[Important Notice](index=3&type=section&id=Important%20Notice) The board, supervisory board, and senior management guarantee the truthfulness and completeness of this quarterly report - The company's board of directors, supervisory board, and all senior management ensure the truthfulness, accuracy, and completeness of this quarterly report and bear corresponding legal responsibilities[4](index=4&type=chunk) - Hu Wei, the company's head, Zhao Guiping, the person in charge of accounting, and Li Xiaojun, the head of the accounting department, guarantee the truthfulness, accuracy, and completeness of the financial statements[5](index=5&type=chunk) - The company's financial statements for the first quarter of 2021 are unaudited[5](index=5&type=chunk) [Company Profile](index=3&type=section&id=Company%20Profile) This section outlines the company's key financial performance and shareholder structure for the reporting period [Key Financial Data](index=3&type=section&id=Key%20Financial%20Data) In Q1 2021, the company achieved a significant turnaround, with revenue growing 313.31% to CNY 1.96 billion and net profit reaching CNY 541 million Key Financial Data for Q1 2021 | Indicator | Current Period-End / Current Period | Prior Year / Prior Year-End | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets (CNY)** | 58,305,290,489.70 | 55,144,962,042.63 | 5.73% | | **Net Assets Attributable to Shareholders (CNY)** | 23,537,891,908.32 | 23,042,941,782.92 | 2.15% | | **Net Cash Flow from Operating Activities (CNY)** | 677,216,593.31 | -335,801,179.71 | Not Applicable | | **Operating Revenue (CNY)** | 1,962,015,531.22 | 474,711,617.77 | 313.31% | | **Net Profit Attributable to Shareholders (CNY)** | 540,534,999.13 | -132,684,403.98 | Not Applicable | | **Basic Earnings Per Share (CNY/share)** | 0.227 | -0.061 | Not Applicable | - Total non-recurring gains and losses for the reporting period amounted to **CNY 14.14 million**, primarily from asset disposal gains of **CNY 15.23 million** due to government compensation for land acquisition along expressways[9](index=9&type=chunk) [Total Shareholders, Top Ten Shareholders, and Top Ten Circulating Shareholders at Period-End](index=5&type=section&id=Total%20Shareholders%2C%20Top%20Ten%20Shareholders%2C%20and%20Top%20Ten%20Circulating%20Shareholders%20at%20Period-End) As of the reporting period end, the company had 18,767 shareholders, with the top three holding a concentrated majority of shares - As of the end of the reporting period, the company had a total of **18,767 shareholders**, including **18,528 A-share shareholders** and **239 H-share shareholders**[10](index=10&type=chunk) Top Ten Shareholders' Holdings | Shareholder Name | Number of Shares Held (shares) | Shareholding Ratio (%) | | :--- | :--- | :--- | | HKSCC NOMINEES LIMITED | 729,642,042 | 33.46 | | Xintongchan Industrial Development (Shenzhen) Co., Ltd. | 654,780,000 | 30.03 | | Shenzhen Shenguanghui Highway Development Co., Ltd. | 411,459,887 | 18.87 | | China Merchants Highway Network Technology Holdings Co., Ltd. | 91,092,743 | 4.18 | | Guangdong Road and Bridge Construction Development Co., Ltd. | 61,948,790 | 2.84 | - Explanation of related party relationships: Xintongchan Industrial Development (Shenzhen) Co., Ltd. and Shenzhen Shenguanghui Highway Development Co., Ltd. are both related parties controlled by Shenzhen International Holdings Co., Ltd[12](index=12&type=chunk) [Significant Events](index=6&type=section&id=Significant%20Events) This section details the company's operational performance, financial analysis, and key developments during the reporting period [Operating Information](index=6&type=section&id=Operating%20Information) Core toll road business recovered significantly, while environmental protection expanded with new projects and clean energy acquisitions [Toll Road Business](index=6&type=section&id=Toll%20Road%20Business) Toll road operations normalized, showing significant traffic and revenue increases due to economic recovery and a low prior-year base - Due to the low base in the prior year caused by the pandemic and free toll policies, all toll road projects experienced significant year-on-year growth in traffic volume and toll revenue during the reporting period[13](index=13&type=chunk) Daily Operating Data for Major Toll Road Projects | Toll Road | Daily Average Mixed Traffic Volume (thousand vehicles/day) | Daily Average Toll Revenue (CNY thousand/day) | | :--- | :--- | :--- | | **Shenzhen Area** | | | | Jihe East Section | 313 | 1,923 | | Outer Ring Project | 194 | 2,143 | | Shuiguan Expressway | 268 | 1,701 | | **Other Areas** | | | | Qinglian Expressway | 58 | 2,831 | | Yangmao Expressway | 45 | 1,314 | - The Outer Ring Phase I project, opened in late December 2020, performed well with **daily average toll revenue of CNY 2.14 million**, though it caused some traffic diversion from the Jihe Expressway[17](index=17&type=chunk) [Environmental Protection Business](index=8&type=section&id=Environmental%20Protection%20Business) Environmental protection business expanded with increased waste management revenue, new project signings, and Xinjiang Mulei wind power acquisitions, enhancing clean energy - Solid waste resource management: Lande Environmental's kitchen waste treatment capacity increased, with operating revenue growing significantly year-on-year; the Guangming Environmental Park project was officially signed in February; completed the controlling acquisition of a **50% equity stake in Qiantai Company**, entering the field of comprehensive utilization of discarded new energy vehicle batteries[21](index=21&type=chunk) - Clean energy: Acquired three Xinjiang Mulei wind power projects during the reporting period, which, after consolidation, collectively generated **70,579.73 MWh of grid-connected electricity**; Baotou Nanfeng project generated **182,156.18 MWh**, a **24% year-on-year increase**[23](index=23&type=chunk) [Financial Analysis](index=9&type=section&id=Financial%20Analysis) The company achieved a net profit of CNY 541 million, a significant turnaround from prior year's loss, driven by revenue growth and increased interest-bearing debt Key Income Statement Item Changes for Q1 2021 | Item | 2021 Q1 (CNY thousand) | 2020 Q1 (CNY thousand) | Year-on-Year Change (%) | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 1,962,016 | 474,712 | 313.31% | Prior year affected by pandemic and free toll policies, current period toll revenue recovered | | **Operating Cost** | 1,056,874 | 518,400 | 103.87% | Increased depreciation and amortization due to traffic growth, and cost recognition for Guilong development project | | **Net Profit Attributable to Parent** | 540,535 | -132,684 | Not Applicable | Primarily due to significant decline in toll road revenue in prior year | - Capital expenditure during the reporting period was approximately **CNY 2.69 billion**; total outstanding interest-bearing debt at period-end was approximately **CNY 23.1 billion**, a **19.43% increase** from the beginning of the year, primarily due to increased borrowings for the acquisition of Mulei wind power projects and new office building purchases; the asset-liability ratio was **54.02%**, an increase of **1.67 percentage points** from the beginning of the year[25](index=25&type=chunk) - During the reporting period, the company completed the **100% equity acquisition** of Qianzhi, Qianhui, and Qianxin (Mulei Wind Power Projects), consolidating them into the financial statements; these three companies collectively contributed **CNY 28.86 million in operating revenue** and **CNY 2.51 million in net profit attributable to parent**[25](index=25&type=chunk) [Analysis of Significant Changes in Major Financial Statement Items and Indicators and Their Reasons](index=10&type=section&id=3.3%20Analysis%20of%20Significant%20Changes%20in%20Major%20Financial%20Statement%20Items%20and%20Indicators%20and%20Their%20Reasons) Significant changes in financial statement items include increased fixed assets and long-term prepayments from acquisitions, and a substantial rise in investment income Significant Changes in Major Financial Statement Items | Item | Change (%) | Primary Reason | | :--- | :--- | :--- | | **Fixed Assets** | 58.93% | Mulei wind power projects consolidated | | **Long-term Prepayments** | 330.45% | Prepayment for new office building purchase | | **Short-term Borrowings** | 66.24% | Increased short-term borrowings based on market funding conditions | | **Other Current Liabilities** | 47.86% | Issuance of ultra-short-term financing bonds | | **Taxes and Surcharges** | 1,045.64% | Increased revenue led to corresponding increase in taxes and surcharges | | **Investment Income** | 317.27% | Lower investment income from associates in prior year, and increased performance of Derun Environment in current period | | **Net Cash Flow from Operating Activities** | Not Applicable | Lower cash inflow from tolls in prior year due to pandemic and free toll policies | | **Net Cash Flow from Investing Activities** | Not Applicable | Payment for new office building prepayment and equity consideration for Mulei wind power projects acquisition | [Progress of Significant Events](index=11&type=section&id=3.4%20Analysis%20of%20Progress%2C%20Impact%2C%20and%20Solutions%20for%20Significant%20Events) The company completed Xinjiang Mulei wind power acquisition, issued short-term financing bonds, and extended H-share private placement resolution validity - The company invested approximately **CNY 1.015 billion** to complete the **100% equity acquisition** of three Xinjiang Mulei wind power projects, with a total installed capacity of **299 MW**[28](index=28&type=chunk) - In February and March 2021, the company issued two tranches of ultra-short-term financing bonds, each for **CNY 1 billion**, with maturities of **60 days and 180 days** and interest rates of **2.65% and 2.75%**, respectively[28](index=28&type=chunk)[29](index=29&type=chunk) - To ensure the smooth progress of the private placement of H-shares, the board of directors approved extending the validity period of relevant resolutions and authorizations by **12 months to March 30, 2022**, pending shareholder approval[29](index=29&type=chunk) [Performance Forecast](index=14&type=section&id=3.6%20Warning%20and%20Explanation%20of%20Potential%20Loss%20or%20Significant%20Change%20in%20Cumulative%20Net%20Profit%20from%20Year-Beginning%20to%20End%20of%20Next%20Reporting%20Period) The company forecasts a significant year-on-year net profit increase for H1 2021, primarily due to a low comparative base from prior year's pandemic impact - The Group expects a **significant year-on-year increase** in net profit for the first half of 2021[33](index=33&type=chunk) - The primary reason for the significant performance growth is the **low comparative base** in the first half of 2020, when toll road revenue significantly declined due to the pandemic and free toll policies[33](index=33&type=chunk) [Appendix](index=15&type=section&id=Appendix) This appendix provides the company's unaudited consolidated and parent company financial statements for the first quarter of 2021 [Financial Statements](index=15&type=section&id=Financial%20Statements) This section presents the company's unaudited consolidated and parent company balance sheets, income statements, and cash flow statements for Q1 2021 [Consolidated Balance Sheet](index=15&type=section&id=Consolidated%20Balance%20Sheet) As of March 31, 2021, total assets were CNY 58.31 billion, total liabilities CNY 31.50 billion, and net assets attributable to shareholders CNY 23.54 billion Key Items of Consolidated Balance Sheet | Item | March 31, 2021 (CNY) | December 31, 2020 (CNY) | | :--- | :--- | :--- | | **Total Assets** | 58,305,290,489.70 | 55,144,962,042.63 | | **Total Liabilities** | 31,496,202,963.17 | 28,865,852,158.86 | | **Total Owners' Equity Attributable to Parent Company** | 23,537,891,908.32 | 23,042,941,782.92 | [Parent Company Balance Sheet](index=17&type=section&id=Parent%20Company%20Balance%20Sheet) As of March 31, 2021, the parent company's total assets were CNY 40.18 billion, total liabilities CNY 21.82 billion, and total owner's equity CNY 18.35 billion Key Items of Parent Company Balance Sheet | Item | March 31, 2021 (CNY) | December 31, 2020 (CNY) | | :--- | :--- | :--- | | **Total Assets** | 40,175,179,202.76 | 36,786,576,377.85 | | **Total Liabilities** | 21,821,024,928.95 | 18,758,101,048.69 | | **Total Owners' Equity** | 18,354,154,273.81 | 18,028,475,329.16 | [Consolidated Income Statement](index=19&type=section&id=Consolidated%20Income%20Statement) In Q1 2021, consolidated operating revenue was CNY 1.96 billion, with net profit attributable to parent company shareholders of CNY 541 million, a significant turnaround Key Items of Consolidated Income Statement | Item | 2021 Q1 (CNY) | 2020 Q1 (CNY) | | :--- | :--- | :--- | | **I. Total Operating Revenue** | 1,962,015,531.22 | 474,711,617.77 | | **III. Operating Profit** | 750,595,014.03 | -219,930,715.23 | | **V. Net Profit** | 585,562,516.85 | -174,228,740.36 | | **Net Profit Attributable to Parent Company Shareholders** | 540,534,999.13 | -132,684,403.98 | [Parent Company Income Statement](index=21&type=section&id=Parent%20Company%20Income%20Statement) In Q1 2021, parent company operating revenue was CNY 149 million, with net profit of CNY 372 million, largely due to investment income Key Items of Parent Company Income Statement | Item | 2021 Q1 (CNY) | 2020 Q1 (CNY) | | :--- | :--- | :--- | | **I. Operating Revenue** | 149,040,642.42 | 54,369,841.66 | | **Investment Income** | 397,364,682.84 | -11,707,862.20 | | **IV. Net Profit** | 371,678,944.65 | -70,353,117.54 | [Consolidated Cash Flow Statement](index=22&type=section&id=Consolidated%20Cash%20Flow%20Statement) Q1 2021 saw positive net cash flow from operating activities of CNY 677 million, while investment activities resulted in a net outflow of CNY 2.27 billion Key Items of Consolidated Cash Flow Statement | Item | 2021 Q1 (CNY) | 2020 Q1 (CNY) | | :--- | :--- | :--- | | **Net Cash Flow from Operating Activities** | 677,216,593.31 | -335,801,179.71 | | **Net Cash Flow from Investing Activities** | -2,266,944,593.98 | -286,429,394.96 | | **Net Cash Flow from Financing Activities** | 1,748,058,149.90 | 1,458,258,351.05 | | **Net Increase in Cash and Cash Equivalents** | 158,328,252.82 | 835,977,124.87 | [Parent Company Cash Flow Statement](index=24&type=section&id=Parent%20Company%20Cash%20Flow%20Statement) In Q1 2021, parent company operating cash flow was CNY 28 million, with a significant net outflow from investment activities of CNY 3.05 billion Key Items of Parent Company Cash Flow Statement | Item | 2021 Q1 (CNY) | 2020 Q1 (CNY) | | :--- | :--- | :--- | | **Net Cash Flow from Operating Activities** | 28,392,252.51 | 88,453,083.53 | | **Net Cash Flow from Investing Activities** | -3,054,646,041.73 | -1,643,707,367.19 | | **Net Cash Flow from Financing Activities** | 2,879,883,135.11 | 2,309,435,756.96 | | **Net Increase in Cash and Cash Equivalents** | -146,370,188.35 | 754,183,600.82 |

Financial Performance - The company reported a total revenue of approximately 1.5 billion RMB for the year 2020, reflecting a year-on-year growth of 10%[14]. - In 2020, the company's operating revenue reached CNY 8,026,737,099.99, representing a 25.61% increase compared to CNY 6,390,295,110.82 in 2019[30]. - The net profit attributable to shareholders was CNY 2,054,523,306.30, a decrease of 19.88% from CNY 2,564,317,594.25 in the previous year[30]. - The basic earnings per share for 2020 was CNY 0.936, down 20.44% from CNY 1.176 in 2019[31]. - The total assets of the company increased by 20.78% to CNY 55,144,962,042.63 at the end of 2020, compared to CNY 45,658,413,658.91 at the end of 2019[30]. - The net cash flow from operating activities was CNY 1,100,633,933.07, a decrease of 35.08% from CNY 1,695,357,337.06 in 2019[30]. - The company reported a weighted average return on equity of 10.83% for 2020, down from 13.73% in 2019, a decrease of 2.89 percentage points[31]. - The company achieved a net profit of 2,054,523 thousand RMB in 2020, a decrease from 2,564,318 thousand RMB in 2019, with a year-on-year growth of approximately 0.32% after excluding deferred tax asset impacts from 2019[151]. - Total operating revenue for 2020 was 8,026,737 thousand RMB, representing a year-on-year increase of 25.61% due to the inclusion of new environmental businesses[153]. Dividends and Shareholder Returns - The board has proposed a final cash dividend of RMB 0.43 per share for the year 2020, subject to approval at the annual general meeting[5]. - The company proposed a cash dividend of CNY 0.43 per share for the 2020 fiscal year, totaling approximately CNY 938 million, which accounts for 45.96% of the net profit attributable to ordinary shareholders[69]. Audit and Compliance - The company reported a standard unqualified audit opinion from Ernst & Young Hua Ming[4]. - There were no non-operating fund occupations by controlling shareholders or related parties during the reporting period[7]. - The company has not violated decision-making procedures for providing guarantees[7]. - The financial report is guaranteed to be true, accurate, and complete by the company's management[6]. Operational Developments - The user base increased by 15% year-on-year, reaching 2 million active users by the end of 2020[15]. - The company plans to expand its market presence by launching two new highway projects in 2021, expected to add 50 kilometers of new routes[15]. - Research and development expenses increased by 20% in 2020, focusing on new traffic management technologies[14]. - The operational efficiency improved, with a reduction in average toll collection time by 25%[14]. - The company is exploring opportunities for international expansion, particularly in Southeast Asia, with potential investments of up to 200 million RMB[15]. - The company is actively involved in the development of urban infrastructure projects through public-private partnerships (PPP) to improve service delivery[17]. Acquisitions and Investments - The company completed the acquisition of a regional competitor, which is expected to contribute an additional 300 million RMB in annual revenue[15]. - The company completed the acquisition of 89.93% of Longda Company, which was included in the consolidated financial statements starting from November 26, 2020[40]. - The company acquired 67.14% of the equity in Lande Environmental and 50% of the equity in Shenshan Qiantai during 2020, enhancing its market position[64][65]. - The company completed the acquisition of 89.93% equity in Longda Expressway on December 1, 2020[53]. Environmental Initiatives - New environmental initiatives were introduced, aiming for a 15% reduction in carbon emissions by 2025[14]. - The company is focusing on organic waste treatment as a key area for development under its large environmental industry strategy, supported by national environmental policies[116]. - The company established a wholly-owned subsidiary, Shenzhen Expressway New Energy Holdings Co., Ltd., with a registered capital of 1.4 billion yuan to focus on wind power and other clean energy investments[124]. Financial Management and Capital Structure - The company issued RMB 4 billion perpetual bonds during the reporting period, which were included in other equity instruments[35]. - The company issued CNY 10 billion in short-term financing bonds in 2020, effectively managing its funding costs[64]. - The company plans to optimize its capital structure and maintain adequate cash reserves to mitigate liquidity risks[188]. - The company actively expanded its financing channels, obtaining approval for RMB 4 billion in short-term financing and RMB 2 billion in green corporate bonds[191]. Impact of COVID-19 - The company experienced a decline in revenue during the pandemic due to a policy that exempted all vehicles from toll fees from February 17 to May 6, 2020[89]. - The company reduced toll fees for over 63 million vehicles during the pandemic, with an average of over 3,000 personnel deployed daily for epidemic prevention[92]. - The implementation of new toll policies is expected to have a long-term positive impact on operational efficiency and cost reduction in the highway sector[88]. Future Outlook - The company plans to continue expanding its market presence and investing in new technologies to enhance operational efficiency[30]. - The group plans to focus on solid waste resource management and clean energy sectors, aiming to become a leader in organic waste treatment and dismantling of old vehicles[77]. - The group is set to leverage its dual main business structure to expand into the environmental protection and clean energy sectors, while maintaining its strengths in toll road operations[83].

Financial Performance - The company's operating revenue for the first half of the year was approximately ¥1.69 billion, a decrease of 37.71% compared to the same period last year[27]. - Net profit attributable to shareholders was approximately ¥43.92 million, reflecting a significant decline of 97.22% year-over-year[27]. - The basic earnings per share decreased to ¥0.020, down 97.22% from ¥0.724 in the previous year[28]. - The weighted average return on equity dropped to 0.24%, a decrease of 8.56 percentage points compared to the previous year[28]. - The total assets increased by 9.19% to approximately ¥49.42 billion compared to the end of the previous year[27]. - The net cash flow from operating activities was negative at approximately -¥157.42 million, a decline of 119.22% year-over-year[27]. - Non-recurring gains and losses totaled approximately ¥55.68 million, with significant contributions from foreign exchange swaps and other financial activities[30]. - The company achieved a total revenue of approximately CNY 1.687 billion in the first half of 2020, representing a year-on-year decline of 37.71%[51]. - The revenue from the main business of toll roads was 1,045,927 thousand RMB, accounting for 62.00% of total revenue, down from 81.40% in the previous year[113]. - The company reported a net profit of 43,923 thousand RMB for the first half of 2020, a decrease of 97.22% compared to 1,578,646 thousand RMB in the same period of 2019, primarily due to reduced toll revenue from the highway free policy during the pandemic[109]. Toll Revenue and Traffic Impact - The company's toll revenue was negatively impacted by government policies that exempted all vehicles from tolls from February 17 to May 6, 2020, leading to a decrease in income during the pandemic[54]. - In the first half of 2020, the overall toll revenue of the group's operated and invested toll roads significantly decreased year-on-year due to the impact of COVID-19, with a notable decline during the free toll period from January 24 to May 6[62]. - Following the resumption of toll collection on May 6, 2020, the average daily mixed traffic volume on the Meiguan Expressway increased by 9.5% to 123,000 vehicles compared to the same period in 2019[60]. - The average daily toll revenue for the Meiguan Expressway during the recovery period rose by 14.5% to RMB 439,000, indicating a positive trend post-lockdown[60]. - The average daily traffic volume and toll revenue on the Meiguan Expressway increased due to the resumption of operations by major production bases like Huawei and accelerated construction of nearby infrastructure projects[63]. Strategic Focus and Business Development - The company has identified the environmental protection industry as its second major business and has completed initial layout in this field[8]. - The company plans to continue market-oriented and innovation-driven strategies to enhance its competitive strength in specific segments[8]. - The company has established a dual main business strategy focusing on toll roads and environmental protection, actively seeking cooperation opportunities in the environmental and clean energy sectors[48]. - The company is actively engaged in the development of new projects, such as the Qinglian project and the Guangwu project, to expand its operational footprint[16]. - The company is focused on enhancing operational efficiency through the use of BIM technology, which aids in project design and management[18]. Infrastructure Projects and Investments - The company is involved in the construction and management of various infrastructure projects, including the Deep-Shan Environmental Park project and the Guizhou Longli project[16]. - The company has undertaken the construction of municipal supporting facilities for the Longda Expressway, enhancing local infrastructure[16]. - The company has signed an agreement to acquire up to 68.1045% of Blue Environmental Technology Group for no more than RMB 809.6 million, integrating it into the group for enhanced organic waste processing capabilities[79]. - The company has invested RMB 225 million to acquire 50% of Qiantai Technology Co., Ltd., which specializes in the dismantling of retired electric vehicles and battery recycling[80]. - The company is exploring land development and urban renewal opportunities as supplementary income sources beyond its main business[93]. Financial Management and Capital Structure - The company has a strong presence in the logistics sector through its subsidiary, Shenzhen International Logistics Development Co., Ltd.[18]. - The company maintains a reasonable capital structure, with a debt ratio increase attributed to higher capital expenditures and reduced revenue during the pandemic[146]. - The company has pledged assets including the Qinglian project with a total bank loan limit of 5.9 billion yuan[143]. - The company has committed RMB 450 million to the establishment of the Ring Science and Technology Industry M&A Investment Fund, with a total subscription amount of RMB 1 billion[105]. - The company has issued 2 billion RMB in short-term financing bonds and green corporate bonds to lower financing costs and optimize debt structure[155]. Corporate Governance and Compliance - The company has committed to improving corporate governance and transparency to promote stable development[179]. - The company has not engaged in any major related party transactions during the reporting period[194]. - The company has confirmed that there are no violations of decision-making procedures regarding external guarantees[199]. - The company has no major litigation or arbitration matters during the reporting period[188]. - The company has renewed the appointment of Ernst & Young Hua Ming as its auditor for the 2020 financial year[188].

[Definitions and Major Risk Warnings](index=4&type=section&id=Definitions%20and%20Major%20Risk%20Warnings) This section provides definitions for key terms used throughout the report and highlights the company's primary operational uncertainties [Definitions](index=4&type=section&id=I.%20Definitions) This chapter defines key terms used in the report, including reporting periods, company entities, business models, and specific project names, providing a foundational understanding of the content - The report defines **over 60 professional terms and company entity abbreviations**, primarily related to the company's toll road projects, environmental business investment entities, and various business cooperation models[5](index=5&type=chunk)[6](index=6&type=chunk)[8](index=8&type=chunk) [Major Risk Warnings](index=13&type=section&id=II.%20Major%20Risk%20Warnings) The company highlights two core operational uncertainties: the significant impact of policy changes on the toll road industry and the potential for regional road network improvements to divert or induce traffic flow, posing management challenges - The company's primary risks stem from changes in the policy environment and road network variations affecting traffic flow, which the Group will address through stable operations and timely strategic adjustments[29](index=29&type=chunk) [Company Profile](index=14&type=section&id=Company%20Profile) Shenzhen Expressway Company Limited, established in 1996, primarily invests in, constructs, and manages toll roads and urban transportation infrastructure, expanding into environmental protection sectors like water and solid waste treatment, listed on both A and H shares with Shenzhen International as its indirect controlling shareholder - The company's core business is toll roads, actively developing the environmental protection industry as its second main business, operating and investing in **16 highway projects** with an equity mileage of approximately **546 kilometers**, and investing in **over 10 environmental, clean energy, and financial projects** as of the reporting date[30](index=30&type=chunk) - The company's total share capital is approximately **2.181 billion shares**, with A-shares accounting for **65.72%** and H-shares for **34.28%**, and indirect controlling shareholder Shenzhen International holds **over 50%** of the company's shares[30](index=30&type=chunk) [Summary of Accounting Data and Financial Indicators](index=16&type=section&id=Summary%20of%20Accounting%20Data%20and%20Financial%20Indicators) This chapter presents the company's core financial and operational data for 2019 and previous years, showing a 6.52% increase in operating revenue but a 27.34% decrease in net profit attributable to shareholders in 2019, primarily due to 2018 asset disposal gains, while non-recurring net profit attributable to shareholders increased by 45.89%, alongside quarterly financial data, non-recurring gains/losses, and five-year traffic volume and toll revenue trends for various road and bridge projects 2019 Annual Key Accounting Data (RMB) | Indicator | 2019 | 2018 | YoY Change (%) | | :--- | :--- | :--- | :--- | | **Operating Revenue** | 6,185,825,111.97 | 5,807,108,031.78 | 6.52% | | **Net Profit Attributable to Shareholders of Listed Company** | 2,499,484,975.75 | 3,440,050,607.33 | -27.34% | | **Net Profit Attributable to Parent Company after Non-recurring Items** | 2,243,627,358.26 | 1,537,875,136.33 | 45.89% | | **Net Cash Flow from Operating Activities** | 1,751,428,675.07 | 3,222,228,582.62 | -45.65% | | **Basic Earnings Per Share (RMB/share)** | 1.146 | 1.577 | -27.34% | | **Total Assets (Year-end)** | 44,923,734,271.98 | 41,100,850,328.23 | 9.30% | 2019 Quarterly Key Financial Data (RMB) | Item | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 1,330,593,040.84 | 1,368,599,660.97 | 1,486,215,187.60 | 2,000,417,222.56 | | **Net Profit Attributable to Shareholders of Listed Company** | 467,451,393.65 | 1,109,372,962.48 | 574,156,897.38 | 348,503,722.24 | - Total non-recurring gains and losses in 2019 amounted to **RMB 256 million**, primarily from gains on disposal of subsidiaries (**RMB 262 million**), fair value changes and settlement gains from foreign exchange swap instruments, and fair value changes of other non-current financial assets[35](index=35&type=chunk) Five-Year Financial Summary (RMB Million) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 6,186 | 5,807 | 5,210 | 4,867 | 3,746 | | **Of which: Toll Revenue** | 4,569 | 5,066 | 4,684 | 4,064 | 3,338 | | **Net Profit** | 2,499 | 3,440 | 1,384 | 1,061 | 1,407 | | **Earnings Per Share (RMB)** | 1.146 | 1.577 | 0.635 | 0.487 | 0.645 | | **Cash Dividend Per Share (RMB)** | 0.52 | 0.71 | 0.30 | 0.22 | 0.34 | | **Asset-Liability Ratio (%)** | 53.87% | 52.46% | 64.13% | 58.59% | 56.62% | [Annual Milestones](index=21&type=section&id=Annual%20Milestones) This chapter chronologically reviews the company's significant events and achievements in 2019, including performance releases, project wins, equity acquisitions, financing approvals, and various industry and social honors, comprehensively showcasing its annual progress in business expansion, capital operations, and corporate governance - In 2019, the company achieved significant business expansion results, including the acquisition of a **51% equity stake in Nanjing Wind Power** and a **67% equity stake in Baotou Nanfeng**, and successfully won bids for the Guangming Environmental Park and Shenshan Environmental Park projects[43](index=43&type=chunk)[44](index=44&type=chunk) - The company gained recognition in the capital market, approved to issue corporate bonds of **no more than RMB 5 billion**, and received multiple honors such as "Best Investor Relations Award" and "Outstanding Investor Return Listed Company"[42](index=42&type=chunk)[44](index=44&type=chunk) [Chairman's Statement](index=22&type=section&id=Chairman's%20Statement) The Chairman reviewed 2019 operating performance, highlighting a **30.42% year-on-year increase in net profit** after excluding 2018 asset disposal gains, noting the completion of core business tasks like toll system upgrades and breakthroughs in the environmental protection industry through acquisitions in food waste treatment and wind power, successfully concluding the "2015-2019" five-year strategy by consolidating the toll road business and initiating new industry layouts, and despite the short-term impact of the COVID-19 pandemic, the company will seize Greater Bay Area opportunities to drive high-quality sustainable development in transportation infrastructure and environmental protection under the new "2020-2024" strategy 2019 Performance Overview and Dividend Proposal | Indicator | Amount (RMB) | YoY Change | | :--- | :--- | :--- | | **Operating Revenue** | 6.186 billion | +6.52% | | **Profit** | 2.499 billion | -27.34% | | **Profit after Non-recurring Items** | - | +30.42% | | **Earnings Per Share** | 1.146 | -27.34% | | **Proposed Final Dividend** | 0.52 per share | 45.37% of EPS | - **Breakthroughs in Environmental Protection Industry**: - Successfully won the bid for Guangming Environmental Park project, adopting a BOT model with a **1,000 tons/day** food waste treatment capacity[48](index=48&type=chunk) - Completed the acquisition of Nanjing Wind Power (wind power system R&D) and Baotou Nanfeng (wind farm operation), successfully entering the wind power industry chain, contributing **RMB 599 million** in revenue and **RMB 102 million** in net profit in the same year[48](index=48&type=chunk) - **Five-Year Strategy (2015-2019) Review**: - **Toll Roads**: Consolidated the main business by investing in Outer Ring, increasing stake in Shuiguan, and acquiring Yichang and Yanjiang Expressways, resulting in a net increase of **130 kilometers** in equity mileage[50](index=50&type=chunk) - **New Industry Expansion**: Focused on waste treatment, water environment management, and clean energy, initially completing the layout of the environmental protection industry[50](index=50&type=chunk) - **Future Outlook and Pandemic Impact**: - The COVID-19 pandemic led to free toll road policies, which will negatively impact **2020 revenue and operating performance**[52](index=52&type=chunk) - The company will formulate a new "2020-2024" development strategy, continuing to focus on transportation infrastructure and environmental protection as its main businesses, seizing opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area and Shenzhen Pilot Demonstration Zone[53](index=53&type=chunk) [Management Discussion and Analysis](index=29&type=section&id=Management%20Discussion%20and%20Analysis) This section provides a comprehensive review of the company's operational performance, financial results, and future plans, highlighting key achievements in toll road and environmental businesses, alongside detailed financial analysis and strategic outlook 2019 Operating Revenue Composition | Business Segment | Revenue (RMB Billion) | Share of Total Revenue (%) | | :--- | :--- | :--- | | Toll Revenue | 4.57 | 73.87% | | Clean Energy Business | 0.599 | 9.68% | | Real Estate Development | 0.457 | 7.39% | | Entrusted Management Services | 0.376 | 6.08% | | Advertising and Others | 0.184 | 2.98% | | **Total** | **6.186** | **100.00%** | [Business Review](index=31&type=section&id=Business%20Review) In 2019, the Group's total revenue reached **RMB 6.186 billion**, a **6.52% year-on-year increase**, with toll revenue accounting for **73.87%** as the primary source, though it decreased year-on-year due to asset disposals, while environmental and new energy businesses showed initial success, contributing nearly **RMB 600 million** or **9.68%** of revenue, and the company made progress across its four segments: toll roads, environmental protection, entrusted management, and project development, with toll road business maintaining growth on a comparable basis, environmental business achieving significant breakthroughs in solid waste treatment and clean energy through multiple acquisitions, and entrusted management business steadily advancing with new maintenance projects successfully expanded [Toll Road Business](index=32&type=section&id=Toll%20Road%20Business) Influenced by stable macroeconomic operation and optimized regional economic structure, the company's toll road business performed steadily overall, with ETC promotion and new vehicle classification standards having some negative impact on revenue but long-term benefits for operational efficiency, and most road sections maintaining growth in traffic volume and toll revenue, notably Yanjiang, Qinglian, and Changsha Ring Expressways, while the company enhanced management efficiency and road conditions through quality management, informatization (BIM), ETC system upgrades, and road maintenance, with ongoing construction projects like Outer Ring and Yanjiang Phase II, and expansion work on Jihe and Yangmao Expressways 2019 Key Road Section Operating Data | Toll Road | Daily Average Mixed Traffic Volume (Thousand Vehicles/Day) | YoY | Daily Average Toll Revenue (RMB Thousand) | YoY | | :--- | :--- | :--- | :--- | :--- | | **Yanjiang Expressway** | 100 | 10.3% | 1,459 | 14.6% | | **Qinglian Expressway** | 48 | 11.5% | 2,293 | 10.0% | | **Changsha Ring Road** | 44 | 22.1% | 428 | 8.4% | | **Guangzhou West Second Ring** | 86 | 15.4% | 1,597 | -3.4% | | **Yangmao Expressway** | 46 | -9.3% | 1,524 | -13.9% | - The company actively promotes major engineering projects: - **Outer Ring Project**: Approximately **67%** completed as of the reporting period end[78](index=78&type=chunk) - **Yanjiang Phase II**: Approximately **40%** completed as of the reporting period end, with the International Convention and Exhibition Center Interchange already open to traffic[79](index=79&type=chunk) - **Jihe Expressway Expansion**: Overall construction plan largely agreed upon, with preliminary special work underway - **Yangmao Expressway Expansion**: Steadily progressing, planned for completion in **2022** - In response to the national policy of abolishing provincial toll stations, the company completed the timely upgrade of toll station and lane hardware/software, and the construction of new ETC gantry systems, successfully launching the new system on **January 1, 2020**[76](index=76&type=chunk) [Environmental Business](index=41&type=section&id=Environmental%20Business) The Group achieved significant breakthroughs in the environmental protection industry, focusing on solid waste treatment and clean energy, winning the bid for the Guangming Environmental Park BOT project with a **1,000 tons/day** capacity, completing controlling acquisitions of **51% of Nanjing Wind Power** (wind turbine manufacturing) and **67% of Baotou Nanfeng** (wind farm operation) to build a full wind power industry chain, and further strengthening its leading position in the food waste treatment market by acquiring a controlling stake in Lande Environmental at the beginning of 2020 - Successfully won the bid for the Guangming Environmental Park project, adopting a BOT model with a **10-year concession period** and a **1,000 tons/day** food waste treatment capacity, with the company holding a **65% equity stake** in the project company[81](index=81&type=chunk) - Signed an agreement in **January 2020** to acquire a controlling stake in Lande Environmental, which owns **16 organic waste treatment BOT/PPP projects**, enabling the Group to rapidly enter and focus on the organic waste treatment segment, forming full industry chain synergy[82](index=82&type=chunk) - Completed controlling acquisitions of a **51% equity stake in Nanjing Wind Power** (wind turbine manufacturing) and a **67% equity stake in Baotou Nanfeng** (wind farm with a total installed capacity of **247.5 MW**), achieving a full industry chain layout from equipment manufacturing to wind farm operation[84](index=84&type=chunk)[85](index=85&type=chunk) [Entrusted Management and Other Infrastructure Development](index=44&type=section&id=Entrusted%20Management%20and%20Other%20Infrastructure%20Development) Leveraging its expertise in infrastructure, the Group actively engaged in entrusted construction and management services, including the Outer Ring project and freight organization adjustment projects, and newly won the Shenshan Environmental Park full-process entrusted construction project, while renewing the equity management contract for Longda Company and successfully bidding for comprehensive maintenance projects for four government-transferred roads, also participating in other infrastructure development projects such as the Nanmen River treatment in Shenshan Cooperation Zone and Guizhou Duohua Bridge construction - **Entrusted Construction Business**: Newly won the full-process entrusted construction for the Shenshan Ecological Environment Technology Industrial Park infrastructure and supporting facilities project, with a contract value of approximately **RMB 227 million**[88](index=88&type=chunk) - **Entrusted Management Business**: Renewed the entrusted management contract for **89.93% equity of Longda Company**, and successfully won bids for comprehensive maintenance projects for four roads: Nanguang, Yanpai, Yanba, and Longda Shenzhen section[88](index=88&type=chunk) - **Other Infrastructure Development**: Participated in the Nanmen River comprehensive treatment project in Shenshan Cooperation Zone (approximately **72% completed**), Guizhou Duohua Bridge project (approximately **38% completed**), and long-term rental apartment projects in Shenzhen[89](index=89&type=chunk) [Project Development and Management](index=47&type=section&id=Project%20Development%20and%20Management) As a beneficial supplement to its main business, the Group prudently conducts integrated land development and urban renewal, with phases one and two of the Guizhou Guilong development project "Interlaken Town" residential units largely sold out and delivered, and phase three under construction and sale, while also completing the equity transfer of approximately **810 mu** of Guilong land to recover funds during the reporting period, and the Meilinguan renewal project in Shenzhen, a collaboration with Shenzhen International and Vanke, progressed smoothly, with all phase one residential units sold and funds recovered, and phase two achieving a **75% signing rate** by the end of the reporting period - **Guilong Development Project**: Interlaken Town Phase I and II residential units are largely sold out and delivered, with **217 units** in Phase III already signed for sale, and during the reporting period, approximately **810 mu** of Guilong land was transferred, recovering approximately **RMB 567 million**[92](index=92&type=chunk)[93](index=93&type=chunk) - **Meilinguan Renewal Project**: All **832 units** in Phase I have been sold and funds recovered; Phase II launched for sale at the end of **September 2019**, with over **510 units** cumulatively signed by the end of the reporting period, achieving a **75% signing rate**[94](index=94&type=chunk) [Financial Analysis](index=50&type=section&id=Financial%20Analysis) In 2019, the Group's net profit attributable to the parent company decreased by **27.34%** year-on-year to **RMB 2.5 billion**, primarily due to significant gains from three asset disposals in the prior year, but excluding this impact, net profit increased by **30.42%** year-on-year, driven mainly by the recognition of deferred income tax assets for Yanjiang Company, revenue recognition from United Land's Meilinguan Phase I project, and investment gains from the transfer of four Guizhou subsidiaries, while operating revenue increased by **6.52%** year-on-year with significant contributions from new wind power business, and finance costs decreased significantly by **45.69%** year-on-year due to reduced borrowing scale and lower exchange losses, with the Group's capital structure remaining stable and asset-liability ratio slightly increasing to **53.87%** Analysis of Major Financial Statement Item Changes (RMB Thousand) | Item | Current Period | Prior Period | Change (%) | | :--- | :--- | :--- | :--- | | **Operating Revenue** | 6,185,825 | 5,807,108 | 6.52 | | **Operating Cost** | 3,499,538 | 2,858,212 | 22.44 | | **Finance Costs** | 572,938 | 1,055,006 | -45.69 | | **Investment Income** | 1,242,672 | 555,594 | 123.67 | | **Income Tax Expense** | -92,249 | 966,447 | N/A | | **Net Cash Flow from Operating Activities** | 1,751,429 | 3,222,229 | -45.65 | - The main reasons for the significant year-on-year increase in net profit (after non-recurring items) include: - **Yanjiang Company Deferred Income Tax Assets**: After completing capital injection into Yanjiang Company, related deferred income tax assets were recognized, increasing net profit by a total of **RMB 464 million**[119](index=119&type=chunk) - **United Land Investment Income**: Recognition of commercial housing development income from Meilinguan Renewal Project Phase I contributed significant investment income to the Group[114](index=114&type=chunk) - **Subsidiary Transfer Gains**: Transfer of **100% equity and creditor's rights** of four Guizhou subsidiaries resulted in a recognized equity transfer gain of **RMB 262 million**, increasing after-tax net profit by **RMB 138 million**[120](index=120&type=chunk) - An impairment provision of **RMB 552 million** was made for the Shuiguan Expressway concession intangible asset, which reduced the Group's 2019 net profit by approximately **RMB 181 million**[121](index=121&type=chunk) Capital Structure and Solvency | Key Indicator | 2019 Year-end | 2018 Year-end | | :--- | :--- | :--- | | **Asset-Liability Ratio** | 53.87% | 52.46% | | **Net Debt-to-Equity Ratio** | 67.02% | 58.04% | | **Interest Coverage Ratio (times)** | 4.56 | 5.54 | [Outlook and Plans](index=72&type=section&id=Outlook%20and%20Plans) The company has largely completed its new "2020-2024 Development Strategy," continuing the "transportation infrastructure + environmental protection" dual-core business model, with the 2020 operating plan focusing on mitigating the impact of COVID-19-induced free toll road policies while ensuring progress on key projects like Yanjiang Phase II and Outer Ring Section A, and the environmental sector will concentrate on integrating newly acquired projects like Lande Environmental and Nanjing Wind Power to enhance core competitiveness, with total capital expenditure planned for the next three years at approximately **RMB 7.65 billion**, primarily for Outer Ring, environmental projects, and Jihe expansion, and the company has identified and formulated risk response measures for operational management, financing, business expansion, and construction management - The company's new "2020-2024 Development Strategy" will continue to adhere to its two main businesses of transportation and urban infrastructure and environmental protection, while exploring new business models such as urban integrated services and industry-finance integration[156](index=156&type=chunk) 2020-2022 Major Capital Expenditure Plan (RMB Thousand) | Project Name | 2020 | 2021 | 2022 | Total | | :--- | :--- | :--- | :--- | :--- | | **Outer Ring Project** | 1,179,163 | 1,770,616 | – | 2,949,779 | | **Lande Food Waste Project** | 700,000 | 300,000 | – | 1,000,000 | | **Guangming Environmental Park PPP Project** | 358,000 | 350,000 | – | 708,000 | | **Jihe Expansion Pre-expenditure** | 400,497 | – | – | 400,497 | | **Yangmao Expansion (Equity)** | 103,750 | 196,580 | 196,590 | 496,920 | | **Total** | **4,238,958** | **2,946,606** | **463,800** | **7,649,364** | - The company identified four key risk areas and formulated response measures: - **Operational Management Risk**: Addressing new challenges from national ETC networking, improving systems and processes, and promoting intelligent upgrades[162](index=162&type=chunk) - **Financing Risk**: Ensuring funding needs during peak capital expenditure periods by issuing H-shares, corporate bonds, and expanding asset securitization channels[165](index=165&type=chunk) - **Business Expansion Risk**: Strengthening integration and management of newly acquired environmental projects, and managing investment return risks for existing highway expansion through innovative business model design[168](index=168&type=chunk) - **Construction Management Risk**: Controlling project schedule, quality, cost, and safety risks for ongoing projects using mature management systems and contractual terms[170](index=170&type=chunk) [Report of the Board of Directors](index=80&type=section&id=Report%20of%20the%20Board%20of%20Directors) This chapter is a statutory report presented as required by listing rules, covering the company's main business, performance and distribution, share capital structure, related party transactions, significant contracts, external guarantees, and commitments, confirming 2019 performance and a proposed final dividend of **RMB 0.52 per share**, detailing daily related party transactions with controlling shareholder Shenzhen International and its associates, such as entrusted management of Longda Company's equity, and explaining the company's environmental, social responsibility, and legal compliance status, along with significant capital operations like the termination of A-share convertible bond issuance and proposed non-public H-share issuance - The Board of Directors recommends a **2019 final cash dividend of RMB 0.52 per share** (tax inclusive)[174](index=174&type=chunk) - During the reporting period, the company had ongoing connected transactions with Baotong Company (a wholly-owned subsidiary of Shenzhen International), specifically the entrusted management of **89.93% equity of Longda Company**, with a management fee of **RMB 8.77 million** in 2019, and this contract has been renewed until the end of **2020**[201](index=201&type=chunk) - The company decided to terminate the issuance of A-share convertible corporate bonds and proposed a non-public issuance of **no more than 300 million H-shares** in early 2020 to optimize its capital structure and support the new development strategy[195](index=195&type=chunk)[196](index=196&type=chunk) - Controlling shareholder Shenzhen International and its parent company Shenzhen Investment Holdings have committed to avoiding horizontal competition, including injecting eligible expressway assets into the company within **5-8 years**[214](index=214&type=chunk) [Share Capital and Shareholder Information](index=96&type=section&id=Share%20Capital%20and%20Shareholder%20Information) This chapter details the company's share capital structure and shareholder information, showing total share capital maintained at **2.181 billion shares** as of the reporting period end, with A-shares accounting for **65.72%** and H-shares for **34.28%**, listing the top ten shareholders, where Xintongchan Company is the largest beneficial shareholder with a **30.03% stake**, and Shenzhen International is the indirect controlling shareholder (**51.56% total stake**), with the Shenzhen SASAC as the ultimate controlling party Top Ten Shareholders' Holdings (As of 2019 Year-end) | Shareholder Name | Number of Shares Held | Percentage (%) | Share Type | | :--- | :--- | :--- | :--- | | HKSCC NOMINEES LIMITED | 729,925,099 | 33.47% | H-share | | Xintongchan Industrial Development (Shenzhen) Co., Ltd. | 654,780,000 | 30.03% | A-share | | Shenzhen Shenguanghui Highway Development Co., Ltd. | 411,459,887 | 18.87% | A-share | | China Merchants Expressway Network & Technology Holdings Co., Ltd. | 87,211,323 | 4.00% | A-share | | Guangdong Provincial Road & Bridge Construction Development Co., Ltd. | 61,948,790 | 2.84% | A-share | - The company's indirect controlling shareholder is Shenzhen International Holdings Limited, which, through its wholly-owned subsidiaries, collectively holds **51.561%** of the company's shares, and the ultimate controlling party is the Shenzhen Municipal People's Government State-owned Assets Supervision and Administration Commission[231](index=231&type=chunk)[233](index=233&type=chunk) [Directors, Supervisors, Senior Management, and Employees](index=101&type=section&id=Directors%2C%20Supervisors%2C%20Senior%20Management%2C%20and%20Employees) This chapter comprehensively introduces the composition of the company's governance team and workforce, covering personal resumes, terms, shareholdings, and remuneration of directors, supervisors, and senior management, detailing the company's remuneration policy, including principles for director/supervisor fees and employee compensation and benefits, and presenting the performance-linked evaluation and incentive system, particularly the "Incremental Profit Incentive and Restraint Scheme" implemented in 2019, while also outlining the overall employee situation, professional composition, educational structure, and annual training plan execution 2019 Partial Senior Management Remuneration (Pre-tax, RMB Ten Thousand) | Name | Position | Total Remuneration | | :--- | :--- | :--- | | Hu Wei | Chairman | 123.34 | | Liao Xiangwen | Executive Director, President | 154.69 | | Wang Zengjin | Supervisor | 151.14 | | Gong Taotao | Vice President, Board Secretary | 149.12 | | Zhao Guiping | Chief Accountant | 167.43 | - The company established a long-term incentive mechanism, implementing the "Incremental Profit Incentive and Restraint Scheme" (2018-2020) approved by the general meeting of shareholders, and has already implemented the incentive scheme for the 2018 operating performance[275](index=275&type=chunk) - As of the reporting period end, the Group's total number of employees was **4,889**, with toll collection personnel accounting for **72%** and management and professional personnel for **28%**, and approximately **36%** of employees holding a college degree or above[268](index=268&type=chunk)[270](index=270&type=chunk)[272](index=272&type=chunk) [Corporate Governance](index=114&type=section&id=Corporate%20Governance) This section details the company's robust corporate governance framework, adherence to A+H listing rules, and the effective functioning of its board, supervisory committee, and specialized committees, ensuring compliance, transparency, and accountability [Overview of Corporate Governance](index=116&type=section&id=Overview%20of%20Corporate%20Governance) The company is committed to improving its governance structure, fully complying with A+H laws, regulations, and listing rules, including all provisions of the HKEX Corporate Governance Code during the reporting period, having established a governance framework comprising the general meeting of shareholders, board of directors, supervisory committee, and management, with clearly defined responsibilities through the Articles of Association and committee rules, and the Board has five specialized committees—Strategy, Audit, Remuneration, Nomination, and Risk Management—all actively performing their duties in 2019, providing professional advice and oversight on company strategy, financial report auditing, executive remuneration and nominations, and risk management - The company's governance structure is clear, comprising the general meeting of shareholders, Board of Directors, Supervisory Committee, and management, with five specialized Board committees established: Strategy, Audit, Remuneration, Nomination, and Risk Management[281](index=281&type=chunk)[290](index=290&type=chunk) - During the reporting period, the company fully adopted and complied with all code provisions of the HKEX Corporate Governance Code, with no significant deviations or violations[279](index=279&type=chunk) - Annual performance of each specialized committee: - **Strategy Committee**: Reviewed the company's "2020-2024 Development Strategic Plan"[291](index=291&type=chunk) - **Audit Committee**: Held **5 meetings**, reviewed periodic reports and internal control reports, and conducted independent meetings with auditors[292](index=292&type=chunk) - **Remuneration Committee**: Evaluated executive performance and reviewed employee incentive schemes[293](index=293&type=chunk) - **Nomination Committee**: Reviewed the Board structure and completed the re-appointment review for the Board Secretary[294](index=294&type=chunk) - **Risk Management Committee**: Reviewed the annual risk report and financial early warning indicator system[295](index=295&type=chunk) [Corporate Governance Report](index=124&type=section&id=Corporate%20Governance%20Report) This report elaborates on the company's compliance with the HKEX Corporate Governance Code, confirming full adoption of all code provisions during the reporting period, covering the Board's duties and operations, separation of Chairman and CEO roles, Board composition and diversity policy, functions of specialized committees, directors' responsibilities and training, financial reporting accountability and audit, and shareholder communication mechanisms, with the company practicing standards higher than code recommendations in areas such as independent director tenure, executive remuneration disclosure, and internal control audits - The company's corporate governance practices exceed the requirements of the Corporate Governance Code in several aspects, such as independent directors serving **no more than 6 years**, named disclosure of all executive remuneration, and external audits of financial reporting internal controls[297](index=297&type=chunk) - The Board of Directors comprises **12 directors**, including **4 independent directors**, meeting the requirement of no less than **1/3**, with members possessing diverse professional backgrounds in highways, environmental protection, finance, banking, and law, reflecting the principle of diversity[301](index=301&type=chunk)[304](index=304&type=chunk) - The company appointed Ernst & Young as its 2019 auditor, responsible for the integrated audit of financial statements and internal controls, with total audit-related fees for 2019 amounting to **RMB 4.598 million**, of which **RMB 2.078 million** was for non-audit services[315](index=315&type=chunk)[316](index=316&type=chunk) [Internal Control](index=138&type=section&id=Internal%20Control) The company's Board of Directors is responsible for establishing and effectively implementing internal controls to ensure operational compliance, asset security, and financial report accuracy, having built a comprehensive management system covering investment, engineering, finance, legal, and information disclosure, and developed an internal control manual based on the "Basic Norms for Enterprise Internal Control" by the "Five Ministries," with the Board, through the Audit Committee and its Audit Department, continuously supervising and evaluating the internal control system, and the 2019 internal control evaluation report concluded that the company maintained effective internal controls over financial and non-financial reporting in all material aspects, with no material weaknesses found, a conclusion supported by an unqualified audit opinion from external auditor Ernst & Young - The Board of Directors confirms that the company has maintained effective internal controls over financial reporting in all material aspects, in accordance with the requirements of the "Basic Norms for Enterprise Internal Control," with no material weaknesses found[332](index=332&type=chunk) - Ernst & Young Hua Ming LLP, engaged by the company, audited the effectiveness of the company's internal controls over financial reporting and issued an unqualified audit opinion[333](index=333&type=chunk) - The company established a systematic risk management system, annually identifying, assessing, and responding to major risks affecting operational objectives, and implemented a reporting mechanism for sudden significant risk events and a financial risk early warning management system[330](index=330&type=chunk) [Investor Relations](index=142&type=section&id=Investor%20Relations) The company upholds a culture of respect and responsibility towards investors, maintaining good relationships with the capital market through timely, accurate, and fair information disclosure and multi-channel communication activities, having issued over **170 announcements and documents** in 2019 and actively conducted performance presentations, roadshows, on-site surveys, and other events, engaging with **over 800 investors and media representatives**, and in terms of shareholder returns, the company adheres to an active dividend policy, having distributed cash dividends for **22 consecutive years**, with a proposed dividend payout ratio of **45.37%** for 2019 - In 2019, the company communicated with **over 800 investors and media representatives** through various forms, including performance presentations, roadshows, reverse roadshows, and investor conferences[338](index=338&type=chunk) - The company is committed to shareholder returns, having continuously distributed cash dividends for **22 consecutive years** since its listing, with cumulative dividends totaling approximately **RMB 8.8 billion**, and a proposed dividend payout ratio of **45.37%** for 2019[342](index=342&type=chunk) [Audit Report and 2019 Annual Financial Statements](index=146&type=section&id=Audit%20Report%20and%202019%20Annual%20Financial%20Statements) This section presents the independent auditor's report, which provides an unqualified opinion on the company's 2019 financial statements, along with the complete audited financial statements and their detailed notes, offering a comprehensive view of the company's financial position and performance [Audit Report](index=148&type=section&id=Audit%20Report) Ernst & Young Hua Ming LLP issued a standard unqualified audit opinion on the company's 2019 financial statements, deeming them to fairly reflect the company's financial position and operating results in all material respects, with two key audit matters highlighted: impairment considerations for long-term equity investments and concession intangible assets, both receiving significant attention due to substantial management accounting estimates and judgments involved - The auditor issued a standard unqualified audit opinion, stating that the financial statements fairly reflect the company's financial position and operating results[347](index=347&type=chunk) - Key audit matters include: - **Impairment of Long-term Equity Investments**: Due to significant accounting estimate uncertainties in valuing investees[350](index=350&type=chunk) - **Impairment of Concession Intangible Assets**: Due to significant judgments and estimates regarding key assumptions like traffic volume, toll rates, and costs when calculating the present value of future cash flows from these assets[354](index=354&type=chunk) [Financial Statements and Notes](index=154&type=section&id=Financial%20Statements%20and%20Notes) This section contains the company's complete audited financial statements for 2019, including consolidated and company balance sheets, income statements, cash flow statements, and statements of changes in shareholders' equity, with accompanying notes detailing the company's significant accounting policies, estimates, and the specific composition and changes of each statement item, serving as crucial supplementary information for understanding the company's financial position and operating results, and also includes supplementary information on non-recurring gains/losses and return on net assets Consolidated Balance Sheet Summary (December 31, 2019) | Item | Amount (RMB) | | :--- | :--- | | **Total Assets** | 44,923,734,271.98 | | Current Assets | 7,666,017,378.51 | | Non-current Assets | 37,257,716,893.47 | | **Total Liabilities** | 24,200,462,012.14 | | Current Liabilities | 6,480,694,273.95 | | Non-current Liabilities | 17,719,767,738.19 | | **Total Shareholders' Equity** | 20,723,272,259.84 | | Equity Attributable to Parent Company Shareholders | 18,374,542,643.63 | Consolidated Income Statement Summary (2019) | Item | Amount (RMB) | | :--- | :--- | | **Total Operating Revenue** | 6,185,825,111.97 | | **Operating Profit** | 2,444,057,783.36 | | **Total Profit** | 2,444,233,723.81 | | **Net Profit** | 2,536,483,221.77 | | Net Profit Attributable to Parent Company Shareholders | 2,499,484,975.75 | Consolidated Cash Flow Statement Summary (2019) | Item | Amount (RMB) | | :--- | :--- | | **Net Cash Flow from Operating Activities** | 1,751,428,675.07 | | **Net Cash Flow from Investing Activities** | -253,489,067.08 | | **Net Cash Flow from Financing Activities** | -1,147,072,626.17 | | **Net Increase in Cash and Cash Equivalents** | 350,980,012.00 | [Company Information](index=324&type=section&id=Company%20Information) This chapter provides the company's basic profile information, including its Chinese and English names, registered and office addresses, legal representative, contact details, information disclosure channels, listed securities details, and key collaborating intermediaries such as legal advisors, accounting firms, and share registrars, additionally including a summary table of toll road project information as of **March 2020**, detailing each project's equity ratio, location, mileage, number of lanes, operational status, and toll expiry date Company Toll Project Information (As of March 2020) | Toll Project | Company's Equity Interest | Location | Toll Mileage (km) | Status | Toll Expiry Date | | :--- | :--- | :--- | :--- | :--- | :--- | | Meiguan Expressway | 100% | Shenzhen | 5.4 | Operational | 2027.03 | | Jihe East Section | 100% | Shenzhen | 23.7 | Operational | 2027.03 | | Yanjiang Project | 100% | Shenzhen | 36.6 | Phase I Operational, Phase II Under Construction | 2038.12 | | Outer Ring Project | 100% | Shenzhen | 60 | Under Construction | – | | Qinglian Expressway | 76.37% | Guangdong | 216.0 | Operational | 2034.07 | | Wuhuang Expressway | 100% | Hubei | 70.3 | Operational | 2022.09 | | Yichang Project | 100% | Hunan | 78.3 | Operational | 2033.12 |