In 2020, the Group launched the "Port Connection Action". Positioning the port sector as a growth-oriented core business, and strive to become a competitive inland port operator in China market. Adhering to its "two-pronged" approach which comprises new construction and merger & acquisitions, the port sector has intensified investment and expansion of high-quality projects and focuses on networking opportunities along the Yangtze River Delta, Pearl River Delta and important water transport nodes, especially via the merger & acquisition of mature projects. The Group plans to expand, strengthen and optimize the port sector during the "14th Five-Year Plan" period and strives to become an important strategic support for the Group.

The Group successfully acquired the Fengcheng Shangzhuang Project, the Jingjiang Port Project and the Shenqiu Port Project in 2020. As the construction of these projects proceeds in an orderly manner and the ports will be put into operation by the end of 2022, a multi-point port network has begun to take shape. In terms of port investment and M&A, the port sector has strengthened efforts in the research and screening of mature projects since the beginning of this year. Horizontally, it has focused on dry bulk terminals and paid preferntial attention to general and container terminals；Vertically, it has looked out for heavy asset projects such as coal shipping stations that have a strong linkage with the port logistics business. At present, the Group has targeted several high-quality projects and is actively conducting acquisition negotiations, which will be put forward in due course.

The Qianhai Project represents the Group's first successfully implemented project under the long closed-loop "investment, construction, operation and transformation" development model. The Qianhai Project will be developed in three phases.

The first phase of the Qianhai Project has a total gross floor area of approximately 110,000 square meters, comprising residential area of approximately 51,000 square meters, office area of approximately 35,000 square meters and commercial area of approximately 25,000 square meters. The residential project in the first phase of the Qianhai Project, namely the PARKVIEW BAY, which was jointly developed by the Group and Shum Yip Land Co., Ltd. ("Shum Yip Land"), was delivered in June 2021. The office project in the first phase of the Qianhai Project, namely Shenzhen International Yidu Building,completed the inspection and acceptance procedures in July 2021 and has been put into operation. As for the commercial project, the Group and SCPG make concerted efforts to make a unique boutique commercial project named "Qianhai Yinli". This project has officially commence operation in September 2022.

The second phase of the Qianhai Project has a plot ratio-based gross floor area of approximately 110,000 square meters, comprising residential area of approximately 91,000 square meters. This phase will be developed in two parts. In particular, the construction of Yicheng Qiwanli, which is developed and operated solely by the Group and has a plot ratio-based gross floor area of approximately 64,900 square meters (comprising residential area of approximately 51,000 square meters and commercial area of approximately 6,000 square meters), officially commenced in March 2021 and launched for sale in Oct 2022 and basically sold out. As for the residential units of the second phase of the Qianhai Project developed jointly with Shenzhen Vanke comprising residential area of approximately 40,000 square meters and commercial area of approximately 3,400 square meters, the construction has officially commenced in February 2022 with pre-sale scheduled to commence within 2022.

The third phase of the Qianhai Project has a plot ratio-based gross floor area of approximately 172,000 square meters in aggregate. The residential project of the third phase of the Qianhai Project developed jointly with Shenzhen Vanke has a plot ratio-based gross floor area of approximately 80,000 square meters, comprising residential area of approximately 50,000 square meters, apartment area of approximately 25,000 square meters and commercial area of approximately 5,000 square meters. The Group has officially commenced the construction of this residential project in February 2022 and is striving to commence pre-sale within 2022. The Group will also individually develop and operate a piece of office land and a piece of commercial land with an aggregate plot ratio-based gross floor area of approximately 92,500 square meters in the third phase of the Qianhai Project.

In general, the transformation and upgrading of Qianhai Project has been developing and releasing value in an orderly manner according to the Group's schedule. And the transformation gain of Qianhai project is divided into three stages, namely, land appreciation gain, land development gain and self-owned operation gain. At present, the land appreciation gain has been realized. By way of land consolidation and preparation in Qianhai, the Group obtained compensation equivalent to approximately RMB8,373 million through the swap of land with a total site area of approximately 120,000 square meters and a total gross floor area of approximately 390,000 square meters (comprising saleable residential area of approximately 190,000 square meters and saleable apartment area of approximately 25,000 square meters) under the new land planning conditions. The gain from appreciation of land value represents the initial benefit of land consolidation and preparation in Qianhai.As the swapped land parcels developed gradually and following the release of completed properties into the market, the project will continue to unlock value from its development in the next few years, which in turn will support steady growth of the Group's performance. Considering the overall planning and shortage of residential projects in the Qianhai area, it is expected that the value of the Group's resources in the Qianhai area will be fully reflected with the construction and sale of the second phase of the Qianhai Project.

At present, the biggest transformation and upgrading project of the Group is Shenzhen South China Logistics Park, which is covering an area of approximately 580,000 square meters, and it is located in the central axis and a core node of Shenzhen. The transformation of SZ South China Logistics Park was supported by various policies during the first half of 2022. The Shenzhen Land and Space Plan, Protection and Development Plan for the 14th Five-Year Plan issued by the Shenzhen Municipal Government in early March signified the enforcement and implementation of the strategic plans and planning principles under the General Land and Space Plan (2020-2035) ahead of schedule. The key "non-logistics " role of SZ South China Logistics Park has been exemplified. Afterwards, the Shenzhen Municipal Government issued the Measures for Coordinating Interests in Land Consolidation and Preparation in Shenzhen (Draft for Comments), pursuant to which SZ South China Logistics Park has been included in the new policy on coordinating interests in land consolidation and preparation as a transferred state-owned land for the first time. Meanwhile, Shenzhen South China Logistics Park was incorporated in the "one axis, one ring road, three centers and multiple parts " spatial plan under the Spatial Planning for the District Hub of Meilin Checkpoint in Shenzhen. Furthermore, speeding up the implementation of spatial and industrial planning of SZ South China Logistics Park has been included in the 2022 Report of the Work of the Government of Longhua District 2022, while promoting the transformation of the first phase of SZ South China Logistics Park has also been listed as one of the key tasks of the local government. These developments indicated that the assumption for the inclusion of SZ South China Logistic Park in the planning and design of southern Longhua has been officially recognized by the government of Longhua District.

These new policies issued by Shenzhen governmental authorities will facilitate the transformation and upgrading of Shenzhen South China Logistics Park. The Group will make every effort to seize the opportunities brought by the Shenzhen comprehensive reform, enhance the positioning of its transformation projects, seek a mutually beneficial solution for all parties involved, and achieve substantive progress as soon as possible.

Shenzhen Airlines, an associated company with 49% equity held by the Group, was repeatedly affected by the domestic pandemic, and the demand for air passenger transport declined. In addition, Geopolitical conflicts have led to the continuous rise of oil prices and exchange rate fluctuations. In the first half of 2022, transportation revenue declined, operating costs remained high, and the passenger transport aviation business experienced difficulties. In the first half of 2022, Shenzhen Airlines recorded a net loss of about RMB4,594 million, of which the Group's share of losses incurred by Shenzhen Airlines amounted to approximately HK$2,710 million.

In face of unprecedented difficulties, Shenzhen Airlines has always adhered to the principle of safety first. On the premise of ensuring flight safety and ensuring the team stability, Shenzhen Airlines will tap potential in many ways and strive to control and reduce losses.

Shenzhen Airlines is an important asset of the Group, and the Group has always adhered to the premise of protecting the interests of shareholders and the Group to the greatest extent.

Since the practice of the last strategic period, Shenzhen Expressway, which is held by the Group, has gradually focused on subdivided fields such as clean energy and solid waste recycling in the aspect of environmental protection business. In order to further develop clean energy in the strategic period of the "14th Five-Year Plan" from 2021-2025, Shenzhen Expressway will develop power generation as its core business, combine light with heavy business, participate in and hold simultaneously and actively layout supporting businesses in the industrial chain including wind power, photovoltaic power plants operation, wind turbine equipment, wind turbine aftermarket operation and maintenance, energy storage, carbon trading, electricity distributing, and build a SZE distinctive "integrated" clean energy system, providing performance support for the Group's development and thereby providing a stable return on investment.

At present, Shenzhen Expressway is actively declaring photovoltaic power generation projects in Shandong, Yunnan, Jiangsu and other provinces through independent development or cooperative development mode, and will make a timely announcement if there is a new project.

From the interim report, some financial data are disappointing, mainly for two reasons. Firstly, Shenzhen Airlines, an associate of the Group, its performance has dragged down the Group's results due to the negative impact of the pandemic. The reduction of passenger volume has led to a decline in revenue, which has affected the profit level; Secondly, under the influence of the pandemic situation and the overall environment of China's economic downturn, the Group's performance in all major sectors has declined to varying degrees. The rent reduction of logistics park and toll road reduction & exemption policies implemented throughout the country have also impacted on revenue and profits.

However, judging from the overall business structure and operating conditions, the Group is still confident for its operating conditions in the second half of the year. Firstly, the Group has good fundamentals, and with sufficient cash flow. The overall operating condition is relatively stable. The three major rating agencies at home and abroad all give investment grade ratings. Secondly, except for Shenzhen Airlines, the business development of all major sectors of the Group is relatively healthy. In the long run, the logistics warehousing industry is expected to improve in the long-term. Thirdly, corporate governance has made continuous progress. In the first half of this year, the Group was selected as "Double Hundred Action" enterprise in the State-owned Enterprise Reform of the State-owned Assets Supervision and Administration Commission of the State Council. The Group was also rated as one of the "Top Ten Management Improvement Benchmarks in Guangdong Province" and was listed as a "benchmarking world-class management improvement enterprise" by the Shenzhen Municipal Government.

In the face of the changing domestic pandemic trend, the Group focuses on the new pattern of the development in main logistics industry, continues to increase market expansion, strictly controls operating costs, and implements long and short closed-loop business models of "Investment, Construction, Operation and transformation" and "Investment, Construction, Financing and Operation". Generally speaking, the impact of the pandemic on the Group's business will be effectively controlled. In the second half of the year, the Group will seize the opportunity to accelerate access to high-quality resources and promote high-quality projects. On the one hand, the Group will seize the window period, speed up its layout, unswervingly implement the "14th Five-Year Plan" strategy, achieve "Shenzhen First, Bay Area Top Three and strive to enter the top five in China" in the logistics sector; On the other hand, it will aim to do everything possible to release profits through the "long and short closed- loops" to strive for greater returns for investors.

Intelligent logistics and cold chain logistics is a "plus" on the basis of a comprehensive "Inland Port Networking, Logistics Parks, Air Cargo and Railway Freight Logistics Infrastructure " logistics infrastructure network, which can generate added value. Up till now, the Intelligent logistics and cold chain logistics projects that have been built, are under construction and are to be built have a total area of 370,000 square meters, and are planned to exceed one million square meters by the end of the "14th Five-Year Plan".

In respect of the cold chain business, the Group has planned and constructed cold warehouses in logistics hub projects such as the SZ Liguang Project, the SZ Pinghunan Project, the Shijiazhuang Project, and the logistics hub projects in Qingbaijiang of Chengdu, Minhang of Shanghai, Tianjin and Zhengzhou. In particular, the cold warehouse with an area of approximately 20,000 square meters in the Shijiazhuang Project has been put into operation, while those in the Chengdu Qingbaijiang Integrated Logistics Hub and the SZ Liguang Project with areas of approximately 17,000 square meters and 50,000 square meters, respectively, are expected to be ready for operation within one year. In addition, a cold chain warehouse project jointly developed by the Group and VX Logistics Properties in Jiangning of Nanjing, with an area of approximately 30,000 square meters, is expected to be put into operation in 2024.

For the development of intelligent warehouses, the Group has finished the intelligent transformation and commenced the operation of 15,000 square meters of warehouses, thereby increasing the utilization rates of the storage space of its clients, such as Pedder Logistics and Ruhnn Holding. During the Period, the Group continued to push through the intelligent transformation of several projects in order to meet the needs of its clients to further enhance their logistics turnover efficiency and the utilization rates of their storage space.

With the above investment and operation of Intelligent warehouses and cold warehouses, the Group's business will be extended to the integrated business of "warehouse, distribution and transportation" of cold warehouse. The next step will be to contact high-quality head customers, discuss high-value added businesses such as operation and processing in the warehouse, and thus create a new business growth engine.

Following the successful injection of Nanchang Project into a fund in 2021, the Group will continue to procure the injection of, among other projects, the Hefei Integrated Logistics Hub and the second phase of the Hangzhou Integrated Logistics Hub into private equity funds. At the same time, the Group will actively plan to issue publicly traded REITs with mature integrated logistics hub projects as their underlying assets. Through multiple channels, the Group seeks to improve the closed-loop "investment, construction, financing and operation" business development model, accelerate its capital recovery, optimize its industry model, enlarge its scale of operation and enhance its profitability while maintaining the Group's operation rights to its projects.

In the second half of 2022, the Group will speed up the injection of, among other projects, the Hefei Integrated Logistics Hub and the second phase of the Hangzhou Integrated Logistics Hub into private equity funds, and the Group will speed up the offering of its first batch of publicly traded REITs to take advantage of policies promulgated by the government to facilitate asset securitization. In the future, public offering of REITs is estimated to be the main source of project injection, supplemented by private funds, to expand financing channels and improve capital utilization efficiency. Public offering of REITs is the prior way for the Group to implement the closed-loop business model of "investment, construction, financing and operation". However, in view of the high compliance and operation requirements of the public REITs on the underlying assets of the project, some projects of the Group still need to be cultivated to meet the conditions for injecting into public REITs.

Shenzhen International implements sound financial policies. During the first half of 2022, net cash generated from operating activities amounted to approximately HK$4,211 million. Net cash used in investing activities amounted to approximately HK$6,495 million. Net cash generated from financing activities amounted to approximately HK$3,523 million. The Group's core businesses maintained a stable cash inflow. The Group closely monitors changes in total borrowings with a view to maintaining its financial ratios at a stable and healthy level.

In the second half of 2022, the Group will continue to carry out structural financing adjustment in accordance with its development strategy and on the premise of maintaining financial stability.

Shenzhen International attaches great importance to its commitment and return to shareholders. In terms of dividend distribution policy, the Group has always pursued a stable core business dividend payout policy. And the comprehensive dividend payout ratio in the past five years has been more than 50% continuously. In the future, the Group will continue to share value with the investors.