CHYY Development Group Limited — Interim / Quarterly Report 2021

Aug 11, 2021

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8128)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2021

CHARACTERISTICS OF THE GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement, for which the directors of China Geothermal Industry Development Group Limited (the “Company”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM (the “GEM Listing Rules”) of The Stock Exchange for the purpose of giving information with regard to the Company. The directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

• 1 -

HIGHLIGHTS

Revenue for the six months ended 30 June 2021 (the “Review Period”) amounted to approximately HK$88,446,000.

Net loss after tax of the Group for the Review Period amounted to approximately HK$28,711,000.

No dividend was declared for the Review Period.

FINANCIAL REVIEW

The following table provides a brief summary of the financial results of China Geothermal Industry Development Group Limited (the “Company”) and its subsidiaries (collectively the “Group”). For more detailed information, please refer to the unaudited consolidated financial statements for the Review Period and for the six months ended 30 June 2020.

	Three months ended	Three months ended	Six months	ended
	30 June		30 June
	2021	2020	2021	2020
	HK$’000	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Revenue
– Shallow geothermal energy	57,925	50,504	82,538	91,776
– Air conditioning/shallow geothermal heat pump	242	18,426	1,324	18,426
– Property investment and development	4,584	3,760	4,584	7,428
	62,751	72,690	88,446	117,630
Profit/(loss) for the period	(5,352)	33,657	(28,711)	14,860
Profit/(loss) attributable to owners of the parent	(4,690)	27,325	(26,963)	9,173

• 2 -

During the Review Period, the Group’s revenue amounted to approximately HK$88,446,000 which was mainly contributed by shallow geothermal energy utilisation business and approximately HK$117,630,000 for the corresponding period last year. The revenue decreased by approximately HK$29,184,000 as compared with that of corresponding period last year which was mainly attributable to the new contracts of engineering projects secured in the first half year was relatively fewer and the projects in progress that bought forward from previous periods decreased. On the other hand, the substantial decrease in coal-to-electricity projects in Hebei region during the Period led to the demand on HYY Heating Devices by the key customers of Hongyuan Ground Energy Heating Device Technology Co., Ltd* (宏源地能熱寶技術有限公司), the Group’s subsidiary, was significantly decreased as compared with the same period last year.

Other income and gains decreased from approximately HK$24,898,000 in the corresponding period last year to approximately HK$2,345,000 for the six months ended 30 June 2021. This was mainly attributable to the waiver of the account payables recorded in the corresponding period last year.

Selling and distribution expenses amounted to approximately HK$10,471,000 and HK$8,400,000 for the six months ended 30 June 2021 and 2020 respectively. The selling and distribution expenses for the Review Period increased as compared with the corresponding period last year was mainly due to the strengthening of the other markets expansion by the Group during the period under review as compared with the same period last year which was affected by epidemic control.

During the Review Period, administrative expenses increased by approximately HK$5,963,000 or 15.07% as compared with that of six months ended 30 June 2020. Administrative expenses increased which was mainly attributable to the increase of management activities.

Finance costs amounted to approximately HK$1,867,000 for the six months ended 30 June 2021 as compared with approximately HK$10,337,000 for last corresponding period. The finance costs mainly represented the borrowing costs on the loan. The decrease was mainly attributable to the repayment of loan.

For the six months ended 30 June 2021, the loss for the period was approximately HK$28,711,000, whereas the profit was approximately HK$14,860,000 for the corresponding period last year. It was mainly attributable to the decrease in revenue resulted to the decrease in gross profit. On the other hand, the waiver of payables, the increase of changes in the fair value of investment properties and the reversal of provision on contract assets and the trade receivables recorded in the corresponding period last year did not exist in the current period this year.

Order Book

As at 30 June 2021, the Group has contracts on hand of approximately HK$83,700,000.

• 3 -

Liquidity, Capital Structure and Gearing Ratio

Net current liabilities of the Group as at 30 June 2021 was approximately HK$34,577,000 (net current liabilities as at 31 December 2020: approximately HK$22,599,000). As at 30 June 2021, the bank borrowing amounted to approximately HK$20,625,000, bearing interest rate at 5.5% per annum which is repayable within one year. The loan will be due in November 2021 according to the loan agreement.

As at 30 June 2021, the Group had cash and cash equivalents of approximately HK$63,886,000 (31 December 2020: approximately HK$63,172,000). Cash and cash equivalents on the condensed consolidated statement of financial position include funds available for general corporate purposes.

Non-controlling interests amounted to approximately HK$27,322,000 which mainly represents the interests attributable to non-controlling shareholders of the Group’s subsidiaries in the PRC.

The gearing ratio of the Group, based on total net debt (including interest-bearing bank borrowings, lease liabilities, trade and bills payables, financial liabilities included in other payables and accruals, less cash and cash equivalents) to the equity (representing equity attributable to owners of the parent) plus net debt of the Group, was 54.8% as at 30 June 2021 (31 December 2020: 57.5%).

Charges on Asset

As at 30 June 2021, certain properties with a carrying amount of approximately HK$9,720,000 were pledged to secure a bank loan.

In addition, the following assets were previously pledged to China Energy Conservation and Environmental Protection Group* (中國節能環保集團有限公司) (“CECEP”), a major shareholder of the Company, in return for CECEP to provide guarantee in favour of the bank for securing the bank loan for the Group. As the Group has fully repaid the bank loan that secured by CECEP in April 2021, the Group has liaised with CECEP to release all the following pledged assets.

• 1) The release of pledge of equity interests in Heng Run Feng Reality (Dalian) Company Ltd., an indirect wholly owned subsidiary of the Group, has been completed as of the reporting date.

• 2) It is in the process of releasing the pledge of China Asset Management – Ever Source Overseas Oriented Asset Management Plan* (華夏基金－恆有源海外定向資產管理計劃) with a carrying value of approximately HK$59,849,000.

• 4 -

Material Acquisition and Disposal

During the period under review, the Group has completed the disposal of 100% equity interest in HYY Science and Technology Development Group Xinyi Co., Ltd.* (恒有源科技發展集團新沂 有限公司) at the consideration of RMB25,830,800. For details of this disposal, please refer to the announcement of the Company dated 26 March 2021.

Save as disclosed above, the Group did not have any material acquisition and disposal during the six months ended 30 June 2021.

Significant Investment Held

On 13 November 2020, HYY Investment Management Co., Ltd. (恒有源投資管理有限公司) (“ HYY Investment ”), an indirect wholly owned subsidiary of the Company, entered into equity transfer agreement to sell the 4.99965% equity interests in Beijing Life Insurance Co. Ltd. (“ Beijing Life ”) for a consideration of RMB237,000,000.

At the extraordinary general meeting held on 19 February 2021, the Shareholders of the Company passed the ordinary resolution in respect of the equity transfer agreement. Details of the disposal can be referred to the Company’s circular dated 26 January 2021. HYY Investment has received the total consideration of RMB237,000,000 in July 2021 and the change of shareholders of Beijing Life and the industrial and commercial filing procedures for the articles of association of Beijing Life is under processing.

As at 30 June 2021, the Group still held the investment of 4.99965% of equity interests in Beijing Life pending for the completion of the change of the registration for share transfer. The size of investment as compared to the Group’s total assets as at 30 June 2021 is 14.72%.

Treasury Policies

The Group continues to adopt a conservative treasury policy with all bank deposits being kept in either Hong Kong dollars, or in local currencies of the operating subsidiaries, keeping a minimum exposure to foreign exchange risks.

Contingent Liabilities

As at 30 June 2021, the Group had no material contingent liabilities (31 December 2020: Nil).

• 5 -

Employees

As at 30 June 2021, the Group has approximately 411 employees in total (31 December 2020: approximately 480). The remuneration package of the employees is determined with reference to their performance, experience and their positions, duties and responsibilities in the Group.

BUSINESS REVIEW AND OUTLOOK

During the period under review, the Group’s revenue amounted to approximately HK$88,446,000, of which revenue of alternative energy engineering accounted for approximately 71.58%, revenue from heating and cooling operation accounted for approximately 21.29%, revenue from leasing of investment property accounted for 5.18% and sales of equipment accounted for 1.1%.

During the period under review, the Group’s revenue fell by 25% as compared with that of the same period last year which was mainly attributable to the significant decline in the revenue of alternative energy projects and sales of heat pump products as compared with that of the same period last year. The decline in revenue from alternative energy projects was mainly due to the fact that the coalto-electricity projects in the surrounding areas have not yet started in the first half of the year. In particular, the coal-to-electricity projects in Hebei Province are expected to be severely reduced as compared to the same period last year. In addition, the number of new projects also decreased as compared with that of the same period of previous year.

During the period under review, the sales of heat pump products declined, which was mainly due to the significant decrease in the number of projects from a major customer of the Group’s subsidiary, Hongyuan Ground Energy Heating Device Technology Co., Ltd.* (宏源地能熱寶技術有限公司), which led to a severe decline in its procurement of ground source heating device products. The single major customer and high dependence of this customer are also one of the key factors for the decline in the sales of the heat pump products.

In view of the severe decline in the above-mentioned businesses, the Group has adjusted its strategic layout and actively expanded to the surrounding areas to open up new markets, such as Hunan, Anhui, Shandong, Changchun and other places. At the same time, according to the industry condition, the use of shallow geothermal energy will be promoted in the industry by drawing upon the experience gained on the key points and areas. It is expected that related projects will be implemented in the second half of the year.

• 6 -

At present, the Rongcheng Hospital project has been successfully implemented in Hunan, and a preliminary intent with Xiangtan Company of CECEP on the Hongsheng Yipin Residence Project (120,000 square meters) has been reached. Cooperative intention on HVAC transformation with regard to the hospitals and the relevant government departments and bureaus in Hunan has been initially formed. In Chengdu area, the demonstration of the technical solutions and the construction of the experimental well were successfully implemented for the Unicorn Island project. In Shandong and Shaanxi areas, cooperation on coal-to-electricity transformation has initially formed intentions. In addition, it has also established synergy in the market with wind power company and solar energy company of CECEP.

Under the favorable background of carbon peaking, carbon neutrality and the opening of the national carbon trading market, the Group is currently actively promoting the development of related businesses. It is expected that contacts of related projects will be signed in the second half of the year. At the same time, due contributions can be made to the country’s carbon reduction and synergy as well as the promotion of the overall green transformation of economic and social development.

During the period under review, the Group has completed the disposal of 100% equity interest in HYY Science and Technology Development Group Xinyi Co., Ltd.* (恒有源科技發展集團新沂有 限公司), and the relevant consideration of approximately RMB25,830,800 was received. For details of this asset disposal, please refer to the announcement of the Company dated 26 March 2021.

At the same time, during the period under review, the Group has utilized part of the proceeds from the assets or equity disposal made in 2020 to repay the remaining bank loans. As of the end of the current period, the bank loan with the principal amount of RMB400 million that guaranteed by CECEP has been fully settled which greatly reduced the financial pressure of the Group, and gradually alleviate the financial pressure faced by the Group’s in its future business activities. Combining the market situation, the Company will further control the costs strictly, strengthen the construction and development of ecological properties, and expand shallow geothermal energy to replace traditional energy for the non-combustion heating market and integrated heating and cooling services.

• 7 -

FINANCIAL RESULTS

The Board of Directors (the “Board”) of China Geothermal Industry Development Group Limited (the “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively the “Group”) for the three months and six months ended 30 June 2021 together with the unaudited comparative figures for the corresponding periods in 2020 as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2021

		Three months	ended	Six months ended	Six months ended
		30 June		30 June
	Notes	2021	2020	2021		2020
		HK$’000	HK$’000	HK$’000	HK$’000
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Revenue	4	62,751	72,690	88,446	117,630
Cost of sales		(38,911)	(37,810)	(59,714)	(74,490)
Gross profit		23,840	34,880	28,732		43,140
Other income and gains	4	224	18,833	2,345		24,898
Selling and distribution expenses		(5,395)	(512)	(10,471)		(8,400)
Administrative expenses		(25,762)	(14,558)	(45,520)	(39,557)
Gain on disposal of a subsidiary		5,672	–	5,672		–
Reversal of impairment losses on trade and
bills receivables, net		–	49	–		3,437
Reversal of impairment losses on contract
assets, net		–	–	–		6,799
Finance costs	5	(1,071)	(4,482)	(1,867)	(10,337)
Fair value changes on investment properties		–	6,212	–		6,212
Other expenses		(4)	(3,392)	(93)		(3,392)
Share of profits and losses of:
Associates		(2,852)	(1,571)	(7,497)		(6,097)
Profit/(loss) before tax	6	(5,348)	35,459	(28,699)		16,703
Income tax expense	7	(4)	(1,802)	(12)		(1,843)
Profit/(loss) for the period		(5,352)	33,657	(28,711)		14,860
Attributable to:
Owners of the parent		(4,690)	27,325	(26,963)		9,173
Non-controlling interests		(662)	6,332	(1,748)		5,687
		(5,352)	33,657	(28,711)		14,860
Earnings/(loss) per share attributable to
ordinary equity holders of the parent	9
Basic and diluted (expressed in HK$ cents)		(0.105)	0.614	(0.606)		0.204

• 8 -

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2021

	Three months	ended	Six months ended	Six months ended
	30 June		30 June
	2021	2020	2021	2020
	HK$’000	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Profit/(loss) for the period	(5,352)	33,657	(28,711)	14,860
Other comprehensive income/(loss):
Other comprehensive income/(loss) that may be
reclassified to profit or loss in subsequent periods:
Exchange differences:
Exchange differences on translation of
foreign operations	3,764	21,218	2,268	(13,700)
Share of other comprehensive income/(loss) of associates	952	40	324	(43)
Net other comprehensive income/(loss) that may be
reclassified to profit or loss in subsequent periods	4,716	21,258	2,592	(13,743)
Other comprehensive (loss)/income that will not be
reclassified to profit or loss in subsequent periods:
Equity investments designated at fair value through
other comprehensive income
Changes in fair value	–	(2,780)	–	(2,780)
Gains on property revaluation	–	436	–	436
Net other comprehensive (loss) that will not be
reclassified to profit or loss in subsequent periods	–	(2,344)	–	(2,344)
Other comprehensive income/(loss) for the period,
net of tax	4,716	18,914	2,592	(16,087)
Total comprehensive profit/(loss) for the period	(636)	52,571	(26,119)	(1,227)
Attributable to:
Owners of the parent	(571)	43,272	(24,695)	(9,138)
Non-controlling interests	(65)	9,299	(1,424)	7,911
	(636)	52,571	(26,119)	(1,227)

• 9 -

CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 30 June 2021

Notes NON-CURRENT ASSETS Property, plant and equipment 10 Investment properties Right-of-use assets Deposits paid for acquisitions of land use rights Other intangible assets Investments in associates Equity investments designated at fair value through other comprehensive income Deferred tax assets Contract assets Trade receivables Total non-current assets CURRENT ASSETS Inventories Properties held for sale Trade and bills receivables 11 Prepayments, other receivables and other assets Contract assets Amounts due from related companies Equity investments designated at fair value through other comprehensive income Financial assets at fair value through profit or loss Restricted cash Time deposits Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade and bills payables 12 Other payables and accruals Contract liabilities Amounts due to associates Amounts due to related companies Interest-bearing bank borrowings Lease liabilities Tax payable Total current liabilities NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES

30 June 2021 31 December 2020 HK$’000 HK$’000 (Unaudited) (Audited) 211,855 213,359 136,137 134,743 702 1,050 – 17,823 70 293 42,828 49,547 61,244 60,577 42 – 20,213 20,213 139,977 139,102 613,068 636,707 55,092 24,733 329,456 342,652 46,060 58,743 147,269 225,075 140,868 122,504 – 551 241,260 238,831 41 34 1,201 7,326 – 233 63,886 63,172 1,025,133 1,083,854 298,638 279,912 471,399 430,934 44,001 51,225 18,076 17,891 32,207 30,341 20,625 100,998 5,667 5,889 169,097 189,263 1,059,710 1,106,453 (34,577) (22,599) 578,491 614,108

• 10 -

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

At 30 June 2021

		30 June
		2021	31 December 2020
		HK$’000	HK$’000
		(Unaudited)	(Audited)
TOTAL ASSETS LESS CURRENT LIABILITIES		578,491	614,108
NON-CURRENT LIABILITIES
Lease liabilities		81,441	89,590
Deferred income		9,604	9,506
Deferred tax liabilities		38,323	37,838
Total non-current liabilities		129,368	136,934
Net assets		449,123	477,174
EQUITY
Equity attributable to owners of the parent
Share capital	13	353,043	353,043
Shares held for Share Award Scheme		(9,608)	(7,676)
Other reserves		78,366	103,061
		421,801	448,428
Non-controlling interests		27,322	28,746
Total equity		449,123	477,174

• 11 -

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2021

At 1 January 2020 (audited) Profit for the period Other comprehensive income/(loss) for the period Total comprehensive income/(loss) for the period Shares purchased for Share Awards Scheme At 30 June 2020 (unaudited)				Attributable to owners of theparent	Attributable to owners of theparent	Attributable to owners of theparent	Attributable to owners of theparent				Total HK$’000 636,066 9,173 (18,311) (9,138) (7,676) 619,252	Non- controlling interests HK$’000 28,039 5,687 2,224 7,911 – 35,950	Total equity HK$’000 664,105 14,860 (16,087) (1,227) (7,676) 655,202
	Share Capital HK$’000 353,043 – – – – 353,043	Share Premium Shares held for Share Awards Scheme HK$’000 HK$’000 904,845 – – – – – – – – (7,676) 904,845 * (7,676)	Statutory reserve HK$’000 2,935 – – – – 2,935 *	Assets revaluation reserve HK$’000 42,616 – 436 436 – 43,052 *	Contributed Surplus HK$’000 154,381 – – – – 154,381 *	Special reserve HK$’000 7,553 – – – – 7,553 *	Capital reserve HK$’000 17,876 – (2,780) (2,780) – 15,096 *	Share option reserve/ share award reserve HK$’000 49,117 – – – – 49,117 *	Exchange fluctuation reserve HK$’000 (42,747) – (15,967) (15,967) – (58,714) *	Accumulated losses HK$’000 (853,553) 9,173 – 9,173 – (844,380) *

Attributable to owners of the parent

														Share
				Shares										option
				held for										reserve/
				Share			Assets							share		Exchange					Non-
	Share	Share		Awards	Statutory		revaluation		Contributed		Special	Capital		award		fluctuation		Accumulated			controlling	Total
	Capital	Premium		Scheme	reserve		reserve		Surplus		reserve	reserve		reserve		reserve		losses		Total	interests	equity
	HK$’000	HK$’000		HK$’000	HK$’000		HK$’000		HK$’000		HK$’000	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000	HK$’000	HK$’000
At 1 January 2021 (audited)	353,043	904,845		(7,676)	2,935		39,300		154,381		7,553	50,878		4,620		(14,616)		(1,046,835)		448,428	28,746	477,174
Profit for the period	–	–		–	–		–		–		–	–		–		–		(26,963)		(26,963)	(1,748)	(28,711)
Other comprehensive income/(loss)
for the period	–	–		–	–		–		–		–	–		–		2,268		–		2,268	324	2,592
Total comprehensive income/(loss)
for the period	–	–		–	–		–		–		–	–		–		2,268		(26,963)		(24,695)	(1,424)	(26,119)
Shares purchased for Share Awards
Scheme	–	–		(1,932)	–		–		–		–	–		–		–		–		(1,932)	–	(1,932)
At 30 June 2021 (unaudited)	353,043	904,845 *		(9,608)	2,935 *		39,300 *		154,381 *		7,553*	50,878 *		4,620 *		(12,348) *		(1,073,798) *		421,801	27,322	449,123

• These reserve accounts comprise the consolidated reserves of HK$78,367,000 (31 December 2020: HK$103,061,000) in the condensed consolidated statement of financial position.

• 12 -

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2021

Net cash flows used in operating activities Net cash flows from investing activities Net cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period Effect of foreign exchange rate changes, net Cash and cash equivalents attributable to a disposal group Cash and cash equivalents at the end of period	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) (92,279) (43,497) 195,543 122,119 (110,452) (52,993) (7,188) 25,629 63,172 56,871 7,902 (4,365) – (11) 63,886 78,124

• 13 -

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

1. CORPORATE INFORMATION

China Geothermal Industry Development Group Limited (the “Company”) was incorporated in Cayman Islands as an exempted company with limited liability and its shares are listed on the GEM of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The addresses of the registered office and principal place of business in Hong Kong of the Company are P.O. Box 31119, Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman KY1-1205, Cayman Islands and 8/F, Chung Hing Commercial Building, 62-63 Connaught Road Central, Central, Hong Kong respectively.

During the six months ended 30 June 2021, the Group was involved in the following principal activities:

• Provision, installation and maintenance of shallow geothermal energy utilisation system

• Trading of air conditioning/shallow geothermal heat pump products

• Investment in properties for their potential rental income

• Trading of securities and other types of investments

2. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

2.1 Basis of preparation

The condensed consolidated financial statements for the six months ended 30 June 2021 have been prepared in accordance with the applicable disclosure requirements of Chapter 18 of the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited (the “ GEM Listing Rules ”) and with Hong Kong Accounting Standard 34 (“ HKAS 34 ”), Interim Financial Reporting, issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”). The condensed consolidated financial statements are presented in Hong Kong dollars and all values are rounded to the nearest thousand except when otherwise indicated.

The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2020.

• 14 -

2.2 Changes in accounting policies and disclosures

The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those applied in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2020, except for the adoption of the following revised Hong Kong Financial Reporting Standards (“HKFRSs”) effective as of 1 January 2021.

Amendments to HKFRS 9, HKAS 39, Interest Rate Benchmark Reform – Phase 2 HKFRS 7, HKFRS 4 and HKFRS 16 Amendment to HKFRS 16 Covid-19-Related Rent Concessions

The adoption of these amended standards and interpretation did not result in any significant impact on the Group’s financial performance and financial position.

3. OPERATING SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services and has four reportable operating segments as follows:

• (a) Shallow geothermal energy segment – provision, installation and maintenance of shallow geothermal energy utilisation system;

• (b) Air conditioning/shallow geothermal heat pump segment – trading of air conditioning/shallow geothermal heat pump products;

• (c) Property investment and development segment – investments in properties for their potential rental income; and

• (d) Securities investment and trading segment – trading of securities and other types of investment.

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/loss, which is a measure of adjusted profit/loss before tax. The adjusted profit/loss before tax is measured consistently with the Group’s profit/loss before tax except that share of profits and losses of associates and a joint venture, interest income, certain other income, certain administration costs, and non-lease-related finance costs are excluded from such measurement.

Segment assets exclude certain investments in associates, deferred tax assets, time deposits, restricted cash and cash and cash equivalents as these assets are managed on a group basis.

• 15 -

Segment liabilities exclude certain amounts due to associates and related companies, interest-bearing bank borrowings, deferred tax liabilities and tax payable as these liabilities are managed on a group basis.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

(a) Segment revenue and results

The following tables present revenue and profit information for the Group’s operating segments for the six months ended 30 June 2021 and 2020, respectively:

	Shallow	Shallow	Air conditioning/Shallow	Air conditioning/Shallow	Property	investment	Securities investment	Securities investment	Securities investment
	geothermal energy		geothermal heat pump		and development		and trading			Total
	Six months	ended 30 June	Six months ended 30 June		Six months	ended 30 June	Six months ended 30		June	Six months	ended 30 June
	2021	2020	2021	2020	2021	2020	2021		2020	2021	2020
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
Segment revenue(note 4)
Sales to external customers	82,538	91,776	1,324	18,426	4,584	7,428	–		–	88,446	117,630
Intersegment sales	–	–	993	7,223	–	–	–		–	993	7,223
	82,538	91,776	2,317	25,649	4,584	7,428	–		–	89,439	124,853
Reconciliation:
Elimination of intersegment sales										(993)	(7,223)
Revenue										88,446	117,630
Segment results	24,368	26,594	(2,251)	1,129	234	14,920	–		(813)	22,351	41,830
Reconciliation:
Elimination of intersegment results										(50)	(463)
Share of profits or losses of
associates										(7,497)	(6,097)
Unallocated other income										4,580	10,236
Corporate and other
unallocated expenses										(46,216)	(18,526)
Finance costs (other than interest on
lease liabilities)										(1,867)	(10,277)
Profit/(loss) before tax										(28,699)	16,703

• 16 -

(b) Segment assets and liabilities

The following tables present assets and liabilities information for the Group’s operating segments as at 30 June 2021 and 31 December 2020, respectively:

30 June 2021 Shallow geothermal energy Air conditioning/ shallow geothermal heat pump Property investment and development Securities investment and trading HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Segment assets 883,110 48,890 483,589 303,258 Reconciliation: Elimination of intersegment receivables Corporate and other unallocated assets Total assets Segment liabilities 849,969 47,867 112,529 9,823 Reconciliation: Elimination of intersegment payables Corporate and other unallocated liabilities Total liabilities 31 December 2020 Shallow geothermal energy Air conditioning/ shallow geothermal heat pump Property investment and development Securities investment and trading HK$’000 HK$’000 HK$’000 HK$’000 (Audited) (Audited) (Audited) (Audited) Segment assets 788,265 52,225 588,438 300,152 Reconciliation: Elimination of intersegment receivables Corporate and other unallocated assets Total assets Segment liabilities 696,418 48,345 154,936 8,760 Reconciliation: Elimination of intersegment payables Corporate and other unallocated liabilities Total liabilities

Total HK$’000 (Unaudited) 1,718,847 (257,856) 177,210 1,638,201 1,020,188 (257,856) 426,746 1,189,078 Total HK$’000 (Audited) 1,729,080 (132,292) 123,773 1,720,561 908,459 (132,292) 467,220 1,243,387

• 17 -

4. REVENUE, OTHER INCOME AND GAINS

An analysis of revenue is as follows:

Revenue from contracts with customers Revenue from other sources Gross rental income	Three months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 58,167 68,930 4,584 3,760 62,751 72,690	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 83,862 110,202 4,584 7,428 88,446 117,630	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 83,862 110,202 4,584 7,428 88,446 117,630
			117,630

Disaggregated revenue information for revenue from contracts with customers

For the six months ended 30 June 2021

		Air
		conditioning/
	Shallow	shallow
	geothermal	geothermal
Segments	energy	heat pump	Total
	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)
Types of goods or services:
Sale of industrial products	–	1,324	1,324
Construction services	82,538	–	82,538
Total revenue from contracts with customers	82,538	1,324	83,862
Geographical markets:
Mainland China	82,538	1,324	83,862
Timing of revenue recognition:
Goods transferred at a point in time	–	1,324	1,324
Services transferred over time	82,538	–	82,538
Total revenue from contracts with customers	82,538	1,324	83,862

• 18 -

For the six months ended 30 June 2020

Segments Types of goods or services: Sale of industrial products Construction services Total revenue from contracts with customers Geographical markets: Mainland China Timing of revenue recognition: Goods transferred at a point in time Services transferred over time Total revenue from contracts with customers	Shallow geothermal energy HK$’000 (Unaudited) – 91,776 91,776 91,776 – 91,776 91,776	Air conditioning/ shallow geothermal heat pump HK$’000 (Unaudited) 18,426 – 18,426 18,426 18,426 – 18,426	Total HK$’000 (Unaudited) 18,426 91,776
			110,202
			110,202
			18,426 91,776
			110,202

Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information:

For the six months ended 30 June 2021

		Air
		conditioning/
	Shallow	Shallow
	geothermal	geothermal
Segments	energy	heat pump	Total
	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)
Revenue from contracts with customers:
External customers	82,538	1,324	83,862
Intersegment sales	–	993	993
	82,538	2,317	84,855
Intersegment adjustments and eliminations	–	(993)	(993)
Total revenue from contracts with customers	82,538	1,324	83,862

• 19 -

For the six months ended 30 June 2020

				Air
				conditioning/
			Shallow	shallow
		geothermal		geothermal
Segments			energy	heat pump		Total
		HK$’000		HK$’000		HK$’000
		(Unaudited)		(Unaudited)		(Unaudited)
Revenue from contracts with customers:
External customers			91,776	18,426		110,202
Intersegment sales			–	7,223		7,223
			91,776	25,649		117,425
Intersegment adjustments and eliminations			–	(7,223)		(7,223)
Total revenue from contracts with customers			91,776	18,426		110,202
Three months			ended	Six months ended
	30	June		30 June
	2021		2020	2021		2020
HK$’000			HK$’000	HK$’000		HK$’000
(Unaudited)			(Unaudited)	(Unaudited)		(Unaudited)
Other income
Interest income	29		43	89		109
Sale of scrap materials	–		375		–	375
Dividend income from equity
investment designated at fair value
through other comprehensive
income	–		3,033		–	3,033
Government grants_(Note)_	6		567	954		2,874
Waive of trade payables	–		16,629		–	16,629
Others	189		(1,814)	1,302		1,878
	224		18,833	2,345		24,898

Note: Government grants have been received in respect of certain heating projects of the Group. There are no unfulfilled conditions or contingencies relating to these grants.

• 20 -

5. FINANCE COSTS

An analysis of finance costs is as follows:

Interest on bank loans Interest on lease liabilities	Three months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 1,071 4,451 – 31 1,071 4,482	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 1,867 10,277 – 60 1,867 10,337	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 1,867 10,277 – 60 1,867 10,337
			10,337

6. PROFIT/(LOSS) BEFORE TAX

The Group’s profit/(loss) before tax is arrived at after charging/(crediting):

	Three months	ended	Six months ended	Six months ended
	30 June		30 June
	2021	2020	2021	2020
	HK$’000	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Cost of inventories sold	22,825	–	28,400	16,259
Cost of services provided	16,086	37,810	31,314	58,231
Depreciation	1,379	4,267	3,670	7,754
Employee benefit expense
(including directors’ and chief
executive’s remuneration)	14,880	13,500	29,400	27,336
Reversal of impairment loss
recognised in respect of trade
and bills receivables, net	–	(49)	–	(3,437)
Reversal of impairment loss
recognized in respect of
contract assets, net	–	–	–	(6,799)

• 21 -

7. INCOME TAX EXPENSE

Pursuant to the laws and regulations of the Cayman Islands and the BVI, the Group is not subject to any income tax in the Cayman Islands and the BVI during both periods.

No provision for Hong Kong profits tax has been made as the Group did not have any assessable profits subject to Hong Kong profits tax during both periods.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, except as stated below, the tax rate of all the other PRC subsidiaries is 25% from 1 January 2008 onwards.

Pursuant to the income tax rules and regulations of the PRC, certain subsidiaries were recognised as high and new technology enterprises and the income tax rate applicable to these subsidiaries was 15% for the six months ended 30 June 2021 (six months ended 30 June 2020: 15%).

Current – Mainland China Deferred Total tax charge for the period	Three months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 4 124 – 1,678 4 1,802	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 12 165 – 1,678 12 1,843	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 12 165 – 1,678 12 1,843
			1,843

8. DIVIDENDS

No interim dividend was paid, declared or proposed during the six months ended 30 June 2021, nor has any dividend been proposed since the end of the interim reporting period (six months ended 30 June 2020: Nil).

9. EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic earnings/(loss) per share amounts is based on the profit/(loss) for the period attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares of 4,447,637,000 (30 June 2020: 4,487,517,000) in issue during the period.

• 22 -

The calculations of basic and diluted earnings/(loss) per share are based on:

		Three months	Three months	ended		Six months	ended
			30 June			30 June
			2021		2020	2021	2020
		HK$’000		HK$’000		HK$’000	HK$’000
		(Unaudited)		(Unaudited)		(Unaudited)	(Unaudited)
	Earnings/(loss)
	Profit/(loss) for the period
	attributable to ordinary equity
	holders of the parent		(4,690)	27,325		(26,963)	9,173
				Number of shares
			’000		’000	’000	’000
	Shares
	Weighted average number
	of ordinary shares in issue
	during the period used in the
	basic earnings/(loss) per share
	calculation	4,447,637		4,448,109		4,447,637	4,487,517
10.	PROPERTY, PLANT AND EQUIPMENT
	During the six months ended 30 June		2021, the Group did not have any material				acquisition of
	property, plant and equipment.
11.	TRADE AND BILLS RECEIVABLES
						30 June	31 December
						2021	2020
						HK$’000	HK$’000
						(Unaudited)	(Audited)
	Trade receivables					290,116	321,087
	Impairment					(104,199)	(123,465)
	Trade receivables, net					185,197	197,622
	Bills receivables					120	223
						186,037	197,845
	Less: non-current portion					(139,977)	(139,102)
	Current portion					46,060	58,743

• 23 -

The Group’s trading terms with its customers are mainly on credit. The credit period is generally three months. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.

An ageing analysis of the trade and bills receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:

Within 90 days 91 to 180 days 181 to 365 days Over 365 days	30 June 2021 HK$’000 (Unaudited) 27,636 74,406 11,428 72,567 186,037	31 December 2020 HK$’000 (Audited) 106,295 3,995 9,625 77,930
		197,845

12. TRADE AND BILLS PAYABLES

An ageing analysis of the trade and bills payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 90 days 91 to 180 days 181 to 365 days Over 365 days	30 June 2021 HK$’000 (Unaudited) 60,793 15,667 7,018 215,160 298,638	31 December 2020 HK$’000 (Audited) 121,586 3,509 7,506 147,311
		279,912

The trade and bills payables are non-interest-bearing and are normally settled in six months.

• 24 -

13. SHARE CAPITAL

	Number of shares	Number of shares
	US$0.01 each		Share	capital		Share	capital
	30 June 31 December		30 June	31 December		30 June	31 December
	2021	2020	2021		2020	2021	2020
	’000	’000	US$’000	US$’000		HK$’000	HK$’000
	(Unaudited)	(Audited)	(Unaudited)	(Audited)		(Unaudited)	(Audited)
Ordinary shares
Issued and fully
paid	4,526,925	4,526,925	45,269	45,269		353,043	353,043
COMMITMENTS
The Group had the following capital commitments at the end of the reporting period:
						30 June	31 December
						2021	2020
						HK$’000	HK$’000
					(Unaudited)		(Audited)
Contracted, but not provided for:
– Capital contributions payable to an associate						551	594

14. COMMITMENTS

15. RELATED PARTY TRANSACTIONS

• (a) Amounts due from/to related companies and associates are included in the condensed consolidated statement of financial position.

• (b) In addition to the transactions detailed elsewhere in these financial statements, the Group had the following transactions with related parties during the period:

	Three months ended	Three months ended	Six months ended	Six months ended
	30	June	30 June
	2021	2020	2021		2020
	HK$’000	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Associates:
Purchases of products	802	29,789	2,175	29,824
Rental income	–	50	–		100
Other related parties:
Cash deposit	–	6	–		6
Rental expense	–	4	–		16
Interest expense	–	3,918	–		8,283

• 25 -

(c) Compensation of key management personnel of the Group:

Short term employee benefits Post-employment benefits Total compensation paid to key management personnel	Three months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 2,699 3,417 – 15 2,699 3,432	Six months ended 30 June 2021 2020 HK$’000 HK$’000 (Unaudited) (Unaudited) 5,633 7,447 – 31 5,633 7,478

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

	**Carrying **	amounts	Fair	values
	30 June	31 December	30 June	31	December
	2021	2020	2021		2020
	HK$’000	HK$’000	HK$’000		HK$’000
	(Unaudited)	(Audited)	(Unaudited)		(Audited)
Financial assets
Trade receivables, non-current
portion	139,977	139,102	139,977		139,102
Equity investments designated at fair
value through other comprehensive
income	302,504	299,408	302,504		299,408
Financial assets at fair value through
profit or loss	41	34	41		34
	442,522	438,544	442,522		438,544
Financial liabilities
Interest-bearing bank borrowings	20,625	100,998	20,625		100,998

The Group’s finance department headed by the finance manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The finance manager reports directly to the chief financial officer and the audit committee.

• 26 -

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS OR SHORT POSITIONS IN THE SHARE CAPITAL OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

As at 30 June 2021, the interests or short positions of the directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) which will be required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short position which they are taken or deemed to have taken under such provisions of the SFO), or which will be required to be entered into the register kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, were as follows:

Long Positions in Shares and Equity Derivatives

	Nature of		Percentage of total
Name of Directors	interest	Number of Shares	issued Shares(1)
Mr. Xu Shengheng	Beneficial owner	715,646,600	15.83%
	Interest of spouse	982,800
Ms. Chan Wai Kay Katherine	Beneficial owner	62,290,400	1.69%
	Interest of spouse	14,103,600
Mr. Wang Manquan	Beneficial owner	716,800	0.02%
Ms. Liu Ening	Beneficial owner	250,000,000	5.52%
Mr. Zhang Yiying	Beneficial owner	2,504,000	5.58%
	Interest of Controlled	250,000,000
	Corporation(2)
Mr. Jia Wenzeng	Beneficial owner	2,000,000	0.04%
Mr. Wu Desheng	Beneficial owner	2,000,000	0.04%
M. Wu Qiang	Beneficial owner	2,000,000	0.04%
M. Guo Qingui	Beneficial owner	2,000,000	0.04%
M. Guan Chenghua	Beneficial owner	2,000,000	0.04%

Notes:

• (1) The calculation is based on (i) the aggregate number of the shares of the Company (“Shares”) and, if any, underlying Shares pursuant to share awards; and (ii) the total number of 4,526,925,163 Shares in issue of the Company.

• (2) Universal Zone Limited, which is wholly owned by Mr. Zhang Yiying, holds 250,000,000 Shares.

• 27 -

Save as disclosed above, as at 30 June 2021, none of the directors, chief executive of the Company or their respective associates had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which will be required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short position which they are taken or deemed to have taken under such provisions of the SFO), or which will be required to be entered into the register kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the minimum standards of dealing by directors of the Company as referred to in Rules 5.46 to 5.67 of the GEM Listing Rules.

INTERESTS DISCLOSEABLE UNDER SFO AND SUBSTANTIAL SHAREHOLDERS

So far as is known to the directors of the Company, as at 30 June 2021, persons (other than directors or chief executive of the Company) who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were required pursuant to Section 336 of the SFO, to be entered into the register referred to therein, were as follows:

Long Positions in Shares and Underlying Shares

			Percentage of total
Name	Nature of interest	Number of Shares	issued Shares(1)
China Energy Conservation and	Beneficial interest	1,190,000,000	26.29%
Environmental Protection
(Hong Kong) Investment
Company Limited(2)
China Energy Conservation and	Interest of controlled	1,190,000,000	26.29%
Environmental Protection Group(2)	corporation
Ms. Luk Hoi Man	Beneficial interest	982,800	15.83%
	Interest of spouse	715,646,600
Universal Zone Limited	Beneficial owner	250,000,000	5.52%
Mr. Wang Zhiyu	Interest of spouse	250,000,000	5.52%

Notes:

• (1) The calculation is based on (i) the aggregate number of Shares and, if any, underlying Shares pursuant to share awards; and (ii) the total number of 4,526,925,163 Shares in issue of the Company.

• (2) China Energy Conservation and Environmental Protection (Hong Kong) Investment Company Limited, a wholly-owned subsidiary of China Energy Conservation and Environmental Protection Group, holds 1,190,000,000 Shares.

• 28 -

Save as disclosed above, as at 30 June 2021, the directors of the Company were not aware of any other person (other than directors or chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were required, pursuant to Section 336 of the SFO, to be entered into the register referred to therein.

SHARE AWARD SCHEME

On 15 January 2020 (the “Adoption Date”), the Board approved the adoption of a share award scheme (the “Share Award Scheme”). The purposes of the Share Award Scheme are to recognise and reward the contribution of eligible participants to the growth and development of the Group, to give incentives to eligible participants in order to retain them for the continual operation and development of the Group and to attract suitable personnel for further development of the Group. For details of the Share Award Scheme, please refer to the announcement of the Company dated 15 January 2020.

During the six months ended 30 June 2021, details of the awarded shares under the Share Award Scheme are set out below:

Awardees Date of grant Vesting date Directors Mr. Xu Shengheng 7 July 2020 31 December 2020 Ms. Chan Wai Kay Katherine 7 July 2020 31 December 2020 Mr. Wang Manquan 7 July 2020 31 December 2020 Mr. Wang Zhiyu# 7 July 2020 31 December 2020 Mr. Zhang Yiying 7 July 2020 31 December 2020 Mr. Jia Wenzeng 7 July 2020 31 December 2020 Mr. Wu Desheng 7 July 2020 31 December 2020 Mr. Wu Qiang 7 July 2020 31 December 2020 Mr. Guo Qingui 7 July 2020 31 December 2020 Mr. Guan Chenghua 7 July 2020 31 December 2020 Employees 7 July 2020 31 December 2020 Consultants 7 July 2020 31 December 2020 16 September 2020 31 December 2020

Number of Shares As at 1 January 2021 Granted during the period Vested during the period Lapsed during the period As at 30 June 2021 4,000,000 – 4,000,000 – – 4,000,000 – 4,000,000 – – 10,000,000 – – 10,000,000 – 2,000,000 – – 2,000,000 – 2,000,000 – 2,000,000 – – 2,000,000 – 2,000,000 – – 2,000,000 – 2,000,000 – – 2,000,000 – 2,000,000 – – 2,000,000 – 2,000,000 – – 2,000,000 – 2,000,000 – – 58,000,000 – 4,000,000 54,000,000 – 30,000,000 – 30,000,000 – – 4,000,000 – 4,000,000 – –

# Mr. Wang Zhiyu resigned as non-executive Director of the Company with effect from 12 March 2021.

• 29 -

COMPETITION AND CONFLICT OF INTERESTS

None of the directors or substantial shareholders of the Company or any of their respective associates has engaged in any business that competes or may compete with the business of the Group or has any other conflict of interests with the Group.

CORPORATE GOVERNANCE CODE

During the Review Period, the Company has complied with the code provisions of the Corporate Governance Code (the “Code”) set out in Appendix 15 of the GEM Listing Rules, except for the deviations as follows:

Under code provision A.6.7 of the Code requires that independent non-executive directors and other non-executive directors shall attend general meetings and develop a balanced understanding of the views of shareholders.

Mr. Yang Wei, Mr. Wang Michael Zhiyu and Mr. Zhang Yiying, the non-executive Directors, as well as Mr. Jia Wenzeng, Mr. Wu Desheng, Mr. Wu Qiang, Mr. Guo Qingui and Mr. Guan Chenghua, the independent non-executive Directors, did not attend the extraordinary general meeting held on 19 February 2021 due to their engagement in other business.

Mr. Zhang Yiying and Ms. Liu Ening, the non-executive Directors, as well as Mr. Jia Wenzeng, Mr. Wu Desheng, Mr. Wu Qiang, Mr. Guo Qingui and Mr. Guan Chenghua, the independent nonexecutive Directors, did not attend the annual general meeting held on 8 June 2021 due to their engagement in other business.

AUDIT COMMITTEE

The Company has established an audit committee with written terms of reference which deal clearly with its authority and duties. The audit committee’s primary duties are to review and to supervise the financial reporting process, risk management and internal control systems of the Group and to provide advice and comments to the directors of the Company.

The audit committee currently comprises five independent non-executive Directors, namely, Mr. Jia Wenzeng, Mr. Wu Desheng, Mr. Wu Qiang, Mr. Guo Qingui and Mr. Guan Chenghua. Mr. Jia Wenzeng is the chairman of the audit committee. The audit committee has reviewed the Group’s unaudited results for the Review Period and has provided advice and comment thereon.

SECURITIES TRANSACTIONS BY DIRECTORS

The Company has not adopted its own code of conduct regarding securities transactions by directors, but having made specific enquiry of all directors and the Company was not aware of any noncompliance with the required standard of dealings as set out in Rules 5.48 to 5.67 of the GEM Listing Rules and its code of conduct regarding securities transactions by directors during the Review Period.

• 30 -

UPDATE ON DIRECTORS’ INFORMATION

Pursuant to Rule 17.50A(1) of the GEM Listing Rules, the change in information of the Directors for the six months ended 30 June 2021 is set out below:

Changes of Directors and nominations of the Company

From 4 February 2021, Mr. Xu Shengheng was elected as the chairman of the Group. In addition, Mr. Xu ceased to act as a director of Ever Source Technology Development Group Dalian Co., Ltd. (恒有源科技發展集團大連有限公司), a subsidiary of the Company, since 3 February 2021. Since 30 April 2021, he ceased to act as a director of Beijing Haidian District Hengyuan Vocational Skills Training School (北京海澱區恒有源職業技能培訓學校), a subsidiary of the Company. Since 22 June 2021, he ceased to act as a director of Dalian Heng Run Feng Jiaye Real Estate Development Co., Ltd.* (大連恒潤豐佳業房地產開發有限公司), a subsidiary of the Company.

From 4 February 2021, Ms. Wang Yan ceased to be the joint chairman of the Board of the Company and remained as an executive Director, deputy chairman of nomination committee and remuneration committee of the Company.

Mr. Wang Zhiyu resigned as non-executive Director of the Company with effect from 12 March 2021.

Ms. Liu Ening ceased to act as alternate Director to Mr. Wang Zhiyu and was appointed as nonexecutive Director of the Company with effect from 12 March 2021.

Mr. Wang Manquan and Ms. Hao Xia were appointed as director of Ever Source Technology Development Group Dalian Co., Ltd.* (恒有源科技發展集團大連有限公司), a subsidiary of the Company, since 3 February 2021.

Changes in Directors’ emolument

The annual salary of Mr. Xu Shengheng, the Chairman of the Company, was decreased from HK$3.8 million to HK$2.9 million for the year 2021.

The annual salary of Ms. Chan Wai Kay, Katherine, the Deputy Chairman of the Company, was decreased from HK$1.92 million to HK$1.47 million for the year 2021.

The annual salary of Ms. Wang Yan, an executive Director of the Company, was decreased from HK$2.016 million to HK$1.116 million for the year 2021.

The annual salary of Mr. Wang Manquan, an executive Director of the Company, was decreased from HK$1.62 million to HK$1.458 million for the year 2021.

• 31 -

The annual salary of Ms. Hao Xia, an executive Director of the Company, was decreased from HK$1.2 million to HK$1.08 million for the year 2021.

The annual salary of Mr. Dai Qi, an executive Director of the Company, was decreased from HK$0.84 million to HK$0.756 million for the year 2021.

Each of the non-executive Directors of the Company, namely Mr. Yang Wei, Mr. Zhang Yiying and Ms. Liu Ening, is entitled to an annual directors’ fee of HK$60,000 for the year 2021.

The annual directors’ fee of each of the independent non-executive Directors of the Company, namely Mr. Jia Wenzeng, Mr. Wu Desheng, Mr. Wu Qiang, Mr. Guo Qingui and Mr. Guan Chenghua increased from HK$150,000 to HK$170,000 for the year 2021.

Save as disclosed above, there is no other information required to be disclosed pursuant to Rule 17.50A(1) of the GEM Listing Rules for the six months ended 30 June 2021.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

During the Review Period, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities, except that the trustee of the Share Award Scheme, pursuant to the rules of the Share Award Scheme, purchased on the open market a total of 24,208,000 shares of the Company, representing approximately 0.53% of the issued share capital of the Company, at a consideration of approximately HK$1,932,000 during the six months ended 30 June 2021.

As at the date of this announcement, the Board comprises Mr. Xu Shengheng, Ms. Chan Wai Kay, Katherine, Ms. Wang Yan, Mr. Wang Manquan, Ms. Hao Xia and Mr. Dai Qi as executive Directors, Mr. Yang Wei, Mr. Zhang Yiying and Ms. Liu Ening as non-executive Directors, Mr. Jia Wenzeng, Mr. Wu Desheng, Mr. Wu Qiang, Mr. Guo Qingui and Mr. Guan Chenghua as independent nonexecutive Directors.

By Order of the Board of China Geothermal Industry Development Group Limited Xu Shengheng Chairman

Hong Kong, 11 August 2021

• For identification purpose only

This announcement will remain on the GEM website with the domain name of www.hkgem.com on the “Latest Company Announcement” page for at least 7 days from the date of publication and on the website of the Company at www.cgsenergy.com.hk.

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