service offerings that can be purchased at the option of the customer.Although the service options are interrelated, none of the services modify the other services and they are not integrated to provide a combinedoutput. Each of the service options is substantive and the enterprise customers cannot purchase each additional service at a significant andincremental discount. Therefore, each service is accounted for as a separate performance obligation. The Company is the primary obligor and doesnot outsource any portion of the order fulfillment services to supply chain franchisee partners. The Company recognizes warehouse managementand order fulfillment services revenue upon completion of the services as that is when the Company transfers control of the services and has rightto payment. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 195 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-362.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Revenue recognition (continued)Supply chain management services (continued)For transportation services, the Company provides the service of arranging transportation and coordinating shipments to and fromlocations designated by its enterprise customers. Each transportation order for delivery of goods from origin to destination is considered aperformance obligation. Performance obligations are generally short-term in nature with transit days being a week or less for each shipment. TheCompany recognizes transportation services revenue over time as customers receive the benefit of the services as the goods are shipped from originto destination. As such, transportation services revenue is recognized proportionally as a shipment moves from origin to destination and the relatedcosts are recognized as incurred. The Company use an output method of progress based on time-in-transit as it best depicts the transfer of control tothe customer.A small percentage of revenue is also earned from supply chain franchisee partners that can access the Company’s supply chain network.These franchisee partners pay an initial non-refundable fee for a comprehensive operating manual and orientation training, as well as an agreedsystem usage fee for each order processed through the Company’s supply chain network. The initial non-refundable fees and system usage feeswere insignificant for all periods presented.Global logistics servicesThe Company provides international logistic services in multiple countries and regions across North America, Europe and Asia, such ascross-border logistic coordination services and express delivery services. Revenue is recognized proportionally as a shipment moves from origin todestination using an output method of progress based on time-in-transit while the related costs are recognized as incurred.Other servicesOther services mainly represent SaaS software service and Capital service the Company provided to customers.SaaS software serviceThe Company serves as a proprietary technology platform to provide solution services to the ecosystem participants. The Company is theprincipal to the transaction for these services and revenue from these transactions is recognized on a gross basis. Revenue is recognized ratablyover the contract period and is initially recorded as “Customer advances and deposits and deferred revenue”. For the years ended December 31,2020, 2021 and 2022, the revenue recognized from SaaS software service was nil, RMB34,639, and RMB41,286 (US$5,986), respectively.Capital serviceThe Company serves as a financing platform to provide tailored financing solutions to BEST’s ecosystem participants, such as fleet andequipment financing lease service and factoring services. Revenue generated from provision of capital services primarily consists of interestincome on lease rental and other financing receivables, which is recognized as revenue using the effective interest rate method. For the years endedDecember 31, 2020, 2021 and 2022, the revenue recognized from Capital service was RMB142,506, RMB117,622, and RMB29,899 (US$4,335),respectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 196 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-372.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Revenue recognition (continued)Express delivery servicesPrior to the disposal of BEST Network in December 2021, the Company provides express services in China that comprise of sorting, line-haul and feeder transportation services to its franchisee service stations, which are also the Company’s customers, when parcels (under 15 kg) aredropped off by the Company’s franchisee service station customers at the Company’s first hub or sortation center.The Company offers an integrated service to the franchised service stations that includes last-mile delivery service to end recipients andacts as the principal that is directly responsible for all parcels sent through its network, from the point when customers drop off the parcels at theCompany’s first hub or sortation center all the way through to the point when the parcels are delivered to end recipients.Customers are required to prepay for express delivery services and the Company records such amounts as “customer advances anddeposits and deferred revenue” in the consolidated balance sheets. The transaction price the Company earns from its customers are based on theparcel’s weight and route to the end recipient’s destination. In addition, the Company provides certain discounts, incentives and rebates based onexplicitly agreed upon terms with its customers that can decrease the transaction price and estimates variable consideration based on the most likelyamount to be provided. The amount of variable consideration included in the transaction price is limited to the amount that will not result in asignificant revenue reversal. The Company reviews the estimate of variable consideration and updates the transaction price at the end of eachreporting period as necessary. Uncertainties related to the estimates of variable consideration are resolved in a short time frame. Adjustments tovariable consideration are recognized in the period the adjustments are identified and were insignificant for the periods presented.The Company’s express delivery services contracts with customers include only one performance obligation. Performance obligations aregenerally short-term in nature and with transit days being a week or less for each parcel. The Company recognizes revenue over time as customersreceive the benefit of the Company’s services as the goods are delivered from one location to another. As such, express delivery services revenue isrecognized proportionally as a parcel moves from origin to destination and the related costs are recognized as incurred. The Company uses anoutput method of progress based on time-in-transit as it best depicts the transfer of control to the customer.A minor percentage of the Company’s express delivery services are performed by the Company through its integrated express deliveryservice network for direct customers (“direct customer express delivery services”), who are the senders of the parcels. The Company is directlyresponsible for the parcel from the point it is received from the senders all the way through the point when the parcels are delivered to endrecipients. Direct customer express delivery services revenue is recognized proportionally as parcels are transported to end recipients and therelated costs are recognized as incurred.Express delivery services revenue also includes initial non-refundable franchise fees. The initial non-refundable franchise fees arerecognized over the franchise period due to the franchisees’ rights to access the Company’s logos and brand names which are considered symbolicintellectual properties. The initial non-refundable franchise fees are negotiated under a separate agreement and represent a very small percentage ofrevenue for all periods presented. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 197 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-382.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Revenue recognition (continued)Contract assets and liabilitiesThe Company enters into contracts with its customers, which may give rise to contract liabilities (deferred revenue) and contract assets(unbilled revenue). The payment terms and conditions within the Company’s contracts vary by the type of service and customers. When the timingof revenue recognition differs from the timing of payments made by customers, the Company recognizes either unbilled revenue (its performanceprecedes the billing date) or deferred revenue (customer payment is received in advance of performance).Contract assets represent unbilled amounts resulting from provision of transportation services as the Company has an unconditional rightto payment only once all delivered goods reach their destination. Contract assets are classified as current and the full balance is reclassified toaccounts receivables when the right to payment becomes unconditional. The balance of contract assets was insignificant as of December 31, 2021and 2022.Contract liabilities are included in “Customer advances and deposits and deferred revenue” in the consolidated balance sheets. Contractliabilities represent the amount of consideration received upfront from customers related to in-transit shipments that has not yet been recognized asrevenue based on our selected measure of progress and non-refundable franchise fees which are recognized over the franchise period. TheCompany classifies contract liabilities as current based on the timing of when the Company expects to recognize revenue, which typically occurswithin a week after period-end.The balances of contract liabilities arising from contracts with customers as of December 31, 2021 and 2022 were as follows: Balance at Balance at Balance atDecember 31,December 31,December 31,202120222022RMBRMBUS$Contract liabilities 98,411 90,505 13,122Revenue recognized in the years ended December 31, 2020, 2021 and 2022 that was included in the contract liabilities balance at thebeginning of the period was RMB35,287, RMB81,951 and RMB 80,003 (US$11,599), respectively. This revenue was driven primarily by freightdelivery performance obligations being satisfied.For contract costs associated with obtaining a contract such as commissions incurred with obtaining a contract, the Company capitalizesthe incremental contract costs and amortizes the capitalized contract costs using a straight-line basis over the term of the contract. The capitalizedcontract costs as of December 31, 2021 and 2022 and the related amortization for the years ended December 31, 2020, 2021 and 2022 wasinsignificant. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 198 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-392.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Cost of revenueCost of revenue consists primarily of transportation costs including cost of freight delivery accessories, operating costs for the deliveryplatforms, hubs and sortation centers, operating costs for the supply chain management network, last-mile delivery service fees, salaries andbenefits of related personnel, depreciation, rental costs, and other related operating costs.Selling expensesAdvertising costs are expensed when incurred and are included in selling expenses in the consolidated statements of comprehensive (loss)income. For the years ended December 31, 2020, 2021 and 2022, advertising expenses were RMB18,886, RMB16,871 and RMB8,775 (US$1,272),respectively.Government subsidiesGovernment subsidies primarily consist of financial subsidies received from local governments for operating a business in theirjurisdictions and compliance with specific policies promoted by the local governments. There are no defined rules and regulations to govern thecriteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevantgovernment authorities. For the government subsidies with no further conditions to be met, the amounts are recorded as “Other operating income,net” if the subsidies are of operating nature, or as non-operating income in “Other income” if the subsidies are of non-operating nature, or as areduction of specific cost or expenses if such subsidies are intended to compensate such amounts. The government subsidies with certain operatingconditions are recorded as liabilities when received and will be recorded as “Other operating income, net” or “Other income” or as a reduction ofspecific cost or expenses when the conditions are met.The Company adopted Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosure by BusinessEntities about Government Assistance (ASU 2021-10), which improves the transparency of government assistance received by most businessentities by requiring annual disclosures of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) theeffect of the assistance on a business entity’s financial statements. The adoption of this new standard did not have a material impact on ourconsolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 199 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-402.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)LeasesThe Company determines whether an arrangement is or contains a lease at inception.Sales-type, direct financing and operating leases as LessorThe Company classifies a lease as a sales-type lease when the lease meets any one of the following criteria at lease commencement:a. The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.b. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.c. The lease term is for a major part of the remaining economic life of the underlying asset.d. The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in thelease payments equals or exceeds substantially all of the fair value of the underlying asset.e. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the leaseterm.For sales-type leases, when collectability is probable at lease commencement, the Company derecognizes the underlying asset andrecognizes the net investment in the lease which is the sum of the lease receivable. Initial direct costs are expensed, at the commencement date, ifthe fair value of the underlying asset is different from its carrying amount. Interest income is recognized in financing income over the lease termusing the interest method.When none of the criteria above are met, the Company classifies a lease as either a direct financing lease or an operating lease. TheCompany will classify the lease as a direct financing lease if (i) the present value of the sum of lease payments and any residual value guaranteedby the lessee and any other third party unrelated to the Company equals or exceeds substantially all the fair value of the underlying asset; and (ii) itis probable that the Company will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. If both of the criteriaabove are not met, the Company will classify the lease as an operating lease.The standard requires lessors within the scope of ASC 942, Financial Services – Depository and Lending, to classify principal paymentsreceived from sales-type and direct financing leases in investing activities in the statement of cash flows. The Company continues to present cashreceipts from sales-type and direct financing leases as an investing cash inflow. For the year ended December 31, 2020, 2021 and 2022, total cashoriginations of sales-type and direct financing leases were RMB91,343, RMB45,606 and nil, respectively. For the year ended December 31, 2020,2021 and 2022, total cash receipts from sales-type and direct financing leases were RMB380,187, RMB546,221 and RMB318,674 (US$46,203),respectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 200 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-412.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Leases (continued)Sale-leaseback transactions as LessorWhen the Company enters into sale-leaseback transactions as lessor, it assesses whether a contract exists and whether the seller-lesseesatisfies a performance obligation by transferring control of an asset when determining whether the transfer of an asset shall be accounted for as asale of the asset. If the seller-lessee transfers the control of the leased asset to the Company, it accounts for the purchase of the leased asset inaccordance with ASC360. The subsequent leaseback of the asset is accounted for in accordance with ASC842 in the same manner as any otherlease. If the seller-lessee does not transfer the control of the leased asset to the Company, it is a failed sales-leaseback transaction which isaccounted for as a financing. The Company does not recognize the transferred asset and records the amounts paid as other financing receivables forwhich the current portion is included in “Prepayments and other current assets” and the non-current portion is included in “Other non-currentassets” in the consolidated balance sheets.Financing lease and operating lease as LesseeThe Company classifies a lease as a financing lease when the lease meets any one of the criteria specified as (a) to (e) in the “Sales-type,direct financing and operating leases as Lessor” policy at lease commencement. When none of the criteria are met, the Company classifies a leaseas an operating lease.For both operating and financing leases, the Company records a lease liability and corresponding right-of-use (ROU) asset at leasecommencement. Lease terms are based on the non-cancellable term of the lease and may contain options to extend the lease when it is reasonablycertain that the Company will exercise the option. Lease liabilities represent the present value of the lease payments not yet paid, discounted usingthe discount rate for the lease at lease commencement.The Company estimates its incremental borrowing rate for its leases at the commencement date to determine the present value of futurelease payments when the implicit rate is not readily determinable in the lease. In estimating its incremental borrowing rate, the Company considersits credit rating and publicly available data of borrowing rates for loans of similar amount, currency and term as the lease.Operating leases are presented as “Operating lease ROU assets” and “Operating lease liabilities”. Lease liabilities that become due withinone year of the balance sheet date are classified as current liabilities. At lease commencement, operating lease ROU assets represent the right to useunderlying assets for their respective lease terms and are recognized at amounts equal to the lease liabilities adjusted for any lease payments madeprior to the lease commencement date, less any lease incentives received and any initial direct costs incurred by the Company.After lease commencement, operating lease liabilities are measured at the present value of the remaining lease payments using thediscount rate determined at lease commencement. Operating lease ROU assets are measured at the amount of the lease liabilities and furtheradjusted for prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs andimpairment of the ROU assets, if any. Operating lease expense is recognized as a single cost on a straight-line basis over the lease term. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 201 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-422.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Leases (continued)Financing lease and operating lease as Lessee (continued)Financing lease are included in “Property and equipment” and “Financing lease liabilities” on the consolidated balance sheets. Leaseliabilities that become due within one year of the balance sheet date are classified as current liabilities. Financing lease ROU assets are amortizedon a straight-line basis from the lease commencement date. After initial measurement, the carrying value of financing lease liabilities are increasedto reflect interest at a constant rate and reduced to reflect any lease payments made during the period.Leases that have a term of 12 months or less at the commencement date (“short-term leases”) are not included in operating lease ROUassets and operating lease liabilities. Lease expense for the short-term leases are recognized on a straight-line basis over the lease term.Sale-leaseback transactions as LesseeWhen the Company enters into sale-leaseback transactions as a seller-lessee, it applies the requirements in ASC 606 by assessing whethera contract exists and whether it satisfies a performance obligation by transferring control of an asset when determining whether the transfer of anasset shall be accounted for as a sale of the asset. If the Company transfers the control of an asset to the buyer-lessor, it accounts for the transfer ofthe asset as a sale and recognizes a corresponding gain or loss on disposal. The subsequent leaseback of the asset is accounted for in accordancewith ASC842 in the same manner as any other lease. If the Company does not transfer the control of an asset to the buyer-lessor, the failed sale-leaseback transaction is accounted for as a financing. The Company does not derecognize the transferred asset and accounts for proceeds receivedas borrowings for which the current portion is included in “Accrued expenses and other liabilities” and the non-current portion is included in“Other non-current liabilities” in the consolidated balance sheets.Research and Development ExpensesResearch and development expenses primarily consist of salaries and benefits for research and development personnel and depreciation ofproperty and equipment. The Company expenses research and development costs as they are incurred, except for the costs incurred in thedevelopment phase for the development of internal use software that fulfill the capitalization criteria under ASC 350-40. The Company amortizesthe capitalized costs over their estimated useful lives. The amount of the capitalized research and development expenses during the years endedDecember 31, 2020, 2021 and 2022 was RMB 34,926, RMB16,477 and RMB33,252 (US$4,821), respectively, which was recorded in “IntangibleAssets – net” on the consolidated balance sheets.Comprehensive (loss) incomeComprehensive (loss) income is defined as the changes in equity of the Company during a period from transactions and other events andcircumstances excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220,Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components ofcomprehensive loss be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of theperiods presented, the Company’s comprehensive loss includes net loss and foreign currency translation adjustments and is presented in theconsolidated statements of comprehensive (loss) income. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 202 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-432.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Income taxesThe Company follows the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assetsand liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records avaluation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, ofthe deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period thatincludes the enactment date of the change in tax rate.The Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties arising from underpaymentof income taxes shall be computed in accordance with the related PRC tax law. The amount of interest expense is computed by applying theapplicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken ina tax return. Interest and penalties are recognized in accordance with ASC 740 as income tax expense in the consolidated statements ofcomprehensive (loss) income.The Company recognizes in its consolidated financial statements the impact of a tax position if a tax return position or future tax positionis “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not”recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized uponsettlement. The Company’s estimated liability for unrecognized tax benefits included in “Other non-current liabilities” in the consolidated balancesheets is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/ordevelopments with respect to tax audits, and expiration of the statute of limitations. The actual benefits ultimately realized may differ from theCompany’s estimates. As each audit is concluded, adjustments, if any, are recorded in the Company’s consolidated financial statements.Additionally, in future periods, changes in facts, circumstances, and new information may require the Company to adjust the recognition andmeasurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period inwhich the changes occur. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 203 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-442.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Share-based compensationAwards granted to employees and non-employeesThe Company had granted awards to employees and non-employees and the Company’s subsidiary had granted awards that areexercisable in the underlying entity’s ordinary shares. The Company determines whether an award should be classified and accounted for as aliability award or equity award. All the Company’s share-based awards to employees and non-employees were classified as equity awards and arerecognized in the consolidated financial statements based on their grant date fair values. For awards only with service conditions, the Company haselected to recognize compensation expense using the straight-line method for awards granted with graded vesting provided that the amount ofcompensation cost recognized at any date is at least equal to the portion of the grant date value of the options that are vested at that date. Forawards with performance and service conditions, the Company uses the accelerated method for awards granted with graded vesting. The Companyaccounts for forfeitures as they occur.The Company, with the assistance of an independent third-party valuation firm, determined the fair value of the share options granted toemployees and non-employees. The binomial option pricing model was applied in determining the estimated fair value of the options granted bythe Company to employees and non-employees.Modification of awardsA change in the terms or conditions of the awards is accounted for as a modification of the award. Incremental compensation cost ismeasured as the excess, if any, of the fair value of the modified award over the fair value of the original award immediately before its terms aremodified, measured based on the fair value of the awards and other pertinent factors at the modification date. For vested awards, the Companyrecognizes incremental compensation cost in the period the modification occurs. For unvested awards, the Company recognizes over the remainingrequisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award onthe modification date. If the fair value of the modified award is lower than the fair value of the original award immediately before modification, theminimum compensation cost the Company recognizes is the cost of the original award.Long-term investmentsThe Company accounts for investments in an investee over which the Company does not have significant influence and which do not havereadily determinable fair value using the measurement alternative, which is defined as cost, less impairments, adjusted by observable price changes.The Company makes a qualitative assessment of whether the investment is impaired at each reporting date. If a qualitative assessment indicatesthat the investment is impaired, the Company estimates the investment’s fair value in accordance with ASC 820. If the fair value is less than theinvestment’s carrying value, the Company recognizes an impairment loss equal to the difference between the carrying value and fair value.Investments in entities in which the Company can exercise significant influence and holds an investment in voting common stock or in-substance common stock (or both) of the investee but does not own a majority equity interest or control are accounted for using the equity methodof accounting in accordance with ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”). Under the equity method, the Companyinitially records its investments at cost. The Company subsequently adjusts the carrying amount of the investments to recognize the Company’sproportionate share of each equity investee’s net income (loss) into earnings after the date of investments. The Company evaluates the equitymethod investments for impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when thedecline in value is determined to be other-than-temporary.The Company accounts for long-term held-to-maturity debt securities in accordance with ASC 320, Investments-Debt Securities (“ASC320”). Long-term held-to-maturity debt securities include time deposits in financial institutions, with maturities of greater than twelve months, thatthe Company has positive intent and ability to hold to maturity, which are stated at amortized cost. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 204 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-452.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Derivative InstrumentsASC 815, Derivatives and Hedging (“ASC 815”) requires all contracts that meet the definition of a derivative to be recognized on thebalance sheet as either assets or liabilities and recorded at fair value. The Group’s derivative liabilities （assets）represent freestanding forwardexchange rate contracts that do not qualify for hedge accounting in accordance with ASC 815. The derivative liabilities are recorded in “Accruedliabilities and other payables” and “Other non-current liabilities” and measured at fair value in the consolidated balance sheets. The derivativeassets are recorded in “Prepayments and other current assets” and “Other non-current assets” and measured at fair value in the consolidated balancesheets. Changes in the fair value of derivative liabilities (assets) is recognized in “(Loss) Gain on change in fair value of derivativeassets/liabilities” in the consolidated statements of comprehensive (loss) income. The notional amount of the derivative contracts related to theforward exchange rate were US$120,500 and US$242,500 as of December 31, 2021 and 2022, respectively. Changes in fair value of derivativeliabilities (assets) were loss of RMB14,918 and gain of RMB71,619 (US$10,384) for the years ended December 31, 2021 and 2022, respectively.The fair value of the Company’s derivatives was determined utilizing market observable forward exchange rates.The Company adopted ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 on January 1, 2021. Thisguidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equitysecurities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The adoption of this standarddoes not have impact on the Company’s consolidated financial statements.Earnings (Loss) per shareIn accordance with ASC 260, Earnings Per Share (“ASC 260”), basic earning (loss) per share is computed by dividing net earnings (loss)attributable to ordinary shareholders by the weighted average number of unrestricted ordinary shares outstanding during the year using the two-class method. Under the two-class method, net loss is allocated between ordinary shares and other participating securities based on theirparticipating rights. The Company’s Class A, Class B and Class C ordinary shares are participating securities. The participating rights (liquidationand dividend rights) of the holders of the Company’s Class A, Class B and Class C ordinary shares are identical, except with respect to voting andconversion (Note 21). In accordance with ASC 260, the undistributed loss for each year is allocated based on the contractual participation rights ofthe Class A, Class B and Class C ordinary shares, respectively. As the liquidation and dividend rights are identical, the undistributed loss isallocated on a proportionate basis.Diluted earnings (loss) per share is calculated by dividing net earnings (loss) attributable to ordinary shareholders as adjusted for the effectof dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstandingduring the period. Ordinary equivalent shares consist of the ordinary shares issuable upon the conversion of the Company’s convertible senior notesusing the if-converted method and ordinary shares issuable upon the exercise of the share options and vesting of restricted share units, using thetreasury stock method. Ordinary share equivalents are excluded from the computation of diluted loss per share if their effects would be antidilutive.Income (loss) from continuing operations is the control number for determining whether including potential common shares in the diluted EPScomputation would be antidilutive. The control number applies to the denominator for the per-share amounts relating to discontinued operations.Preferred shares issued by the Company’s subsidiary, which are classified as convertible non-controlling interests in mezzanine equity, donot affect the Company’s basic earnings per share. The Company includes its subsidiary’s diluted earnings per share in the Company’s dilutedearnings per share only when the effect is dilutive. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 205 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-462.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Segment reportingIn accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise for which separatefinancial information is available that is regularly evaluated by the chief operating decision maker (“CODM”), or decision making group, indeciding how to allocate resources and in assessing performance. The Company’s CODM is the Chief Executive Officer and each of its majorservice lines is a discrete operating and reportable segment. There were changes to the Company’s disclosure for reportable segments in 2022 andprior period segment information were retrospectively revised to conform to current period presentation (Note 24).Impact of COVID-19The COVID-19 pandemic continues to evolve. In 2022, there have been outbreaks of COVID-19 cases from time to time, including theCOVID-19 Delta and Omicron variant cases, in multiple cities in China. China began to modify its zero-COVID policy at the end of 2022, andmost of the travel restrictions and quarantine requirements were lifted in December 2022. There remains uncertainty as to the future impact of thevirus, especially in light of this change in policy. The extent to which the COVID-19 pandemic impacts the Group’s long-term results will dependon future developments which are highly uncertain, unpredictable and beyond the Group’s control, including the frequency, duration and extent ofoutbreaks of COVID-19, the appearance of new variants with different characteristics, the effectiveness of efforts to contain or treat cases, andfuture governmental actions that may be taken in response to these developments, such as measures to stimulate the general economy to improvebusiness conditions, especially for SMEs. As a result, certain of the Group’s estimates and assumptions, including the allowance for credit losses,the valuation of certain debt and equity investments, long-term investments, content assets and long-lived assets subject to impairment assessments,require significant judgments and involve a higher degree of variability and volatility that could result in material changes to the Group’s currentestimates in future periods.ComparativesCertain prior period amounts have been reclassified to conform to the current period presentation.3.CONCENTRATION OF RISKSConcentration of credit riskAssets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents,restricted cash, short-term investments, accounts and notes receivable and lease rental and other financing receivables. As of December 31, 2021and 2022, RMB5,167,085 and RMB2,401,207 (US$348,142), respectively, of the Company’s cash and cash equivalents, restricted cash and notesreceivable were primarily deposited in PRC state-owned financial institutions located in the PRC, which management believes are of high creditquality. PRC state-owned banks, such as Bank of China, are subject to a series of risk control regulatory standards, and PRC financial institutionsregulatory authorities are empowered to take over the operation and management when any of those banks faces a material credit crisis. The Groupdoes not foresee substantial credit risk with respect to cash and cash equivalents, restricted cash and short-term investments held at the PRC state-owned financial institutions. Meanwhile, the Group selected reputable international financial institutions with high rating rates to place its foreigncurrencies. The Group regularly monitors the rating of the international financial institutions to avoid any potential defaults. There has been norecent history of default in relation to these financial institutions.Accounts receivable are typically unsecured and derived from revenue earned from customers mainly in the PRC, which are exposed tocredit risk. Notes receivable represents notes receivable issued by PRC state-owned reputable financial institutions from which the Company isentitled to receive the full face amount at its maturity. The risk is mitigated by credit evaluations the Company performs on its customers and itsongoing monitoring process of outstanding balances. The Company maintains reserves for estimated credit losses, which have generally beenwithin its expectations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 206 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-473.CONCENTRATION OF RISKS (CONTINUED)Concentration of credit risk (Continued)The Company is exposed to default risk on its lease rental and other financing receivables amounting to RMB1,049,416 and RMB233,786(US$33,896) as of December 31, 2021 and 2022, respectively. The Company regularly reviews the creditworthiness and lease rental and otherfinancing receivables are fully collateralized by assets the Company can repossess in the event of default. The Company assesses the allowance forcredit losses related to lease rental and other financing receivables on currency convertibility on a quarterly basis, either on an individual orcollective basis. The Company maintains reserves for estimated credit losses, which have generally been within its expectations.The Company is able to take as collateral certain operating assets which it is able to monitor and repossess for rapid utilization and/ormonetization in the event of a default. In addition, as most of the parties to which the Company provides financial services are the Company’secosystem participants, the Company has substantial knowledge about their business and operations and can monitor their financial position andtheir usage of collateralized assets.Business, customer, political, social and economic risksThe Company participates in a dynamic logistics and supply chain management industry and believes that changes in any of the followingareas could have a material adverse effect on the Company’s future financial position, results of operations or cash flows: changes in the overalldemand for services; competitive pressures due to new entrants; advances and new trends in new technologies and industry standards; changes incertain strategic relationships or customer relationships; regulatory considerations; and risks associated with the Company’s ability to attract andretain employees necessary to support its growth. The Company’s operations could be also adversely affected by significant political, economic andsocial uncertainties in the PRC.Domestic mail delivery service-related businesses and planned value-added telecommunication services in connection with UCargobusiness since 2020 are subject to significant restrictions under current PRC laws and regulations. Specifically, foreign investors are not allowed toinvest in any domestic mail delivery service business. Currently, the Company conducts its operations in China through contractual arrangementsentered between the Company, its PRC subsidiaries and VIEs. The relevant regulatory authorities may find the current contractual arrangementsand businesses to be in violation of any existing or future PRC laws or regulations. If so, the relevant regulatory authorities would have broaddiscretion in dealing with such violations. In addition, if the current ownership structure of the Company and its contractual arrangements with theVIEs are found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its ownershipstructure and operations in the PRC to comply with the changing and new PRC laws and regulations. The Company may not be able to operate orcontrol the VIEs, which may result in deconsolidation of the VIEs.No single customer or supplier accounted for more than 10% of revenues or cost of revenues for the years ended December 31, 2020,2021 and 2022.Currency convertibility riskThe Company primarily transacts all of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994,the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the PBOC. However, theunification of the exchange rates does not imply that the RMB may be readily convertible into United States dollars or other foreign currencies. Allforeign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at theexchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a paymentapplication form together with suppliers’ invoices, shipping documents and signed contracts. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 207 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-483.CONCENTRATION OF RISKS (CONTINUED)Foreign currency exchange rate riskFrom July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.For RMB against U.S. dollars, there was appreciation of approximately 6.5%, appreciation of approximately 2.3% and depreciation ofapproximately 9.2% in the years ended December 31, 2020, 2021 and 2022, respectively. It is difficult to predict how market forces or PRC or U.S.government policy may impact the exchange rate between the RMB and the U.S. dollars in the future.To the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other businesspurposes, appreciation of RMB against the U.S. dollar would have an adverse effect on the RMB amount the Company would receive from theconversion. Conversely, if the Company decides to convert RMB into U.S. dollars for the purpose of making payments for dividends on ordinaryshares, strategic acquisitions or investments or other business purposes, appreciation of the U.S. dollar against RMB would have a negative effecton the U.S. dollar amount available to the Company. In addition, a significant depreciation of the RMB against the U.S. dollar may significantlyreduce the U.S. dollar equivalent of the Company’s earnings or losses.4.DISCONTINUED OPERATIONSIn November 2020, the Company approved a disposal plan to wind down its Dianjia.com services business by the end of December 31,2020 and committed to a plan to sell its Wowo convenience stores (“Store+ disposal plan”) in order to increase focus on the Company’s corebusinesses. All of the components of the Store+ segment are reported as discontinued operations in the consolidated statements of comprehensive(loss) income for the current year and all comparative periods in accordance with ASC 210-05, Discontinued Operations (“ASC 210-05”) as thedisposal plan of the Store+ segment represented a strategic shift that had a major effect on the Company’s operations and financial results. Further,the related current and non-current assets and liabilities associated with the Store+ disposal group are reflected as held-for-sale in the consolidatedbalance sheets as at December 31, 2020. The numbers in all of the relevant footnote disclosures are also adjusted for the current year andcomparative periods. No loss was recognized on the initial measurement of the disposal group as held-for-sale.On November 18, 2021, the Company completed the disposal transaction of Sichuan Wowo with a cash consideration of RMB250,000and recognized a corresponding loss on disposal of RMB34,276 in net income (loss) from discontinued operations in the consolidated statements ofcomprehensive (loss) income for the year ended December 31, 2021.In October 2021, the Company approved a disposal plan to sell BEST Network. All of the components of the Express segment arereported as discontinued operations in the consolidated statements of comprehensive (loss) income for the current year and all comparative periodsin accordance with ASC 210-05 as the disposal plan of the express segment represented a strategic shift that had a major effect on the Company’soperations and financial results. Further, the related current and non-current assets and liabilities associated with the express disposal group arereflected as held-for-sale in the consolidated balance sheets as at December 31, 2020. The numbers in all of the relevant footnote disclosures arealso adjusted for the current year and comparative periods. No loss was recognized on the initial measurement of the disposal group as held-for-sale.On December 9, 2021, the Company completed the disposal transaction of BEST Network with cash consideration of RMB3,876,286 andliabilities assumed by the buyer of RMB5,612,888. The Company recognized a gain on disposal of BEST Express of RMB3,213,599 in net income(loss) from discontinued operations in the consolidated statements of comprehensive (loss) income for the year ended December 31, 2021. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 208 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-494.DISCONTINUED OPERATIONS (CONTINUED)The following tables set forth statement of operations and cash flows of discontinued operations of Store+ services and BEST Express(“Discontinued Operations”) which were included in the Company’s consolidated financial statements:For the years ended December 31, 2020 2021* 2022 2022RMBRMBRMBUS$Revenue21,667,35416,334,363——Cost of revenue (21,389,399) (17,313,107) ——Gross profit (loss) 277,955 (978,744) ——Selling expenses (687,328) (364,917) ——General and administrative expenses (566,169) (530,479) (31,617)(4,584)Research and development expenses (87,671) (51,465) ——Other operating income, net35,753243,391——Total operating expenses (1,305,415) (703,470) (31,617)(4,584)Loss from discontinued operations (1,027,460) (1,682,214) (31,617)(4,584)Interest income19,20015,099——Interest expenses(55,430)(32,613)——Foreign exchange loss (3,715) (2,367) ——Gains on disposal — 3,179,323 ——Other income 56,315 37,570 ——Other expense(8,614)(41,309)(6,847)(993)(Loss) Income before income taxes (1,019,704) 1,473,489 (38,464)(5,577)Income tax expense(3,086)———Net (loss) income from discontinued operations (1,022,790) 1,473,489 (38,464)(5,577)*Including the financial results of discontinued operations of Store+ and BEST express delivery services from January 1, 2021 to November 30,2021 and from January 1, 2021 to December 8, 2021, respectively.During the year ended December 31, 2021 and 2022, total financial results presented in the Company’s continuing operations from theDiscontinued Operations after the disposals transactions as intra-entity transactions are as follows:For the years ended December 31, 2021 2022 2022RMBRMBUS$Revenue Freight delivery 6,271 45,664 6,621Supply chain management 4,500 16,547 2,399Others 42,162 20,080 2,911Total revenue 52,933 82,291 11,931Cost of revenue Freight delivery (4,274) (34,262) (4,967)Supply chain management (3,390) (5,315) (771)Others (4,036) (13,761) (1,995)Total cost of revenue (11,700) (53,338) (7,733)Interest income 4,671 — —During the year ended December 31, 2021 and 2022, the net cash inflows received by the Company’s continuing operations from theDiscontinued Operations after the disposal transactions were RMB43,678 and RMB246,106 (US$35,682), respectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 209 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-505.BUSINESS COMBINATIONSDuring the years ended December 31 2020,the Company completed multiple acquisitions of global logistics service operations tocomplement its existing businesses and achieve synergies in southeast Asia. The purchase consideration was not significant. Results of the acquiredbusiness have been included in the Company’s consolidated financial statements since the acquisition date. Goodwill recognized in 2020 representsthe expected synergies from integrating the global logistics service and is not tax deductible.The actual results of operations after the acquisition date and pro-forma results of operations for these acquisitions have not beenpresented because the effects of these acquisitions were insignificant.During the year ended December 31, 2021 and 2022, there were no new business acquisitions.6.ACCOUNTS AND NOTES RECEIVABLE, NETAccounts and notes receivable, net, consists of the following:As at December 31 2021 2022 2022RMBRMBUS$Accounts receivable 1,046,060 950,666 137,838Notes receivable 9,164 4,614 669Allowance for credit losses (227,593) (263,956) (38,270)Accounts and notes receivable, net 827,631 691,324 100,237The movements in the allowance for credit losses were as follows:As at December 31 2020 2021 2022 2022RMBRMBRMBUS$Balance at beginning of the year (70,861) (204,124) (227,593) (32,998)Adoption of ASU 2016-13(35,752)———Additions (108,151) (31,291) (43,295) (6,277)Write-offs 10,640 7,822 6,932 1,005Balance at end of the year (204,124) (227,593) (263,956) (38,270)As of December 31, 2021 and 2022, the Company derecognized notes receivable transferred to a bank but not yet due of RMB 163,000and nil, respectively.The maximum exposure to loss from the Company’s continuing involvement in the derecognized notes receivable and the undiscountedcash flows to repurchase these derecognized notes receivable is equal to their carrying amounts. The fair values of the Company’s continuinginvolvement in the derecognized notes receivable are not significant.For the years ended December 31, 2020, 2021 and 2022, the Company has not recognized any gain or loss on the date of transfer of thederecognized notes receivable. No gains or losses were recognized from the continuing involvement, both during the year or cumulatively. Theendorsement has been made evenly throughout the year. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 210 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-517.PREPAYMENTS AND OTHER CURRENT ASSETSPrepayments and other current assets consist of the following: As at December 31 2021 2022 2022RMBRMBUS$Value-added taxes (“VAT”) recoverable305,524 283,001 41,031Receivables from failed sale-leaseback transactions (1)428,810 176,210 25,548Rental and other deposits66,786 88,972 12,899Fair value accounting of financial instruments— 49,077 7,115Factoring receivables (2)212,58239,1055,670Interest receivables26,06828,1124,076Government grant19,000——Others147,448 167,688 24,310Allowance for credit losses (3)(33,746)(54,323)(7,876)1,172,472 777,842 112,773(1)Failed sale-leaseback transactions as buyer-lessorThe Company has certain failed sales-leaseback transactions of certain motor vehicles and logistic equipment in which the Company actsas buyer-lessor but the seller-lessee does not transfer the control of the leased asset to the Company. The Company uses effective interest ratemethod in the computation of interest income which is recorded as Capital services revenues in “Revenue – Others” in the consolidated statementsof comprehensive (loss) income. Interest income was insignificant for the years ended December 31, 2020, 2021 and 2022. As of December 31,2021 and 2022, the Company recorded receivables from failed sale-leaseback transactions due within one year of RMB428,810 and RMB176,210(US$25,548), respectively, under the “Prepayments and other current assets”. As of December 31, 2021 and 2022, the Company recordedreceivables from failed sale-leaseback transactions due over one year of RMB109,295 and RMB25,811 (US$3,742), net of allowance for creditlosses of RMB4,752 and RMB7,621 (US$1,105), respectively, under “Other non-current assets”.(2)Factoring receivablesThe Company provides factoring service to provide capital as a lender to certain third-party suppliers who transfer their rights to futurecash receipts from accounts receivable with recourse through a factoring arrangement to fund their operations and improve their credit positionwithin one year. The Company uses effective interest rate method in the computation of interest income which is recorded as Capital servicesrevenues in “Revenue – Others” in the consolidated statements of comprehensive (loss) income. Interest income was RMB32,308, RMB34,956 andRMB7,536 (US$1,093) for the years ended December 31, 2020, 2021 and 2022. As of December 31, 2021 and 2022, the allowance for creditlosses of factoring receivables were RMB10,781 and nil, respectively.(3)Allowance for credit lossesThe movements in the allowance for credit losses were as follows: As at December 312020202120222022 RMB RMB RMB US$Balance at beginning of the year — (12,196) (33,746) (4,893)Adoption of ASU 2016-13 (3,793) — — —Additions (8,403) (21,550) (31,358) (4,546)Write‑offs — — 10,781 1,563Balance at end of the year (12,196) (33,746) (54,323) (7,876) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 211 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-528.PROPERTY AND EQUIPMENT, NETAs at December 31 2021 2022 2022RMBRMBUS$Machinery and electronic equipment 585,524 677,471 98,224Leasehold improvements 682,489 683,804 99,142Motor vehicles 138,876 179,769 26,064Construction in progress 105,146 49,193 7,132 1,512,035 1,590,237 230,562Less: accumulated depreciation (749,393) (805,505) (116,787) 762,642 784,732 113,775The Group acquired certain machinery and electronic equipment by entering into financing leases. The gross amount and the accumulateddepreciation of these machinery and electronic equipment were RMB9,632 and RMB5,460, respectively, as of December 31, 2021 andRMB48,336(US$7,008) and RMB7,772 (US$1,127), respectively, as of December 31, 2022. Future minimum lease payments are disclosed in Note10. Depreciation expense of property and equipment, including assets under financing leases, was RMB145,161, RMB183,332 and RMB176,341(US$25,567) for the years ended December 31, 2020, 2021 and 2022, respectively.As of December 31, 2021 and 2022, the balances of construction in progress were RMB105,146 and RMB49,309 (US$7,149),respectively, which were related to the construction of warehouses, hubs and sortation centers and related equipment.9.INTANGIBLE ASSETS, NETAs at December 31 2021 2022 2022RMBRMBUS$Customer relationships 10,449 10,449 1,515Software 65,001 106,071 15,379Capitalized internal use software in progress50,58244,4236,441126,032160,94323,335Less: accumulated amortization (70,348) (85,390) (12,381) 55,684 75,553 10,954Amortization expense of intangible assets was RMB12,334, RMB8,033 and RMB12,569 (US$1,822) for the years ended December 31,2020, 2021 and 2022, respectively. Estimated amortization expense relating to the existing intangible assets with finite lives for each of the nextfive years is as follows: RMB US$202326,8093,8872024 25,2723,6642025 19,0282,7592026 4,2696192027 1752575,55310,954No impairment losses were recognized for the years ended December 31, 2020, 2021 and 2022, respectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 212 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5310.LEASESLeases of motor vehicles and logistic equipment as LessorThe Company provides direct financing and sales-type leases of motor vehicles and logistic equipment, primarily to transportation serviceproviders that meet the Company’s credit assessment requirements. The lease terms range from two to ten years, do not contain contingent rentalincome clauses, and are fully collateralized by assets the Company can repossess in the event of default. Initial direct costs were insignificant for allperiods presented. The lease agreements include lease payments that are fixed, do not contain residual value guarantees or variable lease payments.The Company generally either grants the lessee an option at the end of the lease term to purchase the underlying asset that the lessee is reasonablycertain to exercise or ownership of the underlying asset transfers to the lessee for a nominal amount.The net investment in direct financing and sales-type leases are presented as “Lease rental receivables” on the consolidated balance sheetsas follows:As at December 31 2021 2022 2022RMBRMB US$Current assets: Direct financing leases175,70842,295 6,132Sales-type leases122,656772 112298,36443,0676,244Non-current assets: Direct financing leases134,01030,682 4,448Sales-type leases101,4199,506 1,379235,42940,1885,827Total533,79383,255 12,071For the years ended December 31, 2020, 2021 and 2022, the Company recorded RMB85,285, RMB45,644 and RMB5,389 (US$781) ofinterest income from direct financing and sales-type leases as a lessor in “Revenue – Others” on the consolidated statements of comprehensive(loss) income.The net investment in direct financing and sales-type leases consisted of:As at December 31 2021 2022 2022RMBRMBUS$Total minimum lease payments receivable 605,285 136,188 19,745Less: Executory costs — — —Minimum lease payments receivable 605,285 136,188 19,745Less: Allowance for credit losses (27,159) (42,313) (6,135)Net minimum lease payments receivable 578,126 93,875 13,610Unguaranteed residuals — — —Less: Unearned income (44,333) (10,620) (1,539)Net investment in financing leases 533,793 83,255 12,071Current portion 298,364 43,067 6,244Non-current portion 235,429 40,188 5,827 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 213 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5410.LEASE (CONTINUED)Leases of motor vehicles and logistic equipment as Lessor (continued)Future minimum lease payments to be received for the direct financing and sales-type leases for each of the five succeeding fiscal years asof the December 31, 2022 are as follows:As at December 312022 RMB US$For the year ending December 31, 2023 52,236 7,574For the year ending December 31, 2024 30,813 4,466For the year ending December 31, 2025 8,318 1,206For the year ending December 31, 2026 2,480 360For the year ending December 31, 2027 28 4Thereafter — —Total minimum lease payments 93,875 13,610Unearned income(10,620)(1,539)Net investment in direct financing and sales-type leases83,25512,071Financing and operating leases as LesseeThe Company has operating leases for certain offices, warehouses, hub and sortation center facilities and equipment and financing leasesfor certain machinery and electronic equipment as a lessee.The Company’s lease agreements include lease payments that are fixed, do not contain material residual value guarantees or variable leasepayments. The leases have remaining lease terms of up to twenty years. Certain lease agreements include terms with options to extend the lease,however none of these have been recognized in the Company’s operating lease ROU assets or operating lease liabilities since those options werenot reasonably certain to be exercised. The Company’s leases do not contain restrictions or covenants that restrict the Company from incurringother financial obligations. The Company’s lease agreements may contain lease and non-lease components. Non-lease components primarilyinclude payments for maintenance and utilities. Consideration for lease and non-lease components are allocated on a relative standalone sellingprice basis. For the years ended December 3120202021 2022 2022 RMBRMBRMBUS$Operating lease cost685,771674,892671,42297,347Short-term lease cost126,846100,766116,10716,834Financing lease cost:Amortization of ROU assets2,5191,2932,313335Interest24516920229Total lease cost815,381777,120790,044114,545 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 214 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5510.LEASE (CONTINUED)Financing and operating leases as Lessee (continued) For the years ended December 312020 2021 2022 2022RMBRMBRMBUS$Other informationCash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 869,129745,032 770,580111,724Operating cash flows from financing leases 245169 20229Financing cash flows from financing leases 1,1791,481 1,772257ROU assets obtained in exchange for new operating lease liabilities 537,302780,576 560,05681,200ROU obtained in exchange for new finance lease liabilities 2,0231,493 38,1345,529Weighted-average remaining lease term (in years): Operating leases 4.135.03 4.58—Financing leases 3.162.79 2.99—Weighted-average discount rate: Operating leases 7.68%7.67% 7.86% Financing leases 5.16%5.19% 5.67% For the year ended December 31, 2020, total lease costs of RMB772,731, RMB642, and RMB39,244 were recorded in cost of revenue,selling expenses, general and administrative expenses, respectively.For the year ended December 31, 2021, total lease costs of RMB740,554, RMB1,035, and RMB34,069 were recorded in cost of revenue,selling expenses, general and administrative expenses, respectively.For the year ended December 31, 2022, total lease costs of RMB755,519 (US$109,540), RMB1,616 (US$234), andRMB30,394(US$4,407) were recorded in cost of revenue, selling expenses, general and administrative expenses, respectively.Future minimum lease payments for operating and financing leases as of December 31, 2022 are as follows: Operating Leases Financing leasesRMB US$RMB US$For the year ended December 31, 2023669,49597,06713,8402,007For the year ended December 31, 2024558,87481,02913,6841,984For the year ended December 31, 2025375,55754,45112,8531,864For the year ended December 31, 2026221,94232,1791,171170For the year ended December 31, 2027114,93616,664122Thereafter288,35141,807——Total minimum lease payments2,229,155323,19741,5606,027Less: imputed interest392,83656,9553,663534Total lease liability balance1,836,319266,24237,8975,493Minimum payments related to leases not yet commenced as of December 31, 202237,3465,41537,8195,483 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 215 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5611.LONG-TERM INVESTMENTS As at December 31 2021 2022 2022RMBRMBUS$Equity investments without readily determinable fair value169,171 156,859 22,742Long-term time deposits50,000 — —Total Long-term Investments219,171 156,859 22,742Equity investments without readily determinable fair valueThe total carrying value of equity investments without readily determinable fair value as of December 31, 2021 and 2022 were as follows: As at December 312021 2022 2022RMBRMBUS$Initial cost basis 57,241 57,241 8,299Cumulative unrealized gains 116,930 116,930 16,953Cumulative unrealized losses (including impairment) (5,000) (17,312) (2,510)Total carrying value 169,171 156,859 22,742During the years ended December 31, 2021, certain equity investments were remeasured based on observable price changes in orderlytransactions for an identical or similar investment of the same issuer and the aggregate carrying amount of these investments was RMB86,977 as ofDecember 31, 2021. There is no orderly transactions for an identical or similar investment of the same issuer identified during the year endedDecember 31, 2022.Total unrealized and realized gains and losses of equity securities without readily determinable fair values for the years ended December31, 2020, 2021 and 2022 were as follows: For the years ended December 312020 2021 2022 2022RMBRMBRMBUS$Gross unrealized gains 18,687 58,643 — —Gross unrealized losses (including impairment) (1) — (5,000) (12,312) (1,785)Net unrealized gains (loss) on equity securities held 18,687 53,643 (12,312) (1,785)Net realized gains on equity securities sold 5,658 247,145 — —Total net gains (loss) recognized 24,345 300,788 (12,312) (1,785)(1)Nil gross unrealized losses (downward adjustments excluding impairment) were recognized for the years ended December 31, 2020, 2021 and2022. In 2021 and 2022, the Company believed that there was a decline in value that was other-than-temporary and recorded impairment ofRMB5,000 and RMB12,312 (US$1,785) in “Other expense” in the consolidated statements of comprehensive (loss) income, respectively.Impairment losses of nil, RMB5,000 and RMB12,312 (US$1,785) were recognized for the years ended December 31, 2020, 2021 and 2022,respectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 216 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5711.LONG-TERM INVESTMENTS (CONTINUED)Equity investments without readily determinable fair value (continued)In 2020 and 2021, the Company disposed partial equity interests in the equity investments without readily determinable fair value with thecarrying amount of RMB 27,937 and RMB100,149 for a cash consideration of RMB33,595 and RMB347,294 and realized a gain on disposal ofRMB5,658 and RMB247,145, respectively, which was included in “Other income” in the consolidated statement of comprehensive (loss) incomefor the years ended December 31, 2020 and 2021. Among which, the Company sold 1.0% share of equity investment without readily determinablefair value with the carrying amount of RMB71,667 to Zhejiang Cainiao Supply Chain Management Co. Ltd (“Cainiao”), a related party of theCompany, with cash consideration RMB220,000 and realized a gain on disposal of RMB148,333.12.GOODWILLFreight delivery Global TotalBalance as of December 31, 2021 5,58048,555 54,135Balance as of December 31, 2022 5,58048,555 54,135Balance as of December 31, 2022 (US$) 8097,040 7,849The Company performed a qualitative assessment for the Freight delivery services reporting unit for the years ended December 31, 2020,2021 and 2022 based on the requirements of ASC 350-20. The Company evaluated all relevant factors, weighed all factors in their entirety andconcluded that it was not more-likely-than-not that the fair value of the Freight delivery services reporting unit was less than its carrying amount.Therefore, further impairment testing on goodwill was unnecessary as of December 31, 2021 and 2022.For the years ended December 31, 2020, 2021 and 2022, the Company performed a quantitative assessment for the Global reporting unitby estimating the fair value of the reporting unit based on an income approach which involved significant management judgment, estimates andassumptions such as the discount rate, revenue growth rates and operating margin. The fair value of the reporting unit exceeded its carrying valueand therefore, goodwill related to the Global reporting unit was not impaired.No impairment losses were recognized for the years ended December 31, 2020, 2021 and 2022. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 217 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5813.SHORT-TERM AND LONG-TERM BANK LOANSAs at December 31 2021 2022 2022RMBRMBUS$Short-term bank loans guaranteed by subsidiaries within the Group 40,000 — —Pledged short-term bank loans369,99573,12810,603Secured bank borrowings 120,500 110,142 15,969530,495183,27026,572Long-term bank loans pledged by deposits769,767928,894134,677Total 1,300,262 1,112,164 161,249During the years ended 2020, 2021 and 2022, the Group factored certain intercompany notes receivables with a total face value ofRMB462,287, RMB475,491 and RMB110,142(US$ 15,969) to several domestic banks for total proceeds of RMB446,652, RMB462,170 andRMB108,365(US$15,711), respectively, at effective interest rates ranging from 1.40% to 5.20%. As these factoring of notes receivables was withrecourse, the receivable factoring transaction did not qualify as a transfer of financial assets to be considered as a sale under ASC 860 and wasaccounted for as a secured borrowing and were recognized as secured bank borrowings included in “Short-term bank loans”.Short-term bank loans consisted of several bank loans denominated in RMB. The total deposits in restricted cash pledged for short-termbank loans and secured bank borrowings was RMB439,285 and RMB191,642 (US$27,785) as of December 31, 2021 and 2022, respectively. Thetotal accounts receivable pledged for short-term bank loans was RMB194,995 and nil as of December 31, 2021 and 2022, respectively. Theweighted average interest rate for the outstanding borrowings as of December 31, 2021 and 2022, was 3.84% and 1.74%, respectively. The totalintercompany notes receivable pledged for secured bank borrowings was RMB120,500 and RMB110,142 (US$15,969) as of December 31, 2021and 2022, respectively.Long-term bank loans were denominated in US$. The deposits in restricted cash pledged for long-term bank loans was RMB847,300 andRMB 998,800 (US$144,812) as of December 31, 2021 and 2022, respectively. Long-term bank loans amounted to RMB774,089 (US$112,232) willmature in 2024 and long-term bank loans amounted to RMB154,805 (US$22,445) will mature in 2025 The weighted average interest rate for theoutstanding borrowings as of December 31, 2021 and 2022, was 1.75% and 1.06%, respectively.14.ACCRUED EXPENSES AND OTHER LIABILITIESAccrued expenses and other liabilities consist of the following:As at December 31 2021 2022 2022RMBRMBUS$Salary and welfare payable 769,761 624,166 90,496Customer deposits282,666218,36631,660Accrued expenses73,54586,27012,508Accrual for purchases of property and equipment 29,545 71,234 10,328Other tax payables 40,741 12,005 1,741Fair value accounting of financial instruments14,9185,452790Accrued contingent liabilities200,114——Others 180,349 128,161 18,580 1,591,639 1,145,654 166,103 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 218 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-5915.LONG-TERM BORROWINGS As at December 312021 2022 2022RMBRMBUS$Long-term borrowings-current: Yunnan Trust Plan-Senior level debts 84,006 — —Secured borrowings from Houfu118,25054,0117,831Secured borrowings from Chengdu Gongtou 85,558 25,137 3,644 287,814 79,148 11,475Long-term borrowings-non-current: Secured borrowings from Houfu 46,496 — —Secured borrowings from Chengdu Gongtou 20,584 381 55 67,080 381 55Xinyuan Leasing Asset Backed Special PlansIn June 2019, BEST Finance transferred certain lease rental and other financing receivables totaling RMB705,033 with remaining leaseterms ranging from 23 months to 59 months originating from its finance leasing services business to a securitization vehicle. The securitizationvehicle created Xinyuan Leasing Asset Backed Special Plan I (the “ABS Plan I”) and contemporaneously issued debt securities securitized by thetransferred lease rental receivables (“asset-backed securities”) to qualified institution investors on the Shanghai Stock Exchange and raised totalproceeds of RMB262,316 under the ABS Plan I, net of issuance costs for the securitization transaction of RMB6,684. The ABS Plan I consists ofthree tranches: Series A tranche with a stated interest of 5.5% matured by end of 2020, Series B tranche with a stated interest of 6.5% matured byend of 2020 and a subordinated tranche maturing by end of 2023. The Company also provided a guarantee to the ABS Plan I to secure the fullrepayment of the principal and interest of the Series A and B tranches of the ABS Plan I issued to external investors.In September 2020, BEST Finance transferred certain lease rental and other financing receivables totaling RMB751,469 with remaininglease terms ranging from 4 months to 59 months originating from its finance leasing services business to a securitization vehicle. The securitizationvehicle created Xinyuan Leasing Asset Backed Special Plan II (the “ABS Plan II”) and contemporaneously issued debt securities securitized by thetransferred lease rental receivables (“asset-backed securities”) to qualified institution investors on the Shanghai Stock Exchange and raised totalproceeds of RMB198,074 under the ABS Plan II, net of issuance costs for the securitization transaction of RMB1,926. The ABS Plan II consists ofthree tranches: Series A tranche with a stated interest of 4.95% matured by end of 2021, Series B tranche with a stated interest of 6.0% maturing byend of 2022 and a subordinated tranche maturing by end of 2023. The Company also provided a guarantee to the ABS Plan II to secure the fullrepayment of the principal and interest of the Series A tranche of the ABS Plan II issued to external investors.The Company acts as the servicer of the both ABS Plans by providing payment collection services for the underlying lease rentalreceivables and holds significant variable interests in the ABS Plans through holding all of the subordinated tranche of asset-backed debt securitiesmaturing no later than 2023 and the guarantee provided, from which the Company has the obligation to absorb losses of the ABS Plans that couldpotentially be significant to the ABS Plans. Accordingly, the Company is considered the primary beneficiary of the Plans and has consolidated theABS Plans’ assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 219 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6015.LONG-TERM BORROWINGS (CONTINUED)Xinyuan Leasing Asset Backed Special Plans (Continued)As a result of the series of transactions described above, the Series A and B tranches of the Plans issued to external investors wereconsidered borrowings from external investors. The proceeds from borrowings from external investors is a financing activity and reported as“Proceeds from issuance of long-term borrowings to external investors, net of issuance costs” on the consolidated statements of cash flows.Repayments on the borrowings totaled RMB210,991, RMB96,829 and nil during the years ended 2020, 2021 and 2022 from external investorswere made according to the payment schedule. As of December 31, 2020 and 2021, the ABS Plan I and II were fully repaid with no outstandingbalances from external investors, respectively.Yunnan Trust PlanIn March 2021, BEST Finance transferred certain lease receivables with remaining lease terms ranging from 18 months to 36 monthsoriginated from its finance leasing services business with future cash flows of RMB577,347 at a discount price of RMB449,671 to YunnanInternational Trust Co., Ltd., a third party, which then created Yunnan Trust Plan (the “Trust Plan”). The Trust Plan contemporaneously issuedSenior and Junior level debt securities of RMB319,610 and RMB130,061, respectively. The annual yield of the Senior securities is 8% and was allacquired by Sinolink Yong Fu Assets management (“Sinolink”), a related party of Yunnan International Trust Co., Ltd., BEST Finance acquired allthe Junior securities which are exposed to all expected losses and entitled to receive all residual returns of the Trust Plan. The Senior debt securitiesmature in 14 months and the Junior debt securities mature in 33 months. BEST Finance repays the cash collected from the individual lessee of thelease receivables to the Trust Plan, with the principal amount of Senior debt securities and interest of Junior debt securities paid firstly ininstallments and then the principal amount of Junior debt securities in installments. The residual returns will be repaid to Junior debt securitiesholders at the end of the Trust Plan.BEST Finance is responsible to provide management and collection services over the transferred lease receivable assets and the Companyprovides guarantees to Yunnan Trust to secure the full repayment of the principal and interest of the holder of the Senior securities and the expectedinterest return rate of the Trust Plan.The Company has the power to direct the activities that most significantly impacts the economic performance of the Trust Plan andprovides payment collection services for the underlying lease rental receivables and holds significant variable interests in the Trust Plan through theJunior debt securities and the guarantee provided, from which the Company has the obligation to absorb losses of the Trust Plan that couldpotentially be significant to the Trust Plan. Accordingly, the Company is considered the primary beneficiary of the Trust Plan and consolidates theTrust Plan’s assets, liabilities, results of operations, and cash flows in the consolidated financial statements.As a result of the series of transactions described above, the Senior level debt securities of the Trust Plan issued to external investors wereconsidered borrowings from external investors. During the year ended December 31, 2021 and 2022, the Company made repayments on theborrowings totaled RMB248,844 and RMB84,365 (US$12,232), respectively, to Yunnan Trust. The Senior level debt securities of the Trust Planwere fully repaid during 2022. As of December 31, 2021 and 2022, the total outstanding borrowings related to the Senior level debt securities wereRMB84,006, and nil, which were repayable within one year, respectively. The weighted average effective interest rate for the outstanding Seniorlevel debt securities borrowings was 14.86% and 16.49% as of December 31, 2021 and 2022, respectively. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 220 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6115.LONG-TERM BORROWINGS (CONTINUED)Secured borrowings from HoufuConcurrently with the set-up of the Trust Plan, BEST Finance transferred the beneficial rights of another set of lease rental receivableswith future cash flows of RMB166,149 to Ningbo Houfu Business management consulting partnership (“Houfu”), a related party of Sinolink, at adiscounted price of RMB133,200. The proceeds received from Houfu were used by BEST Finance to acquire the Junior debt securities of the TrustPlan. BEST Finance agreed to transfer all the benefits it received from the Junior debt securities in the Trust Plan including the principal andinterest of the Junior debt securities to repay its obligations to Houfu in installments over 33 months with BEST Finance’s rights in Junior debtsecurities as collateral.Since the Company has continuing involvement with the lease receivables transferred to Houfu by providing guarantee to the performanceof the transferred lease receivables and the transferred financial assets are not legally isolated from the Company, the transferred lease receivableswere not derecognized and are accounted for as secured borrowings in the consolidated financial statements.During the year ended December 31, 2021 and 2022, the Company made repayments on the borrowings totaled nil and RMB131,851(US$19,117), respectively, to Houfu. The weighted average effective interest rate for the outstanding secured borrowings from Houfu was 32.21%and 37.27% as of December 31, 2021 and 2022, respectively.The future payment schedule for the secured borrowings from Houfu is as follows:Future cash flow RMB US$For the year ending December 31, 202362,921 9,123Total future cash flows 62,921 9,123Secured borrowings from Chengdu GongtouIn August 2021, BEST Finance transferred the beneficial rights of certain lease receivables with future cash flows of RMB161,031 toChengdu Gongtou Finance Lease Limited (“Chengdu Gongtou”) at their present value of RMB135,858.Since the Company has continuing involvement with the lease receivables transferred to Chengdu Gongtou by providing guarantee to theperformance of the transferred lease receivables and the transferred financial assets are not legally isolated from the Company, the transferred leasereceivables were not derecognized and are accounted for as secured borrowings in the consolidated financial statements. The Company will repaythe secured borrowings to Chengdu Gongtou in installments of 33 months. During the year ended December 31, 2021 and 2022, the Companymade repayments totaled RMB33,156 and RMB85,549 (US$12,403), respectively. The weighted average effective interest rate for the outstandingsecured borrowings from Gongtou was 17.16% and 18.85% as of December 31, 2021 and 2022, respectively.The future payment schedule for the secured borrowings from Chengdu Gongtou is as follows:Future cash flows RMB US$For the year ending December 31, 202321,5313,122For the year ending December 31, 202439057Total future cash flows 21,921 3,179 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 221 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6216.CONVERTIBLE SENIOR NOTES As at December 31 202120222022 RMB RMB US$ Current liabilities: Convertible Senior Notes held by a related party-current 2024 Convertible Notes633,475——2025 Convertible Notes—522,74475,791Convertible Senior Notes held by third parties-current 2024 Convertible Notes633,4757711 1,266,950 522,821 75,802Non-current liabilities: Convertible Senior Notes held by a related party-non-current 2025 Convertible Notes 955,097 522,744 75,791 955,097 522,744 75,7911) 2024 Convertible NotesOn September 17, 2019, the Company issued US$200,000 convertible senior notes (the “2024 Convertible Notes”) to several initialpurchasers, of which US$100,000 were issued to Alibaba.com Hong Kong Limited (“Alibaba HK”), an entity affiliated with Alibaba GroupHolding Limited (“Alibaba Group”), a principal shareholder of the Company and US$100,000 to third parties, respectively. The 2024 ConvertibleNotes are senior, unsecured obligations of the Company, and interest is payable semi-annually in arrears at a rate of 1.75% per annum on April 1and October 1 of each year, beginning on April 1, 2020. The 2024 Convertible Notes will mature on October 1, 2024 unless redeemed, repurchasedor converted prior to such date.The 2024 Convertible Notes holders have the right, at their option, to convert the outstanding principal amount of the 2024 ConvertibleNotes, in whole or in part in integral multiples of $1 principal amount (i) upon satisfaction of one or more of the conversion conditions as definedin the indenture for the 2024 Convertible Notes prior to the close of business day immediately preceding October 1, 2024; or (ii) anytime on orafter October 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date (the “ConversionOption”).The initial conversion rate for the 2024 Convertible Notes is 7.0922 of the Company’s American depositary shares (“ADSs”) perUS$1,000 principal amount of the Notes, which is equivalent to an initial conversion price of US$141.00 per ADS, subject to certain anti-dilutionand make-whole fundamental change adjustments but is not adjusted for any accrued and unpaid interest. Upon conversion, the Company isrequired to deliver ADSs to such converting holders and both issuer and holders have no other settlement options.The holders may require the Company to repurchase all or a portion of the 2024 Convertible Notes for cash on September 30, 2022 at arepurchase price equal to 100% of the principal amount of the 2024 Convertible Notes to be repurchased, plus accrued and unpaid interest to, butexcluding, the repurchase date.In 2022, the Company repurchased US$199,989 (equivalent to RMB1,379,364) aggregate principal amount of the 2024 Convertible Notesrequested by the holders. Following settlement of the repurchase, the repurchase amount which was fully accreted was derecognized and US$11(equivalent to RMB77) aggregate principal amount of the 2024 Convertible Notes remained outstanding. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 222 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6316.CONVERTIBLE SENIOR NOTES (CONTINUED)1) 2024 Convertible Notes (continued)If certain events of default, changes in tax laws of the relevant taxing jurisdiction or fundamental change as defined in the indenture forthe 2024 Convertible Notes were to occur, the outstanding obligations under the 2024 Convertible Notes could be immediately due and payable(the “Contingent Redemption Options”). The Company will pay additional interest, at its election, as the sole remedy relating to the failure tocomply with certain reporting obligations as defined in the indenture of the 2024 Convertible Notes. In addition, the 2024 Convertible Notesprovide its holders with additional interest equal to the fair value of any dividends received by the holders of the Company’s ordinary shares (the“Contingent Interest Features”).The Company evaluated the embedded conversion features contained in the 2024 Convertible Notes and determined that the ConversionOption was not required to be bifurcated because it met the scope exception provided for under ASC 815-10-15-74(a).The Company also evaluated the embedded Contingent Redemption Options and Contingent Interest Features contained in the 2024Convertible Notes in accordance with ASC 815 to determine if these features require bifurcation. The Contingent Redemption Options were notrequired to be bifurcated because they are considered to be clearly and closely related to the debt host, as the 2024 Convertible Notes were notissued at a substantial discount and are redeemable at par.The Contingent Interest Features are not considered to be clearly and closely related to the debt host and met the definition of a derivative.However, the fair value of the Contingent Interest Features on the issuance date and at December 31, 2021 and 2022 was not significant. Inaddition, the Company assessed whether the additional interest payments need to be accrued as a liability in accordance with ASC 450. Since thelikelihood of the occurrence of such default events is determined to be remote, the Company did not accrue additional interest expense for the yearsended December 31, 2021 and 2022. The Company will continue to assess the accrual for these additional interest payment liabilities at eachreporting date.In accounting for the 2024 Convertible Notes prior to the adoption of ASU 2020-06, the Company determined that no beneficialconversion feature was recognized for the 2024 Convertible Notes as the fair value per ADS at the commitment date was US$110.60, which wasless than the most favorable conversion price. The Company early adopted ASU 2020-06 on January 1, 2021, which eliminated the beneficialconversion feature and the adoption had no impact in the accounting for the 2024 Convertible Notes.In connection with the issuance of the 2024 Convertible Notes, the Company also purchased capped call options on the Company’s ADSwith certain counterparties at a price of US$22,500 (equivalent to RMB159,138), which was recorded as a reduction of the Company’s additionalpaid-in capital on the consolidated balance sheet with no subsequent changes in fair value recorded. The capped call exercise price is equal to the2024 Convertible Notes’ initial conversion price and the cap price is US$200.00 per ADS, subject to certain adjustments under the terms of thecapped call transactions. The capped call transactions are expected to reduce potential dilution to existing holders of the ordinary shares and ADSsof the Company upon conversion of the 2024 Convertible Notes with such reduction subject to a cap.The net proceeds from the issuance of the 2024 Convertible Notes were US$194,457 (equivalent to RMB1,375,355), after deductingunderwriting discounts and offering expenses of US$5,543 (equivalent to RMB39,205) from the initial proceeds of US$200,000. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 223 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6416.CONVERTIBLE SENIOR NOTES (CONTINUED)1) 2024 Convertible Notes (continued)As of December 31, 2021 and 2022, the principal amount of the 2024 Convertible Notes was RMB1,275,140 and RMB77 (US$11)respectively, unamortized debt discount was RMB8,190 and nil respectively, and the net carrying amount of the 2024 Convertible Notes wasRMB1,266,950 and RMB77 (US$11) respectively.For the years ended December 31, 2021 and 2022, the amount of interest cost recognized relating to both the contractual interest couponand amortization of the discount on the 2024 Convertible Notes was RMB34,758 and RMB21,768 (US$3,156), respectively. As of December 31,2022, the 2024 Convertible Notes will be accreted up to the principal amount of US$11 (equivalent to RMB77) over a remaining period of 1.75years.2) 2025 Convertible NotesOn June 3, 2020, the Company issued US$150,000 convertible senior notes to Alibaba HK. The 2025 Convertible Notes are senior,unsecured obligations of the Company, and interest is payable semi-annually in arrears at a rate of 4.5% per annum on July 1 and January 1 of eachyear, beginning on January 1, 2021. The 2025 Convertible Notes will mature on June 3, 2025 unless redeemed, repurchased or converted prior tosuch date.The 2025 Convertible Notes holders have the right to convert all or any portion of the 2025 Convertible Notes held by it into ordinaryshares, or at the sole discretion of the noteholder, into ordinary shares in the form of ADS at any time on or after the thirty-first trading day afterMay 27, 2020 up to the close of business of the second business day immediately preceding June 3, 2025 (“the 2025 Convertible Notes ConversionOption”).The initial conversion rate for the 2025 Convertible Notes is 823.723 of the Company’s American depositary shares (“ADSs”) perUS$100,000 principal amount of the 2025 Convertible Notes, which is equivalent to an initial conversion price of US$121.40 per ADS, subject tocertain anti-dilution and make-whole fundamental change adjustments but is not adjusted for any accrued and unpaid interest. Upon conversion, theCompany is required to deliver ADSs to such converting holders and both issuer and holders have no other settlement options.The holders may require the Company to repurchase all or a portion of the 2025 Convertible Notes for cash within a period of ninety daysstarting from June 3, 2023 at a repurchase price equal to 100% of the principal amount of the 2025 Convertible Notes to be repurchased, plusaccrued and unpaid interest to, but excluding, the repurchase date (the “Early Redemption Rights”). In April 2023, the Company signed anamendment term sheet with Alibaba HK and modified the Early Redemption Rights of the 2025 Convertible Notes (Note 30). The ContingentRedemption Options and Contingent Interest Features are similar with the terms described for the 2024 Convertible Notes issued in 2019.If certain events of default, changes in tax laws of the relevant taxing jurisdiction or fundamental change as defined in the indenture forthe 2025 Convertible Notes were to occur, the outstanding obligations under the 2025 Convertible Notes could be immediately due and payable(the “2025 Convertible Notes Contingent Redemption Options”). The Company will pay additional interest, at its election, as the sole remedyrelating to the failure to comply with certain reporting obligations as defined in the indenture of the 2025 Convertible Notes. In addition, the 2025Convertible Notes provide its holders with additional interest equal to the fair value of any dividends received by the holders of the Company’sordinary shares (the “2025 Convertible Notes Contingent Interest Features”).The Company evaluated the embedded conversion features contained in the 2025 Convertible Notes and determined that the 2025Convertible Notes Conversion Option was not required to be bifurcated because it met the scope exception provided for under ASC 815-10-15-74(a). Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 224 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6516.CONVERTIBLE SENIOR NOTES (CONTINUED)2) 2025 Convertible Notes (continued)The Company also evaluated the embedded 2025 Convertible Notes Contingent Redemption Options and 2025 Convertible NotesContingent Interest Features in accordance with ASC 815 to determine if these features require bifurcation. The 2025 Convertible NotesContingent Redemption Options were not required to be bifurcated because they are considered to be clearly and closely related to the debt host, asthe 2025 Convertible Notes were not issued at a substantial discount and are redeemable at par.The 2025 Convertible Notes Contingent Interest Features are not considered to be clearly and closely related to the debt host and met thedefinition of a derivative. However, the fair value of the 2025 Convertible Notes Contingent Interest Features on the issuance date and at December31, 2021 and 2022 was not significant. In addition, the Company assessed whether the additional interest payments need to be accrued as a liabilityin accordance with ASC 450. Since the likelihood of the occurrence of such default events is determined to be remote, the Company did not accrueadditional interest expense for the year ended December 31, 2021 and 2022. The Company will continue to assess the accrual for these additionalinterest payment liabilities at each reporting date.In accounting for the 2025 Convertible Notes prior to the adoption of ASU 2020-06, the Company determined that no beneficialconversion feature was recognized for the 2025 Convertible Notes as the fair value per ADS at the commitment date was US$109.80, which wasless than the most favorable conversion price. The Company early adopted ASU 2020-06 on January 1, 2021, which eliminated the beneficialconversion feature and the adoption had no impact in the accounting for the 2025 Convertible Notes.The net proceeds from the issuance of the 2025 Convertible Notes were US$149,340 (equivalent to RMB1,061,421), after deductingoffering expenses of US$660 (equivalent to RMB4,689) from the initial proceeds of US$150,000 (equivalent to RMB1,066,110).As of December 31, 2021, the principal amount of the 2025 Convertible Notes was RMB956,355, unamortized debt discount wasRMB1,258 and the net carrying amount of the 2025 Convertible Notes was RMB955,097. As of December 31, 2022, the principal amount of the2025 Convertible Notes was RMB1,046,074 (US$150,000), unamortized debt discount was RMB586 (US$84) and the net carrying amount of the2025 Convertible Notes was RMB1,045,488 (US$149,916).For the years ended December 31, 2021 and 2022, the amount of interest cost recognized relating to both the contractual interest couponand amortization of the discount on the 2025 Convertible Notes was RMB45,508 and RMB48,708 (US$7,062), respectively. As of December 31,2022, the non-current portion of 2025 Convertible Notes will be accreted up to the principal amount of US$75,000 (equivalent to RMB523,037)over a remaining period of 1.42 years.17.TAXATIONCayman IslandsUnder the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains.British Virgin IslandsUnder the current laws of the British Virgin Islands, BEST BVI, BEST Capital BVI and Store BVI are not subject to tax on income orcapital gains. In addition, upon payments of dividends by BEST BVI, BEST Capital BVI and Store BVI to its shareholders, no withholding tax isimposed. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 225 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6617.TAXATION (CONTINUED)Hong KongThe subsidiaries incorporated in Hong Kong are subject to income tax at the rate of 16.5% on the estimated assessable profits arising inHong Kong. For the years ended December 31, 2020, 2021 and 2022, the Company did not make any provisions for Hong Kong profit tax as therewere no assessable profits derived from or earned in Hong Kong for any of the periods presented. Under the Hong Kong tax law, BEST HK, BESTCapital HK and Store HK are exempted from income tax on their foreign-derived income and there are no withholding taxes in Hong Kong onremittance of dividends.ChinaThe current enterprise income tax law (“EIT Law”) applies a uniform 25% enterprise income tax (“EIT”) rate to both foreign investedenterprises and domestic enterprises.The EIT Law treats enterprises established outside of the PRC with “effective management and control” located in the PRC as PRCresident enterprises for tax purposes. The term “effective management and control” is generally defined as exercising management and control overthe business, personnel, accounting, properties, etc. of an enterprise. Any companies located in jurisdictions outside of the PRC, if considered aPRC resident enterprise for tax purposes, would be subject to the PRC enterprise income tax at the rate of 25% on their worldwide incomecommencing on January 1, 2008. As of December 31, 2022, the Company has not accrued for PRC tax on such basis as the Group’s non-PRCentities had zero assessable profits in the PRC for the period after January 1, 2008. The Company will continue to monitor the tax status of its non-PRC entities with regards to the PRC tax resident enterprise rules.Pursuant to relevant laws and regulations in the PRC and with approval from tax authorities in charge, one of the Company’s subsidiaries,meets the requirements of “high and new technology enterprise” (“HNTE”) and could enjoy the preferential tax rate of 15%. BEST Technology hasrenewed the HNTE certificate in 2022 and is subject to an enterprise income tax (“EIT”) rate of 15% from calendar years 2022 through 2024.Withholding tax on undistributed dividendsThe EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise (“FIE”) to itsimmediate holding company outside of China, if such immediate holding company is considered as a nonresident enterprise without anyestablishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holdingcompany within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for adifferent withholding tax arrangement. According to the Arrangement between the Mainland of China and the Hong Kong Special AdministrativeRegion for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income in August 2006, dividendspaid by a FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if theforeign investor directly owns at least 25% of the shares of the FIE).The Company’s loss before income taxes and share of net loss of equity investees consists of the following:For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$PRC(758,737)(954,592)(1,053,407)(152,730)Non-PRC(251,964)(306,013)(410,909)(59,574)(1,010,701)(1,260,605)(1,464,316)(212,304) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 226 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6717.TAXATION (CONTINUED)Withholding tax on undistributed dividends (continued)The current and deferred components of income tax expense appearing in the consolidated statements of comprehensive (loss) income areas follows:For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Current income tax (18,381) (3,198) (511) (74)Deferred income tax 828 — — — (17,553) (3,198) (511) (74)A reconciliation of the differences between the PRC statutory tax rate and the Company’s effective tax rate for enterprise income tax fromcontinuing operations is as follows:For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Loss before income taxes and share of net loss of equity investees (1,010,701) (1,260,605) (1,464,316)(212,304)Income tax computed at the statutory tax rate of 25% 252,675 315,151 366,07953,076Non-deductible expenses (46,106) (112,363) (20,250)(2,936)Effect of different tax rates in different jurisdictions and preferential tax rate (48,650) 447,053 (68,037)(9,864)Research and development expenses deduction 21,834 25,756 14,2232,062Non-taxable income11,1526,5256,395927Provision to return(5,776)14,568(74,577)(10,813)Deferred tax expense828(21,245)(1,462)(212)Tax rate change18,5942,890(483)(70)Expired tax loss (37,469) (112,725) (160,285)(23,239)Change in valuation allowance (184,635) (568,808) (62,114)(9,005) (17,553) (3,198) (511)(74) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 227 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6817.TAXATION (CONTINUED)Deferred taxAs at December 31 2021 2022 2022RMBRMBUS$Deferred tax assets, non-current Accrued expenses 295,568 278,34140,356Customer advances and deposits 1,255 10,4311,512Allowance for credit losses and inventory provision 87,264 101,18714,671Allowance for long-term investment—3,078446Depreciation and amortization expense 21,997 18,9612,749Net operating losses carrying forwards 1,365,724 1,410,903204,562Lease liabilities493,773467,62367,799Total deferred tax assets 2,265,581 2,290,524332,095Valuation allowance* (1,756,168) (1,818,282)(263,626)Total deferred tax assets net of valuation allowance 509,413 472,24268,469*The Group operates through subsidiaries, VIEs and subsidiaries of VIEs and valuation allowance is considered for each of the entities on anindividual basis. The Group recorded valuation allowance against deferred tax assets of those entities that are in a three-year cumulativefinancial loss position and are not forecasting profits in the near future as of December 31, 2021 and 2022. In making such determination, theGroup also evaluates a variety of factors including the Group’s operating history, accumulated deficit, existence of taxable temporarydifferences and reversal periods.As at December 31 2021 2022 2022RMBRMBUS$Deferred tax liabilitiesFair value changes of equity investments(29,232)(29,232)(4,238)Accrued revenue recognition difference(5,300)(3,765)(546)Right-of-use assets(474,881)(439,245)(63,685)Total deferred tax liabilities(509,413)(472,242)(68,469)As of December 31, 2021 and 2022, the Company has net operating losses from continuing operations of RMB5,702,254 andRMB5,621,989 (US$815,112) primarily from its subsidiaries and VIEs in the PRC, which can be carried forward per tax regulation to offset futurenet profit for income tax purposes. The net operating loss carry forwards as of December 31, 2022 will expire from years 2023 to 2032 if notutilized. As of December 31, 2022, the Company intends to permanently reinvest the undistributed earnings from foreign subsidiaries to fund futureoperations. As of December 31, 2022, the total amount of undistributed earnings from its PRC subsidiaries as well as VIEs was RMB26,600(US$3,857). The amount of unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries are notdetermined because such a determination is not practicable. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 228 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-6917.TAXATION (CONTINUED)Unrecognized tax benefitsAs of December 31, 2021 and 2022, the Company recorded an unrecognized tax benefit of RMB78,800 and RMB94,572 (US$13,711)respectively, of which nil and nil, respectively, are presented on a net basis against the deferred tax assets related to tax loss carry forwards on theconsolidated balance sheets. This primarily represents the estimated income tax expense the Group would pay should its income tax returns havebeen prepared in accordance with the current PRC tax laws and regulations. It is possible that the amount of uncertain tax position will change inthe next twelve months; however, an estimate of the range of the possible outcomes cannot be made at this time. As of December 31, 2021 and2022, unrecognized tax benefits of RMB50,451 and RMB58,813 (US$8,527), respectively, if ultimately recognized, will impact the effectivetax rate. A rollforward of unrecognized tax benefits is as follows:As at December 31 2021 2022 2022RMBRMBUS$Beginning balance 48,966 78,80011,425Additions 30,263 15,7722,286Decreases (429) ——Ending balance 78,800 94,57213,711During the years ended December 31, 2020, 2021 and 2022, the Company recorded insignificant late payment interest expense as part ofincome tax expense and did not incur any penalties.In general, the PRC tax authority has up to five years to conduct examinations of the Company’s tax filings. Accordingly, the tax yearsended December 31, 2017 through December 31, 2022 of the PRC subsidiaries, the VIEs and its subsidiaries remain open to examination by thetaxing jurisdictions.18.RESTRICTED NET ASSETSThe Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries.Relevant PRC statutory laws and regulations permit payments of dividends by the Group’s PRC subsidiaries only out of its retained earnings, ifany, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statementsprepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.In accordance with the Regulations on Enterprises with Foreign Investment of China and its Articles of Association, the Company’s PRCsubsidiaries, being a foreign-invested enterprise established in the PRC, are required to provide certain statutory reserves, namely the generalreserve fund, enterprise expansion fund and staff welfare and bonus fund, all of which are appropriated from net profit as reported in its PRCstatutory accounts. The Company’s PRC subsidiaries are required to allocate at least 10% of its annual after-tax profit to the general reserve funduntil such fund has reached 50% of its registered capital based on the enterprise’s PRC statutory accounts. Appropriations to the enterpriseexpansion fund and staff welfare and bonus fund are at the discretion of the Board of Directors of the PRC subsidiaries. These reserves can only beused for specific purposes and are not transferable to the Company in the form of loans, advances, or cash dividends. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 229 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7018.RESTRICTED NET ASSETS (CONTINUED)In accordance with the PRC Company Laws, the Company’s VIEs and the subsidiaries of the VIEs must make appropriations from theirannual after-tax profits as reported in their PRC statutory accounts to non-distributable reserve funds, namely statutory surplus fund, statutorypublic welfare fund and discretionary surplus fund. The VIEs and the subsidiaries of the VIEs are required to allocate at least 10% of their after-taxprofits to the statutory surplus fund until such fund has reached 50% of their respective registered capital. Appropriations to the discretionarysurplus fund are made at the discretion of the Board of Directors of the VIEs and the subsidiaries of the VIEs. These reserves can only be used forspecific purposes and are not transferable to the Company in the form of loans, advances, or cash dividends.For the years ended December 31, 2020, the Company’s PRC subsidiaries had appropriated RMB173 of statutory reserves and hadreversed RMB7,871 and RMB167 (US$24) of statutory reserves, respectively, for the year ended December 31, 2021 and 2022, which are includedin shareholder’s equity.Under PRC laws and regulations, there are restrictions on the Company’s PRC subsidiaries, the VIEs and the subsidiaries of the VIEs withrespect to transferring certain of their net assets to the Company either in the form of dividends, loans, or advances. Amounts restricted includepaid-in capital and surplus reserves of the Company’s PRC subsidiaries and the VIEs and the subsidiaries of the VIEs, totaling RMB5,269,936(US$764,069) as of December 31, 2022; therefore in accordance with Rules 504 and 4.08(e)(3) of Regulation SX, the condensed parent companyonly financial statements as of December 31, 2021 and 2022 and for each of the three years in the period ended December 31, 2022 are disclosed inNote 29.Furthermore, cash transfers from the Company’s PRC subsidiaries to its subsidiaries outside of China are subject to PRC governmentcontrol of currency conversion. Shortages in the availability of foreign currency may restrict the ability of the PRC subsidiaries and consolidatedVIEs to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their foreign currencydenominated obligations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 230 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7119.EARNINGS (LOSS) PER SHAREBasic and diluted earnings (loss) per share for each of the years presented are calculated as follows: 202020212022Class A Class B Class C Class A Class B Class C Class A Class A Class B Class B Class C Class CRMBRMBRMBRMBRMBRMBRMBUS$RMBUS$RMBUS$Basic loss per share:Numerator: Net loss from continuingoperations attributable toordinary shareholders—basic (635,610) (243,440) (123,668) (768,670) (293,707) (149,205) (909,443)(131,855)(341,778)(49,553)(173,626)(25,173)Net (loss) income fromdiscontinued operations, net oftax (648,334) (248,312) (126,144) 934,833 357,198 181,458 (24,552)(3,562)(9,225)(1,336)(4,687)(679)Net (loss) income attributable toordinary shareholders—basic (1,283,944) (491,752) (249,812) 166,163 63,491 32,253 (933,995)(135,417)(351,003)(50,889)(178,313)(25,852)Denominator: Weighted average number ofordinary shares outstanding—basic 245,626,959 94,075,249 47,790,698 246,207,464 94,075,249 47,790,698 250,326,701250,326,70194,075,24994,075,24947,790,69847,790,698Continuing operations(2.59)(2.59)(2.59)(3.12)(3.12)(3.12)(3.63)(0.53)(3.63)(0.53)(3.63)(0.53)Discontinued operations(2.64)(2.64)(2.64)3.803.803.80(0.10)(0.01)(0.10)(0.01)(0.10)(0.01)Basic (loss) income per share (5.23) (5.23) (5.23) 0.68 0.68 0.68 (3.73)(0.54)(3.73)(0.54)(3.73)(0.54)Basic loss per ADS:Basic net (loss) earnings per ADS(1 ADS equals 20 Class Aordinary shares)(104.60)(104.60)(104.60)13.6013.6013.60(74.60)(10.80)(74.60)(10.80)(74.60)(10.80) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 231 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7219.EARNINGS (LOSS) PER SHARE (CONTINUED)202020212022Class AClass BClass CClass AClass BClass CClass AClass AClass BClass BClass CClass C RMB RMB RMB RMB RMB RMB RMB US$ RMB US$ RMB US$Diluted loss per share:Numerator:Net loss from continuingoperations attributable toordinary shareholders—basic(635,610)(243,440)(123,668)(768,670)(293,707)(149,205)(909,443)(131,855)(341,778)(49,553)(173,626)(25,173)Net (loss) income fromdiscontinued operations, net oftax(648,334)(248,312)(126,144)934,833357,198181,458(24,552)(3,562)(9,225)(1,336)(4,687)(679)Net (loss) income attributable toordinary shareholders—basic(1,283,944)(491,752)(249,812)166,16363,49132,253(933,995)(135,417)(351,003)(50,889)(178,313)(25,852)Reallocation of net loss fromcontinuing operationsattributable to ordinaryshareholders as a result ofconversion of Class C andClass B to Class A ordinaryshares (Note 21)(367,108)——(442,912)——(515,404)(74,726)————Reallocation of net (loss) incomefrom discontinued operations,net of tax attributable toordinary shareholders as aresult of conversion of Class Cand Class B to Class Aordinary shares (Note 21)(374,456)——538,656——(13,912)(2,015)————Reallocation of net (loss) incomeattributable to ordinaryshareholders as a result ofconversion of Class C andClass B to Class A ordinaryshares (Note 21)(741,564)——95,744——(529,316)(76,741)————Net (loss) income attributable toordinary shareholders—diluted(2,025,508)(491,752)(249,812)261,90763,49132,253(1,463,311)(212,158)(351,003)(50,889)(178,313)(25,852)Denominator:Weighted average number ofordinary shares outstanding—basic 245,626,959 94,075,249 47,790,698 246,207,464 94,075,249 47,790,698 250,326,701250,326,70194,075,24994,075,24947,790,69847,790,698Conversion of Class C and ClassB to Class A ordinary shares(Note 21) 141,865,947 — — 141,865,947 — — 141,865,947141,865,947————Weighted average number ofordinary shares for continuingoperations outstanding - diluted 387,492,906 94,075,249 47,790,698 388,073,411 94,075,249 47,790,698 392,192,648392,192,64894,075,24994,075,24947,790,69847,790,698Weighted average number ofordinary shares fordiscontinued operationsoutstanding - diluted 387,492,906 94,075,249 47,790,698 388,073,411 94,075,249 47,790,698 392,192,648392,192,64894,075,24994,075,24947,790,69847,790,698Weighted average number ofordinary shares outstanding -diluted387,492,90694,075,24947,790,698388,073,41194,075,24947,790,698392,192,648392,192,64894,075,24994,075,24947,790,69847,790,698Continuing operations (2.59) (2.59) (2.59) (3.12) (3.12) (3.12) (3.63)(0.53)(3.63)(0.53)(3.63)(0.53)Discontinued operations (2.64) (2.64) (2.64) 3.80 3.80 3.80 (0.10)(0.01)(0.10)(0.01)(0.10)(0.01)Diluted (loss) income per share (5.23) (5.23) (5.23) 0.68 0.68 0.68 (3.73)(0.54)(3.73)(0.54)(3.73)(0.54)Diluted (loss) income per share:Diluted net (loss) earnings perADS (1 ADS equals 20 Class Aordinary shares)(104.60)(104.60)(104.60)13.6013.6013.60(74.60)(10.80)(74.60)(10.80)(74.60)(10.80)For the years ended December 31, 2020, 2021 and 2022, the two-class method is applicable because the Company has three classes ofordinary shares outstanding, Class A, Class B and Class C ordinary shares, respectively (Note 21). The effects of all outstanding share options,restricted share units, convertible senior notes were excluded from the computation of diluted loss per share relating to the continuing operation anddiscontinued operations for the years ended December 31, 2020, 2021 and 2022, as the effects would be antidilutive on the loss from continuingoperations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 232 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7320.SHARE-BASED PAYMENTS2008 Stock Incentive Plan (the “2008 Plan”)On June 4, 2008, the shareholders and Board of Directors of the Company approved the 2008 Plan, which is administrated by the Board ofDirectors and has a term of 10 years from the date of adoption. Under the 2008 Plan, the Company reserved 10,000,000 ordinary shares of theCompany to its eligible employees, directors and officers of the Group and consultants. The purpose of the 2008 Plan is to attract and retain keyemployees, directors, officers and consultants of outstanding ability and to motivate them to exert their best efforts on behalf of the Company byproviding incentives through granting awards. On October 25, 2011 and January 15, 2015, the shareholders and Board of Directors of the Companyapproved a resolution to increase the share option pool under the 2008 Plan to 16,239,033 and 20,934,684 ordinary shares, respectively.The options granted under the 2008 Plan have a contractual term of 15 years and will become vested (but not exercisable) either(i) immediately upon grant; or (ii) with respect to 25% of the options on the first anniversary of the vesting period, and thereafter in thirty-six equalmonthly installments of 2.09% each on the last day of every month that has elapsed following the first anniversary of the vesting period until theoptions are 100% vested.The grantee can exercise vested options after the commencement date of exercise and before the earlier of: 1) its contractual term (i.e. 15years after its grant date); or 2) 90 days after the grantee terminates their employment if the vested options have not been exercised. Thecommencement date of exercise is upon the Company’s IPO.In July 2017, 12,599,520 vested options were exercised pursuant to a conditional one-time waiver of the “exercisable upon the Company’sIPO” condition by the Company (the “early exercise”). The early exercise was not considered substantive for accounting purposes in accordancewith ASC 718-10-55-31.2017 Stock Incentive Plan (the “2017 Plan”)In September 2017, the Company’s shareholders and Board of Directors approved the 2017 Equity Incentive Plan (the “2017 Plan”). The2017 Plan provides for an aggregate amount of no more than 10,000,000 Class A ordinary shares to be issued. In addition, the number of Class Aordinary shares available to be issued under the 2017 Plan will automatically be increased by a maximum of 2% of the Company’s total outstandingshares at the end of the preceding calendar year on January 1, 2019 and on every January 1 thereafter for eight years, provided that the aggregateamount of shares which may be subject to awards granted under the 2017 Plan does not exceed 10% of the Company’s total outstanding shares atthe end of the preceding calendar year.The options granted under the 2017 Plan have a contractual term of 10 years and will become vested with respect to 25% of the options onthe first anniversary of the vesting period, and thereafter in thirty-six equal monthly installments of 2.09% each on the last day of every month thathas elapsed following the first anniversary of the vesting period until the options are 100% vested.The grantee can exercise vested options after the commencement date of exercise and before the earlier of: 1) its contractual term (i.e. 10years after its grant date); or 2) 90 days after the grantee terminates their employment if the vested options have not been exercised.The restricted Class A ordinary shares (“Restricted Shares”) granted under the 2017 Plan have the same terms as the share options exceptthat Restricted Shares do not require exercise and will become vested with respect to 25% of the Restricted Shares on the first, second, third andfourth anniversary of the vesting period until the Restricted Shares are 100% vested. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 233 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7420.SHARE-BASED PAYMENTS (CONTINUED)Options granted to employeesA summary of the employee share option activity under the 2008 Plan is stated below:Weighted-Weighted-averageWeighted-averageremainingAggregateNumber ofaveragegrant-datecontractualintrinsic options exercise price fair value term ValueUS$US$YearsUS$Outstanding, December 31, 2021 1,249,4350.756.8610.02128Granted —————Exercised(965)0.757.67——Forfeited/Expired (193,428)0.755.95——Outstanding, December 31, 2022 1,055,0420.757.029.02—Vested as at December 31, 2022 17,237,2220.672.375.67—Exercisable as at December 31, 2022 1,055,0420.757.029.02—The aggregate intrinsic value in the table above represents higher of the difference between the closing share price on the last trading dayin 2022 and the option’s respective exercise price or zero. Total intrinsic value of options exercised for the years ended December 31, 2020, 2021and 2022 was RMB881,376, RMB884,679 and nil respectively.No share option awards were granted to employees during the years ended December 31, 2020, 2021 and 2022. The total fair value of theequity awards vested under 2008 Plan during the years ended December 31, 2020, 2021 and 2022 were RMB34,671, RMB8,583 and nil,respectively.There were no new grants of share option awards during the years ended December 31, 2020, 2021 and 2022 or any outstanding shareoptions under the 2017 Plan as of December 31, 2021 and 2022, respectively.As of December 31, 2022, there were no remaining unrecognized employee share-based compensation expenses. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 234 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7520.SHARE-BASED PAYMENTS (CONTINUED)Options granted to non-employeesA summary of the non-employee share option activity under the 2008 Plan is stated below: Weighted‑ Weighted‑ averageWeighted‑ averageremaining AggregateNumber of averagegrant‑date contractual intrinsicoptionsexercise price fair valuetermValueUS$US$YearsUS$Outstanding, December 31, 20211,439,177 0.70 2.47 6.65 216Granted—————Exercised—————Forfeited —————Outstanding, December 31, 2022 1,439,1770.702.475.65—Vested at December 31, 2022 1,838,1730.652.435.32—Exercisable at December 31, 2022 1,439,1770.702.475.65—The aggregate intrinsic value in the table above represents the difference between the closing stock price on the last trading day in 2022and the option’s respective exercise price. Total intrinsic value of options exercised for the years ended December 31, 2020, 2021 and 2022 wasRMB20,448, RMB20,457 and nil, respectively.No share option awards were granted to non-employees during the years ended December 31, 2020, 2021 and 2022. The total fair value ofthe equity awards vested during the years ended December 31, 2020, 2021 and 2022 were nil, nil and nil, respectively.There were no new grants of non-employee share option awards during the years ended December 31, 2020, 2021 and 2022 or anyoutstanding non-employee share options under the 2017 Plan as of December 31, 2021 and 2022, respectively.As of December 31, 2022, there were no remaining unrecognized non-employee share-based compensation expenses. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 235 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7620.SHARE-BASED PAYMENTS (CONTINUED)Restricted SharesThe following table summarizes the Company’s Restricted Shares activity under the 2017 Plan:Weighted- average Number of grant-date shares fair valueUS$Outstanding, December 31, 2021 7,908,426 4.36Granted2,932,8000.69Vested(2,718,074)5.38Forfeited(989,559)3.85Outstanding, December 31, 2022 7,133,593 2.54Vested and expected to vest as at December 31, 2022 16,259,040 The weighted average grant-date fair value of Restricted Shares granted during the year ended December 31, 2020, 2021 and 2022 wasUS$5.23, US$2.17 and US$0.69, which was derived from the fair value of the underlying ordinary shares. As of December 31, 2022, there wasRMB69,900 (US$10,135) of total unrecognized share-based compensation expenses related to unvested Restricted Shares expected to vest whichare expected to be recognized over a weighted-average period of 1.71 years. Total unrecognized compensation cost may be adjusted for actualforfeitures occurring in the future. During the year ended December 31, 2020, 2021 and 2022, the Company granted 189,715, 80,000 and 160,000Restricted Shares to non-employees, which were fully vested and issued during the year.Modification of Restricted Shares related to the disposal of BEST NetworkOn November 16, 2021, the Board of Directors of the Company approved the 1,235,896 RSUs granted but not vested upon certain BESTExpress employees shall be accelerated and to be vested all at once upon the closing of the disposal of BEST Network. There is no incrementalcompensation cost immediately before and after the modification date of November 16, 2021. The Company recognized the remainingunrecognized share-based compensation expenses related to these RSUs of RMB18,181 during the year ended December 31, 2021 for theaccelerated vesting of RSUs due to the disposal.The following table summarizes the total share-based compensation expense recognized by the Company:For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Cost of revenue 1,190 345 32146Selling expenses7,7159,6543,523511General and administrative expenses 98,795 88,361 63,2809,175Research and development expenses7,7639,3214,972721Share-based compensation expenses from continuing operations115,463107,68172,09610,453Share-based compensation expenses from discontinued operations 22,738 27,245 ——Total share-based compensation expenses 138,201 134,926 72,09610,453 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 236 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7720.SHARE-BASED PAYMENTS (CONTINUED)Options granted by subsidiaries2020 Equity Incentive Plan of BEST Asia Inc (the “2020 BEST Asia Plan”)On December 31, 2020, the shareholders and Board of Directors of BEST Asia Inc (“BEST Asia”) approved 2020 BEST Asia Plan, whichis administrated by the Board of Directors of BEST Asia. Under the 2020 BEST Asia Plan, BEST Asia reserved 75,000,000 ordinary shares ofBEST Asia to its eligible employees, directors and officers of BEST Asia and consultants. The purpose of the 2020 BEST Asia Plan is to attractand retain key employees, directors and officers of outstanding ability and to motivate them to exert their best efforts on behalf of BEST Asia byproviding incentives through granting awards.The options granted under the 2020 BEST Asia Plan to purchase the ordinary shares of BEST Asia have a contractual term of 10 yearsand will become vested either (i) immediately upon grant; or (ii) with respect to 25% of the options on the first anniversary of the vesting period,and thereafter in thirty-six equal monthly installments of 2.09% each on the last day of every month that has elapsed following the first anniversaryof the vesting period until the options are 100% vested. Under the 2020 BEST Asia Plan, all share options granted are not exercisable until thecompletion of BEST Asia’s IPO.The options granted to employees are accounted for as equity awards and measured at their grant date fair values. Given that the inabilityof the grantees to exercise these options until the completion of the IPO constitutes a performance condition that is not considered probable untilthe IPO completion date, no share-based compensation expenses was recognized for the year ended December 31, 2020, 2021 and 2022. Upon theIPO completion date, the Company will immediately recognize the deferred compensation expenses associated with options that are vested as theIPO completion date and recognize the remaining compensation expenses over the remaining service requisite period using the accelerated method.A summary of the employee equity award activity under the 2020 BEST Asia Plan is stated below:Weighted‑Weighted‑averageWeighted‑averageremainingAggregateNumber ofaveragegrant‑datecontractualintrinsic options exercise price fair value term Value US$ US$ Years US$Outstanding, December 31, 2021 38,614,000 0.01 0.06 9.05 32,494Granted 16,855,000 0.01 0.04 — —Forfeited (12,516,100) 0.01 0.06 — —Outstanding, December 31, 2022 42,952,900 0.01 0.06 8.05 36,145Vested and expected to vest as at December 31, 2022 42,952,900 0.01 0.06 8.05 36,145Exercisable as at December 31, 2022 — ————The aggregate intrinsic value in the table above represents the difference between the fair value of the BEST Asia’s ordinary share as ofDecember 31, 2022 and the option’s respective exercise price.As of December 31, 2022, there was RMB6,690 (US$970) of total unrecognized employee share-based compensation expenses, related tovested but not exercisable share-based awards. Total unrecognized compensation cost may be adjusted for actual forfeitures occurring in the future. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 237 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7820.SHARE-BASED PAYMENTS (CONTINUED)Options granted by subsidiaries (continued)2020 BEST Asia Plan (continued)Grant date fair value of BEST Asia’s employee share optionsThe grant date fair value of share options granted by BEST Asia was determined using the binomial option valuation model, whichrequires the input of various assumptions including risk-free interest rate, expected share price volatility and early exercise factor. For expectedshare price volatilities, the Company has made reference to historical volatilities of several comparable companies. The early exercise factor wasestimated based on the Company’s expectation of exercise behavior of the grantees. The risk-free rate for periods within the contractual life of theoptions is based on the market yield of U.S. Treasury Bonds in effect at the time of grant. The estimated fair value of the ordinary shares, at theoption grant dates, was determined with the assistance from an independent third-party appraiser. The Company’s management is ultimatelyresponsible for the determination of the estimated fair value of its ordinary shares.The assumptions used to estimate the grant date fair value of BEST Asia’s share options granted to employees are as follows: 2021 2022Risk-free interest rate0.92%~1.51%1.78%~3.88%Expected share price volatility40.5%~49.1%45.8%~46.6%Multiple of early exercise2.5x2.5xFair value per ordinary shares as at valuation date0.070.05~0.072022 Equity Incentive Plan of BEST CloudSoft Inc. (the “2022 BEST CloudSoft Plan”)In 2022, the shareholders and Board of Directors of the Company. approved the 2022 BEST CloudSoft Plan, which is administrated by theBoard of Directors of the Company. BEST CloudSoft Inc. reserved 30,000,000 ordinary shares of BEST CloudSoft Inc. to its eligible employees,directors and officers BEST CloudSoft Inc. and consultants. The purpose of the 2022 BEST CloudSoft Plan is to attract and retain the services ofemployees, directors and consultants considered essential to the success of the Company.The options granted under the 2022 BEST CloudSoft Plan to purchase the ordinary share of BEST CloudSoft Inc. have a contractual termof 10 years and will become vested either (i) immediately upon grant; or (ii) with respect to 25% of the options on the first anniversary of thevesting period, and thereafter in thirty-six equal monthly installments of 2.09% each on the last day of every month that has elapsed following thefirst anniversary of the vesting period until the options are 100% vested. Under the 2022 BEST CloudSoft Plan, all share options granted are notexercisable until the completion of BEST CloudSoft Inc.’s IPO.The options granted to employees are accounted for as equity awards and measured at their grant date fair values. Given that the inabilityof the grantees to exercise these options until the completion of the IPO constitutes a performance condition that is not considered probable untilthe IPO completion date, no share-based compensation expenses was recognized for the year ended December 31 2022. Upon the IPO completiondate, the Company will immediately recognize the deferred compensation expenses associated with options that are vested as the IPO completiondate and recognize the remaining compensation expenses over the remaining service requisite period using the accelerated method. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 238 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-7920.SHARE-BASED PAYMENTS (CONTINUED)Options granted by subsidiaries (continued)2022 BEST CloudSoft Plan (continued)A summary of the employee equity award activity under the 2022 BEST CloudSoft Plan is stated below: Number ofoptionsOutstanding, December 31, 2021 —Granted 13,150,000Forfeited (300,000)Outstanding, December 31, 2022 12,850,000Vested and expected to vest as at December 31, 2022 12,850,000Exercisable as at December 31, 2022 —21.SHAREHOLDERS’ EQUITYThe Company has three classes of ordinary shares, Class A, Class B and Class C. The participating rights (liquidation and dividend rights)of the Class A, Class B and Class C ordinary shares are identical, except with respect to voting and conversion rights. Holders of Class A, Class Band Class C ordinary shares shall vote together as one class on all resolutions submitted to a vote by the shareholders (except with respect to themodification of the rights of any class of ordinary shares). Each share of Class A, Class B and Class C ordinary shares entitle the holder thereof toone vote per share, fifteen votes per share and thirty votes per share on all matters subject to vote at the Company’s general meetings, respectively,and each share of Class B and Class C ordinary share is convertible into one Class A ordinary share at any time at the option of the holder thereof.Each holder of Class B ordinary shares or Class C ordinary shares can exercise their conversion right by delivering a written notice to the Companythat specifies the number of Class B or Class C ordinary shares they elect to convert into Class A ordinary shares. In no event shall Class Aordinary shares be convertible into Class B or Class C ordinary shares, Class B ordinary shares be convertible into Class C ordinary shares, norshall Class C ordinary shares be convertible into Class B ordinary shares.In November 2019, the Board of Directors of the Company authorized a share repurchase program (“2019 Share Repurchase Program”),pursuant to which the Company is authorized to repurchase its own issued and outstanding ADSs up to an aggregate value of US$100,000 from theopen market over a period of 18 months in accordance with applicable securities laws from time to time. During the years ended December 31,2021 and 2022, the Company did not repurchase any ADSs under the 2019 Share Repurchase Program. During the year ended December 31, 2020,the Company repurchased an aggregate of 319,752.50 ADSs, representing 6,395,050 Class A ordinary shares under the 2019 Share RepurchaseProgram, at an average price of US$93.80 per ADS, for RMB211,352 (US$32,391). These repurchased shares are intended to be used for grantsunder the 2017 Plan. The remaining shares are recorded as Treasury shares on the consolidated balance sheets. During the years ended December31, 2020, 2021 and 2022, nil, 2,974,987 and 3,420,063 repurchased Class A ordinary shares are granted under 2017 Plan. As of December 31, 2021and 2022, 3,420,063 and nil repurchased shares are recorded as Treasury shares on the consolidated balance sheets.The ratio of the ADSs to Class A ordinary shares changed from one (1) ADS to one (1) Class A ordinary share, to one (1) ADS to five (5)Class A ordinary shares, effective at the start of trading on May 20, 2022. The ratio of ADSs to Class A ordinary shares changed from one (1) ADSto five (5) Class A ordinary shares, to one (1) ADS to twenty (20) Class A ordinary shares, effective at the start of trading on April 4, 2023. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 239 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8022.CONVERTIBLE NON-CONTROLLING INTERESTS As at December 312021 2022 2022RMBRMBUS$Balance at beginning of the year — 191,865 27,818Issuance of BEST Asia Series A preferred shares, net of issuance cost 191,865 — —Net loss attributable to convertible non-controlling interests (30,530) — —Adjustment of convertible non-controlling interests 30,530 — —Balance at end of the year 191,865 191,865 27,818On June 30, 2021, BEST Asia, a wholly-owned subsidiary of the Company, issued 150,000,000 convertible series A preferred shares (the“BEST Asia Series A Preferred Shares”) to Taobao China Holding Limited, a related party investor, at a price of US$0.20 per share for a total cashconsideration of US$30,000 (equivalent to RMB193,803). The BEST Asia Series A Preferred Shares holder have the rights, at its option, to convertthe outstanding principal amount of the BEST Asia Series A Preferred Shares to the ordinary shares of BEST Asia at any time with the initialconversion price of US$0.20 per share subject to certain anti-dilution adjustment.The BEST Asia Series A Preferred Shares are redeemable upon the occurrence of a deemed liquidation event, which is not solely withinthe control of the Company. Therefore, the BEST Asia Series A Preferred Shares are contingently redeemable and are classified as convertible non-controlling interests in mezzanine equity. As the underlying shares of BEST Asia are not publicly traded, the embedded conversion features do notqualify for bifurcation accounting and recognized as part of the convertible non-controlling interests.The Company initially recognized US$29,700 (equivalent to RMB191,865) of convertible non-controlling interests at issuance price, netof issuance costs of US$300 (equivalent to RMB1,938). Since the management determined that the conditional event is not probable to occur, noaccretion is subsequently made to the redemption value.23.RELATED PARTY TRANSACTIONSa)Related PartiesName of Related Parties Relationship with the Group Zhejiang Cainiao Supply Chain Management Co. Ltd(“Cainiao”)Entity controlled by a principal shareholder of the GroupAlibaba Cloud Computing Co. Ltd (“Ali Cloud”)Entity controlled by a principal shareholder of the GroupAlibaba.com Hong Kong Limited (“Alibaba HK”)Entity controlled by a principal shareholder of the GroupAlibaba (China) Network Technology Co., Ltd (“AlibabaTechnology”)Entity controlled by a principal shareholder of the GroupLazada Express Limited (“Lazada”)Entity controlled by a principal shareholder of the GroupTaobao China Holding Limited (“Taobao”)Entity controlled by a principal shareholder of the GroupZhejiang ALOG Supply Chain Management Co,Ltd (“ALOG”)Entity controlled by a principal shareholder of the Group Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 240 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8123.RELATED PARTY TRANSACTIONS (CONTINUED)b)The Group had the following related party transactions:For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Rendering of express delivery, freight delivery and supply chain managementservices: Cainiao 555,798 418,806 237,04534,368Lazada125,561120,892148,62821,549ALOG——11,1021,610681,359539,698396,77557,527For the years ended December 31,2020202120222022 RMB RMB RMB US$Rental of warehouse as a lessee: Cainiao 18,011 ———For the years ended December 31,2020202120222022 RMB RMB RMB US$Operating costs paid on behalf of the Company:Ali Cloud2,768———For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Commission fee paid to related party: Lazada — — 2,526 366 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 241 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8223.RELATED PARTY TRANSACTIONS (CONTINUED)b)The Group had the following related party transactions: (continued)For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Operating costs paid to related party:Ali Cloud 14,861 13,608 9,041 1,311 For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Proceeds of the disposal of machinery and electronic equipment assets received fromrelated party: ALOG — — 16,013 2,322 For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Issue convertible senior notes to related party (Note 16): Alibaba HK 1,061,421 — — — For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Repurchase of convertible senior notes held by related party (Note 16): Alibaba HK — — 746,538 108,238 For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Interest expense of convertible senior notes accrued to related party (Note 16): Alibaba HK 46,460 62,887 62,192 9,017 For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Borrowings received from related party: Alibaba Technology — 600,000 — — Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 242 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8323.RELATED PARTY TRANSACTIONS (CONTINUED)b)The Group had the following related party transactions: (continued)On August 19, 2021, BEST China signed a bridge loan agreement with Alibaba (China) Network Technology Co., Ltd. (“AlibabaTechnology”) with a total principal amount of RMB600,000 with a term of one year and payable upon the completion of disposal of BESTNetwork. The effective interest rate per annum of the Bridge Loan is 0.36%. The Group repaid the borrowings on December 17, 2021. For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Borrowings repaid to related party: Alibaba Technology — 600,000 — — For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Interest expense of borrowings accrued to related party: Alibaba Technology — 674 — — For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Cash proceeds from the disposal of an equity investment (Note 11): Cainiao — 220,000 — — For the years ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$Issuance of BEST Asia Series A Preferred Shares to a related party (Note 22): Taobao — 193,803 — — Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 243 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8423.RELATED PARTY TRANSACTIONS (CONTINUED)c)The Group had the following related party balances at the end of the year:As at December 31 2021 20222022RMBRMBUS$Amounts due from related parties:Cainiao76,73045,3776,579Ali Cloud45437054Lazada48,01424,8953,609ALOG—5,726830125,19876,36811,072As at December 31 2021 2022 2022RMBRMBUS$Amounts due to related parties:Alibaba HK2,76313119Ali Cloud—44665Cainiao—24135Lazada—497722,7631,315191 As at December 31202120222022 RMB RMB US$Convertible senior notes held by a related party – current: Alibaba HK633,475522,74475,791Convertible senior notes held by a related party – non-current:Alibaba HK 955,097 522,744 75,791As at December 31 2021 2022 2022RMBRMBUS$Convertible non-controlling interests held by related party: Taobao 191,865 191,865 27,818 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 244 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8524.SEGMENT REPORTINGSince January 1, 2020, the Company reported segments as six operating segments: (1) Express delivery services, (2) Freight deliveryservices (“Freight delivery”), (3) Supply chain management services (“Supply chain management”), (4) Global logistic services (“Global”), (5)UCargo services (“UCargo”), and (6) Capital services (“Capital”).Since January 1, 2021, together with the strategic refocusing plan executed from late 2020, the Company combined Capital service andUCargo service into “Others” segment. In addition, the Express business was disposed in December 2021 and are reflected in the consolidatedfinancial statements as discontinued operations, it is not reflected in the segment disclosures. Since then, the Company reports its financial resultsin four operating segments: (1) Freight delivery, or the Freight segment, (2) Supply chain management, or the Supply Chain Management segment,(3) Global logistics, or the Global segment, (4) Others segment. To refocus the Company’s core segments and better present the financial results inthe certain segments, prior year’s comparative figures related to Capital services revenue of RMB68,515 under “Revenue - Others” for the yearsended December 31, 2020 have been reclassified to “Revenue - Freight delivery” and “Discontinued operation - Revenue - Express delivery” ofRMB19,279 and RMB49,236 to conform to the presentation in the year-end of December 31, 2021.Since January 1, 2022, due to the winding down of UCargo, the Company reported UCargo services together with Freight deliveryservices. Prior year’s comparative figures related to UCargo services revenue of RMB2,519,919 and RMB2,809,081 under “Revenue - Others” forthe years ended December 31, 2020 and 2021, respectively, have been reclassified to “Revenue - Freight delivery” to conform to the current year’spresentation. The Company continues to report its financial results in four operating segments: (1) Freight delivery, or the Freight segment, (2)Supply chain management, or the Supply Chain Management segment, (3) Global logistics, or the Global segment, (4) Others segment.The chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer. The CODM uses multiple performancemeasures in evaluating the performance of the operating segments and allocating assets but determined that gross profit/loss is the measurementprinciple that is most consistent with those used in measuring the corresponding amounts in the Company’s consolidated financial statements inaccordance with ASC 280-10-50-28. The Company’s reportable segments are strategic business units that offer different services. They aremanaged separately because each business requires different technology and market strategies. The changes in reportable segments align with themanner in which the Company’s CODM currently receives and uses financial information to allocate resource and evaluate the performance ofreporting segments. The accounting policy of the segments are the same as those described in the summary of significant accounting policies in theconsolidated financial statements. Inter-segment sales are accounted for as if the sales were to third parties, that is, at current market prices.The Company currently does not allocate assets to its operating segments, as the CODM does not use such information to allocateresources to or evaluate the performance of the operating segments. The Company retrospectively revised prior period segment information toconform to current period presentation. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 245 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8624.SEGMENT REPORTING (CONTINUED)The table below provides a summary of the Company’s operating segment results for the years ended December 31, 2020, 2021 and 2022:For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Revenue: Freight delivery 7,853,680 8,353,703 4,890,823 709,103Supply chain management1,912,3231,820,2391,852,153268,537Global 777,657 1,194,146 963,505 139,695Others142,506172,447116,85916,943Inter-segment* (157,932) (114,699) (79,268) (11,493)Consolidated revenue 10,528,234 11,425,836 7,744,072 1,122,785Gross profit (loss): Freight delivery158,656(262,303)(226,659)(32,862)Supply chain management 65,422 73,272 110,257 15,986Global(98,077)(64,656)(164,680)(23,876)Others116,28154,29917,5242,541Inter-segment* — — — —Consolidated gross profit (loss)242,282(199,388)(263,558)(38,211)(*)The inter segment eliminations mainly consist of services provided by Freight delivery and Global segment to the Supply chainmanagement services segment, for the years ended December 31, 2020, 2021 and 2022, respectivelyThe Company’s operations are primarily based in China, where the Company derives a substantial portion of their revenues. Thefollowing table presents revenues generated in domestic and overseas markets for the years ended December 31, 2020, 2021 and 2022.For the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$PRC 9,750,578 10,231,981 6,827,165 989,846Non-PRC 777,656 1,193,855 916,907 132,939 10,528,234 11,425,836 7,744,072 1,122,785The following table presents the Group’s revenue from contracts with customers disaggregated by the revenue recognition time:For the years ended December 31,2020202120222022 RMB RMB RMB US$Revenue recognized at point of time 313,520 335,787 282,165 40,910Revenue recognized over time 10,214,714 11,090,049 7,461,907 1,081,875 10,528,234 11,425,836 7,744,072 1,122,785 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 246 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8725.FAIR VALUE MEASUREMENTSThe following tables illustrate the fair value measurement hierarchy of the Company’s financial instruments:Fair value measurements as at December 31, 2021 usingQuoted prices in Significant Significant activeobservable unobservable marketsinputs inputs Fair value (Level 1) (Level 2) (Level 3) TotaladjustmentImpairmentRMBRMBRMBRMB RMB RMBRecurring fair value measurement for: Derivative liabilities — (14,918) —(14,918) (14,918)—Non-recurring fair value measurement for: Equity investments without readily determinable fair value 169,171 — — 169,171 58,643(5,000)Equity method investments—————(5,691)169,171(14,918)—154,25343,725(10,691)Fair value measurements as at December 31, 2022 usingQuotedSignificant Significantprices inobservable unobservable active marketsinputs inputs Fair value (Level 1) (Level 2) (Level 3)TotaladjustmentImpairment RMB RMB RMB RMB RMB US$ RMB US$Recurring fair valuemeasurement for: Derivative assets—50,231—50,2317,28350,2317,283——Derivative liabilities—(18,644)—(18,644)(2,703)(3,726)(540)——Non-recurring fair valuemeasurement for:Equity investments withoutreadily determinable fair value——156,859156,85922,742——(12,312)(1,785) Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 247 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8825.FAIR VALUE MEASUREMENTS (CONTINUED)For equity securities accounted for under the measurement alternative, when there are observable price changes in orderly transactions foridentical or similar investments of the same issuer, the investments are re-measured to fair value (Note 11). The non-recurring fair valuemeasurements to the carrying amount of an investment usually requires management to estimate a price adjustment for the different rights andobligations between a similar instrument of the same issuer with an observable price change in an orderly transaction and the investment held bythe Company. These non-recurring fair value measurements were measured as of the observable transaction dates. The valuation methodologiesinvolved require management to use the observable transaction price at the transaction date and other unobservable inputs (level 3) such asexpected volatility and probability of exit events as it relates to liquidation and redemption preferences. When there is impairment of equitysecurities accounted for under the measurement alternative and equity method investments, the non-recurring fair value measurements aremeasured at the date of impairment. Estimating the fair value of investees without observable market prices is highly judgmental due to thesubjectivity of the unobservable inputs (level 3) used in the valuation methodologies used to determine fair value, especially considering theincreased market volatility in the global financial markets after the COVID-19 outbreak.The Group recognized unrealized gain of RMB18,687, RMB58,643 and nil for measuring equity investments at fair value resulting fromthe observable price changes occurring in the years ended December 31, 2020, 2021 and 2022, respectively. The Group recognized impairment ofnil, RMB5,000 and RMB12,312 (US$1,785) for equity investments at fair value in the years ended December 31, 2020, 2021 and 2022,respectively.Derivative assets and liabilities represent the Group’s freestanding forward exchange rate contracts with banks to reduce volatility in theCompany’s economic value caused by foreign currency fluctuations. The freestanding forward exchange rate contracts did not qualify for hedgeaccounting. The derivative assets and derivative liabilities are recorded in the consolidated statements balance sheets measured at fair value. Belowis the details:As at December 31 2021 2022 2022RMBRMBUS$Prepayments and other current assets — 49,077 7,115Other non-current assets — 1,154 168Total derivative assets — 50,231 7,283Accrued expenses and other liabilities 14,918 5,452 790Other non-current liabilities — 13,192 1,913Total derivative liabilities 14,918 18,644 2,70326.COMMITMENTS AND CONTINGENCIESCapital expenditure commitmentsThe Group has commitments for the construction of warehouses and equipment of RMB39,529 (US$5,731) at December 31 2022, whichare scheduled to be paid within one year.ContingenciesFrom time to time, the Group is subject to legal proceedings, investigations, and claims incidental to the conduct of its business. TheGroup is currently not involved in any legal or administrative proceedings that may have a material adverse impact on the Group’s business,financial position or results of operations. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 248 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-8927.EMPLOYEE DEFINED CONTRIBUTION PLANFull time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certainpension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require thatthe Group’s PRC subsidiaries, VIEs and its subsidiaries make contributions to the government for these benefits based on certain percentages of theemployees’ salaries. The Group has no legal obligation for the benefits beyond the contributions made. The total amounts for such employeebenefits, which were expensed as incurred, were RMB133,271, RMB181,689 and RMB155,642 (US$22,566) for the years ended December 31,2020, 2021 and 2022, respectively.28.ACCUMULATED OTHER COMPREHENSIVE INCOMERMBBalance as of January 1, 2020 163,196Foreign currency translation adjustments, net of tax of nil(11,519)Balance as of December 31, 2020 151,677Foreign currency translation adjustments, net of tax of nil (44,298)Balance as of December 31, 2021 107,379Foreign currency translation adjustments, net of tax of nil 17,085Balance as of December 31, 2022 124,464Balance as of December 31, 2022 (US$)18,046There have been no reclassifications out of accumulated other comprehensive income to net loss for all the periods presented.29.CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANYCondensed Balance SheetsAs at December 31 Notes 2021 2022 2022RMBRMBUS$Current assets: Cash 6,805 6,703972Prepayments and other current assets4,1663,420496Total current assets10,97110,1231,468Non-current assets: Other non-current assets1,646719104Investments in subsidiaries and VIEs and subsidiaries of VIEs 4,684,363 2,135,384309,602Total non-current assets:4,686,0092,136,103309,706Total assets 4,696,980 2,146,226311,174Current liabilities: Accrued liabilities and other payables 38,387 ——Convertible senior notes held by a related party-current16, 23633,475522,74475,791Convertible senior notes held by third parties-current16633,4757711Total current liabilities1,305,337522,82175,802Non-current liabilities: Long-term payable due to subsidiaries 365,586 403,65258,524Convertible senior notes held by a related party 955,097 522,74475,791Convertible senior notes held by third parties———Total non-current liabilities1,320,683926,396134,315Total liabilities2,626,0201,449,217210,117 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 249 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-9029.CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED)Condensed Balance Sheets (continued)As at December 31 Notes 2021 2022 2022 RMB RMB US$Shareholders’ equity Class A ordinary shares (par value of US$0.01 per share as of December 31, 2021 and 2022; 1,858,134,053 shares authorized asof December 31, 2021 and 2022; 255,648,452 shares issued and outstanding as of December 31, 2021 and 2022) 21 16,532 16,532 2,397Class B ordinary shares (par value of US$0.01 per share as of December 31, 2021 and 2022; 94,075,249 shares authorized, issuedand outstanding as of December 31, 2021 and 2022, respectively) 21 6,178 6,178 896Class C ordinary shares (par value of US$0.01 per share as of December 31, 2021 and 2022; 47,790,698 shares authorized, issuedand outstanding as of December 31, 2021 and 2022, respectively) 21 3,278 3,278 475Treasury shares (113,031) — —Statutory reserves 167 — —Additional paid in capital 19,522,173 19,481,417 2,824,540Accumulated deficit (17,471,716) (18,934,860) (2,745,297)Accumulated other comprehensive income 107,379 124,464 18,046Total shareholders’ equity 2,070,960 697,009 101,057Total liabilities and shareholders’ equity 4,696,980 2,146,226 311,174Condensed Statements of Comprehensive (Loss) IncomeFor the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Operating expenses General and administrative expenses (8,620) (44,897) (40,747)(5,908)Operating loss (8,620) (44,897) (40,747)(5,908)Share of losses of subsidiaries and VIEs and subsidiaries of VIEs (1,951,902) (2,826,751) (1,371,524)(198,852)Gain on disposal—3,213,599——Other income, net——17,3292,514Interest expense (64,986) (80,044) (68,369)(9,912)Net (loss) income attributable to ordinary shareholders(2,025,508) 261,907 (1,463,311)(212,158)Other comprehensive (loss) income, net of tax of nilForeign currency translation adjustments(11,519)(44,298)17,0852,477Comprehensive (loss) income (2,037,027) 217,609 (1,446,226)(209,681)Condensed Statements of Cash FlowsFor the years ended December 31, 2020 2021 2022 2022RMBRMBRMBUS$Net cash used in operating activities (11,320) (111,208) (119,115)(17,270)Net cash (used in) generated from investing activities (812,649) 82,099 1,492,777216,432Net cash generated from (used in) financing activities 847,346 2,604 (1,373,764)(199,177)Net increase (decrease) in cash and cash equivalents 23,377 (26,505) (102)(15)Cash and cash equivalents at beginning of the year 9,933 33,310 6,805987Cash and cash equivalents at end of the year 33,310 6,805 6,703972 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231x20f.htm Type: 20-F Pg: 250 of 250 Table of ContentsBEST INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)F-9129.CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED)Basis of presentationFor the presentation of the parent company only condensed financial information, the Company records its investments in subsidiaries andVIEs and subsidiaries of VIEs under the equity method of accounting as prescribed in ASC 323. Such investments are presented on the condensedbalance sheets as “Investments in subsidiaries and VIEs and subsidiaries of VIEs” and the subsidiaries’ and VIEs’ and subsidiaries of VIEs’ lossesas “Share of losses of subsidiaries and VIEs and subsidiaries of VIEs” on the condensed statements of comprehensive (loss) income.The subsidiaries did not pay any dividends to the Company for the periods presented.The Company does not have significant commitments or long-term obligations as of the period end other than those presented.The parent company only financial statements should be read in conjunction with the Company’s consolidated financial statements.30.SUBSEQUENT EVENTSOn April 14, 2023, the Group and Alibaba HK agreed that Alibaba HK would not require the Group to repurchase one half of the 2025Convertible Notes in 2023 and the Group has granted an extra repurchase option to Alibaba HK such that Alibaba HK would be able to require theGroup to repurchase the other one half of the 2025 Convertible Notes, or US$75,000 aggregate principal amount within 90 days after June 3, 2024.The Group has assessed the impact of the modification and classified the extended portion of the 2025 Convertible Notes of RMB522,744(US$75,791) as non-current liabilities as of December 31, 2022 in accordance with ASC 470-10-45. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 1 of 21 Exhibit 2.4DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIESEXCHANGE ACT OF 1934As of December 31, 2022, BEST Inc. (the “company”, “we”, “us” and “our”) had the following series of securities registered pursuant toSection 12(b) of the Exchange Act:Title of each class Trading symbol Name of each exchange on which registeredClass A ordinary shares, par value US$0.01 pershare* American depositary shares, each representing five (5) Class A ordinary shareBESTNew York Stock Exchange*Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.Description of Ordinary Shares (Items 9.A.3, 9.A.5, 9.A.6, 9.A.7, 10.B.3, 10.B.4, 10.B.6, 10.B.7, 10.B.8, 10.B.9 and 10.B.10 of Form 20-F)GeneralWe are an exempted company incorporated in the Cayman Islands with limited liability and our affairs are governed by our ninth amendedmemorandum and articles of association currently in effect, which we refer to as our articles, and the Companies Act (As Revised) of the CaymanIslands, which we refer to as the Cayman Companies Act, and the common law of the Cayman Islands. In June 2017, we changed our name toBEST Inc.Each Class A ordinary share of our company has par value of US$0.01 per share. The number of Class A ordinary shares that had been issuedas of December 31, 2022 is provided on the cover of our annual report on Form 20-F for the year ended December 31, 2022.All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our ordinary shares are issued in registered form, and areissued when registered in our register of members (shareholders). Our shareholders who are non-residents of the Cayman Islands may freely holdand vote their ordinary shares. Our articles prohibit us from issuing shares to bearer.DividendsThe holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Under the laws of the CaymanIslands, our company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paidif this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.Voting RightsOur outstanding share capital consists of Class A ordinary shares, Class B ordinary shares and Class C ordinary shares. Holders of Class Aordinary shares are entitled to one (1) vote per share, holders of Class B ordinary shares are entitled to fifteen (15) votes per share and holders ofClass C ordinary shares are entitled to thirty (30) votes per share, in respect of matters requiring the votes of shareholders of our Company.Voting at any meeting of shareholders is by a show of hands, unless a poll is demanded by the chairman of the meeting or one or moreshareholders present in person or by proxy who together hold shares which carry in aggregate not less than 10% of all votes attaching to all of ourshares in issue and Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 2 of 21 entitled to vote, and, unless a poll is so demanded, a declaration by the chairman of that a resolution has, on a show of hands, been carried orcarried unanimously, or by a particular majority, or lost and an entry to that effect in the minutes of the proceedings of our company, shall beconclusive evidence of the fact, without proof of the number of proportion of the votes recorded in favor of, or against that resolution.Our articles provide that all questions submitted to our shareholders for approval at a general meeting must be decided by a specialresolution, except where a greater majority is required by our articles or by the Cayman Companies Act. A special resolution must be passed by amajority of not less than two-thirds of the votes cast by such of our shareholders as, being entitled to do so, vote in person or by proxy at a generalmeeting, or alternatively may be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by theCayman Companies Act and our articles.Transfer of SharesAny of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in any usual or common form orany other form approved by our board of directors, executed by or on behalf of the transferor.Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share that has not been fully paid up oris subject to a company lien. Our board of directors may also decline to register any transfer of any ordinary share unless:●the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such otherevidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;●the instrument of transfer is in respect of only one class of ordinary shares;●the instrument of transfer is properly stamped, if required;●the relevant fee related to the transfer has been paid to us; and●in the case of any transfer to joint holders, the transfer is not to more than four joint holders.If our directors refuse to register a transfer, they shall within one calendar month after the date on which the instrument of transfer waslodged, to send to each of the transferor and the transferee notice of such refusal.Winding UpOn the solvent winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient torepay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders inproportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respectof which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution in respectof a solvent winding up are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by ourshareholders in proportion to the par value of the shares held by them. On the insolvent winding up of our company, where the liabilities of ourcompany exceed its assets, those assets will be distributed to creditors and the shareholders will not receive any assets.The liquidator may, with the sanction of a special resolution of our shareholders, divide amongst the shareholders in species or in kind thewhole or any part of the assets of our company, and may for such purpose set such value as the liquidator deems fair upon any property to bedivided as aforesaid and may determine how the division shall be carried out as between our shareholders or different classes of shareholders.We are an exempted company with “limited liability” incorporated under the Cayman Companies Act, and under the Cayman CompaniesAct, the liability of our shareholders is limited to the amount, if any, Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 3 of 21 unpaid on the shares respectively held by them. Our memorandum of association contains a declaration that the liability of our members isso limited.Redemption, Repurchase and Surrender of Ordinary SharesWe may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such termsand in such manner as may be determined by our board of directors. Our company may also repurchase any of our shares provided that the mannerand terms of such purchase have been approved by our board of directors or by special resolution of our shareholders (but no repurchase may bemade contrary to the terms or manner recommended by our directors), or as otherwise authorized by our articles. Under the Cayman CompaniesAct, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a new issue of shares made forthe purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if our companycan, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the CaymanCompanies Act no such share may be redeemed or repurchased (i) unless it is fully paid up, (ii) if such redemption or repurchase would result inthere being no shares outstanding or (iii) if the company has commenced liquidation. In addition, our company may accept the surrender of anyfully paid share for no consideration.Calls on Ordinary Shares and Forfeiture of Ordinary SharesOur board of directors may from time to time make calls upon shareholders (or any of them) for any amounts unpaid on their ordinary sharesand each shareholder shall (subject to receiving at least fourteen calendar days' notice specifying the time or times of payment) pay to our companyat the time or times so specified the amount called on such shares. The ordinary shares that have been called upon and remain unpaid are subjectto forfeiture.General Meetings of ShareholdersAs a Cayman Islands exempted company, we are not obliged by the Cayman Companies Act to call shareholders’ annual general meetings.Our articles provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting in which case we shallspecify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and place as may be determined byour directors.Shareholders’ general meetings may be convened by a majority of our board of directors or by our chairman. Advance notice of at least tencalendar days is required for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our shareholders.A quorum required for any general meeting of shareholders consists of at least one shareholder present or by proxy, holding shares which carry inaggregate not less than one-third of all votes attaching to all of our shares in issue and entitled to vote.The Cayman Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provideshareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles ofassociation. Our articles provide that upon the requisition of shareholders holding shares which carry in aggregate not less than one-third of thevotes attaching to all issued and outstanding shares of our company entitled to vote at general meetings, our board will convene an extraordinarygeneral meeting and put the resolutions so requisitioned to a vote at such meeting. However, our articles do not provide our shareholders with anyright to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.Proceedings of Board of Directors Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 4 of 21 Our articles provide that our business is to be managed and conducted by our board of directors. The quorum necessary for board meetingsmay be fixed by the board and, unless so fixed at another number, will be a majority of the directors then in office.Our articles provide that the board may from time to time at its discretion exercise all powers of our company to raise capital or borrowmoney, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of our company andissue debentures, bonds and other securities of our company, whether outright or as collateral security for any debt, liability or obligation of ourcompany or of any third party.Changes in CapitalOur shareholders may from time to time by special resolution:●increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;●consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;●sub-divide our existing shares, or any of them, into shares of a smaller amount; or●cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person anddiminish the amount of our share capital by the amount of the shares so cancelled.Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by ourcompany for an order confirming such reduction, reduce our share capital or any capital redemption reserve in any manner permitted by law.Inspection of Books and RecordsHolders of our ordinary shares will have no general right under the Cayman Companies Act to inspect or obtain copies of our list ofshareholders or our corporate records (other than copies of our memorandum and articles of association, our register of mortgages and charges, andany special resolutions passed by our shareholders). However, we will provide our shareholders with annual audited financial statements.Exempted CompanyWe are an exempted company with limited liability duly incorporated and validly existing under the Cayman Companies Act. The CaymanCompanies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the CaymanIslands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for anexempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:●an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies of the CaymanIslands;●an exempted company’s register of members is not open to inspection;●an exempted company does not have to hold an annual general meeting;●an exempted company may issue no par value, negotiable or bearer shares;●an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually givenfor 20 years in the first instance);●an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;●an exempted company may register as a limited duration company; and Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 5 of 21 ●an exempted company may register as a segregated portfolio company.”Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that shareholder’s sharesof the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improperpurpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil). We are subject to reporting and otherinformational requirements of the Exchange Act, as applicable to foreign private issuers. We follow home country practice for certain corporategovernance practices which may differ from the Corporate Governance Rules of the New York Stock Exchange. The listing requirements of theNew York Stock Exchange require that every listed company hold an annual general meeting of shareholders. In addition, our articles allow ourdirectors to call extraordinary general meetings of our shareholders pursuant to the procedures set forth in our articles.Differences in Corporate LawThe Cayman Companies Act is derived, to a large extent, from the older Companies Acts of England, but does not follow recent statutoryenactments in England and accordingly there are significant differences between the Cayman Companies Act and the current Companies Act ofEngland. In addition, the Cayman Companies Act differs from laws applicable to U.S. corporations and their shareholders. Set forth below is asummary of certain significant differences between the provisions of the Cayman Companies Act applicable to us and the laws applicable tocompanies incorporated in the State of Delaware.Mergers and Similar ArrangementsThe Cayman Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islandscompanies and non-Cayman Islands companies. For these purposes, (i) “merger” means the merging of two or more constituent companies and thevesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (ii) a “consolidation” means thecombination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of suchcompanies in the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approvea written plan of merger or consolidation, which must then be authorized by (i) a special resolution of the shareholders of each constituentcompany, and (ii) such other authorization, if any, as may be specified in such constituent company’s articles of association. The plan must be filedwith the Registrar of Companies of the Cayman Islands together with a declaration with respect to, among other things, the solvency of theconsolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificateof merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger orconsolidation will be published in the Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected incompliance with these statutory procedures.A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by aresolution of shareholders if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that memberagrees otherwise. For this purpose a subsidiary is a company of which at least 90% of the issued shares entitled to vote are owned by theparent company.The consent of each holder of a fixed or floating security interest of a constituent company is required unless this requirement is waived by acourt in the Cayman Islands.Except in certain limited circumstances, a shareholder of a Cayman Islands constituent company who dissents from the merger orconsolidation is entitled to payment of the fair value of his or her shares (which, if not agreed between the parties, will be determined by the GrandCourt of the Cayman Islands) upon dissenting from a merger or consolidation, provide the dissenting shareholder complies strictly with theprocedures set out in the Cayman Companies Act. The exercise of such dissenter rights will preclude the Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 6 of 21 exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, except for theright to seek relief on the grounds that the merger or consolidation is void or unlawful.Separately from the statutory provisions relating to mergers and consolidations, the Cayman Companies Act also contains statutoryprovisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement isapproved by a majority in number of each class of shareholders or creditors with whom the arrangement is to be made, and who must, in addition,represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or byproxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctionedby the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction oughtnot to be approved, the court can be expected to approve the arrangement if it determines that:●the statutory provisions as to the required majority vote have been met;●the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide withoutcoercion of the minority to promote interests adverse to those of the class;●the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of hisinterest; and●the arrangement is not one that would more properly be sanctioned under some other provision of the Cayman Companies Act.The Cayman Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentientminority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% in value of the shares affected within fourmonths of the offer being made, the offeror may, within a two-month period commencing on the expiration of such four month period, require theholders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the CaymanIslands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.If an arrangement and reconstruction is thus approved, or if a tender offer is made and accepted, a dissenting shareholder would have norights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providingrights to receive payment in cash for the judicially determined value of the shares.Shareholders’ SuitsIn principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company and as a general rule, a derivative actionmay not be brought by a minority shareholder. However, based on English law authorities, which would in all likelihood be of persuasive authorityin the Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles (namely the rule in Foss v.Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivativeactions in the name of the company to challenge:●an act which is illegal or ultra vires with respect to the company and is therefore incapable of ratification by the shareholders;●an act which, although not ultra vires, requires authorization by a qualified (or special) majority (that is, more than a simple majority)which has not been obtained; and●an act which constitutes a “fraud on the minority” where the wrongdoers are themselves in control of the company.Indemnification of Directors and Executive Officers and Limitation of Liability Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 7 of 21 The Cayman Companies Act does not limit the extent to which a company’s memorandum and articles of association may provide forindemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to publicpolicy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our articles provide that we shallindemnify our officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained bysuch directors or officer, other than by reason of such person’s dishonesty, willful default or fraud, in or about the conduct of our company’sbusiness or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities ordiscretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director orofficer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in theCayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for aDelaware corporation. In addition, we have entered into indemnification agreements with our directors and executive officers that provide suchpersons with additional indemnification beyond that provided in our articles.Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling usunder the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressedin the Securities Act and is therefore unenforceable.Anti-Takeover Provisions in Our ArticlesSome provisions of our articles may discourage, delay or prevent a change in control of our company or management that shareholders mayconsider favorable, including provisions that authorize our board of directors to issue preferred shares in one or more series and to designate theprice, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders.However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our articles, as amendedand restated from time to time, for a proper purpose and in what they believe in good faith to be in the best interests of our company.Directors’ Fiduciary DutiesUnder Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This dutyhas two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that anordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose toshareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in amanner he or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position for personalgain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its shareholders takeprecedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general,actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in thebest interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should suchevidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that thetransaction was of fair value to the corporation.As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company andtherefore he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profitbased on his or her position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of thecompany conflict with his or her personal interest or his or her duty to a third party, and a duty to exercise powers for the purpose for which suchpowers were intended. A director of a Cayman Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 8 of 21 Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in theperformance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience.However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and theseauthorities are likely to be followed in the Cayman Islands.Shareholder ProposalsUnder the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders,provided it complies with the notice provisions in the governing documents. The Delaware General Corporation Law does not provide shareholdersan express right to put any proposal before the annual meeting of shareholders, but in keeping with common law, Delaware corporations generallyafford shareholders an opportunity to make proposals and nominations provided that they comply with the notice provisions in the certificate ofincorporation or bylaws. A special meeting may be called by the board of directors or any other person authorized to do so in the governingdocuments, but shareholders may be precluded from calling special meetings.The Cayman Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provideshareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles ofassociation. Our articles allow our shareholders holding shares which carry in aggregate not less than one-third of the votes attaching to all issuedand outstanding shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders, inwhich case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting.Our articles provide no other right to put any proposals before annual general meetings or extraordinary general meetings. As a Cayman Islandsexempted company, we are not obligated by law to call shareholders’ annual general meetings. However, our corporate governance guidelinesrequire us to call such meetings every year.Cumulative VotingUnder the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’scertificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on aboard of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, whichincreases the shareholder’s voting power with respect to electing such director. Cayman Islands law does not prohibit cumulative voting, but ourarticles do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue thanshareholders of a Delaware corporation.Removal of DirectorsUnder the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with theapproval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our articles,directors may be removed by special resolution of our shareholders.Transactions with Interested ShareholdersThe Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unlessthe corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation or bylaws that isapproved by its shareholders, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three yearsfollowing the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or whichowns or owned 15% or more of the Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 9 of 21 target’s outstanding voting stock or who or which is an affiliate or associate of the corporation and owned 15% or more of the corporation’soutstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for thetarget in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which suchshareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted inthe person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of anyacquisition transaction with the target’s board of directors.Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delawarebusiness combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significantshareholders, the fiduciary duties owed by our directors do require that such transactions must be entered into bona fide in the best interests of thecompany and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.Dissolution; Winding UpUnder the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approvedby shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it beapproved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate ofincorporation a supermajority voting requirement in connection with dissolutions initiated by the board of directors.Under the Cayman Companies Act, our company may be wound up by either a special resolution of our members or, if our company isunable to pay its debts as they fall due, by an ordinary resolution of our members. In addition, a company may be wound up by an order of thecourts of the Cayman Islands. The court has authority to order winding up in a number of specified circumstances including where it is, in theopinion of the court, just and equitable to do so or if our company is insolvent.Variation of Rights of SharesUnder the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of theoutstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our articles, if our share capital is divided intomore than one class of shares, we may materially and adversely vary the rights attached to any class only with the consent in writing of the holdersof not less than three-fourths of the shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of theshares of that class.Amendment of Governing DocumentsUnder the Delaware General Corporation Law, a corporation’s certificate of incorporation may be amended only if adopted and declaredadvisable by the board of directors and approved by a majority of the outstanding shares entitled to vote, and the bylaws may be amended with theapproval of a majority of the outstanding shares entitled to vote and may, if so provided in the certificate of incorporation, also be amended by theboard of directors. Under the Cayman Companies Act and our articles, our articles may only be amended by special resolution of our shareholders.Rights of Non-Resident or Foreign ShareholdersThere are no limitations imposed by our articles on the rights of non-resident or foreign shareholders to hold or exercise voting rights on ourshares. In addition, there are no provisions in our articles governing the ownership threshold above which shareholder ownership mustbe disclosed. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 10 of 21 Directors’ Power to Issue SharesUnder our articles, our board of directors is empowered to issue or allot shares or grant options, restricted shares, restricted share units, shareappreciation rights, dividend equivalent rights, warrants and analogous equity-based rights with or without preferred, deferred, qualified or otherspecial rights or restrictions. In particular, pursuant to our articles, our board of directors has the authority, without further action by theshareholders, to issue all or any part of our capital and to fix the designations, powers, preferences, privileges, and relative participating, optional orspecial rights and the qualifications, limitations or restrictions therefrom, including dividend rights, conversion rights, voting rights, terms ofredemption and liquidation preferences, any or all of which may be greater than the rights of our ordinary shares. Our board of directors, withoutshareholder approval, may issue preferred shares with voting, conversion or other rights that could adversely affect the voting power and otherrights of holders of our ordinary shares. Subject to the directors’ duty of acting in the best interest of our company, preferred shares can be issuedquickly with terms calculated to delay or prevent a change in control of us or make removal of management more difficult. Additionally, theissuance of preferred shares may have the effect of decreasing the market price of the ordinary shares, and may adversely affect the voting andother rights of the holders of ordinary shares.Description of Debt Securities, Warrants and Rights and Other Securities (Items 12.A, 12.B and 12.C of Form 20-F)None.Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)Citibank, N.A. acts as the depositary bank for the American Depositary Shares. Citibank’s depositary offices are located at 388 GreenwichStreet, New York, New York 10013. The depositary bank typically appoints a custodian to safekeep the securities on deposit. In this case, thecustodian is Citibank, N.A. – Hong Kong, located at 9/F., Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.We have appointed Citibank as depositary bank pursuant to a deposit agreement. A copy of the deposit agreement is on file with the SECunder cover of a Registration Statement on Form F-6. You may obtain a copy of the deposit agreement from the SEC’s Public Reference Room at100 F Street, N.E., Washington, D.C. 20549 and from the SEC’s website (www.sec.gov). Please refer to Registration Number 333-220361 whenretrieving such copy.We are providing you with a summary description of the material terms of the ADSs and of your material rights as an owner of ADSs. Pleaseremember that summaries by their nature lack the precision of the information summarized and that the rights and obligations of an owner of ADSswill be determined by reference to the terms of the deposit agreement and not by this summary. We urge you to review the deposit agreement in itsentirety. The portions of this summary description that are italicized describe matters that may be relevant to the ownership of ADSs but that maynot be contained in the deposit agreement.In May 2022, the ratio of our ADSs to our Class A ordinary shares changed to one (1) ADS to five (5) Class A ordinary shares. In April2023, the ratio of our ADSs to our Class A ordinary shares changed to one (1) ADS to twenty (20) Class A ordinary shares.As of December 31, 2022, each ADS represented the right to receive, and to exercise the beneficial ownership interests in, five (5) Class Aordinary shares that are on deposit with the depositary bank and/or custodian. An ADS also represents the right to receive, and to exercise thebeneficial interests in, any other property received by the depositary bank or the custodian on behalf of the owner of the ADS but that has not beendistributed to the owners of ADSs because of legal restrictions or practical considerations. We and the depositary bank may agree to change theADS-to-Class A ordinary share ratio by amending the deposit Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 11 of 21 agreement. This amendment may give rise to, or change, the depositary fees payable by ADS owners. The custodian, the depositary bank and theirrespective nominees hold all deposited property for the benefit of the holders and beneficial owners of ADSs. The deposited property does notconstitute the proprietary assets of the depositary bank, the custodian or their nominees. Beneficial ownership in the deposited property under theterms of the deposit agreement is vested in the beneficial owners of the ADSs. The depositary bank, the custodian and their respective nominees arethe record holders of the deposited property represented by the ADSs for the benefit of the holders and beneficial owners of the correspondingADSs. A beneficial owner of ADSs may or may not be the holder of ADSs. Beneficial owners of ADSs are able to receive, and to exercisebeneficial ownership interests in, the deposited property only through the registered holders of the ADSs, the registered holders of the ADSs (onbehalf of the applicable ADS owners) only through the depositary bank, and the depositary bank (on behalf of the owners of the correspondingADSs) directly, or indirectly, through the custodian or their respective nominees, in each case upon the terms of the deposit agreement.If you become an owner of ADSs, you will become a party to the deposit agreement and therefore will be bound to its terms and to the termsof any ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your rights andobligations as owner of ADSs and those of the depositary bank. As an ADS holder you appoint the depositary bank to act on your behalf in certaincircumstances. The deposit agreement and the ADRs are governed by New York law. However, our obligations to the holders of Class A ordinaryshares continue to be governed by the laws of the Cayman Islands, which may be different from the laws in the United States.In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain regulatory approvals in certaincircumstances. You are solely responsible for complying with such reporting requirements and obtaining such approvals. Neither the depositarybank, the custodian, us or any of their or our respective agents or affiliates shall be required to take any actions whatsoever on your behalf to satisfysuch reporting requirements or obtain such regulatory approvals under applicable laws and regulations.As an owner of ADSs, we do not treat you as one of our shareholders and you do not have direct shareholder rights. The depositary bankholds on your behalf the shareholder rights attached to the Class A ordinary shares underlying your ADSs. As an owner of ADSs you are able toexercise the shareholders rights for the Class A ordinary shares represented by your ADSs through the depositary bank only to the extentcontemplated in the deposit agreement. To exercise any shareholder rights not contemplated in the deposit agreement you, as an ADS owner, needto arrange for the cancellation of your ADSs and become a direct shareholder.The manner in which you own the ADSs (e.g., in a brokerage account vs. as registered holder, or as holder of certificated vs. uncertificatedADSs) may affect your rights and obligations, and the manner in which, and extent to which, the depositary bank’s services are made available toyou. As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name, through a brokerage or safekeepingaccount, or through an account established by the depositary bank in your name reflecting the registration of uncertificated ADSs directly on thebooks of the depositary bank (commonly referred to as the “direct registration system” or “DRS”). The direct registration system reflects theuncertificated (book-entry) registration of ownership of ADSs by the depositary bank. Under the direct registration system, ownership of ADSs isevidenced by periodic statements issued by the depositary bank to the holders of the ADSs. The direct registration system includes automatedtransfers between the depositary bank and The Depository Trust Company (“DTC”), the central book-entry clearing and settlement system forequity securities in the United States. If you decide to hold your ADSs through your brokerage or safekeeping account, you must rely on theprocedures of your broker or bank to assert your rights as ADS owner. Banks and brokers typically hold securities such as the ADSs throughclearing and settlement systems such as DTC. The procedures of such clearing and settlement systems may limit your ability to exercise your rightsas an owner of ADSs. Please consult with your broker or bank if you have any questions concerning these limitations and procedures. All ADSsheld through DTC are registered in the name of a nominee of DTC. This summary description assumes you have opted to own the ADSs directlyby means of an ADS Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 12 of 21 registered in your name and, as such, we will refer to you as the “holder.” When we refer to “you,” we assume the reader owns ADSs and will ownADSs at the relevant time.The registration of the Class A ordinary shares in the name of the depositary bank or the custodian shall, to the maximum extent permitted byapplicable law, vest in the depositary bank or the custodian the record ownership in the applicable Class A ordinary shares with the beneficialownership rights and interests in such Class A ordinary shares being at all times vested with the beneficial owners of the ADSs representing theClass A ordinary shares. The depositary bank or the custodian shall at all times be entitled to exercise the beneficial ownership rights in alldeposited property, in each case only on behalf of the holders and beneficial owners of the ADSs representing the deposited property.Dividends and DistributionsAs a holder of ADSs, you generally have the right to receive the distributions we make on the securities deposited with the custodian. Yourreceipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders of ADSs will receive suchdistributions under the terms of the deposit agreement in proportion to the number of ADSs held as of the specified record date, after deduction ofthe applicable fees, taxes and expenses.Distributions of CashWhenever we make a cash distribution for the securities on deposit with the custodian, we will deposit the funds with the custodian. Uponreceipt of confirmation of the deposit of the requisite funds, the depositary bank will arrange for the funds received in a currency other thanU.S. dollars to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders, subject to the laws and regulations of theCayman Islands.The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The depositarybank will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian inrespect of securities on deposit.The distribution of cash will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of thedeposit agreement. The depositary bank will hold any cash amounts it is unable to distribute in a non-interest bearing account for the benefit of theapplicable holders and beneficial owners of ADSs until the distribution can be effected or the funds that the depositary bank holds must beescheated as unclaimed property in accordance with the laws of the relevant states of the United States.Distributions of Class A Ordinary SharesWhenever we make a free distribution of Class A ordinary shares for the securities on deposit with the custodian, we will deposit theapplicable number of Class A ordinary shares with the custodian. Upon receipt of confirmation of such deposit, the depositary bank will eitherdistribute to holders new ADSs representing the Class A ordinary shares deposited or modify the ADS-to-Class A ordinary share ratio, in whichcase each ADS you hold will represent rights and interests in the additional Class A ordinary shares so deposited. Only whole new ADSs will bedistributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution.The distribution of new ADSs or the modification of the ADS-to-Class A ordinary share ratio upon a distribution of Class A ordinary shareswill be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order topay such taxes or governmental charges, the depositary bank may sell all or a portion of the new Class A ordinary shares so distributed. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 13 of 21 No such distribution of new ADSs will be made if it would violate a law (e.g., the U.S. securities laws) or if it is not operationallypracticable. If the depositary bank does not distribute new ADSs as described above, it may sell the Class A ordinary shares received upon theterms described in the deposit agreement and will distribute the proceeds of the sale as in the case of a distribution of cash.Distributions of RightsWhenever we intend to distribute rights to subscribe for additional Class A ordinary shares, we will give prior notice to the depositary bankand we will assist the depositary bank in determining whether it is lawful and reasonably practicable to distribute rights to subscribe for additionalADSs to holders.The depositary bank will establish procedures to distribute rights to subscribe for additional ADSs to holders and to enable such holders toexercise such rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs, and if we provide all of thedocumentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees,expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights. The depositary bank is notobligated to establish procedures to facilitate the distribution and exercise by holders of rights to subscribe for new Class A ordinary shares otherthan in the form of ADSs.The depositary bank will not distribute the rights to you if:●We do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; or●We fail to deliver satisfactory documents to the depositary bank; or●It is not reasonably practicable to distribute the rights.The depositary bank will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. Theproceeds of such sale will be distributed to holders as in the case of a cash distribution. If the depositary bank is unable to sell the rights, it willallow the rights to lapse.Elective DistributionsWhenever we intend to distribute a dividend payable at the election of shareholders either in cash or in additional shares, we will give priornotice thereof to the depositary bank and will indicate whether we wish the elective distribution to be made available to you. In such case, we willassist the depositary bank in determining whether such distribution is lawful and reasonably practicable.The depositary bank will make the election available to you only if it is reasonably practicable and if we have provided all of thedocumentation contemplated in the deposit agreement. In such case, the depositary bank will establish procedures to enable you to elect to receiveeither cash or additional ADSs, in each case as described in the deposit agreement.If the election is not made available to you, you will receive either cash or additional ADSs, depending on what a shareholder in the CaymanIslands would receive upon failing to make an election, as more fully described in the deposit agreement.Other DistributionsWhenever we intend to distribute property other than cash, Class A ordinary shares or rights to subscribe for additional Class A ordinaryshares we will notify the depositary bank in advance and will indicate whether we wish such distribution to be made to you. If so, we will assist thedepositary bank in determining whether such distribution to holders is lawful and reasonably practicable. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 14 of 21 If it is reasonably practicable to distribute such property to you and if we provide to the depositary bank all of the documentationcontemplated in the deposit agreement, the depositary bank will distribute the property to the holders in a manner it deems practicable.The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the depositagreement. In order to pay such taxes and governmental charges, the depositary bank may sell all or a portion of the property received.The depositary bank will not distribute the property to you and will sell the property if:●We do not request that the property be distributed to you or if we request that the property not be distributed to you; or●We do not deliver satisfactory documents to the depositary bank; or●The depositary bank determines that all or a portion of the distribution to you is not reasonably practicable.The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.RedemptionWhenever we decide to redeem any of the securities on deposit with the custodian, we will notify the depositary bank in advance. If it ispracticable and if we provide all of the documentation contemplated in the deposit agreement, the depositary bank will provide notice of theredemption to the holders.The custodian will be instructed to surrender the shares being redeemed against payment of the applicable redemption price. The depositarybank will convert into U.S. dollars upon the terms of the deposit agreement the redemption funds received in a currency other than U.S. dollars andwill establish procedures to enable holders to receive the net proceeds from the redemption upon surrender of their ADSs to the depositary bank.You may have to pay fees, expenses, taxes and other governmental charges upon the redemption of your ADSs. If less than all ADSs are beingredeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as the depositary bank may determine.Changes Affecting Class A Ordinary SharesThe Class A ordinary shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominalor par value, split-up, cancellation, consolidation or any other reclassification of such Class A ordinary shares or a recapitalization, reorganization,merger, consolidation or sale of assets of the Company.If any such change were to occur, your ADSs would, to the extent permitted by law and the deposit agreement, represent the right to receivethe property received or exchanged in respect of the Class A ordinary shares held on deposit. The depositary bank may in such circumstancesdeliver new ADSs to you, amend the deposit agreement, the ADRs and the applicable Registration Statement(s) on Form F-6, call for the exchangeof your existing ADSs for new ADSs and take any other actions that are appropriate to reflect as to the ADSs the change affecting the Class Aordinary shares. If the depositary bank may not lawfully distribute such property to you, the depositary bank may sell such property and distributethe net proceeds to you as in the case of a cash distribution.Issuance of ADSs Upon Deposit of Class A Ordinary SharesThe depositary bank may create ADSs on your behalf if you or your broker deposit Class A ordinary shares with the custodian. Thedepositary bank will deliver these ADSs to the person you indicate only after you pay any applicable issuance fees and any charges and taxespayable for the transfer of the Class A ordinary shares to the custodian. Your ability to deposit Class A ordinary shares and receive ADSs may belimited by U.S. and Cayman Islands legal considerations applicable at the time of deposit. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 15 of 21 The issuance of ADSs may be delayed until the depositary bank or the custodian receives confirmation that all required approvals have beengiven and that the Class A ordinary shares have been duly transferred to the custodian. The depositary bank will only issue ADSs inwhole numbers.When you make a deposit of Class A ordinary shares, you will be responsible for transferring good and valid title to the depositary bank. Assuch, you will be deemed to represent and warrant that:●The Class A ordinary shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained.●All preemptive (and similar) rights, if any, with respect to such Class A ordinary shares have been validly waived or exercised.●You are duly authorized to deposit the Class A ordinary shares.●The Class A ordinary shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage oradverse claim, and are not, and the ADSs issuable upon such deposit will not be, “restricted securities” (as defined in the depositagreement).●The Class A ordinary shares presented for deposit have not been stripped of any rights or entitlements.If any of the representations or warranties are incorrect in any way, we and the depositary bank may, at your cost and expense, take any andall actions necessary to correct the consequences of the misrepresentations.Transfer, Combination and Split Up of ADRsAs an ADR holder, you will be entitled to transfer, combine or split up your ADRs and the ADSs evidenced thereby. For transfers of ADRs,you will have to surrender the ADRs to be transferred to the depositary bank and also must:●ensure that the surrendered ADR is properly endorsed or otherwise in proper form for transfer;●provide such proof of identity and genuineness of signatures as the depositary bank deems appropriate;●provide any transfer stamps required by the State of New York or the United States; and●pay all applicable fees, charges, expenses, taxes and other government charges payable by ADR holders pursuant to the terms of thedeposit agreement, upon the transfer of ADRs.To have your ADRs either combined or split up, you must surrender the ADRs in question to the depositary bank with your request to havethem combined or split up, and you must pay all applicable fees, charges and expenses payable by ADR holders, pursuant to the terms of thedeposit agreement, upon a combination or split up of ADRs.Withdrawal of Class A Ordinary Shares Upon Cancellation of ADSsAs a holder, you will be entitled to present your ADSs to the depositary bank for cancellation and then receive the corresponding number ofunderlying Class A ordinary shares at the custodian’s offices. Your ability to withdraw the Class A ordinary shares held in respect of the ADSs maybe limited by U.S. and Cayman Islands considerations applicable at the time of withdrawal. In order to withdraw the Class A ordinary sharesrepresented by your ADSs, you will be required to pay to the depositary bank the fees for cancellation of ADSs and any charges and taxes payableupon the transfer of the Class A ordinary shares. You assume the risk for delivery of all funds and securities upon withdrawal. Once canceled, theADSs will not have any rights under the deposit agreement. If you hold ADSs registered in your name, the depositary bank may ask you to provide proof of identity and genuineness of any signatureand such other documents as the depositary bank may deem Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 16 of 21 appropriate before it will cancel your ADSs. The withdrawal of the Class A ordinary shares represented by your ADSs may be delayed until thedepositary bank receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary bankwill only accept ADSs for cancellation that represent a whole number of securities on deposit.You will have the right to withdraw the securities represented by your ADSs at any time except for:●Temporary delays that may arise because (i) the transfer books for the Class A ordinary shares or ADSs are closed, or (ii) Class Aordinary shares are immobilized on account of a shareholders’ meeting or a payment of dividends.●Obligations to pay fees, taxes and similar charges.●Restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit.The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to comply withmandatory provisions of law.Voting RightsAs a holder, you generally have the right under the deposit agreement to instruct the depositary bank to exercise the voting rights for theClass A ordinary shares represented by your ADSs. The voting rights of holders of Class A ordinary shares are described above under the heading“Description of Ordinary Shares — Voting Rights.”At our request, the depositary bank will distribute to you any notice of shareholders’ meeting received from us together with informationexplaining how to instruct the depositary bank to exercise the voting rights of the securities represented by ADSs.If the depositary bank timely receives voting instructions from a holder of ADSs, it will endeavor to vote the securities (in person or byproxy) represented by the holder’s ADSs in accordance with such voting instructions as follows:●In the event of voting by show of hands, the depositary bank will vote (or cause the custodian to vote) all Class A ordinary shares heldon deposit at that time in accordance with the voting instructions received from a majority of holders of ADSs who provide timelyvoting instructions.●In the event of voting by poll, the depositary bank will vote (or cause the Custodian to vote) the Class A ordinary shares held ondeposit in accordance with the voting instructions received from the holders of ADSs.In the event of voting by poll, holders of ADSs in respect of which no timely voting instructions have been received shall be deemed to haveinstructed the depositary bank to give a discretionary proxy to a person designated by us to vote the Class A ordinary shares represented by suchholders’ ADSs; provided, that no such instructions shall be deemed given and no such discretionary proxy shall be given with respect to any matteras to which we inform the depositary bank that we do not wish such proxy to be given; provided, further, that no such discretionary proxy shall begiven (x) with respect to any matter as to which we inform the depositary that (i) there exists substantial opposition, or (ii) the rights of holders ofADSs or the shareholders of our company will be materially adversely affected, and (y) in the event that the vote is on a show of hands.Please note that the ability of the depositary bank to carry out voting instructions may be limited by practical and legal limitations and theterms of the securities on deposit. We cannot assure you that you will receive voting materials in time to enable you to return voting instructions tothe depositary bank in a timely manner. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 17 of 21 Fees and ChargesAs an ADS holder, you will be required to pay the following fees under the terms of the deposit agreement:Service Fees· Issuance of ADSs (e.g., an issuance of ADS upon a deposit ofClass A ordinary shares, upon a change in the ADS(s)-to-Class Aordinary share(s) ratio, or for any other reason), excluding ADSissuances as a result of distributions of Class A ordinary shares Up to U.S. 5¢ per ADS issued· Cancellation of ADSs (e.g., a cancellation of ADSs for deliveryof deposited property, upon a change in the ADS(s)-to-Class Aordinary share(s) ratio, or for any other reason) Up to U.S. 5¢ per ADS cancelled · Distribution of cash dividends or other cash distributions(e.g., upon a sale of rights and other entitlements) Up to U.S. 5¢ per ADS held · Distribution of ADSs pursuant to (i) stock dividends or other freestock distributions, or (ii) exercise of rights to purchase additionalADSs Up to U.S. 5¢ per ADS held · Distribution of securities other than ADSs or rights to purchaseadditional ADSs (e.g., upon a spin-off) Up to U.S. 5¢ per ADS held · ADS Services Up to U.S. 5¢ per ADS held on the applicable record date(s) establishedby the depositary bankAs an ADS holder you will also be responsible to pay certain charges such as:●taxes (including applicable interest and penalties) and other governmental charges;●the registration fees as may from time to time be in effect for the registration of Class A ordinary shares on the share register andapplicable to transfers of Class A ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon themaking of deposits and withdrawals, respectively;●certain cable, telex and facsimile transmission and delivery expenses;●the expenses and charges incurred by the depositary bank in the conversion of foreign currency;●the fees and expenses incurred by the depositary bank in connection with compliance with exchange control regulations and otherregulatory requirements applicable to Class A ordinary shares, ADSs and ADRs; and●the fees and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the servicing or delivery ofdeposited property.ADS fees and charges payable upon (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person to whom the ADSsare issued (in the case of ADS issuances) and to the person whose ADSs are cancelled (in the case of ADS cancellations). In the case of ADSsissued by the depositary bank into DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made throughDTC, and may be charged to the DTC participant(s) receiving the ADSs being issued or the DTC Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 18 of 21 participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTCparticipant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participants as ineffect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders as of the applicable ADSrecord date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. Inthe case of (i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of theADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC,the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, andmay be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turncharge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs.In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the deposit agreement, refuse therequested service until payment is received or may set off the amount of the depositary bank fees from any distribution to be made to the ADSholder. Certain of the depositary fees and charges (such as the ADS services fee) may become payable shortly after the closing of the ADS offering.Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary bank. You willreceive prior notice of such changes. The depositary bank may reimburse us for certain expenses incurred by us in respect of the ADR program, bymaking available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and thedepositary bank agree from time to time.Amendments and TerminationWe may agree with the depositary bank to modify the deposit agreement at any time without your consent. We undertake to give holders30 days’ prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit agreement. We will notconsider to be materially prejudicial to your substantial rights any modifications or supplements that are reasonably necessary for the ADSs to beregistered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the fees and charges youare required to pay. In addition, we may not be able to provide you with prior notice of any modifications or supplements that are required toaccommodate compliance with applicable provisions of law.You will be bound by the modifications to the deposit agreement if you continue to hold your ADSs after the modifications to the depositagreement become effective. The deposit agreement cannot be amended to prevent you from withdrawing the Class A ordinary shares representedby your ADSs (except as permitted by law).We have the right to direct the depositary bank to terminate the deposit agreement. Similarly, the depositary bank may in certaincircumstances on its own initiative terminate the deposit agreement. In either case, the depositary bank must give notice to the holders at least30 days before termination. Until termination, your rights under the deposit agreement will be unaffected.After termination, the depositary bank will continue to collect distributions received (but will not distribute any such property until yourequest the cancellation of your ADSs) and may sell the securities held on deposit. After the sale, the depositary bank will hold the proceeds fromsuch sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the depositary bank will have nofurther obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding (after deduction of applicablefees, taxes and expenses).In connection with any termination of the deposit agreement, the depositary bank may make available to owners of ADSs a means towithdraw the Class A ordinary shares represented by ADSs and to direct the depositary of such Class A ordinary shares into an unsponsoredAmerican depositary share program established by the depositary bank. The ability to receive unsponsored American depositary shares upontermination of the deposit agreement would be subject to satisfaction of certain U.S. regulatory Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 19 of 21 requirements applicable to the creation of unsponsored American depositary shares and the payment of applicable depositary fees.Books of DepositaryThe depositary bank will maintain ADS holder records at its depositary office. You may inspect such records at such office during regularbusiness hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and thedeposit agreement.The depositary bank will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up and transferof ADSs. These facilities may be closed from time to time, to the extent not prohibited by law.Limitations on Obligations and LiabilitiesThe deposit agreement limits our obligations and the depositary bank’s obligations to you. Please note the following:●We and the depositary bank are obligated only to take the actions specifically stated in the deposit agreement without negligence orbad faith.●The depositary bank disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast orfor the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement.●The depositary bank disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content ofany document forwarded to you on our behalf or for the accuracy of any translation of such a document, for the investment risksassociated with investing in Class A ordinary shares, for the validity or worth of the Class A ordinary shares, for any taxconsequences that result from the ownership of ADSs, for the credit-worthiness of any third party, for allowing any rights to lapseunder the terms of the deposit agreement, for the timeliness of any of our notices or for our failure to give notice.●We and the depositary bank will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement.●We and the depositary bank disclaim any liability if we or the depositary bank are prevented or forbidden from or subject to any civilor criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the depositagreement, by reason of any provision, present or future of any law or regulation, or by reason of present or future provision of anyprovision of our Articles of Association, or any provision of or governing the securities on deposit, or by reason of any act of God orwar or other circumstances beyond our control.●We and the depositary bank disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for inthe deposit agreement or in our Articles of Association or in any provisions of or governing the securities on deposit.●We and the depositary bank further disclaim any liability for any action or inaction in reliance on the advice or information receivedfrom legal counsel, accountants, any person presenting Class A ordinary shares for deposit, any holder of ADSs or authorizedrepresentatives thereof, or any other person believed by either of us in good faith to be competent to give such advice or information.●We and the depositary bank also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or otherbenefit that is made available to holders of Class A ordinary shares but is not, under the terms of the deposit agreement, madeavailable to you.●We and the depositary bank may rely without any liability upon any written notice, request or other document believed to be genuineand to have been signed or presented by the proper parties.●We and the depositary bank also disclaim liability for any consequential or punitive damages for any breach of the terms of thedeposit agreement. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 20 of 21 ●No disclaimer of any Securities Act liability is intended by any provision of the deposit agreement.●Nothing in the deposit agreement gives rise to a partnership or joint venture, or establishes a fiduciary relationship, among us, thedepositary bank and you as ADS holder.●Nothing in the deposit agreement precludes Citibank (or its affiliates) from engaging in transactions in which parties adverse to us orthe ADS owners have interests, and nothing in the deposit agreement obligates Citibank to disclose those transactions, or anyinformation obtained in the course of those transactions, to us or to the ADS owners, or to account for any payment received as partof those transactions.Pre-Release TransactionsSubject to the terms and conditions of the deposit agreement, the depositary bank may issue to broker/dealers ADSs before receiving adeposit of Class A ordinary shares or release Class A ordinary shares to broker/dealers before receiving ADSs for cancellation. These transactionsare commonly referred to as “pre-release transactions,” and are entered into between the depositary bank and the applicable broker/dealer. Thedeposit agreement limits the aggregate size of pre-release transactions (not to exceed 30% of the Class A ordinary shares on deposit in theaggregate) and imposes a number of conditions on such transactions (e.g., the need to receive collateral, the type of collateral required, therepresentations required from brokers, etc.). The depositary bank may retain the compensation received from the pre-release transactions.TaxesYou will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. We,the depositary bank and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell anyand all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceedsdo not cover the taxes that are due.The depositary bank may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release securities on deposit until all taxesand charges are paid by the applicable holder. The depositary bank and the custodian may take reasonable administrative actions to obtain taxrefunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary bank and tothe custodian proof of taxpayer status and residence and such other information as the depositary bank and the custodian may require to fulfill legalobligations. You are required to indemnify us, the depositary bank and the custodian for any claims with respect to taxes based on any tax benefitobtained for you.Foreign Currency ConversionThe depositary bank will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is practical, and itwill distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred inconverting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and other governmentalrequirements.If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable costor within a reasonable period, the depositary bank may take the following actions in its discretion:●Convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the conversionand distribution is lawful and practical.●Distribute the foreign currency to holders for whom the distribution is lawful and practical. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex2d4.htm Type: EX-2.4 Pg: 21 of 21 ●Hold the foreign currency (without liability for interest) for the applicable holders.Governing LawThe deposit agreement and the ADRs are interpreted in accordance with the laws of the State of New York. The rights of holders of Class Aordinary shares (including Class A ordinary shares represented by ADSs) are governed by the laws of the Cayman Islands. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex8d1.htm Type: EX-8.1 Pg: 1 of 1 Exhibit 8.1List of Significant Subsidiaries and Consolidated Variable Interest Entity ofBEST Inc. (as of December 31, 2022)Subsidiaries Jurisdiction of IncorporationEight Hundred Logistics Technologies CorporationBritish Virgin IslandsBEST Logistics Technologies LimitedHong KongZhejiang BEST Technology Co., Ltd.*PRC浙江百世技术 有限公司BEST Logistics Technologies (China) Co., Ltd.*PRC百世物流科技（中国）有限公司BEST Logistics Technologies (Ningbo Free Trade Zone) Co., Ltd.*PRC百世物流科技（宁波保税区）有限公司BEST Capital Inc.Cayman IslandsBEST Capital Holding LimitedBritish Virgin IslandsBEST Capital Management LimitedHong KongXinyuan Financial Leasing (Zhejiang) Co., Ltd.*PRC信远融资租赁（浙江）有限公司BEST Store Network LimitedCayman IslandsBEST Store Network Holding Limited.British Virgin IslandsBEST Store Network Management Limited.Hong KongBEST Store Network (Hangzhou) Co., Ltd.PRCConsolidated Variable Interest EntityJurisdiction of IncorporationHangzhou BEST Information Technology Services Co., Ltd.*PRC杭州百世信息技术服务有限公司Hangzhou Baijia Business Management Consulting Co., Ltd. *PRC杭州百加商业管理咨询有限公司*The English name of this subsidiary or consolidated Variable Interest Entity, as applicable, has been translated from its Chinese name. Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex12d1.htm Type: EX-12.1 Pg: 1 of 1 Exhibit 12.1Certification by the Principal Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Shao-Ning Johnny Chou, certify that:1.I have reviewed this annual report on Form 20-F of BEST Inc. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made knownto us by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internalcontrol over financial reporting; and5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’sinternal control over financial reporting.Date: April 21, 2023By:/s/ Shao-Ning Johnny ChouName:Shao-Ning Johnny ChouTitle:Chief Executive Officer Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex12d2.htm Type: EX-12.2 Pg: 1 of 1 Exhibit 12.2Certification by the Principal Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Gloria Fan, certify that:1.I have reviewed this annual report on Form 20-F of BEST Inc. (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made knownto us by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internalcontrol over financial reporting; and5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’sinternal control over financial reporting.Date: April 21, 2023By:/s/ Gloria FanName:Gloria FanTitle:Chief Financial Officer Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex13d1.htm Type: EX-13.1 Pg: 1 of 1 Exhibit 13.1Certification by the Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the annual report of BEST Inc. (the “Company”) on Form 20-F for the year ended December 31, 2022 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Shao-Ning Johnny Chou, Chief Executive Officer of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: April 21, 2023By:/s/ Shao-Ning Johnny ChouName:Shao-Ning Johnny ChouTitle:Chief Executive Officer Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex13d2.htm Type: EX-13.2 Pg: 1 of 1 Exhibit 13.2Certification by the Principal Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the annual report of BEST Inc. (the “Company”) on Form 20-F for the year ended December 31, 2022 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Gloria Fan, Chief Financial Officer of the Company, certify, pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: April 21, 2023By:/s/ Gloria FanName:Gloria FanTitle:Chief Financial Officer Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex15d1.htm Type: EX-15.1 Pg: 1 of 1 Exhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-8 No. 333-222126) pertaining to the 2008 Equity and Performance Incentive Plan and 2017 EquityIncentive Plan of BEST Inc.,(2)Registration Statement (Form S-8 No. 333-237744) pertaining to 2017 Equity Incentive Plan of BEST Inc., and(3)Registration Statement (Form S-8 No. 333-263062) pertaining to 2017 Equity Incentive Plan of BEST Inc.;of our report dated April 21, 2023, with respect to the consolidated financial statements of BEST Inc. included in this Annual Report (Form 20-F)for the year ended December 31, 2022./s/ Ernst & Young Hua Ming LLPShanghai, the People’s Republic of ChinaApril 21, 2023 Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex15d2.htm Type: EX-15.2 Pg: 1 of 1 Exhibit 15.2April 21, 2023BEST Inc.2nd Floor, Block A, Huaxing Modern Industry ParkNo. 18 Tangmiao Road, Xihu District, Hangzhou, Zhejiang Province 310013People’s Republic of ChinaAttention: The Board of DirectorsDear Sirs or Madam,Re: BEST Inc. (the “Company”)We, King & Wood Mallesons, consent to the reference to our firm under the captions of “Item 3.D — Risk Factors — Risks Related to DoingBusiness in the People’s Republic of China” and “Item 4.B — Business Overview —Regulatory Matters” in BEST Inc.’s annual report onForm 20-F for the year ended December 31, 2022, which will be filed with the Securities and Exchange Commission in the month of April 2023.In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of theSecurities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.Yours faithfully,/s/ King & Wood MallesonsKing & Wood Mallesons Date: 04/21/2023 10:18 AMToppan MerrillProject: 22-31266-1 Form Type: 20-F Client: 22-31266-1_BEST Inc._20-F File: best-20221231xex15d3.htm Type: EX-15.3 Pg: 1 of 1 Exhibit 15.3Certification by the Chief Executive OfficerPursuant to Item 16I(a) of Form 20-FI, Shao-Ning Johnny Chou, Chairman and Chief Executive Officer of BEST Inc. (the “Company”), certify that to my knowledgefollowing due inquiry:(1)As of the date hereof, the directors and officers of the Company consist of: Shao-Ning Johnny Chou, Lin Wan, Xiao Hu, GeorgeChow, Wenbiao Li, Ying Wu, Klaus Anker Petersen, and Gloria Fan;(2)None of the Company’s directors or officers are representatives of any government entity in the People’s Republic China (the“PRC”);(3)As of the date hereof, the following shareholders beneficially own 10% or more of the total outstanding ordinary shares of theCompany: Shao-Ning Johnny Chou and Alibaba Group Holding Limited;(4)No shareholder that beneficially owns 10% or more of the total outstanding ordinary shares of the Company is controlled by anygovernment entity in the PRC;(5)There are no voting, acting-in-concert or other agreements or arrangements, nomination, appointment, designation or other rights, ormaterial relationships, in each case between the Company or any of the aforementioned directors or officers or shareholders on theone hand, and any person on the other hand, that could result in such person being deemed to control the Company; and(6)Based on the above, the Company is not owned or controlled by a government entity in the PRC.Date: April 21, 2023By:/s/ Shao-Ning Johnny ChouName:Shao-Ning Johnny ChouTitle:Chairman and Chief Executive Officer

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