一汽解放：2026年半年度报告（英文版）

FAW JIEFANG GROUP CO., LTD

Semi-Annual Report 2026

August 2026

Section I Important Notes, Contents and Definitions

The Board of Directors, the Directors, and Senior Management of the Company guarantee that the contents of this Semi-Annual Report are true, accurate, and complete, that there are no false records, misleading statements, or material omissions, and that they shall bear individual and joint legal liabilities.

Li Sheng, the person in charge of the Company, Yu Changxin, the person in charge of accounting work, and Yang Li, the person in charge of the accounting organization (chief accountant), hereby declare and guarantee the authenticity, accuracy, and completeness of the financial report in this Semi-Annual Report.

Except for the following directors, other directors attended the Board of Directors meeting to review the semi-annual report in person

This semi-annual report includes forward-looking statements such as future plans and does not constitute a substantial commitment of the Company to investors. Investors and relevant persons should maintain sufficient risk awareness of this and understand the differences between plans, forecasts, and commitments.

The Company has described in detail the possible risks and countermeasures for its future development in the section of Management Discussion and Analysis. Investors are kindly requested to pay attention to relevant contents. China Securities Journal, Securities Times and CNINFO (http://www.cninfo.com.cn) are the designated information disclosure media selected by the Company. All information of the Company is subject to that published in the above selected media. Investors are kindly requested to pay attention to investment risks.

The Company plans not to distribute cash dividends, not to issue bonus shares, and not to convert capital reserves into share capital.

This Report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.

Table of Contents

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

Section II Company Profile and Main Financial Indicators....7

Section III Management Discussion and Analysis....10

Section IV Corporate Governance, Environment, and Social Responsibility....29

Section V Important Matters....31

Section VI Changes in Shares and Shareholders....39

Section VII Bonds....47

Section VIII Financial Report....48

List of Documents for Future Reference

(I) Financial statements signed and sealed by the person in charge of the Company, the person in charge of accounting work, and the person in charge of the accounting organization (chief accountant).

(II) Originals of all company documents and announcements publicly disclosed on the website designated by the China Securities Regulatory Commission (CSRC) in the reporting period.

Interpretation

Section II Company Profile and Main Financial Indicators

I. Company Profile

II. Contact Person and Contact Information

III. Other Information

1. Contact Information of the Company

Whether the registered address, office address and its postal code, official website, email address, etc. of the Company changed during the reporting period

□Applicable Not applicable

There was no change in the registered address, office address and its postal code, official website, email address, etc. of the Company during the reporting period. For details, please refer to the 2025 Annual Report.

2. Information Disclosure and Place for Preparation and Reference

Whether the information disclosure and place for preparation and reference changed during the reporting period □Applicable Not applicable

There was no change in the websites of stock exchanges and media names and their websites where the Company discloses its semi-annual report, nor in the place for preparation and reference of the Company’s semi-annual report during the reporting period. For details, please refer to the 2025 Annual Report.

3. Other Relevant Information

Whether other relevant information changed during the reporting period

□Applicable Not applicable

IV. Main Accounting Data and Financial Indicators

Whether the Company needs to retroactively adjust or restate the accounting data of previous years □ Yes No

V. Differences in Accounting Data under Domestic and Foreign Accounting Standards

□Applicable Not applicable

During the reporting period, there is no difference in net profits and net assets in the financial report disclosed according to the international accounting standards and China accounting standards.

1. Differences in Net Profits and Net Assets in the Financial Report Are Disclosed Simultaneously according to the International Accounting Standards and China Accounting Standards □Applicable Not applicable During the reporting period, there is no difference in net profits and net assets in the financial report disclosed according to the international accounting standards and China accounting standards.

2. Differences in Net Profits and Net Assets in the Financial Report Disclosed Simultaneously according to Foreign Accounting Standards and China Accounting Standards

□Applicable Not applicable

During the reporting period, there is no difference in net profits and net assets in the financial report disclosed according to foreign accounting standards and China accounting standards.

VI. Items and Amounts of Non-recurring Profit and Loss

Applicable □ Not applicable

Unit:

CNY

Specific conditions of other profit and loss items meeting the definition of non-recurring profit and loss:

□Applicable Not applicable

There are no specific conditions of profit and loss items meeting definition of non-recurring profit and loss for the Company.

Explanation on defining the non-recurring profit and loss items listed in the Explanatory Announcement No.1 on Information Disclosure by Companies Issuing Securities Publicly - Non-recurring Profit and Loss as recurring profit and loss items

□Applicable Not applicable

The Company does not define the non-recurring profit and loss items listed in the Explanatory Announcement No. 1 on Information Disclosure by Companies Issuing Securities Publicly - Non-recurring Profit and Loss as recurring profit and loss items.

Section III Management Discussion and Analysis

I. Main Businesses of the Company in the Reporting Period

1. Main Business

The Company is a commercial vehicle manufacturer that produces heavy, medium and light trucks, and buses, as well as core components such as engines, transmissions and axles, and has a complete manufacturing system covering raw materials, core components, key large assemblies and complete vehicles. The products of the Company are mainly used in market segments such as traction, cargo carrying, dumping, special purposes, highway passenger transport, bus passenger transport, etc., and the Company also provides standardized and customized commercial vehicle products.

The Company is committed to becoming a provider of green and intelligent transportation solutions that is “First in China, World-class,” focusing on its core product lines, adhering to innovation-driven and transformation-driven approaches, and building a pioneering advantage. During the reporting period, the Company’s principal business, products, and business model did not undergo any significant changes.

The Company has steadfastly pursued technology leadership and business innovation as key strategic directions for development, proactively accelerating the optimization and adjustment of its production capacity structure, closely aligning with critical development trends such as product premiumization and new energy transformation, while continuously optimizing resource allocation and advancing intelligent upgrades. The Company has successfully built multiple advanced manufacturing bases at the industry-leading level, laying a solid foundation for the Company’s sustained market leadership.

2. Industry Development

In the first half of 2026, the demand in the medium and heavy truck market was robust, with the industry’s sales volume reaching 736 thousand units, a year-on-year increase of 22.9%. In terms of vehicle segments, affected by the international situation, domestic diesel costs rose significantly, and the economic advantages of natural gas heavy trucks once again gained attention; new energy medium and heavy trucks shifted from policy guidance to market traction, generally continuing the growth momentum of 2025. In addition, the global economy warmed up in the first half of the year, emerging economies steadily recovered, and the infrastructure and logistics industries drove a substantial increase in truck demand, leading to a significant year-on-year growth in industry exports.

3. Business Operations

In the first half of the year, against the backdrop of a complex global situation and unbalanced economic recovery, China’s commercial vehicles showed a development trend of “steady recovery in domestic demand, rapid export growth, in-depth structural adjustment, and surging momentum in new energy”. FAW Jiefang anchored the strategic goal of “China’s First, World-Class”, firmly steered towards “Technology Jiefang, Green Jiefang, and Global Jiefang”, seized incremental opportunities across the entire system and all fronts, pooled collaborative efforts, enhanced capacity and efficiency, acted with urgency and dedication, and solidly advanced key tasks such as tackling core technologies, iterative product renewal, the three-year quality improvement, and the construction of a 100-billion-yuan financial pool, achieving staged sound results in business operations and development.

As of June 30, 2026, the Company’s total assets amounted to CNY 82.276 billion, a year-on-year increase of 13.48%; net assets attributable to shareholders of the listed company were CNY 26.387 billion, a year-onyear decrease of 0.32%; during the reporting period, the operating income achieved was CNY 37.571 billion, a year-on-year increase of 33.81%; the net profit attributable to shareholders of the parent company achieved was CNY 306 million, a year-on-year increase of 1,459.16%.

In the second half of the year, FAW Jiefang will solidly implement the Company’s annual work ideas, adhere to focusing on operations, improving quality and reducing costs, prioritizing sales volume, expanding the light-duty segment, and deeply cultivating overseas markets, seize opportunities, accelerate transformation at full speed, forge ahead toward new horizons, and fight decisively to achieve the annual operational goals and tasks, going all out to achieve a triumphant start to the “15th Five-Year Plan”.

II. Analysis of Core Competitiveness

The Company adheres to the corporate vision of “being the most proud commercial vehicle enterprise and the most trustworthy commercial vehicle brand”, the mission of “becoming the China’s first and world-class provider of green and intelligent transportation solutions and building a more prosperous society”; takes products and services as the main task, customers and employees as the foundation, innovation and reform as the driving force; focuses on industry trends and customer needs, and rapidly enhances product competitiveness and service levels.

1. In terms of product R&D: The Company has built the most powerful and complete independent R&D system in China, covering forward-looking technology, engines, transmissions, axles, and complete vehicles, forming an efficient and collaborative R&D team of more than 3,000 people. The Company possesses five core capabilities: technological innovation, performance development, lean design, pilot testing, and test certification, and has established five technical platforms: energy-saving and environmental protection, safety and comfort, reliability and durability, electronic control and intelligence, and materials and processes. It is the only commercial vehicle enterprise in China that masters world-class complete vehicle and three major powertrain core technologies, and has passed ISO9001 and IATF16949 quality system certifications. It also serves as a national-level independent automobile product R&D and test certification base. The Company has established Changchun as its global R&D headquarters, with R&D capabilities for light-, medium-, and heavy-duty trucks in Qingdao; engine R&D bases in Wuxi and Dalian. In recent years, by accurately grasping the needs of segmented markets, the Company has successfully developed ten core product technology advantages, including system fuel efficiency, extended oil change intervals, lightweight design, independent major assemblies, independent electronic control, independent aftertreatment, new energy, intelligent driving, extended warranty, and maintenance-free features.

2. Marketing and procurement: The Company adheres to customer value orientation and has taken the lead in establishing a fully functional marketing service system. The marketing service network, consisting of three marketing centers—Changchun Medium- and Heavy-Duty Trucks, Qingdao Medium- and Heavy-Duty Trucks, and Light-Duty Trucks—comprises nearly 1,000 dealers, more than 2,000 service stations, nearly 100 spare parts centers, and nearly 200 spare parts dealers, covering 268 prefecture-level cities nationwide. The coverage rate in cities with a capacity of over 1,000 vehicles is 90.7%, and the national average service radius is 48 kilometers, reaching a leading level in the industry, providing users with 24/7 efficient and high-quality services.

The Company is committed to integrating global high-quality resources to provide a strong guarantee for the high reliability of Jiefang trucks. In recent years, the Company has successively become strategic partners with leading enterprises at home and abroad, including Shell, Bosch, CATL, C&D Inc., TELD, Cainiao, Zhuoyu, and Huawei.

3. Production and manufacturing: The Company has a complete manufacturing system from raw materials to core components, from key major assemblies to complete vehicles. The Company operates five major vehicle manufacturing bases in Changchun, Qingdao, Guanghan, Liuzhou, and Foshan, with a production capacity of 418 thousand vehicles. It also maintains three major assembly bases in Changchun, Wuxi, and Dalian, independently mastering the core competitiveness and production capabilities of engines, transmissions, and axles in the smart powertrain domain, with product competitiveness at an advanced level. Among these facilities, Wuxi Diesel Engine Works features three major series—Aowei, Bowei, and Jinwei—achieving world-class manufacturing standards. The Company is deeply engaged in four key areas: smart vehicles, new energy, connected vehicles, and the aftermarket, having established five new business bases in Suzhou, Nanjing, Tianjin, Wuxi, and Foshan.

4. New energy: Its product portfolio covers five major lines: tractors, dump trucks, cargo trucks, special purpose vehicles, and buses. These product lines encompass three major technological routes: BEVs, FCVs, and hybrid vehicles, achieving full coverage of key segment markets for new energy commercial vehicles, such as steel mills, coal, and construction spoil. Product development adheres to a user-oriented approach, aiming to meet market demand and address user pain points. It focuses on the “three-low and one-high” core competitiveness - low cost, low self-weight, low energy consumption, and high reliability - as well as differentiated competitiveness characterized by long endurance, low-temperature resistance, high intelligence, and high comfort, continuously iterating and upgrading its products and technologies. In terms of core technology, the Company has achieved integration across three critical areas: vehicle architecture, vehicle control software, and assembly interface. This integration significantly improves development efficiency. The Company harnesses technologies such as efficient energy recovery and scenario-based calibration to significantly reduce energy consumption. Moreover, the application of assembly technology incorporates a dual-wheel drive system that combines independent core assemblies with external high-quality social resources, enabling complementary advantages. Through the continuous exploration and application of new products, new technologies, and new processes, the Company has consistently maintained technological leadership and product excellence in the new energy market, achieving leapfrog growth in sales volume for three consecutive years.

5. Overseas: The Company implements the “SPRINT 2030” internationalization strategy and makes every effort to expand overseas markets. At present, its exports cover 115 countries and regions worldwide, forming a multi-level layout with Southeast Asia, Africa, Latin America, the Middle East, Eastern Europe, and Central Asia as the foundation, while gradually penetrating high-end markets. The Company continues to accelerate its global layout. At present, the Company has more than 140 core dealers and more than 500 service providers overseas. The Company has established overseas subsidiaries in countries such as South Africa and Tanzania, and exports models including CH, CP, DP, LR and others, among which it firmly ranks first in the medium- and heavy-duty truck market share in South Africa. At the same time, it continues to accelerate overseas localized operations, fully launching the layout of 8 overseas subsidiaries, with subsidiaries in Saudi Arabia, Uzbekistan, etc. having been completed and successively put into operation, to fully support the achievement of the Company’s internationalization strategy.

III. Analysis of Main Business

Overview

Please refer to the relevant content of “I. Main Businesses of the Company in the Reporting Period”. Year-on-Year Changes in Key Financial Data

Unit: CNY

Significant changes in profit composition or profit sources of the Company during the reporting period □Applicable Not applicable

There was no significant change in the profit composition or profit sources of the Company during the reporting period.

Composition of operating income

Unit: CNY

Information about industries, products, or regions accounting for more than 10% of the Company’s operating income or operating profit

Applicable □Not applicable

Unit: CNY

The main business data of the Company for the latest period, adjusted according to the statistical criteria at the end of the reporting period, in the event of any adjustment to the statistical criteria of the Company’s main business data during the reporting period

□Applicable Not applicable

IV. Analysis of Non-Main Business

□Applicable Not applicable

V. Analysis of Assets and Liabilities

1. Major Changes in Asset Composition

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

2. Details of Major Overseas Assets

□Applicable Not applicable

3. Assets and Liabilities Measured at Fair Value

Applicable □Not applicable

Unit: CNY

Whether the measurement attribution of the Company’s main assets within the Reporting Period was significantly changed or not □ Yes No

4. Restrictions on Asset Rights as of the End of the Reporting Period

For details, please refer to Section VIII Financial Report, VII. Notes to Items in the Consolidated Financial Statements, 25 “Assets with Restricted Ownership or Right of Use”.

VI. Investment Analysis

1. Overall Situation

Applicable □Not applicable

2. Major Equity Investments Acquired in the Reporting Period

□Applicable Not applicable

3. Major Non-equity Investments in Progress in the Reporting Period

□Applicable Not applicable

4. Financial Assets Investment

(1) Securities investment

□Applicable Not applicable

The Company has no securities investment in the reporting period.

(2) Derivatives investment

Applicable □Not applicable

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

1) Derivatives Investment for the Purpose of Hedging during the Reporting Period

Applicable □Not applicable

Unit: CNY 10 thousand

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

2) Derivatives investment for speculative purposes during the reporting period

□Applicable Not applicable

The Company had no derivatives investment for speculative purposes during the reporting period.

5. Use of Raised Funds

Applicable □Not applicable

(1) Overall Use of Raised Funds

Applicable □Not applicable

Unit: CNY 10 thousand

Description of the Overall Use of Raised Funds:

As approved by the China Securities Regulatory Commission (CSRC) in its “Reply on Approving the Registration of FAW Jiefang Group Co., Ltd. for Issuance of Shares to Specific Objects” (CSRC Permit [2024] No. 972) and with consent from the Shenzhen Stock Exchange, the Company issued 298,507,462 ordinary shares (A shares) to specific objects through the Shenzhen Stock Exchange system via the lead underwriter China International Capital Corporation Limited (hereinafter “CICC”), at an issue price of CNY 6.7 per share. The gross proceeds totaled CNY 1,999,999,995.40, and after deducting issuance expenses of CNY 2,186,599.36 (excluding VAT), the net proceeds amounted to CNY 1,997,813,396.04. The above net proceeds have been verified by Grant Thornton Certified Public Accountants (Special General Partnership) in their “Verification Report.”

As of June 30, 2026, all projects have been completed. The accumulated amount of raised funds invested in proceeds-funded projects was CNY

1,997,813,420.71, and the unused amount was CNY 1,946,071.02. According to the Self-Regulatory Supervision Guidelines for Listed Companies on Shenzhen Stock Exchange No. 1 - Standardized Operation of Main Board Listed Companies and other relevant provisions, where the surplus funds (including interest income) are less than CNY 5 million or less than 1% of the net amount of raised funds for the project, the performance of relevant deliberation procedures may be exempted, and the use thereof shall be disclosed in the annual report. As of July 23, 2026, the Company has transferred out all surplus raised funds to permanently replenish working capital to support the development of the Company’s main business, and has completed the cancellation procedures for the dedicated account for raised funds.

(2) Raised Fund Committed Projects

□Applicable Not applicable

(3) Changes to Raised Fund Investment Projects

□Applicable Not applicable

The Company had no changes to proceeds-funded projects during the reporting period.

VII. Sale of Major Assets and Equity

1. Sale of Major Assets

□Applicable Not applicable

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

2. Sale of Major Equity

□Applicable Not applicable

VIII. Analysis on Main Holding and Joint-Stock Companies

Applicable □Not applicable

Major subsidiaries and joint-stock companies affecting over 10% of the net profit of the Company

Unit: CNY 10 thousand

Acquisition and disposal of subsidiaries in the reporting period

Applicable □Not applicable

IX. Structured Entities Controlled by the Company

□Applicable Not applicable

X. Risks Faced by the Company and Countermeasures

1. Industry competition risks

In the second half of 2026, the characteristics of stock-based competition in the domestic commercial vehicle industry will become increasingly pronounced, the pace of structural adjustments in the industry will accelerate, and competitive pressure will continue to rise. Traditional enterprises continue to intensify product iteration and upgrades, while cross-industry players keep rolling out new products, leaving the dual competitive squeeze unrelieved. Leading industry players continue to ramp up R&D investment in new energy and intelligent connected technologies, while simultaneously optimizing the lightweight and energy-saving performance of traditional fuel vehicles to capture downstream segmented application markets, leading to cutthroat competition for core industry market share. As a key growth engine for the industry, the export market is transmitting external competition back into the domestic market. Meanwhile, the issue of product homogenization across the industry has not been effectively alleviated, and market involution continues to deepen.

2. New Energy Market Competition Risks

In the second half of 2026, the penetration rate of the new energy commercial vehicle market will maintain a steady upward trend, and competition in this sector will continue to intensify, putting greater pressure on the consolidation and expansion of the Company’s new energy business. The R&D and technological upgrading of new energy vehicle models require sustained, substantial investment of capital and specialized manpower. With the industry’s technology iteration cycle continually shortening, if the Company fails to build differentiated competitive barriers in core technical domains such as critical powertrains and in-vehicle intelligent systems, it will continuously face intense competitive pressure from peers. In addition, price volatility of core raw materials in the upstream supply chain remains uncertain, while implementing and scaling innovative business models—such as new energy vehicle operations and leasing—presents considerable challenges. As entrants in various segmented application segments continue to multiply, multiple factors will pose heightened challenges to the Company’s new energy business in the second half of the year.

3. Operational Risks in Overseas Market Expansion

In the second half of 2026, uncertainties surrounding overseas business expansion will increase. On the demand side, the momentum of global economic recovery remains sluggish, with market demand in multiple countries staying depressed. On the trade side, several nations continue to raise vehicle import tariffs, and the scope of carbon border adjustment policies keeps expanding, directly driving up the comprehensive costs of complete vehicle exports. On the compliance side, multiple countries are accelerating the implementation of stringent new motor vehicle emission regulations; expenditures on regulatory compliance and model adaptations for overseas markets continue to rise, pushing up compliance costs. Geopolitically, volatile international relations, coupled with frequent adjustments in national trade and industrial policies, have elevated the risk of overseas regulatory penalties. Compounded by significant variations in regional demand, regulations, and technical standards across overseas markets, the complexity of localized operations and management remains high, which will constrain the achievement of the Company’s overseas sales and profitability targets in the second half of the year.

To address the above risks, the Company has formulated the following measures:

First, deepen industry insights and comprehensively strengthen overall product competitiveness. Aligning closely with its medium- to long-term strategic plan, the Company will accurately identify structural growth opportunities in the market, make every effort to solidify its core base in the existing market, and concentrate internal resources to ensure the orderly achievement of its annual operational targets. The Company will continue to refine core product performance, enhance the pricing premium of complete vehicles, and establish synergistic mechanisms across R&D, marketing, and the aftermarket to build well-rounded, differentiated competitive advantages. It will further cultivate the automotive aftermarket domain, explore value-added services for existing clients, and tap new growth drivers across multiple tiers. On the overseas front, the Company will increase the rollout of highly adapted, high-margin vehicle models, continually expand into overseas niche markets, and steadily increase regional coverage of its flagship products. It will carry out lean operations across the entire overseas marketing value chain and leverage key performance indicators to drive cost reduction and efficiency gains across all business units, thereby offsetting cost pressures arising from industry competition.

Second, consolidate the foundation of the new energy vehicle (NEV) business and reinforce competitive advantages in this segment. The Company will continue to leverage the product strengths of its current NEV models, precisely capture market demand across segmented application scenarios in the second half of the year, and roll out innovative marketing campaigns to ensure the steady fulfillment of NEV operational targets. It will conduct in-depth field research on end-user scenarios on an ongoing basis, dynamically optimizing product solutions to meet diverse market demands. The Company will deepen synergy with upstream and downstream partners across the supply chain, utilizing long-term agreements (LTAs) and joint procurement to hedge against cost pressures caused by price fluctuations of core raw materials. Leveraging auto finance tools, it will refine the full life-cycle business layout for NEVs and steadily enhance the profit quality of new businesses. In addition, it will establish dynamic monitoring mechanisms for capital allocation and operational data in the NEV business, improve the end-to-end risk early warning and resolution system, and achieve early identification and mitigation of risks across R&D, production, and sales, ensuring that overall operational risks in the NEV segment remain strictly controllable.

Third, refine the overseas governance and control system and steadily elevate international market competitiveness. The Company will continue to channel more R&D resources toward dedicated overseas models, strengthen capabilities in overseas regulatory benchmarking and localized technical adaptation, and improve complete vehicles’ adaptability to diverse regional operating scenarios. It will improve standardized management mechanisms for overseas distribution channels and increase investment in regional brand promotion to support ongoing business expansion. It will routinely monitor and interpret industrial, trade, and emission regulations across target countries to deploy compliant products in advance. The Company will accelerate the implementation of localized overseas KD (Knocked Down) assembly projects and establish deeply aligned partnerships with regional channel distributors. It will also refine the full-cycle foreign exchange risk management system, employing diversified financial instruments to hedge against exchange rate volatility. Furthermore, the Company will formulate tiered, classified contingency plans for overseas security emergencies and routinely conduct safety education for overseas personnel, systematically mitigating potential risks concerning geopolitics, policies, operations, and personnel, thereby steadily enhancing overall operational resilience across overseas markets.

XI. Implementation Status of Market Capitalization Management System and Valuation Enhancement Plan

Whether the Company established a market capitalization management system.

Yes □No

Whether the Company disclosed a valuation enhancement plan.

□ Yes No

In accordance with Article 8 of the “Regulatory Guidelines for Listed Companies No. 10—Market Capitalization Management” issued by the China Securities Regulatory Commission, which stipulates that “Companies included in major indices shall establish a market capitalization management system...” The Company has formulated the “Market Capitalization Management System” in accordance with relevant regulations. The main contents include: General Provisions, Market Capitalization Management Organizations and Personnel, Principal Methods of Market Capitalization Management, Monitoring and Early Warning

Mechanisms and Emergency Measures, and Supplementary Provisions. The “Proposal on Establishing the ‘Market Capitalization Management System’” has been reviewed and approved at the 21st meeting of the 10th Board of Directors of the Company.

XII. Implementation of the “Improvement of Both Quality and Return” Action Plan

Whether the Company disclosed the Announcement on the “Improvement of Both Quality and Return” action plan.

Yes □No

To implement the guiding principles established at the Political Bureau Meeting of the CPC Central Committee to “invigorate capital markets and boost investor confidence” and at the Executive Meeting of the State Council to “vigorously enhance the quality and investment value of listed companies, and adopt more forceful and effective measures to stabilize the market and confidence,” the Company has formulated the Action Plan for “Dual Improvement in Quality and Returns” to protect the interests of all shareholders, strengthen investor confidence, and promote the Company’s long-term, sound, and sustainable development. The Company has been proactively advancing the measures outlined in the plan. For details, please refer to the Announcement on the Action Plan for “Dual Improvement in Quality and Returns” (Announcement No.: 2024-014), the Progress Announcement on the Action Plan for “Dual Improvement in Quality and Returns” (Announcement No.: 2025-034), and the Progress Announcement on the Action Plan for “Dual Improvement in Quality and Returns” (Announcement No.: 2026-015) published by the Company in Securities Times, China Securities Journal, and on CNINFO (http://www.cninfo.com.cn) on March 2, 2024, March 29, 2025, and March 28, 2026, respectively.

The Company will consistently take high-quality development as its main theme, anchoring its development around the three strategic pillars of “Technology Jiefang, Green Jiefang, and Global Jiefang.” It will maintain focus on operations, improve quality and reduce costs, prioritize sales volume, expand its lightduty vehicle business, and deeply cultivate overseas markets. The Company is resolutely committed to market expansion, incremental volume growth, and driving volume growth through superior quality, thereby accelerating the expansion of the Jiefang brand’s market scale. In the first half of the year, the Company strictly adhered to the requirements of the Company Law, the Securities Law, and the relevant rules of the Shenzhen Stock Exchange, deepened the development of its corporate governance structure, and successfully completed the re-election of the new Board of Directors. Concurrently, it gave full play to the gatekeeping and review role of the special meetings of independent directors in key areas. The Company has established a new governance framework with the Shareholders’ Meeting as the highest organ of power, the Board of Directors as the decision-making organ, specialized committees as decision-support organs, the Audit and Risk Control Committee as the supervisory organ, and executive management as the execution organ. With well-defined powers and responsibilities and efficient synergy among all governance bodies, a solid foundation has been laid for the Company’s compliant operations and sound decision-making.

The Company attaches great importance to reasonable returns for investors and strictly executes its shareholder dividend return plans and profit distribution policies. Based on its actual business conditions, the Company formulated the 2025 Annual Profit Distribution Plan as follows: Based on a total of 4,921,280,975 shares, a cash dividend of CNY 0.45 (tax inclusive) was distributed to all shareholders for every 10 shares held, resulting in a total cash dividend distribution of CNY 221,457,643.87 (tax inclusive), with the remaining undistributed profits carried forward to the next accounting year. The Company did not convert capital reserve into share capital. The ex-dividend and ex-rights date for this distribution plan was July 8, 2026.

In addition, the Company attaches great importance to investor relations management, establishing multidimensional, comprehensive investor communication channels through corporate disclosures, brokerage strategy conferences, investor interactions, EasyIR (Hudongyi), telephone hotlines, and emails. The Company held the 2025 Annual Performance Briefing on April 10, 2026, and participated in the “Online Collective Investor Reception Day for Listed Companies in Jilin Jurisdiction” on May 19, 2026. Executive management actively listened to opinions and suggestions, addressed concerns raised by investors, and comprehensively presented the enterprise’s corporate value and growth potential.

Section IV Corporate Governance, Environment, and Social Responsibility

I. Changes in Directors and Senior Management of the Company

Applicable □Not applicable

II. Profit Distribution and Transfer from Capital Reserve to Share Capital in the Reporting Period

□Applicable Not applicable

The Company plans not to distribute cash dividends, not to issue bonus shares, and not to convert capital reserve into share capital for the semi-annual period.

III. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or Other Employee Incentive Measures

□Applicable Not applicable

During the reporting period, the Company had no equity incentive plan, employee stock ownership plan, or other employee incentive measures, nor their implementation.

IV. Environmental Information Disclosure

Whether the listed company and its major subsidiaries are included in the list of enterprises required by law to disclose environmental information

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

V. Social Responsibility

In the first half of the year, FAW Jiefang consistently adhered to the development philosophy of “Harmonious Coexistence among People, Vehicles, and Society,” actively devoted itself to philanthropy, fulfilled the corporate social responsibilities of a central state-owned enterprise (SOE), and undertook its mission and obligations. It further developed the “Jiefang Navigator of Love” philanthropic brand, caring for truck drivers, and co-produced the promotional documentary “Gathering Glimmers into a Torch, Navigating with Love” with People’s Daily Online, vividly recounting heartwarming stories of freight professionals and resonating broadly with society. Regarding youth development, the Company coordinated domestic and overseas initiatives in parallel: domestically, it provided assistance to underprivileged students in the Qingdao region; internationally, it carried out aid activities in countries such as the Philippines and Vietnam, conveying corporate warmth through practical actions. Concurrently, FAW Jiefang proactively promoted rural revitalization. On the one hand, it encouraged employees to participate in poverty-alleviation consumption, prioritizing agricultural and sideline products from assisted areas under equal conditions. On the other hand, addressing the needs of its targeted assistance area, Zhenlai County, it established a pairing-assistance and coconstruction partnership with the local Characteristic Industry Development Center, injecting lasting momentum into rural revitalization through a series of innovative measures.

Section V Important Matters

I. Commitments Made by the Company’s Actual Controllers, Shareholders, Related Parties, Purchasers and the Company to Interested Parties that will be Fulfilled in the Reporting Period, and Commitments Unfulfilled Beyond the Time Limit by the End of the Reporting Period

□Applicable Not applicable

1. During the reporting period, there were no commitments made by the Company’s actual controllers, shareholders, related parties, purchasers, the Company, or other related commitment makers during the reporting period, nor any commitments that remained unfulfilled beyond the time limit by the end of the reporting period.

II.Non-operating Occupation of Funds by Controlling Shareholders and Other Related Parties to the Listed Company

□Applicable Not applicable

During the reporting period, there was no non-operating occupation of funds by controlling shareholders and other related parties.

III. Illegal External Guarantee

□Applicable Not applicable

The Company has no illegal external guarantee in the reporting period.

IV. Appointment and Removal of Accounting Firm

Whether the semi-annual financial report has been audited

□ Yes No

The Company’s semi-annual report is unaudited.

V. Description of the Board of Directors on the “Non-standard Audit Report” of the Accounting Firm in the Reporting Period

□Applicable Not applicable

VI. Description of the Board of Directors on the “Non-standard Audit Report” of the Previous Year

□Applicable Not applicable

VII. Matters Related to Bankruptcy Reorganization

□Applicable Not applicable

The Company has no matters related to bankruptcy reorganization in the reporting period.

VIII. Litigation Matters

Major Litigation and Arbitration Matters

□Applicable Not applicable

The Company had no major litigation or arbitration matters during the reporting period.

Other litigation matters

Applicable □Not applicable

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

IX. Punishment and Rectification

□Applicable Not applicable

The Company has no punishment or rectification in the reporting period.

X. Integrity of the Company and Its Controlling Shareholders and Actual Controllers

□Applicable Not applicable

XI. Major Related Transactions

1. Related Transactions in Daily Operations

Applicable □Not applicable

2. Related Transactions Arising from the Acquisition and Sale of Assets or Equity

□Applicable Not applicable

The Company has no related transactions arising from the acquisition and sale of assets or equity in the reporting period.

3. Related Transactions of Joint Foreign Investment

□Applicable Not applicable

The Company has no related transactions of joint foreign investment in the reporting period.

4. Related Credit and Debt Transactions

Applicable □Not applicable

Whether there are non-operating related credit and debt transactions

□ Yes No

The Company has no non-operating related credit and debt transactions in the reporting period.

5. Transaction with Related Finance Companies

Applicable □Not applicable

Deposit Business

Credit Granting or Other Financial Businesses

Note: The closing balance includes the principal and interest of actual deposits in the finance company.

6. Transactions between Finance Companies Controlled by the Company and Related Parties

□Applicable Not applicable

There is no deposit, loan, credit granting or other financial businesses between the finance companies controlled by the Company and related parties.

7. Other Major Related Transactions

Applicable □Not applicable

On February 3, 2026, the 34th meeting of the 10th Board of Directors of the Company reviewed and approved the Proposal on Estimated Amount of Daily Related Transactions in 2026 and Proposal on Estimated Amount of Financial Business with First Automobile Finance Co., Ltd. in 2026, which were reviewed and approved by the First Extraordinary Shareholders’ Meeting of the Company in 2026.

Relevant Inquiries on Disclosure Website of Interim Report of Major Related Transactions

XII. Major Contracts and Their Performance

1. Trusteeship, Contracting and Lease

(1) Trusteeship

□Applicable Not applicable

There is no trusteeship made by the Company in the reporting period.

(2) Contracting

□Applicable Not applicable

There is no contracting made by the Company in the reporting period.

(3) Lease

Applicable □Not applicable

Description of lease

For details of the Company’s operating lease, please refer to Note 15 “Investment Property”, Note 16 “Fixed Assets”, and Note 20 “Right-of-Use Assets” in VII “Notes to Items in Consolidated Financial Statements” of Section VIII “Financial Report”, and 5 “Related Party Transactions” in XIV “Related Parties and Related Transactions”.

Projects that bring about profits and losses exceeding 10% of the total profit of the Company in the reporting period

□Applicable Not applicable

The Company has no leasing project that brings about profits and losses exceeding 10% of the total profit of the Company in the reporting period.

2.Major Guarantees

□Applicable Not applicable

The Company has no major guarantees in the reporting period.

3. Entrusted Financial Management

Applicable □Not applicable

Unit: CNY 10 thousand

Specific circumstances of the Company, acting as a single principal, entrusting financial institutions to conduct asset management, or investing in high-risk entrusted wealth management products with lower security and poorer liquidity

□Applicable Not applicable

4. Other Major Contracts

□Applicable Not applicable

The Company has no other major contracts in the reporting period.

XIII. Registration Form of Reception, Investigation, Communication, Interview and Other Activities in the Reporting Period Applicable □Not applicable

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

XIV. Other Major Matters to be Explained

□Applicable Not applicable

There are no other major matters to be explained by the Company in the reporting period.

XV. Major Events of Subsidiaries

□Applicable Not applicable

Section VI Changes in Shares and Shareholders

I. Changes in Shares

1. Changes in Shares

Unit: share

Reasons for changes in shares

Applicable □Not applicable

During the reporting period, locked-up shares held by directors, senior management and others were restricted from trading in accordance with relevant regulations.

Approval of share changes

□Applicable Not applicable

Transfer of shares changes

□Applicable Not applicable

Implementation progress of share repurchase

□Applicable Not applicable

Implementation Progress of Reducing Shareholding in Repurchased Shares by Centralized Bidding

□Applicable Not applicable

Impact of changes in shares on financial indicators such as basic earnings per share and diluted earnings per share in the latest year and the latest period, and net assets per share attributable to shareholders with ordinary shares of the Company

□Applicable Not applicable

Other information disclosed as deemed necessary by the Company or required by the securities regulatory authority

□Applicable Not applicable

2. Changes in Restricted Shares

Applicable □Not applicable

Unit: share

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

II. Issuance and Listing of Securities

□Applicable Not applicable

III. Number of Shareholders and Shareholdings of the Company

Unit: share

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Participation in securities lending business by shareholders holding more than 5%, the top 10 shareholders, and the top 10 shareholders of unrestricted tradable shares

□Applicable Not applicable

Changes in the top 10 shareholders and top 10 shareholders of unrestricted tradable shares compared to the previous period due to securities lending/return activities □Applicable Not applicable

Do the top 10 shareholders with ordinary shares and the top 10 shareholders with unrestricted ordinary shares of the Company conduct agreed repurchase transactions in the reporting period

□ Yes No

The top 10 shareholders with ordinary shares and the top 10 shareholders with unrestricted ordinary shares of the Company do not conduct agreed repurchase transactions in the reporting period IV.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

IV. Changes in Shareholdings of Directors and Senior Management

Applicable □Not applicable

V. Changes in Controlling Shareholder or Actual Controller

If the Company has previously disclosed that the actual controller is planning a change of control which has not yet been completed, please explain the progress of the change of control.

□Applicable Not applicable

Changes in controlling shareholders in the reporting period

□Applicable Not applicable

There is no change in the controlling shareholders of the Company in the reporting period.

Change of actual controller in the reporting period

□Applicable Not applicable

There is no change in the actual controller of the Company in the reporting period.

VI. Preferred Shares

□Applicable Not applicable

The Company has no preferred shares in the reporting period.

Section VII Bonds

□Applicable Not applicable

Section VIII Financial Report

I. Audit Report

Whether the semi-annual report has been audited

□ Yes No

The Company’s semi-annual financial report is unaudited.

II.Financial Statements

The unit in the notes to the financial statement is CNY

1. Consolidated Balance Sheet

Prepared by: FAW Jiefang Group Co., Ltd.

Tuesday, June 30, 2026 Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Legal Representative: Li Sheng Person in Charge of Accounting Work: Yu Changxin Person in Charge of the Accounting Institution: Yang Li

2.Balance Sheet of Parent Company

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

3. Consolidated Profit Statement

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd. Legal Representative: Li Sheng Person in Charge of Accounting Work: Yu Changxin Person in Charge of the Accounting Institution: Yang Li

Profit Statement of Parent Company

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

5. Consolidated Cash Flow Statement

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

6、Cash Flow Statement of Parent Company

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Amount in the previous year

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

8. Statement of Changes in Owners’ Equity of Parent Company

Amount in the current period

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Amount in the previous year

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

III. Company Profile

FAW Jiefang Group Co., Ltd., formerly known as FAW Car Co., Ltd., is a limited liability company registered in Changchun City, Jilin Province.

FAW Car was approved by TGS [1997] No. 55 Document of the State Commission for Restructuring the Economic Systems in 1997 and established exclusively by China FAW Group Co., Ltd . On June 18, 1997, FAW Car was approved by the China Securities Regulatory Commission to issue shares publicly and listed on the Shenzhen Stock Exchange for circulation.

On April 9, 2012, FAW Group invested 862,983,689 shares of FAW Car into China FAW Co., Ltd. as its capital contribution to FAW, and received the Confirmation of Securities Transfer Registration issued by China Securities Depository & Clearing Co., Ltd. Shenzhen Branch on the same day.

On November 28, 2019, FAW Car held the 10th meeting of the 8th Board of Directors, and reviewed and approved the adjustment plan for major asset restructuring. After the adjustment, FAW Car Co., Ltd. transferred all its assets and liabilities, except for the equity interests in First Automobile Finance Co., Ltd. and Sanguard Automobile Insurance Co., Ltd. and certain reserved assets, to FAW Bestune Co., Ltd. (now renamed as FAW Bestune Auto Co., Ltd.). Subsequently, FAW Car Co., Ltd. used the 100% equity in FAW Bestune as disposed assets to exchange for an equivalent portion of the 100% equity interest of FAW Jiefang Automotive Co., Ltd. held by China FAW Co., Ltd. Meanwhile, FAW Car purchased the difference between the purchased assets and the sold assets from FAW by issuing shares and paying cash.

On March 12, 2020, FAW Car received the Reply on Approving the Major Asset Restructuring of FAW Car Co., Ltd. and Issuing Shares to China FAW Co., Ltd. for Asset Purchase (ZJXK [2020] No.352) issued by the China Securities Regulatory Commission, and China Securities Regulatory Commission reviewed and approved the major asset replacement, share issuance and cash payment for assets purchase and related transactions of FAW Car.

The Capital Verification Report (XYZH/2020BJA100417) issued by ShineWing Accounting Firm (special general partnership) indicates that, as of March 19, 2020, all proposed purchased assets, i.e. 100% equity of Jiefang Limited, to be replaced by FAW Car to FAW by issuing shares had been transferred to FAW Car. The industrial and commercial change registration procedures of Jiefang Limited had been completed, all proposed assets, i.e. 100% equity of FAW Bestune, had been transferred to FAW, and the industrial and commercial change registration procedures of FAW Bestune had been completed. The registered capital of FAW Car is CNY 4,609,666,212.00 after this change.

In May 2020, the Chinese name of FAW Car Co., Ltd. was changed to FAW Jiefang Group Co., Ltd., and the stock abbreviation was changed to “FAW Jiefang”.

On January 11, 2021, the Company held the First Extraordinary General Meeting of Shareholders of 2021, and reviewed and approved the Proposal on the Restricted Share Incentive Plan of FAW Jiefang Group Co., Ltd. (Draft) and Its Summary, the Proposal on the Administrative Measures for the Implementation Assessment of the Restricted Share Incentive Plan of FAW Jiefang Group Co., Ltd., the Proposal on the Administrative Measures for Restricted Share Incentives of FAW Jiefang Group Co., Ltd., and the Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the Company’s Restricted Share Incentive Plan.

On January 15, 2021, the Company held the 12th meeting of the 9th Board of Directors, and reviewed and approved the Proposal on Adjusting the List of the First Batch of Incentive Participants and the Number of Shares to Be Granted under the Phase I Restricted Share Incentive Plan and the Proposal on the First Grant of Restricted Shares to the Incentive Participants of the Phase I Restricted Share Incentive Plan. Nine directors and senior executives, including Hu Hanjie, Zhu Qixin, Zhang Guohua, Wang Ruijian, Shang Xingwu, Ou Aimin, Kong Dejun, Wu Bilei and Wang Jianxun, and 310 other core employees at the rank of senior chief engineer and above were granted the right to subscribe for 40,987,657 new shares of the Company at an issue price of CNY 7.54 per share, and the registered capital of the Company was changed to CNY 4,650,653,869.00. This change was verified by the Capital Verification Report (ZTYZ (2021) No. 110C000033) issued by Grant Thornton Certified Public Accountants (Special General Partnership). On February 1, 2021, the Company disclosed the Announcement on the Completion of the First Grant Registration of the Phase I Restricted Share Incentive Plan.

On December 9, 2021, the Company held the 20th meeting of the 9th Board of Directors and the 19th meeting of the 9th Board of Supervisors, and reviewed and approved the Proposal on Granting Reserved Part of Restricted Shares in the Phase I Restricted Share Incentive Plan to Incentive Objects and the Proposal on Repurchase and Cancellation of Partial Restricted Shares in the Phase I Restricted Share Incentive Plan respectively. Thirty-three core technicians and management backbones, including Wang Manhong, Zhang Yu and Qu Yi, subscribed for 3,721,601 new shares at an issue price of CNY 6.38/share, and 260,857 shares were repurchased at a price of CNY 7.04/share from 2 employees who were no longer eligible for incentive objects. The registered capital of the Company was changed to CNY 4,654,114,613.00. This change was verified by the Capital Verification Report (ZTYZ (2021) No.110C000927) issued by Grant Thornton Accounting Firm (special general partnership). On January 6, 2022, the Company disclosed the Announcement on the Completion of Registration of the Grant of Reserved Part of Restricted Shares in the Phase I Restricted Share Incentive Plan. On January 17, 2022, the Company disclosed the Announcement on the Completion of Repurchase and Cancellation of Some Restricted Shares.

On August 29, 2022, the Company held the 26th meeting of the 9th Board of Directors and the 23rd meeting of the 9th Board of Supervisors, and reviewed and approved the Proposal on Repurchase and Cancellation of Partial Restricted Shares in the Phase I Restricted Share Incentive Plan. It was agreed to repurchase 789,711 shares at a price of CNY 6.39/share from 6 employees who are no longer qualified as incentive objects, and the registered capital of the Company was changed to CNY 4,653,324,902.00. This change was verified according to the Capital Verification Report (XYZH/2022CCAA2B0016) issued by ShineWing Accounting Firm (special general partnership). On November 14, 2022, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

On October 28, 2022, the Company held the 28th meeting of the 9th Board of Directors and the 24th meeting of the 9th Board of Supervisors, and reviewed and approved the Proposal on Repurchase and Cancellation of Partial Restricted Shares in the Phase I Restricted Share Incentive Plan, and agreed to repurchase 1,359,247 shares at a price of CNY 6.39/share from 11 employees who are no longer qualified as incentive objects. The registered capital of the Company was changed to CNY 4,651,965,655.00. This change was verified according to the Capital Verification Report (XYZH/2023CCAA2B0001) issued by ShineWing Accounting Firm (special general partnership). On January 17, 2023, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

On December 15, 2022, the Company held the 30th Meeting of the 9th Board of Directors and the 26th Meeting of the 9th Board of Supervisors, and reviewed and approved the Proposal on the Achievement of Unlocking Conditions in the First Release Period of the Restricted Shares Firstly Granted in the Phase I Restricted Incentive Plan. The unlocking conditions in the first release period of the restricted shares firstly granted in the phase I restricted incentive plan had been fulfilled. The unlocking matters of the first restriction releasing period for restricted shares firstly granted were handled in accordance with the restricted share incentive plan. There were a total of 311 incentive objects eligible for unlocking, and the number of restricted stocks unlocked this time was 13,042,347. These shares were listed on May 16, 2023. On February 3, 2024, the Company disclosed the Indicative Announcement on the Listing and Circulation of Unlocked Shares in the First Release Period of the Restricted Shares Firstly Granted in the Phase I Restricted Share Incentive Plan.

The Proposal on the Repurchase and Cancellation of Partial Restricted Shares in the Phase I Restricted Share Incentive Plan was reviewed and approved at the 30th Meeting of the 9th Board of Directors and the 26th Meeting of the 9th Board of Supervisors on December 15, 2022. The participants at the meeting agreed to repurchase and cancel all or some restricted shares granted to 6 incentive objects but not yet released, totaling 723,435 shares, and the registered capital of the Company was changed to CNY 4,651,242,220. This change was verified according to the Capital Verification Report (XYZH/2023CCAA2B0103) issued by ShineWing Accounting Firm (special general partnership). On April 28, 2023, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

On March 31, 2023, the Proposal on Unfulfilling Conditions for Releasing Restricted Sales in the Second Period of Releasing Restricted Shares Firstly Granted and Conditions for the First Period of Releasing Restricted Shares Reserved for Granting in Phase I Restricted Share Incentive Plan and Repurchase and Cancellation of Some Restricted Shares was reviewed and approved at the 32nd Meeting of the 9th Board of Directors and the 28th Meeting of the 9th Board of Supervisors. The participants at the meeting agreed to repurchase and cancel all or some restricted shares granted to 327 incentive objects but not yet released, totaling 13,909,890 shares, and the registered capital of the Company was changed to CNY 4,637,332,330. This change was verified according to the Capital Verification Report (XYZH/2023CCAA2B017) issued by ShineWing Accounting Firm (special general partnership). On June 30, 2023, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

On April 27, 2023, the Company held the 2nd Meeting of the 10th Board of Directors and the 2nd Meeting of the 10th Board of Supervisors, respectively, and reviewed and approved the Proposal on Releasing Restriction on Sales of Part of Restricted Shares. The Board of Directors believed that conditions for releasing restricted sales of restricted shares in the first restriction releasing period for incentive objects Hu Hanjie, Wu Bilei, Zhang Guohua and Wang Jianxun had been fulfilled, and agreed to release restricted sales of restricted shares in the first restriction releasing period for them, totaling 64,954 shares. These shares were listed on May 16, 2023. On May 15, 2023, the Company disclosed the Indicative Announcement on Sales Restriction Releasing and Listing and Circulation of Part of Restricted Shares.

The Proposal on the Repurchase and Cancellation of Partial Restricted Shares in the Phase I Restricted Share Incentive Plan was reviewed and approved at the 5th Meeting of the 10th Board of Directors and the 4th Meeting of the 10th Board of Supervisors on August 29, 2023. The participants at the meeting agreed to repurchase and cancel all or some restricted shares granted to 8 incentive objects but not yet released, totaling 333,855 shares, and the registered capital of the Company was changed to CNY 4,636,998,475.00. This change was verified according to the Capital Verification Report (XYZH/2023CCAA2B0188) issued by ShineWing

Accounting Firm (special general partnership). On November 29, 2023, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

The Proposal on the Repurchase and Cancellation of Partial Restricted Shares in the Phase I Restricted Share Incentive Plan was reviewed and approved at the 7th Meeting of the 10th Board of Directors and the 6th Meeting of the 10th Board of Supervisors on November 20, 2023. The participants at the meeting agreed to repurchase and cancel all or some restricted shares granted to some incentive objects but not yet released, totaling 512,807 shares, and the registered capital of the Company was changed to CNY 4,636,485,668. This change was verified according to the Capital Verification Report (XYZH/2024CCAA2B0020) issued by ShineWing Accounting Firm (special general partnership). On March 28, 2024, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

On March 28, 2024, the Company held the 11th meeting of the 10th Board of Directors and the 10th meeting of the 10th Board of Supervisors.Subsequently, on April 25, 2024, the Company held its 2023 Annual General Meeting of Shareholders.These meetings reviewed and approved “Proposal on Unfulfilling Conditions for Releasing Restricted Sales in the Third Period of Releasing Restricted Shares Firstly Granted and Conditions for the Second Period of Releasing Restricted Shares Reserved for Granting in Phase I Restricted Share Incentive Plan and Repurchase and Cancellation of Some Restricted Shares.” The meetings approved the repurchase and cancellation of 12,621,954 restricted shares that had been granted to plan participants but had not yet vested. As a result, the Company’s registered capital will be changed to CNY 4,623,863,714. This change was verified according to the Capital Verification Report (XYZH/2024CCAA2B0173) issued by ShineWing Accounting Firm (special general partnership). On June 15, 2024, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

On March 28, 2025, the Company held the 24th meeting of the 10th Board of Directors and the 20th meeting of the 10th Board of Supervisors, and subsequently, on April 18, 2025, the 2024 Annual General Meeting of Shareholders. At these meetings, the “Proposal on Unfulfilled Conditions for the Third Release Period of the Phase I Restricted Share Incentive Plan and the Repurchase and Cancellation of Some Restricted Shares, as well as Adjustment of Repurchase Price” was reviewed and approved.The meetings approved the repurchase and cancellation of 1,090,201 restricted shares that had been granted to incentive participants but had not yet been released from restriction.Consequently, the Company’s registered capital will be adjusted to CNY 4,921,280,975. This change was verified by the Capital Verification Report (ZTYZ (2025) No.110C000149) issued by Grant Thornton Accounting Firm (special general partnership). On June 10, 2025, the Company disclosed the Announcement on Completion of Repurchase and Cancellation of Some Restricted Shares.

According to the resolutions passed at the Company’s Second Extraordinary General Meeting of Shareholders in 2023 and the Second Extraordinary General Meeting of Shareholders in 2024, and as approved by the CSRC’s document “Reply on Approving the Registration of FAW Jiefang Group Co., Ltd.’s Non-public Issuance of Shares” (CSRC [2024] No.972) issued on June 21, 2024, the Company conducted a non-public issuance of 298,507,462.00 A-shares, increasing the registered capital by CNY 298,507,462.00.Consequently, the Company’s registered capital has changed to CNY 4,922,371,176.00. This non-public issuance of shares has been verified by the Capital Verification Report (ZTYZ [2024] No.110C000357) issued by Grant Thornton Accounting Firm (special general partnership).

The Company has established a corporate governance structure consisting of a Shareholders’ Meeting and a Board of Directors, and has 8 wholly-owned subsidiaries, namely Jiefang Limited, FAW Jiefang Group

International Automobile Co., Ltd., Jiefang Saudi Arabia Co., Ltd., Jiefang Uzbekistan Co., Ltd., Jiefang Vietnam Co., Ltd., Jiefang Indonesia Co., Ltd., FAW Jiefang Uni-D Transportation Technology (Tianjin) Co., Ltd., and FAW Jiefang Lvdong Renewable Technology (Wuxi) Co., Ltd., and 2 non-wholly-owned subsidiaries, namely Jiefang Best Co., Ltd. and FAW (Africa) Investment Co., Ltd. FAW (Africa) Investment Co., Ltd. has 1 non-wholly-owned subsidiary, FAW Vehicle Manufacturing (South Africa) Co., Ltd. Jiefang Limited has 4 wholly-owned subsidiaries, namely FAW Jiefang (Qingdao) Automotive Co., Ltd., FAW Jiefang Dalian Diese Engine Co., Ltd., FAW Jiefang Austria R&D Co., Ltd., and FAW Jiefang Automobile Sales Co., Ltd., and 1 non-wholly-owned subsidiary, Jiefang Motors Tanzania Ltd. The Company also has 10 associates, namely Sanguard Automobile Insurance Co., Ltd., FAW Changchun Baoyou Jiefang Steel Processing and Distribution Co., Ltd., FAW Changchun Ansteel Jiefang Steel Processing and Distribution Co., Ltd., Changchun Wabco Automotive Control System Co., Ltd., Suzhou Zhito Technology Co., Ltd., FAW Jiefang Fujie (Tianjin) Technology Industry Co., Ltd., Smartlink Intelligent Technology (Nanjing) Co., Ltd., Foshan Diyiyuansu New Energy Technology Co., Ltd., Changchun Automotive Test Center Co., Ltd., and Diyi AESC New Energy Power Technology (Wuxi) Co., Ltd. Additionally, it has 1 joint venture, Jiefang Times New Energy Technology Co., Ltd.

Business scope of the Company: R&D, production and sales of medium and heavy trucks, vehicles, buses, bus chassis, medium truck deformation vehicles, automobile assemblies and parts, machining, diesel engines and accessories (non-vehicle), mechanical equipment and accessories, instruments, technical services, technical consultation, installation and maintenance of mechanical equipment, lease of mechanical equipment and facilities, lease of houses and workshops, labor services (excluding foreign labor cooperation and domestic labor dispatch), sales of steel, automobile trunks, hardware & electrical equipment and electronic products, testing of internal combustion engine, engineering technology research and testing, advertising design, production and release, import and export of goods and technologies (excluding publication import business and commodities and technologies restricted or prohibited for import and export by the state); (the following items are operated by the branch company) Chinese food production and sales, warehousing and logistics (excluding flammable, explosive and precursor dangerous chemicals), automobile repair, tank manufacturing of chemical liquid tanker, automobile trunk manufacturing (items subject to approval according to law can be operated only after being approved by relevant authorities).

Registered address of the Company: No.2259, Dongfeng Street, Changchun Automobile Development Zone, Jilin Province.

The legal representative of the Company is Li Sheng.

The financial statements and notes to the financial statements were approved for issue by the Board of Directors of the Company on August 27, 2026.

IV.Basis of Preparation for Financial Statements

1.Preparation Basis

The financial statements have been prepared in accordance with the “Accounting Standards for Business Enterprises – Basic Standard” and various specific accounting standards, application guidance, interpretations and other relevant provisions (collectively referred to as the “Accounting Standards for Business Enterprises”) promulgated by the Ministry of Finance, as well as the relevant provisions of the “Rules for Information Disclosure and Reporting by Companies that Publicly Issue Securities No. 15 – General Provisions on Financial Reports” issued by the China Securities Regulatory Commission (CSRC).

2.Continuing Operations

The financial statements have been prepared on a going concern basis.

V. Significant Accounting Policies and Accounting Estimates

Tips for specific accounting policies and accounting estimates:

The following disclosures have covered the specific accounting policies and accounting estimates formulated by the Company based on its actual production and operating characteristics.

Statement of Compliance with Accounting Standards for Business Enterprises

The financial statements comply with the requirements of the Accounting Standards for Business Enterprises promulgated by the Ministry of Finance, and truly and completely reflect the consolidated and parent company financial position of the Company as of June 30, 2026, and the consolidated and parent company operating results and cash flows for the six-month period ended June 30, 2026.

Accounting Period

The accounting year runs from January 1 to December 31 of each calendar year.

Operating Cycle

The operating cycle of the Company is 12 months.

Recording Currency

The Company adopts CNY as its reporting currency.

Methods for Determining Materiality Criteria and Selection Basis

Applicable □Not applicable

Accounting Treatment Method for Business Combination under Common Control and Not under Common Control

Business combinations involving enterprises under common control: The assets and liabilities (including goodwill arising from the ultimate controlling party’s acquisition of the acquiree) obtained by the acquirer in a business combination shall be measured based on the carrying amounts of the acquiree’s assets and liabilities in the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the carrying amount of the net assets acquired in the combination and the carrying amount of the consideration paid for the combination (or the total face value of shares issued) shall be used to adjust the share premium within capital reserve; any excess that cannot be offset against the share premium within capital reserve shall be used to adjust retained earnings.

Business combinations involving enterprises not under common control: The cost of combination shall be the fair value of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer to obtain control of the acquiree at the acquisition date. The excess of the cost of combination over the acquirer’s interest in the fair value of the identifiable net assets of the acquiree acquired in the combination shall be recognized as goodwill; the excess of the acquirer’s interest in the fair value of the identifiable net assets of the acquiree acquired in the combination over the cost of combination shall be recognized in profit or loss for the current period. The identifiable assets, liabilities and contingent liabilities of the acquiree acquired in the combination that meet the recognition criteria shall be measured at fair value at the acquisition date.

Directly related expenses incurred for the business combination shall be recognized in profit or loss for the current period when incurred; transaction costs of issuing equity or debt securities for the business combination shall be included in the initial recognition amount of the equity or debt securities.

Criteria for Control and Preparation Method of Consolidated Financial Statements

Criteria for Determining Control

The scope of consolidation of the consolidated financial statements is determined on the basis of control, and encompasses the Company and all its subsidiaries. Control means that the Company has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee, and has the ability to use its power over the investee to affect the amount of the returns.

Consolidation Procedures

The Company regards the entire enterprise group as a single accounting entity and prepares consolidated financial statements in accordance with uniform accounting policies to reflect the overall financial position, operating results, and cash flows of the enterprise group. The effects of internal transactions between the Company and its subsidiaries, and among subsidiaries, are eliminated. Where internal transactions indicate that impairment losses have occurred on the related assets, such losses shall be recognized in full. Where the accounting policies or accounting periods adopted by a subsidiary are inconsistent with those of the Company, necessary adjustments shall be made in accordance with the Company’s accounting policies and accounting periods when preparing the consolidated financial statements.

The portions of a subsidiary’s owners’ equity, current net profit or loss, and current comprehensive income attributable to non-controlling interests are presented separately under the owners’ equity section in the consolidated balance sheet, under the net profit line item in the consolidated income statement, and under the total comprehensive income line item, respectively. Where the current period losses attributable to the noncontrolling interests of a subsidiary exceed the non-controlling interests’ share in the subsidiary’s owners equity at the beginning of the period, the resulting balance shall be deducted from the non-controlling interests.

(1) Addition of subsidiaries or businesses

During the reporting period, for subsidiaries or businesses added through business combinations involving enterprises under common control, the operating results and cash flows of the subsidiary or business from the beginning of the combination period to the end of the reporting period shall be included in the consolidated financial statements. Meanwhile, the opening balances of the consolidated financial statements and the related items of the comparative statements shall be adjusted, as if the combined reporting entity had existed since the point in time when the ultimate controlling party first obtained control.

Where control is obtained over an investee under common control due to additional investments or other reasons, for the equity investment held before obtaining control over the acquiree, the relevant profit or loss, other comprehensive income, and other changes in net assets previously recognized during the period from the later of the date on which the original equity was acquired and the date on which the acquirer and the acquiree came under common control to the combination date shall be adjusted against the opening retained earnings of the comparative reporting period or profit or loss for the current period, respectively.

During the reporting period, for subsidiaries or businesses added through business combinations involving enterprises not under common control, they shall be included in the consolidated financial statements from the acquisition date based on the fair value of the identifiable assets, liabilities, and contingent liabilities determined as of the acquisition date.

Where control is obtained over an investee not under common control due to additional investments or other reasons, the equity interest previously held in the acquiree before the acquisition date shall be remeasured at its fair value as of the acquisition date, and the difference between the fair value and its carrying amount shall be recognized in investment income for the current period. The other comprehensive income that may be subsequently reclassified to profit or loss, and the other changes in owners’ equity under the equity method, related to the equity interest in the acquiree held before the acquisition date, shall be transferred to investment income for the period in which the acquisition date falls.

(2) Disposal of subsidiaries

① General treatment method

Where control over an investee is lost due to the disposal of a portion of the equity investment or other reasons, the remaining equity investment shall be remeasured at its fair value as of the date on which control is lost. The difference between the sum of the consideration obtained from the disposal of equity and the fair value of the remaining equity investment, and the sum of the share of the net assets of the former subsidiary continuously calculated from the acquisition date or the combination date at the original shareholding ratio plus the associated goodwill, shall be recognized in investment income for the period in which control is lost. The other comprehensive income that may be subsequently reclassified to profit or loss and the other changes in owners’ equity under the equity method, related to the equity investment in the former subsidiary, shall be transferred to investment income for the current period upon the loss of control.

② Step-by-step disposal of subsidiaries

Where the equity investment in a subsidiary is disposed of in stages through multiple transactions until control is lost, and where the terms, conditions, and economic effects of the individual transactions for the disposal of the equity investment in the subsidiary meet one or more of the following criteria, it usually indicates that such multiple transactions constitute a package deal:

ⅰ． These transactions are entered into simultaneously or with consideration of their mutual effects;

ⅱ． These transactions as a whole can achieve a complete commercial result only when taken together;

ⅲ． The occurrence of one transaction depends on the occurrence of at least one other transaction;

ⅳ． A transaction is uneconomic when viewed in isolation but economic when considered together with other transactions.

Where the individual transactions constitute a package deal, they shall be accounted for as a single transaction involving the disposal of the subsidiary and the loss of control; prior to the loss of control, the difference between the disposal consideration for each transaction and the corresponding share of the subsidiary’s net assets attributable to the disposed investment shall be recognized as other comprehensive income in the consolidated financial statements, and shall be transferred in aggregate to profit or loss for the period in which control is lost upon the loss of control.

Where the individual transactions do not constitute a package deal, prior to the loss of control, they shall be accounted for as a partial disposal of the equity investment in the subsidiary without the loss of control; upon the loss of control, they shall be accounted for in accordance with the general treatment method for the disposal of subsidiaries.

(3) Acquisition of non-controlling interests in subsidiaries

The difference between the cost of the newly acquired long-term equity investment arising from the acquisition of non-controlling interests and the share of the subsidiary’s net assets continuously calculated from the acquisition date or combination date at the newly increased shareholding ratio shall be used to adjust the share premium within capital reserve in the consolidated balance sheet; any excess that cannot be offset against the share premium within capital reserve shall be used to adjust retained earnings.

(4) Partial disposal of equity investment in a subsidiary without losing control

The difference between the disposal consideration and the corresponding share of the subsidiary’s net assets continuously calculated from the acquisition date or combination date attributable to the disposed longterm equity investment shall be used to adjust the share premium within capital reserve in the consolidated balance sheet; any excess that cannot be offset against the share premium within capital reserve shall be used to adjust retained earnings.

Classification of Joint Venture Arrangement and Accounting Treatment Methods for Joint Operations

Joint arrangements are classified as joint operations and joint ventures.

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Company recognizes the following items relating to its interest in a joint operation:

(1) Its assets held solely, and its share of any jointly held assets;

(2) Its liabilities incurred solely, and its share of any jointly incurred liabilities;

(3) Its revenue from the sale of its share of the output arising from the joint operation;

(4) Its share of the revenue from the sale of output by the joint operation;

(5) Its expenses incurred solely, and its share of any expenses incurred jointly.

The Company accounts for its investments in joint ventures using the equity method; please refer to Item 19 “Long-term Equity Investments” in Section V “Significant Accounting Policies and Accounting Estimates” of Section VIII Financial Report for details.

Standards for Recognition of Cash and Cash Equivalents

Cash refers to the Company’s cash on hand and deposits that are readily available for payment. Cash equivalents refer to short-term, highly liquid investments held by the Company that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Foreign Currency Transaction and Foreign Currency Statement Translation

Foreign Currency Transactions

Foreign currency transactions shall be recorded in CNY at the spot exchange rate prevailing on the date of the transaction as the translation rate.

On the balance sheet date, balances of foreign currency monetary items shall be translated at the spot exchange rate prevailing on the balance sheet date. The resulting exchange differences shall be recognized in profit or loss for the current period, except for those arising from specific-purpose foreign currency borrowings designated for the acquisition or construction of qualifying assets, which shall be treated in accordance with the capitalization principles for borrowing costs.

Translation of Foreign Currency Financial Statements

Asset and liability items in the balance sheet shall be translated at the spot exchange rate prevailing on the balance sheet date; owners’ equity items, except for “Undistributed Profits”, shall be translated at the spot exchange rate prevailing at the time of occurrence. Revenue and expense items in the income statement shall be translated at the spot exchange rate prevailing on the date of the transactions.

Upon disposal of a foreign operation, the exchange differences arising from the translation of the foreign currency financial statements of the foreign operation previously recognized in owners’ equity shall be transferred to profit or loss for the period in which the disposal occurs.

Financial Instruments

The Company shall recognize a financial asset, a financial liability or an equity instrument when it becomes a party to the contractual provisions of a financial instrument.

Classification of Financial Instruments

Based on the Company’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets, financial assets shall be classified at initial recognition into: financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income (FVTOCI), and financial assets measured at fair value through profit or loss (FVTPL).

The Company classifies the financial assets that meet the following conditions but are not designated to be measured at fair value and with the changes included in current profits or losses as the financial assets measured at amortized cost:

\- The business model objective is to hold financial assets in order to collect contractual cash flows;

\- The contractual cash flows are solely payments of principal and interest on the principal amount outstanding.

The Company classifies financial assets that simultaneously meet the following conditions and have not been designated as financial assets at FVTPL as financial assets at FVTOCI (debt instruments):

\- The objective of the business model is achieved by both collecting contractual cash flows and selling the financial assets;

\- The contractual cash flows are solely payments of principal and interest on the principal amount outstanding.

For investments in equity instruments that are not held for trading, the Company may, upon initial recognition, irrevocably designate them as financial assets measured at fair value through other comprehensive income (equity instruments). Such designation is made on an investment-by-investment basis, and the relevant investment shall meet the definition of an equity instrument from the issuer’s perspective.

Except for the above-mentioned financial assets measured at amortized cost and fair value through other comprehensive income, the Company classifies all remaining financial assets as financial assets measured at fair value through profit or loss. At initial recognition, if doing so eliminates or significantly reduces an accounting mismatch, the Company may irrevocably designate a financial asset that would otherwise be classified as measured at amortized cost or measured at fair value through other comprehensive income as a financial asset measured at fair value through profit or loss.

Financial liabilities shall be classified at initial recognition into: financial liabilities measured at fair value through profit or loss, and financial liabilities measured at amortized cost.

A financial liability that meets one of the following conditions may be designated at initial measurement as a financial liability measured at fair value through profit or loss:

1) Such designation can eliminate or significantly reduce an accounting mismatch.

2) In accordance with a documented risk management or investment strategy of the Company, a group of financial liabilities, or a group of financial assets and financial liabilities, is managed and its performance is evaluated on a fair value basis, and information about such group is reported internally on that basis to key management personnel.

3) The financial liability contains an embedded derivative that needs to be separated independently.

Recognition Basis and Measurement Methods for Financial Instruments

(1) Financial assets measured at amortized cost

Financial assets measured at amortized cost include notes receivable, accounts receivable, other receivables, long-term receivables, debt investments, etc., and shall be initially measured at fair value, with related transaction costs included in the initial recognition amount; accounts receivable that do not contain a significant financing component, as well as accounts receivable for which the Company has elected not to consider the financing component of one year or less, shall be initially measured at the transaction price as defined in the contract.

Interest calculated using the effective interest method during the holding period shall be recognized in profit or loss for the current period.

Upon collection or disposal, the difference between the consideration obtained and the carrying amount of the financial asset shall be recognized in profit or loss for the current period.

(2) Financial assets measured at fair value through other comprehensive income (debt instruments)

Financial assets measured at fair value through other comprehensive income (debt instruments) include receivables financing, other debt investments, etc. They shall be initially measured at fair value, with related transaction costs included in the initial recognition amount. Such financial assets shall be subsequently measured at fair value. Changes in fair value, except for interest calculated using the effective interest method, impairment losses or gains, and foreign exchange gains and losses, shall be recognized in other comprehensive income.

Upon derecognition, the cumulative gains or losses previously recognized in other comprehensive income shall be transferred from other comprehensive income and recognized in profit or loss for the current period.

(3) Financial assets measured at fair value through other comprehensive income (equity instruments)

Financial assets measured at fair value through other comprehensive income (equity instruments) include investments in other equity instruments, etc. They are initially measured at fair value, and related transaction costs are included in the initial recognition amount. Such financial assets shall be subsequently measured at fair value, and changes in fair value shall be recognized in other comprehensive income. Dividends obtained shall be recognized in profit or loss for the current period.

Upon derecognition, the cumulative gains or losses previously recognized in other comprehensive income shall be transferred from other comprehensive income and recognized in retained earnings.

(4) Financial assets measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss include trading financial assets, derivative financial assets, other non-current financial assets, etc. They are initially measured at fair value, and related transaction costs are recognized in profit or loss for the current period. The financial asset is subsequently measured at fair value, and changes in fair value are recognized in profit or loss for the current period.

(5) Financial liabilities measured at fair value through profit or loss

Financial liabilities measured at fair value through profit or loss include trading financial liabilities, derivative financial liabilities, etc. They are initially measured at fair value, and related transaction costs are recognized in profit or loss for the current period. The financial liability is subsequently measured at fair value, and changes in fair value are recognized in profit or loss for the current period.

Upon derecognition, the difference between its carrying amount and the consideration paid shall be recognized in profit or loss for the current period.

(6) Financial liabilities measured at amortized cost

Financial liabilities measured at amortized cost include short-term borrowings, notes payable, accounts payable, other payables, long-term borrowings, bonds payable, and long-term payables, and shall be initially measured at fair value, with related transaction costs included in the initial recognition amount.

Interest calculated using the effective interest method during the holding period shall be recognized in profit or loss for the current period.

Upon derecognition, the difference between the consideration paid and the carrying amount of the financial liability is included in current profit or loss.

Basis for Derecognition of Financial Assets and Recognition Criteria and Measurement Methods for Transfer of Financial Assets

The Company derecognizes a financial asset when one of the following conditions is met:

\- The contractual rights to collect the cash flows of the financial asset have terminated;

\- The financial asset has been transferred, and substantially all the risks and rewards of ownership of the financial asset have been transferred to the transferee;

\- The financial asset has been transferred, and although the Company has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, the Company has not retained control over the financial asset.

Where the Company modifies or renegotiates a contract with a counterparty and such modification constitutes a substantive modification, the original financial asset shall be derecognized, and a new financial asset shall be recognized in accordance with the modified terms.

When a transfer of a financial asset occurs, where substantially all the risks and rewards of ownership of the financial asset are retained, the financial asset shall not be derecognized.

When determining whether the transfer of financial assets meets the aforementioned criteria for derecognition of financial assets, the principle of substance over form shall be applied.

The Company classifies the transfer of financial assets into transfers of entire financial assets and transfers of parts of financial assets. Where the entire transfer of a financial asset meets the criteria for derecognition, the difference between the following two amounts shall be recognized in profit or loss for the current period:

(1) The carrying amount of the transferred financial asset;

(2) The sum of the consideration received from the transfer and the cumulative changes in fair value previously recognized directly in owners’ equity (in the case where the financial asset being transferred is a financial asset measured at fair value through other comprehensive income (debt instruments)).

Where the partial transfer of a financial asset meets the criteria for derecognition, the total carrying amount of the transferred financial asset shall be allocated between the derecognized portion and the portion that is not derecognized, based on their respective relative fair values, and the difference between the following two amounts shall be recognized in profit or loss for the current period:

(1) The carrying amount of the derecognized portion;

(2) The sum of the consideration for the derecognized portion and the amount of the cumulative changes in fair value previously recognized directly in owners’ equity attributable to the derecognized portion (in the case where the financial asset being transferred is a financial asset measured at fair value through other comprehensive income (debt instruments)).

Where the transfer of a financial asset does not meet the criteria for derecognition, the financial asset shall continue to be recognized, and the consideration received shall be recognized as a financial liability.

Derecognition of Financial Liabilities

Where the present obligation of a financial liability has been discharged in whole or in part, the financial liability or a portion thereof shall be derecognized; where the Company enters into an agreement with a creditor to replace an existing financial liability by assuming a new financial liability, and the contractual terms of the new financial liability are substantively different from those of the existing financial liability, the existing financial liability shall be derecognized and the new financial liability shall be simultaneously recognized

Where a substantive modification is made to all or part of the contractual terms of an existing financial liability, the existing financial liability or a portion thereof shall be derecognized, and simultaneously the financial liability with modified terms shall be recognized as a new financial liability.

Upon full or partial derecognition of a financial liability, the difference between the carrying amount of the derecognized portion of the financial liability and the consideration paid (including non-cash assets transferred out or new financial liabilities assumed) shall be recognized in profit or loss for the current period.

Where the Company repurchases a portion of a financial liability, on the repurchase date, the total carrying amount of the financial liability shall be allocated between the portion that continues to be recognized and the portion that is derecognized, based on their respective relative fair values. The difference between the carrying amount allocated to the derecognized portion and the consideration paid (including non-cash assets transferred out or new financial liabilities assumed) shall be recognized in profit or loss for the current period.

Methods for Determining the Fair Value of Financial Assets and Financial Liabilities

For financial instruments with an active market, the fair value shall be determined by the quoted prices in the active market. For financial instruments without an active market, the fair value shall be determined using valuation techniques. In performing valuations, the Company shall adopt valuation techniques that are applicable under current circumstances and are supported by sufficient available data and other information, shall select inputs consistent with the characteristics of the assets or liabilities that market participants would consider in transactions involving the relevant assets or liabilities, and shall prioritize the use of relevant observable inputs. Unobservable inputs shall be used only where relevant observable inputs are unavailable or it is impracticable to obtain them.

Impairment Testing Methods and Accounting Treatment for Financial Instruments

The Company shall perform impairment accounting on the basis of expected credit losses (ECL) for financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income (debt instruments), financial guarantee contracts, and other applicable instruments.

The Company considers reasonable and reliable information about past events, current situation and forecast of the future economic situation, weighs the risk of default, calculates the probability weighted amount of the present value of the difference between the cash flow receivable from the contract and the cash flow expected to be received, and recognizes the expected credit loss.

For receivables and contract assets arising from transactions within the scope of “Accounting Standards for Business Enterprises No. 14 — Revenue” (ASBE 14), regardless of whether they contain a significant financing component, the Company shall always measure the loss allowances at an amount equal to lifetime expected credit losses.

For lease receivables arising from transactions within the scope of “Accounting Standards for Business Enterprises No. 21 — Leases” (ASBE 21), the Company has elected to always measure the loss allowances at an amount equal to lifetime expected credit losses.

For other financial instruments, the Company shall assess, on each balance sheet date, the changes in the credit risk of the relevant financial instruments since initial recognition.

The Company compares the risk of default of financial instruments on the balance sheet date with the risk of default on the initial recognition date so as to determine the relative change in the default risk of financial instruments in the expected duration and evaluate whether the credit risk of financial instruments has increased significantly since the initial recognition. Generally, where a financial instrument is overdue for more than 30 days, the Company shall consider that the credit risk of such financial instrument has increased significantly since initial recognition, unless there is conclusive evidence demonstrating that the credit risk of such financial instrument has not increased significantly since initial recognition.

Where the credit risk of a financial instrument is low as of the balance sheet date, the Company shall consider that the credit risk of such financial instrument has not increased significantly since initial recognition.

Where the credit risk of a financial instrument has increased significantly since initial recognition, the Company shall measure the loss allowance at an amount equal to the lifetime expected credit losses of such financial instrument; where the credit risk of such financial instrument has not increased significantly since initial recognition, the Company shall measure the loss allowance at an amount equal to the 12-month expected credit losses of such financial instrument. The resulting increase or reversal of the loss allowance shall be recognized as an impairment loss or gain in profit or loss for the current period. For financial assets measured at fair value through other comprehensive income (debt instruments), the loss allowances shall be recognized in other comprehensive income, and impairment losses or gains shall be recognized in profit or loss for the current period, without reducing the carrying amount of such financial assets as presented in the balance sheet.

Where there is objective evidence indicating that a certain receivable has been subject to credit impairment, the Company shall make a provision for impairment on an individual basis for such receivable.

Other than the aforementioned receivables for which provision for bad debts has been made on an individual basis, the Company shall classify the remaining financial instruments into various portfolios based on their credit risk characteristics, and shall determine the expected credit losses on a portfolio basis. The portfolio categories and the basis for determining the ECL provision for the Company’s notes receivable, accounts receivable, receivables financing, other receivables, contract assets, long-term receivables, etc. are as follows:

The Company calculates the expected credit loss of the notes receivable and contract assets divided into portfolios by referring to the historical credit loss experience, combining the current situation and the forecast of the future economic situation, and based on the default risk exposure and the expected credit loss rate for the whole duration.

For accounts receivable divided into portfolios, the Company prepares a comparison table of account receivable aging/overdue days and expected credit loss rate for the whole duration with a reference to historical credit loss experience and in combination with the current situation and forecast of the future economic situation, so as to calculate the expected credit loss. The aging of accounts receivable is calculated from the date of recognition, and the number of days overdue from the credit expiration date.

For other receivables divided into portfolios, the Company calculates the expected credit loss through default risk exposure and expected credit loss rate in the next 12 months or the whole duration. The aging of other receivables divided into portfolios by aging is calculated from the date of recognition.

For long-term receivables classified into portfolios, with respect to receivables from installment sales of goods, the Company calculates expected credit losses by reference to historical credit loss experience, in combination with current conditions and forecasts of future economic conditions, through the default risk exposure and the lifetime expected credit loss rate.

The Company calculates the expected credit loss of other receivables and long-term receivables divided into portfolios other than receivables from sales of goods by installments according to the default risk exposure and the expected credit loss rate in the next 12 months or the whole duration.

For debt investments and other debt investments, the Company calculates expected credit losses according to the nature of the investments, by various types of counterparties and risk exposures, through default risk exposures and the 12-month or lifetime expected credit loss rates.

12. Notes Receivable

Refer to 11 “Financial Instruments” in V “Significant Accounting Policies and Accounting Estimates” of Section VIII - Financial Report.

13. Accounts Receivable

Refer to 11 “Financial Instruments” in V “Significant Accounting Policies and Accounting Estimates” of Section VIII - Financial Report.

14. Receivables Financing

Refer to 11 “Financial Instruments” in V “Significant Accounting Policies and Accounting Estimates” of Section VIII - Financial Report.

15. Other Receivables

Methods for Determining Expected Credit Losses of Other Receivables and Accounting Treatment

Refer to 11 “Financial Instruments” in V “Significant Accounting Policies and Accounting Estimates” of Section VIII - Financial Report.

16. Contract Assets

Refer to 11 “Financial Instruments” in V “Significant Accounting Policies and Accounting Estimates” of Section VIII - Financial Report.

17. Inventories

Classification and Cost of Inventories

Inventories are classified as: raw materials, self-produced semi-finished goods and work in progress, finished goods in stock, turnover materials, etc.

Inventories are initially measured at cost. Inventory costs include purchase costs, processing costs, and other expenditures incurred to bring the inventories to their current location and condition.

Valuation Method for Inventories Issued

The Company’s inventories are accounted for at the planned cost when acquired. The difference between planned costs and actual costs is accounted for through the cost variance account, and the cost variances attributable to inventories issued are carried forward periodically to adjust planned costs to actual costs.

Inventory system: The perpetual inventory system is adopted.

Amortization Method for Low-Value Consumables and Packaging Materials

(1) Low-value consumables are amortized using the immediate write-off method;

(2) Packaging materials are amortized using the immediate write-off method.

Recognition Criteria and Provision Method for Inventory Impairment

On the balance sheet date, inventories shall be measured at the lower of cost and net realizable value. Where the cost of inventories exceeds their net realizable value, a provision for decline in value of inventories shall be recognized. Net realizable value refers to the estimated selling price in the ordinary course of business, less the estimated costs to completion, the estimated selling expenses, and the related taxes and surcharges.

For merchandise inventories directly held for sale, such as finished products, commodities in stock, and materials held for sale, in the normal course of production and operations, the net realizable value shall be determined as the estimated selling price less the estimated selling expenses and related taxes and surcharges. For material inventories that require further processing, in the normal course of production and operations, the net realizable value shall be determined as the estimated selling price of the finished products to be produced, less the estimated costs to completion, the estimated selling expenses, and the related taxes and surcharges. For inventories held for the purpose of fulfilling sales contracts or service contracts, the net realizable value shall be calculated based on the contract price; where the quantity of inventories held exceeds the quantity stipulated in the sales contract, the net realizable value of the excess inventories shall be calculated based on the prevailing selling price.

The Company makes provision for inventory depreciation reserves on an individual inventory item basis. For inventories of large quantities and low unit prices, the provision for decline in value of inventories shall be made by inventory category.

After the provision for decline in value of inventories has been recognized, where the factors that previously caused the write-down of inventory values no longer exist, such that the net realizable value of the inventories exceeds the carrying amount, the provision shall be reversed to the extent of the amount of the provision originally recognized, and the amount reversed shall be recognized in profit or loss for the current period.

18. Long-term Receivables

Refer to 11 “Financial Instruments” in V “Significant Accounting Policies and Accounting Estimates” of Section VIII - Financial Report.

19. Long-Term Equity Investments

(1) Criteria for Determining Joint Control and Significant Influence

Joint control refers to the control over certain arrangement under related agreements, and related activities of the arrangement can only be determined with the unanimous consent of the parties sharing the control. Where the Company, together with other venturers, jointly controls an investee and has rights to the net assets of the investee, the investee shall be classified as a joint venture of the Company.

Significant influence refers to the power to participate in the financial and operating policy decisions of an investee, but does not constitute control over, or joint control of, the formulation of such policies. Where the Company is able to exert significant influence over an investee, the investee shall be classified as an associate of the Company.

(2) Determination of Initial Investment Cost

① Long-Term Equity Investments Arising from Business Combinations

For a long-term equity investment in a subsidiary arising from a business combination under common control, the initial investment cost shall be determined as the Company’s share of the carrying amount of the merged party’s owners’ equity as stated in the consolidated financial statements of the ultimate controlling party on the combination date. The difference between the initial investment cost of the long-term equity investment and the carrying amount of the consideration paid shall be adjusted against the share premium under capital reserves; where the share premium under capital reserves is insufficient to offset the difference, the retained earnings shall be adjusted accordingly. Where the Company is able to exercise control over an investee under common control due to reasons such as additional investment, the difference between the initial investment cost of the long-term equity investment determined in accordance with the aforementioned principles and the sum of the carrying amount of the long-term equity investment prior to the combination plus the carrying amount of the newly paid consideration for the further acquisition of shares on the combination date shall be adjusted against the share premium. Where the share premium is insufficient for such offset, the retained earnings shall be adjusted accordingly.

For a long-term equity investment in a subsidiary arising from a business combination not under common control, the initial investment cost shall be the cost of combination determined on the acquisition date. Where the Company is able to exercise control over an investee not under common control due to reasons such as additional investment, the sum of the carrying amount of the previously held equity investment and the cost of the new investment shall be used as the initial investment cost.

② Long-Term Equity Investments Acquired through Means Other than Business Combinations

For a long-term equity investment acquired through cash payment, the initial investment cost shall be the actual purchase consideration paid.

For a long-term equity investment acquired through the issuance of equity securities, the initial investment cost shall be the fair value of the equity securities issued.

(3) Subsequent measurement and recognition of profit or loss

① Long-Term Equity Investments Accounted for Using the Cost Method

The Company’s long-term equity investments in subsidiaries shall be accounted for using the cost method, unless the investments meet the criteria for classification as held for sale. Except for cash dividends or profits declared but not yet distributed that are included in the actual price or consideration paid at the time of acquiring the investment, the Company shall recognize investment income for the current period based on its share of the cash dividends or profits declared for distribution by the investee.

② Long-Term Equity Investments Accounted for Using the Equity Method

Long-term equity investments in associates and joint ventures shall be accounted for using the equity method. Where the initial investment cost exceeds the Company’s share of the fair value of the investee’s identifiable net assets at the time of investment, the initial investment cost of the long-term equity investment shall not be adjusted; where the initial investment cost is less than the Company’s share of the fair value of the investee’s identifiable net assets at the time of investment, the difference shall be recognized in profit or loss for the current period, and the cost of the long-term equity investment shall be adjusted accordingly.

The Company shall recognize investment income and other comprehensive income respectively based on its entitled or attributable share of the net profit or loss realized and other comprehensive income of the investee, and adjust the carrying amount of the long-term equity investment accordingly; the Company shall calculate its entitled share based on the profits or cash dividends declared for distribution by the investee, and reduce the carrying amount of the long-term equity investment correspondingly; for other changes in the investee’s owners equity other than net profit or loss, other comprehensive income, and profit distribution (hereinafter referred to as”other changes in owners’ equity”), the Company shall adjust the carrying amount of the long-term equity investment and recognize such changes in owners’ equity.

When recognizing its entitled share of the investee’s net profit or loss, other comprehensive income, and other changes in owners’ equity, the recognition shall be made based on the fair value of the investee’s identifiable net assets at the time of obtaining the investment, and after making adjustments to the investee’s net profit and other comprehensive income etc. in accordance with the Company’s accounting policies and accounting periods.

Unrealized gains or losses on internal transactions between the Company and its associates or joint ventures shall be offset to the extent of the Company’s proportionate share, and investment income shall be recognized on that basis, except where the assets invested or sold constitute a business. Unrealized losses on internal transactions with the investee that constitute asset impairment losses shall be recognized in full.

For net losses incurred by a joint venture or an associate, the Company shall recognize such losses to the extent of reducing the carrying amount of the long-term equity investment and other long-term interests that in substance constitute a net investment in the joint venture or associate to zero, except where the Company has an obligation to assume additional losses. Where the joint venture or associate subsequently realizes net profits, the Company shall resume recognizing its share of income after the income sharing amount has offset the previously unrecognized loss sharing amount.

③ Disposal of Long-Term Equity Investments

Upon the disposal of a long-term equity investment, the difference between its carrying amount and the actual consideration received shall be recognized in profit or loss for the current period.

Where a long-term equity investment accounted for using the equity method is partially disposed of and the remaining equity interest continues to be accounted for using the equity method, the other comprehensive income previously recognized under the equity method shall be transferred on a pro-rata basis on the same basis as would apply if the investee had directly disposed of the related assets or liabilities, and other changes in owners’ equity shall be transferred on a pro-rata basis to profit or loss for the current period.

Where joint control or significant influence over the investee is lost due to the disposal of equity investments or other reasons, the other comprehensive income previously recognized in respect of the original equity investment accounted for using the equity method shall be accounted for on the same basis as would apply if the investee had directly disposed of the related assets or liabilities upon the discontinuation of the equity method, and other changes in owners’ equity shall be transferred in full to profit or loss for the current period upon the discontinuation of the equity method.

Where control over an investee is lost due to reasons such as the disposal of a portion of the equity investments, in preparing the separate financial statements: Where the remaining equity interest is able to exercise joint control or exert significant influence over the investee, it shall be reclassified for accounting under the equity method, and such remaining equity interest shall be adjusted as if it had been accounted for under the equity method from the date of its initial acquisition. The other comprehensive income recognized prior to obtaining control over the investee shall be transferred proportionately on the same basis as would apply if the investee had directly disposed of the related assets or liabilities, and other changes in owners’ equity recognized as a result of applying the equity method shall be transferred proportionately to profit or loss for the current period. Where the remaining equity interest is unable to exercise joint control or exert significant influence over the investee, it shall be reclassified as a financial asset, and the difference between the fair value and the carrying amount as at the date of loss of control shall be recognized in profit or loss for the current period; all other comprehensive income and other changes in owners’ equity recognized prior to obtaining control over the investee shall be transferred in full.

Where the equity investment in a subsidiary is disposed of in stages through multiple transactions until control is lost, and such transactions constitute a package deal, the various transactions shall be accounted for as a single transaction for the disposal of the equity investment in the subsidiary and the loss of control; the difference between the consideration received from each disposal prior to the loss of control and the carrying amount of the long-term equity investment corresponding to the equity disposed of shall first be recognized in the separate financial statements as other comprehensive income, and then transferred in aggregate to profit or loss for the period in which control is lost. Where the transactions do not constitute a package deal, each transaction shall be accounted for separately.

20. Investment Properties

Measurement mode of investment properties: cost method

Depreciation or amortization method

Investment property refers to property held to earn rentals or for capital appreciation, or both, including land use rights that have been leased out, land use rights held for transfer upon appreciation, and buildings that have been leased out (including buildings self-constructed or developed for the purpose of being leased out upon completion, as well as buildings under construction or development that are intended to be leased out in the future).

Subsequent expenditures related to investment property shall be included in the cost of the investment property when it is probable that the associated economic benefits will flow to the Company and the cost can be measured reliably; otherwise, such expenditures shall be recognized in profit or loss for the current period as incurred.

The Company adopts the cost model to measure its existing investment property. For investment property measured using the cost model—buildings held for leasing out, the same depreciation policy as that applied to the Company’s fixed assets shall be adopted; for land use rights held for leasing out, the same amortization policy as that applied to intangible assets shall be applied.

21. Fixed Assets

(1) Recognition conditions

Recognition and Initial Measurement of Fixed Assets

Fixed assets refer to tangible assets held for the production of goods, the rendering of services, leasing, or for operational and administrative purposes, with a useful life exceeding one accounting year. A fixed asset shall be recognized when the following conditions are simultaneously met:

(1) It is probable that the economic benefits associated with the fixed asset will flow to the Company;

(2) The cost of the fixed asset can be measured reliably.

Fixed assets shall be initially measured at cost (taking into account the impact of estimated decommissioning and restoration costs).

Subsequent expenditures related to a fixed asset shall be included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Company and the cost can be measured reliably; the carrying amount of the replaced part shall be derecognized. All other subsequent expenditures shall be recognized in profit or loss for the current period as incurred.

(2) Depreciation method

Depreciation of fixed assets shall be calculated on a category basis using the straight-line method, and the depreciation rate shall be determined based on the category of fixed assets, the estimated useful life, and the estimated residual value ratio. For fixed assets for which impairment provisions have been made, the depreciation amounts in future periods shall be determined based on the carrying amount net of the impairment provisions and the remaining useful life. Where the individual components of a fixed asset have different useful lives or provide economic benefits to the Company in different ways, different depreciation rates or depreciation methods shall be adopted and depreciation shall be calculated separately for each component.

Disposal of Fixed Assets

If a fixed asset is disposed of or if no economic benefit will be obtained from the use or disposal, the recognition of such fixed asset is terminated. The disposal income from the sale, transfer, retirement or damage of fixed assets shall be included in current profits and losses after deducting its book value and relevant taxes.

22. Construction in Progress

Construction in progress shall be measured at actual costs incurred. Actual costs include construction costs, installation costs, borrowing costs eligible for capitalization, and other necessary expenditures incurred to bring the construction in progress to its intended state of use. Construction in progress shall be transferred to fixed assets when it reaches its intended state of use, and depreciation shall commence from the following month.

23. Borrowing Costs

(1) Recognition principles for capitalization of borrowing costs

Borrowing costs incurred by the Company that are directly attributable to the acquisition, construction, or production of a qualifying asset shall be capitalized and included in the cost of the relevant assets; other borrowing costs shall be recognized as expenses when incurred and charged to profit or loss for the current period.

Qualifying assets refer to assets — such as fixed assets, investment property, and inventories — that require a substantial period of time for acquisition, construction, or production activities to reach their intended state of use or sale.

(2) Capitalization period of borrowing costs

The capitalization period refers to the period from the commencement of capitalization of borrowing costs to the cessation of capitalization, excluding any period during which capitalization is suspended.

Capitalization of borrowing costs shall commence when the following conditions are simultaneously met:

① Expenditures on the asset have been incurred, which include expenditures in the form of cash payments, transfers of non-cash assets, or the assumption of interest-bearing debt for the acquisition, construction, or production of a qualifying asset;

② Borrowing costs have been incurred;

③ Acquisition, construction, or production activities that are necessary to bring the asset to its intended state of use or sale have commenced.

Capitalization of borrowing costs shall cease when the qualifying asset under acquisition, construction, or production reaches its intended state of use or sale.

Suspension of Capitalization

Where the acquisition, construction, or production of a qualifying asset is subject to an abnormal interruption and the interruption lasts for a continuous period of more than 3 months, capitalization of borrowing costs shall be suspended; however, where the interruption is a necessary procedure for the qualifying asset under acquisition, construction, or production to reach its intended state of use or sale, capitalization of borrowing costs shall continue. Borrowing costs incurred during the interruption period shall be recognized in profit or loss for the current period until the acquisition, construction, or production activities resume, after which capitalization of borrowing costs shall continue.

(3) Calculation Methods for the Capitalization Rate and Capitalized Amount of Borrowing Costs

For specific borrowings obtained for the acquisition, construction, or production of a qualifying asset, the capitalized amount of borrowing costs shall be determined as the actual borrowing costs incurred on the specific borrowings during the current period, less any interest income earned on unused borrowing funds deposited in banks or any investment income earned from temporary investments of such funds.

For general borrowings utilized for the acquisition, construction, or production of a qualifying asset, the amount of borrowing costs from general borrowings to be capitalized shall be determined by multiplying the weighted average amount of cumulative asset expenditures in excess of the specific borrowings by the capitalization rate of the general borrowings utilized. The capitalization rate shall be determined based on the weighted average actual interest rate of the general borrowings.

During the capitalization period, exchange differences arising from the principal and interest of specific foreign currency borrowings shall be capitalized and included in the cost of the qualifying asset. Exchange differences arising from the principal and interest of foreign currency borrowings other than specific foreign currency borrowings shall be recognized in profit or loss for the current period.

24. Intangible Assets

(1) Service life and its determination basis, estimate, amortization method or review procedure

Valuation Method for Intangible Assets

The Company shall initially measure intangible assets at cost upon acquisition;

The cost of externally acquired intangible assets includes the purchase price, relevant taxes and surcharges, and other expenditures directly attributable to bringing the asset to its intended use.

Subsequent Measurement

Upon acquisition of an intangible asset, its useful life shall be analyzed and determined.

Intangible assets with finite useful lives shall be amortized over the period during which they are expected to generate economic benefits for the Company; where it is not possible to foresee the period during which an intangible asset will generate economic benefits for the Company, it shall be classified as an intangible asset with an indefinite useful life and shall not be amortized.

Estimation of Useful Lives of Intangible Assets with Finite Useful Lives

(2) Scope of aggregation of expenditures on research and development and related accounting treatment methods

Scope of Collection of Research and Development Expenditures

The Company’s research and development expenditures are directly related to the Company’s research and development activities, including research and development labor costs, test expenses, depreciation costs, design fees, and trial production fees.

Specific Criteria for Distinguishing Between the Research Phase and the Development Phase

Expenditures on the Company’s internal research and development projects shall be classified into research phase expenditures and development phase expenditures.

Specific Conditions for Capitalization of Development Phase Expenditures

The expenditures at the research stage are included in current profits and losses when incurred. Expenditures in the development phase that simultaneously meet the following conditions shall be recognized as intangible assets; development phase expenditures that fail to meet the following conditions shall be charged to profit or loss for the current period:

① It is technically feasible to complete the intangible asset so that it will be available for use or sale;

② The Company has the intention to complete the intangible asset and to use or sell it;

③ The way in which the intangible asset will generate economic benefits can be demonstrated — including evidence that a market exists for the products produced using the intangible asset or for the intangible asset itself; where the intangible asset is to be used internally, its usefulness can be demonstrated;

④ There are adequate technical, financial, and other resources available to support the completion of the development of the intangible asset, and the Company has the ability to use or sell the intangible asset;

⑤ The expenditures attributable to the development phase of the intangible asset can be reliably measured.

Where it is not possible to distinguish between research phase expenditures and development phase expenditures, all research and development expenditures incurred shall be charged to profit or loss for the current period.

The R&D projects of the Company enter the development stage after project approval by meeting the above conditions and passing the technical feasibility and economic feasibility study.

The capitalized expenditures at the development stage are presented as development expenditures on the balance sheet and are transferred into intangible assets from the date when the project realizes its intended use.

The capitalization conditions of specific research and development projects are as follows: The Company’s research and development project ends with product planning, and the division point of the research and development stages lies in the fact that the overall plan of the development project is prepared and adopted through deliberation and decision-making on the product project review meeting (that is, project initiation).

Expenses incurred during the planning stage prior to project commencement shall be directly charged to profit or loss for the current period, and expenses incurred in the stage following project commencement shall be included in development phase expenditures.

25.Impairment of Long-term Assets

Where there are indications of impairment as at the balance sheet date for long-term assets such as long term equity investments, investment property measured using the cost model, fixed assets, construction in progress, right-of-use assets, and intangible assets with finite useful lives, an impairment test shall be performed. Where the results of the impairment test indicate that the recoverable amount of an asset is lower than its carrying amount, an impairment provision shall be recognized for the difference and charged to impairment losses. The recoverable amount shall be the higher of the asset’s fair value less costs of disposal and the present value of the asset’s estimated future cash flows. Impairment provisions shall be calculated and recognized on an individual asset basis. Where it is difficult to estimate the recoverable amount of an individual asset, the recoverable amount shall be determined at the level of the asset group to which the asset belongs. An asset group is the smallest group of assets that is capable of generating cash inflows independently.

For goodwill arising from business combinations, intangible assets with indefinite useful lives, and intangible assets that have not yet reached a state ready for use, an impairment test shall be performed at least at the end of each year, regardless of whether there is any indication of impairment.

The Company shall perform impairment testing on goodwill. The carrying amount of goodwill arising from a business combination shall be allocated, from the acquisition date, to the relevant asset groups on a reasonable basis; where it is difficult to allocate goodwill to the relevant asset groups, it shall be allocated to the relevant groups of asset groups. The relevant asset group or group of asset groups refers to an asset group or group of asset groups that is expected to benefit from the synergies of the business combination.

When performing an impairment test on the relevant asset group or group of asset groups containing goodwill, where there are indications of impairment in the asset group or group of asset groups related to goodwill, an impairment test shall first be performed on the asset group or group of asset groups excluding goodwill. The recoverable amount shall be calculated and compared with the relevant carrying amount, and the corresponding impairment loss shall be recognized accordingly. Subsequently, an impairment test shall be performed on the asset group or group of asset groups containing goodwill, by comparing its carrying amount with its recoverable amount. Where the recoverable amount is lower than the carrying amount, the impairment loss shall first be applied to reduce the carrying amount of goodwill allocated to the asset group or group of asset groups, and then shall be allocated pro rata to reduce the carrying amounts of the other individual assets within the asset group or group of asset groups based on their respective proportionate carrying amounts.

Once the above asset impairment losses are recognized, they shall not be reversed in subsequent accounting periods.

26. Long-term Deferred Expenses

Long-term prepaid expenses refer to various expenses that have been incurred but are to be borne by the current and subsequent periods, with an amortization period of more than one year.

27. Contract Liabilities

The Company presents the contract assets or contract liabilities in the balance sheet according to the relationship between the performance obligations and the customer’s payment. The Company’s obligation to transfer goods or render services to a customer, for which consideration has been received or is receivable from the customer, shall be presented as a contract liability. Contract assets and contract liabilities under the same contract shall be presented on a net basis.

28.Employee Compensation

(1) Accounting method of short-term compensation

During the accounting period in which employees render services to the Company, the Company shall recognize the short-term employee benefits actually incurred as a liability, and charge such liability to profit or loss for the current period or to the cost of the relevant asset.

For social insurance premiums and housing provident fund contributions paid by the Company on behalf of employees, as well as labor union funds and employee education funds accrued in accordance with regulations, the corresponding amount of employee benefits shall be determined based on the prescribed accrual basis and accrual ratios during the accounting period in which the employees render services to the Company.

Employee welfare expenses incurred by the Company shall be charged to profit or loss for the current period or to the cost of the relevant asset based on the actual amount when incurred; non-monetary benefits shall be measured at fair value.

(2) Accounting method of post-employment benefits

Defined contribution plan

The Company makes basic pension insurance and unemployment insurance contributions for its employees in accordance with the relevant regulations of the local government. During the accounting period in which employees render services to the Company, the amount payable shall be calculated based on the locally prescribed contribution base and contribution rate, recognized as a liability, and charged to profit or loss for the current period or to the cost of the relevant asset. In addition, the Company participates in enterprise annuity plans approved by the relevant national authorities. The Company contributes to the annuity plans at a certain percentage of total employee wages, and the corresponding expenditures shall be charged to profit or loss for the current period or to the cost of the relevant asset.

Defined benefit plan

The Company shall attribute the benefit obligations arising from defined benefit plans to the periods in which employees render services, in accordance with the formula determined under the projected unit credit method, and shall charge them to profit or loss for the current period or to the cost of the relevant asset.

The deficit or surplus arising from the present value of the defined benefit obligations less the fair value of the defined benefit plan assets shall be recognized as a net defined benefit liability or net defined benefit asset. Where there is a surplus in the defined benefit plan, the Company shall measure the net defined benefit asset at the lower of the surplus and the asset ceiling.

All defined benefit obligations, including those expected to be settled within twelve months after the end of the annual reporting period in which the employees render services, shall be discounted at market yields, as at the balance sheet date, on government bonds or on high-quality corporate bonds traded in an active market whose currency and term are consistent with those of the defined benefit obligations.

Service costs arising from defined benefit plans and the net interest on the net defined benefit liability or net defined benefit asset shall be charged to profit or loss for the current period or to the cost of the relevant asset; changes arising from the remeasurement of the net defined benefit liability or net defined benefit asset shall be recognized in other comprehensive income and shall not be reclassified to profit or loss in subsequent accounting periods. Upon termination of the original defined benefit plan, the amounts previously recognized in other comprehensive income shall be transferred in full to retained earnings within equity.

Upon settlement of the defined benefit plan, a settlement gain or loss shall be recognized as the difference between the present value of the defined benefit obligation as determined on the settlement date and the settlement price.

(3) Accounting method of termination benefits

When the Company provides termination benefits to employees, the employee benefit liabilities arising from such termination benefits shall be recognized at the earlier of the following two dates and charged to profit or loss for the current period: (1) when the Company can no longer unilaterally withdraw the termination benefits offered under a plan to terminate the employment relationship or a redundancy proposal; (2) when the Company recognizes the costs or expenses related to a restructuring that involves the payment of termination benefits.

(4) Accounting method of other long-term employee benefits

Other long-term employee benefits provided by the Company to its employees that satisfy the conditions for classification as a defined contribution plan shall be accounted for in accordance with the above provisions relating to defined contribution plans. Those that satisfy the conditions for classification as a defined benefit plan shall be accounted for in accordance with the above provisions relating to defined benefit plans; however, the “changes arising from the remeasurement of the net defined benefit liability or net defined benefit asset”

component of the related employee benefit costs shall be charged to profit or loss for the current period or to the cost of the relevant asset.

29. Provisions

The Company shall recognize a provision when an obligation related to a contingency simultaneously meets all of the following conditions:

① The obligation is a present obligation assumed by the Company;

② The fulfillment of the obligation is likely to result in an outflow of economic benefits from the Company;

③ The amount of the obligation can be reliably measured.

A provision shall be initially measured at the best estimate of the expenditure required to settle the related present obligation.

In determining the best estimate, the Company shall take into consideration factors such as the risks, uncertainties, and the time value of money associated with the contingency. Where the impact of the time value of money is material, the best estimate shall be determined by discounting the relevant future cash outflows.

Where the required expenditure falls within a continuous range and each outcome within such range is equally likely to occur, the best estimate shall be determined as the midpoint of that range; in other cases, the best estimate shall be determined as follows:

·Where the contingency involves a single item, the best estimate shall be determined at the most likely outcome.

·Where the contingency involves multiple items, the best estimate shall be calculated based on all possible outcomes and their associated probabilities.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by a third party, the reimbursement shall be separately recognized as an asset when it is virtually certain that the reimbursement will be received, provided that the amount so recognized shall not exceed the carrying amount of the provision.

At each balance sheet date, the Company shall review the carrying amount of each provision. Where there is conclusive evidence that such carrying amount does not reflect the current best estimate, the carrying amount shall be adjusted to the current best estimate.

30.Share-based Payment

A share-based payment of the Company is a transaction in which the Company grants equity instruments or incurs liabilities determined on the basis of equity instruments in exchange for services rendered by employees or other parties. The Company’s share-based payments are classified into equity-settled share-based payments and cash-settled share-based payments.

Equity-Settled Share-Based Payments and Equity Instruments

Where equity-settled share-based payments are made in exchange for services rendered by employees, such payments shall be measured at the fair value of the equity instruments granted to the employees. For sharebased payment transactions that vest immediately upon grant, the fair value of the equity instruments shall be charged to the relevant costs or expenses on the grant date, with a corresponding increase in capital reserve. For share-based payment transactions that vest only upon completion of services during the vesting period or upon the achievement of specified performance conditions, at each balance sheet date during the vesting period, the Company shall, based on the best estimate of the number of equity instruments expected to vest and at the grant-date fair value, charge the services received during the current period to the relevant costs or expenses, with a corresponding increase in capital reserve.

Where the terms of an equity-settled share-based payment are modified, the services received shall be recognized at a minimum as if the terms had not been modified. In addition, any modification that increases the fair value of the equity instruments granted, or any change that is favorable to the employees on the modification date, shall be recognized as an increase in the services received.

Where equity instruments granted are canceled during the vesting period, the Company shall treat such cancellation as an acceleration of vesting, and shall immediately charge to profit or loss for the current period the amount that would otherwise have been recognized over the remaining vesting period, with a corresponding increase in capital reserve. However, where new equity instruments are granted and are identified, on the grant date of such new equity instruments, as replacements for the canceled equity instruments, the replacement equity instruments so granted shall be accounted for in the same manner as a modification of the terms and conditions of the original equity instruments.

Cash-Settled Share-Based Payments and Equity Instruments

Share-based payments settled by cash are measured at the fair value of liabilities recognized based on shares or other equity instruments assumed by the Company. For share-based payment transactions that are vested immediately upon grant, the Company recognizes the fair value of the liability incurred in the relevant cost or expense on the grant date, with a corresponding increase in liabilities. For share-based payment transactions that vest only upon completion of services during the vesting period or upon the achievement of specified performance conditions, at each balance sheet date during the vesting period, the Company shall, based on the best estimate of the vesting outcome and at the fair value of the liability assumed by the Company, charge the services received during the current period to the relevant costs or expenses, with a corresponding increase in liabilities. On each balance sheet date and the settlement date prior to the settlement of the relevant liabilities, the fair value of the liabilities shall be re-measured, with its changes included in the current profits and losses.

Where the Company modifies the terms and conditions of a cash-settled share-based payment agreement so as to reclassify it as an equity-settled share-based payment, on the modification date (whether such modification occurs during or after the vesting period), the Company shall measure the equity-settled sharebased payment at the fair value of the equity instruments granted on that date, recognize the services already received in capital reserve, and simultaneously derecognize the liability recognized for the cash-settled sharebased payment as at the modification date, with any difference between the two amounts charged to profit or loss for the current period. Where the modification results in an extension or shortening of the vesting period, the Company shall apply the accounting treatment based on the modified vesting period.

31. Income

Accounting policies adopted for recognition and measurement of income disclosed by business type.

The Company shall recognize revenue when it has satisfied its performance obligations under the contract, i.e., when the customer obtains control of the relevant goods or services. Obtaining control of the relevant goods or services refers to the ability to direct the use of the goods or services and obtain substantially all of the remaining economic benefits from them.

Where a contract contains two or more performance obligations, the Company shall, at contract inception, allocate the transaction price to each separate performance obligation on a relative stand-alone selling price basis for the goods or services promised under each such performance obligation. The Company shall measure revenue at the transaction price allocated to each separate performance obligation.

The transaction price refers to the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to the customer, excluding amounts collected on behalf of third parties and amounts expected to be refunded to the customer. The Company shall determine the transaction price based on the contract terms and its past customary practices, taking into account the effects of factors such as variable consideration, significant financing components in the contract, non-cash consideration, and consideration payable to the customer. The Company shall include variable consideration in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Where a contract contains a significant financing component, the Company shall determine the transaction price at the amount that would be payable if the customer had paid cash at the time of obtaining control of the goods or services, and shall amortize the difference between such transaction price and the contract consideration over the contract period using the effective interest rate method.

A performance obligation is satisfied over time if it meets any one of the following criteria. Otherwise, it is satisfied at a point in time:

• The customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs.

• The customer controls the asset as it is created or enhanced by the Company’s performance;

• The Company’s performance does not create an asset with an alternative use to the Company, and the Company has an enforceable right to payment for performance completed to date.

For a performance obligation satisfied over time, the Company shall recognize revenue over that period by measuring the progress towards complete satisfaction of that performance obligation, except where such progress cannot be reasonably determined. The Company shall determine the progress of satisfaction by using either the output method or the input method, taking into consideration the nature of the goods or services. Where the progress of satisfaction cannot be reasonably determined but the costs incurred are expected to be recoverable, the Company shall recognize revenue only to the extent of the costs incurred, until such time as the progress of satisfaction can be reasonably determined.

For performance obligations performed at a certain time point, the Company shall confirm the income at the time point when the customer gains control rights of the relevant goods or services. In determining whether the customer has obtained control of the goods or services, the Company shall consider the following indicators:

• The Company has a present right to payment for the goods or services, i.e., the customer has a present obligation to pay for the goods or services.

• The Company has transferred legal title to the asset to the customer, i.e., the customer has legal title to the asset;

• The Company has transferred physical possession of the asset to the customer, i.e., the customer has physical possession of the asset;

• The Company has transferred the significant risks and rewards of ownership of the asset to the customer, i.e., the customer has assumed the significant risks and rewards of ownership of the asset.

• The customer has accepted the asset or service; etc.

The Company shall determine whether it acts as a principal or an agent in a transaction based on whether it controls the goods or services before they are transferred to the customer. Where the Company controls the specified goods or services before they are transferred to the customer, the Company is the principal and shall recognize revenue in the gross amount of consideration received or receivable; otherwise, the Company is an agent and shall recognize revenue in the amount of any fee or commission to which it expects to be entitled.

The specific revenue recognition methods and measurement methods are disclosed by business type.

The Company’s specific method for recognizing revenue from sales of vehicles and their accessories is as follows: When vehicles and their accessories are transported to the agreed delivery location as specified in the contract, and the customer has accepted the goods and obtained control of the goods, the Company recognizes revenue.

32. Contract Cost

Contract costs comprise contract fulfillment costs and contract acquisition costs.

Where costs incurred by the Company in fulfilling a contract are not within the scope of other applicable standards such as those relating to inventories, fixed assets, or intangible assets, and the following conditions are met, the Company shall recognize such costs as an asset (contract fulfillment costs):

•·The costs relate directly to a contract or to an anticipated contract.

• The costs generate or enhance resources of the Company that will be used in satisfying performance obligations in the future;

• The costs are expected to be recovered.

Where the incremental costs of obtaining a contract are expected to be recoverable, the Company shall recognize them as an asset (contract acquisition costs).

An asset recognized in accordance with the above provisions shall be amortized on a systematic basis consistent with the transfer to the customer of the goods or services to which the asset relates; however, where the amortization period of contract acquisition costs does not exceed one year, the Company shall charge such costs to profit or loss for the current period when incurred.

Where the carrying amount of an asset related to contract costs exceeds the difference between the following two items, the Company shall make an impairment provision for the excess amount and recognize it as an asset impairment loss:

1. The remaining consideration that the Company expects to receive in exchange for the transfer of goods or services to which the asset relates;

2. The costs that the Company estimates it will incur in transferring those goods or services.

Where the factors giving rise to impairment in prior periods subsequently change, such that the aforementioned difference exceeds the carrying amount of the asset, the Company shall reverse the previously recognized impairment provision and charge the reversal to profit or loss for the current period, provided that the reversed carrying amount of the asset shall not exceed the carrying amount that would have been determined on the reversal date had no impairment provision been recognized.

33.Government Subsidies

Type

Government grants refer to monetary assets or non-monetary assets received by the Company from the government free of charge, and are classified into asset-related government grants and income-related government grants.

The government subsidies considered as monetary assets are measured at the amount received or receivable. The government subsidies considered as non-monetary assets are measured based on the fair value, or the nominal amount of CNY 1 if the fair value cannot be acquired reliably.

Asset-related government grants refer to government grants received by the Company for the purpose of acquiring, constructing, or otherwise forming long-term assets. Income-related government grants refer to government grants other than asset-related government grants.

Where the government documents do not specifically designate the object of a government grant, the portion of the grant that can form long-term assets and corresponds to the value of such assets shall be classified as an asset-related government grant, and the remainder shall be classified as an income-related government grant. Where it is difficult to distinguish between the two, the government grant shall be classified in its entirety as an income-related government grant.

Timing of Recognition

Government grants shall be recognized when the Company is able to satisfy the conditions attached thereto and it is virtually certain that the grants will be received.

Accounting Treatment

Asset-related government grants shall either be offset against the carrying amount of the related assets or be recognized as deferred income. Where recognized as deferred income, such grants shall be allocated to profit or loss on a reasonable and systematic basis over the useful life of the related assets (grants related to the Company’s ordinary course of business shall be recognized in other income; grants not related to the Company’s ordinary course of business shall be recognized in non-operating income).

Income-related government grants intended to compensate the Company for related costs, expenses, or losses to be incurred in future periods shall be recognized as deferred income, and shall be charged to profit or loss (grants related to the Company’s ordinary course of business shall be recognized in other income; grants not related to the Company’s ordinary course of business shall be recognized in non-operating income) or offset against the related costs, expenses, or losses in the periods in which such costs, expenses, or losses are recognized. Income-related government grants intended to compensate the Company for related costs, expenses, or losses already incurred shall be directly recognized in profit or loss for the current period (grants related to the Company’s ordinary course of business shall be recognized in other income; grants not related to the Company’s ordinary course of business shall be recognized in non-operating income) or offset against the related costs, expenses, or losses.

If it is necessary to refund the government subsidies that have been recognized, the book value of the assets which has been offset at the time of initial recognition is adjusted; the book balance of the deferred income concerned (if any) is offset, and the excess is included in the current profits and losses; others are directly included in the current profits and losses.

34. Deferred Tax Assets and Deferred Tax Liabilities

Income tax includes current income tax and deferred income tax. Except for income tax arising from business combinations and transactions or events that are directly recognized in owners’ equity (including other comprehensive income), the Company shall recognize current income tax and deferred tax in profit or loss for the current period.

Deferred tax assets and deferred tax liabilities are recognized based on the differences between the tax bases of assets and liabilities and their carrying amounts (i.e., temporary differences).

Deferred tax assets shall be recognized for deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The Company shall recognize deferred tax assets for deductible tax losses and tax credits that can be carried forward to subsequent years, to the extent that it is probable that future taxable profit will be available against which such deductible tax losses and tax credits can be utilized.

Deferred tax liabilities shall be recognized for all taxable temporary differences, except in the specific circumstances described below.

The specific circumstances in which deferred tax assets or deferred tax liabilities are not recognized include:

• The initial recognition of goodwill;

• A transaction or event that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit (or deductible tax losses), and for which the initial recognition of the assets and liabilities does not give rise to equal taxable and deductible temporary differences.

Deferred tax liabilities shall be recognized for taxable temporary differences associated with investments in subsidiaries, associates, and joint ventures, except where the Company is able to control the timing of the reversal of the temporary differences and it is probable that such temporary differences will not reverse in the foreseeable future. Deferred tax assets shall be recognized for deductible temporary differences associated with investments in subsidiaries, associates, and joint ventures, to the extent that it is probable that the temporary differences will reverse in the foreseeable future and sufficient taxable profit will be available against which such deductible temporary differences can be utilized.

At the balance sheet date, deferred tax assets and deferred tax liabilities shall be measured at the tax rates that are expected to apply to the period when the related assets are recovered or the related liabilities are settled, in accordance with the provisions of tax laws.

At the balance sheet date, the Company reviews the book value of a deferred income tax asset. Where it is probable that sufficient taxable profit will not be available to allow the benefit of part or all of the deferred tax asset to be utilized, the carrying amount of the deferred tax asset shall be written down accordingly. Any such write-down shall be subsequently reversed where it becomes probable that sufficient taxable income will be available.

Where the Company has a legally enforceable right to set off current tax assets against current tax liabilities, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously, current tax assets and current tax liabilities shall be presented on a net basis.

At the balance sheet date, deferred tax assets and deferred tax liabilities shall be presented on a net basis when both of the following conditions are met:

• The taxpaying entity has a legally enforceable right to set off current tax assets against current tax liabilities;

• The deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity, or different taxable entities which intend, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, either to settle current tax assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously.

35. Lease

(1) Accounting treatment methods of lease with the Company as the lessee

A lease is a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. At the inception of a contract, the Company shall assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration

Where a contract contains multiple separate lease components, the Company shall separate the contract and account for each lease component separately. Where a contract contains both lease and non-lease components, the lessee and the lessor shall separate the lease components from the non-lease components.

The Company as Lessee

Right-of-use assets

At the commencement date, the Company shall recognize a right-of-use asset for all leases other than short-term leases and leases of low-value assets. The right-of-use asset shall be initially measured at cost. The cost comprises:

the amount of the initial measurement of the lease liability;

lease payments made on or before the lease commencement date, from which any lease incentives enjoyed (if any) needed to be deducted;

any initial direct costs incurred by the Company;

an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which the underlying asset is located, or restoring the underlying asset to the condition required by the terms and conditions of the lease, less any lease incentives received, but excluding costs attributable to the production of inventories.

The Company shall subsequently depreciate the right-of-use asset on a straight-line basis. Where it is reasonably certain that the Company will obtain ownership of the underlying asset by the end of the lease term, the right-of-use asset shall be depreciated over the remaining useful life of the underlying asset. Otherwise, the right-of-use asset shall be depreciated over the shorter of the lease term and the remaining useful life of the underlying asset.

The Company shall determine whether a right-of-use asset is impaired and shall account for any identified impairment loss in accordance with the principles set out in Section 25 “Impairment of Long-term Assets” herein.

Lease liabilities

At the commencement date, the Company shall recognize a lease liability for all leases other than shortterm leases and leases of low-value assets. The lease liability shall be initially measured at the present value of the lease payments that are not paid at the commencement date. Lease payments comprise:

Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

Variable lease payments that depend on an index or rate;

Amounts expected to be payable by the Company under residual value guarantees;

The exercise price of a purchase option if the Company is reasonably certain to exercise that option;

Payments of penalties for terminating the lease, if the lease term reflects the Company exercising an option to terminate the lease.

The Company shall use the interest rate implicit in the lease as the discount rate. Where the interest rate implicit in the lease cannot be readily determined, the Company shall use its incremental borrowing rate as the discount rate.

The Company shall calculate interest on the lease liability in each period during the lease term at a constant periodic rate of interest, and shall charge such interest to profit or loss for the current period or to the cost of the related asset.

Variable lease payments not included in the measurement of the lease liability shall be recognized in profit or loss for the period in which the event or condition that triggers those payments occurs, or included in the cost of the related asset as applicable.

After the commencement date, where any of the following circumstances occur, the Company shall remeasure the lease liability and adjust the carrying amount of the corresponding right-of-use asset accordingly. Where the carrying amount of the right-of-use asset has been reduced to zero and a further reduction in the measurement of the lease liability is required, any remaining amount of the remeasurement shall be recognized in profit or loss for the current period:

Where there is a change in the assessment of an option to purchase the underlying asset, an option to extend the lease, or an option to terminate the lease, or where the actual exercise of the aforementioned options differs from the original assessment, the Company shall remeasure the lease liability at the present value of the revised lease payments discounted using a revised discount rate;

Where there is a change in the in-substance fixed payments, a change in the amounts expected to be payable under a residual value guarantee, or a change in the index or rate used to determine the lease payments, the Company shall remeasure the lease liability at the present value of the revised lease payments discounted using the unchanged (original) discount rate. However, where the change in lease payments results from a change in floating interest rates, a revised discount rate shall be used to discount the revised lease payments.

Short-term Leases and Leases of Low-value Assets

Where the Company elects not to recognize right-of-use assets and lease liabilities for short-term leases and leases of low-value assets, the related lease payments shall be recognized in profit or loss or the cost of the related asset on a straight-line basis over the lease term. A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less and does not contain a purchase option. A lease of a low-value asset is a lease for which the underlying asset is of low value when new. Where the Company subleases, or expects to sublease, the underlying asset, the head lease does not qualify as a lease of a low-value asset. For the purposes of the Company, a lease of a low-value asset refers to a lease for which the value of a single underlying asset, when new, is less than CNY 40 thousand.

Lease change

Where a lease is modified and both of the following conditions are met, the Company shall account for the lease modification as a separate lease:

The modification increases the scope of the lease by adding the right to use one or more underlying assets; and

The consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope, adjusted to reflect the circumstances of the particular contract.

Where a lease modification is not accounted for as a separate lease, on the effective date of the modification, the Company shall reallocate the consideration in the modified contract, redetermine the lease term, and remeasure the lease liability at the present value of the revised lease payments discounted using a revised discount rate.

If the lease scope is reduced or the lease term is shortened due to the lease change, the Company will correspondingly reduce the book value of right-of-use assets, and include relevant profits or losses of partial or complete termination of leasing in current profits and losses. If the lease liabilities are remeasured due to the other lease changes, the Company shall adjust the book value of the right-of-use asset accordingly.

(2) Accounting methods of lease with the Company as the lessor

At the inception date of the lease, the Company shall classify each lease as either a finance lease or an operating lease. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Title may or may not eventually be transferred. An operating lease refers to a lease other than a finance lease. When the Company acts as an intermediate lessor, it shall classify the sublease by reference to the right-of-use asset arising from the head lease, rather than by reference to the underlying asset.

Accounting Treatment for Operating Leases

Lease payments from operating leases shall be recognized as lease income on a straight-line basis over the lease term. Initial direct costs incurred by the Company in obtaining an operating lease shall be added to the carrying amount of the underlying asset and recognized as an expense over the lease term on the same basis as the lease income. Variable lease payments not included in the lease payments shall be recognized as income in profit or loss for the period in which they are earned. Where an operating lease is modified, the Company shall account for the modification as a new lease from the effective date of the modification, and any prepaid or accrued lease payments relating to the original lease shall be treated as part of the lease payments of the new lease.

Accounting Treatment for Finance Leases

At the commencement date, the Company shall recognize finance lease receivables for finance leases and derecognize the underlying asset. On initial measurement of the finance lease receivables, the Company shall record such receivables at an amount equal to the net investment in the lease. The net investment in the lease equals the sum of the unguaranteed residual value and the present value of the lease payments not yet received at the commencement date, discounted at the interest rate implicit in the lease.

The Company calculates and recognizes interest income for each period over the lease term at a constant periodic interest rate. Derecognition and impairment of finance lease receivables are accounted for in accordance with “Section VIII Financial Report V. Significant Accounting Policies and Accounting Estimates -11. Financial Instruments” in this note.

Variable lease payments not included in the measurement of the net investment in the lease shall be recognized in profit or loss in the period in which they are earned.

Where a finance lease is modified and both of the following conditions are met, the Company shall account for the lease modification as a separate lease:

The modification increases the scope of the lease by adding the right to use one or more underlying assets; and

The consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope, adjusted to reflect the circumstances of the particular contract.

Where a finance lease modification is not accounted for as a separate lease, the Company shall account for the modified lease according to the following circumstances:

If the modification had been in effect at the inception date of the lease and the lease would have been classified as an operating lease, the Company shall account for the lease modification as a new lease from the effective date of the modification, and shall measure the carrying amount of the underlying asset as the net investment in the lease immediately before the effective date of the modification;

If the modification had been effective on the lease commencement date and the lease would have been classified as a finance lease, the Company accounts for it in accordance with the policies regarding the modification or renegotiation of contracts in “Section VIII Financial Report V. Significant Accounting Policies and Accounting Estimates -11. Financial Instruments”.

36. Other Significant Accounting Policies and Accounting Estimates

Work Safety Expenses and Maintenance & Simple Reproduction Expenses

In accordance with the provisions of CZ [2022] No. 136, the Company accrues work safety expenses on a monthly basis in equal amounts, using a progressive regression method, with the actual operating revenue of the previous year as the accrual basis. The specific standards are as follows:

For the machinery manufacturing enterprises with an operating income of not exceeding CNY 10 million, 2.35% of work safety cost will be withdrawn; for the part of operating income between CNY 10 million and CNY 100 million, 1.25% will be withdrawn; for the part of the operating income between CNY 100 million and CNY 1 billion, 0.25% will be withdrawn; for the part of the operating income between CNY 1 billion and CNY 5 billion, 0.1% will be withdrawn; for the part of the operating income over CNY 5 billion, 0.05% will be withdrawn.

For transportation enterprises, the work safety cost is withdrawn month by month in an average manner according to the following standards based on the actual operating income in the previous year: 1% for ordinary freight business; 1.5% for passenger transportation, pipeline transportation, dangerous goods transportation and other special freight businesses. Work safety expenses and maintenance & simple reproduction expenses shall, upon accrual, be charged to the cost of the related products or to profit or loss for the current period, and shall be simultaneously credited to the “Special Reserve” account.

For the withdrawn work safety cost and maintenance & renovation cost used within the specified scope, those belong to expense expenditures are directly offset by specific reserves; those cost incurred via collection under the item of “construction in progress” is recognized when the safety project completes and is ready for intended use. At the same time, the Company will offset the specific reserves according to the cost that formed fixed assets and determine the accumulated depreciation of the same amount. The fixed assets will no longer be depreciated in subsequent periods.

37. Changes in Significant Accounting Policies and Accounting Estimates

(1) Change in significant accounting policies

□Applicable Not applicable

(2) Change in significant accounting estimates

□Applicable Not applicable

(3) Adjustment of relevant items in the financial statements at the beginning of the year after the first implementation of the new accounting standards since 2026

□Applicable Not applicable

VI. Taxes

1. Main Taxes and Tax Rates

Disclosure of different corporate income tax rates for taxable entities

2. Tax Preference

(1) Income tax

Jiefang Limited, a subsidiary of the Company, is recognized as a high-tech enterprise, with a validity period of three years and an income tax rate of 15% within the validity period according to the High-tech Enterprise Certificate (issued on October 16, 2023, with a certificate number of GR202322000922) jointly issued by the Science and Technology Department of Jilin Province, the Department of Finance of Jilin Province and the Jilin Provincial Tax Service of State Taxation Administration.

Pursuant to the second batch of High and New Technology Enterprise (HNTE) filing list for 2024 issued by Dalian Municipal Government on December 24, 2024 (Certificate No.: GR202421200987), FAW Jiefang Dalian Diesel Engine Co., Ltd., a subsidiary of the Company, has been recognized as a High and New Technology Enterprise with a validity period of three years, during which it is subject to corporate income tax at a preferential rate of 15%.

(2) VAT

FAW Jiefang Automotive Co., Ltd. and FAW Jiefang Dalian Diesel Engine Co., Ltd. satisfy the conditions for advanced manufacturing enterprises and are allowed to add 5% of the current deductible input tax to offset the amount of VAT payable from January 1, 2023 according to the Document No.43 issued by the Ministry of Finance and the State Taxation Administration in 2023, Announcement on VAT Additional Tax Credit Policy for Advanced Manufacturing Enterprises.

VII.Notes to Items in Consolidated Financial Statements

1.Monetary Capital

Unit: CNY

2. Derivative financial assets

Unit: CNY

3. Notes Receivable

(1) Classified presentation of notes receivable

Unit: CNY

(2) Disclosure by the method of provision for bad debts Unit: CNY

Name of category for which bad debt provision is accrued on a portfolio basis: Commercial acceptance bills

Unit: CNY

Description of the basis for determining this portfolio:

If the provision for bad debts of notes receivable is withdrawn based on the general model of expected credit losses:

□Applicable Not applicable

(3) Provision for bad debts provided, recovered or reversed in the current period

Provision for bad debts in the current period:

Unit: CNY

Important provision for bad debts recovered or reversed in the current period:

□Applicable Not applicable

4. Accounts Receivable

(1) Disclosure by aging

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd. (2) Disclosure by the method of provision for bad debts CNY Unit:

Name of category for bad debt provision accrued on an individual basis:

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

Name of category for bad debt provision accrued on a portfolio basis: Bad debt provision accrued on a portfolio basis Unit: CNY

Description of the basis for determining this portfolio:

If the provision for bad debts of accounts receivable is withdrawn based on the general model of expected credit losses:

□Applicable Not applicable

(3) Provision for bad debts provided, recovered or reversed in the current period

Provision for bad debts in the current period:

Unit: CNY

(4) Other accounts receivable and contractual assets from the top five borrowers classified based on the ending balance

Unit: CNY

5. Contract Assets

(1) Contractual assets

Unit: CNY

(2) Disclosure by the method of provision for bad debts Unit: CNY

Name of category for which bad debt provision is accrued on a portfolio basis: Unit: CNY

Description of the basis for determining this portfolio: Provision for bad debts based on the general model of expected credit losses

□Applicable Not applicable

(3) Provision for bad debts provided, recovered or reversed in the current period

Unit: CNY

6. Receivables Financing

(1) Presentation of receivables financing by category

Unit: CNY

(2) Financing of receivables endorsed or discounted by the Company at the end of the period and not yet due on the balance sheet date Unit: CNY

7. Other Receivables

Unit: CNY

(1) Other receivables

1) Classification of other receivables by nature

Unit: CNY

2) Disclosure by aging

Unit: CNY

3) Disclosure by the method of provision for bad debts

Applicable □Not applicable

Unit: CNY

Category name of bad debt provision accrued on an individual basis: Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd.

5) Top five ending balances of other receivables classified by debtors

Name of category for bad debt provision accrued on a portfolio basis: Bad debt provision accrued on a portfolio basis

Unit: CNY

Provision for bad debts based on the general model of expected credit losses: Unit: CNY

Basis for stage division and proportion of bad debt provision: For Stage 1 and Stage 2, bad debt provisions are made based on aging analysis, at a rate of 0.80% for Stage 1 and 5.70% for Stage 2. For accounts classified under Stage 3, the Company measures the loss allowance at an amount equal to the lifetime expected credit losses of such accounts receivable.

Significant book balance changes occurred in the provision for losses in the current period

□Applicable Not applicable

4) Other receivables written off in the current period

Unit: CNY

Unit: CNY

8. Advance Payment

(1) Presentation of advance payment by aging

Unit: CNY

(2) Top five ending balances of advance payments classified by advance payment objects

The aggregate closing balance of the top five prepayments grouped by prepayment counterparty amounted to CNY 345,563,253.31, representing 73.63% of the total closing balance of prepayments.

9. Inventories

Does the Company need to comply with the disclosure requirements of the real estate industry: No (1) Classification of inventories

Unit: CNY

(2) Impairment provision of inventories and contract performance costs

Unit: CNY

10. Long-Term Receivables Due Within 1 Year

Unit: CNY

(1) Debt investments due within one year □Applicable Not applicable

(2) Other debt investments due within one year

□Applicable Not applicable

10. Long-Term Receivables Due Within 1 Year Unit: CNY Item Closing Balance Opening Balance Long-term receivables due within one year 339,978,871.98 355,532,986.69 Total 339,978,871.98 355,532,986.69 (1) Debt investments due within one year □Applicable Not applicable (2) Other debt investments due within one year □Applicable Not applicable

11. Other Current Assets

Unit: CNY

12. Investment in Other Equity Instruments

Unit: CNY

13. Long-term Receivables

(1) Long-term receivables

Unit: CNY

Full Text of Semi-Annual Report 2026 of FAW Jiefang Group Co., Ltd. (2) Disclosure by the method of provision for bad debts

Unit: CNY