Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. 2026 Semiannual Report

August, 2026

Section 1 Important Notice, Table of Contents, and Definitions

The directors and the Board of Directors, and Senior staff members of Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd.(hereinafter referred to as the Company) hereby confirm that there are not any important omissions, fictitious statements or serious misleading carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completeness of the whole contents.

All directors have attended this Board meeting of the Company.

There is no significant risk having adverse influence on attainment of the Company's future development strategy and business targets. The paragraph " Management discussion and analysis" in Section 3 of this Semiannual Report describes major risks , including the risk of increasing market competition risk and the accounts receivable is on the high side. See the related sections for the countermeasures to be taken by the Company.

The Company plans to distribute no cash dividends, no bonus shares and convert no reserve fund into capital stock.

Chairman of the Board of Directors of the Company Mr. Ji Zhijian, Financial Majordomo Mrs. Wang Jinxiu, and the head of Accounting Department Mrs. Wu Bin hereby confirm that the financial report of the semi-annual report is true and complete.

This report is written respectively in Chinese and in English. In the event of any discrepancy between the two above-mentioned versions, the Chinese version shall prevail.

CONTENTS

Section 1 Important Notice, Table of Contents, and Definitions....2

Section 2 About the Company and Main Financia Indicators....6

Section 3 Management Discussion and Analysis....8

Section 4 Corporate Governance....15

Section 5 Important items....16

Section 6 Change in Share Capital and Shareholders' Information....18

Section 7 Bond Related Information....20

Section 8 Financial Report....21

Reference Documents

1. The accounting statements bearing the signatures and seals of the legal representative, the financial majordomo and the accountants in charge.

2. The original copies of all the Company's documents and the original copies of the bulletins published on the newspapers designated by the China Securities Regulatory Commission in the report period.

3. Time for reference: from Monday to Friday 8:00 -11:30 (am) 1:00 -4:30 (pm)

Liaison persons: Mr. Song Wenbao, Ms Du Yu

Tel: 0086-411-87968130

Fax: 0086-411-87968125

Definitions

Section 2 About the Company and Main Financial Indicators

I. Company information

II. Contact persons and information

III. Other situations

1. Contact of company

If the registered address, office address and zip code, website, email box of the Company had any change in the report period

□ Applicable √ Not applicable

2. Information disclosure and place of preparation

If the information disclosure and the place of preparation had any change in the report period

□ Applicable √ Not applicable

The name of newspaper for information disclosure selected by the Company, the address of the website designated by China Securities Regulatory Commission for carrying semi-annual report, the place where the semi-annua report of the Company is prepared had no change in the report period. Refer to the Annual Report for 2025 for details.

IV. Main accounting data and financial indicators

Did the Company retroactively adjust or restate the accounting data of previous years ?

√ Applicable □ Not applicable

The reason for the retroactive adjustment is the same control enterprise merger.

Unit: RMB Yuan

V.1.Difference of accounting data between as per Chinese accounting standards and as per International Accounting Standards

□ Applicable √ Not applicable

2. Difference of accounting data between as per Chinese accounting standards and as per Foreign Accounting Standards

The difference of accounting data between as per Chinese Accounting Standards and as per International Accounting Standards was 0.

VI. Non-recurring profits and losses and their amounts

Section 3 Management discussion and analysis

I. The Company’s Main business during the reporting period

Focusing on the hot and cold industry, the Company is committed to the development of industrial refrigeration and heating business, commercial refrigeration business, air conditioning and environment business, engineering and service business and new business fields, covering the key areas of the hot and cold industry chain and creating a complete hot and cold industry chain

The Company's main products include piston type, screw type, vortex type, lithium bromide absorption refrigeration machines/units, as well as pressure vessels, combination warehouses, controlled atmosphere fresh-keeping warehouses, refrigeration stations, quick freezer, etc. The company provides product sales and comprehensive solutions for both domestic and international markets, with self-operated sales as the main focus and channel sales as a supplement.

In the first half of 2026, rigid demands such as food safety, energy security, consumption upgrading, energy conservation and carbon reduction, and domestic substitution will benefit the refrigeration and air conditioning industry; At the same time, the refrigeration and air conditioning industry is also facing challenges such as intensified market competition, difficulties in improving efficiency, and difficulties in recovering payments. In the face of opportunities and challenges, the Company focuses on the hot and cold business, continuously cultivating advantageous segmented markets such as petrochemicals, cold chain logistics, beer and dairy products, ship refrigeration, ice and snow venues, and environmental simulation. It vigorously expands new businesses such as energy storage thermal management and CCUS, actively seizes the domestic market, and strengthens the development of international markets.

1. Industrial refrigeration and heating business

Industrial refrigeration is an important field reflecting the core technology of the Company. After years of development, the Company has been close to the technical level of the main international competitors in the field of industrial refrigeration, and has achieved catching up in some fields. Based on the traditional refrigeration, the Company realizes the balance of cold and heat through the utilization of heat, which greatly improves the energy utilization rate.

During the reporting period, the Company actively served high-end customers and won multiple high standard projects such as Three Barrel Oil and Chengxin Chemical.

2. Commercial refrigeration business

Commercial refrigeration is the Company's core business. In China, the Company takes the lead in opening up the green intelligent cold chain from the first kilometer of the field to the last 100 meters of the residential community, which is the competitive advantage of the Company.

Focusing on food refrigeration, the Company has patented products pre-cooling from the field, all kinds of quick freezing equipment and refrigeration facilities of various specifications, and China's leading experience in the design and installation of large-scale ammonia and carbon dioxide refrigerators. On the basis of absorbing the relevant experience of Japan, Europe and the United States, combined with China's new needs, to provide newer products, better solutions and fresher experience for the field of food freezing and refrigeration.

During the reporting period, the Company signed multiple key projects, including the Taizhou Jiaojiang Yudu Town project, Zhengzhou Dahe Huiji project, Guangzhou Jiangnan Fruit and Vegetable project, and Shandong Linqing Agricultural Products project.

3. Air conditioning and environment business

In recent years, relying on the complete industrial chain, the Company has continuously carried out transformation and upgrading in the field of air conditioning and environment, developed more energy-saving and environmental protection products around the blue sky project, and accelerated the transformation and upgrading from air treatment to environmental governance.

At present, the Company has developed a series of innovative products around the market segments of commercial air conditioning, central air conditioning and special air conditioning, and provides corresponding solutions in different segments around these innovative products. For hospitals, electronic factories, high-end real estate, rail transit and other fields, provide targeted solutions.

4. Engineering and service business

Cold and hot engineering and service are the Company's advantageous business fields. In recent years, the Company has realized transformation and upgrading from the manufacturer of cold and hot equipment to the service provider of comprehensive solution of cold and hot through the development of engineering and service industry, and realized the dual wheel drive of the enterprise, and provided more professional and accurate services to each segment market, and constantly created new value for customers and realized common growth.

At present, the Company focuses on petrochemical technology, refrigeration, central air conditioning, ice and snow engineering, artificial environment and other market segments. Relying on the enterprise's industria chain, value chain and ecosystem, the Company provides services from consulting, planning, design to manufacturing, installation, commissioning and service in the whole process and life cycle. At the same time, according to the needs of customers, promote the combination of industry and finance, and provide services for customers through the form of project general contracting and financial leasing.

5. New business

With the deepening of China's economic transformation and upgrading, as well as the continuous introduction of environmental governance policies, the domestic industrial energy conservation and environmental protection industry is growing rapidly, the level of energy conservation and consumption reduction of enterprises and the comprehensive utilization of resources is constantly improving, and the energy industrial structure has changed. Strengthening the optimal utilization of energy has become a development trend. For low-grade energy recycling, the Company provides customers with a series of energy-saving, environmental protection, efficient new products, in line with the national strategic requirements of energy conservation, carbon reduction and sustainable development, and contributes professional wisdom to the national carbon peak and carbon neutral strategy.

During the reporting period, the Company continued to sign orders for energy storage thermal management projects and CCUS projects.

II. Analysis of core competence

The Company focuses on main business of cold and heat; independent R&D and joint venture partnerships are cooperate with each other effectively; capital resources integration and business model innovation are in a positive interaction; the community of business and interest are being multi-layered created; the develop mode with Bingshan characteristic are formed.

The Company has the integrated cold-heat industrial chain for offering kinds of comprehensive solution services, including design, manufacture, installation and maintenance etc., and can satisfy individual requirements preferably.

The Company possesses a mature and solid marketing networks and after-sale service network on/off-line, and can offer high quality and high value-added services more initiative and faster for clients from around the city.

Following the technical route of cold and heat balance, the Company has independently developed a series of energy-saving, environment-friendly, efficient and intelligent cold and heat technologies and products, and

actively fulfilled the dual carbon responsibility.

While promoting the transformation and upgrading of its inherent business in an orderly manner, the Company actively cultivates new momentum for development, and the path of sustainable growth is increasingly clear.

During the reporting period, the Company focused on the hot and cold business, deeply cultivated the market segment, and steadily improved its sales force, product force, technical force, engineering force and service force, so as to further enhance its core competitiveness.

III. Analysis of main business

In the first half of 2026, the Company focused on the hot and cold business, deeply cultivated segmented markets, and continuously strengthened its main business. In the first half of 2026, the Company achieved an operating revenue of 2,179.67 million yuan, a decrease of 8.62% year-on-year; The net profit attributable to the shareholders of the listed company was 47.14 million yuan, a decrease of 39.98% year-on-year, mainly due to the rising prices of raw materials and intensified market competition.

During the reporting period, the Company's subsidiary, Bingshan Engineering, continued to deepen its focus in niche markets. In the product sector, it actively served high-end clients, securing contracts for several high-standard projects such as those for the Three Major Oil Companies and Chengxin Chemical. In the engineering sector, it undertook key projects including the Taizhou Jiaojiang Fish Town, Zhengzhou Dahan Huiji, Guangzhou Jiangnan Fruit and Vegetable, and Shandong Linqing Agricultural Product projects. In the energy sector, orders for energy storage thermal management and CCUS continued to be signed.

During the reporting period, the Company's subsidiary, Bingshan Guardian's Cold & Heat System, achieved new milestones in intelligent energy-saving control. The next-generation Model Predictive Control (MPC) algorithm was successfully implemented in Bingshan's cold and heat equipment applications, progressing steadily. The development of MPC energy-saving algorithms embedded in edge controllers has reached phased results. The Hardware-in-the-Loop testing platform for energy storage temperature control systems was pragmatically established, significantly enhancing development efficiency.

During the reporting period, the Company's subsidiary, Sonyo Compressor, achieved independent innovation and high-quality growth. The series development of high-horsepower scroll compressors progressed steadily, while DC inverter scroll compressors suitable for data center temperature control systems were actively promoted. Focusing on the heat pump sector, it continued to deepen its expansion in the European market. Through cost reduction and efficiency improvement, it sought to mitigate the impact of rising bulk material prices. It was recognized as one of the 100 National 5G Factory Model Application Practice Projects and selected as a 2026 Liaoning Provincial Intelligent and Digital Transformation Benchmark Enterprise.

During the reporting period, the subsidiary of the Company, Sonyo Refrigeration, focused on industrial energy conservation and innovative green growth. Signed a contract for the absorption type Class II heat pump project with the largest steam production capacity in a single domestic project, achieving efficient coupling of waste heat recovery and steam production. The specialized lithium bromide unit for offshore platforms has been successfully developed. Awarded as a national level green factory.

During the reporting period, the subsidiary of the Company, Sonyo Refrigeration System, made new progress in product development. The prototype development of the transcritical CO₂ air-cooled integrated unit has been completed, assisting in the expansion of overseas markets. Optimization and upgrade of marine

OCCS compression module and liquefaction module. Launching a new generation of vanadium liquid flow energy storage temperature control system, actively promoting the development of new customers.

Main financial data variations as compared to the same period of last year

Monetary unit: RMB Yuan

Note 1: Financial expenses increased significantly, primarily due to foreign exchange losses incurred during the current period. Note 2: The decrease in income tax expense was primarily due to the reduction in total profit for the current period.

Note 3: The net cash flow generated from operating activities has significantly decreased year-on-year, mainly due to a decrease in current period payments.

Sales income and costs

Main business structure

IV. Analysis of the non-main business

□Applicable√Not applicable

V. Analysis of assets & liabilities

1. Remarkable change in assets

Monetary unit: RMB yuan

2. The main overseas assets

□ Applicable √ Not applicable

3. Assets & liabilities which are measured by fair value

√ Applicable □ Not applicable

The beginning number is 1,683,852.59 yuan for other non-current financial assets measured by fair value. There was no change during the reporting period, and the final number is 1,683,852.59 yuan.

1. Remarkable change in assets Monetary unit: RMB yuan 30-6-2026 31-12-2025 Proportion increase/decrease. Amount Proportion to the total assets Amount Proportion to the total assets Monetary funds 621,705,465.37 8.35% 881,961,122.28 11.59% Decrease 3.24 percentage points Accounts receivable 1,826,609,128.67 24.55% 1,635,556,614.58 21.50% Increase 3.05 percentage points Contract assets 164,032,341.04 2.20% 161,816,928.39 2.13% Increase 0.07 percentage points Inventories 1,401,211,017.51 18.83% 1,439,914,414.18 18.93% Decrease 0.10 percentage points Investment property 133,159,366.12 1.79% 121,350,188.47 2.00% Decrease 0.21 percentage points Long-term equity investment

2. The main overseas assets □Applicable √Not applicable

3. Restrictions on asset rights at the end of reporting period

√ Applicable □ Not applicable

VI. Analysis of investments

1.The overall situation

√ Applicable □ Not applicable

Note: The investment amount during the reporting period decreased by 47.60%, mainly due to the purchase of a high-power production line by its subsidiary Sonyo Compressor in the same period last year.

2.The significant equity investment during the reporting period

□ Applicable √ Not applicable

3 The significant non-equity investment during the reporting period

□Applicable √Not applicable

4.The financial asset investment

(1) The securities investment

□Applicable √Not applicable

(2) Derivative investment

□Applicable √ Not applicable

During the reporting period, the Company does not exist derivative investment.

VII. The material assets and equity sale

1. The material assets sale

□Applicable √Not applicable

2. The material equity sale

□Applicable √Not applicable

Unit: ten thousand yuan (except for registered capital)

Subsidiary companies obtained or disposed in the reporting period √ Applicable □ Not applicable

The scope of consolidation at the end of the reporting period increased by one compared to the beginning of the year, which is Dalian Bingshan Part Technology Co., Ltd., and decreased by one compared to the beginning of the year, which is Wuhan Lan Ning Energy Technology Co., Ltd.

IX. The structured corporate bodies which the Company controlled □Applicable √Not applicable

X. Main risks the company faces and response measures

(1)Increasing market competition risk

Countermeasures: focus on hot and cold industries, deeply cultivate segmented markets; quickly enhance product and engineering capabilities; orderly improving the level of intelligent manufacturing and service-oriented manufacturing; accelerate the transformation and upgrading of inherent undertakings, improve quality and efficiency; accelerate the cultivation of new driving forces and increase differentiated competitive advantages.

(2)Risk of high level of trade receivables

Countermeasures: gradually increase the proportion of self-product revenue, strictly implement the project management system and further strengthen the management of accounts receivable; enhance quality of contract through intensified customer credit assessment and contract appraisal; effective control of increase in trade receivables by reduction of guarantee deposits, and taking bank credit instruments as guarantee deposits; improve contract execution through stricter review on goods delivery, intensified control on project construction and acceptance, and post-sale service; prepare special composition solutions and incentive policy to accelerate settlement of trade receivables with relatively long aging.

XI. Implementation of Market Value Management System and Valuation Enhancement Plan Has the Company established a market value management system.

□Applicable √Not applicable

Has the Company disclosed a plan to increase its valuation.

√Applicable □Not applicable

Due to the fact that the B-share prices have been consistently lower than the net asset value, the Company has formulated the "Valuation Enhancement Plan", aiming to increase the Company's valuation from several dimensions such as business improvement, mergers and acquisitions, cash dividends, information disclosure, investor relations management, and social responsibility. For detailed information, please refer to the relevant announcement disclosed by the Company on April 24, 2026.

XII. Implementation of the Action Plan for "Double Improvement of Quality and Return" Has the Company disclosed the announcement of the "Double Improvement of Quality and Return" action plan. □Applicable √Not applicable

Section 4 Corporate governance Environmental and Social Responsibility

I. Changes of directors and senior managers of the Company

√Applicable □ Not applicable

II. Profit distribution and dividend payment

III．The implementation and effect of equity incentive

□ Applicable √ Not applicable

IV．Major environmental issues

Whether the Company and its major subsidiaries are included in the list of enterprises that are required to disclose environmental information in accordance with the law

√Yes □ No

V．Social responsibilities

In the first half of 2026, based on the solid progress of the rural revitalization assistance work, the Company further expanded its public welfare scope and actively carried out charity education assistance and social volunteer services. The specific work is as follows:

1. Continue to do a good job in the paired assistance work with Songlin Village, Guangmingshan Town, Zhuanghe City. Provide maintenance for the air conditioning equipment of the cultural activity venue for the villagers.

2. Actively organize employees to participate in voluntary blood donation activities, and encourage all employees to actively participate.

3. Organize volunteers to enter the Bingshan Hope School, carry out charity education assistance at the same time, set up public welfare lecture halls to popularize refrigeration knowledge, in order to help with talent cultivation through love-based education assistance, and protect the growth of students with love.

Section 5 Important items

I. Commitments made by the actual controller, shareholders, related parties, purchasers, the company and other relevant parties that have completed their performance during the reporting period and have not completed their performance as of the end of the reporting period

□ Applicable √ Not applicable

II. Non-operation capital occupation by holding shareholders and their related parties in the listed company □ Applicable √ Not applicable

III. Foreign guarantee in violation of regulations □ Applicable √ Not applicable IV. Engagement and dismissal of the accounting firm □ Applicable √ Not applicable

V. Explain to the “non standard audit report” of this reporting period from the board of directors, board of supervisors of the Company □Applicable √Not applicable

VI. Explain to the “non standard audit report” last year from the board of directors of the Company □Applicable √Not applicable

VII. Bankruptcy restructuring related matters

□ Applicable √ Not applicable

VIII. Major lawsuit issues

□ Applicable √ Not applicable

The Company had no major lawsuit issues in the reporting period.

IX. Punishment and rectification

√Applicable □ Not applicable

The Company and related personnel received the Regulatory Rectification Measures Decision (Administrative Regulatory Measures [2026] No. 7) issued by the Dalian Regulatory Bureau of the China Securities Regulatory Commission on March 2, 2026, which required the Company to rectify issues related to related-party transactions, corporate governance, revenue recognition, and other matters. Upon receiving the regulatory measures decision, the Company promptly assigned responsibilities and implemented corrective actions diligently. As of the end of the reporting period, the aforementioned issues had been fully rectified. For details, refer to the "Rectification Report on the Regulatory Rectification Measures Taken by the Dalian CSRC Against the Company and Related Personnel" disclosed by the Company on March 26, 2026, on the Cninfo website.

X. The credibility of Companies and its controlling shareholder, actual controller √ Applicable □ Not applicable

The controlling shareholder of the Company and the Company don’t exist situation such as unfulfilled the court’s effective judgments or failed to pay duly a large amount of debt during the reporting period.

XI. Important associated transactions

1. Important associated transactions

In the reporting period, the total amount of normal associated transactions between the Company and associated parties was 456,500 thousand yuan, accounting for 41.61% of the budgeted amount for the year 2026. This included 125,420 thousand yuan, accounting for 36.23% of the budgeted amount for the year 2026, for purchasing supporting products for package projects from associated parties, and 331,080 thousand yuan, accounting for 44.08% of the budgeted amount for the year 2026, from selling supporting parts and components to associated parties.

2.Associated transactions related to purchases or sales of assets

□ Applicable √ Not applicable

3.Important associated transactions with joint external investments

□ Applicable √ Not applicable

4.Current associated rights of credit and liabilities

□ Applicable √ Not applicable

5. Current associated rights of credit and liabilities with related financial companies or financial companies that the company holds

□ Applicable √ Not applicable

6. Other associated transactions

□ Applicable √ Not applicable

XII．Major contract and its performance

1. Hosting, contracting and leasing status

(1) the hosting status

□ Applicable √ Not applicable

(2) the contracting status

□ Applicable √ Not applicable

(3) the leasing status

√ Applicable □ Not applicable

The Company signed rental contract with MHI Bingshan Refrigeration (Dalian) Co., Ltd., and rent # 6 workshop building located on No. 106 Liaohe East Rd, Dalian Economic and Technology Development Zone to MHI Bingshan Refrigeration (Dalian) Co., Ltd. The rental area is 15,259.04 square meters, and the rental term till 16^th July, 2029. The annual rent fee for the current reporting period is RMB 1.9139 million Yuan.

The Company signed rental contract with Dalian Bingshan Wisdom Park Co., Ltd., and rent out the whole land and house of the Company’s old plant locating at No. 888, Southwest Road, Shahekou District, Dalian to Dalian Bingshan Wisdom Park Co., Ltd., with rental land area of 167,165.61 square meters and housing area of 105,652.43 square meters. The lease term is from April 1, 2017 to December 31, 2036. The annual rent fee for the current reporting period is RMB 6.1403 million Yuan.

2. Guaranteeing status

√ Applicable □ Not applicable

The Company provided guarantees for its client Shandong Jiechuang Energy Technology Co., Ltd., and Jilin Fuyu Agricultural Technology Co., Ltd. based on financing leasing business, which lasted until the reporting period.

As of the date of this report, all guaranteed debts of Shandong Jiechuang Energy Technology Co., Ltd. have been fully settled, and the Company has not assumed any guarantee liability.

Due to its own operational issues, Jilin Province Fuyu Agricultural Technology Co., Ltd. delayed repayment. Its subsidiary, Dalian Bingshan RYOSETSU Quick Freezing Equipment Co., Ltd. ("Bingshan RYOSETSU "), will advance rental payments monthly starting from August 2026, with a total advance amount of 9.1385 million yuan. Based on these advances, Bingshan RYOSETSU has accrued a provision of 1.3016 million yuan in its interim financial statements for the first half of 2026. For details, please refer to the Company's announcement titled "Announcement on Subsidiary's Partial Guarantee Liability Performance" disclosed on August 5, 2026.

3.Entrusted Financial Management

□ Applicable √ Not applicable

4. Major contract of daily operation

□ Applicable √ Not applicable

5. Other important contracts

□Applicable √Not applicable

XIII. Description of other important matters

□Applicable √Not applicable

XV. Major matters of the company's subsidiaries

□Applicable √Not applicable

Section 6 Change in Share Capital and Shareholders' Information

I. Change in share capital

1. Change in share capital

The reason for the Change in share capital

□ Applicable √ Not applicable

Approval of changes in shares

□ Applicable √ Not applicable

The influence of change in share capital on the recent year and recent issue for basic earnings per share ,diluted earnings per share and net assets per share.

□ Applicable √ Not applicable

2. The restricted shares changes

□ Applicable √ Not applicable

II. Securities issuance and listing

1. Securities issuance in the report period

□ Applicable √ Not applicable

III. Shareholders and actual controller

1.Number of shareholders and their shareholding

At the end of the report period, the total number of shareholders of the Company was 61,890, including 55,153 A-share shareholders and 6,737 B-share shareholders.

If the Company shareholders had any agreed repurchase transaction in the report period □ Yes √ No

IV. Changes in shareholding of directors, supervisors and senior managers □ Applicable √ Not applicable

V. Variation in controlling shareholders or actual controllers

Variation in controlling shareholders in the report period

□ Applicable √ Not applicable

There were no changes in the controlling shareholder in the reporting period.

Variation in actual controllers in the report period

□ Applicable √ Not applicable

VI .Information on Preferred Stock

□ Applicable √ Not applicable

Section 7 Bond Related Information

□ Applicable √ Not applicable In the reporting period, the Company didn’t own Bond.

Section 8 Financial Report

I. The Company's semiannual financial report has not been audited.

II. Accounting statement

BALANCE SHEET Prepared by Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. June 30, 2026 Unit: RMB Yuan

Legal Representative: Ji Zhijian Person in Charge of Accounting Organization: Wu Bin

INCOME STATEMENT

Prepared by Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. January-June, 2026 Unit: RMB Yuan

Legal Representative: Ji Zhijian Chief Financial Official: Wang Jinxiu Person in Charge of Accounting Organization: Wu Bin

CASH FLOW STATEMENT

Prepared by Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. January -June, 2026 Unit: RMB Yuan

Legal Representative: Ji Zhijian Chief Financial Official: Wang Jinxiu Person in Charge of Accounting Organization: Wu Bin

CONSOLIDATED STATEMENT OF CHANGES IN OWNERS’ EQUITY

Prepared by Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd 2026.01-06 Unit: RMB Yuan

STATEMENT OF CHANGES IN OWNERS’ EQUITY

Prepared by Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd 2026.01-06 Unit: RMB Yuan

Legal Representative: Ji Zhijian Chief Financial Official: Wang Jinxiu Person in Charge of Accounting Organization: Wu Bin

III. General Information

Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd (the “Company”) was reorganized and reformed from main part of former Dalian Refrigeration Factory. On December 8, 1993, the Company went to the public as a listed Company at Shenzhen Stock Exchange Market. On March 20, 1998, the company successfully went to the public at B share market and listed at Shenzhen Stock Exchange Market with total share capital of RMB350,014,975Yuan.

According to the 13 mathrm t h meeting of the 6 mathrm t h generation of board, extraordinary general meeting for 2015 fiscal year and ' Restricted share incentive plan (draft)', the Company planned to introduce A ordinary shares to incentive objectives, which was 10,150,000 number of shares would be granted to 41 share incentive objectives at granted price of RMB5.56Yuan per share. Up to March 12^th ,2015, the Company received new added share capital of RMB10,150,000Yuan and the share capital had been verified by DaHua Certified Public Accountants, and had been issued the capital verification report Dahuayanzi [2015]000086 on March12^th , 2015.

The general meeting for 2015 fiscal year held on 21st April 2016 approved the profit distribution policy for the year of 2015, which agrees the profit distribution based on the total 360,164,975 number of shares as share capital, paid share dividend of 5 common shares for every 10 shares through capital reserve. The policy stated above was fully implemented on 5th May 2016, and the registered capital was altered to 540,247,462.00Yuan.

The 17 mathrm t h. meeting of the 6 mathrm t h generation of board was held on 4 mathrm t h June 2015 and the 2 mathrm n d interim shareholders’ meeting was held on 24th June 2015, meeting deliberated and passed the proposal of non-public offering of ‘A shares’. China’s Securities Regulatory Commission issued SFC license [2015]3137 on 30 mathrm t h December, 2015, approving that new non-public offering cannot exceeded 38,821,954 number of shares. The company implemented the post meeting procedures for China’s Securities Regulatory Commission, which is regarding adjustment of bottom price and the number of the shares issued after the implementation of profit distribution policy of 2015 in May, 2016, and accordingly revised the upper limit of non-public offering of share to58,645,096 number of new ‘A shares’. The company issued the non-public offering of 58,645,096 number of ‘A shares’ to 7 investors, and as a result, the total number of shares of the company is changed to 598,892,558 shares, and the par value is 1yuan per share and the total share capital is 598,892,558.00Yuan. The share capital stated above has been verified by DaHua Certified Public Accountants, and has been issued the capital verification report Dahuayanzi [2016]000457 on 31st May 2016.

According to the ‘Restricted Share Incentive Plan(draft) of Dalian Refrigeration Company Limited for the year of 2016’ and the ‘Proposal regarding the shareholders’ meeting authorized the board of directors to implement the Restricted Share Incentive Plan’ approved on the 3^rdprovisional general meeting held on 13th September 2016, the 9^th meeting of the 7^th generation of board deliberated and passed the ‘Proposal about granting the restricted shares to incentive targets’ on September 20^th, 2016 and set 20^th September 2016 as share granted date, and granted 12,884,000 number of restricted shares to 188 incentive targets at granted price of 5.62Yuan per share. By 22^ndNovember, 2016, the company has actually received the newly subscribed registered share capital of 12,884,000Yuan subscribed by incentive targets. The share capital stated above has been verified by DaHua Certified Public Accountants, and has been issued the capital verification report Dahuayanzi [2016]001138 on 23^rdNovember, 2016.

On May 20^th, 2017, the general meeting for 2016 fiscal year was held and profit appropriation scheme for 2016 FY was approved, which was every 10 shares will be increased by 4 shares through capital reserve based on the total 611,776,558 number of shares. After the profit appropriation scheme, the registered capital was changed to RMB856,478,181.00Yuan.

On December 18, 2017, the Company held the third extraordinary shareholders’ meeting of 2017 which reviewed and approved the Proposal on Repurchasing and Cancelling Part Restricted Stocks of the 2016 Restricted Stock Incentive Plan”. On March 8, 2018, after the completion of repurchase and cancellation, the Company implemented the corresponding capital reduction procedures according to law, and the registered capital of the Company was changed from 856,487,181 Yuan to 855,908,981 Yuan.

On May 4, 2018, the Company held the 21^st meeting of the seventh board of directors which reviewed and approved the Proposal on Repurchasing and Cancelling Party Restricted Stocks of the 2015 Restricted Stock Incentive Plan. On June 29, 2018, after the completion of repurchase and cancellation, the Company implemented the corresponding capital reduction procedures according to law, and the registered capital of the Company was changed from 855,908,981 Yuan to 855,434,087 Yuan.

On January 17,2019, the Company held the first extraordinary shareholders’ meeting of 2019 which reviewed and approved the Proposal on terminating the implementation of 2016 Restricted Stock Incentive Plan of the Company and logouting the restricted stock. On March 4,2019, the Company has completed the capital reduction process, and the registered capital of the Company was changed from 855,434,087 Yuan to 843,212,507 Yuan.

On December 20^th, 2019, the Company held the 7th meeting of the 8th Board of Directors and approved to change the Company’s name from Dalian Refrigeration Company Limited to Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd.

The Company is in industrial manufacturing sector, mainly engaged in industrial refrigeration, refrigerated and frozen food storage, and manufacture and installation of central air-conditioning and refrigeration equipment. The scope of business includes research and development, design, manufacture, sale, lease, installation and repair of refrigeration and heat equipment, accessories, spare parts, and energy-saving and environmental protection products; Technical services, technical consultation, technical promotion; Design, construction, installation repair and maintenance of complete sets of refrigeration and air conditioning projects, mechanical and electrical installation projects, steel structure projects, anti-corrosion and heat preservation works; Rental of premises; Transport of ordinary goods; Property management; Low temperature storage; Import and export of goods and technologies. (With the exception of projects subject to approval according to law, independently carry out business activities according to law with the business license).

This financial report was approved and issued by the Board of Directors of the Company on August 12, 2026.

IV. Financial Statements Preparation Basis

（1） Preparing basis

The group’s financial statements are prepared according to the actual occurred transactions and events, and in accordance with ‘Accounting Standards for Business Enterprises’, its application guidelines, interpretations and other relevant provisions promulgated by the Ministry of Finance (collectively referred to as "Accounting Standards for Business Enterprises") and " No. 15 of Information Disclosure and Reporting Rules for Publicly Listed Companies - General Provisions for Financial Reports" (revised in 2023) promulgated by the China Securities Regulatory Commission (hereinafter referred to as the "CSRC").

（2） Going concern

The group has assessed the capacity to continually operate within 12 months since June 60, 2025, and hasn’t found the major issues impacting on the sustainable operation ability. The Company’s financial statements are prepared on the basis of going concern assumption.

V. Significant Accounting Policies and Accounting Estimates

1. Declaration for compliance with accounting standards for business enterprises

The financial statements are prepared in line with the requirements of Accounting Standard for Business Enterprise, and reflect the relative information of the financial position for the reporting period ended as of June 30, 2026, operating performance, cash flow of the Company and the group for the reporting period then ended truly and fully.

2. Accounting period

The group adopts the Gregorian calendar year as accounting period from Jan 1 to Dec 31.

3. Operating cycle

The group sets twelve months for one operating cycle.

4. Functional currency

The group adopts RMB as functional currency.

5. Materiality criteria set up method and basis

The financial statements preparation and disclosure are in line with materiality. For those matters to be disclosed and need judgement for materiality, materiality criteria set up method and basis are as follows:

6. Accounting for business combination under same control and not under same control

（1）Business combination under the same control

Business combination under the same control is the situation where entities participating the merger are controlled by the same party or controlled by parties under same ultimate control before and after merger and the control is not temporary.

The group, as an acquirer, the assets and liabilities that the group obtained in a business combination under the same control should be measured on the basis of their carrying amount of the acqiree in the ultimate control party’s consolidated financial statements on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it, the capital surplus shall be adjusted. If the capital surplus is not sufficient to be offset, the retained earnings shall be adjusted.

（2）Business combination not under same control

Business combination not under the same control is the situation where entities participating the merger are not controlled by the same party or not controlled by parties under same ultimate control before and after merger.

When the group is an acquirer, for a business combination not under same control, the asset, liability and contingent liability obtained, shall be measured at the fair value on the acquisition date. The difference, when combination cost exceeds proportionate share of the fair value of identifiable net assets of acquire should be recognized as goodwill. If the combination cost is less than proportionate share of the fair value of identifiable net assets of acquiree, firstly, fair value of identifiable asset, liability or contingent liability shall be reviewed, and so the fair value of non-monetary assets or equity instruments issued in the combination consideration , after review, still the combination cost is less than proportionate share of the fair value of identifiable net assets of acquire, the difference should be recognized as non-operating income.

If a business consolidation not under common control is finally achieved in stages, when preparing the consolidated financial statements, the acquirer shall remeasure its previously held equity interest in the acquiree at its fair value on acquisition date and recognize the gain or loss as investment income for the current period. Other comprehensive income, under equity method accounting rising from the interest held in acquiree in relation to the period before the acquisition, and changes in the value of its other equity other than net profit or loss, other comprehensive income and profit appropriation shall be transferred to investment gain or loss for the period in which the acquisition incurs, excluding the other comprehensive income from the movement on the remeasurement of ne asset or liability of defined benefit

plan.

7. Criteria of control judgment and method of preparation of consolidated financial statements

Consolidation scope is determined on the control basis including the Company and all subsidiaries controlled by the Company. Control criteria is that the group has the power over the investees, enjoy the variable return by involving the relative activities of the investees and also has the impact on the return amount through the power over the investees.

If subsidiaries adopt different accounting policy or have different accounting period from the parent company, appropriated adjustments shall be made in accordance with the Company policy in preparation of the consolidated financial statements.

All significant intergroup transactions, outstanding balances and unrealized profit shall be eliminated in full when preparing the consolidated financial statements. Portion of the subsidiary’s equity not belonging to the parent, profit, loss for the current period, portion of other comprehensive income and total comprehensive belonging to minority interest, shall be presented separately in the consolidated financial statements under “minority interest of equity”, minority interest of profit and loss”, “other comprehensive income attributed to minority interest” and “total comprehensive income attributed to minority interest” title.

If a subsidiary is acquired under common control, its operation results and cash flow shall be consolidated since the beginning of the consolidation period. When preparing the comparative consolidated financial statements, adjustments shall be made to relevant items of comparative figures as regarded that reporting entity established through consolidation has been always existing since the point when the ultimate controlling party starts to have the control.

If a subsidiary is acquired not under common control, its operation results and cash flow shall be consolidated since the beginning of the consolidation period. In preparation of the consolidated financial statements, adjustments shall be made to subsidiary’s financial statements based on the fair value of its all identifiable assets, liability or contingent liability on the acquisition date.

When the group partially disposes of the long –term equity investment in subsidiary without losing the control over it, in the consolidated financial statements, the difference, between disposals price and respective disposed value of share of net assets in the subsidiary since the acquisition date or combination date, shall be adjusted for capital surplus or share premium, no enough capital surplus, then adjusted for retained earnings.

When the group partially disposes of the long –term equity investment in subsidiary and lose the control over it, in preparation of consolidated financial statements, remaining share of interest in the subsidiary shall be remeasured on the date of losing control. Sum of the share disposal consideration and fair value of remaining portion of shareholding minus the share of the net assets in the subsidiary held based on the previous shareholding percentage since the acquisition date or combination date, the balance of above is recognized as investment gain/loss for the period and goodwill shall be written off accordingly. Other comprehensive income relevant to share investment in subsidiary shall be transferred to investment gain /loss for the period on the date of losing control.

When the group partially disposes of the long –term equity investment in subsidiary and lose the control over it by stages, if all disposing transactions are bundled, each individual transaction shall be seen as a transaction of disposal of a subsidiary by losing control. The difference between the disposal price and the share of the net assets in the subsidiary held before the date of losing control, shall be recognize as other comprehensive income until the date of losing control where it is transferred into investment gain/ loss for the current period. If the equity investment in the subsidiary is disposed of by stages through multiple transactions until the control is lost, and it is not a bundled transaction, each transaction shall be accounted for separately according to whether the control is lost.

8. Cash and cash equivalent

The cash listed on the cash flow statements of the Company refers to cash on hand and bank deposit. The cash equivalents refer to short-term (normally with original maturities of three months or less) and liquid investments which are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value.

9. Translation of foreign currency

（1） Foreign currency transaction

Foreign currency transactions are translated at the spot exchange rate issued by People’s Bank of China (“PBOC”) on the 1^st day of the month when the transactions are accounted initially.

At the balance sheet date, foreign currency monetary items should be converted into reporting currency at the balance sheet date’s spot exchange rate. Exchange differences should be taken into the current profits and losses except special foreign currency borrowings for construction and producing assets which are qualifying for assets capitalization, should be capitalized. Foreign currency non-monetary items, which are recorded in historical cost, should be still recorded at the spot exchange rate when the transaction occurred and no change on reporting currency amount. Foreign currency non-monetary items, which are measured at fair value, should be recorded in the spot exchange rate at the date measuring the fair value and the differences should be recognized as profit and loss from fair value changes and included in the current profits and losses. Invested capital in foreign currency shall be converted into reporting currency at FX rate at when the investment is received, and no foreign exchange difference arises between capital received and monetary items.

10. Financial instruments

（1） Recognition and derecognition of financial instruments

The group shall recognize a financial asset or a financial liability when becoming party to the contractual provisions of the instrument.

An entity shall derecognize a financial asset(or a part of it or a group of similar financial asset) when, and only when: 1) the contractual rights to the cash flows from the financial asset expire, or 2) the entity transfers contractual rights to receive the cash flows of a financial asset, or assumes a contractual obligation to pay those cash flows received to the 3^rd party in full amount in time according to the ‘passing-through’ agreement and the entity substantially transfers all the risks and rewards of ownership of the financial asset in nature, or the entity neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but the entity has not retained control.

Financial liabilities shall be derecognized if the obligation of the liability is fulfilled, cancelled or expired. An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms an existing financial liability shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the consideration paid, including any non- cash assets transferred or liabilities assumed, shall be recognized in profit or loss.

A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade date accounting or settlement date accounting.

（2） Classification and measurement of financial assets

At initial recognition, the group shall classify financial assets as measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both the group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Only when the business model for managing the financial assets is changed, the affected financial assets shall be reclassified.

In determining the business model, the group considers, among others, the way in which the company evaluates and reports the performance of financial assets to key management personnel, the risks affecting the performance of financial assets and the way in which they are managed, and the way in which the relevant business managers are remunerated. In assessing whether the objective is to collect contract cash flows, the group needs to make an analytical judgment on the reasons, timing, frequency and value of the sale of the financial assets before the maturity date.

In determining the contract cash flow characteristics, the group is required to determine whether the contract cash flow is only the payment of principal and interest based on the outstanding principal, (including the assessment of the time value of money correction, judging any significant difference between it and the baseline cash flow/ for financial assets containing early repayment characteristics, is required to determine whether the fair value of early repayment features is very small).

Financial assets are measured at fair value at the initial recognition, but accounts receivable or notes receivable arising from the sale of goods or provision of services, etc., do not contain a significant financing component or do not consider the financing component of less than one year, the initial measurement is based on the transaction price.

For financial assets that are measured at fair value, the related transaction costs are directly included in current profit or loss, and those costs of other categories of financial assets are included in their initial recognized amounts.

Financial assets subsequent measurement based on the classification

1) A financial asset measured at amortized cost

A financial asset shall be measured at amortized cost if both of the following conditions are met: ①the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets of this category include: monetary fund, receivable, notes receivable and other receivables.

2) Debt instruments measured at fair value through other comprehensive income

A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met: ① the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and ②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The effective interest rate is applied to interest income. A gain or loss arising from a financial asset measured at fair value through other comprehensive income, which is not part of hedging relationship shall be recognized in other comprehensive income apart from interest income, impairment loss and foreign exchange difference. When this type of financial assets is derecognized, accumulated gain or loss previously in the other comprehensive income shall be out of it and accounted into retained earnings when the financial asset is derecognized. The financial assets of this category include: receivable financing.

3) Equity instruments measured at fair value through other comprehensive income

The group may make an irrevocable election for particular investments in equity instruments that it would be measured at fair value through other comprehensive income, but once the election is made, it is irrevocable. The group only recognizes the dividend (apart from the dividend as investment cost pay back) into profit and loss and fair value movement subsequently will be recognized into comprehensive income and no need for impairment provision. When this type of financial assets is derecognized, accumulated gain or loss previously in the other comprehensive income shall be out of it and accounted into retained earnings when the financial asset is derecognized. The financial asset of this category is equity instruments.

4) A financial asset measured as fair value through profit or loss

Apart from classified as the amortized cost financial assets and as fair value through other comprehensive income financial assets, a financial asset is classified as fair value through profit or loss. The group shall subsequently measure this financial asset at its fair value, except for hedging accounting, any gain or loss on FVTPL shall be accounted into profit and loss. The financial assets of this category include: tradable financial asset other non-current financial asset.

A financial asset shall be classified as fair value through profit or loss if it is recognized contingent consideration through business combination, which is not under same control situation.

（3） Classification, basis for recognition and measurement of financial liability

Except for the financial guarantee contract, commitments to provide a loan at a below‑market interest rate and financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, the group shall initially classify all financial liabilities as it measured at amortized cost or financial liabilities at fair value through profit or loss. For financial liabilities that are measured at fair value, the related transaction costs are directly included in current profit or loss, and those costs of other categories of financial assets are included in their initial recognized amounts.

Financial liabilities subsequent measurement based on the classification

1) Financial liabilities as it subsequently measured at amortized cost

Effective interest method is applied to financial liabilities as subsequently measured at amortized cost

2) Financial liability as it measured at fair value through profit or loss

Financial liability measured at fair value through profit or loss including tradable financial liability (derivative instrument of financial liability included) and designated as financial liability measured at fair value through profit or loss. Tradeable financial liability (including derivate instrument of financial liability) are subsequently measured at fair value. The net gain or loss arising from changes in fair value are recorded in profit or loss for the period in which they are incurred. Financial liability designated as it measured at fair value through profit or loss shall be subsequently measured at fair value, except for changes in fair value caused by changes in the group's own credit risk, which are recognized in other comprehensive income, other changes in fair value are recognized in profit or loss for the current period; The group recognizes all fair value changes (including the amount affected by changes in its own credit risk) in profit or loss if the inclusion of changes in fair value caused by changes in its own credit risk in other comprehensive income would cause or widen the accounting mismatch in profit or loss for the current period.

（4） Financial instrument impairment

Based on expected credit loss, the group shall apply the impairment requirements for the followings: ① a financial asset measured at amortized cost; ② debt investment measured at fair value and changes in fair value is through other comprehensive income; ③ lease receivable; ④ a contractual asset and financial guarantee contract.

Expected credit loss is the weighted average of credit losses with the respective risks of a default occurring as the weights. A credit loss herein is referred to as the present value, at original effective rate, of the difference between the contractual cash flows that are due to the group under the contract; and the cash flows that the Company expects to receive, that's the present value of the total cash shortage. The group shall measure expected credit losses of a financial instrument in a way that reflects: ①an unbiased and probability‑weighted amount that is determined by evaluating a range of possible outcomes; ② the time value of money; and ③reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Expected credit loss of financial instrument is assessed individually and portfolio. The group assesses the expected credit loss based on the portfolio in accordance with the common characteristics of credit risk which involves type of financial instrument, credit risk grade, and age of trade receivables.

When assessing expected credit losses, the group considers all reasonable and supportable information, including that which is forward-looking. In making these judgments and estimates, the group extrapolates the expected changes in the debtor's credit risk based on historical repayment data combined with factors such as economic policies, macroeconomic indicators and industry risks. Different estimates may affect the provision for impairment, and the provision already made may not equal the actual amount of impairment losses in the future.

1) Impairment testing method of receivable and contract asset

For receivable, notes receivable and contract asset etc., which don’t contain significant financing component and arise from sales of products and service provision, the group adopts simplified method to account expected credit loss provision at an amount equal to the whole lifetime expected credit losses.

For lease premium receivable, trade receivable containing significant financing component, and contract asset, the group adopts simplified method to account expected credit loss provision at an amount equal to the whole lifetime expected credit losses.

The group determines the expected credit loss of trade receivable on the basis of portfolios with common characteristics of credit risk, which are considered by expected credit loss measurement reflection, by reference to historical experience of credit loss and by comparison of receivable past due days/ receivable age with default risk rate, unless the single credit loss is separately recognized for contractual payments that is significant in amount and credit impaired. If certain client is significant different from others in terms of credit risk characteristics, or the client’s credit risk has significantly increased, such as experiencing severe finance difficulty, its expected credit loss is obviously higher than it to be at accounting age, the group will make separate credit loss provision for this client’s receivable.

① Portfolio category and recognition basis of receivable ( contract asset)

The group classifies accounts receivable (and contract assets) according to the similarity and relevance of credit risk characteristics based on information such as age, nature of payments, credit risk exposure, historical debt collection, etc. For accounts receivable (and contract assets), the group determines that aging is the primary factor affecting its credit risk and therefore, the group assesses its expected credit losses on the basis of aging portfolios. The group calculates the overdue age based on the payment date agreed in the contract.

No expected credit loss is recognized for receivables from related party within consolidated scope as the group assesses its credit risk is relatively low.

② Portfolio category and recognition basis of notes receivable

2) Impairment testing method of debt investment, other debt investment, loan commitments and financial guarantee contracts

With the exception of financial assets (such as debt investments, other debt investments), loan commitments and financial guarantee contracts for which the simplified measurement method is adopted above, the group adopts the general method (three-stage method) for the provision of expected credit losses. At each balance sheet date, the group assesses whether its credit risk has increased significantly since the initial recognition, and if the credit risk has not increased significantly since the initial recognition, in the first stage, the group measures the loss provision at an amount equivalent to the expected credit loss over the next 12 months and calculates interest income based on the carrying balance and effective interest rate; If the credit risk has increased significantly since the initial recognition but no credit impairment has occurred, in the second stage, the group measures the loss provision at an amount equivalent to the expected credit loss over the entire duration and calculates interest income based on the carrying balance and effective interest rate; If credit impairment occurs after initial recognition, in the third stage, the group measures the loss provision at an amount equivalent to the expected credit loss over the entire duration and calculates interest income at amortized costs and effective interest rates. For financial instruments with only low credit risk at the balance sheet date, the group assumes that their credit risk has not increased significantly since initial recognition

The whole life expected credit loss refers to the expected credit loss caused by all possible default events during the whole expected life of the financial instrument. Expected credit losses over the next 12 months are expected credit losses resulting from defaults on financial instruments that may occur within 12 months after the balance sheet date (or if the expected duration of the financial instrument is less than 12 months) and are part of the overall expected credit losses over the life of the financial instrument.

Criteria of significant increase in credit risk and definition of credit impaired assets are disclosed on Note X.1

（5） Recognition and measurement of transfer of financial assets

A financial asset is derecognized when the financial asset has been transferred together with substantial all risks and rewards to the transferee. A financial asset can not be derecognized when the substantial all risks and rewards to the financial asset has been retained. When the all risks and rewards of the financial asset are neither transferred nor retained, but the group has given up its control of the financial asset, the financial asset shall be derecognized and recognize the asset and liability originated. Where control of the financial asset is not relinquished, the relevant financial asset shall be recognized according to the extent to which it continues to be involved in the transferred financial asset, and the relevant liability shall be recognized accordingly.

In the case where the financial asset as a whole qualifies for the derecognition conditions, the difference between the carrying value of transferred financial asset at the derecognition date and the sum of the consideration received for transfer and the accumulated amount of changes in fair value in respect of the amount of partial derecognition ( financial assets involved in transfer must qualify the following conditions: ① the financial asset is held within a business model whose objective is not only for collecting contractual cash flows but also for sale; ②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest based on the principal amount outstanding) , that was previously recorded under other comprehensive income is transferred into profit or loss for the period.

In the case where only part of the financial asset qualifies for derecognition, the carrying amount of financial asset being transferred is allocated between the portions that to be derecognized and the portion that continued to be recognized according to their relative fair value. The difference between the amount of consideration received for the transfer and the accumulated amount of changes in fair value that was previously recorded in other comprehensive income for the asset partially qualified for derecognition (financial assets involved in transfer must qualify the following conditions: ① the financial asset is held within a business model whose objective is not only for collecting contractual cash flows but also for sale; ; ②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest based on the principal amount outstanding ) and the above-mentioned allocated carrying amount is charged to profit or loss for the period.

Where the assets continue to be involved by providing financial guarantees for the transferred financial assets, the assets that continue to be involved in the same form are recognized at the lower of the carrying value of the financial assets and the amount of the financial guarantees. Financial guarantee amount means the maximum amount of consideration received that will be required to be repaid.

（6） Distinguish between financial liability and equity instrument and accounting

Financial liability and equity instrument shall be distinguished in accordance with the following standards: ① if the group cannot unconditionally avoid paying cash or financial asset to fulfil a contractual obligation, the contractual obligation is qualified or financial liability. For certain financial instrument, although there are no clear terms and conditions to include obligation of paying cash or other financial liability, contractual obligation may indirectly be formed through other terms and conditions. ② the group’s own equity instrument shall also be considered whether it is the substitute of cash, financial asset or it is the remaining equity, after the issuer deducts liability, enjoyed by the equity holder , if it must or can be used to settle a financial asset. If the former, the instrument is a financial liability of the issuer, otherwise it is an equity instrument of the issuer. In certain circumstances, financial instrument contract is classified as financial liability, if financial instrument contract specifies the Company must or can use its own equity to settle the financial instrument, the contractual amount of right or obligation equals to that of the numbers of own equity instrument available or to be paid multiplied by fair value when settling, nevertheless the amount is fixed, or varied partially or fully based on the its own equity’s market price(such as interest rate, certain commodity’s or financial instrument’s price variance).

When classifying a financial instrument (or its component) in the consolidated statements, the group takes all terms and conditions agreed by the its member and instrument holder into consideration. If the group because of the instrument, as a whole, bears settlement obligation by paying cash, other financial asset or other means resulted in financial liability, the instrument shall be classified as financial liability.

（7） Derivative financial instrument

The group uses derivative financial instruments such as foreign exchange forward contracts, commodity forward contracts and interest rate swaps to hedge exchange rate risk, commodity price risk and interest rate risk respectively. Derivative financial instruments are initially measured at their fair value on the date the derivative transaction contract is signed, and are subsequently measured at their fair value. A derivative instrument with a positive fair value is recognized as an asset and a negative fair value is recognized as a liability.

Except hedging accounting, all gain or loss from the FV movement of derivative instrument shall be recognized in the income statement.

（8） Financial asset and financial liability offset

Financial asset and financial liability shall be presented in the balance sheet separately and cannot be offset, unless the following conditions are all met: ①the Company has the legal right to recognized offset amount and the right is enforceable. ② the Company plans to receive or a legal obligation to pay cash at net amount.

11. Inventories

Inventories are raw material, low-valuable consumable, goods on transit, working-in-progress, finished goods, and cost to fulfil the contract etc.

The inventories are processed on perpetual inventory system, and are measured at their actual cost on acquisition. Weighted average cost method is taken for measuring the inventory dispatched or used. Low value consumables and packaging materials is recognized in the income statement by one-off method.

At the balance sheet date, inventory is measured at the lower of cost and net realizable value. If the cost of the inventory is higher than its net realizable value, a provision is made for the decline in the price of the inventory and it is accounted in the current profit or loss. Net realizable value is the amount of the estimated selling price of inventory in daily activities less the estimated costs to be incurred at completion, estimated selling expenses and related taxes.

Impairment provision for the group's raw materials/goods in stock/WIP/ cost to fulfil the contract is made on an individual inventory item, and when determining its net realizable value, the inventory of goods in stock and materials used for sale are determined at the estimated selling price of the inventory less estimated selling expenses and related taxes; Inventory of materials held for use in production is determined at the estimated selling price of the finished goods produced less the estimated costs to be incurred up to completion, estimated selling expenses.

12. Contract asset and contact liability

(1) Contract asset

Contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time. For example, the group sold two goods that can be clearly distinguished to the client, then the group has the right to consideration in exchange of the goods because one of the goods are delivered, but the consideration’s collection is conditioned on the other goods delivery, in this case, the right to consideration shall be recognized as contract asset.

Expected credit loss recognition of contract asset is referred to the Note III、10 Provision for impairment of financial assets.

(2) Contract liability

An entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer. If a customer pays consideration, or the group has a right to an amount of consideration that is unconditional before the group transfers a good or service to the customer, the group shall present the contract as a contract liability when the payment is made or the payment is due (whichever is earlier).

13. Assets relevant to contract cost

(1) Assets recognition methods in relation to contract cost

Assets relevant to contract cost in the group include cost to fulfill the contract and cost to obtain a contract. Cost to fulfill the contract is presented under inventory and other non-current assets. Cost to obtain a contract is presented under other current assets and other non-current assets.

If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard such as inventory , fixed assets or intangible assets , an entity shall recognize an asset from the costs incurred to fulfill a contract only if those costs meet all of the following criteria: the costs relate directly to a contract or to an anticipated contract, including direct labor, direct materials and overheads which is clearly stated to be borne by the client and any other cost in line with the contract; the costs enhance resources of the group that will be used in performance obligations in the future; and the costs are expected to be recovered.

An asset as the incremental costs of obtaining a contract with a customer shall be recognized if the group expects to recover those costs. The group may recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset t is one year or less. The 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 (for example, a sales commission). Other expenses incurred in order to obtain a contract rather than the incremental cost, and expected to be recovered (regardless of whether the contract is obtained such as travelling expenses) shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer.

(2) Amortization of asset relevant to contract cost

An asset recognized in accordance with contract cost shall be amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

(3) Impairment of asset relevant to contract cost

If the carrying value of the group's assets related to the contract cost is higher than the following two differences, the group will make the impairment provision for the excessive part and recognize the asset impairment loss: ① The remaining consideration that the group is expected to obtain due to the transfer of the commodities related to the asset; ② Estimate the costs to be incurred for the transfer of the relevant goods

14. Long-term equity investment

Long term equity investments are the equity investment in subsidiary, in associated company and in joint venture.

(1) Judgement on control, joint control and significant influence

Equity investments in which the group has a significant impact on the investee are investments in associates.

Significant influence refers to having the power to participate in the decision-making of the financial and operational policies of the investee, but not being able to control or jointly control the formulation of these policies with other parties. Significant influence exists when the entity directly or indirectly owned 20% or more but less than 50% voting shares in the investee, unless there is explicit evidence that the company cannot participate in the production and operation decisions of the investee or have control over the investee.

When having less than 20% voting shares, the group’s significant influence still exists if the followings are taken into accounts: representation on the board of directors or equivalent governing body of the investee, participation in financial or operating activities policy-making processes, material transactions between the investor and the investee, interchange of managerial personnel or provision of essential technical information etc.

The group’s joint venture investment is an equity investment whereby the parties have jointly control over it and have rights to the net assets of the investee. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The group’s judgement on joint control is based on the joint arrangement that all participants or combinations of participants collectively control the arrangement and that decisions relating to the activities of the arrangement must be made with the unanimous consent of those participants who collectively control the arrangement.

(2) Accounting

The group initially measures the long-term investment in line with the initial cost for acquiring the investment.

The initial investment cost for long-term equity investment acquired through business combination under common control, is the carrying amount presented in the consolidated financial statements of the share of net assets at the combination date in the acquired company. If the carrying amount of net assets at the combination date in the acquired company is negative, investment shall be recognized at zero.

If long-term equity investment is acquired through business combination not under common control, initial investment cost shall be the combination cost. If the equity investment of investee not under common control is acquired by stages and it’s not a bundled transaction, the carrying amount of the equity investment held previously plus newly increased investment cost are taken as the initial investment cost.

Apart from the long-term equity investments acquired through business combination, the cost of investment for the long-term equity investments acquired by cash payment is the amount of cash paid, relevant direct expense, tax and other necessary expenses for the investment. For long-term equity investment acquired by issuing equity instruments, the cost of investment is the fair value of the equity instrument issued.

The Company adopts cost model for investment in subsidiary on separate financial statement. Under cost model, the long-term equity investment is measured at initial investment cost. When more investment is added, it shall increase the carrying amount of investment by adjusting the fair value of additional investment and relevant transaction expenses. Cash dividend or profit declared by investee shall be recognized as investment gain/loss for the period based on the proportion share in the investee.

The Company adopts equity method for investment in joint venture and affiliate. Under equity method, if the initial investment cost is greater than the share of fair value of the identifiable net assets in the investee, the initial investment cost of long-term equity investment is no need to be adjusted; If the initial investment cost is less than the share of fair value of the identifiable net assets in the investee , the difference shall be recorded into the current profit and loss, and the cost of long-term equity investment shall be adjusted at the same time.

Long-term equity investment subsequently, under equity method, shall be adjusted for it carrying amount according to the share of equity increase or decrease in the investee. The Company shall recognize its share of the investee’s net gain or losses after the investee’s net profit adjustment, based on the fair value of the investee’s individual identifiable assets at the acquisition date, after making appropriate adjustments thereto in conformity with the accounting policies and accounting period, and offsetting the unrealized profit or loss from the inter-group transactions, not constituting the business, between the entity and its associates and joint ventures according to the shareholding attributable to the group (full amount of loss shall be recognized if the inter-group transaction is impairment loss). The group recognizes net losses incurred by investee to the extent that the carrying value of long-term equity investments and other long-term interests substantially constituting net investments in investee are written down to zero, except where the group is obliged to bear additional losses.

The difference between the book value of long-term equity investment and actual acquisition cost shall be recognized in the gain or loss of investment when the long-term equity investment is disposed of.

For long-term investments accounted under equity method, other comprehensive income recorded shall be accounted on the same basis as the investee directly disposing of related assets or liability when equity method is not used any longer. The movements of shareholder’s equity, other than the net profit or loss, other comprehensive income and profit distribution previously recorded in the shareholder’s equity of the Company are recycled to investment income for the period on disposal.

If the remaining equity after the partially disposal is still accounted for under the equity method, the relevant other comprehensive income previously recognized under the equity method, is treated on the same basis as the direct disposal of the relevant assets or liabilities by the investee and is carried forward on a proportional basis, and the owner's equity, which is apart from net profit and loss, other comprehensive income and profit distribution of the investee, shall be recognized and proportionally transfers to current investment income.

Where the entity has no longer joint control or significant influence in the investee company as a result of partially disposal of the investment, the remaining investment will be accounted for in line with the Recognition and Measurement of Financial Instruments Standard -No 22 of Accounting Standards for Business Enterprises(No7 Caikuai [2017]), and the difference between the fair value of remaining investment at the date of losing joint control or significant influence and its carrying amount shall be recognized in the profit or loss for the year.

Where the entity has no longer control over the investee company as a result of partially disposal of the investment, the remaining investment will be changed to be accounted for using equity method providing remaining joint control or significant influence over the investee company. The difference between carrying amount of disposed investment and consideration received actually shall be recognized as investment gain or loss for the period, and investment shall be adjusted accordingly as if it was accounted for under equity model since acquisition. Where the entity has on longer joint control or significant influence in the investee as a result of disposal, the investment shall be accounted for in accordance with the Recognition and Measurement of Financial Instruments Standard -No 22 of Accounting Standards for Business Enterprises(No7 Caikuai [2017]), and difference between the carrying amount and disposal consideration shall be recognized as investment gain or loss for the period, and the difference between the fair value of remaining investment at the date of losing control and its carrying amount shall be recognized in the profit or loss for the year.

15. Investment property

Investment property is held to earn rentals or for capital appreciation or both and includes property, building and use right of land. They are measured at cost model.

Investment property is depreciated or amortized on straight line basis and its expected useful life, net residual value rate and annual depreciation rate is as follows:

16. Fixed assets

Recognition criteria of fixed assets: defined as the tangible assets which are held for the purpose of producing goods, rendering services, leasing or for operation & management, and have more than one year of useful life.

Fixed assets shall be recognized when the economic benefit probably flows into the group and its cost can be measured reliably. Fixed assets include: building, machinery, transportation equipment, electronic equipment and others.

All fixed assets shall be depreciated unless the fixed assets had been fully depreciated and are still being used and land is separately measured. Straight-line depreciation method is adopted by the group. Estimated net residual value rate, useful life, depreciation rate as follows:

The group should review the estimated useful life, estimated net residual value and depreciation method at the end of each year. If any change has occurred, it shall be regarded as a change in the accounting estimates.

17. Construction in progress

The cost of construction in progress is determined according to the actual construction expenditure, including the necessary construction expenditure incurred during the construction period, the capitalized borrowing cost and other related expenses before the construction reaches the condition expected for use.

Constructions in progress are transferred to fixed assets based on the construction budget and actual costs on the date when completing and achieving estimated usable status, and the fixed assets should be depreciated in the next month. Adjustment will be made upon confirmation of their actual values after implementing the completion and settlement procedures.

The construction in progress shall be transferred to fixed assets when it reaches the expected usable state, and the criteria are as follows:

18. Intangible asset

The group’s intangible assets include use right of land, patents, non-patented technologies and others. They are measured at actual cost at acquisition day. For acquired assets, the actual cost is measured at actual price paid and relevant other expenses. Invested intangible asset shall be measured at actual cost as contracted or agreed value, however fair value will be taken if the contracted or agreed value is not fair.

(1) Useful life and the basis for recognition, estimation, amortization method or review procedure

Use right of land shall be amortized evenly within the amortization period since the remised date. Patents, technologies and other intangible assets are amortized over the shortest of their estimated useful life, contractual beneficial period and useful life specified in the law. Amortization charge is included in the cost of assets or expenses, as appropriate, for the period according to the usage of the assets. At the end of the year, for definite life of intangible assets, their estimated useful life and amortization method shall be assessed. Any change shall be treated as change on accounting estimate.

(2) The scope and accounting of research and development

The group separates the expenditure on internal research and development projects into research phase expenditure and development phase expenditure. At research phase, expenditure are expenses directly relevant to research activity, including R&D employee’s salary, materials, depreciation, technology cooperation cost and assessment testing fees. At development phase, expenses can be capitalized only when meeting the following conditions: (a)the technical feasibility of completing the intangible asset so that it will be available for use or sale.

(b)its intention to complete the intangible asset and use or sell it.

(c)how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.

(d)the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

(e)its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Any expenditure not qualifying for the above conditions shall be accounted into profit and loss account.

The projects expenditure will go to the development stage and start to be capitalized after meeting the above conditions, and passing the technical feasibility and economic feasibility studies, and being approved after evaluation.

19. Impairment of long-term assets

The group assesses whether there is any indication that long-term equity investment, investment property under cost model, fixed assets, construction in progress, right-of-use asset and intangible assets with definite useful life may be impaired. If there is any indication that an asset may be impaired, the asset will be tested for impairment. Goodwill and intangible asset with infinite useful life and development cost not reaching available for use status, are tested for impairment annually no matter there is any indication of impairment or not.

(1) Non-current asset impairment excluding financial asset (expect goodwill)

When testing the impairment, the group recognized the recoverable amount of an asset, which the higher of its fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. After impairment test, any difference of carrying amount over its recoverable amount shall be recognized as impairment loss.

The group estimates recoverable amount based on an individual asset. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is determined on the basis of the asset groups or asset portfolio to which the asset belongs. Asset portfolio is determined based on whether the major cash inflow generated by the asset group is independent from the cash inflow of other assets or the asset portfolio.

Net amount which FV less disposal cost is reference to the agreed sale price or observable market price for similar asset within the arm length transaction. When estimating the present value of future cash flows, management must estimate the expected future cash flows of the asset or group of assets and select an appropriate discount rate to determine the present value of future cash flows.

(2) Goodwill impairment

The group allocates the carrying value of the goodwill generated from the business combination to the relevant asset group or to the relevant asset group combination which is difficult to allocate to the relevant asset group，in a reasonable way from the date of purchase. When conducting impairment tests on goodwill contained within the related asset group or asset group combination, if there are signs of impairment in the asset group or asset group combination related to goodwill, the impairment test shall firstly be conducted on the asset group or asset group combination excluding goodwill, and the recoverable amount shall be calculated and compared with the relevant carrying value so to recognize the corresponding impairment loss; Then, an impairment test is conducted on the asset group or asset group combination containing goodwill to compare the carrying value with the recoverable amount. If the recoverable amount is lower than the carrying value, the impairment loss amount is first offset against the carrying value of goodwill allocated to the asset group or asset group combination, and then offset the carrying value of the asset group and asset group combination based on the proportion of the carrying value of other assets in the asset group or asset group combination without goodwill.

The methodology, parameters and assumptions of the goodwill impairment test are referred in Notes VI.19.

Once the impairment loss on the assets is recognized, it can not be reversed in a subsequent period.

20. Long-term prepaid expense

The group's long-term prepaid expense refers to landscape fees, renovation &decoration expenses and other expenses paid and should be allocated over 1year.It will be amortized evenly within its beneficial period. The remaining unamortized expense should be charged into income statement if long-term prepaid expense can not bring the beneficial inflows. Landscape fees will be amortized for 10 years and renovation& decoration fees will be amortized for 5-10 years.

21. Employee benefits

Employee’s benefit comprises short-term benefit, post-employment benefit, termination benefit and other long-term employee’s benefit.

Short-term benefit includes salary, bonus, allowance, welfare, social insurance, housing funds, labor union expense, staff training expense, during the period in which the service rendered by the employees, the actually incurred short term employee benefits shall be recognized as liability and shall be recognized in P&L or related cost of assets based on benefit objective allocated from the service rendered by employees.

Post-employment benefits include the basic pension scheme and unemployment insurance etc. Based on the risk and obligation borne by the Company, post-employment benefits are classified into defined contribution plan and defined benefit plan. For defined contribution plan, liability shall be recognized based on the contributed amount made by the Company to separate entity at the balance sheet date in exchange of employee service for the period and it shall be recorded into current profit and loss account or relevant cost of assets in accordance with beneficial objective.

Other long-term employee’s benefit refers to all other employee benefits other than short-term benefit, post-employment benefit and termination benefit.

22. Provision

When the Company has transactions such as commitment to externals, discounting the trade acceptance note, unsettled litigation or arbitration which meets the following criterion, provision should be recognized: It is the Company's present obligation; carrying out the obligation will probably cause the Company's economic benefit outflow; the obligation can be reliably measured.

Provision is originally measured on the best estimate of outflow for paying off the present obligations. When determining the best estimate, need to consider the risk, uncertainty, time value of monetary relevant to contingent items. The group needs to review the present best estimate and accordingly adjust the carrying value of the provision account.

23. Revenue recognition and measurement

The group recognizes revenue when it has fulfilled its contractual performance obligations, i.e. when the customer has obtained control of the relevant goods or services. Control right of goods or services refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

If the contract between the group and the customer meets the following five conditions at the same time, the group has fulfilled the performance obligation when the customer obtains the control of the relevant goods or services, and the revenue is recognized:

1) the parties to the contract have approved the contract and promised to fulfill their own obligations;

2) the contract specifies the rights and obligations of parties related to the transferred

commodities;

3) the contract has explicit payment terms related to the transferred goods;

4) the contract has commercial substance, where the performance of the contract will change the company's future cash flow risk, time distribution or amount;

5) the consideration to which the company is entitled as a result of the transfer of goods to the customer is likely to be recovered.

When the group transfers control of a good or service over time, it satisfies a performance obligation and recognizes revenue over time only if one of the following criteria is met, otherwise it shall be the performance obligation at a point in time.

1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs

2) the group’s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced

3) the group’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date

(1) Revenue policy from sales

The group’s revenue mainly includes income from sale of goods and installation of the whole set of refrigeration engineering project.

Based on the actual situation, the group recognizes the revenue as the followings；

1) Domestic sales: the sales contract with customers generally includes the performance of obligation of transferring goods. The group recognizes the revenue at the time when the arrival acceptance is completed by customers, having taken all followings into consideration: present debt collection right entitled to the sales of goods, the transfer of the main risks and rewards in the ownership of the goods, the transfer of the legal ownership entitled to the goods, the transfer of physical assets, the acceptance of goods by customers.

2) Export sales: the group will recognize the sales revenue after completing the customs declaration and export procedures.

Revenue from installation of the whole set of refrigeration engineering project. In the refrigeration installation contract between the group and the customer, since the equipment sales and installation services cannot be distinguished separately, the entire project contract is regarded as a single performance obligation, and the revenue of the single performance obligation is recognized at the completion of the customer acceptance. when a performance obligation over time is satisfied, revenue shall be recognized within the contract term according to the performance progress, which is determined by the percentage of the cumulative actual cost to expected total contract cost. When the performance progress can not be estimated reasonably, the group recognizes the revenue to the extent where the already incurred cost can be compensated until the performance progress can be decided.

(2) Determining and allocating the transaction price

If the contract includes two or more performance obligations, at the inception date of contract, the group shall allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price ratio basis and measure the revenue at the allocated transaction price to each performance. If any solid evidence indicates that contract discount is only relevant to one or some (not all) performance obligations, the discount shall be allocated into the one or these performance obligations.

An amount of consideration can vary because of cash discounts, price guarantee. The group determines the best estimate of the variable consideration in line with the expectation or the amount that most probably incurred, but includes, in the transaction price, the variable consideration not exceeding the amount that is highly unlikely to result in a material reversal of cumulative revenue recognized when the relevant uncertainty is eliminated.

The group accounts for consideration payable to a customer as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service. Accordingly, the revenue shall be recognized at the later of the revenue recognition and the consideration paid to a customer.

For sales with a right of return, the group recognizes the revenue for the consideration expected to have the right to receive arising from transferring the goods to customers when the customer receives the control right over the relevant goods, and recognizes the expected refund amount as provision. At the same time, receivable of return cost, as an asset, shall be recognized for the carrying value of the returned goods when it is expected to be transferred less expected cost for getting it back (including decline in value) and net amount of the above asset cost shall be carried over to the cost. At every balance sheet date, the group will reassess the future sales returns and remeasure the above assets and liabilities.

Where a significant financing component exists in the contract, the transaction price shall be measured at the assumed price that the payment is made by cash when the client receives the control right of goods or services. The difference between the promised consideration and the determined transaction price shall be amortized within the contract period using effective interest rate, and it is the discounting rate at which the dominated price of the contract consideration is discounted to the cash price.

According to the agreement or the regulation etc., the group provide warranty for the goods sold and it is the quality assurance for promising the goods are in commodity with the agreed standards and shall be accounted for as Note III、22 provision.

24. Government grants

Government grant shall be recognized only when all attached conditions are met and the grant is possibly received. Where a government grant is in the form of a transfer of monetary asset, it is measured at the amount received. Where a government grant is made on the basis of fixed amount or conclusive evidence indicates relevant conditions for financial support are met and expect to probably receive the fund, it is measured at the amount receivable. Where a government grant is in the form of a transfer of non-monetary asset, it is measured at fair value. If fair value cannot be determined reliably, it is measured at a nominal amount of RMB1 Yuan.

Assets-related government grant is the government fund obtained by the group for the purpose of long-term assets purchase and construction or establishment in the other forms. Income-related grants are the grant given by the government apart from the assets-related grants. If no grant objective indicated clearly in the government documents, the group shall judge it according to the principle mentioned above. If the grant is difficult to be separated, it shall be considered as income-related grant as a whole.

Assets-related government grants are recognized as deferred income, which shall be evenly amortized to profit or loss over the useful life of the related asset. Any assets are sold, transferred, disposed of or impaired earlier than their useful life expired date, the remaining balance of deferred income which hasn’t been allocated shall be carried forward to the income statement when the assets are disposed of.

Income-related government grants that is a compensation for related expenses or losses to be incurred in subsequent periods are recognized as deferred income and credited to the relevant period when the related expenses are incurred. Government grants relating to compensation for related expenses or losses already incurred are charged directly to the profit or loss for the period. Government grants related to daily business, shall be recognized as other income in accordance with business nature or offsetting related expenses, otherwise, shall be recognized as non-operating income or expenses.

25. Deferred tax assets and deferred tax liabilities

The deferred income tax assets or the deferred income tax liabilities should be recognized according to the differences (temporary difference) between the carrying amount of the assets or liabilities and its tax base and the difference between the carrying amount of tax base item and its tax base.

Deferred tax liability shall be recognized for all taxable temporary difference apart from the followings : (1) temporary differences arise from the initial recognition of goodwill or the initial recognition of assets or liabilities arising from non-business combinations that do not affect accounting profits or taxable income (or deductible losses); (2) The group is able to control the timing of the reversal of taxable temporary differences related to investments in subsidiaries, associates, and joint ventures, and such temporary differences are likely not to be reversed in the foreseeable future.

The group recognizes deferred income tax assets for deductible temporary differences, deductible losses, and tax deductions that are likely to be obtained to offset future taxable income, except for the following situations: (1) the initial recognition of assets or liabilities arising from non-business combination transactions where temporary differences do not affect accounting profits or taxable income (or deductible losses); (2) Deductible temporary differences related to investments in subsidiaries, associates, and joint ventures that cannot simultaneously meet the following conditions: temporary differences are likely to be reversed in the foreseeable future, and taxable income is likely to be obtained in the future to offset deductible temporary differences.

The group recognizes deferred income tax assets for all unused deductible losses to the extent that there is likely to be sufficient taxable income to offset the deductible losses. The management uses plenty of judgment to estimate the timing and amount of future taxable income, combined with tax planning strategies, to determine the amount of deferred income tax assets, which results in uncertainty.

On the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the applicable tax rate during the expected period of asset recovery or liability settlement.

When the following conditions are met simultaneously, the group shall present the deferred income tax assets and deferred income tax liabilities at the net amount after offsetting: The group has the legal right to settle the current income tax assets and deferred income tax liabilities at the net amount; Deferred income tax assets and deferred income tax liabilities are related to the income tax levied by the same tax collection and management authority on the same taxpayer or on different taxpayers. However, in the future, within the term when each significant deferred income tax asset and deferred income tax liability to be reversed, the involved taxpayers intend to settle the current income tax assets and liabilities on a net basis or acquire assets and settle debts simultaneously.

26. Lease

(1) Lease identification

Lease: A contract, or part of a contract, that conveys the right to use an asset (the underlying

asset) for a period of time in exchange for consideration.

At inception of a contract, the group shall assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an or many identified assets for a period of time in exchange for consideration.

For a contract that is, or contains several leases, the group shall separate the contract and account each lease separately. The group shall account for each lease component separately from non-lease components of the contract if the contract contains lease and non-lease components. Each leasing part is accounted for according to the leasing standards, while the non-leasing part is accounted for according to other applicable accounting standards. If the contract includes both leasing and non-leasing parts, the group, as the lessor, will split the leasing and non-leasing parts and conduct accounting treatment separately. Each leasing part will be accounted for according to the leasing standards, while the non-leasing part will be accounted for according to other applicable accounting standards. As the lessee, the group chooses not to separate the lease and non-lease, and joins each leased part and its non- leased parts separately into a lease, accounting treatment shall be carried out in accordance with leasing standards; However, if the contract includes embedded derivative instruments that should be split, the group will not merge them with the leasing portion for accounting treatment.

(2) As a leasee

1) Recognition

At the commencement date, the group as a lessee shall recognize a right-of-use asset and a lease obligation except short-term lease and low value asset lease.

Right-of-use assets represents a lessee’s right to use an underlying asset for the lease term, and is initially measured at cost.

The cost of the right-of-use asset shall comprise:

① the amount of the initial measurement of the lease liability,

② any lease payments made at or before the commencement date, less any lease incentives received, which is the incremental cost for the lease

③ any initial direct costs incurred by the lessee which is the incremental cost

④ an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Where the group remeasures the lease liability in accordance with the relevant provisions of the leasing standard, the carrying value of right-of-use asset is adjusted

accordingly.

The group shall follow the following principles when determining the depreciation life of the right-of-use asset: if the ownership of the leased asset can be reasonably determined at the end of the lease term, depreciation shall be calculated and deducted during the remaining service life of the leased asset; Where it is not certain that the ownership of the leased asset can be acquired at the end of the lease term, depreciation shall be calculated at the shorter of the lease term and the remaining service life of the leased asset. The depreciation amount shall be accounted into cost of assets or profit and loss account.

At the commencement date, a lessee shall measure the lease liability at the present value of the lease payments that are not paid at that date.

The lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date: ① fixed payments (including in-substance fixed payments) less any lease incentives receivable; ② variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;③ the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; ④ payments of penalties for terminating the lease, if the lessee will certainly exercise an option to terminate the lease during the lease term; ⑤ amounts expected to be payable by the lessee under residual value guarantees.

When calculating the present value of the lease payments, interest rate implicit in the lease shall be used. If the rate cannot be readily determined, the group shall use the lessee’s incremental borrowing rate. Interest on the lease liability in each period during the lease term shall be calculated based on a constant periodic rate of interest, and be recognized as in profit or loss unless its capitalization.

After the lease commencement date, the group increases the carrying amount of lease liability when recognizing the interest on lease liability and; decreases the carrying amount of lease liability when making lease payment. The group remeasures the lease liability in accordance with the present value of revised lease payment, when the followings incur: ① change of in-substance fixed payments (subject to original discounting rate) ② change of amounts expected to be payable under residual value guarantees(subject to original discounting rate) ③ change of an index or a rate used for future lease payments(subject to revised discounting rate) ④ change in assessment of a buy option(subject to revised discounting rate) ⑤ change in assessment of a renew option or termination option or actual situation(subject to revised discounting rate).

2) Short-term lease and low value asset lease

The group has chosen not to recognize the right-of-use asset and lease liability for short-term lease (lease term less than 12 months) and low value asset (30,000 Yuan) when it is single leased new asset. In this case, lease payment will be accounted directly in profit or loss or on the straight-line basis in profit or loss.

3) Sales and lease back

The group, as a seller and a lease within the sales and lease back transaction, assesses whether the transfer of the asset is a sale. If the transfer of assets is not a sale, the group shall continue to recognize the transferred assets and at the same time recognize a financial liability equal to the transfer income (Note VI. 34 lease). If the transfer of assets is a sale, the group shall measure the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the group. Accordingly, the group shall recognize only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor.

(3) As a lessor

The group, as a lessor, classified it as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset unless an operating lease.

1) Financing lease

At the commencement date, the group shall recognize the lease payment receivable and derecognize of finance lease asset. When initially measuring the lease payment receivable, net lease investment value shall be used for the lease payment receivable.

Net lease investment value equals to the any residual value guarantees plus the PV of undue lease receivable discounted at the interest rate implicit in the lease. The group shall recognize interest income over the lease term based on a constant periodic rate. The variable lease payment obtained by the group related to operating leases, which are not included in the net lease investment, shall be accounted for in the current profit and loss when actually incurred

2) Operating lease

Lease payment received shall be recognized as lease income on a straight-line basis within the period.

The initial direct expenses incurred by the group in relation to operating leases are capitalized to the cost of leasing the underlying asset and are recognized in profit or loss by instalments over the lease period on the same basis as rental income. Variable lease payments made by the group in relation to operating leases that are not included in lease collections are recognized in profit or loss for the period when they are actually incurred.

The group shall account for a modification to an operating lease as a new lease from the effective date of the modification, considering any received in advance or lease payments receivable relating to the original lease as part of the lease payments receivable for the new lease

27. Fair value measurement

The group measures investment property, derivative financial instruments and equity instruments at fair value at each balance sheet date. Fair value refers to the price that market participants can receive by selling an asset or can pay for transferring a liability in an orderly transaction that takes place on the measurement date.

Assets and liabilities measured or disclosed at fair value in the financial statements are determined to belong to the different fair value level based on the lowest level of input values that are significant to the fair value measurement as a whole: level 1 input is the unadjusted quoted price for identical asset or liability available at the active market on the measurement date; level 2 input is the directly or indirectly observable input for relevant asset or liability apart from level 1 input; level 3 input is the unobservable input for relevant asset or liability.

(For levels 1 and 2) For financial instruments traded in an active market, the group determines their fair value by their active market quotes; For financial instruments that are not traded in an active market, the group uses valuation techniques to determine their fair value, and the valuation model used is mainly the discounted cash flow model. The input of valuation techniques mainly includes: risk-free interest rate of debt, credit premium and liquidity premium; estimator coefficient. and liquidity discount of equity.

(For level 3) The fair value of level 3 is determined on the basis of the group's valuation models, such as the discounted cash flow model. The group also considers the initial transaction price, recent transactions of the same or similar financial instruments, or full third-party transactions of comparable financial instruments. As at 31 December 2023, level 3 financial assets measured at fair value are valued by using significant unobserved inputs such as discount rates, but their fair value is not materially sensitive to reasonable changes in these significant unobserved inputs.

The group uses the market approach to determine the fair value of unlisted equity investments. This requires the group to determine comparable listed companies, select market coefficient, estimate liquidity discounts, etc., and is therefore subject to uncertainty.

28. Significant changes in accounting policies and estimates

(1) On December 5, 2025, the Ministry of Finance issued the "Interpretation No. 19 of the Enterprise Accounting Standards" (Finance and Accounting [2025] No. 32) to regulate non same control

The recognition and measurement of compensatory assets in business combinations, the treatment of capital reserves when disposing of subsidiaries acquired through business combinations under the same control, the termination of recognition of financial liabilities settled through electronic payment systems, the refinement of cash flow characteristics (SPPI) evaluation of financial asset contracts, and the classification disclosure of fair value changes in FVOCI equity instrument investments will be implemented from January 1, 2026.

(2) On June 4, 2026, the Ministry of Finance issued the "Interpretation of Enterprise Accounting Standards No. 20" (Finance and Accounting [2026] No. 7), which further refines the evaluation of cash flow characteristics of financial asset contracts (non recourse financial assets and contract linked instruments), and the foreign currency conversion and disclosure when the currency lacks convertibility. It will be implemented from the date of issuance.

After evaluation, the Group is currently not involved in the relevant matters stipulated in this interpretation, and all provisions of Interpretation No. 19 and No. 20 have no impact on the Group's financial statements.

VI. Taxation

1. The main applicable tax and rate to the Group as follows:

Notes for tax entities with different EIT rate

1. The main applicable tax and rate to the Group as follows: Tax Tax base Tax rate Value-added tax (VAT) Sales revenue or Purchase 5%、6%、9%、13% City construction tax Value-added tax payables 7% Education surcharge Value-added tax payables 3% Local education surcharge Value-added tax payables 2% Enterprise income tax(EIT) Current period taxable profit 15% or 25% Real estate tax 70% of cost of own property or revenue from leasing property 1.2% or 12% Land use tax Land using right area Fixed amount per square meter Other tax According to the relevant provisions of the state and local Notes for tax entities with different EIT rate Tax entities EIT rate Bingshan Refrigeration & Heat Transfer Technologies Co. ,Ltd 15% Dalian Bingshan Group Engineering Co., Ltd. 25% Dalian Bingshan Air-conditioning Equipment Co., Ltd. 15% Dalian Bingshan Guardian Automation Co., Ltd. 15% Dalian Bingshan-RYOSETSU Quick Freezing Equipment Co., Ltd. 25%

2. Tax preference

The Company obtained the qualification of high and new technology enterprises on December, 2023 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State

Tax Bureau and Local tax Bureau. The Certificate No. is GR202321201041, and the validity duration is three years. According to the tax law, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

The Company’s subsidiary, Dalian Bingshan Air-conditioning Equipment Co., Ltd. obtained the qualification of high and new technology enterprises on December, 2023 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau. The Certificate No. is GR202321201161, and the validity duration is three years. According to the tax law, Bingshan Air-conditioning can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

The Company’s subsidiary, Dalian Bingshan Guardian Automation Co., Ltd. obtained the qualification of high and new technology enterprises on December, 2024 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau. The Certificate No. is GR202421200978, and the validity duration is three years. According to the tax law, Bingshan Guardian can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

The Company’s subsidiary, Wuhan New World Refrigeration Industrial Co., Ltd obtained the qualification of high and new technology enterprises on November, 2024 approved by Hubei Science Technology Bureau, Hubei Finance Bureau, Hubei State Tax Bureau and Hubei Local tax Bureau. The Certificate No. is GR202442000336, and the validity duration is three years. According to the tax law, Wuhan New World Refrigeration can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

The Company’s subsidiary, Sonyo Compressor(Dalian)Co., Ltd.(hereinafter referred to as“ Sonyo Compressor” obtained the qualification of high and new technology enterprises on December, 2024 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau. The Certificate No. is GR202421200617, and the validity duration is three years. According to the tax law, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

The Company’s subsidiary, Sonyo Refrigeration System (Dalian) Co., Ltd.(hereinafter referred to as“ Sonyo Refrigeration System” obtained the qualification of high and new technology enterprises on December, 2023 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau. The Certificate No. is GR202321201152, and the validity duration is three years. According to the tax law, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

The Company’s subsidiary, Sonyo Refrigeration (Dalian) Co., Ltd.(hereinafter referred to as“ Sonyo Refrigeration System” obtained the qualification of high and new technology enterprises on December, 2024 approved by Dalian Science Technology Bureau, Dalian Finance Bureau, Dalian State Tax Bureau and Local tax Bureau. The Certificate No. is GR202421200850, and the validity duration is three years. According to the tax law, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% in three years.

VII. Notes to Consolidated Financial Statements

The financial statement data disclosed below, unless otherwise specified, "beginning" refers to January 1, 2026, "end of period" refers to June 30, 2026, "current period" refers to the period from January 1 to June 30, 2026, and "previous period" refers to the period from January 1 to June 30, 2025, with the currency unit being RMB yuan.

1. Cash and cash in bank

Note1: within the bank deposits, 110,685,722.16 Yuan was time deposits and interest income; frozen fund of 10,578,125.84 Yuan, and guarantee deposit for migrant worker of 219,297.00Yuan.

Note2: Other monetary funds are bank acceptance deposit 8,410,882.68Yuan, deposit for letter of guarantee is 19,328,431.64 Yuan.

1. Cash and cash in bank Item Closing Balance Opening Balance Cash on hand 9,678.51 11,965.04 Cash in bank 593,956,472.54 825,008,807.79 Other cash and cash equivalents 27,739,314.32 56,940,349.45 Total 621,705,465.37 881,961,122.28 Note1: within the bank deposits, 110,685,722.16 Yuan was time deposits and interest income; frozen fund of 10,578,125.84 Yuan, and guarantee deposit for migrant worker of 219,297.00Yuan. Note2: Other monetary funds are bank acceptance deposit 8,410,882.68Yuan, deposit for letter of guarantee is 19,328,431.64 Yuan.

2. Notes receivable

(1) Category of notes receivable

Provision for bad debts by combination:

Instructions for determining the basis for this combination:

If the bad debt provision for bills receivable is accrued according to the general model of expected credit loss, please refer to the disclosure method of other receivables to disclose the relevant information of bad debt provision:

Applicable Not applicable

(2) Provision for bad debts for the current period:

Provision for bad debts in the current period:

Among them, the amount of bad debt provision recovered or reversed in the current period is important:

Applicable Not applicable

(3)Notes receivable pledged by the company at the end of the period

(4) Notes receivable endorsed or discounted but not mature at the end of year:

3. Accounts receivable

(1) Category of accounts receivable

(Continued)

Instructions for determining the basis for this combination: If the bad debt provision for accounts receivable is accrued according to the general model of expected credit loss, please refer to the disclosure method of other receivables to disclose the relevant information of bad debt provision:

Applicable Not applicable

Disclosure by age

2) Bad debt provision accrued and written-off (withdraw)

Provision for bad debts in the current period:

3) Accounts receivable written off in current period

4. Contract asset

(1) contract asset

(continued)

(2) Category of contract asset based on bad debt provision method

(continued)

1) Bad debt provisions on individual basis

2) Bad debt provisions on group basis

(3) Bad debt provision of current period

5. Receivables financing

(2) Category of accounts receivable based on bad debt provision method

(Continued)

(3) Pledged notes receivable up to the end of year.

6. Other receivables

(1) Dividends receivable

1) Classification of Dividends Receivable

(2). Other receivables

1) Other receivables categorized by nature

2) Provision for bad debts

Changes in book balances with significant changes in loss provisions in the current period

Applicable Not applicable

Disclosure by age

3) Provisions for bad debts accrued, recovered or reversed in the current period

Provision for bad debts in the current period:

4) Other receivables from the top 5 debtors

7. Prepayments

(1) Aging of prepayments

(2) Prepayments from the top 5 debtors based on closing balance

The sum of top 5 of prepayment is 52,008,117.20 Yuan, represents 29.75% of closing balance of prepayment.

8. Inventories

(1) Categories of inventories

(Continued)

(2) Provision for decline in the value of inventories

Accrual for provision for decline in the value of inventories

9. Non-current assets due within one year

10. Other current assets

10. Other current assets Item Closing Balance Opening Balance Input VAT to be deducted 22,468,593.17 29,743,674.42 Prepaid VAT 806,676.67 3,213,956.72 The amount of income tax prepaid 970,258.02 1,898,839.02 Contract acquisition cost 1,245,928.91 28,301.88 Prepaid expenses 428,883.13 14,604.88 Total 25,920,339.90 34,899,376.92

11. Long term receivable

(1) Details

(2) Category of long-term receivable based on bad debt provision method

1) The bad debt provision based on group of long-term receivables

2) The bad debt provision under expected credit loss model

(3) Bad debt provision of long-term receivable for the year

12.Long-term equity investments

13.Other non-current financial assets

13.Other non-current financial assets Item Closing Balance Opening Balance Financial assets classified as FVTPL 1,683,852.59 1,683,852.59 Including: equity instruments 1,683,852.59 1,683,852.59 Total 1,683,852.59 1,683,852.59

14. Investment property

(1) Investment property measured as cost model

(3) Investment property without ownership certificate

There are no investment properties with incomplete property ownership certificates this year.

15. Fixed assets

(1) Fixed assets detail

16. Construction-in-progress

(1) Construction-in-progress details

(2) Change in the significant construction in progress

(Continued)

17. Right-of-use assets

18. Intangible assets

19. Goodwill

(1) Original cost of goodwill

(2) Goodwill impairment provision

In the year 2015, the book value of equity investment of Dalian Universe Thermal Technology Co., Ltd exceeds the fair value of the proportion of the acquired company’s identifiable net asset. The difference between the book value of equity investment of 48, 287,589.78 Yuan and the identifiable net asset’s fair value of Dalian Sanyo High-efficient Refrigeration System Co., Ltd of 46,847,241.86 Yuan on the acquisition date of July 31^st ,2015 is recognized as goodwill of 1,440,347.92 Yuan on The Company consolidated financial report at the end of the year.

In the year 2016, Dalian Bingshan Group Engineering Co., Ltd purchases shares of Dalian Bingshan Baoan Leisure Industry Co., Ltd and gains control. The transferred price is based on the net asset of Dalian BingshanBaoan Leisure Industry Co., Ltd on June 30^th, 2016. Negotiated with Dalian Bingshan Baoan Leisure Industry Co., Ltd’s shareholder Baoan Water Project (China) Limited Company, the transfer price is the combination cost on the purchasing date which is 5,359,548.42 Yuan, the fair value of proportion of Dalian BingshanBaoan Leisure Industry Company’s identifiable net asset is 5,049,096.85 Yuan on the purchasing day, therefore, goodwill is 310,451.57Yuan on the purchasing date. Dalian Bingshan Group Engineering Co., Ltd absorbed Dalian Bingshan Baoan Leisure Industry Co., Ltd in 2019.

In 2022, the Company purchased 60% of the shareholdings of Sonyo Compressor (Dalian)Co., Ltd from Sanyo Electric (China)Co., Ltd, and negotiated with Sanyo Electric (China)Co., Ltd to determine the share transfer consideration of 929,148,000.00 Yuan. After the transaction, Sonyo Compressor (Dalian)Co., Ltd became a subsidiary. This transaction is a business combination not under same control, cost of combination is the FV of previous shareholdings on acquisition date plus 60% shareholdings acquisition consideration, which is 1,548,580,000Yuan in total. Goodwill of 240,922,872.80 Yuan is recognized for the difference between the share of FV of net identifiable asset of acquiree, 1,307,657,127.20Yuan and cost of combination on acquisition date.

In 2022, the Company purchased 30% of the shareholdings of Sonyo Refrigeration System (Dalian) mathrm C o.. , Ltd. from Panasonic Corporation of china mathrm C o.. LTD and 25% shareholdings of Sonyo Refrigeration System (Dalian) Co., Ltd from Panasonic Appliances cold Chain (Dalian)Co.Ltd. The negotiated share transfer consideration of 81,735,060.00 Yuan. After the transaction, Sonyo Compressor (Dalian)Co., Ltd became a subsidiary. This transaction is a business combination not under same control, cost of combination is the FV of previous shareholdings on acquisition date plus 55% shareholdings acquisition consideration, which is 111,456,900.00Yuan in total. Goodwill of 5,671,836.12 Yuan is recognized for the difference between the share of FV of net identifiable asset of acquire, 105,785,063.87Yuan and cost of combination on acquisition date.

In 2023, the Company purchased 40% of the shareholdings of Sonyo Refrigeration (Dalian) Co., Ltd. from Panasonic Corporation of China Co., LTD and 60% shareholdings of Sonyo Refrigeration (Dalian) Co., Ltd from Sanyo Electric (China)Co., Ltd. This transaction is a business combination not under same control, cost of combination is the consideration of 145,285,500.00 Yuan for share transfer. Goodwill of 38,056,663.52Yuan is recognized for the difference between the share of FV of net identifiable asset of acquire. 107,228,836.48Yuan and cost of combination on acquisition date.

The book value of goodwill from business combination shall be allocated into the relevant asset group using the reasonable method since acquisition date, and be tested for impairment on related asset groups containing goodwill by professional appraisal companies or use evaluation models to predict the recoverable amount of related asset groups containing goodwill in accordance with the present value of future cash flows including gross profit rate, sales growth rate (2.81%-7.05%), discount rate(10.51%-12.64%) and other parameters in the next 5 years. No goodwill impairment has been found when the recoverable amount of asset group for testing is higher than its book value.

20. Long-term unamortized expense

20. Long-term unamortized expense Item Opening Balance Increase Amortization Other Decrease Closing balance Greenland of new factory 1,263,830.02 446,057.76 817,772.26 Employee’s dormitory use right 1,181,300.40 69,239.16 1,112,061.24 Membership fee for golf 341,000.00 8,250.00 332,750.00 Renovation and rebuilding 1,306,463.02 678,899.08 236,639.94 1,748,722.16 Amortization of instruments 46,194.67 17,286.25 28,908.42 Software maintenance fee 254,951.67 58,684.68 196,266.99 Technology entrance fee of cold and heat machinery 1,642,531.70 59,699.50 197,258.40 1,504,972.80

21. Deferred tax assets and deferred tax liabilities

(1) Deferred tax assets without offsetting

(2) Deferred tax liabilities without offsetting

(3) Net deferred tax asset or liability (4) Unrecognized deferred tax assets details

(5) Unrecognized deductible loss of deferred tax assets expired years

22. Other non-current asset

23. Assets with restricted ownership or use rights

(continued)

24. Short-term borrowing

(1) Category of short-term borrowing

25. Notes payable

26. Accounts payable

27. Other accounts payable

27.1 Dividend payable

27.2 Other accounts payable

(1) Other payables categorized by payments nature

28. Contract liability

(1) Contract liability

29. Employee’s payable

(1) Category of employee’s payable

(2) Short-term employee’s payables

(3) Defined contribution plan

30. Tax payable

31. Non-current liabilities due within one year

32. Other current liabilities

31. Non-current liabilities due within one year Item Closing balance Opening balance Long term loans due within one year 182,250,000.00 219,320,544.93 Long-term payable due within one year 11,227,411.77 14,883,189.60 Lease obligation due within one year 4,089,628.02 3,243,236.11 Total 197,567,039.79 237,446,970.64

32. Other current liabilities Item Closing balance Opening balance Notes payable endorsed not derecognized 107,933,791.39 145,365,603.31 Output Vat to be carried forward 38,942,677.07 39,373,636.22 Total 146,876,468.46 184,739,239.53

33. Long-term borrowing

(1) Category of long-term borrowing

34. Lease obligation

35. Long term accounts payable

35.1Category by nature

36. Provision

34. Lease obligation

35. Long term accounts payable Item Closing Balance Opening Balance Long term accounts payable 16,350,240.32 18,845,786.63 Category Closing Balance Opening Balance Pledged loan 272,700,000.00 333,902,223.70 Guarantee loan 31,400,000.00 34,426,021.48 Total 304,100,000.00 368,328,245.18 Category Closing Balance Opening Balance Lease payment 33,229,979.92 37,530,642.51 Less: unrecognized finance expense 16,747,057.23 17,790,446.86 Non-current liability due within 1 year 4,089,628.02 3,177,021.87 Total 12,393,294.67 16,563,173.78

36. Provision Nature Closing Balance Opening Balance Reason Warranty 1,734,500.48 2,300,208.22 Others 1,301,570.00 Total 3,036,070.48 2,300,208.22

37. Deferred income

38.Share capital

38.Share capital Item Opening balance Increase/decrease（+/-） Closing balance New share issued Share dividend Transfer from capital reserve others Subtotal Total share capital 843,212,507.00 - - - - -843,212,507.00

39.Capital reserves

40.Other comprehensive income

41. Special reserve

42.Surplus reserves

43.Undistributed profits

44.Operating revenue and cost

(1) Details

(2) Main revenue and COS details

45.Taxes and surcharges

46. Administrative expenses