Zhejiang Expressway Co., Ltd
Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT ANNUAL REPORT STOCK CODE：0576 2 0 2 3 A N N U A L R E P O R T ANNUAL REPORT Definitions Company Profile Corporate Structure of the Group Review of Major Corporate Events Particulars of Major Road Projects Financial and Operating Highlights Chairman’s Statement Management Discussion and Analysis Principal Risks and Uncertainties Corporate Governance Report Directors, Supervisors and Senior Management Profiles Report of the Directors Report of the Supervisory Committee Connected Transactions Independent Auditor’s Report Consolidated Financial Statements & Notes Corporate Information Location Map of Expressways in Zhejiang Province 2 5 6 7 10 12 15 19 40 43 61 75 85 87 116 122 339 341 Articles of Association Associate Audit Committee Board China Merchants Expressway Company or Zhejiang Expressway Communications Group Communication Holding Connected Person Controlling Shareholder De’an Co Directors GDP Group H Shares Hanghui Co HangNing Co Hangrao Co HangShaoYong Co Hangxuan Co HuangQuNan Co Huihang Co Hong Kong Stock Exchange independent third party(ies) Jiaogong Group Jiaogong Maintenance 2 articles of association of the Company has the meaning ascribed to it under the Listing Rules the audit committee of the Company the board of directors of the Company China Merchants Expressway Network & Technology Holdings Co., Ltd. (招商局公 路網絡科技控股股份有限公司), a joint stock limited company established in the PRC on December 18, 1993, whose shares are listed on the Shenzhen Stock Exchange Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the PRC with limited liability on March 1, 1997 Zhejiang Communications Investment Group Co., Ltd. (浙江省交通投資集團有限公 司), a state-controlled enterprise established in the PRC, on December 29, 2001 and the Controlling Shareholder of the Company Zhejiang Communication Investment Holding Group Co., Ltd. (浙江省交投控股集團 有限公司), a wholly-owned subsidiary of Communications Group has the meaning ascribed to it under the Listing Rules has the meaning ascribed to it under the Listing Rules Deqing County De’an Highway Construction Co., Ltd. (德清縣德安公路建設有限責 任公司), an 80.1% owned subsidiary of the Company, established with Zhejiang Hongtu for PPP Project in Deqing County the directors of the Company gross domestic product the Company and its subsidiaries the overseas listed foreign shares of Rmb1.00 each in the share capital of the Company which are primarily listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars since May 15, 1997 Zhejiang Hanghui Expressway Co., Ltd. (浙江杭徽高速公路有限公司), a 51% owned subsidiary of the Company Zhejiang HangNing Expressway Co., Ltd. (浙江杭寧高速公路有限責任公司), a 30% owned associate of the Company Deqing Hangrao Expressway Co., Ltd. (德清縣杭繞高速有限公司), a non-wholly owned subsidiary of Communications Group Zhejiang HangShaoYong Expressway Co., Ltd. (浙江杭紹甬高速公路有限公司), a non-wholly owned subsidiary of Communications Group Zhejiang Hangxuan Expressway Co., Ltd. (浙江杭宣高速公路有限公司), a wholly- owned subsidiary of Communications Group Zhejiang HuangQuNan Expressway Co., Ltd. (浙江黃衢南高速公路有限公司), a 100% owned subsidiary of LongLiLiLong Co Huangshan Yangtze Huihang Expressway Co., Ltd. (黃山長江徽杭高速公路有限責 任公司), a wholly-owned subsidiary of the Company The Stock Exchange of Hong Kong Limited any person(s) or company(ies) and their respective ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are third parties independent of the Group and its connected persons in accordance with the Listing Rules Zhejiang Communications Construction Group Co., Ltd. (浙江交工集團股份有限公 司), a non-wholly owned subsidiary of Communications Group Zhejiang Jiaogong High-grade Expressway Maintenance Co., Ltd. (浙江交工高等級公 路養護有限公司), a non-wholly owned subsidiary of Communications Group 2023 ANNUAL REPORTDefinitionsJiaxiao Co Jiaogong Underground Construction Jiaxing Branch Jinhua Co Liantai Communications Listing Rules Linping Co LongLiLiLong Co Maintenance Co Ningbo Yongtaiwen Co North Channel Co Period PRC Rmb Santongdao South Connection Co SFO Shangsan Co Shareholders Shensuzhewan Branch Shengxin Co Shenjiahuhang Co Shaoxing Communications SRCB Supervisory Committee Yangtze Financial Leasing Jiaxing Jiaxiao Expressway Investment Development Co., Ltd. (嘉興市嘉蕭高速公 路投資開發有限公司), a 70% owned subsidiary of Communications Group Zhejiang Jiaogong Underground Construction Co., Ltd. (浙江交工地下工程有限公 司), a non-wholly owned subsidiary of Communications Group Jiaxing Branch of LongLiLiLong Co Zhejiang Jinhua Yongjin Expressway Co., Ltd. (浙江金華甬金高速公路有限公司), a wholly-owned subsidiary of the Company Guangdong Liantai Communications Investment Co., Ltd. (廣東聯泰交通投資有限 公司), a limited liability company incorporated in the PRC on May 12, 2000 the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited Zhejiang Linping Expressway Co., Ltd. (浙江臨平高速公路有限責任公司), formerly known as “Zhejiang Yuhang Expressway Co., Ltd.” (浙江余杭高速公路有限責任公 司), a 51% owned subsidiary of the Company Zhejiang LongLiLiLong Expressway Co., Ltd. (浙江龍麗麗龍高速公路有限公司), a wholly-owned subsidiary of the Company Zhejiang Expressway Maintenance Co., Ltd. (浙江滬杭甬養護工程有限公司), a non- wholly owned subsidiary of Communications Group Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd. (浙江寧波甬台溫高速公路有限 公司), an approximately 80.45% owned subsidiary of Communications Group Zhejiang Zhoushan North Channel Co., Ltd. (浙江舟山北向大通道有限公司), a 60% owned subsidiary of Communications Group the period from January 1, 2023 to December 31, 2023 the People’s Republic of China Renminbi, the lawful currency of the PRC Hangzhou Santongdao South Connection Engineering Co., Ltd. (杭州三通道南接線 工程有限公司), a non-wholly owned subsidiary of Communications Group Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) Zhejiang Shangsan Expressway Co., Ltd. (浙江上三高速公路有限公司), a limited liability company established in the PRC on January 1, 1998 which is owned as to 73.625% by the Company and 18.375% by China Merchants Expressway, respectively the shareholders of the Company Zhejiang Communications Investment Group Co., Ltd., Shensuzhewan Branch (浙 江省交通投資集團有限公司申蘇浙皖分公司), a branch of Communications Group Zhejiang Shaoxing Shengxin Expressway Co., Ltd. (浙江紹興嵊新高速公路有限公 司), a 50% owned joint venture of the Company Zhejiang Shenjiahuhang Expressway Co., Ltd. (浙江申嘉湖杭高速公路有限公司), an associate company indirectly owned by the Company through its subscribing 30% of the subordinated class of the CICC-Zhejiang Expressway-Shenjiahuhang asset- backed special program Shaoxing Communications Investment Group Co., Ltd. (紹興市交通投資集團有限公 司), a company incorporated in the PRC with limited liability Shanghai Rural Commercial Bank Co., Ltd. (上海農村商業銀行股份有限公司), a 4.96% owned associate of the Company the supervisory committee of the Company Yangtze United Financial Leasing Co., Ltd. (長江聯合金融租賃有限公司), a 10.61% owned associate of the Company 3 Hunan Yonglan Expressway Co., Ltd. (湖南永藍高速公路有限公司), a limited liability company established in the PRC on January 19, 2006 Zhejiang Wenzhou YongTaiWen Expressway Co., Ltd. (浙江溫州甬台溫高速公路有 限公司), a 15% owned associate of the Company Jiaxing Zhajiasu Expressway Co., Ltd., a 55% owned subsidiary of the Company Zhejiang Communications Investment Group Finance Co., Ltd. (浙江省交通投資集 團財務有限責任公司), a 20.08% owned associate of the Company Zheshang Development Group Co., Ltd. (浙商中拓集團股份有限公司), a joint stock limited company established in the PRC and a 44.55% owned associate of Communications Group Zhejiang Zheshang Financial Holding Co., Ltd. (浙江浙商金控有限公司), is a wholly-owned subsidiary of the Communications Group, was established under the laws of the PRC with limited liability in August 2018 Zhejiang Grand Hotel Limited (浙江大酒店有限公司), a wholly-owned subsidiary of the Company Zhejiang Hangzhou-Ningbo Parallel Line Ningbo Phase I Expressway Co., Ltd. (浙江杭甬複線寧波一期高速公路有限公司), a non-wholly owned subsidiary of Communications Group Zhejiang Hongtu Transportation Construction Company (浙江交工宏途交通建設有 限公司), a limited liability company incorporated in the PRC and non-wholly owned by Communications Group Zhejiang High-speed Information Engineering Technology Ltd. (浙江高信技術股 份有限公司), formerly known as Zhejiang Expressway Information Engineering Technology Co., Ltd. (浙江高速信息工程技術有限公司), a company incorporated in the PRC and a 65.85% owned subsidiary of Communications Group Zhejiang Expressway International (Hong Kong) Co., Ltd. (浙江滬杭甬國際（香港）有 限公司), a wholly-owned subsidiary of the Company Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd. (浙江順暢高 等級公路養護有限公司), a limited liability company established in the PRC and a non-wholly owned subsidiary of Communications Group Zhejiang Zheshang Transform and Upgrade Fund of Funds Partnership (Limited Partnership), a 24.99% owned associate of the Company Zheshang Securities Co., Ltd. (浙商證券股份有限公司), a 54.79% owned subsidiary of the Shangsan Co Zhejiang Commercial Group Co., Ltd. (浙江省商業集團有限公司), a company established in the PRC and a subsidiary of Communications Group Zhejiang Zheqi Industrial Co., Ltd. (浙江浙期實業有限公司), a company established in the PRC, an indirectly non-wholly owned subsidiary of the Company Zhejiang Zhijiang Communications Holdings Co., Ltd. (浙江之江交通控股有限 公司), a joint venture owned as to 50% by the Company and China Merchants Expressway, respectively Zhejiang Zhoushan Bay Bridge Co., Ltd. (浙江舟山跨海大橋有限公司), a 51% owned subsidiary of the Company Zhejiang Institute of Communications Co., Ltd. (浙江數智交院科技股份有限公 司), a joint stock limited company established in the PRC and a 55.08% owned subsidiary of Communications Group Yonglan Co Wenzhou YongTaiWen Co Zhajiasu Co Zhejiang Communications Finance Zheshang Development Zheshang Financial Zhejiang Grand Hotel Zhejiang HNPL Co Zhejiang Hongtu Zhejiang Information Zhejiang International Hong Kong Zhejiang Shunchang Zheshang FoF Zheshang Securities Zhejiang Commercial Zhejiang Zheqi Zhijiang Communications Holdings Zhoushan Co ZJIC 4 2023 ANNUAL REPORTDefinitionsZhejiang Expressway is a listed company principally engaging in investing in, developing and operating of high-grade roads as well as securities business. The Company was incorporated on March 1, 1997 as an infrastructure company of the Zhejiang Provincial Government for investing in, developing and operating expressways and Class 1 roads in Zhejiang Province. The H Shares of the Company, which represent approximately 33% of the issued share capital of the Company, were listed on the Hong Kong Stock Exchange on May 15, 1997. The securities business is carried out by its subsidiary Zheshang Securities, which was listed on the Shanghai Stock Exchange (SH Stock Code: 601878) in June 2017. Major assets operated by the Group include nine expressways namely the 248 km Shanghai- Hangzhou-Ningbo Expressway, the 141 km Shangsan Expressway, the 70 km Jinhua section of Ningbo-Jinhua Expressway, the 122 km Hanghui Expressway, the 82 km Huihang Expressway, the 46 km Zhoushan Bay Bridge, the 222 km LongLiLiLong Expressways, the 50km Zhajiasu Expressway and the 161 km HuangQuNan Expressway. Among which, apart from Huihang Expressway which is situated within Anhui Province in the PRC, the rest of the eight expressways are situated within Zhejiang Province in the PRC. As at December 31, 2023, total assets of the Company and its subsidiaries amounted to Rmb207,733.80 million. Incorporated on December 29, 2001, Communications Group, the Controlling Shareholder of the Company, is a state-controlled communications company established by the Zhejiang Provincial Government. It mainly operates a diversity of businesses, such as investment, operations, maintenance, toll collection and ancillary services of expressways; construction and building of transportation project, ocean and coastal transport; as well as real estates. On July 11, 2016, Zhejiang Provincial Party Committee and Zhejiang Provincial Government carried out a merger and restructuring of Communications Group and Zhejiang Railroad Investment Group Co., Ltd.. In July 2018, Zhejiang Provincial Party Committee and Zhejiang Provincial Government carried out a merger and restructuring of Communication Group and Zhejiang Commercial Group Co., Ltd.. Upon merger and restructuring, Communications Group will be responsible for the investment and financing, construction, operation and management of transport related fundamental facilities including expressways, railroads, key cross-region mass transit railways and integrated transport hubs. With a solid foundation built on the Group’s expressway business, the Company will expand its main businesses scale, enhance its core competitiveness, and grow its financial and securities business so as to increase its profit contribution to the Group. Looking ahead, the Company will seize sound investment opportunities to acquire new projects, and strive to develop the Company into an international investment holdings company with a primary focus on transportation infrastructure investment and operation. 5 Company ProfileI n v e s t m e n t T o l l R o a d O v e r s e a s O p e r a t i o n s H o t e l H o n g K o n g I n t e r n a t i o n a l H o t e l G r a n d 1 0 2 . 6 k m 5 0 . 3 k m 8 1 . 6 k m 1 2 2 . 3 k m 6 9 . 7 k m 4 6 . 3 k m S h a n g h a i - H a n g z h o u E x p r e s s w a y 2 2 2 . 2 k m 1 6 1 . 0 k m 1 4 5 . 3 k m 1 4 1 . 4 k m 7 3 . 4 k m 9 2 . 9 k m 9 9 . 0 k m 1 3 8 . 8 k m E x p r e s s w a y E x p r e s s w a y Z h a j i a s u E x p r e s s w a y E x p r e s s w a y S e c t i o n o f B a y B r i d g e i H u h a n g H a n g h u i i J n h u a Z h a u s h a n E x p r e s s w a y i N n g b o - J n h u a i 3 . 4 k m S e c t i o n H a n g z h o u 1 1 . 1 k m S e c t i o n 8 8 . 1 k m S e c t i o n E x p r e s s w a y i L n p n g i i J a x n g i i L o n g L L L o n g i E x p r e s s w a y o f E x p r e s s w a y H u a n g Q u N a n H a n g z h o u - S h a n g s a n S h a o x i n g S h e n j i a h u h a n g H a n g N n g i i N n g b o E x p r e s s w a y S e c t i o n E x p r e s s w a y E x p r e s s w a y i N n g b o - J n h u a i P P P H o t e l P j r o e c t O p e r a t i o n s B r a n c h J i a x i n g Q u N a n C o H u a n g S e c u r i t i e s Z h e s h a n g 1 0 0 % 5 4 . 7 9 % E x p r e s s w a y Y o n g T a W e n i S e c t i o n o f W e n z h o u C o I n v e s t m e n t T o l l R o a d B u s i n e s s L e a s n g i S e r v i c e s F u n d B a n k i n g i F n a n c e i F n a n c i a l I n v e s t m e n t 6 l H o d n g i L e a s n g i i F n a n c e C o C o C o C o C o C o C o C o C o C o C o C o Y o n g T a W e n i C o m m u n c a i t i o n s i F n a n c a i l C o m m u n c a t i o n s i F o F Z h e j i a n g Z h e j i a n g Z h a j i a s u i H u h a n g H a n g h u i i J n h u a Z h o u s h a n D e a n ’ i L n p n g i i L o n g L L L o n g i S h a n g s a n S h e n g x i n j i S h e n a h u h a n g H a n g N n g i W e n z h o u Z h i j i a n g S R C B Y a n g t z e Z h e j i a n g Z h e s h a n g C o r p o r a t e S t r u c t u r e o f t h e G r o u p S e t o u t l b e o w i s t h e c o r p o r a t e a n d i b u s n e s s s t r u c t u r e o f t h e G r o u p a s a t M a r c h 2 5 , 2 0 2 4 : 3 3 % l H o d e r s o f H S h a r e s T h e C o m p a n y i s u b s d a r y i 6 7 % l H o d e r o f D o m e s t i c S h a r e s a s s o c a t e i j i o n t v e n t u r e 1 0 0 % 1 0 0 % 5 5 % 1 0 0 % 5 1 % 1 0 0 % 5 1 % 8 0 . 1 % 5 1 % 1 0 0 % 1 0 0 % 7 3 . 6 2 5 % 5 0 % 3 0 % 3 0 % 1 5 % 5 0 % 4 . 9 6 % 1 0 . 6 1 % 2 0 . 0 8 % 2 4 . 9 9 % 2023 ANNUAL REPORT 1. On March 27, 2023, the Company announced its 2022 annual results. On the same date, the Company and Shaoxing Communications, as a consortium, entered into the investment agreement in respect of the investment and implementation of the Ningbo-Jinhua Expressway (Shaoxing Section) Renovation and Expansion Project, with Zhejiang Road and Transportation Management Center* (浙江省公路與運輸管理中心) and Shaoxing Road and Transportation Management Center* (紹興市公路與運輸管理中心). On March 30, 2023, the Company, together with Zhejiang Grand Hotel, entered into an entrusted management agreement with Communication Holding in order to entrust Communication Holding to operate and manage the hotel located at No. 595 Yan’an Road, Gongshu District, Hangzhou City, held by Zhejiang Grand Hotel. On April 18, 2023, the Board approved the decision to delist the Company’s H Shares from the London Stock Exchange plc; on the same date, the Company filed an application for delisting with the Financial Conduct Authority and London Stock Exchange plc; the delisting took effect from 8:00 a.m. on May 19, 2023 (London time). On April 28, 2023, the Company announced its 2023 first quarterly results. On May 4, 2023, the Company held its 2022 annual general meeting to approve, inter alia, the payment of a final dividend of RMB37.5 cents per share, the reappointment of Deloitte Touche Tohmatsu Certified Public Accountants as Hong Kong auditor of the Company, the reappointment of Pan-China Certified Public Accountants LLP as the PRC auditor of the Company, and the grant of general mandate to the Board to issue, allot and deal with additional H Shares of not more than 20% of the issued H Shares of the Company. On June 9, 2023, the Company held an extraordinary general meeting to elect Ms. Li Yuan as a supervisor representing Shareholders of the Company and Mr. Zheng Ruchun retired from serving as a supervisor representing Shareholders of the Company, and to approve the grant of a specific mandate to the Board to issue, allot and deal with a maximum of 13,001,017 H Shares of the Company for issuance of conversion shares exceeding the 2020 general mandate upon conversion of the Euro230 million zero coupon convertible bonds due 2026 into H Shares at the conversion price of HK$7.30 adjusted for dividend payment. On July 24, 2023, the Company held an extraordinary general meeting to approve the 2023 Rights Issue (as defined below) and the Shareholders’ Return Plan for the Next Three Years (2023–2025), and the 2023 Rights Issue was also approved separately at the H Shares class meeting and the domestic shares class meeting held on the same date. 2. 3. 4. 5. 6. 7. 8. On August 23, 2023, the Company announced its 2023 interim results. On the same date, the Board elected Mr. Yuan Yingjie as the Chairman of the Company and Mr. Yu Zhihong retired from serving as the Chairman of the Company, and approved the Company to operate and manage the Zhejiang Section of HangNing Expressway (99.0 kilometers) as entrusted by HangNing Co and the entrusted management agreement was signed on the same date. 7 Review of Major Corporate Events9. On August 30, 2023, the Company and China Merchants Expressway entered into an investment agreement with Zhejiang Road and Transportation Management Center* (浙江 省公路與運輸管理中心) and Jiaxing Transportation Engineering Construction Management Service Center* (嘉興市交通工程建設管理服務中心) in respect of the investment and implementation of the reconstruction and expansion project of Nanhu Interchange to Zhejiang-Jiangsu Boundary Section of the Zhajiasu Expressway. Subsequently, Zhajiasu Co, a subsidiary of the Company, was designated as the project company for the implementation of the project, and the project company completed the signing of the concession agreement. 10. On September 6, 2023, the Company entered into an investment agreement with Zhejiang Road and Transportation Management Center* (浙江省公路與運輸管理中心) and Jinhua Road and Transportation Management Center* (金華市公路與運輸管理中心) (now renamed as “Jinhua Road Port and Transportation Management Center* (金華市公路港航與運輸 管理中心)”) in respect of the investment and implementation of the reconstruction and expansion project of Ningbo-to-Jinhua section (Jinhua Section) of the Ningbo-Jinhua Expressway. Subsequently, Jinhua Co, a wholly-owned subsidiary of the Company, was designated as the project company for the implementation of the project, and the project company completed the signing of the concession agreement. 11. On September 7, 2023, the Board appointed Mr. Wu Wei as the General Manager of the Company and Mr. Yuan Yingjie ceased to serve as the General Manager of the Company. 12. On September 27, 2023, the Company held an extraordinary general meeting to elect Mr. Wu Wei as an executive Director and Mr. Chen Ninghui retired from serving as an executive Director; and to elect Mr. Lu Wenwei as a supervisor representing Shareholders of the Company and Ms. Li Yuan ceased to serve as a supervisor representing Shareholders of the Company. 13. On September 28, 2023, the Company and Communications Group entered into an equity purchase agreement to acquire 15% equity interest in Wenzhou YongTaiWen Co at a consideration of RMB816,150,000; and on the same date, LongLiLiLong Co (a wholly-owned subsidiary of the Company) and Communications Group entered into an equity purchase agreement to acquire the entire equity interest in HuangQuNan Co at a consideration of RMB16,700,000. 14. On October 13, 2023, the Company held an extraordinary general meeting to elect Mr. Li Wei as an executive Director. 15. On October 31, 2023, the Company announced its 2023 third quarterly results. On the same date, the Board appointed Mr. Wu Wei as an authorized representative of the Company. 16. On November 10, 2023, the Company held an extraordinary general meeting to approve the resolutions in relation to the amendments to Articles of Association due to changes in regulatory rules, as well as to reflect its changes of registered address and business scope. 8 2023 ANNUAL REPORTReview of Major Corporate Events17. On November 24, 2023, the Company and China Merchants Expressway entered into a joint venture agreement, pursuant to which each party agreed to make a capital contribution of RMB1,341.6 million, each representing 50% of the registered capital of the joint venture, for the establishment of the joint venture; on the same date, the Company and China Merchants Expressway entered into an equity acquisition agreement with the relevant shareholders of Yonglan Co, pursuant to which, upon establishment, the joint venture shall acquire 60% equity interest in Yonglan Co at an amount of approximately RMB2,672.77 million. On November 28, 2023, the joint venture Zhijiang Communications Holding was officially established. 18. On December 13, 2023, the Company completed the 2023 Rights Issue of H Shares and domestic shares, raising gross proceeds equivalent to approximately RMB6.15 billion, of which the newly issued H Shares were officially listed on the Hong Kong Stock Exchange on December 14, 2023. Upon completion of the 2023 Rights Issue, the total number of shares of the Company increased to 5,993,498,010 shares. 19. On December 15, 2023, the Company was awarded the “Best Investment Value Listed Company” and “Listed Company with Excellent Investor Relationship Management” in the 13th China Securities Golden Bauhinia Award, and the “Best Listed Company at ESG Information Disclosure” by the Hong Kong International ESG Alliance. 20. On December 20, 2023, the Company was awarded the “ESG Excellence Report” rating in the ESG Report Rating Activity for Social Responsibilities of Communication Enterprises organized by China Association of Communication Enterprise Management. 21. On December 28, 2023, the Company held an extraordinary general meeting to approve the grant of a special mandate to the Board to issue, allot and deal with a maximum of 27,333,464 H Shares of the Company for issuance of conversion shares exceeding the 2020 general mandate and the previous specific mandate upon conversion of Euro230 million zero coupon convertible bonds due 2026 into H Shares at the conversion price of HK$6.69 adjusted for the 2023 Rights Issue. 22. On January 12, 2024, the Company entered into entrusted management agreements with Zhejiang HNPL Co, HangShaoYong Co and Hangrao Co, respectively, pursuant to which the Company was entrusted to operate and manage Phase I Ningbo Section of the Parallel Line G92N of Hangzhou Bay Ring Expressway (55.8 kilometers, “Hangzhou- Ningbo Expressway Parallel Line ”), Hangzhou to Shaoxing Section of Hangzhou- Shaoxing-Ningbo Expressway (52.8 kilometers) and Huzhou Section of the West Parallel Line of the Hangzhou Ring Expressway (50.8 kilometers); among them, the Hangzhou- Ningbo Expressway Parallel Line and Hangzhou to Shaoxing Section of Hangzhou- Shaoxing-Ningbo Expressway opened to traffic on January 19, 2024. 23. On January 22, 2024, the Company, at the option of the holder of convertible bonds, made early redemption of EUR202.6 million (together with accrued interest) of the total Euro230 million zero coupon convertible bonds due 2026 issued by the Company on January 20, 2021. 24. On January 25, 2024, the joint venture Zhijiang Communications Holdings entered into an equity acquisition agreement with Liantai Communications to acquire the remaining 40% equity interest in Yonglan Co. 9 Expressway of Ownership Kilometers Lanes Stations Service Areas Operation Operation Percentage Length in Number of Number of Toll Number of Start of Years of Remaining Shanghai-Hangzhou Expressway – Jiaxing Section – Linping Section – Hangzhou Section Hangzhou-Ningbo Expressway – Hangzhou to Hongken section – Hongken to Duantang section – Duantang to Dazhujia section 100% 51% 100% 100% 100% 100% 88.1 11.1 3.4 15.7 123.4 6.2 Shangsan Expressway 73.625% 141.4 Ningbo-Jinhua Expressway – Jinhua Section 100% 69.7 51% 51% 100% 51% 100% 100% 100% 55% 100% 100% 36.7 85.6 81.6 46.3 119.8 22.97 79.47 50.28 87.26 73.745 Hanghui Expressway – Changyu Section – Changhang Section Huihang Expressway Zhoushan Bay Bridge LongLi Expressway LiLong Expressway – Liandu Section – Other Sections Zhajiasu Expressway HuangQuNan Expressway – Qunan Section – Quhuang Section 10 8 6 4 4 8 4 4 4 4 4 4 4 4 4 4 4 4 4 7 1 1 1 11 1 11 7 5 8 4 8 9 2 5 4 5 5 2 0 0 0 2 0 3 1 1 1 2 1 3 0 1 1 2 2 1998 1995–1998 1995 1992 1995 1996 2000 2005 2004 2006 2004 2009 2006 2007 2006 2002 2008 2011 5 5 5 4 4 4 7 7 6 8 10 11 8 9 8 7 9 12 2023 ANNUAL REPORTParticulars of Major Road Projects CURRENT TOLL RATES ON THE EXPRESSWAYS UNDER THE GROUP 1. Passenger vehicle classification and toll rates Toll for passenger vehicles = Entrance fee + Mileage fee x Actual mileage traveled + Tunnel (bridge) superimposed toll Class Classification standard Toll rates of expressways in Zhejiang Province for passenger vehicles Toll rates of Huihang Expressway for passenger vehicles Mileage fee (Rmb/vehicle/km) Entrance fee (Rmb/trip) Mileage fee (Rmb/vehicle/km) Class 1 Class 2 Class 3 Class 4 ≤ 9 seats (with a length less than 6m) 10–19 seats (with a length less than 6m) Passenger car trailer ≤39 seats (with a length no less than 6m) ≥40 seats (with a length no less than 6m) 0.40 0.40 0.80 1.20 5 5 10 15 0.45 0.8 1.1 1.3 Note: For Shanghai-Hangzhou-Ningbo Expressway, the mileage fee for class 1 and class 2 passenger vehicles is Rmb0.45/vehicle/km. 2. Truck and special motor vehicle classification and toll rates Toll for trucks and special motor vehicles = Mileage fee x Actual mileage traveled + Tunnel (bridge) superimposed toll Class Classification standard Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 2 axles (with a length less than 6m and maximum authorized total weight less than 4,500kg) 2 axles (with a length no less than 6m or maximum authorized total weight no less than 4,500kg) 3 axles 4 axles 5 axles 6 axles or above (inclusive) Toll rates of expressways in Zhejiang Province for trucks and special motor vehicles (Rmb/vehicle/km) Toll rates of Huihang Expressway for trucks and special motor vehicles (Rmb/vehicle/km) 0.45 0.841 1.321 1.639 1.675 1.747 0.45 0.9 1.35 1.7 1.85 2.2 Notes: 1. 2. Total number of axles includes floating axles. For trucks with 6 axles above running on Huihang Expressway, toll rates of trucks with each additional axle shall be calculated at 1.1 times of the standard rate for Class 6 trucks; whereas toll rates of trucks with 10 axles or above shall be calculated at the standard rate for trucks with 10 axles. 11 RESULTS Revenue Profit Before Tax Income Tax Expense Profit for the year Profit for the year attributable to: Owners of the Company Non-controlling interests Basic Earnings Per Share (EPS) (Rmb cents) Diluted EPS (Rmb cents) RETURN ON EQUITY (ROE) 2019 2020 2021 2022 2023 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Restated) (Restated) (Restated) (Restated) 12,943,080 12,723,793 16,641,414 15,331,777 16,965,024 4,895,872 4,114,669 7,854,182 7,342,061 7,851,538 (1,351,157) (1,160,027) (1,873,961) (1,039,051) (1,229,208) 3,544,715 2,954,642 5,980,221 6,303,010 6,622,330 2,840,934 1,997,450 703,781 957,192 4,452,488 1,527,733 62.39 60.69 43.86 43.64 97.78 91.54 5,178,666 1,124,344 113.72 108.33 5,223,679 1,398,651 112.95 105.32 2019 2020 2021 2022 2023 (Restated) (Restated) (Restated) (Restated) ROE 16.7% 8.8% 16.8% 17.3% 16.0% Segmental Revenue / 2023 Segmental Net Profit / 2023 Other Business 1.0% Other Business 12.4% 37.6% Secunities Business 12 28.9% Secunities Business 58.7% Toll Road Business 61.4% Toll Road Business 2023 ANNUAL REPORTFinancial and Operating Highlights Revenue / Rmb Million 12,943 12,724 16,641 15,332 16,965 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2019 2020 2021 2022 2023 (Restated) (Restated) (Restated) (Restated) Net profit / Rmb Million 5,980 6,303 6,622 8,000 6,400 4,800 3,200 1,600 0 3,545 2,955 2019 2020 2021 2022 2023 (Restated) (Restated) (Restated) (Restated) Basic EPS / Rmb Cents 97.78 113.72 112.95 62.39 43.86 2019 2020 2021 2022 2023 (Restated) (Restated) (Restated) (Restated) 16.7 16.8 17.3 16.0 8.8 140 120 100 80 60 40 20 0 ROE / % 20 16 12 8 4 0 2019 2020 2021 2022 2023 (Restated) (Restated) (Restated) (Restated) 13 YUAN Yingjie Chairman 2023 ANNUAL REPORTDear Shareholders, On behalf of the Board, it is my pleasure to present the annual results of Zhejiang Expressway Co., Ltd., and its subsidiaries (collectively referred to as the “Group”) for the year 2023. In 2023, in the face of the complex and severe international environment and the arduous and heavy mission of domestic reform, development and maintaining stable , China deepened its reform and opening up in all respects and intensified its efforts in macro- control, a pick up and improvement of the national economy were seen. Zhejiang Province, where the Group’s principal businesses are located, has seen collaborative recovery in the supply and demand, gaining persistent vitality of innovation, and the economic operation is steadily advancing. During the Period, against the backdrop of pressure-bearing external environment and the slowdown of economic recovery, the Group focused on its principal businesses and made breakthroughs, and successfully achieved its results targets for the year with a number of landmark accomplishments having been made. During the Period, total revenue of the Group increased by 10.7% year on year to RMB16,965.02 million, profit attributable to owners of the Company increased by 0.9% year on year to RMB5,223.68 million, and ROE (return on equity) was 16.0%. The Board recommended a dividend of RMB32.0 cents per share, providing long-term stable shareholder returns on an ongoing basis. 15 Chairman’s StatementAs for the development of the core business, in 2023, adhering to the development concept of “empowering with intelligent technology and rebuilding value ”, the Group successfully realised industrial implementation of intelligent expressways technology , effectively improved the quality of its operation services, and continuously strengthened its capability in innovative development of the core expressways business, by digital and technological means. During the Period, the Group completed the task of transportation safeguard for the Hangzhou Asian Games in a high-quality manner, playing a leading role in the divergent driving force across the province and further improving the reputation of the brand of Zhejiang Expressway. Regarding investment and financing, the Group jointly established an investment platform named “Zhijiang Communications Holdings ” with China Merchants Expressway, and successfully implemented the acquisition of 60% equity interest in Yonglan Co, which laid a solid foundation for the Company to “going-out” from the eastern coastal region of China and achieve geographical expansion; successfully completed the acquisition of 100% equity interest in HuangQuNan Co and the acquisition of 15% equity interest in Wenzhou YongTaiWen Co, continuing to expand and consolidate the toll operation business, which effectively contributed to the performance growth of the Company and consolidated its leading position in the expressway industry in the province. Meanwhile, the Company successfully completed the first equity financing through a rights issue since the Company’s listing on the Hong Kong Stock Exchange, raising funds equivalent to RMB6.15 billion, which effectively met the needs for funds regarding ongoing reconstruction and extension projects, and laid a foundation for debt financing in the future. As for the securities business, during the Period, the global economic situation remained complex and unstable, and the trading volume in the capital market declined in China, tending to be a downturn. In the face of so many unfavourable factors, Zheshang Securities fully grasped the opportunities brought by the comprehensive registration - based IPO system and achieved a growth in its overall results despite of the prevailing trend. Leveraging its strong profitability and steadily growing business scale, Zheshang Securities took a solid step towards being among the medium to large securities firms nationwide. 16 2023 ANNUAL REPORTChairman’s Statement2024 marks a crucial year for the “14th Five-Year” plan. Given the opportunities and challenges, the Group will continue to focus on its core business, strive to improve competitiveness, and take various measures to promote the steady growth of its businesses, in order to strive for its steady and long-term development in a high-quality manner. Looking ahead, the Group will, centering on its business objectives, focus on its principal duties and business, and accelerate the enhancement of its ability to ensure safe and smooth operation, its cost-effective operation ability and market-oriented management and output ability. At the same time, the Group will focus on sustainable development and expand its operation in the expressway-related industry, green and low-carbon industries and new energy. Driven by innovation and empowered by digital intelligence, the Group will accelerate the translation of its new innovative achievements and the export of its technologies, striving to be a leader in the industry. On behalf of the Board, I would like to express my sincere gratitude to all shareholders, investors, business partners, customers, the management and all employees who have been concerned about and supported the development of the Company. The year of 2024 will be a year of unity, commitment and determination for us, and we will endeavour to create an even brighter tomorrow and reward our investors with the results of its high- quality development. YUAN Yingjie Chairman March 25, 2024 17 WU Wei Executive Director and General Manager 18 2023 ANNUAL REPORTBUSINESS REVIEW The year 2023 marked the first year of the post-COVID-19 pandemic era, and the global economy was gradually emerging from the impact of the pandemic. However, against the backdrop of intensifying geopolitical conflicts, concurrent high interest rates and high inflation, and rising trade protectionism, the global economy as a whole was in weak recovery. After the easing of the pandemic prevention and control measures, China’s economy and society generally returned to normal state , but at the same time, were confronted with the challenge of real estate market’s adjustment and transformation. Under the guidance of the government’s general principle of seeking progress while maintaining stability, macro-control policies were implemented in a concerted manner and the consumption and production continued to recover, resulting in an overall upturn in China’s economic performance, with a year-on-year increase of 5.2% in GDP for the year. In 2023, Zhejiang Province’s service sector grew strongly, consumption potential continued to unleash, and the scale of effective investment expanded, boosting a year-on-year increase of 6.0% in GDP of the province. During the Period, the toll revenue of the Group’s expressways increased significantly year-on-year benefiting from the continuous recovery of China’s economy and the low base effect, while revenue from securities business achieved steady growth against the downtrend of the capital market. During the Period, total revenue of the Group was Rmb16,965.02 million, representing an increase of 10.7% year-on-year, of which Rmb10,423.83 million was generated by the nine major expressways operated by the Group (2022 (restated): Rmb9,093.38 million), representing 61.4% of total revenue. R e v e n u e g e n e r a t e d b y t h e s e c u r i t i e s b u s i n e s s w a s R m b6,372.29 m i l l i o n (2022: Rmb6,080.38 million), representing 37.6% of the total revenue. 19 Management Discussion and AnalysisScale & Profitability improving qualitatively, with regular dividend declaration made to reward the shareholders To attain the goal of realizing high-quality development, the Group made efforts in capital operation, reform breakthrough and management improvement and facilitated the development of a synergy among such three aspects, achieving qualitative improvement in its operating scale and profitability. The Group continued to place importance on rewarding the Shareholders, and the Board thus recommended a dividend of RMB32.0 cents per share to reward the investors. 20 2023 ANNUAL REPORTManagement Discussion and AnalysisA breakdown of the Group’s revenue for the Period is set out below: Toll road operation revenue Shanghai-Hangzhou-Ningbo Expressway Shangsan Expressway Jinhua section, Ningbo-Jinhua Expressway Hanghui Expressway Huihang Expressway Shenjiahuhang Expressway Zhoushan Bay Bridge LongLiLiLong Expressways Zhajiasu Expressway HuangQuNan Expressway Securities business revenue Commission and fee income Interest income Other operation revenue Hotel and catering Public-Private Partnership Total revenue 2023 Rmb’000 10,423,833 4,901,165 1,094,646 557,158 737,352 193,725 – 1,201,578 756,412 477,037 504,760 6,372,289 3,919,889 2,452,400 168,902 124,072 44,830 2022 Rmb’000 (Restated) 9,093,380 3,971,714 984,737 466,326 593,918 134,512 619,166 827,693 672,645 389,622 433,047 6,080,383 3,689,947 2,390,436 158,014 88,143 69,871 16,965,024 15,331,777 change (%) 14.6% 23.4% 11.2% 19.5% 24.2% 44.0% -100.0% 45.2% 12.5% 22.4% 16.6% 4.8% 6.2% 2.6% 6.9% 40.8% -35.8% 10.7% Note: Due to the issuance of CICC-Zhejiang Expressway-Shenjiahuhang asset-backed special program, Shenjiahuhang Co was no longer included in the Group’s consolidated financial statement from December 2, 2022. 21 Advantages in the core business were continuously consolidated and the equity financing realized a milestone-like breakthrough Focusing on its primary responsibility and core business, the Group realized industrial implementation of intelligent expressways technology, and created a new model of market- based mergers and acquisitions, with the quality and efficiency of the operation keeping improving and the advantages in the core business being consolidated. Meanwhile, it completed an equity financing successfully which was the first of its kind for the Company since it became listed on the Hong Kong Stock Exchange, with proceeds raised equivalent to RMB6.15 billion, effectively supporting the need of its ongoing reconstruction and expansion projects for funds. 22 2023 ANNUAL REPORTManagement Discussion and AnalysisToll Road Operations During the Period, as China’s economy steadily recovered, the overall traffic volume and toll revenue of the Group’s expressways achieved a significant increase year-on-year. The performance of different sections of the Group’s expressways varied due to various factors. Following the low traffic volume base affected by the pandemic in 2022, a significant increase was seen in the demand for travelling such as business, tourism and family visits after the easing of the pandemic prevention and control policy in 2023, the passenger vehicles traffic volume of the Group’s expressways recovered rapidly and a significant year-on-year increase was recorded in the passenger vehicles toll revenue, with tourism routes including the Huihang Expressway and the Zhoushan Bay Bridge being positively affected in particular. However, the year-on-year increase in the truck traffic volume of the Group’s expressways was relatively flat, which was mainly due to the weaker-than- expected recovery in freight demand as a result of the sluggish recovery of the world economy and the slowdown in global trade and investment. Meanwhile, the traffic volume of the relevant expressways was also influenced by changes in the surrounding road network. The Hangzhou-Shaoxing-Taizhou Expressway fully opened to traffic on February 11, 2022, continued to divert the traffic volume on the Shangsan Expressway. From September 16 to October 9, 2023, for the purpose of transportation security needs of the Hangzhou Asian Games, the relevant sections of the Shanghai-Hangzhou-Ningbo Expressway was under traffic control during the daytime and a 50% discount on the toll was implemented for yellow-plate trucks on the Zhajiasu Expressway, which had a certain negative impact on the toll revenue during such period. The pilot section of the Linjian Expressway opened for traffic from December 30, 2022, attracting vehicles travelling to and from Hangzhou City and Anhui Province to switch to the Hanghui Expressway which is connected to it, resulting in the additional growth of toll revenue of Hanghui Expressway. In addition, since January 1, 2023, Hangzhou Lin’an District Government has implemented the policy to pay the tolls for Zhejiang A-plate Class I ETC passenger vehicles traveling on Hanghui Expressway from Yuhang Toll Station to Qingshanhu Toll Station and from Yuhang Toll Station to Lin’an Toll Station, which is conducive to the growth of the traffic volume of passenger vehicles on the Hanghui Expressway. 23 Seeking transformation by means of reform and development, with the results of Zheshang Securities recording a growth despite of the prevailing unfavorable trend In the face of the multiple negative factors including the complex domestic and international environment and the downward trend of the capital market, Zheshang Securities gathered efforts to develop and reform, and planned for the business transformation as a whole, with various business realizing steady development and the overall performance growing despite of the prevailing unfavorable trend. 24 2023 ANNUAL REPORTManagement Discussion and AnalysisLooking back at 2023, the comprehensive strength of the Group’s core expressway business continued to improve. The Group completed the transportation safeguard services for the Hangzhou Asian Games in a high-quality manner and further enhanced its brand image; piloted intelligent patrol equipment, strengthened the mechanization level of patrol for road maintenance, and continued to improve the quality of the road conditions; completed the alleviation of congestion on high-traffic sections of the Shanghai-Hangzhou- Ningbo Expressway and other high-traffic sections to ensure smoother public travel; took advantage of the post-pandemic self-drive touring boom and actively advanced market-oriented measures to attract traffic and increase revenue; achieved industrial implementation of intelligent expressways technology and digitalization as well as technological innovation and development continued to accumulate new growth drivers. During the Period, total toll revenue from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 141km Shangsan Expressway, the 70km Jinhua Section of the Ningbo- Jinhua Expressway, the 122km Hanghui Expressway, the 82km Huihang Expressway, the 46km Zhoushan Bay Bridge, the 222km LongLiLiLong Expressways, the 50km Zhajiasu Expressway and the 161km HuangQuNan Expressway was Rmb10,423.83 million. During the Period, the daily average traffic volume in full-trip equivalents, toll revenue and the corresponding year-on-year increase on the Group’s expressways are listed below: The Group’s Expressway Sections Traffic Volume increase Revenue increase Daily Average year–on-year Toll year–on-year Shanghai-Hangzhou-Ningbo Expressway – Shanghai-Hangzhou Section – Hangzhou-Ningbo Section Shangsan Expressway Jinhua Section, Ningbo-Jinhua Expressway Hanghui Expressway Huihang Expressway Zhoushan Bay Bridge LongLiLiLong Expressways Zhajiasu Expressway HuangQuNan Expressway (in Full-Trip Equivalents) 88,721 89,315 88,288 32,723 33,710 29,073 12,721 30,216 15,082 41,488 11,613 31.80% 50.77% 20.60% 19.50% 26.26% 25.57% 47.43% 48.49% 16.49% 31.83% 24.62% (Rmb million) 4,901.17 23.4% 1,094.65 557.16 737.35 193.73 1,201.58 756.41 477.04 504.76 11.2% 19.5% 24.2% 44.0% 45.2% 12.5% 22.4% 16.6% 25 To strengthen the empowerment with intelligent technology and strive for an enhancement of long-term investment value The Group will adhere to the direction of high-quality and sustainable development, strengthen the empowerment by intelligent technology, enhance its cost-effective operation capability and market-based management output capability, and continue to strengthen its core competitiveness. Meanwhile, it will systematically plan for the reconstruction and expansion of expressways, increase efforts in investment in and merger & acquisition of high-quality expressway projects and promote sustainable development, to increase the value of the long-term investment of the Company continuously. 26 2023 ANNUAL REPORTManagement Discussion and AnalysisSecurities Business In 2023, global inflation remained high and difficult to alleviate, while the international landscape continued to evolve in a complex manner. China’s economic development still faced challenges brought by cyclical and structural problems. Multiple internal and external factors have led to a lack of investor confidence and a decline in trading activity, as well as the downward volatility in the capital market. Despite facing many unfavorable factors, Zheshang Securities has been able to fully grasp the development opportunity of comprehensive registration-based IPO system, fully initiate reform and development, comprehensively plan for business transformation, continuously improve compliance risk control levels, and steadily develop all business areas, resulting in an overall performance growth against the trend. Among them, investment banking, futures brokerage, and securities investment business were the main drivers of growth. During the Period, Zheshang Securities recorded total revenue of Rmb6,372.29 million, representing an increase of 4.8% year-on-year, of which, commission and fee income increased 6.2% year-on-year to Rmb3,919.89 million, and interest income from the securities business was Rmb2,452.40 million, representing an increase of 2.6% year- on-year. In addition, securities investment gains of Zheshang Securities included in the consolidated statement of profit or loss and other comprehensive income of the Group was Rmb1,024.96 million (2022: Rmb679.73 million). Hotel and Catering Business In 2023, with the smooth transition of epidemic prevention and control and the effective implementation of policies to promote domestic demand and consumption, the service industry has quickly rebounded, especially in contact-based and group-based services such as accommodation and catering. The revenue of two hotels under the Group has increased significantly, but the profitability has not yet returned to pre-epidemic levels. Zhejiang Grand Hotel, owned by Zhejiang Grand Hotel Limited (a 100% owned subsidiary of the Company during the Period), recorded revenue of Rmb41.76 million for the Period (2022: Rmb23.49 million). Grand New Century Hotel, owned by Zhejiang Linping Expressway Co., Ltd. (a 51% owned subsidiary of the Company during the Period), recorded revenue of Rmb82.32 million for the Period (2022: Rmb64.66 million). 27 Long-Term Investments Shengxin Co owns the 73km Shaoxing Section of the Ningbo-Jinhua Expressway. During the Period, the average daily traffic volume in full-trip equivalents was 29,986, representing an increase of 21.63% year-on-year. Toll revenue was Rmb536.65 million (2022: Rmb469.88 million). During the Period, the joint venture recorded a net profit of Rmb164.28 million (2022: Rmb99.54 million). Zhejiang HangNing Expressway Co., Ltd. (a 30% owned associate of the Company during the Period) owns the 99km HangNing Expressway. During the Period, the associate company recorded a net profit of Rmb486.60 million (2022: Rmb207.84 million). During the Period, the Company held 30% of the subordinated class of CICC-Zhejiang Expressway-Shenjiahuhang asset-backed special program (the “Special Program”) which owns the Shenjiahuhang Expressway with a total length of 93km. During the Period, the Special Program recorded a book loss of Rmb141.90 million. Zhejiang Wenzhou YongTaiWen Expressway Co., Ltd. (“Wenzhou YongTaiWen Co”, an associate of the Company, of which the Company completed the acquisition of 15% equity interest on October 26, 2023) operates the Wenzhou section of the YongTaiWen Expressway with a total length of 139km. During the Period, the associate company achieved a net profit of Rmb282.10 million. Zhejiang Communications Investment Group Finance Co., Ltd. (a 20.08% owned associate of the Company during the Period) derived income mainly from interest income, fees and commissions for providing financial services, including arranging loans and receiving deposits, for Communications Group, the Controlling Shareholder of the Company, and its subsidiaries. During the Period, the associate company recorded a net profit of Rmb818.65 million (2022: Rmb850.88 million). Yangtze United Financial Leasing Co., Ltd. (a 10.61% owned associate of the Company during the Period) is primarily engaged in the financial leasing business, the transferring and receiving of financial leasing assets, fixed-income securities investment, and other businesses approved by the National Financial Regulatory Administration. During the Period, the associate company recorded a net profit of Rmb645.30 million (2022: Rmb579.46 million). 28 2023 ANNUAL REPORTManagement Discussion and AnalysisShanghai Rural Commercial Bank Co., Ltd. (a 4.92% owned associate of the Company during the Period) is primarily engaged in the commercial banking business, including deposits, short-, medium-, and long-term loans, domestic and overseas settlements and other businesses that are approved by the National Financial Regulatory Administration. As at the date of this report, the associate company has not yet released its audited financial data for the year 2023. Zhejiang Zheshang Transform and Upgrade Fund of Funds Partnership (Limited Partnership) (a 24.99% owned associate of the Company during the Period) is primarily engaged in equity investments, investment management and investment consultation. During the Period, the net profit of the associate attributable to the Company was Rmb66.17 million (2022: net loss of Rmb40.99 million). Investment, Mergers & Acquisitions and Equity Financing During the Period, the Group successfully acquired all equity interest of HuangQuNan Co (owning 161km HuangQuNan Expressway), and 15% equity interest of Wenzhou YongTaiWen Co (owning 139km Wenzhou section of YongTaiWen Expressway), further expanding its core expressway business. It also jointly established an investment platform with China Merchants Expressway, successfully acquiring 60% equity interest of Yonglan Co (owning 145km Yonglan Expressway), further expanding its strategic layout in core expressway locations. The Group also successfully won the bid for investment in reconstruction and expansion projects of the Shaoxing section and Jinhua section of Ningbo-Jinhua Expressway as well as Zhajiasu Expressway, and completed the signing of concession agreements by project companies, contributing to the sustainable development of its core expressway business. To further enhance the Group’s core competitiveness and accelerate sustainable development, the Company has completed the rights issue of H shares and domestic shares on December 13, 2023 (the “2023 Rights Issue”), including: (1) H Share right issue of 544,864,710 H Shares on the basis of 3.8 H rights shares for every 10 existing H shares at a price of HK$4.06 per H rights share; (2) domestic share right issue of 1,105,518,800 domestic shares on a basis of 3.8 domestic rights shares for every 10 existing domestic shares at a price of Rmb3.73 per domestic share. The 2023 Rights Issue is the first equity financing since the Company’s listing on the Hong Kong Stock Exchange and has raised equivalent to Rmb6.15 billion proceeds at the exchange rate of issue day, providing effective support to the capital needs for its ongoing reconstruction and expansion projects. 29 T h e a g g r e g a t e n o m i n a l v a l u e o f t h e H S h a r e s u n d e r t h e 2 0 2 3 R i g h t s I s s u e i s Rmb544,864,710 and the aggregate nominal value of the domestic shares under the 2023 Rights Issue is Rmb1,105,518,800. The net price per H Share under the 2023 Rights Issue is HK$4.04. The closing price per H Share as stated in the Hong Kong Stock Exchange’s daily quotation sheet on May 23, 2023 (the date of announcement setting out the principal terms and conditions of the 2023 Rights Issue) was HK$6.42 and on November 6, 2023 (the date of announcement setting out the issue prices for the 2023 Rights Issue) was HK$5.96. FINANCIAL ANALYSIS The Group adopts a prudent financial policy with an aim to provide shareholders of the Company with sound returns over the long term. During the Period, profit attributable to owners of the Company was Rmb5,223.68 million, representing an increase of 0.9% year-on-year, basic earnings per share was Rmb112.95 cents, representing a decrease of 0.7% year-on-year, diluted earnings per share was Rmb105.32 cents, representing a decrease of 2.8% year-on-year, and return on owners’ equity was 16.0%, representing a decrease of 7.5% year-on-year. Liquidity and Financial Resources As at December 31, 2023, current assets of the Group amounted to Rmb152,862.43 million in aggregate (December 31, 2022 (restated): Rmb146,213.77 million), of which bank balances, clearing settlement fund, deposits and cash accounted for 18.4% (December 31, 2022 (restated): 16.6%), bank balances and clearing settlement fund held on behalf of customers accounted for 29.7% (December 31, 2022 (restated): 33.3%), financial assets at FVTPL accounted for 27.3% (December 31, 2022 (restated): 29.9%) and loans to customers arising from margin financing business accounted for 13.0% (December 31, 2022 (restated): 12.0%). The current ratio (current assets over current liabilities) of the Group as at December 31, 2023 was 1.50 (December 31, 2022 (restated): 1.40). Excluding the effect of the customer deposits arising from the securities business, the resultant current ratio of the Group (current assets less bank balances and clearing settlement fund held on behalf of customers over current liabilities less balance of accounts payable to customers arising from securities business) was 1.80 (December 31, 2022 (restated): 1.80). 30 2023 ANNUAL REPORTManagement Discussion and AnalysisThe amount of financial assets at FVTPL included in current assets of the Group as at December 31, 2023 was Rmb41,729.11 million (December 31, 2022: Rmb43,789.94 million), of which 61.0% was invested in bonds, 9.3% was invested in stocks, 20.5% was invested in equity funds, and the rest were invested in structured products and trust products. The 2023 Rights Issue has raised gross proceeds in an aggregate amount of HK$6.70 billion, which was equivalent to Rmb6.13 billion by the exchange rate at receipt, of which Rmb5.2 billion will be used for expenses related to existing expressway expansion and reconstruction projects, and the remaining will be used for replenishing working capital and repaying loans for daily operating expenses. As of December 31, 2023, Rmb0.03 billion has been used for intermediary fees, Rmb0.12 billion has been used for expenses related to existing expressway expansion and reconstruction projects. The remaining balance was equivalent to RMB5.98 billion at the exchange rate by end of Period, among which, Rmb5.08 billion will be used for expenses related to existing expressway expansion and reconstruction projects, and the remaining will be used for replenishing working capital and repaying loans for daily operating expenses, which are expected to be used in the upcoming four years. During the Period, net cash inflow from the Group’s operating activities amounted to Rmb9,814.33 million. The currency mix in which cash and cash equivalents are held has not substantially changed as compared to the same period last year. The Directors do not expect the Company to experience any problems with liquidity and financial resources in the foreseeable future. Cash and cash equivalents Restricted bank balances and cash Time deposits Financial assets at fair value through profit or loss As at December 31, 2023 Rmb’000 23,830,440 100,631 4,268,560 41,729,113 2022 Rmb’000 (Restated) 23,990,165 70,179 203,632 43,789,944 Total 69,928,744 68,053,920 31 Borrowings and Solvency As at December 31, 2023, total liabilities of the Group amounted to Rmb147,328.69 million (December 31, 2022 (restated): Rmb141,561.20 million), of which 12.1% was bank and other borrowings, 1.5% was short-term financing note, 19.7% was bonds payable, 16.7% was financial assets sold under repurchase agreements and 30.4% was accounts payable to customers arising from securities business. As at December 31, 2023, total interest-bearing borrowings of the Group amounted to Rmb57,400.74 million, representing an increase of 4.5% compared to that as at December 31, 2022. The borrowings comprised outstanding balances of domestic commercial bank loans of Rmb13,910.40 million, borrowings from overseas commercial bank loans of Rmb63.22 million, borrowings from other domestic financial institutions of Rmb1,449.22 million, borrowings from other domestic institutions of Rmb2,384.10 million, short-term financing note of Rmb1,507.58 million, beneficial certificates of Rmb630.03 million, long- term beneficial certificates of Rmb3,089.38 million, mid-term notes of Rmb3,048.45 million, subordinated bonds of Rmb3,136.48 million, corporate bonds of Rmb18,054.86 million, asset backed securities of Rmb1,685.08 million, convertible bond denominated in Renminbi of Rmb6,626.47 million and convertible bond denominated in Euro that equivalents to Rmb1,815.47 million. Of the interest-bearing borrowings, 75.7% was not payable within one year. As at December 31, 2023, the Group’s borrowings from domestic commercial banks bearing annual fixed interest rates ranged from 2.7% to 4.2%, annual floating interest rates ranged from 3.73% to 4.35%, borrowings from overseas commercial banks bearing annual fixed interest rates were 5.25%, annual floating interest rates were 7.43%, the annual fixed interest rates of other domestic financial institutions were 3.7% and 4.13%, annual floating interest rates were 3.78%, and the annual fixed interest rates of other domestic institutions were 3.0% and 3.65%. As at December 31, 2023, the annual floating interest rates for beneficial certificates ranged from 2.35% to 7.0%, the annual fixed interest rates for short- term financing notes were 2.5%, the annual fixed interest rates for long-term beneficial certificates were 3.75%, the annual fixed interest rate for mid-term notes were 2.8% and 2.97%, the annual fixed interest rates for subordinated bonds were 3.65% and 4.08%, the annual fixed interest rate for corporate bond ranged from 1.638% to 3.49%, the annual coupon rate for convertible bond denominated in Renminbi was 0.4%, the annual coupon rate for convertible bond denominated in Euro was nil. 32 2023 ANNUAL REPORTManagement Discussion and AnalysisMaturity Profile Gross amount Within 1 year Rmb’000 Rmb’000 2-5 years inclusive Rmb’000 Beyond 5 years Rmb’000 Floating rates Borrowings from domestic commercial banks 13,144,725 1,201,115 5,063,586 6,880,024 Borrowings from overseas commercial banks 10,113 10,113 – – Borrowings from a domestic financial institution Beneficial Certificates Asset backed securities Fixed rates 925,558 630,029 1,685,083 96,624 630,029 – Borrowings from domestic commercial banks 765,676 765,676 Borrowings from overseas commercial banks 53,104 53,104 Borrowings from a domestic financial institution Borrowings from domestic institutions Short-term financing notes Long-term Beneficial Certificates Subordinated bonds Corporate bonds Mid-term notes Convertible bonds 523,664 2,384,103 1,507,582 3,089,384 3,136,477 18,054,855 3,048,452 8,441,932 82,664 2,384,103 1,507,582 3,089,384 2,036,477 229,794 48,452 1,830,842 441,000 – – – 1,100,000 17,825,061 3,000,000 6,611,090 429,318 399,616 – – – – – 1,685,083 – – – – – – – – – – Total as at December 31, 2023 57,400,737 13,965,959 34,470,055 8,964,723 Total as at December 31, 2022 (Restated) 54,048,372 20,712,670 21,772,917 11,562,785 Total interest expenses and profit before interest and tax for the Period amounted to Rmb2,104.13 million and Rmb9,955.67 million, respectively. The interest cover ratio (profit before interest and tax over interest expenses) stood at 4.7 times (Corresponding period of 2022 (restated): 4.9 times). 33 Profit before tax and interest Interest expenses Interest cover ratio 2023 Rmb’000 9,955,667 2,104,129 4.7 2022 Rmb’000 (Restated) 9,236,455 1,894,394 4.9 As at December 31, 2023, the asset-liability ratio (total liabilities over total assets) of the Group was 70.9% (December 31, 2022 (restated): 74.2%). Excluding the effect of customer deposits arising from the securities business, the resultant asset-liability ratio (total liabilities less balance of accounts payable to customers arising from securities business over total assets less bank balances and clearing settlement fund held on behalf of customers) of the Group was 63.2% (December 31, 2022 (restated): 65.5%). Capital Structure A s a t D e c e m b e r 31, 2023, t h e G r o u p h a d R m b60,405.11 m i l l i o n i n t o t a l e q u i t y, Rmb112,826.13 million in fixed-rate liabilities, Rmb16,395.51 million in floating-rate liabilities, and Rmb18,107.05 million in interest-free liabilities, representing 29.1%, 54.3%, 7.9% and 8.7% of the Group’s total capital, respectively. The gearing ratio, which is computed by dividing the total liabilities less accounts payable to customers arising from the securities business by total equity, was 169.7% as at December 31, 2023 (December 31, 2022 (restated): 188.9%). As at December 31, 2023 As at December 31, 2022 Total equity Fixed rate liabilities Floating rate liabilities Interest-free liabilities Total Rmb’000 % 60,405,113 112,826,127 16,395,508 18,107,054 29.1% 54.3% 7.9% 8.7% Rmb’000 (Restated) 49,300,214 109,293,991 19,068,360 13,198,849 207,733,802 100.0% 190,861,414 Long-term interest-bearing liabilities 43,762,294 21.1% 39,523,762 % (Restated) 25.8% 57.3% 10.0% 6.9% 100.0% 20.7% Gearing ratio 1 (note) Gearing ratio 2 (note) Asset-liabilities ratio 1 (note) Asset-liabilities ratio 2 (note) 34 169.7% 72.4% 70.9% 63.2% 188.9% 80.2% 74.2% 65.5% 2023 ANNUAL REPORTManagement Discussion and Analysis Note: Gearing ratio 1 represents the total liabilities less balance of accounts payable to customers arising from securities business to the total equity; Gearing ratio 2 represents the total amount of the long-term interest- bearing liabilities to the total equity; Asset-liabilities ratio 1 represents total liabilities to total assets; Asset- liabilities ratio 2 represents total liabilities less balance of accounts payable to customers arising from securities business to total assets less bank balances and clearing settlement fund held on behalf of customers. Capital Expenditure Commitments and Utilization During the Period, capital expenditure of the Group totaled Rmb3,332.05 million. Amongst the total capital expenditure of the Group, Rmb1,767.80 million was incurred for acquiring equity investments, Rmb768.56 million was incurred for acquisition and construction of properties, Rmb795.54 million was incurred for purchase and construction of equipment, facilities and ancillary facilities and Rmb0.15 million was incurred for reconstruction and expansion projects of existing expressways. As at December 31, 2023, the capital expenditure committed by the Group amounted to Rmb6,238.41 million in total. Amongst the remaining balance of total capital expenditure committed by the Group, Rmb1,061.25 million will be used for acquiring equity investments, Rmb428.77 million will be used for acquisition and construction of properties, Rmb968.39 million for acquisition and construction of equipment, facilities and ancillary facilities, Rmb3,780.00 million for reconstruction and expansion projects of existing expressways. The Group will first consider financing the above-mentioned capital expenditure commitments with internal resources, and then will comprehensively consider using debt financing and equity financing to meet any shortfalls. Contingent Liabilities and Pledge of Assets The Company and Shaoxing Communications provided Shengxin Co with joint guarantee for its bank loans of Rmb2.20 billion, in accordance with their proportionate equity interests in Shengxin Co. As at December 31, 2023, the remaining bank loan balance was Rmb518.97 million. Zhoushan Co, a subsidiary of the Company, pledged its rights of toll on expressway for its bank borrowing, and as at December 31, 2023, the remaining bank loan balance was Rmb5,359.90 million. 35 De’an Co, a subsidiary of the Company, pledged its trade receivables for its bank borrowing, and as at December 31, 2023, the remaining bank loan balance was Rmb466.15 million. LongLiLiLong Co, a subsidiary of the Company, pledged its right of toll on expressway for its bank and other borrowing, and as at December 31, 2023, the remaining bank loan balance was Rmb4,218.73 million. Zhajiasu Co, a subsidiary of the Company, pledged its right of toll on expressway for its bank borrowing, and as at December 31, 2023, the remaining bank loan balance was Rmb1,244.60 million. HuangQuNan Co, a subsidiary of the Company, pledged its right of toll on expressway for its bank borrowing, and as at December 31, 2023, the remaining bank loan balance was Rmb2,780.90 million. Zheshang International Financial Holding Co., Ltd., a subsidiary of the Company, pledged its right of loans to customers arising from margin financing business, and as at December 31, 2023, the remaining bank loan balance was Rmb63.22 million. Except for the above, as at December 31, 2023, the Group did not have any other contingent liabilities, pledge of assets or guarantees. Foreign Exchange Exposure During the Period, save for (i) dividend payments to the holders of H Shares in Hong Kong dollars; (ii) Zheshang International Financial Holding Co., Limited. (a wholly owned subsidiary of Zheshang Securities) operating in Hong Kong; (iii) issuance of the zero coupon convertible bond with a principal amount of Euro230 million in Hong Kong capital market in January 2021, which will be due in January 2026, such redemption rights were executed at Euro202.6 million on January 20, 2024 and the outstanding Bonds in the principal amount were Euro27.4 million subsequently; (iv) issuance of the senior fixed- rate bonds with a principal amount of USD470 million in Hong Kong capital market in July 2021, which will be due in July 2026 and has an coupon rate of 1.638%; and (v) the rights issue was completed at the end of 2023, the gross proceeds from H Share rights issue are in Hong Kong dollars; the Group’s principal operations were transacted and booked in Renminbi. 36 2023 ANNUAL REPORTManagement Discussion and AnalysisDuring the Period, the Group has not used financial instruments for hedging purpose. Use of proceeds from convertible bond The Company issued a zero coupon convertible bond due 2026 in an aggregate principal amount of Euro230.00 million on January 20, 2021, to improve the debt structure, increase liquidity to meet financial and operational needs and enhance the investment capability of the Group. After deducting cost of issue of approximately Euro1.00 million, the net proceeds from the issuance of the convertible bond were approximately Euro229.00 million, and were used to repay existing borrowings. OUTLOOK Looking ahead to 2024, risk factors such as geopolitical conflicts, shifts in industrial and supply chains, and trade frictions will continue to disrupt the global economic recovery, coupled with multiple countries facing general elections, the complexity and uncertainty of the global political and economic situation will increase. In the face of a more challenging external environment, the Chinese government will increase its macro-control efforts, coordinate expansion of domestic demand with deepening of supply-side structural reforms, consolidate and enhance the positive momentum of economic recovery. With the introduction and implementation of various policies of ensuring stability in expectations, growth, and employment, it is expected that the Chinese economy will continue to stabilize and rebound in 2024. In this environment of overall economic improvement in China, the overall traffic volume and toll revenue of the expressways under the Group are expected to achieve stable growth. 37 The Group shall focus on its main responsibilities and businesses, implement service- centered, profit-centered, and brand-centered development strategies . It will fully leverage the function of intelligent expressways, so as to forecast and effectively control traffic flow, and improve the capacity to ensure safety and smoothness. It will also initiate specific action plan to reduce costs, improve quality and efficiency, increase preventive maintenance, and innovate maintenance technologies to enhance low-cost operational capabilities. The Group will continue to expand the service essence of its business brand, accelerate the completion of standardized post-investment management manuals for private-owned expressways with Yonglan Expressway as a model, and enhance its market-oriented management capabilities. In addition, it will take digital empowerment for internal control management as a breakthrough, coordinate the establishment of digital systems, and support business operations to improve efficiency and reduce costs. The Group will also focus on integrating technology research and development with business management, achieve capitalization of digital and technological innovation project investment, and accelerate the transformation and export of innovative achievements. In 2024, under the guidance of the goal to accelerate promotion for a financially strong country, reforms and opening up of the capital market will further deepen. It is expected that more policies to activate the capital market will be implemented, while stricter regulation will also become more explicit, presenting both opportunities and challenges for the securities industry. Zheshang Securities will take advantage of new market changes and actively seize business opportunities brought by the Beijing Stock Exchange, continuously upgrade its overall business development model, and effectively enhance its ability to serve the real economy. At the same time, it will strengthen business coordination and capital operations, helping Zheshang Securities to accelerate its entry into the ranks of medium to large securities firms nationwide. Facing the complex domestic and international state of affairs, the Group shall focus on high-quality development, continue to strengthen its core expressways business and improve its securities and financial business. It shall deepen research on policies such as toll collection concession, reconstruction and expansion, and investment and financing to provide strong support for the development of its expressways business. It will also rely on resources along the expressways to expand industries such as expressways-related development and new energy. By strengthening investment through mergers & acquisitions of high-quality expressways projects, the Group will continuously expand its core business. Through systematic planning of expressways reconstruction and expansion, it will facilitate the sustainable development of its core business. 38 2023 ANNUAL REPORTManagement Discussion and AnalysisHUMAN RESOURCES In 2023, the Group adhered to the concept of “Talents are the utmost important resources” throughout the whole process of its human resources work, and performed its responsibilities for talents selection and employment earnestly, promoting the continuous optimization of the talent team structure, effective furthering of the reforms of mechanisms, significant improvement of the per capita effectiveness and efficiency, constant perfection of the systems and institutions, to fulfill the value of human resources effectively and create a sound environment for talents’ development. During the Period, the Group developed and issued documents including the Action Plan for Building a Strong Enterprise Through Talent Development and Creating a First-class Team, specifying the missions and measures for refining the organization, optimizing the team and developing a flexible mechanism. It completed the organization reform and duty optimization, newly established the operation management department, planned for market-oriented development, and reformed the top-level design aiming for continuous optimization. Focusing on benefit-and increment-oriented, it implemented classified performance assessment measures and improved performance-based assessment mechanism for all the staff. The Group also rationalized the compensation incentive system and enhanced fairness in first-time distribution and second-time distribution; continued to refine differentiated distribution, to link compensation with the business volume and contribution of the employees more; and carried out multiple open competitions for posts and exchanges among middle-level cadres from different business lines, different areas and different professions, resulting in the increase of the proportion of young cadres under the age of 35. The Group was successfully selected as a postdoctoral workstation and introduced 25 urgently-needed high-end technical talents, accelerating the gathering of high-level talents; also formulated guidance for building of talent teams, as well as organized training such as benchmark learning and digital enhancement, to gather talents for development of the Group. As at December 31, 2023, there were 10,653 employees within the Group, amongst whom 5,407 mainly worked in the related positions of the toll road operation business and 5,246 worked in the related positions of the securities business. 39 TOLL ROAD BUSINESS RISKS Economic environment The current global economy is gradually emerging from the shadows of the COVID-19 pandemic, with recovery becoming the watchword. However, against the backdrop of the unresolved Russia-Ukraine conflict, the reignition of the Israeli-Palestinian conflict, and the escalation of geopolitical tensions, along with the fluctuating dynamics of China-US relations and the resurgence of trade protectionism, the global economy is moving forward with uncertainty. While China’s macroeconomic growth continues to recover, it is facing a critical period of transition in growth momentum, compounded by the gradually emerging low-cost advantages of other emerging market economies. The path to industrial upgrading domestically is fraught with multiple pressures from both internal and external sources. From the demand side, the declining global demand for manufactured goods is imposing significant constraints on our export market, making it difficult for the Chinese economy to further improve and recover. Given the close correlation between toll collection operations on expressways and the macroeconomic landscape, the performance of traffic volume and toll revenue on the Group’s expressways is also subject to uncertainties. Roads Competition The Group’s expressways will be negatively impacted by the diversion of traffic from surrounding road networks. The Ningbo-Jinhua Railway opened to traffic at the end of December 2023, and is expected to have a continuous diversionary effect on the traffic volume of the Ningbo-Jinhua Expressway of the Group. The Anhui section of Shanghai- Jiaxing-Huzhou Expressway opened to traffic in early 2024, and is expected to have a sustained negative impact on the traffic volume of the Hanghui Expressway and the Huihang Expressway under our group’s jurisdiction. The Hangzhou-Shaoxing-Ningbo Expressway and the Hangzhou-Ningbo Expressway Parallel Line opened to traffic in January 2024, and are expected to have a continuous diversionary effect on the traffic volume of the Hangzhou-Ningbo Expressway and the Zhoushan Bay Bridge operated by the Group. Therefore, we cannot guarantee that the traffic volume and toll revenue of the Group’s expressway will not be adversely affected in the future. 40 2023 ANNUAL REPORTPrincipal Risks and UncertaintiesToll Policy As approved by the Zhejiang Provincial Government, the toll roads across the province continue to implement a 5% discount on tolls for all vehicles with ETC devices, and the state-owned expressway sections within the province continue to implement a 15% discount on tolls for all qualified trucks with ETC in-vehicle device in the province. In February 2024, the Ministry of Transport of the PRC announced the Key Areas of Legal System on Transportation in 2024, indicating that it would implement the revise of the Administrative Regulations on Toll Roads. Accordingly, there are certain possibilities of policy revisions and adjustments in the expressway operation industry. Therefore, there is no assurance that the operating results of the Group’s expressway business will not be adversely affected in the future. SECURITIES BUSINESS RISKS Market Fluctuations The securities business is highly susceptible to market fluctuations and may experience periods of high volatility accompanied by reduced liquidity. It may be materially affected by economic and other factors such as the global market conditions; the availability and cost of capital; the liquidity of the global markets; the level and volatility of stock prices, commodity prices and interest rates; currency values and other market indices; inflation; natural disasters; acts of war or terrorism; as well as investor sentiment and confidence in the financial markets. There is no assurance as to whether our securities business will be adversely affected by fluctuations in the market, or whether our securities business will continue to contribute to our overall profit margin. Regulation of the Securities Business We are subject to extensive regulations in the PRC that govern how we conduct our securities business, and we are subject to risks of intervention by the PRC regulatory authorities. We could be fined, prohibited from engaging in some of our business activities or subject to limitations or conditions on our business activities, among other things. Significant regulatory actions against us could have material adverse impacts on our financial position, cause us significant reputational harm, or harm our business prospects. New laws, regulations or changes in the enforcement of existing laws or regulations applicable to our clients may also adversely affect our business. FINANCIAL RISKS For financial risks and uncertainties of the Group, please see notes 6, 52 and 53 to the Consolidated Financial Statements. 41 STATEMENT OF RESPONSIBILITY FROM THE DIRECTORS WITH RESPECT TO THE ANNUAL REPORT AND THE COMPANY’S ACCOUNTS The Directors, whose names and functions are listed on pages 61 to 74, duly confirm that to the best of their knowledge: – – the consolidated financial statements prepared and subject to disclosure under the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants give a true and fair view of the assets, liabilities, financial position and profit of the Group, and cover the enterprises that have been consolidated into the Company; and the “Management Discussion and Analysis” section included in this annual report includes a fair review of the development and performance of the business and the position of the Group, covers the enterprises that have been consolidated into the Company and describes the principal risks and uncertainties faced by the Group. During the Period and up to the date of this report, there has been no occurrence of significant events that would have a material impact on the normal operation of the Group. By Order of the Board Tony ZHENG Company Secretary Hangzhou, Zhejiang Province, the PRC March 25, 2024 42 2023 ANNUAL REPORTPrincipal Risks and UncertaintiesCORPORATE GOVERNANCE PRACTICES To govern the daily functioning of the Board of Directors of the Company, the Company has adopted its own Guidelines on Corporate Governance that closely followed the principles of good Corporate Governance Code (“CG Code”) in Appendix C1 to the Listing Rules (available at www.hkex.com.hk). During the Period, the Company has complied with all code provisions set out in Part 2 of CG Code and adopted the recommended best practices in the CG Code as and when applicable. The Directors of the Company have been informed that the latest amendment to the Listing Rules and CG Code has been adopted and applied for the daily operation of the Company. DIRECTORS’ SECURITIES TRANSACTIONS The Company has adopted the Rules on Securities Dealings for the Directors, supervisors, senior management personnel and other employees of the Company on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix C3 to the Listing Rules. Upon specific inquiries to all the Directors, the Company’s Directors have confirmed their respective compliance with the required standards for securities transactions by Directors as set out in the Model Code and the Rules on Securities Dealings of the Company. 43 Corporate Governance ReportBOARD OF DIRECTORS OF THE COMPANY (THE “BOARD”) The Chairman of the Company during the Period was: Mr. YUAN Yingjie Mr. YU Zhihong (Appointed, with effect from August 23, 2023) (Resigned, with effect from August 23, 2023) The executive Directors of the Company during the Period were: Mr. WU Wei (A ppointed, with effect from September 27, 2023/Appointed as General Manager, with effect from September 7, 2023) Mr. LI Wei Mr. YUAN Yingjie Mr. CHEN Ninghui (Appointed, with effect from October 13, 2023) (Redesignated as Non-executive Director on September 7, 2023) (Resigned, with effect from September 27, 2023) The non-executive Directors of the Company during the Period were: Mr. YANG Xudong Mr. FAN Ye Mr. HUANG Jianzhang The independent non-executive Directors of the Company during the Period were: Mr. PEI Ker-Wei Ms. LEE Wai Tsang, Rosa Mr. CHEN Bin 44 2023 ANNUAL REPORTCorporate Governance Report During the Period, the Board held a total of 14 meetings. Individual attendances by the Directors (as indicated by the number of meetings attended/number of relevant meetings held during their tenure) are as follows: Attendance in Attendance by through Attendance Mr. YUAN Yingjie (Chairman) Mr. YU Zhihong (Resigned) Mr. WU Wei (General Manager) Mr. LI Wei Mr. CHEN Ninghui (Resigned) Mr. YANG Xudong Mr. FAN Ye Mr. HUANG Jianzhang Mr. PEI Ker-Wei Ms. LEE Wai Tsang, Rosa Mr. CHEN Bin person 8/14 3/9 3/5 3/5 5/9 5/14 4/14 10/14 10/14 proxy communication 2/14 4/9 2/9 10/14 5/14 6/14 10/14 4/14 2/9 2/5 2/5 2/9 4/14 4/14 4/14 4/14 4/14 4/14 45 During the Period, the Company held seven shareholders’ general meetings, one H shareholders’ class meeting and one domestic shareholders’ class meeting. The meetings were chaired by the Chairman, and all executive Directors were present at the meetings. Meanwhile, the Company actively encouraged independent non-executive Directors to attend shareholders’ meetings. Individual attendances by the Directors (as indicated by the number of meetings attended/number of relevant meetings held during their tenure) are as follows: Attendance 9/9 5/5 3/3 2/2 5/5 9/9 9/9 9/9 9/9 Mr. YUAN Yingjie (Chairman) Mr. YU Zhihong (Resigned) Mr. WU Wei (General Manager) Mr. LI Wei Mr. CHEN Ninghui (Resigned) Mr. YANG Xudong Mr. FAN Ye Mr. HUANG Jianzhang Mr. PEI Ker-Wei Ms. LEE Wai Tsang, Rosa Mr. CHEN Bin 46 2023 ANNUAL REPORTCorporate Governance Report The Board is charged with duties as well as given powers that are expressly specified in the Articles of Association of the Company, the scope of which mainly includes, amongst others: to determine the business plans and investment proposals of the Company; to prepare the annual financial budget and final accounts of the Company; to determine the dividend policy of the Company; to appoint or dismiss senior managerial officers of the Company as well as to determine their remuneration; and to draw up proposals for any material acquisition or sale by the Company. To assist the Board to effectively discharge its duties, the Board has set up the Audit Committee, the Nomination Committee, the Remuneration Committee, and the Strategic Committee. Under the Corporate Governance, the Board plays a key role in all aspects and works closely with the management. While the Board fully retains its power to decide on matters within its scope of duties and powers, relevant preparation and drawing up of work plans or proposals are usually delegated to the management. The Company has complied with the requirements under Rules 3.10(1), (2) and 3.10A of the Listing Rules regarding the appointment of independent non-executive Directors, with three independent non-executive Directors appointed, at least one of whom possessing the appropriate professional qualification or accounting or related financial management expertise and the number of independent non-executive Directors (three) appointed represents at least one-third of Board members of the Company (a total of nine). Pursuant to paragraph 12B of Appendix D2 to the Listing Rules, the Company had specifically inquired with all three independent non-executive Directors and received their respective annual confirmation of independence. Each of the three independent non-executive Directors of the Company confirmed that they and their immediate family members had complied with the requirements of the guidelines regarding independence under Rule 3.13 of the Listing Rules during the Period. The Company continues to consider the independent non-executive Directors to be independent. There were no financial, business, family or other material or relevant relationships between members of the Board, including that between the Chairman and the General Manager of the Company. 47 Each newly appointed Director receives induction on the first occasion of his or her appointment, so as to ensure that he or she has appropriate understanding of the business and operations of the Company and that he or she is fully aware of his or her responsibilities and obligations under the Listing Rules and relevant regulatory requirements. Directors are also regularly updated on the Group’s business and industry environments where appropriate in the management’s monthly reports to the Board as well as briefings and materials circulated to the Board before a Board meeting. In addition, during the Period, the Company has arranged for all its executive and non- executive Directors to undergo continuous trainings designed to develop and refresh their knowledge and skills so as to ensure that their contribution to the Board remains informed and relevant. However, as the management considers that the independent non- executive Directors of the Company are very experienced, knowledgeable and resourceful, the Company has not arranged any professional briefings or training programs for its independent non-executive Directors and has decided to leave it to the independent non- executive directors to undergo the trainings as they see fit. The Company has formulated the “Rules of Procedure for the Board of Directors” and the “Procedure for Seeking Independent Professional Advice by Directors” to ensure that the Directors have the right and channels to seek independent professional advice. Meanwhile, the opinions of each Director are respected and the Directors are allowed to retain their individual opinions, thus helping the Board to obtain independent views and opinions. During the Period, the above mechanisms were implemented effectively. CHAIRMAN AND GENERAL MANAGER During the Period, Mr. YUAN Yingjie served as the Chairman (from which Mr. YU Zhihong has resigned) and Mr. WU Wei served as the General Manager (from which Mr. YUAN Yingjie has resigned) of the Company. The roles of Chairman and General Manager are fully segregated as expressly set out in the Articles of Association. NON-EXECUTIVE DIRECTORS Terms for the non-executive Directors of current session of the Board started on July 1, 2021 and will expire on June 30, 2024. 48 2023 ANNUAL REPORTCorporate Governance ReportSPECIAL COMMITTEES UNDER THE BOARD The Board has set up the Audit Committee, the Nomination Committee, the Remuneration Committee, and the Strategic Committee. Roles and functions for each committee are specified in its terms of reference, details of which can be found under the “Corporate Governance” section on the Company’s website. During the Period, Mr. YU Zhihong resigned from the positions as the Chairman, a member of the Nomination Committee and the chairman of the Strategic Committee of the Company on August 23, 2023, Mr. CHEN Ninghui resigned from the positions as an executive Director and a member of the Strategic Committee of the Company on September 27, 2023, Mr. HUANG Jianzhang resigned from the positions as a member of the Audit Committee and the Remuneration Committee of the Company on January 19, 2023, Mr. YUAN Yingjie was appointed as the chairman of the Nomination Committee and the Strategic Committee of the Company on October 31, 2023, and Mr. WU Wei and Mr. LI Wei were appointed as members of the Strategy Committee since 31 October 2023. After the above adjustments, the composition of each of the special committees of the Board is as follows: The Audit Committee of the Company comprises of the three independent non-executive Directors and two non-executive Directors, namely Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa, Mr. CHEN Bin, Mr. FAN Ye and Mr. HUANG Jianzhang, of whom Mr. PEI Ker-Wei serves as the chairman of the Audit Committee. The Nomination Committee of the Company comprises of the Chairman of the Board, the three independent non-executive Directors and one non-executive Director, namely Mr. YUAN Yingjie, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa, Mr. CHEN Bin and Mr. FAN Ye, of whom Mr. YUAN Yingjie serves as the chairman of the Nomination Committee. The Remuneration Committee of the Company comprises of the three independent non- executive Directors and two non-executive Directors, namely, Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa, Mr. CHEN Bin, Mr. FAN Ye and Mr. HUANG Jianzhang, of whom Mr. PEI Ker-Wei serves as the chairman of the Remuneration Committee. 49 The Strategic Committee of the Company mainly comprises of the Chairman of the Board and the two executive Directors, namely Mr. YUAN Yingjie, Mr. WU Wei and Mr. LI Wei as well as Mr. Tony ZHENG, Ms. RUAN Liya, Mr. ZHANG Jingzhong and several outside experts and advisors, of whom Mr. YUAN Yingjie serves as the chairman of the Strategic Committee. During the Period, the Audit Committee held a total of four meetings. Individual attendances by the members of the Audit Committee (as indicated by the number of meetings attended/ number of meetings held during their tenure) are as follows: Mr. PEI Ker-Wei Ms. LEE Wai Tsang, Rosa Mr. CHEN Bin Mr. FAN Ye Mr. HUANG Jianzhang Attendance Attendance in person by proxy 4/4 4/4 3/4 1/4 4/4 1/4 3/4 At the meetings held during the Period, the Audit Committee reviewed financial statements for the quarterly, interim and annual results, and discussed the matters such as the internal audit, the effectiveness of internal control system and the improvement of total risk management of the Company and the effectiveness of the Company’s internal audit function. During the Period, the Nomination Committee held a total of three meetings. Individual attendances by the members of the Nomination Committee (as indicated by the number of meetings attended/number of meetings held during their tenure) are as follows: Mr. YUAN Yingjie Mr. YU Zhihong (Resigned) Mr. PEI Ker-Wei Ms. LEE Wai Tsang, Rosa Mr. CHEN Bin Mr. FAN Ye 50 Attendance Attendance through in person by proxy communication Attendance 1/1 3/3 3/3 3/3 3/3 2023 ANNUAL REPORTCorporate Governance Report During the Period, the Nomination Committee discussed, considered and approved the nomination of the proposed candidates for Chairman, executive Directors and General Manager of the Company by way of telecommunication. Thereafter, the proposed candidates for executive directors of the Company were approved by the Board of Directors and the shareholders’ general meeting, and the proposed candidates for Chairman and General Manager of the Company were approved by the Board of Directors. During the Period, the Remuneration Committee did not hold any meeting. The duties of the Remuneration Committee include making recommendations to the Board on the remuneration packages of the Directors and senior management. The remuneration policy for Directors and senior management formulated by the Remuneration Committee, as well as the tenure system and contract management system for management had continued to play an effective role during the Period. During the Period, the Strategic Committee did not hold any meeting. The Board of the Company is responsible for developing and reviewing the Company’s corporate governance policies and practices, and monitoring the Company’s compliance with the CG Code and its disclosure in this report; the Board reviews and monitors the training and continuous professional development of Directors and senior management through the works of human resources department, and reviews and monitors the Company’s policies and practices in relation to the compliance with legal and regulatory requirements through the works of the discipline inspection and supervision office and the Audit and Legal Department. The Directors have all confirmed their responsibility for preparing the accounts, and that there were no significant uncertain events or conditions which would have a material impact on the Company’s ability to continue to operate as a going concern. DIVERSIFICATION OF BOARD MEMBERS The Company believes that the diversification of Board members is one of the key elements to maintain the Company’s competitive advantage, improve business performances, and promote the Company’s continued development. When determining the composition of the Board, the Company takes into consideration a number of aspects to diversify the Board members, including but not limited to gender, age, culture, education background, professional experience, work and living background, knowledge and skills, etc.. 51 The Board attaches great importance to female directors, with the gender ratio of male and female members of 89% and 11% respectively. The Board will take opportunities to increase the proportion of female members over time as and when suitable candidates are identified. For information on the gender ratio of all employees (including senior management), please refer to the “Growth with Employees” section of in Chapter 4 “Mutual Benefit and Mutual Sharing Promotes Harmony” of the Company’s 2023 Environmental, Social and Governance Report. The Board members have skills in multiple professional fields, such as accounting, finance, management, transportation, construction engineering and computer science, with related experience in different professional sectors. The diversified backgrounds of the Board is beneficial to the corporate governance, and related experiences satisfy the requirements for the Company’s business development, which helps the Company to make important decisions. The age distribution of the Board members of the Company is between 42 and 67. The Board members with different age groups can provide diversified sight of views and opinions. NOMINATION POLICY The Company’s Nomination Committee is responsible for assessing the Board’s structure, number of members and a diversified composition, introducing right talents when appropriate to enrich the Board and providing recommendation or suggestion on the candidates to serve as new directors of the Company to the Board when needed. The assessment as well as recommendation or suggestion above would have fully taken into consideration any pros and cons to the diversification of Board members and new perspectives, skills, expertise and experience given to the Board. (Please refer to “the Terms of Reference for Nomination Committee” under the “Corporate Governance” section on the Company’s website for details) 52 2023 ANNUAL REPORTCorporate Governance ReportAUDITORS’ REMUNERATION During the Period, the Company has paid approximately Rmb4.90 million and Rmb1.26 million respectively to Deloitte Touche Tohmatsu Certified Accountants (the Hong Kong auditor) and Zhejiang Pan-China Certified Public Accountants LLP (the PRC auditor), for the audit services they rendered in 2023, the fees for non-audit services were about Rmb3.85 million to the Hong Kong auditor and their network members, and Rmb0.78 million for the PRC auditor and their network members respectively. SECRETARY TO THE BOARD During the Period, the Secretary to the Board helped the Company to maintain a sound and effective corporate governance framework, reviewed risk management and internal control systems to ensure regulatory compliance, and provided compliance advice to the Board and senior management in the decision making process. The Secretary to the Board also complied with the requirements of Rule 3.29 under the Listing Rules regarding undergoing relevant professional trainings. D I R E C T O R S, S U P E R V I S O R S A N D G E N E R A L M A N A G E R’S INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at December 31, 2023, none of the Directors, Supervisors and General Manager had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code. 53 INTERESTS AND SHORT POSITIONS OF OTHER PERSONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at December 31, 2023, the interests and short positions of other persons in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange are set out below: Substantial Shareholders Capacity Communications Group (Note 1) Beneficial Owner Percentage Numbers held of the issued in domestic domestic share shares of capital of the Company the Company 4,014,778,800 100% Note 1: Communications Group, through its wholly-owned subsidiary, Universal Cosmos Limited, indirectly holds 74,999,195 H Shares of the Company, representing 3.79% of the issued H Shares of the Company. Substantial Shareholders Capacity Percentage Numbers held of the issued in H Shares of H Share capital the Company of the Company China Merchants Expressway Beneficial Owner 363,914,280 (L) 18.39% JPMorgan Chase & Co. Person having a security interest 172,439,805 (L) in shares 15,820,990 (S) 75,912,273 (P) BlackRock, Inc. Interest of controlled corporations 136,757,081 (L) 154,320 (S) 8.71% 0.79% 3.83% 6.91% 0.01% The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes an interest in a lending pool. Save as disclosed above, as at December 31, 2023, no other persons had any interests or short positions in the shares or underlying shares of the Company that were required to be recorded pursuant to Section 336 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange. 54 2023 ANNUAL REPORTCorporate Governance Report SHAREHOLDERS’ RIGHTS According to the Articles of Association of the Company, the shareholders, alone or in aggregate, holding more than 3% of the shares of the Company can make a temporary proposal and submit the same in writing to the convener ten days prior to the date of the general meeting. The convener shall issue a supplementary notice of the general meeting within two days upon the receipt of the proposal, announcing the contents of the temporary proposal. The contents of the temporary proposal shall be within the scope of power of a general meeting, and include a clear subject and specific matters to be resolved, and shall be in compliance with the relevant provisions of laws, administrative regulations and the Articles of Association. Shareholders who individually or collectively hold more than 10% of the Company’s shares may request in writing to convene an extraordinary general meeting. Written requests, proposals and enquiries may be sent to the Company through the contact details listed on page 339 of this report. INVESTOR RELATIONS The Board is committed to ensuring that all shareholders and investors have equal and timely access to information about the Company so as to enable them to accurately assess the Company’s fair value. Such information is available through multiple channels including financial reports, shareholders’ meetings, regular and irregular announcements, the Hong Kong Stock Exchange’s website (www.hkexnews.hk) and the Company’s own website (www.zjec.com.cn). Activities such as investor and analyst briefings, one-on-one meetings, conference calls, roadshows, and press conferences are held regularly by senior management of the Company, particularly after each publication of its results announcement. 55 Great importance is also attached to maintaining clear and effective communication channels with investors as part of the Company’s bid to enhance its transparency and to promote the investors’ understanding of all lines of its business. Any parties who wish to learn more about the Company may do so via the contact details listed below: Mr. Tony Zheng Company Secretary Tel: 86-571-87987700 Fax: 86-571-87950329 Email: zhenghui@zjec.com.cn During the Period, the Company effectively implemented the Shareholders’ communication policy. The Company maintains close contact with domestic and overseas investors, and through the two-way communication mechanism of information disclosure and investor Q&A, the Company can timely understand the hot topics of market concerns while increasing investors’ understanding of the Company and transmitting its investment value, providing information and reference for the Company’s relevant decisions. During the Period, the last shareholders’ meeting of the Company took place at 10:00 a.m. on Thursday, December 28, 2023 at the headquarters of the Company. Details of this extraordinary general meeting of the shareholders were set out in the announcement dated December 28, 2023 on resolutions passed at the extraordinary general meeting of the shareholders. The next shareholders’ general meeting of the Company is expected to be held in May 2024 with exact date and matters for consideration to be specified in the notice of the shareholders’ general meeting when it is issued. 56 2023 ANNUAL REPORTCorporate Governance ReportThe Company has an issued share capital of 5,993,498,010 shares comprising of domestic shares and H Shares. The domestic shares are held by Communications Group as to 4,014,778,800 shares, representing approximately 67% of the total issued capital of the Company. The remaining 1,978,719,210 shares are H Shares, representing approximately 33% of the total issued capital of the Company. Communications Group, through its wholly- owned subsidiary, Universal Cosmos Limited, indirectly holds 74,999,195 H Shares of the Company, representing 3.79% of the issued H Shares of the Company. As at the latest practicable date prior to the issue of this annual report, based on the information that is publicly available to the Company and to the best of the Directors’ knowledge, there was a sufficient prescribed public float of the issued shares of the Company under the Listing Rules. DIVIDEND POLICY The Company has been consistently attaching great importance to the return for those shareholders who support the Company’s development for a long term, by sharing its development results and maintaining a relatively stable dividend payout level. According to the Company’s “Shareholders’ Return Plan for the Next Three Years (2023–2025) (《未 來三年(2023–2025年）股東回報規劃》)”, and subject to compliance with relevant laws and regulations and other regulatory documents, the dividends for the years from 2023 to 2025 shall not be less than 75% of the distributable profits realized for the year (whichever is lower in the statements prepared under China Accounting Standards for Business Enterprises and Hong Kong Financial Reporting Standards). During the Period, the dividend payout accounted for approximately 94.1% of the distributable profits realized for the year. Details of the dividend payout will be announced after the 2023 annual general meeting of the Company. 57 R I S K M A N A G E M E N T , I N T E R N A L C O N T R O L A N D L E G A L CONSTRUCTION The Company has an internal control system that aims to protect assets, preserve accounting and financial information, as well as to ensure the truthfulness of financial statements, including the establishment of functional departments and units, defining duties and responsibilities, the execution of management systems and quality control mechanisms, and the management system on environment, occupational health and safety. With the system, the Company is capable of taking necessary steps to react to possible changes in its businesses as well as external operating environment. Throughout the operating process, the Company’s internal control measures are being continuously enhanced, fulfilled and are deemed effective. The Company has established an anti-corruption and whistle blowing policy. For details, please refer to “Strengthen Integrity Building” in Chapter 1 “ESG Governance Establishes a Solid Foundation” of the Company’s 2023 Environmental, Social and Governance Report. The Company attaches great importance to risk management, by perfecting its risk management mechanism and relevant regulations, improving risk reporting mechanism, and refining its risk management manual. It also assigns the responsibilities for risk management to all branches and departments, conducts risk investigation and assessment, as well as develops risk mitigation plans and takes risk control measures in response to major risks faced by the Company. The Company’s Audit Committee is charged with the duties of monitoring and reviewing internal controls, and directs monitoring activities. Aside from reviewing the annual audit reports by external auditors, the committee also reviews the effectiveness of internal control system and risk management mechanism by reviewing the internal special audit and risk investigation on the Company’s core businesses conducted by the Company’s Audit and Legal Department on a regular basis. During the year, the Audit Committee focused on the implementation of the annual budget, and the use of safety funds and fixed- assets management of the Company. The Audit and Legal Department carried out specific audit into these issues and monitored rectifications thereof, thus ensuring the effective functioning of the Company’s management systems. 58 2023 ANNUAL REPORTCorporate Governance ReportThe Board acknowledges that it is responsible for the risk management and internal control systems and reviewing their effectiveness. During the Period, the Directors carried out a review on the effectiveness of the Company’s internal control system, covering all material aspects of internal control, including financial control, operational control, compliance control and risk management functions. The internal control system of the Company was deemed to be effective and sufficient, and there were no material breaches in the internal control system that might have an impact to shareholders’ rights and interests. The risk management of the Company was deemed to be effective and controllable. The risk management and internal control system is designed to manage rather that eliminate the risk of failure to achieve business objectives and reasonable but no absolute assurance can be provided against material misstatement. The Board regularly listened to the Company’s rule of legal construction, endeavored to promote the integration of legal corporate governance into the Company’s operation and development objectives, and led the implementation of various compliance work and special administration to ensure the legality and compliance of the Company’s operation and management. DISCLOSURE OF INSIDE INFORMATION The Company has developed a disclosure policy to provide a general guide to its directors, supervisors, senior management and relevant employees in handling confidential information, monitoring information disclosure and responding to enquiries. Control procedures have been implemented to ensure that unauthorized access to and use of inside information are strictly prohibited. CHANGES IN THE ARTICLES OF ASSOCIATION During the Period, the Company has amended its Articles of Association. Pursuant to the announcement of the Company dated October 24, 2023 in relation to the amendments to the Articles of Association and the approval of the resolution in relation to the amendments to the Articles of Association at the general meeting held on November 10, 2023, the Articles of Association which came into effect after such amendments were published on November 10, 2023 on the website of the Hong Kong Stock Exchange. 59 MANAGEMENT FUNCTIONS The management functions of the Board and the management are expressly stipulated in the Articles of Association of the Company. Pursuant to the Articles of Association of the Company, the management of the Company is assigned the functions to be in charge of the production and business operation of the Company, to organize the execution of resolutions of the Board, to procure the implementation of annual business plans and investment programs of the Company, to develop plans for the establishment of internal management structure of the Company, to prepare the basic management systems of the Company, and to formulate basic rules and regulations of the Company, etc.. SIGNIFICANT EVENTS OCCURRED AFTER THE END OF THE FINANCIAL YEAR Since the end of the Period, there has not been any significant event that would have a material impact on the Company. 60 2023 ANNUAL REPORTCorporate Governance ReportDIRECTORS Mr. YUAN Yingjie Chairman Mr. YU Zhihong Chairman Born in 1976, is a senior engineer. He obtained a Bachelor’s degree of Engineering in Highways and Urban Roads from Xi’an University of Expressway Traffics, and both Master’s and Doctoral degrees of Engineering in Roads and Railways Engineering from Chang’an University. Since 2004, Mr. Yuan has worked in Zhejiang Highway Management Bureau and Zhejiang Department of Transportation. From 2014, he was deputy director of Construction Management Office of Zhejiang Department of Transportation. From 2017, he was deputy director of chief engineer office of Communications Group. From 2018, he was deputy general manager of the expressway construction department, deputy general manager and general manager of the expressway management department of Communications Group. Since May 2022, he is a Deputy General Manager and a Member of the Party Committee of Communications Group. Mr. Yuan has served as a Director of the Company since 2020 and is currently the Chairman of the Company. Born in 1964, is a graduate from the Department of Electro-mechanic Engineering, Zhejiang University, and holds a Master’s Degree in management from the Management Institute of Zhejiang University. Starting from 1985, Mr. Yu Zhihong worked at Xiushui Township in Xiucheng District of Jiaxing City as Deputy Manager of Township Industrial Company and Deputy Head of Township, from 1987 successively served as Secretary to Xiucheng District Office, Secretary of the Xiucheng District Youth League, Deputy Party Secretary and Party Secretary of Tanghui Township in Xiucheng District, from 1995 working as Deputy Director, Deputy Party Secretary, Director and then Party Secretary of Management, Committee for the Economic Development Zone of Jiaxing City, from 2005 as Party Secretary of Haining City and as Member of Party Standing Committee of Jiaxing City, from 2010 as Deputy Mayor of Hangzhou City, Party Secretary of Qianjiang New Development Zone’s Construction Committee, and then Party Secretary of Xiaoshan District, Member of Party Standing Committee of Hangzhou City, and he became the Deputy Party Secretary and then Mayor of Shaoxing City since 2013. Mr. Yu Zhihong assumed the positions of Chairman and Party Secretary of Communications Group since October 2016, and became Member of Zhejiang Provincial Party Committee since June 2017. Since January 2023, he became a deputy director of the Social Development Affairs Committee of the 14th National People’s Congress of Zhejiang Province. Mr. Yu ceased to be the Chairman of the Company in August 2023. 61 Directors, Supervisors and Senior Management Profiles Mr. WU Wei Executive Director Mr. LI Wei Executive Director 62 Born in 1969, is a professorial senior engineer with a Bachelor’s Degree. Mr. Wu started his career in July 1991. He served as Deputy General Manager and General Party Branch Secretary of Zhejiang Communications Construction Group Third Communications Construction Co., Ltd.; General Manager of Zhejiang Communications Construction Group Third Communications Construction Co., Ltd.; Deputy General Manager and Party Committee Member of Zhejiang Communications Construction Group Co., Ltd.* (浙 江省交通工程建設集團有限公司); Director, General Manager and Party Committee Member of Zhejiang Communications Construction Group Co., Ltd.; Director, General Manager and Deputy Party Secretary of Zhejiang Communications Construction Group Co., Ltd.* (浙江 交工集團股份有限公司, formerly known as 浙江省交通工程建設集團有限公司); Chairman and Party Secretary of Zhejiang Communications Resources Investment Co., Ltd.; Chairman and Party Secretary of Zhejiang Communications Technology Co., Ltd. (stock code: 002061.SZ); Chairman and Party Secretary of Zhejiang Communications Construction Group Co., Ltd.. Mr. Wu has served as an executive Director of the Company since 2023 and is currently the Executive Director, General Manager and Party Secretary of the Company. Born in 1969, is a senior engineer. He graduated from Lanzhou Jiaotong University with a Bachelor’s Degree in Engineering. Mr. Li studied Logistics Management at Dresden University of Technology in Germany from 2004 to 2005. Mr. Li started his career in July 1991, and served as Deputy Director of Jinhua Management Office of Zhejiang JinLiWen Expressway Co., Ltd. and Office Director, Vice Chairman of Labor Union, Deputy General Manager and Party Committee Member of Zhejiang JinLiWen Expressway Co., Ltd.. He also worked as Deputy General Manager and Party Committee Member in Zhejiang ShenSuZheWan Expressway Co., Ltd., and Deputy General Manager for each of Zhejiang ShenJiaHuHang Expressway Co., Ltd., Zhejiang Expressway Logistics Co., Ltd., Zhejiang Ningbo YongTaiWen Expressway Co., Ltd., Zhejiang Taizhou YongTaiWen Expressway Co., Ltd., Zhejiang Zhoushan Bay Bridge Co., Ltd. and Zhejiang Zhoushan Northbound Expressway Co., Ltd.. Mr. Li has served as an executive Director of the Company since 2023 and is currently the Executive Director, Deputy General Manager and a Party Committee Member of the Company. 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles Mr. CHEN Ning hui Executive Director Mr. YANG Xudong Non-Executive Director Born in 1963, a postgraduate at the Party School of the Communist Party of China, graduated from Arizona State University, the United States with a Master’s Degree in Business Administration and a Senior Economist. Mr. Chen has worked since 1981. He had served at Zhejiang Urban and Rural Construction Material Equipment Co., Ltd. (formerly known as the Material Equipment Division of the Department of Development of Zhejiang Province) as General Manager, Chairman and Party Secretary; Zhejiang Communications Investment Industrial Development Corporation as Chairman and Party Secretary; Communications Group as Assistant General Manager; Zhejiang Communications Investment Property Group Co., Ltd. as Chairman and Party Secretary, and etc.. Mr. Chen ceased to be the Executive Director and Party Secretary of the Company in September 2023. Born in 1973, is a senior engineer. He graduated from Highway School of Chang’an University with a Doctoral Degree in Road and Railway Engineering. Mr. Yang served as Deputy General Manager of China Merchants Expressway, Chairman of China Merchants & China Railway Holdings Co., Ltd., and General Manager of Guangxi Huatong Expressway Co., Ltd., Guangxi Guiwu Expressway Guiyang Section Investment Construction Co., Ltd., Guangxi Guixing Expressway Investment Construction Co., Ltd. and Guilin Harbour Construction Expressway Co., Ltd.. He is currently the Director and General Manager of China Merchants Expressway. Mr. Yang also serves as Deputy Chairman of Guangxi Wuzhou Communications Co., Ltd., Director of Anhui Expressway Co., Ltd., Deputy Chairman of Shanxi Communications Industry Development Group Co., Ltd.. Mr. Yang has served as a non-executive Director of the Company since 2022. 63 Mr. FAN Ye Non-Executive Director Mr. HUANG Jianzhang Non-Executive Director 64 Born in 1982, is an economist. He graduated from Zhejiang University with a Doctoral Degree in Economy. Since 2010, Mr. Fan has served at the Investment Development Department of Zhejiang Economy Construction Investment Co., Ltd. Since 2013, he has served at the Railway Transportation Department of Zhejiang Economy Construction Investment Co., Ltd., and served as Assistant General Manager, General Manager of the New Industry Department of CSR Hangzhou Rail Transit Co., Ltd. Since 2014, Mr. Fan has served as Deputy General Manager of Zhejiang Economy Construction Investment Co., Ltd., and since 2018 he has been the Deputy General Manager of Zhejiang Jiaotou Real Estate Group Co., Ltd.. Since 2020, he has served as General Manager of the Industrial Investment Management Department (I) of Communications Group. Mr. Fan has served as a non-executive Director of the Company since 2020 and is currently the General Manager of the Strategic Development Department of Communications Group. Born in 1980, is a senior economist. He graduated from Zhejiang University majoring in Business Management with a Master’s Degree in Management. Mr. Huang began work in March 2005. He served as Deputy General Manager of Juhua Holdings Co., Ltd.; Manager of the Securities Department of Zhejiang Juhua Co., Ltd.; Assistant Director and Deputy Director of the Board Secretary’s Office of Zhejiang Expressway Co., Ltd.; Deputy Manager (in charge of the work) and Manager of the Investment and Development Department of Zhejiang Expressway Co., Ltd.. Mr. Huang has served as a non-executive Director of the Company since 2021 and is currently the Deputy General Manager of the Strategic Development Department of Communications Group. 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles Mr. PEI Ker-Wei Independent Non-Executive Director Mr. PEI Ker-Wei, born in 1957, is a Professor Emeritus in Accounting at the School of Accountancy at the W. P. Carey School of Business-Arizona State University. Mr. Pei received his Ph.D. Degree in Accounting from University of North Texas in 1986. Professor PEI served as the Chairman of the Globalization Committee of the American Accounting Association in 1997 and as the President of the Chinese Accounting Professors Association – North America from 1993 to 1994. Mr. Pei has served as an independent non-executive Director of the Company since 2012 and currently also serves as an Independent Director of Want Want China Holdings Limited (HK 00151), Zhong An Group Limited (HK 00672) and AIM Vaccine Co., Ltd. (HK 06660). Ms. LEE Wai Tsang, Rosa Independent Non-Executive Director Born in 1977, has over 22 years of experience in the financial sector and is a licensed person for asset management under the Securities and Futures Ordinance (“SFO”). She holds a Master of Science in Finance from Boston College and an MBA from University of Chicago. Ms. Lee was an Executive Director of Grand Investment International Ltd (stock code: 1160) from 2005 to 2018 and was appointed as its Chairman from 2013 to 2017. Ms. Lee also served as a Director of Grand Finance Group Company Ltd from 2005 to 2019 and Chief Investment Officer of Grand Capital Holdings Co Ltd from 2019 to 2023. Ms. Lee has served as an independent non-executive Director of the Company since 2014 and is currently a Director of Grand Investment (Bullion) Limited, Tianjin Yishang Friendship Holdings Company Ltd and Chief Investment Officer of Xin Yongan International Financial Holdings Limited. 65 Mr. CHEN Bin Independent Non-Executive Director Born in 1967, graduated from University of South China in Computer Science. He also holds a second Bachelor’s Degree from Chongqing University in Management Engineering. Mr. Chen worked at Tianshi Network Company of TCL Group as Deputy General Manager from 1998 to 2005, at WebEx Group in the U.S. as General Manager of China Investment from 2005 to 2006, and at Cybernaut China Investment Fund as Senior Partner from 2006 to 2008. Mr. Chen has become Chairman and Founding Partner of Zhejiang Cybernaut Investment Management Co., Ltd. since 2008. Mr. Chen has served as an independent non-executive Director of the Company since 2018. 66 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesMr. LU Wenwei Supervisor Representing Shareholders Born in 1978, is a senior accountant. He graduated from the School of Economics and Management at Zhejiang University of Technology with a Master’s Degree in Management. He began work in January 2004. He served as Auditor and Project Manager of Zhejiang Pan-China Certified Public Accountants; Head of the Financial Management Department of Communications Group; General Manager Assistant, Deputy General Manager and Party Committee Member of Zhejiang Communications Investment Group Finance Co., Ltd.; Deputy General Manager of the Financial Management Department of Communications Group; Deputy General Manager and Party Committee Member of Zhejiang Road Industry City Development Group Co., Ltd.. Mr. Lu is currently the Deputy General Manager (in charge of daily work) of the Financial Management Department of Communications Group. Ms. LI Yuan Supervisor Representing Shareholders Born in 1977, graduated from Shanghai University of Finance and Economics (Shanghai National Accounting Institute) with a Master’s Degree in Accounting and is a senior accountant. Ms. Li started working in 1999. She served as Assistant Department Manager of Zhejiang Pan-China Certified Public Accountants. Then she served as Deputy General Manager of the Financial Management Department, Director of the Audit Department (Comprehensive Supervision Department) and General Manager of the Financial Management Department of Communications Group. Ms. Li ceased to be the Supervisor Representing Shareholders of the Company in September 2023. 67 Mr. ZHENG Ruchun Supervisor Representing Shareholders Born in 1962, is a professorial senior accountant. He graduated from Jiangxi College of Finance and Economics with a Bachelor’s degree in Accounting in 1985, and obtained an EMBA degree from Arizona State University in 2014. From 1985 to 1988, Mr. Zheng worked as a teacher in the accounting department of Jiangxi College of Finance and Economics. From 1988 to 2002, he worked as deputy section chief of the finance department and section chief of the collection department of Zhejiang Highway Management Bureau. From 1998 to 2005, he worked as director of the comprehensive accounting department and assistant to the general commander in the highway construction headquarters of Jinliwen Expressway. From 2005 to 2019, he worked as deputy general manager, general manager, chairman of the board and secretary of the party committee of Zhejiang Jinliwen Expressway Co., Ltd.. From 2019 to 2022, he had served as the deputy chief accountant of Communications Group. Mr. Zheng ceased to be the Supervisor Representing Shareholders of the Company in June 2023. Mr. LU Xinghai Supervisor Representing Employees Born in 1967, is a senior economist. He graduated from the Psychology Department of Hangzhou University with a Doctoral Degree in the Industrial Psychology. Mr. Lu had served as the Manager of Human Resources Department of Hangzhou Zhongcui Food Co., Ltd.; Deputy Manager of Human Resources Department of the Company and Director of Party Committee Affairs Department (News Center). Mr. Lu is currently the Consultant of Party Committee Affairs Department (News Center) and a Supervisor Representing Employees of the Company. 68 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles Mr. WANG Yubing Supervisor Representing Employees Ms. HE Meiyun Independent Supervisor Born in 1969, is a senior accountant. He graduated from Shanghai University of Finance and Economics with a Bachelor’s Degree. He started his career in 1991 and worked at the audit office of East China Investigation and Design Institute. He had served as Head of Finance Department of Hangzhou KFC Ltd, Principal Accountant of Finance Department of Zhejiang Liantong Leasing Co., Ltd.. Then he served as Supervisor in the Financial Planning Department, Supervisor in the Internal Audit Department, Assistant Manager and Deputy Manager of the Audit and Legal Department in the Company. Mr. Wang is currently the Manager of Audit and Legal Department (Comprehensive Supervision Department) and a Supervisor Representing Employees of the Company. Born in 1964, is a senior economist. She graduated from Zhejiang University in 1986 with a Bachelor’s Degree in Education and later received an Executive Master of Business Admiration (EMBA) in Cheung Kong Graduate School of Business. Ms. He had served as the Secretary of Youth League Committee at the Hangzhou Business School and as a Secretary to the Board, Deputy General Manager, General Manager and Vice Chairman at Baida Group Co., Ltd., a company listed on the Shanghai Stock Exchange. Ms. He also served as a General Manager of Ping An Securities Company Limited, Zhejiang Branch, Executive Deputy Director of the Professional Secretarial Committee to the board of directors of Zhejiang Provincial Listed Company Association, Deputy Secretary General of Hangzhou Joint Stock Promotion Association, an Independent Director of Lanzhou Minbai Co., Ltd., and an Independent Director of Xilinmen Co., Ltd. Ms. He currently serves as Vice Chairman of Zhejiang Shiqiang Group Co., Ltd., a Member of the Equity Investment and M&A Committee of Zhejiang Merchants Association, a Supervisor of Zhejiang M&A Federation and an Independent Director of Gree Real Estate Co., Ltd.. 69 Mr. WU Qingwang Independent Supervisor Born in 1965, is a PRC Lawyer. He graduated from Hangzhou University with a Bachelor’s Degree in Law in 1989 and later received a Master’s Degree and a Doctoral Degree in Civil and Commercial Law in Southwest University of Political Science and Law in 1995 and 2004, respectively. Mr. Wu had worked in Chun’an Justice Bureau since 1989 and in Zhejiang Securities Co., Ltd. from 1995 to 1996. Mr. Wu has been working in Zhejiang Xinyun Law Firm and is currently a Partner, specializing in civil and commercial litigation, arbitration and project negotiation. Mr. Wu is on the Panel of Arbitrators in China International Economic and Trade Arbitration Commission and Shanghai International Economic and Trade Arbitration Commission. 70 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management ProfilesOther Members of Senior Management Mr. HAN Jinghua Mr. Tony H. ZHENG Born in 1979, graduated from the School of Economics and Management at Zhejiang University of Technology majoring in economics and management with a Master’s Degree in Management, and obtained the title of economist. Mr. Han started his career in July 2006 and served as the secretary to the office of Zhejiang Wenzhou YongTaiWen Expressway Co., Ltd., and joined Communications Group in April 2010, successively served as the assistant to the head of the secretariat of the board of directors, the deputy head, the office deputy head, the head of the secretariat of the board of directors, etc. Mr. Han has served the Company since 2023 and is currently the deputy secretary of the Party Committee, the secretary of the Discipline Committee and the Chairman of Labor Union of the Company. Born in 1969, graduated from University of California at Berkeley with a Bachelor of Science Degree in Civil Engineering in 1995. Mr. Zheng has joined the Company since June 1997, and served as Deputy Director of the Secretarial Office to the Board, Assistant Company Secretary, Director of the Secretarial Office to the Board and Director of Hong Kong Representative Office of the Company. Mr. Zheng is currently the Deputy General Manager and Company Secretary of the Company. He also serves as a Director of Zhejiang Expressway International (Hong Kong) Co., Ltd.. 71 Born in 1969, is a senior economist. Ms. Zhang graduated from Chongqing Jiaotong University majoring in transportation management with a bachelor’s degree in science, and obtained a master’s degree in business administration from Zhejiang University in 2006. From July 1991 to February 1997, she worked in the Operation Division of the Zhejiang Provincial Expressway Executive Commission. She has worked in the Company since March 1997, and served as Assistant General Manager, Deputy Manager, Manager of the Operation Department and Assistant to General Manager. Ms. Zhang is currently the Deputy General Manager and a Party Committee Member of the Company. Born in 1967, graduated from the Party School of the Communist Party of China majoring in business administration. He has a title of Engineer. Mr. Wang has worked since 1989. He had served as Deputy General Manager at the Expressway Administration Department of Communications Group. Mr. Wang has served the Company since 2019 and is currently the Deputy General Manager and a Party Committee Member of the Company. Ms. ZHANG Xiuhua Mr. WANG Bingjiong 72 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles Mr. WU Xiangyang Mr. ZHAO Dongquan Born in 1972, is a professor-level senior engineer, having a Master’s Degree in engineering from Chang’an University and a Bachelor’s Degree in engineering from Harbin University of Civil Engineering and Architecture. Mr. Wu started his career in 1996, and served as Assistant Manager of the Project Maintenance Department and Assistant General Manager of the Traffic Operation Management Department of Communications Group, Deputy Chief Commissioner of Hangzhou Regional Construction Commission, Hangzhou-Shaoxing Sectional Construction Commission for West Parallel Expressway of Hangzhou Ring Road, Lin’an-Jiande Sectional Construction Commission of Lin’an-Jinhua Expressway and Construction Commission of Zhejiang Jiande-Jinhua Expressway. He also worked as Deputy General Manager and a Member of the Party Committee in Hangzhou City Expressway Co., Ltd., and Deputy General Manager in Zhejiang LinJin Expressway Co., Ltd. and Zhejiang HangXuan Expressway Co., Ltd.. Mr. Wu has served the Company since 2020 and is currently the Deputy General Manager and Party Committee Member of the Company. Born in 1972, is a senior engineer, having a Bachelor’s Degree in Civil Engineering from Zhejiang University of Technology. Mr. Zhao started his career in August 1993, and served as Director of the Engineering Department of Xiaoshan Headquarter of Hangzhou-Jinhua-Quzhou Expressway, Deputy Director of the Hangzhou–Shaoxing Administrative Office at Hangjinqu Branch of Communications Group, Deputy Chief Commissioner of Hangzhou–Shaoxing Sectional of Hangzhou-Jinhua-Quzhou Expressway Widening Project Commission, Director of the Supervision and Executive Center at Hangjinqu Branch, Deputy General Manager of the Traffic Operation Management Department and Deputy General Manager of Management Department of Communications Group. Mr. Zhao has served the Company since 2022 and is currently the Deputy General Manager and Party Committee Member of the Company. 73 Born in 1983, is a senior economist. She graduated from Zhejiang University with a Master’s Degree in Science. Ms. Ruan started her career in 2007, and served as Investment Director of Zhejiang Jinji Real Estate Co., Ltd.. She also worked in Communications Group as Director and Assistant Manager of Investment Development Department, as well as Assistant General Manager and Deputy General Manager of Strategic Development and Legal Affairs Department. Ms. Ruan has served the Company since 2020 and is currently the Chief Financial Officer and Party Committee Member of the Company. Born in 1982, graduated from the Electronic Information School of Zhejiang Sci-Tech University with a Bachelor Degree of Engineering in Electronic Information Engineering. Mr. Ma started his career in August 2005. He served as the deputy office director of the Supervision and Executive Center at Hangjinqu Branch, the assistant to the Office Director and the deputy director of the Party Committee Affairs Department (News Center) of Zhejiang Communications Investment Group Co., Ltd.. Mr. Ma ceased to be the Party Committee Member, Secretary of the Disciplinary Inspection Commission and Chairman of the Labor Union of the Company in August 2023. Ms. RUAN Liya Chief Financial Officer Mr. MA Ting Chairman of Labor Union 74 2023 ANNUAL REPORTDirectors, Supervisors and Senior Management Profiles The Directors of the Company hereby present their report and the audited financial statements of the Group for the year ended December 31, 2023. PRINCIPAL ACTIVITIES The principal activities of the Group comprise the operation, management of high grade roads, as well as provision of security broking service and proprietary securities trading. BUSINESS REVIEW A review of the business of the Group and analysis of the Group’s performance using key performance indicators is provided in the section headed “Management Discussion and Analysis” of this annual report. In addition, discussions on the Group’s environmental policies and performance and an account of the Group’s key relationships with its employees, customers, suppliers and others that have a significant impact on the Group and on which the Group’s success depends are provided in the Company’s 2023 Environmental, Social and Governance Report. SEGMENT INFORMATION During the Period, the entire revenue and segment profit of the Group were derived from the PRC. Accordingly, no further analysis of the revenue and segment profit by geographical area is presented. An analysis of the Group’s revenue and segment profit by principal activities for the year ended December 31, 2023 is set out in note 7 to the financial statements. RESULTS AND DIVIDENDS The Group’s profit for the year ended December 31, 2023 and the state of financial position at that date are set out in the financial statements on pages 122 to 338. The Directors have recommended the payment of a dividend of Rmb0.32 (approximately HK$0.353) per share in the year of 2023. The final dividend is subject to shareholders’ approval at the 2023 annual general meeting of the Company and is expected to be paid on or around July 5, 2024. This recommendation has been incorporated in the financial statements as an allocation of retained earnings within the capital and reserves section in the consolidated statement of financial position. The dividend payout ratio reached 36.7% of profit attributable to owners of the Company during the Period. Further details of the dividends are set out in note 17 to the financial statements. 75 Report of the DirectorsFIVE YEAR SUMMARY FINANCIAL INFORMATION The following is a summary of the published consolidated results, and of the assets, liabilities and non-controlling interests of the Group prepared on the basis set out in the notes below. Results 2023 2022 2021 2020 2019 Year ended December 31, Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Restated) (Restated) (Restated) (Restated) Revenue Operating costs Gross profit Securities investment gains Other income and gains and losses Administrative expenses Other expenses and impairment losses 16,965,024 15,331,777 16,641,414 12,723,793 12,943,080 (9,765,685) (9,365,125) (10,069,473) (8,587,932) (7,916,255) 7,199,339 1,024,960 5,966,652 679,734 6,571,941 1,835,563 4,135,861 1,611,873 5,026,825 1,402,684 907,870 (183,981) 2,102,751 (177,405) 741,549 (178,197) 432,177 (147,971) 272,840 (143,820) Share of profit of associates Share of profit of joint ventures 1,056,247 107,046 752,086 49,771 (155,814) (137,134) (63,521) 966,075 56,249 (375,579) (125,271) 688,029 16,282 652,824 34,941 Finance costs Profit before tax Income tax expense Profit for the year Profit for the year attributable to (2,104,129) (1,894,394) (2,075,477) (2,246,003) (2,225,151) 7,851,538 7,342,061 7,854,182 4,114,669 4,895,872 (1,229,208) (1,039,051) (1,873,961) (1,160,027) (1,351,157) 6,622,330 6,303,010 5,980,221 2,954,642 3,544,715 owners of the Company 5,223,679 5,178,666 4,452,488 1,997,450 2,840,934 Profit for the year attributable to non-controlling interests 1,398,651 1,124,344 1,527,733 957,192 703,781 Earnings per share Basic (Rmb cents) Diluted (Rmb cents) 112.95 105.32 113.72 108.33 97.78 91.54 43.86 43.64 62.39 60.69 76 2023 ANNUAL REPORTReport of the Directors Assets and liabilities 2023 2022 2021 2020 2019 As at December 31, Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Restated) (Restated) (Restated) (Restated) Total assets Total liabilities Net Assets Notes: 207,733,802 190,861,414 181,076,203 140,510,531 116,011,509 147,328,689 141,561,200 137,362,426 104,483,697 88,627,735 60,405,113 49,300,214 43,713,777 36,026,834 27,383,774 1. The consolidated results of the Group for the four years ended December 31, 2022 have been abstracted from the Company’s annual report on March 27, 2023, while those for the year ended December 31, 2023 were prepared based on the consolidated statement of profit or loss and other comprehensive income as set out on page 122 of the financial report. 2. The 2023 basic earnings per share is based on the profit attributable to owners of the Company for the year ended December 31, 2023 of Rmb5,223,679,000 (2022 (restated): Rmb5,178,666,000) and the 4,624,765,000 (2022 (restated): 4,553,764,000) ordinary shares in issue during the year. The 2023 diluted earnings per share is based on the profit for the purpose of diluted earnings per share attributable to owners of the Company for the year ended December 31, 2023 of Rmb5,172,495,000 (2022 (restated): Rmb5,227,061,000) and the 4,911,377,000 (2022 (restated): 4,825,048,000) weighted average number of ordinary shares for the purpose of diluted earnings per share during the year. MAJOR CUSTOMERS AND SUPPLIERS In the year under review, the five largest customers and suppliers of the Group accounted for less than 30% of the total turnover and purchases, respectively. The largest customer accounted for approximately 0.6% of total turnover, the largest supplier accounted for approximately 2.2% of total purchases. None of the directors of the Company or any of their associates or any shareholders (which, to the best knowledge of the directors, own more than 5% of the Company’s issued share capital) had any beneficial interest in the Group’s five largest customers. 77 DONATION During the Period, the total amount of donation made by the Group is Rmb8,604,000 for charitable or other purposes. PROPERTY, PLANT AND EQUIPMENT Details of movements in property, plant and equipment of the Group during the Period are set out in note 19 to the financial statements. CAPITAL COMMITMENTS Details of the capital commitments of the Group as at December 31, 2023 are set out in note 51 to the financial statements. RESERVES Details of movements in the reserves of the Group during the Period are set out in the consolidated statement of changes in equity on page 127 to the financial statements. DISTRIBUTABLE RESERVES As at December 31, 2023, before the proposed final dividend, the Company’s reserves available for distribution by way of cash or in kind, as determined based on the lower of the amount determined under PRC accounting standards and the amount determined under HKGAAP, amounted to Rmb9,237,208,000. In addition, in accordance with the Company Law of the PRC, the amount of approximately Rmb8,094,217,000 standing to the credit of the Company’s share premium account as prepared in accordance with the PRC accounting standards was available for distribution by way of capitalization issues. 78 2023 ANNUAL REPORTReport of the DirectorsTRUST DEPOSITS As at December 31, 2023, other than the deposits placed with a non-bank financial institution of Rmb2,936,333,000 the Group’s deposits have been placed with commercial banks in the PRC and the Group has not encountered any difficulty in the withdrawal of funds. PURCHASE, REDEMPTION OR SALE OF THE LISTED SECURITIES OF THE COMPANY Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the Period. DIRECTORS The Directors of the Company during the Period and as at the date of this report are: CHAIRMAN Mr. YUAN Yingjie (Appointed, with effect from August 23, 2023) Mr. YU Zhihong (Resigned, with effect from August 23, 2023) EXECUTIVE DIRECTORS Mr. WU Wei (Appointed, with effect from September 27, 2023) Mr. LI Wei (Appointed, with effect from October 13, 2023) Mr. YUAN Yingjie (Redesignated as a non-executive Director on September 7, 2023) Mr. CHEN Ninghui (Resigned, with effect from September 27, 2023) NON-EXECUTIVE DIRECTORS Mr. YANG Xudong Mr. FAN Ye Mr. HUANG Jianzhang 79 INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. PEI Ker-Wei Ms. LEE Wai Tsang, Rosa Mr. CHEN Bin DIRECTORS’ AND SENIOR MANAGEMENT’S BIOGRAPHIES Biographical details of the Directors and the senior management of the Group are set out on pages 61 to 74 in the Company’s annual report. DIRECTORS’ SERVICE CONTRACTS Directors have entered into a service agreement with the Company, with effect from July 1, 2021 to June 30, 2024. Directors newly appointed during the session of the Board have entered into service agreements with the Company, with effect from the date of their appointments to June 30, 2024. Save as disclosed above, none of the Directors and Supervisors has entered into any service agreement with the Company which is not terminable by the Company within one year without payment of compensation, other than statutory compensation. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACTS As at December 31, 2023 or during the Period, none of the Directors or Supervisors or any entity connected with the Directors or Supervisors had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance to the business of the Group to which the Company, its holding company, or any of its subsidiaries or fellow subsidiaries was a party. 80 2023 ANNUAL REPORTReport of the DirectorsDIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE’S RIGHTS TO SUBSCRIBE FOR SHARES OR DEBENTURES At no time during the year were there rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any Director, Supervisor and chief executive or their respective spouse or minor children, or were any such rights exercised by them; or was the Company, its holding company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable any such persons to acquire such rights in any other body corporate. SHARE CAPITAL During the Period, due to the implementation of the rights issue project, the Company’s issued share capital increased from 4,343,114,500 shares to 5,993,498,010 shares. PRE-EMPTIVE RIGHTS There is no provision for pre-emptive rights in the Company’s Articles of Association or the laws of the PRC which would require the Company to offer new shares on a pro rata basis to existing Shareholders. DIRECTORS’ AND CONTROLLING SHAREHOLDERS’ INTERESTS IN COMPETING BUSINESS Save for their respective interests in the Group, none of the directors and controlling shareholders of the Company was interested in any business which competes or is likely to complete with the businesses of the Group for the Period. 81 CONTRACT OF SIGNIFICANCE WITH CONTROLLING SHAREHOLDERS Save as disclosed in this annual report, there is no contract of significance entered into between the Company, or one of its subsidiary companies, and a controlling shareholder or any of its subsidiaries. TAXATION AND TAX RELIEF According to a Notice issued jointly by PRC Ministry of Finance and State Administration of Taxation regarding individual income tax policies (Caishuizi [1994] No.020), the dividend incomes received by foreign individuals from a foreign-invested enterprise are exempt from individual income tax. As stipulated by a Notice issued by the PRC State Administration of Taxation in relation to the withholding and payment of enterprise income tax by Chinese resident enterprises for payment of dividend to H shareholders Who are overseas non-resident enterprises (Guoshuihan [2008] No.897), the Company as a Chinese resident enterprises is required to withhold 10% enterprise income tax when it distributes dividends for the year 2008 and thereafter to all non-resident enterprise holders of H Shares of the Company (including HKSCC Nominees Limited, other nominees, trustees or other entities and organizations, who will be deemed as non-resident enterprise holders of H Shares) whose names appear on the H Share register of members of the Company on the record date. Dividends payable to the Shareholders who are mainland individual investors or corporate investors investing in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong Kong Stock Connect will be paid in Rmb by China Securities Depository and Clearing Corporation Limited Shanghai Branch (“CSDC Shanghai Branch”) or Shenzhen Branch (“CSDC Shenzhen Branch”) as entrusted by the Company. 82 2023 ANNUAL REPORTReport of the DirectorsAccording to the requirements of the “Notice on Taxation Policies Concerning the Shanghai-Hong Kong Stock Connect Pilot Program (Finance Tax [2014] No. 81《(關於滬 港股票市場交易互聯互通機制試點有關稅收政策的通知》(財稅[2014]81號 )) and “Notice on Taxation Policies Concerning the Shenzhen-Hong Kong Stock Connect Pilot Program (Finance Tax [2016] No. 127) 及《關於深港股票市場交易互聯互通機制試點有關稅收政策的 通知》(財稅[2016]127號) jointly published by the Ministry of Finance, State Administration of Taxation and China Securities Regulatory Commission, the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect tax arrangements are as follows: (i) for Chinese Mainland individual investors who invest in the H Shares via the Shanghai- Hong Kong Stock Connect or the Shenzhen-Hong Kong Stock Connect, the Company will withhold individual income tax at the rate of 20% in the distribution of final dividend. Individual investors may, by producing valid tax payment proofs, apply to the competent tax authority of China Securities Depository and Clearing Company Limited for tax credit relating to the withholding tax already paid abroad; and (ii) for Chinese Mainland securities investment funds that invest in the H Shares via the Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong Kong Stock Connect, the Company will withhold individual income tax in the distribution of final dividend pursuant to the foregoing provisions. For Chinese mainland corporate investors that invest in the H Shares via the Shanghai- Hong Kong Stock Connect or the Shenzhen-Hong Kong Stock Connect, the Company will not withhold the income tax in the distribution of final dividend and such investors shall file the tax returns on their own. Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of dividends paid by the Company. Shareholders of the Company are taxed and/or enjoy tax relief in accordance with the aforementioned regulations. 83 SUFFICIENCY OF PUBLIC FLOAT Based on the information that is publicly available to the Company and within the knowledge of the Directors, as at the latest practicable date prior to the issue of this annual report, the Company has maintained sufficient amount of public float as required under the Listing Rules. DIRECTORS’ PERMITTED INDEMNITY PROVISION The Company purchased appropriate liability insurance coverage for the directors, supervisors and senior management members of the Group during the year ended December 31, 2023 against all actions, costs, charges, losses, damages and expenses which they or any of them may sustain or incur in connection with their duties or the exercise of their powers. AUDITORS Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong, who has served as the Company’s Hong Kong auditors since 2005, will retire and a resolution for their re- appointment as Hong Kong auditors of the Company will be proposed at the forth coming annual general meeting of the Shareholders. By Order of the Board YUAN Yingjie Chairman Hangzhou, Zhejiang Province, the PRC March 25, 2024 84 2023 ANNUAL REPORTReport of the DirectorsD u r i n g t h e P e r i o d, t h e S u p e r v i s o r y C o m m i t t e e d u l y p e r f o r m e d i t s s u p e r v i s o r y responsibilities, and safeguarded the legitimate interests of the shareholders and the Company in accordance with relevant rules and regulations under the Company Law of the People’s Republic of China, the Company’s Articles of Association and the Rules of Procedure of the Supervisory Committee. Main tasks undertaken by the Supervisory Committee during the Period were to assess and supervise lawfulness and appropriateness of the activities of the Directors, General Manager and other senior management of the Company in their business decision-making and daily management processes, through a combination of activities including holding meetings of the Supervisory Committee and sitting in on general meetings of shareholders and meetings of the Board. The Supervisory Committee discussed and reviewed the financial statements to be submitted by the Board to the general meeting of shareholders after carefully examining the operating results and the financial position of the Company. During the Period, the Supervisory Committee held a total of two supervisory meetings, and attended ten Board meetings and seven general meetings, and had no objection to the contents of the reports and proposals submitted by the Board of the Company to the general meetings of shareholders for consideration. The Supervisory Committee considered that the Company’s operations were in strict compliance with the Company Law, the Company’s Articles of Association and the relevant national provisions, that all decision-making procedures were legitimate, and that the Company had sound internal control functions and personnel and all operating activities were regulated in an orderly manner. The Supervisory Committee of the Company supervised the implementation of the resolutions passed at the general meetings of shareholders, and believed that the Board of the Company was able to conscientiously implement the relevant resolutions of general meetings. The management of the Company has earnestly executed the relevant decisions and plans of the Board. The Company has effectively responded to the complex and volatile operating environment, further strengthened the scale and strength of its operations, achieved breakthroughs in the reconstruction and expansion projects, initiated a new mode of market-based mergers and acquisitions of highway assets, and successfully implemented the first equity financing project after listing. 85 Report of the Supervisory CommitteeThe Supervisory Committee has reviewed the financial statements of the Company for 2023 prepared by the Board for submission to the general meeting of shareholders, and concluded that the financial statements accurately reflected the financial position of the Company in 2023, and complied with the relevant laws, regulations and the Company’s Articles of Association. The Company maintained a relatively stable dividend payout, providing satisfactory returns to its shareholders. During the Period, the Supervisory Committee considered that the connected transactions of the Company were fair and reasonable without prejudice to the interests of the shareholders and the Company. During the Period, the members of the Board, General Manager and other senior management of the Company complied with their fiduciary duties and acted in good faith and diligently while performing their responsibilities. There was no incident of abuse of power or infringement of the interests of shareholders or employees. The Supervisory Committee is satisfied with the performance across various lines of business achieved by the Board and the management of the Company during the Period. By the order of the Supervisory Committee LU Wenwei Chairman of the Supervisory Committee Hangzhou, Zhejiang Province, the PRC March 25, 2024 86 2023 ANNUAL REPORTReport of the Supervisory CommitteeDuring the year ended December 31, 2023, the Company had the following non-exempt connected transactions and continuing connected transactions. CONNECTED TRANSACTIONS 1. Underwriting Agreement in relation to the Proposed Listing of ZJIC On April 6, 2023, Zheshang Securities and Haitong Securities Co., Ltd. (the “Haitong Securities”) entered into an underwriting agreement (the “Underwriting Agreement”) with ZJIC in relation to the proposed listing of the A shares of ZJIC on the Shenzhen Stock Exchange (the “Listing”). Pursuant to the Underwriting Agreement, Zheshang Securities was engaged as one of the joint lead underwriters to provide underwriting services in respect of the proposed Listing. Pursuant to the Underwriting Agreement, the aggregate underwriting fees that ZJIC has agreed to pay to the joint lead underwriters are 4.9% of the amount of capital raised from the proposed Listing, which is estimated to be Rmb1.5 billion as set out in the prospectus of ZJIC. 55% of the total underwriting fees would be paid to Zheshang Securities, which was estimated to be Rmb40,425,000. Please refer to the announcement of the Company dated April 6, 2023 for details. Communications Group is a Controlling Shareholder of the Company. ZJIC is a 55.08% owned subsidiary of Communications Group, and is therefore a Connected Person of the Company. As a result, the transaction contemplated under the Underwriting Agreement constituted a connected transaction of the Company. Pursuant to Rule 14A.81 and Rule 14A.82 of the Listing Rules, the respective transactions contemplated under the Underwriting Agreement and the IPO Sponsorship Agreement were entered into or completed within a 12-month period with ZJIC, the transactions contemplated under the Underwriting Agreement and the IPO Sponsor Agreement were required to be aggregated for the calculation of the relevant percentage ratios to determine the classification of the transaction contemplated under the Underwriting Agreement. Pursuant to the IPO Sponsor Agreement, Zheshang Securities has been engaged as an IPO sponsor to provide IPO sponsorship services for the proposed Listing. The total amount of sponsorship fee payable by ZJIC to Zheshang Securities for the proposed Listing amounted to Rmb825,000. 87 Connected TransactionsAs the highest applicable percentage ratio in respect of the underwriting fee receivable by Zheshang Securities under the transaction contemplated under the Underwriting Agreement, after aggregating with the transaction under the IPO Sponsor Agreement, was more than 0.1% but less than 5%, the transaction contemplated under the Underwriting Agreement was therefore subject to the reporting and announcement requirements but exempted from the independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. 2. Construction Agreements for Expansion of Shengzhou Service Area and Jiaxing Service Area On April 18, 2023, Shangsan Co and Jiaxing Branch entered into the construction agreements (the “Construction Agreements”, which consist of the Shengzhou Service Area Construction Agreement and the Jiaxing Service Area Construction Agreement), with Jiaogong Underground Construction as the contractor. Pursuant to the Construction Agreements, Jiaogong Underground Construction agreed to undertake the construction work for the expansion of Shengzhou Service Area and Jiaxing Service Area at the considerations of Rmb71,203,199 and Rmb53,385,933, respectively. All construction work under the Shengzhou Service Area Construction Ag re ement and th e Jia xi ng Service A rea Cons truction A greement shall b e completed within 304 calendar days and 243 calendar days respectively from the commencement date as instructed by the supervisor, followed by a defect liability period of two years. Please refer to the announcements of the Company dated April 18, 2023 and April 25, 2023 for details. Jiaogong Underground Construction is an indirect non-wholly owned subsidiary of Communications Group and is therefore a Connected Person of the Company. As a result, the transactions contemplated under the Construction Agreements constituted connected transactions for the Company under Chapter 14A of the Listing Rules. 88 2023 ANNUAL REPORTConnected TransactionsPursuant to Rule 14A.81 and Rule 14A.82 of the Listing Rules, the respective transactions contemplated under the Construction Agreements were required to be aggregated with a previous transaction (the “Previous Transaction”) entered into by Jiaxing Branch and among others, Jiaogong Underground Construction and Jiaogong Group being the consortium as the contractor on May 13, 2022 in relation to the construction work for the renovation of Jiaxing Service Area Plaza of Shanghai- Hangzhou Expressway, for the calculation of the relevant percentage ratios to determine the classification of the transactions contemplated under the Construction Agreements. As one or more of the applicable percentage ratios in respect of the transactions contemplated under the Construction Agreements, after aggregating with the Previous Transaction, were more than 0.1% but less than 5%, the transactions contemplated under the Construction Agreements were subject to the reporting and announcement requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. 3. Design and Construction Agreements with ZJIC On September 22, 2023, relevant management offices and subsidiaries of the Company entered into the following design and construction agreements (the “Design and Construction Agreements”) with ZJIC respectively: (i) the road co mprehensive improvement p roject agreements (the “R oad Comprehensive Improvement Project Agreements”), pursuant to which ZJIC was engaged to improve the road safety of Jiaxing Section of Shanghai-Hangzhou Expressway, construct facilities to reduce driving fatigue of certain parts of Zhajiasu Expressway, and construct remote traffic congestion warning facilities of certain parts of Jiaxing Section of Shanghai-Hangzhou Expressway at the consideration of Rmb4,117,364.00. The term of the road safety improvement project under the Road Comprehensive Improvement Project Agreements is 45 days of service period plus 1 month of trial operation period and 24 months of defect liability period while the term of the anti-fatigue and prevention of traffic congestion project thereunder is 45 days of service period plus 1 month of trial operation period and 12 months of defect liability period; 89 (ii) (iii) (iv) (v) the landscape lighting upgrade project agreement (the “Landscape Lighting Upgrade Project Agreement”), pursuant to which ZJIC was engaged to upgrade the landscape lighting of Zhoushan Bay Bridge at the consideration of Rmb1,484,584.44. The term of the Landscape Lighting Upgrade Project Agreement is 45 days of service period plus 3 months of trial operation period and 24 months of defect liability period; the provincial border interchange hub intervention system project agreements (t h e “P r o v i n c i a l B o r d e r I n t e r c h a n g e H u b I n t e r v e n t i o n S y s t e m P r o j e c t Agreements”), pursuant to which ZJIC was engaged to install intervention system for abnormal vehicles at the provincial or municipal entrance of Fengjing Section and Shenshi Junction Section of Shanghai-Hangzhou Expressway and Wangjiangjing Section of Zhajiasu Expressway at the consideration of Rmb2,871,989.00. The term of the Provincial Border Interchange Hub Intervention System Project Agreements is 45 days of service period plus 12 months of defect liability period; the electromechanical system upgrade design project agreement (the “Electromechanical System Upgrade Design Project Agreement”), pursuant to which ZJIC was engaged to provide construction design for upgrade of the electromechanical system of LongLiLiLong Expressway at the consideration of Rmb1,120,396.00. The term of the Electromechanical System Upgrade Design Project Agreement is 1 month of survey and design period plus 11 months of follow-up service period; the curved section and tunnel safety improvement project agreements (the “Curved Section and Tunnel Safety Improvement Project Agreements”), pursuant to which ZJIC was engaged to install roadside perception systems for the curved sections and install traffic safety facilities to the tunnels of Jinhua Section of Ningbo-Jinhua Expressway at the consideration of Rmb2,969,019.00. The term of the Curved Section and Tunnel Safety Improvement Project Agreements is 60 days of service period plus 24 months of defect liability period; 90 2023 ANNUAL REPORTConnected Transactions(vi) (vii) the traffic congestion improvement project agreement (the “Traffic Congestion Improvement Project Agreement”), pursuant to which ZJIC was engaged to install certain facilities for improvement of road capacity to Ningbo Section of Hangzhou-Ningbo Expressway at the consideration of Rmb1,143,580.00. The term of the Traffic Congestion Improvement Project Agreement is 3 months of service period plus 24 months of defect liability period; and the lane for Asian Games project agreement (the “Lane for Asian Games Project Agreement”), pursuant to which ZJIC was engaged to set up a dedicated lane for the Asian Games from Xiaoshan to Shaoxing Section of Hangzhou-Ningbo Expressway, including installation of facilities such as signage, road markings and ground decals to the lane for Asian Games to ensure priority access for vehicles of the Asian Games at the consideration of Rmb634,524.00. The term of the Lane for Asian Games Project Agreement is 40 days of service period plus 24 months of defect liability period. Please refer to the announcement of the Company dated September 22, 2023 for details. ZJIC is a 55.08% owned subsidiary of Communications Group, and is therefore a Connected Person of the Company. As a result, the transactions contemplated under the Design and Construction Agreements constituted connected transactions of the Company. Pursuant to Rule 14A.81 and Rule 14A.82 of the Listing Rules, the respective transactions contemplated under the Design and Construction Agreements were required to be aggregated with a total of 11 previous transactions (the “Previous Transactions with ZJIC”) in relation to the provision of expressway related design and construction services entered into or completed within a 12-month period prior to the date of the Design and Construction Agreements between the Group and ZJIC for the calculation of the relevant percentage ratios to determine the classification of the transactions contemplated under the Design and Construction Agreements. 91 As one or more of the applicable percentage ratios in respect of the transactions contemplated under the Design and Construction Agreements, after aggregating with the Previous Transactions with ZJIC, were more than 0.1% but less than 5%, the transactions contemplated under the Design and Construction Agreements were subject to the reporting and announcement requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. 4. Proposed Acquisition of 15% Interest in Wenzhou YongTaiWen Co and Proposed Acquisition of the Entire Interest in HuangQuNan Co On September 28, 2023, the Company and Communications Group entered into an equity purchase agreement (the “YongTaiWen Equity Purchase Agreement”), pursuant to which Communications Group conditionally agreed to sell and the Company conditionally agreed to acquire 15% equity interest in Wenzhou YongTaiWen Co at the consideration of Rmb816,150,000 (the “YongTaiWen Acquisition”). On the same day, LongLiLiLong Co and Communications Group entered into an equity purchase agreement (the “HuangQuNan Equity Purchase Agreement”), pursuant to which Communications Group conditionally agreed to sell and LongLiLiLong Co conditionally agreed to acquire the entire equity interest in HuangQuNan Co at the consideration of Rmb16,700,000 (the “HuangQuNan Acquisition”). Please refer to the announcements of the Company dated September 28, 2023 and October 9, 2023 for details. Communications Group is a Controlling Shareholder of the Company and is therefore a Connected Person of the Company. As a result, each of the YongTaiWen Acquisition and the HuangQuNan Acquisition constitutes a connected transaction for the Company. As one or more of the applicable percentage ratios in respect of each of the YongTaiWen Acquisition and HuangQuNan Acquisition were more than 0.1% but less than 5%, each of the YongTaiWen Acquisition and HuangQuNan Acquisition was subject to the reporting and announcement requirements but exempted from independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. 92 2023 ANNUAL REPORTConnected Transactions5. Agreements with Zhejiang Information and Construction Agreement with Jiaogong Underground Construction i. The Agreements with Zhejiang Information On October 27, 2023, the Company and its relevant subsidiaries entered into the following agreements (the “Agreements”) with Zhejiang Information to engage Zhejiang Information for the provision of a series of services to (i) under the expressway surveillance system improvement agreements (the “Expressway Surveillance System Improvement Agreements”, consisting of the Expressway Surveillance System Improvement Project and the Emergency Response Integration Service Platform Project), enhance the expressway surveillance system and establish the emergency response integration service platform at the consideration of Rmb9,607,510.29. The term of the Expressway Surveillance System Improvement Project thereunder is 30 days of service period plus 24 months of general defect liability period and 60 months of defect liability period for key component. The delivery date for the Emergency Response Integration Service Platform Project is November 30, 2023 with 24 months of warranty period; (ii) under the electromechanical system improvement agreements (the “Electromechanical System Improvement Agreements”), provide renovations services of the electromechanical equipment and facilities for certain sections of the expressways owned by the Group at the consideration of Rmb1,237,880. The term of the Electromechanical System Improvement Agreements is 60 days or 120 days of service period (where applicable) plus 24 months of general defect liability period and 60 months of defect liability period for key component; and (iii) under the safety and emergency management system project agreements (the “Safety and Emergency Management System Project Agreements”), establish the safety and emergency management system at the consideration of Rmb1,000,000. The term of the Safety and Emergency Management System Project Agreements is 4 months of service period plus 1 month of trial operation period and 12 months of warranty period. Please refer to the announcement of the Company dated October 27, 2023 for details. 93 Zhejiang Information, as a 65.85% owned subsidiary of Communications Group, is a Connected Person of the Company. As a result, the transactions contemplated under the Agreements constitute connected transactions of the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 and Rule 14A.82 of the Listing Rules, the respective transactions contemplated under the Agreements were required to be aggregated with a series of agreements entered into or completed within a 12-month period prior to the date of the Agreements between or among the Company and its subsidiaries and Zhejiang Information in relation to information technology services and mechanical and electrical engineering services (the “Previous Transactions with Zhejiang Information”) for the calculation of the relevant percentage ratios to determine the classification of the transactions contemplated under the Agreements. A s o n e o r m o r e o f t h e a p p l i c a b l e p e r c e n t a g e r a t i o s i n r e s p e c t o f t h e transactions contemplated under the Agreements, after aggregating with the Previous Transactions with Zhejiang Information, were more than 0.1% but less than 5%, the transactions contemplated under the Agreements were subject to the reporting and announcement requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. 94 2023 ANNUAL REPORTConnected Transactionsii. The Construction Agreement with Jiaogong Underground Construction On October 27, 2023, Jiaxing Branch entered into a construction agreement (the “Construction Agreement”) with Jiaogong Underground Construction in addition to the Jiaxing Service Area Construction Agreement dated April 18, 2023, to specify the rights and obligations in respect of construction of projects in certain parts of the north section of Jiaxing Service Area which is within a 30-meter range adjacent to the Shanghai-Kunming High-Speed Railway with a term of 60 calendar days upon signing the Construction Agreement. The contract price in relation to the Construction Agreement is Rmb12,781,853. Please refer to the announcement of the Company dated October 27, 2023 for details. Pursuant to Rule 14A.81 and Rule 14A.82 of the Listing Rules, as the transaction contemplated under the Construction Agreement and transactions under the Construction Agreements dated April 18, 2023 (the “Previous Construction Agreements”) were entered into or completed within a 12-month period with Jiaogong Underground Construction, a Connected Person of the Company, the transaction contemplated under the Construction Agreement and transactions under the Previous Construction Agreements were required to be aggregated for the calculation of the relevant percentage ratios to determine the classification of the transaction contemplated under the Construction Agreement. As one or more of the applicable percentage ratios in respect of the transaction contemplated under the Construction Agreement, after aggregating with those transactions under the Previous Construction Agreements, were more than 0.1% but less than 5%, the transaction contemplated under the Construction Agreement was subject to the reporting and announcement requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. 95 6. Formation of the Joint Venture On November 24, 2023, the Company and China Merchants Expressway, a Connected Person of the Company at the subsidiary level, entered into a joint venture agreement (the “JV Agreement”), pursuant to which the parties agree to form a joint venture (the “Joint Venture”) in the PRC for the purpose of the acquisition of 60% equity interest in Yonglan Co. Pursuant to the JV Agreement, each of the Company and China Merchants Expressway makes a capital contribution of RMB1,341.6 million, each representing 50% of the total capital contribution of the Joint Venture. The total capital contribution of the Joint Venture shall be RMB2,683.2 million where the registered capital of the Joint Venture shall be RMB100 million and the remaining of the capital contribution by the parties shall be included in the capital reserve. As the Joint Venture is owned as to 50% each by the Company and China Merchants Expressway upon establishment, it is not be a subsidiary of the Company and its financial results is not to be consolidated into the financial statements of the Group. Please refer to the announcements of the Company dated November 24, 2023 and November 30, 2023 for details. As one or more of the percentage ratios applicable to the formation of the Joint Venture exceeded 5% and were less than 25%, formation of the Joint Venture constitutes a disclosable transaction for the Company and was subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. China Merchants Expressway is a substantial shareholder of Shangsan Co which is a subsidiary of the Company. Therefore, China Merchants Expressway is a Connected Person of the Company at subsidiary level and as a result, formation of the Joint Venture constituted a connected transaction of the Company under Chapter 14A of the Listing Rules. By virtue of Rule 14A.101 of the Listing Rules, as (i) China Merchants Expressway is a Connected Person of the Company at subsidiary level; (ii) the Board has approved formation of the Joint Venture under the JV Agreement; and (iii) the independent non-executive Directors have confirmed that terms of the JV Agreement are fair and reasonable, the JV Agreement is on normal commercial terms or better and in the interests of the Company and Shareholders as a whole, the JV Agreement and formation of the Joint Venture contemplated thereunder were subject to the reporting and announcement requirements but were exempted from the circular, independent financial advice and Shareholders’ approval requirements under Chapter 14A of the Listing Rules. 96 2023 ANNUAL REPORTConnected TransactionsCONTINUING CONNECTED TRANSACTIONS 1. Deposit Services with Zhejiang Communications Finance Pursuant to the financial services agreement dated March 18, 2019 (the “Financial Services Agreement”) together with a supplemental agreement entered into between the Company and Zhejiang Communications Finance, pursuant to which Zhejiang Communications Finance agreed to provide the Company and its subsidiaries with a range of financial services including the provisions of certain deposit services (the “Deposit Services”) for a term of three years commencing from March 30, 2019, subject to the terms and conditions provided therein. Please refer to the announcement of the Company dated March 18, 2019 and the circular dated April 15, 2019 for details. Since the Financial Services Agreement expired on March 29, 2022, on March 25, 2022, the Company entered to the new financial services agreement (the “New Financial Services Agreement”), together with a supplemental agreement on a later date, among others, to revise the annual caps for the Deposit Services to Rmb3,000,000,000 (including any interest accrued thereon) (the “Financial Services Supplemental Agreement”), with Zhejiang Communications Finance for renewal of the terms of the Financial Services Agreement for a term of three years commencing from March 30, 2022 and ending March 29, 2025. Save as otherwise provided, all terms and conditions under the Financial Services Agreement remained substantially unchanged. Please refer to the announcement of the Company dated March 25, 2022 for details. 97 As the issued share capital of Zhejiang Communications Finance is owned as to 79.92% and 20.08% by Communications Group and the Company, respectively, Zhejiang Communications Finance is a Connected Person of the Company. As such, under the Chapter 14A of the Listing Rules, the provision of Deposit Services under the New Financial Services Agreement and the Financial Services Supplemental Agreement constituted a continuing connected transaction for the Company. Pursuant to the New Financial Services Agreement, the Deposit Services to be provided by Zhejiang Communications Finance to the Company and its subsidiaries include the current deposit, time deposit, call deposit and agreement deposit services. The Deposit Services would be provided under the New Financial Services Agreement on a non-exclusive basis and the Company and its subsidiaries were entitled to determine whether to accept the Deposit Services provided by Zhejiang Communications Finance or decide to accept deposit services provided by other financial institutions. The Company and its subsidiaries were not obliged to accept any Deposit Services provided by Zhejiang Communications Finance. The interest rate to be paid by Zhejiang Communications Finance for the deposits of the Company and its subsidiaries with Zhejiang Communications Finance shall be determined based on the prevailing deposit interest rate promulgated by the People’s Bank of China for the same period and should not be lower than the deposit interest rates offered by major commercial banks in the PRC for comparable deposits of comparable periods. The maximum amount of the daily deposit balance (including any interest accrued thereon) for the deposits of the Company and its subsidiaries with Zhejiang Communications Finance shall not be more than Rmb1,200,000,000 and Rmb3,000,000,000 respectively under the New Financial Services Agreement and the Financial Services Supplemental Agreement during the term thereof. As the highest applicable percentage ratio in respect of the Deposit Services under the New Financial Services Agreement was more than 0.1% but less than 5%, such transaction was subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. 98 2023 ANNUAL REPORTConnected TransactionsMeanwhile, as the highest applicable percentage ratio in respect of the revised annual caps for the Deposit Services under the Financial Services Supplemental Agreement was more than 5% but less than 25%, such transaction constituted a non- exempt continuing connected transaction subject to the reporting, announcement, annual review and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. During the Period, the maximum amount of the daily deposit balance (including any interest accrued thereon) for the deposits of the Company and its subsidiaries with Zhejiang Communications Finance under the New Financial Services Agreement together with the Financial Services Supplemental Agreement amounted to Rmb2,977,865,000. 2. Expressway Mechanical and Electrical System Maintenance Agreements On May 31, 2021, LongLiLiLong Co, entered into the expressway mechanical and electrical system maintenance agreements with Zhejiang Information (the “Expressway Mechanical and Electrical System Maintenance Agreements”), pursuant to which LongLiLiLong Co agreed to purchase, and Zhejiang Information agreed to provide, certain expressway mechanical and electrical system maintenance services. The term of the Expressway Mechanical and Electrical System Maintenance Agreements is for three years ending May 30, 2024. The annual service fees payable by LongLiLiLong Co to Zhejiang Information would be Rmb4,829,647.84, which amount to Rmb14,488,943.52 in total for three years. The annual cap on the aggregate service fees payable by LongLiLiLong Co under Expressway Mechanical and Electrical System Maintenance Agreements was Rmb5,000,000. Please refer to announcement of the Company dated May 31, 2021 for details. As set out above, Zhejiang Information is a Connected Person of the Company and as a result, the transactions under the Expressway Mechanical and Electrical System Maintenance Agreements constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. 99 Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, the respective transactions contemplated under the Expressway Mechanical and Electrical System Maintenance Agreements were required to be aggregated with the respective transactions contemplated under the agreements entered into between or among the Group and Zhejiang Information in relation to mechanical and electrical engineering services dated March 16, 2020, October 14, 2020 and December 16, 2020, respectively. A s t h e h i g h e s t a p p l i c a b l e p e r c e n t a g e r a t i o i n r e s p e c t o f t h e t r a n s a c t i o n s contemplated under the Expressway Mechanical and Electrical System Maintenance Agreements, after aggregating such previous agreements, was more than 0.1% but less than 5%, the transactions under the Expressway Mechanical and Electrical System Maintenance Agreements were subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total annual service fees payable by LongLiLiLong Co to Zhejiang Information under the Expressway Mechanical and Electrical System Maintenance Agreements amounted to Rmb3,476,000. 3. Entrusted Management Agreements i. 2021 Entrusted Management Agreements On December 13, 2021, the Company entered into the entrusted management agreements with branch and subsidiaries of the Communications Group (the “2021 Entrusted Management Agreements”), pursuant to which each of Shensuzhewan Branch, Ningbo Yongtaiwen Co and Santongdao South Connection Co shall entrust the Company to take over the operation and management of (i) Zhejiang Section of the Shensuzhewan Expressway, (ii) Xiwu to Xinwu Section of Ningbo Yongtaiwen Expressway; and (iii) South Connection of Qianjiang Channel, respectively. The term of the 2021 Entrusted Management Agreement is 3 years. Please refer to announcement of the Company dated December 13, 2021 for details. 100 2023 ANNUAL REPORTConnected TransactionsThe proposed annual cap on the aggregate entrusted management service fees of the 2021 Entrusted Management Agreements for the each of the three years from July 1, 2021 to June 30, 2024 shall not exceed Rmb10,000,000. As each of Shensuzhewan Branch, Ningbo Yongtaiwen Co and Santongdao South Connection Co is a branch or subsidiary of Communications Group and thus is a Connected Person of the Company and as a result, the respective transactions contemplated under the 2021 Entrusted Management Agreements constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, continuing connected transactions with the same Connected Person or parties who were connected with one another may be aggregated. As the highest applicable percentage ratio in respect of the aggregated annual cap for transactions contemplated under the 2021 Entrusted Management Agreements and the previous continuing connected transactions of the same nature with Communications Group and its subsidiaries was more than 0.1% but less than 5%, the transactions contemplated under the 2021 Entrusted Management Agreements were subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total entrusted management service fees received by the Company under the 2021 Entrusted Management Agreements amounted to Rmb8,690,000. 101 ii. 2022 Entrusted Management Agreements a. Entrusted Management Agreements with North Channel Co and Jiaxiao Co On September 21, 2022, the Company entered into the entrusted management agreements with each of North Channel Co and Jiaxiao Co (the “Entrusted Management Agreements with North Channel Co and Jiaxiao Co”), pursuant to which each of North Channel Co and Jiaxiao Co shall entrust the Company to take over the operation and management of (i) Zhoudai Bridge and Fuchimen Bridge of Ningbo Zhoushan Port Main Passage until June 30, 2024; and (ii) North Connection of Qianjiang Channel until June 29, 2024, respectively. Please refer to announcements of the Company dated September 21 and December 8, 2022 for details. The proposed annual cap on the aggregate entrusted management service fees of the Entrusted Management Agreements with North Channel Co and Jiaxiao Co for the each of the three years from June 30, 2021 to June 30, 2024 shall not exceed Rmb3,000,000. As each of North Channel Co and Jiaxiao Co is a non-wholly owned subsidiary of Communications Group and thus is a Connected Person of the Company. As a result, the respective transactions under the Entrusted Management Agreements with North Channel Co and Jiaxiao Co constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. 102 2023 ANNUAL REPORTConnected TransactionsPursuant to Rules 14A.81 to 14A.83 of the Listing Rules, connected transactions with the same Connected Person or parties who were c o n n e c t e d w i t h o n e a n o t h e r m a y b e a g g r e g a t e d. A s t h e h i g h e s t applicable percentage ratio in respect of the transactions contemplated under the Entrusted Management Agreements with North Channel Co and Jiaxiao Co, after aggregating with the previous continuing connected transaction with Communications Group and its subsidiaries in relation to entrusted management services, was more than 0.1% but less than 5%, the transactions contemplated under the Entrusted Management Agreements with North Channel Co and Jiaxiao Co were subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total entrusted management fees received by the Company under the Entrusted Management Agreements with North Channel Co and Jiaxiao Co amounted to Rmb1,774,000. b. Entrusted Management Agreement with Hangxuan Co O n D e c e m b e r 29, 2022, t h e C o m p a n y e n t e r e d i n t o a n e n t r u s t e d management agreement with Hangxuan Co (the “Entrusted Management Agreement with Hangxuan Co”), pursuant to which Hangxuan Co shall entrust the Company to take over the operation and management of Lin’an to Jiande Section of Linjin Expressway. Please refer to announcement of the Company dated December 29, 2022 for details. The proposed annual cap on the entrusted management service fees of the Entrusted Management Agreement with Hangxuan Co during the term of entrusted management commencing from December 30, 2022 and ending to June 30, 2024 shall not exceed Rmb3,500,000. As Hangxuan Co is a wholly-owned subsidiary of Communications Group and thus is a Connected Person of the Company. As a result, the transaction under the Entrusted Management Agreement with Hangxuan Co constituted continuing connected transaction for the Company under Chapter 14A of the Listing Rules. 103 Pursuant to Rules 14A.81 to 14A.83 of the Listing Rules, connected transactions with the same Connected Person or parties who were c o n n e c t e d w i t h o n e a n o t h e r m a y b e a g g r e g a t e d. A s t h e h i g h e s t applicable percentage ratio in respect of the transactions contemplated under the Entrusted Management Agreement with Hangxuan Co, after aggregating with the previous continuing connected transaction with Communications Group and its subsidiaries in relation to entrusted management services, including but not limited to the 2021 Entrusted Management Agreements and Entrusted Management Agreements with North Channel Co and Jiaoxiao Co, was more than 0.1% but less than 5%, the transaction contemplated under the Entrusted Management Agreement with Hangxuan Co was subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total entrusted management fee received by the Company under the Entrusted Management Agreement with Hangxuan Co amounted to Rmb1,305,000. iii. 2023 Entrusted Management Agreement On August 23, 2023, the Company entered into an entrusted management agreement (the “2023 Entrusted Management Agreement”) with HangNing Co, pursuant to which HangNing Co shall entrust the Company to take over the operation and management of the Zhejiang Section of the HangNing Expressway. The term of 2023 Entrusted Management Agreement is three years ending August 13, 2026. Please refer to announcement of the Company dated August 23, 2023 for details. In accordance with Rule 14A.53 of the Listing Rules, the Company is required to set an annual cap on the total amount of the entrusted management service fee receivable by the Company under the 2023 Entrusted Management Agreement. The proposed annual cap on the entrusted management service fee of the 2023 Entrusted Management Agreement for each of the three years ending August 13, 2026 shall not exceed Rmb5,400,000. 104 2023 ANNUAL REPORTConnected TransactionsHangNing Co is a non-wholly owned subsidiary of Communications Group. Therefore, HangNing Co is a Connected Person of the Company and as a result, the transaction contemplated under the 2023 Entrusted Management Agreement constitutes continuing connected transaction for the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, the transaction contemplated under the 2023 Entrusted Management Agreement was required to be aggregated with the respective transactions carried out on a continuing basis under the agreements with respect to seven transactions entered into between the Company and the associates of the same Connected Person (i.e. the Communications Group) in relation to the provision of entrusted management services of expressways (the “Previous Agreements”). As the highest applicable percentage ratio in respect of the aggregated annual cap for transaction contemplated under the 2023 Entrusted Management Agreement and the respective transactions carried out on a continuing basis under the Previous Agreements was more than 0.1% but less than 5%, the transaction contemplated under the 2023 Entrusted Management Agreement was subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total entrusted management fee received by the Company under the 2023 Entrusted Management Agreement with HangNing Co amounted to Rmb2,382,000. 105 4. Framework Agreement On March 24, 2022, Zhejiang Zheqi and Zheshang Development, entered into a framework agreement (the “Framework Agreement”), pursuant to which Zhejiang Zheqi and Zheshang Development Group would be involved in, among others, (i) bulk commodity sale and purchase transactions and (ii) over-the-counter (OTC) derivatives transactions for a term of three years commencing from the date of the Framework Agreement. The annual cap for each of the sale and purchase transactions of bulk commodity under the Framework Agreement for each of the three years ending March 23, 2025 shall not exceed Rmb800,000,000. The annual cap on the maximum aggregate annual amount of accumulated nominal principal for the OTC derivatives transactions under the Framework Agreement for each of the three years ending March 23, 2025 shall not exceed Rmb1,200,000,000. Please refer to the announcements of the Company dated March 25, 2022 and April 19, 2022 for details. Zheshang Development is a 44.55% owned associate of Communications Group and Zhejiang Zheqi is an indirect non-wholly owned subsidiary of the Company. Therefore, Zheshang Development is a Connected Person of the Company. As a result, the transactions contemplated under the Framework Agreement constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of each of the bulk commodity sale and purchase transactions and the OTC derivatives transactions under the Framework Agreement was more than 0.1% but less than 5%, the entering into of each of the bulk commodity sale and purchase transactions and the OTC derivatives transactions under the Framework Agreement was subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total amount of (i) the bulk commodity sale transactions; (ii) the bulk commodity purchase transactions; and (iii) the OTC derivatives transactions under the Framework Agreement amounted to Rmb402,381,000, Rmb223,481,000 and Rmb1,195,595,000, respectively. 106 2023 ANNUAL REPORTConnected Transactions5. Road Maintenance Agreements i. 2023 Daily Road Maintenance Agreements O n J a n u a r y 10, 2023, t h e C o m p a n y a n d i t s v a r i o u s s u b s i d i a r i e s a n d LongLiLiLong Co entered into the following agreements: a. Daily Road Maintenance Agreements (First to Third Contract Sections) O n J a n u a r y 10, 2023, t h e C o m p a n y a n d i t s v a r i o u s s u b s i d i a r i e s entered into a series of Daily Road Maintenance Agreements (First to Third Contract Sections) with Maintenance Co, Jiaogong Maintenance and Zhejiang Shunchang, respectively, pursuant to which, each of Maintenance Co, Jiaogong Maintenance and Zhejiang Shunchang agreed to undertake the daily road maintenance projects in respect of the relevant expressway as specified therein operated by the Group, respectively. The term of the Daily Road Maintenance Agreements (First to Third Contract Sections) is three years ending December 31, 2025. The total service fees payable by the Group for the maintenance services under the Daily Road Maintenance Agreements (First to Third Contract Sections) amounted to Rmb401,655,846. Please refer to the announcement of the Company dated January 10, 2023 for details. b. Daily Road Maintenance Agreement (Fourth Contract Section) On January 10, 2023, LongLiLiLong Co entered into the Daily Road Mai ntenance Agreement (Fourth C ontract Sect ion) wi th Zheji an g Shunchang, pursuant to which, Zhejiang Shunchang agreed to undertake the daily road maintenance projects in respect of the relevant expressway as specified therein owned by the Group. The term of the Daily Road Maintenance Agreements (Fourth Contract Section) is three years ending December 31, 2025. The total service fees payable by the Group for the maintenance services under the Daily Road Maintenance Agreements (First to Third Contract Sections) amounted to Rmb81,273,948. Please refer to the announcement of the Company dated January 10, 2023 for details. 107 Each of Maintenance Co, Jiaogong Maintenance and Zhejiang Shunchang is an indirect subsidiary of Communications Group. As such, each of Maintenance Co, Jiaogong Maintenance and Zhejiang Shunchang is a Connected Person of the Company. Therefore, the respective transactions contemplated under the Daily Road Maintenance Agreements (First to Third Contract Sections) and Daily Road Maintenance Agreement (Fourth Contract Section) (collectively the “2023 Daily Road Maintenance Agreements”) constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. In accordance with Rule 14A.53 of the Listing Rules, the Company was required to set an annual cap on the total amount of the 2023 Daily Road Maintenance Agreements payable by the Group. Pursuant to Rules 14A.81 and 14A.82 of the Listing Rules, the transactions contemplated under the 2023 Daily Road Maintenance Agreements were required to be aggregated. In aggregate, the proposed annual cap on the aggregate service fees payable by the Group under the 2023 Daily Road Maintenance Agreements for each of the three years ending December 31, 2025 is Rmb163,000,000. During the Period, the total service fees paid by the Group under the 2023 Daily Road Maintenance Agreements amounted to Rmb110,056,000. 108 2023 ANNUAL REPORTConnected Transactionsii. 2023 Dedicated Road Maintenance Agreements On April 25, 2023, the Company and its various subsidiaries and LongLiLiLong Co entered into the following agreements: a. The Dedicated Road Maintenance Agreements (First to Third Contract Sections) On April 25, 2023, the Company and its various subsidiaries entered into a series of dedicated road maintenance agreements (First to Third Contract Sections) (the “Dedicated Road Maintenance Agreements (First to Third Contract Sections)”) with Maintenance Co, Zhejiang Shunchang and Jiaogong Maintenance, respectively, pursuant to which, each of Maintenance Co, Zhejiang Shunchang and Jiaogong Maintenance agreed to undertake the dedicated road maintenance projects in respect of the relevant expressways as specified therein operated by the Group, respectively. The term for the Dedicated Road Maintenance Agreements (First to Third Contract Sections) is eight months from the commencement date as specified by the project supervisor. The total service fees payable by the Group for the maintenance services under the Dedicated Road Maintenance Agreements (First to Third Contract Sections) amounted to Rmb363,627,382. Please refer to the announcement of the Company dated April 25, 2023 for details. 109 b. The Dedicated Road Maintenance Agreement (Third Contract Section of LongLiLiLong Expressway) On April 25, 2023, LongLiLiLong Co entered into the dedicated road maintenance agreement (Third Contract Section of LongLiLiLong Expressway) (the “Dedicated Road Maintenance Agreement (Third C o n t r a c t S e c t i o n o f L o n g L i L i L o n g E x p r e s s w a y)”) w i t h J i a o g o n g Maintenance, pursuant to which, Jiaogong Maintenance agreed to undertake the dedicated road maintenance projects in respect of the relevant expressways as specified therein owned by the Group. The term for the Dedicated Road Maintenance Agreement (Third Contract Section of LongLiLiLong Expressway) is 214 calendar days commencing from the date as instructed by the supervisor of the project. The total service fees payable by LongLiLiLong Co for the maintenance services under the Dedicated Road Maintenance Agreement (Third Contract Section of LongLiLiLong Expressway) was Rmb64,130,397. Please refer to the announcement of the Company dated April 25, 2023 for details. Each of Maintenance Co, Zhejiang Shunchang and Jiaogong Maintenance is an indirect subsidiary of Communications Group. Therefore, each of Maintenance Co, Zhejiang Shunchang and Jiaogong Maintenance is a Connected Person of the Company and as a result, the respective transactions contemplated under the 2023 Dedicated Road Maintenance Agreements constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, the respective transactions contemplated under the 2023 Dedicated Road Maintenance Agreements were required to be aggregated with the respective transactions contemplated under the 2023 Daily Road Maintenance Agreements which were continuing connected transactions entered into with the associates of the same Connected Person (i.e. Communications Group) and are of the same nature. 110 2023 ANNUAL REPORTConnected TransactionsIn accordance with Rule 14A.53 of the Listing Rules, the Company is required to set an annual cap on the total amount of service fees under the 2023 Dedicated Road Maintenance Agreements payable by the Group. For the financial year ending December 31, 2023, the proposed annual cap on the aggregate service fees under the Dedicated Road Maintenance Agreements (First to Third Contract Sections) payable by the Group is RMB370,000,000 and the proposed annual cap on the aggregate service fees under the Dedicated Road Maintenance Agreement (Third Contract Section of LongLiLiLong Expressway) payable by LongLiLiLong Co is RMB65,000,000. The proposed annual cap of the aggregate service fees under the 2023 Dedicated Road Maintenance Agreements payable by the Group for the financial year ending December 31, 2023 is Rmb435,000,000. As one or more of the applicable percentage ratios in respect of the annual cap for transactions contemplated under the 2023 Dedicated Road Maintenance Agreements after aggregating with that of the 2023 Daily Road Maintenance Agreements, were more than 0.1% but less than 5%, the transactions contemplated under the 2023 Dedicated Road Maintenance Agreements were subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total service fees paid by the Group under the Dedicated Road Maintenance Agreements (First to Third Contract Sections) amounted to Rmb349,112,000 and the total service fees paid by the Group under the Dedicated Road Maintenance Agreement (Third Contract Section of LongLiLiLong Expressway) amounted to Rmb59,416,000. 111 iii. 2023 Road Maintenance Agreements On November 10, 2023, the various subsidiaries of the Company entered into several road maintenance agreements (the “2023 Road Maintenance Agreements”) with Zhejiang Shunchang, pursuant to which Zhejiang Shunchang agreed to undertake maintenance services to Jinhua Section of Ningbo-Jinhua Expressway and Shangsheng Section of Shangsan Expressway which would be affected by Jinhua-Ningbo Railway. The service shall commence from the date as specified by the project supervisor and the projects shall be delivered prior to December 30, 2023. The total service fees payable by the Group to Zhejiang Shunchang would be Rmb18,288,360. Please refer to the announcement of the Company dated November 10, 2023 for details. In accordance with Rule 14A.53 of the Listing Rules, the Company was required to set an annual cap on the total amount of the service fees under the 2023 Road Maintenance Agreements payable by the Group. The proposed annual cap on the aggregate service fees under the 2023 Road Maintenance Agreements payable by the Group for the financial year ending December 31, 2023 is Rmb19,000,000. As an indirect non-wholly owned subsidiary of Communications Group, Zhejiang Shunchang is a Connected Person of the Company and as a result, the respective transactions contemplated under the 2023 Road Maintenance Agreements constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, the respective transactions contemplated under the 2023 Road Maintenance Agreements were required to be aggregated with the respective transactions under the 2023 Daily Road Maintenance Agreements and the 2023 Dedicated Road Maintenance Agreements, which were continuing connected transactions entered into with the associate of the same Connected Person (i.e. Communications Group) and are of the same nature. 112 2023 ANNUAL REPORTConnected TransactionsAs one or more of the applicable percentage ratios in respect of the annual cap for transactions contemplated under the 2023 Road Maintenance Agreements after aggregating with those of the 2023 Daily Road Maintenance Agreements and the 2023 Dedicated Road Maintenance Agreements were more than 0.1% but less than 5%, the transactions contemplated under the 2023 Road Maintenance Agreements were subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total service fees paid by the Group under the 2023 Road Maintenance Agreements amounted to Rmb17,365,000. 6. The Guardrail Agreements On November 29, 2023, the Company and its various subsidiaries entered into several guardrail agreements (the “Guardrail Agreements”) with Maintenance Co, Zhejiang Shunchang and Jiaogong Maintenance respectively, pursuant to which (i) Maintenance Co agreed to undertake the guardrail upgrade and revamp projects in respect of two expressways operated by the Group, namely Hangzhou Section of Shanghai-Hangzhou-Ningbo Expressway and Hanghui Expressway at the consideration of Rmb50,050,835; (ii) Zhejiang Shunchang agreed to undertake the guardrail upgrade and revamp projects in respect of three expressways operated by the Group, namely Shaoxing Section of Shanghai-Hangzhou-Ningbo Expressway, Shangsheng Section and Xintian Section of Shangsan Expressway and Jinhua Section of Ningbo-Jinhua Expressway at the consideration of Rmb111,374,164; and (iii) Jiaogong Maintenance agreed to undertake the guardrail upgrade and revamp projects in respect of three expressways operated by the Group, namely Ningbo Section and Jiaxing Section of Shanghai-Hangzhou-Ningbo Expressway, Zhoushan Bay Bridge, and Jiaxing Section of Zhajiasu Expressway at the consideration of Rmb57,854,069. All the construction work shall be completed prior to December 31, 2023. Please refer to the announcement of the Company dated November 29, 2023 for details. 113 In accordance with Rule 14A.53 of the Listing Rules, the Company is required to set an annual cap on the total amount of the service fees under the Guardrail Agreements payable by the Group. The proposed annual cap on the aggregate service fees of the Guardrail Agreements payable by the Group for the financial year ending December 31, 2023 is Rmb220,000,000. Each of Maintenance Co, Zhejiang Shunchang and Jiaogong Maintenance is an indirect subsidiary of Communications Group. Therefore, each of them is a Connected Person of the Company and as a result, the respective transactions contemplated under the Guardrail Agreements constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.81 to Rule 14A.83 of the Listing Rules, the respective transactions contemplated under the Guardrail Agreements were required to be aggregated, all of which were continuing connected transactions entered into with the associates of the same Connected Person (i.e. Communications Group) and were with the same nature. As the applicable percentage ratios in respect of the aggregated annual cap for transactions contemplated under the Guardrail Agreements were more than 0.1% but less than 5%, the transactions contemplated under the Guardrail Agreements were subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules. During the Period, the total service fees paid by the Group under the Guardrail Agreements amounted to Rmb219,737,000. 114 2023 ANNUAL REPORTConnected TransactionsThe independent non-executive Directors have reviewed the continuing connected transactions described above and confirmed that such continuing connected transactions have been entered into: a) in the ordinary and usual course of business of the Group; b) c) on normal commercial terms or on terms no less favourable to the Group than terms available to or from independent third parties; and in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole. The Company’s auditor was engaged to report on the Group’s continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements HKSAE3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The Board confirms that the auditors have issued their unqualified letter containing their findings and conclusions in respect of the continuing connected transactions in accordance with the Rule 14A.56 of the Listing Rules. During the Period, details of the related party transactions and continuing related party transactions under the accounting standards for this report that the Company and its subsidiaries have entered into with Communications Group and its subsidiaries that constituted connected transactions and continuing connected transactions to be disclosed under the Listing Rules are set out in note 57 to the consolidated financial statements. The Company has complied with the disclosure requirements in respect of such connected transactions and continuing connected transactions in accordance with Chapter 14A of the Listing Rules. 115 TO THE MEMBERS OF ZHEJIANG EXPRESSWAY CO., LTD. 浙江滬杭甬高速公路股份有限公司 (Incorporated in the People’s Republic of China with limited liability) OPINION We have audited the consolidated financial statements of Zhejiang Expressway Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 122 to 338, which comprise the consolidated statement of financial position as at December 31, 2023, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information and other explanatory information. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at December 31, 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance. BASIS FOR OPINION We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 116 2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORTKEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Determination of consolidation scope of structured entities We identified the determination of consolidation scope of structured entities, which invested by the Group’s securities operation segment (defined in Note 8), as a key audit matter due to significant judgement applied by management in determining whether a structured entity is required to be consolidated by the Group and the significance of these balances to the Group’s consolidated financial statements as a whole. • • The Group held interests as investor or acted as fund manager in various structured entities including collective asset management schemes, investment funds and limited partnership enterprises. As disclosed in Note 6 to the consolidated financial statements , to determine whether a structured entity should be consolidated, the management applied significant judgement in determining whether the Group has power over the structured entities, and assess whether the combination of investments it held together with its remuneration and credit enhancement creates exposure to variability of returns from the activities of the collective asset management schemes and investment funds that is of such significance that it indicates the Group controlled the structured entities. Our procedures in relation to the management’s determination of consolidation scope of structured entities included: Testing and evaluating key controls of the management in determining the consolidation scope of structured entities; Examining, on a sample basis, the documents and information used by the management in assessing the consolidation criteria of structured entities against the related agreements and other related service agreements of structured entities newly established, invested or with changes in proportion of ownership interests or contractual terms during the year; • Assessing management judgement in determining the scope for consolidation and, on a sample basis, assessing the conclusion about whether a structured entity should be consolidated or not. 117 Key audit matter How our audit addressed the key audit matter Determination of consolidation scope of structured entities (Continued) As disclosed in Notes 45 and 59 to the c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s , a s at December 31, 2023, the total assets o f t h e c o n s o l i d a t e d s t r u c t u r e d e n t i t i e s a m o u n t e d t o R m b2,631,450 t h o u s a n d s and the total assets of the unconsolidated structured entities managed by the Group’s securities operation segment amounted to Rmb106,058,993 thousands, respectively. OTHER INFORMATION The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors of the Company determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 118 2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Company either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. A U D I T O R’S R E S P O N S I B I L I T I E S F O R T H E A U D I T O F T H E CONSOLIDATED FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 119 • • • • • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors of the Company. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 120 2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORTFrom the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in the independent auditor’s report is Ma Hing Fai. Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong March 25, 2024 121 Revenue Including: interest income under effective interest method Operating costs Gross profit Securities investment gains Other income and gains and losses Administrative expenses Other expenses Impairment losses under expected credit loss model, net of reversal Share of profit of associates Share of profit of joint ventures Finance costs Profit before tax Income tax expense Profit for the year NOTES 7 9 10 11 12 13 14 12/31/2023 Rmb’000 16,965,024 2,452,400 12/31/2022 Rmb’000 (Restated) 15,331,777 2,390,436 (9,765,685) (9,365,125) 7,199,339 1,024,960 907,870 (183,981) (125,190) (30,624) 1,056,247 107,046 (2,104,129) 7,851,538 (1,229,208) 6,622,330 5,966,652 679,734 2,102,751 (177,405) (125,349) (11,785) 752,086 49,771 (1,894,394) 7,342,061 (1,039,051) 6,303,010 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Fair value gain/(loss) on debt instruments measured at fair value through other comprehensive income 51,272 (9,055) Impairment loss for debt instruments at fair value through other comprehensive income Income tax impact relating to items that may be reclassified subsequently to profit or loss Exchange differences on translation of financial statements 867 (13,035) 1,108 1,987 of foreign operations 3,907 21,787 Share of other comprehensive income/(loss) of an associate, net of related income tax Other comprehensive income for the year, net of income tax 86,812 129,823 (736) 15,091 Total comprehensive income for the year 6,752,153 6,318,101 122 2023 ANNUAL REPORTConsolidated Statement of Profit or Loss and Other Comprehensive IncomeFor the year ended December 31, 2023 NOTES 12/31/2023 Rmb’000 Profit for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests Earnings per share Basic (Rmb cents) Diluted (Rmb cents) 18 5,223,679 1,398,651 6,622,330 5,327,819 1,424,334 6,752,153 112.95 105.32 12/31/2022 Rmb’000 (Restated) 5,178,666 1,124,344 6,303,010 5,184,248 1,133,853 6,318,101 113.72 108.33 123 NOTES 12/31/2023 Rmb’000 12/31/2022 Rmb’000 (Restated) 5,912,826 621,953 23,674,743 86,867 347,400 10,059,641 440,345 01/01/2022 Rmb’000 (Restated) 5,530,838 666,686 30,253,704 86,867 303,506 9,675,046 440,574 6,202,021 934,837 21,012,910 86,867 388,384 11,491,055 1,497,891 189,527 209,439 363,878 7,718,725 854,473 – 1,446,067 3,048,619 54,871,376 1,306,370 831,478 19,934,761 5,990,540 1,631 1,279,110 41,729,113 445,173 7,729,402 570,257 1,118,363 189,000 1,416,809 – – 1,216,289 10,000 1,617,799 – 44,647,643 50,165,187 606,285 562,884 17,557,268 3,350,918 44 1,000,756 43,789,944 250,683 6,086,210 371,714 475,199 19,394,130 1,379,476 128 613,718 45,445,711 – 7,078,206 45,415,217 48,744,803 38,392,804 100,631 70,179 132,090 4,268,560 23,830,440 203,632 23,990,165 413,843 17,213,997 152,862,426 146,213,771 130,911,016 NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Expressway operating rights Goodwill Other intangible assets Interests in associates Interests in joint ventures Financial assets at fair value through profit or loss (“FVTPL”) Debt instruments at fair value through other comprehensive income (“FVTOCI”) Other receivables and prepayments Financial assets held under resale agreements Deferred tax assets Time deposits CURRENT ASSETS Inventories Trade receivables Loans to customers arising from margin financing business Other receivables and prepayments Dividends receivable Derivative financial assets Financial assets at FVTPL Debt instruments at fair value through other comprehensive income Financial assets held under resale agreements Bank balances and clearing settlement fund held on behalf of customers Bank balances, clearing settlement fund, deposits and cash – Restricted bank balances and cash – Time deposits with original maturity over three months – Cash and cash equivalents 124 19 20 21 22 23 25 26 27 28 31 32 47 34 29 30 31 39 27 28 32 33 34 34 34 2023 ANNUAL REPORTConsolidated Statement of Financial PositionAt December 31, 2023 NOTES 12/31/2023 Rmb’000 12/31/2022 Rmb’000 (Restated) 01/01/2022 Rmb’000 (Restated) CURRENT LIABILITIES Placements from other financial institutions Accounts payable to customers arising from securities business Trade payables Tax liabilities Other taxes payable Other payables and accruals Dividends payable Contract liabilities Derivative financial liabilities Bank and other borrowings Short-term financing note payable Bonds payable Convertible bonds Financial assets sold under repurchase agreements Financial liabilities at FVTPL Lease liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other borrowings Bonds payable Convertible bonds Deferred tax liabilities Lease liabilities 35 36 37 38 39 40 41 42 43 44 45 46 40 42 43 47 46 1,950,000 700,000 500,000 44,803,323 1,265,174 654,107 232,461 13,954,591 168,573 104,000 996,027 4,593,399 2,137,611 5,404,107 1,830,842 24,592,145 472,061 147,914 48,449,595 1,220,832 419,684 379,334 8,924,553 – 161,381 554,357 5,054,083 3,567,025 7,118,247 4,719 23,825,242 1,057,642 119,678 103,306,335 101,556,372 49,556,091 104,427,467 13,213,544 23,610,144 6,611,090 260,060 327,516 44,022,354 60,405,113 44,657,399 89,305,042 17,302,734 16,189,322 5,707,354 481,066 324,352 40,004,828 49,300,214 38,069,350 1,453,998 1,305,228 920,106 5,921,353 – 204,214 451,368 2,451,507 7,940,702 10,455,661 – 25,250,426 2,925,391 105,699 97,955,003 32,956,013 83,121,200 19,661,590 17,193,430 1,714,662 477,525 360,216 39,407,423 43,713,777 125 NOTES 12/31/2023 Rmb’000 CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests 48 49 5,993,498 33,798,718 39,792,216 20,612,897 60,405,113 12/31/2022 Rmb’000 (Restated) 4,343,115 25,665,727 30,008,842 19,291,372 49,300,214 01/01/2022 Rmb’000 (Restated) 4,343,115 22,097,979 26,441,094 17,272,683 43,713,777 The consolidated financial statements on pages 122 to 338 were approved and authorised for issue by the board of directors on March 25, 2024 and are signed on its behalf by: DIRECTOR WU. Wei DIRECTOR LI. Wei 126 2023 ANNUAL REPORTConsolidated Statement of Financial PositionAt December 31, 2023 Attributable to owners of the Company Share of Investment differences Share Share Statutory Capital revaluation arising on Dividend Special Retained Non- controlling capital premium reserve reserve reserve translation reserve reserves profits Sub-total interests Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Note i) (Note ii) At January 1, 2023 (originally stated) 4,343,115 3,355,621 5,966,512 1,712 16,307 7,055 1,628,668 6,928,156 8,671,144 30,918,290 19,291,372 50,209,662 Adjustments - - - - - - - 2,035,302 (2,944,750) (909,448) - (909,448) At January 1, 2023 (restated) 4,343,115 3,355,621 5,966,512 1,712 16,307 7,055 1,628,668 8,963,458 5,726,394 30,008,842 19,291,372 49,300,214 Profit for the year Other comprehensive income for the year Total comprehensive income for the year - - - - - - Issuance of shares (Note 48) 1,650,383 4,448,491 Consideration paid for acquisition of subsidiaries under common control (Note 2) Capital injection to a subsidiary acquired under common control Issuance of Convertible Bond 2022 by a subsidiary (Note 43) Conversion of Convertible Bond 2022 of a subsidiary (Note 43) Deemed partial disposal of interest in a subsidiary upon conversion of Convertible Bond 2022 Establishment of a subsidiary (Note 58) Repurchase of shares by a subsidiary Capital reserve change of an associate Dividend declared to non-controlling interests 2022 dividend (Note 17) Proposed 2023 dividend Transfer to reserves - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 594,328 - - - - - - - - - - - - - - - - - 102,586 102,586 - 1,554 1,554 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (1,628,668) 1,917,919 - - - - - (16,700) 2,165 - - 33 - - (149) - - - - 5,223,679 5,223,679 1,398,651 6,622,330 - 104,140 25,683 129,823 5,223,679 5,327,819 1,424,334 6,752,153 6,098,874 (16,700) 2,165 - - - 6,098,874 (16,700) 2,165 - - 33 - - 804,528 804,528 (15) (15) 128 700 161 700 (405,138) (405,138) (149) - (149) - (503,012) (503,012) - - - - - - - - - - - (1,628,668) (1,917,919) (594,328) - - - - - (1,628,668) - - At December 31, 2023 5,993,498 7,804,112 6,560,840 1,712 118,893 8,609 1,917,919 8,948,807 8,437,826 39,792,216 20,612,897 60,405,113 127 Consolidated Statement of Changes in EquityFor the year ended December 31, 2023For the year ended December 31, 2023 Attributable to owners of the Company Share of Investment differences Share Share Statutory Capital revaluation arising on Dividend Special Retained Non- controlling capital premium reserve reserve reserve translation reserve reserves profits Sub-total interests Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Note i) (Note ii) At January 1, 2022 (originally stated) 4,343,115 3,355,621 5,639,087 1,712 19,447 (1,667) 1,628,668 6,915,988 5,248,371 27,150,342 17,272,683 44,423,025 Adjustments - - - - - - - 2,035,302 (2,744,550) (709,248) - (709,248) At January 1, 2022 (restated) 4,343,115 3,355,621 5,639,087 1,712 19,447 (1,667) 1,628,668 8,951,290 2,503,821 26,441,094 17,272,683 43,713,777 Profit for the year (restated) Other comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year Issuance of Convertible Bond 2022 by a subsidiary (Note 43) Conversion of Convertible Bond 2022 of a subsidiary (Note 43) Deemed partial disposal of interest in a subsidiary upon conversion of Convertible Bond 2022 Capital injection of a subsidiary Dividend declared to non-controlling interests 2021 dividend (Note 17) Proposed 2022 dividend Transfer to reserves - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 327,425 - - - - - - - - - - - - (3,140) (3,140) - 8,722 8,722 - - - - - - - - - - - - - - - - - - - - - - - - (1,628,668) 1,628,668 - - - - - - 6 12,162 - - - - 5,178,666 5,178,666 1,124,344 6,303,010 - 5,582 9,509 15,091 5,178,666 5,184,248 1,133,853 6,318,101 - - 6 476,257 476,257 (10) (10) 101 107 12,162 817,839 830,001 - (409,351) (409,351) - - - - - - (1,628,668) (1,628,668) (327,425) - - - - - (1,628,668) - - At December 31, 2022 (restated) 4,343,115 3,355,621 5,966,512 1,712 16,307 7,055 1,628,668 8,963,458 5,726,394 30,008,842 19,291,372 49,300,214 128 2023 ANNUAL REPORTConsolidated Statement of Changes in EquityFor the year ended December 31, 2023 Notes: (i) Statutory reserves comprise: (a) Statutory surplus reserve In accordance with the Company Law of the People’s Republic of China (the “PRC”) and the respective articles of association of the Company and its subsidiaries (collectively the “Entities”), the Entities are required to allocate 10% of the profit after tax, as determined in accordance with the PRC accounting standards and regulations applicable to the Entities, to the statutory surplus reserve until such reserve reaches 50% of the registered capital of the respective Entities. Subject to certain restrictions set out in the Company Law of the PRC and the respective articles of association of the Entities, part of the statutory surplus reserve may be converted to increase the respective Entities’ capital. (b) General risk reserve In accordance with the Finance Regulation for Financial Enterprises, securities companies are required to allocate 10% of the profit after tax, as determined in accordance with the PRC accounting standards and regulations, to the general risk reserve. This general risk reserve may be used to cover potential losses on risk exposures. (c) Transaction risk reserve In accordance with the Securities Law of the PRC, securities companies are required to allocate not less than 10% of the profit after tax, as determined in accordance with the PRC accounting standards and regulations, to the transaction risk reserve. This transaction risk reserve may be used to cover potential losses on securities transactions. 129 (ii) Special reserves mainly comprise: (a) Other reserve which was arising from the Group’s change of interests in subsidiaries. Amount represented the difference between the carrying value of net assets attributable to the Group acquired and the payment consideration arising from acquisition, or the dilute gain or loss of interests in subsidiaries. (b) Other reserve which was arising from the spin-off and offering of shares by Zheshang Securities Co., Ltd. (“Zheshang Securities”) in prior years. (c) Other reserve which was arising from the Group’s change of interest in an associate. Amount represented the difference between the carrying value of net assets attributable to the Group arising from the associate’s ownership interest change in its subsidiaries other than those recognized in profit or loss or other comprehensive income. (d) Merger reserve which was arising from the acquisition of subsidiaries under common control using the merger accounting method. This includes the capital of the combining entities at their existing book values since the first date they were under common control and were reduced by the Group’s payment of cash consideration to the controlling party. 130 2023 ANNUAL REPORTConsolidated Statement of Changes in EquityFor the year ended December 31, 2023OPERATING ACTIVITIES Profit before tax Adjustments for: Finance costs Interest income from financial institutions Interest income from debt instruments at FVTOCI Foreign exchange loss Share of profit of associates Share of profit of joint ventures Depreciation of property, plant and equipment Amortisation of expressway operating rights Depreciation of right-of-use assets Amortisation of other intangible assets Impairment losses under expected credit loss model, net of reversal – debt instruments at FVTOCI – trade receivables and other receivables – advance to customers arising from margin financing business – financial assets held under resale agreements Allowance for write-down of inventories Loss on disposal of property, plant and equipment Loss on disposal of expressway operating rights Gain on disposal of a subsidiary Gain arising from deemed disposal of associates Gain on decrease in fair value in respect of derivative Year ended 12/31/2023 Rmb’000 NOTE Year ended 12/31/2022 Rmb’000 (Restated) 7,851,538 7,342,061 2,104,129 (360,686) (148,106) 145,665 (1,056,247) (107,046) 814,910 2,650,098 148,932 91,103 867 21,175 2,345 6,237 13,711 5,274 4,595 – – 1,894,394 (144,271) (11,505) 286,160 (752,086) (49,771) 604,165 2,943,759 133,805 76,023 1,108 21,432 (1,521) (9,234) 6,898 1,906 18,645 (1,881,262) (22,062) component of Convertible Bond (280,620) (31,951) Loss on fair value changes of financial assets at FVTPL Loss on disposal of debt instruments at FVTOCI Gain arising from increasing shares of an associate 894 56 (26,457) – – – 131 Consolidated Statement of Cash FlowsFor the year ended December 31, 2023For the year ended December 31, 2023 Operating cash flows before movements in working capital 11,882,367 10,426,693 Year ended 12/31/2023 Rmb’000 NOTE Year ended 12/31/2022 Rmb’000 (Restated) Increase in inventories Increase in trade receivables (Increase)/decrease in loans to customers arising from margin financing business Increase in other receivables and prepayments Decrease in financial assets at FVTPL (Increase)/decrease in financial assets held under resale agreements (Increase)/decrease in restricted bank balance Decrease/(increase) in bank balances and clearing settlement fund held on behalf of customers Decrease/(increase) in net derivative financial assets Increase in placements from other financial institutions (Decrease)/increase in accounts payable to customers arising from securities business Increase/(decrease) in trade payables Decrease in other taxes payable Decrease in contract liabilities Increase in other payables and accruals Decrease in financial liabilities at FVTPL Increase/(decrease) in financial assets sold under repurchase agreements Cash generated from operations Income taxes paid Interest paid (713,796) (268,266) (2,379,838) (2,397,468) 2,188,940 (1,460,429) (30,452) 3,329,586 163,316 1,250,000 (241,469) (89,164) 1,838,383 (1,883,732) 1,877,936 822,230 61,911 (10,351,999) (284,049) 200,000 (3,646,272) 10,380,245 44,342 (146,873) (57,381) 4,895,924 (585,581) 766,903 12,835,022 (1,258,084) (1,762,609) (231,677) (540,891) (42,833) 3,187,851 (1,867,749) (1,425,184) 11,836,502 (1,966,682) (2,058,677) NET CASH FROM OPERATING ACTIVITIES 9,814,329 7,811,143 132 2023 ANNUAL REPORTConsolidated Statement of Cash FlowsFor the year ended December 31, 2023 NOTE INVESTING ACTIVITIES Interest received Dividends received from associates and a joint venture Investment in associates Investment in joint ventures Withdrawal of investment in associates Proceeds on disposal of property, plant and equipment Proceeds on disposal of expressway operating rights Proceeds on disposal or redemption of FVTOCI Purchases of property, plant and equipment Purchases of leasehold lands Purchases of other intangible assets Purchase of – financial assets at FVTPL – debt instruments at FVTOCI Net cashflow on disposal of a subsidiary Withdrawl of entrusted loans Placement of time deposits Withdrawal of time deposits Investment made by infrastructure real estate investment trusts Withdrawl of investment made by infrastructure real estate investment trusts Year ended 12/31/2023 Rmb’000 408,045 523,906 (767,308) (1,000,500) 32,255 10,244 – 240,611 (971,261) (312,255) (129,107) (109,091) (7,549,671) – – (13,237,551) 6,245,535 – – Year ended 12/31/2022 Rmb’000 (Restated) 147,496 497,691 (80,000) – 30,439 7,590 10,828 – (1,514,596) – (103,483) (67,730) (818,491) 2,206,798 2,400,000 – 200,000 (14,900) 14,900 NET CASH (USED IN)/FROM INVESTING ACTIVITIES (16,616,148) 2,916,542 133 NOTE FINANCING ACTIVITIES Dividends paid Dividends paid to non-controlling shareholders New bank and other borrowings raised Repayment of bank and other borrowings New entrusted loans raised Repayment of entrusted loans New issue of bonds payable, including assets-backed bonds Repayment of bonds payable Proceed from issuance of Convertible Bond Issue costs of Convertible Bond Issue of short-term financing note payable Repayment of short-term financing note payable Repayments of lease liabilities Proceed from issuance of shares Transaction costs paid on issuance of shares Repurchase of shares by a subsidiary Acquisition of a subsidiary under common control Capital received from Communications Group under common control Capital injection by non-controlling interests Year ended 12/31/2023 Rmb’000 (1,642,803) (334,439) 6,759,555 (9,657,001) 2,380,810 (4,018,954) 12,500,000 (6,800,000) 3,334,415 – 13,569,470 (14,987,230) (145,537) 6,128,918 (30,044) (405,138) (16,700) 2,165 700 Year ended 12/31/2022 Rmb’000 (Restated) (1,632,065) (409,351) 6,764,713 (6,704,646) 2,788,954 (1,156,173) 8,500,000 (12,806,310) 4,350,789 (1,489) 8,401,470 (12,764,370) (134,827) – – – – – 830,001 NET CASH FROM/(USED IN) FINANCING ACTIVITIES 6,638,187 (3,973,304) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT JANUARY 1 Effect of foreign exchange rate changes TOTAL CASH AND CASH EQUIVALENTS AT DECEMBER 31, represented by Cash and cash equivalents 34 (163,632) 23,990,165 3,907 23,830,440 23,830,440 6,754,381 17,213,997 21,787 23,990,165 23,990,165 134 2023 ANNUAL REPORTConsolidated Statement of Cash FlowsFor the year ended December 31, 2023 1. CORPORATE INFORMATION Zhejiang Expressway Co., Ltd. (the “Company”) was established in the People’s Republic of China (the “PRC”) with limited liability on March 1, 1997. The H shares of the Company (“H Shares”) were subsequently listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on May 15, 1997. All of the H Shares of the Company were admitted to the Official List of the United Kingdom Listing Authority (the “Official List”). Dealings in the H Shares on the London Stock Exchange (the “LSE”) commenced on May 5, 2000. On April 18, 2023, the Company applied for the cancellation of listing of its H shares on the standard listing segment of the Official List of the Financial Conduct Authority and of trading on the Main Market of the LSE. Such cancellation was effective from 8.00 a.m. on May 19, 2023 and the H Shares continue to trade on the Hong Kong Stock Exchange. On July 18, 2000, with the approval of the Ministry of Foreign Trade and Economic Co- operation of the PRC, the Company changed its business registration into a Sino-foreign joint stock limited company. In the opinion of the directors of the Company (the “Directors”), the immediate and ultimate holding company of the Company is Zhejiang Communications Investment Group Co., Ltd. (the “Communications Group”), a state-owned enterprise established in the PRC. The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information section of the annual report. The consolidated financial statements are presented in Renminbi (“Rmb”), which is also the functional currency of the Company. The Company is an investment holding company. The Company and its subsidiaries (collectively referred to as the “Group”) during the current year are involved in the following principal activities: (a) the construction, operation, maintenance and management of high grade roads; (b) the provision of securities and future broking services, margin financing and securities lending services, securities underwriting and sponsorship services, asset management, advisory services and proprietary trading; (c) the hotel operation, investment in other financial institutions and other ancillary services. 135 Notes to the Consolidated Financial StatementsFor the year ended December 31, 2023For the year ended December 31, 20232. MERGER ACCOUNTING RESTATEMENT The Group accounts for all its business combinations involving entities under common control using the principles of merger accounting in accordance with Accounting Guideline 5 “Merger Accounting for Common Control Combinations” (“AG 5”) issued by the Hong Kong Institute of Certificated Public Accountants (the “HKICPA”). On September 28, 2023, Zhejiang LongLiLiLong Expressway Co., Ltd. (“LongLiLiLong Co”), a wholly owned subsidiary of the Company, entered into an equity purchase agreement with Communications Group to acquire 100% equity interest in Zhejiang HuangQuNan Expressway Co., Ltd. (“HuangQuNan Co”) at a cash consideration of Rmb16,700,000. HuangQuNan Co is principally engaged in the operation and management of toll collection rights of the Zhejiang Section of HuangQuNan Expressway located in Zhejiang Province, the PRC, with a total length of 161 kilometers. The acquisition has been approved by the board of directors on September 7, 2023, and by the end of November, HuangQuNan Co became an indirect subsidiary of the Company after the completion of Articles of Association revision and business registration modification pursuant to HuangQuNan Equity Purchase Agreement. Since Communications Group is the immediate and ultimate holding company of the Company, the above acquisitions were regarded as business combinations involving entities under common control and were accounted for using AG 5. As a result, the comparative consolidated statement of profit or loss and other comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year ended December 31, 2022 and the consolidated statement of financial position as at December 31, 2022 and January 1, 2022 have therefore been restated in order to include the financial performance, assets and liabilities of the combining entities since the date on which they first come under common control. 136 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20232. MERGER ACCOUNTING RESTATEMENT (Continued) The effects of the merger accounting restatement in respect of the acquisition of 100% equity interests in HuangQuNan Co on the consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2022 are as follows: Year ended 12/31/2022 Rmb’000 (Originally stated) Merger accounting Year ended restatement Rmb’000 12/31/2022 Rmb’000 (Restated) 14,898,730 433,047 15,331,777 Revenue including: in terest income under effective interest method 2,390,436 – 2,390,436 Operating costs Gross profit/(loss) Securities investment gains Other income and gains and losses Administrative expenses Other expenses Impairment losses under expected credit loss model, net of reversal Share of profit of associates Share of profit of a joint venture Finance costs Profit/(loss) before tax Income tax expense, credit Profit for the year (8,857,926) (507,199) (9,365,125) 6,040,804 679,734 2,093,933 (172,616) (119,701) (11,742) 752,086 49,771 (1,770,008) 7,542,261 (1,039,051) (74,152) – 8,818 (4,789) (5,648) (43) – – (124,386) (200,200) – 5,966,652 679,734 2,102,751 (177,405) (125,349) (11,785) 752,086 49,771 (1,894,394) 7,342,061 (1,039,051) 6,503,210 (200,200) 6,303,010 137 2. MERGER ACCOUNTING RESTATEMENT (Continued) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Fair value loss on debt instruments measured at fair value through other comprehensive income Impairment loss for debt instruments at fair value through other comprehensive income Income tax impact relating to items that may be reclassified subsequently to profit or loss Exchange differences on translation of financial statements of foreign operations Share of other comprehensive loss of an associate, net of related income tax Other comprehensive income for the year, net of income tax Year ended 12/31/2022 Rmb’000 (Originally stated) Merger accounting Year ended restatement Rmb’000 12/31/2022 Rmb’000 (Restated) (9,055) 1,108 1,987 21,787 (736) 15,091 – – – – – – (9,055) 1,108 1,987 21,787 (736) 15,091 Total comprehensive income for the year 6,518,301 (200,200) 6,318,101 Profit for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests Earnings per share – Basic (Rmb cents) – Diluted (Rmb cents) 138 5,378,866 1,124,344 6,503,210 5,384,448 1,133,853 6,518,301 123.85 117.62 (200,200) – (200,200) (200,200) – (200,200) (10.13) (9.29) 5,178,666 1,124,344 6,303,010 5,184,248 1,133,853 6,318,101 113.72 108.33 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 2. MERGER ACCOUNTING RESTATEMENT (Continued) The effects of the merger accounting restatement in respect of the acquisition of 100% equity interest in HuangQuNan Co on the consolidated statements of financial positions as at January 1, 2022 and December 31, 2022 are as follows: Year Merger Ended accounting Year Ended Year Merger Ended accounting Year Ended 01/01/2022 restatement 01/01/2022 12/31/2022 restatement 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Originally stated) (Originally (Restated) stated) (Restated) NON-CURRENT ASSETS Property, plant and equipment 5,019,619 511,219 5,530,838 5,419,682 493,144 5,912,826 Right-of-use assets 666,686 – 666,686 621,953 – 621,953 Expressway operating rights 26,053,256 4,200,448 30,253,704 19,797,341 3,877,402 23,674,743 Goodwill Other intangible assets Interests in associates Interest in a joint venture Financial assets at FVTPL Debt instruments at FVTOCI 86,867 303,350 9,675,046 440,574 363,878 – Other receivables and prepayments 1,216,289 Financial assets held under resale agreements Deferred tax assets 10,000 1,617,799 – 156 86,867 303,506 86,867 347,051 – 349 – – – – – – – 9,675,046 10,059,641 440,574 363,878 – 440,345 209,439 570,257 1,216,289 1,118,363 10,000 189,000 1,617,799 1,416,809 – – – – – – – 86,867 347,400 10,059,641 440,345 209,439 570,257 1,118,363 189,000 1,416,809 45,453,364 4,711,823 50,165,187 40,276,748 4,370,895 44,647,643 139 2. MERGER ACCOUNTING RESTATEMENT (Continued) Year Merger Ended accounting Year Ended Year Merger Ended accounting Year Ended 01/01/2022 restatement 01/01/2022 12/31/2022 restatement 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Originally stated) (Originally (Restated) stated) (Restated) 371,714 467,892 – 7,307 371,714 475,199 606,285 554,368 – 8,516 606,285 562,884 – 19,394,130 17,557,268 – 17,557,268 371 1,379,476 3,347,368 3,550 3,350,918 – – – – – – – – 128 44 613,718 1,000,756 45,445,711 43,789,944 – 250,683 7,078,206 6,086,210 38,392,804 48,744,803 132,090 70,179 413,843 203,632 – – – – – – – – 44 1,000,756 43,789,944 250,683 6,086,210 48,744,803 70,179 203,632 CURRENT ASSETS Inventories Trade receivables Loans to customers arising from margin financing business Other receivables and prepayments Dividends receivable Derivative financial assets Financial assets at FVTPL Debt instruments at FVTOCI Financial assets held under resale agreements Bank balances and clearing settlement fund held on behalf of 19,394,130 1,379,105 128 613,718 45,445,711 – 7,078,206 customers 38,392,804 Bank balances, clearing settlement fund, deposits and cash: – Restricted bank balances and cash 132,090 – Time deposits with original maturity over three months 413,843 – Cash and cash equivalents 17,153,977 60,020 17,213,997 23,917,236 72,929 23,990,165 130,843,318 67,698 130,911,016 146,128,776 84,995 146,213,771 140 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 2. MERGER ACCOUNTING RESTATEMENT (Continued) Year Merger Ended accounting Year Ended Year Merger Ended accounting Year Ended 01/01/2022 restatement 01/01/2022 12/31/2022 restatement 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Originally stated) (Originally (Restated) stated) (Restated) CURRENT LIABILITIES Placements from other financial institutions 500,000 Accounts payable to customers arising from securities business Trade payables Tax liabilities Other taxes payable Other payables and accruals Contract liabilities Derivative financial liabilities Bank and other borrowings Short-term financing note payable Bonds payable Convertible bonds Financial assets sold under repurchase agreements Financial liabilities at FVTPL Lease liabilities 38,069,350 1,387,533 1,305,228 916,269 5,872,066 204,214 451,368 2,316,307 7,940,702 10,455,661 – 25,250,426 2,925,391 105,699 – – 500,000 700,000 38,069,350 48,449,595 – – 700,000 48,449,595 66,465 1,453,998 1,159,833 60,999 1,220,832 – 1,305,228 920,106 419,684 377,435 5,921,353 8,868,740 204,214 451,368 161,381 554,357 3,837 49,287 – – – 1,899 55,813 – – 419,684 379,334 8,924,553 161,381 554,357 135,200 2,451,507 4,915,176 138,907 5,054,083 – – – – – – 7,940,702 3,567,025 10,455,661 7,118,247 – 4,719 25,250,426 23,825,242 2,925,391 1,057,642 105,699 119,678 – – – – – – 3,567,025 7,118,247 4,719 23,825,242 1,057,642 119,678 NET CURRENT ASSETS (LIABILITIES) 33,143,104 (187,091) 32,956,013 44,830,022 (172,623) 44,657,399 97,700,214 254,789 97,955,003 101,298,754 257,618 101,556,372 TOTAL ASSETS LESS CURRENT LIABILITIES 78,596,468 4,524,732 83,121,200 85,106,770 4,198,272 89,305,042 141 2. MERGER ACCOUNTING RESTATEMENT (Continued) Year Merger Ended accounting Year Ended Year Merger Ended accounting Year Ended 01/01/2022 restatement 01/01/2022 12/31/2022 restatement 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Originally stated) (Originally (Restated) stated) (Restated) NON-CURRENT LIABILITIES Bank and other borrowings 14,427,610 5,233,980 19,661,590 12,195,014 5,107,720 17,302,734 Bonds payable Convertible Bonds Deferred tax liabilities Lease liabilities CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests 17,193,430 1,714,662 477,525 360,216 – – – – 17,193,430 16,189,322 1,714,662 5,707,354 477,525 360,216 481,066 324,352 – – – – 16,189,322 5,707,354 481,066 324,352 34,173,443 5,233,980 39,407,423 34,897,108 5,107,720 40,004,828 44,423,025 (709,248) 43,713,777 50,209,662 (909,448) 49,300,214 4,343,115 – 4,343,115 4,343,115 – 4,343,115 22,807,227 (709,248) 22,097,979 26,575,175 (909,448) 25,665,727 27,150,342 17,272,683 (709,248) 26,441,094 30,918,290 (909,448) 30,008,842 – 17,272,683 19,291,372 – 19,291,372 44,423,025 (709,248) 43,713,777 50,209,662 (909,448) 49,300,214 Note: Notes to the consolidated statement of financial position are presented for January 1, 2022 as well if there is merger accounting effect. 142 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 2. MERGER ACCOUNTING RESTATEMENT (Continued) The effects of merger accounting restatement in respect of the acquisition of 100% equity interest in HuangQuNan Co on the consolidated statements of equity as at January 1 2022 and December 31, 2022 are as follows: Year Merger Ended accounting Year Ended Year Merger Ended accounting Year Ended 01/01/2022 restatement 01/01/2022 12/31/2022 restatement 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Originally stated) 4,343,115 3,355,621 5,639,087 1,712 19,447 (1,667) 1,628,668 (Originally (Restated) stated) 4,343,115 4,343,115 3,355,621 3,355,621 5,639,087 5,966,512 1,712 19,447 (1,667) 1,712 16,307 7,055 1,628,668 1,628,668 – – – – – – – (Restated) 4,343,115 3,355,621 5,966,512 1,712 16,307 7,055 1,628,668 – – – – – – – 6,915,988 2,035,302 8,951,290 6,928,156 2,035,302 8,963,458 5,248,371 (2,744,550) 2,503,821 8,671,144 (2,944,750) 5,726,394 Share capital Share premium Statutory reserve Capital reserve Investment revaluation reserve Share of differences arising on translation Dividend reserve Special reserves Retained profits Non-controlling interests 17,272,683 – 17,272,683 19,291,372 – 19,291,372 Total 44,423,025 (709,248) 43,713,777 50,209,662 (909,448) 49,300,214 143 2. MERGER ACCOUNTING RESTATEMENT (Continued) The effects of merger accounting restatement in respect of the acquisition of 100% equity interest in HuangQuNan Co on the consolidated cash flows for the year ended December 31, 2022 are as follows: Year ended Merger accounting 12/31/2022 Rmb’000 restatement Rmb’000 (Originally stated) Year ended 12/31/2022 Rmb’000 (Restated) 7,542,261 (200,200) 7,342,061 Profit before tax Adjustments for: Finance costs Interest income from financial institutions Depreciation of property, plant and equipment Amortisation of expressway operating rights Amortisation of other intangible assets Impairment losses, net of reversal Loss on disposal of property, plant and equipment Loss on disposal of expressway operating rights 1,770,008 (142,358) 554,686 2,621,008 75,491 21,389 1,436 18,434 Other operating cash flow adjustments (2,331,421) Operating cash flows before movements in working capital Increase in trade receivables Increase in other receivables and prepayments Decrease in trade payables Decrease in other taxes payable Increase in other payables and accruals Other working capital adjustments Cash generated from operations Income taxes paid Interest paid NET CASH FROM OPERATING ACTIVITIES 10,130,934 (87,940) (1,880,644) (226,211) (538,834) 3,181,325 967,422 11,546,052 (1,966,682) (1,937,998) 7,641,372 144 124,386 (1,913) 49,479 322,751 532 43 470 211 – 1,894,394 (144,271) 604,165 2,943,759 76,023 21,432 1,906 18,645 (2,331,421) 295,759 10,426,693 (1,224) (3,088) (5,466) (2,057) 6,526 – 290,450 – (120,679) 169,771 (89,164) (1,883,732) (231,677) (540,891) 3,187,851 967,422 11,836,502 (1,966,682) (2,058,677) 7,811,143 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 2. MERGER ACCOUNTING RESTATEMENT (Continued) The effects of merger accounting restatement in respect of the acquisition of 100% equity interest in HuangQuNan Co on the consolidated cash flows for the year ended December 31, 2022 are as follows: (Continued) INVESTING ACTIVITIES Interest received Proceeds on disposal of expressway operating rights Purchases of property, plant and equipment Purchases of other intangible assets Other investing cash flows NET CASH FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of bank and other borrowings Other financing cash flows NET CASH USED IN FINANCING ACTIVITIES 145,583 10,744 (1,482,722) (102,758) 4,376,297 2,947,144 (6,578,386) 2,731,342 (3,847,044) NET INCREASE IN CASH AND CASH EQUIVALENTS 6,741,472 CASH AND CASH EQUIVALENTS AT JANUARY 1 17,153,977 Effect of foreign exchange rate changes 21,787 Year ended Merger accounting 12/31/2022 Rmb’000 restatement Rmb’000 (Originally stated) Year ended 12/31/2022 Rmb’000 (Restated) 147,496 10,828 (1,514,596) (103,483) 4,376,297 1,913 84 (31,874) (725) – (30,602) 2,916,542 (126,260) – (6,704,646) 2,731,342 (126,260) (3,973,304) 12,909 60,020 – 6,754,381 17,213,997 21,787 CASH AND CASH EQUIVALENTS AT DECEMBER 31 23,917,236 72,929 23,990,165 145 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSS”) New and Amendments to HKFRSs that are mandatorily effective for the current year In the current year, the Group has applied the following new and amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the first time, which are mandatorily effective for the Group’s annual periods beginning on 1 January 2023 for the preparation of the consolidated financial statements: HKFRS 17 (including the Insurance Contracts October 2020 and February 2022 Amendments to HKFRS 17) Amendments to HKAS 8 Amendments to HKAS 12 Amendments to HKAS 12 Amendments to HKAS 1 and HKFRS Practice Statement 2 Definition of Accounting Estimates Deferred Tax related to Assets and Liabilities arising from a Single Transaction International Tax Reform-Pillar Two model Rules Disclosure of Accounting Policies Except as described below, the application of the new and amendments to HKFRSs in the current year has had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements. 146 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20233. A P P L I C A T I O N O F N E W A N D A M E N D M E N T S T O H O N G KONG FINANCIAL REPORTING STANDARDS (“HKFRS S”) (Continued) Impacts on application of Amendments to HKAS 8 Definition of Accounting Estimates The Group has applied the amendments for the first time in the current year. The amendments define accounting estimates as “monetary amounts in financial statements that are subject to measurement uncertainty”. An accounting policy may require items in financial statements to be measured in a way that involves measurement uncertainty. In such a case, an entity develops an accounting estimate to achieve the objective set out by the accounting policy. The amendments to HKAS 8 clarify the distinction between changes in accounting estimates, and changes in accounting policies and the correction of errors. The application of the amendments in the current year had no material impact on the consolidated financial statements. Impacts on application of Amendments to HKAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction The Group has applied the amendments for the first time in the current year. The amendments narrow the scope of the recognition exemption of deferred tax liabilities and deferred tax assets in paragraphs 15 and 24 of HKAS 12 Income Taxes so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. 147 3. A P P L I C A T I O N O F N E W A N D A M E N D M E N T S T O H O N G KONG FINANCIAL REPORTING STANDARDS (“HKFRS S”) (Continued) Impacts on application of Amendments to HKAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Continued) In accordance with the transition provision: (i) (ii) the Group has applied the new accounting policy retrospectively to leasing transactions that occurred on or after 1 January 2022; the Group also, as at 1 January 2022, recognised a deferred tax asset (to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised) and a deferred tax liability for all deductible and taxable temporary difference associated with right-of-use-assets and lease liabilities. The application of the amendments has had no material impact on the Group’s financial position and performance. Impacts on application of Amendments to HKAS 1 and HKFRS Practice Statement 2 Disclosure of Accounting Policies The Group has applied the amendments for the first time in the current year. HKAS 1 Presentation of Financial Statements is amended to replace all instances of the term “significant accounting policies” with “material accounting policy information”. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. 148 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20233. A P P L I C A T I O N O F N E W A N D A M E N D M E N T S T O H O N G KONG FINANCIAL REPORTING STANDARDS (“HKFRS S”) (Continued) Impacts on application of Amendments to HKAS 1 and HKFRS Practice Statement 2 Disclosure of Accounting Policies (Continued) The amendments also clarify that accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material. If an entity chooses to disclose immaterial accounting policy information, such information must not obscure material accounting policy information. HKFRS Practice Statement 2 Making Materiality Judgements (the “Practice Statement”) is also amended to illustrate how an entity applies the “four-step materiality process” to accounting policy disclosures and to judge whether information about an accounting policy is material to its financial statements. Guidance and examples are added to the Practice Statement. The application of the amendments has had no material impact on the Group’s financial positions and performance but has affected the disclosure of the Group’s accounting policies set out in Note 5 to the consolidated financial statements. 149 3. A P P L I C A T I O N O F N E W A N D A M E N D M E N T S T O H O N G KONG FINANCIAL REPORTING STANDARDS (“HKFRS S”) (Continued) Amendments to HKFRSs in issue but not yet effective The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective: Amendments to HKFRS 10 Sale or Contribution of Assets between an Investor and HKAS 28 Amendments to HKFRS 16 Amendments to HKAS 1 Amendments to HKAS 1 Amendments to HKAS 7 and HKFRS 7 and its Associate or Joint Venture1 Lease Liability in a Sale and Leaseback2 Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020)2 Non-current Liabilities with Covenants2 Supplier Finance Arrangements2 Amendments to HKAS 21 Lack of Exchangeability3 1 2 3 Effective for annual periods beginning on or after a date to be determined. Effective for annual periods beginning on or after 1 January 2024. Effective for annual periods beginning on or after 1 January 2025. Except for the amendments to HKFRSs mentioned below, the directors of the Company anticipate that the application of all other amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable future. 150 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20233. A P P L I C A T I O N O F N E W A N D A M E N D M E N T S T O H O N G KONG FINANCIAL REPORTING STANDARDS (“HKFRS S”) (Continued) Amendments to HKFRSs in issue but not yet effective (Continued) Amendments to HKAS 1 Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020) (the “2020 Amendments”) and Amendments to HKAS 1 Non-current Liabilities with Covenants (the “2022 Amendments”) The 2020 Amendments provide clarification and additional guidance on the assessment of right to defer settlement for at least twelve months from reporting date for classification of liabilities as current or non-current, which: • • clarify that if a liability has terms that could, at the option of the counterparty, result in its settlement by the transfer of the entity’s own equity instruments, these terms do not affect its classification as current or non-current only if the entity recognises the option separately as an equity instrument applying HKAS 32 Financial Instruments: Presentation. specify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. Specifically, the amendments clarify that the classification should not be affected by management intentions or expectations to settle the liability within 12 months. For rights to defer settlement for at least twelve months from reporting date which are conditional on the compliance with covenants, the requirements introduced by the 2020 Amendments have been modified by the 2022 Amendments. The 2022 Amendments specify that only covenants with which an entity is required to comply with on or before the end of the reporting period affect the entity’s right to defer settlement of a liability for at least twelve months after the reporting date. Covenants which are required to comply with only after the reporting period do not affect whether that right exists at the end of the reporting period. 151 3. A P P L I C A T I O N O F N E W A N D A M E N D M E N T S T O H O N G KONG FINANCIAL REPORTING STANDARDS (“HKFRS S”) (Continued) Amendments to HKFRSs in issue but not yet effective (Continued) Amendments to HKAS 1 Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020) (the “2020 Amendments”) and Amendments to HKAS 1 Non-current Liabilities with Covenants (the “2022 Amendments”) (Continued) In addition, the 2022 Amendments specify the disclosure requirements about information that enables users of financial statements to understand the risk that the liabilities could become repayable within twelve months after the reporting period, if an entity classifies liabilities arising from loan arrangements as non-current when the entity’s right to defer settlement of those liabilities is subject to the entity complying with covenants within twelve months after the reporting period. The 2022 Amendments also defer the effective date of applying the 2020 Amendments to annual reporting periods beginning on or after 1 January 2024. The 2022 Amendments, together with the 2020 Amendments, are effective for annual reporting periods beginning on or after 1 January 2024, with early application permitted. If an entity applies the 2020 Amendments for an earlier period after the issue of the 2022 Amendments, the entity should also apply the 2022 Amendments for that period. Based on the Group’s outstanding liabilities as at 31 December 2023, including convertible instruments in which the conversion options are classified as equity instruments, and the related terms and conditions stipulated in the agreements between the Group and the relevant convertible instrument holders, the application of the 2020 and 2022 Amendments will not result in reclassification of the Group’s liabilities. 152 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20234. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) and by the Hong Kong Companies Ordinance. 5. MATERIAL ACCOUNTING POLICY INFORMATION Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company: • • has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. 153 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Basis of consolidation (Continued) When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including: • • • • the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Group, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. When the Group is an investor of a fund in which the Group also acts as a fund manager, the Group will determine whether it is a principal or an agent for the purpose of assessing whether the Group controls the relevant fund. An agent is a party primarily engaged to act on behalf and for the benefit of another party or parties (the principal(s)) and therefore does not control the investee when it exercises its decision-making authority. In determining whether the Group is an agent to the fund, the Group would assess: the scope of its decision-making authority over the investee; the rights held by other parties; the remuneration to which it is entitled in accordance with the remuneration agreements; and • • • 154 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Basis of consolidation (Continued) • the decision maker’s exposure to variability of returns from other interests that it holds in the investee. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant subsidiaries upon liquidation. 155 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Basis of consolidation (Continued) Change in the Group’s interests in existing subsidiaries Changes in the Group’s interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests according to the Group’s and the non-controlling interests’ proportionate interests. Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-controlling interests (if any) are derecognised. A gain or loss is recognised in the profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the carrying amount of the assets (including goodwill), and liabilities of the subsidiary attributable to the owners of the Company. All amounts previously recognised in other comprehensive income in related to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e., reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKFRS 9 Financial Instruments or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. 156 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Business combinations or asset acquisitions Optional concentration test The Group can elect to apply an optional concentration test, on a transaction-by- transaction basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed. Asset acquisitions When the Group acquires a group of assets and liabilities that do not constitute a business, the Group identifies and recognises the individual identifiable assets acquired and liabilities assumed by allocating the purchase price first to financial assets/financial liabilities at the respective fair values, the remaining balance of the purchase price is then allocated to the other identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction does not give rise to goodwill or bargain purchase gain. Business combinations A business is an integrated set of activities and assets which includes an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired processes are considered substantive if they are critical to the ability to continue producing outputs, including an organised workforce with the necessary skills, knowledge, or experience to perform the related processes or they significantly contribute to the ability to continue producing outputs and are considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs. 157 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Business combinations or asset acquisitions (Continued) Business combinations (Continued) Acquisitions of businesses, other than business combination under common control, are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition- date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. The identifiable assets acquired and liabilities assumed must meet the definitions of an asset and a liability in the Conceptual Framework for Financial Reporting (the “Conceptual Framework”) except for transactions and events within the scope of HKAS 37 Provisions, Contingent Liabilities and Contingent Assets or HK (IFRIC)–Int 21 Levies, in which the Group applies HKAS 37 or HK (IFRIC)–Int 21 instead of the Conceptual Framework to identify the liabilities it has assumed in a business combination. Contingent assets are not recognised. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that: deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 at the acquisition date (see the accounting policy below); assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard; and • • • 158 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Business combinations or asset acquisitions (Continued) Business combinations (Continued) • lease liabilities are recognised and measured at the present value of the remaining lease payments (as defined in HKFRS 16) as if the acquired leases were new leases at the acquisition date, except for leases for which (a) the lease term ends within 12 months of the acquisition date; or (b) the underlying asset is of low value. Right-of- use assets are recognised and measured at the same amount as the relevant lease liabilities, adjusted to reflect favourable or unfavourable terms of the lease when compared with market terms. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net amount of the identifiable assets acquired and the liabilities assumed as at acquisition date. If, after re-assessment, the net amount of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the relevant subsidiary’s net assets in the event of liquidation are initially measured at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets or at fair value. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non- controlling interests are measured at their fair value. 159 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Merger accounting for business combination involving businesses under common control The consolidated financial statements incorporate the financial statements items of the combining businesses in which the common control combination occurs as if they had been combined from the date when the combining or businesses first came under the control of the controlling party. The net assets of the combining businesses are consolidated using the existing book values from the controlling party’s perspective. No amount is recognised in respect of goodwill or bargain purchase gain at the time of common control combination. The consolidated statement of profit or loss and other comprehensive income includes the results of each of the combining businesses from the earliest date presented or since the date when the combining businesses first came under the common control, where this is a shorter period. The comparative amounts in the consolidated financial statements are presented as if the businesses had been combined at the beginning of the previous reporting period or when they first came under common control, whichever is shorter. Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see the accounting policy above) less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash- generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination, which represent the lowest level at which the goodwill is monitored for internal management purpose and not larger than an operating segment. 160 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Goodwill (Continued) A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually or more frequently when there is indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit (or group of cash-generating units). On disposal of the relevant cash-generating unit or any of the cash-generating unit within the group of cash generating units, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal. When the Group disposes of an operation within the cash-generating unit (or a cash generating unit within a group of cash- generating units), the amount of goodwill disposed of is measured on the basis of the relative values of the operation (or the cash-generating unit) disposed of and the portion of the cash-generating unit (or the group of cash-generating units) retained. The Group’s policy for goodwill arising on the acquisition of associates and joint venture is described below. Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. 161 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Investments in associates and joint ventures (Continued) The results and assets and liabilities of associates and joint ventures are incorporated in these consolidated financial statements using the equity method of accounting. The financial statements of associates and joint ventures used for equity accounting purposes are prepared using uniform accounting policies as those of the Group for like transactions and events in similar circumstances. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. Changes in net assets of the associate/joint venture other than profit and loss and other comprehensive income are not accounted for unless such changes resulted in changes in ownership interest held by the Group. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long- term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. 162 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Investments in associates and joint ventures (Continued) The Group assesses whether there is an objective evidence that the interest in an associate or a joint venture may be impaired. When any objective evidence exists, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases. When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in the investee with a resulting gain or loss being recognised in profit or loss. Changes in the Group’s interests in associates and joint ventures The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. 163 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Investments in associates and joint ventures (Continued) Changes in the Group’s interests in associates and joint ventures (Continued) Acquisition of additional interests in associates or joint ventures When the Group increases its ownership interest in an associate or a joint venture but the Group continues to use the equity method, goodwill is recognised at acquisition date if there is excess of the consideration paid over the share of carrying amount of net assets attributable to the additional interests in associates or joint ventures acquired. Any excess of share of carrying amount of net assets attributable to the additional interests in associates or joint ventures acquired over the consideration paid are recognised in the profit or loss in the period in which the additional interest are acquired. Revenue from contracts with customers Information about the Group’s accounting policies relating to contracts with customers is provided in Note 7. Property, plant and equipment Property, plant and equipment are tangible assets that are held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress as described below), are stated in the consolidated statement of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. 164 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Property, plant and equipment (Continued) Depreciation is recognised so as to write off the cost of assets (other than properties under construction) less their residual values over their estimated useful lives, using the straight- line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The estimated useful life and annual depreciation rate (except for construction in progress), after taking into account the residual value, adopted by the Group are set out below: Leasehold land and buildings Hotel Ancillary facilities Communication and signaling equipment Motor vehicles Machinery and equipment Estimated Annual useful life depreciation rate 20 – 50 years 1.9% – 4.9% 30 years 10 – 30 years 5 years 5 – 8 years 5 – 8 years 3.2% 3.2% – 9% 19.4% 12.1% – 19.4% 12.1% – 19.4% An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 165 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Intangible assets Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less any subsequent accumulated impairment losses. Intangible assets acquired in a business combination Intangible assets acquired in a business combination are recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are reported at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from derecognition of an intangible assets are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the period when the asset is derecognised. 166 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Expressway operating rights under service concession arrangements When the Group has a right to charge for usage of concession infrastructure, it recognises concession intangible assets based on fair value of the consideration paid upon initial recognition. Subsequent costs incurred on expressway widening projects and upgrading services are recognised as additional costs of the expressway operating rights. The concession intangible assets representing expressway operating rights are carried at cost less accumulated amortisation and any accumulated impairment losses, if any. The concession intangible assets are amortised to write-off their cost over their expected useful lives in the remaining concession period on a straight-line basis. Costs in relation to the day-to-day servicing, repairs and maintenance of the expressway infrastructures are recognised as expenses in the periods in which they are incurred. Impairment on property, plant and equipment, right-of-use assets and intangible assets other than goodwill (see the accounting policy in respect of goodwill above) At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment, right-of-use assets, and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that they may be impaired. The recoverable amount of property, plant and equipment, right-of-use assets, and intangible assets are estimated individually, when it is not possible to estimate the recoverable amount of an individual asset individually, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. 167 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Impairment on property, plant and equipment, right-of-use assets and intangible assets other than goodwill (see the accounting policy in respect of goodwill above) (Continued) In testing a cash-generating unit for impairment, corporate assets are allocated to the relevant cash-generating unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating unit or group of cash-generating units. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a cash-generating unit, the Group compares the carrying amount of a group of cash-generating units, including the carrying amounts of the corporate assets or portion of corporate assets allocated to that group of cash-generating units, with the recoverable amount of the group of cash- generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit or the group of cash- generating units. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit or the group of cash-generating units. An impairment loss is recognised immediately in profit or loss. 168 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Impairment on property, plant and equipment, right-of-use assets and intangible assets other than goodwill (see the accounting policy in respect of goodwill above) (Continued) Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit or a group of cash-generating units) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit or a group of cash-generating units) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Cash and cash equivalents Cash and cash equivalents presented on the consolidated statement of financial position include: (a) cash, which comprises of cash on hand and demand deposits, excluding bank balances that are subject to regulatory restrictions that result in such balances no longer meeting the definition of cash; and (b) cash equivalents, which comprises of short-term (generally with original maturity of three months or less), highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. 169 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Inventories Inventories include consumables and parts for toll road operation, maintenance and hotel service and those commodities held for sale arising from the securities business. Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Costs necessary to make the sale include incremental costs directly attributable to the sale and non-incremental costs which the Group must incur to make the sale. Lease Definition of a lease A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For contracts entered into or modified on or after the date of initial application of HKFRS 16 or arising from business combinations, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed. 170 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Lease (Continued) The Group as lessee Right-of-use assets The cost of right-of-use asset includes: • • • • the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date, less any lease incentives received; any initial direct costs incurred by the Group; and an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position. 171 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Lease (Continued) The Group as lessee (Continued) Refundable rental deposits Refundable rental deposits paid are accounted under HKFRS 9 Financial Instruments and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments and included in the cost of right-of-use assets. Lease liabilities At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The lease payments include: fixed payments (including in-substance fixed payments) less any lease incentives receivable; variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable by the Group under residual value guarantees; the exercise price of a purchase option if the Group is reasonably certain to exercise the option; and payments of penalties for terminating a lease, if the lease term reflects the Group exercising an option to terminate the lease. • • • • • 172 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Lease (Continued) The Group as lessee (Continued) Lease liabilities (Continued) Variable lease payments that reflect changes in market rental rates are initially measured using the market rental rates as at the commencement date. Variable lease payments that do not depend on an index or a rate are not included in the measurement of lease liabilities and right-of-use assets, and are recognised as expense in the period on which the event or condition that triggers the payment occurs. After the commencement date, lease liabilities are adjusted by interest accretion and lease payments. The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever: • • the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of reassessment. the lease payments change due to changes in market rental rates following a market rent review, in which cases the related lease liability is remeasured by discounting the revised lease payments using the initial discount rate. The Group presents lease liabilities as a separate line item on the consolidated statement of financial position. 173 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Lease (Continued) The Group as lessee (Continued) Lease modifications The Group accounts for a lease modification as a separate lease if: • • the modification increases the scope of the lease by adding the right to use one or more underlying assets; and the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract. For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the modified contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. 174 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Lease (Continued) The Group as a lessor Classification and measurement of leases Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. Leases for which the Group is a lessor are all classified as operating leases for the reporting periods. Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and such costs are recognised as an expense on a straight-line basis over the lease term. Variable lease payments for operating leases that depend on an index or a rate are estimated and included in the total lease payments to be recognised on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate are recognised as income when they arise. Rental income which is derived from the Group’s ordinary course of business is presented as other income. Allocation of consideration to components of a contract When a contract includes both leases and non-lease components, the Group applies HKFRS 15 Revenue from Contracts with Customers (“HKFRS 15”) to allocate consideration in a contract to lease and non-lease components. Non-lease components are separated from lease component on the basis of their relative stand-alone selling prices. 175 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Lease (Continued) The Group as a lessor (Continued) Refundable rental deposits Refundable rental deposits received are accounted for under HKFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments from lessees. Lease modification Changes in considerations of lease contracts that were not part of the original terms and conditions are accounted for as lease modifications, including lease incentives provided through forgiveness or reduction of rentals. The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease. Foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. 176 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Foreign currencies (Continued) For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s operations are translated into the presentation currency of the Group (i.e. Rmb) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of share of differences arising on translation (attributed to non-controlling interests as appropriate). Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Any specific borrowing that remain outstanding after the related asset is ready for its intended use or sale is included in the general borrowing pool for calculation of capitalisation rate on general borrowings. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 177 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Such grants are presented under other income and gains and losses. Employee benefits Retirement benefit costs Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered services entitling them to the contributions. Termination benefits A liability for a termination benefit is recognised at the earlier of when the Group entity can no longer withdraw the offer of the termination benefit and when it recognises any related restructuring costs. 178 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Employee benefits (Continued) Short-term employee benefits Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset. A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and sick leave) after deducting any amount already paid. Taxation Income tax expense represents the sum of current and deferred income tax expense. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises or from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit and at the time of the transaction does not give rise to equal taxable and deductible temporary differences. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. 179 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Taxation (Continued) Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities. 180 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Taxation (Continued) For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 requirements to the lease liabilities and the related assets separately. The Group recognises a deferred tax asset related to lease liabilities to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised and a deferred tax liability for all taxable temporary differences. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied to the same taxation authority. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. Financial instruments Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. 181 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with HKFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss (“FVTPL”)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest income which are derived from the Group’s ordinary course of business are presented as revenue. 182 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets Classification and subsequent measurement of financial assets Financial assets that meet the following conditions are subsequently measured at amortised cost: • • the financial asset is held within a business model whose objective is to collect contractual cash flows; and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (“FVTOCI”): • • the financial asset is held within a business model whose objective is achieved by both selling financial assets and collecting contractual cash flows; and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are subsequently measured at FVTPL, except that at the date of initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if that equity investment is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 Business Combinations applies. 183 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Classification and subsequent measurement of financial assets (Continued) A financial asset is held for trading if: • • it has been acquired principally for the purpose of selling in the near term; or on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit- taking; or • it is a derivative that is not designated and effective as a hedging instrument. In addition, the Group may irrevocably designate a financial asset that are required to be measured at the amortised cost as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. (i) Amortised cost and interest income Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost and debt instruments/receivables subsequently measured at FVTOCI. For financial instruments other than purchased or originated credit- impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the credit impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit- impaired. 184 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Classification and subsequent measurement of financial assets (Continued) (ii) Debt instruments/receivables classified as at FVTOCI Subsequent changes in the carrying amounts for debt instruments/receivables classified as at FVTOCI as a result of interest income calculated using the effective interest method, and foreign exchange gains and losses are recognised in profit or loss. All other changes in the carrying amount of these debt instruments/receivables are recognised in other comprehensive income and accumulated under the heading of FVTOCI reserve. Impairment allowances are recognised in profit or loss with corresponding adjustment to other comprehensive income without reducing the carrying amounts of these debt instruments/receivables. When these debt instruments/receivables are derecognised, the cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss. (iii) Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial asset and is included in the “securities investment gains” line item. 185 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 The Group performs impairment assessment under expected credit loss (“ECL”) model on financial assets (including trade receivables, loans to customers arising from margin financing business, bank balances, clearing settlement fund, deposits and cash, pledged bank deposit, bank balances and clearing settlement fund held on behalf of customers, financial assets held under agreements and other receivables), which are subject to impairment under HKFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessments are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions. The Group always recognises lifetime ECL for trade receivables and other receivables. The ECL on these assets are assessed collectively using a provision matrix with appropriate groupings. For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, in which case the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition. 186 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (i) Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. In particular, the following information is taken into account when assessing whether credit risk has increased significantly: • • • • • an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating; significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor; existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations; an actual or expected significant deterioration in the operating results of the debtor; an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations. 187 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (i) Significant increase in credit risk (Continued) Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Despite the foregoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an internal or external credit rating of ‘investment grade’ as per globally understood definitions. The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due. 188 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (ii) Definition of default For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group). Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. (iii) Credit-impaired financial assets A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit impaired includes observable data about the following events: (a) significant financial difficulty of the issuer or the borrower; (b) a breach of contract, such as a default or past due event; (c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; 189 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (iii) Credit-impaired financial assets (Continued) (d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or (e) the disappearance of an active market for that financial asset because of financial difficulties; or (f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. (iv) Write-off policy The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss. 190 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (v) Measurement and recognition of ECL The measurement of ECL is a function of the probability of default (“PD”), loss given default (“LGD”) (i.e. the magnitude of the loss if there is a default) and the exposure at default (“EAD”). The assessment of the PD and LGD is based on historical data and forward- looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights. The Group uses a practical expedient in estimating ECL on trade receivables using a provision matrix taking into consideration historical credit loss experience and forward looking information that is available without undue cost or effort. Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition. For a financial guarantee contract, the Group is required to make payments only in the event of a default by the debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the ECL is the present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the Group expects to receive from the holder, the debtor or any other party. For ECL on financial guarantee contracts for which the effective interest rate cannot be determined, the Group will apply a discount rate that reflects the current market assessment of the time value of money and the risks that are specific to the cash flows but only if, and to the extent that, the risks are taken into account by adjusting the discount rate instead of adjusting the cash shortfalls being discounted. 191 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (v) Measurement and recognition of ECL (Continued) Lifetime ECL for trade receivables and other receivables are considered on a collective basis taking into consideration past due information and relevant credit information such as forward looking macroeconomic information. For collective assessment, the Group takes into consideration the following characteristics when formulating the grouping: • • • Past-due status; Nature, size and industry of debtors; and External credit ratings where available. The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics. Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset. 192 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Impairment of financial assets subject to impairment assessment under HKFRS 9 (Continued) (v) Measurement and recognition of ECL (Continued) Except for investments in debt instruments/receivables that are measured at FVTOCI and financial guarantee contracts, the Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amounts, with the exception of trade receivables, loans to customers arising from margin financing business, other receivables, financial assets held under resale agreements, pledged bank deposit, bank balances and clearing settlement fund held on behalf of customers, and bank balances, clearing settlement fund, deposits and cash where the corresponding adjustment is recognised through a loss allowance account. For investments in debt instruments that are measured at FVTOCI, the loss allowance is recognised in other comprehensive income and accumulated in the FVTOCI reserve without reducing the carrying amount of these debt instruments/receivables. Such amount represents the changes in the FVTOCI reserve in relation to accumulated loss allowance. Derecognition/modification of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. 193 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Derecognition/modification of financial assets (Continued) On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. On derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss previously accumulated in the FVTOCI reserve is reclassified to profit or loss. A modification of a financial asset occurs if the contractual cash flows are renegotiated or otherwise modified. When the contractual terms of a financial asset are modified, the Group assesses whether the revised terms result in a substantial modification from original terms taking into account all relevant facts and circumstances including qualitative factors. If qualitative assessment is not conclusive, the Group considers the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received, and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial asset, after reducing gross carrying amount that has been written off. For non-substantial modifications of financial assets that do not result in derecognition, the carrying amount of the relevant financial assets will be calculated at the present value of the modified contractual cash flows discounted at the financial assets’ original effective interest rate. Transaction costs or fees incurred are adjusted to the carrying amount of the modified financial assets and are amortised over the remaining term. Any adjustment to the carrying amount of the financial asset is recognised in profit or loss at the date of modification. 194 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial assets (Continued) Financial assets held under resale agreements Financial assets held under resale agreements where the Group acquires financial assets which will be resold at a predetermined price at a future date under resale agreements, the cash advanced by the Group is recognised as secured loans and receivables and presented as amounts held under resale agreements in the consolidated statement of financial position. The difference between the purchase and resale consideration is amortised over the period of the respective agreements using the effective interest method and is included in interest income. Financial assets sold subject to agreements with a commitment to repurchase at a specific future date and price are not derecognised in the consolidated statement of financial position. The proceeds from selling such assets are presented under “financial assets sold under repurchase agreements” in the consolidated statement of financial position. The difference between the selling price and repurchasing price is recognised as interest expense during the term of the agreement using the effective interest method. Securities lending arrangement The Group lends investment securities to clients and requires cash and/or equity securities from customers held as collaterals under such securities lending agreements. The cash collaterals arisen from these are included in “accounts payable to customers arising from securities business”. For those securities held by the Group and lent to client that do not result in the derecognition of financial assets, they are included in financial assets at FVTPL. 195 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Financial liabilities All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it is designated as at FVTPL. 196 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Financial liabilities at FVTPL (Continued) A financial liability is held for trading if: • • • it has been acquired principally for the purpose of repurchasing it in the near term; or on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit- taking; or it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: • • • such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and HKFRS 9 permits the entire combined contract to be designated as at FVTPL. 197 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Financial liabilities at FVTPL (Continued) For financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. For financial liabilities that contain embedded derivatives, such as convertible bond, the changes in fair value of the embedded derivatives are excluded in determining the amount to be presented in other comprehensive income. Changes in fair value attributable to a financial liability’s credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to retained profits upon derecognition of the financial liability. Financial liabilities at amortised cost Financial liabilities including accounts payable to customers arising from securities business, trade payables, other payables, dividends payable, bank and other borrowings, placements from other financial institutions, short-term financing note payable, financial assets sold under repurchase agreements, bonds payable and convertible bond are subsequently measured at amortised cost, using the effective interest method. 198 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantee contract liabilities are measured initially at their fair values. It is subsequently measured at the higher of: • • the amount of the loss allowance determined in accordance with HKFRS 9; and the amount initially recognised less, where appropriate, cumulative amortisation recognised over the guarantee period. Convertible bond contains debt and derivative components A conversion option that will be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity instruments is a conversion option derivative. At the date of issue, both the debt component and derivative components are recognised at fair value. In subsequent periods, the debt component of the Convertible Bond 2021 carried at amortised cost using the effective interest method. The derivative component is measured at fair value with changes in fair value recognised in profit and loss. Transaction costs that relate to the issue of the convertible bond are allocated to the debt and derivative components in proportion to their relative fair values. Transactions costs relating to the derivative component are charged to profit or loss immediately. Transaction costs relating to the debt component are included in the carrying amount of the debt portion and amortised over the period of the convertible bond using the effective interest method. 199 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Convertible bond contains equity component The component parts of the convertible bond are classified separately as financial liability and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity instrument. At the date of issue, the fair value of the liability component (including any embedded non- equity derivatives features) is estimated by measuring the fair value of similar liability that does not have an associated equity component. A conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to share premium. In case of convertible bond issued by a subsidiary, the equity component of the subsidiary is classified as and grouped under non-controlling interests by the Group on consolidation. Where the conversion option remains unexercised at the maturity date of the convertible bond, the balance recognised in equity will be transferred to reserve. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option. Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible bonds using the effective interest method. 200 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Foreign exchange gains and losses For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments. These foreign exchange gains and losses are recognised in the ‘Other income gains and losses’ line item in profit or loss (Note 10) as part of “Exchange losses, net” for financial liabilities that are not part of a designated hedging relationship. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss for financial liabilities that are not part of a designated hedging relationship. Derecognition/modification of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 201 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Derecognition/modification of financial liabilities (Continued) When the contractual terms of a financial liability are modified, the Group assess whether the revised terms result in a substantial modification from original terms taking into account all relevant facts and circumstances including qualitative factors. If qualitative assessment is not conclusive, the Group considers that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. The above said fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. Accordingly, such exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. The exchange or modification is considered as non-substantial modification when such difference is less than 10 per cent. For non-substantial modifications of financial liabilities that do not result in derecognition, the carrying amount of the relevant financial liabilities will be calculated at the present value of the modified contractual cash flows discounted at the financial liabilities’ original effective interest rate. Transaction costs or fees incurred are adjusted to the carrying amount of the modified financial liabilities and are amortised over the remaining term. Any adjustment to the carrying amount of the financial liability is recognised in profit or loss at the date of modification. 202 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20235. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Derivative financial instruments Derivatives are initially recognised at fair value at the date derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately, unless the derivative is designated and effective as a hedging instruments, in which event the timing of recognition in profit or loss depends on the nature of the hedge relationship. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. Embedded derivatives Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of HKFRS 9 are not separated. The entire hybrid contract is classified and subsequently measured in its entirety as either amortised cost or fair value as appropriate. Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of HKFRS 9 are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL. Generally, multiple embedded derivatives in a single instrument that are separated from the host contracts are treated as a single compound embedded derivative unless those derivatives relate to different risk exposures and are readily separable and independent of each other. 203 5. MATERIAL ACCOUNTING POLICY INFORMATION (Continued) Financial instruments (Continued) Offsetting a financial asset and a financial liability A financial asset and a financial liability are offset and the net amount presented in the consolidate statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the recognized amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 204 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20236. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY Critical judgements in applying accounting policies The followings are the critical judgements, apart from those involving estimations (see below), that the Directors has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements. Determination of consolidation scope of structured entities All facts and circumstances must be taken into consideration in the assessment of whether the Group, as a fund manager and/or an investor, controls a structured entity. The principle of control sets out the following three elements of control: (a) power over these entities; (b) exposure, or rights, to variable returns from involvement with these entities; and (c) the ability to use power over these entities to affect the amount of the investor’s returns. The Group reassesses whether or not it controls a structured entity if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. For collective asset management schemes and investment funds where the Group involves as a manager and/or an investor, the Group considers the scope of its decision-making authority and assesses whether the combination of investments it holds, if any, together with its remuneration and credit enhancements creates exposure to variability of returns from the activities of the collective asset management schemes and investment funds that is of such significance that it indicates that the Group is a principal. The collective asset management schemes and investment funds are consolidated if the Group acts in the role of principal. 205 6. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Critical judgements in applying accounting policies (Continued) Determination of consolidation scope of structured entities (Continued) For asset-backed special program (“ABS Program”) where the Group involves as an investor while providing operational service in relation to the underlying assets. In the evaluation of whether the Group has power over the ABS Program, the following factors are taken into consideration: (a) the relevant activities of the ABS Program and decision- making process to direct them; (b) the scope of the Group’s decision-making authority, in terms of the Group’s share percentage within subordinated class of the ABS Program, responsibilities for the daily operation of the underlying assets pursuant to an operation service agreement, and other rights and responsibilities in relation to the ABS Program; (c) substantive rights exercisable by other parties in the ABS Program. Besides, in the evaluation of variable returns from involvement with the ABS Program, the Group mainly considers its level of rewards and risks exposed, including the investment return of the subordinated class, service rewards and commitment from the operational service provided in relation to the underlying assets and other commitments. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year. 206 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20236. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Key sources of estimation uncertainty (Continued) Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units (or group of cash-generating units) to which goodwill has been allocated, which is the higher of the value in use or fair value less cost of disposal. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit (or a group of cash-generating units) and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, or change in facts and circumstances which results in downward revision of future cash flows or upward revision of discount rate, an impairment loss may arise. As at December 31, 2023, the carrying amount of goodwill is Rmb86,867,000 (without accumulated impairment loss) (2022: Rmb86,867,000 (without accumulated impairment loss)). Details of the impairment testing are disclosed in Note 24. Measurement of ECL for loans to customers arising from margin financing business and financial assets held under resale agreements The Group estimates the amount of loss allowance for ECL on its loans to customers arising from margin financing business and financial assets held under resale agreements. Asset’s carrying amount and the present value of estimated future cash flows with the consideration of expected future credit loss are taken into account for determining the loss allowance amount. The assessment of the credit risk of loans to customers arising from margin financing business and financial assets held under resale agreements involves high degree of estimation and uncertainty. When the actual future cash flows are less than expected or more than expected, a material impairment loss or a material reversal of impairment loss may arise, accordingly. 207 6. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Key sources of estimation uncertainty (Continued) Measurement of ECL for loans to customers arising from margin financing business and financial assets held under resale agreements (Continued) The following significant judgements and estimations are required in applying the accounting requirements for measuring the ECL: Significant increase of credit risk ECL are measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL assets for stage 2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. In assessing whether the credit risk of an asset has significantly increased, the Group takes into account qualitative and quantitative reasonable and supportable forward-looking information. Refer to Note 53 for more details. Establishing groups of assets with similar credit risk characteristics When ECLs are measured on a collective basis, the financial instruments are grouped on the basis of shared risk characteristics. Refer to Note 53 for details of the characteristics considered in this judgement. The Group monitors the appropriateness of the credit risk characteristics on an ongoing basis to assess whether they continue to be similar. This is required in order to ensure that should credit risk characteristics change there is appropriate re-segmentation of the assets. This may result in new portfolios being created or assets moving to an existing portfolio that better reflects the similar credit risk characteristics of that group of assets. Assets move from 12-month to lifetime ECLs when there is a significant increase in credit risk, but it can also occur within portfolios that continue to be measured on the same basis of 12-month or lifetime ECLs but the amount of ECL changes because the credit risk of the portfolios differ. 208 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20236. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Key sources of estimation uncertainty (Continued) Measurement of ECL for loans to customers arising from margin financing business and financial assets held under resale agreements (Continued) Models and assumptions used The Group uses various models and assumptions in measuring fair value of financial assets as well as in estimating ECL. Judgement is applied in identifying the most appropriate model for each type of assets, as well as for determining the assumptions used in these models, including assumptions that relate to key drivers of credit risk. Refer to Note 53(b) for more details on ECL and Note 53(c) for more details on ECL measurement. Forward-looking information When measuring ECL the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Refer to Note 53(b) for more details. PD PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions. LGD LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements. 209 6. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Key sources of estimation uncertainty (Continued) Fair value measurements and valuation processes Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. The board of directors of the Group has set up a valuation team, which is headed up by the Chief Financial Officer of the Group, to determine the appropriate valuation techniques and inputs for fair value measurements. The Group uses various valuation techniques to determine the fair value of financial instruments which are not quoted in an active market. Valuation techniques include the use of discounted cash flows analysis, models or other valuation methods as appropriate. To the extent practical, models use only observable data; however areas such as credit risk of the Group and the counterparty, volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the estimated fair value of financial instruments. 210 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20237. REVENUE (i) Disaggregation of revenue from contracts with customers Year ended 12/31/2023 Year ended 12/31/2022 Toll Securities Toll Securities Segments operation operation Others operation operation Others Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Types of goods or services Toll operation 10,423,833 – Securities operation Asset management services Securities and futures commission Investment banking services Others Hotel operating and catering services Revenue from PPP project – – – – – – – – – – – – 403,689 2,634,295 881,905 3,919,889 (Restated) 9,093,380 – 420,826 2,490,292 778,829 3,689,947 – – – – – – – – – – 124,072 44,830 168,902 – – – 88,143 69,871 158,014 – – – – – Total 10,423,833 3,919,889 168,902 9,093,380 3,689,947 158,014 Timing of revenue recognition A point in time Over time Total 10,423,833 3,919,889 124,072 9,093,380 3,689,947 – – 44,830 – – 88,143 69,871 10,423,833 3,919,889 168,902 9,093,380 3,689,947 158,014 211 7. REVENUE (Continued) (i) Disaggregation of revenue from contracts with customers (Continued) Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information. Toll operation Securities operation Others Revenue from contracts with customers Interest under effective interest method Total revenue Year ended 12/31/2023 Rmb’000 10,423,833 3,919,889 168,902 14,512,624 2,452,400 16,965,024 Year ended 12/31/2022 Rmb’000 (Restated) 9,093,380 3,689,947 158,014 12,941,341 2,390,436 15,331,777 (ii) Performance obligations for contracts with customers and revenue recognition policies Toll operation Revenue arising from toll operation is recognised at a point in time when the vehicles exit the toll expressway, of which the Group operates part or all of it. The revenue from toll operation is based on the toll rates determined by government authorities. It is settled by government agencies on a monthly basis. Hotel operation and catering services In respect of hotel operation and catering services, the Group recognises the revenue at a point in time when the services are provided. 212 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 7. REVENUE (Continued) (ii) Performance obligations for contracts with customers and revenue recognition policies (Continued) Asset management services The Group provides asset management services in respect of wealth management products, and is entitled to management fees of these products for its services rendered to customers. Performance obligation is satisfied over the term of respective wealth management products. Management fees of wealth management products are recognised to the extent that it is highly probable that such recognition will not result in a significant revenue reversal in the future when the uncertainty associated with the quantum of management fees is subsequently resolved. Therefore, in practice the variable management fees can only be recognised upon dividend distribution, withdrawal of investors or liquidation of products. Most contracts with customers have original expected duration of less than one year and therefore information about their remaining performance obligations is not disclosed. Securities brokerage services Commission and fee income arising from securities brokerage services is recognised at a point in time when the service is provided and performance obligation is satisfied when the brokerage of customers’ securities, futures or options contracts dealing is completed. Fees are usually received shortly after the service is provided. 213 7. REVENUE (Continued) (ii) Performance obligations for contracts with customers and revenue recognition policies (Continued) Investment banking services The Group provides financial advisory services to its customers. The Group recognises the revenue at a point in time when the services are provided. They are usually collected within one month when they become due. The Group provides sponsoring and underwriting services to its customers for issue of equity or debt instruments to investors. Performance obligation is satisfied when the issue of these equity or debt instruments are completed. Sponsoring and underwriting fees became due when certain milestones are met during the issue process and at completion of the issues. They are usually collected within one month when they become due. (iii) Transaction price allocated to the remaining performance obligation for contracts with customers There is no material unsatisfied or partially unsatisfied remaining performance obligations as at December 31, 2023. 214 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 20238. OPERATING SEGMENTS Information reported to the General Manager of the Company, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided. Specifically, the Group’s reportable and operating segments under HKFRS 8 are as follows: (i) Toll operation – the operation and management of high grade roads and the collection of the expressway tolls. (ii) Securities operation – the securities and future broking, margin financing and securities lending, securities underwriting and sponsorship, asset management, advisory services and proprietary trading. (iii) Others – hotel operation, high grade road construction, investment in other financial institutions and other ancillary services. Segment revenue and results The following is an analysis of the Group’s revenue and results by reportable and operating segment. For the year ended December 31, 2023 Toll operation Rmb’000 Securities operation Rmb’000 Others Rmb’000 Total Rmb’000 Revenue – external customers 10,423,833 6,372,289 168,902 16,965,024 Segment profit 3,890,536 1,915,533 816,261 6,622,330 215 8. OPERATING SEGMENTS (Continued) Segment revenue and results (Continued) For the year ended December 31, 2022 (restated) Toll operation Rmb’000 Securities operation Rmb’000 Others Rmb’000 Total Rmb’000 Revenue – external customers 9,093,380 6,080,383 158,014 15,331,777 Segment profit 3,841,689 1,709,964 751,357 6,303,010 The accounting policies of the operating segments are the same as the Group’s accounting policies described in Note 5. Segment profit represents the profit after tax of each operating segment. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and performance assessment. Segment assets and liabilities The following is an analysis of the Group’s assets and liabilities by reportable and operating segment: Segment assets Segment liabilities 12/31/2023 12/31/2022 01/01/2022 12/31/2023 12/31/2022 01/01/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Restated) (Restated) (Restated) (Restated) 51,395,419 43,815,803 46,150,339 (29,473,199) (31,160,980) (35,080,942) 146,103,622 137,584,981 125,941,428 (117,199,395) (109,660,591) (101,422,949) 10,147,894 9,373,763 8,897,569 (656,095) (739,629) (858,535) Toll operation Securities operation Others Total segment assets (liabilities) 207,646,935 190,774,547 180,989,336 (147,328,689) (141,561,200) (137,362,426) Goodwill 86,867 86,867 86,867 – – – Consolidated assets (liabilities) 207,733,802 190,861,414 181,076,203 (147,328,689) (141,561,200) (137,362,426) Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in the respective reportable and operating segment. 216 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 8. OPERATING SEGMENTS (Continued) Other segment information Amounts included in the measure of segment profit/loss or segment assets: For the year ended December 31, 2023 Income tax expense Interest income from financial institutions Toll operation Rmb’000 853,149 359,558 Securities operation Rmb’000 376,059 – Interest expenses 1,141,766 940,158 Others Rmb’000 – 1,128 22,205 Total Rmb’000 1,229,208 360,686 2,104,129 Impairment losses on loan to customers arising from margin financing business, recognised in profit Impairment losses on trade receivables, net of reversal Interests in associates Interests in joint ventures Share of profit of associates Share of profit of joint ventures Net gains arising from financial assets – 60 2,926,969 1,497,891 145,725 107,046 at FVTPL – 1,438,760 Gain on changes in fair value in respect of the derivative component of convertible bond Additions to non-current assets (Note) Depreciation and amortisation 280,620 3,014,776 3,408,625 – 368,876 276,039 2,345 (556) – 168 2,345 (328) 703,957 7,860,129 11,491,055 – 77,998 – – 832,524 – – – 121,169 20,379 1,497,891 1,056,247 107,046 1,438,760 280,620 3,504,821 3,705,043 217 8. OPERATING SEGMENTS (Continued) Other segment information (Continued) For the year ended December 31, 2022 (restated) Income tax expense Interest income from financial institutions Toll operation Rmb’000 638,475 143,565 Securities operation Rmb’000 395,486 – Interest expenses 1,037,282 828,543 Impairment losses on loan to customers arising from margin financing business, recognised in profit Impairment losses on trade receivables, net of reversal Interests in associates Interests in joint ventures Share of profit of associates Share of profit of joint ventures Net gains arising from financial assets – 26 2,267,377 440,345 46,135 49,771 (1,521) 1,352 668,480 – – (30,138) 736,089 at FVTPL – 744,503 Gain on changes in fair value in respect of the derivative component of convertible bond Additions to non-current assets (Note) Depreciation and amortisation Gain on disposal of a subsidiary 31,951 1,476,663 3,425,950 1,881,262 – 285,226 295,510 – Note: Non-current assets excluded financial instruments and deferred tax assets. 218 Others Rmb’000 5,090 706 28,569 Total Rmb’000 1,039,051 144,271 1,894,394 – 101 (1,521) 1,479 7,123,784 10,059,641 – – – – 30,771 36,292 – 440,345 752,086 49,771 744,503 31,951 1,792,660 3,757,752 1,881,262 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 8. OPERATING SEGMENTS (Continued) Revenue from major services An analysis of the Group’s revenue, net of discounts and taxes, for the year is as follows: Toll operation revenue Commission and fee income from securities operation Interest income from securities operation Hotel and catering revenue Revenue from PPP project Geographical information Year ended 12/31/2023 Rmb’000 10,423,833 3,919,889 2,452,400 124,072 44,830 Year ended 12/31/2022 Rmb’000 (Restated) 9,093,380 3,689,947 2,390,436 88,143 69,871 16,965,024 15,331,777 The Group’s operations are located in the PRC. The Group’s non-current assets are mainly located in the PRC (country of domicile). All of the Group’s revenue from external customers is attributed to the Group entities’ country of domicile (i.e. the PRC). Information about major customers During the years ended December 31, 2023 and 2022, there was no individual customer with sales over 10% of the total revenue of the Group. 219 9. SECURITIES INVESTMENT GAINS Net gains arising from financial assets at FVTPL Net losses arising from debt instruments at FVTOCI Net losses arising from derivative financial instruments Net gains/(losses) arising from financial liabilities at FVTPL Year ended 12/31/2023 Rmb’000 1,438,760 (56) (414,979) 1,235 1,024,960 10. OTHER INCOME AND GAINS AND LOSSES Interest income from financial institutions Rental income (Note i) Gain on changes in fair value in respect of the derivative component of convertible bond Exchange losses, net Gains/(losses) on commodity trading, net (Note ii) Management fee income Government subsidy Gain arising from deemed disposal of associates Gain on disposal of assets Gain on disposal of a subsidiary Others Notes: Year ended 12/31/2023 Rmb’000 360,686 73,264 280,620 (143,902) 131,359 23,195 57,476 – 1,579 – 123,593 907,870 Year ended 12/31/2022 Rmb’000 744,503 – (4,770) (59,999) 679,734 Year ended 12/31/2022 Rmb’000 (Restated) 144,271 73,431 31,951 (229,412) (37,237) 13,777 74,537 22,062 7,333 1,881,262 120,776 2,102,751 (i) Rental income included contingent rent of Rmb1,230,000 (2022: Rmb1,175,000) recognised during the year. The income on commodity trading amounted to Rmb11,899,707,000 (2022: Rmb11,616,371,000) with the cost of Rmb11,768,348,000 (2022: Rmb11,653,608,000). The net gains or losses on commodity trading is presented as other income and gains and losses. And the balance of inventories on commodity trading amounted to Rmb 1,303,882,000 (2022: Rmb603,909,000) as of December 31, 2023. (ii) 220 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 11. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET OF REVERSAL Impairment losses recognised/(reversed) on: Trade receivables – goods and services Other receivables Loans to customers arising from margin financing business Financial assets held under resale agreements Debt instruments at FVTOCI 12. FINANCE COSTS Bank and other borrowings Short-term financing note payable Bonds payable Convertible Bonds Lease liabilities Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 (Restated) (328) 21,503 2,345 6,237 867 30,624 1,479 19,953 (1,521) (9,234) 1,108 11,785 Year ended 12/31/2023 Rmb’000 786,015 95,425 787,671 412,301 22,717 Year ended 12/31/2022 Rmb’000 (Restated) 876,132 103,977 767,335 123,880 23,070 2,104,129 1,894,394 221 13. PROFIT BEFORE TAX The Group’s profit before tax has been arrived at after charging: Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 (Restated) 814,910 148,932 604,165 133,805 2,650,098 2,943,759 91,103 3,705,043 2,854,601 291,685 3,146,286 11,270 5,274 13,711 76,023 3,757,752 2,801,907 267,318 3,069,225 10,732 1,906 6,898 Year ended 12/31/2023 Rmb’000 1,492,507 (263,299) 1,229,208 Year ended 12/31/2022 Rmb’000 (Restated) 1,081,139 (42,088) 1,039,051 Depreciation of property, plant and equipment (included in operating costs and administrative expenses) Depreciation of right-of-use assets Amortisation of expressway operating rights (included in operating costs) Amortisation of other intangible assets (included in operating costs and administrative expenses) Total depreciation and amortisation Staff costs (including directors and supervisors): – Wages, salaries and bonuses – Pension scheme contributions Auditors’ remuneration Loss on disposal of property, plant and equipment Allowance for write-down of inventories 14. INCOME TAX EXPENSE Current tax: PRC Enterprise Income Tax (“EIT”) Deferred tax (Note 47) 222 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 14. INCOME TAX EXPENSE (Continued) Under the Law of the PRC on EIT and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25%. No Hong Kong Profits Tax has been provided as the Group has no estimated assessable profit in Hong Kong for both years. The income tax expense for the year can be reconciled to the profit before tax per the consolidated statement of profit or loss and other comprehensive income as follows: Profit before tax Tax at the PRC EIT rate of 25% (2022: 25%) Tax effect of share of profit of associates Tax effect of share of profit of joint ventures Tax effect of tax losses not recognised Utilisation of unused tax loss previously not recognised Tax effect of expenses not deductible for tax purposes Tax effect of income not subjected to tax purposes Year ended 12/31/2023 Rmb’000 7,851,538 1,962,885 (264,062) (26,762) 71,925 (482,237) 186,775 (219,316) Year ended 12/31/2022 Rmb’000 (Restated) 7,342,061 1,835,515 (188,022) (12,443) 112,442 (122,620) 34,454 (620,275) Income tax expense for the year 1,229,208 1,039,051 223 15. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’ EMOLUMENTS The emoluments paid or payable to each of the 11 (2022: 10) directors and 7 (2022: 5) supervisors are as follows: Yu Yuan Chen Zhihong@ Yingjie^ Ninghui@ Wu Wei@ Li Yang Fan Huang Jin Pei Lee Chen Zheng He Lu Wu Wang Li Lu Wei@ Xudong^ Ye^ Jianzhang^ Chaoyang^ Ker-wei* Wai Tsang* Bin* Ruchun# Meiyun# Xinghai# Qingwang# Yubing# Yuan# Wenwei# Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Note i) (Note ii) (Note iii) (Note iv) (Note v) (Note vi) (Note vii) (Note viii) (Note ix) (Note x) 2023 Fees Salaries, allowances and benefits in kind Bonuses paid and payable Pension scheme contributions Directors’ fee Total emoluments 2022 Fees Salaries, allowances and benefits in kind Bonuses paid and payable Pension scheme contributions Directors’ fee Total emoluments – – – – – – – – – – – 115 – – 377 667 18 – 187 – 13 – 115 1,062 200 210 443 19 – 672 420 716 37 – 1,173 – – – – – 80 199 10 – 289 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 230 230 – – – 223 223 – – – 230 230 – – – 223 223 – – – 80 80 – – – 81 81 2 – – – 2 – – – – – 24 – – – 24 9 – – – 9 – – – – – – – – – – 7 – – – 7 6 – – – 6 – – – – – – – – – - – – – – – – – – – - – – – – – – – – – - 677 981 41 540 2,239 645 1,159 56 527 2,387 Executive directors. The emoluments shown above were for their services in connection with the management of the affairs of the Company and the Group. Non-executive directors. The emoluments shown above were for their services as directors of the Company or its subsidiaries. Independent non-executive directors. The emoluments shown above were for their services as directors of the Company. Supervisors. The emoluments shown above were for their services as supervisors of the Company. @ ^ * # 224 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 15. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’ EMOLUMENTS (Continued) Notes: (i) Resigned on August 23, 2023. (ii) Appointed as the chairman on August 23, 2023; Redesignated as non-executive director on September 7, 2023. (iii) Resigned on September 27, 2023. (iv) Appointed on September 27, 2023. (v) Appointed on October 13, 2023. (vi) Appointed on December 22, 2022. (vii) Resigned on December 22, 2022. (viii) Resigned on June 9, 2023. (ix) Appointed on June 9, 2023; Resigned on September 27, 2023. (x) Appointed on September 27, 2023. Bonuses paid to directors and supervisors are performance-rated and are determined by the Remuneration Committee of the Company, which comprises three independent non- executive directors. No directors or supervisors waived any emoluments and no incentive was paid to any directors or supervisors as an inducement to join the Company and no compensation for loss of office was paid to any directors, supervisors, past directors or past supervisors during both years. 225 15. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENTS’ EMOLUMENTS (Continued) The emoluments paid or payable to each of the other 9 (2022: 8) senior managements are as follows: Zheng Zhang Wang Li Wu Hui Xiuhua Bingjiong Wei Xiangyang Ruan Liya Ma Zhao Han Ting Dongquan Jinghua Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 (Note i) (Note ii) (Note iii) (Note iv) Year ended December 31, 2023 Salaries, allowances and benefits in kind Bonuses paid and payable Pension scheme contributions Total emoluments Year ended December 31, 2022 Salaries, allowances and benefits in kind Bonuses paid and payable Pension scheme contributions Total emoluments 320 589 38 947 357 559 37 953 320 714 38 320 673 37 1,072 1,030 357 668 37 357 614 37 240 597 28 865 357 804 37 320 694 37 320 711 37 1,051 1,068 357 614 37 357 757 37 1,062 1,008 1,198 1,008 1,151 213 661 25 899 357 325 37 719 320 564 38 922 213 – 16 229 159 – 9 168 – – – – 2,532 5,203 287 8,022 2,712 4,341 275 7,328 Notes: (i) Appointed as executive director on October 13, 2023. The emoluments disclosed above include those services rendered by Mr. Li Wei as senior management from January 1, 2022 to October 12, 2023. (ii) Resigned on August 2, 2023. (iii) Appointed on May 26, 2022. (iv) Appointed on October 7, 2023. Bonuses paid to senior managements are performance-rated and are determined by the board of directors. No senior management waived any emoluments and no incentive was paid to any senior management as an inducement to join the Company and no compensation for loss of office was paid to any senior management, past senior management during both years. Bonuses are determined by reference to the individual performance of the senior managements. 226 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 16. EMPLOYEES’ EMOLUMENTS The emoluments of the five highest paid individuals in the Group are as follows: Salaries, allowances and benefits in kind Bonuses paid and payable (Note) Pension scheme contributions Year ended 12/31/2023 Rmb’000 15,036 42,737 530 58,303 Year ended 12/31/2022 Rmb’000 17,353 42,818 508 60,679 Note: The bonuses paid and payable are determined by reference to the performance of the relevant business of the Group for the years ended December 31, 2023 and 2022. No emoluments nor incentive was waived as an inducement to join the Company and no compensation for loss of office was paid to any five highest paid individuals in the Group during both years. Bonuses are determined by reference to the individual performance of the five highest paid individuals in the Group. The five individuals with the highest emoluments in the Group during the year included 5 non-director employees. 227 16. EMPLOYEES’ EMOLUMENTS (Continued) Their emoluments are within the following bands: HK$9,500,001 to HK$10,000,000 (equivalent to Rmb8,608,901 (2022: Rmb8,486,351) to Rmb9,062,000 (2022: Rmb8,933,000)) HK$10,000,001 to HK$10,500,000 (equivalent to Rmb9,062,001 (2022: Rmb8,933,001) to Rmb9,515,100 (2022: Rmb9,379,650)) HK$12,000,001 to HK$12,500,000 (equivalent to Rmb10,874,401 (2022: Rmb:10,719,601) to Rmb11,327,500 (2022: Rmb:11,166,250) HK$12,500,001 to HK$13,000,000 (equivalent to Rmb11,327,501 (2022: Rmb11,166,251) to Rmb11,780,600 (2022: Rmb11,612,900)) HK$13,000,001 to HK$13,500,000 (equivalent to Rmb11,780,601 (2022: Rmb11,612,901) to Rmb12,233,700 (2022: Rmb12,059,550)) HK$13,500,001 to HK$14,000,000 (equivalent to Rmb12,233,701 (2022: Rmb12,059,551) to Rmb12,686,800 (2022: Rmb12,506,200)) HK$15,500,001 to HK$16,000,000 (equivalent to Rmb13,593,001 (2022: Rmb13,846,151) to Rmb14,499,200 (2022: Rmb14,292,800)) HK$17,000,001 to HK$17,500,000 (equivalent to Rmb15,405,401 (2022: Rmb15,186,101) to Rmb15,858,500 (2022: Rmb15,632,750)) HK$17,500,001 to HK$18,000,000 (equivalent to Rmb15,858,501 (2022: Rmb15,632,751) to Rmb16,311,600 (2022: Rmb16,079,400)) No. of individuals Year ended 12/31/2023 Year ended 12/31/2022 1 1 – – 1 1 – – 1 5 1 – 1 1 – – 1 1 – 5 228 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 17. DIVIDENDS Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 Dividends recognised as distribution during the year: 2022 – Rmb37.5 cents (2022: 2021 – Rmb37.5 cents) 1,628,668 1,628,668 Dividend of Rmb32.0 cents per share in respect of the year ended December 31, 2023 (2022: dividend of Rmb37.5 cents per share in respect of the year ended December 31, 2022) in the total amount of Rmb1,917,919,000 (2022: Rmb1,628,668,000) has been proposed by the Directors and is subject to approval by the shareholders in the annual general meeting. 18. EARNINGS PER SHARE The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on the following data: Earnings figures are calculated as follows: Profit for the year attributable to owners of the Company Earnings for the purpose of basic earnings per share Effect of dilutive potential ordinary shares arising from convertible bond: Interest expense Exchange loss (net of income tax) Gain on changes in fair value on derivative component Adjustment to the share of profit of subsidiaries based Year ended 12/31/2023 Rmb’000 5,223,679 5,223,679 228,084 59,700 (280,620) Year ended 12/31/2022 Rmb’000 (Restated) 5,178,666 5,178,666 68,617 27,805 (31,951) on dilution of their earnings per share (58,348) (16,076) Earnings for the purpose of diluted earnings per share 5,172,495 5,227,061 229 18. EARNINGS PER SHARE (Continued) Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share (Note) Effect of dilutive potential ordinary shares arising from convertible bond Weighted average number of ordinary shares for the purpose of diluted Year ended 12/31/2023 ’000 Year ended 12/31/2022 ’000 (Restated) 4,624,765 286,612 4,553,764 271,284 earnings per share 4,911,377 4,825,048 Note: During the year ended December 31, 2023, the Group offered rights issue to its existing Domestic share and H share shareholders, respectively. As the price of share was below the market price at the time of rights issue, there were bonus elements for rights issue and the weighted average number of ordinary shares were adjusted retrospectively. As a result, the weighted average number of ordinary shares and the basic earnings per share for the year ended December 31, 2022 were restated. 230 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 Communication Machinery Hotel Rmb’000 Ancillary and signaling facilities Rmb’000 equipment Rmb’000 Motor vehicles and Construction equipment in progress Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 19. PROPERTY, PLANT AND EQUIPMENT Leasehold land and buildings Rmb’000 2,388,307 32,979 2,421,286 398 20,785 (15,956) (385,362) COST At January 1, 2022 (originally stated) Merger accounting restatement At January 1, 2022 (restated) Additions (restated) Transfer (restated) Disposals (restated) Disposal of a subsidiary 854,136 – 2,009,156 290,222 2,758,218 692,352 854,136 2,299,378 3,450,570 – – (1,495) – 113,232 716,784 (59,307) (97,286) 126,041 198,031 (75,930) (295,452) At December 31, 2022 (restated) 2,041,151 852,641 2,972,801 3,403,260 Additions Transfer Disposals 313,755 928 – – – (705) 13,555 443,993 58,627 208,277 – (123,158) At December 31, 2023 2,355,834 851,936 3,430,349 3,579,979 DEPRECIATION AND IMPAIRMENT At January 1, 2022 (originally stated) Merger accounting restatement At January 1, 2022 (restated) Provided for the year (restated) Disposals (restated) Disposal of a subsidiary At December 31, 2022 (restated) Provided for the year Disposals At December 31, 2023 CARRYING VALUES At December 31, 2023 At December 31, 2022 (restated) At January 1, 2022 (restated) 955,796 3,444 959,240 79,006 (6,788) (164,473) 866,985 131,736 – 227,592 – 227,592 27,879 (356) – 255,115 27,856 (193) 762,519 121,595 884,114 143,113 (34,781) (7,380) 985,066 261,728 – 1,913,762 539,918 2,453,680 231,297 (69,067) (212,451) 2,403,459 260,653 (116,223) 998,721 282,778 1,246,794 2,547,889 1,357,113 1,174,166 1,462,046 569,158 597,526 626,544 2,183,555 1,987,735 1,415,264 999,117 999,801 996,890 The property, plant and equipment are mainly located in the PRC. 177,134 23,197 200,331 39,475 – (15,655) (11,547) 212,604 15,731 – (16,092) 212,243 117,063 14,504 131,567 16,361 (14,826) (4,976) 128,126 17,335 (15,897) 129,564 82,679 84,478 68,764 719,822 14,356 734,178 151,526 40,625 (40,712) (9,542) 876,075 97,930 6,452 (20,530) 959,927 450,089 13,743 463,832 106,509 (36,308) (3,333) 530,700 115,602 (19,127) 627,175 332,752 345,375 270,346 539,667 151,317 9,446,440 1,204,423 690,984 10,650,863 1,067,073 (976,225) – (58,087) 1,497,745 – (209,055) (857,276) 723,745 11,082,277 613,552 (659,650) 1,113,150 – – (160,485) 677,647 12,034,942 – – – – – – – – – – 677,647 723,745 690,984 4,426,821 693,204 5,120,025 604,165 (162,126) (392,613) 5,169,451 814,910 (151,440) 5,832,921 6,202,021 5,912,826 5,530,838 231 20. RIGHT-OF-USE ASSETS COST At January 1, 2023 Addition Decrease At December 31, 2023 DEPRECIATION At January 1, 2023 Addition Decrease At December 31, 2023 CARRYING VALUES At December 31, 2023 At January 1, 2023 Expense relating to short-term leases Total cash outflow for leases Leasehold lands Rmb’000 Leased properties Rmb’000 221,267 312,255 – 533,522 35,214 21,402 – 56,616 476,906 186,053 752,110 153,034 (77,735) 827,409 316,210 127,530 (74,262) 369,478 457,931 435,900 Total Rmb’000 973,377 465,289 (77,735) 1,360,931 351,424 148,932 (74,262) 426,094 934,837 621,953 12/31/2023 Rmb’000 6,458 159,678 12/31/2022 Rmb’000 3,593 154,671 232 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 20. RIGHT-OF-USE ASSETS (Continued) Total cash outflow for leases includes payments of principle and interest portion of lease liabilities, short-term leases and payments of lease payments on or before lease commencement date (including leasehold lands). The Group leases various offices for its operations. Lease contracts are entered into for term of 12 months to 10 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which the contract is enforceable. The amounts of the Group’s lease liabilities and interest expense of lease liabilities are disclosed in Note 46 and Note 12, respectively. For the year ended December 31, 2023, the lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. As at December 31, 2023, the Group did not enter into any lease that is not yet commenced. 233 21. EXPRESSWAY OPERATING RIGHTS COST At January 1, 2022 (originally stated) Merger accounting restatement At January 1, 2022 (restated) Disposals (restated) Disposal of a subsidiary At December 31, 2022 (restated) Disposals At December 31, 2023 AMORTISATION At January 1, 2022 (originally stated) Merger accounting restatement At January 1, 2022 (restated) Charge for the year (restated) Disposals (restated) Disposal of a subsidiary At December 31, 2022 (restated) Charge for the year Disposals At December 31, 2023 CARRYING VALUES At December 31, 2023 At December 31, 2022 (restated) At January 1, 2022 (restated) 234 Rmb’000 59,798,764 7,974,976 67,773,740 (80,685) (7,967,683) 59,725,372 (28,059) 59,697,313 33,745,508 3,774,528 37,520,036 2,943,759 (41,246) (4,371,920) 36,050,629 2,650,098 (16,324) 38,684,403 21,012,910 23,674,743 30,253,704 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 21. EXPRESSWAY OPERATING RIGHTS (Continued) The above expressway operating rights were granted by the Zhejiang Provincial Government and Anhui Provincial Government for a period ranging from 25 to 30 years. During the expressway concessionary period, the Group has the rights of operations and management of Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway, Jinhua Section of the Ningbo-Jinhua Expressway, Hanghui Expressway, Huihang Expressway, HuangQuNan Expressway and Zhoushan Bay Bridge, LongLi Expressway and LiLong Expressway, Zhajiasu Expressway and the toll-collection rights thereof. The Group is required to manage and operate the expressways in accordance with the regulations promulgated by the Ministry of Communication and relevant government authorities. Upon the end of the respective concession service periods, the toll expressways and their toll station facilities without residual value, will be returned to the grantors at nil consideration. The expressway operating rights were amortised using the straight-line basis over the useful life attributable to the Group. 22. GOODWILL COST AND CARRYING VALUES At January 1, 2022, December 31, 2022 and December 31, 2023 Particulars regarding impairment testing on goodwill are disclosed in Note 24. Rmb’000 86,867 235 23. OTHER INTANGIBLE ASSETS Securities/ Customer futures Trading bases firm licenses seats Software Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 COST At January 1, 2022 (originally stated) 163,057 63,083 3,480 431,255 660,875 Merger accounting restatement – – – 319 319 At January 1, 2022 (restated) 163,057 63,083 3,480 Additions (restated) Disposals – – – – – – At December 31, 2022 (restated) 163,057 63,083 3,480 Additions Disposals – – – – – – 431,574 119,917 661,194 119,917 (40) (40) 551,451 132,087 781,071 132,087 (5,167) (5,167) At December 31, 2023 163,057 63,083 3,480 678,371 907,991 AMORTISATION At January 1, 2022 (originally stated) Merger accounting restatement At January 1, 2022 (restated) Charge for the year (restated) Disposals At December 31, 2022 (restated) Charge for the year Disposals At December 31, 2023 CARRYING VALUES At December 31, 2023 At December 31, 2022 (restated) At January 1, 2022 (restated) 113,525 – 113,525 12,386 – 125,911 12,382 – 138,293 24,764 37,146 49,532 – – – – – – – – – – – – – – – – – – 244,000 357,525 163 163 244,163 63,637 357,688 76,023 (40) (40) 307,760 433,671 78,721 (5,167) 91,103 (5,167) 381,314 519,607 63,083 63,083 63,083 3,480 3,480 3,480 297,057 388,384 243,691 347,400 187,411 303,506 236 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 23. OTHER INTANGIBLE ASSETS (Continued) The securities/futures firm licenses of the securities operation are considered by the management of the Group to have indefinite useful lives because they can be renewed at minimal cost. The trading seats of the securities operation are considered by the management of the Group to have an indefinite useful life because there is no economic or regulatory limit to their useful life. Software are amortised on a straight-line basis over three to five years. Particulars of the impairment testing on intangible assets with indefinite useful lives are disclosed in Note 24. 237 24. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES For the purposes of impairment testing, goodwill and other intangible assets with indefinite useful lives set out in Notes 22 and 23 have been allocated to four individual cash generating units (“CGUs”), comprising two subsidiaries in toll operation segment and two subsidiaries in securities operation segment. The carrying amounts of goodwill and other intangible assets as at December 31, 2023 and 2022 allocated to these units are as follows: Goodwill firm licenses Trading seats Securities/futures 12/31/2023 12/31/2022 12/31/2023 12/31/2022 12/31/2023 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Toll operation – Jiaxing Branch of Zhejiang LongLiLiLong Expressway Co., Ltd. (“Jiaxing Branch”) (Note) 75,137 75,137 – Zhejiang Shangsan Expressway Co.,Ltd. (“Shangsan Co”) 10,335 10,335 Securities operation – Zheshang Securities – Zheshang Futures – 1,395 – 1,395 86,867 86,867 – – 51,783 11,300 63,080 – – 51,783 11,300 63,083 – – 2,080 1,400 3,480 – – 2,080 1,400 3,480 Note: Zhejiang Jiaxing Expressway Co., Ltd. was absorbed and merged by LongLiLiLong Co. in 2022, and its main assets and business continued to exist under Jiaxing branch. 238 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 24. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES (Continued) The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are summarised below: Jiaxing Branch and Shangsan Co The recoverable amounts of CGUs of Jiaxing Branch and Shangsan Co are determined based on value in use calculations. The key assumptions for the value in use calculations relate to discount rates, growth rates, and expected changes in toll revenue and direct costs during the forecast period. Those calculations use cash flow projections based on financial budgets approved by the management covering a five-year period and the discount rates the management considered appropriate. No growth rate has been assumed beyond the five-year period up to the remaining toll road operating rights which are 5 years (2022: 6 years) and 7 years (2022: 8 years) for Jiaxing Branch and Shangsan Co, respectively. Management believes that any reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of Jiaxing Branch’s and Shangsan Co’s goodwill to exceed their aggregate recoverable amounts. Zheshang Securities and Zheshang Futures The recoverable amounts of CGUs of Zheshang Securities and Zheshang Futures are determined based on value in use calculations. The key assumptions for the value in use calculations relate to the discount rates, growth rates and profit margin during the forecast period. Those calculations use cash flow projections based on financial budgets approved by the management covering a five-year period with discount rates management believes appropriate. Growth rates beyond the five-year period is assumed to be 1% (2022: 1%). Management believes that any reasonably possible change in any of these assumptions would not cause the carrying amount of Zheshang Securities and Zheshang Futures’ goodwill and other intangible assets to exceed their aggregate recoverable amounts. During the years ended December 31, 2023 and 2022, the management of the Group determines that there are no impairment of any of its CGUs containing goodwill and other intangible assets with indefinite useful lives. 239 25. INTERESTS IN ASSOCIATES Cost of investment in associates Share of post-acquisition profit and other comprehensive income, net of dividends received Fair value of listed investments (Note) 12/31/2023 Rmb’000 8,642,897 12/31/2022 Rmb’000 7,880,487 2,848,158 2,179,154 11,491,055 10,059,641 2,721,041 2,753,623 Note: The fair value of the listed investments is determined based on the quoted market bid price multiplied by the quantity of shares held by the Group. At December 31, 2023 and 2022, the Group had interests in the following associates: Name of entities structure and operation attributable to the Group activities Form of Place of Percentage of equity business registration interest and voting right Principal Zheshang Fund Management Corporate The PRC Co., Ltd. (“Zheshang Fund”) (Note i) 12/31/2023 12/31/2022 % 25 % 25 Asset fund management Zhejiang Communications Corporate The PRC 20.08 20.08 Finance and Investment Group Finance Co., Ltd. (“Zhejiang Communications Finance”) (Note ii) investment Yangtze United Financial Leasing Corporate The PRC 10.61 10.61 Provision of Co., Ltd. (“Yangtze United Financial Leasing”) (Note iii) financial leasing services Zhejiang Zheshang Innovation Corporate The PRC 40 40 Investment Capital Management Co., Ltd. (“Zheshang Innovation Capital Management”) 240 management and consulting 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 25. INTERESTS IN ASSOCIATES (Continued) Name of entities structure and operation attributable to the Group activities Form of Place of Percentage of equity business registration interest and voting right Principal Taiping Science and Technology Corporate The PRC Insurance Co., Ltd. (“Taiping Insurance”) (Note iv) 12/31/2023 12/31/2022 % 8.77 % 8.77 Science and technology related insurance Pujiang JuJinFengAn Investment Partnership The PRC 17.86 17.86 Investment Management LP (“FengAn Investment”) (Note v) management Zheshang FoF for Industry Partnership The PRC 24.99 24.99 Investment Transformation and Upgrading LP (“Zheshang FoF”) (Note vi) management and consulting Zhejiang Concord Property Corporate The PRC 45 45 Investment and Investment Co., Ltd. (“Zhejiang Concord Property”) (Note vii) real estate development Shanghai Rural Commercial Bank Corporate The PRC 4.92 4.86 Commercial Co., Ltd. (“SRCB”) (Note viii) Zhejiang Hangning Expressway Corporate The PRC Co., Ltd. (“Zhejiang Hangning”) (Note ix) Zheshang Zhongtuo Zheqi Supply Corporate The PRC Chain Management (Zhejiang) Co., Ltd. (“Zhongtuo Zheqi”) CICC-Shenjiahuhang Expressway Structured The PRC asset-backed special program product (“ABS Program”) (Note x) Zhejiang Wenzhou YongTaiWen Corporate The PRC Expressway Co., Ltd. (“YongTaiWen Co”) (Note xi) 30 20 30 15 banking 30 Expressway 20 Supply Chain Management 30 Expressway – Expressway All of the above associates are accounted for using the equity method in these consolidated financial statements. 241 25. INTERESTS IN ASSOCIATES (Continued) Notes: (i) The Group is able to exercise significant influence over Zheshang Fund because it has the power to appoint one out of four directors of that company under the provisions stated in the Articles of Association of that company. On August 14, 2014, Zheshang Securities, together with one of the shareholders of Zheshang Fund, Yangshengtang Co., Ltd., auctioned off their respective 25% equity interest (totalling 50%) in Zheshang Fund. The hammer price reached at Rmb414,000,000 offered by Tonglian Capital Management Co., Ltd. (“Tonglian Capital”), another shareholder of Zheshang Fund which is independent to the Group, and Zheshang Securities has received a consideration of Rmb207,000,000 accordingly. As at December 31, 2023, the disposal transaction has not been completed and the refundable consideration of Rmb207,000,000 (2022: Rmb207,000,000) in respect of such transfer reversed by Zheshang Securities was included in other payables in Note 38. The Directors consider the disposal required approval by China Securities Regulatory Commission and equity transfer registration, which was a lengthy process and they are not able to estimate the timing when and whether such approval would be granted. The amount of deposit received would be refundable to Tonglian Capital if the transfer eventually cannot be completed. (ii) The Group is able to exercise significant influence over Zhejiang Communications Finance because it has the power to appoint one out of six directors of that company under the provisions stated in the Articles of Association of that company. (iii) The Group is able to exercise significant influence over Yangtze United Financial Leasing because it has the power to appoint one out of eight directors of that company under the provisions stated in the Articles of Association of that company. (iv) The Group is able to exercise significant influence over Taiping Insurance because it has the power to appoint one out of nine directors of that company after the capital injection. (v) As general partner and the executive partner of FengAn Investment, the management considers the Group has significant influence over the investees. (vi) As a limited partner of Zheshang FoF, the management considers the Group has significant influence over the investees. 24.99% is the percentage of capital commitment subscribed by the Group, the Group recognise share of profit based on the capital account allocation provided by Zheshang FoF. 242 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202325. INTERESTS IN ASSOCIATES (Continued) Notes: (Continued) (vii) The Group is able to exercise significant influence over Zhejiang Concord Property because it has the power to appoint Chief financial officer of Zhejiang Concord Property under the provisions stated in the Articles of Association of that company. (viii) The Group acquired 5,745,700 shares of SRCB and the percentage of entity interest in SRCB slightly increased from 4.86% to 4.92% during the year ended December 31, 2023. The Group can exercise significant influence over SRCB because it has the power to appoint one out of six directors of SRCB. (ix) The Group is able to exercise significant influence over Zhejiang Hangning because it has the power to appoint two out of nine directors of that company under the provisions stated in the Articles of Association of that company. (x) In November, 2022, The Group together with other professional institutional investors entered into the asset management agreement with China International Capital Corporation Limited(“CICC”) as the fund manager of the ABS Program. The Group subscribed Rmb75,000,000 of the subordinated class of the ABS Program and continued to provide operational service in relation to the underlying assets, upon which the Group can exercise significant influence over the ABS Program. (xi) On September 28, 2023, the Company and Communications Group entered into the YongTaiWen Equity Purchase Agreement, pursuant to which the Company agreed to acquire 15% equity interest in Zhejiang Wenzhou YongTaiWen Expressway Co., Ltd. (“YongTaiWen Co”) at the consideration of RMB733,096,810. The transaction was completed on October 26, 2023 upon the revision of Articles of Association and modification of business registration. The Group can exercise significant influence over YongTaiWen Co because it has the power to appoint one out of ten directors of that company under the provisions stated in the Articles of Association of that company. 243 25. INTERESTS IN ASSOCIATES (Continued) Summarised financial information in respect of each of the Group’s material associates is set out below. The summarised financial information below represents amounts shown in the associate’s financial statements prepared in accordance with HKFRSs. All of these associates are accounted for using the equity method in these consolidated financial statements. 12/31/2023 Rmb’000 897,252 6,700,583 (434,561) (30,130) 12/31/2022 Rmb’000 492,302 7,413,984 (528,276) (16,031) Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 1,767,704 1,477,813 486,599 486,599 486,599 214,630 207,838 207,838 207,838 215,887 Zhejiang Hangning Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit from continuing operations Profit for the year Total comprehensive income for the year Dividends received from the associate during the year 244 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 25. INTERESTS IN ASSOCIATES (Continued) Zhejiang Hangning (Continued) Reconciliation of the above summarised financial information to the carrying amount of the interest in Zhejiang Hangning recognised in the consolidated financial statements: Net asset of the associate Proportion of the Group’s ownership interest in Zhejiang Hangning Carrying amount of the Group’s interest in Zhejiang Hangning Zhejiang Communications Finance Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit from continuing operations Profit for the year Total comprehensive income for the year Dividends received from the associate during the year 12/31/2023 Rmb’000 7,133,144 30.00% 2,139,943 12/31/2022 Rmb’000 7,361,979 30.00% 2,208,594 12/31/2023 Rmb’000 16,831,958 37,671,367 12/31/2022 Rmb’000 11,787,116 44,227,839 (45,912,020) (47,913,360) (29,137) (43,834) Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 1,633,045 1,918,456 818,647 818,647 818,647 63,100 850,884 850,884 850,884 61,504 245 25. INTERESTS IN ASSOCIATES (Continued) Zhejiang Communications Finance (Continued) Reconciliation of the above summarised financial information to the carrying amount of the interest in Zhejiang Communications Finance recognised in the consolidated financial statements: Net asset of the associate Proportion of the Group’s ownership interest in Zhejiang 12/31/2023 Rmb’000 8,562,168 12/31/2022 Rmb’000 8,057,761 Communications Finance 20.08% 20.08% Carrying amount of the Group’s interest in Zhejiang Communications Finance 1,719,283 1,617,998 Aggregate information of associates that are not individually material The Group’s share of profit from continuing operations The Group’s share of other comprehensive income/(loss) The Group’s share of total comprehensive income Year ended 12/31/2023 Rmb’000 745,883 86,812 832,695 Aggregate carrying amount of the Group’s interests in these associates 7,631,829 Year ended 12/31/2022 Rmb’000 518,878 (736) 518,142 6,233,049 246 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 26. INTERESTS IN JOINT VENTURES Unlisted investment in joint ventures, at cost Share of post-acquisition gain, net of dividends received 12/31/2023 Rmb’000 1,373,970 123,921 1,497,891 12/31/2022 Rmb’000 373,470 66,875 440,345 At December 31, 2023 and 2022, the Group had interest in the following joint venture: Name of entity Form of business structure Place of Percentage of equity registration interest and voting right and operation attributable to the Group Principal activities 12/31/2023 12/31/2022 Zhejiang Shaoxing Shengxin Corporate The PRC Expressway Co., Ltd. (“Shengxin Co”) Zhejiang Zhijiang Communications Corporate The PRC Holdings Co., Ltd. (Note i) Note: % 50 50 % 50 Management of the Shaoxing section of the Ningbo-Jinhua Expressway – Investment (i) Zhejiang Zhijiang Communications Holdings Co., Ltd. (“Zhijiang Communications Holdings”) is a limited liability company establish in the PRC on November 28, 2023 by the Company and China Merchants Expressway Network & Technology Holdings Co., Ltd. 247 26. INTERESTS IN JOINT VENTURES (Continued) Summarised financial information in respect of each of the Group’s material joint venture is set out below. The summarised financial information below represents amounts shown in the joint venture’s financial statements prepared in accordance with HKFRSs. The joint ventures are accounted for using the equity method in these consolidated financial statements. Shengxin Co Current assets Non-current assets Current liabilities Non-current liabilities The above amounts of assets and liabilities include the following: Cash and cash equivalents Current financial liabilities 12/31/2023 Rmb’000 577,991 1,480,906 (324,683) (549,248) 12/31/2022 Rmb’000 134,330 1,463,019 (37,949) (678,711) 188,584 133,463 (excluding trade and other payables and provisions) (251,023) (798) Non-current financial liabilities (excluding trade and other payables and provisions) (518,000) (643,000) Revenue Profit for the year Total comprehensive income for the year Dividends received from the associate during the year The above profit for the year includes the following: Depreciation and amortisation Interest income Interest expense Income tax expense 248 Year ended 12/31/2023 Rmb’000 550,786 164,277 164,277 50,000 Year ended 12/31/2022 Rmb’000 471,290 99,541 99,541 50,000 (186,572) (185,821) 2,609 (22,785) (55,285) 4,881 (34,287) (33,052) 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 26. INTERESTS IN JOINT VENTURES (Continued) Shengxin Co (Continued) Reconciliation of the above summarised financial information to the carrying amount of the interest in Shengxin Co recognised in the consolidated financial statements: Net asset of the joint venture Proportion of the Group’s ownership interest in Shengxin Co Carrying amount of the Group’s interest in Shengxin Co Zhijiang Communications Holdings Current assets Non-current assets Current liabilities Non-current liabilities 12/31/2023 Rmb’000 1,184,966 50.00% 592,483 12/31/2023 Rmb’000 1,314,002 10,635,177 (1,231,653) (6,558,000) 12/31/2022 Rmb’000 880,689 50.00% 440,345 12/31/2022 Rmb’000 – – – – 12/31/2023 Rmb’000 12/31/2022 Rmb’000 The above amounts of assets and liabilities include the following: Cash and cash equivalents Current financial liabilities (excluding trade and other payables and provisions) Non-current financial liabilities (excluding trade and other payables and provisions) 10,146 (274,976) (5,808,000) – – – 249 26. INTERESTS IN JOINT VENTURES (Continued) Zhijiang Communications Holdings (Continued) Profit for the year Total comprehensive income for the year The above profit for the year includes the following: Interest income Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 49,815 49,815 28 – – – Reconciliation of the above summarised financial information to the carrying amount of the interest in Zhijiang Communications Holdings recognised in the consolidated financial statements: Net asset of Zhijiang Communications Holdings Less: n on-controlling interests of Zhijiang Communications Holdings’ subsidiary Proportion of the Group’s ownership interest in Zhijiang Communications Holdings Carrying amount of the Group’s interest in Zhijiang Communications Holdings 12/31/2023 Rmb’000 4,159,526 (2,348,711) 1,810,815 50.00% 905,408 12/31/2022 Rmb’000 – – – – – 250 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 27. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets mandatorily measured at FVTPL: – Debt securities – Equity securities (Note i, ii) – Funds – Other investments (Note iii) Analysed as: – Listed (Note iv) – Unlisted Analysed for reporting purposes as: Current assets Non-current assets Notes: 12/31/2023 Rmb’000 12/31/2022 Rmb’000 25,464,795 33,061,869 3,875,559 8,564,248 4,014,038 1,977,229 6,991,819 1,968,466 41,918,640 43,999,383 11,498,377 30,420,263 41,918,640 41,729,113 189,527 41,918,640 7,520,937 36,478,446 43,999,383 43,789,944 209,439 43,999,383 (i) The restricted shares with a legally enforceable restriction that prevents the Group to dispose of within a specified period amounted to approximately Rmb57,860,000 as at December 31, 2023 (2022: Rmb270,990,000). The fair values of these securities have taken into account the relevant features including the restrictions. (ii) As at December 31, 2023, the Group has entered into securities lending arrangement with clients that resulted in the transfer of financial assets at fair value through profit or loss with a total fair value of Rmb7,833,652 (2022: Rmb 20,755,531) to external clients. Since the arrangement will be settled by the securities with the same quantity lent, the economic risks and benefits of those securities are not transferred and it does not result in derecognition of the financial assets. (iii) Other investments mainly represent investments in collective asset management schemes issued and managed by the Group, wealth management products issued by banks and targeted asset management schemes (or trust investments) managed by non-bank financial institutions, which mainly invest in debt securities, publicly traded equity securities listed in the PRC. The Group has committed to hold its investments in collective asset management schemes that managed by the Group till the end of the investment period. 251 27. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued) Notes: (Continued) (iv) Securities and funds traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange are included in the “Listed” category. 28. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME Analysed by type of issuers: – Corporate entities (Note i,ii) – Government (Note ii) Analysed as: – Listed(Note iii) – Unlisted Analysed for reporting purposes as: Current assets Non-current assets Expected credit losses Notes: 12/31/2023 Rmb’000 12/31/2022 Rmb’000 1,296,558 6,867,340 8,163,898 514,806 7,649,092 8,163,898 445,173 7,718,725 8,163,898 1,975 820,940 – 820,940 128,529 692,411 820,940 250,683 570,257 820,940 1,108 (i) It mainly comprises bonds and notes issued by corporates. (ii) As at December 31, 2023, the fair value of securities of the Group which have been placed as collateral for financial assets sold under repurchase agreements was Rmb 5,397,901,000 (December 31, 2022: Rmb430,958,000). (iii) Debt securities traded on stock exchanges are included in the “Listed” category. 252 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 28. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Continued) The following table shows reconciliation of loss allowances that have been recognised for debt instruments at fair value through other comprehensive income. As at January 1, 2023 Changes in the loss allowance: – Charged to profit or loss As at December 31, 2023 Lifetime ECL Lifetime ECL (not credit- impaired) Rmb’000 (credit- impaired) Rmb’000 – – – – – – 12m ECL Rmb’000 1,108 867 1,975 Total Rmb’000 1,108 867 1,975 The table below details the credit risk exposures of the debt instruments at fair value through other comprehensive income, which are subject to ECL assessment. As at December 31, 2023 Gross carrying amount As at December 31, 2022 Gross carrying amount Lifetime ECL Lifetime ECL (not credit- impaired) Rmb’000 (credit- impaired) Rmb’000 – – – – 12m ECL Rmb’000 8,163,898 820,940 Total Rmb’000 8,163,898 820,940 253 29. TRADE RECEIVABLES Trade receivables – contracts with customers Less: Allowance for credit losses Trade receivables (before allowance for credit losses) comprise: Fellow subsidiaries Third parties 12/31/2023 Rmb’000 12/31/2022 Rmb’000 (Restated) 01/01/2022 Rmb’000 (Restated) 837,226 (5,748) 831,478 19,520 817,706 837,226 569,232 (6,348) 562,884 15,663 553,569 569,232 480,998 (5,799) 475,199 22,921 458,077 480,998 The Group has no credit period granted to its trade customers of toll operation business. The Group’s trade receivable balance for toll operation is toll receivables from the respective expressway fee settlement centre of Zhejiang Province and Anhui Province, Transportation Bureau of Linping County of Hangzhou, Transportation Bureau of Hangzhou, Transportation Bureau of Yiwu, Transportation Bureau of Linan of Hangzhou, Transportation Bureau of Jiaxing, etc. In respect of the Group’s asset management service, security commission and financial advisory service operated by Zheshang Securities, trading limits are set for customers. The Group seeks to maintain tight control over its outstanding accounts receivable in order to minimise credit risk. Overdue balances are regularly monitored by the management. 254 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 29. TRADE RECEIVABLES (Continued) The following is an aged analysis of trade receivables net of allowance for credit losses presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates: Within 3 months 3 months to 1 year 1 to 2 years Over 2 years Movement of allowance for credit losses At the beginning of the year Impairment recognised for the year Amount reversed during the year Written off At the end of the year 12/31/2023 Rmb’000 420,733 381,569 23,734 5,442 831,478 12/31/2022 Rmb’000 (Restated) 358,162 181,217 21,025 2,480 562,884 12/31/2023 Rmb’000 6,348 271 (599) (272) 5,748 01/01/2022 Rmb’000 (Restated) 342,615 121,753 7,554 3,277 475,199 12/31/2022 Rmb’000 (Restated) 5,799 1,584 (105) (930) 6,348 255 30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS Loans to margin clients Less: Impairment allowance 12/31/2023 Rmb’000 19,948,786 (14,025) 12/31/2022 Rmb’000 17,568,948 (11,680) 19,934,761 17,557,268 The Group has provided customers with margin financing and security lending for securities transactions, the credit facility limits to margin clients are determined by the discounted market value of the pledged securities accepted by the Group or the market value of cash collaterals. All of the loans to margin clients which are secured by the underlying pledged securities are interest bearing. The Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio. Any excess in the lending ratio will trigger a margin call which the customers have to make good of the shortfall. The Group has the right to process forced liquidation if the customer fails to make good of the shortfall within a short period of time. As at December 31, 2023, loans to customers under the margin financing and securities lending activities carried out in the PRC were secured by the customers’ securities and cash collaterals. The undiscounted market value of the security collaterals was amounted to Rmb53,641,550,000 (2022: Rmb50,528,176,000). Cash collateral of Rmb2,380,641,000 (2022: Rmb2,417,634,000) received from clients was included in accounts payable to customers arising from securities business in Note 36. No aged analysis is disclosed as in the opinion of the Directors, the aged analysis does not give additional value in view of the nature of business of securities margin financing. The following table shows reconciliation of loss allowances that has been recognised for loans to customers arising from margin financing business. 256 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 30. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS (Continued) As at January 1, 2022 – Transfer to 12m ECL – Transfer to Lifetime ECL (not credit- impaired) – Charged to profit or loss As at December 31, 2022 – Transfer to 12m ECL – Transfer to Lifetime ECL (not credit- impaired) – Charged to profit or loss As at December 31, 2023 Lifetime ECL Lifetime ECL (not credit- impaired) Rmb’000 (credit- impaired) Rmb’000 12m ECL Rmb’000 Total Rmb’000 8,634 53 (293) 821 9,215 89 (849) (1,415) 7,040 1,388 (53) 293 (73) 1,555 (89) 849 2,595 4,910 3,178 13,200 – – (2,268) 910 – – 1,165 2,075 – – (1,520) 11,680 – – 2,345 14,025 The tables below detail the credit risk exposures of the Group’s loans to customers arising from margin financing business, which are subject to ECL assessment. As at December 31, 2023 Gross carrying amount As at December 31, 2022 Gross carrying amount Lifetime ECL (not credit- Lifetime ECL 12m ECL Rmb’000 impaired) (credit-impaired) Total Rmb’000 Rmb’000 Rmb’000 18,782,496 1,164,213 2,077 19,948,786 16,753,901 812,627 2,420 17,568,948 257 31. OTHER RECEIVABLES AND PREPAYMENTS Non-Current Entrusted loan Prepayments Receivables from government cooperation projects Current Entrusted loan Prepayments Trading deposits (Note i) Receivables from government cooperation projects Others Note: 12/31/2023 Rmb’000 – 12,350 842,123 854,473 12/31/2022 Rmb’000 (Restated) – 332,431 2,621,739 150,320 246,428 12/31/2022 Rmb’000 180,000 – 938,363 1,118,363 01/01/2022 Rmb’000 (Restated) – 147,135 876,744 152,805 202,792 3,350,918 1,379,476 12/31/2023 Rmb’000 180,151 431,595 4,951,608 148,270 278,916 5,990,540 (i) Trading deposits mainly represent over-the-counter option deposit and equity swap deposit. 258 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS Analysed by collateral type: Bonds Stock securities Less: Impairment allowance Analysed by market: Inter bank market Shanghai/Shenzhen Stock Exchange Less: Impairment allowance Analysed for reporting purposes as: Current assets Non-current assets 12/31/2023 Rmb’000 12/31/2022 Rmb’000 3,590,327 4,256,006 7,846,333 (116,931) 7,729,402 186,805 7,659,528 7,846,333 (116,931) 7,729,402 7,729,402 – 7,729,402 2,466,160 3,919,744 6,385,904 (110,694) 6,275,210 8,000 6,377,904 6,385,904 (110,694) 6,275,210 6,086,210 189,000 6,275,210 The collaterals include both equity and debt securities listed in the PRC. As at December 31, 2023, the fair value of equity securities and debt securities held as collaterals was Rmb11,215,727,000 (2022: Rmb10,837,092,000) and Rmb3,844,169,000 (2022: Rmb3,362,016,000), respectively. The following table shows reconciliation of loss allowances that has been recognised for financial assets held under resale agreements. 259 32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS (Continued) As at January 1, 2022 – Transfer to lifetime ECL (not credit- impaired) – Transfer to 12m ECL – Charged to profit or loss As at December 31, 2022 – Transfer to lifetime ECL (not credit- impaired) – Charged to profit or loss As at December 31, 2023 Lifetime ECL Lifetime ECL (not credit- impaired) Rmb’000 (credit- impaired) Rmb’000 Total Rmb’000 3,090 96,412 119,928 2,515 (2,888) 2,743 5,460 155 3,793 9,408 – – (1,941) 94,471 – – – – (9,234) 110,694 – 6,237 94,471 116,931 12m ECL Rmb’000 20,426 (2,515) 2,888 (10,036) 10,763 (155) 2,444 13,052 The tables below detail the credit risk exposures of the Group’s financial assets held under resale agreements, which are subject to ECL assessment. Lifetime ECL Lifetime ECL (not credit- impaired) Rmb’000 (credit- impaired) Rmb’000 12m ECL Rmb’000 Total Rmb’000 7,117,112 634,750 94,471 7,846,333 5,925,679 365,754 94,471 6,385,904 As at December 31, 2023 Gross carrying amount As at December 31, 2022 Gross carrying amount 260 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 33. BANK BALANCES AND CLEARING SETTLEMENT FUND HELD ON BEHALF OF CUSTOMERS For the Group’s securities operation carried out by Zheshang Securities, the Group receives and holds money deposited by customers (including other institutions). These customers’ money is maintained in one or more segregated bank accounts. The Group has recognised the corresponding accounts payable to respective customers and other institutions. Bank balances and clearing settlement fund held on behalf of customers carry interest at market rates which range from 0.3% to 5.90% (2022: 0.3% to 5.45%) per annum. Bank balances and clearing settlement fund held on behalf of customers that are denominated in currencies other than the functional currency of the respective group entities are set out below: As at December 31, 2023 As at December 31, 2022 HKD Rmb’000 282,732 190,674 USD Rmb’000 794,934 289,578 261 34. BANK BALANCES, CLEARING SETTLEMENT FUND, DEPOSITS AND CASH Non-Current Time deposits Current 12/31/2023 Rmb’000 3,048,619 12/31/2022 Rmb’000 – Time deposits with original maturity over three months Restricted bank balances and cash (Note) 12/31/2023 Rmb’000 4,268,560 100,631 12/31/2022 Rmb’000 (Restated) 203,632 70,179 01/01/2022 Rmb’000 (Restated) 413,843 132,090 Unrestricted bank balances and cash 23,630,440 22,381,227 16,213,130 Time deposits with original maturity of less than three months 200,000 1,608,938 1,000,867 Cash and cash equivalents 23,830,440 23,990,165 17,213,997 28,199,631 24,263,976 17,759,930 Note: The restricted bank deposits include the bank acceptance deposits, fund management risk reserve, collective asset management schemes deposits and margin deposits. Bank balances carry interest at the average market rate is 0.35% (2022: 0.41%) per annum. Time deposits carry interest at fixed rates ranging from 1.95% to 4.89% (2022: 3% to 5.19%) per annum. 262 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 34. BANK BALANCES, CLEARING SETTLEMENT FUND, DEPOSITS AND CASH (Continued) Bank balances, clearing settlement fund, deposits and cash that are denominated in currencies other than the functional currency of the respective group entities are set out below: As at December 31, 2023 As at December 31, 2022 HKD Rmb’000 2,028,698 35,198 USD Rmb’000 271,850 572,996 35. PLACEMENTS FROM OTHER FINANCIAL INSTITUTIONS Due to banks 12/31/2023 Rmb’000 1,950,000 12/31/2022 Rmb’000 700,000 As at December 31, 2023, the effective interest rates bearing on the outstanding amount of due to banks vary from 1.80% to 2.50% (December 31, 2022: 1.94% to 2.47%) per annum. The amount of due to banks were repayable within seven days from the end of the reporting period. 36. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES BUSINESS The amounts mainly represent money held on behalf of clients at the banks and clearing houses by the Group. The amounts also include payables for securities/futures business as well as cash collaterals from customers for securities lending and/or margin financing arrangement. The majority of the accounts payable balance is repayable on demand except where certain accounts payable to brokerage clients represent margin deposits received from clients for their trading activities under normal course of business. No aged analysis is disclosed as in the opinion of the Directors, an aged analysis does not give any additional value in view of the nature of the business. 263 36. ACCOUNTS PAYABLE TO CUSTOMERS ARISING FROM SECURITIES BUSINESS (Continued) As at December 31, 2023, Rmb2,380,641,000 (2022: Rmb 2,417,634,000) cash collaterals have been received from clients for securities lending or margin financing arrangement, of which under normal course of business. Only the excess amounts over the required margin deposits stipulated are repayable on demand. Accounts payable to customers arising from securities business that are denominated in currencies other than the functional currency of the respective group entities are set out below: As at December 31, 2023 As at December 31, 2022 37. TRADE PAYABLES HKD Rmb’000 282,732 190,485 USD Rmb’000 794,934 289,577 Trade payables mainly represent the payables for the expressway improvement projects. The following is an aged analysis of trade payables presented based on the invoice date: 12/31/2023 Rmb’000 668,425 127,248 154,917 78,708 235,876 12/31/2022 Rmb’000 (Restated) 671,828 142,923 139,799 39,275 227,007 01/01/2022 Rmb’000 (Restated) 915,863 134,465 88,521 62,490 252,659 1,265,174 1,220,832 1,453,998 Within 3 months 3 months to 1 year 1 to 2 years 2 to 3 years Over 3 years 264 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 38. OTHER PAYABLES AND ACCRUALS Accrued payroll and welfare Advances Advance payments for settlement from securities business Advance received from futures insurance 12/31/2023 Rmb’000 1,630,360 28,932 103,439 85 12/31/2022 Rmb’000 (Restated) 1,557,456 37,756 01/01/2022 Rmb’000 (Restated) 1,458,165 41,712 217,977 7,196 132,296 7,196 Trading deposit and settlement (Note) 10,096,481 5,766,292 2,577,793 Deposit received for disposal of an associate Retention payable Pledge deposit for warehouse receipt Compensations for highway crossing Clearing funds payables Toll collected on behalf of other toll roads Futures risk reserve Government subsidies from removal of expressway toll station on provincial borders Deferred income Notes payable Balance payable of share purchase Others 207,000 138,312 521,454 45,977 524,597 7,708 179,764 48,067 60,700 170,000 27,500 164,215 207,000 121,308 203,959 53,045 190,430 4,352 159,464 61,488 76,612 – 27,500 232,718 207,000 120,027 164,438 58,509 372,137 3,866 142,853 93,374 93,477 192,400 27,500 228,610 13,954,591 8,924,553 5,921,353 Note: Trading deposits mainly represent over-the-counter option deposit and equity swap deposit. 265 39. DERIVATIVE FINANCIAL ASSETS/LIABILITIES Nominal Amount Rmb’000 8,202,798 57,072,022 32,299,545 5,554,008 13,499,999 12/31/2023 Assets Rmb’000 79,828 1,126,616 33,045 36,954 2,667 116,628,372 1,279,110 Nominal Amount Rmb’000 6,238,751 60,907,168 1,858,477 78,313,967 12/31/2022 Assets Rmb’000 221,865 590,511 34,717 153,663 147,318,363 1,000,756 Liabilities Rmb’000 56,512 871,920 37,547 28,255 1,793 996,027 Liabilities Rmb’000 122,368 328,571 12,579 90,839 554,357 Equity swap Equity option Commodity futures Commodity options Others (Note) Equity swap OTC option Commodity options Others (Note) Note: Others include stock index futures, treasury futures, interest rate swap (“IRS”) and other options. Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in stock index futures, treasury futures were settled daily. Accordingly, the net position of them in derivative instruments were nil at December 31, 2023 and 2022. Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in IRS were settled daily in the corresponding payments or receipts were included in “clearing settlement funds” as at December 31, 2023. Accordingly, the net position of the IRS contracts in derivative instruments was nil at December 31, 2023 (2022: nil). For IRS contracts and other options in mainland China not under the daily mark-to-market and settlement arrangement are presented gross at the end of reporting period. 266 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 40. BANK AND OTHER BORROWINGS Loans from banks, secured (Note i) Loans from banks, unsecured Loans from related parties, secured (Note i) Loans from related parties, unsecured 12/31/2023 Rmb’000 12/31/2022 Rmb’000 (Restated) 01/01/2022 Rmb’000 (Restated) 13,207,942 14,396,255 17,501,733 765,675 925,558 1,668,209 1,017,790 71,859 1,121,317 (Notes 57(i), 57(ii)) 2,907,768 5,274,563 3,418,188 Carrying amount repayable: Within one year More than one year but not exceeding two years More than two years but not more than five years More than five years Less: Amounts due within one year 17,806,943 22,356,817 22,113,097 4,593,399 1,812,450 4,121,454 7,279,640 17,806,943 (4,593,399) 5,054,083 4,362,670 4,437,310 8,502,754 22,356,817 (5,054,083) 2,451,507 1,557,090 6,728,780 11,375,720 22,113,097 (2,451,507) Amounts shown under non-current liabilities 13,213,544 17,302,734 19,661,590 The bank and other borrowings comprise: Fixed-rate borrowings Variable-rate borrowings 3,726,547 14,080,396 6,119,923 16,236,894 3,490,047 18,623,050 17,806,943 22,356,817 22,113,097 267 40. BANK AND OTHER BORROWINGS (Continued) The range of effective interest rates (which are also agreed to contract interest rates) on the Group’s borrowings are as follows: Effective interest rate: Fixed-rate borrowings Variable-rate borrowings Note: 12/31/2023 12/31/2022 01/01/2022 2.70%-5.25% 3.73%-7.43% 3.00%-7.08% 3.00%-4.85% 3.00%-4.70% 4.08%-4.70% i A s a t D e c e m b e r 31, 2023, t h e G r o u p p l e d g e d t h e f o l l o w i n g a s s e t s f o r t h e s e s e c u r e d l o a n s f r o m financial institutions: (i) other receivables with an aggregate carrying value of Rmb 990,393,000 (2022: Rmb1,088,683,000) and (ii) expressway operating rights of Zhoushan Bay Bridge, LongLi Expressway and Lilong Expressway, Zhajiasu Expressway, and HuangQuNan Expressway (2022: expressway operating rights of Zhoushan Bay Bridge, LongLi Expressway and Lilong Expressway, Zhajiasu Expressway, and HuangQuNan Expressway) and (iii) security collaterals from loans to customers arising from margin financing business. 41. SHORT-TERM FINANCING NOTE PAYABLE Unsecured: Short-term financing bonds Beneficial certificates Total 12/31/2023 Rmb’000 12/31/2022 Rmb’000 1,507,582 630,029 2,137,611 2,511,352 1,055,673 3,567,025 As at December 31, 2023, the short-term financing bond bears an interest rate at 2.50% (2022: short-term financing bonds bears an interest rate at 1.83% to 2.50%), the yields of all the outstanding beneficial certificates were between 2.35% to 7.00% (2022: 1.90% to 13.00%). 268 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 42. BONDS PAYABLE Corporate and subordinated bonds without redemption option (Note i, ii) Medium-term notes (Note iii) Infrastructure real estate investment trusts (Note iv) Less: Bonds due within 1 year Amounts shown under non-current liabilities Notes: 12/31/2023 Rmb’000 12/31/2022 Rmb’000 24,280,716 3,048,452 1,685,083 29,014,251 18,438,111 3,048,452 1,821,006 23,307,569 (5,404,107) (7,118,247) 23,610,144 16,189,322 (i) This balance represented 8 corporate bonds, 2 subordinated bonds and 1 beneficial certificate (2022: 4 corporate bonds, 6 subordinated bonds and 1 beneficial certificate) due by year 2024 to 2026 (2022: 2023 to 2026) issued by Zheshang Securities, without redemption option, with fixed interest rates ranging from 2.89% to 4.08% (2022: 2.10% to 4.18%) per annum. (ii) On July 14, 2021, the Group issued the 1.638% Bonds due 2026 in the aggregate principal amount of US$470,000,000. The Bonds will bear interest from and including 14 July 2021 at the rate of 1.638% per annum, payable semi-annually in arrear on 14 January and 14 July in each year. (iii) This balance represented 2 medium-term notes due by year 2025 issued by the Company with fixed interest rates 2.80% and 2.97% per annum. (iv) On June 21, 2021, the Group issued infrastructure real estate investment trusts (the “REITs”) with the underlying expressway operating rights in relation to the Hangzhou section of Hanghui Expressway. The Group held 51% of the share of the REITs, with an operational period of 20 years. The REITs made distribution in June 2023 as per announcement. 269 43. CONVERTIBLE BONDS Convertible Bond 2021 On January 20, 2021, the Company issued a zero coupon convertible bond due 2026 in an aggregate principal amount of Euro230,000,000. The Convertible Bond 2021 is listed on the Stock Exchange (the “Stock Exchange”). The principal terms of the Convertible Bond 2021 are set out below: (1) Conversion right The Convertible Bond 2021 will, at the option of the holder (the “Bondholders 2021”), be convertible (unless previously redeemed, converted or purchased and cancelled) on or after March 2, 2021 up to January 10, 2026 into fully paid ordinary shares with a par value of Rmb1.00 each at an initial conversion price (the “Conversion Price 2021”) of HK$8.83 per H share and a fixed exchange rate of HK$9.5145 to Euro1.00 (the “Fixed Exchange Rate”). The Conversion Price 2021 is subject to the anti-dilutive adjustments and certain events including mainly: share consolidation, subdivision or re-classification, capitalisation of profits or reserves, capital distributions, rights issues of shares or options over shares, rights issues of other securities and issues at less than current market price. The latest Conversion Price 2021 was HK$6.69 per H share. (2) Redemption (i) Redemption at maturity Unless previously redeemed, converted or purchased and cancelled as provided herein, the Company will redeem each Convertible Bond 2021 at 100 percent of its outstanding principal amount on the maturity date of January 20, 2026 (the “Maturity Date 2021”). 270 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202343. CONVERTIBLE BONDS (Continued) Convertible Bond 2021 (Continued) (2) Redemption (Continued) (ii) Redemption at the option of the Company The Company may, having given not less than 30 nor more than 60 days’ notice, redeem the Convertible Bond 2021 in whole and not some only at 100 percent of their outstanding principal amount as at the relevant redemption date. (a) at any time after January 20, 2024 but prior to the Maturity Date 2021, provided that no such redemption may be made unless the closing price of an H share translated into Euro at the prevailing rate applicable to each Stock Exchange business day, for any 20 Stock Exchange business days within a period of 30 consecutive Stock Exchange business days, the last of such Stock Exchange business day shall occur not more than 10 days prior to the date upon which notice of such redemption is given, was, for each such 20 Stock Exchange business days, at least 130 percent of the Conversion Price 2021 (translated into Euro at the Fixed Exchange Rate); or (b) if at any time the aggregate principal amount of the Convertible Bond 2021 outstanding is less than 10 percent of the aggregate principal amount originally issued. (iii) Redemption at the option of the bondholders The Company will, at the option of the Bondholders, redeem whole or some of that holder’s bond on January 20, 2024 (the “Put Option Date”) at their outstanding principal amount on that Date. 271 43. CONVERTIBLE BONDS (Continued) Convertible Bond 2021 (Continued) (2) Redemption (Continued) (iii) Redemption at the option of the bondholders (Continued) The Convertible Bond 2021 comprises two components: (a) Debt component was initially measured at fair value amounted to Euro183,297,000 (equivalent to Rmb1,443,009,000). It is subsequently measured at amortised cost by applying effective interest rate method after considering the effect of the transaction costs. The effective interest rate used is 4.74%. (b) Derivative component comprises conversion right of the bondholders, redemption option of the Company, and redemption option of the bondholders. Transaction costs totalling Rmb8,427,515 that relate to the issue of the Convertible Bond 2021 are allocated to the components (including conversion right and redemption options) in proportion to their respective fair values. Transaction costs amounting to approximately Rmb1,711,247 relating to the derivative component were charged to profit or loss during the year ended December 31, 2021. Transaction costs amounting to approximately Rmb6,716,268 relating to the debt component are included in the carrying amount of the debt portion and amortised over the period of the Convertible Bond 2021 using the effective interest method. The derivative component was measured at fair value with reference to valuation carried out by a firm of independent professional valuers. 272 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202343. CONVERTIBLE BONDS (Continued) Convertible Bond 2021 (Continued) (2) Redemption (Continued) (iii) Redemption at the option of the bondholders (Continued) The movement of the debt and derivative components of the Convertible Bond 2021 for the years ended December 31, 2023 and 2022 is set out as below: As at January 1, 2022 Exchange realignment Interest charge Gain on changes in fair value Debt component Derivative components at amortised cost at FVTPL Total Euro’000 Rmb’000 Euro’000 Rmb’000 Euro’000 Rmb’000 190,374 1,374,445 47,124 340,217 237,498 1,714,662 – 9,027 – 37,073 68,617 – – – – – (5,594) (31,951) – 9,027 (5,594) 37,073 68,617 (31,951) As at December 31, 2022 199,401 1,480,135 41,530 308,266 240,931 1,788,401 Exchange realignment Interest charge Gain on changes in fair value – 28,080 – 79,600 228,084 – – – – – 28,080 79,600 228,084 – (38,012) (280,620) (38,012) (280,620) As at December 31, 2023 227,481 1,787,819 3,518 27,646 230,999 1,815,465 As of December 22, 2023, pursuant to the terms and conditions of the bonds, notice of redemption had been served on the Company requiring the Company to redeem part of the bonds at the principal amount of Euro 202,600,000. Such redemption rights were executed on January 20, 2024 and the outstanding Bonds in the principal amount were Euro27,400,000 subsequently. The detailed key inputs the valuers use to calculate the fair value of the derivative component refer to Note 53(c). 273 43. CONVERTIBLE BONDS (Continued) Convertible Bond 2022 On June 14, 2022, Zheshang Securities, a subsidiary of the Company, issued a convertible bond due 2028 (the “Maturity Date 2022”) in an aggregate principal amount of Rmb7,000,000,000 (the “Convertible Bond 2022”). The Convertible Bond 2022 is listed and trading on Shanghai Stock Exchange. The coupon rate is 0.2% per annum for the first year, 0.4% per annum for the second year, 0.6% per annum for the third year, 1.0% per annum for the fourth year, 1.5% per annum for the fifth year, 2.0% per annum for the sixth year, and will be paid annually. Out of the principal amount of Rmb7,000,000,000, Rmb3,833,185,000 was subscribed by Zhejiang Shangsan Expressway Co., Ltd. (“Shangsan Co”), another subsidiary of the Group. The principal terms of the Convertible Bond 2022 are set out below: (1) Conversion right The Convertible Bond 2022 will, at the option of the holders (the “Bondholders 2022”), be convertible (unless previously redeemed, converted or purchased and cancelled) during the period from December 20, 2022 up to June 13, 2028, into fully paid ordinary shares of Zheshang Securities with a par value of Rmb1.00 each at an initial conversion price (the “Conversion Price 2022”) of Rmb10.49 per share. The initial conversion price will be adjusted when Zheshang Securities distributes stock dividends, capitalises common reserves into share capital, issues new shares (excluding the increase in share capital due to the conversion of the Convertible Bond 2022 issued) or places new shares, distributes cash dividend. When the share price of Zheshang Securities is less than 80% of the conversion price for any 15 business days within a period of 30 consecutive business days prior to the maturity date of the Convertible Bond 2022 (the “Maturity Date 2022”), the board of directors of Zheshang Securities has the right to propose a downward revision resolution on conversion price, and submits it to the shareholder’s meeting of Zheshang Securities for approval. As at December 31, 2023, the latest conversion price was Rmb10.19 per share. 274 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202343. CONVERTIBLE BONDS (Continued) Convertible Bond 2022 (Continued) (2) Redemption (i) Redemption at maturity Zheshang Securities will redeem all outstanding Convertible Bond 2022 at 106 percent of its outstanding principal amount (including the last instalment of interest payment) within five business days from the Maturity Date 2022. (ii) Redemption on conditions During the conversion period of the Convertible Bond 2022, upon the occurrence of any of the following two conditions, Zheshang Securities is entitled to redeem all or part of the outstanding Convertible Bond 2022 based on the par value and interest in arrears: (a) During the conversion period of the Convertible Bond 2022, for any 15 business days within a period of 30 consecutive business days, the closing share price of Zheshang Securities is not less than 130 percent (including 130 percent) of the conversion price; (b) When the aggregate principal amount of the outstanding Convertible Bond 2022 is less than Rmb30,000,000. Convertible Bond 2022 contains a liability component and an equity component. At initial recognition, the equity component of the Convertible Bond 2022 was separated from the liability component. As the Convertible Bond 2022 was issued by a subsidiary of the Company and is convertible into that subsidiary’s own shares, the equity element is considered as non-controlling interests. The effective interest rate of the liability component is 3.3564% per annum. 275 43. CONVERTIBLE BONDS (Continued) Convertible Bond 2022 (Continued) (2) Redemption (Continued) (ii) Redemption on conditions (Continued) Changes in the liability and equity component of the Convertible Bond 2022 since the issuance of Convertible Bond 2022 to December 31, 2023 are set out as below: Issuance on June 14, 2022 Issue cost Interest charge Addition Conversion into shares At December 31, 2022 Interest charge Interest paid Addition (Note i) Conversion into shares (Note ii) At December 31, 2023 Notes: Liability Equity Component Component Rmb’000 2,856,082 (12,782) 71,825 1,008,644 (97) 3,923,672 184,217 (11,163) 2,529,887 (146) Rmb’000 310,732 (1,387) – 166,912 (10) 476,247 – – 804,528 (15) Total Rmb’000 3,166,814 (14,169) 71,825 1,175,556 (107) 4,399,919 184,217 (11,163) 3,334,415 (161) 6,626,467 1,280,760 7,907,227 (i) During the year ended December 31, 2023, Shangsan Co disposed the Convertible Bond 2022 held on hand with the principal amount of Rmb2,715,347,000 (2022: Rmb1,117,838,000). Upon the disposal, this balance is no longer an intragroup assets and liabilities which were eliminated in full on consolidation, and is considered as an addition during the year. (ii) During the year ended December 31, 2023, the bondholders converted part of the Convertible Bond 2022 with a principal amount of Rmb157,000 to the shares of Zheshang Securities. As at December 31, 2023, Zheshang Securities had not exercised the redemption rights. 276 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 44. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS Analysed as collateral type: Bonds Equity securities Analysed by market: Shanghai/Shenzhen Stock Exchange Inter-bank market 12/31/2023 Rmb’000 12/31/2022 Rmb’000 24,569,621 22,524 4,206,992 20,385,153 24,592,145 23,825,242 – 5,766,118 18,059,124 23,825,242 As at December 31, 2023 and 2022, the above financial assets sold under repurchase agreements include those repurchase agreements entered into with qualified investors, with maturities within 1 year. Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date. Since the repurchase prices are fixed, the Group is still exposed to substantially all the credit risks and market risks and rewards of those securities sold. These securities are not derecognised from the financial statements but regarded as “collateral” for the liabilities because the Group retains substantially all the risks and rewards of these securities. The cash proceed received is recognised as financial liability. As at December 31, 2023 and 2022, the Group enters into repurchase agreements with certain counterparties. The proceeds from selling such securities are presented as financial assets sold under repurchase agreements. Because the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred securities during the term of the arrangement. 277 44. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS (Continued) The following tables provides a summary of carrying amounts and fair values related to transferred financial assets that are not derecognised in their entirety and the associated liabilities as at December 31, 2023 and December 31, 2022. As at December 31, 2023 Carrying amount of transferred assets Carrying amount of associated liabilities Net position As at December 31, 2022 Financial assets at FVTPL Rmb’000 Financial assets at FVTOCI Rmb’000 Total Rmb’000 16,335,665 (15,069,991) 5,397,901 21,733,566 (4,905,813) (19,975,804) 1,265,674 492,088 1,757,762 Carrying amount of transferred assets Carrying amount of associated liabilities 25,303,293 (16,485,206) 430,958 (334,413) 25,734,251 (16,819,619) Net position 8,818,087 96,545 8,914,632 45. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial liabilities held for trading: – Securities – Funds Financial liabilities designated at FVTPL: – Fi nancial liabilities arising from consolidation of structured entities (Note) 278 12/31/2023 Rmb’000 12/31/2022 Rmb’000 331,350 33,114 107,597 472,061 915,407 60,636 81,599 1,057,642 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 45. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued) Note: Financial liabilities designated at FVTPL arising from consolidation of structured entities represent the third party unit holders’ interests in the consolidated structure schemes and funds. Interests in these consolidated structured entities directly held by the Group amounted to fair value of Rmb 1,947,766,000 and Rmb2,391,869,000 at December 31, 2023 and 2022, respectively. The total assets of the consolidated structured entities amounted to Rmb 2,631,450,000 and Rmb3,661,442,000 at December 31, 2023 and 2022, respectively. The Group has designated these liabilities as FVTPL, as in the opinion of the management, such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise. 46. LEASE LIABILITIES Lease liabilities payables Within one year Within a period of more than one year but no more than two years Within a period of more than two years but no more than five years Within a period of more than five years 12/31/2023 Rmb’000 12/31/2022 Rmb’000 147,914 119,678 123,731 93,225 184,120 19,665 475,430 193,989 37,138 444,030 Less: Am ounts due for settlement with 12 months shown under current liabilities (147,914) (119,678) Amount due for settlement after 12 months shown under non-current liabilities 327,516 324,352 279 47. DEFERRED TAXATION For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes: Deferred tax assets Deferred tax liabilities 12/31/2023 Rmb’000 1,446,067 (260,060) 1,186,007 12/31/2022 Rmb’000 1,416,809 (481,066) 935,743 The following are the major deferred tax liabilities and assets recognised and movements thereon during the current and prior years: Difference in tax and accounting depreciation of property Temporary differences of accrued Changes in plant and Fair value expenses fair value of equipment adjustment and financial and of long term impairment instruments expressway assets arising losses and carried operating from business tax losses at fair value rights combination and others Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 At January 1, 2022 Charge (credit) to profit or loss Charge to other comprehensive income (163,542) 62,220 2,264 971,551 (78,324) – Transfer out through disposal of a subsidiary – (200,322) At December 31, 2022 Charge (credit) to profit or loss Charge to other comprehensive income (99,058) 974 (12,818) 692,905 (21,264) – (146,061) 12,627 – – (133,434) 13,817 – 478,326 45,565 (277) 1,140,274 42,088 1,987 (48,284) (248,606) 475,330 269,772 (217) 935,743 263,299 (13,035) At December 31, 2023 (110,902) 671,641 (119,617) 744,885 1,186,007 280 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 47. DEFERRED TAXATION (Continued) As at December 31, 2023, a deferred tax asset of Rmb128,138,000 in relation to unused tax losses for LongLiLiLong Co has been recognised in the consolidated statement. In addition, the Group had unused tax losses of approximately Rmb476,852,000 (2022: Rmb2,118,100,000) and differences in tax and accounting of expressway operating rights of approximately Rmb911,815,000 (2022: Rmb917,950,000 as restated) for which deferred tax was not recognised due to uncertainty of future taxable income. The expiry dates of the unrecognised tax losses are listed as below. 2023 2024 2025 2026 2027 2028 48. SHARE CAPITAL 12/31/2023 Rmb’000 – – 12,615 31,668 144,869 287,700 476,852 12/31/2022 Rmb’000 418,124 478,586 667,480 304,342 249,568 – 2,118,100 Number of shares Share Capital Domestic Domestic Shares H Shares ’000 ’000 Total ’000 Shares H Shares Total Rmb’000 Rmb’000 Rmb’000 Registered, issued and fully paid: At January 1, 2022 and December 31, 2022 2,909,260 1,433,855 4,343,115 2,909,260 1,433,855 4,343,115 Rights issue 1,105,519 544,864 1,650,383 1,105,519 544,864 1,650,383 At December 31, 2023 4,014,779 1,978,719 5,993,498 4,014,779 1,978,719 5,993,498 The domestic shares are not currently listed on any stock exchange. The H Shares have been listed on the Stock Exchange since May 15, 1997. 281 48. SHARE CAPITAL (Continued) Pursuant to the CSRC’s written approval in respect of the Rights Issue, i.e. the Approval Regarding the Registration of Shares to be Issued by Zhejiang Expressway Co., Ltd. to Specific Targets (Zheng Jian Xu Ke [2023] No. 2473) (《關於同意浙江滬杭甬高速公路股份 有限公司向特定對象發行股票註冊的批覆》(證監許可[2023]2473號)), new domestic rights shares were allotted to Communications Group on the basis of three point eight domestic rights shares for every ten existing domestic rights shares, while new H rights shares were allotted to qualified H Shares holders on the basis of three point eight H rights shares for every ten existing H Shares. 544,864,710 new H rights shares were issued at a price of HK$4.06 per share, raising approximately HK$2.2 billion in total. The new H Shares were listed on the Hong Kong Stock Exchange on December 14, 2023. As at the time of listing of H shares, approximately RMB4.1 billion in total has also been received for 1,105,518,800 new domestic rights shares at a price of RMB3.73 per share. After the completion of the above right issues, a total of 1,650,383,510 new share were issued. The fund raised in excess of the par value of the new shares (net of issuance cost) was credited to share premium. All the domestic shares and H Shares rank pari passu with each other as to dividends and voting rights. 282 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202349. NON-CONTROLLING INTERESTS The summarised financial information in respect of the Group’s subsidiary that has material non-controlling interests, namely Shangsan Co and its subsidiaries, Linping Co, and Zhajiasu Co (as defined in Note 58) at the end of the Reporting Period are set out below. The summarised financial information below represents amounts before intragroup elimination with the Company. Shangsan Co and its subsidiaries Current assets Non-current assets Current liabilities Non-current liabilities Equity attributable to owners of the Company Non-controlling interests Revenue Expenses Profit for the year Other comprehensive income for the year Total comprehensive income for the year Profit attributable to owner of the Company Profit attributable to non-controlling interests Total comprehensive income attributable to owner of the Company Total comprehensive income attributable to non-controlling interests Dividends paid to non-controlling shareholders Net cash inflow from operating activities Net cash outflow from investing activities Net cash inflow/(outflow) from financing activities 12/31/2023 Rmb’000 12/31/2022 Rmb’000 139,345,784 136,360,358 11,882,573 95,092,076 22,590,243 14,655,985 18,890,053 7,480,666 4,887,621 96,961,620 12,600,288 14,049,531 17,636,540 7,075,848 (5,291,516) (4,913,813) 2,189,150 43,011 2,232,161 992,980 1,196,170 2,189,150 1,010,308 1,221,853 2,232,161 (323,381) 2,661,928 (7,763,620) 3,642,509 2,162,035 15,827 2,177,862 1,005,941 1,156,094 2,162,035 1,012,259 1,165,603 2,177,862 (493,565) 4,215,003 (1,198,936) (1,979,915) Net cash (outflow)/inflow (1,459,183) 1,036,152 283 49. NON-CONTROLLING INTERESTS (Continued) 12/31/2023 Rmb’000 12/31/2022 Rmb’000 790,369 546,354 85,287 5,187 635,587 610,662 247,370 (151,346) 96,024 48,972 47,052 96,024 (11,058) 141,252 (2,936) (22,567) 115,749 676,505 596,113 94,284 5,543 598,123 574,668 195,206 (119,109) 76,097 38,809 37,288 76,097 (11,058) 49,883 (4,987) (22,567) 22,329 Linping Co Current assets Non-current assets Current liabilities Non-current liabilities Equity attributable to owners of the Company Non-controlling interests Revenue Expenses Profit for the year Profit and total comprehensive income – attributable to owner of the Company – attributable to non-controlling interests Dividends paid to non-controlling shareholders Net cash inflow from operating activities Net cash outflow from investing activities Net cash outflow from financing activities Net cash inflow 284 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 49. NON-CONTROLLING INTERESTS (Continued) Zhajiasu Co Current assets Non-current assets Current liabilities Non-current liabilities Equity attributable to owners of the Company Non-controlling interests Revenue Expenses Loss for the year Profit and total comprehensive income – attributable to owner of the Company – attributable to non-controlling interests Dividends paid to non-controlling shareholders Net cash inflow from operating activities Net cash (outflow)/inflow from investing activities Net cash outflow from financing activities Net cash inflow/(outflow) 12/31/2023 Rmb’000 544,384 2,128,331 339,382 1,022,069 721,195 590,069 477,037 (484,917) (7,880) (4,334) (3,546) (7,880) – 373,478 (29,204) (329,950) 14,324 12/31/2022 Rmb’000 119,901 2,813,460 377,218 1,236,999 725,529 593,615 389,622 (471,654) (82,032) (45,118) (36,914) (82,032) – 267,472 71,097 (365,994) (27,425) 285 50. RETIREMENT BENEFITS SCHEMES The employees of the Group are members of the state-managed retirement benefits scheme operated by the PRC government. To supplement this existing retirement benefits scheme, the Group adopted a corporate annuity scheme in accordance with relevant rules and regulations. The Group is required to contribute a certain percentage of payroll costs to these retirement benefits schemes to fund the benefits. The only obligation of the Group with respect to these retirement benefits schemes is to make the specified contributions. No forfeited contributions are available to reduce the contribution payable in future years. 51. COMMITMENTS Authorised but not contracted for: – Purchase of machinery and equipment – Acquisition and construction of properties – Reconstruction and expansion projects of existing expressways Contracted for but not provided: – Equity investments Total 12/31/2023 Rmb’000 12/31/2022 Rmb’000 968,391 428,765 3,780,000 1,061,250 6,238,406 1,214,428 1,156,293 2,500,000 860,245 5,730,966 286 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 52. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year. The capital structure of the Group consists of net debt, which includes the borrowings and lease liabilities disclosed in Notes 40, 41, 42, 43, 44 and 46, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital, reserves and retained profits. The Directors review the capital structure on a regular basis. As part of this review, the Directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the Directors, the Group will balance its overall capital structure through the payment of dividends and new share issues as well as the issue of new debt or the redemption of existing debt. 287 53. FINANCIAL INSTRUMENTS (a) Categories of financial instruments Financial assets Financial assets at FVTPL Financial assets at FVTOCI Derivative financial assets 12/31/2023 Rmb’000 41,918,640 8,163,898 1,279,110 12/31/2022 Rmb’000 (Restated) 43,999,383 820,940 1,000,756 Financial assets at amortised cost 111,560,176 101,351,991 Financial liabilities Derivative financial liabilities Financial liabilities at FVTPL Convertible Bonds – derivative component Financial liabilities at amortised cost 996,027 472,061 554,357 1,057,642 27,646 308,266 130,657,729 129,291,177 (b) Financial risk management objectives and policies The Group’s major financial instruments include trade receivables, loans to customers arising from margin financing business, other receivables, derivative financial assets, financial assets at FVTPL, debt instruments at FVTOCI, financial assets held under resale agreements, bank balances, clearing settlement fund held on behalf of customers, pledged bank deposits, clearing settlement fund, deposits and cash, placements from other financial institutions, accounts payable to customers arising from securities business, trade payables, other payables, derivative financial liabilities, bank and other borrowings, short- term financing note payable, bonds payable, convertible bonds and financial guarantee, financial assets sold under repurchase agreements, financial liabilities at FVTPL. Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (interest rate risk, currency risk, and other price risk), credit risk and impairment assessment, and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. 288 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (i) Interest rate risk The Group is exposed to fair value interest rate risk in relation to debt instruments at FVTOCI, loans to customers arising from margin financing business, financial assets held under resale agreements, fixed-rate time deposits, placements from other financial institutions, fixed-rate bank and other borrowings, fixed rate short-term financing note payable, bonds payable, debt component of convertible bonds, financial assets sold under repurchase agreements and financial liabilities at FVTPL (see Notes 28, 30, 32, 34, 35, 40, 41, 42, 43, 44 and 45 for details). The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances and clearing settlement fund held on behalf of customers, bank balances, clearing settlement fund, deposits and bank and other borrowings (see Notes 33, 34 and 40 for details). The Group currently does not have an interest rate risk hedging policy as the management considers the Group is not exposed to significant interest rate risk. The management will continue to monitor interest rate risk exposure and consider hedging against it should the need arise. The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. 289 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (i) Interest rate risk (Continued) Sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments, comprising variable-rate bank balances and clearing settlement fund held on behalf of customers, bank balances, clearing settlement fund, deposits and bank and other borrowings at the end of the reporting period. The analysis is prepared assuming the balances outstanding at the end of the reporting period were outstanding for the whole year. A 50 basis points (2022: 50 basis points) increase or decrease represents the management’s assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points (2022: 50 basis points) higher/lower and all other variables were held constant, the Group’s post-tax profit for the year ended December 31, 2023 would have increased/decreased by Rmb 221,938,000 (2022: Rmb212,895,000, as restated). This was mainly attributable to the Group’s exposure to interest rates on its variable-rate bank balances and clearing settlement fund. 290 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202353. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (ii) Currency risk Several subsidiaries of the Group have foreign currency denominated monetary assets and liabilities, which expose the Group to foreign currency risk. The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of the reporting date are as follows: Hong Kong dollar (“HKD”) United States dollar (“USD”) Euro dollar (“EUR”) (Note) Assets Liabilities 12/31/2023 12/31/2022 12/31/2023 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 2,311,475 1,066,784 – 225,872 862,574 – 282,732 4,123,803 1,815,465 190,485 3,562,939 1,788,401 Note: Amount represented both the debt and derivative component of the Convertible Bond 2021. Sensitivity analysis The Group is mainly exposed to HKD, USD and EUR relative to Rmb. The following table details the Group’s sensitivity to a 10% (2022: 10%) increase and decrease in Rmb against the relevant foreign currencies. 10% (2022: 10%) is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents the management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 10% (2022: 10%) change in foreign currency rates. A positive number below indicates an increase in post- tax profit where Rmb strengthen 10% (2022: 10%) against the relevant currency. For a 10% (2022: 10%) weakening of Rmb against the relevant currency, there would be an equal and opposite impact on the profit and other equity and the balances below would be negative. 291 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (ii) Currency risk (Continued) Sensitivity analysis (Continued) HKD impact USD impact EUR impact 12/31/2023 12/31/2022 12/31/2023 12/31/2022 12/31/2023 12/31/2022 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Profit or loss (152,880) (2,654) 229,276 202,527 136,157 134,130 In the management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year. (iii) Other price risk The Group is exposed to equity and debt security price risk in relation to its financial assets at FVTPL, derivative financial assets and liabilities and financial liabilities at FVTPL. The Group currently does not have a price risk hedging policy and the management will continue to monitor price risk exposure and consider hedging against it should the need arise. 292 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (iii) Other price risk (Continued) Sensitivity analysis For financial instruments other than derivative component of Convertible Bond 2021 The sensitivity analyses below have been determined based on the exposure to equity and debt security price risks at the reporting date. If the prices of the respective equity and debt instruments had been 5% (2022: 5%) higher/ lower, • • post-tax profit for the year ended December 31, 2023 would have increased/ decreased by Rmb1,571,949,000 as a result of the changes in fair value of financial assets at FVTPL. post-tax profit for the year ended December 31, 2022 would have increased/ decreased by Rmb1,649,977,000 as a result of the changes in fair value of financial assets at FVTPL. For derivative component of Convertible Bond 2021 The price risk in 2023 came from the derivative component of Convertible Bond 2021. The exposure to foreign currency exchange rate of the Convertible Bond 2021 had been covered in Note 53(b)(ii) already. 293 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (iii) Other price risk (Continued) Sensitivity analysis (Continued) For derivative component of Convertible Bond 2021 (Continued) Conversion option derivatives of Convertible Bond 2021 1) Changes in share price If the share price of the Company had been 10% (2022:10%) higher/lower while all other input variables of the valuation models were held constant, the Group’s profit for the year would have (decreased) increased as follows: Year ended 12/31/2023 Rmb’000 (5,746) 465 Year ended 12/31/2022 Rmb’000 (61,517) 35,379 Higher by 10% Lower by 10% 294 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Market risk (Continued) (iii) Other price risk (Continued) Sensitivity analysis (Continued) For derivative component of Convertible Bond 2021 (Continued) Conversion option derivatives of Convertible Bond 2021 (Continued) 2) Changes in volatility If the volatility to the valuation model had been 10% (2022:10%) higher/lower while all other variables were held constant, the Group’s profit for the year would have (decreased)/ increased as follows: Higher by 10% Lower by 10% Year ended 12/31/2023 Rmb’000 (1,408) 465 Year ended 12/31/2022 Rmb’000 (17,962) 12,818 295 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment As at December 31, 2023, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties provided by the Group is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position and the amount of contingent liability in relation to financial guarantee issued by the Group as disclosed in Note 56. The credit risk on liquid funds, representing bank balance, clearing settlement fund, deposits and cash is limited because the counterparties are state-owned banks or banks with high credit ratings assigned by international credit-rating agencies. Other items under the Group’s different operations with credit risk and corresponding impairment assessment are set out below: Toll operation and high grade road construction service The Group performs impairment assessment under ECL model upon application of HKFRS 9 on trade balances arising from toll operation on collective basis on individual basis, using life-time ECL under the simplified approach. The Group has no credit period granted to its trade customers of toll operation. All the Group’s trade receivable balances for toll operation, upon the conditions satisfied, are receivable from the government-operated organisations. In this regard, the Directors consider that the credit risk is low as the Group has no history of loss experience with the government-operated organisations in the past. No significant ECL was recognised as at December 31, 2023 and 2022. 296 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202353. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Securities operation The Group’s securities operation currently faces credit risk primarily from loans to customers arising from margin financing business, and financial assets held under resale agreements which are secured by clients’ securities or deposits held as collateral. It refers to the risk of loss arising from the debtor’s failure to meet its contractual obligations in a timely manner. i) Credit risk management Credit risk from loans to customers arising from margin financing business and financial assets held under resales agreements mainly including the debtor falsifying the application, failing to repay debts, violating the agreement, violating regulatory discipline of trading behaviour, and providing collateral that involves law dispute, etc. The Group management authorises professional personnel to examine and approve the credit limit of these businesses, as well as adjust such credit limit in accordance with the regular assessment of the debtor’s repayment capacity. Risk management division oversights the collaterals and usage of related credit limit, and initiates margin call if necessary. Once the debtor fail to enhance the collateral to the account, the credit risk will be controlled by liquidating the pledged securities. ii) Measurement of ECL Since January 1, 2018, The Group has applied the ECL model to measure the expected credit losses for applicable financial assets mainly including loans to customers arising from margin financing business and financial assets held under resale agreements. 297 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Securities operation (Continued) ii) Measurement of ECL (Continued) The group has used the “3 stage” ECL model to assess the credit losses when its credit risk has increased significantly since initial recognition: (i) An asset moves to stage 1 where there has low risk of default or has not been a significant increase in credit risk and that are not credit impaired. The Group will continuously monitor its credit risk; (ii) An asset moves to stage 2 where there has been a significant increase in credit risk since initial recognition but that are not credit impaired. The Group does not see it as an impairment loss occurred instrument; (iii) An asset moves to stage 3 when impairment losses occurred; and (iv) The loss impairment for financial instruments in stage 1 is anticipated credit losses for the next 12 months, which correspond to the amount of anticipated credit losses for the entire life time resulting from possible defaults within the next 12 months. In the second or third stage, the expected credit losses of financial instruments are measured for the entire life time and the expected credit losses are recorded. The factors the Group considers whether credit risk increases significantly refer to Note 6. In particular, for loans to customers arising from margin financing business and financial assets held under resale agreement, the Group generally believes that when the loan to collateral ratio determined by fair value reaches the warning line, the credit risk increases significantly and needs to be transferred to “stage 2”, and when the loan to collateral ratio determined by fair value reaches the liquidation line or expect there would be loss after closing the position mandatorily, it will be transferred to “stage 3”. 298 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202353. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Securities operation (Continued) ii) Measurement of ECL (Continued) The Group uses PD, EAD and LGD to measure credit risks: (i) PD is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions; (ii) EAD is the amount that the Group should be repaid at the time of default in the next 12 months or throughout the remaining life; and (iii) LGD is an estimate of the loss arising on default. The Group estimates LGD based on the history of recovery rates and considers the recovery of any collateral that is integral to the financial asset, taking into account forward-looking economic assumptions where relevant. The expected credit losses are measured based on the probability weighted results of PD, EAD and LGD. The assessment of significant increase in credit risk and the measurement of ECL all involve forward-looking information. When considering macroeconomic forward-looking adjustments, the Group simulates optimistic, extremely optimistic, pessimistic, and extremely pessimistic scenarios by adjusting the coefficients of the baseline scenario, and assigns corresponding weights. Through the analysis of historical data, the Group identifies the key economic indicators affecting the credit risk and ECL of each asset portfolio. The Group regularly forecasts the economic condition by selecting various indicators within the macroeconomic indicator pool to make a sound estimation of the ECL. 299 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Securities operation (Continued) In order to determine the relationship between these economic indicators and the default probability as well as the default loss rate, the Group constructs an econometric model to determine the impact of historical changes in these indicators on the PD and LGD. The Group makes forward-looking estimation of the ECL based on the scenario reflecting key economic indicators above. The Group accrues the credit loss provisions for the next 12 months for financial assets in Stage 1, and accrues the credit loss provisions for the whole life for those financial assets in Stage 2 and Stage 3. The Group has classified exposures with similar risk characteristics when calculating anticipated credit loss impairment in a portfolio. During the classification, the Group obtained sufficient information to ensure its statistical reliability. Other operations In respect of the Group’s other operations, the management of the Group has delegated a team responsible for determination of credit limits and credit approvals. Other monitoring procedures are in place to ensure that follow-up action is taken to recover overdue debts. The Group did not experience significant credit loss on its other operations, and performs impairment assessment under ECL model upon application of HKFRS 9 on trade balances based on provision matrix. In this regard, the Directors consider that the Group’s credit risk is significantly reduced. 300 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202353. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) The Group’s internal credit risk grading assessment comprises the following categories: Other financial assets/other items Internal credit rating Description Trade receivables (Note) Low risk (stage 1) The counterparty has a low risk of default and Lifetime ECL – not 12-month ECL does not have any past-due amounts credit-impaired Doubtful (stage 2) There have been significant increases in Lifetime ECL – not Lifetime ECL – not credit risk since initial recognition through credit-impaired credit-impaired information developed internally or external resources Loss (stage 3) There is evidence indicating the asset is Lifetime ECL – Lifetime ECL – credit-impaired credit-impaired credit-impaired Write-off There is evidence indicating that the debtor Amount is written off Amount is written off is in severe financial difficulty and the Group has no realistic prospect of recovery Note: Other financial assets include loans to customers arising from margin financing business, bank balances, clearing settlement fund, deposits and cash, pledged bank deposit, bank balances and clearing settlement fund held on behalf of customers, debt instruments at FVTOCI, financial assets held under agreements and other receivables. 301 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) The table below details the credit risk exposures of the Group’s financial assets and financial guarantee contracts, which are subject to ECL assessment: Notes 28 29 External credit rating Internal credit rating 12/31/2023 12/31/2022 12-months Gross carrying Gross carrying or lifetime ECL amount Rmb’000 amount Rmb’000 (Restated) N/A N/A N/A N/A Low risk 12-month ECL 8,163,898 820,940 Low risk Lifetime ECL Low risk Lifetime ECL Low risk Lifetime ECL 545,379 284,654 7,193 249,088 309,700 10,444 30 N/A Low risk 12-month ECL 18,782,496 16,753,901 Doubtful Lifetime ECL – not credit- impaired Loss Lifetime ECL – credit- impaired 1,164,213 812,627 2,077 2,420 34 AA to AAA Low risk 12-month ECL 31,248,250 24,263,976 Financial assets Debt instruments at FVTOCI Trade receivables (Note i) – toll operation – securities operation – others Loans to customers arising from margin financing business – securities operation Bank balances, clearing settlement fund, deposit and cash 302 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) External credit rating Internal credit rating Notes 12/31/2023 12/31/2022 12-months Gross carrying Gross carrying or lifetime ECL amount Rmb’000 amount Rmb’000 (Restated) 33 32 31 56 AA Low risk 12-month ECL 45,415,217 48,744,803 N/A Low risk 12-month ECL 7,117,112 5,925,679 Doubtful Lifetime ECL– not credit- impaired Loss Lifetime ECL– credit- impaired N/A Low risk 12-month ECL 634,750 365,754 94,471 6,463,994 94,471 4,178,578 N/A Low risk 12-month ECL 259,484 321,899 Bank balances and clearing settlement fund held on behalf customers – securities operation Financial assets held under resale agreements – securities operation Other receivables Other items Financial guarantee contracts (Note ii) – toll operation Notes: i. During the year ended December 31, 2023, the Group provided ECL on trade receivables by Rmb5,748,000 (2022: Rmb6,348,000, as restated). ii. For financial guarantee contracts, the gross carrying amount represents the maximum amount the Group has guaranteed under the respective contracts. 303 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Concentration of credit risk As at December 31, 2023, other than the concentration of credit risk on trade receivables and financial guarantee contract amounting to Rmb837,226,000 (2022: Rmb569,232,000, as restated), and Rmb259,484,000 (2022: Rmb321,899,000), respectively, of which these balances were only limited and concentrated to a few counterparties, the Group does not have any other significant concentrations of credit risk. There are also no concentration risks on its margin financing business and financial assets held under resale agreements as at December 31, 2023 and 2022 respectively as the Group has a large number of clients who are dispersed. The Group’s concentration of credit risk by geographical location is mainly in the PRC. Liquidity risk Most of the bank balances, clearing settlement fund, pledged bank deposits and cash at December 31, 2023 and 2022 were denominated in Rmb which is not a freely convertible currency in the international market. The exchange rate of Rmb is regulated by the PRC government and the remittance of these Rmb funds out of the PRC is subject to foreign exchange controls imposed by the PRC government. The Group closely monitors its cash position resulting from its operations and maintains a level of cash and cash equivalents deemed adequate by the management to enable the Group to meet in full its financial obligations as they fall due for the foreseeable future. The following table details the Group’s remaining contractual maturity for its non- derivative financial liabilities. Liquidity risk analysis below excludes derivative component of Convertible Bond 2021 as the settlement of which does not involve cash settlement. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. 304 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202353. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Liquidity risk (Continued) Liquidity tables Weighted average interest rate % On demand or less than 3 months Rmb’000 3 months – 1 year 1 – 3 years 3 – 5 years over 5 years Total undiscounted cash flows Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Carrying amount at year end Rmb’000 2023 Non-derivative financial liabilities Accounts payable to customers arising from securities business Trade payables Other payables Bank and other borrowings – fixed rate – variable rate Short-term financing note payable Financial assets sold under repurchase agreements Placements from other financial institutions Bonds payable Convertible Bonds – debt component Lease liabilities Financial guarantee Financial liabilities at fair value through profit or loss – – – 2.70%-5.25% 3.73%-7.43% 2.89% 4.14% 2.05% 3.27% 3.36%-4.74% 3.62%-5.35% – – 44,803,323 1,265,174 696,520 2,360,057 132,765 1,985,585 24,636,064 1,950,778 158,063 1,592,274 46,444 259,484 – – – 963,137 1,683,870 162,338 – – – – – 451,015 3,244,412 – – – – – – – – – – – 44,803,323 44,803,323 1,265,174 696,520 1,265,174 696,520 3,774,209 3,726,547 3,006,150 9,286,371 17,353,568 14,080,396 – – – – – – 2,147,923 2,137,611 24,636,064 24,592,145 1,950,778 1,950,000 5,932,643 23,412,573 584,570 1,107,732 31,195,581 29,014,251 27,999 101,318 – 111,995 240,416 7,454,720 115,486 – – – – 26,121 – – – 9,186,988 529,785 259,484 8,441,932 475,430 – 364,464 107,597 472,061 472,061 80,250,995 8,978,902 27,460,411 11,160,926 10,420,224 138,271,458 131,655,390 305 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Liquidity risk (Continued) Liquidity tables (Continued) Weighted average interest rate % On demand or less than 3 months Rmb’000 – – – 48,449,595 1,220,832 460,290 3%-7.08% 3%-4.70% 135,537 228,932 2022 (restated) Non-derivative financial liabilities Accounts payable to customers arising from securities business Trade payables Other payables Bank and other borrowings – fixed rate – variable rate Short-term financing note payable 3.17% 3,468,558 3.68% 2.20% 3.32% 23,831,743 700,300 92,209 Financial assets sold under repurchase agreements Placements from other financial institutions Bonds payable Convertible Bonds – debt component Lease liabilities Financial guarantee Financial liabilities at fair value through profit or loss 306 3 months – 1 year 1 – 3 years 3 – 5 years over 5 years Total undiscounted cash flows Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Carrying amount at year end Rmb’000 – – – 3,629,063 1,489,803 210,789 – – – – – 2,996,402 3,572,822 – – – – – – – – – – – 48,449,595 48,449,595 1,220,832 460,290 1,220,832 460,290 6,761,002 6,119,923 3,518,895 10,442,266 19,252,718 16,236,894 – – – – – – 3,679,347 3,567,025 23,831,743 23,825,242 700,300 700,000 7,587,916 10,361,235 5,976,450 1,387,522 25,405,332 23,307,569 3.36%-4.74% 3.62%-5.35% – – – 12,771 321,899 13,501 107,172 – 976,043 81,599 70,000 208,708 1,655,135 127,024 – – – – 50,631 – – 7,419,967 9,158,603 5,403,807 444,030 – 506,306 321,899 1,057,642 1,057,642 79,898,709 13,119,843 17,209,167 11,277,504 19,300,386 140,805,609 130,792,849 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (b) Financial risk management objectives and policies (Continued) Liquidity risk (Continued) Liquidity tables (Continued) The amounts included above for financial guarantee contracts are the maximum amounts the Group could be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely than not that no amount will be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses. The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates differ to those estimates of the interest rates determined at the end of the reporting period. As at December 31, 2023 and 2022, the Group has not entered into any master netting arrangements with counterparties. The collaterals of which, such as financial assets held under resale agreement, financial assets at FVTPL, loans to customers arising from margin financing business, placements from other financial institutions and financial assets sold under repurchase agreements, financial liabilities FVTPL, etc., are disclosed in the corresponding notes, which are generally not on the net basis in financial position. However, the risk exposure associated with favourable contracts is significantly reduced by the collaterals received by the Group which could be recovered to the extent if a default occurs, in respect of the outstanding receivable amounts from the counterparty. The analysis above does not include the cash flow of derivatives, which do not have material impact on the cash flow of the Group. 307 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments This note provides information about how the Group determines fair values of various financial assets and financial liabilities. Fair value measurements recognised in the statement of financial position that are measured at fair value on a recurring basis Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used). If there is a reliable market quote for a financial instrument, the fair value of the financial instrument is measured based on quoted market price. If a reliable quoted market price is not available, the fair value of the financial instrument is estimated using valuation techniques. For the fair value of financial instruments categorised within Level 2, the valuation techniques applied include discounted cash flow, recent transaction price and net asset value method. The significant observable inputs used in the valuation techniques used for Level 2 include future cash flows estimated based on applying the interest yield curves, net asset values determined with reference to observable (quoted) prices of underlying investment portfolio, contractual terms, forward interest rates and forward exchanges. For financial instruments categorised within Level 3, fair values are determined by using valuation techniques, including valuation methods such as discounted cash flow model, the option pricing model, net asset value method and recent transaction price method. Determinations to classify fair value measures within Level 3 are generally based on the significance of the unobservable inputs to the overall fair value measurement. The following table presents the valuation techniques and inputs used for the major financial instruments in Level 3. 308 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202353. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) Valuation Significant Relationship of unobservable Financial instruments Fair value technique(s) hierarchy and key input(s) unobservable input(s) to fair input(s) value Equity securities Level 3 The fair value is determined with reference to Discount for lack The higher the the quoted market prices with an adjustment of marketability. discount, the of discount for lack of marketability. This The volatility of lower the fair discount is determined by option pricing the share prices value. The higher model. of the securities. the volatility, the lower the fair value. Debt investments Level 3 The fair value is determined with reference to Discount rate The higher the the quoted market prices with an adjustment of discount for lack of marketability. discount, the lower the fair value. Trust products Level 3 The fair value is determined with reference Discount rate The higher the to the net asset value of the underlying investments with an adjustment of discount for the credit risk of counterparty. discount, the lower the fair value. Equity securities/ Level 3 Recent transaction price with an adjustment of Discount for lack The higher the Unlisted equity investments discount for the marketability. of marketability. discount, the lower the fair value. 309 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) Valuation Significant Relationship of unobservable Financial instruments Fair value technique(s) hierarchy and key input(s) unobservable input(s) to fair input(s) value Interests Level 3 The fair value is determined with reference P/E multiples The higher the attributable to other holders of consolidated structured entities to the net asset value of the structured Discount for lack multiples, the entities, calculated based on pricing/yield of of marketability. higher the fair comparable companies with an adjustment of discount for lack of marketability. value. The higher the discount, the lower the fair value. Derivative Level 3 Binomial option pricing model Expected volatility The higher the component of Convertible Bond (23.32%) taking expected into account the volatility, the actual historical higher the fair share price of value. the Company over the same time period as the Convertible Bond’s remaining time to maturity. Derivative assets/ Level 3 The option pricing model is used which is The volatility of The higher volatility liabilities calculated based on the option exercise the underlying of the underlying price, the price and volatility of the equity equity instrument, underlying equity instrument, the option instrument for the greater impact exercise time, and the risk-free interest rate. option on the fair value. There were no transfer between Level 1 and Level 2 during the year. 310 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) As at December 31, 2023 Financial assets at FVTPL – Equity securities – Funds – Debt investments – Asset management schemes – Trust products – Unlisted equity investments Level 1 Rmb’000 Level 2 Rmb’000 Level 3 Rmb’000 Total Rmb’000 3,689,142 1,406,449 6,344,926 – – – 120,800 7,157,799 19,115,369 3,792,244 – – 65,617 – 3,875,559 8,564,248 4,500 25,464,795 – 3,792,244 32,267 189,527 32,267 189,527 Sub-total 11,440,517 30,186,212 291,911 41,918,640 Debt instruments at FVTOCI 514,806 7,649,092 – 8,163,898 Derivative assets – 141,810 1,137,300 1,279,110 Financial liabilities at FVTPL – Securities – Fund – Structured entities Sub-total Derivative component of Convertible Bond 2021 Derivative liabilities Level 1 Rmb’000 Level 2 Rmb’000 Level 3 Rmb’000 Total Rmb’000 327,658 – – 3,692 33,114 87,571 327,658 124,377 – – – 104,513 – – 20,026 20,026 27,646 891,514 331,350 33,114 107,597 472,061 27,646 996,027 311 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) As at December 31, 2022 Level 1 Rmb’000 Level 2 Rmb’000 Level 3 Rmb’000 Total Rmb’000 Financial assets at FVTPL – Equity securities – Funds – Debt investments – Asset management schemes – Trust products – Unlisted equity investments 1,626,768 1,183,099 4,440,080 – – – 79,471 270,990 5,808,720 28,617,288 1,732,338 – – 1,977,229 6,991,819 – 4,500 33,061,868 – 1,732,338 154,799 81,330 154,799 81,330 Sub-total 7,249,947 36,237,817 511,619 43,999,383 Debt instruments at FVTOCI Derivative assets 128,529 – 692,411 375,529 – 820,940 625,227 1,000,756 Level 1 Rmb’000 Level 2 Rmb’000 Level 3 Rmb’000 Total Rmb’000 Financial liabilities at FVTPL – Securities – Fund – Structured entities 904,187 – – 11,220 60,636 81,587 Sub-total 904,187 153,443 – – 12 12 Derivative component of Convertible Bond 2021 Derivative liabilities – – – 212,997 308,266 341,360 915,407 60,636 81,599 1,057,642 308,266 554,357 312 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) The following tables represent the changes in Level 3 financial assets at FVTPL during the years ended December 31, 2023 and 2022, respectively. For the changes in Level 3 derivative component of Convertible Bond 2022 during the year ended December 31, 2023 and 2022, please refer to Note 43. For the year ended December 31, 2023 Financial instruments in Level 3: At beginning of the year Additions (Note i) Disposal Transfer out (Note ii) Changes in fair value changes Financial Derivative Financial Derivative assets at financial liabilities at financial FVTPL assets FVTPL liabilities Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 511,619 144,560 (386,486) (4,617) 26,835 625,227 460,160 54,411 – (2,498) 12 20,000 (12) – 26 341,360 453,377 273,455 – 1,478,218 1,078,097 (58,632) (4,617) (176,678) (152,315) At end of the year 291,911 1,137,300 20,026 891,514 2,340,751 Total gains/(losses) for assets held at the end of the year – unrealised gains/(losses) recognised in profit or loss 245,066 Unrealised gains/(losses) recognised in profit or loss for FVTPL are disclosed in Note 9. Notes: (i) Financial assets at FVTPL included the equity securities traded on the NEEQ with decreased turnover rates with significant unobservable inputs applied in valuing these investments. The equity securities traded on the NEEQ with decreased turnover rates were transferred from Level 2 to Level 3 in the fair value hierarchy. (ii) These included equity securities traded on stock exchanges with lock-up periods. They were transferred from Level 3 to Level 1 when the lock-up period lapsed and became unrestricted. 313 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) For the year ended December 31, 2022 Financial instruments in Level 3: Financial Derivative Financial Derivative assets at financial liabilities at FVTPL assets FVTPL financial liabilities Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 At beginning of the year Additions Disposal Transfer out 979,971 168,135 (497,200) (145,297) 118,757 530,443 (47,261) – Changes in fair value changes 6,010 23,288 At end of the year 511,619 625,227 Total gains/(losses) for assets held at the end of the year – unrealised gains/(losses) recognised in profit or loss 18 – – – (6) 12 123,676 457,229 1,222,422 1,155,807 (80,100) (624,561) – (145,297) (159,445) (130,153) 341,360 1,478,218 561,172 Unrealised gains/(losses) recognised in profit or loss for FVTPL are disclosed in Note 9. 314 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 53. FINANCIAL INSTRUMENTS (Continued) (c) Fair value measurements of financial instruments (Continued) As at 12/31/2023 As at 12/31/2022 Carrying amount Rmb’000 Fair value Rmb’000 Carrying amount Rmb’000 Fair value Rmb’000 Debt component of Convertible Bond 2021 1,815,465 1,779,176 1,480,135 1,343,040 Debt component of Convertible Bond 2022 6,626,467 6,698,743 3,923,672 3,929,596 The fair value of the debt component of Convertible Bond 2022 and Convertible Bond 2021 as at December 31, 2023 and December 31, 2022 are under level 3 category and was determined by the Directors with reference to the valuation performed by a firm of independent professional valuers. The fair value of the debt component of Convertible Bond 2022 and Convertible Bond 2021 are determined by discounted cash flow using the inputs including estimated cash flows over the remaining terms of the Convertible Bond 2022 and Convertible Bond 2021 and discount rate that reflected the credit risk of the Company. 315 54. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash. Liabilities arising from financing activities are those for which cash flows were or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities. Bank and Short-term Dividends other Bonds Convertible Lease financing payable borrowings payable Bonds Liabilities note payable Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 At January 1, 2022 (originally stated) Adjustment At January 1, 2022 (restated) Financing cash flows – – – 16,743,917 27,649,091 1,714,662 465,915 7,940,702 54,514,287 5,369,180 – – – – 5,369,180 22,113,097 27,649,091 1,714,662 465,915 7,940,702 59,883,467 (restated) (2,041,416) 1,692,848 (4,306,310) 3,851,944 (134,827) (4,362,900) (5,300,661) – – – – 3,397 2,038,019 (859,906) (1,078,777) (1,465,354) – – – – – – – 276,230 – – – – (31,951) 37,073 – (5,126) (114,754) (2,058,563) – 94,998 – – – – – – – – (1,465,354) 94,998 (31,951) 316,700 2,038,019 – – – – 876,132 767,335 123,880 23,070 103,977 1,894,394 – – – – 16,562 (97) – – – – 16,562 (97) 22,356,817 23,307,569 5,712,073 444,030 3,567,025 55,387,514 Operating cash flows (restated) Non-cash changes Disposal of a subsidiary New lease entered Fair value adjustment Exchange realignment Accrued dividend Interest expenses (restated) Interest expenses adjustment due to bond disposal Conversion into shares At December 31, 2022 (restated) 316 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 54. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES (Continued) Bank and Short-term Dividends other Bonds Convertible Lease financing payable borrowings payable Bonds Liabilities note payable Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 At January 1, 2023 (restated) Financing cash flows Operating cash flows Non-cash changes New lease entered Lease decreased Fair value adjustment Exchange realignment Accrued dividend Interest expenses Conversion into shares – 22,356,817 23,307,569 5,712,073 444,030 3,567,025 55,387,514 (1,977,242) (4,535,590) 5,700,000 2,529,887 (145,537) (1,417,760) 153,758 – – – – 14,135 2,131,680 – – (800,299) (836,385) (11,163) (7,683) (107,079) (1,762,609) – – – – – – – – 55,396 – – – 165,368 (3,465) (280,620) 79,600 – – – – – – – – – 165,368 (3,465) (280,620) 149,131 2,131,680 786,015 787,671 412,301 22,717 95,425 2,104,129 – – (146) – – (146) At December 31, 2023 168,573 17,806,943 29,014,251 8,441,932 475,430 2,137,611 58,044,740 55. OPERATING LEASES The Group as lessor The Group leased their service areas and communication ducts and part of spare office premises under operating lease arrangements. Leases are negotiated for terms ranging from 1 to 25 years and rentals are fixed annually. 317 55. OPERATING LEASES (Continued) The Group as lessor (Continued) At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments: Within one year In the second to fifth year inclusive After five years 12/31/2023 Rmb’000 12/31/2022 Rmb’000 61,778 146,857 63,834 272,469 61,817 149,833 30,765 242,415 For certain of the Group’s service areas, the rental income is variable and being calculated at the higher of a pre-agreed percentage of revenue of the relevant service areas made by the lessees or the minimum lease payments. The commitment above represented the minimum lease payments from lessees only and do not include any contingent rent elements. 56. CONTINGENT LIABILITIES Guarantees given to bank, in respect of a joint venture 12/31/2023 Rmb’000 259,484 12/31/2022 Rmb’000 321,899 318 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 56. CONTINGENT LIABILITIES (Continued) The Group provided a financial guarantee to Shengxin Co, a 50% owned joint venture of the Group, in favour of a bank for 50% of its outstanding long-term bank borrowings and interest, and accrued off-balance sheet provision in light of the financial guarantee. As at December 31, 2023, the bank borrowings of Shengxin Co and accrued interest amounted to Rmb518,967,000 (2022: Rmb643,798,000). The Directors consider that the fair value of the guarantee is insignificant at initial recognition and default by the guaranteed party is not probable, therefore the provision under ECL model for financial guarantee contract is not material as at December 31, 2023 and 2022. 57. RELATED PARTY TRANSACTIONS AND BALANCES Other than disclosed elsewhere in the consolidated financial statements, during the year, the Group also entered into the following significant transactions with related parties: (i) Transactions and balances with Communications Group and government related parties Details of significant transactions with Communications Group are summarised below: Borrowings Pursuant to the loan contract entered into between Shangsan Co and Communications Group on June 13, 2022, Communications Group agreed to provide Shangsan Co borrowings amounting to Rmb2,735,000,000 at a fixed interest rate of 4.5% per annum, with maturity date of December 13, 2023. Principal amount of Rmb1,100,000,000 was repaid on December 17, 2022. Principal amount of Rmb 600,000,000 was repaid on January 17, 2023. Principal amount of Rmb 535,000,000 was repaid on April 19, 2023, Principal amount of Rmb 500,000,000 was repaid on July 12, 2023. 319 57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (i) Transactions and balances with Communications Group and government related parties (Continued) Borrowings (Continued) Pursuant to the entrusted loan contracts entered into between the Company and Zhejiang Highway Logistic Company Limited (“Logistic Co”), a wholly-owned subsidiary of the Communications Group, on July 21, 2023. Logistic Co agreed to provide the Company with entrusted loans amounting to Rmb50,810,229 at a fixed interest rate of 3.00% per annum, with maturity date of July 20, 2024. Pursuant to the entrusted loan contracts entered into between HuangQuNan Co and Communications Group on March 7, 2023, Communications Group agreed to provide the Company with entrusted loans amounting to Rmb2,330,000,000 with a maturity date of March 7, 2024 and at a fixed interest rate of 3.65% per annum as at December 31, 2023. For the year For the year ended 12/31/2023 Rmb’000 116,470 ended 12/31/2022 Rmb’000 (Restated) 79,059 Interest expenses incurred 320 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (i) Transactions and balances with Communications Group and government related parties (Continued) Management and Administrative services The Company has entered into agreements with the Communications Group and its subsidiaries, pursuant to which, the Company would provide the management and administrative services for nine toll roads, including Shensuzhewan Expressway, South Line of Qianjiang Channel, Ningbo Yongtaiwen Expressway, Hangning Expressway, Hangrao Expressway, Jiaxing 320 National Highway, North Line of Qianjiang Channel, Linjian Expressway, Zhoudai Bridge and Fuchimen Bridge of Ningbo Zhoushan Port Main Passage and North Connection of Qianjiang Channel. According to the agreements, the Company would charge the Communications Group and its subsidiaries management fee on actual cost basis. During this year, a total management fee of Rmb21,153,488 (2022: Rmb13,777,059) has been charged. Other transactions Toll road service area leasing income earned (Note a) Toll road service area management fee paid (Note a) Property leasing income earned Road maintenance service expenses incurred Construction cost incurred (Note b) System development and maintenance, expressway mechanical and electrical engineering services expenses incurred Toll road related inspection services expense incurred Underwriting and sponsor service income earned Year ended 12/31/2023 Rmb’000 10,401 10,552 4,993 578,389 411,978 44,406 12,474 1,379 Year ended 12/31/2022 Rmb’000 (Restated) 12,770 7,734 4,816 630,757 537,829 120,916 10,664 – 321 57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (i) Transactions and balances with Communications Group and government related parties (Continued) Other transactions (Continued) Notes: (a) Pursuant to the leasing and operation agreement entered into between Jinhua Co (as defined in Note 58), Hanghui Co (as defined in Note 58), Longlililong Co (as defined in Note 58), Zhoushan Co (as defined in Note 58), HuangQuNan Co (as defined in Note 58) and Zhejiang Commercial Group Co., Ltd. (“Zhejiang Commercial Group”, a fellow subsidiary of Communications Group), the toll road service areas were leased to Zhejiang Commercial Group Co.,Ltd, and Zhejiang Communications Group managed the operation of the service area in respect of the toll road service area. Such businesses began from January 1, 2011, and will be expired at the same time with the operating rights. (b) On April 18, 2023, Jiaxing Branch of LongLiLiLong Expressway Co. and Shengzhou Branch of Shangsan Expressway Co. entered into the Construction Agreement with Jiaogong Underground Construction, pursuant to which the expansion project of Jiaxing Service Area of Shanghai-Hangzhou Expressway and Shengzhou Service Area of Shangsan Expressway was undertaken respectively. Each of Group and Jiaogong Underground Construction is an indirectly non-wholly owned subsidiary of Communications Group. On November 29, 2023, the Company and its subsidiaries entered into the Guardrail Agreements with Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd. (“Zhejiang Shunchang”), Zhejiang Expressway Maintenance Co., Ltd. (“Maintenance Co”) and Zhejiang Jiaogong High-grade Expressway Maintenance Co., Ltd. (“Jiaogong Maintenance”) respectively, pursuant to which the guardrail revamp and upgrade projects was undertaken in respect of six expressways operated by the Group. Each of Zhejiang Shunchang, Maintenance Co and Jiaogong Maintenance is an indirect subsidiary of Communications Group. 322 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202357. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (i) Transactions and balances with Communications Group and government related parties (Continued) Other transaction balances In addition to the transaction balances already disclosed in the report, the other material transaction balances in relation to the transactions disclosed above with related parties are listed below. Other receivables Trade payables Other payables 12/31/2023 Rmb’000 220,498 407,040 161,312 12/31/2022 Rmb’000 (Restated) 206,832 407,523 170,704 Sales of asset management schemes and derivative contract business with Communications Group During the year, Zheshang Securities Asset Management Co., Ltd. (“Asset Management”, an indirect subsidiary of the Company) earned the management fee income of Rmb94,934 (2022: Rmb234,549) from Zhejiang Zheshang Financial Holdings, Co., Ltd. Other transactions with government related parties The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government (“government-related entities”). In addition, the Group itself is part of a larger group of companies under the Communications Group which is controlled by the PRC government. However, due to the business nature, in respect of the Group’s toll road and securities business, the Directors are of the opinion that it is impracticable to ascertain the identity of counterparties and accordingly whether the transactions are with other government-related entities in the PRC. 323 57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (i) Transactions and balances with Communications Group and government related parties (Continued) Other transactions with government related parties (Continued) In addition, the Group has entered into other banking transactions, including deposit placements, borrowings and other general banking facilities, with certain banks and financial institution which are government-related entities in its ordinary course of business. In view of the nature of those banking transactions, the Directors are of the opinion that separate disclosure would not be meaningful. (ii) Transactions and balances with associates and other related parties Financial service provided by Zhejiang Communications Finance The Group entered into a financial services agreement with Zhejiang Communications Finance. Pursuant to the agreement, Zhejiang Communications Finance agreed to provide the Group with the deposit services, the loan and financial leasing services, the clearing services and other financial services. Loan advanced from Zhejiang Communications Finance During the year, Shangsan Co has repaid short-term loans with an aggregated principal amount of Rmb200,000,000 to Zhejiang Communications Finance. During the year, Zhoushan Co has repaid short-term loans with an aggregated principal amount of Rmb130,000,000 to Zhejiang Communications Finance. During the year, LongLiLiLong Co has repaid short-term and long-term loans with an aggregated principal amount of Rmb970,232,000 to Zhejiang Communications Finance. During the year, Zhejiang Communications Finance provided LongLiLiLong Co with short-term loans with an aggregated principal amount of Rmb49,000,000 (2022: Rmb154,000,000) and fixed rate of 3.7% per annum (2022: 4.13%). 324 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202357. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (ii) Transactions and balances with associates and other related parties (Continued) Financial service provided by Zhejiang Communications Finance (Continued) Loan advanced from Zhejiang Communications Finance (Continued) During the year, Zhejiang Communications Finance provided LongLiLiLong Co with long-term loans with an aggregated principal amount of Rmb441,000,000 (2022: Rmb546,000,000) and fixed rate of 3.7% per annum (2022: 4.13%). Outstanding loan payable balances: repayable within one year 1 to 5 years over 5 years Interest expenses incurred 12/31/2023 Rmb’000 12/31/2022 Rmb’000 179,288 870,318 399,616 789,026 958,848 512,710 1,449,222 2,260,584 Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 78,076 99,755 325 57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (ii) Transactions and balances with associates and other related parties (Continued) Financial service provided by Zhejiang Communications Finance (Continued) Deposits to Zhejiang Communications Finance Bank balances and cash – Cash and cash equivalents 12/31/2023 Rmb’000 12/31/2022 Rmb’000 (Restated) 2,936,333 3,013,781 Year ended 12/31/2023 Rmb’000 Year ended 12/31/2022 Rmb’000 (Restated) Interest income earned 51,422 35,580 Sales of asset management schemes with Zhejiang Communications Finance During the year, Asset Management sold 180,618,622 units (2022: 259,864,605 units) equivalent to Rmb200,000,000 (2022: Rmb259,999,000) of the asset management schemes to Zhejiang Communications Finance. Management fee income of Rmb8,673,317 (2022: Rmb4,352,774) was earned. 326 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 57. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (ii) Transactions and balances with associates and other related parties (Continued) Purchase/Sales of inventory from/to and derivatives contract business with Zheshang Development Group Co., Ltd. and its subsidiaries (collectively referred to as “Zheshang Development Group”) During the year, Zhejiang Zheqi purchased and sold commodities of Rmb223,481,124 (2022: Rmb447,327,097) and Rmb402,380,891 (2022: Rmb329,366,545) respectively from and to Zheshang Development Group, to operate commodity trading business. As at December 31, 2023, Zhejiang Zheqi received deposits of Rmb5,998,290 (2022: Rmb30,206,224) from Zheshang Development Group for derivatives business. Zheshang Futures had the balance of Rmb210,274,925 (2022: Rmb230,984,810) with the Zheshang Development Group in the accounts payable to customers arising from securities business. During the year, Zhejiang Zheqi carried out derivatives contract business with Zheshang Development Group, and the investment losses was Rmb49,241,604 (2022: gains Rmb254,425,726) in total. Zhajiasu Co provides China Merchants Expressway Network & Technology Holdings Co. Ltd. (“China Merchants Expressway”, another shareholder of Zhajiasu Co) with entrusted loan According to the entrusted loan contract signed between Zhajiasu Co and China Merchants Expressway on July 30, 2021, Zhajiasu Co provides an entrusted loan of Rmb180,000,000 at a fixed rate of 2.75% per annum. Interest income during the Period was Rmb 4,734,670. (iii) Key management emoluments The remuneration of the Directors, supervisors and key management personnel during the year was Rmb10,261,000 (2022: Rmb9,718,000) including retirement benefit scheme contribution of Rmb328,000 (2022: Rmb334,000) which is determined by the performance of the individuals and the market trends. 327 58. PARTICULARS OF SUBSIDIARIES OF THE COMPANY 58.1 General information of subsidiaries Registered and paid-in Date and capital/share place of registration capital Rmb Name of subsidiary Percentage of equity interest attributable to the Company Direct Indirect Principal activities 12/31/2023 12/31/2022 12/31/2023 12/31/2022 Zhejiang Linping Expressway Co., Note 1 75,223,000 Ltd. (“Linping Co”) % 51 % (Restated) 51 Shangsan Co Note 2 5,380,000,000 73.625 73.625 Zhejiang Expressway Vehicle Towing Note 3 8,000,000 100 100 and Rescue Services Co., Ltd (“Towing Co”) % – – – % (Restated) – – – Management of the Linping Section of the Shanghai-Hangzhou Expressway Management of the Shangsan Expressway Provision of vehicle towing, repair and . emergency rescue services Zheshang Securities Note 4 3,878,194,246 Zheshang Futures Note 5 1,371,244,600 Zheshang Capital Management Note 6 500,000,000 Asset Management Note 7 1,200,000,000 Ningbo Dongfang Jujin Investment Note 8 1,000,000 Management Co., Ltd (“Dongfang Jujin”) Zhejiang Zheqi Note 9 2,200,000,000 – – – – – – – – – – – – *40.3384 *40.3385 Operation of securities business **39.7871 **39.7872 Operation of securities business **40.3384 **40.3385 Operation of securities business **40.3384 **40.3385 Provision of asset management service – **40.3385 Provision of investment management and advisory services **39.7871 **39.7872 Trading of future Zhejiang Jinhua Yongjin Expressway Note 10 1,350,000,000 100 100 – – Management of the Jinhua Section of the Co., Ltd. (“Jinhua Co”) Ningbo- Jinhua Expressway 328 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 58. P A R T I C U L A R S O F S U B S I D I A R I E S O F T H E C O M P A N Y (Continued) 58.1 General information of subsidiaries (Continued) Registered and paid-in Date and capital/share place of registration capital Rmb Name of subsidiary Hanghui Co Note 11 3,101,853,000 Hangzhou Jujin Jiawei Investment Note 12 206,103,000 Management (Limited Partnership) (“Jujin Jiawei”) Zheshang International Financial Note 13 41,591,000 Holding Co., Limited Percentage of equity interest attributable to the Company Direct Indirect Principal activities 12/31/2023 12/31/2022 12/31/2023 12/31/2022 % – – – % (Restated) – – – % 51 % (Restated) 51 Management of the Zhejiang Section of the Hangzhou-Ruili Expressway – **18.1635 Provision of investment management and advisory and private equity investments **39.7871 **39.7872 Trading of future Huihang Co Note 14 580,000,000 100 100 Deqing Co Zhoushan Co Note 15 320,000,000 80.1 Note 16 4,114,690,000 Zhejiang Grand Hotel Note 17 306,662,167 Zheshang Securities Investment Note 18 261,000,000 Co., Ltd. *** 80.1 51 100 51 100 – – – – – – – – – Management of the Anhui Section of the Hangzhou-Ruili Expressway Construction and management Management of the Zhoushan Bay Bridge Operation of hotel – **40.3384 **40.3385 Provision of investment management and advisory and private equity investments LongLiLiLong Co Note 19 8,519,856,565 100 100 – – Management of the LongLi Expressway and LiLong Expressway 329 58. P A R T I C U L A R S O F S U B S I D I A R I E S O F T H E C O M P A N Y (Continued) 58.1 General information of subsidiaries (Continued) Registered and paid-in Date and capital/share place of registration capital Rmb Name of subsidiary Zhajiasu Co Zheshang International Asset Management Ltd. (“Zheshang International Asset Management”) Note 20 300,000,000 Note 21 HKD10,000,000 Zhejiang Zhijiang Intelligent Note 22 100,000,000 Transportation Technology Co., Ltd. HuangQuNan Co Note 23 100,000,000 Percentage of equity interest attributable to the Company Direct Indirect Principal activities 12/31/2023 12/31/2022 12/31/2023 12/31/2022 % 55 – 98 – % (Restated) 55 – – – % – % (Restated) – Management of the Zhajiasu Expressway **39.7871 **39.7872 Provision of asset management service – – Provision of technology service 100 100 Management of the HuangQuNan Expressway * The company is a subsidiary of Shangsan Co, a non-wholly-owned subsidiary of the Company, and, accordingly, is accounted for as a subsidiary by virtue of the Group’s control over it. On June 26, 2017, Zheshang Securities has completed the Spin-off and Offering on the Shanghai Stock Exchange, resulting in the dilution of the equity interest attributed to the Company. On March 12, 2019, Zheshang Securities issued a convertible bond and the conversion of shares during the year ended December 31, 2020 resulted in the dilution of the equity interest attributed to the Company. On May 21, 2021, Zheshang Securities issued non-public A shares which resulted in the dilution of the equity interest attributed to the Company. On June 14, 2022, Zheshang Securities has issued convertible bonds, the conversion of shares resulting in the dilution of the equity interest attributed to the Company during the years ended December, 2022 and 2023. The company repurchased its ordinary share amounted to 38,781,600 during the years ended December 2023 for future incentive scheme, accordingly the voting right of the Company increase from 40.3384% to 40.7459%. ** These companies and partnership entities are subsidiaries of Zheshang Securities, a non-wholly-owned subsidiary of Shangsan Co, and accordingly, are accounted for as subsidiaries by virtue of the Group’s control over them. *** The English translated name is for identification only. 330 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 58. P A R T I C U L A R S O F S U B S I D I A R I E S O F T H E C O M P A N Y (Continued) 58.1 General information of subsidiaries (Continued) Note 1: Linping Co was established on June 7, 1994 in the PRC as a joint stock limited company and was subsequently restructured into a limited liability company under its current name on November 28, 1996. The Company is able to control over Linping Co because it has the power to appoint five out of nine directors of that company and under the provisions stated in the Articles of Association of that company, the passing of ordinary resolutions at the board meetings required one-half of the Directors attending the meetings. Zhejiang Yuhang Expressway Co., Ltd. has been renamed to Zhejiang Linping Expressway Co., Ltd. in 2021. Note 2: Shangsan Co was established on January 1, 1998 in the PRC as a limited liability company. On November 29, 2022, the Group, Shangsan Co, the Existing Shareholders and Communications Group entered into a Capital Increase Agreement to increase the registered capital of Shangsan Co, and as per the revised Articles of Association on the same date, the voting right of the Group in Shangsan Co slightly decreased from 73.625% to 73.624%. As at reporting date, no capital injected from any shareholder. Note 3: Towing Co was established on July 31, 2003 in the PRC as a limited liability company. Note 4: Zheshang Securities was established on May 9, 2002 in the PRC as a limited liability company. On March 12, 2019, Zheshang Securities issued a convertible bond and the Group ‘equity interest was diluted resulting from the conversion of shares by outside shareholders. On May 21, 2021, Zheshang Securities issued non- public A shares which resulted in the dilution of the equity interest attributed to the Company. On June 14, 2022, Zheshang Securities issued a convertible bond and the Group’s equity interest of Zheshang Securities was diluted resulting from the conversion of shares by outside shareholders. See Note 43 for more details. Note 5: Zheshang Futures was established on September 7, 1995 in the PRC as a limited liability company. During the year ended December 31, 2022, the Group’s percentage of entity interest in Zhejiang Futures slightly decreased from 40.3387% to 39.7872% as the result of the capital increase of Zheshang Futures. Note 6: Zheshang Capital Management was established on February 9, 2012 in the PRC as a limited liability company. Note 7: Asset Management was established on July 22, 2013 in the PRC as a limited liability company. Note 8: Dongfang Jujin was established on March 25, 2014 in the PRC as a limited liability company. The company was deregistered in 2023. Note 9: Zhejiang Zheqi was established on April 9, 2013 in the PRC as a limited liability company, and its paid-in share capital was increased by Rmb100,000,000 to Rmb200,000,000 during the year ended December 31, 2014. 331 58. P A R T I C U L A R S O F S U B S I D I A R I E S O F T H E C O M P A N Y (Continued) 58.1 General information of subsidiaries (Continued) Note 10: Jinhua Co was established in February 2002 in the PRC as a limited liability company. Jinhua Co became a wholly owned subsidiary and directly held by the Company during the year ended December 31, 2013. Note 11: Hanghui Co was established in December 2008 in the PRC as a limited liability company. During the year ended December 31, 2015, the Company acquired the 80.614% equity interests in Hanghui Co from Communications Group, and Hanghui Co then became a subsidiary and directly held by the Company as at December 31, 2015. In December 2015, the equity interest held by the Group increased to 88.674% as the Company has made a capital contribution to Hanghui Co. In June 2021, the Hanghui Expressway public REITs was successfully listed on the Shanghai Stock Exchange. The Company held 51% shareholder’s interest indirectly after the restructure. During the restructure in light of the issuance of REITs, the Group’s equity share decreased from 88.674% to 51% and thus didn’t lose control over Hanghui Co. The equity transaction as a result of the restructure was accounted for under special reserves. Note 12: Jujin Jiawei was established on April 15, 2015 in the PRC as a limited partnership. Pursuant to the partnership agreement, Dongfang Jujin is a general partner, while Zheshang Capital Management and other three individuals are limited partners of the partnership. The Directors consider that the Group has the practical ability to direct the relevant activities of Jujin Jiawei unilaterally, and it is therefore classified as a subsidiary of the Group. The company was deregistered in 2023. Note 13: Zheshang International Financial Holding Co., Limited (previously known as Zheshang Futures (Hong Kong) Co., Limited) was established on April 23, 2015 in Hong Kong as a limited liability Company. Note 14: Huihang Co was established in September 2000 in the PRC as a limited liability company. During the year ended December 31, 2016, the Company acquired the 100% equity interests in Huihang Co from an independent third party, and Huihang Co then became a subsidiary and directly held by the Company as at December 31, 2016. Note 15: Deqing Co was established on April 12, 2018 in the PRC as a limited liability company. The registered capital of Deqing Co has been increased from Rmb100,000,000 to Rmb320,000,000 during the year ended December 31, 2020, of which Rmb17,421,750 was contributed by the Company, Rmb4,328,250 was contributed by Zhejiang Hongtu and the rest were converted from capital reserve. 332 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202358. P A R T I C U L A R S O F S U B S I D I A R I E S O F T H E C O M P A N Y (Continued) 58.1 General information of subsidiaries (Continued) Note 16: Zhoushan Co was established on as a limited liability company. On July, 2018, Shenjiahuhang Expressway entered into an equity purchase agreement with Zhejiang Communications Investment Group Co., Ltd. to acquire 51% equity interest in Zhoushan Co. During the year, as part of the reorganisation for the purpose of the proposed issuance of Asset-Backed Securities (“ABS”), Shenjiahuhang Co transferred its 51% of equity interests in Zhoushan Co to the Company at the audited net asset value of Zhoushan Co as at June 30, 2022 pursuant to an equity transfer agreement dated 19 September 2022. Upon which Zhoushan Co became the immediate subsidiary of the company. Note 17: Zhejiang Grand Hotel was established on January 6, 1998 in the PRC as a limited liability company and was acquired from Communications Group. On June 5, 2019, the Company entered into an equity transfer agreement with a wholly-owned subsidiary of Communications Group to acquire 100% equity interest in Zhejiang Grand Hotel at a cash consideration of Rmb1,010,144,600. Note 18: Zheshang Securities Investment Co., Ltd. was established on November 26, 2019 in the PRC as a limited liability company, and its paid-in share capital was increased by Rmb36,000,000 to Rmb261,000,000 during the year ended December 31, 2023. Note 19: LongLiLiLong Co is a limited liability company established in the PRC on April 8, 2005, and was acquired from Communications Group. Note 20: Zhajiasu Co is a limited liability company established in the PRC on January 25, 2001, and was acquired on May 7, 2021 from two natural person shareholders. Note 21: Zheshang International Asset Management is a limited liability company established in Hong Kong on November 15, 2021. Note 22: Zhejiang Zhijiang Intelligent Transportation Technology Co., Ltd. is a limited liability company established in the PRC on April 27, 2023. As at December 31, 2023, 35% of the registered capital of Rmb100,000,000 has been paid. Note 23: HuangQuNan Co is a limited liability company established in the PRC on December 29, 2022, formerly existed as a branch in Communications Group before the business was acquired by LongLiLiLong Co. 333 58. P A R T I C U L A R S O F S U B S I D I A R I E S O F T H E C O M P A N Y (Continued) 58.1 General information of subsidiaries (Continued) Except that Zheshang International Financial Holding Co., Limited and Zheshang International Asset Management Ltd. are operating in Hong Kong, all of the Company’s o t h e r s u b s i d i a r i e s a r e o p e r a t i n g i n M a i n l a n d C h i n a. A s a t D e c e m b e r 31, 2023, Zheshang Securities has subordinated bonds, corporate bonds, short-term financing bonds and beneficial certificates at the total principal amount of Rmb3,100,000,000, Rmb14,500,000,000, Rmb1,500,000,000 and Rmb3,627,700,000 (2022: Rmb6,400,000,000, Rmb14,499,894,000, Rmb2,500,000,000 and Rmb2,045,460,000), respectively. 58.2 Change in ownership interest in a subsidiary During the year ended December, 2023, 15,213 shares of the Convertible Bond 2022 was converted, resulting in the slight dilution of the equity interest in Zheshang Securities attributed to the Company from 40.3385% to 40.3384%, and the Group’s percentage of entity interest in its subsidiaries decreased accordingly. 59. INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES Regarding securities operation segment as defined in Note 8, the Group held interests in structured entities including collective asset management schemes, investment funds and limited partnership. The Group acted as fund manager for some structured entities and had power over them during the years ended December 31, 2023 and 2022. Except for the structured entities the Group has consolidated as disclosed in Note 45, in the opinion of the Directors, the variable returns the Group exposed to over these collective asset management schemes, investment funds and limited partnership in which the Group has interests or acted as fund manager are not significant. The Group therefore did not consolidate these structured entities. 334 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 202359. INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES (Continued) The total assets of unconsolidated funds, asset management schemes managed by securities operation segment amounted to Rmb106,058,993,000 and Rmb103,411,981,000 as at December 31, 2023 and 2022, respectively. The related management fee income for the year ended December 31, 2023 amounted to Rmb403,702,000 (December 31, 2022: Rmb420,826,000). Regarding securities operation segment, the Group classified the investments in unconsolidated funds, asset management schemes and limited partnership as financial assets at FVTPL and interests in associates. As at December 31, 2023 and 2022, the carrying amounts of the Group’s interests in unconsolidated funds, asset management schemes and limited partnership are Rmb12,637,492,000 and Rmb8,948,227,000, respectively. The related management fee income and net investment gains for the year ended December 31, 2023 are disclosed in Note 7 and Note 9. Except for the abovementioned structured entities, the Group also invested in certain ABS Program classified as interests in associates which it doesn’t act as the fund manager. With regard to the ABS Program, in case that the net cash flow generated from the underlying assets was not sufficient to cover the necessary expenditures of the ABS Program as agreed and senior class holder’s share that they’re entitled, the Group was committed to compensating the insufficient part. During the year ended December 31, 2023, the ABS Program’s cashflow was sufficient to cover necessary expenditures and senior class holder’s share. Besides, the fund manager accepts open-ended withdrawal and subscription of senior class securities within the withdrawal registering period at the end of each three years from issuance of ABS, and the Group will purchase any senior class securities which have not completed open-ended withdrawal if the holders intend to within the withdrawal registering period. 335 60. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Expressway operating rights Other intangible assets Interests in subsidiaries Interests in associates Interests in joint ventures Other receivables and prepayments Time deposits CURRENT ASSETS Trade receivables Other receivables and prepayments Amount due from subsidiaries Dividends receivable Bank balances and cash – Time deposits with original maturity over three months – Cash and cash equivalents 12/31/2023 Rmb’000 12/31/2022 Rmb’000 1,075,491 105,008 1,112,067 28,401 10,766,236 8,475,700 1,373,970 12,350 3,048,619 975,338 7,800 1,455,240 29,393 10,691,936 7,739,747 373,470 – – 25,997,842 21,272,924 259,960 134,272 1,280,194 2,366,109 3,051,214 10,054,616 17,146,365 109,532 119,839 1,300,068 2,366,109 – 9,407,345 13,302,893 336 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 60. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY (Continued) CURRENT LIABILITIES Trade payables Tax liabilities Other taxes payable Other payables and accruals Amount due to subsidiaries Bonds payable Bank and other borrowings Convertible Bond NET CURRENT LIABILITIES 12/31/2023 Rmb’000 12/31/2022 Rmb’000 211,735 157,157 26,427 268,755 7,829,311 69,546 271,689 1,815,465 10,650,085 6,496,280 232,254 57,083 22,057 265,765 5,628,161 67,278 253,679 – 6,526,277 6,776,616 TOTAL ASSETS LESS CURRENT LIABILITIES 32,494,122 28,049,540 NON-CURRENT LIABILITIES Bonds payable Convertible Bond Bank and other borrowings Deferred tax liabilities CAPITAL AND RESERVES Share capital Reserves 6,325,061 – – 90,203 6,415,264 6,268,315 1,788,401 616,360 106,412 8,779,488 26,078,858 19,270,052 5,993,498 20,085,360 26,078,858 4,343,115 14,926,937 19,270,052 337 60. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY (Continued) Movement of share capital and reserve of the Company was set out below. Investment Share Share Statutory revaluation Dividend Special Retained capital premium reserves reserve reserve reserves profits Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 At January 1, 2022 4,343,115 3,645,726 2,364,430 19,447 1,628,668 71,382 6,119,290 18,192,058 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 2021 dividend Proposed dividend – – – – – – – – – – – – – – – – (736) (736) – – – – – (1,628,668) 1,628,668 – – – – – 2,707,398 2,707,398 – (736) 2,707,398 2,706,662 – (1,628,668) (1,628,668) – At December 31, 2022 4,343,115 3,645,726 2,364,430 18,711 1,628,668 71,382 7,198,020 19,270,052 Profit for the year Other comprehensive income for the year Total comprehensive income for the year – – – – – – Issuance of shares 1,650,383 4,448,491 2022 dividend Proposed dividend Transfer to reserves – – – – – – – – – – – – 299,412 – – – – – – – – – – – (1,628,668) 1,917,919 – – – – – – – – 2,338,600 2,338,600 – – 2,338,600 2,338,600 – – 6,098,874 (1,628,668) (1,917,919) (299,412) – – At December 31, 2023 5,993,498 8,094,217 2,663,842 18,711 1,917,919 71,382 7,319,289 26,078,858 338 2023 ANNUAL REPORTNotes to the Consolidated Financial StatementsFor the year ended December 31, 2023 CHAIRMAN YUAN Yingjie (Appointed on August 23, 2023) YU Zhihong (Resigned on August 23, 2023) EXECUTIVE DIRECTORS WU Wei (Appointed on September 27, 2023) LI Wei (Appointed on October 13, 2023) YUAN Yingjie (Redesignated as a non-executive Director on September 7, 2023) CHEN Ninghui (Resigned on September 27, 2023) NON-EXECUTIVE DIRECTORS YANG Xudong FAN Ye HUANG Jianzhang INDEPENDENT NON-EXECUTIVE DIRECTORS PEI Ker-Wei LEE Wai Tsang, Rosa CHEN Bin SUPERVISORS LU Wenwei (Appointed on September 27, 2023) LI Yuan (Appointed on June 9, 2023; resigned on September 27, 2023) ZHENG Ruchun (Resigned on June 9, 2023) HE Meiyun WU Qingwang LU Xinghai WANG Yubing COMPANY SECRETARY Tony ZHENG AUTHORIZED REPRESENTATIVES YUAN Yingjie WU Wei (Appointed on October 31, 2023) YU Zhihong (Resigned on September 7, 2023) STATUTORY ADDRESS AND PRINCIPAL PLACE OF BUSINESS Room 501, No. 2, Mingzhu International Business Center 199 Wuxing Road, Shangcheng District Hangzhou City Zhejiang Province PRC 310020 Tel: 86–571–8798 5588 Fax: 86–571–8798 5599 LEGAL ADVISERS As to Hong Kong law: Ashurst Hong Kong 43/F, Jardine House 1 Connaught Place Central, Hong Kong As to English law: Ashurst LLP London Fruit & Wool Exchange 1 Duval Square London E1 6PW United Kingdom 339 Corporate InformationAs to PRC law: T & C Law Firm 11/F, Block A, Dragon Century Plaza 1 Hangda Road Hangzhou City, Zhejiang Province PRC 310007 AUDITORS Deloitte Touche Tohmatsu 35/F, One Pacific Place 88 Queensway Hong Kong INVESTOR RELATIONS CONSULTANT Wonderful Sky Financial Group Holdings Limited 9/F, The Center, 99 Queen’s Road Central, Hong Kong Tel: 852-3977 1892 Fax: 852-2815 1352 PRINCIPAL BANKERS Industrial and Commercial Bank of China, Jiefang Road Branch Shanghai Pudong Development Bank, Hangzhou Branch H SHARE REGISTRAR AND TRANSFER OFFICE Hong Kong Registrars Limited Room 1712–1716, 17/F, Hopewell Centre 183 Queen’s Road East Hong Kong H SHARES LISTING INFORMATION The Stock Exchange of Hong Kong Limited Code: 0576 REPRESENTATIVE OFFICE IN HONG KONG Room 1710B Office Tower Convention Plaza 1 Harbour Road Wan Chai, Hong Kong Tel: 852-2537 4295 Fax: 852-2537 4293 WEBSITE www.zjec.com.cn 340 2023 ANNUAL REPORTCorporate InformationLocation Map of Expressways in Zhejiang Province 2023 ANNUAL REPORT ANNUAL REPORT STOCK CODE：0576 2 0 2 3 A N N U A L R E P O R T 

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