WEIFU HIGH-TECHNOLOGY GROUP CO., LTD.

SEMI-ANNUAL REPORT 2025

August 2025

Section I. Important Notice, Contents and InterpretationBoard of Directors and all directors, senior executives of Weifu High-Technology Group Co., Ltd.(hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements,misleading statements, or important omissions carried in this report, and shall take allresponsibilities, individual and/or joint, for the reality, accuracy and completion of the wholecontents.Yin Zhenyuan, Principal of the Company, and Feng Zhiming, person in charge of accounting works,and Wu Junfei, person in charge of accounting organ (accounting principal) hereby confirm that theFinancial Report of Semi-Annual Report 2025 is authentic, accurate and complete.All directors have attended the BoD Meeting for the Report deliberation.The forward-looking statements with future plans involved in the Report do not constitute asubstantial commitment for investors. Investors and related parties should maintain sufficient riskawareness and investors are advised to exercise caution of investment risks.Possible risks and countermeasures for the future operation of the Company are described in the“Discussion and Analysis of the Management” in the Report and investors are advised to checkthem out.The profit distribution plan that was deliberated and approved by the Board Meeting is: based ontotal share capital of 966,785,693, distributed 1.00 yuan (tax included) bonus in cash for every 10-share held by all shareholders, 0 share bonus issued (tax included) and no transfer of capital reserveinto share capital. When the profit distribution plan is implemented, if there is a change in the totalamount of shares entitled to profit distribution, on the basis of the total amount of shares entitled toprofit distribution on the equity registration date at the time of implementation of the distributionplan, the distribution amount shall be adjusted according to the principle of unchanged distributionproportion.

The Report is prepared in Chinese and English respectively. In the event of any discrepancybetween the two versions, the Chinese version shall prevail.

Content

Section I. Important Notice, Contents and Interpretation ................................................................................... 2

Section II. Company Profile and Main Financial Indexes ................................................................................... 6

Section III. Discussion and Analysis of the Management ..................................................................................... 9

Section IV Corporate Governance, Environmental and Social Responsibilities ...... 23

Section V. Important Events ................................................................................................................................. 26

Section VI. Changes in Shares and Particulars about Shareholders ................................................................ 33

Section VII. Corporate Bonds............................................................................................................................... 37

Section VIII. Financial Report ............................................................................................................................. 38

Section IX. Other Reported Data ....................................................................................................................... 157

Documents Available for Reference

I. Financial statement carrying the signatures and seals of person in charge of the Company, principal of theaccounting works and person in charge of accounting organ (accounting Supervisor);II. Original documents of the Company and manuscripts of public notices that disclosed in the website designatedby CSRC during the reporting period;III. The Semi-Annual report summary is published on China Securities Journal and Securities Times during thereporting period.IV. Place for preparation: Office of the BoD of the Company

Interpretation

Section II. Company Profile and Main Financial IndexesI. Company information

II. Person/Way to contact

III. Other information

1. Company contact information

Whether the registered address, office address, postal code, website, email address, etc. of the Company changed during the reportperiod or not

□ Applicable ?Not applicable

The registered address, office address, postal code, website, and email address of the Company remained unchanged during thereport period. Please refer to the 2024 Annual Report for details.

2. Information disclosure and location

Has the information disclosure and location changed during the report period?

□ Applicable ? Not applicable

The website and media name and website of the stock exchange where the Company disclosed its semi-annual report, and theplace of placement of the Company’s semi-annual report remains unchanged during the report period. Please refer to the 2024Annual Report for details.

3. Other relevant information

Whether there is any change in other relevant information during the report period or not

□ Applicable ?Not applicable

IV. Main accounting data and financial indexes

Whether it has retroactive adjustment or re-statement on previous accounting data or not

□ Yes ? No

V. Difference of the accounting data under accounting rules in and out of China

1. Difference of the net profit and net asset disclosed in financial report, under both IAS (InternationalAccounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)

□ Applicable ? Not applicable

The Company had no difference of the net profit or net asset disclosed in financial report, under either IAS (InternationalAccounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in report period.

2. Difference of the net profit and net asset disclosed in financial report, under both foreign accountingrules and Chinese GAAP (Generally Accepted Accounting Principles)

□ Applicable ?Not applicable

The Company had no difference of the net profit or net asset disclosed in financial report, under either foreign accounting rules orChinese GAAP (Generally Accepted Accounting Principles) in report period.

VI. Items and amounts of non-recurring gains/losses

?Applicable □Not applicable

In RMB

Other gains/losses that conform to the definition of non-recurring gains/losses:

□ Applicable ? Not applicable

The Company does not have other gains/losses that conform to the definition of non-recurring gains/losses.Information on the definition of non-recurring gains/losses listed in the Q&A Announcement No.1 on Information Disclosure forCompanies Offering Their Securities to the Public --- Non-recurring Gains/Losses as Recurring Gains/Losses

□Applicable ?Not applicable

The Company does not have any non-recurring gains/losses listed in the Q&A Announcement No.1 on Information Disclosure forCompanies Offering Their Securities to the Public --- Non-recurring Gains/Losses as Recurring Gains/Losses.

Section III. Discussion and Analysis of the Management

I. Major business of the Company within report period(I) Main business engaged by the Company

The main business of the Company is the research and development, production and sales of core automotive parts, and currently hasfour business segments, including energy conservation and emission reduction, green hydrogen energy, intelligent electric, industrialand other. During the report period, the main products sold were diesel fuel injection system, exhaust aftertreatment system, airintake system, core parts of fuel cells, core parts of hydrogen energy and electric drive systems, core parts of thermal managementsystems, cabin core parts, core parts of brake systems, core components for situational awareness, core components of hydraulicsystem, etc.

1. Diesel fuel injection system, including high pressure oil pump, high pressure oil rail, injector, filter and other products, widelyused in diesel engines of all levels of power, supporting various trucks, buses, construction machinery, marine, agriculturalmachinery, generator sets, and can meet the CN VI, off-road stage IV emission regulations, leading in the product variety, productionscale, market share. While doing a good job in supporting domestic engines, some products are exported to the Americas, SoutheastAsia, the Middle East and other regions.

2. Exhaust aftertreatment system, including diesel purifier, gasoline purifier, natural gas purifier, muffler, catalyst and other products,can meet the CN VI, off-road stage IV emission regulations, with leading technical level, market scale and production capacity inChina, widely used in traditional power & plug-in hybrid passenger vehicles, commercial vehicles, off-road machinery and otherfields, and can provide strong support for product upgrading and renewal of OEMs.

3. Air intake system, including diesel supercharger, gasoline supercharger, natural gas supercharger and other products, can meet CNVI, off-road stage IV emission regulations, with the scope of application covering commercial vehicles, traditional power & plug-inhybrid passenger vehicles, construction machinery, agricultural machinery, generator sets and other fields, and can support the majordomestic OEMs and automobile manufacturers.

4. Core parts of fuel cells, including membrane electrode, bipolar plate (graphite, metal), catalyst and BOP critical parts (such asvalves, pumps, air compressor critical parts), hydrogen storage cylinder and other products, mainly support domestic and foreignhydrogen fuel cell stack and system manufacturers and energy storage enterprises.

5. Core parts of electric drive systems, including motor shaft, end cover, water jacket and other products, mainly support domesticand foreign new energy passenger car enterprises or electric drive system manufacturers.

6. Core parts of thermal management systems, including electronic oil pump, electronic water pump, thermostat and other products,mainly support domestic and foreign new energy passenger vehicles, commercial vehicle enterprises.

7. Cabin core parts, including car seat assembly, seat skeleton, electric long slide, shock absorber and other products, mainly supportdomestic mainstream commercial vehicles, passenger car enterprises.

8. Core parts of brake systems, including mechanical vacuum pump and other products, mainly support domestic and foreignmainstream passenger car enterprises.

9. Core components for situational awareness: Products include 4D imaging radar, front radar, corner radar, in-cabin radar, andbarrier radar, primarily used in intelligent driving, smart cockpits, smart parking, and vehicle-to-infrastructure (V2X) applications.

10. Core components for suspension systems: Products include hydraulic motor pumps and accumulators, primarily supplied todomestic and international new energy passenger vehicle manufacturers.

11. Core components for hydraulic systems: Products include forklift hydraulic systems, motor pumps, internal gear pumps, motorcontrollers, and piston components, supplied to major domestic hydraulic equipment manufacturers.

(II) Business model

The Company adheres to the business philosophy of "producing high-quality products, establishing a renowned brand, and achievingshared value growth." It operates under a model where the parent Company provides centralized management while subsidiarieshandle decentralized production. The parent Company is responsible for formulating strategic development plans and businessobjectives. It also oversees the subsidiaries in areas such as finance, major personnel management, core raw materials, quality control,and technology research and development. The subsidiaries manage production based on market orders, ensuring uniform productquality, timely understanding of customer needs, logistics cost savings, timely product supply, and improved economic efficiency forthe Company.(III) Industry development

The Company operates in the automotive parts manufacturing industry. In the first half of 2025, China’s automotive industry, amid acomplex and volatile global economic environment, remained committed to innovation-driven development and deepened structuraladjustments, fully leveraging the resilience of the industrial chain and market potential. Guided by the “stabilizing growth andboosting consumption” policies of the CPC Central Committee and the State Council, coupled with the continuation of the “trade-in”policy, the ongoing iteration of new energy vehicle technologies, and the accelerated implementation of internationalization strategies,the industry as a whole demonstrated a development trend characterized by overall stability and structural optimization. In the firsthalf of the year, national automobile production and sales reached 15.621 million units and 15.653 million units, representing year-on-year increases of 12.5% and 11.4%, respectively. The penetration rate of new energy vehicles exceeded 44.3%, while exportsgrew by more than 10% year-on-year.

1. Commercial vehicle market overview

In the first half of 2025, under a macroeconomic environment of stable operation and a new normal in the freight marketcharacterized by oversupply of vehicles, insufficient cargo volume, and subdued freight rates, replacement and renewal served as theprimary growth drivers, resulting in a slight increase in total sales. From January to June, commercial vehicle production and salesreached 2.099 million units and 2.122 million units, representing year-on-year increases of 4.7% and 2.6%, respectively. By vehicletype, truck production and sales totaled 1.837 million units and 1.856 million units, up 4.2% and 1.8% year-on-year, respectively.Within the truck segment, compared with the same period of the previous year, production and sales of heavy-duty trucks and light-duty trucks recorded varying degrees of growth, while those of medium-duty trucks and mini trucks experienced declines to varyingextents. Specifically, heavy-duty truck sales reached 539,000 units, up 6.9% year-on-year; medium-duty truck sales were 60,000units, down 15.1% year-on-year; light-duty truck sales reached 1.036 million units, up 6.7% year-on-year; and mini truck sales were222,000 units, down 20.4% year-on-year. Bus production and sales totaled 262,000 units and 265,000 units, representing year-on-year increases of 8.4% and 8.7%, respectively. Within the bus segment, compared with the same period of the previous year, all threemajor bus categories recorded varying degrees of growth in both production and sales. Specifically, sales of large and medium-sizedbuses reached 52,000 units, up 2.4% year-on-year, while sales of light buses reached 213,000 units, up 10.3% year-on-year.

2. Passenger vehicle market overview

Driven by the “Two New” policies, domestic demand saw a significant boost, further supported by sustained growth in overseasexports. In the first half of the year, the passenger vehicle market maintained steady upward momentum, with cumulative productionand sales reaching 13.522 million units and 13.531 million units, representing year-on-year increases of 13.8% and 13.0%,respectively. Leveraging advancements in quality, electrification, and intelligent technologies, Chinese brands achieved a penetrationrate of 68.5%, contributing the majority of domestic market growth and substantially replacing the market share of joint venture andforeign brands. Passenger vehicle exports totaled 2.581 million units, up 10.3% year-on-year. Although the growth rate narrowed dueto a higher export base, increased trade barriers, and slower automotive industry transformation in other markets, the long-termoutlook remains positive.

3. New energy vehicle market overview

Supported by favorable policies, increased investment from automakers, and rapid export growth, the new energy vehicle (NEV)market achieved strong momentum in the first half of the year. Cumulative production and sales reached 6.968 million units and

6.937 million units, representing year-on-year increases of 41.4% and 40.3%, respectively, with a penetration rate of 44.3%. Amongthe major categories, compared with the same period last year, production and sales of fuel cell vehicles declined significantly, while

the other two major NEV categories recorded varying degrees of growth. Specifically, battery electric vehicle (BEV) sales reached

4.42 million units, up 46.2% year-on-year; plug-in hybrid electric vehicle (PHEV) sales totaled 2.52 million units, up 36.0% year-on-year; and fuel cell vehicle (FCV) sales were 13,730 units, down 46.8% year-on-year.

4. Off-road market overview

In the first half of 2025, the construction machinery industry entered an upward phase under the combined influence of multiplefactors such as the recovery of infrastructure investment, the arrival of the replacement cycle, and the boost from exports. The salesvolume of diesel internal combustion engines for construction machinery reached 455,000 units, marking a year-on-year growth of

2.9%. In contrast, the agricultural machinery market faced a decline in grain prices and a diminishing marginal return on cross-regional operations, which weakened the driving force for investment in agricultural machinery. Coupled with the market entering adownward cycle, the sales volume of diesel internal combustion engines for agricultural machinery stood at 818,000 units in the firsthalf of the year, a year-on-year decrease of 0.9%.(Source: China Association of Automobile Manufacturers, First Commercial Vehicle Network, China Internal Combustion EngineIndustry Association)(IV) Company operations during the report periodSince the beginning of the year, the Company has earnestly implemented its annual operational objectives and plans, actively seizingand responding to industry opportunities and challenges. During the report period, the Company achieved operating revenue of 5.760billion yuan, representing an increase of 1.16% compared with the same period of the previous year; net profit attributable toshareholders of the listed company was 702 million yuan, down 26.45% year-on-year.The main initiatives undertaken by the Company during the report period were as follows:

1. Captured market opportunities and drove business expansion

Energy saving and emission reduction products: Leveraging sustained growth opportunities in niche markets such as hybridpassenger vehicles, sales of gasoline catalytic converters exceeded 2.05 million units, up 9% year-on-year, while diesel catalyticconverter sales reached 150,000 units, up 26% year-on-year; market share for after-treatment system products in the passengervehicle segment continued to increase steadily, while market share in the commercial vehicle segment remained stable. Among theintake system products, the sales volume of four-cylinder diesel turbochargers reached 370,000 units, with a year-on-year growth ofover 16%, continue to maintain the industry position of having the highest market share in the country. Gasoline turbochargers seizedthe market opportunity of hybrid passenger vehicles, newly acquired multiple key projects from leading customers, and are expectedto gradually achieve mass production in the second half of the year. The sales volume of six-cylinder turbochargers increased by over25% year-on-year, and multiple key customer projects were obtained.Intelligent Electric Products: The sales volume of core components of the electric drive system has achieved year-on-year growth,and multiple leading customers have been secured for designated projects. The electronic fuel pump product has achieved batchproduction for multiple domestic and foreign customer projects, and several key customer projects are being advancedsimultaneously. The millimeter-wave radar business has established a close strategic partnership with Bosch, actively promoting in-depth cooperation in the market, technology, and supply chain. It is expected to achieve mass production within the year. Theautomotive seat products have achieved large-scale mass production for key projects of both passenger and commercial vehicles andare in a rapid growth phase. Moreover, positive progress has been made in core component innovation technologies, such as the longslide rail innovation technology.Green hydrogen energy products: The sales volume of metal bipolar plates has grown rapidly, obtaining multiple customerdesignated projects and metal single-cell development projects, while actively exploring overseas markets; BOP products such aselectronic water pumps and ejectors have obtained multiple customer project designations; completed the delivery of 100-kilowattPEM hydrogen production equipment and the first electrolytic water hydrogen production demonstration project in Wuxi - the WeifuPEM hydrogen production industrial application project - has been put into operation and started up.

2. Drove product iteration and accelerated R&D implementation

Energy saving and emission reduction products: The reliability verification of the dual-fuel injector and gas pressure regulationmodule for the engine was completed, and the first sample on the production line was successfully produced；The performance test

of the engine with high-pressure methanol injection system was completed; The ignition and basic performance tests of the hydrogendirect injection injector engine have been completed. The post-treatment products have completed the development of multiplehybrid passenger vehicle models and export projects, expanded the development of commercial vehicles and non-road applications,and developed methanol engine products. We have also actively carried out the development of post-treatment packaging, catalysts,and system integration to meet the National VII emission standards. The turbocharger products are accelerating the development ofcustomer projects for gasoline hybrid passenger vehicles and diesel and natural gas commercial vehicles, achieving batch productionfor some key customer projects, and expanding and supplying methanol turbocharger products to key customers.Intelligent Electric Products: The 120W electronic oil pump platform has completed product development and achieved massproduction, the 48V electronic oil pump customer project has achieved batch production. The suspension motor pump project hasbeen awarded a project order from a leading customer and conducted technical exchanges with multiple customers and are advancingthe project order process. The development of 3D corner radar is progressing smoothly and is accelerating its industrialization. The4D imaging radar is continuously advancing in development optimization and industrial application.Green Hydrogen Products: The Company is steadily advancing the development of PEM electrolysis water hydrogen productionsystem platform technology and products, as well as the delivery of customer projects. The commissioning of the electrolytic watercatalyst production line has been completed, and the iterative development of the electrolytic water membrane electrode products hasbeen accomplished. Complete the development of the 35Mpa bottle valve B sample and initiate type approval, and continuouslypromote the development and application of bottle valves, pressure reducing valves and other products; The fuel cell businesscontinues to enhance the performance and durability of membrane electrodes, and promotes the development and industrialization ofkey BOP components such as electronic water pumps, thermostats, and hydrogen circulation pumps.

3. Optimized strategic planning and deepened investment cooperation

In terms of strategic planning: Focus on advancing the strategic pre-research work related to the withdrawal of the IPO applicationand market targets; conduct planning research around the product areas of the humanoid robot industry to support and promote thecompany's external cooperation and internal R&D strategic actions; actively promote the comprehensive deepening of strategiccooperation with Bosch; strengthen the implementation and advancement of the company's strategic goals and start the work on the15th Five-Year Plan. In terms of investment and cooperation: Advance the cooperation with Bolong on the full active suspensionmotor hydraulic pump project; promote the implementation of joint venture and cooperation projects such as WFSS Radar andGerman Voith hydrogen storage bottles and maintain partnerships; actively explore potential target projects such as humanoid robots,automotive seats, and core components of the chassis domain; deepen the cooperation with strategic partners such as Bosch inintelligent business and hydraulic business. Continuously improve investment management and post-investment evaluation work, andconstantly improve the management system of the Investment Committee.

4. Strengthened the quality system and advancing intelligent manufacturing

Carried out annual quality initiatives focusing on quality systems, preventive controls, process management, problem resolution, andteam development; prioritized the standardization of quality issue resolution and the enhancement of personnel competency acrosstalent tiers; refined quality requirements for the project development phase, and established a quality management model fromsample to SOP+; implemented quality empowerment and collaborative management for key business domains and developmentprojects. Released the Group’s process planning roadmap, reviewed and categorized existing process technologies, and definedcapability improvement targets. Launched the Weifu Quality Management Platform project, completed the business blueprint, anddesigned the functional modules for Phase I. Continued to drive digital and intelligent transformation, with WFAC new energyelectric drive workshop passing the national Level 4 Intelligent Manufacturing Capability Maturity Assessment and being recognizedas a “National Intelligent Manufacturing Model Factory.” Promoted the application of FMS and TMS systems across the Group’sbusiness divisions and subsidiaries; extended the digital factory model to WFTT and advanced the design of integrated projectblueprints; expanded technical support and core system coverage to overseas subsidiaries and developed an operation andmaintenance plan for the overseas data center; facilitated the application of AI technologies such as Deepseek in enterprise scenarios,reviewed and assessed new scenario requirements, and completed development of multiple projects. Progressed steadily on

construction projects including Phase VI of the 103 Plot Plant, the Hydrogen Energy Industrial Park, and the Huishan Chang’anIndustrial Park.

5. Enhanced operational quality and strengthened risk management

Optimized the operational monitoring and analysis mechanism, reinforced the “One Report, One Meeting” and OPL managementpractices; advanced the review and documentation of responsibilities and processes for new business divisions; and coordinated theextension of institutional processes to overseas subsidiaries. Streamlined financial domain policies and processes, identified businessrisks and implemented updates, and improved process efficiency. Continued to conduct product profitability analyses, established acost penetration analysis system, and integrated market-based settlement into monthly business division reviews; strengthened assetleasing and disposal evaluations. Alleviated cost pressures through inventory optimization and material substitution, while drivingprocess improvements and resource recycling to offset long-term cost pressures. Completed supplier category mapping, determinedrisk suppliers based on supply value and product types, identified high-risk suppliers and optimization opportunities, and providedsupport for supply chain strategy adjustments. Continued to advance SRM platform, monitor its operational effectiveness, andimplement ongoing improvements. Further enhanced the risk control system, continuously improving risk management capabilitiesand strengthening the review, control, and response to risk events at all levels. In strategic emerging businesses and key projects,enhanced talent acquisition and optimized talent structure; organized targeted training programs such as English proficiency and“Excellent Engineer” initiatives, conducted advanced training for high-skilled intelligent manufacturing talent, established skill-levelenhancement training programs, and promoted the development of the “San Hang Yi Jiang” talent initiative. Continued to promotethe cultivation of international talent, formulated international assignment policies, and dispatched management personnel tooverseas subsidiaries.

II. Analysis on core competitivenessThe company shall comply with the disclosure requirements for the automobile manufacturing industry as specified in the ShenzhenStock Exchange Guidelines for Self-Regulation of Listed Companies No. 3 – Industry Information Disclosure.

1. Industry and brand advantages. Established in 1958, with more than sixty years of development, the Company has become arenowned manufacturer of auto parts in China and has established long-term and stable cooperation with major domestic OEMs andvehicle manufacturers. The existing core auto parts products such as automotive fuel injection system, exhaust gas after-treatmentsystem, air intake system and core parts of hydrogen fuel cell have strong market competitiveness and high market shares. TheCompany is a leading enterprise in the internal combustion engine industry of China and ranked 39th on the 2024 Top 100 ChineseAutomotive Parts Enterprises. The Company's subsidiaries, WFLD and WFTT, were respectively recognized as the 7th and 8th batchof National Manufacturing Single Champion Enterprises, while WFTT and WFJN were both awarded the title of NationalSpecialized, Refined, Unique and Innovative "Little Giant" Enterprises.

2. Technology and product advantages. The Company is a national high-tech enterprise with scientific research platforms such asNational Enterprise Technology Center, National High Technology Research and Development Program AchievementIndustrialization Base, Postdoctoral Research Station, Jiangsu Provincial Postgraduate Workstation, as well as several provincialengineering technology research centers, provincial engineering laboratories and other R&D institutions, which mainly focus on fuelinjection system for vehicles, exhaust gas after-treatment system, air intake system, hydrogen fuel cell, intelligent network, thermalmanagement system and other businesses for technological innovation and product development. The Company has acquired anumber of key core technologies, with the technical indicators of its main products at the leading level in the industry. In recent years,the Company has made key strategic layout in the fields of green hydrogen energy, intelligent electric power industries and otherfields, and formed product technology research and development capabilities in hydrogen energy and fuel cell core components,research and development capabilities for renewable energy hydrogen production, core parts of E-drive, thermal management systemcomponents, intelligent perception modules, hydraulic systems, core components as well as other components.

3.Management and manufacturing advantage: The company has a sound organizational structure, management systems and processes,and has established a financial shared service platform, which enables the effective transfer and stable operation of organizations,personnel, business operations and accounting; an human resource information system platform, which ensures the timeliness,

accuracy and standardization of basic data related to organization, personnel, compensation and attendance; and a procurementshared system, which connects the information between the company and its suppliers and realizes the closed-loop management ofthe procurement process. The Company has implemented Weifu Production System (WPS) with lean concept and established anoverall process quality management system with relatively strong manufacturing, quality assurance, cost control and product deliverycapabilities. With the focus on smart manufacturing, the Company has continued to build a smart factory with Weifu characteristicsand promote the application of big data analysis and AI application, as well as application of technologies such as cloud computingand the Internet of Things, which can strongly support the future business development of the Company.

4. Marketing and service advantages. The Company features a stable, professional and experienced marketing team, which canprovide targeted support and services based on customer demands, as well as cordial customer relationships. With regard to long-term strategic customers, the Company has established key account managers, cooperating with marketing departments and businessdivisions to promote sale businesses. Regular visits among the management of the companies to promote communication andcooperation. The Company has a relatively complete after-sales service system, and has built an after-sales service network,intelligent service platform, and set up special maintenance technical service stations nationwide to regularly train end-users in theuse of maintenance and fault analysis and judgment, so as to provide customers with fast, timely and professional all-round after-sales services.

5. Talent team advantages. The management team of the Company has extensive experience in the auto parts industry with excellentindustry reputation. The Company attaches importance to the growth of employees as well as the development of core talents. Withyears of accumulation, the Company has deposited a group of professional and high-quality management and technical talents andestablished a reasonable talent echelon, which provides a strong guarantee of human resources for the long-term and stabledevelopment of the Company. The human resource management system of the Company is relatively comprehensive, and thecontinuously optimized human resource management system has provided a fair platform for career development of employees torealize their values. The Company attaches importance to the service and care for employees, and aims to enhance the serviceexperience of employees through the construction of employee self-help platform to create a working environment with warmth anda sense of belonging.

6. International cooperation advantages. The Company is committed to the core automotive parts industry and has long beencooperating with strategic partners at home and abroad in depth. The Company has been cooperating with industry giant RobertBosch Company since 1984, and has established a long-term and stable cooperation relationship with Bosch and continuouslyexpanded cooperation in new business areas, and the cooperation model between the two sides has become an industry model.Meanwhile, the Company has built joint ventures with Autocam in the United States and Voith Germany and cooperates closely inthe field of high-end precision manufacturing and hydrogen storage cylinder. By long-term cooperation with renowned enterprises inEurope and the United States, the Company has cultivated a group of middle and senior management and technical personnel withinternational communication abilities, international visions and familiarity with international standards, and has mastered R&Dprocess design, quality control and production management capabilities with international advanced levels, which has promotedfavorable development of the business of the Company as well as international business and market development.

7. Outstanding Corporate Culture. The Company upholds the mission of “Driving a Better Life with Quality and Intelligence” andthe vision of “Becoming a Domestic First-Class and Internationally Leading Industrial Components Enterprise,” while practicing itscore values of “Focus, Innovation, Responsibility, and Integration” and embracing the corporate spirit of “Practical Action, ProactiveEngagement, Collaborative Partnership, and the Courage to Lead.” The Company has developed a “Quality & Intelligence” culturalsystem, with “Quality” and “Intelligence” serving as dual cultural engines—embodying a commitment to its original aspirations anda pursuit of future excellence. This strong corporate culture provides robust support for the Company’s sustained excellence inoperations and its growth into a domestic first-class and internationally leading industrial components enterprise, playing an activerole in the achievement of strategic objectives.III. Analysis of main business

Overview

Refer to the relevant content of “1. Major business of the Company within report period”.Year on year changes in major financial data

In RMB

Significant changes in the composition or source of profits of the Company during the report period

□ Applicable ?Not applicable

There have been no significant changes in the composition or source of profits of the Company during the report period.Component of operation income

In RMB

Information on industries, products, or regions accounting for more than 10% of the Company's operating income or operating profit?Applicable □Not Applicable

IV. Analysis of non-main business

?Applicable □Not applicable

In RMB

V. Asset and liability analysis

1. Major changes of asset component

In RMB

2. Major foreign assets

?Applicable □Not applicable

3. Assets and liabilities measured at fair value

?Applicable □ Not applicable

In RMB

Other changes: Maturity redemptionWhether there were major changes in the measurement attributes for main assets of the Company in report period or not

□ Yes ?No

4. The asset rights restricted till end of the report period

In RMB

VI. Analysis on investment

1. Overall status

?Applicable □Not applicable

2. Significant equity investments obtained during the report period

?Applicable ?Not applicable

Note: It is presented based on the central parity rate of RMB against foreign currencies in the inter-bank foreign exchange marketas disclosed by the company for the first time.

3. Major non-equity investment in progress in report period

□ Applicable ? Not applicable

4. Financial asset investment

(1) Securities investment

? Applicable □Not applicable

In RMB

Note: Hanma Technology was generated from the conversion of accounts receivable into securities.

(2) Derivative investment

□ Applicable ? Not applicable

There are no derivative investments during the report period.

5. Application of raised proceeds

□ Applicable ? Not applicable

There is no application of raised proceeds during the report period.

VII. Sales of major asset and equity

1. Sales of major asset

□ Applicable ? Not applicable

No major asset was sold during the report period.

2. Sales of major equity

□ Applicable ? Not applicable

VIII. Analysis of main controlling and participating companies? Applicable □ Not applicableMain subsidiaries and participating enterprises with over 10% influence on net profit of the Company

In RMB

Subsidiaries acquired and disposed in report period?Applicable ?Not applicable

Description of major participating enterprises:

Nil

IX. Structured subject controlled by the Company

□ Applicable ? Not applicable

X. Risks faced by the Company and corresponding measures

1. Macroeconomic and market risks

Currently, the macroeconomic and market environment remains complex and challenging, and the automotive industry will still facesignificant pressure. If the demand in the automotive industry declines and competition within the industry intensifies, it will have acertain impact on the company's production, operation and profitability.Countermeasures: The company will keep a close eye on macroeconomic trends and industry developments, consolidate the marketposition of its existing businesses, proactively expand into new businesses, enhance the core competitiveness of its producttechnologies, and strive to improve the company's overall competitiveness and risk resistance capability.

2. Operation management and control risks

With the acceleration of the international layout of the Company and the expansion of the scope of strategic new business, especiallyin the field of new energy, the management span is relatively large with potential operational management and investment risks.Countermeasures: The Company will continuously improve and optimize internal management, improve processes, and furtherregulate management and control operational risks; Reinforce the control of international business and accelerate the construction ofinternational talent team to satisfy the strategic development demands of the enterprise.

3. Risk of raw material price fluctuations

The company's main raw materials include aluminum, precious metals, etc. The continuous rise in their prices will bring the risk ofincreased costs to the company.Countermeasures: The company will actively take measures such as improving market forecasting capabilities, planning productioncapacity in advance, and reasonably controlling raw material inventory to mitigate the risk of raw material price fluctuations. Besides,it will continuously optimize supply chain management, strengthen the capability of vertical integration in the industrial chain, andtransfer part of the risks through cost control measures and product price adjustments, so as to reduce the impact of raw materialprice fluctuations on performance.

4. Risks related to financial instruments

The major financial instruments of the Company include monetary funds, structured deposits, receivables, investments in equityinstruments, financial products, borrowings, payables, etc. In the process of operation, the Company is exposed to risks related tofinancial instruments, including credit risks, market risks and liquidity risks.Countermeasures: Identify and analyze various risks exposed to the Company, establish appropriate risk tolerance thresholds andmanage risks, monitor various risks in a timely manner, ensure that risks are controlled within limits, minimize the negative impact ofrisks on the operating performance of the Company, and maximize the interests of shareholders and other investors.

XI. Formulation and implementation of market value management system and valuationenhancement planWhether the company has formulated market value management system or not??Yes □ NoTo strengthen the company's market value management, further standardize its market value management practices, protect thelegitimate rights and interests of the company's investors (especially medium and small investors) and other stakeholders, enhancethe company's investment value, and improve investor returns, the company has formulated the Market Value Management Systemin accordance with the relevant provisions of laws, regulations and normative documents such as the Company Law of the People'sRepublic of China, the Securities Law of the People's Republic of China, the Guidelines for Supervision of Listed Companies No.10 – Market Value Management, and the Rules Governing the Listing of Stocks on Shenzhen Stock Exchange, as well as theArticles of Association of the Company, and in combination with the company's actual situation. This system was reviewed andapproved at the 6th meeting of the 11th session of the Board of Directors on April 16, 2025.Whether the company has disclosed valuation enhancement plan or not?

□Yes ?No

XII. Implementation of the action plan for “Double Improvement of Quality and Return”Whether the Company discloses the Action Plan for “Double Improvement of Quality and Return” or not?

□Yes ?No

Section IV Corporate Governance, Environmental and Social

Responsibilities

I. Changes in directors, supervisors and senior executives?Applicable ? Not applicable

II. Profit distribution and capitalization of capital reserves during the report period?Applicable □Not applicable

III. Implementation of the Company’s stock incentive plan, employee stock ownership planor other employee incentives

□Applicable ?Not applicable

The company didn’t implement stock incentive plan, employee stock ownership plan or other employee incentives.

IV. Environment information disclosure

Whether the listed company and its major subsidiaries included in the list of enterprises are required to disclose environmentinformation in accordance with laws?? Yes □ No

V. Social responsibility

In 2025, the Company remains firmly oriented toward high-quality development, integrating social responsibility into the fabric of itscorporate strategy, and fulfilling its pledge to “Give Back to Society What is Taken from Society” with a steadfast and pragmaticapproach. From caring for employees in the smallest details to engaging in extensive social welfare initiatives, the Company isguided by the principles of “Humanity, Benevolence, and Dedication,” ensuring that every action serves as a warm bridge connectingthe enterprise with society, and writing a responsible corporate chapter amid the tides of the times.In the area of employee care, the Company has established a multi-dimensional support network by leveraging resources from theMunicipal Federation of Trade Unions, the Municipal Red Cross Society, the Industrial Group, and its own Weifu Group PublicWelfare Mutual Aid Fund to create a comprehensive assistance system. By precisely addressing diverse needs such as medicalassistance, educational support, and livelihood aid, the Company provided a total of 238,100 CNY in assistance to 49 employees.From emergency medical aid to scholarship programs, from livelihood support to participation in public welfare projects, eachcontribution embodies the Company’s warm commitment to “Treating the Enterprise as Home.” On the public welfare stage, theCompany continues to demonstrate its sense of responsibility: donating 75,000 CNY to the Wuxi Red Cross Society and winning the“Organizational Award for Red Cross Fundraising” for consecutive years, fulfilling its philanthropic mission throughinstitutionalized giving. The Company also innovatively advanced the “Healthy Enterprise” initiative by organizing a series ofactivities, including on-site medical consultations, first-aid skills training (such as cardiopulmonary resuscitation and the Heimlichmaneuver), and lectures on chronic disease prevention and treatment. These efforts have equipped employees with self-rescue andmutual aid skills, extending health and well-being into every aspect of both work and life.From the “Warmth to Yushu” initiative, which delivered brand-new blankets to Yushu No. 4 Complete Primary School in Qinghai,to heartfelt companionship at Meicun Nursing Home during the Dragon Boat Festival; from environmental clean-up efforts at CanalPark under the “Protect Green Waters and Lush Mountains” campaign, to public disaster prevention classes conducted by youngvolunteers at Changlei Community; from the innovative “Swap Idle Books for Vegetables” green charity program, to ongoingscholarship and hardship assistance projects—Weifu employees have measured responsibility with their footsteps and infused publicwelfare with innovative energy.This commitment is further reflected in the exemplary actions of employees: an employee has donated whole blood 30 times andblood components 63 times over the past 22 years, earning the “National Award for Special Contribution to Voluntary BloodDonation.”Looking ahead, the Company will continue to write its commitment to social responsibility with the “pen” of duty and the “ink” ofpractical action, sustaining efforts in the areas of employee growth, community co-development, and public welfare innovation.

From deepening the “Enterprise as Home” care system to expanding the “Love Warms Society” public welfare footprint, theCompany will remain in step with the times and in harmony with society, ensuring that every effort becomes a spark contributing tocommon prosperity, converging into a galaxy that lights the future, and continuously embodying the solid responsibility of acorporate citizen in the new era.

Section V. Important EventsI. Commitments completed in Period and those completed till the end of the Period fromactual controller, shareholders, related parties, purchaser and companies?Applicable ? Not applicableThere are no commitments which are not completed in Period and those completed till the end of the Period from actual controller,shareholders, related parties, purchaser and companies.II. Non-operational fund occupation by controlling shareholders and their related parties

□ Applicable ? Not applicable

No non-operational fund occupation by controlling shareholders and their related parties in period.III. External guarantee out of regulations

□ Applicable ? Not applicable

No external guarantee out of the regulations occurred in the period.

IV. Appointment and dismissal of CPAWhether the semi-annual financial report has been audited or not?

□ Yes ? No

The company's semi-annual report has not been audited.V. Explanation from the BOD, the board of supervisors and independent directors (ifapplicable) for “Qualified Audit Opinion” issued by CPA

□ Applicable ?Not applicable

VI. Explanation from the BOD for “Qualified Audit Opinion” of last period

□ Applicable ?Not applicable

VII. Bankruptcy reorganization

□ Applicable ?Not applicable

No bankruptcy reorganization for the Company in report periodVIII. Lawsuits

Material litigation and arbitration matters

□ Applicable ? Not Applicable

During the report period, the company has no material litigation or arbitration matters.Other litigation matters? Applicable □ Not Applicable

IX. Penalty and rectification

□ Applicable ?Not applicable

No penalty and rectification for the Company in report period.

X. Integrity of the Company, its controlling shareholder and actual controller

□ Applicable ?Not applicable

XI. Major related transaction

1. Related transaction with routine operation concerned

? Applicable ? Not applicable

2. Assets or equity acquisition, and sales of assets and equity

□ Applicable ? Not applicable

3. Related transaction of joint external investment

□ Applicable ?Not applicableNo related transaction of joint external investment occurred in the period

4. Related credits and liabilities

□ Applicable ? Not applicable

No related credits and liabilities occurred in period

5. Contact with related finance companies

□ Applicable ?Not applicable

There are no deposits, loans, credits or other financial businesses between the finance companies with associated relationship andrelated parties

6. Transactions between the finance companies controlled by the Company and related parties

□ Applicable ? Not applicable

There are no deposits, loans, credits or other financial business between the finance companies controlled by the Company andrelated parties

7. Other major related transactions

? Applicable ?Not applicableThe company held the 4

th meeting of the 11

thsession of the Board of Directors on October 23, 2024, and reviewed and approved theProposal on Acquiring the Equity of Minority Shareholders of the Controlled Subsidiary and Connected Transactions. For specificdetails, please refer to the Announcement on Acquiring the Equity of Minority Shareholders of the Controlled Subsidiary andConnected Transactions (Announcement No.: 2024-067) disclosed by the company on October 25, 2024. In February 2025, thecompany completed the acquisition of the equity of minority shareholders of the subsidiary; and the subsidiary has completed theindustrial and commercial change registration procedures and obtained a new business license. For specific details, please refer to theProgress Announcement on Acquiring the Equity of Minority Shareholders of the Controlled Subsidiary and Connected Transactions

(Announcement No.: 2025-005) disclosed by the company on February 22, 2025.The company held the 25

th meeting of the 10

thsession of the Board of Directors on May 14, 2024, and reviewed and approved theProposal on Intended Capital Increase to the Equity Investment Company and Connected Transactions. For specific details, pleaserefer to the Announcement on Intended Capital Increase to the Equity Investment Company and Connected Transactions(Announcement No.: 2024-038) disclosed by the company on May 15, 2024. On June 12, 2025, the company disclosed the ProgressAnnouncement on Capital Increase to the Equity Investment Company and Connected Transactions (Announcement No.: 2025-044).The company and all parties have completed the signing of the first round of capital increase agreement and fulfilled the payment ofrelevant funds in accordance with the agreement.For more information on major related party transactions, please refer to the temporary report disclosure website.

XII. Significant contract and implementation

1. Trusteeship, contract and leasing

1) Trusteeship

□ Applicable ?Not applicable

No trusteeship for the Company in report period

2) Contract

□ Applicable ?Not applicable

No contract for the Company in report period

3) Leasing

□ Applicable ?Not applicable

No leasing in the Period

2. Major guarantee

?Applicable □ Not applicable

In ten thousand yuan

Specific description for using the guarantee by complex method: Nil

3. Trusted cash asset management

? Applicable □ Not applicable

In ten thousand yuan

Details of the single major amount, or high-risk trust investment with low security, poor fluidity? Applicable □ Not applicable

In ten thousand yuan

It is expected that the principal of entrusted financial management fails to recover or there are other situations leading toimpairment in entrusted financial management

□ Applicable ? Not applicable

4. Other material contracts

□ Applicable ? Not applicable

No other material contracts in the period.

XIII. Explanation on other significant events?Applicable ? Not applicableThere are no other significant events to be explained.

XIV. Significant events of subsidiaries of the Company

?Applicable ?Not applicableOn April 15, 2025, the Company disclosed the Announcement on the Progress of a Significant Matter Concerning a Wholly-ownedSubsidiary (Announcement No.2025-013). The Company’s wholly-owned subsidiary, WFTR, received the Criminal Judgment((2024) S02XCNo.22) from the Wuxi Intermediate People’s Court of Jiangsu Province. The court, after hearing the case brought bythe Wuxi Municipal People’s Procuratorate of Jiangsu Province against defendant Liu for contract fraud, rendered a first-instancejudgment on April 11, 2025, convicting Liu of contract fraud. The seized, impounded, and frozen assets involved in the case will bedisposed of by the public security authorities in accordance with laws.On July 12, 2025, the Company disclosed the Announcement on the Progress of a Significant Matter Concerning a Wholly-ownedSubsidiary (Announcement No. 2025-051). The Company was informed by the Wuxi Intermediate People’s Court of JiangsuProvince that the Jiangsu Provincial Higher People’s Court had issued the Criminal Ruling ((2025) SXCHNo.69). The CriminalJudgment ((2024) S02XHNo.22) rendered by the Wuxi Intermediate People’s Court of Jiangsu Province in the case brought by theWuxi Municipal People’s Procuratorate of Jiangsu Province against defendant Liu for contract fraud became effective on July 8,2025. Liu has been convicted and sentenced for contract fraud, and the assets involved in the case will be disposed of in accordancewith laws.

Section VI. Changes in Shares and Particulars about Shareholders

I. Changes in share capital

1. Changes in share capital

In Share

Reasons for share changed?Applicable □Not applicable

1. During the report period, the Company repurchased and canceled 25.00 million shares, resulting in a change in restricted shares;

2. During the report period, titles of some directors, supervisors, and senior executives of the Company were adjusted, and the lock-up shares held by senior executives changed, resulting in changes in unrestricted shares.Approval status of share changes?Applicable □Not applicable

1. On April 16, 2025 and May 9, 2025, the company held the 6

th meeting of the 11

thsession of the Board of Directors and the 2024Annual General Meeting of Shareholders respectively, and reviewed and approved the Proposal on Changing the Purpose ofRepurchased Shares and Canceling Them. It was agreed to change the purpose of 25 million A-shares in the special securities

account for share repurchase, from “for the implementation of employee stock ownership plans or equity incentive plans” to “forcancellation and reduction of registered capital”.

2. On February 27, 2025, the company held the 5

th meeting of the 11

th

session of the Board of Directors and reviewed and approvedthe Proposal on the Resignation of Directors and the By-election of Directors. On March 17, 2025, the company held the FirstExtraordinary General Meeting of Shareholders in 2025 and reviewed and approved the above proposal.Ownership transfer of share changed

□Applicable ?Not applicable

As of June 26, 2025, the company has completed the cancellation procedures for the above-mentioned 25 million repurchased sharesat the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.Progress of the implementation of buyback share?Applicable ?Not applicable

1. On April 16, 2025 and May 9, 2025 respectively, the Company held the 6

th meeting of the 11

thsession of the Board of Directorsand the 2024 Annual General Meeting of Shareholders, and reviewed and approved the Proposal on the Plan for Repurchasing Part ofthe Company's A-shares. It was agreed that the Company would repurchase part of its A-shares through centralized biddingtransactions with its own funds and special loans for share repurchase. The total amount of funds for this repurchase shall be not lessthan RMB 100.00 million (inclusive) and not more than RMB 150.00 million (inclusive); the repurchase price for the shares (A-shares) shall not exceed RMB 35.00 per share (inclusive); and the repurchase period shall be within 12 months from the date whenthe 2024 Annual General Meeting of Shareholders of the Company reviewed and approved this repurchase plan. For specific details,please refer to the Repurchase Report on Repurchasing Part of the Company's A-shares (Announcement No.: 2025-038) disclosed bythe Company.

2. On July 3, 2025, the Company disclosed the Announcement on the Completion of Repurchase of Part of A-shares and ShareChange (Announcement No.: 2025-049), and completed the above-mentioned share repurchase. Through the special securitiesaccount for repurchase, the Company has repurchased a total of 5,200,600 A-shares by means of centralized bidding transactions,accounting for 0.54% of the Company's total share capital. Among them, the highest transaction price was RMB 19.97 per share, thelowest transaction price was RMB 18.41 per share, and the total transaction amount was RMB 100,005,328 (excluding transactionfees).

3. On July 10, 2025, the Company disclosed the Announcement on the Completion of Cancellation of Part of Repurchased Sharesand Share Change (Announcement No.: 2025-050). The Company has completed the cancellation procedures for the above-mentioned 5,200,600 repurchased shares at the Shenzhen Branch of China Securities Depository and Clearing Corporation Limitedon July 8, 2025. After the completion of this cancellation, the total share capital of the Company has changed from 971,986,293shares to 966,785,693 shares.Progress of the implementation of reducing buyback shares by means of centralized bidding

□Applicable ?Not applicable

Influence on the basic EPS and diluted EPS as well as other financial indexes of net asset per share attributable to commonshareholders of Company in latest year and period

□ Applicable ? Not applicable

Other information necessary to disclose or need to disclosed under requirement from security regulators

□ Applicable ? Not applicable

2. Changes of restricted stocks

?Applicable □Not applicable

In Share

II. Securities issuance and listing

□ Applicable ? Not applicable

III. Number and shareholding situation of Company shareholders

In Share

Shareholders holding more than 5% of the shares, top 10 shareholders or top ten unrestricted shareholders participating in thelending of shares through refinancing business

□Applicable ? Not applicable

Top 10 shareholders or top ten unrestricted shareholders participating in the lending/returning of shares through refinancingbusiness

□Applicable ? Not applicable

Whether the top ten common shareholders or top ten unrestricted shareholders have agreed repurchase dealing in report period ornot?

□ Yes ? No

The top ten common shareholders or top ten unrestricted shareholders didn’t have agreed repurchase dealing in report period.IV. Changes in shareholding of directors, supervisors, and senior management

?Applicable ?Not applicableThe shareholdings of the company's directors, supervisors and senior management did not change during the report period; fordetails, please refer to the 2024 Annual Report.V. Changes of controlling shareholders or actual controller in report periodChanges of controlling shareholders in report period

□ Applicable ? Not applicable

The Company had no changes of controlling shareholders in report periodChanges of actual controller in report period

□ Applicable ? Not applicable

The Company had no changes of actual controller in report periodVI. Preferred stock

□ Applicable ? Not applicable

The Company had no preferred stock in report period.

Section VII. Corporate Bonds

□ Applicable ? Not applicable

Section VIII. Financial Report

I. Audit reportWhether the semi annual report is audited

□Yes ?No

The Company's semi- annual financial report has not been audited

II. Financial statementStatement in Financial Notes are carried in RMB/CNY

1. Consolidated Balance Sheet

Prepared by Weifu High-Technology Group Co., Ltd.

June 30, 2025

In RMB

Legal Representative: Yin ZhenyuanPerson in charge of accounting works: Feng ZhimingPerson in charge of accounting institute: Wu Junfei

2. Balance sheet of parent company

In RMB

3. Consolidated profit statement

In RMB

Legal representative: Yin ZhenyuanPerson in charge of accounting works: Feng ZhimingPerson in charge of accounting institute: Wu Junfei

4. Profit statement of parent company

In RMB

5. Consolidated cash flow statement

In RMB

6. Cash flow statement of parent company

In RMB

7. Consolidated statement of change in owners’ equity

Current period

In RMB

Last period

In RMB

8. Statement of changes in owners’ equity (parent company)

Current period

In RMB

Last period

In RMB

III. Basic information of the Company

1. Historical origin of the Company

By the approval of STGS (1992) No. 130 issued by Jiangsu Economic Restructuring Committee, Weifu High-Technology Group Co.,Ltd. (hereinafter referred to “the Company” or “Company”) was established as a company of limited liability with funds raised fromtargeted sources, and registered at Wuxi Administration for Industry & Commerce in October 1992. The original share capital of theCompany totaled 115.4355 million yuan, including state-owned share capital amounting to 92.4355 million yuan, public corporateshare capital amounting to 8.00 million yuan and inner employee share capital amounting to 15.00 million yuan.Between year of 1994 and 1995, the Company was restructured and became a holding subsidiary of Wuxi Weifu Group Co., Ltd(hereinafter referred to as “Weifu Group”).By the approval of Jiangsu ERC and Shenzhen Securities Administration Office in August 1995, the Company issued 68 millionspecial ordinary shares (B-share) with value of 1.00 yuan for each, and the total value of those shares amounted to 68 million yuan.After the issuance, the Company’s total share capital increased to 183.4355 million yuan.By the approval of CSRC in June 1998, the Company issued 120 million RMB ordinary shares (A-share) at Shenzhen StockExchange through on-line pricing and issuing. After the issuance, the total share capital of the Company amounted to 303.4355million yuan.In the middle of 1999, deliberated and approved by the Board and Shareholders’ General Meeting, the Company implemented theplan of granting 3 bonus shares for each 10 shares. After that, the total share capital of the Company amounted to 394.46615 millionyuan, of which state-owned shares amounted to 120.16615 million yuan, public corporate shares 10.4 million yuan, foreign-fundedshares (B-share) 88.40 million yuan, RMB ordinary shares (A-share) 156 million yuan and inner employee shares 19.5 million yuan.In the year 2000, by the approval of the CSRC and based upon the total share capital of 303.4355 million shares after the issuance ofA-share in June 1998, the Company allotted 3 shares for each 10 shares, with a price of 10 yuan for each allotted share. Actually 41.9million shares was allotted, and the total share capital after the allotment increased to 436.36615 million yuan, of which state-ownedcorporate shares amounted to 121.56615 million yuan, public corporate shares 10.4 million yuan, foreign-funded shares (B-share)

88.4 million yuan and RMB ordinary shares (A-share) 216 million yuan.

In April 2005, the Board of Directors of the Company examined and approved 2004 Profit Pre-distribution Plan, and examined andapproved by 2004 Shareholders’ General Meeting, the Company distributed 3 shares for each 10 shares to the whole shareholderstotaling to 130,909,845 shares in 2005.According to the Share Merger Reform Scheme of the Company deliberated and approved by related shareholders’ meeting of ShareMerger Reform and SGZF [2006] No.61 Reply on Questions about State-owned Equity Management in Share Merger Reform ofWeifu High-Technology Co., Ltd. issued by the State-owned Assets Supervision & Administration Commission of Jiangsu Province,8 non-circulating shareholders, including Weifu Group, arranged pricing with granting 1.7 shares for each 10 shares to circulating A-share shareholders (totally granted 47,736,000 shares), so as to realize the originally non-circulating shares can be traded on marketwhen certain conditions were satisfying, the scheme was implemented on April 5, 2006.On May 27, 2009, Weifu Group satisfied the consideration arrangement by dispatching 0.5 shares for each 10 shares based on thenumber of circulating A share as prior to Share Merger Reform, according to the aforesaid Share Merger Reform, with an aggregateof 14,039,979 shares dispatched. Subsequent to implementation of dispatch of consideration shares, Weifu Group then held100,021,999 shares of the Company, representing 17.63% of the total share capital of the Company.Pursuant to the document (XGZQ (2009) No.46) about Approval for Merger of Wuxi Weifu Group Co., Ltd. by Wuxi IndustryDevelopment Group Co., Ltd. issued by the State-owned Assets Supervision and Administration Commission of Wuxi CityGovernment, Wuxi Industry Development Group Co., Ltd. (hereinafter referred to as Wuxi Industry Group) acquired Weifu Group.After the merger, Weifu Group was then revoked, and its assets and credits & debts were transferred to be under the name of WuxiIndustry Group. Accordingly, Wuxi Industry Group has became the first largest shareholder of the Company since then.In accordance with the resolutions of shareholders' meeting and provisions of amended constitution, and approved by [2012] No. 109document of China Securities Regulatory Commission, in February 2012, the Company issued RMB ordinary shares (A-share) of

112,858,000 shares to Wuxi Industry Groups and overseas strategic investors privately, Robert Bosch Co., Ltd. (ROBERTBOSCHGMBH) (hereinafter referred to as Robert Bosch Company), face value was 1.00 yuan per share, added registered capital of112,858,000 yuan, and the registered capital after change was 680,133,995 yuan. Wuxi Industry Group is the first majorityshareholder of the Company, and Robert Bosch Company is the second majority shareholder of the Company.In March 2013, the profit distribution pre-plan for year of 2012 was deliberated and approved by the Board, and also was approvedby the Annual General Meeting 2012 of the Company in May 2013. On basis of total share capital 680,133,995 shares, distributed 5-share for every 10 shares held by whole shareholders, 340,066,997 shares in total are distributed. Total share capital of the Companyamounted to 1,020,200,992 yuan up to December 31, 2013.Deliberated and approved by the company’s first extraordinary general meeting in 2015, the company has repurchased 11,250,422shares of A shares from August 26, 2015 to September 8, 2015, and finished the cancellation procedures for above repurchase sharesin China Securities Depository and Clearing Corporation Limited Shenzhen Branch on September 16, 2015; after the cancellation ofrepurchase shares, the company’s paid-up capital (share capital) becomes 1,008,950,570 yuan after the change.Deliberated and approved by the 5

th meeting of 10

thsession of the BOD for year of 2021, the 291,000 restricted shares were buy-backand canceled by the Company initially granted under the 2020 Restricted Share Incentive Plan. The cancellation of the above-mentioned buy-back shares are completed at the Shenzhen Branch of CSDC on December 20, 2021; the paid-in capital (equity) ofthe Company was 1,008,659,570.00 yuan after the change.After deliberation and approved by the 8

th meeting of 10

thsession of the BOD for year of 2022, the 56,277 restricted shares werebought back and canceled by the Company initially granted under the 2020 Restricted Share Incentive Plan. The cancellation of theabove-mentioned buy-back shares were completed at the Shenzhen Branch of CSDC on July 8, 2022; the paid-in capital (equity) ofthe Company was 1,008,603,293.00 yuan after the change.After deliberation and approval by the the 14

th

, 16th and 20

th

meetings of the 10

thsession of the BOD of the Company for the year of2023, the 430,000, 5,593,500 and 417,000 restricted shares were bought back and canceled by the Company initially granted underunder the 2020 Restricted Share Incentive Plan. The cancellation of the above-mentioned buy-back shares were completed at theShenzhen Branch of CSDC on February 16, 2023, June 16, 2023 and December 18, 2023; the paid-in capital (equity) of theCompany was 1,002,162,793 yuan after changed.On April 16, 2025 and May 9, 2025, the company held the 6th meeting of the 11th session of the Board of Directors and the 2024Annual General Meeting of Shareholders respectively, and reviewed and approved the Proposal on Changing the Purpose ofRepurchased Shares and Canceling Them. It was agreed to change the purpose of 25 million A-shares in the special securitiesaccount for share repurchase, from “for the implementation of employee stock ownership plans or equity incentive plans” to “forcancellation and reduction of registered capital”. As of June 26, 2025, the company has completed the cancellation procedures for theabove-mentioned 25 million repurchased shares at the Shenzhen Branch of China Securities Depository and Clearing CorporationLimited.

2. Registered place, organization structure and head office of the CompanyRegistered place and head office of the Company: No.5 Huashan Road, Xinwu District, WuxiUnified social credit code: 91320200250456967NThe Company sets up Shareholders’ General Meeting, the Board of Directors (BOD) and the Board of Supervisors (BOS).The Company sets up Administration Department, Technology Centre, organization & personnel department, Office of the Board,compliance department, IT department, Strategy & new business Department, market development department, Party-massesDepartment, Finance Department, Purchase Department,Manufacturing Quality Department, MS (Mechanical System) division,AC(Automotive Components) division and DS (Diesel System ) division, etc. and subsidiaries such as Wuxi Weifu LIDA CatalyticConverter Co., Ltd, Nanjing WFJN Co., Ltd, IRD Fuel Cells A/S, Borit NV, VHIO.

3. Business nature and major operation activities of the Company

Operation scope of parent company: Technical development and consulting services in the machinery industry; manufacturing ofinternal combustion engine fuel system products, fuel system testing instruments and equipment, automotive electronic components,automotive electrical components, non-standard equipment, non-standard cutting tools, and exhaust gas post-treatment systems; salesof general machinery, hardware, electrical appliances, chemical products and raw materials (excluding hazardous chemicals),automotive parts, and motor vehicles (excluding passenger vehicles with less than nine seats); maintenance of internal combustionengines; leasing of self-owned properties; import and export of various goods and technologies on a self-operated and agency basis(excluding goods and technologies restricted or prohibited from import and export by the state). Engineering and technical researchand experimental development; research and development of energy recovery systems; manufacturing of automotive parts andaccessories; manufacturing of general equipment (excluding special equipment manufacturing) (projects that require approval inaccordance with laws can only be carried out after being approved by relevant departments). Licensed projects: Manufacturing ofspecial equipment; installation, renovation and repair of special equipment (projects that require approval in accordance with lawscan only be carried out after being approved by relevant departments, and the specific business projects shall be subject to theapproval results); General projects: Investment activities with self-owned funds; software development; software sales; softwareoutsourcing services; mold manufacturing; mold sales; manufacturing of machine tool functional components and accessories; salesof machine tool functional components and accessories; manufacturing of drawing, computing and measuring instruments; sales ofdrawing, computing and measuring instruments; sales of industrial robots; installation and maintenance of industrial robots;manufacturing of intelligent basic manufacturing equipment; sales of intelligent basic manufacturing equipment; manufacturing ofindustrial automatic control system devices; sales of industrial automatic control system devices; manufacturing of material handlingequipment; sales of material handling equipment; manufacturing of gas and liquid separation and purification equipment; sales of gasand liquid separation and purification equipment; technical services, technical development, technical consultation, technicalexchanges, technology transfer, technology promotion; research and development of new energy technologies; import and export ofgoods; import and export of technologies; manufacturing of ordinary valves and cocks (excluding special equipment manufacturing);research and development of valves and cocks; sales of valves and cocks (except for projects that require approval in accordance withlaws, independent business activities shall be carried out in accordance with laws with a business license).The main subsidiaries are respectively engaged in the production and sales of internal combustion engine parts, automotive parts,mufflers, purifiers, fuel cell parts, etc.

4. Authorized reporting parties and reporting dates for the financial report

Financial report of the Company was approved by the Board of Directors for reporting dated August 22, 2025.

5. In the notes to these financial statements, unless otherwise specified, the following company names are

abbreviated as follows:

IV. Basis of preparation of financial statements

1．Preparation baseThe financial statements are stated in compliance with Accounting Standard for Business Enterprises –Basic Norms issued by theMinistry of Finance, the specific accounting rules, the Application Instruments of Accounting Standards and interpretation onAccounting standards and other relevant regulations (together as “Accounting Standards for Business Enterprise”), as well as theCompilation Rules for Information Disclosure by Companies Offering Securities to the Public No.15 – General Provision ofFinancial Report (Revised in 2023) issued by CSRC in respect of the actual transactions and proceedings, on a basis of ongoingoperation.In line with relevant regulations of Accounting Standards of Business Enterprise, accounting of the Company is on Accrued basis.Except for certain financial instruments, the financial statement measured on historical cost. Assets have impairment been found;corresponding depreciation reserves shall Accrued according to relevant rules.

2．Going concern

The Company comprehensively assessed the available information, and there are no obvious factors that impact sustainable operationability of the Company within 12 months since end of the report period.V. Major accounting policies and estimationSpecific accounting policies and estimation attention:

Based on the actual production and operation characteristics, the company and each of its subsidiaries have formulated a number ofspecific accounting policies and accounting estimates for various transactions and events in accordance with the provisions ofrelevant accounting standards for enterprises. The detailed descriptions are as follows.1．Statement on observation of accounting standard for business enterprises

The financial statements prepared by the company comply with the requirements of accounting standards for enterprises, truthfullyand completely reflecting the company's financial position, operating results, cash flows and other relevant information of in reportperiod.2．Accounting periodsThe accounting periods of the Company are divided into annual periods and interim periods. An interim accounting period refers to areport period that is shorter than a full accounting year. The Company's accounting year adopts the calendar year, that is, fromJanuary 1st to December 31st of each year.

3．Operating cycle

The Company takes 12 months as an operating cycle and uses it as the criterion for classifying the liquidity of assets and liabilities.4．Functional currencyThe currency used by the Company in preparing these financial statements is the Renminbi. The overseas subsidiaries of theCompany determine their functional currencies based on the currencies in the main economic environment where they operate, suchas the Euro, Danish Krone, US Dollar, etc.5．Method for determining importance criteria and selection criteria?Applicable □ Not applicable

6．Accounting treatment methods for business combinations under the same control and under non-SamecontrolBusiness combination refers to a transaction or event that combines two or more separate enterprises to form a single reporting entity.Business combinations are classified into business combinations under the same control and business combinations under non-samecontrol.

（1）Business combinations under the same control

A business combination under the same control occurs when the enterprises involved in the combination are ultimately controlled bythe same party or the same group of parties both before and after the combination, and such control is not temporary. In a businesscombination under the same control, the party that obtains control over the other enterprise involved in the combination on thecombination date is the combining party, and the other enterprise involved in the combination are the combined parties. Thecombination date refers to the date on which the combining party actually obtains control over the combined party.

The assets and liabilities obtained by the company in a business combination are measured at their carrying amounts in theconsolidated financial statements of the ultimate controlling party on the combination date, including the goodwill formed when theultimate controlling party acquired the combined party. If there is a difference between the carrying amount of the net assets obtainedand the carrying amount of the combination consideration paid (or the total par value of the issued shares), it shall be adjusted againstthe share premium in capital reserve. If the share premium in capital reserve is insufficient to cover the difference, the retainedearnings shall be adjusted.All direct expenses incurred by the combining party for the business combination shall be recognized as current profits and losseswhen incurred.

（2）Business combinations under not the same control

A business combination under non-same control occurs when the enterprises involved in the combination are not ultimatelycontrolled by the same party or the same group of parties both before and after the combination. In a business combination undernon-same control, the party that obtains control over the other enterprises involved in the combination on the acquisition date is theacquirer, and the other enterprise involved in the combination are the acquirees. The acquisition date refers to the date on which theacquirer actually obtains control over the acquiree.For a business combination under non-same control, the combination cost includes the fair values of the assets transferred, theliabilities incurred or assumed, and the equity securities issued by the acquirer on the acquisition date in order to obtain control overthe acquiree. The intermediary expenses such as audit, legal services, and valuation consultation, as well as other administrativeexpenses incurred for the business combination shall be recognized as current profits and losses when incurred. The transaction costsrelated to the equity securities or debt securities issued by the acquirer as consideration for the combination shall be included in theinitial recognition amount of the equity securities or debt securities. The contingent consideration involved shall be included in thecombination cost at its fair value on the acquisition date. If new or further evidence of the circumstances existing on the acquisitiondate emerges within 12 months after the acquisition date, which requires adjustment of the contingent consideration, the goodwill ofthe combination shall be adjusted accordingly. The combination cost incurred by the acquirer and the identifiable net assets obtainedin the combination shall be measured at their fair values on the acquisition date. If the combination cost is greater than the acquirer'sshare of the fair value of the identifiable net assets of the acquiree on the acquisition date, the difference shall be recognized asgoodwill. If the combination cost is less than the acquirer's share of the fair value of the identifiable net assets of the acquiree, the fairvalues of the identifiable assets, liabilities, and contingent liabilities of the acquiree obtained, as well as the measurement of thecombination cost, shall first be rechecked. If, after the recheck, the combination cost is still less than the acquirer's share of the fairvalue of the identifiable net assets of the acquiree, the difference shall be recognized as current profits and losses.If the acquirer obtains the deductible temporary differences of the acquiree but does not recognize them as deferred income tax assetson the acquisition date because the recognition conditions for deferred income tax assets are not met, and within 12 months after theacquisition date, new or further information indicates that the relevant circumstances on the acquisition date already existed and it isexpected that the economic benefits brought by the deductible temporary differences of the acquiree on the acquisition date can berealized, the relevant deferred income tax assets shall be recognized, and at the same time, the goodwill shall be reduced. If thegoodwill is insufficient to cover the reduction, the remaining difference shall be recognized as current profits and losses. Except forthe above circumstances, the recognition of deferred income tax assets related to the business combination shall be included incurrent profits and losses.For a business combination under non-same control achieved in multiple transactions in stages, if it is part of a “package oftransactions”, the accounting treatment shall be carried out with reference to the descriptions in the preceding paragraphs of thissection and Note III.14 Long-Term Equity Investments these financial statements. If it is not part of a “package of transactions”,relevant accounting treatments shall be carried out separately for the individual financial statements and the consolidated financialstatements:

In the individual financial statements, the initial investment cost of the investment shall be the sum of the carrying amount of theequity investment in the acquiree held before the acquisition date and the additional investment cost on the acquisition date. If theequity of the acquiree held before the acquisition date involves other comprehensive income, when disposing of the investment, the

relevant other comprehensive income shall be accounted for on the same basis as that used by the acquiree when directly disposing ofthe relevant assets or liabilities (i.e., except for the corresponding share of the changes in the net liabilities or net assets of the definedbenefit plan remeasured by the acquiree accounted for under the equity method, the rest shall be transferred to the current investmentincome).In the consolidated financial statements, for the equity of the acquiree held before the acquisition date, it shall be re-measured at itsfair value on the acquisition date, and the difference between the fair value and its carrying amount shall be included in the currentinvestment income. If the equity of the acquiree held before the acquisition date involves other comprehensive income, the relevantother comprehensive income shall be accounted for on the same basis as that used by the acquiree when directly disposing of therelevant assets or liabilities (i.e., except for the corresponding share of the changes in the net liabilities or net assets of the definedbenefit plan remeasured by the acquiree accounted for under the equity method, the rest shall be transferred to the investment incomeof the current period to which the acquisition date belongs).7．Criteria for judging control and preparation method for consolidated financial statements

(1) Criteria for judging control

The consolidation scope of the consolidated financial statements is determined on the basis of control. Control means that thecompany has the power over the investee, enjoys variable returns by participating in the relevant activities of the investee, and hasthe ability to use its power over the investee to influence the amount of those returns. Generally, it includes the invested entities inwhich the parent company holds more than half of the voting rights, and the invested entities in which the company holds less thanhalf of the voting rights but, through agreements with other investors of the invested entity, holds more than half of the voting rights;according to the articles of association or agreements, it has the right to determine the financial and operational decisions of theinvested entity; it has the right to appoint and remove the majority of the members of the board of directors of the invested entity; andit holds the majority of the voting rights on the board of directors of the invested entity.

(2) Methods for preparing consolidated financial statements

The company begins to include a subsidiary in the consolidation scope from the date when it obtains the actual control over thesubsidiary's net assets and production and operation decisions, and stops including it in the consolidation scope from the date when itloses the actual control. For a disposed subsidiary, the operating results and cash flows before the disposal date have beenappropriately included in the consolidated income statement and the consolidated cash flow statement; for a subsidiary disposed of inthe current period, the beginning figures of the consolidated balance sheet will not be adjusted. For a subsidiary added through abusiness combination under non-same control, its operating results and cash flows after the acquisition date have been appropriatelyincluded in the consolidated income statement and the consolidated cash flow statement, and the beginning figures and comparativefigures of the consolidated financial statements will not be adjusted. For a subsidiary added through a business combination under thesame control, its operating results and cash flows from the beginning of the current consolidation period to the combination date havebeen appropriately included in the consolidated income statement and the consolidated cash flow statement, and the comparativefigures of the consolidated financial statements will be adjusted at the same time.When preparing the consolidated financial statements, if the accounting policies or accounting periods adopted by a subsidiary areinconsistent with those of the company, necessary adjustments will be made to the subsidiary's financial statements in accordancewith the company's accounting policies and accounting periods. For a subsidiary obtained through a business combination under non-same control, its financial statements will be adjusted based on the fair value of the identifiable net assets at the acquisition date.All significant intercompany balances, transactions, and unrealized profits within the company will be eliminated when preparing theconsolidated financial statements.The portion of the subsidiary's shareholders' equity and current net profit and loss that does not belong to the company will beseparately presented as the minority shareholders' equity and the minority shareholders' profit and loss under the shareholders' equityand net profit items in the consolidated financial statements. The share of the subsidiary's current net profit and loss attributable tothe minority shareholders will be presented as the item "Minority Shareholders' Profit and Loss" under the net profit item in theconsolidated income statement. If the losses of the subsidiary borne by the minority shareholders exceed the share of the minorityshareholders in the subsidiary's beginning shareholders' equity, the minority shareholders' equity will still be reduced. When the

control over a subsidiary is ceased due to disposal of a portion of an interest in a subsidiary, the fair value of the remaining equity isre-measured on the date when the control ceased. The difference between the sum of the consideration received from disposal ofequity and the fair value of the remaining equity, less the net assets attributable to the company since the acquisition date, isrecognized as the investment income from the loss of control. Other comprehensive income relating to original equity investment insubsidiaries shall be treated on the same basis as if the relevant assets or liabilities were disposed of by the purchaser directly whenthe control is lost, namely be transferred to current investment income other than the relevant part of the movement arising from re-measuring net liabilities or net assets under defined benefit scheme by the original subsidiary. Subsequent measurement of theremaining equitys shall be in accordance with relevant accounting standards such as Accounting Standards for business Enterprises 2– Long-term Equity Investments or Accounting Standards for business Enterprises 22 – Financial Instruments Recognition andMeasurement. Refer to Note V.18 Long-term Equity investment or Note V.11 Financial InstrumentThe company shall determine whether loss of control arising from disposal in a series of transactions should be regarded as packagedeal. When the economic effects and terms and conditions of the disposal transactions meet one or more of the following situations,the transactions shall normally be accounted for as package deal: ①The transactions are entered into after considering the mutualconsequences of each individual transaction; ② The transactions need to be considered as a whole in order to achieve a deal incommercial sense;③The occurrence of an individual transaction depends on the occurrence of one or more individual transactions inthe series; ④ The result of an individual transaction is not economical, but it would be economical after taking into account of othertransactions in the series. When the transactions are not regarded as package deal, the individual transactions shall be accounted as“disposal of a portion of an interest in a subsidiary which does not lead to loss of control” and “disposal of a portion of an interest ina subsidiary which led to loss of control”. When the transactions are regarded as package deal, the transactions shall be accounted asa single disposal transaction; however, the difference between the consideration received from disposal and the share of net assetsdisposed in each individual transactions before loss of control shall be recognized as other comprehensive income, and reclassified asprofit or loss arising from the loss of control when control is lost.8．Classification of joint arrangements and accounting treatment methods for joint operations

A joint arrangement refers to an arrangement jointly controlled by two or more participating parties. Based on the rights enjoyed andobligations assumed by the company in the joint arrangement, the joint arrangement is classified into joint operations and jointventures. A joint operation is a joint arrangement in which the company enjoys the relevant assets of the arrangement and assumesthe relevant liabilities of the arrangement. A joint venture is a joint arrangement in which the company has rights only to the netassets of the arrangement.The company accounts for its investment in a joint venture using the equity method and deals with it in accordance with theaccounting policies described in Note V.18 (2) ② "Long-Term Equity Investments Accounted for by the Equity Method" of thesenotes.As a party to a joint operation, the company recognizes the assets held solely by the company, the liabilities borne solely by thecompany, and also recognizes, according to its share, the jointly held assets and jointly borne liabilities; recognizes the revenuegenerated from the sale of the company's share of the output of the joint operation; recognizes, according to its share, the revenuegenerated by the joint operation from the sale of the output; recognizes the expenses incurred solely by the company, and alsorecognizes, according to its share, the expenses incurred by the joint operation.When the company, as a party to a joint operation, contributes or sells assets (such assets do not constitute a business, the samebelow) to the joint operation, or purchases assets from the joint operation, before such assets are sold to a third party, the companyonly recognizes the portion of the profit or loss arising from the transaction that is attributable to the other participating parties of thejoint operation. If the assets incur asset impairment losses in accordance with the provisions of Accounting Standards for EnterprisesNo. 8 - Asset Impairment and other relevant regulations, in the case of the company contributing or selling assets to the jointoperation, the company fully recognizes the loss; in the case of the company purchasing assets from the joint operation, the companyrecognizes the loss according to its assumed share.9．Recognition standards for cash and cash equivalents

Cash refers to stock cash, savings available for paid at any time; cash and cash equivalent refers to the cash held by the Companywith short terms (expired within 3 months since purchased), and liquid and easy to transfer as known amount and investment withminor variation in risks.10．Foreign currency business and translation of foreign currency financial statements

(1) Translation method for foreign currency transactions

When a foreign currency transaction occurs in the company, it is initially recognized and translated into the amount in the functionalcurrency at the spot exchange rate on the transaction date. However, for foreign currency exchange transactions or transactionsinvolving foreign currency exchange conducted by the company, they are translated into the amount in the functional currency at theactual exchange rate applied.

(2) Translation methods for foreign currency monetary items and foreign currency non-monetary itemsOn the balance sheet date, foreign currency monetary items are translated at the spot exchange rate on the balance sheet date. Theresulting exchange differences will be booked into current profits and losses, except for the followings: ① the exchange differencesarising from foreign currency special loans related to the acquisition and construction of assets qualified for capitalization, which areaccounted for in accordance with the principles of capitalizing borrowing costs; ② the exchange differences of hedging instrumentsfor effective hedging of net investments in overseas operations (such differences are booked into other comprehensive income andwill only be recognized as current profits and losses when the net investment is disposed of); ③ for available-for-sale foreigncurrency monetary items, the exchange differences arising from changes in other carrying amounts other than the amortized cost areincluded in other comprehensive income .When preparing consolidated financial statements involving overseas operations, if there are foreign currency monetary items thatsubstantially constitute a net investment in overseas operations, the exchange differences arising from exchange rate fluctuations areincluded in other comprehensive income; when the overseas operation is disposed of, they are transferred to the profit or loss of thecurrent period of disposal.For foreign currency non-monetary items measured at historical cost, they are still measured at the amount in the functional currencytranslated at the spot exchange rate on the date of the transaction. For foreign currency non-monetary items measured at fair value,they are translated at the spot exchange rate on the date when the fair value is determined. The difference between the translatedamount in the functional currency and the original amount in the functional currency is treated as changes in fair value (includingexchange rate changes) and is included in current profits and losses or recognized as other comprehensive income.

(3) Translation method for foreign currency financial statements

When preparing consolidated financial statements involving overseas operations, if there are foreign currency monetary items thatsubstantially constitute a net investment in overseas operations, the exchange differences arising from exchange rate fluctuations arerecognized as other comprehensive income as "translation differences of foreign currency financial statements"; when the overseasoperation is disposed of, they are booked into the profit or loss of the current period of disposal.The foreign currency financial statements of overseas operations are translated into RMB financial statements according to thefollowing methods: The assets and liabilities items in the balance sheet are translated at the spot exchange rate on the balance sheetdate; for items in the shareholders' equity category, except for the "undistributed profits" item, other items are translated at the spotexchange rate at the time of occurrence. The revenue and expense items in the income statement are translated at the spot exchangerate on the date of the transaction. The undistributed profits at the end of the previous year are the undistributed profits at the end ofthe previous year after translation in the previous year; the undistributed profits at the end of the period are calculated and presentedaccording to each item of the translated profit distribution; the difference between the total of the translated asset items and the totalof the liability items and shareholders' equity items is recognized as other comprehensive income as the translation differences offoreign currency financial statements. When disposing of an overseas operation and losing control, all or in proportion to the disposalof the overseas operation, the translation differences of foreign currency financial statements related to the overseas operation andshown under the shareholders' equity items in the balance sheet are transferred to the profit or loss of the current period of disposal.

The foreign currency cash flows and the cash flows of overseas subsidiaries are calculated at the spot exchange rate on the date whenthe cash flows occur. The impact of exchange rate changes on cash is presented separately as a reconciliation item in the cash flowstatement.Balance at the end of the previous year and the actual amount of the previous year are presented according to the amounts aftertranslation of the previous year's financial statements.When disposing of all the owners' equity of the company's overseas operation or losing control of the overseas operation due to thedisposal of part of the equity investment or other reasons, all the translation differences of foreign currency financial statementsrelated to the overseas operation and attributable to the owners' equity of the parent company shown under the shareholders' equityitems in the balance sheet are transferred to the profit or loss of the current period of disposal.When the proportion of equitys in an overseas operation held is reduced due to the disposal of part of the equity investment or otherreasons but control over the overseas operation is not lost, the translation differences of foreign currency financial statements relatedto the disposed part of the overseas operation are attributable to the minority shareholders' equity and are not transferred to thecurrent profits and losses. When disposing of part of the equity of an overseas operation that is an associated enterprise or a jointventure, the translation differences of foreign currency financial statements related to the overseas operation are transferred to theprofit or loss of the current period of disposal in proportion to the disposal of the overseas operation.11．Financial instrumentsA financial asset or financial liability is recognized when the Company becomes a party to a financial instrument contract.

(1) Classification, recognition and measurement of financial assets

Based on the business model for managing the financial assets and the contractual cash flow characteristics of the financial assets, theCompany classifies financial assets into financial assets measured at amortized cost, financial assets measured at fair value throughother comprehensive income and financial assets measured at fair value through profit or loss.Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair value through profit or loss,the relevant transaction costs are directly recognized in current gains/losses; for other categories of financial assets, the relevanttransaction costs are included in the initial recognition amount. For accounts receivable or notes receivable arising from the sale ofproducts or the provision of services that do not contain or do not consider a significant financing component, the Company uses theamount of consideration it expects to be entitled to receive as the initial recognition amount.

① Financial assets measured at amortized cost

The Company's business model for managing financial assets measured at amortized cost is to collect contractual cash flows, and thecontractual cash flow characteristics of such financial assets are consistent with basic lending arrangements, that is, the cash flowsgenerated on specific dates are only payments of principal and interest based on the outstanding principal amount. For such financialassets, the Company uses the effective interest rate method and measures them subsequently at amortized cost. The gains or lossesarising from amortization or impairment are recognized in current gains/losses.

② Financial assets measured at fair value through other comprehensive income

The Company's business model for managing such financial assets is both to collect contractual cash flows and to sell, and thecontractual cash flow characteristics of such financial assets are consistent with basic lending arrangements. The Company measuressuch financial assets at fair value and recognizes the changes in fair value in other comprehensive income, but impairment losses orgains, exchange differences and interest income calculated using the effective interest rate method are recognized in currentgains/losses.In addition, the Company designates some non-tradable equity instrument investments as financial assets measured at fair valuethrough other comprehensive income. The Company recognizes the relevant dividend income from such financial assets in currentgains/losses, and recognizes the changes in fair value in other comprehensive income. When such financial assets are derecognized,the cumulative gains or losses previously recognized in other comprehensive income will be transferred from other comprehensiveincome to retained earnings and will not be recognized in current gains/losses.

③ Financial assets measured at fair value through profit or loss

The Company classifies financial assets other than those measured at amortized cost and those measured at fair value through othercomprehensive income as financial assets measured at fair value through profit or loss. In addition, upon initial recognition, in orderto eliminate or significantly reduce accounting mismatches, the Company designates some financial assets as financial assetsmeasured at fair value through profit or loss. For such financial assets, the Company measures them subsequently at fair value, andthe changes in fair value are recognized in current gains/losses.

(2) Classification, recognition and measurement of financial liabilities

Financial liabilities are classified upon initial recognition as financial liabilities measured at fair value through profit or loss and otherfinancial liabilities. For financial liabilities measured at fair value through profit or loss, the relevant transaction costs are directlyrecognized in current gains/losses, and the relevant transaction costs of other financial liabilities are included in their initialrecognition amount.

① Financial liabilities measured at fair value through profit or loss

Financial liabilities measured at fair value through profit or loss include trading financial liabilities (including derivative instrumentsthat are financial liabilities) and financial liabilities designated upon initial recognition as measured at fair value through profit or loss.Trading financial liabilities (including derivative instruments that are financial liabilities) are measured subsequently at fair value.Except for those related to hedge accounting, the changes in fair value are recognized in current gains/losses.For financial liabilities designated as measured at fair value through profit or loss, the changes in fair value caused by the changes inthe Company's own credit risk are recognized in other comprehensive income, and when the liability is derecognized, the cumulativechanges in fair value caused by the changes in its own credit risk that have been recognized in other comprehensive income aretransferred to retained earnings. The remaining changes in fair value are recognized in current gains/losses. If accounting for theimpact of the changes in the own credit risk of such financial liabilities in the above manner would result in or exacerbate accountingmismatches in profit or loss, the Company will recognize all the gains or losses (including the impact amount of the changes in theenterprise's own credit risk) of such financial liabilities in current gains/losses.

② Other financial liabilities

Other financial liabilities, except for financial liabilities arising from financial asset transfers that do not meet the derecognitioncriteria or from continued involvement in the transferred financial assets and financial guarantee contracts, are classified as financialliabilities measured at amortized cost, and are measured subsequently at amortized cost. The gains or losses arising fromderecognition or amortization are recognized in current gains/losses.

(3) Recognition criteria and measurement methods for financial asset transfers

A financial asset is derecognized if one of the following conditions is met: ① The contractual right to receive the cash flows of thefinancial asset expires; ② The financial asset has been transferred and substantially all the risks and rewards of ownership of thefinancial asset have been transferred to the transferee; ③ The financial asset has been transferred, and although the enterprise hasneither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, it has relinquished controlof the financial asset.If the enterprise has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset and hasnot relinquished control of the financial asset, it shall recognize the relevant financial assets to the extent of its continuinginvolvement in the transferred financial asset and recognize the relevant liabilities accordingly. The extent of continuing involvementin the transferred financial asset refers to the level of risk to which the enterprise is exposed due to changes in the value of thefinancial asset.When the transfer of a financial asset in its entirety meets the derecognition criteria, the difference between the carrying amount ofthe transferred financial asset, the consideration received as a result of the transfer, and the cumulative amount of changes in fairvalue originally recognized in other comprehensive income is recognized in current gains/losses.When a partial transfer of a financial asset meets the derecognition criteria, the carrying amount of the transferred financial asset isallocated between the derecognized and non-derecognized parts based on their relative fair values, and the difference between theconsideration received as a result of the transfer, the cumulative amount of changes in fair value originally recognized in other

comprehensive income that should be allocated to the derecognized part, and the allocated carrying amount is recognized in currentgains/losses.When the Company sells a financial asset with recourse or endorses and transfers a held financial asset, it needs to determine whethersubstantially all the risks and rewards of ownership of the financial asset have been transferred. If substantially all the risks andrewards of ownership of the financial asset have been transferred to the transferee, the financial asset is derecognized; if substantiallyall the risks and rewards of ownership of the financial asset have been retained, the financial asset is not derecognized; if neithersubstantially all the risks and rewards of ownership of the financial asset have been transferred nor retained, the enterprise willcontinue to determine whether it retains control over the asset and conduct accounting treatment in accordance with the principlesdescribed in the preceding paragraphs.

(4) Derecognition of financial liabilities

When the current obligation of a financial liability (or a part thereof) has been discharged, the Company derecognizes the financialliability (or the part of the financial liability). When the Company (the borrower) enters into an agreement with the lender to replacethe original financial liability by assuming a new financial liability, and the contractual terms of the new financial liability aresubstantially different from those of the original financial liability, the original financial liability is derecognized and a new financialliability is recognized at the same time. When the Company makes a substantial modification to the contractual terms of the originalfinancial liability (or a part thereof), the original financial liability is derecognized and a new financial liability is recognized inaccordance with the modified terms at the same time.When a financial liability (or a part thereof) is derecognized, the Company recognizes the difference between its carrying amount andthe consideration paid (including the transferred non-cash assets or the assumed liabilities) in current gains/losses.

(5) Balance-out between the financial assets and liabilities

As the company has the legal right to balance out the financial liabilities by the net or liquidation of the financial assets, the balance-out sum between the financial assets and liabilities is listed in the balance sheet. In addition, the financial assets and liabilities arelisted in the balance sheet without being balanced out.

(6) Fair value determination method for financial assets and financial liabilities

Fair value refers to the price that market participants can receive from selling an asset or pay to transfer a liability in an orderlytransaction that occurs on the measurement date. If there is an active market for financial instruments, the company determines theirfair value using quotes from the active market. The quotation in an active market refers to the price that is easily obtained regularlyfrom exchanges, brokers, industry associations, pricing service agencies, etc., and represents the actual market transaction price thatoccurs in fair trade. If there is no active market for financial instruments, the company uses valuation techniques to determine theirfair value. Valuation techniques include referencing prices used in recent market transactions by parties familiar with the situationand willing to trade, referencing the current fair value of other financial instruments that are substantially the same, discounted cashflow method, and option pricing models.At the time of valuation, the company adopts valuation techniques that are applicable in thecurrent situation and supported by sufficient available data and other information, selects input values that are consistent with theasset or liability characteristics considered by market participants in transactions related to the asset or liability, and prioritizes the useof relevant observable input values as much as possible. In situations where observable input values cannot be obtained or are notfeasible to obtain, use non input values.Impairment of financial assetsThe financial assets that the company needs to recognize impairment losses are financial assets measured at amortized cost and debtinstrument investments measured at fair value with changes in fair value recognized in other comprehensive income, mainlyincluding notes receivable, accounts receivable, contract assets, other receivables, creditors' investments, other creditors' investments,long-term receivables, etc. In addition, for some financial guarantee contracts, impairment provision and credit impairment losses arealso recognized in accordance with the accounting policies described in this section.

(1) Recognition method for impairment provision

Based on expected credit loss, the company has made impairment provision and recognized credit impairment losses for the above-mentioned items with the applicable expected credit loss measurement methods (general or simplified methods).

Credit loss refers to the difference between all contract cash flows receivable discounted at the original effective interest rate and allexpected cash flows received by the company, that is to say, the present value of all cash shortfall. Among them, for financial assetsthat have been purchased or generated and have experienced credit impairment, the Company will discount them at the actual interestrate adjusted for credit of the financial asset.The general method for measuring expected credit loss refers to the assessment of whether the credit risk of financial assets hassignificantly increased since initial recognition by the Company on each balance sheet date. If the credit risk has significantlyincreased since initial recognition, the Company measures the impairment provision based on an amount equivalent to the expectedcredit loss over the entire period of existence; If the credit risk does not significantly increase after initial recognition, the companymeasures the impairment provision based on an amount equivalent to the expected credit loss within the next 12 months. Whenevaluating expected credit loss, the company considers all reasonable and evidence-based information, including forward-lookinginformation.For financial instruments with low credit risk on the balance sheet date, the Company assumes that their credit risk has notsignificantly increased since initial recognition, and chooses to measure the impairment provision based on the expected credit loss inthe next 12 months/does not choose a simplified treatment method, and measures the impairment provision based on whether theircredit risk has significantly increased since initial recognition, using the expected credit loss amount in the next 12 months or theentire duration as the basis.

(2) Criteria for determining whether credit risk has significantly increased since initial recognitionIf the default probability of a financial asset during the expected duration determined on the balance sheet date is significantly higherthan the default probability during the expected duration determined at initial recognition, it indicates a significant increase in creditrisk of the financial asset. Except in special circumstances, the company uses the changes in default risk that will occur within thenext 12 months as a reasonable estimate of the changes in default risk that will occur throughout the entire existence period todetermine whether credit risk has significantly increased since initial recognition.Usually, if the overdue period exceeds 30 days, the company considers that the credit risk of the financial instrument has significantlyincreased, unless there is conclusive evidence to prove that the credit risk of the financial instrument has not significantly increasedsince initial recognition.When evaluating whether credit risk has significantly increased, the company will consider the following factors:

Whether there has been a significant change in the actual or expected operating results of the debtor;Whether there have been significant adverse changes in the regulatory, economic, or technological environment in which the debtoris located;Whether there have been significant changes in the value of the collateral used as collateral for debt or the quality of the guarantee orcredit enhancement provided by a third party, which is expected to reduce the debtor's economic motivation to repay within thecontractually stipulated period or affect the probability of default;Whether there have been significant changes in the debtor's expected performance and repayment behavior;Has there been any change in the company's credit management methods for financial instruments.On the balance sheet date, if the Company determines that a financial instrument has only low credit risk, the Company assumes thatthe credit risk of the financial instrument has not significantly increased since initial recognition. If the default risk of a financialinstrument is low, the borrower has a strong ability to fulfill its contractual cash flow obligations in the short term, and even if thereare adverse changes in the economic situation and operating environment over a longer period of time, it may not necessarily reducethe borrower's ability to fulfill its contractual cash obligations, then the financial instrument is considered to have low credit risk.

(3) Portfolio-based approach for evaluating expected credit risk

The company evaluates the credit risk of financial assets with significantly different credit risks, such as accounts receivable fromrelated parties, accounts receivable that are in dispute with the other party or involve litigation or arbitration, there are clearindications that the debtor may not be able to fulfill their repayment obligations, such as accounts receivable.In addition to financial assets assessed for credit risk individually, the company divides financial assets into different groups based oncommon risk characteristics. The common credit risk characteristics adopted by the company include financial instrument type, credit

risk rating, aging portfolio, overdue aging portfolio, contract settlement period, debtor's industry, etc. Credit risk is evaluated basedon portfolio.

(4) Accounting treatment methods for impairment of financial assets

At the end of the period, the Company calculates the estimated credit losses of various financial assets. If the estimated credit loss isgreater than the carrying amount of its current impairment provision, the difference is recognized as an impairment loss; If it is lessthan the carrying amount of the current impairment provision, the difference is recognized as an impairment gain.Methods for determining credit losses of financial assetsExcept for separately evaluating credit risk accounts receivable, the company divides accounts receivable into different portfoliosbased on common risk characteristics and evaluates credit risk on the basis of the portfolio. The specific basis for determiningdifferent portfolios and methods for measuring expected credit loss are as follows:

For accounts receivable that are measured for expected credit loss based on their aging, their aging is calculated continuously fromthe initial recognition date of the debt. The corresponding provision ratio for expected credit loss at different aging stages is asfollows:

12．Notes receivableNotes receivable 1: bank acceptanceNotes receivable 2: trade acceptanceThe Company calculates expected credit loss by referring to historical credit loss experience, taking into account current conditionsand forecasts of the future economic situation.

13．Accounts receivable

Accounts receivable 1: receivable from clientsAccounts receivable 2: receivable from internal related partyThe Company calculates expected credit loss by referring to historical credit loss experience, taking into account current conditionsand forecasts of the future economic situation.

14．Receivable financing

The note receivable and accounts receivable which are measured at fair value and whose changes are included in othercomprehensive income are classified as receivables financing within one year(inclusive) from the date of acquisition. Refer to morerelevant accounting policies in Note V.11 Financial Instrument.15．Other accounts receivableDetermination method of expected credit loss and accounting treatmentOther accounts receivable 1: receivable from internal related partyOther accounts receivable 2: receivable from othersThe Company calculates expected credit loss by referring to historical credit loss experience, taking into account current conditionsand forecasts of the future economic situation.16．Contract assetsRecognition methods and criteria for contract assets: Contract assets refer to the right of the company to receive consideration inreturn for having transferred goods or provided services to customers, and this right depends on factors other than the passage of time.The company's unconditional right to receive consideration from customers (i.e., depending solely on the passage of time) isseparately presented as accounts receivable.Determination method for expected credit loss on contract assets: The method for determining expected credit loss on contract assetsis consistent with that for expected credit loss on accounts receivable.Accounting treatment method for expected credit loss on contract assets: When contract assets are impaired, the company debits the"Asset Impairment Loss" account and credits the "Contract Asset Impairment Reserve" account for the amount to be written down;when reversing the already accrued asset impairment provision , the opposite accounting entry is made.17．Inventory

（1）Classification of inventory

Inventory mainly includes raw materials, product in process, finished products, contract performance costs, etc.

（2）The pricing method for outbound inventory

Valuation shall be based on the weighted average method for outbound inventory;

（3） The perpetual inventory system is applied.

（4）Amortization method for low value consumables and packaging materials

Low value consumables are amortized with one-time amortization method upon receipt; Packaging materials are amortized with one-time amortization method upon receipt.

（5）Recognition criteria and provision method for impairment provision for inventory

The net realizable value of inventory refers to the estimated selling price of inventory in daily activities, minus the estimated costs tobe incurred until completion, estimated sales expenses, and related taxes. When determining the net realizable value of inventory, it isbased on conclusive evidence obtained, while considering the purpose of holding inventory and the impact of events after the balancesheet date.On the balance sheet date, inventory is measured at the lower of cost or net realizable value. When its net realizable value is lowerthan its cost, the provision for inventory impairment is withdrawn. The provision for inventory impairment is usually withdrawnbased on the difference between the cost of a single inventory item and its net realizable value. For inventory with a large quantityand low unit price, the provision for inventory impairment shall be withdrawn according to the inventory category; For inventory

related to product lines produced and sold in the same region, with the same or similar end use or purpose, and difficult to measureseparately from other items, the provision for inventory impairment can be made through consolidation.After the provision for inventory impairment has been made, if the influencing factors that previously reduced the value of inventoryhave disappeared, resulting in the net realizable value of inventory higher than its book value, it shall be reversed within the originalprovision for inventory impairment, and the reversed amount shall be included in the current gains/losses.18．Assets held for sale

（1）Non-current assets held for sale and disposal group

If the Company mainly recovers the book value of a non-current asset through sale (including exchange of non-monetary assets withcommercial substance, the same below) rather than continuing to use it or disposing of it, it will be classified as held for sale. Thespecific criteria are to meet the following conditions simultaneously: a non-current asset or disposal group can be immediately soldunder the current circumstances, in accordance with the customary practice of selling such assets or disposal groups in similartransactions; The company has made a resolution regarding the sale plan and obtained a confirmed purchase commitment; The sale isexpected to be completed within one year. Among them, the disposal group refers to a group of assets that are disposed of as a wholethrough sale or other means in a transaction, as well as the liabilities directly related to these assets transferred in the transaction. Ifthe asset group or the portfolio of asset groups to which the disposal group belongs has been allocated the goodwill acquired in thebusiness combination in accordance with the Accounting Standards for Enterprises No. 8- Impairment of Assets, the disposal groupshall include the goodwill allocated to the disposal group.When the Company initially measures or re-measures non-current assets held for sale and disposal groups on the balance sheet date,if their carrying value is higher than the net amount of fair value minus selling expenses, the carrying value shall be reduced to thenet amount of fair value minus selling expenses, and the reduced amount shall be recognized as asset impairment loss and included inthe current gains/losses. At the same time, the impairment provision for held for sale assets shall be made. For the disposal group, therecognized impairment loss of assets is first offset against the carrying amount of goodwill in the disposal group, and thenproportionally offset against the carrying amount of various non-current assets within the disposal group that are subject to themeasurement provisions of the Accounting Standards for Enterprises No. 42- Non-current Assets Held for Sale, Disposal Groups, andDiscontinued Operations (hereinafter referred to as the “Standards of Assets Held for Sale”).If the net amount after deducting theselling expenses from the fair value of the disposal group held for sale on the subsequent balance sheet date increases, the previouslywritten down amount should be restored and reversed within the asset impairment loss amount recognized for non-current assetsmeasured under the Standards of Assets Held for Sale after being classified as holding for sale. The reversed amount should beincluded in the current gains/losses, and the book value of each non-current asset measured under the Standards of Assets Held forSale in the disposal group, except for goodwill, should be increased proportionally based on the proportion of its book value; Thebook value of goodwill that has been offset, as well as the impairment losses recognized for non-current assets under the holding forsale standard before being classified as held for sale, shall not be reversed.The non-current assets held for sale or disposed of indisposal groups are not subject to depreciation or amortization, and interest and other expenses on liabilities held for sale in disposalgroups continue to be recognized.In case non-current assets or disposal groups no longer meet the criteria for being classified as held for sale, the Company will nolonger continue to classify them as assets held for sale or remove non-current assets from the disposal group, and measure them interms of the lower of the following two: (1) the book value of such assets before being classified as assets held for sale, adjusted fordepreciation, amortization, impairment, etc. that would have been recognized if not classified assets held for sale; (2) Recoverableamount.

（2）Recognition criteria and reporting methods for termination of operations

Termination of operation refers to a component that meets one of the following conditions, can be distinguished separately, and hasbeen disposed of or classified as held for sale: 1) the component represents an independent main business or an independent mainoperating region; 2) This component is part of a related plan to dispose of an independent major business or a separate majoroperating area; 3) This component is a subsidiary acquired specifically for resale.

The company reports the relevant gains/losses arising from termination of operation in the income statement and discloses the impactof termination in the notes.19．Long term equity investmentThe long-term equity investment referred to in this section refers to the long-term equity investment in which the company hascontrol, joint control, or significant influence over the invested entity. The long-term equity investments that the Company does nothave control, joint control, or significant influence over the investee are accounted for as financial assets measured at fair value withchanges recognized in current gains/losses. If they are non trading, the Company may designate them as financial assets measured atfair value with changes recognized in other comprehensive income at initial recognition. The accounting policy is detailed in NoteV.11 Financial Instruments.Joint control refers to the shared control of a certain arrangement by the company in accordance with relevant agreements, and therelated activities of the arrangement must be unanimously agreed upon by the parties sharing control rights before making decisions.Significant impact refers to the power of the company to participate in decision-making on the financial and operational policies ofthe invested entity, but the company fails to control or jointly control the formulation of these policies with other parties.

（1）Recognition of investment cost

For a long-term equity investment acquired through a business combination involving enterprises under common control, the initialinvestment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equityunder the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between theinitial cost of the long-term equity investment and the cash paid, non-cash assets transferred as well as the book value of the debtsborne by the absorbing party shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earningsshall be adjusted. If the consideration of the merger is satisfied by issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity under the consolidatedfinancial statements of the ultimate controlling party on the date of combination. With the total face value of the shares issued asshare capital, the difference between the initial cost of the long-term equity investment and total face value of the shares issued shallbe used to offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. Forbusiness combination resulting in an enterprise under common control by acquiring equity of the absorbing party under commoncontrol through a stage-up approach with several transactions, these transactions will be judged whether they shall be treated as“package deal”. If they belong to “package deal”, these transactions will be accounted for a transaction in obtaining control. If theyare not belonging to “package deal”, the initial investment cost of the long-term equity investment shall be the absorbing party’sshare of the carrying amount of the owner’s equity under the consolidated financial statements of the ultimate controlling party on thedate of combination. The difference between the initial cost of the long-term equity investment and the aggregate of the carryingamount of the long-term equity investment before merging and the carrying amount the additional consideration paid for furthershare acquisition on the date of combination shall offset against the capital reserve. If the capital reserve is insufficient to offset, theretained earnings shall be adjusted. Other comprehensive income recognized as a result of the previously held equity investmentaccounted for using equity method on the date of combination or recognized for available-for-sale financial assets will not beaccounted for.For business combination resulted in an enterprise not under common control by acquiring equity of the acquire under commoncontrol through a stage-up approach with several transactions, these transactions will be judged whether they shall be treat as“package deal”. If they belong to “package deal”, these transactions will be accounted for a transaction in obtaining control. If theyare not belonging to “package deal”, the initial investment cost of the long-term equity investment accounted for using cost methodshall be the aggregate of the carrying amount of equity investment previously held by the acquire and the additional investment cost.For previously held equity accounted for using equity method, relevant other comprehensive income will not be accounted for.The intermediary fees such as audit, legal services, evaluation consulting, and other related management expenses incurred by themerging or purchasing party for the enterprise merger shall be included in the current gains/losses at the time of occurrence.Except for long-term equity investments formed by corporate mergers, other equity investments are initially measured at cost, which

is determined on the basis of the actual cash purchase price paid by the company, the fair value of equity securities issued by thecompany, the value agreed upon in investment contracts or agreements, the fair value or original book value of assets exchanged innon-monetary asset exchange transactions, and the fair value of the long-term equity investment itself, depending on the method ofacquisition. The expenses, taxes, and other necessary expenditures directly related to obtaining long-term equity investments are alsobooked into investment cost. For long-term equity investments that can have a significant impact on the investee or exercise jointcontrol but do not constitute control due to additional investments, the cost of long-term equity investments is the sum of the fairvalue of the original held equity investment determined in accordance with the Accounting Standards for Enterprises No. 22-Recognition and Measurement of Financial Instruments and the cost of additional investments.

（2）Subsequent measurement and recognition methods of gains/losses

Long term equity investments that have joint control (excluding joint operators) or significant influence over the invested entity shallbe measured with the equity method. Besides, in the company's financial statements, long-term equity investments that can exercisecontrol over the investee is measured with cost method.

① Long term equity investments measured with cost method

When measured with cost method, long-term equity investments are valued at their initial investment costs, and the cost of long-termequity investment shall be adjusted in case of additional or recovered investments. Current investment income is recognized based onthe cash dividends or profits declared but not yet distributed by the investee, except for the actual payment made at the time ofinvestment or the cash dividends or profits included in the consideration.

② Long term equity investments measured with equity method

When measured with equity method, where the initial investment cost of a long-term equity investment exceeds the investor’sinterest in the fair value of the invested party’s identifiable net assets at the acquisition date, no adjustment shall be made to the initialinvestment cost. Where the initial investment cost is less than the investor’s interest in the fair value of the invested party’sidentifiable net assets at the acquisition date, the difference shall be charged to current gains/losses, and the cost of the long-termequity investment shall be adjusted accordingly.When measured with the equity method, investment income and other comprehensive income shall be recognized on the basis of theGroup’s share of the net gains/losses and other comprehensive income made by the invested party, respectively. Meanwhile, thecarrying amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall bereduced in terms of the Group’s share of profit or cash dividend distributed by the invested party. In respect of changes inshareholders’ equity other than net gains/losses, other comprehensive income and profit distribution of invested party, the carryingvalue of long-term equity investment shall be adjusted and included in the capital reserves. Share in the invested party’s netgains/losses shall be recognized after the net profit of the investee is adjusted on the basis of the fair values of the invested party’sindividual separately identifiable assets at the time of acquisition. In the event of in-conformity between the accounting policies andaccounting periods of the invested party and the Company, the financial statements of the invested party shall be adjusted inconformity with the accounting policies and accounting periods of the Company. Investment income and other comprehensiveincome shall be recognized accordingly. In respect of the transactions between the Group and its associates and joint ventures inwhich the assets disposed of or sold are not classified as operation, the share of unrealized gains/losses arising from inter-grouptransactions shall be offset by the portion attributable to the Company. Investment gain shall be recognized accordingly. However,any unrealized loss arising from inter-group transactions between the Group and an invested party will not be offset to the extent thatthe loss is impairment loss of the transferred assets. In the event that the Group disposed of an asset classified as operation to its jointventures or associates, which resulted in acquisition of long-term equity investment by the investor without obtaining control, theinitial investment cost of additional long-term equity investment shall be the fair value of disposed operation. The difference betweeninitial investment cost and the carrying value of disposed operation will be fully booked into current gains/losses. In the event thatthe Group sold an asset classified as operation to its associates or joint ventures, the difference between the carrying value ofconsideration received and operation shall be fully booked into current gains/losses. In the event that the Company acquired an assetwhich formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in accordance with

“Accounting Standards for Business Enterprises No. 20 “Business combination”. Gains/losses related to the transaction shall bemeasured in full.The Group’s share in the net losses of the invested party shall be recognized to the extent that the carrying amount of the long-termequity investment together with any long-term interests that in substance form part of the investor’s net investment in the investedparty are reduced to zero. If the Group has to assume additional obligations, the expected liabilities shall be recognized in terms ofthe estimated obligation assumed and be booked into the investment loss for the period. Where the invested party makes profits insubsequent periods, the profits attributed to the company shall be firstly used to make up unrecognized losses.

③Acquisition of minority interest

At the time of preparing consolidated financial statements, the difference between the increase in the long-term equity investmentraising from the purchase of minority interest and the net assets attributable to the subsidiary which are measured continuously sincethe purchase date (or combination date) in terms of the proportion of newly acquired shares shall be used to adjust the capital surplus,or retained earnings in case capital surplus is insufficient.

④ Disposal of long-term equity investments

In consolidated financial statements, in case the parent company disposes part of long-term equity investments in a subsidiarywithout loss of control, the difference between disposal price and the net asset of the subsidiary related to the disposal of the long-term equity investments shall be booked into the owners’ equity. If disposal of a portion of the long-term equity investments in asubsidiary by the parent company results in the loss of its control on the subsidiary, the relevant accounting policies described inNote 3.7(2). “Preparation method of consolidated financial statements” shall prevail.On disposal of a long-term equity investment otherwise, the difference between the carrying amount of the investment and the actualconsideration paid is recognized through current gains/losses.In respect of the long-term equity investment measured with equity method, in case the remaining equity after disposal is alsomeasured with equity method, other comprehensive income previously under owners’ equity shall be accounted for in accordancewith the same accounting treatment for direct disposal of relevant asset or liability by invested party on pro rata basis at the time ofdisposal. The owners’ equity recognized due to changes in other owners’ equity (excluding net gains/losses, other comprehensiveincome and profit distribution of invested party) shall be transferred to current gains/losses on pro rata basis.In respect of long-term equity investment measured with cost method, in case the remaining equity is also measured with equitymethod after disposal, other comprehensive income recognized and measured with equity method or recognition and measurementprinciple before control over the invested party shall be accounted for in terms of the same accounting treatment for direct disposalof relevant asset or liability by invested party on pro rata basis at the time of disposal and shall be transferred to current gains/losseson pro rata basis; among the net assets of invested party unit recognized with equity method (excluding net gains/losses, othercomprehensive income and profit distribution of invested party) shall be transferred to current gains/losses on pro rata basis.In the event of loss of control over invested party due to partial disposal of equity investment by the group, at the time of preparingseparate financial statements, the remaining equity, which can apply common control or impose significant influence over theinvested party after disposal, shall be measured with equity method. Such remaining equity shall be treated as being measured withequity method since it is obtained and adjustment shall be made accordingly. The remaining equity, which cannot apply commoncontrol or impose significant influence over the invested party after disposal, shall be accounted for in accordance with therecognition and measurement principles for financial instruments. The difference between its fair value and carrying amount as at thedate of losing control shall be booked into current gains/losses. In respect of other comprehensive income recognized with equitymethod or the recognition and measurement principles of financial instruments before the company obtains control over the investedparty, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability byinvested party at the time when the control over invested party is lost. Changes in other owners’ equity than net gains/losses, othercomprehensive income and profit distribution) under net asset of invested party recognized with equity method shall be transferred tocurrent gains/losses at the time when the control over invested party is lost. Of which, for the remaining equity after disposalmeasured with equity method, other comprehensive income and other owners’ equity shall be carried forward on pro rata basis, andfor the remaining equity after disposal measured with the recognition and measurement principles of financial instruments, other

comprehensive income and other owners’ equity shall be fully transferred.In the event of loss of common control or significant influence over invested party due to partial disposal of equity investment by theGroup, the remaining equity after disposal shall be accounted for using the recognition and measurement standard of financialinstruments. The difference between its fair value and carrying amount as at the date of losing common control or significantinfluence shall be included in current gains/losses. In respect of other comprehensive income recognized under previous equityinvestment using equity method, it shall be accounted for in accordance with the same accounting treatment for direct disposal ofrelevant asset or liability by invested party at the time when equity method was ceased to be used. Movement of other owners’ equity(excluding net profit or loss, other comprehensive income and profit distribution under net asset of invested party accounted for andrecognized using equity method) shall be transferred to current gains/losses at the time when equity method was ceased to be used.The Group disposes its equity investment in subsidiary by a stage-up approach with several transactions until the control over thesubsidiary is lost. If the said transactions belong to “package deal”, each transaction shall be accounted for as a single transaction ofdisposing equity investment of subsidiary and loss of control. The difference between the disposal consideration for each transactionand the carrying amount of the corresponding long-term equity investment of disposed equity before loss of control shall initiallyrecognized as other comprehensive income, and subsequently transferred to profit or loss arising from loss of control for the currentperiod upon loss of control.20．Investment propertiesMeasurement model of investment propertiesMeasured with cost methodDepreciation or amortization methodInvestment properties refer to properties held for the purpose of earning rental income or capital appreciation, or both. They includeleased land use rights, land use rights held for the purpose of appreciation and subsequent transfer, leased buildings, etc.Investment properties are initially measured at cost. Subsequent expenditures related to investment properties are included in the costof investment properties if it is highly probable that the economic benefits related to the asset will flow into the enterprise and thecost can be measured reliably. Other subsequent expenditures are recognized in current gains/losses when they occur.The company measures subsequent investment properties with the cost model and depreciates or amortizes them in accordance withthe same policies as those for buildings or land use rights.For the impairment test methods and the methods for provision of impairment losses of investment properties, please refer to Note V.24 Impairment of Long-term Assets.When owner-occupied properties or inventories are converted into investment properties, or investment properties are converted intoowner-occupied properties, the carrying value before the conversion is used as the carrying value after the conversion.When the purpose of an investment property changes to owner-occupation, as of the date of the change, the investment property isconverted into fixed assets or intangible assets. When the purpose of an owner-occupied property changes to earning rental income orcapital appreciation, as of the date of the change, the fixed assets or intangible assets are converted into investment properties. Uponconversion, if the investment property is measured with the cost model after conversion, the carrying value before the conversion isused as the carrying value after the conversion; if the investment property is measured with the fair value model after conversion, thefair value on the conversion date is used as the carrying value after the conversion.When an investment property is disposed of, or is permanently withdrawn from use and it is expected that no economic benefits canbe obtained from its disposal, the investment property shall be derecognized. The disposal proceeds from the sale, transfer, scrappingor damage of an investment property, after deducting its carrying value and relevant taxes and fees, are recognized in currentgains/losses.

21．Fixed assets

（1）Recognition criteria

Fixed assets refer to tangible assets held for the production of goods, provision of services, leasing, or business management, with auseful life exceeding one accounting year. Fixed asset are recognized only when it is probable that the economic benefits associated

with it will flow to the Company and its cost can be measured reliably. Fixed assets are initially measured at cost, taking into accountthe expected impact of decommissioning costs.

（2）Depreciation method

The expected residual value refers to the amount that the Company is currently expected to obtain from the disposal of the fixed assetafter deducting the expected disposal expenses, assuming that the fixed asset has reached the end of its expected useful life and is inthe expected state at that time.

（3）Impairment test methods and methods for provision of impairment losses of fixed assets

For the impairment test methods and methods for provision of impairment losses of fixed assets, please refer to Note V. 24“Impairment of Long-term Assets”.

（4）Other explanations

Subsequent expenditures related to fixed assets are booked into the cost of the fixed assets if it is highly probable that the economicbenefits related to the fixed assets will flow into the Company and their costs can be measured reliably, and the carrying value of thereplaced part shall be derecognized. Subsequent expenditures other than the above are recognized in current gains/losses when theyoccur.A fixed asset shall be derecognized when it is in a state of disposal or when it is expected that no economic benefits can be generatedthrough its use or disposal. The difference between the disposal proceeds from the sale, transfer, scrapping or damage of a fixed assetand its carrying value and relevant taxes and fees shall be recognized in current gains/losses.The Company reviews the useful life, expected residual value and depreciation method of fixed assets at least at the end of each year.If any changes occur, they will be accounted for as changes in accounting estimates.22．Construction in progressThe Company's construction in progress is divided into two types, built by the company or by the contracting-out method. When theconstruction in progress is completed and reaches the intended usable state, it is transferred to fixed assets. The criteria fordetermining the intended usable state shall meet one of the following situations: The physical construction (including installation) ofthe fixed asset has been completely finished or substantially completed; It has undergone trial production or trial operation, and theresults indicate that the asset can operate normally or can stably produce qualified products, or the trial operation results show that itcan operate or conduct business normally; The expenditure on the constructed fixed asset is very small or hardly occurs any more;The constructed fixed asset has met the design or contractual requirements, or is basically in line with the design or contractualrequirements.When the construction in progress reaches the intended usable state, it is transferred to fixed assets at the actual project cost. Forthose that have reached the intended usable state but for which the final accounts of the project have not been settled, they are firsttransferred to fixed assets at the estimated value, and after the final accounts of the project are settled, the original estimated value isadjusted according to the actual cost, but the originally accrued depreciation will not be adjusted.For the impairment test methods and methods for provision of impairment losses of construction in progress, please refer toNote V. 24 “Impairment of Long-term Assets”.23．Borrowing costs

Borrowing costs include borrowing interest, amortization of discounts or premiums, auxiliary expenses, and exchange differencesarising from foreign currency borrowings, etc. Borrowing costs that can be directly attributed to the acquisition, construction, orproduction of assets that meet the capitalization criteria shall commence to be capitalized when the asset expenditures have beenmade, the borrowing costs have occurred, and the necessary acquisition, construction, or production activities to bring the asset to theintended usable or sellable state have started; the capitalization shall cease when the qualifying asset under construction or productionreaches the intended usable or sellable state. The remaining borrowing costs are recognized as expenses in the period in which theyoccur.For specific borrowings, the amount of interest expense actually incurred during the current period, after deducting the interestincome obtained from depositing the unutilized borrowing funds in the bank or the investment income obtained from temporaryinvestments, shall be capitalized; The capitalized amount of general borrowings shall be determined by multiplying the weightedaverage of the asset expenditures exceeding the specific borrowings by the capitalization rate of the general borrowings used. Thecapitalization rate is determined on the basis of weighted average interest rate of the general borrowings.During the capitalization period, the exchange differences of specific foreign currency borrowings shall be capitalized in full; Theexchange differences of general foreign currency borrowings shall be booked into current gains/losses.Assets that meet the capitalization criteria refer to fixed assets, investment properties, inventories, and other assets that require asubstantial period of acquisition, construction, or production activities to reach the intended usable or sellable state.If an abnormal interruption occurs during the acquisition, construction, or production of an asset that meets the capitalization criteriaand the interruption period continues for more than 3 months, the capitalization of borrowing costs shall be suspended until theacquisition, construction, or production activities of the asset resume.Assets that meet the capitalization criteria refer to fixed assets, investment properties, inventories, and other assets that require asubstantial period of acquisition, construction, or production activities to reach the intended usable or sellable state.

24．Intangible assets

（1）Useful life and its determination basis, estimation situation, amortization method or review procedureIntangible assets refer to identifiable non-monetary assets without physical substance that are owned or controlled by the Company.Intangible assets are initially measured at cost. Expenditures related to intangible assets are included in the cost of intangible assets ifit is highly probable that the relevant economic benefits will flow into the Company and the cost can be measured reliably.Expenditures for items other than the above are recognized in current gains/losses when they occur.The acquired land use rights are usually accounted for as intangible assets. When constructing factories and other buildings throughself-development, the expenditures for the relevant land use rights and the construction costs of the buildings are accounted for asintangible assets and fixed assets respectively. In the case of externally purchased houses and buildings, the relevant purchase price isallocated between the land use rights and the buildings. If it is difficult to make a reasonable allocation, it shall all be treated as fixedassets.For intangible assets with a finite useful life, the original value minus the expected residual value and the cumulative amount of theprovision for impairment losses already accrued shall be amortized on a straight-line basis and evenly over its expected useful lifestarting from the time they are available for use. Intangible assets with an indefinite useful life are not amortized.At the end of the period, the useful life and amortization method of intangible assets with a finite useful life shall be reviewed.Changes, if any, will be accounted for as changes in accounting estimates. In addition, the useful life of intangible assets with anindefinite useful life is also reviewed. If there is evidence indicating that the period during which the intangible asset bringseconomic benefits to the enterprise is foreseeable, its useful life shall be estimated and such intangible assets shall be amortized inaccordance with the amortization policy for intangible assets with a finite useful life.

（2）Scope of accumulation of R&D expenditures and relevant accounting treatment methods

The expenditures of the Company's internal research and development projects are divided into expenditures in the research stageand expenditures in the development stage.Expenditures in the research stage are booked into current gains/losses when they occur.The Company's research and development expenditures includes materials used in research and development, labor and service costs,amortization of research and development equipment, amortization of other intangible assets and fixed assets used in thedevelopment process, and expenses such as water and electricity fees.The specific criteria for the Company to divide the expenditures of internal research and development projects into those in theresearch stage and those in the development stage are as follows:

The research stage refers to the stage of original and planned investigations and research activities carried out to acquire andunderstand new scientific or technical knowledge; the development stage implies the stage of activities in which research results orother knowledge are applied to a certain plan or design before commercial production or use, in order to produce new or substantiallyimproved materials, devices, products, etc.Expenditures in the development stage that meet the following conditions simultaneously are recognized as intangible assets, andexpenditures in the development stage that do not meet the following conditions are recognized in current gains/losses:

① It is technically feasible to complete the intangible asset so that it can be used or sold;

② There is an intention to complete the intangible asset and use or sell it;

③ The way in which the intangible asset generates economic benefits, including being able to prove that there is a market forproducts produced with such intangible asset or that there is a market for the intangible asset itself. If the intangible asset will be usedinternally, it can be proved to be useful;

④ There are sufficient technical, financial and other resources to support the completion of the development of the intangible asset,and capable of using or selling the intangible asset;

⑤ Expenditures attributable to the development stage of the intangible asset can be measured reliably.The specific conditions for capitalizing the expenditures in the development stage of the Company:

If it is impossible to distinguish between expenditures in the research stage and expenditures in the development stage, all theresearch and development expenditures incurred will be recognized in current gains/losses.

（3）Impairment test methods and methods for provision of impairment losses of intangible assetsFor the impairment test methods and methods for provision of impairment losses of intangible assets, please refer to Note V. 24Impairment of Long-term Assets.25．Impairment of long-term assetsThe Company will judge if there are any sings of impairment as at the balance sheet date in respect of non-current non-financialassets such as fixed assets, construction in progress, intangible assets with a finite useful life, investment properties measured at cost,and long-term equity investments in subsidiaries, joint controlled entities and associates. If there is any evidence indicating that anasset may be impaired, recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with an indefiniteuseful life and intangible assets beyond working conditions will be tested for impairment annually, regardless of whether there is anyindication of impairment.If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the impairment provisionwill be made in terms of the difference and recognized as an impairment loss. The recoverable amount of an asset is the higher of itsfair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. An asset’s fairvalue is the price in a sale agreement in an arm’s length transaction. If there is no sale agreement but the asset is traded in an activemarket, fair value shall be determined on the basis of the bid price. If there is neither sale agreement nor active market for an asset,fair value shall be estimated on the basis of the best available information. Costs of disposal are expenses attributable to disposal of

the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to prepare the asset for itsintended sale. The present value of the future cash flows expected to be derived from the asset over the course of continued use andfinal disposal is determined as the amount discounted at an appropriately selected discount rate. Provisions for assets impairmentshall be made and recognized for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset,the recoverable amount of the asset group to which the asset belongs shall be defined. The asset group is the smallest group of assetscapable of generating cash flows independently.For the purpose of impairment test, the carrying amount of goodwill presented separately in the financial statements shall beallocated to the asset groups or asset group portfolio benefiting from synergy of business combination. If the recoverable amount isless than the carrying amount, the impairment loss shall be recognized. The amount of impairment loss shall first reduce the carryingamount of any goodwill allocated to the asset group or asset groups portfolio, and then reduce the carrying amount of other assetsgoodwill within the asset group or asset group portfolio on the basis of the carrying amount of each asset.An impairment loss recognized on the aforesaid assets shall not be reversed in a subsequent period in respect of the part whose valuecan be recovered.

26．Long-term deferred expenses

long-term deferred expenses refer to various expenses that have been incurred but are to be amortized over a period of more than oneyear and are borne by the current report period and subsequent periods. The long-term deferred expenses of the company mainlyinclude decoration and renovation costs. The long-term deferred expenses are amortized with the straight - line method over theexpected beneficial period.27．Contract liabilitiesContract liabilities refer to the obligations of the company to transfer goods to customers in exchange for consideration received orreceivable from customers. If the customer has paid the contract consideration or the company has obtained the unconditional right toreceive payment before the company transfers the goods to the customer, the company will record the received or receivable amountas contract liability at the earlier of the actual payment date by the customer and the due payment date. Contract assets and contractliabilities under the same contract are presented on a net basis, and contract assets and contract liabilities under different contracts arenot offset.28．Employee compensation

（1）Accounting treatment for short-term compensation

During the accounting period when the staff provides service to the Company, the short-term remuneration actual occurred shall berecognized as liability and be reckoned into current gains/losses. During the accounting period when staff provides service to theCompany, the actual short-term compensation occurred shall be recognized as liabilities and be reckoned into current gains/losses,except for those in line with accounting standards or being allowed to be reckoned into capital costs; the welfare occurred shall bereckoned into current gains/losses or relevant asses costs at the time of actual occurrence. The employee compensation shall berecognized as liabilities and be reckoned into current gains/losses or relevant assets costs at the time of actual occurrence. Theemployee benefits that belong to non-monetary benefits are measured at fair value; the social insurances including the medicalinsurance, work-injury insurance and maternity insurance and the housing fund that the enterprise pays for the employees as well asthe labor union expenditure and employee education funds withdrawn by relevant provisions should be calculated and determined asthe corresponding compensation amount and determined the corresponding liabilities in accordance with the specified withdrawingbasis and proportion, and be reckoned in the current profits and losses or relevant asset costs in the accounting period that theemployees provide services.

（2）Accounting treatment for post-employment benefit

The post-employment benefit includes the defined contribution plans and defined benefit plans. Post-employment benefits plan refersto the agreement about the post-employment benefits between the enterprise and employees, or the regulations or measures theenterprise established for providing post-employment benefits to employees. The defined contribution plan refers to the post-employment benefits plan that the enterprise doesn’t undertake the obligation of payment after depositing the fixed charges to theindependent fund; the defined benefit plans refer to post-employment benefits plans except the defined contribution plan.

（3）Accounting treatment for retirement benefits

In case the Company terminates the employment relationship with employees before the end of the employment contracts or providescompensation as an offer to encourage employees to accept voluntary redundancy, the Company shall recognize employeecompensation liabilities arising from compensation for staff dismissal and included in current gains/losses, when the Companycannot revoke unilaterally compensation for dismissal due to the cancellation of labor relationship plans and employee redundantproposals; and the Company recognize cost and expenses related to payment of compensation for dismissal and restructuring,whichever is earlier.The early retirement plan shall be accounted for in accordance with the accounting principles for compensationfor termination of employment. The salaries or wages and the social contributions to be paid for the employees who retire beforeschedule from the date on which the employees stop rendering services to the scheduled retirement date, shall be recognized (ascompensation for termination of employment) in the current profits and losses by the Group if the recognition principles forprovisions are satisfied.

（4）Accounting treatment for other long-term employee benefits

Except for the compulsory insurance, the Company provides the supplementary retirement benefits to the employees satisfyingcertain conditions, the supplementary retirement benefits belong to the defined benefit plans, and the defined benefit liabilityconfirmed on the balance sheet is the value by subtracting the fair value of plan assets from the present value of defined benefitobligation. The defined benefit obligation is annually calculated with the expected accumulated welfare unit method by theindependent actuary on the basis of treasury bond rate with similar obligation term and currency. The service charges related to thesupplementary retirement benefits (including the service costs of the current period, the previous service costs, and the settlementgains or losses) and the net interest are reckoned in the current profits and losses or other asset costs, the changes generated byrecalculating the net liabilities of defined benefit plans or net assets should be reckoned in other consolidated income.29．Anticipated liabilities

When the obligations arising from contingent events such as providing external guarantees, litigation matters, product qualitywarranties, and loss contracts become the present obligations of the company, and it is highly probable that the fulfillment of theseobligations will lead to an outflow of economic benefits from the company, and the amount of these obligations can be reliablymeasured, the company will recognize these obligations as anticipated liabilities.The company initially measures the anticipated liabilities based on the best estimate of the expenditures required to fulfill therelevant present obligations, and reviews the carrying amount of the anticipated liabilities on the balance sheet date.If all or part of the expenditures required to settle anticipated liabilities are expected to be compensated by a third party, thecompensation amount will be recognized as asset separately when it is basically certain that the compensation can be received, andthe recognized compensation amount will not exceed the carrying amount of the anticipated liabilities.

30．Share-based payments

（1）Accounting treatment methods for share-based payments

Share-based payments are transactions in which equity instruments are granted or liabilities determined on the basis of equityinstruments are assumed in order to obtain services provided by employees or other parties. Share-based payments are classified intoshare-based payments settled with equity instruments and share-based payments settled in cash.

① Share-based payments settled with equity instruments

For share-based payments settled by equity instruments in exchange for services provided by employees, they are measured at thefair value of the equity instruments granted to employees on the grant date. In the case where the fair value amount can only beexercised after the completion of the services during the vesting period or the achievement of the specified performance conditions,based on the best estimate of the number of exercisable equity instruments during the vesting period, it is calculated on a straight-linebasis and included in the relevant costs or expenses. When the equity instruments can be exercised immediately after the grant, theyare included in the relevant costs or expenses on the grant date, and the capital reserve is correspondingly increased. On each balancesheet date during the vesting period, the Company makes the best estimate based on the latest subsequent information such aschanges in the number of employees who are expected to be eligible to exercise the rights, and revises the estimated number ofexercisable equity instruments. The impact of the above estimates is included in the relevant costs or expenses of the current period,and the capital reserve is adjusted accordingly.For share-based payments settled by equity instruments in exchange for services provided by other parties, if the fair value of theservices provided by other parties can be reliably measured, it is measured at the fair value of the services provided by other partieson the date of acquisition. If the fair value of the services provided by other parties cannot be reliably measured, but the fair value ofthe equity instruments can be reliably measured, it is measured at the fair value of the equity instruments on the date of acquisition ofthe services, included in the relevant costs or expenses, and the shareholders' equity is correspondingly increased.

② Cash-settled share-based payment and equity instruments

Cash-settled share-based payments are measured at the fair value of the liabilities calculated and determined on the basis of shares orother equity instruments undertaken by the Company. If it’s vested immediately after the grant, the fair value of the liabilitiesassumed on the date of the grant is included in the cost or expense, and the liability is increased accordingly. If the service within thewaiting period is completed or the specified performance conditions are met, the service obtained in the current period shall beincluded in the relevant costs or expenses based on the best estimate of the vesting situation within the waiting period and the fairvalue of the liabilities assumed to increase the corresponding liabilities.On each balance sheet date and settlement date before the settlement of the relevant liabilities, the fair value of the liabilities isremeasured, and the changes are included in the current gains/losses.

（2）Relevant accounting treatment for modification and termination of share-based payment plansWhen the Company modifies a share-based payment plan, if the modification increases the fair value of the equity instrumentsgranted, the Company recognizes the increase in the services received accordingly based on the increase in the fair value of theequity instruments. The increase in the fair value of the equity instruments refers to the difference between the fair values of theequity instruments before and after the modification on the modification date. If the modification reduces the total fair value of theshare-based payment or adopts other methods unfavorable to employees, the Company will still continue to account for the servicesreceived as if the change had never occurred, unless the Company cancels some or all of the granted equity instruments.During the waiting period, if the granted equity instruments are cancelled, the Company will treat the cancellation of the grantedequity instruments as an acceleration of vesting, immediately recognize the amount that should be recognized in the remainingwaiting period in the current gains/losses, and at the same time recognize the capital reserve. If employees or other parties are able tochoose to meet the non - vesting conditions but fail to do so during the waiting period, the Company will treat it as the cancellation ofthe granted equity instruments.

（3）Accounting treatment for share-based payment transactions involving the company and its shareholders or controllingshareholdersFor share-based payment transactions involving the Company and its shareholders or controlling shareholders, if one of thesettlement enterprises and the service-receiving enterprise is within the Company's consolidation scope and the other is outside theCompany's consolidation scope, the following accounting treatment will be carried out in the Company's consolidated financialstatements:

① If the settlement enterprise settles with its own equity instruments, the share-based payment transaction will be treated as anequity - settled share-based payment; otherwise, it will be treated as a cash - settled share-based payment.

If the settlement enterprise is an investor of the service-receiving enterprise, it will recognize the long-term equity investment in theservice-receiving enterprise based on the fair value of the equity instruments on the grant date or the fair value of the liability to beassumed, and at the same time recognize the capital reserve (other capital reserve) or liability.

② If the service-receiving enterprise has no settlement obligation or the equity instruments granted to its employees are its ownequity instruments, the share-based payment transaction will be treated as an equity - settled share-based payment; if the service-receiving enterprise has a settlement obligation and the equity instruments granted to its employees are not its own equity instruments,the share-based payment transaction will be treated as a cash - settled share-based payment.For share-based payment transactions among enterprises within the Company's consolidation scope, if the service-receivingenterprise and the settlement enterprise are not the same enterprise, the recognition and measurement of the share-based paymenttransaction in the individual financial statements of the service-receiving enterprise and the settlement enterprise will be handled byreferring to the above principles.31．Other financial instruments such as preferred stocks and perpetual bonds

(1) Distinction between perpetual bonds and preferred stocks

Financial instruments issued by the company, such as perpetual bonds and preferred stocks, that meet the following conditions areconsidered equity instruments:

① This financial instrument does not include contractual obligations to deliver cash or other financial assets to other parties, or toexchange financial assets or financial liabilities with other parties under potential adverse conditions;

② In case the financial instrument needs to be settled or can be settled using the enterprise's own equity instruments in the future, ifthe financial instrument is a non-derivative instrument, it does not include the contractual obligation to deliver a variable quantity ofits own equity instruments for settlement; If it is a derivative instrument, the company can only settle the financial instrument byexchanging a fixed amount of its own equity instruments for a fixed amount of cash or other financial assets.Except for financial instruments that can be classified as equity instruments according to the above conditions, other financialinstruments issued by the Company should be classified as financial liabilities.If the financial instruments issued by the company are composite financial instruments, they shall be recognized as a liability basedon the fair value of the liability component, and the amount received after deducting the fair value of the liability component isrecognized as “other equity instruments”. The transaction costs incurred in the issuance of composite financial instruments shall beallocated between the liability component and the equity component in proportion to their respective proportions of the total issuanceprice.

(2) Accounting treatment methods for perpetual bonds and preferred stocks

Financial instruments such as perpetual bonds and preferred stocks classified as financial liabilities, including their related interest,dividends, gains or losses, as well as gains or losses arising from redemption or refinancing, are booked into current gains/losses,except for borrowing costs that meet capitalization criteria (see Note V.22 "Borrowing Costs").When financial instruments such as perpetual bonds and preferred stocks classified as equity instruments are issued (includingrefinancing), repurchased, sold, or cancelled, the Company treats them as changes in equity and deducts related transaction costsfrom equity. The company treats the distribution of equity instrument holders as profit distribution.The company does not recognize changes in fair value of equity instruments.32．Revenue

Disclose accounting policies used for revenue recognition and measurement based on business typeWhen the contract signed between the company and the customer meets the following conditions simultaneously, revenue isrecognized when the customer obtains control of the relevant goods: the parties to the contract have approve the contract and promiseto fulfill their respective obligations; The contract specifies the rights and obligations of all parties involved in the transfer of goodsor provision of services; The contract has clear payment terms related to the transferred goods; The contract has commercial

substance, that is, the performance of the contract will change the risk, time distribution or amount of the company's future cashflows; The consideration that the company is entitled to receive from transferring goods to customers is likely to be recovered.On the commencement date of the contract, the company identifies each individual performance obligation in the contract anddistributes the transaction price to each individual performance obligation based on the relative proportion of the individual sellingprice of the promised goods for each individual performance obligation. When determining the transaction price, factors such asvariable consideration, significant financing components in the contract, non-cash consideration, and payable customer considerationshall be taken into account.For each individual performance obligation in the contract, if one of the following conditions is met, the company will recognize thetransaction price allocated to that individual performance obligation as revenue during the relevant performance period according tothe performance progress: the customer obtains and consumes the economic benefits brought by the company's performance at thesame time as the company's performance; Customers are able to control the goods under construction during the performance processof the company; The goods produced by the company during the performance process have irreplaceable uses, and the company hasthe right to collect payments for the completed performance portion throughout the entire contract period. The performance progressis determined using the input method based on the nature of the transferred goods. When the performance progress cannot bereasonably determined, if the costs already incurred by the company are expected to be compensated, revenue is recognized on thebasis of the amount of costs already incurred until the performance progress can be reasonably determined.If any of the above conditions is not met, the company will recognize the transaction price allocated to the single performanceobligation as revenue when the customer obtains control of the relevant goods. When determining whether the customer has obtainedcontrol of the product, the company considers the following indications: the enterprise has the right to receive payment for theproduct at present, that is, the customer has a current payment obligation for the product; The enterprise has transferred the legalownership of the product to the customer, that is, the customer already owns the legal ownership of the product; The enterprise hastransferred the physical item to the customer, meaning that the customer has already physically occupied the item; The enterprise hastransferred the main risks and rewards of ownership of the product to the customer, that is, the customer has obtained the main risksand rewards of ownership of the product; The customer has accepted the product; Other signs indicating that the customer has gainedcontrol of the product.The time point for recognizing domestic sales revenue of the company is as follows: the company delivers goods according to thesales contract or order agreement. On the reconciliation date agreed with the buyer, the goods received and inspected by the buyerduring the period from the previous reconciliation date to this reconciliation date are verified with the buyer. After verification byboth parties, the risk and reward are transferred to the buyer. The company issues an invoice to the buyer based on the confirmedvariety, quantity, and amount, and confirms the realization of sales revenue on the reconciliation date.The recognition time point for the company's foreign sales revenue: After the customs review is completed, the company confirmsthe realization of sales revenue based on the export date stated on the customs declaration form.The situation where similar businesses adopt different business models involving different revenue recognition and measurementmethodsNil

33．Contract costsContract costs are divided into contract performance costs and contract acquisition costs.The costs incurred by the company for the performance of a contract that simultaneously meet the following conditions arerecognized as a contract performance cost asset:

（1）The cost is directly related to a current or expected contract, including direct labor, direct materials, manufacturing expenses(or similar expenses), costs explicitly borne by the customer, and other costs incurred solely due to the contract;

（2）The cost increases the resources that the enterprise will use in the future to fulfill its performance obligations;

（3）The cost is expected to be recoverable.

The incremental costs incurred by the company for obtaining a contract that are expected to be recoverable are recognized as contractacquisition cost asset; however, if the amortization period of the asset does not exceed one year, it can be recognized in currentgains/losses when it occurs.Assets related to contract costs are amortized on the same basis as the recognition of revenue from the related goods or services.If the carrying value of an asset related to contract costs is higher than the difference between the following two items, the companywill make an impairment provision for the excess amount and recognize it as an asset impairment loss:

（1）The remaining consideration expected to be obtained from the transfer of the goods or services related to the asset;

（2）The estimated costs to be incurred for the transfer of the related goods or services.

If the above asset impairment provision is subsequently reversed, the carrying value of the asset after the reversal shall not exceed thecarrying value of the asset on the reversal date assuming no impairment provision is made.34．Government grants

Government grants refer to monetary and non-monetary assets obtained by the Company from the government free of charge,excluding the capital invested by the government as an investor with corresponding ownership rights. Government grants areclassified into asset-related government grants and income-related government grants. The Company defines government grantsobtained for the construction or other formation of long-term assets as asset-related government grants; the remaining governmentgrants are defined as income-related government grants. If the grantee is not clearly specified in the government document, thefollowing methods are used to classify the grants into income-related government grants or asset-related government grants: (1) Ifthe specific project to which the grant relates is specified in the government document, such grant shall be divided in terms of therelative proportion of the expenditure amount that will form assets and the expenditure amount that will be included in expenses inthe budget of the specific project. This division proportion will be reviewed on each balance sheet date and changed if necessary; (2)If the government document only makes a general description of the use and does not specify a specific project, it will be regarded asincome-related government grant. Monetary government grants are measured at the amount received or receivable. Non-monetarygovernment grants are measured at fair value; if the fair value cannot be reliably obtained, the government grants shall be measuredat nominal value. Government grants measured at nominal value are directly recognized in the current gains/losses.The Company usually recognizes and measures government grants at the actual amount received when they are actually received.However, for those where there is conclusive evidence at the end of the period indicating that the relevant conditions specified in thefiscal support policy are met and the fiscal support funds are expected to be received, they are measured at the receivable amount.Government grants measured at the receivable amount shall meet the following conditions simultaneously:(1) The amount of thereceivable grant has been confirmed by the relevant government department in writing, or can be reasonably estimated according tothe relevant provisions of the officially issued fiscal fund management measures, and there is no significant uncertainty in theestimated amount; (2) It is based on the officially released fiscal support projects and their fiscal fund management measures by thelocal fiscal department and actively disclosed in accordance with the provisions of the Regulations on the Disclosure of GovernmentInformation, and the management measures shall be universal (any qualified enterprise can apply), rather than specifically formulatedfor specific enterprises; (3) The relevant grant approval document has clearly promised the disbursement period, and thedisbursement of the funds is guaranteed by the corresponding fiscal budget, so it can be reasonably ensured that the funds can bereceived within the specified period; (4) According to the specific circumstances of the Company and the grant matter, other relevantconditions (if any) shall be met.Government grants related to assets are recognized as deferred income and amortized into the current gains/losses in a reasonable andsystematic way over the useful life of the relevant assets. Government grants related to income, if they are used to compensate forrelevant costs, expenses or losses in the future, are recognized as deferred income and included in the current gains/losses in theperiod when the relevant costs, expenses or losses are recognized; if they are used to compensate for relevant costs, expenses orlosses that have already occurred, they are directly included in the current gains/losses.

Government grants that contain both parts related to assets and parts related to income are accounted for separately according todifferent parts; if it is difficult to distinguish, they are classified as a whole as income-related government grants.Government grants related to the Company's daily activities are included in other income or deducted from relevant costs andexpenses according to the essence of economic transactions; government grants not related to daily activities are included in non-operating income and expenses.In case it is required to return the recognized government grants if there is a balance of relevant deferred income, the book balance ofthe relevant deferred income shall be written off, and the excess part is adjusted to the current gains/losses and the book value ofassets; in other cases, it is directly booked into current gains/losses.35．Deferred income tax assets/Deferred income tax liabilitiesBased on the difference between the carrying value of assets and liabilities and their tax bases (for items that are not recognized asassets and liabilities but for which the tax base can be determined according to tax law provisions, the difference between the taxbase and the book amount), deferred income tax assets or deferred income tax liabilities are calculated and recognized in terms of theapplicable tax rate during the period when the asset is expected to be recovered or the liability is expected to be settled.The recognition of deferred income tax assets is limited to the amount of taxable income that is likely to be available to offset thedeductible temporary differences. At the balance sheet date, if there is conclusive evidence indicating that sufficient taxable income islikely to be obtained in future periods to offset the deductible temporary differences, the deferred income tax assets that were notrecognized in previous accounting periods are recognized.The carrying value of deferred income tax assets will be reviewed at the balance sheet date. If it is likely that sufficient taxableincome will not be available in future periods to offset the benefits of the deferred income tax assets, the carrying value of thedeferred income tax assets shall be written down. When it is likely that sufficient taxable income will be obtained, the written-downamount is reversed.The current income tax and deferred income tax of the company are booked in the current gains/losses as income tax expenses orgains, except for the income tax arising from business combinations, transactions or events directly recognized in owners' equity.When the Company has the legal right to settle on a net basis and intends to settle on a net basis or to acquire assets and settleliabilities simultaneously, the current income tax assets and current income tax liabilities of the Company are presented at the netamount after offset.36．Leasing

(1) Accounting treatment method of leasing as a lessee

The company as the lesseeThe main category of leased assets of the company is buildings.On the commencement date of the lease term, the Company recognizes right of use assets and lease liabilities for leases other thanshort-term leases and low value asset leases, and separately recognizes depreciation and interest expenses during the lease term.The company adopts the straight-line method during each period of the lease term to record the lease payments for short-term leasesand low value asset leases as current expenses.

（1）Right of use assets

The right of use asset refers to the lessee’s right to use the leased asset during the lease term. On the commencement date of the leaseterm. The right of use assets is initially measured at cost. The cost includes: ① the initial measurement amount of the lease liability;

② If there is lease incentive for the lease payment made on or before the start date of the lease term, the relevant amount of the leaseincentive already enjoyed shall be deducted; ③ The initial direct expenses incurred by the lessee; ④ The lessee is expected to incurthe cost of dismantling and removing the leased asset, restoring the leased asset's location, or restoring the leased asset to the statespecified in the lease terms.

The depreciation of the company's right of use assets is classified and provisioned with the straight-line method. For those who canreasonably determine that ownership of the leased asset will be acquired upon the expiration of the lease term, depreciation shall beaccrued over the expected remaining useful life of the leased asset; For those whose ownership of the leased asset cannot bereasonably determined upon expiration of the lease term, depreciation shall be accrued during the shorter of the lease term or theremaining useful life of the leased asset.The company determines whether the right of use assets have been impaired and performs accounting treatment in accordance withthe relevant provisions of Enterprise Accounting Standard No. 8- Asset Impairment.1） Lease liabilitiesLease liabilities are initially measured at the present value of lease payments that have not yet been paid on the lease termcommencement date. The lease payment amount includes: ① fixed payment amount (including substantial fixed payment amount),and if there is a lease incentive, the relevant amount of the lease incentive shall be deducted; ② Variable lease payments based onindices or ratios; ③ The estimated amount to be paid based on the residual value of the guarantee provided by the lessee; ④ Theexercise price for purchasing the option, provided that the lessee reasonably determines that the option will be exercised; ⑤ Thepayment required to exercise the option to terminate the lease, provided that the lease term reflects that the lessee will exercise theoption to terminate the lease;The company adopts the implicit interest rate of leasing as the discount rate; If the implicit interest rate of the lease cannot bereasonably determined, the incremental borrowing rate of the company shall be applied as the discount rate. The company calculatesthe interest expenses of lease liabilities during each period of the lease term based on a fixed periodic interest rate and includes themin financial expenses. The cyclical interest rate refers to the discount rate or revised discount rate adopted by the company.Variable lease payments that are not included in the measurement of the lease liability are recognized in the current period'sgains/losses when they actually occur.When there are changes in the evaluation results of the option to renew, terminate or purchase the lease, the present value of the leaseliability shall be remeasured based on the changed lease payment amount and the revised discount rate, and the book value of theright of use asset shall be adjusted accordingly. When there are changes in the actual lease payment amount, the expected payableamount of the guarantee residual value, or the variable lease payment amount depending on the index or ratio, the lease liability shallbe remeasured based on the present value calculated by the changed lease payment amount and the original discount rate, and thebook value of the right of use asset shall be adjusted accordingly.2） Short term leasing and low value asset leasingFor short-term leases (leases with a lease term of no more than 12 months on the lease commencement date) and leases of low valueassets (with a value less than 2000 yuan), the Company adopts a simplified approach by not recognizing right of use assets and leaseliabilities. Instead, the lease payments are recorded in the relevant asset costs or current gains/losses with straight-line method orother systematic and reasonable methods during each period of the lease term.

(2) Accounting treatment method of leasing as a lessor

The company as the lessor? Operating leaseThe company uses the straight-line method to recognize the lease receipts from operating leases as rental income for each periodduring the lease term. Variable lease payments related to operating leases that are not included in lease receipts are recognized in thecurrent period's gains/losses when they actually occur.? Financial leasing

On the commencement date of the lease term, the Company recognizes the receivable financing lease payments and terminates therecognition of financing lease assets. The financing lease payments receivable are initially measured based on the net leaseinvestment (the sum of unsecured residual value and the present value of lease receipts not yet received on the lease commencementdate discounted at the lease implicit interest rate), and interest income is recognized during the lease term based on a fixed periodic

interest rate. The variable lease payments obtained by the company that are not included in the net measurement of lease investmentsare recognized in the current gains/losses when they actually occur.37．Other important accounting policies and estimatesIn the process of applying accounting policies, due to the inherent uncertainty of operating activities, the company needs to makejudgments, estimates, and assumptions about the book value of financial statement items that cannot be accurately measured. Thesejudgments, estimates, and assumptions are based on the past historical experience of the company's management and have been madetaking into account other relevant factors. These judgments, estimates, and assumptions will affect the reported amounts of income,expenses, assets, and liabilities, as well as the disclosure of contingent liabilities on the balance sheet date. However, the actualresults resulting from the uncertainty of these estimates may differ from the current estimates of the company's management, leadingto significant adjustments to the carrying amounts of future affected assets or liabilities.The company conducts regular reviews of the aforementioned judgments, estimates, and assumptions on a going concern basis. Ifchanges in accounting estimates only affect the current period of the change, their impact is recognized in the current period of thechange; If it affects both the current and future periods of the change, its impact shall be recognized in both the current and futureperiods of the change.On the balance sheet date, the Company needs to make judgments, estimates, and assumptions about the amounts of financialstatement items in the following important areas:

(1) Accrual of bad debts reserve

The company uses the expected credit loss model to evaluate the impairment of financial instruments. Applying the expected creditloss model requires making significant judgments and estimates, taking into account all reasonable and evidence-based information,including forward-looking information. When making such judgments and estimates, the Company infers the expected changes in thedebtor's credit risk based on historical repayment data combined with economic policies, macroeconomic indicators, industry risks,and other factors.

(2) Impairment provision for inventory

According to inventory accounting policy, the company measure inventory at the lower of cost and net realizable value, and makeimpairment provision for inventory for those with costs higher than net realizable value, as well as for obsolete and unsold inventory.The impairment of inventory to net realizable value is based on evaluating the sellability and net realizable value of inventory. Toidentify inventory impairment, management shall make judgments and estimates based on obtaining conclusive evidence andconsidering factors such as the purpose of holding inventory and the impact of events after the balance sheet date. The differencebetween the actual result and the original estimate will affect the book value of inventory and the provision or reversal of impairmentprovision for inventory s during the period when the estimate is changed.

(3) Impairment provision for non-financial and non-current assets

On the balance sheet date, the company assesses whether there are signs of potential impairment of non-current assets other thanfinancial assets. For intangible assets with uncertain useful lives, in addition to annual impairment tests, impairment tests are alsoconducted when there are signs of impairment. When there are indications that the carrying amount of non-current assets other thanfinancial assets cannot be recovered, impairment test shall be conducted.When the book value of an asset or asset group is higher than the recoverable amount, which is the higher of the net amount of fairvalue minus disposal expenses and the present value of expected future cash flows, it indicates impairment.The net amount after deducting disposal expenses from fair value is determined by referring to the sales agreement price orobservable market price of similar assets in fair transactions, and subtracting the incremental costs directly attributable to the disposalof the asset.When estimating the present value of future cash flows, significant judgments need to be made regarding the production, sale price,related operating costs, and discount rate used in calculating the present value of the asset (or asset group). When estimating therecoverable amount, the company will use all available relevant information, including forecasts of production, selling prices, andrelated operating costs based on reasonable and supportable assumptions.

The company tests at least once a year whether there is any impairment of goodwill. This requires estimating the present value offuture cash flows from asset groups or portfolio of asset groups that have been allocated goodwill. When estimating the present valueof future cash flows, the company needs to estimate the cash flows generated by future asset groups or portfolio of asset groups, andselect an appropriate discount rate to determine the present value of future cash flows.

(4) Depreciation and amortization

The company, after considering the residual values of investment real estate, fixed assets and intangible assets, calculates and accruesdepreciation and amortization using the straight-line method over their useful lives. The company regularly reviews the service lifeto determine the amount of depreciation and amortization expenses to be included in each report period. The service life isdetermined by the company based on past experience with similar assets and expected technological updates. If there are significantchanges in previous estimates, adjustments will be made to depreciation and amortization expenses in future periods.

(5) Fair value of financial instruments

For financial instruments for which there is no active trading market to provide quotes, valuation techniques need to be adopted todetermine their fair values. Valuation techniques need to be used to determine fair value for financial instruments that cannot bequoted in markets with no active trading, for example, the latest trading information in the market, discounted cash flow method, andoption pricing models. The company has established a set of workflow to ensure that qualified personnel are responsible for thecalculation, verification, and review of fair value. The valuation model used by the company incorporates market information asmuch as possible and minimizes the use of unique information of the company. It should be pointed out that some of the informationused in the valuation model needs to be estimated by the management (such as discount rate and target exchange rate volatility). Thecompany regularly reviews the above estimates and assumptions and makes adjustments as necessary.

(6) Income tax

In the normal business operations of the company, there is a certain degree of uncertainty in the final tax treatment and calculation ofsome transactions. Whether some items can be deducted before tax requires the approval of the tax authorities in charge. If there is adifference between the final determination result of these tax matters and the initially estimated amount, such difference will have animpact on the current income tax and deferred income tax in the period of the final determination.

38．Changes of important accounting policies and estimation

(1) Changes of important accounting policies

?Applicable ? Not applicable

(2) Changes in important accounting estimations

□ Applicable ? Not applicable

(3) Related entries of the financial statements at the beginning of the first year of implementing the new

accounting standards since 2025

□ Applicable ? Not applicable

39．Others

Nil

VI. Taxation

1. Major taxes and tax rates

Disclose reasons for different taxpaying body

2. Tax incentives

The Company, WFJN, WFLD, WFTT, WFMA, WFAM, WFSC and WFAS are recognized as high-tech enterprises and enjoy apreferential income tax rate of 15 % in the year of 2025.According to the Continuation of the Enterprise Income Tax Policies for Western Development(No.23,2020) issued together byMinistry of Finance, SAT and NDRC, from January 1, 2011 to December 31, 2030, the enterprises located in the west region andmainly engaged in the industrial projects stipulated in the Catalogue of Encouragement Industries in Western China, and whose mainbusiness income accounting for more than 60% of the total income of the enterprise in the current year can pay the corporate incometax at the tax rate of 15%. In the year of 2025, WFLD (Chongqing) paid its corporate income tax at the tax rate of 15%.In 2025, WFLD (Wuhan) and WFLD(Nanchang) were qualified small and low-profit enterprises. According to the Announcementon Further Supporting the Development of Small and Micro Enterprises and Individual Businesses Related to Tax Policies(Announcement No. 12 of the Ministry of Finance and the State Administration of Taxation in 2023), the taxable income of smalland micro profit enterprises will be calculated at a reduced rate of 25%, and the enterprise income tax policy will be paid at a tax rateof 20%, which will be extended until December 31, 2027.

3. Other

Nil

VII. Notes to major items in consolidated financial statements

1. Monetary funds

In RMB

Other explanationThe ending balance of other monetary fund includes RMB 142,735,966.40 deposited in the bank acceptance deposit, cash deposit forMastercard RMB225,875.75 and guarantee deposit RMB8,470,394.37, and performance bond RMB278,566.46.

2. Tradable financial asset

In RMB

Other explanationNil

3. Notes receivable

(1) Classification of notes receivable

In RMB

(2) Accrued bad debts reserve

In RMB

The bad debts reserve of note receivable is made in accordance with the general model of expected credit loss:

□Applicable ?Not applicable

(3) Bad debts reserve accrued, recovered or reversed

Bad debts reserve in the current period:

□ Applicable ? Not applicable

Major amount of bad debts reserve recovered or reversed:

□ Applicable ? Not applicable

(4) Notes receivable already pledged by the Company at the end of the period

□ Applicable ? Not applicable

(5) Notes endorsement or discount and undue on balance sheet date

Nil

(6) Notes receivable charged off in the period

Nil

4. Accounts receivable

(1) By aging

In RMB

(2) Disclosure by classification based on the accrual method of bad debts reserve

In RMB

Bad debts reserve accrued on single basis: 17,272,964.58 yuan

In RMB

Bad debts reserve accrued on portfolio: 24,815,484.28 yuan

In RMB

Explanation on determining the basis of portfolioNilBad debts reserve accrued on general model of expected credit loss:

□ Applicable ? Not applicable

(3) Bad debts reserve accrued, recovered or reversed

Bad debts reserve accrued in the period:

In RMB

Major amount of bad debts reserve recovered or reversed: Nil

(4) Accounts receivable charged off in the Period

In RMB

Major accounts receivable charged off: Nil

(5) Top five accounts receivable and contract assets at ending balance by debtors

In RMB

5. Receivable financing

(1) By category

In RMB

(2) Disclosure by classification based on the accrual method of bad debts reserveBasis for division of each stage and accrual ratio of bad deb reserveNilExplanation of significant changes in the financing book balance of accounts receivable with changes in impairment provision inthe current period:

Nil

(3) Bad debt provision accrued, recovered or reversed

Other explanation: Nil

(4) Receivable financing pledged by the Company at period-end

In RMB

(5) Receivable financing endorsed or discounted but undue on balance sheet date

In RMB

(6) Receivable financing charged off in current period

Nil

(7) Increase/decrease of receivable financing and changes in fair value of receivable financing in currentperiodNil

(8) Other explanation

Nil

6. Other accounts receivable

In RMB

(1) Interest receivable

1) Category of interest receivable

Nil

2) Significant overdue interest

Nil

3) Disclosure by classification based on the accrual method of bad debts reserve

□Applicable ?Not applicable

4) Bad debts reserve accrued, recovered or reversed

Nil

5) Interest receivable charged off in current period

Nil

(2) Dividends receivable

1) By category

In RMB

2) Major dividends receivable with aging over one year

Nil

3) Disclosure by classification based on the accrual method of bad debts reserve

□Applicable ?Not applicable

4) Bad debts reserve accrued, recovered or reversed in current period

Nil

5) Dividends receivable charged off in current period

Nil

(3) Other accounts receivable

1) By nature

In RMB

2) By aging

In RMB

3) Accrued bad debts reserve

?Applicable □Not applicableBad debts reserve accrued on the general model of expected credit loss:

In RMB

Changes in book balance of bad debts reserve whose amount has major changes in the period

□ Applicable ? Not applicable

4) Bad debts reserve accrued, recovered or reversed

Bad debts reserve accrued in the period:

In RMB

5) Other accounts charged off during the report period

In RMB

Major other accounts receivable charged off: Nil

6) Top 5 other accounts receivable at ending balance by debtors

In RMB

7) Listed as other receivables due to centralized fund management

Nil.

7. Account paid in advance

(1) By aging

In RMB

Explanation on reasons why prepayments with an aging of over 1 year and significant amounts were not settled in a timely mannerNil

(2) Top 5 accounts paid in advance at ending balance by prepayment object

In RMB