招港B：2026年半年度报告（英文版）

CHINA MERCHANTS PORT GROUP CO., LTD.

INTERIM REPORT 2026

Date of Disclosure: 29 August 2026

Part I Important Notes, Table of Contents and Definitions

The Board of Directors (or the “Board”) as well as the directors and senior management of China Merchants Port Group Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report, and shall be individually as well as jointly and severally liable for any misrepresentations, misleading statements or material omissions therein.

Xu Song, Legal Representative, Huang Zhenzhou, Chief Financial Officer, and Liu Shixia, Head of Accounting Department, hereby guarantee that the financial statements carried in this Report are factual, accurate and complete.

All the Company’s directors have attended the Board meeting for the review of this Report.

Any forward-looking statements such as future plans or development strategies mentioned herein shall not be considered as the Company’s promises to investors. And investors are reminded to exercise caution when making investment decisions.

Risks exposed to the Company and countermeasures have been explained in Item X in “Part III Management Discussion and Analysis” herein, which investors are kindly reminded to pay attention to.

Securities Times, China Securities Journal, Shanghai Securities News, and www.cninfo.com.cn have been designated by the Company for information disclosure. And all information about the Company shall be subject to what is disclosed on the aforesaid media.

The Company is not subject to any industry-specific disclosure requirements.

The Board has approved an interim dividend plan as follows: based on the Company’s total share capital at the record date of the dividend payout, a cash dividend of RMB2.00 (tax inclusive) per 10 shares is to be distributed to shareholders, with no bonus issue from either profit or capital reserves.

This Report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.

Table of Contents

Part I Important Notes, Table of Contents and Definitions....1

Part II Corporate Information and Key Financial Information....6

Part III Management Discussion and Analysis....10

Part IV Governance, Environmental and Social Information....41

Part V Significant Events....48

Part VI Share Changes and Shareholder Information....63

Part VII Bonds....68

Part VIII Financial Statements....73

Documents Available for Reference

1. Financial Statements carrying the signatures and stamps of the Legal Representative, the Chief Financial Officer and the Head of Accounting Department; and

2. Original copies of all documents and announcements disclosed by the Company on the website designated by the CSRC during the Reporting Period.

Definitions

Note: In this Report, certain total numbers may not be exactly equal to the summation of their sub-item numbers as a result of rounding-off.

Part II Corporate Information and Key Financial Information

I Corporate Information

II Contact Information

III Other Information

1. Contact Information of the Company

Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address, email address and other contact information of the Company in the Reporting Period.

 Applicable √ Not applicable

No change occurred to the said information in the Reporting Period, which can be found in the 2025 Annual Report.

2. Media for Information Disclosure and Place where this Report is Lodged

Indicate by tick mark whether any change occurred to the information disclosure media and the place for lodging the Company’s periodic reports in the Reporting Period.

 Applicable √ Not applicable

The website of the stock exchange, media and other websites where the Company’s periodic reports are disclosed, as well as the place for lodging such reports did not change in the Reporting Period. The said information can be found in the 2025 Annual Report.

3. Other Relevant Information

Indicate by tick mark whether any change occurred to the other relevant information in the Reporting Period.

 Applicable √ Not applicable

IV Key Financial Information

Indicate by tick mark whether there is any retrospective adjustment or restatement to prior-year financial statements.

 Yes √ No

The total share capital at the end of the last trading session before the disclosure of this Report:

Fully diluted earnings per share based on the latest total share capital above:

V Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards

1. Net Profit and Equity under CAS and IFRS

 Applicable √ Not applicable

No difference for the Reporting Period.

2. Net Profit and Equity under CAS and Foreign Accounting Standards

 Applicable √ Not applicable

No difference for the Reporting Period.

3. Reasons for Accounting Data Differences between Domestics and Overseas Accounting Principle

 Applicable √ Not applicable

VI Non-recurring Profit or Loss

Unit: RMB

Other gains and losses that meet the definition of non-recurring gain/loss:

 Applicable √ Not applicable

No such cases.

Explanation of the situation where the non-recurring gains and losses items listed in Interpretative Announcement No. 1 of Companies Issuing Publicly Traded Securities - Non-Recurring Gains and Losses are classified as recurring gains and losses items:

 Applicable √ Not applicable

During the Reporting Period, the Company did not classify any gain or loss item listed in Interpretative Announcement No. 1 of Companies Issuing Publicly Traded Securities - Non-Recurring Gains and Losses as a recurring gain or loss item.

Part III Management Discussion and Analysis

I Principal Activities of the Company during the Reporting Period

1. Main businesses and business models

The Company’s core business includes port investment, port operation, port logistics and smart technology.

The Company has established a comprehensive port network across the hub locations along coastal China, and the terminals which the Company invested in or invested in and managed are located in hub locations across Hong Kong, Taiwan, Shenzhen, Ningbo, Shanghai, Qingdao, Tianjin, Dalian, Zhangzhou, Zhanjiang and Shantou, as well as in Asia, Africa, Europe, Oceania, South and North America, amongst others. Port investment includes oversea and domestic port investments. The Company puts emphasis on its presence in global major hub locations, gateway ports and regions with huge market potential, rapid economic growth and promising development, in order to capture investment opportunities in ports, logistics and related infrastructure and further improve the global port network. Port operation mainly includes containers and bulk cargo handling and warehousing services. The Company focuses on the construction and management of leading port and the improvement of service, so as to provide clients with higher-quality port services.

In terms of port logistics, the Company leverages innovative park business models and services to deeply explore the synergistic value between ports and parks. It provides customers with diversified value-added services within key zones such as the Shenzhen Qianhai Comprehensive Bonded Zone, Qingdao Qianwan Comprehensive Bonded Zone, Tianjin Dongjiang Comprehensive Bonded Zone, Djibouti International Free Trade Zone and Hambantota Industrial Park. These services include warehousing leasing, customs clearance, division or merger of cargoes, documentation services, and more. The Company is driving growth in port tugboat service, tallying operations, and engineering supervision and management business. It also focuses on port-related business innovation and supply chain logistics. By integrating port ecosystem service resources and fostering collaboration across the upstream and downstream of the port logistics value chain, the Company prioritizes resource openness and sharing. This integrated approach facilitates smoother trade flows and enhances the efficiency of logistics, information, and capital flows within the port service chain, ultimately helping customers reduce costs and improve efficiency.

The smart technology business focuses on the application of a new generation of information technology, such as big data, Internet of Things (IoT) and artificial intelligence (AI), promotes “digital intelligence” and “green” upgrades, and continues to empower the core businesses, such as the production, management, services and ecology of the port. Smart technology injects new momentum into the development of the port enterprises.

The main business segments of the Company are as follows:

2. During the Reporting Period, the development trajectory and periodicity of, as well as the position in the industry in which the Company operates

(1) The macro-economic and trade environment

In the first half of 2026, the global economic growth remained stable and stronger than expected, although growth was uneven across regions. Supply shocks triggered by the war in the Middle East and the technology benefits driven by artificial intelligence constituted two opposing forces, exerting an asymmetric dual impact on national economies. Geopolitical shocks were weighing on energy-importing nations and vulnerable economies, while AI-driven demand has boosted economic growth in countries integrated into global technology value chains. Driven by factors including the restructuring of global industrial and supply chains, inflationary pressures and the rise of AI, growth in developed and emerging economies continued to diverge. Among developed economies, growth was uneven. The momentum of the US economic recovery has strengthened significantly, while the momentum of economic growth in Europe has slowed down. According to data from the US Department of Commerce, the US’s GDP growth for the first quarter of 2026 was revised upwards to 2.1% quarter-on-quarter. Data from Eurostat indicated that the mathrm E U prime s GDP contracted by 0.1% quarter-on-quarter during the same period. Emerging economies demonstrated greater growth resilience, with Southeast Asian markets performing particularly well. In the first quarter of 2026, the GDP of Vietnam, Indonesia and Malaysia grew by 7.8%, 5.6% and 5.4% year-on-year, respectively. With respect to trade, global trade maintained moderate growth, driven by the expansion of trade activities spurred by advancements in AI, structural demand growth resulting from the restructuring of global production and supply chains, and the trade front-loading effect, which has partially offset the disruptions caused by US tariff policies. According to data from WTO, the volume of global merchandise trade rose by 3.2% year-on-year in the first quarter of 2026.

In the first half of 2026, faced with a complex international environment characterized by heightened uncertainty in global trade policies and ongoing geopolitical conflicts, China adhered to the general principle of seeking progress while maintaining stability and effectively implemented proactive and effective macroeconomic policies. The national economy forged ahead against headwinds and operated within a reasonable range. According to data from the National Bureau of Statistics of China, China’s GDP grew by 4.7% year-on-year in the first half of 2026, continuing to demonstrate the resilience of its economic development. In terms of trade, China’s foreign trade maintained a positive trend, with notable achievements in stabilizing scale and optimizing structure. The export structure continued to improve, with the share of exports of mechanical and electrical products and high-tech products increasing, and a diversified market structure taking further shape. According to data from the General Administration of Customs of China, the total value of import and export goods reached RMB25.47 trillion in the first half of 2026, surpassing the historical level for the corresponding period once again, with a year-on-year increase of 16.9%, firmly maintaining China’s position as the world’s largest goods trading nation. Of this, the total value of exports was RMB14.73 trillion, up by 13.4% year-on-year; total imports stood at RMB10.74 trillion, up by 22.1% year-on-year, with the growth rate of imports exceeding that of exports by 8.7 percentage points. Total value of import and export volume with “Belt and Road Initiative” partner countries amounted to RMB12.97 trillion, up by 14.8% year-on-year, accounting for 50.9% of total foreign trade.

Looking ahead to the second half of 2026, trade shifts or imbalances may prompt more economies to raise tariffs or impose additional non-tariff restrictions, leading to a renewed escalation of trade tensions, which in turn could weigh on global economic growth. The IMF forecasts global economic growth of 3.0% for 2026. Among which, the developed economies are projected to see slow growth in 2026, falling from 1.9% in 2025 to 1.7% in 2026, with growth in the Eurozone declining from 1.4% in 2025 to 0.9% in 2026. However, US growth is expected to rise from 2.1% in 2025 to 2.3% in 2026. The economic growth of emerging markets and developing economies is projected to be 3.8% in 2026, down by 0.7 percentage points year-on-year, of which the growth of emerging market and developing economies in Asia is expected to be 5.0%, down by 0.6 percentage points year-on-year. Global trade growth is set to slow, affected by persistent geopolitical uncertainty, inflationary pressures and rising trade costs. The IMF forecasts that global trade volume (goods and services) will grow by 3.5% in 2026, a decrease of 1.5 percentage points year-on-year.

In the second half of 2026, the effects of China’s macroeconomic policies are expected to continue to unfold and take effect. China will introduce more proactive and targeted measures in response to evolving circumstances. New growth drivers are expected to make an increasing contribution to economic growth while maintaining strong momentum, and the economic structure is expected to continue to be optimized. However, it should also be noted that there are numerous external sources of instability and uncertainty, the contradiction between strong domestic supply and weak demand remains prominent, and the foundation for economic recovery still needs to be consolidated. Going forward, macroeconomic policies will adhere to the principle of seeking progress while maintaining stability and improving quality and efficiency. Efforts will be intensified to strengthen counter-cyclical and cross-cyclical adjustments, while continuing to expand domestic demand and optimize supply, with a focus on stabilizing employment, enterprises, markets and expectations.

(2) Analysis of development trajectory of port and shipping industry

In the first half of 2026, the global container shipping market was affected by multiple factors, including geopolitical conflicts, trade policies and structural changes in supply and demand, resulting in international freight rates following a volatile upward trend. On the supply side, according to the maritime consultancy Alphaliner, the global operational container vessel capacity in aggregate reached approximately 34.32 million TEUs as at the end of June 2026. During the first half of the year, the global container fleet saw a capacity increase of around 2.0% due to new vessel deliveries, with the annual growth rate in container vessel capacity projected to be approximately 4.2%. On the demand side, according to forecasts by the maritime consultancy Clarksons, the global container shipping volume in 2026 is expected to grow by approximately 2.4% year-on-year. While capacity growth continued to outpace demand growth, effective capacity tightened temporarily in the first half of the year due to the need to reroute vessels around the Red Sea and the Middle East, leading to a fluctuating upward trend in freight rates on ocean-going routes. In the second half of the year, freight rates are likely to face downward pressure as demand momentum weakens following the dissipation of the trade front-loading effect, coupled with supply-side pressures arising from new vessel deliveries. However, geopolitical uncertainties will continue to provide underlying support for freight rates. Furthermore, to meet customers’ increasingly diverse service requirements, leading liner companies are actively adjusting their business strategies. They are focusing on building end-to-end logistics capabilities covering the entire supply chain, accelerating the deep integration of digital and intelligent technologies with shipping operations, and speeding up the deployment of new-energy vessels and the decarbonization of their fleets, thereby comprehensively enhancing the quality of shipping services.

Container throughput at major global hub ports showed positive growth, with emerging markets such as Southeast Asia and Latin America recording an outstanding performance. However, the Middle East container market has seen a significant decline in volumes due to the impact of geopolitical conflicts. According to forecasts by the maritime consultancy Drewry, the ports in Asia handled a throughput of 280 million TEUs in the first half of 2026, representing an increase of 5.0% year-on-year. Among which, the ports in Southeast Asia handled a throughput of 75.80 million TEUs, representing an increase of 7.2% year-on-year. The ports in the Middle East handled a throughput of 14.88 million TEUs, representing a decrease of 34.9% year-on-year. The ports in Europe and North America handled a throughput of 78.73 million TEUs and 39.86 million TEUs respectively, representing increases of 4.5% and 1.7%. The ports in Africa and Latin America handled a throughput of 22.97 million TEUs and 33.62 million TEUs respectively, representing increases of 0.5% and 7.7%. Thanks to the steady growth of China’s foreign trade scale, the container throughput growth rate of the ports in China maintained at a relatively high level. According to data published by the Ministry of Transport of China, the accumulated container throughput handled by ports in Chinese Mainland achieved 182.92 million TEUs in the first half of 2026, representing an increase of 5.9% year-on-year. Of which, the accumulated container throughput handled by coastal ports achieved 161.05 million TEUs, representing an increase of 5.9% year-on-year.

(3) The Company’s industry position

The Company ranks among the global leading public port operators and is committed to developing as a world-class comprehensive port service provider. In terms of scale, the Company has established a relatively complete port network at major hub locations along coastal China, with its presence in 51 ports in 26 countries and regions including Asia, Africa, Europe, Oceania, South and North America. According to the statistics of the shipping consulting agency Drewry, in 2025, the Company ’ s equity throughput of containers reached 66.00 million TEUs, ranking among the top global port operators. In terms of quality, the major terminals controlled by the Company have occupied various market and regional leading positions. The Company continued to promote ESG development, and strived to create an ESG port benchmark in the industry. In addition, leveraging the strong foundation in port technology and based on the TOS system self-developed by CMPort, the Company has developed the world's first full-scenario, full-time, all-condition and multi-factor traditional container terminal upgrading solution, and has built the trade facilitation platform for the Guangdong-Hong Kong-Macao Greater Bay Area through blockchain technology, which has been extended to 35 terminals in the Greater Bay Area to help enhance the trade facilitation level in the Greater Bay Area. In terms of performance, the Company has continually promoted high-quality development and has been an industry leader in terms of net profit margin and overall labour productivity and other indicators.

II Analysis of Core Competitiveness

1. Strong shareholder background and resource integration capability

The Company’s ultimate controlling shareholder, China Merchants Group, is a century-old centrally administered state-owned enterprise (SOE) that originated from the port and shipping logistics sector, and enjoys an outstanding industry reputation together with extensive business resources.

Founded in 1872, China Merchants Group is a key state-owned backbone enterprise directly administered by the central government. It is also one of the earliest Chinese-funded enterprises established and operated in Hong Kong. As a century-old SOE, a comprehensive central enterprise, and a central enterprise based in Hong Kong, China Merchants Group primarily focuses on four major business segments: transportation and logistics, integrated finance, property and industrial parks, and technology and innovation industries. At present, the Group is committed to becoming an innovation-driven, international and comprehensive world-class enterprise. It is advancing and upgrading traditional industries, cultivating and expanding emerging industries, while building a “Smile Curve” that climbs toward the higher end of the industrial chain and a sustainable “Malik Curve”. Through these initiatives, the Group is comprehensively accelerating its “third entrepreneurship” strategy and leading high-quality development to a new level.

The transportation and logistics segment of China Merchants Group covers ports, shipping, logistics, shipbuilding and ship repair, as well as highways, providing extensive opportunities for coordinated services across the industrial chain. As the Group continues to accelerate its international expansion and improve its global logistics network, it effectively supports China Merchants Port in developing into a port investment and operation platform with an international perspective and global expansion capability, as well as an interconnected international port integrated service system.

2. Professional and efficient global port investment capability

The Company focuses on port investment, capturing global industrial trends and local market opportunities, while achieving full-process and full-cycle management throughout the investment lifecycle.

As an important platform for domestic and overseas port investment and operation under China Merchants Group, China Merchants Port has accumulated more than 30 years of experience in port investment and operations, of which over 15 years of experience is in overseas investment and operations. The Company has established a scientific and professional investment management system and built a specialized global investment research team with extensive experience in policy research, industry analysis, risk control, capital raising and post-investment management. The Company continuously conducts in-depth research on the development trends of global industrial and supply chains, focusing resources on its global footprint. By closely aligning with major national strategic opportunities and dynamic overseas investment prospects, the Company makes well-planned investments in strategically significant hub ports and gateway ports around the world.

The Company strives to maintain a balanced distribution of its port investment portfolio across both regions and lifecycle stages. In its overseas operations, the Company adheres to the principle of “ extensive consultation, joint contribution and shared benefits ” , embedding itself in local communities and actively fostering a community with a shared future. Building upon strengthened connectivity and cooperation, the Company continues to expand new avenues for international collaboration, significantly enhancing its resilience in responding to industry fluctuations, trade frictions and unforeseen events.

3. Increasingly sophisticated integrated port management capability

The Company has developed deep expertise in port operations and continues to enhance its integrated management capability through digitalization and platform-based management.

Leveraging its self-developed SMP platform, the Company is comprehensively advancing the digital transformation of business processes and implementing holistic management and control across its operations. While balancing safety and development, the Company adheres to lean operations and maintains a strong focus on its core business, thereby establishing an industry-leading management system. Through the implementation of cost leadership and the COE operating mechanism, the Company continues to deepen the integration of business and finance, optimize resource allocation, and effectively promote cost reduction and efficiency improvement. At the same time, by focusing on quality and efficiency enhancement, the Company institutionalizes best practices and continuously strengthens its profitability. The Company’s long-standing accumulation of integrated port management expertise has earned widespread recognition and a strong reputation within the industry.

4. Continuously optimized value chain integrated service capability

The Company is committed to creating value along the regional and logistics chains centered on ports and is advancing toward its vision of becoming a “world-leading port service provider”.

In response to the shipping industry’s increasing demand for network efficiency and collaborative resilience, the Company actively promotes the integration of port assets both domestically and internationally. Relying on its well-established global port network, the Company works in close synergy with the resource strengths of China Merchants Group in maritime transport, land transport, warehousing, logistics and trade. It is dedicated to providing customers with integrated port logistics service solutions, continuously enhancing corporate value and reinforcing its distinctive competitive advantage in the market.

5. Independent innovation capability in smart port development

The Company undertakes its industry responsibility by promoting the upgrading of traditional industries and leading the development of smart ports.

The Company is accelerating its digital and intelligent transformation, promoting the integrated development of technological innovation and industrial innovation, and introducing distinctive integrated smart port solutions within the industry. In terms of core port production operating systems, CMIT, a technology enterprise under the Company, has independently developed a new-generation CTOS product with strong global market competitiveness. In the construction of industrial internet platforms, the Company has upgraded and developed the “CM ePort” integrated service platform, providing one-stop comprehensive port services for the port, shipping and logistics industries. With the arrival of the AI era, the Company has launched the “Piercep ” AI brand to lead the development of intelligent port ecosystem agents and related products. The Company’s Mawan Smart Port, located in the Guangdong-Hong Kong-Macao Greater Bay Area, is the region’s first 5G-enabled smart port and has been awarded the designation of “China Five-Star Smart Port ” , demonstrating the Company ’ s outstanding achievements in digitalization and intelligentization.

6. Continuous improvement in ESG sustainability

The Company continues to focus on the vision of becoming a world-leading green and smart comprehensive port service provider, implements the ESG concept and enhances its sustainable development capabilities.

The Company set up a comprehensive and well-established ESG management system by incorporating the ESG concept into operational management. This aims to make more tangible achievements in various material issues such as “Environmental, Social and Governance”, making ESG practices a new engine of the Company’s growth and facilitating the sustainability of the Company. In respect of governance, board building, systems refinement and risk control are integrated into the Company’s ESG governance framework, which mainly strengthens overseas compliance risk management and embeds ESG risks into its comprehensive risk management system. In respect of the environment, the Company continuously optimizes its energy structure, accelerates the electrification of equipment, promotes the application of low-carbon technologies and strengthens port-shipping synergistic carbon reduction. Meanwhile, it deepens full-process environmental management, emphasizing waste reduction at the source and resource recycling, while safeguarding local natural ecosystems and advancing biodiversity conservation. Regarding social responsibility, internally, the Company prioritizes employee development and is committed to fostering a diverse, equitable, inclusive and safe work environment. Externally, it actively promotes the integrated development of its terminals with surrounding communities, driving local employment, environmental protection, support for vulnerable groups, children’s education and cultural harmony to achieve win-win cooperation.

III Analysis of Principal Businesses

1. Review of port business

(1) Overall overview of port business

During the first half of 2026, the container business of the Company showed growth momentum, and its bulk cargo business maintained a stable foundation. The Company’s ports handled a total container throughput of 106.78 million TEUs, representing a year-on-year increase of 5.5%; bulk cargo volume reached 622.03 million tonnes, representing a year-on-year decrease of 1.5%. For the container business, ports in Mainland China handled 84.69 million TEUs, representing a year-on-year increase of 6.9%. Ports in Hong Kong and Taiwan recorded a combined throughput of 2.40 million TEUs, representing a year-on-year decrease of 14.7%. Overseas ports handled 19.69 million TEUs, representing a year-on-year increase of 2.5%. For the bulk cargo business, ports in Mainland China handled 616.34 million tonnes, representing a year-on-year decrease of 1.6%, while overseas ports handled 5.70 million tonnes, representing a year-on-year increase of 18.6%.

Table 3-1 Company Throughput and Changes in the First Half of 2026 Note: The above statistics represent the total throughput of the Company’s subsidiaries, associates and joint ventures.

(2) Regional operating performance of port business

Table 3-2 Company Container Throughput and Changes in the First Half of 2026 (0,000 TEUs)

Table 3-3 Company Bulk Cargo Throughput and Changes in the First Half of 2026 (0,000 tonnes)

Pearl River Delta region

The West Shenzhen Port Zone handled a container throughput of 8.74 million TEUs, up by 4.2% year-on-year, which was mainly benefitted from the growth of foreign trade; and handled a bulk cargo volume of 7.12 million tonnes, down by 5.0% year-on-year, mainly due to adjustments in business structure. Shunde New Port handled a container throughput of 0.20 million TEUs, up by 8.1% year-on-year; and handled a bulk cargo volume of 3.02 million tonnes, up by 22.2% year-on-year, which was mainly benefitted from the business expansion in the hinterland. Dongguan Mayong handled a bulk cargo volume of 8.68 million tonnes, remaining year-on-year stable. CKRTT handled a total container throughput of 0.38 million TEUs, down by 4.1% year-on-year; and handled a bulk cargo volume of 1.75 million tonnes, down by 19.4% year-on-year, mainly due to a decline in demand for construction materials.

Yangtze River Delta region

SIPG handled a container throughput of 28.74 million TEUs, up by 6.4% year-on-year; and handled a bulk cargo volume of 39.14 million tonnes, down by 1.1% year-on-year. Ningbo Port handled a container throughput of 27.69 million TEUs, up by 8.8% year-on-year; and handled a bulk cargo volume of 330.39 million tonnes, down by 4.4% year-on-year.

Bohai Rim region

Liaoning Port handled a container throughput of 5.76 million TEUs, up by 5.2% year-on-year; and handled a bulk cargo volume of 121.21 million tonnes, up by 3.9% year-on-year. Laizhou Port handled a bulk cargo volume of 8.38 million tonnes, up by 5.0% year-on-year. QQCTU handled a container throughput of 6.90 million TEUs, up by 8.7% year-on-year, which was mainly due to the optimization of shipping routes adjustment. QQTU handled a bulk cargo volume of 6.25 million tonnes, down by 2.4% year-on-year. Qingdao Dongjiakou handled a bulk cargo volume of 43.92 million tonnes, up by 6.1% year-on-year, which was mainly benefitted from the increase in the cargo volume of ore. Tianjin Port Container Terminal handled a container throughput of 4.60 million TEUs, up by 6.9% year-on-year, which was mainly attributable to the shipping routes optimization.

South-East region

Shantou Port handled a container throughput of 0.82 million TEUs, down by 3.0% year-on-year; and handled a bulk cargo volume of 2.54 million tonnes, up by 22.4% year-on-year, which was mainly benefitted from growing demand for cement in the hinterland. Zhangzhou Port handled a container throughput of 0.24 million TEUs, up by 14.5% year-on-year, which was mainly benefitted from the development of new shipping routes; and handled a bulk cargo volume of 5.02 million tonnes, down by 10.6% year-on-year, mainly due to the decline in demand for coal and iron ore. Xia Men Bay Terminals handled a bulk cargo volume of 1.96 million tonnes, down by 25.9% year-on-year, mainly due to the decline in demand for sandstone.

South-West region

Zhanjiang Port handled a container throughput of 0.62 million TEUs, up by 7.1% year-on-year, which was mainly benefitted from the business expansion in the hinterland and the optimization of the route network; and handled a bulk cargo volume of 36.95 million tonnes, down by 1.7% year-on-year.

Hong Kong and Taiwan

CMCS and MTL in Hong Kong handled a total container throughput of 1.86 million TEUs, down by 11.2% year-on-year, mainly due to market factors. KMCT in Taiwan handled a total container throughput of 0.54 million TEUs, down by 24.9% year-on-year, mainly due to route adjustments of shipping alliances.

Overseas region

CICT in Sri Lanka handled a container throughput of 1.64 million TEUs, down by 2.0% year-on-year. HIPG in Sri Lanka handled a container throughput of 0.33 million TEUs, up by 80.6% year-on-year, which was mainly benefitted from the capacity enhancement and market expansion; and handled a bulk cargo volume of 1.78 million tonnes, up by 46.3% year-on-year, which was mainly benefitted from the rising demand in the local building materials market and the growth of RoRo business volume. NPH in Indonesia handled a container throughput of 0.39 million TEUs, down by 0.5% year-on-year. LCT in Togo handled a container throughput of 0.84 million TEUs, down by 12.7% year-on-year, mainly due to the congestion in neighboring ports. TCP in Brazil handled a container throughput of 0.84 million TEUs, up by 4.0% year-on-year, which was mainly benefitted from the volume growth of reefer containers. Kumport in Turkey handled a container throughput of 0.83 million TEUs, up by 14.6% year-on-year, which was mainly benefitted from shipping routes optimization. PDSA in Djibouti handled a container throughput of 0.61 million TEUs, up by 5.8% year-on-year; and handled a bulk cargo volume of 3.13 million tonnes, up by 28.0% year-on-year, which was mainly benefitted from economic growth in the hinterland. TICT in Nigeria handled a container throughput of 0.17 million TEUs, up by 1.2% year-on-year. Terminal Link handled a container throughput of 14.06 million TEUs, up by 2.4% year-on-year; and handled a bulk cargo volume of 0.78 million tonnes, down by 20.9% year-on-year.

2. Implementation of operating plan during the Reporting Period

During the Reporting Period, the Company committed to its strategic goal of becoming a “world-leading comprehensive port service provider”, upholding the three-driver model of “Global Presence”, “Lean Management” and “Innovative Transformation”. It achieved results in areas such as homebase port development, overseas expansion, operational management, technological innovation, and ESG initiatives, with key operational performance indicators securing sound growth.

(1) As for homebase port construction, the Company consolidated its regional foundations and enhanced competitive advantages. The West Shenzhen Port Zone maintained an upward trend in its container business. Efforts to integrate container business resources and optimize the deployment in the West Shenzhen Port Zone were undertaken in an orderly manner, and steady progress was made on the construction of the Dachan Bay Phase II project. In overseas homebase ports, CICT in Sri Lanka maintained its leading market share in container throughput within the port area and continued to strengthen cooperation with key customers. HIPG in Sri Lanka leveraged its regional strength to continuously enhance capacity and streamline its business structure. With coordinated growth across the container and RoRo business segments, the Company's operations showed positive momentum.

(2) Regarding overseas expansion, the Company focused on key regions and intensified its strategic deployment. Focusing on structural investment opportunities in growth markets such as Southeast Asia, Latin America and Africa, the Company steadily and methodically expanded its portfolio of overseas controlled terminals. Concurrently, the Company continued to promote integrated synergy between CICT and HIPG in Sri Lanka, strengthening port capacity and achieving efficient resource sharing and complementary advantages. TCP in Brazil has accelerated projects such as yard expansion, berth refurbishment and gantry crane upgrades. Meanwhile, NPH in Indonesia has proceeded with management integration to maintain smooth business operations.

(3) In respect of operations management, the Company deepened its lean management and strengthened top-down empowerment. The Company has laid a solid foundation for value creation through lean management and empowered high-quality development through top-down control and management. On the one hand, the Company continued to deepen the philosophy of lean management, optimize the end-to-end operational system, establish commercial control mechanisms, promote meticulous management and coordinated business expansion, achieve cost control and operation efficiency enhancement, and improve the financing structure to enhance asset operational efficiency. On the other hand, the Company has strengthened governance across its global operations by establishing localized decision-making rules, clarifying governance responsibilities, and improving overseas risk identification and process control systems. By leveraging digital systems to advance the integration of financial management both domestically and overseas, the Company supported its long-term, steady development through high-standard global resource allocation and enhanced governance efficiency.

(4) As regards technological innovation, the Company advanced digital and intelligent empowerment to build green ports. The Company remained committed to technology-driven development, actively exploring applications of cutting-edge technologies such as artificial intelligence, and focusing on leveraging technology to empower industrial upgrading. Firstly, the Company sustained its efforts to strengthen system research and development. A new foundational version of the CTOS system has been released, which features capabilities to support the operations of small, medium and micro-scale container terminals. Regarding the BTOS product for bulk and general cargo, a contract has been signed for the Somaport terminal in Morocco. Secondly, the Company spared no effort to promote smart applications. Shekou Container Terminal has rolled out a smart yard plan, effectively reducing the rate of container overturns, while Mawan Smart Port has continuously optimized port operations, with the operation efficiency of autonomous vehicles improving steadily. Thirdly, green transformation was actively pursued with Mawan Smart Port having completed the first ship-to-ship LNG bunkering operation.

(5) In terms of ESG construction, the Company explored cutting-edge issues and achieved excellent results in rating improvements. The Company continuously reinforced the integration of ESG into its operations and promoted the routine management of ESG issues. On the environmental front, the Company published its first Nature-related Financial Impact Report in April 2026, systematically assessing the impact on nature across its value chain and formulating corresponding biodiversity conservation strategies. On the social front, the Company was recognized as an outstanding model of volunteer service in Guangdong Province for 2025. In terms of governance, the Company has advanced the development of the boards of directors for the Company and its subsidiaries, continuously enhancing governance standards. During the period, the Company maintained its Wind ESG rating at AAA, ranking first in the transportation infrastructure industry and being selected for Fortune China's ESG Impact List. The MSCI ESG rating of its subsidiary China Merchants Port was upgraded from BBB to A in March.

3. Year-on-year Changes in Key Financial Data

Unit: RMB

Significant changes to the profit structure or sources of the Company in the Reporting Period:

 Applicable √ Not applicable

No such changes in the Reporting Period.

Breakdown of operating income:

Unit: RMB

Operating division, product category or operating segment contributing 10% or more of operating income or operating profit:

Unit: RMB

Core business data restated according to the changed methods of measurement that occurred in the Reporting Period:

 Applicable √ Not applicable

IV Analysis of Non-Core Businesses

Unit: RMB

V Analysis of Assets and Liabilities

1. Significant Changes in Asset Composition

Unit: RMB

2. Major Assets Overseas

3. Assets and Liabilities at Fair Value

Unit: RMB

Other changes: None.

Significant changes to the measurement attributes of the major assets in the Reporting Period:  Yes √ No

4. Restricted Asset Rights as at the Period-End

The restricted cash and bank balances were RMB82,452,617.41 in total, including accrued interest, performance bond, frozen funds, etc.

The carrying value of fixed assets as collateral for bank loans was RMB1,096,793,866.99.

The carrying value of intangible assets as collateral for bank loans was RMB591,085,146.25.

VI Investments Made

1. Total Investment Amount

2. Major Equity Investments Made in the Reporting Period

 Applicable √ Not applicable

3. Major Non-Equity Investments Ongoing in the Reporting Period

 Applicable √ Not applicable

4. Financial Investments

(1) Securities Investments

Unit: RMB

(2) Investments in Derivative Financial Instruments

 Applicable √ Not applicable

No such cases in the Reporting Period.

5. Use of Funds Raised

 Applicable √ Not applicable

No such cases in the Reporting Period.

VII Sale of Major Assets and Equity Investments

1. Sale of Major Assets

 Applicable √ Not applicable

No such cases in the Reporting Period.

2. Sale of Major Equity Investments

 Applicable √ Not applicable

VIII Principal Subsidiaries and Associates

Principal subsidiaries and associates with a 10% or more effect on the Company’s net profit:

Unit: RMB

Note: Ningbo Zhoushan Port financial data accurate to RMB'000.

Subsidiaries obtained or disposed of in the Reporting Period:

 Applicable √ Not applicable

Other information on principal subsidiaries and associates:

There is no other information related to the Company’s principal subsidiaries and associates in the Reporting Period that is required to be disclosed.

IX Structured Entities Controlled by the Company

 Applicable √ Not applicable

X Risks Exposed to the Company and Countermeasures

1. Market uncertainty risks

Affected by macroeconomic and environmental factors such as global economic trends, geopolitical dynamics and trade protectionist policies, market conditions may shift, demand may soften and industry competition could intensify, potentially leading to the loss of existing business, unsuccessful expansion into new market segments, and adverse impacts on investment and operational performance. International geopolitical instability, for example, the conflict involving the US, Israel and Iran poses a risk of closing the Strait of Hormuz, exerts severe pressure on the global supply chain and the container shipping industry.

To mitigate these market risks, the Company upholds its three-driver model of “Global Presence”, “Lean Management” and “Innovative Transformation”, striving for substantive breakthroughs and high-quality development. Driven by global presence: the Company aims to elevate its global resource allocation capabilities by enhancing supply chain resilience and building a diversified international shipping network. Driven by lean management: the Company establishes a full-lifecycle management system and a risk early-warning system amid slowed industry growth and frequent risk-event impacts. The systems are used to strengthen agile responses to emergencies, deepen cost reduction and efficiency enhancement, and bolster resilience against cyclical fluctuations and sudden risks. Driven by innovative transformation: the Company actively responds to international green and low-carbon regulations while accelerating the digital, intelligent and green transformation of ports. By advancing clean energy applications and deepening the scenario-based integration of emerging technologies, such as big data and AI, across port operations and logistics supply chains, the Company effectively transforms “Smart + Green” capabilities into the core competitiveness and driving force for upgrading its primary port business.

2. Policy risk

Internationally, global political and economic volatility, rising protectionism, ongoing geopolitical conflicts, and regulatory adjustments across nations pose challenges, including shifting investment environments, foreign exchange controls and operational cost fluctuations, all of which may affect the execution pace of the Company’s overseas projects, investment return stability and supply chain continuity. Domestically, ongoing economic structural realignments, policy mandates for cost reduction and efficiency enhancement in the logistics industry and trade policy shifts may influence port operational costs, business models and investment planning.

To mitigate these policy risks, the Company builds a comprehensive macroeconomic policy analysis mechanism, leverages digital tools to improve early-warning accuracy, and dynamically adjusts its strategic planning accordingly; hedges against the impacts of unilateralism and policy-related risks through regional synergy and diversified asset allocation, thereby mitigating single-market exposure risks; strengthens ESG governance and refines penetrative compliance risk identification capabilities across all business segments and throughout the industry chain, ensuring regulatory compliance and sustainable development amid changing global policy environments; and systematically deploys tools including commercial political risk insurance and multilateral investment guarantee mechanisms to cover key risk exposures associated with its overseas assets.

3. Operational and management risks

The Company takes the initiative to explore port investment opportunities globally, expanding its network footprint across multiple regions and countries through M&A and investments to provide comprehensive services to global clients. As globalization deepens alongside adverse macroeconomic shifts, ports in certain regions face challenges such as rising local compliance costs, lower-than-expected investment returns and underperforming operational efficiency.

To address operational and management risks, in the first, the Company deepens full-chain business synergies to solidify the market foundation. Through focusing on the three key elements of “Market, Resources and Services ” , it enhances its market competitiveness by advancing initiatives such as joint marketing for key accounts within the system, business model innovation and service upgrades on the ePort3.0 platform, thereby boosting retention of existing clients and achieving breakthroughs in incremental business. In addition, the Company fortifies risk control and compliance defences while empowering foreign-related rule of law. It refines risk monitoring metrics, improves early-warning and handling procedures for major risks, and digitally enhances risk management capabilities to eliminate hidden risks through penetrative tracking. Furthermore, the Company enforces full-lifecycle control to drive post-investment value creation. It explores a closed-loop $' \mathrm { I n v e s t \mathrm { ~ - ~ } B u i l d \mathrm { ~ - ~ } M a n a g e \mathrm { ~ - ~ } E x i t ^ { \prime \prime } }$ process control model to ensure internal control requirements fully cover all operating projects. By routinely conducting audits and post-investment evaluations, establishing asset classification revitalization and dynamic optimization mechanisms, the Company promotes quality and efficiency for underperforming assets while continuously improving operational management.

XI Implementation of the Market Value Management System and Valuation Enhancement Plan

Indicate whether the Company has a market value management system.

√ Yes  No

Indicate whether the Company has disclosed a valuation enhancement plan.

√ Yes  No

To effectively promote the enhancement of the listed company’s investment value, increase investor returns, and protect the legitimate rights and interests of the Company, investors, and other stakeholders, the Company actively responds to and implements regulatory requirements. Based on the Company’s specific situation, a valuation enhancement plan has been developed. The Company will focus on improving the quality of the listed company, enhancing operational efficiency and profitability, and legally and compliantly using methods such as share repurchases and cash dividends to promote the increase of the Company’s investment value.

In accordance with relevant provisions such as the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, the Several Opinions of the State Council on Strengthening Supervision, Preventing Risks, and Promoting the High-Quality Development of the Capital Market, the Administrative Measures for Information Disclosure of Listed Companies, the Regulatory Guideline No. 10 for Listed Companies—Market Value Management, the Articles of Association, etc., the Company held the First Extraordinary Meeting of the 11th Board of Directors in 2025 on 27 February 2025, and passed the proposal on the Valuation Enhancement Plan. For specific details, please refer to the Valuation Enhancement Plan disclosed on www.cninfo.com.cn on 28 February 2025 (Announcement No.: 2025-007).

On 1 April 2026, the Company held the Sixth Meeting of the 11th Board of Directors, and passed the proposal on the Assessment Report on the Implementation of the 2025 Valuation Enhancement Plan. For specific details, please refer to the Assessment Report on the Implementation of the 2025 Valuation Enhancement Plan disclosed on www.cninfo.com.cn on 3 April 2026 (Announcement No.: 2026-017).

XII Implementation of the Action Plan for “Dual Enhancement of Development Quality and Investor Returns”

Indicate whether the Company has disclosed an announcement on the Action Plan for “Dual Enhancement of Development Quality and Investor Returns”.

√ Yes  No

In order to implement the requirements of the State Council’s Opinions on Strengthening Supervision and Preventing Risks and Promoting High-Quality Development of the Capital Market and Opinions on Further Improving the Quality of Listed Companies, the Company has formulated the Action Plan for “Dual Enhancement of Development Quality and Investor Returns”, with a view to continuously improving the quality of the Company, enhancing the returns to investors, enabling relevant stakeholders to share the fruits of the Company’s development, and achieving sustainable development. For details, please refer to the Announcement on the Action Plan for “Dual Enhancement of Development Quality and Investor Returns” (Announcement No.: 2024-068), disclosed by the Company on www.cninfo.com.cn on 31 August 2024.

The Company convened the Second Meeting of the 12th Board of Directors on 27 August 2026, and reviewed and approved the Proposal on the Progress Report of the Action Plan for “Dual Enhancement of Development Quality and Investor Returns”. For details, please refer to the Announcement on the Progress of the Action Plan for “Dual Enhancement of Development Quality and Investor Returns” (Announcement No. 2026‑045), disclosed by the Company on www.cninfo.com.cn on 29 August 2026.

Part IV Governance, Environmental and Social Information

I Changes of Directors and Senior Management

II Interim Dividend Plan

Pursuant to the Company’s unaudited 2026 Interim Financial Statements, for the six months ended 30 June 2026, the consolidated net profit attributable to the Company stood at RMB2,781,107,015.26 and the net profit of the Company at RMB887,224,735.10. (1) According to the Company Law and the Articles of Association of the Company, when distributing the current year’s after-tax profits, the Company shall draw 10% of the profits for the Company’s statutory reserve. The Company’s statutory surplus reserve has cumulatively reached 50% of its registered capital and is no longer accrued. The accumulative retained earnings of the Company at the end of June 2026 were RMB1,411,502,981.28. (2) Based on the total 2,482,148,285 shares, a cash dividend of RMB2.00 (tax included) is to be distributed for every 10 shares, totalling RMB496,429,657.00, with no bonus issue from either profit or capital reserves. After the above-mentioned distribution, the retained earnings of the Company will be RMB915,073,324.28. The above profit distribution plan still needs to be submitted to the First Extraordinary Meeting of Shareholders in 2026 fo approval.

III Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees

1. Equity incentive

The Stock Option Incentive Plan (Phase I):

On 6 February 2024, the Company disclosed the Reminder Announcement on the Adoption of Independent Exercise Mode for the Third Exercise Period of the Stock Options (Initial Grant) under the Stock Option Incentive Plan (Phase I) of the Company (Announcement No. 2024-013) and the Reminder Announcement on the Adoption of an Independent Exercise Mode for the Second Exercise Period of the Stock Options (Reserved Grant) under the Stock Option Incentive Plan (Phase I) of the Company (Announcement No. 2024-014). Upon the review and confirmation of Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, the exercise conditions were met for the third exercise period of the stock options (initial grant) and the second exercise period of the stock options (reserved grant) under the Stock Option Incentive Plan (Phase I).

As of the end of the Reporting Period, the cumulative number of stock options exercised under the Company’s Stock Option Incentive Plan (Phase I) was 2,891,320 shares; and during the Reporting Period, the number of stock options exercised under the Company’s Stock Option Incentive Plan (Phase I) was 306,100 shares.

2. Employee Stock Ownership Plans

 Applicable √ Not applicable

3. Other Incentive Measures for Employees

 Applicable √ Not applicable

IV Environmental Information Disclosure

Indicate whether the listed company or any of its major subsidiaries is included in the list of companies that are required by law to disclose environmental information.

√ Yes  No

V Corporate Social Responsibility (CSR)

In the first half of 2026, the Company coordinated its domestic and overseas public welfare initiatives across such areas as ecological protection, educational support, and community development. These social responsibility efforts delivered tangible and wide-ranging results.

i. Ecological Environmental Protection

The Company remained firmly committed to green development and integrated ecological protection, biodiversity management, and green community development into its port operations and local development.

Ecological conservation was further advanced in Sri Lanka. HIPG in Sri Lanka implemented multiple ecological initiatives, completed habitat surveys for sea turtles, wild elephants, and coastal birds, and advanced the greening development of the port area. CICT continued to implement coastal ecological conservation initiatives, deeply participated in industry exchanges for World Oceans Day, and strengthened nearshore environmental improvement and biodiversity restoration.

Outstanding achievements were achieved in wildlife protection. HIPG continued the “Save Elephant Calves” public welfare project, collaborating with local environmental protection organizations to introduce specialized milk powder for baby elephants, ensuring the year-round dietary supply for 25 baby elephants at a local elephant transit home.

Domestic green volunteer activities were carried out in an orderly manner. Zhanjiang Port proactively supported the development of green and beautiful villages by planting 100 tall coconut trees along the Hongkanjiao shoreline, improving the rural landscape. Xia Men Bay Terminals organized environmental improvement volunteer activities, including litter removal, to improve the local living environment.

ii. Educational Support and Youth Development

Leveraging its strengths in the port and shipping industry, public welfare platforms, and employee volunteer teams, the Company provided educational support at different levels and continued to improve its innovative and sustainable operating framework for public welfare programs. The CMPort Volunteer Service Team was named a 2025 Guangdong Outstanding Volunteer Service Model (Volunteer Service Organization Category).

Science and technology innovation education in rural areas was further improved. The Company continued to explore new approaches to science and technology innovation education through the “C ME FLY: Harbor for Future” public welfare program to support rural education. It established a science and technology innovation space for young people and organized innovation camps, career awareness activities, and student exchanges between Shenzhen and Shunde. It also held growth camps in Wuhua and Zhanjiang and continued to improve its “Summer camp - Growth camp - Support camp “ three-in-one care system. The program reached 3,716 students at 6 schools in Shenzhen, Zhanjiang, Wuhua County in Meizhou, and Shunde District in Foshan, providing hands-on science and technology training, developmental mentoring, and overall competency development services. Leveraging port technologies, the program extended access to high-quality science and technology innovation education resources to communities surrounding the ports.

The C Blue Training Program was further deepened. The 17th session of the study and training program was conducted in Beijing and Shenzhen in March, with seven participants from Benin, Brazil, Italy, and Togo taking part in seminars and field visits to smart terminals. The 18th session was held in June, bringing together 36 participants from 18 countries for visits to the four port cities of Nanjing, Hangzhou, Quanzhou, and Shenzhen and providing a platform for industry and cultural exchanges.

Support for local schools overseas continued on a regular basis. NPH in Indonesia continued to operate several community reading centers. In the first half of the year, it invested IDR16.89 million in a range of activities to improve literacy and overall competencies among children in surrounding communities. In cooperation with a local university, NPH also implemented the “Knowledge Sharing on Campus” program, providing hands-on professional training to 43 students. HIPG steadily advanced its industry-academia cooperation under the “China Merchants Scholarship” program by providing nutritional assistance, donating supplies, and establishing libraries and language learning centers, thereby improving educational conditions in nearby villages. Preparations proceeded for the implementation of a youth vocational skills training program in Paranaguá, with a view to developing it into a model overseas public welfare brand for youth development.

iii. Community Development and Livelihood Support

Guided by its philosophy of mutual growth with local communities worldwide, the Company implemented a wide range of community welfare and livelihood support initiatives tailored to local development needs.

Progress was made in disability sports in Sri Lanka. The Company continued to support the development of wheelchair tennis in Sri Lanka, helping the Sri Lankan wheelchair tennis team finish as runner-up in the Asian qualifier for the World Cup and secure a place in the 2026 Wheelchair Tennis World Team Cup in Paris. It also assisted in hosting three international tournaments, promoting the social inclusion of people with disabilities and enhancing the influence of local sports.

Phase III of the “Love Villages” project in Sri Lanka progressed steadily. Focusing on villagers difficulties in accessing water, the project completed a small-scale farmland irrigation system to increase agricultural productivity. It also completed and commissioned the installation of household water supply pipelines for 60 farming households in need and procured water purification equipment for two public areas to ensure access to safe drinking water.

Post-disaster emergency assistance was provided overseas through multiple channels. In response to flooding in Indonesia, NPH promptly activated its emergency response mechanism and distributed emergency supplies to 10 affected employee households to meet their basic living needs. TCP in Brazil launched a post-disaster restoration project for a local historic school, contributing to the preservation of cultural heritage and the sustainable development of the community.

Community outreach activities were conducted on a regular basis. NPH in Indonesia invested IDR72.70 million in festival outreach activities across 5 communities surrounding the Port of Tanjung Priok, helping maintain good relations between the port and neighboring communities. HIPG continued to sponsor folk cultural activities in surrounding communities, assisted in organizing a coastal culture and tourism carnival, and completed the installation of streetlights around the port area. These initiatives supported community harmony and tourism development while improving the safety of villagers traveling at night.

Targeted public welfare donations were made in China. Shantou Port donated a total of RMB250,000 in the first half of the year to support outreach to people in need, rural civility initiatives, and other programs. It also partnered with Guang’ao School to organize a series of public welfare activities on campus, extending care and support. Qianhaiwan Real Estate partnered with Tencent Charity to conduct the “Books Build Dreams” book donation campaign, further enhancing the influence of its public welfare reading brand.

Part V Significant Events

I Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Entities Fulfilled in the Reporting Period or Overdue at the Period-End

 Applicable √ Not applicable No such cases in the Reporting Period.

II Occupation of the Company’s Capital by the Controlling Shareholder or any of other Related Parties for Non-Operating Purposes

 Applicable √ Not applicable No such cases in the Reporting Period.

III Irregularities in the Provision of Guarantees

 Applicable √ Not applicable No such cases in the Reporting Period.

IV Engagement and Disengagement of Independent Auditor

Are the interim financial statements audited?  Yes √ No The interim financial statements are unaudited.

V Explanations Given by the Board of Directors Regarding the Independent Auditor’s “Non-standard Opinion” on the Financial Statements of the Reporting Period

 Applicable √ Not applicable

VI Explanations Given by the Board of Directors Regarding the Independent Auditor’s “Non-standard Opinion” on the Financial Statements of Last Year

 Applicable √ Not applicable

VII Bankruptcy Reorganization

 Applicable √ Not applicable No such cases in the Reporting Period.

VIII Litigation and Arbitration Matters

Major lawsuits and arbitrations:

 Applicable √ Not applicable

No such cases in the Reporting Period.

Other legal matters:

IX Punishments and Rectifications

 Applicable √ Not applicable

No such cases in the Reporting Period.

X Integrity and Credibility of the Company as well as Its Controlling Shareholder and Actual Controller

 Applicable √ Not applicable

XI Major Related-Party Transactions

1. Continuing Related-Party Transactions

Note: The small aggregate amount of other related parties mentioned above mainly covers the labor and leasing services, etc., provided by China Merchants Hoi Tung Trading Company Limited, China Merchants Energy Shipping Co., Ltd., China Merchants Industry Holdings Company Limited, etc., to the Company, or received by the said companies from the Company. The above single related parties do not have transaction amounts exceeding 0.5% of the Company’s audited equity for the most recent period and are presented on an aggregated basis given their individual immaterial amounts and large number of counterparties.

2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests

 Applicable √ Not applicable

No such cases in the Reporting Period.

3. Related Transactions Regarding Joint Investments in Third Parties

 Applicable √ Not applicable No such cases in the Reporting Period.

4. Credits and Liabilities with Related Parties

Credits receivable with related parties:

Liabilities payable with related parties:

5. Transactions with Related Finance Companies

Deposit business

Loan business

Credit facilities or other financial services

6. Transactions with Related Parties by Finance Company Controlled by the Company

 Applicable √ Not applicable

No such cases in the Reporting Period.

7. Other Major Related-Party Transactions

(1) The Company held the 6th Meeting of the 11th Board of Directors on 1 April 2026, and reviewed and approved the Proposal on the 2026 Annual Donation Budget or Possible Related‑Party Transaction Constituted Thereby. For details, please refer to the Announcement on the 2026 Annual Donation Budget or Possible Related‑Party Transaction Constituted Thereby (Announcement No. 2026‑012), disclosed by the Company on 3 April 2026.

(2) The Company held the 6th Meeting of the 11th Board of Directors on 1 April 2026, and reviewed and approved the Proposal on the Related-Party Transactions Regarding Making Deposits in and Obtaining Loans from China Merchants Bank in 2026, which was submitted to the 2025 Annual General Meeting of the Company for deliberation. The Company held the 2025 Annual General Meeting on 21 May 2026, and deliberated and approved the Proposal on the Related-Party Transactions Regarding Making Deposits in and Obtaining Loans from China Merchants Bank in 2026, agreeing the Company and its subsidiaries in the scope of consolidated financial statements to open bank accounts with China Merchants Bank. In 2026, the maximum deposit balance of the Company and its subsidiaries in the scope of consolidated financial statements with China Merchants Bank shall not exceed RMB10 billion, and the maximum credit balance shall not exceed

RMB15 billion. For details, please refer to the Announcement on the Related-Party Transactions Regarding Making Deposits in and Obtaining Loans from China Merchants Bank in 2026 (Announcement No. 2026-013) disclosed by the Company on 3 April 2026, the Announcement on the Resolutions of the 2025 Annual General Meeting (Announcement No. 2026-026) disclosed by the Company on 22 May 2026 and other relevant announcements.

(3) The Company held the 6th Meeting of the 11th Board of Directors on 1 April 2026, and reviewed and approved the Proposal on Conducting Financial Leasing Business and Related-Party Transactions with Related Parties in 2026, which was submitted to the 2025 Annual General Meeting of the Company for deliberation. The Company held its 2025 Annual General Meeting on 21 May 2026, and reviewed and approved the Proposal on Conducting Financial Leasing Business and Related-Party Transactions with Related Parties in 2026. For details, please refer to the Announcement on Conducting Financial Leasing Business and Related-Party Transactions with Related Parties in 2026 (Announcement No. 2026-014) disclosed by the Company on 3 April 2026, the Announcement on the Resolutions of the 2025 Annual General Meeting (Announcement No. 2026-026) disclosed by the Company on 22 May 2026, and other relevant announcements.

(4) The Company held the 2nd Extraordinary Meeting of the 11th Board of Directors in 2026 on 28 April 2026, and reviewed and approved the Proposal on Entering into the Financial Services Agreement and Related-Party Transaction with China Merchants International Finance Company Limited, which was submitted to the 2025 Annual General Meeting of the Company for deliberation. The Company held its 2025 Annual General Meeting on 21 May 2026, and reviewed and approved the Proposal on Entering into the Financial Services Agreement and Related-Party Transaction with China Merchants International Finance Company Limited. For details, please refer to the Announcement on Entering into the Financial Services Agreement and Related-Party Transaction with China Merchants International Finance Company Limited (Announcement No. 2026-021) disclosed by the Company on 30 April 2026, the Announcement on the Resolutions of the 2025 Annual General Meeting (Announcement No. 2026-026) disclosed by the Company on 22 May

2026, and other relevant announcements.

Information on the disclosure website for current announcements on significant related-party

transactions:

XII Major Contracts and Execution thereof

1. Entrustment, Contracting and Leases

(1) Entrustment

 Applicable √ Not applicable

No such cases in the Reporting Period.

(2) Contracting

 Applicable √ Not applicable

No such cases in the Reporting Period.

(3) Leases

 Applicable √ Not applicable

No such cases in the Reporting Period.

2. Major Guarantees

Note 1: The Company convened a Board meeting on 1 April 2025, and approved the Proposal on the External Guarantee Progress of the Company in 2024 and the Expected New External Guarantee Line in the Next 12 Months. For details, please refer to the Announcement on the External Guarantee Progress of the Company in 2024 and the Expected New External Guarantee Line in the Next 12 Months (Announcement No. 2025-024), disclosed on http://www.cninfo.com.cn dated 3 April 2025. This proposal was approved at the Company’s 2024 Annual General Meeting. As of the date of this Report, no such guarantee has actually been incurred.

Note 2: The Company convened a Board meeting on 1 April 2026, and approved the Proposal on the External Guarantee Progress of the Company in 2025 and the Expected New External Guarantee Line in the Next 12 Months. For details, please refer to the Announcement on the External Guarantee Progress of the Company in 2025 and the Expected New External Guarantee Line in the Next 12 Months (Announcement No. 2026-011), disclosed on http://www.cninfo.com.cn dated 3 April 2026. This proposal was approved at the Company’s 2025 Annual General Meeting. As of the date of this Report, no such guarantee has actually been incurred.

3. Cash Entrusted for Wealth Management

 Applicable √ Not applicable

No such cases in the Reporting Period.

4. Other Major Contracts

 Applicable √ Not applicable

No such cases in the Reporting Period.

XIII Communications with the Investment Community such as Researches, Inquiries and Interviews

XIV Other Significant Events

1. Index to Disclosed Information

The significant events disclosed by the Company on Securities Times, China Securities Journal, Shanghai Securities News and www.cninfo.com.cn during the Reporting Period are as follows:

2. Progress of the Internal Control Work

In accordance with the Enterprise Internal Control Standards and the accompanying guidelines, the internal control work carried out by the Company during the Reporting Period is as follows:

(1) The development of the internal control system. The Company completed the full coverage of the development of the internal control system by standards of control entity and legal entity, and carried out internal control system evaluation and internal control authority list review as planned. The Company’s headquarters and subordinate units improved their own business procedures in a timely manner, and a quarterly notification mechanism was established to promote the improvement in the internal control system. The Company carried out a second round of internal control supervision and inspection featuring “full coverage in two years”. The on-site supervision and inspection of internal control has been completed for Zhangzhou Port and NPH in Indonesia, and the lists of issues and the preparation of reports are currently underway.

(2) Comprehensive risk management. The Company adhered to the integrated and coordinated “six-in-one” risk control system, continuously developing risk control systems and management process standards, optimizing risk management and work appraisal plans, and regularly implementing closed-loop risk management throughout the entire process. Through the annual major risk assessment, monitoring and early warning of key risk indicators, and tracking and managing operational risk events, including follow-up on special risk work related to government cooperation, the Company strictly managed all risk exposures through “eliminating existing risks and controlling incremental risks”.

XV Significant Events of Subsidiaries

 Applicable √ Not applicable

Part VI Share Changes and Shareholder Information

I Share Changes

1. Share Changes

Unit: share

Reasons for the share changes:

During the Reporting Period, the Company increased its share capital by a total of 306,100 shares as a result of the independent exercise of options under the Stock Option Incentive Plan, and the total share capital of the Company increased from 2,481,842,185 shares to 2,482,148,285 shares. Approval of the share changes:  Applicable √ Not applicable Transfer of share ownership:  Applicable √ Not applicable Progress on any share repurchase:  Applicable √ Not applicable Progress on the disposal of repurchased shares by means of centralized bidding:  Applicable √ Not applicable

Effects of the share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively:

The Company reported basic earnings per share of RMB1.12 and diluted earnings per share of RMB1.12 for the first half of 2026, and equity per share attributable to the Company’s ordinary shareholders of RMB26.30. During the Reporting Period, the Company increased its share capital by a total of 306,100 shares as a result of the independent exercise of options under the Stock Option Incentive Plan, and the total share capital of the Company increased from 2,481,842,185 shares to 2,482,148,285 shares. By the measurement of the Company’s total share capital as at the end of 2025, irrespective of the effect of the independent exercise of the Stock Option Incentive Plan, the Company’s basic earnings per share in H1 2026 was RMB1.12, the diluted earnings per share was RMB1.12, and the equity per share attributable to the Company’s ordinary shareholders was RMB26.30.

Other information that the Company considers necessary or is required by the securities regulator to be disclosed:  Applicable √ Not applicable

2. Changes in Restricted Shares

 Applicable √ Not applicable

II Issuance and Listing of Securities

 Applicable √ Not applicable

III Shareholders and Their Holdings as at the Period-End

Unit: share

5% or greater shareholders, top 10 shareholders and Top 10 unrestricted shareholders involved in refinancing shares lending

 Applicable √ Not applicable

Changes in top 10 shareholders and top 10 unrestricted shareholders due to refinancing shares lending/return compared with the prior period

 Applicable √ Not applicable

Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any agreed repurchase transaction during the Reporting Period.

 Yes √ No

No such cases in the Reporting Period.

IV Change in Shareholdings of Directors and Senior Management

V Change of the Controlling Shareholder or the De Facto Controller

Change of the controlling shareholder in the Reporting Period

 Applicable √ Not applicable

No such cases in the Reporting Period.

Change of the de facto controller in the Reporting Period

 Applicable √ Not applicable

No such cases in the Reporting Period.

VI Preference Shares

 Applicable √ Not applicable

No preference shares in the Reporting Period.

Part VII Bonds

I Enterprise Bonds

 Applicable √ Not applicable

No enterprise bonds in the Reporting Period.

II Corporate Bonds

1. Basic Information of the Corporate Bonds

Unit: RMB’0,000

Overdue bonds

 Applicable √ Not applicable

2. The Trigger and Execution of the Option Clause of the Issuers or Investors and the Investor Protection Clause

 Applicable √ Not applicable

3. Adjustment of Credit Rating Results during the Reporting Period

 Applicable √ Not applicable

4. Execution and Changes of Guarantee, Repayment Plan and Other Repayment Guarantee Measures as well as Influence on Rights and Interests of Bond Investors during the Reporting Period

 Applicable √ Not applicable

III Debt Financing Instruments of Non-financial Enterprises

1. Basic Information of Debt Financing Instruments of a Non-financial Enterprise

Unit: RMB’0,000

Overdue bonds

 Applicable √ Not applicable

2. Triggering and Implementation of Issuer or Investor Option Clauses and Investor Protection Clauses

 Applicable √ Not applicable

3. Credit Rating Adjustments during the Reporting Period

 Applicable √ Not applicable

4. Implementation and Changes of Guarantees, Repayment Plan and Other Repayment Guarantee Measures during the Reporting Period, and their Impact on the Rights and Interests of Bond Investors

 Applicable √ Not applicable

IV Convertible Corporate Bonds

 Applicable √ Not applicable

No such cases in the Reporting Period.

V Losses within the Scope of the Consolidated Financial Statements during the Reporting Period Exceeding 10% of Equity at the End of Last Year

□ Applicable √ Not applicable

VI The Major Accounting Data and the Financial Indicators of the Recent 2 Years of the Company up the Period-end

Part VIII Financial Statements

I Independent Auditor’s Report

These interim financial statements have not been audited by an independent auditor.

II Financial Statements

See attached.

China Merchants Port Group Co., Ltd.

Board of Directors

Dated 29 August 2026

CHINA MERCHANTS PORT GROUP CO., LTD.

FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

CONTENTS PAGE(S) CONSOLIDATED BALANCE SHEET 1-3 BALANCE SHEET OF THE COMPANY 4-6 CONSOLIDATED INCOME STATEMENT 7-8 INCOME STATEMENT OF THE COMPANY 9 CONSOLIDATED CASH FLOW STATEMENT 10 CASH FLOW STATEMENT OF THE COMPANY 11 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 12-13 THE COMPANY'S STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 14-15 NOTES TO THE FINANCIAL STATEMENTS 16-195

CHINA MERCHANTS PORT GROUP CO., LTD.

AT 30 JUNE 2026

Consolidated Balance Sheet

RMB

The accompanying notes form part of the financial statements.

CHINA MERCHANTS PORT GROUP CO., LTD.

AT 30 JUNE 2026

Consolidated Balance Sheet - continued

RMB

The accompanying notes form part of the financial statements.

Consolidated Balance Sheet - continued

RMB

The accompanying notes form part of the financial statements.

The financial statements were signed by the following:

CHINA MERCHANTS PORT GROUP CO., LTD.

AT 30 JUNE 2026

Balance Sheet of the Company

RMB

The accompanying notes form part of the financial statements.

CHINA MERCHANTS PORT GROUP CO., LTD.

AT 30 JUNE 2026

Balance Sheet of the Company - continued

RMB

The accompanying notes form part of the financial statements.

RMB

CHINA MERCHANTS PORT GROUP CO., LTD.

AT 30 JUNE 2026

Balance Sheet of the Company - continued

The accompanying notes form part of the financial statements.

CHINA MERCHANTS PORT GROUP CO., LTD.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Consolidated Income Statement

RMB

The accompanying notes form part of the financial statements.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Consolidated Income Statement - continued

RMB

The accompanying notes form part of the financial statements.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Income Statement of the Company

RMB

The accompanying notes form part of the financial statements.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Consolidated Cash Flow Statement

RMB

The accompanying notes form part of the financial statements.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Cash Flow Statement of the Company

RMB

The accompanying notes form part of the financial statements.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Consolidated Statement of Changes in Shareholders' Equity RMB

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

Consolidated Statement of Changes in Shareholders' Equity - continued

RMB

The accompanying notes form part of the financial statements.

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

The Company's Statement of Changes in Shareholders' Equity RMB

FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2026

The Company's Statement of Changes in Shareholders' Equity - continued

RMB

The accompanying notes form part of the financial statements.

(I) GENERAL INFORMATION OF THE COMPANY

China Merchants Port Group Co., Ltd. (hereinafter referred to as the "Company") is a joint-stock company incorporated in Shenzhen, Guangdong Province, on 16 January 1993.

The headquarters of the Company is located in Shenzhen, Guangdong Province. The Company and its subsidiaries (collectively the "Group") are actually engaged in the principal operating activities of port services, bonded logistics services and other businesses such as property development and investment.

The Company's and consolidated financial statements were approved by the Board of Directors on 27 August 2026.

(II) BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Basis of preparation of financial statements

The Group has adopted the Accounting Standards for Business Enterprises (hereinafter referred to as "ASBE") issued by the Ministry of Finance. In addition, the Group has disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No. 15 -- General Provisions on Financial Reporting (Revised in 2023).

Going concern

As at 30 June 2026, the Group had total current liabilities in excess of total current assets by RMB 11,625,901,958.85. As at 30 June 2026, the Group had available and unused credit facilities and bonds amounting to RMB 68,671,064,184.07, which is greater than the balance of the net current liabilities. The Group can obtain financial support from the available line of credit and bonds when needed. Therefore, the financial statements have been prepared on a going concern basis.

(III) STATEMENT OF COMPLIANCE WITH THE ASBE

The financial statements prepared by the Company comply with the requirements of the Accounting Standards for Business Enterprises, and truly and completely reflect the consolidated and Company's financial position as at 30 June 2026, and the consolidated and Company's operating results, consolidated and Company's shareholders' equity, and consolidated and Company's cash flow for the period from 1 January to 30 June 2026.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

1. Accounting year

The financial year of the Group is from 1 January to 31 December of the Gregorian calendar year.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

2. Operating cycle

Business cycle refers to the period from the purchase of assets for processing to the realization of cash or cash equivalents. The Group is engaged in the principal operating activities of port services, bonded logistics services and other businesses such as property development and investment. The operating cycle is typically one year.

3. Functional currency

The Company’s functional currency is Renminbi (hereinafter referred to as "RMB"), and these financial statements are presented in RMB. The Company and its domestic subsidiaries use RMB as their bookkeeping base currency. The Company's overseas subsidiaries determine their functional currency according to the currency in the primary economic environment in which they operate. The Company adopts RMB to prepare its financial statements.

4. Basis of accounting and principle of measurement

The Group has adopted the accrual basis of accounting. Except for financial instruments which are measured at fair value, the Group adopts the historical cost as the principle of measurement of the financial statements. Upon being restructured into a stock company, the fixed assets and intangible assets initially contributed by the state-owned shareholders are recognised based on the valuation amounts confirmed by the state-owned assets administration department. Where assets are impaired, provisions for asset impairment are made in accordance with the relevant requirements.

Where the historical cost is adopted as the measurement basis, assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds or assets received or the contractual amounts for assuming the present obligation, or, at the amounts of cash or cash equivalents expected to be paid to settle the liabilities in the normal course of business.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using valuation technique. Fair value measurement and disclosure in the financial statements are determined according to the above basis.

In the measurement of non-financial assets at fair value, market participants' ability to best utilize such assets to generate most economic benefits, or the ability to sell such assets to other market participants who are able to best utilize the assets to generate economic benefits is taken into account.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

4. Basis of accounting and principle of measurement - continued

For financial assets of which transaction prices are the fair value on initial recognition, and of which valuation technique involving unobservable input is used in subsequent measurement, the valuation technique in the course of valuation is adjusted to enable the result of initial recognition based on the valuation technique equal to the transaction price.

Fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

5. Method for determination of materiality criteria and basis for selection

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

5. Method for determination of materiality criteria and basis for selection Item Materiality criteria Significant prepayments aged more than 1 year The amount exceeds RMB 10 million individually Significant dividends receivable aged more than 1 year The amount exceeds RMB 5 million individually Significant other receivables for which bad debt provision is assessed on an individual basis The amount exceeds RMB 10 million individually Reversal or recovery of significant bad debt provision The amount exceeds RMB 10 million individually Impairment testing of significant long-term equity investments The carrying amount of an individual long-term equity investment≥ 2% of the amount of total assets Significant construction in progress The period-end carrying amount of an individual construction in progress ranges top ten Impairment testing of significant construction in progress The carrying amount of an individual construction in progress ≥20% of the amount of construction in progress Significant accounts payable aged more than 1 year The amount exceeds RMB 10 million individually Significant advance payments received aged more than 1 year The amount exceeds RMB 10 million individually Significant contract liabilities aged more than 1 year The amount exceeds RMB 10 million individually Significant dividends payable aged more than 1 year The amount exceeds RMB 50 million individually Significant other payables aged more than 1 year The amount exceeds RMB 30 million individually Cash flows from significant investing activities The amount exceeds 0.5% of the amount of total assets individually Significant non-wholly owned subsidiaries The amount of total revenue or total assets of subsidiaries exceeds 15% of the amount of total consolidated revenue or total consolidated

6. Business combinations

Business combinations are classified into business combinations involving enterprises under common control and business combinations not involving enterprises under common control.

6.1 Business combinations involving enterprises under common control

A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory.

Assets and liabilities obtained by the combining party shall be measured at their respective carrying amounts as recorded by the final controlling party in the consolidated financial statements at the date of the combination. The difference between share of the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or total par value of issued shares) is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb the difference, any excess shall be adjusted against surplus reserve and retained earnings in turn.

Costs that are directly attributable to the combination are charged to profit or loss in the period in which they are incurred. The merger date is the date on which the combining party actually obtains control over the combined party.

6.2 Business combinations not involving enterprises under common control

A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination.

The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer, in exchange for control of the acquiree. The intermediary expenses (fees in respect of auditing, legal services, valuation and consultancy services, etc.) and other general and administrative expenses attributable to the business combination are recognised in profit or loss in the periods when they are incurred.

The acquiree's identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business combination that meet the recognition criteria shall be measured at fair value at the acquisition date. The acquisition date refers to the date on which the acquirer actually obtains control over the acquiree.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

6. Business combinations - continued

6.2 Business combinations not involving enterprises under common control - continued

Where the cost of combination exceeds the acquirer's interest in the fair value of the acquiree's identifiable net assets, after considering the impact of relevant deferred income tax, the difference is treated as an asset and recognised as goodwill, which is measured at cost on initial recognition. Where the cost of combination is less than the acquirer's interest in the fair value of the acquiree's identifiable net assets, the acquirer reassesses the measurement of the fair values of the acquiree's identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after that reassessment, the cost of combination is still less than the acquirer's interest in the fair value of the acquiree's identifiable net assets, the acquirer recognises the remaining difference immediately in profit or loss for the current period.

7. Goodwill

Goodwill arising from a business combination is measured at cost less accumulated impairment losses, and is presented separately in the consolidated financial statements. Goodwill shall be subject to impairment testing at least at the end of each year.

The impairment testing of goodwill shall be conducted in combination with the relevant assets group or assets group combination. That is, since the purchase date, the book value of goodwill is apportioned to the assets group or combination of assets groups that can benefit from the synergistic effect of business combination in a reasonable way. If the recoverable amount of the assets group or combination of assets groups containing apportioned goodwill is lower than its book value, the corresponding impairment loss is recognised. The amount of impairment loss shall first offset the book value of goodwill apportioned to the assets group or assets group portfolio, and then offset the book value of other assets in proportion to the proportion of the book value of other assets other than goodwill in the assets group or assets group portfolio.

The recoverable amount is the higher of the net amount of the fair value of the assets minus the disposal expenses and the present value of the estimated future cash flow of the assets.

The impairment loss of goodwill shall be included in the current profit and loss when it occurs, and shall not be reversed in future accounting periods.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

Consolidated financial statements

The consolidation scope of consolidated financial statements is determined on the basis of control. Control exists when the investor 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 over the investee to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes in the above elements of the definition of control.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

For a subsidiary already disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated cash flow statement, as appropriate.

For subsidiaries acquired through a business combination involving enterprises not under common control, when preparing the consolidated financial statements of the current period, the purchased subsidiary will be included in the consolidation scope of the Company from the acquisition date on the basis of the fair value of the identifiable assets and liabilities of the purchased subsidiary determined on the acquisition date. The operating results and cash flows from the acquisition date (the date when control is obtained) are included in the consolidated income statement and consolidated cash flow statement, as appropriate.

No matter when the business combination occurs in the reporting period, subsidiaries acquired through a business combination involving enterprises under common control, when preparing the consolidated financial statements of the current period, the book value of each assets and liability of the consolidated subsidiary in the final controller's financial statements is taken as the basis, as if they had been included in the scope of consolidation from the date when they first came under the common control of the ultimate controlling party. Their operating results and cash flows from the date when they first came under the common control of the ultimate controlling party are included in the consolidated income statement and consolidated cash flow statement, as appropriate.

The significant accounting policies and accounting periods adopted by the subsidiaries are determined based on the uniform accounting policies and accounting periods set out by the Company.

Where the accounting policies and accounting periods adopted by subsidiaries are inconsistent with those of the Company, appropriate adjustments are made to the subsidiaries' financial statements in accordance with the accounting policies of the Company.

All significant intra-group balances and transactions are eliminated on consolidation.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

8. Consolidated financial statements - continued

The portion of subsidiaries' equity that is not attributable to the Company is treated as noncontrolling interests and presented as " non-controlling interests " in the consolidated balance sheet under the line item of shareholders' equity. The portion of net profits or losses of subsidiaries for the period attributable to non-controlling interests is presented as " non-controlling interests " in the consolidated income statement under the line item of "net profit". The portion of comprehensive income of subsidiaries for the period attributable to non-controlling interests is presented as " attributable to non-controlling interests " in the consolidated income statement under the line item of "total comprehensive income".

When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders' portion of the opening balance of shareholders equity of the subsidiary, the excess amount is still allocated against non-controlling interests.

Acquisition of non-controlling interests or disposal of interests in a subsidiary that does not result in the loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, surplus reserve and retained earnings shall be offset in turn.

For the stepwise acquisition of equity interest till acquiring control after a few transactions and leading to business combination not involving enterprises under common control, it shall be dealt with based on whether it belongs to 'package deal': if it belongs to 'package deal', it will be accounted for as a transactions to acquire control; if it does not belong to 'package deal', it will be accounted for as a transaction to acquire control on acquisition date, and the fair value of acquiree's shares held before acquisition date will be revalued, and the difference between fair value and carrying amount will be recognised in profit or loss of the current period; if acquiree's shares held before acquisition date involve changes in other comprehensive income and other changes in shareholders' equity under equity method, shall be reclassified to profit or loss of the period to which the acquisition date belongs.

When the Group loses control over a subsidiary due to disposal of equity investment or other reasons, any retained interest is re-measured at its fair value at the date when control is lost. The difference between the sum of the consideration obtained from the disposal of equity and the fair value of the remaining equity, less the share of the net assets of the parent company that should be continuously calculated from the purchase date based on the original shareholding ratio, is included in the investment income of the current period when the control right is lost, and at the same time, the goodwill is offset. Other comprehensive income associated with investment in the former subsidiary is reclassified to investment income in the period in which control is lost.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

8. Consolidated financial statements - continued

When the Group loses control of a subsidiary in two or more arrangements (transactions), terms and conditions of the arrangements (transactions) and their economic effects are considered. One or more of the following indicate that the Group shall account for the multiple arrangements as a 'package deal': (i) they are entered into at the same time or in contemplation of each other; (ii) they form a complete transaction designed to achieve an overall commercial effect; (iii) the occurrence of one transaction is dependent on the occurrence of at least one other transaction; (iv) one transaction alone is not economically justified, but it is economically justified when considered together with other transactions. Where the transactions of disposal of equity investments in a subsidiary until the loss of control are assessed as a package deal, these transactions are accounted for as one transaction of disposal of a subsidiary with loss of control. Before losing control, the difference of consideration received on disposal and the share of net assets of the subsidiary continuously calculated from acquisition date is recognised as other comprehensive income. When losing control, the cumulated other comprehensive income is transferred to profit or loss of the period of losing control. If the transactions of disposal of equity investments in a subsidiary are not assessed as a package deal, these transactions are accounted for as unrelated transactions.

9. Joint arrangements

Joint venture arrangement refers to an arrangement jointly controlled by two or more participants. The joint venture arrangement of the Group has the following characteristics: (1) all participants are bound by the arrangement; (2) two or more participants exercise joint control over the arrangement. None of the participants can control the arrangement alone, and none of the participants with joint control over the arrangement can prevent other participants or a combination of participants from controlling the arrangement alone.

Joint control refers to the common control over an arrangement according to relevant agreements, and the relevant activities of the arrangement must be agreed by the participants sharing the control right before making decisions.

There are two types of joint arrangements - joint operations and joint ventures. The classification is based on the rights and obligations of the parties under the joint arrangements, taking into account factors such as the structure, legal form and contractual terms of the arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. 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 arrangement.

The Group accounts for investments in joint ventures using equity method. Refer to Note (IV), 14.3.2 ‘Long-term equity investments accounted for using the equity method’ for details.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

9. Joint arrangements - continued

When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation: - its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation, and its expenses, including its share of any expenses incurred jointly. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the accounting standards applicable to the particular assets, liabilities, revenues and expenses.

10. Cash and cash equivalents

Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term (generally due within 3 months since the acquisition date), highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

11. Financial instruments

The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of the financial instrument.

For financial assets purchased or sold in regular ways, assets to be received and liabilities to be assumed are recognised on the transaction date or assets sold are derecognised on that date.

Financial assets and financial liabilities are initially measured at fair value (the method for determining the fair values of the financial assets and financial liabilities is set out in related disclosures under "basis of accounting and principle of measurement" in Note (IV) 4). For financial assets and financial liabilities at fair value through profit or loss, transaction costs are immediately recognised in profit or loss. For other financial assets and financial liabilities, transaction costs are included in their initial recognised amounts. Upon initial recognition of contract assets, bills receivable and accounts receivable that do not contain significant financing component or without considering the financing component included in the contract with a term not exceeding one year under the Accounting Standards for Business Enterprises No. 14 -- Revenue (hereinafter referred to as "Revenue Standards"), the Group adopts the transaction price as defined in the Revenue Standards for initial measurement.

When there is a difference between the fair value of financial assets or financial liabilities initially recognised and the transaction price, if the fair value is not determined based on the quotation of the same assets or liabilities in the active market or based on the valuation technique only using observable market data, no gains or losses will be recognised when the financial assets or financial liabilities are initially recognised.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant accounting periods.

The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset or financial liability to the carrying amount of the financial asset or to the amortised cost of the financial liability. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial asset or financial liability (such as repayment in advance, extension, call option or other similar options etc.) without considering the expected credit losses.

The amortised cost of a financial asset or a financial liability is the amount of a financial asset or a financial liability initially recognised net of principal repaid, plus or less the cumulative amortised amount arising from amortisation of the difference between the amount initially recognised and the amount at the maturity date using the effective interest method, net of cumulative credit loss allowance (only applicable to financial assets).

11.1 Classification, recognition and measurement of financial assets

Subsequent to initial recognition, the Group's financial assets of various categories are subsequently measured at amortised cost, at fair value through other comprehensive income or at fair value through profit or loss.

If the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, and the financial asset is held within a business model whose objective is achieved by collecting contractual cash flows, the Group classifies such financial asset as financial assets at amortised cost, which include cash and bank balances, bills receivable, accounts receivable, other receivables, and long-term receivables etc.

If the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, and the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial asset, the Group classifies such financial asset as financial assets at FVTOCI. The accounts receivable and bills receivable classified as FVTOCI upon acquisition are presented under receivables under financing, while the remaining items due within one year (inclusive) upon acquisition are presented under other current assets. Other financial assets of such type are presented as other debt investments if they are due after one year since the acquisition, or presented under non-current assets due within one year if they are due within one year (inclusive) since the balance sheet date.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.1 Classification, recognition and measurement of financial assets - continued

On initial recognition, the Group may irrevocably designate non-trading equity instruments, other than contingent consideration recognised through business combination not involving enterprises under common control, as financial assets at FVTOCI on an individual basis. Such financial assets at FVTOCI are presented as investments in other equity instruments.

A financial asset is classified as held for trading if one of the following conditions is satisfied:

It has been acquired principally for the purpose of selling in the near term; or

On initial recognition, it is part of a portfolio of identified financial instruments that the Group manages together and there is objective evidence that the Group has a recent actual pattern of short-term profit-taking; or

Related financial assets are derivatives. However, the derivatives meeting the definition of financial guarantee contract and those designated as effective hedging instruments are excluded.

Financial assets measured at fair value through profit or loss (hereinafter referred to as "FVTPL") include those classified as financial assets at FVTPL and those designated as financial assets at FVTPL:

Financial assets not satisfying the criteria of classification as financial assets at amortised cost or financial assets at FVTOCI are classified as financial assets at FVTPL.

Upon initial recognition, the Group may irrevocably designate the financial assets at FVTPL if doing so eliminates or significantly reduces accounting mismatch.

Financial assets at FVTPL other than derivative financial assets are presented as financial assets held for trading. Financial assets with a maturity over one year since the balance sheet date (or without a fixed maturity) and expected to be held for over one year are presented under other noncurrent financial assets.

11.1.1 Financial assets measured at amortised cost

Financial assets measured at amortised cost are subsequently measured at amortised cost using the effective interest method. Gain or loss arising from impairment or derecognition is recognised in profit or loss.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.1 Classification, recognition and measurement of financial assets - continued

11.1.1 Financial assets measured at amortised cost - continued

For financial assets measured at amortised cost, the Group recognises interest income using effective interest method. The Group calculates and recognises interest income through carrying amount of financial assets multiplying effective interest rate, except for the following circumstances:

For purchased or originated credit-impaired financial assets, the Group calculates and recognises the interest income based on amortised cost of the financial asset and the effective interest rate through credit adjustment since initial recognition.

For financial assets that have not suffered from credit impairment but have become credit impairment in subsequent periods, the Group will calculate and determine their interest income according to the amortised cost and effective interest rate of the financial assets in subsequent periods. If the financial instruments no longer has credit impairment due to the improvement of its credit risk in the subsequent period, and this improvement can be related to an event that occurs after the application of the above provisions, the Group will calculate and determine interest income by multiplying the actual interest rate by the carrying amount of the financial asset.

11.1.2 Financial assets at FVTOCI

For financial assets classified as FVTOCI, except for the impairment losses or gains and the interest income and exchange losses or gains calculated using the effective interest method which are included in profit or loss for the period, the changes in fair value are included in other comprehensive income. The amounts included in profit or loss for each period are equivalent to that as if the financial assets have been always measured at amortised cost. Upon derecognition, the accumulated gains or losses previously included in other comprehensive income are transferred to profit or loss for the period.

Changes in fair value of non-trading equity instrument investments designated as financial assets at FVTOCI are recognised in other comprehensive income, and the cumulative gains or losses previously recognised in other comprehensive income allocated to the part derecognised are transferred and included in retained earnings. During the period in which the Group holds the nontrading equity instruments, revenue from dividends is recognised in profit or loss for the current period when (1) the Group has established the right of collecting dividends; (2) it is probable that the associated economic benefits will flow to the Group; and (3) the amount of dividends can be measured reliably.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.1 Classification, recognition and measurement of financial assets - continued

11.1.3 Financial assets at FVTPL

Financial assets at FVTPL are subsequently measured at fair value. Gain or loss arising from changes in fair value and dividends and interest related to the financial assets are recognised in profit or loss.

11.2 Impairment of financial instruments

For financial assets at amortised cost, financial assets classified as FVTOCI, lease receivables, contract assets, loan commitments that are not financial liabilities at FVTPL, financial liabilities that are not at FVTPL and financial guarantee contracts that are not qualified for derecognition due to the transfer of financial assets or financial liabilities arising from continuing involvement of the transferred financial assets, the Group accounts for the impairment and recognises the provision for losses on the basis of expected credit loss (hereinafter referred to as "ECL").

For all contract assets, bills receivable and accounts receivable arising from transactions regulated by Revenue Standards, and lease receivables arising from transactions regulated by the Accounting Standards for Business Enterprises No. 21 -- Leases, the Group recognises the provision for losses at an amount equivalent to lifetime ECL.

For other financial instruments (other than purchased or originated credit-impaired financial assets), the Group assesses the changes in credit risk since initial recognition of relevant financial instruments at each balance sheet date. If the credit risk has increased significantly since initial recognition of the financial instruments, the Group recognises the provision for losses at an amount equivalent to lifetime ECL; if the credit risk has not increased significantly since initial recognition of the financial instruments, the Group recognises the provision for losses at an amount equivalent to 12-month ECL. The increase or reversal of credit impairment for financial assets other than those classified as FVTOCI is recognised as impairment loss or gain and included in profit or loss for the period. For financial assets classified as FVTOCI, the provision for bad debts is recognised in other comprehensive income and the impairment loss or gain is included in profit or loss for the period without reducing the carrying amount of the financial assets in the balance sheet.

Where the Group has measured the provision for losses at an amount equivalent to lifetime ECL of a financial instrument in prior accounting period, but the financial instrument no longer satisfies the criteria of significant increase in credit risk since initial recognition at the current balance sheet date, the Group recognises the provision for losses of the financial instrument at an amount equivalent to 12-month ECL at the current balance sheet date, with any resulting reversal of provision for losses recognised as impairment gains in profit or loss for the period.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.2 Impairment of financial instruments - continued

11.2.1 Significant increase of credit risk

The Group uses reasonable and supportable forward-looking information to assess whether the credit risk has increased significantly since initial recognition by comparing the risk of a default occurring on the financial instrument at the balance sheet date with the risk of a default occurring on the financial instrument at the date of initial recognition. For loan commitments and financial guarantee contracts, the date on which the Group becomes a party to the irrevocable commitment is considered to be the date of initial recognition in the application of criteria related to the financial instrument for impairment.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly:

(1) Significant changes in internal price indicators resulting from changes in credit risk;

(2) Significant changes in the rates or other terms of an existing financial instrument if the instrument was newly originated or issued at the balance sheet date (such as more stringent covenants, increased amounts of collateral or guarantees, or higher rate of return, etc.);

(3) Significant changes in the external market indicators of credit risk of the same financial instrument or similar financial instruments with the same expected duration. These indicators include: credit spreads, credit default swap prices against borrower, length of time and extent to which the fair value of financial assets is less than their amortised cost, and other market information related to the borrower (such as the borrower's debt instruments or changes in the price of equity instruments);

(4) An actual or expected significant change in the financial instrument's external credit rating;

(5) An actual or expected decrease in the internal credit rating for the debtor;

(6) 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;

(7) An actual or expected significant change in the operating results of the debtor;

(8) Significant increase in credit risk of other financial instruments issued by the same debtor;

(9) Significant adverse changes in the regulatory, economic, or technological environment of the debtor;

(10) Significant changes in the value of the collaterals or the quality of guarantees or credit enhancements provided by third parties, which are expected to reduce the debtor's economic motives to repay within the time limit specified in contract or affect the probability of default;

(11) Significant change in the debtor's economic motives to repay within the time limit specified in contract;

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.2 Impairment of financial instruments - continued

11.2.1 Significant increase of credit risk - continued

(12) Expected changes to loan contracts, including the exemption or revision of contractual obligations, the granting of interest-free periods, the jump in interest rates, the requirement for additional collateral or guarantees, or other changes in the contractual framework for financial instruments that may result from the breach of contract;

(13) Significant change in the expected performance and repayment of the debtor;

(14) Changes in the method used by the Group to manage the credit of financial instruments.

The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have lower credit risk at the balance sheet date. A financial instrument is determined to have lower credit risk if: i) it has a lower 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.

11.2.2 Credit-impaired financial assets

When one or more events that are expected to have an adverse impact on the future cash flows of the financial assets have occurred, the financial assets become credit-impaired. The evidence of credit impairment of financial assets include the following observable information:

(1) Significant financial difficulty of the issuer or debtor.

(2) A breach of contract by the debtor, such as a default or delinquency in interest or principal payments.

(3) A creditor grants a concession to the debtor that it would not otherwise consider, driven by economic or contractual considerations relating to the debtor's financial difficulty.

(4) It becomes probable that the debtor will enter bankruptcy or other financial reorganizations.

(5) The disappearance of an active market for the financial asset because of financial difficulties of the issuer or the debtor.

(6) Purchase or origination of a financial asset with a large scale of discount, which reflects the fact of credit loss.

Based on the Group's 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 collateral held by the Group).

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.2 Impairment of financial instruments - continued

11.2.3 Determination of expected credit loss

The Group determines the credit loss of lease receivables on the basis of single assets, and determines the credit loss of related financial instruments on the basis of combination of cash at bank and on hand, bills receivable, accounts receivable, other receivables, long-term receivables, etc. with impairment matrix. The Group divides financial instruments into different groups based on common risk characteristics. Common credit risk characteristics adopted by the Group include: type of financial instruments, credit risk rating, type of collateral, initial recognition date, remaining contract period, industry of the debtor, geographical location of the debtor, value of collateral relative to financial assets, etc.

The Group determines the ECL of relevant financial instruments using the following methods:

For financial assets, the credit loss is the present value of the difference between the contractual cash flows that are due to the Group under the contract and the cash flows that the Group expects to receive.

For financial guarantee contracts (refer to Note (IV) 11.4.1.3 for the detail of accounting policies), the credit loss is the present value of the expected payments to reimburse the holder for the credit loss incurred less any amounts that the Group expects to receive from the holder, the debtor or any other party.

For financial assets credit-impaired at the balance sheet date, but not purchased or originated credit-impaired, the credit loss is the difference between the carrying amount of the financial assets and the present value of estimated future cash flows discounted at the original effective interest rate.

The factors reflected by the Group's measurement of ECL of financial instruments include: unbiased probability weighted average amount recognised by assessing a range of possible outcomes; time value of money; reasonable and supportable information related to historical events, current condition and forecast of future economic condition that is available without undue cost or effort at the balance sheet date.

11.2.4 Write-off of financial assets

When the Group no longer reasonably expects that the contractual cash flows of financial assets can be collected in aggregate or in part, the Group will directly write down the carrying amount of the financial assets, which constitutes derecognition of relevant financial assets.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.3 Transfer of financial assets

The Group will derecognise a financial asset if one of the following conditions is satisfied: (i) the contractual rights to the cash flows from the financial asset expire; (ii) the financial asset has been transferred and substantially all the risks and rewards of ownership of the financial asset are transferred to the transferee; or (iii) although the financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, and it retains control of the financial asset, the Group will recognise the financial asset to the extent of its continuing involvement in the transferred financial asset and recognise an associated liability. The Group will measure relevant liabilities as follows:

For transferred financial assets carried at amortised cost, the carrying amount of relevant liabilities is the carrying amount of financial assets transferred with continuing involvement less amortised cost of the Group's retained rights (if the Group retains relevant rights upon transfer of financial assets) with addition of amortised cost of obligations assumed by the Group (if the Group assumes relevant obligations upon transfer of financial assets). Relevant liabilities are not designated as financial liabilities at fair value through profit or loss.

For transferred financial assets carried at fair value, the carrying amount of relevant liabilities is the carrying amount of financial assets transferred with continuing involvement less fair value of the Group's retained rights (if the Group retains relevant rights upon transfer of financial assets) with addition of fair value of obligations assumed by the Group (if the Group assumes relevant obligations upon transfer of financial assets). Accordingly, the fair value of relevant rights and obligations shall be measured on an individual basis.

For the transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (1) the carrying amount of the financial asset transferred and (2) the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognised in other comprehensive income, is recognised in profit or loss. Where the transferred assets are nontrading equity instrument investments designated as FVTOCI, cumulative gains or losses previously recognised in other comprehensive income are transferred out and included in retained earnings.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.3 Transfer of financial assets - continued

If a part of the transferred financial asset qualifies for derecognition, the overall carrying amount of the financial asset prior to transfer is allocated between the part that continues to be recognised and the part that is derecognised, based on the respective fair value of those parts at the date of transfer. The difference between (1) the carrying amount allocated to the part derecognised on the date of derecognition; and (2) the sum of the consideration received for the part derecognised and any cumulative gain or loss allocated to the part derecognised which has been previously recognised in other comprehensive income, is recognised in profit or loss. Where the transferred assets are nontrading equity instrument investments designated as FVTOCI, cumulative gains or losses previously recognised in other comprehensive income are transferred out and included in retained earnings.

For a transfer of a financial asset in its entirety that does not satisfy the derecognition criteria, the Group continues to recognise the transferred financial asset in its entirety. The consideration received from the transfer of the assets of assets is recognised as a financial liability upon receipt.

11.4 Classification of financial liabilities and equity instruments

Financial instruments issued by the Group or their components are classified into financial liabilities or equity instruments on the basis of the substance of the contractual arrangements and the economic nature rather than solely on their legal form, together with the definition of financial liability and equity instrument on initial recognition.

11.4.1 Classification, recognition and measurement of financial liabilities

On initial recognition, financial liabilities are classified into financial liabilities at FVTPL and other financial liabilities.

11.4.1.1 Financial liabilities at FVTPL

Financial liabilities at FVTPL consist of financial liabilities held for trading (including derivatives classified as financial liabilities) and those designated as FVTPL. Except for derivative financial liabilities presented separately, the financial liabilities at FVTPL are presented as financial liabilities held for trading.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.4 Classification of financial liabilities and equity instruments - continued

11.4.1 Classification, recognition and measurement of financial liabilities - continued

11.4.1.1 Financial liabilities at FVTPL - continued

A financial liability is classified as held for trading if one of the following conditions is satisfied:

It has been acquired principally for the purpose of repurchasing in the near term; or

On initial recognition, it is part of a portfolio of identified financial instruments that the Group manages together and there is objective evidence that the Group has a recent pattern of shortterm profit-taking; or

It is a derivative that is not a financial guarantee contract or designated and effective as a hedging instrument.

A financial liability may be designated as FVTPL on initial recognition when one of the following conditions is satisfied: (i) Such designation eliminates or significantly reduces accounting mismatch; or (ii) The Group makes management and performance evaluation on a fair value basis, in accordance with the Group's formally documented risk management or investment strategy, and reports to key management personnel on that basis. (iii) The qualified financial instrument is a hybrid instrument containing one or more embedded derivatives.

Held-for-trading financial liabilities are subsequently measured at fair value. Any gains or losses arising from changes in fair value and any dividends or interest expenses paid on the financial liabilities are recognised in profit or loss.

For a financial liability designated as at FVTPL, the amount of changes in fair value of the financial liability that are attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, while other changes in fair value are included in profit or loss for the current period. Upon the derecognition of such financial liability, the accumulated amount of changes in fair value that are attributable to changes in the credit risk of that liability, which was recognised in other comprehensive income, is transferred to retained earnings. Any dividend or interest expense on the financial liabilities is recognised in profit or loss. If the accounting treatment for the impact of the change in credit risk of such financial liability in the above ways would create or enlarge an accounting mismatch in profit or loss, the Group shall present all gains or losses on that liability (including the effects of changes in the credit risk of that liability) in profit or loss for the period.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.4 Classification of financial liabilities and equity instruments - continued

11.4.1 Classification, recognition and measurement of financial liabilities - continued

11.4.1.1 Financial liabilities at FVTPL - continued

For financial liabilities arising from contingent consideration recognised by the Group as the acquirer in the business combination not involving enterprises under common control, the Group measures such financial liabilities at fair value through profit or loss, and includes the changes in the financial liabilities in profit or loss for the period.

11.4.1.2 Other financial liabilities

Except for financial liabilities, financial guarantee contracts and loan commitments arising from transfer of financial assets that do not meet the derecognition criteria or those arising from continuing involvement in the transferred financial assets, other financial liabilities are subsequently measured at amortised cost, with gain or loss arising from derecognition or amortisation recognised in profit or loss.

If the modification or renegotiation for the contract by the Group and its counterparties does not result in derecognition of a financial liability subsequently measured at amortised cost but the changes in contractual cash flows, the Group will recalculate the carrying amount of the financial liability, with relevant gain or loss recognised in profit or loss. The Group will determine the carrying amount of the financial liability based on the present value of renegotiated or modified contractual cash flows discounted at the original effective interest rate of the financial liability. For all costs or expenses arising from modification or renegotiation of the contract, the Group will adjust the modified carrying amount of the financial liability and make amortisation during the remaining term of the modified financial liability.

11.4.1.3 Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder of the contract for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Subsequent to initial recognition, financial guarantee contracts that are not designated as financial liabilities at fair value through profit or loss or financial liabilities arising from transfer of financial assets that do not meet the derecognition criteria or those arising from continuing involvement in the transferred financial assets, are measured at the higher of amount of loss provision; and the amount initially recognised less cumulative amortisation amount determined in accordance with the revenue standards.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.4 Classification of financial liabilities and equity instruments - continued

11.4.2 Derecognition of financial liabilities

The Group derecognises a financial liability (or part of it) when the underlying present obligation (or part of it) is discharged. An agreement between the Group (the debtor) and the creditor to replace the original financial liability with a new financial liability with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

When the Group derecognises a financial liability or a part of it, it recognises the difference between the carrying amount of the financial liability (or part of the financial liability) derecognised and the consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.

11.4.3 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 (including refinanced), repurchased, sold and cancelled by the Group are recognised as changes in equity. The Group's issuance of equity instruments is recorded in the shareholders' equity at the actual issue price, and the relevant transaction costs are deducted from the shareholders' equity (capital reserve). If the capital reserve is insufficient to offset, the surplus reserve and retained earnings are offset in turn. The consideration and transaction costs paid for repurchasing the Company's equity instruments reduce the shareholders' equity.

The Group recognises the distribution to holders of the equity instruments as distribution of profits, and dividends paid do not affect total amount of shareholders' equity.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.5 Derivatives and embedded derivatives

Derivatives include forward exchange contracts, currency swaps, interest rate swaps and foreign exchange options, etc. Derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are subsequently measured at fair value.

For hybrid contracts comprising an embedded derivative and a host contract, where the host contract is a financial asset, the Group does not separate the embedded derivative from such hybrid contracts. The hybrid contract shall apply the relevant accounting standards regarding the classification of financial assets as a whole.

Derivatives embedded in hybrid contracts with hosts that are not financial assets are separated and treated as separate derivatives by the Group when they meet the following conditions:

(1) the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract;

(2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative;

(3) the hybrid contracts are not measured at fair value through profit or loss.

For the embedded derivative separated from the host contracts, the Group accounts for the host contracts in the hybrid contracts with applicable accounting standards. When the embedded derivatives whose fair value cannot be measured reliably by the Group according to the terms and conditions of the embedded derivatives, the fair value of such derivatives is measured at the difference between the fair value of the hybrid contracts and the fair value of the host contracts. By adopting the above method, if the embedded derivative cannot be measured on a stand-alone basis at the time when it is acquired or at subsequent balance sheet dates, the hybrid instrument is designated as financial instruments at fair value through profit or loss as a whole.

11.6 Offsetting financial assets and financial liabilities

Where the Group has a legal right that is currently enforceable to set off the recognised financial assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.7 Compound instruments

For convertible bonds issued by the Group that contain both liabilities and conversion option that may convert the liabilities to its own equity instrument, upon initial recognition, the bonds are split into liabilities and conversion option which are separately recognised. Therein, the conversion option that exchanges a fixed amount of cash or other financial assets for a fixed amount of equity instruments is accounted for as an equity instrument.

Upon initial recognition, the fair value of liability portion is determined based on the prevailing market price of the bonds containing no conversion option. The overall issue price of the convertible bonds net of the fair value of the liability portion is considered as the value of the conversion option that enables the bonds holder to convert the bonds to equity instruments, and is included in other equity instruments.

The liability portion of the convertible bonds is subsequently measured at amortised cost using effective interest method; the value of the conversion option classified as equity instrument remains in equity instrument. The expiry or conversion of convertible bonds will not result in loss or gain.

The transaction costs incurred for issuance of the convertible bonds are allocated between the liability portion and equity instrument portion in proportion to their respective fair values. The transaction cost relating to the equity instrument portion is directly included in equity instrument; while the transaction costs relating to the liability portion is included in the carrying amount of the liability, and amortised over the lifetime of the convertible bonds using effective interest method.

11.8 Reclassification of financial instruments

When the Group changes the business model to manage the financial assets, the financial assets affected will be reclassified and no financial liabilities will be reclassified.

The financial assets are reclassified by the Group and are accounted for prospectively since the date of reclassification (i.e., the first date of the initial reporting period after the business model of which the financial assets are reclassified by the enterprise is changed).

Where a financial asset at amortised cost is reclassified as a financial asset at fair value through profit or loss by (hereinafter referred to as "FVTPL") the Group, such financial asset is measured at fair value at the date of reclassification and the difference between the original carrying amount and the fair value is recognised in profit or loss for the period.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

11. Financial instruments - continued

11.8 Reclassification of financial instruments - continued

Where a financial asset at amortised cost is reclassified as a financial asset at fair value through other comprehensive income (hereinafter referred to as "FVTOCI") by the Group, such financial asset is measured at fair value at the date of reclassification, and the difference between the original carrying amount and the fair value is recognised in other comprehensive income.

Where a financial asset at FVTOCI is reclassified as a financial asset at amortised cost by the Group, the accumulated gains or losses previously recognised in other comprehensive income are transferred out and the fair value at the date of reclassification is adjusted. The adjusted fair value is determined as the new carrying amount, as if the financial asset has been always measured at amortised cost. The reclassification of the financial asset shall not affect its effective interest rate or the measurement of ECL.

Where a financial asset at FVTOCI is reclassified as a financial asset at FVTPL by the Group, such financial asset continues to be measured at fair value. At the same time, the accumulated gains or losses previously recognised in other comprehensive income are transferred to profit or loss for the period.

Where a financial asset at FVTPL is reclassified as a financial asset at amortised cost by the Group, the fair value at the date of reclassification is determined as the new carrying amount.

Where a financial asset at FVTPL is reclassified as a financial asset at FVTOCI by the Group, such financial asset continues to be measured at fair value.

Where a financial asset at FVTPL is reclassified, the effective interest rate is determined on the basis of the fair value of the financial asset at the date of reclassification.

12. Receivables

12.1 Determination and accounting methods for expected credit losses of receivables

The Group assesses the credit risk of receivables with significantly different credit risks on an individual basis, and determines the credit losses of receivables on a portfolio basis using an impairment matrix for other receivables. The amount of increase in or reversal of allowance for expected credit losses on receivables is included in profit or loss for the period as credit losses or gains.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

12. Receivables - continued

12.2 Categories of portfolios for which provision for bad debts is assessed on a portfolio basis according to credit risk characteristics and the basis for determination

The Group classifies receivables into groups A, B and C based on common risk characteristics. The common credit risk characteristics adopted by the Group include: type of financial instrument, credit risk rating, initial recognition date, remaining contractual term, industry of the debtor, geographical location of the debtor, etc.

The Group assigns internal credit ratings to customers and determines expected loss rate of receivables. The bases for determining ratings and the expected loss rates are as follows:

12.3 Determination criteria for provision for bad debts on an individual basis

13. Inventories

13.1 Categories of inventories, measurement method of cost of inventories, inventory count system, amortisation method of low-value consumables and packaging materials

13.1.1 Categories of inventories

The Group's inventories mainly include raw materials, merchandise and others. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditures incurred in bringing the inventories to their present location and condition.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

13. Inventories - continued

13.1 Categories of inventories, measurement method of cost of inventories, inventory count system, amortisation method of low-value consumables and packaging materials - continued

13.1.2 Measurement method of cost of inventories

Cost of inventories recognised is calculated using the weighted average method at the end of the month and first-in-first-out method.

13.1.3 Inventory count system

The inventory system adopted is the perpetual inventory system.

13.1.4 Amortisation method for low cost and low-value consumables items and packaging materials

Packaging materials and low cost and short-lived consumable items are amortised using the immediate write-off method.

13.2 Recognition criteria and provision method for decline in value of inventories

At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the cost of inventories is higher than the net realizable value, a provision for decline in value of inventories is made.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, after taking into consideration the purposes of inventories being held and effect of post balance sheet events.

Provision for decline in value of inventories is made based on the excess of cost of inventory over its net realizable value on an item-by-item basis.

After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

14. Long-term equity investments

14.1 Basis for determining joint control and significant influence over investee

Control means that the investor has the power over the investee, enjoys variable returns by participating in the relevant activities of the investee, and has the ability to use the power over the investee to affect the amount of its returns. Joint control refers to the common control over an arrangement according to relevant agreements, and the relevant activities of the arrangement must be agreed by the participants sharing the control right before making decisions. Significant influence refers to having the right to participate in the decision-making of the investee's financial and operating policies, but not being able to control or jointly control the formulation of these policies with other parties. When determining whether it is possible to control or exert significant influence on the investee, the convertible corporate bonds, exercisable warrants and other potential voting rights of the investee held by the investor and other parties have been considered.

14.2 Determination ofinitial investment cost

For a long-term equity investment acquired through business combination involving enterprises under common control, share of carrying amount of shareholders' equity of the acquiree in the consolidated financial statements of ultimate controlling party is recognised as initial investment cost of long-term equity investment at the date of combination. The difference between initial investment cost of long-term equity investment and cash paid, non-cash assets transferred and carrying amount of liabilities assumed, is adjusted in capital reserve. If the balance of capital reserve is not sufficient to absorb the difference, surplus reserve and retained earnings shall be offset in turn. If the consideration of the combination is satisfied by the issue of equity securities, the initial investment cost of the long-term equity investment is the share of carrying amount of shareholders equity of the acquiree in the consolidated financial statements of ultimate controlling party at the date of combination. The aggregate face value of the shares issued is accounted for as share capital. The difference between the initial investment cost and the aggregate face value of the shares issued is adjusted to capital reserve. If the balance of capital reserve is not sufficient to absorb the difference, surplus reserve and retained earnings shall be offset in turn.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

14. Long-term equity investments - continued

14.2 Determination of initial investment cost - continued

For a long-term equity investment acquired through business combination not involving enterprises under common control, the initial investment cost of the long-term equity investment acquired is the acquisition cost.

The expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services and other associated general and administrative expenses attributable to the business combination are recognised in profit or loss when they are incurred.

The long-term equity investment acquired otherwise than through a business combination is initially measured at its cost. When the entity is able to exercise significant influence or joint control (but not control) over an investee due to additional investment, the cost of long-term equity investments is the sum of the fair value of previously-held equity investments determined in accordance with Accounting Standards for Business Enterprises No.22 -- Financial Instruments: Recognition and Measurement (ASBE No. 22) and the additional investment cost.

14.3 Subsequent measurement and recognition of profit or loss

14.3.1 Long-term equity investments accounted for using the cost method

Long-term equity investments in subsidiaries are accounted for using the cost method in Company's separate financial statements. A subsidiary is an investee that is controlled by the Group.

Under the cost method, a long-term equity investment is measured at initial investment cost. When additional investment is made or the investment is recouped, the cost of the long-term equity investment is adjusted accordingly. Investment income is recognised in the period in accordance with the attributable share of cash dividends or profit distributions declared by the investee.

14.3.2 Long-term equity investments accounted for using the equity method

Except for investments in associates and joint ventures classified as held-for-sale in whole or in part, the Group accounts for investment in associates and joint ventures using the equity method. An associate is an entity over which the Group has significant influence and a joint venture is a joint arrangement whereby the Group only has rights to the net assets of the arrangement.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

14. Long-term equity investments - continued

14.3 Subsequent measurement and recognition of profit or loss - continued

14.3.2 Long-term equity investments accounted for using the equity method - continued

Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group's share of the fair value of the investee's identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initial investment cost is less than the Group's share of the fair value of the investee's identifiable net assets at the time of acquisition, the difference is recognised in profit or loss for the period, and the carrying amount of the longterm equity investment is adjusted accordingly.

Under the equity method, the Group recognises its share of the net profit or loss and other comprehensive income of the investee for the period as investment income and other comprehensive income for the period. Meanwhile, the carrying amount of long-term equity investment is adjusted; the carrying amount of long-term equity investment is decreased in accordance with its share of the investee's declared profit or cash dividends; other changes in shareholders' equity of the investee other than net profit or loss, other comprehensive income and profit distribution are correspondingly adjusted to the carrying amount of the long-term equity investment, and recognised in capital reserve. The Group recognises its share of the investee's net profit or loss based on the fair value of the investee's individual identifiable assets, etc. at the acquisition date after making adjustments. When the investee's accounting policies and accounting period are inconsistent with those of the Group, the Group recognises investment income and other comprehensive income after making appropriate adjustments to conform to the Group's accounting policies and accounting period. However, unrealised gains or losses resulting from the Group's transactions with its associates and joint ventures and assets invested or sold, which do not constitute a business, are eliminated based on the proportion attributable to the Group and then investment gains or losses are recognised. However, unrealised losses resulting from the Group's transactions with its associates and joint ventures which represent impairment losses on the transferred assets are not eliminated.

When recognising the net loss of the investee that should be shared, the book value of the long-term equity investments and other long-term interests that substantially constitute the net investment in the investee should be written down to zero. In addition, if the Group has incurred obligations to assume additional losses, a provision is recognised according to the obligation expected, and recorded in the investment loss for the period. Where net profits are subsequently made by the investee, the Group resumes recognising its share of those profits only after its share of the profits exceeds the share of losses previously not recognised.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

14. Long-term equity investments - continued

14.4 Disposal of long-term equity investments

On disposal of a long-term equity investment, the difference between the consideration received and the carrying amount is recognised in profit or loss for the period. For long-term equity investments accounted for using the equity method, if the remaining interest after disposal is still accounted for using the equity method, other comprehensive income previously recognised using the equity method is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities, and transferred to profit or loss for the period on a pro rata basis; shareholders' equity recognised due to other changes in shareholders' equity of the investee (other than net profit or loss, other comprehensive income and profit distribution) is transferred to profit or loss for the period on a pro rata basis. For long-term equity investments accounted for using the cost method, if the remaining interest after disposal is still accounted for using the cost method, other comprehensive income previously recognised using the equity method or in accordance with the standards for the recognition and measurement of financial instruments before the acquisition of control over the investee, is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities, and transferred to profit or loss for the period on a pro rata basis; other changes in shareholders' equity in the investee's net assets recognised under the equity method (other than net profit or loss, other comprehensive income and profit distribution) are transferred to profit or loss for the period on a pro rata basis.

Where the Group loses control over the investee due to disposal of part of shares, and in preparing the separate financial statements, remaining shares after disposal can have joint control or significant influence over the investee, the equity method shall be adopted to adjust the remaining shares as if the equity method had been applied since the acquisition date. If remaining shares after disposal cannot have joint control or significant influence over the investee, they are accounted for in accordance with the standards for recognition and measurement of financial instruments, and the difference between fair value on date of losing control and carrying amount is recognised in profit or loss for the period. Other comprehensive income recognised using the equity method or in accordance with the standards for the recognition and measurement of financial instruments before obtaining control over the investee, is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities when the control over the investee is lost; other changes in shareholders' equity in the investee's net assets recognised under the equity method (other than net profit or loss, other comprehensive income and profit distribution) is transferred to profit or loss for the period. Where remaining shares after disposal are accounted for under equity method, other comprehensive income and other shareholders' equity are transferred on a pro rata basis. Where remaining shares after disposal are accounted for in accordance with the standards for recognition and measurement of financial instruments, other comprehensive income and other shareholders' equity are all transferred.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

14. Long-term equity investments - continued

14.4 Disposal of long-term equity investments - continued

Where the Group loses joint control or significant influence over the investee after due to the disposal of part of its equity investment, remaining shares after disposal are accounted for in accordance with the standards for recognition and measurement of financial instruments, and the difference between fair value at the date of losing joint control or significant influence and carrying amount is recognised in profit or loss for the period. Other comprehensive income previously recognised under the equity method, is accounted for on the same basis as would have been required if the investee had directly disposed of related assets or liabilities when the equity method is not adopted, and other changes in shareholders' equity other than net profit or loss, other comprehensive income and profit distribution are transferred to investment income for the period when the equity method is not adopted.

The Group disposes of its equity investment in subsidiaries through multiple transactions step by step until it loses control over the subsidiaries. If these transactions are assessed as a "package deal", all transactions are deemed as one transaction on disposal of equity investment in subsidiaries, and the difference between the amount of disposal and carrying amount of long-term equity investment is recognised as other comprehensive income before the loss of control, and transferred to profit or loss for the period when the control is lost.

15. Investment properties

Investment property is the property held by the Group to earn rentals or for capital appreciation or both. It includes a land use right that is leased out and a building that is leased out.

An investment property is measured initially at cost. Subsequent expenditures incurred for such investment property are included in the cost of the investment property if it is probable that economic benefits associated with the investment property will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequent expenditures are recognised in profit or loss for the period in which they are incurred.

The Group uses the cost model for subsequent measurement of investment property, and the investment properties are depreciated over their useful lives using the straight-line method. The depreciation life, estimated residual value rate and annual depreciation rate of each category of investment properties are as follows:

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

15. Investment properties - continued

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and it is estimated that no economic benefits can be obtained from its disposal, the investment properties is derecognised.

When an investment property is sold, transferred, retired or damaged, the Group recognises the amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss for the period.

16. Fixed assets and depreciation

Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognised only when it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured at cost, taking into account the impact of estimated abandonment costs. Upon being restructured into a stock company, the fixed assets initially contributed by the state-owned shareholders are recognised based on the valuation amounts confirmed by the stateowned assets administration department.

Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset if it is probable that economic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss for the period in which they are incurred.

A fixed asset is depreciated over its useful life using the straight-line method starting from the month subsequent to the one in which it is ready for intended use. The depreciation life, estimated net residual value rate and annual depreciation rate of each category of fixed assets are as follows:

Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

16. Fixed assets and depreciation - continued

When a fixed asset is disposed or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognised in profit or loss for the period.

The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at each financial year-end, and accounts for any change as a change in accounting estimates.

17. Construction in progress

Construction in progress is measured at its actual costs. The actual costs include various construction expenditures during the construction period, borrowing costs capitalized before it is ready for intended use and other relevant costs. Construction in progress is not depreciated.

Construction in progress is accounted for by categories of projects initiated, and is transferred to a fixed asset when it is ready for intended use. The criteria for judging the intended use shall be one of the following:

(1) The physical construction (including installation) of fixed assets has been fully or substantially completed;

(2) The trial production or trial operation has been carried out and the results of which indicate that the asset is capable of normal operation or producing qualified products on a stable basis, or the results of which indicate that it is capable of normal functioning or operation;

(3) The fixed assets and intangible assets acquired and constructed have met the design or contractual requirements or are basically in compliance with the design or contractual requirements.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

18. Intangible assets

18.1 Intangible assets

Intangible assets include land use rights, terminal operating rights, data resources and others.

An intangible asset is measured initially at cost. Upon being restructured into a stock company, the intangible assets initially contributed by the state-owned shareholders are recognised based on the valuation amounts confirmed by the state-owned assets administration department. Except for terminal operating rights, when an intangible asset with a finite useful life is available for use, its original cost minus the expected net residual value and the accumulated amount of impairment provision is amortised over its estimated useful life by using straight-line method. The terminal operating rights under the output method are amortised over periods according to the ratio of the estimated minimum guaranteed throughput to the estimated minimum guaranteed total throughput during the operation period. When the estimated minimum guaranteed throughput cannot be measured reliably, the straight-line method will be used for amortisation. An intangible asset with indefinite useful life will not be amortised.

For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation method at the end of the year, and makes adjustments when necessary.

18.2 Expenditure on research and development

Expenditure during the research phase is recognised in profit or loss for the period in which it is incurred.

Expenditure during the development phase that meets all of the following conditions at the same time is recognised as intangible asset. Expenditure during development phase that does not meet the following conditions is recognised in profit or loss for the period:

(1) it is technically feasible to complete the intangible asset so that it will be available for use or sale.

(2) the Group has the intention to complete the intangible asset and use or sell it.

(3) the Group can demonstrate the ways in which the intangible asset will generate economic benefits, including the evidence of the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

18. Intangible assets - continued

18.2 Expenditure on research and development - continued

(4) The availability of adequate technical, financial, and other resources to complete the development of the intangible asset and the ability to use or sell the intangible asset.

(5) The expenditure attributable to the intangible asset during its development phase can be measured reliably.

If the expenditures cannot be distinguished between the research phase and development phase, the Group recognises all of them in profit or loss for the period. The costs of intangible assets generated by the internal research only include the total expenditure incurred for the period from the time point of capitalization to the time point when the intangible assets are ready for intended use. For the identical intangible asset, the expenditures recorded as expenses before they qualify for capitalization during the development process are not adjusted.

The Group classifies the expenditures on an internal research and development project into expenditures in the research phase and expenditures in the development phase. The scope of R&D expenditures refer to those directly related to the R&D activities, including wages, salaries, and welfare expenses of personnel directly engaged in R&D activities, materials directly consumed in R&D activities, depreciation expenses for instruments and equipment used in R&D activities, travel, transportation, and communication expenses required for research and experimental development, etc. Technical feasibility and economic viability studies are adopted as specific criteria for classifying the research and development phases once such studies have been evaluated and approved.

19. Long-term deferred expenses

Long-term deferred expenses refer to various expenses that have been incurred but should be borne in the current and subsequent periods with an apportionment period of more than one year. Longterm deferred expenses are amortised using the straight-line method over the expected periods in which benefits are derived.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

20. Impairment of non-financial assets other than goodwill

On each balance sheet date, the Group checks whether there is any sign of possible impairment of long-term equity investments, investment properties measured by cost model, fixed assets, construction in progress, right-of-use assets, long-term deferred expenses, and intangible assets whose useful life is determined. If there is any indication that such assets may be impaired, recoverable amounts are estimated for such assets. Intangible assets with indefinite useful life and intangible assets not yet available for use are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired.

Recoverable amount is estimated on an individual basis. If it is not practical to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. The recoverable amount of an asset or assets group is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset.

The present value of the estimated future cash flow of the assets is determined according to the estimated future cash flow generated during the continuous use and final disposal of the assets, and the amount discounted which is determined by selecting an appropriate pre tax discount rate.

If the recoverable amount of an asset is less than its carrying amount, the deficit is accounted for as an impairment loss and is recognised in profit or loss.

Once the impairment losses of above-mentioned assets are recognised, it shall not be reversed in any subsequent period.

When determining the impairment losses of assets related to contract costs, first determine the impairment losses of other assets related to contracts that are recognised in accordance with other relevant accounting standards for business enterprises; Then, if the book value of the assets related to the contract costs is higher than the difference between the following two items, the excess part of the provision for impairment shall be recognised as impairment losses: (i) the Group's expected remaining consideration for the transfer of goods or services related to the assets; (ii) the Estimate the cost to be incurred for the transfer of the relevant goods or services.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

20. Impairment of non-financial assets other than goodwill - continued

Except for the impairment losses related to the contract costs, once the above impairment losses are recognised, it will not be reversed in future accounting periods. After the provision for impairment of assets related to contract costs has been made, if the factors of impairment in previous periods have changed resulting in the above two differences are higher than the book value of the assets, the provision for impairment of the assets that has been made is reversed and included in the current profits and losses, but the book value of the assets after reversal does not exceed the book value of the assets on the reversal date assuming that no provision for impairment is made.

21. Provisions

Provisions are recognised when the Group has a present obligation related to a contingency, it is probable that the obligation settlement will result in an outflow of economic benefits, and the amount of the obligation can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money. Where the effect of the time value of money is material, the amount of the provision is determined by discounting the related future cash outflows.

If all or part of the expenses required to settle the estimated liabilities are expected to be compensated by a third party, the compensation amount will be separately recognised as assets when it is basically determined that it can be received, and the recognised compensation amount will not exceed the book value of the estimated liabilities.

22. Employee benefits

22.1 Short-term employee benefits

Employee benefits refer to various forms of 'remuneration' or compensation provided by the Group for the services provided by employees or the termination of labor relations. Employee benefits includes short-term compensation, post employment benefit, termination benefits and other longterm employee benefits.

Except for compensation for termination of labor relationship with employees, the Group recognises employee benefits payable as liability during the accounting period when employees provide services.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

22. Employee benefits - continued

22.1 Short-term employee benefits - continued

The Group shall participate in the employee social security system established by government agencies in accordance with regulations, including basic endowment insurance, medical insurance, housing provident fund and other social security systems, and the corresponding expenses shall be included in relevant asset costs or current 'profit and loss' when incurred.

Short-term benefits refer to the employee benefits that the Group is required to make full payments within 12 months after the annual reporting period during which relevant services are provided by the employees, except the post-employment benefits and termination benefits. Specifically, the short-term benefits include: employee salaries, bonuses, allowances and subsidies, employee benefits, social insurance contributions such as the medical insurance and the work injury insurance, housing funds, trade union funds and employee education funds, short-term paid absence, shortterm profit sharing plan, non-monetary welfare and other short-term benefits.

Short-term employee benefits payable are recognised as liabilities, with a corresponding charge to profit or loss for the period or in the costs of relevant assets according to the beneficiaries of services provided by employees in the accounting period in which employees provide services to the Group. Staff welfare expenses incurred by the Group are recognised in profit or loss for the period or the costs of relevant assets based on the actually occurred amounts when they actually occurred. Nonmonetary staff welfare expenses are measured at fair value.

Payment made by the Group of social security contributions for employees such as premiums or contributions on medical insurance, work injury insurance and maternity insurance, etc. and payments of housing funds, as well as trade union funds and employee education costs provided in accordance with relevant requirements, are calculated according to prescribed bases and percentages in determining the amount of employee benefits and recognised as relevant liabilities, with a corresponding charge to profit or loss for the period or the costs of relevant assets in the accounting period in which employees provide services.

22.2 Post-employment benefits

Post-employment benefits refer to the rewards and benefits of various forms provided by the Group after the employees have retired or terminated the labor relationship with the enterprise for the services rendered by the employees, except the short-term benefits and the termination benefits. The post-employment benefits consist of the pension insurance, the annuity, the unemployment insurance and other post-employment benefits.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

22. Employee benefits - continued

22.2 Post-employment benefits - continued

Post-employment benefit plans are classified by the Group into defined contribution plans and defined benefit plans. The post-employment benefit plan refers to the agreements the Group entered into with the employees on the post-employment benefits or the regulations or measures established by the Group for provisions of the post-employee benefits, among which the defined contribution plans refer to the post-employment benefit plan under which the Group shall no longer undertake any obligations of payments after paying fixed contributions to independent funds; the defined benefit plans refer to the post-employment benefit plans other than the defined contribution plans. During the accounting period in which employees render services to the Group, the amounts payable calculated based on the defined contribution plans are recognised as liabilities and included in profit or loss for the period or costs of related assets.

For defined benefit plans, the Group attributes the welfare obligations arising from the defined benefit plans to the period in which employees provide services to the Group according to the formula determined based on the projected unit credit method, and includes them in profit or loss for the period or costs of related assets. Defined benefit costs are categorized as follows:

Service cost (including current service cost, past service cost, as well as gains and losses on settlements);

Net interest of net liabilities or assets of defined benefit plans (including interest income of plan assets, interest expenses of defined benefit plan liabilities and effect of asset ceiling); and

• Changes arising from remeasurement of net liabilities or net assets of defined benefit plans.

Service costs and net interest of net liabilities and net assets of defined benefit plans are recognised in profit or loss for the period or costs of related assets. Remeasurement of the net defined benefit liabilities (assets) (including actuarial gains and losses, the return on plan assets, excluding amounts included in net interest on net defined benefit liabilities (assets), and any changes in the effect of the asset ceiling, excluding amounts included in net interest on net defined benefit liabilities (assets)) are recognised in other comprehensive income.

The deficit or surplus resulting from the present value of the defined benefit plan obligations less the fair value of the defined benefit plan assets is recognised as a net defined benefit plan liability or net asset.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

22. Employee benefits - continued

22.3 Termination benefits

Termination benefits refer to the compensations the Group pay to the employees for terminating the employment relationship with employees before the expiry of the employment contracts or encouraging employees to accept voluntary redundancy. When the Group provides termination benefits to employees, employee benefit liabilities are recognised for termination benefits, with a corresponding charge to profit or loss for the period at the earlier of: (1) when the Group cannot unilaterally withdraw the offer of termination benefits because of the termination plan or a curtailment proposal; and (2) when the Group has a detailed and formal restructuring plan involving the payment of termination benefits; Provided that, the restructuring plan has been implemented or the main contents of the plan have been notified to the affected parties, so that all parties have formed a reasonable expectation that the Group will implement the restructuring.

22.4 Other long-term employee benefits

Other long-term employee benefits refer to all employee benefits except for short-term benefits, post-employment benefits, and termination benefits.

Other long-term employee benefits that qualify as defined contribution plans are treated in accordance with the relevant provisions of the defined contribution plans mentioned above, except that the net liability or net asset for other long-term employee benefits is recognised and measured in accordance with the relevant provisions of the defined benefit plans. At the end of the reporting period, employee compensation costs arising from other long-term employee benefits are recognised as three components: service cost, net interest on net liability or net asset for other longterm employee benefits, and changes resulting from the remeasurement of the net liability or net asset for other long-term employee benefits. The total net amount of these items is included in profit or loss for the period or in the costs of related assets.

The Group provides internal retirement benefits to employees accepting the internal retirement arrangements. Internal retirement benefits refer to the payments of salaries and social security contributions for employees who have not reached the retirement age regulated by the country and are approved to quit the job voluntarily. For internal retirement benefits, the internal retirement benefits the Group is expected to pay during the period from the date when employees stop providing services to the date of normal retirement are recognised as liabilities at the present value and included in profit or loss for the period when relevant recognition requirements of the internal retirement benefits are met.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

23. Share-based payments

A share-based payment is a transaction which the Group grants equity instruments, in return for services rendered by employees or other parties. The Group's share-based payments include equitysettled share-based payments.

Equity-settled share-based payments in exchange for services rendered by employees are measured at fair value of the equity instruments granted to employees at the grant date. Such amount is recognised as related costs or expenses on a straight-line basis over the vesting period, based on the best estimate of the number of equity instruments expected to vest/ as related costs or expenses at the grant date, if the equity instruments could be vested immediately, with a corresponding increase in capital reserve.

24. Bonds payable

The Group's bonds payable are measured at fair value when initially recognised, and relevant transaction costs are included in the initially recognised amount. It is subsequently measured at amortised cost.

The difference between the bond issue price and the total face value of the bonds is regarded as the bond premium or discount, which is amortised at the time of interest accrual according to the effective interest method during the duration of the bonds, and is treated according to the principle of handling borrowing costs.

25. Preference shares, perpetual bonds and other financial instruments

The actual issue price for the issuance of equity instruments is included in shareholders' equity after deducting relevant transaction costs from shareholders’ equity (capital reserve). If the capital reserve is insufficient to offset, surplus reserve and retained earnings will be offset in turn. The consideration and transaction costs paid for repurchasing the Group's equity instruments reduce shareholders’ equity.

The Group classifies financial instruments, or their components, as financial liabilities or equity instruments at initial recognition based on the contractual terms of the issued perpetual bonds and their reflected economic substance, combined with the definitions of financial liabilities and equity instruments.

For financial instruments such as perpetual bonds classified as equity instruments, interest expense or dividend (dividend) distributions are treated as profit distributions of the Group, and their repurchases, cancellations, etc., are treated as changes in equity, and related transaction costs are deducted from equity.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

26. Revenue recognition

26.1 Disclosure of accounting policies adopted for revenue recognition and measurement by type of business

Revenue refers to the total inflow of economic benefits formed in the daily activities of the Group, which will lead to the increase of shareholders' equity and has nothing to do with the capital invested by shareholders. The Group's revenue is mainly from port business, bonded logistics business and other businesses.

The Group recognises revenue based on the transaction price allocated to the performance obligation when the Group satisfies a performance obligation in the contract, namely, when the customer obtains control over relevant goods or services. A performance obligation is a commitment that the Group transfers distinct goods or service to a customer in the contract. The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties and amounts expected to be refunded to a customer. The transaction price recognised by the Group does not exceed the amount of cumulative revenue recognized that is highly probable not being significantly reversed when the relevant uncertainty is eliminated.

The Group evaluates the contract on the contract start date, identifies each individual performance obligation contained in the contract, and determines whether each individual performance obligation is performed within a certain period or at a certain time point. It is a performance obligation satisfied during a period of time and the Group recognises revenue during a period of time according to the progress of performance if one of the following conditions is met: (i) the customer obtains and consumes economic benefits at the same time of the Group's performance; (ii) the customer is able to control goods or services in progress during the Group's performance; (iii) goods or services generated during the Group's performance no alternative use, and the Group is entitled to collect amounts of cumulative performance part which have been done up to now. Otherwise, revenue is recognised at a point in time when the customer obtains control over the relevant goods or services.

The Group adopts output method, i.e., the value of goods or services transferred to customers to determine the appropriate progress of performance. Where the progress cannot be determined reasonably, the revenue is recognised based on the amount of cost that is expected to be compensated based on the cost already incurred, until the progress of performance is reasonably determined.

Contract assets refer to the right that the Group has transferred goods or services to customers and is entitled to receive consideration, and the right depends on other factors other than the passage of time. Please refer to Note (IV) 11 for details of the accounting policies for the impairment of contract assets. The Group's unconditional (that is, only depending on the passage of time) right to collect consideration from customers is separately listed as receivables.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

26. Revenue recognition - continued

26.1 Disclosure of accounting policies adopted for revenue recognition and measurement by type of business - continued

Contract liabilities refer to the Group's obligation to transfer goods or services to a customer for consideration received or receivable from the customer.

Contract assets and contract liabilities under the same contract are presented in net amount.

If there are two or more of performance obligations included in the contract, at the inception of the contract, the Group allocates the transaction price to each single performance obligation based on the proportion of stand-alone selling price of goods or services promised in each stand-alone performance obligation. However, if there is conclusive evidence indicating that the contract discount or variable consideration is only relative to one or more (not the whole) performance obligations in the contract, the Group will allocate the contract discount or variable consideration to relative one or more performance obligations. Stand-alone selling price refers to the price of a single sale of goods or services. If the stand-alone selling price cannot be observed directly, the Group estimates the stand-alone selling price through comprehensive consideration of all relative information that can be reasonably acquired and maximum use of observable inputs.

In case of the existence of variable consideration (such as sales discount) in the contract, the Group shall determine the best estimate of variable consideration based on the expected value or the most likely amount. The transaction price including variable consideration shall not exceed the amount of the cumulatively recognised revenue which is highly probable not being significantly reversed when relevant uncertainty is eliminated. At each balance sheet date, the Group re-estimates the amount of variable consideration which should be included in transaction price.

If the customer pays non-cash consideration, the Group determines the transaction price based on the fair value of the non-cash consideration. If the fair value of non-cash consideration cannot be reasonably estimated, the Group shall determine the transaction price indirectly by reference to the stand-alone selling price of the goods or services promised to transfer to the customer.

For any consideration payable to a customer in a contract, unless such payment is made in exchange for a distinct good or service obtained from the customer, the Group accounts for the consideration payable as a reduction of the transaction price. The resulting reduction in revenue is recognised at the later of when the related revenue is recognised and when the Group pays or promises to pay the consideration.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

26. Revenue recognition - continued

26.1 Disclosure of accounting policies adopted for revenue recognition and measurement by type of business - continued

In case of the existence of a significant financing component in the contract, the Group shall determine the transaction price on the assumption that the customer has paid the amount payable by cash when obtaining the control over the goods or services. Differences between transaction price and contract consideration are amortised using effective interest method during the contract life. At the inception of the contract, if the period between when the Group transfers promised goods or service to a customer and when the customer pays for that goods or service will be one year or less, the Group dose not consider the significant financing component in the contract.

The Group assesses whether it controls each specified goods or service before that goods or service is transferred to the customer to determine whether the Group is a principal or an agent. If the Group controls the specified good or service before that good or service is transferred to a customer, the Group is a principal and recognises revenue in the gross amount of consideration received or receivable. Otherwise, the Group is an agent and recognises revenue in the amount of any fee or commission to which it expects to be entitled. The fee or commission is the net amount of consideration that the Group retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party, or is determined in accordance with the established commission amount or percentage, etc.

Where the Group receives receipts in advance from a customer for sales of goods or rendering of services, the amount is first recognised as a liability and then transferred to revenue when the related performance obligation has been satisfied. When the Group's advance payments received are not required to be refunded and it is probable that the customer will waive all or part of its contractual rights, the Group recognises the said amounts as revenue on a pro-rata basis in accordance with the pattern of exercise of the customer's contractual rights, if the Group expects to be entitled to the amounts relating to the contractual rights waived by the customer; otherwise, the Group reverses the related balance of the said liabilities to revenue only when it is highly unlikely that the customer will require performance of the remaining performance obligations.

For port business, the revenue from the handling of containers and bulk cargos is recognised over time based on the progress of completed services, and the revenue from the storage of containers and bulk cargos is recognised on a straight-line basis over the period of storage.

For bonded logistics business, the revenue is recognised based on the progress of services rendered, where the progress of completed services is determined based on the proportion of days on services provided to the estimated total number of service days. As at the balance sheet date, the Group has re-estimated the progress of completed bonded logistics service so that it reflects the changes in performance status.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

26. Revenue recognition - continued

26.2 Similar operations under different business models which involve different revenue recognition and measurement methods

The Group has no similar operations under different business models which involve different revenue recognition and measurement methods.

26.3 Costs of obtaining a contract

For the incremental cost of obtaining the contract (cost that will not occur if the contract is not obtained) that is expected to be recoverable, it is recognised as an asset. If the amortisation period of such asset is less than one year, it is recognised in profit or loss for the period when incurred. Other expenses incurred for obtaining the contract are included in profit or loss for the period when incurred, except for those explicitly assumed by the customer.

26.4 Costs to fulfil a contract

If the costs incurred in fulfilling a contract are not within the scope of any standards other than Revenue Standards, the Group recognises an asset only if those costs meet all of the following criteria: (1) the costs relate directly to a contract or to an anticipated contract that the Group can specifically identify; (2) the costs enhance resources of the Group that will be used in satisfying performance obligations in the future; and (3) the costs are expected to be recovered. The asset mentioned above shall be amortised on a basis that is consistent with the revenue recognition of the goods or services to which the asset relates and recognised in profit or loss for the period.

27. Government grants

Government grants refer to monetary assets and non-monetary assets obtained by the Group from the government free of charge. Government grants are recognised when they can meet the conditions attached to government grants and can be received.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a nominal amount is recognised immediately in profit or loss for the period.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

27. Government grants - continued

27.1 Determination basis and accounting treatment of government grant related to assets

Government grants of the Group mainly include grants for intelligent system, etc., and these government grants relate to assets as they will form long-term assets.

A government grant related to an asset is recognised as deferred income, and included in profit or loss by stages over the useful life of the related asset in a reasonable and systematic way. A government grant measured at a nominal amount is recognised immediately in profit or loss in the current period. Where the relevant asset is sold, transferred, retired or damaged prior to the end of its useful life, the related remaining balance of deferred income is transferred to profit or loss of the disposal period.

27.2 Determination basis and accounting treatment of government grant related to income

Government grants of the Group mainly include grants for business development and specialized operations, etc., and these government grants relate to income as they will not form long-term assets. The Group classifies government grants that are difficult to be distinguished as government grants related to income aggregately.

For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant is recognised as deferred income and recognised in profit or loss for the period in which the related costs or losses are recognised; if the grant is a compensation for related expenses or losses already incurred, the grant is recognised immediately in profit or loss.

A government grant related to the Group's daily activities is recognised in other income; a government grant not related to the Group's daily activities is recognised in non-operating income.

28. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalized when expenditures for such asset and borrowing costs are incurred and activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired, constructed or produced becomes ready for its intended use or sale. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally and when the interruption is for a continuous period of more than 3 months. Capitalization of borrowing costs is suspended until the acquisition, construction or production of the asset is resumed. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

28. Borrowing costs - continued

Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed under generalpurpose borrowings, the Group determines the amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings. During the capitalization period, exchange differences related to a specific-purpose borrowing denominated in foreign currency are all capitalized. Exchange differences in connection with general-purpose borrowings are recognised in profit or loss for the period in which they are incurred.

29. Income tax

The income tax expenses include current income tax and deferred income tax.

29.1 Current income tax

At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws.

29.2 Deferred tax assets and deferred tax liabilities

For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognised as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognised using the balance sheet liability method.

Deferred tax assets and liabilities are generally recognised for all taxable temporary differences. Deferred tax assets for deductible temporary differences are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. However, for temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction, which is not a business combination that affects neither the accounting profit nor taxable profits (or deductible losses) and will not result in taxable temporary differences and deductible temporary differences in equivalent amounts at the time of transaction, no deferred tax asset or liability is recognised.

For deductible losses and tax credits that can be carried forward, deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

29. Deferred tax assets/ deferred tax liabilities - continued

29.2 Deferred tax assets and deferred tax liabilities - continued

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not be reversed in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with investments in subsidiaries, associates and joint ventures are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilized and they are expected to be reversed in the foreseeable future.

At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates applicable in the period in which the asset is realised or the liability is settled according to tax laws.

Current and deferred tax expenses or income are recognised in profit or loss for the period, except when they arise from transactions or events that are directly recognised in other comprehensive income or shareholders' equity, in which case they are recognised in other comprehensive income or shareholders' equity, and when they arise from business combinations, in which case they adjust the carrying amount of goodwill.

At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Any such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.

29.3 Income tax offsetting

When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.

When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

30. Transactions denominated in foreign currencies and translation of financial statements denominated in foreign currencies

30.1 Transactions denominated in foreign currencies

A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange rate on the date of the transaction.

At the balance sheet date, foreign currency monetary items are translated into functional currency using the spot exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance sheet date are recognised in profit or loss for the period, except that (1) exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized as part of the cost of the qualifying asset during the capitalization period; (2) exchange differences related to hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting; (3) exchange differences arising from changes in the carrying amounts (other than the amortised cost) of monetary items at fair value through other comprehensive income are recognised as other comprehensive income.

When the consolidated financial statements include foreign operation(s), if there is foreign currency monetary item substantially constitute a net investment in a foreign operation, exchange differences arising from changes in exchange rates are recognised as "exchange differences arising from translation of financial statements denominated in foreign currencies" in other comprehensive income, and in profit or loss for the period upon disposal of the foreign operation.

Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot exchange rates on the dates of the transactions. Foreign currency non-monetary items measured at fair value are re-translated at the spot exchange rate on the date when the fair value is determined. Difference between the re-translated functional currency amount and the original functional currency amount is treated as changes in fair value (including changes in exchange rate) and is recognised in profit or loss or as other comprehensive income.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

30. Transactions denominated in foreign currencies and translation of financial statements denominated in foreign currencies - continued

30.2 Translation of financial statements denominated in foreign currencies

For the purpose of preparing the consolidated financial statements, financial statements of a foreign operation are translated from the foreign currency into RMB using the following method: assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items except for translation differences arising from translation of foreign currency financial statements items in retained earnings and other comprehensive income are translated at the spot exchange rates at the dates on which such items arose; all items in the income statement as well as items reflecting the distribution of profits are translated at the average exchange rate of the accounting period of the consolidated financial statements; retained earnings at the beginning of the year are the converted year-end retained earnings of the previous year. The year-end retained earnings are calculated and presented in accordance with the items of profit distribution after conversion. The difference between the translated assets and the aggregate of liabilities and shareholders' equity items is recognised as other comprehensive income and included in shareholders' equity.

Cash flows arising from a transaction in foreign currency and the cash flows of a foreign subsidiary are translated at average exchange rate during the accounting period of consolidated financial statements. The effect of exchange rate changes on cash and cash equivalents is regarded as a reconciling item and presented separately in the cash flow statement as "effect of exchange rate changes on cash and cash equivalents".

The amount at the beginning of the year and the comparative figures of previous year are presented at the translated amounts in the previous year's financial statements.

On disposal of the Group's entire interest in a foreign operation, or upon a loss of control over a foreign operation due to disposal of certain interest in it or other reasons, the Group transfers the accumulated exchange differences arising from translation of financial statements of this foreign operation attributable to the shareholders’ equity of the Company and presented under other comprehensive income, to profit or loss in the period in which the disposal occurs.

In case of a disposal of part of the equity interests or other reason leading to lower interest percentage in foreign operations but does not result in the Group losing control over a foreign operation, the exchange differences arising from the translation difference of financial statements denominated in foreign currencies related to this disposed part are re-attributed to non-controlling interests and are not recognised in profit or loss. For partial disposals of equity interests in foreign operations which are associates or joint ventures, the proportionate share of the accumulated exchange differences arising from translation difference of financial statements denominated in foreign currencies is reclassified to profit or loss.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

31. Leases

A lease is a contract under which a lessor conveys the right to use an asset to a lessee for a specified period in exchange for consideration.

At the inception of a contract, the Group assesses whether the contract is a lease or includes a lease. If one party in the contract transfers the right to control the use of one or more identified assets within a certain period in exchange for consideration, the contract is a lease or includes a lease. Unless the contract terms and conditions change, the Group dose not re-evaluate whether the contract is a lease or includes a lease.

31.1 The Group as lessee

31.1.1 Separating components of a lease

For a contract that contains one or more lease components or non-lease components, the Group separates each individual lease and non-lease component and allocates the contract consideration in the relative proportion of the sum of the individual price of each lease component and the individual price of the non-lease component.

31.1.2 Right-of-use assets

Except for short-term leases and leases of low-value assets, the Group recognises the right-of-use assets of the leases at the commencement date. The commencement date of the lease is the date from which the lessor provides the leased assets to make them available for use by the Group. Rightof-use assets are initially measured at cost. The cost includes:

the amount of the initial measurement of the lease liabilities.

• any lease payments made at or before the commencement date, less any lease incentives.

• any initial direct costs incurred by the Group.

an estimate of costs to be incurred by the Group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The Group depreciates right-of-use assets in accordance with the depreciation requirements set out in Accounting Standard for ASBE No.4 -- Fixed Assets. If it is reasonably certain that the Group will obtain ownership of the underlying asset by the end of the lease term, the right-of-use asset is depreciated over the remaining useful life of the underlying asset. If it is not reasonably certain that the Group will obtain ownership of the underlying asset by the end of the lease term, the right-ofuse asset is depreciated over the shorter of the lease term and the remaining useful life of the underlying asset.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

31. Leases - continued

31.1 The Group as lessee - continued

31.1.3 Lease liabilities

Except for short-term leases and leases of low-value assets, the Group initially measures lease liabilities at the present value of the outstanding lease payments at the commencement date. In calculating the present value of the lease payments, the Group uses the implicit interest rate of the lease as the discount rate. If it is not possible to determine the implicit interest rate of the lease, the incremental borrowing rate shall be applied.

The lease payments comprise the following payments by the Group for the right to use the underlying asset during the lease term:

fixed payments (including in-substance fixed payments), less any lease incentives.

variable lease payments that depend on an index or a rate.

the exercise price of a purchase option if the Group is reasonably certain to exercise that option.

payments for terminating the lease, if the lease term reflects the Group exercising an option to terminate the lease.

amounts expected to be payable by the Group under residual value guarantees.

Variable lease payments that depend on an index or a rate, are initially measured using the index or rate as at the commencement date. Variable lease payments not included in the measurement of the lease liabilities, are recognised in profit or loss, or in the cost of relevant assets, in the period of those payments.

After the commencement date, interest expense on the lease liabilities in each period during the lease term is calculated by a constant periodic rate of interest and included in profit or loss or charged to cost of related assets.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

31. Leases - continued

31.1 The Group as lessee - continued

31.1.3 Lease liabilities - continued

After the commencement date, the Group shall remeasure the lease liabilities and make corresponding adjustments to the related right-of-use assets in the following circumstances. If the carrying amount of the right-of-use assets is reduced to zero and there is a further reduction in the measurement of the lease liabilities, the Group shall recognise the difference in profit or loss:

where there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, the Group remeasures the lease liabilities, on the basis of the revised leases payments and the revised discount rate.

where there is a change in the amounts expected to be payable under a residual value guarantee, or in future lease payments resulting from a change in an index or a rate used to determine those payments, the Group remeasures the lease liabilities, on the basis of the revised lease payments and the unchanged discount rate, unless the change in the lease payments results from a change in floating interest rates, in which case the revised discount rate is applied.

31.1.4 Short-term leases and leases of low-value assets

The Group elects not to recognise right-of-use assets or lease liabilities for short-term leases and leases of low-value assets, i.e., port and terminal facilities, buildings, machinery and equipment, furniture, fixture and other equipment, motor vehicles and cargo ships and others. A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less and does not contain a purchase option. A lease of low-value assets is a lease of an underlying asset that, even if new, would have a low value. For short-term leases and leases of low-value assets, the Group recognises the lease payments in profit or loss, or in the cost of related assets on a straight-line basis over each period within the lease term.

31.1.5 Lease modifications

A lease modification should be accounted for as a separate lease if both of the following apply:

the modification increases the scope of the lease by adding the right to use one or more underlying assets.

the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price according to the circumstances of the particular contract.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

31. Leases - continued

31.1 The Group as lessee - continued

31.1.5 Lease modifications - continued

For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification, the Group should allocate the consideration in the modified contract, determine the lease term of the modified lease and remeasure the lease liabilities based on the present value of the changed lease payments and the revised discount rate.

For lease modifications that decrease the scope of the lease or shorten the term of the lease, the Group should decrease the carrying amount of the right-of-use assets with any gain or loss relating to the partial or full termination of the lease recognised in profit or loss. For re-measurement of lease liabilities due to other lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use assets.

31.2 The Group as lessor

31.2.1 Separating components of a lease

For a contract that contains lease components and non-lease components, the Group allocates the contract consideration in accordance with the Revenue Standards on allocation of transaction prices, based on the respective individual prices of the lease components and the non-lease components.

31.2.2 Classification of leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership. All other leases are classified as operating leases.

31.2.3 The Group as lessor under operating leases

The Group recognises lease receipts from operating leases as rental income using a straight-line method over the respective periods of the lease term. The Group's initial direct costs incurred in connection with operating leases are capitalized when the costs incurred, and are allocated to profit or loss for the period over the lease term on the same basis as the recognition of rental income.

Variable lease receipts acquired by the Group in connection with operating leases that are not included in the lease receipts are recognised in profit or loss for the period when they arise.

(IV) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

31. Leases - continued

31.2.4 The Group as lessor under finance leases

At the commencement date, the Group recognises a finance lease receivable at the amount equal to the net lease investment with assets under finance lease derecognised. The net investment in the lease is the sum of the present value of the unguaranteed residual value and the lease payments receivable at the commencement date, discounted using the lease’s implicit interest rate.

The lease receivable comprises the following payments collected by the Group from the lessee for the transfer of the right to use the underlying assets during the lease term:

fixed payments (including in-substance fixed payments) paid by the lessee, less any lease incentives.