京东方Ｂ：2025年年度审计报告（英文版）

BOE Technology Group Co., Ltd.

31 December 2025

ENGLISH TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR 1 JANUARY 2025 TO 31 DECEMBER 2025

IF THERE IS ANY CONFLICT BETWEEN THE CHINESE VERSION AND ITS ENGLISH

TRANSLATION, THE CHINESE VERSION WILL PREVAIL

CONTENTS

Pages I. AUDITOR'S REPORT 1 -6 II. AUDITED FINANCIAL STATEMENTS Consolidated balance sheet 7 -9 Consolidated income statement 10 -11 Consolidated statement of changes in equity 12 -15 Consolidated statement of cash flows 16 -17 Company balance sheet 18 -19 Company income statement 20 Company statement of changes in equity 21 -24 Company statement of cash flows 25 -26 Notes to financial statements 27 -139 SUPPLEMENTARY INFORMATION Non-recurring Gains and Losses: Items and Amounts 1 Return on net assets and earnings per share 1

AUDITOR’S REPORT

Ernst & Young Hua Ming (2026) Shen Zi No. 70008969\_A01 BOE Technology Group Co., Ltd.

To the shareholders of BOE Technology Group Co., Ltd. :

(I) Opinion

We have audited the financial statements of BOE Technology Group Co., Ltd. (the “Company”), which comprise the consolidated and company balance sheets as at 31 December 2025, and the consolidated and company income statements, the consolidated and company statements of changes in equity and the consolidated and company statements of cash flows for the year then ended, and notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the Company’s financial position as at 31 December 2025, and the consolidated and the Company’s financial performance and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises (“ASBEs”).

(II) Basis for opinion

We conducted our audit in accordance with China Standards on Auditing (“CSAs”). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with China Independence Standard No. 1 - Independence Requirements for Financial Statement Audit and Review Engagements and China Code of Ethics for Certified Public Accountants (the “Code”). We have also fulfilled our other ethical responsibilities in accordance with the Code. We have complied with the independence requirements relevant to the audit of public interest entities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

(III) Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

AUDITOR’S REPORT (continued)

Ernst & Young Hua Ming (2026) Shen Zi No. 70008969\_A01 BOE Technology Group Co., Ltd.

Ernst & Young Hua Ming (2026) Shen Zi No. 70008969\_A01 BOE Technology Group Co., Ltd.

AUDITOR’S REPORT (continued)

(III) Key Audit Matters (continued)

AUDITOR’S REPORT (continued)

Ernst & Young Hua Ming (2026) Shen Zi No. 70008969\_A01 BOE Technology Group Co., Ltd.

(IV) Other information included in the Annual Report

BOE Group‘s management are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

(V) Responsibilities of management and those charged with governance for the financial statements

BOE Group‘s management are responsible for the preparation of the financial statements that give a true and fair view in accordance with ASBEs, and for such internal control as BOE Group‘s management determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, BOE Group‘s management are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless BOE Group‘s management either intend to liquidate the Group or to cease operations or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

AUDITOR’S REPORT (continued)

Ernst & Young Hua Ming (2026) Shen Zi No. 70008969\_A01 BOE Technology Group Co., Ltd.

(VI) Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are generally considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.

(4) Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

AUDITOR’S REPORT (continued)

Ernst & Young Hua Ming (2026) Shen Zi No. 70008969\_A01 BOE Technology Group Co., Ltd.

(VI) Auditor’s responsibilities for the audit of the financial statements (continued)

(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Ernst & Young Hua Ming LLP

Chinese Certified Public Accountant: Xie Feng (Engagement Partner)

Chinese Certified Public Accountant: Wang Jing

Beijing, the People’s Republic of China

30 March 2026

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

2024 (continued)

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

BOE Technology Group Co., Ltd. COMPANY BALANCE SHEET 31 December 2025

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

Feng Qiang

Yang Xiaoping

Xu Yaxiao

The head of the accounting department

The accompanying notes to the financial statements form an integral part of these financial statements

Chen Yanshun Feng Qiang Yang Xiaoping Xu Yaxiao

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

The accompanying notes to the financial statements form an integral part of these financial statements.

I. General information

BOE Technology Group Company Limited (the “Company”) is a company limited by shares established on 9 April 1993 in Beijing, with its head office located at Beijing. The parent of the Company and the Company’s ultimate holding company is Beijing Electronics Holdings Co., Ltd. (“Beijing Electronics Holdings”).

The Company and its subsidiaries (referred to as the “Group”) comprise five main business segments: display business, Internet of Things (IoT) innovation business, sensor business, MLED business and smart medicine & engineering business. For information about the subsidiaries of the Company, refer to Note VIII.

The financial statements were approved and authorised for issue by the board of directors on March 30, 2026.

II. Basis of preparation of the financial statements

1. Basis of preparation

The financial statements have been prepared in accordance with the Accounting Standards for Business Enterprises - Basic Standardand the specific accounting standards, interpretations, and other relevant provisions issued and subsequently revised by the Ministry of Finance (collectively referred to as the "Accounting Standards for Business Enterprises").In addition, these financial statements also present the relevant financial information in accordance with the Rules for the Preparation of Information Disclosure by Companies Offering Securities to the Public No. 15 – General Provisions for Financia Reports.

2. Going concern

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

III. Material accounting policies and significant estimates

1. Statement of compliance

The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises, which are also referred to as China Accounting Standards (“CAS”), issued by the Ministry of Finance (“MOF”) of the People’s Republic of China. These financial statements present truly and completely the consolidated and company financial position of the Company as at 31 December 2025, and the consolidated and company financial performance and cash flows of the Company for the year then ended.

2. Accounting year

The accounting period is from 1 January to 31 December.

3. Operating cycle

The Company takes the period from the acquisition of assets for processing to until the ultimate realisation of cash or cash equivalents as a normal operating cycle. The operating cycle of the Company is usually less than 12 months.

III. Material accounting policies and significant estimates (continued)

4. Functional currency

The Company’s functional currency is Renminbi and these financial statements are presented in Renminbi. Functional currency is determined by the Company and its subsidiaries on the basis of the currency in which major income and costs are denominated and settled. Some of the Company’s subsidiaries have functional currencies that are different from the Company’s functional currency. Their financial statements have been translated based on the accounting policy set out in Note III.9.

5. Method used to determine the materiality threshold and the basis for selection

Item

Significant receivables for which provisions for bad and doubtful are individually assessed recoveries or reversals and written-offs Significant prepayments, contract liabilities, accounts payable and other payables with ageing of more than one year Significant construction projects in progress

Significant non-wholly-owned subsidiaries, joint ventures or associates

Significant capitalised research and development projects

Materiality threshold

Amount of the individual accounts receivable ≥ RMB50 million Amount of the individual items exceeds 0.5% of the Group’s tota assets Carrying amount of individual item at the end of the period exceeds RMB10 billion Carrying amount of long-term equity investments in individua investee exceed 5% of the Group’s total assets; total revenue of nonwholly-owned subsidiaries exceed 5% of the Group’s total revenue Accumulated expenditure of individual R&D project exceeds 0.5% of the Group’s total assets

6. Business combinations

A transaction or event constitutes a business combination when the Group obtains control of one or more entities (or a group of assets or net assets) which meet the definition of a business. Business combinations are classified as either business combinations involving enterprises under common control or business combinations not involving enterprises under common control.

For a transaction not involving enterprises under common control, the acquirer determines whether an acquired set of assets constitutes a business. The Group may elect to apply the simplified assessment method, the concentration test, to determine whether an acquired set of assets is a business. If the concentration test is met, the set of assets is determined not to be a business, no further assessment is needed. If the concentration test is not met, the Group should perform the assessment according to the guidance on the determination of a business.

When the set of assets the Group acquired does not constitute a business, acquisition costs should be allocated to each identifiable asset and liability on the basis of their relative fair values at the date of acquisition. The accounting treatments for business combinations described below are not applied.

III. Material accounting policies and significant estimates (continued)

6. Business combinations (continued)

(1) Business combinations involving entities under common control

A business combination involving entities under common control is a business combination in which all of the combining entities are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The assets acquired and liabilities assumed are measured based on their carrying amounts in the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the share of carrying amount of the net assets acquired and the consideration paid for the combination (or the total par value of shares issued) is adjusted against share premium in the capital reserve, with any excess deducted from surplus reserve and retained earnings sequentially. Any costs directly attributable to the combination are recognised in profit or loss when incurred. The combination date is the date on which one combining entity obtains control of other combining entities.

(2) Business combinations involving entities not under common control

A business combination involving entities not under common control is a business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the business combination. The Group, as the acquirer, the sum of the fair value of the assets paid (including the equity of the acquiree held before the acquisition date), liabilities incurred or assumed, and equity securities issued on the acquisition date, minus the fair value share of the identifiable net assets of the acquiree acquired in the merger on the acquisition date, after considering the impact of relevant deferred income tax, if it is positive, it will be recognized as goodwill (see Note III.18). If it is negative, it will be recognised in profit or loss for the current period. The costs of issuing equity or debt securities as a part of the consideration for the acquisition are included in the carrying amounts of these equity or debt securities upon initial recognition. Other acquisition-related costs are expensed when incurred. Any difference between the fair value and the carrying amount of the assets transferred as consideration is recognised in profit or loss. The acquiree’s identifiable assets, liabilities and contingent liabilities, if the recognition criteria are met, are recognised by the Group at their acquisition-date fair values. The acquisition date is the date on which the acquirer obtains control of the acquiree.

7. Consolidated financial statements

(1) General principles

The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the Company and its subsidiaries. Control exists when the investor has all of the following: power over the investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to affect those returns through its power over the investee. The financial position, financial performance and cash flows of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Intra-group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated when preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains, unless they represent impairment losses that are recognised in full in the financial statements.

III. Material accounting policies and significant estimates (continued)

7. Consolidated financial statements (continued)

(2) Subsidiaries acquired through a business combination

Where a subsidiary was acquired during the reporting period through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements based on the carrying amounts of the assets and liabilities of the subsidiary in the financial statements of the ultimate controlling party as if the combination had occurred at the date that the ultimate controlling party first obtained control. The opening balances and the comparative figures of the consolidated financial statements are also restated.

Where a subsidiary was acquired during the reporting period through a business combination involving entities not under common control, the identifiable assets and liabilities of the acquired subsidiaries are included in the scope of consolidation from the date that control commences, based on the fair values of those identifiable assets and liabilities at the acquisition date.

(3) Disposal of subsidiaries

When the Group loses control over a subsidiary, any resulting disposal gains or losses are recognised as investment income for the current period. The remaining equity investment is re-measured at its fair value at the date when control is lost, and any resulting gains or losses are also recognised as investment income for the current period.

(4) Changes in non-controlling interests

Where the Company acquires more interest in a subsidiary from the subsidiary’s non-controlling shareholders or disposes of a portion of an interest in a subsidiary without losing control, the difference between the portion of the interest in the subsidiary’s net assets being acquired or disposed of and the amount of the consideration paid or received is adjusted to the capital reserve (share premium) in the consolidated balance sheet, with any excess deducted from surplus reserve and retained earnings sequentially.

8. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits that can be readily withdrawn on demand, and short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.

9. Foreign currency transactions and foreign currency translation

When the Group receives capital in foreign currencies from investors, the capital is translated to Renminbi at the spot exchange rate at the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to Renminbi at the spot exchange rates on the dates of the transactions.

Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. The resulting exchange differences are generally recognised in profit or loss, unless they arise from the re-translation of the principal and interest of specific borrowings for the acquisition and construction of qualifying assets (see Note III.16). Non-monetary items that are measured at historical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date. Non-monetary items that are measured at fair value in foreign currencies are translated using the exchange rate at the date the fair value is determined. The resulting exchange differences are recognised in profit or loss, except for the differences arising from the re-translation of equity investments at fair value through other comprehensive income, which are recognised in other comprehensive income.

III. Material accounting policies and significant estimates (continued)

9. Foreign currency transactions and foreign currency translation (continued)

In translating the financial statements of a foreign operation, assets and liabilities of foreign operation are translated to Renminbi at the spot exchange rate at the balance sheet date. Equity items, excluding retained earnings and the translation differences in other comprehensive income, are translated to Renminbi at the spot exchange rates at the transaction dates. Income and expenses of foreign operation are translated to Renminbi at rates that approximate the spot exchange rates at the transaction dates. The resulting translation differences are recognised in other comprehensive income. At the time of disposal of overseas operations, the relevant translation differences arising from translation of foreign currency financial statements is transferred from shareholders’ equity to the current profit and loss of disposal.

Foreign currency cash flows and cash flows of overseas subsidiaries are translated to Renminbi at rates that approximate the spot exchange rates at the date the cash flows occur. The effect of exchange rate changes on cash is presented separately as a reconciling item in the statement of cash flows.

10. Financial instruments

Financial instruments include cash at bank and on hand, investments in debt and equity securities other than those classified as long-term equity investments (see Note III.12), receivables, payables, loans and borrowings, debentures payable and share capital.

(1) Recognition and initial measurement of financial assets and financial liabilities

A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of a financial instrument.

Financial assets and financial liabilities are measured initially at fair value. For financial assets and financial liabilities measured at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related directly attributable transaction costs are included in their initial costs. Trade receivables that do not have a significant financing component or do not account for the significant financing component in one-year-or-less contracts under the practical expedient are initially measured at the transaction price in accordance with Note III.24.

(2) Classification and subsequent measurement of financial assets

(a) Classification of financial assets

The classification of financial assets is generally based on the business model under which a financial asset is managed and its contractual cash flow characteristics. On initial recognition, a financial asset is classified as measured at amortised cost, at fair value through other comprehensive income (“FVOCI”), or at fair value through profit or loss (“FVTPL”).

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(2) Classification and subsequent measurement of financial assets (continued)

(a) Classification of financial assets (continued)

\- it is held under a business model whose objective is to hold assets to collect contractual cash flows; and

\- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

\- it is held under a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

\- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis, and the instrument meets the definition of equity from the perspective of the issuer.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL.

The business model refers to how the Group manages its financial assets in order to generate cash flows. That is, the Group’s business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Group determines the business model for managing the financial assets according to the facts and based on the specific business objective for managing the financial assets determined by the Group’s key management personnel.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The Group also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

(b) Subsequent measurement of financial assets

- Financial assets at FVTPL

These financial assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss unless the financial assets are part of a hedging relationship.

- Financial assets at amortised cost

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(2) Classification and subsequent measurement of financial assets (continued)

(b) Subsequent measurement of financial assets (continued)

These assets are subsequently measured at amortised cost using the effective interest method. A gain or loss on a financial asset that is measured at amortised cost and that is not part of a hedging relationship should be recognised in profit or loss when the financial asset is derecognised, reclassified, amortised under the effective interest method or when an impairment gain or loss is recognised.

- Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, and impairment and foreign exchange gains and losses are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

- Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to retained earnings.

(3) Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at FVTPL or as financial liabilities measured at amortised cost.

- Financial liabilities at FVTPL

A financial liability is classified as at FVTPL if it is classified as held-for-trading (including derivative financial liabilities) or if it is designated as such on initial recognition.

Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss, unless the financial liabilities are part of a hedging relationship.

- Financial liabilities at amortised cost

These financial liabilities are subsequently measured at amortised cost using the effective interest method.

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(4) Offsetting

Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the following conditions are satisfied:

\- the Group currently has a legally enforceable right to set off the recognised amounts;

\- the Group intends either to settle on a net basis, or to realise the financial asset and settle the financial liability simultaneously.

(5) Derecognition of financial assets and financial liabilities

A financial asset is derecognised when one of the following conditions is met:

\- the Group’s contractual rights to the cash flows from the financial asset expire;

\- the financial asset has been transferred and the Group transfers substantially all of the risks and rewards of ownership of the financial asset; or

\- the financial asset has been transferred; and although the Group neither transfers nor retains substantially all of the risks and rewards of ownership of the financial asset, it does not retain contro over the transferred asset.

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognised in profit or loss:

\- the carrying amount of the financial asset transferred measured at the date of derecognition;

\- the sum of the consideration received from the transfer and, when the transferred financial asset is a debt investment at FVOCI, any cumulative gain or loss that has been recognised directly in other comprehensive income for the financial asset derecognised.

The Group derecognises a financial liability (or part of it) only when its contractual obligation (or part of it) is extinguished.

(6) Impairment

The Group recognises loss allowances for expected credit loss (ECL) on:

\- financial assets measured at amortised cost;

\- contract assets;

\- debt investments measured at FVOCI;

\- lease receivables

Financial assets measured at fair value, including debt investments or equity securities at FVTPL, equity securities designated at FVOCI and derivative financial assets, are not subject to the ECL assessment.

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(6) Impairment (continued)

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period (including extension options) over which the Group is exposed to credit risk.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the balance sheet date (or a shorter period if the expected life of the instrument is less than 12 months).

Loss allowances for notes receivable, accounts receivable, receivables financing and contract assets arising from ordinary business activities such as sale of goods and provision of services, as well as lease receivables arising from lease transactions are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the balance sheet date.

Except for notes receivable, accounts receivable, receivables financing, contract assets, and lease receivables, the Group measures loss allowances at an amount equal to 12-month ECLs for the following financial instruments, and at an amount equal to lifetime ECLs for all other financial instruments:

\- Financial instruments that have been determined to have low credit risk at the balance sheet date; or

\- Financial instruments for which credit risk has not increased significantly since initial recognition.

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(6) Impairment (continued)

Provisions for bad and doubtful debts arising from receivables

Categories of groups for collective assessment based on credit risk characteristics and basis for determination

Item

Basis for recognition

Notes receivable Based on the different credit risk characteristics of acceptors, the Group classifies notes receivable into two groups: bank acceptance bills and commercial acceptance bills.

Accounts receivable Historically, there is no significant difference in terms of occurrence of losses among different customer types for the Group. Therefore, the Group classifies accounts receivable into three groups, specifically: receivables from customers with high credit risk, receivables from customers with low credit risk and receivables from customers with medium credit risk.

Receivables financing The Group’s receivables financing are bank acceptance bills held for dual purposes. As the accepting banks have high credit ratings, the Group considers all receivables financing as a single group.

Other receivables The Group’s other receivables mainly include cash pledges and deposits receivable, petty cash receivables due from employees, receivables due from related parties, dividends receivable, etc. Based on the nature of receivables and the credit risk characteristics of different counterparties, the Group classifies other receivables into three groups, specifically: receivables with high credit risk, receivables with low credit risk and receivables with medium credit risk.

Contract assets Historically, there is no significant difference in terms of occurrence of losses among different customer types for the Group. Therefore, the Group makes provisions for bad and doubtful debts arising from contract assets on the basis of all customers being one group without further segmentation by different customer types.

Financial instruments that have low credit risk

The credit risk on a financial instrument is considered low if the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term, and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group compares the risk of default occurring on the financial instrument assessed at the balance sheet date with that assessed at the date of initial recognition.

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(6) Impairment (continued)

Significant increases in credit risk (continued)

When determining whether the credit risk of a financial asset has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort, including forward-looking information. In particular, the following information is taken into account:

\- failure to make payments of principal or interest on their contractual due dates;

\- an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available);

\- an actual or expected significant deterioration in the operating results of the debtor;

\- existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Group.

The Group determines that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

Credit-impaired financial assets

At each balance sheet date, the Group assesses whether financial assets carried at amortised cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

\- significant financial difficulties of the issuer or debtor;

\- a breach of contract, such as a default or delinquency in interest or principal payments;

\- for economic or contractual reasons relating to the debtor’s financial difficulties, the Group having granted to the debtor a concession that it would not otherwise consider;

\- it is probable that the debtor will enter bankruptcy or other financial reorganisation;

\- the disappearance of an active market for the financial asset because of financial difficulties of the issuer or debtor.

Presentation of allowance for ECL

ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt investments that are measured at FVOCI, the loss allowance is recognised in other comprehensive income and not deducted from the carrying amount of the assets.

III. Material accounting policies and significant estimates (continued)

10. Financial instruments (continued)

(6) Impairment (continued)

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition event. This generally occurs when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(7) Equity instruments

The issuance of equity instruments is recognised at the actual issue price in shareholders’ equity, relevant transaction costs are deducted from shareholders’ equity (capital reserve), with any excess deducted from surplus reserve and retained earnings sequentially. Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from shareholders’ equity.

When the Company repurchases its own shares, those shares are treated as treasury shares. The entire repurchase expenditure is recorded as the cost of the treasury shares in the reference register. Treasury shares are excluded from profit distributions and are presented as a deduction from shareholders’ equity on the balance sheet.

When treasury shares are cancelled, the share capital should be reduced to the extent of the total par value of the treasury shares cancelled. Where the cost of the treasury shares cancelled exceeds the total par value, the excess is deducted from capital reserve (share premium), surplus reserve and retained earnings sequentially. If the cost of treasury shares cancelled is less than the total par value, the difference is credited to the capital reserve (share premium).

When treasury shares are disposed of, any excess of proceeds above cost is recognised in capital reserve (share premium); otherwise, the shortfall is deducted against capital reserve (share premium), surplus reserve and retained earnings sequentially.

(8) Perpetual bonds

At initial recognition, perpetual bonds issued by the Group or their components are classified as financial assets, financial liabilities or equity instruments based on their contractual terms and economic substance with reference to the definition of financial assets, financial liabilities and equity instruments.

Perpetual bonds issued by the Group that should be classified as equity instruments are recognised in equity based on the actual proceeds received. Any distribution of dividends or interests during the instruments’ duration is treated as profit appropriation. When the perpetual bonds are redeemed according to the contractual terms, the redemption amount is recognised as a deduction from equity.

III. Material accounting policies and significant estimates (continued)

11. Inventories

(1) Categories

Inventories include raw materials, work in progress, finished goods and reusable materials. Reusable materials include low-value consumables, packaging materials and other materials which can be used repeatedly but which do not meet the definition of fixed assets. Contract fulfillment costs classified as current assets are disclosed at inventory.

In addition to the purchase cost of raw materials, work in progress and finished goods include direct labour costs and an appropriate allocation of production overheads based on normal capacity.

(2) Measurement method of cost of inventories

Cost of inventories is calculated using the weighted average method.

(3) Inventory count system

The Group maintains a perpetual inventory system.

(4) Amortisation method for low-value consumables and packaging materials

Consumables including low-value consumables and packaging materials are amortized by one-off write off method. The amortisation charge is included in the cost of the related assets or recognised in profit or loss for the current period.

(5) Criteria and method for provision for obsolete inventories

At the balance sheet date, inventories are carried at the lower of cost and net realisable value. Any excess of the cost over the net realisable value of each category of inventories is recognised as a provision for obsolete inventories, and is recognised in profit or loss.

The net realisable value of materials held for use in production is measured based on the net realisable value of the finished goods in which they will be incorporated. The net realisable value of inventory held to satisfy sales or service contracts is measured based on the contract price. If the quantities of inventories held by the Group exceed the quantities specified in sales contracts, the net realisable value of the excess portion of inventories is based on general selling prices.

12． Long-term equity investments

(1) Investment cost of long-term equity investments

(a) Long-term equity investments acquired through a business combination

The initial cost of a long-term equity investment acquired through a business combination involving entities under common control is the Company’s share of the carrying amount of the subsidiary’s equity in the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the initial investment cost and the carrying amount of the consideration given is adjusted to the share premium in the capital reserve, with any excess deducted from surplus reserve and retained earnings sequentially.

III. Material accounting policies and significant estimates (continued)

12. Long-term equity investments (continued)

(1) Investment cost of long-term equity investments (continued)

(a) Long-term equity investments acquired through a business combination (continued)

For a long-term equity investment obtained through a business combination not involving entities under common control, the initial cost comprises the aggregate of the fair value of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquiree.

(b) Long-term equity investments acquired other than through a business combination

A long-term equity investment acquired other than through a business combination is initially recognised at the amount of cash paid if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities.

Where the initial investment cost of a long-term equity investment exceeds the investor’s proportionate share of the investee’s identifiable net assets at fair value at the time of investment, such excess shall be included in the initial investment cost. Where the initial investment cost is less than the investor’s proportionate share of the investee’s identifiable net assets at fair value 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.

(2) Subsequent measurement of long-term equity investment

(a) Investments in subsidiaries

In the Company’s separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method for subsequent measurement. For any additional investment or recovery of investment, adjust the cost of long-term equity investment. The Company recognises its share of the cash dividends or profit distributions declared by the investee as investment income for the current period.

(b) Investment in joint ventures and associates

A joint venture is an arrangement whereby the Group and other parties have joint control (see Note III.12(3)) and rights to the net assets of the arrangement. An associate is an entity over which the Group has significant influence (see Note III.12(3)).

An investment in a joint venture or an associate is accounted for using the equity method for subsequent measurement, unless the investment is classified as held for sale (see Note III.31).

III. Material accounting policies and significant estimates (continued)

12. Long-term equity investments (continued)

(2) Subsequent measurement of long-term equity investment (continued)

(b) Investment in joint ventures and associates (continued)

After acquiring the investment, the Group recognises its share of the investee’s profit or loss and other comprehensive income as investment income or losses and other comprehensive income respectively, and adjusts the carrying amount of the investment accordingly. When recognizing its share of the net profit or loss of the investee, the Group calculates such share on the basis of the fair value of the investee's identifiable assets at the acquisition date, applying the Group's accounting policies and fiscal period. The recognition amount is determined after adjusting the investee's net profit to reflect the elimination, to the extent of the Group's proportionate interest, of intra-group transaction gains or losses arising from dealings with associates and joint ventures (except that losses from intra-group transactions that represent an impairment loss on assets are recognized in full). No such adjustment is made, however, where the investment involves the contribution or sale of assets that constitute a business. Once the investee declares any cash dividends or profit distributions, the carrying amount of the investment is reduced by the amount attributable to the Group. Changes in the Group’s share of the investee’s owners’ equity, other than those arising from the investee’s net profit or loss, other comprehensive income or profit distribution (referred to as “other changes in owners’ equity”), are recognised directly in the Group’s equity, and the carrying amount of the investment is adjusted accordingly.

The Group discontinues recognising its share of further losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that in substance forms part of the Group’s net investment in the joint venture or associate is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. If the joint venture or associate subsequently reports net profits, the Group resumes recognising its share of those profits only after its share of the profits has fully covered the share of losses not recognised.

(3) Criteria for determining the existence of joint control or significant influence over an investee

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (activities with significant impact on the returns of the arrangement) require the unanimous consent of the parties sharing control.

The following factors are usually considered when assessing whether the Group can exercise joint control over an investee:

\- Whether no single participant party is in a position to control the investee’s relevant activities unilaterally;

\- Whether decisions relating to the investee’s relevant activities require the unanimous consent of all participant parties that share control.

Significant influence is the power to participate in the financial and operating policy decisions of an investee but is not control or joint control of those policies.

III. Material accounting policies and significant estimates (continued)

13． Investment properties

Investment properties are properties held either to earn rental income or for capital appreciation or both.

Investment properties are initially measured at cost. Subsequent expenditures related to an investment property are recognized as part of the cost of the investment property when it is probable that the economic benefits associated with the asset will flow to the Group and the cost can be reliably measured. Otherwise, such expenditures are recognized in profit or loss as incurred.

Investment properties are accounted for using the cost model and stated in the balance sheet at cost less accumulated depreciation, amortisation and impairment losses. The cost of investment property, less its estimated residual value and accumulated impairment losses, is depreciated or amortised using the straight-line method over its estimated useful life, unless the investment property is classified as held for sale (see Note III.31).

The estimated useful lives, residual value rates and depreciation rates of each class of investment properties are as follows:

14． Fixed assets

(1) Recognition of fixed assets

Property, plant and equipment are recognized only if it is probable that the economic benefits associated with the asset will flow to the Group and the cost of the asset can be reliably measured. Any subsequent costs including the cost of replacing part of an item of fixed assets are recognised as assets when it is probable that the economic benefits associated with the costs will flow to the Group, and the face value of the replaced part is derecognised. The costs of the day-to-day maintenance of fixed assets are recognised in profit or loss as incurred.

The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of selfconstructed assets is measured in accordance with the policy set out in Note III.15.

Where the parts of an item of fixed assets have different useful lives or provide benefits to the Group in a different pattern, thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset.

III. Material accounting policies and significant estimates (continued)

14． Fixed assets (continued)

(2) Depreciation of fixed assets

The cost of a fixed asset, less its estimated residual value and accumulated impairment losses, is depreciated using the straight-line method over its estimated useful life, unless the fixed asset is classified as held for sale (see Note III.31).

The estimated useful lives, residual value rates and depreciation rates of each class of fixed assets are as follows:

Useful lives, estimated residual values and depreciation methods are reviewed at least at each yearend, and are adjusted if necessary.

15. Construction in progress

The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs (see Note III.16), and any other costs directly attributable to bringing the asset to working condition for its intended use.

A self-constructed asset is classified as construction in progress and transferred to fixed assets when it is ready for its intended use. No depreciation is recorded against construction in progress.

The criteria according to which, construction projects in progress are transferred to fixed assets:

Class

Criteria for the transfers to fixed assets

When an enterprise sells products or by-products produced before a fixed asset is available for its intended use, the proceeds and related cost are accounted for in accordance with CAS 14 – Revenue and CAS 1 – Inventories respectively, and recognised in profit or loss for the current period.

III. Material accounting policies and significant estimates (continued)

16. Borrowing costs

Borrowing costs incurred that are directly attributable to the acquisition and construction of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as financial expenses when incurred.

During the capitalisation period, the amount of interest (including amortisation of any discount or premium on borrowing) to be capitalised in each accounting period is determined as follows:

\- Where funds are borrowed specifically for the acquisition and construction of a qualifying asset, the amount of interest to be capitalised is the interest expense calculated using effective interest rates during the period less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before they are used on the asset.

\- To the extent that the Group borrows funds generally and uses them for the acquisition and construction of a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditure on the asset over the above amounts of specific borrowings. The capitalisation rate is the weighted average of the interest rates applicable to the general-purpose borrowings.

The effective interest rate is determined as the rate that exactly discounts estimated future cash flow through the expected life of the borrowing or, when appropriate, a shorter period to the initially recognised amount of the borrowings.

During the capitalisation period, exchange differences related to the principal and interest on a specificpurpose borrowing denominated in foreign currency are capitalised as part of the cost of the qualifying asset. The exchange differences related to the principal and interest on foreign currency borrowings other than a specific-purpose borrowing are recognised as a financial expense when incurred.

Capitalisation of borrowing costs is suspended during abnormal interruptions in the acquisition or construction of a qualifying asset that last for a continuous period of more than three months, provided that such interruptions are not necessary to prepare the asset for its intended use or sale. Borrowing costs incurred during such interruptions are recognised as financial expenses in profit or loss until the acquisition or construction activities resume.

17. Intangible assets

(1) Useful life and amortisation methods

For an intangible asset with finite useful life, its cost less estimated residual value and accumulated impairment losses is amortised using the straight-line method over its estimated useful life, unless the intangible asset is classified as held for sale (see Note III.31).

III. Material accounting policies and significant estimates (continued)

17. Intangible assets (continued)

The estimated useful lives, basis for determination and amortisation methods of intangible assets are as follows:

Useful lives and amortisation methods of intangible assets with finite useful lives are reviewed at least at each year-end.

An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the period over which the asset is expected to generate economic benefits for the Group. At the balance sheet date, the Group does not have any intangible assets with indefinite usefu lives.

(2) The scope of research and development expenditures

The Group classifies all expenses directly related to the R&D activities as research and development (R&D) expenditure, including the employee benefits of R&D personnel, direct investments, depreciation expenses and long-term deferred expenses, design expenses, equipment commissioning costs, amortisation expenses of intangible assets, development costs incurred by an entrusted external party as well as other expenses. Expenditures on internal research and development projects are classified into expenditures incurred during the research phase and expenditures incurred during the development phase.

(3) The basis for the classification of internal R&D projects under the research phase and the development phase

\- The phase of planned investigations to acquire new techniques and knowledge should be identified as the research phase, which is characterised by, among other things, a planned and exploratory approach.

\- The phase of applying research results or other knowledge to a plan or design to produce new or substantially improved materials, devices, products, etc., prior to commercial production or use, shall be identified as the development phase, which is characterised by its relevance and greater likelihood of generating results.

III. Material accounting policies and significant estimates (continued)

17. Intangible assets (continued)

(4) Expenditures on research and development

Expenditures on internal research and development projects are classified into expenditures incurred during the research phase and expenditures incurred during the development phase.

Expenditures during the research phase are expensed when incurred. Expenditures during the development phase are capitalised if development costs can be measured reliably, the product or process is technically and commercially feasible, and the Group intends to and has sufficient resources to complete the development. Other development expenditures are recognised as expenses in the period in which it is incurred.

When an enterprise sells products or by-products produced in the course of research and development, the proceeds and related cost are accounted for in accordance with CAS 14 – Revenue and CAS 1 – Inventories respectively, and recognised in profit or loss for the current period.

18. Goodwill

The initial cost of goodwill represents the excess of the cost of the acquisition over the acquirer’s interest in the fair value of the identifiable net assets of the acquiree under a business combination not involving entities under common control.

Goodwill is not amortised and is stated in the balance sheet at cost less accumulated impairment losses (see Note III.20).

19. Long-term deferred expenses

Long-term deferred expenses are amortised using the straight-line method within the benefit period. The respective amortisation periods for such expenses are as follows:

Item

Payment for public facilities construction and use Leasehold improvements Others

Amortisation period (years)

10 -15 years 2 -10 years 2 -12 years

III. Material accounting policies and significant estimates (continued)

20. Impairment of assets other than inventories and financial assets

The carrying amounts of the following assets are reviewed at each balance sheet date based on internal and external sources of information to determine whether there is any indication of impairment:

\- fixed assets

\- construction in progress

\- right-of-use assets

\- intangible assets

\- investment properties measured using a cost model

\- long-term equity investments

\- goodwill

\- long-term deferred expenses

If any indication exists, the recoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill at each year-end, irrespective of whether there is any indication of impairment. For the purposes of impairment testing, goodwill is allocated to each asset group, or set of asset groups, that is expected to benefit from the synergies of the business combination.

The recoverable amount of an asset (or asset group or set of asset groups) is the higher of its fair value (see Note III.21) less costs of disposal and the present value of its expected future cash flows.

An asset group is composed of assets related to cash generation and is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups.

The present value of an asset’s expected future cash flows is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using an appropriate pre-tax discount rate.

An impairment loss is recognised in profit or loss when the recoverable amount of an asset is less than its carrying amount. A provision for impairment of the asset is recognised accordingly to reduce the carrying amount to the recoverable amount. Impairment losses related to an asset group or a set of asset groups are allocated first to reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then to reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, such allocations would not reduce the carrying amount of an asset below the highest of its fair value less costs of disposal (if measurable), the present value of its expected future cash flows (if determinable) and zero.

Once an impairment loss is recognised, it should not be reversed in a subsequent period.

21. Fair value measurement

Unless otherwise specified, the Group measures fair value as follows:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

When measuring fair value, the Group takes into account the characteristics of the particular asset or liability (including the condition and location of the asset and restrictions, if any, on the sale or use of the asset) that market participants would consider when pricing the asset or liability at the measurement date, and the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data and other information are available to measure fair value. Valuation techniques mainly include the market approach, the income approach and the cost approach.

22. Provisions

A provision is recognised for an obligation related to a contingency if the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Where the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows. Factors pertaining to a contingency such as the risks, uncertainties and time value of money are taken into account as a whole in reaching the best estimate. Where there is a continuous range of possible outcomes for the expenditure required, and each possible outcome in that range is as likely as any other, the best estimate is the mid-point of that range. In othe cases, the best estimate is determined as follows:

\- Where the contingency involves a single item, the best estimate is the most likely outcome.

\- Where the contingency involves a large population of items, the best estimate is determined by weighting all possible outcomes by their associated probabilities.

The Group reviews the carrying amounts of provisions at the balance sheet date and adjusts their carrying amounts to the current best estimates.

23. Share-based payments

(1) Classification of share-based payments

Share-based payment transactions in the Group are equity-settled share-based payments.

Equity settled share-based payments refer to transactions in which the Group settles for services using shares or other equity instruments as consideration.

III. Material accounting policies and significant estimates (continued)

23. Share-based payments (continued)

(2) Accounting treatment of share-based payments

- Equity-settled share-based payments

Where the Group uses shares or other equity instruments as consideration for services received from employees, the payment is measured at the fair value of the equity instruments granted to employees at the grant date. If the equity instruments granted do not vest until the completion of services for a period, or until the achievement of a specified performance condition, the Group recognises an amount at each balance sheet date during the vesting period based on the best estimate of the number of equity instruments expected to vest according to newly obtained subsequent information regarding changes in the number of employees expected to vest the equity instruments. The Group measures the services received at the grant-date fair value of the equity instruments and recognises the costs or expenses as the services are received, with a corresponding increase in capital reserve.

24. Revenue generated from contracts with customers

Revenue is recognised when the Group satisfies the performance obligation in a contract by transferring control over relevant goods or services to the customers. Obtaining control over relevant goods or services refers to being able to dominate the use of the goods or services and obtain almost all economic benefits from them.

Where a contract has two or more performance obligations, the Group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. The Group recognises as revenue the amount of the transaction price that is allocated to each performance obligation. The stand-alone selling price is the price at which the Group would sell a promised good or service separately to a customer. If a stand-alone selling price is not directly observable, the Group considers all information that is reasonably available to the Group and maximises the use of observable inputs to estimate the stand-alone selling price.

For a contract in which the Group grants a customer the option to acquire additional goods or services (such as loyalty points, discount coupons for future purchases.), the Group assesses whether the option provides a material right to the customer. If the option provides a material right, the Group recognises the option as a performance obligation, and recognises revenue when those future goods or services are transferred or when the option expires. If the stand-alone selling price for a customer’s option to acquire additional goods or services is not directly observable, the Group estimates it, taking into account all relevant information, including the difference in the discount that the customer would receive when exercising the option or without exercising the option, and the likelihood that the option will be exercised.

III. Material accounting policies and significant estimates (continued)

24. Revenue generated from contracts with customers (continued)

For a contract with a warranty, the Group analyses the nature of the warranty provided, if the warranty provides the customer with a distinct service in addition to the assurance that the product complies with agreed-upon specifications, the Group recognises the promised warranty as a performance obligation. Otherwise, the Group will carry out accounting treatment in accordance with the provisions of Note III NO.22. For contracts with quality assurance clauses that are not included as individual services, the Group needs to provide for warranty expenses based on the actual amount incurred in previous years and the actual sales situation of the current period, estimated reasonably as considered by the management.

The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The Group recognises the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. To determine the transaction price for contracts in which a customer promises consideration in a form other than cash, the Group measures the non-cash consideration at fair value. If the Group cannot reasonably estimate the fair value of the non-cash consideration, the Group measures the consideration indirectly by reference to the stand-alone selling price of the goods or services promised to the customer in exchange for the consideration. Where the contract contains a significant financing component, the Group recognises the transaction price at an amount that reflects the price that a customer would have paid for the promised goods or services if the customer had paid cash for those goods or services when (or as) they are transferred to the customer. The difference between the amount of promised consideration and the cash selling price is amortised using an effective interest method over the contract term. The Group does not adjust the consideration for any effects of a significant financing component if it expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

The Group satisfies a performance obligation over time if one of the following criteria is met; otherwise, the performance obligation is satisfied at a point in time:

\- the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;

\- the customer can control the asset created or enhanced during the Group’s performance; or

\- the Group’s performance does not create an asset with an alternative use to it and the Group has an enforceable right to payment for performance completed to date.

For a performance obligation satisfied over time, the Group recognises revenue over time by measuring the progress towards complete satisfaction of that performance obligation. When the outcome of that performance obligation cannot be measured reasonably, but the Group expects to recover the costs incurred in satisfying the performance obligation, the Group recognises revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation.

III. Material accounting policies and significant estimates (continued)

24. Revenue generated from contracts with customers (continued)

For a performance obligation satisfied at a point in time, the Group recognises revenue at the point in time at which the customer obtains control of the relevant goods or services. To determine whether a customer has obtained control of goods or services, the Group considers the following indicators:

\- the Group has a present right to payment for the goods or services;

\- the Group has transferred the legal ownership of the product to the customer;

\- the Group has transferred physical possession of the goods to the customer;

\- the Group has transferred the legal title of the goods or the significant risks and rewards of ownership of the goods to the customer; and

\- the customer has accepted the goods or services.

The Group determines whether it is a principal or an agent, based on whether it obtains control of the specified good or service before that the good or service is transferred to a customer. The Group is a principal if it controls the specified good or service before that good or service is transferred to a customer, and recognises revenue in the gross amount of consideration which it has received (or which is receivable). Otherwise, the Group is an agent, and recognises revenue in the amount of any fee or commission to which it expects to be entitled. The fee or commission is the net amount of consideration that the Group retains after paying the other party the consideration or is determined according to the established amount or proportion.

For the sale of a product with a right of return, the Group recognises revenue when the customer obtains control of that product, in the amount of consideration to which the Group expects to be entitled in exchange for the product transferred (i.e. excluding the amount that is expected to be returned), and recognises a refund liability for the products expected to be returned. Meanwhile, an asset is recognised at an amount equal to the carrying amount of the product expected to be returned less any expected costs to recover those products (including potential decreases in the value of the returned products), and carry forward to cost in the amount of carrying amount of the transferred products less the above costs. At each balance sheet date, the Group updates its assessment of future sales return liability. If there is any change, it is accounted for as a change in accounting estimate.

The Group grants a licence of intellectual properties to a customer, and it determines whether the licence is transferred to the customer at a point in time or over time. If all of the following criteria are met, the licence revenue is recognised as a performance obligation satisfied over time. Otherwise, the licence revenue is recognised as a performance obligation satisfied at a point in time.

\- the contract requires, or the customer reasonably expects, that the Group will undertake activities that significantly affect the intellectual property to which the customer has rights;

\- the rights granted by the licence directly expose the customer to any positive or negative effects of the Group’s activities; and

\- those activities do not result in the transfer of a good or a service to the customer as those activities occur.

The Group recognises revenue for a sales-based or usage-based royalty promised in exchange for a licence to intellectual property only when (or as) the later of the following events occurs:

\- the subsequent sale or usage occurs; and

\- the performance obligation has been satisfied (or partially satisfied)

III. Material accounting policies and significant estimates (continued)

24. Revenue generated from contracts with customers (continued)

For a change in the scope or price of a contract that is approved by the parties to the contract, the Group accounts for the contract modification as follows:

\- In cases where the additional promised goods or services are distinct and the price of the contract increases by an amount of consideration that reflects the stand-alone selling prices of the additional promised goods or services, the Group should account for the contract modification as a separate contract.

\- If the above criteria are not met, and the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification, the Group accounts for the contract modification as if it were a termination of the existing contract and the creation of a new contract.

\- If the above criteria are not met, and the remaining goods or services are not distinct from the goods or services transferred on or before the date of the contract modification, the Group accounts for the contract modification as if it were a part of the existing contract. The effect that the contract modification has on revenue is recognised as an adjustment to revenue in the reporting period.

A contract asset is the Group’s right to consideration in exchange for goods or services that it has transferred to a customer when that right is conditional on something other than the passage of time. The Group recognises loss allowances for expected credit loss on contract assets (see Note III.10(6)). Accounts receivable is the Group’s right to consideration that is unconditional (only the passage of time is required). A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

The following is a description of accounting policies regarding revenue from the Group’s principal activities:

(1) Sale of goods

The sales contracts / orders signed between the Group and its customers usually contain various trading terms. Depending on the trading terms, customers obtain control of the goods when the goods are received, or when they are received by the carrier. Revenue of sale of goods is recognised at that point in time.

For the transfer of goods with a right of return, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. Therefore, the amount of revenue recognised is adjusted for the amount expected to be returned, which are estimated based on the historical data. The Group recognises a refund liability based on the amount expected to be returned. An asset is initially measured by reference to the former carrying amount of the product expected to be returned less any expected costs to recover those products (including potential decreases in the value of returned products). At each balance sheet date, the Group updates the measurement of the refund liability for changes in expectations about the amount of returns. The above assets and liabilities are adjusted accordingly.

III. Material accounting policies and significant estimates (continued)

24. Revenue generated from contracts with customers (continued)

(2) Rendering of services

The Group recognises the revenue from rendering of services within a certain period of time according to the progress of the performance as the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs. Otherwise, for performance obligation satisfied at a point in time, the Group recognises revenue at the point in time at which the customer obtains control of relevant services.

25. Contract costs

Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Group recognises as an asset the incremental costs of obtaining a contract with a customer if it expects to recover those costs. Other costs of obtaining a contract are expensed when incurred.

If the costs to fulfil a contract with a customer are not within the scope of inventories or other accounting standards, the Group recognises an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:

-the costs relate directly to an existing contract or to a specifically identifiable anticipated contract, including direct labour, direct materials, allocations of overheads (or similar costs), costs that are explicitly chargeable to the customer and other costs that are incurred only because the Group entered into the contract;

\- the costs generate or enhance resources of the Group that will be used in satisfying (or in continuing to satisfy) performance obligations in the future;

\- the costs are expected to be recovered.

Assets recognised for the incremental costs of obtaining a contract and assets recognised for the costs to fulfil a contract (the “assets related to contract costs”) are amortised on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate and recognised in profit or loss for the current period.

The Group recognises an impairment loss in profit or loss to the extent that the carrying amount of an asset related to contract costs exceeds:

\- the remaining amount of consideration that the Group expects to receive in exchange for the goods or services to which the asset relates;

\- the estimated costs that relate directly to providing those goods or services that have not yet been recognised as expenses.

26. Employee benefits

(1) Short-term employee benefits

Employee wages or salaries, bonuses, and social security contributions such as medical insurance, work injury insurance, maternity insurance and housing fund, measured at the amount incurred or accrued at the applicable benchmarks and rates, are recognised as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate.

III. Material accounting policies and significant estimates (continued)

26. Employee benefits (continued)

(2) Post-employment benefits – defined contribution plans

The defined contribution plans in which the Group participates include: Pursuant to the relevant laws and regulations of the People’s Republic of China, the Group participated in a defined contribution basic pension insurance plan and unemployment insurance plan in the social insurance system established and managed by government organisations, and annuity plan established by the Group in compliance with the national policy of the corporation annuity. The Group makes contributions to basic pension and unemployment insurance plans based on the applicable benchmarks and rates stipulated by the government. Annuity is accrued at a certain proportion of the total wages of employees who voluntarily participate in the annuity plan. Basic pension insurance contributions payable are recognised as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate.

(3) Termination benefits

When the Group terminates an employee’s employment before the employment contract expires, or provides compensation under an offer to encourage employees to accept voluntary redundancy, a provision is recognised with a corresponding expense in profit or loss at the earlier of the following dates:

\- When the Group cannot unilaterally withdraw the offer of termination benefits provided in an employee termination plan or a curtailment proposal;

\- When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

27. Government grants

A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attached to the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amoun received or receivable. If a government grant is in the form of a transfer of a non-monetary asset, it is measured at fair value.

Government grants related to assets are grants whose primary condition is that the Group qualifying for them should purchase, construct or otherwise acquire long-term assets. Government grants related to income are grants other than those related to assets.

Those related to daily activities of the Company are included in other income or used to write off related cost based on the nature of economic businesses, or included in non-operating income and expense in respect of those not related to daily activities of the Company.

III. Material accounting policies and significant estimates (continued)

27. Government grants (continued)

With respect to the government grants related to assets, if the Group first obtains government grants related to assets and then recognises the long-term assets purchased and constructed, deferred income is included in profit and loss based on a reasonable and systematic approach by stages when related assets are initially depreciated or amortised; or the deferred income is written off against the carrying amount of the asset when the asset becomes ready for its intended status or intended use. If the Group obtains government grants related to the assets after relevant long-term assets are put into use, deferred income is included in profit and loss based on a reasonable and systematic approach by stages within the remaining useful life of relevant assets, or the deferred income is written off against the carrying amount of relevant asset when the grants are obtained; the assets shall be depreciated or amortised based on the carrying amount after being offset and the remaining useful life of relevant assets. If the relevant assets are sold, transferred, scrapped or damaged before the end of their useful life, the undistributed balance of related deferred income shall be transferred to the profit or loss of the current period of asset disposals.

A grant that compensates the Group for expenses or losses to be incurred in the future is recognised as deferred income, and included in current income or offset against related expenses in the periods in which the expenses or losses are recognised. Otherwise, the grant is included in current income or offset against the related expenses directly.

In respect of the policy-based preferential loan interest subsidy obtained by the Group, if the interest subsidy is appropriated to the lending bank which shall provide loans to the Group at the policy-based preferential interest rate, the actual loan amount is used as the entry value and relevant borrowing costs are calculated on the basis of the loan principal and the preferential interest rate. If the interest subsidy is directly appropriated to the Group, relevant borrowing costs shall be offset by corresponding interest subsidy. If borrowing costs are capitalised as part of the cost of the asset (see Note III.16), the interest subsidy shall be used to offset relevant asset costs.

28. Specific reserve

The Group recognises a safety fund in the specific reserve pursuant to relevant government regulations, with a corresponding increase in the costs of the related products or expenses.

When the safety fund is subsequently used for revenue expenditure, the specific reserve is reduced accordingly. When the safety fund is subsequently used for the construction or acquisition of fixed assets, the Group recognises the capitalised expenditure incurred as the cost of the fixed assets when the related assets are ready for their intended use. In such cases, the specific reserve is reduced by the amount that corresponds to the cost of the fixed assets and the credit side is recognised in the accumulated depreciation with respect to the related fixed assets. Consequently, such fixed assets are not depreciated in subsequent periods.

29. Income tax

Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to a business combination or items recognised directly in equity (including other comprehensive income).

Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable in respect of previous years.

III. Material accounting policies and significant estimates (continued)

29. Income tax (continued)

At the balance sheet date, current tax assets and liabilities are offset only if the Group has a legally enforceable right to set them off and also intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include deductible losses and tax credits carried forward to subsequent periods. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.

Various taxable temporary differences are recognized as deferred income tax liabilities, unless:

(1) Taxable temporary differences arise in the following transactions: the initial recognition of goodwill, or the initial recognition of assets or liabilities arising from a single transaction with the following characteristics: the transaction is not a business merger, and it does not affect accounting profits o taxable income or deductible losses at the time of the transaction And the initially recognized assets and liabilities did not result in equal taxable temporary differences and deductible temporary differences;

(2) For taxable temporary differences related to investments in subsidiaries, joint ventures, and associates, the timing of the reversal of such temporary differences can be controlled and it is highly likely that they will not be reversed in the foreseeable future.

For deductible temporary differences, deductible losses that can be carried forward to future years, and tax deductions, the Group recognizes deferred income tax assets arising from them to the extent that it is likely to obtain future taxable income to offset deductible temporary differences, deductible losses, and tax deductions, unless:

(1) Deductible temporary differences arise in the following individual transactions: the transaction is not a business merger, the transaction does not affect accounting profits or taxable income or deductible losses at the time of occurrence, and the initially recognized assets and liabilities do not result in equal taxable temporary differences and deductible temporary differences;

(2) For deductible temporary differences related to investments in subsidiaries, joint ventures, and associates, the temporary differences are likely to be reversed in the foreseeable future and taxable income used to offset the temporary differences is likely to be obtained in the future.

At the balance sheet date, deferred tax is measured based on the tax consequences that would follow from the expected manner of recovery or settlement of the carrying amounts of the assets and liabilities, using tax rates enacted at the balance sheet date that are expected to be applied in the period when the asset is recovered or the liability is settled.

On the balance sheet date, the Group reviews the book value of deferred income tax assets. If it is likely that sufficient taxable income will not be available in the future to offset the benefits of deferred income tax assets, the carrying amount of the deferred income tax assets will be written down. On the balance sheet date, the Group reassesses unrecognized deferred income tax assets and recognizes them to the extent that sufficient taxable income is likely to be available for the reversal of deferred income tax assets.

III. Material accounting policies and significant estimates (continued)

29. Income tax (continued)

At the balance sheet date, deferred tax assets and deferred tax liabilities are offset if all of the following conditions are met:

\- the taxable entity has a legally enforceable right to offset current tax liabilities and current tax assets;

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

30. Leases

At inception of a contract, the Group assesses whether a 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.

For a contract that contains multiple separate lease components, the lessee and the lessor separate the lease components and account for each lease component as a lease separately. For a contract that contains lease and non-lease components, the lessee and the lessor separate the lease components from the non-lease components.

(1) As a lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement date excluding short-term leases and low value asset leases.

The Group depreciates the right of use assets using the straight-line method. If the lessee is reasonably certain to obtain the ownership of the lease asset by the end of the lease term, the right-of-use asset is depreciated over the remaining useful life of the underlying asset. Otherwise, the right-of-use asset is depreciated over the shorter of the lease term or the remaining useful life of the lease asset.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate.

A constant periodic rate is used to calculate the interest on the lease liability in each period during the lease term with a corresponding charge to profit or loss or included in the cost of assets where appropriate. Variable lease payments not included in the measurement of the lease liability are charged to profit or loss or included in the cost of assets where appropriate as incurred.

III. Material accounting policies and significant estimates (continued)

30. Leases (continued)

(1) As a lessee (continued)

Under the following circumstances after the lease commencement date, the Group remeasures lease liabilities based on the present value of revised lease payments:

\- Changes in the substantial fixed payment amount;

\- there is a change in the amounts expected to be payable under a residual value guarantee;

\- there is a change in future lease payments resulting from a change in an index or a rate used to determine those payments;

\- there is a change in the assessment of whether the Group will exercise a purchase, extension or termination option, or the Group has exercised the extension or termination option in a different manner from the original assessment.

When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets (a leased asset is of low value individually when it is new). The Group recognises the lease payments associated with these leases in profit or loss or as the cost of the assets where appropriate using the straight-line method or other systematic basis over the lease term.

(2) As a lessor

The Group determines at lease inception whether each lease is a finance lease or an operating lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset irrespective of whether the legal title to the asset is eventually transferred. An operating lease is a lease other than a finance lease.

When the Group is a sub-lessor, it assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the practical expedient described above, then it classifies the sub-lease as an operating lease.

Under a finance lease, at the commencement date, the Group recognises the finance lease receivable and derecognises the asset under finance lease.

The Group recognises finance income over the lease term with a constant periodic rate of return. The derecognition and impairment of the finance lease receivable are accounted for in accordance with the accounting policy in Note III.10. Variable lease payments not included in the measurement of net investment in the lease are recognised as income as they are earned.

Lease receipts from operating leases are recognised as income using the straight-line method or other systematic basis over the lease term. Variable lease payments not included in lease receipts are recognised as income as they are earned. The initial direct cost capitalization is amortized over the lease term on the same basis as the recognition of rental income, and is recognized in the current period's profit and loss in installments.

III. Material accounting policies and significant estimates (continued)

31. Assets held for sale and discontinued operations

Non-current assets or disposal groups held for sale

The Group classifies a non-current asset or disposal group as held for sale when the carrying amount of a non-current asset or disposal group will be recovered through a sale transaction rather than through continuing use.

A non-current asset or disposal group is classified as held for sale when all the following criteria are met:

\- According to the customary practices of selling such assets or disposal groups in similar transactions, the non-current asset or disposal group is available for immediate sale in its present condition;

\- The sale is highly probable to occur, that is, the Group has made a resolution on a sale plan and entered into a legally binding sales. The sale is expected to be completed within one year.

Non-current assets or disposal groups held for sale are stated at the lower of carrying amount and fai value (see Note III.21) less costs to sell (except financial assets (see note III.10) and deferred tax assets (see note III.29)) initially and subsequently. Any excess of the carrying amount over the fair value (see Note III.21) less costs to sell is recognised as an impairment loss in profit or loss.

Discontinued operations

The Group classifies a separate component as a discontinued operation either upon disposal of the operation or when the operation meets the criteria to be classified as held for sale if it is separately identifiable and satisfies one of the following conditions:

\- It represents a separate major line of business or a separate geographical area of operations;

\- It is part of a single coordinated plan to dispose of a separate major line of business or a separate geographical area of operations;

\- It is a subsidiary acquired exclusively with a view to resale.

Where an operation is classified as discontinued in the current period, profit or loss from continuing operations and profit or loss from discontinued operations are separately presented in the income statement for the current period. The comparative information for profit or loss from discontinued operations, which used to present as profit or loss from continuing operations in the prior period, is represented as profit or loss from discontinued operations in the comparative income statement.

32. Dividends distributions

Dividends or profit distributions proposed in the profit appropriation plan, which will be approved after the balance sheet date, are not recognised as a liability at the balance sheet date but are disclosed in the notes separately.

III. Material accounting policies and significant estimates (continued)

33. Related parties

If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties are subject to common control or joint control from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Company is under common control only from the State and that have no other related party relationships are not regarded as related parties.

In addition to the related parties stated above, the Company determines related parties based on the disclosure requirements of the Administrative Procedures on the Information Disclosures of Listed Companies issued by the CSRC.

34. Segment reporting

Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internal organisation, management requirements and internal reporting system after taking the materiality principle into account. Two or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics and are the same or similar in respect of the nature of products and services, the nature of production processes, the typesproduction processes, the types or classes of customers for the products and services, the methods used to distribute the products or provide the services, and the nature of the regulatory environment.

For segment reporting, inter-segment revenues are measured on the basis of the actual transaction prices for such transactions, and segment accounting policies are consistent with those used to prepare the consolidated financial statements.

35. Significant accounting estimates and judgements

When preparing financial statements, the management of the Group needs to apply judgments, estimates, and assumptions, which will have an impact on the application of accounting policies and the amounts of assets, liabilities, income, and expenses. Estimates as well as the underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

(1) Uncertainty of estimation

The following are key assumptions regarding the future and other key sources of estimation uncertainty at the balance sheet date:

-Impairment of financial instruments and contract assets: Note III, 10 (6); Notes V, 3, 4, 5, 7, and 9; -Impairment of goodwill: Note V, 19;

-Impairment of non current assets other than financial assets and goodwill: Note III, 20; Note V, 15, 16, 17, 18;

-Fair value valuation of financial instruments: Note X

-Deferred income tax assets: Note III, 29; Note V, 21

-Product quality assurance: Note III, 24; Note V, 32

-Share-based payment: Note XI

III. Material accounting policies and significant estimates (continued)

1. Main types of taxes and corresponding tax rates Tax type Tax basis Tax rate Value-added tax (VAT) According to tax laws, output VAT is calculated on product sales and taxable services revenue. VAT payable is determined by deducting input VAT from output VAT for the period 6%，9%，13% Urban maintenanc e and constructio n tax Based on VAT paid, VAT exemption and offset for the period 7%，5% Education surcharges and local education surcharges Based on VAT paid, VAT exemption and offset for the period 3%，2% Corporate income tax

2. Corporate income tax The income tax rate applicable to the Company for the year is 15% (2024: 15%). Pursuant to the Corporate Income Tax Law of the People’s Republic of China treatment No.28, corporate income tax for key advanced and high-tech enterprises supported by the State is applicable to a preferential tax rate of 15%. On 30 November 2023, the Company renewed the High-tech Enterprise Certificate No. GR202311004505, which was entitled jointly by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal Tax Service, State Taxation Administration. The Company is subject to corporate income tax rate of 15% since the date of certification with the valid period of three years.

35. Significant accounting estimates and judgements (continued)

(2) Judgments

In the process of applying the accounting policies of the Group, the management has made the following judgments that have a significant impact on the amounts recognized in the financial statements:

-Significant judgments and assumptions regarding control over other entities: Note VIII, 1 (1) -Business Model and Contract Cash Flow Characteristics: Note 3, 10 (2)

IV. Taxation

1. Main types of taxes and corresponding tax rates

2. Corporate income tax

The income tax rate applicable to the Company for the year is 15% (2024: 15%).

Pursuant to the Corporate Income Tax Law of the People’s Republic of China treatment No.28, corporate income tax for key advanced and high-tech enterprises supported by the State is applicable to a preferential tax rate of 15%.

On 30 November 2023, the Company renewed the High-tech Enterprise Certificate No. GR202311004505, which was entitled jointly by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal Tax Service, State Taxation Administration. The Company is subject to corporate income tax rate of 15% since the date of certification with the valid period of three years.

IV. Taxation (continued)

1. Cash at bank and on hand 2025 2024 Cash on hand 1,355,467 1,528,764 Deposits with banks 71,281,904,007 72,723,894,478 Other monetary funds 939,680,701 1,527,201,973 Total 72,222,940,175 74,252,625,215 Including: Total overseas deposits were equivalent to RMB 7,892,050,802 (2024: RMB 6,539,879,671). As at 31 December 2025, other monetary funds included deposits with securities companies by the Group amounting to RMB 27,859,235 (2024: RMB 85,440,549), used as refundable deposits for stock repurchase and payment for settlement with third party platform, which can be withdrew on demand. The rest was restricted monetary funds, of which, RMB 205,382,358 (2024: RMB 595,018,149) was pledged for issuance of bills payable, and an equivalent to RMB 706,439,108 (2024: RMB 846,743,275) was mainly deposits in commercial banks as security.

2. Corporate income tax (continued)

Except that 32 subsidiaries such as Beijing BOE Optoelectronics Technology Co., Ltd. are applicable to high-tech enterprise tax preference, 7 subsidiaries such as Chongqing BOE Display Lighting Co., Ltd. are applicable to encouraged enterprises in the Western Development, and 15% corporate income tax rate is applicable, and overseas subsidiaries are applicable to local tax rate, the tax rate applicable to other enterprises of the Group is 25%.

V. Notes to key items of the consolidated financial statements

1. Cash at bank and on hand

Including: Total overseas deposits were equivalent to RMB 7,892,050,802 (2024: RMB 6,539,879,671).

As at 31 December 2025, other monetary funds included deposits with securities companies by the Group amounting to RMB 27,859,235 (2024: RMB 85,440,549), used as refundable deposits for stock repurchase and payment for settlement with third party platform, which can be withdrew on demand. The rest was restricted monetary funds, of which, RMB 205,382,358 (2024: RMB 595,018,149) was pledged for issuance of bills payable, and an equivalent to RMB 706,439,108 (2024: RMB 846,743,275) was mainly deposits in commercial banks as security.

2. Financial assets held for trading

V. Notes to key items of the consolidated financial statements (continued)

3. Notes receivable

(1) Classification of Notes receivable

(2) The pledged notes receivable of the Group at the end of the year

2025

Bank acceptance bills

31,919,605

(3) Notes receivable endorsed or discounted but not yet matured on the balance sheet date

Amount not Amount derecognized derecognized

Bank acceptance bills

As at 31 December 2025, the carrying amount of notes receivable of the Group that had been endorsed to suppliers for settlement of accounts payable or discounted amounted to RMB 360,019,857 (2024: RMB 209,269,910). The Group considers that it retains substantially all the risks and rewards incidental to these notes receivable, including the related default risk, and therefore continues to recognise the notes receivable and the related settled accounts payable in full.

For the 31 December 2025, no notes receivable were reclassified to accounts receivable due to the issuers’ inability to fulfill their obligations.

V. Notes to key items of the consolidated financial statements (continued)

4. Accounts receivable

(1) An ageing analysis of accounts receivable is as follows

The ageing is counted starting from the date when accounts receivable are recognised.

(2) Accounts receivable by provisioning method

2025

V. Notes to key items of the consolidated financial statements (continued)

4. Accounts receivable (continued)

(2) Accounts receivable by provisioning method (continued)

(a) Criteria for collective assessment and details

Customer group

Basis

(b) Assessment of ECLs on accounts receivable

At all times the Group measures the impairment loss for accounts receivable at an amount equal to lifetime ECLs, and the ECLs are based on the number of overdue days and the expected loss rate. According to the Group’s historical experience, different loss models are applicable to different custome groups.

(3) Details of allowance for doubtful debts

Movements of provisions for bad and doubtful debts：

(4) Five largest accounts receivable and contract assets by debtor at the end of the year

The subtotal of the five largest accounts receivable and contract assets of the Group at the end of the year is RMB12,591,208,802, representing 38% of the total accounts receivable and contract assets.

V. Notes to key items of the consolidated financial statements (continued)

5. Receivables financing

(1) Receivables financing by category

(2) Receivables financing that are endorsed or discounted but have not matured at the end of the year:

As at the end of the year, the carrying amount of the Group’s receivables financing assets endorsed to suppliers for settlement of accounts payable or discounted amounted to RMB 1,214,507,608 (2024: RMB 683,496,249). Since substantially all the risks and rewards of these instruments have been transferred to other parties, the Group has fully derecognized such instruments and the corresponding account payables in its books and recognized the related discount expenses accordingly.

For the 31 December 2025, no receivables financing were reclassified to accounts receivable due to the issuers’ inability to fulfill their obligations.

6. Prepayments

(1) The ageing analysis of prepayments is as follows:

The ageing is counted starting from the date when prepayments are recognized.

The total of the five largest prepayments of the Group at the end of the year is RMB 320,046,324, representing 39% of the total prepayments.

V. Notes to key items of the consolidated financial statements (continued)

7. Other receivables

Other receivables

(1) The ageing analysis of the Group’s other receivables is as follows

The ageing is counted starting from the date when other receivables are recognised.

(2) The other receivables categorised by nature

V. Notes to key items of the consolidated financial statements (continued)

7. Other receivables (continued)

Others receivables (continued)

(3) Other receivables by provisioning method

2025

V. Notes to key items of the consolidated financial statements (continued)

7. Other receivables (continued)

Others receivables (continued)

(3) Other receivables by provisioning method(continued)

The movements of the provision for bad debts provided for other receivables based on 12-month ECL and lifetime ECL respectively are as follows:

(4) Five largest other receivables by debtor at the end of the year

As of 31 December 2025, the top five balances of other receivables of the Group amounted to RMB 438,387,325 representing 65.75% of the total year-end balance of other receivables. These mainly comprise security deposits and receivables from equity transfers, and after assessment, no allowance for doubtful accounts is considered necessary.

V. Notes to key items of the consolidated financial statements (continued)

8. Inventories

(1) The Group’s inventories by category

The Group’s year-end balance of inventories included no capitalised borrowing costs (2024: Nil).

At the year end, no inventories were pledged as security by the Group (2024: Nil).

(2) An analysis of provision for impairment of inventories of the Group is as follows

V. Notes to key items of the consolidated financial statements (continued)

9. Contract assets

Changes in provision for impairment of contract assets are as follows:

Based on the Group’s historical experience, there are no significant differences in the incidence of losses among different customer groups. Accordingly, the Group treats all contract assets as a single portfolio and recognizes impairment provisions based on collective assessment of credit risk characteristics.

As at 31 December 2025, the carrying amount of contract assets subject to collective impairment based on credit risk characteristics amounted to RMB 398,590,711 (2024: RMB 151,647,876), with impairment provisions of RMB 5,508,809 (2024: RMB 776,390), representing an impairment ratio of 1.38% (December 31, 2024: 0.51%).

10. Other current assets

V. Notes to key items of the consolidated financial statements (continued)

11. Long-term equity investments

As at 31 December 2025, certain associates invested by the Group suffered loss and the Group did not have an obligation to assume additional losses. Therefore, the Group discontinues recognising its share of further losses after the carrying amount of long-term equity investment is reduced to zero, the accumulated unrecognised investment losses amounted to RMB12,057,070 (2024: RMB11,456,900).

For the year ended 31 December 2025, foreign currency translation accounted for the change in the provision for impairment of the Group’s long-term equity investments.

V. Notes to key items of the consolidated financial statements (continued)

Other equity investments

(1) Investments in other equity instruments

(2) Investments derecognised during the year

V. Notes to key items of the consolidated financial statements (continued)

13. Other non-current financial assets

14. Investment properties

Investment property measured using the cost model

Information regarding the Group’s investment properties pledged as collateral is set out in detail in Note V.23.

V. Notes to key items of the consolidated financial statements (continued)

15. Fixed assets

The Group’s fixed assets held for operating leases include buildings and structures, machinery and equipment.

The recoverable amount of the relevant asset group is determined by reference to its fair value less costs of disposal and the present value of its expected future cash flows. The cash flow forecast period is determined based on the estimated remaining useful life of the asset, the cash flows over the estimated remaining useful life of the asset are determined based on projected market conditions, and the pre-tax discount rate is determined with reference to comparable companies and the relevant capital structure.

As at 31 December 2025, fixed assets pending certificates of ownership totalled RMB3,536,731,228 and certificates of ownership is still being processed.

V. Notes to key items of the consolidated financial statements (continued)

16. Construction in progress

(1) Analysis of the Group’s construction in progress is as follows

Information regarding the Group’s construction in progress pledged as collateral is set out in detail in Note V.23.

V. Notes to key items of the consolidated financial statements (continued)

16. Construction in progress (continued)

(2) Movements of major construction projects in progress during the year

V. Notes to key items of the consolidated financial statements (continued)

17. Right-of-use assets

V. Notes to key items of the consolidated financial statements (continued)

18. Intangible assets

Information regarding the Group’s Intangible assets pledged as collateral is set out in detail in Note V.23.

V. Notes to key items of the consolidated financial statements (continued) 19. Goodwill (1) Goodwill

The recoverable amount of the above-mentioned goodwill related asset group is determined using the method of estimating the present value of future cash flows. When estimating the present value of cash flows, the cash flows for the next 5 years are predicted based on market conditions. After 5 years, the cash flows for all years remain stable, with a sustainable growth rate of zero; The pre tax discount rate is determined based on comparable companies and related capital structures, ranging from 8% to 12%.

V. Notes to key items of the consolidated financial statements (continued)

20. Long-term prepaid expenses

21. Deferred tax assets and liabilities

(1) Un-offset deferred tax assets

(2) Un-offset deferred tax liabilities

V. Notes to key items of the consolidated financial statements (continued)

21. Deferred tax assets and liabilities (continued)

(3) Deferred tax assets or liabilities presented at the net amount after offsetting

(4) Details of unrecognised deferred tax assets

As at 31 December 2025, the accumulated deductible temporary differences are mainly subsidiaries’ impairment provisions of assets and accrual of expenses. Due to the uncertainty that there will be sufficient taxable income to cover these deductible differences in future periods, the deferred income tax assets were not recognised in consideration of prudence.

(5) Expiration of deductible tax losses for unrecognised deferred tax assets

V. Notes to key items of the consolidated financial statements (continued)

22. Other non-current assets

23. Assets with restrictive ownership titles or right of use

2025

V. Notes to key items of the consolidated financial statements (continued)

23. Assets with restrictive ownership titles or right of use (continued)

2024

The amortization amount of intangible assets pledged as collateral in 2025 is RMB 53,096,009 (2024： RMB 60,476,811).

24. Short-term borrowings

As at 31 December 2025, no short-term loan was past due (2024: Nil).

25. Notes payable

There is no due but unpaid bill payable at the end of the year. The bills above are all due within one year.

V. Notes to key items of the consolidated financial statements (continued)

26. Accounts payable

As at 31 December 2025, the Group had no significant accounts payable with ageing of more than one year.

As at December 2025, amounts received by suppliers from commercial banks through platform services included in the Group’s accounts payable amounted to RMB 857,558,695.

Such platform services are provided under cooperation between the Group and commercial banks, under which suppliers may voluntarily choose to receive payment from commercial banks in advance. The payment terms of the Group’s payables remain unchanged under this arrangement.

27. Contract liabilities

Contract liabilities primarily relate to the Group’s advances from goods purchase and sale contracts. The Group receives a certain proportion of advances as agreed in contract when entering into the contract with customers. The revenue related to the contracts will be recognised when the Group satisfies its performance obligations

As at 31 December 2025, the Group had no significant contract liabilities with ageing of more than one year.

For the year 2025, the amount of revenue recognized by the Group that was derived from the beginning carrying amount of contract liabilities amounted to RMB 1,871,844,676 (2024：RMB 2,779,202,988).

28. Employee benefits payable

(1) Employee benefits payable

V. Notes to key items of the consolidated financial statements (continued)

28. Employee benefits payable (continued)

(2) Short-term employee benefits

(3) Post-employment benefits – defined contribution plans

29. Taxes and surcharges payable

V. Notes to key items of the consolidated financial statements (continued)

30. Other payables

The Group’s significant other payables aged over one year are payables of projects and equipment.

Note: The Group's fund transaction payables as at 31 December 2025 were amounts and interest due to original controlling shareholders of Nanjing Display Technology and Chengdu Display Technology, with the interest rates of 2.175% and 0%, respectively.

31. Current portion of non-current liabilities

V. Notes to key items of the consolidated financial statements (continued)

32. Other current liabilities

The other current liabilities of the Group were warranty provisions. The warranty provisions mainly relate to the expected after-sales repair warranty to the customers. The provision is estimated by the management, based on historical claim experience and current actual sales outcomes.

33. Long-term borrowings

As at 31 December 2025 ， The annual interest rate of the above borrowings is 1.20% to 5.50% (December 31, 2024: 1.20% to 6.37%).

34. Bonds payable

V. Notes to key items of the consolidated financial statements (continued)

34. Bonds payable (continued)

(1) Analysis of the Group’s Bonds payable is as follows

35. Lease liabilities

In 2025, as a lessee, the Group elected the practical expedient for short-term leases, leases of lowvalue assets and sub-leased right-of-use assets, and the related income and expenses were immaterial.

36. Long-term payables

V. Notes to key items of the consolidated financial statements (continued)

37. Provisions

Balance at the Accrued during Decrease during Balance at the beginning of the the year the year end of the year year

Outstanding litigation 1,652,566 1,652,566

38. Deferred income

Balance at the Amounts Additions during Balance at the beginning of the recognised in Other changes the year end of the year year other income

Related to assets 3,579,152,245 3,920,678,415 (1,254,718,699) (103,249,206) 6,141,862,755

Related to income 965,465,686 293,699,530 (602,234,294) (760,467) 656,170,455

Total 4,544,617,931 4,214,377,945 (1,856,952,993) (104,009,673) 6,798,033,210

Other non-current liabilities

2025 2024

Contribution of non-controlling interests with redemption provisions

Deferred VAT on imported equipment Others

2,083,780,538 2,491,844,290

1,555,616,492

357,505,637 601,446,602

Sub-total

3,996,902,667 3,093,290,892

Less: Other non-current liabilities due within one year(V.31)

444,468,133

Total

3,996,902,667 2,648,822,759

The contribution of non-controlling interests with redemption provisions is mainly due to the redemption obligation of the Company to the non-controlling interests of Fuzhou BOE. The Company recognises the above non-controlling interests contribution as a financial liability which is subsequently measured at the cost of amortisation and will be repurchased according to the agreed price and time.

V. Notes to key items of the consolidated financial statements (continued)

39. Other non-current liabilities 2025 2024 Contribution of non-controlling interests with redemption provisions 2,083,780,538 2,491,844,290 Deferred VAT on imported equipment 1,555,616,492 - Others 357,505,637 601,446,602 Sub-total 3,996,902,667 3,093,290,892 Less: Other non-current liabilities due within one year(V.31) -444,468,133 Total 3,996,902,667 2,648,822,759 The contribution of non-controlling interests with redemption provisions is mainly due to the redemption obligation of the Company to the non-controlling interests of Fuzhou BOE. The Company recognises the above non-controlling interests contribution as a financial liability which is subsequently measured at the cost of amortisation and will be repurchased according to the agreed price and time.

40. Share capital

During the year ended 31 December 2025, the Company cancelled 231,135,739 shares of treasury shares at China Securities Depository and Clearing Corporation Limited Shenzhen Branch. After the completion of the cancellation procedures, the total shares will be changed from 37,645,016,203 shares to 37,413,880,464 shares.

41. Other equity instruments

Financial instruments (including perpetual bonds) that remain outstanding are set out as follows:

42. Capital reserves

43. Treasury shares

In 2025, pursuant to the resolutions of the Company's 11th Board of Directors' 4th meeting and 11th Supervisory Committee's 2nd meeting held on 18 April 2025, the Company approved the Proposals on Changing the Purpose and Cancellation of Repurchased Shares, the Proposal of Repurchase and Cancellation of Certain Restricted Shares, and the Proposal on the Fulfilment of the Conditions for the Release of Restricted Shares Granted under the 2020 Share Option and Restricted Share Incentive Plan during the Third Release Period of the Restricted Shares and the Fulfilment of the Conditions for the Third Exercise Period of the First Exercise Period of the Initial Grant of Share Options. Accordingly, the Company retired 228,882,900 treasury shares held at the beginning of the year and completed the vesting and retirement of restricted shares totaling 91,349,379 shares.

V. Notes to key items of the consolidated financial statements (continued)

44. Other comprehensive income

V. Notes to key items of the consolidated financial statements (continued)

45. Surplus reserves

According to the provisions of the Company Law and the Company’s Articles of Association, the Company appropriates 10% of the profit to the statutory surplus reserves. Where the accumulated amount of the surplus reserves reaches 50% or more of the Company’s registered capital, further appropriation is not required.

46. Retained earnings

V. Notes to key items of the consolidated financial statements (continued)

47. Operating income and operating costs

(1) Operating income and operating costs

(2) Breakdown information of operating income

Information on income of principal activities has been included in Note XV.

(3) Performance obligations

The main activity for the Group to generate revenue is the sale of goods, which is a performance obligation fulfilled at a certain point in time. The sales contracts / orders signed between the Group and its customers usually contain various trading terms. Depending on the trading terms, customers obtain control of the goods when the goods are received, or when they are received by the carrier. Revenue of sale of goods is recognised at that point in time.

For the transfer of goods with a right of return, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. Therefore, the amount of revenue recognised is adjusted for the amount expected to be returned, which are estimated based on the historical data. The Group recognises a refund liability based on the amount expected to be returned. An asset is initially measured by reference to the former carrying amount of An asset is initially measured by reference to the former carrying amount of the product expected to be returned less any expected costs to recover those products (including potential decreases in the value of returned products). At each balance sheet date, the Group updates the measurement of the refund liability for changes in expectations about the amount of returns. The above assets and liabilities are adjusted accordingly.

Relating to ordinary activities

Revenue and the related costs of the Group's sales before intended use are as follows:

V. Notes to key items of the consolidated financial statements (continued)

48. Taxes and surcharges

V. Notes to key items of the consolidated financial statements (continued)

49. Selling expenses 2025 2024 Staff costs and daily expenses 1,624,822,483 1,524,547,555 Others 547,800,436 470,747,097 Total 2,172,622,919 1,995,294,652

50. Administrative expenses 2025 2024 Staff costs and daily expenses 3,512,116,851 3,781,534,288 Depreciation and amortisation 1,217,805,235 1,062,279,681 Others 1,166,419,750 1,374,858,161 Total 5,896,341,836 6,218,672,130

51. Research and development expenses 2025 2024 Staff costs and daily expenses 5,710,005,753 5,570,963,161 Material and test expenses 3,586,849,188 3,331,371,532 Depreciation and amortisation 2,187,062,573 2,201,837,134 Others 2,352,753,364 2,019,137,404 Total 13,836,670,878 13,123,309,231

52. Finance expenses

The interest rates per annum at which borrowing costs were capitalised by the Group was 2.35% \~ 3.46% for the year.

The capitalized amount of borrowing costs has been included in the construction in progress.

53. Other income

The amount of government subsidies related to income received by the Group in 2025 and directly included in other income was RMB552,746,828.

54. Investment income/loss

V. Notes to key items of the consolidated financial statements (continued)

55. Fair value gains

Credit impairment losses

56. Credit impairment losses 2025 2024 Accounts receivable 60,494,566 106,324,987 Other receivables 2,992,597 5,790,193 Notes receivable 3,074 9,934 Total 63,490,237 112,125,114

57. Impairment losses of assets

58. Gains on disposal of non-current assets (expressed with negative value for losses)

V. Notes to key items of the consolidated financial statements (continued)

59. Non-operating income

V. Notes to key items of the consolidated financial statements (continued)

60. Non-operating expenses 2025 2024 Amount recognised in non-recurring gains and losses in 2025 Donations provided 5,788,145 22,799,573 5,788,145 Losses from scrapping of non- current assets 25,716,740 9,315,968 25,716,740 Others 32,134,891 29,175,134 32,134,891 Total 63,639,776 61,290,675 63,639,776

61. Income tax expenses (continued)

The reconciliation between income tax expenses and profit before income tax is as follows:

Note: Income tax expenses in mainland China are calculated based on profits and tax rates in mainland China, while income tax expenses in other regions are calculated based on profits and tax rates in the country or region where the business is located.

62. Earnings per share

Basic earnings per share is calculated as dividing consolidated net profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding. The Group does not have any potential dilutive ordinary shares for the listed years.

V. Notes to key items of the consolidated financial statements (continued)

62. Earnings per share (continued)

The specific calculations for basic earnings per share and diluted earnings per share are as follows:

V. Notes to key items of the consolidated financial statements (continued)

63. Cash Flow Statement Line Item Notes

(1) Cash relating to operating activities

V. Notes to key items of the consolidated financial statements (continued)

63. Cash Flow Statement Line Item Notes (continued)

(3) Cash relating to financing activities (continued)

Changes in liabilities arising from financing activities：

V. Notes to key items of the consolidated financial statements (continued)

64. Supplementary Information to the Cash Flow Statement

(1) Supplementary information for the cash flow statement

Reconciliation of net profit / (loss) to cash flows from operating activities:

V. Notes to key items of the consolidated financial statements (continued)

64. Supplementary Information to the Cash Flow Statement

(1) Supplementary information for the cash flow statement (continued)

Change in cash and cash equivalents:

Note: The cash and cash equivalents disclosed above do not include bank deposits held for investment purpose, the interest accrued on bank deposits at the end of the period and the use of other Cash at bank and on hand subject to restrictions.

(3) Monetary funds other than cash and cash equivalents

VI. Research and Development Expenses

1. Presentation by nature

2. Expenditures on research and development projects which are eligible for capitalisation

VII. Changes in the scope of consolidation

Increases in the consolidation scope during the year were new subsidiaries established during the year, and the decreases in the consolidation scope were cancellations of subsidiaries during the year.

VIII. Interests in Other Entities

1. Interests in subsidiaries

(1) Composition of the Group

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(1) Composition of the Group (continued)

As the Company has signed agreements of concerted action and other relevant agreements with other shareholders of Hefei Display Technology, Wuhan BOE, Chongqing BOE Display, Fuzhou BOE Display, Chengdu Display Sci-tech and HC SemiTek.

VIII. Interests in Other Entities (continued)

1. Interests in subsidiaries (continued)

(2) Material non-wholly owned subsidiaries

As of 31 December 2025, the Group had five subsidiaries with significant minority interests, and the total amount attributable to minority interests of the aforementioned companies was RMB 41,664,159,425; In 2025, the total amount of income attributable to minority shareholders of the aforementioned company was RMB 500,553,054, and the total amount of dividends paid to minority shareholders was RMB 57,454,123.

(3) Key financial information about material non-wholly owned subsidiaries

The following table sets out the key financial information of the above subsidiaries without offsetting internal transactions, but with adjustments made for the fair value adjustment at the acquisition date and any differences in accounting policies:

VIII. Interests in Other Entities (continued)

2. Transactions that cause changes in the Group’s interests in subsidiaries that do not result in loss of control

(1) Changes in the Group’s interests in subsidiaries:

(2) Impact of transactions on non-controlling interests and equity attributable to the shareholders of the Company:

The changes in the shareholding of the Company in the owners of above-mentioned other subsidiaries were caused by the non-proportional capital increase of shareholders and the acquisition of noncontrolling interests, which results in the increase of capital reserves by RMB 56,866,309.

3. Interests in joint ventures and associates

No material restrictions on transfers of funds from investees to the Group. The judgement basis of the Company and its subsidiaries to hold lower than 20% of the voting rights of other entities but have significant influence on the entity is due to the fact that the Company and its subsidiaries have seats in the board of directors of the entity, and the Company and subsidiaries of the Company may have significant influence on the entity through the representation of the directors in the process of formulating financial and operating policies.

The Group has no material joint ventures or associates. Please see Note V.11 for details of the summarised financial information of the joint ventures and associates.

IX. Financial instruments and related risks

1. Risks of financial instruments

The Group's activities expose it to a variety of financial risks: mainly include credit risk, liquidity risk and market risk. The risk management policy of this group is outlined below.

(1) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group’s credit risk is primarily attributable to receivables. Exposure to these credit risks is monitored by management on an ongoing basis.

The cash at bank of the Group is mainly held with well-known financial institutions. Management does not foresee any significant credit risks from these deposits and does not expect that these financial institutions may default and cause losses to the Group.

In respect of receivables, the Group has established a credit policy under which individual credit evaluations are performed on all customers to determine the credit limit and terms applicable to the customers These evaluations focus on the customers’ financial position, the external ratings of the customers and the record of previous transactions. Receivables are due within 7 to 180 days from the date of billing. Debtors with balances that are past due are requested to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from customers.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer, therefore significant concentrations of credit risk arise primarily when the Group has significant exposure to individual customers. As at the balance sheet date, 38% (2024: 45%) of total accounts receivable and contract assets were due from the Group’s five largest customers. In addition, the debtors of the Group that are neither past due nor impaired mainly relate to a wide range of customers for whom there was no recent history of arrearage.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. As at 31 December 2025, the Group did not provide any other guarantees which would expose the Group to credit risk.

IX. Financial instruments and related risks (continued)

1. Risks of financial instruments (continued)

(2) Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in meeting obligations that are settled by delivering cash or another financial asset. The Company and its individual subsidiaries are responsible for their own cash management, including short-term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash, readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The tables below summaries the maturity profile of the Group's financial liabilities and lease liabilities based on the undiscounted contractual cash flows:

2025

IX. Financial instruments and related risks (continued)

1. Risks of financial instruments (continued)

(3) Market risk

Interest rate risk

Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest risk, respectively. The Group determines the appropriate weightings for fixed and floating rate interest-bearing instruments based on current market conditions and performs regular reviews and monitoring to achieve an appropriate mix of fixed and floating rate exposure. The Group does not enter into financial derivatives to hedge interest rate risk.

As at 31 December 2025, it is estimated that a general increase/decrease of 100 basis points in interest rates of variable rate instrument, with all other variables held constant, would decrease/increase the Group’s net profit and shareholders’ equity by RMB537,676,118 (2024: RMB502,550,533).

For non-derivative instruments at floating interest rates held at the balance sheet date that expose the Group to cash flow interest rate risk, the impact on net profit and owner's equity in the sensitivity analysis above reflects the effect of interest rate changes on interest expenses or income estimated on an annual basis. The analysis for the prior year was based on the same assumptions and methodologies.

Currency risk

In respect of cash at bank and on hand, accounts receivable and payable, and short-term loans denominated in foreign currencies other than the functional currency, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

(a) The Group’s exposure as at 31 December to currency risk arising from recognised currency assets or liabilities is mainly denominated in US dollar. The amount of the USD exposure is net assets exposure USD3,037,027,933 (2024: net liabilities exposure: USD 2,564,028,518), translated into RMB 21,346,661,935 (2024: RMB 18,431,262,599), using the spot rate at the balance sheet date. Differences resulting from the translation of the financial statements denominated in foreign currency are excluded.

(b) Assuming all other risk variables remained constant, a 5% strengthening/weakening of the Renminbi against the US dollar at 31 December would have decreased/increased both the Group’s shareholders’ equity and net profit by the amount RMB 939,351,220 (2024: decreased/increased RMB 792,219,870).

The sensitivity analysis above assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to currency risk at the balance sheet date. The analysis excludes differences that would result from the translation of currency financial statements. The analysis is performed on the same basis for the previous year.

IX. Financial instruments and related risks (continued)

2. Capital management

The Group’s primary objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders, by pricing products and services commensurately with the level of risks and by securing access to financing at a reasonable cost.

The Group defines “capital” as including all components of equity, less unaccrued proposed dividends. The balances of related party transactions are not regarded by the Group as capital.

The Group’s capital structure is regularly reviewed and managed to achieve an optimal structure and return for shareholders. In this regard, factors for the Group’s consideration include: its future funding requirements, capital efficiency, actual and expected profitability, expected cash flows, and expected capital expenditure. Adjustments are made to the capital structure in light of changes in economic conditions affecting the Group.

The Group’s capital structure is monitored on the basis of an adjusted net debt-to-capital ratio (total liabilities divided by total assets). The capital management strategies exerted by the Group remained unchanged from 2024. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, request new loans, issue new shares, or sell assets to reduce debt.

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern in order to provide returns for owners and to maintain an optimal capital structure to reduce the cost of capital.

X. Fair value disclosure

The following table presents the fair value information and fair value hierarchy, at the end of the current reporting period, of the Group’s assets and liabilities which are measured at fair value at each balance sheet date on a recurring or non-recurring basis. The level at which fair value measurement is categorised is determined by the lowest level input in the fair value hierarchy that is significant to the entire fair value measurement. The levels are defined as follows:

Level 1 inputs: unadjusted quoted prices in active markets that are observable at the measurement date for identical assets or liabilities;

Level 2 inputs: inputs other than Level 1 inputs that are either directly or indirectly observable for underlying assets or liabilities;

Level 3 inputs: inputs that are unobservable for underlying assets or liabilities.

X. Fair value disclosure (continued)

1. Assets and liabilities measured at fair value

2025

X. Fair value disclosure (continued)

1. Assets and liabilities measured at fair value (continued)

2024

2. Level 1 fair value measurement

The Group uses the active market quote as the fair value of financial assets within Level 1.

The fair value of listed equity instrument investment and debt investment is determined at the market price.

3. Level 2 fair value measurement

Interest rate swaps included in derivative financial instruments are measured using valuation techniques consistent with swap models and present value methods. The model incorporates multiple market‑observable inputs, including the counterparty’s credit quality, spot and forward exchange rates, and interest rate curves. The carrying amount of interest rate swaps equals their fair value. The mark‑to‑market value of derivative financial assets represents the net amount after adjusting for credit valuation adjustments attributable to counterparty default risk associated with derivative instruments. Changes in counterparty credit risk do not have a material effect on the assessment of hedge effectiveness for derivatives designated in hedging relationships, nor on other financial instruments measured at fair value.

X. Fair value disclosure (continued)

Level 3 fair value measurement

For wealth management products measured at fair value, the fair value is determined based on the discounted cash flow method.

Receivables financing are notes receivable with short remaining maturities, for which the fair value determined is equal to the original carrying amount.

For unlisted equity instrument investments, the Group measures their fair value by applying valuation techniques that are appropriate in the current circumstances and supported by sufficient available data and other information. The objective of using valuation techniques is to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Valuation techniques generally include the market approach, income approach and cost approach. The Group selects one or more of these valuation techniques based on actual circumstances to estimate the fair value of the relevant assets or liabilities. However, in limited circumstances, where recent information to determine fair value is insufficient, or where the range of reasonable fair value estimates is significant, and cost represents the best estimate of fair value within that range, cost may constitute an appropriate estimate of fair value within such range.

4. Level 3 fair value measurement For wealth management products measured at fair value, the fair value is determined based on the discounted cash flow method. Receivables financing are notes receivable with short remaining maturities, for which the fair value determined is equal to the original carrying amount. For unlisted equity instrument investments, the Group measures their fair value by applying valuation techniques that are appropriate in the current circumstances and supported by sufficient available data and other information. The objective of using valuation techniques is to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Valuation techniques generally include the market approach, income approach and cost approach. The Group selects one or more of these valuation techniques based on actual circumstances to estimate the fair value of the relevant assets or liabilities. However, in limited circumstances, where recent information to determine fair value is insufficient, or where the range of reasonable fair value estimates is significant, and cost represents the best estimate of fair value within that range, cost may constitute an appropriate estimate of fair value within such range.

5. Fair value of assets and liabilities that are not measured at fair values

Fair value of long-term loans and bonds payable is determined by discounted future cash flow method.with market yield of other financial instruments with similar contractual terms, credit risk and remaining period, which used as the discount rate. As at 31 December 2025, its own default risk of longterm loans was evaluated as insignificant.

XI. Related party relationships and transactions

Information about the parent of the Company

The Company’s ultimate controlling party is Beijing Electronics Holding Co., Ltd.

1. Information about the parent of the Company Name of the parent Registered address Nature of business Registered capital Proportion of ownership interest in the Company (%) Proportion of voting power in the Company (%) Beijing Electronics Holding Co., Ltd. Area A, No.6, West 6th Street, Sanlitun, Chaoyang District, Beijing Operation and management of state- owned assets within authorization, etc 7,007,391,319 0.73 12.45 The Company’s ultimate controlling party is Beijing Electronics Holding Co., Ltd.

2. Information about the subsidiaries of the Company

For information about the subsidiaries of the Company, refer to Note VIII.1.

XI. Related party relationships and transactions (continued)

3. Joint ventures and associates of the Company

Associates and joint ventures that have related party transactions with the Group during this year or the previous year are as follows:

Note 1: In 2025, Beijing BOE Microbiology Technology Co., Ltd. changed its name to Genewise Bio Co., Ltd.

Note 2: In 2025, Beijing BOE Art Cloud Technology Co., Ltd. changed its name to Dongfang Yiyun Technology Group Co., Ltd.

4. Other related parties

Related party relationships

Note: Hua Xia Bank Co., Ltd. was no longer a related party of the Company on 29 October 2025. China Minsheng Banking Corporation Limited was no longer a related party of the Company on 31 October 2024.

XI. Related party relationships and transactions (continued)

5. Related party transactions

The transactions below with related parties were conducted under normal commercial terms or relevant agreements.

(1) Purchases of goods and receiving of services from related parties