Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. 2023 Annual Report April 2024 1 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2023 Annual Report Part I Important Notice, Table of Contents and Definitions The Board of Directors, the Board of Supervisors as well as the directors, supervisors and senior officers of Infore Environment Technology Group Co., Ltd. warrant that the information in this report contains no misrepresentations, misleading statements or material omissions, and jointly and severally accept liability for the truthfulness, accuracy and completeness of information in this report. Ma Gang, the Company's legal representative, Wang Qingbo, the Company's principal officer in charge of accounting, and Wu Shanshan, the principal officer of the Company's accounting division (head of accounting) warrant that the financial statements contained in this report are truthful, accurate and complete. All directors of the Company attended the Board meeting to review this report. Any forward-looking statements such as future plans mentioned in this report shall not be considered as promises to investors. Investors are advised to pay attention to possible investment risks. The Board has approved a proposal on dividend plan as follows: Based on the total share capital (minus shares in the Company's repurchase account) on the date of record for the 2023 final dividend plan, a cash dividend of RMB 1.25 (tax inclusive) per 10 shares will be distributed to the shareholders, with no capitalization of the capital reserve to share capital. 2 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Contents Part I Important Notice, Table of Contents and Definitions..................................................................................2 Part II Company Profile and Principal Financial Indicators................................................................................ 6 Part III Management Discussion and Analysis......................................................................................................12 Part IV Corporate Governance...............................................................................................................................42 Part V Environmental and Social Responsibility.................................................................................................. 64 Part VI Significant Events....................................................................................................................................... 73 Part VII Share Changes and Shareholder Information....................................................................................... 85 Part VIII Information on Preference Shares......................................................................................................... 93 Part IX Information on Bonds................................................................................................................................ 94 Part X Financial Report...........................................................................................................................................97 3 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Documents Available for Reference (I) Financial statements with signatures and seals of the legal representative of the Company, principal officer in charge of accounting and principal officer of the accounting division. (II) Original audit report with the seal of the accounting firm, and signed and stamped by certified public accountants (CPAs). (III) Originals of all corporate documents and announcements publicly disclosed on the website designated by the CSRC during the reporting period. The originals and legally effective photocopies of the aforesaid documents are available at the Company and the stock exchange for inspection by investors. 4 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Definitions Term means Definition Company, the Company, Infore Enviro means Infore Environment Technology Group Co., Ltd. Changsha Zoomlion Environmental Industry Co., Zoomlion Environmental means Ltd. Infore Technology means Guangdong Infore Technology Co., Ltd. Shenzhen Green Oriental Environmental Green Oriental Company means Protection Co., Ltd. CSRC means China Securities Regulatory Commission SZSE means Shenzhen Stock Exchange General Meetings of Shareholders of Infore General Meetings of Shareholders means Environment Technology Group Co., Ltd. Board of Directors of Infore Environment Board of Directors, the Board means Technology Group Co., Ltd. Board of Supervisors of Infore Environment Board of Supervisors means Technology Group Co., Ltd. Company Law means Company Law of the People's Republic of China Securities Law means Securities Law of the People's Republic of China Articles of Association of Infore Environment Articles of Association means Technology Group Co., Ltd. 5 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part II Company Profile and Principal Financial Indicators I. Company Information Stock abbreviation Infore Enviro Stock code 000967 Shares listed on Shenzhen Stock Exchange Chinese name 盈峰环境科技集团股份有限公司 Chinese abbreviated name 盈峰环境科技集团 English name (if any) Infore Environment Technology Group Co., Ltd. Legal representative Ma Gang 1818 Renmin West Road, Dongguan Street, Shangyu District, Shaoxing City, Zhejiang Province, Registered address China Postal code 312300 On February 29, 2016, the Company changed its registered address to 1818 Renmin West Road, Historical updates to Dongguan Street, Shangyu District, Shaoxing City, Zhejiang Province, China, from Shangpu registered address Town, Shangyu City, Zhejiang Province. 23/F, Infore Center, 7-8 Yixing Road, Xincheng Area, Beijiao Town, Shunde District, Foshan Office address City, Guangdong Province Postal code 528300 Company website www.inforeenviro.com Email inforeenviro@infore.com II. Contact Details Board Secretary Securities Representative Name Jin Taotao Wang Fei 23/F, Infore Center, 7-8 Yixing Road, 23/F, Infore Center, 7-8 Yixing Road, Xincheng Xincheng Area, Beijiao Town, Shunde Address Area, Beijiao Town, Shunde District, Foshan City, District, Foshan City, Guangdong Guangdong Province Province Telephone 0757-26335291 0757-26335291 Fax 0757-26330783 0757-26330783 Email wangyf@infore.com wangyf@infore.com III. Information Disclosure and Access Stock exchange website on which the Shenzhen Stock Exchange: http://www.szse.cn/ report is published Publications and websites on which the China Securities Journal, Securities Times, Securities Daily, Shanghai Securities report is published Journal, and Cninfo (http://www.cninfo.com.cn/) Securities Department, 23/F, Infore Center, 7-8 Yixing Road, Xincheng Area, Beijiao Place where the report is lodged Town, Shunde District, Foshan City 6 Infore Environment Technology Group Co., Ltd. 2023 Annual Report IV. Changes to Registered Information Unified Social Credit Code 913300006096799222 Since it went public in 2000, the Company has changed its business scope five times. Scope of business as at November 18, 1993: the research, development and production of ventilators, air-cooling and water-cooling equipment, air conditioners, refrigerators, quick-freezing equipment, molds and power generators. Export (refer to the documents of approval from the Ministry of Foreign Trade and Economic Cooperation for details); On July 2, 2002, the scope of business expanded to include "metal and plastic-steel composite pipes and profiles". On November 14, 2003, the scope of business expanded to include "environmental engineering". On February 29, 2016, a strategic transformation led to an expansion of the Company's scope of business to: R&D, maintenance, and operation services of environmental monitoring instruments, development, consulting, and services of environmental management technologies, operation services of environmental management facilities; design and construction of environmental engineering, environmental engineering, municipal engineering, and water conservancy and other water-related projects, technological development and services for water pollution control, water treatment, and ecological restoration; R&D, sales, and technical consulting services of communication products, network products, mechatronic products, automatic control products, intelligent building and community products, as well as software products; design, development, investment, operation management, and technical consulting services of relevant supporting facilities for the disposal and recycle of municipal waste and Changes to the Company's principal solid waste; sales of ventilators and air-cooled, water-cooled, and air conditioning activities since its listing (if any) equipment; operation of import and export businesses; industrial investment, investment management, asset management, and investment consultation; On May 18, 2016, "investment, the operation of import and export business, industrial investment, investment management and asset management" were removed from the Company's scope of business. On June 28, 2019, the Company's scope of business was updated to: R&D, manufacturing, sales, technical consultation, maintenance and operation services of sanitation equipment, special operation robots, new energy vehicles (NEV), environmental monitoring equipment, special equipment for environmental protection, car charging equipment and parts; equipment leasing; design, operations management, technological development and technical services of supporting facilities relating to disposal and recycling of municipal garbage and solid waste; design, construction, operations management, technological development, technical services of environmental engineering, municipal engineering, garden engineering, electric power engineering, water conservancy engineering, water pollution treatment engineering, air pollution treatment engineering, and soil remediation engineering; operational cleaning, collection, transportation and treatment services of urban household garbage (operating with license); development, technical consultation and technical services of environmental protection, IoT and Internet technologies; software development and sales; sales of ventilators, air cooling, water cooling and air conditioning equipment; import and export business and investment consultation. 1. In 2000, the Company went public, and its largest shareholder was Zhejiang Fan & Air-cooled Equipment Co., Ltd. 2. On February 23, 2006, the former controlling shareholder of the Company, Zhejiang Shangfeng Industry Group Co., Ltd., and the Company's shareholder, Midea Group Co., Ltd., transferred their respective stocks of 9,575,027 shares and 24,897,984 shares to Guangdong Infore Group Co., Ltd. Guangdong Infore Group Co., Ltd. became the Company's largest shareholder. 3. On August 5, 2008, the Company's controlling shareholder, Changes to the Company's controlling Guangdong Infore Group Co., Ltd. changed its name to "Guangdong Infore Holding shareholders since its incorporation (if Investment Group Co., Ltd." 4. On September 30, 2010, Guangdong Infore Holding any) Investment Group Co., Ltd. changed its name to "Infore Holding Investment Group Co., Ltd." The latter became the Company's controlling shareholder. 5. On January 4, 2019, the private placement of new shares for the purchase of new assets was made, and the Company issued 1,017,997,382 shares to Ningbo Infore Asset Management Co., Ltd. to acquire its 51% equity interest in Zoomlion Environmental. Ningbo Infore Asset Management Co., Ltd. became the Company's largest shareholder. As at the end of the reporting period, the Company's controlling shareholder was Ningbo Infore Asset Management Co., Ltd. 7 Infore Environment Technology Group Co., Ltd. 2023 Annual Report V. Other Relevant Information The accounting firm engaged by the Company Name of accounting firm Pan-China Certified Public Accountants LLP (Special General Partnership) 27/F, Run'ao Business Center (T2), Qianjiang Century CBD, Xiaoshan District, Office address of accounting firm Hangzhou City, Zhejiang Province Authorized signatories Bian Shanshan, and Wei Xiaohui The sponsor engaged by the Company to exercise constant supervision over the Company during the reporting period Applicable □Not applicable Supervisory Sponsor Sponsor's office address Representative period Huaxing Securities Huaxing Securities, 2301, Raffles City The Bund East Tower, Li Zeming, Zheng 2023 Co., Ltd. No. 1089 Dongdaming Road, Hongkou District, Shanghai Zaoshun The financial advisor engaged by the Company to exercise constant supervision over the Company during the reporting period □Applicable Not Applicable VI. Major Accounting Data and Financial Indicators Whether the Company needs to retrospectively adjust or restate accounting data in previous years □Yes No 2023 2022 YoY change 2021 Operating revenue 12,631,050,967.34 12,255,992,938.42 3.06% 11,866,291,611.45 (RMB) Net profit attributable to the listed company's 498,383,730.00 418,794,179.13 19.00% 752,792,198.66 shareholders (RMB) Net profit attributable to the listed company's shareholders after non- 444,753,430.22 324,753,411.18 36.95% 557,050,456.60 recurring gains and losses (RMB) Net cash flows from operating activities 1,385,556,509.49 1,662,482,287.71 -16.66% 809,218,720.13 (RMB) Basic earnings per 0.16 0.13 23.08% 0.24 share (RMB/share) Diluted earnings per 0.16 0.13 23.08% 0.24 share (RMB/share) Weighted average 2.88% 2.41% 0.47% 4.51% return on equity December 31, 2023 December 31, 2022 YoY change December 31, 2021 Total assets (RMB) 29,048,201,560.36 29,271,291,859.98 -0.76% 28,362,883,652.30 Net assets attributable to the listed company's 17,437,509,156.73 17,288,602,018.09 0.86% 16,927,565,990.33 shareholders (RMB) The lower of net profit before and after non-recurring gains and losses is negative for the most recent three fiscal years, and the latest auditor's report shows there is uncertainty as to the Company's ability to continue as a going concern. 8 Infore Environment Technology Group Co., Ltd. 2023 Annual Report □Yes No The lower of net profit before and after non-recurring gains and losses is negative. □Yes No VII. Accounting Data Differences Arising from Domestic/Overseas Accounting Standards 1. Differences in net profit and net assets under Chinese Accounting Standards and International Accounting Standards □Applicable Not Applicable No such differences during the reporting period. 2. Differences in net profit and net assets under Chinese Accounting Standards and Overseas Accounting Standards □Applicable Not Applicable No such differences during the reporting period. VIII. Quarterly Key Financial Indicators Unit: RMB Q1 Q2 Q3 Q4 Operating revenue 2,671,198,594.33 3,461,432,009.54 2,857,777,560.35 3,640,642,803.12 Net profit attributable to the listed company's 156,375,931.23 216,592,838.32 230,043,358.95 -104,628,398.50 shareholders Net profit attributable to the listed company's shareholders after non- 132,592,018.43 194,972,218.23 216,119,614.54 -98,930,420.98 recurring gains and losses Net cash flows from -372,981,710.55 482,209,744.40 213,560,033.15 1,062,768,442.49 operating activities Whether the financial indicators above or their sums differ materially from those in the Company's disclosed quarterly and interim reports □Yes No IX. Non-recurring Gains and Losses Items and Amounts Applicable □Not applicable Unit: RMB Item Amount in 2023 2022 2021 Note Gain or loss for the disposal of non-current assets (inclusive of -4,146,549.53 -2,289,681.16 6,337,251.97 - provisions to write off impaired assets) 9 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Government subsidies recognized as gain or loss during the reporting period (exclusive of government subsidies given in the Company's ordinary course of 52,966,550.75 80,268,041.82 55,341,877.03 - business based on the established criteria and having a continuous impact on the Company's gain or loss as per the government policies or regulations) Gain or loss arising from changes in fair value of financial assets and financial liabilities held by non- financial enterprises as well as from the - 0.00 -79,222,823.84 - disposal of financial assets and financial liabilities (exclusive of effective hedges that arise in relation to the Company's ordinary business operations) Capital collected from non-financial enterprises that was 52,623.28 1,280,730.46 3,173,551.55 recognized as gain or loss during the reporting period Gain or loss on Income from wealth entrusting other parties 12,111,406.99 19,091,108.25 29,170,261.66 management products: with investment or RMB 12,111,406.99. asset management Reversal of provisions for impaired receivables that have 484,240.00 - - - been individually tested for impairment Gain/loss on debt -3,130,560.92 -5,380,200.00 - - restructuring Operating revenue and expenses other than the 9,532,774.64 2,164,235.04 2,598,028.75 - above items Other gains and losses that fall into the definition of non- - 19,785,940.63 172,459,718.81 - recurring gains and losses Tax rebates, reductions - 1,004,379.44 3,768,945.18 - 10 Infore Environment Technology Group Co., Ltd. 2023 Annual Report and exemptions granted ultra vires or without official documents of approval Less: Income tax 11,730,712.09 22,153,064.81 -8,007,245.43 - Minority interest 2,509,473.34 -269,278.28 5,892,314.48 - affected (after tax) Total 53,630,299.78 94,040,767.95 195,741,742.06 -- Details on other gains and losses that fall into the definition of non-recurring gain/loss: □Applicable Not Applicable No such cases during the reporting period. Explanation of classification of non-recurring gains and losses listed in the Explanatory Announcement No. 1 on Information Disclosure by Companies Offering Securities to the Public — Non-recurring Gains and Losses as recurring gains and losses □Applicable Not Applicable No such cases during the reporting period. 11 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part III Management Discussion and Analysis I. Industry Performance During Reporting Period 1. Industry overview Infore Enviro is a leading investor and operator in the smart urban service industry, primarily engaging in two areas: urban cleaning services and environmental protection equipment. Urban cleaning services refer to the comprehensive activities of collecting, comprehensively treating and recycling domestic and industrial waste, and managing related social activities to minimize the environmental impact of urban waste and ensure a clean and hygienic working and living environment for city dwellers. Specifically, these services include cleaning, maintenance and watering of urban roads, squares, and other public spaces; collecting and transporting domestic waste from residential areas and public spaces; construction, maintenance, and service of sanitation facilities such as public toilets, waste bins, and garbage transfer stations; terminal harmless treatment of urban waste and special waste; planning, construction, and maintenance of urban landscapes and green spaces. 2. Development trends 2023 marked the beginning of full implementation of the guiding principles of the 20th CPC National Congress, and was a crucial year for implementing China's 14th Five-Year Plan. The urban service market maintained robust momentum thanks to the sanitation marketization reform and the "urban steward" model. Driven by policy incentives, demand for environmental protection equipment remained high, indicating a positive outlook over the long term. However, the market experienced a continued decline from the previous year due to macroeconomic challenges, decline in government's fiscal payment capacity, and downturn in customers' budgets. Increase in annual amount and total amount of urban services contracts in the past eight years: Total sales of environmental protection equipment, and sales of pure-electric environmental protection equipment in the past eight years: Urban service is an essential item of government spending, as it is closely related to people's livelihoods. The sector's long-term 12 Infore Environment Technology Group Co., Ltd. 2023 Annual Report growth is not entirely connected with short-term economic volatility, and it is tied with long-term economic trends, policy directives, environmental requirements, and people's living standards, without notable seasonal and regional features. As the existing sanitation equipment gradually enters a replacement cycle and the supportive policies for new energy increase in 2024, the new energy sanitation market in China will reach an economic inflection point. With the introduction of franchise management measures and supportive policies, the sanitation franchise market will fully expand. It is expected that the overall growth trend of the sanitation industry will remain unchanged. 3. Development priorities (1) Comprehensive adoption of new energy-powered and smart environmental protection equipment As China advances ecological construction, achieving carbon peak and neutrality has been included in the national plan for ecological endeavors. Against this backdrop, more and more cities are launching large-scale initiatives to transition their environmental protection equipment toward new energy sources, particularly the increased adoption of low-noise and less-emissions new energy-powered sanitation vehicles. The penetration rate of new energy solutions in the environmental protection equipment sector reached 8.4% in 2023. As the market scales up and costs decrease, the life-cycle cost of new energy sanitation vehicles has become significantly lower than that of oil-powered vehicles. This signifies that the comprehensive transition of environmental protection equipment to new energy sources is entering a phase of rapid acceleration. The traditional sanitation industry is characterized by its labor-intensive nature. With the aging population and the changing career preferences of younger generations, labor demand is skyrocketing, and labor costs remain high. This has given rise to the development of smart environmental protection equipment. Sanitation cleaning and maintenance is a low-growth area of application, and the technology is relatively mature and has begun to show economic viability. Current autonomous sanitation vehicles can replace certain human operations on closed and semi-closed roads. They can automatically perform scheduled cleaning tasks during off-peak hours of traffic in parks and other areas. Managers can remotely monitor the status of the robots in real time. This significantly reduces the workload of sanitation workers, and minimizes their exposure to harsh working environment while reducing management costs and alleviating labor shortages. As a significant part of the optimization of urban management models, the future of urban/rural services is increasingly steered towards one that is smart, and requires less or even no human labor, signifying a vast development space and application prospects in this sector. (2) Smart urban services As urbanization accelerates, the gradual transition from traditional "sanitation integration" to a smarter, more precise, and more efficient "urban steward" model has become a consensus in the new round of urban service reform. Traditional sanitation management models can no longer meet the demand for modern urban development. The emergence of smart urban services offers a solution for sustainable urban development. By leveraging Internet of Things (IoT) and mobile Internet, smart urban services enable full-process and real-time monitoring of all environmental sanitation service personnel, vehicles, objects, and events, assist in rationally designing sanitation management models, boosting operating quality, reducing operating costs, and making sanitation management effective through statistical data and assessments. All smart urban services are deployed on the Smart Urban Management Cloud and connected to the Smart City Network, and are provided to managers and workers in a cloud-based manner anytime. As technology continues to advance and applications continue to expand, smart urban services will play a more important role in the future, driving cities towards a greener, lower-carbon, and more sustainable future. Drawing on its insights into the current state of the environmental protection industry, Infore Enviro began its foray into the field of urban stewardship in 2021 with a forward-looking perspective. Incorporating sophisticated technologies in "intelligent equipment, smart services, and Smart Sanitation Cloud Platform", Infore Enviro has created an "Infore Mode" encompassing "full series of intelligent equipment + full-scenario smart urban services". The Company's 5G intelligent cleaning robots can work through human- machine collaboration and auto driving, and have strong cleaning capabilities. They can complete high-precision automated cleaning tasks, based on real-time positioning, autonomous navigation, obstacle avoidance and detour, and autonomous safe operation, on complex outdoor roads and under dynamically changing scenarios. In collaboration with the new digital and intelligent management model and the remote monitoring and management model of the Smart Sanitation Cloud Platform, they are capable of 24/7, all-round, 13 Infore Environment Technology Group Co., Ltd. 2023 Annual Report seamless, precise, and efficient operation, maintenance, supervision, and management of service personnel, vehicles, objects, and events. On top of these strengths, the Company provides customers with tailored smart solutions to urban services including "smart supervision, smart operation, smart service", as well as a new model featuring "management + service + operation" for the whole process of urban public space, public resources, and public projects, which enables real transition from management to service, and from governance to operation, to meet the needs for refined urban management. For a detailed analysis on the industry, please refer to Discussion and Analysis on the Future Development of the Company. II. Principal Business During the Reporting Period 1. Principal activities In terms of urban service business, Infore Enviro has created an "Infore Mode" encompassing "full series of intelligent equipment + full-scenario smart urban services" by incorporating sophisticated technologies in "intelligent equipment, smart services, and Smart Sanitation Cloud Platform". The services range from road cleaning and maintenance, snow and ice removal, waste collection and transportation, waste sorting, municipal infrastructure maintenance, urban landscaping, water area cleaning to marine sanitation. The Company also offers customers one-stop services including planning, design, investment, construction, and operation of environmental sanitation projects. In terms of business scope, the Company implements an "urban steward + sanitation integration" dual strategy. Regarding business model, the Company pursues diversification through "government procurement", "franchising", and "equity cooperation". As such, it has consistently maintained its industry-leading position in the long-cycle urban service market. In 2023, the Company ranked No.2 for increase in annual amount of urban service contracts, and ranked No.3 for total amount of urban service contracts. The Company ranked No.1 in terms of sales of environmental protection equipment in 2023 for the 23rd consecutive year in China. 2. Principal products In terms of intelligent equipment, leveraging its leading position in the environmental protection equipment industry, strong R&D and manufacturing capabilities and a well-established nationwide sales network, the Company forged a most comprehensive suite of environmental protection equipment of over 400 models within the industry, providing customers with a wide range of solutions including various sanitation and cleaning equipment, waste collection and transportation equipment, and new and clean energy environmental protection equipment. The Company's range of products spans from cleaning and maintenance equipment, waste collection and transportation equipment, waste compression station equipment, kitchen food waste recycling equipment, municipal and landscaping equipment, to emergency snow and ice removal equipment. An industry leader in intelligent equipment R&D, the Company developed 5G intelligent cleaning robots, autonomous sanitation vehicles, small smart cleaning robots, smart energy storage equipment for industrial and commercial use, etc. 14 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Smart Sanitation Cloud Platform is a big data smart urban service cloud platform developed in-house and a pioneering platform in China's sanitation industry that encompasses the full industrial chain. The platform, with an investment of nearly RMB 200 million, supported by over 25 smart urban service-related copyrighted software and patents and integrating 5G, AI, big data, cloud computing, edge computing and other advanced technologies to form an immersive framework and develop core technologies such as integrated IoT applications, data communication, video command and control, safe driving tests, IoT software and hardware compatible technologies and big data applications. Through the platform, the Company can monitor all environmental sanitation service personnel, vehicles, objects, and events on a real-time basis. The Company has designed robust sanitation management models to boost operating quality, reduce operating costs, and make sanitation management effective through statistical data and assessments. At present, the platform is providing intelligent services for more than 80,000 products of customers across China, with over 40,000 daily active users. In the future, the Company will continue to apply digital technologies and create innovative intelligent equipment and smart services. Moreover, through in-depth integration into smart city development, it will continuously boost the application of smart corporate cloud platforms to become a leader and enabler in the digital transformation of the environmental sanitation sector by dint of intelligence. In terms of smart services, the Company's "Environmental Sanitation APP" enables remote monitoring, data collection and procedural approval for its line-up of smart equipment and products during operations. Through visualized operational data and automatic business analysis, the Smart Sanitation Cloud Platform is capable of digitalized equipment management, sophisticated process management, and quantified materials management. This drives a digitalized, intelligent, IT-based, and integrated management approach throughout the entire sanitation process. 3. Technology accumulation and innovation (1) Cumulative R&D capabilities 15 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Enviro's R&D team of environmental protection equipment comprises experts from national research institutions, who have a long track record in scientific research. Based on China's status of environmental governance, the Company has built the most comprehensive environmental industry system in China, providing customers with complete sets of equipment and solutions for road cleaning and maintenance, solid waste collection and transportation, municipal emergency rescue, landscaping and maintenance, snow and ice removal, kitchen food waste treatment, environmental governance and water treatment. The Company's advanced technologies in environmental protection equipment powered by new energy and hydrogen energy are at the forefront of the industry. The Company owns 1,155 patents, including 599 utility patents, 447 utility model patents, and 109 design patents. It leads the industry in terms of the number of technical and utility patents. Many national, industry, and local standards have been made under the direction of Infore Enviro. With provincial research centers, the Company has been recognized as a National Intellectual Property Model Enterprise, and a National Intellectual Property Competitive Enterprise and received numerous awards, including the China Patent Excellence Award, China Machinery Industry Science and Technology Award, Hunan Provincial Science and Technology Progress Award, and Huaxia Construction Science and Technology Award. It has obtained the first autonomous drive test license in sanitation. Furthermore, the Company was identified by the Ministry of Industry and Information Technology (MIIT) as a leading enterprise with key tasks in new-generation AI industry innovation, making it a top player in China's AI domain and a member of the "national team" of intelligent cleaning robot innovators. During the reporting period, the Company invested RMB 353 million in R&D for continuous improvement and innovation in product tech, with 353 patent applications, including 95 utility patents, 197 utility model patents, and 61 design patents. It has made remarkable R&D results and is leading the industry in this regard. (2) Innovation of cloud platform Smart Sanitation Cloud Platform is a big data smart cloud platform that was developed in-house by the Company. By integrating advanced underlying technologies such as big data, cloud computing, IoT, mobile Internet and AI into the platform, the Company developed core technologies such as integrated IoT applications, data communication, video command and dispatch, safe driving tests, IoT software and hardware compatible technologies and big data applications. The seamless integration of environmental protection equipment and operations allows the platform to achieve real-time connectivity between urban service personnel, vehicles, objects, and events as well as standardized, digitalized and smart operation and management. The Company established a digital operation and management system for smart services, which, through smart and safe operation that requires less human labor and energy consumption, enables it to develop competitive advantages with smart services. The platform is supported by over 20 urban service-related software copyrights and patents and has won accolades such as the MIIT's 2019 Pilot Demonstration of the Integration of Key Industries and the Internet, 2021 Outstanding Cases of Mobile IoT, 2021 Excellent Industrial App of Hunan, 2022 Changsha's Key R&D Project Garbage Classification Collection and Transportation System Based on Image Recognition and CNN Deep Learning Algorithm, and 2022 Changsha Torch Plan for Intelligent Vehicle Industry Ecosystem. The platform has provided smart services to over 80,000 products of customers. (3) Leader in new energy Pioneering the development of new energy in the sanitation industry, the Company offers the most comprehensive portfolio of new energy products in the industry. Infore Enviro started the research and development of new energy-powered environmental protection equipment in 2007 and successfully developed the first pure-electric sweeper truck in China in July 2008. The Company was tasked with the cleaning and sanitation of the streets during the 2008 Beijing Olympics. Over three decades of sustained R&D in sanitation vehicles and over a decade of hard work have led Infore Enviro into developing over 40 types of new energy vehicles (NEV) for cleaning, washing, waste collection and urban sanitation. The Company's nearly 200 vehicle models form the most comprehensive suite of new energy-powered sanitation vehicles in China. The Company launched its fifth generation of new energy- powered environmental protection equipment, as the industry's most comprehensive range of products, including over 100 varieties that cover road sweeping and washing, garbage transportation, urban landscape, solar power cleaning, and mobile charging. Additionally, it unveiled the industry's first domain controller platform to fully integrate the chassis-control system of the chassis and upper installation, with platformized hardware, integrated software, modular functionality and scene-based products. The Company 16 Infore Environment Technology Group Co., Ltd. 2023 Annual Report has reduced system costs by 9% while increasing system performance by 15%, leading the innovative development of new energy sanitation. This helps customers lower purchasing and operating costs. The Company sold 1,974 pure-electric powered sanitation vehicles in 2023, with a market share of 32.4%, ranking No.1 in the industry, according to the motor vehicle accident liability insurance data released by the National Financial Regulatory Administration. (4) Pioneer in intelligent cleaning robots The Company has independently developed over 10 models of intelligent cleaning robots (both basic and 5G smart models are available) and offers the most comprehensive suite of cutting-edge intelligent cleaning robots in the market. The entire series of products are integrated with core technologies such as green new energy, 5G+AIOT cluster control, AI, machine vision, 360-degree image recognition and are equipped with sensors such as laser radar, ultrasonic radar, high precision differential GPS, 360-degree cameras, allowing for smart operations and smart navigation of intelligent cleaning robots as well as paving the way for a more diverse operational capacity in a wide range of locations and scenarios. The Company's first "5G Cloud + Intelligent Cleaning Robot" is a smart remote cluster model of operation that redefines how sanitation is carried out. By raising the standards of digitalization and efficiency in the industry drastically and reducing safety risks to sanitation personnel as well as labor costs, the new model of operation presents remarkable economic and social benefits for the community and economy. The Company's 5G intelligent cleaning robot crew has been deployed in Shenzhen, Changsha and Suzhou. The crew has become a new benchmark for smart urban services and has been repeatedly recognized by government agencies and other associations as a model for technological innovation that breathes new life into the traditional sanitation industry with AI. The 5G smart sanitation robot crew digitalizes and informatizes urban sanitation, raises the capabilities for and standards of informatization in the sanitation industry and improves the standards of sophisticated management of urban public services, creating a better living environment for the people. Other businesses of the Company primarily include environmental monitoring, solid waste treatment, and ventilator equipment manufacturing. The Company's environmental monitoring business covers the monitoring of smoke, air quality, haze, water quality, water conservation, soil and dust and the provision of an integrated one-stop service for environmental protection, water conservation, water supply and smart cities. Product sales are the main business operations, supplemented by the provision of services for operation and maintenance. The Company's solid waste disposal business primarily encompasses the incineration of domestic waste to generate energy, the landfilling of domestic waste, the recycling of food waste and the utilization of solid waste in industrial parks. With waste-to-energy projects as the core, the industrial parks of solid waste recycling are equipped with treatment facilities for domestic waste disposal, hazardous waste disposal, sludge treatment, food waste treatment, sewage treatment, construction wastewater treatment, ecological restoration of landfills, leachate treatment and fly ash disposal. Their operating model is public-private partnership (PPP). The Company's ventilation machinery manufacturing covers ventilators, mufflers, dampers, refrigerators, magnetic levitation fans, blowers and nuclear-grade dampers for nuclear power, subways, tunnels, rail transportation, industrial and civil construction and other areas. Its fans are mainly sold via a combination of direct sales and retailers. III. Analysis of Core Competitiveness 1. Industry leader in sanitation equipment The Company sold 1,974 pure-electric powered sanitation vehicles in 2023, with a market share of 32.4%, ranking No.1 in the industry, according to the motor vehicle accident liability insurance data released by the National Financial Regulatory Administration. As a leader in China's sanitation equipment sector, ranking No.1 in terms of sales of sanitation equipment for the 23rd consecutive year, the Company owns state-of-the-art technologies and offers the most comprehensive range of environmental protection equipment. In terms of R&D, the Company has mastered industry-leading technologies in new energy-powered environmental protection equipment, intelligent cleaning robots and autonomous environmental sanitation vehicles, and obtained the 17 Infore Environment Technology Group Co., Ltd. 2023 Annual Report first drive test license in environmental sanitation from the government. The Company developed the world's first intelligent cleaning robot crew and successfully deployed the crew in Orange Isle, a 5A level national scenic spot in Changsha City, Hunan Province. The Company's 5G autonomous intelligent cleaning robot crew has also been deployed in the college town in Changsha. The Company has developed a comprehensive suite of environmental protection equipment that spans over 400 models and allows the Company to meet the diverse sanitation demand across the country. As one of the pioneers in environmental protection equipment, the Company developed the first wet and dry vacuum sweeper truck, the first fully hydraulic mini road sweeper, the first tunnel road washer, the first pure-electric road sweeper and the first natural gas-powered road washer in China. The Company has extensive proven experience in the environmental sanitation industry and become the most influential brand in the industry. 2. Fast-growing urban services with standardized management The Company established a new sanitation ecosystem with its operational model of "mechanized production+smart operation+standardized service". With its new operational model, the Company aims for the centralized management of services and planning, visual monitoring of the entire process of sanitation, swift response to emergencies and closed-loop management. With smart analysis performed on all data and improvements to management and controls that are based on evidence and rigorous science, the Company strives to standardize services, refine sanitation management by virtue of smart technologies, grow business rapidly, build key competitive advantages, and lead in the new era of smart urban services. From 2016 to 2023, the Company recorded a contract amount of RMB 1.237 billion, RMB 5.561 billion, RMB 8.711 billion, RMB 9.72 billion, RMB 12.574 billion, RMB 8.435 billion, RMB 9.251 billion, and RMB 7.652 billion respectively and an annual service contract amount of RMB 55 million, RMB 305 million, RMB 429 million, RMB 855 million, RMB 1.248 billion, RMB 1.228 billion, and RMB 1.819 billion, and RMB 1.553 billion, respectively for urban services. The Company's operating revenue from urban services increased by 35.38% YoY to RMB 5.63 billion in 2023. 3. "Direct repair+" after-sales service After-sales service is a critical touchpoint for companies to connect with customers, and high-quality after-sales service is a company's core competitive edge. Based on product lifecycle management, the Company launched a "Speedy Service" Program that follows the "1314" service standards—responding to customers within 15 minutes; departing within 30 minutes and arriving at material service areas within 2 hours; addressing general faults within 1 day and material faults within 3 days; offering free services four times each quarter. For this service program, the Company has deployed resources, including one platform, 300 service outlets, 1,000 service engineers, and 400 service stations. Currently, Infore Enviro can deliver timely, warm, quality, fairly-priced, and trustworthy services to its customers. 4. Corporate culture and management team Corporate culture is the cornerstone of a company's creativity and unity as well as an important part of a company's key competitive advantages. With the corporate mission of "Cleaner World, Better Future", the Company sticks to the corporate philosophy of "simple and professional with quick execution" and the core values of "our clients are vital to us; our employees are our partners in our endeavors; we aim to be achievement-oriented - competence beats mediocrity; and technology innovation is the basis for our development." We adopt the development strategy with leading technology at the center, being order-driven as the means, and motivating talent as the basis, and are committed to becoming a respected and trusted leader in providing intelligent equipment and services with cleaning robots at its core. After years of efforts, the Company has deeply incorporated the core elements of its corporate culture into operations. These principles have guided its business segments, branches, and subsidiaries in benchmarking operations, advancing refined management, and high-quality growth. The Company is helmed by a pragmatic and competent management team. The Company's management team endorses the corporate culture and shares the same management philosophy. Each member of the team complements the others' strengths and has clearly defined responsibilities. As a whole, the team is united and possesses strong executive abilities. With abundant industry experience and forward-looking vision, the team identifies industry trends with precision and speed and seizes market opportunities promptly. For many years, the Company has promoted stock incentives and employee stock ownership programs as well as set up team management frameworks for cornerstone partnerships, senior partnerships and general partnerships, gathering a group of 18 Infore Environment Technology Group Co., Ltd. 2023 Annual Report passionate trailblazers who share the Company's values, building a community for key employees in the Company and propelling the Company towards stable, healthy and long-term growth. IV. Analysis of Principal Business 1. Overview Infore Enviro faced severe external challenges in 2023 amidst the macroeconomic situation. Despite that, the Company remained committed to its development strategies and annual business plan, with a strong emphasis on its core "5115" strategy. It significantly improved its internal operations by strengthening its key teams and intensifying technological innovation and product research and development. As a result, the Company maintained its position as an industry leader in smart urban services based on its established R&D advantages in environmental protection equipment. In 2023, the Company generated RMB 498,383,700 in net profit attributable to the listed company's shareholders and RMB 12,631,051,000 in operating revenue. As at the end of the reporting period, the Company reported RMB 29,048,201,600 in total assets and RMB 17,437,509,200 in net assets attributable to the listed company's shareholders. During the reporting period, the Company registered rapid growth in urban services while maintaining its leadership in the environmental protection equipment sector. 1. Ranked No.2 for increase in annual amount of urban service contracts in 2023 According to Huanjing Sinan, Infore Enviro signed 82 urban service projects across 18 Chinese provinces in 2023. These new contracts have an annual amount of RMB 1.553 billion, ranking No.2 in the industry, and a total amount of RMB 7.652 billion, ranking No.3 in the industry. The Company's operating revenue from urban services increased by 35.38% YoY to RMB 5.63 billion. As at the end of the reporting period, Infore Enviro was running 263 urban service projects. These contracts have an annual amount of RMB 6.567 billion and a total amount of RMB 60.018 billion. The Company's executory contracts total RMB 43.809 billion. The Company performed well in terms of sustainable operation. 2. Ranked No.1 in terms of sales of sanitation equipment in 2023 The Company sold 12,319 pieces of environmental protection equipment in 2023, according to the motor vehicle accident liability insurance data released by the National Financial Regulatory Administration. The sales of environmental protection equipment amounted to RMB 5.085 billion, ranking No.1 in the industry in China for the 23rd consecutive year. 3. Ranked No.1 in terms of sales of new energy-powered environmental protection equipment in 2023 The Company sold 1,974 pure-electric powered sanitation vehicles in 2023, with a market share of 32.4%, ranking No.1 in the industry, according to the motor vehicle accident liability insurance data released by the National Financial Regulatory Administration. 4. Improvement in quality and efficiency, and high-quality development With the key goal of "achieving high-quality development", centering on all steps of production and operation, the Company explored multiple methods for improving its asset operation capabilities to reduce existing assets and control incremental assets. It dismissed high-risk orders, strengthened the classification and accountability mechanisms for contract risks, enhanced recovery of corporate sales revenue, and accelerated operational turnover efficiency. In 2023, the Company recorded RMB 1,385,556,500 in net cash flows from operating activities, and YoY increase of 1.79% and 1.23% in gross profit margin from the two core business segments: intelligent equipment and smart services, leading to the improvement in operational quality ultimately, improvement in quality and efficiency, and effectively driving high-quality sustainable development. 5. Digital transformation and the setup of a highly efficient operating system Infore Enviro continued to digitalize value chains as digitalization has been one of its core transformation strategies. The Company fully digitalized all applications and processes across value chains using one system and platform under Infore Enviro. By expanding online coverage and enhancing standardization and information technology, it advanced the comprehensive digitalization and visualization for decision-making support across all segments, supported operations management with data, accelerated the 19 Infore Environment Technology Group Co., Ltd. 2023 Annual Report monetization of data assets, improved its refined process management, enhanced control capabilities, reduced costs and risks, and empowered operations. It eventually managed to cut costs and increase efficiencies. 6. High cash dividends for shareholders Valuing investor return, the Company has been implementing an active profit distribution policy. It has paid high cash dividends for many years in a row as return for its shareholders. According to the 2023 profit distribution plan (proposed) approved at the six meeting of the Tenth Board of Directors, a cash dividend of RMB 1.25 (tax inclusive) per 10 shares will be distributed to the shareholders, based on the total share capital (minus shares in the Company's repurchase account) on the date of record for the plan. A total cash dividend of around RMB 396 million (tax inclusive) is expected to be distributed, accounting for 79.43% of the net profit attributable to the listed company's shareholders in 2023. As the proposed plan is awaiting the approval of the General Meeting of Shareholders, the actual dividend amount will be disclosed by the Company in the relevant announcements. In the past three years (2021–2023), the Company has paid RMB 1.056 billion in cash dividends, accounting for 41.45%, 83.18% and 79.43% of the net profit attributable to the listed company's shareholders, respectively. 7. Active fulfillment of social responsibility as part of its corporate responsibility In 2023, while seeking business growth, the Company fulfilled its social responsibility as it got involved in poverty alleviation and disaster relief efforts. In terms of poverty alleviation, the Company took an active part in various initiatives, including making donations, such as the Shangyu Fourth Round Poverty Alleviation and Assistance Charity Fund, the "Warmth of the Ancient City" Relief and Assistance Foundation, and other charity funds or foundations, including those supporting individuals with disabilities. These monetary contributions are used for a wide range of purposes, including poverty alleviation, education, medical and elder care, disaster relief, innovative poverty reduction efforts, and public welfare projects. The Company also readily responds to emergency situations. In response to floods caused by typhoons and continued heavy rainfall, particularly in Beijing and Hebei, the Company swiftly put in place an emergency rescue mechanism with local partners and customers and sent dedicated teams to ensure the proper functioning of equipment through around-the-clock personnel and vehicle services. Its service engineers worked tirelessly to keep sanitation vehicle functioning properly and deliver essential supplies promptly, becoming key contributors to the post-disaster reconstruction efforts. 2. Revenue and cost (1) Breakdown of operating revenue Unit: RMB 2023 2022 As a percentage of As a percentage of YoY change Amount Amount operating revenue operating revenue Total revenue 12,631,050,967.34 100% 12,255,992,938.42 100% 3.06% Sector Smart urban 10,715,122,532.51 84.83% 10,242,746,845.77 83.57% 4.61% service Others 1,915,928,434.83 15.17% 2,013,246,092.65 16.43% -4.83% Product Intelligent 5,085,372,879.14 40.26% 6,084,414,800.17 49.64% -16.42% equipment Smart service 5,629,749,653.37 44.57% 4,158,332,045.60 33.93% 35.38% Others 1,915,928,434.83 15.17% 2,013,246,092.65 16.43% -4.83% Region Domestic 12,584,153,957.04 99.63% 12,237,181,369.71 99.85% 2.84% Overseas 46,897,010.30 0.37% 18,811,568.71 0.15% 149.30% Wholesale 20 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Direct sales 11,172,859,318.43 88.46% 10,735,356,968.50 87.59% 4.08% Retail 1,458,191,648.91 11.54% 1,520,635,969.92 12.41% -4.11% (2) Sectors, products, regions or sales models accounting for over 10% of operating revenue or profit Applicable □Not applicable Unit: RMB Gross YoY change in YoY change in YoY change in Operating revenue Operating cost profit operating gross profit operating costs margin revenue margin Sector Smart urban 10,715,122,532.51 8,366,738,029.64 21.92% 4.61% 4.28% 0.25% service Others 1,915,928,434.83 1,378,744,058.28 28.04% -4.83% -4.67% -0.13% Product Intelligent 5,085,372,879.14 3,675,986,033.73 27.71% -16.42% -18.44% 1.79% equipment Smart 5,629,749,653.37 4,690,751,995.91 16.68% 35.38% 33.41% 1.23% service Others 1,915,928,434.83 1,378,744,058.28 28.04% -4.83% -4.67% -0.13% Region Domestic 12,584,153,957.04 9,712,142,988.74 22.82% 2.84% 2.73% 0.07% Overseas 46,897,010.30 33,339,099.18 28.91% 149.30% 109.52% 13.50% Wholesale Direct 11,172,859,318.43 8,647,595,286.40 22.60% 4.08% 4.35% -0.21% sales Retail 1,458,191,648.91 1,097,886,801.52 24.71% -4.11% -7.16% 2.48% The Company's main business data for the year was adjusted to take into account revised statistical standards that were updated during the reporting period □Applicable Not Applicable (3) Whether revenue from goods sales higher than revenue from rendering services Yes □No Sector Item Unit 2023 2022 YoY change Sales Unit 14,903 17,674 -15.68% Intelligent Production Unit 15,216 16,221 -6.20% equipment Inventory Unit 1,947 1,634 19.16% Explanation of data with YoY differences that exceed 30% □Applicable Not Applicable (4) Fulfillment of material sales/procurement contracts signed during the reporting period □Applicable Not Applicable (5) Breakdown of operating costs Sector 21 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Unit: RMB 2023 2022 YoY Sector Item As a percentage As a percentage Amount Amount change of operating cost of operating cost Smart urban Raw materials 3,578,986,019.54 42.78% 4,021,886,417.92 50.13% -11.01% service Smart urban Labor expense 1,762,380,063.07 21.06% 1,056,998,188.36 13.17% 66.73% service Smart urban Depreciation 504,195,683.78 6.03% 423,631,356.77 5.28% 19.02% service Smart urban Utilities 403,490,139.16 4.82% 463,060,371.23 5.77% -12.86% service Other Smart urban manufacturing 2,117,686,124.09 25.31% 2,057,720,725.63 25.65% 2.91% service overhead Others Raw materials 596,485,884.08 43.27% 729,321,140.14 50.43% -18.21% Others Labor expense 125,343,062.94 9.09% 97,064,385.84 6.71% 29.13% Others Depreciation 163,979,538.70 11.89% 140,507,354.03 9.72% 16.71% Others Utilities 24,003,170.66 1.74% 26,661,871.00 1.84% -9.97% Other Others manufacturing 468,932,401.90 34.01% 452,659,020.35 31.30% 3.60% overhead Note Labor costs in relation to smart urban services rose significantly over the previous year, primarily because revenue from smart service increased during the current period, resulting in a corresponding increase in supporting facilities, labor costs, and labor outsourcing costs. (6) Changes in the scope of consolidated financial statements for the reporting period Yes □No For details of the changes in the scope of the consolidated financial statements during the reporting period, please refer to Note 8 "Changes in the Scope of Consolidation" in Part X Financial Statements. (7) Material changes in the business, products or services during the reporting period □Applicable Not Applicable (8) Major customers and suppliers Major customers of the Company Total sales to top five customers (RMB) 768,801,478.51 Total sales to top five customers as a percentage of annual total 6.09% sales Total sales to related parties among top five customers as a 0.00% percentage of annual total sales Top five customers As a percentage of annual No. Customer Sales revenue (RMB) total sales 22 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 1 Customer A 184,221,542.53 1.46% 2 Customer B 159,156,813.97 1.26% 3 Customer C 151,343,512.56 1.20% 4 Customer D 139,862,294.97 1.11% 5 Customer E 134,217,314.48 1.06% Total -- 768,801,478.51 6.09% Other information about major customers □Applicable Not Applicable Major suppliers of the Company Total purchases from top five suppliers (RMB) 1,548,979,382.34 Total purchases from top five suppliers as a percentage of 19.85% annual total purchases Total purchases from related parties among top five suppliers as 0.00% a percentage of annual total purchases Top five suppliers Purchase during the reporting As a percentage of total No. Supplier period (RMB) purchases 1 Supplier A 625,907,194.69 8.02% 2 Supplier B 448,675,120.98 5.75% 3 Supplier C 245,457,742.48 3.15% 4 Supplier D 128,693,061.92 1.65% 5 Supplier E 100,246,262.27 1.28% Total -- 1,548,979,382.34 19.85% Other information about major suppliers □Applicable Not Applicable 3. Expenses Unit: RMB 2023 2022 YoY change Reason for material change Selling expenses 794,334,952.02 762,970,847.95 4.11% -- Mainly due to increase in revenue from smart service Administrative during the current period, 726,159,237.45 609,601,680.23 19.12% expenses resulting in a corresponding increase in remuneration of management members. Mainly due to increase in deposit interest income and Financial Expenses 75,321,084.87 101,839,423.91 -26.04% decrease in loan interest expenses during the current period. R&D expenses 344,030,239.33 340,775,707.34 0.96% -- 4. R&D investments Applicable □Not applicable 23 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Expected impact on Name of major R&D Objectives Progress Proposed goals future development of projects the Company Intelligent Magnetic Levitation Turbine This helps the To industrialize the Centrifugal To explore and expand Mass-produced and Company improve its result and generate Compressor Equipment the segment launched on the market key competitive market orders for Blower and advantages Vacuum Systems This helps the To industrialize the Nuclear-grade To explore and expand Mass-produced and Company improve its result and generate Centrifugal Roof Fan the segment launched on the market key competitive market orders advantages To meet the energy This helps the Three-phase To industrialize the efficiency requirements Mass-produced and Company improve its Centrifugal Blower for result and generate of centrifugal blower launched on the market key competitive Nuclear Islands market orders for nuclear islands advantages To expand the product To develop a type of Automatic Online range for the online This helps the automatic online water Water Quality Monitor monitoring of thallium Mass-produced and Company improve its quality monitor for the for the Content of Total in domestic sewage launched on the market key competitive content of total Thallium and industrial advantages thallium wastewater To develop new To develop a type of products suitable for pretreatment pretreatment for equipment for surface This helps the surface water stations, water stations, i.e., Automatic Water Mass-produced and Company improve its with functions such as sampler with functions Sampler launched on the market key competitive retention of non- such as retention of advantages compliant samples and non-compliant samples synchronous sample and synchronous retention sample retention To expand the product This helps the To develop a type of range for the online Company improve its Ozone Analyzer R&D completed highly accurate ozone monitoring of ambient key competitive analyzer atmospheric ozone advantages To expand the product To develop a type of This helps the Pollution Source CO2 range for the online online automatic Company improve its R&D completed Analyzer monitoring of polluting monitor of CO2 key competitive greenhouse gases emissions advantages To expand the range of Continuous Monitoring scientific instruments, To develop a set of This helps the System for Volatile enabling online online monitoring Company improve its R&D completed Organic Compounds in monitoring of 116 system of 116 types of key competitive Ambient Air types of VOCs in VOCs advantages ambient air To successfully This helps the Autonomous To develop a type of develop a type of Company improve its Unmanned Sweeping unmanned sweeping R&D completed unmanned sweeping key competitive Robot robot robot advantages To conduct specialized technology Outdoor Unmanned To successfully This helps the development for Driving Operating develop the outdoor Company improve its outdoor unmanned R&D completed System R&D (Phase unmanned driving key competitive driving technology to II) technology (phase II) advantages enhance technical capabilities 24 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Research on Pneumatic This helps the Noise Control and To further reduce To reduce energy Company improve its Energy-Saving product energy R&D completed consumption and noise key competitive Pneumatic Conveying consumption and noise of existing products advantages Technology 1. To solve the problem of low loading capacity of the existing product; 2. To solve the To develop a wet waste problems of material collection and Third-generation This helps the accumulation and compression truck with Leakage-free Company improve its scattering on the top of R&D completed features such as full Compression Garbage key competitive the garbage bin in the sealing, no leakage, Truck advantages existing product; and large loading 3. To solve the problem capacity of odor leakage due to the unsealed open end of the existing product. To address energy This helps the 18-ton Pure-Electric To improve the consumption, noise, Company improve its Dual-fan Road R&D completed performance of the and other problems of key competitive Cleaners existing product the product advantages To expand the product To develop a range for landscape specialized vehicle maintenance, such as with front-mounted the trimming, boom arm and quick- collection of green change system for This helps the 18-ton Front Collection belts on highways, ring transitions between Company improve its R&D completed Green Hedge Trimmer road expressways, and various landscaping key competitive urban roads, the tools to manage advantages pruning of high trimming tasks in a branches of bush on variety of settings, roadside, and slope including green belts, mowing roadsides, and slopes Information about R&D personnel 2023 2022 Change Number of R&D personnel 1,212 1,415 -14.35% R&D personnel as a 5.99% 8.23% -2.24% percentage of total staff Education background of R&D personnel Bachelor's degree 802 995 -19.40% Master's degree 358 374 -4.28% Doctoral degree 11 12 -8.33% College degree 41 34 20.59% Age composition of R&D personnel < 30 years 471 662 -28.85% 30~40 years 560 641 -12.64% > 40 years 181 112 61.61% Information about R&D investments 2023 2022 Change R&D investments (RMB) 352,849,905.78 364,237,563.22 -3.13% R&D investments as a 2.79% 2.97% -0.18% 25 Infore Environment Technology Group Co., Ltd. 2023 Annual Report percentage of operating revenue Capitalized R&D investments 8,819,666.45 23,461,855.88 -62.41% (RMB) Capitalized R&D investments as a percentage of total R&D 2.50% 6.44% -3.94% investments Reasons and impacts of material change in R&D personnel composition □Applicable Not Applicable Reasons for significant YoY change in total R&D investments as a percentage of operating revenue □Applicable Not Applicable Reasons and rationale for significant change in capitalization rate of R&D investment Applicable □Not applicable The capitalization rate of R&D investment decreased by 3.94% YoY, mainly due to the decrease in the investment in R&D projects under development during the reporting period. 5. Cash flow Unit: RMB Item 2023 2022 YoY change Subtotal of cash inflows from 14,265,101,402.26 14,255,237,258.75 0.07% operating activities Subtotal of cash outflows 12,879,544,892.77 12,592,754,971.04 2.28% from operating activities Net cash flows from operating 1,385,556,509.49 1,662,482,287.71 -16.66% activities Subtotal of cash inflows from 1,691,155,211.72 5,558,632,508.54 -69.58% investing activities Subtotal of cash outflows 2,766,885,333.81 6,696,412,810.26 -58.68% from investing activities Net cash flows from investing -1,075,730,122.09 -1,137,780,301.72 5.45% activities Subtotal of cash inflows from 1,486,267,737.80 2,381,374,197.63 -37.59% financing activities Subtotal of cash outflows 2,462,201,245.03 2,447,214,731.68 0.61% from financing activities Net cash flows from financing -975,933,507.23 -65,840,534.05 -1,382.27% activities Net increase in cash and cash -664,519,991.45 461,918,360.27 -243.86% equivalents Explanation of main impact factor of material change of the data YoY Applicable □Not applicable The cash inflows from investing activities decreased by 69.58% YoY, and the cash outflows from investing activities declined by 58.68% YoY, mainly due to the YoY decrease in the purchase and redemption of wealth management products during the reporting period. 26 Infore Environment Technology Group Co., Ltd. 2023 Annual Report The cash inflows from financing activities decreased by 37.59% YoY, and the net cash flows from financing activities dropped by 1,382.27% YoY, mainly due to optimization of the debt mix during the reporting period, resulting in more repayments of loans than new borrowings. Explanation of reasons for the material difference between net cash flows from operating activities during the reporting period and net profit for the year □Applicable Not Applicable V. Analysis of Non-Core Business Applicable □Not applicable Unit: RMB As a percentage of Recurrent or non- Amount Reasons for generation total profit recurrent RMB 4,960,692.79 is the returns on long-term equity investments Investment income -51,597,205.92 -8.46% -- calculated using the equity method, which is recurrent; the other portion is non-recurrent. Gain or loss on 0.00% -- No changes in fair value Mainly due to provision Impairment of assets -123,390,769.02 -20.23% of goodwill impairment No loss Non-operating revenue 19,846,705.60 3.25% -- No Non-operating 13,031,066.19 2.14% -- No expenses VI. Assets and Liabilities 1. Material changes of asset items Unit: RMB December 31, 2023 January 1, 2023 Reason for As a percentage As a percentage Change Amount Amount material change of total assets of total assets Cash and cash 4,411,376,583. 4,728,203,530. 15.19% 16.15% -0.96% -- equivalents 78 46 Accounts 5,867,669,476. 5,625,792,472. 20.20% 19.22% 0.98% -- receivable 86 37 Contract assets 74,803,489.48 0.26% 101,023,854.33 0.35% -0.09% -- Inventories 971,229,637.15 3.34% 881,038,036.95 3.01% 0.33% -- Investment 1,138,868.60 0.00% 27,105,435.03 0.09% -0.09% -- properties Long-term equity 681,629,084.69 2.35% 676,829,959.84 2.31% 0.04% -- investment 27 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2,338,316,124. 2,268,287,202. Fixed assets 8.05% 7.75% 0.30% -- 14 01 Construction in 288,057,018.89 0.99% 41,073,267.68 0.14% 0.85% -- progress Right-of-use 25,125,671.95 0.09% 31,859,454.24 0.11% -0.02% -- assets Short-term 126,939,855.26 0.44% 440,103,105.44 1.50% -1.06% -- borrowings Contract 306,777,173.57 1.06% 274,289,978.25 0.94% 0.12% -- liabilities Long-term 1,884,356,851. 1,922,306,226. 6.49% 6.57% -0.08% -- borrowings 73 32 Lease liabilities 16,170,790.76 0.06% 23,255,624.30 0.08% -0.02% -- Intangible 5,984,348,824. 6,048,114,364. 20.60% 20.66% -0.06% -- assets 39 49 Offshore assets account for high proportion □Applicable Not Applicable 2. Assets and liabilities measured at fair value Applicable □Not applicable Unit: RMB Gain/loss on Cumulative Accrual of Purchase Sales changes in changes in Opening impairment amount amount Other Closing Item fair value fair value balance during the during the during the changes balance during the included in period period period period equity Financial assets 4. Investments 15,352,97 15,352,971. in other entity 1.01 01 instruments Subtotal of 15,352,97 15,352,971. financial 1.01 01 assets 15,352,97 15,352,971. Total 1.01 01 Financial 0.00 0.00 liabilities Other changes Whether any material changes occurred to the measurement attributes of the Company's major assets during the reporting period □Yes No 3. Restricted asset rights as at the end of the reporting period Unit: RMB Items Closing balance Carrying amounts at Type of restriction Reason for restriction 28 Infore Environment Technology Group Co., Ltd. 2023 Annual Report the end of the period Deposits, escrow Cash and cash equivalents 495,231,329.24 495,231,329.24 Guarantee, freeze, etc. accounts, frozen due to litigation preservation Notes receivable - bank Endorsement or Endorsed or discounted 4,472,210.78 4,472,210.78 acceptance discount but undue Notes receivable - trade Endorsement or Endorsed or discounted 407,749.04 349,861.59 acceptance discount but undue Accounts receivable 357,237,223.82 338,232,491.18 Pledged Pledged Receivable financing 55,280,364.20 55,280,364.20 Pledged Pledged Long-term accounts Factoring financing and Factoring financing and receivable and non-current 66,695,425.00 61,841,516.63 pledge with recourse pledge with recourse assets due within one year Fixed assets 72,439,458.40 27,881,359.42 Mortgaged Mortgaged Intangible assets 84,779,751.51 77,778,795.88 Mortgaged Mortgaged 100% equity interest in Biyang Fenghe New Energy 105,047,950.25 105,047,950.25 Pledged Power Co., Ltd. 100% equity interest in Funan 78,720,044.41 78,720,044.41 Pledged Company Mortgaged [Note] 100% equity interest in Poyang Greenlander 76,768,690.77 76,768,690.77 Pledged Renewable Energy Co., Ltd. 75% equity interest in 112,692,107.66 112,692,107.66 Pledged Lianjiang Company 25% equity interest in Frozen for litigation 37,564,035.89 37,564,035.89 Freeze Lianjiang Company preservation Total 1,547,336,340.97 1,471,860,757.90 [Note]: The pledged amount refers to the Company's proportionate share in net assets of each entity. VII. Investments 1. Overview Applicable □Not applicable Investment amount for the reporting period Investment amount for the prior period Change (RMB) (RMB) 7,056,438.75 106,000,002.00 -93.34% 2. Material equity investments made during the reporting period □Applicable Not Applicable 3. Material non-equity investments ongoing during the reporting period □Applicable Not Applicable 29 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 4. Financial investments (1) Securities investments □Applicable Not Applicable No such cases during the reporting period. (2) Derivatives investments □Applicable Not Applicable No such cases during the reporting period. 5. Use of proceeds from fundraising activities Applicable □Not applicable (1) Overall use of proceeds Applicable □Not applicable Unit: RMB 10,000 Total amount Total Accumul of Share of amount ative Total Accumula proceeds accumula Net of amount amount Purpose and Proceeds Total tive with tive Fundraising amount proceeds of of tracking of left idle Year amount of amount of change of proceeds type of used proceeds unused unused for over 2 proceeds proceeds use with proceeds during with proceed proceeds years used during change of the change of s the use period use reporting period RMB 1 billion will temporarily replenish working Public capital, and offering of 147,618.9 145,733. 107,743 the 2020 convertible 3,956.73 38,836.42 0 0 0.00% 0 6 62 .13 remaining corporate amount will bonds be used to implement recent investment projects. 147,618.9 145,733. 107,743 Total -- 3,956.73 38,836.42 0 0 0.00% -- 0 6 62 .13 Explanation of the overall use of proceeds According to the Approval of the Public Offering of Convertible Corporate Bonds by Infore Environment Technology Group Co., Ltd. (Z.J.X.K. [2020] No. 2219) issued by the CSRC, the lead underwriter of the Company, Huaxing Securities Co., Ltd. (formerly known as Huajing Securities, hereinafter "Huaxing Securities") issued 14,761,896 convertible corporate bonds ("CBs") to the public with the offering price of RMB 100 and a par value of RMB 100 for each CB, raising a total of RMB 1,476,189,600.00. Specifically, priority allotment of 9,405,386 CBs were issued to original shareholders of the Company, accounting for 63.71% of the total amount of this public offering; 5,304,730 CBs were issued to public investors through online channels, accounting for 35.94% 30 Infore Environment Technology Group Co., Ltd. 2023 Annual Report of the total amount of this public offering; 51,780 CBs were to be underwritten by the lead underwriter, accounting for 0.35% of the total amount of this public offering. Proceeds in this offering had been remitted to the Company's raised fund supervision account by the lead underwriter Huaxing Securities on November 10, 2020, and the amount actually received after deducting RMB 15,238,100 of underwriting and sponsorship fees (tax exclusive) was RMB 1,460,951,500. After deducting RMB 3,615,300 (tax exclusive) of external fees that were directly related to CB such as online offering expenses, printing fee for the prospectus, fees of the reporting accountant, counsel fee, credit rating fee, information disclosure expenses, and issuance commission fee, the net amount of proceeds from this offering was RMB 1,457,336,200. The availability of the above-mentioned proceeds has been verified by Pan-China Certified Public Accountants LLP in its Capital Verification Report (T.J.Y. [2020] No.490). As at December 31, 2023, the accumulated use of fundraising proceeds was RMB 388,364,200, and the total amount of fundraising proceeds not yet used was RMB 1,077,431,300. (2) Projects with committed investment of proceeds Applicable □Not applicable Unit: RMB 10,000 Accumulat Whether Investment Date when Committed ive Whether projects Investmen progress as the Benefits Whether investment Adjusted investment there are have been Total t amount at the end projects realized the projects and total amount as material changed amount of during the of the are ready during the estimated investment investment at the end changes in (including proceeds reporting reporting for their reporting return is of excessive amount (1) of the the project partial period period intended period realized proceeds reporting feasibility change) (3)=(2)/(1) use period (2) Committed investment projects The project of the comprehens 129,638. December Not ive smart No 129,638.49 3,956.73 22,741.29 17.54% 8,757.61 No 49 31, 2024 applicable sanitation allocation center Replenishm No benefit ent of 16,095.1 Not Not No 16,095.13 0 16,095.13 100.00% generated No working 3 applicable applicable separately capital Subtotal of committed 145,733. -- 145,733.62 3,956.73 38,836.42 -- -- 8,757.61 -- -- investment 62 projects Investment of excessive proceeds Not applicable Repayment of bank -- 0 0 0 0 0.00% -- -- -- -- loans (if any) Replenishm ent of working -- 0 0 0 0 0.00% -- -- -- -- capital (if any) Subtotal of investment -- 0 0 0 0 -- -- -- -- of excessive proceeds 31 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 145,733. Total -- 145,733.62 3,956.73 38,836.42 -- -- 8,757.61 -- -- 62 On April 26, 2024, the Proposal on the Delay of Part of the Projects of Proceeds from the Public Issuance of A-share Convertible Corporate Bonds was deliberated and approved at the sixth meeting of the Tenth Board of Directors and the sixth meeting of the Tenth Board of Supervisors. The Company agreed to adjust the investment progress by changing the date for the intended use of the Project-by-project details and reasons for above projects to December 31, 2026. The adjustment was made because the failure to realize planned progress and investment progress of the project of the comprehensive smart sanitation expected return (including the reasons for allocation center was mainly based on the current business size of the Company's choosing "N/A" for "Whether the expected sanitation service projects. The project's investment progress fell short of return is realized") expectations due to the impact of the overall decline in demand for sanitation equipment and the designation of or restrictions on sanitation equipment suppliers for some projects on the number of orders. Therefore, the Company adjusted the project's investment progress to ensure the quality and full use of proceeds. Explanations of the material changes in the Not applicable project feasibility Amount, purpose, and progress of excessive Not applicable proceeds Location changes in the implementation of Not applicable investment projects of the proceeds Adjustments to the implementation method of Not applicable investment projects of the proceeds Early investment and placement of the Not applicable investment projects of the proceeds Applicable The Proposal on Using Part of the Idle Fundraising Proceeds to Replenish Working Capital was deliberated and approved at the 21st Meeting of the Ninth Board of Directors and the 19th Meeting of the Ninth Board of Supervisors held by the Company on October 26, 2022, allowing the Company to use idle fundraising proceeds of no more than RMB 1 billion for temporary replenishment of working capital, which shall be used for the production and operation related to the Company's main businesses with a tenor of no more than 12 months as at the date when the Proposal was deliberated and approved by the Board of Directors. The Company issued the Announcement on the Return of Fundraising Proceeds for Temporary Replenishment of Working Capital on October 25, 2023, in which Temporary replenishment of working capital the Company returned all the RMB 1 billion of proceeds for temporary with idle proceeds replenishment of working capital to the relevant designated account for proceeds on October 24, 2023 for a period not exceeding 12 months. The Proposal on Using Part of the Idle Fundraising Proceeds to Replenish Working Capital was deliberated and approved at the Fourth Meeting of the Tenth Board of Directors and the Fourth Meeting of the Tenth Board of Supervisors held on October 28, 2023, allowing the Company to use idle fundraising proceeds of no more than RMB 1 billion for temporary replenishment of working capital, which shall be used for the production and operation related to its principal businesses with a tenor of no more than 12 months as at the date when the Proposal was deliberated and approved by the Board of Directors. As at December 31, 2023, the balance of the idle fundraising proceeds used by the Company for temporary replenishment of working capital was RMB 1,000,000,000. The amount of and reasons for the balance of Not applicable the proceeds from the project implementation Purpose and tracking of the unused proceeds The Proposal on Using Part of the Idle Fundraising Proceeds to Replenish 32 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Working Capital was deliberated and approved at the Fourth Meeting of the Tenth Board of Directors and the Fourth Meeting of the Tenth Board of Supervisors held on October 28, 2023, allowing the Company to use idle fundraising proceeds of no more than RMB 1 billion for temporary replenishment of working capital, which shall be used for the production and operation related to its principal businesses with a tenor of no more than 12 months as at the date when the Proposal was deliberated and approved by the Board of Directors. As at December 31, 2023, the balance of the idle fundraising proceeds used by the Company for temporary replenishment of working capital was RMB 1,000,000,000. The other unused proceeds of RMB 77,431,300 were kept in the designated proceeds account in the form of demand deposits to be used for the construction of the corresponding investment projects. Problems in the use of proceeds and Not applicable disclosure, or other cases (3) Changed projects of proceeds □Applicable Not Applicable No such cases during the reporting period. VIII. Sale of Material Assets and Equity Investments 1. Sale of material assets □Applicable Not Applicable No such cases during the reporting period. 2. Sale of material equity investments □Applicable Not Applicable IX. Analysis of Major Subsidiaries and Joint Stock Companies Applicable □Not applicable Main subsidiaries and joint stock companies with an over 10% influence on the Company's net profit Unit: RMB Type of Principal Registered Operating Operating Company name Total assets Net assets Net profit company activities capital revenue profit Changsha Zoomlion Smart urban 2,351,529,8 17,721,351,6 8,074,408,45 10,689,866,5 815,342,983. 712,220,602. Environmental Subsidiary service 00 11.36 5.97 67.16 52 56 Industry Co., Ltd. Acquisition and disposal of subsidiaries during the reporting period Applicable □Not applicable Acquisition and disposal Company name of subsidiaries during the Effects on the overall operations and performance reporting period Hubei Yingling Testing Technology Service Business combination not Positive effects on the Company's business Co., Ltd. under common control 33 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Liaocheng Chiping Yingsheng Environmental Incorporation Positive effects on the Company's business Sanitation Service Co., Ltd. Jiangmen Lvying Urban Environmental Service Incorporation Positive effects on the Company's business Co., Ltd. Fuzhou Changle Yingsheng Urban Incorporation Positive effects on the Company's business Environmental Service Co., Ltd. Chongqing Banan Yinghe Urban Incorporation Positive effects on the Company's business Environmental Service Co., Ltd. Guangzhou Yingtai Urban Management Service Incorporation Positive effects on the Company's business Co., Ltd. Foshan Shunde Yingchuang Urban Incorporation Positive effects on the Company's business Environmental Service Co., Ltd. Puning Honglian Environmental Service Co., Incorporation Positive effects on the Company's business Ltd. Hefei Yingsheng Urban Environmental Service Incorporation Positive effects on the Company's business Co., Ltd. Fengyang Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Sanya Yinglian Urban Environmental Service Incorporation Positive effects on the Company's business Co., Ltd. Fuzhou Yinghe Environmental Development Incorporation Positive effects on the Company's business Co., Ltd. Chuzhou Tongying Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Yongxin Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Lianjiang Yinglian Urban Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Guangzhou Yingzhi Urban Environmental Incorporation Positive effects on the Company's business Sanitation Service Co., Ltd. Shenzhen Longgang Yinglian Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Shenzhen Yinglian Landscaping Engineering Incorporation Positive effects on the Company's business Co., Ltd. Yangjiang Yinghe Urban Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Renshou Yinghe Urban and Rural Sanitation Incorporation Positive effects on the Company's business Service Co., Ltd. Chibi Yinglian Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Shenzhen Longgang Yingji Urban Service Co., Incorporation Positive effects on the Company's business Ltd. Wuyi Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Xuchang Jian'an Tongying Environmental Incorporation Positive effects on the Company's business Sanitation Management Co., Ltd. Foshan Shunde Yinglian Urban Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Taizhou Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Changsha Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Huichang Yingmao Environmental Incorporation Positive effects on the Company's business Management Co., Ltd. Tangshan Yinglian Environmental Management Incorporation Positive effects on the Company's business Co., Ltd. Yongfeng Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business 34 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Management Co., Ltd. Nanjing Yinglian Environmental Technology Incorporation Positive effects on the Company's business Co., Ltd. Suzhou Wujiang Yinghe Environmental Incorporation Positive effects on the Company's business Sanitation Management Co., Ltd. Xiajiang Yinghe Environmental Sanitation Incorporation Positive effects on the Company's business Management Co., Ltd. Longquan Tongying Environmental Sanitation Incorporation Positive effects on the Company's business Service Co., Ltd. Xinhua Yinglian Modern Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Guangxi Luocheng Yingxin Urban Incorporation Positive effects on the Company's business Environmental Service Co., Ltd. Suzhou Yingfen Environmental Industry Co., Incorporation Positive effects on the Company's business Ltd. Renshou Zhongying Sanitation Service Co., Incorporation Positive effects on the Company's business Ltd. Nantong Lianying Environmental Service Co., Incorporation Positive effects on the Company's business Ltd. Huazhou Liansheng Urban Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Heyuan Zijin Liansheng Urban Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Tangshan Yingxing Sanitation Equipment Incorporation Positive effects on the Company's business Manufacturing Co., Ltd. Quanzhou Yingxin Urban Environmental Incorporation Positive effects on the Company's business Service Co., Ltd. Zhejiang Yolsh Intelligent Emergency Incorporation Positive effects on the Company's business Equipment Co., Ltd. Heyang Yinghe Urban Environmental Service Incorporation Positive effects on the Company's business Co., Ltd. Xuzhou Tongying Environmental Sanitation Incorporation Positive effects on the Company's business Service Co., Ltd. Asset optimization; No material impact on the Meishan Pengshan Zhongfeng Environmental De-registration Company's production, operation and Industry Co., Ltd. performance Asset optimization; No material impact on the Chengdu Yinglian Environmental Management De-registration Company's production, operation and Co., Ltd. performance Asset optimization; No material impact on the Guangxi Guiping Yinghe Environmental De-registration Company's production, operation and Sanitation Management Co., Ltd. performance Asset optimization; No material impact on the Shengzhou Yinghe Environmental Sanitation De-registration Company's production, operation and Management Co., Ltd. performance Asset optimization; No material impact on the Chongyang Yinglian Environmental Protection De-registration Company's production, operation and Co., Ltd. performance Asset optimization; No material impact on the Yiyang Yinglian Environmental Sanitation De-registration Company's production, operation and Management Co., Ltd. performance Asset optimization; No material impact on the Wanning Yinglian Environmental Industry Co., De-registration Company's production, operation and Ltd. performance Asset optimization; No material impact on the Shenzhen Longhua District Yinglian Urban De-registration Company's production, operation and Service Co., Ltd. performance 35 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Asset optimization; No material impact on the Guangdong Infore Smart Technology Co., Ltd. De-registration Company's production, operation and performance Asset optimization; No material impact on the Anhua Yingsheng Environmental Sanitation De-registration Company's production, operation and Service Co., Ltd. performance Asset optimization; No material impact on the Gucheng Yinglian Urban Environmental Transfer Company's production, operation and Service Co., Ltd. performance Asset optimization; No material impact on the Zaozhuang Yinglian Urban Environmental Transfer Company's production, operation and Service Co., Ltd. performance Asset optimization; No material impact on the Yichun Yinglian Urban Environmental Service Transfer Company's production, operation and Co., Ltd. performance Asset optimization; No material impact on the Chongqing Yinglian Urban Environmental Transfer Company's production, operation and Sanitation Service Co., Ltd. performance Asset optimization; No material impact on the Huaibei Zhongfeng Urban Environmental Transfer Company's production, operation and Service Co., Ltd. performance Fact sheet of major subsidiaries X. Structured Entities Controlled by the Company □Applicable Not Applicable XI. Future Prospects of the Company (I) Market opportunities 1. The 2023 national policies are favorable for the development of the sanitation industry On January 30, the Ministry of Industry and Information Technology, together with other seven state departments issued the Notice on Organizing the Pilot Program of Pilot Zones for Full Electrification of Public Service Vehicles, requiring that there should be a significant rise in the proportion of new energy vehicles in incremental and upgraded vehicles in pilot areas, with an 80% level in terms of buses, taxis, sanitation, postal and express delivery, and urban logistics vehicles fueled by new energy. This policy is favorable for the development of the industry. The Opinions of the Central Committee of the CPC and the State Council on Fulfilling the Key Work of Comprehensively Promoting Rural Revitalization in 2023, which was issued on February 13, requires that efforts should be made to solidly advance the improvements in the rural living environment and increase the intensity of improvements in the village public space. This directly benefits the waste collection and transportation equipment sector. On May 17, the National Development and Reform Commission (NDRC) issued the Guidelines on Accelerating the Construction of Charging Infrastructure to Better Support New Energy Vehicle Purchases in the Countryside and Rural Revitalization. This policy encourages regions with suitable conditions to increase support for the adoption of new energy vehicles (NEV) in public transport, road passenger transport, taxis, law enforcement, sanitation, and logistics. The State Council, at a policy briefing held on June 21, announced a pilot program for the full electrification of public vehicles. This program involves an implementation plan for heavy-duty truck electrification, and acceleration of the electrification of urban buses, logistics vehicles, taxis, sanitation vehicles, and heavy trucks. 36 Infore Environment Technology Group Co., Ltd. 2023 Annual Report On June 30, the General Office of NDRC and other departments issued the Notice on Addressing Shortcomings in Public Sanitation and Environmental Facilities and Carrying Out Clean-up and Rectification in Urban and Rural Environmental Sanitation. This notice sets out initiatives to improve urban environmental sanitation and rural living environments, and address deficiencies in urban and rural waste and sewage treatment. On July 25, the NDRC issued the Notice on the Action Plan for Upgrading Environmental Infrastructure Construction (2023- 2025). This plan calls for accelerating improvements in domestic waste sorting facilities and systems, reasonably blueprinting the construction of collection points, stations, and transfer compression stations, and enhancing collection and transportation networks. This document also aims to address the shortage of domestic waste incineration capacity in county-level regions by encouraging the use of the model of collection at villages, transportation in towns, and processing in counties or nearby to promote the construction of facilities in towns with established status and rural areas. On July 31, the NDRC and other departments issued the Notice on Several Measures to Promote Automobile Consumption. This policy encourages the purchase of new energy vehicles for government agencies, public transport, taxis, postal services, sanitation, and landscaping in appropriate areas when new vehicles are needed or old vehicles need to be upgraded. On August 25, the Ministry of Industry and Information Technology and six other departments issued the Notice on the Work Plan for Stabilizing Growth in the Automobile Industry (2023-2024). This plan requires organizing the pilot program of pilot zones for full electrification of public service vehicles, accelerating the adoption of new energy buses, taxis, sanitation, postal and express delivery, and urban logistics vehicles, studying, exploring and promoting pilot projects for zero-emission heavy-duty truck in regional freight transport to further increase the electrification level of public service vehicles. It also calls for comprehensively promoting the demonstration of fuel cell vehicles and steadily increasing the applications of fuel cell vehicles. On October 24, the sixth meeting of the 14th Standing Committee of the National People's Congress adopted a resolution on the issuance by the State Council of additional government bonds and the plan to adjust the 2023 central budget. The central government issued an additional RMB 1 trillion of 2023 government bonds in the fourth quarter. These funds were allocated directly to local governments through transfer payments, for them to focus on rebuilding disaster-stricken areas and addressing deficiencies in disaster prevention and relief infrastructure. On November 15, the Ministry of Industry and Information Technology, the Ministry of Transport, and six other departments issued the Notice on Launching the First Batch of Pilot Program of Pilot Zones for the Full Electrification of Public Service Vehicles. This notice identifies fifteen cities, namely Beijing, Shenzhen, Chongqing, Chengdu, Zhengzhou, Ningbo, Xiamen, Jinan, Shijiazhuang, Tangshan, Liuzhou, Haikou, Changchun, Yinchuan and Ordos, as pilot zones to explore replicable experiences and models, to play a demonstrative and leading role in the full market expansion of NEVs and the development of a green and low- carbon transport system. The document sets out a pilot program that focuses on promoting NEVs in various sectors, including government vehicles, city buses, sanitation trucks, taxis, postal and delivery vehicles, urban logistics vehicles, airport vehicles, and heavy-duty trucks for specific applications, and the goal is to deploy over 600,000 NEVs. On November 21, the third round of central ecological and environmental inspection commenced, with five inspection teams dispatched to Fujian, Henan, Hainan, Gansu, and Qinghai for a month-long inspection. The inspections focused on environmental issues in implementation of major regional strategies, major ecological damage, environmental pollution, environmental risks, and related responses; environmental infrastructure construction and operation; rectification of issues, ecological and environmental issues that have been raised by the people as major concerns; and the implementation of the principle that both Party committees and governments take responsibility, and officials perform their duties while also taking responsibility for ecological and environmental protection. On November 30, the State Council issued the Notice on the Action Plan for Continuous Improvement of Air Quality. This plan sets out targets of reducing PM2.5 concentrations by 10% compared to 2020 levels, and limiting the proportion of days with severe or severer air pollution to less than 1% in all prefecture-level and above cities; reducing PM2.5 concentrations by 20% in the Beijing- Tianjin-Hebei Region and surrounding areas, and 15% in Fenwei Plain, and achieving overall compliance with national standards on PM2.5 concentration in Yangtze River Delta Region, and maintaining Beijing's PM2.5 concentration below 32 micrograms per cubic 37 Infore Environment Technology Group Co., Ltd. 2023 Annual Report meter. In key regions, at least 80% of newly added or updated public buses, taxis, urban logistics vehicles, and light sanitation vehicles should be fueled by new energy. In prefecture-level and above cities, the mechanical cleaning rate of roads within the built- up area should reach around 80%, and the mechanical cleaning rate of roads in counties should reach around 70%. On December 25, the Ministry of Ecology and Environment issued the Notice on Issuing the Comprehensive Action Plan for Tackling Air Pollution in the Beijing-Tianjin-Hebei Region and Surrounding Areas and the Fenwei Plain during the Autumn and Winter of 2023-2024. This plan requires that by the end of December 2023, the construction or renovation of VOCs treatment facilities should be completed at 1,040 enterprises, and VOCs fugitive emissions should be addressed at 1,217 enterprises. At least 80% of newly added or updated public service vehicles, such as public buses, taxis, logistics vehicles, and light sanitation vehicles, should be fueled by new energy. 2. The demand for urban services will keep increasing The source of urban services revenue is the government budget with the nature of rigid expenditure and is less affected by macroeconomic regulation factors. The business is characterized by continuity and stability. (1) The scale of demand for services driven by urbanization As urbanization continues, the construction of urban roads will directly increase the area for road cleaning, urban housing, compound construction, and urban greening, hence increasing the demand for environmental protection equipment and urban cleaning services. Furthermore, sanitation is one of the prerequisites for each province, city, and district to construct urban upgrades such as "national civilized cities", "national hygienic cities", "national model cities of environmental protection", and "national ecological garden cities". From 2015 to 2022, the area of road cleaning in China's cities and counties increased from 9.678 billion square meters to 13.337 billion square meters, an overall increase of nearly 37.8%; the domestic waste removed and transported in cities and counties rose from 258 million tons to 317 million tons, an overall growth of 22.9%, according to the statistics from the National Bureau of Statistics and the Ministry of Housing and Urban-Rural Development. Driven by urbanization, the release of urban service demand is constantly facilitated in order to maintain the cleanliness and sanitation of urban roads, residential compounds, and municipal gardens, as well as the normal transfer and treatment of domestic waste. (2) The "Beautiful Countryside" kick-started, and the rural sanitation market is gradually gaining momentum The Five-Year Action Plan for the Remediation and Improvement of Rural Living Environment (2021-2025) requires that "the rural toilet revolution shall be firmly implemented", "the promotion of rural domestic sewage treatment shall be accelerated", and "the standard of rural domestic waste treatment shall be improved comprehensively". In the era of building "beautiful villages" and boosting urban and rural sanitation integration, projects like promotion by all counties and comprehensive management have emerged continuously and the rural sanitation market will enter a new stage for further rapid market expansion. This will create vast opportunities for urban services and the entire sanitation industry. (3) Continued promotion of waste classification and the continued release of market demand In September 2020, President Xi Jinping chaired the meeting of the Central Comprehensively Deepening Reforms Commission, at which the Several Opinions on Further Promoting Domestic Waste Classification was deliberated and approved. The accelerated implementation of waste classification policies would overturn the traditional domestic waste collection and transportation system. Conventional sanitation vehicles will no longer meet the needs of classified collection and transportation. Domestic waste is treated in four steps, namely "dumping", "collection", "transportation", and "disposal", requiring upgrades and renovation of traditional sanitation technology and equipment. Additionally, making the system smart requires increased investment, spurring a continuous release of market demand. (4) Full electrification of public service vehicles and increasing demand for new energy-powered environmental protection equipment On January 30, 2023, the MIIT, together other seven other state departments issued the Notice on Organizing the Pilot Program of Pilot Zones for Full Electrification of Public Service Vehicles, setting out to launch nationwide pilot programs of pilot zones for full electrification of public service vehicles from 2023 to 2025. The document requires that there should be a significant rise in the proportion of NEVs in incremental and upgraded vehicles in pilot areas, with an 80% level in terms of buses, taxis, sanitation, postal 38 Infore Environment Technology Group Co., Ltd. 2023 Annual Report and express delivery, and urban logistics vehicles fueled by new energy. Since 2012, China has made a guiding policy to accelerate the cultivation of the new energy vehicle industry, and has successively released important documents for its promotion. After a period of development, new energy-powered sanitation vehicles are poised for significant growth. (5) The increasing mechanization will drive the growth in the environmental protection equipment market The increase in mechanization rate of the sanitation industry will reduce the cost of sanitation operations and relieve the financial burden of governments and enterprises. With the expansion of China's urban and rural road cleaning areas, the mechanization rate of the sanitation industry is gradually increasing. According to the 2022 Urban and Rural Construction Statistical Yearbook, at the end of 2022, the mechanical cleaning space of roads in cities across the country reached 11.1 billion square meters, with a mechanization rate of 79.7%; the mechanical cleaning space of roads in counties across the country reached 2.4 billion square meters, with a mechanization rate of 78.4%. This indicates that there is still room for development in terms of the mechanization level of sanitation industry in China. In the future, as labor costs continue to rise, the mechanization of sanitation operations will become the main development direction of the domestic sanitation market, and it will cover road cleaning, guardrail cleaning, waste collection & transportation, and other segments. (6) The trend of aging population will drive the expansion of the environmental protection equipment market The frequent adjustments made by China in terms of minimum wages in different cities have largely influenced the operating costs of urban service enterprises. The defects including high operating costs and low working efficiency in the traditional manual urban service model have increased the business pressure on sanitation operation enterprises. Furthermore, China's elderly population reached 297 million at the end of 2023, accounting for 21.1% of the nation's total population, according to the State Statistics Bureau. The aging trend will exacerbate the workforce deficit in the urban service industry. Meanwhile, with the diversification of job options, the number of young and middle-aged laborers who are willing to engage in sanitation work is also decreasing. Therefore, improving the mechanization rate of the sanitation industry and expanding the use of environmental protection equipment is not only a realistic need in the face of the labor market shortage, but also the requirement for the development of urban sanitation level. (7) Industrial breakthrough fueled by technological advancement The rapid development of 5G and AI technology has widened industrial boundaries and opened up a slew of new opportunities. Small-sized smart devices and smart services will be the new bonanza, introducing new variables and increments for the sector. Smart, less humanized, or even unmanned sanitation will be a general trend. (II) Business plan for 2023 In 2023, the Company closely revolved around its development strategy and annual business plan, focusing on its core strategic business. It improved internal operations, and actively promoted smart urban services, achieving its business plan relatively well for 2023. The Company's business targets set at the beginning of the year were: RMB 80 billion in the planned cumulative contract amount of smart urban services and RMB 6.5 billion in annual revenue. The actual planned cumulative contract amount of smart urban services reached RMB 60.018 billion, while annual revenue posted RMB 5.63 billion. In 2023, the Company failed to accomplish its annual revenue target of RMB 6.5 billion for smart services, with an achievement rate of 86.62%. It also failed to accomplish its operating target of RMB 80 billion in total contract amount, with an achievement rate of 75.02%. The reason for the Company's failure to achieve the operating target of the total contract amount is a decrease in orders with long cycles of more than 5 years in the market, resulting in a slight decrease in the total contract amount of orders obtained by the Company. In 2024, the Company will take into account the market trends, diversify its operations and actively attract short- and medium-cycle projects. 2024 operating target: to achieve a cumulative contract amount of RMB 100 billion for smart urban service solutions, and to realize an annual revenue of RMB 10 billion; from 2020 to 2024, the planned cumulative contract amount would be RMB 100 billion, so as to achieve an annual revenue of RMB 10 billion. The Company will continue to increase resource input in its strategic core business, smart urban service, striving to be one of the top-ranking enterprises in the industry in the next five years. 39 Infore Environment Technology Group Co., Ltd. 2023 Annual Report In 2024, the Company will continue to follow its strategy of technology and product leadership, with further focus on its core business – smart urban services. At the same time, it will expand its presence in new energy products, including solar panel brackets as well as energy storage products for industrial and commercial purposes. (III) Plan for use of funds 2024 is a key period for the Company's rapid development. Given its big demand for funding, the Company will make a funding supply and demand plan that fits its development. Apart from making full use of its own funds, the Company will also further strengthen the management of accounts receivable while optimizing the financial structure to enable strong financial guarantees for its business development and control financial risks. The main funding sources are diverse, including any and combination of issuance of financing bills, medium-term notes, cash flows from operating activities, and bank loans. (IV) Main risk factors that may adversely affect the achievement of the Company's future development strategies and business objectives 1. Policy-related risks As the state attaches more importance to environmental protection and environmental governance, unprecedented development opportunities will also appear in the environmental protection industry, but such industry is also highly dependent on national industrial policies since it is typically policy-driven. Adjustments to macroeconomic policies, tax policies, environmental industry policies and environmental management policies will affect the Company's performance. Countermeasures: To raise the scientific decision-making capacity of managers and boost the Company's resilience against policy-related risks, the Company will pay careful attention to changes in national macroeconomic policies and strengthen research and analysis of industry policies. 2. Operation management risks As the Company continuously expands its business scale, enriches its business types, broadens its markets and develops more subsidiaries, its asset scale, personnel scale and organization scale are also undergoing rapid expansion, causing its organizational structure and management system to become more complex. Although the Company has formed a complete set of management policies for internal control and improved it annually, the difficulties and risks in the management and control are still increasing due to the differences in industry attributes, geographic distribution, cultural characteristics and corporate culture of its branch institutions. Countermeasures: the Company is concentrating on strengthening the management and risk control systems, further improving the operation management system and business process, continuing to refine management, and strengthening the risk control and culture of subsidiaries, all while strengthening the talent team. 3. Heightened market competition risks The sanitation industry in China is an emerging comprehensive industry that is still in the early stages of marketization and has a relatively low level of concentration. However, the industry is currently in a period of rapid growth. With its rapid growth, the involvement of upstream and downstream enterprises, and the continuous participation of new enterprises in different sectors, market competition will continue to intensify. The Company will likely face the risk of losing market share in the future. Countermeasures: the Company will continue to pursue a technology-driven development strategy in order to preserve its technological leadership in the industry and, as a result, solidify its market leadership. XII. Visits Paid to the Company for Purposes of Research, Communication, and Interview during the Reporting Period Applicable □Not applicable Main content of Visitor Reference of the study's Time Venue Method Visitor discussion and type basic information materials provided April 24, Foshan, By phone Institution Harvest Fund, China Operating status For details, please refer to 40 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2023 Guangdong Future Capital, Haitong and R&D direction the Record Sheet Investor Province Securities, Greenwoods of the Company Relations Activities Asset Management, GF disclosed by the Company Securities, Changjiang on April 24, 2023 on Securities, Huatai Cninfo Securities, Huatai (www.cninfo.com.cn) Securities Asset Management, China Merchants Securities, National Green Development Fund, Tianfeng Securities, Soochow Securities, Industrial Securities, Guotai Junan Securities, Everbright Securities, Huachuang Securities, etc. "Interactive For details, please refer to Business Platform for the Record Sheet of Online development status Investor Investor Relations May 12, communication and future business Relations" Others Investors Activities disclosed by the 2023 on Internet strategy of the on Company on May 12, 2023 platform Company's Panorama on Cninfo segments Network (www.cninfo.com.cn) Changjiang Securities, Northeast Securities, For details, please refer to CITIC Securities, Harvest Market situation the Investor Relations Foshan, Fund, Penghua Fund and core December Activities disclosed by the Guangdong By phone Institution Management, China Life competitiveness of 17, 2023 Company on December 18, Province Asset, Minsheng Royal the Company's 2023 on Cninfo Fund, Orient Fund, ABC- products (www.cninfo.com.cn) CA Fund Management, etc. XIII. Implementation of the Action Plan for Quality and Return Improvements Whether the Company disclosed the Action Plan for Quality and Return Improvements. □Yes No 41 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part IV Corporate Governance I. General Information of Corporate Governance 1. The Company continuously perfects its corporate governance structure in strict accordance with the requirements of the Company Law, the Securities Law and the relevant laws and regulations of the CSRC. The Board of Directors has four special committees, namely, Strategy Committee, Audit Committee, Nomination Committee, and Remuneration & Appraisal Committee, dedicated to providing advice and recommendations to ensure the Board of Directors' deliberation and decision-making are professional and efficient. 2. The Company convenes the Annual General Meeting of Shareholders in strict accordance with the relevant provisions of the Articles of Association and Rules of Procedure for General Meeting of Shareholders. The Board of Directors, which is the decision- making body of the Company, conscientiously implements the resolutions of General Meetings of Shareholders. The Board of Supervisors exercises its supervisory authorities and powers in strict accordance with the regulations, and it supervises the financial affairs of the Company as well as duty performance and actions of directors and senior officers, thus safeguarding the legitimate rights and interests of the Company and all shareholders. The Management of the Company strictly implements the resolutions of General Meetings of Shareholders and Meetings of the Board of Directors and executes decisions. All functional departments and subsidiaries of the Company are responsible for day-to-day operations. 3. During the reporting period, in order to regulate its insider information management, ensure confidentiality of insider information and effective registration and management of insiders who have access to insider information, effectively prevent securities violations of laws and regulations such as insider trading, maintain the fairness of information disclosure, and protect the legitimate rights and interests of the general investors, the Company promptly, truthfully and fully recorded all the persons with access to the insider information before disclosure at stages such as discussion and planning, demonstration and consultation, establishment and in phases such as reporting, transmission, preparation, examination, resolution, and disclosure, as well relevant information archives regarding the content, time, place, basis and method, etc. for the insiders to know the insider information, and file with the relevant regulatory authorities to strictly prevent the occurrence of insider trading, pursuant to the laws and regulations such as the Securities Law, the Measures for the Administration of Information Disclosure by Listed Companies, as well as the relevant provisions of the Articles of Association, Information Disclosure Management Policy, and Policy on Internal Reporting of Material Information of the Company. 4. The Company discloses information in strict accordance with the provisions of the Company Law, the Securities Law, the Rules Governing the Listing of Shares on SZSE, and other relevant laws, regulations and normative documents, as well as the Information Disclosure Management Policy, to ensure that it makes true, accurate, complete, timely and fair information disclosure to increase the openness and transparency of its operations. The Company has received no disciplinary actions such as criticism and reprimand from the stock exchange for issues relating to information disclosure. During the reporting period, there were no governance irregularities such as the provision of undisclosed information to the controlling shareholder and the de facto controller. 5. During the reporting period, there was no change in the stock price arising from leakage of inside information of the Company. As part of its next steps, the Company will constantly improve its corporate governance structure, further standardize corporate operations, and raise the level of corporate governance pursuant to relevant laws and regulations as well as the requirements of the SZSE. As to the actual status of corporate governance whether there is any material departure from laws, administrative regulations and the rules issued by the CSRC on listed company governance □Yes No As to the actual status of governance of the Company, there is no material non-compliance with laws, administrative regulations, and the rules issued by the CSRC on the governance of listed companies. 42 Infore Environment Technology Group Co., Ltd. 2023 Annual Report II. Independence of the Company from the Controlling Shareholder and De Facto Controller and on Ensuring Company's Assets, Personnel, Finance, Structure and Businesses and Other Aspects The Company is completely independent of the controlling shareholder in terms of businesses, personnel, assets, organization and finance, etc., and has fully independent businesses and operation capacity. Details are as follows: (1) Business independence: The Company's businesses are independent of the controlling shareholder, and the controlling shareholder and its affiliates are not engaged in any businesses in competition with the Company. (2) Personnel separation: The personnel of the Company are independent of the controlling shareholder, and the President, CFO, Board Secretary and other senior officers of the Company do not hold positions other than directors in the controlling shareholder, the financial officers of the Company do not have a part-time job in affiliated companies. The Company has put in place independent policies on labor, personnel and remuneration management and established an independent labor and personnel management department. Thus, its labor, personnel and remuneration management are completely independent. (3) Integrity of assets: The Company owns independent and complete assets and has independent production, supply and sales systems, and there is no horizontal competition between the Company and its controlling shareholder in the manufacturing and operation of the same products. (4) Organizational independence: The Company is organizationally complete, and there is no superior-subordinate relationship between its controlling shareholder and functional departments thereof and the Company and functional departments thereof. The Company's Board of Directors, Board of Supervisors and other internal institutions operate fully independently. (5) Financial separation: The Company's finance is entirely independent, with an independent financial department. It has also established an independent accounting system and financial accounting management policy dedicated to independent accounting, independent opening of bank accounts and independent tax payment. III. Horizontal Competition □Applicable Not Applicable IV. Annual and Extraordinary General Meetings of Shareholders Convened During the Reporting Period 1. General meetings of shareholders convened during the reporting period Investor Meeting Type Date of the meeting Disclosure date Meeting resolution participation ratio The Announcement on the Resolutions of the First Extraordinary General Meeting of The first Shareholders in 2023 extraordinary Extraordinary (Announcement No.: 2023-004) general general was published on the Securities 45.17% January 12, 2023 January 13, 2023 meeting of meeting of Daily, the Securities Times, the shareholders shareholders China Securities Journal, and in 2023 Cninfo (http://www.cninfo.com.cn), which are the media designated by the Company for information disclosure. The 2022 Annual The Announcement on the 72.23% May 22, 2023 May 23, 2023 Annual General Resolutions of the 2022 Annual 43 Infore Environment Technology Group Co., Ltd. 2023 Annual Report General Meeting of General Meeting of Shareholders Meeting of Shareholders (Announcement No.: 2023-030) Shareholders was published on the Securities Daily, the Securities Times, the China Securities Journal, and Cninfo (http://www.cninfo.com.cn), which are the media designated by the Company for information disclosure. 2. Extraordinary general meeting of shareholders convened at the request of preference shareholders with resumed voting rights □Applicable Not Applicable V. Information of directors, supervisors and senior officers 1. Basic information Number Number of Beginning Ending Reasons of shares shares Incumbent/ Start of End of number of Other number for share Name Gender Age Position increased decreased Former tenure tenure shares changes of shares increase/d during the during the held held ecrease period period Chairman of the Board December January 1,654,60 Ma Gang Male 45 Incumbent 1,654,600 0 0 0 N/A and 4, 2014 11, 2026 0 President September January Su Bin Male 46 Director Incumbent 0 0 0 0 0 N/A 6, 2021 11, 2026 Kuang January January Male 45 Director Incumbent 0 0 0 0 0 N/A Guangxiong 30, 2019 11, 2026 January January Shen Ke Male 53 Director Incumbent 0 0 0 0 0 N/A 30, 2019 11, 2026 Independent December January Zhang Yu Male 46 Incumbent 0 0 0 0 0 N/A Director 26, 2019 11, 2026 Independent December January Li Ruidong Male 47 Incumbent 0 0 0 0 0 N/A Director 26, 2019 11, 2026 Independent January January Li Yingzhao Male 62 Incumbent 0 0 0 0 0 N/A Director 12, 2023 11, 2026 Chairman of the Board November January Jiao Wanjiang Male 43 Incumbent 308,692 0 0 0 308,692 N/A of 14, 2016 11, 2026 Supervisors December January Liu Kan Male 40 Supervisor Incumbent 0 0 0 0 0 N/A 26, 2019 11, 2026 Employee November January Lin Meiling Female 39 Incumbent 0 0 0 0 0 N/A Supervisor 14, 2016 11, 2026 Vice April 29, January Wang Qingbo Male 48 President & Incumbent 800 0 0 0 800 N/A 2022 11, 2026 CFO Vice President December January Jin Taotao Male 41 Incumbent 0 0 0 0 0 N/A and 26, 2019 11, 2026 Secretary of 44 Infore Environment Technology Group Co., Ltd. 2023 Annual Report the Board of Directors 1,964,09 Total -- -- -- -- -- -- 1,964,092 0 0 0 -- 2 Whether any director or supervisor left office or any senior officer was dismissed during their tenure during the reporting period □Yes No Changes of the Company's directors, supervisors and senior officers Applicable □Not applicable Name Position held Type Date Reason Li Yingzhao Independent Director Elected January 12, 2023 New member election 2. Position and biographical information Professional backgrounds, major work experience and current posts in the Company of the incumbent directors, supervisors and senior officers: 1. Mr. Ma Gang, born in 1979, holding a master's degree, is Chairman of the Tenth Board of Directors of Infore Enviro. Starting in December 2014, he has been serving as President of the Company. He joined Midea Group in June 2001, and held successively the positions of R&D Engineer, branch salesman and Regional Director at Midea Rice Cooker Division, General Manager at Midea Small Domestic Appliance Sales Company in China, President of China Marketing Headquarters of Midea Daily Home Electric Appliance Group, Vice President and Domestic Sales General Manager at Midea Small Domestic Appliance Division, Vice President of Midea Small Domestic Appliance Division and General Manager at Midea Water Material Product Company, and Deputy Director at Midea Domestic Market Department. 2. Mr. Su Bin, born in 1978, holding a Master's degree, is Director of the Tenth Board of Directors of Infore Enviro. Starting in October 2020, he has been Vice President of Infore Group Co., Ltd. From March 2013 to October 2020, he held successively the positions of Executive President and President of Fosun Group's Energy and Environment Group, as well as the Executive President and Vice President of Fosun Capital, etc. He was a Partner of Mingli China Growth Fund from January 2009 to February 2013 and an Executive Director of Hongshang Industrial Holding Group Co., Ltd. from March 2003 to December 2008. 3. Mr. Kuang Guangxiong, born in 1979, holding a master's degree, is a PRC Certified Public Accountant and International Accountant, in addition to Director of the Tenth Board of Directors of Infore Enviro. He has been Vice President of Infore Group from October 2018 till now. From July 2002 to October 2018, he held successively the positions of Financial Manager at Midea Daily Home Electric Appliance Group, Financial Manager at Midea subsidiary in the US, Financial Director at Midea Kitchen Appliances Division, Financial Director at Midea Commercial Air Conditioner Division, and Financial Director at Midea-KUKA Joint Venture in China. 4. Mr. Shen Ke, born in 1971, holding a master's degree, is Director of the Tenth Board of Directors of Infore Enviro. He has been Vice President of Zoomlion Heavy Industry Science and Technology Co., Ltd. from September 2020 till now. From July 2003 to September 2020, he held the positions of Head of the Investment Development Department, Board Secretary, and Investment Director at Zoomlion Heavy Industry Science and Technology Co., Ltd. 5. Mr. Zhang Yu, born in 1978, holding a doctorate degree, is Independent Director of the Tenth Board of Directors of Infore Enviro. He has served as Associate Professor and Professor at China Europe International Business School since 2015 till now, and held the position of Assistant Professor at University of California, Irvine from 2008 to 2015. 6. Mr. Li Ruidong, born in 1977, holding a bachelor's degree, is Independent Director of the Tenth Board of Directors of Infore Enviro. He has been President and Editor-in-chief at the China Environment Magazine since November 2013 till now. He served as Assistant to General Manager of Environmental Protection Magazine Co., Ltd. from February 2012 to November 2013, and Director of the Office of the Environmental Protection Magazine from March 2008 to January 2012. 45 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 7. Mr. Li Yingzhao, born in 1962, holding a doctorate degree, is Professor of Accounting at School of Business Administration, South China University of Technology, and he serves as Independent Director of the Tenth Board of Directors of Infore Enviro. He also currently serves as Independent Director at Guangdong TLOONG Technology Group Co., Ltd., and External Supervisor of Nanhai Rural Commercial Bank Co., Ltd. He served as Independent Director at such listed companies as Guangzhou Friendship Group Co., Ltd. and Shenzhen Zhongjin Lingnan Nonfemet Co., Ltd. He has participated in the SZSE training and received the Independent Director Qualification. 8. Mr. Wang Qingbo, born in 1976, holding a bachelor's degree, is Vice President and CFO of Infore Enviro. He previously served as Vice President and Vice President of Finance at Guangdong NVC Lighting Technology Co., Ltd., Vice President of Finance at Guangdong Xinbang Logistics Co., Ltd., CFO at Midea Annto Logistics Division, Deputy CFO at Midea Small Domestic Appliance Division, Financial Manager at Midea Industrial Design Company, and Financial Supervisor at Midea Fan Factory. 9. Mr. Jin Taotao, born in 1983, holding a master's degree, is Vice President and Board Secretary of Infore Enviro. He held the positions of Engineer at the Environmental Planning Institute of the Ministry of Ecology and Environment (formerly the Ministry of Environmental Protection) from September 2005 to April 2016, Vice President at Infore Environment Technology Group Co., Ltd. from May 2016 to June 2019, and Board Secretary at Stariver Environmental Technology Co., Ltd. from July 2019 to November 2019. Mr. Jin Taotao joined the SZSE board secretaries training program in November 2019 and obtained the qualification certificate for Board Secretary. 10. Mr. Jiao Wanjiang, born in 1981, holding a master's degree, is Chairman of the Tenth Board of Supervisors of Infore Enviro. He is currently the General Manager of the Business Department of Infore Environment Technology Group Co., Ltd. He successively served as Head of the Operation Management Department and General Manager of the Solid Waste Treatment Department of Infore Environment Technology Group Co., Ltd. He joined Midea in July 2005. He successively held the positions of Domestic Sales Branch Manager of Guangdong Midea Small Domestic Appliance Sales Company in China, Senior Product Planning Manager at Headquarters and Head of Brand & Marketing Department of Headquarters. 11. Mr. Liu Kan, born in 1984, holding a bachelor's degree, is Supervisor of the Tenth Board of Supervisors of Infore Enviro. He has served the Company since February 2016 till now, and is currently Director of the Operation Management Department of a subsidiary. He held the positions of General Manager at Infore Network Technology Co., Ltd. from 2017 to November 2019, Director of the Operation Management Department of Universtar Science & Technology (Shenzhen) Co., Ltd. from 2016 to 2017, and Rice Cooker Product Planning Manager at Midea Small Domestic Appliance Shenzhen Branch and Midea Small Domestic Appliance Division from 2006 to 2015. 12. Ms. Lin Meiling, born in 1985, holding a bachelor's degree, is Supervisor of the Tenth Board of Supervisors of Infore Enviro. She is currently the Director of Human Resources at Infore Environment Technology Group Co., Ltd. Starting in 2010, she has been responsible for the administration and HR affairs of the Company. Positions held in shareholder entities: Applicable □Not applicable Receiving Name of the remuneration or Position held at the personnel holding Shareholder entity Start of tenure End of tenure allowance from the shareholder entity position shareholding entity or not Infore Group Co., Ma Gang Director March 6, 2018 April 1, 2024 No Ltd. Infore Group Co., Director and Co- Su Bin November 13, 2020 - Yes Ltd. President Kuang Infore Group Co., Director and Co- October 1, 2018 - Yes Guangxiong Ltd. President Zoomlion Heavy Shen Ke Industry Science Vice President June 29, 2015 - Yes and Technology 46 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Co., Ltd. Statements on positions held in - shareholder entities Positions held in other entities: Applicable □Not applicable Name of the Receiving personnel Position held in End of remuneration or Name of other entity Start of tenure holding other entity tenure allowance from position other entities or not Su Bin Beijing Baination Pictures Co Ltd. Director March 18, 2021 - No Su Bin KUKA Home Co., Ltd. Director February 2, 2024 - No Guangzhou Holly's International Su Bin Director August 5, 2021 - No Auction Co., Ltd. Ningbo Infore Equity Investment Fund Manager, Executive Su Bin April 21, 2021 - No Management Co., Ltd. Director Nanjing Kele Composite Materials Co., Su Bin General Manager March 6, 2017 - No Ltd. Zhuhai Aofei Infore Private Equity General Manager, Su Bin September 27, 2022 - No Fund Management Co., Ltd. Chairman Shenzhen Hongfeng Business Su Bin Vice Chairman September 25, 2023 - No Management Co., Ltd. Su Bin Shanghai Fudehui Trading Co., Ltd. Unknown April 1, 2023 - No Kuang Guangdong Infore Finance Connect Director July 6, 2020 - No Guangxiong Small Loan Co., Ltd. Kuang KUKA Home Co., Ltd. Director February 2, 2024 - No Guangxiong Kuang Guangzhou Baopu Investment Co., Ltd. Director April 22, 2022 - No Guangxiong Kuang Guangdong Infore Material Technology Chairman October 9, 2023 - No Guangxiong Co., Ltd. Kuang Infore Capital Management Co., Ltd. Director March 14, 2019 - No Guangxiong Kuang Yinghe (Shenzhen) Robotics and Director August 5, 2020 - No Guangxiong Automation Technology Co., Ltd. Bichamp Cutting Technology (Hunan) Shen Ke Director July 5, 2014 - No Co., Ltd. Chasing Jixiang Life Insurance Shen Ke Director October 31, 2012 - No Company Limited Shen Ke Zoomlion Capital Co., Ltd. Director October 22, 2015 - No Zoomlion Earth Working Machinery Executive Director, Shen Ke July 29, 2020 - No Co., Ltd. Manager Shen Ke Zoomlion Finance Co., Ltd. Director May 28, 2015 - No Shaanxi Zoomlion West Earthmoving Shen Ke Executive Director July 30, 2020 - No Machinery Co., Ltd. Zoomlion Purong Financial Leasing Shen Ke Director April 12, 2016 - No Co., Ltd. Shen Ke Zoomlion Agriculture Co., Ltd. Director October 31, 2023 - No Shen Ke Hunan Teli Hydraulic Co., Ltd. Supervisor March 11, 2020 - No 47 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Shen Ke Hunan Fangsheng Company Limited Supervisor January 30, 2018 - No Zoomlion Intelligent Agriculture Co., Shen Ke Director November 5, 2020 - No Ltd. Zoomlion Business Factoring (China) Shen Ke Director October 11, 2023 - No Co., Ltd. Hunan Xiangjiang Private Equity Fund Shen Ke Director April 28, 2021 - No Management Co., Ltd. Hunan Zoomlion Emergency Device Shen Ke Director August 17, 2017 - No Co., Ltd. Hunan Zoomlion International Trade Shen Ke Director September 23, 2002 - No Co., Ltd. Zoomlion Heavy Machinery Zhejiang Shen Ke Chairman November 8, 2023 - No Co., Ltd. Chongqing Zoomlion Shenghong Shen Ke Executive Director January 5, 2024 - No Machinery Manufacturing Co., Ltd. Hunan Zhongchen Rolled Steel Shen Ke Director May 20, 2020 - No Manufacturing Engineering Co., Ltd. Beijing Junlai Capital Management. Shen Ke Director June 22, 2018 - No Company Limited Changsha Zhonglian Zhitong Shen Ke Director April 13, 2009 - No Trenchless Technology Co., Ltd. China Europe International Business Zhang Yu Professor July 1, 2015 - Yes School Independent Zhang Yu Guangzhou MINO Equipment Co., Ltd. July 28, 2020 - Yes Director Aidite (Qinhuangdao) Technology Co., Zhang Yu Director February 1, 2022 - Yes Ltd. President and Li Ruidong China Environment Magazine November 1, 2013 - Yes Editor-in-chief Li Yingzhao Jiangxi Green Recycling Co., Ltd. Director November 19, 2020 - Yes Guangdong TLOONG Technology Independent Li Yingzhao July 21, 2022 - Yes Group Co., Ltd. Director China Broadnet Guangzhou Network Independent Li Yingzhao April 27, 2021 - Yes Co., Ltd. Director Jiao Guangdong Shunkong Environmental Director November 9, 2016 - No Wanjiang Investment Co., Ltd. Wang Guangdong Shunkong Environmental Supervisor February 23, 2023 - No Qingbo Investment Co., Ltd. Statements on positions held in - other entities Punishments imposed in the past three years by the securities regulator on the incumbent directors, supervisors and senior officers as well as those who left office during the reporting period: □Applicable Not Applicable 3. Remuneration of directors, supervisors and senior officer Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior officers The remunerations of the directors, supervisors and senior officers of the Company for 2023 are strictly in compliance with the Remuneration Plan for Directors, Supervisors and Senior Officers in 2023 deliberated and adopted by the Company, the Rules of Procedure for the Board of Directors formulated by the Company, the Rules of Procedure for the Board of Supervisors and the 48 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Articles of Association of the Company, as well as the relevant provisions of the Company Law. The remuneration of the Company's directors, supervisors and senior officers shall be determined on the basis of reasonable remuneration in the market and the Company's performance appraisal results. The actual remuneration of the independent directors of the Company is paid on an annual basis. The actual remuneration of senior officers is partly on a monthly basis, and the part linked to the Company's performance is paid at year-end. Remuneration of directors, supervisors and senior officers of the Company during the reporting period Unit: RMB 10,000 Receiving Total pre-tax remuneration Incumbent remuneration Name Gender Age Position from the /Former from the Company's related Company parties or not Chairman of the Board and Ma Gang Male 45 Incumbent 290.17 No President Su Bin Male 46 Director Incumbent 0 Yes Kuang Male 45 Director Incumbent 0 Yes Guangxiong Shen Ke Male 53 Director Incumbent 0 Yes Li Yingzhao Male 62 Independent Director Incumbent 10 No Zhang Yu Male 46 Independent Director Incumbent 10 No Li Ruidong Male 47 Independent Director Incumbent 10 No Chairman of the Board of Jiao Wanjiang Male 43 Incumbent 88.34 No Supervisors Liu Kan Male 40 Supervisor Incumbent 122.12 No Lin Meiling Female 39 Employee Supervisor Incumbent 16.12 No Wang Qingbo Male 48 Vice President & CFO Incumbent 80.1 No Vice President and Secretary Jin Taotao Male 41 Incumbent 75.44 No of the Board of Directors Total -- -- -- -- 702.29 -- Other information □Applicable Not Applicable VI. Performance of Duties by Directors during the Reporting Period 1. Information on the Board of Directors during the reporting period Meeting Date of the meeting Disclosure date Meeting resolution The Announcement on the Resolutions of the First Meeting of the Tenth The 1st meeting Board of Directors (Announcement No.: 2023-002) was published on of the Tenth January 12, 2023 January 13, 2023 the Securities Daily, the Securities Times, the China Securities Journal, Board of and Cninfo (www.cninfo.com.cn), which are the media designated by Directors the Company for information disclosure. The Announcement on the Resolutions of the Second Meeting of the The 2nd Tenth Board of Directors (Announcement No.: 2023-009) was meeting of the April 24, 2023 April 25, 2023 published in the Securities Daily, the Securities Times, the China Tenth Board of Securities Journal, and Cninfo (www.cninfo.com.cn), which are the Directors media designated by the Company for information disclosure. The 3rd The Announcement on the Resolutions of the Third Meeting of the meeting of the Tenth Board of Directors (Announcement No.: 2023-038) was August 25, 2023 August 26, 2023 Tenth Board of published in the Securities Daily, the Securities Times, the China Directors Securities Journal, and Cninfo (www.cninfo.com.cn), which are media 49 Infore Environment Technology Group Co., Ltd. 2023 Annual Report the designated by the Company for information disclosure. The Announcement on the Resolutions of the Fourth Meeting of the The 4th meeting Tenth Board of Directors (Announcement No.: 2023-045) was of the Tenth October 27, 2023 October 28, 2023 published in the Securities Daily, the Securities Times, the China Board of Securities Journal, and Cninfo (www.cninfo.com.cn), which are the Directors media designated by the Company for information disclosure. 2. Attendance of directors at Board meetings and general meetings of shareholders Attendance of directors at Board meetings and general meetings of shareholders Number of Having failed Number of Number of Number of Number of Number of Board to attend two Board Board Board general Director's Board meetings consecutive meetings meetings meetings meetings of name meetings attended by Board attended on attended absent with shareholders held way of meetings in site through proxy apologies attended telecoms person or not Ma Gang 4 4 0 0 0 No 2 Su Bin 4 4 0 0 0 No 2 Kuang 4 4 0 0 0 No 2 Guangxiong Shen Ke 4 4 0 0 0 No 2 Zhang Yu 4 4 0 0 0 No 2 Li Ruidong 4 4 0 0 0 No 2 Li Yingzhao 4 4 0 0 0 No 2 Explanation of failure to attend two consecutive Board meetings 3. Objections raised to relevant matters of the Company Whether any directors raised an objection to any relevant matter of the Company □Yes No Directors did not raise any objection to the relevant matters of the Company during the reporting period. 4. Other information about the performance of duties by directors Whether any recommendations from directors were adopted by the Company Yes □No Explanation of adoption/rejection of directors' recommendations for the Company During the reporting period, the directors of the Company acted in a diligent and responsible manner, and actively attended Board meetings and general meetings of shareholders in strict compliance with provisions and requirements in the Articles of Association of the Company, the Rules of Procedure for the Board of Directors as well as relevant laws and regulations. Based on the actual situation of the Company, the directors proposed relevant opinions on the Company's material governance and operation decisions, reached a consensus through adequate communication and discussion, firmly supervised and promoted the execution of resolutions of the Board of Directors, ensured the decision-making was scientific, timely and highly efficient and protected the legitimate rights and interests of the Company and all shareholders. VII. Information on Special Committees of the Board during the Reporting Period Name of the Members Number Date of Meeting contents Important Other Specific 50 Infore Environment Technology Group Co., Ltd. 2023 Annual Report committee of the opinions information information meetings meeting and on on matters held suggestions performance that proposed of duties objections were raised (if any) Li Yingzhao, 1. Pre-approval of the Financial Approved Kuang Statements in 2022 Annual Report; 2. January the relevant Audit Guangxiong 2022 Annual Internal Control Self- Not 5 16, proposals of -- Committee , Li Assessment Report; 3. 2023 Internal applicable 2023 this Ruidong Audit Work Plan Report; 4. Ex-ante meeting. and Zhang Communication of 2022 Annual Report. Yu 1. 2022 Annual Report and its summary; 2. 2022 Annual Final Financial Accounting Report; 3. 2022 Profit Distribution Plan Proposal; 4. 2023 First Quarter Report; 5. Assurance Report on the Placement and Use of Fundraising Proceeds in 2022; 6. Proposal on the Delay of Part of the Projects of Proceeds from the Public Issuance of A-share Convertible Corporate Bonds; 7. Proposal on Changes to Accounting Policy of the Company and Its Subsidiaries; 8. Proposal on Provision for Impairment of Goodwill in 2022; 9. Proposal on Estimated Routine Related Party Transactions for 2023; 10. Proposal on the 2023 Annual Plan for Entrusted Li Wealth Management with Self-owned Yingzhao, Funds; 11. Proposal on Guarantee Approved Kuang April Limits Provided by the Company to Its the relevant Audit Guangxiong Not 5 21, Subsidiaries; 12. Proposal on the proposals of -- Committee , Li applicable 2023 Provision of Buyer's Credit Guarantees this Ruidong for Customers; 13. Proposal on the meeting. and Zhang Application for Comprehensive Credit Yu Lines from Banks and the Authorization for the Chairman to Sign Bank Credit Contracts; 14. Proposal on Continuously Carrying out Accounts Receivable Factoring; 15. Proposal on Related Party Transactions for Temporary Borrowing Funds Provided by Infore Group Co., Ltd. to the Company in 2023; 16. Proposal on Professional Services for the Procurement Information System and Related Transactions; 17. Proposal on the Reappointment of Accounting Firms; 18. Summary Report of 2022 Auditor's Report by Pan-China Certified Public Accountants LLP (Special General Partnership); 19. 2022 Annual Internal Control Self- 51 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Assessment Report; 20. Proposal on Revising Articles of Association. 1. Summary of Internal Audit for the First Half of 2023; 2. 2023 Interim Report and its summary; 3. Special Report on the Placement and Use of Li Fundraising Proceeds in the First Half Approved Yingzhao, of 2023; 4. Revised Procedure for August the relevant Audit Kuang Annual Report Work of Audit Not 5 24, proposals of -- Committee Guangxiong Committee; 5. Revised Internal Audit applicable 2023 this and Li Management Policy; 6. Revised meeting. Ruidong Procedure for Annual Report Work of Independent Directors; 7. Revised Accountability Policy for Material Errors in Annual Report Information Disclosure. Li 1. Internal Control Work Summary for Approved Yingzhao, the Third Quarter of 2023; 2. Third October the relevant Audit Kuang Quarter Report for 2023; 3. Proposal Not 5 26, proposals of -- Committee Guangxiong on the Use of Part of Idle Fundraising applicable 2023 this and Li Proceeds to Temporarily Replenish meeting. Ruidong Working Capital. Li Yingzhao, Approved Kuang Decemb the relevant Audit Guangxiong Communication on Pre-approval of Not 5 er 11, proposals of -- Committee , Li 2023 Annual Report applicable 2023 this Ruidong meeting. and Zhang Yu 1. Reviewing the Performance of the Company's Directors and Senior Officers in Fulfilling Their Duties in Li Ruidong, Approved Remunerati 2022 and Conducting Annual Kuang January the relevant on & Performance Assessment Based on Not Guangxiong 3 12, proposals of -- Appraisal Assessment Criteria and Remuneration applicable and Zhang 2023 this Committee Policies and Plans; 2. Implementation Yu meeting. of the Remuneration Plan for Directors, Supervisors, and Senior Officers in 2022. Li Ruidong, Approved Remunerati Kuang April Proposal on the Remuneration Plan for the relevant on & Not Guangxiong 3 21, Directors, Supervisors, and Senior proposals of -- Appraisal applicable and Zhang 2023 Officers in 2023 this Committee Yu meeting. Li Ruidong, Approved Remunerati Kuang August Proposal on the Adjustment of the the relevant on & Not Guangxiong 3 24, Exercise Price of the Third Stock proposals of -- Appraisal applicable and Zhang 2023 Option Incentive Scheme this Committee Yu meeting. 1. Proposal on Electing Mr. Ma Gang as Chairman of the Tenth Board of Approved Zhang Yu, January Directors; 2. Proposal on the the relevant Nomination Ma Gang Not 1 12, Composition of the Special Committees proposals of -- Committee and Li applicable 2023 of the Tenth Board of Directors; 3. this Yingzhao Proposal on Appointing the Tenth meeting. Senior Management Team; 4. Proposal 52 Infore Environment Technology Group Co., Ltd. 2023 Annual Report on Appointing Ms. Wang Fei as Securities Representative of the Company. 1. President's Work Report 2022; 2. Proposal on the Delay of Part of the Projects of Proceeds from the Public Issuance of A-share Convertible Approved Corporate Bonds; 3. Proposal on the Ma Gang, April the relevant Strategy 2023 Annual Plan for Entrusted Wealth Not Su Bin and 3 21, proposals of -- Committee Management with Self-owned Funds; 4. applicable Shen Ke 2023 this Proposal on Continuously Carrying out meeting. Accounts Receivable Factoring; 5. Proposal on the Suspension of Downward Revision of the Conversion Price of Infore Convertible Bonds. Approved Ma Gang, August the relevant Strategy Not Su Bin and 3 24, Revised Working Rules for President proposals of -- Committee applicable Shen Ke 2023 this meeting. Approved Ma Gang, October Proposal on Using Part of the Idle the relevant Strategy Not Su Bin and 3 26, Fundraising Proceeds to Replenish proposals of -- Committee applicable Shen Ke 2023 Working Capital this meeting. VIII. Work of the Board of Supervisors Whether the Board of Supervisors identified any risk in the Company in its supervision during the reporting period □Yes No The Board of Supervisors has no objection to supervisory matters during the reporting period. IX. Information on Employees of the Company 1. Number, specialty and educational backgrounds of employees Number of in-service employees of the parent company at the 196 end of the reporting period Number of in-service employees of the major subsidiaries at 20,034 the end of the reporting period Total number of in-service employees at the end of the 20,230 reporting period Total number of paid employees during the reporting period 20,230 Number of retirees to whom the parent company or its major 0 subsidiaries need to pay retirement pensions Specialty Specialty category Number of people in the specialty Production personnel 15,969 Sales personnel 1,220 Technical personnel 1,637 Finance personnel 173 53 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Administrative personnel 1,231 Total 20,230 Educational level Types of educational level Number of people Doctoral degree 11 Master's degree 474 Bachelor's degree 2,501 College 2,274 Below college 14,970 Total 20,230 2. Remuneration policy The remuneration of employees is paid on time according to the remuneration policy of the Company. The fixed remuneration of employees is determined by the Company according to the position value and individual performance, and the floating salary of employees is determined according to the Company's individual performance assessment results. The Company swings the weight of salary payment towards strategic professionals to ensure that the income level of core talent is competitive in the market. The employee remuneration policy is subject to dynamic adjustments based on regional conditions, talent supply, staff turnover, the extent of changes in the industry environment and the corporate payment capacity. 3. Training plan The Company pursues a talent strategy of high quality, high incentives, high performance, and high cultural identity. To support employees through targeted and efficient training, Infore Enviro has put in place a 3-tier training system that covers the company level, division level, and department level. The Company has set up the Employee Skills Enhancement Center, focusing on improving the competence and capabilities of employees while actively promoting corporate culture. By continuously strengthening the trainer team, and improving online learning platforms and other key resources, while maintaining standardized training management processes, the Company is committed to creating a collaborative and efficient organizational climate that empowers employees and promotes individual growth. Its learning and development programs comprehensively cover three key areas: new skills, expertise, and leadership. Leadership development is facilitated through a string of well-designed programs such as Ascent Program, Exploration Program, and Climbing Program. These initiatives aim to guide employees in continuously scaling new heights in their professional growth and development. Expertise programs, focusing on job-specific skills, are carried out in diverse forms such as specialized training camps, marketing and R&D lectures in order to help employees meet job requirements and adapt to market changes. To better support new employees in swiftly integrating into the Company and achieving a career transformation within 90 days, both from campus and social recruiting, a wide range of training programs are carried out, such as the Young Talent Training Camp, Graduate Training Program, and programs specific to new employees from social recruiting. Moreover, a fair and competitive career development system for employees has been established to ensure that each individual has opportunities for continuous growth and promotion. The Company regularly conducts comprehensive assessments to promote employees, as part of its tangible actions to support career advances. In 2023, successful promotions for over three hundred professional employees are not only a recognition of their hard work and talent, but also the outcomes of talent development strategy. 4. Labor outsourcing Applicable □Not applicable 54 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Total hours of labor outsourced 65,861,146.46 Total payment for labor outsourcing (RMB) 789,175,464.30 X. Company's Profit Distribution and Converting Capital Reserve into Share Capital Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy during the reporting period Applicable □Not applicable According to the Articles of Association, while satisfying the conditions of cash dividend and ensuring the Company's normal operation and long-term development, the Company shall in principle pay cash dividend on an annual basis. The Board of Directors may propose interim cash dividends depending on the Company's profit status, cash flow status, development stage and capital requirements. The Company shall maintain the continuity and stability of the profit distribution policy. When the conditions for cash dividends are met, the cumulative profit distributed in cash in the recent three years shall not be less than 30% of the average annual distributable profit realized in the recent three years. During the reporting period, the Company distributed profit in strict accordance with the provisions of the Articles of Association and fully protected the legitimate rights and interests of small and medium investors. Independent directors have voiced their opinions on the proposal on the annual profit distribution of the Company. Special remarks on the cash dividend policy Whether it complies with the Company's Articles of Association or resolutions of the general meetings of Yes shareholders: Whether dividend distribution standards and ratio are explicit Yes and clear: Whether the decision-making procedure and mechanism are Yes complete: Whether independent directors diligently performed their duties Yes and played their due role: In the event that the Company does not distribute cash dividends, it shall disclose the specific reasons and the next Not applicable steps to elevate the level of return for investors. Whether minority shareholders have the opportunity to fully express their opinions and demand and whether their legal Yes rights and interests are adequately protected: In case of adjusting or changing the cash dividend policy, whether the conditions and procedures involved are in Yes compliance with applicable regulations and transparent: The Company made profits during the reporting period and the parent company's profits distributable to shareholders were positive, but no proposal for cash dividend distribution was put forward. □Applicable Not Applicable 2. Profit distribution and converting capital surplus into share capital for the reporting period Applicable □Not applicable Bonus shares per 10 shares (share) 0 Dividend per 10 shares (RMB) (tax inclusive) 1.25 Total shares as the basis for the proposal for profit distribution 3,166,941,288.00 (share) Cash dividends (RMB) (tax inclusive) 395,867,661.00 Cash dividends in other forms (such as share repurchase) 0.00 55 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (RMB) Total cash dividends (inclusive of those in other forms) (RMB) 395,867,661.00 Distributable profit (RMB) 786,431,614.32 Total cash dividends (inclusive of those in other forms) as a 50.34% percentage of total distributed profit Information on this cash dividend Others Details about the proposal for profit distribution and converting capital reserve into share capital The profit distribution plan for 2023 is as follows: Based on the total share capital (minus company shares in the Company's repurchase account) on the date of record for the 2023 profit distribution plan, a cash dividend of RMB 1.25 (tax inclusive) per 10 shares will be distributed to the shareholders, with no bonus issue from either profit or capital reserves. At the end of 2022, the Company reported RMB 559,764,885.53 in profits available for distribution and RMB 211,401,343.85 in retained earnings after cash dividends. In 2023, the Company realized a net profit of RMB 63,892,252.27 and a surplus reserve of RMB 63,892,252.27. As a result, profits available for distribution at the end of 2023 reached RMB 786,431,614.32. When the profit distribution plan for 2023 is implemented, if the total share capital (minus shares in the Company's repurchase account) on the date of record for the plan remains unchanged, which is 3,166,941,288, a cash dividend of RMB 1.25 (tax inclusive) will be distributed for every 10 shares, totaling RMB 395,867,661. As a result, retained earnings after cash dividends will be RMB 390,563,953.32. If the total share capital changes due to reasons such as the conversion of convertible bonds, share repurchases, stock incentive exercise, and the listing of new shares from refinancing before the plan is implemented, the Company will maintain the policy of distributing RMB 0.125 (tax inclusive) per share and adjust the total cash dividends accordingly. XI. Company's Implementation of Stock Option Incentive Scheme and Employee Stock Ownership Plan or Other Employee Incentive Measures Applicable □Not applicable 1. Stock incentive Overview of the Third Stock Option Incentive Scheme: 1. On April 22, 2021, the Proposal on Matters Related to the Exercise in the Second Exercise Period of the Third Stock Option Incentive Scheme was deliberated and approved at the 13th meeting of the Ninth Board of Directors and the 12th meeting of the Ninth Board of Supervisors. A total of 17,814,000 stock options of the Third Stock Option Incentive Scheme were deemed fit to be exercised at RMB 6.34 per share voluntarily in the second exercise period. Prior to the exercise of stock option, if the Company has dividend distribution, capital reserve transferred to share capital, distribution of share bonus, share split, share reduction or increase issue in stocks, etc., the exercise price of stock options will be adjusted accordingly. 2. On August 19, 2021, the 14th meeting of the Ninth Board of Directors and the 13th meeting of the Ninth Board of Supervisors held by the Company deliberated and approved the Proposal for Adjustment of the Exercise Prices of the Second and Third Stock Option Incentive Schemes. In view of the fact that the Company's 2020 annual equity distribution was completed on July 8, 2021, according to relevant provisions on the adjustment of the exercise price of the Third Stock Option Incentive Scheme (Draft), if the Company has capital reserve transferred to share capital, distribution of share bonus, share split, share reduction, dividend distribution or share allotments, etc. within the validity period of the stock options, the exercise price of stock options will be adjusted accordingly. After the implementation of this equity distribution, the exercise price of the Third Stock Option Incentive Scheme will be adjusted from RMB 6.34 per share to RMB 6.22 per share. 3. On August 24, 2022, the 19th meeting of the Ninth Board of Directors and the 18th meeting of the Ninth Board of Supervisors held by the Company deliberated and approved the Proposal for Adjustment of the Exercise Price of the Third Stock Option Incentive Scheme. In view of the fact that the Company's 2021 annual equity distribution was completed on July 20, 2022, according to relevant provisions on the adjustment of the exercise price of the Third Stock Option Incentive Scheme (Revised Draft), if the Company has capital reserve transferred to share capital, distribution of share bonus, share split, share reduction, dividend distribution or share 56 Infore Environment Technology Group Co., Ltd. 2023 Annual Report allotments, etc. within the validity period of the stock options, the exercise price of stock options will be adjusted accordingly. After the implementation of this equity distribution, the exercise price of the Third Stock Option Incentive Scheme will be adjusted from RMB 6.22 per share to RMB 6.12 per share. 4. On October 26, 2022, the 21st Meeting of the Ninth Board of Directors and the 19th meeting of the Ninth Board of Supervisors held by the Company deliberated and approved the Proposal for the Adjustment of the Eligible Participants and the Number of Options to Be Exercised under the Third Stock Option Incentive Scheme and Cancellation of Partial Stock Options and the Proposal for Matters Relating to Option Exercise during the Third Exercise Period of the Third Stock Option Incentive Scheme of the Company. (1) The Company's 22 recipients resigned and were identified by the Company's Board of Directors as no longer suitable for incentives. According to the Third Stock Option Incentive Scheme (Revised Draft), their 1,788,000 stock options in total were canceled for the second and third exercise periods. After the adjustments, the number of recipients of the Third Stock Option Incentive Scheme was adjusted from the original 231 to 209, and the number of locked stock options granted was adjusted from 23,752,000 to 21,964,000. (2) The exercise conditions for the third exercise period under the Third Stock Option Incentive Scheme have been met, and the total number of exercisable options is 21,964,000, which are exercised by individual exercise at the price of RMB 6.12 per share. Prior to the exercise of stock option, if the Company has dividend distribution, capital reserve transferred to share capital, distribution of share bonus, share split, share reduction or increase issue in stocks, etc., the exercise price of stock options will be adjusted accordingly. 5. On December 27, 2022, the Proposal on the Cancellation of Expired, Unexercised Stock Options for the Second Exercise Period of the Third Stock Option Incentive Scheme was deliberated and approved at the 22nd meeting of the Ninth Board of Directors and the 20th meeting of the Ninth Board of Supervisors. The 231 recipients exercised 16,409,380 stock options, with 1,404,620 unexercised during the second exercise period of the Third Stock Option Incentive Scheme. According to the Third Stock Option Incentive Scheme (Revised Draft), the Board of Directors agreed to cancel the 1,404,620 expired stock options. After the completion of the cancellation, the Company's Third Stock Option Incentive Scheme will continue to be implemented in accordance with the requirements. 6. On August 25, 2023, the 3rd meeting of the Tenth Board of Directors and the 3rd meeting of the Tenth Board of Supervisors held by the Company deliberated and approved the Proposal for Adjustment of the Exercise Price of the Third Stock Option Incentive Scheme. In view of the fact that the Company's 2022 annual equity distribution was completed on July 18, 2023, according to relevant provisions on the adjustment of the exercise price of the Third Stock Option Incentive Scheme (Revised Draft), if the Company has capital reserve transferred to share capital, distribution of share bonus, share split, share reduction, dividend distribution or share allotments, etc. within the validity period of the stock options, the exercise price of stock options will be adjusted accordingly. After the implementation of this equity distribution, the exercise price of the Third Stock Option Incentive Scheme will be adjusted from RMB 6.12 per share to RMB 6.01 per share. 7. On January 8, 2024, the Proposal on the Cancellation of Expired, Unexercised Stock Options for the Third Exercise Period of the Third Stock Option Incentive Scheme was deliberated and approved at the 5th extraordinary meeting of the Tenth Board of Directors. According to the provisions of the Third Stock Option Incentive Scheme (Revised Draft), the Board of Directors agreed to cancel the 21,964,000 expired stock options of 209 recipients unexercised during the third exercise period. After the cancellation, the Third Stock Option Incentive Scheme will be fully implemented. For details, please refer to announcements published on April 23, 2021, August 21, 2022, August 25, 2022, October 27, 2022, December 28, 2022, August 26, 2023, and January 9, 2024 on the media for information disclosure designated by the Company and Cninfo (http://www.cninfo.com.cn). Equity incentives granted to directors and senior officers of the Company: □Applicable Not Applicable Appraisal mechanism and incentives for senior officers 57 Infore Environment Technology Group Co., Ltd. 2023 Annual Report The Company has established a sound performance assessment and incentive system. The Board of Directors has the Remuneration & Appraisal Committee as the administrative agency for the appointment and remuneration appraisal of the senior officers of the Company, which shall be responsible for formulating remuneration standards and schemes for senior officers, reviewing their performance of duties and formulating scientific and reasonable remuneration schemes and submitting to the Board for review and discussion. The current senior officers of the Company shall be subject to comprehensive performance appraisal based on their positions, the current remuneration policy of the Company, the Company's actual operating performance, individual performance, performance of duties and achievement of responsibilities and goals, and the result of such appraisal shall serve as the basis to determine their remunerations. The Company pays the remunerations of senior officers based on schedule. During the reporting period, the senior officers of the Company conscientiously performed their duties in strict accordance with the Company Law, the Articles of Association and the relevant laws and regulations, actively implemented relevant resolutions of the General Meetings of Shareholders and Board meetings, and completed tasks of the year in a quite good way. 2. Implementation of the employee stock ownership plan Applicable □Not applicable Information on all effective employee stock ownership plans during the reporting period As a percentage of the total Source of funds Number of Total number of Scope of employees Changes share to implement employees shares held capital of the plan the listed company Employees' As at October 12, 2023, the lock- legitimate Directors (excluding up period for the Company's remuneration, independent directors), Second Employee Stock self-raised supervisors, senior officers, Ownership Plan expired, with funds, and other and backbone personnel 134 64,789,616 employees' cumulative holding of 2.04% funds obtained (technology, marketing, 64,789,616 shares of the by means production, etc.) of the Company, accounting for 2.04% permitted by Company. of the Company's total share laws and capital. regulations. Shareholding of directors, supervisors and senior officers in the employee stock ownership plan during the reporting period Number of shares held Number of shares held As a percentage of the Name Position at the beginning of the at the end of the total share capital of reporting period (share) reporting period (share) the listed company Ma Gang Chairman & President 17,246,996 17,246,996 0.54% Wang Qingbo Vice President & CFO 4,159,493 4,159,493 0.13% Vice President & Board Jin Taotao 2,462,005 2,462,005 0.08% Secretary Chairman of the Board of Jiao Wanjiang 1,846,504 1,846,504 0.06% Supervisors Liu Kan Supervisor 155,495 155,495 0.00% Changes in the asset management institution during the reporting period □Applicable Not Applicable Changes in equity arising from disposal of shares by holders during the reporting period □Applicable Not Applicable Exercise of shareholders' rights during the reporting period 58 Infore Environment Technology Group Co., Ltd. 2023 Annual Report NA Other relevant circumstances and explanations of the employee stock ownership plan during the reporting period □Applicable Not Applicable Change of the members of the employee stock ownership plan management committee □Applicable Not Applicable The financial impact of the employee stock ownership plan on the listed company during the reporting period and relevant accounting treatment □Applicable Not Applicable Termination of the employee stock ownership plan during the reporting period □Applicable Not Applicable Other statements: NA 3. Other employee incentive measures □Applicable Not Applicable XII. Establishment and Implementation of the Internal Control Policy during the Reporting Period 1. Establishment and implementation of internal control (1) Internal control development Infore Enviro has established and improved rules and regulations relating to corporate governance and internal control in accordance with the requirements of the Company Law, the Securities Law, the Basic Standard for Enterprise Internal Control, the Rules Governing the Listing of Shares on SZSE and other statutory documents. The operations of the General Meeting of Shareholders, the Board of Directors and the Board of Supervisors in Infore Enviro are in compliance with the provisions of the relevant laws, regulations, the Articles of Association of the Company, the Rules of Procedures for the General Meeting of Shareholders, the Rules of Procedures for the Board of Directors, and the Rules of Procedures for the Board of Supervisors. Corresponding internal management policy with respect to such material issues as financial accounting, fundraising, external investment, external guarantee, related party transactions and information disclosure has been established in Infore Enviro to ensure the legality and compliance of day-to-day operations and decision-making procedures for material matters. (2) Internal control implementation (a) Execution of information disclosure management policies Upon verification, the Company effectively complied with the Information Disclosure Management Policy in 2023, with good performance in information disclosure, and was not subject to punishments by the securities regulatory authorities for violation of rules on information disclosure. (b) Implementation of financial internal control policies Upon verification, with respect to finance and accounting, the Company has established the relevant internal management policy in accordance with the requirements of the Accounting Standards for Enterprises, the Company Law and other relevant laws and 59 Infore Environment Technology Group Co., Ltd. 2023 Annual Report regulations, which can ensure the accuracy and reliability of the financial and accounting information and the security and effectiveness of the financial and accounting systems. (c) Implementation of other internal control policies Upon verification, Infore Enviro complied with the provisions of the Articles of Association and the relevant rules and regulations, performed necessary decision-making procedures, and implemented the internal control policy quite well. 2. Details of material internal control deficiencies identified during the reporting period □Yes No XIII. Management and Control of the Company over the Subsidiaries during the Report Period Integration Problems in the Resolution Resolution Follow-up Company name Integration plan progress integration measures taken progress resolution plan Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable XIV. Assessment Report or Audit Report on Internal Control 1. Internal control assessment report Date of full disclosure of the April 29, 2024 internal control assessment report Index to full disclosure of the For details, please refer to the Internal Control Assessment Report disclosed on Cninfo internal control assessment report (http://www.cninfo.com.cn). The total assets of the organization included in the assessment as a percentage of the total assets in the 100.00% Company's consolidated financial statements The revenue of the organization included in the assessment as a percentage of the revenue in the 100.00% Company's consolidated financial statements Deficiency identification criteria Category Related to financial reporting Unrelated to financial reporting Material deficiencies: Material deficiencies: If the likelihood of 1. Fraud committed by directors, supervisors the deficiency is high, it could materially and senior officers in relation to financial impair work efficiency or effectiveness, reporting; materially increase uncertainty in 2. Material misstatement in financial outcomes, or result in a material statements of the current period identified by deviation from expected targets. CPAs, which was not identified in the course Significant deficiencies: If the likelihood Qualitative criteria of the functioning of internal controls; of the deficiency is medium, it could 3. Ineffective supervision over internal control significantly diminish work efficiency or by the Audit Committee and internal audit effectiveness, significantly increase agency of the Company; uncertainty in outcomes, or result in a 4. Lack of post qualification or obvious significant deviation from expected incompetence of principal financial personnel; targets. 5. Ineffective compliance supervision and General deficiencies: 60 Infore Environment Technology Group Co., Ltd. 2023 Annual Report violations of regulations that could materially If the likelihood of the deficiency is low, affect the reliability of financial statements; it could diminish work efficiency or Significant deficiencies: effectiveness, increase uncertainty in 1. No anti-fraud procedures and controls have outcomes, or result in a deviation from been established; expected targets. 2. Internal control over the selection and application of accounting policy in line with the generally accepted accounting standards have not been implemented; 3. There are one or more deficiencies in the controls over the year-end financial reporting process, and it cannot reasonably ensure that the financial statements are prepared to achieve the objectives of authenticity and completeness. General deficiencies: Other internal control deficiencies that do not constitute material deficiencies or significant deficiencies. Material deficiencies: 1. The potentially misstated amount in the profit statement is greater than or equal to 1% of the revenue in the consolidated financial statements of the Company for the most recent fiscal year or 5% of the total pre-tax profit; 2. The potentially misstated amount in the balance sheet is greater than or equal to 1% of the total assets in the consolidated financial statements of the Company for the most recent fiscal year. Significant deficiencies: 1. The potentially misstated amount in the profit statement is greater than or equal to Material deficiencies: Direct property 0.5% of the Company's revenue or 3% of the loss amount is greater than or equal to total pre-tax profit in the consolidated 1% of the Company's total assets (latest financial statements for the most recent fiscal audited). year but less than 1% of the Company's Significant deficiencies: Direct property revenue or 5% of the total pre-tax profit in the loss amount is greater than or equal to Quantitative criteria consolidated financial statements for the most 0.5% of the Company's total assets (latest recent fiscal year. audited) but less than 1% of the 2. The potentially misstated amount in the Company's total assets (latest audited). balance sheet is greater than or equal to 0.5% General deficiencies: Direct property of the total assets in the consolidated financial loss amount is less than 0.5% of the statements of the Company for the most recent Company's total assets (latest audited). fiscal year but less than 1% of the total assets in the consolidated financial statements for the most recent fiscal year. General deficiencies: 1. The potentially misstated amount in the profit statement is less than 0.5% of the Company's revenue or 3% of the total pre-tax profit in the consolidated financial statements for the most recent fiscal year; 2. The potentially misstated amount in the balance sheet is less than 0.5% of the consolidated total assets of the Company for the most recent fiscal year. 61 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Number of material deficiencies 0 related to financial reporting Number of material deficiencies 0 unrelated to financial reporting Number of significant deficiencies 0 related to financial reporting Number of significant deficiencies 0 unrelated to financial reporting 2. Audit report on internal control Applicable □Not applicable The Opinion paragraph in the audit report on internal control Infore Enviro maintained, in all material respects, effective internal control related to financial reporting as at December 31, 2023, in accordance with the Basic Standard for Enterprise Internal Control and other applicable rules. Disclosure status of the audit report on internal control Disclosed Disclosure date of the full audit report on internal control April 29, 2024 For details, please refer to the Internal Control Audit Report Index to the full audit report on internal control disclosed on Cninfo (http://www.cninfo.com.cn) Opinion type of the audit report on internal control Standard unqualified opinion Whether any material deficiency unrelated to financial No reporting Whether the accounting firm has issued the audit report with modified opinion on the Company's internal control □Yes No Whether the auditor's report on the Company's internal control is consistent with the self-assessment report issued by the Company's Board of Directors Yes □No XV. Rectification of Self-Detected Problems through the Special Campaign to Improve Governance of Listed Companies According to the system of the CSRC for filling and reporting the special self-examination list for the governance of listed companies, the Company conducted self-examination work during the special campaign based on facts and in strict accordance with the Company Law, the Securities Law, Guidelines No. 1 of SZSE for Self-regulation of Listed Companies—Standardized Operation of Companies Listed on the Main Board and other relevant laws and regulations as well as its internal rules and regulations, carefully sorted out the issues and filled in the forms. Through this self-examination, the Company believes that its corporate governance complies with the requirements of the Company Law, the Securities Law, Guidelines No. 1 of SZSE for Self-regulation of Listed Companies—Standardized Operation of Companies Listed on the Main Board and other laws and regulations, and that its corporate governance structure is sound and functions in a standardized way, without no material issues or errors. The Company shall continue to strengthen management in the following areas: 1. Further improving the internal control policy of the Company The Company shall systemically sort out and improve its corporate governance and internal control in accordance with the latest laws and regulations and combined with the requirements of the regulatory authorities and its self-examination result, further perfect its internal control policy and implement the corresponding examination and approval procedure on the revised and improved relevant policies. 2. Further facilitating special committees of the Board to play their roles 62 Infore Environment Technology Group Co., Ltd. 2023 Annual Report During the reporting period, the Company maintained special committees in strict accordance with the relevant laws and regulations, and the special committees conducted on-site inspection and supervised and guided the Company's operations management and the execution of resolutions of the Board of Directors. In the future, the Company shall continue to create conditions for members of the special committees to know well the business of the Company, facilitate themselves to play their roles and provide advice and suggestions on the Company's development planning, operations management, risk control, selection and engagement of senior officers and back-up personnel, performance appraisal of senior officers, internal control and internal audit, etc., to further improve the scientific decision-making capacity and risk prevention capacity of the Company. 3. Further improving the quality of information disclosure The Company shall optimize its policy system in strict accordance with the Administration of Information Disclosure Affairs and in combination with its own situation. In day-to-day information disclosure management, the Company shall conduct information disclosure in a concise and easy-to-understand manner on the premise that the Company, its shareholders and other information disclosure obligors shall ensure the authenticity, accuracy, completeness, timeliness and fairness of information disclosure. The relevant personnel of information disclosure shall treat the information disclosure in a diligent manner, prevent errors and ensure the quality of information disclosure and elevate the level of information disclosure. During the reporting period, the Company and its relevant personnel disclosed information in strict accordance with the requirements of laws and regulations. 4. Further ramping up staff training in laws and regulations By optimizing internal training programs and increasing training, the Company helped its staff better understand laws, regulations, and normative documents such as the Securities Law, the Rules Governing the Listing of Shares on SZSE, and the Guidelines No. 1 of SZSE for Self-regulation of Listed Companies—Standardized Operation of Companies Listed on the Main Board. Such training also helped the Company strictly comply with relevant regulations, manage its operations in a prudent manner, and prevent violations. 63 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part V Environmental and Social Responsibility I. Material Environmental Issues Whether the listed company and its subsidiaries are major pollutant emitters announced by national environmental authorities Yes □No Environmental policies and industry standards The Company strictly abides by the laws, regulations, and emission standards, such as the Environmental Protection Law of the People's Republic of China, Water Pollution Prevention and Control Law of the People's Republic of China, Integrated Wastewater Discharge Standard, and Law of the People's Republic of China on the Prevention and Control of Air Pollution. It consistently improves its management policies and optimizes pollutant treatment facilities and technologies to minimize the discharge of pollutants. Environmental administrative licensing The Company has been running all its key pollutant-discharging projects according to laws and regulations for many years. During the construction period, environmental impact assessment was carried out for these projects under relevant laws and regulations such as the Environmental Protection Law of the People's Republic of China and Law of the People's Republic of China on Environmental Impact Assessment, and environmental impact assessment documents were approved by environmental authorities. Besides, the Company obtained approval from environmental authorities before pilot production, organized environmental acceptance inspection for the completed projects during pilot production, and simultaneously designed, constructed and put into use the supporting environmental facilities and the main works. Industry discharge standards and discharge of pollutants in production and operating activities Types of main Names of main Pollutant Total Number of Discharge Total Name of entity or pollutants pollutants and Way of discharge approved Excessive discharge Layout of discharge outlets concentration/ discharge subsidiary and characteristic discharge standards discharge discharge outlets intensity volume characteristi pollutants implemented volume c pollutants Foshan Shunde Continuous GB 18918-2002, Wastewater COD 1 Beijiang River trunk stream waterway 10.5mg/L 388.37t 1606t/a N/A Huaqingyuan Water discharge Class 1A Environmental Ammonia Continuous GB 18918-2002, Wastewater 1 Beijiang River trunk stream waterway 0.54mg/L 19.97t 200.75t/a N/A Protection Co., Ltd. nitrogen discharge Class 1A (Phases I and II Wastewater Total Continuous 1 Beijiang River trunk stream waterway 0.25mg/L GB 18918-2002, 9.25t 20.075t/a N/A 64 Infore Environment Technology Group Co., Ltd. 2023 Annual Report sewage stations by phosphorus discharge Class 1A the gate), Foshan Shunde Yuanrun Water Environmental Continuous GB 18918-2002, Wastewater Total nitrogen 1 Beijiang River trunk stream waterway 6.08mg/L 224.88t 602.25t/a N/A Protection Co., Ltd. discharge Class 1A (Phase III sewage station by the gate) 80m Waste gas Smoke 1 North side of the main plant 4.2mg/Nm GB18485-2014 2.316t 14.6t/a N/A chimney 80m 40.059mg/N Waste gas SO2 1 North side of the main plant GB18485-2014 24.543t 89.28t/a N/A chimney m 80m 146.314mg/N Waste gas NOx 1 North side of the main plant GB18485-2014 85.702t 96.72t/a N/A chimney m 80m 35.987mg/N Waste gas HCl 1 North side of the main plant GB18485-2014 21.406t / N/A chimney m Funan Greenlander 80m Environmental Waste gas CO 1 North side of the main plant 15.09mg/Nm GB18485-2014 9.365t / N/A chimney Energy Co., Ltd. 80m 0.0146mg/N Waste gas Pb 1 North side of the main plant GB18485-2014 / / N/A chimney m 80m 0.0000945mg Waste gas Cd 1 North side of the main plant GB18485-2014 / / N/A chimney /Nm 80m 0.0048mg/N Waste gas Hg 1 North side of the main plant GB18485-2014 / / N/A chimney m 80m 0.057ng- Waste gas Dioxins 1 North side of the main plant GB18485-2014 / / N/A chimney TEQ/m 80m Waste gas Smoke 1 West side of the main plant 2.4mg/Nm GB18485-2014 1.49t 12t/a N/A chimney 80m Waste gas SO2 1 West side of the main plant 43.39mg/Nm GB18485-2014 20.19t 70t/a N/A chimney 80m 202.48mg/N Shouxian Waste gas NOx 1 West side of the main plant GB18485-2014 123.53t 144t/a N/A chimney m Greenlander New 80m Energy Co., Ltd. Waste gas HCl 1 West side of the main plant 51.97mg/Nm GB18485-2014 29.65t / N/A chimney 80m Waste gas CO 1 West side of the main plant 2.8mg/Nm GB18485-2014 3.74t / N/A chimney 80m Waste gas Pb 1 West side of the main plant 0.0016mg/m GB18485-2014 / / N/A chimney 65 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 80m 0.000694mg/ Waste gas Cd 1 West side of the main plant GB18485-2014 / / N/A chimney m 80m 0.00082mg/N Waste gas Hg 1 West side of the main plant GB18485-2014 / / N/A chimney m 80m 0.038ngTEQ/ Waste gas Dioxins 1 West side of the main plant GB18485-2014 / / N/A chimney m 80m Waste gas Smoke 1 East side of the main plant 1.1mg/Nm GB18485-2014 0.85t 6.78t/a N/A chimney 80m Waste gas SO2 1 East side of the main plant 28.6mg/Nm GB18485-2014 14.09t 26.06t/a N/A chimney 80m Waste gas NOx 1 East side of the main plant 151mg/Nm GB18485-2014 96.45t 104t/a N/A chimney 80m 41.718mg/N Waste gas HCl 1 East side of the main plant GB18485-2014 24.27t / N/A chimney m Lianjiang 80m Greenlander New Waste gas CO 1 East side of the main plant 28.9mg/Nm GB18485-2014 20.36t / N/A chimney Energy Co., Ltd. 80m Waste gas Pb 1 East side of the main plant / GB18485-2014 / / N/A chimney 80m Waste gas Cd 1 East side of the main plant / GB18485-2014 / / N/A chimney 80m 0.0023mg/N Waste gas Hg 1 East side of the main plant GB18485-2014 / / N/A chimney m 80m 0.063ng- Waste gas Dioxins 1 East side of the main plant GB18485-2014 / / N/A chimney TEQ/m 80m Waste gas Smoke 1 West side of the main plant 0.22mg/m GB18485-2014 0.109t / N/A chimney 80m Waste gas SO2 1 West side of the main plant 22.76mg/m GB18485-2014 16.52t 58t/a N/A chimney 80m Xiantao Greenlander Waste gas NOx 1 West side of the main plant 208.97mg/m GB18485-2014 118.29t 148.85t/a N/A chimney Environmental Power 80m Generation Co., Ltd. Waste gas HCl 1 West side of the main plant 26.69mg/m GB18485-2014 15.3t / N/A chimney (1# furnace) 80m Waste gas CO 1 West side of the main plant 2.77mg/m GB18485-2014 3.47t / N/A chimney 80m Waste gas Pb 1 West side of the main plant 0.0029mg/m GB18485-2014 / / N/A chimney Waste gas Cd 80m 1 West side of the main plant 0.00013mg/m GB18485-2014 / / N/A 66 Infore Environment Technology Group Co., Ltd. 2023 Annual Report chimney 80m Waste gas Hg 1 West side of the main plant / GB18485-2014 / / N/A chimney 80m 0.0014ngTEQ Waste gas Dioxins 1 West side of the main plant GB18485-2014 / / N/A chimney /m 80m Waste gas Smoke 1 West side of the main plant 1.03mg/m GB18485-2014 0.59t / N/A chimney 80m Waste gas SO2 1 West side of the main plant 23.13mg/m GB18485-2014 9.96t 58t/a N/A chimney 80m Waste gas NOx 1 West side of the main plant 224.04mg/m GB18485-2014 81.9t 148.85t/a N/A chimney 80m Waste gas HCl 1 West side of the main plant 29.33mg/m GB18485-2014 9.78t / N/A Xiantao Greenlander chimney Environmental Power 80m Waste gas CO 1 West side of the main plant 0.87mg/m GB18485-2014 1.76t / N/A Generation Co., Ltd. chimney (2# furnace) 80m Waste gas Pb 1 West side of the main plant 0.0032mg/m GB18485-2014 / / N/A chimney 80m 0.00014mg/m Waste gas Cd 1 West side of the main plant GB18485-2014 / / N/A chimney 80m Waste gas Hg 1 West side of the main plant / GB18485-2014 / / N/A chimney 80m 0.002ngTEQ/ Waste gas Dioxins 1 West side of the main plant GB18485-2014 / / N/A chimney m 80m 0.7655 Waste gas Smoke 1 North side of the main plant GB18485-2014 0.457t 12t/a N/A chimney mg/Nm 80m 40.0409mg/N Waste gas SO2 1 North side of the main plant GB18485-2014 23.9035t 80t/a N/A chimney m 80m 223.9976mg/ Waste gas NOx 1 North side of the main plant GB18485-2014 133.7214t 250t/a N/A chimney Nm Poyang Greenlander 80m 38.3231mg/N Renewable Energy Waste gas HCl 1 North side of the main plant GB18485-2014 22.878t / N/A chimney m Co., Ltd. 80m Waste gas CO 1 North side of the main plant 2.40mg/Nm GB18485-2014 1.433t / N/A chimney 80m Waste gas Pb 1 North side of the main plant 0.01mg/Nm GB18485-2014 / / N/A chimney 80m 0.00015mg/N Waste gas Cd 1 North side of the main plant GB18485-2014 / / N/A chimney m 67 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 80m 0.000035mg/ Waste gas Hg 1 North side of the main plant GB18485-2014 / / N/A chimney Nm 80m Waste gas Dioxins 1 North side of the main plant 0.063ng/m GB18485-2014 / / N/A chimney 80m Waste gas Smoke 1 South side of the main plant 1.72mg/m GB18485-2014 0.524t 10.95t/a N/A chimney 80m Waste gas SO2 1 South side of the main plant 43.02mg/m GB18485-2014 25.406t 31.68t/a N/A chimney 80m Waste gas NOx 1 South side of the main plant 194.13mg/m GB18485-2014 119.737t 159.72t/a N/A chimney 80m Waste gas HCl 1 South side of the main plant 30.46mg/m GB18485-2014 18.663t / N/A chimney Biyang Fenghe New 80m Energy Power Co., Waste gas CO 1 South side of the main plant 5.76mg/m GB18485-2014 1.817t / N/A chimney Ltd. 80m Waste gas Pb 1 South side of the main plant 0.0642mg/m GB18485-2014 / / N/A chimney 80m 0.000126mg/ Waste gas Cd 1 South side of the main plant GB18485-2014 / / N/A chimney m 80m Waste gas Hg 1 South side of the main plant 0.003mg/m GB18485-2014 / / N/A chimney 80m 0.0078ngTEQ Waste gas Dioxins 1 South side of the main plant GB18485-2014 / / N/A chimney /Nm Ammonia: Discharge outlets for kitchen waste and Ammonia and 1.5mg/Nm; sludge at the end of the deodorization Waste gas hydrogen Centralized 2 Hydrogen GB14554-93 None / N/A system, with waste gas discharged sulfide sulfide: through the chimney 0.06mg/Nm Smoke: Smoke: Smoke: Xiantao Yinghe Discharge outlets of kitchen biogas 20mg/Nm; 0.00832t 0.241t; Environmental Smoke, SO2 combustion at the end of the SO2: ;SO2: SO2: Waste gas Centralized 1 GB13271-2014 N/A Protection Co., Ltd. and NOX combustion system, with waste gas 50mg/Nm; 0t; 0.467t; discharged through the chimney NOX: NOX: NOX: 200mg/Nm 0.0251t 1.809t Sewage discharge outlets at the end of COD: COD: COD: COD and the sewage treatment facility, with 500mg/L; 1.969t; 4.2627t; Wastewater ammonia Centralized 1 GB8978-1996 N/A sewage discharged to the sewage plant Ammonia Ammonia Ammonia nitrogen in the west of the city after centralized nitrogen: nitrogen: nitrogen: 68 Infore Environment Technology Group Co., Ltd. 2023 Annual Report treatment 45mg/L 0.088t 0.427t Emission Standard of Eastern exhaust outlet of waste gas Volatile Organic from paint drying for whole-machine Compounds and coating (longitude 112° 50' 14.28", Ni for Surface latitude 28° 13' 59.99")/Western 0.03905 Coating Waste gas Benzene Planned 2 0.038624t / N/A exhaust outlet of waste gas from paint mg/m (Automobile drying for whole-machine coating Manufacturing (longitude 112° 50' 12.30", latitude 28° and Repair 13' 59.99") Industry) (DB43/1356- 2017); 1 mg/m Emission Standard of Eastern exhaust outlet of waste gas Volatile Organic from paint drying for whole-machine Compounds and coating (longitude 112° 50' 14.28", Ni for Surface Changsha Zoomlion latitude 28° 13' 59.99")/Western 0.0514175 Coating Environmental Waste gas Toluene Planned 2 0.057679t / N/A exhaust outlet of waste gas from paint mg/m (Automobile Industry Co., Ltd. drying for whole-machine coating Manufacturing (longitude 112° 50' 12.30", latitude 28° and Repair 13' 59.99") Industry) (DB43/1356- 2017); 3 mg/m Emission Standard of Eastern exhaust outlet of waste gas Volatile Organic from paint drying for whole-machine Compounds and coating (longitude 112° 50' 14.28", Ni for Surface latitude 28° 13' 59.99")/Western 0.300981 Coating Waste gas Xylene Planned 2 0.27389t / N/A exhaust outlet of waste gas from paint mg/m (Automobile drying for whole-machine coating Manufacturing (longitude 112° 50' 12.30", latitude 28° and Repair 13' 59.99") Industry) (DB43/1356- 2017); 17 mg/m 69 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Emission Standard of Eastern exhaust outlet of waste gas Volatile Organic from paint drying for whole-machine Compounds and coating (longitude 112° 50' 14.28", Ni for Surface Non-methane latitude 28° 13' 59.99")/Western 1.774702 Coating Waste gas Planned 2 1.770279t 424.83t/a N/A hydrocarbons exhaust outlet of waste gas from paint mg/m (Automobile drying for whole-machine coating Manufacturing (longitude 112° 50' 12.30", latitude 28° and Repair 13' 59.99") Industry) (DB43/1356- 2017); 40 mg/m Pollutant treatment The Company values environmental protection and has established a management committee to coordinate its safety and environmental activities. Safety and environmental departments equipped with management personnel have also been set up across key business segments. In recent years, the Company and its subsidiaries have been strengthening environmental policies and strictly regulating the operating procedures and job responsibilities of environmental facilities to ensure their proper functioning. This has effectively controlled pollutant emissions, and no instances of exceeding discharge standards have occurred. Throughout the routine production and operational processes, the environmental facilities integrated into the Company and its subsidiaries guarantee the uninterrupted functioning of all environmental systems. Environmental self-monitoring plan The Company developed the 2023 Environmental Self-Monitoring Plan for each of its key pollutant-discharging projects in accordance with environmental impact assessment requirements and relevant laws and regulations, and filed them with local ecological and environmental authorities. It has also engaged a professional third-party inspection agency to carry out regular environmental monitoring of the pollutants discharged by its projects. Contingency plan for environmental emergencies The Company engaged a professional third-party agency to develop a contingency plan for environmental emergencies for each of its key pollutant-discharging projects, and such plans have been approved and filed for record. In 2023, the Company carried out regular training and drills among its employees in different projects according to the requirements and contents of the contingency plans to enable them to timely and accurately deal with environmental pollution emergencies. Investment in environmental governance and protection payment of environmental taxes The Company's commitment to green development and environmental protection underpins its sustained efforts in clean production, energy conservation, consumption reduction, emission reduction, and efficiency improvement. By incorporating its environmental philosophy into day-to-day management, the Company strives to become a resource-conserving and environmental friendly business. In 2023, it invested approximately RMB 26.246 million in environmental protection and paid approximately RMB 22,800 in environmental taxes under the relevant laws and regulations. 70 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Measures adopted during the reporting period to reduce carbon emissions and their effects Applicable □Not applicable The Company made rational use of waste resources and effectively reduced environmental carbon emissions through environmental protection industrial modes such as domestic waste incineration for power generation, kitchen waste resource utilization and sewage treatment. In terms of the project of domestic waste incineration for power generation, the greenhouse gas emission reduction is about 0.78-1.32kg per kilowatt-hour, and 0.36tCO2e per ton of waste, with sound emission reduction effect. Administrative penalties for environmental issues during the reporting period Impact on the Name of entity or production and Reason Violation Penalty Rectification measures subsidiary operation of the listed company 1. Provided training for drivers in relevant legal Susong Yinghe It had no material provisions; 2. Strengthened the vehicle Environmental Non- impact on the Violation of Article 69 of the Highway Safety Protection A fine of RMB management policy to guarantee adherence to Sanitation compliant production and Regulations 200 loading protocols; 3. Carried out routine Management Co., operation operation of the listed inspections to guarantee the projects were Ltd. company. operated under established rules. Violation of Article 33 of the Regulations on the Administration of Pollutant Discharge Permit, Table 3-2, 1. A fine of RMB Loudi Zoomlion Table 2-2, Table 12-3 and Table 13 of Administrative 865,300 on the It had no material 1. Conducted training sessions for employees in Huabao Non- Penalty Discretion Standards of Hunan Province for Company; 2. A impact on the relevant legal provisions; 2. Formulated and Environmental compliant Ecological Environment Protection, Article 23 of the fine of RMB production and refined relevant rules and policies; 3. Protection operation Regulations on the Administration of Environmental 87,500 on directly operation of the listed Implemented routine inspections to ensure that Technology Co., Protection of Construction Projects, and Article 38 of the accountable company. projects were operated in compliance with rules. Ltd. Measures for the Administration of Environmental persons. Emergency Response 1. Conducted training sessions for project It had no material personnel in relevant legal provisions; 2. Xiangtan Yinglian Non- Violation of Article 10 and Article 39 of the Water impact on the Formulated and refined relevant rules and Environmental compliant Pollution Prevention and Control Law of the People's RMB 670,000 production and policies; 3. Implemented routine inspections to Industry Co., Ltd. operation Republic of China. operation of the listed ensure that projects were operated in compliance company. with rules. Zhangjiagang Non- Violation of Articles 43 and 65 of the Regulations of It had no material 1. Conducted training sessions for employees in A fine of 5,000 Zhongying compliant Jiangsu Province on the Administration of City Appearance impact on the relevant legal provisions; 2. Formulated and RMB Environmental operation and Environmental Sanitation. production and refined relevant rules and policies; 3. 71 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Development Co., operation of the listed Implemented routine inspections to ensure that Ltd. company. projects were operated in compliance with rules. Zhangjiagang It had no material 1. Conducted training sessions for employees in Zhongying Non- Violation of Articles 43 and 65 of the Regulations of impact on the relevant legal provisions; 2. Formulated and A fine of 5,000 Environmental compliant Jiangsu Province on the Administration of City Appearance production and refined relevant rules and policies; 3. RMB Development Co., operation and Environmental Sanitation. operation of the listed Implemented routine inspections to ensure that Ltd. company. projects were operated in compliance with rules. Other disclosable environmental information The Company disclosed the environmental information of each of its key pollutant-discharging projects on the government's environmental information disclosure platform on a regular basis according to the requirements of local environmental authorities. Other environmental related information NA II. Corporate Social Responsibility For details, please refer to the 2023 Sustainability Report disclosed at Cninfo (www.cninfo.com.cn). III. Performance in Consolidating Achievements in Poverty Alleviation and Promoting Rural Revitalization During the reporting period, the Company donated RMB 1,216,100 in money and materials to support poverty alleviation and rural revitalization efforts. 72 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part VI Significant Events I. Performance of undertakings 1. Undertakings of the Company's de facto controller, shareholders, related parties, and acquirer, as well as the Company and other commitment makers fulfilled during the reporting period or ongoing at the period- end Applicable □Not applicable Term of Fulfillment of Undertaking Party Type Content Date undertakings undertakings I have no plan to relinquish Undertaking Undertaking on not It is being De facto control over the listed company made at the to relinquish control January 3, properly controller He in the next 60 months from the 60 months time of asset over the listed 2019 fulfilled without Jianfeng date of completion of this restructuring company breach. transaction. Undertaking to avoid horizontal Undertaking to avoid horizontal De facto competition, Undertaking competition, regulate and It is being controllers He regulate and reduce made at the reduce related party August properly Jianfeng, Ningbo related party Indefinitely time of asset transactions, and maintain 15, 2018 fulfilled without Infore, and Infore transactions, and restructuring independence of the listed breach. Group maintain company independence of the listed company Ningbo Infore, Hongchuang Undertaking to Undertaking Investment, avoid horizontal Undertaking to avoid horizontal It is being made at the Zoomlion, competition, and competition, and regulate and August properly Indefinitely time of asset Ningbo Yingtai, regulate and reduce reduce related party 15, 2018 fulfilled without restructuring Ningbo related party transactions breach. Zhongfeng, transactions Ningbo Liantai Not fulfilled properly. The audited net The accumulative total net profit (net profit profit recorded by Lianjiang is the lower of Greenlander New Energy Co., before or after Ltd, Xiantao Greenlander deducting non- Environmental Power recurring gains Greenlander Undertaking Generation Co., Ltd., Funan and losses) for Investment made at the Undertaking related Greenlander Environmental October the period from Holding Co., Ltd. 48 months time of asset to performance Energy Co., Ltd. and Shouxian 14, 2015 2016 to 2019 is and Zheng restructuring Greenlander New Energy Co., RMB Weixian Ltd. from 2016 to 2019 shall 2,156,500, not be less than RMB 120 RMB - million (net profit is subject to 24,424,500, the lower after deducting non- RMB - recurring gains and losses). 19,192,800, and RMB -625,700 respectively; and the 73 Infore Environment Technology Group Co., Ltd. 2023 Annual Report accumulated net profit is RMB - 42,086,600 which is RMB 162,086,600 less than the performance commitment, indicating a failure to achieve the commitment in respect of the net profit for 2016 - 2019. 1. From 2016 to 2019, the newly signed waste incineration power generation BOT agreements (subject to the Not fulfilled signing of franchise agreement) properly. The signed by Greenlander newly signed Environmental shall specify a projects by total daily disposal capacity of Greenlander not less than 6,500 tons (a Environmental Greenlander single project shall have a daily Undertaking from 2016 to Investment disposal capacity of not less made at the Project October 2019 totaled Holding Co., Ltd. than 500 tons, of which at least 48 months time of asset undertakings 14, 2015 1,400 tons, and Zheng one shall be more than 2,000 restructuring 5,100 tons less Weixian tons). 2. Jiujiang Company than the project shall start construction and undertaking. obtain approval before 31 The project in December 2020. If it fails to Jiujian has not start construction or the commenced construction is recovered by the construction. government, it shall compensate the listed company at a consideration of no less than RMB 5 million. Whether the undertakings were No fulfilled on time On July 18, 2022, the High People's Court of Guangdong Province ruled that Greenlander If the undertaking is not fulfilled Investment Holding Co., Ltd. and Zheng Weixian shall pay the Company RMB 113,406,600 for on time, the specific reasons for non-fulfillment of performance commitment. As at the date of this report, the Company received non-fulfillment and the next steps RMB 106,222,592.96 in proceeds from enforcement of the ruling, or RMB 99,229,334.96 plan shall be elaborated excluding enforcement fees appraisal fees, service fees, applicable taxes, and costs. 2. Where any earnings forecast was made for any of the Company's assets or projects and the reporting period is still within the forecast period, the Company shall explain whether the performance of the asset or project reaches the earnings forecast and why □Applicable Not Applicable 74 Infore Environment Technology Group Co., Ltd. 2023 Annual Report II. Occupation of the Company's Capital by the Controlling Shareholder or Other Related Parties for Non-Operating Purposes □Applicable Not Applicable No such cases during the reporting period. III. Illegal Provision of Guarantees for External Parties □Applicable Not Applicable No such cases during the reporting period. IV. Explanations Given by the Board of Directors Regarding the "Modified Audit Opinion" for the Latest Period □Applicable Not Applicable V. Explanation of the Board of Directors, the Board of Supervisors, and Independent Directors (If Any) Regarding the "Modified Audit Opinion" for the Reporting Period □Applicable Not Applicable VI. Reason for Changes in Accounting Policies, Accounting Estimates or Corrections of Material Accounting Errors as Compared to the Financial Statements for the Prior Year Applicable □Not applicable 1. Starting from January 1, 2023, the Company has adopted the regulations on accounting treatment that the exemption of initial recognition shall not apply to the deferred income tax relating to assets and liabilities arising from a single transaction in the Interpretation of China Accounting Standards for Business Enterprises No. 16 issued by the MOF. This change in accounting policy has no effect on the Company's financial statements. VII. Reason for Changes in Scope of the Consolidated Financial Statements as Compared to the Financial Statements for the Prior Year Applicable □Not applicable For details of the changes in the scope of the consolidated financial statements during the reporting period, please refer to Note 8 "Changes in the Scope of Consolidation" in Part X Financial Statements. VIII. Engagement and Disengagement of Accounting Firm Current accounting firm Pan-China Certified Public Accountants LLP (Special General Name of the domestic accounting firm Partnership) The Company's payment to the domestic accounting firm (in 315 RMB 10,000) Consecutive years of the domestic audit service provided by the 22 75 Infore Environment Technology Group Co., Ltd. 2023 Annual Report accounting firm Names of the domestic certified public accountants from the Bian Shanshan, Wei Xiaohui accounting firm Consecutive years of audit service provided by domestic 5 years and 2 years, respectively certified public accountants from the accounting firm Whether the accounting firm was changed during the current period □Yes No Engagement of any accounting firm for internal control audit, financial advisor, or sponsor Applicable □Not applicable During the year, Pan-China Certified Public Accountants LLP (Special General Partnership) was appointed as the Company's internal control auditor, and Huaxing Securities Co., Ltd. was appointed as the Company's sponsor. IX. Possibility of Delisting after the Disclosure of This Report □Applicable Not Applicable X. Bankruptcy and Reorganization □Applicable Not Applicable No such cases during the reporting period. XI. Material Litigation and Arbitration □Applicable Not Applicable During the reporting period, other lawsuits that did not meet the disclosure criteria for material litigation primarily included purchase and sales contract disputes, with a total amount of approximately RMB 466 million, which are not expected to incur any provision of large amount. XII. Punishments and Rectifications □Applicable Not Applicable No such cases during the reporting period. XIII. Credit Standing of the Company as well as Its Controlling Shareholder and De Facto Controller Applicable □Not applicable During the reporting period, the Company as well as its controlling shareholder and de facto controller had good credit standing, with no such cases as non-fulfillment of effective court judgments or outstanding debts of large amounts due and unpaid. XIV. Material Related Party Transactions 1. Related party transactions in relation to day-to-day operations Applicable □Not applicable 76 Infore Environment Technology Group Co., Ltd. 2023 Annual Report As a Available Approved Pricing Transaction percentage market Type of Contents of Transa transaction Over Related Related party principle of amount (in of Method of price for Disclosure Index to related party related party ction limit (in approved party relationship related party RMB10,00 transactions settlement transactions date disclosure transaction transaction price RMB10,00 limit transaction 0) of same of same 0) type type Shareholder holding more Zoomlion Goods or Goods or As per than 5% of Market April 25, www.cnin Heavy financial financial -- 8,116.42 17,000 No contractua -- the price 2023 fo.com.cn Industry services services l terms Company's shares Total -- -- 8,116.42 -- 17,000 -- -- -- -- -- Details of any large-amount sales return N/A Give the actual fulfillment situation during the Before the Company's routine related party transactions in 2023, subsidiaries comprehensively assessed and reporting period (if any) where an estimate by estimated their related party transactions. However, due to changes in the market and customer demand, type had been made for the total amounts of there were differences between the Company's related party transactions and the actual situation. This was routine related party transactions to occur regular business activity and had minimal impact on day-to-day operations and performance. during the period Reason for any significant difference between the transaction price and the market reference Not applicable price (if applicable) 2. Related party transactions regarding purchase or sales of assets or equity interests □Applicable Not Applicable No such cases during the reporting period. 3. Related party transactions regarding joint investments in external parties □Applicable Not Applicable No such cases during the reporting period. 4. Current associated rights of credit and liabilities □Applicable Not Applicable No such cases during the reporting period. 5. Transactions with finance companies with related party relationships Applicable □Not applicable Deposit business Amount of the current period Maximum Opening Total Ending balance Related party daily deposit Range of Related parties balance (in Total deposited withdrawn (in relationship limit (in deposit rate amount (in RMB10,000) amount (in RMB10,000) RMB10,000) RMB10,000) RMB10,000) Related company of Zoomlion shareholder No interest Finance Co., 0 31 31 holding more accrued Ltd. than 5% of the Company's 77 Infore Environment Technology Group Co., Ltd. 2023 Annual Report shares Loan business □Applicable Not Applicable Credit or other financial business □Applicable Not Applicable 6. Transactions between the finance company controlled by the Company and related parties □Applicable Not Applicable There is no deposit, loan, credit, or other financial business between the finance company controlled by the Company and related parties. 7. Other material related party transactions □Applicable Not Applicable No such cases during the reporting period. XV. Material Contracts and Execution Thereof 1. Trusts, subcontracts, and leases (1) Trusts □Applicable Not Applicable No such cases during the reporting period. (2) Subcontracts □Applicable Not Applicable No such cases during the reporting period. (3) Leases Applicable □Not applicable Description of leases In accordance with the Property Lease Contract signed between the Company and the related party Foshan Shunde Yinghai Investment Co., Ltd., the Company leased the 23rd floor of Yingfeng Business Building at 8 Yixing Road, Junlan Community, Beijiao Town, Shunde District, Foshan City, as the business premises with a gross floor area of 1,578.68 sqm. The rent payable for 2023 was RMB 1,348,100, and the actual payment was RMB 1,348,100. As at December 31, 2023, the above amounts have been settled. Items that brought profits or losses to the Company accounting for more than 10% of the gross profit of the Company during the reporting period □Applicable Not Applicable No leasing items brought profits or losses to the Company accounting for more than 10% of the gross profit of the Company during the reporting period. 78 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2. Material guarantees Applicable □Not applicable Unit: RMB 10,000 Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries) Disclosure date of the Actual Actual Counter- Guarantee Guaranteed Guarantee Guarantee Collateral Term of Completed guarantee occurrence guarantee guarantee for a related party limit limit type (if any) guarantee or not date amount (if any) party or not announcement Joint and Buyer's credit April 25, August 31, several 1,687.47 1,687.47 N/A -- 4 years No No business 2023 2021 liability guarantee Joint and Buyer's credit April 25, June 27, several 687.85 687.85 N/A -- 3 years No No business 2023 2022 liability guarantee Joint and Buyer's credit April 25, September several 6,122.01 6,122.01 N/A -- 1 year No No business 2023 18, 2022 liability guarantee Joint and Buyer's credit April 25, September several 353.7 353.7 N/A -- 1 year No No business 2023 9, 2022 liability guarantee Joint and Buyer's credit April 25, June 30, several 4,306.24 4,306.24 N/A -- 3 years No No business 2023 2021 liability guarantee Joint and Buyer's credit April 25, September several 6,787.84 6,787.84 N/A -- 2 years No No business 2023 5, 2022 liability guarantee Buyer's credit April 25, 85,054.89 -- -- -- business 2023 Total approved limit for Total actual amount of external guarantee during the 105,000 external guarantee during 19,945.11 reporting period (A1) the reporting period (A2) Total actual balance of Total approved limit for external guarantee at the external guarantee at the end 105,000 19,945.11 end of the reporting of the reporting period (A3) period (A4) Guarantees provided by the Company for its subsidiaries Disclosure date of the Actual Actual Counter- Guarantee Guaranteed Guarantee Guarantee Collateral Term of Completed guarantee occurrence guarantee guarantee for a related party limit limit type (if any) guarantee or not date amount (if any) party or not announcement Zhejiang Shangfeng Joint and Special April 25, February 3, several 28,600 9,754.12 N/A -- 3 years No Yes Blower 2023 2023 liability Industrial guarantee Co., Ltd. Zhejiang April 25, May 22, Joint and 22,350 13,687.35 N/A -- 1 year No Yes Shangfeng 2023 2023 several 79 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Special liability Blower guarantee Industrial Co., Ltd. Zhejiang Shangfeng Joint and Special April 25, October 31, several 30,000 2,596.74 N/A -- 1 year No Yes Blower 2023 2023 liability Industrial guarantee Co., Ltd. Zhejiang Shangfeng Joint and Special April 25, March 31, several 12,000 8,700 N/A -- 3 years No Yes Blower 2023 2022 liability Industrial guarantee Co., Ltd. Zhejiang Shangfeng Joint and Special April 25, July 24, several 15,000 8,105.96 N/A -- 1 year No Yes Blower 2023 2023 liability Industrial guarantee Co., Ltd. Guangdong Joint and Infore April 25, March 1, several 4,000 12.72 N/A -- 1 year No Yes Technology 2023 2021 liability Co., Ltd. guarantee Guangdong Joint and Infore April 25, August 16, several 5,000 1,079.03 N/A -- 1 year No Yes Technology 2023 2023 liability Co., Ltd. guarantee Guangdong Joint and Infore Smart April 25, December several Sanitation 2,000 N/A -- 4 years No Yes 2023 1, 2021 liability Technology guarantee Co., Ltd. Changsha Joint and Zhongbiao April 25, September several Environment 5,000 N/A -- 2 years No Yes 2023 11, 2021 liability al Industry guarantee Co., Ltd. Shenzhen Green Joint and Oriental February 2, August 25, several 13,000 2,795 N/A -- 8 years No Yes Environment 2016 2016 liability al Protection guarantee Co., Ltd. Shouxian Joint and Greenlander April 30, November several 9,221 7,170.3 N/A -- 15 years No Yes New Energy 2022 10, 2022 liability Co., Ltd. guarantee Xiantao Greenlander Joint and Environment April 30, June 7, several 27,870 25,210 N/A -- 13 years No Yes al Power 2022 2022 liability Generation guarantee Co., Ltd. Poyang August 25, 25,000 April 26, 25,000 Joint and N/A -- 10 years No Yes 80 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Greenlander 2022 2023 several Renewable liability Energy Co., guarantee Ltd. Maoming Infore Joint and Environment December 26, March 20, several Water 15,000 9,435.05 N/A -- 15 years No Yes 2017 2018 liability Treatment guarantee Technology Co., Ltd. Lianjiang Joint and Greenlander April 30, November several 9,963 7,641.49 N/A -- 15 years No Yes New Energy 2022 30, 2020 liability Co., Ltd. guarantee Lianjiang Joint and Greenlander April 30, May 25, several 17,600 8,648.2 N/A -- 15 years No Yes New Energy 2022 2022 liability Co., Ltd. guarantee Lu'an Zhongfeng Joint and Urban April 23, June 8, several 8,000 7,400 N/A -- 13 years No Yes Environment 2021 2021 liability al Service guarantee Co., Ltd. Tongshan Joint and Tongda Water April 25, February 1, several Treatment 6,000 925 N/A -- 18 years No Yes 2020 2021 liability Technology guarantee Co., Ltd. Changde Joint and Zelian April 23, May 26, several Environment 12,000 11,700 N/A -- 15 years No Yes 2021 2021 liability al Service guarantee Co., Ltd. Xiantao Joint and Yinghe August 21, January 20, several Environment 30,100 12,200 N/A -- 15 years No Yes 2020 2021 liability al Protection guarantee Co., Ltd. Biyang Joint and Fenghe New April 25, May 23, several Energy 22,000 21,426 N/A -- 14 years No Yes 2023 2022 liability Power Co., guarantee Ltd. Changsha Zoomlion Joint and Changgao October 24, March 25, several 10,000 3,000 N/A -- 5 years No Yes Environment 2019 2020 liability al Industry guarantee Co., Ltd. Xiangtan Joint and Yinglian April 30, several Environment 15,000 July 5, 2022 4,000 N/A -- 10 years No Yes 2022 liability al Industry guarantee Co., Ltd. Tongren April 30, 14,300 August 19, 9,750 Joint and N/A -- 15 years No Yes 81 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Bijiang 2022 2022 several District liability Zhongfeng guarantee Environment al Industry Co., Ltd. Huai'an Joint and Yinghe August 25, December several Environment 15,000 5,595 N/A -- 15 years No Yes 2022 26, 2022 liability Technology guarantee Co., Ltd. Infore Zoomlion Joint and Urban April 25, November several 3,000 N/A -- 1 year No Yes Environment 2023 19, 2023 liability al Service guarantee Co., Ltd. Zhejiang Shangfeng Special April 25, 17,000 -- -- -- Blower 2023 Industrial Co., Ltd. Guangdong Infore April 25, 1,000 -- -- -- Technology 2023 Co., Ltd. Guangdong Infore Smart April 25, Sanitation 1,000 -- -- -- 2023 Technology Co., Ltd. Lianjiang Greenlander April 25, 1,200 -- -- -- New Energy 2023 Co., Ltd. Liling Zhaoyang April 25, Environment 50,000 -- -- -- 2023 al Protection Co., Ltd. Huai'an Chenjie Environment April 25, 5,000 -- -- -- al 2023 Engineering Co., Ltd. Other wholly- April 25, owned 7,000 -- -- -- 2023 subsidiaries Total actual guarantee Total approved guarantee amount for subsidiaries limit for subsidiaries during 231,150 68,935.92 during the reporting the reporting period (B1) period (B2) Total approved guarantee Total actual guarantee limit for subsidiaries at the 518,204 balance for subsidiaries 205,831.96 end of the reporting period at the end of the reporting 82 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (B3) period (B4) Guarantees between subsidiaries Disclosure date Actual Actual Counter- Guarantee Guaranteed of the Guarantee Guarantee Collateral Term of Completed occurrence guarantee guarantee for a related party guarantee limit limit type (if any) guarantee or not announcement date amount (if any) party or not Total actual guarantee Total approved guarantee amount for subsidiaries limit for subsidiaries during 0 0 during the reporting the reporting period (C1) period (C2) Total approved guarantee Total actual guarantee limit for subsidiaries at the balance for subsidiaries 0 0 end of the reporting period at the end of the reporting (C3) period (C4) Total guarantee amount (total of the three kinds above) Total actual guarantee Total approved guarantee amount during the limit during the reporting 336,150 88,881.03 reporting period period (A1+B1+C1) (A2+B2+C2) Total approved guarantee Total actual guarantee limit at the end of the balance at the end of the 623,204 225,777.07 reporting period reporting period (A3+B3+C3) (A4+B4+C4) Total actual guarantees (A4+B4+C4) as a percentage 12.95% of the Company's net assets Of which: Amount of guarantees provided for shareholders, the 0 actual controller and their related parties (D) Balance of debt guarantees provided directly or indirectly for the guaranteed party with a liability-to- 156,651.97 asset ratio over 70% (E) Total of the three types of guarantees above (D+E+F) 156,651.97 Description of any cases during the reporting period where unexpired guarantee contracts led to guarantee liability or had indications that the Company may N/A assume joint and several liabilities for compensation (if applicable). Description of composite guarantees 3. Entrusted cash management (1) Entrusted wealth management Applicable □Not applicable Overview of entrusted wealth management during the reporting period Unit: RMB 10,000 Accrued impairment Entrusted Unrecovered Type Funding source Undue amount amount for unrecovered amount overdue amount overdue wealth 83 Infore Environment Technology Group Co., Ltd. 2023 Annual Report management Bank's wealth Own funds 85,630 0 0 0 management product Total 85,630 0 0 0 High-risk entrusted wealth management with a material single amount or low security and low liquidity □Applicable Not Applicable Entrusted wealth management with expected irrecoverable principal or other circumstances that may lead to impairment □Applicable Not Applicable (2) Entrusted loans □Applicable Not Applicable No such cases during the reporting period. 4. Other material contracts □Applicable Not Applicable No such cases during the reporting period. XVI. Other Material Events □Applicable Not Applicable No such cases during the reporting period. XVII. Material Events of Subsidiaries Applicable □Not applicable On April 29, 2022, the Proposal on the Revised Plan of Infore Environment Technology Group Co., Ltd. for the Spin-off of Zhejiang Shangfeng Special Blower Industrial Co., Ltd. to be Listed on the ChiNext Board was deliberated and approved at the 18th meeting of the Ninth Board of Directors. On May 24, 2022, the proposal on the spin-off of Zhejiang Shangfeng Special Blower Industrial Co., Ltd. ("Shangfeng") for listing on the ChiNext market of SZSE were deliberated and approved at the Company's 2021 Annual General Meeting of Shareholders. For details, please refer to the announcement published on April 30, 2022 on the media for information disclosure designated by the Company and Cninfo (www.cninfo.com.cn). On June 30, 2022, SZSE accepted the application for IPO and listing on the ChiNext submitted by Shangfeng. On July 25, 2022, SZSE issued the Letter on Review and Inquiry of the Application Documents of Zhejiang Shangfeng High-tech Special Wind Industrial Co., Ltd. for IPO and Listing on the ChiNext (S.H.H. [2022] No. 010721). Shangfeng submitted its reply to the letter on December 7, 2022. On December 15, 2022, SZSE issued the Letter on the Second Round of Review and Inquiry of the Application Documents of Zhejiang Shangfeng Special Blower Industrial Co., Ltd. for IPO and Listing on the ChiNext (S.H.H. [2022] No. 011129). Shangfeng submitted its reply to the letter on March 17, 2023. On July 21, 2023, SZSE rendered its decision (S.Z.S.S. [2023] No. 586) to terminate the review process for the intended IPO and listing of Zhejiang Shangfeng Special Blower Industrial Co., Ltd. on the ChiNext. 84 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part VII Share Changes and Shareholder Information I. Share Changes 1. Share changes Unit: Share Before change Increase/decrease (+/-) After change Shares as Shares as dividend dividend converted Quantity Ratio New issues Others Sub-total Quantity Ratio converted from from profit capital reserves I. Restricted 1,838,140 0.06% 0 0 0 -365,671 -365,671 1,472,469 0.05% Shares 1. Shares held by the 0 0.00% 0 0 0 0 0 0 0.00% State 2. Shares held by state- 0 0.00% 0 0 0 0 0 0 0.00% owned corporations 3. Shares held by other 1,838,140 0.06% 0 0 0 -365,671 -365,671 1,472,469 0.05% domestic investors Including: Shares held by 0 0.00% 0 0 0 0 0 0 0.00% domestic corporations Shares held by 1,838,140 0.06% 0 0 0 -365,671 -365,671 1,472,469 0.05% domestic individuals 4. Shares held by 0 0.00% 0 0 0 0 0 0 0.00% overseas investors Including: Shares held by 0 0.00% 0 0 0 0 0 0 0.00% overseas corporations Shares held by 0 0.00% 0 0 0 0 0 0 0.00% overseas individuals II. Unrestricted 3,177,667 3,178,034,2 99.94% 1,111 0 0 365,671 366,782 99.95% Shares ,419 01 3,177,667 3,178,034,2 1. RMB- 99.94% 1,111 0 0 365,671 366,782 99.95% ,419 01 85 Infore Environment Technology Group Co., Ltd. 2023 Annual Report denominated common shares 2. Domestically 0 0.00% 0 0 0 0 0 0 0.00% listed foreign shares 3. Overseas listed foreign 0 0.00% 0 0 0 0 0 0 0.00% shares 4. Others 0 0.00% 0 0 0 0 0 0 0.00% III. Total 3,179,505 3,179,506,6 Number of 100.00% 1,111 0 0 0 1,111 100.00% ,559 70 Shares Reasons for share changes Applicable □Not applicable 1. Upon the expiry of the lock-up period due to a change in the Company's senior officer positions, the lock-up on senior officer- held shares was lifted, resulting in a decrease of 365,671 restricted shares and a commensurate rise of 365,671 unrestricted shares. 2. As at December 31, 2023, 16,944 shares in total were converted from the Infore Convertible Bonds issued by the Company. In particular, 1,111 shares were converted in 2023, resulting in an increase in the Company's non-restricted shares by 1,111. Approval of changes in share capital Applicable □Not applicable With the approval granted by the CSRC under Document Z.J.X.K. [2020] No. 2219, the Company publicly issued 14,761,896 convertible corporate bonds on November 4, 2020, with a par value of RMB 100 and a total amount of RMB 1,476,189,600. Per approval of SZSE, the Company's convertible corporate bonds of RMB 1,476,189,600 have been listed for trading on SZSE, starting on December 2, 2020. The Infore Convertible Bonds in this offering are convertible into the Company's shares from May 10, 2021. Transfer of shares Applicable □Not applicable During the reporting period, China Securities Depository and Clearing (Shenzhen) Corporation Limited handled the share registration procedures for 1,111 shares converted from convertible corporate bonds. Effects of share changes on basic earnings per share, diluted earnings per share, net asset value per share attributable to the Company's common shareholders and other financial indicators of the prior year and the prior accounting period, respectively □Applicable Not Applicable Other information that the Company deems disclosable or disclosable as required by the securities regulatory authorities □Applicable Not Applicable 2. Changes in restricted shares Applicable □Not applicable Unit: Share Number of shares Increase of restricted Decrease of Number of shares Reasons for Name of held at the Date of lifting shares during the restricted shares held at the end of trading shareholder beginning of the trading restriction period during the period the period restriction period Locked-up Annual restriction Others 1,838,140 0 365,671 1,472,469 shares of lifting under senior officers regulations 86 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Total 1,838,140 0 365,671 1,472,469 -- -- II. Issuance and Listing of Securities 1. Issuance of securities (exclusive of preference shares) during the reporting period □Applicable Not Applicable 2. Changes in total number of shares, shareholder structure and asset and liability structures Applicable □Not applicable 1. Upon the expiry of the lock-up period due to a change in the Company's senior officer positions, the lock-up on senior officer- held shares was lifted, resulting in a decrease of 365,671 restricted shares and a commensurate rise of 365,671 unrestricted shares. 2. With the approval granted by the CSRC under Document Z.J.X.K [2020] No. 2219, the Company publicly issued 14,761,896 convertible corporate bonds on November 4, 2020, each with a par value of RMB 100 and the total issued amount is RMB 1,476,189,600. Per approval of SZSE, the Company's convertible corporate bonds of RMB 1,476,189,600 have been listed for trading on SZSE, starting on December 2, 2020. The Infore Convertible Bonds in this offering are convertible into the Company's shares from May 10, 2021. On January 3, 2024, the Company disclosed the Announcement on Results of Conversion of Convertible Bonds and Changes in Share Capital in the Fourth Quarter of 2023. As at December 31, 2023, 16,944 shares in total were converted from the "Infore Convertible Bonds" issued by the Company. In particular, 1,111 shares were converted in 2023, resulting in an increase in non- restricted shares by 1,111. 3. Existing internal employee shares □Applicable Not Applicable III. Controlling Shareholders and De Facto Controller 1. Number of shareholders and their shareholdings Unit: Share Number of Number of preference Number of shareholders shareholders Number of preference shareholders at the end of with resumed shareholders with resumed of common the month voting power voting power at the end of shares at the 35,253 34,412 0 0 prior to the at the end of the previous month prior to end of the disclosure the reporting the disclosure date of this reporting date of this period (if report (if any) (see Note 8) period report any) (see Note 8) Shareholders holding over 5% of total shares or top 10 shareholders Shareholding Shares pledged, tagged or Increase/decr s at the end Number of Number of frozen Name of Nature of Shareholding ease during of the restricted unrestricted shareholder shareholder ratio the reporting reporting shares held shares held Share status Quantity period period Ningbo Domestic 32.02% 1,017,997,38 0 0 1,017,997,38 Pledged 610,798,429 87 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Asset non-state- 2 2 Management owned Co., Ltd. corporation Zoomlion Heavy Domestic Industry non-state- Not 12.56% 399,214,659 0 0 399,214,659 0 Science and owned applicable Technology corporation Co., Ltd. Domestic Infore Group non-state- 11.31% 359,609,756 0 0 359,609,756 Pledged 100,000,000 Co., Ltd. owned corporation Hongchuang (Shenzhen) Domestic Investment non-state- Not 9.76% 310,423,813 0 0 310,423,813 0 Center owned applicable (Limited corporation Partnership) Infore Environment Technology Group Co., Ltd.-The Not Others 2.04% 64,789,616 0 0 64,789,616 0 Second applicable Employee Stock Ownership Plan Domestic Not He Jianfeng natural 2.00% 63,514,690 0 0 63,514,690 0 applicable person Zara Green Foreign Not Hong Kong 1.72% 54,778,335 0 0 54,778,335 0 corporation applicable Limited Domestic Not Chen Liyuan natural 0.98% 31,018,000 0 0 31,018,000 0 applicable person Guangdong Hengjian Capital State-owned Not 0.88% 28,059,147 0 0 28,059,147 0 Management corporation applicable Holding Co., Ltd. Hong Kong Securities Foreign Not Clearing 0.86% 27,190,851 10,888,577 0 27,190,851 0 corporation applicable Company Ltd. Strategic investor/general corporation becoming a top Not applicable. 10 shareholder in a rights issue (if any) (see Note 3) Related party or acting-in- Ningbo Infore Asset Management Co., Ltd. and Infore Group Co., Ltd. share the same de facto concert relationship among controller He Jianfeng, and they are persons acting in concert mutually. Apart from that, the Company the aforementioned is not aware of any related party or acting-in-concert relationship (as defined in the Measures for the shareholders Administration of the Takeover of Listed Companies) among other shareholders aforementioned. 88 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Shareholders above entrusting/entrusted with or Not applicable. waiving voting rights Top 10 shareholders with repurchase account (if any) NA (see Note 10) Shareholding of top 10 unrestricted shareholders Number of Type of share unrestricted shares at Name of shareholder the end of the Type of share Quantity reporting period RMB-dominated Ningbo Infore Asset Management Co., Ltd. 1,017,997,382 1,017,997,382 common shares RMB-dominated Zoomlion Heavy Industry Science and Technology Co., Ltd. 399,214,659 399,214,659 common shares RMB-dominated Infore Group Co., Ltd. 359,609,756 359,609,756 common shares Hongchuang (Shenzhen) Investment Center (Limited RMB-dominated 310,423,813 310,423,813 Partnership) common shares Infore Environment Technology Group Co., Ltd.-The Second RMB-dominated 64,789,616 64,789,616 Employee Stock Ownership Plan common shares RMB-dominated He Jianfeng 63,514,690 63,514,690 common shares RMB-dominated Zara Green Hong Kong Limited 54,778,335 54,778,335 common shares RMB-dominated Chen Liyuan 31,018,000 31,018,000 common shares RMB-dominated Guangdong Hengjian Capital Management Holding Co., Ltd. 28,059,147 28,059,147 common shares RMB-dominated Hong Kong Securities Clearing Company Ltd. 27,190,851 27,190,851 common shares Ningbo Infore Asset Management Co., Ltd. and Infore Group Co., Ltd. share the same de facto controller He Jianfeng, and they are Related party or acting-in-concert relationship among top 10 persons acting in concert mutually. Apart from that, the Company unrestricted public shareholders, as well as between top 10 is not aware of any related party or acting-in-concert relationship unrestricted public shareholders and top 10 shareholders (as defined in the Measures for the Administration of the Takeover of Listed Companies) among other shareholders aforementioned. Infore Environment Technology Group Co., Ltd. - Second Top 10 common shareholders involved in securities margin Employee Stock Ownership Plan holds 64,789,616 shares in the trading (if any) (see Note 4) Company through credit accounts. Top ten common shareholders involved in securities lending through securities financing transactions □Applicable Not Applicable Changes in the top ten common shareholders compared to the previous period Applicable □Not applicable Unit: Share Changes in the top ten common shareholders compared to the end of the previous period Number of shares held in shareholders' Outstanding balance of securities lent general and credit accounts, and securities Addition/withdrawal through securities financing transactions at lent through securities financing Name of shareholder during the reporting the end of the period transactions that have not been returned by period the end of the period Total number As a percentage of Total number As a percentage of 89 Infore Environment Technology Group Co., Ltd. 2023 Annual Report total share capital total share capital Hong Kong Securities Clearing Addition 0 0.00% 27,190,851 0.86% Company Ltd. Ningbo Yingtai Investment Withdrawal 0 0.00% 10,228,414 0.32% Partnership (Limited Partnership) Whether any top 10 common shareholders or top 10 unrestricted common shareholders of the Company conducted any agreed repurchase transactions during the reporting period □Yes No No such cases during the reporting period. 2. Controlling shareholder Nature of controlling shareholder: Natural person Type of controlling shareholder: Corporation Legal Name of controlling Principal business representative/Perso Date of incorporation Organization code shareholder activities n-in-charge Asset management, Ningbo Infore Asset industrial investment, Wei Ting May 2, 2017 91330206MA290L5J3L Management Co., Ltd. investment management. Other domestically and overseas listed companies as controlling Not applicable. shareholders and equity participants during the reporting period Changes in controlling shareholders during the reporting period □Applicable Not Applicable During the reporting period, there was no change in controlling shareholders of the Company. 3. De facto controller and persons acting in concert Nature of de facto controller: Domestic natural person Type of de facto controller: Natural person Relationship with de facto Residency in other Name of de facto controller: Nationality controller country/region or not He Jianfeng Himself China Yes Main occupation and position Chairman of the Board and President of Infore Group Co., Ltd. Controlling interests in other Beijing Baination Pictures Co., Ltd. (Stock code: 300291) Jason Furniture(Hangzhou)Co., Ltd. domestically and overseas listed (Stock code: 603816) companies in the past 10 years Change in de facto controller during the reporting period □Applicable Not Applicable During the reporting period, there was no change in the de facto controller of the Company. 90 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Ownership and control relationship between the de facto controller and the Company The de facto controller controls the Company via trust or other asset management arrangement □Applicable Not Applicable 4. The pledged shares in the Company's controlling shareholder or largest shareholder and its persons acting in concert account for 80% of their total shareholdings □Applicable Not Applicable 5. Other corporate shareholders with a shareholding of more than 10% Applicable □Not applicable Legal Name of representative Date of Registered corporate Principal business or management activities /Person-in- incorporation capital shareholder charge Development, production, and sales of engineering machinery, agricultural machinery, sanitation machinery, crane trucks and exclusive chassis, fire engines and exclusive chassis, aerial work machines, emergency and rescue equipment, mining machinery, machinery in coal mines, material transportation facilities, other machinery, metal and non-metal materials, and new high-tech products Zoomlion of optical-electro-mechanical integration and provision of leasing and Heavy after-sale technical services; Sales of building and decorative materials, RMB Industry August 31, vehicles for engineering and metal materials, chemical materials, and Zhan Chunxin 8,677,992,2 Science and 1999 chemical products (excluding hazardous chemicals and monitoring 36 Technology products); Sales of lubricant oil, lubricating grease and hydraulic oil Co., Ltd. (excluding hazardous chemicals); Retail of refined oil products (operated by licensed subsidiaries only); Operation of commodity and technology import and export businesses; Investment in real estate with self-owned assets (without permit to carry out national financially regulated and financial credit businesses such as absorbing deposits, fund-raising and collection, entrusted loans, and issuing notes and lending). Sales of used vehicles; Disassembly and recovery of disused 91 Infore Environment Technology Group Co., Ltd. 2023 Annual Report machinery equipment. (Business activities subject to approval under laws shall not be carried out unless approval from competent authorities has been obtained.) Investment in various industries, investment management, investment consultation, and asset management; Enterprise management and enterprise consulting; Computer information services and software services; Film production and planning (based on validated licenses); Advertising planning and production; Appraisal and consultancy services of artwork (excluding ivory and ivory products) and collectibles; Planning of culture and art exhibitions; Sales of maternal and baby products and clothing; Supply and marketing of domestic business and goods except for the above items; Business information consulting services; Import and export of commodities or technologies RMB (excluding the import and export of commodities and technologies that Infore Group April 19, He Jianfeng 4,450,000,0 are prohibited by the state or involve administrative review and Co., Ltd. 2002 00 approval); R&D, manufacturing, sales and leasing of sanitation equipment, robots, new energy vehicles, and environmental monitoring equipment; Cleaning, collection, recycling, transportation, and treatment services of urban domestic waste; Undertaking environmental engineering and water pollution control projects; R&D, manufacturing and sales of ventilators, and air-cooling, water-cooling and air conditioning equipment; R&D, manufacturing, and sales of new materials, equipment, and products. (Production and manufacturing projects are operated by subsidiaries) (Business activities subject to approval under laws shall not be carried out without the approval of relevant authorities.) 6. Limitations on shareholding reduction by the Company's controlling shareholder, de facto controller, reorganizer and other commitment makers □Applicable Not Applicable IV. Repurchase of Shares during the Reporting Period Progress of share repurchase □Applicable Not Applicable Progress of reducing the repurchased shares by way of centralized bidding: □Applicable Not Applicable 92 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part VIII Information on Preference Shares □Applicable Not Applicable During the reporting period, the Company had no preference shares. 93 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part IX Information on Bonds Applicable □Not applicable I. Enterprise Bond □Applicable Not Applicable During the reporting period, the Company had no enterprise bonds. II. Corporate Bond □Applicable Not Applicable During the reporting period, the Company had no corporate bonds. III. Debt Financing Instruments of Non-financial Enterprises □Applicable Not Applicable During the reporting period, the Company had no debt financing instruments of non-financial enterprises. IV. Convertible Corporate Bonds Applicable □Not applicable 1. Previous adjustments to conversion price With the approval granted by the CSRC under Document Z.J.X.K. [2020] No. 2219, the Company publicly issued 14,761,896 convertible corporate bonds on November 4, 2020, with a par value of RMB 100 and a total amount of RMB 1,476,189,600. The initial conversion price of this tranche of convertible bonds is RMB 8.31 per share. In case of distribution of bonus shares, increase of share capital through conversion, issuance of new shares (excluding the increased share capital due to the conversion of convertible corporate bonds issued this time), allotment of shares and distribution of cash dividends, the conversion price will be adjusted accordingly pursuant to relevant laws and regulations. On July 8, 2021, the Company's equity distribution for 2020 was completed. In accordance with the issuance terms of the Prospectus for Public Offering of Convertible Corporate Bonds by Infore Environment Technology Group Co., Ltd. and the relevant regulations of the CSRC on the issuance of convertible bonds, the conversion price of Infore Convertible Bonds was adjusted from the original RMB 8.31 per share to RMB 8.19 per share since July 8, 2021. The adjusted conversion price took effect on July 8, 2021. On July 20, 2022, the Company's equity distribution for 2021 was completed. In accordance with the relevant requirements of the Prospectus for Public Offering of Convertible Corporate Bonds by Infore Environment Technology Group Co., Ltd., the conversion price of Infore Convertible Bonds was adjusted from the original RMB 8.19 per share to RMB 8.09 per share, effective on July 20, 2022. The adjusted conversion price took effect as from July 20, 2022. On July 18, 2023, the Company's equity distribution for 2022 was completed. In accordance with the relevant requirements of the Prospectus for Public Offering of Convertible Corporate Bonds by Infore Environment Technology Group Co., Ltd., the conversion price of Infore Convertible Bonds was adjusted from the original RMB 8.09 per share to RMB 7.98 per share, effective on July 18, 2023. The adjusted conversion price took effect on July 18, 2023. 94 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2. Information on cumulative conversion of bonds into shares Applicable □Not applicable The number of shares converted as Unconverted a percentage Abbreviated Accumulated Accumulated amount as a Start and end Total issued Total issued of the total Amount name of conversion conversion percentage of date of number amount issued shares unconverted convertible amount number the total conversion (sheet) (RMB) in the (RMB) bond (RMB) (share) issued Company amount before start of conversion Infore 1,476,189,60 1,476,050,70 Convertible 2021-05-10 14,761,896 138,900.00 16,944 0.00% 99.99% 0.00 0.00 Bonds 3. Information on top 10 convertible bond holders Number of Amount of Proportion of convertible Nature of convertible bonds convertible bonds bonds held at No. Name of convertible bond holder convertible held at the end of held at the end of the end of the bond holder the reporting the reporting reporting period (RMB) period period (sheet) Renmin Stable, Double-Benefit Fixed-income Pension 1 Product - Industrial and Commercial Bank of China Others 510,449 51,044,900.00 3.46% Limited CNPC Enterprise Annuity Program - Industrial and 2 Others 469,484 46,948,400.00 3.18% Commercial Bank of China Limited CITIC Securities - Sany Heavy Industry Co., Ltd. - 3 CITIC Securities Sany Zunxiang Customized No. 1 Others 460,310 46,031,000.00 3.12% Single Asset Management Program Industrial and Commercial Bank of China Limited - 4 Aegon-industrial Hengyi Bond Securities Investment Others 360,000 36,000,000.00 2.44% Fund China AMC Yannianyishou Fixed-income Pension 5 Others 343,276 34,327,600.00 2.33% Product - Agricultural Bank of China Limited Fullgoal Fuyi Aggressive Fixed-income Pension 6 Product - Industrial and Commercial Bank of China Others 336,594 33,659,400.00 2.28% Limited China AMC - Hexie Health Insurance Co., Ltd. - 7 Universal Life Insurance - China AMC - Huajing Fixed Others 300,791 30,079,100.00 2.04% Income No.1 Single Asset Management Program CITIC Bank Corporation Limited - XinAo Credit Bond 8 Others 300,000 30,000,000.00 2.03% Securities Investment Fund 9 National Social Security Fund 210 Portfolio Others 294,176 29,417,600.00 1.99% CCB Corporation Enterprise Annuity Program - 10 Others 292,404 29,240,400.00 1.98% Industrial and Commercial Bank of China Limited 4. Information on material changes in the profitability, asset status and credit standing of guarantor □Applicable Not Applicable 95 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 5. Change in the Company's liabilities and credit standing, and cash arrangements for debt repayment in coming years at the end of the reporting period On June 19, 2023, China Chengxin International Credit Rating Co., Ltd. issued the Follow-up Rating Report on the Public Offering of Convertible Corporate Bonds by Infore Environment Technology Group Co., Ltd. (2023) (X.P.W.H.Z. [2023] Track No.0566), assigning the Company a corporate credit rating of AA +, with stable rating outlook for the coming 12 to 18 months. For details, please refer to the Follow-up Rating Report on Public Offering of Convertible Corporate Bonds by the Company disclosed by the Company (2023) on June 21, 2023 on Cninfo (www.cninfo.com.cn). The primary sources of funding for the Company to pay the principal and interest of the convertible bonds in the future are as follows: (1) The Company seeks organic growth by strengthening financial management and increasing net cash inflows and net profits from operating activities; (2) The Company has a good credit standing and a reasonable asset mix and can obtain financing from banks and other avenues to reasonably arrange for redemption funds. V. During the Reporting Period, the Loss in the Scope of Consolidated Statements Outstripped 10% of the Net Assets at the End of the Previous Year □Applicable Not Applicable VI. Overdue Interest-Bearing Debts Other Than Bonds at the End of the Reporting Period □Applicable Not Applicable VII. Violation of Rules and Regulations During the Reporting Period □Yes No VIII. Main Accounting Data and Financial Indicators of the Company in Last Two Years as at the End of the Reporting Period Unit: RMB 10,000 At the end of the reporting Item At the end of last year YoY change period Current ratio 1.75 1.67 4.79% Liability-to-asset ratio 38.39% 39.40% -1.01% Quick ratio 1.62 1.56 3.85% The reporting period The prior year YoY change Net profit after deducting non- 44,475.34 32,475.34 36.95% recurring gains and losses EBITDA/total liabilities 14.29% 12.30% 1.99% Interest coverage ratio 4.63 3.79 22.16% Cash/interest coverage ratio 13.68 14.07 -2.77% EBITDA/interest coverage ratio 9.39 7.39 27.06% Loan repayment rate 100.00% 100.00% 0.00% Interest coverage ratio 100.00% 100.00% 0.00% 96 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Part X Financial Report Audit Report Type of audit opinions Standard unqualified opinion Signing date of the auditor’s report April 26, 2024 Name of the auditor Pan-China Certified Public Accountants LLP (Special General Partnership) No. of the auditor’s report PCCPAAR [2024] No. 4373 Names of certified public accountants Bian Shanshan, and Wei Xiaohui Main body of the auditor's report To the Shareholders of Infore Environment Technology Group Co., Ltd.: I. Audit Opinion We have audited the financial statements of Infore Environment Technology Group Co., Ltd. (the “Company”), which comprise the consolidated and parent company balance sheets as at December 31, 2023, the consolidated and parent company income statements, consolidated and parent company cash flow statements, and consolidated and parent company statements of changes in equity for the year then ended, as well as notes to financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023, and its financial performance and its cash flows for the year then ended in accordance with China Accounting Standards for Business Enterprises. II. Basis for Audit Opinion We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in the Certified Public Accountant’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. III. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not express a separate opinion on these matters. 97 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (I) Revenue recognition 1. Key audit matters Please refer to section III (XXVII) and section V (II) 1 of notes to the financial statements for details. The Company is mainly engaged in sales of environmental and sanitation machinery and ventilation equipment as well as sanitation operation service. In 2023, the operating revenue amounted to 12,631.05 million yuan, with year-over-year growth of 3.06%. As operating revenue is one of the key performance indicators of the Company, the authenticity, accuracy and completeness of revenue recognition have a significant impact on the Company’s financial statements, we have identified revenue recognition as a key audit matter. 2. Responsive audit procedures Our main audit procedures for revenue recognition are as follows: (1) We obtained understandings of key internal controls related to revenue recognition, assessed the design of these controls, determined whether they had been executed, and tested the effectiveness of the operation; (2) We checked sales contracts with clients, obtained understandings of main contractual terms or conditions, and assessed whether the revenue recognition method conformed to China Accounting Standards for Business Enterprises; (3) We performed analysis procedure on operating revenue and gross margin by month, product, customer, project, etc., so as to identify whether there are significant or abnormal fluctuations and find out the reason; (4) For revenue from sales of environmental and sanitation machinery, ventilation equipment, etc., we checked supporting documents related to revenue recognition by sampling method, including sales contracts, sales invoices, outbound delivery order, delivery note, delivery receipt, etc. For revenue from sanitation operation service, we checked supporting documents related to revenue recognition by sampling method, including sales contracts, service assessment statements, supervision schedule, etc.; (5) We performed confirmation procedures on significant clients of product sales and major clients of sanitation operation service to confirm the sales amounts in the current period, and the balances of current accounts; (6) We performed cut-off tests on the operating revenue recognized around the balance sheet date, and assessed whether the operating revenue was recognized in the appropriate period; and 98 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (7) We checked whether information related to operating revenue had been presented appropriately in the financial statements. (II) Impairment of accounts receivable and long-term receivables 1. Key audit matters Please refer to section III (XII) and section V (I) 3, 9 and 11 of notes to the financial statements for details. As of December 31, 2023, the book balance of accounts receivable amounted to 6,647.08 million yuan, with provision for bad debts of 779.41 million yuan, and the carrying amount amounted to 5,867.67 million yuan; the book balance of long-term receivables (including those due within one year) amounted to 1,067.49 million yuan, with provision for bad debts of 92.31 million yuan, and the carrying amount amounted to 975.18 million yuan. The carrying amount of accounts receivable and long-term receivables (collectively referred to as “receivables”) totaled 6,842.85 million yuan. Based on credit risk features of receivables, the Company’s management (the “Management”) measures the loss allowance at the amount of lifetime expected credit losses, either on an individual basis or on a collective basis. For receivables with expected credit losses measured on an individual basis, the Management estimates the expected cash flows, so as to identify the provision for bad debts to be accrued, based on a comprehensive consideration of information with reasonableness and evidence, which is related to the past events, the current situation and the forecast of future economic conditions. For receivables with expected credit losses measured on a collective basis, the Management classifies portfolios on the basis of ages, adjusts them based on historical credit risk loss experience and forward-looking estimations, prepares the comparison table of ages and expected credit loss rate of receivables, so as to calculate the provision for bad debts to be accrued. As the amount of receivables is significant and the impairment testing involves significant judgment of the Management, we have identified impairment of receivables as a key audit matter. 2. Responsive audit procedures Our main audit procedures for impairment of receivables are as follows: (1) We obtained understandings of key internal controls related to receivables, assessed the design of these controls, determined whether they had been executed, and tested the effectiveness of the operation; (2) We reviewed receivables with provision for bad debts made in previous periods for their subsequent write-off or reversal, and assessed the accuracy of historical estimations made by the 99 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Management; (3) We reviewed the consideration of the Management on credit risk assessment of receivables and objective evidence, and assessed whether the credit risk features of receivables had been appropriately identified by the Management; (4) For receivables with expected credit losses measured on an individual basis, we obtained and checked the Management’s estimations on the expected future cash flows, assessed the reasonableness of key assumptions and the accuracy of data adopted in the estimations and checked them with acquired external evidence; (5) For receivables with expected credit losses measured on a collective basis, we assessed the reasonableness of portfolio classification on the basis of credit risk features; we assessed the reasonableness of the comparison table of ages and expected credit loss rate of receivables prepared by the Management based on the historical credit loss experience of portfolios with similar credit risk features and forward-looking estimations; we tested the accuracy and completeness of data used by the Management (including ages, etc.) and whether the calculation of provision for bad debts was accurate; (6) We checked the subsequent collection of receivables and assessed the reasonableness of provision for bad debts made by the Management; and (7) We checked whether information related to impairment of receivables had been presented appropriately in the financial statements. (III) Impairment of goodwill 1. Key audit matters Please refer to section III (XXI) and section V (I) 20 of notes to the financial statements for details. As of December 31, 2023, the cost of goodwill amounted to 6,268.85 million yuan, with provision for impairment of 623.48 million yuan, and the carrying amount amounted to 5,645.37 million yuan, accounting for 19.43% of total assets. The Management will perform impairment test on goodwill together with related asset groups or asset group portfolios when there is evidence indicating impairment loss in asset group or asset group portfolio related to goodwill, or at the end of each period, and the recoverable amount of related asset groups or asset group portfolios is determined based on the estimated present value of future cash flows. Key assumptions adopted in the impairment test include: revenue growth rate in detailed forecast period, growth rate for stable income, profit margin, pre-tax discount rate, etc. 100 Infore Environment Technology Group Co., Ltd. 2023 Annual Report As the amount of goodwill is significant and impairment test involves significant judgment of the Management, we have identified impairment of goodwill as a key audit matter. 2. Responsive audit procedures Our main audit procedures for impairment of goodwill are as follows: (1) We obtained understandings of key internal controls related to impairment of goodwill, assessed the design of these controls, determined whether they had been executed, and tested the effectiveness of the operation; (2) We reviewed the present value of future cash flows estimated by the Management in previous years and the actual operating results, and assessed the accuracy of the Management’s historical estimations; (3) We obtained understandings of and assessed the competency, professional quality and objectivity of external appraisers engaged by the Management; (4) We assessed the competency, professional quality and objectivity of external appraisers engaged by us and the appropriateness of their works; (5) We assessed the reasonableness and consistency of impairment test method adopted by the Management; (6) We assessed the reasonableness of key assumptions used in impairment test and reviewed whether relevant assumptions were consistent with overall economy environment, industry condition, management situation, historical experience, operation plan, approved budget, meeting summary and other assumptions related to the financial statements used by the Management; (7) We reviewed the sensitivity analysis on key assumptions performed by the Management, assessed the effect of changes in key assumptions on impairment test result, and identified signs of possible management bias in choosing key assumptions; (8) We tested the accuracy, completeness and relativity of data used in the impairment test by the Management and reviewed the internal consistency of related information in the impairment test; (9) We tested whether the calculation of estimated present value of future cash flows by the Management was accurate; and (10) We checked whether information related to impairment of goodwill had been presented appropriately in the financial statements. 101 Infore Environment Technology Group Co., Ltd. 2023 Annual Report IV. Other Information The Management is responsible for the other information. The other information comprises the information included in the Company’s annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. V. Responsibilities of the Management and Those Charged with Governance for the Financial Statements The Management is responsible for preparing and presenting fairly the financial statements in accordance with China Accounting Standards for Business Enterprises, as well as designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. VI. Certified Public Accountant’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with China Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the 102 Infore Environment Technology Group Co., Ltd. 2023 Annual Report economic decisions of users taken on the basis of these financial statements. We exercise professional judgment and maintain professional skepticism throughout the audit performed in accordance with China Standards on Auditing. We also: (I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of i n t e r n a l c o n t r o l . (II) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (III) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. (IV) Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. (V) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (VI) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain sole responsibility for our audit opinion. We communicate with those charged with governance regarding the planned audit scope, time schedule and significant audit findings, including any deficiencies in internal control of concern that we identify during our audit. 103 Infore Environment Technology Group Co., Ltd. 2023 Annual Report We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Pan-China Certified Public Accountants LLP Chinese Certified Public Accountant: (Engagement Partner) Hangzhou China Chinese Certified Public Accountant: Date of Report: April 26, 2024 The auditor’s report and the accompanying financial statements are English translations of the Chinese auditor’s report and statutory financial statements prepared under accounting principles and practices generally accepted in the People’s Republic of China. These financial statements are not intended to present the financial position and financial performance and cash flows in accordance with accounting principles and practices generally accepted in other countries and jurisdictions. In case the English version does not conform to the Chinese version, the Chinese version prevails. 104 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Consolidated balance sheet as at December 31, 2023 (Expressed in Renminbi Yuan) Note Assets Closing balance December 31, 2022 No. Current assets: Cash and bank balances 1 4,411,376,583.78 4,728,203,530.46 Settlement funds Loans to other banks Held-for-trading financial assets Derivative financial assets Notes receivable 2 4,947,131.83 13,565,706.22 Accounts receivable 3 5,867,669,476.86 5,625,792,472.37 Receivables financing 4 146,814,501.64 107,316,593.41 Advances paid 5 140,241,046.66 192,360,542.24 Premiums receivable Reinsurance accounts receivable Reinsurance reserve receivable Other receivables 6 316,661,073.26 385,622,271.00 Financial assets under reverse repo Inventories 7 971,229,637.15 881,038,036.95 Contract assets 8 74,803,489.48 101,023,854.33 Assets held for sale Non-current assets due within one year 9 552,082,464.00 476,505,825.28 Other current assets 10 523,880,405.80 497,450,797.42 Total current assets 13,009,705,810.46 13,008,879,629.68 Non-current assets: Loans and advances Debt investments Other debt investments Long-term receivables 11 423,098,527.59 932,130,871.82 Long-term equity investments 12 681,629,084.69 676,829,959.84 Other equity instrument investments 13 15,352,971.01 15,352,971.01 Other non-current financial assets Investment property 14 1,138,868.60 27,105,435.03 Fixed assets 15 2,338,316,124.14 2,268,287,202.01 Construction in progress 16 288,057,018.89 41,073,267.68 Productive biological assets Oil & gas assets Right-of-use assets 17 25,125,671.95 31,859,454.24 Intangible assets 18 5,984,348,824.39 6,048,114,364.49 Development expenditures 19 30,338,218.08 Goodwill 20 5,645,365,375.67 5,739,602,679.79 Long-term prepayments 21 31,130,797.49 30,210,935.91 Deferred tax assets 22 116,448,305.64 114,577,132.19 Other non-current assets 23 488,484,179.84 306,929,738.21 Total non-current assets 16,038,495,749.90 16,262,412,230.30 Total assets 29,048,201,560.36 29,271,291,859.98 Legal representative: Officer in charge of accounting: Head of accounting department: 105 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Consolidated balance sheet as at December 31, 2023 (continued) (Expressed in Renminbi Yuan) Liabilities & Equity Note No. Closing balance December 31, 2022 Current liabilities: Short-term borrowings 25 126,939,855.26 440,103,105.44 Central bank loans Loans from other banks Held-for-trading financial liabilities Derivative financial liabilities Notes payable 26 2,294,276,551.46 2,515,229,293.17 Accounts payable 27 2,918,543,704.46 2,771,961,271.66 Advances received Contract liabilities 28 306,777,173.57 274,289,978.25 Financial liabilities under repo Absorbing deposit and interbank deposit Deposits for agency security transaction Deposits for agency security underwriting Employee benefits payable 29 490,900,839.98 409,574,018.72 Taxes and rates payable 30 124,031,931.13 114,968,226.88 Other payables 31 709,941,824.77 657,122,287.53 Handling fees and commissions payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year 32 405,027,444.29 561,019,099.59 Other current liabilities 33 36,931,126.97 31,616,947.24 Total current liabilities 7,413,370,451.89 7,775,884,228.48 Non-current liabilities: Insurance policy reserve Long-term borrowings 34 1,884,356,851.73 1,922,306,226.32 Bonds payable 35 1,360,603,802.12 1,308,690,556.32 Including: Preferred shares Perpetual bonds Lease liabilities 36 16,170,790.76 23,255,624.30 Long-term payables 37 302,949,472.95 315,735,814.91 Long-term employee benefits payable Provisions 38 1,994,511.41 4,575,049.22 Deferred income 39 115,340,494.42 120,890,710.04 Deferred tax liabilities 22 47,219,579.85 54,207,628.08 Other non-current liabilities 40 8,148,148.14 8,333,333.33 Total non-current liabilities 3,736,783,651.38 3,757,994,942.52 Total liabilities 11,150,154,103.27 11,533,879,171.00 Equity: Share capital 41 3,179,506,670.00 3,179,505,559.00 Other equity instruments 42 266,914,714.33 266,916,341.80 Including: Preferred shares Perpetual bonds Capital reserve 43 9,661,398,721.27 9,662,511,254.48 Less: Treasury shares 44 94,132,795.17 94,132,795.17 Other comprehensive income 45 -4,630,000.00 -4,630,000.00 Special reserve 46 Surplus reserve 47 379,017,020.19 315,124,767.92 General risk reserve Undistributed profit 48 4,049,434,826.11 3,963,306,890.06 Total equity attributable to the parent company 17,437,509,156.73 17,288,602,018.09 Non-controlling interest 460,538,300.36 448,810,670.89 Total equity 17,898,047,457.09 17,737,412,688.98 Total liabilities & equity 29,048,201,560.36 29,271,291,859.98 Legal representative: Officer in charge of accounting: Head of accounting department: 106 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Parent company balance sheet as at December 31, 2023 (Expressed in Renminbi Yuan) Note Assets Closing balance December 31, 2022 No. Current assets: Cash and bank balances 564,746,779.67 632,554,163.45 Held-for-trading financial assets Derivative financial assets Notes receivable Accounts receivable Receivables financing 43,226,079.68 118,400,000.00 Advances paid 450,233.21 638,924.48 Other receivables 1 4,470,847,162.66 4,492,807,441.80 Inventories Contract assets Assets held for sale Non-current assets due within one year Other current assets Total current assets 5,079,270,255.22 5,244,400,529.73 Non-current assets: Debt investments Other debt investments Long-term receivables Long-term equity investments 2 16,970,439,351.38 17,076,616,871.15 Other equity instrument investments 15,352,971.01 15,352,971.01 Other non-current financial assets Investment property Fixed assets Construction in progress Productive biological assets Oil & gas assets Right-of-use assets 1,830,027.06 593,318.35 Intangible assets 744,535.28 1,749,936.60 Development expenditures Goodwill Long-term prepayments Deferred tax assets Other non-current assets Total non-current assets 16,988,366,884.73 17,094,313,097.11 Total assets 22,067,637,139.95 22,338,713,626.84 Legal representative: Officer in charge of accounting: Head of accounting department: 107 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Parent company balance sheet as at December 31, 2023 (continued) (Expressed in Renminbi Yuan) Note Liabilities & Equity Closing balance December 31, 2022 No. Current liabilities: Short-term borrowings 8,006,821.92 20,022,000.00 Held-for-trading financial liabilities Derivative financial liabilities Notes payable 34,562,159.28 42,395,262.51 Accounts payable 1,137,507.93 1,137,507.93 Advances received Contract liabilities Employee benefits payable 3,603,061.04 4,221,817.88 Taxes and rates payable 6,535,689.77 6,259,662.49 Other payables 783,282,804.29 1,064,116,084.37 Liabilities held for sale Non-current liabilities due within one year 12,180,055.74 311,902,807.73 Other current liabilities Total current liabilities 849,308,099.97 1,450,055,142.91 Non-current liabilities: Long-term borrowings 48,985,720.00 59,871,432.00 Bonds payable 1,360,603,802.12 1,308,690,556.32 Including: Preferred shares Perpetual bonds Lease liabilities 626,060.41 Long-term payables 3,000,000.00 3,000,000.00 Long-term employee benefits payable Provisions 1,563,887.81 4,114,064.16 Deferred income Deferred tax liabilities Other non-current liabilities Total non-current liabilities 1,414,779,470.34 1,375,676,052.48 Total liabilities 2,264,087,570.31 2,825,731,195.39 Equity: Share capital 3,179,506,670.00 3,179,505,559.00 Other equity instruments 266,914,714.33 266,916,341.80 Including: Preferred shares Perpetual bonds Capital reserve 15,324,662,735.39 15,324,654,061.79 Less: Treasury shares 94,132,795.17 94,132,795.17 Other comprehensive income -4,630,000.00 -4,630,000.00 Special reserve Surplus reserve 344,796,630.77 280,904,378.50 Undistributed profit 786,431,614.32 559,764,885.53 Total equity 19,803,549,569.64 19,512,982,431.45 Total liabilities & equity 22,067,637,139.95 22,338,713,626.84 Legal representative: Officer in charge of accounting: Head of accounting department: 108 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Consolidated income statement for the year ended December 31, 2023 (Expressed in Renminbi Yuan) Note Items Current period cumulative Preceding period comparative No. I. Total operating revenue 1 12,631,050,967.34 12,255,992,938.42 Including: Operating revenue 1 12,631,050,967.34 12,255,992,938.42 Interest income Premiums earned Revenue from handling fees and commissions II. Total operating cost 11,755,419,190.66 11,359,383,512.75 Including: Operating cost 1 9,745,482,087.92 9,469,510,831.27 Interest expenses Handling fees and commissions Surrender value Net payment of insurance claims Net provision of insurance policy reserve Premium bonus expenditures Reinsurance expenses Taxes and surcharges 2 70,091,589.07 74,685,022.05 Selling expenses 3 794,334,952.02 762,970,847.95 Administrative expenses 4 726,159,237.45 609,601,680.23 R&D expenses 5 344,030,239.33 340,775,707.34 Financial expenses 6 75,321,084.87 101,839,423.91 Including: Interest expenses 156,635,777.38 170,568,834.86 Interest income 99,626,077.56 86,389,951.68 Add: Other income 7 119,986,816.29 119,564,678.48 Investment income (or less: losses) 8 -51,597,205.92 -41,466,125.62 Including: Investment income from associates and joint ventures 4,960,692.79 8,548,481.77 Gains from derecognition of financial assets at amortized cost Gains on foreign exchange (or less: losses) Gains on net exposure to hedging risk (or less: losses) Gains on changes in fair value (or less: losses) Credit impairment loss 9 -216,352,591.11 -104,837,162.42 Assets impairment loss 10 -123,390,769.02 -312,998,494.66 Gains on asset disposal (or less: losses) 11 -1,191,825.82 532,796.72 III. Operating profit (or less: losses) 603,086,201.10 557,405,118.17 Add: Non-operating revenue 12 19,846,705.60 12,798,235.90 Less: Non-operating expenditures 13 13,031,066.19 13,947,988.82 IV. Profit before tax (or less: total loss) 609,901,840.51 556,255,365.25 Less: Income tax expenses 14 97,357,651.45 96,963,243.68 V. Net profit (or less: net loss) 512,544,189.06 459,292,121.57 (I) Categorized by the continuity of operations 1. Net profit from continuing operations (or less: net loss) 512,544,189.06 459,292,121.57 2. Net profit from discontinued operations (or less: net loss) (II) Categorized by the portion of equity ownership 1. Net profit attributable to owners of parent company (or less: net loss) 498,383,730.00 418,794,179.13 2. Net profit attributable to non-controlling shareholders (or less: net loss) 14,160,459.06 40,497,942.44 VI. Other comprehensive income after tax -350,000.00 Items attributable to the owners of the parent company -350,000.00 (I) Not to be reclassified subsequently to profit or loss -350,000.00 1. Remeasurements of the net defined benefit plan 2. Items under equity method that will not be reclassified to profit or loss 3. Changes in fair value of other equity instrument investments -350,000.00 4. Changes in fair value of own credit risk 5. Others (II) To be reclassified subsequently to profit or loss 1. Items under equity method that may be reclassified to profit or loss 2. Changes in fair value of other debt investments 3. Profit or loss from reclassification of financial assets into other comprehensive income 4. Provision for credit impairment of other debt investments 5. Cash flow hedging reserve 6. Translation reserve 7. Others Items attributable to non-controlling shareholders VII. Total comprehensive income 512,544,189.06 458,942,121.57 Items attributable to the owners of the parent company 498,383,730.00 418,444,179.13 Items attributable to non-controlling shareholders 14,160,459.06 40,497,942.44 VIII. Earnings per share (EPS): (I) Basic EPS (yuan per share) 0.16 0.13 (II) Diluted EPS (yuan per share) 0.16 0.13 Legal representative: Officer in charge of accounting: Head of accounting department: 109 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Parent company income statement for the year ended December 31, 2023 (Expressed in Renminbi Yuan) Note Preceding period Items Current period cumulative No. comparative I. Operating revenue 1 156,799.03 818,861.05 Less: Operating cost 1 45,108.06 818,861.05 Taxes and surcharges 8,724.82 24,479.22 Selling expenses 188,548.41 Administrative expenses 32,795,434.31 37,210,341.13 R&D expenses Financial expenses -46,439,991.45 -26,702,758.90 Including: Interest expenses 6,683,662.60 17,704,428.72 Interest income 114,151,812.97 105,355,828.68 Add: Other income 90,205.68 134,351.98 Investment income (or less: losses) 2 627,767,256.36 192,483,839.36 Including: Investment income from associates and joint ventures 32,220,248.17 25,737,537.83 Gains from derecognition of financial assets at amortized cost Gains on net exposure to hedging risk (or less: losses) Gains on changes in fair value (or less: losses) Credit impairment loss -4,535,721.98 304,725.02 Assets impairment loss Gains on asset disposal (or less: losses) II. Operating profit (or less: losses) 637,069,263.35 182,202,306.50 Add: Non-operating revenue 1,853,259.39 1,496,537.14 Less: Non-operating expenditures III. Profit before tax (or less: total loss) 638,922,522.74 183,698,843.64 Less: Income tax expenses IV. Net profit (or less: net loss) 638,922,522.74 183,698,843.64 (I) Net profit from continuing operations (or less: net loss) 638,922,522.74 183,698,843.64 (II) Net profit from discontinued operations (or less: net loss) V. Other comprehensive income after tax -350,000.00 (I) Not to be reclassified subsequently to profit or loss -350,000.00 1. Remeasurements of the net defined benefit plan 2. Items under equity method that will not be reclassified to profit or loss 3. Changes in fair value of other equity instrument investments -350,000.00 4. Changes in fair value of own credit risk 5. Others (II) To be reclassified subsequently to profit or loss 1. Items under equity method that may be reclassified to profit or loss 2. Changes in fair value of other debt investments 3. Profit or loss from reclassification of financial assets into other comprehensive income 4. Provision for credit impairment of other debt investments 5. Cash flow hedging reserve 6. Translation reserve 7. Others VI. Total comprehensive income 638,922,522.74 183,348,843.64 VII. Earnings per share (EPS): (I) Basic EPS (yuan per share) (II) Diluted EPS (yuan per share) Legal representative: Officer in charge of accounting: Head of accounting department: 110 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Consolidated cash flow statement for the year ended December 31, 2023 (Expressed in Renminbi Yuan) Note Preceding period Items Current period cumulative No. comparative I. Cash flows from operating activities: Cash receipts from sale of goods or rendering of services 12,453,986,179.20 11,979,875,703.49 Net increase of client deposit and interbank deposit Net increase of central bank loans Net increase of loans from other financial institutions Cash receipts from original insurance contract premium Net cash receipts from reinsurance Net increase of policy-holder deposit and investment Cash receipts from interest, handling fees and commissions Net increase of loans from others Net increase of repurchase Net cash receipts from agency security transaction Receipts of tax refund 30,441,488.60 178,294,936.92 Other cash receipts related to operating activities 1.(1) 1,780,673,734.46 2,097,066,618.34 Subtotal of cash inflows from operating activities 14,265,101,402.26 14,255,237,258.75 Cash payments for goods purchased and services received 7,623,799,094.31 7,399,369,111.76 Net increase of loans and advances to clients Net increase of central bank deposit and interbank deposit Cash payments for insurance indemnities of original insurance contracts Net increase of loans to others Cash payments for interest, handling fees and commissions Cash payments for policy bonus Cash paid to and on behalf of employees 2,522,411,850.58 2,062,334,468.26 Cash payments for taxes and rates 534,381,305.14 734,988,426.49 Other cash payments related to operating activities 1.(2) 2,198,952,642.74 2,396,062,964.53 Subtotal of cash outflows from operating activities 12,879,544,892.77 12,592,754,971.04 Net cash flows from operating activities 1,385,556,509.49 1,662,482,287.71 II. Cash flows from investing activities: Cash receipts from withdrawal of investments Cash receipts from investment income 17,581,018.93 24,671,510.32 Net cash receipts from the disposal of fixed assets, intangible assets and other long-term assets 22,804,215.79 16,999,998.22 Net cash receipts from the disposal of subsidiaries & other business units 115,100,000.00 Other cash receipts related to investing activities 1.(3) 1,650,769,977.00 5,401,861,000.00 Subtotal of cash inflows from investing activities 1,691,155,211.72 5,558,632,508.54 Cash payments for the acquisition of fixed assets, intangible assets and other long-term assets 1,119,006,242.88 1,083,515,734.97 Cash payments for investments 4,900,000.00 130,189,561.55 Net increase of pledged borrowings Net cash payments for the acquisition of subsidiaries & other business units 43,472.96 83,807,513.74 Other cash payments related to investing activities 1.(4) 1,642,935,617.97 5,398,900,000.00 Subtotal of cash outflows from investing activities 2,766,885,333.81 6,696,412,810.26 Net cash flows from investing activities -1,075,730,122.09 -1,137,780,301.72 III. Cash flows from financing activities: Cash receipts from absorbing investments 7,119,980.00 57,744,844.02 Including: Cash received by subsidiaries from non-controlling shareholders as investments 7,119,980.00 34,345,285.00 Cash receipts from borrowings 1,430,455,757.80 2,033,074,142.02 Other cash receipts related to financing activities 1.(5) 48,692,000.00 290,555,211.59 Subtotal of cash inflows from financing activities 1,486,267,737.80 2,381,374,197.63 Cash payments for the repayment of borrowings 1,946,364,301.72 1,732,314,139.87 Cash payments for distribution of dividends or profits and for interest expenses 471,087,036.44 451,503,767.45 Including: Cash paid by subsidiaries to non-controlling shareholders as dividend or profit 7,622,681.40 11,792,867.41 Other cash payments related to financing activities 1.(6) 44,749,906.87 263,396,824.36 Subtotal of cash outflows from financing activities 2,462,201,245.03 2,447,214,731.68 Net cash flows from financing activities -975,933,507.23 -65,840,534.05 IV. Effect of foreign exchange rate changes on cash and cash equivalents 1,587,128.38 3,056,908.33 V. Net increase in cash and cash equivalents -664,519,991.45 461,918,360.27 Add: Opening balance of cash and cash equivalents 4,580,665,245.99 4,118,746,885.72 VI. Closing balance of cash and cash equivalents 3,916,145,254.54 4,580,665,245.99 Legal representative: Officer in charge of accounting: Head of accounting department: 111 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Parent company cash flow statement for the year ended December 31, 2023 (Expressed in Renminbi Yuan) Current period Preceding period Items cumulative comparative I. Cash flows from operating activities: Cash receipts from sale of goods and rendering of services 118,392.43 Receipts of tax refund 1,008,139.39 Other cash receipts related to operating activities 448,771,549.67 622,328,508.84 Subtotal of cash inflows from operating activities 449,898,081.49 622,328,508.84 Cash payments for goods purchased and services received Cash paid to and on behalf of employees 12,214,656.58 20,656,924.48 Cash payments for taxes and rates 19,920.85 24,479.22 Other cash payments related to operating activities 448,609,614.55 727,589,122.93 Subtotal of cash outflows from operating activities 460,844,191.98 748,270,526.63 Net cash flows from operating activities -10,946,110.49 -125,942,017.79 II. Cash flows from investing activities: Cash receipts from withdrawal of investments 115,100,000.00 Cash receipts from investment income 355,469,611.94 221,911,743.60 Net cash receipts from the disposal of fixed assets, intangible assets and other long- term assets Net cash receipts from the disposal of subsidiaries & other business units Other cash receipts related to investing activities 1,133,866,191.35 1,416,859,323.47 Subtotal of cash inflows from investing activities 1,489,335,803.29 1,753,871,067.07 Cash payments for the acquisition of fixed assets, intangible assets and other long- term assets Cash payments for investments 96,546,250.00 Net cash payments for the acquisition of subsidiaries & other business units Other cash payments related to investing activities 1,020,256,248.67 1,441,321,272.72 Subtotal of cash outflows from investing activities 1,020,256,248.67 1,537,867,522.72 Net cash flows from investing activities 469,079,554.62 216,003,544.35 III. Cash flows from financing activities: Cash receipts from absorbing investments 23,399,559.02 Cash receipts from borrowings 108,000,000.00 96,200,000.00 Other cash receipts related to financing activities 228,995,320.75 Subtotal of cash inflows from financing activities 108,000,000.00 348,594,879.77 Cash payments for the repayment of borrowings 430,885,712.00 155,585,856.00 Cash payments for distribution of dividends or profits and for interest expenses 367,220,162.26 340,633,373.24 Other cash payments related to financing activities 1,258,782.48 181,368,993.06 Subtotal of cash outflows from financing activities 799,364,656.74 677,588,222.30 Net cash flows from financing activities -691,364,656.74 -328,993,342.53 IV. Effect of foreign exchange rate changes on cash and cash equivalents V. Net increase in cash and cash equivalents -233,231,212.61 -238,931,815.97 Add: Opening balance of cash and cash equivalents 631,351,957.34 870,283,773.31 VI. Closing balance of cash and cash equivalents 398,120,744.73 631,351,957.34 Legal representative: Officer in charge of accounting: Head of accounting department: 112 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Consolidated statement of changes in equity for the year ended December 31, 2023 (Expressed in Renminbi Yuan) Current period cumulative Equity attributable to parent company Items Other equity instruments Other General Non-controlling Less: Surplus Total equity Share capital Preferred Perpetual Capital reserve comprehensive Special reserve risk Undistributed profit interest Others Treasury shares reserve shares bonds income reserve I. Balance at the end of prior year 3,179,505,559.00 266,916,341.80 9,662,511,254.48 94,132,795.17 -4,630,000.00 315,124,767.92 3,963,306,890.06 448,810,670.89 17,737,412,688.98 Add: Cumulative changes of accounting policies Error correction of prior period Business combination under common control Others II. Balance at the beginning of current year 3,179,505,559.00 266,916,341.80 9,662,511,254.48 94,132,795.17 -4,630,000.00 315,124,767.92 3,963,306,890.06 448,810,670.89 17,737,412,688.98 III. Current period increase (or less: decrease) 1,111.00 -1,627.47 -1,112,533.21 63,892,252.27 86,127,936.05 11,727,629.47 160,634,768.11 (I) Total comprehensive income 498,383,730.00 14,160,459.06 512,544,189.06 (II) Capital contributed or withdrawn by owners 1,111.00 -1,627.47 -1,112,533.21 5,189,851.81 4,076,802.13 1. Ordinary shares contributed by owners 8,619,980.00 8,619,980.00 2. Capital contributed by holders of other equity 1,111.00 -1,627.47 8,673.60 8,157.13 instruments 3. Amount of share-based payment included in equity 4. Others -1,121,206.81 -3,430,128.19 -4,551,335.00 (III) Profit distribution 63,892,252.27 -412,255,793.95 -7,622,681.40 -355,986,223.08 1. Appropriation of surplus reserve 63,892,252.27 -63,892,252.27 2. Appropriation of general risk reserve 3. Appropriation of profit to owners -348,363,541.68 -7,622,681.40 -355,986,223.08 4. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special reserve 1. Current period appropriation 8,608,843.62 8,608,843.62 2. Current period use -8,608,843.62 -8,608,843.62 (VI) Others IV. Balance at the end of current period 3,179,506,670.00 266,914,714.33 9,661,398,721.27 94,132,795.17 -4,630,000.00 379,017,020.19 4,049,434,826.11 460,538,300.36 17,898,047,457.09 Legal representative: Officer in charge of accounting: Head of accounting department: 113 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Consolidated statement of changes in equity for the year ended December 31, 2023 (continued) (Expressed in Renminbi Yuan) Preceding period comparative Equity attributable to parent company Items Other equity instruments Other General Non-controlling Less: Surplus Total equity Share capital Preferred Perpetual Capital reserve comprehensive Special reserve risk Undistributed profit interest Others Treasury shares reserve shares bonds income reserve I. Balance at the end of prior year 3,175,734,760.00 266,929,289.24 9,772,795,863.75 455,303,777.91 -4,280,000.00 296,754,883.56 3,874,934,971.69 357,221,037.38 17,284,787,027.71 Add: Cumulative changes of accounting policies Error correction of prior period Business combination under common control Others II. Balance at the beginning of current year 3,175,734,760.00 266,929,289.24 9,772,795,863.75 455,303,777.91 -4,280,000.00 296,754,883.56 3,874,934,971.69 357,221,037.38 17,284,787,027.71 III. Current period increase (or less: decrease) 3,770,799.00 -12,947.44 -110,284,609.27 -361,170,982.74 -350,000.00 18,369,884.36 88,371,918.37 91,589,633.51 452,625,661.27 (I) Total comprehensive income -350,000.00 418,794,179.13 40,497,942.44 458,942,121.57 (II) Capital contributed or withdrawn by owners 3,770,799.00 -12,947.44 -110,284,609.27 -361,170,982.74 60,341,209.93 314,985,434.96 1. Ordinary shares contributed by owners 3,761,991.00 -112,538,093.97 -361,170,982.74 46,970,675.00 299,365,554.77 2. Capital contributed by holders of other equity 8,808.00 -12,947.44 66,691.53 62,552.09 instruments 3. Amount of share-based payment included in equity 3,868,552.56 170,516.82 4,039,069.38 4. Others -1,681,759.39 13,200,018.11 11,518,258.72 (III) Profit distribution 18,369,884.36 -330,422,260.76 -9,249,518.86 -321,301,895.26 1. Appropriation of surplus reserve 18,369,884.36 -18,369,884.36 2. Appropriation of general risk reserve 3. Appropriation of profit to owners -312,052,376.40 -9,249,518.86 -321,301,895.26 4. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special reserve 1. Current period appropriation 8,693,981.54 8,693,981.54 2. Current period use -8,693,981.54 -8,693,981.54 (VI) Others IV. Balance at the end of current period 3,179,505,559.00 266,916,341.80 9,662,511,254.48 94,132,795.17 -4,630,000.00 315,124,767.92 3,963,306,890.06 448,810,670.89 17,737,412,688.98 Legal representative: Officer in charge of accounting: Head of accounting department: 114 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Parent company statement of changes in equity for the year ended December 31, 2023 (Expressed in Renminbi Yuan) Current period cumulative Other equity instruments Other Items Less: Treasury Special Share capital Preferred Perpetual Capital reserve comprehensive Surplus reserve Undistributed profit Total equity Others shares reserve shares bonds income I. Balance at the end of prior year 3,179,505,559.00 266,916,341.80 15,324,654,061.79 94,132,795.17 -4,630,000.00 280,904,378.50 559,764,885.53 19,512,982,431.45 Add: Cumulative changes of accounting policies Error correction of prior period Others II. Balance at the beginning of current year 3,179,505,559.00 266,916,341.80 15,324,654,061.79 94,132,795.17 -4,630,000.00 280,904,378.50 559,764,885.53 19,512,982,431.45 III. Current period increase (or less: decrease) 1,111.00 -1,627.47 8,673.60 63,892,252.27 226,666,728.79 290,567,138.19 (I) Total comprehensive income 638,922,522.74 638,922,522.74 (II) Capital contributed or withdrawn by owners 1,111.00 -1,627.47 8,673.60 8,157.13 1. Ordinary shares contributed by owners 2. Capital contributed by holders of other equity 1,111.00 -1,627.47 8,673.60 8,157.13 instruments 3. Amount of share-based payment included in equity 4. Others (III) Profit distribution 63,892,252.27 -412,255,793.95 -348,363,541.68 1. Appropriation of surplus reserve 63,892,252.27 -63,892,252.27 2. Appropriation of profit to owners -348,363,541.68 -348,363,541.68 3. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special reserve 1. Current period appropriation 2. Current period use (VI) Others IV. Balance at the end of current period 3,179,506,670.00 266,914,714.33 15,324,662,735.39 94,132,795.17 -4,630,000.00 344,796,630.77 786,431,614.32 19,803,549,569.64 Legal representative: Officer in charge of accounting: Head of accounting department: 115 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Parent company statement of changes in equity for the year ended December 31, 2023 (continued) (Expressed in Renminbi Yuan) Preceding period comparative Other equity instruments Other Items Less: Treasury Special Undistributed Share capital Preferred Perpetual Capital reserve comprehensive Surplus reserve Total equity Others shares reserve profit shares bonds income I. Balance at the end of prior year 3,175,734,760.00 266,929,289.24 15,433,256,911.67 455,303,777.91 -4,280,000.00 262,534,494.14 706,488,302.65 19,385,359,979.79 Add: Cumulative changes of accounting policies Error correction of prior period Others II. Balance at the beginning of current year 3,175,734,760.00 266,929,289.24 15,433,256,911.67 455,303,777.91 -4,280,000.00 262,534,494.14 706,488,302.65 19,385,359,979.79 III. Current period increase (or less: decrease) 3,770,799.00 -12,947.44 -108,602,849.88 -361,170,982.74 -350,000.00 18,369,884.36 -146,723,417.12 127,622,451.66 (I) Total comprehensive income -350,000.00 183,698,843.64 183,348,843.64 (II) Capital contributed or withdrawn by owners 3,770,799.00 -12,947.44 -108,602,849.88 -361,170,982.74 256,325,984.42 1. Ordinary shares contributed by owners 3,761,991.00 -112,538,093.97 -361,170,982.74 252,394,879.77 2. Capital contributed by holders of other equity 8,808.00 -12,947.44 66,691.53 62,552.09 instruments 3. Amount of share-based payment included in equity 3,868,552.56 3,868,552.56 4. Others (III) Profit distribution 18,369,884.36 -330,422,260.76 -312,052,376.40 1. Appropriation of surplus reserve 18,369,884.36 -18,369,884.36 2. Appropriation of profit to owners -312,052,376.40 -312,052,376.40 3. Others (IV) Internal carry-over within equity 1. Transfer of capital reserve to capital 2. Transfer of surplus reserve to capital 3. Surplus reserve to cover losses 4. Changes in defined benefit plan carried over to retained earnings 5. Other comprehensive income carried over to retained earnings 6. Others (V) Special reserve 1. Current period appropriation 2. Current period use (VI) Others IV. Balance at the end of current period 3,179,505,559.00 266,916,341.80 15,324,654,061.79 94,132,795.17 -4,630,000.00 280,904,378.50 559,764,885.53 19,512,982,431.45 Legal representative: Officer in charge of accounting: Head of accounting department: 116 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Infore Environment Technology Group Co., Ltd. Notes to Financial Statements For the year ended December 31, 2023 Monetary unit: RMB Yuan I. Company profile Infore Environment Technology Group Co., Ltd. (the “Company”), formerly known as Zhejiang Shangfeng Industrial Co., Ltd., was registered at Zhejiang Administration for Industry and Commerce on November 18, 1993. Under the approval of Zhejiang Share System Pilot Work Coordination Group with document of approval numbered Zhe Gu [1993] 51, the Company was established by Zhejiang Fan Air Cooling Equipment Co., Ltd., the main initiator, and Shangyu Fan Factory and Shaoxing Fluid Engineering Research Institute, the joint initiators, through targeted fundraising. Headquartered in Shaoxing City, Zhejiang Province, the Company currently holds a business license with unified social credit code of 913300006096799222. As of December 31, 2023, it has registered capital of 3,179,505,559.00 yuan, and total share capital of 3,179,506,670.00 yuan. The difference between the registered capital and share capital is because the change related to new share capital has not been registered at the administration for market regulation. According to the records in China Securities Depository and Clearing Corporation Limited, as of December 31, 2023, the Company has restricted outstanding shares of 1,472,469 shares, and unrestricted outstanding shares of 3,178,034,201 shares, totaling 3,179,506,670.00 shares. The Company’s shares were listed on the Shenzhen Stock Exchange on March 30, 2000. The Company belongs to the ecological protection and environmental management industry. The main business activities include R&D, maintenance and operation services of environmental monitoring instruments and environmental protection equipment, environmental treatment technology development, consulting and services, operation services of environmental treatment facilities, environmental engineering, environmental protection engineering, urban engineering, sale of ventilators, air-cooling, water-cooling and air-conditioning equipment, etc. Its revenue is mainly from sales of environmental and sanitation machinery, ventilation equipment, and sanitation operation service. The financial statements were approved and authorized for issue by the sixth meeting of the tenth session of the Board of Directors dated April 26, 2024. The Company has brought 278 subsidiaries including Changsha Zoomlion Environmental Industry Co., Ltd. (the “Zoomlion Environmental Company”), Zhejiang Shangfeng Special Blower Industrial Co., Ltd. (the “Shangfeng Industrial Company”), Guangdong Infore Technology Co., Ltd. (the “Infore Technology Company”) and Shenzhen Green Oriental Environmental Protection Co., Ltd. (the “Green Oriental Company”) into the consolidation scope. Please refer to section VII of notes to the financial statements for details. 117 Infore Environment Technology Group Co., Ltd. 2023 Annual Report II. Preparation basis of the financial statements (I) Preparation basis The financial statements have been prepared on the basis of going concern. (II) Assessment of the ability to continue as a going concern The Company has no events or conditions that may cast significant doubts upon the Company’s ability to continue as a going concern within the 12 months after the balance sheet date. III. Significant accounting policies and estimates Important note: The Company has set up accounting policies and estimates on transactions or events such as impairment of financial instruments, depreciation of fixed assets, depreciation of right-of-use assets, amortization of intangible assets, revenue recognition, etc., based on the Company’s actual production and operation features. (I) Statement of compliance The financial statements have been prepared in accordance with the requirements of China Accounting Standards for Business Enterprises (CASBEs), and present truly and completely the financial position, financial performance and cash flows of the Company. (II) Accounting period The accounting year of the Company runs from January 1 to December 31 under the Gregorian calendar. (III) Operating cycle The Company has a relatively short operating cycle for its business, an asset or a liability is classified as current if it is expected to be realized or due within 12 months. (IV) Functional currency The Company’s functional currency is Renminbi (RMB) Yuan. (V) Determination method and basis for selection of materiality The Company prepares and discloses financial statements in compliance with the principle of materiality. The items disclosed in notes to the financial statements involving materiality judgements, determination method and basis for selection of materiality are as follows: 118 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Disclosed items involving Determination method and basis for selection of Note No. materiality judgements materiality Significant accounts receivable Accounts receivable with single amount in excess of with provision for bad debts made V (I) 3 (2) 2) 0.3% of total assets are identified as significant on an individual basis accounts receivable. Accounts receivable written off with single amount in Significant accounts receivable V (I) 3 (4) 2) excess of 0.3% of total assets are identified as written off significant accounts receivable written off. Advances paid with single amount in excess of 0.3% Significant advances paid with V (I) 5 (1) 2) of total assets are identified as significant advances age over one year paid. Significant other receivables with Other receivables with single amount in excess of provision for bad debts made on V (I) 6 (3) 2) 0.3% of total assets are identified as significant other an individual basis receivables. Other receivables written off with single amount in Significant other receivables V (I) 6 (5) 2) excess of 0.3% of total assets are identified as written off significant other receivables written off. Construction in progress with single amount in excess Significant construction in V (I) 16 (2) of 0.3% of total assets are identified as significant progress construction in progress. Accounts payable with single amount in excess of 0.3% Significant accounts payable with V (I) 27 (1) 2) of total assets are identified as significant accounts age over one year payable. Contract liabilities with single amount in excess of Significant contract liabilities V (I) 28 (2) 0.3% of total assets are identified as significant contract with age over one year liabilities. Other payables with single amount in excess of 0.3% Significant other payables with V (I) 31 (2) of total assets are identified as significant other age over one year payables. Cash flows from investing activities with single Significant cash flows from V (III) 1 amount in excess of 10% of total assets are identified investing activities as significant cash flows from investing activities. Capitalized R&D projects and outsourced R&D Significant capitalized R&D projects with single amount in excess of 0.3% of total projects and outsourced R&D VI (II) 2 assets are identified as significant capitalized R&D projects projects and outsourced R&D projects. Subsidiaries with total assets in excess of 15% of the Significant subsidiaries, not group’s total assets are identified as significant VII (I) 2 wholly-owned subsidiaries subsidiaries or significant not wholly-owned subsidiaries. Joint ventures and associates with the amount of Significant joint ventures, single long-term equity investment in excess of 0.5% VII (V) associates and joint operations of the total assets are identified as significant joint ventures, associates or joint operations. (VI) Accounting treatments of business combination under and not under common control 1. Accounting treatment of business combination under common control Assets and liabilities arising from business combination are measured at carrying amount of the combined party included in the consolidated financial statements of the ultimate controlling party at the combination date. Difference between carrying amount of the equity of the combined party included in the consolidated financial statements of the ultimate controlling party and that of the combination consideration or total par value of shares issued is adjusted to capital reserve, if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. 119 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2. Accounting treatment of business combination not under common control When combination cost is in excess of the fair value of identifiable net assets obtained from the acquiree at the acquisition date, the excess is recognized as goodwill; otherwise, the fair value of identifiable assets, liabilities and contingent liabilities, and the measurement of the combination cost are reviewed, then the difference is recognized in profit or loss. (VII) Judgement criteria for control and compilation method of consolidated financial statements 1. Judgement of control An investor controls an investee if and only if the investor has all the following: (1) power over the investee; (2) exposure, or rights, to variable returns from its involvement with the investee; and (3) the ability to use its power over the investee to affect the amount of the investor’s returns. 2. Compilation method of consolidated financial statements The parent company brings all its controlled subsidiaries into the consolidation scope. The consolidated financial statements are compiled by the parent company according to “CASBE 33 – Consolidated Financial Statements”, based on relevant information and the financial statements of the parent company and its subsidiaries. (VIII) Classification of joint arrangements and accounting treatment of joint operations 1. Joint arrangements include joint operations and joint ventures. 2. When the Company is a joint operator of a joint operation, it recognizes the following items in relation to its interest in a joint operation: (1) its assets, including its share of any assets held jointly; (2) its liabilities, including its share of any liabilities incurred jointly; (3) its revenue from the sale of its share of the output arising from the joint operation; (4) its share of the revenue from the sale of the assets by the joint operation; and (5) its expenses, including its share of any expenses incurred jointly. (IX) Recognition criteria of cash and cash equivalents Cash as presented in cash flow statement refers to cash on hand and deposit on demand for payment. Cash equivalents refer to short-term, highly liquid investments that can be readily converted to cash and that are subject to an insignificant risk of changes in value. (X) Foreign currency translation 1. Translation of transactions denominated in foreign currency Transactions denominated in foreign currency are translated into RMB yuan at the spot exchange rate at the transaction date at initial recognition. At the balance sheet date, monetary items denominated in foreign currency are translated at the spot exchange rate at the balance sheet date with difference, except for those arising from the principal and interest of exclusive borrowings eligible for capitalization, included in profit or loss; non-cash items carried at historical costs are translated at the spot exchange rate at the transaction date, with the RMB amounts 120 Infore Environment Technology Group Co., Ltd. 2023 Annual Report unchanged; non-cash items carried at fair value in foreign currency are translated at the spot exchange rate at the date when the fair value was determined, with difference included in profit or loss or other comprehensive income. 2. Translation of financial statements measured in foreign currency The assets and liabilities in the balance sheet are translated into RMB at the spot exchange rate at the balance sheet date; the equity items, other than undistributed profit, are translated at the spot exchange rate at the transaction date; the revenues and expenses in the income statement are translated into RMB at the spot exchange rate at the transaction date. The difference arising from the aforementioned foreign currency translation is included in other comprehensive income. (XI) Financial instruments 1. Classification of financial assets and financial liabilities Financial assets are classified into the following three categories when initially recognized: (1) financial assets at amortized cost; (2) financial assets at fair value through other comprehensive income; (3) financial assets at fair value through profit or loss. Financial liabilities are classified into the following four categories when initially recognized: (1) financial liabilities at fair value through profit or loss; (2) financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies; (3) financial guarantee contracts not fall within the above categories (1) and (2), and commitments to provide a loan at a below-market interest rate, which do not fall within the above category (1); (4) financial liabilities at amortized cost. 2. Recognition criteria, measurement method and derecognition of financial assets and financial liabilities (1) Recognition criteria and measurement method of financial assets and financial liabilities When the Company becomes a party to a financial instrument, it is recognized as a financial asset or financial liability. The financial assets and financial liabilities initially recognized by the Company are measured at fair value; for the financial assets and liabilities at fair value through profit or loss, the transaction expenses thereof are directly included in profit or loss; for other categories of financial assets and financial liabilities, the transaction expenses thereof are included into the initially recognized amount. However, at initial recognition, for accounts receivable that do not contain a significant financing component or in circumstances where the Company does not consider the financing components in contracts within one year, they are measured at the transaction price in accordance with “CASBE 14 – Revenues”. (2) Subsequent measurement of financial assets 1) Financial assets measured at amortized cost The Company measures its financial assets at the amortized costs using effective interest method. Gains or losses on financial assets that are measured at amortized cost and are not part of hedging relationships shall be included into profit or loss when the financial assets are derecognized, reclassified, amortized using effective interest method or recognized with impairment loss. 2) Debt instrument investments at fair value through other comprehensive income The Company measures its debt instrument investments at fair value. Interests, impairment gains or losses, and 121 Infore Environment Technology Group Co., Ltd. 2023 Annual Report gains and losses on foreign exchange that calculated using effective interest method shall be included into profit or loss, while other gains or losses are included into other comprehensive income. Accumulated gains or losses that initially recognized as other comprehensive income should be transferred out into profit or loss when the financial assets are derecognized. 3) Equity instrument investments at fair value through other comprehensive income The Company measures its equity instrument investments at fair value. Dividends obtained (other than those as part of investment cost recovery) shall be included into profit or loss, while other gains or losses are included into other comprehensive income. Accumulated gains or losses that initially recognized as other comprehensive income should be transferred out into retained earnings when the financial assets are derecognized. 4) Financial assets at fair value through profit or loss The Company measures its financial assets at fair value. Gains or losses arising from changes in fair value (including interests and dividends) shall be included into profit or loss, except for financial assets that are part of hedging relationships. (3) Subsequent measurement of financial liabilities 1) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include held-for-trading financial liabilities (including derivatives that are liabilities) and financial liabilities designated as at fair value through profit or loss. The Company measures such kind of liabilities at fair value. The amount of changes in the fair value of the financial liabilities that are attributable to changes in the Company’s own credit risk shall be included into other comprehensive income, unless such treatment would create or enlarge accounting mismatches in profit or loss. Other gains or losses on those financial liabilities (including interests, changes in fair value that are attributable to reasons other than changes in the Company’s own credit risk) shall be included into profit or loss, except for financial liabilities that are part of hedging relationships. Accumulated gains or losses that originally recognized as other comprehensive income should be transferred out into retained earnings when the financial liabilities are derecognized. 2) Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies The Company measures its financial liabilities in accordance with “CASBE 23 – Transfer of Financial Assets”. 3) Financial guarantee contracts not fall within the above categories 1) and 2), and commitments to provide a loan at a below-market interest rate, which do not fall within the above category 1) The Company measures its financial liabilities at the higher of: a. the amount of loss allowances in accordance with impairment requirements of financial instruments; b. the amount initially recognized less the amount of accumulated amortization recognized in accordance with “CASBE 14 – Revenues”. 4) Financial liabilities at amortized cost The Company measures its financial liabilities at amortized cost using effective interest method. Gains or losses on financial liabilities that are measured at amortized cost and are not part of hedging relationships shall be included 122 Infore Environment Technology Group Co., Ltd. 2023 Annual Report into profit or loss when the financial liabilities are derecognized and amortized using effective interest method. (4) Derecognition of financial assets and financial liabilities 1) Financial assets are derecognized when: a. the contractual rights to the cash flows from the financial assets expire; or b. the financial assets have been transferred and the transfer qualifies for derecognition in accordance with “CASBE 23 – Transfer of Financial Assets”. 2) Only when the underlying present obligations of a financial liability are relieved totally or partly may the financial liability be derecognized accordingly. 3. Recognition criteria and measurement method of financial assets transfer Where the Company has transferred substantially all of the risks and rewards related to the ownership of the financial asset, it derecognizes the financial asset, and any right or liability arising from such transfer is recognized independently as an asset or a liability. If it retained substantially all of the risks and rewards related to the ownership of the financial asset, it continues recognizing the financial asset. Where the Company does not transfer or retain substantially all of the risks and rewards related to the ownership of a financial asset, it is dealt with according to the circumstances as follows respectively: (1) if the Company does not retain its control over the financial asset, it derecognizes the financial asset, and any right or liability arising from such transfer is recognized independently as an asset or a liability; (2) if the Company retains its control over the financial asset, according to the extent of its continuing involvement in the transferred financial asset, it recognizes the related financial asset and recognizes the relevant liability accordingly. If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the amounts of the following two items is included in profit or loss: (1) the carrying amount of the transferred financial asset as of the date of derecognition; (2) the sum of consideration received from the transfer of the financial asset, and the accumulative amount of the changes of the fair value originally included in other comprehensive income proportionate to the transferred financial asset (financial assets transferred refer to debt instrument investments at fair value through other comprehensive income). If the transfer of financial asset partially satisfies the conditions for derecognition, the entire carrying amount of the transferred financial asset is, between the portion which is derecognized and the portion which is not, apportioned according to their respective relative fair value, and the difference between the amounts of the following two items is included into profit or loss: (1) the carrying amount of the portion which is derecognized; (2) the sum of consideration of the portion which is derecognized, and the portion of the accumulative amount of the changes in the fair value originally included in other comprehensive income which is corresponding to the portion which is derecognized (financial assets transferred refer to debt instrument investments at fair value through other comprehensive income). 4. Fair value determination method of financial assets and liabilities The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data and information are available to measure fair value. The inputs to valuation techniques used to measure fair value are arranged in the following hierarchy and used accordingly: 123 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (1) Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date; (2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability, for example, interest rates and yield curves observable at commonly quoted intervals; market-corroborated inputs; (3) Level 3 inputs are unobservable inputs for the asset or liability. Level 3 inputs include interest rate that is not observable and cannot be corroborated by observable market data at commonly quoted intervals, historical volatility, future cash flows to be paid to fulfill the disposal obligation assumed in business combination, financial forecast developed using the Company’s own data, etc. 5. Impairment of financial instruments The Company, on the basis of expected credit loss, recognizes loss allowances of financial assets at amortized cost, debt instrument investments at fair value through other comprehensive income, contract assets, leases receivable, loan commitments other than financial liabilities at fair value through profit or loss, financial guarantee contracts not belong to financial liabilities at fair value through profit or loss or financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. Expected credit losses refer to the weighted average of credit losses with the respective risks of a default occurring as the weights. Credit loss refers to the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate. Among which, purchased or originated credit-impaired financial assets are discounted at the credit-adjusted effective interest rate. At the balance sheet date, the Company shall only recognize the cumulative changes in the lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets. For leases receivable, and accounts receivable and contract assets resulting from transactions regulated in “CASBE 14 – Revenues”, the Company chooses simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses. For financial assets other than the above, on each balance sheet date, the Company shall assess whether the credit risk on the financial instrument has increased significantly since initial recognition. The Company shall measure the loss allowance for the financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition; otherwise, the Company shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit loss. Considering reasonable and supportable forward-looking information, the Company compares the risk of a default occurring on the financial instrument as at the balance sheet date with the risk of a default occurring on the financial instrument as at the date of initial recognition, so as to assess whether the credit risk on the financial 124 Infore Environment Technology Group Co., Ltd. 2023 Annual Report instrument has increased significantly since initial recognition. The Company may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have relatively low credit risk at the balance sheet date. The Company shall estimate expected credit risk and measure expected credit losses on an individual or a collective basis. When the Company adopts the collective basis, financial instruments are grouped with similar credit risk features. The Company shall remeasure expected credit loss on each balance sheet date, and increased or reversed amounts of loss allowance arising therefrom shall be included into profit or loss as impairment losses or gains. For a financial asset measured at amortized cost, the loss allowance reduces the carrying amount of such financial asset presented in the balance sheet; for a debt investment measured at fair value through other comprehensive income, the loss allowance shall be recognized in other comprehensive income and shall not reduce the carrying amount of such financial asset. 6. Offsetting financial assets and financial liabilities Financial assets and financial liabilities are presented separately in the balance sheet and are not offset. However, the Company offsets a financial asset and a financial liability and presents the net amount in the balance sheet when, and only when, the Company: (1) currently has a legally enforceable right to set off the recognized amounts; and (2) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. For a transfer of a financial asset that does not qualify for derecognition, the Company does not offset the transferred asset and the associated liability. (XII) Recognition criteria and accrual method for expected credit losses of receivables and contract assets 1. Receivables and contract assets with expected credit losses measured on a collective basis using similar credit risk features Basis for determination of Method for measuring expected credit loss Categories portfolio Based on historical credit loss experience, the Bank acceptance receivable current situation and the forecast of future Type of notes economic conditions, the Company calculates expected credit loss through exposure at Trade acceptance receivable default and lifetime expected credit loss rate. Based on historical credit loss experience, the Accounts receivable – Portfolio Balances due from related current situation and the forecast of future grouped with balances due from parties within the economic conditions, the Company calculates related parties within the consolidation scope expected credit loss through exposure at consolidation scope default and lifetime expected credit loss rate. Based on historical credit loss experience, the current situation and the forecast of future economic conditions, the Company prepares Accounts receivable – Portfolio Ages the comparison table of ages and lifetime grouped with ages expected credit loss rate of accounts receivable, so as to calculate expected credit loss. Accounts receivable – Portfolio Nature of receivables Based on historical credit loss experience, the 125 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Basis for determination of Method for measuring expected credit loss Categories portfolio grouped with government current situation and the forecast of future subsidies for new energy vehicles economic conditions, the Company calculates expected credit loss through exposure at default and lifetime expected credit loss rate. Other receivables – Portfolio Balances due from related grouped with balances due from parties within the Based on historical credit loss experience, the related parties within the consolidation scope current situation and the forecast of future consolidation scope economic conditions, the Company calculates Other receivables – Portfolio expected credit loss through exposure at grouped with performance Nature of receivables default and 12-month or lifetime expected compensations credit loss rate. Other receivables – Portfolio Nature of receivables grouped with buyer’s credit Based on historical credit loss experience, the current situation and the forecast of future Other receivables – Portfolio economic conditions, the Company prepares Ages grouped with ages the comparison table of ages and expected credit loss rate of other receivables, so as to calculate expected credit loss. Long-term receivables – Portfolio grouped with finance Expected credit loss rates are calculated based lease payment/ Long-term on five-level classification of credit assets of receivables – Portfolio grouped non-bank financial institutions: 1.5% for pass with receivables financing Nature of receivables category, 3% for special-mention category, factoring payment /Accounts 30% for substandard category, 60% for receivable – Portfolio grouped doubtful category, and 100% for loss category with commercial factoring payment For long-term receivables within the credit period that has not reached the contractual payment deadline, provision for bad debts is Long-term receivables – accrued at 5% of the balance. For long-term Nature of receivables Portfolio grouped with ages receivables that have exceeded the contractual payment deadline and have not yet been paid, provision for bad debts is accrued based on the age of the balance. Based on historical credit loss experience, the current situation and the forecast of future Contract assets – Portfolio Nature of the balance economic conditions, the Company calculates grouped with warranty reserve expected credit loss through exposure at default and lifetime expected credit loss rate. 126 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2. Comparison table of ages and expected credit loss rate of portfolio grouped with ages Expected credit Expected credit loss rate Expected credit Expected credit loss rate loss rate of of accounts receivable of loss rate of of other receivables of accounts ventilation equipment other ventilation equipment Ages receivable of manufacturing industry receivables of manufacturing industry parent company and environmental parent company and environmental (%) integrated industry (%) (%) integrated industry (%) 1-180 days (inclusive, the 0 5 0 5 same hereinafter) 180 days - 1 year 2 5 2 5 1-2 years 10 10 10 10 2-3 years 30 30 30 30 3-5 years 50 50 50 50 Over 5 years 80 100 80 100 Ages of accounts receivable, other receivables and long-term receivables are calculated from the month when such receivables are accrued. 3. Recognition criteria for receivables and contract assets with expected credit losses measured on an individual basis For receivables and contract assets whose credit risk is significantly different from that of portfolios, the Company accrues expected credit losses on an individual basis. (XIII) Inventories 1. Classification of inventories Inventories include finished goods or goods held for sale in the ordinary course of business, work in process in the process of production, materials, supplies, etc. to be consumed in the production process or in the rendering of services. 2. Accounting method for dispatched inventories Inventories dispatched from storage are accounted for with weighted average method. 3. Inventory system Perpetual inventory method is adopted. 4. Amortization method of low-value consumables and packages (1) Low-value consumables Low-value consumables are amortized with one-off method. (2) Packages Packages are amortized with one-off method. 5. Provision for inventory write-down Recognition criteria and accrual method of provision for inventory write-down 127 Infore Environment Technology Group Co., Ltd. 2023 Annual Report At the balance sheet date, inventories are measured at the lower of cost and net realizable value; provisions for inventory write-down are made on the excess of its cost over the net realizable value. The net realizable value of inventories held for sale is determined based on the amount of the estimated selling price less the estimated selling expenses and relevant taxes and surcharges in the ordinary course of business; the net realizable value of inventories to be processed is determined based on the amount of the estimated selling price less the estimated costs of completion, selling expenses and relevant taxes and surcharges in the ordinary course of business; at the balance sheet date, when only part of the same item of inventories have agreed price, their net realizable value are determined separately and are compared with their costs to set the provision for inventory write-down to be made or reversed. (XIV) Non-current assets or disposal groups held for sale, discontinued operations 1. Classification of non-current assets or disposal groups held for sale Non-current assets or disposal groups are accounted for as held for sale when the following conditions are all met: (1) the asset must be available for immediate sale in its present condition subject to terms that are usual and customary for sales of such assets or disposal groups; (2) its sales must be highly probable, i.e., the Company has made a decision on the sale plan and has obtained a firm purchase commitment, and the sale is expected to be completed within one year. When the Company acquires a non-current asset or disposal group with a view to resale, it shall classify the non- current asset or disposal group as held for sale at the acquisition date only if the requirement of “expected to be completed within one year” is met at that date and it is highly probable that other criteria for held for sale will be met within a short period (usually within three months). An asset or a disposal group is still accounted for as held for sale when the Company remains committed to its plan to sell the asset or disposal group in the circumstance that non-related party transactions fail to be completed within one year due to one of the following reasons: (1) a buyer or others unexpectedly set conditions that will extend the sale period, while the Company has taken timely actions to respond to the conditions and expects a favorable resolution of the delaying factors within one year since the setting; (2) a non-current asset or disposal group classified as held for sale fails to be sold within one year due to rare cases, and the Company has taken action necessary to respond to the circumstances during the initial one-year period and the criteria for held for sale are met. 2. Accounting treatments of non-current assets or disposal groups held for sale (1) Initial measurement and subsequent measurement For initial measurement and subsequent measurement as at the balance sheet date of a non-current asset or disposal group held for sale, where the carrying amount is higher than the fair value less costs to sell, the carrying amount is written down to the fair value less costs to sell, and the write-down is recognized in profit or loss as assets impairment loss, meanwhile, provision for impairment of assets held for sale shall be made. For a non-current asset or disposal group classified as held for sale at the acquisition date, the asset or disposal group is measured on initial recognition at the lower of its initial measurement amount had it not been so classified and fair value less costs to sell. Apart from the non-current asset or disposal group acquired through business 128 Infore Environment Technology Group Co., Ltd. 2023 Annual Report combination, the difference arising from the initial recognition of a non-current asset or disposal group at the fair value less costs to sell shall be included into profit or loss. The assets impairment loss recognized for a disposal group held for sale shall reduce the carrying amount of goodwill in the disposal group first, and then reduce its carrying amount based on the proportion of each non- current asset’s carrying amount in the disposal group. No provision for depreciation or amortization shall be made on non-current assets held for sale or non-current assets in disposal groups held for sale, while interest and other expenses attributable to the liabilities of a disposal group held for sale shall continue to be recognized. (2) Reversal of assets impairment loss When there is a subsequent increase in fair value less costs to sell of a non-current asset held for sale at the balance sheet date, the write-down shall be recovered, and shall be reversed not in excess of the impairment loss that has been recognized after the non-current asset was classified as held for sale. The reversal shall be included into profit or loss. Assets impairment loss that has been recognized before the classification is not reversed. When there is a subsequent increase in fair value less costs to sell of a disposal group held for sale at the balance sheet date, the write-down shall be recovered, and shall be reversed not in excess of the non-current assets impairment loss that has been recognized after the disposal group was classified as held for sale. The reversal shall be included into profit or loss. The reduced carrying amount of goodwill and non-current assets impairment loss that has been recognized before the classification is not reversed. For the subsequent reversal of the impairment loss that has been recognized in a disposal group held for sale, the carrying amount is increased based on the proportion of carrying amount of each non-current asset (excluding goodwill) in the disposal group. (3) Non-current asset or disposal group that is no longer classified as held for sale and derecognized A non-current asset or disposal group that does not meet criteria for held for sale and no longer classified as held for sale, or a non-current asset that removed from a disposal group held for sale shall be measured at the lower of: 1) its carrying amount before it was classified as held for sale, adjusted for any depreciation, amortization or impairment that would have been recognized had it not been classified as held for sale; and 2) its recoverable amount. When a non-current asset or disposal group classified as held for sale is derecognized, unrecognized gains or losses shall be included into profit or loss. 3. Recognition criteria of discontinued operations A component of the Company that has been disposed of, or is classified as held for sale and can be clearly distinguished is recognized as a discontinued operation when it fulfills any of the following conditions: (1) it represents a separate major line of business or a separate geographical area of operations; (2) it is part of a related plan to dispose of a separate major line of business or a separate geographical area of 129 Infore Environment Technology Group Co., Ltd. 2023 Annual Report operations; or (3) it is a subsidiary acquired exclusively with a review to resale. 4. Presentation method of discontinued operations The Company presents gains or losses from continuing operations and gains or losses from discontinued operations separately in the income statement. Operating gains or losses including impairment loss of discontinued operations and its reversal amount, and gains or losses on disposal are presented as gains or losses from discontinued operations. For discontinued operations presented in the current period, the information previously presented as gains or losses from continuing operations is reclassified as gains or losses from discontinued operations for the comparative period in the current financial statements. For discontinued operations that no longer meet criteria for held for sale, the information previously presented as gains or losses from discontinued operations is reclassified as gains or losses from continuing operations for the comparative period in the current financial statements. (XV) Long-term equity investments 1. Judgment of joint control and significant influence 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. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of these policies. 2. Determination of investment cost (1) For business combination under common control, if the consideration of the combining party is that it makes payment in cash, transfers non-cash assets, assumes its liabilities or issues equity securities, on the date of combination, it regards the share of the carrying amount of the equity of the combined party included in the consolidated financial statements of the ultimate controlling party as the initial cost of the investment. The difference between the initial cost of the long-term equity investments and the carrying amount of the combination consideration paid or the par value of shares issued offsets capital reserve; if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. When long-term equity investments are obtained through business combination under common control achieved in stages, the Company determines whether it is a “bundled transaction”. If it is a “bundled transaction”, stages as a whole are considered as one transaction in accounting treatment. If it is not a “bundled transaction”, on the date of combination, investment cost is initially recognized at the share of the carrying amount of net assets of the combined party included the consolidated financial statements of the ultimate controlling party. The difference between the initial investment cost of long-term equity investments at the acquisition date and the carrying amount of the previously held long-term equity investments plus the carrying amount of the consideration paid for the newly acquired equity is adjusted to capital reserve; if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. (2) For business combination not under common control, investment cost is initially recognized at the acquisition- date fair value of considerations paid. 130 Infore Environment Technology Group Co., Ltd. 2023 Annual Report When long-term equity investments are obtained through business combination not under common control achieved in stages, the Company determined whether they are stand-alone financial statements or consolidated financial statements in accounting treatment: 1) In the case of stand-alone financial statements, investment cost is initially recognized at the carrying amount of the previously held long-term equity investments plus the carrying amount of the consideration paid for the newly acquired equity. 2) In the case of consolidated financial statements, the Company determines whether it is a “bundled transaction”. If it is a “bundled transaction”, stages as a whole are considered as one transaction in accounting treatment. If it is not a “bundled transaction”, the carrying amount of the acquirer’s previously held equity interest in the acquiree is remeasured at the acquisition-date fair value, and the difference between the fair value and the carrying amount is recognized in investment income; when the acquirer’s previously held equity interest in the acquiree involves other comprehensive income under equity method, the related other comprehensive income is reclassified as income for the acquisition period, excluding other comprehensive income arising from changes in net liabilities or assets from remeasurement of defined benefit plan of the acquiree. (3) Long-term equity investments obtained through ways other than business combination: the initial cost of a long- term equity investment obtained by making payment in cash is the purchase cost which is actually paid; that obtained on the basis of issuing equity securities is the fair value of the equity securities issued; that obtained through debt restructuring is determined according to “CASBE 12 – Debt Restructuring”; and that obtained through non-cash assets exchange is determined according to “CASBE 7 – Non-cash Assets Exchange”. 3. Subsequent measurement and recognition method of profit or loss For a long-term equity investment with control relationship, it is accounted for with cost method; for a long-term equity investment with joint control or significant influence relationship, it is accounted for with equity method. 4. Disposal of a subsidiary in stages resulting in the Company’s loss of control (1) Judgement principles of “bundled transaction” For disposal of a subsidiary in stages resulting in the Company’s loss of control, the Company determines whether it is a “bundled transaction” based on the agreement terms for each stage, disposal consideration obtained separately, object of the equity sold, disposal method, disposal time point, etc. If the terms, conditions and economic effect of each transaction meet one or more of the following conditions, these transactions are usually considered as a “bundled transaction”: 1) these transactions are entered into at the same time or in contemplation of each other; 2) these transactions form a single transaction designed to achieve an overall commercial effect; 3) the occurrence of one transaction is dependent on the occurrence of at least one other transaction; and 4) one transaction considered on its own is not economically justified, but it is economically justified when considered together with other transactions. (2) Accounting treatments of non-bundled transactions 131 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 1) Stand-alone financial statements The difference between the carrying amount of the disposed equity and the consideration obtained thereof is recognized in profit or loss. If the disposal does not result in the Company’s loss of significant influence or joint control, the remained equity is accounted for with equity method; however, if the disposal results in the Company’s loss of control, joint control, or significant influence, the remained equity is accounted for according to “CASBE 22 – Financial Instruments: Recognition and Measurement”. 2) Consolidated financial statements Before the Company’s loss of control, the difference between the disposal consideration and the proportionate share of net assets in the disposed subsidiary from acquisition date or combination date to the disposal date is adjusted to capital reserve (capital premium), if the balance of capital reserve is insufficient to offset, any excess is adjusted to retained earnings. When the Company loses control, the remained equity is remeasured at the loss-of-control-date fair value. The aggregated value of disposal consideration and the fair value of the remained equity, less the share of net assets in the disposed subsidiary held before the disposal from the acquisition date or combination date to the disposal date is recognized in investment income in the period when the Company loses control over such subsidiary, and meanwhile goodwill is offset correspondingly. Other comprehensive income related to equity investments in former subsidiary is reclassified as investment income upon the Company’s loss of control. (3) Accounting treatment of bundled transaction 1) Stand-alone financial statements Stages as a whole are considered as one transaction resulting in loss of control in accounting treatment. However, before the Company loses control over a subsidiary, the difference between the disposal consideration at each stage and the carrying amount of long-term equity investments corresponding to the disposed investments is recognized as other comprehensive income at the stand-alone financial statements and reclassified as profit or loss in the period when the Company loses control over such subsidiary. 2) Consolidated financial statements Stages as a whole are considered as one transaction resulting in loss of control in accounting treatment. However, before the Company loses control over a subsidiary, the difference between the disposal consideration at each stage and the proportionate share of net assets in the disposed subsidiary is recognized as other comprehensive income at the consolidated financial statements and reclassified as profit or loss in the period when the Company loses control over such subsidiary. (XVI) Investment property 1. Investment property includes land use right of leased-out property and of property held for capital appreciation and buildings that have been leased out. 2. The initial measurement of investment property is based on its cost, and subsequent measurement is made using the cost model, the depreciation or amortization method is the same as that of fixed assets and intangible assets. 132 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (XVII) Fixed assets 1. Recognition principles of fixed assets Fixed assets are tangible assets held for use in the production of goods or rendering of services, for rental to others, or for administrative purposes, and expected to be used during more than one accounting year. Fixed assets are recognized if, and only if, it is probable that future economic benefits associated with the assets will flow to the Company and the cost of the assets can be measured reliably. 2. Depreciation method of different categories of fixed assets Depreciation Useful life Residual value Annual depreciation Categories method (years) proportion (%) rate (%) Buildings and Straight-line method 3-50 3.00-5.00 2.71-32.33 structures Straight-line General equipment 3-5 3.00-5.00 19.00-32.33 method Straight-line Special equipment 2-15 0.00-5.00 6.33-50.00 method Straight-line Transport facilities 3-15 3.00-5.00 6.33-32.33 method Straight-line Other equipment 3-10 5.00 9.50-31.67 method (XVIII) Construction in progress 1. Construction in progress is recognized if, and only if, it is probable that future economic benefits associated with the item will flow to the Company, and the cost of the item can be measured reliably. Construction in progress is measured at the actual cost incurred to reach its designed usable conditions. 2. Construction in progress is transferred into fixed assets at its actual cost when it reaches the designed usable conditions. When the auditing of the construction in progress is not finished while reaching the designed usable conditions, it is transferred to fixed assets using estimated value first, and then adjusted accordingly when the actual cost is settled, but the accumulated depreciation is not to be adjusted retrospectively. Categories Standards and time point of transferring construction in progress to fixed assets When the design requirements or acceptance criteria for use as specified in the Machinery contract are met after installation and commissioning When the completion acceptance is finished and reaching the designed usable Engineering construction conditions (XIX) Borrowing costs 1. Recognition principle of borrowing costs capitalization Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it is capitalized and included in the costs of relevant assets; other borrowing costs are recognized as expenses on the basis of the actual amount incurred, and are included in profit or loss. 2. Borrowing costs capitalization period (1) The borrowing costs are not capitalized unless the following requirements are all met: 1) the asset disbursements have already incurred; 2) the borrowing costs have already incurred; and 3) the acquisition and 133 Infore Environment Technology Group Co., Ltd. 2023 Annual Report construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. (2) Suspension of capitalization: where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs is suspended; the borrowing costs incurred during such period are recognized as expenses, and are included in profit or loss, till the acquisition and construction or production of the asset restarts. (3) Ceasing of capitalization: when the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs is ceased. 3. Capitalization rate and capitalized amount of borrowing costs For borrowings exclusively for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests is determined in light of the actual interest expenses incurred (including amortization of premium or discount based on effective interest method) of the special borrowings in the current period less the interest income on the unused borrowings as a deposit in the bank or as a temporary investment; where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the Company calculates and determines the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the excess of the accumulative capital disbursements over the special borrowings by the capitalization rate of the general borrowing used. (XX) Intangible assets 1. Intangible assets include land use right, patent right, non-patented technology, etc. The initial measurement of intangible assets is based on its cost. 2. For intangible assets with finite useful lives, their amortization amounts are amortized within their useful lives systematically and reasonably, if it is unable to determine the expected realization pattern reliably, intangible assets are amortized by the straight-line method with details as follows: Items Useful life and determination basis Amortization method Franchise Contractual term Straight-line method 35-50 years; useful life registered on the land Land use right Straight-line method use certificate Patented technology 5-10 years; economic life cycle Straight-line method Software 3-10 years; estimated economic life Straight-line method Others 5 years; economic life cycle Straight-line method 3. Permitted scope of R&D costs (1) Personnel costs Personnel costs include wages and salaries, basic endowment insurance premiums, basic medical insurance premiums, unemployment insurance premiums, occupational injuries premiums, maternity premiums and housing provident funds for the Company’s R&D personnel, as well as labor costs for external R&D personnel. If R&D personnel serve for multiple R&D projects at the same time, personnel costs are recognized based on their 134 Infore Environment Technology Group Co., Ltd. 2023 Annual Report working hour records provided by the Company’s administrative department, and proportionately allocated among different R&D projects. If personnel directly engaged in R&D activities and external R&D personnel are engaged in non-R&D activities at the same time, the Company, based on their working hour records at different positions, allocates personnel costs actually incurred between R&D expenses and production and operating expenses using reasonable methods such as the ratio of actual working hours. (2) Direct input costs Direct input costs refer to relevant expenses actually incurred by the Company for R&D activities, which include: 1) materials, fuel and power costs directly consumed by R&D activities; 2) development and manufacturing costs of molds and craft equipment used for intermediate tests and trial production, acquisition costs of samples, prototypes and general testing methods that do not constitute fixed assets, and inspection costs of trial production; and 3) operation and maintenance, adjustment, inspection, testing and repairing costs of instruments and equipment used for R&D activities. (3) Depreciation and long-term prepayments Depreciation refers to the depreciation of instruments, equipment and in-use buildings used for R&D activities. For instruments, equipment and in-use buildings both used for R&D activities and non-R&D activities, necessary records shall be kept on their usage, and depreciation actually incurred is allocated between R&D expenses and production and operating expenses in a reasonable manner based on the actual working hours, the usable area, etc. Long-term prepayments refer to those incurred during renovation, modification, decoration and repairing of R&D facilities, which are collected based on actual amount and amortized evenly over a specified period. (4) Amortization of intangible assets Amortization of intangible assets refer to the amortization of software, intellectual property, and non-patented technology (proprietary technology, licenses, design and calculation methods, etc.) used for R&D activities. (5) Design expenses Design expenses refer to expenses incurred for the conception, development and manufacturing of new products and techniques, design of processes, technical specifications, process specification formulation, operational characteristics, etc., including expenses incurred for creative design activities to obtain innovative, creative and breakthrough products. (6) Equipment commissioning and testing expenses Equipment commissioning expenses refer to expenses incurred for R&D activities during tooling preparation, including expenses incurred for activities such as development of special and specialized production machines, changes in production and quality control procedures, development of new methods and standards, etc. Expenses incurred for routine tooling preparation and industrial engineering for the purpose of large-scale/mass and commercial production are not included in the permitted scope. 135 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Testing expenses include clinical trial fees for new drug development, on-site testing fees for exploration and production technologies, field testing fees, etc. (7) R&D outsourcing expenses R&D outsourcing expenses refer to expenses incurred for R&D activities outsourced to other domestic or foreign organizations or individuals (outcomes of R&D activities are owned by the Company and closely related to the Company’s main business operations). (8) Other expenses Other expenses refer to expenses other than those mentioned above that are directly related to R&D activities, including technical books and materials fees, data translation fees, expert consultation fees, high-tech R&D insurance premiums, R&D outcomes search, demonstration, evaluation, appraisal and acceptance fees, intellectual property application, registration and agency fees, conference fees, business travelling fees, communication fees, etc. 4. Expenditures on the research phase of an internal project are recognized as profit or loss when they are incurred. An intangible asset arising from the development phase of an internal project is recognized if the Company can demonstrate all of the followings: (1) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (2) its intention to complete the intangible asset and use or sell it; (3) how the intangible asset will generate probable future economic benefits, among other things, the Company 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; (4) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (5) its ability to measure reliably the expenditure attributable to the intangible asset during its development. 5. Criteria for distinguishing the research phase from the development phase of an internal project to create an intangible asset: The planned investigation phase for acquiring new technology and knowledge should be defined as the research phase, which has the characteristics of planning and exploratory nature; before commercial production or use, when the research results or other knowledge are applied to a certain plan or design with the intention to produce new or substantially improved materials, devices, products, etc., such stage should be determined as the development phase, which has the characteristics of pertinence and greater possibility of forming results. The Company divides the research and development phases by forming the prototype drawing and starting the prototype trial production. Expenditures in the research phase of internal research and development projects are included in profit or loss when they incur. When the Company enters the development phase, project expenditures are first calculated by projects under “development expenditure”, and if the capitalization conditions are met, they are presented as development expenditures in the financial statements. The project will be transferred to intangible assets when the project has the conditions for sale or mass production. (XXI) Impairment of part of long-term assets For long-term assets such as long-term equity investments, investment property at cost model, fixed assets, 136 Infore Environment Technology Group Co., Ltd. 2023 Annual Report construction in progress, right-of-use assets, intangible assets with finite useful lives, etc., if at the balance sheet date there is indication of impairment, the recoverable amount is to be estimated. For goodwill recognized in business combination and intangible assets with indefinite useful lives, no matter whether there is indication of impairment, impairment test is performed annually. Impairment test on goodwill is performed on related asset group or asset group portfolio. When the recoverable amount of such long-term assets is lower than their carrying amount, the difference is recognized as provision for assets impairment through profit or loss. (XXII) Long-term prepayments Long-term prepayments are expenses that have been recognized but with amortization period over one year (excluding one year). They are recorded with actual cost, and evenly amortized within the beneficiary period or stipulated period. If items of long-term prepayments fail to be beneficial to the following accounting periods, residual values of such items are included in profit or loss. (XXIII) Employee benefits 1. Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits. 2. Short-term employee benefits The Company recognizes, in the accounting period in which an employee provides service, short-term employee benefits actually incurred as liabilities, with a corresponding charge to profit or loss or the cost of a relevant asset. 3. Post-employment benefits The Company classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. (1) The Company recognizes in the accounting period in which an employee provides service the contribution payable to a defined contribution plan as a liability, with a corresponding charge to profit or loss or the cost of a relevant asset. (2) Accounting treatment by the Company for defined benefit plan usually involves the following steps: 1) In accordance with the projected unit credit method, using unbiased and mutually compatible actuarial assumptions to estimate related demographic variables and financial variables, measure the obligations under the defined benefit plan, and determine the periods to which the obligations are attributed. Meanwhile, the Company discounts obligations under the defined benefit plan to determine the present value of the defined benefit plan obligations and the current service cost; 2) When a defined benefit plan has assets, the Company recognizes the deficit or surplus by deducting the fair value of defined benefit plan assets from the present value of the defined benefit plan obligation as a net defined benefit plan liability or net defined benefit plan asset. When a defined benefit plan has a surplus, the Company measures the net defined benefit plan asset at the lower of the surplus in the defined benefit plan and the asset ceiling; 137 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 3) At the end of the period, the Company recognizes the following components of employee benefits cost arising from defined benefit plan: a. service cost; b. net interest on the net defined benefit plan liability (asset); and c. changes as a result of remeasurement of the net defined benefit liability (asset). Item a and item b are recognized in profit or loss or the cost of a relevant asset. Item c is recognized in other comprehensive income and is not to be reclassified subsequently to profit or loss. However, the Company may transfer those amounts recognized in other comprehensive income within equity. 4. Termination benefits Termination benefits provided to employees are recognized as an employee benefit liability for termination benefits, with a corresponding charge to profit or loss at the earlier of the following dates: (1) when the Company cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a curtailment proposal; or (2) when the Company recognizes cost or expenses related to a restructuring that involves the payment of termination benefits. 5. Other long-term employee benefits When other long-term employee benefits provided to the employees satisfied the conditions for classifying as a defined contribution plan, those benefits are accounted for in accordance with the requirements relating to defined contribution plan, while other benefits are accounted for in accordance with the requirements relating to defined benefit plan. The Company recognizes the cost of employee benefits arising from other long-term employee benefits as the followings: (1) service cost; (2) net interest on the net liability or net assets of other long-term employee benefits; and (3) changes as a result of remeasurement of the net liability or net assets of other long-term employee benefits. As a practical expedient, the net total of the aforesaid amounts is recognized in profit or loss or included in the cost of a relevant asset. (XXIV) Provisions 1. Provisions are recognized when fulfilling the present obligations arising from contingencies such as providing guarantee for other parties, litigation, products quality guarantee, onerous contract, etc., may cause the outflow of the economic benefit and such obligations can be reliably measured. 2. The initial measurement of provisions is based on the best estimated expenditures required in fulfilling the present obligations, and its carrying amount is reviewed at the balance sheet date. (XXV) Share-based payment 1. Types of share-based payment Share-based payment consists of equity-settled share-based payment and cash-settled share-based payment. 2. Accounting treatment for settlements, modifications and cancellations of share-based payment plans (1) Equity-settled share-based payment For equity-settled share-based payment transaction with employees, if the equity instruments granted vest immediately, the fair value of those equity instruments is measured at grant date and recognized as transaction cost or expense, with a corresponding adjustment in capital reserve; if the equity instruments granted do not vest until the counterparty completes a specified period of service or fulfills certain performance conditions, at the balance 138 Infore Environment Technology Group Co., Ltd. 2023 Annual Report sheet date within the vesting period, the fair value of those equity instruments measured at grant date based on the best estimate of the number of equity instruments expected to vest is recognized as transaction cost or expense, with a corresponding adjustment in capital reserve. For equity-settled share-based payment transaction with parties other than employees, if the fair value of the services received can be measured reliably, the fair value is measured at the date the Company receives the service; if the fair value of the services received cannot be measured reliably, but that of equity instruments can be measured reliably, the fair value of the equity instruments granted measured at the date the Company receives the service is referred to, and recognized as transaction cost or expense, with a corresponding increase in equity. (2) Cash-settled share-based payment For cash-settled share-based payment transactions with employees, if share appreciation rights vest immediately, the fair value of the liability incurred as the acquisition of services is measured at grant date and recognized as transaction cost or expense, with a corresponding increase in liabilities; if share appreciation rights do not vest until the employees have completed a specified period of service or fulfills certain performance conditions, the liability is measured, at each balance sheet date until settled, at the fair value of the share appreciation rights measured at grant date based on the best estimate of the number of share appreciation right expected to vest. (3) Modifications and cancellations of share-based payment plan If the modification increases the fair value of the equity instruments granted, the Company includes the incremental fair value granted in the measurement of the amount recognized for services received as consideration for the equity instruments granted; similarly, if the modification increases the number of equity instruments granted, the Company includes the fair value of the additional equity instruments granted, in the measurement of the amount recognized for services received as consideration for the equity instruments granted; if the Company modifies the vesting conditions in a manner that is beneficial to the employee, the Company takes the modified vesting conditions into account. If the modification reduces the fair value of the equity instruments granted, the Company does not take into account that decrease in fair value and continue to measure the amount recognized for services received as consideration for the equity instruments based on the grant date fair value of the equity instruments granted; if the modification reduces the number of equity instruments granted to an employee, that reduction is accounted for as a cancellation of that portion of the grant; if the Company modifies the vesting conditions in a manner that is not beneficial to the employee, the Company does not take the modified vesting conditions into account. If the Company cancels or settles a grant of equity instruments during the vesting period (other than that cancelled when the vesting conditions are not satisfied), the Company accounts for the cancellation or settlement as an acceleration of vesting, and therefore recognizes immediately the amount that otherwise would have been recognized for services received over the remainder of the vesting period. (XXVI) Other financial instruments such as preferred shares and perpetual bonds Pursuant to CASBEs on financial instruments and “Regulations on Accounting Treatments of Perpetual Bonds” (Cai Kuai [2019] No. 2) issued by the Ministry of Finance, for financial instruments such as convertible bonds etc., 139 Infore Environment Technology Group Co., Ltd. 2023 Annual Report the Company classifies a financial instrument or its components at initial recognition as a financial asset or liability or equity instrument, based on contract terms and economic essence it reveals instead of its legal form, combining with the definitions of financial asset, liability and equity instrument. At the balance sheet date, for a financial instrument classified as an equity instrument, its interest expenditure or dividend distribution is treated as profit distribution, and share repurchase and cancelation are treated as changes in equity; for a financial instrument classified as a financial liability, its interest expenditure or dividend distribution is treated as borrowing expense, and gain or loss on repurchase or redemption is included in profit or loss. (XXVII) Revenue 1. Revenue recognition principles At contract inception, the Company shall assess the contracts and shall identify each performance obligation in the contracts, and determine whether the performance obligation should be satisfied over time or at a point in time. The Company satisfies a performance obligation over time if one of the following criteria is met, otherwise, the performance obligation is satisfied at a point in time: (1) the customer simultaneously receives and consumes the economic benefits provided by the Company’s performance as the Company performs; (2) the customer can control goods as they are created by the Company’s performance; (3) goods created during the Company’s performance have irreplaceable uses and the Company has an enforceable right to the payments for performance completed to date during the whole contract period. For each performance obligation satisfied over time, the Company shall recognize revenue over time by measuring the progress towards complete satisfaction of that performance obligation. In the circumstance that the progress cannot be measured reasonably, but the costs incurred in satisfying the performance obligation are expected to be recovered, the Company shall recognize revenue only to the extent of the costs incurred until it can reasonably measure the progress. For each performance obligation satisfied at a point in time, the Company shall recognize revenue at the time point that the customer obtains control of relevant goods or services. To determine whether the customer has obtained control of goods, the Company shall consider the following indications: (1) the Company has a present right to payments for the goods, i.e., the customer is presently obliged to pay for the goods; (2) the Company has transferred the legal title of the goods to the customer, i.e., the customer has legal title to the goods; (3) the Company has transferred physical possession of the goods to the customer, i.e., the customer has physically possessed the goods; (4) the Company has transferred significant risks and rewards of ownership of the goods to the customer, i.e., the customer has obtained significant risks and rewards of ownership of the goods; (5) the customer has accepted the goods; (6) other evidence indicating the customer has obtained control over the goods. 2. Revenue measurement principle (1) Revenue is measured at the amount of the transaction price that is allocated to each performance obligation. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties and those expected to be refunded to the customer. (2) If the consideration promised in a contract includes a variable amount, the Company shall confirm the best 140 Infore Environment Technology Group Co., Ltd. 2023 Annual Report estimate of variable consideration at expected value or the most likely amount. However, the transaction price that includes the amount of variable consideration only to the extent that it is high probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. (3) In the circumstance that the contract contains a significant financing component, the Company shall determine the transaction price based on the price that a customer would have paid for if the customer had paid cash for obtaining control over those goods or services. The difference between the transaction price and the amount of promised consideration is amortized under effective interest method over contractual period. The effects of a significant financing component shall not be considered if the Company expects, at the contract inception, that the period between when the customer obtains control over goods or services and when the customer pays consideration will be one year or less. (4) For contracts containing two or more performance obligations, the Company shall determine the stand-alone selling price at contract inception of the distinct good underlying each performance obligation and allocate the transaction price to each performance obligation on a relative stand-alone selling price basis. 3. Revenue recognition method The Company mainly sells environmental and sanitation machinery, ventilation equipment, etc., and engages in sanitation operation service. (1) Sale of ventilation equipment is a performance obligation satisfied at a point in time. Revenue from domestic sales of products that do not require installation is recognized when the Company has delivered goods to the designated address as agreed by contract and such delivered goods have been verified for acceptance by customers, and the Company has obtained delivery receipts, and has collected the payments or has obtained the right to the payments, and related economic benefits are highly probable to flow to the Company. For products that need to be installed, revenue is recognized when the products are delivered and qualified for installation, commissioning and acceptance. Revenue from overseas sales is recognized when the Company has declared goods to the customs based on contractual agreements and has obtained a bill of lading, and the Company has collected the payments or has obtained the right to the payments, and related economic benefits are highly probable to flow to the Company. (2) Sales of environmental and sanitation machinery products is a performance obligation satisfied at a point in time, and revenue is recognized when customers receive and consume the products, and the Company has collected the payments or has obtained the right to the payments, and related economic benefits are highly probable to flow to the Company. (3) Comprehensive environmental and sanitation management engineering is a performance obligation satisfied over time. Revenue is recognized based on the performance progress according to the project progress confirmed by the supervisor. (4) Sanitation operation service is a performance obligation satisfied over time. Revenue is recognized based on the service assessment statement confirmed by the labor receiving party, etc. 141 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (5) For revenue recognition method of PPP business with BOT model, etc., please refer to section III (XXXV) 1 of notes to the financial statements for details. (XXVIII) Costs of obtaining a contract and costs to fulfill a contract The Company recognizes as an asset the incremental costs of obtaining a contract if those costs are expected to be recovered. The costs of obtaining a contract shall be included into profit or loss when incurred if the amortization period of the asset is one year or less. If the costs incurred in fulfilling a contract are not within the scope of standards related to inventories, fixed assets or intangible assets, etc., the Company shall recognize the costs to fulfill a contract as an asset if all the following criteria are satisfied: 1. The costs relate directly to a contract or to an anticipated contract, including direct labor, direct materials, manufacturing overhead cost (or similar cost), cost that are explicitly chargeable to the customer under the contract, and other costs that are only related to the contract; 2. The costs enhance resources of the Company that will be used in satisfying performance obligations in the future; and 3. The costs are expected to be recovered. An asset related to contract costs shall be amortized on a systematic basis that is consistent with related goods or services, with amortization included into profit or loss. The Company shall make provision for impairment and recognize an impairment loss to the extent that the carrying amount of an asset related to contract costs exceeds the remaining amount of consideration that the Company expects to receive in exchange for the goods or services to which the asset relates less the costs expected to be incurred. The Company shall recognize a reversal of an impairment loss previously recognized in profit or loss when the impairment conditions no longer exist or have improved. The carrying amount of the asset after the reversal shall not exceed the amount that would have been determined on the reversal date if no provision for impairment had been made previously. (XXIX) Contract assets, contract liabilities The Company presents contract assets or contract liabilities in the balance sheet based on the relationship between its performance obligations and customers’ payments. Contract assets and contract liabilities under the same contract shall offset each other and be presented on a net basis. The Company presents an unconditional right to consideration (i.e., only the passage of time is required before the consideration is due) as a receivable, and presents a right to consideration in exchange for goods that it has transferred to a customer (which is conditional on something other than the passage of time) as a contract asset. The Company presents an obligation to transfer goods to a customer for which the Company has received consideration (or the amount is due) from the customer as a contract liability. (XXX) Government grants 142 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 1. Government grants shall be recognized if, and only if, the following conditions are all met: (1) the Company will comply with the conditions attaching to the grants; (2) the grants will be received. Monetary government grants are measured at the amount received or receivable. Non-monetary government grants are measured at fair value, and can be measured at nominal amount in the circumstance that fair value cannot be assessed. 2. Government grants related to assets Government grants related to assets are government grants with which the Company purchases, constructs or otherwise acquires long-term assets under requirements of government. In the circumstances that there is no specific government requirement, the Company shall determine based on the primary condition to acquire the grants, and government grants related to assets are government grants whose primary condition is to construct or otherwise acquire long-term assets. They offset carrying amount of relevant assets, or they are recognized as deferred income. If recognized as deferred income, they are included in profit or loss on a systematic basis over the useful lives of the relevant assets. Those measured at notional amount are directly included into profit or loss. For assets sold, transferred, disposed or damaged within the useful lives, balance of unamortized deferred income is transferred into profit or loss of the period in which the disposal occurred. 3. Government grants related to income Government grants related to income are government grants other than those related to assets. For government grants that contain both parts related to assets and parts related to income, in which those two parts are blurred, they are thus collectively classified as government grants related to income. For government grants related to income used for compensating the related future cost, expenses or losses, they are recognized as deferred income and included in profit or loss or used to offset relevant cost during the period in which the relevant cost, expenses or losses are recognized; for government grants related to income used for compensating the related cost, expenses or losses incurred to the Company, they are directly included in profit or loss or used to offset relevant cost. 4. Government grants related to the ordinary course of business shall be included into other income or used to offset relevant cost based on business nature, while those not related to the ordinary course of business shall be included into non-operating revenue or expenditures. (XXXI) Deferred tax assets/Deferred tax liabilities 1. Deferred tax assets or deferred tax liabilities are calculated and recognized based on the difference between the carrying amount and tax base of assets and liabilities (and the difference of the carrying amount and tax base of items not recognized as assets and liabilities but with their tax base being able to be determined according to tax laws) and in accordance with the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. 2. A deferred tax asset is recognized to the extent of the amount of the taxable income, which is most likely to obtain and which can be deducted from the deductible temporary difference. At the balance sheet date, if there is any exact evidence indicating that it is probable that future taxable income will be available against which deductible temporary differences can be utilized, the deferred tax assets unrecognized in prior periods are recognized. 143 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 3. At the balance sheet date, the carrying amount of deferred tax assets is reviewed. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow the benefit of the deferred tax asset to be utilized. Such reduction is subsequently reversed to the extent that it becomes probable that sufficient taxable income will be available. 4. The income tax and deferred tax for the period are treated as income tax expenses or income through profit or loss, excluding those arising from the following circumstances: (1) business combination; and (2) the transactions or items directly recognized in equity. 5. Deferred tax assets and deferred tax liabilities shall offset each other and be presented on a net basis when the following conditions are all met: (1) the Company has the legal right to settle off current tax assets against current tax liabilities; (2) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same tax authority on either: 1) the same taxable entity; or 2) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (XXXII) Leases 1. The Company as lessee At the commencement date, the Company recognizes a lease that has a lease term of 12 months or less as a short- term lease, which shall not contain a purchase option; the Company recognizes a lease as a lease of a low-value asset if the underlying asset is of low value when it is new. If the Company subleases an asset, or expects to sublease an asset, the head lease does not qualify as a lease of a low-value asset. For all short-term leases and leases of low-value assets, lease payments are recognized as cost or profit or loss with straight-line method over the lease term. Apart from the above-mentioned short-term leases and leases of low-value assets with simplified approach, the Company recognizes right-of-use assets and lease liabilities at the commencement date. (1) Right-of-use assets The right-of-use asset is measured at cost and the cost shall comprise: 1) the amount of the initial measurement of the lease liabilities; 2) any lease payments made at or before the commencement date, less any lease incentives received; 3) any initial direct costs incurred by the lessee; and 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. The Company depreciates the right-of-use asset using the straight-line method. If it is reasonable to be certain that the ownership of the underlying asset can be acquired by the end of the lease term, the Company depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. (2) Lease liabilities 144 Infore Environment Technology Group Co., Ltd. 2023 Annual Report At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Company’s incremental borrowing rate shall be used. Unrecognized financing expenses, calculated at the difference between the lease payment and its present value, are recognized as interest expenses over the lease term using the discount rate which has been used to determine the present value of lease payment and included in profit or loss. Variable lease payments not included in the measurement of lease liabilities are included in profit or loss in the periods in which they are incurred. After the commencement date, if there is a change in the following items: 1) actual fixed payments; 2) amounts expected to be payable under residual value guarantees; 3) an index or a rate used to determine lease payments; 4) assessment result or exercise of purchase option, extension option or termination option, the Company remeasures the lease liability based on the present value of lease payments after changes, and adjusts the carrying amount of the right-of-use asset accordingly. If the carrying amount of the right-of-use asset is reduced to zero but there shall be a further reduction in the lease liability, the remaining amount shall be recognized into profit or loss. 2. The Company as lessor At the commencement date, the Company classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise, it is classified as an operating lease. (1) Operating lease Lease receipts are recognized as lease income with straight-line method over the lease term. Initial direct costs incurred shall be capitalized, amortized on the same basis as the recognition of lease income, and included into profit or loss by installments. Variable lease payments related to operating lease which are not included in the lease payment are charged as profit or loss in the periods in which they are incurred. (2) Finance lease At the commencement date, the Company recognizes the finance lease payment receivable based on the net investment in the lease (sum of the present value of unguaranteed residual value and lease receipts that are not received at the commencement date, discounted by the interest rate implicit in the lease), and derecognizes assets held under the finance lease. The Company calculates and recognizes interest income using the interest rate implicit in the lease over the lease term. Variable lease payments not included in the measurement of the net investment in the lease are charged as profit or loss in the periods in which they are incurred. 3. Sale and leaseback (1) The Company as the lessee In accordance with the “CASBE 14 – Revenues”, the Company would assess and determine whether the transfer of an asset in the sale and leaseback transaction is accounted for as a sale of that asset. If the transfer of an asset is accounted for as a sale of the asset, the Company measures the right-of-use asset arising from the leaseback at the proportion of the original carrying amount of the asset that relates to the right of use retained by the Company. Accordingly, the Company recognizes only the amount of any gain or loss that relates to 145 Infore Environment Technology Group Co., Ltd. 2023 Annual Report the rights transferred to the lessor. Otherwise, the Company continues the recognition of the transferred assets, and recognizes a financial liability equal to the amount of transfer income in accordance with the “CASBE 22 – Financial Instruments: Recognition and Measurement” at the same time. (2) The Company as the lessor In accordance with the “CASBE 14 – Revenues”, the Company would assess and determine whether the transfer of an asset in the sale and leaseback transaction is accounted for as a sale of that asset. If the transfer of an asset is accounted for as a sale of the asset, the Company accounts for the purchase of assets in accordance with other applicable standards, and accounts for the lease of assets in accordance with the “CASBE 21 – Leases”. Otherwise, the Company does not recognize the transferred asset, but recognizes a financial asset equal to the amount of transfer income in accordance with the “CASBE 22 – Financial Instruments: Recognition and Measurement”. (XXXIII) Work safety fund The Company appropriates work safety fund in accordance with the “Circular on Management Measures on the Appropriation and Use of Work Safety Fund” (Cai Zi [2022] No. 136) issued by the Ministry of Finance and the Ministry of Emergency Management. Standard work safety fund is included in the cost or profit or loss, meanwhile accounted for under “special reserve”. When work safety fund is used as an expense, it is to offset special reserve directly. When work safety fund is qualified to be included in the cost of fixed assets, it is accounted for under “construction in progress” and transferred to fixed assets when related safety projects reach the designed useful conditions; meanwhile, the cost included in fixed assets is to offset “special reserve”, and accumulated depreciation shall be recognized at the same amount. Such fixed assets shall not be depreciated in future periods. (XXXIV) Segment reporting Operating segments are determined based on the structure of the Company’s internal organization, management requirements and internal reporting system. An operating segment is a component of the Company: 1. that engages in business activities from which it may earn revenues and incur expenses; 2. whose financial performance is regularly reviewed by the Management to make decisions about resource to be allocated to the segment and to assess its performance; and 3. for which accounting information regarding financial position, financial performance and cash flows is available through analysis. (XXXV) Other significant accounting policies and estimates 1. PPP business The Company adopts the build-operate-transfer approach (PPP projects, mainly using BOT, TOT, etc.) to participate in the public infrastructure business. The project company obtains the franchise of public infrastructure 146 Infore Environment Technology Group Co., Ltd. 2023 Annual Report projects from government departments and participates in the construction and operation of the project. After the franchise expires, the project company needs to hand over relevant infrastructure to the government or the department designated by the government. For the PPP project contract under which the Company provides multiple services (such as the rendering of construction services of PPP projects as well as post-completion operation services and maintenance services), the Company identifies each performance obligation in the contracts in accordance with the provisions of “CASBE 14 – Revenues”, and allocates the transaction price to each performance obligation on the basis of the relative stand- alone selling prices. If the stand-alone selling price cannot be directly observed, or if there is a lack of similar market prices, the Company will take into account market conditions, specific factors of the Company and information related to customers and other relevant information, and make a reasonable estimate of the stand-alone selling price using methods such as market adjustment method, cost-plus method, residual value method, etc. Construction services are performance obligations satisfied over time. Revenue from construction services is recognized by the percentage of completion of the performance obligations, which is determined based on the proportion of the incurred costs to the estimated total costs. In the circumstance that the percentage of completion cannot be measured reasonably, but the incurred costs are expected to be recovered, the Company recognizes revenue only to the extent of the incurred costs until it can reasonably measure the percentage of completion. The Company has the right to charge users of public goods and services during the operation of the project in accordance with the PPP project contracts. However, if the amount of the fees is uncertain, such right does not constitute an unconditional right to receive cash, and the consideration or construction revenue of the relevant PPP project assets is recognized as intangible assets when the PPP project assets reach the designed useful conditions, which shall be accounted for in accordance with “CASBE 6 – Intangible Assets”. If the Company is qualified to have the right to receive a determinable amount of cash (or other financial assets) during the operation of the project in accordance with the PPP project contracts, such amount is recognized as accounts receivable when the Company has the right to such consideration (the right depends only on the factor of the passage of time) and is accounted for in accordance with “CASBE 22 – Financial Instruments: Recognition and Measurement”. The Company recognizes the difference between the consideration or construction revenue of the relevant PPP project assets and the determinable amount of cash (or other financial assets) as intangible assets when the PPP project assets reach the designed useful conditions. For the portion of the consideration or construction revenue recognized as intangible assets, the contract assets recognized during the relevant construction period are presented under “intangible assets” in the balance sheet; for other contract assets recognized during the construction period, they are presented under “contract assets”, or “other non-current assets” in the balance sheet if they are expected to be realized within twelve months of the balance sheet date. After the PPP project assets reach the designed useful conditions, the Company recognizes revenue related to operating services in accordance with “CASBE 14 – Revenues”. 2. Accounting treatment related to share repurchase 147 Infore Environment Technology Group Co., Ltd. 2023 Annual Report When the Company repurchases its shares for the purpose of reducing its registered capital or rewarding its employees, if the purchased shares are to be kept as treasury shares, the treasury shares are recorded at the cash distributed to existing shareholders for repurchase; if the purchased shares are to be retired, the difference between the total book value of shares retired and the cash distributed to existing shareholders for repurchase is to reduce capital reserve, or retained earnings when the capital reserve is not enough to reduce. If the Company repurchases vested equity instruments in equity-settled share-based payment transactions with employees, cost of treasury shares granted to employees and capital reserve (other capital reserve) accumulated within the vesting period are to be written off on the payment made to employees, with a corresponding adjustment in capital reserve (share premium). (XXXV) Significant changes in accounting policies Changes in accounting policies arising from changes in CASBEs The Company has adopted the regulations about accounting for deferred tax related to assets and liabilities arising from a single transaction to which the initial recognition exemption does not apply in the “Interpretation of China Accounting Standards for Business Enterprises No. 16” issued by the Ministry of Finance since January 1, 2023, and makes adjustments on such single transactions occurring between the beginning of the earliest comparative period and the first adoption date accordingly. For taxable and deductible temporary differences associated with lease liabilities and right-of-use assets, provisions associated with decommissioning obligations and corresponding assets arising from such single transactions and presented at the beginning of the earliest comparative period, the cumulative effect of initially applying such regulations and “CASBE 18 – Enterprise Income Tax” shall be adjusted into retained earnings or other related items at the beginning of the earliest comparative period presented. Such change in accounting policies has no impact on the Company’s financial statements. IV. Taxes (I) Main taxes and tax rates Taxes Tax bases Tax rates The output tax calculated based on the revenue 3%, 6%, 9%, 13%. Exported from sales of goods or rendering of services in goods are subject to “exemption, Value-added tax (VAT) accordance with the tax law, net of the input credit, refund” policies, with tax that is allowed to be deducted in the refund rate of 13%. current period For housing property levied on the basis of price, housing property tax is levied at the rate of 1.2% of the balance after deducting 30% of Housing property tax 1.2%, 12% the cost; for housing property levied on the basis of rent, housing property tax is levied at the rate of 12% of lease income. Urban maintenance and Turnover tax actually paid 7%, 5% construction tax Education surcharge Turnover tax actually paid 3% Local education surcharge Turnover tax actually paid 2%, 1% Enterprise income tax Taxable income 15%, 20%, 25% Different enterprise income tax rates applicable to different taxpayers: 148 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Taxpayers Income tax rate Infore Technology Company 15% Guangdong Infore Intelligent Sanitation Technology Co., Ltd. 15% Shangfeng Industrial Company 15% Zoomlion Environmental Company 15% Fengyun IoT Technology Co., Ltd. 15% Huaian Chenjie Environmental Engineering Co., Ltd. 15% Zhejiang Yolsh Electric Drive Technology Co., Ltd. (the “Yolsh 15% Company”) Xiantao Green Oriental Environmental Power Generation Co., 15% Ltd. (the “Xiantao Company”) Foshan Shunde Huaqingyuan Environmental Protection Co., Ltd. 15% (the “Huaqingyuan Company”) Foshan Shunde District Huaying Environmental Water Co., Ltd. 15% Lianjiang Green Oriental New Energy Co., Ltd. (the “Lianjiang 15% Company”) 25%, 20% for small enterprises with Taxpayers other than the above-mentioned meager profit (II) Tax preferential policies 1. Enterprise income tax No. Entities Preferential policies Zoomlion Environmental Company, Fengyun IoT Technology Co., Ltd., Huaian Chenjie Environmental Engineering Co., Ltd., Yolsh Pursuant to the preferential income tax policy for high-tech enterprises, 1 Company, Xiantao Company, Foshan Shunde enterprise income tax rate is reduced to 15% from 2023 to 2025. District Huaying Environmental Water Co., Ltd. Shangfeng Industrial Company, Infore Technology Company, Huaqingyuan Company, Pursuant to the preferential income tax policy for high-tech enterprises, 2 Guangdong Infore Intelligent Sanitation enterprise income tax rate is reduced to 15% from 2022 to 2024. Technology Co., Ltd., Lianjiang Company Revenue from the production of non-restricted and non-prohibited Huaqingyuan Company, Foshan Shunde products that meet the relevant national and industry standards using District Huaying Environmental Water Co., resources specified in the “Resources Comprehensive Utilization of 3 Ltd., Foshan Shunde District Yuanrun Water Enterprise Income Tax Preferential Catalog (2008 Edition)” as the main Environmental Protection Co., Ltd., Foshan raw material will be reduced to 90% as taxable income for enterprise Shunde Huabo Environmental Water Co., Ltd. income tax in the current period. Pursuant to the “Announcement of Ministry of Finance (MOF) and State Taxation Administration (STA) on the Further Implementation of the Enterprise Income Tax Preferential Policies for Small Enterprises with Meager Profit and Individually-owned Businesses” Subsidiaries and sub-subsidiaries including (Announcement of MOF and STA [2022] No. 13), “Announcement of Shenzhen Infore City Service Intelligent MOF and STA on the Enterprises Income Tax Preferential Policies for Technology Co., Ltd., Foshan Shunde Huabo Small Enterprises with Meager Profit and Individually-owned 4 Environmental Water Co., Ltd., Foshan Shunde Businesses” (Announcement of MOF and STA [2023] No. 6),and the Yuanyi Water Environmental Protection Co., “Announcement of MOF and STA on Further Implementation of the Ltd., Dingnan Zoomlion Environmental Enterprises Income Tax Preferential Policies for Small Enterprises with Industry Co., Ltd., etc. Meager Profit and Individually-Owned Businesses” (Announcement [2023] No. 12), from January 1, 2023 to December 31, 2027, the enterprise income tax for the portion of the taxable income within 3 million yuan is levied at 20% based on 25% of that portion of income. Subsidiaries and sub-subsidiaries including Pursuant to the “Law of the People’s Republic of China on Enterprise Pingdingshan Yinghe Environmental Income Tax” and its implementation regulations, the “Notice of MOF, 5 Sanitation Management Co., Ltd., Heyang STA and National Development and Reform Commission (NDRC) on Yinghe Urban Environmental Service Co., Publishing the Catalog of Enterprise Income Tax Preferences for 149 Infore Environment Technology Group Co., Ltd. 2023 Annual Report No. Entities Preferential policies Ltd., Zhangjiajie Yinglian Environmental Environmental Protection, Energy Saving, and Water Saving Projects Management Co., Ltd., Liling Zhaoyang (Trial)” (Cai Shui [2009] No. 166) (the “2009 Catalog”), the project Environmental Protection Co., Ltd., etc. companies are entitled to enjoy the preferential policy of three-year exemption from the first profit-making year, followed by three years of 50% reduction of enterprise income tax. Pursuant to the “Announcement No. 36, 2021 of MOF, STA, NDRC, and Ministry of Ecology and Environment” issued by four departments including the MOF dated December 16, 2021, the entities’ business comply with the “2021 Catalog”, and relevant projects can still enjoy the above preferential policy. Pursuant to the document numbered Guo Ban Han [2012] 103 by the State Council, newly established enterprises that settle in the Ruili Pilot Zone are entitled to enjoy the five-year-exemption and five-year-half- reduction policy for the enterprise income tax shared by the local Ruili Yinglian Environmental Industry Co., 6 authority of the region (40% of total enterprise income tax), i.e., they Ltd. enjoy enterprise income tax exemption from 2021 to 2025, and enjoy a 50% reduction in income from 2026 to 2030, while for the enterprise income tax shared by central government (60%), they enjoy the preferential policy as small enterprises with meager profit. 2. VAT (1) Pursuant to the “Notice of MOF and STA on VAT Policies for Software Products” (Cai Shui [2011] No. 100), general VAT taxpayers who sell software products developed and produced by themselves are subject to VAT refund upon collection for the amount exceeding 3% of their actual VAT burdens. In 2023, the subsidiaries Zoomlion Environmental Company and Infore Technology Company are entitled to enjoy the VAT refund upon collection policy for sale of their self-developed and self-produced software products. (2) Pursuant to the “Announcement of MOF and STA on Clarifying Policies on VAT Reduction and Exemption, etc. for Small-scale Taxpayers” (Announcement of MOF and STA [2023] No. 1), eligible taxpayers engaged in the life services as met the provisions of the “Announcement of MOF and STA on Clarifying Extra VAT Deduction and Exemption Policy for Life Service Industry” (Announcement of MOF and STA [2019] No. 87) are entitled to enjoy an extra 10% VAT credit. In 2023, the subsidiaries Zoomlion Environmental Company and its certain subsidiaries, Foshan Shunde Yuanyi Water Environmental Protection Co., Ltd. and Infore Zoomlion City Environmental Service Co., Ltd. are entitled to enjoy such preferential policy. (3) Pursuant to the “Notice of MOF and STA on Extra VAT Deduction Policy for Advanced Manufacturing Enterprises” (Announcement of MOF and STA [2023] No. 43), from January 1, 2023 to December 31, 2027, advanced manufacturing enterprises are eligible to enjoy an extra 5% VAT credit. In 2023, the subsidiaries Zoomlion Environmental Company, Infore Technology Company, Shangfeng Industrial Company and Yolsh Company are entitled to enjoy such preferential policy. (4) Pursuant to Article 5 of the “Announcement of MOF and STA on Improving VAT Policy for Improving Comprehensive Utilization of Resources” (Announcement of MOF and STA [2021] No. 40), since March 1, 2022, enterprises rendering sewage treatment services are entitled to enjoy 70% VAT refund upon collection. In 2023, the subsidiaries Huaqingyuan Company, Foshan Shunde District Huaying Environmental Water Co., Ltd., Foshan Shunde District Yuanrun Water Environmental Protection Co., Ltd. are entitled to enjoy such preferential policy. Pursuant to Article 4 of the “Notice of MOF and STA on Printing and Distributing the Announcement on VAT 150 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Policy for Improving Comprehensive Utilization of Resources” (Announcement of MOF and STA [2021] No. 40), since March 1, 2022, enterprises rendering sewage treatment services are entitled to enjoy VAT refund upon collection policy or VAT exemption policy. In 2023, the subsidiaries Huaqingyuan Company, Foshan Shunde District Huaying Environmental Water Co., Ltd., Foshan Shunde District Yuanrun Water Environmental Protection Co., Ltd. and Foshan Shunde Huabo Environmental Water Co., Ltd. have adopted VAT exemption policy. (5) Pursuant to Article 2 of the “Announcement of MOF and STA on Improving VAT Policy for Improving Comprehensive Utilization of Resources” (Announcement of MOF and STA [2021] No. 40), enterprises producing electricity and heat products with fuel from garbage and biogas resources produced by garbage fermentation are entitled to enjoy 100% VAT refund upon collection. Pursuant to Article 5, enterprises rendering garbage treatment and sewage treatment services are entitled to enjoy 70% VAT refund upon collection. The subsidiaries Lianjiang Company, Shouxian Green Oriental New Energy Co., Ltd. (the “Shouxian Company”) and Funan Green Oriental Environmental Energy Co., Ltd. (the “Funan Company”) are entitled to enjoy such preferential policy. (6) Pursuant to the “Measures for the Implementation of the Pilot Implementation of VAT Reform for the Transportation Industry and Certain Modern Service Industries” (Cai Shui [2011] No. 111), revenue from technology transfer, technology development, and related technical consulting, and technical service businesses is exempt from VAT. In 2023, the subsidiary Shenzhen Dingzhu Environmental Technology Co., Ltd. meets the condition and is exempt from VAT. (7) Pursuant to the “Announcement of MOF, STA and Ministry of Veterans Affairs (MVA) on Tax Policies for Further Supporting the Business Startup by and the Employment of Veterans Seeking Independent Employment” (Announcement of MOF, STA and MVA [2023] No. 14), from January 1, 2023 to December 31, 2027, if an enterprise enters into an employment contract with veteran seeking independent employment for a term of one year or more and pays social insurance premiums in accordance with the law, it may enjoy a credit within the standard quota against, in sequential order, VAT, urban maintenance and construction tax, educational surcharge, local education surcharges and enterprise income tax according to the number of persons actually employed for three years from the month when the employment contract is signed and the social premiums are paid. In 2023, the subsidiary Zoomlion Environmental Company and its certain subsidiaries were entitled to enjoy such tax reduction and exemption policy. (8) Pursuant to the “Announcement of the MOF, SAT, Ministry of Hunman Resources and Social Security (MHR), Ministry of Agriculture and Rural Affairs (MAR) on Tax Policies for Further Supporting the Business Startup by and the Employment of Key Populations” (Announcement [2023] No. 15), from January 1, 2023 to December 31, 2027, if an enterprise enters into an employment contract with people who have been lifted out of poverty, as well as people who have been registered as unemployed for more than six months at the public employment service agency of MHR with an “Entrepreneurship Certificate” or “Unemployment Registration Certificate” (Indicated “Enterprise Tax Absorption Policy”), for a term of one year or more and pays social insurance premiums in accordance with the law, it may enjoy a credit within the standard quota against, in sequential order, VAT, urban maintenance and construction tax, educational surcharge, local education surcharges and enterprise income tax according to the number of persons actually employed for three years from the month when the employment 151 Infore Environment Technology Group Co., Ltd. 2023 Annual Report contract is signed and the social premiums are paid. In 2023, the subsidiary Zoomlion Environmental Company and its certain subsidiaries were entitled to enjoy such tax reduction and exemption policy. 3. Reduction and exemption policy on six local taxes and two rates Pursuant to the “Announcement of the MOF and SAT on Tax Policies for Further Supporting the Development of Small Enterprises with Meager Profit and Individually-Owned Businesses” (Announcement of MOF and STA [2023] No. 12), from January 1, 2023 to December 31, 2027, for VAT small-scale taxpayers, small enterprises with meager profit and individually-owned businesses, resource tax (excluding water resources tax), urban maintenance and construction tax, housing property tax, urban land use tax, stamp duty (excluding securities transaction stamp duty) cultivated land occupation tax and education surcharge, local education surcharge will be halved. In 2023, some subsidiaries of Zoomlion Environmental Company, Foshan Shunhe Environmental Protection Co., Ltd., Foshan Shunde Huabo Environmental Water Co., Ltd. and Foshan Shunde Yuanyi Water Environmental Protection Co., Ltd. were eligible to enjoy such tax preferential policy. V. Notes to items of consolidated financial statements (I) Notes to items of the consolidated balance sheet 1. Cash and bank balances (1) Details Items Closing balance Opening balance Cash on hand 310,688.91 84,414.54 Cash in bank 4,150,666,527.57 4,590,418,271.45 Other cash and bank balances 260,399,367.30 137,700,844.47 Total 4,411,376,583.78 4,728,203,530.46 Including: Deposited overseas 1,519,215.68 3,949,867.33 (2) Other remarks 1) Closing balance of cash in bank included funds frozen due to lawsuits of 5,100,869.89 yuan, engineering escrow accounts not available for separate use of 154,141.05 yuan, frozen security deposits of 290,200.17 yuan and certificates of deposit of 230,340,333.33 yuan, which was with use restrictions. 2) Closing balance of other cash and bank balances included deposits for notes of 179,001,533.41 yuan, deposits for letters of guarantee of 77,546,493.49 yuan, engineering deposits of 929,734.93 yuan, ETC deposits of 3,000.00 yuan, deposits for buyer’s credit of 861,924.65 yuan and deposits for land reclamation of 1,003,098.32 yuan, which was with use restrictions. 2. Notes receivable (1) Details Items Closing balance Opening balance Bank acceptance 4,597,270.24 6,474,284.28 Trade acceptance 349,861.59 7,091,421.94 152 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Closing balance Opening balance Total 4,947,131.83 13,565,706.22 (2) Provision for bad debts 1) Details on categories Closing balance Categories Book balance Provision for bad debts Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision for bad debts made on a collective 5,005,019.28 100.00 57,887.45 1.16 4,947,131.83 basis Including: Bank acceptance 4,597,270.24 91.85 4,597,270.24 Trade acceptance 407,749.04 8.15 57,887.45 14.20 349,861.59 Total 5,005,019.28 100.00 57,887.45 1.16 4,947,131.83 (Continued) Opening balance Categories Book balance Provision for bad debts Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision for bad debts made on a collective 15,111,625.30 100.00 1,545,919.08 10.23 13,565,706.22 basis Including: Bank acceptance 6,474,284.28 42.84 6,474,284.28 Trade acceptance 8,637,341.02 57.16 1,545,919.08 17.90 7,091,421.94 Total 15,111,625.30 100.00 1,545,919.08 10.23 13,565,706.22 2) Notes receivable with provision for bad debts made on a collective basis Closing balance Items Provision proportion Book balance Provision for bad debts (%) Bank acceptance portfolio 4,597,270.24 Trade acceptance portfolio 407,749.04 57,887.45 14.20 Subtotal 5,005,019.28 57,887.45 1.16 (3) Changes in provision for bad debts Increase Decrease Opening Closing Items Recovery or balance Accrual Write-off Others balance Reversal Receivables with provision for bad debts 1,545,919.08 -1,488,031.63 57,887.45 made on a collective basis Total 1,545,919.08 -1,488,031.63 57,887.45 153 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (4) No pledged notes at the balance sheet date. (5) Endorsed or discounted but undue notes at the balance sheet date Items Closing balance derecognized Closing balance not yet derecognized Bank acceptance 4,472,210.78 Trade acceptance 407,749.04 Subtotal 4,879,959.82 (6) Notes receivable transferred to accounts receivable due to non-performance of issuer Items Amount transferred Trade acceptance 9,618,317.80 Subtotal 9,618,317.80 3. Accounts receivable (1) Age analysis Ages Closing book balance Opening book balance Within 1 year 4,798,113,288.74 4,708,241,417.53 1-2 years 930,689,479.95 892,266,330.70 2-3 years 552,003,141.94 336,117,089.17 3-5 years 277,106,854.66 199,203,953.15 Over 5 years 89,167,772.76 74,219,972.77 Total 6,647,080,538.05 6,210,048,763.32 (2) Provision for bad debts 1) Details on categories Closing balance Categories Book balance Provision for bad debts Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision made on an 261,607,248.18 3.94 108,069,720.23 41.31 153,537,527.95 individual basis Receivables with provision made on a 6,385,473,289.87 96.06 671,341,340.96 10.51 5,714,131,948.91 collective basis Total 6,647,080,538.05 100.00 779,411,061.19 11.73 5,867,669,476.86 (Continued) Opening balance Categories Book balance Provision for bad debts Carrying amount 154 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Provision Amount % to total Amount proportion (%) Receivables with provision made on an 26,702,254.77 0.43 16,482,074.94 61.73 10,220,179.83 individual basis Receivables with provision made on a 6,183,346,508.55 99.57 567,774,216.01 9.18 5,615,572,292.54 collective basis Total 6,210,048,763.32 100.00 584,256,290.95 9.41 5,625,792,472.37 2) Significant accounts receivable with provision made on an individual basis Opening balance Closing balance Debtors Basis for Book Provision for Provision for bad Provision Book balance provision balance bad debts debts proportion (%) made Guangdong Tianshu New Expected Energy Technology Co., 189,921,071.39 56,976,321.42 30.00 credit losses Ltd. Subtotal 189,921,071.39 56,976,321.42 30.00 3) Accounts receivable with provision for bad debts made on a collective basis Closing balance Items Provision proportion Book balance Provision for bad debts (%) Portfolio grouped with ages 6,050,614,468.43 659,820,086.32 10.91 Portfolio grouped with 294,408,028.59 11,521,254.64 3.91 commercial factoring receivable Portfolio grouped with government grants receivable for 40,450,792.85 new energy vehicles Subtotal 6,385,473,289.87 671,341,340.96 10.51 4) Accounts receivable with provision made on a collective basis using age analysis method Closing balance Ages Provision proportion Book balance Provision for bad debts (%) Within 1 year 4,404,011,770.14 220,200,588.57 5.00 1-2 years 824,904,402.24 82,490,440.22 10.00 2-3 years 476,520,031.86 142,956,009.56 30.00 3-5 years 262,010,432.44 131,005,216.22 50.00 Over 5 years 83,167,831.75 83,167,831.75 100.00 Subtotal 6,050,614,468.43 659,820,086.32 10.91 5) Commercial factoring portfolio grouped by five-level classification Closing balance Five-level classification Unrealized financing Provision for bad Provision Book balance income debts proportion (%) Pass 249,939,526.65 3,749,092.90 1.50 155 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing balance Five-level classification Unrealized financing Provision for bad Provision Book balance income debts proportion (%) Special-mention 20,623,662.36 618,709.87 3.00 Substandard 23,844,839.58 7,153,451.87 30.00 Subtotal 294,408,028.59 11,521,254.64 3.91 (3) Changes in provision for bad debts 1) Details Increase/Decrease Closing Items Opening balance Recovery or Accrual Write-off Others balance Reversal Receivables with provision made on 16,482,074.94 100,712,885.29 484,240.00 8,641,000.00 108,069,720.23 an individual basis Receivables with provision made on 567,774,216.01 151,514,611.64 835,452.64 47,112,034.05 671,341,340.96 a collective basis Total 584,256,290.95 252,227,496.93 1,319,692.64 55,753,034.05 779,411,061.19 2) No significant provisions collected or reversed in the current period. (4) Accounts receivable actually written off in the current period 1) Accounts receivable written off Items Amount written off Accounts receivable actually written off 55,753,034.05 2) No significant accounts receivable written off in the current period. (5) Details of the top 5 debtors with largest balances of accounts receivable and contract assets Closing book balance Proportion to the total Provision for bad Contract assets balance of accounts debts of accounts (including contracts receivable and contract assets receivable and Debtors Accounts assets presented under Subtotal (including contracts assets provision for receivable presented under other non- impairment of other non-current assets) current assets) (%) contract assets No. 1 189,921,071.39 189,921,071.39 2.75 56,976,321.42 No. 2 100,039,699.41 100,039,699.41 1.45 17,825,857.13 No. 3 74,592,738.95 74,592,738.95 1.08 5,958,563.47 No. 4 70,454,956.26 5,935,440.93 76,390,397.19 1.11 7,895,525.34 No. 5 64,715,567.52 64,715,567.52 0.94 3,235,778.38 Subtotal 499,724,033.53 5,935,440.93 505,659,474.46 7.33 91,892,045.74 4. Receivables financing (1) Details Items Closing balance Opening balance 156 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Closing balance Opening balance Bank acceptance 146,814,501.64 107,316,593.41 Total 146,814,501.64 107,316,593.41 (2) Pledged receivables financing at the balance sheet date Items Closing balance of pledged notes Bank acceptance 55,280,364.20 Subtotal 55,280,364.20 (3) Endorsed or discounted but undue receivables financing at the balance sheet date Items Closing balance derecognized Bank acceptance 126,601,525.47 Subtotal 126,601,525.47 Due to the fact that the acceptor of bank acceptance is commercial bank, which is of high credit level, there is very little possibility of failure in recoverability when it is due. Based on this fact, the Company derecognized the endorsed or discounted bank acceptance. However, if any bank acceptance is not recoverable when it is due, the Company still holds joint liability on such acceptance, according to the China Commercial Instrument Law. 5. Advances paid (1) Age analysis 1) Details Closing balance Ages Provision for Book balance % to total Carrying amount impairment Within 1 year 131,172,209.02 93.53 131,172,209.02 1-2 years 8,100,756.68 5.78 8,100,756.68 2-3 years 327,684.83 0.23 327,684.83 Over 3 years 640,396.13 0.46 640,396.13 Total 140,241,046.66 100.00 140,241,046.66 (Continued) Opening balance Ages Provision for Book balance % to total Carrying amount impairment Within 1 year 186,619,989.22 97.02 186,619,989.22 1-2 years 4,515,793.00 2.35 4,515,793.00 2-3 years 1,175,026.94 0.61 1,175,026.94 Over 3 years 49,733.08 0.02 49,733.08 Total 192,360,542.24 100.00 192,360,542.24 2) No material balance with age over one year. 157 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (2) Details of the top 5 debtors with largest balances Proportion to the total balance of Debtors Book balance advances paid (%) No. 1 7,896,200.00 5.63 No. 2 3,636,283.20 2.59 No. 3 2,387,925.65 1.70 No. 4 1,988,886.43 1.42 No. 5 1,980,000.00 1.41 Subtotal 17,889,295.28 12.75 6. Other receivables (1) Other receivables categorized by nature Nature of receivables Closing book balance Opening book balance Temporary advance payment receivable and 163,429,454.84 189,730,555.74 petty cash Security deposits 82,240,734.41 115,535,012.45 Performance compensation 113,460,620.00 113,460,620.00 Others 4,598,968.70 6,649,505.96 Total 363,729,777.95 425,375,694.15 (2) Age analysis Ages Closing book balance Opening book balance Within 1 year 117,612,450.57 195,949,031.83 1-2 years 65,555,129.46 171,544,892.21 2-3 years 149,623,905.77 27,310,051.83 3-4 years 10,558,177.00 22,981,433.06 4-5 years 14,053,059.51 3,490,125.62 Over 5 years 6,327,055.64 4,100,159.60 Total 363,729,777.95 425,375,694.15 (3) Provision for bad debts 1) Details on categories Closing balance Categories Book balance Provision for bad debts Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision made on an individual basis Receivables with provision made on a 363,729,777.95 100.00 47,068,704.69 12.94 316,661,073.26 collective basis 158 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing balance Categories Book balance Provision for bad debts Provision Carrying amount Amount % to total Amount proportion (%) Total 363,729,777.95 100.00 47,068,704.69 12.94 316,661,073.26 (Continued) Opening balance Categories Book balance Provision for bad debts Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision made on an individual basis Receivables with provision made on a 425,375,694.15 100.00 39,753,423.15 9.35 385,622,271.00 collective basis Total 425,375,694.15 100.00 39,753,423.15 9.35 385,622,271.00 2) Other receivables with provision made on a collective basis a. Other receivables with provision made on a collective basis – parent company Closing balance Ages Book balance Provision for bad debts Provision proportion (%) Portfolio grouped with performance 113,460,620.00 2,179,342.69 1.92 compensation Portfolio grouped with 24,127,705.88 4,857,450.12 20.13 buyer’s credit Portfolio grouped with 4,995,936.39 1,713,840.08 34.30 ages Including: 1-180 days 258,669.54 180 days-1 year 1,019,113.00 20,382.26 2.00 1-2 years 315,690.79 31,569.08 10.00 2-3 years 329,381.49 98,814.45 30.00 3-5 years 2,984,636.57 1,492,318.29 50.00 Over 5 years 88,445.00 70,756.00 80.00 Subtotal 142,584,262.27 8,750,632.89 6.14 Notes: For the portfolio grouped with performance compensation, expected credit losses are measured based on the remaining balance after the mandatory enforcement after the balance sheet date. Please refer to section XIV (III) 1 of notes to the financial statements for details. b. Ventilation equipment manufacturing industry and environmental integrated industry Closing balance Portfolios Book balance Provision for bad debts Provision proportion (%) 159 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing balance Portfolios Book balance Provision for bad debts Provision proportion (%) Portfolio grouped with ages 221,145,515.68 38,318,071.80 17.33 Including: Within 1 year 104,576,885.16 5,229,038.34 5.00 1-2 years 52,869,515.66 5,286,951.57 10.00 2-3 years 35,833,904.28 10,750,171.28 30.00 3-5 years 21,626,599.94 10,813,299.97 50.00 Over 5 years 6,238,610.64 6,238,610.64 100.00 Subtotal 221,145,515.68 38,318,071.80 17.33 (4) Changes in provision for bad debts Stage 1 Stage 2 Stage 3 Items 12 month Lifetime expected Lifetime expected Subtotal expected credit credit losses (credit credit losses (credit losses not impaired) impaired) Opening balance 8,420,041.44 5,808,427.22 25,524,954.49 39,753,423.15 Opening balance in the current period --Transferred to stage 2 -2,649,887.72 2,649,887.72 --Transferred to stage 3 -3,616,328.58 3,616,328.58 --Reversed to stage 2 --Reversed to stage 1 Provision made in the -479,707.78 1,972,005.47 7,298,991.30 8,791,288.99 current period Provision recovered or reversed in the current 18,583.43 305,040.36 1,129,941.75 1,453,565.54 period Provision written off in the current period Other changes [Note] -22,441.91 -22,441.91 Closing balance 5,249,420.60 6,508,951.47 35,310,332.62 47,068,704.69 Provision proportion (%) 4.96 9.93 19.56 12.94 Note: Other changes refer to balances transferred out due to the disposal of subsidiaries in the current period. Division basis for each stages: ages of other receivables. (5) Details of the top 5 debtors with largest balances Proportion to the Provision for bad total balance of Debtors Nature of receivables Closing book balance Ages debts at the balance other receivables sheet date (%) Performance compensation and No. 1 113,792,911.19 [Note] 31.29 2,362,244.28 temporary advance payment receivable Temporary advance No. 2 9,707,040.68 1-2 years 2.67 2,912,112.20 payment receivable Temporary advance 180 days-1 No. 3 8,550,000.00 2.35 855,000.00 payment receivable year 160 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Proportion to the Provision for bad total balance of Debtors Nature of receivables Closing book balance Ages debts at the balance other receivables sheet date (%) No. 4 Security deposits 6,068,877.68 2-3 years 1.67 1,820,663.30 No. 5 Security deposits 5,325,411.20 4-5 years 1.46 2,662,705.60 Subtotal 143,444,240.75 39.44 10,612,725.38 Note: It includes 113,460,620.00 yuan as performance compensation with age of 2 to 3 years, 298,779.19 yuan as temporary advance payment receivable with age of 3 to 5 years, and 33,512.00 yuan as temporary advance payment receivable with age over 5 years. 7. Inventories (1) Details Closing balance Opening balance Items Provision for write- Provision for write- Book balance Carrying amount Book balance Carrying amount down down Raw materials 124,680,011.55 17,707,425.98 106,972,585.57 179,291,553.12 10,856,535.28 168,435,017.84 Work in process 185,705,546.49 5,117,048.20 180,588,498.29 177,447,500.50 2,633,928.18 174,813,572.32 Goods on hand 671,255,477.27 10,858,073.14 660,397,404.13 543,123,849.45 16,365,369.64 526,758,479.81 Materials on consignment for 135,587.95 135,587.95 710,664.71 710,664.71 further processing Costs to fulfill a 23,135,561.21 23,135,561.21 10,320,302.27 10,320,302.27 contract Total 1,004,912,184.47 33,682,547.32 971,229,637.15 910,893,870.05 29,855,833.10 881,038,036.95 (2) Provision for inventory write-down 1) Details Increase Decrease Opening Items Reversal or Closing balance balance Accrual Others Others write-off Raw materials 10,856,535.28 9,203,927.63 2,353,036.93 17,707,425.98 Work in process 2,633,928.18 2,675,381.31 192,261.29 5,117,048.20 Goods on hand 16,365,369.64 3,963,683.30 9,470,979.80 10,858,073.14 Total 29,855,833.10 15,842,992.24 12,016,278.02 33,682,547.32 2) Determination basis of net realizable value and reasons for the reversal or write-off of provision for inventory write-down Determination basis of net realizable Reasons for write-off of provision for Items value inventory write-down Estimated selling price of relevant Inventories with provision for finished goods less cost to be incurred Raw materials, work in inventory write-down made at the upon completion, estimated selling process beginning of the period were used or expenses, and relevant taxes and sold in the current period. surcharges Estimated selling price of relevant Inventories with provision for Goods on hand finished goods less estimated selling inventory write-down made at the 161 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Determination basis of net realizable Reasons for write-off of provision for Items value inventory write-down expenses, and relevant taxes and beginning of the period were sold in surcharges the current period. (3) Costs to fulfill a contract Items Opening balance Increase Carried forward Closing balance Township sewage delivery project phase II of Hanshou 908,488.95 7,208,417.24 908,488.95 7,208,417.24 County Kitchen project of Shangrao 4,533,540.92 4,533,540.92 Guangfeng District Well-point equipment sales of 1,815,112.42 1,815,112.42 Leiyang City Pretreatment equipment procurement project of Duyun 1,681,363.40 1,681,363.40 project Leachate delivery project of 1,117,852.48 1,117,852.48 Xi’an Chanba Transfer Station Equipment sales of Yongshun County, Xiangxi Tujia and Miao 1,450,156.90 1,450,156.90 Autonomous Prefecture - township sewage (Wanping) Leachate delivery project of Fuzhou Qingliangshan Transfer 2,059,176.45 500,917.40 2,560,093.85 Station Others 2,969,515.07 9,001,530.72 5,191,771.04 6,779,274.75 Subtotal 10,320,302.27 22,925,769.68 10,110,510.74 23,135,561.21 8. Contract assets (1) Details Closing balance Items Provision for Book balance Carrying amount impairment Quality guarantee deposits receivable 84,519,179.04 9,715,689.56 74,803,489.48 Total 84,519,179.04 9,715,689.56 74,803,489.48 (Continued) Opening balance Items Provision for Book balance Carrying amount impairment Quality guarantee deposits receivable 116,355,489.32 15,331,634.99 101,023,854.33 Total 116,355,489.32 15,331,634.99 101,023,854.33 162 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (2) Details on provision for impairment 1) Details on categories Closing balance Categories Book balance Provision for impairment Carrying Provision proportion amount Amount % to total Amount (%) Receivables with provision made on a 84,519,179.04 100.00 9,715,689.56 11.50 74,803,489.48 collective basis Total 84,519,179.04 100.00 9,715,689.56 11.50 74,803,489.48 (Continued) Opening balance Categories Book balance Provision for impairment Carrying Provision proportion amount Amount % to total Amount (%) Receivables with provision made on a 116,355,489.32 100.00 15,331,634.99 13.18 101,023,854.33 collective basis Total 116,355,489.32 100.00 15,331,634.99 13.18 101,023,854.33 2) Contract assets with provision for impairment made on a collective basis Closing balance Items Book balance Provision for impairment Provision proportion (%) Portfolio grouped with 84,519,179.04 9,715,689.56 11.50 quality guarantee deposits Subtotal 84,519,179.04 9,715,689.56 11.50 (3) Changes in provision for impairment Increase/Decrease Closing Items Opening balance Recovery Accrual Write-off Others balance or reversal Receivables with provision for impairment made on a 15,331,634.99 -5,615,945.43 9,715,689.56 collective basis Total 15,331,634.99 -5,615,945.43 9,715,689.56 9. Non-current assets due within one year Closing balance Items Unrecognized Provision for bad Discount rate Book balance Carrying amount finance income debts range (%) Sales of goods in 328,993,341.47 6,469,240.60 15,965,200.41 306,558,900.46 4.20-4.30 installments Payments for finance lease 46,826,104.16 2,749,700.41 1,354,452.95 42,721,950.80 4.20-4.30 Factoring of receivables 215,722,449.48 9,685,000.00 3,235,836.74 202,801,612.74 4.20-4.30 financing Total 591,541,895.11 18,903,941.01 20,555,490.10 552,082,464.00 163 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (Continued) Opening balance Items Unrecognized Provision for bad Discount rate Book balance Carrying amount finance income debts range (%) Sales of goods in 433,440,778.60 8,785,866.67 21,166,538.93 403,488,373.00 4.30-4.65 installments Payments for finance lease 58,791,768.45 2,263,633.33 895,847.05 55,632,288.07 4.30-4.65 Factoring of receivables 17,823,638.14 171,119.36 267,354.57 17,385,164.21 4.30-4.65 financing Total 510,056,185.19 11,220,619.36 22,329,740.55 476,505,825.28 10. Other current assets (1) Details Closing balance Opening balance Items Provision for Provision for Book balance Carrying amount Book balance Carrying amount impairment impairment Input VAT to be credited, excess 513,175,804.36 513,175,804.36 482,764,023.99 482,764,023.99 input VAT credits and prepaid taxes Costs to obtain a 10,704,601.44 10,704,601.44 9,306,113.04 9,306,113.04 contract Listing expenses of subsidiary spun 5,380,660.39 5,380,660.39 off Total 523,880,405.80 523,880,405.80 497,450,797.42 497,450,797.42 (2) Costs to obtain a contract Provision for Items Opening balance Increase Amortization Closing balance impairment Costs to obtain 9,306,113.04 35,876,372.11 34,477,883.71 10,704,601.44 a contract Subtotal 9,306,113.04 35,876,372.11 34,477,883.71 10,704,601.44 11. Long-term receivables (1) Details Closing balance Items Unrealized finance Provision for bad Discount rate Book balance Carrying amount income debts range (%) Sales of goods in 474,463,111.30 28,883,881.35 69,637,094.56 375,942,135.39 4.20-4.30 installments Guaranteed collection 32,146,788.99 3,759,737.26 1,607,339.45 26,779,712.28 4.30-4.65 amount for BOT projects Payments for finance lease 21,422,534.54 1,929,467.83 486,521.79 19,006,544.92 4.20-4.30 Factoring of receivables 1,391,000.00 20,865.00 1,370,135.00 4.20-4.30 financing Total 529,423,434.83 34,573,086.44 71,751,820.80 423,098,527.59 164 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (Continued) Opening balance Items Unrealized finance Provision for bad Discount rate Book balance Carrying amount income debts range (%) Sales of goods in 607,626,695.18 28,919,805.27 101,644,682.13 477,062,207.78 4.30-4.65 installments Guaranteed collection 32,146,788.99 3,759,737.26 1,607,339.45 26,779,712.28 4.30-4.65 amount for BOT projects Payments for finance lease 40,885,220.88 2,877,273.01 682,107.05 37,325,840.82 4.30-4.65 Factoring of receivables 421,616,855.59 24,329,491.82 6,324,252.83 390,963,110.94 4.30-4.65 financing Total 1,102,275,560.64 59,886,307.36 110,258,381.46 932,130,871.82 (2) Changes in provision for bad debts 1) Details on categories Closing balance Categories Book balance Provision for impairment Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision for impairment made on an individual 1,711,994.50 0.35 1,711,994.50 100.00 basis Receivables with provision for impairment made on an individual 493,138,353.89 99.65 70,039,826.30 14.20 423,098,527.59 basis Total 494,850,348.39 100.00 71,751,820.80 14.50 423,098,527.59 (Continued) Opening balance Categories Book balance Provision for impairment Provision Carrying amount Amount % to total Amount proportion (%) Receivables with provision made 1,042,389,253.28 100.00 110,258,381.46 10.58 932,130,871.82 on a collective basis Total 1,042,389,253.28 100.00 110,258,381.46 10.58 932,130,871.82 2) No significant long-term receivables with provision for bad debts made on an individual basis. 3) Long-term receivables with provision for bad debts made on a collective basis using age analysis method Closing balance Ages Book balance Provision for bad debts Provision proportion (%) Payments undue 106,097,455.52 5,304,872.78 5.00 Payments due 398,800,450.27 64,227,566.73 16.11 Subtotal 504,897,905.79 69,532,439.51 13.77 165 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 4) Long-term receivables with provision for bad debts using the five-level classification Closing balance Items Book balance Provision for bad debts Provision proportion (%) Portfolio grouped with 21,422,534.54 486,521.79 2.27 finance lease payment Portfolio grouped with receivables financing 1,391,000.00 20,865.00 1.50 factoring payment Subtotal 22,813,534.54 507,386.79 2.22 (3) Changes in provision for bad debts Increase/Decrease Opening Items Recovery or Closing balance balance Accrual Write-off Others reversal Receivables with provision for impairment made on an 1,711,994.50 1,711,994.50 individual basis Receivables with provision for impairment made on a 110,258,381.46 -40,218,555.16 70,039,826.30 collective basis Total 110,258,381.46 -38,506,560.66 71,751,820.80 12. Long-term equity investments (1) Categories Closing balance Opening balance Items Provision for Provision for Carrying Book balance Carrying amount Book balance impairment impairment amount Investments 681,629,084.69 681,629,084.69 676,829,959.84 676,829,959.84 in associates Total 681,629,084.69 681,629,084.69 676,829,959.84 676,829,959.84 (2) Details Increase/Decrease Adjustment in Investees Opening balance Investment income Investments Investments other recognized under increased decreased comprehensive equity method income Associates Tengine Innovation (Beijing) Monitoring 29,631,523.07 -1,821,854.32 Instrument Co., Ltd. Guangdong Shunkong Environmental 218,036,312.90 30,240,907.09 Investment Co., Ltd. Guangdong Tianshu New Energy Technology Co., Ltd. [Note 1] Shantou Zoomlion Ruikang Environmental 21,960,846.16 2,546,071.11 Sanitation Service Co., Ltd. Shantou Chaoyang District Zoomlion Ruikang 31,419,699.92 647,839.13 Environmental Sanitation Service Co., Ltd. Changsha Cowa Zoomlion Intelligent 4,893,582.51 -222,073.44 Technology Co., Ltd. Guangdong Liangke Environmental 32,695,599.98 203,520.80 Engineering Co., Ltd. 166 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Increase/Decrease Adjustment in Investees Opening balance Investment income Investments Investments other recognized under increased decreased comprehensive equity method income Guangxi Zoomlion Guilv Urban 2,361,751.84 260,465.40 Environmental Service Co., Ltd. Shenzhen Yingmei City Housekeeper Co., Ltd. 28,165.29 41.05 Foshan Yingtong Electrical Materials Co., Ltd. 228,933,254.09 -26,979,326.27 China Urban Institute (Beijing) Environmental 97,387,146.22 3,801,154.35 Technology Co., Ltd. Beijing Xingyun Zhixing Technology Co., Ltd. 9,482,077.86 -816,487.88 Guangdong Yingling Testing Technology Service Co., Ltd. [Note 2] Taizhou Jinzhong Environmental Industry Co., 4,900,000.00 -2,899,564.23 Ltd. Total 676,829,959.84 4,900,000.00 4,960,692.79 (Continued) Increase/Decrease Closing balance Investees Cash dividend/ Changes in Provision for Provision for Profit declared for Others Carrying amount other equity impairment impairment distribution Associates Tengine Innovation (Beijing) 27,809,668.75 Monitoring Instrument Co., Ltd. Guangdong Shunkong Environmental Investment Co., 5,061,567.94 243,215,652.05 Ltd. Guangdong Tianshu New Energy Technology Co., Ltd. [Note 1] Shantou Zoomlion Ruikang Environmental Sanitation Service 24,506,917.27 Co., Ltd. Shantou Chaoyang District Zoomlion Ruikang Environmental 32,067,539.05 Sanitation Service Co., Ltd. Changsha Cowa Zoomlion 4,671,509.07 Intelligent Technology Co., Ltd. Guangdong Liangke Environmental Engineering Co., 32,899,120.78 Ltd. Guangxi Zoomlion Guilv Urban 2,622,217.24 Environmental Service Co., Ltd. Shenzhen Yingmei City 28,206.34 Housekeeper Co., Ltd. Foshan Yingtong Electrical 201,953,927.82 Materials Co., Ltd. China Urban Institute (Beijing) Environmental Technology Co., 101,188,300.57 Ltd. Beijing Xingyun Zhixing 8,665,589.98 Technology Co., Ltd. Guangdong Yingling Testing Technology Service Co., Ltd. [Note 2] Taizhou Jinzhong Environmental 2,000,435.77 Industry Co., Ltd. Total 5,061,567.94 681,629,084.69 167 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Note 1: Long-term equity investments of 0.00 yuan in Guangdong Tianshu New Energy Technology Co., Ltd. was due to its long-term loss. The carrying amount of such long-term equity investment was adjusted to 0.00 yuan by the Company under the equity method. Note 2: Long-term equity investments of 0.00 yuan in Guangdong Yingling Testing Technology Service Co., Ltd. was due to its long-term loss. The carrying amount of such long-term equity investment was adjusted to 0.00 yuan by the Company under the equity method. 13. Other equity instrument investments Increase/Decrease Gains or losses included Items Opening balance Investments Investments into other comprehensive Others increased decreased income in the current period Zhejiang Shangyu Rural Commercial Bank Co., 800,000.00 Ltd. Shenzhen Infore Environmental Protection Industry 270,000.00 Fund Management Co., Ltd. Shenzhen Infore Environmental Protection Industry 14,282,971.01 M&A Fund [Note] Total 15,352,971.01 (Continued) Accumulated gains or Dividend income losses included into other Items Closing balance recognized in the comprehensive income at current period the end of the period Zhejiang Shangyu Rural Commercial 800,000.00 408,044.00 Bank Co., Ltd. Shenzhen Infore Environmental Protection Industry Fund Management 270,000.00 Co., Ltd. Shenzhen Infore Environmental 14,282,971.01 Protection Industry M&A Fund [Note] Total 15,352,971.01 408,044.00 Note: As of December 31, 2023, Shenzhen Infore Environmental Protection Industry M&A Fund is still in liquidation. 14. Investment property (1) Details Items Buildings and structures Total Cost Opening balance 29,071,100.66 29,071,100.66 168 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Buildings and structures Total Increase Decrease 27,266,145.23 27,266,145.23 1) Disposal 360,965.00 360,965.00 2) Transferred out into fixed assets 26,905,180.23 26,905,180.23 Closing balance 1,804,955.43 1,804,955.43 Accumulated depreciation and amortization Opening balance 1,965,665.63 1,965,665.63 Increase 88,593.04 88,593.04 1) Accrual or amortization 88,593.04 88,593.04 Decrease 1,388,171.84 1,388,171.84 1) Disposal 117,929.48 117,929.48 2) Transferred out into fixed assets 1,270,242.36 1,270,242.36 Closing balance 666,086.83 666,086.83 Closing carrying amount 1,138,868.60 1,138,868.60 Opening carrying amount 27,105,435.03 27,105,435.03 (2) Investment property with certificate of titles being unsettled Items Carrying amount Reasons for unsettlement Shangyu Wanda real estate 1,138,868.60 In processing Subtotal 1,138,868.60 15. Fixed assets (1) Details Buildings and Transport Other Items General equipment Special equipment Total structures facilities equipment Cost Opening balance 1,549,398,837.99 164,152,084.63 1,174,010,394.82 66,315,220.43 37,872,401.73 2,991,748,939.60 Increase 52,284,572.68 15,914,123.88 298,543,607.90 1,856,706.52 1,470,994.40 370,070,005.38 1) Acquisition 3,474,388.92 10,351,560.25 251,273,170.38 1,856,706.52 1,470,994.40 268,426,820.47 2) Transferred in from construction 21,905,003.53 5,411,810.98 37,441,177.36 64,757,991.87 in progress 3) Business 150,752.65 127,198.00 277,950.65 combination 4) Transferred in 9,702,062.16 9,702,062.16 from inventories 5) Transferred in from investment 26,905,180.23 26,905,180.23 property Decrease 14,500.00 4,184,733.91 36,311,332.14 8,206,633.02 1,883,665.88 50,600,864.95 1) Disposal/ 4,131,399.40 35,268,132.12 8,206,633.02 1,776,065.88 49,382,230.42 Scrapping 2) Disposal of 14,500.00 53,334.51 1,043,200.02 107,600.00 1,218,634.53 subsidiaries Closing balance 1,601,668,910.67 175,881,474.60 1,436,242,670.58 59,965,293.93 37,459,730.25 3,311,218,080.03 Accumulated depreciation 169 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Buildings and Transport Other Items General equipment Special equipment Total structures facilities equipment Opening balance 211,955,077.34 65,300,299.82 409,748,290.58 18,602,556.14 17,855,513.71 723,461,737.59 Increase 64,097,222.86 21,457,613.17 186,749,488.79 5,965,787.96 1,360,261.65 279,630,374.43 1) Accrual 62,826,980.50 21,314,398.19 186,697,080.47 5,965,787.96 1,360,261.65 278,164,508.77 2) Business 143,214.98 52,408.32 195,623.30 combination 3) Transferred in from investment 1,270,242.36 1,270,242.36 property Decrease 14,065.00 3,673,714.78 19,965,831.24 4,791,734.14 1,744,810.97 30,190,156.13 1) Disposal/ 3,643,672.74 19,142,825.69 4,791,734.14 1,653,857.30 29,232,089.87 Scrapping 2) Disposal of 14,065.00 30,042.04 823,005.55 90,953.67 958,066.26 subsidiaries Closing balance 276,038,235.20 83,084,198.21 576,531,948.13 19,776,609.96 17,470,964.39 972,901,955.89 Carrying amount Closing balance 1,325,630,675.47 92,797,276.39 859,710,722.45 40,188,683.97 19,988,765.86 2,338,316,124.14 Opening balance 1,337,443,760.65 98,851,784.81 764,262,104.24 47,712,664.29 20,016,888.02 2,268,287,202.01 (2) No fixed assets temporarily idle at the balance sheet date. (3) Fixed assets leased out under operating leases Items Carrying amount Buildings and structures 22,736,364.29 Subtotal 22,736,364.29 (4) Fixed assets with certificate of titles being unsettled Items Carrying amount Reasons for unsettlement Integration project plant 302,783,876.40 In processing Employee dormitory in Lueryuan 135,358,752.00 In processing Bottom renovation workshop in 21,125,640.93 In processing Lueryuan Lueryuan Exhibition Center 15,696,091.03 In processing Staff canteen in Lueryuan 22,984,574.86 In processing Subtotal 497,948,935.22 16. Construction in progress (1) Details Closing balance Opening balance Projects Provision for Provision for Carrying Book balance Carrying amount Book balance impairment impairment amount Infore Environment Shunde Environmental Protection 256,519,519.36 256,519,519.36 Technology Industrial Park (Phase II) Project Equipment to be installed 19,134,556.95 19,134,556.95 16,211,018.08 16,211,018.08 Piecemeal projects 12,402,942.58 12,402,942.58 24,862,249.60 24,862,249.60 Total 288,057,018.89 288,057,018.89 41,073,267.68 41,073,267.68 (2) Changes in significant projects 170 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Opening Transferred to Transferred to Other Closing Projects Budgets Increase balance fixed assets intangible assets decreases balance Infore Environment Shunde Environmental Protection Technology 483,333,200.00 256,519,519.36 256,519,519.36 Industrial Park (Phase II) Project Equipment to be 16,211,018.08 21,439,852.20 7,036,652.70 11,479,660.63 19,134,556.95 installed Piecemeal projects 24,862,249.60 45,469,636.25 57,721,339.17 207,604.10 12,402,942.58 Total 41,073,267.68 323,429,007.81 64,757,991.87 11,687,264.73 288,057,018.89 (Continued) Accumulated Completion Accumulated amount Amount of borrowing Annual Fund Projects input to budget percentage of borrowing cost cost capitalization in capitalization source (%) (%) capitalization the current period rate (%) Infore Environment Shunde Environmental Self-raised, Protection Technology 54.95 54.95 2,716,000.00 2,716,000.00 0.73 long-term Industrial Park (Phase II) borrowings Project Equipment to be Self-raised installed Piecemeal projects Self-raised Total 2,716,000.00 2,716,000.00 17. Right-of-use assets Items Buildings and structures Total Cost Opening balance 46,849,639.86 46,849,639.86 Increase 2,440,036.08 2,440,036.08 1) Leased in 2,440,036.08 2,440,036.08 Decrease 9,387,245.15 9,387,245.15 1) Disposal 9,387,245.15 9,387,245.15 Closing balance 39,902,430.79 39,902,430.79 Accumulated depreciation Opening balance 14,990,185.62 14,990,185.62 Increase 8,706,270.90 8,706,270.90 1) Accrual 8,706,270.90 8,706,270.90 Decrease 8,919,697.68 8,919,697.68 1) Disposal 8,919,697.68 8,919,697.68 Closing balance 14,776,758.84 14,776,758.84 Carrying amount Closing balance 25,125,671.95 25,125,671.95 Opening balance 31,859,454.24 31,859,454.24 171 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 18. Intangible assets (1) Details Patented Items Land use right Software Franchise Total technology Cost Opening balance 657,565,927.37 70,369,281.83 6,775,246,738.14 459,379,594.21 7,962,561,541.55 Increase 7,152,320.00 14,940,796.49 659,915,003.74 32,917,511.29 714,925,631.52 1) Acquisition 7,152,320.00 3,253,531.76 659,915,003.74 670,320,855.50 2) Transferred in from construction in 11,687,264.73 11,687,264.73 process 3) Independent R&D 32,917,511.29 32,917,511.29 Decrease 362,058,343.47 3,536,938.02 365,595,281.49 1) Disposal 24,255,438.09 3,536,938.02 27,792,376.11 2) Transferred out into other non-current 337,802,905.38 337,802,905.38 assets Closing balance 664,718,247.37 85,310,078.32 7,073,103,398.41 488,760,167.48 8,311,891,891.58 Accumulated amortization Opening balance 85,065,544.63 23,500,971.70 1,486,964,648.90 271,140,604.91 1,866,671,770.14 Increase 13,707,737.35 8,023,452.35 488,433,164.54 37,144,253.06 547,308,607.30 1) Accrual 13,707,737.35 8,023,452.35 488,433,164.54 37,144,253.06 547,308,607.30 Decrease 130,675,779.15 634,634.14 131,310,413.29 1) Disposal 20,113,600.89 634,634.14 20,748,235.03 2) Transferred out into other non-current 110,562,178.26 110,562,178.26 assets Closing balance 98,773,281.98 31,524,424.05 1,844,722,034.29 307,650,223.83 2,282,669,964.15 Provision for impairment Opening balance 24,687,522.85 23,087,884.07 47,775,406.92 Increase Decrease 2,902,303.88 2,902,303.88 1) Disposal 2,902,303.88 2,902,303.88 Closing balance 24,687,522.85 20,185,580.19 44,873,103.04 Carrying amount Closing balance 565,944,965.39 53,785,654.27 5,203,693,841.27 160,924,363.46 5,984,348,824.39 Opening balance 572,500,382.74 46,868,310.13 5,263,594,566.39 165,151,105.23 6,048,114,364.49 (2) No land use right with certificate of titles being unsettled at the balance sheet date. 19. Development expenditures (1) Details 172 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing balance Opening balance Items Provision for Carrying Provision for Book balance Book balance Carrying amount impairment amount impairment Development 9,063,080.60 9,063,080.60 33,160,925.44 2,822,707.36 30,338,218.08 expenditures Total 9,063,080.60 9,063,080.60 33,160,925.44 2,822,707.36 30,338,218.08 (2) Other remarks Please refer to section VI of notes to the financial statements for details on development expenditures. 20. Goodwill (1) Details Investees or events Closing balance Opening balance resulting in goodwill Provision for Carrying Provision for Book balance Book balance Carrying amount impairment amount impairment Zoomlion 5,714,428,315.9 618,097,980.8 5,096,330,335.1 5,714,428,315.9 528,229,356.5 5,186,198,959.4 Environmental 9 3 6 9 5 4 Company Green Oriental 65,456,185.12 65,456,185.12 78,074,688.12 78,074,688.12 Company Foshan Shunhe Environmental 329,083,984.91 3,152,463.61 325,931,521.30 316,465,481.91 316,465,481.91 Protection Co., Ltd. [Note] Shangfeng 100,455,813.40 100,455,813.40 100,455,813.40 100,455,813.40 Industrial Company Yolsh Company 13,389,232.61 13,389,232.61 13,389,232.61 13,389,232.61 Lianjiang Company 46,032,017.84 2,229,729.76 43,802,288.08 46,032,017.84 1,013,513.53 45,018,504.31 6,268,845,549.8 623,480,174.2 5,645,365,375.6 6,268,845,549.8 529,242,870.0 5,739,602,679.7 Total 7 0 7 7 8 9 Note: On December 25, 2023, the Company’s subsidiary Foshan Infore Environmental Water Treatment Co., Ltd. changed its name to Foshan Shunhe Environmental Protection Co., Ltd. (2) Cost Investees or events resulting in Opening balance Increase [Note] Decrease [Note] Closing balance goodwill Zoomlion Environmental Company 5,714,428,315.99 5,714,428,315.99 Green Oriental Company 78,074,688.12 12,618,503.00 65,456,185.12 Foshan Shunhe Environmental 316,465,481.91 12,618,503.00 329,083,984.91 Protection Co., Ltd. Shangfeng Industrial Company 100,455,813.40 100,455,813.40 Yolsh Company 13,389,232.61 13,389,232.61 Lianjiang Company 46,032,017.84 46,032,017.84 Total 6,268,845,549.87 12,618,503.00 12,618,503.00 6,268,845,549.87 Note: Pursuant to the “Equity Transfer Agreement” entered into in December 2023, Green Oriental Company transferred 100% of equity of Funan Company to Foshan Shunhe Environmental Protection Co., Ltd., with goodwill of 12,618,503.00 yuan transferred out accordingly, which is a portion of the goodwill of 78,074,688.12 173 Infore Environment Technology Group Co., Ltd. 2023 Annual Report yuan formerly formed in the Company’s acquisition of Green Oriental Company. (3) Provision for impairment Investees or events resulting in Opening balance Increase Decrease Closing balance goodwill Zoomlion Environmental 528,229,356.55 89,868,624.28 618,097,980.83 Company [Note 1] Lianjiang Company [Note 2] 1,013,513.53 1,216,216.23 2,229,729.76 Foshan Shunhe Environmental 3,152,463.61 3,152,463.61 Protection Co., Ltd. [Note 3] Total 529,242,870.08 94,237,304.12 623,480,174.20 Note 1: For impairment loss of goodwill of Zoomlion Environmental Company, as the goodwill of 92,031,026.04 yuan was recognized at the time of the acquisition of Zoomlion Environmental Company through deferred tax liabilities due to appraisal appreciation at the date of business combination not under common control, provision for impairment of 3,857,982.20 yuan was made along with changes in deferred tax liabilities in the current period. The accumulated provision for impairment of goodwill arising from this factor totaled 56,757,490.15 yuan. Impairment loss of 86,010,642.08 yuan was recognized at the difference between the recoverable amount and the carrying amount of equipment asset group portfolio of Zoomlion Environmental Company, and the accumulated provision for impairment of goodwill arising from this factor totaled 561,340,490.68 yuan. Note 2: For impairment loss of goodwill of Lianjiang Company, as the goodwill of 30,000,000.00 yuan was recognized at the time of the acquisition of Lianjiang Company through deferred tax liabilities due to appraisal appreciation at the date of business combination not under common control, provision for impairment of 1,216,216.23 yuan was made along with changes in deferred tax liabilities in the current period. The accumulated provision for impairment of goodwill arising from this factor totaled 2,229,729.76 yuan. Note 3: Impairment loss of 2,161,796.44 yuan was recognized at the difference between the recoverable amount and the carrying amount of water governance operation asset group, and the accumulated provision for impairment of goodwill arising from this factor totaled 2,161,796.44 yuan. Impairment loss of 990,667.17 yuan was recognized based on the difference between recoverable amount and carrying amount of Funan Company in the urban-rural sanitation integrated operation asset group portfolio. The accumulated provision for impairment of goodwill arising from this factor totaled 990,667.17 yuan. (4) Related information of asset groups or asset group portfolios which include goodwill 1) Related information of asset groups or asset group portfolios Whether asset groups or asset group portfolios are Composition of asset groups Asset groups or asset group Operating segment and its consistent with those at or asset group portfolios and portfolios basis acquisition date/at goodwill its basis impairment testing date in previous years Operating long-term assets of Zoomlion Environmental Zoomlion Environmental Company (manufacturing Sanitation vehicles and Company (manufacturing and and sales of sanitation equipment manufacturing and sales of sanitation vehicles vehicles and equipment) Yes sales asset group and equipment), and and Changsha Zhongbiao Changsha Zhongbiao Environmental Industry Environmental Industry Co., Co., Ltd. 174 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Whether asset groups or asset group portfolios are Composition of asset groups Asset groups or asset group Operating segment and its consistent with those at or asset group portfolios and portfolios basis acquisition date/at goodwill its basis impairment testing date in previous years Ltd. Operating long-term assets of Zoomlion Environmental Zoomlion Environmental Company (sanitation Company (sanitation integrated operation), integrated operation), Green Green Oriental Company, Urban-rural sanitation Oriental Company, Funan Funan Company, Huaian integrated operation asset Company, Huaian Chenjie Yes [Note] Chenjie Environmental group portfolio Environmental Engineering Engineering Co., Ltd., Co., Ltd., Biyang County Biyang County Fenghe Fenghe New Energy Power New Energy Power Co., Co., Ltd., and Lianjiang Ltd., Lianjiang Company Company Operating long-term assets of Foshan Shunhe Foshan Shunhe Water governance operation Environmental Protection Environmental Protection Co., Yes asset group Co., Ltd. (water treatment Ltd. (water treatment business) business) Ventilation equipment Operating long-term assets of Shangfeng Industrial manufacturing and sales asset Shangfeng Industrial Yes Company group Company Electrical equipment Operating long-term assets of manufacturing and sales asset Yolsh Company Yes Yolsh Company group Note: In December 2018, Zoomlion Environmental Company, which was acquired under business combination under common control by the Company, had two asset groups, i.e., sanitation vehicles and equipment manufacturing and sales asset group and urban-rural sanitation integrated operation asset group (including waste transfer, landfill and treatment). Data of original goodwill at the formation of Zoomlion Environmental Company was based on the fair value of the identifiable net assets as at the end of June 2017 under asset-based method in the appraisal report numbered Zhong Rui Ping Bao Zi [2017] 110731042, without considering the synergy between the urban-rural sanitation integrated operation asset group of Zoomlion Environmental Company and the waste incineration power generation operation asset group of former Green Oriental Company. After the business combination of Zoomlion Environmental Company, as its urban-rural sanitation integrated operation asset group and the waste incineration power generation operation asset group of Green Oriental Company were similar in terms of business acquisition, production and operation activities, and cash return realization methods, and the Management had started to carry out integrated management, these two asset groups were identified as the urban- rural sanitation integrated operation asset group portfolio. The Company acquired Lianjiang Company through business combination not under common control in February 2022. After the business combination of Lianjiang Company, as its asset group and urban-rural sanitation integrated operation asset group and the waste incineration power generation operation asset group of the Company were similar in terms of business acquisition, production and operation activities, and cash return realization methods, and the Management had carried out integrated management, the asset group of Lianjiang Company was identified as the urban-rural sanitation integrated operation asset group portfolio. (5) Specific method for determining recoverable amount 175 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 1) Recoverable amount determined based on the fair value less costs of disposal Carrying amount of asset groups or asset group Recoverable Provision for Items portfolios which include amount impairment goodwill Urban-rural sanitation integrated operation asset 198,587,216.61 197,596,549.44 990,667.17 group portfolio Water governance operation 433,349,512.21 431,187,715.77 2,161,796.44 asset group Subtotal 631,936,728.82 628,784,265.21 3,152,463.61 (Continued) Determination method of fair Items Key parameters and determination basis value and costs of disposal Urban-rural sanitation Equity disposal price, disposal expenses integrated operation asset Determined based on the incurred after the balance sheet date, non- group portfolio subsequent disposal price of operating assets, liabilities, working capital, Water governance the asset group etc. as stipulated in the “Equity Transfer operation asset group Agreement” signed by the Company 2) Recoverable amount determined based on the present value of estimated future cash flows Carrying amount of asset groups or asset group Recoverable amount Items Provision for impairment portfolios which include [Note 2] goodwill [Note 1] Sanitation vehicles and equipment manufacturing and 11,619,748,317.81 11,451,100,000.00 86,010,642.08 sales asset group Urban-rural sanitation integrated operation asset group portfolio 4,600,796,416.27 4,969,530,000.00 [Note 3] Ventilation equipment manufacturing and sales asset 302,264,770.42 447,883,111.44 group Electrical equipment manufacturing and sales asset 44,643,222.78 53,492,386.65 group Subtotal 16,567,452,727.28 16,922.005,498.09 86,010,642.08 Note 1: The goodwill of the asset group portfolio has included the portion attributable to non-controlling shareholders. Cost of original goodwill of Zoomlion Environmental Company of 5.714 billion yuan was reallocated to the sanitation vehicles and equipment manufacturing and sales asset group and urban-rural sanitation integrated operation asset group portfolio based on the percentages of gross profit contributed by the two businesses, with 5.636 billion yuan and 78 million yuan reallocated, respectively. Note 2: The present value of estimated future cash flows (recoverable amount) of sanitation vehicles and equipment manufacturing and sales asset group was based on the appraisal report numbered Zhong Rui Ping Bao Zi [2024] 300596 issued by Chungrui Worldunion Assets Appraisal Group Co., Ltd. The present value of estimated future cash flows (recoverable amount) of urban-rural sanitation integrated operation asset group portfolio was based on the appraisal report numbered Zhong Rui Ping Bao Zi [2024] 300557 issued by Chungrui Worldunion Assets Appraisal Group Co., Ltd. and the appraisal report numbered Jun Rui Ping 176 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Bao Zi [2024] 065 issued by Shenzhen Junrui Assets Appraisals LLP. Note 3: It does not include the portion of urban-rural sanitation integrated operation asset group, which has been transferred out under equity transfer agreement after the balance sheet date. (Continued) Parameters including Parameters including revenue Discount rate Forecast revenue growth rate and growth rate and gross margin and its Items period gross margin for forecast for stable period and their determination (years) period and their determination basis basis [Note 4] determination basis Sanitation vehicles and equipment manufacturing and 5 [Note 1] The revenue growth rate is 0 10.71% sales asset group Urban-rural sanitation integrated [Note 1] [Note 1] [Note 1] 8.95%-8.97% operation asset group portfolio Ventilation equipment manufacturing and sales asset 5 [Note 2] The revenue growth rate is 0 11.01% group Electrical equipment manufacturing and sales asset 5 [Note 3] The revenue growth rate is 0 12.93% group Note 1: The recoverable amount of asset groups and asset group portfolios is estimated based on the business characteristics of different asset groups or asset group portfolios according to the budget approved by the Management. The revenue growth rate of the product production and sales asset group in 2024 is based on the existing orders, historical data and operating budget, while the expense rate is based on the average expense rate of the previous three years, in combination with the reasonable income growth, capital depreciation and labor cost growth in the future; for operation asset groups or asset group portfolios, due to the large difference in income and gross profit margin between the investment period and period of maturity of PPP operating projects, the expected growth rate, stable period growth rate and profit rate of the asset groups and asset group portfolios show an irregular distribution when multiple projects are run in parallel, and the income, costs and expenses are estimated based on the time to mature operation and design capacity of each specific project. Note 2: The revenue growth rate of ventilation equipment manufacturing and sales asset group during the forecast period from 2024 to 2028 is 13.40%, 4.00%, 3.00%, 2.00% and 1.00%, respectively, which are determined based on the Company’s historical annual operating performance, growth rates, existing orders, and the Management’s expectations for market development. Note 3: The revenue growth rate of electrical equipment manufacturing and sales asset group during the forecast period from 2024 to 2028 is 105.08%, 25.00%, 30.00%, 35.00% and 40.00%, respectively, which are determined based on the Company’s historical annual operating performance, growth rates, existing orders, and the Management’s expectations for market development. Note 4: Discount rate: determined based on weighted average cost of capital (WACC), cost of equity capital and cost of liabilities. 21. Long-term prepayments 177 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Other Items Opening balance Increase Amortization Closing balance decreases Expenditures on improvement of 25,781,580.05 6,548,947.45 8,722,846.35 23,607,681.15 leased-in fixed assets Others 4,429,355.86 7,108,859.69 4,015,099.21 7,523,116.34 Total 30,210,935.91 13,657,807.14 12,737,945.56 31,130,797.49 22. Deferred tax assets and deferred tax liabilities (1) Deferred tax assets before offset Closing balance Opening balance Items Deductible Deductible Deferred tax Deferred tax temporary temporary assets assets difference difference Provision for impairment 697,808,362.88 107,271,372.72 668,318,234.13 102,350,161.93 of assets Unrealized profit from 20,475,833.05 3,071,374.96 22,214,585.93 3,332,187.89 internal transactions Deductible losses 47,114,527.25 8,894,435.03 47,115,916.60 8,894,782.37 Lease liabilities 26,136,462.82 4,103,472.14 Total 791,535,186.00 123,340,654.85 737,648,736.66 114,577,132.19 (2) Deferred tax liabilities before offset Closing balance Opening balance Items Taxable Taxable Deferred tax Deferred tax temporary temporary liabilities liabilities difference difference Accelerated depreciation 26,637,066.56 4,698,936.18 24,481,935.20 3,672,290.28 of fixed assets Assets appraisal appreciation due to 267,111,526.85 45,461,139.37 448,250,679.76 50,535,337.80 business combination not under common control Right-of-use assets 25,125,671.95 3,951,853.51 Total 318,874,265.36 54,111,929.06 472,732,614.96 54,207,628.08 178 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (3) Deferred tax assets or liabilities after offset Closing balance Opening balance Deferred tax Deferred tax Items Deferred tax Deferred tax assets offset by assets offset by assets/liabilities after assets/liabilities after deferred tax deferred tax offset offset liabilities liabilities Deferred tax assets 6,892,349.21 116,448,305.64 114,577,132.19 Deferred tax liabilities 6,892,349.21 47,219,579.85 54,207,628.08 (4) Details of unrecognized deferred tax assets Items Closing balance Opening balance Deductible temporary difference 825,763,726.98 510,065,399.73 Deductible losses 749,514,337.17 596,581,457.35 Unrealized profit from internal 364,794,037.67 343,937,402.32 transactions Total 1,940,072,101.82 1,450,584,259.40 (5) Maturity years of deductible losses of unrecognized deferred tax assets Maturity years Closing balance Opening balance Remarks Year 2023 24,742,029.97 Year 2024 86,322,391.77 82,954,604.70 Year 2025 187,721,684.90 206,033,354.21 Year 2026 94,150,648.91 97,279,157.08 Year 2027 175,149,966.49 185,572,311.39 Year 2028 206,169,645.10 Total 749,514,337.17 596,581,457.35 23. Other non-current assets (1) Details Closing balance Items Book balance Provision for impairment Carrying amount Assets to be disposal of 227,240,727.12 227,240,727.12 Contract assets – Quality 164,081,168.47 21,618,229.88 142,462,938.59 guarantee deposit receivable Advances for long-term assets 55,114,043.37 55,114,043.37 Costs to obtain a contract 63,666,470.76 63,666,470.76 Receivables for agent construction 8,518,174.25 8,518,174.25 Total 518,620,583.97 30,136,404.13 488,484,179.84 179 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (Continued) Opening balance Items Book balance Provision for impairment Carrying amount Contract assets – Quality guarantee 154,548,259.36 17,968,552.02 136,579,707.34 deposit receivable Advances for long-term assets 93,266,692.04 93,266,692.04 Costs to obtain a contract 68,565,164.58 68,565,164.58 Receivables for agent construction 8,518,174.25 8,518,174.25 Total 324,898,290.23 17,968,552.02 306,929,738.21 (2) Contract assets 1) Details Closing balance Items Book balance Provision for impairment Carrying amount Contract assets – Quality guarantee 164,081,168.47 21,618,229.88 142,462,938.59 deposit receivable Total 164,081,168.47 21,618,229.88 142,462,938.59 (Continued) Opening balance Items Book balance Provision for impairment Carrying amount Contract assets – Quality guarantee 154,548,259.36 17,968,552.02 136,579,707.34 deposit receivable Total 154,548,259.36 17,968,552.02 136,579,707.34 2) Details on provision for impairment a. Details on categories Closing balance Categories Book balance Provision for impairment Carrying amount Provision Amount % to total Amount proportion (%) Receivables with provision 164,081,168.47 100.00 21,618,229.88 13.18 142,462,938.59 made on a collective basis Total 164,081,168.47 100.00 21,618,229.88 13.18 142,462,938.59 (Continued) Opening balance Categories Book balance Provision for impairment Carrying amount Provision Amount % to total Amount proportion (%) Receivables with provision 154,548,259.36 100.00 17,968,552.02 11.63 136,579,707.34 made on a collective basis Total 154,548,259.36 100.00 17,968,552.02 11.63 136,579,707.34 180 Infore Environment Technology Group Co., Ltd. 2023 Annual Report b. Contract assets with provision for impairment made on a collective basis Closing balance Portfolios Book balance Provision for impairment Provision proportion (%) Portfolio grouped with quality guarantee 164,081,168.47 21,618,229.88 13.18 deposits Subtotal 164,081,168.47 21,618,229.88 13.18 3) Changes in provision for impairment a. Details Increase/Decrease Items Opening balance Closing balance Recovery or Accrual Write-off Others reversal Receivables with provision for impairment 17,968,552.02 4,018,806.01 369,128.15 21,618,229.88 made on a collective basis Total 17,968,552.02 4,018,806.01 369,128.15 21,618,229.88 b. No significant provisions collected or reversed in the current period. (3) Costs to obtain a contract Opening Provision for Items Increase Amortization Closing balance balance impairment Costs to obtain a 68,565,164.58 25,071,451.76 29,970,145.58 63,666,470.76 contract Subtotal 68,565,164.58 25,071,451.76 29,970,145.58 63,666,470.76 24. Assets with title or use right restrictions (1) Details 1) Details on assets with restrictions at the balance sheet date Closing carrying Items Closing book balance Type of restrictions Reasons for restrictions amount Deposits, escrow account, Cash and bank balances 495,231,329.24 495,231,329.24 Guaranteed, frozen, etc. frozen due to litigation preservation Notes receivable – Bank Endorsed or discounted but 4,472,210.78 4,472,210.78 Endorsed or discounted acceptance undue Notes receivable – Trade Endorsed or discounted 407,749.04 349,861.59 Endorsed or discounted acceptance but undue Accounts receivable 357,237,223.82 338,232,491.18 Pledged Pledged Receivables financing 55,280,364.20 55,280,364.20 Pledged Pledged Long-term receivables and Recourse factoring, Recourse factoring, non-current assets due within 66,695,425.00 61,841,516.63 pledged pledged one year Fixed assets 72,439,458.40 27,881,359.42 Mortgaged Mortgaged Intangible assets 84,779,751.51 77,778,795.88 Mortgaged Mortgaged 100% of equity of Biyang County Fenghe New Energy 105,047,950.25 105,047,950.25 Pledged Pledged [Note] Power Co., Ltd. 181 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing carrying Items Closing book balance Type of restrictions Reasons for restrictions amount 100% of equity of Funan 78,720,044.41 78,720,044.41 Pledged Company 100% of equity of Poyang Green Oriental Renewable 76,768,690.77 76,768,690.77 Pledged Energy Co., Ltd. 75% of equity of Lianjiang 112,692,107.66 112,692,107.66 Pledged Company 25% of equity of Lianjiang Frozen due to litigation 37,564,035.89 37,564,035.89 Frozen Company preservation Total 1,547,336,340.97 1,471,860,757.90 Note: The pledged amount refers to the Company’s proportionate share of net assets in these entities. 2) Details on assets with restrictions at the beginning of current period Opening carrying Reasons for Items Opening book balance Type of restrictions amount restrictions Security deposits, Guaranteed, escrow account, frozen Cash and bank balances 147,538,284.47 147,538,284.47 frozen, etc. due to litigation preservation Endorsed or Endorsed or Notes receivable – Bank acceptance 2,732,733.00 2,732,733.00 discounted discounted but undue Endorsed or Endorsed or Notes receivable – Trade acceptance 5,422,499.62 4,836,352.06 discounted discounted but undue Accounts receivable 276,390,131.13 273,691,152.48 Pledged Pledged Receivables financing 42,293,141.00 42,293,141.00 Pledged Pledged Long-term receivables and non- Recourse 66,716,222.75 60,356,875.95 Recourse factoring current assets due within one year factoring Fixed assets 561,518,592.09 477,655,980.05 Mortgaged Mortgaged Intangible assets 56,073,651.51 47,082,404.81 Mortgaged Mortgaged 100% of equity of Funan Company 69,631,957.01 69,631,957.01 Pledged 100% of equity of Poyang Green 80,733,192.59 80,733,192.59 Pledged Oriental Renewable Energy Co., Ltd. Pledged [Note] 50% of equity of Lianjiang Company 68,922,363.62 68,922,363.62 Pledged 100% of equity of Biyang County 105,525,597.14 105,525,597.14 Pledged Fenghe New Energy Power Co., Ltd. Frozen due to litigation 25% of equity of Lianjiang Company 34,461,181.81 34,461,181.81 Frozen preservation Total 1,517,959,547.74 1,415,461,215.99 Note: The pledged amount refers to the Company’s proportionate share of net assets in these entities. 25. Short-term borrowings Items Closing balance Opening balance Guaranteed borrowings 66,077,658.34 281,942,622.11 Pledged borrowings 29,830,000.00 Mortgaged borrowings 18,018,500.00 18,020,900.00 Credit borrowings 8,006,821.92 140,139,583.33 Pledged and guaranteed borrowings 5,006,875.00 Total 126,939,855.26 440,103,105.44 182 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 26. Notes payable Items Closing balance Opening balance Trade acceptance 58,782,211.43 222,877,645.46 Bank acceptance 2,235,494,340.03 2,292,351,647.71 Total 2,294,276,551.46 2,515,229,293.17 27. Accounts payable (1) Details Items Closing balance Opening balance Payments for goods 2,580,677,947.96 2,547,048,086.70 Payments for engineering and equipment 240,704,266.86 164,908,990.42 Others 97,161,489.64 60,004,194.54 Total 2,918,543,704.46 2,771,961,271.66 (2) No material closing balance with age over one year. 28. Contract liabilities (1) Details Items Closing balance Opening balance Payments for goods received in advance 290,854,742.72 247,747,809.30 Rebate for customers 15,922,430.85 26,542,168.95 Total 306,777,173.57 274,289,978.25 (2) No material closing balance with age over one year. 29. Employee benefits payable (1) Details Items Opening balance Increase Decrease Closing balance Short-term employee 405,398,080.74 2,467,413,107.42 2,385,539,192.67 487,271,995.49 benefits Post-employment benefits - 1,991,692.81 119,076,238.47 118,435,010.78 2,632,920.50 defined contribution plan Termination benefits 2,184,245.17 19,327,584.57 20,515,905.75 995,923.99 Total 409,574,018.72 2,605,816,930.46 2,524,490,109.20 490,900,839.98 (2) Details of short-term employee benefits Items Opening balance Increase Decrease Closing balance Wage, bonus, allowance 389,433,590.07 2,301,824,431.43 2,219,899,492.88 471,358,528.62 and subsidy Employee welfare fund 767,326.06 60,407,067.82 59,534,554.49 1,639,839.39 183 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Opening balance Increase Decrease Closing balance Social insurance premium 833,759.70 61,992,305.12 61,878,494.51 947,570.31 Including: Medicare 768,080.23 55,857,687.14 55,764,342.50 861,424.87 premium Occupational injuries 65,679.47 6,134,617.98 6,114,152.01 86,145.44 premium Housing provident fund 1,806,925.39 36,374,491.24 36,548,481.56 1,632,935.07 Trade union fund and 12,556,479.52 6,814,811.81 7,678,169.23 11,693,122.10 employee education fund Subtotal 405,398,080.74 2,467,413,107.42 2,385,539,192.67 487,271,995.49 (3) Details of defined contribution plan Closing Items Opening balance Increase Decrease balance Basic endowment insurance 1,595,528.10 115,104,704.80 114,149,325.50 2,550,907.40 premium Unemployment insurance 396,164.71 3,971,533.67 4,285,685.28 82,013.10 premium Subtotal 1,991,692.81 119,076,238.47 118,435,010.78 2,632,920.50 30. Taxes and rates payable Items Closing balance Opening balance VAT 86,581,679.18 66,918,012.44 Enterprise income tax 27,900,731.55 36,440,528.78 Individual income tax withheld for tax 4,803,397.21 3,778,293.58 authorities Urban maintenance and construction tax 506,023.66 1,991,056.41 Housing property tax 1,191,074.92 2,606,954.11 Land use tax 1,168,188.55 157,193.04 Stamp duty 1,433,178.29 1,661,333.48 Education surcharge 252,330.39 845,859.65 Local education surcharge 135,999.15 562,045.06 Others 59,328.23 6,950.33 Total 124,031,931.13 114,968,226.88 31. Other payables (1) Details Items Closing balance Opening balance Recourse factoring of accounts receivable 22,660,825.00 66,789,887.39 [Note] Temporary receipts payable 354,511,622.56 297,006,996.69 Security deposits 165,161,284.82 129,748,015.42 Others 167,608,092.39 163,577,388.03 184 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Closing balance Opening balance Total 709,941,824.77 657,122,287.53 Note: The balance refers to the recourse factoring of accounts receivable made by Zoomlion Environmental Company to the non-bank financial institutions. However, as non-bank financial institutions have the right to request Zoomlion Environmental Company to repurchase the accounts receivable if they are overdue, the accounts receivable shall not be derecognized, and the receipts of factoring shall be recognized as other payables. (2) No material closing balance with age over one year. 32. Non-current liabilities due within one year Items Closing balance Opening balance Long-term borrowings due within one 387,310,047.45 555,746,357.94 year Lease liabilities due within one year 8,613,396.84 4,673,226.74 Long-term payables due within one year 9,104,000.00 599,514.91 Total 405,027,444.29 561,019,099.59 33. Other current liabilities Items Closing balance Opening balance Output VAT to be recognized 36,931,126.97 31,616,947.24 Total 36,931,126.97 31,616,947.24 34. Long-term borrowings Items Closing balance Opening balance Pledged borrowings 200,179,577.30 454,467,547.52 Mortgaged borrowings 154,000,000.00 Guaranteed borrowings 47,300,000.00 70,029,166.64 Credit borrowings 90,650,000.00 18,800,000.00 Mortgaged and guaranteed borrowings 150,000,000.00 Pledged and guaranteed borrowings 1,392,227,274.43 1,229,009,512.16 Total 1,884,356,851.73 1,922,306,226.32 35. Bonds payable (1) Details Items Closing balance Opening balance Convertible corporate bonds 1,360,603,802.12 1,308,690,556.32 Total 1,360,603,802.12 1,308,690,556.32 (2) Current period movements (not including other financial instruments such as preferred shares/perpetual bonds 185 Infore Environment Technology Group Co., Ltd. 2023 Annual Report classified as financial liabilities) Whether Bonds Par value Coupon rate (%) Issuing date Maturity Amount outstanding default Infore convertible 100.00 [Note] 11/4/2020 6 years 1,476,189,600.00 No bonds Subtotal 100.00 1,476,189,600.00 (Continued) Funds Current Premium/ returned due Par value Current period Converted Bonds Opening balance period Discount to conversion Closing balance interest repayment to shares issuance amortization of bonds into shares Infore 11,808,996.0 1,360,603,802. convertible 1,308,690,556.32 13,440,998.27 50,289,412.70 8,157.13 12.02 2 12 bonds 11,808,996.0 1,360,603,802. Subtotal 1,308,690,556.32 13,440,998.27 50,289,412.70 8,157.13 12.02 2 12 Note: The coupon rate is 0.20% in the first year, 0.50% in the second year, 0.80% in the third year, 1.50% in the fourth year, 1.80% in the fifth year and 2.00% in the sixth year. (3) Converting conditions and time of convertible bonds Under the “Approval of the Public Offering of Convertible Bonds by Infore Environment Technology Group Co., Ltd.” issued by China Securities Regulatory Commission (Zheng Jian Xu Ke [2020] 2219) dated September 10, 2020, on November 4, 2020, the Company issued publicly convertible bonds of 1,476,189,600 yuan, with a total issuance of 14,761,896 pieces, and a term of 6 years. The coupon rate of the convertible bonds issued this time is 0.20% in the first year, 0.50% in the second year, 0.80% in the third year, 1.50% in the fourth year, 1.80% in the fifth year, and 2.00% in the sixth year. Interest of the convertible corporate bonds is paid once a year, and principal and the last year’s interest are paid at maturity. The Company will redeem all convertible bonds not converted by investors at the 110% of the par value (including the last year’s interest) within 5 trading days upon maturity of the convertible bonds issued this time. The duration of the convertible bonds issued this time is 6 years from the date of issuance, that is, from November 4, 2020 to November 3, 2026. The initial conversion price of the convertible bonds issued this time is 8.31 yuan/share; the conversion period of the convertible bonds issued this time starts from the first trading day (May 10, 2021) after the expiration of six months from the end date of the issuance on November 10, 2020 to the maturity date of the convertible bonds (November 3, 2026). As of December 31, 2023, a total of 1,389 Infore convertible bonds had been converted to the Company’s ordinary A shares, with a total of 16,944 shares converted. In the current period, capital reserve (share premium) of 8,673.60 yuan was recognized at the difference between the carrying amount of the convertible bonds actually converted and other equity instruments and share capital increased due to actual conversion of bonds into shares. 36. Lease liabilities Items Closing balance Opening balance 186 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Closing balance Opening balance Unpaid lease payments 17,036,813.59 24,948,023.12 Less: Unrecognized financing expenses 866,022.83 1,692,398.82 Total 16,170,790.76 23,255,624.30 37. Long-term payables (1) Details Items Closing balance Opening balance Long-term payables 15,173,333.32 Special payables 287,776,139.63 315,735,814.91 Total 302,949,472.95 315,735,814.91 (2) Long-term payables Items Closing balance Opening balance Factoring funds payable 15,173,333.32 Subtotal 15,173,333.32 (3) Special payables Items Opening balance Increase Decrease Closing balance Reasons for balance Special funds for treasury Funds from conversion of 3,000,000.00 3,000,000.00 bond projects treasury bonds into loans. Special funds for Jiayu Special government funds 176,015,774.58 9,475,977.00 27,203,971.75 158,287,779.83 Sewage Treatment Project for PPP projects. Special funds for Tongshan Special government funds 136,720,040.33 3,144,000.00 13,375,680.53 126,488,359.80 Sewage Treatment Project for PPP projects. Subtotal 315,735,814.91 12,619,977.00 40,579,652.28 287,776,139.63 38. Provisions Items Closing balance Opening balance Reasons for balance Guarantee for buyer’s Credit guarantees 1,994,511.41 4,575,049.22 credit Total 1,994,511.41 4,575,049.22 39. Deferred income (1) Details Opening Items Increase Decrease Closing balance Reasons for balance balance Government Government grants 120,890,710.04 3,994,300.00 9,544,515.62 115,340,494.42 grants related to assets Total 120,890,710.04 3,994,300.00 9,544,515.62 115,340,494.42 (2) Other remarks 187 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Please refer to section VIII (II) of notes to the financial statements for details on government grants included into profit or loss. 40. Other non-current liabilities Items Closing balance Opening balance Central special construction funds 8,148,148.14 8,333,333.33 Total 8,148,148.14 8,333,333.33 41. Share capital (1) Details Movements Items Opening balance Conversion of Closing balance Issue of new Bonus reserve to Others Subtotal shares shares shares Total shares 3,179,505,559.00 1,111.00 1,111.00 3,179,506,670.00 (2) Other remarks The Company converted convertible corporate bonds with par value of 9,000 yuan into the Company’s ordinary A shares of 1,111 shares, with capital premium (share premium) recognized at 8,673.60 yuan. 42. Other equity instruments (1) Please refer to section V (I) 35 of notes to financial statements for basic information of convertible corporate bonds outstanding at the balance sheet date. (2) Current period movements of financial instruments such as preferred shares or perpetual bonds outstanding at the balance sheet date Opening balance Increase Decrease Closing balance Items Carrying Carrying Quantity Carrying amount Quantity Quantity Quantity Carrying amount amount amount Convertible corporate 14,760,597 266,916,341.80 90 1,627.47 14,760,507 266,914,714.33 bonds Total 14,760,597 266,916,341.80 90 1,627.47 14,760,507 266,914,714.33 Note: As of December 31, 2023, convertible corporate bonds with par value of 9,000 yuan had been converted into ordinary A shares, with other equity instruments decreased by 1,627.47 yuan accordingly. 43. Capital reserve (1) Details Items Opening balance Increase Decrease Closing balance Capital premium (share 9,604,610,324.24 164,826.05 1,277,359.26 9,603,497,791.03 premium) Other capital reserve 57,900,930.24 57,900,930.24 188 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Opening balance Increase Decrease Closing balance Total 9,662,511,254.48 164,826.05 1,277,359.26 9,661,398,721.27 (2) Other remarks 1) Current increase of capital premium (share premium) was mainly due to: a. the conversion of convertible corporate bonds with par value of 9,000 yuan into the Company’s ordinary A shares of 1,111 shares, with capital premium (share premium) recognized at 8,673.60 yuan; b. the difference of 156,152.45 yuan between the reduced registered capital of 38,423,985.00 yuan of the subsidiary Xiantao Yinghe Environmental Protection Co., Ltd. based on the resolution of its shareholders’ meeting in December 2023 and the proportionate share in net assets continuously calculated from the acquisition date or combination date. 2) Current decrease of capital premium (share premium) was mainly due to the difference of 1,277,359.26 yuan between the consideration for acquisition of 4% of equity of the subsidiary Huaian Chenjie Environmental Engineering Co., Ltd. in June 2023 and the proportionate share in net assets continuously calculated from the acquisition date or combination date. 44. Treasury shares Items Opening balance Increase Decrease Closing balance Treasury shares 94,132,795.17 94,132,795.17 Total 94,132,795.17 94,132,795.17 45. Other comprehensive income (OCI) Current period cumulative Net OCI after tax Less: OCI previously Opening recognized but Items Less: OCI transferred to retained Closing balance balance previously Current period Less: Attributable to Attributable to earnings in the current recognized but cumulative before Income tax parent non-controlling period (attributable to transferred to income tax expenses company shareholders parent company after profit or loss in tax) the current period Items not to be reclassified -4,630,000.00 -4,630,000.00 subsequently to profit or loss Including: Changes in fair value of other equity -4,630,000.00 -4,630,000.00 instrument investments Total -4,630,000.00 -4,630,000.00 46. Special reserve Items Opening balance Increase Decrease Closing balance Work safety fund 8,608,843.62 8,608,843.62 Total 8,608,843.62 8,608,843.62 189 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 47. Surplus reserve (1) Details Items Opening balance Increase Decrease Closing balance Statutory surplus 315,124,767.92 63,892,252.27 379,017,020.19 reserve Total 315,124,767.92 63,892,252.27 379,017,020.19 (2) Other remarks Current increase of 63,892,252.27 yuan was due to the appropriation of statutory surplus reserve at 10% of net profit generated by the parent company in the current period. 48. Undistributed profit Current period Preceding period Items cumulative comparative Opening balance 3,963,306,890.06 3,874,934,971.69 Add: Net profit attributable to owners of the 498,383,730.00 418,794,179.13 parent company Less: Appropriation of statutory surplus reserve 63,892,252.27 18,369,884.36 Dividend payable on ordinary shares 348,363,541.68 312,052,376.40 Closing balance 4,049,434,826.11 3,963,306,890.06 (II) Notes to items of the consolidated income statement 1. Operating revenue/Operating cost (1) Details Current period cumulative Preceding period comparative Items Revenue Cost Revenue Cost Main operations 12,593,195,441.07 9,725,483,452.68 12,206,399,059.56 9,429,679,886.47 Other operations 37,855,526.27 19,998,635.24 49,593,878.86 39,830,944.80 Total 12,631,050,967.34 9,745,482,087.92 12,255,992,938.42 9,469,510,831.27 Including: Revenue from 12,627,471,564.83 9,743,083,609.80 12,253,033,163.91 9,467,213,554.61 contracts with customers (2) Breakdown of revenue 1) Breakdown of revenue from contracts with customers by goods or services Current period cumulative Preceding period comparative Items Revenue Cost Revenue Cost Intelligent sanitation 10,715,122,532.51 8,366,738,029.63 10,242,746,845.76 8,023,297,059.91 Other businesses 1,912,349,032.32 1,376,345,580.17 2,010,286,318.15 1,443,916,494.70 Subtotal 12,627,471,564.83 9,743,083,609.80 12,253,033,163.91 9,467,213,554.61 190 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2) Breakdown of revenue from contracts with customers by operating regions Current period cumulative Preceding period comparative Items Revenue Cost Revenue Cost Domestic 12,580,574,554.53 9,709,744,510.62 12,234,221,595.20 9,451,301,571.85 Overseas 46,897,010.30 33,339,099.18 18,811,568.71 15,911,982.76 Subtotal 12,627,471,564.83 9,743,083,609.80 12,253,033,163.91 9,467,213,554.61 3) Breakdown of revenue from contracts with customers by time of transferring goods or rendering services Items Current period cumulative Preceding period comparative Recognized at a point in time 5,853,953,110.98 6,705,692,980.49 Recognized over time 6,773,518,453.85 5,547,340,183.42 Subtotal 12,627,471,564.83 12,253,033,163.91 2. Taxes and surcharges Items Current period cumulative Preceding period comparative Urban maintenance and 19,347,236.29 27,686,507.84 construction tax Education surcharge 9,237,216.76 12,075,573.31 Housing property tax 16,056,747.97 9,759,719.80 Land use tax 9,274,170.36 8,282,959.61 Local education surcharge 4,897,252.61 7,807,835.47 Stamp duty 9,430,645.45 7,540,686.80 Vehicle and vessel use tax 1,791,754.71 1,481,678.21 Environmental protection tax 22,817.10 50,061.01 Others 33,747.82 Total 70,091,589.07 74,685,022.05 3. Selling expenses Items Current period cumulative Preceding period comparative Employee benefits 335,609,966.84 340,290,000.65 Marketing expenses and 265,269,393.83 221,534,865.64 agency fees Business entertainment 48,124,800.71 47,320,675.86 expenses Office expenses 44,084,358.46 39,159,155.49 Expenses for tendering and 23,714,813.45 33,479,432.56 bidding Vehicle usage fees 26,437,459.78 27,886,649.81 Business travelling expenses 24,235,527.24 22,889,790.05 Depreciation and amortization 2,564,157.65 8,871,711.08 191 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Current period cumulative Preceding period comparative After-sales service expenses 9,468,198.50 8,427,436.37 Share-based payments 789,290.58 Others 14,826,275.56 12,321,839.86 Total 794,334,952.02 762,970,847.95 4. Administrative expenses Items Current period cumulative Preceding period comparative Employee benefits 405,851,793.11 325,720,014.09 Depreciation and amortization 96,124,324.58 92,377,339.97 Office expenses 55,346,741.42 49,435,534.41 Business entertainment 57,420,506.69 47,088,220.88 expenses Agency consulting fees 49,770,146.66 38,554,467.66 Vehicle usage fees 11,285,144.00 15,346,887.97 Business travelling expenses 12,998,629.92 9,732,527.31 Repair fees 3,476,335.42 2,863,363.74 Share-based payments 1,905,828.75 Others 33,885,615.65 26,577,495.45 Total 726,159,237.45 609,601,680.23 5. R&D expenses Items Current period cumulative Preceding period comparative Employee benefits 246,795,666.58 248,961,357.20 Direct inputs 34,669,099.04 40,506,455.35 Other expenses 62,565,473.71 50,336,437.55 Share-based payments 971,457.24 Total 344,030,239.33 340,775,707.34 6. Financial expenses Items Current period cumulative Preceding period comparative Interest expenses 156,635,777.38 170,568,834.86 Interest income -99,626,077.56 -86,389,951.68 Gains and losses on foreign -1,587,128.38 -3,056,908.33 exchange Others 19,898,513.43 20,717,449.06 Total 75,321,084.87 101,839,423.91 192 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 7. Other income Amount included in Current period Preceding period Items non-recurring profit cumulative comparative or loss Government grants related 9,544,515.62 8,085,032.61 2,128,328.14 to assets Government grants related 69,450,144.75 93,590,019.49 50,838,222.61 to income Refund of handling fees for withholding individual 424,735.51 429,102.26 income tax VAT extra deductions 40,567,420.41 17,460,524.12 Total 119,986,816.29 119,564,678.48 52,966,550.75 8. Investment income Items Current period cumulative Preceding period comparative Investment income from long- term equity investments under 4,960,692.79 8,548,481.77 equity method Gains from fair value remeasurement at the time of 51,896,314.25 obtaining control Investment income from 12,111,406.99 19,091,108.25 financial products Performance compensation -50,000,000.00 Losses from debt restructuring -3,130,560.92 -5,380,200.00 Gains from non-recurse factoring of accounts -64,671,667.09 -65,918,373.23 receivable Others -867,077.69 296,543.34 Total -51,597,205.92 -41,466,125.62 9. Credit impairment loss Items Current period cumulative Preceding period comparative Bad debts -218,933,128.92 -103,391,907.05 Credit guarantee loss 2,580,537.81 -1,445,255.37 Total -216,352,591.11 -104,837,162.42 10. Assets impairment loss Items Current period cumulative Preceding period comparative Inventory write-down loss -15,842,992.24 -15,053,708.82 Impairment loss of goodwill -94,237,304.12 -296,010,591.93 Impairment loss of other non- -12,686,044.85 2,080,536.79 current assets Impairment loss of contract 5,615,945.43 -1,192,023.34 193 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Current period cumulative Preceding period comparative assets Impairment loss of -6,240,373.24 -2,822,707.36 development expenditures Total -123,390,769.02 -312,998,494.66 11. Gains on asset disposal Amount included in Current period Preceding period Items non-recurring profit or cumulative comparative loss Gains on disposal of fixed -661,936.68 301,250.20 -661,936.68 assets Gains on disposal of -529,889.14 10,073.29 -529,889.14 intangible assets Gains on disposal of right- 221,473.23 of-use assets Total -1,191,825.82 532,796.72 -1,191,825.82 12. Non-operating revenue Amount included in Current period Preceding period Items non-recurring profit cumulative comparative or loss Gains on damage or retirement of non-current 428,721.52 8,797.04 428,721.52 assets Penalty and confiscatory 14,363,825.53 9,298,430.37 14,363,825.53 income Others 5,054,158.55 3,491,008.49 5,054,158.55 Total 19,846,705.60 12,798,235.90 19,846,705.60 13. Non-operating expenditures Amount included in Current period Preceding period Items non-recurring profit cumulative comparative or loss Donation expenditures 1,837,168.20 2,302,553.92 1,837,168.20 Losses on damage or retirement of non-current 2,654,891.96 2,913,020.22 2,654,891.96 assets Special funds for local water 490,964.79 409,764.78 conservancy construction Penalty and confiscatory 6,546,510.22 6,695,894.28 6,546,510.22 expenses Others 1,501,531.02 1,626,755.62 1,501,531.02 Total 13,031,066.19 13,947,988.82 12,540,101.40 14. Income tax expenses (1) Details 194 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Current period cumulative Preceding period comparative Current period income tax 106,216,873.13 110,132,217.76 expenses Deferred income tax expenses -8,859,221.68 -13,168,974.08 Total 97,357,651.45 96,963,243.68 (2) Reconciliation of accounting profit to income tax expenses Items Current period cumulative Preceding period comparative Profit before tax 609,901,840.51 556,255,365.25 Income tax expenses based on tax rate applicable to the parent 152,475,460.13 139,063,841.31 company Effect of different tax rate -108,201,596.08 -14,174,894.59 applicable to subsidiaries Effect of prior income tax 10,458,266.74 2,488,907.40 reconciliation Effect of non-taxable income -1,995,800.61 -10,408,754.85 Effect of non-deductible costs, 17,657,279.37 10,640,861.01 expenses and losses Effect of utilization of deductible losses not previously -13,171,099.82 -3,001,651.62 recognized as deferred tax assets Effect of deducible temporary differences or deductible losses 86,948,728.47 20,910,057.40 not recognized as deferred tax assets in the current period Effect of extra deduction -46,798,282.51 -49,866,353.99 Difference between deferred and -15,304.24 1,311,231.61 current income tax rates Income tax expenses 97,357,651.45 96,963,243.68 15. Other comprehensive income, net of income tax Please refer to section V (I) 45 of notes to the financial statements for details. (III) Notes to items of the consolidated cash flow statement 1. Other cash receipts or payments related to operating activities, investing activities and financing activities (1) Other cash receipts related to operating activities Items Current period cumulative Preceding period comparative Receipts of deposits for notes, letters of credit and letters of 167,737,972.76 385,183,093.29 guarantee Receipts of government grants 58,010,336.36 112,106,818.35 Receipts of security deposits 111,742,962.57 109,630,599.89 Recovery of petty cash and temporary advance payment 99,329,855.08 76,785,785.58 receivable 195 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Current period cumulative Preceding period comparative Temporary receipts payable 180,665,554.52 152,028,816.71 Receipts of interest income 76,788,792.42 48,011,644.19 Receipts of factoring payment and 1,066,072,685.44 1,128,899,220.36 principal of finance lease Receipt of principal and interest of 67,760,782.25 time deposits Others 20,325,575.31 16,659,857.72 Total 1,780,673,734.46 2,097,066,618.34 (2) Other cash payments related to operating activities Items Current period cumulative Preceding period comparative Payments for deposits for notes, letters of credit and letters of 285,090,684.20 130,498,826.74 guarantee Operating period expenses 731,115,039.63 807,025,083.75 Payments for security deposits 63,056,515.55 64,966,788.26 Payments for petty cash and temporary advance payment 60,967,713.23 120,806,495.16 receivable Payments for factoring and 719,746,793.47 1,181,778,621.41 principal of finance lease Time deposits 230,000,000.00 Temporary receipts payable 94,331,472.76 80,648,317.53 Others 14,644,423.90 10,338,831.68 Total 2,198,952,642.74 2,396,062,964.53 (3) Other cash receipts related to investing activities Items Current period cumulative Preceding period comparative Redemption of financial products 1,638,150,000.00 5,398,900,000.00 Receipts of special payables 12,619,977.00 Receipts of principal and interest 2,961,000.00 of call loans Total 1,650,769,977.00 5,401,861,000.00 (4) Other cash payments related to investing activities Items Current period cumulative Preceding period comparative Purchase of financial products 1,638,150,000.00 5,398,900,000.00 Recovery of special payables 3,000,000.00 Cash outflows from disposal of 1,785,617.97 subsidiaries Total 1,642,935,617.97 5,398,900,000.00 196 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (5) Other cash receipts related to financing activities Items Current period cumulative Preceding period comparative Receipts of call loans 48,692,000.00 44,250,000.00 Receipts of payments for 228,995,320.75 employee stock ownership plan Recourse factoring of accounts 17,309,890.84 receivable Total 48,692,000.00 290,555,211.59 (6) Other cash payments related to financing activities Items Current period cumulative Preceding period comparative Return of call loans 32,418,130.98 57,303,692.00 Payments for rents 10,331,775.89 6,227,752.76 Purchase of non-controlling 2,000,000.00 interest Payments for factoring service 14,049,209.58 fees and handling fees Payments for employee stock 180,112,670.02 ownership plan Prepaid IPO listing expenses 5,703,500.00 Total 44,749,906.87 263,396,824.36 2. Supplementary information to the cash flow statement Current period Preceding period Supplementary information cumulative comparative (1) Reconciliation of net profit to cash flows from operating activities: Net profit 512,544,189.06 459,292,121.57 Add: Provision for assets impairment 339,743,360.13 417,835,657.08 Depreciation of fixed assets, oil and gas assets, 278,253,101.81 217,634,741.39 productive biological assets Depreciation of right-of-use assets 8,706,270.90 7,064,171.89 Amortization of intangible assets 508,294,636.17 458,736,681.20 Amortization of long-term prepayments 12,737,945.56 8,520,526.60 Losses on disposal of fixed assets, intangible 1,104,586.11 -614,542.02 assets and other long-term assets (Less: gains) Fixed assets retirement loss (Less: gains) 2,226,170.44 2,904,223.18 Losses on changes in fair value (Less: gains) Financial expenses (Less: gains) 156,286,924.35 177,688,052.22 Investment losses (Less: gains) -17,097,464.58 -24,239,932.54 Decrease of deferred tax assets (Less: increase) -1,871,173.45 -4,814,568.19 Increase of deferred tax liabilities (Less: -6,988,048.23 -8,354,405.89 decrease) 197 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Current period Preceding period Supplementary information cumulative comparative Decrease of inventories (Less: increase) -115,741,461.68 226,633,956.56 Decrease of operating receivables (Less: -217,119,189.86 -409,725,335.43 increase) Increase of operating payables (Less: decrease) -75,523,337.24 129,881,870.69 Others 4,039,069.40 Net cash flows from operating activities 1,385,556,509.49 1,662,482,287.71 (2) Significant investing and financing activities not related to cash receipts and payments: Conversion of debt into capital Convertible bonds due within one year Fixed assets leased in under finance leases (3) Net changes in cash and cash equivalents: Cash at the end of the period 3,916,145,254.54 4,580,665,245.99 Less: Cash at the beginning of the period 4,580,665,245.99 4,118,746,885.72 Add: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase of cash and cash equivalents -664,519,991.45 461,918,360.27 3. Composition of cash and cash equivalents (1) Details Items Closing balance Opening balance 1) Cash 3,916,145,254.54 4,580,665,245.99 Including: Cash on hand 310,688.91 84,414.54 Cash in bank on demand for payment 3,914,780,983.13 4,580,210,453.03 Other cash and bank balances on demand 1,053,582.50 370,378.42 for payment Central bank deposit on demand for payment Deposit in other banks Loans to other banks 2) Cash equivalents Including: Bond investments maturing within three months 3) Cash and cash equivalents at the end of the period 3,916,145,254.54 4,580,665,245.99 Including: Cash and cash equivalents of parent company or subsidiaries with use restrictions (2) Cash and cash equivalents with use restrictions Reasons for use restrictions Items Closing balance Opening balance and for considered as cash and cash equivalents 198 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Reasons for use restrictions Items Closing balance Opening balance and for considered as cash and cash equivalents Raised funds 77,431,277.37 115,338,436.21 Raised funds Business funds specifically used for 22,851,951.00 Special funds project payments Subtotal 100,283,228.37 115,338,436.21 (3) Cash and bank balances not considered as cash and cash equivalents Reasons for not considered as Items Closing balance Opening balance cash and cash equivalents Deposits for bank Unable to be withdrawn on 179,001,533.41 46,878,240.34 acceptance demand Deposits for letters of Unable to be withdrawn on 77,546,493.49 87,619,095.60 guarantee demand Unable to be withdrawn on Engineering deposits 929,734.93 927,865.56 demand Unable to be withdrawn on ETC deposits 3,000.00 3,000.00 demand Deposits for land Unable to be withdrawn on 1,003,098.32 1,000,832.05 reclamation demand Deposits for buyer’s Unable to be withdrawn on 861,924.65 901,432.50 credit demand Engineering escrow Unable to be withdrawn on accounts that are not 154,141.05 9,107,818.42 demand available for separate use Frozen bank deposits due Unable to be withdrawn on 5,100,869.89 1,100,000.00 to lawsuits demand Time deposits and Unable to be withdrawn on 230,340,333.33 interests demand Unable to be withdrawn on Others 290,200.17 demand Subtotal 495,231,329.24 147,538,284.47 4. Changes in liabilities related to financing activities Increase Decrease Items Opening balance Changes in non- Changes in non- Closing balance Changes in cash Changes in cash cash cash Short-term 440,103,105.44 599,206,768.24 9,696,553.27 922,066,571.69 126,939,855.26 borrowings Dividend payable 355,986,223.08 355,986,223.08 Other payables 29,093,805.32 21,380,000.00 2,040,387.09 28,714,555.94 23,799,636.47 Long-term borrowings (including long- 2,474,887,976.24 831,248,989.56 93,048,642.05 1,127,518,708.67 2,271,666,899.18 term borrowings due within one year) Bonds payable (including bonds 1,308,690,556.32 63,722,253.84 11,809,008.04 1,360,603,802.12 payable due within one year) 199 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Increase Decrease Items Opening balance Changes in non- Changes in non- Closing balance Changes in cash Changes in cash cash cash Lease liabilities (including lease 31,093,459.07 4,126,126.53 10,248,232.04 187,165.96 24,784,187.60 liabilities due within one year) Long-term payables (including long-term payables 27,312,000.00 2,703,662.62 4,175,192.30 1,563,137.00 24,277,333.32 due within one year) Subtotal 4,283,868,902.39 1,479,147,757.80 531,323,848.48 2,460,518,491.76 1,750,302.96 3,832,071,713.95 200 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 5. Significant activities not involving cash receipts and payments Please refer to section V (III) 4 of notes to the financial statements for details on significant investing and financing activities not involving cash receipts and payments. (IV) Others 1. Monetary items in foreign currencies Closing balance in RMB equivalent at Items Exchange rate foreign currencies the end of the period Cash and bank balances 38,281,796.98 Including: USD 1,299,398.42 7.0827 9,203,249.19 EUR 3,577,091.77 7.8592 28,113,079.64 HKD 1,065,402.95 0.9062 965,468.15 Accounts receivable 17,855,293.19 Including: USD 164.00 7.0827 1,161.56 EUR 2,271,749.24 7.8592 17,854,131.63 2. Leases (1) The Company as lessee 1) Please refer to section V (I) 17 of notes to the financial statements for details on right-of-use assets. 2) Please refer to section III (XXXII) of notes to the financial statements for details on the Company’s accounting policies on short-term leases and leases for which the underlying asset is of low value. The amounts of short-term leases and low-value asset leases included into profit or loss are as follows: Items Current period cumulative Preceding period comparative Expense relating to short-term 19,527,703.71 10,884,849.01 leases Expense relating to leases of low- value assets (excluding short-term leases) Total 19,527,703.71 10,884,849.01 3) Profit or loss and cash flows related to leases Items Current period cumulative Preceding period comparative Interest expenses on lease 1,190,325.15 1,337,799.45 liabilities Variable lease payments included in profit or loss but not included in the measurement of lease liabilities Income from subleasing right-of- use assets Total cash outflows related to 29,859,479.60 17,112,601.77 leases Gains or losses arising from sale 201 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Current period cumulative Preceding period comparative and leaseback transactions 4) Please refer to section IX (II) of notes to the financial statements for details on maturity analysis of lease liabilities and related liquidity risk management. (2) The Company as lessor 1) Operating lease a. Lease income Items Current period cumulative Preceding period comparative Lease income 3,249,127.28 1,855,150.51 Including: Income relating to variable lease payments not included in the measurement of the lease liabilities b. Assets leased out under operating leases Items Closing balance December 31, 2022 Buildings and structures 23,875,232.89 27,105,435.03 Subtotal 23,875,232.89 27,105,435.03 Please refer to section V (I) 15 of notes to the financial statements for details on fixed assets leased out under operating leases. c. Undiscounted lease payments to be received arising from non-cancellable leases based on the lease contract signed with lessee Remaining years Closing balance December 31, 2022 Within 1 year 104,738.00 157,112.00 1-2 years 104,738.00 157,112.00 2-3 years 104,738.00 157,112.00 3-4 years 104,738.00 157,112.00 4-5 years 104,738.00 157,112.00 Over 5 years 157,112.00 Total 523,690.00 942,672.00 2) Finance lease a. Profit or loss related to finance lease Items Current period cumulative Preceding period comparative Finance income on the net 2,245,842.84 5,464,955.41 investment in the lease 202 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Income relating to variable lease payments not included in the measurement of the net investment in the lease b. Reconciliation of undiscounted lease payments to net investment in the lease Items Closing balance December 31, 2022 Undiscounted lease payments 68,248,638.70 99,676,989.33 Less: Unrealized finance income 4,679,168.24 5,140,906.34 relating to lease payments Add: Present value of unguaranteed residual value Net investment in the lease 63,569,470.46 94,536,082.99 c. Undiscounted lease payments to be received arising from non-cancellable leases based on the lease contract signed with lessee Remaining years Closing balance December 31, 2022 Within 1 year 46,826,104.16 58,791,768.45 1-2 years 19,550,334.54 32,869,315.86 2-3 years 1,497,760.00 6,143,705.02 3-4 years 374,440.00 1,497,760.00 4-5 years 374,440.00 Total 68,248,638.70 99,676,989.33 VI. R&D costs (I) R&D costs Items Current period cumulative Preceding period comparative Employee benefits 252,327,439.92 266,224,944.76 Direct inputs 37,083,931.61 44,582,928.01 Other expenses 63,438,534.25 52,458,233.21 Share-based payment 971,457.24 Total 352,849,905.78 364,237,563.22 Including: R&D costs to be 344,030,239.33 340,775,707.34 expensed R&D costs to be capitalized 8,819,666.45 23,461,855.88 (II) Development expenditures 1. Changes in development expenditures Increase Decrease Opening Internal Items Recognized as Transferred out Closing balance balance development Others Others intangible assets into profit or loss expenditures 203 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Increase Decrease Opening Internal Items Recognized as Transferred out Closing balance balance development Others Others intangible assets into profit or loss expenditures R&D of indoor self-driving 765,552.19 765,552.19 operating system Intelligent barreled garbage 662,327.79 662,327.79 transfer machine Indoor sweeping robot 870,662.83 870,662.83 Deep cleaning machine 524,164.55 524,164.55 Research on wire control technology for small self- 4,115,027.48 120,653.35 4,235,680.83 made chassis R&D of outdoor self- driving operating system 5,758,682.29 826,253.18 6,584,935.47 (Stage 2) Research on aerodynamic noise control and pneumatic 2,351,791.55 85,060.50 2,436,852.05 conveying energy-saving technology Pure electric road sweeper 1,565,839.40 1,565,839.40 Sanitation robot IoT 3,351,117.77 248,957.47 3,600,075.24 platform Economical garbage 225,467.15 225,467.15 transfer truck Development of cleaning robot based on autonomous 1,325,659.13 734,617.23 2,060,276.36 unmanned system Special funds for S2000 2,442,440.66 1,997,898.12 4,440,338.78 series top-selling products Special funds for S18 series 4,283,010.42 3,193,424.27 7,476,434.69 top-selling product project Brand new first generation economical version of 470,115.54 1,612,802.33 2,082,917.87 rolling sweeper Indoor floor washing robot 1,763,287.72 1,763,287.72 Pure electric small garbage 1,024,782.18 1,024,782.18 cleaning machine Pure electric sidewalk 1,592,468.75 1,592,468.75 sweeper Pure electric garbage 68,528.04 68,528.04 collector Total 33,160,925.44 8,819,666.45 32,917,511.29 9,063,080.60 2. Impairment of development expenditures (1) Changes in provision for impairment Increase Decrease Opening Items Disposal/ Closing balance balance Accrual Others Others Scrapping R&D of indoor self-driving 765,552.19 765,552.19 operating system Intelligent barreled garbage 662,327.79 662,327.79 transfer machine Indoor sweeping robot 870,662.83 870,662.83 Deep cleaning machine 524,164.55 524,164.55 204 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Increase Decrease Opening Items Disposal/ Closing balance balance Accrual Others Others Scrapping Pure electric road sweeper 1,565,839.40 1,565,839.40 Economical garbage 225,467.15 225,467.15 transfer truck Indoor floor washing robot 1,763,287.72 1,763,287.72 Pure electric small garbage 1,024,782.18 1,024,782.18 cleaning machine Pure electric sidewalk 1,592,468.75 1,592,468.75 sweeper Pure electric garbage 68,528.04 68,528.04 collector Subtotal 2,822,707.36 6,240,373.24 9,063,080.60 (2) Impairment test on development expenditures Recoverable Provision for Items Carrying amount amount impairment R&D of indoor self-driving operating system Intelligent barreled garbage transfer machine Indoor sweeping robot Deep cleaning machine Pure electric road sweeper 1,565,839.40 1,565,839.40 Economical garbage transfer truck 225,467.15 225,467.15 Indoor floor washing robot 1,763,287.72 1,763,287.72 Pure electric small garbage 1,024,782.18 1,024,782.18 cleaning machine Pure electric sidewalk sweeper 1,592,468.75 1,592,468.75 Pure electric garbage collector 68,528.04 68,528.04 Subtotal 6,240,373.24 6,240,373.24 (Continued) Items Determination method of fair value and costs of disposal Full provision for impairment is made as the Company R&D of indoor self-driving terminates R&D of the project due to its R&D resource operating system direction adjustment and changes of market demand. Full provision for impairment is made as the Company Intelligent barreled garbage terminates R&D of the project due to its R&D resource transfer machine direction adjustment and changes of market demand. Full provision for impairment is made as the Company Indoor sweeping robot terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. Full provision for impairment is made as the Company Deep cleaning machine terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. Full provision for impairment is made as the Company Pure electric road sweeper terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. 205 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Determination method of fair value and costs of disposal Full provision for impairment is made as the Company Economical garbage transfer truck terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. Full provision for impairment is made as the Company Indoor floor washing robot terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. Full provision for impairment is made as the Company Pure electric small garbage terminates R&D of the project due to its R&D resource cleaning machine direction adjustment and changes of market demand. Full provision for impairment is made as the Company Pure electric sidewalk sweeper terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. Full provision for impairment is made as the Company Pure electric garbage collector terminates R&D of the project due to its R&D resource direction adjustment and changes of market demand. Subtotal VII. Interest in other entities (I) Composition of the consolidation scope 1. The Company has brought 278 subsidiaries including Zoomlion Environmental Company, Shangfeng Industrial Company, Infore Technology Company, and Green Oriental Company into the consolidation scope. 2. Basic information of significant subsidiaries Main operating Holding proportion (%) Subsidiaries Registered capital place and place Business nature Acquisition method of registration Direct Indirect Fan equipment Business combination Shangfeng Industrial Shaoxing, 109.21 million yuan manufacturing 60.20 not under common Company Zhejiang and others control Environmental Business combination Green Oriental Shenzheng, monitoring and 150 million yuan 70.00 not under common Company Guangdong solid waste control disposal Environmental Business combination monitoring and Funan Company 87.50 million yuan Funan, Anhui 70.00 not under common solid waste control disposal Environmental Business combination Xiantao, monitoring and Xiantao Company 125 million yuan 70.00 not under common Hubei solid waste control disposal Environmental Business combination Shouxian, monitoring and Shouxian Company 87.50 million yuan 70.00 not under common Anhui solid waste control disposal Environmental Xiantao Yinghe Xiantao, monitoring and Environmental 100.14 million yuan 70.32 5.35 Set up Hubei solid waste Protection Co., Ltd. disposal Environmental Infore Technology Foshan, monitoring and 110 million yuan 100.00 Set up Company Guangdong solid waste disposal Foshan Shunhe Environmental Business combination Foshan, Environmental 300 million yuan monitoring and 100.00 not under common Guangdong Protection Co., Ltd. solid waste control 206 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Main operating Holding proportion (%) Subsidiaries Registered capital place and place Business nature Acquisition method of registration Direct Indirect disposal Environmental Business combination Huaqingyuan Foshan, monitoring and 12 million yuan 100.00 not under common Company Guangdong solid waste control disposal Foshan Shunde Environmental Business combination District Huaying Foshan, monitoring and 3 million yuan 100.00 not under common Environmental Water Guangdong solid waste control Co., Ltd. disposal Foshan Shunde Environmental Business combination District Yuanrun Foshan, monitoring and 12 million yuan 100.00 not under common Water Environmental Guangdong solid waste control Protection Co., Ltd. disposal Foshan Shunde Environmental Business combination Huabo Foshan, monitoring and 1 million yuan 100.00 not under common Environmental Water Guangdong solid waste control Co., Ltd. disposal Zoomlion Changsha, Smart city Business combination Environmental 2,351.53 million yuan 100.00 Hunan services under common control Company Changsha Zoomlion Changgao Changsha, Smart city 30 million yuan 100.00 Set up Environmental Hunan services Industry Co., Ltd. Fujian Nan’an Yinglian Urban Nan’an, Smart city 30 million yuan 80.00 Set up Environmental Fujian services Service Co., Ltd. Zhangjiajie Yinglian Zhangjiajie, Smart city Environmental 8 million yuan 90.00 Set up Hunan services Management Co., Ltd. Cili County Zoomlion Huabao Smart city 6 million yuan Cili, Hunan 60.00 Set up Environmental services Industry Co., Ltd. Hanshou Zoomlion Hanshou, Smart city Environmental 13 million yuan 90.00 Set up Hunan services Industry Co., Ltd. Longhui County Zoomlion Longhui, Smart city 1 million yuan 100.00 Set up Environmental Hunan services Industry Co., Ltd. Shimen Zoomlion Shimen, Smart city Environmental 15 million yuan 90.00 Set up Hunan services Industry Co., Ltd. Ningbo Infore Ningbo, Finance Lease Co., USD 72.60 million Finance lease 99.31 0.69 Set up Zhejiang Ltd. (II) Business combination not under common control 1. Business combination not under common control in the current period Equity Equity Proportion of equity Equity acquisition Acquirees Acquisition date acquisition date acquisition cost acquired (%) method Hubei Yingling Testing May 18, 2023 156,438.75 100.00 Acquisition May 18, 2023 Technology Service Co., Ltd. (Continued) Acquiree’s Acquiree’s net Acquiree’s cash flows from acquisition date to Determination income from profit from period end Acquirees basis for acquisition date acquisition date acquisition date Net inflows Net inflows Net inflows to period end to period end 207 Infore Environment Technology Group Co., Ltd. 2023 Annual Report from operating from investing from financing activities activities activities Hubei Yingling Testing Transfer of 86,770.44 -812,968.37 -87,733.23 Technology Service Co., Ltd. control 2. Combination costs and goodwill Hubei Yingling Testing Technology Service Items Co., Ltd. Combination costs Cash 156,438.75 Total combination costs 156,438.75 Less: Share of fair value of net identifiable 156,438.75 assets acquired Goodwill/Balance of fair value of net identified assets acquired after deducting combination costs 3. Acquisition-date identifiable assets and liabilities of acquirees (1) Details Hubei Yingling Testing Technology Service Co., Ltd. Items Acquisition-date fair value Acquisition-date carrying amount Assets 410,344.64 410,344.64 Cash and bank balances 112,965.79 112,965.79 Accounts receivable 97,680.00 97,680.00 Advances paid 16,000.00 16,000.00 Other receivables 43,871.50 43,871.50 Fixed assets 82,327.35 82,327.35 Long-term prepayments 57,500.00 57,500.00 Liabilities 253,905.89 253,905.89 Accounts payable 104,920.44 104,920.44 Employee benefits 29,996.37 29,996.37 payable Tax payable 1,006.22 1,006.22 Other payables 117,982.86 117,982.86 Net assets 156,438.75 156,438.75 Net assets acquired 156,438.75 156,438.75 (2) Fair value determination method on identifiable assets and liabilities The carrying amount of assets and liabilities on the acquisition date of Hubei Yingling Testing Technology Service Co., Ltd. is taken as the fair value of identifiable assets and liabilities. 208 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (II) Disposal of subsidiaries One-time disposal leading to loss of control over a subsidiary Details Difference between disposal Equity Equity Determination basis consideration and net assets Equity disposal disposal Loss of control Subsidiaries disposal for loss of control attributable to the Company at consideration proportion date method date the consolidated financial (%) statements level Gucheng Yinglian Substantial Urban Environmental 500,000.00 100.00 Transfer 8/24/2023 -381,328.08 control transfer Service Co., Ltd. Zaozhuang Yinglian Substantial Urban Environmental 500,000.00 100.00 Transfer 3/1/2023 -7,097.77 control transfer Service Co., Ltd. Yichun Yinglian Substantial Urban Environmental 500,000.00 100.00 Transfer 8/8/2023 -235,810.55 control transfer Service Co., Ltd. Chongqing Yinglian Substantial City Sanitation 500,000.00 100.00 Transfer 12/6/2023 24,004.26 control transfer Service Co., Ltd. Huaibei Zhongfeng Substantial Urban Environmental 1.00 100.00 Transfer 9/13/2023 -215,560.78 control transfer Service Co., Ltd. (Continued) Changes in other Determination Proportion of Fair value of Gains/Losses on comprehensive Carrying amount method and major remaining remaining fair value income/equity related of remaining assumption on fair Subsidiaries equity at the equity at the remeasurement to former subsidiary’s equity at the loss value of remaining loss of control loss of control of remaining equity investment of control date equity at the loss of date (%) date equity transferred to control date investment income Gucheng Yinglian Urban Environmental Service Co., Ltd. Zaozhuang Yinglian Urban Environmental Service Co., Ltd. Yichun Yinglian Urban Environmental Service Co., Ltd. Chongqing Yinglian City Sanitation Service Co., Ltd. Huaibei Zhongfeng Urban Environmental Service Co., Ltd. (III) Changes in the consolidation scope due to other reasons 1. Entities brought into the consolidation scope Equity Equity Holding Entities acquisition Capital contribution acquisition date proportion (%) method Liaocheng Chiping District Yingsheng Environmental Set up 1/4/2023 100,000.00 100.00 Sanitation Service Co., Ltd. Jiangmen Lvying Urban Set up 2/3/2023 [Note] 100.00 Environmental Service Co., Ltd. Fuzhou Changle District Set up 2/8/2023 [Note] 100.00 Yingsheng Urban 209 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Equity Equity Holding Entities acquisition Capital contribution acquisition date proportion (%) method Environmental Service Co., Ltd. Chongqing Banan District Yinghe Urban Environmental Set up 2/17/2023 300,000.00 100.00 Service Co., Ltd. Guangzhou Yingtai Urban Set up 2/22/2023 [Note] 100.00 Management Service Co., Ltd. Foshan Shunde District Yingchuang Urban Set up 3/1/2023 2,300,000.00 100.00 Environmental Service Co., Ltd. Puning Honglian Environmental Set up 3/7/2023 [Note] 100.00 Service Co., Ltd. Hefei Yingsheng Urban Set up 3/15/2023 200,000.00 100.00 Environmental Service Co., Ltd. Fengyang Yinghe Environmental Sanitation Set up 3/21/2023 500,000.00 100.00 Management Co., Ltd. Sanya Lianying Urban Set up 3/22/2023 100,000.00 100.00 Environmental Service Co., Ltd. Fuzhou Yinghe Environmental Set up 4/11/2023 [Note] 60.00 Development Co., Ltd. Chuzhou Tongying Environmental Sanitation Set up 4/11/2023 500,000.00 100.00 Management Co., Ltd. Yongxin Yinghe Environmental Sanitation Management Co., Set up 4/17/2023 500,000.00 100.00 Ltd. Lianjiang Lianying Urban Set up 4/21/2023 2,100,000.00 100.00 Environmental Service Co., Ltd. Guangzhou Yingzhi Urban Environmental Sanitation Set up 5/5/2023 [Note] 100.00 Service Co., Ltd. Shenzhen Longgang Yinglian Set up 6/2/2023 [Note] 100.00 Environmental Service Co., Ltd. Shenzhen Yinglian Afforest Set up 6/5/2023 [Note] 100.00 Engineering Co., Ltd. Yangjiang Yinghe Urban Set up 6/8/2023 10,000,000.00 100.00 Environmental Service Co., Ltd. Renshou Yinghe Urban and Rural Sanitation Service Co., Set up 6/13/2023 2,000,000.00 100.00 Ltd. Chibi Lianying Environmental Sanitation Management Co., Set up 6/27/2023 14,662,100.00 100.00 Ltd. Shen Zhen Longgang District Set up 7/5/2023 [Note] 100.00 Yingji City Service Co., Ltd. Wuyi Yinghe Environmental Sanitation Management Co., Set up 7/18/2023 [Note] 100.00 Ltd. Xuchang Jian’an District Tongying Environmental Set up 7/18/2023 100,000.00 100.00 Sanitation Management Co., Ltd. 210 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Equity Equity Holding Entities acquisition Capital contribution acquisition date proportion (%) method Foshan Shunde District Lianying Urban Environmental Set up 7/20/2023 1,770,000.00 59.00 Service Co., Ltd. Taizhou Yinghe Environmental Sanitation Management Co., Set up 7/24/2023 [Note] 100.00 Ltd. Changsha Yinghe Environmental Sanitation Set up 7/24/2023 500,000.00 100.00 Management Co., Ltd. Huichang Yingmao Environmental Management Set up 7/25/2023 6,500,000.00 65.00 Co., Ltd. Tangshan Yinglian Environmental Management Set up 7/26/2023 [Note] 100.00 Co., Ltd. Yongfeng Yinghe Environmental Sanitation Set up 7/27/2023 500,000.00 100.00 Management Co., Ltd. Nanjing Yinglian Environmental Technology Co., Set up 8/1/2023 1,000,000.00 100.00 Ltd. Suzhou Wujiang Yinghe Environmental Sanitation Set up 8/4/2023 200,000.00 100.00 Management Co., Ltd. Xiajiang Yinghe Environmental Sanitation Management Co., Set up 8/14/2023 500,000.00 100.00 Ltd. Longquan Tongying Environmental Sanitation Set up 8/22/2023 100,000.00 100.00 Service Co., Ltd. Xinhua Yinglian Modern Set up 8/28/2023 10,879,960.00 80.00 Environmental Service Co., Ltd. Guangxi Luocheng Yingxin Urban Environmental Service Set up 9/25/2023 [Note] 51.00 Co., Ltd. Suzhou Yingfen Environmental Set up 10/30/2023 2,100,000.00 70.00 Industry Co., Ltd. Renshou Zhongying Sanitation Set up 11/3/2023 2,000,000.00 70.00 Service Co., Ltd. Nantong Lianying Set up 11/17/2023 100,000.00 100.00 Environmental Service Co., Ltd. Huazhou Liansheng Urban Set up 12/11/2023 8,000,000.00 100.00 Environmental Service Co., Ltd. Heyuan Zijin Liansheng Urban Set up 12/27/2023 [Note] 100.00 Environmental Service Co., Ltd. Tangshan Yingxing Sanitation Equipment Manufacturing Co., Set up 12/28/2023 [Note] 68.00 Ltd. Quanzhou Yingxin Urban Set up 12/29/2023 [Note] 100.00 Environmental Service Co., Ltd. Zhejiang Yolsh Intelligent Set up 12/13/2023 100,000,000.00 70.00 Emergency Equipment Co., Ltd. Heyang Yinghe Urban Set up 4/26/2023 5,000,000.00 100.00 211 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Equity Equity Holding Entities acquisition Capital contribution acquisition date proportion (%) method Environmental Service Co., Ltd. Xuzhou Tongying Sanitation Set up 12/5/2023 100,000.00 100.00 Service Co., Ltd. Note: As of December 31, 2023, the Company has not paid contribution to these entities. 2. Entities excluded from the consolidation scope Net profit from the Equity disposal Equity disposal Disposal-date Entities period beginning to method date net assets the disposal date Meishan Pengshan Zhongfeng Environmental Cancellation 10/10/2023 -287,156.36 Industry Co., Ltd. Chengdu Yinglian Environmental Cancellation 6/1/2023 -4,011.80 Management Co., Ltd. Guangxi Guiping Yinghe Environmental Sanitation Cancellation 8/18/2023 -43,942.03 Management Co., Ltd. Shengzhou Yinghe Environmental Sanitation Cancellation 7/12/2023 -65,689.18 Management Co., Ltd. Chongyang Yinglian Environmental Protection Cancellation 2/28/2023 0.04 Co., Ltd. Yiyang Yinglian Environmental Sanitation Cancellation 4/19/2023 25.21 Management Co., Ltd. Wanning Yinglian Environmental Industry Cancellation 4/4/2023 296,440.93 Co., Ltd. Shenzhen Longhua District Yinglian Urban Cancellation 10/14/2023 -203.21 Service Co., Ltd. Guangdong Infore Smart Cancellation 1/6/2023 Technology Co., Ltd. Anhua Yingsheng Environmental Sanitation Cancellation 9/20/2023 -10,713.04 Service Co., Ltd. (IV) Transactions resulting in changes in subsidiaries’ equity but without losing control 1. Changes in subsidiaries’ equity Holding proportion Holding proportion Subsidiaries Date of change before change after change Huaian Chenjie Environmental 6/1/2023 96.00% 100.00% Engineering Co., Ltd. Xiantao Yinghe Environmental 12/25/2023 80.58% 75.67% Protection Co., Ltd. 212 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 2. Effect of transactions on non-controlling interest and equity attributable to parent company Huaian Chenjie Environmental Xiantao Yinghe Environmental Items Engineering Co., Ltd. Protection Co., Ltd. Acquisition costs/Disposal considerations Cash 2,000,000.00 35,872,650.00 Total acquisition costs/ 2,000,000.00 35,872,650.00 disposal considerations Less: Share in subsidiaries’ net assets based on acquired/ 722,640.74 35,716,497.55 disposed net assets proportion Balance 1,277,359.26 156,152.45 Including: Capital reserve 1,277,359.26 156,152.45 adjusted (V) Interest in joint ventures or associates 1. Significant joint ventures or associates Main Holding proportion Accounting treatment Place of (%) Associates operating Business nature on investments in joint registration place Direct Indirect ventures or associates Foshan Yingtong Electrical Materials Foshan Foshan Manufacturing 49.00 Equity method Co., Ltd. 2. Main financial information of significant associates Closing balance/Current period Opening balance/Preceding cumulative period comparative Items Foshan Yingtong Electrical Foshan Yingtong Electrical Materials Co., Ltd. Materials Co., Ltd. Current assets 1,111,710,931.09 1,089,506,862.74 Non-current assets 164,920,906.11 201,274,064.95 Total assets 1,276,631,837.20 1,290,780,927.69 Current liabilities 672,193,265.67 691,609,958.01 Non-current liabilities 55,400,000.00 520,544.08 Total liabilities 727,593,265.67 692,130,502.09 Non-controlling interest 66,338,530.17 68,425,663.17 Equity attributable to owners of 482,700,041.36 530,224,762.44 parent company Proportionate share in net assets 236,523,020.27 259,810,133.60 Adjustments Others -34,569,092.45 -30,876,879.51 Carrying amount of investments 201,953,927.82 228,933,254.09 in associates Operating revenue 1,773,954,226.95 2,238,921,694.12 Net profit -49,874,177.08 -44,464,542.43 213 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 3. Aggregated financial information of insignificant joint ventures and associates Closing balance/Current Opening balance/Preceding Items period cumulative period comparative Associates Total carrying amount of investments 479,675,156.87 447,896,705.75 Proportionate shares in the following items Net profit 31,940,019.06 31,671,037.49 Other comprehensive income Total comprehensive income 31,940,019.06 31,671,037.49 VIII. Government grants (I) Government grants increased in the current period Items Amount Government grants related to assets 3,994,300.00 Including: Included into deferred income 3,994,300.00 Government grants related to income 69,450,144.75 Including: Included into other income 69,450,144.75 Total 73,444,444.75 (II) Liabilities related to government grants Amount included Amount included Items Opening balance Increase into non-operating into other income revenue Deferred income 120,890,710.04 3,994,300.00 9,544,515.62 Subtotal 120,890,710.04 3,994,300.00 9,544,515.62 (Continued) Amount Amount Related to Other Items offsetting offsetting Closing balance assets/Related to changes costs assets income Deferred income 115,340,494.42 Related to assets Subtotal 115,340,494.42 (III) Government grants included into profit or loss Items Current period cumulative Preceding period comparative Government grants included into 78,994,660.37 101,675,052.10 other income Total 78,994,660.37 101,675,052.10 214 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (IV) Government grants returned in the current period Items Amounts returned Reason for return Guangdong Infore Intelligent Sanitation Special fund for promoting Technology Co., Ltd. failed to meet the high-quality development of requirements of government grants as it 893,100.00 foreign investment in Foshan was transformed from a foreign-invested of 2021 enterprise to a domestic-funded one, and returned the government grants of 2021. Total 893,100.00 IX. Risks related to financial instruments In risk management, the Company aims to seek the appropriate balance between the risks and benefits from its use of financial instruments and to mitigate the adverse effects that the risks of financial instruments have on the Company’s financial performance, so as to maximize the profits of shareholders and other equity investors. Based on such risk management objectives, the Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits on a timely and reliable basis. The Company has exposure to the following risks from its use of financial instruments, which mainly include: credit risk, liquidity risk, and market risk. The Management has deliberated and approved policies concerning such risks, and details are: (I) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. 1. Credit risk management practice (1) Evaluation method of credit risk At each balance sheet date, the Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When assessing whether the credit risk has increased significantly since initial recognition, the Company takes into account reasonable and supportable information, which is available without undue cost or effort, including qualitative and quantitative analysis based on historical data, external credit risk rating, and forward-looking information. The Company determines the changes in default risk of financial instruments during the estimated lifetime through comparison of the default risk at the balance sheet date and the initial recognition date, on an individual basis or a collective basis. The Company considers the credit risk on a financial instrument has increased significantly when one or more of the following qualitative and quantitative standards are met: 1) Quantitative standard mainly relates to the scenario in which, at the balance sheet date, the probability of default in the remaining lifetime has risen by more than a certain percentage compared with the initial recognition; 2) Qualitative standard mainly relates to significant adverse changes in the debtor’s operation or financial position, present or expected changes in technology, market, economy or legal environment that will have significant adverse 215 Infore Environment Technology Group Co., Ltd. 2023 Annual Report impact on the debtor’s repayment ability; (2) Definition of default and credit-impaired assets A financial instrument is defined as defaulted when one or more following events have occurred, of which the standard is consistent with that for credit-impairment: 1) significant financial difficulty of the debtor; 2) a breach of binding clause of contract; 3) it is very likely that the debtor will enter bankruptcy or other financial reorganization; 4) the creditor of the debtor, for economic or contractual reasons relating to the debtor’s financial difficulty, having granted to the debtor a concession(s) that the creditor would not otherwise consider. 2. Measurement of expected credit losses The key factors in the measurement of expected credit loss include the probability of default, loss given default, and exposure to default risk. The Company develops a model of the probability of default, loss given default, and exposure to default risk on the basis of quantitative analysis of historical data (e.g., counterparty rating, guarantee measures and collateral type, payment method, etc.) and forward-looking information. 3. Please refer to section V (I) 2, 3, 4, 6, 8, 11 and 23 of notes to the financial statements for details on the reconciliation table of opening balance and closing balance of loss allowances of financial instrument. 4. Exposure to credit risk and concentration of credit risk The Company’s credit risk is primarily attributable to cash and bank balances and receivables. In order to control such risks, the Company has taken the following measures: (1) Cash and bank balances The Company deposits its bank balances and other cash and bank balances in financial institutions with relatively high credit levels, hence, its credit risk is relatively low. (2) Receivables and contract assets The Company performs credit assessment on customers using credit settlement on a regular basis. The Company selects credible and well-reputed customers based on credit assessment result, and conducts ongoing monitoring on balance of receivables, to avoid significant risks in bad debts. As the Company’s credit risks fall into several business partners and customers, as of December 31, 2023, 7.33% (December 31, 2022: 9.38%) of the total accounts receivable and contract assets was due from the five largest customers of the Company. The Company has no significant central credit risk. The maximum amount of exposure to credit risk of the Company is the carrying amount of each financial asset at the balance sheet. (II) Liquidity risk Liquidity risk is the risk that the Company may encounter deficiency of funds in meeting obligations associated 216 Infore Environment Technology Group Co., Ltd. 2023 Annual Report with cash or other financial assets settlement, which is possibly attributable to failure in selling financial assets at fair value on a timely basis, or failure in collecting liabilities from counterparties of contracts, or early redemption of debts, or failure in achieving estimated cash flows. In order to control such risk, the Company comprehensively utilizes financing tools such as notes settlement, bank borrowings, etc. and adopts long-term and short-term financing methods to optimize financing structures, and finally maintains a balance between financing sustainability and flexibility. The Company has obtained credit limit from several commercial banks to meet working capital requirements and expenditures. Financial liabilities classified based on remaining time period till maturity Closing balance Items Contract amount not Carrying amount Within 1 year 1-3 years Over 3 years yet discounted Bank 2,398,606,754.44 2,785,244,392.01 598,015,270.38 611,768,269.63 1,575,460,852.00 borrowings Notes payable 2,294,276,551.46 2,294,276,551.46 2,294,276,551.46 Accounts 2,918,543,704.46 2,918,543,704.46 2,918,543,704.46 payable Other payables 709,941,824.77 709,941,824.77 709,941,824.77 Lease liabilities 24,784,187.60 26,511,358.34 9,474,544.70 17,036,813.64 Long-term 312,053,472.95 312,053,472.95 9,104,000.00 15,173,333.32 287,776,139.63 payables Bonds payable 1,360,603,802.12 1,566,237,165.60 11,809,516.80 22,142,844.00 1,532,284,804.80 Subtotal 10,018,810,297.80 10,612,808,469.59 6,551,165,412.57 666,121,260.59 3,395,521,796.43 (Continued) December 31, 2022 Items Contract amount not Carrying amount Within 1 year 1-3 years Over 3 years yet discounted Bank 2,918,155,689.70 3,064,480,800.96 795,179,666.92 725,728,644.01 1,543,572,490.03 borrowings Notes payable 2,515,229,293.17 2,515,229,293.17 2,515,229,293.17 Accounts 2,771,961,271.66 2,771,961,271.66 2,771,961,271.66 payable Other payables 657,122,287.53 657,122,287.53 657,122,287.53 Lease liabilities 31,093,459.06 33,953,751.30 9,005,728.14 16,755,133.25 8,192,889.91 Long-term 316,335,329.82 316,335,329.82 599,514.91 315,735,814.91 payables Bonds payable 1,308,690,556.32 1,573,618,113.60 7,380,948.00 11,809,516.80 1,554,427,648.80 Subtotal 10,518,587,887.26 10,932,700,848.04 6,756,478,710.33 754,293,294.06 3,421,928,843.65 (III) Market risk Market risk is the risk that the Company may encounter fluctuation in fair value or future cash flows of financial instruments due to changes in market price. Market risk mainly includes interest risk and foreign currency risk. 1. Interest risk Interest risk is the risk that an enterprise may encounter fluctuation in fair value or future cash flows of financial instruments due to changes in market interest rates. The Company’s fair value interest risks arise from fixed-rate 217 Infore Environment Technology Group Co., Ltd. 2023 Annual Report financial instruments, while the cash flow interest risks arise from floating-rate financial instruments. The Company determines the proportion of fixed-rate financial instruments and floating-rate financial instruments based on the market environment, and maintains a proper financial instruments portfolio through regular review and monitoring. The Company’s interest risk in cash flows relates mainly to bank borrowings with floating interest rate. As of December 31, 2023, balance of borrowings with interest accrued at floating interest rate totaled 1,811,617,334.60 yuan (December 31, 2022: 1,755,696,317.89 yuan). If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s gross profit and equity will not be significantly affected. 2. Foreign currency risk Foreign currency risk is the risk arising from changes in fair value or future cash flows of financial instrument resulted from changes in exchange rate. The Company is mainly operated in mainland China, whose main activities are denominated in RMB, hence, the Company bears insignificant market risk arising from foreign exchange changes. Please refer to section V (IV) 1 of notes to the financial statements for details on foreign currency financial assets and liabilities at the end of the period. X. Fair value disclosure (I) Details of fair value of assets and liabilities at fair value at the balance sheet date Fair value as at the balance sheet date Items Level 1 fair value Level 2 fair value Level 3 fair value Total measurement measurement measurement Recurring fair value measurement 1. Receivables financing 146,814,501.64 146,814,501.64 2. Other equity instrument 15,352,971.01 15,352,971.01 investments Total assets at recurring fair value 162,167,472.65 162,167,472.65 measurement (II) Qualitative and quantitative information of valuation technique(s) and key input(s) for level 3 fair value at recurring and non-recurring fair value measurement 1. For receivables financing, the Company uses specific valuation techniques to determine its fair value based on its par value. 2. For other equity instrument investments, the Company uses specific valuation techniques to determine its fair value. XI. Related party relationships and transactions (I) Related party relationships 1. Parent company 218 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (1) Details Holding proportion Voting right Place of Business Registered Parent company over the Company proportion over the registration nature capital (%) Company (%) Foshan, Industrial Infore Group Co., Ltd. 4.45 billion 43.33 [Note] 43.33 Guangdong investment Note: Infore Group Co., Ltd. (the “Infore Group”) directly holds 11.31% of equity of the Company, and indirectly holds 32.02% of equity of the Company through its wholly-owned subsidiary Ningbo Infore Asset Management Co., Ltd. (2) The Company’s ultimate controlling party is He Jianfeng, who directly holds 2.00% of equity of the Company, and indirectly holds 43.33% of equity of the Company through Infore Group. 2. Please refer to section VII of notes to the financial statements for details on the Company’s subsidiaries. 3. Joint ventures and associates of the Company Please refer to section VII of notes to the financial statements for details on the Company’s significant joint ventures and associates. Details of other joint ventures or associates carrying out related party transactions with the Company in the current period or in preceding period but with balance in the current period are as follows: Joint ventures or associates Relationships with the Company Guangdong Tianshu New Energy Technology Co., Associate of the Company Ltd. Tengine Innovation (Beijing) Monitoring Associate of the Company Instrument Co., Ltd. Guangdong Shunkong Environmental Investment Associate of the Company Co., Ltd. Changsha Cowa Zoomlion Intelligent Technology Associate of the Company’s subsidiary Zoomlion Co., Ltd. Environmental Company Guangxi Zoomlion Guilv Urban Environmental Associate of the Company’s subsidiary Zoomlion Service Co., Ltd. Environmental Company Shantou Chaoyang District Zoomlion Ruikang Associate of the Company’s subsidiary Zoomlion Environmental Sanitation Service Co., Ltd. Environmental Company Shantou Zoomlion Ruikang Environmental Associate of the Company’s subsidiary Zoomlion Sanitation Service Co., Ltd. Environmental Company Associate of the Company’s subsidiary Zoomlion Taizhou Jinzhong Environmental Industry Co., Ltd. Environmental Company Guangdong Liangke Environmental Engineering Associate of the Company’s subsidiary Guangdong Co., Ltd. Infore Environmental Investment Co., Ltd. Associate of the Company’s subsidiary Guangdong Foshan Yingtong Electrical Materials Co., Ltd. Infore Environmental Investment Co., Ltd. Associate of the Company’s subsidiary Guangdong Beijing Xingyun Zhixing Technology Co., Ltd. Infore Environmental Investment Co., Ltd. 4. Other related parties of the Company Related parties Relationships with the Company Zoomlion Heavy Industry Co., Ltd. (the “Zoomlion Shareholder holding more than 5% of the Company’s Heavy Industry Company”) shares Shenzhen Infore Smart Technology Co., Ltd. Under control of the actual controller Foshan Shunde District Yinghai Investment Co., Under control of the actual controller Ltd. 219 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Related parties Relationships with the Company Guangzhou Huayi International Aution Co., Ltd. Under control of the actual controller Foshan Shunde District Midea Hotel Management Under control of immediate family of the actual Co., Ltd. controller Under control of immediate family of the actual Ningbo Midea Property Management Co., Ltd. controller Under control of immediate family of the actual Guangdong Bomei Property Service Co., Ltd. controller Under control of immediate family of the actual Guangdong Midea HVAC Equipment Co., Ltd. controller Guangdong Welling Motor Manufacturing Co., Under control of immediate family of the actual Ltd. controller Under control of immediate family of the actual Guangdong Midea Electric Co., Ltd. controller Guangdong Midea Refrigeration Equipment Co., Under control of immediate family of the actual Ltd. controller Under control of immediate family of the actual Guangdong Midea Building Technologies Co., Ltd. controller Chongqing Midea General Refrigeration Under control of immediate family of the actual Equipment Co., Ltd. controller Under control of immediate family of the actual Anhui Meizhi Refrigeration Equipment Co., Ltd. controller Under control of immediate family of the actual Midea Group Co., Ltd. controller Guangdong Ferries New Energy Technology Co., Under control of the Company’s associate Ltd. Foshan Yingtong Electrical Materials Co., Ltd. Under control of the Company’s associate Foshan Guangdong Weiqi Electrical Materials Co., Ltd. Yingtong Electrical Materials Co., Ltd. Under control of the Company’s associate Foshan Liaoning Donggang Magnet Wire Co., Ltd. Yingtong Electrical Materials Co., Ltd. Under control of the Company’s associate Foshan Anhui Weiqi Electrical Materials Co., Ltd. Yingtong Electrical Materials Co., Ltd. Associate of the Company’s shareholder Zoomlion Zoomlion Hengtong Machinery Co., Ltd. Heavy Industry Company Green Oriental Investment Holdings Co., Ltd. (the Non-controlling shareholder of the subsidiary “Hong Kong Investment Company”) Gucheng Yinglian Urban Environmental Service The former subsidiary of the Company’s subsidiary Co., Ltd. [Note] Zoomlion Environmental Company Yichun Yinglian Urban Environmental Service The former subsidiary of the Company’s subsidiary Co., Ltd. [Note] Zoomlion Environmental Company Note: The Company disposed of all the equity of Gucheng Yinglian Urban Environmental Service Co., Ltd. and Yichun Yinglian Urban Environmental Service Co., Ltd., the former subsidiaries of Zoomlion Environmental Company, in August 2023, which continued to be disclosed as related parties within one year after disposal, and the current disclosure period of related party transactions was from September 2023 to December 2023. (II) Related party transactions 1. Purchase and sale of goods, rendering and receiving of services (1) Purchase of goods and receiving of services Current period Preceding period Related parties Content of transactions cumulative comparative Guangdong Tianshu New Energy Materials 8,393,506.88 7,638,710.54 220 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Current period Preceding period Related parties Content of transactions cumulative comparative Technology Co., Ltd. Tengine Innovation (Beijing) Monitoring Materials 3,572,705.19 9,239,400.36 Instrument Co., Ltd. Guangdong Ferries New Energy Materials 518,435.64 Technology Co., Ltd. Changsha Cowa Zoomlion Intelligent Materials 150.98 10,847,784.36 Technology Co., Ltd. Guangdong Shunkong Environmental Labor services 10,692,550.78 9,909,911.14 Investment Co., Ltd. Zoomlion Heavy Industry Company Materials 77,364,306.08 105,493,871.91 Information systems Shenzhen Infore Smart Technology Co., and related 4,253,139.63 Ltd. implementation services Guangdong Liangke Environmental Labor services 1,500,000.00 1,415,094.34 Engineering Co., Ltd. Foshan Shunde District Midea Hotel Labor services 116,702.94 180,887.93 Management Co., Ltd. Ningbo Midea Property Management Labor services 516,713.84 Co., Ltd. Guangzhou Huayi International Aution Labor services 801,033.29 Co., Ltd. Guangdong Bomei Property Service Co., Labor services 1,191,467.15 Ltd. Subtotal 108,403,998.56 145,242,374.42 (2) Sale of goods and rendering of services Current period Preceding period Related parties Content of transactions cumulative comparative Guangdong Liangke Environmental Goods and factoring 1,706,918.19 781,333.30 Engineering Co., Ltd. Guangdong Tianshu New Energy Goods and factoring 4,572,082.14 90,942,152.84 Technology Co., Ltd. Guangdong Weiqi Electrical Materials Factoring 5,100,534.46 1,873,184.56 Co., Ltd. Liaoning Donggang Magnet Wire Co., Factoring 2,843,034.34 124,354.60 Ltd. Anhui Weiqi Electrical Materials Co., Goods and factoring 2,323,149.35 416,492.94 Ltd. Foshan Yingtong Electrical Materials Factoring 549,056.60 233,830.19 Co., Ltd. Guangdong Ferries New Energy Goods 32,674,315.93 Technology Co., Ltd. Guangdong Midea HVAC Equipment Goods 28,141.59 543,008.85 Co., Ltd. Guangdong Welling Motor Goods and labor 233,895.50 Manufacturing Co., Ltd. services Beijing Xingyun Zhixing Technology Goods 943.40 Co., Ltd. Taizhou Jinzhong Environmental Labor services 22,021,147.55 Industry Co., Ltd. Guangdong Bomei Property Service Co., Goods and labor 4,719,857.33 3,118,410.25 221 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Current period Preceding period Related parties Content of transactions cumulative comparative Ltd. services Guangxi Zoomlion Guilv Urban Goods -141,215.31 6,862,177.99 Environmental Service Co., Ltd. Zoomlion Heavy Industry Company Goods 3,780,395.53 1,995,580.83 Shantou Chaoyang District Zoomlion Ruikang Environmental Sanitation Goods 94,726.56 589,792.61 Service Co., Ltd. Shantou Zoomlion Ruikang Environmental Sanitation Service Co., Goods 118,489.02 65,565.12 Ltd. Subtotal 80,625,472.18 107,545,884.08 2. Related party leases (1) The Company as the lessor Types of assets Lease income for Lease income for the Lessees leased the current period preceding period Plant and Guangdong Tianshu New Energy comprehensive 2,304,088.08 988,266.74 Technology Co., Ltd. building Guangdong Liangke Environmental Office 15,600.00 Engineering Co., Ltd. (2) The Company as the lessee Current period cumulative Lease of right-of-use assets recognized Expenses for short-term leases and Types of assets Lessors leases of low-value assets with Lease expenses paid leased Increased simplified approach and variable (excluding variable lease Interest principal of lease payments not included in the payments not included in expenses lease measurement of lease liabilities the measurement of lease recognized liabilities liabilities) Foshan Shunde District Office building, Yinghai Investment Co., 20,952.38 1,258,782.48 84,848.59 parking space Ltd. Shenzhen Infore Smart Office building 695,812.82 Technology Co., Ltd. (Continued) Preceding period comparative Lease of right-of-use assets recognized Expenses for short-term leases and Types of assets Lease expenses paid Lessors leases of low-value assets with leased (excluding variable simplified approach and variable Increased Interest lease payments not lease payments not included in the principal of expenses included in the measurement of lease liabilities lease liabilities recognized measurement of lease liabilities) Foshan Shunde District Office building, Yinghai Investment Co., 1,256,323.04 63,604.54 parking space Ltd. Shenzhen Infore Smart Office building 840,509.43 Technology Co., Ltd. 222 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 3. Related party guarantees (1) The Company and its subsidiaries did not act as guarantors in the current period. (2) The Company and its subsidiaries did not act as guaranteed parties in the current period. 4. Temporary call loans between related parties In 2023, Infore Group lent temporary funds to the Company and its subsidiaries, totaling 800 million yuan, which were usually returned within one working day. Therefore, the two parties have not settled the interest on the funds occupied. 5. Key management’s emoluments Items Current period cumulative Preceding period comparative Key management’s emoluments 7,022,866.00 6,500,407.42 6. Special agreement on continued implementation of sales contract signed in the name of Zoomlion Heavy Industry Company Since June 1, 2017, the sanitation business of Zoomlion Heavy Industry Company was merged into Zoomlion Environmental Company. In order to continue the implementation of the sales contract originally signed in the name of Zoomlion Heavy Industry Company, Zoomlion Environmental Company invoiced Zoomlion Heavy Industry Company, which will then issue the invoice of the same amount to end customers. The tax-excluded amount of income from such transactions in 2023 is -1,489,633.01 yuan. Zoomlion Environmental Company related such transactions directly to end customers. 7. Other related party transactions In 2023, the subsidiary Zoomlion Environmental Company carried out financing factoring business through Zoomlion Heavy Industry Company and paid the financing factoring service fees of 19.5 thousand yuan. (III) Balances due to or from related parties 1. Balances due from related parties Closing balance Opening balance Items Related parties Provision for bad Provision for bad Book balance Book balance debts debts Guangdong Tianshu New 189,921,071.39 56,976,321.42 200,788,348.94 8,569,313.68 Energy Technology Co., Ltd. Guangdong Weiqi Electrical 43,161,070.83 647,416.06 112,174,999.99 1,682,625.00 Materials Co., Ltd. Liaoning Donggang Magnet 40,963,666.44 614,455.00 31,300,000.00 469,500.00 Wire Co., Ltd. Accounts Guangdong Ferries New receivable 36,921,977.00 1,846,098.85 Energy Technology Co., Ltd. Anhui Weiqi Electrical 21,157,622.95 317,364.34 30,586,839.62 458,802.59 Materials Co., Ltd. Taizhou Jinzhong Environmental Industry Co., 5,934,700.00 296,735.00 Ltd. 223 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing balance Opening balance Items Related parties Provision for bad Provision for bad Book balance Book balance debts debts Guangdong Shunkong Environmental Investment 4,108,567.88 1,696,739.48 4,158,567.88 890,025.90 Co., Ltd. Shantou Chaoyang District Zoomlion Ruikang 4,048,556.31 1,185,488.39 4,017,898.31 401,789.83 Environmental Sanitation Service Co., Ltd. Gucheng Yinglian Urban Environmental Service Co., 2,045,755.42 102,287.77 Ltd. Guangxi Zoomlion Guilv Urban Environmental 1,889,210.92 188,921.09 3,762,921.52 188,146.08 Service Co., Ltd. Zoomlion Heavy Industry 1,150,774.01 237,645.17 665,051.93 126,337.58 Company Guangdong Bomei Property 876,777.77 43,838.89 903,500.08 45,175.00 Service Co., Ltd. Guangdong Welling Motor 85,215.05 4,260.75 Manufacturing Co., Ltd. Shantou Zoomlion Ruikang Environmental Sanitation 77,715.00 3,885.75 10,711.00 535.55 Service Co., Ltd. Guangdong Midea HVAC 31,910.00 1,595.50 233,371.88 51,798.38 Equipment Co., Ltd. Guangdong Midea Electric 54,018.62 54,018.62 Co., Ltd. Guangdong Midea Refrigeration Equipment 42,819.11 42,819.11 Co., Ltd. Guangdong Midea Building 33,413.42 33,413.42 Technologies Co., Ltd. Guangdong Liangke Environmental Engineering 30,000,000.00 450,000.00 Co., Ltd. Foshan Yingtong Electrical 20,486,000.00 307,290.00 Materials Co., Ltd. Subtotal 352,374,590.97 64,163,053.46 439,218,462.30 13,771,590.74 Guangdong Tianshu New 3,776,800.00 Receivables Energy Technology Co., Ltd. financing Zoomlion Heavy Industry 600,000.00 200,000.00 Company Subtotal 4,376,800.00 200,000.00 Gucheng Yinglian Urban Environmental Service Co., 500,000.00 Ltd. Zoomlion Heavy Industry 155,660.67 85,768.19 Company Advances paid Guangzhou Huayi International Aution Co., 40,800.00 Ltd. Chongqing Midea General Refrigeration Equipment 31,500.00 Co., Ltd. Subtotal 696,460.67 117,268.19 Gucheng Yinglian Urban Environmental Service Co., 2,739,525.00 136,976.25 Other Ltd. receivables Guangdong Shunkong 1,730,000.00 1,730,000.00 1,730,000.00 865,000.00 Environmental Investment 224 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Closing balance Opening balance Items Related parties Provision for bad Provision for bad Book balance Book balance debts debts Co., Ltd. Shantou Chaoyang District Zoomlion Ruikang 838,613.91 41,930.70 Environmental Sanitation Service Co., Ltd. Guangzhou Huayi International Aution Co., 327,600.00 16,380.00 Ltd. Foshan Shunde District 205,228.40 102,614.20 205,228.40 102,614.20 Yinghai Investment Co., Ltd. Anhui Meizhi Refrigeration 5,000.00 250.00 Equipment Co., Ltd. Zoomlion Heavy Industry 7,190,173.17 359,508.66 Company Guangdong Midea HVAC 10,000.00 500.00 Equipment Co., Ltd. Shenzhen Infore Smart 304,020.00 15,308.44 Technology Co., Ltd. Guangdong Weiqi Electrical 337,565.30 168,782.65 Materials Co., Ltd. Subtotal 5,845,967.31 2,028,151.15 9,776,986.87 1,511,713.95 Guangdong Midea HVAC Contract assets 31,800.00 3,180.00 Equipment Co., Ltd. and other non- Zoomlion Heavy Industry current assets 22,500.00 1,125.00 162,550.00 8,127.50 Company Subtotal 54,300.00 4,305.00 162,550.00 8,127.50 Guangdong Tianshu New 5,037,500.00 1,511,250.00 5,137,500.01 77,062.50 Energy Technology Co., Ltd. Long-term Shantou Zoomlion Ruikang receivables and Environmental Sanitation 3,456,000.00 1,342,250.00 3,456,000.00 651,050.00 non-current Service Co., Ltd. assets due within Shantou Chaoyang District one year Zoomlion Ruikang 7,369,548.45 1,995,153.96 7,531,548.45 983,685.27 Environmental Sanitation Service Co., Ltd. Subtotal 15,863,048.45 4,848,653.96 16,125,048.46 1,711,797.77 2. Balances due to related parties Items Related parties Closing balance Opening balance Zoomlion Heavy Industry Company 33,784,532.87 55,248,477.35 Guangdong Tianshu New Energy 3,737,470.40 6,037,232.82 Technology Co., Ltd. Tengine Innovation (Beijing) 2,963,838.75 6,033,821.63 Monitoring Instrument Co., Ltd. Midea Group Co., Ltd. 587,507.93 587,507.93 Guangdong Shunkong Environmental Accounts payable 585,700.00 993,522.02 Investment Co., Ltd. Guangdong Ferries New Energy 519,697.82 Technology Co., Ltd. Guangzhou Huayi International 327,600.00 Aution Co., Ltd. Changsha Cowa Zoomlion Intelligent 26,733.52 7,253,459.78 Technology Co., Ltd. Foshan Shunde District Midea Hotel 22,848.91 80,789.37 Management Co., Ltd. 225 Infore Environment Technology Group Co., Ltd. 2023 Annual Report Items Related parties Closing balance Opening balance Guangdong Liangke Environmental 875,000.00 Engineering Co., Ltd. Subtotal 42,555,930.20 77,109,810.90 Zoomlion Heavy Industry Company 51,685,972.00 59,153,632.35 Tengine Innovation (Beijing) 3,002,040.00 Monitoring Instrument Co., Ltd. Notes payable Changsha Cowa Zoomlion Intelligent 471,035.00 Technology Co., Ltd. Guangdong Tianshu New Energy 252,000.00 520,000.00 Technology Co., Ltd. Subtotal 52,409,007.00 62,675,672.35 Zoomlion Heavy Industry Company 101,061.95 6,145,050.10 Guangdong Liangke Environmental 987,079.70 987,079.67 Engineering Co., Ltd. Contract liabilities Guangdong Tianshu New Energy 13,296.46 1,681.42 Technology Co., Ltd. Guangxi Zoomlion Guilv Urban 78,180.53 Environmental Service Co., Ltd. Subtotal 1,101,438.11 7,211,991.72 Hong Kong Investment Company 32,958,498.54 21,875,000.00 Gucheng Yinglian Urban 3,480,000.00 Environmental Service Co., Ltd. Taizhou Jinzhong Environmental 1,545,898.65 Industry Co., Ltd. Guangxi Zoomlion Guilv Urban 1,525,315.33 403,654.00 Environmental Service Co., Ltd. Zoomlion Heavy Industry Company 68,259.20 363,559.20 Other payables Yichun Yinglian Urban 63,965.82 Environmental Service Co., Ltd. Tengine Innovation (Beijing) 50,000.00 Monitoring Instrument Co., Ltd. Guangdong Bomei Property Service 5,000.00 5,000.00 Co., Ltd. Zoomlion Hengtong Machinery Co., 4,300.00 4,300.00 Ltd. Guangdong Tianshu New Energy 2,700.00 2,700.00 Technology Co., Ltd. Subtotal 39,703,937.54 22,654,213.20 Lease liabilities and Foshan Shunde District Yinghai non-current liabilities 1,845,892.92 Investment Co., Ltd. due within one year Subtotal 1,845,892.92 XII. Share-based payment (I) Overall information 1. Details Quantity and amount of equity instruments Granted in the current Vested in the Unlocked in the Objects Expired in the current period period current period current period Quantity Amount Quantity Amount Quantity Amount Quantity Amount Management 10,420,000.00 7,312,289.83 personnel 226 Infore Environment Technology Group Co., Ltd. 2023 Annual Report R&D personnel 5,048,000.00 3,542,460.56 Sales personnel 4,380,000.00 3,073,688.05 Production 2,116,000.00 1,484,914.13 personnel Total 21,964,000.00 15,413,352.57 2. Other remarks The decision-making procedures and approval status of the Company’s phase III stock option incentive plan According to the “Proposal on the ‘Phase III Stock Option Incentive Plan (Draft)’ and Its Summary” approved by the Company’s third extraordinary shareholders’ meeting of 2019 dated November 12, 2019, and the “Proposal on Adjusting the List of Incentive Targets and the Number of Granted Stock Options for Phase III Stock Option Incentive Plan” deliberated and approved by 32nd meeting of the eighth session of the Board of Directors dated November 26, 2019, the Company intends to implement stock option incentive plans for some of the Company’s middle and senior managers and core backbones (technology, marketing, production, etc.). The total number of stock options granted to incentive targets is 65.09 million, accounting for approximately 2.06% of the Company’s total share capital of 3,163.0621 million shares when the incentive plan is signed. If each stock option meets the exercise conditions after 12 months from the grant date, the incentive targets exercise the option by three installments at 30%, 30%, and 40% at the exercise price of 6.45 yuan per share within the next 36 months. According to the “Proposal on Adjusting the Incentive Targets and the Number of Options Exercised in Phase II and Phase III Stock Option Incentive Plans” deliberated and approved by the fourth meeting of the ninth session of the Board of Directors and the third meeting of the ninth session of the Board of Supervisors dated April 23, 2020, 5 employees who resigned due to personal reasons were identified by the Company’s Board of Directors as no longer eligible for incentives. According to the provisions of the “Phase III Stock Option Incentive Plan (Draft)”, their first, second, and third installments of stock options, a total of 1.28 million, were cancelled. After the adjustments, the incentive targets of phase III stock option incentive plan have been adjusted from the original 249 to 244, and the number of locked stock options granted has been adjusted from 65.09 million to 63.81 million. The “Proposal on the Company’s Phase III Stock Option Incentive Plan’s Failure to Meet the Exercising Conditions for the First Exercise Period and Cancellation of Part of the Stock Options” was deliberated and approved by the fourth meeting of the ninth session of the Board of Directors and the third meeting of the ninth session of the Board of Supervisors. Given that the Company’s performance did not reach the exercising conditions of the first exercise period of the phase III stock option incentive plan, the 19.143 million stock options granted but not yet exercised in the first exercise period cannot be exercised. According to the relevant provisions of the “Phase III Stock Option Incentive Plan (Draft)”, the Company’s Board of Directors agreed to cancel the 19.143 million stock options granted but not yet exercised in the first exercise period. The Company has disclosed the “Announcement on the Implementation of the Annual Equity Distribution of 2019” on July 4, 2020, based on the Company’s current total share capital after excluding the repurchased shares (0 share), i.e., 3,163,062,146 shares, cash dividend of 1.10 yuan (tax inclusive) for every 10 shares is to be distributed to all shareholders. The equity registration date for this equity distribution is July 9, 2020, and the ex-rights and ex- 227 Infore Environment Technology Group Co., Ltd. 2023 Annual Report dividend date is July 10, 2020. Given that the Company’s equity distribution of 2019 has been implemented on July 10, 2020, according to provisions on the adjustment of the exercise price of the phase II and phase III stock option incentive plan drafts, if the Company has conversion of capital reserve into share capital, distribution of share bonus, or share split, share reduction, dividend distribution, and share allotments, the exercise price of stock options will be adjusted accordingly. After the implementation of this equity distribution, the exercise price of phase III stock option incentive plan will be adjusted from 6.45 yuan per share to 6.34 yuan per share. Pursuant to the “Proposal on Revising the Performance Appraisal Indicators of Phase III Stock Option Incentive Plan” deliberated and approved by the sixth meeting of the ninth session of the Board of Directors dated August 20, 2020, it is agreed to revise the performance appraisal indicators of phase III stock option incentive plan. Pursuant to the “Proposal on Adjusting the Incentive Targets and the Number of Options Exercised and Cancellation of Part of the Stock Options in Phase II and Phase III Stock Option Incentive Plans” deliberated and approved by the 13th meeting of the ninth session of the Board of Directors and the 12th meeting of the ninth session of the Board of Supervisors dated April 22, 2021, 13 incentive targets who resigned from the Company or the Company’s controlled subsidiaries due to personal reasons were identified by the Company’s Board of Directors as no longer eligible for incentives. According to the provisions of the “Phase III Stock Option Incentive Plan (Revised Draft)”, their second and third installments of stock options, a total of 3.101 million, were cancelled. After the adjustments, the incentive targets of phase III stock option incentive plan have been adjusted from the original 244 to 231, and the number of locked stock options granted has been adjusted from 44.667 million to 41.566 million. According to the “Proposal on Matters Related to the Second Exercise Period of Phase III Stock Option Incentive Plan” deliberated and approved by the 13th meeting of the ninth session of the Board of Directors and the 12th meeting of the ninth session of the Board of Supervisors, given that the conditions for the second exercise period of the Company’s phase III stock option incentive plan have been fulfilled, the phase III stock option incentive plan has determined and passed the assessment for a total of 231 incentive targets, and a total of 17.814 million shares can be exercised in the second exercise period. Pursuant to the “Profit Distribution of 2020” deliberated and approved by the shareholders’ meeting of 2020 dated May 14, 2021, based on the Company’s current total share capital of 3,163,086,005 shares after excluding the repurchased shares of 58,976,234 share, i.e., 3,104,109,771 shares, cash dividend of 1.20 yuan (tax inclusive) for every 10 shares is to be distributed to all shareholders, with 0 bonus share (tax inclusive) and no conversion of capital reserve into share capital. The equity registration date for this equity distribution is July 7, 2021, and the ex- rights and ex-dividend date is July 8, 2021. The “Proposal on Adjusting the Exercise Price of Stock Options in Phase II and Phase III Stock Option Incentive Plans” was deliberated and approved by the 14th meeting of the ninth session of the Board of Directors and the 13th meeting of the ninth session of the Board of Supervisors on August 19, 2021. Given that the Company’s equity distribution of 2020 has been implemented on July 8, 2021, according to provisions on the adjustment of the exercise price of the phase III stock option incentive plan draft, if the Company has conversion of capital reserve 228 Infore Environment Technology Group Co., Ltd. 2023 Annual Report into share capital, distribution of share bonus, or share split, share reduction, dividend distribution, and share allotments, the exercise price of stock options will be adjusted accordingly. After the adjustment, the exercise price of phase III stock option incentive plan will be adjusted from 6.34 yuan per share to 6.22 yuan per share. Pursuant to the “Profit Distribution of 2021” deliberated and approved by the shareholders’ meeting of 2021 dated May 24, 2022, based on the Company’s current total share capital of 3,179,499,998 shares after excluding the repurchased shares of 58,976,234 share, i.e., 3,120,523,764 shares, cash dividend of 1.00 yuan (tax inclusive) for every 10 shares is to be distributed to all shareholders, with 0 bonus share (tax inclusive) and no conversion of capital reserve into share capital. The equity registration date for this equity distribution is July 19, 2022, and the ex-rights and ex-dividend date is July 20, 2022. The “Proposal on Adjusting the Exercise Price of Stock Options in Phase III Stock Option Incentive Plan” was deliberated and approved by the 19th meeting of the ninth session of the Board of Directors and the 18th meeting of the ninth session of the Board of Supervisors on August 24, 2022. Given that the Company’s equity distribution of 2021 has been implemented on July 20, 2022, after the adjustment, the exercise price of phase III stock option incentive plan will be adjusted from 6.22 yuan per share to 6.12 yuan per share. According to the “Proposal on Adjusting the Incentive Targets and the Number of Options Exercised and Cancellation of Part of the Stock Options in Phase III Stock Option Incentive Plan” deliberated and approved by the 21st meeting of the ninth session of the Board of Directors and the 19th meeting of the ninth session of the Board of Supervisors dated October 26, 2022, 22 incentive targets who resigned from the Company were identified by the Company’s Board of Directors as no longer eligible for incentives. According to the provisions of the “Phase III Stock Option Incentive Plan (Revised Draft)”, their third installments of stock options, a total of 1.788 million, were cancelled. After the adjustments, the incentive targets of phase III stock option incentive plan have been adjusted from the original 231 to 209, and the number of locked stock options granted has been adjusted from 23.752 million to 21.964 million. The “Proposal on Cancellation of Expired but Unexercised Stock Options for the Third Exercise Period of the Phase III Stock Option Incentive Plan” was deliberated and approved by the fifth extraordinary meeting of the tenth session of the Board of Directors dated January 8, 2024. As of November 25, 2023, the third exercise period of the Company’s phase III stock option incentive plan has expired, and 21.964 million stock options held by 209 incentive objects for the third exercise period of the phase III stock option incentive plan have not been exercised. According to the regulations of the phase III stock option incentive plan, incentive objects must exercise their options within the valid exercise period. If the exercise conditions are not met, the current stock options shall not be exercised and shall be canceled by the Company; if the exercise conditions are met, but the stock options are not exercised within the valid exercise period, the stock options shall be canceled by the Company. Therefore, the Company will cancel a total of 21.964 million stock options that have been granted to but not yet exercised by the aforementioned 209 incentive objects during the third exercise period. After the completion of this cancellation, the Company’s phase III stock option incentive plan has been fully implemented. (II) Equity-settled share-based payment 229 Infore Environment Technology Group Co., Ltd. 2023 Annual Report 1. Details Stock options: Grant-date fair value Determination method and key parameters of grant-date of the stock options was determined fair value of equity instruments according to the Black-Scholes option pricing model It is expected that all incentive targets Determination method for the number of equity still hold positions with the Company instruments expected to vest by then will fully exercise their rights Reasons for significant difference between the estimates None in the current period and preceding period Capital reserve accumulated due to equity-settled share- 63,871,094.05 based payment XIII. Commitments and contingencies (I) Significant commitments As of December 31, 2023, the Company has no significant commitments to be disclosed. (II) Contingencies 1. Contingent liabilities incurred by pending lawsuit/arbitration and the financial effect On November 19, 2018, Hong Kong Investment Company, the former shareholder of the Company’s 70%- controlled subsidiary Green Oriental Company, filed a civil complaint with the People’s Court of Qianhai Cooperation Zone, Shenzhen City, Guangdong Province, requesting the Company and its subsidiary Shenzhen Green Ark Investment Co., Ltd. to pay 21.875 million yuan and interest thereof for the 25% equity acquisition of Lianjiang Company in 2016, and therefore applied for freezing 25% of equity of Lianjiang Company. According to the Civil Judgment numbered [2018] Yue 0391 Min Chu 4117 issued by the People’s Court of Qianhai Cooperation Zone, Shenzhen City, Guangdong Province on June 18, 2019, the subsidiary Shenzhen Green Ark Investment Co., Ltd. shall pay 21.875 million yuan and interest thereof for the 25% equity acquisition of Lianjiang Company in 2016 to Hong Kong Investment Company. On July 12, 2019, Shenzhen Green Ark Investment Co., Ltd. filed a civil appeal petition to Shenzhen Intermediate People’s Court, requesting to revoke the Civil Judgment numbered [2018] Yue 0391 Min Chu 4117 in accordance with the law, and to dismiss all the claims made by Hong Kong Investment Company. On May 20, 2021, the Shenzhen Intermediate People’s Court made the final judgement numbered (2019) Yue 03 Min Zhong 24451. The court believed that although the Company and Shenzhen Green Ark Investment Co., Ltd. were related parties, they were independent of each other as corporations, thus did not support the Shenzhen Green Ark Investment Co., Ltd.’s unsafe right of defense against Hong Kong Investment Company based on the “Cooperation Framework Agreement”; meanwhile, as Green Oriental Company and Shenzhen Green Ark Investment Co., Ltd. were also independent corporations, the court did not support Shenzhen Green Ark Investment Co., Ltd.’s claim for a set-off based on the reason that Green Oriental Company had the creditor’s rights to Hong Kong Investment Company. The civil judgment numbered (2019) Yue 03 Min Zhong 24451 upheld the first- instance judgment. On January 8, 2021, Shenzhen Yongsheng Electric Power Equipment Co., Ltd. claimed that it had acquired the creditor’s rights as confirmed by the civil judgment numbered (2019) Yue 03 Min Zhong 24451, and applied to the People’s Court of Qianhai Cooperation Zone, Shenzhen City, Guangdong Province for 230 Infore Environment Technology Group Co., Ltd. 2023 Annual Report compulsory enforcement. Later, Shenzhen Green Ark Investment Co., Ltd. raised an enforcement objection, which had been accepted by the court with the case number of (2021) Yue 0391 Zhi Yi 240. According to the civil judgment numbered [2021] Yue 0391 Min Chu 5890 issued by the People’s Court of Qianhai Cooperation Zone, Shenzhen City, Guangdong Province on July 31, 2022, the court ruled to revoke the defendant Hong Kong Investment Company’s transfer of its creditor’s right including equity transfer funds of 21,875,000 yuan and interest thereof, litigation fees of 172,535 yuan and preservation fees of 5,000 yuan to the defendant Shenzhen Yongsheng Electric Power Equipment Co., Ltd. On August 10, 2022, Hong Kong Investment Company and Shenzhen Yongsheng Electric Power Equipment Co., Ltd. filed an appeal to the Shenzhen Intermediate People’s Court. As of December 31, 2023, the Company has accrued other payables of 32,958,498.54 yuan due to Hong Kong Investment Company. 2. Contingent liabilities incurred by providing debt guarantees for other entities and the financial effect (1) Please refer to section XI of notes to the financial statements for details on guarantees provided by the Company to related parties. (2) Guarantees provided by the Company and its subsidiaries to non-related parties 1) Certain customers of the Company use working capital loans provided by banks to finance their purchase. According to the arrangement of the agreement, the Company provides guarantees for such transactions. Meanwhile, the actual controller of the borrower provides a joint and several liability guarantee for the full amount of loans. As of December 31, 2023, the Company’s maximum exposure to these guarantees is 121,356,312.99 yuan. 2) Certain customers of the Company use finance lease services provided by third-party finance lease companies to finance their purchase from the Company. According to the arrangement of the agreement, the Company provides guarantees for third-party finance lease companies. If customers default, the Company will be required to compensate the third-party finance lease companies for the lease payment owed by customers. Meanwhile, the Company has the right to take back and sell the machinery that is the subject of the lease, and keep any sales income exceeding the balance of the guarantee payment to the lease company. As of December 31, 2023, the Company’s maximum exposure to these guarantees is 78,094,828.01 yuan. XIV. Events after the balance sheet date (I) Significant non-adjusting events The Company has no significant non-adjusting events after the balance sheet date. (II) Profit distribution after the balance sheet date According to the “Profit Distribution Plan of 2023” deliberated and approved by the sixth meeting of the tenth session of the Board of Directors on April 26, 2024, the Company intends to distribute cash dividends of 1.25 yuan (tax inclusive) per 10 shares based on the current total share capital of 3,166,941,288 shares (net of shares in the Company’s special account for repurchase), with cash dividends distributed totaling 395,867,661.00 yuan. 231 Infore Environment Technology Group Co., Ltd. 2023 Annual Report (III) Other remarks 1. Recognition of performance compensation and indemnity Pursuant to the “Proposal on Signing the Equity Transfer Agreement and Cooperation Framework Agreement” deliberated and approved by the 13th interim meeting of the seventh session of the Board of Directors of the Company dated October 14, 2015, the Company signed the “Signing of Equity Transfer Agreement” and the “Cooperation Framework Agreement of Shenzhen Green Oriental Environmental Protection Co., Ltd.” (the “Cooperation Framework Agreement”), which stipulated that the Company will acquire 51.00% of equity of Green Oriental Company held by Shenzhen Feima Investment Co., Ltd. and Shenzhen Qianhai Chima Environmental Protection Investment Co., Ltd. at the consideration of 100,548,976.00 yuan, of which, 96,605,878.90 yuan is the consideration for the 49.00% of equity of Green Oriental Company held by Shenzhen Feima Investment Co., Ltd., and 3,943,097.10 yuan is the consideration for the 2.00% of equity of Green Oriental Company held by Shenzhen Qianhai Chima Environmental Protection Investment Co., Ltd. According to the Cooperation Framework Agreement, Hong Kong Investment Company and Zheng Weixian made commitments on the business performance of Green Oriental Company in the next four years as follows: (1) from January 1, 2016 to December 31, 2019, the total net profit realized by the four project companies including Lianjiang Company, Xiantao Company, Funan Company and Shouxian Company (collectively, the “four project companies”) shall not be less than 120 million yuan. Otherwise, Hong Kong Investment Company and Zheng Weixian shall compensate the Company based on the difference between the accumulated committed net profit and the accumulated realized net profit multiplied by 60%, which should be paid in cash. If the cash compensation is insufficient, they will compensate the Company with the equity of Green Oriental Company held by Hong Kong Investment Company; (2) within 24 months after the completion of registration of capital increase at the administration for market regulation, Hong Kong Investment Company shall transfer its Luyi Project and Puyang Project to Green Oriental Company, and smoothly start the construction as scheduled according to the law. If the projects cannot be transferred or partially transferred, unable to be transferred, or are withdrawn and cancelled by the government within the above period, Hong Kong Investment Company and Zheng Weixian will pay the lump sum indemnity of not less than 5.00 million yuan for each project to the Company; (3) before December 31, 2018, the Poyang Project and the Yangxin Project must officially start construction and obtain approval procedures. If the construction cannot be started or the projects are withdrawn by the government, Hong Kong Investment Company and Zheng Weixian will pay the indemnity of not less than 10.00 million yuan for each project to the Company; (4) before December 31, 2020, Jiujiang Green Oriental Renewable Energy Co., Ltd. must start construction and obtain approval procedures. If the construction cannot be started or it is withdrawn by the government, Hong Kong Investment Company and Zheng Weixian will pay the indemnity of not less than 5.00 million yuan for each project to the Company; (5) from January 1, 2016 to December 31, 2019, for the new waste incineration power generation BOT agreement (subject to the signed franchise agreement) signed by Green Oriental Company, the total daily processing capacity shall be not less than 6,500 tons (the daily processing capacity of a single project is not less than 500 tons, at least one of which must be more than 2,000 tons). If the above conditions are not met, Hong Kong Investment Company and Zheng Weixian will compensate Green Oriental Company 5 million yuan for every 500 tons less than the daily processing capacity. 232 Infore Environment Technology Group Co., Ltd. 2023 Annual Report In addition, in 2015, the Company and Hong Kong Investment Company entered into the equity pledge contract, stipulating that Hong Kong Investment Company would pledge 49% of equity of Green Oriental Company for the debt portfolio worth 340 million yuan as agreed in the Cooperation Framework Agreement. The equity pledge was processed by both parties in the same year. As of October 31, 2015, the Company has paid all the equity transfer payments, and Green Oriental Company has been brought into the consolidation scope since the end of October 2015. In April 2016, the Company continued to acquire 19.00% of equity of Green Oriental Company through capital increase of 86.67 million yuan and finally held 70% of equity of Green Oriental Company. On April 23, 2020, Pan-China Certified Public Accountants LLP issued an assurance report numbered PCCPAAR [2020] 3439, which stated that: the audited net profits of the four project companies for the year ended December 31, 2016, 2017, 2018 and 2019 (the lower of net profits before and after deducting non-recurring profit or loss) amounted to 2.16 million yuan, -24.42 million yuan, -19.19 million yuan and -0.63 million yuan, respectively; the accumulated net profit amounted to -42.09 million yuan, which was 162.09 million yuan less than the amount of performance commitment, and the committed net profits from 2016 to 2019 were not achieved. In order to promote the implementation of performance compensation and indemnity, the Company filed a lawsuit with the Intermediate People’s Court of Foshan City, Guangdong Province, requiring Hong Kong Investment Company and Zheng Weixian to pay indemnity and compensation to the Company in accordance with the Cooperation Framework Agreement. On January 13, 2021, the Intermediate People’s Court of Foshan City, Guangdong Province made a first-instance judgment, requesting Hong Kong Investment Company and Zheng Weixian to pay the indemnity of 113.46 million yuan for the unfulfilled performance commitment, i.e., [120 million yuan - (-42.09 million yuan)]*70%; pay the compensation of 50.00 million yuan for the unfinished daily processing volume; at the same time, the court supported the Company to enjoy the priority of compensation within 200 million yuan for the 30% of equity of Green Oriental Company held by Hong Kong Investment Company. On January 29, 2021, Hong Kong Investment Company and Zheng Weixian appealed to the Higher People’s Court of Guangdong Province. On November 2, 2021, the Higher People’s Court of Guangdong Province held a public hearing of the second- instance case. On July 18, 2022, the Higher People’s Court of Guangdong Province made the final judgement of the second instance, ruling that Hong Kong Investment Company and Zheng Weixian shall pay the Company 113.46 million yua