三花智控:2021年半年度报告(英文版)

                    Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




Zhejiang Sanhua Intelligent Controls Co., Ltd.

           2021 Semi-Annual Report




                 August 2021




                                                                                        1
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              Section I Important Notes, Contents and Definitions

     The Board of Directors, Board of Supervisors, Directors, Supervisors and Senior Management
of Zhejiang Sanhua Intelligent Controls Co., Ltd. (hereinafter referred to as the “Company”) hereby
guarantee that the information presented in this report shall be authentic, accurate, complete and
free from material misstatement whether due to false record, misleading statement or significant
omission, and they will bear both individual and joint legal liabilities.

     Zhang Yabo, the Company's legal representative, Yu Yingkui, the person in charge of the
accounting work, and Sheng Xiaofeng, the person in charge of accounting department (Accounting
Officer) hereby declare and warrant that the financial statements in this report are authentic,
accurate and complete.

     All directors attended the board meeting to review this report.

     The Company describes in detail concerning the possible risks and countermeasures in Section
X " Risks and Countermeasures of the Company" under Section III " Management’s Discussion and
Analysis of Operations". Please pay particular attention to relevant contents.

     The Company will not distribute cash dividend, distribute bonus shares, or distribute shares from

capital reserve during the current reporting period.




                                                                                                                    2
                                                                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




                                                                                  CONTENTS




Section I Important Notes, Contents and Definitions...................................................................................................................................... 2
Section II Corporate Profile and Key Financial Indicators............................................................................................................................. 6
Section III Management’s Discussion and Analysis of Operations...........................................................................................................10
Section IV Corporate Governance.................................................................................................................................................................. 26
Section V Environmental and Social Responsibility.....................................................................................................................................29
Section VI Significant Events......................................................................................................................................................................... 34
Section VII Changes in Shares and Information about Shareholders...........................................................................................................52
Section VIII Information of Preferred Shares................................................................................................................................................ 59
Section IX Bonds............................................................................................................................................................................................. 60
Section X Financial Report..............................................................................................................................................................................63




                                                                                                                                                                                                              3
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                          List of Documents Available for Inspection
     1. The 2021 Semi-Annual Report signed by the chairman of the board.
     2. The financial report signed and sealed by the Company's legal representative, chief finance officer and
person in charge of accounting department.
     3. Original copy of all the Company's documents and announcements published on the newspapers
designated by CSRC within the reporting period.
     4. Other documents available for inspection




                                                                                                                      4
                                                       Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report



                                                    Definitions


                  Items                 Refers to                                  Definition

The Company, Company                    Refers to Zhejiang Sanhua Intelligent Controls Co., Ltd.

The Articles of Associations            Refers to Articles of Associations for Zhejiang Sanhua Intelligent Controls Co., Ltd.

The CSRC                                Refers to China Securities Regulatory Commission

SZSE                                    Refers to Shenzhen Stock Exchange

                                        Refers to Zhejiang Securities Regulatory Bureau of China Securities Regulatory
Zhejiang Securities Regulatory Bureau
                                                    Commission

General Meeting                         Refers to General Meeting of Zhejiang Sanhua Intelligent Controls Co., Ltd.

The Board of Directors                  Refers to The Board of Directors of Zhejiang Sanhua Intelligent Controls Co., Ltd.

The Board of Supervisors                Refers to The Board of Supervisors of Zhejiang Sanhua Intelligent Controls Co., Ltd.

Yuan                                    Refers to RMB




                                                                                                                                5
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             Section II Corporate Profile and Key Financial Indicators

I.       Corporate Information

Stock abbreviation          Sanhua Intelligent Controls              Stock code                    002050

Stock Exchange where the
shares of the Company are   Shenzhen Stock Exchange
listed
Name of the Company in
                            浙江三花智能控制股份有限公司
Chinese
Abbr. of the Company name
                            三花智控
in Chinese (if any)
Name of the Company in
                            ZHEJIANG SANHUA INTELLIGENT CONTROLS CO., LTD.
English (if any)
Abbr. of the Company name
                            SANHUA
in English (if any)

Legal Representative        Zhang Yabo


II. Contacts and Contact Information

                                                       Board Secretary                    Securities Affairs Representative

Name                                     Hu Kaicheng                                 Wang Yutong

                                         No. 12 St., No. 289 Xiasha Economic         No. 219, Woxi Avenue, Meizhu, Xinchang,
Address
                                         Development, Hangzhou, Zhejiang, China. Zhejiang, China.

Tel.                                     0571-28020008                               0575-86255360

Fax                                      0571-28876605                               0575-86563888-8288

E-mail                                   shc@zjshc.com                               shc@zjshc.com


III. Other Relevant Information

1. Company’s contact information

Whether there is any change in the Company’s registered address, office address, zip code, website or email
address during the reporting period.
□Applicable √Not applicable
There are no changes in the Company’s registered address, office address, zip code, website or Company email
address during the reporting period. Please refer to 2020 Annual Report for details.




                                                                                                                               6
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2. Information disclosure and place of the report

Whether there is any change in information disclosure and place of the report during the reporting period.
√Applicable □ Not applicable
Newspaper designated by the Company for
                                                         China Securities Journal, Securities Times
information disclosure
Website specified by CSRC for release of the
                                                         http://www.cninfo.com.cn
Semi-Annual Report
Place where the Semi-Annual Report is available for
                                                         Office of the Board of Directors
inspection

Note: The newspapers designated by the Company were changed from Securities Times and Shanghai Securities News to China
Securities Journal and Securities Times on July 1.


IV. Key Accounting Information and Financial Indicators

Whether the Company performed a retrospective adjustment or restatement of previous accounting data
□Yes √ No
                                                                                                                         Unit: RMB

                                                                               Corresponding Period of
                                               Current Reporting Period                                     YoY Change (%)
                                                                                     Last Year

 Operating Revenue (RMB)                                 7,674,081,761.69             5,318,178,626.77                    44.30%

 Net Profit Attributable to Shareholders
                                                          823,881,221.70                643,481,717.35                    28.03%
 of the Listed Company (RMB)

 Net Profit Attributable to Shareholders
 of the Listed Company after Deducting                    719,771,655.78                582,191,161.67                    23.63%
 Non-recurring Gains and Losses (RMB)

 Net Cash Flow Generated from
                                                          825,216,623.26              1,104,651,449.42                   -25.30%
 Operational Activities (RMB)

 Basic Earnings per Share (RMB/Share)                                   0.23                       0.18                   27.78%

 Diluted Earnings per Share (RMB/Share)                                 0.23                       0.18                   27.78%

 Weighted Average ROE                                              8.04%                         6.74%                     1.30%

                                               At the End of the Current
                                                                               At the End of Last Year      YoY Change (%)
                                                     Reporting Period

 Total Assets (RMB)                                    21,007,499,311.90             17,032,530,730.18                    23.34%

 Net Assets Attributable to Shareholders
                                                       10,444,077,103.59             10,064,794,519.57                     3.77%
 of the Listed Company (RMB)




                                                                                                                                   7
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V. Differences in Accounting Data between Domestic and Overseas Accounting Standards

1. Difference in net profits and net assets of this financial report between International Financial
   Reporting Standards and China Accounting Standards

□ Applicable √ Not applicable
There is no difference in net profits and net assets of this financial report between International Financial
Reporting Standards (IFRS) and China Accounting Standards in the reporting period.

2. Difference in net profits and net assets of this financial report between Overseas Accounting Standards
    and China Accounting Standards

□ Applicable √ Not applicable
There is no difference in net profits and net assets of this financial report between Overseas Accounting Standards
and China Accounting Standards in the reporting period.

VI. Items and Amounts of Non-recurring Gains and Losses

√ Applicable □ Not applicable
                                                                                                                              Unit: RMB

                               Items                                            Amount                            Note

 Gains or Losses from Disposal of Non-current Assets
                                                                                    -1,623,182.25
 (Including the Write-off for the Accrued Impairment of Assets)

 The Government Subsidies Included in the Current Gains and
 Losses (Excluding the Government Subsidies Closely Related
                                                                                   64,034,111.05
 to Regular Businesses of the Company and Issued in the Quota
 or Quantity Based on the National Standards)

                                                                                                    In order to avoid the price risk
                                                                                                    of raw materials and prevent
                                                                                                    exchange rate risk, the
                                                                                                    Company and its subsidiaries
 Gains or Losses Attributed to the Changes in Fair Value for                                        have carried out derivatives
 Holding Held-for-trading financial assets, Derivative Financial                                    business, including futures
 Assets, Trading Financial Liabilities, Derivative Financial                                        contracts and foreign exchange
 Liabilities and Investment Income from Disposal of                                                 forward contracts. From
                                                                                   60,752,561.20
 Held-for-trading financial assets, Derivative Financial Assets,                                    January to June 2021, the
 Trading Financial Liabilities, Derivative Financial Liabilities                                    futures income was RMB
 and Other Debt Investment, Excluding Hedging Businesses                                            19.8287 million and the
 Related to the Regular Business Operation of the Company                                           forward income was RMB
                                                                                                    40.9239 million; from January
                                                                                                    to June 2020, the futures
                                                                                                    income was RMB 1.0049
                                                                                                    million and the forward loss


                                                                                                                                       8
                                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                                   was RMB 24.4147 million.
                                                                                                   Thus, the amount of
                                                                                                   non-recurring profit and loss
                                                                                                   items fluctuated greatly in the
                                                                                                   first half of the two years.
                                                                                                   Meanwhile, the exchange loss
                                                                                                   from January to June 2021 was
                                                                                                   RMB 51.1292 million, and the
                                                                                                   exchange gain from January to
                                                                                                   June 2020 was RMB 45.6796
                                                                                                   million. According to the
                                                                                                   Explanatory Announcement
                                                                                                   No. 1 of Information
                                                                                                   Disclosure of Listed
                                                                                                   Companies – Non-recurring
                                                                                                   Gains and Losses, foreign
                                                                                                   exchange gains and losses are
                                                                                                   recurring gains and losses,
                                                                                                   while futures and forward gains
                                                                                                   and losses are non-recurring
                                                                                                   gains and losses.

 Non-operating Income and Expenditures Other Than the Above                          891,333.20

 Other Gains and Losses Items that Fit in the Definition of
                                                                                     702,064.60
 Non-recurring Gains and Losses

 Less: Impact of Income Tax                                                       20,201,305.62

      Impact of Minority Equity (after tax)                                          446,016.26

 Total                                                                           104,109,565.92                    --

The reasons for the non-recurring gains and losses items defined or listed in the Explanatory Announcement No. 1
of Information Disclosure of Listed Companies – Non-recurring Gains and Losses are defined as recurring gains
and losses items
□Applicable √ Not applicable
In the reporting period, the Company did not define any non-recurring gains and losses items defined and listed in
the Explanatory Announcement No. 1 of Information Disclosure of Listed Companies – Non-recurring Gains and
Losses, as recurring gains and losses items.




                                                                                                                                     9
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     Section III Management’s Discussion and Analysis of Operations

I.   The Principal Business of the Company during the Reporting Period

1.   Main business
The Company adheres to the "Focus on Leading, Innovation, Transcendence" business path, concentrating on the
research and application of heat pump technology and thermal management system products, focusing on the
development of environmental thermal management solutions for heat exchange and temperature intelligent
control, and is committed to the professional operation in the fields of building HVAC, electrical equipment and
automotive thermal management. According to the different stages and characteristics of strategic business and
their development, the Company's business is mainly divided into refrigeration and air conditioning electrical
components business and automotive components business.


The main products of refrigeration and A/C electrical parts business include Four-way Reversing Valve, Electronic
Expansion Valve, Solenoid Valve, Microchannel Heat Exchanger, Omega Pump, etc., which are widely used in
A/C, refrigerator, cold chain logistics, dishwasher and other fields; the main products of automotive components
business include Thermal Expansion Valve, Receiver Drier, Electronic Expansion Valve, Thermal Management
Integrated Module for new energy vehicle, Electronic Water Pump, etc., which are widely used in both traditional
fuel vehicles and new energy vehicle.


During the reporting period, the Company's main business and its business model have not changed.


2.   Industry development
(1) Refrigeration and air conditioning electrical components industry
China is the largest manufacturing base of A/C and refrigerators in the world, and its production and sales volume
ranks first globally. In line with the trend of environmental protection in the world, energy-saving inverter and
intelligent technology have become the trend, which puts forward a series of new requirements for the market of
control components, and also brings new development opportunities. As a leading enterprise in the refrigeration
control components industry, the Company will follow the trend, firmly seize this opportunity and develop
steadily.


(2) Automotive components industry
The global automobile industry has been developing rapidly, which also drives the market demand of automotive
A/C and thermal management products to continue to grow substantially. In recent years, the development of new
energy vehicles has become a certain trend, which puts forward higher and more updated requirements for A/C
and thermal management products no matter in hybrid, pure electric or hydrogen energy vehicles. Focusing on the
in-depth research on A/C and thermal management system of new energy vehicles, the Company has gradually
developed from components to module and subsystems, and has become the cooperative partner of Valeo,
Volkswagen, Mercedes Benz, BMW, Volvo, Toyota, GM, Geely, BYD, SAIC, NIO, etc.




                                                                                                                      10
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3.   Industry position of the Company
The Company is the world's largest manufacturer of refrigeration control components and the world's leading
manufacturer of automotive A/C and thermal management system control components. "Sanhua" refrigeration
intelligent control components have become a world-famous brand, and a strategic partner of many automobile
enterprises and air-conditioning refrigeration appliance manufacturers in the world. After more than 30 years of
development, the Company has established a leading position in the global market of refrigeration and automotive
thermal management. The market share of the Company's Electronic Expansion Valve, Four-way Reversing
Valve, Solenoid Valve, Microchannel Heat Exchanger, Automotive Electronic Expansion Valve, Thermal
Management Integrated Module for new energy vehicle, Omega Pump ranks first globally. The market share of
the Company's Service Valve, Vehicle Thermal Expansion Valve and Receiver Drier is in the leading position in
the world.

II. Core Competitiveness Analysis

1. Clear strategic layout
The Company adheres to the " Focus on Leading, Innovation, Transcendence " business path, takes the research
and application of heat pump technology and thermal management system products as the core, firmly grasps the
development theme of energy conservation, environmental protection and intelligent control, upgrades from
"mechanical parts development" to "system control technology solution development of electronic control
integration". The Company’s product series are expanded from household A/C and refrigerator components to the
field of commercial A/C and commercial refrigeration, and extending to the direction of inverter control
technology and system integration and upgrading. Meanwhile, after the injection of automotive business, it gives
full play to the synergetic effect with the original business, continues to deepen the research and development of
automobile A/C and new energy vehicle thermal management system components, and actively explores the
deeper application of thermal management components and subsystems in the automotive field, so as to provide
global customers with competitive environmental intelligent control solutions.


2. Technology leading, customer oriented
As a national high-tech enterprise, the Company has always adhered to the technological route of independent
development and innovation. For decades, it has focused on the field of intelligent control and vigorously
cultivated core technologies with independent intellectual property rights. It has been authorized 2,529 patents
both domestic and abroad, including 1,235 invention patents. The first priority of the Company is to meet the
needs of customers with all products, services and quality.


3. Quality assurance, scale economy effect
The Company's products cover refrigeration A/C electrical components and automotive components industry. The
market share of the Company's Electronic Expansion Valve, Four-way Reversing Valve, Solenoid Valve,
Microchannel Heat Exchanger, Automotive Electronic Expansion Valve, Thermal Management Integrated Module
for new energy vehicle, Omega Pump ranks first globally. The market share of Service Valve, Vehicle Thermal
Expansion Valve and Receiver Drier is in the leading position in the world. The Company has established a
complete and strict quality assurance system, achieved ISO9001, IATF16949, QC080000 quality system
certification. The Company won the National Quality Award, Zhejiang Quality Award, and won the high
comments from JCI, Daikin, Carrier, Gree, Midea, Haier, Toyota, Benz, Volkswagen, Valeo and other well-known


                                                                                                                      11
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enterprises at home and abroad.


4. Advantages of global marketing network and production base
Since the 1990s, the Company has focused on opening up international market, and established overseas
subsidiaries in Japan, South Korea, Singapore, the United States, Mexico, Germany and other places to build a
global marketing network. At the same time, it established overseas production bases in the United States, Poland,
Mexico, Vietnam and other places, and has preliminary ability to cope with production globalization. And in
practice, we have trained a number of management talents who can meet the requirements of business
development in different countries and regions.

III. Main Business Analysis

Overview
In the first half of 2021, the Company actively responded to the changes and challenges, and the overall operation
of the Company were elevated even under the harsh background of continued impact from overseas epidemic,
sharp rise in international shipping prices and raw material prices, appreciation of RMB exchange rate against US
dollar. Specific to the industry in which the Company operates, the refrigeration and air conditioning electrical
parts business has maintained a growth trend due to the stable recovery of the home appliance industry and the
upgrading of consumption concept. The automotive components business continues to improve due to the
prosperity of the new energy vehicle market, which drives the rapid growth of revenue.


During the reporting period, the operating revenue is RMB 7.674 billion, a year-on-year increase of 44.30%. The
operating profit is RMB 1.008 billion, a year-on-year increase of 36.29%. The net profit attributable to
shareholders of listed company is RMB 824 million, a year-on-year increase of 28.03%. The operating revenue of
refrigeration and air conditioning electrical components business is RMB 5.563 billion, a year-on-year increase of
27.37%. The operating revenue of automotive components business is RMB 2.111 billion, a year-on-year increase
of 122.14%.


(I). Actively improve efficiency, reduce costs and optimize the layout of globalization
1. Refrigeration and air conditioning electrical components business
In terms of the refrigeration and air conditioning electrical components business, the Company improves
efficiency and reduces costs through automation transformation, lean production, staff reduction and efficiency
increase, procurement costs reduction, technology costs reduction and other measures. Although AWECO's
business is affected by the European epidemic, it has realized positive net profit monthly through tapping
potentials of internal management and supply chain transformation. After relocation of the new plant in Vietnam
Sanhua, it has been recognized by major customers in the United States, and costs of some products have been
lower than that in China. In addition, the Company actively expands kitchen appliances and other products, so as
to further broaden the Company's new development fields, continuously improve its sustainable profitability and
market competitiveness.


2. Automotive components business
The automotive components business will continue to support its strategic customers. In order to satisfy the
increasing need of capacity, the Company orderly promotes the production line construction and mass production

                                                                                                                       12
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


project of the Mexican factory and Shaoxing Binhai factory. On the premise of ensuring the projects of existing
customers, the Company develops competitive products, technologies, and actively obtains new orders. In terms
of internal management, the Company takes first-class enterprises as models, establishes a global quality
management system, so as to improve the quality management of factories at home and abroad. Facing the
challenge of the continuous rise of raw material prices and freight expenses, the Company spares no effort to
promote the costs reduction, efficiency increase, and linkage rise of product prices through active communication
with downstream customers.


(II). Continue to promote investment projects and improve the profitability
The Company's convertible bonds were listed and traded in Shenzhen Stock Exchange on June 30, 2021, raising
RMB 3 billion, which is mainly used in "Construction project of commercial refrigeration and air conditioning
intelligent control components with a capacity of 65 million sets per year" and "Technical transformation project
of high-efficiency and energy-saving control components for refrigeration and air conditioning with a capacity of
50.5 million sets per year”. The implementation of these projects will help promote the development of the
Company's products towards a more efficient and energy-saving direction, further improve the Company's
business scale and competitive advantage, optimize the business structure, improve the Company's sustainable
profitability, and lay a solid foundation for the Company to achieve medium and long-term strategic development
goals.


(III). Enhance product strength and improve patent layout of strategic products
During the reporting period, the Company invested RMB 352 million in R&D, a year-on-year increase of 46.73%.
The Company spares no effort in enhancing its product strengthen through continuous R&D investment. And the
Company participates in market competition with new products and new technologies through continuous
optimization iteration. In terms of patent layout, the Company will continue to implement "High-quality patents
and high-value patents" by promoting the patent layout of key products. By the end of the reporting period, 2,529
patents have been authorized at home and abroad, including 1,235 invention patents.


Changes in key financial data over the corresponding period of last year
                                                                                                                      Unit: RMB

                                                     Corresponding Period of
                          Current Reporting Period                              YoY Change (%)            Note of Change
                                                           Last Year

Operating Revenue            7,674,081,761.69           5,318,178,626.77             44.30%

Operating Cost               5,601,811,479.62           3,839,626,004.70             45.89%

Selling Expenses              321,908,769.46             257,442,500.54              25.04%

Administrative Expenses       374,431,536.21             315,350,745.15              18.73%

                                                                                                         Mainly due to the
                                                                                                         increase of foreign
Financial Expenses             49,304,431.90             -29,893,397.04             264.93%
                                                                                                        exchange loss in the
                                                                                                           current period

                                                                                                         Mainly due to the
Income Tax Expenses           170,607,121.16             99,017,348.37               72.30%
                                                                                                      increase of total profit in



                                                                                                                                13
                                                             Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                                            the current period, and
                                                                                                           difference resulted from
                                                                                                                adjustment of final
                                                                                                           settlement of income tax

                                                                                                                Mainly due to the
                                                                                                                 increase of R&D
R&D Investments                  352,175,549.62            240,012,928.38               46.73%                  personnel salary +
                                                                                                            investment in material
                                                                                                                    and power

                                                                                                           Mainly due to increase in
                                                                                                            purchasing goods and
                                                                                                           receiving labor services,
Net Cash Flows from
                                 825,216,623.26            1,104,651,449.42             -25.30%                decrease in net cash
Operating Activities
                                                                                                            inflow from sales, and
                                                                                                               increase in employee
                                                                                                                  compensation

                                                                                                                Mainly due to the
                                                                                                                  increase in net
                                                                                                           redemption of financial
Net Cash Flows from
                                -313,010,482.60            -679,392,344.66              53.93%             products and the increase
Investment Activities
                                                                                                           in the purchase of fixed,
                                                                                                               intangible and other
                                                                                                                 long-term assets

                                                                                                                Mainly due to the
Net Cash Flows from                                                                                         issuance of convertible
                                2,299,821,228.74           310,293,217.58               641.18%
Financing Activities                                                                                           bonds in the current
                                                                                                                      period

Net Increase in Cash and
                                2,794,780,733.88           709,896,200.36               293.69%
Cash Equivalents

Whether there is significant change in Company’s profit structure or profit source during the reporting
period
□ Applicable √ Not applicable
There is no such case during the reporting period
Revenue structure
                                                                                                                            Unit: RMB

                                Current Reporting Period               Corresponding Period of Last Year

                                              Proportion to total                        Proportion to total       YoY Change (%)
                              Amount                                     Amount
                                                   revenue                                    revenue

 Total Revenue             7,674,081,761.69                 100%     5,318,178,626.77                 100%                     44.30%

 Classified by Industry

 General                   7,674,081,761.69             100.00%      5,318,178,626.77              100.00%                     44.30%


                                                                                                                                      14
                                                           Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


 Equipment
 Manufacturing
 Industry

 Classified by Products

 Refrigeration A/C
 Electrical               5,563,260,796.57               72.49%    4,367,942,431.64               82.13%                27.37%
 Components

 Automotive
                          2,110,820,965.12               27.51%      950,236,195.13               17.87%               122.14%
 Components

 Classified by Region

 Domestic                 3,703,718,671.83               48.26%    2,479,768,382.72               46.63%                49.36%

 Overseas                 3,970,363,089.86               51.74%    2,838,410,244.05               53.37%                39.88%

Industries, products or regions accounting for more than 10% of the Company’s operating revenue or
operating profit
√ Applicable □ Not applicable
                                                                                                                       Unit: RMB

                                                                           YoY Change (%)
                        Operating                                                            YoY Change (%) YoY Change (%)
                                       Operating cost     Gross margin       of operating
                         revenue                                                             of operating cost   of gross margin
                                                                               revenue
Classified by industry

General
Equipment
                     7,674,081,761.69 5,601,811,479.62            27.00%            44.30%            45.89%              -0.80%
Manufacturing
Industry

Classified by product

Refrigeration A/C
Electrical           5,563,260,796.57 4,015,609,936.55            27.82%            27.37%            26.91%               0.26%
Components

Automotive
                     2,110,820,965.12 1,586,201,543.07            24.85%           122.14%           134.80%              -4.06%
Components

Classified by region

Domestic             3,703,718,671.83 2,655,946,262.75            28.29%            49.36%            52.18%              -1.33%

Overseas             3,970,363,089.86 2,945,865,216.87            25.80%            39.88%            40.66%              -0.41%

In the case that the Company's main business data statistics are adjusted during the reporting period, the
Company's main business data of the latest reporting period were adjusted according to the statistics at the
end of the last reporting period
□ Applicable √ Not applicable


Explanations on relevant data changed for more than 30% on a year-over-year base


                                                                                                                                   15
                                                      Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


√Applicable □Not applicable
The operating revenue of automotive components business is increased by 122.14% over the same period of last
year. It is mainly due to the continuous improvement of new energy vehicle market. Thus, it drives automotive
components business to grow rapidly and operating costs are increased correspondingly.

IV. Non-Main Business Analysis

√Applicable □Not applicable
                                                                                                                     Unit: RMB

                                             Proportion to net
                          Amount                                            Note of Change               Sustainability
                                                  profit

                                                                   Gains and losses of futures
                                                                   contract settlement, foreign
 Investment
                           97,400,173.01                   9.67%   exchange forward contract      No
 Income
                                                                   settlement, bank financial
                                                                   product, etc.

                                                                   Floating income of futures
 Gains and Losses
                                                                   contracts, foreign exchange
 from Change of           -32,695,697.38                -3.25%                                    No
                                                                   forward contracts, bank
 Fair Value
                                                                   financial products, etc.

                                                                   Income from nonpayment,
                                                                   compensation and
 Non-operating
                            2,472,160.14                   0.25%   liquidated damages, gains      No
 Income
                                                                   from retirement of fixed
                                                                   assets, etc.

                                                                   Loss on retirement of fixed
 Non-operating
                            3,604,181.70                   0.36%   assets, litigation             No
 Expenditures
                                                                   compensation loss, etc.

 Credit
                          -48,442,168.40                -4.81%     Bad debt loss, etc.            No
 Impairment Loss

 Assets                                                            Loss on impairment of
                          -18,614,580.55                -1.85%                                    No
 Impairment Loss                                                   inventories, etc.

 Gains on
                                                                   Gains on disposal of fixed
 Disposal of                    400,172.51                 0.04%                                  No
                                                                   assets
 Properties

                                                                                                  The government grants of
                                                                                                  VAT refund of civil welfare
                                                                                                  enterprises and software
 Other Gains               72,081,481.22                   7.16%   Government subsidies, etc.
                                                                                                  product VAT exceeding tax
                                                                                                  burden are sustainable,
                                                                                                  while the rest are not



                                                                                                                                16
                                                               Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                                         sustainable


V. Analysis of Assets and Liabilities

1. Material changes of assets

                                                                                                                            Unit: RMB

                         At the End of Current
                                                       At the End of Last Year         YoY
                           Reporting Period
                                                                                      Change         Note of significant change
                                     Percentage of                    Percentage of
                         Amount                         Amount                         (%)
                                      total assets                     total assets

 Cash and Bank      6,301,888,182.                   3,489,687,568.                                Mainly due to the issuance of
                                       30.00%                           20.49%        9.51%
     Balance               65                             14                                   convertible bonds in the current period

    Accounts        3,100,856,902.                   2,355,613,299.
                                       14.76%                           13.83%        0.93%
   Receivable              63                             57

                    2,917,803,847.                   2,307,761,706.
   Inventories                         13.89%                           13.55%        0.34%
                           90                             46

   Investment
                     9,398,176.54       0.04%        10,067,588.96       0.06%        -0.02%
    property

Long-term Equity
                    17,828,507.38       0.08%        15,219,616.68       0.09%        -0.01%
   Investment

                    3,965,615,647.                   3,839,408,059.
  Fixed Assets                         18.88%                           22.54%        -3.66%
                           93                             45

 Construction in    914,010,795.5
                                        4.35%        628,730,529.07      3.69%        0.66%
    Progress               9

   Short-term       521,381,193.6
                                        2.48%        383,088,296.60      2.25%        0.23%
   Borrowings              4

   Contractual
                    44,096,560.86       0.21%        42,581,607.67       0.25%        -0.04%
   Liabilities

   Long-term                                         1,707,918,994.
                    17,425,691.86       4.37%                           10.03%        -5.66%
   Borrowings                                             87

  Non-current
                    1,012,141,338.
  liabilities due                       4.82%        130,553,923.87      0.77%        4.05%
                    04
 within one year

                    2,588,449,353.                                                                 Mainly due to the issuance of
 Bonds Payable                         12.32%                                         12.32%
                           66                                                                  convertible bonds in the current period


2. Main overseas assets

√Applicable □ Not applicable


                                                                                                                                     17
                                                                      Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                                                          Proportion
                                                                                                                                         Whether
                                                                                          Control                         of overseas
                                       Assets                                                                                            there is
 Content of                                                           Operation          measures          Income          assets in
                     Formation          Scale          Location                                                                         significant
      Assets                                                               Mode          to ensure         (RMB)          net assets
                                       (RMB)                                                                                            impairment
                                                                                        asset safety                        of the
                                                                                                                                             risk
                                                                                                                          Company

                                                                      R&D,
 Sanhua                                                               Manufactur
                                                                                        Financial
 Internation                                                          ing,
                                                                                        supervision
 al Inc.             Equity          1,676,659,       The United      Marketing                          108,267,40
                                                                                        and                                             No
 (USA)               Investment      000.33           States          and                                6.20
                                                                                        external
 (Consolidat                                                          Investment
                                                                                        audit
 ed)                                                                  Manageme
                                                                      nt

 Sanhua                                                               Manufactur
 Internation                                                          ing,              Financial
 al                                                                   Marketing         supervision
                     Equity          3,020,615,                                                          48,785,981
 Singapore                                            Singapore       and               and                                             No
                     Investment      669.89                                                              .05
 PTE. Ltd.                                                            Investment        external
 (Consolidat                                                          Manageme          audit
 ed)                                                                  nt


3. Assets and liabilities measured at fair value

√ Applicable □ Not applicable
                                                                                                                                          Unit: RMB

                                       Profit and      Cumulative
                                       loss of fair     changes in         Impairment         Current
                       Opening                                                                             Current sale        Other         Closing
       Items                         value change        fair value    accrued in the         purchase
                        balance                                                                                 amount       changes         balance
                                     in the current     included in    current period         amount
                                         period           equity

Financial Assets

1.
Held-for-tradi
ng       financial
assets               752,224,861.7                                                                         562,087,170.                 189,524,312
                                      -613,379.14
(Excluding                8                                                                                      50                            .14
Derivative
Financial
Assets)

2.Derivative                         -31,937,779.9                                                                                      26,392,706.
                     58,330,486.53
Financial                                   1                                                                                                  62



                                                                                                                                                       18
                                                               Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Assets

                  810,555,348.3 -32,551,159.0                                                 562,087,170.                 215,917,018
Subtotal
                        1              5                                                           50                           .76

                  810,555,348.3 -32,551,159.0                                                 562,087,170.                 215,917,018
        Total
                        1              5                                                           50                           .76

   Financial                                                                                                               7,726,384.6
                   7,939,957.91    -213,573.29
  Liabilities                                                                                                                       2

Whether there were any material changes on the measurement attributes of major assets of the Company
during the reporting period:
□ Yes √ No

4. Limitation of asset rights as of the end of reporting period

                Items                        Closing Book value (RMB)                           Reasons for being restricted
                                                                                    Margin deposits, margin deposits in futures
Cash and Bank Balance                                106,963,410.23
                                                                                    institutions, litigation frozen bank deposits
Notes Receivable                                    1,579,929,231.31                Pledge for financing
Total                                               1,686,892,641.54                                          --


VI. Analysis of Investments

1. Overview

√Applicable □ Not applicable
  Investment during the Reporting Period         Investment over the Corresponding Period
                                                                                                        Fluctuation Rate (%)
                    (RMB)                                  of Last Year (RMB)

                1,581,000,000.00                                  0.00                                        0.00%


2. Significant equity investment during the reporting period

□Applicable √Not applicable

3. Significant non-equity investment during the reporting period

□Applicable √ Not applicable

4. Financial asset investment

(1)Securities Investments

□ Applicable √ Not applicable




                                                                                                                                        19
                                 Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


(2)Derivatives Investments

√Applicable □ Not applicable




                                                                                                    20
                                                                                                                        Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report
                                                                                                                                                                         Unit: RMB in 10 thousand

                                                                                                                                                                            Proportion
                                                                                                                                                                             of closing
                                                                                                                                                                            investment
                                                                                                                                                                                            Actual
                                                                                                                                                                             amount to
                                                            Initial                                                Purchased        Sold                                                    gain or
Operation                                                                                                                                      Impairmen                        the
               Whether         Whether        Type of     investment                                  Opening       amount         amount                      Closing                       loss
party     of                                                                           Terminatio                                                   t                       Company’
               related          related     derivatives   amount of     Initial date                investment     during the    during the                   investment                    during
derivatives                                                                              n date                                                 provisions                     s net
               party          transaction   investment    derivatives                                 amount        reporting     reporting                    amount                         the
investment                                                                                                                                       (if any)                    assets at
                                                          investment                                                 period        period                                                  reporting
                                                                                                                                                                             the end of
                                                                                                                                                                                            period
                                                                                                                                                                                the
                                                                                                                                                                             reporting
                                                                                                                                                                              period

                                            Futures
                                            contracts,
Futures                                     foreign
Company,       No             No            exchange
Bank                                        forward
                                            contracts,
                                            etc.

Total                                                                        --            --

Capital source of derivatives investment                  Company’s self-fund

Prosecution (if applicable)                               Not applicable

Announcement date for approvals of derivatives
investment from the board of directors (if any)

Announcement date for approvals of derivatives
investment from the general meeting (if any)

Risk analysis and control measures (including but not     In order to avoid the price risk of raw materials and exchange rate risk, the Company and its subsidiaries have carried out derivative

                                                                                                                                                                                                   21
                                                                                                                    Zhejiang Sanhua Intellige
limited to, market risk, liquidity risk, credit risk,   business, including futures contracts and foreign exchange forward contracts. The Com
operational risk, legal risk, etc.) of holding          relevant provisions listed in the Management Measures for Future Hedging Business an
derivatives during the reporting period                 Hedging Business.

Change of market price or fair value of invested
derivatives during the reporting period; specific
methods, related assumptions and parameter setting      --
of the derivatives’ fair value analysis should be
disclosed

During the current reporting period, whether there
was significant changes of accounting policies and
                                                        Not applicable
accounting principles of the Company’s derivatives
comparing to the prior reporting period

Specific opinions on the Company’s derivatives
investments and risk control from independent           Not applicable
directors
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




VII.        Disposal of Significant Assets and Equity

1. Disposal of significant assets

□ Applicable √ Not applicable
During the reporting period, there was no disposal of significant assets

2. Sale of significant equity

□ Applicable √ Not applicable

VIII. Analysis of Major Subsidiaries and Investees

√ Applicable □ Not applicable
Information about major subsidiaries, and investees that contribute above 10% of the Company’s net profit

                                                                                                                      Unit:RMB


  Company        Company         Principal   Registered       Total                    Operating     Operating
                                                                         Net assets                                  Net profit
    name            type         business      capital       assets                     revenue        profit

                             Refrigerati
                             on and A/C
 Zhejiang
                             electrical
 Sanhua
                             component       RMB 250        3,637,761,   3,279,261,    774,323,41    111,526,87      95,553,871
 Refrigerati    Subsidiary
                             s               million           589.65        854.94          5.75          9.24             .33
 on Group
                             manufactur
 Co., Ltd.
                             ing and
                             marketing

                             Refrigerati
 Hangzhou                    on and A/C
 Sanhua                      electrical
 Microchan                   component       RMB 360        1,800,554,   1,108,549,    770,019,63   81,182,913       63,929,318
                Subsidiary
 nel Heat                    s               million           246.62        765.66          9.79           .69             .98
 Exchanger                   manufactur
 Co., Ltd.                   ing and
                             marketing

                             Refrigerati
 Zhejiang                    on and A/C
 Sanhua                      electrical      RMB 50         2,537,279,   123,385,28    1,945,291,    2,372,959.
                Subsidiary                                                                                           843,027.66
 Trading                     component       million           807.18          1.81        190.28               94
 Co., Ltd.                   s
                             marketing

 Zhejiang       Subsidiary   Automotiv       RMB 1.46       5,169,808,   3,247,619,    2,110,820,   308,193,12       258,125,37


                                                                                                                                  23
                                                      Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


 Sanhua                     e             billion          588.81        222.58        965.12          6.38          9.09
 Automotiv                  component
 e                          s
 Componen                   manufactur
 ts Co., Ltd                ing and
                            marketing

 Zhejiang                   Refrigerati
 Sanhua                     on and A/C
                                          RMB
 Commerci                   electrical                  1,707,953,   1,646,698,                 -2,147,004.   -2,147,004.
               Subsidiary                 1.64929
 al                         component                      772.71        303.74                          73            73
                                          billion
 Refrigerati                s
 on Co., Ltd                marketing

                            Refrigerati
                            on and A/C
                            electrical
 Sanhua                     component
 Internation                s
 al Limited                 manufactur    USD 37.55     1,676,659,   359,644,42    1,648,045,   116,132,36    108,267,40
               Subsidiary
 (USA)                      ing           million          000.33          5.37        127.66          6.44          6.20
 (Consolida                 marketing
 ted)                       and
                            investment
                            manageme
                            nt

                            Refrigerati
                            on and A/C
                            electrical
 Sanhua
                            component
 Internation
                            s
 al                                       USD
                            manufactur                  3,020,615,   627,453,69    2,727,490,   62,021,135    48,785,981
 Singapore     Subsidiary                 105.57983
                            ing                            669.89          3.86        087.22           .54           .05
 PTE. Ltd.                                3 million
                            marketing
 (Consolida
                            and
 ted)
                            investment
                            manageme
                            nt

Information about obtaining and disposal of subsidiaries during the reporting period
□ Applicable √ Not applicable

IX. Structural Entities Controlled by the Company

□ Applicable √ Not applicable



                                                                                                                         24
                                                    Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


X. Risks and Countermeasures of the Company

(1) Risk of price fluctuation of raw materials
The raw materials needed by the Company are copper and aluminum, which account for a large proportion of the
cost composition of the products. Therefore, the fluctuation of the market price of raw materials will bring large
cost pressure to the Company. The Company will reduce the adverse impact of raw material price fluctuations
through the establishment of linkage pricing mechanism, hedging operation of commodity futures, and timely
negotiation with customers.


(2) The risk of rising labor cost
The labor costs are rising year by year, which reduces the profit margin of the Company to a certain extent. In the
future, the Company will continue to improve the level of intelligent manufacturing by continuously promoting
lean production, process improvement and technical transformation.


(3) Exchange rate fluctuation risks
The Company's export volume is large, involving North America, Europe, Japan, Southeast Asia and other regions.
Due to the changes in regional trade policies, the Company's daily operation will be affected. The Company deals
with interregional trade risks through transferring production capacity to foreign countries. In addition, the
fluctuation of exchange rate will also have a certain impact on the profit. According to the actual situation, the
Company deals with and reduces this risk by means of forward foreign exchange settlement and establishing
overseas production bases in the United States, Poland, Mexico, India and other places.




                                                                                                                       25
                                                       Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




                                   Section IV Corporate Governance

I.     Annual General Meeting and Extraordinary General Meetings Convened During the
         Reporting Period

1. Annual General Meeting convened during the current reporting period

                                         Proportion of
       Meeting              Nature       participating         Convened Date        Disclosure Date      Disclosure Index
                                           investors
                                                                                                       The announcement
                                                                                                       of the resolution of
                                                                                                       the first
                                                                                                       extraordinary
First Extraordinary                                                                                    general meeting of
                      Extraordinary
General Meeting in                                69.04% February 25, 2021        February 26, 2021    shareholders in 2021
                      General Meeting
2021                                                                                                   No. 2021-012 was
                                                                                                       published in
                                                                                                       Securities Times,
                                                                                                       Shanghai Securities
                                                                                                       News and CNINFO
                                                                                                       The announcement
                                                                                                       on the resolution of
                                                                                                       the annual general
                                                                                                       meeting of
2020 Annual           Annual General
                                                                                                       shareholders in 2020
General Meeting of    Meeting of                 69. 77% April 16, 2021           April 17, 2021
                                                                                                       (2021-029) was
Shareholders          Shareholders
                                                                                                       published in
                                                                                                       Securities Times,
                                                                                                       Shanghai Securities
                                                                                                       News and CNINFO.

                                                                                                       The announcement
                                                                                                       on the resolution of
                                                                                                       the second
Second                                                                                                 extraordinary
Extraordinary         Extraordinary                                                                    general meeting of
                                                 67. 29% June 24, 2021            June 25, 2021
General Meeting in    General Meeting                                                                  shareholders in 2021
2021                                                                                                   (2021-055) was
                                                                                                       published in
                                                                                                       Securities Times,
                                                                                                       Shanghai Securities



                                                                                                                              26
                                                      Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                                          News and CNINFO.


2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting
   rights

□ Applicable √ Not applicable

II. Changes of directors, supervisors and senior management personnel

√ Applicable □Not applicable
      Name             Position           Type            Date                                 Reasons

                                                                        Mr. Zhu Hongjun, an independent director, resigned
                                                                        on December 28, 2020 and continued to perform the
                                                                        duties of independent director and the audit
                                                                        committee of the board of directors. On February 25,
                   Independent                     February 25,
 Pan Yalan                           Appointment                        2021, the general meeting of shareholders agreed to
                   Director                        2021
                                                                        appoint Ms. Pan Yalan as an independent director of
                                                                        the Company. Ms. Pan Yalan will take the relevant
                                                                        position of Mr. Zhu Hongjun in the audit committee
                                                                        of the sixth board of directors of the Company.




III. Profit distribution and conversion of capital reserve to share capital during the reporting
       period

□ Applicable √ Not applicable
The Company will not distribute cash dividend, distribute bonus shares, or distribute shares from capital reserve
during the current reporting period.

IV. The Implementation of an Equity Incentive Plan, Employee Stock Incentive Plan, or
      Other Incentive Plans

√Applicable □Not applicable
On June 8, 2021, The 18th extraordinary meeting of the 6th board of directors and the 16th extraordinary meeting
of the 6th board of supervisors approved The Proposal on Adjusting Repurchase Price of Restricted Stock
Incentive Plan in 2020, The Proposal on Repurchase and Cancellation of Some Restricted Stocks, The Proposal
on the Achievement of Unlocking Conditions of the First Vesting Period for the 2020 Stock Incentive Plan, and
The Proposal on Adjusting the Repurchase Price of the Restricted Stock Incentive Plan in 2018. The specific
contents of the announcements are disclosed as follows:
               Important issues                       Disclosure Date                            Disclosure Index

Announcement on the Resolution of the 18th
                                                       June 9, 2021                         http://www.cninfo.com.cn
Interim Meeting of the 6th Board of Directors




                                                                                                                               27
                                                  Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Announcement on the Resolution of the 16th
Interim Meeting of the 6th Board of                June 9, 2021                      http://www.cninfo.com.cn
Supervisors

Announcement on Adjusting the Repurchase
Price of the Restricted Stock Incentive Plan in    June 9, 2021                      http://www.cninfo.com.cn
2018

Announcement on adjusting the exercise price
of stock appreciation right incentive plan in      June 9, 2021                      http://www.cninfo.com.cn
2018

Announcement on Adjusting Repurchase Price
                                                   June 9, 2021                      http://www.cninfo.com.cn
of Restricted Stock Incentive Plan in 2020

Announcement on the Achievement of
Unlocking Conditions of the First Vesting          June 9, 2021                      http://www.cninfo.com.cn
Period for the 2020 Stock Incentive Plan

Announcement on Cancellation of Stock
                                                   June 9, 2021                      http://www.cninfo.com.cn
Appreciation Right

Announcement on Repurchase and
                                                   June 9, 2021                      http://www.cninfo.com.cn
Cancellation of Some Restricted Stocks




                                                                                                                     28
                                                             Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




                     Section V Environmental and Social Responsibility

I.      Significant environmental issues

Whether the Company or any of its subsidiaries should be categorized as a critical pollutant enterprise defined by
National Environmental Protection Department
√ Yes □ No

                 Name of
                   main
     Name of                                           Distribution    Emission                                Approved         Over
                 pollutants     Emission   Number of                               Emission         Total
Company or                                             of emission concentratio                                  total        standard
                    and          mode       outlets                                standards      emissions
 subsidiary                                              outlets          n                                    emission       emission
                characteristi
                c pollutants

                                                                                      The
                                                                                  limitation of
                                                                                    COD in
     Zhejiang
                                                                                  GB8978-19
     Sanhua                                                                                                                      Not
                                                                                       96                      61.867 T
 Intelligent       COD          Nanotube      1           North       ≦500mg/L                    21.53 T                   exceeding
                                                                                   Integrated                    /year
     Controls                                                                                                                the standard
                                                                                  Wastewater
     Co., Ltd
                                                                                   Emission
                                                                                  Standard is
                                                                                   500mg / L

                                                                                      The
                                                                                   limitation
                                                                                    listed in
                                                                                  DB33/887-2
                                                                                  013 Indirect
     Zhejiang                                                                      Emission
     Sanhua                                                                        Limits of                                     Not
                 Ammonia                                                                                        6.186 T
 Intelligent                    Nanotube      1           North       ≦35mg/L     Nitrogen        2.153 T                   exceeding
                 Nitrogen                                                                                        /year
     Controls                                                                         and                                    the standard
     Co., Ltd                                                                     Phosphorus
                                                                                   Pollutants
                                                                                      from
                                                                                   Industrial
                                                                                  Wastewater
                                                                                  is 35mg / L

     Zhejiang                                                                         The
                                 Direct                                                                                          Not
     Sanhua         SO2                       1           North       ≦50mg/m3 limitation         0.402 T    2.15 T /year
                                emission                                                                                     exceeding
 Intelligent                                                                        listed in

                                                                                                                                         29
                                                  Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


 Controls                                                            GB13271-2                            the standard
  Co., Ltd                                                               014
                                                                      Emission
                                                                     Standard of
                                                                         Air
                                                                      Pollutants
                                                                     for Boilers
                                                                     is 50mg/m3

                                                                     According
                                                                      to the low
                                                                      Nitrogen
                                                                      emission
 Zhejiang
                                                                     requirement
  Sanhua                                                                                                      Not
               Nitrogen    Direct                                     s of local                10.06 T
 Intelligent                          1        North    ≦50mg/m3                   1.879 T                exceeding
                Oxide     emission                                   government                  /year
 Controls                                                                                                 the standard
                                                                      , the limit
  Co., Ltd
                                                                      value of
                                                                      gas-fired
                                                                      boiler is
                                                                     50mg / m3

                                                                         The
 Zhejiang
                                                                      limitation
  Sanhua                                                                                                      Not
                                                                        from                    9.205 T
Refrigeratio    COD       Nanotube    1        South    ≦500mg/l                   2.377 T                exceeding
                                                                     GB8979-19                   /year
  n Group                                                                                                 the standard
                                                                     96 is 500mg
  Co., Ltd
                                                                         /L

                                                                         The
 Zhejiang
                                                                      limitation
  Sanhua                                                                                                      Not
                Total                                                   from
Refrigeratio              Nanotube    1        South     ≦2.0mg/l                  0.079 T        /       exceeding
               Copper                                                GB8979-19
  n Group                                                                                                 the standard
                                                                        96 is
  Co., Ltd
                                                                       2.0mg/l



Construction and operation of pollution control facilities
Adhering to the advanced management concept, the Company takes "developing energy-saving and low-carbon
economy, creating a green quality environment" as its own responsibility, constantly surpasses, and becomes an
important creator and contributor of human green quality living environment with limited resources and unlimited
wisdom.


1. In terms of waste water treatment, the Company responded to the construction of "five water treatment",
   "eliminating inferior V-type water" and "zero direct discharge of sewage" in the whole province. The
   Company renovated the rainwater and sewage outlets in the factory area, implemented the separation of
   rainwater and sewage, and installed cut-off valves and video monitoring equipment at the Company's

                                                                                                                       30
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    rainwater discharge outlets, and collected and treated the early rainwater. There are two wastewater treatment
    stations in the factory. The sewage treatment stations have been equipped with standardized sewage outlets
    and set up discharge outlet signs. Online monitoring device, solenoid valve flowmeter and card swiping
    sewage system are installed at the discharge outlet, which has been connected with the environmental
    protection department. The monitoring indicators include pH, COD, total copper, total zinc, total chromium,
    total nickel and flow. Wastewater treatment: The Company has entrusted a third-party professional treatment
    unit for treatment. The discharge indicators of the Company's internal control wastewater are stricter than the
    environmental discharge standard. The final treated wastewater is discharged into the sewage collection pipe
    network of the industrial zone and sent to Shengxin sewage treatment plant for retreatment.


2. Waste gas treatment: The Company has acid pickling, electroplating waste gas, welding dust, ultrasonic
   cleaning and other waste gas. All kinds of waste gas discharge cylinders are equipped with corresponding
   waste gas treatment devices. The acid pickling and electroplating waste gas absorption and treatment tower is
   installed with automatic dosing system, and the waste gas is discharged to air after treatment. At the same
   time, in order to win the blue-sky defense activity, the Company carried out low Nitrogen emission
   transformation of the Company's gas boilers in accordance with the requirements of relevant official
   departments in 2019. In 2021, the transformation and upgrading of VOCs treatment facilities in industrial
   enterprises are being implemented. At the same time, in order to reduce generation of VOCs, aqueous
   cleaning is used to replace organic solvent cleaning.


3. Solid waste and soil (groundwater) treatment: all kinds of hazardous waste of the Company are entrusted to
   the third qualified party for disposal, the general solid waste with utilization value is recycled, the domestic
   waste is cleared and transported by the environmental sanitation station, and the construction waste is cleaned
   and transported by the construction unit. The Company also tests the soil and groundwater every year and
   publishes them on the corresponding website In March 2020, Sanhua Refrigeration Group carried out a
   special site investigation on soil and groundwater in Xialiquan plant area, and prepared an investigation report.
   No pollution was found. In July 2020, the Company became one of the first "waste free factories" in Shaoxing
   City.


4. Noise control: The Company's existing main noise is workshop production noise, air compressor room, waste
   gas and waste water treatment equipment noise. Equipment layout is reasonable, and trees are planted around
   the workshop. Noise at factory meets the standard.


5. The "three wastes" pollution control facilities of the Company are in normal and stable operation, the
   pollutants are discharged based on the standard, and there is no environmental pollution event.


Environmental Impact Assessment (EIA) of construction projects and other administrative permits for
environmental protection
1. Since 2010, the Company has invested in the construction of Meizhu Sanhua Industrial Estate in Xinchang
County, and has obtained 25 EIA replies. All the projects have passed. In August 2020, the Company obtained the
national emission permit.


2. Zhejiang Sanhua Refrigeration Group Co., Ltd. has invested in Xialiquan of Xinchang County since 2013, and

                                                                                                                       31
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has obtained 6 EIA replies. All the projects have passed.


Emergency Response Plan
1. The Company re-write Emergency Response Plan in April 2021, and filed with Xinchang Environmental
Protection Bureau on June 10, 2021 (Record No. 330624-2021-06-M).


2. In order to manage environmental emergencies and reduce the environmental hazards caused by sudden
environmental pollution accidents, Zhejiang Sanhua Refrigeration Group Co., Ltd. re-compiled Emergency
Response Plan for Environmental Pollution Accidents of Zhejiang Sanhua Refrigeration Group Co., Ltd.
(simplified version) in October 2018, which was filed with Xinchang County Environmental Protection Bureau on
October 29, 2018 (Record No. 3306242018013).


Environmental self-monitoring program
The Company formulated Self-monitoring Scheme of Zhejiang Sanhua Intelligent Control Co., Ltd. according to
the requirements of the superior environmental protection department, combined with the actual production
situation and the actual needs of environmental management of the Company. The sewage station of the Company
is equipped with a laboratory, and the detection is conducted by a specially assigned person. On line automatic
monitoring equipment such as pH, COD, TOC, total copper, total zinc, total chromium, total nickel, flow rate etc.
are installed at the Company's total wastewater discharge outlet, so as to achieve the combination of automatic
monitoring and manual testing. For the pollution factors such as suspended matters, total Phosphorus, Ammonia
Nitrogen, total Iron and Petroleum, the Company entrusts a third-party testing agency to carry out regular
monitoring. The monitoring results are published regularly on the enterprise self-monitoring information
disclosure platform of Zhejiang Province.


Zhejiang Sanhua Refrigeration Group Co., Ltd. has good pollutant emission monitoring and management ability,
and can timely inform the environmental protection administrative department and the public of the monitoring
information. According to the actual production situation and the actual needs of environmental management, the
environmental protection laboratory of wastewater treatment station is set up, and the detection is carried out by
specially assigned person daily. On line automatic monitoring equipment such as pH, COD, TOC, total copper and
flow rate are installed at the total wastewater discharge outlet of the Company. The combination of automatic
monitoring and manual testing effectively ensures the timeliness and effectiveness of monitoring. At the same
time, a third-party testing Company is entrusted to carry out regular monitoring. The monitoring results are
published regularly on the enterprise self-monitoring information disclosure platform of Zhejiang Province.


Administrative penalties for environmental problems during the reporting period
Not applicable


Other environmental information that should be disclosed
Not applicable


Other environmental information
Not applicable

                                                                                                                       32
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II. Social Responsibility

NO




                                                                                               33
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                                    Section VI Significant Events

I.   Complete and Incomplete Commitments of the Company and Its Actual Controller,
       Shareholders, Related parties, Acquirers, and Other Related Parties by the End of the
       Reporting Period

√ Applicable □ Not applicable


                    Giver of                                                       Date of        Term of
 Commitments                      Nature        Details of commitments                                          Performance
                 commitments                                                    commitments     commitments

                                            When the number of shares sold
                 Zhang Yabo,                through listing and trading in
                 controlling                Shenzhen Stock Exchange
                                  Other
 Commitments     shareholder                reaches 1% of the total number
                                  comm                                          November 21,                    Strict
 of share        Sanhua                     of shares of the Company, it                       Long term
                                  itment                                        2005                            performance
 reform          Holding                    shall make an announcement
                 Group Co.,                 within two working days from
                 Ltd.                       the date of the occurrence of the
                                            fact.

                                            The commitment made at the
                                  Comm
                                            time of IPO, it shall not engage
                                  itment
                                            in the same production,
                                  on
                                            operation or business as the
                                  horizo
                                            Company in the future. In order
                 Zhang Daocai,    ntal
                                            to avoid business competition
                 controlling      compe
                                            with the Company and clarify
                 shareholder      tition,
                                            the non-competition                                                 Strict
                 Sanhua           related                                       June 7, 2005   Long term
 Commitments                                obligations, Sanhua Holding                                         performance
                 Holding          party
 made during                                Group, on behalf of itself and
                 Group Co.,       transa
 asset                                      its subsidiaries with more than
                 Ltd.             ctions
 restructuring                              50% equity, makes a
                                  and
                                            commitment to Sanhua
                                  capital
                                            intelligent controls to avoid
                                  occup
                                            possible horizontal competition.
                                  ation


                 Zhang Daocai,    Comm      Zhang Daocai and Sanhua
                 controlling      itment    holding group, the controlling      January 5,                      Strict
                                                                                               Long term
                 shareholder      on        shareholder of the Company,         2009                            performance
                 Sanhua           horizo    promise that there will not be



                                                                                                                              34
                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Holding         ntal      any competition with Sanhua
Group Co.,      compe     intelligent controls in the
Ltd.            tition,   business scope being or already
                related   carried out in the future.
                party
                transa
                ctions
                and
                capital
                occup
                ation

                          Sanhua Holding Group
                          promises: after the completion
                          of this transaction, Sanhua
                          Holding Group and Sanhua
                          intelligent controls will sign an
                Comm      agreement according to law,
                itment    perform legal procedures, fulfill
                on        the obligation of information
                horizo    disclosure and handle
Zhang Daocai,   ntal      significant matters for approval
controlling     compe     in accordance with relevant
shareholder     tition,   laws, regulations, articles of
                                                              January 5,                        Strict
Sanhua          related   association of Sanhua                                Long term
                                                              2009                              performance
Holding         party     intelligent controls. In the
Group Co.,      transa    process of implementation of
Ltd.            ctions    related party transactions, we
                and       will follow the principle of
                capital   legality and reasonableness,
                occup     ensure the fairness of prices and
                ation     procedures, and make certain
                          that the legitimate interests of
                          Sanhua intelligent controls and
                          other shareholders will not be
                          damaged through related party
                          transactions.

Zhang Daocai,   Comm      In order to avoid horizontal
Zhang Yabo,     itment    competition with Sanhua
Zhang           on        intelligent controls, Zhang
Shaobo,         horizo    Daocai, Zhang Yabo, Zhang                                             Strict
                                                              July 24, 2015    Long term
controlling     ntal      Shaobo, Sanhua Holding Group                                          performance
shareholder     compe     the controlling shareholder of
Sanhua          tition,   the Company, and Sanhua
Holding         related   Lvneng Industry, the trading


                                                                                                              35
                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Group Co.,       party     partner made the following
Ltd., Zhejiang   transa    commitments:
Sanhua           ctions    1. I (or the Company) will not
Lvneng           and       directly or indirectly engage in
Industrial       capital   or participate in the business
Group Co.,       occup     that constitutes potential direct
Ltd.             ation     or indirect competition with
                           Sanhua Intelligent Controls and
                           its subordinate enterprises;
                           guarantee that legal and
                           effective measures shall be
                           taken to urge other enterprises
                           controlled by me (or the
                           Company) not to engage in or
                           participate in any business
                           competing with Sanhua
                           Intelligent Controls and its
                           subordinate enterprises.
                           2. If Sanhua Intelligent Controls
                           further expands its business
                           scope, I (or the Company) and
                           other controlled enterprises will
                           not compete with Sanhua
                           Intelligent Controls' expanded
                           business; if it is possible to
                           compete with Sanhua Intelligent
                           Controls' business after
                           expansion, I (or the Company)
                           and other controlled enterprises
                           will withdraw from Sanhua
                           Intelligent Controls in the
                           following ways of competition:
                           A. Stop the businesses that
                           compete or may compete with
                           Sanhua Intelligent Controls; B.
                           Inject the competitive business
                           into Sanhua Intelligent
                           Controls; C. Transfer the
                           competitive business to an
                           unrelated third party.
                           3. If I (or the Company) and
                           other enterprises controlled by
                           me (or the Company) have any
                           business opportunities to


                                                                                                             36
                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                           engage in and participate in any
                           activities that may compete
                           with Sanhua Intelligent
                           Controls' business operation,
                           they shall immediately inform
                           Sanhua Intelligent Controls of
                           the above business
                           opportunities. If Sanhua
                           Intelligent Controls makes an
                           affirmative reply to take
                           advantage of the business
                           opportunity within a reasonable
                           period specified in the notice, it
                           shall do its best to give the
                           business opportunity to Sanhua
                           Intelligent Controls.
                           4. In case of breach of the
                           above commitment, I (or the
                           Company) is willing to bear all
                           responsibilities arising
                           therefrom and fully compensate
                           all direct or indirect losses
                           caused to Sanhua Intelligent
                           Controls.

                           In order to standardize the
                           related party transactions with
                           Sanhua Intelligent Controls,
Zhang Daocai,    Comm
                           Zhang Daocai, Zhang Yabo,
Zhang Yabo,      itment
                           Zhang Shaobo, Sanhua Holding
Zhang            on
                           Group the controlling
Shaobo,          horizo
                           shareholder of the Company
controlling      ntal
                           and Sanhua Lvneng Industrial
shareholder      compe
                           the trading partner made the
Sanhua           tition,
                           following commitments:                                               Strict
Holding          related                                        July 24, 2015   Long term
                           1. I (or the Company) and the                                        performance
Group Co.,       party
                           controlled enterprises will
Ltd., Zhejiang   transa
                           reduce the related party
Sanhua           ctions
                           transactions with Sanhua
Lvneng           and
                           intelligent controls as far as
Industrial       capital
                           possible, and will not use their
Group Co.,       occup
                           own status as shareholders of
Ltd.             ation
                           Sanhua intelligent controls to
                           seek for superior rights in terms
                           of business cooperation and


                                                                                                              37
                                        Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                         other aspects compared with
                         other third parties;
                         2. I (or the Company) will not
                         take advantage of the right to
                         enter into a transaction with
                         Sanhua intellectual controls
                         using the position as a
                         shareholder.
                         3. If there are necessary and
                         unavoidable related party
                         transactions, I (or the Company)
                         and the controlled enterprises
                         will sign agreements with
                         Sanhua intelligent controls in
                         accordance with the principles
                         of fairness, follow legal
                         procedures, and perform the
                         information disclosure
                         obligations in accordance with
                         the requirements of relevant
                         laws, regulatory documents and
                         the articles of association. It
                         shall also perform relevant
                         internal decision-making and
                         approval procedures to ensure
                         that it will not conduct
                         transactions with Sanhua
                         intelligent controls on terms
                         that are obviously unfair
                         compared with the market price,
                         and will not use such
                         transactions to engage in any
                         behavior that damages the
                         legitimate rights and interests of
                         Sanhua intelligent controls and
                         other shareholders.

Zhang Daocai,            Zhang Daocai, Zhang Yabo,
Zhang Yabo,              Zhang Shaobo and Sanhua
Zhang                    holding Group, the controlling
                Other
Shaobo,                  shareholder of the Company,                                          Strict
                Comm                                          July 24, 2015   Long term
controlling              made the following                                                   performance
                itment
shareholder              commitments: after the
Sanhua                   completion of the transaction,
Holding                  Sanhua intelligent controls will


                                                                                                            38
                                           Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Group Co.,                 continue to improve the
Ltd.                       corporate governance structure
                           and independent operation of
                           the Company management
                           system in accordance with the
                           requirements of relevant laws
                           and regulations and the articles
                           of Association, and continue to
                           maintain the independence of
                           Sanhua intelligent controls in
                           business, assets, finance,
                           institutions, personnel, etc. to
                           protect the interests of all
                           shareholders.

                           1. I (or the Company) and the
                           controlled enterprises will
                           reduce the related party
                           transactions with Sanhua
                           intelligent controls as far as
                           possible, and will not use the
                           position as a shareholder of
                           Sanhua intellectual controls to
Zhang Daocai,    Comm
                           seek the superior rights for
Zhang Yabo,      itment
                           business cooperation with
Zhang            on
                           Sanhua intelligent controls
Shaobo,          horizo
                           compared with other third
controlling      ntal
                           parties;
shareholder      compe
                           2. I (or the Company) will not
Sanhua           tition,
                           use my position as a                September 18,                     Strict
Holding          related                                                        Long term
                           shareholder of Sanhua               2017                              performance
Group Co.,       party
                           intellectual controls to seek for
Ltd., Zhejiang   transa
                           the priority right to cooperate
Sanhua           ctions
                           with Sanhua intellectual
Lvneng           and
                           controls;
Industrial       capital
                           3. If there are necessary and
Group Co.,       occup
                           unavoidable related party
Ltd.             ation
                           transactions, I (or the Company)
                           and the controlled enterprises
                           will sign agreements with
                           Sanhua intelligent controls in
                           accordance with the principles
                           of fairness, follow legal
                           procedures, and perform the
                           information disclosure


                                                                                                               39
                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                           obligations in accordance with
                           the requirements of relevant
                           laws, regulatory documents and
                           the articles of association. It
                           shall also perform relevant
                           internal decision-making and
                           approval procedures to ensure
                           that it will not conduct
                           transactions with Sanhua
                           intelligent controls on terms
                           that are obviously unfair
                           compared with the market price,
                           and will not use such
                           transactions to engage in any
                           behavior that damages the
                           legitimate rights and interests of
                           Sanhua intelligent controls and
                           other shareholders.

                           1. I (or the Company) will not
                           directly or indirectly engage in
                           or participate in any business
                           that may constitute potential
                           direct or indirect competition
                           with Sanhua intelligent controls
Zhang Daocai,    Comm
                           and its subordinate enterprises;
Zhang Yabo,      itment
                           guaranteed that legal and
Zhang            on
                           effective measures will be taken
Shaobo,          horizo
                           to urge other enterprises
controlling      ntal
                           controlled by me (or the
shareholder      compe
                           Company) not to engage in or
Sanhua           tition,
                           participate in any business that     September 18,                   Strict
Holding          related                                                        Long term
                           is competitive with Sanhua           2017                            performance
Group Co.,       party
                           intelligent controls and its
Ltd., Zhejiang   transa
                           subordinate enterprises
Sanhua           ctions
                           business.
Lvneng           and
                           2. If Sanhua intelligent controls
Industrial       capital
                           further expands its business
Group Co.,       occup
                           scope, I (or the Company) and
Ltd.             ation
                           other enterprises controlled by
                           me (or the Company) will not
                           compete with Sanhua intelligent
                           controls' expanded business; if
                           it is possible to compete with
                           Sanhua intelligent controls'


                                                                                                              40
                                       Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                        business after expansion, I (or
                        the Company) and other
                        enterprises controlled by me (or
                        the Company) will withdraw
                        from Sanhua intelligent controls
                        in the following ways of
                        competition: A. stop the
                        businesses that compete or may
                        compete with Sanhua intelligent
                        controls; B. inject the
                        competitive business into
                        Sanhua intelligent controls; C.
                        transfer the competitive
                        business to an unrelated third
                        party.
                        3. If I (or the Company) and
                        other enterprises controlled by
                        me (or the Company) have any
                        business opportunities to
                        engage in and participate in any
                        activities that may compete
                        with Sanhua intelligent controls'
                        business operation, they shall
                        immediately inform Sanhua
                        intelligent controls of the above
                        business opportunities. If
                        Sanhua intelligent controls
                        makes an affirmative reply to
                        take advantage of the business
                        opportunity within a reasonable
                        period specified in the notice, it
                        shall do its best to give the
                        business opportunity to Sanhua
                        intelligent controls.
                        4. In case of breach of the
                        above commitment, I (or the
                        Company) is willing to bear all
                        responsibilities arising
                        therefrom and fully compensate
                        all direct or indirect losses
                        caused to Sanhua intelligent
                        controls.

Zhang Daocai,   Other   After the completion of the          September 18,                   Strict
                                                                             Long term
Zhang Yabo,     comm    transaction, the listed Company      2017                            performance


                                                                                                           41
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                Zhang             itment   will continue to improve the
                Shaobo,                    corporate governance structure
                controlling                and independent operation of
                shareholder                the Company management
                Sanhua                     system in accordance with the
                Holding                    requirements of relevant laws
                Group Co.,                 and regulations and the articles
                Ltd., Zhejiang             of association, continue to
                Sanhua                     maintain the independence of
                Lvneng                     the listed Company in business,
                Industrial                 assets, finance, institutions,
                Group Co.,                 personnel and other aspects, and
                Ltd.                       effectively protect the interests
                                           of all shareholders.

 Are the
 commitments
                Yes
 fulfilled on
 time


II. The Company’s funds used by the controlling shareholder or its related parties for
      non-operating purposes.

□ Applicable √ Not applicable
No such case during the reporting period.

III. Illegal provision of guarantees for external parties

□ Applicable √ Not applicable
No such case during the reporting period.

IV. Engagement and disengagement of the CPA firm

Whether this financial report was audited
□Yes √ No
This report was not audited.

V. Explanation Given by the Board of Directors and Supervisory Committee Regarding the
     “Non-standard Auditor’s Report” Issued by the CPA Firm for the Reporting Period

□ Applicable √ Not applicable




                                                                                                                             42
                                                Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


VI. Explanation Given by the Board of Directors Regarding the “Non-standard Auditor’s
      Report” Issued by the CPA Firm for the Prior Year

□ Applicable √ Not applicable

VII.    Bankruptcy and Restructuring

□ Applicable √ Not applicable
No such case during the reporting period.

VIII. Material Litigation and Arbitration

Material Litigation and Arbitration
□ Applicable √ Not applicable
No such case during the reporting period.


Other litigations
□ Applicable √ Not applicable

IX. Punishments and Rectifications

□ Applicable √ Not applicable
No such case during the reporting period.

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

□ Applicable √ Not applicable

XI. Significant Related-party Transaction

1. Significant related-party transactions arising from routine operation

□Applicable √Not applicable
No such case in the reporting period.

2. Related-party transactions regarding purchase and disposal of assets or equity

□Applicable √Not applicable
No such case in the reporting period.

3. Significant related-party transactions arising from joint investments on external parties

□Applicable √Not applicable
No such case in the reporting period.

                                                                                                                   43
                                                     Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


4. Related credit and debt transactions

□ Applicable √Not applicable
No such case in the reporting period.

5. Transactions with related financial companies and financial companies controlled by the Company

□Applicable √Not applicable
No such case in the reporting period.

6. Other significant related party transactions

□Applicable √Not applicable
No such case in the reporting period.

XII.     Significant Contracts and Their Execution

1. Matters on trusteeship, contracting, and leasing

(1)Trusteeship

□ Applicable √ Not applicable
No such case in the reporting period.

(2)Contracting

□ Applicable √ Not applicable
No such case in the reporting period.

(3)Leasing

√Applicable □ Not applicable
Illustration of lease
Aweco Polskas Appliance sp.z.o.o sp.k, a wholly-owned subsidiary of the Company, acquired 2 buildings through
capital lease.


Items with profit and loss exceeding 10% of the total profit of the Company in the report period
□ Applicable √ Not applicable
During the reporting period, there is no leasing project with profit and loss of more than 10% of the total profit of
the Company.

2. Significant guarantees

√Applicable □ Not applicable

                                                                                                                        44
                                                           Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




(1) Guarantees
                                                                                                         Unit: RMB in 10 thousand

            External Guarantees from the Company and its Subsidiaries (Excluding Guarantees to the Subsidiaries)

           Disclosure
                                                                                                                        Guarante
             date of                                                                     Counter
                                       Actual         Actual                                                              e for
Guaranteed announcem Guarantee                                    Type of    Collateral guarant Term of        Due or
                                     Occurrence Guarantee                                                                Related
  Party     ent of the    Cap                                    Guarantee    (if any)    ee (if   Guarantee      Not
                                        Date         Amount                                                             Parties or
            guarantee                                                                     any)
                                                                                                                           Not
               cap

                                               Company's Guarantees to Subsidiaries

           Disclosure
                                                                                                                        Guarante
             date of                                                                     Counter
                                       Actual         Actual                                                              e for
Guaranteed announcem Guarantee                                    Type of    Collateral guarant Term of        Due or
                                     Occurrence Guarantee                                                                Related
  Party     ent of the    Cap                                    Guarantee    (if any)    ee (if   Guarantee      Not
                                        Date         Amount                                                             Parties or
            guarantee                                                                     any)
                                                                                                                           Not
               cap

SANHUA
INTERNAT
                                                                Joint                              2019.07.0
IONAL      April 3,                  July 5,
                          132,000                     11,529.3 liability                           5-2022.06 No         Yes
SINGAPO 2019                         2019
                                                                guarantee                          .20
RE PTE.
LTD.

SANHUA
                                                                Joint                              2019.12.0
INTERNAT April 3,                    December
                            30,000                   20,026.31 liability                           9-2022.12 No         Yes
IONAL,     2019                      9, 2019
                                                                guarantee                          .09
INC.

SANHUA
                                                                Joint                              2020.06.2
INTERNAT April 29,                   June 24,
                            50,000                    9,690.15 liability                           4-2021.06 Yes        Yes
IONAL,     2020                      2020
                                                                guarantee                          .23
INC.

SANHUA
INTERNAT
                                                                Joint                              2020.09.1
IONAL      April 29,                 September
                          150,000                      7,686.2 liability                           4-2021.09 No         Yes
SINGAPO 2020                         14, 2020
                                                                guarantee                          .13
RE PTE.
LTD.

SANHUA
                                                                Joint                              2020.11.0
INTERNAT April 29,                   November
                          150,000                      7,686.2 liability                           2-2021.11 No         Yes
IONAL      2020                      2, 2020
                                                                guarantee                          .01
SINGAPO



                                                                                                                                   45
                                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


RE PTE.
LTD.

SANHUA
INTERNAT
                                                                   Joint                           2020.06.1
IONAL         April 29,               June 12,
                            150,000                         7,500 liability                        2-2022.12 No         Yes
SINGAPO 2020                          2020
                                                                   guarantee                       .25
RE PTE.
LTD.

SANHUA
INTERNAT
                                                                   Joint                           2020.02.1
IONAL         April 3,                February
                            132,000                      9,992.06 liability                        0-2021.02 Yes        Yes
SINGAPO 2019                          10, 2020
                                                                   guarantee                       .09
RE PTE.
LTD.

SANHUA
                                                                   Joint                           2021.06.2
INTERNAT March 27,                    June 23,
                             50,000                      9,690.15 liability                        3-2022.06 No         Yes
IONAL,        2021                    2021
                                                                   guarantee                       .16
INC.

SANHUA
INTERNAT
                                                                   Joint                           2021.02.1
IONAL         March 27,               February
                            180,000                      9,992.06 liability                        0-2021.08 No         Yes
SINGAPO 2021                          10, 2021
                                                                   guarantee                       .06
RE PTE.
LTD.

SANHUA
INTERNAT
                                                                   Joint                           2021.06.0
IONAL         March 27,               June 8,
                            180,000                      1,537.24 liability                        8-2021.12 No         Yes
SINGAPO 2021                          2021
                                                                   guarantee                       .08
RE PTE.
LTD.

Total Amount of                                      Total Amount of
Guarantees to                                        Guarantees to
Subsidiaries Approved                    280,000 Subsidiaries Actually                                                   21,219.45
during the Reporting                                 Occurred during the
Period (B1)                                          Reporting Period (B2)

Total Amount of                                      Total Balance of
Guarantees to                                        Guarantees Actually
Subsidiaries Approved                 334,428.01 Paid to Subsidiaries at                                                 75,647.46
by the End of the                                    the End of the Reporting
Reporting Period (B3)                                Period (B4)

                                                Subsidiaries' Guarantees to Subsidiaries

Guaranteed Disclosure     Guarantee     Actual          Actual       Type of    Collateral Counter Term of     Due or    Guarante


                                                                                                                                 46
                                                               Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


   Party         date of        Cap      Occurrence Guarantee       Guarantee     (if any)   guarant Guarantee      Not       e for
             announcem                        Date      Amount                                ee (if                        Related
              ent of the                                                                      any)                          Parties or
              guarantee                                                                                                        Not
                  cap

The total amount of the Company's guarantees (the total of the above three items)

                                                      Total Amount of
Total Amount of Guarantees                            Guarantees Actually
Approved during the Reporting                 280,000 Occurred during the                                                  21,219.45
Period (A1+B1+C1)                                     Reporting Period
                                                      (A2+B2+C2)

                                                      Total Balance of
Total Amount of Guarantees                            Guarantees Actually
Approved by the End of the               334,428.01 Paid at the End of the                                                 75,647.46
Reporting Period (A3+B3+C3)                           Reporting Period
                                                      (A4+B4+C4)

Total Amount of Actual Guarantees (A4+B4+C4)
                                                                                                                               7.24%
as a Percentage of the Company's Net Assets

Of which:

Balance of Debt Guarantees Directly or Indirectly
Offered to Guaranteed Objects with Asset-liability                                                                         29,716.46
Ratio Exceeding 70% (E)

Total Amount of the Above Three Guarantees
                                                                                                                           29,716.46
(D+E+F)


3. Entrusted wealth management

√Applicable □ Not applicable
                                                                                                            Unit: RMB in 10 thousand

                                                                                                                  Accrued impairment
                                                                         Balance before           Overdue         amount of overdue
   Specific types          Capital source             Amount
                                                                             maturity        uncollected amount      unrecovered
                                                                                                                   financial product

                        The Company’s
Bank financial
                        owned funds, raised                 75,048.5             18,839.78
products
                        funds

Total                                                       75,048.5             18,839.78



Specific situation of high-risk entrusted financial management with large single amount or low security, poor
liquidity and without guarantee of principal
√Applicable □ Not applicable

                                                                                                                                       47
                                                                                                               Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                                                                                           Unit: RMB in 10 thousand

                                                                                                                                                                   Future
                                                                                                                                   Actual
                                                                                                                                              Amount               entruste
                                                                                                  Referen               Actual     recover                                     Event
                                                                                                                                                 of      Throug       d
                                                                                       Determi      ce                   profit      y of                                     overvie
             Type                                                 Termina   Capital                          Expecte                          provisio   h legal   financia
 Name of                Product     Amoun    Capital     Start                          nation    annualiz              and loss    profit                                    w and
               of                                                  tion     investm                          d return                          n for     procedu      l
  trustee                type         t      source      date                             of      ed rate                in the    and loss                                   relevant
             trustee                                               date       ent                            (if any)                         impair      res or   manage
                                                                                        return      of                  reportin    in the                                     index
                                                                                                                                              ment (if     not      ment
                                                                                                   return               g period   reportin                                   (if any)
                                                                                                                                               any)                plan or
                                                                                                                                   g period
                                                                                                                                                                     not

Industrial
                       "Tianlibao                                                      Floating
and
                         " Net                                               Bank      income
Commerci
                         worth                          Decemb              financia   without
al Bank of                                   Self-fun             January
             Bank      financial    20,000              er 30,                 l       guarant    2.62%                  7.19       7.19                   Yes        -
China                                          ds                 4, 2021
                        product                          2020               product     ee of
Xinchang
                          for                                                  s       principa
sub
                       corporate                                                          l
branch

                       "E-Lingto
Industrial
                        ng" net                                                        Floating
and
                         worth                                               Bank      income
Commerci
                       financial                        Decemb              financia   without
al Bank of                                   Self-fun             January
             Bank      products     5,000               er 31,                 l       guarant    3.03%                  1.66       1.66                   Yes        -
China                                          ds                 4, 2021
                          for                            2020               product     ee of
Xinchang
                       corporate                                               s       principa
sub
                        without                                                           l
branch
                       fixed term

Bank of      Bank       Bank of     10,000   Self-fun   Februar   May 10,    Bank      Floating   3.50%                  80.51      80.51                  Yes        -

                                                                                                                                                                                   48
                                                                                                       Zhejiang Sanhua Intellige
Communi            Communi                 ds        y 10,      2021     financia   income
cations             cations                          2021                   l        with
Co., Ltd.          Yuntong                                               product    guarant
Shaoxing           wealth fix                                               s        ee of
Xinchang           structured                                                       principa
sub                 deposit                                                            l
branch               for 89
                     days
                    (linked
                   exchange
                      rate
                    bullish)

                   Structured
                    deposits                                                        Floating
                    linked                                                Bank      income
BNP
                     with                                      Decemb    financia    with
Paribas                                  Self-fun   June 29,
            Bank    foreign     10,000                         er 13,       l       guarant    3.80%              0          0
Shanghai                                   ds        2021
                   exchange                                     2021     product     ee of
Branch
                    rate of                                                 s       principa
                   Euro and                                                            l
                   US dollar

Guangzho
                                                                                    Floating
u
                                                                          Bank      income
Developm           Xinjiaxin
                                                    October    January   financia    with
ent Bank             No.16               Self-fun
            Bank                9,500                 22,        22,        l       guarant    3.30%            73.74      73.7
Hangzhou           structured              ds
                                                     2020       2021     product     ee of
Xiaoshan            deposit
                                                                            s       principa
sub
                                                                                       l
branch
                                                                                                           Zhejiang Sanhua Intellige

                                                                                        Floating
Heng                                                                          Bank      income
Seng                                                     October   January   financia    with
                     Hengliyin                Self-fun
Bank        Bank                  5,000                    23,       22,        l       guarant    3.35%            39.94      39.9
                        g                       ds
Hangzhou                                                  2020      2021     product     ee of
Branch                                                                          s       principa
                                                                                           l

                                                                                          Fix
China                                                                         Bank      income
CITIC                                                    Decemb    Februar   financia    with
                    Structured                Self-fun
Bank        Bank                  5,000                   er 31,    y 1,        l       guarant    3.55%            15.14      15.1
                      deposit                   ds
Hangzhou                                                  2020      2021     product     ee of
Branch                                                                          s       principa
                                                                                           l

                                  64,500
Total                                【 1】
                                                 --         --       --         --         --       --         0    218.18       --




Note: [1] The above mentioned are the details of the Company's single significant financial management (single amount is m


Entrusted financial management is expected to be unable to recover the principal or there are other situations that may lead to
□ Applicable √ Not applicable
                                                  Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




4. Significant contracts for daily operation

□ Applicable √ Not applicable
No such case in the reporting period.

5. Other significant contracts

□ Applicable √ Not applicable
No such case in the reporting period.

XIII. Other significant events

√Applicable □ Not applicable
The Company completed the issuance and listing of RMB 3 billion convertible bonds. According to China
Securities Regulatory Commission Reply on Approving Public Offering of Convertible Corporate Bonds by
Zhejiang Sanhua Intelligent Controls Co., Ltd (ZJXK [2021] NO. 168), the Company issued 30 million
convertible corporate bonds with a face value of RMB 100 on June 1, 2021. It was listed and traded on Shenzhen
Stock Exchange on June 30, 2021 (the bond is referred to as "Sanhua convertible bond" and the bond code is
"127036"). See Section IX "Bonds" of the 2021 Semi-Annual report for more details.

XIV. Significant events of the Company’s subsidiaries

□ Applicable √ Not applicable




                                                                                                                     51
                                                             Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




     Section VII Changes in Shares and Information about Shareholders

I.     Changes in Shares

1. Changes in shares

                                                                                                                                 Unit: Share

                                Before the change                  Changes in the period (+, -)                     After the change

                                                                              Share
                                                       New                 transferred
                                                                  Bonus
                                Shares       Ratio     Shares                 from        Others       Sub-total    Shares        Ratio
                                                                  share
                                                       Issued                capital
                                                                             reserve

1. Shares subject to           61,268,30                                                                           56,841,96
                                              1.71%                                      -4,426,340 -4,426,340                      1.58%
conditional restriction(s)               5                                                                                   5

                               61,268,30                                                                           56,841,96
3) Other domestic shares                      1.71%                                      -4,426,340 -4,426,340                      1.58%
                                         5                                                                                   5

Of which:     Shares held by
       domestic legal person

     Shares held by domestic 61,268,30                                                                             56,841,96
                                              1.71%                                      -4,426,340 -4,426,340                      1.58%
              natural person             5                                                                                   5

2. Shares without              3,530,333,                                                                          3,534,759
                                             98.29%                                      4,426,340 4,426,340                       98.42%
restriction                          163                                                                                ,503

                               3,530,333,                                                                          3,534,759
1) RMB ordinary shares                       98.29%                                      4,426,340 4,426,340                       98.42%
                                     163                                                                                ,503

                               3,591,601,                                                                          3,591,601
3. Total                                     100.00%                                               0           0                  100.00%
                                     468                                                                                ,468

Reason for the changes in share capital
√ Applicable □ Not applicable
1.At the beginning of each year, the number of locked shares held by senior executives of the Company shall be
recalculated according to 75% of the total shares held by senior executives.

2. On June 18, 2021, the first vesting period of the 2020 restricted stock incentive plan matured, and 4,596,150
restricted shares of 883 incentive objects who meet the unlocking conditions were unlocked. According to the
relevant provisions of shares management for senior executives, 4,426,340 shares were actually unlocked and
listed for circulation.


Approval for changes in share capital


                                                                                                                                          52
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


√ Applicable □ Not applicable
On June 8, 2021, the 18th interim meeting of the sixth board of directors and the 16th interim meeting of the sixth
board of supervisors deliberated and approved The Proposal on the Achievement of Unlocking Conditions of the
First Vesting Period for the 2020 Stock Incentive Plan. There were 883 incentive objects who meet the conditions
for unlocking, and the number of unlocked shares was 4,596,150
Transfer of shares
□Applicable √ Not applicable
Information about the implementation of share repurchase
□Applicable √ Not applicable
The progress on reduction of re-purchase shares by means of centralized bidding
□Applicable √Not applicable
Effects of changes in share capital on the basic earnings per share ("EPS"), diluted EPS, net assets per
share attributable to common shareholders of the Company, and other financial indexes over the last year
and last period
√Applicable □Not applicable
Please refer to the financial report for details.
Other contents that the Company considers necessary or required by the securities regulatory authorities to
disclose
□ Applicable √ Not applicable

2. Changes in restricted shares

√ Applicable □ Not applicable
                                                                                                                                Unit: Share

                  Opening balance                                             Closing balance
    Name of                          Vested in current   Increased in                                Note for
                    of restricted                                              of restricted                         Date of unlocking
   shareholder                            period         current period                          restricted shares
                       shares                                                     shares
                                                                                                                     According to the
                                                                                                                     relevant
                                                                                                Restricted shares
                                                                                                                     provisions of
Zhang Yabo              39,023,400                   0                    0        39,023,400 for senior
                                                                                                                     shares
                                                                                                executives
                                                                                                                     management for
                                                                                                                     senior executives

                                                                                                On June 18,          According to the
                                                                                                2021, 39,000         relevant
                                                                                                restricted shares    provisions of
Wang Dayong                197,600             39,000             33,962              192,562 were unlocked + shares
                                                                                                restricted shares    management for
                                                                                                for senior           senior executives
                                                                                                executives           + equity incentive

                                                                                                On June 18,          According to the
Ni Xiaoming                197,600             39,000             33,962              192,562
                                                                                                2021, 39,000         relevant


                                                                                                                                        53
                                                Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


                                                                                  restricted shares   provisions of
                                                                                  were unlocked + shares
                                                                                  restricted shares   management for
                                                                                  for senior          senior executives
                                                                                  executives          + equity incentive

                                                                                  On June 18,         According to the
                                                                                  2021, 39,000        relevant
                                                                                  restricted shares   provisions of
Chen Yuzhong             197,600      39,000           33,962           192,562 were unlocked + shares
                                                                                  restricted shares   management for
                                                                                  for senior          senior executives
                                                                                  executives          + equity incentive

                                                                                  On June 18,         According to the
                                                                                  2021, 39,000        relevant
                                                                                  restricted shares   provisions of
Hu Kaicheng              197,600      39,000           33,962           192,562 were unlocked + shares
                                                                                  restricted shares   management for
                                                                                  for senior          senior executives
                                                                                  executives          + equity incentive

                                                                                  On June 18,         According to the
                                                                                  2021, 39,000        relevant
                                                                                  restricted shares   provisions of
Yu Yingkui               221,080      39,000           33,962           216,042 were unlocked + shares
                                                                                  restricted shares   management for
                                                                                  for senior          senior executives
                                                                                  executives          + equity incentive

                                                                                                      According to the
                                                                                                      relevant
                                                                                  Restricted shares
                                                                                                      provisions of
Chen Xiaoming               8,325          0                 0             8,325 for senior
                                                                                                      shares
                                                                                  executives
                                                                                                      management for
                                                                                                      senior executives
                                                                                                      According to the
                                                                                  On June 18,
                                                                                                      relevant
                                                                                  2021, 4,401,150
Other incentive                                                                                       provisions of
                       21,225,100   4,401,150                        16,823,950 restricted shares
objects                                                                                               shares
                                                                                  were unlocked +
                                                                                                      management for
                                                                                  equity incentive
                                                                                                      equity incentive

Total                  61,268,305   4,596,150         169,810        56,841,965           --                     --


II. Issuance and Listing of Securities

□ Applicable √ Not applicable

                                                                                                                         54
                                                                 Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


III. Total Number of Shareholders and Their Shareholdings

                                                                                                                                Unit: Share

                                                                        Total Number of Preferred
                                                                        Shareholders (If Any) (Refer
 Total Number of Common
                                                                        to Note 8) Whose Voting
 Shareholders at the End of                                77,721                                                                      0
                                                                        Rights Have Been Recovered
 the Reporting Period
                                                                        at the End of the Reporting
                                                                        Period

              Particulars about shares held by shareholders with a shareholding percentage over 5% or the Top 10 of them

                                                                                    The                           Pledged or frozen
                                                       Total                     number of The number
                                                                    Increase/
                                       Share-holdi     shares                    common       of shares
                                                                    decrease
   Name of              Nature of          ng        held at the                   shares       held
                                                                   during the
  shareholder         shareholder      percentage end of the                     held with     without         Status        Amount
                                                                    reporting
                                          (%)        reporting                    trading      trading
                                                                       period
                                                       period                    restriction restrictions
                                                                                     s

 Sanhua
                    Domestic
 Holding                                              1,057,2      -12,291,8                 1,057,245
                    non-state-owned       29.44%                                                             Pledged         228,128,169
 Group Co.,                                            45,749      31                              ,749
                    corporation
 Ltd.

 Zhejiang
 Sanhua
                    Domestic
 Lvneng                                               742,747                                742,747,9
                    non-state-owned       20.68%                   0
 Industrial                                               ,954                                         54
                    corporation
 Group Co.,
 Ltd

 Hong Kong
 Central            Overseas                          592,539      307,366,2                 592,539,3
                                          16.50%
 Clearing           corporation                           ,322     07                                  22
 Limited

                    Domestic                          52,031,                     39,023,    13,007,80
 Zhang Yabo                                1.45%                   0
                    Individual                            200                         400                0

 China
 Construction
 Bank
 Corporation -                                        36,405,      36,405,56                 36,405,56
                    Others                 1.01%
 Huaxia                                                   561      1                                     1
 energy
 innovation
 stock



                                                                                                                                        55
                                                      Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


securities
investment
fund

Bank of
China
Limited - E
fund strategic
emerging                                    33,182,     33,182,09              33,182,09
                 Others             0.92%
industry                                       090      0                               0
equity
securities
investment
fund

Abu Dhabi
                 Overseas                   26,879,     26,879,72              26,879,72
Investment                          0.75%
                 corporation                   720      0                               0
Authority

Agricultural
Bank of
China
Limited –
Guotai
                                            24,221,     24,221,78              24,221,78
intelligent      Others             0.67%
                                               783      3                               3
automobile
stock
securities
investment
fund

National
Social                                      23,692,                            23,692,94
                 Others             0.66%               34,765
Security                                       945                                      5
Fund-111

China
Merchants
Bank Co.,
Ltd. - E fund
innovative                                  23,290,     -2,235,77              23,290,91
                 Others             0.65%
growth                                         913      4                               3
hybrid
securities
investment
fund

Information about Strategic    No



                                                                                                                         56
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Investors’ or General Legal
Persons’ Becoming Top Ten
Common Shareholders for
Placement of New Shares (If
Any) (Refer to Note 3)

                                     Among the above shareholders, Sanhua Holding Group Co., Ltd., Zhejiang Sanhua Lvneng
Explanation on Associated
                                     Industrial Group Co., Ltd. and Zhang Yabo are the persons acting in concert. The Company
Relationship or Concerted
                                     does not know whether there is any related relationship between other shareholders, or
Actions among the
                                     whether they belong to the persons acting in concert stipulated in the Administrative
Above-Mentioned Shareholders
                                     Measures for the Acquisition of Listed Companies.

 Particulars about Shares Held by Top Ten Common Shareholders Holding Shares That Are Not Subject to Trading Restrictions

                                           Number of Common Shares Held without                          Type of shares
      Name of Shareholder
                                        Restrictions at the End of the Reporting Period               Type            Amount

                                                                                              RMB common
Sanhua Holding Group Co., Ltd.                                               1,057,245,749                         1,057,245,749
                                                                                              stock

Zhejiang Sanhua Lvneng                                                                        RMB common
                                                                              742,747,954                            742,747,954
Industrial Group Co., Ltd                                                                     stock

Hong Kong Central Clearing                                                                    RMB common
                                                                              592,539,322                            592,539,322
Limited                                                                                       stock

China Construction Bank
Corporation - Huaxia energy                                                                   RMB common
                                                                                36,405,561                             36,405,561
innovation stock securities                                                                   stock
investment fund

Bank of China Limited - E fund
                                                                                              RMB common
strategic emerging industry equity                                              33,182,090                             33,182,090
                                                                                              stock
securities investment fund

                                                                                              RMB common
Abu Dhabi Investment Authority                                                  26,879,720                             26,879,720
                                                                                              stock

Agricultural Bank of China
Limited –                                                                                    RMB common
                                                                                24,221,783                             24,221,783
Guotai intelligent automobile                                                                 stock
stock securities investment fund

National Social Security                                                                      RMB common
                                                                                23,692,945                             23,692,945
Fund-111                                                                                      stock

China Merchants Bank Co., Ltd. -
                                                                                              RMB common
E fund innovative growth hybrid                                                 23,290,913                             23,290,913
                                                                                              stock
securities investment fund

China Construction Bank
Corporation - BOCOM Schroder                                                                  RMB common
                                                                                22,714,690                             22,714,690
alpha core hybrid securities                                                                  stock
investment fund


                                                                                                                                57
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


 Explanation of Associated
 Relationship or Concerted
                                    Among the above shareholders, Sanhua Holding Group Co., Ltd., Zhejiang Sanhua Lvneng
 Actions among Top Ten Common
                                    Industrial Group Co., Ltd. are the persons acting in concert. The Company does not know
 Shareholders without Trading
                                    whether there is any related relationship between other shareholders, or whether they belong
 Restrictions, and among Top Ten
                                    to the persons acting in concert stipulated in the Administrative Measures for the
 Common Shareholders without
                                    Acquisition of Listed Companies.
 Trading Restrictions and Top Ten
 Common Shareholders
 Explanation of Top Ten Common
 Shareholders’ Participation in
                                    No
 Securities Margin Trading (If
 Any) (Refer to Note 4)
Any of the Company’s top 10 common shareholders or top 10 non-restricted common shareholders conducted any
agreed buy-back in the reporting period?
□ Applicable √ Not applicable
No such cases during the current reporting period.

IV. Shareholding changes of directors, supervisors, senior management personnel

□ Applicable √ Not applicable

V. Changes in Controlling Shareholders or Actual Controllers

Change of the controlling shareholder during the current reporting period
□ Applicable √ Not applicable
No such cases in the reporting period.

Change of the actual controller during the reporting period
□ Applicable √ Not applicable
No such cases in the current reporting period.




                                                                                                                                   58
                                                   Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




                     Section VIII Information of Preferred Shares

□ Applicable √ Not applicable
No existed preferred shares for the Company during the current reporting period.




                                                                                                                      59
                                                          Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




                                              Section IX Bonds

√ Applicable □ Not applicable

I.   Enterprise bond (hereinafter referred to as the bond issued by domestic state-owned
       entity)

□ Applicable √ Not applicable

II. Corporate bond

□ Applicable √ Not applicable

III. Debt financing instruments of non-financial enterprises

□ Applicable √ Not applicable

IV. Convertible bond

√ Applicable □ Not applicable
1.   Previous Adjustments of Stock Conversion Price
□ Applicable √ Not applicable
2.   Share Conversions (Accumulative)
□ Applicable √ Not applicable
3.   Top 10 Holders of the Convertible Bond
                                                                                                                    Unit: share

                                                                    Number of             Amount of           Proportion of
                                              Nature of          convertible bonds    convertible bonds     convertible bonds
        Name of convertible bond holder    convertible bond      held at the end of    held at the end of   held at the end of
                                               holders              the reporting        the reporting        the reporting
                                                                   period (share)        period (yuan)           period

                                          Domestic
 1      Sanhua Holding Group Co., Ltd.    non-state-owned                 8,854,432      885,443,200.00               29.51%
                                          corporation

                                          Domestic
        Zhejiang Sanhua Lvneng
 2                                        non-state-owned                 6,220,514      622,051,400.00               20.74%
        Industrial Group Co., Ltd
                                          corporation

                                          Domestic
 3      Zhang Yabo                                                         435,760         43,576,000.00                  1.45%
                                          Individual

 4      Bank of China Limited - E fund    Others                           263,035         26,303,500.00                  0.88%


                                                                                                                                 60
                                                               Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


        strategic emerging industry
        equity securities investment fund

        China Construction Bank
        Corporation - Huaxia energy
 5                                              Others                          219,101            21,910,100.00               0.73%
        innovation stock securities
        investment fund

        China Merchants Bank Co., Ltd.
 6      - E fund innovative growth              Others                          213,786            21,378,600.00               0.71%
        hybrid securities investment fund

        China Construction Bank
        Corporation - BOCOM Schroder
 7                                              Others                          211,157            21,115,700.00               0.70%
        alpha core hybrid securities
        investment fund

        Agricultural Bank of China
        Limited – Guotai intelligent
 8                                              Others                          206,817            20,681,700.00               0.69%
        automobile stock securities
        investment fund

                                                Domestic
 9      Bohai Securities Co., Ltd               state-owned                     200,315            20,031,500.00               0.67%
                                                corporation

        Industrial and Commercial Bank
        of China Limited - BOCOM
        Schroeder's advantageous
 10                                             Others                          193,317            19,331,700.00               0.64%
        industries flexibly allocate
        hybrid securities investment
        funds



4.    The Profitability, Asset and Credit Status of the Guarantor Have Changed Significantly
□ Applicable √ Not applicable

V. The loss within the scope of consolidated statements in the reporting period exceeded
     10% of the net assets at the end of the previous year

□ Applicable √ Not applicable

VI. Main accounting data and financial indicators of the Company in recent two years by the
      end of the reporting period


                                                                                                              Unit: RMB in 10 thousand

                                       At the end of the reporting
             Item                                                        At the end of last year              YoY Change (%)
                                                 period


                                                                                                                                   61
                                                      Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Current ratio                                     228.79%                         245.04%                         -16.25%

Asset liability ratio                               49.81%                          40.39%                          9.42%

Quick ratio                                       183.95%                         196.22%                         -12.27%

                                                              Corresponding Period of Last
                                Current Reporting Period                                          YoY Change (%)
                                                                         Year

Net profit after deducting
                                                 71,977.17                       58,219.12                         23.63%
non-recurring profit and loss

EBITDA total debt ratio                             18.39%                          27.11%                         -8.72%

Time interest earned ratio                            26.05                           23.72                         9.82%

Cash interest guarantee times                         33.01                           36.41                        -9.34%

EBITDA Time interest earned
                                                      31.93                           29.92                         6.72%
ratio

Repayment of debt (%)                             100.00%                         100.00%

Payment of interest (%)                           100.00%                         100.00%




                                                                                                                         62
                                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report




                                           Section X Financial Report

I. Auditor Report

Whether audit has been performed on this interim financial report
□ Yes √ No
The Company’s 2021 Half Year Report has not been audited


II. Financial Statements

Units of financial reports in the notes: RMB


1. Consolidated Balance Sheet

Prepared by: Zhejiang Sanhua Intelligent Controls Co., Ltd.
                                                              June 30, 2021
                                                                                                                         Unit: RMB

                   Items                                June 30, 2021                              December 31, 2020

Current asset:

     Cash and Bank Balances                                           6,301,888,182.65                           3,489,687,568.14

     Settlement funds

     Loans to other banks

     Held-for-trading financial assets                                  189,524,312.14                             752,224,861.78

     Derivative financial assets                                         26,392,706.62                              58,330,486.53

     Notes receivable                                                 2,019,431,592.73                           2,323,934,781.53

     Accounts receivable                                              3,100,856,902.63                           2,355,613,299.57

     Receivable financing

     Advances paid                                                      101,251,054.08                              69,404,326.45

     Premium receivable

     Reinsurance accounts receivable

     Reinsurance reserves receivable

     Other receivables                                                   98,155,207.51                              76,935,495.05

       Including: Interest receivable

                    Dividends receivable

     Repurchasing of financial assets

     Inventories                                                      2,917,803,847.90                           2,307,761,706.46


                                                                                                                                 63
                                            Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


       Contract assets

       Assets held for sales

       Non-current assets due within one
year

       Other current assets                          131,694,347.04                              150,460,488.01

Total current assets                               14,886,998,153.30                          11,584,353,013.52

Non-current assets:

       Loans and advances paid

       Debt investments

       Other debt investments

       Long-term receivable                             2,295,085.00                                2,074,750.00

       Long-term equity investments                    17,828,507.38                              15,219,616.68

       Other equity instrument
investments

       Other non-current financial assets

       Investment property                              9,398,176.54                              10,067,588.96

       Fixed assets                                 3,965,615,647.93                           3,839,408,059.45

       Construction in progress                      914,010,795.59                              628,730,529.07

       Productive biological assets

       Oil & gas assets

       Right-of-use assets

       Intangible assets                              643,300,116.81                             507,693,672.93

       Development expenditures

       Goodwill                                        31,959,091.60                              31,959,091.60

       Long-term prepayments                           26,140,183.68                              23,706,401.61

       Deferred tax assets                           144,257,327.85                              137,808,879.28

       Other non-current assets                      365,696,226.22                              251,509,127.08

Total non-current assets                            6,120,501,158.60                           5,448,177,716.66

Total assets                                       21,007,499,311.90                          17,032,530,730.18

Current liabilities:

       Short-term borrowings                         521,381,193.64                              383,088,296.60

       Central bank loans

       Loans from other banks

       Held-for-trading financial
liabilities


                                                                                                               64
                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


       Derivative financial liabilities                   7,726,384.62                                7,939,957.91

       Notes payable                                  1,856,484,983.84                           1,238,574,463.73

       Accounts payable                               2,491,675,800.21                           2,279,661,755.97

       Advances received                                 10,000,000.00                              10,000,000.00

       Contract liabilities                              44,096,560.86                              42,581,607.67

       Selling of repurchased financial
assets

       Absorbing deposit and interbank
deposit

       Deposit for agency security
transaction

       Deposit for agency security
underwriting

       Employee benefits payable                       219,968,593.89                              289,305,913.99

       Taxes and rates payable                          113,721,224.46                              75,008,142.06

  Other payables                                       229,547,075.23                              270,888,400.58

          Including: Interest Payable

                     Dividends Payable                    1,200,000.00

         Handling fee and commission
payable

         Reinsurance accounts payable

         Liabilities classified as held for
sale

         Non-current liabilities due within
                                                      1,012,141,338.04                             130,553,923.87
one year

         Other current liabilities

Total current liabilities                             6,506,743,154.79                           4,727,602,462.38

Non-current liabilities:

         Insurance policy reserve

         Long-term borrowings                          917,425,691.86                            1,707,918,994.87

         Bonds payable                                2,588,449,353.66

   Including: Preferred shares

                 Perpetual bonds

         Lease liabilities

         Long-term payables                              84,940,677.91                              90,336,083.27

         Long-term employee benefits


                                                                                                                 65
                                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


payable

       Provisions                                                                                                     2,638,000.00

       Deferred income                                                  134,799,813.94                             140,105,336.43

       Deferred tax liabilities                                         151,508,468.13                             130,778,184.48

       Other non-current liabilities                                     79,000,938.74                              80,398,897.72

Total non-current liabilities                                         3,956,124,944.24                           2,152,175,496.77

Total liabilities                                                    10,462,868,099.03                           6,879,777,959.15

Equity:

     Share capital                                                    3,591,601,468.00                           3,591,601,468.00

     Other equity instruments                                           409,766,556.24

     Including: Preferred shares

                    Perpetual bonds

     Capital reserve                                                    335,514,496.32                             315,417,434.22

  Less: Treasury shares                                                 243,244,768.84                             281,483,741.34

     Other comprehensive income                                        -106,871,598.13                              -89,624,962.61

     Special reserve

     Surplus reserve                                                    637,967,613.47                             637,967,613.47

     General risk reserve

     Undistributed profit                                             5,819,343,336.53                           5,890,916,707.83

Total equity attributable to the parent
                                                                     10,444,077,103.59                          10,064,794,519.57
Company

     Non-controlling interest                                           100,554,109.28                              87,958,251.46

Total equity                                                         10,544,631,212.87                          10,152,752,771.03

Total liabilities & equity                                           21,007,499,311.90                          17,032,530,730.18


Legal representative:Zhang Yabo       Officer in charge of accounting:Yu Yingkui   Head of accounting department:Sheng Xiaofeng


2. Parent Company Balance Sheet

                                                                                                                         Unit: RMB

                        Items                                 June 30, 2021                        December 31, 2020

Current assets:

     Cash and bank balances                                           2,959,776,349.70                           1,848,930,095.07

     Held-for-trading financial assets                                  100,000,000.00                             323,000,000.00

     Derivative financial assets                                          7,353,623.48                                8,856,174.56

     Notes receivable                                                   888,134,401.64                             773,393,944.74


                                                                                                                                 66
                                              Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


     Accounts receivable                               510,046,587.17                              729,906,676.91

     Receivables financing

     Advances paid                                        5,250,160.02                                6,803,910.27

     Other receivables                                 396,489,965.06                              348,897,078.11

        Including: Interest Receivable

                    Dividends Receivable                  1,800,000.00

     Inventories                                       530,323,536.73                              553,388,303.73

     Contract assets

     Assets classified as held for sale

     Non-current assets due within one year

     Other current assets                                36,417,031.99                              46,083,837.26

Total current assets                                  5,433,791,655.79                           4,639,260,020.65

Non-current assets:

     Debt investments

     Other debt investments

     Long-term receivable

     Long-term equity investments                     6,129,331,347.10                           4,528,546,229.37

     Other equity instrument investments

     Other non-current financial assets

     Investment property

     Fixed assets                                     1,548,514,876.61                           1,565,826,802.57

     Construction in progress                            42,341,929.78                              71,862,243.72

     Productive biological assets

     Oil & gas assets

     Right-of-use assets

     Intangible assets                                 153,679,564.23                              156,335,743.52

     Development expenditures

     Goodwill

     Long-term prepayments

     Deferred tax assets                                  7,419,451.65                                7,336,345.87

     Other non-current assets                            49,684,556.63                              36,566,524.79

Total non-current assets                              7,930,971,726.00                           6,366,473,889.84

Total assets                                         13,364,763,381.79                          11,005,733,910.49

Current liabilities:



                                                                                                                 67
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     Short-term borrowings                                                                               20,012,527.78

     Held-for-trading financial liabilities

     Derivative financial liabilities                          2,395,550.00

     Notes payable                                          499,079,955.18                              381,631,833.96

     Accounts payable                                      1,568,983,343.65                           1,566,994,944.07

     Advances received

     Contract liabilities                                        261,929.11                                1,155,759.09

     Employee benefits payable                                54,314,740.59                              93,150,785.46

     Taxes and rates payable                                   8,234,550.36                              10,811,341.50

     Other payables                                        1,173,975,858.95                           1,355,955,388.81

          Including: interest payable

                    Dividends Payable

     Liabilities classified as held for sale

     Non-current liabilities due within one year            770,756,434.72

     Other current liabilities

Total current liabilities                                  4,078,002,362.56                           3,429,712,580.67

Non-current liabilities:

     Long-term borrowings                                   660,582,222.22                            1,381,428,522.65

     Bonds payable                                         2,588,449,353.66

            Including: Preferred shares

                      Perpetual bonds

     Lease liabilities

     Long-term payables

     Long-term employee benefits payable

     Provisions                                                                                            2,638,000.00

     Deferred income                                          31,801,319.56                              35,908,399.54

     Deferred tax liabilities                                 45,003,642.04                              48,177,657.42

     Other non-current liabilities

Total non-current liabilities                              3,325,836,537.48                           1,468,152,579.61

Total liabilities                                          7,403,838,900.04                           4,897,865,160.28

Equity:

     Share capital                                         3,591,601,468.00                           3,591,601,468.00

     Other equity instruments                               409,766,556.24

            Including: Preferred shares



                                                                                                                      68
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                         Perpetual bonds

     Capital reserve                                1,224,991,751.62                           1,198,721,706.52

     Less: treasury shares                            243,244,768.84                                281,483,741.34

     Other comprehensive income

     Special reserve

     Surplus reserve                                  509,280,441.15                                509,280,441.15

     Undistributed profit                             468,529,033.58                           1,089,748,875.88

Total equity                                        5,960,924,481.75                           6,107,868,750.21

Total liabilities & equity                         13,364,763,381.79                          11,005,733,910.49


3. Consolidated Income statement

                                                                                                         Unit: RMB

                   Items                   2021 Interim                              2020 Interim

I. Total operating revenue                           7,674,081,761.69                          5,318,178,626.77

     Including: Operating revenue                    7,674,081,761.69                          5,318,178,626.77

                 Interest income

                 Premium earned

                 Revenue from handling
charges and commission

II. Total operating cost                             6,735,994,919.86                          4,658,848,422.13

     Including: Operating cost                       5,601,811,479.62                          3,839,626,004.70

     Interest expenses

     Handling charges and commission
expenditures

     Surrender value

     Net payment of insurance claims

     Net provision of insurance policy
reserve

     Premium bonus expenditures

     Reinsurance expenses

     Taxes and surcharges                                 36,363,153.05                              36,309,640.40

     Selling expenses                                 321,908,769.46                                257,442,500.54

     Administrative expenses                          374,431,536.21                                315,350,745.15

     R&D expenses                                     352,175,549.62                                240,012,928.38

     Financial expenses                                   49,304,431.90                             -29,893,397.04


                                                                                                                 69
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       Including: Interest expenses                         40,208,255.75                              32,558,310.10

                     Interest income                        43,640,017.31                              19,167,271.27

      Add: Other income                                     72,081,481.22                             101,528,141.23

          Investment income (or “-”: losses)              97,400,173.01                               -8,109,921.96

            Including: Investment income
                                                             4,108,890.70                                1,826,673.64
from associates and joint ventures

       Gains from derecognition of
                                                            -3,707,072.41                                 -114,807.17
financial assets at amortized cost

       Gains on foreign exchange (or “-”:
losses)

          Gains on net exposure to hedging
risk (or “-”: losses)

          Gains on changes in fair value (or
                                                           -32,695,697.38                                6,520,045.96
“-”: losses)

          Credit impairment loss (or “-”:
                                                           -48,442,168.40                              -12,874,290.80
losses)

          Assets impairment loss (or “-”:
                                                           -18,614,580.55                               -6,302,857.17
losses)

          Gains on asset disposal (or “-”:
                                                               400,172.51                                 -319,355.00
losses)

III. Operating profit (or “-”: losses)                 1,008,216,222.24                             739,771,966.90

      Add: Non-operating revenue                             2,472,160.14                                1,466,984.81

      Less: Non-operating expenditures                       3,604,181.70                                1,354,079.15

IV. Profit before tax (or “-”: losses)                 1,007,084,200.68                             739,884,872.56

      Less: Income tax expense                             170,607,121.16                              99,017,348.37

V. Net profit (or “-”: losses)                           836,477,079.52                             640,867,524.19

   (I) Categorized by the continuity of
operations

      1. Net profit from continuing
                                                           836,477,079.52                             640,867,524.19
operations (or “-”: losses)

      2. Net profit from discontinued
operations (or “-”: losses)

   (II) Categorized by the portion of
equity ownership

      1. Net profit attributable to owners
                                                           823,881,221.70                             643,481,717.35
of parent Company

      2. Net profit attributable to                         12,595,857.82                               -2,614,193.16



                                                                                                                    70
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non-controlling shareholders

VI. Other comprehensive income after
                                                          -17,246,635.52                              -26,456,121.98
tax

      Items attributable to the owners of the
                                                          -17,246,635.52                              -26,456,121.98
parent Company

       (I) Not to be reclassified
subsequently to profit or loss

         1. Changes in remeasurement on
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

         4. Changes in fair value of own
credit risk

         5. Others

       (II) To be reclassified subsequently
                                                          -17,246,635.52                              -26,456,121.98
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                           -17,246,635.52                              -26,456,121.98

         7. Others

       Items attributable to non-controlling
shareholders

VII. Total comprehensive income                           819,230,444.00                             614,411,402.21

       Items attributable to the owners of
                                                          806,634,586.18                             617,025,595.37
the parent Company

       Items attributable to non-controlling
                                                           12,595,857.82                               -2,614,193.16
shareholders

VIII. Earnings per share (EPS):


                                                                                                                   71
                                                                 Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


      (I) Basic EPS                                                                     0.23                                       0.18

      (II) Diluted EPS                                                                  0.23                                       0.18


Legal representative:Zhang Yabo          Officer in charge of accounting:Yu Yingkui    Head of accounting department:Sheng Xiaofeng


4. Income statement of the Parent Company

                                                                                                                              Unit: RMB

                       Items                                  2021 Interim                                2020 Interim

I. Operating revenue                                                     2,657,932,583.46                           2,117,212,102.62

    Less: Operating cost                                                 2,099,047,503.77                           1,616,751,481.77

            Taxes and surcharges                                              14,087,430.38                               14,883,710.72

            Selling expenses                                                  18,489,336.95                               15,130,538.49

            Administrative expenses                                           88,329,399.37                               72,140,520.61

            R&D expenses                                                     130,378,747.72                               88,292,793.63

            Financial expenses                                                28,429,967.53                                8,904,811.12

                 Including: Interest expenses                                 38,011,175.51                               34,495,598.61

                           Interest income                                    21,728,593.75                               10,398,609.20

      Add: Other income                                                       26,148,191.57                               52,824,654.27

      Investment income (or “-”: losses)                                    32,124,589.36                               10,995,316.73

          Including: Investment income
                                                                               3,703,896.30                                1,922,776.38
from associates and joint ventures

      Gains from derecognition of
financial assets at amortized cost (or
“-”: losses)

      Gains on net exposure to hedging
(or “-”: losses)

      Gains on changes in fair value (or
                                                                              -3,898,101.08                               12,520,875.00
“-”: losses)

      Credit impairment loss (or “-”:
                                                                              -2,333,077.79                                1,810,314.30
losses)

      Assets impairment loss (or “-”:
losses)

      Gains on asset disposal (or “-”:
                                                                                  31,965.08                                   60,000.75
losses)

II. Operating profit (or “-”: losses)                                      331,243,764.88                              379,319,407.33

      Add: Non-operating revenue                                                703,532.10                                  472,666.13



                                                                                                                                      72
                                             Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


      Less: Non-operating expenditures                     553,058.35                                 137,009.04

III. Profit before tax (or “-”: losses)             331,394,238.63                              379,655,064.42

      Less: Income tax expense                          57,159,487.93                              42,344,717.35

IV. Net profit (or “-”: losses)                     274,234,750.70                              337,310,347.07

      (I) Net profit from continuing
                                                      274,234,750.70                              337,310,347.07
operations (or “-”: losses)

      (II) Net profit from discontinued
operations (or “-”: losses)

V. Other comprehensive income after
tax

      (I) Not to be reclassified
subsequently to profit or loss

      1. Changes in remeasurement on
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

      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                        274,234,750.70                              337,310,347.07




                                                                                                                73
                                             Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


5. Consolidated Cash Flow Statement

                                                                                                         Unit: RMB

                    Items                  2021 Interim                              2020 Interim

I. Cash flows from operating activities:

  Cash receipts from sale of goods or
                                                     7,791,922,676.43                           5,669,226,956.30
rendering of services

  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
charges and commission

  Net increase of loans from others

  Net increase of repurchase

  Net cash receipts from agency
security transaction

  Receipts of tax refund                                  292,769,667.23                            135,301,637.22

  Other cash receipts related to
                                                          112,704,898.93                            138,981,847.05
operating activities

Subtotal of cash inflows from operating
                                                     8,197,397,242.59                           5,943,510,440.57
activities

  Cash payments for goods purchased
                                                     5,594,083,556.18                           3,476,000,876.09
and services received

  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


                                                                                                                 74
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  Cash payments for interest, handling
charges and commission

  Cash payments for policy bonus

  Cash paid to and on behalf of
                                                    1,043,695,672.97                             783,884,263.51
employees

  Cash payments for taxes and rates                   212,797,119.37                             205,682,821.70

  Other cash payments related to
                                                     521,604,270.81                              373,291,029.85
operating activities

Subtotal of cash outflows from
                                                    7,372,180,619.33                           4,838,858,991.15
operating activities

Net cash flows from operating activities             825,216,623.26                            1,104,651,449.42

II. Cash flows from investing activities:

  Cash receipts from withdrawal of
investments

  Cash receipts from investment
                                                        5,663,475.29                              23,348,369.16
income

  Net cash receipts from the disposal of
fixed assets, intangible assets and other                 508,246.83                                2,066,447.61
long-term assets

  Net cash receipts from the disposal of
subsidiaries & other business units

  Other cash receipts related to
                                                     671,922,049.93                              277,649,043.00
investing activities

Subtotal of cash inflows from investing
                                                     678,093,772.05                              303,063,859.77
activities

  Cash payments for the acquisition of
fixed assets, intangible assets and other            955,954,243.67                              442,252,824.96
long-term assets

  Cash payments for investments

  Net increase of pledged borrowings

  Net cash payments for the acquisition
of subsidiaries & other business units

  Other cash payments related to
                                                       35,150,010.98                             540,203,379.47
investing activities

Subtotal of cash outflows from
                                                     991,104,254.65                              982,456,204.43
investing activities

Net cash flows from investing activities             -313,010,482.60                            -679,392,344.66

III. Cash flows from financing


                                                                                                               75
                                               Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


activities:

  Cash receipts from absorbing
                                                                                                      118,643,250.00
investments

  Including: Cash received by
subsidiaries from non-controlling
shareholders as investments

  Cash receipts from borrowings                           283,678,800.00                          1,379,378,896.06

  Other cash receipts related to
                                                       2,987,977,500.00                                26,080,652.17
financing activities

Subtotal of cash inflows from financing
                                                       3,271,656,300.00                           1,524,102,798.23
activities

  Cash payments for the repayment of
                                                           38,237,578.82                              758,969,786.13
borrowings

  Cash payments for distribution of
dividends or profits and for interest                     924,187,677.93                              451,059,488.63
expenses

  Including: Cash paid by subsidiaries
to non-controlling shareholders as                                                                      2,680,000.00
dividend or profit

  Other cash payments related to
                                                            9,409,814.51                                3,780,305.89
financing activities

Subtotal of cash outflows from
                                                          971,835,071.26                          1,213,809,580.65
financing activities

Net cash flows from financing activities               2,299,821,228.74                               310,293,217.58
IV. Effect of foreign exchange rate
                                                          -17,246,635.52                              -25,656,121.98
changes on cash & cash equivalents
V. Net increase in cash and cash
                                                       2,794,780,733.88                               709,896,200.36
equivalents
 Add: Opening balance of cash and
                                                       3,400,144,038.54                           2,553,783,015.01
 cash equivalents
VI. Closing balance of cash and cash
                                                       6,194,924,772.42                           3,263,679,215.37
equivalents


6. Cash Flow Statement of the Parent Company

                                                                                                           Unit: RMB

                  Items                    2021 Interim                                2020 Interim

I. Cash flows from operating activities:

  Cash receipts from sale of goods and
                                                       2,501,766,645.73                           1,582,936,545.48
rendering of services

  Receipts of tax refund                                   69,595,321.15                               45,688,483.71



                                                                                                                   76
                                            Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


  Other cash receipts related to
                                                       44,634,342.32                              59,466,164.51
operating activities

Subtotal of cash inflows from operating
                                                    2,615,996,309.20                           1,688,091,193.70
activities

  Cash payments for goods purchased
                                                    1,584,525,056.92                             822,533,884.63
and services received

  Cash paid to and on behalf of
                                                     259,052,505.85                              193,396,299.54
employees

  Cash payments for taxes and rates                    67,230,440.08                              51,272,174.14

  Other cash payments related to
                                                       99,950,220.20                              79,419,321.52
operating activities

Subtotal of cash outflows from
                                                    2,010,758,223.05                           1,146,621,679.83
operating activities

Net cash flows from operating activities             605,238,086.15                              541,469,513.87

II. Cash flows from investing activities:

  Cash receipts from withdrawal of
                                                                                                    3,000,000.00
investments

  Cash receipts from investment
                                                       21,811,801.45                                6,834,184.92
income

  Net cash receipts from the disposal of
fixed assets, intangible assets and other                 104,233.67                                 174,800.00
long-term assets

  Net cash receipts from the disposal of
subsidiaries & other business units

  Other cash receipts related to
                                                      229,811,657.82                             175,228,503.46
investing activities

Subtotal of cash inflows from investing
                                                     251,727,692.94                              185,237,488.38
activities

  Cash payments for the acquisition of
fixed assets, intangible assets and other              89,501,487.52                             102,274,729.91
long-term assets

  Cash payments for investments                     1,581,000,000.00                             140,874,000.00

  Net cash payments for the acquisition
of subsidiaries & other business units

  Other cash payments related to
                                                       88,686,804.01                             472,363,792.38
investing activities

Subtotal of cash outflows from
                                                    1,759,188,291.53                             715,512,522.29
investing activities



                                                                                                               77
                                           Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


Net cash flows from investing activities          -1,507,460,598.59                            -530,275,033.91

III. Cash flows from financing
activities:

  Cash receipts from absorbing
                                                                                                118,643,250.00
investments

  Cash receipts from borrowings                       50,000,000.00                           1,159,811,000.00

  Other cash receipts related to
                                                   3,139,300,342.01                             161,770,652.17
financing activities

Subtotal of cash inflows from financing
                                                   3,189,300,342.01                           1,440,224,902.17
activities

  Cash payments for the repayment of
                                                      20,000,000.00                             570,000,000.00
borrowings

  Cash payments for distribution of
dividends or profits and for interest               919,172,149.40                              437,223,073.41
expenses

  Other cash payments related to
                                                    250,973,534.61                               12,254,861.11
financing activities

Subtotal of cash outflows from
                                                   1,190,145,684.01                           1,019,477,934.52
financing activities

Net cash flows from financing activities           1,999,154,658.00                             420,746,967.65

IV. Effect of foreign exchange rate
changes on cash and cash equivalents

V. Net increase in cash and cash
                                                   1,096,932,145.56                             431,941,447.61
equivalents

     Add: Opening balance of cash and
                                                   1,803,237,880.51                             974,923,339.25
cash equivalents

VI. Closing balance of cash and cash
                                                   2,900,170,026.07                           1,406,864,786.86
equivalents




                                                                                                              78
                                                                                                                                  Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report
7. Consolidated Statement of Changes in Owners' Equity

Amount of this period
                                                                                                                                                                                                 Unit: RMB

                                                                                                       2021 Interim

                                                                       Equity Attributable to parent Company

                                Other equity instruments                                                    Speci                 Gener
   Items                                                                     Less:                                                                                                Non-controll
                                                                                               Other
                                                             Capital                                         al      Surplus      al risk Undistributed Othe                                     Total equity
                               Preferr Perpetu                                                                                                                                    ing interest
              Share Capital                                                 treasury        comprehensi                                                             Subtotal
                                 ed      al      Others      reserve                                        reser     reserve     reserv     profit          rs
                                                                             shares          ve income
                               shares bonds                                                                  ve                     e

I. Balance
at the end    3,591,601,46                                 315,417,434 281,483,741 -89,624,962.                     637,967,613            5,890,916,70           10,064,794,51 87,958,251.4 10,152,752,77
of prior                8.00                                       .22                .34              61                   .47                       7.83                 9.57              6            1.03
year

       Add:
Cumulative
changes of
accounting
policies



Error
correction
of prior
period

Business
combinatio
n under


                                                                                                                                                                                                            79
                                                                                                   Zhejiang Sanhua Intellige
common
control


Others

II. Balance
at the
               3,591,601,46                 315,417,434 281,483,741 -89,624,962.     637,967,613          5,890,916,70
beginning
                       8.00                         .22         .34            61            .47                   7.83
of current
year

III. Current
period
                              409,766,556 20,097,062. -38,238,972. -17,246,635.                          -71,573,371.3
increase (or
                                      .24           10           50            52                                     0
“-”:
decrease)

(I) Total
                                                                      -17,246,635.                        823,881,221.
comprehens
                                                                               52                                    70
ive income

(II) Capital
contributed
                              409,766,556 20,097,062. -38,238,972.
or
                                      .24           10           50
withdrawn
by owners

1. Ordinary
shares
contributed
by owners

2. Capital                    409,766,556
contributed                           .24
                                          Zhejiang Sanhua Intellige
by holders
of other
equity
instruments

3. Amount
of
share-based    20,097,062. -38,238,972.
payment                10           50
included in
equity

4. Others

(III) Profit                                    -895,454,593.
distribution                                                00

1.
Appropriati
on of
surplus
reserve

2.
Appropriati
on of
general risk
reserve

3.
Appropriati                                     -895,454,593.
on of profit                                                00
to owners

4. Others
               Zhejiang Sanhua Intellige

(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
comprehens
ive income
carried over
to retained
earnings
                                                                                                                                        Zhejiang Sanhua Intellige

6. Others
(V) Special
reserve
1.
Appropriati
on of
current
period

2.
Application
of current
period

(VI) Others

IV. Balance
at the end    3,591,601,46                       409,766,556 335,514,496 243,244,768 -106,871,598                      637,967,613              5,819,343,33
of current            8.00                                 .24          .32              .84               .13                    .47                      6.53
period

Amount of Previous Period



                                                                                                            2020 Interim

                                                                         Equity Attributable to parent Company

                                     Other equity
     Items                                                                                                  Speci                    Gener
                                     instruments                               Less:             Other
                                                              Capital                                            al     Surplus      al risk Undistributed Oth
              Share Capital Preferr Perpetu                                   treasury    comprehensi
                                                   Other      reserve                                       reserv      reserve      reserv       profit          s
                                ed         al                                 shares           ve income
                                                     s                                                           e                      e
                               shares    bonds

I. Balance at 2,765,657,898.                               1,090,800,022. 363,781,151. -39,332,748.                   559,896,619.            5,278,392,288.
                                                                                            Zhejiang Sanhua Intellige
the end of                 00               06           34            50             39                     84
prior year

         Add:
Cumulative
changes of
accounting
policies



Error
correction of
prior period

Business
combination
under
common
control



Others

II. Balance
at the          2,765,657,898.   1,090,800,022. 363,781,151. -39,332,748.    559,896,619.        5,278,392,288.
beginning of               00               06           34            50             39                     84
current year

III. Current
period
                826,383,880.0    -847,059,678. -54,328,425. -26,456,121.                          230,144,177.0
increase (or
                            0               04           00            98                                     5
“-”:
decrease)

(I) Total                                                     -26,456,121.                        643,481,717.3
                                                                 Zhejiang Sanhua Intellige
comprehensi                                                 98                     5
ve income

(II) Capital
contributed
                             -20,384,598.0 -54,328,425.
or             -291,200.00
                                        4             00
withdrawn
by owners

1. Ordinary
shares                       -49,264,050.0 -49,264,050.
contributed                             0             00
by owners

2. Capital
contributed
by holders
of other
equity
instruments

3. Amount
of
share-based
                             30,463,131.96
payment
included in
equity

                                             -5,064,375.0
4. Others      -291,200.00   -1,583,680.00
                                                       0

(III) Profit                                                           -413,337,540.
distribution                                                                      30

1.
                                                 Zhejiang Sanhua Intellige
Appropriatio
n of surplus
reserve

2.
Appropriatio
n of general
risk reserve

3.
Appropriatio                                           -413,337,540.
n of profit to                                                    30
owners

4. Others

(IV) Internal
carry-over       826,675,080.0   -826,675,080.
within                      0              00
equity

1. Transfer
of capital       826,675,080.0   -826,675,080.
reserve to                  0              00
capital

2. Transfer
of surplus
reserve to
capital

3. Surplus
reserve to
cover losses
                                                                                        Zhejiang Sanhua Intellige

4. Changes
in defined
benefit plan
carried over
to retained
earnings

5. Other
comprehensi
ve income
carried over
to retained
earnings

6. Others
(V) Special
reserve
1.
Appropriatio
n of current
period

2.
Application
of current
period

(VI) Others

IV. Balance
at the end of 3,592,041,778.   243,740,344.0 309,452,726. -65,788,870.   559,896,619.        5,508,536,465.
current                  00                2          34           48             39                     89
period
                                                                                                                           Zhejiang Sanhua Intellige
8. Statement of Changes in Owners' Equity of the Parent Company

Amount of this period



                                                                                                        2021 Interim

         Items                                Other equity instruments                                                Other
                                                                                                   Less: treasury               Special
                        Share Capital                                            Capital reserve                  comprehensive         Surplus res
                                         Preferred Perpetual                                          shares                    reserve
                                                                   Others                                            income
                                          shares    bonds
I. Balance at the
                      3,591,601,468.00                                          1,198,721,706.52 281,483,741.34                         509,280,44
end of prior year

     Add:
Cumulative
changes of
accounting policies

Error correction of
prior period

Others
II. Balance at the
beginning of          3,591,601,468.00                                          1,198,721,706.52 281,483,741.34                         509,280,44
current year
III. Current period
increase (or less:                                             409,766,556.24     26,270,045.10 -38,238,972.50
decrease)
(I) Total
comprehensive
income
(II) Capital
contributed or
                                                               409,766,556.24     26,270,045.10 -38,238,972.50
withdrawn by
owners
1. Ordinary shares
contributed by
                                                                       Zhejiang Sanhua Intellige
owners
2. Capital
contributed by
                       409,766,556.24
holders of other
equity instruments
3. Amount of
share-based
                                        26,270,045.10 -38,238,972.50
payment included
in equity
4. Others
(III) Profit
distribution
1. Appropriation of
surplus reserve
2. Appropriation of
profit to owners
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
                                                                                                                         Zhejiang Sanhua Intellige

6. Others

(V) Special reserve
1. Appropriation of
current period
2. Application of
current period
(VI) Others
IV. Balance at the
end of current     3,591,601,468.00                          409,766,556.24 1,224,991,751.62 243,244,768.84                           509,280,44
period
Amount of Previous Period



                                                                                                       2020 Interim

         Items                              Other equity instruments                                          Other
                                                                                           Less: treasury               Special
                         Share Capital                                   Capital reserve                  comprehensive           Surplus reserve
                                           Preferred Perpetual                                shares                    reserve
                                                               Others                                        income
                                            shares    bonds
I. Balance at the end
                        2,765,657,898.00                                2,005,303,119.53 363,781,151.34                           431,209,447.07
of prior year

     Add:
Cumulative changes
of accounting
policies

Error correction of
prior period

Others
II. Balance at the
beginning of current 2,765,657,898.00                                   2,005,303,119.53 363,781,151.34                           431,209,447.07
year
III. Current period      826,383,880.00                                 -847,059,678.04 -54,328,425.00
increase (or less:
                                                                          Zhejiang Sanhua Intellige
decrease)
(I) Total
comprehensive
income
(II) Capital
contributed or
                           -291,200.00    -20,384,598.04 -54,328,425.00
withdrawn by
owners
1. Ordinary shares
contributed by                            -49,264,050.00 -49,264,050.00
owners
2. Capital
contributed by
holders of other
equity instruments
3. Amount of
share-based
                                          30,463,131.96
payment included in
equity
4. Others                  -291,200.00     -1,583,680.00 -5,064,375.00
(III) Profit
distribution
1. Appropriation of
surplus reserve
2. Appropriation of
profit to owners
3. Others
(IV) Internal
carry-over within       826,675,080.00   -826,675,080.00
equity
1.Transfer of capital
                        826,675,080.00   -826,675,080.00
reserve to capital
2.Transfer of
surplus reserve to
capital
3.Surplus reserve to
cover losses
                                                                            Zhejiang Sanhua Intellige
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. Appropriation of
current period
2. Application of
current period
(VI) Others
IV. Balance at the
end of current         3,592,041,778.00   1,158,243,441.49 309,452,726.34           431,209,447.07
period
                                                    Zhejiang Sanhua Intelligent Controls Co., Ltd. 2021 Semi-Annual Report


III. Company profile

      The Company was established by the original Sanhua Fuji Koki Co., Ltd. The Company currently holds a
business license with a unified social credit code of 913300006096907427 registered and issued by Zhejiang
Administration of Industry and Commerce, with headquarter in Shaoxing City, Zhejiang Province. The registered
capital of RMB 3,591,601,468.00 , total share of 3,591,601,468 shares (each with par value of RMB 1). The
Company’s shares were listed at Shenzhen Stock Exchange.
      The Company operates in the machinery manufacturing industry. Business scope includes production and
marketing of Service Valve, Electronic Expansion valve, Drainage Pump, Solenoid Valve, One-way Valve,
Compressor Parts, Pressure Pipeline Components, Electromechanical Hydraulic Control Pump and other
electromechanical hydraulic control components, undertaking services of inspection, test and analysis of
refrigeration accessories, and engaging in import and export business. Main products include control components
and parts of household appliances and automobile A/C.
      The financial statements have been approved by the board of directors of the Company and disclosed on
August 11th, 2021.

    Zhejiang Sanhua Climate and Appliance Controls Group Co., Ltd. and other subsidiaries are included in the
scope of consolidated financial statements in the current period. For further details, please refer to the change of
consolidation scope in the notes to the financial report and the description of equity in other entities.

IV. Preparation basis of the financial statements

1. Preparation basis

     The financial statements have been prepared on the basis of going concern.

2. 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.

V. Significant accounting policies and estimates

Notes to specific accounting policies and accounting estimates:

1.Statement of compliance with China Accounting Standards for Business Enterprises

     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, results of
operations and cash flows of the Company.

2.Accounting period

     The accounting period of the Company is from 1 January to 31 December of each calendar year.


                                                                                                                       93
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3.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.

4.Functional currency

     The Company’s functional currency is Renminbi (RMB) Yuan.

5.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.
      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 acquire 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.

6.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.

7.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.

8.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/ the
beginning of the month 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

                                                                                                                         94
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exchange rate at the transaction date, with its RMB amount 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 rate at the balance sheet date;
the equity items, other than undistributed profit, are translated at the spot rate at the transaction date; the revenues
and expenses in the income statement are translated into RMB at the approximate exchange rate similar to the
systematically and rationally determined spot exchange rate at the transaction date. The difference arising from
foreign currency translation is included in other comprehensive income

9.Financial instruments

      Financial instruments refer to contracts that form one party’s financial assets into other parties’ financial
liabilities or equity instruments.
      1. Classification of financial assets and financial liabilities
      The Company's financial assets fall into two main categories: (1) financial assets at amortized cost; (2)
financial assets at fair value through profit or loss. Financial liabilities are classified into the following two
categories: (1) financial liabilities at amortized cost; (2) financial liabilities at fair value through profit or loss.
      2. Recognition criteria, measurement method and derecognition condition 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 contracts in which the financing
components with associated period less than one year are not considered, the Company measures at their
transaction price.
      (2) Subsequent measurement of financial assets
      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, through the amortization
process or in order to recognize impairment gains or losses.
      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
      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 into profit or loss when the financial liabilities are derecognized and through the amortization process.
      Financial liabilities designated as at fair value through profit or loss. The Company measures such kind of
liabilities at fair value. Other gains or losses on those financial liabilities shall be included into profit or loss,
except for financial liabilities that are part of hedging relationships.


                                                                                                                         95
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      (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 are 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.
      4. Fair value determination method of financial assets and liabilities
      The Company use valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value.
      5. Impairment of financial instruments
     (1) Measurement and accounting treatment
     The Company, on the basis of expected credit loss, recognizes loss allowances of financial assets at
amortized cost. The Company considers reasonable and evidence-based information about past events, current
conditions, and forecasts of future economic conditions, and uses the risk of default as the weight to calculate the
difference between the contractual cash flow receivable and the expected cash flow Probability-weighted amount
of the present value to confirm expected credit losses. The Company separately measures the expected credit
losses of financial instruments at different stages on the balance sheet date. The first stage, if the credit risk of a
financial instrument has not increased significantly since the initial recognition, and the loss provision is measured
according to the expected credit loss in the next 12 months. The second stage, if the credit risk of a financial
instrument has increased significantly since its initial recognition but no credit impairment has occurred, and the
loss provision is measured based on the expected credit loss for the entire duration. The third stage, if a financial
instrument has been credit-impaired since its initial recognition, and the loss provision is measured based on the
expected credit loss for the entire duration.
     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
instrument has increased significantly since initial recognition.
     The Company may assume that the credit risk on a financial instrument has not increased significantly since

                                                                                                                         96
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initial recognition if the financial instrument is determined to have low credit risk on the balance sheet date. The
Company measures the loss provision according to the expected credit loss in the next 12 months
     Regarding the accounts receivable (including bills receivable and accounts receivable) stipulated in the
"CASBE14 –Revenue", regardless of whether it contains significant financing components (including financing in
contracts not exceeding one year) Component), the Company measures the loss provision based on the expected
credit loss for the entire duration.
     For financial instruments in the first and second stages and with lower credit risk, the interest income is
calculated based on the book balance and the effective interest rate without deducting the provision for
impairment. For financial instruments in the third stage, the interest income is calculated based on the amortized
cost and the actual interest rate after the book balance minus the provision for impairment.
     If the "credit risk-related information" of a single instrument has been known or is relatively easily available,
the Company assesses expected credit risk and measures expected credit losses on the basis of a single financial
instrument. Such financial instruments usually include accounts receivable from related parties, deposit deposits
receivable from government units or public utility units, and financial instruments with solid evidence that credit
impairment has occurred.
     If sufficient evidence of “credit risk-related information” cannot be obtained at a reasonable cost at the level
of individual instruments, the Company assesses expected credit risk and measures expected credit losses based
on a combination of financial instruments. The Company combines financial instruments based on the same or
similar credit risk characteristics, including but not limited to aging combinations.
     If the availability of "credit risk-related information" of a single tool changes from being difficult to obtain to
being available, the Company will change from a combination-based assessment measurement to a single
tool-based assessment measurement.
     The Company remeasures expected credit losses on each balance sheet date, and the resulting increase in loss
reserves or the amount of reversal is included in the current profits and losses as impairment losses or gains. For
financial assets measured at amortized cost, the loss allowance shall be deducted from the book value of the
financial assets listed in the balance sheet.
     (2) Financial instruments with expected credit risk assessed and expected credit losses measured on a
collective basis
     For other receivables that are difficult to be evaluated and measured by a single tool, the Company mainly
combines aging as a credit risk feature, refers to historical credit loss experience, combines current conditions and
forecasts of future economic conditions, and adopts default risk exposure and The expected credit loss rate in the
next 12 months or the entire duration is used to calculate the expected credit loss.
     (3) Accounts receivable with expected credit losses measured on a collective basis
     Regarding the accounts receivable specified in the "CASBE14 –Revenue", regardless of whether it contains
significant financing components (including financing components in contracts not exceeding one year), refer to
historical credit loss experience and combine current The situation and the forecast of future economic conditions,
through the default risk exposure and the entire duration of the expected credit loss rate, calculate the expected
credit loss. For accounts receivable that are difficult to be evaluated and measured by a single tool, the Company
divides the accounts receivable into several combinations based on credit risk characteristics, and calculates the
expected credit loss on the basis of the combination. The basis for determining the combination and the specific
accrual method are shown below table:
                                   Basis for determination of
        Portfolio Name                                                    Method for measuring expected credit loss
                                           portfolio


                                                                                                                           97
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Notes             receivable—Bank Accepted by financial
                                                                                            No provision
acceptance bill                      institutions
Notes receivable— Commercial Not accepted by financial
                                                                                                 5%
acceptance bill                      institutions
Accounts          receivable—Ages                                  receivable with provision made on a collective basis based on
                                     Ages
portfolios                                                             the comparison table of age and expected credit loss rate
        Accounts receivable – comparison table of ages and lifetime expected credit loss rate
                           Ages                                           Expected credit loss rate
Within 1 year                                                                       5%
1-2 years                                                                          10%
2-3years                                                                           30%
Over 3 years                                                                       50%
     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 those who meet the corresponding conditions at the same time.

10.Inventories

        1. Classification of inventories
        Inventories include material, work in process in the process of production and finished goods etc.
        2. Accounting method for dispatching inventories
      Inventories dispatched from storage at actual cost are accounted with weighted average method at the end of
each month; Inventories dispatched from storage according to the plan, the cost difference will be carried forward
at the same time at the end of the month.
        3. Basis for determining net realizable value
     At the balance sheet date, inventories are measured at the lower of cost or net realizable value; provisions for
inventory write-down are made on the excess of its cost over the net realizable value. Inventory used directly for
sale, in the course of normal production and operation, the net realizable value of the inventory shall be
determined by the estimated selling price minus the estimated selling expenses and related taxes; Inventories that
require processing, in the course of normal production and operation, the net realizable value of the finished
product shall be determined by the estimated selling price of the finished product minus the estimated cost to be
incurred at the time of completion, the estimated selling expenses and the relevant taxes and fees. On the balance
sheet date, where a part of the same inventory has a contract price and other parts do not have a contract price, the
net realizable value thereof shall be determined separately, and compare with the corresponding cost to determine
the amount of the provision for inventory depreciation or the amount of the reversal.
        4. Inventory system
        The perpetual inventory system is adopted.

        5. Revolving materials are amortized with one-off method.

11. Contract assets

    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

                                                                                                                                   98
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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.

12.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 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.
     (2) For business combination not under common control, investment cost is initially recognized at the
acquisition-date fair value of considerations paid.
     (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.
     3. Subsequent measurement and recognition method of profit or loss
     For long-term equity investments with control relationship, it is accounted for with cost method; for
long-term equity investments with joint control or significant influence relationship, it is accounted for with equity
method.

13. Investment property

Investment property measurement model
Measurement by cost method
Depreciation or amortization method
     1. Investment property includes land use right of rent-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.




                                                                                                                        99
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14. 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


  Categories                                                                 Estimated residual value Annual depreciation rate
                           Depreciation method         Useful life (years)
                                                                                 proportion (%)                (%)
Buildings and structures Straight-line method    20-30                       0%, 5%                   3.17% - 5%

Machinery and
                         Straight-line method    5-12                        0%, 5%                   7.92% - 20%
equipment

Measurement analysis
                         Straight-line method    5-10                        5%                       9.50% - 19%
equipment

Vehicle                  Straight-line method    5-8                         0%, 5%                   11.88% - 20%

Office equipment and
                         Straight-line method    5-8                         0%, 5%                   11.88% - 20%
others


15.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 was 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.

16.Borrowing costs

     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.

17.Intangible assets

(1) Valuation method, service life, impairment test

         Intangible assets include land use right, land ownership, application software, patent right and non-patented

                                                                                                                            100
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technology etc. The initial measurement of intangible assets is based on its cost.
     Intangible assets are amortized by the straight-line method with details as follows:
                       Categories                      Amortization method        Amortization period (years)
Land use rights                                         Straight-line method        Contractual service life
Intellectual Property of Air Conditioning Controller    Straight-line method                5—10
Patented technology of electronic expansion valve       Straight-line method                  10
controller of Dotech
Application software                                    Straight-line method                 1—4
     Intangible assets with indefinite useful life are not amortized, but their useful life is reviewed annually. The
indefinite land ownership held by overseas subsidiaries abroad is not amortized due to uncertain service life.

(2)Accounting policy for internal R&D expenditure

     Expenditures on the research phase of an internal project are recognized as profit or loss when it is incurred.
An intangible asset arising from the development phase of an internal project is recognized if the Company can
meet the corresponding conditions.

18.Impairment of part of long-term assets

      Long-term assets, such as long-term equity investment, investment properties, fixed assets, construction in
progress, intangible assets that measured at cost are tested for impairment if there is any indication that an asset
may be impaired at the balance sheet date. Impairment test to goodwill and the intangible assets whose using life
is not certain shall be carried out at least at the end of each year. Goodwill shall be tested for impairment in
combination with its related asset group or combination of asset groups.
    If the recoverable amount of the aforementioned long-term assets is lower than its book value, the asset
impairment provision shall be recognized according to the difference and included in the current profit and loss.

19.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.

20.Employee benefits

(1) Short-term employee benefits

     1. Employee benefits includes short-term employee benefits, post- employment benefits, termination benefits
and other long-term employee benefits.
     2. 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.


                                                                                                                         101
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(2) Post-employment benefits

     The Company classifies post-employment benefit plans as either defined contribution plans or defined
benefit plans. 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.

(3) 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: a. when the Company
cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a
curtailment proposal; or b. when the Company recognizes cost or expenses related to a restructuring that involves
the payment of termination benefits.

(4) 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. To simplify the relevant accounting treatment, the Company recognizes the cost of employee
benefits arising from other long-term employee benefits as service cost. Net interest on the net liability or net
assets of other long-term employee benefits and changes as a result of remeasurement of the net liability or net
assets of other long-term employee benefits .The net total of the aforesaid amounts is recognized in profit or loss
or included in the cost of a relevant asset.

21.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.

22.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 terms and
conditions
      (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, at the balance sheet date within the vesting period,

                                                                                                                      102
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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
goods or services received can be measured reliably, the fair value is measured at the date the Company obtains
the goods or the counterparty renders service; if the fair value of the goods or services received cannot be
measured reliably, the fair value of the equity instruments granted measured at the date the Company obtains the
goods or the counterparty renders 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 goods or 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, 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&e